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Real Estate License > Real Estate II > Flashcards

Real Estate II Flashcards

1
Q

synonyms for whole numbers

A

positive integers or basic numbers

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2
Q

improper fractions

A

numerator is larger then denominator

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3
Q

profit

A

A financial gain. Making more money selling a product than was spent buying or producing the product.

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4
Q

loss

A

A financial loss. Making less money selling a product than was spent buying or producing the product.

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5
Q

mortgage

A

is a secured loan that is tied to real estate, where the borrower has to pay the money back to the lender on a set schedule and amount of payments.

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6
Q

principal

A

The amount lent to a borrower to purchase a house

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7
Q

interest

A

Money repaid regularly at a specified rate as compensation for money lent is called

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8
Q

down payment

A

is the initial payment made when buying something on credit; a down payment is paid directly by the buyer to the seller.

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9
Q

amortization

A

is the repayment of a loan over time in equal installments that include principal and interest.

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10
Q

With an amortizing loan, mortgage payments are:

A

made over time, consist of equal installments, and go towards both principal and interest

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11
Q

commission split

A

the compensation payment from the broker to the sponsored licensee is what is known as

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12
Q

total revenue

A

total money gained

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13
Q

total loss

A

total money lost

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14
Q

net profit or total

A

part / percentage = total

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15
Q

PITI payment

A

principal, interest, taxes, insurance

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16
Q

annual interest total

A

Principal x Interest rate = Annual interest

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17
Q

monthly interest formula

A

Annual interest ÷ 12 (months) = Monthly Interest

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18
Q

In an amortized loan, the monthly interest payment is always based on:

A

the remaining principal

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19
Q

total loan cost for amortized loans

A

Monthly payment x Number of payments = Total loan cost

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20
Q

total interest paid for amortized loans

A

Total loan cost - Original loan principal = Total interest paid

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21
Q

origination points

A

are fees charged to the borrower by the lender to pay for the loan origination.

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22
Q

discount points

A

are paid by the borrower to lower the interest rate.

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23
Q

1 point=

A

1% of the loan principal

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24
Q

total cost of points

A

Loan points x Loan principal = Total cost of points

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25
Q

assessed value

A

is the value placed on a property by a governmental unit for use in calculating property taxes.

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26
Q

property taxes =

A

tax rate x assessed value

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27
Q

assessing unit

A

or approved assessing unit is a department that has the power to assess real property (such as a city, town, or county

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28
Q

what are ad valorem taxes based upon?

A

the value of the property

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29
Q

the amount that a homeowner pays in property taxes are based upon two things:

A

tax rate and assessed value of the property

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30
Q

property taxes owed=

A

Tax rate x Assessed value

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31
Q

proration

A

is the act of dividing or allocating expenses between buyers and sellers based on the actual period of usage of the item or service.

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32
Q

accrued items

A

are costs that have been incurred, but have not been paid for yet. Accrued costs are owed by a seller (such as some recurring special assessments and mortgage interest), but which will ultimately be paid by a buyer after they receive title to a property.

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33
Q

prepaid items

A

is an item that has been paid for ahead of time, generally by the seller.

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34
Q

1 mile=x feet

A

5,280 feet

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35
Q

1 cubic yard = x cubic feet

A

27 cubic feet

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36
Q

1 sq. yard = x sq ft

A

9 sq ft

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37
Q

1 acre= x sq ft

A

43,560 sq ft

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38
Q

1 sq mile= x acres

A

640 acres

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39
Q

livable area

A

This is considered the finished area of a home . includes rooms within the house or connected to the house that are typically heated and/or air-conditioned, making them suitable for habitation year-round.

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40
Q

unfinished area

A

includes external areas such as patios, porches, decks, and garages. A basement or attic could also be considered unfinished, depending on the functionality of the room.

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41
Q

most common measurement for the size of a building

A

square ft

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42
Q

common measurement for size of land

A

acreage

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43
Q

1 section= x square mile

A

1 square mile=640 acres

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44
Q

1 township= x sections

A

36 sections=36 square miles

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45
Q

1 linear mile = x linear feet

A

5,280 linear ft

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46
Q

area of triangle

A

(Base x Height) ÷ 2 = Sq. ft.

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47
Q

frontage

A

is the portion of the boundary of a lot that borders the street. This is measured in front feet.

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48
Q

amortized loans are paid in

A

arrears

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49
Q

appraisal

A

is the value of a property, based on factors determined by the opinion of a certified appraiser.

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50
Q

USPAP

A

Uniform Standards of Professional Appraisal Practice- is the ethical code that appraisers in the United States must follow.

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51
Q

appraisers are regulated by

A

the appraiser qualifications board AQB of the appraisal foundation

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52
Q

TALCB

A

Appraisers in Texas are regulated by the Texas Appraiser Licensing & Certification Board and is closely related to TREC

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53
Q

3 types of appraising a trainee can attain

A

Licensed Residential Appraiser

Certified Residential Appraiser

Certified General Appraiser

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54
Q

licensed residential appraisers can/cannot appraise

A

cannot appraise subdivisions
can appraise 1-4 family non complex residential units less than 1 million dollars. can appraise 1-4 family complex units less than $250000

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55
Q

education requirements for licensed residential appraiser

A

75 additional education hours on top of the 79 already taken. Verify their national USPAP course was taken after Feb 1 2002. Needs 2000 hours of logged appraisal experience over one year min. needs at least an associates

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56
Q

education requirements for certified residential appraiser

A

125 additional education hours on top of the 79 already taken. Verify their national USPAP course was taken after Feb 1 2002. Needs 2500 hours of logged appraisal experience over 2 years min. needs at least a bachelors degree.

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57
Q

certified residential appraisers can/cannot appraise

A

can participate in one to four residential unit transactions, no matter the value.

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58
Q

certified residential appraisers can/cannot appraise

A

appraise any kind of property, anywhere, anytime, anyhow.

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59
Q

education requirements for certified residential appraiser

A

225 additional education hours on top of the 79 already taken. Verify their national USPAP course was taken after Feb 1 2002. Needs 3000 hours of logged appraisal experience over 2 1/2 years min. 1500
hours of this should be spent on nonresidential property. needs at least a bachelors degree.

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60
Q

limited appraisal

A

is a simpler, abbreviated version of a regular appraisal.

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61
Q

appraisals take 2 types of data into consideration

A

general data and specific data

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62
Q

general data

A

is information about the area surrounding the property. This could include the city, region, and neighborhood in which the property is situated.

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63
Q

specific data

A

on the other hand, is information regarding the property itself.

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64
Q

3 types of value in real estate

A

market, appraised and assessed value

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65
Q

market value

A

is the price for which a property will sell if offered openly under normal conditions.

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66
Q

appraised value

A

is an estimation of property’s value as of a specific date, performed by a certified appraiser.

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67
Q

assessed value

A

is the value placed on a property by a governmental unit for use in levying annual real estate taxes

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68
Q

loan to value ratio

A

LTV ratio is the ratio between a loan amount and the value of the asset purchased by the loan.

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69
Q

highest and best use

A

is achieved when the property is used for the most appropriate purpose with the highest returns.

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70
Q

principal of anticipation

A

is the idea that the present value of a property is affected by the anticipated income or utility that property will give its property owner.

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71
Q

principal of contribution

A

A property’s overall value is made up of the combined value of each of its parts. The value of each component contributes to the total value.

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72
Q

principal of substitution

A

is present in practically all markets, not just real estate. This principle states that the value of something is affected by the cost of getting a similar (substitute) item elsewhere

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73
Q

principal of change

A

reminds us that the condition of a property, the desirability of its location, and the market in which it exists can always change.

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74
Q

principal of conformity

A

values are highest when the houses in a neighborhood look roughly the same. Value suffers when a house is much nicer, much worse, or just plain weirder than the other houses on the block.

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75
Q

principle of regression

A

When lower-value properties surround a subject property, they can drag down the value of the property

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76
Q

principle of progression

A

If the subject property is located among properties that have a higher value, that can bump up the subject property’s value because of

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77
Q

sales comparison approach

A

Determining value by comparing the subject property to similar properties (“comps”) that have sold recently. It’s most commonly used for single-family residences.

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78
Q

cost approach

A

Determining value by considering how much the same property would cost to build brand new at current prices (replacement cost), then adjusting for depreciation.

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79
Q

income approach

A

Determining value by considering how much income the property could generate when used as rental property.

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80
Q

reconciliation

A

the appraiser will compare estimates they made based on cost approach, sales comparison approach, and/or income approach

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81
Q

Functional obsolescence

A

Loss of value because a property’s function or appearance has gone out of style or has been replaced by a more appealing version

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82
Q

Economic obsolescence

A

Loss in value caused by negative forces outside the property which are beyond the control of the owner (unfavorable changes in the environment or market)

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83
Q

Deterioration:

A

Loss of value caused by physical wear and tear over time

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84
Q

properties have 2 ages

A

chronological and effective age (age influenced by updates)

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85
Q

appraisal report

A

is a report from a licensed appraiser that sums up a property’s market value based on collected data.

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86
Q

first step of appraisal

A

stating the objective: legal description, property rights, type of value, effective date, limitations

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87
Q

appraisal review

A

the lender’s underwriter may call for this to double check the accuracy of the appraisal

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88
Q

desk review

A

can be done right at the lender’s desk! They go through the original appraisal and ensure that it’s been properly completed and that the opinions formed by the appraiser are supported by the findings of the report.

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89
Q

field review

A

is performed by a third-party appraiser who carefully checks the validity of all the work that the first appraiser did.

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90
Q

DUST- characteristics that make real estate valuable

A

Demand
Utility
Scarcity
Transferability

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91
Q

demand

A

When more people want the property, it’s more valuable.

When less people want the property, it’s less valuable.

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92
Q

scarcity

A

If there’s an overabundance of something, its value won’t be particularly high.
When a certain type of property is hard to find, it becomes more valuable.

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93
Q

transferability

A

Anything that limits people’s ability to purchase a property makes it less valuable.
An item is more valuable if it’s relatively easy to move from one owner to another.

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94
Q

Sales comparison formula

A

Comparable property sale price ± Adjustments = Subject property value

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95
Q

cost approach equation for property value

A

Reproduction cost - Depreciation + Land value = Property value

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96
Q

quantity survey method

A

This involves the appraiser individually tallying up the value of everything that goes into the cost: labor and equipment, raw materials, business overhead, and other fees.

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97
Q

unit-in-place method

A

It takes direct and indirect costs into account, but combines them into a simplified cost for a building component.

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98
Q

square foot method

A

least accurate and widely used. The appraiser estimates a cost per square foot for that specific type of building and then multiplies it by the square footage of the structure.

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99
Q

age-life depreciation

A

Age of property ÷ Total useful life = Depreciation (%)

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100
Q

replacement cost

A

is the cost of giving the new building similar features using comparable modern materials at current prices.

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101
Q

reproduction cost

A

is the cost of procuring exact copies of the building’s components, preserving the styles and materials used at the subject property’s original construction. (You probably wouldn’t do this unless the goal was to recreate the look of a historical building.)

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102
Q

most likely property you would use the cost approach on?

A

new construction

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103
Q

functional obsolescence

A

loss of value because a property’s function or appearance has gone out of style or has been replaced by a more appealing or effective version

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104
Q

external (economic) obsolescence

A

loss of property value caused by negative forces outside the property which are beyond the control of the owner (unfavorable changes in the environment or market)

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105
Q

depreciation can be classified as either

A

curable or incurable

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106
Q

incurable

A

that could mean it’s impossible to fix, but in most cases it means that fixing it would not be worth the expense.

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107
Q

every property has two ages

A

chronological and effective age

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108
Q

economic life

A

is the length of time for which an improvement on property is expected to remain functional and useful.

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109
Q

physical deterioration

A

is the loss of value caused by physical wear and tear over time.

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110
Q

obsolescence

A

is a property’s loss of value due to economic or functional factors.

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111
Q

income capitalization approach formula

A

determines an investment property’s value based on its return.is the ratio of NOI to property value. calculates the percentage of expected annual income earned over a property’s value.

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112
Q

rental property IRV formula

A

Net operating income (I) ÷ Capitalization rate (R) = Value (V)

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113
Q

Potential gross income PGI

A

simplest calculation-the amount of income the property would bring in if it was at 100% occupancy (all units rented out).

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114
Q

Effective gross income (EGI)

A

Most buildings have at least some income loss caused by vacancies and unpaid rent. If you subtract the income loss from the PGI, you get this.

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115
Q

Net operation income (NOI)

A

takes into account both income loss and operating expenses, it is the most accurate representation of how much money a property actually brings in.

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116
Q

comparative market analysis (CMA)

A

uses information regarding recently sold homes in the area to arrive at an indication of what the fair market value of a similar property would be. different from an appraisal

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117
Q

subject property

A

the property that is the subject of the comparative market analysis or appraisal) is one of the primary factors that determine its value.

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118
Q

comparable

A

is any property that has sold and is similar enough in features, location, and proximity in time to inform the value of subject property.

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119
Q

qualities of a good comparable

A

recently sold within last 3-6 mo, within .25-.5 miles, same neighborhood, age of property

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120
Q

CMA steps

A

Evaluate the neighborhood.

Evaluate the subject property.

Get your comparables.

Compare and adjust selected comparables.

Establish a listing price range.

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121
Q

primary mortgage market

A

is the arena in which borrowers and lenders meet up for the purposes of negotiating the loan terms of a mortgage transaction.

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122
Q

secondary mortgage market

A

consists of holding warehouse agencies — most with some governmental ties — that purchase those bundles and reassemble them into packages of loans that they expect to resell to investors.-place where mortgages are bought and sold

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123
Q

mortgage backed securities MBS

A

When packages of loans are sold to investors, these repackaged loan bundles are presented as

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124
Q

3 major players in the secondary mortgage market

A

Fannie Mae: Federal National Mortgage Association (FNMA)

Freddie Mac: Federal Home Loan Mortgage Corporation (FHLMC)

Ginnie Mae: Government National Mortgage Association (GNMA)

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125
Q

government-sponsored enterprises (GSEs),

A

created by Congress to provide liquidity, stability, and affordability to the mortgage market. ex. Fannie Mae and Freddie Mac that engage primarily in conventional conforming mortgage loans ex. Federal Agricultural Mortgage Corporation (Farmer Mac)

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126
Q

Ginnie Mae

A

created in 1968 as a government owned corporation with HUD. FHA, VA and other government supported mortgage loans

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127
Q

Fannie Mae

A

Formal Name: Federal National Mortgage Association FNMA

Type of enterprise: GSE

Specialization: buying loans from large commercial banks

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128
Q

Freddie Mac

A

Formal Name: Federal Home Loan Mortgage Corporation FHLMC

Type of enterprise: GSE

Specialization: purchasing loans from smaller “thrift banks”

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129
Q

Ginnie Mae

A

Formal Name: Government National Mortgage Association GNMA

Type of enterprise: government owned enterprise

Specialization: buying loans to help housing assistance and support programs

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130
Q

Farmer Mac

A

Formal Name: Federal Agricultural Mortgage Corporation FAMC

Type of enterprise: GSE

Specialization: making credit available for agricultural and rural loans

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131
Q

depository institutions

A

utilize funds from savings accounts

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132
Q

thrift institutions

A

“thrifts” either stock companies or mutual companies.

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133
Q

Federal Home Loan Bank System FHLB

A

chartered to do four things:

Regulate member organizations

Set reserve requirements

Establish discount rates

Provide insurance for depositors

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134
Q

FHLB operates how many banks and are regulated by who

A

11 district banks that are regulated by the Federal Housing Finance Agency

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135
Q

Federal Deposit Insurance Corporation (FDIC)

A

created in response to the great depression in 1933 to:
Insure deposits up to $250,000 per depositor per account
Supervise financial institutions for safety and soundness
Make large financial institutions resolvable
Manage receiverships

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136
Q

Savings ASsociations

A

specialize in long term residential loans offering conventional, FHA-insured and VA guaranteed loans

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137
Q

real estate mortgage trusts (REMTs

A

is a registered company that owns and operates real estate mortgages; investors can buy and sell interests in mortgages.

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138
Q

Savings Banks

A

long term loans with funds derived from savings accounts. generally limited by their charters. provide local real estate support.

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139
Q

mortgage bankers

A

are not bankers in the traditional sense, but more like private entrepreneurs. The income is derived from fees received for originating and servicing real estate loans. less regulated than commercial banks.

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140
Q

savings associations

A

generally the most flexible of all the lending institutions in regard to their mortgage lending procedures
specialize in long-term residential loans

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141
Q

commercial banks

A

designed to be safe depositories and lenders for a multitude of commercial banking activities
rely mainly on demand deposits (checking accounts) for their basic supply of funds

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142
Q

mortgage broker

A

seldom invest capital in real estate loans and do not service the loans they help bring about
bring together a borrower and a lender and earns a fee for that service

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143
Q

savings banks

A

generally are limited in their lending activities because of their charters
provide long-term mortgage loans with funds derived from customer savings accounts

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144
Q

mortgage means what in old french

A

death pledge

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145
Q

3 housing GSE’s are

A

FNMA, FHLM, FHLBank system

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146
Q

Federal Home Loan Bank Act (the Bank Act)

A

created the FHLBank System and the Federal Home Loan Bank Board (FHLBank Board) as its regulator.

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147
Q

National Housing Act

A

enacted in 1934 as part of the new deal and established FHA Federal Housing Administration which offered loans funded by approved lenders

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148
Q

who issued the first conventional loan MBS?

A

Freddie Mac

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149
Q

pre qualification

A

is the first step a borrower takes in applying for a loan. The lender gives an estimate of a loan based on information provided by borrower.

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150
Q

pre approval

A

follows pre-qualification and is a more thorough examination of the borrower’s financial status.

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151
Q

The Uniform Residential Loan Application (or URLA)

A

is a standardized document owned by both FAnnie Mae and Freddie Mac to allow borrowers to apply for a mortgage loan and to allow consistency in data-gathering by lenders that is needed to evaluate borrower eligibility.

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152
Q

computerized loan origination CLO system

A

allows a real estate broker or sales agent to pull up a menu of mortgage lenders, interest rates, and loan terms, then help a buyer select a lender and apply for a loan right from the brokerage office.

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153
Q

automated underwriting

A

is a process of electronically evaluating a loan application and subsequently providing a recommendation for or against loan approval.

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154
Q

fixed rate amortized loans are also known as

A

direct reduction loans

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155
Q

straight amortized loan

A

features a payment plan wherein each total monthly payment amount is different. The fixed portion of the payment is the amount applied towards the principal with the portion paid to interest changing from month to month as the principal balance is reduced.

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156
Q

Adjustable rate mortgage ARM loans

A

the interest rate changes periodically, usually in relation to an index, and payments may go up or down accordingly.

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157
Q

the fully indexed rate is

A

equal to the margin plus the index

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158
Q

2 types of interest rate caps

A

periodic adjustment cap and lifetime cap

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159
Q

negative amortization

A

A payment cap can limit the increase to your monthly payments but also can add to the amount you owe on the loan.

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160
Q

negative amortization is the addition of

A

unpaid interest and the loan balance

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161
Q

flexible payment loan

A

specific type of ARM where the initial few years are lower monthly payments and then they increase

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162
Q

flexible payment loan

A

specific type of ARM where the initial few years are lower monthly payments and then they increase. appealing to younger groups.

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163
Q

interest only loan

A

also a straight loan or term loan is a type of balloon payment loan that calls for periodic payments of interest.

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164
Q

balloon payment

A

the final payment is larger then the rest.

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165
Q

maximum allowable payment formula

A

Borrower monthly income x Maximum allowable housing expense ratio = Maximum allowable monthly payment

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166
Q

maximum loan proceeds formula

A

(Maximum allowable payment ÷ Mortgage factor) x 1,000 = Maximum loan amount

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167
Q

T+I=

A

(Annual insurance premium + Annual taxes) ÷ 12 months = T + I

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168
Q

PITI=

A

P + I +T + I

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169
Q

conventional loans

A

are loans that are not underwritten by any agency of the federal government. can be either conforming or non conforming

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170
Q

government backed loans

A

are those insured by the Federal Housing Administration (FHA), guaranteed by the Veterans Administration (VA), provided by the U.S. Department of Agriculture (USDA), or provided by special programs created by individual states or local jurisdictions.

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171
Q

Loan-to-Value (LTV) Ratio

A

is a ratio of debt to value of the property

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172
Q

LTV=

A

Loan amount ÷ Purchase price

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173
Q

Private Mortgage Insurance PMI

A

is required on conventional loans for which the borrower has invested less than 20%

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174
Q

There is usually no legal limit on loan amounts with:

A

conventional loans

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175
Q

FHA mission

A

Its mission has been to provide access to low down payment mortgages to qualified buyers.

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176
Q

FHA-Insured Loans

A

operates under HUD refers to a loan that is insured by the agency.. this neither builds homes no lends money itself. must not exceed a certain housing expense ratio and total debt ratio.

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177
Q

Mortgage insurance premium MIP

A

When the FHA issues an insurance commitment to a lender, it promises to repay the balance of the loan in full if the borrower defaults.this is paid by the borrower when obtaining an FHA insured loan

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178
Q

VA-Guaranteed (GI) Loans

A

help veterans finance a home purchase with little or no down payment. This means VA loans can be used for 100% of the purchase price. refers to a loan that is not made by the agency but guaranteed by it.

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179
Q

VA loans can be used for HOW MUCH of the purchase price?

A

100%

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180
Q

For VA loan limits, the actual limit is established by:

A

county

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181
Q

The combined total of a VA borrower’s monthly debts cannot exceed

A

41% of their gross monthly income.

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182
Q

residual income

A

is defined as the amount of monthly income remaining after all the debts are deducted, including:

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183
Q

Certificate of Reasonable Value (CRV)

A

is an estimate of the market value on the date of inspection from VA approved appraiser for the property being purchased.

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184
Q

Farm Service Agency (FSA)

A

offers both direct and guaranteed ownership or operating loans to purchase and maintain farmland and to construct or repair buildings and other fixtures.

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185
Q

Rural Development (RD)

A

provides both direct and guaranteed loans for the purchase or construction of single-family homes, repair of existing homes, and the development of affordable rental housing. USDA loan

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186
Q

The two programs under the USDA that offer agricultural loans are the:

A

Farm Service Agency and Rural Developoment

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187
Q

USDA Rural Development Guaranteed Housing Loans are usually referred to as:

A

USDA loans

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188
Q

meet Fannie Mae and Freddie Mac guidelines

can be sold in the secondary market

A

conforming conventional loans

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189
Q

The property must meet HUD’s minimum property standards.

An upfront mortgage insurance premium (MIP) must be paid by the borrower.

A

FHA loans

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190
Q

do not meet Fannie Mae/Freddie Mac guidelines

The loans may exceed the conforming loan limit or buyers may lack sufficient credit or collateral.

A

nonconforming conventional loans

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191
Q

A certificate of eligibility is required to reflect the available entitlement.
loans to purchase or construct homes for eligible veterans and their spouses

A

VA loan

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192
Q

My First Texas Home

A

This program allows qualified Texans access to competitive interest rate home loans and down payment and closing cost assistance. you qualify if it’s your first home, must not exceed income limits, purchase price doesn’t exceed limit

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193
Q

According to the My First Texas Home program, a census tract in which 70% or more of the families have incomes that are 80% or less of the statewide median income is know as a:

A

targeted area

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194
Q

Texas Mortgage Credit Certificate Program (MCC)

A

to help make ownership of new and existing homes more affordable for individuals and families of low and moderate income, especially first-time buyers. lowers the amount of taxes owed to the federal gov

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195
Q

A Mortgage Credit Certificate:

A

allows the homebuyer to claim a tax credit for some portion of the mortgage interest paid per year, is a dollar-for-dollar reduction against their federal tax liability, and reduces the amount of taxes owed to the federal government.

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196
Q

Texas Bootstrap Loan Program

A

Owner-Builder Loan Program- is a self-help housing construction program that provides very low-income families (owner-builders) an opportunity to purchase or refinance real property on which to build new housing or repair their existing homes through “sweat equity.”

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197
Q

Texas Bootstrap Loan Program requirements

A

provide at least 65% of the labor necessary to build or rehabilitate their housing by working with a state-certified Nonprofit Owner-Builder Housing Provider (NOHP). cannot exceed $45000 per household

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198
Q

Texas Veterans Land Board VLB

A

administers three programs to assist Texas veterans in purchasing a principal residence and/or land and in financing home improvements. all programs are financed with bonds

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199
Q

three VLB loan programs available to a Texas veteran are:

A

Home loans

Land loans

Home improvement loans

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200
Q

VLB Land Loans may:

A

be assumed after three years

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201
Q

Texas Veterans Home Improvement Program (VHIP)

A

was introduced in 1986 to provide below-market interest rate loans to qualified Texas veterans for home repairs and improvements. offers up to $50,000 for a 20-year loan or up to $10,000 for a 10-year loan.

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202
Q

Texas Bootstrap loan program

A

All borrowers are required to provide at least 65% of the labor necessary to build or rehabilitate their housing.
a self-help housing construction program that provides very low-income families an opportunity to purchase or refinance real property through “sweat equity”

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203
Q

Texas Mortgage credit certificate program

A

allows the homebuyer to claim a tax credit for some portion of the mortgage interest paid per year
The homebuyer must complete a pre-purchase homebuyer education course prior to loan closing.

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204
Q

My first texas home

A

must qualify under FHA, RHS, VA, or conventional (Fannie Mae HFA Preferred) guidelines
provides up to 5% of down payment/closing cost assistance

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205
Q

Federal Reserve System (Fed)

A

the nation’s central bank, operates to maintain sound credit conditions, help counteract inflationary and deflationary trends, and create a favorable economic climate.

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206
Q

how many federal reserve districts are there?

A

12

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207
Q

How does the Fed maintain sound credit conditions?

A

sets requirements for Reserve Funds for each chartered bank and open market operations

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208
Q

When the Fed raises federal fund reserve requirements

A

decreased amount of funds in marketplace, causes interest rates to rise and loans become more expensive. discount rate is high.

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209
Q

When the Fed lowers federal fund reserve requirements

A

increased amount of funds in marketplace, causes interest rates to lower and loans become less expensive. discount rate is low.

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210
Q

prime rate

A

the short-term interest rate charged to a bank’s largest, most creditworthy customers is influenced by Fed’s discount rate. often the basis of determining banks interest rates for other loans and mortgages

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211
Q

The federal funds rate is the rate a:

A

bank charges when lending funds to other banks. The Fed indirectly controls this rate.

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212
Q

discount rate

A

Rate that the Fed charges banks for money lent. The Fed directly controls this rate.

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213
Q

The difference between the federal funds rate and the prime rate is that the prime rate is for:

A

The prime rate is for consumers and the federal funds rate is for other banks.

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214
Q

graduated payment mortgage

A

fixed rate, starts off a lower interest rate, interest rate increases over first few years before leveling off, used by younger borrowers

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215
Q

buydown mortgages

A

the borrower pays a fee upfront. In exchange, the interest rate initially starts well below the market rate.

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216
Q

pledged account mortgage

A

funds are drawn from a savings account to subsidize interest payments during the initial years of a loan term. Once those funds are depleted, the borrower assumes responsibility for making a full monthly mortgage payment.

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217
Q

package mortgage

A

includes not only the real estate but also all personal property and appliances installed on the premises.

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218
Q

contract for deed

A

title to property does not transfer to the purchaser until the full price has been paid- used when mortgage financing is unavailable or too expensive or when the purchaser doesn’t have a big enough down payment

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219
Q

purchase-money mortgage

A

the buyer borrows from the seller in addition to the lender

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220
Q

hard money loan

A

is financing that is secured and based on the value of an asset. usually higher interest rates then conventional and mostly short term loans

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221
Q

bridge loans

A

are short-term loans used to transition from one loan to another.

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222
Q

wraparound loans

A

enables a borrower to obtain additional financing from a second lender without paying off the first loan. The second lender gives the borrower a new, increased loan at a higher interest rate and assumes payment of the existing loan. total amount of new loan includes existing loan as well as the additional funds needed by the borrower.

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223
Q

alienation clause

A

or due on sale clause is a provision in the mortgage contract that triggers the payment in full of the loan upon the sale or conveyance of the property.

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224
Q

reverse mortgage

A

enable homeowners who are 62 years old or older to borrow against the equity in their homes. based on owners age.

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225
Q

Participation Loan

A

also known as a syndicated loan, can involve hundreds of banks partnering in on a single loan or package of loans.

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226
Q

shared-appreciation mortgage (SAM)

A

the lender originates a deed of trust loan at a favorable interest rate (several points below the current rate) in return for a guaranteed share of the gain (if any) the borrower realizes when the property is sold.

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227
Q

Blanket Mortgages

A

pledges more than one parcel or lot. usually includes a partial release clause that permits the borrower to obtain the release of a single lot or parcel from the lien by paying a specified amount of the loan.

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228
Q

Sale and Leaseback Loan

A

are used to finance large commercial or industrial properties.

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229
Q

seller-financed loan

A

is a real estate agreement in which the seller handles the mortgage process instead of a financial institution.

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230
Q

Seller Financing Addendum

A

must be used when the seller is financing all or part of the purchase price.it addresses credit documentation, credit approval, promissory note, deed of trust, tax and insurance escrow and prior liens.

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231
Q

Construction Loans

A

is made to finance the construction of improvements on real estate (homes, apartments, and office buildings). loan distributed in draws. have higher than market interest rates. short term until borrower gets a take out loan

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232
Q

Subprime Loan

A

carries an interest rate higher than the rates of prime mortgages due to higher risk. is generally a loan that is meant to be offered to prospective borrowers with impaired credit records.

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233
Q

predatory lending

A

is when a lender puts their welfare above that of the borrower. Good lending practices are beneficial to both the lender and the borrower.

234
Q

enables homeowners who are 62 years old or older to borrow against the equity in their homes
Loan proceeds can be used for any purpose and can be taken out as a lump sum, fixed monthly payment, line of credit, or a combination

A

reverse mortgage

235
Q

When a buyer cannot qualify for a bank loan for the full amount, the seller takes back a portion of the purchase price as a second mortgage.
The buyer borrows from the seller in addition to the lender.

A

purchase money mortgage

236
Q

It allows the homeowner to use the funds that accumulate from rising home prices and/or the first-loan paydown.
The lender agrees to make a loan based on the amount of equity in a borrower’s home.

A

home equity loan

237
Q

short-term loans used to transition from one loan to another

connects the borrower from their present construction loan to their eventual mortgage loan when the house is built

A

bridge loan

238
Q

Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act)

A

was enacted on July 30, 2008, and mandates a nationwide licensing and registration system for residential mortgage loan originators (MLOs).

239
Q

licensing requirements for MLO’s

A

must be registered as a MLO and have a unique identifier (federal registration); for all other individuals a state license and registration and have a unique identifier

240
Q

The SAFE Act aims to:

A

is meant to provide consumers with information on MLOs, aggregate and improve information flow between regulators, provide accountability and tracking, and enhance consumer protections.

241
Q

Dodd-Frank Wall Street Reform and Consumer Protection Act

A

The act called for the creation of a number of new government agencies with oversight responsibilities of different aspects of the banking system, including those involving commercial and residential mortgage origination and servicing.

242
Q

Consumer Financial Protection Bureau (CFPB)

A

is one of the agencies created as a result of the Dodd-Frank Act. Its primary directive is to educate and protect consumers and prevent predatory lending in the mortgage marketplace.

243
Q

Truth in Lending Act (TILA)

A

allows consumers to make comparisons from one lender to another, it also gives consumers protection

244
Q

The Truth in Lending Act:

A

is designed to help consumers compare different funding options and protect consumers from unfair credit practices.

245
Q

Regulation Z

A

applies to credit transactions, secured by residence, to be used for personal, family or household purposes only - all must receive a disclosure statement and provide ARM borrowers with a consumer handbook on adjustable rate mortgages

246
Q

three-day right of rescission

A

borrower has three days to rescind the transaction from the lender

247
Q

trigger terms

A

such as the down payment, number of payments, monthly payment, or dollar amount of the finance charge

248
Q

As per Regulation Z rules, an advertisement may:

A

general phrases like “liberal terms available” may be used, and the selling price and annual percentage rate (APR) may be advertised without disclosure of additional financing information.

249
Q

If an advertisement includes the amount of the down payment, which of the following is one of the details that must also be included?

A

If an advertisement includes the amount of the down payment, which of the following is one of the details that must also be included?

250
Q

Fair Credit Reporting Act (FCRA)

A

promotes the accuracy, fairness, and privacy of information in the files of consumer reporting agencies.

251
Q

Real Estate Settlement Procedures Act (RESPA)

A

is a consumer protection statute that aims to help educate consumers about closing and settlement services. created in 1974

252
Q

One important goal of RESPA is to protect:

A

is to protect consumers from abusive lending practices.

253
Q

Affiliate Business Arrangement (ABA)

A

Disclosure stating the relationship and that the buyer need not use affiliated firm.

254
Q

Settlement Statement (HUD-1 form)

A

was a standard form required by RESPA that showed all of the borrower’s and seller’s charges arising from the settlement of their real estate transaction or closing costs

255
Q

Settlement Statement is now known as

A

Closing Disclosure. TILA-RESPA Integrated Disclosure or TRID.

256
Q

TRID

A

requires that lenders give borrowers two disclosures: the Loan Estimate and the Closing Disclosure.

257
Q

Closing Disclosure

A

is a form used to itemize services and fees charged to the borrower by the lender when applying for a real estate loan. must be received no later than 3 business days before consummation of the loan

258
Q

Loan Estimate Form

A

license holders give their clients an estimate of the expenses involved in closing the transaction

259
Q

Equal Credit Opportunity Act (ECOA)

A

outlaws credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or the use of public assistance.

260
Q

Community Reinvestment Act (CRA)

A

ensures that financial institutions pursue their responsibilities to meet both the deposit and the credit needs of members of the communities in which they are chartered. prohibits redlining

261
Q

redlining

A

is to purposely limit the number of loans or the loan-to-value ratio in certain areas of a community or city.

262
Q

usury laws

A

State laws that limit interest rates

263
Q

3 types of land use controls

A

public and private land use controls, and public ownership of land

264
Q

Public land-use controls:

A

Government-issued land-use controls such as zoning ordinances, subdivision regulations, and building codes. PETE- police power, eminent domain, taxation and escheat

265
Q

Private land-use controls

A

Land-use controls that are put into place by non-governmental entities, such as real estate developers. Most commonly, these come in the form of deed restrictions (we’ll get to that in just a moment).

266
Q

public ownership of land

A

The role of government to own and maintain public land, such as streets, highways, and parks.

267
Q

types of land controls under police power

A

zoning (most common), building codes, regulation of subdivisions, application of rules

268
Q

zoning

A

is the division of land within a jurisdiction into separate districts within which uses are permitted, prohibited, or permitted with conditions. ensures the type of land use in a district is compatible with neighboring districts and the needs of the community
designates specific districts for particular types of structures or activities

269
Q

zoning classification

A

agricultural, residential, commercial, industrial

270
Q

Zoning ordinances are enforced through permits issued by the:

A

municipality

271
Q

nonconforming use

A

When a pre-existing structure violates a zoning regulation

272
Q

variance

A

is permission granted by the government so that property may be used in a manner not allowed by the current zoning. area variance and use variance

273
Q

Building codes

A

are sets of regulations pertaining to building design, materials, safety, sanitation, and structure.
building permits are granted if the builder demonstrates that their proposed project is in compliance

274
Q

building permit

A

are granted if, among other things, the builder demonstrates that their proposed project is in compliance with building codes.

275
Q

regulation of subdivisions

A

The third application of police power. the government doesn’t create them but has the authority to enforce them
local authorities regulate all the details of subdivision development

276
Q

application of rules

A

If there is a conflict between a government restriction and a private restriction, the strictest restriction will be applied.

277
Q

4 types of land use controls that fall under scope of police power in regulation and development

A

zoning, building codes, regulation of subdivisions, application of rules

278
Q

Eminent domain

A

is the power of the government (local, state, or federal) to seize a citizen’s private property or seize a citizen’s rights in property (with compensation), but without the consent of the owner

279
Q

Condemnation

A

is the formal act of the exercise of the power of eminent domain to transfer title to the property from its private owner to the government.

280
Q

Inverse condemnation

A

occurs when the government takes private property but fails to pay the just compensation required by the Constitution.

281
Q

taxation

A

is a charge (in this case, a charge on real estate) that is used to pay for services provided by the government.

282
Q

assessed value

A

of a property is the value placed on a property by a governmental unit for use in levying annual real estate taxes.

283
Q

Ad valorem taxes

A

calculated according to the assessed value of real estate, are levied through property taxes by the local authorities.

284
Q

A rollback tax

A

is a property tax rate that applies when land changes from a qualifying use to a non-qualifying use

285
Q

Tax Increment Reinvestment Zones (TIRZ)

A

also known as a Tax Increment Financing (TIF) district. is created by the city council for the purpose of attracting new businesses to the area.

286
Q

intestate

A

If someone dies without a will, they have died ______

287
Q

escheat

A

the descendant’s ownership interest in any property is transferred directly to the state without their consent.

288
Q

PETE describes the:

A

four basic types of public controls over land-use.

289
Q

CC&R’s describes the:

A

private land use controls - covenants, conditions, restrictions

290
Q

dedicatory instrument

A

is a document governing the establishment, maintenance, or operation of a residential subdivision, planned unit development, condominium or townhouse regime, or any similar planned development.

291
Q

Restrictive Covenants

A

are non-governmental limitations that control how buyers of lots within residential subdivisions use their land. commonly known as deed restrictions. binding on subsequent purchases.

292
Q

Who generally places deed restrictions on a property?

A

property developer

293
Q

Construction on or alterations to private property have to comply with:

A

deed restrictions (private controls) and state, local and municipal regulations (public controls)

294
Q

fee simple subject to a condition subsequent

A

an estate in which the property must be used for a specific purpose and if it’s not, the real estate reverts back to the original owner.

295
Q

subdivider

A

is an individual who engages in the purchase of undeveloped land and divides it into smaller parcels for resale or lease to individuals or developers.

296
Q

developer

A

Develops unimproved land prior to resale or lease

297
Q

Bureau of land management

A

is a government agency that manages hundreds of millions of acres of the remaining “public domain” land in the United States

298
Q

U.S. Forest Service

A

is a federal agency under the U.S. Department of Agriculture that manages 193 million acres of land, ex. national forests and grasslands

299
Q

U.S. Fish and Wildlife Service

A

their mission is to work with others to conserve, protect and enhance fish, wildlife and plants and their habitats for the continuing benefit of the American people through Federal programs relating to migratory birds, endangered species, inter-jurisdictional fish and marine mammals, and inland sport fisheries.

300
Q

national parks system

A

their mission is to preserve nature for future generations.

301
Q

What percentage of land in Texas is privately owned?

A

95%

302
Q

Interstate Land Sales Full Disclosure Act

A

the law requires developers engaged in the interstate sale or leasing of 100 or more lots to file a statement of record and register the subdivision with the Consumer Financial Protection Bureau as of 2011.

303
Q

The CFPB Consumer Financial Protection Bureau seeks to protect the consumer by:

A

by assuring access to all the information needed for a sensible, unhurried land purchase.

304
Q

When must the property report be given to the buyer?

A

before the purchase agreement is signed

305
Q

Jennifer wants to revoke her contract and receive a refund of any monies paid to date. It has been nine days since the signing of the contract. Jennifer:

A

The “cooling off period” is seven days after the signing of the contract. You should contact the developer, preferably in writing, if you wish to revoke your contract and receive a refund of any monies paid to date.

306
Q

CFPB

A

holds all property reports for public inspection

307
Q

Texas Commission on Environmental Quality (TCEQ).

A

Most federal environmental legislation is enforced at the state level by this

308
Q

Lead-Based Paint Disclosure

A

is a federally-required addendum that must be presented to buyers of all residential property built prior to 1978.

309
Q

Certificate of Mold Remediation

A

certifies that remediation was done and completed by a licensed mold assessment consultant. must be passed to buyers within next 5 years.

310
Q

Polychlorinated Biphenyl (PCB)

A

are carcinogenic substances used widely before 1977 as coolants and lubricants in transformers, capacitors, and other electrical equipment.

311
Q

Asbestos, an environmental hazard, is a mineral that has been used for many years as:

A

insulation

312
Q

Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)

A

in 1980, it established a $9 billion Superfund to clean up uncontrolled hazardous waste sites and to respond to spills. EPA enforces this.

313
Q

An Energy Star-qualified new home is at least X percent more energy-efficient than homes built to the 2004 International Residential Code (IRC).

A

15

314
Q

National Green Building Standard (NGBS)

A

approved in January 2009 as the only consensus-based green building standard for residential properties.

315
Q

LEED

A

measures performance in nine key categories which encourage such activities as using a previously developed lot close to community resources and transit; monitoring energy-use; reusing and recycling building materials to reduce waste; educating homebuyers; using renewable and clean sources of energy (generated on-site or off-site); and using water-wise landscaping.

316
Q

2 green mortgages

A

Energy-Efficient Mortgage (EEM) and Energy-Improvement Mortgages (EIMs)

317
Q

A mortgage that recognizes the added value of energy efficiency is called a(n):

A

Energy Efficient Mortgage EEM

318
Q

Ad Valorem Property Tax Exemption

A

Texas offers this for the portion of the appraised property value that arises from installation of green energy sources

319
Q

Agents can specialize in things such as:

A

client types, property types, services provided

320
Q

lease

A

is a contract in which one party conveys property to another for a specific predetermined period of time, generally in return for periodic payment.

321
Q

resort home

A

sometimes called a vacation home, is a property that an owner doesn’t live in full time but instead uses as a getaway or rental property.

322
Q

A resort homebuyer will likely sell their home within about:

A

5 years

323
Q

investment property

A

is a property purchased primarily or exclusively for investment purposes rather than as a place to live.

324
Q

ranch

A

regardless of the degree of development, is land that has been designated for raising grazing livestock

325
Q

REO

A

real estate owned- It is used to describe a property that is owned by a lender as result of a failure to find a third-party buyer at a foreclosure auction.

326
Q

Who are the two most common client groups who look to purchase REO properties?

A

investors and first time home buyers

327
Q

short sale

A

is a sale in which the lender will agree to accept less than what is actually due on the mortgage before the property goes into foreclosure.

328
Q

3 types of auctions

A

absolute, minimum bid, reserve auction

329
Q

absolute auction

A

An auction absent of any reserve or restriction on price. The highest bid is accepted. Also known as a no-reserve auction (NR).

330
Q

minimum bid auction

A

A minimum acceptable sale price (reserve), disclosed or not, is set.

331
Q

reserve auction

A

The seller reserves the right to accept or reject the highest bid (within a predetermined time). While this format provides the greatest degree of control to the seller, it can also drive down the ultimate sale price if the auction format ends up suppressing buyer interest.

332
Q

auctioneer’s are excempt from needing a real estate license as long as:

A

They are licensed as auctioneers under Chapter 1802 of the Texas Occupations Code

They do not perform any other act of a broker or license holder

333
Q

3 ways a license holder can participate in real estate auctions

A

referring agent, cooperative agent, listing agent

334
Q

judicial foreclosure

A

the proceeds from the property sale go first to payment of any remaining mortgage loan debt and, afterwards, to satisfy other outstanding liens. remaining funds will go to borrower. court ordered

335
Q

nonjudicial foreclosure

A

a lender has the right to foreclose and sell a property without court approval if a borrower defaults on a mortgage loan- after 3 missed payments breach letter sent out. 30 days provided to be current. afterwards acceleration clause sent

336
Q

acceleration clause

A

the entire loan amount due immediately if there is a default.

337
Q

deed in lieu of foreclosure

A

effectively transfers the title from the borrower to the mortgagee (lender) and relieves the borrower of the debt they owe the lender.

338
Q

Equitable redemption

A

also known as right of redemption, is derived from common law and allows defaulting debtors to pay the defaulted portion of the debt (as well as costs the lender incurred) in order to prevent a foreclosure sale.

339
Q

deficiency judgment

A

mortgagee can seek remaining amounts owed after foreclosure but would require them to incur legal expense to pursue

340
Q

foreclosure timeline (3)

A

pre-foreclosure, foreclosure auction, real estate owned REO

341
Q

pre foreclosure

A

Homeowner sells property — possibly as a short sale with lender approval

342
Q

foreclosure auction

A

A third-party trustee sells the property at a foreclosure auction

343
Q

real estate owned REO

A

The lender sells the property — possibly through their loss mitigation department and/or with assistance from an in-house or outside real estate broker

344
Q

commercial real estate

A

Any non-residential property intended for the purposes of commercial gain.multi-family residential properties with five or more dwellings are considered commercial properties because of the profit-making intent of the property

345
Q

The REO asset management responsibilities tend to fall under three categories:

A

Pre-List
Management/Sale
Title/Closing

346
Q

The three main reasons to invest in real estate are:

A

income/cash flow, appreciation, and investment gain .

347
Q

Cash flow

A

refers to the cash that an investment generates after accounting for the operating expenses, debt service, and taxes associated with the enterprise.

348
Q

Appreciation

A

is the increase in value of a property. It can occur with developed and undeveloped land.

349
Q

ARV

A

after repair value

350
Q

investment gain

A

is when the investment property owner actively performs development and capital improvements on the property. (not passive like appreciation)

351
Q

rate of return

A

is the percentage gain (or loss) on the cost of investment over a period of time

352
Q

Liquidity

A

refers to ease and speed with which an asset can be bought or sold without significantly diminishing the asset’s value.

353
Q

time value of money (TVM)

A

is an investment concept that states that today’s money is worth more now than the same amount will be in the future because of its present earning capacity.

354
Q

leverage

A

is the use of debt as a tool to stretch an available pool of money farther by using it to mortgage many properties rather than purchase one or a few outright.

355
Q

loan to value (LTV) ratio

A

The ratio between a loan amount to the value of the asset purchased with the loan. When a property has a high loan to value ratio, it is said to be highly leveraged

356
Q

2 investment performance measures

A

cash flow and appreciation/gain

357
Q

operating statement

A

is used to determine the cash flow potential of a property by providing a clear picture of the rental income stream (cash inflow) and the various expenditures (cash outflow), concluding with a bottom-line, after-tax cash flow.

358
Q

potential gross income

A

about potential-the revenue generation would be in a best-case scenario where the property enjoyed 100% occupancy and collected 100% of the rent due.

359
Q

effective gross income

A

or gross operating income-vacancy allowance subtracted from potential gross income equals this

360
Q

Net operating income NOI

A

is the pre-tax amount of income after all necessary expenses have been taken out. It gives an idea of what the actual income will be. effective gross income-operating expenses

361
Q

Gross Rent Multiplier (GRM)

A

is the ratio of the price of investment property to its annual rental income before considering expenses like taxes and insurance, etc.A lower GRM typically signifies a better investment opportunity.

362
Q

debt services

A

payments made towards principal and interest of a loan

363
Q

after tax cash flow

A

Subtracting the investor’s income taxes from the pre-tax cash flow brings

364
Q

Gross domestic product (GDP)

A

is the total value of goods produced/services provided by a country in a year

365
Q

risk reward ratio

A

is the degree of risk tolerance willingly taken on in exchange for a potential reward.

366
Q

capital improvement

A

is the addition, restoration, or remodel of a property in a way that increases property value and/or extends its useful life.

367
Q

an individual can take a sizable tax-free capital gain on the sale of their principal residence as long as

A

they lived in it for two of the five years preceding the sale.

368
Q

individual capital gain threshold

A

$250,000

369
Q

feasibility study

A

the detailed analysis of the viability of an idea

370
Q

Adjusted investor basis

A

Purchase price + Cost of acquisition + Capital improvements - Depreciation =

371
Q

net sale price=

A

sale price - cost of sale=

372
Q

capital gain=

A

net sale price - adjusted investor basis=

373
Q

Section 1031 Exchange

A

allows investors to sell a property and defer payment of capital gain taxes on those sales.

374
Q

Syndication

A

is when two or more individuals pool their financial resources to participate in a transaction they could not afford to undertake individually.

375
Q

real estate investment syndi

A

is a method of pooling forces and resources of individual investors who would not be able to fund, get financing, or manage a real estate undertaking on their own.

376
Q

A benefit of a real estate investment syndicate is that they:
cate

A

allow for more participation from small-scale investors.

377
Q

3 phases of syndication

A

organization, operation, liquidation

378
Q

organization

A

planning, acquiring property, satisfying registration and disclosure rules, and marketing

379
Q

operation

A

sponsor usually manages both the syndicate and the real property

380
Q

liquidation

A

also known as completion (resale of the property)

381
Q

active manager

A

The sponsor, also known as the syndicator or the organizer

382
Q

the most common formal organization of a real estate investment syndicate is that of a

A

limited partnership (LP) or limited liability company (LLC).

383
Q

general partnership

A

avoids the double taxation normally involved in a corporate entity, but the unlimited liability provision and lack of centralized management tend to argue against its use for a real estate syndicate.

384
Q

limited partnership

A

the limited liability of a limited partner is confined to the extent of their individual investment in the partnership. does not participate in the daily operations of the businessdo not pay income tax-thus no double taxation

385
Q

limited liability company (LLC)

A

is a hybrid type of legal structure that provides the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partner.

386
Q

All members equally share responsibilities, profits, and losses in a:

A

general partnership

387
Q

Comparing them with LLC members, limited partners in an LP:

A

general partners retain power to make management decisions and, with that responsibility, assume full personal liability.

388
Q

joint venture

A

is a business arrangement that a partnership will use when joining forces for a single business objective.

389
Q

a syndicate is equal to a:

A

limited partnership

390
Q

cannot hold a real estate license as an entity

grant personal asset protection for all members from the business debts and liabilities

A

syndicates as limited liability companies

391
Q

seldom utilized in modern syndicates because of double taxation
ensure centralized management and limited liability for investors

A

syndicates as corporations

392
Q

a partnership among one or more individuals for a single project
a temporary relationship as opposed to an ongoing business

A

syndicates as joint ventures

393
Q

must be comprised of at least two individuals (one general partner and one limited partner)
general partners assume full personal liability, and limited partners are liable only to the extent of their personal investments

A

syndicates in limited partnership

394
Q

REIT Real estate investment trust

A

is a company that owns – and typically operates – income-producing real estate or real estate-related assets.

395
Q

REITs generally fall into three categories:

A

Equity REITs

Mortgage REITs

Hybrid REITs

396
Q

equity REITs

A

is a REIT that earns income for its investors through rent collection or the sale of the properties in their portfolio.

397
Q

mortgage REITs

A

provide money to real estate owners and operators either directly in the form of mortgages or other types of real estate loans, or indirectly through the acquisition of mortgage-backed securities

398
Q

hybrid REITs

A

generally are companies that use the investment strategies of both equity REITs and mortgage REITs.

399
Q

no traded REITS downside

A

iliquid investment and no value transparency

400
Q

pass-through entity

A

is a small business structure in which the business profits “pass through” to the owner, where they are taxed at the owner’s individual rate.

401
Q

special purpose vehicle (SPV)

A

is a limited corporate entity created with a specific objective.

402
Q

Mortgage-Backed Securities (MBS)

A

are asset-backed securities, where the underlying asset is a single mortgage or a bundle of mortgages that serve to back the securities.

403
Q

secondary mortgage market

A

is the environment in which mortgage lenders sell home loans they originate to government agencies or investment bankers.

404
Q

Collateralized mortgage obligations (CMOs)

A

are collateralized debt obligations (CDOs) that are made up of bundles or pools of mortgage-backed securities created by government agencies or investment banks and issued as investment-grade bonds.most of these are REMIC’s

405
Q

tranches

A

When mortgage-backed securities are sold to investors at different risk levels and classes

406
Q

Real Estate Mortgage Investment Conduit (REMIC)

A

is a type of special purpose vehicle (SPV) that:

Holds commercial and residential mortgages in trust

Assembles said mortgages into pools based on risk

Then issues bonds (securities) on these pools to sell to investors in the secondary mortgage market

407
Q

When a REMIC is created, the mortgage pools are segmented based on:

A

maturity dates

408
Q

The biggest disadvantage to the investor of a REMIC is that investors:

A

do pay taxes on profits earned (avoid double taxation though)

409
Q

forms of syndicates

A

Corporation: Ensures centralized management and limited liability for the investors, but seldom utilized in modern syndicates because of their negative tax features

General Partnership: All members equally share responsibilities, profits, and losses

Limited Partnership: Has some of the corporate advantages of limited liability and centralized management and the tax advantages of a partnership

410
Q

three categories of REITs

A

Equity REITs: Own and operate income-producing real estate

Mortgage REITs: Provide money to real estate owners and operators either directly (mortgages) or indirectly (mortgage-backed securities)

Hybrid REITs: Use the investment strategies of both equity REITs and mortgage REITs

411
Q

two types of tenancies

A

Residential Tenancy (in which tenants reside on the property)

Commercial Tenancy (in which an income-producing business uses the property)

412
Q

every residential tenancy consists of two parties

A

landlord and tenant

413
Q

Americans with Disabilities Act

A

1990-It identified and defined the protected disabilities.

It codified that any buildings built after March 13, 1991 with public access or employees, must have features that provide reasonable access for people with protected disabilities.

414
Q

Federal Fair Housing Act

A

Race, Color, Religion, sex/gender, national origin, ancestry, familial status, disability

415
Q

what isn’t protected under federal or state law but is under NAR code of ethics?

A

sexual orientation

416
Q

4 primary estates:

A

freehold, leasehold, concurrent, and equitable

417
Q

freehold estate

A

An estate in which the owner has an indefinite length of ownership

418
Q

leasehold estate

A

An estate in which a tenant has the right to possess a piece of property during the lease; also known as a non-freehold estate

419
Q

concurrent estate

A

An estate that is owned by two or more individuals

420
Q

equitable estate

A

An estate in which a freehold estate owner has ownership interest on the property, but another party has interest in the property that are less than the interest afforded by ownership (e.g. liens, easements)

421
Q

reversionary right

A

a term which refers to an estate wherein, upon the death of the life estate owner, full ownership reverts to the original fee simple owner;

422
Q

4 types of leasehold estates

A

estate for years, periodic estate, estate at will, tenancy at sufferance

423
Q

estate for years

A

is a leased possession of property for a certain, specific period of time; also known as a tenancy for years.

424
Q

periodic estate

A

also known as a periodic tenancy) has a fixed lease period, meaning that the lease is automatically renewed at the end of each lease period until the landlord or tenant act to terminate it. (month to month lease)

425
Q

estate at will

A

When a tenant is occupying a property with the landlord’s knowledge and consent, but without a formal lease agreement

426
Q

tenancy at sufferance

A

occurs when a tenant remains in possession of the property beyond their lease term, without the consent of the landlord.

427
Q

holdover tenant

A

When a tenancy at sufferance occurs, the tenant is referred to as

428
Q

The age at which a person can enter into a lease agreement is:

A

18

429
Q

for leases what is considered the -consideration- paid for possession?

A

rent

430
Q

The requirements of a valid lease include:

A

parties to the lease, competent parties, offer and acceptance (mutual agreement), consideration, lawful objective, and legal description of the property.

431
Q

A tenant’s right to enjoy their property without disturbance from the landlord is known as the covenant of:

A

quiet enjoyment

432
Q

There are a number of ways a lease can be discharged, all of which tend to fall into these four categories:

A

expiration, agreement, breach of one of the parties or by operation of law (special statutory rights)

433
Q

actual eviction

A

the name given to the process by which a tenant is expelled from a property — with the Justice of the Peace Court to get approval to remove the tenant.

434
Q

constructive eviction

A

which is the termination of a lease in circumstances where the landlord intentionally failed to provide required repairs or maintenance to such a degree that the premises are considered unusable.

435
Q

Landlord & Tenant Act

A

title 8

436
Q

landlords must provide a copy of the singed lease within

A

3 business days of signing a lease

437
Q

What is a reasonable time for making repairs in a residential tenancy?

A

7 days

438
Q

A residential landlord must postmark the return of a security deposit within:

A

30 days

439
Q

A residence should have smoke alarms in every:

A

bedroom, in each level of a dwelling, and in each corridor that serves multiple bedrooms.

440
Q

when should a landlord inspect the smoke alarm?

A

at the beginning of a tenant’s lease, whenever the tenant reports a malfunction, and whenever a tenant requests an inspection.

441
Q

When must the landlord rekey residences?

A

within 7 days after tenant turnover

442
Q

gross lease

A

the tenant pays a simple, flat rent every month

443
Q

net lease

A

is a lease in which the (usually commercial) tenant pays a base rent rate plus property taxes.

444
Q

double net lease

A

rent, property taxes and insurance must be paid

445
Q

triple net lease

A

rent, property taxes, insurance and maintenance

446
Q

percentage lease

A

is a type of (usually commercial) lease in which the tenant pays a base rent amount and a percentage of their business profits to the landlord.

447
Q

variable lease

A

is a leasehold agreement in which the base rent changes. It can take the form of a:

Graduated lease

Index lease

448
Q

graduated lease

A

is a variable lease agreement in which the amount of rent increases at fixed future dates.

449
Q

index lease

A

is a variable lease agreement that allows for a graduated increase of rent at periodic intervals, with increases relative to some economic indicator, such as the Consumer Price Index.

450
Q

ground lease

A

The leasing of bare, undeveloped land

451
Q

lease purchase agreement

A

is used when a tenant wishes to buy a property but cannot do so right away. also referred to as option agreement, lease option, lease-option-to- buy

452
Q

In a lease purchase agreement, the tenant is able to:

A

purchase the property during the duration of the lease.

453
Q

sale and leaseback agreement

A

is an agreement in which a business owner sells their interest in a property and then leases it back at the same monthly rate, usually from an investor owner and, in doing so, frees up capital for other business ventures.

454
Q

The landlord will be responsible for the property’s operating expenses.
The tenant pays a simple, flat rent every month.

A

gross lease

455
Q

commonly used for commercial properties only and takes the form of net leases
a way for landowners to free up capital while maintaining the same overhead expenses

A

sale and leaseback agreement

456
Q

It can take the form of a graduated lease or an index lease.

The base rent changes.

A

variable lease

457
Q

grants the exclusive right to extract any oil or gas from the ground beneath a property
requires the drilling party to pay the reversionary owner royalties

A

oil and gas lease

458
Q

3 conditions to charge a late fee:

A

must be stated in lease, must be reasonable and must be at least one full day late

459
Q

2 broad categories of commercial real estate

A

retail property and office property

460
Q

Which property category do distribution centers and warehouses fall under?

A

industrial property

461
Q

fiduciary duties

A

old car

obedience, loyalty, disclosure, confidentiality, accounting, reasonable care

462
Q

How long are property managers bound by confidentiality?

A

forever

463
Q

What area of the contract will inform the property manager about the amount of costs they may incur without consulting the owner?

A

allocation of costs

464
Q

How is the net operating income determined?

A

effective gross income - operating expenses

465
Q

A manager’s fee is calculated off of:

A

gross income (before expenses)

466
Q

operating budget

A

is a budget created from taking anticipated revenues and expenses and then planning for the long-term goals of the property owner.

467
Q

Property managers are able to track a property’s financial performance in the future through the use of:

A

operating budgets

468
Q

Capital expenditures

A

are funds used by a company to acquire or upgrade physical assets like property, industrial buildings, or equipment.

469
Q

Which law or act protects an individual’s sensitive personal information?

A

Identity theft enforcement and protection act

470
Q

ADA tax credit

A

an be used to offset the cost of undertaking barrier removal and alterations to improve accessibilityis available to businesses that have total revenues of $1,000,000 or less in the previous tax year or 30 or fewer full-time employees.

471
Q

Economic viability

A

is when a project or property is both economically feasible and will have a positive impact on the area around it.

472
Q

Occupational Safety and Health Administration, or OSHA

A

is the government agency charged with the task of ensuring that employers are responsible for providing safe and healthy workplaces for their employees.

473
Q

the u.s. patriot act

A

signed into law by President George W. Bush to strengthen security controls
apartment owners and managers needed to verify the identity of people who did not have a social security number but were in the US legally

474
Q

a federal act administered by CFPB
if an applicant is rejected due to the credit score, information about that score and its factors need be included in the rejection notice

A

the fair credit reporting act

475
Q

if someone’s identifying information is used by an unauthorized party, that person then becomes a victim with certain rights and relief
businesses have to destroy records of sensitive personal information when they are no longer needed

A

identity theft enforcement and protection act

476
Q

requires many businesses and organizations to implement a written Identity Theft Prevention Program
enables consumers to place fraud alerts in their credit files

A

fair and accurate credit transactions act of 2003

477
Q

mitigate liability

A

ACTOR

avoid, control, transfer (insurance policy), or, retain

478
Q

indemnification provisions

A

require one party to reimburse the other for losses or damages incurred as a result of a claim against that other party.

479
Q

typically not all-inclusive but targeted toward specific risks
covers damages that occurred because of theft, burglary, vandalism, or machinery damage

A

casualty insurance

480
Q

also called rent-loss insurance

something happening to or on the property makes it unable to produce income

A

interruption insurance

481
Q

covers damages from things like wind storms, hurricanes, hail, explosions, etc.
covers damages from things like riots, civil commotions, smoke, air and land vehicles, etc.

A

extended coverage

482
Q

employers can choose to carry occupational and disability insurance instead
provides medical care and some of the lost wages to employees who have suffered from a work-related illness or injury

A

workers’ compensation insurance

483
Q

The majority of single family rental properties are managed by:

A

the property owner

484
Q

National Association of Residential Property Managers (NARPM®)

A

is a trade organization for the residential property management industry, specifically those engaged in property management of single-family and small residential properties.

485
Q

Vacation Rental Management Association (VRMA)

A

is to advance professionally managed vacation rentals as a preferred rental option for consumers.

486
Q

class A

A

Newer, attractively located, and in high demand with high rent rates (office property)

487
Q

class B

A

A little older but still in good shape, decent location, and in average demand with average rent rates (office property)

488
Q

class C

A

ven older and/or in questionable shape, featuring outdated infrastructure and technology, and geared to tenants looking for low-cost, functional space (office property)

489
Q

A rental rate is established by all of the following EXCEPT:

A

the area of the property: is established by assessing the income from the rentable space, the fixed charges and operating expenses, and the return on investment.

490
Q

deed

A

is a legal document that transfers a title of real estate from one party to another.

491
Q

Granting Clause

A

also known as words of conveyance, is needed to state the grantor’s intention to convey the property.

492
Q

Habendum Clause

A

specifies both the owner’s rights, as well as the limitations on those rights (i.e., prohibited activities).

493
Q

The granting clause needs to include:

A

what interest in the property is being conveyed by the grantor.

494
Q

What is the purpose of a habendum clause?

A

is used to define or limit the ownership interest of the grantee.

495
Q

Acceleration Clause

A

makes the entire loan amount due immediately upon default.

496
Q

Hypothecation Clause

A

the borrower pledges collateral to secure a debt or as a condition precedent to the debt. Sometimes, a third party will pledge collateral for the borrower in this clause.

497
Q

Defeasance Clause

A

is a substitution of collateral. This gives the mortgagor the right to redeem their property upon payment of the mortgagor’s obligations to the mortgagee.a 30-45 day process that is sometimes coordinated with a sale or refinance

498
Q

Release Clause

A

This clause allows one party to withdraw under certain circumstances. It’s also called a “kick-out clause.”

499
Q

If a grantor is unable to sign, a grantor’s signature can be signed by an:

A

attorney in fact

500
Q

A title to real estate does not pass or transfer until:

A

the deed is actually delivered to and accepted y the grantee

501
Q

In Texas, deed acknowledgment is:

A

not essential to the validity of a deed. Still, it is best practice to acknowledge all deeds.

502
Q

four main types of deeds in conveying real estate

A

General warranty deed

Special warranty deed

Bargain and Sale deed

Quitclaim deed

503
Q

general warranty deed

A

provides the greatest protection of any deed. certain covenants or warranties legally bind the grantor.

504
Q

Five Basic Implied Warranties

A

Covenant of Seisin, Covenant Against Encumbrances, Covenant of Quiet Enjoyment, Covenant of Further Assurance, Covenant of Warranty Forever

505
Q

Covenant of Seisin

A

The grantor warrants that they are the property owner and have the right to convey title. If this is broken, the grantee can recover the full purchase price.

506
Q

Covenant Against Encumbrances

A

The grantor warrants that the property is free from liens or encumbrances (except those named in the deed.) If this covenant is broken, the grantee can sue for the cost of removing the encumbrance.

507
Q

Covenant of Quiet Enjoyment:

A

The grantor guarantees that the title is good against any third party who might bring court actions to establish a superior title to the property.

508
Q

Covenant of Further Assurance:

A

The grantor promises to obtain and deliver any instrument needed to make the title good.

509
Q

Covenant of Warranty Forever:

A

The grantor guarantees that they will compensate the grantee for losses if the title fails in the future.

510
Q

Special Warranty Deeds

A

is A conveyance that carries only one covenant

511
Q

bargain and sale deed

A

sometimes called a deed without warranty, contains no warranties against encumbrances. However, it does imply that the grantor holds the title and possession of the property.

512
Q

quitclaim deed

A

provides the grantee with the least protection of any deed while putting the least liability on the grantor. It carries no covenants or warranties and conveys only such interest that the grantor may have when the deed is delivered.

513
Q

executor’s deed

sheriff’s deed

A

deed executed pursuant to court order

514
Q

contains no warranties against encumbrances

a deed without warranty

A

bargain and sale deed

515
Q

The grantor warrants only that the property was not encumbered during the time they held title, and that they have done nothing during ownership to cloud or damage the title.
a conveyance that carries only one covenant

A

special warranty deed

516
Q

when a trustee sells or conveys property out of the trust

A

trustee’s deed

517
Q

title

A

is the actual ownership of a real property that includes the bundle of rights in which a party may own legal or equitable interest.

518
Q

title policy

A

also known as title insurance or a title insurance policy, protects homeowners (and, likewise, their lenders) from financial losses related to title issues.

519
Q

A lender’s title insurance policy is paid for by the:

A

borrower and protects the lender.

520
Q

abstract of title

A

is an abbreviated history of a property, including info on any transfers, grants, wills, conveyances, liens, and encumbrances.

521
Q

Recording

A

is the placing of documents about the claims and ownership of real estate in the county clerk’s office at the courthouse.

522
Q

Documents relating to real property must be kept on file in the:

A

county where the property is located

523
Q

“Giving notice” of one’s interest in a real property can be broken into:

A

b nn and actual notice

524
Q

A property’s ownership chain is broken. There are several gaps in the chain of title. This means there is a:

A

cloud on the title

525
Q

marketable title

A

is one that is free from significant defects that have the potential to subject the buyer to litigation.

526
Q

title defect

A

is anything that can cause a title to be considered invalid or defective in some way

527
Q

Abstractors are responsible for:

A

information present in existing public records

528
Q

Torrens System

A

This is a recording system used in some states in which the state holds all records of land and title ownership, evidenced by a certificate of title. (doesn’t show taxes)

529
Q

alienation

A

transfer of title to real estate

530
Q

When it comes to recording a deed, recording:

A

Recording is not necessary to make a deed valid. However, it is in the grantee’s best interest to do so. Recording the deed gives the public constructive notice of the grantee’s ownership.

531
Q

Easement by Necessity

A

allows the owner of a landlocked parcel of land to gain access to their land. This type of easement is also known as an easement appurtenant,

532
Q

Easement in Gross

A

is a legal right to use another individual’s land for as long as the owner owns that land or until the holder of the easement dies.

533
Q

Easement by Prescription

A

are implied easements granted after the dominant estate has used the property in a hostile, continuous, and open manner for a statutorily prescribed number of years

534
Q

Easement by Restriction

A

is a legally binding agreement between a landowner and an agency or organization. also called a conservation restriction or conservation easement.

535
Q

Condemnation

A

is the legal process of acquiring private property for public use through the government’s power of eminent domain.

536
Q

The estate that will pass to another party at the death of the person upon whom the life estate is based is the:

A

remainder

537
Q

With a leasehold estate, tenants have what specific kind of estate in the property for the duration of their lease?

A

possessory estate

538
Q

A buyer is purchasing a property. They signed a contract but the sale has not yet closed. What kind of ownership interest or estate do they have?

A

equitable estate

539
Q

4 types of estates

A

leasehold, equitable, concurrent, freehold

540
Q

intestate

A

someone who dies without having left a valid will

541
Q

testate

A

someone who dies with a will indicating how property will be disposed after death

542
Q

hereditament

A

Any property (real or personal) that is capable of being inherited

543
Q

testator

A

makes a will

544
Q

devise

A

The gift of real property by will

545
Q

devisee

A

a person who receives real property by will

546
Q

legacy or bequest

A

a gift of personal property

547
Q

legatee

A

the person receiving the personal property

548
Q

Holographic Wills

A

A handwritten will created solely by the maker (and not witnessed)

549
Q

Any witnesses to the creation of a will should:

A

not be anyone who is named as devisee or legatee in the will.

550
Q

community property

A

any property jointly owned by a married couple, passes charged with any debts that are against it, and also on the death of one spouse without a will

551
Q

alienation

A

the act of transferring property from one party to another

552
Q

2 types of alienation

A

voluntary and involuntary

553
Q

voluntary alienation

A

the method by which property is transferred from the current owner to another party either by sale or gift

554
Q

dedication

A

is the voluntary gift of one’s land to the public.

555
Q

involuntary alienation

A

occurs when a property is transferred without the owner’s consent.

556
Q

inverse condemnation

A

It occurs when the government has over-regulated a property so that it can’t be fairly used via restrictions, permitting, etc., that virtually eliminate any use of the property.

557
Q

adverse possession

A

is another form of involuntary alienation. An owner who does not use their land, or does not inspect it for a number of years, may lose their title to another person with a claim to the land who takes possession of and uses it.

558
Q

easement

A

is the right of one party to access or use someone else’s land.

559
Q

Easement Appurtenant

A

right to cross the other parcel of land by the landlocked owner

560
Q

dominant tenement

A

parcel benefitting

561
Q

servient tenement

A

parcel suffering from the easement

562
Q

easement in gross

A

an individual or company is allowed to be on the owner’s property for specific purposes.(people are gross)

563
Q

easement by prescription

A

the area in question would have to have been used by the non-owner of the property for several years, continuously, exclusively, and without the owner’s permission.

564
Q

easement by necessity

A

land granted by necessity or they can’t access their property

565
Q

statute of frauds

A

is the law that requires certain contracts to be in writing to be valid.

566
Q

option money

A

is a payment that the prospective buyer makes to the seller in exchange for the exclusive option to terminate the sales contract within a specified period of time (known as the “option period”) without penalty.

567
Q

The buyer MUST receive a copy of their Closing Disclosure by:

A

3 business days prior to closing

568
Q

What are three conditions shared by most residential sales contracts?

A

good title, property inspection and financing

569
Q

amendments

A

are changes in a legal document made by adding, altering or omitting a certain term or condition

570
Q

contingency

A

is a provision within a contract that makes performance conditional upon the occurrence of a stated event.

571
Q

3 title searches to public records are made when?

A
  1. the date of the original sales contract
  2. the day of closing
  3. prior to recording papers since last search
572
Q

closing agent

A

the representative of the title insurance company

573
Q

closing disclosure

A

a document that itemizes services and fees charged to the borrower

574
Q

Once a sales contract is signed by all parties, TREC requires the broker deposit the earnest money by the end of the:

A

second business day

575
Q

DOCTRINE of relation back

A

the deed passes title to the purchaser as of the date it was delivered to the escrow agent

576
Q

Real Estate Settlement Procedures Act (RESPA)

A

enacted in 1974 to protect consumers from abusive lending practices

577
Q

TILA-RESPA Integrated Disclosure Rule (TRID)

A

addresses what information lenders are required to provide to borrowers and when they are required to provide it.

578
Q

A broker charges a fee for using a CLO system. This is:

A

acceptable as long as the fee is diclised and reasonable

579
Q

Deceptive Trade Practices Act (DTPA)

A

is the primary consumer protection law in Texas. protects consumers against false or misleading statements, unconscionable actions and breaches of warrenty

580
Q

The charges for recording all of the closing statement documents must be paid to _____ .

A

the county clerk

581
Q

Expenses that are owed by the seller, but will later be paid by the buyer are considered:

A

accrued items

Real Estate License (7 decks)

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