AYPO REAL ESTATE UPDATED CORE EXAM MANUAL
QUESTIONS AND SOLUTIONS GUARANTEE A+
✔✔Home Equity Loans - ✔✔Home equity loans are standard lump-sum loans that
convert the equity of a house into usable funds.
✔✔Home Equity Line of Credit (HELOC - ✔✔Almost like Home Equity Loans-The
difference is that home equity lines of credit operate more like credit cards. Instead of a
lump sum disbursement, the borrower is allowed to use the line of credit whenever they
desire.
✔✔Wraparound Mortgages - ✔✔The wraparound loan, or a "wrap," is a form of creative
financing, that may or may not be allowed with a homeowner's original loan. It is a
secondary loan for real property, that 'wraps around' the first loan, without paying it off.
✔✔Chattel Mortgages - ✔✔A chattel mortgage is a mortgage loan that is secured by
some form of personal property that is not tied to a piece of land. Like a standard
mortgage loan, the borrower transfers ownership of the personal property, like a car or
boat, to the lender until the loan is paid off.
✔✔Deeds of Trust - ✔✔deed of trust includes a third-party trustee. The role of the
trustee alters the manner of dealing with a default.-In the event of a default, the trustee
has the right to sell the property in order to cover the loan, or as much of it as they can
get through a sale. The power-of-sale rights vested in them allow the trustee to
foreclose on the property without going through formal proceedings required for a
judicial foreclosure.
✔✔Power-of-Sale - ✔✔The power-of-sale that is connected to a deed of trust is
regulated by legislation generally requiring notice to be given regarding the sale.
Because this type of sale is not approved officially by a court, it does leave a slightly
larger window for litigation resulting from disagreements over the title.
✔✔Real Estate Cycles - ✔✔The U.S. real estate market is said to run in an 18-year
cycle.
✔✔Real estate's unique role in the economic system - ✔✔- A presence in virtually all
economic sectors, including financial
- A predominance of long-term, and often costly, financial commitments
- Home ownership's intrinsic ties to individual wealth, disposable income, and
employment
✔✔The Four-Phase Cycle - ✔✔- Recovery
- Expansion
- Hyper supply
- Recession
,✔✔Phase 1: Recovery - ✔✔During this first phase of the cycle, the market is no longer
in decline, but now has begun to curve back upward. This, generally, would be the best
time for buyers, because there is really only one real direction for the market to go: up!
This economic phase of the cycle usually comes with high (but stabilized)
unemployment, a higher number of foreclosures, and a lot of fear and nervousness in
the general economy. Most people will be wary and shy away from real estate
purchases at this point until their confidence in the market returns. The investor and the
bold will be looking to buy while prices are bottomed out.
✔✔Phase 2: Expansion - ✔✔During the expansion phase, the economic engines are
running with more power and predictability. Businesses are adding employees and
looking to expand their customer base, and confidence in real estate is gaining
momentum.
✔✔Speculators - ✔✔investors who rely heavily on future growth of the real estate
market to generate profits, and base their numbers upon this need. As a result, they
may begin to overpay for properties in hopes of flipping or reselling them for even more.
✔✔Phase 3: Hyper Supply - ✔✔"boom" time- Overzealous Speculation
✔✔Phase 4: Recession - ✔✔In Phase 4, the ambitious building projects undertaken in
Phases 1 and 2 aren't selling, so prices start to drop. Foreclosures rise as owners find
themselves underwater and investors begin to flounder. Compound this with an
economic recession and you have a recipe for economic disaster such as we saw in the
mid 2000s.
✔✔Other Factors Influencing the Real Estate Cycle - ✔✔- Demographics
Interest rates
-The Economy
-Government Interventions and Policies
✔✔Demographics - ✔✔demographic that is in the market and driving the current trend.-
ex. Baby boomers either upgrading, downgrading or moving to homes for care
✔✔Interest Rates - ✔✔The more affordable the loans become, the more people can
enter the market. Likewise, rises in the rates will drive many right back out of the
market.
✔✔The Economy - ✔✔Economic indicators such as the GDP, employment data,
manufacturing activity, the prices of goods, etc. all will have an impact on the availability
of mortgage funds and the consumer's ability to access them
,✔✔Government Policies/Subsidies - ✔✔Some of the more common policies present in
our daily economic management toolkit, such as tax credits, deductions and subsidies
can be enough to inject a little life back into an otherwise sluggish market.
Ex.Other times, such as during the 2008 crash, more substantive interventions are
called for. In this instance, bailout programs, like the Home Affordable Refinance
Program (HARP) and the Home Affordable Modification Program (HAMP) were
designed to specifically address the crisis at that time
✔✔Impact of the Economy - ✔✔Real estate, as much as any commodity or investment,
is subject to the health of the general economy. Although the real estate market does
not run completely parallel to the overall economy, it is heavily influenced by the
availability of capital to fund the purchase of real estate.
✔✔Financial Markets - ✔✔The financial market can be described as any or all of
multiple marketplaces where trading of securities takes place. These include equities,
bonds, currencies and derivatives.
✔✔Stock Markets - ✔✔Stock markets, such as the New York Stock Exchange, provide
investors with a place to buy and sell shares in publicly traded companies.
✔✔Bond Markets - ✔✔A bond is an investment vehicle where an investor loans money
to a specified entity. The bond generally has a predetermined duration and interest rate,
and can be sold by both the private and public sectors to fund their projects and
initiatives.
✔✔Money Market - ✔✔The money market is the section of the financial market where
highly liquid financial instruments with very short maturity periods are traded. That
means that the "instruments" are easily convertible into cash (cash being the most liquid
of all) and reach their maturity in value generally in less than a year, sometimes in much
shorter terms.
✔✔Forex Market - ✔✔Currencies are traded in the forex market (foreign exchange), the
largest market in the world, where an average trading value exceeding $1.9 trillion takes
place every day. Forex market trading involves all of the currencies in the world. Any
individual, business, or government authority may participate in this market.
✔✔OTC Market - ✔✔The term "over-the-counter" refers to stocks traded either on the
over-the-counter bulletin board (OTCBB) or the "pink sheets," but not traded on any of
the stock markets. OTCBB and pink sheet companies are far less regulated than those
on a stock exchange, with the majority traded this way being penny stocks or from much
smaller companies.
✔✔Capital Markets - ✔✔A capital market is a market in which individuals and
institutions trade financial securities. Organizations and institutions in the public and
, private sectors also can sell securities on the capital markets to raise funds for their
other endeavors.
✔✔Primary Markets - ✔✔Primary markets are where securities are created and initially
exchanged. In a primary market, investment products are purchased directly from the
financial institutions that originate them. An example of a primary market exchange
would be the purchase of a company's stock during an initial public offering (IPO).
Ex: If financing for a real estate transaction is acquired through the primary market, it
means that the loan is acquired directly from a financial institution such as a bank.
✔✔Secondary Markets - ✔✔Secondary markets are where investment products (mainly
securities) are exchanged between investors. The stock market and stock exchanges
are principal elements of the secondary capital markets.The secondary market is where
the bulk of exchange trading occurs each day.
✔✔Information Resources - ✔✔Financial markets can fluctuate day-to-day or may be
exhibiting signs of a trend, positive or negative, foretelling near-term or long-term
change.
Potential Sources of information:
-Uniform Residential Loan Application
-Verification of Deposit
Request for Verification of Employment
-Uniform Residential Appraisal Report
-Loan Estimate Form
-The Closing Disclosure
-Know Before You Owe mortgage disclosure rule
Real Estate Finance Tx:
-Texas Department of Housing and Community Affairs (TDHCA)
-Texas State Affordable Housing Corporation (TSAHC)
-HUD State Program Page (All 50 States) - Texas
-Rental assistance
-Home buying and ownership programs
-Advice on buying a home, renting, default, foreclosure avoidance, credit issues or
reverse mortgages
-Assistance to the homeless
-Bankrate.com (for example private lenders)
-Private lenders Link (for example private lenders)
TREC 1-4 residential contract
General Economic Resources:
-New York Stock Exchange
NASDAQ
-American Stock Exchange
QUESTIONS AND SOLUTIONS GUARANTEE A+
✔✔Home Equity Loans - ✔✔Home equity loans are standard lump-sum loans that
convert the equity of a house into usable funds.
✔✔Home Equity Line of Credit (HELOC - ✔✔Almost like Home Equity Loans-The
difference is that home equity lines of credit operate more like credit cards. Instead of a
lump sum disbursement, the borrower is allowed to use the line of credit whenever they
desire.
✔✔Wraparound Mortgages - ✔✔The wraparound loan, or a "wrap," is a form of creative
financing, that may or may not be allowed with a homeowner's original loan. It is a
secondary loan for real property, that 'wraps around' the first loan, without paying it off.
✔✔Chattel Mortgages - ✔✔A chattel mortgage is a mortgage loan that is secured by
some form of personal property that is not tied to a piece of land. Like a standard
mortgage loan, the borrower transfers ownership of the personal property, like a car or
boat, to the lender until the loan is paid off.
✔✔Deeds of Trust - ✔✔deed of trust includes a third-party trustee. The role of the
trustee alters the manner of dealing with a default.-In the event of a default, the trustee
has the right to sell the property in order to cover the loan, or as much of it as they can
get through a sale. The power-of-sale rights vested in them allow the trustee to
foreclose on the property without going through formal proceedings required for a
judicial foreclosure.
✔✔Power-of-Sale - ✔✔The power-of-sale that is connected to a deed of trust is
regulated by legislation generally requiring notice to be given regarding the sale.
Because this type of sale is not approved officially by a court, it does leave a slightly
larger window for litigation resulting from disagreements over the title.
✔✔Real Estate Cycles - ✔✔The U.S. real estate market is said to run in an 18-year
cycle.
✔✔Real estate's unique role in the economic system - ✔✔- A presence in virtually all
economic sectors, including financial
- A predominance of long-term, and often costly, financial commitments
- Home ownership's intrinsic ties to individual wealth, disposable income, and
employment
✔✔The Four-Phase Cycle - ✔✔- Recovery
- Expansion
- Hyper supply
- Recession
,✔✔Phase 1: Recovery - ✔✔During this first phase of the cycle, the market is no longer
in decline, but now has begun to curve back upward. This, generally, would be the best
time for buyers, because there is really only one real direction for the market to go: up!
This economic phase of the cycle usually comes with high (but stabilized)
unemployment, a higher number of foreclosures, and a lot of fear and nervousness in
the general economy. Most people will be wary and shy away from real estate
purchases at this point until their confidence in the market returns. The investor and the
bold will be looking to buy while prices are bottomed out.
✔✔Phase 2: Expansion - ✔✔During the expansion phase, the economic engines are
running with more power and predictability. Businesses are adding employees and
looking to expand their customer base, and confidence in real estate is gaining
momentum.
✔✔Speculators - ✔✔investors who rely heavily on future growth of the real estate
market to generate profits, and base their numbers upon this need. As a result, they
may begin to overpay for properties in hopes of flipping or reselling them for even more.
✔✔Phase 3: Hyper Supply - ✔✔"boom" time- Overzealous Speculation
✔✔Phase 4: Recession - ✔✔In Phase 4, the ambitious building projects undertaken in
Phases 1 and 2 aren't selling, so prices start to drop. Foreclosures rise as owners find
themselves underwater and investors begin to flounder. Compound this with an
economic recession and you have a recipe for economic disaster such as we saw in the
mid 2000s.
✔✔Other Factors Influencing the Real Estate Cycle - ✔✔- Demographics
Interest rates
-The Economy
-Government Interventions and Policies
✔✔Demographics - ✔✔demographic that is in the market and driving the current trend.-
ex. Baby boomers either upgrading, downgrading or moving to homes for care
✔✔Interest Rates - ✔✔The more affordable the loans become, the more people can
enter the market. Likewise, rises in the rates will drive many right back out of the
market.
✔✔The Economy - ✔✔Economic indicators such as the GDP, employment data,
manufacturing activity, the prices of goods, etc. all will have an impact on the availability
of mortgage funds and the consumer's ability to access them
,✔✔Government Policies/Subsidies - ✔✔Some of the more common policies present in
our daily economic management toolkit, such as tax credits, deductions and subsidies
can be enough to inject a little life back into an otherwise sluggish market.
Ex.Other times, such as during the 2008 crash, more substantive interventions are
called for. In this instance, bailout programs, like the Home Affordable Refinance
Program (HARP) and the Home Affordable Modification Program (HAMP) were
designed to specifically address the crisis at that time
✔✔Impact of the Economy - ✔✔Real estate, as much as any commodity or investment,
is subject to the health of the general economy. Although the real estate market does
not run completely parallel to the overall economy, it is heavily influenced by the
availability of capital to fund the purchase of real estate.
✔✔Financial Markets - ✔✔The financial market can be described as any or all of
multiple marketplaces where trading of securities takes place. These include equities,
bonds, currencies and derivatives.
✔✔Stock Markets - ✔✔Stock markets, such as the New York Stock Exchange, provide
investors with a place to buy and sell shares in publicly traded companies.
✔✔Bond Markets - ✔✔A bond is an investment vehicle where an investor loans money
to a specified entity. The bond generally has a predetermined duration and interest rate,
and can be sold by both the private and public sectors to fund their projects and
initiatives.
✔✔Money Market - ✔✔The money market is the section of the financial market where
highly liquid financial instruments with very short maturity periods are traded. That
means that the "instruments" are easily convertible into cash (cash being the most liquid
of all) and reach their maturity in value generally in less than a year, sometimes in much
shorter terms.
✔✔Forex Market - ✔✔Currencies are traded in the forex market (foreign exchange), the
largest market in the world, where an average trading value exceeding $1.9 trillion takes
place every day. Forex market trading involves all of the currencies in the world. Any
individual, business, or government authority may participate in this market.
✔✔OTC Market - ✔✔The term "over-the-counter" refers to stocks traded either on the
over-the-counter bulletin board (OTCBB) or the "pink sheets," but not traded on any of
the stock markets. OTCBB and pink sheet companies are far less regulated than those
on a stock exchange, with the majority traded this way being penny stocks or from much
smaller companies.
✔✔Capital Markets - ✔✔A capital market is a market in which individuals and
institutions trade financial securities. Organizations and institutions in the public and
, private sectors also can sell securities on the capital markets to raise funds for their
other endeavors.
✔✔Primary Markets - ✔✔Primary markets are where securities are created and initially
exchanged. In a primary market, investment products are purchased directly from the
financial institutions that originate them. An example of a primary market exchange
would be the purchase of a company's stock during an initial public offering (IPO).
Ex: If financing for a real estate transaction is acquired through the primary market, it
means that the loan is acquired directly from a financial institution such as a bank.
✔✔Secondary Markets - ✔✔Secondary markets are where investment products (mainly
securities) are exchanged between investors. The stock market and stock exchanges
are principal elements of the secondary capital markets.The secondary market is where
the bulk of exchange trading occurs each day.
✔✔Information Resources - ✔✔Financial markets can fluctuate day-to-day or may be
exhibiting signs of a trend, positive or negative, foretelling near-term or long-term
change.
Potential Sources of information:
-Uniform Residential Loan Application
-Verification of Deposit
Request for Verification of Employment
-Uniform Residential Appraisal Report
-Loan Estimate Form
-The Closing Disclosure
-Know Before You Owe mortgage disclosure rule
Real Estate Finance Tx:
-Texas Department of Housing and Community Affairs (TDHCA)
-Texas State Affordable Housing Corporation (TSAHC)
-HUD State Program Page (All 50 States) - Texas
-Rental assistance
-Home buying and ownership programs
-Advice on buying a home, renting, default, foreclosure avoidance, credit issues or
reverse mortgages
-Assistance to the homeless
-Bankrate.com (for example private lenders)
-Private lenders Link (for example private lenders)
TREC 1-4 residential contract
General Economic Resources:
-New York Stock Exchange
NASDAQ
-American Stock Exchange
