Term
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Definition
| The practice of purchasing real estate using a small amount of your own money and a larger proportion of borrowed funds. |
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Definition
| To provide title to a property as a security for a loan without giving up possession. |
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Term
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Definition
| The basic instrument used to evidence the obligation or debt. It is an unconditional promise in writing by one person to another to pay on demand, or over a fixed determinable time, a certain sum of money. Most common is personal check. |
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Term
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Definition
| The dollar amount of the loan. (the loan balance) |
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Term
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Definition
| The rent charged for the use of money. |
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Term
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Definition
| Paid only on the principal amount owed. It is the interest on most real estate loans. |
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Term
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Definition
| A promissory note in which a borrower repays the principal in one lump sum, at maturity, while interest is paid in installments or at maturity, all due at once. Payment in full on due date. |
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Term
| Installment Note With Balloon Payment (Partially Amortized Note) |
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Definition
| A promissory note with periodic payments of principal and interest and a large payment at the end. (maturity date or due date). |
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Term
| Fully Amortized Installment Note |
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Definition
| A promissory note for which both the principal and interest are paid in equal installments until the debt is paid in full. Equal monthly payments until paid in full. |
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Term
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Definition
| A short-term note of up to and including a term of 36 months. |
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Term
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Definition
| A note that is longer than 36 months |
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Term
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Definition
| Any financial document (promissory note, check or other) that can be passed easily from one person to another, if it meets certain legal requirements. It must be 1. an unconditional promise 2. in writing 3. made by one person to another 4. signed by the maker 5. payable on demand or on a set date 6. for a set amount of money |
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Term
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Definition
| One who has taken a negotiable instrument from another, in good faith, without knowledge of defect. |
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Term
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Definition
| Upon the occurrence of a specific event, the lender has the right to demand immediate payment of the entire note. Always found in a trust deed. |
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Term
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Definition
| A payment that is, unless otherwise stated, more than ten days past due. |
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Term
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Definition
| A form of the acceleration clause, stating that the entire loan becomes due and payable when the property is sold, assigned, transferred, or otherwise alienated. Due on sale clause. |
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Term
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Definition
| When a loan on a property that is already emcumbered, he or she accepts responsibility, with the lender's consent, for the full payment of the loan. |
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Term
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Definition
| Part of a trust deed or mortgage that allows for a future change in the priority of financial liens. |
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Term
| Impound Accounts (Reserves) |
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Definition
| Moneys collected in advance from borrowers to assure the payment of recurring costs, such as property taxes and fire insurance. |
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Term
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Definition
| the rate stated in the note |
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Term
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Definition
| The rate the borrower is actually paying (including interest, points, and loan fees). |
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Term
| The formula for calculating interest is... |
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Definition
| Interest = Principal x Rate x Time |
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Term
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Definition
| The repaying of a loan (principal and interest), in regular payments, over the term of the loan. |
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Term
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Definition
| Means the interest rate charges are higher than the monthly payment. |
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Term
| Adjustable Rate Mortgage "ARM" (Or Trust Deed) |
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Definition
| A loan in which the interest rate fluctuates periodically, based on a specific index, which makes the payment amount also change. |
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Term
| Graduated Payment Mortgage |
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Definition
| Type of fixed interest rate loan for which the monthly payments start out lower and then gradually increase. |
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Term
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Definition
| Also known as a reverse annuity mortgage (RAM), enables older homeowners (62+) to convert their home equity into tax-free income without having to sell their home, give up title, or take on a mortgage. |
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Term
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Definition
| An origination fee of 1% of the amount borrowed, charged by the lender. |
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Term
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Definition
| Charging more than the legally allowed percentatage of interest. |
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Term
| Security Devices (Financial Instruments) |
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Definition
| Written documents that pledge real property as security for a promissory note. |
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Term
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Definition
| A financial instrument in the form of a lien that secures a property for payment of a promissory note. It is not common in California. |
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Term
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Definition
| Borrower who retains title but gives lender a lien on the property as the security for debt |
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Term
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Definition
| lender who holds mortgage |
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Term
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Definition
| A security device that makes the real property collateral for the promissory note |
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Term
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Definition
| held by a trustor while he or she is repaying a trust deed and note. It is true ownership in that the trustor may enjoy all customary rights of title and possession. |
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Term
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Definition
| "Bare or Naked" Held by a trustee until the terms of a trust deed and not have been fulfilled. |
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Term
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Definition
| Provides proof that a promissory note and the accompanying trust deed have been paid in full. |
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Term
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Definition
| The time within wich the trustor may pay all past due payments |
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Term
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Definition
| When a lender will accept less than the amount owed on a debt if the property is sold. |
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Term
| Most junior liens are eliminated by foreclosure. The following liens might not be eliminated: |
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Definition
1. Federal Tax Lien
2. State, county, and city taxes or assessments.
3. Mechanic's liens for work begun before the trust deed was recorded. |
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Term
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Definition
| Any loan on real property obtained after the first trust deed and secured by a second, third, or subsequent trust deed. |
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Term
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Definition
| Your Net Worth. It is the amount that is left after subtracting all that you owe (debt) from what you own (assets). |
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Term
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Definition
| Loans based on the homeowner's increase in equity caused by inflation, rising property values, and the reduction, by payments, of the existing loan balance. |
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Term
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Definition
| An instrument of finance in which the seller retains legal ownership of the property until the buyer has made the last payment. |
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Term
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Definition
| An owner selling under a land contract |
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Term
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Definition
| A buyer using a land contract |
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Term
| Annual Percentage Rate (APR) |
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Definition
| Represents the relationship between the total of the finance charges (interest rate, points, and the loan fee) and the total amount financed, expressed as a percentage. |
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Term
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Definition
| The result of too much money chasing too few goods. |
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Term
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Definition
| When prices of real estate, goods, and services go down. |
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Term
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Definition
| The prices of real estate are up and there is less real estate listed for sale or rent. |
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Term
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Definition
| When the prices of real estate are down; terms are easy and there is usually a great deal of real estate listed for sale or rent. |
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Term
| Federal Reserve Banking System (The "Fed") |
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Definition
| The nation's central banking authority |
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Term
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Definition
| A committee appointed by the President, but is politically independent. |
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Term
| Gross Domestic Product (GDP) |
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Definition
| The total value of all goods and services produced by an economy during a specific period of time |
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Term
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Definition
| The process of obtaining a new loan to pay off the old loan |
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Term
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Definition
| The percentage of sale price or appraised value, whichever is lower, the lender will loan to the borrower to purchase the property. |
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Term
| Factors Comprising a Credit Score include: |
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Definition
1. Payment History
2. Amounts Owed
3. Length of Credit History
4. New Credit
5. Types of Credit Used |
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Term
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Definition
| The ease and rate with which an asset can be converted into a medium of exchange (like cash). |
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Term
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Definition
| The lost profit one could have made by the alternative investment action not taken. |
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Term
| Three Areas of Demand For Borrowing Money Are: |
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Definition
1. Construction funds to build
2. Financing a purchase
3. Refinancing |
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Term
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Definition
| Very large corporations that lend the money of their depositors to finance real estate transactions. |
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Term
| Federal Deposit Insurace Corporation (FDIC) |
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Definition
| A government corporation that, for a fee, insures each account of a depositor up to $100,000. |
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Term
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Definition
| The bank finances long-term loans for existing land and the buildings |
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Term
| Construction Loans (or Interim Loans) |
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Definition
| Money is provided for the construction of a building, to be repaid when the construction is complete. |
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Term
| Take-Out Loans (Repayment of Interim Loan) |
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Definition
| Permanent long-term loans are made to pay off the interim lender upon completion of construction of commercial or apartment projects. |
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Term
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Definition
| This type of loan is for repairing and modernizing existing buildings. |
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Term
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Definition
| Individuals and organizations that lend on a private or individual basis. |
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Term
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Definition
| Loans that are not insured or guaranteed by the United States Government. |
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Term
| Real Estate Investment Trust REIT |
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Definition
| Type of company that sells securities to invest in real estate properties. |
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Term
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Definition
| Company that invests in real estate itself or several real estate properties |
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Term
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Definition
| A Company that invests in mortgages and other types of real estate |
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Term
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Definition
| An investment organization that obtains funds from people before they retire and invests this money for their clints' retirement. |
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Term
| Mortgage Insurance Premium (MIP) |
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Definition
| Also called mutual mortgage insurance, is the protection for the FHA that insures the lender for any loss if there is a foreclosure. |
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Term
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Definition
| the requirement of reporting annual and quarterly loan activity to the Department of Real Estate if, within the past 12 months, the broker has negotiated any combination of 20 or more loans to a subdivision or a total of more that $2,000,000 in loans |
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Term
| Sales Comparison Approach |
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Definition
| It is a process that collects sales of comparable properties that occured about the same time as the date of value, and compares them to the property being appraised. |
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Term
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Definition
| Property sales used for purposes of comparison in the appraisal process: ideally, relatively similar to the subject property, open market transactions, and with a time of sale close to the date of value. |
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Term
| 4 Steps in the Sales Comparison Approach |
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Definition
1. Research Recent Sales
2. Analyze the Sales
3. Adjust for the Differences
4. Arrive at Value Estimate |
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Term
| Sale must meet what three criteria to be considered a valid comparable. |
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Definition
1. Competitive Property
2. Open-market transaction
3. Sale occured close in time to the date of value. |
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Term
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Definition
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Term
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Definition
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Term
| Physical Characteristics of the property |
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Definition
1. Land size, shape, topography, soil
2. The size and nature of the structure or structures.
3. The age of the structures and the quality of their design and construction.
4. Any special features
5. Condition of the structure and the quality of any modernization.
6. Available utilities
7. Any problems with the property. |
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Term
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Definition
| Means the numeric value that is suggested as typical, with regard to size, price, or other variable studied. |
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Term
| Different Measures of Central Tendency |
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Definition
1. Mean
2. Median
3. Mode
4. Range
5. Standard Deviation |
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Term
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Definition
| The average numeric "value" of the sample. |
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Term
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Definition
| The middle value, that is, the value in the sample with as many values that are greater as values that are less. |
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Term
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Definition
| The most frequently occuring value in a sample. |
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Term
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Definition
| The difference, or spread, between the highest and lowest value in the sample. |
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Term
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Definition
| A measurement of whether the observations are clustered close to the mean, or, instead, scattered throughout the range. It is calculated as the square root of the sum of the squared differences between each observation and the mean of all observations, divided by the total number of observations. |
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Term
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Definition
| Selection of market data so that the subject is contained within a range of data (that is, some properties larger and some smaller). |
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Term
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Definition
| A dollar or percentage amount that is added to or subtracted from the sale price of a comparable property, to account for a feature that the property has or does not have, that is different from the subject property. |
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Term
| The sales comparison approach involves: |
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Definition
Analyzing sales
Comparing sales to a subject property |
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Term
| The first step in the sales comparison approach is to: |
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Definition
| Research comparable sales |
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Term
| The sales comparison approach is often simpler and more direct than the income or cost approaches because: |
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Definition
| There are fewer mathematical calculations, so there is less chance of mathematical errors. |
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Term
| Appraisers use bracketing in order to: |
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Definition
| Study properties that are better and worse than the subject |
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Term
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Definition
| In sales comparison approach, the income approach, and the cost approach |
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Term
| The criteria used to establish that a property can be considered comparable include: |
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Definition
It must be a competitive property
It must be an open-market transaction |
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Term
| USPAP requires that prior sales of the subject property within three years of the date of value be considered in the appraisal of: |
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Definition
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Term
| The number of comparable sales needed for the sales comparison approach is dependent on: |
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Definition
how good the comparables are
the reliability of the data
the intended use of the appraisal |
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Term
| You need to know all this about a comparable property: |
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Definition
the sales price
the date of sale
the type of financing involved |
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Term
| In order to improve the reliability of the information about a sale, the appraiser should: |
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Definition
make at least an exterior inspection
identify property changes made since the sale date
verify the price and terms of sale |
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Term
| Principle of Substitution |
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Definition
| When a property can be easily replaced by another, the value of such property tends to be set by the cost of acquiring an equally desirable substitute property. |
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Term
| Two methods of comparing sales |
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Definition
Direct Comparison Method
Elements of Comparison Method |
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Term
| The Four Elements of Comparison |
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Definition
1. Terms and conditions of sale
2. Time of sale
3. Location elements
4. Physical Elements |
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Term
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Definition
| when a loan from the seller is more favorable than the terms of the third party lenders. |
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Term
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Definition
| Where the existing loan is assumed by the buyer and has terms more or less favorable than the terms of a new conventional loan. |
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Term
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Definition
| or buyer's closing costs: when the seller pays some of the buyer's loan points or other costs, this acts to reduce the seller's net receipts in the same way as when the seller sells at a lower price. |
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Term
| The process of comparing and adjusting sales involves two steps: |
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Definition
| Comparison and analysis of the four elements of comparison and Adjusting the sales price to account for the differences |
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Term
| Rules for making adjustments |
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Definition
1. The sale property (and its price) must be adjusted to be more like the subject property.
2. Use market adjustments
3. Make adjustments in the proper sequence. |
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Term
| A desirable sequence of adjustments: |
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Definition
1. terms and conditions of sale
2. time and state of the market
3. location
4. physical features, including quality and condition issues |
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Term
| 3 commonly used types of adjustments |
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Definition
Lump-sum dollars
Percentage
Units of Comparison |
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Term
| Lump-sum dollar adjustment |
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Definition
| This type of adjustment uses a specific dollar amount to adjust each sale for the particular property difference. Such an amount is added to, or subtracted from, the price of each comparable sale in order to make it more like the subject. |
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Term
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Definition
| Uses a percentage of the comparable's sale price to adjust for a difference between the comparable sale and the subject. |
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Term
| Unit of Comparison Adjustment |
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Definition
| Sales analysis tool, wherein the sales prices of the comparables are vonverted to price per physical or economic unit that is found to be closely related to selling price or value. The value of the subject property is suggested by multiplying its number of units by the price per physical or economic unit of comparison found to be appropriate. |
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Term
| 3 types of units of comparison: |
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Definition
1. Total Property
2. Physical units of comparison
3. Economic units of comparison |
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Term
| Total Property Comparison |
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Definition
| Unit of comparison used when all the sales are quite similar to the property being appraised. |
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Term
| Physical units of Comparison |
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Definition
| This unit of comparison uses any significant, objectively measurable physical characteristic that varies among the sales. |
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Term
| Economic Unit of Comparison |
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Definition
| This type of comparison is some economic feature or characteristic of the property that closely relates to its value. |
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Term
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Definition
| The adjustment is calculated by analyzing the depreciated replacement costs for the particular property feature. |
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Term
| steps in Depreciated Cost Method |
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Definition
1. select the particular feature or difference between the properties for which an adjustment is indicated
2. estimate the additional cost to include that feature when building a new house as of the date of value.
3. deduct an allowance for the age and condition of the feature being studied.
4. adjust the sale price ofthe comparable sale, by adding or subtracting the depreciated cost amount |
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Term
| two types of regression analysis |
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Definition
linear regression
multiple regression |
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Term
| automated valuation model |
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Definition
| a computer software program that analyzes data using some type of automated process |
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Term
| The Four Steps to Arrive at a Value Conclusion |
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Definition
1. Review the entire approach.
2. Review the sales data.
3. Estimate a value range.
4. Select a final value. |
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Term
| The four elements of comparison used in the sales comparison approach are: |
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Definition
terms and conditions of sale
time of sale
location elements
physical elements |
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Term
| The rules for making sales adjustments includes the following: |
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Definition
Adjust the sale price toward the subject property
Use market-related adjustments
Make adjustments in the proper sequence |
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Term
| To use a lump-sum adjustment on a sale that is inferior to the subject property: |
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Definition
| Add a lump-sum dollar amount to the price |
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Term
| To use the unit of comparison adjustment: |
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Definition
| Select an important property variable |
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Term
| a physical unit of comparison refers to: |
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Definition
| any significant physical characteristic of the sales that varies |
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Term
| The economic unit of comparison is defined as: |
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Definition
| An economic measure of the property and its value |
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Term
| To use the direct market method of estimating the dollar or percent adjustment, you should first: |
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Definition
| Calculate the price difference between two matched pair comparables |
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Term
| A comparable should be adjusted for terms of sale when: |
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Definition
| There is favorable seller financing |
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Term
| Linear Regression, as used here: |
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Definition
| Adjusts for only one difference or variable |
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Term
| Graduated Payment Mortgage |
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Definition
| A mortgage or deed of trust where the payments increase over the term of the loan, the payments increase as the buyer's income is projected to increase |
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Term
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Definition
| A financing charge equal to one percent of the amount of the loan |
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Term
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Definition
| A type of acceleration clause, calling for a debt under a mortgage or deed of trust, to be due in its entirety upon transfer of ownership. |
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Term
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Definition
| federal home loan mortgage corporation. Federal agency it helps savings and loan banks by purchasing their home loan mortgages and providing them with funds to make new loans available to home buyers. |
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Term
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Definition
| The government national mortgage association. Federal corporation under the department of housing and urban development , that subsidizes mortgages by buying mortgages on the secondary market and selling federally insured shares of pooled mortgages on the stock market. |
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