Test Bank for Real Estate Principles
Chapters 17-24 4th Edition by Valerie D.
Thompson
value of the property - ANSthe decision to buy, sell, or grant a loan on real estate hinges on the
appraisal - ANSthe estimate of the value of something
market approach - ANScomparable sales data (aka sales comparison approach); value
approach
market value (or fair market value) - ANSthe most probable price that a property should bring in
a competitive and open market
cost approach - ANSconstruction cost plus land value; value approach
income approach - ANSa method of valuing a property based on the monetary returns it can be
expected to produce; value approach
capitalize - ANSto convert future income to current value
scheduled gross - ANSthe estimated rent a fully occupied property can be expected to produce
on an annual basis; aka projected gross
operating expenses - ANSexpenditures necessary to maintain the production of income
depreciation - ANSloss in value due to deterioration and obsolescence
reserves for replacement - ANSestablished for items that do not required an expenditure of cash
each year
net operating income - ANSthe balance that remains when the operating expense total is
subtracted from the effective gross income
income/rate - ANSdirect capitalization using cap rate =
operating expense ratio - ANSobtained by dividing the total operating expenses by the effective
gross income
, net operating income - ANSthe final step in the income approach is to capitalize the
mortgage-equity tables - ANSthese tables allow the user to look up a single number, called an
overall rate, and divide it into the net operating income to find a value for the property
FIRREA - ANSFinancial Institutions Reform, Recovery, and Enforcement Act of 1989; created
mandatory requirements for certain federally related real estate appraisals
letter, form, and narrative - ANSwhat are the three traditional formats for written reports?
demand, utility, scarcity, and transferable - ANSwhat are the characteristics of value?
buyer's market - ANSexcess supply of housing for sale/lease
seller's market - ANSexcess demand for housing for purchase/lease
broad market - ANSmany buyers and sellers are in the market at the same time
thin market - ANSwhen there are only a few buyers and a few sellers in the market at the same
time
licensee - ANSone who holds a license
real estate broker - ANSa person or legal entity licensed to act independently in conducting real
estate brokerage business
real estate sales associate (agent) - ANSa person working for a broker to list, negotiate, sell, or
lease real property for others. anyone with a real estate license who works under a sponsoring
broker
100% commission - ANScompensation arrangement when the agent does not share any
commission with the sponsoring broker
compensation - ANSusually a percentage of earned commissions
independent contractor - ANSone who contracts to do work according to one's own methods
and is responsible to his employer for the results of only that work
realtor - ANSregistered trade name; member of National Association of Realtors; GRI;
license suspension - ANSto temporarily make a license ineffective
license revocation - ANSto recall and make void a license
Chapters 17-24 4th Edition by Valerie D.
Thompson
value of the property - ANSthe decision to buy, sell, or grant a loan on real estate hinges on the
appraisal - ANSthe estimate of the value of something
market approach - ANScomparable sales data (aka sales comparison approach); value
approach
market value (or fair market value) - ANSthe most probable price that a property should bring in
a competitive and open market
cost approach - ANSconstruction cost plus land value; value approach
income approach - ANSa method of valuing a property based on the monetary returns it can be
expected to produce; value approach
capitalize - ANSto convert future income to current value
scheduled gross - ANSthe estimated rent a fully occupied property can be expected to produce
on an annual basis; aka projected gross
operating expenses - ANSexpenditures necessary to maintain the production of income
depreciation - ANSloss in value due to deterioration and obsolescence
reserves for replacement - ANSestablished for items that do not required an expenditure of cash
each year
net operating income - ANSthe balance that remains when the operating expense total is
subtracted from the effective gross income
income/rate - ANSdirect capitalization using cap rate =
operating expense ratio - ANSobtained by dividing the total operating expenses by the effective
gross income
, net operating income - ANSthe final step in the income approach is to capitalize the
mortgage-equity tables - ANSthese tables allow the user to look up a single number, called an
overall rate, and divide it into the net operating income to find a value for the property
FIRREA - ANSFinancial Institutions Reform, Recovery, and Enforcement Act of 1989; created
mandatory requirements for certain federally related real estate appraisals
letter, form, and narrative - ANSwhat are the three traditional formats for written reports?
demand, utility, scarcity, and transferable - ANSwhat are the characteristics of value?
buyer's market - ANSexcess supply of housing for sale/lease
seller's market - ANSexcess demand for housing for purchase/lease
broad market - ANSmany buyers and sellers are in the market at the same time
thin market - ANSwhen there are only a few buyers and a few sellers in the market at the same
time
licensee - ANSone who holds a license
real estate broker - ANSa person or legal entity licensed to act independently in conducting real
estate brokerage business
real estate sales associate (agent) - ANSa person working for a broker to list, negotiate, sell, or
lease real property for others. anyone with a real estate license who works under a sponsoring
broker
100% commission - ANScompensation arrangement when the agent does not share any
commission with the sponsoring broker
compensation - ANSusually a percentage of earned commissions
independent contractor - ANSone who contracts to do work according to one's own methods
and is responsible to his employer for the results of only that work
realtor - ANSregistered trade name; member of National Association of Realtors; GRI;
license suspension - ANSto temporarily make a license ineffective
license revocation - ANSto recall and make void a license
