Property Valuation and Real Estate Law – Lecture Notes (Pages 1-5)

A set of Q&A flashcards covering key concepts from the lecture notes on appraisal, value, financing, and property law.

What is the definition of Appraisal in real estate?

A professional opinion or estimate of a property's value at a specific time.

What does the Loan-to-Value (LTV) ratio represent and how is it calculated?

The percentage of a property's value financed with a loan; calculated as loan amount divided by property value (e.g., $160k loan on a $200k home = 80% LTV).

What is the Principle of Substitution in real estate?

A buyer won't pay more for a property than for a similar one of equal utility.

What does the Principle of Progression state in real estate value?

A lower-value property increases in value when near higher-value ones.

What does the Principle of Regression state in real estate value?

A higher-value property decreases in value when near lower-value ones.

What is the Principle of Competition in property economics?

Profits attract competition, which lowers profits and values.

What are the four components of DUST that influence property value?

Demand, Utility, Scarcity, and Transferability.

What is Market Value in real estate?

The most probable price a property sells for in an open, fair market.

What is Assessed Value?

Value set by government for property taxes.

What are Ad Valorem Taxes?

Taxes based on assessed value; e.g., $200k home × 2% = $4,000/year.

What are the main steps in the Appraisal Process?

Social economic Governmental environmental

What is the Sales Comparison Approach?

Value estimated by comparing with recently sold similar properties and adjusting for differences.

What is Functional Obsolescence?

Loss of value from outdated design or layout.

What is External Obsolescence?

Loss of value from outside factors (e.g., proximity to nuisances like train tracks).

What happens at Closing (Consummation)?

Final step where ownership transfers (buyer signs loan docs, seller gives deed, buyer gets keys).

What does ECOA stand for and prohibit?

Equal Credit Opportunity Act; lenders cannot discriminate in credit decisions.

What is the Secondary Market in real estate financing?

Where existing loans are bought and sold by investors (e.g., bank sells mortgage to Fannie Mae).

What is a Loan Estimate?

A 3-page disclosure of loan terms and costs given within 3 days of application.

What is a Blanket Mortgage?

One mortgage covering multiple properties, with a partial release clause.

What does a Budget Mortgage include?

Monthly payment includes PITI (principal, interest, taxes, insurance). Example: $1,200 P&I; + $400 T&I; = $1,600 total.

What is Mortgage Insurance Premium (MIP)?

Insurance required on FHA loans (upfront fee plus monthly MIP).

What is the Sovereignty of the Soil?

Tracing Texas land ownership back to original government grants.

What is Police Power in real estate?

Government right to regulate property for public welfare (e.g., zoning).

What is the difference between Eminent Domain and Condemnation?

Eminent Domain is the right to take; Condemnation is the act of taking.

What is Inverse Condemnation?

When the government damages property or takes without formal eminent domain, and the owner sues for compensation.

What is CERCLA (Superfund)?

Comprehensive Environmental Response, Compensation, and Liability Act of 1980; created a fund and EPA authority to clean hazardous waste sites and recover costs from responsible parties.

What is Equitable Title?

Right to obtain full ownership once contract conditions are met, even though legal title hasn't transferred yet.

What is a General Warranty Deed?

The strongest type of deed; guarantees clear title and will defend against all claims past and present.

What is Alienation in real estate?

Transfer of property ownership from one party to another, voluntarily or involuntarily.

What is a Devise?

Transfer of real property through a will when the owner dies.

What is Intestate Succession?

Distribution of property when someone dies without a will, per state laws; escheat if no heirs.

What is a Legal Description in real estate?

A description precise enough to locate land on the ground (e.g., Lot 12, Block C, etc.).

What is the Covenant of Quiet Enjoyment?

Promise that the grantee/tenant can peacefully enjoy the property without disturbances from another with a superior title; the seller must defend the title, and the tenant has undisturbed use.