TEXAS PRINCIPLES OF REAL ESTATE II 2025
WITH ACTUAL QUESTIONS AND CORRECT
ANSWERS FROM A VERIFIED SOURCE
GRADED A+
Mixed Numbers - ANSWERS-A number containing both a whole number and a fraction
(examples: 1⅓; 9⅞)
- ANSWERS-a fraction with its numerator equal to or greater than its Improper
Fractions denominator
Commission Calculation - ANSWERS-Sales price X rate of commission = total
commission
Solving for the Commission Rate - ANSWERS-Commission Rate = Commission ÷
Price
Solving for the Property's Price - ANSWERS-Price = Commission ÷ Commission Rate
Profit - ANSWERS-Profit (or Loss) = Selling price - Original cost
Profit Percentage - ANSWERS-Percentage of profit = Profit ÷ Original cost
Profit Margin - ANSWERS-Profit margin = Profit ÷ Selling price
Interest - ANSWERS-the price paid for the use of borrowed money
3 types of interest calculations - ANSWERS-Simple interest, add-on interest, and
compound interest
Simple interest - ANSWERS-Interest = principal x rate x time
,Add-on interest APR - ANSWERS-APR = 2 x number of payment periods in one year x
total financing charges ÷ (principal, or amount borrowed x (number of scheduled payments
+1)
Compound interest - ANSWERS-interest which is computed on the principal amount
plus the accrued interest.
Compound Interest Formula - ANSWERS-Compound amount = Initial deposit (1 +
Interest rate)n
Points - ANSWERS-a one-time service charge to the borrower for making the loan
Two types of points - ANSWERS-origination fee and discount points
Loan-to-Value Ratio (LTV) - ANSWERS-expresses the relationship between a
property's purchase price and its loan amount.
Loan-to-Value formula - ANSWERS-LTV ratio = (Loan amount ÷ Value)
Area of a rectangle - ANSWERS-Area = length x width
Add-on interest - ANSWERS-loan amount x contracted interest rate x number of
payments
Area of a square - ANSWERS-Area = side x side
Area of a triangle - ANSWERS-Area = ½ base x height
Perimeter - ANSWERS-a lot or other shape is the sum of the length of all its sides.
Acre - ANSWERS-A measure of land equal to 43,560 square feet.
Hectare - ANSWERS-is equal to 10,000 square meters or approximately 2.47 acres.
To convert acres to hectares - ANSWERS-divide the total acres by 2.47
,Appraisal - ANSWERS-is an unbiased estimate of the nature, quality, value or utility of
an interest in or aspect of identified real estate and related personalty as of a certain date.
Specific data - ANSWERS-This is information and details about the subject property, as
well as data (used for comparison) about comparable properties' costs, income and
expenses, sales and other relevant information
General data - ANSWERS-This is information about the property's location - its country,
region, city, and, most importantly, its neighborhood
Steps in Appraisal Process - ANSWERS-1. Define problem and scope of work
2. Collect, record, and verify the required data
3. Determine the property's highest and best use
4. Estimate the land value
5. Use ALL THREE approaches to estimate value
6. Reconcile the estimated values to determine the final value estimate
7. Communicate the final value estimate
Highest and Best Use - ANSWERS-Legally permissible
Physically possible
Financially feasible
Maximally productive
Describe the difference between specific and general data - ANSWERS-Specific data is
information and details about the subject property and the comparables.
General data is information about the property's location - its country, region, city, and
neighborhood.
Direct sales comparison - ANSWERS-sales of comparable vacant parcels are analyzed
and adjusted to indicate a value for the subject land
Allocation - ANSWERS-a typical ratio of land value to total value is derived from
comparable properties and applied to the subject
Extraction - ANSWERS-land value is estimated by deducting the depreciated cost of
improvements on a property from the total sale price of the property.
, Subdivision development analysis - ANSWERS-costs and profit are deducted from
estimated gross sale prices of subdivided and finished lots, and net sales proceeds are
discounted to present value
Land residual - ANSWERS-net operating income attributable to the land is capitalized
at market rates to obtain land value
Ground rent capitalization - ANSWERS-ground rent of subject is capitalized at market
rates
In the cost approach to value - ANSWERS-the appraiser estimates a property's value
by adding the land value to the depreciated value of any improvements to the property
The income approach - ANSWERS-(sometimes called the "income capitalization
approach") is used by appraisers who need to value commercial and investment properties
In the sales comparison approach - ANSWERS-an appraiser examines the price (or
price per unit area) of similar properties recently sold or currently being sold in the
marketplace to come up with comparable value assessments
In the reconciliation step - ANSWERS-the appraiser looks at each approach to value
and all the data used to determine
Communicating the Appraisal - ANSWERS-1. Short- or Long-Form Narrative Reports
2. Reports
3. Letter or Oral Reports
Valuation - ANSWERS-is the process of estimating the value of an identified interest in
specific property as of a given date
Types of Value - ANSWERS-Investment Value
Insured Value
Use Value
Investment value - ANSWERS-is the amount of the return on an investment that an
income-producing property will produce
WITH ACTUAL QUESTIONS AND CORRECT
ANSWERS FROM A VERIFIED SOURCE
GRADED A+
Mixed Numbers - ANSWERS-A number containing both a whole number and a fraction
(examples: 1⅓; 9⅞)
- ANSWERS-a fraction with its numerator equal to or greater than its Improper
Fractions denominator
Commission Calculation - ANSWERS-Sales price X rate of commission = total
commission
Solving for the Commission Rate - ANSWERS-Commission Rate = Commission ÷
Price
Solving for the Property's Price - ANSWERS-Price = Commission ÷ Commission Rate
Profit - ANSWERS-Profit (or Loss) = Selling price - Original cost
Profit Percentage - ANSWERS-Percentage of profit = Profit ÷ Original cost
Profit Margin - ANSWERS-Profit margin = Profit ÷ Selling price
Interest - ANSWERS-the price paid for the use of borrowed money
3 types of interest calculations - ANSWERS-Simple interest, add-on interest, and
compound interest
Simple interest - ANSWERS-Interest = principal x rate x time
,Add-on interest APR - ANSWERS-APR = 2 x number of payment periods in one year x
total financing charges ÷ (principal, or amount borrowed x (number of scheduled payments
+1)
Compound interest - ANSWERS-interest which is computed on the principal amount
plus the accrued interest.
Compound Interest Formula - ANSWERS-Compound amount = Initial deposit (1 +
Interest rate)n
Points - ANSWERS-a one-time service charge to the borrower for making the loan
Two types of points - ANSWERS-origination fee and discount points
Loan-to-Value Ratio (LTV) - ANSWERS-expresses the relationship between a
property's purchase price and its loan amount.
Loan-to-Value formula - ANSWERS-LTV ratio = (Loan amount ÷ Value)
Area of a rectangle - ANSWERS-Area = length x width
Add-on interest - ANSWERS-loan amount x contracted interest rate x number of
payments
Area of a square - ANSWERS-Area = side x side
Area of a triangle - ANSWERS-Area = ½ base x height
Perimeter - ANSWERS-a lot or other shape is the sum of the length of all its sides.
Acre - ANSWERS-A measure of land equal to 43,560 square feet.
Hectare - ANSWERS-is equal to 10,000 square meters or approximately 2.47 acres.
To convert acres to hectares - ANSWERS-divide the total acres by 2.47
,Appraisal - ANSWERS-is an unbiased estimate of the nature, quality, value or utility of
an interest in or aspect of identified real estate and related personalty as of a certain date.
Specific data - ANSWERS-This is information and details about the subject property, as
well as data (used for comparison) about comparable properties' costs, income and
expenses, sales and other relevant information
General data - ANSWERS-This is information about the property's location - its country,
region, city, and, most importantly, its neighborhood
Steps in Appraisal Process - ANSWERS-1. Define problem and scope of work
2. Collect, record, and verify the required data
3. Determine the property's highest and best use
4. Estimate the land value
5. Use ALL THREE approaches to estimate value
6. Reconcile the estimated values to determine the final value estimate
7. Communicate the final value estimate
Highest and Best Use - ANSWERS-Legally permissible
Physically possible
Financially feasible
Maximally productive
Describe the difference between specific and general data - ANSWERS-Specific data is
information and details about the subject property and the comparables.
General data is information about the property's location - its country, region, city, and
neighborhood.
Direct sales comparison - ANSWERS-sales of comparable vacant parcels are analyzed
and adjusted to indicate a value for the subject land
Allocation - ANSWERS-a typical ratio of land value to total value is derived from
comparable properties and applied to the subject
Extraction - ANSWERS-land value is estimated by deducting the depreciated cost of
improvements on a property from the total sale price of the property.
, Subdivision development analysis - ANSWERS-costs and profit are deducted from
estimated gross sale prices of subdivided and finished lots, and net sales proceeds are
discounted to present value
Land residual - ANSWERS-net operating income attributable to the land is capitalized
at market rates to obtain land value
Ground rent capitalization - ANSWERS-ground rent of subject is capitalized at market
rates
In the cost approach to value - ANSWERS-the appraiser estimates a property's value
by adding the land value to the depreciated value of any improvements to the property
The income approach - ANSWERS-(sometimes called the "income capitalization
approach") is used by appraisers who need to value commercial and investment properties
In the sales comparison approach - ANSWERS-an appraiser examines the price (or
price per unit area) of similar properties recently sold or currently being sold in the
marketplace to come up with comparable value assessments
In the reconciliation step - ANSWERS-the appraiser looks at each approach to value
and all the data used to determine
Communicating the Appraisal - ANSWERS-1. Short- or Long-Form Narrative Reports
2. Reports
3. Letter or Oral Reports
Valuation - ANSWERS-is the process of estimating the value of an identified interest in
specific property as of a given date
Types of Value - ANSWERS-Investment Value
Insured Value
Use Value
Investment value - ANSWERS-is the amount of the return on an investment that an
income-producing property will produce
