IAAO COURSE 102 QUESTIONS AND
ANSWERS
Income Approach - ans- sw sw sw
Approach to value in which the appraiser analyzes a property's ability to earn future incom
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e
Investor Asks These Questions to Analyze Investments - ans-1. How much will it cost
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2. How much will I get back
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3. When will I get it back
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4. What are the risks
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5. What is the return on investment
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Return on Investment - ans-
sw sw sw sw
The profit or interest earned on an investment. AKA Overall yeild (Yo) or Discount Rate
sw sw sw sw sw sw sw sw sw sw sw sw sw sw
Recapture Rate - ans-Getting back the amount invested. AKA return OF investment.
sw sw sw sw sw sw sw sw sw sw sw
Principle of Anticipation - ans- sw sw sw sw
Affirms that value is created by anticipated benefits to be derived in the future.
sw sw sw sw sw sw sw sw sw sw sw sw sw
Principle of Substitution - ans- sw sw sw sw
The maximum value of a property tends to be set by the cost of purchasing an equally desi
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rable substitute property.
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9 Factors Influencing Investor Decisions - ans-1. Time
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2. Safety
sw
3. Liquidity
sw
4. Income tax benefits
sw sw sw
5. Appreciation
sw
6. Management
sw
7. Size
sw
8. Collateral
sw sw
9. Leverage
sw
Positive Leverage - ans-The benefits from borrowing funds exceed the costs of borrowing.
sw sw sw sw sw sw sw sw sw sw sw sw
Negative Leverage - ans- sw sw sw
Occurs when borrowed funds cost more than the income the funds generate
sw sw sw sw sw sw sw sw sw sw sw
Neutral Leverage - ans- sw sw sw
Occurs when the rate of return from the investment is equal to the interest rate paid on borr
sw sw sw sw sw sw sw sw sw sw sw sw sw sw sw sw sw
owed funds sw
, 4 Methods of Financing Real Estate - ans-1. Cash
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2. Trust Deed
sw sw
3. Land Contract
sw sw
4. Mortgage
sw
First Mortgage (conventional) - ans-
sw sw sw sw
A loan that is neither insured nor guaranteed by the federal government.
sw sw sw sw sw sw sw sw sw sw sw
Junior Mortgage - ans- sw sw sw
Any mortgage recorded after the first mortgage. AKA second mortgage.
sw sw sw sw sw sw sw sw sw
Purchase Money Mortgage - ans- sw sw sw sw
A mortgage given by the seller to the buyer to cover all or part of the sale price. Seller finan
sw sw sw sw sw sw sw sw sw sw sw sw sw sw sw sw sw sw sw
cing.
Construction Loan - ans-A short- sw sw sw sw
term, interim loan for financing the cost of construction. The lender makes payments to the
sw sw sw sw sw sw sw sw sw sw sw sw sw sw
builder at periodic intervals as the work progresses.
sw sw sw sw sw sw sw sw
Open-End Mortgage - ans- sw sw sw
A loan containing a clause which allows the mortgagor to borrow additional money without
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rewriting the mortgage.
w sw sw
Chattel Mortgage - ans- sw sw sw
a mortgage on personal property given as security for the payment of an obligation
sw sw sw sw sw sw sw sw sw sw sw sw sw
Package Mortgage - ans- sw sw sw
A mortgage, used in the purchase of new residential property which, in addition to real pro
sw sw sw sw sw sw sw sw sw sw sw sw sw sw sw
perty, covers certain personal property items and equipment. (Washer, dryer, drapes, refri
sw sw sw sw sw sw sw sw sw sw sw
gerator, stove) sw
4 types of repayment for Mortgages - ans-1. Amortized - fixed rate
sw sw sw sw sw sw sw sw sw sw sw
2. Straight Mortgage - short term
sw sw sw sw sw
3. Partially amortized - balloon payment
sw sw sw sw sw
4. Reverse mortgage - low interest, for seniors
sw sw sw sw sw sw sw
4 Variables that Affect Mortgage Payment - ans-1. Amount borrowed
sw sw sw sw sw sw sw sw sw
2. Interest rate
sw sw
3. Term of loan
sw sw sw
4. Frequency of pmt
sw sw sw
Overall Yield Rate - ans-(Discount Rate) reflects the return on the investment
sw sw sw sw sw sw sw sw sw sw sw
Summation Concept: 4 Parts - ans-1. Safe rate sw sw sw sw sw sw sw
2. Risk Rate
sw sw
ANSWERS
Income Approach - ans- sw sw sw
Approach to value in which the appraiser analyzes a property's ability to earn future incom
sw sw sw sw sw sw sw sw sw sw sw sw sw sw
e
Investor Asks These Questions to Analyze Investments - ans-1. How much will it cost
sw sw sw sw sw sw sw sw sw sw sw sw sw
2. How much will I get back
sw sw sw sw sw sw
3. When will I get it back
sw sw sw sw sw sw
4. What are the risks
sw sw sw sw
5. What is the return on investment
sw sw sw sw sw sw
Return on Investment - ans-
sw sw sw sw
The profit or interest earned on an investment. AKA Overall yeild (Yo) or Discount Rate
sw sw sw sw sw sw sw sw sw sw sw sw sw sw
Recapture Rate - ans-Getting back the amount invested. AKA return OF investment.
sw sw sw sw sw sw sw sw sw sw sw
Principle of Anticipation - ans- sw sw sw sw
Affirms that value is created by anticipated benefits to be derived in the future.
sw sw sw sw sw sw sw sw sw sw sw sw sw
Principle of Substitution - ans- sw sw sw sw
The maximum value of a property tends to be set by the cost of purchasing an equally desi
sw sw sw sw sw sw sw sw sw sw sw sw sw sw sw sw sw
rable substitute property.
sw sw
9 Factors Influencing Investor Decisions - ans-1. Time
sw sw sw sw sw sw sw
2. Safety
sw
3. Liquidity
sw
4. Income tax benefits
sw sw sw
5. Appreciation
sw
6. Management
sw
7. Size
sw
8. Collateral
sw sw
9. Leverage
sw
Positive Leverage - ans-The benefits from borrowing funds exceed the costs of borrowing.
sw sw sw sw sw sw sw sw sw sw sw sw
Negative Leverage - ans- sw sw sw
Occurs when borrowed funds cost more than the income the funds generate
sw sw sw sw sw sw sw sw sw sw sw
Neutral Leverage - ans- sw sw sw
Occurs when the rate of return from the investment is equal to the interest rate paid on borr
sw sw sw sw sw sw sw sw sw sw sw sw sw sw sw sw sw
owed funds sw
, 4 Methods of Financing Real Estate - ans-1. Cash
sw sw sw sw sw sw sw sw
2. Trust Deed
sw sw
3. Land Contract
sw sw
4. Mortgage
sw
First Mortgage (conventional) - ans-
sw sw sw sw
A loan that is neither insured nor guaranteed by the federal government.
sw sw sw sw sw sw sw sw sw sw sw
Junior Mortgage - ans- sw sw sw
Any mortgage recorded after the first mortgage. AKA second mortgage.
sw sw sw sw sw sw sw sw sw
Purchase Money Mortgage - ans- sw sw sw sw
A mortgage given by the seller to the buyer to cover all or part of the sale price. Seller finan
sw sw sw sw sw sw sw sw sw sw sw sw sw sw sw sw sw sw sw
cing.
Construction Loan - ans-A short- sw sw sw sw
term, interim loan for financing the cost of construction. The lender makes payments to the
sw sw sw sw sw sw sw sw sw sw sw sw sw sw
builder at periodic intervals as the work progresses.
sw sw sw sw sw sw sw sw
Open-End Mortgage - ans- sw sw sw
A loan containing a clause which allows the mortgagor to borrow additional money without
sw sw sw sw sw sw sw sw sw sw sw sw sw s
rewriting the mortgage.
w sw sw
Chattel Mortgage - ans- sw sw sw
a mortgage on personal property given as security for the payment of an obligation
sw sw sw sw sw sw sw sw sw sw sw sw sw
Package Mortgage - ans- sw sw sw
A mortgage, used in the purchase of new residential property which, in addition to real pro
sw sw sw sw sw sw sw sw sw sw sw sw sw sw sw
perty, covers certain personal property items and equipment. (Washer, dryer, drapes, refri
sw sw sw sw sw sw sw sw sw sw sw
gerator, stove) sw
4 types of repayment for Mortgages - ans-1. Amortized - fixed rate
sw sw sw sw sw sw sw sw sw sw sw
2. Straight Mortgage - short term
sw sw sw sw sw
3. Partially amortized - balloon payment
sw sw sw sw sw
4. Reverse mortgage - low interest, for seniors
sw sw sw sw sw sw sw
4 Variables that Affect Mortgage Payment - ans-1. Amount borrowed
sw sw sw sw sw sw sw sw sw
2. Interest rate
sw sw
3. Term of loan
sw sw sw
4. Frequency of pmt
sw sw sw
Overall Yield Rate - ans-(Discount Rate) reflects the return on the investment
sw sw sw sw sw sw sw sw sw sw sw
Summation Concept: 4 Parts - ans-1. Safe rate sw sw sw sw sw sw sw
2. Risk Rate
sw sw
