FNAN 304 test 2

A traditional zoning ordinance includes all of the following EXCEPT

performance standards

The right of government to acquire private property, without the owner’s consent, for public use in exchange for just compensation is referred to as:

eminent domain.

Tax rates are usually stated in mills. Assuming the tax rate in percentage terms is 6.5%, convert this rate to mills.

65 mills

Traditional zoning regulations are criticized for often being too rigid in forcing uniform types of development. One proposed solution to this issue allows traditional zoning requirements to vary in exchange for an enhancement to the community, such as the construction of a park. This is more commonly referred to as a

planned unit development.

After a structure is built, it is impractical for even a building expert to fully assess the quality of the construction and the safety hazards it may harbor. This is an example of which of the following problems that plagues private real estate markets?

incomplete information

Development taking place in rural areas well beyond the urban fringe is commonly referred to as:

urban sprawl

In the state of Florida, for example, homeowners may qualify for a tax exemption in which up to $50,000 will be deducted from the assessed value of the property before taxes are calculated as long as the property owner occupies a home as the family’s principal residence and has claimed residency within the state. This exemption is better known as the:

homestead exemption.

\
Which of the following federal environmental control laws was responsible for giving the EPA authority to control discharges of pollutants into waters of the United States?

\

\n Clean Water Act

A contemporary planning movement that explicitly advocates a traditional grid pattern of development designed to give pedestrian life priority over motor vehicles (e.g., including narrowed streets with houses close to the street and garage access through side alleys) is commonly referred to as:

\

new urbanism.

Proposals for large-scale developments must be accompanied by studies that analyze the project’s effect on the surrounding area. This requirement is referred to as the:

\

economic and environmental impact requirement.

Which of the following tools of public land use control represents the earliest method of police power to regulate land use? (Hint: Standards for energy efficiency and sustainability are the most recent trends in the application of this land use control.)

\

building codes

Special assessments are levied to pay for specific improvements that benefit a particular group of properties. All of the following characteristics of special assessments are true EXCEPT:

they are considered ad valorem taxes.

Externalities can play an important role in determining a property’s price, either by adding value through positive externalities or by diminishing value through negative externalities. Which of the following is most likely to be considered a negative externality?

public assistance facilities such as homeless shelters

Negative externalities can diminish a property’s value by imposing costs on the community at large. In order to offset this detrimental impact, economists advocate “internalizing” these externalities by implementing

impact fees

When a zoning ordinance is revised, some existing land uses then fall outside the new zoning classification. These land uses are referred to as:

nonconforming uses

Real estate taxes represent the largest single source of revenue for a large portion of local governments. Most property taxes are applied in relation to the value of the property, or in other words, they are:

ad valorem taxes.

A public planning movement that explicitly advocates a cul-de-sac hierarchy of development, an automobile oriented society, and separated land use is more commonly referred to as:

traditional residential planning.

Most communities contain a number of tax-exempt properties. All of the following are typically included in the tax-exempt property classification EXCEPT:

single-family homes.

While it is often sufficient to rely on informal methods of estimating the market value of real estate assets, the complexity and large dollar value of many real estate decisions dictate that formal estimates based on methodical collection and analysis of relevant market data should be utilized. The unbiased written estimate of the market value of a property is commonly referred to as a(n):

appraisal.

Accrued depreciation is the difference between the current market value of a building and the total cost to reproduce it new. One reason for this difference is related to changes in tastes, preferences, technical innovations, or market standards. This is commonly referred to as:

\

functional obsolescence.

If all appraisal methods are appropriate for use in valuing a particular property, there is a clear order of preference that real estate professionals adhere to. Which of the following depicts the preferred order, with the most preferable approach being listed first and the least preferable listed last?

sales comparison approach, income approach, cost approach

Most appraisers would say that report writing is one of the most important functions that they perform. Assume that an appraiser is putting together a report for a single family home. Which of the following reporting options would be the most commonly used in this scenario?

summary appraisal report

Real estate appraisers generally distinguish among the concepts of market value, investment value, and transaction value. Which of the following statements best describes the concept of market value?

It is an estimate of the most probable selling price of a property in a competitive market.

\
Estimating the market value of real estate is complicated by the unique characteristics of real estate markets. In contrast to stock markets, real estate markets are characterized by all of the following EXCEPT:

market prices are revealed almost instantaneously to prospective buyers.

\
Assume you have been hired to appraise a local hospital. Your best estimate of the reproduction (or replacement) cost of the building is $3,700,000. However, upon evaluating the use of land in the local area, you have deemed the value of the site to be worth an additional $800,000. If the building has depreciated by $500,000 over its lifetime and there are no further depreciation losses due to external or functional obsolescence, what is the indicated value of the hospital using the cost approach?

$4,000,000

In real estate markets, a transaction occurs only when the investment value of the buyer exceeds the investment value of the seller. The buyer’s investment value is the ________ that he or she would be willing to pay for a particular property, while the seller’s investment value is the _______ that he or she would be willing to accept.

maximum; minimum

Which of the following approaches for calculating the market value of a property involves estimating the dollar value associated with replacing the property new, as well as determining the loss in value due to physical, functional, and external obsolescence?

cost approach

The cost approach to valuation assumes the market value of a new building is similar to the cost of constructing it today. Which of the following terms refers to the expenditure required to construct a building of equal utility using modern construction techniques, materials, and design that eliminates outdated aspects of the structure?

replacement cost

While there are several conventional approaches used to estimate the market value of real estate, which of the following is typically considered the most reliable approach?

sales comparison approach

Real estate professionals have long supported strict standards of ethics and practice. Followed by all states and federal regulatory agencies, which of the following imposes ethical obligations and minimum standards that must be followed by all real estate professionals providing formal estimates of market value?

Uniform Standards of Professional Appraisal Practice (USPAP)

\
As part of the data analysis step in the appraisal process, it is necessary to consider the highest and best use of the property in question. In regards to determining highest and best use, all of the following statements are true EXCEPT:

\

No financial limits are considered when determining the property’s best use.

Given the following information, determine the value of having an additional bedroom. Assume that the comparable properties are similar in all other attributes besides those listed in the table below.

 

 Comparable 1Comparable 2Comparable 3Comparable 4Time SoldToday1 Year AgoToday1 Year AgoBathrooms2223Bedrooms3343Sale Price$375,000$365,000$380,000$367,500

$5,000

\
At the conclusion of the traditional sales comparison approach to valuation, the appraiser evaluates and reconciles the final adjusted sale prices into a single value for the subject property. This single value is commonly referred to as:

\

indicated value.

\
The price we observe when a property is sold is more commonly referred to as the property’s:

transaction value

Given the following information, determine the value of having an additional bedroom. Assume that the comparable properties are similar in all other attributes besides those listed in the table below.

 

 Comparable 1Comparable 2Comparable 3Comparable 4Time SoldToday1 Year AgoToday1 Year AgoBathrooms2223Bedrooms4555Sale Price$250,000$265,000$275,000$270,000

$25,000

\
While there is no specific number of comparables that is required for every appraisal assignment, how many comparable sales are considered adequate as long as the properties are very similar to the subject property?

\

3

\
The value a particular investor places on a property is more commonly referred to as the property’s:

\

investment value

In many commercial real estate loans, the lender cannot hold the borrower personally liable in the event of a default. Such loans are commonly referred to as

nonrecourse loans

The market determined interest rate that is the “moving part” in an adjustable rate mortgage is more commonly referred to as the:

index rate

Which of the following loan clauses releases the borrower from liability for fulfillment of the mortgage loan contract?

exculpatory clause

\
Known popularly by its section in the Federal Bankruptcy Code, which of the following types of bankruptcy is the traditional form of bankruptcy wherein the court simply liquidates the assets of the debtor and distributes the proceeds to creditors in proportion to their share of total claims?

\

chapter 7 bankruptcy

\
Known popularly by its section in the Federal Bankruptcy Code, which of the following types of bankruptcy is a court supervised workout for a troubled household?

\

Chapter 13 bankruptcy

\
In a mortgage agreement, the borrower conveys to the lender a security interest in the mortgage property. The lender, i.e. the individual who receives the mortgage claim, is known as the:

\

mortgagee.

\
The risk of bankruptcy tends to travel with the risk of foreclosure since both can result from financial distress. Known popularly by its section in the Federal Bankruptcy Code, which of the following types of bankruptcy is a court-supervised workout for a troubled business?

\

chapter 11 bankruptcy

\
In addition to numerous congressional acts that focus more on national regulation, laws have been created that affect the practice of home mortgage lending at a community or neighborhood level. For example, laws have been enacted to prevent lenders from avoiding certain neighborhoods without regard to the merits of the individual loan applications, a practice more commonly referred to as:

\

redlining

\
Most real estate loans have a definite term to maturity, stated in years. The majority of home loans will typically have a term to maturity between:

\

15-30 years

\
Violations of the requirements of a note that do not disrupt the payments on the loan tend to be viewed as “technical” defaults. In practice, how many days must a payment be overdue in order for lenders to treat a default as serious (i.e., a substantive default)?

\

90 days

\
Because the mortgage conveys a complex claim for a long period of time, clauses are included in anticipation of possible future complications. Which of the following clauses requires a borrower to make monthly deposits into an account in order to pay obligations such as property taxes, community association fees, or causality insurance premiums?

\

escrow clause

\
When a borrower defaults on the payment requirements of a loan, there are several options that the lender has at its disposal. When the lender allows the borrower simply to convey the property to the lender rather than pursue a court supervised process of terminating all of the borrower’s claims of ownership of the property, this is commonly referred to as:

\

deed in lieu of foreclosure.

\
A special contract in which the borrower pledges the mortgaged property as security to the lender is commonly referred to as the:

\

mortgage (Deed of Trust).

\
In certain states, such as the state of Georgia, there is a temporary transfer of title to the lender at the time the mortgage loan is made. The borrower then would obtain the rights to the title once the loan has been repaid. These states are referred to as:

\

title theory states.

\
Based on your understanding of the relation between the various types of bankruptcy and the foreclosure process, which of the following types of bankruptcy would you expect to be least harmful to a lender’s mortgage interest?

\

Chapter 7 bankruptcy

\
In a mortgage loan agreement, the financial rights and obligations of borrower and lender are detailed in the:

\

note

\
Most Adjustable Rate Mortgage (ARM) loans have been marketed with a temporarily reduced interest rate commonly referred to as a:

\

teaser rate

\
Assume that an individual has just lost his job and has been consistently late paying his bills. The bank recognizes deterioration in the individual’s credit score and has notified him that he must pay his home equity line of credit in full. The mortgage clause that makes this possible is known as the:

\

demand clause