Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Wisconsin Real Estate License > Chapter 14 - Consumer Protection > Flashcards

Chapter 14 - Consumer Protection Flashcards

1
Q

What is considered agent misrepresentation?

A

When a real estate agent gives incorrect facts based on his/her opinion or physical observation. To protect yourself legally, ask for information from the owner (whenever possible, document the seller’s source) or professionals.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Puffing

A

incredulous claims made by sellers or seller’s agents to attract potential buyers - gives unsubstantiated opinions rather than verifiable facts. Puffing is not illegal per se, but false advertising is, if deception can be proven.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Negligent Misrepresentation of agent

A

failure of a real estate licensee to use reasonable care to uncover and reveal property defects. This duty goes further than the requirement to disclose known material defects; it requires the licensee to be proactive in discovering potential defects and issues within an agent’s professional expertise.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Passive Fraud aka Negative Fraud

A

the intentional failure to reveal a material fact that impacts a real estate transaction.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Active Fraud aka Actual Fraud

A

intentional deception through misrepresenting a material fact that induces the person to rely upon the fact.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Self-Dealing

A

involves an agent who acts in his/her own best interest in a real estate transaction rather than in the best interest of the client to whom s/he owes a fiduciary responsibility.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is a real estate agent’s responsibility when it comes to property inspections?

A

in general in Wisconsin, real estate licensees are obligated to conduct a “reasonably competent and diligent inspection” of accessible areas and immediately surrounding areas of a property to detect observable, materially adverse facts (i.e., visible cracks in structural elements, aged roofing, broken windows, etc.). Licensees are not required to move around any fixtures or furniture for visual inspection or put themselves at risk of physical harm by using ladders or crawling. Licensees are also to make inquiries to the seller (in writing) regarding the condition of the structure, mechanical systems, and other relevant aspects of the property as applicable, giving the seller a reasonable opportunity to disclose any known defects that may have been overlooked

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Who do adverse material facts need to be disclosed to?

A

Both the buyer and the seller

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What report is required to be filled out by the seller regarding the condition of the home for sale?

A

Real Estate Condition Report / Property Condition Report - must be given to a prospective buyer within 10 days of accepting a sale or option contract or else the buyer can rescind the contract without penalties. In addition, if the report defines defects not disclosed prior to contract or the report is incomplete/inaccurate, the buyer may terminate the agreement as well. Buyers can also waive the right to receive the property condition report.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What should the seller disclose on the Property Condition Report?

A

Owner’s information, Environmental, wells, septic systems, storage tanks, taxes, special assessments, permits, land use, additional information, and owner’s certification

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are exceptions to a seller needing to fill out a Property Condition Report?

A
  1. If the seller has never occupied the property (i.e., personal representative of an estate, trustee, conservator, or court-appointed party)
  2. If the seller is the owner of a multi-unit property w/ 5+ individual dwellings
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Material Adverse Fact

A

Condition that, if known, would potentially influence the decision of a prospective buyer. Must disclose any issues even if an independent inspector overlooked it and must be disclosed in writing.
EX: defects (anything considered to be anything that may have a negative impact on the monetary value of the property), health hazards (mold, termites, etc.)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What are examples of facts that do not need to be disclosed to buyers?

A
  • -Misdemeanors that occurred on the property
  • -Sex offender information is not required upfront, but if asked, you must disclose any first-hand information you might have and provide written notice advising the party to contact the dept of correction for further information
  • -Confidential, proprietary information about the seller (i.e., seller’s minimum acceptable sale price)
  • -Discriminatory information related to the buyer/seller
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Do side agreements need to be disclosed?

A

YES, per Wisconsin law: a licensee who becomes aware that a party to the transaction has not disclosed that party’s entire agreement regarding the transaction to that party’s secured lender shall disclose this fact in writing and in a timely manner to the party’s secured lender. The purpose is to try to circumvent any fraudulent activities that may put the lender and/or buyer at risk.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What happens when a buyer finds out that there’s been intentional misrepresentation in their real estate transaction?

A
  1. Sue for breach of contract
  2. If the buyer hasn’t moved in yet, they can rescind the contract in its entirety.
  3. If the buyer has already moved in, the buyer can sue both the seller and broker for up to 3x the total amount of damages + legal expenses - “treble damages”
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Truth-in-Lending Act (TILA) aka Regulation Z

A

The name given to the federal statutes and regulations (Regulation Z) which are designed primarily to ensure that prospective borrowers and purchasers of credit receive credit cost information before entering into a transaction.
–enacted to make sure consumers are provided w/ various types of disclosures by creditors when they’re looking to take on debt

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What 5 loan types are covered by TILA?

A
  1. Residential
  2. Federally related
  3. 1-4 family properties
  4. Non-commercial properties
  5. Family Farms
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What are the 3 disclosure requirements under TILA?

A
  1. Loan Estimate must be made 3 days after the purchaser submits specific information to the lender
  2. Closing disclosure (CD) - lender must deliver the CD to the buyer 3 business days before closing & borrower has the right to rescind the loan in these 3 days
  3. Advertising Trigger words for further Disclosures
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What will trigger a new 3-day review period of the Closing Disclosure?

A
  1. APR increased more than 1/8 on a fixed rate loan or 1/4 on an adjustable loan
  2. Prepayment penalty is added
  3. Lender changes the type of loan
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What days of the week are considered business days under TILA?

A

everyday besides Sundays & holidays

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Which lenders are subject to TILA advertising guidelines?

A

lenders that lend funds at least 25x on an annual basis and/or 5 loans a year must be housing loans.

22
Q

What 4 trigger words in advertisement will require additional disclosures according to TILA?

A
  1. Amount of % of a down payment
  2. Number of Payments or Length of time for repayment
  3. Amount of any payment
  4. Amount of finance charge or stating that there is no charge for credit
    * **When any of the above is mentioned, ALL of the following must be disclosed: (1) terms of repayment of the loan, (2) APR & any potential increases, (3) total finance charge, (4) total number of payments & the date those payments are due, & (5) the amount or % of a down payment
23
Q

What if a lender fails to deliver the proper disclosures to a borrower?

A

They can be held liable for actual damages the borrower incurs as a result of the failure to disclose or statutory damages as defined by law which typically range from $400-$4,000
PLUS the Consumer Financial Protection Bureau charges violation penalties from $5,000/day (1st tier) to $1 million/day (3rd tier)

24
Q

Under TILA, what is the real estate agent required to provide to the lender?

A

within 10-14 days of closing, the real estate agent must provide their commission, administrative charges, commission credit and license information

25
Q

Real Estate Settlement Procedures Act (RESPA) aka Regulation X

A

A federal law requiring the disclosure to borrowers of settlement (closing) procedures and costs by means of a pamphlet and forms prescribed by the United States Department of Housing and Urban Development.

  • -requires disclosure of affiliated business relationships
  • -establishes various escrow and accounting guidelines for lenders
26
Q

What 5 transactions does RESPA cover?

A
  1. loans secured by a lien or residential property
  2. loan assumption provided by a lender
  3. refinancing of residential loans
  4. home equity credit lines
  5. reverse mortgages
27
Q

What’s included in a loan estimate?

A
  1. estimated interest rate and if it is a fixed or adjustable rate
  2. estimated monthly payment and what is included in it
  3. estimated closing costs
  4. charges unique to the loan (i.e., prepayment penalty or balloon payment)
  5. list of services and fees the borrower cannot shop for, including the appraisal fee, credit fee, and fees related to flood monitoring and checks
  6. list of services borrowers can shop for including termite inspections, survey fees, and title insurance costs
  7. cash needed to close
28
Q

Closing Disclosure

A

includes final numbers for the borrower’s actual loan making it a critical document to review carefully–it should look very similar to the loan estimate for comparison purposes. Consists of:

  1. Loan amount, interest rate, monthly payment of int & principal
  2. Prepayment penalty, if any
  3. Balloon payment, if any
  4. Estimated monthly payment w/ insurance, escrow, etc.
  5. Closing costs & cash needed to close
  6. Services the borrower did and did not shop for
  7. Other fees (i.e., real estate commissions, HOA fees, etc)
  8. If the seller has agreed to pay a credit
  9. Cost of late payment
  10. Information regarding the escrow account
  11. Contract details
    * **MUST be provided to the borrower at least 3 business days before closing, allowing for sufficient time for the borrower to review and understand the disclosures.
    * **Used to be called the HUD-1 Settlement Statement - form changed to CD 10/3/2015
29
Q

What will bring about a violation of RESPA?

A

loan covered under RESPA that involves a payment made or receipt of something of value in exchange for a referral for a settlement related service

30
Q

Affiliated Business Arrangement (AFBA)

A

occurs when a real estate agent or broker has a financial interest in a settlement provider entity. AFBAs are allowed under RESPA as long as specific guidelines are followed (i.e., specific disclosures need to be provided to the client to sign off on)

31
Q

TRID

A

combination of TILA-RESPA integrated disclosures, commonly known as the “Know before you Owe” disclosures. The Consumer Financial Protection Bureau’s goal is to make it as easy and transparent as possible for buyers to understand the terms and cost of a real estate loan and the closing fees, including interest rates, number of payments expected, total amounts paid on principal and interest, etc. TRID also helps regulate the fees that lenders can charge.

32
Q

What does TRID apply to?

A

most real property transactions, except home equity credits loans or loans intended for a dwelling that is not attached to real property (i.e., mobile home)

33
Q

What 6 specific items are required on a borrower’s home loan application?

A
  1. Borrower’s Name
  2. Borrower’s income
  3. Borrower’s SSN
  4. Property Address
  5. Estimated value of the property
  6. Mortgage Loan amount sought
    * *This helps reduce a borrower’s likelihood to be discriminated against on superficial factors such as race, occupation, or hobbies
34
Q

Credit on a Closing Disclosure

A

A bookkeeping entry on the right side of an account, recording the reduction or elimination of an asset or an expense, or the creation of or addition to a liability or item of equity or revenue.
–Money flowing into an account

35
Q

Debit on a Closing Disclosure

A

A bookkeeping entry on the left side of an account, recording the addition of an asset or an expense, or the creation of or elimination of a liability or item of equity or revenue.
–That which is due from one person to another.

36
Q

At closing, the debits and credits for each party must add up to ___

A

$0 (i.e., if the buyer’s total debits > his credits, then the buyer must bring money to closing sufficient to pay the debits down to zero (i.e., cash from buyer to close). Similarly, if the seller’s credits > his debits, then the settlement agent must cut a check to the seller for the excess credits (i.e., cash to seller))

37
Q

Proration

A

Adjustments of interest, taxes, and insurance, etc., on a pro rata basis as of the closing or agreed upon date.

38
Q

How many pages is the CD?

A

always 5 pages

  1. General loan overview for buyer (kind of loan, loan terms, projected payments, & costs at closing) – mirrors loan estimate
  2. Details all the closing costs (loans costs & other costs not related to the loan, such as taxes, prepaid expenses, initial escrow deposits, home inspection fees, commissions due to real estate agents, etc)
  3. Summarizes the transaction (showing the buyer’s and seller’s debits & credits) & calculates how much money the buyer must bring at the beginning of closing and how much money the settlement agent must give the seller at the end of closing
  4. Discloses important info about how the lender will administer the loan (i.e., assumption, early repayment, etc)
  5. Provides calculations about the loan as a whole, some additional disclosures, and contact info for key players in the transaction
39
Q

When is the first mortgage loan payment due for the buyer?

A

one full month after closing
For example, if closing was on 3/17, the buyer would owe mortgage loan interest for 3/17 - 3/31 at closing and their first payment wouldn’t be due until 5/1.

40
Q

How is mortgage interest calculated per diem / per day?

A

(Loan Amount x Interest Rate) / 360 days

41
Q

How are annual property taxes prorated on the closing disclosure?

A

Annual Tax Bill / 365 days = amount of taxes per diem (per day)
Since property taxes are due on specific dates each year, there will be times when the property taxes have not been paid by the closing date. In this case the buyer will have to pay the full years’ worth of taxes after closing and therefore will be reimbursed by the seller for the days leading up to and including the closing date (buyer will receive a credit from seller at closing). OR if the property taxes for the year were already paid prior to closing, the seller will be credited for amount paid through the closing date.

42
Q

How do insurance premiums get prorated?

A

since insurance is almost always paid in advance, it will be marked as a credit to the seller at closing. This will be the amount the seller is reimbursed by their insurance company - Insurance Policy / 365 days

43
Q

How does rental income get prorated?

A

rental income must be prorated btwn the buyer and seller at closing once received in advance around the 1st of the month. When the rental property is sold, the seller gets to keep the portion of rent thru the closing date, but will credit the buyer for that portion of the monthly rent beyond the closing date. = Monthly Rent / Number of Days in the Month

44
Q

How do you calculate the monthly principal and interest payment on a home loan?

A

Multiply the loan principal (amount borrowed) by the interest rate factor (provided by the lender or obtained online from a mortgage factor chart) and divide it by 1,000. To find the monthly property tax and insurance amounts, simply divide the annual bill by 12.

45
Q

What’s the difference btwn private mortgage insurance and mortgage insurance premiums?

A

private mortgage insurance (PMI) is used for conventional loans, when a borrower’s loan-to-value ratio is too high ( > 80%); whereas, mortgage insurance premiums (MIP) are used for FHA-insured loans. Additionally, MIP requires an upfront funding fee, which may be rolled into the loan amount, plus a monthly insurance premium.
EX: 245,000 FHA loan + 1.75% up-front premium = $249,287.50 loan + additional monthly MIP assessment of 0.85% = $176.58 monthly MIP due

46
Q

What are the 2 most common credits that sellers have on their closing statement?

A

price of the property and prepaid items (i.e. homeowner’s insurance, real estate property taxes, mortgage interest, etc)

47
Q

What is the most common debit for a seller on the closing statement?

A

the amount the seller owes on property loans + outstanding liens on the property, real estate commissions, transfer fees, attorney fees, recording fees, etc.

48
Q

Seller’s proceeds

A

Sale price of property - seller’s debits = debit on the closing statement

49
Q

What are the most common credits for the buyer on the closing statement?

A

Proceeds of their loan, initial deposit, any balance due from the seller, & items in arrears from the seller

50
Q

Buyer’s balance due at closing

A

Purchase Price of the home + other expenses - earnest money = credit for the buyer & amount of the check the buyer needs to bring on the day of closing

51
Q

What are the most common debits for a buyer?

A

Purchase price of the property, title costs, title insurance, attorney fees, property taxes, recording fees, and items that the seller has already prepaid

Wisconsin Real Estate License (19 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions