National Chapter 5 Flashcards
intentional misrepresentation of a material facts for the purpose of gaining an unfair or dishonest advantage over another person
active fraud
intentional nondisclosure of a material fact
passive fraud
3 types of agency relationship
express, implied, agency ratification and estoppel (ostensible)
what is the essence of agency relationship?
trust, confidence, and mutual good faith
what is an agency relationship based on?
authorization and mutual consent
When is commissioned earned?
- broker has produced a ready, willing, able buyer
- buyer has signed an offer to purchase
- seller has accepted the offer
- both buyer and seller have received signed copies of the agreement
principal federal statute that covers competition and is one of the most important pieces of antitrust legislation
Sherman Antitrust Act
collusion between or among members of a particular trade to maintain prices at a set level
price fixing
agreements between or among members of a particular trade that would prevent other members from fair participation in the trade’s activities
group boycotting
agreements between or among members of a trade to avoid doing business in specific market areas
market allocation
arrangement that requires a buyer to purchase additional or unrelated products or services when making a product purchase
tie-in arrangements
made both substantive and procedural modifications to the federal antitrust law
Clayton Antitrust Act
under the Clayton Act, private individuals are permitted to sue antitrust violators and, if successful, can recover _x the damages incurred plus court costs and fees
3
has the power to judge whether particular trade practices are unfair
FTC
most common form of the agency relationship
seller agency
may be created by a written agreement or it may be created by words/actions
subagency
exists when a real estate firm or licensee represents both the seller and the buyer or the landlord and the tenant in the same transaction
dual agency
broker may designate 1+ licensees to act exclusively as the agent of the seller/landlord, and designate 1+ licensees to act exclusively as the agent of the buyer/tenant
designated agency
agent can represent only 1 party in a single transaction, but never both - all other parties to the transaction are customers
single agency relationship
if the agent enters into an agency with the seller
seller’s agent
if the agent enters into an agency with a buyer
buyer’s agent
legally binding contract that creates and agency relationship authorizing a broker to serve as the agent for a principal in a real estate transaction
listing agreement
3 common types of listings
open, exclusive right to sell, exclusive agency
3 types of buyer agency agreements
exclusive buyer agency, exclusive-agency buyer agency, open buyer agency
the 2 most common changes in a listing agreement are
price changes and listing period extensions
only the _ can initiate an action or file a suit against a seller or buyer to receive a commission -
broker
clause in a listing agreement that says that the broker is still entitled to a commission for a set period of time after the listing expires, if the property is sold to a prospect that the broker introduced to the property
carryover or safety clause
agreement between 2+ parties who, in a “meeting of the minds” have pledged to perform or refrain from performing some act
contract
meets the legal requirements for validity
valid contract
agreement that does not meet the tests for validity and therefore is no contract at all
void contract
one which initially appears to be valid, but is subject to cancellation by a party to the contract who is believed to have acted under some kind of disability
voidable
requires that certain contracts must be in writing to be enforceable
statute of frauds
termination of a contract may occur for any of what reasons
performance, infeasibility, mutual agreement, operation of law
restricts the time period for which an injured party in a contract has the right to bring a lawsuit against the other party
statute of limitations
breach of contract gives the damaged party the right to take legal action in one of which ways
rescission, forfeiture, suit for damages, suit for specific purpose
contract in which the buyers agree to purchase a property for a certain price and the sellers agree to convey title to the buyers using a deed or an assignment of lease
purchase and sale agreements
bilateral agreement between a seller, the vendor, and a buyer, the vendee, in which the vendor defers receipt of some or the entire purchase price of a property over a specified period of time
installment sales contract
enforceable contract in which a potential seller, optionor, grants a potential buyer, optionee, the right to purchase a property before a stated time for a stated price and terms
option to buy
right of a person to have the first opportunity to purchase or lease a property
right of first refusal
both an instrument of conveyance and a contract between parties to uphold certain covenants and obligations
lease
transfer by a tenant of a portion of the leasehold interest to another party
sublease
transfer of the entire leasehold interest by a tenant to a third party
assignment of the lease
requires the landlord to pay the property’s operating expenses, including utilities, repairs, and maintenance while the tenants only pay rent
gross lease
tenant pays rent and maintenance and operating expenses, such as taxes, insurance, utilities and repairs
net lease
rent payments start at affixed amount but increase as the lease term matures
graduated lease
concerns the land portion of a real property - owner grants the tenant a leasehold interest in the land only, in exchange for rent
ground of land lease
lease whose rental is based on a percentage of the monthly or annual gross sales made on the site
percentage lease
conveys a leasehold interest to an owner of a co-op
proprietary lease
provides for the adjustment of rent according to changes in a price index
index lease
hired to perform certain acts, but the broker cannot control how the salesperson performs those acts
independent contractor
real estate firms engage in 2 types of advertising
institutional and product
attempts to establish a positive image of the company, its services and its reputation in the minds of the public - sometimes called corporate ads
institutional ads
directed toward the particular properties a company has for sale
product ads
time-tested method for writing good ads
AIDA A - attention I - interest D - desire A - action
what is the main purpose of real estate advertising?
reach the largest number of probable prospects
What does truth in lending prohibit?
bait and switch ads
advertising property or credit terms for a property that an agent does not intend to sell or that is actually not available just to attract buyers for other properties the agent has for sale
bait and switch ads
what is the single most important decision to make when listing a home for sale?
the listing price
a listing agent helps the seller set a realistic selling price by considering
seller’s wishes, market conditions and timing of the sale
what is one of the most important tasks a licensee needs to perform with the seller-client?
market analysis of what the property is worth
earnest money is AKA
trust account money
deposit usually made in the form of a check, to show evidence of the buyer’s intention to carry out the terms of the contract in good faith
earnest money
when is earnest money provided?
the offer to purchase real estate is made
requirements for an escrow account
- must be non-intreat bearing
- sponsoring broker may maintain 1+ escrow accounts
- must be maintained at a federally-insured depository
- all licensees should give earnest money checks to their sponsoring brokers immediately
- earnest money must be deposited by the next business day of contract acceptance
illegal act when a real ersatz licensee places client or customer funds with their own personal funds
commingling
once the purchase offer has been accepted, what process begins?
closing
seller is required to deliver what at closing?
marketable title
who should have title insurance?
buyer and lender
insurance policy may be issued to a lender only, a buyer only or jointly to lender and buyer
standard title insurance
insures against many of the items excluded in the standard policy
extended coverage
process in which a disinterested third party holds all money and docs relating to the transaction until all of the terms and conditions of the escrow instructions have been satisfied
escrow
oversees the prep and recording of all the legal docs, prorates the settlement costs, preps the settlement statements and does various other tasks
closing agent
what is the most common type of property insurance?
homeowner’s
clause that requires the homeowner has insurance that is equal to 80% of the home’s replacement value
coinsurance clause
what is not inlaced in a basic homeowner’s policy
flood insurance
requires that the parties to certain transactions receive the correct figures pertaining to their closing costs
RESPA
what purchases does RESPA apply to?
residential property, involving 1st or 2nd mortgages, and financed by a federally related loan
What does RESPA specially prohibit?
kickbacks
What does RESPA require lenders to use?
closing disclosure
details the costs that the buyer and seller will pay at closing
closing disclosure
debit
money buyer/seller need to pay
credit
money buyer/seller will receive
when did fair housing laws begin?
with the civil rights act of 1866
list of protected classes of the federal fair housing act
race, religion, color, sex, national origin, handicap, familial status
How long does someone have to file a complaint with HUD if they believe they have been discriminated against
1 year from the alleged act
in addition to or instead of filing a complaint with HUD, a person may file in a state or federal court within how many years of the alleged violation?
2 years
mandates that a person with disabilities have equal access to jobs, public accommodations, government services, public transportation and telecommunications
ADA - Americans with Disability Act
making a profit by inducing owners to sell by telling them that persons of a protected class are moving into the neighborhood which will have detrimental results
blockbusting
channeling homebuyers toward to away from homes in certain neighborhoods in order to preserve or alter the makeup of that neighborhood
steering
restricting the number of loans in certain areas of a community because of its racial or ethnic makeup
redlining
administration of rental or other property by a person or a team of people who are acting for the owner
property management
a PM has dual responsibility to whom?
the owner and the tenants
real estate broker who manages properties for one owner or a number of owners
individual property manager
manages a singel large property
individual building manager
manages and lives on property
resident manager
acts as the property owners’ agent and adviser for the property
real estate asset manager
employment contract for a PM
management agreement
what is the PM’s first responsibility?
to realize max profit on the property that is consistent with the owner’s instructions
3 types of budgets for each rental project a PM should establish
operating, capital reserve, and stabilized budget
3 types of maintenance
preventative, corrective, construction
schedule of planned maintenance actions aimed at the prevention of breakdowns and failures
preventative maintenance
repair or replacement of compounds which have failed or broken
corrective maintenance
remodeling, interior redecorating, or new capital improvements
construction maintenance
It is critical for a PM to know how to market what effectively?
the space available for rent
PM report should include
monthly and annual account statements and delinquent account reports
what are the 2 major classes of property?
residential and nonresidential
include single-family homes and multiple -family properties such as apartments, condos, and co-ops
residential properties
broken down into 5 major subcategories
nonresidential properties
5 major categories of nonresidential properties
commercial, industrial, agricultural, recreational, and institutional
commercial real estate can br broken down into what subcategories?
office buildings, retail space, hotels/motels
commercial buildings can contain both office and retail space and some can contain residential space - this is known as
mixed use development
important reasons why. business would choose to lease space instead of purchase
- leasing can be more cost effective
- owning a building would reduce the flexibility of the business
- engaging in leasing, repairing, and maintaining extra building space could cause the business to lose focus on its major business activities
- if the business wanted to downsize, the building owner would have to find someone to use or purchase the excess space
a particular building’s potential for generating income depends on what 2 factors?
ability to attract tenants to rent space and expense involved with the building’s operation
term used to the net income produced by a specific property after all expenses have been deducted from the gross receipts
NOI
what affects NOI?
market rent, vacancies and both fixed and variable operating expenses
