Principles of Real Estate 2 Champions-with 100% verified solutions 2024-2025-tutor verifie, Exams of Business Fundamentals

Download Principles of Real Estate 2 Champions-with 100% verified solutions 2024-2025-tutor verifie and more Exams Business Fundamentals in PDF only on Docsity! Principles of Real Estate 2 Champions-with 100% verified solutions 2024-2025-tutor verified 334Q&A What does D.U.S.T. stand for? Demand, Utility, Scarcity, Transferability the percentage of value or sales price that a lender is willing to finance Loan to Value Ratio (LTV) the value of a property is equal to the sum of the contributory value of each of its component parts. principle of contribution the forces acting on a parcel of land are always affecting the value of the land PRINCIPLE OF CHANGE the legal use that gives the greatest return in money and/or amenities. HIGHEST AND BEST USE the purchase price is affected by the expectation of future appeal and benefits. PRINCIPLE OF ANTICIPATION value is maximized when there is a reasonable degree of homogeneity, or sameness, in a neighborhood. principle of conformity reduction in value of property from causes such as deterioration or obsolescence. Depreciation 1. Physical deterioration 2. functional obsolesce 3. external obsolesce Types of depreciation the loss in a property's value due to daily wear and tear. Physical deterioration The legal procedure under which property may be sold to satisfy an unpaid promissory note Foreclosure Ad valorem according to value What are taxes based on? Assessed Value Appraiser must follow what? Uniform Standards of Professional Appraisal Practice (USPAP). URAR is commonly referred as 1004 Uniform Residential Appraisal Report (URAR) is known as Fannie Mae 1004 or Freddie Mac form 70 Standards that have been established by the Appraisal Standards Board of the Appraisal Foundation USPAP Value Does not always equal price If a type of property in a market area is too abundant, it has reduced value Scarcity Many lenders, especially when dealing with high-LTV loans, will order this type of appraisal Field Review 3 approaches to value are 1. Sales Comparison Approach 2. Cost Approach 3. Income Approach appraiser focuses on recent sales in determining the value of the subject SALES COMPARISON APPROACH How many comparison sales will and appraiser gather? Minimum of 3. some lenders require 4 The degree to which a comparable is adjusted in 2 ways 1. Net adjustment 2. gross adjustment the absolute adjustments made to the comparable, considering those that are positive and negative Net Adjustments - the sum of all adjustments, whether or not they are positive or negative Gross Adjustments the market value of the property considers how much a new structure of this size and type would currently cost to build. COST APPROACH loss in desirability of the style, layout, or function of an element of a property over time. Functional obsolescence to the loss in value of a property caused by factors outside of the property itself External obsolescence Process of estimating the value of an income-producing property by capitalization of the annual net income. INCOME APPROACH Gross Rent Multiplier formula GRM = Sales Price ÷ Monthly Rent b. An opinion of value c. A market analysis d. The market value of a property b. An opinion of value For tax purposes the _______ is determined by the taxing authority. a. assessed value b. appraised value c. market price d. investment value a. assessed value In the appraisal report, the property being appraised is referred to as the _______ property. a. Target property b. Comparable property c. Sold property d. Subject property d. Subject property The principle of ___________ suggests that the value of property is equal to the sum of the contributory value of each of its component parts? a. Anticipation b. change c. substitution d. contribution d. contribution The market in which borrowers and lenders come together to create and negotiate the terms of a mortgage transaction Primary mortgage market The practice of refusing to provide financing in a particular location Redlining The process of making a lending decision Underwriting The process of creating a new mortgage loan Origination a pledge of real estate as security for repayment of a debt mortgage The borrower, is known as mortgagor. The lender is known as the mortgagee. The mortgage "package" actually consists of two major documents: 1. promissory note, 2. mortgage, The market in which borrowers and mortgage lenders come together to create and negotiate terms of a mortgage transaction is called the primary mortgage market. A major difference between mortgage companies and regulated lenders is mortgage companies rely on commercial banks Mortgage loan originators can be broken down into three categories 1. mortgage bankers, 2. mortgage brokers 3. correspondent lenders What is Servicing? activities include collecting monthly payments, disbursing the funds to pay taxes and property insurance, supervising the loan, preventing The Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) was established. The Bureau has the authority to examine and enforce consumer protection regulations for all mortgage-related businesses, large non-bank financial companies, and banks and credit unions with assets greater than $10 billion. Consumer Financial Protection Bureau (CFPB) Responsible for enforcing "federal consumer financial law" Consumer Financial Protection Bureau (CFPB) to ensure that banks would serve the needs of the community in which they were chartered to do business. Community Reinvestment Act ensures that all consumers are given an equal chance to obtain credit. Equal Credit Opportunity Act (ECOA), Equal Credit Opportunity Act prohibits discrimination in any aspect of Race Color Religion National Origin Sex Martial status Age Receipt of income designed to protect consumers in credit transactions by requiring clear disclosure of key terms of the lending arrangement and all costs. Truth In Lending Act (TILA) exists for the purchase and sale of existing mortgages to investors. secondary market The originator of the loan becomes a seller large investing institutions that deal in the secondary market for mortgage loans are called purchasers is the return on investment that the investor receives over time net yield Fannie Mae and Freddie Mac have jointly developed a series of documents to standardize mortgage loan purchases, and loans prepared on these documents have become known as "conforming loans." established in the United States in 1968 to promote home ownership. The Government National Mortgage Association (GNMA) Does a Pre-Qualification Letter bind a lender to loan money? No, it is to give the buyer a price point of what they may be able to afford. What is the acronym for an application to be considered "COMPLETE" PENSIL What does PENSIL stand for? Property Address Estimated Value Name of the Borrower Social Security Number Income Loan Amount This is determined by the rate of interest charged on the loan and the discount points charged by the lender at closing. The yield A loan with no discount points is known as a "par loan" ultimate purpose of this is to protect consumers in their dealings with lenders and creditors and to ensure that consumers are aware of the terms and costs of credit. Truth in Lending Act (TILA) 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. Loan Estimate (LE) the Loan Estimate (LE) must be provided no later than 3 days after receipt of the written application What are the penalties for Mortgage Fraud? possible prison term and a fine not to exceed $10,000. This increases the penalties for a federal conviction for mortgage fraud to A.) a maximum of 30 years in prison and B.) a fine of up to $1 million. Fraud Enforcement and Recovery Act (FERA) rate remaining fixed for the entire term of the loan. fixed-rate mortgage the monthly payment includes an amount that is applied first to interest that is due, with the remainder of the loan payment being applied to the outstanding loan balance amortizing loan Jill's loan balance on March 1st was report as $127,380. The regular monthly payment of principal and interest is $836.03, and the rate of interest is 4%. 1.When Jill makes her April 1st payment, how much interest will be due? ______ $424.60 1.) 127,380 x .04 = $5,095. 20 (yearly interest) 2.) 5,095.20 divided by 12 = $424.60 (monthly interest) Jill's loan balance on March 1st was report as $127,380. The regular monthly payment of principal and interest is $836.03, and the rate of interest is 4%. 2.After the April 1st payment has been applied, what will her new loan balance be? ____________________ $127,968.57 1.) 836.03 - 424.60 = $411.43 (Principal Paid) 2.) 127,380 - 411.43 = $127,968.57 (new balance) Mortgage loan in which the interest rate my increase or decrease Adjustable Rate Mortgage (ARM) The period between rate changes in an adjustable rate mortgage is called the adjustment period. is what the lender uses as an instrument for measuring changes in interest rates in an ARM. Index is the world's most widely used benchmark for short-term interest rates. London Interbank Offered Rate - LIBOR The percent added to the index in order to calculate the payment interest rate. Margin is equal to the margin plus the index and is usually to the nearest one- eighth of a percent. Fully Indexed Rate - A lower interest rate is offered by the lender during the first year or more of the loan. is a partially amortized loan with a final payment substantially larger than the others. BALLOON NOTE is a specific type of asset-based financing in which a borrower receives funds secured by the value of a parcel of real estate. hard-money loan is a method of financing which preserves the low, existing interest rate on the original note. WRAPAROUND MORTGAGE permits additional borrowing on the same note and mortgage OPEN-END MORTGAGE is 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 CONTRACT FOR DEED two or more lenders own a share. This allows the lenders to share or distribute the risk. PARTICIPATION LOAN Homeowners who are least 62 years of age can borrow against the equity in their property, using a REVERSE ANNUITY MORTGAGE When an unscrupulous lender takes advantage of a consumer's lack of knowledge regarding lending practices, it is called predatory lending Residential mortgages are divided into two broad categories: conventional loans and government loans. is used to qualify a borrower for a loan based upon the proposed house payment and his or her gross monthly income (GMI). front ratio is the ratio of the borrower's total recurring monthly debts, including such obligations as the house payment, payments on all installment debts, monthly payments on all junior liens, alimony, car lease payments and other recurring payment obligations back ratio refers to a loan made with real estate as security and which does not involve government participation in the form of insuring or guaranteeing the loan. conventional loan Conventional loans that meet these standards are known as conventional conforming loans. If a residential property contains five or more living units, the sale is considered a commercial transaction. Conventional lending guidelines specify a front ratio of _______and back ratio of _______. front ratio of 28% back ratio of 36%. is a special form of insurance which is designed to allow lenders to increase the LTV ratio Private mortgage insurance (PMI) Government loans are divided into three categories: FHA, VA, and USDA. When the seller agrees to pay some of the buyer's expenses, we have a seller concession a. The Real Estate Settlement Procedures Act b. The Fair Credit Reporting Act c. The Truth In Lending Act d. All of the above d. All of the above Investors assign large blocks of loans into _______ as collateral to back mortgage-backed securities. a. originations b. warehouse lines of credit c. bonds d. loan pools d. loan pools title to land in the United States can be traced back to its original owner, which is referred to as the sovereignty of the soil. Acronym for Governments rights in land PETE What does PETE stand for? Police Power Eminent Domain Taxation Eschest is the right of the government to regulate and control the way land is used. Police Power is the amount of space required between the lot line and the building line. A setback is an area of land separating one land use from another, such as residential from commercial. buffer zone Changing the zoning of a property to a lower value use is called downzoning is the right of the government to take private land for public use Eminent Domain The action of taking the land is called . condemnation If a landowner sues the government in order to force the government to buy his or her land, this is . inverse condemnation is the government's right to tax real estate Taxation Property taxes are referred to as ad valorem taxes, is property value for tax purposes. Assessed Value Rates can be per hundred or per thousand, called mills is the process of transferring real estate to the state when a person dies intestate (without a will) and without heirs. Escheat passed to protect consumers from fraud in the sale or lease of land. Requires developers to register subdivisions of lots or condominium units sold in interstate commerce Interstate Land Sales Full Disclosure Act Many license holders specialize in the sale of unimproved property. LAND BROKERAGE are seeking opportunities in residential housing, retail, commercial properties, farm and ranch and vacant land, to name a few. Investment buyers The term "REO" is an acronym that stands for "Real Estate Owned." The value of the asset is put on the books of the firm under a category called Real Estate Owned (REO) is one in which a property, with the consent of the lender, is sold by an owner/borrower at a price that is not sufficient to pay off the existing mortgage A short sale Auctioneers who call at a real estate auction may do so without needing to be licensed. an auctioneer is involved in any part of a real estate transaction beyond calling at auction, he or she must be a licensed individual. is also responsible for managing the budget and for preparing financial reports for the owner. A property manager Which of the following designations is a challenging program regarded as the "gold standard" for commercial real estate professionals? a. RLI b. CCIM c. ABR d. ALC b. CCIM The ABR designation is especially useful for: a. Residential buyer's agents b. Commercial property managers c. Foreclosure specialists d. Industrial property specialists a. Residential buyer's agents When a license holder is asked to locate an investment property for a potential buyer: a. The license holder should go ahead with the transaction because having a real estate license means that he or she is qualified. b. The license holder should decline, because the License Act prohibits this type of activity. c. The license holder should go ahead with the transaction only if he or she is competent to do so. d. None of these is correct c. The license holder should go ahead with the transaction only if he or she is competent to do so. The potential income of a property is the amount of rent that would be collected in a year, assuming that the property was fully rented with no vacancies and no credit losses. This potential income is often referred to as the Gross Scheduled Income, or Gross Potential Income. What is the Capitalization Rate Formula? Net Income divided by Sales Price The sale of a capital asset results in either a gain or a loss capital gain Residential income property is depreciated over a 27.5 year period Commercial income property is depreciated over a What is the minimum of investors needed for a REIT? 100 investors Additional capital or property included in a transaction to even out the exchange is called ______. a. capital gain b. a syndicate c. gross potential income d. boot d. boot The potential income of a property that is derived from rents collected in a year is called: a. Gross Rent Multiplier b. Gross Scheduled Income c. Great Rental Income d. Appreciation Schedule b. Gross Scheduled Income Real estate investment syndicates: a. Are a form of ownership b. May be organized as limited or general partnerships c. Are not under the jurisdiction of state and federal laws d. Are very popular today because of favorable state and federal laws b. May be organized as limited or general partnerships What are these 1.) Estate for Years 2.) Periodic Tenancy 3.) Tenancy at Sufferance 4.) Tenancy at Will Leasehold Estates The ________ is an instrument or conveyance used to create a leasehold estate. lease The ____________________ gives the tenant possession without ownership. leasehold estate Owner and landlord is called the Lessor The tenant is called the Lessee A lease for a period of more than one year must be in writing to comply with the Statute of Frauds a lease with a definite beginning date and definite ending date Estate for years - a lease that renews itself automatically for like periods of time Periodic tenancy - is an interest in leased property created when the holdover tenant (one whose lease has ended and who refuses to leave Tenancy at sufferance - a leasehold in which a tenant occupies real estate with the permission of the owner for an uncertain or unspecified length of time. Tenancy at will - What are these 1.) Graduated Lease 2.) Gross Lease 3.) Net Lease 4.) Percentage Rent 5.) Lease Option 6.) Sake and leaseback b. Landlord and Tenant Act A(n) _______ is a lease of property where the landlord pays charges regularly incurred in ownership, such as taxes, insurance, utilities, and repairs. The tenant pays only rent. a. Graduated lease b. Net lease c. Lease and take back d. Gross lease d. Gross lease A _______ is an agreement that conveys the right to use property for a period of time. a. Deed b. Warranty deed c. Lease d. Life estate c. Lease A building certification program for properties that are "green" LEED Servicing a property and its equipment in order to prevent mechanical failure and keep property values high Preventive maintenance An organization that advocates on the part of building owners and managers BOMA The property manager's employment contract with the owner Management agreement Deterioration of a property due to delayed maintenance Deferred maintenance The role of a property manager is established by a written agreement called a management agreement. A property's value and desirability is determined by the level of preventive maintenance When a property is not properly maintained, the result is deferred maintenance _____________ is the act of mixing a client's funds with a broker's business or personal funds. commingling ______________ is advocacy on the part of building owners and managers BOMA ______________________was founded by BOMA in 1970 to provide certification programs for managers of commercial properties. The Building Owners and Managers Institute (BOMI) ___________________ promotes advancement in the shopping center industry and promotes the role of centers in the commercial distribution of consumer goods and services The International Council of Shopping Centers (ICSC) The lists all cash that came into and all expenses incurred by a property during the reporting period. a. Property management agreement b. Bank statement c. Cash flow report d. Leasing agreement c. Cash flow report __________________ is a statement of the condition of title at a moment of time title commitment Any change in the ownership of real property is known as . alienation _______________ is a transfer of title that is a free act of the grantor Voluntary alienation ________________ is a transfer of ownership against the will of the owner. In many cases, court action is required to transfer ownership. Involuntary alienation Property may be subject to forced sale under eminent domain if it is in an area that has been designated ____________ "blighted" ____________ occurs when an individual acquires title from the rightful owner through hostile, actual, and continuous occupation of the land for the statutory period. Adverse possession all of the estate devised or bequeathed by the will transfers immediately to the devisees or legatees named will Real property conveyed by will is called a devise A person who acquires title to property under a will it is said to have acquired title by devise and devisee. Personal property that is inherited is called a bequest Personal property that is inherited is called a bequest, and money is a legacy Any property, whether real or personal, that is capable of being inherited, is called a _______________ hereditament An individual who dies leaving a valid will is said to have died ____________ testate That individual's estate will be settled by an _____________ executor _____________ prepared by an attorney, is the best type as it will be accepted in all fifty states, and is least likely to be contested formal or witnessed will __________ , or handwritten wills Holographic _________ is an oral or deathbed will. This type, while legal in Texas, is very vulnerable to being contested. nuncupative will ____________ is an addition or an amendment to an existing will codicil _______________ occurs when an individual dies, leaving no valid will Intestate succession An individual who receives property in this manner is said to have acquired the property by _____________ descent - the grantor promises the grantee the uninterrupted use of the property covenant of quiet enjoyment - the grantor is responsible for any documentation needed to ensure title is transferred to the grantee covenant of further assurance - the grantor's promises have no expiration date covenant of warranty forever in a deed is a limitation placed on the new owner by the grantor. restriction in a deed reserves rights for the grantor reservation In this deed, the grantor states promises to warrant and defend the grantee's interest in the property, general warranty deed. , the grantor promises to warrant and defend title, but only against claims which may have arisen during his or her period of ownership special warranty deed is one with no guarantees or warranties bargain and sale deed is one with no guarantees, warranties, or covenants quitclaim deed where the consideration is love and affection, a , guardian's deed , which is used to convey title to property sold by the government at a tax sale tax deed Two or more persons sharing joint ownership may wish to divide the property amongst themselves in a . partition is the combination of two or more properties into one. assemblage or plottage Title is conveyed when the deed is signed and ____________ a. Witnessed b. Delivered c. Recorded d. Notarized b. Delivered The most common type of deed used in Texas is the _____________ a. Bargain and Sale Deed b. Quitclaim Deed c. General Warranty Deed d. Special Warranty Deed . General Warranty Deed Which of the following is not a type of involuntary alienation? a. Bankruptcy b. Devise c. Condemnation d. Foreclosure b. Devise The title commitment is divided into sections called "schedules,"