exam smart terms

Question 1

A lease where the landlord pays taxes, assessments, insurance, etc.

Answer 1

Gross Lease

Question 2

A lease where the tenant pays all or part of taxes, assessments, insurance, etc. Taxes paid by tenant would be tax deductible for the tenant.

Answer 2

net lease

Question 3

A lease where the rent is based on a percentage of sales; normally used in retail leases

Answer 3

percentage lease

Question 4

A lease where the payments can go up or down, but are pre-determined

Answer 4

graduated lease

Question 5

A lease usually long-term; e.g., farmers, gas stations, etc. Win-win for landlord tenant

Answer 5

ground lease

Question 6

The type of deed used to transfer title from a seller to a buyer whereby seller gives buyer greatest protection; seller promises the covenant of seizin, quiet enjoyment, against encumbrances, further assurance and warranty forever

Answer 6

general warranty deed

Question 7

A type of deed transferring title from a seller to a buyer. However, the seller only makes promises regarding ownership, encumbrances, etc. during the time period in which the seller owned the property, no promises before that.

Answer 7

special warranty

Question 8

A type of deed transferring title from a seller to a buyer where the only promise made by the seller is the covenant of seizing (seller promises ownership of the property and the right to sell)

Answer 8

bargain & sale deed

Question 9

A type of deed transferring title from a seller to a buyer where NO promises are made by the seller. The seller says IF I own it, but I`m not saying I do, I give you whatever rights I MAY have. This deed is typically used to quiet cloudy titles.

Answer 9

quitclaim deed

Question 10

A loan where the payments apply to interest only; usually short-term; e.g., used on construction loans

Answer 10

straight note (Term Loan)

Question 11

A loan where the payments apply to principal and interest; however, the principal loan balance is only partially paid down, thus usually requiring a balloon payment at the end of the loan term

Answer 11

partially amortized note

Question 12

A loan where the payments apply to principal and interest; the entire principal loan balance is totally paid off over the term

Answer 12

fully amortized

Question 13

A note where payments start out lower than normal, then go up yearly typically for 5 years, then leveling off for the remaining term; the FHA245 is a type of graduated payment note; sometimes can result in negative amortization

Answer 13

graduated payment note

Question 14

A note where the interest changes periodically, thereby possibly changing all terms of the loan

Answer 14

adjustable rate mortgage (ARM)

Question 15

A mortgage clause where a lender charges a penalty if the loan is paid off early

Answer 15

pre-payment clause

Question 16

A mortgage clause where a lender calls a loan balance due and payable upon the happening of certain event, e.g., non-payment of mortgage

Answer 16

acceleration clause (due on default clause)

Question 17

A mortgage clause where a lender calls a loan balance due and payable upon selling the property; makes loan non-assumable

Answer 17

alienation clause (Due on Sale Clause)

Question 18

A mortgage clause where lenders change the lien priority that is different than recording date; lender waives their right in favor of another

Answer 18

subordination clause

Question 19

A mortgage clause that voids the security upon the loan being paid off

Answer 19

defeasance clause (Null and Void Clause)

Question 20

2 ways a buyer can take over a sellers loan

Answer 20

subject to, assumption

Question 21

An assignment of a loan from the seller to the buyer where the seller remains solely liable for debt

Answer 21

subject to

Question 22

An assignment of a loan from the seller to the buyer where the buyer becomes primarily liable for debt and the seller remains secondarily liable

Answer 22

assumption

Question 23

mortgage that is owner financing; typically where a seller carries a second mortgage on behalf of the buyer

Answer 23

purchase money mortgage

Question 24

mortgage that covers more than one property; used by developers, etc. Usually contains a partial release clause to release each property as it is sold

Answer 24

blanket mortgage

Question 25

mortgage that uses both real and personal property as security

Answer 25

package mortgage

Question 26

mortgage that acts as a line of Credit; can borrow again and again on the same loan; e.g., home equity loan; works like a credit card

Answer 26

open end mortgage

Question 27

A type of mortgage where predetermined amounts, in addition to regular principal and interest payments, apply to principal each month

Answer 27

growing equity mortgage

Question 28

Typically, a short term loan; money is released as needed; usually riskiest type of loan

Answer 28

construction loan mortgage

Question 29

A type of mortgage where the mortgagee (lender) pays the mortgagor (borrower) a fixed amount every month; usually for retired people with home completely paid off

Answer 29

reverse annuity mortgage (RAM)

Question 30

A type of loan where the borrower typically pays a down payment of 20%, thus receiving an 80% loan from the lender; there is no government involvement in this type of loan

Answer 30

conventional loan

Question 31

An organization in the secondary mortgage market that buys notes from local lenders; government corporation under HUD; buys notes in depressed areas of country; primarily buys FHA & VA loans

Answer 31

GNMA, Ginnie Mae:

Question 32

The largest organization in the secondary mortgage market that buys notes from lenders, thus providing liquidity for lenders; even though a private organization. raises money by selling government guaranteed bonds; buys all types of loans

Answer 32

FNMA, Fannie Mae:

Question 33

Earns money by bringing lenders and borrowers together; normally does not actually make loans

Answer 33

mortgage broker

Question 34

Acts as a middleman between lender and borrower; actually make the loans to the borrowers; earns money by servicing loans

Answer 34

mortgage bankers

Question 35

A type of lender with their largest investment in residential home loans

Answer 35

savings & loans

Question 36

A type of lender that historically specialized in making business loans

Answer 36

commercial banks

Question 37

Set the maximum interest rate that can be charged by law

Answer 37

usury laws

Question 38

A federal law pertaining to lenders having to disclose all loan costs to borrowers

Answer 38

truth in lending (Reg z)

Question 39

A federal law whose purpose is to inform borrowers ahead of time total closing costs so borrowers can shop around to get the best deal

Answer 39

real estate settlement procedures (RESPA)

Question 40

who oversees RESPA

Answer 40

HUD (housing and urban development)

Question 41

Owner financing where the seller keeps the warranty deed for the entire duration ; thus the seller retains legal title. The buyer gets possession and receives an equitable title , allowing for the buyer to obtain the deed after the entire contract is paid off.

Answer 41

contract for deed. Also referred to as an installment contract or land contract.

Question 42

Number of years item is profitable

Answer 42

economic life (shorter than physical life)

Question 43

Number of years item is physically sound

Answer 43

physical life

Question 44

Allows owners of investment property to deduct a percentage of the cost of the property each year from their taxable income

Answer 44

tax depreciation (recapture)

Question 45

The use of a property that provides greatest net return on land

Answer 45

highest & best use

Question 46

A property is only worth what one can get another one for just like it

Answer 46

substitution

Question 47

The total value of combined properties exceeds total value of individual properties

Answer 47

assemblage (plottage increment)

Question 48

An approach to value best used on residential property and vacant land; uses comparable properties to estimate values

Answer 48

market data approach

Question 49

An approach to value best used on special purpose properties, such as churches and hospitals; the approach values a property by determining the current replacement cost, less depreciation, plus the current land value

Answer 49

cost approach

Question 50

An approach to value best used on income producing properties such as shopping centers, apartment complexes, etc. This approach uses the net operating income and a capitalization rate to estimate the value.

Answer 50

income approach (capitalization approach)