Property Valuation and Financing Flashcards
7 cards from real Arkansas Real Estate License practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Property Valuation and Financing flashcards as text
Which economic principle states that adding more improvements to a property will eventually produce diminishing returns in value?
Answer: Principle of increasing and diminishing returns
The principle of increasing and diminishing returns recognizes that beyond a certain point, additional improvements add less value than their cost.
A home's assessed value in Arkansas is $120,000 with an assessment ratio of 20%. What is the taxable assessed value?
Answer: $24,000
Taxable assessed value = $120,000 × 20% = $24,000, which is the base used to calculate property taxes.
When a lender requires a borrower to pay both principal and interest in equal monthly installments, this loan structure is known as:
Answer: Fully amortizing loan
A fully amortizing loan ensures the debt is completely paid off by the final scheduled payment through consistent principal and interest payments.
In the income approach, the Gross Rent Multiplier (GRM) is calculated by:
Answer: Dividing the sale price by the gross monthly rent
GRM = Sale Price ÷ Gross Monthly Rent, providing a quick estimate of value relative to rental income.
Which of the following best describes 'economic life' of a building in appraisal terminology?
Answer: The period during which the building contributes positively to the property's value
Economic life is the period over which improvements contribute to value, which may be shorter than the physical life of the structure.
A homebuyer in Arkansas obtains a conventional loan requiring 20% down. Which statement about PMI is correct?
Answer: PMI is not required because the LTV is 80% or below
With a 20% down payment the LTV is 80%, so PMI is not required on conventional loans.
The 'principle of conformity' in appraisal suggests that property values are maximized when:
Answer: A property is similar in style and use to surrounding properties
Conformity holds that properties achieve maximum value when they harmonize with the character and use of surrounding properties.