Principles of Real Estate 2 Champions School of Real
Estate Exam 2023
appraisal - ANSWER appraisers opinion of value
principal of contribution - ANSWER the value if the property is equal to the sum if the
contributory value of each of its component parts.
loan to value ratio - ANSWER percentage of value or sales price that a lender is willing
to finance.
desk review - ANSWER goes through items as they analyze the appraisal report for
completeness and acceptable conclusions
field review - ANSWER independent 3rd party appraiser will be contracted to review
the appraisal report then verify the accuracy
limited appraisal - ANSWER exterior only/ drive by inspection (low risk loans)
subject property - ANSWER property being appraised
highest and best use - ANSWER gives greatest return in money or amenities
principle of change - ANSWER forces acting on the parcel of land are always affecting
the value of the land.
principle of anticipation - ANSWER purchase price is affected by the expectation of of
future appeal and benefits.
principle of substitution - ANSWER value of a commodity is influenced by the cost of
acquiring a substitute or a comparable item.
principle of conformity - ANSWER maximized value when homogeneity in
neighborhood
principle of increasing and decreasing returns - ANSWER value added to improvement
exceeds the cost of improvement.
principle of supply and demand - ANSWER supply is short, prices go up. high supply,
low demand, prices go down
principle of regression - ANSWER presence of lower priced properties in the area will
cause a decline in the value of a subject property
principle of competition - ANSWER completion causes prices to increase
,market value - ANSWER most reasonable price a property should bring in a
competitive open market.
ad valorem - ANSWER according to value
depreciation - ANSWER loss in value due to any cause
assessed value - ANSWER for tax purposes- determined by tax authority- not reliable
estimate of market value
chronological age - ANSWER physical number of years
sales comparison approach "market data approach" - ANSWER compares subject
property charectoristcs with those of comparable properties which have recently sold
functional obsolescence - ANSWER loss in value by factors outside
sales comparison - ANSWER price a wiling seller will sell for & price willing buyer will
buy.
cost approach to value - ANSWER estimate of value based on current construction
costs. less depreciation, plus land value.
effective age - ANSWER age of structure based off observed physical condition
determined by the degree of maintenance and repair
uspap - ANSWER uniform standards of appraisal practice- established by appraisal
foundation
urar - ANSWER uniform residential appraisal report aka fannie mae form 1004, Freddie
mac form 70.
principle of progression - ANSWER value of subject property is increased by value of
surrounding properties
net adjustment - ANSWER absolute adjustments made to the comparable, considering
those that are +/-
gross adjustments - ANSWER sum of all adjustments.
gross rent multiplier - ANSWER grm= sales price/ monthly rent
net income - ANSWER gross income- expenses
ivr(income, return on investment, value) - ANSWER if similar properties in the market
are selling at prices that yield and investor a return of x%
, potential rate of return(income, return on investment, value) - ANSWER r=I/v
certain rate of return (income, return on investment, value) - ANSWER I=v*r
pud- planned unit development - ANSWER subdivision that includes locally owned
commodities and common facilities
mortgagor - ANSWER the borrower
mortgagee - ANSWER the lender
promissory note (real estate lien note) - ANSWER unconditional promise to pay
mortgage - ANSWER document that pledges the property as security for repayment of
the note.
foreclosure - ANSWER legal procedure where secured property is sold to pay unpaid
note.
REO- real estate owned - ANSWER foreclosed property
title theory - ANSWER mortgage is a transfer of owner ship
lien theory - ANSWER borrower retains ownership, but is subject to the lein
primary mortgage market - ANSWER borrowers and lenders come to negotiate.
bonds - ANSWER fixed income investment- money mortgage companies use to make
loans
warehouse line of credit - ANSWER mortgage notes repaid by sale of notes through
the secondary market
mortgage banker - ANSWER source of residential loans
mortgage broker - ANSWER source of commercial loans
correspondent lender - ANSWER hybrid of commercial and residential loans
underwriting - ANSWER evaluating borrowers loan application to determine risk
processing - ANSWER file built on credit information and to be used in underwriting
servicing - ANSWER sending monthly payment statements, and collecting monthly
payments, maintaining records and balances.
SAFE act - ANSWER secure and fair enforcement for mortgage licensing-enhance
Estate Exam 2023
appraisal - ANSWER appraisers opinion of value
principal of contribution - ANSWER the value if the property is equal to the sum if the
contributory value of each of its component parts.
loan to value ratio - ANSWER percentage of value or sales price that a lender is willing
to finance.
desk review - ANSWER goes through items as they analyze the appraisal report for
completeness and acceptable conclusions
field review - ANSWER independent 3rd party appraiser will be contracted to review
the appraisal report then verify the accuracy
limited appraisal - ANSWER exterior only/ drive by inspection (low risk loans)
subject property - ANSWER property being appraised
highest and best use - ANSWER gives greatest return in money or amenities
principle of change - ANSWER forces acting on the parcel of land are always affecting
the value of the land.
principle of anticipation - ANSWER purchase price is affected by the expectation of of
future appeal and benefits.
principle of substitution - ANSWER value of a commodity is influenced by the cost of
acquiring a substitute or a comparable item.
principle of conformity - ANSWER maximized value when homogeneity in
neighborhood
principle of increasing and decreasing returns - ANSWER value added to improvement
exceeds the cost of improvement.
principle of supply and demand - ANSWER supply is short, prices go up. high supply,
low demand, prices go down
principle of regression - ANSWER presence of lower priced properties in the area will
cause a decline in the value of a subject property
principle of competition - ANSWER completion causes prices to increase
,market value - ANSWER most reasonable price a property should bring in a
competitive open market.
ad valorem - ANSWER according to value
depreciation - ANSWER loss in value due to any cause
assessed value - ANSWER for tax purposes- determined by tax authority- not reliable
estimate of market value
chronological age - ANSWER physical number of years
sales comparison approach "market data approach" - ANSWER compares subject
property charectoristcs with those of comparable properties which have recently sold
functional obsolescence - ANSWER loss in value by factors outside
sales comparison - ANSWER price a wiling seller will sell for & price willing buyer will
buy.
cost approach to value - ANSWER estimate of value based on current construction
costs. less depreciation, plus land value.
effective age - ANSWER age of structure based off observed physical condition
determined by the degree of maintenance and repair
uspap - ANSWER uniform standards of appraisal practice- established by appraisal
foundation
urar - ANSWER uniform residential appraisal report aka fannie mae form 1004, Freddie
mac form 70.
principle of progression - ANSWER value of subject property is increased by value of
surrounding properties
net adjustment - ANSWER absolute adjustments made to the comparable, considering
those that are +/-
gross adjustments - ANSWER sum of all adjustments.
gross rent multiplier - ANSWER grm= sales price/ monthly rent
net income - ANSWER gross income- expenses
ivr(income, return on investment, value) - ANSWER if similar properties in the market
are selling at prices that yield and investor a return of x%
, potential rate of return(income, return on investment, value) - ANSWER r=I/v
certain rate of return (income, return on investment, value) - ANSWER I=v*r
pud- planned unit development - ANSWER subdivision that includes locally owned
commodities and common facilities
mortgagor - ANSWER the borrower
mortgagee - ANSWER the lender
promissory note (real estate lien note) - ANSWER unconditional promise to pay
mortgage - ANSWER document that pledges the property as security for repayment of
the note.
foreclosure - ANSWER legal procedure where secured property is sold to pay unpaid
note.
REO- real estate owned - ANSWER foreclosed property
title theory - ANSWER mortgage is a transfer of owner ship
lien theory - ANSWER borrower retains ownership, but is subject to the lein
primary mortgage market - ANSWER borrowers and lenders come to negotiate.
bonds - ANSWER fixed income investment- money mortgage companies use to make
loans
warehouse line of credit - ANSWER mortgage notes repaid by sale of notes through
the secondary market
mortgage banker - ANSWER source of residential loans
mortgage broker - ANSWER source of commercial loans
correspondent lender - ANSWER hybrid of commercial and residential loans
underwriting - ANSWER evaluating borrowers loan application to determine risk
processing - ANSWER file built on credit information and to be used in underwriting
servicing - ANSWER sending monthly payment statements, and collecting monthly
payments, maintaining records and balances.
SAFE act - ANSWER secure and fair enforcement for mortgage licensing-enhance
