Principles of Real Estate 2- Study Guide
*Approaches to Value/Appraisal* Appraiser focuses on recent sales in determining the value of the subject. The appraiser will gather at least three comparison sales. These comparison sales are referred to as "comparables" or "comps" in the appraisal business. A lot of residential properties will use this approach. A) Sales Comparison Approach "Market Data Approach" B) Cost Approach C) Income Approach D) Principal Approach
A
*Government's right in land- PETE* If the proposed use of property violates zoning, the owners must request a ________ to get permission to violate the rules. Example: permission to extend a building beyond the setback or building line A) Variance B) Buffer Zone C) Downzoning D) Condemnation
A
*Government's right in land- PETE* The government's right to tax real estate. In the past, land ownership was limited to the nobility. When individuals gained the right to own land, the government retained the right to tax it. As opposed to other assets, real estate is easy to tax because it is impossible to hide. A) Taxation B) Police Power C) Escheat D) Eminent Domain
A
*Government's right in land- PETE* _________ by condemnation are also allowed under the right of eminent domain. For example, the government may take an ________ in someone's property to run power lines to another property. The government will use the right of eminent domain to take _________ for itself, the utilities and the railroads. A) Easements B) Inverse condemnation C) Ad valorem taxes D) Variance
A
*Principles of Appraisals* A fundamental economic concept at the core of appraisal, and is referred to as a commodity's value that is influenced by the cost of acquiring a substitute or comparable item. A) Principle of Substitution B) Principle of Conformity C) Principle of Increasing & Decreasing Returns D) Principle of Regression E) Principle of Competition
A
*Principles of Appraisals* A property is defined as the legal use that gives the highest return in money and/or amenities. A site's value arises from its potential or actual use. The characteristics of the site itself (for example, size and topography) make specific uses possible and others impossible A) Highest and best use B) Principle of Contribution C) Principle of Change D) Principle of Anticipation E) Principle of Supply and Demand
A
*Real Estate Transaction Terminology* The process of transferring funds to a title or escrow company for disbursement A) Funding B) Servicing C) Closing D) Origination E) Consummation
A
A Loan Estimate (LE) must be provided no later than _____ business days after receipt of the written application. If the application is denied before the end of the _____-business-day period, the LE is not required A) 3 B) 5 C) 7 D) 10
A
A reduction in the value of a property due to deterioration or obsolescence. A) Depreciation B) Incline C) Appreciation D) Decline
A
A specific type of asset-based financing in which a borrower receives funds secured by the value of a parcel of real estate. These loans are typically issued at much higher interest rates than conventional commercial or residential property loans and are seldom issued by commercial banks or other depository institutions A) Collateral-Dependent Loans (Hard-Money Loans) B) Wraparound Mortgage C) Construction to Permanent D) Open-End Mortgage
A
A type of seller financing wherein the owner retains title to the property while the purchaser takes possession of the premises and pays on the principal. When the final payment is made to the seller, the title will transfer to the buyer. Is also known as a land contract or installment land contract. A) Contract for Deed B) Seller Financing C) Participation Loan D) Reverse Annuity Mortgage E) Sub-Prime Loan
A
Also known as the Federal National Mortgage Association (FNMA), plays a vital role in financing mortgages and increasing home ownership opportunities in the United States. It began in 1938 as an agency of the federal government and was created to bring stability to the U.S. housing market. Is is the largest investor in home mortgages today. A) Fannie Mae B) Freddie Mac
A
Characteristics of Value: DUST There must be sufficient demand for the property for it to have value. Without demand, it is of little or no value. A) Demand B) Utility C) Scarcity D) Transferability
A
Covers more than one piece of property. A builder may buy more than one lot in a new subdivision; he will do so with one loan. A) Blanket Mortgage B) Package Mortgage C) Budget Mortgage D) Balloon Loans
A
Federal law that affects lenders that was passed to ensure that banks would serve the needs of the community in which they were chartered to do business. It prohibits redlining, which is the practice of refusing to provide financing in a particular area because of the location. It was enacted by Congress in 1977 and was substantially revised in May of 1995. A) Community Reinvestment Act (CRA) B) Equal Credit Opportunity Act (ECOA) C) Truth In Lending Act (TILA) D) Reg Z
A
Funded by investors and exists for the purchase and sale of existing mortgages to investors. It is designed to provide greater liquidity to the residential real estate market by providing for a steady supply of funds from investors. A) Secondary Mortgage Market B) Appreciation C) Depreciation
A
Operates exclusively in the secondary market and provides support to mortgage lending institutions in the primary market. Lenders who originate loans in the primary market may either hold the loans in their portfolios or sell them in the secondary market. By selling loans in the secondary market, lenders can obtain additional funds with which to make more loans to home buyers. A) Fannie Mae B) Freddie Mac C) CRA D) None of these
A
Requires an application from the borrower. The ___________ Letter is only issued after the lender has evaluated the borrower in the underwriting process. Even with a letter in hand, many qualifying conditions must be met for a successful closing. Buyers and sellers must be cautioned that neither of the two letters guarantee ultimate approval for a loan. A) Pre-approval B) Appraisal C) Pre-qualification D) Escrow
A
The best choice for the borrower planning to remain in a home for the long term. It is most prevalent in the US. Typical term is 15-30 years. Is also ideal for the borrower who is averse to risk, or who believes that the trend in mortgage rates is upward. An additional benefit is that it is predictable, which allows the homeowner to budget and plan for the future with greater certainty. It will never change! A) Fixed Rate Mortgage B) Adjustable Rate Mortgage (ARM) C) Blanket Mortgage D) Package Mortgage
A
The loss in a property's value due to daily wear and tear. The most straightforward form of depreciation to cure and has the least effect on the value of the property. Examples that should be noted on the appraisal report include a leaky roof, a badly cracked driveway, inadequate floor coverings, or an overall need for repainting. A) Physical Deterioration B) Functional Obsolescence C) External Obsolescence
A
*Approaches to Value/Appraisal* Considers how much a new structure of this size and type would currently cost to build. This approach is commonly used for unique properties for which there is little market activity. Unique properties include special-purpose buildings such as churches and bowling alleys. The appraiser applies current industry and market price estimates for the underlying land, building supplies, and construction costs. A) Sales Comparison Approach "Market Data Approach" B) Cost Approach C) Income Approach D) Principal Approach
B
*Government's right in land- PETE* An area of land separating one land use from another, such as residential from commercial. Is located between incompatible uses. It is a transitional use. Example: single-family, apartments, retail. The apartments are the ____________. A) Variance B) Buffer Zone C) Downzoning D) Condemnation
B
*Government's right in land- PETE* Assessed Value (ad valorem) is property value for tax purposes. Tax rate times assessed value equals the tax payment. Rates can be per _______ or per ________, called mills. A) 10/100 B) 100/1,000 C) 1,000/10,000 D) 10,000/100,000
B
*Government's right in land- PETE* If a landowner sues the government in order to force the government to buy his or her land. A) Easements B) Inverse condemnation C) Ad valorem taxes D) Variance
B
*Government's right in land- PETE* The right of the government to regulate and control the way land is used. The most common example is zoning. Other examples include wetlands legislation, environmental protection legislation, and health and fire codes. A) Taxation B) Police Power C) Escheat D) Eminent Domain
B
*Government's right in land- PETE* There is a ___ year right of redemption for homestead property sold at a tax auction in Texas. The right of redemption means, if a person loses the homestead property due to unpaid taxes, he has ___ years to pay the purchaser all expenses and a penalty and regain the land. If the land is not homestead property, the right of redemption is only for six months. A) 1 B) 2 C) 5 D) 7
B
*Principles of Appraisals* Suggests that value is maximized when there is a reasonable degree of homogeneity, or sameness, in a neighborhood. The home that is outside of the normal range of values for a neighborhood will be problematic, as will the "oddball" house with an architectural style that does not blend with the neighboring homes. A) Principle of Substitution B) Principle of Conformity C) Principle of Increasing & Decreasing Returns D) Principle of Progression E) Principle of Competition
B
*Principles of Appraisals* Used for almost all properties that have improvements on the property. Each component of the property contributes something to the overall value of the property. A lot of times, people will add things to their properties that are considered over-improvements to their property-- Ex: add a swimming pool that cost 40-50k, and it only adds about 25% of the overall cost (15-20k) contribution to the overall value. A) Highest and best use B) Principle of Contribution C) Principle of Change D) Principle of Anticipation E) Principle of Supply and Demand
B
*Real Estate Transaction Terminology* Includes sending monthly payment statements and collecting monthly payments, maintaining records of payments and balances, collecting and paying taxes and insurance (and managing escrow and impound funds), remitting funds to the note holder, and following up on delinquencies. A) Funding B) Servicing C) Closing D) Origination E) Consummation
B
A method of financing that preserves the low, existing interest rate on the original note. It is seller financing, in which a new loan takes a secondary lien position, and the original mortgage is not repaid. A) Collateral-Dependent Loans (Hard-Money Loans) B) Wraparound Mortgage C) Construction to Permanent D) Open-End Mortgage
B
A special form of insurance which is designed to allow lenders to increase the LTV ratio. This is required when the LTV of a conventional loan exceeds 80%. It insures the difference between the borrower's down payment and 80% LTV. If you're putting anything less than 20% as a down payment on a conventional loan program. A) Renters Insurance B) Private Mortgage Insurance (PMI) C) Mortgage Insurance Premium (MIP) D) Dwelling Insurance
B
According to the RESPA-TILA Integrated Disclosure Rule, a mortgage loan originator must provide, in a clear and concise form, an estimate of the amount of settlement charges the borrower is likely to pay. This is considered: A) Appraisal B) Loan Estimate (LE) C) Pre-approval D) Pre-qualification
B
Characteristics of Value: DUST The property must be able to fulfill a need. If for some reason, the property has no use, it is of little or no value. It does not necessarily mean development. The property may have _______ to an investor who holds it for future gain or development. A) Demand B) Utility C) Scarcity D) Transferability
B
If the loan limits the loan-to-value ratio to a maximum of 90%, and the appraised value of the home is $100,000, the maximum loan amount permitted under that program is $90,000. A) $80,000 B) $90,000 C) $100,000 D) $110,000
B
Includes both real and personal property (fixtures and furnishings). Furnished condominiums in resort areas are often sold this way A) Blanket Mortgage B) Package Mortgage C) Budget Mortgage D) Balloon Loans
B
Originally passed in 1974, ensures that all consumers are given an equal chance to obtain credit. It covers all creditors who regularly extend credit and impacts professionals, such as mortgage originators who are involved in granting credit. It prohibits discrimination in any aspect of a credit transaction on the basis of: Race, Color, Religion, National Origin, Sex. Marital Status, Age, Receipt of income from a public assistance program. A) Community Reinvestment Act (CRA) B) Equal Credit Opportunity Act (ECOA) C) Truth In Lending Act (TILA) D) Reg Z
B
Sometimes, the seller is willing to take part or all of his equity in the form of a note. If this occurs, there is a TREC-mandated addendum to be used with the transaction. A) Contract for Deed B) Seller Financing C) Participation Loan D) Reverse Annuity Mortgage E) Sub-Prime Loan
B
The actual age of the property in years. If the house is 20 years old, it has an age of 20. A) Depreciation B) Chronological Age C) Effective Age
B
The best choice for a buyer that plans to sell sooner rather than later. Might also be an ideal product for the borrower that believes that the trend in mortgages rates is downward. Desirable for a borrower that wants to qualify at a lower initial rate to give him or her more purchasing power. Most widely used alternative loan program. Will pick a certain term (15, 20, 30/yr term) A) Fixed Rate Mortgage B) Adjustable Rate Mortgage (ARM) C) Blanket Mortgage D) Package Mortgage
B
The loss in the desirability of the style, layout, or function of an element of a property over time. For example, a residential heating system featuring steam radiators may adequately warm the rooms, but it is _______________ because buyers today prefer heating methods that are less obvious and take up less space. A) Physical Deterioration B) Functional Obsolescence C) External Obsolescence
B
The most probable price a property should bring in a competitive and open market under all conditions requisite to a fair sale, under guidelines published by federal lending institutions (what a buyer is willing to pay and what the seller is willing to accept- neither have to take action, it's at their own free will)- Fannie Mae & Freddie Mac A) Demand B) Market Value C) Utility D) Scarcity
B
When calculating the loan-to-value ratio, the lender will use the sales price or appraised value, whichever is _______. A) Higher B) Lower
B
Who is the largest investor of Secondary Mortgage Market? A) Freddie Mac B) Fannie Mae
B
*Approaches to Value/Appraisal* Sometimes used to analyze residential properties but it is primarily used for investment properties (commercial, office buildings, apartment complexes, strip malls). If we apply this approach to residential properties, then we look at a Gross Rent Multiplier (GRM). A) Sales Comparison Approach "Market Data Approach" B) Cost Approach C) Income Approach D) Principal Approach
C
*Approaches to Value/Appraisal* Will be used when there are a notable number of rental properties in the area, but not in a typical residential transaction because it applies only to income-generating rental property. The calculation begins with a review of comparable rental rates and market values in the subject's area. These rates are then used to compute a gross rent multiplier (GRM). A) Sales Comparison Approach "Market Data Approach" B) Cost Approach C) Income Approach D) Principal Approach
C
*Government's right in land- PETE* Also referred to as property taxes, which means according to value. The higher the value of a parcel of land, the higher the taxes. Property taxes create the highest priority lien against property. Unpaid taxes are an automatic lien, and at foreclosure will always be paid first. If property taxes are not paid, the property will be seized and sold. A) Easements B) Inverse condemnation C) Ad valorem taxes D) Variance
C
*Government's right in land- PETE* Changing the zoning of a property to a lower value use. The government is under no obligation to compensate an owner for this, even though the property may suffer a decrease in value as a result. A) Variance B) Buffer Zone C) Downzoning D) Condemnation
C
*Government's right in land- PETE* The process of transferring real estate to the state when a person dies intestate (without a will) and without heirs. The government takes title to the property under the right of _______. If property is abandoned, the government will take ownership via _______ because the government does not want any land to be unowned (and untaxed). A) Taxation B) Police Power C) Escheat D) Eminent Domain
C
*Principles of Appraisals* Change is constant; therefore, the forces acting on a parcel of land are always affecting the value of the land. An appraisal has a relatively short shelf life as property values will fluctuate up and down. Can only go 6/mo back in sales to find comparable properties because you can miss an upward/downward trend in the market A) Highest and best use B) Principle of Contribution C) Principle of Change D) Principle of Anticipation E) Principle of Supply and Demand
C
*Principles of Appraisals* States that mixed land use should result in the maximum value for all properties involved. A master-planned community is an excellent example of this principle. A) Principle of Substitution B) Principle of Conformity C) Principle of Balance D) Principle of Regression E) Principle of Competition
C
*Principles of Appraisals* When it is prudent to improve property when the value added by the improvement exceeds the cost of the improvement. This principle would suggest that an owner should not "over-improve" a property. A) Principle of Substitution B) Principle of Conformity C) Principle of Increasing & Decreasing Returns D) Principle of Regression E) Principle of Competition
C
*Real Estate Transaction Terminology* In which all appropriate documents are signed and the proceeds of the mortgage loan are disbursed by the lender A) Funding B) Servicing C) Closing D) Origination E) Consummation
C
Characteristics of Value: DUST If a type of property in a market area is too abundant, it has reduced value. If a market is flooded with property for sale, values will remain flat. (goes back to Supply & Demand). This is something we would like to see if we are the owners of the property. A) Demand B) Utility C) Scarcity D) Transferability
C
Is a benefit, but its value should not be over-sold, especially to the seller A) Pre-approval B) Appraisal C) Pre-qualification D) Escrow
C
Is an insurance policy used in FHA loans if your down payment is less than 20%. The rate you pay for annually depends on the length of the loan and the loan-to-value (LTV) ratio. A) Renters Insurance B) Private Mortgage Insurance (PMI) C) Mortgage Insurance Premium (MIP) D) Dwelling Insurance
C
The Loan Estimate must be delivered or placed in the mail no later than the _______ business day before consummation of the transaction A) 3 B) 5 C) 7 D) 10
C
The appraiser's estimate of the age of the house based upon its ongoing maintenance and upgrades. A house may be well-maintained and been updated over the years; therefore, the appraiser might determine that a 20-year-old house might have an age of 10. A) Depreciation B) Chronological Age C) Effective Age
C
The loss in value of a property caused by factors outside of the property itself. Such as the oversupply and consequent drop in demand for a particular kind of property, government actions, such as zoning changes or condemnation proceedings, and proximity to undesirable land uses, such as highways or factories. It is sometimes referred to as environmental or economic obsolescence. A) Physical Deterioration B) Functional Obsolescence C) External Obsolescence
C
The monthly house payment includes principal, interest, taxes, and insurance (known as PITI). The tax and insurance portion of the payment is held in a special account called an escrow account. It is also called an impound, trust, or reserve account. A) Blanket Mortgage B) Package Mortgage C) Budget Mortgage D) Balloon Loans
C
The percentage of value or sales price that a lender is willing to finance A) Principle of Contribution B) Principle of Anticipation C) Loan-to-Value Ratio (LTV) D) Principle of Substitution
C
Two or more lenders own a share, allowing the lenders to share or distribute the risk. Another form of this allows the lenders to share in the profitability of the property, in addition to collecting principal and interest on the loan. If a lender collects principal and interest and shares in the profits when the property is sold, then it is called a Shared Appreciation Mortgage. A) Contract for Deed B) Seller Financing C) Participation Loan D) Reverse Annuity Mortgage E) Sub-Prime Loan
C
U.S. federal law designed to protect consumers in credit transactions by requiring clear disclosure of key terms of the lending arrangement and all costs. The Consumer Financial Protection Bureau (CFPB) assumed the authority to publish regulations under most provisions as of July 21, 2011. The primary purpose is to ensure the meaningful disclosure of consumer credit and lease terms so that consumers can compare those terms and shop wisely. A) Community Reinvestment Act (CRA) B) Equal Credit Opportunity Act (ECOA) C) Truth In Lending Act (TILA) D) Reg Z
C
Was passed by Congress in 1980 and was designed to clean up sites contaminated with hazardous substances, pollutants or contaminants. A) Statues Fraud B) CC&R's C) Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) D) Interstate Land Sales Full Disclosure Act
C
What are the two main types of mortgage loans: A) Fixed Rate/Blanket B) Adjustable/Balloon C) Fixed Rate/Adjustable Rate D) Adjustable/Blanket
C
When a buyer wants to purchase a residential property in need of repair or modernization, the buyer usually has to obtain financing first to purchase the dwelling, additional financing to do the rehabilitation construction, and a permanent mortgage when the work is completed to pay off the interim loans with a permanent mortgage. The FHA 203(k) program provides for the purchase and rehabilitation of buildings with up to four living units. A) Collateral-Dependent Loans (Hard-Money Loans) B) Wraparound Mortgage C) Construction to Permanent D) Open-End Mortgage
C
When borrowers are _____________, they provide basic information to the lender, including income, debt, and credit history. A _____________ Letter does not obligate the lender to extend credit, and it does not obligate the borrower to the lender. A) Pre-approval B) Appraisal C) Pre-qualification D) Escrow
C
*Government's right in land- PETE* The action of taking the land. Land must be taken for the good of all. Examples of valid reasons for taking land include schools, parks, hospitals, government buildings, roads, and utilities. When this occurs, the owner is compensated for the land taken A) Variance B) Buffer Zone C) Downzoning D) Condemnation
D
*Government's right in land- PETE* The right of the government to take private land for public use. Land must be taken for the good of all. Examples of valid reasons for taking land include schools, parks, hospitals, government buildings, roads, and utilities. When this occurs, the owner is compensated for the land taken. A) Taxation B) Police Power C) Escheat D) Eminent Domain
D
*Principles of Appraisals* States that the purchase price is affected by the expectation of future appeal and benefits (ex: future school sites) A) Highest and best use B) Principle of Contribution C) Principle of Change D) Principle of Anticipation E) Principle of Supply and Demand
D
*Principles of Appraisals* The presence of lower-priced properties in the area will cause a decline in the value of the subject property. For example, a $200,000 home built in a neighborhood of $125,000 - $150,000 homes will have its value decreased. A) Principle of Substitution B) Principle of Conformity C) Principle of Increasing & Decreasing Returns D) Principle of Regression E) Principle of Progression
D
*Real Estate Transaction Terminology* The process of creating a new mortgage loan, including all steps taken by a lender to attract and qualify a borrower. Can be either a mortgage broker, mortgage banker, or a correspondent lender. The mortgage products offered are basically the same (fixed-rate, adjustable-rate, FHA, VA, and RHS mortgage loans, for example). A) Funding B) Servicing C) Closing D) Origination E) Consummation
D
A summarized report, regarding how it applies to real estate advertisements. These provisions have been selected from a manual published by the Federal Trade Commission entitled "How to Advertise Consumer Credit." A) Community Reinvestment Act (CRA) B) Equal Credit Opportunity Act (ECOA) C) Truth In Lending Act (TILA) D) Reg Z
D
An appraisal that is less than the sales price will generally result in which of the following: A) Termination of the transaction B) Reduction of the sales price by the seller to match the appraised value C) Payment of the difference between the sales price and the appraised value by the buyer/ borrower D) All of the above
D
Beneficial to some borrowers, especially those who do not plan to stay in their homes for an extended period. Is a partially amortized loan with a final payment substantially larger than the others. The benefit of this type of loan is a lower interest rate. The main disadvantage is the high cost of refinancing. A) Blanket Mortgage B) Package Mortgage C) Budget Mortgage D) Balloon Loans
D
CERCLA gives the authority to recover natural resource damages caused by releases of hazardous substances. Authority for cleanup under the act is granted to (3): A) Federal natural resource agencies B) States' natural resource agencies C) Native American tribes D) All of the above
D
Characteristics of Value: DUST If, for some reason, the property cannot be transferred, it is of little value. The inability to transfer may be due to a title flaw that cannot be cured like government regulations or restrictions that make transfer impossible. A) Demand B) Utility C) Scarcity D) Transferability
D
Fannie Mae helps accomplish the following important housing objectives: A) It addresses imbalances of mortgage credit among regions of the United States by making funds available to capital-deficient areas of the country in order to finance new mortgage originations. B) It allows lenders to originate mortgages for sale, rather than for portfolio investment. C) It standardizes mortgage loans, thereby attracting investors who traditionally have not invested in the primary market, further strengthening the market. D) All of the above
D
Homeowners who are least 62 years of age can borrow against the equity in their property. The loan becomes due upon the sale of the property or the death of the owner. The borrower can NEVER be forced to sell the home. This mortgage is considered the most expensive home equity loan because the debt continues to accrue or grow with interest, and heirs will inherit the property with a lien on it. A) Contract for Deed B) Seller Financing C) Participation Loan D) Reverse Annuity Mortgage E) Sub-Prime Loan
D
Permits additional borrowing on the same note and mortgage. This mortgage is a Home Equity Line of Credit or HELOC. The minimum withdrawal on this line of credit is $4,000.00 in Texas A) Collateral-Dependent Loans (Hard-Money Loans) B) Wraparound Mortgage C) Construction to Permanent D) Open-End Mortgage
D
The property, when identified, must also meet the lender's underwriting requirements, including, but not limited to: A) Appraisal B) Insurability C) Lender-required repairs D) All of the above
D
What was passed by Congress in 1968, to protect consumers from fraud in the sale or lease of land. A) Statues Fraud B) CC&R's C) Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) D) Interstate Land Sales Full Disclosure Act
D
Which of the following is a type of depreciation: A) Physical B) Functional C) External/Economic D) All of the above
D
Which of the following is an advantage when choosing an Adjustable Rate Mortgage (ARM): A) Lower interest rate up front so more are able to qualify B) Afford a higher loan amount C) Falling rates D) All of the above
D
Which of the following is an approach to value/appraisal: A) Sales Comparison Approach "Market Data Approach" B) Cost Approach C) Income Approach D) All of the above
D
*Principles of Appraisals* States that the absence of competition will cause prices to increase in the marketplace. Conversely, increased competition tends to bring prices down. A) Principle of Substitution B) Principle of Conformity C) Principle of Regression D) Principle of Balance E) Principle of Competition
E
*Principles of Appraisals* States that the value of a subject property is increased by the value of surrounding properties A) Principle of Substitution B) Principle of Conformity C) Principle of Increasing & Decreasing Returns D) Principle of Regression E) Principle of Progression
E
*Principles of Appraisals* When the demand for real estate is great, and the supply is short, prices in the marketplace go up. Likewise, when the supply is high and demand is low, prices decline. - Buyers market favor the buyers - Sellers market favor the sellers - Balanced market doesn't favor either buyer or seller. A) Highest and best use B) Principle of Contribution C) Principle of Change D) Principle of Anticipation E) Principle of Supply and Demand
E
*Real Estate Transaction Terminology* The process of formulating, executing, and delivering all documents required by a permanent investor, the disbursement of the mortgage funds, and providing for the protection of the investor's security. The required documentation for each closing is determined by the lender or investor in the transaction. A) Funding B) Servicing C) Closing D) Origination E) Consummation
E
The pre-qualification or pre-approval process benefits not only the buyer but also the seller and agents in which way: A) Buyers can be more realistic when setting their pricing goals. B) The buyer's agent has a better understanding of the buyer's ability to pay. C) The buyer's agent can avoid showing properties that the buyer cannot afford. D) Sellers are somewhat reassured that the buyer has sufficient income and credit to close the transaction. E) All of the above
E
This loan has risk-based pricing. The rates are not published on these loans. Borrowers are rated A-F with a prime borrower having an A rating. A minus to F-rated borrowers will pay 1 to 5 % higher than those with good credit. These are non-conforming loans. A) Contract for Deed B) Seller Financing C) Participation Loan D) Reverse Annuity Mortgage E) Sub-Prime Loan
E
Which of the following characteristics is needed for a property to have value: A) Utility B) Transferability C) Demand D) Scarcity E) All of the above
E
Which of the following is a disadvantage when choosing an Adjustable Rate Mortgage (ARM): A) Early refinancing B) Not sure what your payments will be over a long term C) Long term cost D) Confusion E) All of the above
E
Which of the following is a factor considered by appraisers: A) Analysis of market data (Sales Comparison Approach) B) Cost Approach Analysis (if required) C) Income Approach Analysis (if required) D) Reconciliation of values E) All of the above
E
Which of the following is a factor considered by appraisers: A) Property and lender information B) Neighborhood description C) Site description D) Improvements to the site E) All of the above
E
Which of the following is one of the 4 government's rights in land (these rights exist at the local, state & federal level): A) Taxation B) Police Power C) Escheat D) Eminent Domain E) All of the above
E
*Government's right in land- PETE* T/F: A $2.50 rate per hundred means an owner pays $2.50 for every $100 of assessed value. A rate of 25 mills means an owner pays $25 for every $1000 of assessed value.
T
T/F: Since an appraisal gives an expert's opinion of a property's value, the lender will use it to ensure that the loan amount does not exceed the established loan-to-value ratio.
T
T/F: The Gross Rent Multiplier (GRM) is the relationship between the amount of rent a specific property can command and the value of the property to the owner. This number is neighborhood-specific. The GRM is calculated as follows: GRM = Sales Price ÷ Monthly Rent.
T
T/F: The appraiser is concerned with age in two areas: Chronological Age and Effective Age.
T
T/F: The value of a property may be affected by social, economic, governmental, and environmental influences.
T
