NYS Real Estate U: Core Concepts to Know Flashcards
Responsible for issuing real estate licenses, pocket cards, and handing down disciplinary action.
NYS Department of State
According to Article 12-A (NYS Real Property Law), who shall prosecute criminal actions for violations of the Real Property Law?
Attorney General
The __________________ is the highest court in New York State.
The New York Court of Appeals is the highest court in New York State.
The Department of State (DOS) may also impose a fine not to exceed $_____.
The Department of State (DOS) may also impose a fine not to exceed $1,000.
Before renewing a license, the salesperson must complete _____ hours of Continuing Education.
22.5-hours of Continuing Education.
License Exemptions
- Attorneys admitted to the NY State Bar are exempt from obtaining a license if they represent a client. If an attorney wants to employ salespersons, they then must obtain a broker’s license.
- Public officers are exempt when performing official duties.
- Persons under the judgement or order of a court.
Advertising
“All advertisements placed by a broker must indicate that the advertiser is a broker or give the name of the broker and his telephone number.
According to Article 443-a of the NY Real Property Law, sellers and seller agents do not have to disclose the following facts when selling or leasing residential property:
1) Occupants who have AIDS or other illnesses not transmitted through occupancy.
2) Properties that were a site of death due to natural causes, accidents, suicide, homicide, crime and other reasons.
Brokers must maintain records of all transactions for at least __ years.
Brokers must maintain records of all transactions for at least 3 years.
General Agent
Someone authorized to transact every kind of business for the principal.
Example: Property Manager
Special Agent
An agent with limited authority to act on behalf of the principal, such as created by a listing.
Example: Real Estate Agent / Real Estate Broker
Universal Agent
A universal agent has complete authority over any activity of the principal.
Example: Power of Attorney
The salesperson is a ______ of their broker.
The salesperson is a Sub-agent of their broker.
Use the acronym OLD CAR to remember the agent’s fiduciary duties to their client.
Obedience – Agent shall follow the legal instructions of their client.
Loyalty – Agent shall work in the best interests of their client.
Disclosure of Information (Full Disclosure) – Agent shall promptly communicate all information about the transaction to their client. This includes presenting all offers to the client.
Confidentiality – Agent shall not reveal confidential information about the client to prospective buyers, without the express consent from the client. Such confidential information may harm the client.
Accountability – (refers to financial accountability) the agent must account for and promptly remit all money or property entrusted to the agent.
Reasonable Care and Duty to Account – Agent shall possess the necessary skills and training to perform their requested services.
Agency Disclosure Form
This Agency Disclosure Form is known as the ‘New York State Disclosure Form for Buyer and Seller’.
The Agency Disclosure Form is not required for the sale of ________?
The sale of vacant land
According to Section 443 of the NYS Real Property Law, licensees must present a written Agency Disclosure Form that details consumer choices about representation at the _________________?
The first substantive contact.
Dual agency inherently puts the agents fiduciary duty of ______ at risk.
Loyalty
Estoppel
An agency by estoppel exists when a principal does not stop an individual from representing his or her interests, thus creating an agency relationship between the two.
Exclusive Right to Sell Agreement:
This listing contract offers the most security to the broker. The seller must work exclusively with the broker to sell their property. The broker is entitled to a commission even if the seller finds a buyer themselves.
Exclusive Agency Agreement:
Exclusive Agency Agreement:
Open Listing Contract:
The seller is allowed to work with any broker who brings them a buyer. Only the broker who brings a buyer is entitled to a commission. This is the riskiest type of listing contract for a broker.
An open listing contract is an example of a unilateral contract.
Net Listing
A net listing is not technically a listing agreement, but a method of establishing the listing broker’s commission as all money above a specified net amount to the seller.
What type of listing is illegal in NY?
Net listings are illegal in New York.
Vicarious Liability
Vicarious liability is a situation in which one party is held partly responsible for the unlawful actions of a third party.
Sherman Anti-Trust Act
The Sherman Anti-Trust Act made the following actions illegal:
1) Price fixing
2) Group boycotts
3) Market allocation
4) Tie-in arrangements
Misrepresentation
Misrepresentation consists of:
1) A false representation of a material fact.
2) A person making the false representation knew or should have known it to be false.
3) A person acts or does not act based on the misrepresentation.
4) A person who relies on the misrepresentation in acting or not acting.
Positive misrepresentation means the broker concealed a material defect from the buyer.
Self-dealing is another example of positive misrepresentation.
Positive misrepresentation
Positive misrepresentation means the broker concealed a material defect from the buyer.
Self-dealing is another example of positive misrepresentation.
Unintentional misrepresentation
Unintentional misrepresentation occurs when the broker makes a false statement to the buyer about the property and the broker does not know whether the statement is true or false.
Property Condition Disclosure Statement
The Property Condition Disclosure Act requires the seller to submit to the buyer, a Property Condition Disclosure Statement, prior to signing the contract of sale. If the statement is not signed, the buyer shall receive a $500 credit against the purchase price of the property.
Most seller attorneys advise their clients NOT to sign the statement, as it opens them up to a vast amount of liability.
Real property
Real property is the land and improvements, and all legal rights, powers, and privileges of real estate ownership. Real property includes the bundle of rights.
A fixture
A fixture is personal property that attaches permanently to the land or improvements and becomes part of the real property.
A few typical examples of a fixture include:
- chandelier
- custom book shelves
- wall-to-wall carpeting
- plumbing fixtures
Trade Fixtures
Trade fixtures are items of personal property that a business operator installs in rented building space.
Unlike a typical fixture, a trade fixture is considered personal property of the business owner. It is assumed the business owner will take the trade fixtures with them when moving out of the rented space.
A display case is a common example of a trade fixture.
Fee Simple
Fee simple absolute provides the most complete form of ownership.
Most properties in New York have a Fee Simple Absolute deed, unless specified otherwise!
Ownership in Severalty
When title to real estate is in the name of only one person or entity, it is an estate (ownership) in severalty.
Think of it as a single individual owns real estate, therefore, the ownership is ‘severed’ from all others.
Joint tenancy
Joint tenancy is a form of co-ownership by two or more persons, each of whom has an undivided interest WITH the “right of survivorship”.
Tenancy in common
Tenancy is common is a form of co-ownership by two or more persons, each of whom has an undivided interest, WITHOUT the “right of survivorship”.
Tenancy by the entirety:
This form of co-ownership is limited to married couples.
Unities of Co-ownership
The 4 possible unities include:
1) Time
2) Title
3) Interest
4) Possession
Life Estates
A life estate is ownership, possession, and control of a property for someone’s lifetime.
For example:
Joe will grant ownership of his property to Sarah until the death of Nancy.
Once Nancy passes away, the ownership of the property will revert back to Joe (or Joe’s heirs).
A life estate is a form of fee simple estate.
Estate for years
An estate for years exists for a fixed period of time. It can be as short as a day and as long as many years. Once the term of the lease ends, the rental agreement is automatically terminated.
Most residential leases are an estate for years.
Periodic Estate
A periodic lease automatically renews itself for another period at the end of each period unless one party gives notice to the other party at a time specified in the lease before the lease ends.
Estate at Will
The duration of an estate at will is for an unknown period of time. This is an open-ended estate.
Littoral Rights
Littoral Rights = Lake
Littoral rights apply to property bordering a stationary body of water.
Riparian Rights
Riparian Rights = River (stream)
Riparian rights belong to the owner of a property bordering a flowing body of water.
Easement
An easement is the right to cross or otherwise use someone else’s property for a specified purpose.
The common term for an easement is “right-of-way”.
Easements “run with the land”.
Easement in gross
A right of use in the land of another without the requirement that the holder of the right own adjoining land.
Also known as a commercial easement in gross.
This type of easement is commonly used by utility companies.
Easement by necessity:
Used when a property owner is landlocked and needs to cross an adjacent property to get access to their property.
Easement by prescription
Obtained by use of land without the owner’s permission for a legally prescribed length of time.
In New York, the use must be open and obvious and must continue uninterrupted for 10 years.
Easement by implication
This type of easement arises by implication from the conduct of the parties.
For example, if a landowner sells mineral rights to a company, that company has an easement by implication to go onto the property to do mining.
Encroachments
An encroachment is a building, part of a building, or obstruction which intrudes upon the property of another.
Common encroachments include:
- a fence that was partially built onto the neighbor’s property.
- a tree that has grown to cantilever over the property line.
- a deck that was built slightly over the property line.
- a garage or shed, part of which was built over the neighbor’s property line.
Mechanic’s Lien
This type of lien applies to individuals or companies who have “supplied labor or materials that improve a property”.
For example, if a roofing contractor does not get paid for work performed on a person’s property, they may file a mechanic’s lien against the property.
A mechanic’s liens is a type of an involuntary, specific lien.
Mortgage Lien
This is the most common type of lien.
When a homeowner obtains a mortgage, they are granting the lender a mortgage lien on their property. If the mortgage is not paid, the lender may exercise the mortgage lien and demand full payment of the loan through the sale of the property (also known as foreclosure).
A mortgage lien is another example of a voluntary, specific lien.
Tax Lien:
When a taxpayer is delinquent in paying property taxes, a tax lien attaches against the property.
A tax lien takes the highest priority among other liens (even higher than a mortgage lien).
Essential Elements of a Deed:
- Must be in-writing (according to the Statute of Frauds).
- Include a grantor (the person conveying title to the property).
- Include a grantee (the person receiving title).
- Contain a granting clause, which includes words of conveyance.
- Provide evidence of consideration (something of value).
- Include a legal description of the property.
- Include an habendum clause (this clause begins with the words “to have and to hold”).
- Include limitations and subject-to clause (any deed restrictions or easements must be noted).
- The signature of the grantor (the grantee is not required to sign the deed).
- Acknowledgement/recording (the deed must be notarized and recorded).
- Delivery and acceptance (a valid deed must be delivered to the grantee).
Conveyance
The transfer of the title of land from one to another. The means or medium by which title of real estate is transferred.
What are the 3 acceptable types of property descriptions:
1) Metes and bounds
2) Description by reference, lot and block
3) Monuments
Survey
A survey is a drawing prepared by a licensed surveyor, which shows the exact dimensions of a property and any improvements located on the property (including a garage, deck, fend, driveway).
A survey is drawn using the metes and bounds method.
Full Covenant and Warranty Deed
The Full Covenant and Warranty deed contains the broadest form of guarantee of title of any type of deed and provides the greatest protection to the grantee.
Title
Ownership of property
Chain of title
Chain of title refers to the sequence of historical transfers of title to a property.
It runs from the present owner all the way back to the original owner of the property.
Abstract of title
An abstract of title is a condensed history of title.
It is a summary of all links in the chain of title.
Using the old deed
The seller’s attorney uses the old deed to prepare a new deed for the closing.
A bi-lateral contract
A bi-lateral contract includes two parties.
Most contracts in real estate are bi-lateral.
A few common examples include listing contracts, sales contracts, buyer representation agreements and independent contractor agreements.
A uni-lateral contract
A uni-lateral contract is an “open contract” where one party promises to pay another party if the other party performs a specific action.
An open listing contract is an example of a uni-lateral contract.
The following people generally hold the deposit/down payment:
- Listing agent (seller’s broker)
- Seller’s attorney
Earnest money deposit
A deposit that a buyer makes at the time of submitting an offer to demonstrate the true intent of the purchase; also referred to as a binder, good faith deposit, and escrow deposit.
An earnest money deposit is usually binding.
Novation:
This is the act of either:
1) replacing an obligation to perform with a new obligation; or
2) adding an obligation to perform; or
3) replacing a party to an agreement with a new party.
Full performance
When the duties of the contract are performed by both parties, full performance is achieved. This is the most common and desirable way to discharge a contract.
Specific performance
This is an order from the court requiring specific performance means that the contract is to be completed as the parties originally agreed.
Compensatory damages
Compensatory damages equal the amount of money actually lost due to the breach of contract.
Liquidated damages
Liquidated damages are damages agreed to be paid in the contract.
Reformation
A doctrine that permits the court to rewrite a contract.
Right of first refusal
It allows the holder to purchase (or lease) a property if the seller decides to sell or another purchaser (or lessee) comes along.
The holder of the right of first refusal can match the offer from the third party or forfeit their claim to purchase or lease the property.
Use Provisions in a Lease
The ‘use provisions’ is a clause in a lease that requires a tenant reasonably use the space for its intended use.
For example, a tenant cannot continuously throw loud, late-night parties, which disturb the other tenants in the building.
Actual eviction
Actual eviction is where the tenant is physically removed from the premises. The most obvious case is when the landlord wrongfully evicts the tenant by physically throwing the tenant out or by locking the tenant out of the property.
Constructive Eviction
This occurs when the tenant is prevented from the quiet enjoyment of the property.
In other words, the landlord deliberately renders the property unfit or unsuitable to live in.
An example may be refusing to repair a broken toilet or bathtub.
Mortgagor
Mortgagor is the borrower (typically the person buying the house)
Mortgagee
Mortgagee is the lender or bank who provides a loan to the borrower or homeowner.
Fixed-Rate Mortgage / Fully Amortized Loan
This is the most common type of loan. The borrower makes installment payments (usually once a month). Over time the balance on the loan decreases. At the end of the term of the loan (30 years for examples), the loan balance reaches $0 and the loan is paid in full.
In a fixed-rate mortgage, the borrower pays both principal and interest with each mortgage payment.
Straight Loan (also known as a Term Loan)
This is an interest-only loan. The balance of the loan always remains the same. At the end of the term of the loan, the borrower must pay the full balance back.
Adjustable Rate Mortgage (ARM)
In this type of loan, the monthly payment fluctuates based on a standard index. These are considered high-risk loans for borrowers because the monthly payment may increase to an amount the borrower cannot afford.
Blanket Mortgage
A blanket mortgage is a type of commercial mortgage in which two or more parcels of real estate are pledged as security for payment of the mortgage debt.
Purchase Money Mortgage
A purchase money mortgage is a type of seller financing in which a mortgage is given by the buyer to the seller to cover part of the purchase price.
In this type of loan, the seller becomes the mortgagee and the buyer becomes the mortgagor.
Wraparound Mortgage
A wraparound mortgage is another type of seller financing. The seller extends to the buyer a junior mortgage, which wraps around the existing in addition to any superior mortgages already secured by the property.
Swing/Bridge Loan
A type of short-term loan, typically taken out for a period of 2 weeks to 3 years.
A bridge loan is a type of gap mortgage in which funds are provided over and above an already existing loan until more permanent financing is in place.
Graduated Payment Mortgage (GPM)
In a graduated payment mortgage, the monthly payments are lower in the early years of the mortgage term, but increase at specific intervals until the payment amount is sufficient to amortize the loan over the remaining term.
The monthly payments are low in the early years because the borrower does not pay all of the interest that is then added to the principal balance.
Construction Mortgage
A construction mortgage is a form of interim, or temporary, short-term financing for creating improvements or buildings on a property.
Negative Amortization
Occurs when the monthly payment is less than full interest and does not pay any principal. The interest that is unpaid accrues and the principal balance owed increases.
Conventional loans
Conventional loans are loans issued by commercial lenders without any participation by an agency of the federal government.
Government Loans
Government loans involve some kind of participation by a government agency.
The most common type of government loan is an FHA-insured loan.
VA-guaranteed loans are another example of government loans.
Prepayment Penalty Clause
A pre-payment penalty clause states that the borrower cannot pay off the loan at any time before expiration of the full mortgage term without a financial penalty for early payoff.
Primary mortgage market
The primary mortgage market is where lending institutions originate mortgages.
Example: Bank of America gives a loan to the home buyer.
The secondary mortgage market
The secondary mortgage market is where the loans originated in the primary mortgage market are bought and sold.
Real Estate Settlement Procedures Act (RESPA)
A consumer protection statute, first passed in 1974.
The purpose of RESPA is:
1) To help consumers become better shoppers for settlement services and
2) To eliminate kickbacks and referral fees that unnecessarily increase the costs of certain settlement services.
Truth in Lending Act (TILA) / Regulation Z
The Truth in Lending Act of 1968 is United States federal law designated to promote the informed use of consumer credit, by requiring disclosures about its terms and cost to standardize the manner in which costs associated with borrowing are calculated and disclosed.
TILA requires four main disclosures:
1) Annual percentage rate
2) Finance charge
3) Amount financed
4) Total amount of money to be paid toward the mortgage in principal and interest payments
With regards to advertisements, the only specific item that may be stated in an advertisement, without making a full disclosure is the annual percentage rate.
Points and Buydowns
1 point equals 1% of the loan amount.
For example:
If a lender charges 1-1/2 points as a loan origination fee, the fee will equal 1.5% of the loan amount.
Usury Laws
Usury laws govern the amount of interest that can be charged on a loan.
Zoning
Zoning determines the usage allowed for a building or subdivision.
Zoning Board of Appeals
The Zoning Board of Appeals is a local appointed Board that has the power to review administrative rulings made by the Planning Board or another legislative body.
One of the main duties of a Zoning Board of Appeals is to maintain the essential character of neighborhoods.
It is the interpreter of the zoning ordinance.
The Zoning Board of Appeals is also responsible for granting variances.
Non-Conforming Use
A non-conforming use is a preexisting use of a property that no longer complies with the current zoning regulations. The non-conforming use is “grandfathered” in.
For example, a property owner has been using his building as a manufacturing facility for the past 30 years; however, the neighborhood has since been re-zoned for residential use.
Variance
Variance is the authorization to improve or develop a particular property in a manner not authorized by the local zoning code.
A use variance
A use variance allows a homeowner to use their property in a way that is not currently permitted by the local zoning code.
For example: convert an existing structure into a medical office where the zoning only permits residential use for the property.
An area variance
An area variance allows the property owner to expand the building on their property to a size larger than is permitted by zoning. This can include total square footage of the building as well as size and height of the building.
For example: add an additional story to a building, which will make the building taller than is permitted by zoning.
Building Codes
The primary purpose of building codes is to ensure a safe, properly functioning environment for the occupants.
Escheat
If a property owner dies intestate (without having a valid will), the decedent’s property is distributed to their heirs.
If the deceased property owner does not have any heirs, the property reverts to the State. This is known as escheat.
Eminent Domain
Eminent domain is the right of the government to acquire private property for necessary public use. The property owner must receive fair compensation.
Remember: eminent domain is the RIGHT to take private property, while condemnation is the actual ACT of doing so.
Condemnation
Condemnation is the act of taking private property for public use.
Remember: eminent domain is the RIGHT to take private property, while condemnation is the actual ACT of doing so.
Percolation
Percolation is the movement of water through soil.
Platform framing
Platform framing is the most common type of framing used in residential construction.
Balloon framing
Balloon framing is an alternative to platform framing; however, it is considered illegal in New York State.
Footing
A footing is a horizontal concrete member, set in the soil, which supports a building’s foundation wall.
The footing is located at the bottom of the foundation wall.
The footing is the lowest structural member in a house/building.
Sill Plate
The sill plate is a horizontal wood member that sits on top of the house’s foundation.
It is used as a nailing surface for the floor system.
A sill plate is considered the lowest horizontal beam and wood member in the frame of a house.
Studs
Studs are vertical wood members used to construct walls.
Joists
Joists are horizontal beams or timbers that support a floor.
Roof Components
Eave – the lowest part of the roof that projects beyond the wall of the structure.
Soffit – The area under the roof extension.
Fascia – The area of material facing the outer edge of the soffit.
Pitch
Also known as the slope.
Typically used in describing the slope of a roof, driveway, sidewalk, etc.
The slope of the roof is known as the ‘pitch of the roof’.
Flashing
Flashing is added at joints/bends/corners on the exterior of a house (typically made of metal and/or rubber materials), which prevents water from entering the house.
For example, flashing is added around the base of a chimney (where the chimney meets the roof).
Sheathing
refers to panels that span between wall studs and cover the exterior wall or interior walls.
Sheathing is typically made of plywood on the exterior of the building, and gypsum board on interior walls.
Siding
Siding materials on buildings can be metal (such as aluminum), wood or vinyl. Behind the siding is a layer of sheathing.
Urea Formaldehyde Foam Insulation (UFFI)
Urea Formaldehyde Foam Insulation (UFFI) is a type of foamed in-place insulation that releases formaldehyde gas.
UFFI contains large amounts of formaldehyde, which is why it has rarely been used by building contractors since the 1980s.
R-Value
R-value is a measurement of the ability of insulation to slow the transfer of heat or cold.
In other words, it is the degree of resistance to heat transfer of a wall.
The higher the R-value, the greater the insulating power.
Generally, the higher the R-value, the thicker the insulation.
BTU Ratings
BTU stands for British Thermal Unit.
BTU is a measure of heat energy. It measures the amount of heat required to raise the temperature of one pound of water by one degree Fahrenheit.
Specifications
A document provided by Architects that describes the quality of construction.
Blueprints
Architectural drawings that describe the layout and construction of a house. These drawings describe the quantities used in construction
Forced Warm Air System
A forced warm air system consists of a furnace that contains a fan, a heat source such as gas or oil, and filters. The system extracts cool air from in and out doors and passes this cool air through the heat sources. The warmed air flows through ducts to the rooms.
A forced warm air system provides cooling as well as heating through the same ducts.
Fuse
A device used in electrical systems to protect against excessive current.
The fuse melts and opens the circuit, causing electric power to stop when overheating occurs.
Circuit Breakers
Circuit breakers perform a similar function but are more convenient and safer than fuses.
Circuit breakers trip; that is, they switch off the electric power for a given circuit when the current increases beyond the system’s capacity.
CFCs
CFCs are synthetic chemical substances used in refrigerators and air conditioners, Styrofoam products, aerosol dispensers, and cleaning agents.
CFCs have been shown to lead to the depletion of the ozone layer.
Most home air conditioning units use HCFCs, known as Freon.
Polychlorinated bihpenyls (PCBs)
PCBs were widely used as dielectric and coolant fluids, for example in transformers, capacitors, and electric motors.
PCBs have been known to leak in to the ground from electrical transformers. PCBs appear in groundwater and soil.
Radon
Radon is a colorless, odorless gas that is emitted from soils, rocks and water as a result of radioactive decay.
Radon from surrounding soil enters a home through small spaces such as cracks in concrete, floor drains, sump pump openings, wall and floor joints in basements, and pores in hollow block walls.
Remember: radon typically enters the house through the basement or cracks in the foundation.
Asbestos
Asbestos is a naturally occurring mineral fiber sometimes found in older homes.
It is hazardous to health when a possibility exists of exposure to inhalable fibers (also known as friable asbestos).
Lead
The Residential Lead-Based Paint Hazard Reduction Act of 1992 sets forth the procedures in disclosing the presence of lead-based paint for sales of properties built before 1978.
Remember: “Lead-based paint 1978”
Comparative Market Analysis (CMA)
A CMA is a property evaluation that determines property value by comparing other properties currently on the market, properties that have recently sold, and expired listings.
A CMA is NOT an appraisal. Instead, it is an opinion of value.
A CMA is typically prepared by a real estate agent.
Market Value
Market value is the most probable price that a property should bring if exposed for sale in the open market for a reasonable period of time, with both the buyer and seller aware of current market conditions, neither being under duress.
Market value applies to an “arm’s length transaction”.
Market Price
Market price refers to the actual selling price of a property.
Remember: market value is the probable price, while market price is the actual selling price.
Direct costs
also known as hard costs, they include the cost of labor and materials.
Indirect costs:
Costs that create and support the project. These include architectural and engineering fees, attorney fees, and financing costs, among others.
Obsolescence
One of the causes of depreciation. It is the loss of desirability and usefulness caused by new inventions, changes in design, and improved processes for production, or from the influence of external factors. Obsolescence may be either economic or functional.
Functional Obsolescence can be an outdated design or floor plan.
Civil Rights Act of 1866
The Civil Rights Act of 1866 has no exemptions and contains the blanket statement that ‘citizens have the same rights to inherit, buy, sell, or lease real and personal property.
The Civil Rights Act of 1866 is primarily interpreted to prohibit racial discrimination.
Civil Rights Act of 1968
The Fair Housing Act was included as part of the Civil Rights Act of 1968.
The initial protected classes under the Fair Housing Act included:
- Race
- Color
- Religion
- National origin
The Housing and Community Development Act of 1974
The Housing and Community Development Act of 1974 added sex as a protected class to the Fair Housing Act.
1988 Amendment to the Civil Rights Act
The 1988 Amendment to the Civil Rights Act added two new protected classes:
– Persons with mental or physical disabilities
– Familial status
Blockbusting
The practice of inducing homeowners in a particular neighborhood to sell their homes quickly, often at below market prices, by creating the fear that the entry of a minority group or groups into the neighborhood will cause a precipitous decline in property values.
Steering
The practice in which real estate brokers guide prospective home buyers towards (or away) from certain neighborhoods based on their race.
Redlining
The refusal to lend money within a specific area for various reasons. This practice is illegal.
Before the Fair Housing Act, some lenders circled certain local areas with a red line on the map, refusing to make loans within the circled areas based on some characteristic of property owners in the area.
Testers
Testers are volunteers, employees of federal programs, and people from civil rights groups who visit real estate offices posing as prospective home buyers to see if race influences the information or services that the broker or salesperson offers.
1 Acre
43,560 square feet
1 Hectare
2.47 Acres
Building Department
The Building Department is responsible for enforcing the building code and issuing building/construction permits.
Architectural Review Boards
Oversees and upholds the quality and aesthetics of a neighborhood, town, or city.
Municipal Engineer’s Office
– Estimate the costs of paving, sewers and sidewalks, and other public works projects.
– Supervise streets and other public works activities
– Issue permits to private contractors for street openings and curb and gutter construction.
– Assume responsibility for sewage, water supply, distribution systems.
NYS Department of Health
The NYS Department of Health performs the following basic functions:
– Drinking water safety, including standards for private and community well construction and well water safety and regulation.
– Septic tank approval.
– Certain wastewater treatment approval.
HO-1: Basic Policy
This is a basic policy that insures the home and its contents against perils, including fire, theft, or vandalism. An HO-1 policy does not cover falling objects.
HO-3: Special Form Policy
The most widely used and recommended homeowners policy. It covers the home for all risks or physical loss except damage caused by flood, earthquake, war, or nuclear accident.
HO-4: Tenants or Cooperative Owners Policies
Commonly referred to as renters insurance, regardless if you are renting a home, condo, or apartment. This policy also covers cooperative owners since they hold a proprietary lease (not real property)
HO-6: Condominium Unit Owners Policies
Insure against damage to the contents of an apartment, cooperative, or condominium.
Umbrella Policy
Insurance policy that covers amounts above those covered under one or more other primary policies, and which does not pay until the losses exceed a certain sum.
- Also called excess insurance
Commercial General Liability Insurance (CGL)
Commercial general liability insurance is a basic business liability policy that covers four forms of injury: bodily injury that results in actual physical damage or loss, property damage that results in actual physical damage or loss, personal injury, and advertising injury.
CGL may be purchased by landlords for their rental/income properties
Actual cash value
Actual cash value means that the insured is reimbursed for the replacement cost minus the physical depreciation of the lost or damaged property.
Replacement cost
Replacement cost means that the insured is covered and reimbursed for the actual cost of replacing the damaged property.
For example, if a refrigerator is destroyed in a fire, the replacement cost will be the cost of buying another refrigerator
New York Property Insurance Underwriting Association (NYPIUA
The NYPIUA is a pool of all insurance companies writing fire insurance in New York.
It offers fire and extended coverage as well as coverage for vandalism, malicious mischief, and sprinkler leakage to consumers who are unable to purchase this type of insurance from individual insurance companies.
Ad Valorem
Property is taxed on an ad valorem basis, that is, according to value.
In New York, the real property tax is based on the fair market value of real property.
Special Assessments
Special assessments are assessments made against a property to pay for a public improvement by which the assessed property is supposed to be especially benefit from.
A special assessment may be for such things as streets, sidewalks, sewers, rural drainage ditches and other public improvements.
Homestead Properties
Homestead properties include: – 1-3 family houses – Condominiums – Mixed-use properties when they are mostly residential – Mobile homes – Vacant land under 10 acres – Farm land / farm dwellings
Homestead = Residential
Non-homestead Properties
Non-homestead includes everything else: – Commercial – Industrial – Special franchise – Utility properties
Non-homestead = Commercial
Condominiums
Condominiums are considered real property.
For that reason, condo owners receive a deed a closing.
- Condominiums are considered freehold estates.
- For tax purposes, a condominium is classified as a residence.
Cooperatives
Cooperatives are NOT considered real property.
The owner of a co-op receives a proprietary lease at closing.
A proprietary lease is considered personal property.
- Co-ops are considered a leasehold estate. The leasehold estate gives the right to possession of an apartment and use of the common areas.
Condop
A condop is a building that includes condominium and cooperative ownership in the same structure.
In other words, the building is part condo, part co-op.
Board of Directors
The Board of Directors manages a cooperative.
The Board oversees the maintenance, finances, and policy decisions of the cooperative.
By-laws
The by-laws are the owner’s rights and obligations for a condominium.
The by-laws may include:
- The powers and duties of the Board of Managers
- Sublet provisions
- Restrictions on the use of units and common spaces
- Pet restrictions
Remember: House rules are associated with cooperatives, while by-laws are associated with condominiums.
House Rules
Rules in a cooperative that cover common issues including garbage disposal, maintenance, noise, and conflict resolution.
House rules are generally more detailed than items in the proprietary lease and deal with the day-to-day behavior of tenants and general operations.
Board Package
If a prospective buyer is looking to purchase a unit in a cooperative, the Board of Directors will most likely want the buyer to submit a board package.
The board package includes mostly financial documents.
The Board of Directors will review the buyer’s board package and use it help determine if they will approve the buyer’s application or not. If the buyer’s application is not approved, they cannot purchase a unit in the cooperative.
Right of First Refusal
Condominium contracts typically contain a ‘Right of First Refusal’ clause. The clause allows the condominium association the first opportunity to purchase the condominium when it goes up for sale.
Offering Plan
The developer of a new condominium or cooperative building (or the conversion of a building into a condo/coop) must file an Offering Plan with the NY Attorney General’s office.
CPS-1
CPS-1 stands for Cooperative Policy Statement.
It is used by real estate developers to test the market before building a condominium or cooperative building.
Gross Lease
In a gross lease, the landlord pays all expenses. These include property taxes, insurance and maintenance.
The residential lease is a common example of a gross lease.
Net Lease
In a net lease, the tenant pays some or all of the expenses.
For example, in a triple net lease, the tenant pays all of the expenses in addition to the rent.
A net lease, in particular a triple net lease, is commonly used by commercial tenants.
A large company may have a triple net lease and rent an entire office building.
Percentage Lease
A lease of property in which the rent is based upon the percentage of the volume of sales made upon the leased premises, usually provides for minimal rent.
A percentage lease is typically used with retail tenants.
Ground Lease
A ground lease is a long-term lease of unimproved land, usually for construction purposes.
For example, a lessee may be given a 99-year ground lease for a large vacant property. The lessee will build a large multi-family building on the property.
At the end of the 99-year lease, the lessor (the original land owner) will take back the land and any improvements on the land (including the multi-family building).
A ground lease is also known as a land lease.
Loft Lease
A loft lease is for the rental of floor space this is not generally divided into rooms.
A loft lease is typically for an open, unfinished space.
Graduated Lease
A graduated lease is a lease in which the rent changes from period to period over the lease term.
The lease contract specifies the change in rental amount, which is usually an increase in stair-step fashion.
Escalation Clause
An escalation clause allows landlords to raise rents during the term of the lease.
Lease escalation clauses call for the increased costs to the tenant for different reasons at specified times during the lease term. These clauses protect the property owner against increases during the lease term.
Rentable square footage
Rentable square footage is the total area of a space, some of which cannot be used.
Rentable square footage equals the entire space, including the usable square footage and the tenant’s pro rata share of the building’s common areas, such as the lobby, hallways, and restrooms.
Usable square footage
Usable square footage is the area contained within a building that is actually occupied by a commercial tenant.
Usable space typically does not include elevators, stairs, mechanical spaces, etc..
Pro Forma
A pro forma is an accounting statement that forecasts income and expenses for a period of time, typically five or more years. Pro forma statements are typically used by investors to estimate their rate of return for a particular property.
Liquidity
Real estate is considered an illiquid asset because it cannot quickly or easily be sold.
Active income
Money earned through salaries or in a business in which the taxpayer actively participates.
(Example: a typical full-time job).
Passive income
Money earned from investing in a business venture or partnership.
(Example: income earned from a rental property)
Portfolio income
Money earned from Interest, annuities, dividends, and royalties.
(Example: income earned from investing in stocks, bonds, mutual funds).
Tax shelters
Any method of reducing taxable income resulting in a reduction of the payments to tax collecting entities, including state and federal governments.
Straight-Line Depreciation
Depreciation is a paper loss required for estimated wear, tear, and obsolescence of a property.
The IRS allows real estate investors to depreciate their investment properties.
Straight-Line Depreciation: Residential Properties
Residential buildings and improvements are depreciable over 27.5 years using straight-line depreciation.
Straight-Line Depreciation: Commercial Properties
Commercial buildings and improvements depreciate over 39 years using straight-line depreciation.
Corrective Maintenance
A maintenance task performed to identify, isolate, and rectify a problem with a property so that the property can be restored to an acceptable condition.
An example of corrective maintenance would include fixing a leaky faucet.
Preventative Maintenance
Preventative maintenance involves keeping property and equipment in a good state of repair so as to minimize the need for more costly repair work or replacement.
An example of preventative maintenance would include changing air filters in air conditioners and furnaces.
Operating Statement
The operating statement is used by property managers to project the net operating income for the property.
The operating statement defines all of the income and expenses for the property.
Ad valorem tax
A tax based on the assessed value of an item, such as real estate or personal property. The Latin phrase means “according to value.” So all ad valorem taxes are based on the assessed value of the item being taxed
A straight-term loan is also known as a/an…?
Interest-only loan
Which of the following framing members are horizontal beams that support the floor in a house?
Joists
Which of the following construction elements is the lowest horizontal wood beam in the frame of a house?
Sill plate
Which of the following building components is primarily used to prevent water from entering a structure at a joint, corner, or bend?
Flashing
Which of the following structural members is set in the soil and supports the building’s foundation wall?
Footing
Which of the following is a chemical compound used in refrigerants?
CFCs
Which of the following building materials is a type of foamed in-place insulation that releases formaldehyde gas?
UFFI
Which of the following is considered a direct cost?
Labor cost
The actual selling price of a property is known as the…?
Market price
Familial status was added as a protected class to the Fair Housing Act in what year?
1988
Gender was added as a protected class to the Fair Housing Act in what year?
1974
When an individual is renting an apartment or house, what type of insurance is typically obtained?
HO-4
Which of the following agencies administers the National Flood Insurance Program (NFIP)?
FEMA
Which of the following statements are used by real estate investors to estimate the return on investment for a particular investment property?
Pro Forma
Which of the following loans is associated with monthly payments which fluctuate based on a standard index?
Adjustable-Rate Mortgage (ARM)
The actual act of taking private property for public use by the government is known as…?
Condemnation
Which of the following is a vertical wood member used to construct walls?
Stud
Which of the following is a naturally occurring radioactive gas, which typically enters a house through the basement?
Radon
Which of the following is a measurement of the ability of insulation to slow the transfer of heat or cold?
R-value
Disability was added as a protected class to the Fair Housing Act in what year?
1988
Which of the following is NOT permitted as a deduction on a homeowner’s income tax return?
Appraisal fees
What type of financing is used to purchase a new property when the old property hasn’t been sold yet?
Swing loan
What carcinogenic component was used as insulation in electric transformers that contaminated soil and groundwater?
PCBs (Polychlorinated bihpenyls)
What is it called when a building loses its desirability because of an outdated design feature?
Obsolescence
What did the 1988 amendment to the civil rights act protect?
Disability and familial status
This document governs issues such as noise, pets, etc., in a condo or coop?
House Rules
What is the budget that is set aside for repairs and large improvements?
Capital reserve budget
