NJ Real estate practice questions Flashcards
Businesses with what number of employees must be compliant with the standards of the American with Disabilities Act?
more than 14 employees
A defect that is hidden and cannot be seen.
Latent Defect
This type of mortgage is first paid by interest only and then a lump sum payment at the end of the term. Common with a line of credit
Straight/ Term Mortgage
This type of loan is common when buying a home
Amorized loan
This type of loan consists of the same payment every month. Payments go towards both interest and balance with interest being paid for mostly in the beginning.
Amortized loan
This loan is also referred to as DIRECT REDUCTION
Amortized loan
Once periodic payments are completed by maturity date in an amortized loan, this is referred to as
fully amortized loan
This type of loan can reduce the amount of time one is paying a 30 year loan to 20-25 years
Bi-weekly mortgage
This type of loan may or may no require automatic payments
Bi-weekly mortgage
This type of mortgage is not legal in NJ. It is one in which the principal balance may not be paid before maturity.
Closed mortgage
True or false: in an open mortgage, there may or may not be a pre payment penalty
True
This type of mortgage allows the mortgagor to pay the principal at anytime before maturity
Open Mortgage
Any mortgage in which the interest rates vary is referred to as
Variable rate mortgage (VRM)
This type of. loan includes the option to convert a loan into a fixed rate mortgage during a certain time period
convertible arm
Difference between a VRM Loan and RRM loan (renegotiable rate mortgage)
VRM loans allow the interest rate to be adjusted up or down every 6 months to a year where a RRM is usually every 5 years.
Also referred to as a growing equity mortage
Graduated equity mortgage
A plan in which the borrower is required to make increased monthly payments for a stipulated number of years. This provides savings on interest payments
Graduated equity mortgage
This type of mortgage is when the lender provides lower interest rate in return for a percentage of the anticipated appreciation of the property value.
Shared appreciation mortgage
This type of mortgage is usually given the morgagor in stages
Construction mortgage
What is the advantage of a construction mortgage for a LENDER
It assures the lender that the money is being used for the intended purpose and also provides increased security as the principal amount increases.
What is the advantage for a construction mortgage for a borrower?
Interest is based on the outstanding principal and is not taken until needed
This type of loan is sometimes known as gap financing and swing loan
Bridge mortgage
When an employing broker is a business or corporation, they are referred to as
the broker of record
True or false: The requirements to become a broker sales person are the same as those to become a broker
True
What are all licensees required to carry when engaging in real estate business?
Pocket license ( can be physical or online)
This is a type of easement acquired when a person has continually without permission of the owner used the land of another for a statutory period of time.
Prescriptive easement
The privilege to use the land of another and is generally irrevocable
Easement in gross
Easement in gross are not transferable and terminate with the death of the person who acquired it. True or false ?
True
These type of easements permanently burden a property and can consist of gas pipes, telephone lines, etc
Commercial easements
A form of ownership with two or more persons with no rights or survivorship.
Tenancy on common
A type of ownership by two or more persons with disctictive rights in survivorship.
Joint tenancy
This type of ownership requires that each owner have the same fraction of ownership. Owners can sell their fraction without permission.
Joint tenancy
When a person buys a fraction of ownership from a joint tenant , that person becomes a ______ with the current owners
Tenant in common
This type of ownership says that when one owner dies, his interests go to his heirs
Tenant in common
Type of ownership reserved for married couples. Interest automatically
Vests in surviving spouse in the event of death. They can not sell their interest without permission
Tenancy by entirety
The transferring of title from one person to another is
Conveyance , alienation
Is alienatom voluntary of involuntary ?
Can be both
Common type of deed used today which warrants the grantor has not encumbered the property while they held it
CVG bargain and sale covenant vs grantor deed
This type of deed only transfers title and does not make an warrenkes whatsoever of condition
Bargain and sale deed
This type of deed RELEASES all rights. Not usually used as a deed of convergence.
Quitclaim deed
What type of deed is a sheriffs deed ?
Bargain and sale deed without covenants
Legal remedy available to owners that disagree on what to do with property
Portion action
9 components of a deed
- Competenet grantor
- Ready identifiable grantee.
- Consideration paid
- Granting clause
- Habadeum clause
- Property description
- Exceptions
- Signature of grantor
- Delivery and acceptance.
Who’s signature is required on a deed ?
Grantor
Gradual wearing away of land by water wind or general weather conditions. Land lost through this can not be reclaimed
Erosion
Sudden and noticeable shifting of land from
One property to another caused by flood, earthquake, etc. land can be recruited during a prescribed period.
Avulsion
When a body of water permanently recedes it exposes dry land. This land becomes property of the property owner
Relocation / dereliction
Owner of a property gains land acquired by accreation- true or false ?
True
What language must a deed be written in ?
English or accompanied by a translation into English
What requirements of eligibility for a recording ?
Must be in English. Must bear signature with name printed beneath signature line. Must state consideration paid for property. Must include a reference to lot and block. Must be acknowledged by a formal witness.
Who usually pays the recording fee ?
Grantor (not required. But general)
Issued by title company or attorney ,, this expresses the condition of the title based on examination of public records
Certificate of title
Produced by a title search , this is a condensed history of the title. It is a summary of all conveyances in order as well as liens , encumbrances affecting the property.
Abstract of title
Does the abstract of title gaurentee there are no clouds r defects affecting the property?
No
This evidence of title simply exposes all items regarding the title that are recorded in public record. No guarantees of the title itself
Abstract of title
Public records analyzed to determine the quality of a title is referred to as a
Title search
Title insurance protects who ?
The insured - can be the owner through owners policy and or mortgageee through lender policy (loan policy)
Written statement under oath that the grantor is the owner and has not impaired condition of title since the last date the title was formally
Examined.
Affidavit of title
A search of title up to date proper ro closer to reveal any newly recorded items
Continuation / run down search
Are torrents title systems used in NJ
NO
4 types of encumbrances that affect physical condition of propert
- Easement
- Party wall
- Restrictive covenant
- Enroachment
These are usually found in deeds and limit the use of land. It can be for a stipulated period or indefinite amount of time. A free of encumbrance on a property.
Restrictive covenant
A type of encumbrance in which a building or some portion of a building , fence, driveway or any other improvement illegally intrudes onto another persons land.
Encroachment
A bill of sale would be used to transfer
Personal property
Sometimes referred to chattel or personality, this is any property that is usually moveable or not permanently attached to the property.
Personal property
Refers to any property that is tangible and posses physical quality.
Corporal property
Refers to property real or personal of an intangible nature
Incorporeal property
Land, building, furnaces are all examples of ______ property
Corporeal
Rights under a lease, mortgage or easement are all ______ property
Incorporeal
Leaving personal property by will
Bequeath
Leaving real property by will
Devise
Harvesting a crop after tenancy has ended the ability to harvest crop after tenancy has ended
Emblement
What are essentials of a valid contract (5)
Mutual agreement Competent parties Consideration Lawful objective Property description Signatures
When the offeror revokes an offer before accepted by the other party.
Revocation
True or falSe : oral offers and accepting are binding
False - statue of frauds requires things to be in writing to be enforceable
When parties have the ability and mental capacity to understand implications of entering a contest to
Contractual ability
Emotional value such as “love and affection.” Which usually only has value to person receiving t
Good consideration.
Which parties must sign a CONTRACT
ALl parties in the contract
When there is a breach of contract and one party becomes injured , what can they do ?
Sue for specific performance or money damages
When a person in a contract is compelled by court to carry out the terms of the agreement
Specific performance
Court decision in which an injured parry is entitled to monetary payment for losses incurred by the default of another party
Money damages/ compensatory damages
A dollar amount specified in a contract that is predetermined on the event a party defaults on a contract
Liquidated damages
A term used to describe like going back in time to before a contract existed returning each party back to their position before entering the contract.
Rescission
What does the kick out clause refer to ?
It refers to when a buyer needs to seek a buyer for their own property creating a contenfjncg on a property they have put an offer in for and are under contract. The seller has the right to continue to market the property and if a second buyer comes they must give the first buyer a certain amount of
Days to show they will be able to execute the contract. If not, the buyer can cancel contract.
Who usually pays for the inspection of a house ?
The buyer. The inspector should be working in the best interest of the buyer
Requires that the contract of sale shall include provision requiring as a condition of the sale the testing of well water supply for at least the minimal parameters
Private well testing act
Are questionable items such as personal property included in the sale ?
No.must be stated in contract
Where is an attorney review clause needed ?
1-4 family dwellings
Vacant one family building lots
Residential lease for one year or more
Meghans law refers to
Register sex offenders
What does opinion 26 refer to ?
Attorneys in real estate contracts
Is it required that a broker obtain writing acknowledgment of the client stating they received opinion 26 notice ?
No, but it is advised
Who inquires at closing about weather the buyer and seller received the opinion 26 starker
Title officer
Brief instrument sometimes used to submit a written offer and secure a written acceptance until a detailed sales agreement can be drawn up
Binder or order form or letter of intent
This rule reduces the possibility of fraudulent claim but does not disallow such evidence to prove fraud or to clarify ambiguous written in contact
Parol of evidence rule
Parol is Latin for
Oral
Et al is Latina for
And others
ET ux is Latin for
And wife
Et vir
And husband
Prima facie is Latin for
True, valid , suffice t
Pledging of property without giving up possession
Hypothecation
This clause is when the loan is repaid and the lenders interest in the property no longer exist.
Defeasance clause
Parties to a promissory note are
Obligor: borrower
Obligee lender
True or false : trust deeds are used in nj.
False
When is a subordination clause used
Mortgage for purchase of vacant land
Clause which operates to transfer mortgage lien interest from mortgagor to morrgagee
Granting clause
Due on sale clause
Alienation clause
Explain acceleration and alienation clause
When a borrower defaults on one of their promises to a mortgage (failure to pay, maintain property Etc) the entire mortgage is due immediately. This is the first step in foreclosure. The alienation clause is a form of the acceleration clause in that if the borrower tries to sell the property without ther he lenders consent , the full balance becomes due and payable.
What is the purpose of the alienation clause
Prevent assumption or mortgage or Anytning scheming
Why is the alienation clause a popular method for lenders
They get rid of old low interest mortgages
This clause would be used to make the loan be more attractive to the lender
Equity participation clause
This type of mortgage requires an appraisal and the government is not involved
Conventional
Charging more than the legal amount of interest
Usury
As the loan to value ration increases , and lenders risk ______
Increases
Proportion the loan bears to the appraised value of property or sales price , whichever is lower
Loan to value ratio
Percent the VA gaurentees in loan amount
25 percent with maximum of 36k
Are VA mortgages assumable ?
Yes even by non veterans but the veteran is still held to promissory note unless release
True / false : there can be no prepayment penalties on VA loans
True
What is the VA option clause
Clause added to a VA sales
Contract. States if CRV does not come
Through for at least the purchase price the applicant shall not lose earnest money deposit and does not need to complete the contract
Insured loans
FHA
What are the criteria for a propert to be eligible for FHA loan
Minimum property requirements
Minimum propert standards
What is the most
Popular type of FHA loan
Fixed rate known as 203 b plan
Insures a percentage of the appraised value or acquisition. Price , wh ever is less
Mutual mortgage insurance MMI
What is the up front mortgage insurance premium
1.75 percent of the loan
Can the upfront mortgage insurance premium be financed into the mortgage ?
Yes
What is MIP and how is it paid
Mortgage insurance premium paid monthly
Are interest rates and points negotiable on FHA loans
Yes
Who applies for a conditional commitment through an approved lending institution
A seller
Sets fourth an appraised value and the amount of insurance
Conditional commitment
The amendatory clause is specific to
FHA Loans
States that a borrower shall not forfeit any earnest deposit money and does. Not need to complete repurchase should the conditional
Commitment not come through for at least the purchase price
Amendatory clause
These loans gaurentee up to 100 percent or financing in rural areas.
USDA rural development home loans
How are USDA similar to home loans
Borrower must agree to occupy the home and pay upfront fee and mortgage insurance.
Provides funding for affordable home Owenership and housing opportunities for NJ residents
NJHMFA NJ HOUSINF AND MORTGAGE FINANCE AGENCY
What is the difference between PMI and FHA
PMI insurances only a portion of the loan FHA insured the entire loan
Mortgage insurance through private insurance companies. It is the private decors answer to FHA insurance
PMI
When can a borrower initiate cancellation of PMI
When LTV falls below 80 percent
When does PMI automatically cancel
When LTV falls below 78 percent
What is lender PMI
it is a higher interest rate insurance which can sometimes provide lower monthly payments.
How does lender PMI differ from regular PMI
It can not be cancelled. It is tax deductible. Overtime the borrower pays MORE through lender PMI
Percentage charged by a lender
Nominal rate
Actual rate charged after considering effect of points,
Effective rate
Charges imposed by the lender such as an application fee and increase of effective rate is
Annual percentage rate (APR) or APY
True or falSe: points often make money more readily available to the public when certain economic factors would otherwise make money right
True
More points up front may at times be used to buy down a loan
True
When would a uniform residential loan application be used
Conventional 1-4 family mortgage loan
Front ratios consists of
Totally monthly housing expensive
What percentage is acceptable for front ratios ?
28 percent or less
Total monthly obligations is known as
Back ratio
What percentage of back ratio is usually acceptable
36 percent or less
This act requires a creditors to mail or deliver the loan applicant no later than the third business day after the creditor received application for credit
Equal credit opportunity act
This act requires a lender that denies a loan application to tell the applicant whether the denial was based on information contained by credit report
Fair credit reporting act
When a lender must do their due diligence to make sure a borrower has income , employment etc
Ability to repay rule
Easiest way for a lender to meet the ability to repay rule
Qualified mortgages
This is something filed with a county clerk in order to discharge a mortgage
Satisfaction . Discharge of mortgage
Something a mortgage attempts to do when they have equity in a property in order to avoid foreclosure
Distress sale
Is strict foreclosure used in nj ?
No
Process by which lender obtains a court approved deadline for borrower to pay outstanding balance. Generally only takes place when debt is greater than value of property
Strict foreclosure
What type of foreclosures are used in nj
Foreclosure by sale (not requiring court order)
New Jersey used judicial foreclosure , what does this mean
The court only supervises
This notifies future lien holders that there is legal action involving a property
Lis pedens (litigaton pending)
Is equitable right of redemption or statutory right of redemption used in nj
Equitable rifht of redemption
When must a lender request a deficiency judgement
Within three months
When the foreclosure sale does not generate enough money to satisfy the loan , the lender may _______
Obtain deficiency judgment
What is unique about what happens when a lender obtains a Deficiency judgement
It restablishes the borrowers right of redemption. They have 6 months to pay all costs to redeem property
What type
Of loan is one in which the borrower does not sign a promissory note
Non-recourse loan.
What clause is found in a non recourse loan which waived the lenders right of defiency judgement
Exculpatory clause
Voluntary conveyance by the mortgage instead of going through foreclosure process
Deed in lieu of foreclosure
What is a complication of deed on lui of foreclosure
It would not foreclosure on junior liens
These types of properties are often referred to as bank owned and considered distressed property sales
REO properties
Another word for short sale is
Distressed sale
Market made up of lenders who directly loan money to borrowers
Primary mortgage market
Savings and loan institutions, saving banks, credit unions , mortgage bank companies and others are all
Primary mortgage market
Can lenders in primary market sell their loans ?
Yes , replenishes available funds
This consists of buying and selling existing mortgages
Secondary mortgage market.
Which mortgage market does Fannie Mae, Freddie Mac and ginnie Mae work in
Secondary mortgage market
This is an association part of the secondary mortgage market that does not lend money directly to homeowners. It is a private shareholder owned company and is operated under direct federal control.
Federal national mortgage association Fannie Mae)
Issues mortgage backed securitieS in exchange for pools of mortgage s
Fannie Mae
Highly liquid investment and are traded through security dealers
Fannie Mae
A private company serving public purpose. Does not recieve federal funds
Freddie Mac federal home loan mortgage corporation
Designed to increase the supply of funds that mortgage lenders can make available to homebuyers and multi family investments
Freddie Mac
Buys mortgages from lenders packages them into securities and sells securities to investors
Freddie Mac
Supports the convention mortgage market
Fannie Mae
Supports the market for FHA, VA. RD and pih loans
Ginnie Mae
____me is the government and _____\ Mae is private
Ginnie, Fannie
Allow mortgage lenders to obtain. A better price for their mortgage oran in the secondary market. Lenders can use proceeds to make new loans
Ginnie Mae gaurentee
Name 4 places legal description is used
Leases listing agreements deeds and mortgages
When would a survey normally be done
After a propertY is sold
This determines the properties exact location and defines the property boundaries and shape.
Survey
What are things a survey may reveal about a propert ?
All enroachments by or on subject property
What are the primary methods of property description? Name 4
Street address. Lot and block. Monuments. Metes and bounds.
Although not the best way to describe a property location, this may be the easiest way. Usually used to support a more reliable property description
Street address
Tract of land that divides property into smaller lots
Subdivision
Measurement across the front of a property. Corner properties may have 2
Front footage
Measures along the lines opposite of frontage
Back footage
When the boundaries of the property are outlined using both natural and man made markers.
Monuments
The most accurate of all legal descriptions
Metes and bounds.
Point of beginning is related to which property description method ?
Meters and bounds
Which property description method is not used in NJ
Rectangular survey system / government survey system
What approache should not be used for vacant land
Cost approach
Summation approach is the same as
Coat approach
What approach is used for vacant land
Sales comparisons
This method estimates costs of labor and all
Materials and installation
Quantative survey method
Estimating each component of the busing in place such foundation floors walls roof etc
Unit In place method
The three methods for computing reproduction. Or replacement cost are
Square foot method
Unit in place
Quantative survey method
Total amount of depreciation
Accrued depreciation
Amount of income a property would normally produce if it was always occupied
Annual gross income
Properties are usually not always occupied or there may be collections. Problems. What is the name of the income that takes this into consideration
Effective gross income
How is annual net income calculated
Effective gross income minus the annual operating expenses
Net income being converted into current market value
Capitalization
How do you calculate cap rate
Net operating income divided by sales price.
Example : NOI=18,000 sale price =180000
Cap rate = 10 percent
An approach for valuing income property which is considered i formal and less accurate than other approaches.
Gross rent multiplier
An informal appraisal made
By real estate agents
CMA
A BPO is equivalent to a
CMA
BPO means
Broker price opinion
The value of property will be reduced by influence of surrounded poorly maiinted properties
Regression
Surrounding properties in good
Condition will increase the value of property
Progression
Government regulations such as zoning , taxes building codes and rent control will effect value
Political forces
Factors such as population and average house hold size may affect value
Social forces.
Properties maximum value set by cost of an putting an equal property
Substitution.
Ad valorem
Means
According to value
Two forms of real estate taxes
General tax and special assessments
When are tax bills usually received by property owners
May or June
This is a charge for the benefit If the general public
Special assessment
How does the town determine who pays for special assessment
Front footage and benefit received
Special assessment a are usually financed
True
True or false : taxes on real property will automatically become a lien on the property in the year they are assess
True
Who wins at a tax foreclosure
Person willing to accept
LEAST amount of interest (no greater than 18 percent
What is given to a person who wins at a tax auction
Tax lien certificate
What is the purpose of the tax lien certificate
Puts a lien on the property. Owner has 2 years to pay taxes before the person who posses tax lien can foreclosure
A legal proceeding only available to municipalities
Rem proceeding
How long does a fax sale need to be advertise for
4 weeks
Does failure to send notice to owner about tax sale invalidate the process ?
No
A list of the assessed values of all land and buildings within a municipality available to the public to review and compare
Assessment role
Used to calculate real estate taxes
Mill
One mill is equal to
1/10th Of one cent or 1 dollar per 1000 dollars
Qualified homes under federal tax law are
Main home and one other residence
True or false : are points tax deductibile
True
True or false : points paid on a second home are tax deductible
False - can only be paid over the life of the loan
In order for real estate property taxes to be deductible or federal income tax is
If the tax is on assed
Value and tax charges a uniform rate on all property in jurisdiction.
True or false : special assessments are tax dedu
False
True or false : special assessments increase benefit of
Propert
True
Can land depreciate ?
No
4 qualifications for for something to be depreciable
It must be property you own
Must be business or income producing
It must have useful life
It must be expected to last more than 1 year
What type of assets is real propert
Capital assets
Propert sold for more than original price
Capital gain
Property sold for less than original price
Capital loss
Are Costa to repair your home and keep it in good conditioned considered when determining the original basis of your propert
No. An improvement would be considered
This is determined by how the home was acquired
Basis
Adjusted basis is
Results after all adjustments are made
What amount is taxable gain
Anything over the original basis
How much capital gain can a tax payer exclude from taxable income ? Married couples how often can this exclusion be made ?
250k
500k
Every 2 years
Does a seller provide a 1099 form ?
No - whoever closes the transaction. Usually settlement agent or attorney
The amount a property is rented for
Contract rent
The potential amount a propert could be rented for
Economic rent
Useable area
Privately
Owners area
Rentable area
Common space areas
Rent roll
All the rental units including who is renting and amount being paid
A list of rental unite along with a brief description and statement of proposed rental rates made by owner or property manager
Rent schedule
Who is the only person who can order evictions
Judge
When someone enters a unit and attempts to remove the tenant from the unit without court judgement
Self help eviction. Illegal in NJ
True or false : nj licensees can not prepare leases for commercial property
True
What happens when a property that is being leased is taken by the condemnation clause
The lessees interest come first. Rent will be decreased usually
How many members are on a governing body municipality
7-9
What are the 7-9 members on a municipality called
Planning board
Plan of growth in and development
Master plan
Who carries out a zoning ordinance
Building inspector
How are zoning ordinances enforced
In order to occupy a building , a zoning inspector must provide a permit (certificate of eligibility)
When zoning is a positive tool to direct growth and positive use for the public
Directive zoning
When zoning is a preventative tool (safe)
Restrictive / preventative
This type of zoning restricts certain persons from becoming residents or a township
Exclusionary zoning
True or false - regional contribution agreements Re no longer allowed
True
Variation in a zoning ordinance for a small area of land permitting a ISthat is inharmonious with the immediate surrounding area
Spot zoning
Providing a small convient store in a residential area is an example of _____ zoning
Spot zoning
Land main tes with shrubs trees etc and seperates land of different occupancy
Buffer zone
Permitted use in a particular zone for a specific purpose
Conditional use
Distance from the street or curb
Setback line
Distance between street curb or boundary of the lot beyond which no building can extend
Building line
