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CA REAL ESTATE > PRACTICE > Flashcards

PRACTICE Flashcards

1
Q

What are the 7 TYPES of Real Estate?

A 
Residential
Industrial
Commercial
Agricultural
Special purpose (Schools, Churches, Govt)
Recreational
Investment Property
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2
Q

What are the 7 areas of SPEACIALIZATION?

A 
Type of property
Clients
Geography
Business Type
Transactions
Auction Sales
Mortgage loans
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3
Q

What’s the difference between an EMPLOYEE and a INDEPENDENT/GENERAL CONTRATOR?

A

CONTROL!

EMPLOYEE works under the supervision of the Broker

CONTRACTOR performs tasks for the Broker but isn’t controlled by them

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4
Q

What are 2 important insurance coverages that most Brokers require of their Salespeople?

A

High amount of car insurance

Errors and Omissions (for errors that are not intentional)

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5
Q

What is NAR?

A

National Association of Realtors (Most important National Trade Group)

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6
Q

What is NAREB?

A

National Association of Real Estate Brokers (aka “Realists”)
A Minority Owned Business Organization

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7
Q

What is NAHREP?

A

National Association of Hispanic Real Estate Proffesionals

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8
Q

What is AREAA?

A

Asian Real Estate Association of America

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9
Q

What is CAR?

A

CA Association of Realtors

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10
Q

What is the ADA?

A

AMERICANS WITH DISABILITIES ACT of 1992

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11
Q

If a judge decides against you that Fair Housing Laws have been violated, what are the Federal penalties?

A

$11,000 first time offense

$27,500 if they have had 1 previous offense in the last 5 years

Max of $55,000 if 2 or more offenses in the last 7 years.

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12
Q

If a person feels like they have been discriminated against, how long do they have to file a complaint?

A

With HUD - 1 year

In state or federal court -2 years

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13
Q

What is the RUMFORD FAIR EMPLOYMENT & HOUSING ACT?

A

The CA Fair Housing Law

Outlaws Discrimination in the negotiation or financing of housing.

Requires reasonable accommodation of a handicapped or disabled person.

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14
Q

Broker funds such as commissions in a Trust Account must be disbursed within ___ days of deposit, and records must be kept for ___ years?

A

25

3

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15
Q

Good Ethical Practices include:

A

Trust
Honesty
Competence

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16
Q

Duties to the Client include:

A

Protecting and promoting the interests of the client

Avoiding the concealment of pertinent facts

Informing sellers or purchasers of the licensee’s interest in a property

Providing equal, non-discriminatory services to all persons

Being truthful and clear in advertising

Refraining from false or misleading statements about competitors

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17
Q

What is the UNRUH Civil Rights Act

A

Protection from discrimination by ALL business establishments.

Complaints must be filed within one year of the alleged discrimination.

Senior citizens’ housing is exempt from this act.

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18
Q

In 1968, ______ prohibited discrimination in housing based on race, color, religion, or national origin?

In 1974, the Housing and Community Development Act added ___ to the list of protected classes?

Also in 1974, the Fair Housing Amendments Act added _________?.

A

Title 8
Sex
Handicap and Family Status

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19
Q

Even though the term “agent” is often used interchangeably with the terms licensee, broker or salesperson, in California an agent is defined as?

A

A licensed BROKER

Salespeople who work under a Broker are technically called ASSOCIATE BROKERS

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20
Q

In DUAL AGENCY, it is extremely difficult if not impossible to balance the competing needs of 2 Principals, but is allowed if….

A

the buyer and seller are informed of the situation and give their written consent

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21
Q

Undisclosed dual agency is a violation of…

A

License law and could ultimately result in a lawsuit for damages or disciplinary action by the commission.

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22
Q

What is DESIGNATED AGENCY?

A

NOT LEGAL IN CA

Similar to Dual Agency, but a Broker assigns a Licensee to handle the Seller, and another at the same agency to handle the Buyer. Legal as long as everyone is made aware and gives their written consent.

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23
Q

What is a TRANSACTION BROKER?

A

NOT LEGAL IN CA

Not an agent for either party. These licensees work as facilitators or intermediaries to assist the buyer and seller in the property transfer

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24
Q

When is an Agency Relationship created?

A

When a Principal delegates to another person an Agent the right to act on his or her behalf in business transactions with third parties

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25
Q

What Fiduciary responsibility doesn’t end when a sale closes?

A

CONFIDENTIALITY

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26
Q

The DISCLOSURE REGARDING REAL ESTATE AGENCY RELATIONSHIPS has what 3 choices for Agent Relationship?

A

Seller’s Agent
Buyer’s Agent
Dual Agent

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27
Q

What is the REAL ESTATE TRANSFER DISCLOSURE STATEMENT?

A

An Agent selling a 1-4 unit property must provide the buyer with a written disclosure statement that describes the CONDITION of the property

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28
Q

What are the 3 parts of the REAL ESTATE TRANSFER DISCLOSURE STATEMENT?

A

A. What items in the home are operational

B. Significant defects or malfunctions

C. Misc: environmental hazards, easements or encroachments, improvements or alterations to the property, zoning or neighborhood concerns.

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29
Q

What is an AGENT’S INSPECTION DISCLOSURE?

A

Agents are required to conduct a competent and diligent visual inspection of a one-to-four-unit property and disclose the material facts

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30
Q

A few important things to look for when conducting the AGENT’S INSPECTION DISCLOSURE are?

A

Structural Defects
Deterioration
Water Damage
Insect Damage

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31
Q

For homes build prior to _____ Sellers must provide prospective Buyer’s with a booklet about?

A

1978

Lead Based Paint Hazards

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32
Q

What is the COMBINED HAZARDS BOOK?

A

Given to prospective Buyers and covers:
Earthquake Hazards
Lead Based Paint Hazards
Other Hazards

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33
Q

Are Agent’s required to disclose that a Death happened on the property for sale?

A

Not if more than 3 years ago

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34
Q

What is a PUBLIC REPORT and when must it be provided?

A

Statement from the DRE that discloses to prospective buyers pertinent facts about a SUBDIVISION.

Purchasers must sign a receipt indicating that they have received and accepted the report before they enter into the purchase transaction

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35
Q

What does the TRID require of lenders?

A

Give the Closing Disclosure to the buyer at least 3 business days before settlement

A Loan Estimate of closing costs within 3 days of the loan application

Provide a copy of the booklet, “Your home loan toolkit” at the time of application for a loan

Let the borrower know in writing if they expect someone else to service the loan

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36
Q

What is the MILITARY ORDINANCE?

A

Written Disclosure if a property for sale is 1 mile or less from former military training site

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37
Q

Timeshare buyers have the right to rescind a transaction within ___ after signing the purchase contract

A

7 Days

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38
Q

What are the 3 PRINCIPALS OF AGENCY RELATIONSHIP and what does it not include?

A

MUTUAL CONSENT
AUTHORIZATION
FIDUCIARY DUTIES

COMPENSATION is not needed for an Agency Relationship

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39
Q

What does RESPA require?

A

That Lenders provide a good faith estimate of closing costs within 3 days of loan application for federally-related loans.

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40
Q

If an agent does not comply with the requirement of conducting a visual inspection of a property, how long after possession does the buyer have to file a suit?

A

2 years

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41
Q

What is Real Estate “FARMING”?

A

Prospecting for Clients in an area that is of interest to you like a geographical area

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42
Q

What are 4 basic things to have on your website to entice BUYERS?

A
  1. Current Listings
  2. Services you provide (like help with Lenders)
  3. Current interest rates
  4. Mortgage Loan Calculator
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43
Q

What are 2 common methods to determine an ASKING PRICE?

A

Competitive Market Analysis (CMA)

Appraisal

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44
Q

In preparing a CMA, what 3 lists should you make to start, and how many homes should be for each?

A

At least 3 homes from each…

  1. Recently Sold Properties (nearby, with similar size/amenities, sold in the last 6 months)
  2. Properties Currently For Sale (that are similar)
  3. Unsold Expired Listing Properties (that are similar, but were probably overpriced)
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45
Q

What is a VALUE RANGE?

A

After completing the CMA, present the Seller with a VALUE RANGE of pricing for listing their property

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46
Q

What price do you use to do the ESTIMATED SELLERS PROCEED FORM?

A

The List Price, minus expenses = estimated profit

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47
Q

What is the difference between a LEIN and an ENCUMBRANCE?

A

LEIN: a legal right or INTEREST that a creditor has a MONETARY CLAIM

ENCUMBRANCE: a claim or LIABILITY attached to a property NON-MONITARY

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48
Q

One reason that FSBO (For Sale By Owner) is a bad idea is that Buyer’s often view these as?

A

Distress Sales, and offer a lower price thinking that they will get a bargain

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49
Q

Do Agents help with Property Appraisals?

A

No

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50
Q

Is a list of Former Client References needed in a Presentation Manual for Buyer’s (to get them to go with you as their Agent)?

A

No

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51
Q

What is an OPEN LISTING?

A

This type of listing gives the seller or buyer the right to engage any number of Brokers as agents.

Rare.

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52
Q

The most widely used Listing Agreement is?

A

Exclusive-authorization-and-right-to-SELL

The broker has the exclusive right to market the property for a specified period of time, and the Seller is obligated to pay a commission no matter who brings in a Buyer.

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53
Q

What must an Exclusive-authorization-and-right-to-sell Listing Agreement have?

A

A definite termination date

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54
Q

What is an EXCLUSIVE AGENCY listing?

A

Gives one broker the exclusive right to market and sell the property

BUT

the owner finds a Buyer they do not owe the Agent a commission

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55
Q

Are NET LISTINGS illegal in CA?

A

No, but they are strongly discouraged. The Broker is putting his/her own interests ahead of their fiduciary duty to the Client.

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56
Q

What is the Exclusive-Authorization-To-ACQUIRE-Property

A

A Buyer’s agreement with a Broker.

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57
Q

Can Listing Agreements be Oral?

A

They are not enforceable unless they are in writing.

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58
Q

What is the SAFETY CLAUSE of a Listing Agreement?

A

A specific number of days after a listing expires where a Seller still owes a commission to the Broker if the property sells to anyone the Broker brought in (on a list of names delivered within 3 days of experiation)

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59
Q

What does the SECURITY AND INSURANCE CLAUSE of the listing agreement address?

A

The broker is not responsible for loss or damage to the property, even with a lockbox present. The seller must take steps to safeguard any valuables and obtain insurance to cover the risks.

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60
Q

What does the WATER HEATER STATEMENT OF COMPLIANCE address?

A

A mandatory seller disclosure dealing with the law requiring water heaters to be strapped, braced or anchored to resist earthquake motion

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61
Q

California law requires that the sellers receive a copy of _________ at the time the signatures are obtained?

A

Listing Agreement

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62
Q

Which Listing Form is non-standard and should be prepared by a broker to give to sellers

A

Defective Furnaces in CA

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63
Q

What is the primary criticism that sellers have about their agents?

A

Lack of Communication

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64
Q

What is AIDA?

A

In advertising content…

Attention
Interest
Desire
Action

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65
Q

What kind of ad is illegal in California?

A

Blind ads that do not identify the advertiser as a Broker

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66
Q

What kind of advertising does the Truth in Lending Act prohibit?

A

Bait-and-switch

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67
Q

What are the 2 main types of ADVERTISING?

A

Institutional (aka Corporate)

Product

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68
Q

Radio ads are effective because?

A

Most listeners choose to tune in when they are doing something that allows them to listen (driving, relaxing etc…)

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69
Q

It is common for Lenders to use what formula to determine if someone can afford a home?

A

Mortgage/Insurance/Tax payments (prorated) should not be more than 28% of a person’s Gross monthly income

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70
Q

What is FLOOR TIME?

A

When you are in the office answering the phones and dealing with walk-ins. If they do not ask for a specific Agent, then they become your prospects.

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71
Q

For your safety, it’s best to meet a new prospect in person for the first time _____?

A

At the office!

If at the property, its best to bring a colleague along

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72
Q

What is QUALIFYING THE BUYER?

A

The process of correlating the buyer’s needs and wants with their financial capacity to buy

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73
Q

The best way to QUALIFY THE BUYER is?

A

Have them go through a lender’s prequalification process

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74
Q

What are 4 pieces of info that you should collect from Buyer Prospects?

A

Demographics
Financial information
Current information
Needs and wants

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75
Q

What is a SWITCH SHEET?

A

A list of properties in the firm’s inventory that are comparable so they can be offered as good alternatives to callers who see an ad about 1 property

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76
Q

If you pull up to a property and the Buyer Prospect says they are no longer interested, you should…?

A

Not pressure them to see it.

Call the Listing Agent or Seller and let them know that you are cancelling.

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77
Q

Why give callers as little info about the property as you can?

A

The less info they have, the more of a chance you will have to schedule them in for a showing.

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78
Q

Buyer Prospects who call about which kind of ads are usually the most excited?

A

Internet (more photos, video tours etc…)

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79
Q

What is not relevant to Qualifying The Buyer to afford a house over the LONG-TERM?

A

How much money they have in their Savings Account (this is only relevant to ability to pay down payment)

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80
Q

Most Buyer’s who see an ad that interests them do what?

A

Call your office

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81
Q

What is an ASSUMPTIVE CLOSE?

A

Getting a signal from your Buyer that they have made up their minds and you then ASSUME that they want to close

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82
Q

What is a BONUS CLOSE?

A

When you mention something like if they close now the Buyer will throw in appliances for free

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83
Q

What is an OWNERSHIP CLOSE?

A

Acting like your Buyer already owns it

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84
Q

What is a STANDING ROOM ONLY CLOSE?

A

Acting like it’s the last chance to get this, and they don’t want to miss out.

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85
Q

What are the 5 Aspects of a SELLING APPROACH?

A

KNOW your product.

COMMUNICATE

RAPPORT with the buyer

HANDLE OBJECTIONS

ASKING FOR THE SALE

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86
Q

On the Purchase Agreement, why is it important for the buyers to indicate whether or not they intend to OCCUPY the property?

A

It can have an effect on such items as loan qualification, rates and terms.

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87
Q

On the Purchase Agreement, what’s important to know about the LIQUIDATED DAMAGES paragraph?

A

Must be initialed by both parties

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88
Q

On the Purchase Agreement, what happens if the parties do not initial the ARBITRATION CLAUSE?

A

They can settle their dispute in Court

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89
Q

Which section of the purchase agreement does not apply directly to the buyers and sellers?

A

The final section where the ESCROW HOLDER acknowledges receipt of the contract and agrees to act as the escrow holder in the transaction.

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90
Q

What is an ALTERNATE CLOSE?

A

Offering more than one alternative to the prospects and having them choose.

91
Q

On the Purchase Agreement, what is the TERMS AND CONDITIONS OF OFFER clause?

A

If the buyer defaults after acceptance, the buyer may be responsible for the broker’s commission.

92
Q

What is the difference between a LISTING AGENT, a SELLER’S AGENT, and a SELLING AGENT?

A

LISTING AGENT (aka SELLER’S AGENT) represents the Seller.

SELLING AGENT represents the BUYER

93
Q

Can Sellers officially accept an Offer over the phone?

A

NO, but they can reject one.

94
Q

If you are the Listing Agent and you receive more than one offer on a property, you must…?

A

Present the Sellers with all offers at one time

95
Q

When reviewing an Offer with your Seller, besides the amount, what else is important to review before they decide to accept an offer?

A

EARNEST MONEY DEPOSIT - shows if Buyers are serious

FINANCING - Is there a large down payment, is it all cash, are they prequalified?

CONTINGENCIES - Do the Buyers need to see their house first?

CLOSING DATE - Do the dates give the sellers the flexibility they need to find their next home?

96
Q

Should you use the original Purchase Agreement to write a COUNTER-OFFER?

A

No, best to use a separate form so its easy to keep track if it goes back-and-forth through multiple counter-offers

97
Q

When do the Broker’s receive their COMMISSIONS?

A

When ESCROW CLOSES

98
Q

The acceptance and formation of a legal purchase contract does not take place until?

A

The party who made the offer is notified in writing…Delivered in person, in the mail, or by Fax

99
Q

When presenting Sellers with an Offer, best to do it how?

A

In-person with supporting documentation

-

100
Q

What could it mean if a BUYER’S FAMILY is pressuring them to make an offer?

A

That they themselves are not as interested in the property which could create closing issues later on. The Seller may want to pick another offer (if there is one).

101
Q

What is the LOAN ORIGINATION FEE?

A

Typically 1% of total amount of loan that lenders charge

102
Q

What are POINTS?

A

Each point = 1% of loan

A one-time service charge that is additional income for the Lender making a loan

Paid at closing

103
Q

What is the MARGIN?

A

The Lender’s Markup

104
Q

What is a GROWING EQUITY MORTGAGE?

A

A fixed-rate loan in which payments increase by a predetermined amount each year. Allows mortgages to be paid off early - in 15-20 years.

105
Q

What are the 3 types of limits placed on the interest rate in an adjustable rate mortgage?

A

INTEREST RATE CAPS - limit the amount of interest the borrower can be charged.

PERIODIC CAPS - limit the amount the rate can change at any one time.

OVERALL CAPS - limit the amount the interest can increase over the life of the loan

106
Q

To determine LOAN TO VALUE ratio, what is used for the VALUE?

A

The sale price or the appraisal price, whatever is lowest

107
Q

When a Buyer has less than a 20% down payment, who gets the PMI?

A

The LENDER and it typically covers 25%-35% of the loan, and then the costs are passed down to the BUYER as a flat fee at closing, and a monthly fee.

108
Q

When is PMI terminated?

A

After a Borrower…

  • Has 22% equity in the property.
  • Is current with all loan payments
109
Q

What is special about FHA loans?

A

Little or no down-payment.

They are high loan-to-value ratio loans; so FHA insures the loans in order to make them available to higher risk individuals

110
Q

In the event of a default, the VA would pay what?

A

The amount of the guarantee to the lender if the foreclosure on the property didn’t bring enough money to cover the balance due on the loan.

111
Q

What is special about VA loans?

A

NO DOWN PAYMENT

112
Q

What is a PURCHASE MONEY MORTGAGE?

A

When the Seller finances the purchase. Can be a first loan or a 2nd (to make up part of the financing)

113
Q

What is an INSTALLMENT LAND SALES CONTRACT (aka CONTRACT FOR DEED)?

A

When the Seller finances the purchase, The seller keeps legal title until the debt is paid in full. The buyer receives equitable title until the debt is fully paid.

114
Q

What is a LEASE OPTION?

A

A clause in a lease that gives the tenant the right to purchase the property under specific conditions

115
Q

Do 2nd Mortgages usually have a higher or lower interest rate compared to 1st?

A

HIGHER because they are riskier for the lender

116
Q

What is a BLANKET MORTGAGE?

A

A loan covers more than one piece of property.

Land developers commonly use blanket mortgages when they buy a plot of land and divide it into many separate lots.

117
Q

What is an OPEN END LOAN?

A

Commonly used by Farmers who need an advance to plant crops

It is an expandable loan which gives a borrower a limit up to which he or she may borrow. Each incremental advance must be secured by the same mortgage, and any advances may not exceed the original borrowing limit

118
Q

Is a bigger down payment a LOW or HIGH Loan to Value Ratio?

A

LOW

119
Q

Can you explain the 3 major components of real estate financing:
Federal Reserve System.
Primary mortgage market.
Secondary mortgage market.

A

FED: sets monetary policies for the economy

PRIMARY MORTGAGE MARKET: originates the loans that are bought, sold and traded in the SECONDARY MORTGAGE MARKET.

120
Q

The Federal Reserve was created in ___ has ___ Governors appointed by ____?

A

1913
7
POTUS

121
Q

What is a MORTGAGE BANK?

A

They originate loans with their own money and money from their investors. The intention is to sell off the loans at a later time and receive service fees.

Large part of CA Mortgage Market

122
Q

In CA, can Real Estate Licensees act as MORTGAGE BROKERS?

A

Yes, and collect a fee (some requirements and restrictions apply)

123
Q

Under Article __, the Maximum amount of expenses that can be charged by a Mortgage Broker is?

A

Article 7

5% of loan amount but no less than $390 and no more that $700

124
Q

Why do Primary Lenders sell their Mortgages in the Secondary Market?

A

To generate more money to make more loans

125
Q

The 3 Major Participants in the Secondary Market are?

A

Fannie Mae
Ginnie Mae
Freddie Mac

126
Q

The Federal National Mortgage Association (FNMA), or FANNIE MAE is what?

A

Buys conventional, FHA and VA loans
Sells mortgage-backed securities

Guarantees Mortgages

127
Q

Government National Mortgage Association (GNMA), or GINNIE MAE is what?

A

Administers special assistance programs as part of HUD.
Helps Fannie Mae in its activities.
Guarantees payment on Fannie Mae’s high-risk, low-yield loans

Guarantees Mortgages

128
Q

Federal Home Loan Mortgage Corporation (FHLMC), or FREDDIE MAC is what?

A

Buys and pool mortgages.
Sells bonds in the open market, using the mortgages as security.

DOES NOT Guarantee Mortgages

129
Q

What is a PROMISSORY NOTE?

A

The buyer’s promise to repay the loan according to the terms

The borrower gives the this to the lender with an agreement called a mortgage to repay the loan, and the lender loans the borrower the funds

130
Q

If lenders intend to sell mortgages in the secondary market, what must they do?

A

Use the uniform procedures - outlined in the Fannie Mae and Freddie Mac forms.

131
Q

What actions does a lender take to sell a mortgage in the secondary market?

A

The original lender signs the note over to a third party investor or other mortgage company and then executes a document called an assignment of mortgage.

132
Q

What is The Truth in Lending Act (aka Regulation Z)?

A

This law requires lenders to disclose to buyers the true cost of obtaining credit, so that borrowers can compare the costs of various lenders.

133
Q

Regulation Z does not apply to?

A

Commercial Loans

Agricultural Loans over $25,000

134
Q

Advertising is subject to Regulation Z if it contains?

A

Any financing info

135
Q

The two most important things regulated by Regulation Z are?

A

Financing Charges

Interest Rate

136
Q

Willful violation of Regulation Z punishment is?

A

A misdemeanor that is punishable by a fine of up to $5,000 or one year in prison, or both

137
Q

What is The Equal Credit Opportunity Act (ECOA)?

A

prohibits lenders from discriminating against applicants on the basis of:

Race
Color
Religion
National origin
Sex
Marital status
Age
Dependency on public assistance
138
Q

What is the HOME MORTGAGE DISCLOSURE ACT?

A

Requires Lenders with over $10 Million in certain geographic areas to send annual reports to the Government detailing load practices.

139
Q

What is The Real Estate Settlement Procedures Act (RESPA)?

A

Standardizes settlement practices

Ensures that both buyers and sellers understand the costs involved

Prohibits kickbacks for referrals

140
Q

ECOA requires that a lender send a denial notice within?

A

30 DAYS

141
Q

In California, the majority of escrows are handled by?

A

Title insurance companies & Independent escrow companies.

Most of the rest are by Attorneys and Banks

142
Q

Can a Broker act as an Escrow Agent?

A

YES

and charge a fee for those services

ONLY if he or she personally represents the buyer or seller in that transaction

143
Q

The Escrow Instructions are usually based on what?

A

The Purchase Agreement

144
Q

Who should have TITLE INSURANCE?

A

Both the Buyer and the Lender - paid for one time when the property transfers and stays in effect until the next sale.

145
Q

The standard Title Insurance policy in CA is?

A

California Land Title Association (CLTA)

Can be issued to a Lender only, a Buyer only, or Jointly

146
Q

Not covered in a standard CTLA policy are?

A

Defects known to the insured but not disclosed to the title insurer.

Easements, encumbrances and liens not shown in the public record.

Rights or claims of persons in physical possession of the property.

Unrecorded claims that could be discovered by physical inspection or correct survey.

Taxes or assessments that are not yet liens.

Mining claims.

Reservations in patents.

Water rights.

Zoning ordinances.

147
Q

Can the Lender get extended coverage for items not covered by CTLA policies?

A

Yes. American Land Title Association (ALTA)

However, no insurance is available for:

  • Defects known to the insured but not disclosed to the title insurer.
  • Government zoning regulations.
148
Q

RESPA prohibits referral fees for these….?

A 
Title search.
Title insurance.
Inspection.
Survey.
Appraisal.
Loan.
Credit report.
Attorney.
149
Q

Buyer’s Fees at CLOSING include?

A 
Mortgage recording fees.
Title insurance.
Appraisal fees.
Credit fees.
Survey.
Loan origination.
Attorney fees.
Homeowner's insurance.
Reserves deposited with the lender, such as insurance, taxes, assessments.
Private Mortgage Insurance (PMI), if applicable.
150
Q

Seller’s Fees at CLOSING include?

A

Broker commission.
Title fees, such as for clearing the title.
Fees for preparing the deed.
Attorney fees.

151
Q

What Expenses are usually prorated between Buyers and Sellers at closing?

A

Taxes.
Insurance.
Mortgage interest.
Utilities.

152
Q

What is the CLOSING DISCLOSURE FORM?

A

Details the costs that the buyer and seller will pay at closing

Must be delivered 3 days prior to closing

153
Q

What is MARKETABLE TITLE?

A

Proof of Ownership of a Property

154
Q

What type of loan does RESPA not apply to?

A

Seller financed loans

155
Q

What must a Broker do if they act as an Escrow Agent?

A
  1. Not Advertise that they are an Escrow Agent
  2. Can’t use “Escrow” in a fictitious name
  3. Can’t delegate Escrow
  4. Instructions must indicate that He/She is a licensed Broker
156
Q

Assistants who are asked to be available for tasks in the field rather than in the office are referred to as ___?

A

ON-CALL ASSISTANTS

157
Q

What are the important PROPERTY TAX dates?

A 
Jan 1 - Taxes for the upcoming FY become a lien on property
July 1 - Fiscal Year Starts
Nov 1 - 1st payment due
Dec 10 - late after 5pm
Feb 1 - 2nd payment due
Apr 10 - late after 5pm
158
Q

New Owners will probably receive a supplemental tax bill for what?

A

The difference in taxes between the old valuation and the new valuation - starting at the day of closing

159
Q

New Owners must notify the County Tax Assessor of a change in ownership within ____ Days?

A

45 Days

Penalty is $100 or 10% of the taxes applicable to the new valuation, whichever is greater

160
Q

What properties might be exempt from TAXES?

A
  • Government
  • Educational
  • Religious
  • Charitable Organizations
161
Q

Is a SPECIAL ASSESSMENT TAX a tax?

A

Not technically. It is levied by the City or County and must have voter approval.

162
Q

Who assess a DOCUMENTARY TRANSFER TAX and for how much?

A 
The County (some cities also)
Usually it is .55 cents for every $500 in SALE PRICE

To calculate, Take the sale price, divide by 500 and multiply by .55 cents

163
Q

Homeowners can typically deduct these 3 items from their annual income taxes?

A
  1. Mortgage Interest
  2. Property Taxes
  3. Pre-payment penalties (if paying off loan early)
164
Q

What is the CAPITOL GAIN TAX EXCLUSION amount when selling a home?

A

Single - $250,000
Married - $500,000

Can use this once every 2 years
You must have lived in the house 2 out of last 5 years

165
Q

In addition to the 3 main deductions for all properties, what else can Owners of INCOME PRODUCING PROPERTIES deduct?

A
  1. Operating Expenses

2. Depreciation of Improvements

166
Q

What is an IMPROVEMENT VALUE of a rental property?

A

On Income Generating Properties…

Total original cost

  • Land cost
  • Improvements since then
167
Q

What is the ADJUSTED COST BASIS?

A

Original Sale price + Improvements = ACB

168
Q

What is the ADJUSTED SALES PRICE?

A

Sale Price - Sale Expenses

169
Q

How do you calculate GAIN when selling?

A

Selling Price - Adjusted Cost Basis (Your Purchase Price +Improvements) = Gain

Take Total Gain and subtract Exclusions (Mortgage owed)

What’s left is what the Capitol Gain tax is based on

170
Q

What is a PROGRESSIVE INCOME TAX?

A

The more money you make the higher your rate is

171
Q

What is a REGRESSIVE TAX?

A

Ex. Sales Tax (everyone pays the same rate regardless of income)

172
Q

What is a 1031 EXCHANGE?

A

An exchange of properties where you defer the taxes to a later time when you sell it.

Income generating property
Commercial property.
Industrial property.
Farms or land.

173
Q

What is Foreign Investment in Real Property Tax Act (FIRPTA)?

A

To eliminate the problem of collecting delinquent taxes from foreigners…

The buyer is responsible for withholding 15% of the sales price if the seller is a foreigner and the home is priced over $300,000. If the money is not withheld, the buyer and broker are equally responsible and the broker could end up paying the entire unpaid taxes due.

174
Q

What is exempt from FIRPTA?

A

Residences under $300,000 in sale price

175
Q

Under what circumstances can a loss on the sale of a personal residence be deducted from income taxes?

A

Normally, under no circumstances. But if the property is converted to an income-producing rental, then a loss on the subsequent sale could be deducted.

176
Q

What are 3 groups of people who get Property Tax exemptions and how much is the deduction?

A

Homeowners - $7000

Veterans - $4000, up to $191,266 (depending on disability)

Seniors over 62 with a household income less than $25,000 - CA pays their taxes and puts a lien on it to be paid when they sell or die

177
Q

Can a loss on selling a property be deducted from income taxes?

A

Not on a personal residence, but yes on a rental property

178
Q

What is a tax BOOT?

A

When exchanging properties, Any cash or relief (higher valued property) one party receives in addition to the actual property. The person who receives the boot has a net gain and must pay taxes on that part

179
Q

How long must buyers and brokers keep the documentation on a foreign sale?

A

5 years

180
Q

What are 2 ways that Capitol Gains taxes can be deferred or reduced?

A

An Installment Sale (spreading taxes over years)

A 1031 Property Exchange

181
Q

What are the three important considerations for a good property investment?

A

Meets the investor’s OBJECTIVES.

Have the FINANCIAL ABILITY to handle the costs involved.

Must examine the ECONOMIC SOUNDNESS of the investment.

182
Q

How could refinancing be an investment benefit?

A

Free up funds to purchase another income property.

Proceeds from the refinancing are tax free.

Interest on the new loan for the second property is fully tax deductible.

183
Q

How is property management seen as a risk to investing?

A

If they don’t hire a professional property manager, there could be real problems keeping the investment profitable.

184
Q

What is EFFECTIVE GROSS INCOME of a rental property?

A

Potential Gross Income - Vacancy = Effective Gross Income

185
Q

What is NET OPERATING INCOME of a rental property?

A

Effective Gross Income (Potential Gross Income - Vacancies)

- Operating Expenses = NET OPERATING INCOME

186
Q

What are 4 characteristics to consider when purchasing a rental property?

A
  1. Location
  2. Population (increasing or decreasing?)
  3. Rental Trends
  4. Projected Demands
187
Q

How do life insurance companies get involved in the investment market?

A

Life insurance companies like to invest in large commercial projects such as shopping malls.

188
Q

How does a LIMITED PARTNERSHIP differ from a GENERAL PARTNERSHIP?

A

LIMITED: one general partner who has unlimited personal liability for the group’s debts and obligations, while the other partners are liable only up to the limits of their capital investment.

GENERAL: all partners have unlimited personal liability for the debts and obligations of the partnership.

189
Q

What is special about a REIT?

A

REIT’s profits are not taxed. In this way they act like mutual funds and distribute income as dividends to investors

190
Q

Which type of lender typically deals in interim financing?

A

Commercial Bank

191
Q

What are the 3 components of a BUSINESS OPPORTUNITY SALE?

A
  1. Real Property - Sale or Lease Transfer
  2. Personal Property - Inventory, Fixtures, Equipment
  3. Goodwill - Public will continue to come
192
Q

What is the Uniform Commercial Code (UCC)?

A

A body of law that standardizes a number of business practices such as Business Opportunity Sales

193
Q

What is the Institute of Real Estate Management (IREM)?

A

A membership organization for Individual Property Managers that certifies different types of Managers

194
Q

What is a CERTIFIED PROPERTY MANAGER (CPM)?

A

An IREM designation for individuals who meet a certain level of education and experience requirements.

195
Q

What is an ACCREDITED RESIDENTIAL MANAGER (ARM)?

A

An IREM designation for resident managers who have a lesser degree of training and on-site experience

196
Q

What is an ACCREDITED MANAGEMENT ORGANIZATION (AMO)?

A

An IREM designation for companies who meet certain IREM guidelines and employ at least one CPM

197
Q

What are the 3 types of PROPERTY MANAGERS?

A
  1. Property Manager - Usually a Broker who manages multiple properties and may work within a large firm
  2. Building Manager - Usually just one building and may work for a Property Manager
  3. Resident Manager - Lives on the Property and may work for the Property Manager
198
Q

Buildings & Mobile Home Parks must have an on-site resident Manager if they are how big?

A

Buildings - 16 units or more

Parks - 50 Mobile Homes or more

199
Q

What are reasons that a Property Manager could refuse to lease a property without violating Fair Housing Laws?

A

Previous Rent-related problems

  • Not paying or paying late
  • Damaging Property
  • Fighting with other Tenants
  • Poor Work History
200
Q

What type of lease has a RECAPTURE CLAUSE?

A

A Percentage Lease

Allows the landlord to terminate the lease if the tenant does not make the desired gross sales

201
Q

What are the main responsibilities of a PROPERTY MANAGER?

A
  • Renting Units
  • Inspecting Vacant Units
  • Hiring Staff

They may also do some Marketing and Advertising

202
Q

Which type of Lease has no time limit?

A

Estate at Will

203
Q

What year is the Americans With Disabilities Act?

A

1992

204
Q

What are 5 required SELLER’S DISCLOSURES?

A
  1. Real Estate Transfer Disclosure
  2. Seller’s affidavit of Non-Foreign status
  3. Water Heater
  4. Smoke Detector
  5. Lead Based Paint and Hazards
205
Q

What is the role of CREDIT UNIONS?

A

Mostly provide short-term installment and home improvement loans to their member depositors.

BUT, they are moving more into home loans.

206
Q

What are the UNIFORM PROCEDURES forms?

A

Standardized loan applications forms that most financiers use which are from Fannie Mae and Freddie Mac.

Makes it more streamlined when they sell the Mortgages in the secondary market

207
Q

What BORROWER INFO is needed on a loan application?

A 
Age
Education
Employment history
Monthly income and expenses
Assets
Debts
208
Q

What PROPERTY INFO is needed on a loan application?

A

Age
Year acquired
Original cost
Current loan balance

209
Q

What SUPPORTING DOCS are needed on a loan application?

A

Appraisal
Credit report
Verification of income and employment
Purchase Contract

210
Q

What is a SYNDICATE?

A

2 or more people who combine resources to purchase properties that could not be purchased by an individual alone.

211
Q

What is the INTANGIBLE ASSET of a Business Opportunity Sale?

A

GOODWILL

212
Q

Do you pay PERSONAL PROPERTY TAXES on a home?

A

NO. Real Estate is not Personal Property it is Real Property and you pay Real Estate Taxes

213
Q

Always remember to deduct what to figure out CAPITAL GAINS TAXES?

A

The Capital Gain Exclusion

250K single
500k married

214
Q

Explain the basics of a MORTGAGE?

A

The Borrower gives the lender a promisary note and an agreement called a mortgage to repay the loan

Then the Lender gives the funds over.

215
Q

What is the most important part of AIDA in an ad?

A

capturing ATTENTION (the others follow)

216
Q

The major objective of a PROPERTY MANAGE is to?

A

Maximize profits and minimize expenses for the Owner

217
Q

How often must a Broker RECONCILE Trust Accounts?

A

Monthly

218
Q

What is a GRI Certificate?

A

A Graduate Realtor Institute Certificate from NAR

A way to stand out

219
Q

What is the minimum amount of time that the IRS allows you to deduct the depreciation of improvements on rental properties?

A

27.5 years

220
Q

What is the “BASIS” used to calculate Federal Income Taxes once you sell a personal residence?

A

Purchase price + capital improvements = BASIS

221
Q

What is the MAXIMUM COMMISSION on a Second Mortgage?

A

5% if less than 2 years

10% if 2-3 years

15% if 3 or more years

222
Q

Is a TIME SHARE considered RECREATIONAL PROPERTY?

A

Yes.

Recreational Vehicles can be time shares too

223
Q

Who selects the Escrow Company in CA?

A

This is negotiable and both parties must agree, but usually the Buyer chooses and the Seller agrees to it.

224
Q

If the UCC is not followed in a Business Opportunity Sale, who might suffer the greatest?

A

Buyer

CA REAL ESTATE (4 decks)

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