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Colorado Real Estate Exam > CO Real Estate - Law and Practice (Unit 12-21) > Flashcards

CO Real Estate - Law and Practice (Unit 12-21) Flashcards

1
Q

The basic costs of owning are home are… (4)

A

P - principal
I - interest
T - taxes
I - insurance

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2
Q

Charging interest in excess of the maximum rate allowed by law.

A

Usury

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3
Q

How do you calculate loan origination fees and discount points?

A

Both are calculated as a percentage of the loan principal amount.

Discount point = 1% of the loan

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4
Q

Process where a debtor retains the right of possession and control of a secured property, while creditor receives an equitable right

A

Hypothecation

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5
Q

Document issued when a mortgage is paid in full

A

Satisfaction of Mortgage (filed with public)

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6
Q

State where the mortgagor retains both legal and equitable title to a secured property, while mortgagee has a lien on the property.

A

Lien theory state - if mortgagor defaults then mortgagee must go through formal foreclosure proceeding

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7
Q

Option for a defaulted mortgagor to buy back the property during a certain period after a foreclosure sale

A

right of redemption

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8
Q

Third-party security instrument used to convey bare title without the right of possession

A

Deed of trust

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9
Q

State where the borrower is the trustor who conveys legal title to the trustee but retains equitable title and right of possession

A

Title Theory State

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10
Q

The right of a lender to accelerate the maturity of debt if borrower defaults

A

Acceleration Clause

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11
Q

Requirements of lender under the defeasance clause

A

Lender required to execute a satisfaction of mortgage when the note has been fully paid

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12
Q

When a property is sold “subject to” the mortgage..

A

Buyer is not personally obligated to pay the debt in full, although they will make payments as normal. If default, and property is foreclosed and sold, the buyer is not responsible for paying any difference

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13
Q

A buyer who purchases a property and becomes personally obligated for the payment of the entire debt means they have…

A

assumed the mortgage - if seller wants to be completely free from original loan the parties must execute a novation agreement in writing

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14
Q

A clause that provides that when the property is sold, the lender may either declare the entire debt due immediately or permit the buyer to assume the loan at an interest rate acceptable to the lender (prevents from buyer assuming a super low interest rate)

A

Alienation Clause (resale clause, due on sale clause, call clauses)

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15
Q

Type of loan where borrower makes periodic payments of interest only, then pays principal in full at end of loan term

A

Straight Loan / Interest-only Loan

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16
Q

Type of loan where each payment is part interest part principal

A

Amortized Loan

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17
Q

Type of loan that begins at one interest rate then fluctuates up or down during the loan term based on a specific indicator

A

Adjustable-Rate Mortgage

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18
Q

Economic indicator that is used to adjust the interest rate on a loan

A

Index

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19
Q

Loan that uses a fixed interest rate, but payments of principal are increased according to an index or schedule

A

Growing-equity mortgage

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20
Q

A final payment that is at least twice the amount of any other payment

A

Balloon payment

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21
Q

Mortgage allowing a homeowner aged 62 or older to borrow money against the equity built up in the home

A

Reverse mortgage

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22
Q

3 Types of Foreclosure Proceedings

A

Judicial Foreclosure - property sold by court order after mortgagee has given sufficient public notice
Nonjudicial Foreclosure - used when the security instrument contains a power of sale clause
Strict Foreclosure - appropriate notice is given, then court awards full legal title to lender

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23
Q

If a foreclosure sale doesn’t produce enough cash to pay the loan balance in full the mortgagee may be entitled to

A

A deficiency judgment

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24
Q

3 main components of the real estate financing market

A
  1. Government influences, primarily the FED
  2. Primary Mortgage Market
  3. Secondary Mortgage Market
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25
Q

Major Lenders of home mortgage and commercial property loans include:

A

Savings Associations/Commercial Banks
Insurance Companies
Credit Unions
Pension Funds
Endowment Funds
Investment Group Financing
Mortgage Banking Companies
Mortgage Brokers

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26
Q

Fannie Mae
Freddie Mac
Ginnie Mae

All types of…

A

Government sponsored enterprises

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27
Q

GSE who’s main function is conventional, FHE-insured and VA loans

A

Fannie Mae

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28
Q

GSE who’s main function is mostly conventional loans

A

Freddie Mac

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29
Q

GSE who’s main function is special assistance loans

A

Ginnie Mae

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30
Q

GSE who’s main function is loans for agricultural and rural utilities

A

Farmer Mac (Federal Agricultural Mortgage Corporation)

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31
Q

Insurance policy that would provide lender with funds in the event of borrower default

A

Private mortgage insurance

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32
Q

Loans that are insured by the Federal housing Administration agency

A

FHA-Loan

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33
Q

Rules of a VA loan qualification

A
  • Qualifying service
  • Owner must live on property
  • Owner must apply for certificate of eligibility
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34
Q

Loan that includes real and personal property

A

Package Loan

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35
Q

Loan that covers more than one parcel of lot (can pay off parcels individually)

A

Blanket Loan

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36
Q

Loans that provides funds at the execution but also secures any future advances of funds

A

Open-end loan

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37
Q

A loan that takes advantage of the equity built up in a home and allows $100k of interest paid to be tax deductible

A

Home equity loan

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38
Q

Legislation that requires credit institutions inform borrowers of the true cost of obtaining credit

A

Regulation Z of the Truth in Lending Act (doesn’t apply to commercial or agricultural loans

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39
Q

How many days must a borrower have to rescind a transaction?

A

3 business days

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40
Q

Legislation that prohibits discrimination in granting credit based on race, color, religion, national origin, sex, martial status, age and receipt of public assistance

A

Equal Credit Opportunity Act

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41
Q

Legislation that requires financial institutions to meet the deposit and credit needs of their communities

A

Community Reinvestment Act

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42
Q

Legislation applied to residential real estate transactions involving new first mortgage loans that is designed to ensure that the buyer and seller are both fully informed of all costs related to closing the transaction

A

Real Estate Settlement Procedures Act (RESPA)

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43
Q

A sworn statement in which the seller assures the title company that no other defects in the title have occurred since the date of the title examination

A

Affidavit of title

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44
Q

Law that has changed how buyers, sellers, lenders, mortgage brokers, title agents, and real estate professionals prepare for a closing

A

Mortgage Disclosure Improvement Act

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45
Q

Kickbacks, fee-splitting for referrals, requiring that the buyer purchase title insurance with a certain company and requiring excessive escrow account deposits are all prohibited under

A

RESPA

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46
Q

RESPA permits a _____ between a real estate brokerage and a mortgage company when
1. there is a 1 % or more common ownership between the companies (client must be notified)
2. participation is not required
3. other providers are available
4. nothing else of value is received from it

A

Affiliated business arrangement

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47
Q

Form that highlights the information that historically has been the most important to consumers (interest rate, monthly payment, total closing costs)

A

Loan Estimate Form

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48
Q

Three tiers of tolerance for closing costs that may or may not change prior to settlement after the Loan Estimate form is issued

A
  1. No tolerance - underwriting, loan origination fees, discount points, yield premiums
  2. 10% tolerance - settlement services if the lender selects the provider
  3. Unlimited tolerance - settlement services that are out of lender’s control (homeowners insurance, mortgage interest, costs when borrower chooses provider)
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49
Q

Form that itemizes all charges that are normally paid by a borrower and a seller in connection with settlement

A

Closing Disclosure form

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50
Q

Information booklet provided by a creditor to a mortgage applicant as part of the loan application process including general information about settlement and how to find the best mortgage

A

Your Home Loan Toolkit

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51
Q

Four ways to create a lien (VISE)

A

Voluntary - created intentionally by property owner
Involuntary - not a matter of choice, created by law
Statutory - created by a statue
Equitable - arises out of common law

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52
Q

Lien that affects all property, real and personal, of a debtor

A

General Lien

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53
Q

Lien secured by a specific property

A

Specific lien

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54
Q

Lien belonging to a provider for the unpaid purchase price of a property when the provider has not taken any other lien or security beyond the personal obligation of the purchaser

A

Vendor’s Lien (uncommon, typically involved in owner financing)

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55
Q

Taxes based on the value of the property being taxed

A

general real estate tax, ad valorem tax

56
Q

Specific, voluntary lien on real estate given to a lender as security for a real estate loan

A

Mortgage Loan

57
Q

Specific, involuntary lien that gives security to persons that perform labor or furnish material to improve real property

A

Mechanic’s Lien

58
Q

A notice of a possible future lien

A

Lis Pendens

59
Q

A court order against the property of another person that directs the sheriff or court to seize or take control of a property, to prevent a debtor from conveying title to unsecured real estate while a court suit is being decided

A

writ of attachment

60
Q

General, statutory, involuntary liens that encumber a deceased person’s real and personal property

A

Estate/Inheritance Taxes

61
Q

General, statutory, involuntary lien on all real and personal property held by a delinquent tax payer

A

IRS tax lien

62
Q

Comparative Market Analysis based on the following:

A
  1. recently closed properties
  2. properties currently on the market
  3. properties that did not sell
63
Q

Characteristics that bring value to real estate

A

Demand
Utility
Scarcity
Transferability

64
Q

Basic principles of value (11)

A

Anticipation
Change
Competition
Conformity
Contribution
Highest and best use
Increasing and Diminishing returns
Plottage
Regression and Progression
Substitution
Supply and Demand

65
Q

Three approaches to value

A
  1. Sales comparison approach
  2. Cost Approach
  3. Income Approach
66
Q

Five steps to cost approach

A
  1. Estimate value of land at highest and best use
  2. estimate current cost of constructing buildings and improvements
  3. Estimate accrue depreciation
  4. deduct accrued depreciation from cost of construction
  5. Add the land value to amount from step 4
67
Q

3 types of depreciation

A
  1. physical deterioration
  2. functional obsolescence
  3. External obsolescence
68
Q

Income approach steps

A

Gross
Income
Vacancy
Expenses
Net operating Income

69
Q

Equation for calculation value under income approach

A

Value * Cap Rate = NOI

70
Q

Gross Rent Multiplier equation (properties with 4 or less units)

A

Sales price / monthly gross rent = GRM

71
Q

Gross income multiplier (properties with 5 or more units)

A

Sales price / annual gross income = GIM

72
Q

The act of analyzing all three approaches to value and effectively weighing the findings

A

Reconciliation

73
Q

Four types of leasehold estates

A

Estate for years - any definite period

Estate from period to period - indefinite, automatically renewing

Estate at will - indefinite, possession with landlord’s consent

Estate at sufferance - tenant’s previously lawful possession continues without landlord’s consent

74
Q

When a tenant with an estate for years remains in possession, or holds over, after the lease term expires and no new lease agreement is made - _____ is created

A

A holdover tenancy

75
Q

A tenant with a disability must be allowed to make reasonable modifications to a property at the tenant’s own expense under this Act

A

Americans with Disabilities Act (and fair housing)

76
Q

Difference between assigning a lease and subleasing

A

Assignment of a lease transfers the entire leasehold interest to another person. New tenant is then legally obligated to comply with all promises made in original lease.

Subleasing transfers less than the entire leasehold interest. Original tenant remains responsible for rent being paid by the new tenant and for any damage done to rental during sublease term

77
Q

Clause in a financing instrument used to mortgage leased premises where mortgagee agrees not to terminate the tenancy of lessees so long as they are current in payment, should mortgagee foreclose on the property

A

Nondisturbance Clause

78
Q

Right of first refusal…

A

allows tenant the opportunity to buy the property before the owner accepts an offer from another party

79
Q

3 Types of Leases

A
  1. Gross Lease: landlord pays all taxes, insurance, repairs and other utilities not paid by tenant
  2. Net Lease: Tenant pays all or most of the property expenses, insurance, taxes and CAM charges plus rent (think Net income for the landlord)
  3. Percentage lease: fixed rent + % of gross revenue of tenant
80
Q

Variable Leases

A
  1. Graduated lease provides for specific rent increases at set future dates
  2. Index lease allows rent to be increased or decreased based on CPI
81
Q

When a tenant wants to purchase a property but can’t find financing quick enough they can enter into a

A

Lease Purchase (requires a down payment)

82
Q

Two types of remedies for breach of contract leases

A

Actual Eviction - landlord remedy

Constructive Eviction - tenant remedy if unit becomes uninhabitable and landlord refuses to fix

83
Q

Legislation that prohibits discrimination based on raced in every real estate transaction

A

Civil Rights Act of 1866

84
Q

Legislation that further prohibits discrimination based on race, color, national origin, religion, familial status, sex, disability

A

The Fair Housing Act (Title VIII of civil rights act)

85
Q

Legislation that repealed the requirement that housing intended for those age 55 or older have “significant facilities and services” designed for seniors, now just requires that at least 80% of occupied units have 1 person age 55 or older living in them to apply

A

Housing for Older Persons Act

86
Q

Who administers the fair housing act?

A

Department of Housing and Urban Development (HUD)

87
Q

Exemptions to the Fair Housing Act

A
  1. owner-occupied buildings with no more than 4 units
  2. single-family housing sold or rented without the use of a real estate professional
  3. housing operating by organizations and private clubs that limit occupancy to members (assuming membership is non-discriminatory)
88
Q

Act of encouraging people to sell or rent their homes by claiming that the entry of a protected class of people into the neighborhood will have some sort of negative impact on property value

A

Blockbusting

89
Q

Channeling of homeseekers to particular neighborhoods or discouraging potential buyers from considering some areas

A

Steering

90
Q

The practice of refusing to make mortgage loans or issue insurance policies in specific areas for reasons other than economic qualifications

A

Redlining

91
Q

Three main goals of a property manager

A
  1. Achieve owner’s goals
  2. Generate income
  3. Preserve and/or add value to the property
92
Q

An outline that details a property owner’s objectives with the property, as well as what the PM expects to accomplish and how, including financial objectives

A

Management Plan

93
Q

Three types of maintenance

A
  1. Preventative - regularly scheduled activities such as painting and seasonal servicing of appliances, preserves long-range value and physical integrity
  2. Repair or corrective - actual repairs that keep building’s equipment, utilities and amenities functioning
  3. Routine - day-to-day duties and regular upkeep to HVAC and landscaping
94
Q

Construction alterations to the interior of a building to meet a tenant’s particular space needs (typically made by the PM prior to tenant moving in)

A

Tenant Improvements

95
Q

The four alternative risk management techniques

A

Avoid - remove risk
Control - prepare for emergency before it happens
Transfer - shift to a third party (insurance)
or
Retain - take your chance with risk

96
Q

Common types of commercial insurance coverage

A

Fire and hazard

Flood

Consequential loss, use and occupancy - business interruption insurance

Contents and personal property

General Liability - covers risk when the public enters the building & workers comp

Casualty - against theft, burglary, vandalism, machinery damage as well as health & accident insurance

Surety Bonds - protects from losses resulting form an employee’s criminal acts or negligence while working

97
Q

What helps implement a comprehensive plan and regulates and controls the use of land structures within a designated land-use district

A

Zoning Ordinances

98
Q

Some municipalities use these to ease transition from one land use to the other

A

Buffer zones

99
Q

If a building exists in a certain way, and a zoning ordinance is introduced that goes against the buildings way of existing that building is considered

A

A nonconforming use

100
Q

Grants nonconforming but related land use

A

Conditional-use permit (special-use)

101
Q

Permits a prohibited land use to avoid undue harship

A

A variance

102
Q

Difference between a subdivider and a developer

A

Subdivider segments land into parcels

Developer constructs improvements on subdivided parcels

103
Q

A detailed map illustrating the geographic boundaries of individual lots

A

Plat map

104
Q

Limitations on the use of property imposed by a past owner or the current owner by inclusion in the deed to the property that are binding for life

A

Deed restrictions

105
Q

These ___Based products can create airborne contaminants that may result in respiratory disaease

A

Asbestos

Improper removal procedures can make this worse - use proper encapsulation

106
Q

Product from paint or other sources that can result in damage to the brain, nervous system, kidneys and blood (especially in kids)

A

Lead

107
Q

A naturally occurring, colorless, odorless, tasteless, radioactive gas produced by decay of other radioactive substances and needs to be properly ventilated

A

Radon

108
Q

A colorless chemical with a strong, pronounced color and used widely in the manufacture of building materials and many household products because of its preservative characteristics

A

Formaldehyde

109
Q

Colorless, odorless and tasteless gas that occurs as a by product of burning fuels such as wood, oil and natural gas,

A

Carbon Monoxide

110
Q

Consists of more than 200 chemical compounds not found in nature, is flame resistant and often used in electrical equipment

A

Polychlorinated Biphenyls

111
Q

Nontoxic, nonflammable chemicals use din refrigerants in air conditioners, refrigerators and freezers and bad for the ozone layer

A

Chlorofluorocarbons

112
Q

Can grow on almost any organic substance as long as moisture, oxygen and organic food are present

A

Mold

113
Q

Water that exists under the earth’s surface within the tiny spaces or crevices in geological formations

A

Groundwater

114
Q

Groundwater forms this, and is the natural level at which the ground is saturated

A

Water table

115
Q

Commonly found on sites where petroleum products are used or where gas stations and auto repair shops are located

A

Underground Storage Tanks

116
Q

The process of laying two to four feet of soil over the top of a site and then planting grass on it to enhance the landfill’s aesthetic value and prevent erosion

A

Capping

117
Q

Defunct, derelict or abandoned commercial or industrial sites many of which may contain toxic waste

A

Brownfields

118
Q

Law that provides funds to assess and clean up brownfields, clarifies liability protections and provides tax incentives toward enhancing state and tribal response programs

A

Small Business Liability Relief and Brownfields Revitalization Act

119
Q

Law that established a Superfund to clean up uncontrolled hazardous waste sites and to response to spills

A

Comprehensive Environmental Response, Compensation and Liability Act

120
Q

Law that creates an innocent landowner immunity status

A

Superfund Amendments and Reauthorization Act

121
Q

Law that creates an innocent landowner immunity status

A

Superfund Amendments and Reauthorization Act

122
Q

1 mile in feet

A

5,280 feet

123
Q

1 rod in feet

A

16.5 feet

124
Q

1 mile in rods

A

320 rods

125
Q

Area

A

LxW

126
Q

Square foot in inches

A

144 square inches

127
Q

1 square yard in square feet

A

9 square feet

128
Q

1 acre in square feet

A

43,560 square feet

129
Q

1 section in acres/miles

A

640 acres, 1 square mile

130
Q

Area of triangle

A

1/2(Base x height)

131
Q

Volume equation

A

L x W x H

132
Q

1 cubic yard in feet

A

27 cubic feet

133
Q

Volume of triangular prism

A

1/2 (Base x height x width)

134
Q

X bar method

A

Part / (Total X Rate)

Enter the two known items, if there is a multiplication sign between the two items, you multiply to equal the missing item

likewise if there is a division sign between the two known items, you divide

135
Q

The states in which the owner gives up legal title of mortgaged real estate are known as

A

title theory states

136
Q

Whose signature is necessary for a signed offer to purchase real estate to become a contract?

A

Buyer’s and sellers

Colorado Real Estate Exam (9 decks)

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