Exam (elaborations)
CE Shop Exam 6 Questions and Answers
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CE Shop Exam 6 Questions and Answers
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CE Shop Exam 6 Questions andAnswers
Primary Market (local) - Answer -Local lenders make funds available to borrowers
Market Players
Bank
Thrift
Credit Union
Mortgage co.
Secondary Market (National) - Answer -Fannie Mae
Fed Home Loan Bank
Freddie Mac
Investment bans
Ginnie Mae
Private investors
- National institutions purchase loans made by local lenders
- Players in the secondary market package loans and sell these packages to investors
as Mortgage Backed Securities
hypothecation - Answer -Borrower is legal owner and has the right to possess and
control the property; lender has the right to foreclose after a loan default.
pledge - Answer -A pledge is different from hypothecation in that the owner actually
surrenders possession of the property to a lender to hold as security for a debt
repayment.
leverage - Answer -leverage, which is using various financial instruments or borrowed
funds to purchase and/or increase a property's (or other asset's) potential return.
Leverage comes into play with real property financing when borrowers put down a
percentage of their own money (the down payment) in order to purchase a property of
which they can use, enjoy, and control 100%. Real estate investors are highly interested
in leverage. If an investor puts 10% down on a property worth $350,000 ($35,000) and
that property appreciates 20% over six years, the investor earns 20% on the entire
$350,000 value, not just on the initial $35,000 invested.
,Taxpayer Relief Act of 1997 - Answer -exempted homeowners from paying taxes on
capital gains up to $500,000 for married couples filing their income taxes jointly
($250,000 for individuals), provided the property was their primary residence and they
lived there for two out of the previous five years. TRA '97 eliminated some previous
requirements to obtain the exemption, making it easier for homeowners to claim the
exemption. Essentially, the act relieved some of the tax burden homeowners may have
been subject to when selling their home, potentially making homeowners more willing to
sell their home and make a new home purchase.
Mortgage Forgiveness Debt Relief Act of 2007 - Answer -
American Taxpayer Relief Act of 2012 - Answer -
Silent Generation - Answer -Years born: Mid 1920s to mid-1940s
Description: Grew up during the Great Depression era. During World War II, they
watched America surpass its previous economic conditions and become a global
superpower.
Housing trends: Only 55% financed their home purchase, and those who financed
averaged a 23% down payment.
Housing Needs: They have the lowest median household income at $66,000 and tend
to live off of retirement income, so need less expensive housing. Desire smaller, lower-
maintenance homes.
Baby Boomers - Answer -Years born: 1946 - 1964
Description: Children of the Silent Generation, a product of the post-WWII baby boom, a
huge explosion in the U.S. population
Housing trends: Those over age 58 tend to purchase townhomes or condos; 80% of
those under age 58 purchase single-family homes (NAR survey 2014).
Housing Needs:Four out of 10 intend to move in their retirement, with more than a third
expecting to downsize their housing needs.The majority of Boomers want to age in
place and rely on in-home services in order to maintain their independence or live with
their adult children in multi-generation households
Generation X - Answer -Years born: Early 1960s to early 1980s
Description: Highly educated, active, balanced, grew up with technology and are
comfortable using it
Housing trends: Largest share of first-time homebuyers (76%) (NAR survey 2014). More
than half used a mobile device to search for their homes, with 22% finding the home
they eventually purchased via a mobile device.
Housing Needs: Diversity and education have afforded them the ability and desire to
move both jobs and locations more frequently than the boomers.More families are
relying on both spouses working, and many Gen Xers start their own
businesses.Demand greener and more sustainable living arrangements.
Millennials (Gen Y) - Answer -Years born: 1980s - 1990s
, Description: Many are children of Baby Boomers. This group tends to delay typical
adulthood rites, such as marriage, career, family. Have never known a world without
technology and grew up with social media.
Housing trends: Fully 97% of this group financed the home purchase, with 56% blaming
student loan debt for their inability to save. Prefer city life, smaller condo units, high-
tech-enabled units; likely to look online first before making a purchasing decision; more
than half used a mobile device, with 26% finding the home they eventually purchased
via a mobile device.
Housing Needs: Highly comfortable handling all or most of their tasks via the Internet,
including virtual tours and other interactive online media. Less tied down to their
job/location than previous generations and apt to move and change jobs more
frequently, often living in areas far removed from where their work is located. Frequently
take advantage of telecommuting opportunities.Strive for more work/life balance, and
their homes reflect this need.
Generation Z - Answer -Years born: 1990s - 2001 (though some put this group between
1982 and 2002, and others lump Millennials with Generation Y)
Description: Children of Generation X, this group saw the Great Recession, 9/11, and
numerous industrial and governmental scandals in their formative years and can appear
to lack direction.
Housing trends: Many will likely get assistance from their parents to finance their
housing purchases when/if they decide to purchase.
Housing Needs: There's not enough data or evidence to make many claims for this
generation yet, but their near ubiquitous usage of the Internet for nearly everything has
led many to dub them the iGeneration. Almost everything for this generation is mobile
friendly and shared or followed readily across multiple social media platforms.
What factors increase SUPPLY? - Answer -- availability of properties
- construction of new properties
- renovations or conversions of properties
- low construction costs
When supply is greater than demand, it's a "_______ market" - Answer -buyers
What factors may increase DEMAND - Answer -- high employment levels (low
unemployment)
- stable or increasing wages
- consumer confidence
- availability of loans or credit
- low or falling interest rates
- growing population
When demand is greater than supply it's a "_______ market" - Answer -sellers
Real Estate Cycle - Answer -Expansion - companies are hiring, lowering unemployment
more buyers, heavy demand
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