Real Estate Principles Quiz

The capitalization rate (CAP rate) is calculated by dividing the net operating income (NOI) by the property value.

The Gross Rent Multiplier (GRM) is calculated by dividing the sales price of a property by its gross monthly rent.

Mortgage fraud decreases property value, increases interest rates, and raises crime rate in the area.

Earnest money is a deposit showing a buyer's serious intent to purchase a property.

Licenses (permissions to use property) can end due to death, sale of property, agreement cancellation, decision by the licensee.

A counter offer occurs when the offeree makes changes to the buyer's offer.

The appraisal method using net income is the capitalization rate method (CAP rate).

Protected classes include race, color, religion, sex, familial status, national origin, and handicap.

An exculpatory clause prevents a lender from seeking a deficiency judgment.

The commission is the sales price multiplied by the commission rate.

A mortgage note is a legal document that specifies the terms of a loan, including the amount borrowed, interest rate, and repayment schedule. It's signed by the borrower (mortgagor) and given to the lender (mortgagee).

Net Operating Income (NOI) is the amount of money a property generates after deducting operating expenses but before accounting for debt service (mortgage payments).

The Real Estate Settlement Procedures Act (RESPA) mandates standardized closing statements for real estate transactions, ensuring transparency and fairness for buyers and sellers. This includes clear disclosure of all fees and expenses related to the transaction.

A real estate broker earns a commission when they successfully facilitate a transaction that results in a sale or exchange of a property. This usually happens when the transaction closes, meaning both the buyer and seller agree on the terms.

For an offer to become a legally binding contract, it must be accepted by both the buyer and the seller, have clear terms and conditions, be in writing, and signed by all parties involved. It must also meet any legal requirements for the specific jurisdiction.