Prep agent review videos Flashcards
What is ownership of land?
Holding title to it
What is the evidence of the transfer of title is the: ____
Deed
The seller executes a _____ to transfer _____ to real property and the ____________
1) deed
2) title
3) bundle of rights
The bundle of rights include:
Right of Enjoyment
Right of disposition
Right of possession
Right of control
Right of exclusion
When a home buyer purchases a property they can expect to have the ______ bundle of rights to their property
Whole
(Right of Enjoyment
Right of disposition
Right of possession
Right of control
Right of exclusion)
Who can the bundle of rights typically be broken up and distributed with?
1) Investment properties
2) Rental properties
What is the Bundle of Rights
A buyer who purchases a property gets a bundle of rights when the title is transferred, and these rights generally give the buyer the freedom to use property for legal use
The ________________ gives the title holder the right to participate in any lawful activities they find enjoyable on the property. For Example, they have the right to put their feet up on the couch and watch TV.
Right of Enjoyment
The ___________ protects the title holder’s right to transfer ownership, permanently or temporarily, to another party.
It Basically means you can sell, rent or will the property. You only get this right when the property is owned outright and money is not owed to another party, such as a lender.
Right of Disposition/Transfer
The _______________ simply states that the title holder is the legal owner of the property.
Right of possession
The _______________ means the owner can use the property in any manner that is legal. Note that when there is a homeowner’s association, the association can place additional restriction on uses, like patio decoration or pet ownership.
Right of control/use
The ________________ allows the owner to limit who may enter the property. However, easements may be in place which override this right, such as utility company’s right to access power lines.
Right of Exclusion
What is a license?
A official permission to Do, Use, or Own something
What does a license sometimes represent?
A permit
What is a real estate license?
Permits issues by state governments. Give licensees the legal authorization to represent the home buyer or seller in a real estate transaction.
Its a license to perform the act of soliciting real estate business.
Are licenses appurtenant or run with the land?
No they are a personal right. They are not a true interest in the land. They can come from a verbal agreement.
Can licenses be revoked at any time?
Yes
Is a license a privilege?
Yes, they are a privilate, give permission.
Is a license to use the land the same thing as an easement?
No - by definition: easements are a legitimate interest in land and are often irrevocable by the person whose land is being used
Licenses are a _____ right and are ______ revocable
personal, easily
When are licenses irrevocable?
In some situations where a license holder has spent significant amount to make improvements on the land with the approval of the grantor
Does anyone have the title to water?
No one has title to water. Property owners who land adjoins by water have reasonable rights to use a body of water
What are Riparian RIVER rights?
WATER MOVING IN A DIRECTION - Allows a property owner to use water from a water course such as a river, stream or creak
What are Littorial LAKE rights
WATER THAT DOES NOT HAVE A DIRECTION - Concerning properties near an ocean, sea or lake. Usually concerned with the use and enjoyment of the shore.
Correlative use
Allows a property owner the use of underground water or water from a river for irrigation purposes.
What is the Doctrine of Prior appropriation?
Use in states where water is scare. Under this doctrine of prior appropriate - it determine the use of water. Use of water is determined by the state, not the by the property adjacent to the body of water
What is Accretion?
It’s when soil is deposited by the natural action of water and may increase the size of the property
“Mother nature’s gift to the land owner”
What is Reliction?
Gradual change of water line on a real property which gives the owner more dry land
What is Erosion?
The wearing away of Land and soil by the action of wind, water, currents or ice
What is Avulsion?
“Bad news” The sudden tearing away of land by violent actions of natural causes such as a river or other water course
Ex: dam breaking
Natures way of say “screw you” to the land owner
“real = _____”
Immovable
” peronsal = _______”
movable
What is chattel
personal property, Moooo vable (cow)
What is a fixture?
Personal property that has become real property because of its associate with the property.
Example chandelier - starts off as movable personal property but once it becomes installed and immovable (real)P
What are the 5 ways to tell if an item qualifies as a fixture?
- M ethod - method of attachment. Is it attached to the walls, floor, celling with nails, screws, glue, cemment ?
- A daptability - if a fixture has become an integral part of the home then it has become part of the real property. Ex. pool cover is real property because that specific cover goes for that specific pool
- R elationship of the parties
- I ntention of the party when an item was attached. If an item was installed with the intention of making it a permeant attachment, like a built in bookcase, the item is a fixture
- A greemet - most purchase contract includes which item is included in the sale. Any agreement between the two parties overrides all other factors when determining if something is a fixture.
What are trade fixtures
Type of fixture that is used for a trade of business that is considered personal property
items that are Often immovable based on their attachment to real property. (unlike ordinary fixtures that become part of the real property) Trade fixtures go with the person or entity that owns the business where the fixtures is installed because they are considered PERSONAL PROPERTY
Ex: dentist chair goes with the dentist
What is an appurtenance?
Something that is installed in or sits on a property. It is something that is considered part of the property. It is sold with the property and is passed on the new owners.
“Runs with the land”
Real property is:
immovable or fixed property
What is an Encroachment?
The physical intrusion of a structure or improvement on the land of another
Where does the property extend?
Up to the sky therefore a tree hanging over the property line is a form of encroachment
What are examples of an encroachment?
A fence or driveway over the property line, tree hanging over your property
How can encroachments be found?
Through survey
When an encroachment occurs what can you sue for?
Truss pass. Encroachment is a form of trust pass
What is an Easement?
A right held by one person to use the land of another person for a specified purpose - such as access to a property
What is an appurtenant Easement?
Involves two properties owned by two different owners. Involves dominant and servient tenants
What is a Dominant tenant?
In control
What is a Servient tenant?
serving a purpose to a dominant property
What is ingress
to enter
What is engress
to exit
Does an Appurtenant easement continue after the sale of a property?
yes. An appurtenant easement attaches itself to a piece of property and is said to run with the land. Whenever a new property is sold, the new owner has the same right to use the property as the previous owner did.
What is an easement in gross?
Has no dominent tenent because the people crossing the property because they are not used it to get to another property
Under each states _______________ law, easements must be ________________ to be valid
STATUE OF FRAUDS LAW, in writing
What is an easement in gross?
Has no dominant tenant because the people crossing the property because they are not used it to get to another property
What are common examples of easement in gross?
Utility company. Ex: the electric company may want to connect the power lines between two pools. If they want to do this, they will be granted an easement in gross.
What is an easement by necessity created by?
by a court
When is an easement by necessity issued?
When someone has to cross over someone else’s land to gain access to their property
What is an example of an easement by necessity?
For example, let’s say property owner Anne sells a back portion of her land to buyer Dave, but neglects to give Dave an easement for access. If Anne refuses to give Dave the easement, Dave can go to court and have an easement by necessity granted. Easements by necessity are also considered appurtenant easements that will now run with the land.
What is an example of an easement by prescription?
Here’s an example to explain how easements by prescription work:
Every night, when your neighbor Joe comes home, he drives his car across a corner of your property. You see him but never stop him, and he does it for a long time. Eventually, you get tired of him driving across your property and tell him to stop, but he says “No way, I have an easement by prescription!” Joe takes the matter to court and the court agrees with him. The fact that Joe’s actions persisted over a long period of time are a big factor in the court granting him the easement. And now, Joe now has a permanent easement by prescription across your property.
What is an easement by prescription?
A Prescriptive Easement is defined as an Easement created from an open, adverse, and continuous use, hostile to the true owners title over a statutory period.
It is a lot like taking land from someone else. Acquired not by paying money but rather by acquired without permission.
Easements by prescription are the result of a _______, so a ________court order is required for them to be granted.
lawsuit, court order
What is “open and notorious”,
which is a legal term meaning “not hidden”.
What is “hostile”
not in your best interest.
How can easements be terminated?
Agreement/Release - dominant tenement agrees to give up the easement to the servient
Merging - on of the tenants buys the others
Abandonment - stop crossing the property. Then it no longer exists
Need no longer exists - if you can prove that it’s no longer necessary than it can be terminated
How is a prescriptive easement aquired?
It is aquired without permission
What is “adverse” use
must be done without permission from the owner.
An easement in gross involves _____ property
only one
Is an easement in gross sold with the land?
No. the easement in gross is for your own personal use, and may not be a right which would be included with your land should you choose to sell your land. An easement in gross does not transfer with the property when it is sold.
An easement by necessity is created by the ______
Courts
In many ways an easement by necessity is a type of _______ easement
implied
When will the courts create an easement by necessity?
When the easement is necessary to some piece of property
When are easements by necessity most often created?
When a certain piece of land is completely land locked. and the only way to get to the land is by crossing another neighbors property, an easement by necessity is created to provide access over the neighbors property.
However, if at some point in the future other options arise and the necessity no longer exists, neither does the easement.
An easement by necessity can and will only last for as long as it is necessary to achieve its results.
A fee simple absolute estate is ____
the maximum degree of ownership one can have
What limitations does fee simple absolute estate have?
The government retains the rights to the property through the 4 government powers: PETE
What are the 4 government powers?
PETE
P - police power
E - eminent domain
T - Taxation
E - escheat
What is police power?
Police power is the states inherent right to regulate an individuals conduct or property to protect the health, safety, welfare and morals of the community.
What are common examples of police power as it relates to real estate?
Zoning, building codes, rent control
What is not designed to take property away from you, but is there to set standards for how the property can be used?
Police power
Is compensation payed to property owners affected by zoning, building codes, or rent control?
No - compensation is not payed to property owners affected by police power. zoning, building code and rent control are police power.
What is eminent domain?
Under eminent domain the government can appropriate property if they feel that it is for the greater good of the community?
What is the owner of eminent domain entitle to?
Fair compensation usually defined as FAIR MARKET VALUE of the property
What process is the compensation of eminent domain paid through?
Condemnation
What can a property owner file for when they feel like they didnt get properly compensated during eminent domain?
Inverse condemnation
What allows the property owner to file a claim against the government to recover just compensation for the property that was taken
Inverse condemnation
What is taxation
Property taxes are a charge on real estate used to pay for services provided by the government
Unpaid property taxes are the result of ________ lien
Specific lien
What is the difference between a specific lien and general lien in regards to taxes
Unpaid property taxes result in specific lien which means you can loose your property for not paying taxes.
However general lien - where items above and beyond your property can be seized to pay your debts
What is escheat?
occurs When a property reverts to state ownership after an individual dies without a will and without an heir to the property.
Is an escheat process revocable?
yes - ownership of the estate or property reverts to any rightful heirs that might appear.
What does escheat ensure?
It ensures a property always has ownership. If no one else has a claim on the property, the government steps in to manage it
What is the definition of eminent domain?
the inherent power of the state to seize a citizens private property or a citizens rights in the property in exchange for monetary compensation
What are the most common uses of the property taken by government domain?
Public utilities, highways and railroads
What is “The formal act of the exercise of the power of eminent domain to transfer title to the property from its private owner to the government”?
Condemnation
Does condemnation have to be ownership of the entire property?
No , it could even be smaller interest in it like and easement
When is a property condemned?
When a building has been so dilapidated that it is legally unfit. does not deprived owner of title but forces owner to rectify property
What is a situation in which the government takes private property but fails to pay the just compensation
Inverse condemnation
Suing the government is essentially ______ condemnation
Inverse condemnation
What is zoning?
Zoning is the regulation of private land use and development by the local government
Are there such thing as FEDERAL zoning laws?
No
Does zoning increase the marketability of the property?
Yes
What plan is zoning a part of?
Master plan
What is the comprehensive plan to guide the long-term physical development of a particular area?
Master plan
What is zoning for land use typically divided into?
Residential
Commercial
Agricultural
Industrial
Special use properties
What are special purpose properties/special use properties
Properties that are a benefit to the public like Schools, libraries, police stations
What is R3
Residential multi-family
What are a set of laws that control:
- height of buildings
- setback
- density (bulk)
- floor area ratios
- buffers
- buffer zones
- variances
Zoning ordinances
What is the distance from the edge of the road or sidewalk to the structure that was build. It can also be from the center of the road
Set back
What is usually associated with subdivisions, restricting the number of the houses per acre that may be build within that subdivision
Density
What is the ratio of the square footage to the land area. It can be used in zoning to limit the amount of construction in a certain area.
Floor area ratio
What is found between two lots, such as a fence, a wall or a row of trees
buffer
What is a space of land between two districts such as a park, playground or high way
Buffer zone
What is the change in the zoning to permit less intensive developments that are currently permitted
Down zoning
What is a zone going from commercial to residential an example of?
Down zoning
What is an exception that is granted from the zoning rules?
Variance
What is an exception to the rule?
Variance
What are granted lot by lot and granted on individual basis?
Variance
What is a free hold estate?
An estate in which you have exclusive rights to enjoy the possession of a property for an undefined length of time
What are the types of FEE hold estates?
- Fee simple absolute (FEE)
- Fee simple defeasible
- Life estate
What is a Fee simple/Fee simple absolute?
An estate in land. Ownership can not be defeated by the previous owner or the previous owner’s heirs.
What is a less than free hold estate?
An estate in which you have exclusive rights to enjoy the possession of a property for a fixed or defined period
What is a fee simple absolute not free from?
encumbrances
What is the greatest interest in a parcel of land that one can possible own?
Fee simple absolute
What can sometimes be referred to as “FEE”?
Fee simple absolute
What is the most common way real estate is owned in common law countries?
Fee simple absolute
What is the ordinarily the most complete ownership interest that can be had in real property, short of absolute title?
Fee simple absolute
What is fee simple absolute ownership limited by?
PETE, certain encumbrances, condition in the dead
When is a fee simple defeasible created?
created when a grantor creates a CONDITION on a fee simple estate.
Upon the occurrence of a specified event, the state may be lost
What are the two type of fee simple defeasiable estates?
- Fee simple determinable
- Fee simple condition subsequent
What is a fee simple determinable?
If a grantor uses conditional language like “To adam, as long as the land is used as a park”
If the land is used for something other than a park, the estate will automatically terminate and REVERT back to the grantor or the grantors estate.
What is a fee simple condition subsequent?
If there is a condition such as “no alcohol to be served” then it would be a condition subsequent because you could loose the title if you serve alcohol
What is a life estate?
A life estate is an interest in real property which is held for the duration of life for a designated person.
In legal terms - an estate in real property that ends at death. When the estate of the real property either reverts to the original owner or passes to another person.
What is the life estate limited by?
Limited by the life of the person holding it or the life of another person
What is a Life tenant in regards to a life estate?
A life tenant receives the property and is responsible for the maintenance of the property and paying taxes.
If a life tenant allows a property to ____ it would be committing waste
deteriorate. A life tenant can not commit waste
what can the life tenant of the life estate not do? What can they do?
CAN NOT
1. Can not commit waste (which means they can not leave a property to deteriorate) in a way that prevents the property from passing to the remainder once their ownership is terminated
2. Can not leave the property to anyone in their will
CAN
3. They may sell, mortgage or lease a property for the duration of the estate, thus all contracts would be terminated by the life tenant. For example: if the life tenant dies, the property goes back to the individual who created the life estate
What is the process called where the life tenant (holder of the life estate) dies and the property goes by to the individual who created the life estate?
Estate in reversion
If he individual who created the life estate dies, will it go to the life tenant?
No, the life tenant only has the property for as long as the person who created the life estate is a live.
What happens to the estate when the holder of the life estate dies?
It reverts to the estate in reversion
What happens when the estate in reversion dies?
It goes to the remainder
One common example of life estate:
To provide housing for someone until they die
- When a child transfers a property to the parent for the rest of that parents life. After the parent dies, ownership of the property reverts back to that specific child. In this situation, the child owns a “reversionary right” to this property.
- If a mother creates a life estate dead to give her younger husband a life estate in the property, assuring that he will always have a place to live. She can ensure in the deed that the remainderment goes to the son after the husband dies. Son will be known as the remaindermaint for that life estate.
What is a less than free hold estate?
An estate held by one who rents or leases property
What are the classifications of a less-than-freehold estate?
- ) Estate for years
- ) Periodic tenancy
- ) Estate at will
- ) Estate at sufferance
What is a lease hold interest in land for a FIXED PERIOD OF TIME?
Estate for years. It has a defined beginning and end date. No termination Notice is needed because the end date is established at the beginning
What is another term for “a tenancy for years”?
Estate for years
What is a summer rental an example of?
Estate for years. It has a defined beginning and end date. No termination Notice is needed because the end date is established at the beginning of the rental
Is a termination notice needed for estate for years?
No. No termination Notice is needed because the end date is established at the beginning of the rental
What tenancy is not bound to a lease for a fixed period?
Periodic tenancy
month-to-month, week-to-week and year-to year are an example of what tenancy?
Periodic tenancy
Does proper notice have to be given for periodic tenancy?
Yes - so landlord has time to find someone new
What estate gives the leasee the right to possession until the estate is terminated by either party
Estate at will
Which estate has a term that is indefinite?
Estate at will - basically it can ended at any time
What estate arises when a tenant wrongfully hold over after the expiration of his term?
Estate at sufference
Is Estate at sufference a form of trespass?
No - at one point the tenant had the right to be on the property.
When a estate at sufference is created, the landlord would need to do what?
Legally Evict the tenant
What are the two general ways you can own property:
1) by yourself
2) with someone else or others
What is ownership by yourself of property
Ownership in severalty
What is Ownership with someone else
Concurrent estate
What type of estate is joint tenancy?
Concurrent estate
What type of estate is tenancy in common?
Concurrent estate
What tenancy occurs where tenants:
1) have different percentages of interest (tenant A & B each have 25% while Tenant C has 50%)
2) occur tenancy at different times (tenant A&B obtained in 2009 while tenant C obtained later in 2018)
3) Each tenant can receive their ownership interests through separate convyences (tenant A & B can be on same title by tenat C has own distinct title)
4) ONLY THING EACH TENANT SHARES IS POSSESSION ( share unity of possession)
+ NO right of survivorship
Tenancy in Common
What tenancy occurs where tenants:
Each tenant much obtain
1) equal shares of the property
2) with the same document
3) at the same time
4 unities: TTIP
T- time
T - title
I - interest
P - possession
+ right of survivorship
TTIP ROS
Joint tenenacy
What happens if any of the 4 unities of TTIP are broken
Tenancy Reverts from JOINT TENANCY to TENANCY IN COMMON
What does TTIP stand for?
Time, Title, Interest, possession
What are the main similarities of Joint tenants & tenants in common
When two or more people own a property of either joint tenants or tenants in common - each individual owns a share of the entire property and has the right to possess it
What is the biggest different for joint tenants and tenants in common?
The right of survivorship
What happens when a owners of Joint tenancy dies? Do they have a right of survivorship
1) The interest of the deceased owner automatically transfers to the surviving owner or owners
2) Yes - joint tenancies have the right of survivorship
Example of Joint tenancy right of survivorship:
If Carol, Vivian and stephen own a property with joint tenancy, what happens if vivian dies?
Stephen and carol each obtain one half of vivians share of the property
What happens when a owners of tenants in common dies? Do they have a right of survivorship?
1) Since there is no right of survivorship - generally a deceased common in interest belongs to their estate -( unless they have a will that include the other tenants)
2) No
Example of tenancy in common right of survivorship:
If Carol, Vivian and stephen own a property with joint tenancy, what happens if vivian dies?
Vivian’s heirs get vivians share of the property, not the surviving owners
If you own property with a corporation, what tenancy would you take it as?
Tenant in common, NOT JOINT TENANT
This is because corporations don’t die, the dissolve.
Tenants in common DO NOT have right of suvivorship so this applies to cooporations
In a lease, who is the lessor and who is the lessee
Landlord - lessor
Tenant - lessee
OR - gives
EE - receives
Can oral leases can be binding?
Yes however generally leases are written
What do leases provide?
They give Exclusive right to the Lessee
and reversionary right to the lessor
What is it called when the owner of a lease has the right to regain possession of the property after the lease has expired?
A reversionary right
What must a lease contain?
Must contain everything that’s in a lawful contract:
M - mutual agreement
C - consideration
C - capable partes
L - lawful object
What does the tenant in a lease have right of?
Quiet enjoyment and possession of property: Assurance that their possession will not be disturbed by anybody with superior title
The lease is a ______ contract:
Bilateral contract - which means a promise for a promise
“I promise to let you live in the property if you promise to pay”
Does death usually terminate the lease?
NO - death doesn’t usually terminate the lease:
The responsibilities as state in the agreement could pass on to the heirs of the deceased
Are leases personal property?
Yes - Leases are personal property as they do not always run with the land
This means that when the property is sold, the lease does not always transfer with it.
It is a contract with an individual person. lease is a piece of paper. Piece of paper is moveable. Moveable is personal property
Can a tenant assign or sublease a property
Yes - UNLESS the lease forbids it. The tenant has the right to assign or sublease the property
In a lease: What is it called when an tenant transfers contract rights?
Assignment
example: if you assign your lease to bob, you can move on with your life and bob is not responsible to the landlord
In a lease: What is it called when a tenant rents the property they lease to another person while still maintaining their responsibity to the landlord under their rental agreement
Sublet
example: if you sublet your lease to bob, and the landlord does not get paid, you are responsible regardless of what bob does or does not do
What is a term used in the law of real property to describe a circumstance in which a landlord either does something or fails to do something that he has a legal duty to provide.
Constructive eviction
ex: if landlord does not provide water to the tenant as a tenant can not live without water thus they must vacate
What does HOA stand for?
Home owners association
The HOA will have its own government documents in the form of _________ and _____________-
bylaws & CC&Rs
What does CC&Rs stand for?
Covenants, Conditions, and Restrictions
What is the Declaration of CC&Rs exactly?
The declaration of the CC&R is the legal document that lays out the guidelines of the planned community
Where are the CC&Rs recorded? Are they legally binding?
They are recorded in the county records in the county where the property is located and are legally binding.
CC&Rs are the rules of ______
your neighborhood
The CC&Rs govern what?
What you can and cannot or must do with respect to your home
What is the goal of the CC&Rs?
to protect, preserve, and enhance property values in the community. Most of the time, the rules make sense and are easy to accept.
It is typical for the ______to regulate things such as:
- basketball hoops
-clotheslines
-fences
-TV antennas/satellite dishes
-garbage cans
-External architecture
and much more..
CC&Rs
How are changes made to the CC&R?
Because this record is kept on file with the sate, it can be difficult to amend and requires a vote by the HOA membership to make any changes
What happens if you don’t abide by the CC&Rs?
If you don’t abide by the CC&Rs, the HOA may impose penalties for any violations.
If you violate the CC&Rs the penalties can include:
-fines
-forced compliance
-or the HOA can even file a lawsuit
If _______ cover the “what of the HOA, the ________ cover the “how”. The HOA, is which is typically set up as a ______ is an organization set up to maintain a private planned community
CC&Rs, bylaws, nonpropfit corporation
What governs how the HOA operates and contain the information needed to run the HOA business
bylaws
What covers
- Frequency of HOA board elections
-Process for nominating and electing new board members
-Membership voting rights
-Number of members that serve at one time
-Length of board member service terms
-Meeting frequency
-How the meetings are conducted
-The duties of the various offices of the board of directors and much more
the bylaws of HOA
are bylaws difficult to change?
Yes, like CC&Rs, bylaws are difficult to change. The require a vote by the membership to amend
Does passing your real estate exam mean you are a realtor?
No - Passing your exam makes it legal for you to find a property for a buyer but it DOESN’T mean you are a realtor.
What is a real estate agent in most states?
A licensed real estate sales person - that works under a licensed real estate broker
What is the name of a real estate professional who is also a member of the NAR? What doe NAR stand for?
Realtor
NAR stands for National Association of Realtors
What do you become a member of NAR
- Pay membership dues
- Abide by the associations ethics and standards.
What do Realtors promise?
Bound by the code of ethics, Realtors promise to operate by 1. Transparency, 2. Honesty, 3. Integrity
Expected to conduct their business with the best interest of their clients in minds.
Without exaggeration or misrepresentation of any time
They should be experts in their fields
Realtors can be _____ or ______
Agents or brokers
Which licenses allows a person to represent a buyer or sell in a real estate transaction in exchange for compensation?
- Salesperson license
- Sales associate license
- Brokers license
Agents must work under who?
A licensed broker who is legally accountable
______ are licensed to facilitate real estate transactions. They work under a license broker who is legally responsible.
Real Estate agents
_______ have more stringent license requirements and have the option to work alone or have other agents work under them
Brokers
_______ Are licensees that are a part of the NAR, a trade organization
Realtors
A (an) ______ is a person who has been legally empowered to act on behalf of another person or entity
Agent
Is an agent the same as a POA
No, having an agent is not the same as a power of attorney, where one person has the power to act as another person for that one act
A client is also known as a ______
principle
What does the law of agency define?
The rights, duties and responsibilities of all legal parties
Once an agency relationship is created, then what must the agent follow?
The agent must follow fundamental responsibilities
What are the fundamental responsibilities of an agent, once an agency relationship is created?
OLD CAR
O - obedience
L - Loyalty
D - disclosure
C - confidentiality
A - accounting
R - reasonable care
If a seller refuses to take an offer for a reason that violates fair housing lows, does obedience apply in regards to the agency relationship?
NO - the agent should not and legally can not follow those instructions
When it comes to the real estate transaction, the client must put the clients BEST INTEREST above anyone elses, including their own. What is this known as?
Do what is best for the client not the commission check.
Loyalty
If an agent gives preference to an offer due to a bonus, what is this in violation of?
Loyalty, aspect of agency relationship
If an agent is getting a bonus for selling a certain property, does he or she have to tell the client? what is this referred to as?
Yes, they must disclose it to the client before writing up a purchase offer. This is under Loyalty, which is an aspect of agency relationship.
The agent must _______ any information they receive that can benefit the clients position in negotiation?
disclose
If an agent is representing a buyer and the agent knows the seller has a pending offer on another house, what should the agent do?
It is the agents duty to disclose that information to the client
What is something that might cause the buyer to change their actions regarding the purchase?
Material facts
Must agents disclose any material facts?
Yes
Should agent disclose information learned about their clients? what is this known as?
No, confidentiality
Should the agent disclose a client/principles business information, financial situation, personal affairs and or other reasons for doing the transaction to the other party?
No, confidentiality
How long does the fiduciary duty of confidentiality last to the client?
Forever
Does the fiduciary duty of confidentialty end after the close of the business transation?
No - the fiduciary duty of confidentiality lasts forever
If an agent knows the client lost their job and is selling because of financial situation, can they disclose to the other party after the transaction is over? what is this called?
No, confidentiality lasts forever - unless a court instructs you to disclose certain items they seem is necessary
What is it called when agents are responsible for accurate money and documentation of each transaction, which includes accurate RECORD KEEPING
accounting
What is it called when agents are expected to have a certain level of knowledge and be able to guide and advise clients through a process without harm. Licensed real estate professionals are legally held to a standard that can be hard to pin down.
Reasonable Care
As a real estate agent clients will expect you to knowledgeable advise them on Prices, Inspections, negotiations, repairs and many other aspects of the transactions - what is associated with?
Reasonable Care
IF questions comes up by a client, that the agent does not know, what is expected of the agent?
Expectations to advise them on how to obtain the information they seek (Reasonable care)
Should an agent offer advise or services that they are not qualified to clients?
No - advise or services that the agents are not qualified for should not be offered just to please the clients (Reasonable care) “stay in your lane”
If an agent has a hole in the patio, should the agent offer advise on what causes patio holes and how to replace the patio?
No - the real estate agent rather advise the client to listen to a certified inspector (reasonable care)
A ______ duty legally obligates one person to act solely in the interest in another person
Fiduciary (verb)
What is the name of the person who knowingly accepts the obligation of one person to act solely in the interest in another person
A fiduciary (noun)
A fiduciary agrees to always but whose best interests first?
Client’s
What is the name of an interested party who might be dealing with an agent but is not being represented by the agent
Customer
Is their a fiduciary duty by the agent owed to the customer?
No
A customer can expect _______ dealing from an agent
Honest and fair dealing
What is the name of someone who has and agency relationship with an agent?
client/principle
Is their a fiduciary duty by the agent owed to the client?
yes
Is their a fiduciary duty by the agent owed to the principle?
yes
What does it mean with a fiduciary duty is owed to a client or principle?
This means that the agent is expected to exercise discretion when acting on your behalf and they must adhered to specific responsibilities and standards in acting in good faith and loyalty.
What is the term for when the buyer and seller are represented by the same agent? do people prefer this? why or why not?
dual agency
Most people don’t prefer this because there is a natural conflict of interest. The agent is trying to be fair to both side. Because they have to remain neutral they are not effectively working on behalf of either party
What type of agents are hired to perform one specific duty for the client
Special agent
What is the standard agency relationship for a real estate agent and client
special agent -
What agent’s authority is limited to one specific task
special agent
What one act is a real estate agent hired for?
Finding a buyer for the listed property. once the act is complete, the agency relationship ends
What type of agent can perform any and all act associated with principal’s ongoing business the agent has been appointed to act in.
General agent
What agency relationship is continuous and ongoing.
General agent
What type of agent is a property manager
General agent
When does a general agency relationship end
It ends when the contract ends or by mutual agreement
What agency relationships have full authority to act on behalf of a principle?
Universal
Many times a Universal agent have who to act on their principal’s behalf?
A Power of Attorney
Many time universal agents can act like they are the ______ by doing what?
principle, sign legal documents or purchase or sale property for them
What agency is created when the licensee and the principle express their intentions either oral or in writing to enter into an agency relationship
Express agency/ Express agreement
Is an ORAL expressed agreement valid?
The validity of an oral agreement in establishing an agency relationship varies from state to state. It may also be possible for an oral agreement to establish an agency relationship, but not enforceable by the licensee when trying to collect a fee.
What is the typically written agreement between the agent and client?
Listing agreement or buyers agency agreement
What agreement is the most appropriate and legally safe way to create an agency relationship.
written agreement
What agency establishes an agency relationship through the actions of the two parties.
implied agency
In what agency occurs when nothing formal has been said or written down, but the real estate licensee and the principle act as if they have an agency relationship
implied agency
This is an example of which agency?:
Susan is selling her home by herself and puts up a for-sale sign on the lawn. You drive by, see the sign, and stop in. You identify yourself as a real estate agent and ask some questions about the house. Susan tells you she doesn’t want to list the house for sale with any brokerage, but she does tell you to bring any possible buyers around.
The next day you bring the Bauers, who really like the house and want to make an offer. You inform Susan and begin negotiating a deal. If this situation were to end with you filing a lawsuit for the commission, ultimately it would be up to a court to decide.
implied agency
What agency happens when a person makes a representation to a third party, whether by words or conduct, that another person is their agent- and subsequently the third party deals with that person as an agent. The original person will not be permitted to deny the existence of the agency if to do so would cause damage to that third party. And by damage we mean financial loss.
agency by estoppel
This is an example of which agency?:
Stephen is Oscar’s agent. Oscar terminates the agency relationship but, unbeknownst to him, Stephen continues to transact with third parties on his behalf. If Oscar fails to notify any third parties of Stephen’s termination, Oscar may still be bound to any agreement Stephen enters into.
agency by estoppel
This is an example of which agency?:
Say you’re the owner of a building and you tell your agent to show an apartment to a possible tenant. The agent goes ahead and negotiates a lease even though you didn’t give the agent any direct authority to do so. The tenant assumes the agent has the authority, and an _______ has been created.
agency by estoppel
What agency occurs when a principal approves and adopts, an act which has already been done in his name and on his behalf by another person (like a real estate licensee) who, in fact, had no actual authority (whether express or implied) to act on behalf of the principal.
Ratification
What agency creates an agency relationship between the principal and the agent for that one act that was ratified by the principal- not for any past or future action
Ratification
What are the main types of agency
1) Express agency/ Express agreement
2) implied agency
3) agency by estoppel
4) Ratification
5) Agency by necessity
6) Agency Coupled with an Interest
What agency arises when one party makes a decision on behalf of another person who is unable to do so. The decision must be essential in nature, and it must be in the principal’s best interests when making the decision.
Agency by necessity
which agency arises it is practically impossible for the agent to communicate with the principal
Agency by necessity
What is an agency coupled with an interest is a situation in which an agent has some kind of interest in the property that’s being sold.
Agency Coupled with an Interest
This is an example of which agency?:
Suppose a part-time broker is also an architect. The broker/architect agrees to design some houses for a builder, who’s giving the broker/architect the listings for the sale of the finished houses. In essence, the broker/architect has now made an investment in the project, so the builder can not cancel the agency agreement.
Agency Coupled with an Interest
What agency occurs when the buyer and the seller are both represented by the same real estate broker.
Dual agency
What agency comes about when potential buyers don’t have an agent, so they contact a seller’s real estate agent directly when they are interested in a property. They ask the seller’s agent to submit an offer on their behalf.
Dual agency
Where do problems arise in dual agencies?
A potential conflict of interest. Can be loyal to one. You are a neutral party.
Agency relationships usually involve a fiduciary duty. This means the agent must have a sense of loyalty to their client. If the agent is representing both sides on the same transaction, who gets their loyalty? This potential conflict of interest is why dual agency is frowned upon in some areas and is straight-up not allowed in others.
What are the restrictions for dual agency to protect against conflict of interest:
1) The agency must inform both buyer and seller of the dual agency in writing
2) The agent is required to treat both buyer and seller with complete honesty
3) The agent must provide full disclosure regarding the property and it’s material condition
4) Agent CAN NOT reveal confidential or personal information of either party involved
5) The agent has to look out for both parties interests
6) When it’s time to make an offer - the real estate agent can not advise either the price to offer or the price to accept
7) FIDUCIARY DUTY OF LOYALTY IS NOW GONE. They are not allow to advance one parties interest over another. The agent must stay in neutral
What agency is created when a buyer and seller each have their own agent but each agent is under the same broker?
dual agency
Can a dual agency occur when there are two agents involved?
yes, If one agent from the brokerage has a home listed and another agent from that same brokerage has a buyer-brokerage agreement with someone who wants to buy the listed property, dual agency occurs.
Who is a person appointed to act for another in business or legal matters?
Attorney
Is a power of attorney always a layer?
No
What is a Legal document that authorizes someone to act for you?
Power of attorney
When you grant someone the power of attorney, that act as the:
Attorney in Fact
Who can you authorize to:
signing checks and tax returns, entering into contracts, buying or selling real estate, depositing or withdrawing funds, running a business, or anything else you do for yourself.
Attorney in fact, by giving them the power of attorney
What is the right to keep possession of a property belonging to another person until a debt owed by that person is discharged
Lien
Are liens attached the property or the owner?
Property
When you take on a property, you want to make sure you have appropriate ______ removed before transferring title
Liens
What are all of the classifications of liens?
1) General or specific
2) Voluntary or involuntary
3) Statutory or equitable
What type of lien is a lien on property both real and personal of the debtor?
General Liens
What type of lien is judgement lien
general lien, involuntary lien
What type of lien is corporation lien
general lien
What type of lien is franchise tax lien
general lien
What type of lien is inheritance tax lien
general lien
What type of lien is income tax lien
general lien
What type of lien is debts of a deceased person lien
general lien
what is a lien against one property?
specific lien
What type of lien is mechanics lien
specific lien, involuntary lien
What type of lien is trust deed?
specific lien, voluntary lien
What type of lien is mortgage?
specific lien, voluntary lien
What type of lien is property tax assessments
specific lien
What is a lien placed on the property with the consent of the owner
voluntary lien
What is a lien placed on the property without the consent of the owner
involuntary lien
What is the name of the courts final decision on the right of an obligator to pay the parties involved. Once this is filed, it created a general lien against all of the property of the defendent
Judgement lien
This is filed for the nonpayment of labor of materials that were used to improve the property
Mechanics lien
Can mechanics lien impair your ability to get a loan on the property?
Yes - mechanics liens take priority, so if money comes back mechanics lien will be paid off before the lender is paid off in the event of forclosure
What is the lien placed on the property by law?
Statutory lien
What is the lien placed on the property by written contract or by what is fair and equitable?
Equitable lien
What does the borrower have to sign, which serves as a “I owe you” before the lender gives the borrower the money?
Promissory Note
What note states the terms of the loan such as - the rate of interest and the number of years the borrower has to pay back the loan.
Promissory Note
What is evidence of the debt?
Promissory Note
What security does the lender have once they give the money to the borrower?
The security is the collateral, which is the property the borrower uses to buy with the funds
What does mortgage actually mean?
Pledge
Mortgagor gives what?
gives the pledge to the lender
Is the Mortgagor the borrower or the lender?
Borrower
What is the clause that requires that a loan (mortgage) to be paid off when the property is sold
Due on sale
What two categories do states fall under regarding securing a loan made for the purchase of real property:
1) Title Theory
2) Lien Theory
What is the real property that is pledged to the lending institution, which has a lien on the real property
Lien Theory
What is it called when the borrower conveys legal title to a trustee. The borrower is the trustor. The bank is the beneficiary
Title Theory
What is a loan that covers two or more pieces of real estate?
Blanket mortgage
What loan allows one of the properties to be sold before the entire mortgage loan is paid off
Blanket mortgage
Why are blanket mortgages helpful for developers?
consider a situation where a developer is building ten homes. A standard mortgage would require the developer to pay off the entire mortgage in order to sell one home. Or the developer could take out 10 individual loans that need to be separately managed, but could be paid off as each home is sold.
With a blanket mortgage, the developer takes out one loan to cover all 10 developments. When one-tenth of the mortgage is paid off, a “release clause” is triggered allowing one of the homes to be released from the lien so it can be sold. One thing to note is that, depending on the terms of the blanket mortgage, the loan may need to be refinanced as separate properties are sold.
How many sets of fees does a blanket mortgage require?
one set of fees rather than seperate fees for each property
What does the individual save on in an blanket mortgage?
Saves on fees of applying for and closing on multiple loans
Who typically uses blanket mortgages?
1) developers
2) Businesses with multiple locations they wish to own and operate
3) Real estate developers who are investing in commercial or residential property such as apartment buildings or multi family homes
4) house flippers who buy multiple properties to flip
What is it called when you buy a property with the intention of selling it quickly to turn a profit
houseflipping
What is a gradual reduction of a loan debt through periodic installment payments of principal and interest
Amortization
What is the amount that is loaned to you?
Priniciple
What is the amount you are paying for the right to borrow that money (rent on money)
Interest
Where is the mortgage payment applied with each payment?
A portion of the payment is applied toward reducing the principle, and another portion of the payment is applied toward paying the interest on the loan
What shows the ratio of principle and interest, and demonstrates how the a loan debt decreases over time
Amortization table
What is a loan called that has been completely paid off at the end of the loan term?
Fully Amortized
This is when you keep making your payments on time but the debt keeps increasing
Negative Amortization
What is a loan where you are just paying the interest?
Straight note
What is a type of secondary financing for the type of purchase of real property
A wraparound mortgage aka WRAP
In what financing does a junior mortgage “wrap around” an existing mortgage?
A wraparound mortgage aka WRAP
What is often referred to as a “second” mortgage? But it could also be a third of fourth mortgage
A junior mortgage
What term refers to the priority of liens?
“Junior” in the case of junior mortgages.
In the case of a foreclosure, what order are the mortgages paid?
1) Senior mortgage paid down first
2) Then Junior mortgages are paid based on the date they were recorded
Wraps are a form of_____
Seller financing
What is any transaction in which a property’s seller finances all or some of the purchase directly with the buyer
Seller financing
How is seller financing secured?
a promissory note that details the terms of the financing and the promissory note serves as evidence of the debt.
Do seller-financed deals require principal to be paid upfront?
No, don’t require the principal amount to be exchanged upfront.
What does the installment payments in the seller-financed deals include?
The buyer makes installment payments directly to the sell which includes principal and interest
When is a wraparound mortgage structure used?
When a seller has a remaining balance to pay on a properties first mortgage loan.
The agreement takes into account the remaining balance on the seller’s existing mortgage at its contracted mortgage rate and adds an additional balance to arrive at the total purchase price.
What is the advantage to the seller in a WRAP loan?
- In a wrap, the seller charges an interest rate based on the terms of the existing mortgage loan.
-To break even, the seller must charge at least as much interest as they are being charged on their existing loan. That gives the seller flexibility when negotiating the buyer’s interest rate. - Generally, the seller will negotiate the highest possible interest rate so they can make payments on the first mortgage while also earning a profit on the deal.
Seller-financed purchases don’t have the same costs as financing through banks and other types of lenders, which can benefit both the buyer and the seller.
What is this and example of?
Let’s say that Vivian has an $80,000 mortgage on her home with a rate of 4%. She sells her home to Stephen for $120,000 who puts 10% down and borrows the remainder, or $108,000, at a rate of 7%. Vivian earns 7% on $28,000 (the difference between $108,000 and $80,000), plus the difference between 7% and 4% on the $80,000 mortgage.
Wrap around mortgage
Who takes on the greatest risk with seller financed services?
the seller takes on greater risks and responsibilities so they often require higher-than-average down payments. If the buyer defaults on any payments, it will be up to the seller to pay the original loan or risk foreclosure on the home.
What clause requires the seller to repay the original mortgage entirely if collateral ownership is transferred or if the collateral is sold.
alienation clause
Do seller financing loans require higher or lower down payments?
Higher
the seller takes on greater risks and responsibilities so they often require higher-than-average down payments. If the buyer defaults on any payments, it will be up to the seller to pay the original loan or risk foreclosure on the home.
What clauses are common in most mortgage loans, which often prevent wraparound loans from occurring.
alienation clause
If either party fails to perform the purchase agreement contract, what can the other party obtain?
Remedies in the from of Monetary damages and specific performance
Certain relief when a purchase agreement contract is broken / pay back for the other party not following through
Remedies
What are the two main types of remedies?
1) Monetary damages
2) Specific performance
What are the most common type of legal remedy when dealing with home purchases
Monetary damages
If a seller backs out of a purchase agreement, what does a buyer sue for when they seek compensation for all the costs they paid and return of their earnest money deposit and often ask for additional compensation for missed time and opportuniteis
Monetary damages
What is a court order that requires a party to perform a specific action, usually one stated in the original contract
Specific performance
What is considered an equitable remedy and is used when monetary damages will not satisfy the party seeking relief
Specific performance
If specific performance is sought, will the client likely face monetary damages
NO, If specific performance is sought as a remedy, it’s unlikely that monetary damages will also be awarded. While each state’s laws are different, usually it’s one or the other.
What elements must be present in order for specific performance to be possible:
1) Contract - For a court to order specific performance, there must be a valid and enforceable binding contract.
2) Damages Inadequate - Specific performance is only ordered when monetary damages are inadequate to compensate the injured party.
3) Mutuality of Obligation - There must also be a mutuality of obligation, meaning that both parties have undertaken duties toward each other as part of the contract.
4) Judge’s Discretion - When creating a real estate sales contract, the parties can freely include specific performance as a remedy. But if this provision is not included in the contract, the potential for specific performance is left to the judge’s discretion. It will be up to the court to determine if specific performance is the best remedy after one party shows a breach of contract.
Usually, the court will require the plaintiff, or the party benefiting from the judge’s ruling, to show that they substantially performed their part of the contract and that they are capable of continuing to perform their contractual obligations.
What is “lis pendens”
relates to a buyer and specific performance - notice of pendency
Once a lawsuit is underway, the real estate buyer can also file a legal document known as a “notice of pendency”. This notice, also called a “lis pendens”, effectively prevents any transfer of the property to a third party until the claim has been resolved. The seller will be unable to sell the property to another buyer while the lawsuit is ongoing.
Can real estate broker sue for specific performance?
No - real estate brokers cannot sue for specific performance. If there is a breach of contract that negatively impacts them, a broker would sue for monetary damages.
What are the Two basic classifications of home loans
1) Conventional Loans
2) Unconventional Loans
What loans are not secured by FHA, USDA or VA
Conventional Loans
Who are conventional loans offered by?
Private lenders
What are conventional loans often referred to as?
Conforming loans
What do conventional loans conform to?
Rules set forth by Fannie Mae and Freddie Mac
Who are the two largest investors in Conventional loans
Fannie Mae, Freddie Mac
Who are conventional loans good for?
Those with excellent credit, those in good economic standing, and and have money for large down payment
The benefits of flexibility of property to purchase and chance to significantly reduce mortgage insurance
Conventional loans
What are the two basic types of conventional loans
1) fixed rate mortgage
2) adjustable rate mortgage (ARM)
What mortgage has an interest rate that does not change?
Fixed rate mortgage - monthly payments will be the same
What mortgage has an interest rate that adjusts monthly or a year
Adjustable rate mortgage
What are unconventional loans backed by?
backed by government or secured by band or private lender
Who are unconventional loans good for?
Individuals with low income or less than perfect credit
What are FHA and VA loans?
Unconventional loans
What loans are insured by the federal housaing adminstration and require a small down payment
FHA loans
Do VA loans require a down payment? do they have to occupy the residence?
No, Yes
Where are loans originated?
Primary market
What is the market where lenders and investors buy and sell existing mortgages or mortgage backed securities (resell market place of loans)
Secondary market
What Loans have the primary purpose of:
to ensure lenders of loss so that they are not scared to lend to people with a wider variety of economic backgrounds.
FHA loans, established in 1934 - did this through smaller down payment and smaller monthly payments paid down in 30 years
What is the Federal National Mortgage Association created in 1938
Fannie Mae
What association buys FHA insured mortgages from the lenders which created a secondary market place where
Fannie Mae
When it comes to the US government or Fannie mae, who grantees Monthly principal and interest payments?
Monthly principal and interest payments are guaranteed by Fannie Mae, but not by the US government.
What is the government national mortgage association? when was it created?
Ginnie Mae - 1968
What is a federally-owned corporation of the Department of Housing and Urban Development. and administers special assistance programs, and its main focus is to ensure liquidity for US government-insured mortgages, including those insured by the FHA and VA.
Ginnie Mae
What is a warranty deed?
A warranty deed gives the grantee a warranty, or guarantee, that the grantor does actually have legal title to the property. The seller, who is the grantor, is promising the buyer that “Yes, I do own this property and I have the right to sell it to you.”
What are the basic characteristics of a deed?
1) Signature - the signature of the person transferring the real estate (the grantor);
2) Date - the date of the transaction;
3) Names - the names of the parties involved; and
4) Description - a description of the property being transferred.
What is not required for a warranty deed?
RECORDING
If recording is done in a warranty deed, what must be done?
The documents must be ACKNOWLEDGED
What is the big advantage to the buyer with warranty deeds
title protection
In addition to guaranteeing their ownership of the property, the seller warrants that the property is free of encumbrances- except those noted in the deed itself, which can be things like easements, zoning restrictions, and subdivision deed restrictions. And the protections in warranty deeds are granted whether the seller and the buyer are individuals or businesses.
What deeds are good options for real estate sales where commercial or residential properties are transferred between parties who don’t know each other.
General Warranty Deeds and Special Warranty Deeds
What do both General Warranty Deeds and Special Warranty Deeds guarantee?
Both types of deeds guarantee to the buyer:
1) that the seller owns the title;
2) that the seller is legally allowed to sell the property;
3) that the property has not already been sold;
4) that the property is free of debt or other claims (aside any mentioned in the deed); and
5) that the seller is responsible for any problems/faults with the property.
Which deed is when the grantor is responsible for any breach of warranties and guarantees, even if the breach occurred without their knowledge or during a period when the grantor did not own the property
General Warranty Deeds
For which deeds are title insurance most often used?
puts a greater amount of risk on the seller, so title insurance is used in most transactions to help guard against possible claims and liens. Before a title company will provide insurance for a title, they will conduct a full title search and explore any other possible breaches. This gives the buyer extra peace of mind, as both the seller and the title company have verified that title to the property looks clean.
What is another name for a special warranty deed?
Limited warranty deed?
What deed only covers the period of time for which the seller owned it. While the seller must still defend the title against other claims and compensate the buyer for any unsettled debts or damages, they must only do so for debts and problems that happened during their ownership of the property?
special warranty deed
When is a special warranty deed used?
Special Warranty Deeds are only used in special cases where a General Warranty Deed is not a good option.
A deed where a seller makes no warranties of any kind
Quitclaim deed
what deeds involve quick transfers between people with established relationships such as between family members or when a situation requires a property’s quick release.
Quitclaim deed
From the grantee’s perspective, what deed is better than a quitclaim deed, but not as good as a warranty deed.
Bargain and sale deed without covenants
What deed includes a warranty that the grantor has title to the property but does not guarantee that the property is free of claims
Bargain and sale deed without covenants
What is a bargain and sale deed will specifically state one or more additional guarantees
bargain and sale deed with covenants
A bargain and sale deed with covenants is similar to a:
special warranty deed
What deed is better for the grantee than a bargain and sale deed without covenants, but still not as good as a general warranty deed.
special warranty deed
When are Bargain and sale deeds are most often used?
when property is transferred after a foreclosure, tax sale, or the settlement of a deceased person’s estate. They may also be used in the same situations as a quitclaim deed, although they give the grantee a little more protection.
When given the option, grantors prefer to use what deed?
Bargain and sale deed because it limits their liability.
When given the option, Grantees prefer to use what deed?
Always prefer a general warranty deed because it gives them the most protection possible.
What deeds are used when limited or no warranties can be provided but title can be proved.
bargain and sale deeds
What clause in a mortgage or trust deed stipulates that the entire debt is due immediately, if the borrower defaults under the terms of the contract. It will also give the conditions for when a lender can demand a full loan repayment.
Acceleration clause
Is accelerating a loan a good or bad thing?
Accelerating a loan is usually a bad thing. Usually it means that a borrower has missed payments or violated the terms of the contract and the lender is demanding immediate payment of the full loan amount to avoid foreclosure.
home loans typically have an __________ clause that is triggered when the borrower misses too many payments.
Acceleration clause
What clause is also known as an alienation clause
Due-On-Sale clause
What clause is a loan stipulation that requires a borrower to pay the entire loan balance if the property is being sold.
Due-On-Sale clause
Lenders use this clause to prevent the buyer of a property from assuming the current loan at the original interest rate.
Due-On-Sale clause
What penalties exist to protect lenders against the loss of interest income that would have been paid on the loan over time.
Prepayment penalties
What clause stipulates a penalty charge which can be imposed on a borrower who pays off a loan early.
Prepayment penalties clause
In real estate, _________ refers to the order of liens on a property.
subordination
When is a Subordination clauses typically used?
Subordination clauses are typically used when a home loan is refinanced and there are existing liens on a property. Refinancing generally results in the original home loan being paid off and a new loan getting issued with the new interest rate. Chronologically, that would put the new loan at the end of the line- but mortgage lenders require their loans to be first in line. In order to complete the refinance, other lien-holders would have to agree to be subordinate to the refinancing loan.
What is an example where not all lien-holders may agree to the subordination clause
For example, if you fall behind on your taxes, the IRS may put a lien on your home to ensure they get paid back. If you try to refinance, the IRS will have to decide whether or not to be subordinate to your loan. They may agree but, if they don’t, your refinance may not be approved.
What clause effectively makes the current claim senior to any existing claims that have already been recorded.
Subordination clauses
What clause is a loan provision that allows an individual property in a blanket mortgage to be released from any liens by the lender.
Release clause
Blanket mortgages enable investors, builders, and developers to place multiple properties under a single loan, which is much more efficient than having multiple mortgages. If the loan contains a __________, a designated parcel or property is freed from any claims by the creditor once a proportional amount of the loan has been paid off, giving the borrower full rights to that property.
Release clause
What is a intentional misrepresentation or a representation without any regard of the actual facts or the suppression.
Actual fraud
What is it call when a promise made without any intention to follow through with that promise.
Actual fraud
What is this an example of:
telling a buyer that the roof of a property is completely fine when he knows full well that it is not ok at all. It would also be actual fraud to for the agent to say “do not worry about the roof, if buy this house I will personally fix it, you have my word” they will fix the roof., when they do not have the ability to fix or have no intention of fixing it.
Actual fraud
What is lying through omission
Negative fraud
What occurs when somebody does not disclose a material fact to somebody in a effort to get somebody to enter into a contract that can cause that person to a bad situation with respect to money, damage or even personal harm.
Negative fraud
What is this an example of?
when an agent is showing a home with roof problems and the client asks “are there any issues with the structure of the roof?” and the agent replies “have I shown you the basement?”
Negative fraud
What is lying without knowing you are lying
Constructive fraud
What is this an example of?
An example would be when an agent is showing a home with roof problems and the client asks “are there any issues with the structure of the roof?” and the agent replies “Ya, its fine, the roof is great” when the roof has problems but the agent authentically things the roof is fine.
An example would be when an agent is showing a home with roof problems and the client asks “are there any issues with the structure of the roof?” and the agent replies “Ya, its fine, the roof is great” when the roof has problems but the agent authentically things the roof is fine.
What is A deceptive act done intentionally by one party in order to influence the other party to enter into the contract
Fraud
What does fraud have that missrepresentation does not?
intent
Does fraud make a contract void or voidable?
Voidable
What is a representation of a material fact made by a party who believes it to be true, the other party relied on the statement and entered into the contract based upon the statement which later on turned out to be incorrect.
Missrepresentation
Does missrepresentation make a contract void or voidable?
voidable at option of injured party
What is an exaggeration of fact?
Puffing
What determines that documents that must be in writing to be enforceable?
Statute of frauds
In most states, what must be in writing?
Real estate documents such as: Sales contracts , deeds & mortgages
What must an agent have in place in order to collect compensations
Employment contract (listing agreement), in writing
What does “time is of the essence” mean in a contract?
Everything must be done within a specific time
What does an “as is clause” mean in a contract?
Means a buyer is buying a property as he sees it, with all existing conditions
Who is the name of the party transferring the contract?
assignor
Who is the party receiving the contract?
assignee
What is the transfer of contract writes from one party to another?
assignment
Are personal service contracts usually assignable?
No
what is the term the substitution of one contraction for another and releases liability (new contract)
Novation (nova = new)
An assignment does not relieved the assignor from liability unless what has been granted?
novation
What is a contractual provision that determines in advance the measure of damages if a party breaches the agreement?
A liquidated damage clause
What occurs when there is an agreement between the contracting parties to waive all the remaining duties and to terminate the contract.
Rescission
What is an oral or written agreement to do a specific thing?
contract
for the “as is clause” must they disclose the defects
Yes it is being sold as is. The defects must be disclosed just not required to fix it.
What contract is a promise for a promise?
bilateral contract
What type of contracts are sales contracts and listings?
Bilateral contract
What is a one sided agreement? one party makes a promise to perform
Unilateral contract
What type type of contract is a lease option?
Unilateral contract
In a lease, who is the lessor and who is the lessee
Lessor - landlord
Lessee - renter
what type of contract is the lease?
bilateral contract - The lease is a bilateral contract because both the landlord and tenant have obligations to perform.
Are leases personal property?
leases are personal property as they do not always run with the land. It is a contract with an individual person.
What is a A reversionary right in a lease agreement?
A reversionary right means the owner has the right to regain possession of the property after the lease has expired.
What does a lease have to contain to be valid?
Just like in any other contract a valid lease must contain mutual agreement, consideration, capable parties and lawful object
What does the lessee have the right to?
The lessee has the right of quiet enjoyment and possession of property which is the assurance that their possession will not be disturbed by anybody with superior title (the landlord).
Does death terminate the lease?
Death does not usually terminate the lease, upon death of one of the parties; the responsibilities as stated in the agreement could pass on to the heirs of the deceased.
What is the difference between an assigment and an sublet?
An assignment is a transfer of contract rights as supposed to a sublet is when you rent the property you lease to another person while still maintaining your responsibility to your landlord under your rental agreement.
Does the lease have the right to assign or sublet the property?
Unless the lease forbids it the tenant has the right to assign or sublet the property.
What is a term used in the law of real property to describe a circumstance in which a landlord either does something or fails to do something that he has a legal duty to provide.
Constructive eviction
What is this an example of?
An example would be if the landlord refuses to provide heat or water to the apartment as a tenant can not live without water, thus they need to vacate the premise
Constructive eviction
What is a rental agreement for the use of the property where the tenant pays a fixed amount which does not change as a result of changes in the various expenses of the property. The landlord pays for these expenses such as all repairs, taxes and operating
expenses incurred through ownership.
Gross lease
What is a rental agreement where the responsibility to pay taxes, insurance, and maintenance are incurred by lessee in addition to the monthly lease payment. This is often referred to as a triple net lease.
Net lease
What is a rental agreement indicating a tenant’s option to purchase a property during the term or at the end of the lease.
Lease option
What is a rental agreements that is based on a percentage of the monthly or annual gross sales made on the premises.
percentage lease
What leases are common with large retail stores, especially in shopping centers
percentage lease
A net lease where the responsibility to pay taxes, insurance, and maintenance
A triple net lease
An option contract is a unilateral contract because?
It is a unilateral contract in that the seller is obligated to sell, but the buyer has the option to buy.
When created, an option contract is a unilateral contract. But when the buyer exercises the option, it becomes a bilateral contract.
An in an option contract who is the seller and who is the buyer?
seller = optionor
buyer = optionee.
In a ________ the lessee agrees to lease the property with an option to buy the property.
Lease option
What is a bilateral Employment Contract between principal and broker whereby the broker is employed by the principal to find a buyer and accept a deposit.
A listing
What is the most essential element of an enforceable broker-principal relationship.
A listing contract
A _____ hires a broker to find a buyer, not to sell a house.
Listing
protection period clause is also known as ___________, ____________, __________
safety clause, extender or carry- over clause.
What is the clause that allows agents to be able to close deals with buyers you found during the term of the listing.
protection period clause (aka safety clause, extender or carry- over clause.)
listing agreement is a ______
personal service contract
Should the principle or seller die, or either party becomes incapacitated or the property is physically destroyed, such as by a fire or a natural disaster, the, is the listing agreement terminated?
Yes - In short remember this, a personal service contract needs a person there, therefore you can not assign this contract to another person.
What is the right of subrogation?
is the right to pursue someone else’s claim.
What are the examples of subrogation?
You may find subrogation in leases, mortgages, insurance policies, guarantees and other agreements.
What does this example describe?
Suppose you own a building which burns down due to the negligence of a third party.
Your fire insurance company can pay off your claim,
Subrogation
Your fire insurance company can pay off your claim, however, the insurance company is then subrogated to your claim against the negligent third party.
This means your claim against the negligent third party is treated as having been assigned to the insurance company, which may sue him to recover the amount it paid you on account of the fire loss.
What does this example describe?
Suppose you hold an interest in someone else’s real property. It might be an easement, a leasehold estate or a lien or encumbrance of some sort.
If the owner allows the property taxes to go into default, you might decide to pay the taxes in order to protect your own interest. By doing so, however, you also protect the interest of the owner by paying off an obligation the owner should be paying.
Subrogation
In this situation, you are subrogated to the rights of the taxing authority and may proceed against the fee owner in order to obtain reimbursement for the taxes you paid.
What is a legal agreement which establishes one debt as ranking behind another debt in the priority for collecting repayment from a debtor?
Subordination
What does subordination typically involve?
Loans
What are the 4 essential elements of Value?
STUD
Scarcity - is there alot of it?
Transferability - can i sell it?
Utility - Can I use it?
Demand - anyone want it?
what is the present worth of one commodity to draw on the open market.
Market Value
How is the original cost of an item related to its value?
The original cost of an item has no relevance to its value.
What is a form of depreciation which results in a loss in value even though the property is still in good condition.
Obsolescence
What is obsolescence due to conditions within the property
Functional Obsolescence
What obsolescence are these an example of?
– Poor design
- Too many or too few materials
– excess construction
– lack of utility (features that are not practical or desirable)
– Overly costly operating expenses.
Functional Obsolescence
What is obsolescence that is a form of depreciation caused by factors that are not on the property, in the property or even within the property lines.
Economic obsolescence
What obsolescence are these an example of?
- Rezoning
-crime in area - recession
- national economic depression
- abandon near by building
Economic obsolescence
What are these an example of:
- Paint jobs
– roof repairs
- Deferred maintenance
– Repairs to the heating or cooling system
- Faulty wiring
- Lose tiles
- Breakage
- Dated construction material
- normal Wear and Tear.
the list can go on and on….
Curable physical deterioration examples
What is the most obvious form of deprecation because, simply said, you can see it. When your maintenance does not keep up with the natural wear and tear
physical deterioration
is Physical Deterioration is not a form of Obsolescence?
No
In real estate your value will increase if it is in the area of much more desirable homes. What is this an example of?
Progression
The Principle of progression states that the value of less expensive properties will increase when more expensive properties come into the area.
In real estate your value will decrease if it is in an area of less desirable homes. What is this an example of?
Regression
The principle of regression states that the value of a more expensive properties will decrease when less expensive properties come into the area.
The Principle of Substitution is the basis for the _______ approach
Market Data approach to appraisal.
In _____ , there must be other properties in the area which could be substituted for the subject property and which have recently sold.
The Principle of Substitution
What principle says that the maximum value of a property usually is established by the cost of acquiring an equavelent substitute property that has the same use, design and income.
The Principle of Substitution
What is the market data approach also known as?
sales comparison approach
What appraisal approach is usually used to establish Rent Schedules
market data approach
What appraisal approach becomes less reliable during times of rapid economic change or instability, in an inactive market or in analyzing unique properties
market data approach - because there are limited options for comparing properties.
Which appraisal approach is it when you are finding value by comparing a property to other properties of similar size and condition in the same area.
market data approach
What appraisal approach is the process of estimating the value of a property by adding to the estimated land value the appraiser’s estimate of the replacement cost of the building, less depreciation.
Cost approach
What is the appraisal approach most commonly used to appraise special purpose properties such as Libraries, Schools and police stations.
Cost approach
What appraisal approach sets the upper limits of value
Cost approach sets the upper limits of value because essentially you are looking at what it cost to replace a building brand new.
Is the cost approach best for new or old buildings?
New
This approach is most appropriate for the appraisal of new property, not old. This is so because the older the building is the more variables there are estimating it’s value. If something was built yesterday, then that cost of how much it cost to build is much more accurate.
If you had to appraise a property from 1910 you would be using the current cost of reproduction, the Cost it took to build it in 1910 would not be a factor.
What are the Methods for estimating the cost of Construction:
- Unit-in-Place Method
-Unit-in-place calculates the added cost of single units installed;
Square Footage Method - Square Footage method utilizes exterior dimensions to calculate the cost per square foot
Quantity Survey Method - Quantity survey calculates the cost of labor and materials to construct each component of a building, it is very accurate but time consuming
What is the ratio of the price of a real estate investment to its annual rental income before expenses such as property taxes, insurance, and even utilities for vacation rental properties.
Gross Rent Multiplier
How is the
The GRM is calculated?
price / rent (rent can be yearly or monthly)
What is Valuable consideration?
It is a necessary component of all contracts. It is the benefit one party receive in exchange for granting benefit to the other. Generally it is money in any amount both parties agree to, though it can take other forms.
What is a promissory Note?
negotiable instruments that serve as evidence of debt
What does “At arms length” Mean?
Means transactions involving independent and objective parties with no unrelated motivations to distort the true value
Mortgage bankers typically do what?
Originate a large number of loan transactions and then sell these mortgages at a discount to large investors in the secondary market
When real estate under an estate for years is sold, what happens to the lease?
It binds the new owner.
Tenancy for years is the common form of rental agreement and binds all future owners for the term of the lease.
What is a land contract also known as?
Conditional installment sales contract
What happens in a Conditional installment sales contract (Land contract)
The vendor (seller) becomes a lender to the vendee (buyer). The Vendee gets to use the property (equitable title) as the seller retains legal title of land as a security device (the right to sell.
What real estate advertisement does not include the employing broker?
Blind ad
When can a lien be filed for a mechanics lien?
Within 90 days of the supply of materials
What is a “quiet title”
Owner might use this action to correct a minor mistake in the property description or to remove and easement that’s been unused for years.
Additionally, they are used when a third party tries to assert some right to the property through a dubious claim.
The suit “quiets” that persons’ claim to the land and establishes a clear ti
What ownership is undivided interest in common areas and a separate interest in a certain unit of an industrial, commercial or residential building?
A condominium unit has fee simple ownership of their unit as well as an undivided ownership share of any common areas, like a pool or clubhouse.
“undivided interest: means that a person owns a share of property that can’t be separate from the whole.
In other words, If a condominium project has fifty owners, each unit owns one-fiftieth of the common areas
A “GPAM” mortgage loan provides for:
Graduated Payment Adjustable Mortgage (GPAM) allows for the deferment of certain principal payments.
What does RESPA do?
Make borrowers more aware of costs and charges. ITs a standard for closing procedures
What does standard policy of title insurance protect agains?
Forgery and improperty delivery
What is a desist and refrain order?
Issued by the RE commissioner against a developer. Similar to a restraining order in that it immediately halts the action or actions in question
What is conversion and an example
Conversion is unauthorized use or control of someone else’s property, at a minimum personal property.
A property manager wrote a check to himself from his clients trust account to cover office rent cost.
What is the purpose of the truth and lending act? (TILA)
The purpose of this act was to promote the informed used of credit
What doesn’t place limits on the rates of interest or loan fees that a lender chargers. Limits for interest rates are imposed by state usury laws
TILA doesn’t place limits on the rates of interest or loan fees that a lender charges. Limits for interest rates are imposed by state usury laws.
