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
When a lawsuit has been filed concerning a real estate, the plaintiff can file a ___ ___, against the property with the county recorder.
Lis Pendens
Partition
True or False
Everyone that who live in Ohio has an estate plan.
(leave a will or if you don’t the state takes care of it)
True
A person who dies with a Will.
Testate
A person who dies without a Will.
The laws of ___ succession, (aka descent distribution) will provide your estate plan.
Intestate
A person who makes the Will.
Side note: Domicile is that person permanent residence.
Testator
Provided exceptions for housing specifically designed for seniors. The exception allows those who live in senior developments in which at least 80% of the units are occupied by at least one person who is 55 or older to discriminate on the basis of age.
They may not discriminate on the basis of any other protected class.
Housing for Older Persons Act of 1995
Owner-occupied building with no more than four units may be exempt. The exemption is disallowed if the owner uses discriminatory advertising or if a licensee becomes involved in the transaction in any way.
Mrs. Murphy Exemption
- Single-family housing sold or rented without a broker’s assistance (if the owner doesn’t own three properties or more) is exempt. No real estate license may be involved, and no discriminatory advertising is permitted.
- Housing operated by religious organizations or private clubs that limit the occupancy to members, provided the membership rules do not discriminate.
- Discrimination based on race is never permitted.
Some EXEMPTIONS/EXCEPTIONS to FFH laws
An illegal and discriminatory practice by lenders or insurance companies that refuse or limit business within specific geographic areas based on the demographics of the area rather than on the creditworthiness of the specific borrower, Figuratively drawing a “red line” around an area to indicate unwillingness to lend or insure homes in that area.
Redlining
The practice of charging non-white borrowers higher fees or interest rates.
Reverse Redlining
- Puffery - an exaggerated statement that wouldn’t be relied on.
- Misrepresentation - Licensees must avoid misrepresentation advertising.
- Negligent Misrepresentation - a statement made by a person who should have known it to be false, becomes fraud.
Fair Housing Advertising Rules
Prohibits protected class-based discrimination in the delivery of commercial and public programs, services, and activities.
Americans with Disabilities Act of 1990
Primary to prevent monopolies that would cause a restraint of trade.
Shermans Act’s 1890
Support the Sherman Act by prohibiting mergers that would result in a monopoly.
The FTC (federal trade commission) investigates antitrust violations and penalizes violators.
Clayton Act
Involves an agreement (or Collusion) between competitors (brokers) to fix contract terms, services, or products at a specific price or level, such as suggesting there’s a “standard” fee for broker compensation.
Price Fixing
A statement that appears to a reasonable person as an exaggeration that wouldn’t be relied on.
Puffery
Offers the greatest warranty to buyers and is the preferred type of deed in most situations.
1. Seisin
2. Right to Convey
3. No Encumbrances
4. Quiet Enjoyment
5. Warranty
6. Further Assurances
General Warranty Deed (full covenant and warranty deed)
Providing a service dependent on the customer/client obtaining (or not obtaining) another service from a specific provider.
tie-in arrangement
An agreement between two or more parties who conspire to not do business with a particular person or company.
Group Boycotting
Antitrust violation is one in which the competing firms agreed to violate antitrust laws.
Per Se
Good faith deposit, is a sum of money you put down to demonstrate your seriousness about buying a home. In most cases, ___ ___ acts as a deposit on the property you’re looking to buy.
Held in an escrow/trust account.
Earnest Money
When trust (escrow) funds are mixed with personal or brokerage firm funds.
Commingling
Using trust funds for anything other than their intended purpose.
Conversion
The process of converting personal property to real property. (MARIA TEST)
Annexation
Test to determine if an item is a FIXTURE or PERSONAL PROPERTY
1) Method of annexation
2) Adaptability for use
3) Relationship of the parties
4) Intention in placing
5) Agreement of the parties
MARIA
Fixtures that are removed from the improvement before an agreement of sale become personal property again through this process.
Severance
Cultivated crops that are considered personal property, even though they’re part of the soil. (previous owner can harvest the crop when its ready)
Emblements
Includes:
* Possession- titleholder may possess (be on) the property.
* Control-owner controls the use of property.
* Exclusion- the owner may decide who may or may not access the property.
*Enjoyment- The owner may use the property in any legal matter.
*Disposition- The owner has the right to sell or convey the property.
Bundle of Rights
Permits a specific parcel of property to be located by a trained surveyor.
Three primary types, 1)METES AND BOUNDS
2)LOT AND BLOCK (recorded plat)
3)RECTANGULAR GOV. SURVEY SYSTEM
Legal Description
Descriptions are characterized by a point of beginning, which is where the description both begins and ends.
It also uses monuments to mark boundaries.
Metes-and-Bounds
A permanent physical marker used in a metes-and bounds description that can be man-made or natural.
It may be a tree, creek, rock, or a stake placed in the ground.
*Also the point of beginning of a legal description. (infrequently used)
Monument
Begins with a reference to either metes and bounds or RGSS, then divide the land into lots with numerical descriptions of each parcel.
Includes streets, access roads, other important features.
Lot-and-Block
Regulated by the U.S. Department of the Interior’s Bureau of Land Management, DIVIDES land into townships and further into sections and fractions called sections.
Principal Meridian?(Range lines)
Base Line? (township lines)
Every township is six miles square or 36 square miles.
Every section is one square mile, which is also one mile squared.
Government Survey ( Rectangular Survey)
Measurement for Elevation.
There are two.
*Datum - Horizontal point reference, surveyor measures the depth and height of various land elevation.
*Benchmark - A point where the exact elevation is known and marked with a brass or aluminum plate. Surveyors can use this as a starting point for other elevations.
A legal limitation on the owner’s use of the property or its value. It can affect marketability and may be monetary and physical.
Encumbrance
Affect real and personal property and include judgement liens, federal and state tax liens, and decedent’s liens.
General Lien
When the courts place an encumbrance on the property of a defendant in a lawsuit for monetary damages ( also known as judgement).
Attachment Lien
a non-possessory right acquired ray one party to use another party’s land for special use. Often acquired through a written agreement. It affects the use of property, they have the potential to diminish the property’s value.
Easement
The property on which the easement lies.
Suffers the easement because majority one their property.
Servient Estate
The property or individual who use the easement.
Enjoys the easement.
Dominant Estate
Attached to a specific parcel of land, transfers (runs) with the land, and gives the “dominant tenement” right to use adjoining property/servient tenement.
Easement Appurtenant
Granted to a specific individual or business rather than attached to the property itself.
Easement in Gross
This type of easement can only be created for the purpose of INGRESS or EGRESS.
Easement by necessity
This easement isn’t legal, and is created through the continued, uninterrupted, obvious, exclusive, and adverse use of someone’s property without permission.
Easement by Prescription
Are structures or objects built on another’s land without permission. Always illegal.
Backyard fence, extending a house onto someone else’s property line.
Encroachment
A provision in a mortgage contract that ensures that a rental agreement between the tenant and the landlord will continue under any circumstances. This is done primarily to protect the renter from eviction by the mortgagor if the property is foreclosed upon by the lender.
Non-Disturbance Clause
The right to drill or dig for minerals on the property.
Mineral Rights (Subsurface rights)
The right to use the area in the sky above a property.
Air Rights
Are especially important for agriculture use or in areas where a well is needed of prior appropriation.
Water Rights
1) Riparian- rights address water that moves through a property, such as a river or stream. (two types of water: navigable or non-navigable)
2) Littorals- rights address static water, such as pond, lake, or ocean.
3)Prior Appropriation- the first party to physically take water from a source and put it to beneficial household, agriculture, or industrial use will continue to have a claim to the water.
Three Categories of Water Rights
Accretion- Process by which water carries rock, sand, and soil and causes land build-up.
Alluvion- New deposits of land due to a natural force.
Erosion- Gradual loss of land due to a natural force.
Avulsion- A sudden loss of land by swift, large-scale change in water flow.
Reliction- When water gradually recess and uncovers new land.
Natural Process Associate with Water Rights
One person owns the property with no joint interest by any other person.
The estate possess either according to instructions in the owner’s will or according to state law.
Ownership in Severalty
A form of co-ownership in which each co-owner requires unity of time, title, interest, and possession.
*Rights of SURVIVORSHIP, surviving co-owner(s) will own the property of a joint tenant who dies.
*If a ___ ___ sells his/her interest, the buyer doesn’t become a joint tenant with the other owners; the buyer is a tenant in common with the raining joint owners. That’s because the unities of time and possession don’t apply.
Tenancy in Common
Owned by several joint owners, each of whom has the right to use the property under the specific terms of a ___ agreement.
May be sold as fee simple or right-to-use.
Ownership is typical split into 52 weeks. A 1/13th of 52 weeks are 4weeks.
Timeshare
Fee simple ownership type of timeshare.
Timeshare Estate
The right-to-use type of timeshare.
Timeshare Use
Buyers agree to a one-time purchase price and an annual maintenance fee, and in return get a selected accommodation time and have the right to use the unit for a specified number of years.
Vacation Ownership
Ownership typically involves ownership of a unit within a building and not the structure itself or any land.
Includes undivided shared interest in the common spaces.
Condominium
Members own shares in a corporation that owns the building.
Members don’t own the real estate.
Each owner’s right of possession of his/her individual unit comes from a propriety lease.
The corporation that owns the real estate pays the single property tax bill.
Cooperative (co-op)
Single-family homes but typically share walls with neighbors.
An owner of both structure and land.
Townhomes
A mixed-use development that has both residential and commercial units, consists of a parcel of land, any improvements, and shared common areas.
Planned Unit Development (PUD)
Ownership is limited to someones lifetime. The future owner is determined based on the life estate’s terms.
Life Estate or Freehold Estate
Based on the life of the estate holder/life tenant.
Ordinary Life Estate
Based on the life of someone other than the holder of the life estate/life tenant.
Pur Autre Vie
Any act by the estate holder that significantly reduces the value of the property at the end of the life estate.
Act of Waste
When a life estate ends, ownership of and interest in the property is determined in one of two ways.
Remainder- ownership will pass to remainder man instead of the party who established the life estate.
Reversion- Ownership will revert to the life estate originator (or the originator’s successors and heirs).
Is an interest in real property where the owner’s possession of the property isn’t fixed duration, as it would be in a lease (leasehold estate).
Freehold Estate
Is a type of freehold estate that conveys the most rights available. Property held as a ___ ___ can be sold and is inheritable.
Fee Simple Estate (fee simple absolute)
Is a type of freehold estate in which ownership is subject to either the occurrence or non-occurrence of a particular event.
There are two categories of ___ __ ___.
1.fee simple determinable
2.fee simple subject to condition subsequent
Fee Simple Defeasible
The current property owner conveys ownership to a new owner as long as some event does or doesn’t occur.
ex. on worksheet
Fee Simple Determinable Estate
The current property owner conveys ownership to a new owner on a specific condition.
ex on worksheet
Fee Simple Subject to Condition Subsequent Estate
An estate in which the holder has a possessory interest in a property but no ownership.
Leasehold Estate
A lease that ends on a specific date and must be renewed by mutual agreement between the landlord and tenant.
Estate for Years
A lease that automatically renews at the end of its terms (such as a month-to-month lease).
Periodic Estate
A lease without an established ending that can be terminated by either party.
Estate at Will
Is one in which a tenant didn’t leave when the lease expired.
Estate at Sufferance
One of the three PRESENT in warranties.
the grantor holds title to and possession of the property.
Covenant of Seisin
One of the three PRESENTt in warranties.
The grantor has the right to convey both title and possession of the property.
Covenant of Right to Convey
One of the three PRESENT in warranties.
The grantor assures the grantee that there are no encumbrances against the title other than those identified in public records or the deed itself.
Covenant Against Encumbrances
One of the three FUTURE warranties.
The grantor assures that the grantee’s use and enjoyment of the property will be unimpaired and unrestricted, subject to public police powers and private deed restrictions.
Covenant of Quiet Enjoyment
One of the three FUTURE warranties.
The grantor promises to take whatever actions necessary (within his power) to correct any title defects.
Covenant of Further Assurances
One of the three FUTURE warranties.
In this most important covenant, the grantor promises to protect and defend the title against lawful claims made by others.
Covenant of Warrant or Warranty Forever
Typically only warrants against title defects acquired during the grantor’s ownership of the property. It guarantees that the grantor owns and may convey the property, and warranties that the property is free of any debts or encumbrances not noted in the deed.
Special Warranty Deed
Often used in tax or foreclosure sales.
Bargain and Sale Deed
No warranties to the grantee. It only releases any of the grantor’s property rights to the grantee.
Used to clear up a simple cloud on the tittle.
Quitclaim Deed
To convey property from a dependents estate.
Executor’s Deed
Used to convey foreclosure property to property sold for tax liens.
Sheriff’s Deed
Conveys real estate to a trustee for the beneficiary named in the trust agreement.
Ex. in states that use a non judicial foreclosure process, the deed is conveyed to a trustee who holds it until the mortgage is paid in full OR until the borrower defaults and the lender must foreclose.
A Deed in Trust (or Deed of Trust)
Protects buyers and lenders (through separate policies) against financial loss that might be incurred because of title defects discovered after closing.
Title Insurance
Establishes chain of title. When the last grantee is not the next grantor, a gap exist in the chain. Gaps must be resolved.
Grantor-Grantee Index
Preliminary report, which promises to insure the property as long as certain conditions are met.
Title Commitment
Establishes the pathway of property ownership from its first owner to the current owner.
Begins with the current owner and works backwards.
Chain of Title
Any encumbrance, such as a lien or inheritance claim, that prevents the seller from providing clear, marketable title.
Most common in real estate is a mortgage lien.
Cloud on Title (title defect)
Has no defects or clouds to which a reasonable buyer would object.
Marketable Title
Is one against which there may be known defects (such as easement), but the title company has notified the parties of the defect and has agreed to insure against it.
A concern, sellers who offer insurable title instead of marketable title may not have to clear up title problems that come up before closing.
Insurable Title
Shared expenses that either party owes at closing are divided up depending on when closing occurs.
-property taxes and HOA dues
-Fuel (propane or oil tank)
-water and sewer charges
Proration(s)
Working with the lender, the closing officer prepares the __ __, incorporating all the figures and calculations required for the loan and other closing costs.
Any interest rate change of more than 1/8th of a percent requires a new CD, triggering a new three day waiting period.
The CD identifies who pays what at closing.
Closing Disclosure (CD)
Ensures that buyers receive an estimate of closing costs from the lender within THREE days of loan application and a final disclosure of closing costs at least three business days before closing.
Real Estate Settlement Act (RESPA)
Tila/RESPA integrated Disclosures.
The Dodd-Frank Act implemented use of these forms for all federally related mortgage transactions.
These forms are not required for home equity line, sellers financing or reverse mortgage.
TRID
A real property sale triggers a ___ ___, that’s collected at closing and payable when the deed is recorded.
May be paid by either the buyer or seller, as negotiated between them.
Rates vary by location, but the rate is usually a percentage of the total sale price or a dollar amount per $1,000 of the sale price.
Transfer Tax
Type of distressed property sale.
Is a property that is being sold by the lender due to the buyer’s default.
Foreclosure
Type of distressed property sale.
A property that the seller, with the lender’s permission, is selling for less than the seller owes against the property.
Short Sale
Type of distressed property sale.
In this type of sale, ownership has reverted to the lender because of a failed foreclosure sale or because the borrower surrendered ownership of the property to the lender through a deed in lieu of foreclosure.
Real Estate Owned (REO)
The process of distributing and administering a deceased person’s estate.
Probate
An appraisal formal opinion of value that a real estate appraiser assigns, based on supportable evidence, for a specific purpose, party, and property as of a specific date, and accordance with ____.
Uniform Standards of Professional Appraisal Practice (USPAP)
1989 requires that appraisals performed in conjunction with federally related transactions must be completed by state-certified or licensed appraisers.
Financial Institutions Reform, Recovery and Enforcement Act (FIRREA)
Not FHA-insured or VA-guaranteed and will not be sold to a government-sponsored enterprise (GSE), such as Fannie Mae or Freddie Mac.
Residential properties valued $400k or less are exempt from federal appraisal requirements.
Purchased financed with a loan guaranteed by the U.S. Department of Veterans Affairs (VA) must be appraised by a VA-certified, state licensed appraiser.
Federally Related Transactions
Intent to ensure that appraisals reflect an accurate, unbiased property value by requiring that appraiser be:
-Certified or licensed in the state in which the appraised proeprty is located
-Knowledgeable about local real estate market
-Qualified to appraise the subject property
Prohibits lenders from attempting to influence or coerce n appraiser with respect to the opinion of value.
Appraiser Independence Retirement (AIR)
- State the problem
- Identify data needed
- Gather and analyze data
- Determine highest and best use
- Estimate the land value (as if the land were vacant)
- Use one or more of the three approaches to valuation
- Reconcile values to determine the final appraised value
- Develop and deliver the appraisal report
Steps Appraiser follow USPAP Steps
- Market value
- Insurance Value
- Replacement Value
Types of value that Appraisers may be asked:
D : How popular or desirable a property is.
U : The property’s function.
S : Relates to the market supply
T : The ease with which another person can purchase the property; a property with a title defect may suffer a loss of value because of the difficulty of being able to transfer title to another.
DUST = Demand, Utility, Scarcity and Transferability
The principle of conformity
The principle of competition
The principle of substitution
The principle of contribution
The principle of pottage
The principle of assemblage
The principle of regression
The principle of progression
The principle of anticipation
Economic Principles of value
(Valuation Packet)
A process in which an appraiser use both superior and inferior units of comparison such as age, transaction price, etc, to determine a probable range of values for a property.
Bracketing
Based on the concept that the entire property is worth the sum of the value of the land and the value of the improvements on that land.
Appraisers rely on this approach.
Cost Approach
also know as economic obsolescence, is caused by factors outside the property. (an airport is nearby, next to a highway)
External Depreciation
A form of depreciation or loss in value caused by defects in design and can occur with outdated structure or systems or when a property is overbuilt for the area.
Functional Obsolescence
Occurs with wear and tear, damage, and improper maintenance.
Physical Deterioration
Refers to an item of physical deterioration or functional obsolescence where the cost to cure the item is less than or the same as the anticipated increase in the property’s value after the item is cured.
Curable Depreciation
Includes items not practical to correct.
Incurable Depreciation
A transaction that the parties to the sale are unrelated and that no one is under duress or pressure to complete the sale.
Ex. on non-__ __ is parents selling to their children.
Arm’s Length
One that’s quite similar to the subject property in terms of size, condition, number of rooms, and location.
Comparable Property
Licensees have a duty to disclose to potential buyers any Material, Adverse information they Actually possess about the Physical condition.
M - Info. is considered M if it is important in deciding what course of action the buyer takes regarding the real estate transaction.
A - Info. is considered adverse if it is negative and is regarded as any info. that would reduce a property’s value.
A - The licensee must have actual knowledge about the physical condition of the property. Licensees must disclose what they know.
P - The licensee has a duty to disclose adverse material fact about the physical condition of the property.
Material, Adverse, Actual, Physical (MAAP)
Randon - occurs naturally, can be found in soil and well water
Asbestos
Mold
Lead
Interior environmental hazards in homes
A hidden property condition that’s not likely to be discovered through a general review or inspection.
Latent Defect
Other licensees affiliated with the brokerage.
Affiliated Licensee
Offers for the same property from two or more clients represented by the same agent that will likely be considered by the seller during the same time period.
Contemporaneous Offer
Can be created through written or unwritten EXPRESS agreement. Agency agreements aren’t covered under the statute of frauds, which requires certain contracts to be in writing.
Although an agency relationship could be established through verbal agreement, that agreement may not be enforceable in court.
Agency in Ohio (Ohio Law)
Relationship that exists when a licensee represents a principal in the real estate transaction.
Agency Relationship
Single Agency: Agency relationship between the licensee and one party to the transaction.
Dual Agency
Sub-Agency: agency relationship between the licensee and another licensee’s client.
Split Agency: when agent represents one party to a transaction and a different agent from the firm is identified to represent the other party; often done to avoid dual agency.
Permitted Agency relationships in OHIO
Falls under real property.
(something that is transferred with or “runs with” the land) is a right or privilege associated with the property, although not necessarily a physical part of it.
ex. parking spaces in multi unit apartments, easements, water rights, and other improvements.
Appurtenance
The concept that no two parcels of property are exactly the same or in the same location.
Nonhomogeneity
Common-law rights granted to owners of land along the course of a river, stream, or similar flowing body of water.
Law varies state to state, but usually have right to use the water.
Riparian Rights
Plant or crops that require annual cultivation.
Fructus Naturals don’t require annual harvest. Regular trees and shrubs.
Emblements
A special category of fixtures includes property used in the court of business.
An article owned by a tenant, attached to a rented space building, and used in conducting a business.
Ex. hydraulic lift in auto repair shop, lanes and pin setting in bowling ally, dining booths in restaurant.
Trade Fixture
Include mineral rights and other natural resources that can be leased or sold separately fro surface rights.
Subsurface Rights
7 Protected Classes:
- Race
- Color
- Religion
- National Origin
- Sex
- Disability
- Familial Status
Additional protected classes are, Ancestry and Military Status.
Fair Housing Act Ohio
- Age - 65 or older and 55 or older
- Private Clubs - Organization that have membership restrictions may provide restricted housing its members, as long as it doesn’t offer to the general public.
- Religious Organizations - Housing sponsored by a religious organization may be restricted to members of that particular religious organization.
Fair Housing Act that are the exception to the rule.
Provides the greatest protection to the buyer because the grantor is legally bound by certain covenants (promises) or warranties.
Most used deed. Conveys real estate in fee simple from grantor to grantee, heirs, assignees, or successors.
General Warranty Deed
Limits the grantor’s defense of the title transferred by warranting 1. that the grantor received title
2. that the property was not encumbered during the time the grantor held title, except for otherwise noted in the deed.
*The grantor only warrants title to the grantee during the time period that the grantor held title.
Limited (special) Warranty Deed
Provides the grantee with the least protection of any deed. It carries no covenants or warranties.
Quitclaim Deed
The part of the deed beginning with the words “to have and to hold,” following the granting clause and defining the extent of ownership the grantor is conveying.
Habendem Clause
Contains no express warranties against encumbrances, but it does imply that the grantor holds title and possession of the property.
Bargain and Sale Deed
The act of transferring property to another.
May be voluntary, such as a gift or sale, or involuntary, as through eminent domain or adverse possession.
Alienation
Used by a trustee to return title to the truster.
Reconveyance Deed
When a person dies INTESTATE (without a valid will) the title to the real estate passes to the heirs identified in the state’s law of INTESTATE SUCCESSION.
No heirs can be identified or found, the state will acquire the property by the state’s power of ESCHEAT.
Involuntary transfer of property by law
Formal judicial process. Must take place where the decendents resided.
Probate
Frequently used when two or more individuals are buyers. Upon the death of one of the owners, their interest is not considered an asset of the estate and title transfers to the survivor(s) upon recording of the certified death certificate, avoiding probate.
Joint and Survivorship Deed
Used to convey real property made by an executor, administrator, guardian, trustee, etc, to the grantee. The grantor has the legal authority to transfer the property in the grantor’s respective capacity.
Fiduciary Deed
Statutory requirements in Ohio for adverse possession are that the property must be occupied continuously without interruption for 21 years.
Adverse Possession
When a person dies without a will or heir.
Intestate
The person has prepared a will indicating how that person’s property will be disposed at time of death.
Testate
The legal presumption that information has been obtained by an individual through due diligence.
Constructive Notice
Not only the information of an interest in property is available but also that someone is actually aware of it.
Actual Notice
A summary report of what the title search found in the public records.
Abstract of Title
A statement of opinion of the title’s status on the date the certificate is issued.
This isn’t a guarantee of ownership.
Certificate of Title
A contract under which the policyholder is protected from losses arising from defects in the title.
Title Insurance
A legal system used to verify ownership of real estate.
Torrens System
The clause in a mortgage or deed of trust stating that the balance of the second debt becomes immediately due and payable at the lender’s option if the property is sold by the borrower.
This clause prevents the borrower from assigning the debt without the lender’s approval.
Alienation Clause
A system of land ownership in which land is held free and clear of any rent or service due to the government. Federal system land.
Allodial System
A loan in which the principal, as well as the interest, is payable on the monthly or other periodic installments over the term of the loan.
Amortization Loan
A final payment of mortgage loan that is considerably larger than the required periodic payments because the loan amount was not fully amortized.
Balloon Payment
Any documents, claims, unreleased lien, or encumbrance that may impair the title to real property or make the title doubtful; usually revealed by a title search and removed by either a quitclaim deed or suit to quiet title.
Cloud on the Title
The loan amount to the property value.
Used to determine down payment when initially writing mortgage loans.
Loan-to-Value Ratio (LTV)
Lenders may require this for personal loans when the down payment is less than 20% and the LTV is higher than 80%.
protects the lender. It is a a second loan to the original to make up the 20% down payment.
Private Mortgage Insurance (PMI)
Interest pre-payment at closing to temporarily reduce interest rate, usually for a period of one to three years.
Buydown
is the total of all the buyer’s debt obligations divided by income. The required ratio will vary depending on loan type and lender.
Housing Ratio (aka debt-to-ratio or the back-end-ratio)
is the borrowers projected monthly housing expense (PITI, second liens, and association fees) divided by income.
Housing Ratio (aka the from-end ratio)
Aren’t government-insured or guaranteed.
Lenders see this as most secure loan which requires a 20% down payment. (LTV Ratio)
Conventional Loan
Meets the loan limit on other criteria that Fannie Mae and Freddie Mac set.
Conforming Loan
The tenant stays after the right to possess has terminated. Tenant is known as a holdover tenant.
Estate at Sufferance
The lease’s duration is unknown when it’s created.
Estate at Will
The lease terminates automatically when the specified period (day, week, month, year, etc) ends.
Estate for Years
The lease automatically renews at the end of each period specified in the lease.
Periodic Estate
Obedience - Agents must obey all of the landlords lawful instructions related to managing the property.
Loyalty- Agents must put the landlords interest ahead of all others, including their own.
Disclosure- Agents must disclose all material facts related to managing the property.
Confidentiality - Agents must maintain the landlords personal and financial confidentiality, disclosing nothing that would damage the landlord’s ability to negotiate for the best rental price and terms.
Accounting - Agents must account for all money or property belonging to the landlord.
Reasonable skill and care - Agents are obligated to use reasonable skill and care when performing the duties prescribed by the parties agreements.
Common Fiduciary Duties Performed by property manager - OLD CAR
Gross Lease
Net Lease
The process of converting personal property to real property.
Used in MARIA
Annexation
