Module 2: Idaho Real Estate (2023/2024) Already Passed

Module 2: Idaho Real Estate (2023/2024) Already Passed Appraisal The process of estimating and supporting an opinion of value as of a certain date. Market Value A real estate appraiser estimates the market value or fair market value 4 Characteristics of Demand 1. Demand 2. Utility 3. Scarcity 4. Transferability Anticipation The value of a property may increase or decrease based on potential purchaser's belief that some future event will benefit or detract from the value of the property Change Real estate conditions, both physical and economic, do not remain constant and this in turn changes value Competition Competition results from the interaction between supply and demand Conformity The maximum value for a property is reached when it conforms to the surrounding land use Contribution The value of an improvement is equal to its contribution to the added value of the property. Increasing and Diminishing Returns Returns refers to the relationship between the cost of an improvement and the value it adds to the property Plottage Combining or consolidating adjacent lots into one larger lot, the resulting land value will be higher than the sum of the values of the separate lots Assemblage The process of merging the lots Regression The value of a better property will be lessened by the presence of poorer properties Substitution The maximum value of a property is equal to the cost of purchasing or constructing equally desirable properties Supply and Demand Property values will be affected both by the supply of property and by buyer demand for it Topography Builders prefer gently rolling land that looks more appealing but is not so steep that it would increase development costs Shape Irregularly shaped lots are not as valuable as rectangular lots Size The width and depth of the lot determines its potential uses and affects its value Exposure How a lot is positioned to the light, air or view affects its value Soil The ability of the ground to support a structure affects construction costs Corner Influence A corner location has greater value for commercial property Location This is the site of the property in relation to other uses and physical features Consumer Price Index (CPI) Measures inflation Appraisal Foundation A private, non-profit organization composed of representatives from all the major appraisal organizations and other related professional groups Appraisal Foundation - Objectives - Establish uniform appraisal standards - Develop minimum criteria for the certification and recertification of qualified appraisers - Maintain systems for the appraisers Uniform Residential Appraisal Report (URAR) Most common appraisal report used today for government agencies such as: Fannie Mae, Freddie Mac, HUD, VA, FHMA Appraisal Qualifications Board Establishes minimum criteria for state certified appraisers and endorses uniform examinations for certification Appraisal Standards Board Sets minimum standards for appraisals performed in federally related transactions Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) Intended to upgrade the professionalism and competency of appraisers The Dodd-Frank Act Required legislative changes to strengthen appraiser independence and prohibit the coercion and other activities that influenced appraisals and often resulted in fraud Broker Price Option Broker's estimate of the possible selling price, rather than an estimate of value. Used by lenders, Fannie Mae, and Freddie Mac. Cost Approach Estimates the value of the subject property based on cost of purchasing a similar parcel of land and constructing similar improvement Physical Deterioration Loss of value due to wear and tear on buildings and other improvements caused by age, use or negligence. Functional Obsolescence Type of depreciation refers to the loss of value owing to poor design and features that make the building outdated (EX: Kitchen opposite from garage) Income Approach Used to value income producing properties such as commercial and industrial by using estimated net income Gross Income Multiplier Commercial and industrial properties Capitalization Rate Rate of return or yield that an investor expects from investing money in the property Gross Living Area (GLA) Room count of a house, the appraiser only includes the finished area above grade Subject Property The property being appraised Comparable Properties Similar to the subject properties and have recently sold Sales Comparison Approach Uses information from the sale of similar properties that have recently sold and compares it with the subject property Paired Data Analysis **If the comparable feature is INFERIOR, the adjustment is an INCREASE in value **If the comparable feature is SUPERIOR, the adjustment is a DECREASE in value Comparative Market Analysis An opinion of value What is considered confidential? Motivation to buy Mortgage A contract between a borrower and a lender that provides security for the loan by creating a lien on the property Mortgagor Borrower Mortgagee Lender Deed of Trust Used when buying a house Title Theory In Idaho, the bank holds the title for personal property Lien Theory In Idaho, the homeowner owns the title to real estate Right of Redemption Specific period of time to get home back during foreclosure by paying the amount due to the lender Discount Points Frontloading interest **Points based on loan amount Hypothecation To pledge property as security for an obligation or loan without giving up the possession of it Home Equity (HELOC) Offers borrowers a line of credit on mortgage Purchase Money Mortgage A loan given by the seller to finance part of the purchase price Amortized Loan A loan that has been fully paid off in terms of principal and interest Truth in Lending Act (Regulation Z) Purpose is to force creditors to inform borrowers of the true cost of obtaining a loan Regulation Z Implements the truth in lending act Three Day Right of Recission Allows the borrower 3 days to decide if they want to cancel the loan contract Real Estate Settlement Procedures Act (RESPA) A consumer protection law designed to provide consumers with information about the costs associated with their real estate transaction and prohibit kickbacks and referral fees that unnecessarily increase the cost of certain settlement services Good Faith Estimate Lender must provide the prospective buyer with a three-page good faith estimate of key loans terms and closing costs within 3 business days of the loan application Annual Percentage Rate (APR) Includes the interest rate and other loan costs represents the true yearly cost of credit The Consumer Financial Protection Bureau (CFPB) Independent government agency that is responsible for consumer protection in the financial sector. Includes "any transaction with a consumer for a consumer financial product or service" The Federal Deposit Insurance Corporation (FDIC) Insures bank deposits in both savings institutions and commercial banks The Federal Housing Finance Agency (FHFA) Supervises the two housing enterprises, Fannie Mae and Freddie Mac. Usury Laws Limits the interest rate lenders can charge borrowers Defeasence Clause Stipulates that the mortgage lien is void when the loan is repaid Acceleration Clause Clause in mortgage or deed of trust that can enforce the borrower to make the entire debt due immediately if the borrower defaults on an installment payment or other obligation Judicial Foreclosure Foreclosure procedures that use the courts Nonjudicial Foreclosure Foreclosure procedure that does not involve the courts Deficiency Judgement A judgement against a debtor's personal assets if the sale of real estate is not sufficient to satisfy the loan Primary Mortgage Market Market where mortgages originate Secondary Mortgage Market A market for the purchase and sale of existing mortgages, designed to provide greater liquidity for mortgages Fannie Mae A government sponsored agency that operates in the secondary mortgage market. It handles FHA, VA and conventional loans and is the largest mortgage purchaser Ginnie Mae A wholly owned government corporation that guarantees investors the timely payment of principal and interest on securities backed by federally insured or guaranteed loans Conventional Loan A loan that is not insured or guaranteed by a government agency. The lender assumes the full risk of default Federal Housing Administration Insured Loan (FHA) Principal role is to insure residential mortgage loans made by private lenders Wrap-Around Loan A loan arrangement in which an existing loan on a property is assumed by a lender, who then gives the borrower a new, larger loan Buy Downs Allows consumer to buy down interest with points. Each point is 1% of the loan amount Adjustable Rate Mortgage Interest rate changes at predetermined intervals according to a predetermined market index A client has a 3 car home to which they have added two additional garages. Each garage bay cost $10,000. You determine the client won't get the full value under the principle of? Diminishing Returns A farm sits in an area that has been rezoned commercial and has a shopping mall being built next door. What principle indicates that the farm may not be being used at its highest possible value? Highest and Best Use Under the title theory, the __________ holds the title to the property. Bank Under the Lien theory, the ___________ holds the title to the property. Owner Pledging a property to secure a loan is called? Hypothecation A mortgage, in Idaho, requires a ___________ Foreclosure Judicial A deed of trust, in Idaho, requires a ______________ Foreclosure Non-Judicial Alienation Legal term for transferring title to real estate Holographic Will In writing and not witnessed Testate Die with a will Intestate Die without a will Testator The dead person who made the will if a man Testatrix The dead person who made the will if a woman Transfer Tax law that requires a tax to be paid when the title to real estate is transferred Deed written instrument that conveys ownership interests in real estate from grantor to grantee General Warranty Deed provides the greatest protection for the grantee because the grantor provide's various covenants or guarantees that good and marketable title is being given to the grantee Special Warranty Deed(Limited Warranty Deed) warrants that the grantor has title and limits the grantor's liability to encumbrances against the property that occurred after she acquired the title Acknowledgement a voluntary declaration before a notary public or officer of the court that verifies the signature of the grantor The Officer of the Controller of the Currency (OCC) responsible for monitoring and regulating the nationally charted banking and thrift industry Loan Estimate form provides consumers with information on the costs, features and risk of the loan they are applying for Dodd-Frank Wall Street Reform and Consumer Protection Act tasked with preventing predatory mortgage lending, improving the clarity of mortgage paperwork for consumers and reducing incentives for creditors to steer homebuyers into more expensive loans Federal Reserve helps maintain a sound credit and economic environment and to counter-act inflation and deflation trends. Regulates interest rates Reserve Requirement portion of bank funds that cannot be loaned out Federal Open Market Committee (FOMC) Helps regulate the supply of money 1) If FOMC sells securities, money supply decreases 2) If FOMC buys securities, money supply increases The method for determining value for a property that looks at capitalization rate? Income Approach A decrease in value over time is considered? Depreciation A church was originally built for $120,000 and had an economic life of 40 years. What would the remaining value be in 9 years? 1) 120,000/40=3,000 2) 3,000*9 years= 27,000 3) 120,0000-27,000= $93,000 What is market analysis? An opinion of value for prospective sale by licensed broker or salesperson Who does market analysis? Licensed broker or salesperson What is an Appraisal? Opinion of value completed by certified appraiser An increase in value from combing two or more lots is called? Plottage or Assemblage A potential client adds an astronomical observatory to their property. You suggest it will not add much value under the principle of? Over Improvement Constructive Notice refers to information that has been made public Actual Notice refers to direct knowledge of information a person has actually gained by reading, seeing or hearing Abstract a condensed history of all documents affecting title Chain of Title record of a property's ownership Quiet Title Lawsuit initiated to remove clouds on a title Marketable Title free from major defects that would deter potential buyers of the property, place the buyer in a position of legal inability or threaten the buyer's right to quiet enjoyment of the property Torrens System land registration used for assuring and recording title Subrogation title company obtains the insured's legal rights to defend a claim against a property Closing settlement(Settlement Statement) is used for a detailed accounting of funds in real estate transaction Escrow Agent is a disinterested third party who coordinates the closing activities A buyer takes out a loan for $125,000 for 25 years. At the end of the period, the buyer will owe nothing. What kind of loan does the buyer have? Amortized Under the Federal Truth In Lending Act, a lender must disclose to a home buyer what? True cost of the loan Interpleader occurs through court when both parties cannot agree on how to handle the distribution of earnest money. Exclusive right to sell type of listing in which the seller hires a single broker. In this type of listing a commission is owed to the broker no matter who makes the sale Exclusive right to sell with exclusions excludes specific people from purchasing the property Exclusive Agency type of listing in which the seller hires a single broker. If the seller rather than the broker actually sells the property, however, a commission is not owed to the broker Open Listing listing in which the seller employs any number of brokers at the same time but owes a commission only to the broker who sells the property Withdrawal of the listing agreement when an owner instructs a broker not to promote the property for sale and not to deliver any additional offers. the contract remains in full force and effect Cancellation of listing agreement when the broker, the owner or both fully terminate their listing agreement. Cancellation may be by either party or by the mutual consent Note Negotiable Instrument If the contract is not correct, the contract is? Voidable when does an offer have to be responded to? as per the terms of the contract If check bounces, what do we do? Immediately disclose to the seller Commingling mixing trust funds with personal funds who must provide the evidence of the title? The seller Business Refernces no person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise Loan A credit to the borrower. **A loan is a credit to the buyer on a settlement statement pre-paid interest on an ASSUMED loan is ALWAYS prorated Use diligence to procure a purchaser Conventional Loan not involving government participation in the form of insuring or guaranteeing the loan. The lender assumes full risk of default Non-Conventional Loan FHA and VA government agencies provide some protection to the lender so the loans can be made with smaller downpayments Purpose of Federal Housing Administration(FHA? stimulate housing by establishing better ways of financing mortgage loans who administers FHA loans? Department of housing and urban development (HUD) FHA insured any qualified lender can issue a FHA loan Which loans are back by the government? IHFA, VA, FHA, Rural Development Which loans are regulated by The government? IHFA, VA, FHA, Rural Development, Conventional