Principles of Real Estate 1

Question 1

appraisal

Answer 1

• An appraiser’s opinion of value.

- Lenders use to determine the market value of the property bing being used to secure the loan.

Question 2

loan to value ratio (LTV)

Answer 2

• Percentage of value or sales price that a lender is willing to finance
• Lenders use appraisal to make sure loan amount doesn’t exceed loan-to-value ratio.

Question 3

highest and best use (of a property)

Answer 3

the legal use that gives the greatest return in money and/or amenities

Question 4

principle of contribution

Answer 4

suggests that the value of a property is equal to the sum of the contributory value of each of its component parts.

Question 5

principle of change

Answer 5

• the forces acting on a parcel of land are always affecting the value of the land.
• this makes appraisals temporary
• change can be specific or external to the property

Question 6

principle of anticipation

Answer 6

the purchase price is affected by the expectation of future appeal and benefits.

Question 7

principle of substitution

Answer 7

the value of a commodity is influenced by the cost of acquiring a substitute or comparable item

Question 8

principle of conformity

Answer 8

suggests that value is maximized when there is a reasonable degree of homogeneity, or sameness, in a neighborhood .

Question 9

functional obsolescence

Answer 9

loss in desirability of style, layout, or function of an element of a property over time

Question 10

principle of regression

Answer 10

the presence of lower-priced properties in the area will cause a decline in the value of the subject property.

Question 11

principle of of competition

Answer 11

• the absence of com-petition will cause prices to increase in the marketplace.
• conversely, increase competition tends to bring prices down

Question 12

principle of of competition

Answer 12

• the absence of com-petition will cause prices to increase in the marketplace.
• conversely, increase competition tends to bring prices down

Question 13

external obsolescence

Answer 13

loss in value of a property caused by factors outside of the property itself

Question 14

Primary Mortgage Market

Answer 14

Market in which borrowers and mortgage lenders come together to create and negotiate terms of a mortgage transaction

Question 15

Secondary mortgage market

Answer 15

• Exists for the purchase and sale of existing mortgages to investors.
• market wherein loan originators can sell their loans and recover cash for originating more loans

Question 16

Closing

Answer 16

The consummation of a real estate transaction in which all appropriate documents are signed and the proceeds of the mortgage loan are disbursed by the lender

Question 17

Funding

Answer 17

Process of transferring funds to a title or escrow company for disbursement

Question 18

Servicing

Answer 18

Includes sending monthly payment statements and collecting monthly payments, maintaining records of payments and balances, collecting and paying taxes and insurance, remitting funds to the note holder, and following up on delinquencies

Question 19

RMLO

Answer 19

• Residential Mortgage Loan Originator
• trusted loan originators
• loan officer
• mortgage banker/broker
• term mandated by the SAFE Act

Question 20

Redlining

Answer 20

Refusing to provide financing in a particular area because of location