Exam (elaborations)
iaao 102 (actual exam)questions,answers 2024 – 2025
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iaao 102 (actual exam)questions,answers 2024 – 2025
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iaao 102 (actual exam)questions,answers2024 – 2025
When assessments are less than 100% (fractional) then the effective tax rate is -
ANSWERS-the ratio of tax rate to assessment level
Expresses the relationshio between net operating income and market value of
property. - ANSWERS-Ro or overall cap rate
Represents the percentage that NOI is in relation to the the total property value. -
ANSWERS-Overall Cap Rate
3 components of overall capitilization rate - ANSWERS-Yield (Discount) + Recap +
ETR
,The overall capitalization rate that is commonly used in ad valorem tax appraisals
does have an _ _ _ component and is referred to as __________ __________
_________. - ANSWERS-ETR, loaded cap rate.
The standard overall cap rate used in most appraisal situations does not have an _
_ _ component and is referred to as an ____________ ______________
________________. - ANSWERS-ETR, unloaded cap rate
Higher Cap Rate - ANSWERS-Means Higher Risk and Lower Overall Value
Lower Cap Rate - ANSWERS-Means Lower Rise and Higher Overall Value
Return of investment aka - ANSWERS-Recapture Rate (or getting back the amount
invested)
Return on Investment - ANSWERS-Overall Yield Rate (or discount rate; profit
realized in addition to getting back the amount invested)
Components of Capitalization Process - ANSWERS-Value, Net Operating Income,
and Capitalization Rate
The underlying economic principle of 3 approaches to value - ANSWERS-
substitution
,Market Value is also known as - ANSWERS-value in exchange
Most probable price the property will sell for in an arm's-length transaction under
normal conditions on the open market - ANSWERS-market value
The nine factors influencing the decisions of investors - ANSWERS-Safety,
Liquidity, Collateral, Time, Size, Management, Appreciation, Income Tax
Advantages, Leverage.
Time to convert to actual dollars - ANSWERS-Liquidity
Collateral - ANSWERS-The entire investment in a savings account can be used as
collateral for a loan. However, lending institutions generally will only allow a
percentage of the real estates market value to be used as collateral.
Leverage - ANSWERS-The borrowing of funds in hopes of earnings greater return
than the cost of the borrowed funds.
3 types of leverage. - ANSWERS-Positive negative neutral
The benefits from borrowing funds exceed the costs of borrowing. - ANSWERS-
Positive leverage
, An investment situation in which the cost of borrowed funds is exactly equal to
the yield provided by the investment. - ANSWERS-Neutral
occurs when borrowed funds cost more than the income the funds generate -
ANSWERS-Negative leverage
Cash, Trust Deed, Land Contract, Mortgages - ANSWERS-Four types of real estate
financing
Trust Deed - ANSWERS-a legal instrument similar to a mortgage that transfers the
title of a property to a trustee. The borrow conveys the title to a trustee for the
benefit of the lender but retains the right to use and occupy the property. Used to
eliminate the need for a foreclosure proceeding against the borrower in the event
of of a default.
Land Contract - ANSWERS-aka as contract for deed or installment sales contract.
the purchaser agrees to pay a small down payment when the contract is signed
with the balance is specified amounts over the term of the contract.
7 types of mortgages - ANSWERS-First Mortgage, Junior Mortgage (2nd), Purchase
Money Mortgage, Construction Loan Mortgage, Open End Mortgage, Chattel
Mortgage, Package Mortgage.
One of the 3 approaches to value in which the appraiser derives a value indication
by converting anticipated benefits through ownership of income producing
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