National Test Flashcards
1
Q
What are the Bundle of Rights
A
Possession (landscaping, mining, building set against zoning)
Transfer (sell, bequeath, lease, donate, assign certain rights such as a tenant lease)
Encumber (mortgage)
Exclude (keep people off and prosecute trespassers)
Control, Enjoyment, Exclusion and Disposition (encumber with mortgage)
2
Q
Real Property Rights
A
Real property is immovable. It includes the land, everything that is permanently attached to it, and the rights that “run with” the land. Personal property, on the other hand, is movable. Private ownership is not absolute
3
Q
Real Estate
A
Land + all permanent structures
4
Q
Real Property
A
Ownership of real estate and bundle of rights associated with it and is tangible where as personal property can be tangible or intangible
5
Q
Licensing Laws administered and enforced
A
by the jurisdiction of the state real estate commission
6
Q
License laws
A
Administered and enforced under the state real estate commission
7
Q
What is AFAIR
A
Fixture or Personal property
Agreement, written in the contract
Functionality when if it was removed then it would have a negative impact on property
Adaption, meaning how the fixture is adapted to the property
Intention, attachment that was intended to be removed when leaving
Relationships is for relationships of the parties
The listing of an item (fixture or personal property) in a sale or lease overrides all considerations
8
Q
Fixtures
A
Items that are permanently attached to a property, such as by screws, nails, or glue. Fixtures are considered part of the property and will go to the buyer along with the rest of the property
9
Q
Conversion of property
A
From real property to personal or vise versa.
Severance is when the fixture is detached and made personal
Affixing is where personal property is affixed to become a fixture
10
Q
Assession
A
When tenant fails to remove a trade fixture and it becomes real property owned by the landlord
11
Q
Emblements
A
are Plants and crops grown by humans. Grown natural are regarded as real property
12
Q
Factory built homes
A
are either personal property or real property depending on how they are fixed to the ground. Manufactured homes are ones that conform to HUD standards (Department of Housing and Urban Development)
13
Q
Universal agent
A
Empowered to do everything through power of attorney including legal needs
14
Q
General agent
A
similar to Universal but with focus on a particular business or enterprise (can sign)
15
Q
Special agent
A
or limited agent where there may not be a binding contract and relationship terminate after a particular activity (most real estate broker deals)
16
Q
Independent Licensee
A
Commission only (no withholding for tax or social security)
Freedom to set hours
Broker has liability for their work
Must comply with IRS requirements for qualified real estate agent
50-100% commission plan only paid by employing broker
17
Q
Creation of agency
A
Express agency, written or oral. Implied agency by action
18
Q
Different types of agency
A
Single agent (buyer or seller) where agent represents client
Sub agent (sales people etc) where the sub agent works for the broker/ agency to client
Dual agent where the agent works for seller and buyer.
No agency where broker acts as facilitator or transaction broker\Cooperating Broker
19
Q
Authority of Real Estate Agents
A
No authority to bind a client to any contract
Receive compensation directly from a client
Accept a listing or deposit that is not in the brokers name
20
Q
Agents responsibilities to principals
A
Fiduciary duties OLD CAR
Obedient
Loyalty
Disclosures
Confidential
Accounting
Reliable Care
21
Q
What is a customer and how differs from a client (principal)?
A
DAR
Disclosures
Accounting
Reliable Care
22
Q
Disclosing material fact
A
Includes, opinion of property condition, buyer’s motivations and financial status, open disclosure of relationship with other buyers, title defects, environmental hazards and defects.
23
Q
Property Disclosure
A
Filled out by Seller
24
Q
RR105c
A
“Property Information Form” filed out by property manager. Disclosure statement including how many units are in the building*, how many units are arrears in their maintenance fees, how many are in foreclosure and if there’s any litigation in the building etc
25
Key difference between licensee’s duty to client and customer
No loyalty or obedience to customer
Disclosures
Accounting
Reliable Care
26
Express agency
in writing or oral
27
Independent contractor
income based on production
28
Open listing
Allows a seller to work with multiple real estate agents to sell their home where the seller is not bound to a single agent. Instead, multiple agents can compete to find a buyer and receive a commission and seller is free of any obligations except to the agent who successfully negotiates a sale.
29
Exclusive Agency
is exclusive to one agency with expiry date, but leaves the client open to sell themselves without broker assistance or commission
(can lose out to seller agent),
30
Exclusive Right to Sell
Most widely used contract includes commission of customers found by client (with expiration date), death does not terminate contract
31
Listing contract
is not binding on heirs. Is employment contract between brokerage and principal.
32
Commission
is always negotiable between seller and agent
33
Broker Fiduciary duty
OLDCAR
Obedience, Loyalty, Disclosure, Confidentiality, Accountability, Reasonable Care/Diligence.
34
Entities not allowed to broker real estate
Non profits, Business Trusts of investment trusts, Cooperative associations
35
NAR
National Association of Realtors, with trademarked Realtor (broker) and Realtor Associate (sales person)
36
TCPA
Telephone Consumer Protection Act - Unsolicited telephone calls
37
CAN - SPAM
Bans sending unwanted emails, required authorization and opt out
38
Uniform Commercial Code
fixtures may be personal property (chattels) and separately financed and removed upon foreclosure.
39
FINRA
Federal Industry Regulatory Agency - registration of all dealers of securities in an investment partnership. Excludes syndicator, property and investors in one state and Lees than 35 investors in a private non advertised sydication
40
Surface rights
Include water
41
Doctrine of Prior Appropriation
State owns and controls water rights but can permit to landowner for normal use and attach to property over time
42
Littoral rights
Rights based on the water being non moving such as a lake or sea. Owners next to water can't own water or land beneath it. High tide etc 20'-40' setback
43
Riparian rights
Water that is moving such as a river or stream. If unnavigable then owner has unrestricted use and ownership to midpoint. If navigatable then public (owner has no rights or ownership)
44
Fee Simple Absolute
Has no restrictions or conditions for use or sale
45
Fee simple defeasible
Must conform to stated use
Determinable (until) usage limitations if violated automatically returns property back to the previous grantor (owner) or heirs.
Condition Subsequent (but if) violations return the property back to the previous owner but not automatic and grantor must take physical ownership back in a limited time frame
46
Life Estates
Freehold estate that is limited to life of owner/named person (life tenant) and then on death revert back to grantor or to a charity, family member etc through a (remainder) Remainderman (who has future interest in the estate on the life tenant’s death. If no Remainderman then property goes back to the grantor who has reversionary interest in the estate.
Test note - Life Estate can do anything with the estate except devise (will) it so it is not inheritable
Two types of life estates, Ordinary (ends with the death of the life tenant) or Pur Autre Vie (where property reverts back to grantor when 3rd named person dies)
47
Pur Autre Vie
Lifetime of 3rd party who when dies, interest reverts back to grantor from tenant holder
48
Legal Life estates
Created by state laws not property owner's agreement to protect property rights of surviving family
49
Homestead
Protect home from creditors of judgment liens, not exempt from tax, mortgage or improvement debts, signed by both spouses and live there,
50
Dower and Curtesy
Dower (wife’s interest) and Curtesy (husband’s interest) (replaced by Uniform Probate Code). Claim made on estate by surviving spouse, during life of head of the household and pass to children under legal age.
51
Elective Shares
Replace Dower and Curtesy and allow surviving spouse to claim percentage of decreased real and personal property even though will may exclude them. It is not transferable.
52
Tenancy in Severalty
Ownership by one person or entity/corporation that passes to heirs through probate
53
Tenants/Estate in Common
Two or more owners
Can be unequal shares commonly (assumed equal shares if not known)
Identical rights (equal indivisible rights)
Individual interests so that each owner has right to sell or encumber without consent
No survivorship so that the deceased ownership can pass via probate to heirs
Can be acquired at different times
Can acquire at any time
54
Joint Tenants
Own property as one with equal interests and rights that are not divisible
Equal rights and interests until one dies with survivorship (remaining tenants share increased ownership) or sells share with permission to a new tenant in common. When one remains joint tenancy is terminated and becomes estate in severalty and interests become inheritable
All parties acquire at same time and same deed of conveyance
55
Partition Suit
Can terminate joint or common tenancy plus foreclosure or bankruptcy. Done by a tenant to get out of agreement and have property divided or sold if not agreed
56
Tenancy by Entireties
For married + same sex couples where interest passed to surviving spouse. Single undivided interest. No foreclosure by individual debts. Terminated by death, divorce or mutual agreement
57
Community Property
Either separate property or community. Community property can't be transfered or encumbered without consent of other party. On death, separate property goes to individual's heirs.
58
Estates in Trust
Will, deed or trust agreement where the granter transfers interest to trustor who holds and managed estate on behalf of a beneficiary.
59
LIving Trust
Trustor to convey title to a trustee to manage estate on behalf of a beneficiary who gains all revenue and fees if sold (less trustees fees).
Testamentary trust is the same but only takes effect when trustor dies
(personal and real property)
60
Land Trust
Trustor conveys title or real property only to trustee over limited time but remains beneficiary (could be a corporation) and controls property and trustee and can be hidden. The beneficiary's interest is personal property with advantages for transferring, encumbering and robating in state at death
61
Cooperatives
All buildings, land and improvements are owned by corporation in severalty. Owners hold leasehold estate (proprietary lease). No deed. Unit can be independently financed. Can deduct mortgage interest and property tax imposed on individual units
62
Timesharing
Administered by Time Share administrator appointed by DCCA
Partial interest in development + equity in unit. Title and right to sell, will, rent etc
Tenants in Common - deed to undivided interest in unit prorated to paid for plan
Interval Ownership - Estate for (x) years + title to unit during time period. End of period, becomes tenant in common
Right to use - lease agreement for rights to occupy a unit for x weeks over x years. No equity interest
Vacation License like hotel operation, can’t rent or lease unit and can’t be sold for profit
Vacation Lease on unit for fixed annual occupancy but can sublease or transfer interest
Club membership right to occupy for specific time of club buildings used by members. Fixed times or at different times each year
Can deduct property tax from income tax
Timeshare Disclosure Statement
7 days to terminate after signature
Real Estate agent can be liable if purchase cancels
63
Partnerships
If real estate business, all actively engaged in business must have salesperson or broker license.
64
Corporation
If real estate business, manager must be employee or officer with brokers license. Security-need securities license.
65
Tenancy and rights of heirs
Tenancy in common (don't have to have equal shares or interest) , when one owner dies, their share is passed on to their heirs. The heirs then own the property together with the original owner as tenants in common.
Joint tenancy,when one owner dies, their interest is automatically transferred to the surviving tenants. The surviving owners inherit equal shares of the property title.
66
Easements in Gross
Utilities, road widening
Personal right granted to one party and not attached to grantor's real property. No dominant or servient estates.
Personal easement in gross terminates on grantee's death
Commercial easement can be transferred, assigned or willed
67
Appurtenant easement
Right or privilege associated with property (easement to access sea/dock)
Dominant tenement (beneficiary how uses land access but doesn't own
68
License
Personal, not transferable, and don't attached to land. terminate on death of either party or sale of property
69
Servient tenement
Owns land and burdened by access rights that runs with the land.
70
Easements when the land is sold
Easements appurtenant are tied with the land and not personal to the owner of the land and recorded as part of the deed. If the servient estate is sold, the new owner must allow the owner of the dominant estate to continue to use the land. Similarly, if the dominant estate is sold, the new owner will have access to the easement.
71
Creation of easements appurtenant
Easement Grant (dedication to public (must accept to record)
Easement of Necessity where property is landlocked (not HI)
Easement of Prescription (HI 20 years):
Not secret (open, notorious and visible)
No permission given (hostile and adverse to owners interest)
Exclusive to the party making the claim
Continuous and uninterrupted
Adverse Possession = transpassing
72
Termination of easements appurtenant
No longer needed
Dominant and Servient become one
Release of right
Abandonment of easement
Nonuse of easement
Adverse possession by owned of Servient tenement
Destruction of Servient tenement
Lawsuit (quiet title action)
Excessive use
73
Priority of liens
First recorded, except tax (always first), mechanics (when work began) can take priority
In a foreclosure expenses paid first
74
Restrictive Covenants (deed or lease restriction) CC&Rs
LImit the actions of the person or entity.
Prevail if stricter than zoning
75
Deed restrictions
Restrictions are contracts between two parties.
Take precedence over all. Run with the land
Declaration Restriction for subdivision, PUD, condominium and commercial industrial parks have similar resitivtoons to Deed restriction but they can't be extinguished through quitclaim deed
Deed condition stricted use of property and violation gives grantor right to repossess and file suit
76
Deed of and in Trusts
Deed of trust is for 3rd party collateral on a loan.
Deed in Trust is for land Trusts
77
Patent Deed
Used to transfer government property to private parties
78
Estoppel
Prevents a person to make a claim that is against their previous actions. (sells property with defect title, buyer sorts it out and original owner prevented from taking it back because of their previous defect title actions)
79
Federal Regulation
primary concerned with real property usage, natural disaster, land description and discrimination and does not levy real estate taxes
80
States regulate
Real estate businesses and can levy taxes but normally pass to local governments.
Counties and local government regulate land use, control of improvements and taxes (school districts can levy taxes as well)
81
Federal Housing Administration
Promotes and regulates home ownership
82
Encroachment
Is encumbrance on property. Determined by survey. Fence constructed over lot line.
83
Police power
Government restrictions on real property (zoning)
84
Power of eminent domain
Government right Process is condemnation
85
Power of escheat
Dies without will if no heirs reverts to government through escheat (15 years HI)
86
License
Permits use but not give ownership (boys club)
87
Originary Lease
Has interest in the property for a fixed period of time and can enjoy possession and exclusion (but not landlord)
88
URLTA
Provides blueprint for state laws for fair conditions between landlords and tenants including maximum deposits, interest on deposits, commingling, Return of deposits.
Does not apply to transient rentals (under 180 days) hotels, motels, cooperative proprietary leases or residential occupancy under a contract for deed
89
Dedication
Allocation of land to public and public acceptance
90
All liens are encumbrances but all encumbrances are not liens
91
Taking
Government taking property without just compensation
92
Voluntary (mortgage) and involuntary liens (taxes).
Charges against property.
No ownership interest but is an encumbrance that runs with the estate until paid and cleared.
Leinholder can bring legal action to force sale acquire title.
Short sale made when there is less value in the property than what is owed
Voluntary created intentionally by say a mortgage company
Involuntary created by law (tax liens, judgment or municipal)
93
Alienation
Transfer of title both voluntary and involuntary
Property is liable to be sold
94
Metes and bounds
Start at POB (point of beginning) and return to it end end of description, great for irregular plots in HI
Metes = distance and direction
Bounds = fixed reference points
Datum - how high
Natural marks used such as trees, rocks, rivers and lakes
Artificial landmarks are surveyors stakes
95
Bilateral Contracts
Agreement between the vendee (buyer) and vendor seller) via a standard state template contract
96
Unilateral contracts
One has to do something. (e.g. option)
97
Valid contracts
Binding and enforceable on all parties
Competent parties
Mutual consent
Valuable consideration
Legal Purpose
Voluntary act of good faith
Acknowledged - verification of grantor's identity through a notary
98
Void contracts
Illegal. Unable to complete. One or more elements missing.
99
Voidable
May be rescinded by one or both parties if are not legally competent (minor, crazy).
100
Essential elements of Contracts
Offer, Acceptance, Consideration, Legal Capacity of Parties, Reality of Consent,
Legality of object, possibility of completion
101
Statute of Frauds
The Statute of Frauds, contracts to be in writing to be enforceable for the sale, gift, or financing of real property
102
Contract Remedies
Specific performance, rescission (return), compensatory damages, liquidated damages
103
All terms except those required by law are negotiable
104
Risk of loss of property is upon the seller during escrow
105
Land Contract for Deed
Contract for deed or land contract, legal agreement between a buyer (vendee) and seller (vendor) of real property where seller finances the purchase of the property with a lien. The buyer moves in when the contract is signed (1st closing) and pays the seller monthly payments (has equitable title). The seller retains legal title until all payments are made (2nd close).
If buyer defaults, vendor may get property back and keep down payment depending on judgment
106
Options
Allows seller (optionor) grants buyer (optionee) the opportunity to buy the property by a certain time and an agreed cost and terms. If the buyer goes ahead the option payment is deducted from the earnest money. This is a unilateral agreement that becomes a bilateral agreement once the option is exercised. No obligations on the optionee (buyer) but the seller must perform if the option is triggered. Can be used in commercial transactions also to allow buyer to investigate zoning, permits etc (equitable interest).
107
When does sales contract end
Rejected, countered, accepted (becomes executory contract)? Withdrawing is unilateral and gives all earnest money back to buyer.
108
Sales contracts are binding on heirs in case of death of principles. Offer may be withdrawn any time before acceptance
109
Voluntary Alienation
Sale of property that has to be sold
110
Involuntary Alienation
Foreclosure, bankruptcy, adverse possession, eminent domain.
111
Constructive Notice
Notice given to the public via recorded documents such as a deed recorded with the new title in the public records held at the county.
Acknowledgement verifies signatures and allows recordation, confirms authenticity
112
General Warranty Deed (warrants most), Quitclaim Deed (warrants least). Quiet title is...
Any lawsuit that attempts to confirm ownership, fix a title error, or settle an ownership dispute. The end result of a quiet title lawsuit is a court order clarifying or confirming who owns the subject property. In other words, a quiet title fixes the chain of title.
113
Property Descriptions
Location of property
Metes and Bounds-survey, distances from point to point in feet and degrees.
Plat or Lot and Block-description by reference
Government Rectangular system-meridians and baselines (not in Hawaii)
114
Types of liens
VISE (Voluntary, Involuntary, Statutory, Equitable
115
Property tax
Equals assessed value times rate divided by 1000
116
Hypothecation
Pledging property (through a mortgage)
117
Theories of financing
Lien (or mortgage) Theory State-Hawaii. Borrower holds title, lender has recorded lien. Title Theory State-mortgagee or third party actually holds legal title to property as security for loan Defeasance).
118
Defeasance clause
Within a mortgage contract that states the property's title will be transferred to the borrower (mortgagor) when they satisfy payment conditions from the lender (mortgagee).
119
Acceleration clause
Immediately due and payable. Alienation (due on sale) is one specific form of acceleration. (assumption taking over loan, novation off the hook)
120
Judicial foreclosure
Suit (day in court)
121
Nonjudicial foreclosure
Power of sale, to advertise, open house, hold auction.
122
Equitable redemption
Before foreclosure sale can pay all to get back
123
Statutory Redemption
After foreclosure can pay all to get back (only tax sales in HI)
124
Deed in lieu of foreclosure-
Mortgagor gives back property to bank
125
Distribution of sales proceeds
Loans, liens, expenses, closing costs, taxes, mortgage, commission
126
Deficiency judgment
Attaches to owner in case not enough equity in property to get loan amount back for judicial foreclosure.
Non judicial foreclosures require lender to file a new deficiency suit
Non judicial foreclosures no not allow redemption rights
127
Nonrecourse note
No personal liability if written in note
128
Subordination
Changes the liens priority)
129
Secondary mortgage market activities
Activities between lending institutions (Fannie Mae, Ginnie Mae, Freddie Mac) Do not deal directly with public
130
Loan to Value ratio
What percentage of appraised value can you get a loan (VA = 100%)
131
What is novation?
To replace or substitute
132
VA loans assumed by non vets make vet secondarily liable (no novation)
133
All assigned loans, assignor remains secondarily liable.
134
What is APR?
Annual Percentage Rate for the full costs of the loan over a year
135
Equity
Value minus debt
136
TILA
Truth in lending act, protects you against inaccurate and unfair credit billing and credit card practices finance charges, Reg Z (truth in advertising) protection against shady lending practises and kickbacks
137
RESPA
Real estate settlements procedures act - provides buyer with disclosures of settlement costs and to reduce the costs of closing by the elimination of referral fees and kickbacks.
Good Faith Estimate. For residential first mortgage loans only.
138
National Environmental Policy Act 1969
environmental policies for land use
139
CERCLA/super fund
1986 Land owners held liable even if innocent for environmental violations
140
Lead
Lead based paint act 1992 to disclosure for paint in homes before 1978 with safety brochure
141
Types of loans
ARM’s (adjustable rate mortgage), Fixed Rate, Graduated, Negatively Amortized etc.
142
ECOA
Equal credit opportunity act - discrimination law for lending
143
UETA
Uniform Electronics Transactions Act - and the Electronic Signatures i Global and National Commerce Act (E-Sign) provide legal online signatures
144
Discount points
Always negotiable between buyer and seller 1% added to the loan
145
What is PMI
Private Mortgage Insurance)? When is it usually required? anything under 20% down
146
Leasehold estates
Nonfreehold, equity interest, technically personal property
147
Leasehold estate for years
for a defined period of time and then terminated such as a 1 year lease
148
Periodic estate
Automatic renewal of lease so long as all fees and restrictions are adhered to (such as month to month leases) 45 days landlord, 28 days tenant termination
149
Estate at will/tenancy at will
Not agreed termination date and can continue for life or within the termination provision. 10 days termination notice
150
Estate at sufferance
Terminated/evicted tenant that fails to leave the property
151
Right of reversion
Owner transferred property to another person but retained the right to future possession/ ownership. Owner's future interest in the property
152
Types of Commercial Leases
Gross (Landlord gets gross amount and all expenses from it).
Net lease (landlord gets net amount. Tenant pays rent + all utilities and expenses),
Graduated lease (graduated amounts through the term of the lease for inflation),
Fixed lease,
Percentage (retail) of sales plus base rent.
153
Functions of a property manager
Managing clients properties and financial performance need a license if managing more that 1 client. Duty to tenant= collect tenant’s rent and give receipt; keep property habitable
154
Types of Value
Income, use, appreciation (market value) and tax benefits, supply and demand
(market, production, appraised)
155
Characters of Value for Real Property
(intrinsic, )
156
Basic Economic Valuation Principles
DUST = demand utilities, supply, transferability
157
Anticipation
New safeway, contribution (new room), increasing returns/diminishing returns (painting new floors)
158
Depreciation
Loss of value of real estate from any cause. Used in cost approach to valuation
159
Cost approach to price/valuation
Price is equal to the cost of constructing an equivalent building on special purpose properties (church)
Property Value = Land Value plus Cost New minus Depreciation.
The market data approach is best used for residential properties and vacant land.
Regression, progression (compromals adjusted to property appraised) based on nearby homes
160
Income approach
The cap rate formula = annual rate of return on an investment property.
Cap Rate = Net Operating Income (NOI) / Property Value x 100%
Net Operating Income (NOI) is calculated as:
Rental Income + Ancillary Income - Direct Operating Expenses
Cap rates between 4% and 12% are good.
The GRM dividing the property's price by its gross rental income.
Gross Rent Multiplier = Property Price / Gross Rental Income
161
Progression
Value of existing home of lesser value increases because of more expensive homes in a neighbor being built
162
Functional obsolescence
Property has outmoded physical or design features that are outdated. Curable means they can be replaced and costs offset from contributed value. Or incurable such as a floor plan that would cost more to replace than value achieved
163
External/Economic obsolescence
Where the surrounding area contributed or reduced property value
164
Public Land Use controls
Planning, zoning, nonconforming use, variance, spot zoning (to make one lot commercial for a store)
165
Federal Regulations ILSFDA
The Interstate Land Sales Full Disclosure Act is a Federal law regulating sale of unimproved lots administered by Consumer Financial Protection Bureau
Designed to prevent fraudulent marketing schemes for unsee lots
Must disclosure:
Types of title being transferred
Number of homes currently occupied
Recreation facilities
Distance to communities
Utilities charges
Soil condition
Foundation and/or construction problem
Purchasers must receive Property Report unless:
Less than 25 lots
Lots of 20+ acres
Areas where seller has to construct in less than two years
166
Private Land Use regulations
Deed Restriction
Deed or lease restrictions (Restrictive Covenants) set standards for all parcels within a subdivision. If conflict with zoning then stricter prevails.
CC&R’s enforced by injunction and lost through Latches if left too long
Quitclaim Deed can terminate a private deed restriction
Declaration Restriction
Declaration of Subdivision, PUD, Condo, Comercial/Industrial parks contain private use restrictions (same legal effect as deed restriction powers) but can’t be extinguished by agreement or quitclaim deed
167
Taking
Government confiscation without adequate payment
168
Fair Housing terms
Blockbusting familial status, redlining etc. know what they mean, steering
169
Civil rights Act of 1866
No racial discrimination. know exceptions
170
Fair Housing 1968,
Protect race color religion national origin definitions:
Housing is a dwelling, Familial cannot restrict number of occupants with children.
Disability physical or mental impairments + recovery programs. Disabled can make modifications to dwelling and return to original state. Prohibited denying participation in MLS or rental service.
1988 (added protected classes). No exemptions if you use or are a real estate licensee
1995 HOPA Act exempts senior housing familial status discrimination by person 62 Plus or older or 80% of 55+.
171
ECOA
Equal Credit Opportunity Act deals with discrimination in lending
172
How does earnest money, purchase price, loan amount, loan assumption appear on the closing statement?
Accounting of debits and credits
Debits amount person owes and pays at closing
Credits amount set aside for person having already paid or willing to pay via a loan
1. General Information
2. Loan Terms
3. Projected Payment (Principal and interest, insurance, estimated ESCROW, monthly mortgage over term
4. Costs at Closing
173
Prorations
If seller prepaid, credit seller, debit buyer with number of days buyer owns property
174
Exceptions to title insurance policies are NOT covered
175
Withdrawing IRA funds to buy home
You can withdraw from your IRA at any time and for any purpose, but there may be tax penalties involved.
There is a carveout if you're a qualified first-time home buyer who hasn't owned a home in the last 3 years prior to closing. You can withdraw up to $10,000 to buy or build your first home without a 10% tax penalty
176
Depreciation always excludes vacant land
177
Deductions on personal residence can only be property taxes and mortgage interest. Only real estate held as investment (business) can deduct expenses of maintenance
178
To calculate gain - add capital improvement cost to basis (acquisition cost) subtract from sales price. Cap rate equals rate of return.
179
Tax deferred exchanges 1031 exchange
Each is like a separate sale of like kind properties. Tax on the gain is postponed.
180
Imputed interest may be assumed by IRS if interest rate charged by seller is too low.
181
Homeowner can deduct real estate taxes on tax return
182
Personal residence - no deduction for depreciation
183
Exchange-like kind (investment for investment). Must be investment property not personal residence. Defers tax does not forgive it.
184
Investment property
Improvements minus depreciation is calculable gain.
185
Income Capitalization Approach to property value
Divide Net Operating Income into (by) Capitalization rate
income
________
cap rate
186
GRM
Property Price divided by the gross monthly rent = GRM
GRM x monthly gross annual income = Value
187
Mortgage Income Calculator
Monthly housing expenses divided by monthly gross income = income ratio
Monthly gross income x income ratio = monthly housing expenses mortgage interest, principal, fees, insurance)
188
Capital Gain on sale of investment
Net sales proceeds - adjusted base = Capital Gain
189
Adjusted Basis
Beginning basis (what you bought the property for) + capital improvements - costs/easements, other expenses = Adjusted Basis
190
Cash Flow
Total Revenue flowing in and out of business (income - all expenses and costs = Cash Flow (note depreciation not allowed)
191
Depreciation of investment property
Only allowed on improvements over a fixed term (39 years (after 1994)
192
ROI is calculated by
Net Operating Income divided by Price - ROI
193
Property Taxes
Tax base = total assessed homes - exemptions
Tax Rate - budget divided by the tax base
Individual tax rate = Tax rate x taxable value
194
Conversion
Worse than commingling, misappropriation of Escrow funds by converting them for brokers business or personal use
195
Credits and Debits
Debit - Money you owe Must (pay or has already paid at close)
Credit - Money owed to you (Amount must receive or already received at close)
196
MATH CALCULATIONS
Loan to Value LTV
Appraisal-Original value if given present value and depreciation
Lease calculations-calculations involving percentage lease to determine sales
Commission splits and calculating selling price
Sales price required to achieve net amount given expenses
Calculating monthly payment given expenses
Calculating GRM
