IAAO 102 EXAM 2024 NEWEST 2 VERSIONS FROM
ACTUAL EXAM 200 QUESTIONS AND CORRECT
DETAILED ANSWERS (100% CORRECT) |ALREADY
GRADED A+
Principle of Anticipation - ANSWER: Value is created by the expectation of benefits to
be derived in the future.
Principle of Change - ANSWER: Investors expectation of changes in income levels, the
expenses required to ensure income and probable increases or decreases in property
must be addressed and forecast.
Principle of Competition - ANSWER: Competition means that an excess of one type of
facility will decrease the value of all such facilities. Excess competition destroys
balance. Competition is created by the potential for profits, which attracts new
buyers and sellers to a market. Competition between buyers may lead to shortages,
which increases prices and profits to sellers.
Principle of Substitution - ANSWER: The prices, rents, and rates of return of property
tend to be set by the current prices, rents and rates of return for equally desirable
substitute properties. The principle of substitution is market oriented and provides
the basis for estimating rents and expenses and selecting the proper discount rate or
capitalization rate for the subject property.
Balance - ANSWER: A suitable balance among types and locations of income
producing properties affects value; and imbalance in use may result in declining
value.
Principle of Contribution - ANSWER: The value of a component of real estate can be
measured by the amount it contributes to net operating income (NOI) because NOI
can be capitalized into value.
Supply - ANSWER: The amount of product that producers are willing to sell under
various conditions during a given period.
Demand - ANSWER: The amount of product buyers are willing and able to buy during
some period, given the choices available to them.
Market Value - ANSWER: The most probable price which a property should bring in a
competitive and open market under all conditions requisite to a fair sale, the buyer
and seller each acting prudently and knowledgeably and assuming the price is not
affected by undue stimulus. Implicit in this definition are the consummation of a sale
as of a specified date and the passing of title from seller to buyer.
, Investment Value - ANSWER: The worth of an investment property to a particular
investor. Investment value may or may not coincide with market value depending on
requirements of the specified investor.
Real Estate Competes - ANSWER: Real estate competes with other investments for
the investors dollars.
Fix Dollar Investments - ANSWER: Real estate fixed dollar investments - not much
risk and very little gain. Example: savings account.
Growth Investments - ANSWER: Growth investments have more risk associated with
them, but offer greater opportunity for growth. Examples: real estate and stocks.
Return ON Investment - ANSWER: All investors want a return ON their investment
(overall yield or discount rate).
Return OF Investment - ANSWER: All investors want a return OF their investment:
recapture rate.
Factors Including Investors - ANSWER: Factors influencing investor bahavior. The 9
factors are: safety, liquidity, size, collateral, time, management, appreciation, income
tax, and leverage.
Trust Deed - ANSWER: Trust Deed (Deed of Trust) A legal instrument similar to a
mortgage that transfers the title of a property to a trustee. The borrower conveys
the title to a trustee for the benefit of the lender, but remains the right to use and
occupy the property. Trust deeds are used to eliminate the need for a foreclosure
proceeding against the borrower in the event of default.
Land Contract - ANSWER: Land contract of installment sales contract. This agreement
is also known as a land contract or an installment sales contract. The purchaser
agrees to pay a small down payment when the contract is signed, with the balance in
specified amounts over the term of the contract.
Mortgages - ANSWER: Mortgages are two party agreements between the borrower
(mortgagor) and the lender (mortgagee). It is a written document that pledges
specific real estate as a guarantee for the payment of a loan to help purchase a
property. Types of mortgage are: first mortgage,, construction loan mortgage,
purchase money mortgage, junior mortgage, chattel mortgage, open end mortgage,
and package mortgage.
First Mortgage - ANSWER: First mortgage (conventional) A loan that is neither
insured nor guaranteed by the Federal government. Typical loan ratio covers 60-95%
of the property value. A first mortgage can also be an insured mortgage when the
loan insured against loss by an agency of the Federal government or a private
insurer.
ACTUAL EXAM 200 QUESTIONS AND CORRECT
DETAILED ANSWERS (100% CORRECT) |ALREADY
GRADED A+
Principle of Anticipation - ANSWER: Value is created by the expectation of benefits to
be derived in the future.
Principle of Change - ANSWER: Investors expectation of changes in income levels, the
expenses required to ensure income and probable increases or decreases in property
must be addressed and forecast.
Principle of Competition - ANSWER: Competition means that an excess of one type of
facility will decrease the value of all such facilities. Excess competition destroys
balance. Competition is created by the potential for profits, which attracts new
buyers and sellers to a market. Competition between buyers may lead to shortages,
which increases prices and profits to sellers.
Principle of Substitution - ANSWER: The prices, rents, and rates of return of property
tend to be set by the current prices, rents and rates of return for equally desirable
substitute properties. The principle of substitution is market oriented and provides
the basis for estimating rents and expenses and selecting the proper discount rate or
capitalization rate for the subject property.
Balance - ANSWER: A suitable balance among types and locations of income
producing properties affects value; and imbalance in use may result in declining
value.
Principle of Contribution - ANSWER: The value of a component of real estate can be
measured by the amount it contributes to net operating income (NOI) because NOI
can be capitalized into value.
Supply - ANSWER: The amount of product that producers are willing to sell under
various conditions during a given period.
Demand - ANSWER: The amount of product buyers are willing and able to buy during
some period, given the choices available to them.
Market Value - ANSWER: The most probable price which a property should bring in a
competitive and open market under all conditions requisite to a fair sale, the buyer
and seller each acting prudently and knowledgeably and assuming the price is not
affected by undue stimulus. Implicit in this definition are the consummation of a sale
as of a specified date and the passing of title from seller to buyer.
, Investment Value - ANSWER: The worth of an investment property to a particular
investor. Investment value may or may not coincide with market value depending on
requirements of the specified investor.
Real Estate Competes - ANSWER: Real estate competes with other investments for
the investors dollars.
Fix Dollar Investments - ANSWER: Real estate fixed dollar investments - not much
risk and very little gain. Example: savings account.
Growth Investments - ANSWER: Growth investments have more risk associated with
them, but offer greater opportunity for growth. Examples: real estate and stocks.
Return ON Investment - ANSWER: All investors want a return ON their investment
(overall yield or discount rate).
Return OF Investment - ANSWER: All investors want a return OF their investment:
recapture rate.
Factors Including Investors - ANSWER: Factors influencing investor bahavior. The 9
factors are: safety, liquidity, size, collateral, time, management, appreciation, income
tax, and leverage.
Trust Deed - ANSWER: Trust Deed (Deed of Trust) A legal instrument similar to a
mortgage that transfers the title of a property to a trustee. The borrower conveys
the title to a trustee for the benefit of the lender, but remains the right to use and
occupy the property. Trust deeds are used to eliminate the need for a foreclosure
proceeding against the borrower in the event of default.
Land Contract - ANSWER: Land contract of installment sales contract. This agreement
is also known as a land contract or an installment sales contract. The purchaser
agrees to pay a small down payment when the contract is signed, with the balance in
specified amounts over the term of the contract.
Mortgages - ANSWER: Mortgages are two party agreements between the borrower
(mortgagor) and the lender (mortgagee). It is a written document that pledges
specific real estate as a guarantee for the payment of a loan to help purchase a
property. Types of mortgage are: first mortgage,, construction loan mortgage,
purchase money mortgage, junior mortgage, chattel mortgage, open end mortgage,
and package mortgage.
First Mortgage - ANSWER: First mortgage (conventional) A loan that is neither
insured nor guaranteed by the Federal government. Typical loan ratio covers 60-95%
of the property value. A first mortgage can also be an insured mortgage when the
loan insured against loss by an agency of the Federal government or a private
insurer.
