Real Estate II Flashcards
1
Q
synonyms for whole numbers
A
positive integers or basic numbers
2
Q
improper fractions
A
numerator is larger then denominator
3
Q
profit
A
A financial gain. Making more money selling a product than was spent buying or producing the product.
4
Q
loss
A
A financial loss. Making less money selling a product than was spent buying or producing the product.
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.
6
Q
principal
A
The amount lent to a borrower to purchase a house
7
Q
interest
A
Money repaid regularly at a specified rate as compensation for money lent is called
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.
9
Q
amortization
A
is the repayment of a loan over time in equal installments that include principal and interest.
10
Q
With an amortizing loan, mortgage payments are:
A
made over time, consist of equal installments, and go towards both principal and interest
11
Q
commission split
A
the compensation payment from the broker to the sponsored licensee is what is known as
12
Q
total revenue
A
total money gained
13
Q
total loss
A
total money lost
14
Q
net profit or total
A
part / percentage = total
15
Q
PITI payment
A
principal, interest, taxes, insurance
16
Q
annual interest total
A
Principal x Interest rate = Annual interest
17
Q
monthly interest formula
A
Annual interest ÷ 12 (months) = Monthly Interest
18
Q
In an amortized loan, the monthly interest payment is always based on:
A
the remaining principal
19
Q
total loan cost for amortized loans
A
Monthly payment x Number of payments = Total loan cost
20
Q
total interest paid for amortized loans
A
Total loan cost - Original loan principal = Total interest paid
21
Q
origination points
A
are fees charged to the borrower by the lender to pay for the loan origination.
22
Q
discount points
A
are paid by the borrower to lower the interest rate.
23
Q
1 point=
A
1% of the loan principal
24
Q
total cost of points
A
Loan points x Loan principal = Total cost of points
25
assessed value
is the value placed on a property by a governmental unit for use in calculating property taxes.
26
property taxes =
tax rate x assessed value
27
assessing unit
or approved assessing unit is a department that has the power to assess real property (such as a city, town, or county
28
what are ad valorem taxes based upon?
the value of the property
29
the amount that a homeowner pays in property taxes are based upon two things:
tax rate and assessed value of the property
30
property taxes owed=
Tax rate x Assessed value
31
proration
is the act of dividing or allocating expenses between buyers and sellers based on the actual period of usage of the item or service.
32
accrued items
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.
33
prepaid items
is an item that has been paid for ahead of time, generally by the seller.
34
1 mile=x feet
5,280 feet
35
1 cubic yard = x cubic feet
27 cubic feet
36
1 sq. yard = x sq ft
9 sq ft
37
1 acre= x sq ft
43,560 sq ft
38
1 sq mile= x acres
640 acres
39
livable area
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.
40
unfinished area
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.
41
most common measurement for the size of a building
square ft
42
common measurement for size of land
acreage
43
1 section= x square mile
1 square mile=640 acres
44
1 township= x sections
36 sections=36 square miles
45
1 linear mile = x linear feet
5,280 linear ft
46
area of triangle
(Base x Height) ÷ 2 = Sq. ft.
47
frontage
is the portion of the boundary of a lot that borders the street. This is measured in front feet.
48
amortized loans are paid in
arrears
49
appraisal
is the value of a property, based on factors determined by the opinion of a certified appraiser.
50
USPAP
Uniform Standards of Professional Appraisal Practice- is the ethical code that appraisers in the United States must follow.
51
appraisers are regulated by
the appraiser qualifications board AQB of the appraisal foundation
52
TALCB
Appraisers in Texas are regulated by the Texas Appraiser Licensing & Certification Board and is closely related to TREC
53
3 types of appraising a trainee can attain
Licensed Residential Appraiser
Certified Residential Appraiser
Certified General Appraiser
54
licensed residential appraisers can/cannot appraise
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
55
education requirements for licensed residential appraiser
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
56
education requirements for certified residential appraiser
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.
57
certified residential appraisers can/cannot appraise
can participate in one to four residential unit transactions, no matter the value.
58
certified residential appraisers can/cannot appraise
appraise any kind of property, anywhere, anytime, anyhow.
59
education requirements for certified residential appraiser
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.
60
limited appraisal
is a simpler, abbreviated version of a regular appraisal.
61
appraisals take 2 types of data into consideration
general data and specific data
62
general data
is information about the area surrounding the property. This could include the city, region, and neighborhood in which the property is situated.
63
specific data
on the other hand, is information regarding the property itself.
64
3 types of value in real estate
market, appraised and assessed value
65
market value
is the price for which a property will sell if offered openly under normal conditions.
66
appraised value
is an estimation of property's value as of a specific date, performed by a certified appraiser.
67
assessed value
is the value placed on a property by a governmental unit for use in levying annual real estate taxes
68
loan to value ratio
LTV ratio is the ratio between a loan amount and the value of the asset purchased by the loan.
69
highest and best use
is achieved when the property is used for the most appropriate purpose with the highest returns.
70
principal of anticipation
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.
71
principal of contribution
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.
72
principal of substitution
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
73
principal of change
reminds us that the condition of a property, the desirability of its location, and the market in which it exists can always change.
74
principal of conformity
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.
75
principle of regression
When lower-value properties surround a subject property, they can drag down the value of the property
76
principle of progression
If the subject property is located among properties that have a higher value, that can bump up the subject property’s value because of
77
sales comparison approach
Determining value by comparing the subject property to similar properties (“comps”) that have sold recently. It's most commonly used for single-family residences.
78
cost approach
Determining value by considering how much the same property would cost to build brand new at current prices (replacement cost), then adjusting for depreciation.
79
income approach
Determining value by considering how much income the property could generate when used as rental property.
80
reconciliation
the appraiser will compare estimates they made based on cost approach, sales comparison approach, and/or income approach
81
Functional obsolescence
Loss of value because a property’s function or appearance has gone out of style or has been replaced by a more appealing version
82
Economic obsolescence
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)
83
Deterioration:
Loss of value caused by physical wear and tear over time
84
properties have 2 ages
chronological and effective age (age influenced by updates)
85
appraisal report
is a report from a licensed appraiser that sums up a property's market value based on collected data.
86
first step of appraisal
stating the objective: legal description, property rights, type of value, effective date, limitations
87
appraisal review
the lender's underwriter may call for this to double check the accuracy of the appraisal
88
desk review
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.
89
field review
is performed by a third-party appraiser who carefully checks the validity of all the work that the first appraiser did.
90
DUST- characteristics that make real estate valuable
Demand
Utility
Scarcity
Transferability
91
demand
When more people want the property, it's more valuable.
| When less people want the property, it's less valuable.
92
scarcity
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.
93
transferability
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.
94
Sales comparison formula
Comparable property sale price ± Adjustments = Subject property value
95
cost approach equation for property value
Reproduction cost - Depreciation + Land value = Property value
96
quantity survey method
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.
97
unit-in-place method
It takes direct and indirect costs into account, but combines them into a simplified cost for a building component.
98
square foot method
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.
99
age-life depreciation
Age of property ÷ Total useful life = Depreciation (%)
100
replacement cost
is the cost of giving the new building similar features using comparable modern materials at current prices.
101
reproduction cost
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.)
102
most likely property you would use the cost approach on?
new construction
103
functional obsolescence
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
104
external (economic) obsolescence
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)
105
depreciation can be classified as either
curable or incurable
106
incurable
that could mean it's impossible to fix, but in most cases it means that fixing it would not be worth the expense.
107
every property has two ages
chronological and effective age
108
economic life
is the length of time for which an improvement on property is expected to remain functional and useful.
109
physical deterioration
is the loss of value caused by physical wear and tear over time.
110
obsolescence
is a property's loss of value due to economic or functional factors.
111
income capitalization approach formula
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.
112
rental property IRV formula
Net operating income (I) ÷ Capitalization rate (R) = Value (V)
113
Potential gross income PGI
simplest calculation-the amount of income the property would bring in if it was at 100% occupancy (all units rented out).
114
Effective gross income (EGI)
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.
115
Net operation income (NOI)
takes into account both income loss and operating expenses, it is the most accurate representation of how much money a property actually brings in.
116
comparative market analysis (CMA)
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
117
subject property
the property that is the subject of the comparative market analysis or appraisal) is one of the primary factors that determine its value.
118
comparable
is any property that has sold and is similar enough in features, location, and proximity in time to inform the value of subject property.
119
qualities of a good comparable
recently sold within last 3-6 mo, within .25-.5 miles, same neighborhood, age of property
120
CMA steps
Evaluate the neighborhood.
Evaluate the subject property.
Get your comparables.
Compare and adjust selected comparables.
Establish a listing price range.
121
primary mortgage market
is the arena in which borrowers and lenders meet up for the purposes of negotiating the loan terms of a mortgage transaction.
122
secondary mortgage market
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
123
mortgage backed securities MBS
When packages of loans are sold to investors, these repackaged loan bundles are presented as
124
3 major players in the secondary mortgage market
Fannie Mae: Federal National Mortgage Association (FNMA)
Freddie Mac: Federal Home Loan Mortgage Corporation (FHLMC)
Ginnie Mae: Government National Mortgage Association (GNMA)
125
government-sponsored enterprises (GSEs),
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)
126
Ginnie Mae
created in 1968 as a government owned corporation with HUD. FHA, VA and other government supported mortgage loans
127
Fannie Mae
Formal Name: Federal National Mortgage Association FNMA
Type of enterprise: GSE
Specialization: buying loans from large commercial banks
128
Freddie Mac
Formal Name: Federal Home Loan Mortgage Corporation FHLMC
Type of enterprise: GSE
Specialization: purchasing loans from smaller "thrift banks"
129
Ginnie Mae
Formal Name: Government National Mortgage Association GNMA
Type of enterprise: government owned enterprise
Specialization: buying loans to help housing assistance and support programs
130
Farmer Mac
Formal Name: Federal Agricultural Mortgage Corporation FAMC
Type of enterprise: GSE
Specialization: making credit available for agricultural and rural loans
131
depository institutions
utilize funds from savings accounts
132
thrift institutions
"thrifts" either stock companies or mutual companies.
133
Federal Home Loan Bank System FHLB
chartered to do four things:
Regulate member organizations
Set reserve requirements
Establish discount rates
Provide insurance for depositors
134
FHLB operates how many banks and are regulated by who
11 district banks that are regulated by the Federal Housing Finance Agency
135
Federal Deposit Insurance Corporation (FDIC)
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
136
Savings ASsociations
specialize in long term residential loans offering conventional, FHA-insured and VA guaranteed loans
137
real estate mortgage trusts (REMTs
is a registered company that owns and operates real estate mortgages; investors can buy and sell interests in mortgages.
138
Savings Banks
long term loans with funds derived from savings accounts. generally limited by their charters. provide local real estate support.
139
mortgage bankers
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.
140
savings associations
generally the most flexible of all the lending institutions in regard to their mortgage lending procedures
specialize in long-term residential loans
141
commercial banks
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
142
mortgage broker
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
143
savings banks
generally are limited in their lending activities because of their charters
provide long-term mortgage loans with funds derived from customer savings accounts
144
mortgage means what in old french
death pledge
145
3 housing GSE's are
FNMA, FHLM, FHLBank system
146
Federal Home Loan Bank Act (the Bank Act)
created the FHLBank System and the Federal Home Loan Bank Board (FHLBank Board) as its regulator.
147
National Housing Act
enacted in 1934 as part of the new deal and established FHA Federal Housing Administration which offered loans funded by approved lenders
148
who issued the first conventional loan MBS?
Freddie Mac
149
pre qualification
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.
150
pre approval
follows pre-qualification and is a more thorough examination of the borrower’s financial status.
151
The Uniform Residential Loan Application (or URLA)
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.
152
computerized loan origination CLO system
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.
153
automated underwriting
is a process of electronically evaluating a loan application and subsequently providing a recommendation for or against loan approval.
154
fixed rate amortized loans are also known as
direct reduction loans
155
straight amortized loan
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.
156
Adjustable rate mortgage ARM loans
the interest rate changes periodically, usually in relation to an index, and payments may go up or down accordingly.
157
the fully indexed rate is
equal to the margin plus the index
158
2 types of interest rate caps
periodic adjustment cap and lifetime cap
159
negative amortization
A payment cap can limit the increase to your monthly payments but also can add to the amount you owe on the loan.
160
negative amortization is the addition of
unpaid interest and the loan balance
161
flexible payment loan
specific type of ARM where the initial few years are lower monthly payments and then they increase
162
flexible payment loan
specific type of ARM where the initial few years are lower monthly payments and then they increase. appealing to younger groups.
163
interest only loan
also a straight loan or term loan is a type of balloon payment loan that calls for periodic payments of interest.
164
balloon payment
the final payment is larger then the rest.
165
maximum allowable payment formula
Borrower monthly income x Maximum allowable housing expense ratio = Maximum allowable monthly payment
166
maximum loan proceeds formula
(Maximum allowable payment ÷ Mortgage factor) x 1,000 = Maximum loan amount
167
T+I=
(Annual insurance premium + Annual taxes) ÷ 12 months = T + I
168
PITI=
P + I +T + I
169
conventional loans
are loans that are not underwritten by any agency of the federal government. can be either conforming or non conforming
170
government backed loans
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.
171
Loan-to-Value (LTV) Ratio
is a ratio of debt to value of the property
172
LTV=
Loan amount ÷ Purchase price
173
Private Mortgage Insurance PMI
is required on conventional loans for which the borrower has invested less than 20%
174
There is usually no legal limit on loan amounts with:
conventional loans
175
FHA mission
Its mission has been to provide access to low down payment mortgages to qualified buyers.
176
FHA-Insured Loans
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.
177
Mortgage insurance premium MIP
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
178
VA-Guaranteed (GI) Loans
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.
179
VA loans can be used for HOW MUCH of the purchase price?
100%
180
For VA loan limits, the actual limit is established by:
county
181
The combined total of a VA borrower's monthly debts cannot exceed
41% of their gross monthly income.
182
residual income
is defined as the amount of monthly income remaining after all the debts are deducted, including:
183
Certificate of Reasonable Value (CRV)
is an estimate of the market value on the date of inspection from VA approved appraiser for the property being purchased.
184
Farm Service Agency (FSA)
offers both direct and guaranteed ownership or operating loans to purchase and maintain farmland and to construct or repair buildings and other fixtures.
185
Rural Development (RD)
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
186
The two programs under the USDA that offer agricultural loans are the:
Farm Service Agency and Rural Developoment
187
USDA Rural Development Guaranteed Housing Loans are usually referred to as:
USDA loans
188
meet Fannie Mae and Freddie Mac guidelines
| can be sold in the secondary market
conforming conventional loans
189
The property must meet HUD’s minimum property standards.
| An upfront mortgage insurance premium (MIP) must be paid by the borrower.
FHA loans
190
do not meet Fannie Mae/Freddie Mac guidelines
| The loans may exceed the conforming loan limit or buyers may lack sufficient credit or collateral.
nonconforming conventional loans
191
A certificate of eligibility is required to reflect the available entitlement.
loans to purchase or construct homes for eligible veterans and their spouses
VA loan
192
My First Texas Home
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
193
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:
targeted area
194
Texas Mortgage Credit Certificate Program (MCC)
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
195
A Mortgage Credit Certificate:
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.
196
Texas Bootstrap Loan Program
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."
197
Texas Bootstrap Loan Program requirements
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
198
Texas Veterans Land Board VLB
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
199
three VLB loan programs available to a Texas veteran are:
Home loans
Land loans
Home improvement loans
200
VLB Land Loans may:
be assumed after three years
201
Texas Veterans Home Improvement Program (VHIP)
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.
202
Texas Bootstrap loan program
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"
203
Texas Mortgage credit certificate program
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.
204
My first texas home
must qualify under FHA, RHS, VA, or conventional (Fannie Mae HFA Preferred) guidelines
provides up to 5% of down payment/closing cost assistance
205
Federal Reserve System (Fed)
the nation’s central bank, operates to maintain sound credit conditions, help counteract inflationary and deflationary trends, and create a favorable economic climate.
206
how many federal reserve districts are there?
12
207
How does the Fed maintain sound credit conditions?
sets requirements for Reserve Funds for each chartered bank and open market operations
208
When the Fed raises federal fund reserve requirements
decreased amount of funds in marketplace, causes interest rates to rise and loans become more expensive. discount rate is high.
209
When the Fed lowers federal fund reserve requirements
increased amount of funds in marketplace, causes interest rates to lower and loans become less expensive. discount rate is low.
210
prime rate
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
211
The federal funds rate is the rate a:
bank charges when lending funds to other banks. The Fed indirectly controls this rate.
212
discount rate
Rate that the Fed charges banks for money lent. The Fed directly controls this rate.
213
The difference between the federal funds rate and the prime rate is that the prime rate is for:
The prime rate is for consumers and the federal funds rate is for other banks.
214
graduated payment mortgage
fixed rate, starts off a lower interest rate, interest rate increases over first few years before leveling off, used by younger borrowers
215
buydown mortgages
the borrower pays a fee upfront. In exchange, the interest rate initially starts well below the market rate.
216
pledged account mortgage
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.
217
package mortgage
includes not only the real estate but also all personal property and appliances installed on the premises.
218
contract for deed
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
219
purchase-money mortgage
the buyer borrows from the seller in addition to the lender
220
hard money loan
is financing that is secured and based on the value of an asset. usually higher interest rates then conventional and mostly short term loans
221
bridge loans
are short-term loans used to transition from one loan to another.
222
wraparound loans
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.
223
alienation clause
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.
224
reverse mortgage
enable homeowners who are 62 years old or older to borrow against the equity in their homes. based on owners age.
225
Participation Loan
also known as a syndicated loan, can involve hundreds of banks partnering in on a single loan or package of loans.
226
shared-appreciation mortgage (SAM)
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.
227
Blanket Mortgages
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.
228
Sale and Leaseback Loan
are used to finance large commercial or industrial properties.
229
seller-financed loan
is a real estate agreement in which the seller handles the mortgage process instead of a financial institution.
230
Seller Financing Addendum
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.
231
Construction Loans
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
232
Subprime Loan
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.
233
predatory lending
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
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
reverse mortgage
235
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.
purchase money mortgage
236
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.
home equity loan
237
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
bridge loan
238
Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act)
was enacted on July 30, 2008, and mandates a nationwide licensing and registration system for residential mortgage loan originators (MLOs).
239
licensing requirements for MLO's
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
The SAFE Act aims to:
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
Dodd-Frank Wall Street Reform and Consumer Protection Act
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
Consumer Financial Protection Bureau (CFPB)
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
Truth in Lending Act (TILA)
allows consumers to make comparisons from one lender to another, it also gives consumers protection
244
The Truth in Lending Act:
is designed to help consumers compare different funding options and protect consumers from unfair credit practices.
245
Regulation Z
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
three-day right of rescission
borrower has three days to rescind the transaction from the lender
247
trigger terms
such as the down payment, number of payments, monthly payment, or dollar amount of the finance charge
248
As per Regulation Z rules, an advertisement may:
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
If an advertisement includes the amount of the down payment, which of the following is one of the details that must also be included?
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
Fair Credit Reporting Act (FCRA)
promotes the accuracy, fairness, and privacy of information in the files of consumer reporting agencies.
251
Real Estate Settlement Procedures Act (RESPA)
is a consumer protection statute that aims to help educate consumers about closing and settlement services. created in 1974
252
One important goal of RESPA is to protect:
is to protect consumers from abusive lending practices.
253
Affiliate Business Arrangement (ABA)
Disclosure stating the relationship and that the buyer need not use affiliated firm.
254
Settlement Statement (HUD-1 form)
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
Settlement Statement is now known as
Closing Disclosure. TILA-RESPA Integrated Disclosure or TRID.
256
TRID
requires that lenders give borrowers two disclosures: the Loan Estimate and the Closing Disclosure.
257
Closing Disclosure
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
Loan Estimate Form
license holders give their clients an estimate of the expenses involved in closing the transaction
259
Equal Credit Opportunity Act (ECOA)
outlaws credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or the use of public assistance.
260
Community Reinvestment Act (CRA)
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
redlining
is to purposely limit the number of loans or the loan-to-value ratio in certain areas of a community or city.
262
usury laws
State laws that limit interest rates
263
3 types of land use controls
public and private land use controls, and public ownership of land
264
Public land-use controls:
Government-issued land-use controls such as zoning ordinances, subdivision regulations, and building codes. PETE- police power, eminent domain, taxation and escheat
265
Private land-use controls
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
public ownership of land
The role of government to own and maintain public land, such as streets, highways, and parks.
267
types of land controls under police power
zoning (most common), building codes, regulation of subdivisions, application of rules
268
zoning
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
zoning classification
agricultural, residential, commercial, industrial
270
Zoning ordinances are enforced through permits issued by the:
municipality
271
nonconforming use
When a pre-existing structure violates a zoning regulation
272
variance
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
Building codes
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
building permit
are granted if, among other things, the builder demonstrates that their proposed project is in compliance with building codes.
275
regulation of subdivisions
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
application of rules
If there is a conflict between a government restriction and a private restriction, the strictest restriction will be applied.
277
4 types of land use controls that fall under scope of police power in regulation and development
zoning, building codes, regulation of subdivisions, application of rules
278
Eminent domain
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
Condemnation
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
Inverse condemnation
occurs when the government takes private property but fails to pay the just compensation required by the Constitution.
281
taxation
is a charge (in this case, a charge on real estate) that is used to pay for services provided by the government.
282
assessed value
of a property is the value placed on a property by a governmental unit for use in levying annual real estate taxes.
283
Ad valorem taxes
calculated according to the assessed value of real estate, are levied through property taxes by the local authorities.
284
A rollback tax
is a property tax rate that applies when land changes from a qualifying use to a non-qualifying use
285
Tax Increment Reinvestment Zones (TIRZ)
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
intestate
If someone dies without a will, they have died ______
287
escheat
the descendant's ownership interest in any property is transferred directly to the state without their consent.
288
PETE describes the:
four basic types of public controls over land-use.
289
CC&R's describes the:
private land use controls - covenants, conditions, restrictions
290
dedicatory instrument
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
Restrictive Covenants
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
Who generally places deed restrictions on a property?
property developer
293
Construction on or alterations to private property have to comply with:
deed restrictions (private controls) and state, local and municipal regulations (public controls)
294
fee simple subject to a condition subsequent
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
subdivider
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
developer
Develops unimproved land prior to resale or lease
297
Bureau of land management
is a government agency that manages hundreds of millions of acres of the remaining "public domain" land in the United States
298
U.S. Forest Service
is a federal agency under the U.S. Department of Agriculture that manages 193 million acres of land, ex. national forests and grasslands
299
U.S. Fish and Wildlife Service
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
national parks system
their mission is to preserve nature for future generations.
301
What percentage of land in Texas is privately owned?
95%
302
Interstate Land Sales Full Disclosure Act
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
The CFPB Consumer Financial Protection Bureau seeks to protect the consumer by:
by assuring access to all the information needed for a sensible, unhurried land purchase.
304
When must the property report be given to the buyer?
before the purchase agreement is signed
305
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:
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
CFPB
holds all property reports for public inspection
307
Texas Commission on Environmental Quality (TCEQ).
Most federal environmental legislation is enforced at the state level by this
308
Lead-Based Paint Disclosure
is a federally-required addendum that must be presented to buyers of all residential property built prior to 1978.
309
Certificate of Mold Remediation
certifies that remediation was done and completed by a licensed mold assessment consultant. must be passed to buyers within next 5 years.
310
Polychlorinated Biphenyl (PCB)
are carcinogenic substances used widely before 1977 as coolants and lubricants in transformers, capacitors, and other electrical equipment.
311
Asbestos, an environmental hazard, is a mineral that has been used for many years as:
insulation
312
Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)
in 1980, it established a $9 billion Superfund to clean up uncontrolled hazardous waste sites and to respond to spills. EPA enforces this.
313
An Energy Star-qualified new home is at least X percent more energy-efficient than homes built to the 2004 International Residential Code (IRC).
15
314
National Green Building Standard (NGBS)
approved in January 2009 as the only consensus-based green building standard for residential properties.
315
LEED
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
2 green mortgages
Energy-Efficient Mortgage (EEM) and Energy-Improvement Mortgages (EIMs)
317
A mortgage that recognizes the added value of energy efficiency is called a(n):
Energy Efficient Mortgage EEM
318
Ad Valorem Property Tax Exemption
Texas offers this for the portion of the appraised property value that arises from installation of green energy sources
319
Agents can specialize in things such as:
client types, property types, services provided
320
lease
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
resort home
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
A resort homebuyer will likely sell their home within about:
5 years
323
investment property
is a property purchased primarily or exclusively for investment purposes rather than as a place to live.
324
ranch
regardless of the degree of development, is land that has been designated for raising grazing livestock
325
REO
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
Who are the two most common client groups who look to purchase REO properties?
investors and first time home buyers
327
short sale
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
3 types of auctions
absolute, minimum bid, reserve auction
329
absolute auction
An auction absent of any reserve or restriction on price. The highest bid is accepted. Also known as a no-reserve auction (NR).
330
minimum bid auction
A minimum acceptable sale price (reserve), disclosed or not, is set.
331
reserve auction
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
auctioneer's are excempt from needing a real estate license as long as:
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
3 ways a license holder can participate in real estate auctions
referring agent, cooperative agent, listing agent
334
judicial foreclosure
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
nonjudicial foreclosure
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
acceleration clause
the entire loan amount due immediately if there is a default.
337
deed in lieu of foreclosure
effectively transfers the title from the borrower to the mortgagee (lender) and relieves the borrower of the debt they owe the lender.
338
Equitable redemption
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
deficiency judgment
mortgagee can seek remaining amounts owed after foreclosure but would require them to incur legal expense to pursue
340
foreclosure timeline (3)
pre-foreclosure, foreclosure auction, real estate owned REO
341
pre foreclosure
Homeowner sells property — possibly as a short sale with lender approval
342
foreclosure auction
A third-party trustee sells the property at a foreclosure auction
343
real estate owned REO
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
commercial real estate
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
The REO asset management responsibilities tend to fall under three categories:
Pre-List
Management/Sale
Title/Closing
346
The three main reasons to invest in real estate are:
income/cash flow, appreciation, and investment gain .
347
Cash flow
refers to the cash that an investment generates after accounting for the operating expenses, debt service, and taxes associated with the enterprise.
348
Appreciation
is the increase in value of a property. It can occur with developed and undeveloped land.
349
ARV
after repair value
350
investment gain
is when the investment property owner actively performs development and capital improvements on the property. (not passive like appreciation)
351
rate of return
is the percentage gain (or loss) on the cost of investment over a period of time
352
Liquidity
refers to ease and speed with which an asset can be bought or sold without significantly diminishing the asset's value.
353
time value of money (TVM)
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
leverage
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
loan to value (LTV) ratio
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
2 investment performance measures
cash flow and appreciation/gain
357
operating statement
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
potential gross income
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
effective gross income
or gross operating income-vacancy allowance subtracted from potential gross income equals this
360
Net operating income NOI
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
Gross Rent Multiplier (GRM)
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
debt services
payments made towards principal and interest of a loan
363
after tax cash flow
Subtracting the investor's income taxes from the pre-tax cash flow brings
364
Gross domestic product (GDP)
is the total value of goods produced/services provided by a country in a year
365
risk reward ratio
is the degree of risk tolerance willingly taken on in exchange for a potential reward.
366
capital improvement
is the addition, restoration, or remodel of a property in a way that increases property value and/or extends its useful life.
367
an individual can take a sizable tax-free capital gain on the sale of their principal residence as long as
they lived in it for two of the five years preceding the sale.
368
individual capital gain threshold
$250,000
369
feasibility study
the detailed analysis of the viability of an idea
370
Adjusted investor basis
Purchase price + Cost of acquisition + Capital improvements - Depreciation =
371
net sale price=
sale price - cost of sale=
372
capital gain=
net sale price - adjusted investor basis=
373
Section 1031 Exchange
allows investors to sell a property and defer payment of capital gain taxes on those sales.
374
Syndication
is when two or more individuals pool their financial resources to participate in a transaction they could not afford to undertake individually.
375
real estate investment syndi
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
A benefit of a real estate investment syndicate is that they:
cate
allow for more participation from small-scale investors.
377
3 phases of syndication
organization, operation, liquidation
378
organization
planning, acquiring property, satisfying registration and disclosure rules, and marketing
379
operation
sponsor usually manages both the syndicate and the real property
380
liquidation
also known as completion (resale of the property)
381
active manager
The sponsor, also known as the syndicator or the organizer
382
the most common formal organization of a real estate investment syndicate is that of a
limited partnership (LP) or limited liability company (LLC).
383
general partnership
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
limited partnership
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
limited liability company (LLC)
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
All members equally share responsibilities, profits, and losses in a:
general partnership
387
Comparing them with LLC members, limited partners in an LP:
general partners retain power to make management decisions and, with that responsibility, assume full personal liability.
388
joint venture
is a business arrangement that a partnership will use when joining forces for a single business objective.
389
a syndicate is equal to a:
limited partnership
390
cannot hold a real estate license as an entity
| grant personal asset protection for all members from the business debts and liabilities
syndicates as limited liability companies
391
seldom utilized in modern syndicates because of double taxation
ensure centralized management and limited liability for investors
syndicates as corporations
392
a partnership among one or more individuals for a single project
a temporary relationship as opposed to an ongoing business
syndicates as joint ventures
393
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
syndicates in limited partnership
394
REIT Real estate investment trust
is a company that owns – and typically operates – income-producing real estate or real estate-related assets.
395
REITs generally fall into three categories:
Equity REITs
Mortgage REITs
Hybrid REITs
396
equity REITs
is a REIT that earns income for its investors through rent collection or the sale of the properties in their portfolio.
397
mortgage REITs
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
hybrid REITs
generally are companies that use the investment strategies of both equity REITs and mortgage REITs.
399
no traded REITS downside
iliquid investment and no value transparency
400
pass-through entity
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
special purpose vehicle (SPV)
is a limited corporate entity created with a specific objective.
402
Mortgage-Backed Securities (MBS)
are asset-backed securities, where the underlying asset is a single mortgage or a bundle of mortgages that serve to back the securities.
403
secondary mortgage market
is the environment in which mortgage lenders sell home loans they originate to government agencies or investment bankers.
404
Collateralized mortgage obligations (CMOs)
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
tranches
When mortgage-backed securities are sold to investors at different risk levels and classes
406
Real Estate Mortgage Investment Conduit (REMIC)
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
When a REMIC is created, the mortgage pools are segmented based on:
maturity dates
408
The biggest disadvantage to the investor of a REMIC is that investors:
do pay taxes on profits earned (avoid double taxation though)
409
forms of syndicates
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
three categories of REITs
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
two types of tenancies
Residential Tenancy (in which tenants reside on the property)
Commercial Tenancy (in which an income-producing business uses the property)
412
every residential tenancy consists of two parties
landlord and tenant
413
Americans with Disabilities Act
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
Federal Fair Housing Act
Race, Color, Religion, sex/gender, national origin, ancestry, familial status, disability
415
what isn't protected under federal or state law but is under NAR code of ethics?
sexual orientation
416
4 primary estates:
freehold, leasehold, concurrent, and equitable
417
freehold estate
An estate in which the owner has an indefinite length of ownership
418
leasehold estate
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
concurrent estate
An estate that is owned by two or more individuals
420
equitable estate
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
reversionary right
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
4 types of leasehold estates
estate for years, periodic estate, estate at will, tenancy at sufferance
423
estate for years
is a leased possession of property for a certain, specific period of time; also known as a tenancy for years.
424
periodic estate
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
estate at will
When a tenant is occupying a property with the landlord's knowledge and consent, but without a formal lease agreement
426
tenancy at sufferance
occurs when a tenant remains in possession of the property beyond their lease term, without the consent of the landlord.
427
holdover tenant
When a tenancy at sufferance occurs, the tenant is referred to as
428
The age at which a person can enter into a lease agreement is:
18
429
for leases what is considered the -consideration- paid for possession?
rent
430
The requirements of a valid lease include:
parties to the lease, competent parties, offer and acceptance (mutual agreement), consideration, lawful objective, and legal description of the property.
431
A tenant's right to enjoy their property without disturbance from the landlord is known as the covenant of:
quiet enjoyment
432
There are a number of ways a lease can be discharged, all of which tend to fall into these four categories:
expiration, agreement, breach of one of the parties or by operation of law (special statutory rights)
433
actual eviction
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
constructive eviction
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
Landlord & Tenant Act
title 8
436
landlords must provide a copy of the singed lease within
3 business days of signing a lease
437
What is a reasonable time for making repairs in a residential tenancy?
7 days
438
A residential landlord must postmark the return of a security deposit within:
30 days
439
A residence should have smoke alarms in every:
bedroom, in each level of a dwelling, and in each corridor that serves multiple bedrooms.
440
when should a landlord inspect the smoke alarm?
at the beginning of a tenant's lease, whenever the tenant reports a malfunction, and whenever a tenant requests an inspection.
441
When must the landlord rekey residences?
within 7 days after tenant turnover
442
gross lease
the tenant pays a simple, flat rent every month
443
net lease
is a lease in which the (usually commercial) tenant pays a base rent rate plus property taxes.
444
double net lease
rent, property taxes and insurance must be paid
445
triple net lease
rent, property taxes, insurance and maintenance
446
percentage lease
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
variable lease
is a leasehold agreement in which the base rent changes. It can take the form of a:
Graduated lease
Index lease
448
graduated lease
is a variable lease agreement in which the amount of rent increases at fixed future dates.
449
index lease
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
ground lease
The leasing of bare, undeveloped land
451
lease purchase agreement
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
In a lease purchase agreement, the tenant is able to:
purchase the property during the duration of the lease.
453
sale and leaseback agreement
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
The landlord will be responsible for the property’s operating expenses.
The tenant pays a simple, flat rent every month.
gross lease
455
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
sale and leaseback agreement
456
It can take the form of a graduated lease or an index lease.
| The base rent changes.
variable lease
457
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
oil and gas lease
458
3 conditions to charge a late fee:
must be stated in lease, must be reasonable and must be at least one full day late
459
2 broad categories of commercial real estate
retail property and office property
460
Which property category do distribution centers and warehouses fall under?
industrial property
461
fiduciary duties
old car
| obedience, loyalty, disclosure, confidentiality, accounting, reasonable care
462
How long are property managers bound by confidentiality?
forever
463
What area of the contract will inform the property manager about the amount of costs they may incur without consulting the owner?
allocation of costs
464
How is the net operating income determined?
effective gross income - operating expenses
465
A manager's fee is calculated off of:
gross income (before expenses)
466
operating budget
is a budget created from taking anticipated revenues and expenses and then planning for the long-term goals of the property owner.
467
Property managers are able to track a property's financial performance in the future through the use of:
operating budgets
468
Capital expenditures
are funds used by a company to acquire or upgrade physical assets like property, industrial buildings, or equipment.
469
Which law or act protects an individual's sensitive personal information?
Identity theft enforcement and protection act
470
ADA tax credit
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
Economic viability
is when a project or property is both economically feasible and will have a positive impact on the area around it.
472
Occupational Safety and Health Administration, or OSHA
is the government agency charged with the task of ensuring that employers are responsible for providing safe and healthy workplaces for their employees.
473
the u.s. patriot act
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
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
the fair credit reporting act
475
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
identity theft enforcement and protection act
476
requires many businesses and organizations to implement a written Identity Theft Prevention Program
enables consumers to place fraud alerts in their credit files
fair and accurate credit transactions act of 2003
477
mitigate liability
ACTOR
| avoid, control, transfer (insurance policy), or, retain
478
indemnification provisions
require one party to reimburse the other for losses or damages incurred as a result of a claim against that other party.
479
typically not all-inclusive but targeted toward specific risks
covers damages that occurred because of theft, burglary, vandalism, or machinery damage
casualty insurance
480
also called rent-loss insurance
| something happening to or on the property makes it unable to produce income
interruption insurance
481
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.
extended coverage
482
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
workers' compensation insurance
483
The majority of single family rental properties are managed by:
the property owner
484
National Association of Residential Property Managers (NARPM®)
is a trade organization for the residential property management industry, specifically those engaged in property management of single-family and small residential properties.
485
Vacation Rental Management Association (VRMA)
is to advance professionally managed vacation rentals as a preferred rental option for consumers.
486
class A
Newer, attractively located, and in high demand with high rent rates (office property)
487
class B
A little older but still in good shape, decent location, and in average demand with average rent rates (office property)
488
class C
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
A rental rate is established by all of the following EXCEPT:
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
deed
is a legal document that transfers a title of real estate from one party to another.
491
Granting Clause
also known as words of conveyance, is needed to state the grantor's intention to convey the property.
492
Habendum Clause
specifies both the owner's rights, as well as the limitations on those rights (i.e., prohibited activities).
493
The granting clause needs to include:
what interest in the property is being conveyed by the grantor.
494
What is the purpose of a habendum clause?
is used to define or limit the ownership interest of the grantee.
495
Acceleration Clause
makes the entire loan amount due immediately upon default.
496
Hypothecation Clause
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
Defeasance Clause
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
Release Clause
This clause allows one party to withdraw under certain circumstances. It's also called a "kick-out clause."
499
If a grantor is unable to sign, a grantor’s signature can be signed by an:
attorney in fact
500
A title to real estate does not pass or transfer until:
the deed is actually delivered to and accepted y the grantee
501
In Texas, deed acknowledgment is:
not essential to the validity of a deed. Still, it is best practice to acknowledge all deeds.
502
four main types of deeds in conveying real estate
General warranty deed
Special warranty deed
Bargain and Sale deed
Quitclaim deed
503
general warranty deed
provides the greatest protection of any deed. certain covenants or warranties legally bind the grantor.
504
Five Basic Implied Warranties
Covenant of Seisin, Covenant Against Encumbrances, Covenant of Quiet Enjoyment, Covenant of Further Assurance, Covenant of Warranty Forever
505
Covenant of Seisin
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
Covenant Against Encumbrances
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
Covenant of Quiet Enjoyment:
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
Covenant of Further Assurance:
The grantor promises to obtain and deliver any instrument needed to make the title good.
509
Covenant of Warranty Forever:
The grantor guarantees that they will compensate the grantee for losses if the title fails in the future.
510
Special Warranty Deeds
is A conveyance that carries only one covenant
511
bargain and sale deed
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
quitclaim deed
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
executor’s deed
| sheriff’s deed
deed executed pursuant to court order
514
contains no warranties against encumbrances
| a deed without warranty
bargain and sale deed
515
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
special warranty deed
516
when a trustee sells or conveys property out of the trust
trustee's deed
517
title
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
title policy
also known as title insurance or a title insurance policy, protects homeowners (and, likewise, their lenders) from financial losses related to title issues.
519
A lender's title insurance policy is paid for by the:
borrower and protects the lender.
520
abstract of title
is an abbreviated history of a property, including info on any transfers, grants, wills, conveyances, liens, and encumbrances.
521
Recording
is the placing of documents about the claims and ownership of real estate in the county clerk’s office at the courthouse.
522
Documents relating to real property must be kept on file in the:
county where the property is located
523
"Giving notice" of one's interest in a real property can be broken into:
b nn and actual notice
524
A property's ownership chain is broken. There are several gaps in the chain of title. This means there is a:
cloud on the title
525
marketable title
is one that is free from significant defects that have the potential to subject the buyer to litigation.
526
title defect
is anything that can cause a title to be considered invalid or defective in some way
527
Abstractors are responsible for:
information present in existing public records
528
Torrens System
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
alienation
transfer of title to real estate
530
When it comes to recording a deed, recording:
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
Easement by Necessity
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
Easement in Gross
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
Easement by Prescription
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
Easement by Restriction
is a legally binding agreement between a landowner and an agency or organization. also called a conservation restriction or conservation easement.
535
Condemnation
is the legal process of acquiring private property for public use through the government’s power of eminent domain.
536
The estate that will pass to another party at the death of the person upon whom the life estate is based is the:
remainder
537
With a leasehold estate, tenants have what specific kind of estate in the property for the duration of their lease?
possessory estate
538
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?
equitable estate
539
4 types of estates
leasehold, equitable, concurrent, freehold
540
intestate
someone who dies without having left a valid will
541
testate
someone who dies with a will indicating how property will be disposed after death
542
hereditament
Any property (real or personal) that is capable of being inherited
543
testator
makes a will
544
devise
The gift of real property by will
545
devisee
a person who receives real property by will
546
legacy or bequest
a gift of personal property
547
legatee
the person receiving the personal property
548
Holographic Wills
A handwritten will created solely by the maker (and not witnessed)
549
Any witnesses to the creation of a will should:
not be anyone who is named as devisee or legatee in the will.
550
community property
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
alienation
the act of transferring property from one party to another
552
2 types of alienation
voluntary and involuntary
553
voluntary alienation
the method by which property is transferred from the current owner to another party either by sale or gift
554
dedication
is the voluntary gift of one’s land to the public.
555
involuntary alienation
occurs when a property is transferred without the owner’s consent.
556
inverse condemnation
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
adverse possession
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
easement
is the right of one party to access or use someone else's land.
559
Easement Appurtenant
right to cross the other parcel of land by the landlocked owner
560
dominant tenement
parcel benefitting
561
servient tenement
parcel suffering from the easement
562
easement in gross
an individual or company is allowed to be on the owner's property for specific purposes.(people are gross)
563
easement by prescription
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
easement by necessity
land granted by necessity or they can't access their property
565
statute of frauds
is the law that requires certain contracts to be in writing to be valid.
566
option money
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
The buyer MUST receive a copy of their Closing Disclosure by:
3 business days prior to closing
568
What are three conditions shared by most residential sales contracts?
good title, property inspection and financing
569
amendments
are changes in a legal document made by adding, altering or omitting a certain term or condition
570
contingency
is a provision within a contract that makes performance conditional upon the occurrence of a stated event.
571
3 title searches to public records are made when?
1. the date of the original sales contract
2. the day of closing
3. prior to recording papers since last search
572
closing agent
the representative of the title insurance company
573
closing disclosure
a document that itemizes services and fees charged to the borrower
574
Once a sales contract is signed by all parties, TREC requires the broker deposit the earnest money by the end of the:
second business day
575
DOCTRINE of relation back
the deed passes title to the purchaser as of the date it was delivered to the escrow agent
576
Real Estate Settlement Procedures Act (RESPA)
enacted in 1974 to protect consumers from abusive lending practices
577
TILA-RESPA Integrated Disclosure Rule (TRID)
addresses what information lenders are required to provide to borrowers and when they are required to provide it.
578
A broker charges a fee for using a CLO system. This is:
acceptable as long as the fee is diclised and reasonable
579
Deceptive Trade Practices Act (DTPA)
is the primary consumer protection law in Texas. protects consumers against false or misleading statements, unconscionable actions and breaches of warrenty
580
The charges for recording all of the closing statement documents must be paid to _____ .
the county clerk
581
Expenses that are owed by the seller, but will later be paid by the buyer are considered:
accrued items
