HACEABLE AGENT PRINCIPLES OF
REAL ESTATE 2 QUESTIONS AND
CORRECT DETAILED ANSWERS
Amortization - The repayment of a loan principle over time
Arrears - Payment for an item or service after it's received
Down Payment - The initial payment made when buying something on credit, a ____________ is paid
directly by the buyer to the seller
Proration - The allocation or distribution of an annual expense across smaller chunks of time
Acreage - A unit of measurement used to determine the size of land; 1 acre = 43560 square feet
Appraisal - The value of property, based on factors determined by a certified appraiser
General data - Information about the area surrounding a property, this could include the city, region, and
neighborhood in which the property is situated
Specific Data - Information regarding the property itself
Limited Appraisal - A simple, abbreviated version of a regular appraisal
Market Value - The price for which a property would sell if offered openly under normal conditions. This
refers to the economic principle, it's the price that a buyer and seller would probably accept
Appraised Value - Refers to the value given by a licensed appraiser during the mortgage origination
process. Appraisers are chosen by the lender but paid for by the homebuyer.
Assessed Value - Refers to the value placed on a property by a governmental unit for use in levying
annual real estate taxes
Loan-to-Value Ratio (LTV) - The limit on the value of a loan, usually a certain percentage of the home's
appraised value or sales price, whichever is lower
Subject Property - The property that is being evaluated in any given appraisal
Highest and Best Use - What is achieved when a property is used for the most appropriate purpose with
the highest returns
Principle of Anticipation - The present value of a property is affected by the anticipated income or utility
that property will give to the property owner
Principle of Contribution - A property's overall value is made of the combined value of each of its parts
,Principle of Substitution - The value of something is effected by the cost of getting a similar (substitute)
item elsewhere
Principle of Change - The condition of a property, the desirability of its location, and the market in which
it exists can always change
Principle of Conformity - Values are the highest when houses in a neighborhood look roughly the same
Principle of Regression - Lower value properties surrounding a subject property are can drag down the
value of a property
Principle of Progression - Higher value properties of a subject property can bump of the value of a
property
Sales Comparison Approach - Determining value by comparing the subject property to similar properties
("comps") that have sold recently. It's most commonly used for single family residences.
Cost Approach - Determining value by considering how much the same property would cost to build
brand new at current prices (replacement cost), then adjusting for depreciation
Income Approach - Determining value by considering how much income the property would generate
when used as rental property
Depreciation - The loss of value because of obsolescence or deterioration
Functional Obsolescence - Loss of value because a property's function or appearance has gone out of
style or has been replaced by a more appealing version
External Obsolescence - Loss of value caused by negative forces outside the property which are beyond
the control of the owner (unfavorable changes in the environment or market)
Deterioration - Loss of value caused by physical wear and tear over time
Chronological age - The literal age of a property; a home built 30 years ago has a ________________ age
of 30
Effective Age - An estimated age that is influenced by the updates and quality of maintenance of the
property; a 30 year house that has been well cared for might have an effective age of 15
Reconciliation - When an appraiser compares estimates using different techniques (cost approach, sales
approach, and/or income approach) and comes to a single number for value
Appraisal Report - a report from a licensed appraiser that sums up a property's market value based on
collected data
Appraisal Review - a review of the appraisal report to make sure the appraisal meets the lender's
standards
Desk Review - When a lender carries an appraisal review at the desk (as opposed to sending someone to
the field) to make sure the original appraisal is accurate
, Field Review - When a third party appraiser is sent back out to the property to check the validity of the
first appraisal
Fair Market Value - The price for which a property will sell if offered openly under normal market
conditions
Subject Property - The property that is subject of the CMA
Comparative Market Analysis - Also known as a CMA, this is a report generated by a license holder that
compares prices of recently sold homes (comparables) in order to estimate the fair market value of a
similar property (the "subject property")
Government hSponsored hEnterprises h- hPublicly htraded hinstitutions hthat hwere hcreated hby hCongress hto
hprovide hliquidity, hstability, hand haffordability hto hthe hmortgage hmarket
General hAgricultural hMortgage hCorporation h- hA hgovernment-sponsored henterprise h(GSE) hproviding ha
hsecondary hmarket hfor hagricultural hand hrural hmortgage hloans; halso hknown has hFarmer hMac
Depository hLenders h- hInstitutions hthat hmake hmortgage hloans hfrom hfunds hderived hfrom htheir
hcustomers' hsavings haccounts
Saving hAssociations h- hSpecialize hin hlong-term hresidential hloans; hprimary hfunction his hto hpromote
hthrift hand hhome hownership
Federal hHome hLoan hBank hSystem h- heleven hprivate, hwholesale hregional hU.S. hbanks hchartered hto
hregulate hmember horganizations, hset hreserve hrequirements hestablish hdiscount hrates, hand hprovide
hinsurance hor hdepositors
Federal hDeposit hInsurance hCorportation h- hcreated hby hCongress hin h1933 hto hinsure hdeposits,
hsupervise hfinancial hinstitutions, hmake hlarge hfinancial hinstitutions hresolvable, hand hmanage
hreceiverships
Commercial hBanks h- hdesigned hto hbe hsage hdepositories hand hlenders hfor ha hmultitude hof hcommercial
hbanking hactivities, hrelying hmainly hon hdemand hdeposits h(checking haccounts) hfor htheir hbasic hsupply
hof hfunds
Credit hUnions h- hprovide hmembers hwith ha hsource hof hfunding hfor hpersonal hproperty hand, hmore
hrecently, hreal hestate hmortgage hloans
Savings hBanks h- hPlay han hactive hand himportant hrole hin hlocal hreal hestate hfinancing hactivities,
hproviding hlong-term hmortgage hloans hwith hfunds hderived hfrom hcustomer hsavings haccounts
Life hInsurance hCompanies h- hprefer hinvestments hin hlarge hprojects hsuch has hshopping hcenters has
hopposed hto hsmaller hloans hfor hhome hmortages hand hconstruction hloans
Mortgage hBankers h- hnot hbankers hin hthe htraditional hsense, hbut has hprivate hentrepreneurs, htheir
hincome his hderived hfrom hfees hreceived hfor horiginating hand hservicing hreal hestate hloans
Mortgage hBrokers h- hbring htogether hborrowers hand hlenders hand hearns ha hfee hfor hthat hservice
REAL ESTATE 2 QUESTIONS AND
CORRECT DETAILED ANSWERS
Amortization - The repayment of a loan principle over time
Arrears - Payment for an item or service after it's received
Down Payment - The initial payment made when buying something on credit, a ____________ is paid
directly by the buyer to the seller
Proration - The allocation or distribution of an annual expense across smaller chunks of time
Acreage - A unit of measurement used to determine the size of land; 1 acre = 43560 square feet
Appraisal - The value of property, based on factors determined by a certified appraiser
General data - Information about the area surrounding a property, this could include the city, region, and
neighborhood in which the property is situated
Specific Data - Information regarding the property itself
Limited Appraisal - A simple, abbreviated version of a regular appraisal
Market Value - The price for which a property would sell if offered openly under normal conditions. This
refers to the economic principle, it's the price that a buyer and seller would probably accept
Appraised Value - Refers to the value given by a licensed appraiser during the mortgage origination
process. Appraisers are chosen by the lender but paid for by the homebuyer.
Assessed Value - Refers to the value placed on a property by a governmental unit for use in levying
annual real estate taxes
Loan-to-Value Ratio (LTV) - The limit on the value of a loan, usually a certain percentage of the home's
appraised value or sales price, whichever is lower
Subject Property - The property that is being evaluated in any given appraisal
Highest and Best Use - What is achieved when a property is used for the most appropriate purpose with
the highest returns
Principle of Anticipation - The present value of a property is affected by the anticipated income or utility
that property will give to the property owner
Principle of Contribution - A property's overall value is made of the combined value of each of its parts
,Principle of Substitution - The value of something is effected by the cost of getting a similar (substitute)
item elsewhere
Principle of Change - The condition of a property, the desirability of its location, and the market in which
it exists can always change
Principle of Conformity - Values are the highest when houses in a neighborhood look roughly the same
Principle of Regression - Lower value properties surrounding a subject property are can drag down the
value of a property
Principle of Progression - Higher value properties of a subject property can bump of the value of a
property
Sales Comparison Approach - Determining value by comparing the subject property to similar properties
("comps") that have sold recently. It's most commonly used for single family residences.
Cost Approach - Determining value by considering how much the same property would cost to build
brand new at current prices (replacement cost), then adjusting for depreciation
Income Approach - Determining value by considering how much income the property would generate
when used as rental property
Depreciation - The loss of value because of obsolescence or deterioration
Functional Obsolescence - Loss of value because a property's function or appearance has gone out of
style or has been replaced by a more appealing version
External Obsolescence - Loss of value caused by negative forces outside the property which are beyond
the control of the owner (unfavorable changes in the environment or market)
Deterioration - Loss of value caused by physical wear and tear over time
Chronological age - The literal age of a property; a home built 30 years ago has a ________________ age
of 30
Effective Age - An estimated age that is influenced by the updates and quality of maintenance of the
property; a 30 year house that has been well cared for might have an effective age of 15
Reconciliation - When an appraiser compares estimates using different techniques (cost approach, sales
approach, and/or income approach) and comes to a single number for value
Appraisal Report - a report from a licensed appraiser that sums up a property's market value based on
collected data
Appraisal Review - a review of the appraisal report to make sure the appraisal meets the lender's
standards
Desk Review - When a lender carries an appraisal review at the desk (as opposed to sending someone to
the field) to make sure the original appraisal is accurate
, Field Review - When a third party appraiser is sent back out to the property to check the validity of the
first appraisal
Fair Market Value - The price for which a property will sell if offered openly under normal market
conditions
Subject Property - The property that is subject of the CMA
Comparative Market Analysis - Also known as a CMA, this is a report generated by a license holder that
compares prices of recently sold homes (comparables) in order to estimate the fair market value of a
similar property (the "subject property")
Government hSponsored hEnterprises h- hPublicly htraded hinstitutions hthat hwere hcreated hby hCongress hto
hprovide hliquidity, hstability, hand haffordability hto hthe hmortgage hmarket
General hAgricultural hMortgage hCorporation h- hA hgovernment-sponsored henterprise h(GSE) hproviding ha
hsecondary hmarket hfor hagricultural hand hrural hmortgage hloans; halso hknown has hFarmer hMac
Depository hLenders h- hInstitutions hthat hmake hmortgage hloans hfrom hfunds hderived hfrom htheir
hcustomers' hsavings haccounts
Saving hAssociations h- hSpecialize hin hlong-term hresidential hloans; hprimary hfunction his hto hpromote
hthrift hand hhome hownership
Federal hHome hLoan hBank hSystem h- heleven hprivate, hwholesale hregional hU.S. hbanks hchartered hto
hregulate hmember horganizations, hset hreserve hrequirements hestablish hdiscount hrates, hand hprovide
hinsurance hor hdepositors
Federal hDeposit hInsurance hCorportation h- hcreated hby hCongress hin h1933 hto hinsure hdeposits,
hsupervise hfinancial hinstitutions, hmake hlarge hfinancial hinstitutions hresolvable, hand hmanage
hreceiverships
Commercial hBanks h- hdesigned hto hbe hsage hdepositories hand hlenders hfor ha hmultitude hof hcommercial
hbanking hactivities, hrelying hmainly hon hdemand hdeposits h(checking haccounts) hfor htheir hbasic hsupply
hof hfunds
Credit hUnions h- hprovide hmembers hwith ha hsource hof hfunding hfor hpersonal hproperty hand, hmore
hrecently, hreal hestate hmortgage hloans
Savings hBanks h- hPlay han hactive hand himportant hrole hin hlocal hreal hestate hfinancing hactivities,
hproviding hlong-term hmortgage hloans hwith hfunds hderived hfrom hcustomer hsavings haccounts
Life hInsurance hCompanies h- hprefer hinvestments hin hlarge hprojects hsuch has hshopping hcenters has
hopposed hto hsmaller hloans hfor hhome hmortages hand hconstruction hloans
Mortgage hBankers h- hnot hbankers hin hthe htraditional hsense, hbut has hprivate hentrepreneurs, htheir
hincome his hderived hfrom hfees hreceived hfor horiginating hand hservicing hreal hestate hloans
Mortgage hBrokers h- hbring htogether hborrowers hand hlenders hand hearns ha hfee hfor hthat hservice
