Components of Capitalization Process - ANSWER-Value, Net Operating Income, and Capitalization Rate
The underlying economic principle of 3 approaches to value - ANSWER-substitution
Market Value is also known as - ANSWER-value in exchange
Most probable price the property will sell for in an arm's-...
IAAO 102 Exam Questions |Already
Answered | Graded A+
Components of Capitalization Process - ANSWER-Value, Net Operating Income, and Capitalization Rate
The underlying economic principle of 3 approaches to value - ANSWER-substitution
Market Value is also known as - 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 - ANSWER-market value
Higher Cap Rate - ANSWER-Means Higher Risk and Lower Overall Value
Lower Cap Rate - ANSWER-Means Lower Rise and Higher Overall Value
Return of investment aka - ANSWER-Recapture Rate (or getting back the amount invested)
Return on Investment - 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 - ANSWER-Safety, Liquidity, Collateral, Time, Size,
Management, Appreciation, Income Tax Advantages, Leverage.
Time to convert to actual dollars - ANSWER-Liquidity
Collateral - 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 - ANSWER-The borrowing of funds in hopes of earnings greater return than the cost of the
borrowed funds.
3 types of leverage. - ANSWER-Positive negative neutral
The benefits from borrowing funds exceed the costs of borrowing. - ANSWER-Positive leverage
An investment situation in which the cost of borrowed funds is exactly equal to the yield provided by the
investment. - ANSWER-Neutral
occurs when borrowed funds cost more than the income the funds generate - ANSWER-Negative
leverage
Cash, Trust Deed, Land Contract, Mortgages - ANSWER-Four types of real estate financing
Trust Deed - 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 - 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.
7 types of mortgages - ANSWER-First Mortgage, Junior Mortgage (2nd), Purchase Money Mortgage,
Construction Loan Mortgage, Open End Mortgage, Chattel Mortgage, Package Mortgage.
One of the 3 approaches to value in which the appraiser derives a value indication by converting
anticipated benefits through ownership of income producing property is the _______________
_________________. - ANSWER-Income Approach
Real estates competes with other investments for the investors dollar. As an investor analyzes various
opportunities what will they consider (5)? - ANSWER-Cost (am I giving up something else to do this),
, what will i get back, when will i get it back, risk associated with investment, the return compared to
other investments.
The economic principle of ____________ states that value is created by the expectation of benefits to
be derived in the future. - ANSWER-anticipation
The economic principle of ______________ stats that the a property's maximum value tends to be set
by the lowest cost or price at which another property of equivalent utility can be acquired. - ANSWER-
substitution
Competition is created by the potential for profits. However, competiton among sellers may lead to
________________, which reduces prices and profits. - ANSWER-oversupply
Competition among buyers may lead to _______________________, which increases prices and profits
to sellers. - ANSWER-shortages
The ________________ rate reflects the return of the investment in the wasting asset. - ANSWER-
recapture
What are the nine factors influencing investor decisions - ANSWER-Appreciation, COLLATERAL,
LEVERAGE, LIQUIDITY, income, management, safety, size, time.
______________________ leverage is achieved when funds are invested in property, which has a higher
rate of return than the cost of borrowed funds. - ANSWER-Positive
The four most common methods of financing real estate are? - ANSWER-Cash, Trust Deed, Land
Contract, Mortgages
A mortgage on personal property is called what? - ANSWER-A chattel mortgage.\
A _________________ mortgage is also called a second mortgage - ANSWER-junior
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller lecturervince8. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $18.47. You're not tied to anything after your purchase.
