Principles of Real Estate 2 Exam Review Flashcards

Principles of Real Estate 2 (Exam Review) Flashcards PMI vs. MIP and where they are used- Private Mortgage Insurance is required when the LTV of a conventional loan exceeds 80%- Mortgage Insurance Premium is used with FHA loans CERCLA and Cleanup Authority- Comprehensive Environmental Response, Compensation, and Liability Act; passed by Congress in 1980 and was designed to clean up sites contaminated with hazardous substances- This has the authority to recover natural resource damages caused by releases of hazardous substances- Responsibility given to federal, state, and Native American tribes; primary responsibility is given to the EPA Factors considered by appraisers- property and lender info- neighborhood description- site description- improvements to site- analysis of market data- cost approach analysis- income approach analysis (rental properties)- reconciliation of values- additional support documents Math calculation of commission & commission split Listing Price x Commission percentage (decimal) = commission split TREC Buyer's Temporary Lease featuresAllows for rent to be calculated per day and states that the property is to be used for residential purposes only Real Estate Transaction TerminologyFunding: process of transferring funds to a title or escrow

company for disbursementServicing: 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

delinquenciesOrigination: the process of creating a new

mortgage loan, including all steps taken by a lender to

attract and qualify a borrowerConsummation: the closing of

a real estate transaction in which all appropriate documents

are signed and the proceeds are disbursedClosing: final

phase of mortgage loan processing in which the property title passes from the seller to the buyer Roles and responsibilities of a sponsoring broker 1. Advise each agent of the scope of their authorized agents2. Create competency standards for their agents3.Set geographic limitations based on competency4.Maintain written policies and procedures to ensure their agents are competent enough to conduct any authorized activities Math Calculation - Principal, Interest, and Term Principal: the amount of the loan itselfInterest: money paid at a particular rate for the use of money loaned to a person

or entityTerm: the term of the debt obligation(s)

Operating and non-operating expenses for property management budgeting

Operating expenses: utilities, salaries, taxes, marketing

expenses, trash, management fees, repairs,

etc.Non-operating expenses: loan payments, depreciation,

and income taxes Approaches to Appraisal1. Sales Comparison Approach - also known as market data approach; the appraiser focuses on recent sales in determining the value of the subject; will gather at least 3 comparison sales; best indicator of value2. Cost Approach

• considers how much of a new structure of this size and

type would currently cost to build; commonly used for properties with little market activity3. Income Approach - used when there are a significant number of rental properties in the area, but not in a typical residential transaction because it applies only to income-generating rental properties Math calculation - commission splitListing Price x commission percentage (decimal) = commission split Purpose of Fannie Mae- created in 1938- addresses the imbalance of credit among various regions across the country- allows lenders to originate mortgages for sale vs. having to keep loans in their own portfolio Four Types of Leasehold Estates1. Estate for Years - definite start and end date2. Period Tenancy - automatically renews each term, notice of termination is needed3. Tenancy at Will - landlord or tenant can terminate "at will"4. Tenancy at Sufferance - holdover tenant Features of a deed including grantor, grantee, consideration, execution

• Grantor must be competent and be of legal age and

sound mind- Grantee must be clearly identifiable- Consideration is something of value given in exchange for

a conveyance by the grantor- Execution: some states

require a witness or witnesses to sign Transfer of property to heirs with a will vs. without a will1. Intestate Succession - without a will; passed onto the person's spouse, then kids, then parents2. Will - estate will be settled by an executor chosen by that person and named in the will Possible outcomes when a borrower is in default 1. Foreclosure - lender attempts to recover the balance of a loan from a borrower to the lender; forced sale2. Quick Sale - property sold for less than the amount due on the mortgage3. Short Sale - a property with the consent of lender, is sold by an owner/borrower at a price that is not sufficient to pay off the existing mortgage; must have the consent of the lender and owe less than what is owed on the mortgage balance Types of Easements - creation and purpose 1. Easement in Gross - belongs to a person or corporation and does not belong to the land2. Easement in

Appurtenant - right for the benefit of a piece of land; runs with the land and passes to new owners when the land is

sold- Created by:A. Grant - specifically givenB. Reservation

• the seller reservesC. Implied Grant - implied in word or

actionD. Prescription - use of land without permissionE.Necessity - court requiresF. Condemnation - the

government takes an easement- Terminated by:A. Merger -

two properties become oneB. Release - written agreementC. Abandonment - if there is intent to abandonD.

Death - when the holder dies- Purpose: gives one the rights

to use or pass over another's property for a specific purpose