Flash Cards and Study Sheet for DE State Exam (2025)
DREC
Administers License Law in DE
- Created to Protect the Public,
- Oversees all the RE activities thruout the state (unfair practices, diminished competition that limited consumer choices)
Duties of DREC - Overall
Develop standards for the industry
Create rules and regulations
Grants and renews licenses
Conduct audits
Monitor complaints
Conduct formal hearings & impose sanctions
Duties of DREC - Complaints
- Refers complains regarding a licensee to the Division of Professional Regulation for investigation
- After investigation, DREC may hold a hearing and could impose sanctions or other penalties
- Could arrange for the wronged party to receive compensation from the Guaranty Fund
Duties of DREC - Fees
DREC may charge fees for (all fees assessed separately:
- license application and renewal
- license change or reinstatement
- reciprocal license
- Guaranty Fund support
Fees are to offset commission and division expenses. Every 2 years the DREC, Division or State Agency calculate fees for the coming year
Duties of DREC - Licensure
- Develops qualifications - grants and renew licenses
- Requires certified records to assess for evidence of unfair or illegal practices or other offenses before license approval
- Develops pre-licensing & CE studs, including exam
- Uses Nat’l recognized test center & appoints committee to evaluate exam meets state rules & regs
DREC - Hearings
- If a meeting serves as a hearing where evidence is presented, the hearings must be recorded verbatim and transcript be made
- Person requesting the hearing pays for the transcript
DREC - Order & Meetings
- Every year members elect a chairperson, vice chairperson and secretary
- Elected positions serve 1 year only
- Elections held same month every year
- Business mtgs held at least 1x/qtr
- Chairperson or majority can call for extra mtgs - need a quorum to attend
- Copies of mtg minutes are given to Division of Prof. Regulation
DREC Member - Service Terms
- Members serve a 3 year term
- May be appointed to serve 1 add’l term
- If vacancy, Governor could appoint someone to serve remainder of vacating members term
- Members earn $50 for every mtg attended - up to a max. of $500 (10 mtgs annually)
DREC Members & Qualifications
DREC - ultimate enforcer of RE Laws and Regulations
DE Admin. Code sets Regulations for DREC
9 Members, appointed by the Governor (All members have to live in DE for 5+ yrs prior to appoint)
- 5 members must be RE Professionals - No member may serve as an elected official of leader of Prof. Assoc. in RE
- 3 Brokers (1 from each county) - active license for 5+ yrs
- 1 Associate Broker - active license for 5+ yrs
- 1 Salesperson - active license for 4+ yrs
- 4 members are appointed from the public
- 1 from each county and 1 from Wilmington
- Within 8 years prior to appt. no member or immediate family member could hold a license in RE, worked as a Broker, had any financial interest in goods or services given to RE licensees - NO WAY connected to RE industry
DREC- Suspension & Dismissal
- Governor has the right to dismiss and member on ground of malfeasance
- Neglect of duty - miss 3 consecutive its or fail to attend more than 1/2 of the reg. mtgs in 1 calendar year
- Misconduct
- Incompetence
- Unprofessional behavior
- Member under investigation in disciplinary hearings will be suspended until matter is resolved
Division of Professional Regulation
Entity that investigates complaints against licensees or the commission
Activities Requiring a RE License
- Anyone who performs RE svcs or activities - including marketing and advertising properties for sale
- Licensure ensures adequate education, knowledge, supervision and regulatory oversight
- Only licensed agents can represent themselves as a RE professional
- Business entities providing RE activities must engage a licensed RE Broker
Exceptions to Needing a RE License
- Owners, lessors, buyers, lesses (or employees) who perform RE activities on their own behalf
- Companies, subsidiaries or divisions performing RE for their own properties in regular course of management or investment business
- Attorney-in-Fact under POA
- Attorneys performing legal svcs for a client or employee
- Trustees in bankruptcy, under court order
- Trustees real property under deed of trust
- Auctioneers
Violations for Practicing RE without a License
- Anyone in violation of practicing RE w/o a license can be called before the Justices of the Peace for a misdemeanor hearing where sanctions could be imposed
- Fines for the 1st offense - $500 - $5000
- Fines for secondary offenses - $1000 - $10000
- Justices of the Peace have jurisdiction over all violations
Path to Licensing
1) Complete the Pre-Licensing Course
2) Interview Brokers
3) Take exam - make an appointment, pay fees and pass
4) Submit application, exam results and pay fees
Type of DE Licenses
- Salesperson
- Associate Broker
- Broker
- Must be competent to transact business
- Ineligible if; had disciplinary action involving RE, impairment due to drugs or alcohol, Doctor orders, criminal conviction or pending charges for RE, conviction of fraud
Reciprocity
License application will ask if you are applying by examination or reciprocity
Affiliating with a Broker
Consider:
- Firm location, size, longevity
- Reputation
- Specialities
- Training & admin support
- Compensation
- Policies & procedures
- Culture
- Personality
If you affiliate with 1+ Brokers - need written approval from each, written commitment from new broker and obtain an additional license
Transaction Brokerage
Only legal in some states
- Do not represent either side
- Can receive commission
Salesperson License Requirements
Works under the supervision of a Broker
- Must be 18+
- Prelicensing
- Need 99+ hours
- 3 hrs RE Orientation
- 36 hrs RE Sales
- 33 hrs RE Law
- 24 hrs RE Math
- 3 hrs Review for subjects above
- Need to pass general and state segments with 70%+
- 3 attempts, if don’t pass then have to retake course
Steps for Salesperson License
- Take 99 hr course
- Pass exam in 3 attempts or less
- Create user account on DE Prof. Reg. online sec (DELPROS)
- Complete online application
- Upload supporting docs (course completion, exam scores, broker written acceptance)
- Pay license fee online - includes $25 to Guaranty Fund
- Submit application within 1 year of completing course
Associate Broker & Broker - Licensing Requirements
- Must be 23+
- Licensing
- Need 96+ hours
- 30 hrs Sales Mgmt & Business Mgmt
- 6 hrs RE Documents
- 6 hrs Valuing Real Property
- 9 hrs Financing
- 9 hrs Landlord/Tenant/Code/Property Mgmt/Condo
- 15 hrs Legal & Gov’t Aspects of RE
- 12 hrs RE Investment
- 6 hrs Ethics
- 3 hrs Review
- Need 96+ hours
- Need to pass general and state with 75%+
- 3 attempts
Associate Broker & Broker - Experience Requirements
Associate Broker - must have held a Salesperson or Broker license in DE or elsewhere for 5+ concurrent years
Broker - must be Actively licensed as a Salesperson or Associate Broker for continuous 5+ years and actively practicing for 3+ years prior to application
Associate Broker
Broker who chooses to affiliate with another Brokerm but doesn’t participate in the day to day management of a brokerage
Steps for Associate Broker License
- Take 96 hr course
- Pass exam in 3 attempts or less
- Submit application (DELPROS)
- Upload docs
- Pay fees - don’t have to pay Guaranty Fund again if you paid it when applying for Salesperson
- Include list of 30 transactions completed within 5 yrs immediately prior to application (address, seller and buyers name, date) - get signed by Broker
- Submit application within 1 year of completing course
Broker
Qualified to sell real estate, train, supervise and manage brokerage day to day activities
Steps for Broker License
Same steps as Associate Broker
+
- Proof of compliance with escrow account rules & regs
- Proof of day-to-day brokerage mgmt & supervision
- If intending to serve as replacement broker, need to submit a letter from current broker naming them as new broker w/application
- If names don’t match will need legal proof
CE Requirements After 1st Renewal - All Licensees
After 1st Renewal - you need 21 hours of CE (3 hrs each):
- Agency and Fair Housing
- Professional Stds
- RE Documents
- Office Management
- Legislative Issues
- RE Practices
- Electives (can choose another approved module above)
CE Requirements - Newly Licensed Brokers, Assoc. Brokers & Reciprocal Licenses
- CE must come from standard modules
- CE is prorated for 1st renewal depending on when licensed
- Associate Broker or Brokers changing status from one to the other follow the 21 hours of CE
CE Requirements - New Licensees “DON’T WAIT”
- Once you’ve passed the exam the CE clock starts whether you apply for your license right away
- Must take 12 hrs of CE between 1yr to 1.5 years after course completion even if you haven’t applied for license yet
- Must take 21 hrs of CE between 1.5 yrs to 2 yrs after course completion and then 2 hrs for each renewal after course completion
CE Requirements for 1st Yr - New Agents
CE requirements are prorated:
- New salesperson (if not licensed elsewhere) - need 12 hours of CE within 90 days of getting license
- Professional Stds
- Sales Agreement
- Real Estate Docs
- Professionalism
< 6mo. to renewal - only need 12 hrs above within 90 days
6 mo. to 1 yr - need 12 hrs above + 6 add’l hrs
1 yr to 1.5 yrs - need 12 hrs above + 12 add’l hrs
1.5 years - < 2 yrs - need 12 hrs above + 18 hrs
CE Substitutions
- DREC members who attend 80% of meetings during a 2yr period earn 1 CE credit for every mtg attended
- Licensees who complete Brokers course will earn 21 hours of CE
- Licensees who take out-of-state brokers course of 99+ hrs earn 18 hrs
- Licensees who take 6+ hrs of a Nat’l accredited program and earn designation earn 6 hrs of CE
CE Waivers
- Licensee can submit a written request w/proof of illness, injury or family hardship
- DREC may waive or postpone requirement
- Must submit requests no later than 60 days before renewal period
CE Compliance Audits
DREC selects licensees for audits
- Will notify licensee 60 days after May 31st of even numbered yrs
- If you have a late renewal, automatically subject to audit
- Have 20 days to verify CE including submitting docs to show completion
- If determined doesn’t meet CE requirements - a hearing will be held per the Admin. Procedure Act
Licenses Changes in DE
- When there is a change that affects your license, licensees must notify DREC and pay any associated fees
- All changes completed through DELPROS - most docs can be uploaded
- Examples of changes:
- Transfer to new brokerage - both licensee & broker need to take action
- Place license in inactive status - releasing broker needs to take action
- Request to terminate - releasing broker to take action
- Cancel a license
- Licensee name changes - submit legal document
- Licensee address changes - notify within 30 days
- Change broker Type
- Change broker address - broker notifies DREC w/list of all licensees and DREC will update each license
- License reinstatement:
- Lapsed can renew - complete online
- Lapsed must Reinstate - apply in DELPROS - DREC reviews at monthly meeting (submit at least 10 days before monthly meeting) - DREC may reject if it has been > 1 yr or may require you retake the license exam
License Renewal Process
- Need to satisfy CE requirements
- Pay renewal fee
- Renew online DELPROS where you have to attest to completion of CE hrs (Broker to ensure you are in compliance)
- Broker and Licensee has to hold records for 3 years
License Renewal Period
DE Licensees renew every 2 years (even numbered yrs) on April 30th
- Commission mails renewal notices a few weeks before expiration
License Renewal Process - New License after Revocation
- Need to wait 2 years before re-licensing
- Take and pass course
- Take and pass exam
- Meet any other requirements stated by DREC
*Note: DREC isn’t compelled to issue an applicant a new license. If permanently revoked - can never get a license in RE again
License Renewal Process - Late License Renewal
- If don’t renew by April 30th on the even numbered yrs license will expire
- Can apply for late renewal up to 60 days after expiration
- Have to pay late fee plus renewal fee
- If > 60 Days license will terminate and you have to do a license reinstate
License Renewal Process - Inactive License
- If inactive, still need to renew
- No CE is required
- Will need to reactivate once you get back in to RE
License Renewal Process - Reinstate
- Provide proof of mtg CE requirements
- Need to pass any exams DREC requires
- Need to pay all fees
- If 6 mo. pass & haven’t reinstated, you’ll be required to re-take the state exam
- If 2 yrs pass, you’ll have to take state and general exams
Licenses for Military Personnel
Active Military - permit continuation of license
- Can request license remains active while deployed
- Protected from expiration date, still need CE require.
Provisional License - service member or spouse can apply for provisional license in DE for up to 6 months while application is in process
Licensing w/Criminal Charges
- Applicants w/criminal record or pending charges may ask for authorities to provide information about the charges to the DREC for review, DREC reviews, if not related to RE could waive stipulation - need majority vote of a quorum
- Felony waivers - if 5+ yrs since conviction, not incarcerated, not serving a suspended sentence or on probation or work release
- Misdemeanor - not incarcerated, serving a suspended sentence on probation, parole or work release
Grounds for Discipline (stay on right side of law)
Licensee and Broker can both lose license - if convicted or plead guilty to forgery, embezzlement, bribery, extortion license can be suspended or revoked
- Misrepresentation, false promises
- Misrepresentation, false promises thru advertising
- Failure to act for escrow funds
- Negligent or incompetent RE activities
- Commission, compensation, valuable consideration violations
- Rules and regulations violations
- Misrepresentation of sellers disclosure condition & radon
- Fraud or deceptive practices in gaining RE license
- Disciplinary actions in another jurisdiction
- Illegal practice of RE, helping someone practice RE illegally
DREC will not suspend/revoke license without giving notice and chance to plead your case
Guaranty Fund
Pays out when a person wins a judgement against a licensee for losses or damages due to any kind of deceit and the person can’t collect the entire amount of judgement. File a claim with the commission within 60 days of the final judgment.
Unauthorized Practice of Law
Illegal action that occurs when someone who is not a licensed attorney attempts to practice law, draft legal documents, or otherwise performs any actions for which a law license is required
Admin. Procedure Act
The Delaware Administrative Procedure Act is the law governing procedures for state administrative agencies to propose and issue regulations and provides for judicial review of agency adjudications and other final decisions in Delaware. It can be found in Title 29, Chapter 101 of the Delaware Code. Helps to ensure that no governmental entity acts without an opportunity for public input by requiring public disclosure and discourse before rulemaking. Example: Conducts hearings for failed CE audits
Consumer Credit Protection Act (CCPA) - 1968
- Includes Truth in Lending Act (TILA)
- Meant to safeguard the consumer in the use of residential credit by requiring full disclosure of the terms and conditions in any offer of credit
- Requires lenders to make disclosures that allow consumers to compare the costs across different lenders
Regulation Z “Truth in Lending Act”
Created to let borrowers know the true cost of credit - MUST BE PROVIDED WITHIN 3 DAYS OF MAKING LOAN APPLICATION
- Enforces TILA - includes all advertising to promote RE
- Make credit info. “clear and conspicuous”
- APR (cost of credit) must be disclosed when borrowers apply for credit
- Does not set a minimum or maximum interest rate
- Full Disclosure needed if “trigger terms are; down payment, payment amount, number of payments, interest rate, not APR
- If ad is simply mentioning financing in a general way, like “low down payment” or “easy financing” no add’l disclosure is needed
Equal Credit Opportunity Act (ECOA)
- Regulation B
- Prohibits discrimination in financing on protected classes (race, color, religion, national origin, sex, marital status, age (18+), dependence on public assistance
RE Settlement Procedures Act (RESPA) - 1974
- Enacted by US Dept. of Housing and Urban Development (HUD)
- Prohibits illegal kickbacks and referral fees
- Covers loan on 1-4 family residential properties (includes loan assumptions, refinances, home improvement loans, equity lines of credit
- Must provide borrowers with a written disclosure of estimated settlement costs
Community Reinvestment Act - 1977
- Lenders must offer affordable loans to “low to moderate” income indivduals
- Lenders must prepare a statemtn showing how they are invested in low-income & rehabilitation efforts (show boundaries, credit offered, comments from schools
- Involves Fed. Regulatory Review by Comptroller, Fed. Reserve Board of Driectors, FDIC, Office of Thrft Supervision
- Lenders must post they are subject to this review and make results public
American with Disabilities Act (1990)
- Seeks to accommodate those with disabilities by broadening their access to public facilities
- Any business with 15+ employees must update their facility to conform w/ADA rules and regs
- All new construction (except SF homes) must be handicap accessible
- Ground floor apartments need to be ADA compliant, but UL do not
- 1988 - multi family w/4+ units must comply w/ADA
Unit Property Act (UPA) - Prior to 2009
Governs the creation and administration of condominiums; applies primarily to developments created prior to 2009. The Unit Property Act specifically regulates condominiums and their development and doesn’t address other types of common interest communities. Most of its provisions were superseded by DUCIOA when it was enacted in 2009, but the management of pre-existing condo communities may still be regulated under the provisions of the Unit Property Act. The act’s provisions describe how units are held and transferred, requirements for managing the property, how condominium owners are taxed and insured, how liens can be placed, how repairs and improvements must be handled, and so forth.
DE Uniform Common Interest Ownership Act (DUCIOA) - 2009
Governs the formation, management, and termination of all common interest communities since 2009. Requires delivery of resale package. Associations have 10 days to provide the certificate once requested. The association may charge up to $200, or $250 for a hard copy. Unit owners aren’t liable to purchasers for association errors the owner isn’t aware of. If the resale certificate isn’t provided to the buyer prior to signing the purchase contract, the buyer may cancel the contract within five days of receiving the resale certificate. Applis to Conods, Co-ops and PUDs. Exempt for commercial common interest properties, conitnuing care faclities or smaller communities with < 20 or fewer units. Developers of new construction are required to provide buyers with a public offering statement that provides disclosures about the developer, how the ocmmunity is governed and financials for the community.
Common Interest Condominium Act (CICA)
Delaware Condominum Act
Delaware Home Inspectors Statute
Delaware Mortgage Loan Modification Servcies Act (MLMSA)
loan modification service providers are prohibited from indicating or suggesting that homeowners shouldn’t or aren’t allowed to communicate with their lender, among other things. It doesn’t prohibit a real estate licensee from also acting as a loan modification service provider or from charging the homeowner for loan modification services. Part of the service involves negotiating with lenders on behalf of the homeowner/borrower regarding loan modification.
Manufactured Home Owners and Community Owners Act (MHOCOA)
Outlines the rights of manufactured home owners in a manufactured home community
The act requires manufactured home community owners to give residents advance notice of an impending sale. Residents are granted the right of first offer—that is, they have the right to purchase it first by forming a cooperative or homeowners association (HOA).
The co-op or HOA has 30 days after receiving the community owner’s notice of sale, which includes the sale price and terms, to either accept the price and terms, to reject them, or to make a counter-offer.
Bundle of Rights
Police Power
Governments authority at state, local and federal level - to do what it can to ensure the health, safety and welfare of its citizens
Dual Agency “Limited Agency”
Represents buyer and seller - also known as “limited agency”
Conformity
Blockbusting
Redlining
Inducement
Premiums, prizes, merchandise discounts or other incentives to list, sell, purchase or lease property, or event o visit open houses
**Undisclosed inducements related to a purchase agreement are prohibited
Std Agreement of Sale
- Requires title to be free and clear of liens, judgements, encumbrances other than any easements or restrictions.
- Any encroachments or title issues must be disclosed on the Sellers Disclosure of Real Property Condition Report
Realty
Land and everything permanently attached to it
Real Property Ownership Rights “DEEP C”
- Disposition
- Enjoyment
- Exclusion
- Possession
- Control
Real Property vs. Personal Property
Real Property - the land and everything attached to the land
Personal property - everything that isn’t real property (not attached)
Improvements
Artificial attachments (fencing, sheds, buildings, walkways)
Tests of a Fixture “MARIA”
Method of Annexation
Adaptability of item to lands use
Relationship of the parties
Intention in placing the item on the land
Agreement of the parties
Deed Restriction
A private control which limits the use or appearance of a given property
CCR’s
- Conditions - contingencies in which a property might be won or lost if the condition is violated
- Covenants - agreements between two or more parties
- Restrictions - deed restrictions
Restrictive Covenant
Private control that limits the use of the property
Land
Earth’s surface extending downward to the center of the earth and upward to infinity, including permanently-attached natural objects
License
Permission to do something on another’s land without actually possessing and interest or ownership in the land
**Usually temporary and may be revoked by the landowner at any time
Easement
The authorized use of another property for a specific purpose
Easement Appurtenant
- Attached to a specific parcel of land
- Transfers with the land
- Grants the right to use adjoining property
Easement by Necessity
Only created for the purpose of ingress and egress
Easement by Prescription
Created through the continued, uninterrupted, obvious and adverse use of another property for many years
Easement in Gross
Granted to a specific individual or business entity rather than attached to the property itself
Adverse Possession
If someone uses someone else’s land for a long period of time without permission, that person has rights based on fact they were treating the property as their own
Encroachment
An affixed intrusion onto another persons property (ex. fence, shed)
Encumbrance
Any claim or lien held by another person or entity against a property that limits owners use or rights or decreases property value
Riparian Rights
Concern the allocation of water between land owners along a flowing waterway (river)
Littoral Rights
Concern the use of the shore of closed bodies of water (lakes) for abutting property owners
Lis Pendes
A public notice that a legal issue is pending
PUD
Planned Unit Development - everything in definition of land, plus all things permanently attached to it naturally or artificially
Chain of Title
Establishes path of ownership
Abstract of Title
Summary of title history
Forms of Ownership
Severalty - title is held by one owner
Co-Ownership - title is held by 2+ persons or 2+ legal entities
Title Insurance Policy
Insures against title defects for policy holder
Deed
Establishes proof of ownership, legal document that is signed and delivered
Types of Deeds
- Full covenant and warranty
- Special warranty
- Bargain and sale
- Quitclaim
- Referre’s
- Executor’s
- Deed in Trust
General Warranty Deed
In a general warranty deed, the grantor is warranting against title defects that occurred not only during the grantor’s period of ownership, but also all prior owner periods.
Special Warranty Deed
- Customary way to convey title to RE in DE
- Conveys title or interest to the grantee and warrants against the grantor and grantor’s heirs and assigns.
- Does not provide a warranty for claims prior to the Grantors ownership
Bargain and Sale Deed
Quitclaim Deed
A quit claim deed contains no covenants of warranty and transfers nothing more than the grantor’s interest in the real estate at the time of the execution, rather than the real estate itself. The grantor is not providing any expressed or implied warranties against title defects.
Referee’s Deed
Executor’s Deed
Deed in Trust
Elements of a Deed
- Grantor/Grantee
- Act of conveyance (granting clause)
- Consideration
- Legal description
- Habendum clause
- Limitations and “subject to” clause
- Signature of Grantor
- Acknowledgment/recording
- Delivery and acceptance
Recording a Deed
- Must be acknowledged before recording
- Deed must be recorded in the county where the property is located
- Recording date is used to establish order of lien priority, not the date the deed is signed
Freehold Estate
Ownership estates of indeterminable length (fee simple, life estate)
Fee Simple “Absolute”
Highest form of ownership of land and any buildings on it. It is a type of freehold ownership that grants the owner full and irrevocable rights to the property. Can sell, mortgage or pass along to anyone
Fee Simple Condition Precedent
Type of property interest that is similar to a fee simple, but is subject to a condition that can end the interest. A condition precedent is a condition that must be met before a future interest can become possessor.
Fee Simple Condition Subsequent
Right of re-entry - type of property ownership where the grantor has the right to take back the property if certain conditions are not met. This is different from a fee simple determinable, where the property automatically reverts to the grantor if the conditions are not met. Have to take legal action to reclaim property
Fee Simple Defeasible
Type of real estate ownership that can be taken away if a specific event occurs or doesn’t occur. The conditions are outlined in the property’s deed or legal document.
Fee Simple Determinable
Type of real estate ownership that automatically ends when a certain condition is met. The property then reverts to the original grantor or their heirs.
Leasehold Estate
Rights of possession without ownership (ex: estate for years, estate at will, estate at sufferance, periodic estate)
Periodic Estate
Estate at Sufferance
Estate at Will
Estate for Years
Estate in Fee
Estate in Severalty
One person owns the property; all other interests are severed
Courtesy
Grants a husband (or child) interest in his wife’s estate when she passes
Dower
Grants a wife (or child) interest in her husbands estate when he passes
Intestate
Died without leaving a will
Escheat
States power to claim the estate of a deceased person without a will, heirs or creditors
Testate
Died leaving a will
Eminent Domain
The power of the gov’t to take private property for public use
Joint Tenancy
Equal ownership with undivided rights of possession; each owner may sell his own interest; if one owner dies, that person’s ownership reverts to the survivors
Tenancy in Common
Each person is entitled to possession of the whole; if one dies, that person’s ownership is inheritable (but doesn’t necessarily pass to the other owners)
Tenancy by the Entirety
Spouses (including same-sex spouses) own property together as a single legal entity; neither spouse may sell or give away an interest in the property without the other’s permission; if one dies, the entire ownership reverts to the surviving spouse
Alienation
Transfer of title to real property
Voluntary Alienation
- Sale
- Will
Involuntary Alienation
- Foreclosure
- Court ordered sale
- Adverse possession
Legal Description
Description of RE sufficient to identify it for legal purposes
Forms of Legal Description
- Metes and bounds
- Lot and Block
- Rectangular Survey
Metes and Bounds
Uses compass heading and directions
Lot and Block
Provides plat reference
Rectangular Survey
Divides land surveyed into 6 mile square townships, which are further divided
Mortgage Survey
Buyers in New Castle County have the option of a mortgage survey to reduce costs. The buyer must agree to accept a survey/plat map showing the position of improvements on the property using historically identified boundaries rather than setting corner markers and identifying the actual boundary lines. This does require a licensed surveyor. NOT permitted in Kent and Sussex counties.
DE regulations allow a mortgage survey or mortgage survey plan
- Requires a buyer or owner if not selling but getting a mortgage, to sign waiver allowing the survey to be done without setting corner markers.
- Provides a warning that the boundary lines haven’t been identified and that a more complete survey may be needed in the future
- Buyer receives a plat map showing the positions of buildings and other improvements with descriptions on the property
Boundary Survey or Improvement Location Plan
Corner markers are set
Zoning
Establishing specific classifications to land that impacts how the land may be used
3 “C’s” of Underwriting
1) Credit - credit score and accounts
2) Capacity - cash reserve and debt to income ratio
3) Collateral - down payment and property taxes
Mortgage
Voluntary, specific (applies to one property) lien
Mortgagor vs. Mortgagee
Mortgagor = borrower
Mortgagee = lender
General Lien
Attaches to all of debtors property
Specific Lien
Attaches to a single property
Voluntary vs. Involuntary Lien
Voluntary - debtor agrees to voluntary lien (mortgage)
Involuntary - lien placed without debtor’s consent
Reverse Mortgage
- Lender gives money to borrow using the home itself as collateral
- Repay at death or sell home
- Popular with:
- Elderly
- Lot of equity “house rich”
- Little liquid cash “cash poor”
Swing Loan (Bridge or Gap Loan)
Short term loan that allows borrowers to borrow against current property in order to buy a new one
Secondary Mortgage Markets
- FMHA
- Fredie Mac
- Fannie Mae
Subordination Agreement
An agreement to subordinate a priority lien beneath another
Ginnie Mae
Encourages low income housing
*Freddie mac has some programs for low income
Compound Interest
Interest paid on accrued interest as well as principle
Satisfaction Piece
Document from lender that states the property has been paid off and is released from lien
Lienor vs Lienee
Leinor holds the lien vs. Lienee is subject to the lien
Lien Priority in DE
1) Sate/municipal liens
2) Super Liens (1st 6 mo. unpaid HOA)
3) 1st and 2nd Mortgages
4) HOA’s - in excess of super lien
5) 3rd mortgages, mechanics liens, judgements
Appraisal
Appraiser will investigate following factors:
- economic
- environmental
- physical
- social
Market Value vs. Market Price
Market Value - estimate of what a property should sell for
Market price - price a property did sell for
Sales Comparison Approach “Market Approach”
Referred to as “Market Approach”
- Valuation by an appraiser using similar properties and makes valuation adjustments
Deficiency Judgement
A legal condition in which a foreclosed homeowner or short sale seller owes the lender the diff, btw what was owed and the sales proceeds
Estoppel
1031 Tax-Deferred Exchange
Section 1031 of the Internal Revenue Code allows the owner of real property to sell that property and then reinvest in a “like-kind” property and defer paying any capital gains taxes; strict IRS rules regulate this type of exchange
Abandonment
When a tenant vacates a property without notice and before the lease terminates
Abutting
Land parcels that share a common border
Acceleartion Clause
Allows a lender to demand immediate and full payment of all debt owed if a buyer defaults or fails to meet certain conditions that apply to the loan
Accession
The addition of value to property through labor or the addition of new materials, including an increase in land through natural processes. Ex.Jonathan’s property borders a bay. The bay receded, and Jonathan gained an extra 10 feet of property to his land through accession; also, Chris built a fence on his neighbor’s property with no agreement allowing Chris to remove the fence. The neighbor now owns the fence.
Accretion
The gradual growth in the size of a land parcel due to water-deposited sand, silt, or gravel. Ex. Jillian’s property grew through accretion when the creek flow created a long sandbar.
Accessory Use
An incidental or subordinate use to the primary use of the property. Ex. Andy’s military bunker in his back yard constituted an accessory use of the property.
Acknowledgement
A requirement for deed transfer; a public official must acknowledge, usually by a notary public, the grantor’s signature
Acre
A unit of land that is equal to 43,560 square feet
Act of Waste
Abuse of a property by a person who holds possession through a life estate
Adjusted Basis
The final basis for taxing purposes, computed by taking acquisition costs plus capital improvements and less certain deductions such as depreciation
Administrative Law
Law related to the legal process; enacted by administrative agencies, which are governmental bodies of the city, county, state, or federal government
Ad Valorem
Related to the concept of property taxes; a Latin term that means “according to value”. Ex. Ad valorem is a method of charging a tax according to the value of the property instead of by a fixed rate.
Adverse Material Fact
A fact that might cause the buyer to change his mind about purchasing the property
Aerobic Septic System
A type of septic system that promotes the growth of aerobic bacteria by introducing air into the wastewater, leading to more efficient waste breakdown.
Aesthetic Zoning
Specifies style or architecture of buildings in an area in order to preserve charm, feel, etc.
Affidavit of Title
A sworn statement assuring that no title defects have occurred since the date of the last title search
After Tax Flow
The amount of money left over after a property’s operating expenses, debt service, and taxes have been paid
Air Rights
Rights to use the airspace above the land may be sold or leased independently of the land itself
Alienation Clause
A provision in a mortgage that requires the loan to be paid in full by the mortgagor if a transfer of ownership takes place. This is also called a due-on-sale clause.
Alluvion
The material that creates an increase of soil and thus land parcel size due to accretion. Water flowing from a creek bordering Jillian’s property created a sandbar, and she was able to use the alluvion—the new land mass that formed—as her own property.
Anchor Store/Anchor Tenant
A large commercial tenant that draws in traffic to a mall or shopping center
Annexation
An attachment of personal property to real property, thereby making it a fixture (also known as an attachment)
Annual constant
The sum of the annual mortgage payments—both principal and interest—divided by the mortgage balance; also commonly referred to as an annual loan constant or mortgage constant; annual constant = annual payment ÷ mortgage balance
Annual Percentage Rate (APR)
A rate derived to reflect the true cost of financing that allows consumers to compare loan products; includes financing fees, so it will always be higher than the actual interest rate on a loan
Antitrust, Antitrust Law
Laws relating to the promotion of fair competition in the marketplace. Ex. Antitrust violations include price-fixing, tie-in arrangements, market allocation, and group boycotting.
Appraisal
An estimate of value as of a specific date and for a specific use performed by a state-licensed or certified appraiser.
Appurtenances
Automatic rights inherent in property ownership
Ex. Jason loved being a property owner. He decided not to sell off the water rights that came with his property and to others. He kept all of his bundle of sticks together.
Asbestos
A fibrous mineral found in rocks and soil, previously used in construction materials for its insulating and fire-retardant strength and currently classified by the EPA as a hazardous material.
As-Built Drawing
as-built drawing
A plan or drawing that reflects the final design and modifications of a septic system as constructed.
Ex. An engineer submits an as-built drawing to the local health department, documenting the exact layout and specifications of the installed septic system.
As-of-Right-Zoning
Zoning regulations that permit property owners to develop their land in accordance with predetermined guidelines without needing special permissions or approvals from local authorities
Assemblage
The process of combining separate adjacent parcels of land into one piece
Assessor Parcel Number
Number assigned to each plot of land by a county tax assessor
Assignment (rentals)
The substitution of tenants, putting the responsibility for the lease contract in the new tenant’s hands. Requires written permission of landlord.
Assignment (contracts)
When a new party to a contract agrees to satisfy the former party’s obligations. Unless there is a novation (a new contract) the original parties remain liable for the contract terms.
Ex. Ty decided to take an African Safari in the middle of his transaction. His brother agreed to have the contract assigned to him. However, Ty remains responsible unless a new contract is drawn up, naming his brother as the contracted party.
Assignment (mortgages)
The transfer of a mortgage from the original lender to another
Ex. Sima must not have been paying attention to her disclosures because she was surprised with EZ Well Bank assigned her mortgage to another lender.
Assessment Ratio
The percentage of a property’s market value that is subject to taxation, used to calculate the assessed value for property tax purposes
Ex. To find the assessment ratio, divide the assessed value by the market value. If a property has an assessed value of $150,000 and a market value of $200,000, the assessment ratio is 75%.
Automated Valuation Models (AVMs)
Rely on mathematical modeling combined with data from sources such as tax records to provide real estate property valuations
Avulsion
A loss of existing land by the sudden change in a watercourse, washing it away. Ex. Brady was aghast when part of his property washed away in a tidal wave. This avulsion caused him to lose 15% of his property.
B-1 Environmental Issue
A significant environmental concern or condition associated with a property is typically identified during environmental due diligence assessments. These issues are categorized based on their severity and potential impact on human health or the environment, with B-1 being one of the highest priority classifications.
Ex. B-1 environmental issues include the presence of hazardous substances, contamination of soil or groundwater, or other conditions requiring remediation to address potential risks to occupants or the surrounding environment.
Delaware Human Relations Commission
28 member appointed by the Governor, 7 from each county and 7 that don’t represent a specific county. Responsible for enforcing Fair Housing Laws
Delaware Division of Human Relations
The Division of Human Relations receives complaints of fair housing violations, investigates discrimination, and mediates solutions. The State Human Relations Commission plays a role in implementing the provisions of Delaware’s Fair Housing Act. It’s not part of the Delaware Real Estate Commission’s role to handle fair housing complaints, though it can discipline licensees who are found guilty of violating fair housing law.
Fair Housing Discrimination Penalties
Individuals found guilty of violating state fair housing laws may be fined. Fines can be as high as $50,000 per violation for those who’ve consistently engaged in discriminatory practice over time, or even as high as $100,000 per violation in cases where a pattern of discriminatory behavior is found.
A complaint of discrimination can also be filed as a civil action in the county where the discrimination occurred. If the court finds for the plaintiff, actual and punitive damages may be awarded.
Delaware Statutory Agent
Delaware makes a licensee a Statutory Agent by Default. No written agereement is needed. A statutory agent in real estate is a licensed real estate agent who acts as an independent contractor to bring buyers and sellers together. The permitted actions for a statutory agent include presenting an offer to a client when the property is already under contract; serving as a single agent, dual agent, or sub-agent; and showing the same property to multiple interested parties.They also provide advice and negotiate on behalf of their clients. Delaware outlines statutory duties required of a licensee when working with a client. They include the duty to perform ministerial tasks related to the contract.
Customer
Only owe duty of confidentiality. In Delaware, a real estate customer is a member of the public who is working with a real estate licensee. A customer may be a potential buyer, seller, landlord, or tenant. They may also be consulting with a licensee about a brokerage agreement or transaction
Client
In Delaware, a real estate client is a member of the public who is the main party in a real estate transaction. A client can be a buyer or seller.
Confidentiality
The duty of confidentiality required by Delaware law begins upon the first contact (as opposed to first scheduled appointment) between a licensee and the customer. Thus, confidential information a consumer shares with a licensee, even if it’s just discussing the property over the phone or at an open house, is protected. The following are defined as confidential:
A buyer/tenant is willing to pay more than the price offered.
A seller or landlord is willing to accept less than the asking price.
Personal motivating factors for any party to a transaction.
A client will agree to terms other than those offered.
Material confidential information about the parties or property unless disclosure is required by statute or regulation or failure to disclose such information would constitute fraud or intentional misrepresentation.
Facts or suspicions regarding circumstances that may psychologically impact or stigmatize any real property.
Facts or suspicions that any party in the community is a registered sex offender. If asked, licensees must refer the person to the Delaware State Police to seek this information.
** Information that’s public knowledge isn’t considered confidential, and licensees may disclose this information without the client’s permission ** The duty of confidentiality may only be broken if disclosure is required by law or if not disclosing would constitute fraud or intentional misrepresentation.
Permitted Actions of Licensee (does not break confidentiality)
The following actions do not breach any obligation that a licensee has to either a customer or client with whom the licensee is working:
List and advertise competing properties.
Show properties that aren’t listed by the licensees’ brokerage.
Show the same property to multiple interested clients/customers.
Present offers for the same property on behalf of more than one client/customer.
Disseminate generally known information to which all licensees are privy (e.g. MLS info.), as long as the client/customer makes the ultimate decision about what to do with it.
Help transaction parties prepare offers and counter-offers, as long as the forms being used contain language advising the parties that they may seek legal counsel prior to signing.
Unless the client/customer instructs otherwise, present all offers and counter-offers, even if the property is already under contract.
Assist clients/customers in negotiating, advising them on how to proceed in the transaction.
Perform ministerial tasks.
Serve as either a single agent or dual agent for the same parties in different transactions, or as a sub-agent for another licensee.
Cooperate with other real estate licensees. (Note: Licensees can’t work with any common-law sub-agents from other brokerages.)
Discuss transactions with the licensee’s broker, other designated licensees, and other office personnel.
Provide customers and clients with requested information and advise clients on how to proceed while answering any questions.
Consumer Information Sheet
Required for all transactions involving one- to four-family residential properties and single lots intended for one- to four-family residences. CIS explains agency, the licensee’s duties, and the difference between a client and a customer. It identifies the consumer’s working relationship with the licensee. Consumers can decline to enter into dual agency or any agency relationship at all on the CIS form. The licensee working with the consumer must deliver the CIS to the consumer (except nonrenewable leases or 120 days or fewer) no later than the earliest of:
The first scheduled appointment
The first showing of a property
The time when an offer is being made
** The customer/client should sign the CIS prior to signing an agreement of sale, listing agreement, or buyer/tenant representation agreement *
**MUST BE DISPLAYED AT OPEN HOUSES*
Radon Disclosure Form
All property sellers must disclose to potential buyers that the property being sold may potentially expose the buyers to radon. Form is to be completed and signed by the seller prior to signing the listing agreement. Must also include and radon testing or inspection reports, along with any known hazards. Buyer needs to review and sign acknowledging receipt. Radon disclosure isn’t required for a property being sold by or purchased by a government entity. Disclosure exemptions for radon are the same as those for the seller’s property condition disclosure.
Radon Rights, Risks and Remedy for the Home Buyer and Radon Disclosure
Disclosure that must be provided to the Buyer. Must be signed by both buyer and seller
Sellers Disclosure of Real Property Condition Report
When listing a property of 1-4 units, the seller must complete prior to signing a listing agreement. It’s never completed by the licensee, and it’s required whether or not the seller is represented by a licensee. However, sellers are only obligated to disclose actual knowledge of any material defects; they don’t need to have an inspection done to uncover issues they’re not already aware of. Must be provided to any prospective buyer.
Sellers Disclosure of Real Property Condition Report - EXEMPTIONS
When exempt from providing, use the Exempt Property Certification form and provide to buyer for signature and inclusion in the contract.
Transfers by a fiduciary in the course of the administration of the decedent’s estate, guardianship, or trust: For estates, this exemption only applies if the executor or administrator is the seller. If the people who inherited the property are the sellers, they must complete the seller’s disclosure form.
Court-ordered transfers, such as those from a bankruptcy or judgment for specific performance
Transfers to a mortgagee (lender) by a mortgagor (borrower) in default by a deed in lieu of foreclosure
Transfers by any sheriff’s sale for default on an obligation secured by a mortgage, judgment, tax, or other lien: If the seller is a lender who acquired the property by a deed in lieu of foreclosure or by sheriff sale, the lender is required to complete the seller’s disclosure form when reselling the property.
Transfers from one co-owner to one or more other co-owners
Transfers made to a spouse or to a person or persons in the lineal line of consanguinity (e.g., direct relations such as grandparent, parent, and child) of one or more of the transferors
Transfers between spouses resulting from a property settlement incident to a divorce
Transfers to or from any government entity
Sellers Real Property Condition Report - New Construction
New construction uses its own disclosure form, which is called the Seller’s Real Property Condition Report – New Construction Only.
Do Leases Require the Sellers Disclosure of Real Property Condition Report?
Yes, when renting a property it is required, even if it is a manufactired home
Resale Certificate
The seller of the unit in the residential complex larger than 20 units is responsible for requesting a resale certificate from the condo association. The cooperative community isn’t covered by this DUCIOA requirement because of its size (fewer than 20 units). Commercial common interest communities and continuing care facilities are also exempt from the DUCIOA requirement for a resale certificate.
Delawares Protected Classes
Delaware identifies 13 protected classes in its fair housing laws, but military service isn’t one of them. In addition to the seven classes that are also protected under federal law (race, color, religion, nationality, familial status, sex, and disability), Delaware adds creed (hasn’t been legally defined and may be equated with specific religious beliefs or any strongly held system of beliefs), sexual orientation, marital status, age, gender identity, and source of income.
Well and Septic Provision
The purchase contract for residential property includes a provision that requires Andy to have the septic system pumped and inspected by licensed professionals prior to completion of the sale. A soil evaluation would only come into play if the property didn’t have any existing form of sewage treatment available
Uniform Electronic Transactions Act
Agreement from the parties to conduct the transaction electronically can be determined from the circumstances; it doesn’t have to be an agreement in writing. The law says that the contract signed electronically by both buyer and the seller now has the same effect as a contract that was signed physically by both parties.
Tax form 5403
Form 5403 is titled Real Estate Tax Return Declaration of Estimated Income Tax, and it records the amount owed for capital gains (not transfer tax) if the seller is an out-of-state entity. All sellers will complete it, but residents will mark the box indicating that they’re not subject to the withholding.
Consumer Fraud Act
The purpose of the Delaware Consumer Fraud Act is to protect consumers from unfair or deceptive sales practices. It applies to the sale of all kinds of merchandise, including real estate.
The act prohibits any sale, lease, or advertising that deceives or misrepresents a product.
The act prohibits companies from listing a fake business name and number, implying the business is local when it’s not, or not properly identifying the business or the business’s actual location.
Home Inspections Consumer Act
State Board of Home Inspectors
Home inspectors in Delaware must be licensed by the state and registered with the state Board of Home Inspectors. Must have a high school diploma or equivalent, pass a written home inspector’s exam and complete board mandated educational and training requirements. The board may deny licensure to applicants with a criminal history related to home inspection. The statute allows home inspector licensees from other states to apply for a temporary Delaware license to work on a specific assignment.
Home Inspections License
The State Division of Professional Regulation receives complaints against home inspection licensees and investigates alleged home inspection law violations. Possible disciplinary actions include: formal reprimand, probation, license suspension/revocation, and fines not to exceed $1,000 per violation.
Title 25
No county or municipal government, homeowner association, or association formed for the management of commonly-owned elements and facilities or for regulating use of private property shall adopt any covenant, restriction, deed restriction, zoning restriction, or subdivision restriction which prohibits or restricts the owner of a property from using a system for obtaining wind energy, installing or using a roof mounted system for a residential single family dwelling unit.
Common Law Agency
Only brokerages that exclusively practice single agency can engage in common law agency agreements for one- to four-family properties, and the relationship must be established in writing.
Clear Zone Law
Signs may not be placed on medians, within 10 feet of the pavement of a public road, or within seven feet of the pavement on a residential street. If a sidewalk is present on a residential street, signs may be placed on the sidewalk edge furthest from the street. Signs may not be placed on state right-of-way property, such as utility poles and transit shelters.
Internet Advertisements
Ted’s website must follow the rules for Internet advertisements. It must include the city and state in which his main office is located and his jurisdiction of licensure in addition to his brokerage office name and office phone number. These disclosures must be included on every page, but they can be made by using a link to the full disclosure. Do not need licensee license number.
Billboard Advertising
Billboard advertising for personal promotion, must include brokerage’s name and office phone number as registered with the Delaware Real Estate Commission. Telephone numbers must be identified as an office. REALTOR® logo is not a required disclosure.
Yard Signs
Yard signs are excluded from the requirement to disclose license status in advertisements for property owned by the licensee
Exempt Property Certification Form
Required in certain transfers, and only if a real estate licensee is involved in the transfer. Transfer of property to a person “in the line of consanguinity” of the transferor (meaning a relation in a direct line, such as a son, granddaughter, or parent of the seller) is one of the situations that’s exempt from the use of the usual property disclosures and will use the Exempt Property Certification. Form should be completed before signing a brokerage agreement with Harry.
Delawares Agricultural Leases Act
Delaware law requires sellers of agricultural land that’s subject to an agricultural lease to disclose information related to lease renewal. The provisions of the Delaware Agricultural Leases Act don’t say anything about terminating a lease while crops are still in the ground, and it doesn’t obligate a property buyer to renegotiate lease terms. The act doesn’t require buyer approval from tenants, either.
Mortgage Loan Modification Requirements
Contracts for mortgage loan modification services must be in writing and free of alterations or modifications, and be given to homeowners for their review at least 24 hours before they sign. They must include a detachable page entitled “NOTICE OF CANCELLATION” that permits cancellation at any time without penalty.
They may not suggest that homeowners can’t communicate directly with their lender.
They may not accept any compensation until after homeowners and their lender execute a written agreement including the providers’ offer.
They may not claim they’re associated with a government agency, a non-profit or government homeowner assistance or counseling program, a lender or loan service provider, or any other program, organization, entity, or individual.
Business-related communications they issue must include three specific disclosures.
The Delaware Mortgage Loan Modification Services Act (MLMSA)
Protects homeowners from unfair or deceptive practices that shady mortgage loan modification service providers might attempt to employ. Requires mortgage loan modification service providers to:
Register with the attorney general
Pay a $1,000 fee
Submit copies of print and electronic advertising
Obtain a $100,000 surety bond.
Exempt Entities: Attorneys practicing regular activities in the state, Anyone performing legal business activities at a financial institution (e.g., bank, trust company, or credit union) or insurance company, Anyone performing regular business services as a licensed mortgage loan originator, mortgage broker, lender, or debt services provider, Licensed real estate brokers or real estate salespersons negotiating with loan holders for properties they have listed with their brokerage, Nonprofit organizations that provide housing counseling, Public corporations or governmental agencies or subdivisions
Verify Access to Water and Sewer
Delaware law requires a notice to buyers in the agreement of sale for unimproved land that warns them to check for water and sewer services. The notice also allows the buyer to make the sale contingent on approval of a site evaluation.
Lease Requirements
Leases for less than one year may be verbal, but those for one year or longer must be in writing. Leases with no specified term are understood to be month to month. The following can NOT be included in a lease agreement in DE; Attempts to recover attorney’s fees from the other party, Confessions of judgment to resolve a dispute (instead of normal court proceedings), Waivers, limits, or indemnifications regarding the landlord’s legal liability or indemnification for such liability, Waivers of a tenant’s rights as provided in the code. If any of the above are included, the lease is void and unenforceable.
Landlords Responsibility
Landlords must give tenants: A copy of any written agreement at no charge, A copy of the summary of the code published by the Consumer Protection Unit of the attorney general’s office, The landlord is obligated to comply with all laws, regulations, and ordinances regarding maintenance, construction, use, or appearance of the rental unit, and to ensure that the unit is habitable and safe. If a landlord fails to provide heat, electricity, light, running water, or adequate sewage services, or any other dangerous condition exists for at least five days after receiving notice, tenants may file a petition with the Justice of the Peace Court.
Surety Bond
Tenants may opt to purchase a surety bond from a carrier licensed by the Delaware Department of Insurance instead of paying part or all of the security deposit, but only if the landlord agrees. Surety bonds must not be more than one month’s rent.
Acceptable Fees Landlord Can Charge
Landlords may charge an application fee, security deposit, pet deposit, or a reservation deposit for a specific unit for a specific time period, as well as optional fees for services, like pool, tennis, or fitness room fees.
Tenants Obligations
Tenants must abide by landlords’ reasonable rules and restrictions regarding the rental unit, provided the rules apply to all tenants, are clear and understandable, and preserve tenants’ health, safety, enjoyment, and fair access to services.
Landlords Notice to Tenant
Landlords must give tenants 48 hours’ notice before entering for maintenance, repairs, or routine inspections, which must take place during normal business hours. Tenants must allow landlords to have reasonable access.
Rental - Protected Classes
In Delaware, tenants may not be denied access to rental properties on the basis of race, color, creed, religion, national origin, marital status, familial status, gender, gender identity, sexual orientation, disability, age, income source, or occupation.
Rent Rules
For leases longer than one month, monthly rent is due at the beginning of each month, with a five-day grace period.
If the landlord’s office is in another county, an eight-day grace period applies.
Late fees may not be more than 5% of the monthly rent.
Landlords who accept cash payments must give tenants a cash receipt within 15 days and maintain records of all cash receipts for three years.
Landlords must give tenants 60 days’ notice of a rent increase. Tenants then have 15 days from the date of receiving the increase notice to notify the landlord if they’ll be terminating the lease at the end of the 60 days. Without such notice, landlords can infer that the tenants accept the raised rent.
Tenants Violations
If a tenant violates the lease terms, the landlord can give the tenant a seven-day notice to remedy the situation, or the landlord will terminate the tenancy and file an eviction lawsuit.
Dealware Transfer Tax
The transfer of a property from one person to another triggers a tax known as a transfer tax. This tax becomes payable when the deed is recorded. Delaware transfer tax is usually a total of 4%. It includes:
A transfer tax established by the municipality or county, which may be as much as 1.5% of the purchase price.
A state transfer tax is 3%, unless it’s combined with a full 1.5% transfer tax from the county or municipality, in which case the state charges 2.5% to make the full transfer tax 4% of the purchase price.
Transfer tax is split equally between the buyer and seller, unless the parties agree otherwise.
First-time homebuyers receive an exemption from the county transfer tax but no discount from the state.
Unimproved Land Notices to Buyer
Every unimproved land contract in Delaware must contain a notice to buyers that services, such as water and sewer, may not be available. The text of the notice is stipulated in the Delaware Code. If the buyer determines central sewerage and water access isn’t available, the provision allows the buyer to make the contract contingent on a satisfactory site evaluation and approval to install a well and septic system. The buyer may also choose to waive the provision if access to water and a sewage system isn’t an issue for the planned use of the property.
Unimproved Land Disclosures
The Agreement of Sale for Unimproved Land includes disclosures related to:
The potential for hidden environmental hazard; the buyer is encouraged to have a written agreement with the seller to conduct environmental testing.
The possibility that the property is in a designated flood zone or wetland, which could limit the development options.
The possible existence of various physical and regulatory characteristics that could prevent the buyer from using the property as intended, including water quantity and quality, availability or future extension of municipal utilities (and any associated costs), physical property characteristics, zoning regulations and restrictions, soil conditions, etc.
Required site evaluation and approval for new wells and septic systems.
Delaware Department of Natural Resources and Environmental Control (DNREC)
All aspects of septic system design, installation, repair, and maintenance are overseen by the Delaware Department of Natural Resources and Environmental Control
On-site Wastewater Treatment and Disposal System (OWTDS)
Treatment/disposal systems installed on an owner’s land specifically for that owner’s use.
OWTDS - Agreement of Sale
In a residential sale of property that uses an OWTDS, the Agreement of Sale requires the seller to have the system pumped out by a Class F licensee and then inspected by a Class H licensee prior to closing. The seller must provide the buyer with a report indicating the system is in working order. Sellers must disclose any known issues with an OWTDS, but since the systems are often hidden, sellers may not be aware of any malfunctions. The buyer may also elect to have an additional inspection of the OWTDS made and make the contract contingent on the findings of the inspection.
Installation of a Septic System
Installation of a septic system involves three steps:
1) Site evaluation: Must be performed by licensed Class D soil scientist. Requires a fee and DNREC approval.
2) Design: Must be designed by a system designer licensed for the relevant type of system; a permit is issued upon approval by the DNREC.
3) Installation: Must be installed by a licensed Class E system contractor.
Purchase Money Mortgages - Seller Financing
When a seller provides financing to the buyer in a Delaware real estate sale, the purchase contract must include an amortization schedule showing all payments the buyer must make according to the agreement.
The purchase agreement must also include a statement that the seller(s) and buyer(s) have read and understood the amortization schedule. All of the parties must sign it.
The purchase price in the contract must not include any interest from financing. A trustee and beneficiary are involved when the property is secured by a deed of trust
Conditional/Installment Sales Contract
(aka installment land contract or contract for deed)
Contractual agreement in which the buyer pays the seller the purchase price over time in a series of installments until the contract has been paid in full. The seller holds the deed to the property until the purchase price is paid. While a contract is executory, the seller retains legal rights to the property while the buyer has equitable rights, which include the right of possession.
Conditional/Installment Sales Contract - Time Period
(aka installment land contract or contract for deed)
In Delaware, a purchase contract may not remain executory for longer than six months, with one six-month extension allowed if the parties agree in writing.
This requirement applies only to residential property of one to four units, not to commercial or larger residential properties.
Conditional/Installment Sales Contract - Included Provisions
(aka installment land contract or contract for deed)
Installment sales contracts in Delaware must include provisions that specify:
The rental value of the property
The buyer’s right to redeem the property after default by paying the full purchase price within 120 days of default
If the buyer defaults and doesn’t redeem, the sales contract becomes a landlord/tenant agreement
Tax Ditch
Tax ditches are subdivisions within the state government organized to control the watershed in various areas of the state. The work is financed by a tax on property owners in the area. The actual drainage ditch that controls the water may or may not be anywhere close to a particular property owner’s land. if the ditch is actually located on or bordering the property, that’s a required seller disclosure. The amount of each property owner’s tax is relative to the property’s assessment base
Tax Ditch Organization (1951)
The tax ditch organization is a subdivision of the state government. Passed in 1951 by The Delaware General Assembly. There are over 230 tax ditch organizations in DE managine more than ,2000 miles of ditches. They collect taxes to fund maintenance, control vegetation, restore ditch lines and grades, and remove beavers and beaver dams. Ditch managers calculate the amount of taxes to levy against property owners by calculating the ratio between each property’s assessment base and the tax ditch’s total assessment base.
Delaware Code Title 24
Delaware code requires licensees to include a specific statement with a CMA, which must be in at least a 12-point bold font immediately following the estimated market price, explaining that the CMA is not an appraisal and can’t be used as one. The text of the statement is in section 2931 of Delaware Code Title 24.
Voluntary Treatment Options (formerly Rule 14)
Licensees who are chemically dependent or impaired due to drug or alcohol addiction can enter into a Voluntary Treatment Option.
If the board receives a report of a licensee’s dependency or impairment, the Director of Professional Regulation is immediately notified. If the director receives the report, then the chairperson of the board must be immediately notified.
The licensee will be notified in writing within seven days of the report. The notification includes a description of the voluntary treatment option, and the opportunity to enter into treatment.
Participation requires voluntary drug and alcohol screenings and evaluations. The initial screening or evaluation must occur within 30 days of written notification.
Licensees who enter the voluntary treatment option may continue to practice real estate, but may be subject to limitations determined by the director or chairperson in consultation with the professional treating the licensee.
If a licensee doesn’t fully cooperate with the treatment option, screenings, or evaluations, an investigation may be conducted which could lead to disciplinary proceedings and sanctions.
Straight Note
A straight note calls for the payment of interest only the entire principal due and payable at the end of the term.
Promissory Note
The note is evidence of the debt. It contains the promise to pay and is a contract complete onto itself. The deed of trust is a security device used to secure the note.
Quiet Title
A court action that “quiets” or settles a dispute concerning title. It is often used to clear a cloud on a title.
Tenancy
Mode or method of holding title to real property
Life Estate
All interests on a life estate terminates when the person on whose life the estate depends dies.
Estate of Inheritance
Also known as Fee Simple Defeasible
Property
The definition of property is the rights or interest that a person has in the thing owned
Year Racial Discrimination was prohibited
1968
