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60 Cards in this Set

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appraise
develop an opinion of value. Although there are many types of value, the most common objective of an appraisal is to estimate market value—the most probable sales price of a property.
value
an estimate of future benefits
cost
represents a measure of past expenditures
price
reflects the actual amount of money paid for a property.
highest and best use
Each parcel of land has one legal use that gives that property its greatest value.
substitution
The maximum value of a property is equal to the cost of purchasing or constructing equally desirable properties.
supply and demand
Property values will be affected both by the supply of property and by buyer demand for it.
conformity
The maximum value for a property is reached when it conforms to the surrounding land use.
externalities
Influences outside a property may have a positive or negative effect on its value
anticipation
The value of a property may increase or decrease based on a potential purchaser's belief that some future event will benefit or detract from the value of the property.
increasing and diminishing returns
Returns refer to the relationship between the cost of an improvement and the value it adds to the property. A certain number of improvements may add substantial value to the property (increasing return) but adding more than that number will add less value or no value (diminishing return).
plottage
By combining or consolidating adjacent lots into one larger lot, the resulting land value will be higher than the sum of the values of the separate lots.
contribution
The value of any component of a property is measured by the amount it contributes to the value of the whole or the amount its absence detracts from that value
competition
When substantial profits are being made, competition will be attracted.
change
No physical or economic condition remains constant.
sales comparison approach
the value of the subject property is compared with the values of others like it that have sold recently
competitive market analysis,
an abbreviated variation of the sales comparison approach, to assist sellers in pricing property or to assist buyers in determining how much to offer for a property.
cost approach
an appraiser calculates the cost of building a similar structure on a similar site.
income approach
is an analysis based on the relationship between the rate of return that an investor requires and the net operating income that a property produces.
gross rent multiplier
often is used to estimate the value of single-family residential properties that are not usually rented but could be. The GRM is computed by dividing the sales price of a property by its gross monthly rent.
reconciliation
the validity and reliability of each approach are weighed objectively to arrive at the single best and most supportable conclusion of value.
title theory states
States that recognize the lender as the owner of mortgaged property
lien theory states
recognize the borrower as the owner of mortgaged property-Texas
promissory note
the promise, or agreement, to repay the debt in definite installments with interest. The note creates the debt. The note also sets the rate of interest at which the loan is made and that the mortgagor or trustor must pay as a charge for borrowing the money
mortgage
a contract between two parties (the mortgagor and the mortgagee), providing security for the debt by creating a lien on the property.
deed of trust
the mortgage document generally used in Texas to secure payment of the debt. involves three parties: the trustor (the mortgagor or borrower), the trustee (a third party, usually a bank or title company), and the beneficiary (the mortgagee or lender).
mortgage banks
use money borrowed from other institutions and/or funds of their own to make real estate loans. They make loans in the name of the mortgage bank with the intention of selling them to investors.
mortgage broker
are not lenders but are intermediaries to bring borrowers and lenders together. They locate potential borrowers, process preliminary loan applications, and submit the applications to lenders for final approval. The loans are generally closed in the name of the lender, not the mortgage broker.
Fully amortized loans
requires periodic payment of both interest and principal, usually a constant amount. The mortgagee (lender) credits each payment first to the interest owed and then applies the balance to reduce the principal amount over a term of years.
term loan
(also called a straight loan or an interest-only loan), payments include only interest, and the full amount of the principal is due at the end of the loan period.
flexible payment loan
vThe flexible-payment loan is generally used to enable younger buyers and buyers in times of high interest rates to purchase real estate. Under this plan, a mortgagor makes lower monthly payments for the first few years of the loan and larger payments for the remainder of the term, when the mortgagor's income is expected to increase.
partially amotrized balloon payment
A balloon loan requires periodic payments that do not fully amortize the amount of the loan by the time the final payment is due; the remaining balance (the balloon payment) is larger than the other payments.
conventional loan
not underwritten by a federal agency. Lenders rely primarily on their own appraisal of the security and their own credit reports and information concerning the credit reliability of the prospective borrower.
loan to value ration (LTV)
on a conventional loan has been 80 percent of the value of the property or less, unless the borrower obtains private mortgage insurance (PMI).on a conventional loan has been 80 percent of the value of the property or less, unless the borrower obtains private mortgage insurance (PMI).
discount points
represent the percentage by which the face amount of a mortgage loan is discounted, or reduced, when it is sold to an investor to make its interest rate competitive in the current money
va loan
authorized to guarantee loans to purchase or construct homes for eligible veterans and their spouses (including unremarried spouses of veterans whose deaths were service-related or the spouse of a service person missing in action or a prisoner of war).
certificate of reasonable value
for the property being purchased, stating its current market value based on a VA-approved appraisal and placing a ceiling on the amount of the VA loan allowed for the property. If the purchase price is greater than the amount cited in the CRV, the veteran must pay the difference in cash.
residual income
defined as the amount of monthly income remaining after all the debts listed above, income tax, Social Security tax, and maintenance and utilities are deducted.
federal reserve system
established by Congress to maintain sound credit conditions, help counteract inflationary and deflationary trends, and create a favorable economic climate. It regulates the flow of money and interest rates by controlling the discount rate and reserve requirements of its member banks and through its open market operations.
discount rate
the interest rate charged other banks by the Fed for loans. For example, if the rate is increased, less money is loaned, and the money supply drops and the economy slows.
reserve requiremtent
the portion of a member bank's deposits that may not be loaned. By adjusting the reserve requirement, the Fed affects the amount of money available, which influences interest rates and the economy
open market operationa
The Fed can buy or sell U.S. Treasury Securities. By doing so it changes the money supply. For example, if it sells securities, the money supply decreases (draws money from investors) and the economy slows
fannie may
Fannie Mae is a privately owned corporation that issues its own common stock and provides a secondary market for conventional, FHA, and VA loans. Fannie Mae guarantees payment of all interest and principal to holders of its securities
freddie mac
Freddie Mac is a private corporation that provides a secondary market for conventional loans primarily. Freddie Mac does not guarantee payment of its mortgages.
ginnie mae
Ginnie Mae is a wholly-owned corporation within the Department of Housing and Urban Development (HUD) that provides a secondary market for FHA and VA loans. Ginnie Mae certificates are guaranteed by Ginnie Mae and backed by the full faith and credit of the United States
voluntary transfer
made by either gift or sale. To transfer title by voluntary alienation during his or her lifetime, an owner must use some form of deed of conveyance
general warranty deed
the greatest protection of any deed by binding the grantor to certain covenants or warranties: the covenant of seisin (in which the grantor warrants that he or she is the owner of the property and has the right to convey title to it) and the covenant against encumbrances (in which the grantor warrants that the property is free from any liens or encumbrances except those specifically stated in the deed). Covenants in a general warranty deed are not limited to matters that occurred during the time the grantor owned the property; they extend back to the origin of the title.
special warranty deed
warrants only that the title to the real estate has not been encumbered by the grantor except as stated in the deed and that the grantor has done nothing during ownership to cloud or damage the title.
quitclaim deed
carries with it no warranties whatsoever and conveys only the interest, if any, the grantor possesses in the property. If the grantor has no interest in the property, the grantee will acquire nothing. A quitclaim deed frequently is used to cure a title defect, called a cloud on the title.
constructove notice
refers to information that has been made public. Properly recording documents in the pubic record serves as constructive notice to the world of an individual's rights or interest. So does the physical possession of a property. Because the information or evidence is readily available to the world, a prospective purchaser or lender is responsible for discovering the interest.
actual notice
knowledge acquired directly and personally by an individual. After an individual has searched the public records and inspected the property, he or she has actual notice.
priority
refers to the order of rights in time
closing
the consummation of the real estate transaction.
abstract of title and attorney's opinion of title
an abstracter is hired to prepare an abstract of title, a condensed history of all the instruments found in the public records that affect a particular parcel of land. An abstracter concludes with an abstracter's certificate indicating which records were searched and which records were not searched in the preparation of the report. Then the attorney for the buyer examines the abstract and issues an opinion of title.
title insurance
a contract by which the policyholder is protected from losses arising from defects in the title. Unlike other insurance policies that insure against future losses, title insurance protects the insured from an event that occurred before the policy was issued
respa
was enacted to protect consumers from abusive lending practices. It ensures that consumers are provided with accurate and timely information about the actual costs of closing on a residential transaction financed by a federally related mortgage loan.
normal closing charges
Common expenses incurred in a real estate transaction include broker's commissions, attorney fees, recording expenses, title expenses, loan fees (such as discount points), appraisal fees, escrow closing fees, and survey fees. These expenses would be debited (charged) to the party incurring the expense
prorations
Prorations of expenses between buyer and seller are necessary to ensure that expenses are divided fairly. Items that are most frequently prorated include interest on an assumed loan, taxes, and rents
accrued items
expenses that are owed by the seller, but later will be paid by the buyer—such as taxes and interest on an assumed mortgage. The seller is debited (charged) for these items at closing and the buyer gets the credit.
prepaid items
expenses that have been prepaid by the seller but not fully used up—such as prepaid insurance or fuel oil in a tank. The buyer is debited (charged) at closing and the seller gets the credit.