real estate (national) Flashcards
what legal document supports the conveyance of real estate?
deed
what supports the conveyance of personal property?
receipt or bill of sale
what is used as the legal description of land
metes and bounds
metes and bounds uses…
- a point of beginning
- compass directions
lot and block uses…
recorded plats/plat maps
government survey uses..
legal description for land
-1 section = 1 sq mi (640 acres)
- 36 sq mi in a township
what are the 3 methods of land descriptions
- metes and bounds
- government survey
- lot and block
how many square ft are in 1 acre?
1 acre =43560 sq ft
what is a lien
a legal claim/interest against a property to protect lender from loss
types of liens (2)
- voluntary
- involuntary
example of a voluntary lien
mortgage
example of involuntary lien
tax lien, mechanics lien, etc
how does a voluntary lien affect property value or title?
it doesn’t
how does an involuntary lien affect property value and title?
- decreases market value
- clouds title (meaning it creates an impediment to selling/refinancing)
easement
the right to use another persons property for a specific use
types of easements (2)
- appurtenant easement
- easement in gross
appurtenant easement
burdens one piece of land for the benefit of another (ex. driving over neighbors land to reach yours as it’s the only way)
easement in gross
benefits and person only and not the land (ex. utility companies right to private access in order to complete their job)
encroachment
when one property owner extends a structure of their property onto their neighbors without permission
what is probate
transfer of the property owned by a deceased person without a will
adverse possession
possession of a property without the owners permission. once it reaches a certain amount of time, the person trespassing can claim the property
littoral rights
rights of landowners to access a body of water that is still, such as a lake
riparian rights
a landowner whose property borders a river has a right to use water from that river on his land
basic types of ownership (2)
- ownership in severalty
- co ownership/concurrent
- common interest
ownership in severalty
1 owner
co ownership/concurrent
more than 1 owner
tenancy in common: type of ownership, how many people have ownership of the property, survivorship?
- most common type of co ownership
- 2 or more people have an undivided interest in the entire property
- no survivorship
joint tenancy: type of ownership, ownership implications, survivorship?
- co ownership
- each owner has undivided interest
- right of survivorship ( if one owner dies the others get some of their share)
common interest ownership: definition and example
where owners share an interest in common areas
ex. condominiums, retirement communities, timeshares
timeshare
a vacation property multiple people own (basically a vacation condo)
condominiums
type of ownership where a building is divided into multiple units. can be owned separately or in common
co-op/cooperative
buildings owned by corporations.
- residents are shareholders, each paying a proprietary lease
- if one shareholder fails to pay the lease, the whole cooperative may face foreclosure
trust deed
instruments held by a third party as security for the payment of a note
what are the 3 party devices of a trust deed?
- borrower= trustor
- lender= beneficiary
- independent 3rd party= trustee
what is an estate?
a possessory interest which entitles the holder to the possession of the property, either now (present interest) or in the future (future interest)
life estate
a freehold estate that lasts only as long as a specified person lives
condemnation
when the government orders a property to be vacated and stay vacant
escheat
transfer property to the government if the owner dies and has no heirs
police power
authority of the government to enact regulations that protect the public’s safety
governments have controls on land use through…(2)
- zoning laws
- building code
appraisal
an opinion on value of property
what is survivorship
the inheritance of interest other owners receive when one of the owners die
building codes
regulations set by the government to control the design, construction, and modification of buildings
covenants and example
specific rule on a property through the deed
ex. deed includes the requirement of the property to be kept a religious property, be kept a certain color, etc.
types of land controls/restrictions (2)
what type of people establish them?
- public (government)
- private
subdivision CCR’s (covenants, conditions, and restrictions)
set of rules/promises made by the developer governing the use of a property
bylaw
rules created by company to control the actions of its members
what type of condominium controls are in place? (2)
-bylaws
-owner’s association regulations
situations that require an appraisal (4)
- loans
- taxes
- insurance
- refinance
effective date
the date you are valuing (appraising) the property
steps to an appraisal (8)
- define the problem
- determine scope of work
- collect relevant data
- determine properties highest and best use
- determine land value (without the property value)
- apply 3 approaches to value
- reconcile
- report
scope of work
an appraisal outline identifying the work needed to complete the appraisal
General appraisal data (PEGS)
- physical factors
- economical factors
- governmental factors
- social factors
highest and best use
most profitable use
3 approaches to value
- sales comparison approach’s
- cost approach
- income approach
sale comparison approach
uses recent sales data from similar properties to determine a property’s market value
- most useful/accurate
cost approach
considers the cost to construct a property similar to the one being appraised
- best for unique properties/ones not sold enough to have enough sales comparison data
income approach
estimates value by how much income the property generates
- best for commercial/investment properties
reconciliation
process of weighing each approach to value in order to reach a final value conclusion
market value
expected price
market price
actual price
loan value
amount lender is willing to loan for property
insurance value
amt of money the property can be insured for
assessed value
estimate of a properties value, which is used to calculate property taxes
property characteristics that affect value (3)
- immobility
- indestructibility
- uniqueness
economic principles that affect property value (4)
- highest and best use
- supply and demand
- conformity
- scarcity
comparative/competitive market analysis (cma)
method of determining recommended listing price by comparing the subject property to other properties that have sold, are presently for sale, or did not sell in a given area
broker price opinion (BPO)
estimate of a properties value typically performed by a broker or an agent
automated valuation method (AVM )
Computer program that uses algorithms and property data to estimate a properties market value
discount points
- One point is 1% of the loan amount
- add to lenders yield
lenders yield
used to determine the risk of a real estate investment
net operating income (NOI)/loan amount
loan to value ratios (LTV)
amount of money borrowed/price of property
private mortgage insurance (PMI)
offered by private companies to protect a lender against default
what are the 4 components of a monthly mortgage payment?
PITI
-Principal
-Interest
-Taxes
-Insurance
Conventional loan
long term, fully amortized, fixed rate real estate loan
debt service ratio & formula
the ability to generate enough cash to cover debt payments
Net Operating Income/Annual debt service
credit scoring
determining credit worthiness
promissory note
a promise to pay an amount of money in a specific timeframe to a person
amortized loan
loan payed back in monthly payments with interest
partially amortized/balloon loans
loans payed back in monthly payments plus interest with one big payment at the end
interest only loan
borrower pays only the interest for a certain amount of time before paying the principle balance
adjustable rate mortgage (ARM)
loan with variable interest rates
3 types of government loans
- fha insured loan
- va guaranteed loans
- usda/rural development loan programs
federal housing administration (fha)
gov agency under HUD that actually insures the loans
va guaranteed loans
a portion of a loan the va pays for
in order to attain a va loan, you need… (2)
- Certificate of eligibility (COE)
- Discharge Papers
USDA rural development loan programs
provides low interest no down payment loans to help eligible families living in rural communities
land contract
right to occupy property by…
Installment agreement where the buyer makes payments to the seller in exchange for the right to occupy and use the property.
- no deed/title is transferred until all or a specific portion of the payment has been made
underwriter
the individual that evaluates a loan application to determine its risk level for a lender or investor
- usually the final decision maker
home equity loan
usually a one time loan that lets you use your home equity as collateral
home equity: owners interest in a property determined by how much they paid off (the more they pay off the more their home equity is)
home equity line of credit (HELOC) loan
money available to the homeowner to be borrowed as expenses arise
bridge mortgage loan
mortgage that occurs between the termination of one mortgage and the beginning of the next
reverse mortgage loan
a senior (age 62+) mortgages their house and in return receives a lump sum of cash, sets up an equity line, or receives a monthly check from the lender
construction loan
Temporary loan used to finance the construction of improvements and buildings on land
rehab loans
a loan that provides enough funds to buy a property and renovate it
- property must be at least a year old
real estate settlement procedures act (RESPA)
fed law dealing with closings that lays out the specific procedures and guidelines for disclosure of settlement costs
-prohibits kickbacks
kickback
when a real estate agent acting as a fiduciary receives gifts from a third party for referring clients to them
-this is ILLEGAL
truth in lending (regulation z)
discloses the true costs of obtaining credit/lending
to follow truth in lending/regulation z for advertisements, trigger phrases must be…
fully disclosed
ex. amount of down payment (20%, 10%, etc)
RESPA disclosures include.. (3)
- HUD booklet
- mortgage servicing disclosure statement
- Good faith estimate (GFE) of settlement cost
equal credit opportunity act (ECOA)
fed law that prohibits discrimination in granting credit to people based on
-sex
-age
-marital status
-color
-religion
-national origin
-receipt of public assistance
-exercised rights under the the consumer protection act
lending process (5)
- consult with lender
- complete loan application
- process loan application
- analyze the borrower and the subject property
- closing the loan
prepayment clause/penalty
gives lenders right to charge the borrower a penalty for early payment of loan
balloon payments
large lump sum payment at the end of a loan term
progression
worst home in best area
regression
best home in worst area
conformity
particular home achieves its max value when surrounded by homes that are similar
5 elements for valid contract
- Contractual capacity
- offer
- acceptance
- consideration
- lawful and possible objective
statute of frauds
law requiring certain types of contracts to be written and signed in order to be enforceable
offer
legal document listing the terms and conditions th buyer requires to buy the property
what events can terminate an offer? (4)
- lapse of time
- death/incapacity of party
- revocation
- rejection
void contract
contract that was void from the beginning and cannot be made valid
voidable contract
initially valid but can be eventually annulled by one of the parties
unenforceable contract
contract that cannot be be enforceable by the court of law
unilateral contract
1 party makes a promise to the other party
bilateral
both parties make promises to each other
option
contracts that give 1 person the right to do something without obligating them to do it
is an option a bilateral or unilateral contract
Unilateral
option requirements (2)
- be in writing
- be very specific
right of preemption
right to have the first chance to buy/lease the property if the owner decides to sell it
acceptance of a contract only may….(4)
-be made by the offeree
- be communicated to the offeror
- be made in the manner specified
- not vary the terms of the offer
possible remedies for breach (4)
- compensatory breach
- liquidated damages
- specific performance
- rescission
rescission of contract
allows a party to cancel a contract in the case of duress, misrepresentation
-nullified as if it never happened
cancellation of contract
describes the end of a contract, requires legal justification
termination of contract
ending a contractual relationship due to breach of a contract
addenda/um to contracts
separate document if attached to original contract that modifies or add its terms
amendments to contracts
a change to an existing contracts all parties agree on
purchase agreement
legally binding contract between a buyer and seller that outlines the terms and conditions for the sale of good/services
contract contingency
a condition that must be met for a contract to be valid/a transaction to proceed
lease purchase agreement
contract that allows a tenant to rent a property with the option to buy at the end of the lease
types of leases (4)
- gross lease
- net lease
- percentage lease
- land/ground lease
gross lease
tenant pays fixed amt for rent, landlord pays other expenses (taxes, insurance, utilities, etc)
net lease
tenant pays property expenses in addition to rent
percentage lease
tenant pays rent + percentage of sales made (used for commercial buildings)
land/ground lease
a person rents land from a landowner, not the property
agency relationships (4)
- licensee and a seller
- licensee and a buyer
- dual agency btw licensee and buyer and seller
- split agency btw 2 licensees in the same brokerage
dual agency
agent represents both buyer and seller
split agency
two agents from same broker represent buyer and seller
types of listing contracts (4)
- exclusive right to sell
- exclusive agency agreement
- open listing
- net listing
escrow
a deed, bond, money, or something of value held in trust by a 3rd party to be given to the grantee upon fulfillment of a condition
exclusive right to sell
a seller agrees to work with one agent to market and sell their property
exclusive agency agreement
seller gives the agent the right to market and sell a property only if the agent brings the buyer
open listing
allows property owner to work with multiple agents to sell their property
net listing
seller tells agent the lowest amount they want the property to sell for, if the agent finds a buyer who pays a higher price, the excess is paid to the agent
power of attorney
allows someone to act on the behalf of someone else in a real estate transaction
agency relationships are created by…
the agents being provided authority by the principle
based on the level of authority, agents can be classified as…(3)
- universal
- general
- special
universal agent
agent with the ability to act on behalf of the client in any legal/financial matter that can be delegated
-this authority is ongoing
general agent
agent with the ability to act on the behalf of a client within a specific area
-this authority can be ongoing
special agent
agent with the ability to act on the behalf of a client for a special task
- this authority is not ongoing
types of authority (3)
-actual
-express
-implied
actual authority
power of an agent to act on the behalf on a principle, which can be given expressly or impliedly
express authority
the principal explicitly give authority to the agent
implied authority
the principle implies the agent has authority to act, not expressly given
reasons for agency termination (6)
- accomplishment of task
- expiration
- operation of law
- mutual agreement
- renunciation
- revocation
fiduciary responsibilities (6)
ACCOLD
-Accountability
-Confidentiality
-Care
-Obedience
-Loyalty
-Disclosure
T or F: the agent is a fiduciary to a third party
False
agency disclosure
lets buyer and seller know who is working for whom in the transaction
seller and sellers agent must tell the buyer about _____ defects and are not required to disclose _____ defects
latent, patent
latent defects
hidden defect
patent defects
obvious defects
residential property disclosure form
includes detailed description of property condition, including checks for mold, smoke damage, flood damage, etc.
- delivered to buyer before offer to purchase
federal fair housing act
prohibits discriminating based on sex, race, religion, race, national origin, etc in the sale or lease of property
Americans with disabilities act (ADA) requires compliance in… (5)
- employment
- public services
- public accommodations
- private entities
- telecommunications
t or f: the comparative market analysis is not the equivalent of an appraisal
true; its performed by a real estate agent, and therefore cannot be an actual appraisal
t or f: an appraisal is not required to refinance a home
false; it is required
title insurance policy
a contract that protects the owner of a property from losses that may occur if the title has defects
title
the actual lawful ownership of a property
possible title problems
- unpaid taxes
- liens, such as mortgage or mechanics
- fraudulent documents
- more
resolutions to title problems (3)
- title searches
- negotiate with lien holders
- legal action to clear title
title search
review of public record to find the lawful owner of a property
cloud in the title
an defect that makes the ownership of the property unclear
marketable title
owner with an unbroken chain of recorded titles going back 40 years
insurable title
a title that an insurance company is willing to insure, even if it has defects
transfer of title becomes effective when…
the grantor (seller) gives executed and signed the deed to the buyer (grantee)
the deed is required to be ____ after it is delivered
recorded with the county
who pays for the day of closing?
seller
steps to closing (6)
- offer acceptance & deposit of earnest money
- home inspection & appraisal
- getting financing
- title search & insurance
- closing costs & preparations
- closing/roundtable meeting
home warranty
covers the cost of replacing home appliances and home systems
builders/new construction warranty
agreement between a home builder and a homeowner that covers the quality of the construction
redlining
refusal to give loans for discriminatory reasons
federal fair housing act exemptions
- single family home sold/rented by individual owner
- rental of a room/unit in a dwelling with no more than 4 units
blockbusting
panic selling
- predicting the entry of minorities into a neighborhood, so you tell current residents to leave
steering
steering certain buyers into certain neighborhoods based on their race, religion, national origin, etc
disparate treatment
outright discrimination
antitrust laws
encourages competition and prevents monopolies
economic/external obsolescence
factors unrelated to the property negatively affects its value
functional obsolescence
factors related to the property that negatively affect its value
constructive notice
assumes everyone has received notice of a legal action, which happens when a property is recorded
actual notice
Individual has first hand notice of something
estate for years
any estate for a definite amount of time (ex. a lease)
testate
having left a will
intestate
having not left a will
3 types of concurrent/co ownership
- tenancy in common
- joint tenancy
- tenancy by the entirety
tenancy by the entirety
each owner has the equal amount of interest in the property (1 person has 100% interest and the other person also has 100% interest)
- for married couples
4 conditions needed to be met in order for joint tenancy
PITT
- Possession
- Interest
- Time
- Title
