Tx- Marketing I (SAE)

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Alimony, child support and other similar ongoing obligations

"Other" debts

A 1st time buyer may make a penalty free withdrawal from IRA of up to

$10,000

If a property is worth $320,000 and has loans of $10,000 against it, the owner's equity is

$310,000 ($320,000 - $10,000 = $310,000)

VAs loan guaranty amount has been raised from time to time by Congress from the original amount of $2,000 to its current amount of ______

$417,000.00

A small multifamily property generates $50,000 in rental income, $10,000 in expenses, and $35,000 in debt service. The property appreciates about $25,000 each year. What is the cash flow on this property

$5,000 ($50,000 - $10,000 - $35,000 = $5,000)

IRAs max contribution in 2015 was

$5,500

Investor A exchanges a building worth $200,000 for investor B's building worth $150,000, a car worth $20,000 and $30,000 in cash, investor A has a taxable boot of

$50,000 ($20,000 + $30,000= $50,000)

The VA reimburses lenders for loss up to _____ in the event of default by a VA borrower

$60,000

VA reimburses lenders for loss up to ____ in the event of default by VA borrower

$60,000

Net Present Value (NPV)

(-) discounted present value of investment from the cost implementing that alternative difference between present value of cash inflows and outflows over a period of time

Common method of predicting the price of a stock

(P/E)

Less widely used as a predictor of the price of REITs

(P/E)

Tells investors how much in dividends they will receive per dollar of stock purchased

(P/E)

A loss in value with any structure due to changes in tastes, technical innovations, market standards or any outdated style. The item in question may be curable, such as lack of air conditioning in Florida, or incurable, such as exceptionally low ceilings in a warehouse, depending on the costs of correcting the item as compared to the benefits expected if the correction is made

(Preferred) Functional Depreciation

All complaints must be filed with HUD within ___ of the date that the alleged act of discrimination took place

1 year

1 point is __ of a loan amount

1%

Origination fee is to be ___ of the loan amount

1%

Bonus Deductible must meet:

1. Be in the interior of the property 2. Be made of non-residential property 3. Be made by landlord/tenant/sub lessee 4. Be made 3 yrs after construction 5. Not be improvements to internal structure of building that benefit a common area 6. Not be made by or for a tenant related to the landlord

Most conventional primary lenders follow these set limits on the amount of money they will lend

1. The limits are ment to decrease the risk of default and 2. Primary lenders look to sell conventional loans on the secondary market to secondary lenders (Freddie Mac or Fannie Mae

Mortgage-backed securities are attractive to investors for 2 reasons

1. They cost less than purchasing an entire loan and they are more easily liquidated 2.They are guaranteed

What is a basis point

1/100 of a percent

Property rehabilitation before 1936 ___% credit

10

Long term real estate cycles generally run from

10 to 15 years

Within ____ of receiving any complaint, HUD must notify a complainant as to whether it intends to act on the complaint

100 Days

1031 Exchange reports proceeds from real estate transactions and files form ____ to IRS

1099s

Appraisal foundation requires ______ hours for certification

120-135

There are ____ major FHA programs under the National Housing Act

14

Vacation rental property to qualify as a business property- Taxpayer may not employ the property for personal use for either more than ____ days, a year or 10% of the days actually rented at rental value during tax year, whichever figure is greater

14

Yard signs account for ____% of sales transactions

14

During the next decade or so $____ will transfer from one generation to the next

14 trillion

Recent study, only ____% of real estate licensees display the Equal Housing Opportunity logo on their business cards

16

Alyssa purchased raw land $1,000 per acre. She pays $80 per acre for annual real estate taxes and has various expenses of about 8% per year. By how much per year must land appreciate in order for Alyssa to break even

16% ($1,000 × .08 = $80) ($80 + $80= $160) (160/1000= 16%)

The Code of Ethics has how many Articles?

17

1031 exchange transactions must be completed within ____ days

180

Deferred Exchange Requirements: Replacement property must close sale no later than ____ days after close of escrow for sale of phase 1 or exchanger must acquire property by the date required to file tax return (including extension) for 1 year transfer of relinquished property occurred

180

Deferred Exchange Requirements: Replacements property must close sale no later than ____ days TOTAL (NOT 45 + ___ days)

180

EATs holding CANNOT exceed ____ days

180

Investor has ___ days minus time EAT held replacement property

180

Reverse Exchange must be completed in a ____ day period

180

The replacement property must be received within _____ days

180

Penalty Free Withdrawal

1st time buyers to withdraw up to $10,000 from their IRA for principle residence purchase, make withdrawal ANYTIME WITHOUT any penalties

FNMA Underwriting Guidelines: 90% loans require ___ months mortgage payments in reserve escrow account

2

Most sources of income will be included in an underwriters income analysis provided a ___ year history can be established

2

Property held for ____ years likely indicates NOT acquired for resale

2

•Phone or personal solicitations of property owners who have been identified by a real estate sign, MLS or other information service showing property listed with another realtor •Mail or other forms of written solicitations of prospects who properties are listed with another realtor. "For Sale" or "For Rent" signs

2 Basic Solicitation Types

General Partnership

2 or more parties must agree to conduct business together for a profit

75% loan to value (LTV) ratio, investors pay _____% of purchase price

25

Company's spend _____% of budget on advertising and marketing

25

SEP IRA (Simplified Employee Pension), Employer contributions up to _____% of employees compensation or $40,000 whichever is less

25

Front-End Ratio

25%-28%

Typical nonconforming ratios are

28 and 36 (housing expense to income/total debt service ratio)

Conventional loans Expense To Income Ratio for the proposed housing expense (principal, interest, taxes and insurance) should NOT exceed ___ of the borrowers stable monthly income

28%

Total Debt Ratio

28%-36%

FHA loan requires a housing expense to income ratio not to excess _____. Housing expenses include PITI

29%

______ does NOT qualify for an investment property

2nd Home

FNMA Underwriting Guidelines: 98% loans require ___ months mortgage payments in reserve escrow account

3

Simple, Employers matching contributions cannot equal more than ___% of employees salary

3

Baird Exchange (Baird publishing exchange)

3 party 1031 exchange 2 individuals (exchanger and another party) trade properties recipient of relinquished property sells property, he/she has acquired to 3rd party

Alderson Exchange

3 party 1031 exchange 3rd party buyer procures property that an exchanger wants to acquire in an exchange transaction

Exchanger must identify the replacement property conforming to at least one of 3 rules

3 property rule, 200% rule and 95% rule

Short term real estate cycles generally run from

3 to 5 years

FHA loan rules require a minimum down payment of _____ for new purchase loans

3.5%

A leasehold with ______ or more to run (including all option periods in the contract) can also be exchanged

30 years

98% loan to value ratios are

33 and 40%

The appraisal foundation intends to further the education requirements for certification and licensing by _____

35 to 60%

Conventional lenders consider borrowers income if the Total Debt Service Ratio, the proposed total housing expense (principal, interest, taxes,hazard insurance, mortgage insurance and other recurring liabilities) does NOT exceed ____ of the borrowers stable monthly income

36%

For a conventional loan, the borrowers total debt service should not exceed

36% of stable monthly income

A lender will lend up to ___ times the veterans eligibility

4

Land, labor, capital and management

4 agents of production

End Result Ethics, Rules and Laws Ethics, Social Contract Ethics and Individual Conscience Ethics

4 approaches to making ethical decisions

Seller may pay any or entire veterans closing costs, including the loan origination fee. VA puts a ____ limit on any Seller contribution

4%

FHA requires a total debt service ratio of _____. Debts paid in full in 9 months are not included, long term debts and revolving debts are included.

41%

VA qualifying ratio ____ of gross income

41%

VA uses 1 ratio to qualify buyers: a debt to income ratio of ____

41%

VA uses one ratio to qualify buyers: a debt to income ratio of ____

41%

Deferred Exchange Requirements: Timing is Paramount: Replacement property/properties must be properly identified no later than ____ calendar days (even holidays) after closing of escrow for the sale of exchangers phase 1 property (relinquished property)

45

The replacement property must be identified within _____ days

45

Donor has an additional ____ years to carry forward any unused deductions

5

Funds are often distributed to investor as early as ____ years of age without account holder paying a tax penalty

59 1/2

The eligibility amount used is ____ of the VA loan amount or total eligibility available

60%

To qualify for reverse mortgage, one of the homeowners must be at least how old

62

Funds will be distributed when account holders turn what age

65 (accepted retirement age)

Minimum distribution age ____ must be accepting some income from the funds in retirement accounts (and paying taxes)

70

At least ___ of an Savings and Loans Associations (S&Ls) assets must be housing related for it to meet the QTL test

70%

There are ___ steps of the appraisal process

8

When a LTV loan that is greater than ___ is made, escrow accounts are required on all loans, regardless if conventional, FHA or VA

80%

At the end of the year both investor and EAT report exchange to IRS on form _____

8824

Farming Techniques: Licensees should only make cold calls between

8am-9pm

Appraisal foundation requires ____ hours of coursework for licence

90

Currently the Appraisal Foundation requires ___ hours of instruction for licensure

90

Veterans are eligible for VA loans who served

90 days of wartime service and 181 days of continuous peacetime service

FNMA Underwriting Guidelines: Co borrower must be a member of the immediate family and take title to collateral property with a ___ loan

90%

FNMA Underwriting Guidelines: ____ % loans require 3% limit on seller contribution toward buyer closing costs

98

1979 the _____ court ruled that the 1031 section of the revenue code did not disallow deferred exchanges. This changed the face of tax favourable transactions in general, now there was solid legal support for non simultaneous exchanges

9th Circuit

Some Charitable Gift Annuity (CGA) income tax solution benefits include

A client can avoid paying any taxes up front, Creates an immediate income cash flow, Provides a benefit from a sizable income tax deduction

The primary text benefit in owning a non income property such as residence is

A deduction for mortgage interest

Complaints of discrimination brought under the Civil Rights Act of 1866 must be taken directly to

A federal court

An investment syndicate is to be set up to allow all members to share equally in the managerial decisions, profits and losses involved in the venture

A general partnership

The Equal Credit Opportunity Act (ECOA)

A lender must judge an applicant only on the basis of income, net worth, job stability, and credit rating as required by

Compared to a stock portfolio, a real estate investment would be considered

A more management intensive investment

When used for real estate investments, the form of ownership used by a syndication is usually

A partnership

Laissez-faire

A policy or attitude of letting things take their own course, without interfering.

Raden

A radioactive gas formed during the natural breakdown of uranium in soil, rock and water

A real estate investor may expect _____ concerning her investment

A rate of return higher than the prevailing interest rate

What is a REIT

A real estate investment trust

Tax device that allows cash flows from an underlying block of commercial mortgages to be passed through to security holders without income taxes at the level of the trustee or agent

A real estate mortgage investment conduit (REMIC)

Ethics

A set of beliefs that govern the actions and conduct of a group of professionals

What is a lien theory state in contrast to a title theory state

A state in which a mortgagor (borrower) retains title to a property when a mortgage lien is created

If a property owner has the right to redeem his or her property after a tax sale, the owner has

A statutory right of redemption

Which of the following entities can legally levy annual real property taxes

A tax district

Business Plan

A written description of the business operational and financial goals and strategies that the business will use to achieve them

Accessibility Guidelines are NOT mandatory. Builders and developers may choose to depart from the guidelines and meet the legal requirements of the ____

ADA

A teaser rate is typically associated with which type of loan

ARM

Why a borrower might NOT want an adjustable rate mortgage (ARM)

ARM rates can increase to levels above market interest rates for conventional loans. Negative amortization or increase in principal balance of the loan. Attractive because lower interest rates lower than those for conventional loans (typically 1-3 points lower)

_______ do not contribute to a property's value, an appraiser does NOT consider it

Above Ground Pools

A clause in the mortgage document that, if enforced, makes the entire balance of the mortgage due to the lender immediately upon default

Acceleration Clause (Alienation Clause)

Buses and trains, as well as their stations, must be ______ to disabled persons

Accessible

An appraiser will take on many roles as he or she prepares the report: broker, surveyor, economist and possibly even _____

Accountant

Risk Management: A company's risk management plan should involve 2 key components: A lawyer and an

Accountant

Replacement property is _____ before the relinquished property is sold

Acquired

In regard to discrimination, remember that the _____ and its results are what truly matters, not the intent behind the action

Action

Professional Standards Hearing Panel's authority is limited to selecting penalties from disciplining ____

Actions List

Office space: Site is the

Actual location of office space

The subject property has a swimming pool but the comparable does not. How should you account for this in valuing calculations?

Add the contributing value of the pool to the price of the comparable

ARM means

Adjustable Rate Mortgage

Index + Margin =

Adjustable Rate Mortgage (ARM)

____ are amortized loans where the interest rate changes or "adjusts" at predetermined periods, usually annually

Adjustable Rate Mortgages (ARMs)

The original cost of the asset plus capital improvements minus depreciation

Adjusted basis

If an investor purchases a property for $200,000, makes $100,000 in improvements, and takes $50,000 in depreciation, the investors

Adjusted basis is now $250,000 ($200,000 + $100,000= $300,000) ($300,000 - $50,000= $250,000)

Period of time between changes in either the interest rate and/or the monthly payment

Adjustment Interval

Comparable property plus or minus ____ equals the subject property value

Adjustments

Methods of recruiting salespeople: Although brokers will mainly use ____ mediums to reach consumers, brokers should also remember that these messages also reach potential recruits

Advertising

Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA)

Affected estate taxation and planning

ROTH IRA are created with ____ tax dollars

After

4 key communication skills: Set the _____

Agenda

Real estate salespeople CANNOT complete the negotiation of any

Agreement

The absence of qualified intermediaries can create certain drawbacks for those involved in an

Alderson Exchange

Taxpayer (A) gives their relinquished property to a buyer (B) they give cash to 3rd party (C) from whom (B) receives a replacement property which is conveyed to (A) in exchange for relinquished property. (Buyer (B) bought 3rd parties (C) property with money he would have used to buy taxpayer (A) property and exchanged it for (A) property)

Alderson Exchange (ABC Exchange)

3 party exchanges come in 2 types, commonly known as the

Alderson Exchange and The Baird Exchange

Investor may continue to exchange properties and NOT pay taxes until one of these conditions are met

All accumulated gain from sale of original property to sale of any exchanged properties becomes taxable or the loan becomes due when investor liquidates his investment for good

Code of Ethics- Article 9

All agreements shall be in writing and get agreements expressed in clear and specific language, initialing a contract party will be given a copy of what they signed or initiated

Code of Ethics- Article 8

All monies the realtor handles must be kept separate from their own funds

What is a feature of month to month lease

Allows for rent increases

Commercial Property transactions are NOT normally included under the Federal Fair Housing Act, they are covered by other laws, such as the

Americans With Disabilities Act

ADA

Americans with Disabilities Act

Latin term "killing off slowly over time "

Amortization

Promissory Notes: Equal monthly payments that contribute to both principal and interest until the entire loan is paid constitute an ____ note

Amortized

The VA does set a limit on the _____ of the loan it will guarantee

Amount

What are the 3 factors that determine cash flow

Amount of rent received, Operating expenses and method of debt repayment

Tying Arrangement

An agreement to sell one product only if the buyer agrees to buy another, different product

Is addition to income, credit and employment data, a mortgage lender requires additional documentation, usually including

An appraisal report

Economic Growth

An areas ability to expand and develop

What is similar to a mutual fund

An equity REIT

London Interbank Offered Rate (LIBOR) interest rates are often used on adjustable rate mortgages to establish

An index

Morals

An individuals opinion of right and wrong

An investor may defer federal income taxes on a portion of the gain on the sale of a property, provided all sales proceeds are not received during the year of the sale. This describes

An installment sale

General Recommendations: Take fair housing courses _____ to ensure awareness of all current and new laws

Annually

Contract with an insurance company for a lump sum or scheduled premiums

Annuity

Value may change due to a predicted event

Anticipation

____ can file an ethics complaint

Anyone

Boot

Anything of value that taxpayer receives in exchange other than a replacement property

The act or process of developing an estimate of value

Appraisal

Monitors the education requirements for all types of appraisal licences and certifications and has set education requirement to increase between 35% and 60% over the next 2 years

Appraisal foundation

A VA certificate of reasonable value includes an ______ of the home and an expiration date after which the certificate is no longer usable

Appraised Value

Appraisers evaluating single family homes, most frequently on behalf of the buyer or the buyer's lender, receive an _____

Appraiser's Fee

Requires that candidates prove their ethical character and field competency beyond the average state and federal requisites

Appraisers (NAIFA)

Real estate trends, agricultural movements and city planning to acquire the information needed to assess the value of any property

Appraisers must keep up with

CGA in real estate equity exchange program enables the client to exchange their _____ real estate for a guaranteed tax favorable income stream and suffer no losses via taxes, real estate fees or closing cost

Appreciated

An increase in the value of a property owning to economic forces beyond the control of the investor

Appreciation

Correct term for increase in present value of the property over time

Appreciation

Increase in the present value of a property over time

Appreciation

A parcel of property that increases in value because of its location in the center of an affluent and rapidly growing neighborhood is an example of

Appreciation through intrinsic value

Deferred Exchange Requirements: 180 day period may be shortened when phase 1 closing occurs between October 15th and December 31st unless taxpayer files a timely extension with IRS by ____ the following year

April 15th

Commercial Brokerages

Apts, warehouse, shopping centers and office buildings, land, business opportunities, parcels or land for mobile homes

All parties to the dispute advised the local board in writing that they choose NOT to _____ before the board, they may not have to arbitrate

Arbitrate

If all parties declined to participate in mediation it does not relieve realtors of the duty to ______

Arbitrate

Reach authorative judgement or settlement

Arbitrate

Realtors are required by NAR to ________ matters that involve disputes between realtors of different firms regarding contractual and non contractual matter in nature

Arbitrate and Litigate

If dispute is settled by mediation, no ____ hearing needed

Arbitration

Settlement

Arbitration

Occurs between willing buyer and willing seller with each party completely knowledgeable about the market. A purchaser of property between relatives (father & son) would NOT be an _______

Arm's Length Transaction

A transaction in which neither the seller nor buyer act under undue duress

Arms length transaction

Market value, Mortgage loan value, Capitalization value, Book value, Inheritance tax value and Value in use

Assessed Value

The value determined by the local taxing authority, which it uses for ad valorem taxation

Assessed value

A tangible or intangible item of value

Asset

If the buyer defaults, both the buyer and seller may be responsible for any deficiency

Assumption

In an _____ of a mortgage, the purchaser signs an agreement to assume the obligation of the original mortgage.

Assumption

According to the person facing the decision, anything related to the situation that is assumed to be true in which the conclusion can be drawn

Assumptions

The writers job is to capture the readers _____ and deliver the message clearly and effectively

Attention

An _____ provides the instruments that assure that a plan meets ERISA guidelines

Attorney

When discriminatory action requires immediate solution HUD will attempt to establish temporary solution to the complaint or ask the _____ to handle the suit in court while it works on completing a full investigation

Attorney General

To successfully defer capital gains taxes in a 1031 exchange the exchange must be defeasible under _____

Audit

Managerial Style: The ______ style is similar to dictatorial but its not as authoritative

Autocratic

Standards Of Care provides the _________ degree of skill, care and diligence exercised by members of the same profession

Average

When preparing a document writers should ____ jargon

Avoid

If 3rd party CANNOT be found seller (C) in ____ Exchange may be stuck with property they don't want

Baird

Taxpayer (A) and seller (C) exchange property, (C) sells property (A's) relinquished property to (C holds title) 3rd party buyer (B) for cash

Baird Exchange (ABC Exchange or Missouri Waltz Exchange)

The appraisal principle that states that the highest property values are realized when improvements are proportional to one another and the land in size and type

Balance

____ regulators must adopt policies regarding the performance and utilization of appraisals

Bank

Banking regulators and federal legislation will NOT allow _____ to accept appraisals if the appraiser has any type of interest, even if disclosed

Banks

A measurement of how much is invested in the property for tax purposes

Basis

Federal reserve economic analysis compile a report before every Federal open market committee meeting

Beige Book

2 qualifications for a FHA insured loan

Being of legal age and having proof of U.S. citizenship or possessing a green card

CGA is a ____ contract which an individual donates an irrevocable gift to a non profit organization

Binding

Mortgage on more than 1 property. Make sure the agreement includes a release clause that permits 1 or more properties to be released from the obligation of mortgage upon repayment of a determined amount of the mortgage balance. Most commonly used for subdivision developers

Blanket Mortgage

State laws passed requiring registration of securities to protect the public from investing schemes are commonly called

Blue sky laws

Non like property will be deemed ____ at taxed on fair market value of property received

Boot

Graduated Payment Mortgage (GPM) advantages:

Borrower qualifies on the basis of the lower initial payments

Describe the company's purpose, philosophy, service and products

Brochures

Seller remodeling MUST obtain _______, if not the seller will need to tear down project and redo it or pay significant fines

Building permits

The ownership rights of real property are described as the

Bundle of legal rights

_____ organizations can participate in 1031 exchange

Business

Under a buydown plan the subsidizing party- borrower, seller, builder, etc- establishes a ____, which is collected in cash at closing

Buydown Fund

Caveat Emptor

Buyer beware

Plausible Assumption Resold

Buyer pay only so much

Whose responsibility is it to disclose how long a property has been listed?

Buyers agent

Which are methods used by the Federal Reserve System to regulate the money supply

Buying securities, changing the discount rate, and controlling banking reserves

There is no longer a ____ on the total penalties which may be imposed against a defendant

CAP

Equal to the NOI divided by the net present value of the property

CAP Rate

Most widely used method of valuing income producing real estate

CAP Rate

There's no management, CPA, legal or planning fees associated with a _____. This allows 100% of the value of the property to work for the annuitant(s) without loss of principal

CGA

Net Operating Income (NOI)

Calculate used to analyze income generating real estate investments NOI (=) all revenue from property(-) all necessary operating expenses (cap rates & cash flows)

Land _____ be depreciated

Cannot

Baird Exchange, taxpayer (A) does NOT pay _____ taxes on property they relinquished. Seller (C) has to pay those taxes when they sell to 3rd party (B)

Capital Gains

Personal property exchange includes many types of ______ transport equipment (airplanes, boats, trains, auto, trucks, production machinery, materials handling equipment, telecommunication devices and medical and data processing equipment

Capital equipment

If an investor's adjusted basis in a property is $400,000 and the property has a net selling price of $500,000, the investor has a $100,000

Capital gain (Gaining $100,000 on property)

The difference between the net sales proceeds of an asset and its adjusted basis

Capital gain (or loss)

Deferred Exchange Requirements: Exchanger cannot sell property and use part of the proceeds for an exchange, must use it all or else pay _____ taxes on unused portion

Capital gains

Trading and funding of long term loans

Capital market

The interest rate used in the income capitalization approach to appraisal that represents an expected annual rate of return on one's investment

Capitalization Rate

The remaining positive or negative amount of income an investment produces after subtracting all operating expenses and debt services from gross income

Cash Flow

Improve value, Insurable value, Appraised value, Exchange value, Liquidation value and Investment value

Cash Value

Mold

Causes wheezing, throat irritation and tightness in chest

Methods of recruiting salespeople: Before holding a seminar, brokers should select a ____ location for the meeting

Central

A VA appraisal is known as a:

Certificate of Reasonable Value

States must develop and maintain a system of licensure and ____ for appraisers

Certification

_______ property tax credit of 20% cost rehabilitation

Certified Historic

A report involving a property worth one million or a 1 unit to 4 unit residential complex with a value over $250,000 must completed by a

Certified appraiser

Non Qualified Product Applications

Charitable gift annually (CGA) and ROTH IRA

If the complainant feels that discrimination occurred even after the conciliation process, they can take the issue to the

Civil Courts

After Martin Luther Kings assassination congress passed

Civil Rights Act 1968

The fair housing law that 1st protected people against discrimination in housing based on race was the

Civil Rights Act of 1866

Business letters, memos, emails, texts, websites and messages must be written ______ so the reader can extract the meaning and understand the information

Clearly

A veteran and non veteran or a veteran and non veteran, unmarried partner cannot be ______ on a loan

Co Borrowers

The following may be used as ______ for a loan: Tenant's leasehold rights, Lenders receivable mortgage rights and farmers unharvested crops

Collateral

2 more businesses joined together to push out another business

Collusion

MLS is an arrangement when broker agrees to share their listings in exchange for a share of the ______

Commission

All adjustments are made to the ____ purchase price

Comparable

All adjustments are made to the _____ purchase price, NOT the subject property

Comparable

Farming Techniques: CMA provides sellers with recent sales information of ______ properties within their neighborhood

Comparable

Properties which are sustainably equivalent to the subject property to be used in the process of determining value of a subject property

Comparables

What is needed when using the sales comparison approach to find a listing price?

Comparables

Code of Ethics- Article 7

Compensation received must be revealed to the other parties involved in the transaction

1. Always remember that to best serve the interest of our nation, land should be utilized for its highest and best use and there should be a wide distribution of land ownership 2. Realtors should always perform their duties with integrity and honor 3. Always stay informed of current events and issues that affect real estate and be ready and willing to share with others the knowledge and experience that you have gained 4. Any Realtor having personal knowledge of conduct that violates NAR Code of Ethics should bring this matter to the attention of the local board or association 5. Treat others as you would like to be treated

Concepts contained in the preamble to NAR Code of Ethics

Sometimes complaints may be the result of a simple misunderstanding, or an investigation may reveal issues that require additional clarification. HUD can hold an informal meeting/conference to help resolve the issue

Conciliation

Atmosphere

Conditions under which message is sent and received

Conventional loans that adhere to FNMA and FHLMC guidelines are referred to as ____ loans

Conforming

Conventional loans are divided into 2 categories

Conforming and Non Conforming

"Focuses on what lies within each person"

Conscience

"The voice within"

Conscience

The Equal Credit Opportunity Act (ECOA) requires lenders to

Consider the income of a spouse in evaluating a family's creditworthiness

Interim Financing

Construction Loan

Used for financing new construction or renovating existing improvements

Construction Loan

Builders of new homes must furnish veterans with certain _____ before the VA will guarantee a loan

Construction Warranties

Builders of new homes must furnish veterans with certain ______ before the VA will guarantee a loan

Construction Warranties

Economic Factors: _______ refers to the willingness of buyers and sellers to enter the market

Consumer confidence

Deceptive Trade Practices Act (DTPA)

Consumer protection act that protects the public from false and misleading acts

Annuities

Contracts for lump payments or premiums created with after tax dollars

Agreed in contract

Contractual

Installment debts that cannot be paid off by paying the minimum payments in 12 months or less will be included in the applicants total long-term debt ratio, for ____ loans

Conventional

Monthly payment stability and borrower will not be able to take advantage of a drop in interest rates without refinancing

Conventional Fixed Rate Mortgage

Loan offered by primary lenders such as commercial banks and credit unions, savings and loans associations and mortgage banks

Conventional Loans

Loan that is neither federally insured or federally guaranteed

Conventional Loans

Annexation

Converting personal property into real property

Corporations are NOT required to file a certificate of business name. But ARE required to have

Corporate license from TREC

Money paid for a good or service supplied

Cost

Reproduction cost of (-) Improvements depreciation (+) Site value (=) Property value

Cost Approach

This approach is for non-income producing properties other than single family residences

Cost Approach

When choosing this approach an appraiser must receive construction costs

Cost Approach

1. Establish the improvements reproduction cost 2. Find the depreciation in dollars on the existing building 3. Establish the value of a comparable parcel 4. Make the necessary adjustments to the comparable parcel 5. Combine the figures from the previous steps into the cost approach formula 6. State the value of the subject property

Cost Approach To Appraisal Steps

A method of appraising property based on the depreciated reproduction cost (new) of all improvements, plus the market value of the site

Cost approach

In real estate, one of the most important economic characteristics is the ____

Cost of credit

The amount of money it costs to borrow funds, or the interest paid on a long term loan, is the

Cost of credit

The amount one pays on borrowed money, an interest rate

Cost of credit

Operating Expenses

Cost to maintain and run business

The Accessibility Guidelines only apply to ______ dwellings such as buildings consisting of 4 or more dwelling units if such buildings have one or more elevators and ground floor dwelling units in other buildings consisting of 4 or more units

Covered Multifamily

2 primary figures on the Request For Verification Of Deposit Form the underwriter looks at are

Current balance on deposit and Average balance for the previous 2 months

Receivers

Customers

Certificates that establish a veterans eligibility in writing and can be obtained with the following forms

DD-214 (discharge form) VA Form 26-1880 (application form) DD-13 (statement of service if veteran is still on active duty) DD-1747 (unavailability of base housing)

An appraiser should always include both the type of value assessed as well as the assessment ____

Date

Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) is sometimes called

Death Tax Bill

When a company issues bonds that are a claim against its general assets, they are called unsecured bonds or

Debentures

Conservative, they are passive investment managers that require security interest in the property being financed

Debt investors

All investors fall into 1 of 2 categories

Debt investors or Equity investors

The debt ratio formula used to qualify borrowers is

Debt payments divided by gross income

NOT considered in NOI calculation

Debt services and leasing commissions

DTI

Debt to income ratio

Determines civil penalties that the Attorney General can potentially collect from businesses that engage in false, misleading or deceptive conduct

Deceptive Trade Practices Act (DTPA)

4 key communication skills: Get your customer involved in their _____

Decision

Asset Management

Decision making process involved in maximizing returns on real property investments

What is asset management

Decision making process involving in maximizing returns on real estate investment

Physical commodities diminish. Once demand no longer justifies the high maintenance on a property, the property enters into its 3rd stage

Decline

Liens on the title limit the transferability of title and consequently ____ the property's value

Decrease

When suppy increases, real estate prices usually

Decrease

Once additional improvements or maintenance on an improvement no longer yield a positive cash flow or value contribution

Decreasing returns

In deriving taxable income on an investment property, it is generally legal to

Deduct interest payments from income

Sequential Deeding

Deed is transferred to a qualified intermediary who transfers the deed to receiving party and the process is repeated for the 2nd exchange property. Leads to a total of 4 title transfers

In a 2 party exchange the 2 principals trade

Deeds and balance equities

The property given up as often sold prior to finding or buying the property being acquired. (require- replacement property (-) or (+) equity and fair market value)

Deferred or Delayed Exchange

Would be exchanger now faces a failed exchange and obligated to pay taxes that would have been deferred

Delay closing

An economic concept that implies not only the presence of a "need" but also the existence of monetary power to fill that need

Demand

To bring about ___ the purchasing power must be available to satisfy the perceived need

Demand

4 value criterions

Demand, Utility, Scarcity and Transferability

A method of allocating the cost of an aging asset over its estimated useful life. For income tax purposes, depreciation is a provision for the estimated wear and tear of an asset. Depreciation deductions can be claimed as a tax deduction on real estate improvements, not land, regardless of whether the market indicates an increase or decrease in the value of the property

Depreciation (accounting)

A loss in value from where, use, or obsolescence (disuse)

Depreciation (real estate)

To derive the properties adjusted basis, the basis is adjusted by adding any improvements made and deducting

Depreciation expenses taken

The Appraisal Process: Collecting a detailed ____ of the property is especially important in the sales comparison approach to appraisal

Description

Equal Credit Opportunity Act (ECOA)

Designed to make credit available to every financially qualified applicant

Occurs through wear and tear or exposure to the elements

Deterioration

2 causes of depreciation

Deterioration and obsolescence

Market Analysis

Determine target audience and marketing strategies, customer base- age, income, education

Pro Forma Projection

Determines cash flows for investments/assets

Appraisal Process Step 4

Determining The Highest and Best Use •Depends on the information gathered in step 3

Managerial Style: The _____ style is not popular with many companies because it is inconsistent with their business philosophy

Dictatorial

Investor buys directly and manages personally

Direct

Employers may NOT discriminate against an individual with a ______ when they are making decisions about hiring

Disability

Physical or mental impairment that substantially limits one or more of an individual's major life activities, record of having such impairment and being regarded as having such an impairment

Disability

Another name for a Permanent Buydown is

Discount Point or Point

The Feds member banks borrow funds from their district federal reserve banks at an interest rate that is considered to be the

Discount Rate

Using words, phrases, symbols, visual aids or media in the advertising of real estate that may indicate the advertisers preference for or prejudice against members of a protected class

Discrimination in Advertising

Civil rights act of 1964

Discrimination of race, color and national origin

Brokers need to offer which services

Diverse array of services

ECOA "Marital Status" differs in important ways from "Familial Status" established by Federal Fair Housing Act. Under The ECOA, lenders may NOT deny a loan to an individual merely because that person is _______

Divorced or Widowed

If an investor decides to liquidate property previously acquired through 1031 exchange and is NOT acquiring replacement property in this transaction. Capital gains taxes are ____ on the capital gain accumulated since the purchase of the initial property

Due

Articles 1-9

Duties To Clients and Customers

Articles 15-17

Duties To Realtors

Articles 10-14

Duties To The Public

The Fair Housing Act defines a _____ as any building, structure, or portion of a building that is occupied as/or designed or intended for occupancy as a residence by one or more families. This also includes any vacant land offered for sale or lease for the construction of a building, structure, or portion of a building that is intended to be occupied as a residence

Dwelling

Individuals seeking housing are granted additional protection against discrimination by the federal

ECOA

Economic Factors: Gross domestic product measures the total amount of _______ activity and standard of living in a country

Economic

Include the local median income and interest rates

Economic

Local median income, interest rates and the availability of financing

Economic characteristics

• Job opportunities in the area •Salary/wage levels •Inflation

Economic factors

Broker well rounded training program

Economic trends, environmental issues, company policies and procedures, ordinances and code of ethics

Market characteristics influence value. These characteristics fall under one of the following categories

Economic, Social, Governmental or Physical

All the sources of income, including rent, minus vacancy and collection expenses (non-payment, late payment, etc)

Effective gross income

4 key communication skills: Listen and respond with _____

Empathy

401K

Employees can place up to $18,000 in pre-tax dollars into account

Simple (Savings incentive match plan for employees)

Employer sponsored plan typically used in small companies.

The Americans With Disabilities Act (ADA) addresses discrimination in 4 general areas

Employment, Public Services, Public Accommodations and Telecommunications

List advantages and disadvantages of decision. (pragmatic approach) obey the law, this approach tries to find solution that makes the most people happy

End Result Ethics

Certified Public Accountant (CPA)

Endorses or makes modifications to tax strategies and provides consultative services to attorney in financial planner

Lenders use an income ratio in qualifying to

Ensure a borrower has the earning power to make the loan payments

Philanthropy Protection Act 1995

Ensures the viability and integrity of a Charitable Gift Annuity (CGA)

Individual partnership interest may NOT transfer in a 1031 exchange, small investments and business properties are owned by partners. If name is under partnership, then _____ partnership must participate in the exchange

Entire

If a veteran sells his or her home to another party who does not assume the VA loan, it is important to calculate the veterans remaining _____ in order to determine what loan amount the veteran can get to purchase a new home

Entitlement

There is no required down-payment on VA loans, if the sales price and the VA appraisal amounts are _____ and the veteran has full entitlement

Equal

ECOA

Equal Credit Opportunity Act

Lender may NOT discriminate against a potential borrower because of the borrower's age or the fact that the borrower receives money from public assistance programs

Equal Credit Opportunity Act

Deferred Exchange Requirements: To defer recognition of all gain, exchanger must acquire replacement property the price _____ than net sale price of relinquished property equity amount- downpayment on replacement property

Equal or greater

General Recommendations: Be careful to treat all parties involved in a transaction _____

Equally

Title VII Of the Consumer Protection Act

Equilal Credit Opportunity Act (ECOA)

Amount of a property that the investor has actually paid for

Equity

That portion of a property's value owned by the legal owner, expressed as the difference between the property's market value and all loan balances outstanding on the property

Equity

Funds applied to the actual principle on a loan, rather than the interest, plus any gain in property value through appreciation

Equity (equity buildup)

Mortgage loan where the lender has a partial equity interest in the property or receives a portion of income from the property during ownership (if its an income producing property)

Equity Participation Mortgage

A pool of large scale income properties wherein shares are sold to investors

Equity REIT

What is the difference between an equity REIT and a real estate syndicate

Equity REITs pool properties and sell shares to investors, while real estate syndicates pool several investors funds to purchase one property

What is the final cash flow from real estate

Equity build up

Sarah is a real estate investor, she owns several homes in Galveston that she rents out on both short and long term leases. She has mortgages on the homes that she pays monthly. What is the portion of her mortgages that is applied to the principle for each loan considered

Equity buildup

Utilize venture capital and unsecured investment money that usually demands a very high interest rate and take a more active, although unsecured, role in their investment

Equity investors

When the Internal Revenue Service (IRS) eliminated tax deductions for interest paid on consumer loans but preserved the deductions for interest paid on home loans, more interest was created in

Equity loans

3 types of REITS

Equity, Mortgage, Hybrid

Risk Management: _______ insurance covers certain claims against the company due to oversights and mistakes

Errors and omissions

This insurance covers the claim resulting from the oversights and mistakes of company's salespeople

Errors and omissions insurance

For loans less than 80%, no ____ account is required

Escrow

____ accounts held by the lending institution to which the borrower pays monthly installments for property taxes, insurance and special assessments

Escrow

Real estate salespeople have NO control over

Escrow accounts and funds

Philosophy

Establishes the company's attitudes towards its services, products, customers and employees

Business Plan

Establishes the company's mission statement, goals and strategies

In the income capitalization approach, an appraiser

Estimates net income and applies a capitalization rate to it

Appraisal Process Step 5

Estimating The Land Value •Appraiser evaluates land parcel separate from any improvements upon it •Appraiser locates similar parcels to adjust and compare with subject land parcel •Completes with Sales Comparison Approach

Appraisal Process Step 6

Estimating Value With Each Of 3 Approaches

Societal Standards and Principles

Ethics

Best describes the relationship between ethics and morals

Ethics are essentially comprised of a set of principles based on morals

Some unacceptable words/phrases for newspaper advertisements

Ethnic Landmark, Oriental, Mentally Handicapped, Exclusive, Couple, Family, Private and Integrated

Discounted Cash Flow (DCF)

Evaluate the price of a property and the return of several alternatives

Puffing

Exaggerated or superlative comments or opinions.

Market Allocation

Example: The Brokers in a certain area meet and agree that some brokers will handle residential property under $100,000, others will handle residential property over $100,000, others will handle commercial property

Inflation Predictors: The ______ rate is the amount of a foreign currency that a dollar can buy

Exchange

One who takes title to property to meet the requirements of IRS section 1031 and Treasury Revenue Ruling 2003-37 to facilitate a reverse exchange

Exchange Accommodation Titleholder (EAT)

1031 Exchanges

Exchange of property (real & personal) held for productive use (in trade or business) or investment

Identification Period (45 day rule)

Exchanger conducting a deferred exchange must identify a replacement property within 45 days of selling

Acquisition Period (180 day exchange period)

Exchanger deferred exchange must close the sale of replacement property within 180 days of closing sale

3 property rule

Exchanger may identify a Max of 3 property (replacement) without regard to fair market value

Mortgage Boot

Exchangers amount is effectively reduced

Before writing a purchase offer or presenting CMA realtor shall ask if they are a party to any _______ agreement

Exclusive Representation

1995 CGA Antitrust Relief Act

Exempts CGAs from antitrust laws: 1933 securities act, 1934 securities exchange act, 1940 investment company act

The ratio of the housing expense of a borrower, or PITI, to the net income of the borrower

Expense to income ratio

Methods of recruiting salespeople: One of the most important criteria of hiring employees is ____

Experience

The Fair Housing Amendments Act of 1988

Extends discrimination to include gender, handicapped status, and family status

Reduction in property's value caused by factors outside the physical boundaries of the subject property, such as social, environmental, or political factors, also known as "economic depreciation". Usually cannot be rectified by owner

External obsolescence

Zoning laws, supply and demand, or a changing highest and best use cause

External obsolescence

A government loan designed to preserve the nations existing housing stock by facilitating renovation and restoration. Down-payment as little as 3% and loan amounts up to 110% of the homes after improved value

FHA 203K Property Rehabilitation Program

Help low and moderate income families become homeowners by lowering some of their mortgage costs. Lower down-payments but the expense of mortgage insurance premium paid by the borrower and the low limits on the loan amount

FHA Insured Mortgage

Federally Insured Loan

FHA Loans

Debts with 6 or more payments remaining will be included in the applicants total long-term debt ratio, for ____ loans

FHA and VA

Federal Home Loan Mortgage Corporation, aka Freddie Mac, purchases first mortgages on residences

FHLMC

Federal National Mortgage Association, aka Fannie Mae, supplies home mortgage funds through a congressionally chartered, shareholder company

FNMA

Statement or assertion of verified information about something that is the case or has happened

Facts

The Secretary of the Department of Housing and Urban Development (HUD) is in charge of enforcing

Fair Housing Law

Code of Ethics- Article 10

Fair Housing- No discrimination based on race, color, sex, familial status, national origin, religion, handicap, sexual orientation or gender identity

Value of the property without deductions taken for any loans or other liabilities secured by the property

Fair market value

Rising interest rates cause _______ property values because most property is purchased with borrowed money and the purchasers who are paying more in interest are willing to pay less for the property itself

Falling

An example of a principle plus business property

Family Farm Property

Issues what are known as mortgage backed securities Mortgages are purchased on an administered price system

Fannie Mae

____ is now a privately owned purchaser of FHA,VA and Conventional loans

Fannie Mae

The major organization's operating in the secondary mortgage market are

Fannie Mae, Freddie Mac and Ginnie Mae

Major participants in the secondary residential mortgage market are

Fannie Mae, Ginnie Mae and Freddie Mac

______ governments provide tax credits for real estate

Federal & State

In 1989, the Texas Congress passed the Texas Fair Housing Act. It created a body known as the Texas Commission on Human Rights. They are both analogous of the

Federal Fair Housing Act and HUD

The largest holder of mortgage loan debt for 1 to 4 family units are

Federal and related agencies

The Access Board (Architectural and Transportation Barriers Compliance Board)

Federal organization that issues guidelines to ensure that buildings, facilities and transit vehicles are accessible and usable by people with disabilities

Fair housing protected classes are established by

Federal, State and Local Laws

Sarah believes a real estate agent has kept her from seeing certain property for rent because she is a woman. What actions should she take if she wants legal satisfaction for her complaint

File a complaint with HUD and/or file suit against the offending parties in a state or federal court within the prescribed time period

Decision reached after careful consideration of all facts, assumptions, effects on people and groups, available resources (people and written) and results applying 4 approaches to decision

Final Decision

________ section of business plan includes cash flow statements, income, profit and loss statements, balance sheets and 1 year budget

Finances

A lender may ask only questions that are relevant to an individuals ______ standing. This means that while asking if someone is divorced is inappropriate, asking if someone must pay alimony is acceptable

Financial

Risk Management: A risk management plan allows companies to decide how they wish to allocate _______ resources to prepare for lawsuits

Financial

The provisions of _____ are aimed at protecting federally insured banks from fraudulent or incompetent appraisals and preventing dishonest industry pressure

Financial Institutions Reform, Recovery and Enforcement Act (FIRREA)

______ makes investments strategy recommendations

Financial Planner

Tax favourable transactions involve qualified products require a broad range of skills, parties whos special skills will help a licensee to craft a quality transaction

Financial planner, A certified public accountant, Lender

Non Qualified Products

Financial products purchased with after tax dollars

When nonprofit organization gets a donation, in return they agree to pay 1 or 2 persons (annuitants) a ____ of income for life (annuity)

Fixed Stream

A (CGA) provides guaranteed _____ favourable income stream for up to 2 people- 1 donor and possibly for another person whom the annuity is assigned after the donors death

Fixed and tax

Conventional Loans

Fixed monthly payments that go towards principle and interest on loan and slowly amortize the loan balance until paid off

Real property held for business or investment is considered like kind to all other such property. Exceptions are ____

Foreign property and partnership interests

1099s

Form used to report sale or exchange of home to IRS

Reliable appraisers should have all of the following

Formal Education, Field Experience, Complete Objectivity and Competency

Seller (C) of the exchange does NOT want to take title to sell (A) property. 4th party (accommodator or intermediary) is brought in, who buys (A's) property, exchanges it with seller (C) for (seller C's) property

Four Party Exchange (Accommodation Exchange)

Exchanger must prove intent to conduct exchange before the sale of relinquished property or else exchanger and any associated real estate licensees may be liable for _____

Fraud

Since 1973, the DTPA has been the most important tool in the Attorney General's fight against ______ practices

Fraudulent Business

Securities sold are known as participation certificates (PCs) Created during the Savings and Loans crisis of the 80s

Freddie Mac

___ buys VA, FHA, Conventional and Adjustable Rate loans that meet its underwriting criteria

Freddie Mac

___ was created to provide a secondary market for conventional loans during the Saving and Loan crisis of the 80s

Freddie Mac

The 2 largest purchasers of home loans on the secondary market are

Freddie Mac and Fannie Mae

Outdated layout or design

Functional Obsolescence

The ____ fee takes the place of the Mortgage Insurance Premium in FHA loans

Funding

____ is the cost of receiving a VA guarantee

Funding Fee

4 written communications are effective for distributing information and providing a printed document for _____ references

Future

Appraisal Process Step 3

Gathering, Recording and Verifying Data •Begins with gathering general information relating to geographic and economic characteristics of the area where property is located

A property manager would be what kind of agent

General

All members own and manage

General Partnership

Owned by the Government

Ginnie Mae

Wholly owned by the government Activities are under the direct supervision of HUD The only issuer of government guaranteed MBSs

Ginnie Mae

What is needed to establish the significant cash flows required for a return on real estate investment

Good asset management plan

Commercial Broker and salespeople must be able to explain why property is a

Good investment

Include property taxes, zoning laws and rent controls

Governmental

____ controls influence property use and distribution

Governmental

____ controls property taxes, zoning laws and rent controls

Governmental

Not available in today's mortgage market, must be aware if listing a property. This loan was designed to negatively amortize and are sometimes referred to as negative amortization loans. Payments increase over the next 5 years until they level off sufficient amount that fully amortizes the loan over remaining loan term period

Graduated Payment Mortgage (GPM)

+P*

Greater than the current price level P, inflation is expected

Acts as a screening committee for complaints, they decide if there is a possible violation of the NAR code

Grievance Committee

Mediation occurs prior to or after the ____ reviews the allegations

Grievance Committee

The arbitration process begins with the request for arbitration that is reviewed by the _____

Grievance Committee

GDP

Gross Domestic Product

Commissions on in house sales, Referral fees, Appraisal fees & Cooperating transaction commissions are examples of

Gross Income

Sales Price (-) Adjusted Basis (-) Depreciation Example: Purchase for $50,000, Depreciates $40,000 and Sells for $65,000 ($65,000 - $40,000 - $10,000 = $15,000 $15,000 / $65,000 = 23.08%

Gross Profit

The formula for determining taxable income produced by an income property is

Gross income minus expenses minus building depreciation

Net Income

Gross income minus total operating expenses

A new property experiences a period of ____ in which its short supply will drive up demand and consequently, value

Growth

Inflation Predictors: Strong economic ____ measured by the gross domestic product or GDP can also indicate future inflation

Growth

Fixed interest rate with an average 1 full percent below the 30 year fixed mortgage rate. Payments increase annually reducing principal and paying off loan in 12 to 17 years depending on amount of increase of payments. Typically 3%, 5% or 7.5% per year

Growth Equity Mortgage (GEM)

The principle of change states that no commodity remains constant and value always shift as a result of natural phenomena and market demands. This occurrence creates what is called inclining in declining periods, or the 3 stages of a community's existence:

Growth, Stability and Decline

Veterans pay a one time up front funding fee as the cost of receiving the _____ loan

Guaranteed

Members of the public who feel they have been or are being discriminated against may file a suit with

HUD

Limited Partnership

Has 2 types of partners- limited and general. (Limited- investor / general- assume personal liability NOT business liability)

A disabled person is someone who

Has a physical or mental impairment that affects his or her performance of major life activities

Insurance coverage that in the event of physical damage to a property from fire, wind, vandalism, or other hazards

Hazard Insurance

Companies with telephone service must offer communication access for people with speech or ______ impairments

Hearing

(P/E)s above 16 are

High ratios

The one most profitable and efficient use of any given tract of land, which must be legal, financially viable, productive and physically plausible

Highest and best use

When considering a proposed or possible expansion site, office location, project or investment, such organizations may use appraisers to evaluate a number or of financial feasibility principles, including the ______

Highest and best use

Enacted in 1973, to provide lawful protection for consumers during business transactions and gave the Attorney General authority to seek civil penalties in the amount of $2000 per violation

History of DTPA

The practice of redlining is specifically prohibited by

Home Mortgage Disclosure Act

For this exemption to apply, the housing is occupied only by persons who are 62 years of age or older and 80% of the housing units have at least one occupant who is 55 years old or older

Housing for Older Persons

Commercial Brokers and salespeople must have a clear understanding of

How location, taxes and purchase arrangements affect the return on investment

A VA certificate of eligibility determines

How much of a loan the VA will guarantee

A homeowner borrows money from a lender and gives the lender a mortgage on the property as collateral for the loan. The homeowner retains title to the property. This is an example of

Hypothecation

V (value) =

I/R ( I= net operating income/R= capitalization rate)

Which describes a retirement vehicle that is purchase using pre-tax dollars

IRA

•Co-owners each hold separate title to property themselves •No more than 35 co-owners •Co-owners cannot act as a partnership for business or tax purposes •Co-owners must obtain rights to sell, lease and manage the property •Proceeds and liability must be shared among co-owners •Co-owners must share profits, losses, and debt in proportion to their respective interests

IRS

International Population

Immigration and international corporations moving workers from country to country

Appurtenance

Immovable or fixed to the land

It is best to offer _____ to referring and referred tenants to increase likelihood of a successful referral

Incentives

The exchanger must use the replacement property as an investment, rental or for the production of _____

Income

Most reliable for commercial or income producing properties

Income Capitalization Approach

When choosing this approach an appraiser must know a property's investment return and figures relating to personal investment amounts

Income Capitalization Approach

Appraisers only use the income capitalization approach for ____ properties

Income Producing

Underwriters approve or deny a mortgage loan application based on an evaluation of

Income and Assets, Credit and Property

2 of the financial rewards the investments offer are

Income and tax benefits

A method of estimating the present value of the property's anticipated income benefits

Income capitalization approach

Real property objective that is also real property security objective

Income stream

Tax Deferred

Income that is not subject to taxes immediately but that will later be subject to taxes. (Not tax free)

5 concerns a lender verifies when qualifying the buyer

Income, Credit, Net Worth, Source Of Funds and Debts

Ownership Benefits

Income, appreciation, tax shelter: depreciation and interest deductions

When demand increases, real estate prices

Increase

Inflation

Increase in price goods and services that causes decrease in purchasing power of the buyer

Estate Tax Relief

Increase in unified estate tax credit

When the money spent on a particular improvement yields a proportionate or greater value contribution

Increasing returns

Inclining and declining periods for the property as a whole, is ascertained by 2 determining periods

Increasing returns and decreasing returns

Exchanging property under section 1031 is NOT tax free transaction. Tax deferred ______ until replacement property is sold or exchanger dies

Indefinitely

An appraiser calculates the value of the building and the value of the land ____

Independently

An ___ for an ARM is always based on external, economic factors that the lender does not control

Index

Published measure of interest rates on certain types of investments

Index

IRS will NOT permit ____ ownership interest exchange even if assets are real estate partnership

Individual

Cannot use this approach when managing an office, each person has their own personal ethical code

Individual Conscience Ethics

Uses individual and personal believes in order to establish a standard for decision making

Individual Conscience Ethics

Tax Deferred Exchange (1031 Exchange)

Individual can sell investment property and defer taxes associated with transaction

IRA (Individual Retirement Account)

Individual retirement plans, they are like 401Ks in that interest accured in them is nontaxable

Economic Factors: In order to manage _____ the government will adjust the interest rates

Inflation

Even without appreciation the value can increase through

Inflation

How can I property increase in value without appreciating

Inflation

The increase of money in circulation coupled with a rise in prices, resulting in a deadline in the value of money, is called

Inflation

The beginning rate on the ARM. It will stay the same until adjusted either up or down on adjustment date specified in the mortgage

Initial Interest Rate

All ARMs have 4 basic features:

Initial interest rate, Adjustment interval, Index and Margin

Installment payments extended into another tax year

Installment Sales

Fixed beginning and ending date example: car loan

Installment debts

A borrowers recurring liabilities can be broken down into 3 categories

Installment, Revolving and Other

Refers only to the amount for which an insurance company insures a property

Insurable value

Remind sellers that any ______ made will show up on report. The buyers insurance company runs before writing policy for buyer

Insurance claims

Demonstrable discriminatory ____ is NOT sufficient to establish discrimination legally

Intent

Affirmative misrepresentations and affirmative concealment, when person making the misrepresentation is aware of the true facts. Example: Builder didn't build home right and was falling apart. (promise made without any intent of performing it and saying something is a fact, when it is not true)

Intentional Fraud

___ is the rent paid on money

Interest

___ are determined by the market, individual lenders, but are influenced by the Federal Reserve Systems open market activities and its primary lending discount rate ( the interest rate the FED charges to other banks)

Interest Rates

Tax Deferral

Interest free, No term loan from the IRS on the taxes due

Adjustable Rate Mortgage (ARM)

Interest rate lower than market rate for conventional loans, rate is adjusted at set intervals (adjustment periods)

______ are negatively correlated, interest rates are high consumers pay more on rent and have less money for rent on real estate

Interest rates and property values

Individual partnership CANNOT exchange their individual partnership _____

Interests

Many of the real estate related activities for commercial banks include construction loans, also known as

Interim financing

Cost effective way to provide information to customers

Internet

To be exempt from federal income tax, real estate investment trust (REITs) must be structured to

Invest at least 75% of its assets in real estate, other REITs, securities or cash

____ properties pose complex value calculations. An experienced appraiser often needs to gather the necessary data and complete computation before submitting a valuation

Investment and Commercial

The rational behind 1921 act was to maintain the continuity of ______ (allow investors to have truly liquid assets that they could sell to buy other assets without losing money in the exchange) and to make it easier and simpler for the government to monitor and regulate exchanges

Investment liquidity

Legislation provides protection to the ____ and establishes the Charitable Gift Annuity (CGA) as a distinctive investment option

Investor

Leverage, Diversification, Management relief, Consolidation, Cash flow and Increase depreciation

Investor Motives

How does Cap Rate Analysis work?

Investor uses a projection of the NOI of a property in 10 years and the expected rate at which future investors will desire to capitalize his/her income to determine future value for property. Investor can compare future value with sale price to predict return on investment

FHA does NOT insure loans to ____, only homeowners

Investors

One of the disadvantages of investing in real estate is

Investors need expert help

Veterans service cut short due to injury or reasons out of their control, such as _____ may still be eligible for VA loans

Involuntary reduction in force

Basics of The Professional Standards Enforcement Process: 2 Basic Types of Cases

Issues of ethics in relation to possible violations to the NAR code and Request for arbitration related to a money dispute between 2 realtors usually from different firms

How does the secondary mortgage market aid borrowers seeking a mortgage loan

It cycles funds back to primary lenders so they can make more loans

How is a tax credit treated for income tax purposes

It is a direct reduction in tax due

Sam wants to rent out his home, but wants to exclude families with children because of his belief that they cause damage. Under what conditions would federal fair housing laws allow Sam to rent on these terms

It is a single family house, and the owner owns only one other rental home in addition to his own residence

Why is it risky for an investor to purchase raw land with the expectation that there will be growth in the area in the future

It's intrinsic value and potential appreciation is difficult to determine

How the ADA affects the real estate industry

It's most noticeable effects are on the operations and construction of real estate brokerages and on broker representation in transactions involving commercial property

Money award for dispute not paid voluntarily, arbitration award can be taken to court enforced through ___ processes

Judicial

Insurance companies only insure improvements and not the ____

Land

Lessor

Landlord

General Recommendations: Never conduct business with individuals who are unwilling to comply with the _____

Law

Insurance policies protect a company from unexpected events such as

Lawsuits and accidents

Only a plan that fits the following criteria may be the highest and best use

Legal, Financially viable, Productive and Physically Plausible

There is no limit on the amount of a loan a veteran can obtain, the _____ determines this

Lender

Margin

Lender adds fixed rate

______ are a source of funding for various transactions

Lenders

A national list of all licenced and certified appraisers is available to ____ institutions

Lending

-P*

Less than P, deflation is expected

How is a loan qualifying ratio used to determine the maximum monthly payment a borrower can make, with respect to the borrows gross monthly income and long term debt? The borrower's total housing expense ratio (X) the borrower's gross monthly income (=) the maximum allowed housing expense with respect to housing expenses. Then, the total debt service ratio is (X) by the difference between gross monthly income and the long term debt to find the maximum allowable housing expense with respect the borrows debt. The LESSER OR GREATER of the 2 maximum expenses is the maximum allowable housing expense?

Lesser (Choosing the lesser expense gives a figure less than or equal to both maximum housing expense figures)

John has purchased an investment property through the use of borrowed funds. In doing so, he is taking advantage of

Leverage

Risks generally are directly proportional to ______

Leverage

The relationship between the yield rate of an investment and the interest rate of funds borrowed to finance the investment. If the yield rate is greater than the loan rate, positive leverage results. If the yield rate is less than the loan rate, negative leverage results

Leverage

The use of loaned funds to finance an investment

Leverage

A buyer makes a minimal down payment and borrows a balance needed to purchase real property. This is called

Leveraging

Appraisers for bank use must be either certified or _____

Licensed

Any report involving a 1 unit to 4 unit residential complex/dwelling worth less than $250,000 or most non residential property worth less than $250,000 may be completed by a

Licensed appraiser

IRS form 8824

Like-Kind

Deferred exchange requirements: Replacement property must be of ______ to relinquished property

Like-kind

General partner manages, limited partners own but do not manage

Limited Partnership

The assumability of an FHA insured loan is

Limited by when the loan was originated

The loan becomes due when investor _____ his investment for good

Liquidates

The degree to which an investment is readily marketable, or convertible to another form of asset. If immediately salable, an investment is liquid; the longer it takes to sell, the more illiquid the investment. Real property is relatively illiquid in comparison with other types of investment

Liquidity

Appraisal Process Step 2

Listing The Necessary Data and Its Sources •Which approach/approaches will be used

Take claim or dispute to court of law- go to law

Litigate

Risk Management: A company can protect its self from lawsuits by purchasing insurance or by setting up a ______ fund

Litigation

An amount paid to the lender to lower the lending rate, loan discounts are expressed in points, where one point equals 1% of the loan, 8 points is equivalent to a 1% interest rate reduction

Loan Discount

The fraction of the appraised value of the property offered as collateral which the lender is willing to lend

Loan to value ratio

Voluntary dispute resolution process, offered by _______ they appoint a mediator who help resolve the dispute, mutual agreement between parties

Local Boards and Associations

FHA loan limits vary depending upon ____ of properties

Location

Office Space

Location, size, site

Mortgages, deeds of trust, stocks, and bonds

Long term financing

SEP IRA (Simplified Employee Pension)

Low cost pension plan useful for small businesses.

Temporary Buydown Advantages

Low initial payments and The borrower is most often qualified on the basis of the lower initial payments

ARM advantages

Low initial payments and the borrower is most often qualified on the basis of the lower initial payments

(P/E)s below 16 are

Low ratios

What is a feature of long term leases

Lower rates

Farming Techniques: _____ include newsletters, postcards, flyers, brochures that licensees wish to send to prospects

Mailings

The business owner identifies the owners and employees in the ________ section of the business plan

Management

_______ section, owners identify owners and sales agents of the business plan and explain how their skills will benefit the company

Management

Business plans serve as a ________ that allows business owners to track their progress

Management tool

Exchange Accommodation Titleholder (EAT)

Many qualified intermediaries perform this service. Exchanger hires to satisfy the legal requirements of a reverse exchange. (Job- purchase & hold title- Replacement property )

An additional amount the lender adds to the index to account for business expenses

Margin

The sales comparison approach is also called the ____ data approach

Market

Anti-trust laws prohibit competing firms from dividing their markets to insulate themselves from each others competition

Market Allocation

Brokers need to understand which trends

Market and economic trends

The sales comparison approach, is also called the

Market data approach

The most profitable price which a property should bring in a competitive and open market

Market value

After creating a business plan you should make a

Marketing plan

Sellers Disclosure

Material fact seller knows about property

200% rule

May identify any number of properties as long as the fair market value does not exceed 200% of aggregate fair market value of relinquished property

95% rule

May identify any number of property without regard to aggregate fair market as long as exchanger acquires 95% of aggregate fair market value of all replacement properties prior to the end of the 180 day of acquisition period

Discrimination: This definition does NOT concern itself with weather a real estate professional _____ to be discriminatory

Meant

Taking a ____ in a appraisal society helps one maintain his or her professional credentials and keep up-to-date in the appraisal field

Membership

Lead

Metallic element found in rocks and soils, can cause damage to brain and kidneys

Mortgage Broker

Middleman who initiates loan process bringing together lender and borrower

What is the degree of risk associated with real estate investment

Moderately high

Short term financing

Money market

Making Home Affordable Program, Home Affordable Modification Program, and Home Affordable Reference Program are government programs that have the potential to lower a homeowners ________

Monthly mortgage payment

Growth Equity Mortgage (GEM) disadvantages

Monthly payment increases overtime and must determine if able to make payments as they increase over the years

The term Realtor has competency, fairness and high integrity resulting from adherence to a ideal of ____ conduct in business relations

Moral

Personal Beliefs

Morals

A financial institution experiencing disintermediation is best described as

More funds being withdrawn than deposited

Promissory Notes: A ____ loan actually includes 2 documents: a mortgage and a promissory note

Mortgage

___ control the greatest share of the primary lending market. They manage capital, not from personal deposits but from large investors like insurance companies and retirement funds

Mortgage Bankers

Payments on amortization loans are calculated by using

Mortgage Constant Factors

_____ can be obtained from amortization tables, financial calculators or financial programs on personal computers

Mortgage Constant Factors

1st time buyers can apply for ________ before obtaining a home loan allowing tax credit for a portion of their mortgage interest

Mortgage Credit Certificate (MCC)

Fannie Mae does NOT own or sell Mortgage-backed securities, a lender brings a ______ to Fannie Mae and Fannie Mae exchanges the guaranteed securities with the lender for the mortgages

Mortgage Package

A property's equity represents its current value less

Mortgage indebtedness

Which of the following circumstances would create a voluntary lien

Mortgage on the property

Fannie Mae issues ______ which are investment instruments like stocks, which pay returns to their holders

Mortgage-backed securities (MBSs)

VA and FHA appraise properties before insuring or ____

Mortgaging

Deferred Exchange (Delayed Exchange/Starker)

Most common 1031 exchange, exchanger sells property they are relinquishing before buying replacement property

The Cap Rate

Most widely used method of valuing income producing real estate cap rate (=) NOI (Net Operating Income) (÷) net present value of property

Cash Flow

Movement of money in and out of the business

Growth Equity Mortgage (GEM) Advantages:

Much like a fixed rate loan that borrower self accelerates. 2 differences: Never a prepayment penalty and The structure of the loan makes acceleration mandatory rather than optional

Tax-exempt

NOT subject to taxes

Realtors should recognize that the interest of the ____ and its citizens require the highest and best use of land and the widest distribution of land ownership

Nation

Federal Reserve System (The Fed)

Nations Monetary Manager (Has a role in creating conditions favorable to high employment, stable values, internal growth of the nation and rising levels of consumption)

Asbestos

Naturally occurring mineral fibers found in rocks linked to cancer of lungs and stomach

Who would be a good candidate for CGA

Need to fund life insurance for long term care, Have low mortgages, Own properties that are not producing income, Are younger investors who want to defer income for retirement, No longer want to manage the property, Need income and tax relief, Own highly appreciated real estate

If payment being made is NOT sufficient to cover the interest due for any payment period, then the unpaid interest is added to the principal balance

Negative Amortization or Deferred Interest

Failing to perform some duty required to perform under law, or failing to perform duty in accordance with industry standards (pending lawsuit)

Negligence

Statement made by a person who did not know that the statement was false, they had no reasonable basis believing its truth or should have known of its falsity Example: Landslide- Realtor saw the area and had an idea about it but didn't say anything

Negligent Misrepresentation

The applicants current assets, including the source of funds being used for any down payment and settlement costs

Net Worth

An annual representation of realized profit (gross income minus operating expenses)

Net operating income

Managerial Style: Most ____ managers fall victim of laissez-faire style because they want employees to like them

New

1031 Exchange

New property is effectively a continuation of the exchangers old investment

Deferred Exchange Requirements: Is personal property for private use for real property or foreign real property for domestic property like-kind to relinquished property?

No

The city recently zoned a land filled nearby the home. May this prevent an arms length sale?

No

=P*

No inflation is expected

Non-accelerating inflation rate of unemployment (NAIRU)

No pressure for either inflation or deflation

Does ECOA apply to all lenders?

No, ECOA applies only persons or institutions that make loans on a regular basis

Conventional loans that do NOT adhere to FNMA and FHLMC guidelines are referred to as ____ loans

Non Conforming (Jumbo Loans)

Not bound or secured by a contract

Non Contractual

Expressed with persons facial expressions, body language and gestures. Includes smiling, eye contact, scowls, fidgeting and touching

Non verbal communication

Property held for resale (inventory or dealer property)

Not exchangeable, requires exchange property to be acquired with the intent to hold for investment (no minute holding period, sufficient to prove held for investment)

Terminating one agreement by replacing it with another, usually including a new party or parties

Novation

Any personal interest in a particular property must be disclosed to all revelant parties

Objectivity

Annuity

Obligation to pay specific sum to recipient

Changing laws and tastes most commonly cause _____

Obsolescence

Disuse

Obsolescence

Signs placed directly on a property for rent/lease can be effective tools in increasing the ____ rate

Occupancy

Adjustment related to location

Off site features

LLC (Limited Liability Company)

Offers businesses the benefit of both partnership and corporation

Which department was the U.S. Treasury instrumental in creating to establish a national currency to finance the Civil War

Office of the Comptroller of the Currency (OCC)

Adjustment related to physical differences between 2 properties

On site features

Factors for which an appraiser may adjust the comparables purchase price are grouped into 3 categories

On site features, off site features and sale conditions

The Appraisal Process: Identifying the property with a complete legal description is part of step ___ in the process

One

Banks offer _____ where they provide both interim and permanent loan, allowing the borrower to save costs

One Time Closing Loans

Charitable Gift Annuity (CGA)

One option offering a simple and dynamic income and tax solution

Sole Proprietorship

One owner has complete control over the business

P*

One reliable predictor of inflation

Allows mortgagors to borrow additional funds at a later date on top of the original loan amount

Open End Mortgage

Manager can encourage feedback by asking

Open-ended questions (How, What, Who, When or Where)

Commissions paid to salespeople, MLS fees, Rent, Legal services, Office supplies & Marketing costs are examples of

Operating Expenses

All the costs associated with maintaining and running the property

Operating expenses

The ______ section allows the business owner to establish how he/she wishes to run the business

Operations

_____ section, how the owner wishes to run the business- managed/hiring/insurance/lease agreement

Operations

Expense of time and money relative to other applications, or expense opportunities

Opportunity cost

HUD got assistance from: •The Southern Building Code Congress International •The National Association of Home Builders •The National Coordinating Council on Spinal Cord Injuries in developing a series of proposals defining the phrase "Reasonable Accommodation" ______ became the basis for HUDs final accessibility guidelines

Option One

USPAP does NOT allow ____ reports

Oral

Inflation Predictors: P* is = to the quotient of long run aggregate demand and the federal boards estimate of potential domestic ______

Output

Cap Rate Analysis

Overlooks the deeper reasons behind NOI

Loan discount points may only be deducted from homeowners gross income if the points are

Paid in cash at closing

Deferred exchange requirements: Each _____ of real estate involved in exchange must be held for investment or use in trade or business

Paracel

Securities sold by Freddie Mac are called _____ they work the same way as Fannie Maes Mortgage-backed securities (MBSs)

Participation Certificates (PCs)

Managerial Style: Organizations that use _____ style thrive on the talents and insights of its employees

Participative

NAR established a guide for implementing Standards Of Care called

Pathways to professionalism

When taxpayer remains in same taxbracket or moves to lower taxbracket

Paying smaller taxes

Annuity

Payment received every year

Recession

Period of reduced economic activity

Capital Gains Exemption

Permits capital gains (single-$250,000 & married filling jointly-$500,000) must have owned home for at least 5 years, been principle residence for 2-5 yrs before sale, sale of home must be only exempted sale taxpayer has made in past 2 yrs

Taxpayer Relief Act (TRA-97)

Permits capital gains on the sale of a personal residence of up to $500,000 for married couples filing jointly and $250,000 for singles.

2nd home might be rented out and could qualify as a rental property if owner uses for personal use for more than 14 days, one year or 10% of days it is actually rented. It's NOT an investment or rental property for that tax year, it will be treated as a 2nd ______ residence

Personal

Exchanges of like kind

Personal Property Exchange

Chattels

Personal property

Business aircraft for another business aircraft, Livestock for other livestock, Mexican gold coins for Australian gold coins, Restaurant equipment for other restaurant equipment are

Personal property exchanges

Personal Property Exchange

Personal property held for investment or for productive use in a trade or business can qualify for tax deferred exchange

All persons that will probably be affected by whatever decision is reached

Persons Affected

An adequate physical description is so important that many appraisers use a ___ to record the property's condition

Photo Journal

The location of the property, its age, its condition

Physical

1. Proximity to shopping, schools, places of worship, public transportation 2. Climatic conditions 3. Physical hazards or natural hazards 4. Character in soil- Farmland 5. Size- width, depth and shape of lot 6. Action of the sun 7. Topography- varying from level land and hillside property

Physical Characteristics

Real property posseses seven basic characteristics that fall into 2 categories

Physical and economic

Capital

Physical assets that can be used to produce income. Business net worth

The location of the property, it's age, its condition, and the climate in which it is located all affect value

Physical characteristics

People who were previously addicted to illegal drugs, people who are present or former alcoholics, and people with AIDS can all be considered disabled if they have serious ______ impairments arising from these conditions

Physical or Mental

When looking at comparables, Ann finds one recent sale that is almost the same as the subject property as far as features, but the sale did not occur in arms length. What should she do?

Pick a different property

Neglecting proper ______ can cause beneficiaries a great deal ranging from 41% to 72% of their networth. Losses include: highly appreciated assets such as stocks, bonds and real estate as well as pension funds that may have been established

Planning

Business plans serve as __________ that allow business owners to prepare for any potential roadblock or complication

Planning tools

Lenders manage the risk of a loan going into default by the amount the buyer is required to

Pledge as collateral

____ are what lenders charge borrowers for providing a loan

Points

Broker must have made available to sales agents with policies and procedures of brokerage firm

Policy Manual

•Building codes •Mass transportation system •Adequate fire and police protections •Legislation with attention to solution of community problems

Political or Governmental influences

If the property converting its capital at a low rate

Poor management, ill repair, high vacancy from low demand

Income from interest, stocks dividends, and royalties is

Portfolio Income

Letter of warning, Letter of reprimand, Education, Fine not to exceed $2,500, Probation for 1 year or less, Suspended from board membership- not less than 30 days nor more than 1 year, Expulsion from board membership for a period of 1-3 years, Suspension or termination of MLS, Administrative processing fee (if found in violation) not to exceed $500 (court costs)

Potential Professional Standard Hearing Panel discipline actions

A property's maximum profit opportunity providing for no vacancies or collection losses

Potential gross income

Net operating income equal to

Potential gross income minus vacancy and credit loss minus expenses- Annualization Formula

Disadvantages of an ARM

Potential of negative amortization and Potential higher payments in the future

Boycotting

Practice of unfairly excluding brokers from real estate professional associations or withholding patronage- (support, privilege) from other businesses

Standards Of Care conforms to establish

Practices

In 1862 to the U.S.'s 1st income law was enacted to help support the expenses created by the Civil War

Pre-Starker Exchange Law

Introduction

Preamble

The ____ of the NAR Code of Ethics contains concepts which all realtors are expected to aspire

Preamble

Take Priority

Precedence

The price of earnings ratio

Predicting the price of a stock is the price to earnings ratio (P/E). Tells investors how much in dividends they will receive per dollar of stock purchase

The "no ____ penalty" provision applies to ALL VA loans

Prepayment

___ is the accepted contracted amount, transaction charge or the value at which the property actually sells

Price

An agreement between competing real estate brokers to fix prices each will charge a 3rd party violates state and federal antitrust laws

Price Fixing

Commercial banks, Credit unions and Life insurance companies are examples of ______ participants

Primary market

Making a deposit into a credit union is an example of investing in a

Primary market

_______ residence cannot qualify as like kind replacement property

Principal

Implies 2 things progression and regression

Principal of conformity

When all homes in a given area are of similar design, age, size, maintenance, and market appeal, value increases

Principal of conformity

PITI

Principal, Interest, Taxes, Insurance

Proper relationships between supply and demand, land, labor, capital, management and consumers and producers increases value

Principle of balance

No commodity remains constant and value fluctuates due to natural phenomena and market demands

Principle of change

The availability of similar properties in a local area affects the value of the particular property in question

Principle of competition

An improvement to home is only worth as much as it adds to the property's market value and does not relate to improvements actually cost

Principle of contribution

Property values are influenced by outside factors such as currency rates, world conflict, the stock market, a change in tax code, and/or the development of governmental services

Principle of externalities

The price someone is willing to pay for a property is only as high as the amount that it takes to acquire a similar or comparable property

Principle of substitution

Popular and less expensive way to advertise

Print Media

When a loan is less than 80% LTV, _____ may be cancelled

Private Mortgage Insurance

___ insures lenders against losses due to non repayment of low down payment conventional mortgages

Private Mortgage Insurance

Title VIII of the Civil Rights Act of 1968 applies to the sale of

Privately owned single family residences listed with a broker

Discounted Cash Flow Analysis

Production of income, gaining ground in valuation of real property

Marketing section, business plan writer should describe the need for

Products and services offered, establish customer profile, pricing techniques and explain advertising techniques

If the Grievance Committee agrees that there was a violation of NAR code they recommend the case to the _______

Professional Standards Hearing Panel

Members of the Professional Standards Committee, they provide due process by hearing sworn testimony, witnesses and evidence.

Professional Standards Hearing Panel

Higher values attained when homes conform to one another.

Progression

Title VIII of Civil Rights Act of 1968 (Fair Housing Act)

Prohibits discrimination in real estate practice, based on race, color, national origin, religion, sex, familial status.

The Federal Fair Housing Act Of 1968

Prohibits discrimination in residential housing based on race, color, national origin and religion

Civil Rights Act Of 1866

Prohibits, without exception, all discrimination based on race in any real estate transaction

Both ______ must be in the U.S.

Properties

Code of Ethics- Article 1

Protect and promote clients interest

Code of Ethics- Article 4

Protect clients from unfair treatment realtor must disclose in writing any interest they have in a property. Disclosing if realtor is listing the property, has interest in the property or has family linked to the property

Why are anti-trust laws important?

Protect free enterprise, make price fixing, boycotting, market allocation and tying arrangements illegal

General Recommendations: Never use ______ classes as a basis for advertising a prospect about renting or buying a property

Protected

Acceleration Clause

Protects the lender in the event of default. It makes the entire loan due upon default

Senate Bill 1212 increase the DTPA's penalty

Provision

Some _____ TV stations have specific blocks of programs that show advertisements for real estate

Public

Real Estate Investment Trust (REIT)

Publicly traded company that owns and operates commercial real estate

Exchanger becomes liable for tax burden until they relinquished the property unless they

Purchase a property that is NOT like kind to relinquished property or Does NOT purchase any like kind replacement property after 180 days

What is it called when an investor refinances existing holdings and uses the proceeds to buy more properties

Pyramiding

______ plan holder may purchase or sell an asset whenever it is convenient and without time restraints

Qualified

Investor and EAT sign _____ stating EAT is holding property for like kind exchange under Revenue Procedure 2000-37

Qualified Exchange Accommodation Agreement (QEAA)

Revenue procedure 2000- 37- Requires exchanger to sign contract 5 days no later with EAT called

Qualified Exchange Accommodation Arrangement (QEAA) - Safe harbor reverse exchange

Savings and Loans Associations (S&Ls) are chartered by the government and must meet the ____ test to retain that charter and receive benefits from the Federal Home Loan Bank System

Qualified Thrift Leader (QTL)

Licensee may suggest or approximate market value, his or her opinion should never replace that of a

Qualified licensed or Certified real estate appraiser

All income reported by the applicant is verified by the lender

Quality

The applicants income must be sufficient to repay both the mortgage loan and all other recurring debts

Quantity

3 tests of a borrower's income

Quantity, Quality and Durability (How much, How well and How long income can be expected to last)

An individual has invested in a real estate trust that will derive income using the net profits from the rental and sale of rental properties. She has invested in a

REIT

What type of trust would be used by investor to earn money from apartments, houses, offices and shopping centers

REIT

Discrimination is the unfair treatment of a person because of ___ sex, color, religion, national origin, familial status or disability

Race

ECOA Prohibits Discrimination Based ON

Race Color Religion National Origin Sex Age Marital Status Public Assistance Dependence

7 protected classes of the Federal Fair Housing Act

Race, Religion, Sex, National Origin, Color, Disability and Familial Status

Reaches customers quickly but expensive and ineffective

Radio and TV

An investors percentage yield based off a property's income

Rate of return

Realtors continuously strive to become and remain informed on issues affecting _____ and share fruit of their experience and study with others

Real Estate

Who develops an opinion of value?

Real Estate Appraiser

Investors buy trust certificates; trust invests in real estate assets and investors share returns per ownership percent

Real Estate Investment Trust

Real estate brokerage start up requirements

Real estate brokers license and funding

The UPS and Downs of real estate activities are described as

Real estate cycles

Mortgage REITs

Real estate investment trusts that extend credit to the owner of real estate

Equity REITs

Real estate investment trusts that hold income-producing properties

Hybrid REITs

Real estate investment trusts that invest in both properties and mortgages.

Senders

Real estate licensees

NAR Code of Ethics

Real estate professionals provide highest level of professionalism in transactions and interactions with customers and clients

National Association Of Realtors (NAR)

Real estate professionals who adhere NAR code of ethics

All interest, benefits and rights involved in owning real estate

Real property

George is a real estate investor, he has a 100% ownership in several houses in the DFW area. What type of investments are the houses considered

Real property assets

Severance

Real property becomes personal property when it is 'severed" from the land. Uninstall, unattach

Jill owns Ginnie Mae certificates as part of her real estate investments. What type of investments are the certificates considered

Real property securities

Sale price minus taxpayers basis in property NOT all realized gain is recognized at time of sale in 1031 exchange. Recognition of gain is deferred until replacement property is sold

Realized Gain

Listing Broker refuses to disclose listing expiration date

Realtor may contact owner to secure information and may discuss terms upon which realtor might take further listing or take listing to become effective upon expiration of any existing exclusive listing. (same with buyer/tenant agency agreements) Realtor can contact buyer/tenant

Code of Ethics- Article 6

Realtor must not mislead into believing the use of services or products will benefit buyer/seller beyond its regular scope. Realtor is free to promote services and products but must reveal any benefits they will receive from buyer/sellers use of services/products

Code of Ethics- Article 11

Realtor shall be competent in the services he performs and shall not attempt to provide services outside his scope of expertise without getting assistance from a person who is competent in the area where the realtor is lacking

Code of Ethics- Article 12

Realtor shall be honest and advertising and identify his professional status in each ad. Must disclose realtors firm when advertising

Code of Ethics- Article 13

Realtor shall not practice law if they are not authorized to do so, they should recommend to obtain qualified legal counsel in order to resolve any disputes

Code of Ethics- Article 16

Realtor shall not solicit a seller/buyer already bound by a listing contract/buyers representation agreement or owner that has existing property management with another realtor

____ are zealous to maintain and improve the standards of their calling

Realtors

Code of Ethics- Article 17

Realtors must arbitrate rather than litigate matters that involve disputes with other realtors of different firms. Their realtor relationship that are either contractual or non contractual

Code of Ethics- Article 5

Realtors shall not use their expertise in order to gain an unfair advantage over buyer/seller in order to promote professional services. Any interest realtors have in a property must be fully disclosed to all involved parties

Code of Ethics- Article 2

Realtors should avoid misrepresentation, fully disclose property condition, restrict advice to matters that are within agents expertise and keep confidential matters confidential

Code of Ethics- Article 15

Realtors should be truthful in all representations in statements they make about competitors. Unless they are certain of a competitors business or practice the realtor should not disclose any uncertain information to buyer/seller

NAR Code of Ethics was adopted in 1913- for conducting business in a proper fashion. What are the 2 disclosures that precede the body of NAR Code of Ethics

Realtors used in this code and preamble, deemed to include Realtor Associate ®️s and Obligations higher than those mandated by law, obligations of the law must take precedence

A VA certificate of ______ includes an appraised value of the home and an expiration date after which the certificate is no longer usable

Reasonable Value

The Appraisal Process: Combining the data from each approach the Appraiser uses is called ____

Reconciliation

When an appraiser uses more than 1 method, they have to combine the data from each of the approaches is called _____

Reconciliation

Appraisal Process Step 7

Reconciliation Of The Final Values Estimate •Appraiser places the most weight on the data and approach that are most relevant to the subject property

Some lending institutions limit the number of loans or the loan to value ratio in certain areas of a community or city

Redlining

Tax credit are NOT ______ in taxpayers taxable income. They ARE ________ reductions in amount of taxes due. Example: $100 taxes & has $50 tax credit, $50 taxes owed

Reductions, Dollar for dollar

Emblements

Refers to crops which require annual planting.

Refund Annuity

Refunds any unpaid sum to the annuitants estate when they die

Federal Fair Housing laws describe specific behaviors and practices that violate the Act. Discriminatory conduct includes

Refusing sale due to a person's membership in a protected class, not making reasonable accommodations for a prospective tenants disability and changing the terms of a sale due to ones membership in a protected class

Ill placement or a lack of conformity adversely affects value

Regression

The Appraisal Foundation, FIRREA and USPAP work together to _____ the appraisal profession

Regulate

Because a real estate investment can take a long time to sell, real estate investments are considered to be

Relatively illiquid

Ownership Risks

Relatively illiquid, management intensive, negative leverage and price movements

When a client does NOT want to work with current Broker and when asked if they sought assistance from Broker/Manager of company? The client replys that the Broker/Manager show them the home and they don't want to be associated with that brokerage. What should the broker do?

Rely on community standards, customs and arbitration by personal standards hearing panel of their local board or association of realtors in order to resolve issue

When suppy decreases and demand decreases, real estate prices

Remain stable

Physical barriers which interfere with the activities of disabled persons must be _____

Removed

A return on land is called

Rent

Price tenant pays to use property

Rent

Investments in real estate have 3 main flows

Rent, Appreciation & Equity

Which of the following is one of the cash flows in real estate investment

Rent, Appreciation and Increase in equity

Asset management decisions

Rent/Lease, Renew/Replace & Hold/Sell

Salvage value, Depreciated value, Replacement value, Leased fee value, Leasehold value and Going concern value

Rental Value

Fair Housing law does NOT apply to the rental of rooms or units any dwelling containing living quarters occupied by no more than 4 families living independently of each other, if the owner actually occupies one of the living units as his residence

Rental of Rooms or Units in Owner Occupied Property

Farming Techniques: Most presentations are geared towards 1st time homebuyers and current

Renters

Operating expenses include

Repairs, Utilities and Taxes

Acquired

Replacement property (phase 2 property)

The Reverse Exchange (Reverse Starker)

Replacement property is transferred before the settlement of the relinquished property

Improvement Exchange

Replacement property may need to be built or may require construction or improvements before use. Occurs when the exchanger uses exchange proceeds to make these changes to the replacement property

Like-Kind (IRS form 8824)

Report each exchange investment or business property

Verification of the source of the borrowers down payment and settlement costs is made through the _____

Request Verification Of Deposit Form

Under federal fair housing laws, the owner of a 10 unit apartment building may legally

Require families without children to pay the same security deposit that families with children must pay

Home Mortgage Disclosure Act (HMDA)

Requires lenders to report income and ethnicity data of loan applicants, as well as the type of loan applied for, where the property is located, and weather the application was approved, denied, or withdrawn

Community Reinvestment Act (CRA)

Requires lenders to serve their local communities first- to meet the deposit and credit needs of their low income and moderate income housing communities

All persons, periodicals and books that offer information on how other people have handled identical or similar situations

Resources

Assets

Resources owned by a business. Tangible and intangible items that can be used to cover liabilities of a business or be converted into cash, such as office equipment and property.

ROTH IRA

Retirement account funded by after tax monies allows monies to collect interest tax free

Qualified Products

Retirement vehicles which are purchased using pretax dollars (401K, simples, SEP IRAs and individual IRAs)

Details how investors may obtain advance rulings on the tax status of tendency in common investments

Revenue Procedure 2000-22

Provides guidelines and regulations that define a legally valid Reverse Exchange involving a title parking agreement.

Revenue Procedure 2000-37

Lender makes monthly payments to borrower up to predetermined max amount. Interest is charged only on the balance received by the mortgagor. Loan is repaid upon the sale of the property or the death of the owners

Reverse Annuity Mortgage

Allow replacement property to be acquired prior to the disposition of the exchanged property. Parks title with EAT (beneficial owner of property), Investor exchanges relinquished property with EAT for replacement property gaining title and all ownership benefits associated with replacement property. EAT leases relinquished property to Investor rent free

Reverse Exchange

In a _______ investor advances $130,000 to EAT. At closing EAT enters into contract with buyer, deeds property to buyer and receives $150,000 from sale. Pays out closing costs and other fees. Then repays investor $130,000 advance for the purchase of replacement property.

Reverse Exchange

Replacement property is acquired before the relinquished property is sold

Reverse Exchange

Open- end line of credit with minimum monthly payments example: credit cards

Revolving debts

Inflation

Rise in general prices

All agencies involved in _____ conservation or construction hire appraisers

Road

8 points increases the investors yield by 1%

Rule of Eights

FHA ____ for down payments don't vary from state to state, but the amount of your down payment could vary

Rules

Believe that values and laws are necessary in society because they are based on fundamental morals truths and all laws and rules should apply to everyone equally

Rules and Laws Ethics

IRS Code refers qualified intermediary as ____ they will be the party that receives cash proceeds from the sale of taxpayer's property. Instead of taxpayer they will hold the proceeds in escrow or trust account until taxpayer purchases replacement property

Safe Harbor

Reverse Exchanges may still be structured outside 2000-37 guidelines, but lack the IRS ___ protection

Safe Harbor

Creative financing may have influenced the comparable purchase price. The appraiser would adjust for all these conditions

Sale conditions

The Fair Housing Act is primarily intended to prohibit discrimination in the

Sale, Rental and Advertisement of Dwellings

The ____ to appraisal is most commonly used for residential homes

Sales Comparison Approach

When choosing this approach the appraiser must have access to the purchase prices of comparable properties

Sales Comparison Approach

To establish the value of land an appraiser uses the

Sales comparison approach

Originally established by government for the purpose of offering long-term, single family home loans

Savings and Loans Associations (S&Ls)

In limited supply

Scarcity

____ is the unavailability of a desired commodity

Scarcity

Real estate loans are bought and sold on ____ market

Secondary

Syndications often come under securities registration laws administered by the federal

Securities and Exchange Commission (SEC)

Qualified Intermediary

Seeks only to facilitate the exchange between the principles. Intermediary is required if the exchange is to qualify for tax benefits. Impartial party not directly involved in the exchange cannot be exchangers salesperson, broker, lawyer accountant or escrow officer (disqualified parties)

Borrower pre-pays principal amounts of the loan before they are due, shortening the life of the loan

Self Acceleration

This privilege allows lenders to evaluate their lending practices, if they find discriminatory practices in their business, they are allowed to remedy these without federal lawsuits

Self Testing

4 key communication skills: Maintain or enhance customer

Self esteem

Seller of the real estate provides financing for the sale by taking back a secured note in the form of a mortgage, land contract or deed of trust ( Real estate professional should advise BOTH buyer and seller to seek legal counsel before agreeing to this financing agreement)

Seller Financing

4 components- communicate a message

Sender, receiver, atmosphere and message

Us Treasury bills, notes, and securities, to Euros and certificates of deposit

Short term financing

Requires an appraiser to collect the recent purchase prices of properties ___ to the property she or he is appraising

Similar

Small companies often use a ____ as an alternative to a 401K

Simple

2 annuities that can be brought through insurance companies

Simple (straight) annuity and Refund annuity

Charitable Gift and Annuity (CGA) is one option offering a ______ income tax solution

Simple and Dynamic

Stops payment when annuitant dies

Simple annuity

______ closings often thought to create significant danger and legal exposure for exchanger, may unforeseen events can cause closing to be delayed one or both properties

Simultaneous

Can create significant danger and legal exposure for the exchanger

Simultaneous Exchange

Deferred Exchange Requirements: Can exchange 1 investment for several or consolidate several investment properties by replacing with _____ property

Single

For this exemption to apply, it is important that the person making the sale or arranging the rental NOT be in the business of selling or renting dwellings

Single Family Residence Sold By Owner

4 general circumstances under which a dwelling is exempt and NOT covered by the Federal Housing Act

Single Family Residence Sold By Owner, Rental Of Rooms Or Units In Owner Occupied Property, Dwellings Belonging To Religious Organizations Or Private Clubs and Housing For Older Persons

The sale or rental of a single family residence is NOT bound by the act if the property owner does not own more than 3 single family residence at 1 time. The owner is not the most recent resident of the property being sold, that owner is only granted one exempt sale in any 24 month period. Owner does not use the facilities or services of a real estate licensee, broker, salesman or anyone engaging in the business of selling or renting dwellings. Owner does not use any discriminatory advertising

Single Family Residences Sold by Owner

Some acceptable words/phrases for newspaper advertisements

Sober, Bachelors Apartment, Seniors, Family Room, Security Provided, Secluded and No Smoking

Relate to the local populations

Social

Consider their community's best interest when making an ethical decision. Example: National association of realtor (NAR) members agree to hold themselves to higher standard than the law. "Believe in helping others and working for the common good"

Social Contract Ethics

Sometimes change is difficult because the established community belief system. Fearful and skeptical of new practices presented. Also they believe that the supreme authority is the state

Social Contract Weakness

____ that affect property value relate to the local populations: mainly their ages, preferences, family, sizes, etc.

Social conditions

•Marriage/divorce rates •Birth/death rates •Social atmosphere- quality of school system, parks, culture centers •Attitudes toward law and order •Social comparison- people with comparable interest, similar social and economic status

Social conditions

Mobile Population

Social group is constantly on the move, they are constantly purchasing, renting and selling due to job change, promotion and job location transfer

Appraisers usually use the sales comparison approach to value to appraise vacant lots as well. Such differences might include

Soil integrity, terrain, size and or shape, zoning ordinances, favorable location and the presence of utilities

Promissory Notes: The note is a negotiable instrument that can be ___ to another investor or lender

Sold

Office space: Size is the

Space

Real estate agent would be what kind of agent

Special agent

Jargon

Special words or expressions

Commercial Services

Specialize in offering services to real estate investor, commercial/industrial "user" or both. / property management

Economic Factors: GDP= consumer ______ + business and residential investment + government expenditure- Trade Deficit

Spending

Some change in market taste, environment, market strength, etc is inevitable. Consequently, either by natural phenomena, ageing materials, or altering taste, the value levels off. A property enters its 2nd stage when steady value increase stops

Stabilization

Is a realtor allowed to disclose confidential information given to him by client?

Standard Practice 1-9: A realtor can withhold confidential information as long as it doesn't violate laws

Establishes a level of SERVICE the party has a right to expect

Standards Of Care

Performs the brokers dutys of due diligence and the duty to be CAREFUL

Standards Of Care

Broker will ensure that this is delivered to consumers by their sales associates

Standards of care

Appraisal Process Step 1

State The Problem •Identify the property with a complete legal description •Establish which property rights are to be appraised •State the type of value the appraisal seeks to define •Note effective date, value changes over time •Clarify any limitations

If realtor becomes aware of damaging practice to the public they should tell the ___

State real estate commission

Balance Sheet

Statement that itemizes assets, liabilities, and net worth

The American recovery and investment act of 2009 is also called the

Stimulus package

1031 does NOT apply to any exchanges of

Stock-in-trade (inventory or raw materials) or any property held primarily for sale, Stocks, bonds or notes, Other securities or evidences of indebtedness or interest, Interests in partnerships, Certifications of trust or beneficial interest, Chooses in action (actionable claims or receivables), Cannot involve property held for personal use such as home or a boat, Cannot exchange real property for personal property

Simple (straight) Annuity

Stops payment when annuitant dies, regardless of principal (+) interest has been paid

Referral Network

Structured organizations that enable brokers to refer one another and help customers find a broker who can fulfill their needs

Methods of recruiting salespeople: When offering licensing courses, brokers should be careful because many states have laws that prohibit the solicitation of

Students

Adjustments are ALWAYS made to the comps, NEVER to the _______ for CMAS

Subject property

Comparable property purchase price (+) adjustments (=)

Subject property value

Allowing one lien to take or have priority over other liens or debt is known as

Subordination

The sales comparison approach to appraisal utilizes 2 value principles: Contribution and _____

Substitution

Appendices (Appendix) Section

Summarize findings and company highlights

In appraisal, _____ relate to the availability and demand for a particular kind of home within a given neighborhood

Supply and demand

Entrepreneurial Incentive is also called ______

Surplus Productivity

An appraiser estimates the _____, which refers to the net income minus the expenses of ownership (wages from labor and management, property taxes, maintenance etc)

Surplus productivity

A private or public business venture to own property

Syndicate

Nonhomogeneity and Heterogeneity are

Synonymous terms (No 2 pieces of real estate are exactly alike)

Standards Of Care are influenced by

TREC, TRELA, Code of ethics and Court decisions

Taking advantage of which strategy reduces taxes to an investor in low income housing

Tax Credits

A conveyance instrument for property that is sold to enforce a tax lien

Tax Deed

1st concept of Charitable Gift Annuity (CGA) was 1st put into place by Harvard University in 1917, in response to estate ______

Tax Legislation

_____ may also defray cost of seniors long term health care or assistant living care

Tax Savings

An investment that produces depreciation or other non cash losses that a taxpayer can deduct from other income to reduce tax liability

Tax Shelter

Improvement/construction costs can increase the value of replacement property that makes it at least = to the value of the relinquished property allowing the transaction to remain ______

Tax deferred

National Community Foundation (NCF) and New Life Corporation Of America (NLC)

Tax exempt (non profit organizations) under internal revenue code are the leading edge of charitable strategies that create income and tax relief for individuals or families owning highly appreciated real estate

CGA has 3 tiers of income and pays individuals at each tier accordingly

Tax free income, Capital gain income and Ordinary interest income

The availability of ______ is considered a benefit of real estate investment

Tax shelters

Gross Profit % (X) (Payment Amount - Interest) Example: Payment-$800, Interest-$200, Gross Profit- 23.08% 0.2308 (X) ($800 - $200)= $138.48 Seller pays 28% on capital gains 0.28 (X) $138.48= $38.77

Taxable Gains

2 transfers of direct deeding trade, pay fewer title transfer fees and generally pay smaller amounts of _____

Taxes

For income tax purposes, a homeowner may deduct, from gross income, real estate

Taxes

State, County, City, School, Junior College, MUD (municipal utility district), Fire District and/or FM Road

Taxes

Escrow accounts generally contain the following payments

Taxes, Hazard Insurance and Private Mortgage Insurance

Escrow accounts generally contain the following payments:

Taxes, Hazard Insurance and Private Mortgage Insurance

Direct Deeding (non sequential deeding)

Taxpayer deeds their relinquished property directly to the buyer

In replacement property is understood to be = to his or her basis in relinquished property minus the net boot received

Taxpayers Basis

Basis (Tax Basis)

Taxpayers cost for obtaining and maintaining property. Taxpayers investment on property

Provides the borrower with the temporary help they need without chance of negative amortization and with a predictable payment structure. There is a higher loan fee for this type of loan

Temporary Buydown

Lessee

Tenant

HUD investigates some complaints by using ___. The goal here is to determine whether that business treats the members of different groups in a fair and equal way

Testers

Actors, for instance a white couple and a black couple, who are given similar (fake) identities and financial data, who attempt to rent units from the same landlord to determine whether the landlord is violating provisions of the Fair Housing Act

Testers or Shoppers (undercover operatives)

Undercover (buyer, seller, tenant, landlord) whose mission is to get a housing provider to commit a violation

Testers or Shoppers (undercover operatives)

Texas has a Fair Housing Program that has been judge "substantially equivalent" to that of HUD. Complaints may also be filed with this Program or HUD. (Complaints filed with HUD will be referred to the _____)

Texas Commission on Human Rights

National, non profit organization founded in 1987

The Appraisal Foundation

____ sets the minimal education requirements for the appraisal industry

The Appraisal Foundation

2 boards make up The Appraisal Foundation

The Appraisal Standards Board (ASB) and The Appraiser Qualifications Board (AQB)

Every applicant for a brokers or salesperson's licence in Texas is required to pledge to comply with

The Canon Of Professional Ethics and Conduct

Which of the following laws gave all citizens the same basic property rights regardless of race or color

The Civil Rights Act 1866

Ginnie Maes activities are under the direct supervision of

The Department of Housing and Urban Development (HUD)

Which laws or regulations prevent mortgage lenders from discriminating in extending credit to potential borrowers

The Equal Credit Opportunity Act

3 government sponsored agencies which are the chief operators in the secondary market are

The Federal National Mortgage Association (FNMA or Fannie Mae), The Federal Home Loan Mortgage Company (FHLMC or Freddie Mac) and The Government National Mortgage Association (GNMA or Ginnie Mae)

The most important principle to consider is

The Highest and Best Use

Which laws or regulations require mortgage lenders to provide an estimate of closing costs to a borrower and forbid them to pay kickbacks for referrals

The Real Estate Settlement and Procedures Act

The 1st step in establishing the federal government's practice of not recognizing gain or loss on like-kind exchanges, this act specifically referenced exchanges of property without a "readily realizable market value"

The Revenue Act of 1921

The Texas Real Estate License Act (TRELA) is administered by

The Texas Real Estate Commission (TREC)

The 3 overriding considerations of a lender's mortgage loan decision are

The ability to repay, the value of the collateral, and the profitability of the loan

Enforces the Uniform Standards of Professional Appraisal Practices (USPAP) which outlines the ethical in professional standards of real estate appraisal

The appraisal standards board (ASB)

Responsible for establishing the rules for completing an appraisal and compiling its report

The appraisal standards board (ASB)

Develops the minimum standards for state agencies to use in their respective licencing and certification laws for real estate appraisers

The appraiser qualifications board (AQB)

Establishes the minimum qualifications for licencing, certification and recertification of appraisers nationwide

The appraiser qualifications board (AQB)

Capital Gain

The difference between the adjusted basis of property and its net selling price

Of all the factors that influence value, the single most important principle to consider is

The highest and best use

A borrower's PITI payment is also called

The housing expense ratio

The key feature of an adjustable mortgage loan is that

The interest rate may vary

Ginnie Maes role in the secondary market is

The largest issuer of mortgage-backed securities and only government guaranteed mortgage-backed securities

The 2 sources of capital most commonly used when borrowing money are:

The money market and The capital market

All investors desire their investments to increase in value. However,

The more the investor stands to gain, the greater risk that the investor may lose

This action is allowed under federal fair housing laws

The owner of a duplex who resides in one of the units refuses to rent the other unit to a non Christian

At the closing of a mortgage loan

The parties complete all loan origination documents and the loan is funded

Annuitant

The party receiving the benefits of an annuity, similar to the insured on an insurance policy. The annuitant usually also owns the annuity, although you can buy an annuity to benefit another party, who would then be the annuitant.

2 financial ratios used to estimate the value of an investment

The price to earnings ratio and The cap rate

Graduated Payment Mortgage (GPM) disadvantages:

The principal balance increases instead of decreases in the 1st few years making it hard for borrower to continue making payments due to the payment increase

Relinquished Property

The property given up (phase 1 property)

Simultaneous Exchanges

The sale of both relinquished property and the replacement property had to close on same day

synonymous

The same as

The ownership of the qualified product is exempt from _______

The section 1031 "like kind rule"

A broker who acts as a subagent represents

The seller

As long as the cost of a contributions of keep does not rise above the value of it to a property, then it justifies maintaining

The theory of increasing and decreasing returns

How does knowing how to apply the various methods of ethical decision help a decision maker?

They can evaluate from various points of views and pick the right one that benefits all parties

The reason lenders consider the loan to value ratio important in underwriting is that

They want to ensure there is more than enough collateral to cover the loan amount

Savings and Loans Associations (S&Ls) are known as

Thrift Lenders

In real estate, transferability refers to

Title

A _______ will research a property's title to ensure it is clean and can be legally transferred

Title Company

A lender lends money to a homeowner and takes legal title to the property as collateral during the payoff period. They are in a

Title Theory State

Legal grey area, exchangers parked titles to replacement properties with qualified interm. until exchangers relinquished other properties primarily issue constructive ownership

Title parking

Bonus Deduction

To qualify for 50% 1st year deduction, depreciciable leasehold improvements

Multiple Leg Exchange

Transaction with series of exchanges (groups)

A commoditys ability to change hands is known as ____

Transferability

The possession and control of all the rights which constitute ownership of property

Transferability

When property is _______ to recipient, NO taxes are due immediately. Partial elimination of the capital gains tax with the rest of the tax spread over the life expectancy of the donor(s)

Transferred

Deed

Transferring title

A property owner has an easement appurtenant (goes with the land) on her property. One day the property is sold to another party who is opposed to the easement. Following the closing, this particular form of easement

Transfers with the property

Index

Treasury Securities

Possible decision that must be more closely considered before becoming a final decision

Trial Decision

Payments to contractors/suppliers made by the exchange facilitator from funds held in the _____

Trust Account

Shareholders in a real estate investment trust (REIT) generally receive most of the _____ each year

Trust's income

In a lien theory state, who holds the equitable title

Trustor

Who are the essential parties involved in a estate in trust

Trustor (giving), Trustee (receiving), and Beneficiary (benefit from later)

Which laws are regulations require mortgage lenders to disclose financing costs and annual percentage rate to a borrower before funding a loan

Truth In Lending Laws and Regulation Z

Illegal _____ involve a seller of the tying product who has substantial or dominant market power in the tying product

Tying Arrangements

Temporary Buydown disadvantages

Typically expensive and requires a large payment at closing and its only temporary, the borrower will have increased monthly payments that may be difficult to afford

The Appraisal Process: An appraiser must complete his/her report in accordance with ____ standards

USPAP

The process by which an applicant is qualified for and then receives a loan

Underwriting Process

Inflation Predictors: Falling ______ often accompanies economic growth, more people have jobs means more disposable income in circulation

Unemployment

A widely used form for VA, FNMA, HUD, FHLMC, and FMHA loans and estimating the market value of properties

Uniform Residential Appraisal Report (URAR)

An annual publication printed by the appraisal foundation that defines key appraisal terminology and offers guidelines for completing non biased and accurate appraisals

Uniform Standards of Professional Appraisal Practice (USPAP)

Code of Ethics- Article 3

Unless contrary to the best interests of his/her principal, Realtor shall cooperate with other brokers

Promissory Notes: An ____ note has no collateral pledge for the loan and is a promise backed only by the signature of the borrower

Unsecured

Standards of care are:

Used as criteria to measure whether negligence has occurred

What is leveraging

Using borrowed money to finance the bulk of an investment

Financial leverage is described as

Using other people's money to acquire something of value

A lender who charges a rate of interest in excess of legal limits is guilty of

Usury

For a commodity to be valuable, it must fulfill some purpose, known as ____

Utility

The power of a good to render a service or fill a need

Utility

No insurance fee, no down-payment required, limited to veterans only, must pay a funding fee to receive the guarantee and the guarantee is only partial, affectively limiting the amount of a loan a veteran can usually take; although no legal limits

VA Guaranteed Mortgage

Federally guaranteed loan

VA Loans

____ allow several veterans to purchase 1 to 4 family unit homes together, even if they are not married or related, provided they intend to occupy the property

VA Stipulations

Taxpayers may exchange ______ properties if the properties are selling as investments, businesses or for income production and will hold properties they are buying for one or more of the same purposes

Vacation Rental

Tax law remains undecided whether ______ are to be considered like kind property that is held for investment or use in trade or business

Vacation or 2nd homes

Worth of an item relative to some function or indicator for a given date

Value

Attributes a property's worth to its ability to fulfill its intended purpose, which applies mainly to commercial businesses

Value in use

Opportunity Cost

Value of the next best alternative cost that do not show up on any financial statement

2 types of communication

Verbal and Non Verbal

Oral communication: Conversation, discussion or meeting

Verbal communication

Lender sends a ____ to the employer requesting information regarding the length of employment, gross salary and other income

Verification Of Employment Form

The amount of money a veteran is entitled to under the VA loan program, based on the veterans record and the amount of entitlement currently being used

Veterans Entitlement

Since the passage of this amendment the Attorney General can now seek up to $20,000 for each ____ of the DTPA

Violation

Licensees should consider a 1031 exchanges for clients

Want the ability to transfer or dispose of property at their discretion, Desire current tax deduction using depreciation, Cannot or do not want to defer income until age 59 1/2, Are willing to pay capital gains taxes at time of sale, Are willing to conduct the transaction according to section 1031s like-kind restrictions

A mortgage banker operating as a correspondent lender typically does not have his own funds to lend, so he establishes a line of credit with commercial banks that is called

Warehousing

Donors can use their tax savings and tax favourable income to provide funding for a _____ and provide beneficiaries with full inheritance value of property, tax free

Wealthy Replacement Trust or Irrevocable Life Insurance Trust

Properties that will appreciate over time

Well kept properties located in desirable areas

Code of Ethics- Article 14

When a realtor is charged with unethical practices they must appear before the board and disclosed facts pertaining to the case to the board

When does a tying arrangement become illegal?

When buyer cannot receive the product that they wish to buy without 1st buying a different product

This Insurance protects the company against claims that its sales agents were neglect or caused physical or mental damage

Workers compensation insurance

Insurances needed to protect from lawsuits and accidents

Workers compensation insurance (required by law), liability insurance and errors and omissions insurance

A ____ mortgage is a second loan that encompasses a preexisting loan, along with additional funds

Wraparound

Buyer makes payments to the seller and the seller pays the lender

Wraparound Mortgage

Standard a practice 1-7 of code of ethics: Listing brokers (realtors) shall submit seller/landlord offers and counter offers until closing or execution of lease unless they waive in ____

Writing

Appraisal Process Step 8

Writing and Presenting The Value Report •Appraiser completes report in accordance with USPAP standards and presents to client

Executive Summary

Written description that provides the reader with an overview of business plan

Internal Rate Of Return (IRR)

Yeild of the investment within itself, when all cash inflows and outflows to the investment have been discounted to zero

Deferred Exchange Requirements: Is improved real estate for unimproved real estate and residential property to commercial property like-kind to relinquished property?

Yes

The buyer is a seller's son-in-law. May this prevent an arms length sale?

Yes

The home is put up for sale for tax delinquency. May this prevent an arms length sale?

Yes

The seller failed to disclose the untreated mold growth in the bathroom. May this prevent an arms length sale?

Yes

The sellers company transferred her to a new city and she must move immediately. May this prevent an arms length sale?

Yes

Filled with or showing strong desire to get something done

Zealous

Some private mortgage companies have introduced a program called _____ , which allows the buyer to incorporate the PMI into the monthly payment

Zero Option Mortgage Premium (ZOMP)

Cash Boot

in an exchange the exchanger receiving distribution of a portion of cash from sale (Taxable)

The purchase price is either = or ____ than market value

less

Scarcity

shortage, short supply

To substitute entitlement, the purchaser must meet the following qualifications:

•Be a veteran •Have at least as much entitlement as the original mortgagor •Agree in writing to substitute her or his entitlement •Qualify for the assumption

2 primary figures on request for verification of deposit form the underwriter looks at

•Current balance on deposit •Average balance for the previous 2 months (varies by lender)

General rules when trying to decide if a transaction is at arms length

•Forced sales (foreclosure, tax sale, estate liquidation, etc) Do NOT constitute a sale at arms length •If the principals know each other outside the sales transaction, then it is NOT at arms length •Extremely creative financing and/or little or no down payment will compromise an arms length sale

Disadvantages of ZOMP

•It cannot be cancelled after LTV drops below 80% •It has an amortizing MIP (Mortgage Insurance Premium) over 30 years

Growth Equity Mortgage (GEM) Benefits:

•Lower initial interest rate •Simplicity of the loan •Known/predictable payments •Equity builds up quickly •Reduced interest costs •No chance of negative amortization

FHA Advantages

•No penalty charge for making loan payments earlier than they are due •Can be made on a graduated payment schedule •Lower down payments

VA Eligibility Requirements

•Spouses of veterans killed or missing in action or prisoners of war •Veterans who served during WWII, The Korean War, Gulf War or peacetime efforts following these wars •90 days of wartime service •U.S. citizens who served in the armed forces of a government allied with the U.S. in WWII •181 days of continuous peacetime service •Selected Reservists or National Guard members who have served at least 6 years are eligible

FHA Disadvantages

•Takes between 15-30 days longer than processing a conventional loan •There is a maximum loan amount

Once a veteran has used their entitlement, it cannot be reused until:

•The original loan is paid off in full •The VA is notified of the fact that it has been paid off by the original lender •The house is disposed of (no longer owned by the veteran)

Advantages of ZOMP

•There is no cash requirement at closing •The mortgage payments include the monthly portion of the amortized 1 time premium are usually smaller than the mortgage payments including a share of the traditional renewal premium •The policy is self canceling when the home is sold


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