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Real Estate Chapter 7-10
Terms in this set (72)
The difference between the current market value of a building and the total cost to construct it. This difference generally increases with building age and is attributed to three elements: physical deterioration, functional obsolescence, and external obsolescence.
Factors (transactional and property) that must be considered when employing the sales comparison approach. Adjustments apply to the value of the comparable property in comparison to the subject property.
An unbiased written estimate of the market value of a property.
The document the appraiser submits to client and contains (1) the appraiser's final estimate of value, (2) the data upon which the estimate is based, and (3) the reasoning and calculations used to arrive at the estimate.
A fairly negotiated transaction that occurred under typical market conditions.
Used by he sales comparison method, which is a general method for appraising all types of properties and involves comparing the subject property to other similar properties that have been recently sold. This is based of the economic principle of substitution.
Elements of Comparison
Relevant characteristics used to compare and adjust property prices (site/lot size, construction quality, effective age, living area, number of baths, garage spaces, porch, patio, deck, fence, pool, etc.)
Reflects the loss in value due to influences external to the site that affect value. It results from deterioration in the subject property's neighborhood.
ex) Noxious odors, unpleasant sights, and increased traffic due to more intensive uses (commercial and industrial) introduced into a residential neighborhood.
A loss in value within a structure due to changes in tastes, preferences, technical innovations, or market standards. Associated with the passage of time.
ex) Newer building materials, construction techniques, and designs, coupled with changing consumer tastes and preferences, generally make older buildings less desirable to tenants.
Highest and Best Use
Of a property is defined as the use found to be the most (1) legally permissible, (2) physically possible, (3) financially feasible, and (4) maximally productive (i.e. yielding the greatest benefit to an owner)
A reconciled value of all of the final adjusted sales prices derived from different methods.
The value a particular individual investor (not the market in general) places on a property.
- The buyer's investment value is the maximum that he/she would be willing to pay for a particular property.
- The seller's investment value is the minimum that he/she would be willing to accept.
Changes to this can result from general inflation (or deflation) in the economy or changes in the local conditions of supply and demand. Affects the price of comparable properties to their past values.
The most probably selling price, assuming "normal" sale conditions. It can be viewed as the value the typical (imaginary) participant would place on a property.
Items of personal property, such as furniture, equipment, rugs, fireplace equipment, and built-in TVs.
Represents the loss in value of a building over time associated with the aging and decay of its physical condition. Older buildings are worth less than otherwise equivalent newer structure.
Recognize the locational, physical, and economic differences between properties, plus the ways in which the properties are used and the presence or absence of personal property
7. Physical Elements
8. Economic Characteristics
10. Non-realty Adjustments (Personal Property)
The process of assigning a final (single) estimate of market value in which the appraiser weighs the relative reliability of value indicators for the property being valued.
The value movements attributed to changes in market conditions are best estimated by this method of tracking the prices of individual properties are they sell repeatedly over time.
The expenditure needed to construct the building of equal utility to the existing building. This cost estimate incorporates the use of modern construction techniques, materials, and design and represents the cost of a building for which some or all outdated aspects are eliminated.
Expenditure required to contrast the building today, replication in exact detail. This includes any outdated functional aspects of the building such as poor interior design, inadequate equipment, or an outdated heating and air-conditioning system. It also includes construction the building using outmoded materials such as surface wiring, steel window frames, and steel plumbing.
Concern the nature and terms of the deal. These potential influences on the bargaining position or motivation of buyer, seller, or both can affect the negotiated price, regardless of the physical, economic, and locational characteristics of the property.
1. Property rights conveyed
2. Financing terms
3. Conditions of sale
4. Expenditures made immediately after purchase
5. Market conditions
Prices we observe on sold property. We observe transaction only when the investment value of a buyer exceeds the investment value of a seller = agreed upon price, not necessarily the market value.
Uniform Standards of Professional Appraisal Practice (USPAP)
Imposes both ethical obligations and minimum appraisal standards that must be followed by all professional appraisers.
is a market determined interest rate that is the moving part in the adjustable interest rate.
or impound clause, requires a borrower to make monthly deposits into an escrow account of money to pay such obligations as property taxes, casualty insurance premiums, or community association fees.
The lender can use these escrowed funds only for the purprose of paying the __ obligations on behalf of the __.
The obligations involved in some manner affect the ability of the __ to rely on the mortgaged property as security for the __.
Deed of trust
In over 20 states this is used in place of a mortgage.The borrower conveys a deed of trust to a trustee, who holds the deed on behalf of both borrower and lender.
(deed of trust) If the obligation is paid off in accordance with the note, the trustee returns the __ to the __.
Deed in lieu of foreclosure
the lender may allow the borrower simply to convey the property to the lender.
The deed in lieu of foreclosure has several attractions being..
its is faster than foreclosure, less costly, and creates less public attention to the event.
The worst risk in accepting a deed in lieu of foreclosure is..
__ is the ultimate recourse of the lender.
Funds not recovered through foreclosure can be recovered through a __.
deficiency judgment (judgment against mortgager who unrecovered balance)
Deficiency judgment is
the legal right of lenders to file suit against borrowers when the proceeds from foreclosure sale do not fully pay off an outstanding loan, as well as any late fees and charges.
Chapter 11 bankruptcy
is a court-supervised workout for a troubled business. Once a court accepts the petition of a debtor firm, creditors are suspended from pursuing legal action against the assets of the firm.
Chapter 13 bankruptcy
applies to a household, it allows the petitioner to propose a repayment plan to the court.
when a buyer acquires a property having an existing mortgage loan and beings making the required payments without assuming personal responsibility for the note. (without recourse)
What aspects of a mortgage loan will be addressed in the note rather than in the mortgage?
a lender may reserve the right to require prepayment of a loan at anytime they see fit through a..
when a buyer of a property with an existing mortgage loan acquires the property without signing the note for the exiting loan, the buyer is acquiring the property..
subject to the mortgage
what points in a mortgage loan would be addressed in the mortgage (possibly in the note as well?)
to finance property where either the borrower, the property, or both fail to qualify for standard mortgage financing, a common nonmortgage solution is through the..
contract for deed (land contract)
ways that a lender may respond to a defaulted loan without resorting to foreclosure include all the following except..
accelerate the debt (force foreclosure)
if the lender is a standard first mortgage wishes to foreclose cost effectively, it is crucial to have which clause in the mortgage?
a common risk that frequently interferes with a lender's efforts to work out a defaulted loan through either nonforeclosure means or foreclosure is..
bankruptcy (federal not state)
the chara. of a borrower that can be considered by a lender in a mortgage loan application are limited by the..
equal credit opportunity act
Foreclosure tends to be quickest in states that:
have power of sale
From a home mortgage lender's perspective, which statement is true about the effect of bankruptcy upon foreclosure?
Chapter 7 bankruptcy is the most "lender friendly" form.
The most internationally oriented index rate for adjustable rate mortgages is:
a LIBOR rate
A type of loan that has grown in volume in recent years which has raised concerns about predatory lending practices is the:
A partially amortizing loan always will have
A balloon payment.
With what type of loan security arrangement is the deed held by a neutral party and returned upon payment of the mortgage in full?
Deed of trust
The Truth in Lending Act gives a home mortgage borrower how long to rescind a mortgage loan?
Deed of trust is a __ document not ownership.
Equal credit opportunity act (1974)
this act prohibits discrimination in lending practices on the basis of race, color, religion, national origin, sex etc. because all or part of an applicant's income derives from a public assistance program.
two elements of a mortgage loan
note (exact terms of the financial obligation (promisory)
mortgage (pledges the property as security for the note)
per diem charge is __
per day charge
right of lender to require prepayment (borrow commercially)
have the ability to make things due because of default.
accelerate clause has two types..
substantive and technical
behind on your payments
because of violation in covenants
forebearance agreement (allonge)
reference note, deed of trust. modification change of agreement
equity of redemption
foreclosure process in place, and right before foreclosure the cost needed for mortgage is paid last min., (borrower pays full) therefore foreclosure cancelled.
contract for deed requires you to..
make all payments so you can get title, legal in all 50 states.
right of rescission gives you __ days.
3 (federal truth-in-lending act -TILA)
community reinvestment act
can't take money to another community, and bank can't take deposits and loan outside that community.
usually is very severe for the first few years of the loan, but declines in the latter half of the loan term.
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