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CA RE Principles > CA RE Practice > Flashcards

CA RE Practice Flashcards

1
Q

Real estate is affected by:

A

Supply and Demand
Pricing
Costs incurred in bringing properties to market
Value aspects of desire, usefulness, scarcity, and ability to pay

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2
Q

Most MLS state commission split will be __________.

A

Divided b/w listing and selling broker

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3
Q

7 Types of Property

A

Residential
Industrial
Commercial
Agricultural
Special-purpose
Recreational
Investment

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4
Q

7 Types of RE Specialization

A

Property Type
Clients
Geography
Business Type
Transactions
Auction Sales
Mortgage Loans

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5
Q

Safe Harbor Test

A

Used to establish a person is indeed an independent contractor

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6
Q

3 conditions of the safe harbor test

A

Properly licensed
Gross income is based on production not hours worked
Written agreement which states independent contractor status

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7
Q

Errors and Omissions Insurance

A

Covering broker and salesperson for negligent acts

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8
Q

Protects broker against embezzlement by a licensee

A

Fidelity bond

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9
Q

4 Requirements for Written Agreement b/w RES and Broker

A

Each person’s responsibilities to the other
Broker’s supervision
Licensee’s duties
Licensee’s compensation program

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10
Q

Largest and most prestigious real estate organization in the world

A

National Association of REALTORS® (NAR)

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11
Q

NAR requires a mandatory ___ course every __ years

A

Ethics
4

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12
Q

Oldest and largest minority trade association in the United States

A

National Association of Real Estate Brokers (NAREB)

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13
Q

State Division of NAR

A

California Association of REALTORS® (CAR)

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14
Q

Two components of Structural/Systemic Racism

A

Interpersonal
Institutional

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15
Q

Housing and Community Development Act

A

Added Sex to List of Discrimination Classes (1974)

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16
Q

Fair Housing Amendments Act

A

Added Handicap and Familial Status to Discrimination Classes (1988)

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17
Q

American Disabilities Act (ADA)

A

Prohibits discrimination in the “full and equal enjoyment of goods and services” provided by public places, and it applies to the lease and operation of commercial facilities (1992)

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18
Q

7 Classes Protected by Federal Fair Housing Act

A

Race including Ancestry
Religion
Color
National origin
Sex
Handicap
Familial status

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19
Q

HUD will determine if there is reasonable cause to charge discrimination or dismiss complaint within _____ days

A

100

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20
Q

Conciliation

A

HUD can attempt to resolve the complaint by getting assurance from the person against whom the complaint was filed that he or she will remedy the alleged violation

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21
Q

If Administrative Law Judge determines discrimination occured, the respondent can be ordered to (4)

A

Compensate for actual damanges
Provide injunctive or other equitable relief
Pay civil penalty
Pay reasonable attorney’s fees

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22
Q

Civil Penalties for Discrimination

A

$11k if no priors
$27.5k if 1 charge during past 5 years
$55k if 2+ charges during the past 7 years

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23
Q

3 CA Fair Housing Laws

A

Unruh Act

Rumford Fair Housing Act (Fair Employment and Housing Act)

Holden Act (Housing Financial Discrimination Act)

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24
Q

Unruh Act

A

Protects people from being discriminated against because of their sex, race, color, religion, ancestry, national origin, disability, medical condition, marital status or sexual orientation.

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25
Q

Unruh Act Damages

A

3x actual damages (no less than $250)

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25
Q

Rumford Fair Housing Act/ Fair Employment and Housing Act (3 Prohibitions)

A

Discrimination in the sale, rental, lease, negotiation or financing of housing based on race, color, religion, sex, marital status, familial status, disability, national origin, ancestry, sexual orientation or source of income.

Eviction of a person in retaliation for seeking to uphold the rights under this act.

Refusal to reasonably accommodate a handicapped or disabled person.

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26
Q

Before any remedies are awarded for Rumford Act, the aggrieved party would have to _________.

A

Waive all rights under the Unruh Act

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27
Q

Holden Act/ Housing Financial Discrimination Act

A

Prohibits financial institutions from discriminating in loan activities based on race, color, religion, marital status, national origin, ancestry, or sex.

Prohibits redlining

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28
Q

Violations of the Holden Act may be filed with the ________

A

Department of Financial Institutions under the Division of Business Oversight

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29
Q

United States v. Mohamed Bacchus and Alan Zander (E.D. Pa.)

A

property management company discriminated on the basis of familial status when they refused to allow the complainant to move his pregnant girlfriend and her child into his unit.

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30
Q

Clinton-Brown v. Hardwick in 2020

A

Sellers withdrew their listing and the buyers sued, claiming discrimination based on race under the Fair Housing Act and the state’s fair housing laws

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31
Q

When a client gives a broker a deposit for the purchase of a property, the broker must do one of three things:

A

Give the funds to the broker’s principal.
Deposit the funds directly into escrow.
Deposit the funds into his or her trust account.

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32
Q

Broker is permitted to hold an uncashed check at the ________’s request before an offer is accepted or at the ________’s request after the offer is accepted.

A

buyer’s
seller’s

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33
Q

A broker may deposit money into the trust account to cover reasonable service charges on the account, but this amount cannot exceed _______.

A

$200

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34
Q

Any broker-owned funds, such as earned commissions, must be disbursed from the account _______ (time).

A

within 25 days after deposit.

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35
Q

The broker must maintain a record of _____

A

the receipt and disbursal of all the funds in the account, including interest, if applicable.

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36
Q

Trust accounts must be reconciled ______, except in months when there was no activity.

A

monthly

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37
Q

Trust accounts must be available for inspection by _____

A

Real estate commissioner

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38
Q

All trust account records must be kept for ______

A

Three (3) years

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39
Q

Which California Fair Housing law provides protection from discrimination by business establishments?

A

Unruh Civil Rights Act

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40
Q

General Law of Agency applies to ______. Each state’s licensing laws directly affect ________.

A

all business transactions
agency relationship among licensees, clients, and public

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41
Q

Associate Licensees

A

Licensees who work under broker supervision

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42
Q

Agency relationship is between ______ (buyer or seller) and __________ (acting on their behalf)

A

Principal
Agent

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43
Q

3 Principles Governing Agency Relationship

A

Mutual consent
Agreement to form
Fiduciary

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44
Q

Duties Agent Owes to Principal

A

Care
Obedience
Accounting
Loyalty
Disclosure

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45
Q

Duty related to carelessness or negligency

A

Care

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46
Q

Duty related to following principal’s directions (as long as they’re legal)

A

Obedience

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47
Q

Duty related to ensuring all monies, documents, and other property are safe

A

Accounting

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48
Q

Trust account records must be kept for ____ years

A

3

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49
Q

Duty related to placing client’s interests above all else

A

Loyalty

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50
Q

Duty related to informing client of all material facts that may affect client’s interest in the transaction

A

Disclosure

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51
Q

Easton v. Strassburger

A

Agent is responsible for discovering anything that may be deemed important to their client

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52
Q

California law allows dual agency if _____

A

Buyer and seller are informed of the situation and give their written consent.

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53
Q

Divided Dual Agency

A

Neither party is informed of the situation

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54
Q

Designated Agency

A

Avoids potential conflict of interest for dual agency (one agent assigned to one principal)

Not allowed in CA

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55
Q

Transaction broker

A

Not agent to either party, just facilitates transaction

Not allowed in CA

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56
Q

Time when Disclosure Regarding Real Estate Agency Relationships should be provided by the listing agent to seller, selling agent to seller, and selling agent to buyer

A

Listing agent must provide to the seller prior to securing the listing agreement.

Selling agent must provide to the seller “as soon as practicable” prior to presenting a purchase offer.

Selling agent must provide to buyer “as soon as practicable” prior to the execution of the buyer’s offer to purchase.

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57
Q

3 Parts of Real Estate Transfer Disclosure Statement

A

*Items in home and operational status
*Significant defects or malfunctions in home
*Misc items such as environ. hazards, easements, encroachments, improvements, zoning or neighborhood concerns

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58
Q

Buyer must receive a copy of the real estate transfer disclosure statement __________. If not, buyer has the right __________.

A

prior to the execution of an offer to purchase

to cancel offer within 3 days after delivery

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59
Q

Agent’s Inspection Disclosure Exemptions

A

NONE

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60
Q

If an agent does not comply with Agent’s Inspection Disclosure, a buyer has ____ (time) to file suit

A

2 years from date of possession

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61
Q

4 Important things to look for during Agent’s Inspection

A

Structural defects
Deterioration
Water damage
Insect damage

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62
Q

California Civil Code states that if the buyer receives a copy of ____________, the seller and seller’s agent are not required to furnish any additional information, unless they ______.

A

The Homeowner’s/Commercial Property Owner’s Guide to Earthquake Safety

Have actual knowledge of hazards affecting the property

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63
Q

Natural Hazard Disclosure Statement Inclusions (6)

A

Special flood hazard area.
Area of potential flooding.
Very high fire hazard zone.
State fire responsibility area.
Earthquake fault zone.
Seismic hazard zone.

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64
Q

California Civil Code states that if the buyer receives a copy of ____________, the seller and seller’s agent are not required to furnish any additional environmental information, unless they ______.

A

Residential Environmental Hazards Guide

have actual knowledge of environmental hazards on the property

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65
Q

Homes built prior to _______ must provide a booklet entitled (for lead hazards) ________, which is included in ______

A

1978
Protect Your Family from Lead in Your Home

Combined Hazards Book

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66
Q

Sellers or landlors of residences built prior to _______ must provide ________ to buyers, regardless of ___________

A

1978

Lead-Based Paint and Lead-Based Paint Hazards Disclosure

whether or not the owner knows if lead-based paint was ever used on the property

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67
Q

Combined Hazards Book Includes (3)

A

Earthquake hazards
Lead-based paint
Other Environmental hazards

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68
Q

Military ordinance disclosure

A

If seller knows property is within 1 mile of a former military training site

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69
Q

2 Disclosures Not Required

A

Death > 3 years
AIDS (Prohibited under Fair Housing Act)

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70
Q

When selling lots or units in a common interest subdivision, the subdivider or agent must give the buyer _____ and _____.

A

Public report
Statement called Common Interest Development General Information.

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71
Q

Recission Rights

A

Rights to rescind (or cancel) a contract

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72
Q

2 Types of Subdivisions with Unqualified Right of Recission & Timeframes

A

Timeshare buyers (7 days)

Undivided interest buyers (midnight of the 3rd day following the day of purchase)

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73
Q

Seller financing arrangements on all one-to-four-unit residences must be disclosed to both the seller and the buyer using ___________. If seller is carrying back a note, it falls on ______.

A

Seller Financing Addendum and Disclosure

Whoever is arranging the credit

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74
Q

Seller Financing Addendum and Disclosure must be made before ________ and a copy must be kept on file by the arranger for ____

A

Any note is executed
3 years

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75
Q

Any real estate broker who solicits or negotiates loans on behalf of borrowers or lenders which will be secured directly or collaterally by liens on real property must deliver ____________

A

Mortgage Loan Disclosure Statement (MLDS)

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76
Q

MLDS must be delivered to the borrower within _____

A

3 business days of receipt of loan application

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77
Q

Real Estate Settlement Procedures Act (RESPA) was passed in ____ and implemented as ________

A

1974

Regulation X

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78
Q

3 Situations where RESPA does not apply

A

Loans used to finance purchase of 25 acres or more

Loans used to finance purchase Vacant Land

Transactions where buyer takes over or assumes an existing first lien loan

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79
Q

RESPA provisions apply to _____

A

any federally related mortgage loan secured by a first or subordinate lien on a residential real property designed for one to four families

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80
Q

TILA/RESPA Integrated Disclosure Rule (TRID) Requirements (3)

A

Give copy of the booklet “Your home loan toolkit” at the time of loan application

Loan estimates of closing costs within 3 days of loan application

At least 3 business days before settlement or anticipated close of escrow, borrower must receive Closing Disclosure form

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81
Q

5 Disclosures of Regulation Z

A

Amount financed
Finance charge
Annual percentage rate
Total of payments
Payment schedule

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82
Q

Truth in Lending Act

A

Requires a creditor to furnish certain disclosures to the consumer before making a contract for a loan.

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83
Q

Truth in Lending allows the consumer the right to rescind the contract until ______.

A

midnight of the third business day following the completion of the loan

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84
Q

Notice of Transfer of Loan Servicing

A

If a loan is secured by a one-to-four-unit property, the lender must notify the borrower when the loan collection is transferred to another entity.

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85
Q

Notice of Adverse Action - (Equal Credit Opportunity Act)

A

A lender or creditor who denies an application for credit must provide the applicant with a statement of reasons or a written notification of the applicant’s right to obtain such a statement

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86
Q

ECOA Timeframe to Provide Applicant with Statement

A

Within 30 days after receiving the completed loan application.

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87
Q

Geographical farm

A

can be a neighborhood, a subdivision or an area where the homes share some common characteristics, such as age or family types

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88
Q

2 Methods to Price Property

A

Competitive market analysis (CMA)
Appraisal

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89
Q

Fair Market Value

A

most probable price a property should bring in an open and competitive market

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90
Q

3 Things to Look at During CMA

A

Prices of properties currently on the market.

Prices of recently sold properties (3-6 mths).

Properties that were listed and did not sell.

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91
Q

1 Reason Property Fails to Sell

A

Overpricing

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92
Q

Estimated Seller’s Proceeds

A

Estimates all the costs the owners are apt to incur

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93
Q

Listing Agreement

A

Legally-binding contract that creates an agency relationship authorizing a broker to serve as the agent for a principal in a real estate transaction

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94
Q

5 Common Types of Listings

A

Open Listing (Buyer or Seller)
Exclusive-Authorization-and-Right-To-Sell (Seller)
Exclusive Agency (Seller)
Net Listing (Seller)
Exclusive-Authorization-To-Acquire Property (Buyer)

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95
Q

Open Listing

A

non-exclusive contract, authorizing a broker to serve as the agent for either the sale or the purchase of property

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96
Q

Exclusive-authorization-and-right-to-sell

A

Broker has the exclusive right to market the property for a specified period of time

Even if the seller himself finds the buyer with no help from the broker, the seller still owes the broker the commission.

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97
Q

All exclusive listing contracts must contain a __________

A

definite termination date

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98
Q

Exclusive agency

A

one broker the exclusive right to market and sell the property, while the owner retains the right to find a buyer and sell the property without owing the broker a commission.

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99
Q

Net Listing

A

not technically a type of listing agreement

Discouraged in CA

an owner sets a minimum amount that he wants to receive from the sale of the property and lets the broker have as commission any amount above the set minimum.

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100
Q

Exclusive-Authorization-To-Acquire-Property

A

authorizes the broker to act as the agent of the buyer rather than the seller

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101
Q

Paragraphs of Listing Agreement

A

Paragraph 1 - Exclusive Right to Sell
Paragraph 2 - Listing Price and Terms
Paragraph 3 - Compensation to Broker
Paragraph 4 - Items Included and Excluded
Paragraph 5 - Multiple Listing Service
Paragraph 6 - Benefits of Using the MLS
Paragraph 7 - Public Marketing of Property
Paragraph 8 - MLS Data on the Internet
Paragraph 9 - Seller Representations
Paragraph 10 - Broker’s and Seller’s Duties
Paragraph 11 - Deposit
Paragraph 12 - Agency Relationships
Paragraph 13 - Security and Insurance
Paragraph 14 - Photographs and Internet Advertising
Paragraph 15 - Keysafe/Lockbox
Paragraph 16 - Sign
Paragraph 17 - Equal Housing Opportunity
Paragraph 18 - Attorney Fees
Paragraph 19 - Additional Terms
Paragraph 20 - Management Approval
Paragraph 21 - Successors and Assigns
Paragraph 22 - Dispute Resolution
Paragraph 23 - Entire Contract
Paragraph 24 - Ownership, Title and Authorit

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102
Q

unless the terms are specified, a seller is not required to pay a commission when refusing a full price offer unless ___________.

A

the offer is all cash

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103
Q

Subparagraph A-2 (Safety Clause)

A

In Paragraph 3 of Listing Agreement

broker and sellers agree to a specific number of days after the listing expiration during which the broker may still receive a commission

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104
Q

For Safety Clause, ____________ must be given to the owner within __________

A

list of persons to whom the original broker showed the property during the listing period

three calendar days after the listing expiration.

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105
Q

Subparagraph A-3 (of Para 3 in Listing Agreement)

A

broker is still entitled to a commission if the seller makes the property unmarketable by any voluntary act during the listing period.Subparagraph B

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106
Q

Subparagraph B (of Para 3 in Listing Agreement)

A

if a party other than the seller prevents the completion of the sale, the commission due will be the lesser of the commission due under paragraph 4A or one-half of the damages recovered by the seller, after expenses

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107
Q

Subparagraph C (of Para 3 in Listing Agreement)

A

additional compensation to the broker, such as advertising fees, transaction fees, or MLS fees

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108
Q

Subparagraph D (of Para 3 in Listing Agreement)

A

Indicates broker has informed the seller of the firm’s policy of dealing with cooperating brokers and how the commissions are divided.

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109
Q

Subparagraph E (of Para 3 in Listing Agreement)

A

Indicates that the seller will have escrow pay the broker’s commission directly from the sale proceeds.

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110
Q

Subparagraph F (of Para 3 in Listing Agreement)

A

owner’s warranty that he or she is not obligated to pay a commission to any other broker if the property sells within the listing period, except if the property is sold to any of the listed prospective buyers

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111
Q

Paragraph 4 - Items Included and Excluded

A

List any personal property that may be included as part of the sale or any real or personal property that is being excluded from the sale

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112
Q

Paragraph 5 - Multiple Listing Service

A

broker will provide the transaction terms to the Multiple Listing Service, unless the seller signs a form to withhold the listing.

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113
Q

Paragraph 9 - Seller Representations

A

indicates that the seller is unaware of any legal, financial or physical reasons that would affect the seller’s ability to sell the property.

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114
Q

Paragraph 10 - Broker’s and Seller’s Duties

A

broker agrees to use due diligence to achieve the purpose of the listing agreement

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115
Q

Paragraph 11 - Deposit

A

authorizes the listing agent to accept and hold any deposits on the seller’s behalf which will be applied to the purchase price.

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116
Q

Paragraph 12 - Agency Relationships

A

explains that the broker represents the seller

also informs the seller that the broker represents other sellers

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116
Q

Paragraph 13 - Security and Insurance

A

states that the broker is not responsible for loss or damage to the property, even with a lockbox present

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117
Q

Paragraph 15 - Keysafe/Lockbox

A

defines a lockbox and states that persons using the lockbox are not insured against theft, damage, vandalism, etc. which could be attributed to lockbox use

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118
Q

Paragraph 16 - Sign

A

seller checks a box if he or she does not want a sign on the property

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119
Q

Paragraph 17 - Equal Housing Opportunity

A

states that the property is offered in compliance with all anti-discrimination laws.

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120
Q

Paragraph 18 - Attorney Fees

A

states that the loser of a suit or arbitration of any disagreement must pay the associated costs.

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121
Q

Paragraph 19 - Additional Terms

A

provides space for any agreement or terms not covered by any other section

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122
Q

Paragraph 20 - Management Approval

A

states that if an associate licensee entered into this agreement, the broker has a right to cancel within 5 days

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123
Q

Paragraph 21 - Successors and Assigns

A

states that the agreement is binding on the seller and the seller’s successors and assigns

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124
Q

Paragraph 23 - Entire Contract

A

states that this agreement supersedes all previous discussions, negotiations , and agreements between the seller and the broker

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125
Q

Paragraph 22 - Dispute Resolution

A

Subparagraph A says that the broker and the seller agree to mediate any disputes that arise from this agreement before taking any other action.

Subparagraph B explains arbitration, but arbitration will not be executed unless both the broker and seller have initialed the appropriate spaces at the end of the paragraph.

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126
Q

Paragraph 24 - Ownership, Title and Authority

A

warrants that the owners are the only title-holders of the property and therefore have authorization to sell it

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127
Q

4 Paragraphs of Listing Agreement related to MLS

A

Paragraph 6 - Benefits of Using the MLS

Paragraph 7 - Public Marketing of Property

Paragraph 8 - MLS Data on the Internet

Paragraph 14 - Photographs and Internet Advertising

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127
Q

Subparagraph ___ of Paragraph ____ of the listing agreement should not be explained to sellers

A

B of 22
Advise them to consult an attorney

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128
Q

California law requires that the sellers receive _____ at the time the signatures are obtained.

A

a copy of the listing agreement

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129
Q

If the owner is married, _______ should sign the agreement, even if ______.

A

both spouses

the property is held in the name of only one of the spouses.

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130
Q

Because of California’s community property laws, a buyer might have difficulty suing for specific performance if _______.

A

both seller signatures are not on the listing agreement

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131
Q

List of Listing Packet Forms

A

Completed Residential Listing Agreement (RLA)
Seller’s Advisory (SA)
Disclosure Regarding Real Estate Agency Relationships (AD)
Seller’s Affidavit of Nonforeign Status and/or California Withholding Exemption (AS)
Real Estate Transfer Disclosure Statement
Supplemental Statutory and Contractual Disclosures (SSD)
Smoke Detector Statement of Compliance (SDS-11)
Water Heater Statement of Compliance (WHS-11)
Lead-Based Paint and Lead-Based Paint Hazards Disclosure, Acknowledgment and Addendum (FLD-11)
Natural Hazards Disclosure Statement (NHD) and Combined Hazards Book
Home Warranty Application or Waiver

132
Q

Seller’s Advisory (SA)

A

Talks about some things regarding disclosures that sellers need to think about and do as they market their property.

133
Q

Disclosure Regarding Real Estate Agency Relationships (AD)

A

describes the agency relationships available in California

134
Q

Seller’s Affidavit of Nonforeign Status and/or California Withholding Exemption (AS)

A

deals with an IRS requirement that a buyer may need to withhold income tax if the seller is a “foreign person”

Buyer should also get a copy of the form

135
Q

Supplemental Statutory and Contractual Disclosures (SSD)

A

disclose awareness of a number of factors, such as death on the property, insurance claims against the property, location in or near an industrial zone, etc.

136
Q

Smoke Detector Statement of Compliance (SDS-11)

A

requires at least one operable smoke detector in every single-family dwelling

137
Q

Water Heater Statement of Compliance (WHS-11)

A

law requiring water heaters to be strapped, braced or anchored to resist earthquake motion

138
Q

Notice to Buyers and Sellers - Defective Furnaces in California

A

explains that the Consumer Product Safety Commission has issued a warning for a certain type of horizontal gas-fired attic furnace, manufactured by Consolidated Industries, which has been known to cause fires

Not a standard form

139
Q

Things to Include on Weekly Activity Report

A

Number of inquiries on the property that week.
Number of showings.
Advertising done that week.
Open houses held.
Number of open house visitors.
Comments made by other agents or prospective buyers.

140
Q

2 Forms of Advertising

A

Institutional
Product

141
Q

Institutional advertising

A

aims at increasing sales by informing the public of the company’s capabilities.

142
Q

Product advertising

A

directed toward the particular properties a company has for sale

143
Q

“AIDA” standard for writing good advertising

A

Attention

Interest

Desire

Action

144
Q

Blind ad

A

Any ad that does not identify the advertiser as a broker (illegal in CA)

145
Q

Penalty for Advertising as a Broker w/o License

A

Up to 6 months in county jail

146
Q

Penalty for Advertising a False Statement

A

Up to $1k
Up to 1 yr in county jail
License suspension/revocation

147
Q

Bait-and-switch advertising

A

Advertising property or credit terms for a property that an agent doesn’t intend to sell or that is actually not available just to attract buyers for other properties the agent has for sale

148
Q

Equity

A

Paid-off share of owned property

149
Q

Typical Formula for Determining Buyer Eligibility

A

28% of Gross Monthly Income (before tax) = Monthly Mortgage Payment + Taxes + Insurance

150
Q

Switch sheet

A

list of comparable properties that are priced 15-20% higher or lower than an advertised property

151
Q

Floor time

A

When a licensee is on floor duty, any new caller who does not ask for a specific agent by name becomes that licensee’s prospect

152
Q

4 Categories of Information To Collect

A

Demographics
Current information
Needs and wants
Financial information

153
Q

5 Closing Techniques

A

Assumptive Close
Alternative Close
Bonus Close
Ownership Close
Standing-Room-Only Close

154
Q

Assumptive close

A

acting as if the person has already made the decision to buy

155
Q

Alternative close

A

offering more than one alternative to the prospects and having them choose

156
Q

Bonus close

A

offers an inducement for the sale

157
Q

Ownership close

A

similar to the assumptive close, except that you act as if they already own it and you talk about how it will fit into their lives

158
Q

California Residential Purchase Agreement Sections

A

Identifying the Buyer and Property
Agency Disclosure
Terms of Purchase
Condition of Property
Disclosures
Title
Cancellation
Repairs
Escrow Instructions
Time is of the essence
Liquidated damages

159
Q

If the buyers or sellers are married, ______ should sign the purchase agreement.

A

Each spouse

160
Q

When someone authorized by power of attorney signs a purchase agreement on behalf of one of the parties. How should they sign it?

A

Signor Name, by Behalf Name, his/her attorney in fact

161
Q

C.A.R. purchase agreement form requires evidence of authorization to sign within _____ (timeframe)

A

3 days

161
Q

Within 3 days of seller’s acceptance, buyer must provide _______

A

verification that they have the funds to close

Timeframe can be changed if both parties agree

162
Q

Parts of Terms of Purchase paragraph in Purchase Agreement

A

Good Faith Deposit
Loan Terms
Broker Compensation
Loan Contingency
Additional Contingencies
Possession
Closing Costs

163
Q

Purchase agreement gives the buyer the right to inspect the property one last time during the _______ (unless otherwise specified) prior to closing

A

five days

164
Q

Buyer has _______ after acceptance either to remove contingencies and proceed with the sale, or to ___________.

A

17 days
cancel the agreement

165
Q

Liquidated Damages

A

a sum of money that the parties agree in advance will be the total compensation in the event of a breach

Cannot be more than 3% of purchase price

166
Q

What’s important to know about the Liquidated Damages paragraph?

A

This paragraph must be initialed by both parties for it to apply.

167
Q

What happens if the parties do not initial the section of dispute resolution that deals with binding arbitration?

A

If they don’t initial it, binding arbitration will not be part of the agreement and they could choose to settle a dispute in court.

168
Q

Loan Origination Fee

A

Typically 1 percent of loan amount

Covers lender ‘s cost for generating the loan

169
Q

Points

A

Typically 1 percent of loan amount

one-time service charge to the borrower for making the loan

170
Q

Discount Points (Discount Charges)

A

means of raising the effective interest rate of the loan

designed to offset any losses the lender might suffer when selling the loan to the secondary mortgage market

171
Q

_____% for each discount point. So. a charge of 4 points would increase a 7.25% mortgage to _____

A

1/8

7.75%

172
Q

Wise choice for someone who plans to own the property for a short time and believes the property will appreciate during that time

A

interest-only loan

173
Q

Conversion options

A

allow the borrower to convert the ARM to a fixed-rate loan at certain times during the life of the loan

174
Q

Balloon payment loans are ______ loans

A

partially amortized

175
Q

Growing Equity Mortgage (GEM)

A

fixed-rate loan in which payments increase by a predetermined amount each year, reducing the outstanding balance of the loan

176
Q

Reverse Annuity Mortgage (RAM)

A

Borrower pays a fixed rate of interest and then repays the loan either when the home sells or from the borrower’s estate upon his or her death

177
Q

2 Types of Caps in an Adjustable Rate Mortgage

A

Interest caps
Periodic caps

178
Q

Loan-to-value ratio

A

ratio of debt to the value of the property

179
Q

Most secure loan

A

Conventional loan

180
Q

Loan that is typically uninsured

A

Conventional loans

181
Q

2 Types of FHA Loans

A

Fixed-rate 10- to 30-year loans

One-year-adjustable loans

182
Q

FHA Loan Borrowers must have cash for ______

A

down payment and closing costs

183
Q

FHA Loan Borrowers are charged ______ as a premium for the insurance (can be paid by seller)

A

Percentage of loan

184
Q

FHA properties must be ______

A

Appraised by an approved FHA appraiser
Available for one-to-four family residences and some condo units

185
Q

Unlike an FHA loan, which is____, a VA loan is _____

A

insured
guaranteed

186
Q

For most VA Loans, ___ downpayment is required

A

No

187
Q

Maximum VA loan terms

A

30 years for one-to-four family homes
40 years for farms

188
Q

Types of VA Loans

A

Fixed-rate
Adjustable Rate

189
Q

For VA Loans:

Interest rates are ______
__ Monthly Mortgage Insurance Premium
Buyer’s closing costs are limited to ____

A

Negotiable
No
No more than 1% of loan origination fee + Reasonable costs

190
Q

VA charges a _____ fee which can be paid ______

A

funding
At closing or financed with the loan

191
Q

Release of liability

A

approved by VA so original veteran borrower is not liable for repayment of loan

does not release the veteran’s liability to the lender. veteran must negotiate directly with the lender for that release.

192
Q

2 Conditions for Release of Viability

A

Buyer assumes all of the veteran’s liabilities on the loan.

VA and the lender approve the buyer and approve the assumption agreement

193
Q

VA doesn’t set a maximum on _______

A

the amount of the loan a veteran can get - only the amount of the loan that it will guarantee

194
Q

Unlike the insured FHA loan or the guaranteed VA loan, the CalVet loan is actually a _________.

A

land contract

195
Q

When a veteran is approved for a CalVet loan, the state _______ using a contract of sale

A

purchases the property and resells it to the veteran

196
Q

CDVA offers ______ rates

A

Below market interest

197
Q

Typical CalVet loan terms

A

30 yrs

198
Q

CalVet Guaranteed Loans Down Payment Requirements

A

No for VA Loans
Only 3% for non-VA Loans

199
Q

When is a lender required to terminate a borrower’s private mortgage insurance?

A

After the borrower has accumulated 22% of equity in the property and is current with the loan payments.

200
Q

Purchase Money Mortgage

A

buyer borrows from the seller in addition to the lender.

201
Q

Installment Land Sales Contract/ Contract Deed

A

buyer does not receive legal title until the final payment is made

202
Q

Lease purchase arrangement

A

tenant enters into two agreements simultaneously - an agreement to purchase and a lease

203
Q

Blanket Mortgage

A

Covers more than one piece of property

204
Q

Interest rates on construction loans are usually ______ than on other loans because the risk is ______.

A

higher
greater

205
Q

3 Risks for Construction Loans

A

Inadequate protection against mechanics’ liens.

Potential delays in construction completion.

Financial failure of contractors or subcontractors.

206
Q

Wraparound Loan

A

allows a borrower who has an existing loan to get another loan from a second lender without paying off the first loan

207
Q

Package Loan

A

one that includes all the personal property and appliances that are installed on the property

208
Q

Open-End Loan

A

expandable loan which gives a borrower a limit up to which he or she may borrow

209
Q

Sale and Leaseback

A

used by commercial enterprises to free up money that has been tied up in the real estate to use as working capital in the business.

210
Q

Bridge Loan

A

short-term loan that covers the period between the end of one loan and the beginning of another

211
Q

Down Payment Assistance Programs in CA

A

MyHome Assistance Program
School Teacher and Employee Assistance Program

212
Q

MyHome Assistance Program

A

offers a deferred-payment junior loan of an amount up to the lesser of three and half percent (3.5%) of the purchase price or appraised value to assist with down payment and/or closing costs.

213
Q

School Teacher and Employee Assistance Program

A

first-time homebuyers who are school employees and must be up to 4% of the purchase price and can only be combined with an eligible CalHFA first mortgage loan

214
Q

Federal Reserve System created by ______ with the purpose of ______________

A

Federal Reserve Act of 1913

helping to stabilize the economy through the judicious handling of the money supply and credit available in the US

215
Q

The Fed has a Board of Governors consisting of _______ who are appointed by the _________ and a total of __ Federal Reserve District Banks.

A

seven members
President
12

216
Q

4 Tools Used by Fed to Influence/Stabilize the Economy

A
  1. Set the Rate of Growth in the money supply
  2. Regulates Reserve requirements for all institutions offering checking accounts
  3. Sets a Discount Rate of interest to member institutions.
  4. Engages in open market operations through buying or selling Government Bonds.
217
Q

7 Types of Primary Lenders

A

Savings associations.
Commercial banks.
Credit unions.
Insurance companies.
Investment groups.
Mortgage bankers.
Mortgage brokers.

218
Q

Savings Associations

A

promote thrift and home ownership

219
Q

Commercial banks

A

act as a safe depository and lender of mostly short-term loans.

220
Q

2 Types of Fiduciary Lenders

A

Savings associations.
Commercial banks.

221
Q

Fiduciary Lenders

A

have a fiduciary responsibility to protect the funds of the depositors, which they invest in loans

222
Q

Credit Unions

A

generally provide short-term installment and home improvement loans to their member depositors, but have now ventured into mortgages

223
Q

Insurance companies

A

supply loans for very large and expensive properties

224
Q

Investment Groups

A

invest in large real estate projects

225
Q

Mortgage banking companies

A

originate loans with their own money and money from their investors. The intention is to sell off the loans later and receive service fees.

226
Q

Mortgage brokers

A

locate potential borrowers and submit preliminary loan applications to the lenders for approval

Do not lend money or service loans

227
Q

California law allows real estate licensees to act as ____________ and receive compensation for soliciting and negotiating loans for buyers.

A

mortgage loan brokers

228
Q

When negotiating a loan for a prospect, within __________ or prior to ____________, you must make certain that the borrower receives a ________

A

three business days of receiving a completed loan application

the signing of any loan documents

completed loan disclosure statement

229
Q

3 Types of Secondary Lenders

A

Federal National Mortgage Association (FNMA or Fannie Mae)

Government National Mortgage Association (GNMA or Ginnie Mae)

Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac)

230
Q

Federal National Mortgage Association (FNMA or Fannie Mae) buys _______ in exchange for _______

A

Conventional, FHA and VA loans

mortgage-backed securities

231
Q

Government National Mortgage Association (GNMA or Ginnie Mae) helps _______ by guaranteeing _______

A

Fannie Mae

VA, FHA Loans

232
Q

Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac) sells ______ using ______ as security

A

bonds in the open market

the mortgages.

233
Q

What do Fannie Mae and Ginnie Mae do that Freddie Mac does not?

A

Guarantee payment of mortgages

234
Q

Underwriting

A

evaluation process of a lender assessing the risk of granting the loan to the buyer

235
Q

Loan Commitment

A

Lender gives the applicant a written notice that specifies the terms of the agreement the lender is willing to grant.

236
Q

Assignment of Mortgage

A

document that allows original lender to sell mortgage loan

237
Q

2 Step Process for Lender to sell a mortgage in the secondary market

A

Signs the note over to a third party investor or other mortgage company

Executes a document called an assignment of mortgage.

238
Q

3 Steps of Underwriting

A

Qualify the buyer.
Qualify the property.
Decide yes or no to the loan.

239
Q

Truth in Lending Act is implemented by _______ and it requires ______

A

Regulation Z

lenders to disclose to buyers the true cost of obtaining credit, so that borrowers can compare the costs of various lenders.

240
Q

Regulation Z does not apply to ______

A

Commercial loans
Agricultural loans over $25,000

241
Q

4 Provisions of Regulation Z

A

Disclosure of costs
Right to rescind the transaction
Advertising offers
Noncompliance penalties

242
Q

Reg Z requires lenders to make disclosures using _________ within _________

A

Loan Estimate form

three business days of loan application.

243
Q

Right to Rescind for Borrower with Reg Z

A

3 Days for refinancing and home equity loans

Not for residential first mortgage loans

244
Q

Ads subject to Regulation Z disclosure contain one of these items

A

Amount or percentage of down payment
Installment payment or amount
Specific finance charge
Number of installments
Period of repayment
Indication that there is no charge for credit

245
Q

penalty for violation of Regulation Z is ______, up to _______ plus __________.

A

twice the amount of the finance charge or a minimum of $100

$1,000 max

Court costs, attorney fees and any actual damages

246
Q

Willful violation of Regulation Z is a _______ that is punishable by _______

A

misdemeanor

a fine of up to $5,000 or one year in prison, or both

247
Q

Equal Credit Opportunity Act Discrimination Classes

A

Race
Color
Religion
National origin
Sex
Marital status
Age
Dependency on public assistance

248
Q

ECOA requires lenders to inform an applicant who was rejected the reasons for the denial. This notice must be _______ and given within _______.

A

in writing

30 days

249
Q

Requirements for Mortgage Lenders subject to Home Mortgage Disclosure Act

A

Assets exceeding $10M

1+ offices in a certain geographic location

250
Q

Mortgage Lenders subject to Home Mortgage Disclosure Act must ________

A

send annual reports to the government, detailing all mortgage loans the institution has given or purchased

251
Q

RESPA prohibits lenders from paying________ to parties who may have referred the borrower to the lender.

A

kickbacks and unearned fees

252
Q

Who supervises the Truth in Lending Act?

A

The Fed

253
Q

Escrow

A

a disinterested third party holds all money and documents relating to a transaction until all of the terms and conditions of the escrow instructions have been satisfied.

254
Q

In many cases, the _____ serves as the basis for the escrow instructions

A

purchase contract

255
Q

Entities that can act as escrow agents without having a license

A

Attorneys.
Banks.
Brokers.
Insurance companies.
Title companies.
Trust companies.
Savings and loan associations.

256
Q

In CA, majority of escrows are handled by _____ and remaining are handled by _______

A

title insurance or independent escrow companies

attorneys who routinely perform escrows or brokers who handle their own escrows

257
Q

5 Step Escrow Process

A
  1. Select the escrow company.
  2. Deliver the purchase contract to the escrow holder.
  3. Open the escrow.
  4. Complete all items outlined in the escrow instructions.
  5. Close the escrow.
258
Q

Title insurance is paid for one time, when ____. It stays in effect until _____ and protects against _________

A

the property passes from one owner to another

the property sells again

any losses that may result from imperfections in the title

259
Q

No title insurance policy protects against:

A

Defects known to the insured but not disclosed to the title insurer.
Government zoning regulations.

260
Q

ALTA-R policy is recommended for ________ and does not include ____

A

owners of one-to-four unit, owner-occupied residences

survey

261
Q

RESPA does not apply to ______-

A

seller-financed loans or loan assumptions w/o term changes or >$50 charge

262
Q

TRID Rule Effective Date

A

Oct 2015

263
Q

TRID Rule

A

copy of “Your home loan toolkit” booklet

Loan Estimate of settlement costs within 3d of application

Closign disclosure must be delivered to the borrower at least 3 days before closing

264
Q

If a RE office gives borrowers info about different loans, does prequalification and initiates the loan application process, the office may charge a fee IF _____ and the broker must -_____

A

As long as only the borrower pays the fee

tell the prospective borrower that other mortgage products are available that are not part of the broker’s system

265
Q

3 Sections of Closing Disclosure First Page

A

Closing Info

Transaction Info

Loan Info

266
Q

4 Columns of Closing Disclosure Second Page

A

Description of costs
Costs paid by borrower
Costs paid by seller
Costs paid by others

267
Q

City’s or county’s operating revenue comes mostly from _______

A

assessing and collecting taxes on real property

268
Q

County Assessor

A

determines the amount of real property taxes based on the assessed value of the property

269
Q

County Collector

A

responsible for collecting property taxes taxes, which are paid annually or semi-annually.

270
Q

Prop 19 Permits Exemptions to Prop 13 IF

A

at least one of the homeowners must be 55 years of age or older, and
the replacement property must be purchased within two years of the original sale.

271
Q

Prop 13

A

maximum annual tax on real property is limited to 1% of “full cash value,” or market value, plus a max 2% increase in market value per year

272
Q

Prop 19

A

allows the transfer of property from one spouse to another or children, without triggering a reassessment

273
Q

Fiscal year starts on _____ and ends on ___

A

July 1

June 30

274
Q

Timeframe for Buyer to Inform County Recorder/Assessor of Property Acquisition & Penalty

A

45 days
$100 or 10% of Taxes, whichever is greater

275
Q

Homeowner’s Exemption Amount

A

$7000

276
Q

Veteran’s Exemption Amount

A

$4000

277
Q

One CAN/CANNOT apply both the veteran’s exemption and homeowner’s exemption

A

CANNOT

278
Q

Senior Citizen’s Property Tax Postponement Eligibility

A

seniors
household income of $51,762 or less

279
Q

Special Assessment Tax is Levied _____ (timeframe) and is done to ______

A

Only once

offset costs of specific local improvements

280
Q

Documentary Transfer Tax and is computed at the rate of _____

A

Apply to the transfer of properties located in the county

55 cents for each $500 of consideration

281
Q

2 Additional Income Tax Deductions for Income-Producing Property

A

Operating Expenses
Depreciation of Improvments (not land)

282
Q

Capital Gains:
Deduction Amount
Frequency
Eligibility

A

Up to $250k for single, $500k for couple

Every 2 years

Seller must live in the home for 2 out of the last 5 years

283
Q

How to deduct loss on a personal residence?

A

Client turns it into income-producing property

283
Q

Depreciation Schedule for Commercial Buildings

A

39 years

284
Q

Capital gains are taxed at a____ rate than ordinary income

A

lower

285
Q

3 Step Process for Determining Profit or Loss of Property Sale

A
  1. Calculate adjusted cost basis
  2. Calculate adjusted sale price
  3. Calculate gain
286
Q

Adjusted cost basis

A

original purchase price, plus improvements, minus depreciation (not applicable on personal residences).

286
Q

Installment Sales

A

one in which the buyer makes payments for a property over more than one calendar year

286
Q

Progressive taxes

A

one in which the rate increases as the amount to be taxed increases

286
Q

Adjusted sale price

A

Sales price minus any sales expenses.

286
Q

Gain

A

Subtract adjusted cost basis from adjust sales price

286
Q

Regressive Taxes

A

one that uses the same rate regardless of income

286
Q

Tax-Deferred Exchanges/ 1031 Exchange

A

property owners can exchange one investment property for another as long as the transaction qualifies (tax-free!)

287
Q

boot

A

Any cash or relief one party receives in addition to the actual property during exchange

287
Q

Like-Kind Property for Section 1031

A

Apartments and residential rentals.
Commercial property.
Industrial property.
Farms or land.

287
Q

Foreign Investment in Real Property Tax Act (FIRPTA)

A

requires a buyer to withhold estimated taxes equal to 15% of the sale price (10% for dispositions before February 17, 2016) in any sale or exchange of property owned by a foreigner (not a US citizen).

287
Q

FIRPTA requirement exemption

A

Residential property that sells for <$300k and used as the buyer’s personal residence

288
Q

If foreign seller’s last known address is ______, the buyer may be required to set aside ___ of the sales price for the Franchise Tax Board.

A

outside of California
3.3%

288
Q

CA FIRPTA Exemptions (4)

A

<$100k sales price
seller’s primary residence
Seller-signed CA residency declaration
Waiver from the Franchise Tax Board

289
Q

Brokers & Buyers must keep documentation regarding foreign sales for ______

A

5 years

290
Q

Max Property Tax Exemption for Totally Disabled Veteran

A

$224,991

291
Q

Installment Dates for Property Taxes

A

Nov 1 (first)
Feb 1 (second)

292
Q

Limited vs General Partnership

A

In LP, one general partner is liable for all debts & obligations and other partners are liable to their investment.

In GP, all partners have unlimited personal liability for all debts & obligations

293
Q

Potential Gross Income

A

The total income the property would produce at full occupancy with no deductions for expenses

294
Q

Vacancy factor

A

An allowance for vacancies and uncollectible rents.

295
Q

Effective gross income

A

Potential gross income adjusted for vacancy.

296
Q

Net operating income

A

Effective gross income minus operating expenses. This figure represents the amount of income available as a return to the investor.

297
Q

Savings banks typically finance ______

A

Single-family residence loans

298
Q

Commercial banks typically finance ______

A

Interim Financing

299
Q

Life Insurance companies typically finance ______

A

Large commercial projects

300
Q

Sellers typically finance ______

A

Land and special purpose projects

301
Q

Uniform Commercial Code (UCC)

A

body of law that standardizes a number of business practices

302
Q

3 Actions the UCC requires buyer to do

A

Demand that the seller provide a schedule of all the tangible property involved in the sale.
Demand the list of all creditors from the seller.
Give notice to the creditors of the impending sale.

303
Q

UCC complaince ensures _______-

A

New buyer is not liable for debts owed to creditors prior to sale

304
Q

Institute of Real Estate Management (IREM) was formed in ______

A

1933

305
Q

3 Types of IREM Certifications

A

Certified Property Manager© (CPM©)
Accredited Residential Manager© (ARM©)
Accredited Management Organization© (AMO©)

306
Q

Certified Property Manager© (CPM©)

A

individuals who meet a certain level of education and experience requirements.

307
Q

Accredited Residential Manager© (ARM©)

A

resident managers who have a lesser degree of training and on-site experience

308
Q

Accredited Management Organization© (AMO©)

A

reserved for companies who meet certain IREM guidelines and employ at least one CPM©.

309
Q

3 Types of Property Managers

A

Individual PM
Individual Building Manager
Resident Manager

310
Q

Individual PM

A

usually a real estate broker who manages properties for one owner or a number of owners

311
Q

Individual Building Manager

A

usually manages a single large property

312
Q

Resident Manager

A

lives on the property and may be employed by a real estate broker, a managing agent or an owner to manage a property on a part-time or full-time basis

313
Q

CA law requires a resident manager for any property of ______ units or for any mobile park of _____

A

16+
50+

314
Q

2 PM Reports Provided to Owner

A

Monthly account statements.
A detailed annual statement.

315
Q

Most property managers base their fees on ______

A

percentage of the gross rents collected

316
Q

3 General Responsibilities of a PM

A

Renting the units promptly at the highest market rent possible.
Keeping operational and other costs within budget.
Preserving and enhancing the physical value and prestige of the property.

317
Q

4 Responsibilities Outlined in Management Contract

A

Terms and period of the contract.
Policies pertaining to the management of the premises.
Management fees.
Authority and powers given by the owner to the manager.

318
Q

recapture clause

A

In % clause, indicates that if the tenant does not obtain the desired gross sales, the owner has the right to terminate the lease

319
Q

Graduated Lease

A

CA RE Principles (6 decks)

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