IAAO 102 EXAMS TESTBANK 2024-2026
NEWEST VERSION 200+ QUESTIONS WITH
COMPLETE SOLUTIONS
Components of Capitalization Process - CORRECT
ANSWER ✔️ Value, Net Operating Income, and
Capitalization Rate
The underlying economic principle of 3 approaches to
value - CORRECT ANSWER ✔️ substitution
Market Value is also known as - CORRECT ANSWER ✔️
value in exchange
Most probable price the property will sell for in an arm's-
length transaction under normal conditions on the open
market - CORRECT ANSWER ✔️ market value
Higher Cap Rate - CORRECT ANSWER ✔️ Means
Higher Risk and Lower Overall Value
,Lower Cap Rate - CORRECT ANSWER ✔️ Means Lower
Rise and Higher Overall Value
Return of investment aka - CORRECT ANSWER ✔️
Recapture Rate (or getting back the amount invested)
Return on Investment - CORRECT ANSWER ✔️ Overall
Yield Rate (or discount rate; profit realized in addition to
getting back the amount invested)
The nine factors influencing the decisions of investors -
CORRECT ANSWER ✔️ Safety, Liquidity, Collateral,
Time, Size, Management, Appreciation, Income Tax
Advantages, Leverage.
Time to convert to actual dollars - CORRECT ANSWER
✔️ Liquidity
,Collateral - CORRECT ANSWER ✔️ The entire
investment in a savings account can be used as collateral
for a loan. However, lending institutions generally will only
allow a percentage of the real estates market value to be
used as collateral.
Leverage - CORRECT ANSWER ✔️ The borrowing of
funds in hopes of earnings greater return than the cost of
the borrowed funds.
3 types of leverage. - CORRECT ANSWER ✔️ Positive
negative neutral
The benefits from borrowing funds exceed the costs of
borrowing. - CORRECT ANSWER ✔️ Positive leverage
An investment situation in which the cost of borrowed
funds is exactly equal to the yield provided by the
investment. - CORRECT ANSWER ✔️ Neutral
, occurs when borrowed funds cost more than the income
the funds generate - CORRECT ANSWER ✔️ Negative
leverage
Cash, Trust Deed, Land Contract, Mortgages - CORRECT
ANSWER ✔️ Four types of real estate financing
Trust Deed - CORRECT ANSWER ✔️ a legal instrument
similar to a mortgage that transfers the title of a property to
a trustee. The borrow conveys the title to a trustee for the
benefit of the lender but retains the right to use and
occupy the property. Used to eliminate the need for a
foreclosure proceeding against the borrower in the event
of of a default.
Land Contract - CORRECT ANSWER ✔️ aka as contract
for deed or installment sales contract. the purchaser
agrees to pay a small down payment when the contract is
signed with the balance is specified amounts over the term
of the contract.
NEWEST VERSION 200+ QUESTIONS WITH
COMPLETE SOLUTIONS
Components of Capitalization Process - CORRECT
ANSWER ✔️ Value, Net Operating Income, and
Capitalization Rate
The underlying economic principle of 3 approaches to
value - CORRECT ANSWER ✔️ substitution
Market Value is also known as - CORRECT ANSWER ✔️
value in exchange
Most probable price the property will sell for in an arm's-
length transaction under normal conditions on the open
market - CORRECT ANSWER ✔️ market value
Higher Cap Rate - CORRECT ANSWER ✔️ Means
Higher Risk and Lower Overall Value
,Lower Cap Rate - CORRECT ANSWER ✔️ Means Lower
Rise and Higher Overall Value
Return of investment aka - CORRECT ANSWER ✔️
Recapture Rate (or getting back the amount invested)
Return on Investment - CORRECT ANSWER ✔️ Overall
Yield Rate (or discount rate; profit realized in addition to
getting back the amount invested)
The nine factors influencing the decisions of investors -
CORRECT ANSWER ✔️ Safety, Liquidity, Collateral,
Time, Size, Management, Appreciation, Income Tax
Advantages, Leverage.
Time to convert to actual dollars - CORRECT ANSWER
✔️ Liquidity
,Collateral - CORRECT ANSWER ✔️ The entire
investment in a savings account can be used as collateral
for a loan. However, lending institutions generally will only
allow a percentage of the real estates market value to be
used as collateral.
Leverage - CORRECT ANSWER ✔️ The borrowing of
funds in hopes of earnings greater return than the cost of
the borrowed funds.
3 types of leverage. - CORRECT ANSWER ✔️ Positive
negative neutral
The benefits from borrowing funds exceed the costs of
borrowing. - CORRECT ANSWER ✔️ Positive leverage
An investment situation in which the cost of borrowed
funds is exactly equal to the yield provided by the
investment. - CORRECT ANSWER ✔️ Neutral
, occurs when borrowed funds cost more than the income
the funds generate - CORRECT ANSWER ✔️ Negative
leverage
Cash, Trust Deed, Land Contract, Mortgages - CORRECT
ANSWER ✔️ Four types of real estate financing
Trust Deed - CORRECT ANSWER ✔️ a legal instrument
similar to a mortgage that transfers the title of a property to
a trustee. The borrow conveys the title to a trustee for the
benefit of the lender but retains the right to use and
occupy the property. Used to eliminate the need for a
foreclosure proceeding against the borrower in the event
of of a default.
Land Contract - CORRECT ANSWER ✔️ aka as contract
for deed or installment sales contract. the purchaser
agrees to pay a small down payment when the contract is
signed with the balance is specified amounts over the term
of the contract.
