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95 Cards in this Set
- Front
- Back
Functional Obsolescence |
Refers to the loss in desirability of the style, layout, or function of an element of a property over time |
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Sales comparison |
The approach used as the best indicator of value for existing properties |
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Highest and best use |
The legal use for property that gives the greatest return in money and/or amenities |
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Market Value |
The price a willing seller will sell for and the price a willing buyer will pay |
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External Obsolescence |
The loss in value of a property caused by factors outside the property itself |
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Appraisal |
An appraiser’s opinion of value. Lenders use them to determine the market value of the property being used to secure the loan |
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Loan-to-value ratio (LTV) |
The percentage of value or sales price that a lender is willing to finance |
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Subject property |
The property being appraised |
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Principle of Contribution |
A property’s value is equal to the sun of the contributory value of each of its component parts Example: adding a swimming pool to a property for $50,000 might result in a contributory value of only $20,000 |
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Principle of Change |
A appraisal has a relatively short shelf life Forces of change can be specific or external to the property Example: Adverse site conditions, a zoning change or damage to the improvements |
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Principle of Anticipation |
Purchase price is affected by the expectation of future appeal and benefits |
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Principle of substitution |
A commodity’s value is influenced by the cost of acquiring a substitute or comparable item |
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Principle of Conformity |
Value is maximized when there is a reasonable degree of homogeneity or sameness in a neighborhood - Houses in a neighborhood also tend to conform in value to each other |
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Principle of increasing and decreasing returns |
It is prudent to improve property when the value added by the improvement exceeds the cost of the improvement |
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Principle of Suppy and demand |
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 |
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Principle of regression |
The presence of lower-prices properties in the area will cause a decline in the value of the subject property |
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Principle of competition |
The absence of competition will cause prices to increase in the marketplace. Conversely, increased competition tends to bring prices down |
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Principle of balance |
Mixed land use should result in the maximum value for all properties involved Example: master planned community |
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Characteristics of Value (DUST) |
Demand Utility Scarcity Transferability |
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Three Approaches to Value |
Sales comparison approach Cost Approach Income approach |
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Sales Comparison Approach |
Aka Market data approach Appraiser focuses on recent sales in determining the value of the subject - The appraiser will gather at least three comparison sale aka “comparables” or “comps” |
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Comparables or comps |
These comparable are recently-sold properties of similar type, size, quality and locale as the subject. Considered most reliable approach |
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Cost approach |
Market value of the property is considered by how much a new structure of this size and type would currently cost to build |
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Depreciation |
The reduction in the value of a property due to deterioration or obsolescence |
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Physical deterioration |
Is the loss in a property’s value due to daily wear and tear |
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Functional obsolescence |
Is the loss in desirability of the style, layout or function of an element of a property over time |
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As Valorem |
According to Value Taxes |
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USPAP |
Standards that have been established by the Appraisal Standards Board of the Appraisal Foundation |
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URAR |
Fannie Mae Form 1004 |
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URAR |
Fannie Mae Form 1004 |
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Principle of Progression |
The value of a subject property is increased by the value of surrounding properties |
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Value |
Does not always equal price |
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Scarcity |
If a property in a market area is too abundant, it has reduced value |
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Field Review |
Ordered by lenders when dealing with high-LTV loans |
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Primary Mortgage Market |
The market in which borrowers and lenders come together to create and negotiate the terms of a mortgage transaction |
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Redlining |
The practice of refusing to provide financing in a particular location |
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Underwriting |
The process of making a lending decision |
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Foreclosure |
The legal process under which property may be sold to satisfy an unpaid promissory note |
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Origination |
The process of creating a new mortgage loan |
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Processing |
Once the application is complete, the file moves into the processing phase During this phase, the loan processor will “build a file” that will be used to make an underwriting decision. |
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Consummation |
The closing of a real estate transaction in which all appropriate documents are signed and the proceeds of a mortgage loan are disbursed by the lender |
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Funding |
The process of transferring funds to a escrow company for disbursement |
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Servicing |
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 |
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Secondary Market |
Exists for the purchase and sale of existing mortgages to investors. |
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Requirements for a loan application acronym |
PENSIL |
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PENSIL |
Property Address Estimated Value Name of Borrower Social Security Number Income Loan Amount |
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Discount Rate |
Is the interest rate a Reserve Bank charges eligible financing institutions to borrow funds on a short term basis. - Set by the boards of directors of the Federal Reserve Banks - Is subject to approval by the Board of Governors |
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Mortgage fraud penalties |
- Possible Prison Term - Fine not to exceed $10,000 |
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Sovereignty of the Soil |
Title to land in the U.S can be traced back to its original owner |
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Police Power |
The right of the government to regulate and control the way that an individual uses their land |
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Taxation |
The governments right to tax real estate |
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Escheat |
The right the government has to take an individuals land if they die without a will or heirs |
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Eminent Domain |
The governments right to take private land for public use |
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Zoning |
- Most common example of police power Zoning laws regulate the use of land within a municipality. ... Zoning is what keeps a residential district residential, a commercial district commercial, an industrial district industrial, and so on |
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Variance |
If the proposed use of property violates zoning, the owners must request a variance - Permission to violate the rules |
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Buffer Zone |
Is an area of land separating one land from another. - The buffer zone is located between incompatible uses - Example: Single family, apartments, retail. The apartments are the buffer zone |
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Condemnation |
The action of the government taking land |
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Assessed Value |
Is property value for tax purposes |
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Greenfields |
Land that has never been commercially developed |
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Greyfields |
Land containing abandoned structures that are capable of redevelopment |
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Brownfields |
Former commercial and industrial sites that have been suspected or proven to be contaminated |
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Wetlands |
Are defined as the “transitional zones between uplands and deep water” - Swamps, Marshes, bogs, fens, lagoons, and quagmires, etc... |
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Mold |
A mold or mould is a fungus that grows in the form of multicellular filaments called hyphae |
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Environmental Impact Statements |
EIS A report that includes a detailed description of the proposed project, including its purpose and need. Any alternatives to the proposed project could accomplish the purpose and how the project will affect the environment |
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Greywater |
Greywater includes all wastewater generated in the home, except toilet water (which is considered “blackwater”). ... Plants and microorganisms in the soil consume and filter the organic nutrients and bacteria found in greywater, treating it naturally and returning clean water to the water cycle |
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Listing Agent |
Works with a seller to list property with a brokerage firm |
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Selling Agent |
Represents a buyer in a real estate transaction |
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Home inspector |
Examines a home and prepares a report that lists deficiencies in a property |
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Property Manager |
Protects and enhances the value of a property while generating income on behalf of the owner |
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Farm and Ranch Brokers |
Specializes in “working” farms and ranches. |
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Commercial Real estate |
Defined as any real estate that is not residential |
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Land Brokerage |
Unimproved property the license holders specialize in |
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Land Brokerage |
Unimproved property the license holders specialize in |
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Investment |
In real estate, the buyer is generally not the end-user of the property |
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Leasing |
Leasing agents may represent residential or commercial landlords and tenants |
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Real Estate Owned |
REO when a lending institution becomes the owner of a property through a foreclosure, the property becomes an asset of the company |
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Foreclosure specialist |
Is not well defined. Includes many activities including REO and short sales |
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Short Sale |
In which a property with the consent of the lender, is sold by an owner or borrower at a price that is not sufficient to pay off the existing mortgage |
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Auctioneers |
May call a real estate auction without a license |
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Resort |
Resort Communities Short term rentals or vacation rentals |
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Commercial or residential development |
Specializes in a particular type of property such as multi family, office buildings or retail space Residential developers subdivide larger tracts of land into smaller parcels for resale of individual land or builders |
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Residential mortgage loan originators |
Who originate loans for federally regulated depository institutions or their subsidiaries must be registered |
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Appraisers |
Are specialists who estimate the value of properties for owners, lenders, estates and taxing authorities |
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Appreciation |
The passive increase in the value of a parcel due to market forces |
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Liquidity |
The ease of converting an investment into cash |
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Operating expenses |
Deducted from gross income to determine the net operating income |
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Capitalization Rate |
Found by dividing the net income of a property by its sales price |
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Gross schedule income |
The amount of rent that will be collected in a year, assuming that a property was fully rented with no vacancies and no credit losses |
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Income |
Is derived from the collection of rents and other revenue streams from a property |
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Investment gain |
The increase in value in a parcel of land due to the activities of the owner/ developer. A parcel of raw land developed into a subdivision or shopping center gains value |
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Net operating income NOI |
Operating expenses are deducted from gross income to determine NOI |
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Capital Gain |
Or loss is realized when a property is sold. Profit when an asset is sold |
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Real estate syndicate |
A method of raising funds for the purchase of a real estate investment |
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Real estate investment trusts REIT |
Create by Congress in 1960 Let’s investors invest in larger commercial properties by purchasing shares in a organization that owns real estate |
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Real Estate Mortgage Investment Conduit |
Allows for the indirect investment in mortgage through the sale of securities. A real estate mortgage investment conduit purchases “pools” of mortgages |