Texas Principles of Real Estate II Test Questions & Answers(RATED A+)
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Course
Texas Principles of Real Estate II
Institution
Texas Principles Of Real Estate II
Profit - ANSWER The result of selling something for more than what it cost to purchase it
Profit Margin - ANSWER is the percentage of selling price that is turned into profit.
Interest - ANSWER the amount paid in return for the use of money.
Types of Interest Calculations - ANSWER Simp...
Texas Principles of Real Estate
II Test Questions &
Answers(RATED A+)
Profit - ANSWER The result of selling something for more than what it cost to purchase it
Profit Margin - ANSWER is the percentage of selling price that is turned into profit.
Interest - ANSWER the amount paid in return for the use of money.
Types of Interest Calculations - ANSWER Simple
Add-on
Compound
Add-on Interest - ANSWER entails computing the interest on the total amount of the loan for the
entire loan term. Then this amount of interest is added to the total principal amount before the
monthly payments are calculated. Almost doubles the interest rate.
Compound Interest - ANSWER Interest which is calculated not only on the initial principal but also
the accumulated interest of prior periods. At the beginning of a new interest period all accrued
interest is added to the principal forming a new principal figure.
Discount Points - ANSWER Charges designed to offset losses the lender might suffer when selling
mortgage to secondary mortgage market. Are a means of raising the effective interest rate on a loan.
1/8 for each discount point.
Loan To Value Ration - ANSWER The relationship between a properties purchase price and it's loan
amount.
, Appraisal Process Steps - ANSWER 1. Define problem, and scope of work
2. Collect, Record, and Verify required date
3. Determine highest and best use
4. Estimate land value
5. Use all three approaches to estimate value
6. Reconcile estimate values to determine final value estimate.
Cost Approach - ANSWER Mostly used for special use properties like government structures,
marinas, or newer properties that haven't suffered depreciation yet. Appraiser estimates a properties
value by adding the land to the depreciated value of any improvements to the property.
Most reliable for recently built properties, since appraiser can get costs of actual development and
construction
Income Approach - ANSWER used by appraisers to value properties that earn income (offices,
warehouses, apartments, malls) using reliable financial data that is available for recent sales of
similar income properties in a given market. Depends heavily on income and expense data for the
property.
Also assumes principle of substitution.
Investors will use this approach to determine how much they will pay for a property.
Method is often difficult to determine appropriate capitalization rate, and hard to find info on
income and expenses.
Sales Comparison Approach - ANSWER The process of estimating the value of a property by
examining and comparing actual sales of comparable properties. Is considered most reliable if
adequate comparables exist. Appraiser must compare the similarities and differences among the
properties and make adjustments to the sales prices of the comparable properties to account for the
differences. Deemed most reliable for appraisals of single family homes. Most appraisers compare 3-
6 homes, must include 3 on report.
Principle of Substitution - ANSWER A buyer will not pay more for the subject property than he or she
would pay for a property that is similar in characteristics and amenities.
Adjustments made based on Sales Comparison Approach - ANSWER Date of Sale
Location
Physical Characteristics
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