FINAL Flashcards
Polychlorinated bihpenyls (PCBs)
PCBs were widely used as dielectric and coolant fluids, for example in transformers, capacitors, and electric motors.
PCBs have been known to leak in to the ground from electrical transformers. PCBs appear in groundwater and soil.
NYS Department of Health
The NYS Department of Health performs the following basic functions:
– Drinking water safety, including standards for private and community well construction and well water safety and regulation.
– Septic tank approval.
– Certain wastewater treatment approval.
Actual Cash Value vs Replacement Cost
Actual cash value means that the insured is reimbursed for the replacement cost minus the physical depreciation of the lost or damaged property.
- Replacement cost means that the insured is covered and reimbursed for the actual cost of replacing the damaged property.
For example, if a refrigerator is destroyed in a fire, the replacement cost will be the cost of buying another refrigerator.
Corrective Maintenance:
A maintenance task performed to identify, isolate, and rectify a problem with a property so that the property can be restored to an acceptable condition.
In other words, corrective maintenance does NOT involve major repairs or capital expenditures.
An example of corrective maintenance would include fixing a leaky faucet.
Security Cameras
Real estate offices should be equipped with security cameras in order to record possible break-ins.
Dual Agency
Dual agency occurs when a broker represents both the buyer and seller in a transaction.
Dual agency is permitted in New York State; however, advanced informed consent by BOTH parties is required.
Dual agency inherently puts the agents fiduciary duty of loyalty at risk.
Undisclosed Dual Agency is illegal in New York State.
Instead, the agent should notify both parties and have them sign the Agency Disclosure form, which states that the agent is acting as a dual agent. This is known as Advance Consent to Dual Agency.
Dual Agency with Designated Agents
A broker may elect to have designated agents within his/her office to represent both sides in the transaction.
In this case, one designated agent will represent the seller and another designated agent will represent the buyer.
This helps reduce the broker’s risk of violating their fiduciary duties to the client.
Asbestos
Asbestos is a naturally occurring mineral fiber sometimes found in older homes.
It is hazardous to health when a possibility exists of exposure to inhalable fibers (also known as friable asbestos).
If friable asbestos is present, an asbestos professional must be used to remove the asbestos.
Asbestos was commonly used in insulation (around boilers, ducts, pipes, sheeting, and fireplaces), floor tiles, ceiling tiles, roof shingles and flashing.
Asbestos can lead to asbestosis, which is a chronic lung disease caused by inhaling asbestos fibers.
Escalation Clause
An escalation clause allows landlords to raise rents during the term of the lease.
Lease escalation clauses call for the increased costs to the tenant for different reasons at specified times during the lease term. These clauses protect the property owner against increases during the lease term.
Market Value
Market value is the most probable price that a property should bring if exposed for sale in the open market for a reasonable period of time, with both the buyer and seller aware of current market conditions, neither being under duress.
Market value applies to an “arm’s length transaction”.
Also known as ‘Fair Market Value’.
Market value is driven by supply and demand in the competitive marketplace.
Escheat
If a property owner dies intestate (without having a valid will), the decedent’s property is distributed to their heirs.
If the deceased property owner does not have any heirs, the property reverts to the State. This is known as escheat.
Lead
Lead can be present in drinking water (from lead pipes), interior and exterior paint (from lead-based paint), dust within a home, and soil around a home.
The Residential Lead-Based Paint Hazard Reduction Act of 1992 sets forth the procedures in disclosing the presence of lead-based paint for sales of properties built before 1978.
Remember: “Lead-based paint 1978”
New York Property Insurance Underwriting Association (NYPIUA)
The NYPIUA is a pool of all insurance companies writing fire insurance in New York.
It offers fire and extended coverage as well as coverage for vandalism, malicious mischief, and sprinkler leakage to consumers who are unable to purchase this type of insurance from individual insurance companies.
Offering Plan
The developer of a new condominium or cooperative building (or the conversion of a building into a condo/coop) must file an Offering Plan with the NY Attorney General’s office.
The first part of the Attorney General’s review is called the preliminary prospectus or “red herring”. the Attorney General can suggest any changes to the project. Once the Attorney General accepts the prospectus, it is known as a black book or offering plan.
Although the Attorney General does not regulate price, proper disclosure of price must be accepted by the Attorney General. If the developer of a new condominium building is changing the prices of all (or a group) apartment, he/she must file the changes with the Attorney General for acceptance.
Passive income
Money earned from investing in a business venture or partnership.
(Example: income earned from a rental property).
Protesting Assessments
Property owners can protest the assessed value of their property.
Their grievances are heard by the Board of Assessment Review.
The property must make a case that the assessor’s assessment of their property is wrong.
For that reason, the burden of proof is on the property owner to prove the assessor incorrect.
The law presumes that the assessor is correct.
The four grounds for review in New York are unequal assessment, excessive assessment, unlawful assessment, and misclassification.
Estate for years:
An estate for years exists for a fixed period of time. It can be as short as a day and as long as many years. Once the term of the lease ends, the rental agreement is automatically terminated.
Most residential leases are an estate for years.
Abstract of title
An abstract of title is a condensed history of title.
It is a summary of all links in the chain of title.
Blockbusting
The practice of inducing homeowners in a particular neighborhood to sell their homes quickly, often at below market prices, by creating the fear that the entry of a minority group or groups into the neighborhood will cause a precipitous decline in property values.
House Rules
Rules in a cooperative that cover common issues including garbage disposal, maintenance, noise, pet restrictions, and conflict resolution.
House rules are generally more detailed than items in the proprietary lease and deal with the day-to-day behavior of tenants and general operations.
Zoning
Zoning determines the usage allowed for a building or subdivision.
Zoning also determines the ‘bulk’ of a house or building, meaning the maximum size of the structure (height, square footage, size of floor plate).
Using the old deed
The seller’s attorney uses the old deed to prepare a new deed for the closing.
Usury Laws
Usury laws govern the amount of interest that can be charged on a loan.
Violations of the Real Property Law
The Department of State may suspend or revoke a real estate salesperson or broker’s license for violations of the Real Property Law.
The DOS may also impose a fine not to exceed $1,000.
Mechanic’s Lien:
This type of lien applies to individuals or companies who have “supplied labor or materials that improve a property”.
For example, if a roofing contractor does not get paid for work performed on a person’s property, they may file a mechanic’s lien against the property.
A mechanic’s liens is a type of an involuntary, specific lien.
Architectural Review Boards
Oversees and upholds the quality and aesthetics of a neighborhood, town, or city.
The following are functions of the Architectural Review Board:
– promotes the orderly and harmonious development of the municipality.
– protects a municipality’s cultural heritage.
Civil Rights Act of 1968
The Fair Housing Act was included as part of the Civil Rights Act of 1968.
The initial protected classes under the Fair Housing Act included:
- Race
- Color
- Religion
- National origin
Eave
the lowest part of the roof that projects beyond the wall of the structure.
Primary vs. Secondary Mortgage Markets
The primary mortgage market is where lending institutions originate mortgages.
Example: Bank of America gives a loan to the home buyer.
The secondary mortgage market is where the loans originated in the primary mortgage market are bought and sold.
Right of first refusal
The right of first refusal may be added to a sales contract or a lease.
It allows the holder to purchase (or lease) a property if the seller decides to sell or another purchaser (or lessee) comes along.
The holder of the right of first refusal can match the offer from the third party or forfeit their claim to purchase or lease the property.
Swing/Bridge Loan
A type of short-term loan, typically taken out for a period of 2 weeks to 3 years.
A bridge loan is a type of gap mortgage in which funds are provided over and above an already existing loan until more permanent financing is in place.
A bridge loan allows a buyer to obtain a new property without having to sell his/her current property.
Deed Restrictions
Deed restrictions are a form of encumbrance on real property.
A deed restriction is an imposed restriction in a deed for the purpose of limiting the use of real property, such as:
1) A restriction against the sale of liquor on a property.
2) A restriction as to the size, type, value or placement of improvements that may be erected on the property.
Deed restrictions are in the form of restrictive covenants and/or conditions (CC&R’s).
1988 Amendment to the Civil Rights Act
The 1988 Amendment to the Civil Rights Act added two new protected classes:
– Persons with mental or physical disabilities
– Familial status
Open Listing Contract:
The seller is allowed to work with any broker who brings them a buyer. Only the broker who brings a buyer is entitled to a commission. This is the riskiest type of listing contract for a broker.
An open listing contract is an example of a unilateral contract.
Forced Warm Air System
A forced warm air system consists of a furnace that contains a fan, a heat source such as gas or oil, and filters. The system extracts cool air from in and out doors and passes this cool air through the heat sources. The warmed air flows through ducts to the rooms.
A forced warm air system provides cooling as well as heating through the same ducts.
Non-Tax Deductible Closing Costs
The following closing costs are NOT tax deductible:
1) Appraisal fees
2) Notary fees
3) Preparation costs for the mortgage
4) Mortgage insurance premiums
5) VA funding fees
Industrial Investment Properties
Industrial investment properties include the following:
– Heavy manufacturing – Light manufacturing – Multi-tenant – Owner Occupied – Self Storage – Special Purpose – Warehouse / Distribution
Buyer Agency / Buyer Brokerage
Buyer agency occurs when a purchaser/renter hires a broker to represent them.
The purchaser/renter employs a broker to locate a property. In this relationship, the buyer is the principal and the broker is the agent.
A Buyer Representation Form should be signed between the buyer and broker.
Universal Agent
A universal agent has complete authority over any activity of the principal.
Example: Power of Attorney
Fixed-Rate Mortgage / Fully Amortized Loan
This is the most common type of loan. The borrower makes installment payments (usually once a month). Over time the balance on the loan decreases. At the end of the term of the loan (30 years for examples), the loan balance reaches $0 and the loan is paid in full.
In a fixed-rate mortgage, the borrower pays both principal and interest with each mortgage payment.
Down payment
The down payment is the portion of a property’s purchase price that is paid in cash and is not part of the mortgage loan.
The down payment must be placed in a separate escrow account.
The following people generally hold the deposit/down payment:
- Listing agent (seller’s broker)
- Seller’s attorney
Agency Disclosure Form
The Agency Disclosure Form is a written explanation, to be signed by a prospective buyer or seller of real estate, explaining to the client the role that the broker plays in the transaction.
This Agency Disclosure Form is known as the ‘New York State Disclosure Form for Buyer and Seller’.
The Agency Disclosure Form outlines the following:
– The agent’s duties to the client.
– Explains that an agent owes a fiduciary duty to the client.
– Allows for advance consent to dual agency.
The Agency Disclosure Form is not required for the sale of vacant land.
According to Section 443 of the NYS Real Property Law, licensees must present a written Agency Disclosure Form that details consumer choices about representation at the first substantive contact.
If a seller or buyer refuses to sign the Agency Disclosure Form, the agent should do the following:
- Document the names and time, date, and reasons for refusal to sign the disclosure form.
- Complete the declaration form stating the facts, have it acknowledged, and retain a copy for their records for at least 3 years.
- The declaration form should say the following:
“Although I indicated to the buyer/seller that New York State Law required that I request that he/she sign to acknowledge receipt of the disclosure notice, he/she refused to sign the acknowledgement to the disclosure form when presented. The reason given for this refusal was as follows…”
Capital Gain Tax Break
A special exclusion in the IRS law gives home sellers a tax break on capitals gains when they are selling their home.
Home sellers may be eligible to exclude up to $250,000 if single or up to $500,000 if married of the capital gain on the sale of the residence.
Contract Requirements
– In New York State, an individual must be at least 18 years of age to enter into a contract.
– Minors (less than 18 years old) CANNOT enter into a contract. The contract is voidable if signed by a minor.
– In New York State, an individual must be mentally and emotionally capable to enter into a contract.
Liens
A lien is a claim or charge against the property of another.
Real Property vs Personal Property
Real property is the land and improvements, and all legal rights, powers, and privileges of real estate ownership. Real property includes the bundle of rights.
Everything that is not real property is personal property.
Personal property is also known as chattel.
Percolation
Percolation is the movement of water through soil.
Preventative Maintenance:
Preventative maintenance involves keeping property and equipment in a good state of repair so as to minimize the need for more costly repair work or replacement.
An example of preventative maintenance would include changing air filters in air conditioners and furnaces.
Debt-to-Income Ratio
The percentage of a consumer’s monthly gross income that goes towards paying debts.
Formula: Recurring Monthly Debt / Gross Monthly Income
Vicarious Liability
Vicarious liability is a situation in which one party is held partly responsible for the unlawful actions of a third party.
According to Section 442-c of the New York Real Property Law, a broker is vicariously liable for a salesperson’s actions only when “the broker had actual knowledge of such violations or if the broker retains the benefits from the transaction after he knows that the salesperson has engaged in some wrongdoing”.
Easement in gross
A right of use in the land of another without the requirement that the holder of the right own adjoining land.
Also known as a commercial easement in gross.
This type of easement is commonly used by utility companies.
Prepayment Penalty Clause
A pre-payment penalty clause states that the borrower cannot pay off the loan at any time before expiration of the full mortgage term without a financial penalty for early payoff.
Redlining
The refusal to lend money within a specific area for various reasons. This practice is illegal.
Before the Fair Housing Act, some lenders circled certain local areas with a red line on the map, refusing to make loans within the circled areas based on some characteristic of property owners in the area.
Municipal Engineer’s Office
The Municipal Engineer performs the following basic functions:
– Estimate the costs of paving, sewers and sidewalks, and other public works projects.
– Supervise streets and other public works activities
– Issue permits to private contractors for street openings and curb and gutter construction.
– Assume responsibility for sewage, water supply, distribution systems.
Purchase Money Mortgage
A purchase money mortgage is a type of seller financing in which a mortgage is given by the buyer to the seller to cover part of the purchase price.
In this type of loan, the seller becomes the mortgagee and the buyer becomes the mortgagor.
Riparian Rights = River (stream)
Riparian rights belong to the owner of a property bordering a flowing body of water.
The Economy - Inflation
Inflation occurs when there is an increase in money and credit relative to available goods, resulting in higher prices.
Actual eviction:
Actual eviction occurs when the landlord removes the tenant from the property without aid or control of the court system.
Actual eviction is wrongful use of self-help.
Cooperatives
Cooperatives are NOT considered real property.
The owner of a co-op receives a proprietary lease at closing.
A proprietary lease is considered personal property.
- Co-ops are considered a leasehold estate. The leasehold estate gives the right to possession of an apartment and use of the common areas.
Compensatory damages:
Compensatory damages equal the amount of money actually lost due to the breach of contract.
Condemnation
is the act of taking private property for public use.
Building Department
The Building Department is responsible for enforcing the building code and issuing building/construction permits.
In order to begin construction or renovation on a property, the property owner must first submit construction drawings for approval. Once the construction drawings are approved, a building permit may be issued, which allows the building contractor to commence work on the property.
Property Tax Exemptions
Certain qualified individuals may be eligible for a partial exemption in their property taxes. These include:
– Veterans
– Senior Citizens
– Disabled
The STAR program allows qualified owner-occupied, primary residences to be exempt from school property taxes.
Littoral Rights
Lake
Littoral rights apply to property bordering a stationary body of water.
Special Assessments
Special assessments are assessments made against a property to pay for a public improvement by which the assessed property is supposed to be especially benefit from.
A special assessment may be for such things as streets, sidewalks, sewers, rural drainage ditches and other public improvements.
The special assessment is a lien against the property until paid. If the lien is not paid, the taxing unit may execute on the lien.
Tax shelters
Any method of reducing taxable income resulting in a reduction of the payments to tax collecting entities, including state and federal governments.
One of the advantages that real estate offers to investors is a tax shelter, which allows investors to only pay income taxes on a portion of their properties cash flow (or pay no taxes at all).
Right of First Refusal
Condominium contracts typically contain a ‘Right of First Refusal’ clause. The clause allows the condominium association the first opportunity to purchase the condominium when it goes up for sale.
Capital Gain
Capital gain is the profit realized from the sale of any capital investment including real estate.
Capital gain occurs when an investor sells the property for more than the adjusted basis.
Net Lease
In a net lease, the tenant pays some or all of the expenses.
For example, in a triple net lease, the tenant pays all of the expenses in addition to the rent.
A net lease, in particular a triple net lease, is commonly used by commercial tenants.
A large company may have a triple net lease and rent an entire office building.
R-Value
R-value is a measurement of the ability of insulation to slow the transfer of heat or cold.
In other words, it is the degree of resistance to heat transfer of a wall.
The higher the R-value, the greater the insulating power.
Generally, the higher the R-value, the thicker the insulation.
Government Loans
Government loans involve some kind of participation by a government agency.
The most common type of government loan is an FHA-insured loan.
Mortgage insurance premium (MIP) is paid upfront when obtaining an FHA-insured loan.
VA-guaranteed loans are another example of government loans. These loans are offered to Veterans.
Earnest money deposit
A deposit that a buyer makes at the time of submitting an offer to demonstrate the true intent of the purchase; also referred to as a binder, good faith deposit, and escrow deposit.
An earnest money deposit is usually binding.
Soffit
The area under the roof extension.
Net Listing
A net listing is not technically a listing agreement, but a method of establishing the listing broker’s commission as all money above a specified net amount to the seller.
Net listings are illegal in New York.
Eminent domain
is the right of the government to acquire private property for necessary public use. The property owner must receive fair compensation.
Real Estate Settlement Procedures Act (RESPA)
A consumer protection statute, first passed in 1974. Also known as Regulation X.
The purpose of RESPA is:
1) To help consumers become better shoppers for settlement services and
2) To eliminate kickbacks and referral fees that unnecessarily increase the costs of certain settlement services.
Time value of money
Time value of money is the idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.
It is a process that calculates the value of an asset in the past, present, or future.
It is based on the idea that the original investment or principal increases in value over a certain time.
Graduated Payment Mortgage (GPM)
In a graduated payment mortgage, the monthly payments are lower in the early years of the mortgage term, but increase at specific intervals until the payment amount is sufficient to amortize the loan over the remaining term.
The monthly payments are low in the early years because the borrower does not pay all of the interest that is then added to the principal balance.
Residential Market Analysis
Residential market analysis is a study of the property being listed.
The analysis views the property in light of the conditions in the marketplace.
These conditions determine how the agent should market the property.
A residential market analysis will analyze the following:
1) Recently sold properties
2) Current competing properties
3) Recently expired properties
4) Buyer appeal
5) Market position
6) Positives and negatives of the property being marketed
7) Area market conditions
8) Recommended terms
9) Market value range
Misrepresentation
Misrepresentation means making an intentionally false statement to induce someone to contract.
Misrepresentation consists of:
1) A false representation of a material fact.
2) A person making the false representation knew or should have known it to be false.
3) A person acts or does not act based on the misrepresentation.
4) A person who relies on the misrepresentation in acting or not acting.
Positive misrepresentation means the broker concealed a material defect from the buyer.
Self-dealing is another example of positive misrepresentation.
Unintentional misrepresentation occurs when the broker makes a false statement to the buyer about the property and the broker does not know whether the statement is true or false.
Homestead vs Non-Homestead Properties
Tax Assessing Units may elect to establish separate tax rates for homestead and non-homestead properties.
Homestead properties include: – 1-3 family houses – Condominiums – Mixed-use properties when they are mostly residential – Mobile homes – Vacant land under 10 acres – Farm land / farm dwellings
Non-homestead includes everything else: – Commercial – Industrial – Special franchise – Utility properties
In summary:
Homestead = Residential
Non-homestead = Commercial
Title
Title is evidence of the right to own property.
Fee Simple
Fee simple absolute provides the most complete form of ownership.
Absolute ownership of real property; a person has this type of estate where the person is entitled to the entire property with unconditional power of disposition during the person’s life and descending to the person’s heirs or distributees.
Most properties in New York have a Fee Simple Absolute deed, unless specified otherwise!
Attorney General
According to Article 12-A (NYS Real Property Law), the Attorney General shall prosecute criminal actions for violations of the Real Property Law.
Exclusive Agency Agreement:
The seller must work exclusively with the broker to sell their property, BUT the seller does not have to pay the broker a commission if they find a buyer themselves.
Footing
A footing is a horizontal concrete member, set in the soil, which supports a building’s foundation wall.
The footing is located at the bottom of the foundation wall.
The footing is the lowest structural member in a house/building.
Liquidity
Real estate is considered an illiquid asset because it cannot quickly or easily be sold.
Studs
Studs are vertical wood members used to construct walls.
Zoning Board of Appeals
The Zoning Board of Appeals is a local appointed Board that has the power to review administrative rulings made by the Planning Board or another legislative body.
One of the main duties of a Zoning Board of Appeals is to maintain the essential character of neighborhoods.
It is the interpreter of the zoning ordinance.
The Zoning Board of Appeals is also responsible for granting variances.
The Housing and Community Development Act of 1974
The Housing and Community Development Act of 1974 added sex as a protected class to the Fair Housing Act.
Tax Lien:
When a taxpayer is delinquent in paying property taxes, a tax lien attaches against the property.
A tax lien takes the highest priority among other liens (even higher than a mortgage lien).
Impossibility of performance
If there is a change in the law which makes full performance of the contract illegal, the contract may be discharged due to impossibility of performance.
In another example, if a property is destroyed by fire, the listing contract between the owner and broker may be discharged due to ‘impossibility of performance’.
Operation of law
This includes the statue of limitations.
Operating Statement
The operating statement is used by property managers to project the net operating income for the property.
The operating statement defines all of the income and expenses for the property.
Comparative Market Analysis (CMA)
A CMA is a property evaluation that determines property value by comparing other properties currently on the market, properties that have recently sold, and expired listings.
In other words, a CMA is an analysis of the competition in the marketplace that a property will face upon sale attempts.
A CMA is NOT an appraisal. Instead, it is an opinion of value.
A CMA is typically prepared by a real estate agent.
Reformation:
A doctrine that permits the court to rewrite a contract.
Rentable vs Usable Square Footage
Usable square footage is the area contained within a building that is actually occupied by a commercial tenant.
Usable space typically does not include elevators, stairs, mechanical spaces, etc..
Rentable square footage is the total area of a space, some of which cannot be used.
Rentable square footage equals the entire space, including the usable square footage and the tenant’s pro rata share of the building’s common areas, such as the lobby, hallways, and restrooms.
The difference between the rentable and usable area in a commercial space is known as the loss factor.
Assignment vs. Sub-Lease
In an assignment, the assignee is responsible for paying the rent directly to the landlord. The assignee takes responsibility of the lease.
In a sublease, the original tenant is still responsible to the landlord for the lease payments under the lease contract.
In a sublease arrangement, the sub-lessee pays the rent to the tenant (lessee) and the tenant pays the landlord.
Platform framing
is the most common type of framing used in residential construction.
Ownership in Severalty
When title to real estate is in the name of only one person or entity, it is an estate (ownership) in severalty.
Think of it as a single individual owns real estate, therefore, the ownership is ‘severed’ from all others.
