Wisconsin Real Estate License Valuing and Financing Property Questions and Answers Flashcards
6 cards from real Wisconsin 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 6 Wisconsin Real Estate License Valuing and Financing Property Questions and Answers flashcards as text
A buyer is purchasing a home for $250,000 with a 20% down payment. What is the loan-to-value (LTV) ratio?
Answer: 80%
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%.
Which appraisal approach estimates value by calculating the cost to rebuild the structure minus depreciation, then adding land value?
Answer: Cost approach
The cost approach estimates value by determining the replacement or reproduction cost of improvements, subtracting accrued depreciation, and adding the land value.
Under Wisconsin law, what is the primary purpose of a property appraisal in a real estate transaction?
Answer: To establish an opinion of market value for the lender
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.
Which type of depreciation is caused by factors external to the property and is generally incurable?
Answer: Economic obsolescence
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.
In Wisconsin, a conventional loan that exceeds 80% LTV typically requires which of the following?
Answer: Private mortgage insurance (PMI)
Conventional loans exceeding 80% LTV generally require private mortgage insurance to protect the lender against default risk.
What does the capitalization rate represent in the income approach to property valuation?
Answer: The rate of return an investor expects on a real estate investment
The capitalization rate represents the expected rate of return on an investment property and is used to convert net operating income into an estimate of value.