Champions Principles of Real Estate 2 QUESTIONS AND ANSWERS 2024, Exams of Business Administration

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Champions Principles of Real Estate 2

QUESTIONS AND ANSWERS 2024

appraisal value of a property maybe affected by social, economic, govt and environmental influences Loan-to-Value Ratio (LTV) The percentage of value or sales price that a lender is willing to finance. limited appraisal report exterior only/drive by inspection. deemed as low risk loan highest and best use of property legal use that gives the greatest return Principal of Contribution cost does not equal value Residential Mortgage Loan Originators (RMLO) Must be certified licence holders and is mandated by the SAFE ACT (TX dept of savings and mortgage lending) Principle of Anticipation purchase price is affected by the expectation of future appeal and benefits Principal of Substitution value of a commodity is influenced by the cost of acquiring subsitute or comparable item Principal of progression value of properties around yours goes up; so does yours Principal of Regression The Value of more expensive home placed in a neighborhood of less expensive homes will drop in value Market Value the most probable price a property should bring in a competitive and open market under fair conditions requisit to a fair sale. appraisal process The value of a property may be affected by social, economic, governmental and environmental influences. An appraiser must always be aware of these influences and possible changes in them that could affect market value. Three approaches to value (1) The Sales Comparison Approach (2) The Cost Approach, (3) The Income Approach.

Sales Comparison Approach A value for existing properties method for comparing similar properties to the subject property. this is the best indicator. Market Data Approach aka: sales comparison approach Physical Deterioration Loss of value of a building from its reproduction cost, resulting from wear and tear over time. Functional Obsolescence loss of desirability of the style, layout or function of an element of property over time External Obsolescence Losses of property value caused by forces or conditions beyond the borders of the property. ie. zoning, highways promissary note evidence of a lean. simply a note Foreclosure secured property may be sold ti satisfy the unpaid promissory note. Primary Mortgage Market the loan origination market where borrowers and lenders negotiate mortgage terms funding transferring funds to a title co for disbursement when loan is approved. Servicing The process of collecting loan monthly payments, keeping records and balances, collecting and paying taxes and insurance Equal Credit Opportunity Act federal law passed in 1974. doesn't include: gender or immigration status. consumers are given equal chance to obtain credit. secondary market exists for the purchase and sale of existing mortgages to investors Liquidity provides a steady supply of funds to keep making loans yield represents money earned on an investment Fannie Mae began in 1938. largest investors in home mortgages in the secondary market Freddy Mac began in 1970. purchases mortgages in the secondary market pre approval

hedge against inflation, higher than avg rate of return, leverage - use of borrowed money to make money investing in real-estate (personal advantages) tax shelter, favorable capital gains, and tax shelter and deferred taxation disadvantages of real estate investment lack of liquidity, risk, expense and need for management lease doesn't have to be recorded. just sign main reason for incentive to investment in real estate tax advantage real estate syndicate 100% partnerships organized, limited & general partnership, or corporation raising funds for the purchase of real estate investment - under state and federal security laws 3 types of real estate investment syndications limited, general partnership or corporation under jurisdiction of state and federal security laws real estate mortgage investment conduits (remic) purchase pools of mortgages 2 Trec promulgated lease forms seller/buyer residential temp lease. up to 90 days property manager should always have errors and omissions insurance. property manager main job is to protect and preserve the value of an investment property while generating income for the owner. they are bonded cash flow much like a bank statement and it shows all cash received, expenses during a reporting period Statue of Frauds state law requires law, real estate contracts and leases over a year to be in writing. Management Agreement employment written agreement contract management fees negotiated between landlord and manager. generally 5-10% range with fees. higher for smaller properites deed first sign then pass to the new owner conveys an interest in real estate from one party to another. doesn't indicate that they are legal owner conveys an interest in real estate from one party to another. doesn't indicate that they are legal owner Sovereignty of the soil

The government is the original owner of all land Abstract of Title complete history of title including deeds, easements, liens, foreclosures, wills, marriages, death... everything about the property that was recorded. Chain of titles history or list of all owners back to the sovereignty of the soil you want this one. purchase title insurance either by grantor or grantee. insured against loss resulting from defects of the title you want this one. purchase title insurance either by grantor or grantee. insured against loss resulting from defects of the title types of changes in the ownership of the property changes in property may be: involuntary or voluntary Voluntary Alienation transfer of title with the grantor's consent the absence of force proves the conveyance is voluntary Interstate Succession dying without a valid will given by the grantor or grantee. something of value given in exchange for a conveyance. it can be money, personal property, ie $ given by the grantor or grantee. something of value given in exchange for a conveyance. it can be money, personal property, ie $ Covenant of Quiet Enjoyment grantor promises the grantee interrupted use of the property Quitclaim Deed A deed with no guarantees or warranties - it offers the buyer the least protection - can be used to correct or cure a defect or cloud on title Lispendens pending lawsuits affecting the property final rule mandates the use of 2 disclosures that help the consumer in understanding the key features, costs and risk: 3 pages loan estimate & closing disclosure forms. final rule mandates the use of 2 disclosures that help the consumer in understanding the key features, costs and risk: 3 pages loan estimate & closing disclosure forms. Closure Disclosure (CD) is always compared to the loan estimate RESPA (Real Estate Settlement Procedures Act) implements Consumer Federal Protection Bureau