National Exam Flashcards
What is the law of agency?
The law of agency is a legal doctrine dealing with contractual or quasi-contractual rights or obligations of a person (the agent) acting on behalf of another person (the principal).
Define ‘Tenancy in Common’.
‘Tenancy in Common’ refers to a type of concurrent estate in which each owner, referred to as a tenant in common, is regarded by the law as owning separate and distinct shares of the same property.
What is a deed?
A deed is a legal document that conveys an interest in real property. The three most common types of deeds, in order of decreasing legal protection, are: Warranty Deed, Special Warranty Deed, and Quitclaim Deed.
Define ‘Fair Housing Act’.
The Fair Housing Act is a federal law that prohibits discrimination in housing based on race, color, religion, sex, familial status, national origin, and disability.
What is a ‘lien’?
A lien is a legal claim or a “hold” on some type of property, whether personal or real property, making it collateral against monies or services owed to another person or entity.
Define ‘Easement’.
An easement is a nonpossessory right to use and/or enter onto the real property of another without possessing it.
What is a ‘Listing Agreement’?
A Listing Agreement is a contract between a real estate broker and an owner of real property granting the broker the authority to act as the owner’s agent in the sale of the property.
What is the ‘Truth in Lending Act’ (TILA)?
TILA is a federal law designed to promote the informed use of consumer credit by requiring disclosures about its terms and cost. It standardizes the manner in which costs associated with borrowing are calculated and disclosed.
What are the four essential elements of a valid contract?
The four elements are competent parties, mutual agreement (offer and acceptance), consideration (something of value), and legal purpose.
What is the difference between a ‘Mortgage’ and a ‘Deed of Trust’?
A mortgage involves two parties (borrower and lender). A deed of trust involves three parties (borrower, lender, and trustee). The trustee holds the property in trust as security for the loan.
What is a ‘Net Listing’?
In a net listing, the seller sets a minimum net amount they are willing to accept for the property. If the agent sells the property for more than the minimum, they keep the excess as their commission.
Define ‘Encumbrance’.
An encumbrance is a claim, lien, charge, or liability attached to and binding real property. It may affect the title, value, or use of the property.
What is ‘Redlining’?
Redlining is an unethical and illegal practice where lenders refuse to make loans or impose more onerous terms in certain areas of a community, often racially determined.
What is the ‘Community Reinvestment Act’ (CRA)?
The CRA is a federal law designed to encourage commercial banks and savings associations to help meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods.
Define ‘Appraisal’.
Appraisal is the process of developing an opinion of value for real property. It involves market, cost, and income data analysis.
What is the ‘RESPA’ (Real Estate Settlement Procedures Act)?
RESPA is a federal law that gives consumers the right to review information about loan settlement costs after they apply for a loan and again at loan settlement. It was designed to help consumers become better shoppers for settlement services.
What is a ‘Balloon Payment’?
A balloon payment is a large, lump-sum payment scheduled at the end of a series of considerably smaller periodic payments.
What does ‘PMI’ stand for and when is it used?
PMI stands for Private Mortgage Insurance. It’s used when a homebuyer makes a down payment of less than 20% of the home’s purchase price.
What are ‘Restrictive Covenants’?
Restrictive covenants are limitations to the use of property imposed by past or present owners and recorded in the deed. They can bind future owners and often affect the transferability of the deed.
Define ‘Joint Tenancy’.
a form of property ownership where two or more individuals, often referred to as joint tenants, hold equal and undivided interests in a property.
What is the ‘Equal Credit Opportunity Act’ (ECOA)?
The ECOA is a federal law that prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or because someone receives public assistance.
Define ‘Capital Gains’.
Capital gains refer to profits from the sale of an investment or real estate, which are calculated by subtracting the purchase value from the sale value.
What is a ‘Breach of Contract’?
A breach of contract refers to the violation of any terms or conditions in a contract without a legal excuse.
What is ‘Escrow’?
Escrow refers to the use of a third party during a transaction to ensure that the buyer and seller fulfill their obligations before the transaction is finalized.
What is ‘Title Insurance’?
Title insurance is a type of insurance that protects the holder from financial loss due to defects in the title to a property.
Define ‘Comparative Market Analysis’ (CMA).
A CMA is an estimate of a home’s value based on similar properties in the immediate area that have recently sold, are currently on the market, or were listed but did not sell.
What is a ‘Real Estate Investment Trust’ (REIT)?
A REIT is a company that owns, operates, or finances income-producing real estate. They provide a way for individual investors to earn dividends from real estate investments without having to buy, manage, or finance properties themselves.
What is ‘Landlord-Tenant Law’?
Landlord-tenant law is a part of the common law that details the rights and duties of landlords and tenants. It includes elements of both real property law and contract law.
Define ‘Property Management’.
Property management involves overseeing and handling the daily operations of real estate properties. This could be residential, commercial, or industrial real estate.
What is ‘Zoning’?
Zoning refers to municipal or local laws or regulations that dictate how real property can and cannot be used in certain geographic areas.
What is ‘Sweat Equity’?
Sweat Equity is the non-monetary investment that homeowners or investors put into a property, such as do-it-yourself home improvements.
Define ‘Metes and Bounds’.
Metes and Bounds is a system of land description whereby all boundary lines are set forth by use of terminal points and angles – metes (measures) including distances and angles, bounds (boundaries) using physical features of the land.
What is a ‘1031 Exchange’?
A 1031 exchange, also known as a like-kind exchange, is a transaction that allows for the disposal of a property and the acquisition of another property without generating a tax liability from the sale of the first property.
What is the role of a ‘Real Estate Appraiser’?
A real estate appraiser is a licensed or certified professional who evaluates a property to establish its market value. They use detailed information about the property and data on comparable properties to arrive at an estimate.
What is ‘Dual Agency’?
Dual agency occurs when a real estate agent is representing both the buyer and the seller in the same transaction. Some states permit this practice with disclosure, while others do not.
What is a ‘Contingency’ in a real estate contract?
A contingency in a real estate contract is a condition or action that must be met for the contract to become binding.
What is the difference between ‘Freehold’ and ‘Leasehold’?
Freehold refers to ownership of the land and buildings on it for an indefinite period. Leasehold refers to the right to use and occupy land and/or buildings for a certain, fixed period.
Define ‘Due Diligence’ in real estate.
Due diligence in real estate is the time period given to the buyer to fully inspect the property and the terms of the purchase agreement to ensure they want to proceed with the transaction.
Fair Housing Act’?
The Fair Housing Act is a federal law that prohibits discrimination in housing based on race, color, religion, sex, familial status, national origin, and disability.
Define ‘Chain of Title’.
A Chain of Title is the history of all of the documents that transfer title to a parcel of real property, starting with the earliest existing document and ending with the most recent.
What is a ‘Non-Disturbance Agreement’?
A Non-Disturbance Agreement is a clause in a mortgage agreement that ensures that a tenant will not be evicted if the property owner defaults on the loan.
What is ‘Seller Disclosure’?
Seller Disclosure is a document provided by a home seller to a buyer, disclosing known issues and defects with the home and the surrounding area. The requirements for these disclosures vary by state.
What is a ‘Quitclaim Deed’?
A Quitclaim Deed is a legal instrument that is used to transfer interest in real property. The person transferring the interest, grants or quits any interest they may have in the property but makes no guarantees about the extent of their interest.
What is a ‘Blanket Mortgage’?
A blanket mortgage is a mortgage that covers multiple pieces of real estate simultaneously. It’s often used by developers and investors who buy large tracts of land, then subdivide them to create many individual parcels to be gradually sold one at a time.
What is ‘Eminent Domain’?
Eminent domain is the power of the government or its agent to take private property for public use with payment of compensation.
What is the ‘Department of Housing and Urban Development’ (HUD)?
HUD is a U.S. government agency created in 1965 to support the housing market and homeownership. Its mission is to create strong, sustainable, inclusive communities and quality affordable homes for all.
Define ‘Conveyance’.
Conveyance refers to the act of transferring ownership of a property from one person to another.
What is a ‘Buyer’s Agent’?
A buyer’s agent is a real estate professional who guides a buyer through the process of purchasing a home. Their duty is to protect the buyer’s interests in a real estate transaction.
What is ‘Condominium Ownership’?
Condominium ownership is a type of ownership where the individual owns the airspace of their unit, as well as a share in the common areas.
What is the ‘Truth in Lending Act’ (TILA)?
TILA is a federal law designed to promote the informed use of consumer credit by requiring disclosures about its terms and cost. It gives consumers the right to cancel certain credit transactions that involve a lien on a consumer’s principal dwelling.
What is a fixture in real estate?
A fixture is personal property that has been converted to real property by method of attachment.
Who must sign the mortgage and the note?
The Mortgagor – which is the Owner. (Mortgagee refers to the Lender)
Who can prepare a survey?
A Surveyor
Who can provide a legal description for a survey?
A Surveyor or Title Attorney
When does legal title pass from the seller to the buyer?
When the deed is delivered
Does a deed need to be recorded?
No, a deed does not have to be recorded, but it must be signed by the Grantor
What does a Deed do?
A Deed conveys and transfers title – it requires Delivery and acceptance
What is Tenancy in Common?
Form of property ownership where two or more individuals, known as tenants in common, hold separate and distinct shares or interests in a property.
Separate Ownership Shares: Each tenant in common has a distinct and separate ownership share in the property. These shares can be equal or unequal, depending on the agreement between the co-owners.
Independent Transferability: Tenants in common have the right to transfer or sell their ownership share without the consent of the other co-owners. They can freely sell, gift, or mortgage their portion of the property. However, the new owner becomes a tenant in common with the existing co-owners.
No Right of Survivorship: Unlike joint tenancy, there is no right of survivorship in tenancy in common. If a tenant in common passes away, their share does not automatically transfer to the other co-owners. Instead, it becomes part of their estate and will be distributed according to their will or applicable laws of inheritance.
Individual Possession: Each tenant in common has the right to possess and use the entire property, regardless of their ownership percentage. However, they must not interfere with the other co-owners’ rights to do the same.
Shared Responsibilities: All co-owners in a tenancy in common share the responsibilities and costs associated with the property, such as property taxes, insurance, and maintenance expenses. The proportionate share of these obligations is typically based on their ownership percentages.
Legal Entity Not Required: Tenancy in common does not require the co-owners to form a legal entity, such as a partnership or corporation. It is a relatively straightforward form of co-ownership.
What are the 4 types of ownership?
Tenancy in Sevarity: Sole ownership, also known as sole proprietorship, occurs when a property is owned by a single individual. The individual has exclusive rights to the property and is solely responsible for all ownership-related decisions and obligations.
Joint Tenancy: Joint tenancy is a form of co-ownership where two or more individuals hold equal and undivided interests in a property. It includes the right of survivorship, meaning that when one joint tenant passes away, their interest automatically transfers to the surviving joint tenant(s).
Tenancy in Common: Tenancy in common is another form of co-ownership where two or more individuals hold separate and distinct ownership shares in a property. Each tenant in common has independent ownership rights and can transfer or sell their share independently. Unlike joint tenancy, there is no right of survivorship.
Tenancy by the Entirety: Tenancy by the entirety is a type of joint ownership available only to married couples. It provides the same rights of survivorship as joint tenancy, but with the added protection that neither spouse can independently transfer their interest without the consent of the other. It offers a level of asset protection against individual creditors.
What requires the Statute of Frauds to be in writing?
Notes and Mortgages
Who does the court appoint to handle an estate intestate (without a will)?
Administrator
What is ‘Intestate’ and ‘Testate’?
Intestate means someone died without a will. Testate means someone died with a will.
What is the Sherman Antitrust Act?
Sherman Antitrust Act makes it illegal to fix prices, allocate markets, and boycott
What type of ownership does Miss Adam have when she purchases a 2-bedroom condo?
Freehold Estate/Freehold Interest
also known as fee simple ownership or fee simple absolute, is the highest form of ownership interest one can have in real estate. It represents absolute ownership of the property, granting the owner the most extensive rights and control over the land.
What is ‘Abstract of title’?
Abstract of title is a collection of all documents filed on a property
What is ‘Chain of title’?
Chain of title is a list of all previous owners
Who is the ‘Mortgagor’?
Mortgagor is one who pledges property as a security for the loan
In real estate finance, what is a promissory note?
A promissory note is a document that evidences a debt and has the details of the mortgage
What is an Attorney in fact/ Power of attorney/Universal Agent?
They are individuals authorized to make decisions for someone. Real Estate Agents are special agents that can act for a client.
At minimum, what must a real estate agent do?
A real estate agent must answer all questions, present all offers, and disclose all material facts
For real property to be depreciated, it must be what?
Improved
What are the three types of Approaches to Value?
Sales Comparison approach (or market data), Income value approach, Cost approach
What are the 3 types of Depreciation?
Physical Deterioration, Functional obsolescence, Economic obsolescence
What is a Package mortgage?
A form of mortgage that covers both real estate and personal property
What is a Blanket mortgage?
A mortgage that covers two or more properties
Who does the DTPA protect?
The consumer
What is a General Warranty Deed?
An instrument conveying title, guarantees title is good and forever defends it. It is the highest and best form of title conveyance.
All real estate contracts must be in what form?
In writing.
What can happen if a property is sold at foreclosure and does not bring enough to cover the mortgage?
A deficiency judgment can occur.
What type of estate is limited to the life of a person to whom it was given?
Life estate
What is an Acceleration Clause?
An acceleration clause found in a mortgage means upon a certain event the whole note comes due
What is Voluntary Alienation?
When someone transfers title to another by deed, he’s divested himself by Voluntary Alienation
What is Involuntary Alienation?
Involuntary alienation happens in cases such as foreclosure, property tax or mortgage foreclosure, eminent domain, adverse possession (squatting)
What type of property would you use the income approach to determine the value of?
A shopping center
What is an example of involuntary alienation?
Adverse possession
What must a seller disclose to a buyer?
If there was mold in the last 5 years, if the property was built before 1978, if the property contains asbestos
What is Tenancy in Severalty?
Property held by one person, severed ownership of all other people
What is the right of the government to take privately held land called?
Eminent Domain. The process of eminent domain is called condemnation
What is an Addenda?
An Addenda is adding to the offer
What is an Amendment?
An Amendment is to change the contract
What is an Appurtenance?
Appurtenance is a right or a claim that goes with your land (like a parking stall for a condo). An Easement can be considered an appurtenance
What is the difference between Lien Theory and Title Theory?
Lien Theory is where they loan you money and allow you to have title in your name. If you don’t pay they take the house and title. Title Theory is where the title stays in the lender’s name until you finish payments.
