PSI Exam Prep: All Topics Flashcards
National Prep Exam
Usually the party to the transaction who is represented (the client)
Principal
Someone who is in the position of trust who owes loyalty to another.
Someone who manages money or property for someone else.
Fiduciary
Someone who acts in behalf of someone else.
Agent
Has a wide authority to act on the behalf of another or principle.
A person who can provide advice and representation services to real estate buyers and sellers.
Universal Agent
Has limited authority to act on a client’s behalf, such as real estate agent or an escrow officer.
This type of agent can’t bind a client to a contract.
Special Agent (aka Limited Agent)
Responsible for handling all dealings in a given area for a client, such as a property manager.
This type of agent may bind a client to a contract.
General Agent
When a licensee represents one party, either the buyer or the seller, in a transaction.
The firms DON’T permit licensees to engage in dual agency, even if the state permits it.
Single Agency
The representation of both the buyer and the seller in the same transaction.
Dual Agency
When a single licensee represents both the buyer and the seller in the same transaction.
Single-License Dual Agency
When two separate licensees from a single firm each represent one party (buyer or seller) in the same transaction.
Designated/appointed Agency
aka (Dual-License Dual Agency)
Has traditionally been recognized as a situation in which a licensee brings an unrepresented buyer to a transaction.
Sub-Agency
An agency relationship that’s understood and agreed to by the parties. Spoken or written words create ___ ___.
Express Agency
Actions of the parties such as statements are to be avoided. All agency agreements should be in writing.
Implied Agency
Acceptance after the fact, either through signing paperwork or through the parties’ actions.
Ratification
Prevents one party from suing another, because the party’s actions or statements implied that he or she agreed with the other party.
Estoppel
Agreements allow one brokerage to market and sell the property.
Exclusive Listing
Agreements provided the listing agent with a commission no matter who brings the buyer to the transaction.
Exclusive right-to-sell
Agreements allow the seller to work with multiple agents.
Open Listing
Is one in which the broker contracts with the seller to receive all net proceeds from a sale above a specified sale price.
Net Listing
Other licensees CAN’T represent the buyer during the term of an agreement.
Exclusive Right-To-Represent
These relationships are those in which the licensee doesn’t represent the consumer in an agency capacity but instead provides non-agency assistance that doesn’t require the licensee to exercise judgment or discretion.
Non-Agency (aka transactional or facilitator)
Agency agreements can terminate in one of the five basic ways:
- Expiration
- Completion (performance)
- Force of Law
- Destruction of the property or death of the principal
- Mutual Agreement
Duties include obedience, loyalty, disclosure, confidentiality, accounting and reasonable skill and care (OLD CAR).
These duties are owed to clients but not customers.
Non-agents don’t have these duties.
Fiduciary Responsibilities
The agency has some form of ownership of, security interested in, or possession of the principal’s property.
Agency Coupled with Interest
Orders the lender or trustee to immediately release full title to the borrower once the loan is paid in full.
Defeasance Clause
Makes the entire debt due immediately if there’s borrower default.
Before foreclosure.
Acceleration Clause
Requires the borrower to repay the loan when transferring ownership to another.
Due-on-sale-clause
(alienation clause)
Permits the lender to charge a specified amount for interest lost when a borrower sells or pays off a loan early.
Rare in today’s market.
Pre-Payment Penalty Clause
The borrower’s projected monthly housing expense(principal, interest, taxes, insurance, second liens, and association fees) divided by income.
Housing Ratio (a.k.a. the front-end ratio)
The total of all the buyer’s debt obligations divided by income. The required ratio will depend on loan type.
Debt Ratio
(debt-to-income ratio OR back-end ratio)
Involves three parties: the trustor (borrower), the beneficiary (the lender), and the trustee (an independent third party who holds the deed of trust).
Deed of Trust (Trust Deed)
States use the deed of trust as the primary security instrument because the lender/trustee holds legal title to the property until the mortgage loan is paid in full.
Title Theory States
Borrowers hold ___ ___, they have possessory rights (can live in and use the property) and have the right to obtain legal title once they’ve paid the loan off.
Equitable Title
The deed of trust permits the lender to use a non-judicial foreclosure process . Lender doesn’t have to go to court.
Power of Sale Clause
states that use a mortgage as the security instrument.
Don’t pay, Something happens. (Hint)
Lien Theory States
The lender must go through the courts to foreclose.
Judicial Foreclosure Process
Promise to repay the mortgage loan.
They are negotiable instruments which means they can be transferred to another holder.
Promissory Note
Aren’t government insured or guaranteed.
Lenders view as the most secure Loan.
May require a 20% down payment.
Can be conforming or non-conforming.
Conventional Loan
Federal Housing Financing Agency imposes ___ ___on the amount buyers may borrow.
Loan limits vary by region.
Loan Limits
Meets the loan limit and other criteria that Fannie Mae or Freddie Mac set.
Conforming Loan
A conventional loan that fails to meet Fannie M. and Freddie M. guidelines for credit scores, LTV, and/or loan amount.
Non-Coforming
A conventional non-conforming loan because it exceeds conforming loan limits but meets other conforming loan requirements.
Jumbo Loan
Is on in which the loan principal is paid down over the life of the loan.
Amortized Loan
Will be paid in full after the last scheduled loan payment (or sooner if the borrower makes additional principal payment during the loan term).
Fully Amortized Loan
Includes partial amortization over the loan term and a balloon payment at the end of the term, where the borrower pays off the loan in one lump sum.
Partially Amortized Loan
Interest rate fluctuates based on selected economic index.
Rate adjustments are based on index rates.
Typically have lower interest rate for an initial period of one to several years.
Adjustable-Rate Mortgage
When a payments fails to cover the amount of interest due. When this happens the difference between interest owed and interest paid is added to the loan’s principal.
Negative Amortization
Insures lenders against loss in case of borrower default.
Must pay minimum 3.5% down payment.
Mortgage insurance premium applies all loans for the life of the loan.
There is a maximum loan amount. Buyer can make the difference with down payment.
Federal Housing Administration
Offers direct guaranteed loans to farmers and ranchers and for rural housing.
Loans up to 100%of the purchase price, set for 33 years (38 for very low-income borrowers) and provide loan guarantee up to 95% of the loss of principal and interest.
USDA Farm Service Agency (FSA)
Are government loans specifically for family farms and rural home financing. They offer longer payback period to reduce monthly payments.
Rural Development Loans
Requires the buyer to make installments payments to the seller for property purchase.
The seller retains the title while buyer gets equitable title.
Land Contract/Contract for Deed
A loan a seller issues to the buyer as part of the purchase transaction. This typically occurs where the buyer cannot qualify for a mortgage through TRADITIONAL means.
Purchase Money Mortgage
The seller holds a mortgage that wraps the new buyer’s mortgage around the seller’s existing mortgage.
The seller continues to make payments on the first mortgage, and the buyer makes payments to the seller on the wrap-around mortgage.
Wrap-Around Mortgage
Is designed for those who want to use the equity in their homes to stay in their homes.
The lender makes payments to the homeowner for a specified period of time and gains corresponding ownership.
Reverse Mortgage Loan
A loan from the equity of a home.
If the property is owned free and clear, the home equity loan is a first mortgage. If not, it’s a second or junior mortgage.
Rates the loan tend to be higher than conventional loans, and their term rates shorter.
Home Equity Loan
Loan based on the equity in a home.
Borrowers typically use this loan for major purchases, such as vacations, tuition, or home repairs, upgrades.
Home Equity Line of Credit
Temporary financing for construction purposes.
Lender makes a loan based on the property appraisal value and construction loans.
Loan is given in payments, not all at once.
Once, completed the construction loan converts to permanent Lon-term financing.
Construction Loan
A government-backed combination loan to combine a home purchase with home repair by allowing the borrowers to buy and renovate a fixer-upper property with on loan.
Also known as FHA 203k loan or a construction loan.
After the loan closes, renovations must be completed before the borrower moves in.
Rehab Loan
A temporary, short-term loan that provides funds until buyers can obtain permanent financing.
May obtain the loan when their current home hasn’t sold yet but they are ready to purchase a new home.
The loan covers the down payment.
Bridge Loan or Swing Loan
Is a consumer protection statute designed to protect homebuyers from unscrupulous lending and settlement practices.
Licensees are prohibited from paying or receiving a fee, kickback, or anything of value based on referring customers or clients to a settlement service provider.
Requires that lenders provide written disclosures to help male estimated and final settlement costs clear and fair to consumers.
Real Estate Settlement Procedure Act (RESPA) 1974
Requires lenders to disclose credit terms and conditions when advertising triggers loan terms, so as not to mislead consumers.
Truth-in-Lending Act (TILA) 1968
Ads that would require the full disclosure of all terms include down payment, payment amount, number of payments, and interest rate (other than APR).
Trigger Terms
Requires mortgage lenders to follow TILA disclosure requirements for real estate advertisement that includes credit terms.
Regulation Z
Prohibits lenders from making credit unavailable or offering less favorable terms based on protected class status (race, color, religion, sex, national origin, marital status, or income source) vs. creditworthiness.
Equal Credit Opportunity Act
Predatory lending
Mortgage Fraud
Illegal Property Flipping
Equity Skimming
Straw Buyers
Inflated Appraisals
Usury (lending excessive money)
Illegal loan schemes, Fraudulant
Based on the real estate’s value. General property taxes may pay for schools, police, fire, etc
Ad Valorem Taxes
Imposed only on properties that benefit from the improvement, such as a tax to install a sewer line or city water line in on especial street.
Special Assessment Taxes
The process of taking title and physical possession of private property using the government’s power of eminent domain; property owner paid just the value of the property.
Condemnation Action
The governments power to take private land for public use.
Ex. planed freeway project
Eminent Domain
Government takes private property but FAILs to compensate the owner.
Owners usually file a suite to be compensated.
Inverse Condemnation
The state’s power to take the property of a descendent who dies without a will, heir, or creditors.
Escheat
Rules that specifiy the standards to which certain building projects must comply.
address the method of construction, materials used, and building safety and sanitary standards.
State building codes provide bare minimum standards for all residential and commercial buildings in the state, while LOCAL Codes provide additional regulations.
Building Codes
Local laws or regulations that implement the comprehensive plan by regulating zoning and land use and are usually enforced at the city level.
Regulate - lot size, building height, permitted use within each zoning classification on a zoning map.
Zoning Ordinances
Allows otherwise prohibited development in return for the developer providing a community benefit.
Incentive Zoning
Regulates the density of a given area by requiring certain building height limitations, lot width, setback requirements, etc.
Applies to both commercial and residential zoning.
Bulk Zoning
A way to ensure the visual architectural consistency of an area.
Aesthetic Zoning
The process of assigning a low-density use zone to an area previously allowing a higher density.
Downzoning
Rezones a specific property for use within another zoning area.
Spot Zoning
Nonconforming use
Moratorium
Special use permit
Variance
Zoning Actions
Meetings held by planning and zoning boards must be open to the public.
Sunshine Law
is part of Freedom of Information Act
May impact property value and should be part of appraisal.
Development limitations on these lands.
CLEAN WATER ACT provides guidelines for waters, including ______.
Only certain buildings can be built on this land.
Wetlands
Must obtain flood insurance.
Federal emergency management agency used to determine if their property lies in a flood zone.
100 year floodplain 1%chance or 500 year flood plain .2% chance.
Flood Zones (floodplains)
Abandoned commercial or industrial sites suspected to contain toxic waste.
Brownfield
Applied to specific areas, protected lands and those under conservative easements may restrict development and prevent certain uses that may be destructive.
Conservative Easement
Includes: easements, liens, deed restrictions, and subdivision regulations or HOA rules.
If a property faces both a public and private restriction regarding the same issue, the most restrictive one takes precedence.
Private Land Use Controls
- A description of the property to be managed.
- A description of all managers duties.
- The term of the agreement
- A statement describing the owner’s responsibilities.
- Any explanation of the manager’s authority
- Any reporting the manager owe’s
- Compensation to be paid (management fee)
*ANTITRUST Provision (real estate-related compensation, compensation and fees are negotiable) - A statement of management costs the manager will pay (office rent, employees)
- Equal opportunity statement
Property Management Agreement should include:
- painting and delivering financial report
- renting properties
- marketing properties
- Screening and selecting tenants
- Handling security deposits and collecting rent
- Maintaining relationships with tenants and handling tenant problems
- Maintaining the property
- Complying with local, state, and federal regulations
Common Property Manager Duties
Estate at Sufferance - The tenant stays after the right to possess has terminated. The tenant is known as a holdover tenant.
Estate at Will - The lease’s duration is unknown when it’s created.
Estate for Years - The lease terminates automatically when the specified period ends.
Periodic Estate - The lease automatically renews at the end of each period specific in the lease.
Types of leaseholds/leases
ADA is important in commercial priority management, apartment buildings are generally subject to ADA regulations.
Landlords, managers must accommodate to disabled people with reasonable reason.
Service dogs don’t count as pets, no fees charged.
The American with Disabilities Act (ADA)
Subdivision of HUD
Enforces fair housing laws, including ADA and the federal fair housing act.
Can file a complaint through FHEO for up to one year following the time of the alleged discrimination occured.
If found guilty of federal fair housing, licensees may face lawsuits and payment of compensatory damages.
Office of Fair Housing and Equal Opportunity (OFHEO)
Manipulates owners into the fear that the entry of a protected class will negatively impact property values to encourage an owner to rent or sell.
Blockbusting
Occurs when members of protected classes are guided toward certain areas, buildings, or neighborhoods by a property manager a real estate licensee.
Steering
Is a sample law that states may follow in enacting their own landlord-tenant legislature.
This provides more specific guidance for the landlords.
Uniform Residential Landlord Tenant Act (URLTA)
This is the legal process used to physically remove the tenant.
Actual Eviction
The landlord takes matters into his own hands and evicts the tenant without using legal procedures.
Self-help Eviction
The tenant is prohibited from quiet enjoyment of the premises and vacates prior to termination of the lease agreement.
Constructive Eviction
-Obedience
-Loyalty
-Disclosure
-Confidentiality
-Accounting
-Reasonable skill and care
Common Fiduciary Duties performed by property managers
-Race
-Color
-Religion
-Sex
-Disability
-Familial Status
-National Origin
Protected Classes Under Federal Fair Housing Act
Prohibits housing discrimination based on race or color. There are no exemptions under this law.
Civil Rights Act of 1866
Is the Fair Housing Act.
This act prohibits housing discrimination based on race, color, national origin, and religion.
Title VIII of the Civil Rights Act 1968
Added sex to the list of protected classes.
Housing and Community Development Act of 1974
Requires lenders to give consumers equal access to credit.
Prohibits discrimination.
Requires lenders to respond within 30 days.
Equal Credit Opportunity Act (ECOA)
Extended fair housing protection to cover familial status and disability and provides remedies to victims of housing discrimination.
FAMILIAL STATUS references protection given to persons under the age of 18 living with a parent or guardian.
The coverage extends to pregnancy or the process of taking custody of a child/children.
Fair Housing Amendment Act of 1988
Involuntary transfer of real property, where the government forces a sale of the property to be used for public purposes.
Eminent Domain
A claim brought by a landowner against the government claiming that the government action effectively took the value of the property away from the owner.
Ex, parking lot law book pg. 98-99
Inverse Condemnation
If you are a trespasser long enough, you will become an owner.
Law Book pg 100 examples and 5 requirements.
Adverse Possession
Is a lawsuit brought in court to establish ownership and title to the real property.
Quiet Title Action
If an owner of real property in Ohio dies without any heirs, their property will be transferred to the state of Ohio.
Escheat
The court will resolve a dispute by dividing the land into two parcels. The court will do so in proportion to their ownership interests.
Partition
Each township broken down to sections of?
1-mile by 1-mile section
1 square mile = 640 square milea
Real property transferred from one owner to the other.
There is a grantor and grantee.
Deed
- General Warranty
- Limited Warranty
- Quitclaim Warranty
- Fiduciary
Ohio Recognizes four types of Deeds
The fact that a lien exist on property.
You would need to pay the loan off to clear the title.
Title Defect
Guarantees against ANY problems with the title to the property, but limited warranty deed guarantees against problems that the grantor has created.
Limited Warranty ( Special Warranty Deed)
Contains no warranties or guarantees at all.
It simply ends (quits) any claim that the grantor may have in the property.
Quitclaim Deed
Used when someone other than an owner of real property (a fiduciary) transfers ownership to another person.
Ohio warranties that the fiduciary
1. was duly appointed
2. was acting in the fiduciary capacity and not in their own interest
3. was authorized to make the sale
4. has complied with all applicable laws
Fiduciary Deed
All real property is subject to a tax collected by the county ____.
To secure payment of this tax, an automatic lien is on every parcel of realty in Ohio.
this lien always exist and takes priority over other liens.
Auditor’s Tax Lien
In Ohio, this lien creates a claim against the improved real estate to secure payment for the construction work and materials.
This is done when a contractor is doing work on realty or supplying materials for work.
They don’t get paid and hence a lien is placed.
Mechanic’s Liens
When the property owner fails to pay federal and state taxes when they are due, the taxing authority can place a lien on the property secure payment for the unpaid taxes.
Federal and State Tax Liens
In Ohio, a person who has received a monetary court judgement against a real property owner has the right to place a _____ lien against the property.
Judgement Liens
