National Flashcards
The owner states the price he/she wants for the property and agrees to pay the broker any amount over that price
Net Listing
Unilateral contract in which multiple agents can be employed to find a buyer. If the owner finds a buyer no commission is paid
Open Listing (non exclusive listing)
Employment agreement in which specified agent earns a commission if a property is sold within a specified time frame. The specified agent will generally earn a commission even if another licensee finds a buyer. If two exclusive listings are signed the seller may have to pay two commissions
Exclusive Listing
Employment contract where the seller agrees to pay a broker commission if any agent/broker finds a buyer but if the owner sells it themselves the broker gets no commission
Exclusive Agency Listing
Gives the brokerage firm maximum rights to payment and entitles the listing brokerage firm to a commission regardless of who sells the property during the listing period
Exclusive Right to Sell Listing
Is any fact that is relevant to a person making a decision
Material Fact
Is a defect concerning a property that a party does not know about, cannot reasonably discover, and would reasonably want to know about before making a decision to buy
Material Latent Defect
Is a legal relationship created when a person acts on behalf of another in business and legal dealings with others
Agency/Fiduciary
Is the person who employs an agent to represent him/her
Principal/Client
Is a party who is not represented by a real estate professional in the transaction
Third Party/Customer
Involves taking unfair advantage of a position of confidence or authority or of a persons distress or weakness on mind
Undue Influence
Is a show of an intention to inflict harm
Menace
Forcing a person to do something against his/her will including using threats to force a person to do something
Duress or Coercion
Restored to original condition
Rescission
Amount determined in advance to be paid in the event of a breach
Liquidated (Damages)
Amount determined by the court or arbitrator to cover the actual amount of the loss suffered as a result of the breach
Compensatory (Damages)
Occurs when one party takes action through a legal procedure or lawsuit to force the other party to perform
Specific Performance (Damages)
Have limited authority to conduct a single transaction and have no power to bind the client
Special Agent
Are authorized to conduct a series of transactions in a specified range and have limited power to bind the client
General Agent
Are authorized to perform all acts that can lawfully be delegated to a representative including the power to sign contracts
Universal Agent
Has the same knowledge or notice of facts known by his/her agent or subagent
Imputed Knowledge
Is liability for the actions of another
Vicarious Liability
Agent Duties to a Principal: Obedience, Loyalty, Disclosure, Confidentiality, Accountability, Reasonable Care
OLD CAR
Agent Obligations to the Third Party: Disclosure, Accounting, Honesty/Good Faith
DAH
Missing any of the essential elements of a contract
Void
Has all necessary elements of a contract; upheld in court; valid or voidable
Enforceable
All elements of a contract; enforceable by both parties
Valid
Is enforceable but is subject to rescission by one of the parties taken advantage of in the contract
Voidable
If it was valid at the time it was created but for some reason cannot be proven or enforced in court
Unenforceable
Defines the time period after the default on a contract in which an injured party can seek justice from the courts
Statue of Limitations
Allows the seller to promise that a buyer may have the first right to meet or beat an offer in the future
First Right of Refusal
A tenant pays a fixed rent amount and the landlord pays all expenses
Gross Lease
A tenant pays a base rent and part of the taxes, insurance, or maintenance
Net Lease
A tenant pays a base rent and a percentage of the sales
Percentage Lease
Rent payments adjust over time
Graduated/Index Lease
Is the transfer of all of ones interest to another
Assignment
Is a method by which a party to a contract transfer his/her duties as well as his/her rights to another and by doing so the party is relived of secondary liability (cancels the existing obligations and creates a new one)
Novation
Legally Competent Parties, Mutual Agreement, A Legal Objective, Consideration, A Written Contract
Essential Elements of a Contract
One side contract, only one party has an obligation to perform under contract
Unilateral Contract
Each party makes promises obligated to perform
Bilateral Contract
Is in the process of being performed; something remains to be done by one or both parties
Executory Contract
Both parties to the contract have fully performed the terms
Executed Contract
Created by either written or oral agreement
Express Contract
An agreement created by actions of the parties involved but there is no written record or actual verbal agreement
Implied Contract
Is the practice of representing only one principal in a transaction
Single Agency
When a agent represents both the buyer and seller in the same transaction
Dual Agency
When the agent for the buyer and the agent for the seller in a single transaction work for the same broker
Designated Agency
When a licensee acts as a facilitator in a transaction instead of as an agent
Non-agency or Transactional Brokerage
Is authority given after an act has already been performed
Ratification
Created in an emergency situation when the agent doesn’t have time to obtain instructions from the client
Agency by Necessity
Created when a court stops a client from denying that an agency relationship exists, after the client has allowed another person to believe that an agency relationship exists
Agency by Estoppel
Created when a person has acted in a manner that implies representation without informed consent
Agency by Implication
Is property that is legally or physically immovable; person who owns the land owns its surface, subsurface, and airspace; real estate consist of land, improvements, and rights
Real Property
Is property that is not real property; It is mobile and belongs to the seller
Personal Property
Personal property can be converted to real property by being attached to the real property
Fixtures
Anything attached to the land that will be conveyed
Appurtenance
Transfer or Sold
Convey
Used to covey title to personal property
Bill of Sale
Determines if an item is a fixture: Method, Adaptation, Relationship, Intent, Agreement
MARIA
Measurements/Boundaries
Metes and Bounds
Government Survey (Rectangular)
Lot and Block
Tied to flowing water like rivers/streams; Right to use; Moveable
Riparian Rights
Tied to standing water like lakes/sea; Non navigable, Center
Littoral Rights
Immobile, Indestructible, and Unique (Non homogeneous)
Physical Characteristics of Land
Scarcity (Supply/Demand), Improvability, Situs (Location), Fixity (Investment)
Economic Characteristics of Land
Special permission to allow a land use that would normally be a violation of current zoning
Variance
A promise not to violate the restrictions
Covenant
Used to privet a violation or to remedy a violation
Injunction
Grandfathering Clause
NonConforming Use
The holder of mineral rights or other rights beneath the land has duty to support the surface owners land in its natural state
Subjacent Support
That an adjoining landowner has duty to support his/her neighbors land in its natural state
Lateral Support
Transfer real estate or real property
Deed
Rights granted to others in return for services
Feudal System
Is the system of ownership that allow land to be owned and combined by individuals
Allodial System
Is the right of the government to enact legislation dealing with land use an the health, safety, and general welfare of the public
Police Power
Is the right of a government agency or private entity to take private land for public use
Eminent Domain
Is the process used to obtain the property (owner receives compensation)
Condemnation
Is the right to raise money to support itself through taxes
Taxation
The government has the right to take back property when it has been abandoned; owner dies without a will or no heirs
Escheat
Sole ownership by one person
Tenancy in Severalty
Two or more people that own real estate passable to heirs or devisees; No right of survivorship
Tenancy in Common
Two or more individuals a joint; Same interest, possession, time, title; Right of survivorship
Joint Tenancy
Married Spouses; Dower=wife rights; Curtesy=husband rights; Right of survivorship
Tenant by the Entirety
Created when a trustor conveys title to real property to one or more trustees
Trust
Ownership rights are conveyed with the title and how fees and common elements will be divided in the owners association
Condominium
Is a common interest community where ownership is held for a specific time each year
Timeshare
Owned by a corporation; a person would purchase shares of stock in the corporation that owns the building
Cooperatives
Is any interest or right to land held by third persons that affects the title and possibly the value of the property; Affecting the physical condition of the property include deeds restrictions, easements, and encroachments
Encumbrance
A written right to use all or portion of another’s land for specific purpose (not a right to possess)
Easement
Owner of the land
Servient Tenement
Owns the right to use the land
Dominant Tenement
Owner of land gives permission to use
Easement Appurtenant
Owner does not give permission to use the land; If the property is landlocked and the owner needs access her adjacent property
Easement by Necessity
Formed by statutory law
Prescriptive Easement
Giving a person the right to use another’s land; City’s right to use
Gross Easement
Acquiring title when the occupant of the land has been in (OCEAN) open, continuous, exclusive, actual, notorious possession of the property for a required statutory period of time
Adverse Possession
To trespass onto someone’s property (Unintentionally building a fence)
Encroachment
Is a security interest of the creditor in the property of another
Lien
An encumbrance against one or more specified parcels of real estate; Mechanics lien, Property tax lien; Special assessment
Specific Lien
Applies against a person and all his/her real and personal property, except property exempted by statue; Judgement lien, debt of a decedent, income tax lie, estate tax lien
General Lien
In the transfer or separation of the title to real estate from one party to another
Alienation
Competent Grantor, Signature of the Grantor, Identification of the Parties, Deliver to Acceptance by Grantee, Legal Description of the Property, Consideration, Words of Conveyance
Essential Elements of a Deed
Provides the greatest protection for a grantee and creates the greatest liability for the grantor
General Warranty Deed
Limits the warranty against encumbrances to only those defects arising from actions by through or under the grantor
Special Warranty Deed
Conveys title without any warranties or covenants
Bargain and Sale Deed
Releases any claims of the grantor to rights in the property
Quitclaim Deed
A person who dies with a will
Testate
A person who dies without a will
Intestate
An encumbrance, charge, or claim against the property which could make it legally impossible for the owner to convey marketable title
Cloud on the title
Requires that contracts involving transfers of interest in real estate be in writing and signed to be enforceable 12 months or less
Statue of Frauds
The act or process of estimating or creating an opinion of value
Valuation
Determined by buyers and sellers
Market Value
Is the actual sold price
Market Price
Holds that the value of over improved property will suffer if it is in an area of lesser valued homes
Regression
Holds that the value of smaller property will increase if it is in an area of bigger homes
Progession
Is the use that will create the greatest return on investment and is not necessarily the current use
Highest and Best Use
Gives an estimate or opinion of value in the completed appraisal report
Appraiser
Is an agreement between competent parties based upon legal consideration creating legally enforceable duties and obligations and granting the exclusive right to buy, sell, lease, property at a given price within a stated period of time
Option
The property owner who gives the option
Optionor
The purchaser on tenant who receives the option
Optionee
Performed by specified dates
Time is of the essence
Requires a real estate appraisal to be used with any federally related loan transaction
Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) of 1989
Is an opinion of value based on the principles of value; requires the completion of a highest and best use analysis
Appraisal
Is the primary form used by appraisers for residential properties
Uniform Residential Appraisal Report (URAR)
Approach for residential properties
Sales Comparison
Approach for churches and libraries
Replacement Cost - Depreciation + Value of Land = Estimated Value
Cost Approach
Approach for p=any property that generates income such as office buildings, shopping centers, apartment buildings
Value - I/R=V
Rate - I/V=R
Income - RxV=I
Income Approach
Is the wear and tear or breaking down of the physical structure which takes place over time
Physical Deterioration
Is the loss in the usefulness of structures that causes them to become less desirable or less useful
Obsolescence
Is the loss of value due to factors of inadequacy or over-adequacy within the property itself
Functional Obsolescence
Is a loss in value resulting from conditions outside the property
External Obsolescence (Economic Obsolescence)
Total Gross Income - Effective Gross Income - Operating Expenses = Net Operating Income
Net Operating Income (NOI) Formula
Is a rate of return that converts net income to value
Capitalization Rate
Sales Price/Gross Rent = Multiplier
Value = Gross Rent x GRM
Gross Rent Multiplier (GRM)
Using financing to allow payment of a small amount of cash down to purchase a large property investment
Leverage
Converting an assest to cash
Liquidity
Is a written contract pledging real property the borrower owns or will own to secure the debt
Mortgage/Deed of Trust
Allows the property to be sold without going to court
Power of Sale Clause
Allows the lender to declare the entire unpaid loan balance due upon a default of any of the terms or conditions of the document
Acceleration Clause
Once a loan is paid according to the terms of the note and the other covenants are fulfilled the lender will release the lien so the borrower will regain clear title and free title to the property
Defeasance Clause
When a mortgage is paid off
Satisfaction
Allows the borrower under state law a period of time after the foreclosure sale to buy back the property
Statutory Right of Redemption
Is the amount of a loan a lender will provide based upon the property’s value
Loan-to-value ration (LTV) or Mortgage Rate
Is the difference between the market value of a property and the balance of the owner’s debt against the property
Market Value Today - Total Debt Today = Equity
Equity
Points charged to raise a lenders return on a loan
loan x number of points in percentage = dollars in points
Discount Points
Smaller payments but the loan has the full principal payment due at the end
Interest-Only Loan
Has a larger payment then the term loan which makes the final balloon payment smaller
Partially Amortized Loan
Allows the borrower to know what their payment will be each month and to pay the loan in full with the last payment
Fully Amortized Loan
Rate x Loan Balance = Annual Interest / 12 to get monthly interest
Interest Formula
Is to ensure that applicants for consumer credit are given sufficient information and disclosures about the cost and conditions of the credit so they can easily compare credit terms offered by various lenders
Truth in Lending Act (TILA) administered by the Consumer Financial Protection Bureau (CFPB)
Allows lenders to collect no more than two months of cushion in their escrow accounts to pay borrowers tax and insurance bills; prohibits kickbacks in real estate transactions
Real Estate Settlement Procedures Act (RESPA)
Requires the lender to give a borrower a Loan Estimate within three days after application; must also receive a Closing Disclosure form three days prior to closing
TRID (TILA/RESPA Integrated Disclosures)
Prohibits creditors from discriminating against a loan applicant based on race, creed, color, religion, national origin, sex, martial status, age, etc
Equal Credit Opportunity Act
The maximum rate of interest that may be charged for various types of loans in the state
Usury Laws
Regulates the supply of money and interest rates in the US
Federal Reserve System
The rate of interest stated in the loan document
Nominal Interest Rate
A form of revolving credit in which a persons home serves as collateral
Appraised Value x Percentage - Less Mortgage Debt = Potential Loan or Credit Line
Home Equity Line of Credit (HELOC)
Is inducing or attempting to indue, for profit, owners of housing to sell or rent by representing that persons of a certain race, color etc are or may be entering into the neighborhood
Blockbusting
Is restricting or attempting to restrict the choices of a person
Steering
Occurs when a lender refuses to make or provide information on a loans
Redlining
sales price paid x percentage of commission = commission
Commission Split = Subtract by 100%
Commission Formula
sales price x percentage to seller = net dollars to seller
Percentage to the seller is 100% minus the rate of commission
Estimating Net to Seller
property value x percentage of increase = appreciated value
Appreciation Formula
original value x percentage of value NOT lost = present value
Solve before proceeding with original formula:
100% divide by years = yearly depreciation rate
numbers of years divided by depreciation rate = depreciation to date
100% minus depreciation to date = value not lost
Depreciation Formula
monthly payment x 12 = annual debt service
Annual debt service
sales price - loan assumed / $ x rate = transfer tax
Transer tax
assessed value x mill rate = annual taxes
or
(assessed value/$100) x tax rate = annual taxes
Property tax
