FIN 331 Real Estate

FIN 331 Real Estate
Phase 2 Exam
Chapters 7 - 11
Fall 2015
Chapter 7
Valuation: Sales Comps vs. Cost
A. Concepts / Terms / Applications
1. What is the purpose of an Appraisal?
2. How do comparable properties fit into the
appraisal process?
3. How does uniqueness affect appraisals?
4. What is meant by the following terms:
a. Market value
b. Replacement Cost
c. Reproduction Cost
5. How does market value differ from investment
6. How do supply and demand affect values?
Chapter 8
Valuation: Income Approach
A. Income, Capitalization, Investment Value
1. What does it mean when we capitalize income?
2. How does the capitalization rate affect investment
3. How does direct capitalization differ from the
Discounted Cash Flow method to value investment
4. Define or explain the following terms:
Potential Gross Income (PGI)
Effective Gross Income (EGI)
Net Operating Income (NOI)
5. How does the vacancy rate affect EGI?
6. How does capital Expenditure affect NOI?
Chapter 9
R.E. Law and Contracts
A. General Considerations
Why do real estate transactions involve debt?
Why is debt financing attractive to investors?
What does loan amortization mean?
How does the principal portion of the monthly payment
change over time vis-à-vis the interest portion?
What does it mean when your mortgage has a balloon
What is a conforming loan? A jumbo loan?
What does it mean to escrow taxes and insurance?
What does it mean when a property is foreclosed?
What is a short sale?
Chapter 10
Mortgage Types, Borrower Decisions
A. Mortgage Markets
1. How does a primary market for mortgages differ
from the secondary market?
2. What is a conventional mortgage?
3. Why are FHA/VA mortgages of interest to investors?
4. When is a home buyer most like to have to buy
mortgage insurance?
5. What makes an Adjustable Rate Mortgage (ARM)
risky for the borrower? Attractive to the lender?
6. What are Home Equity Loans?
7. When would it be a good idea to refinance a loan?
8. Who is most likely to use a reverse mortgage?
Chapter 11
Funding Residential Mortgages
A. What is disintermediation with regard to the Savings
and Loan industry?
B. How is the Housing Expense ratio calculated? Total
Debt ratio?
C. How do lenders evaluate the risk of loan default? (3C’s + FICO)
D. How do mortgage brokers differ from mortgage
E. What is a subprime mortgage? Alt-A Loans? Who gets
F. What is loan underwriting?
G. What is the mortgage pipeline timeline?