Real Estate Appraisal and Practical Math Review

Comprehensive vocabulary flashcards covering real estate math formulas, contract types, agency laws, financing clauses, and property ownership terms based on lecture notes.

Gross Rent Multiplier (GRM)

Calculated as $\text{Sales Price} / \text{Gross Rental Income}$. It is used to find the value of a property based on its rental income.

Gross Income Multiplier (GIM)

Calculated as $\text{Sales Price} / \text{Gross Income}$. It is similar to GRM but uses total gross income.

Effective Age Method of Depreciation

The formula to find the percentage depreciated: $\frac{\text{Effective Age}}{\text{Total Economic Life}}$. For example, a 5-year-old roof with a 20-year economic life is $25\%$ depreciated.

IRV Formula

A fundamental appraisal math formula where $I = \text{Income}$, $R = \text{Rate}$, and $V = \text{Value}$. Relationships include $I = R \times V$, $R = I / V$, and $V = I / R$.

Potential Gross Income (PGI)

The total of all rental income plus any other income before any losses are deducted.

Effective Gross Income (EGI)

Calculated as $\text{Potential Gross Income (PGI)} - (\text{Vacancy Loss} + \text{Collection Loss})$.

Net Operating Income (NOI)

The income remaining after subtracting all other operating expenses from the Effective Gross Income (EGI).

Township

A square of land measured as $6\text{ mi} \times 6\text{ mi}$, containing $36$ sections.

Section

A land unit within a township consisting of one square mile or $640$ acres.

Acre

A measure of land area equal to $43,560\text{ sq. ft.}$

Mill

A unit of taxation equal to $1/1,000$ of a dollar. To convert a tax rate percentage to mills, multiply the rate by $1,000$.

Loan to Value (LTV) ratio

The percentage of the property's value that is mortgaged, calculated as $\text{Loan Amount} / \text{Value}$.

Statute of Frauds

A law stating that certain Real Estate contracts, such as the sale of real estate or leases for more than 1 year, must be in writing to be enforceable.

Unilateral Contract

A one-sided agreement where one party agrees to something to persuade another party to act (e.g., agreeing to pay a commission if a renter is found).

Voidable Contract

A seemingly valid contract that may be rescinded, often because a party is not of legal age or there was misrepresentation.

Exclusive Right to Sell

A listing agreement where the broker is paid even if the owner sells the property without help.

Net Listing

A listing agreement where the broker is entitled to keep any amount over a set sales price as their profit.

Novation

The act of replacing something old with something new, such as replacing an old debt with a new debt in a contract.

Specific Performance

A legal action in which a court requires a contract to be fulfilled by the parties involved.

Estate/Tenancy for Years

A leasehold estate that lasts for a fixed period of time and ends on a specific date.

Tenancy at Sufferance

Occurs when a tenant remains in possession of the property after the lease has ended without the owner's consent.

Gross Lease

A lease where the tenant pays a fixed rent and the owner pays for expenses like insurance and taxes.

Net Lease

A lease where the tenant pays rent plus expenses associated with the tenancy.

Mortgagor

The homeowner/borrower who 'gives' the mortgage note to the lender to secure a loan.

Acceleration Clause

A provision in a mortgage that makes the entire amount due immediately if the borrower defaults.

Alienation Clause

A provision that makes the full mortgage balance due upon the transfer of title, preventing a buyer from assuming the loan.

Blockbusting

The illegal practice of coaxing owners to sell by claiming minority persons are moving into the area.

Redlining

The illegal practice of denying or restricting loans based on the specific community or area.

Steering

The illegal act of funneling buyers to or away from particular areas based on the demographic makeup of those areas.

DUST (Elements of Value)

An acronym for the four elements of value: Demand, Utility, Scarcity, and Transferability.

FIRREA

The Federal Financial Institutions Reform Recovery and Enforcement Act of 1989, which requires state licensing or certification for appraisers in federally related transactions.

Riparian Rights

Water rights associated with land located directly next to flowing water sources like streams or rivers.

Littoral Rights

Water rights associated with land next to non-flowing water, such as lakes or oceans.

Accretion

The gradual increase of land through the deposit of soil by water.

C.C. L.O.A.D.

Acronym for an agent's fiduciary duties to a client: Confidentiality, Care, Loyalty, Obedience, Accountability, and Disclosure.

Severalty

A type of ownership where the property is owned by one person only (sole ownership).

Joint Tenancy

Ownership by two or more parties where, if one owner dies, their interest automatically goes to the surviving owners.