Wisconsin Real Estate License Wisconsin Real Estate License Valuing and Financing Property Questions and Answers 2

Question 1

A buyer is purchasing a home for $250,000 with a 20% down payment. What is the loan-to-value (LTV) ratio?

Accepted Answer

80%

Answer

With a 20% down payment on a $250,000 home, the loan amount is $200,000, making the LTV ratio $200,000 ÷ $250,000 = 80%.

Question 2

Which appraisal approach estimates value by calculating the cost to rebuild the structure minus depreciation, then adding land value?

Accepted Answer

Cost approach

Answer

The cost approach estimates value by determining the replacement or reproduction cost of improvements, subtracting accrued depreciation, and adding the land value.

Question 3

Under Wisconsin law, what is the primary purpose of a property appraisal in a real estate transaction?

Accepted Answer

To establish an opinion of market value for the lender

Answer

The primary purpose of an appraisal in a real estate transaction is to provide the lender with an independent opinion of the property's market value to protect their investment.

Question 4

Which type of depreciation is caused by factors external to the property and is generally incurable?

Accepted Answer

Economic obsolescence

Answer

Economic (or external) obsolescence is caused by factors outside the property such as neighborhood decline or zoning changes and is typically incurable by the owner.

Question 5

In Wisconsin, a conventional loan that exceeds 80% LTV typically requires which of the following?

Accepted Answer

Private mortgage insurance (PMI)

Answer

Conventional loans exceeding 80% LTV generally require private mortgage insurance to protect the lender against default risk.

Wisconsin Real Estate License Practice Test

Wisconsin Real Estate License Practice Test

Wisconsin Real Estate License Wisconsin Real Estate License Valuing and Financing Property Questions and Answers 2