REE 3043 EXAM 1 QUESTIONS WITH
REVIEWED ANSWERS
Functional Obsolescence - Answer-An older design and the building doesn't function in
such a way maintain value
Cost approach - Answer-Can you determine the cost to replace reproduce any type of
property
Fully Amortized Mortgage - Answer-Periodic payments that are sufficient enough to
cover the entirety of the loan and the entirety of the interest by the end of the term
Interest only loan - Answer-Making payments toward only the interest during the
duration of the loan. At the end the principal is paid as one payment.
Ballon loan - Answer-When a loan amortizes over 25 years but the loan matures at year
10. Used in commercial loans
Reverse mortgage - Answer-A loan by which a homeowner receives a lump sum,
monthly payments, or a line of credit based on the homeowner's equity in the property
secured by the mortgage. The loan must be repaid at a prearranged date, upon the
death of the owner, or upon the sale of the property.
ARM- Adjustable rate mortgage - Answer-To start a fixed payment is made then interest
rate adjust according to the market. Margin rate stays the same index adjusts
Option ARM - Answer-Allows you to decide the amount of your payment. The initial
amount covers interest, remaining goes toward principle
Cost Approach 1 - Answer-Opinion of site value
Cost approach 2 - Answer-Depreciated cost of the improvements
The cost approach 3 - Answer-As is value of the site improvement
Negative amortization - Answer-Occurs when the payment is not enough to even cover
interest. Remaining interest is applied to principle causing loan balance to increase
Mortgage payments - Answer-Cover PITI Principle, Interest, Taxes, insurance
Interest payments - Answer-Cover the cost of using money for the past
Market value - Answer-Probable selling price. You want this high
Investment value - Answer-How much an investor finds the property worth. You want
this high
Assessed value - Answer-Used by the property appraisers office for tax purposes. You
what this low
REVIEWED ANSWERS
Functional Obsolescence - Answer-An older design and the building doesn't function in
such a way maintain value
Cost approach - Answer-Can you determine the cost to replace reproduce any type of
property
Fully Amortized Mortgage - Answer-Periodic payments that are sufficient enough to
cover the entirety of the loan and the entirety of the interest by the end of the term
Interest only loan - Answer-Making payments toward only the interest during the
duration of the loan. At the end the principal is paid as one payment.
Ballon loan - Answer-When a loan amortizes over 25 years but the loan matures at year
10. Used in commercial loans
Reverse mortgage - Answer-A loan by which a homeowner receives a lump sum,
monthly payments, or a line of credit based on the homeowner's equity in the property
secured by the mortgage. The loan must be repaid at a prearranged date, upon the
death of the owner, or upon the sale of the property.
ARM- Adjustable rate mortgage - Answer-To start a fixed payment is made then interest
rate adjust according to the market. Margin rate stays the same index adjusts
Option ARM - Answer-Allows you to decide the amount of your payment. The initial
amount covers interest, remaining goes toward principle
Cost Approach 1 - Answer-Opinion of site value
Cost approach 2 - Answer-Depreciated cost of the improvements
The cost approach 3 - Answer-As is value of the site improvement
Negative amortization - Answer-Occurs when the payment is not enough to even cover
interest. Remaining interest is applied to principle causing loan balance to increase
Mortgage payments - Answer-Cover PITI Principle, Interest, Taxes, insurance
Interest payments - Answer-Cover the cost of using money for the past
Market value - Answer-Probable selling price. You want this high
Investment value - Answer-How much an investor finds the property worth. You want
this high
Assessed value - Answer-Used by the property appraisers office for tax purposes. You
what this low
