Texas Principles of Real Estate II (2024 / 2025) Exam | Guide with Questions and Verified Answers | 100% Correct

Texas Principles of Real Estate II (2024 / 2025) Exam | Guide with Questions and Verified Answers | 100% Correct Q: Principle of Contribution? Answer: A component part of a property is valued in proportion to its contribution to the value of the whole. Holds that maximum values are achieved when the improvements on a site produce the highest (net) return, commensurate with the investment. Q: Principle of Competition? Answer: Holds that profits tend to breed competition and excess profits tend to breed ruinous completion. Q: Principle of Change? Answer: Holds that it is the future, not the past, which is of prime importance in estimating value. Change is largely the result of cause and effect. Q: Reconciliation? Answer: taking values indicated by the various approaches used and reconciliating into one single value Q: Comparative Market Analysis(CMA)? Answer: An analysis of the competition in the marketplace that a property will face upon sale attempts. Q: Sellers net return? Answer: seller profit once closing costs, commissions, and other fees have been subtracted. The amount the seller walks away with after a sale. Q: Appraisal Process? Answer: 1) State the problem - What is the appraised being done for; new home purchase, refinance, home equity loan or other purpose 2) List the data needed and the sources of the data 3) Gather, record, and verify all the necessary data in step 2 - very time consuming 4) determining the highest and best use of the property 5) value estimated from each of three appraisal methods 6) Reconciliation - takes all three approaches and values and reconciles it into one single value. After all steps are completed, appraiser takes what he has learn and conveys that to the client. Where he gives his opinion and how he came to the appraisal value. Q: Appraisal reporting - information actually sent to client? Answer: 1) Opinion of value and date it was recorded 2) The purpose on which the appraisal was done 3) Description of the neighborhood and surrounding areas of the subject property - demographics 4) Factual data with respect to each of the three appraisal methods; sales of recently sold similar properties 5) Analysis and interpret the data collected 6) Presentation with enough detail to state and prove his final number, with supporting documents and data points. Q: Insured Value? Answer: The cost of replacing a structure completely destroyed by an insured hazard. Q: Book Value? Answer: The current value for accounting purposes of an asset expressed as original cost plus capital additions minus accumulated depreciation. Q: Assessed Value? Answer: A valuation placed upon a piece of property by a public authority as a basis for levying taxes on the property. Q: Market Price? Answer: The price paid regardless of pressures, motives or intelligence. Q: IRV? Answer: Income * Rate = Value Q: List at least three examples of lenders who offer financing to residential buyers.? Answer: Convential, FHA, VA Q: Explain the difference between a balloon mortgage and term mortgage.? Answer: Balloon is interest only to defer the principal until final payment is to be made. Term is fixed for length and generally has an amortization set over the life of the loan. Q: Explain the concept of negative amortization and why it is risky for borrowers.? Answer: Occurs when monthly installment payments are insufficient to pay the interest accruing on the principal balance, so that the unpaid interest must be added to the principal due. Q: Identify at least three participants in the secondary mortgage market.? Answer: Fannie Mae, Freddie Mac, Ginnie Mae Q: Mortgage Banker? Answer: A person whose principal business in the originating, financing, closing, selling and servicing of loans secured by the real property for institutional lenders on a contractual basis. Q: Mortgage Broker?