Presentation on theme: "Chapter 8 Influences on Real Estate Values. Chapter 8: Objectives After completing this chapter, students will be able to: –Identify the differences between."— Presentation transcript:
Chapter 8 Influences on Real Estate Values
Chapter 8: Objectives After completing this chapter, students will be able to: –Identify the differences between the four broad forces and how these forces and perceptions affect the value of real estate
Key Terms Asbestos Clean Air Act Clean Water Act Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) Electromagnetic Fields (EMFs) Environmental Hazard Environmental Protection Agency (EPA)
Key Terms Resource Conservation and Recovery Act (RCRA) Safe Drinking Water Act (SDWA) Sick Building Syndrome Stigmatized Property Underground Storage Tanks (USTs) Urea-Formaldehyde Urea-Formaldehyde Foam Insulation (UFFI) Wetlands cont.
Four Forces Influencing Real Estate Values PEGS: –Physical forces –Economic forces –Governmental forces –Social forces
Physical Forces May also be referred to as environmental and geographic forces May include conditions: –On a property (specific) –External to the property (broad)
(Physical) Environmental Forces Many are controlled at the federal level through federal laws and regulations –Other environmental issues are controlled at the state or local level Certain inspections and/or disclosures may be required
Environmental Protection at the Federal Level National Environmental Policy Act (NEPA) Environmental Protection Agency (EPA) Clean Air Act (CAA) Clean Water Act (CWA) Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) Superfund Amendments and Reauthorization Act (SARA) Resource Conservation and Recovery Act (RCRA) Safe Drinking Water Act (SDWA)
Environmental ProtectionWetlands Ecosystems where the land is permeated with water, and are commonly referred to as swamps, bogs, and marshes Protected under the federal Clean Water Act –Enforced by the U.S. Army Corps of Engineers Some activities are prohibited and require a permit if they could permanently change or destroy the wetland habitat
Environmental Protection Property Hazards Internal and external hazards Nuisance: Anything emitting from the outside of the property that interferes with the owners right of quiet enjoyment –If a nuisance is permanent, it is an external obsolescence Environmental hazard: A situation that exists with potential for harm to persons or property from conditions that exist outside or within a property
Common Environmental Hazards Asbestos Electromagnetic fields (EMFs) Lead Methamphetamine Poor air quality (sick building syndrome) Underground storage tanks (USTs) Urea-formaldehyde Mold Radon
(Physical) Geographic Forces Characteristics related to the environment surrounding the property that either can contribute or detract from value –Topography –Soil conditions –Water –Location and view (linkages) –Climate –Natural features and barriers
Work Problem What are some uses or locations where various types of natural features and barriers can either be a benefit or a hindrance to property value? Possible examples include (but are not limited to): Ski slopes Mountain resorts Waterfront businesses and housing sites Nature preservations and resorts
Economic Forces World events Energy costs War Terrorist activities Cost and availability of credit Employment levels Availability of employment Earnings levels Taxes Inflation
Government Forces Government services Revenue generating law (right of taxation) Right to regulate laws (police power) Governmental fiscal and monetary policies Secondary mortgage markets and government mortgage programs
Social Forces Demographic changes Migrations of the population Social trends Buyers tastes and standards
Stigmatized Properties Properties held to be undesirable by most people because of a past event or condition –Crime, murder, suicide, drug activity, past environmental hazards (methamphetamine, fire, chemical spill) Determining value influence can be time intensive and require significant knowledge of market reaction –Being objective is ultimately important
Chapter 8 Quiz 1.Radon gas a.can indicate the presence of a toxic uranium dump close to the property. b.can present a problem indoors if allowed to build up to dangerous levels. c.is a man-made waste byproduct. d.makes a house worthless because it must be condemned by the EPA.
Chapter 8 Quiz 2.What statement about electromagnetic fields is FALSE? a.They are created by moving electrical currents. b.They can affect other charged objects. c.They can be produced by high-tension power lines. d.They have been proven to cause cancer.
Chapter 8 Quiz 3.It is well known that a murder took place in a house 40 years ago. This could be an example of a.an internal obsolescence. b.neighborhood decline. c.a stigmatism. d.social force.
Chapter 8 Quiz 4.A trend of moving to a new suburban area is an example of a.economic forces b.locational forces c.physical forces d.social forces
Chapter 8 Quiz 5.The states housing finance authority has just issued a low-interest, first- time homebuyer mortgage program. Sales are spurred as a result of this a.governmental force. b.physical force. c.social force. d.supply and demand.
Chapter 8 Quiz 6.Which is an example of the governmental force of revenue generating laws? a.cost of credit b.earnings levels c.permissibility of zoning d.specific tax policies
Chapter 8 Quiz 7.Wetlands are protected under what federal Act? a.Clean Water Act b.Federal Wetlands Protection and Wildlife Act c.SARA d.U.S. Army Corps Act
Chapter 8 Quiz 8.Sick building syndrome is a result of a.a former traumatic act. b.inadequate soil composition. c.linkages to toxic waste dumps. d.poor air quality.
Chapter 8 Quiz 9.The Comprehensive Environmental Response, Compensation, and Liability Act primarily addresses a.abandoned waste sites. b.air quality in public buildings. c.properties ridden with mold. d.safe drinking water.
Chapter 8 Quiz 10.Which is an example of linkages? a.estimated driving time from populated areas to major interstate highways b.known relationship of environmental concerns and terminal illness c.proximity of hazardous substances to populated areas d.relationship of household members when analyzing social forces
Chapter 9 Economic Principles and Applications
Chapter 9: Objectives After completing this chapter, students will be able to: Apply economic principles when forming value opinions
Key Terms Amenity Anticipation Balance Buyers Market Change Competition Conformity Contribution Excess Land Four Agents of Production Highest and Best Use Interim Use Law of Diminishing Returns Law of Increasing Returns Market Equilibrium
Key Terms Market-Use Property Opportunity Cost Principle of Consistent Use Progression Regression Sellers Market Single-Use Property Special-Use Property Substitution Supply and Demand Surplus Land Surplus Productivity cont.
Four Agents of Production C E L L –Capital –Entrepreneurship –Land –Labor
Fundamental Economic Principles Anticipation Change Supply and demand Substitution Competition Balance Contribution Conformity Externalities
Economic Principles Exercises 1.Value constantly fluctuates due to the principle of _______. 2.When demand exceeds supply, prices will _____. 3.Property uses that compliment each other are evidence of the theory of __________. 4.Value is created through the expectation of future benefits according to the theory of ____________. change rise conformity anticipation
Economic Principles Exercises True or False 5.To an investor, the greater the expectation of benefits from a property, the less valuable it is to the investor. 6.Surplus productivity is realized after various agents of productivity have been satisfied. FALSE TRUE
Economic Principles Exercises 7.Contribution, whether more or less than cost, is measured by the law of __________ and ____________ returns. 8.Name the four agents of production (hint: C-E-L-L): a.Capital b.Entrepreneurship c.Land d.Labor increasing decreasing
Highest and Best Use There is only one highest and best use for land at a given point in time. Land not devoted to highest and best use results in a loss of income. Highest and best use gives the owner maximum economic advantage.
Highest and Best Use Highest and best use allocates land resources efficiently; maximizing economic return. Highest and best use gives economic benefits to surrounding land (conformity). Highest and best use gives economic benefits to the community (conserves a scarce resourceland). cont.
Four Tests of Highest and Best Use 1.Is the ideal use legally permitted? 2.Is it physically possible for the ideal structure to be built on the property? 3.Is the ideal use economically (financially) feasible on the property? 4.Is the ideal use the maximally productive use for the property?
Value of a Vacant Site or As If the Land Were Vacant
Value of the Land as Improved
Application Illustration 1 A corner lot with commercial zoning currently is improved with a residential dwelling. Determine the appropriate highest and best use recommendation if demand for the commercial site is recognized immediately. Improved value$185,000 As vacant$205,000 Demolition cost$12,000 Recommendation: Raise the dwelling to make the site vacant. $205,000 – $12,000 (demolition cost) = $193,000 $193,000 – $185,000 = $8,000 higher value
Application Illustration 2 A single-family residence is currently valued at $58,000. The majority of properties within close proximity to the subject are duplexes with typical values in the range of $79,000. If the cost of converting the subjects single-family residence into a duplex has been estimated at $20,000, and the interior demolition is estimated to be $1,000, what is the highest and best use conclusion? Conclusion: The highest and best use of the property remains as a single-family residence, since there is no entrepreneurial reward for the owner upon completion of the conversion. $58,000 + $20,000 + $1,000 = $79,000
Application Illustration 3 A real property appraiser is performing a highest and best use analysis for a vacant parcel. The appraiser has determined that the highest and best use of the parcel is for a two to four unit apartment building with (per maximum lot coverage) exterior dimensions of 4,000. Which improvement should the appraiser suggest? Two, four-bedroom, three-bath units which could each rent for $1,250 per month. Indicated value by the income approach is $42.50 per square foot and cost of the 4,000 square foot building will be $67.00 per square foot. Three, three-bedroom, two-bath units which could each rent for $950 per month. Indicated value by the income approach is $50.59 per square foot and cost of the 4,000 square foot building will be $49.00 per square foot. Four, two-bedroom, two-bath units which could each rent for $750 per month. Indicated value by the income approach is $44.25 per square foot and cost of the 4,000 square foot building will be $45 per square foot.
Application Illustration 3 continued Suggested unit type and mix: Three three-bedroom, two-bath units Two, four-bedroom, three-bath units 4,000 × $42.50 = $170,000 4,000 × $67.00 = $268,000 Three, three-bedroom, two-bath units 4,000 × $50.59 = $202,360 4,000 × $49.00 = $196,000 Four, two-bedroom, two-bath units 4,000 × $44.25 = $177,000 4,000 × $45.00 = $180,000
Application Illustration 4 A 20,000 square foot residential lot zoned for single-family or two- family use is the subject of an appraisal assignment. The lot is currently improved with a 1,800 square foot single-family residence. What is the indicated highest and best use? Vacant land value$0.75 per square foot Razing cost$8,000 Present value of single-family dwelling from paired data$80 per square foot. Potential monthly rent if converted to two-family$800 each Indicated value by the income approach per square foot$96 Conversion cost to two-family$28,000
Application Illustration 4 continued Indicated highest and best use: Converted to two-units Vacant: 20,000 square feet × $0.75 per square foot = $15,000 Razing cost: $8,000 $15,000 – $8,000 = $7,000 As is: 1,800 square feet × $80 = $144,000 Converted: 1,800 square feet × $96 = $172,800 – $28,000 conversion = $144,800
Application Illustration 5 A single-family dwelling contains 1,860 square feet and is situated on a commercially zoned lot that is 155 x 220. If, through paired-data, the improved property has a per square foot value of $58 and the commercial land value in this area is $150,000 per acre, what is the highest and best use if the razing cost is estimated to be $20,000? Highest and best use conclusion: as-improved As-improved: 1,860 × $58 = $107,880 Vacant: 155 × 220 = 34,100 ÷ 43,560 = acre × $150,000 = $117,424 – $20,000 = $97,424
Interim Use A temporary use of property while it awaits conversion to its highest and best use –E.g., waiting for a zoning change or accumulation of investment dollars Appraiser must observe the principle of consistent use: –Land cannot be valued for one use while the improvements are valued for another use
Final Determination of Highest and Best Use
Special Uses Single-use property Multiple-use property Special-use property
Surplus and Excess Land Surplus land –Portion over and above what is necessary for the highest and best use of the subject property and does not have a stand-alone highest and best use Excess land –Land (or site) area that is not necessary to support the use of the existing improvements situated on the subject property
Highest and Best Use Application Exercise 1.For an improved property, highest and best use analyzes whether the current improvements should be 2.Zoning is one consideration of 3.Highest and best use gives the property owner maximum 4.As a(n) use, the property could be held for future development. 5.The four tests of highest and best use are: 1.Legally permissible 2.Physically possible 3.Financially feasible 4.Maximally productive razed, converted, or left as is. legally permissible. economic advantage. interim
Case Study 9.1 C o r n e r C o m m e r c i a l S i t e w i t h U s e a n d N o n - C o m p e t e R e s t r i c t i o n s
Case Study 9.1 Certified general appraiser, Max Riley, was performing a highest and best use analysis of a high- visibility corner commercial site that is located on Hightowns primary commercial strip. Three major shopping malls and strip centers are across the street from the subject. Another is located adjacent to it on the same side of the street. The subject parcel contains approximately one acre and is improved with a 1960s automotive service station that has not operated for a number of years. The site has been rented throughout recent years to various vendors selling flowers, fruits and vegetables, and other seasonal products. The fuel storage tanks have been removed from the site and the property has been certified to be environmentally sound. The property owner, a private individual, realizes the property is too valuable to continue its present use and has asked appraiser Riley to determine its value for marketing purposes. Appraiser Riley surveys the area and the market and has found no other sites immediately available in this highly desirable area. His research has revealed that the last similar comparable one-acre parcel sold approximately two years ago for $850,000. The comparable parcelan interior lot without the corner influencewas located approximately 1,000 feet from the subject. On inquiry with the broker facilitating that transaction, he found the comparable property went under contract to a restaurant enterprise, soon after being offered to the market. The broker also noted that he received two additional backup offers for the property. One was for $850,000, and the other was for $900,000. Both of these offers were from similar restaurant developers.
Case Study 9.1 cont. Demand Utility Scarcity Point Break Of the characteristics effecting value, which characteristics have been identified?
Further information obtained from the real estate broker indicated that all offers for the comparable parcel were from restaurants that required a site for which a liquor license could be obtained. The broker also had interest from other non-liquor food service users including fast-food facilities. But, none of these non-liquor vendors would be willing to pay as much as those requiring a liquor license. Appraiser Rileys research confirms this trend with non-liquor restaurants paying up to 50% less than those requiring a liquor license. Additionally, appraiser Riley confirms with the state liquor control board that a liquor license would be available for the site. Case Study 9.1 cont.
Case Study 9.1 cont. Restaurant desiring to sell alcohol Point Break From this information, what conclusion could be drawn about the highest and best use of the subject property?
After performing a highest and best use analysis of the property, appraiser Riley has determined that a restaurant use that requires a liquor license would be the highest and best use of the property. The use as a site for a non-alcohol restaurant was analyzed; after considering they typically pay substantially less for a commercial site that option was eliminated. Alternative users, such as most retail, typically pay up to 50% less than a non-alcohol product restaurant. After considering supply and demand patterns, historic sales data, and the physical characteristics of the subject parcel, the appraisers value opinion is a range of $1,200,000 to $1,500,000. Appraiser Riley holds a meeting with the property owner. After a presentation of the marketability and value opinion of the property, the property owner offers that there may be a problem. The property owner inherited the property from his mother, a conservative lady who was strongly opposed to alcohol. He believes there may be some restriction relating to alcohol and the use of the property. Following up on this information, appraiser Riley finds a deed restriction stating the property may never be used for the sale or consumption of alcohol. Case Study 9.1 cont.
Case Study 9.1 cont. The number of interested users has been affected by the restriction. Based on the data given, the property's value diminishes by at least 50%. Point Break How does this deed restriction impact the use and value of the property?
Case Study 9.1 cont. Since the owner inherited the property and the restriction, he might be able to file for a court action to have the restriction removed Point Break Are there potential remedies or alternatives?
Appraiser Riley suggests that the property owner seek legal counsel to discuss the restriction and any potential solutions. Legal counsel suggests that, in this particular case, a court action could be filed to seek removal of the restriction claiming it is unreasonable and has a significant and unreasonable impact on the property value as alternative highest and best uses could result in up to a 50% downward impact on it. After deep consideration, the property owner was not willing to challenge his mothers request. Case Study 9.1 cont.
Case Study 9.1 cont. Changes the highest and best use to an establishment that does not sell liquor, such as fast food Point Break How does this information affect the highest and best use?
With this decision, the appraiser now deems the highest and best use to be as a food service facility that does not sell liquor. At this point, the property owner tells appraiser Riley that he also owns the land and building immediately next door to the subject. It was built for and leased to a fast-food facility specializing in roast beef sandwiches about 25 years ago. He also inherited this property. The restaurant has been a good tenant and is currently engaged in a lease with 10 years remaining. Appraiser Riley asks to review the fast-food restaurants lease. Case Study 9.1 cont.
Case Study 9.1 A non-compete agreement cont. Point Break What type of information is appraiser Riley looking for?
In the course of reviewing the lease, appraiser Riley finds what he suspectedthe non-compete agreement. The agreement states that during the term of this lease, no property owned by the lessor, within a three mile radius, shall be sold or leased for the sale or consumption of roast beef, hamburgers, chicken, and fish. Case Study 9.1 cont.
Case Study 9.1 Eliminates most fast food users As the uses of a property diminish, so does the propertys value cont. Point Break How has the information impacted highest and best use and the value of the property? What vital characteristic of value is at issue, or not present? The property was sold to chain of doughnut shops. They paid $375,000 for the site.
Chapter 9 Quiz 1.Highest and best use a.allocates land resources efficiently. b.always considers the intended use of the owner. c.can be several different uses at any given time. d.results in a minimal loss of income.
Chapter 9 Quiz 2.Externalities can be a positive or negative influence on value, primarily due to the property characteristic of a.balance. b.immobility. c.level benefits. d.surplus productivity.
Chapter 9 Quiz 3.An interim use might be determined when a.the appraiser is unable to make a determination due to limited data. b.the owner cannot make up his mind on what to do. c.a reasonable and probable change in circumstances is forthcoming. d.waiting for a volatile market to settle before deciding.
Chapter 9 Quiz 4.Regarding physically possible, which would NOT be considered? a.building materials b.building set back lines c.parking requirements d.size of the building
Chapter 9 Quiz 5.A school building might be an example of a(n) __________ property. a.commercial-use b.multiple-use c.special-use d.utility-use
Chapter 9 Quiz 6.When the highest and best use of the property is vacant, the current improvements are a.in a state of equilibrium. b.lending no value to the vacant site. c.taking away from the value of the vacant site. d.taking away from the vacant site value by more than the cost to raze the improvements.
Chapter 9 Quiz 7.When a buyer will not pay more for something than its cost, the buyer is influenced by a.contribution. b.opportunity cost. c.substitution. d.supply and demand.
Chapter 9 Quiz 8.Which is NOT one of the four agents of production? a.capital b.gross profit c.labor d.land
Chapter 9 Quiz 9.The law of diminishing returns is most directly linked to which economic principle? a.change b.competition c.contribution d.substitution
Chapter 9 Quiz 10.When properties are listed at a certain price in the neighborhood, that price tends to set the limits of value for other properties around it, according to the concept of a.balance. b.competition. c.contribution. d.Substitution.
Chapter 9 Quiz 11.Which economic principle suggests that value is created through expectation of future benefits? a.anticipation b.balance c.contribution d.surplus productivity
Chapter 9 Quiz 12.Which of the following is likely to contribute the most value? a.adding 500 square feet to a 1,200 square feet house, where 1,200 square feet is the predominant square footage b.adding a fence where fences are prohibited c.adding a second bath to a three-bedroom house, where three bedrooms, two baths is the norm d.changing granite countertops to laminate
Chapter 9 Quiz 13.The largest and most expensive house in the neighborhood could likely be experiencing regression through which economic principle? a.anticipation b.conformity c.substitution d.surplus productivity
Chapter 9 Quiz 14.When might a residual physical segment of a land parcel be considered surplus site? a.if it is needed for future expansion of the subjects improvements b.if it would be legally permissible to have another house built on it c.when it cannot be legally sold separately from the subject property d.when it could freely transfer and be made available to the open market
Chapter 9 Quiz 15.Which is included within the test of legally permissible? a.allowable to zoning b.hazard insurance could be obtained c.police protection is available d.title is free of encumbrances
Chapter 10 Overview of Market Fundamentals
Chapter 10: Objectives After completing this chapter, students will be able to: –Identify supply and demand model as part governmental and part economic –Describe the role of money and capital markets
Key Terms Federal Home Loan Mortgage Corporation (Freddie Mac) Federal National Mortgage Association (Fannie Mae) Federal Open Market Committee (FOMC) Federal Reserve Banks Federal Reserve Board Fiscal Policy Government Loan Government National Mortgage Association (Ginnie Mae) Inflation Monetary Policy Moral Suasion cont.
Broad Economic Concepts Economics: The study of how resources are allocated –Fiscal policy –Monetary policy
Command Economy vs. Market Economy Command economic system –Government or other central authority makes all decisions about production and distribution Market economic system –Individual people and businesses are free to make their own decisions about production and distribution
Supply-Side vs. Demand-Side Economics Supply-side economics –Seeks to create economic activity by having the government lower taxes –Allow market forces to determine where the most productive investment and job creation should take place Demand-site economics –Seeks to create economic activity through government spending aimed at job creation –Keynesian economics
Monetary Policy Implementation Four tools used by the FED (D O R M) –Discount rates –Open market operations –Reserve requirements –Moral suasion
Role of Money and Capital Markets Competing investments –Debt investors: Conservative and passive; favor bonds and mortgages with a certain return and repayment of principal –Equity investors: Aggressive and open to more risk; venture capital Sources of capital –Debt and equity –Cash, REITs, partnerships, syndications, joint ventures, pension funds, insurance companies
Mortgage Markets Primary mortgage markets –Lenders who make mortgage loans directly to borrowers –Portfolio lenders Secondary mortgage markets –Private investors and government agencies that buy and sell real estate mortgages
Function of Secondary Mortgage Markets Buy and sell mortgages from primary market lenders The primary lenders (e.g., local banks) then have more money to lend to other potential borrowers Local banks invest surplus funds in real estate investments from other regionsreal estate cycles are then moderated by stable investments from areas going through different phases of the cycle Standardization loan criteria
The Agencies of Secondary Mortgage Market Federal National Mortgage Association (Fannie Mae) Government National Mortgage Association (Ginnie Mae) Federal Home Loan Mortgage Corporation (Freddie Mac)
Conforming vs. Nonconforming Loan Conforming loan –General terms of the mortgage loan application meet the requirements of the secondary markets underwriting guidelines or a private investors lending policy –Considered low risk for the investor Nonconforming loan –Have one or more underwriting indicators that fall outside the acceptable range of guidelines –Considered higher risk for the originating lender
Underwriting Standards Loan-to-value (LTV) ratios Income-expense ratios In order to sell mortgages on the secondary market, lenders must conform to underwriting guidelines –Implements quality control –Increases quality of the loans lenders make
Overview of Mortgages First mortgage –A security instrument that has a first mortgage lien position; has priority over all other mortgages Second mortgage –A security instrument in second lien position –Also called junior mortgages Amortization –The principal and interest of a loan is repaid in installments
Types of Mortgages Conventional loans –May have private mortgage insurance (PMI) Government loans –FHA loans, VA loans Adjustable rate mortgages (ARMs) Purchase money mortgages Balloon mortgages
Chapter 10 Quiz 1.The federal government influences the money supply through a.fiscal and monetary policy. b.physical and social factors. c.rules of equilibrium. d.supply and demand.
Chapter 10 Quiz 2.The Treasury Department is NOT responsible for a.federal spending. b.managing the federal deficit. c.tax collection. d.secondary mortgage markets.
Chapter 10 Quiz 3.The Federal Reserve System has how many regional Federal Reserve Banks? a.6 b.8 c.12 d.14
Chapter 10 Quiz 4.Tools used by the Fed to implement monetary policy include a.Congressional Acts. b.discount rates and reserve requirements. c.fiscal assertiveness. d.prime rates and subprime rates.
Chapter 10 Quiz 5.The U.S. Treasury is responsible for __________ policy. a.economic b.fiscal c.monetary d.social
Chapter 10 Quiz 6.The amount a commercial bank must keep on deposit is known as a.equilibrium. b.monetary policy. c.reserve requirements. d.supply and demand.
Chapter 10 Quiz 7.If the federal government spends less money than revenue, which would likely occur? a.Interest rates would rise sharply for mortgage loans. b.Federal Reserve Board would not meet. c.Market equilibrium would occur in the Federal Reserve. d.More funds would be available for real estate loans.
Chapter 10 Quiz 8.Tax credits, such as those created through the American Recovery and Reinvestment Act of 2009, are an example of which force influencing the value of real property? a.economic b.governmental c.physical d.social
Chapter 10 Quiz 9.Which is NOT a source of equity used as capital for acquisition of investment real estate? a.joint ventures b.mortgages c.partnerships d.pensions funds
Chapter 10 Quiz 10.What is the lump-sum remaining principle balance referred to that is payable when a mortgage loan is not fully amortized? a.balloon balance b.deficit balance c.discount balance d.passive balance
Chapter 10 Quiz 11. In general, conforming conventional mortgage loans represent a.less risk of loss to the lender. b.a loan avenue for borrowers who have a high debt to income ratio. c.loans that are insured or guaranteed by the government. d.an opportunity to charge a higher interest rate.
Chapter 10 Quiz 12.Which is an advantage of the secondary mortgage market? a.Lenders can sell existing lower interest rate loans to free-up money. b.The lender is only lending funds from their institutions deposits. c.Secondary market loans are only for home equity loans, so there is less risk. d.There are no national requirements for the secondary market.