Quizlet Transfer Flashcards
Holds the principal responsible for actions performed by their agent
General Agency
The broker is the ______ of the agent.
Principal
The relationship between a broker & their sponsored agent is an example of a _____ relationship.
General Agency
The relationship between a broker & their client is an example of a _____ relationship.
Special Agency
The relationship between an adult son who is asked to oversee the affairs of his elderly father is an example of a/an _____ relationship.
Universal Agency
Created by a written/oral agreement between the principal & the agent.
Express Agency
Outlines the relationship & the duties of each party to the listing agreement
Express Agency
• There is nothing in writing
• Agency relationship is recognized bc of the actions, conduct, & words of both parties
Implied Agency
Occurs when a broker or sales agent has done something on behalf of, but w/o prior authorization of, a principal
Agency by Ratification
• Law passed in 1890 that prohibits trusts , contracts, combinations, or conspiracies in the restraint of trade or commerce
• Essentially made monopolies illegal
Texas Fair Enterprise & Antitrust Act of 1983
Outlaws price fixing
Sherman Antitrust Act
Serves to keep competition high, keep the quality of services & products at the highest level, & allow capitalism to work the way it is supposed to
Sherman Antitrust Act
When should agency relationships be disclosed?
At an initial meeting - orally or in writing
To have a legal & ethical responsibility to act in their client’s best interest
Fiduciary
What are the Fiduciary Duties?
OLD CAR:
Obedience
Loyalty
Disclosure
Confidentiality
Accounting
Reasonable Care
According to the Texas Real Estate License Act, when must the written statem’t providing the Information about Brokerage Services be provided?
At the first substantive dialogue
When a broker represents both sides (buyer & seller or landlord & tenant) of a real estate transaction
Intermediary Broker
Operation expenses for property are collected from the association (usually a monthly fee)
Condos
Hallways, elevators, stairwells, pools, recreational facilities, laundry rooms, parking lots
Common Elements
The title for the apartment building belongs to a legally created entity
The Cooperative
• Every resident buys stock in this & receives a proprietary lease for one of the units
• The ______ pays taxes, loans, & other expenses
Cooperative
“Maintenance payment”
“Common charges”
“Monthly Assessment”
“Mortgage”
Monthly fee co-op owners must pay for various expenses
Can also pay for upgrades that all co-op owners approve “ex: pools, recreation areas, other amentities”
Monthly Assessments
Examples are high rise apartments & single-family homes
Cooperative
• made up of owners/elected group of owners
• approves co-op sales
• handles the finances
• enforces rules
- ensures maintenance is done
Co-op Board of Directors
- Picky about who they’ll approve as an owner as owners’ default affects all of the owners
- Will interview prospective buyers before approving the sale
Co-op Board
If there isn’t enough in common fund to cover repairs & expenses, the building can fall into disrepair - loss of value
Co-Op Risks
What is the major difference between a townhouse & condo?
Townhouse owners generally own the land below their unit.
How can you verify the difference between a unit & a townhome or condo?
By reviewing the legal description in the deed
Usually include the unit & the land
Townhouses
Usually include the unit only
Condos
Survey for this will have a space enclosed showing the 4 corners of the unit on the floor & the 4 corners for the ceiling
Survey for a condo
2nd way to tell if residence is a townhouse
Review the survey
Will be clearly drawn on a survey for a townhouse
The lot lines
A subdivision/development that includes single-family dwellings along with some common elements such as parks, pools, community recreational centers
Planned Unit Development (PUD)
Common elements are either owned by HOA or collectively by all homeowners
Planned Unit Development (PUD)
All residents are required to be members of the association & pay a fee for the amenities
Planned Unit Development (PUD)
- Dwellings that are built in a factory & then delivered to the site once complete
- Mobile homes, double-wides, & trailers
Manufactured homes
- Duplex, triplex, & fourplex
- Some clients may want these as investment properties
Multi-Family Homes
Anything more than 4 units
Commercial Real Estate
What is a benefit to owning multi-family homes?
An economy of sale
Why are the sales of multi-family homes referred to as an economy of sale?
Because of the reduced cost of maintaining 1 location that serves more than 1 family
One residence that has multiple owners who take turns using the property
Timeshares
Share the right of possession of the property for a specific period of time
Timeshares
- Typically used as vacation homes in desirable recreational locations near beach/mountains
- Found along the coast more than anywhere else
Timeshares
Old buildings mostly located in urban areas where demand for residential units is high & space for new development is limited
Converted Use Properties
Describe the IRA withdrawal tax benefit for 1st time homebuyers
1st time homeowners may be able to w/draw up to $10,000 penalty free from their tax deferred individual retirement account to go towards down payment
The profit received from selling a capital asset
Capital Gains
What is a benefit enjoyed by homeowners who sell their primary residence
Tax exemptions on capital gains
The loss incurred from selling a capital asset is referred to as…
Capital Loss
Include all of taxpayer’s tangible property - real estate, investment properties, & equipment
Assets
The IRS imposes taxes on all forms of _______.
Capital Gains
How do you calculate capital gain in real estate?
Sales Price - (purchase price + cost of improvements) + Total Depreciation - Expenses = Gain
Why is depreciation omitted when calculating capital gains on the sale of a primary residence?
B/c homeowners get a tax break on the sale of a primary residence
The length of time a property is held is referred to as…
the holding period
The amount of time between the day a property is bought & the day it is sold
The holding period
Holding period is shorter than 1 year
Short-term holding period
Determines whether a capital gain is taxed as a short-term or long-term gain
The holding period
Holding period is > or equal to 1 year
Long-term holding period
Taxed as normal income according to the federal income tax rates - meaning they are taxed at a much higher rate than LTGs
Short-Term Gains
Current tax %s for Long Term Gains
0%, 10%, 20%
Determines the tax bracket at which the long-term gains will be taxed
The income level of the individual taxpayer
____ _________ ________ ____ ___ _______ created certain exclusions from capital gains taxes for homeowners.
The Taxpayer Relief Act of 1997
Universal exclusions provided by the Taxpayer Relief Act of 1997
Married homeowners may exclude up to the 1st $500,000 of profit on the sale of a primary residence & single homeowners may exclude up to the 1st $250,000
This exclusion is reusable every 2yrs after the sale
The universal exclusion under the Taxpayer Relief Act of 1997
How can a taxpayer become eligible for the capital gains exclusion?
1 of 2 Ways
- Taxpayer must have owned & occupied the home as a principal residence for at least 2 of the 5 years preceding the sale
- Years may be aggregate - not necessarily continuous
How can taxpayer become eligible for capital gains exclusion?
2 of 2 Ways
Homes sold for profit of < $250,00 or $500,000 for joint files don’t require the owners to file an info return reporting the sale of their principal residence
What are the 2 items contained in a written assurance?
1.) Statement that entire gain made from the sale can be excluded
2.) Statement that property is the owner’s principle residence
Government requires sellers of principal residences to provide them with…
Written Assurance
Let’s an investor sell a property, reinvest the proceedings in a brand new property, & defer all capital gains taxes
1031 Exchange
Under this, the investor is never allowed to touch $ from the sale
Sales must go through a qualified intermediary
1031 Exchange
___ ________ ________ ________ ____ __________ allows homeowners to deduct the interest they pay on their loans.
The federal mortgage interest tax deduction
________ _______ are automatic & protects homeowners from claims by creditors being made against their homes
Homestead Rights
What are the exemptions to the homestead rights?
- mortgage lenders b/c the homestead itself is used as collateral
- tax liens
Homestead limit in urban areas
Maximum amount of land can’t exceed 10 acres
Homestead limit in rural areas
- 200 acres for family &
- 100 acres for single person
- Creditors aren’t permitted to force someone in debt to sell their home to pay off the debt
- doesn’t apply to mortgage debt
The homestead protection
Calculated according to the assessed value of real estate & collected from each property owner to create revenue to run the local government agencies & provide benefits to residents of the community
Ad Valorem Taxes
“according to value” taxes
Ad Valorem Taxes
Removes a % or an absolute $ amount from the assessed taxable value of the property
Exemption
The value placed on a property by a governmental unit for the use in levying annual real estate taxes
Assessed Value
- reduces the amount of ad valorem taxes paid on the homestead
- an owner can only claim 1 homestead
Homestead Tax Exemption
Tax exemption required by Texas law of school districts to offer
$25,000 tax exemption on residence homestead
A license holder who represents a principal through cooperation with the principal’s broker
Subagent
a license holder who:
a.) represents a principal through cooperation with & the consent of a broker representing the principal and
b.) is not sponsored or associated with the principal’s broker
Subagency
On a listing sheet what would a field stating “BC:3” mean?
It means the buyer’s broker will get a 3% commission once the sale closes
Occur when the same real estate office/broker is representing both the seller & the buyer as clients in the same transaction
Intermediary relationships
Counties are required to offer a _______ _________ if the county collects _____ __ ______ ______ or _______ _________ ______.
$3,000 exemption if the county collects farm - to - market taxes or flood control taxes
The appraised value of the property established by the county is _______ for homeowners ____ or _______.
frozen for homeowners 65 or older
In order for a brokerage to be able to represent both the buyer & seller in a RE transaction, the brokerage needs to have the permission of ______ _________
both parties
Type of intermediary relationship where 1 agent represents the interests of the seller & a different agent does the same for the buyer allowing both agents to give a full degree of representation to both clients
Intermediary With Appointments
- Any fact that is significant/essential to the transaction
- Any piece of information that could reasonably be expected to influence a prudent individual’s decisions regarding the transaction
Material fact
What are the 2 requirements to disclosing agency?
1.) Tell everyone whom you represent at first contact
2.) Give the written statutory statement (IABS) communication about a specific property
When should agency relationships be disclosed?
At first contact
What is the name given to the duties owed by agents to their clients?
Fiduciary Duties
Which fiduciary duty does the “O” stand for in OLD CAR?
Obedience
What fiduciary duty the “L” stand for in OLD CAR?
Loyalty
What fiduciary duty does the “D” stand for in OLD CAR?
Disclosure
What fiduciary duty does the “C” stand for in OLD CAR?
Confidentiality
What fiduciary duty does the “A” stand for in OLD CAR?
Accounting
What fiduciary duty does the “R” stand for in OLD CAR?
Reasonable Care
- Includes the prohibition of commingling
- Agents must account for all client funds entrusted to them
Accounting
- Including sharing of material facts about a property
- If it will help the client, the agent should share it
Disclosure
Purpose is to protect consumers against false misleading , & deceptive business practices, unconscionable actions, & breaches of warranty
Texas Deceptive Trade Practices-Consumer Protection Act (DTPA)
An action that takes advantage of the lack of knowledge, ability, experience or capacity of a person to a grossly unfair degree
Unconscionable action as defined by the DTPA
The unintentional spread of false information
Misrepresentation
3 x as much
Treble damages
Actual awareness of the act, practice, condition, defect, or failure constituting the breach of warranty
What “knowingly” means in the event of a breach of an express/implied warranty
A type of security interest granted over a property to secure the payment of a debt or performance of some other obligation
Lien
What is the BEST way to avoid giving misinformation & consequently violating the Texas Deceptive Trade Practices-Consumer Protection Act?
Cite a source for any information you give a client about a property
A kind of guarantee that an agent gives to a 3rd party that establishes that the agent has the authority to bind a principal - that the agent has the authority to make contracts, agreements, & enter into similar arrangements on the principal’s behalf
Warranty of Authority
An opportunity for the seller to be upfront & comprehensive about all facts & defects concerning the property
Seller’s Disclosure Notice
Why should RE agents refrain from giving legal advice to clients?
Agents aren’t licensed to give legal advice, & if they do, they could be held liable.
Describing a property in a flattering/favorable way
Puffing
Broker - Client Relationship
Special Agency
Sales Agent - Broker Relationship
General Agency
