Arkansas Real Estate License Arkansas Real Estate License Property Valuation and Financing Questions and Answers 2 — Questions and Answers
Question 1: A buyer is purchasing a home in Little Rock for $210,000 with a 90% LTV conventional loan. What is the required down payment?
- $21,000 (Correct answer)
- $18,900
- $19,500
- $25,200
Correct answer: $21,000
A 90% LTV loan means the borrower finances 90% of the purchase price, so the down payment is 10% of $210,000 which equals $21,000.
Question 2: Under Arkansas law, which approach to value is most commonly used when appraising a single-family residence?
- Sales comparison approach (Correct answer)
- Income capitalization approach
- Cost approach
- Gross rent multiplier approach
Correct answer: Sales comparison approach
The sales comparison approach uses recent sales of similar properties and is the most reliable method for appraising residential properties in Arkansas.
Question 3: An Arkansas property has an annual net operating income of $36,000 and the investor requires an 8% capitalization rate. What is the estimated value using the income approach?
- $450,000 (Correct answer)
- $360,000
- $288,000
- $500,000
Correct answer: $450,000
Value equals net operating income divided by the capitalization rate: $36,000 / 0.08 = $450,000.
Question 4: Which federal regulation requires lenders to provide a Loan Estimate within three business days of receiving a mortgage application?
- TILA-RESPA Integrated Disclosure (TRID) (Correct answer)
- Equal Credit Opportunity Act
- Community Reinvestment Act
- Home Mortgage Disclosure Act
Correct answer: TILA-RESPA Integrated Disclosure (TRID)
TRID rules require lenders to provide a Loan Estimate disclosing loan terms and estimated costs within three business days of application.
Question 5: A property in Fayetteville was purchased for $175,000 five years ago. The replacement cost of improvements is $200,000 with $30,000 in accrued depreciation and the land is valued at $50,000. What is the property value using the cost approach?
- $220,000 (Correct answer)
- $175,000
- $200,000
- $250,000
Correct answer: $220,000
The cost approach calculates value as replacement cost minus depreciation plus land value: $200,000 - $30,000 + $50,000 = $220,000.
Question 6: In Arkansas, what type of mortgage clause prevents a buyer from assuming the seller's existing loan without lender approval?
- Due-on-sale clause (Correct answer)
- Defeasance clause
- Subordination clause
- Prepayment penalty clause
Correct answer: Due-on-sale clause
A due-on-sale clause allows the lender to demand full repayment of the loan if the property is sold or transferred without prior approval.
Arkansas Real Estate License Arkansas Real Estate License Property Valuation and Financing Questions and Answers 2
A buyer is purchasing a home in Little Rock for $210,000 with a 90% LTV conventional loan.
What is the required down payment?