real estate exam 2

  1. what is a note?
    a document used to create a legal debt.
  2. the most common instrument used to finance the acquisition of existing commercial property is.......
    balloon mortgage
  3. what is par value?
    the remaining loan balance on residential mortgages
  4. what is a lockout provision?
    prohibits prepayment of the mortgage for a period of time after its origination.
  5. what are prepayment penalties?
    expressed as a percentage of the remaining loan balance. these can significantly increase the cost of refinancing and therefore reduce the benefits.
  6. yield maintainence agreement?
    the penalty that borrowers pay depend on how far interest has fallen since origination.
  7. what is defeasance?
    a borrower who prepays must purchase for the lender of us treasury securities whose coupon payments replicate the cash flows the lender will lose as a resultof the early retirement of the mortgage.
  8. floating rate mortgage
    usually based on the prime rate
  9. installment sale
    seller allows buyer to pay the purchase price over a number of years, what this does is it allows the seller to collect a down payment and loans the remainder of the purchase price to the buyer
  10. joint venture
    lender receives a portion of cash flow from operation or sale of property.or both as well as scheduled mortgage payments. lender does this buy acquiring ownership in property
  11. sale leasebacks
    borrower either currently owns or purchases the buildings and other improvements. The other party purchases the land and leases it back to the borrower. Usually the investor also provides the long term mortgage for the building if land and structure are to be acquired.
  12. second mortgage
    secured by the borrowers pledge of the property as collateral, but the second mortgage is subordinate to the primary mortgage in the event of foreclosure.
  13. mezzanine loans
    similar to second mortgages except the fact that these loans are not secured by a lien on the property. they are secured by the equity interest in the borrowers company.
  14. the risk that NOI (net operationg income) will be less than debt service is called.....
    financial risk
  15. correspondent relationship
    business relationship in which a permanent lender agrees to purchase loans or to consider loan requests froma mortgage broker or banker
  16. property type
    each commercial proerty type represents an investment in a diverse business with different operating margins, regulatory constarints, and supply and demand fundamentals.
  17. location
    local markets have an effect on how properties perform. for this reason, lenders often perform the same kinds of market and feasibility analyses undertaken by investors and appraisers.
  18. tenant quality
    tenants typically fufill their lease obligations as long as their business is profitable. lenders are therefore concerned about the number of tenants in each property and their creditworthiness.
  19. lease terms
    cash flow from property operations is derived from leases. Therefore, lenders must evaluate important lease terms such as base rental rates, escalation clauses, expense payment provisions, and renewal and cancellation options
  20. property management
    can affect the operating performance of a property. thus, lenders must evaluate the managers experience and knowledge of the local market
  21. Building quality
    the age design and physical appearance of the building can dramatically affect its income producing ability. In particular, lenders should be concerned about any deferred maintainence or required capital expenditures that may affect the ability of the borrower to service the debt
  22. environmental concerns
    these have become more and more important
  23. borrower quality
    although they have to worry about land issues, borrower quality is also very important
  24. due diligence
    a check to make sure the potential borrower has not misrepresented in any way
  25. loan commitment
    written agreement commits lender give loan to borrower as long as borrower follows terms and conditions
  26. rate lock agreement
    protects against contract interest rate increases
  27. land acquisition loans
    finance purchase of raw land
  28. land development loans
    finance installation of of on site and off site improvements to land.
  29. construction loans
    used to finance costs associated with erecting the building or buildings
  30. miniperm loan
    a single short term permanent mortgage
  31. securitized investments
    pool money from multiple investors
  32. equity reit
    invest in and operate in commercial properties
  33. mortgage reit
    purchase mortgage obligation and effectivelt become mortgage lenders
  34. hybrid reit
    combination of both properties and mortgages
  35. reits are corps and thus receive the same protection as
    c corps
Card Set
real estate exam 2
real estate exam 2