Real Estate Pre-Licensing Course [National Study] Flashcards
Why do we have real estate licenses?
to protect consumers
to protect the public or for the public good
What does police power mean?
the right of the government to enact laws to protect the public
Who needs a real estate license?
anyone who does any of the following for a fee or with expectation of a fee:
- advertise
- business of selling
- renting
- leasing
- negotiating
- exchanging
- purchasing
- dealing in real estate
- options for real estate
Who governs real estate licensure?
State legislature
- state or local real estate board or commission oversees the laws and enforces them in most states.
In addition to state laws, your real estate activities will also be subject to ?
Federal law (laws of the United States)
* state law builds on federal law
is more specific
* federal law wins in any conflict
What are the two types of real estate license in most states?
a. Salesperson License
b. Broker License
T or F: Realtors and NAR is a state licensing?
F:
- Realtors and the NAR is a membership in a trade association
- est. 1908 (National Association of Realtors)
- largest trade association
- one of the most powerful lobbying groups in US.
Salesperson License
- Must affiliate w/ a broker to practice real estate
- May not accept direct client payment
Broker’s License
- Can do everything that a real estate salesperson can do
- may operate independently
- accept client payment
- can handle escrow funds (client deposit)
Can associate brokers or broker associates handle escrow accounts?
No; they have a brokers license but work under another broker, so they can not handle escrow accounts.
Who can handle escrow accounts?
- Employing Brokers
- Broker of records
If the office is associated with a local REALTOR associations, what must all agents associated with that office must be?
REALTORS
How long does the usual process for a real estate
1-12+ months (and about 2-4 months on avg.)
What are you hired to do as a listing agent by a seller to sell their property?
working in their best interest to get the property sold for the most money in the shortest timeframe.
What is the first step when you are hired as a listing agent by a seller to sell their property?
preparing the property for sale
What is one of the most important aspects of a listing agent’s job?
Advertising the property
MLS
Multiple Listing Services
When can brokers and agents pay or split commissions with their unlicensed assistants?
Never allowed to split or pay commissions with their unlicensed assistants
What are the two (2) forms of hiring at a brokerage?
- 1099 independent contractor
- W2 employee
What is considered a 1099 independent contractor?
- paid by the job or commission
- sets their own schedule
- can turn down work
- use their own methods
What are most residential real estate agents?
1099 contractors
note: do not have taxes withheld from their pay
Typically in commercial real estate or hire administrators or assistants, paid hourly, on a salary, employer controls what and how work is down is considered?
W2 Employee
What is drafted after a buyer has viewed the property and submit and offer to the seller if they accept it?
Purchase and Sale Contract (P&S)
How many days typically before the Purchase and Sales Contract is signed?
7-14 days
Once the offer is accepted, depending on negotiations, the buyer will have between a few days and two (2) weeks to do what?
Due Diligence in examining the property w/ a professional
* depends on what time frame was negotiated
After the due diligence is complete, what will be drafted?
Purchase and Sales Contract by attorneys with 7 to 14 days after offer is accepted
What parties will attend the closing table once the terms and conditions of the P&S are met?
Seller
Buyer
Attorneys
closing attorney if different
title company representative
possibly the lender
When are brokerages and their agents paid?
after closing, the transfer of ownership happens
Client is?
the person who hires an agent in a real estate transaction
aka PRINCIPAL
Principal is?
person who hires an regent in a real estate transaction
a Special Agent is?
Broker; hired to perform a specific task on behalf of the client
- can be hired and paid directly by the client
- also primary agent
What is a subagent?
someone authorized to assist the primary agent
How does a broker pay their agent?
as a Subagent
What is an agent with a brokers license who choose to work under another broker?
associate-broker = are generally subagent
broker-associate
What is vicarious liability?
When someone is responsible for the actions of another when the party is acting on their behalf (i.e. Broker and the agents working on the behalf of the broker).
* if agent violates the law, it is as if the broker had done it himself
What is a “team”?
a group of real estate agents who all work for the same broker and decide to work together
note: a team can not advertise separately
What should the broker of record do if a group of agents forms a team in an office?
make sure that they are treated as independent contractors of the broker, and not as agents of the team or W2 employees
Are brokers and agents allowed to pay or split commissions with their unlicensed assistants?
Never allowed; unlicensed assistants are very limited in what they can legally do in real estate transactions.
What should brokers be aware of in a real estate transaction and establishing policies for their agents?
when a license is required about the use of unlicensed assistants
what is written that will govern how much commission payments will be, when an agent is entitled to pay, how pay works, who owns the agent’s listings, and how the relationship will be terminated if an agent is hired as a 1099 independent contractor?
independent contractor agreement
What is real property?
Land and anything attached to it
- various rights associated w/ ownership of the land
- also know as (realty, real estate or immovable property)
What is personal property?
What is the difference between real property and real estate, realty and immovable property and why they are not interchangeable?
real estate, realty and immovable property refer just to the land and what is attached to it
real property refers to both the land and rights associated with it
How is ownership of real property transferred or conveyed?
using a deed
What is a deed similar to ?
A receipt for real estate
What is transferring ownership (legal title) to real estate known as?
granting title
what is a grouping of property rights that can be separately transferred?
Bundle of rights (possession, exclusion, control, disposition, enjoyment)
- right to possess
- right to control
- right to exclude
- right to enjoy
- right to transfer or dispose
(PEE-CD or DEEP-C)
Rights to the land’s surface are known as?
Surface rights
- can extend to approximately 30 ft below the land’s surface.
What is considered improvements?
anything that is attached permanently (direct or indirect to the land)
(ex. house is an improvement)
What are rights to the space above and below the land?
air & mineral rights
- as well as oil and precious metals
- vertical interest than can be sold separately from the surface rights
What is real property?
the land and anything attached to it, and all the rights associated with it
What is personal property?
Anything not attached to the land
Means ownership made up of fee simple (also known as fee simple absolute) fee simple determinable, life estate?
Freehold Estate
What does freehold estate mean?
full ownership of their house or land until they decide to sell or do something with it.
What is non-freehold estate?
non ownership but someone has legal interest in the property
- ex. lease or rent
What is ownership by own person (or just one owner)?
Severalty
Ownership of real property is transferred or conveyed using?
a deed
the act of transferring legal ownership of a property from a seller to buyer through a legal document?
Granting title
- through grant deed
What test can you do to see if a property is a fixture?
M - Method
A - Adaptability
R - Relationship
I - Intention
A - Agreement
What is personal property that is now real property because it is now permanently attached to the land?
fixture
Give or grant
Confer
What are three (3) forms of defeasible interest?
- Fee Simple Determinable
- Fee simple subject to a condition
subsequent - Fee simple subject to an executory
limitation
What are the two (2) major categories in Interest in real estate?
Freehold Interest = Ownership
Non-freehold interest = less than freehold
( not ownership but interest and rights to the property, ie rent)
Where is Habendum Clause seen?
life estate deeds
What is known as to have and to hold?
Habendum Clause
This explains the rights that the new owner has with the property?
Habendum Clause
For anothers life is also know as ?
Pur Autrie Vie
This type of life estate is based on a third party not on the grantee’s life?
Pur Autrie Vie
Which type of lien is place on real estate to get payment for work that fixed the real estate and is involuntary?
Mechanics Lien
What is ownership that is for the term of someones life?
Life Estate
What are the different types of freehold interests?
Fee Simple Absolute
Fee Simple Defeasible
Life Estate
Default type of ownership, is inheritable and is not limited in any way?
Fee Simple Absolute
- Fee
- Fee Simple
- Fee Simple indefeasible
What is fee simple defeasible also known as?
Qualified Fee
What are the three forms of defeasible interests?
- Fee simple determinable
- Fee simple subject to a condition subsequent
- Fee simple subject to an executory limitation
What are the types of freehold interests?
Fee Simple Absolute
Fee Simple Defeasible
Life Estate
How many forms of defeasible interest are there?
three (3) :
- fee simple determinable = automatic
- fee simple subject to condition subsequent = legal action for
breaking rule, then goes to grantor
- fee simple subject to executor limitation = legal action for breaking
the rule, then goes to third party
What sets up a Board of Trustees to manage the condominiums and is know as condo conversion?
Declaration of Trust
What could happen if owners of a condo fail to pay condo fees?
Risk of foreclosure
* a super-priority lien for up to 6 months of unpaid condo fees
What are some common condo problems?
Low Occupancy rate
Special Assessments
Lack of Capital Reserves
What is the most common reason someone would create a Trust?
avoid probate
When are trust generally created?
during a person’s life (living trust)
or death (testamentary trust)
Trust that only hold real estate are called?
land trusts
Investors in syndications can be?
General Partners (GP) = Managers
or
Limited Partners (LP) = Passive
What are some real estate investment vehicles?
- REITs (real estate investment trust)
- REMICs (real estate mortgage investment
conduits) - REMTs (real estate mortgage trust)
In order to market or sell syndications what is need?
Securities License
Lessor is?
landlord
Lessee is?
the tenant
What are the four (4) ways easements appurtenants may be created?
- Deeds
- Implications
- Necessity
- Prescription
Which types of homes are required to meet the local building codes?
both stick built homes +
modular/factory built homes
Who governs construction site safety?
OSHA
Occupational Safety + Health Administration
How are property taxes calculated?
against the assessed value or tax value of property
note: know as ad valorem tax (at value)
Every Property subject to tax is listed on?
Municipal Tax Roll
How are property taxes paid?
in Mills
(per $1000)
How are taxes paid on?
a fiscal year (july 1st to june 30th)
if
Bi-annual ( nov 1st + may 1st)
if
quarterly ( feb 1st, may 1st, aug 1st + Nov 1st)
What are private limitations known as?
CC&Rs
Covenants, Conditions + Restrictions
In order for CC&Rs to remain legal and enforceable they must ?
enforced consistently and uniformly against all property owners in a subdivision
If there is ever a conflict between private restrictions + public restrictions which one wins?
the more restrictive rule
What are the two (2) ways to remove easements appurtenenat?
- Combining adjourning lots
- easement that was granted is impossible or doesn’t exist anymore
When does the easement in gross finish?
when the person holding the right passes away. Automatically happens
What could happen if not action is taken on an encroachment?
could lose land ONCHA 20 yr timeframe
What two (2) forms of voluntary liens are there?
a. Mortgage
b. installment Sales contract
- conditional sales contract
- contract for deed
- land contract
(similar to rent to own)
In order for a deed to be valid, what is the minimum criteria?
Must Be in writing (statue of fraud)
Grantor signature
must have a consideration
must name the grantee
grantor must be legally competent
complete and accurate description of the land
include granting clause
must have delivery and acceptance
What does a deed not require?
date
signature of grantee (buyer or receiver)
witnesses
acknowledgement (notarization) or recordation
What are the four (4) basic types of deed that transfer title to real estate?
General Warranty Deed (warranty Deed)
Special Warranty Deed (limited warranty Deed)
Bargain + Sales Deed
Quitclaim Deed (Non-Warranty Deeds)
What is the most common type of deed in most states?
Special Warranty Deed (limited warranty deed)
What kind of deeds are often used in bank foreclosure?
quitclaim deeds (non warranty deeds)
What is another word for transfer?
conveyance
What is one of the min. criteria of a valid deed?
a complete and accurate description of the land (full legal description)
What shows the location and dimension of the land itself?
survey sketch
What shows the location + dimension of the land, plus the location, size and shape of the improvements on the lot?
Spot Survey
What is the most common type of land description?
Metes + Bounds
Used in most of the United States but not in the original 13 colonies to standardize land descriptions?
Government Rectangular survey system | rectangular survey system |public land survey system
How many principal meridians are there in the US?
37
What is also referred to as a township line?
Tiers
What are the squares created by the intersections of the township lines and range lines?
Townships
How are townships divided?
into sections of 36 there are 1 mile x 1 mile
numbered 1-36 starting northeast going to northwest then south. like a box
What section is the northeast corner always?
first (1st) Section
Which section is always the school section?
sixteenth (16th) usually for school purposes
What is true about know defects and title insurance company?
they are not covered by title insurance co. unless otherwise specified
What coverages are provided by title insurance companies?
Can vary but generally
Standard coverage [Basic Title issues]
Extended coverage [tenants + squatters, unrecorded easements + liens, mineral + water right claims]
What two (2) separate policies are often offered by title insurance?
Mortgagor [owner protection] protection up to full purchase price of property
Mortgagee [lender protection] up to outstanding balance
When is any transfer of registered land considered valid?
when a new certificate of title is issued in the name of the new owner
What are amendments to wills?
codicils
What is needed in order for a contract to be officially recognized an not just be an agreement?
Essentials of a contract are:
- offer + acceptance
- consideration
- legal object
- reality of consent + competence
What is misrepresentation?
misstatement of facts without intent to deceive
Something that is intended to be a contract, but lacks offer + acceptance, consideration and legal object is know as?
a void contract
What are voidable contracts?
lack consent + competence
Are voidable contracts valid?
yes; unless a court voids it
What are some common clause (stipulations)?
- Iron Merger Clause (integration clause,
Merger Clause, Entire agreement clause) - Severability Clause
- Contingency Clause
Once an offer is accepted what does it become?
a contract
What are the basic essentials of a valid purchase and sales contract?
- Names of Buyers + Sellers
- legal description of realty
- offer + acceptance (statue of fraud) (in
writing) - Condsideration
- terms + conditions agreed to by parties
- contingencies negotiated
- date of performance (closing)
What is used to hir a real estate agent to sell a property?
Listing Contract
Broker Employment Contracts
“hiring contract”
A contract that represents that covers the buyer’s exclusivity?
Buyers Agency Contract
- on test Seller covers cost of commission
What is the longest a lease can last?
99 years
What must a lease contract contain?
- essentials of a contract
- statement of intent to rent (x lease to y)
- description of property (usually address)
- total rental amt.
- time + manner of payment
- term (length) of lease
Under most leases who is liable for and insures common areas?
Lessor
Under most leases, lessee are liable for and insure what?
the leased premises (the rented unit)
What is additional square footage in commercial leasing referred to as?
common area load
common area factor
load factor
5-15%
How are most commercial rents calculated?
annual price per square foot
What is used to confirm a lease when a property is sold?
certificate of no defense
or
estoppel certificate
What is the only way to relieve a lessee of their obligation under a lease?
Novation
* transferring remaining portion of a lease to a third party through a new contract
what is a lease also known as?
tenancy for years, estate for years, interest for years, demise and non-freehold interest
What is the maximum lease term?
99 year lease
What are the three (3) ways a tenant can transfer a lease?
Sublet - take over a certain timeframe of contract
Assignment - take over remaining time on contract
Novation (involves landlord) - cancel and new contract
What are the three (3) main programs that the government provides for borrowers that protects the lenders?
- Federal Housing Administration Financing (FHA)
- Veterans Affairs Financing (VA)
- USDA
