Real Estate Flashcards
What does PETE stand for?
Police Power, Eminent Domain, Taxation, Escheat
What is Escheat?
Abandonment (dying with no will and no heirs with the property being taken by the state government)
How is LTV calculated?
Loan amount divided by sale price or appraised value (whichever is lower) = LTV
What is Eminent domain?
It is the government taking private property for public good.
What does a title insurance policy list?
All recorded defects against the title. It just covers issues that have been recorded.
What does a standard title insurance policy insure against?
Any recorded title defects or liens.
What are some things generally covered under an extended title policy?
Water rights, questions of survey and adverse possession claims.
What does a standard title insurance policy cover?
Recorded title defects and liens
What documents would be a condensed history of all records that affect the title?
An abstract
What is an abstract?
A history of all recorded documents that affect the title.
What is a survey used for?
To find boundaries and check for encroachments.
What is an affidavit of title?
A sworn statement concerning the title.
What is a chain of title?
A list of all owners.
What is a special assessment tax? And what happens if it’s not paid?
It is a real estate tax and if not paid, the property could be auctioned off.
What is Ad valorem?
Ad valorem tax is a tax whose amount amount is based on the value of a transaction or of property. It is typically imposed at the time of a transaction, as in the case of a sales tax or value-added tax.
What are Ad valorem taxes for?
General assessment tax, not a special assessment tax.
How are special assessment taxes paid?
They are normally paid each year for a certain number of years by the owners of the properties that have been improved.
What do special assessment taxes cover and what do general assessment taxes cover?
Special assessment taxes are normally to cover the cost of sewers and sidewalks. General assessment taxes are to cover public good items such as police and fire protection.
What deals with safety in construction?
Building codes.
What is a tax on the land plus improvements?
General assessment tax. (The more value (ad valorem) in the real property, the more one pays in taxes.
What is used to keep things in order such as zoning and building codes?
Police power.
What is the ability of the government to tax private property?
Taxation
What word describes Escheat?
Abandonment
What does TAR stand for?
TAX, Assessed Value, Rate. As a whole, it basically means taxes.
Test for intent (Method of Fixtures)
Attachment, Adaptation, Agreement
Which of the following describes an encroachment? Liquid asset, form of trespass, variance, buffer zone
Form of trespass
An estate is…
The right of ownership.
What rights do I have with Fee Simple Absolute?
Absolutely ALL the rights.
How long does Fee Simple Absolute last?
Forever
What rights do I have with Fee Simple Defeasible?
All rights but one. A fee simple defeasible is a conveyance of property that has conditions placed on it. The holder of a fee simple defeasible possesses the property as a fee simple subject to that condition. If the condition is violated or not met, then the property will either go back to the original grantor or a specified third party.
How long does a Life Estate last?
For the life of the grantee.
What happens when grantee of Life Estate dies?
Property reverts back to Grantor or third party (remainder-man)
Which estate can there exist a Remainderman?
A life estate
How many Freehold Estates are there and what are they?
There are 3 freehold estates. They are: 1. Fee Simple or Fee Simple Absolute 2. Fee Simple Defeasible 3. Life Estate
Upon the death of the life tenant, the estate returns to…
Fee Simple Absolute.
The Grantor or the Remainderman now owns the property in Fee Simple Absolute.
A life estate is ____________________ but generally not inheritable.
Transferable
A life estate is transferable but generally not __________________.
Inheritable
How many leasehold estates are there and what are they?
There are 4 Leasehold Estates. They are: 1. Estate for Years 2. Periodic Estate 3. Estate at Will 4. Estate at Sufferance
What interest does a tenant have in the property?
Leasehold
What interest does a landlord have in the property?
Lease fee
What is an Estate at Sufferance?
Landlord is “suffering” because tenant hasn’t paid rent and refuses to leave so now an eviction is necessary to get tenant off the property. The tenant is insufferable.
What is an Estate for Years?
An estate which lasts a definite amount of time. Has an expiration. This is the most common type of Leasehold estate.
What are two ways the government can acquire privately held land?
Eminent domain & Escheat
An estate that lasts only so long as a specified condition is met is known as a
Qualified Fee
An irrevocable right to use the lands of another is called?
An easement
A holder of a freehold estate has rights of…
Ownership
Which estate usually does NOT terminate upon the death of the holder of the estate?
Estate for years
Real property taxes are computed based on the property’s…
Assessed value
What are the four encumbrances?
Deed restrictions, Encroachments, Easements, Liens
What are the government’s right in land?
P.E.T.E: Police power, eminent domain, taxation, escheat
How many encumbrances are there and what are they?
- Liens, encroachments, easements, deed restrictions (Covenants)
Who has the easement on their property?
Serving tenement
What is the difference between a license and an encumbrance?
A license is revocable
What is the circle formula for taxes?
T.A.R.
Freehold estates are for how long?
Forever
Leasehold estates are for how long?
Definite period of time. Has a termination date.
Which taxes always take priority?
County government taxes
Who collects property taxes?
The county
What type of process will reveal an encroachment?
ILC (Improvement Location Certificate)
What does ILC stand for?
Improvement Location Certificate
Can a corporation own a property? If so, how?
Yes, by severalty
What form of ownership allows the right of survivorship?
Joint tenancy
What’s the best way for a married couple to take title?
Consult with an attorney
What act allows for common interest communities to levy (impose) mandatory assessments?
Common Interest Ownership Act ALLOWS common interest communities to exist.
We do exist, we can then file a declaration.
We can now levy mandatory assessments.
How do condo owners own the common elements?
Tenants in common
What type of ownership will allow all parties to have equal ownership?
Joint tenancy
How would we take title if we didn’t want equal shares?
Tenants in common
TRUE OR FALSE: In a cooperative, the individual would have to sign a deed in order to sale the property.
False. In a cooperative, individuals have ownership of stock, shares.
What document do individuals use to transfer property between individuals?
Deed
If government gives property to an individual it’s called?
Patent
How does an individual give their property to the government?
A dedication
What are the essential elements of a valid deed?
Competent grantor Signs the deed Identifiable grantee who accepts the deed With legal description Words of conveyance Consideration
The deed that gives the grantee the most guarantees is?
General warranty
What five covenants does a general warranty deed give the grantee?
FAQCW
Further assurance “If anything should happen in the future I
I will come back. I will sign anything I
need to sign. You have my assurance.”
Against encumbrances "If there's an encumbrance, I have told you about it and if there's a mortgage on this property, I will pay it off. There will be no encumbrances on this property when you give this deed. I assure you."
Quiet enjoyment “No third party is going to come knocking
at your door saying ‘this property is
mine!’ I guarantee you quiet enjoyment.”
Covenant of siesen “I’ve seized the property and I have a
right to convey it. I’m telling you that I
own it and I am guaranteeing my
ownership and I have a right to
convey it.”
Warranty forever “Forever and ever and ever I will tell you
this, may God strike me dead. I have
ownership, I’m going to give this to you,
it’s yours, forever. I give my warranty on
my life.”
What’s a material fact?
Something, if known, might change a decision.
Must a broker disclose a material fact?
Yes. If the broker knows about it, she must disclose it.
When does a property actually transfer ownership?
Upon delivery and acceptance.
Where do you go to learn or give constructive notice?
The courthouse.
In a real estate transaction, who goes to the courthouse and gives constructive notice?
The title company.
In a real estate transaction, who gives actual notice?
The broker.
How is actual notice given?
The broker looks around the property, she uses her eyes.
Does a buyer have to buy both a standard and an extended title policy?
No
If a buyer has a mortgage on the property they’re going to have to buy ______________________________ insurance.
Mortgagee’s Title
If there’s not a mortgage on the property, what kind of title insurance does the buyer have to purchase?
Standard title insurance
What does standard title insurance cover?
All the things that might have happened if the title insurance company made a mistake
What does extended title insurance cover?
All things that might have been missed when actual notice was taken.
- Adverse possession
- Prescriptive easement
- Things that the courthouse doesn’t have record of
What’s the difference between a title report and a title opinion?
A title opinion is done by an attorney, abstract is needed for an opinion.
Definition of an appraisal
An estimate or opinion of MARKET VALUE supported by an analysis of relevant property data.
What does CMA stand for in terms of appraisal?
Comparative Market Analysis
What further designations can appraisers obtain and where from?
MAI: Member of the Appraisal Institute
SRA: Senior Residential Appraiser
From: the Appraisal Institute
An appraisal is required for all of what type of loans?
Federally related loans such as conventional, FHA, VA.
What does CMA stand for in terms of a real estate licensee? What other acronyms are related to CMA?
Competitive Market Analysis
Others: BPO - Broker’s Price Opinion
BOV - Broker’s Opinion of Value
What does CMA/BPO/BOV do?
Assists a seller and a buyer in determining value.
Who performs a CMA/BPO/BOV?
A broker.
Can a client be charged a fee for the CMA/BPO/BOV?
Yes, a broker can charge a fee but should make it clear that it is not an appraisal.
What is the difference between Market Value and Market Price?
Market Value is the ideal price a seller wants for their property. Market Price is what a buyer actually pays for it. (The price I want versus the price I got)
What does DUST stand for? And these are essential elements of _________________?
DEMAND (desire, affordability)
UTILITY (usefulness, does the property fulfill a specific need, it is subjective; based on needs and desires of specific potential buyer)
SCARCITY (there is a finite supply of land, land in specific areas is limited)
TRANSFERABILITY (must have marketable title)
These are essential elements of VALUE.
What is DUST?
It is value in the real estate market. Basically, it’s the worth based on desirability. It’s in the same category as Market Value & Market Price.
What is the Highest and Best use?
It is the use that produces the best return on investment over time.
What is the meaning of supply and demand?
Seller’s market versus buyer’s market.
Prices moves __________________ of supply.
Opposite. When supply goes up, price goes down.
Price moves ___________________ demand.
With. When demand goes up, price does up.
Does supply and demand determine sales prices and rental rates?
Yes
What is the most important principle in appraisal and what does it mean?
Substitution is the most important principle. It is the basis of the sales comparison approach and is used in all three approaches.
What is never a liquid asset?
Land
The borrower’s right to cure the default and stop the foreclosure sale is _________________________.
Equitable redemption
A mortgage pledging personal property, as well as real property, as security for a debt is a _______________________.
Package mortgage
The clause that appears in both the note and the mortgage that allows the lender to demand immediate payment of the entire debt if the borrower defaults is an ______________________________.
Acceleration clause
A loan that is repaid in one single lump sum at the end of its life is called a straight loan or _______________________.
Term loan
A loan in which payments are scheduled so the entire principal balance is repaid by the maturity date is a ____________________________.
fully amortized loan
A final payment that is larger than preceding payments is a _______________________ payment.
Balloon
A _________________________ is used when more than one property is pledged as security for a single loan.
Blanket mortgage
A mortgage given by the purchaser to the seller in partial payment for the property is a ____________________________________________.
Purchase money mortgage
The different between a property’s market value and the debts against it is ____________________.
Equity
A loan that allows a borrower to make smaller payments of interest and principal but has a balloon payment at the end is a ______________________________.
Partially amortized loan.
What does amortized mean?
Reduce or extinguish a debt by money regularly put aside.
The clause that entitles a lender to accelerate the loan if it is assumed WITHOUT THE LENDER’S APPROVAL is an _____________________________________________.
Alienation clause
Points charges by lenders are computed as a percentage of the _________________________________.
Mortgage amount
The higher the loan-to-value ratio, the higher the __________________________________.
Leverage
A contract that gives a buyer the right to occupy the property now and receive a deed after payment in full of the purchase price is a _____________________________.
Contract for deed
The mortgage makes payments to the mortgagor in a _____________________________.
Reverse mortgage
The process of converting a future income stream into an expression of present value is _______________________.
Capitalization
The cost of replacing an improvement with another of similar quality but not an exact replica is ___________________________.
Replacement cost
Loss in value due to causes external to the property is ____________________________.
Economic obsolescence
A method of valuing a property by complying the subject property to chi liar properties that have recently sold is the __________________________.
Market data approach (sales comparison)
Demand, utility, scarcity, and transferability are essential elements of ____________________.
Value
To obtain the value using the capitalization approach, an appraiser would divide the _______________________ by the capitalization rate.
Net operating income
An appraisal is an _________________________ of value.
Estimate
The market data approach is based on the principle of ___________________________.
Substitution
An appraiser calculates accrued depreciation in the _______________________.
cost approach
When an appraiser determines the accrued depreciation, outdated plumbing fixtures would be considered ______________________________________.
Functional obsolescence
An appraiser estimating operating expenses is using the ____________________________.
Income approach
The market data approach is also known as __________________________.
Sales comparison
The step in which the appraiser weighs all approaches to determine a final value is __________________________.
Reconciliation
An appraiser determining the value of shopping center would use the _________________________________.
Income approach
The best approach to determine the value of library would be the __________________________.
Cost approach
What common test words are associated with “Sales Comparison/Market Data”?
Residential/single family
CMA - BOV, BPO
Subject
Comparables
What common test words are associated with “Cost Approach”?
Unique Property (schools, churches) No income Depreciation Appreciation Replacement Reproduction
What common test words are associated with “Income Approach”?
NOI (Net Operating Income)
Investment
Cap Rate (Capitalization Rate)
A contract whose terms have been explicitly declared either verbally or in writing is an ____________________________ contract.
Express
When only one party has the right to void the contract is a _______________________ contract.
Voidable
When only one party to the agreement makes a promise, the result is a _________________________ contract.
Unilateral
A contract created by the actions of the parties is an ___________________ contract.
Implied
A contract with a minor will be ______________________.
Voidable
A lease agreement in which the tenant pays rent only is a _____________________________.
Gross lease (it’s GROSS that I even have to pay rent!)
A lease agreement in which the tenant pays rent plus operating expenses is _______________________.
Net lease (I’m caught in a net of bills and there’s no getting out!)
A unilateral contract in which buyer has the right to purchase a property from the seller, if buyer chooses to do so is an _________________.
Option
A party attempting to enforce an oral executory contract for the purchase of real estate would be stopped by the _____________________________.
Statute of frauds
___________________________ means that there was an offer and acceptance; there was no fraud, misrepresentation, or mistake: and the consent was genuinely and freely given.
Mutual agreement
The party who makes an offer to another is known as the ___________________.
Offeror
An accepted offer becomes binding on the Offeror upon _________________________________.
Communication of acceptance
Actual knowledge to enter into a contract by intentionally deceiving a party is ____________________.
Fraud
Something of value given in exchange for something else of value is ________________________.
Consideration
___________________________ is not consideration but may be required as part of liquidated damaged in a purchase contract.
Earnest money
Additional material attached to and made part of an offer is an ______________________.
Addendum
To modify a written contract, both parties must sign an ___________________________.
Amendment
The buyer has equitable title in an _______________________ contract.
Executory
The right of parties to a contract to sue each other to perform the contract terms is _________________________________.
Specific performance
When the seller keeps only the earnest money or other things of value of a buyer who is in default, the contract remedy is ________________________________.
Liquidated damages
The priority of a recorded instrument is determined by the date of ________________________.
Recording
When an attorney or title insurance company traces the ownership of a parcel of land to the beginning of its recorded history, the process is known as a ____________________.
Title search
A recorded notice stating that a pending lawsuit may affect title to a particular property is a __________________.
Lis pendens
A document that summarizes all recorded interests affecting title to a given parcel of land is an ______________________________.
Abstract of title
All the documents that comprise the history of the title are the ______________________.
Chain of title
Protection against incomplete or defective records of the title to land can best be obtained by securing ________________________.
Title insurance
In many cases it is better to ______________________ asbestos rather than to __________________ it.
Encapsulate
Abate
A problem that is not covered by standard or extended title insurance is an ______________________.
Exception
When prorating, an item paid in advance will be a ______________________ to the buyer.
Buyer
The federal act that applies to closings and requires a good faith estimate of cost and a HUD-1 Settlement Statement is ______________________.
RESPA
An item paid in arrears will be a ____________ to the buyer.
Credit
Most deeds to be recorded must be _____________________.
Notarized
A new loan will show on the settlement statement as a buyer _________________.
Credit
Shared items, such as property taxes and water bills, will be ___________________ between the buyer and the seller.
Prorated
____________________ is an odorless, colorless gas that, if found, is often mitigated by adding ventilation.
Radon
What is the definition of notarized?
Document that is legalized by authority.
A written legal document by which ownership of real property is transferred from one party to another is a ___________.
Deed
The two parties to a deed are the __________________ and _____________________.
Grantor and grantee
In order to convey title, a deed must be signed by the __________________.
Grantor
Title does not pass to the grantee until the deed is ________________________________.
Delivered and accepted
Assurance to grandees that they will not be disturbed by someone else with a lawful interest in the property is the covenant of _______________________________.
Quiet enjoyment
The type of deed that is considered the best deed for a grantee is a ____________________________.
General warranty deed
A deed that conveys whatever interest in the property the grantor holds at the time of conveyance and contains no covenants or warranties is an ______________________________.
Quitclaim deed
A deed with warranties that apply only to the period the grantor owned the property is a _______________________________.
Special warranty deed
Property owned by one person is said to be owned in ___________________.
Severalty
A form of concurrent ownership in which each tenant owns an undivided ownership share in the entire property and has no right of survivorship is __________________________________.
Tenants in common
A form of concurrent ownership in which all owners have equal shares in the property and the right of survivorship is _____________________________.
Joint tenancy
An undivided interest in a resort condominium as a tenant in common for a specific period each year is a ____________________.
Time-share
A condominium is created by filing a _________________________.
Declaration
________________________ does not require co-owners to go through probate to obtain a title.
Joint tenancy
A person who holds stock in a building owned by a corporation owns the right to a ___________________________.
Cooperative
List two ways the government can acquire privately held land.
Eminent domain
Escheat
Public control of land use by the government is known as _____________________________.
Police power
A right of use or enjoyment which one person has in the lands of another for a specific purpose is an ________________________.
Easement
A tenant’s right to possess real estate for the term of a lease is a _____________________________.
Leasehold estate
A tree limb that overhangs into a neighbor’s yard is an example of an ______________________________.
Encroachment
An easement is not ____________________, but a license is.
Revocable
A claim that one person has against the land of another to secure payment of a debt is a _______________________.
Lien
A person who has not been paid for work performed on real property may record a ______________________________.
Mechanic’s lien
A party wall or a shared driveway is an example of an easement _________________________.
Appurtenant
The right of an owner to occupy a parcel of real estate forever is a ________________________________.
Fee simple absolute
The type of lien that takes priority over all others is the ___________________________________ for property taxes.
Government lien
As part of their right to govern land use, local municipalities enact and enforce ________________________________.
Zoning ordinances
A freehold estate is an estate of ownership with a(n) _______________________________.
Indefinite duration
Leasehold estates are estates of possession with a(n) __________________________.
Definite duration
Zoning laws are set at a _______________________.
Local level
Deed restrictions are created as a form of _______________________________ over land use.
Private control
All property other than real estate is known as __________________________.
Personal property
Real estate consists of three things: land, improvements and ___________________.
Rights
If a seller is taking a fixture, it must have been _________________________ from the purchase agreement.
Excluded
Land is not considered a __________________ because it cannot be sold quickly.
Liquid asset
When articles of personal property are permanently attached to the improvements, they become _______________________.
Fixtures
Before a new building can be inhabited, a __________________________ of occupancy is required.
Certificate of occupancy
Permission to vary from strict compliance with zoning requirements may be obtained in the form of a ___________________.
Variance
When a previously established use does not comply with requirements of a new zoning ordinance, it may be allowed to continue as a _______________________________.
Non-conforming use
Townships, sections, and meridians are used in the ____________________________________ form of legal description.
Rectangular government survey
A legal description that uses compass degrees is __________________________.
Metes and bounds
The type of legal description used in most urban areas is ____________________________________.
Lot, block and subdivision
A _________________________ may be used to separate two incompatible zoning uses.
Buffer zone
Real estate and fixtures are transferred with a ______________.
Deed
Personal property is transferred with a ______________________________.
Bill of sale
If the buyer is keeping the seller’s personal property, it must be ____________________________ in the purchase agreement.
Included
What is an example of non-conforming use?
A retail store in a residential neighborhood.
What other word also means mortgage?
Deed of trust
What ways can property be foreclosed?
- No principal/interest (no payment)
- No taxes/HOA/Special Assessment
- No insurance
- Removal of improvements
- Alienation without consent
- Waste (32 cats, meth lab, depreciating property in an unusual way)
What circle formula applies to any situation involving appreciation or depreciation? What does each part stand for? What is the hook?
A = the value AFTER (a=after) the percent change. B = the value BEFORE (b=before) the percent change. Per = the formula percentage (ALWAYS 100%)
If it states “appreciation” within the question, you will ADD the percentage specified to PER.
If it states “depreciation” within the question, you will SUBTRACT the percentage specified to PER.
Hook: Think of A=appreciation B=depreciation and that’s PERfect.
What circle formula is used for capitalization? What does each part stand for? What is the hook?
I = (income) Net Operating Income/NOI R = (rate) Capitalization Rate (investor rate of return, also affected by market forces)
V = value (what can be paid for a property to get the expected return)
Hook: IRV is an investor who only cares about capitalization.
(Be sure to compare apples to apples: monthly to monthly, annual to annual)
What is the circle formula used for taxes? What does each part stand for? What is the hook?
T = Taxes A = Assessed Value R = Rate
Hook: We get stuck in the TAR when we have to pay our taxes.
What is the circle formula for Gross Rent Multiplier? What does each part stand for?
Value = Value of the property GRM = Gross Rent Multiplier Rent = Rent amount
(Be sure to compare apples to apples: monthly to monthly, annual to annual)
Appraisals are not required for which type of loan?
Seller-carry loan
USPAP matches…
Appraiser. (An appraiser is expected to follow USPAP: Uniform Standards of Professional Appraiser Practices)
Highest and best use matches…
Appraisal. (An appraiser must show the current highest best use in an appraisal)
BPO matches…
NOT an appraisal.
Increasing returns matches…
Contribution. (Improvements that add more value than they cost)
Most important principle matches…
Substitution. (The most important appraisal principle of value is substitution. It’s used in all three methods of valuation)
Progression matches…
Conformity. (The idea that under-improved property tends to increase)
