National Portion Flashcards
An important fact; one that is likely to influence a decision.
Material Fact
Is a licensee allowed to prepare a contract?
No
It is a practice of law and therefore not allowed by licensee.
In good faith; genuine.
Bona Fide
Termination of an offer
- Lapse of Time
- Death or Incapacity of One of the Parties
- Revocation
- Rejection
Termination of a contract
- Absence of Genuine Assent
- Assignment
- Conditions
- Mutual Agreement
Prohibits racial discrimination in any property transaction in the United States: real or personal, residential or commercial, improved or unimproved.
Civil Rights Act of 1866
Prohibits discrimination based on race, color, religion, sex, national origin, disability, or familial status in the sale or lease of residential property.
Federal Fair Housing Act (Title VIII)
Protected classes under the Civil Rights Act of 1866.
- Race
- Color
- Ancestry
Protected classes under the Federal Fair Housing Act.
- Race
- Color
- Religion
- Sex
- National Origin
- Disability
- Familial Status
What type of property falls under the Civil Rights Act of 1866?
All Property
Real and personal, residential and commercial
What type of property falls under the Federal Fair Housing Act?
Only residential or land for residential use
Are there any exemptions for the Civil Rights Act of 1866?
No
Are there any exemptions for Federal Fair Housing Act?
- For sale by owner
- Owner occupied rental of 4-units or less
- Religious organizations
- Private clubs
What class(es) are never protected by civil rights laws?
- Age
2. Marital Status
A freehold estate that last only as long as a specified person lives.
Life Estate
A future interest that becomes possessory when a life estate terminates, and that is held by someone other than the grantor of the life estate.
Remainder
A future interest that becomes possessory when a temporary estate (such as a life estate) terminates, and that is held by the grantor (or grantor’s successors in interest).
Reversion
The measuring life is someone other than the life tenant.
Life Estate Pur Autre Vie
The government’s constitutional power to take private property for public use, as long as the owner is paid just compensation.
POWER
Eminent Domain
Taking private property for public use.
ACT
Condemnation
Steps of the appraisal process
- Define the problem
- Determine scope of work
- Collect and analyze data
- Determine highest and best use
- Determine value of land
- Apply appropriate approach(es) to value
- Reconcile
- Report conclusion
Characteristics of value
(DUST)
- Demand
- Utility
- Scarcity
- Transferability
A number derived from comparable rental properties in an area, which is then used to estimate the value of a piece of real estate.
Gross Rent Multiplier
How to determine Gross Rent Multipler
Sale Price / Gross Annual Rent
How to determine Gross Monthly Rent Multiplier
Sale Price / Gross Monthly Rent
A rate of return, stated as a percentage, used to derive a value opinion from the anticipated net operating income a property could generate.
Capitalization Rate
Income before expenses
Gross Income
Net Operating Income of Rental Property =
Potential Gross Income - Vacancy and Collection Loss - Operating Expenses
Something of value (e.g., money, services, goods, promises) given to induce another to enter into a contract.
Consideration
An inducement to have the buyer’s offer accepted and a means of showing to the seller that the buyer is serious and able to follow through with the financing necessary to buy the property.
Earnest Money
Is earnest money a consideration?
NO
A contract clause that means performance on the exact dates specified is an essential element of the contract; failure to perform on time is a material breach.
Time Is of the Essence
A response to an offer to enter into a contract, changing some terms of the original offer.
If is a rejection of the original offer (not a form of acceptance) and does not create a binding contract unless it is accepted by the original offeror.
Counteroffer
A law that require certain types of contracts to be in writing and signed in order to be enforceable.
Statute of Frauds
Contracts that must be in writing
- Longer than 1 year
- Sale of goods $500 or more
- Sale of personal property $5,000 or more
- Promise of marriage, promise to pay another’s debts, lease longer than 1 year
To pledge the property to be the security for a loan without giving up possession of it (as with a mortgage).
Hypothecate
A mortgage given by a buyer to a seller to secure part or all of the money borrowed to purchase property.
Purchase Money Mortgage
Who retains a mortgage as security in a Purchase Money Mortgage?
Seller
Who has title in a Purchase Money Mortgage?
Buyer
Federal guidelines that require full disclosure of all credit terms for consumer loans.
Regulation Z
How does a mortgage show up on a closing statement?
Credit for buyer
Federal law that prohibits discrimination in granting credit to people based on sex, age, marital status, race, color, religion, national origin, or receipt of public assistance.
Equal Credit Opportunity Act (ECOA)
Protected classes under ECOA not under Federal Fair Housing.
(PAM)
- Public assistance
- Age
- Marital Status
What is taken under consideration when people are applying for a loan?
- Income adequacy
- Sufficient net worth
- Job stability
- Satisfactory credit rating
Federal law dealing with real estate closings that provides specific procedures and guidelines for the disclosure of settlement costs.
Real Estate Settlement Procedures Act (RESPA)
A legal arrangement in which title to property (or funds) is vested in one or more trustees who manage the property (or invest the funds) on behalf of the trust’s beneficiaries, in accordance with instructions set forth in the document establishing it.
Trust
An instrument held by a third party as security for the payment of a note.
Like a mortgage, it creates a voluntary lien on real property to secure repayment of a debt.
Unlike a mortgage, it has a power of sale, allowing the trustee to foreclose non-judicially.
Trust Deed or Deed of Trust
A person appointed to manage a trust on behalf on the beneficiaries.
Trustee
Conveys real estate of a trustee as proscribed in a trust agreement or a will.
Trustee’s Deed
Is a trust deed or deed of trust different than trustee’s deed?
Yes
Who makes the acknowledgements at closings?
Buyer and Seller
Each tenant has an equal undivided interest in the property and the right of survivorship.
When one tenant conveys their interest, is simply terminates the right of survivorship as to that interest.
Joint Tenancy
The unities that must be present for joint tenancy.
(PITT)
- Possession
- Interest
- Time
- Title
A form of co-ownership in which two or more persons each have an undivided interest in the entire property, but no right of survivorship.
Tenancy in Common
A form of co-ownership in which a married couple owned the property with the right of survivorship, and neither spouse could convey or encumber his or her interest without the consent of the other spouse.
Abolished by the Ohio General Assembly in 1985.
Tenancy by the Entireties
Difference between tenancy in common and joint tenancy.
- Unequal interest (tenancy in common)
2. Right of survivorship (joint tenancy)
Is a landlord allowed to enter a tenant’s property whenever they want?
No
Must give reasonable notice to tenant
If a tenant does not pay rent, what kind of notice can the landlord give them?
3-Day Notice
Words that usually indicate wrong answer
Must
Always
Never
Greatest
Who does the day of closing belong to?
Seller
Primary purpose of a deed
Transfer of Title
A defect that is hidden from view.
Latent Defect
A defect that a prudent buyer can see.
Patent Defect
What can a Dual Agent not do?
- Act biased towards buyer or seller.
- Advocate for either buyer or seller.
- Negotiate on buyer or seller behalf.
When one party takes over responsibility for the loan of another party and the terms of the loan or note remain unchanged.
Assumption
A place where something exists; an area of preference or preference by people for a certain location, thus giving economic attributes (value) to the property.
Situs
An appraisal method that estimates the value of real estate by figuring the cost of building the house or other improvement on the land, minus depreciation, plus the value of vacant land.
Cost Approach
Agent’s fiduciary duties
(OLD CAR) Obedience Loyalty Disclosure Confidentiality Accounting Reasonable Care
The agent must follow the (legal) directions of the principal, obey the restrictions of the agency relationship, and not stray beyond the scope of their authority.
Obedience
The agent must put the principal’s interests above all others including the agent’s own.
Loyalty
The agent must not conceal anything from the principal.
Disclosure
What the agent should disclose to the principal
- True property value.
- All offers to purchase (offer at same time, order does not matter).
- Identity of other party.
- Customer’s financial condition.
- Any relationship between other party and broker/agent.
- Any commission-splitting arrangements with other brokers.
All information given by the client to the agent or gained by the agent from other sources must be kept __________ forever to keep from destroying the integrity o the agency process.
Confidentiality
Money received in an agency relationship belongs to the principal, not the agent.
Accounting
The agent is viewed and trusted as a professional and an expert.
Must always be used by an agent when acting on behalf of a client.
Reasonable Care
Refusing to make loans secured by property located in certain neighborhoods for discriminatory reasons.
Redlining
Channeling prospective buyers or tenants to particular neighborhoods based upon their race, religion, national origin, or ancestry.
Steering
The illegal practice of inducing owners to sell their homes (often at a deflated price) by suggesting the ethnic or racial composition of the neighborhood is changing, with the implication that property values will decline as a result.
Blockbusting
A contract clause used to defeat or cancel a certain right upon the happening of a specific event (e.g., upon final payment, words of grant in a mortgage are void and the mortgage is thereby concealed and title is reverted to the mortgagor.
Defeasance Clause
A contract clause used to give a borrower the right to redeem real estate after default on a note by paying the full amount due plus fees and court costs.
Defeasance Clause
A contract clause used in title theory states, whereby a mortgagee agrees to deed property back to the mortgagor after all contract terms have been performed as agreed.
Defeasance Clause
What does RESPA require lenders to do?
- Provide “good faith” estimate of settlement costs no later than 3 business days following completion of loan app.
- Provide booklet explaining settlement costs.
- Use of standardized closing disclosure form provided at least 3 business days before closing.
Elements for a valid contract.
- Contractual capacity
- Offer
- Delivery with acceptance
- Consideration
- Lawful and possible objective
A land use that does not comply with the general zoning rules for the zone in which it is located, but is permitted because it benefits the public (e.g., a hospital in a residential neighborhood).
Conditional Use
Property use that does not conform to current zoning laws, but is allowed because the property was being used that way before the new zoning law was passed.
Nonconforming Use
Is a right to use another person’s real property for a particular purpose.
Easement
Types of Easements
Appurtenances Easement
Easement in Gross
Burdens one piece of land for the benefit of another piece of land.
Appurtenant Easement
Benefits a person only and not the land.
Easement in Gross
What type of easement runs with the land (i.e., which one is transferred when title is transferred to a new owner)?
Appurtenant Easement
Which easement allows utility companies to enter private property to install and service power lines?
Easement in Gross
When the non-breaching party takes actions to minimize the losses resulting from a breach of contract.
Mitigation
A leasehold estate set to last for a definite period (e.g., one week, three years) after which it automatically terminates.
Estate for Years or Term Tenancy
A leasehold estate for a duration of time, not a specific date.
Periodic Tenancy
A leasehold estate with no specified termination date or specified period of time.
Tenancy at Will
An intentional misrepresentation or concealment of a material fact.
Actual Fraud
A negligent misrepresentation or concealment of a material fact.
Constructive Fraud
Which type of fraud occurs when a person intently hides information?
Actual Fraud
When someone who granted or offered something withdraws it; as when a principal withdraws authority granted to the agent, an offeror withdraws the offer.
Revocation
Court-ordered seizure of property belonging to a defendant in a lawsuit, so it will be available to satisfy a judgement.
In the case of real property, it creates a lien.
Attachment
A recorded notice stating there is a lawsuit pending that may affect title to the defendant’s real estate.
Lis Pendens
Who does the salesperson owe direct fiduciary duty to?
Broker
Who does the broker owe direct fiduciary duty to?
Client
Property joined to increase value.
Plottage
When one party to a contract withdraws and a new party is substituted, with consent of all parties, relieving the withdrawing party of liability.
Novation
The substitution of a new obligation for an old one.
Novation
What duties does a salesperson owe to a customer?
- Good faith
2. Fair dealing
Carry warranties of clear title and the grantor’s right to convey title.
Warranty Deeds
Transfer title to real property, but with them, the grantor makes no warranties regarding title, nor does the grantor guarantee that he even has the right to convey title.
Deeds without Warranties
Deeds in which the grantor warrants the title against defects that might have arisen before or during this period of ownership.
General Warranty Deed
Deeds in which the grantor warrants the title only against defects during the time that he owned the property, and not against defects arising before that time.
Limited Warranty Deeds or
Special Warranty Deed
Convey any interest in real property the grantor has at the time the deed is executed.
Makes no warranties regarding the title.
Quitclaim Deed
Imply the grantor owns the property and has a right to convey it, but there are no warranties that go with it.
Bargain and Sale Deeds
Executed by a trustee, executor, or other fiduciary, conveying the property that the fiduciary does not own but is authorized to manage.
Fiduciary Deeds
Requirements of a deed
- Competent grantor’s signature
- Last recorded instrument number
- Identifiable grantee
- Words of conveyance
- Description
- Good consideration
- Acknowledgement
- Delivery and acceptance
Who is considered the mortgagor?
Borrower or Buyer
Who is considered the mortgagee?
Lender
What is taken under consideration when determining whether something is a fixture or not?
- Intention and purpose of annexer.
- Manner of annexation.
- Relationship of parties.
(1 and 2 most important)
A survey that determines if a property’s buildings encroach on adjoining property, or if any adjoining property’s buildings encroach on the subject property.
Location Survey
Charging an interest rate that exceeds legal limits.
Usury
A lender-approved sale in which the proceeds are not sufficient to cover the mortgage amount(s).
Short Sale
What are contracts made by minors?
Void
Why do lenders charge discount points?
To lower interest rates.
What do warranty deeds not guarantee against?
Easements on record
What happens when a mortgagor defaults on the note?
Mortgage becomes due and payable.
What happens to an easement when land is sold?
Remains valid unless an owner is merging two separate properties.
The land benefiting from an easement.
Dominant Tenement
The land burdened by the easement.
Servient Tenement
Created in a deed when a landowner divides property and includes language in the deed that transfers a servient tenement to the buyer, but retains a dominant tenement for the seller.
Thus, the seller keeps an easement across his former property.
Easement by Express Reservation
Created by law when land is divided, and there is a long-standing apparent use that is reasonably necessary for the enjoyment of the dominant tenement.
Generally arises when a tract of land was originally held by one owner, then divided into two or more parcels.
Easement by Implication
Created when a property would be completely useless without an easement against another property, even if there is not a long-standing, apparent use.
Easement by Necessity
Created by open and notorious, and hostile and adverse use of another person’s land for 21 years.
Easement by Prescription
Termination of easements
- Release
- Merger
- Abandonment
- Prescription
- Destruction
- Failure of Purpose
A document in which a legal right is given up.
Release
Uniting two or more separate properties by transferring ownership of all to one person.
Merger
The failure to occupy and use property, which may result in a loss of rights.
Abandonment
Occurs after 21 years of non-use.
Prescription
What happens to an easement on a property that is destroyed?
Terminates
Easement is not automatically revived if rebuilt.
What is not covered by the Statute of Frauds?
Listing Agreement
If it is less than 1 year, should be in writing anyways
An interest created in property upon the execution of a valid sales contract, whereby actual title will be transferred by deed at a future date (closing).
Equitable Title
The vendee’s (buyer’s) interest in property under a land contract.
Equitable Title
Additional funds in the form of points paid to a lender at the beginning of a loan to lower the interest rate and monthly payments.
Buydown
A legal remedy in which a court orders the breaching party of a contract to perform as agreed, rather than simply paying monetary damages.
Special Performance
Title insurance policy states all possible clouds or problems with the title, like liens or unpaid taxes.
Standard Coverage Title Insurance
Covers additional defects in title that may be discovered only through actual inspection of a survey.
Protects the property owner from unrecorded liens (provided the new property owner did not have actual notice of the liens).
Extended Coverage Title Insurance
When a person transfers his interests under a contract to another.
Assignment
Termination of a contract without undoing the acts already performed under it.
Cancellation
When a contract is terminated and each party gives anything acquired under the contract back to the other party.
Rescission
A sum of money that the parties to a contract agree in advance (at the time of entering into the contract) will serve as compensation in the event of a contract breach.
Liquidated Damages
A damages award, usually monetary, intended to compensate the plaintiff for harm caused by the defendant’s act or failure to act, including personal injuries (physical and mental), property damages, and financial losses.
Compensatory Damages
A nonpossessory interest in a property (e.g., easement, lien, restrictive covenant), which burdens the property owner’s title.
Encumbrance
Who is a mortgage still valid to even if it is unrecorded?
Borrower and Lender
When does a mortgage become valid to third parties?
When it is recorded
Public restrictions on land use.
- Zoning ordinances
- Building codes
- Subdivision regulations
- Environmental laws
Private land use restrictions.
Conditions
Covenants
Provisions in a deed (or other document) that make the parties’ rights and obligations depend on the occurrence (or non-occurrence) of a particular event.
Conditions
Promises or guarantees, either express or implied, in a deed or other document.
Covenants
Binding promises concerning the use of real property.
Restrictive Covenants
Property specific factors that affect value.
- Highest and best use
- Location
- Substitution
- Conformity
- Contribution
The most profitable, legally permitted, financially feasible, and physically possible use of a property.
Highest and Best Use
A particular home achieves its maximum value when it is surrounded by homes that are similar in style and function.
Conformity
Worst home in the best neighborhood.
Progression
Best home in the worst neighborhood.
Regression
A particular item or feature of a property is worth only what it actually contributes in value to the real estate.
The value of an item or improvement is equal only to what a typical prospective buyer is willing to pay for it.
Contribution
Expected price.
Market Value
Actual price.
Market Price
Approaches used in appraisal.
Sales Comparison Approach
Cost Approach
Income Approach
An appraisal method that develops an indication of the value of real property by comparing the property being appraised with other recently sold properties.
Sales Comparison Approach
An appraisal method that develops an indication of the value of real property by analyzing the amount of rent or income the property could generate using market data.
Income Approach
A referral fee paid for directing a buyer or seller to a real estate agent.
Finder’s Fee
A real estate investment business with at least 100 investors, organized as a trust.
Real Estate Investment Trust (REIT)
If a REIT wants to do business in Ohio, where does a special report with the names and addresses of the trustees and a copy of the trust document need to be filed?
Secretary of State’s Office
An ordinary life estate.
An estate granted for the grantee’s lifetime
If a spouse owns a parcel of land separately, they own it:
In Severalty
Can a joint tenant’s interests be willed to heirs?
No
A joint tenancy is created by
Deed or Will
What happens in a sale-and-leaseback arrangement?
Seller retains possession of the property.
Taxes levied on a property owner to pay for improvements that benefit only that property.
Special Assessment
A real estate installment agreement where a buyer makes payment to a seller in exchange for the right to occupy and use property, but no deed or title transfers until all, or a specified portion of, payments have been made.
Land Contract
States in which a mortgagee holds a lien against property (not actual title) only until the loan is repaid, and the mortgagor holds the actual title.
Lien Theory States
