Course Notes Flashcards

Question

Livery of Seisin

Answer 1

When you sell the entire bundle of rights

Answer 2

means, "I own the property," it is what we think of as "Ownership." There is no definite ending date. The estate lasts at least a lifetime, because the property can be willed to a person's heirs, and can be enjoyed without the interference of others.

Answer 3

means to will

Answer 4

means to allow others to use

Answer 5

DEMAND - the more demand there is for a particular property the more valuable it is to consumers looking for real estate. UTILITY OR USEFULNESS - a three bedroom house is more useful to more consumers than a two bedroom or a one bedroom. SCARCITY - if few properties in a particular area go on the market, when one does, it sells quickly. TRANSFERABILITY - when loans are available and rates are low real estate is readily transferable from seller to buyer. SITUS - the three most important economic characteristics of real estate are Location, Location, and Location.

Answer 6

IMMOBILITY - real estate is permanent INDESTRUCTIBLE - land is permanent NONHOMOGENEOUS (Uniqueness) - each parcel of land has its own unique characteristics (there are no two properties that are the same) BECAUSE NO TWO PROPERTIES ARE THE SAME, A BUYER CAN SUE A SELLER OR A SELLER CAN SUE A BUYER FOR "SPECIFIC PERFORMANCE" IF ONE OF THEM REFUSES TO CLOSE.

Answer 7

something which once was personal, but has been installed – therefore, it becomes real property.

Answer 8

verb: personal property becomes real property

Answer 9

M.A.I.D. Method of Annexation - how the item is attached to the property (a window air -conditioner (personal) vs. a central air conditioning unit (appurtenance). Adaptability - a microwave oven that is "built in" vs. a microwave that simply sits on a kitchen counter. Intent of the parties - when an owner installs a ceiling fan it is assumed that it is appurtenant to the property and transfers to the buyer. It is important that real estate agents write into the offer (made by the buyer), items that may lead to misunderstandings. Damage - if, by agreement, a fixture is to be removed, the damage caused by removal must be repaired.

Answer 10

Annual crops such as wheat, corn, and vegetables are considered personal property. As long as the annual crop is growing it will be transferred as part of the real estate, unless a special provision is included in the sale contract.

Answer 11

Perennial trees, perennial bushes, and grasses that do not require annual cultivation are considered real property. If a tree is cut down and sold as firewood, the firewood becomes personal property.

Answer 12

changes personal property to real property.

Answer 13

changes real property to personal property.

Answer 14

The property of a tenant that is installed, and is necessary for their trade or business. A trade fixture is personal property, and can be removed by the tenant any time before the end of the lease term. If a trade fixture is not removed before the expiration of the lease, the trade fixture becomes the property of the landlord at the end of the lease term.

Answer 15

"PETE", (Police Power, Eminent Domain, Taxation, and Escheat)

Answer 16

The right of the government to enact laws and enforce them.

Answer 17

The use of the land Lot sizes Types of structures permitted Building heights Setbacks (how far back from the street an improvement can be built) Density (the ratio of land area to improved area) Types of animals that can or cannot be kept on a property (no pet cougars, etc...)

Answer 18

occurs when a small area of land or section in an existing neighborhood is singled out and zoned differently from that of neighboring properties. For example, a park, school, or small grocery store might be permitted in a residential area if it serves a useful purpose to the neighborhood residents.

Answer 19

the process by which property is acquired through Eminent Domain. This takes place when the owner and the government cannot negotiate a satisfactory voluntary acquisition of the property. This is called a "Taking."

Answer 20

a tax or levy imposed against only those specific parcels of realty that will benefit from a proposed public improvement, as opposed to a general tax on the entire community. *For example, if sidewalks were added in a neighborhood to better serve the community, the government would place a Special Assessment on each home owner fronting the sidewalk to pay for it.

Answer 21

property cannot be without an owner. Therefore, when an owner dies without a WILL and without HEIRS, then the property reverts back to the state. Similarly, if the property is abandoned (through lack of paying taxes), the ownership of the property goes to the state.

Answer 22

means, "I rent the property," it is what we think of as "Renting" or "Leasing." There is usually a definite ending date. Sometimes, these are referred to as "Less than Freehold Estates."

Answer 23

``` Freehold estate: Owns the bundle of rights Highest degree of ownership Has unlimited duration Is inheritable Is subject to only the government powers ```

Answer 24

Freehold estate: based on an occurrence or a non-occurrence of a specified event. Fee simple conditional An estate that dictates, "on the condition that..." An estate that provides the "right to re-enter"  Example: "I will sell my property to you with the condition that alcohol is never served on the premises. If you have a wine and cheese party, then I have the right to take back the property."

Answer 25

the grantor separates his/her fee simple estate into two parts which are: A life estate which is deeded to a life tenant. Reversion estate which is retained by the grantor.

Answer 26

Possesses an incomplete bundle of rights for his/her lifetime. Once the life tenant dies, the life estate portion reverts back to the grantor, who once again has the complete bundle of rights. Grantor -> Life Tenant -> Death of Life Tenant -> Grantor

Answer 27

The grantor separates his/her bundle of rights into two parts: Life estate is deeded to a life tenant. Remainder estate is given to a third party who is known as the remainderman (once the life tenant dies, the remainderman owns the property fee simple, since he now possesses the complete bundle of rights). Grantor -> Life Tenant -> Death of Life Tenant -> Remainderman

Answer 28

Iincomplete bundle of rights: can sell, lease or demise (lease), encumber which means to borrow against, use, enjoy, exclude meaning no trespassing, occupy, cultivate, exchange to defer capital gains, explore, license (give others permission to use, dedicate for streets, schools, and parks, etc., share, mortgage, trade. Remember, if a life tenant does any of the above the person or lender, or any other entity who accepts the use of the property, in any way, only owns or has the right to use it until the death of the life tenant. Because a life tenant only owns an incomplete bundle of rights he/she cannot: Will the property to anyone else. Waste or destroy the property.

Answer 29

This is a life estate, based on the life of another, rather than the life tenant. The life tenant can have the incomplete bundle of rights until that third party dies. A pur autre vie life estate can be either an estate in reversion or an estate in remainder.

Answer 30

Legal Life Estates, also called marital rights. It is not possible to sell the property without the consent of the partner, nor own property in one name only

Answer 31

a wife's interest in the husband's property

Answer 32

a husband's interest in a wife's property

Answer 33

protection against unsecured debts for the party who did not sign for the loan

Answer 34

REVERSIONARY RIGHT OR INTEREST by the LESSOR (OWNER)

Answer 35

Has a definite beginning and ending date. It is not necessary to give notice to the landlord to terminate an estate for years. Renewal is NOT automatic, when this type of lease is over, it's over. Remember this type of lease can be for any amount of time.

Answer 36

Also known as periodic tenancy, or a month-to-month lease. Proper notice is required to terminate (30 days - 60 days or whatever is agreed to in the lease). No definite ending date (this type of lease renews itself for whatever period of time that was called for in the original lease or whatever is agreed upon in the actual lease). Most apartment leases are estates from period to period if the tenant is required to give notice to terminate.

Answer 37

Landlord lets you stay without a lease. Notice can be given by either party without warning. Death of either party immediately terminates an estate at will.

Answer 38

Tenant stays past the term of his lease. This tenant is known as a: Holdover tenant because he/she are unlawfully in possession of the property. The landlord must evict tenant through the courts. Cannot lock the tenant out, turn off utilities, or forcibly remove the tenant.

Answer 39

The landlord's remedy to regain possession of property.

Answer 40

The tenant's remedy if the property is not habitable. The tenant must vacate the property, send notice to the landlord telling him of the problem and put the rent money in escrow until the issue can be resolved.

Answer 41

Apartment. Lessee pays: flat fee. Lessor pays:all expenses

Answer 42

Commercial. Lessee pays: flat fee and a % of expenses. Lessor pays: balance of expenses

Answer 43

Shopping mall. Lessee pays: flat fee and a % of gross sales. Lessor pays: all expenses

Answer 44

long term lease, usually 99 years, tenant may build on a property with a ground lease, but the property is still the landlord's.

Answer 45

lease is based on some type of index such as Cost of Living etc. Usually adjusts upward.

Answer 46

a lease which states a date in the future for a new appraisal. If the appraisal is higher than last appraisal, the rent will go up accordingly.

Answer 47

cost goes up at regular intervals.

Answer 48

the tenant has agreed to pay ownership expenses, usually utilities, property taxes and special assessments.

Answer 49

the tenant pays for the insurance as well.

Answer 50

the tenant also pays for some agreed upon items of repair and maintenance

Answer 51

a clause in a lease in which the parties agree to an adjustment of rent based on set increases in taxes, insurance, maintenance and other operating costs.

Answer 52

A type of clause in a mortgage contract. The nondisturbance clause ensures that the rental agreement between the tenant and the landlord will continue under any circumstances.

Answer 53

currently referred to as MARKET RENT, it is the rental income that real estate can command in an open, competitive market at any given time, in contrast with contract rent, or the income actually received under a lease agreement.

Answer 54

The grantor (seller) decides what type of estate is transferred, (e.g. fee simple estates, life estates, etc.) However, it is the grantee (buyer) who decides how to take title to an estate.

Answer 55

If ONE PERSON takes title to real estate, he or she takes title in Severalty. The root of this word is to SEVER which means to "cut off" everyone else's interests. This is sometimes referred to as "sole ownership" or an "estate in severalty." Corporations always take title to real estate in this manner (in Severalty).

Answer 56

Individual interests in group ownership

Answer 57

Tenants in Common

Answer 58

Tenants in Common

Answer 59

Tenants in Common

Answer 60

Tenants in Common

Answer 61

If other share holders will not buy the interests of a share holder who wants to sell out, and no-one can be found to buy the shares, an individual can request that the courts sell either his/her shares (seek an equitable distribution) or the whole property.

Answer 62

Unity of Ownership

Answer 63

TIME - all owners must take title at the same time. TITLE - one deed transferred property from the grantor (seller) to the grantee (buyer). Remember that only the Grantor (seller) signs a deed to transfer property. INTEREST each must have equal interest. There cannot be unequal interests in a Joint Tenancy. POSSESSION undivided interest in the whole property as in Tenants in Common. If you see a test question about this issue, it is something that Tenants in Common and Joint Tenants have in common.

Answer 64

Joint Tenancy

Answer 65

Joint Tenancy. For example, if you wanted to will real estate to your children as Joint Tenants you would place in your will something like the following: "To Jane and Bill Smith, and to the survivor of them, and his or her heirs and assigns as Joint Tenants, with rights of survivorship, and not as tenants in common."

Answer 66

A joint tenancy is terminated when any of the four unities are broken. One sells his/her interest in the property: If there are three joint tenants and one sells his interest to a fourth party, this fourth party becomes a tenant in common with the remaining two joint tenants. Partition Law Suit: As stated above under Tenants in Common Bankruptcy: Of any one of the Joint Tenants. Foreclosure: Of the property.

Answer 67

``` Essentially this is Joint Tenancy plus marriage! Owners must be husband and wife Right of Survivorship Equal Undivided Interest Inheritable ```

Answer 68

Death of either spouse - survivor now owns the property Divorce - parties become tenants in common Mutual agreement - agree to sell the property Foreclosure No Right of Partition - cannot sell the property without your spouse

Answer 69

Yes, remember that married couples may for personal reasons take title as Tenants in Common, or as Joint Tenants.

Answer 70

Another form of ownership in some states for married people. Laws have Spanish origin and are therefore more prevalent in the Southwestern United States. In states which recognize community property laws (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin), there are two types of property: Community property is anything which was acquired during the marriage or commingling of the properties. Separate property is anything that either spouse brought to the marriage, or anything that was acquired before the marriage, or acquired by gift or inheritance.

Answer 71

One who purchases property for another so as to conceal the identity of the real purchaser; a dummy purchaser; a nominee, a front.

Answer 72

An encumbrance is anything that burdens or limits your title to a property. Or, you may think of it as a right someone else has in your property. The following are examples of encumbrances: Liens Easements Encroachments Deed Restrictions Licenses

Answer 73

a charge against the property that provides security for a debt, usually money.

Answer 74

iens applied to a specific piece of property and affect only that piece of property. (Example: a property tax lien).

Answer 75

liens against the person and all assets (all real and personal property) as a result of a lawsuit when the court awards a judgment.

Answer 76

Filed when a workman does repair or construction work on your home. Also filed when a lumberyard or supplier delivers construction materials to your home. Are considered specific liens & involuntary And they are statutory, meaning they are created by state and/or local rules for enforcement.

Answer 77

a bank loan you take out to buy the property. Voluntary & equitable

Answer 78

when the government places a charge on the property since you did not pay income tax. Involuntary & statutory.

Answer 79

a loss in a lawsuit resulting in the charges being brought against everything you own. Involuntary & equitable.

Answer 80

a mortgage lien. All others are involuntary.

Answer 81

liens arising out of a written contract that shows an intention of the parties to charge some particular property as security for a debt or obligation. Example: a mortgage lien or a judgment; all others are statutory liens (provided for under state law).

Answer 82

Must be recorded only for the amount charged for the work completed. Must be filed within a specific time period as determined by state law. Must be on improved property only (land can be improved). Anyone can file if they have supplied materials or worked on the property including surveyors, appraisers, graders, lumberyards, carpenters, etc.

Answer 83

court retains custody of the property until suit is decided; prohibits the property from being sold.

Answer 84

(means "pending litigation") - recorded at courthouse; renders a property unmarketable.

Answer 85

court decision on the rights and claims of the parties in a suit.

Answer 86

court order authorizing a sheriff or other officer of the court to sell the property to satisfy a judgment.

Answer 87

Cost of the Sale Property Taxes - This lien does not have to be recorded to be valid and/or collectable. General (Ad Valorem Taxes) Special Assessments First Mortgage or Deed of Trust All other mortgages and other types of liens in ORDER OF PRIORITY, or the date and time of recording, including IRS, mechanics, materialman etc.

Answer 88

Failure to completely pay off the loan on the courthouse steps will cause the debt holder to file a deficiency judgment against the borrower and then the total assets of the borrower are available for collection by the debt holder (such as wages, cars, boats, campers as well as the proceeds from the sold house).

Answer 89

give someone else the right to USE a part of your property while you still retain the ownership rights. An easement does not give any possessory rights, just the right of ingress (enter) and egress (exit). For that reason, an easement is said to be an interest in property but not an estate.

Answer 90

the right to use the land of another (adjoining or nearby land usually). The easement right transfers with the dominant tenement (property using the easement). It also remains if the servient tenement (property being used) is transferred to another owner.

Answer 91

benefits an individual and is not tied to the land. Easements in gross are typically utility easements, although some are personal easements in gross. It is a personal right (not merely permission) to use someone’s land and does not have a dominant estate. An easement in gross does not transfer when the property transfers, and the individual with the easement cannot transfer the easement to another party.

Answer 92

n easement arising by implication from the acts or conduct of the parties. For example, a person acquiring mineral rights on a property also acquires an implied easement to enter the property for the purposes of removing the minerals.

Answer 93

The creation, on behalf of the grantor, of a new right issuing from what was granted. A reservation thus is something that did not exist as an independent right before the conveyance. For example, I convey to you a 5 acre parcel but I reserve a life estate until I die. I would have reserved easement rights of egress and ingress.

Answer 94

An easement created by a court of law in cases of justice and if necessity dictates it, especially in a classic landlocked situation.

Answer 95

A judicial or administrative proceeding to exercise the power of eminent domain, that is, the power of the government (federal, state, local, improvement district) to take private property for public use. The agency taking the property is the condemner, and the person whose property is being taken is the condemnee. In the taking of private property for public use, a fee simple estate or any lesser right, such as an easement, may be acquired. A common example of condemnation is the taking of an owner's access to a street entrance when the county builds a highway or dedicates the area for county use.

Answer 96

An express contract (easement) exists when the parties state the terms and show their intentions in words. An express contract can be either oral or written. Like all real estate contracts, express easements should be reduced to writing to be enforceable in a court of law. (Statute of Frauds)

Answer 97

an easement by prescription is created when someone uses the property of another repeatedly over a period of time without interruption and without permission of the owner. It is similar to taking ownership by adverse possession, except that an easement is created rather than ownership.

Answer 98

A developer “dedicates” an easement for use by all area homeowners (i.e., access to a lake or a walking path).

Answer 99

Appurtenant In Gross Prescription Necessity

Answer 100

who is the person benefited by the easement.

Answer 101

who is the person who is burdened by the easement.

Answer 102

NOT tied to any land, but instead owned by a person or company. For that reason they are considered a mere personal interest. Gross easements are usually commercial in nature and can be sold to others.

Answer 103

Easements by necessity are also sometimes referred to as an "Easement by implication" and are created by a court of law. An easement by necessity would be granted to a landlocked property. A property can be landlocked but there must be a way to get out! An example of an easement by implication would be when someone sells land, but retains the mineral rights. There is an implication that the seller will have the right to use the land to obtain the minerals.

Answer 104

Easement by prescription is when the claimant has used the land for the time period set by law. If this time required has been fulfilled, the claimant can claim the right to use the land foreve: Possession - an individual must be in possession of the property for the prescribed period of time required by the state where the property is located. Open - the individual must make "open use" that is, "He/she must wave their flag to let the whole world know that they are in possession of the property." Actual - Must actually be in possession of the property for the prescribed period of time. Continuous - Once again for the prescribed period of time required by law. Hostile - Possession is both exclusive and hostile to the title of the owner, without the permission of the owner of the property, and evidencing an intention to maintain the claim of ownership against all who may contest it.

Answer 105

``` Purpose no longer exists Abandonment Merger of the Parties Destruction Quit Claim Deed (explained later in the course) Excessive use ```

Answer 106

an unauthorized intrusion of a building or other improvement onto another person's land.

Answer 107

A restriction is a use encumbrance. Restrictive covenant limits the use of a property. Usually placed by the grantor in a deed, thereby binding future owners.

Answer 108

State things you can never do. (No fences, no dog runs, etc.).

Answer 109

State things you must abide by. (Set back requirements, minimum square footage, front of house must be brick, etc.) Who can enforce these restrictions? Enforcement of restrictions is always done by a court of law.

Answer 110

Any restriction that violates public policy (State or Federal law) or is discriminatory is not enforceable. Other unenforceable restrictions include: Any restriction that limits your right to sell at a future date. For example, if the following statement was written in a deed it would be an illegal restriction that would violate the Federal Fair Housing Laws. "The owner of this property you can only sell it in the future to his/her relatives".

Answer 111

It is not assignable. The person who gave the license has the right to revoke it at any time. Death terminates the license.

Answer 112

Along a NAVIGABLE river, (commercial traffic) one owns to the water's edge. Along a NON-NAVIGABLE stream one owns the land to the center of the stream. (The government owns the water.)

Answer 113

A state's government can give permission to a non-adjacent land owner for crop IRRIGATION and other uses.

Answer 114

Seashore and beaches. | Along large NAVIGABLE lakes and oceans one owns to the average high water mark.

Answer 115

the increase of land created by deposits of soil by the natural action of the water.

Answer 116

The decrease of land by the gradual wearing away that is caused by flowing water.

Answer 117

Is the "sudden" loss of land by an act of nature (e.g. the ocean washes away the water front during a typhoon).

Answer 118

Increase in land due to the receding of water from the shore.

Answer 119

An Alluvial plain is a delta area where soil deposits from a river; Alluvion is the accumulation of soil, rock and other matter from the movement of water.

Answer 120

describes condo air space ownership.

Answer 121

"Interval Ownership" is especially popular for vacation resort areas. A buyer purchases ownership of a property for a specific period of time each year. Time share "ownership" is fee simple ownership. Time share "use" consists of the right to occupy and use the facilities for a certain number of years. When the time is up the owner has the right to terminate the use. Time share usage is not a fee simple estate.

Answer 122

when many investors bring in additional investors as a means of raising money and spreading the risk of the investment.

Answer 123

a business organization where two or more persons carry on a business as co-owners and share in the business's profits and losses.

Answer 124

A form of business organization in which two or more co-owners carry on a business for profit. All general partners participate in the: Management of the partnership. Full liability for the debts, any losses, and obligations of the partnership.

Answer 125

Must have at least one General Partner - The remaining partners are known as "silent partners." Limited partners are only investors, and have no say in the organization and direction of the operation. A limited partner shares in the profits and compensates the general partner for his or her efforts out of such profits. A limited partner cannot be held liable for any debts beyond their investment.

Answer 126

Severalty A Sub-Chapter S corporation is a business organization that does business as a corporation, but is treated as a partnership for tax purposes.

Answer 127

another term for "transfer or convey." It is the "right and evidence of ownership of the land."

Answer 128

a document that transfers ownership from grantor to grantee. | A deed is evidence of title just as a marriage license is evidence of a marriage.

Answer 129

Premise: Grantor, grantee & accurate legal description Habendum: Consideration Granting Clause - (Words of Conveyance) Habendum Clause - (Defines Ownership Taken By the Grantee) In a deed, the words that clarify the purpose of the deed, with the phrase: "TO HAVE AND TO HOLD". Designation of any limitations Exceptions and Reservations Testimonium: Signature of Grantor (Acknowledgment). Delivery by the grantor & acceptance by the grantee. The date is not a requirement of a valid deed, but when a deed is recorded it is dated by the recorder of deeds.

Answer 130

"I own it and I can convey it to you." A general warranty deed contains each of the five "covenants" or promises of the seller

Answer 131

I guarantee that I own it and have the right to sell it."

Answer 132

"No one will interfere with your possession or right to use the property."

Answer 133

"I promise there are no hidden liens or encroachments other than those stated in the deed."

Answer 134

"If there is a defect, I promise to take care of any problems."

Answer 135

"These promises go back as far as there were public records."

Answer 136

"I promise you that it's been clear since I've had it. I'm not making any promises before that." Seller is only making these promises during the time period in which he/she owned the property. "I will defend and correct any flaws in the title that occurred during the time that I owned it, but not before."

Answer 137

"I own it... but that's about it! I'm not going to make any promises."

Answer 138

"If I own it..... and I'm not saying I do.... then I give you my interest." Offers least amount of protection for the buyer. Grantor makes absolutely no promises. A quit claim deed is often used to clear up a misspelling before it becomes a cloud on the title.

Answer 139

A deed can convey (transfer) title. The difference in the deeds is in the promises a seller makes should there be a problem. Remember that all of the deeds can transfer title from the grantor to the grantee.

Answer 140

Then there is a CLOUD on the title that must be cleared up with a QUIET THE TITLE LAWSUIT - action in court to either establish title or to remove a cloud on a title.

Answer 141

States that oral agreements, promises and inducements made by the parties prior into entering into a written contract may not be used in court to dispute or contradict some written provision expressed in the contract.

Answer 142

A state law that requires certain contracts to be in writing and signed by the party to be charged (or held) to the agreement in order to be legally enforceable in a court of law.

Answer 143

Legal doctrine used to bar a claim asserted after the passing of a statutory period of time.

Answer 144

No, a deed does not need to be recorded to be valid between the parties, but recording does protect the ownership interests of the Grantee (Buyer). Most buyers do record their deed in the public records, so they are documented as the owners of their piece of property. It is not necessary for a date to be on a deed for it to be recorded. When a deed is recorded the Recorder of Deeds will date it. Also, a deed would be presumed to have been delivered when it has been recorded.

Answer 145

Yes, the easement is valid between the parties, but once again it is best to record easements to prevent misunderstandings at a later date.

Answer 146

Establishes priority - who was the first party granted the property from the grantor? Provides constructive record for any interested party to see who is the owner of record. Transfer of Title to real property is conveyed by deed when it is delivered and accepted by the grantee. Remember just signing a deed is not enough to transfer the title from the grantor to the grantee. The grantor must deliver the deed to the grantee, and the grantee has to accept it or the transfer does not take place.

Answer 147

Constructive notice (recording) is information that can be obtained from the public records at the courthouse.

Answer 148

Actual notice is that which is legally known, but not recorded. For example, posting or advertising in the newspaper, or that which can be seen by observing such as an unrecorded easement.

Answer 149

let the "buyer beware" Means that the buyer or his representative should check the records for any problems and physically examine the property to make sure everything is okay.

Answer 150

Although it doesn't have to be recorded to be valid, if you want to record it, it must be notarized. The person must go before a notary public and ACKNOWLEDGE that the signing of the deed was a voluntary act.

Answer 151

Sometimes property is transferred without the voluntary act of the grantor. The government has interfered or the owner has died.

Answer 152

The decedent died intestate (without a will) and without heirs the property becomes owned by the government

Answer 153

``` (Very similar to easement by prescription) Possession Open Actual Continuous Hostile to the owner's title ```

Answer 154

Two or more owners working together to claim adverse possession.

Answer 155

Is a court action used to clear a cloud on a title.

Answer 156

Color of title means that a title appears to be clear but it is not; always used with adverse possession.

Answer 157

Foreclosure happens when property is transferred by non-payment of a debt secured by real estate.

Answer 158

then the property escheats back to the state.

Answer 159

then the property will be transferred according to the laws known as the Statute of Descent and Distribution.

Answer 160

the estate must be probated before the heirs can take possession of the property.

Answer 161

dying with a will.

Answer 162

dying without a will.

Answer 163

``` Legal Age Sound Mind Proper Wording No undue influence Witnesses Signed by Testator ```

Answer 164

maker of a will.

Answer 165

To give real estate through a will

Answer 166

The transfer of personal property through a will

Answer 167

Amendment to a will.

Answer 168

A will in the testator's own handwriting. Not legal in some states.

Answer 169

A deathbed will, given orally by testator, written down by nurse, and witnessed by doctor.

Answer 170

a brief history of all recorded instruments affecting title to a parcel of land.

Answer 171

the record of property ownership connecting the present owner to the original source of the title.

Answer 172

indicates a property is free and clear of significant liens, encumbrances, and reasonable doubt as to true ownership.... has easy transferability.

Answer 173

the property is free and clear of problems and can be easily sold, thus giving value to it.

Answer 174

The owner (or title company) must file a Suit to Quiet the Title.

Answer 175

covers only those things that appear on the public record.

Answer 176

covers things that do not appear on the public record, such as encroachments.

Answer 177

belongs to owner of property, does not decline in value from original value.

Answer 178

belongs to lender of the property; declines in value as the loan decreases.

Answer 179

TITLE INSURANCE PREMIUMS are paid on the day of closing of a transaction. It is a one time charge that generally will protect the insured against losses arising from title defects.

Answer 180

The substitution of a third person in place of a creditor to whose rights the third person succeeds in relation to the debt.

Answer 181

A legal system of land registration used to verify ownership and encumbrances without the necessity of an additional search of the public records. Title insurance can protect the insured against losses from title defects and hidden risks. The title company will agree to defend the policy holder's title in court against any lawsuits that may arise from defects covered in the policy with the exception of a list of conditions of and exclusions to coverage.

Answer 182

one of utmost trust. When one person is empowered by another to represent him in any type transaction, it is called an agency relationship. Money is not the issue, but rather the relationship of the parties.

Answer 183

An oral or written contract in which the parties state the contract’s terms and express their intentions in words. We agree orally the terms of our agency relationship wherein you will hire me to market your property or represent you as a buyer’s agent. In most states it is required that these agreements are committed to writing to prevent misunderstandings.

Answer 184

A contract under which the agreement of the parties is demonstrated by their acts and conduct. Example: “I’ll help you buy a house so don’t work with anyone else because I will be your agent. Let's go look at some houses today.”

Answer 185

An actual agency relationship that arises by the actions of the parties rather than by express agreement. For example, the owner of a property knows a broker is showing the owner's vacant lot to prospective buyers without authority to do so. Unless the owner takes steps to stop such unauthorized showings, the law considers that third parties have a just cause to believe the broker to be the "owner's broker." This situation is called an ostensible agency because on the surface an agency appears to exist. Once this type of agency is created, the owner is prevented by estoppel* from denying its existence.

Answer 186

A legal doctrine by which a person is prevented from asserting rights or facts that are inconsistent with a previous position or representation made by act, conduct or silence.

Answer 187

A method of creating an agency relationship in which the principal (seller or buyer) accepts the conduct of someone who acted without prior authorization as the principal’s agent. Example: A licensee who shows a property without the owner’s prior approval, and then the owner agrees to work with the agent to sell the property.

Answer 188

CLIENT. Example: The seller of a property who has signed a listing agreement has agreed to be your client.

Answer 189

CUSTOMER! Example: You are holding an open house on your listed property, and a buyer walks in who is interested in purchasing the property. You must disclose to the buyer that you represent the seller and explain customer relationships. In some States you could be a Dual agent or a Transactional Broker (Salesperson). See the State section of this course for an explanation of the rules in your State.

Answer 190

Handles all delegated business of principal. The Universal Agent has Power of Attorney which is sometimes called an Attorney-in-Fact. An example would be a person who is hired or appointed by an estate to handle the real estate affairs of a deceased individual.

Answer 191

Handles multiple transactions of a client. The best example in real estate would be property management.

Answer 192

Handles one transaction for one seller of one property. The best example would be a licensee who is hired to sell one property for a client.

Answer 193

When the real estate licensee is a partner in the ownership of the property. This type of agency does not allow for cancellation of listings as other types do. Example: I own 50 acres of ground that I will sell to a builder with the understanding that I will list his/her properties for sale until they are all sold. I cannot be fired, and if I die my estate will be entitled to any fees earned from the remaining sales. In most States, listing agreements must have a definite beginning and ending date. In this case, the listing would have to be for the time period estimated to sell all the properties.

Answer 194

(C O A L N) Care: Taking due care of that which is entrusted to the agent, including writing a contract in such a manner so that the interests of the Principal are protected. Obedience: Lawful instructions of the Principal are followed. Accounting: Handling money (including escrows) with care and closing statement figures. Loyalty: Putting the principal first, confidentiality, and avoidance of dual agency unless agreed to by all parties. Notice (sometimes called Disclosure): Material facts disclosed as well as relationships, important business facts for the principal to make decisions upon.

Answer 195

Honesty – While a licensee does not owe a “customer” a fiduciary duty we do have an obligation to be honest. If we know of a latent defect or a problem with a property it must be disclosed to the purchaser (customer). Accuracy – A licensee should be sure of the statements made to a customer. For example, if a customer wants to know the size of a lot the best answer would be, “It says in the MLS that the lot size is 100 X 200, but it would be best to have a survey to determine the exact dimensions. Should we write that into your offer and make the purchase contingent upon the lot size being 100 X 200?” Disclosure of defects – Example: If a licensee is aware of any latent (hidden) defects in a property such as leaking basement, flood plain, foundation problems, termites, etc. these issues must be disclosed to a customer. If the seller, your client, does not want to disclose these issues, it is best not to accept the listing on the property. An acronym to help you remember the duties you owe a "customer" is HAD which stands for Honesty, Accuracy, and a Disclosure of Defects.

Answer 196

is something that is known to the seller, but not to the purchaser and not readily discoverable by inspection. If the seller or the broker is aware of such a defect, he/she must disclose this to the buyer. Failure to disclose latent defects is misrepresentation and the buyer may rescind the contract. Example: If a licensee is aware that the basement in the property leaks, this information must be disclosed to a potential purchaser regardless of an agency relationship that exists.

Answer 197

Seller and THE Broker.

Answer 198

Listing broker is always entitled to a fee regardless of who procures the buyer. Offers the most protection to the broker Owner of the property must pay a commission to the listing broker regardless of who sells the property. A selling broker will be compensated by the listing broker. Brokers cooperate through the MLS (Multiple Listing Service) and agree to split commission upon bringing a ready, willing, and able buyer to the seller. The cooperating license should make his/her agency or non-agency relationship clear when calling for an appointment (Buyer agent, Transaction broker, Sub-agent of the seller or dual agent). Listing in most states must have a definite Beginning & Ending date so an: Automatic Extender clauses are not legal is many States. An "extender" clause automatically extends the listing for a set period of time or renews the listing until the parties agree to terminate their agreement. In most States all listings must have a definite expiration date - no automatic extensions. All listings expire at midnight of the date of expiration unless otherwise noted. Check the State specific section of this course to determine the rules in your area.

Answer 199

Only one broker is allowed to act on behalf of the principal; however, if the owner sells the property him/herself, no commission is paid to the broker. Again, selling broker will look to the listing broker for compensation. The seller can sell the property him/herself and pay no commission under an Exclusive Agency!

Answer 200

Seller retains the right to hire any number of brokers to sell his property. Whoever provides seller with a ready, willing and able purchaser is entitled to a commission. If the seller sells the property without the aid of a broker, he/she pays no commission.

Answer 201

ILLEGAL IN MOST STATES (frowned upon in others) Listing which states that seller is to receive a certain amount of money from the sale and any amount over that amount will be paid to the broker as a commission.

Answer 202

An agency relationship in which the agent is given an estate or interest in the property. The principal cannot revoke this type of agency, nor is it terminated upon the death of the principal. For example, a broker may supply the financing for a new home development provided the builder agrees to give the broker an exclusive listing to sell the homes that will be built.

Answer 203

Fulfillment of the purpose of the listing (performance) - The broker sells the property and the property transfers. Expiration of time as stated in the agreement - The seller agreed to a three-month listing and the property did not sell. Breach or cancellation by one of the parties (renunciation by the broker or revocation by the principal). While either party may cancel a contract there may be some obligations that must be fulfilled. Since this is a contractual agreement if the seller cancels the broker may decide to sue for damages (expenses etc.). Transfer of title to the property as operation of law, such as bankruptcy or foreclosure - if the seller loses the property due to one of these causes the listing is automatically cancelled. Mutual consent - the broker (salesperson) and the seller mutually agrees that it is in the best interest of all parties to cancel the listing. Death or incapacitation of either party (seller or the broker dies). Destruction of the property or a change in property use by outside forces (such as a change in zoning, condemnation, house burns down)

Answer 204

An oral or written contract in which the parties state the contract's terms and express their intentions in words. Example: "I want to buy your house for $100,000, and I want you to leave the microwave oven, the refrigerator, and the riding mower. Let's put it in writing so there are no misunderstandings."

Answer 205

This is a contract that is unwritten and inferred from the actions of the parties. Such an agreement is created by neither words nor writing, it is inferred from the conduct of the parties. This type of contract is also one in which the terms are understood and agreed to, but not fully stated in the document. For obvious reasons, this is not a very business like or effective way of transacting real estate business.

Answer 206

In which both parties promise to do something (a promise for a promise). Example: A contract between a seller and a buyer.

Answer 207

In which one party promises to do something if the other party acts

Answer 208

Everything has been done, all promises fulfilled and have performed under the contract. Example: A closing has taken place, and title has transferred from the grantor to the grantee.

Answer 209

Something remains to be completed in the contract. Example: the closing has not taken place yet! The grantee (buyer) has equitable title and the grantor (seller) holds legal title. When the closing takes place and title transfers the buyer receives legal title to the property, and the contract has been executed.

Answer 210

Most contracts require a valuable consideration, such as a promise to pay money. Example: the purchase price.

Answer 211

The consideration would be "for love and affection". Example: I will give this house to my daughter in return for her "love and affection."

Answer 212

A promise by one party to act or perform in a specified manner provided the other party acts or performs in the manner requested. Until the buyers and sellers have both signed the papers, it is merely an offer. Once an offer is signed, it must be communicated back to the person who made the offer (offeror) before it becomes a contract. An offer may be withdrawn prior to being accepted at any time! Once it is accepted it is a contract between the parties.

Answer 213

means that the work must be performed within a certain time frame or the party is guilty of breach of contract. Example: The closing is set in a contract for a specific date, time and location. If either party to the contract does not appear they are in breach of contract.

Answer 214

Transfer of rights or duties to a third party and original party remains secondarily liable. Example: A seller and buyer have agreed to close on the purchase of a property. The buyer decides to sell or give his/her rights under the contract to another party. The contract may or may not allow this "Assignment" without the permission of the seller. If the new purchaser does not close the original purchaser is still liable.

Answer 215

Substituting a new contract for an old one. Example: I decide to sell my property to you, and you want to assume my existing loan. If I allowed you to take over my existing loan "Subject to" the existing loan without receiving a "Novation" from the bank then I would be responsible if you default. If I allow you to "Assume" the loan, with a "Novation" from the bank, you would be primarily liable, and I would be released from liability.

Answer 216

Cash deposit that shows buyer's intention to carry out the terms of the contract. Example: An earnest deposit can be taken in any form. Cash, check, personal property, a boat, or a diamond ring would be examples of possible earnest deposits that might be used. The key issue here is notification to the seller of the form of the deposit. The seller must agree and understand that the deposit was in the form of "Two Pig

Answer 217

(Also called qualified acceptance) Any attempt by seller to change the terms proposed by the buyer. This may be revoked at any time prior to acceptance. Original offer made is terminated upon counteroffer. When a buyer makes an offer he/she is called the "Offeror" and the seller is the "Offeree." If the seller makes any changes to the offer he/she now becomes the "Offeror" and the buyer becomes the "Offeree." Remember, all parties must be notified of the agreement of the other party before the offer becomes a contract.

Answer 218

Seller agrees to an offer exactly as it was made. Example: No changes are made to an offer. The seller signs the offer as written. Remember, that this does not become a contract until the buyer is notified that the seller agreed to the terms of the offer.

Answer 219

Amount of money and or personal property agreed upon as settlement if one party doesn't live up to the terms of the contract. Example: The buyer does not show up to close the transaction. The contract will call for what the buyer will lose as "Liquidated damages," and who will get the money and or personal property agreed upon. If a broker produced a ready, willing and able buyer usually the contract will call for some portion of the "Liquidated damages" to go to the company and the balance to the seller.

Answer 220

``` An agreement to keep open, for a set period, an offer to sell or lease real property. An option can be used to give the buyer (Optionee) time to resolve questions of financing, title, zoning, etc., before committing the buyer to purchase. An option merely creates a contractual right; it does not give the buyer (Optionee) any estate in the property. Although the owner (Optionor) is obligated to sell if given notice by the buyer, the buyer (Optionee) is not obligated to purchase. An option is an example of a "Unilateral contract". The Optionee (maybe buyer) must give the Optionor (seller) some form of consideration, (usually money) which is forfeited if the buyer decides not to purchase the property. ```

Answer 221

The interest buyer has in property between time of acceptance of contract and closing. Example: In a contract or a contract for Deed the seller keeps legal title until final closing, and the purchaser receives equitable title. Equitable title gives the purchaser the right to receive legal title, upon final closing.Until the time of final payment, the buyer retains equitable title, described as the right to obtain legal title in the future.

Answer 222

When parties to a real estate contract put their agreement into final written form, the parol evidence rule prevents the admission into court of evidence of any prior or contemporaneous oral or written negotiations or agreements that varies or contradicts the terms of the written contract. No oral agreements allowed! Example: We orally agree that you will leave some personal property (lawn mower, washer and dryer, refrigerator etc.), but we do not put it in the written contract or any other written document. The "Parol Evidence Rule" says that the courts will not rule on this issue

Answer 223

The parties state the terms in words, either oral or written.

Answer 224

The agreement of the parties is demonstrated by their conduct and is not expressed in words.

Answer 225

Buyer may cancel the contract and recover the earnest money. Buyer may file a suit for "specific performance" to force the seller to convey the property. The basis for an equity court's jurisdiction in breach of a real estate contract, (suit for specific performance) is the fact that land is unique and mere legal damages would not adequately compensate the buyer for the seller's breach.     Buyer may sue the seller for compensatory damages

Answer 226

Seller may declare the contract forfeited (seller usually has the right to retain earnest money). Seller may rescind the contract and return all payments made by the buyer. Seller may sue for specific performance. Seller may sue for compensatory damages.

Answer 227

An equitable doctrine used by courts to bar or prevent the assertion of a right or claim because of undue delay or failure to assert a claim or right. Latches, is similar to the statute of limitations, which is a legal (as opposed to an equitable) doctrine used to bar a claim asserted after the passing of a statutory period of time.

Answer 228

one who preserves the value of an investment property while generating income as an agent for the owners. becomes a fiduciary when a management agreement is signed with an owner

Answer 229

``` Property Description Term of Agreement Definition of Responsibilities Extent of Authority Reporting Requirements Management Fee Allocation of Costs ```

Answer 230

A broker is required to deposit into an escrow account, other than the property management escrow account, security deposits and any rent, other than current rent, and to maintain these funds intact, and The property management escrow account is for current rents and management

Answer 231

A contract provision permitting an adjustment of certain payments either up or down to cover certain contingencies

Answer 232

``` Budgeting Expenses Renting the Property Maintaining Good Relations with the Tenants Maintaining the Property Handling Environmental Concerns Adjusting rates Showing units ```

Answer 233

General agent because of the authority vested in him/her by the principal.

Answer 234

o realize the: Maximum Profit on the property that is consistent with the owner's instructions.

Answer 235

Advertising Property - MUST BE DONE IN ACCORDANCE WITH FAIR HOUSING LAWS. Evaluating the rental market - Survey Competitive Properties in terms of rental rates, amenities included, number of vacancies, etc. Obtain tenants - Through signs, newspaper ads, flyers, cold calling, etc. Screening Applicants - Cannot use any screening criteria that violate Federal Fair Housing Laws Tenant Complaints and Conflicts among tenants - Remember that you are in the service business and by providing prompt service on complaints and handling conflicts in a judicious manner, you stand to have a greater tenant retention rate that translates into a higher return for your owner. Fiduciary Responsibility to Owner - Must always act in a manner that maintains your fiduciary responsibility to owner: COALNFees, security deposits, and rent collection

Answer 236

You owe a tenant the same duties that you owe a buyer when you are the seller's agent. Honesty Accuracy Disclosure of Material Facts

Answer 237

``` Race (No exceptions or exclusions!!!!) Color Religion National origin Sex Handicap Familial Status ```

Answer 238

While there are exceptions in other areas, as described below, there are absolutely no exceptions or excuses for racial discrimination. Sale or rental of a single family home by an owner if: The owner does not own more than three homes at the time AND THE PROPERTY IS OWNER OCCUPIED! The owner does not use discriminatory advertisements. The owner does not use a real estate agent.Rental of units in an owner-occupied one-to-four family dwelling. (If the property is bigger than a four family there are no exceptions.) Religious organizations may restrict housing to members of same religious organization. Non-profit religious organization can add a surcharge to the sale or rental of a property to a person that does not belong to their religious group, as long as the membership in the group is not limited by race, color, sex, and national origin. Private clubs may restrict to members only. Senior citizen projects: Residents must be at least 62 years old or 80% of the residents must be at least 55.

Answer 239

he licensee routinely assists sellers in determining whether a proposed buyer in a land contract or purchase-money mortgage is creditworthy.

Answer 240

The original cost basis of a property reduced by certain deductions and increased by certain improvement costs.

Answer 241

A temporary or permanent increase in the worth or value of property due to economic causes; the opposite of depreciation.

Answer 242

The dollar amount that the Internal Revenue Service attributes to an asset for the purposes of determining annual depreciation or cost recovery, and gain or loss on the sale of an asset.

Answer 243

Money or other property that is not like-kind, which is given to make up any difference in value or equity between exchanged properties.

Answer 244

The spendable income from an investment after deducting from gross income all operating and fixed expenses, including principal and interest.

Answer 245

An expense deduction taken for an investment in depreciable property to allow for the recovery of the cost of the investment. Depreciation cannot be taken on a personal residence.

Answer 246

(Called a 1031 Tax Deferred Exchange)- A transaction in which all or part of the consideration for the purchase of real property is the transfer of property of "like kind" (real estate for real estate)

Answer 247

The impact of borrowed funds on investment return. The use of borrowed funds to purchase property with the anticipation that the acquired property will increase in return so that the investor will realize a profit not only on his/her own investment but also on the borrowed funds.

Answer 248

Refers to tax provisions that enable the taxpayer to defer paying taxes in certain situations such as the exchange of real property.

Answer 249

The taxable profit derived from the sale of a capital asset. The capital gain is the difference between the sales price and the basis of the property, after making appropriate adjustments for closing costs, capital improvements and allowable depreciation.

Answer 250

The Internal Revenue Service today issued guidance in the form of both final and temporary regulations related to excluding gain on the sale of a principal residence. A 1997 law substituted an exclusion of up to $250,000 ($500,000 for a married couple filing jointly) for the old "replacement residence" rules. Unlike a previous once-in-a-lifetime exclusion for senior citizens, the new exclusion may be claimed repeatedly, but usually only once every two years.

Answer 251

requires that the homeowner must have insurance to cover 80% of the replacement cost; otherwise the insurance company will not pay for the replacement of the building if it is lost to fire. A home has a market value of $100,000, the coinsurance clause is 80 percent, ($100,000 X 80% = $80,000) and the homeowner only carries $60,000 in insurance. If the home owner only carries $60,000 in insurance he/she is under insured. To determine how much under insurance in this case divide 60,000 actual coverage by 80,000 amount required by the insurance company = 75% coverage. In the event of partial loss of $30,000, the insurance company's liability is only $22,500, which is calculated as follows: $30,000 insurance coverage x 75% = $22,500 Company's limit of liability $80,000 insurance required X 75% coverage = 60,000 -$30,000 actual loss = 30,000 X 75% coverage = $22,500 Insurance companies will not pay more than face value of the property, nor will they pay more than percentage of coverage to market value.

Answer 252

``` Care Obedience Accounting Loyalty Disclosure ```

Answer 253

Lot lines, dimensions and position of a home on the lot Existing encroachments Easements Compliance with setbacks and zoning requirements The survey is usually paid for by the buyer.

Answer 254

The type of survey used to determine boundaries of parcels for defining ownership

Answer 255

sometimes called mortgage note (Pledge) is the promise to repay the debt. It is an I.O.U. It is the primary evidence that there is a loan between the lender and the borrower.

Answer 256

If a person only signs a note, without using property as collateral. a long-term note that is not secured by a specific property. A promissory note is a negotiable instrument, which means that the lender can sell the note to a third party.

Answer 257

most real estate loans

Answer 258

both used for the same purpose; they create the collateral for a loan by promising the property in case of default by the borrower. The major differences in the two instruments are the number of parties involved, and the method of foreclosure on default.

Answer 259

Trustor, Beneficiary, Trustee

Answer 260

Bank Vice President or anyone else designated by the lender. The trustee holds naked legal title and has the right to foreclose, with directions from the beneficiary. This is often referred to as non-judicial foreclosure.

Answer 261

the promise to repay (Promissory Note) from the borrower.

Answer 262

the security (Deed of Trust) for the debt.

Answer 263

When the borrower has paid the entire balance, the lender is required to execute a satisfaction of mortgage or a release deed of trust. When a mortgage or deed of trust is paid off, a defeasance clause allows the lender to release the mortgage or deed of trust rights and issue a Satisfaction Piece.The Satisfaction Piece puts on public record that the loan was paid, and that the lender no longer has a lien on your property. Recording the satisfaction piece releases the Mortgage or Deed of Trust lien.

Answer 264

A certificate issued by the mortgagee when a mortgage is paid in full. Upon payment in full of the debt secured by a mortgage, it is said that the mortgage is "satisfied."

Answer 265

A document used to transfer legal title from the trustee back to the borrower (trustor) after a debt secured by a deed of trust has been paid to the lender (beneficiary.)

Answer 266

clause in a Mortgage or Deed of Trust wherein a subsequent mortgage or deed of trust takes priority. Example, the first deed or mortgage holder becomes the second deed or mortgage holder in the order they were recorded in priority - the second becomes the first. This clause is further defined as a "change in priority positions between holders of liens on a Mortgage or Deed of Trust in case of foreclosure."

Answer 267

when the buyer takes over the original payment, the original loan and the original interest rate of the seller's existing loan

Answer 268

If the clause in the deed states that the buyers are purchasing the property "subject to the existing loan" the buyers acknowledge the existing loan, and promises to pay the obligation. If the buyer does not pay the original borrower will be held responsible. If the original borrower (grantor) does not pay the buyer (grantee) will lose the property, and thus his or her equity, in a foreclosure sale.

Answer 269

the purchaser is accepting the debt and is, therefore, personally liable for the entire debt. The bank could require the original seller to remain secondarily liable if the new borrower does not pay. The seller would no longer be liable if the lender will consider a novation*.

Answer 270

if recorded, must be recorded in the: City, county or municipality where the property is located; Junior mortgages are second mortgages or deeds of trust. The priority of junior liens is determined by the date and time of recording.

Answer 271

Cost of Sale - advertising, attorney fees, trustee fees, etc. Special assessment taxes, and general taxes which are called "ad valorem", according to value taxes, are paid after the costs of the sale. The first mortgage, which is determined by the order of recording. Whatever is recorded next would then be paid because of a foreclosur

Answer 272

Judicial foreclosure is required. Property used as security for a debt is sold to satisfy the debt in the event of default in payment of the mortgage note or default of other terms in the mortgage document. Once there is a foreclosure, this right is terminated!

Answer 273

Non-Judicial foreclosure is required. The lender does not have to go through the courts to foreclose; and it is therefore, a quicker process. The trustee, in a Deed of Trust, holds, "Naked Legal Title" (one without possessory rights), and can claim the property without going through the courts.

Answer 274

gives the borrower the right to clear up the debt prior to the foreclosure sale. Before foreclosure the mortgagor (borrower) has a right to reclaim the property forfeited due to mortgage default.

Answer 275

gives the borrower a certain amount of time after the sale to clear the debt.

Answer 276

the lender can go to court and seek: A Deficiency judgment against the borrower. This is a general lien and would apply to all of the borrower's assets. Deed in lieu of foreclosure is referred to as a "friendly foreclosure." Lender and borrower agree that the lender will become the owner of the property instead of going through the formal foreclosure process. However, this process does not clear any junior liens.

Answer 277

the total dollar amount of interest and points paid by a borrower at closing.

Answer 278

are a one-time fee paid at closing to increase the yield to the investor. Points give the lender more money up-front so he/she will be encouraged to make a loan at a lower interest rate.

Answer 279

One Percent (1%) of the loan balance. A loan of $50,000 would mean 1 point equals $500 or 1% of the loan balance. The cost of points is not deducted from the loan

Answer 280

8. If the conventional loan is at 15 1/4% and VA loan is at 15%, the lender will want to charge 2 points to invest in the 15% VA loan which would increase his/her yield on the investment. If the conventional loan is at 15 1/2% and the VA loan is at 15% the lender will want to charge 4 points to increase his/her yield on the investment.

Answer 281

``` If the current rate in the market is a 12% interest rate, and the lender will give the loan to the buyer for 11.5% interest, the lender will need to charge 4 discount points, each worth 1% of the loan balance. Expressed in dollars, points work out this way... Loan A $50,000 loan 12% interest rate 0 points ``` Loan B $50,000 loan 11.5% interest rate 4 points @ $500 each = $2000 By charging points, the lender is able to make lower interest rate loans, but the buyer must come up with the point money in cash at the time of closing. Points paid at closing would always be a debit (charge) to the buyer at closing on the loan amount, not the sale price

Answer 282

the principal of using other people's money to make investments, such as buying homes. The lower the down payment, the higher the risk to lender. The lower the down payment the higher the "leverage" obtained by the borrower. Example: 10% down = 90% loan (this would be a “highly leveraged” loan) 25% down = 75% loan (would not be as highly "leveraged" because the borrower put more money down)

Answer 283

The ratio of loan amount compared to the value of the property (the amount of a loan expressed as a percentage of the value of the real estate offered as security) or LTV. Example, if a borrower purchases a property for $100,000, and borrows $80,000 he/she is said to have an 80% ($80,000) loan to value ratio.

Answer 284

the cost per thousand that is required to create the principal and interest payment necessary to pay off the loan. One way that loan officers and real estate licensees are able to determine monthly payments is by the use of factors

Answer 285

A buyer got a 30 year loan of $50,000 with an interest rate of 10%, a factor of 8.78. What will the buyer's monthly P & I, be? $50,000 = 50 thousands Take 50 times factor of 8.78 = $439 per month for 30 years. Another way to figure out the answer to this question is to move the factor's decimal point over three places and take it times the loan balance. .00878 x $50,000 = $439 per month for 30 years. Note: The longer the loan, the lower the interest rate = lowest factor = lowest payment for the buyer. Example - A 30 year loan at 7% interest will produce a lower monthly payment than a 15 year loan at 7% interest.

Answer 286

Where only interest is paid. The borrower must be prepared to pay the entire principal at the end of the time period!

Answer 287

A type of loan where interest and principal are paid on an equal basis until the final payment, which is larger. A balloon is the remaining balance that is due at the maturity of a note or obligation.

Answer 288

regular payments of principal and interest are made and the entire loan is paid off by the end of the term. The liquidation of a debt by periodic installments.

Answer 289

a loan, which has a payment composed of principal, interest, taxes and insurance.

Answer 290

(sometimes called ARM): Interest rate fluctuates and is usually tied to an index; increases are capped for each period and for the term of the loan.

Answer 291

ften tied to U.S. Treasury securities. | The interest rate is usually the index plus a premium called the Margin.

Answer 292

an escalator clause that allows the interest to adjust over the loan term.

Answer 293

he rate of the loan goes up or down, depending on the caps, margin and adjustment period. Yearly caps limit the amount of the interest rate that may be charged during any one adjustment period. Lifetime caps set the maximum amount for payments.

Answer 294

How often the loan rate may be changed is determined by the Adjustment Period. Most have both yearly rate caps, which limit the amount the rate may change at one time, and lifetime caps, which limit the amount the rate may increase over the life of the loan.

Answer 295

Lower payments first year, then payments increase.

Answer 296

Homeowner receives monthly payments based on accumulated equity rather than a lump sum. Loan must be repaid upon the death of the owner or sale of the property. Most advantageous for senior citizens who own their own home - house rich/cash poor.

Answer 297

or Purchase Money Mortgage (PMM) - A mortgage given as part of the buyer's consideration (cash) for the purchase of real property, and delivered at the same time that the real property is transferred as a simultaneous part of the transaction. It is commonly a mortgage taken back by a seller from a purchaser in lieu of purchase money.

Answer 298

Loan on real estate, plus fixtures, and appliances; always includes personal property as well as real property. Used extensively in the sale of condominiums (the property comes with the refrigerator, stove, drapes, washer and dryer).

Answer 299

Loan on several pieces of land. Blanket mortgages usually contain a Partial Release Clause. This is a clause in a mortgage/deed of trust under which the mortagee/beneficiary agrees to release certain parcels from the lien of the blanket mortgage/deed of trust upon payment by the mortgagor/trustor of a certain sum of money. Example - A builder purchases 100 acres of land, and develops it into 100, 1 acre lots. As the lots are sold, in order to give the purchaser clear title, that lot needs to be released from under the blanket mortgage. So the builder pays the lender for the lot, and can now issue a deed to the purchaser. (Usually a General Warranty Deed)

Answer 300

A mortgage or Deed of Trust in which the mortgagor/trustor is allowed to re-borrow against principal that has already been paid so far. The full loan is secured by the same original mortgage/deed of trust. A lender is allowed to increase the outstanding balance of a loan up to the original amount of the loan, in order to advance additional funds to the borrower as the funds are needed. Example - A farmer needs to borrow money to plant his/her crop. The bank agrees to lend the farmer up to a certain amount of money based on the value of the property. The farmer can borrow all of the money at one time, or borrow it as needed. After the crop grows, and the farmer hopefully is able to harvest it, sell it, and make a profit he/she can repay the loan without a prepayment penalty. If it is a bad year for the farmer, as long as payments continue to be made the bank will be happy to accept the interest on the loan. Of course, if the farmer does not pay foreclosure can occur.

Answer 301

Additional financing from a second lender. One payment- two loans. The new lender pays the first loan, but charges higher interest for a second. Original loan must be assumable with no alienation clause. Type of loan where the original 1st mortgage is not disturbed. Example - You are interested in purchasing a property, but interest rates are high, and your lender will not make you a loan. You and your lender discover that the seller has an FHA or a VA loan. Remember, that this type of loan cannot have an alienation (due on sale) clause. Your lender agrees to assume the seller's mortgage, and make you a loan for the entire amount you need to purchase the property.

Answer 302

The payment is subsidized at the beginning by a builder or other party for a 3 to 5 year period, and thereafter, the purchaser takes over and pays the regular payment amount. This is a financing technique used to reduce the monthly payment for the home buying borrower during the initial years. As interest rates climbed in the late '70's and early '80's many families could not qualify for sufficient loans needed to purchase a home. This type of help from a builder or from the borrower him/herself allowed a family to qualify for a lower interest rate loan.

Answer 303

Two types 1) The lender commits the full amount of the loan to the borrower, but makes partial progress payments as the building is being completed after lien waivers have been obtained 2) High interest rate to builders, usually one percent over prime rate to be loaned for “spec homes.” It is converted to Take-out on a long term basis. A builder's construction loan is considered by lenders to be a much higher risk loan than a residential home loan.

Answer 304

Long term permanent financing for large construction projects, usually commercial. Replaces construction loan on large commercial projects.

Answer 305

Owner sells his or her improved property and at the same time, signs a long-term lease. Example, A commercial property is sold on the condition that the new owner lease it back to the seller at the time title passes. Grantor (original seller) becomes the lessee and the grantee (new owner of the property) becomes the lessor. In a sale-leaseback the grantor (original seller) had a “Freehold estate”. After the sale, the new tenant (the original grantor) ends up with a “Less than freehold estate” (a leasehold estate).

Answer 306

A mortgage in which the lender participates in the income of the mortgaged property beyond a fixed return, or receives a yield on the loan in addition to the straight interest rate. Example - An insurance company teams with a bank and a purchaser to buy a property.

Answer 307

Short term interim loan for buyer, usually six months to one year in duration. May be placed on former house to buy new house until first house sells.

Answer 308

A program that provides buyers with a "gift" of money to use toward their down payment or closing costs which never has to be paid back. Some popular programs include AmeriDream, Nehemiah, Housing Action Resource Trust (HART) and Partners in Charity. Some lenders also accept "gift letters" which acknowledge that the down payment money was a gift from a relative and does not need to be repaid.

Answer 309

Also called an installment land contract where the buyer does not receive legal title until the final payment is made. Seller is vendor, buyer is the vendee. Seller keeps legal title until the debt is paid in full. Buyer receives equitable title until debt is paid in full.

Answer 310

he seller of realty - the seller under contract for deed.

Answer 311

The purchaser of realty - the buyer under a contract for deed.

Answer 312

The act of acquiring title to property that has an existing mortgage and agreeing to be personally liable for the terms and conditions of the mortgage, including the payments. (The buyer is "Taking over" the seller's responsibilities)

Answer 313

A grantee [buyer] taking title to a real property "subject to" a mortgage [that a seller is letting the buyer take over] is NOT personally liable to the lender [mortgagee] for the payment of the mortgage note. In the event of a foreclosure the buyer would lose their equity. If the buyer doesn't pay, I the seller would have to pay, and if I don't pay then the property gets foreclosed on, and the buyer loses the property.

Answer 314

insures loans on real property made by qualified or approved lending institutions. The Department of Housing and Urban Development oversees the FHA. If a buyer wants to obtain an FHA loan, a licensee should send them to a qualified lender, such as a savings & loan or a bank.

Answer 315

The borrower must have cash for a down payment & closing costs. The borrower is charged a one-time Mortgage Insurance Premium (MIP) which provides insurance to the lender in addition to the real estate in case of borrower default on the loan. There is an upfront portion paid at closing and a monthly premium paid as well. The upfront portion may be added to the loan amount. Lender can charge points and the borrower or the seller or both can pay them. There are no prepayment penalties allowed on FHA loans. Loans are assumable with certain qualifying conditions depending upon when the original loan was obtained. (You just need to know that FHA loans are assumable.) The mortgaged real estate must be appraised by an approved FHA appraiser. FHA regulations set minimum standards for the type and construction of buildings and credit-worthiness of borrowers.The borrower is charged a one-time insurance premium which provides security to the lender in addition to the real estate in case of borrower default. There is a one-time charge paid at closing by the borrower or some other party. (seller) There is also a renewal premium paid monthly. The lender can charge points, and either the borrower or the seller can pay them

Answer 316

FHA does NOT build homes nor does it lend money itself. The term "FHA Loan" refers to a loan that is insured by the agency. The Department of Housing and Urban Development (HUD) oversees the FHA. If a buyer wants to obtain an FHA loan, a licensee should send them to a qualified lender, such as a savings and loan, mortgage broker or banker, and/or a bank.

Answer 317

Guaranteed Loans - Authorized to guarantee repayment of loans up to a specific amount.

Answer 318

The veteran must have served 181 days active service in the military since 1940. The maximum eligibility for each veteran is $104,250 and the maximum loan amount with no down payment is $417,000. Lenders will generally lend up to 4 times your available entitlement without requiring a down payment, provided the veteran's income and credit qualify and the property appraises for the asking price. There is no maximum VA loan but lenders will generally limit VA loans to $417,000. This is because lenders sell VA loans in the secondary market, which currently places a $417,000 limit on the loans. For loans up to $417,000, it is usually possible for qualified veterans to obtain no down payment financing. (These numbers change from time to time and there are counties that are considered "High-Cost counties" and their loan limits are higher.) VA will guarantee real property, mobile homes and plots for the mobile home. The VA requires that a veteran assume liability for the loan. If a veteran does not pay the mortgage as agreed there will be a foreclosure. The property must be owner-occupied for at least one year. A qualified veteran may borrow up to 100% of the loan with no down payment.

Answer 319

Veteran must first apply for a: Certificate of Eligibility in order to obtain a VA loan. The amount of the loan is limited to the amount shown on the Certificate of Reasonable Value. The house must qualify with an appraisal and is issued a: Certificate of Reasonable Value. Loans may be assumed by non-veterans, but veteran still liable. VA will lend money in rural areas where there is no financial institution available (200 acre residence for example.) Points can be paid by either the seller or the buyer. VA does not allow prepayment penalties to be charged if a veteran pays off a loan early. If a veteran has died his/her widow or widower may be eligible for a VA loan. In order to be eligible for a VA loan, the widow or widower may not be married again at the time of application. If a loan is assumed by another veteran and the seller has used all of his/her eligibility, the seller cannot use his/her eligibility again, unless they are given a novation because he/she will still be liable for the loan.

Answer 320

FHA and VA will allow buyer to pay more than appraised value, if they pay the difference in CASH. Remember - FHA & VA do not allow prepayment penalties. FHA & VA loans cannot have an alienation (due on sale) clause in the promissory note, mortgage or deed of trust. The difference between VA & FHA is FHA insures & VA guarantees repayments of loans.

Answer 321

formerly known as Farmers Home Administration (FmHA) is a federal lender with the U.S. Department of Agriculture that makes loans for home purchases or construction in rural areas and small communities outside metropolitan areas. (If you see the letters FmHA on your state examination it is always a detractor) These areas for direct loans from RECD are defined as having a population of 20,000 or less. In addition to the property location, RECD requires that borrowers demonstrate a limited income record and a need for housing. Loans are either made directly by RECD or made by a private lender with RECD guaranteeing a certain percentage.

Answer 322

RECD does not make direct loans to the public in areas with a population of more than 20,000 – FHA never makes direct loans – VA will make a direct loan if there are no lenders in the area where a veteran wants to buy property. FHA insures loans only for one-to four-family housing. The FHA section 203 B program requires a minimum down payment with the maximum loan based on local market conditions, which vary across the nation. This is the "standard" and most popular type of FHA loan.

Answer 323

for loans on condominiums

Answer 324

Graduated Payment Plan Mortgage

Answer 325

Allows the purchaser to borrow enough money to rehabilitate a property

Answer 326

No government guarantees or insurance. Loans obtained at local savings and loans, mortgage brokers and mortgage bankers. Minimum down payment of 20%. However, there are conventional loans available with lower down payments if the buyer is willing to pay a Private Mortgage Insurance premium (PMI). Conventional Loans normally require a larger down payment (20% down or more) than FHA or VA, but do not require insurance with 20% or more down payments. Most loans are packaged by the lenders and sold in the secondary market to Fannie Mae or Freddie Mac.

Answer 327

No government guarantees of insurance but insurance from private insurance companies

Answer 328

is insurance provided by a private insurer that protects the lender against loss in the event of a foreclosure and deficiency. Insurance is required for all loans with less than 20% down payment. Largest private insurer is M.G.I.C. - MORTGAGE GUARANTEE INSURANCE CORPORATION. The amount a lender will loan is generally based on the appraised value for loan purposes or the sale price whichever is lower. Remember, whether an FHA, VA or conventional loan is made to a consumer the lender and/or investor: Is concerned with the current and future value of the property. Is concerned with the income and income potential of the loan applicant. Is concerned with the attractiveness of other investments that could be made for a better return. A lender or investor is really not interested or concerned with the loan applicant's need of financial assistance.

Answer 329

The ratio of annual net income to annual debt service. For example, a lender may require that a qualified corporate borrower have net income of 1.5 times the debt service of the loan being approved.

Answer 330

Type of property (residential, commercial, agricultural) Location Area zoning Value range Neighborhood Actual age/Effective age/Remaining economic life Condition (repairs and predications) Special clearances (code compliance, well and septic certifications etc.) Overall marketability

Answer 331

A full summary of all consecutive grants, conveyances, wills, records and judicial proceedings affecting title to a specific parcel of real estate, together with a statement of all recorded liens and encumbrances affecting the property and their present status. The abstract of title does not guarantee or ensure the validity of the title of the property. It is a condensed history that merely discloses those items about the property that are of public record. It does not reveal such things as encroachments and forgeries. Therefore, the abstracter is usually liable only for damages caused by his or her negligence in searching the public records.

Answer 332

The recorded history of matters that affect the title to a specific parcel of real estate, such as ownership, encumbrances and liens, usually beginning with the original recorded source of the title. The chain of title shows the successive changes of ownership, each one linked to the next so that a "chain" is formed.

Answer 333

A comprehensive indemnity contract under which a title insurance company warrants to make good a loss arising through defects in title to real estate or any liens or encumbrances thereon. Title insurance protects a policyholder against loss from some occurrence that has already happened, such as a forged deed somewhere in the chain of title.

Answer 334

the buyer must obtain a loan for that specific property. A loan underwriter evaluates a loan application to determine the desirability of the loan. An underwriter is a person working for a lender who reviews a loan application and makes recommendations to the loan committee

Answer 335

A loan in which the borrower is not held personally liable on the note. The lender of a non-recourse loan generally feels confident that the property used as collateral will be adequate security for the loan.

Answer 336

Real estate loans are often sold in the financial market. When a non-recourse clause is included in the sale's agreement, the seller of the security is not liable if the borrower defaults.

Answer 337

The non-performance of a duty or obligation that is part of a contract. The most common occurrence of default on the part of a buyer or lessee is nonpayment of money when due. A default is normally a breach of contract, and the non-defaulting party can seek legal remedies to recover any loss. A buyer's good faith inability to obtain financing under a contingency provision of a purchase agreement is not considered a default (the performance of the contract depends on the buyer getting the property financed), and in this case the seller must return the buyer's deposit.

Answer 338

(conditional or qualified commitment): A written pledge by a lender to lend a certain amount of money to a qualified borrower on a particular piece of real estate for a specified time under specific terms. It is more formal than a preliminary loan approval. After reviewing the borrower's loan application, the lender usually decides whether to make a commitment to lend the requested funds. This application contains such information as the name and address of the borrower, place of employment, salary, bank accounts, credit references, and the like.

Answer 339

The analysis of the extent of risk assumed in connection with a loan. Underwriting a loan includes the entire process of preparing the conditions of the loan, determining the borrower's ability to repay and subsequently deciding whether to give loan approval.

Answer 340

An appraiser's fees are typically based on time and expenses; fees are never based on a percentage of the appraised value.

Answer 341

A fund of the buyer's money that the lender sets aside for future needs relating to the parcel of property. Most lenders require an impound account to cover future payments of insurance and taxes. Sometimes this is referred to as the buyers' escrow (not the brokers).

Answer 342

The process of individuals investing their funds directly instead of placing money with banks, savings and loans and other savings institutions. Disintermediation has a direct influence on the scarcity of money or surplus of money available for mortgages.

Answer 343

A legal doctrine by which a person is prevented from asserting rights or facts that are inconsistent with a previous position or representation made by act, conduct or silence. For example, a mortgagor/trustor who certifies that he or she has no defense against the mortgagee/beneficiary would be estopped to later assert any defenses against a person who purchases the mortgage in reliance on the mortgagor's certificate of no defense. Another example: Depending upon the area of the country you live in, the title company or escrow company want to know how much you owe the lender on the day of closing so they can withhold that amount from the proceeds of closing. The title company or escrow company ask the lender to sign an estoppel certificate with this information. If the lender makes a mistake they are estopped from making a claim against the title company or escrow company for the mistake. (The lender may come after the borrower claiming the borrower knew how much they owed.)

Answer 344

A clause sometimes inserted in a mortgage note in which the lender waives the right to a deficiency judgment. As used in a lease, a clause that intends to clear or relieve the landlord from liability for tenants' personal injury and property damage. It may not, however, protect the landlord from injuries to third parties.

Answer 345

the sale of a secured real property where the sale price is less than what is owed to the lender. To consummate the conveyance, the lender releases the mortgage or trust deed so that the property can be sold free and clear to a new purchaser. Lenders will agree to a short sale to avoid the delay and expense of a foreclosure action. Lenders wish to avoid foreclosure because it can result in the bank owning the asset and thus carrying a Real Estate Owned (REO) property on its books. A short sale can also be a sale where the title has been transferred, but the selling price was insufficient to cover all the liens and costs of sale. The seller is unable to bring enough cash to the transaction to pay off the shortage.

Answer 346

Foreclosure: Occurs when the lender takes back a house because the homeowner has not made mortgage payments. When this happens, the property becomes a lender-owned property (REO). Short sale: Occurs in lieu of a foreclosure. A homeowner sells the property based on a listing price arrived at by a comparative market analysis of recent comparables and the condition of the home. In the end, the lender agrees to accept a loan payoff amount that is less than what is actually owed.

Answer 347

The settlement agent does the closing, calculates the costs involved and fills out the closing statements. The agent must also fill out all the papers that are necessary for the particular transaction, which may include filing IRS forms. A settlement agent could be an attorney, a real estate broker, a closer from the title company or a lender.

Answer 348

is charged when the property is conveyed by: Deed Contract for deed Lease Sublease Assignment One purpose of the tax is to collect reliable data on the fair market value of the property to help establish more accurate property tax assessments. Transfer taxes are paid by the seller or lessor. The tax may be paid by the purchase of tax stamps or by payment of a transfer fee.

Answer 349

``` Savings and loans Banks Insurance companies Mortgage broker Mutual savings banks ```

Answer 350

Once the leading mortgage lending institution, S&Ls were adversely impacted by the financial crises in the 1980s. Their leadership role in mortgage lending has been largely supplanted by institutional banks regulated by the Federal Reserve and insured by FDIC. S&Ls are now regulated by the Federal Housing Finance Board (FHFB) and deposits are insured by the Deposit Insurance Fund. Deposits are insured for at least $250,000.

Answer 351

Banks initiate real estate-related loans of virtually every variety, including short- and long-term loans, construction loans, and loans on every type of real estate including residential, commercial, industrial, and land. Bank deposits are insured by the Federal Deposit Insurance Corporation for up to $250,000 per account.

Answer 352

Prefer large commercial projects, but will make residential loans. They like to have an equity position. They are sometimes partners with developers. This type of lending is called:

Answer 353

A mortgage in which the lender participates in the income of the mortgaged property beyond a fixed return, or receives a yield on the loan in addition to the straight interest rate.

Answer 354

A person, corporation, or firm not otherwise in banking & finance, that either provides its own funds for loans or negotiates, sells, or arranges loans for compensation. Sometimes this person or firm continues to service the loan(s).

Answer 355

Are also lenders in the primary market, but they are primarily in the Eastern states.

Answer 356

a central banking system designed to manage the nation's economy. Each of the 12 Districts is served by a Federal Reserve Bank. The "Fed" has a great impact on real estate investment through its various functions.

Answer 357

the amounts of money (assets) banks are required to keep on hand. Takes 30 to sixty days to have an effect on the market.

Answer 358

he rate at which the “Fed” charges banks for money. This influences the economy much more quickly. Almost overnight in some areas of the country.

Answer 359

“The Fed” is buying or selling securities or bonds. When they are buying bonds, there is more money in the market, interest rates lower, and the economy is stimulated. When they are selling bonds, there is less money available in the market, interest rates rise and the economy is slowed. This could take from six months to a year to have an effect on the economy. If there is an increase in the availability of money, interest rates would go down.

Answer 360

Increases discount rates Sell securities Raise reserve requirement

Answer 361

Are laws that are for consumer protection in lending. (Equal Credit Opportunity Law, Truth in Lending (Regulation Z), and the Real Estate Settlement Procedures Act which we will discuss later in this section)

Answer 362

to provide liquidity (funds) for the primary market (institutional lenders). The promissory note is: Considered to be PERSONAL PROPERTY (readily negotiable) that can be bought and sold. Lenders sell their “Paper” or notes in the secondary mortgage market to free up money so they can make more loans. The Secondary Mortgage Market is the market in which these notes are exchanged and funds are provided directly to institutional lenders. They are holding warehouse agencies, which purchase a number of mortgage loans and assemble them into one or more packages of loans for resale to investors.

Answer 363

Federal National Mortgage Association or Fannie Mae (FNMA) Government National Mortgage Association or Ginnie Mae (GNMA) Federal Home Loan Mortgage Corporation or Freddie Mac (FHLMC)

Answer 364

Sells seasoned mortgages and deeds of trust to individual investors and financial institutions. A seasoned mortgage is one that has been in existence for some time and has a good record of repayment by the mortgagor. Fannie Mae was established in 1938 for the purpose of purchasing FHA loans from loan originators to provide some liquidity for government insured loans. Quasi Government Corp – was government when originally formed, but is now a private corporation. Buys FHA loans, VA loans, and conventional loans. FNMA is referred to "Fannie Mae." Largest purchaser in secondary market.

Answer 365

Buys FHA loans or VA loans. Referred to as "Ginnie Mae." "Ginnie Mae is controlled by an agency of the Department of Housing and Urban Development.

Answer 366

called the Tandem Plan. It is a mortgage subsidy program offered by Congress from time to time through the Government National Mortgage Association. When assistance is needed, GNMA is authorized to purchase certain mortgages at below market interest rates so that borrowers can be granted low interest loans.

Answer 367

Buys conventional loans. Referred to as "Freddie Mac." HUD (Department of Housing and Urban Development) is the regulator for Ginnie Mae and Freddie Mac. You must be able to recognize these three major players in the secondary market by their Full Names, Nick Names and Initials. Note: In September 2008, Fannie Mae and Freddie Mac were placed into conservatorship under the federal government’s Federal Housing Finance Agency.

Answer 368

Interest payments made on first and second homes that meet the necessary qualifications; Certain loan origination fees and discount points; Loan prepayment penalties and real estate property taxes.Tax benefits – a Capital Gain is the profit realized from the sale or exchange of an asset; Capital gain exclusion on principal place of residence of $250,000 per individual (up to $500,000 for a couple); The cost of improvements may be depreciated or deducted over an arbitrary period of time, but land can never be depreciated. (We will discuss this more in the Valuation section.)

Answer 369

Most homeowner’s insurance policies contain a “Coinsurance clause” that requires the homeowner to maintain insurance equal to at least 80 % of the replacement cost of the improvements.

Answer 370

Real estate is not highly liquid. The purchaser of investment property must be prepared to "invest" for the long haul. There is a high degree of risk in buying and selling investment real estate because market conditions are changing all the time.

Answer 371

``` Selling shares (securities) of FNMA, GNMA, FHLMC requires a securities license. The method by which a property is offered for sale may determine if the offering is a real estate security. In certain cases, condominiums are considered real estate securities. Real property securities must be registered with the Securities and Exchange Commission (SEC) and depending on the type of sale, may also fall under the regulation of state securities law (blue-sky laws). If an agent suspects a property may be a real property security, he or she should refer the seller to a securities professional for advice. ```

Answer 372

Truth in Lending Law RESPA Equal Opportunity Act

Answer 373

The purpose of this law is DISCLOSURE. The law requires lenders to disclose to buyers the true cost of obtaining credit so that the borrower can compare the costs of various lenders. The regulation requires that the consumer be fully informed of all finance charges, as well as the true annual interest rate, before a transaction is consummated. The truth in lending law does not control interest rates.....does not control costs to close a transaction. (RESPA - The Real Estate Settlement Procedures Act covers costs to close. This law will be covered later.) Truth In Lending applies to residential loans, federally related 1-4 family properties, non-commercial properties, and family farms. Commercial transactions are not covered under the Truth in Lending law.

Answer 374

Advertising | Annual Percentage Rate (A.P.R.)

Answer 375

An expression of the relationship of the total finance charge to the total amount to be financed. Use of APR permits the consumer to compare rates. Is a standardized yardstick expressing the true annual cost of borrowing

Answer 376

Legal fees to prepare deeds, survey fees, recording fees, title insurance premiums

Answer 377

a lender must lend funds 25 times a year and/or must lend the funds for at least 5 housing loans annually. An owner of property advertising acreage for sale could advertise "no down payment." The owner is not considered a lender under Truth In Lending guidelines.

Answer 378

(Does not apply to residential purchase money or first mortgage or deed of trust loans) A clause in a contract, required by some state subdivided land sales laws, that informs a purchaser of his/her rescission rights as provided by state law. HOME IMPROVEMENTS - APPLIANCES - FURNITURE!! 3 day right of rescission applies here.

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