Aceable Principles of Real Estate 2 Review Exam Questios with 100% Correct Answers

Aceable Principles of Real Estate 2 Review Exam Questios with 100% Correct Answers Real Estate Settlement Procedures Act (RESPA) - answerto protect consumers from abusive lending practices. General data - answeris information about a property's location. This could include the city, region, and neighborhood in which the property is situated. The appraisal report is usually paid by - answerthe buyer Specific data - answerinformation regarding the property itself. What types of data do Appraisers use? - answerBOTH Specific Data and General Data The appraiser that will complete the appraisal report is usually chosen by - answerthe lender Market value is: - answerNot the same thing as the sales price An opinion, not a fact Not always agreed upon by all appraisers price for which a property will sell if offered openly under normal conditions. Market value is all about the present. What will someone pay for their property TODAY? Depreciation - answera concept well known by appraisers, is the loss of value because of obsolescence (becoming obsolete) or deterioration. Depreciation is also tied closely with a property's effective age, Effective Age - answeran estimated age that is influenced by the updates and quality of maintenance of the property. An appraiser's job: - answera licensed real estate agent cannot perform an appraisal unless they are also a licensed appraiser. supply impartial and unbiased information in order to estimate the value of a property. appraisal report - answera report from a licensed appraiser that sums up a property's market value based on collected data. Principle of Anticipation - answerThe idea that the present value of a property is affected by the anticipated income or utility that property will give its property owner. Principle of Anticipation EXAMPLE - answerJimmy is buying a property and plans to rent it out for business purposes — his ability to make income off of rent is affecting the amount he is willing to bid on the house. Principle of Contribution - answerThe idea that a property's overall value is made up of the combined value of each of its parts. But the contributory value of an item is not always equal to the price of that item. Principle of Contribution EXAMPLE - answerJimmy renovated his kitchen, but was disappointed that the appraisal of his house only added part of the cost of the renovation to his house's value — Jimmy learned that his house's overall value is made up of the value of all of the parts. (The broken-down A/C affects his house's value as much as the new kitchen.) Principle of Substitution - answerStates that the value of something is affected by the cost of getting a similar (substitute) item elsewhere. EXAMPLE: Jimmy wants to put his house for sale, and his neighbor Shane, who has an almost identical house in his neighbor, put his house up for sale — Jimmy is carefully watching Shane (and vice versa). Principle of Change - answerReminds us that the condition of a property, the desirability of its location, and the market in which it exists can always change, which could affect the value of the property. EXAMPLE: Jimmy got an appraisal for his home in 2015, but market conditions have changed so that appraisal is no longer correct. Principles of Supply and Demand - answerStates that when supply is low and demand is high, prices will increase. And if supply is plentiful and demand is low? Prices will then drop. EXAMPLE: The local factory in Jimmy's town shut down, and suddenly 30% of the town put their house for sale — due to this supply increase (and demand decrease), the value of Jimmy's house decreased. Principle of Conformity: - answerClaims that maximum value is realized when land use is in harmony with surrounding standards. EXAMPLE: Jimmy's house has a "farmhouse look" and so do the houses that surround his — the high value of Jimmy's house is partly a result of the fact that the houses that surround his have a similar look. Principles of Regression & Progression - answerstates that the presence of higher value or lower value homes near the subject property can change its value. EXAMPLE: Jimmy's small home is surrounded by larger, more expensive homes. The value of Jimmy's house is probably increased through the principle of progression. DUST: four characteristics that make real estate valuable: - answerDemand: If there are multiple buyers interested in a property, the property will increase in value. Utility: Properties need to be useful or serve some kind of purpose in order to have value to a buyer. An empty lot, for example, may not look like it has much utility, but to a buyer who wants to build a custom home in that area, it's quite useful! Scarcity: If the amount of housing in an area is low in supply, it grows in value. Transferability: Whether it's government rules or a title issue, anything that limits the transferability of real estate makes it less valuable. Comparative Market Analysis (CRM) - answerNOT an appraisal. It does, however, use information regarding recently sold homes in the area to arrive at an indication of what the fair market value of a similar property would be. Three Approaches to Calculating Value - answerThe Sales Comparison Approach (used mostly for owner-occupied residential property and vacant land) The Cost Approach (used mostly for new construction) The Income Approach (used mostly for commercial properties) Cost Approach (several methods used for determining value within) - answerQuantity survey method: the appraiser tallies the value of everything that goes into the cost