Principles of Real Estate 2 Champion Exam With 100% Correct Answers 2024
What does D.U.S.T. stand for? - answer✔✔Demand, Utility, Scarcity, Transferability the percentage of value or sales price that a lender is willing to finance - answer✔✔Loan to Value Ratio (LTV) the value of a property is equal to the sum of the contributory value of each of its component parts. - answer✔✔principle of contribution the forces acting on a parcel of land are always affecting the value of the land - answer✔✔PRINCIPLE OF CHANGE the legal use that gives the greatest return in money and/or amenities. - answer✔✔HIGHEST
AND BEST USE
the purchase price is affected by the expectation of future appeal and benefits. - answer✔✔PRINCIPLE OF ANTICIPATION value is maximized when there is a reasonable degree of homogeneity, or sameness, in a neighborhood. - answer✔✔principle of conformity reduction in value of property from causes such as deterioration or obsolescence. - answer✔✔Depreciation
- Physical deterioration
- functional obsolesce
- external obsolesce - answer✔✔Types of depreciation
the loss in a property's value due to daily wear and tear. - answer✔✔Physical deterioration The legal procedure under which property may be sold to satisfy an unpaid promissory note - answer✔✔Foreclosure the value of a commodity is influenced by the cost of acquiring a substitute or comparable item. - answer✔✔principle of substitution appraisal - answer✔✔someones opinion of value. 1 / 3
The actual age of the property in years. - answer✔✔Chronological Age The appraiser's estimate of the age of the house based upon its ongoing maintenance and upgrades. - answer✔✔Effective Age TYPES OF APPRAISAL REVIEWS - answer✔✔1. Desk Review
- Field Review
- answer✔✔PRINCIPLE OF INCREASING AND DECREASING RETURNS
to improve property when the value added by the improvement exceeds cost of the improvement.
demand for real estate is great and the supply is short, prices in the marketplace go up. - answer✔✔PRINCIPLE OF SUPPLY AND DEMAND The presence of lower-priced properties in the area will cause a decline in the value of the subject property - answer✔✔PRINCIPLE OF REGRESSION The absence of competition will cause prices to increase in the marketplace - answer✔✔PRINCIPLE OF COMPETITION Acronym for Characteristics of Value - answer✔✔D.U.S.T.The price a willing seller will sell for and the price a willing buyer will pay. - answer✔✔Market value Most common misunderstood appraisal concept? - answer✔✔Market Value Does price equal value? - answer✔✔No, many factors go into determining the market value of a property.Ad valorem - answer✔✔according to value What are taxes based on? - answer✔✔Assessed Value Appraiser must follow what? - answer✔✔Uniform Standards of Professional Appraisal Practice
(USPAP).
URAR is commonly referred as - answer✔✔1004 Uniform Residential Appraisal Report (URAR) is known as - answer✔✔Fannie Mae 1004 or Freddie Mac form 70 Standards that have been established by the Appraisal Standards Board of the Appraisal Foundation - answer✔✔USPAP Value - answer✔✔Does not always equal price If a type of property in a market area is too abundant, it has reduced value - answer✔✔Scarcity 2 / 3
Many lenders, especially when dealing with high-LTV loans, will order this type of appraisal - answer✔✔Field Review
- approaches to value are - answer✔✔1. Sales Comparison Approach
- Cost Approach
- Income Approach
appraiser focuses on recent sales in determining the value of the subject - answer✔✔SALES
COMPARISON APPROACH
How many comparison sales will and appraiser gather? - answer✔✔Minimum of 3. some lenders require 4 The degree to which a comparable is adjusted in 2 ways - answer✔✔1. Net adjustment
- gross adjustment
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the absolute adjustments made to the comparable, considering those that are positive and negative - answer✔✔Net Adjustments - the sum of all adjustments, whether or not they are positive or negative - answer✔✔Gross Adjustments the market value of the property considers how much a new structure of this size and type would currently cost to build. - answer✔✔COST APPROACH loss in desirability of the style, layout, or function of an element of a property over time. - answer✔✔Functional obsolescence to the loss in value of a property caused by factors outside of the property itself - answer✔✔External obsolescence Process of estimating the value of an income-producing property by capitalization of the annual net income. - answer✔✔INCOME APPROACH Gross Rent Multiplier formula - answer✔✔GRM = Sales Price ÷ Monthly Rent Value = Income ÷ Return - answer✔✔Income Capitalization Formula What is the final step in the appraisal process? - answer✔✔Reconciliation What is the percentage of value or sales price that a lender is willing to finance? - answer✔✔loan-to-value ratio (LTV) How many hours of education required for Appraiser Trainee? - answer✔✔75 hours How many appraiser trainee's can one person sponsor at one time? - answer✔✔No more than 3