Texas Principles of Real Estate 2 - Champions Flashcards

Texas Principles of Real Estate 2 - Champions Flashcards Real Estate Settlement Procedures Act (RESPA) is a consumer protection statute that was enacted in 1974.closeall appropriate documents are signed and the proceeds of the mortgage loan are disbursed by the lender is called consummation.Government loansFHA, VA, and USDA.Ad valorem-according to value-taxes are assessed based upon the assessed value of the property and the current tax rate.REOis an acronym that stands for "Real Estate Owned." When a lending institution becomes the owner of a property through a foreclosure, the property becomes an asset of the company.Four types of leasehold estates1. Estate for years2. Periodic Estate3. Tenancy at Will4.Tenancy at sufferance appraisal processThe value of a property may be affected by social, economic, governmental, and environmental influences External Obsolescencerefers to the loss in value of a property caused by factors outside of the property itself.Right of first refusalA tenant has the right to match or better any offer the landlord may receive on the property before the property is sold to someone else.Depreciation- A reduction in the value of a property due to deterioration or obsolescence.-Types of depreciation include physical deterioration, functional obsolescence, and external obsolescence.CERCLAgives the authority to recover natural resource damages caused by releases of hazardous substances. Authority for

cleanup under the act is granted to: Federal natural

resource agencies States' natural resource agencies Native American tribes

SCOPE OF LICENSE HOLDER'S AUTHORITY AND

BROKER'S RESPONSIBILITY

-A broker is required to advise a sponsored sales agent of the scope of the sales agent's authorized activities under the License Act.-A sponsoring broker is required to create competency standards for supervised license holders.Lessor(landlord or owner) - The person who gives occupancy to the tenant.OriginationThe process of creating a new mortgage loan, including all steps taken by a lender to attract and qualify a borrower.Percentage rentlease in which all or part of the rent is based on the gross receipts of the tenant's business. Percentage rent is typical of a shopping center lease.

Primary Mortgage MarketThe primary mortgage market is made up of the businesses that lend to borrowers for the purchase of real estate.Principle of RegressionThe presence of lower-priced properties in the area will cause a decline in the value of the subject property.blanket mortgagecovers more than one piece of property.TermThe duration of the agreement should be stated in the lease, including the termination date and any requirements for notice to terminate.appraisaldefined as an appraiser's opinion of value.When borrowers are pre-qualified:they provide basic information to the lender, including income, debt, and credit history.Mortgage Brokersprovide consumers with assistance securing hard to place or niche sources of mortgage money.Market Valueis the most probable price a property should bring in a competitive and open market under all conditions requisite to a fair sale, under guidelines published by federal lending institutions (Fannie Mae, Freddie Mac).Real Estate Investment Trust (REIT)-2 Forms of REIT (Equity and Mortgage)-An equity REIT purchases commercial property such as office buildings, apartments, and self-storage facilities.-The mortgage REIT invests in mortgages or mortgage-backed Loan-to-Value Ratio (LTV)is the percentage of value or sales price that a lender is willing to finance.Capital Gains Tax-A capital gain or loss is realized when a property is sold.-The gain (or loss) on the sale of real estate is far more than a simple calculation of the sales price minus the original purchase price.Community Reinvestment Act (CRA)It prohibits redlining, which is the practice of refusing to provide financing in a particular area because of the location.fixed-rate mortgageloan has dominated residential lending in the United States for many years.Short Saleone in which a property with the consent of the lender, is sold by an owner/borrower at a price that is not sufficient to pay off the existing mortgage Loan Estimate (LE)must be provided no later than three business days after receipt of the written application.Private Mortgage Insurance (PMI)-is a special form of insurance which is designed to allow lenders.-to increase the LTV ratio.secondary marketexists for the purchase and sale of existing mortgages to investors.Certain requirements must be met for a lease to be valid: Competent parties Let and take agreement Adequate consideration Legal purpose Description of the property (street address is sufficient)

The Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) designed to enhance consumer protection and reduce fraud.FundThe process of transferring funds to a title or escrow company for disbursement.Farm and Ranch brokeragespecialize in "working" farms and ranches. Mineral rights Water Rights Surface leases for grazing and other uses Easements Farm and ranch equipment REAL ESTATE MORTGAGE INVESTMENT CONDUITS The two largest issuers of real estate mortgage investment conduits are Freddie Mac and Fannie Mae.The pre-approval of a buyer:is a considerably more involved process and requires an application from the borrower.For a property to have value, it must have four

characteristics:

DUST- demand, utility, scarcity, transferability.Functional Obsolescenceis the loss in the desirability of the style, layout, or function of an element of a property over time.Servicingincludes sending monthly payment statements and collecting monthly payments, maintaining records of payments and balances, collecting and paying taxes and insurance (and managing escrow and impound funds), remitting funds to the note holder, and following up on delinquencies.Principle of ProgressionStates that the value of a subject property is increased by the value of surrounding properties.UnderwritingA well-trained professional known as an underwriter reviews all the information, analyzes the creditworthiness of the borrower, and renders a decision on the loan request.Tax-Sheltered IncomeCommercial property is depreciated over 39 years.Appreciationis the "passive" increase in the value of a parcel due to market forces. The value of the parcel goes up simply because the market, in general, is appreciating. Almost all parcels of land have the potential to appreciate in a rising market.Tax BenefitsInvestment in real estate includes certain tax advantages,

including: tax-sheltered income favorable capital gains tax

treatment deferred taxation on exchanges Fannie Maehelps accomplish the following important housing

objectives: It addresses imbalances of mortgage credit

among regions of the United States by making funds available to capital-deficient areas of the country in order to finance new mortgage originations. It allows lenders to originate mortgages for sale, rather than for portfolio investment. It standardizes mortgage loans, thereby attracting investors who traditionally have not invested in the primary market, further strengthening the market.

lease optionAlthough this is a legal agreement, license holders in Texas are prohibited specifically from writing this type of agreement for their clients. If a client wishes to enter into a lease-purchase agreement, send them to an attorney.Principle of CompetitionStates that the absence of competition will cause prices to increase in the marketplace.LICENSE HOLDER'S COMPETENCYA sponsoring broker must maintain written policies and procedures to ensure that a sponsored sales agent is competent to conduct authorized activities.Adjustable Rate MortgageFluctuating Interest Rate Cost Approachthe market value of the property considers how much a new structure of this size and type would currently cost to build.NOIAKA NET OPERATING INCOME-Operating expenses are deducted from gross income to determine the net operating income (NOI) of the property.-The NOI of the property is the income (cash flow) that the owner receives from the operation of the property.Three approaches to value1) Sales Comparison Approach.2) Income Approach.3) Cost Approach.Sales Comparison Approach-Also known as the market data approach, the appraiser focuses on recent sales in determining the value of the subject.-is used as the best indicator of value for existing properties.Equal Credit Opportunity Act (ECOA)originally passed in 1974, ensures that all consumers are given an equal chance to obtain credit.budget mortgagethe monthly house payment includes principal, interest, taxes, and insurance (known as PITI).Construction-to-permanentThese loans are commonly referred to as rehabilitation or rehab loans.Indexis what the lender uses as an instrument for measuring changes in interest rates.Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) was passed by Congress in 1980. CERCLA was designed to clean up sites contaminated with hazardous substances, pollutants or contaminants.Certified Commercial Investment Member (CCIM) designation is a challenging program for commercial real estate professionals that is regarded as the "gold standard" for commercial designations.Principle of SubstitutionAccording to this principle, a commodity's value is influenced by the cost of acquiring a substitute or comparable item.release clauseallowing the borrower to obtain partial releases of specific lots by making required lump sum payments.