Real Estate terms Flashcards
Escheat
Escheat refers to the right of a government to take ownership of estate assets or unclaimed property. It most commonly occurs when an individual dies with no will and no heirs. Escheat rights can also be granted when assets are unclaimed for a prolonged period of time.
Usury
Usury is the act of lending money at an interest rate that is considered unreasonably high or that is higher than the rate permitted by law.
MOG rights
Mineral Oil & Gas rights
Elements of a valid contract
- Capable parties
- Lawful object
- Consideration
- Offer and acceptance
When is a contract void?
To say that a contract is void means that it does not fulfill the requirements of a valid contract, it is not legally binding or enforceable. A contract that is void in one that is missing any one of the essential elements that make a contract binding:
- Capable parties
- Lawful object
- Consideration
- Offer and acceptance
What is a voidable contract?
A voidable contract is a formal agreement between two parties that may be rendered unenforceable for a number of legal reasons. Reasons that can make a contract voidable include:
Failure by one or both parties to disclose a material fact
A mistake, misrepresentation or fraud
Undue influence or duress
One party’s legal incapacity to enter a contract
One or more terms that are unconscionable
A breach of contract
Voidable vs. Void Contracts
A voidable contract occurs when one of the involved parties would not have agreed to the contract originally if they had known the true nature of all of the elements of the contract prior to original acceptance. With the presentation of new knowledge, the aforementioned party has the opportunity to reject the contract after the fact.
What is an unenforceable contract?
An unenforceable contract or transaction is one that is valid but one the court will not enforce. Unenforceable is usually used in contradiction to void (or void ab initio) and voidable. If the parties perform the agreement, it will be valid, but the court will not compel them if they do not.
Might include oral contracts.
Appurtenant easement
An appurtenant easement is a type of easement that still applies to a property even if the owners change. It is sometimes referred to as “running with the land”.
Easement vs. encumbrance
An easement is a type of encumbrance.
An encumbrance is a claim against a property by a party that is not the owner.
Easement is a real estate concept that defines a scenario in which one party uses the property of another party, where a fee is paid to the owner of the property in return for the right of easement.
Prescriptive easement
A prescriptive easement is the right to use the land of another, not an ownership interest in the land of another. In order to acquire a prescriptive easement over another’s property, the following elements must be met: (1) actual use of the property; (2) open and notorious use of the property; (3) use that is hostile and adverse to the original owner; (4) continuous and uninterrupted use of the property; (5) use of the property under a claim of right to the property; and (6) use for the statutory period of five years.
Package mortgage
A mortgage in which the loan is used to buy a house as well as all furniture and other property in the house.
Blanket mortgage
A blanket mortgage is a single mortgage that covers two or more pieces of real estate. The real estate is held together as collateral, but the individual properties may be sold without retiring the entire mortgage. Blanket mortgages are commonly used by developers, real estate investors, and flippers.
Open mortgage
An open mortgage is one that can be fully paid off, refinanced or re-negotiated at any time without penalties. … Open mortgages tend to have higher interest rates compared to closed mortgages due to the prepayment flexibility. As a result, open mortgages are not as popular as closed mortgages.
Open-end mortgage
An open-end mortgage is a type of mortgage that allows the borrower to increase the amount of the mortgage principal outstanding at a later time. Open-end mortgages permit the borrower to go back to the lender and borrow more money. There is usually a set dollar limit on the additional amount that can be borrowed.
Lease assignment
When a tenant decides to assign a lease, he is essentially giving up all his rights and responsibilities to the rental agreement and the unit to a third-party assignee. As a result, the original tenant (the “assignor”) will have to vacate the unit and allow the new tenant to take over all of the leased premises.
However, please note that under the terms of most lease agreements, the original tenant will remain responsible for the terms of the lease. This is important if the new tenant defaults on the lease agreement or causes damage to the property. (Do keep in mind that, sometimes, a landlord may in fact release the original tenant from liability under an assignment of lease). If you’re considering a lease assigment, it can be a smart idea to pursue permanent assignment so you won’t be on the hook for expenses or damages.
Specific performance
Specific performance is a remedy in contract law that is most often applied in real estate litigation and disputes where a court issues an order requiring a party to perform a specific act, and to specifically perform according to the terms of a contract. … This is called specific performance.
Cap rate
The capitalization rate (also known as cap rate) is used in the world of commercial real estate to indicate the rate of return that is expected to be generated on a real estate investment property. … It is used to estimate the investor’s potential return on their investment in the real estate market.
Calculation:
net operating income / current market value = cap rate (percentage)
Severalty
Ownership in severalty means one person owns the property. Think of the word “severed,” separated from, rather than the word “several,”
Tenancy in common vs joint tenancy
Basically, joint tenancy pertains to homeownership in which each party is on the home title and has an equal interest in the property. An example of a joint tenancy is the ownership over a house by a married couple. In this situation, each of the spouses has an equal share and interest over the house. In the case of divorce, each spouse may sell his or her share in the property. Once there is a sale, the joint tenancy becomes tenancy in common.
Tenancy in common, on the other hand, refers to ownership over a certain property by two individuals without any right of survivorship. They are co-owners of the property and their shares and interest over said property are equal. However, there are also situations in tenancy in common when the parties do not have equal shares. The sharing scheme shall depend entirely on the stipulation of the parties.
Joint tenancy and tenancy in common have different rules concerning the death of one of the tenants. This is the main difference between these two kinds of tenancy. In tenancy in common, the death of one of the parties shall have the effect of transferring the rights of the decedent tenant in favor of his heirs. In joint tenancy, the parties enjoy the right of survivorship. This means that when one of the co-owners dies, the survivor co-owner shall get the decedent’s share over the property. In joint tenancy, each co-owner’s possession, interest, time, and, title of the property is vital. In order for the transfer of rights to accrue, there must be a will of a deed executed in favor of the survivor.
Fee simple
a permanent and absolute tenure in land with freedom to dispose of it at will, especially (in full fee simple absolute in possession ) a freehold tenure, which is the main type of land ownership.
Fee simple defeasible
Fee simple defeasible is a legal term and type of property ownership, where the ownership is dependent on specific conditions. If the conditions of ownership are violated, the property may be returned to the grantor or to a specified third party.
Fee simple absolute
The best form of property ownership is fee simple absolute, sometimes called a freehold, which means that the owner or owners can do whatever they like with the property, subject only to encumbrances like liens, or local guidelines, such as zoning, taxation, or criminal laws.
Fee simple determinable
a determinable fee simple estate is one that automatically terminates upon the occurrence of a specified event or the cessation of use for a specified purpose and will revert to the grantor without any entry or other act
Discount points
Mortgage points, also known as discount points, are fees paid directly to the lender at closing in exchange for a reduced interest rate. This is also called “buying down the rate,” which can lower your monthly mortgage payments. One point costs 1 percent of your mortgage amount (or $1,000 for every $100,000).
Regulation B
Regulation B is intended to prevent applicants from being discriminated against in any aspect of a credit transaction. Reg B outlines the rules that lenders must adhere to when obtaining and processing credit information.
Fair Credit Reporting Act
The Fair Credit Reporting Act (FCRA) is a federal law that regulates the collection of consumers’ credit information and access to their credit reports. It was passed in 1970 to address the fairness, accuracy, and privacy of the personal information contained in the files of the credit reporting agencies.
Truth in Lending Act
The Truth in Lending Act (TILA) protects you against inaccurate and unfair credit billing and credit card practices. It requires lenders to provide you with loan cost information so that you can comparison shop for certain types of loans.
(includes 3 day good faith estimate requirement)
Also known as Regulation Z.
Equal Credit Opportunity Act
The Federal Trade Commission (FTC), the nation’s consumer protection agency, enforces the Equal Credit Opportunity Act (ECOA), which prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or because you get public assistance.
Real estate settlement procedures act (RESPA)
RESPA applies to the majority of purchase loans, refinances, property improvement loans, and equity lines of credit. RESPA requires lenders, mortgage brokers, or servicers of home loans to provide disclosures to borrowers concerning real estate transactions, settlement services, and consumer protection laws.
Regulation Z
Truth in Lending Act.
Regulation Z is a law that protects consumers from predatory lending practices. Also known as the Truth in Lending Act, the law requires lenders to disclose borrowing costs so consumers can make informed choices.
Suit for punitive damages
Damages achieved by a judicial award for a plaintiff in a lawsuit in addition to the actual damages. Punitive damages are used to penalize the defendant for bad faith, malice, fraud, violence, or evil intent. It is designed as a punishment, and to prevent future actions of the defendant.
Deficiency judgment
A deficiency judgment is a ruling made by a court against a debtor in default on a secured loan, indicating that the sale of a property to pay back the loan did not cover the outstanding debt in full. It is mostly a lien placed on the debtor for further money.
Suit to quiet title
A quiet title action, also known as an action of quiet title, is a circuit court action—or lawsuit—that is filed with the intended purpose to establish or settle the title to a property. They are particularly prevalent in cases where there is a disagreement on the title. The lawsuit is meant to remove, or “quiet,” a claim or objection to a title.
Suit for liquidated damages
The Liquidated Damages clause in a real estate contract is a reasonable and agreed upon amount that would be awarded to the seller, should the buyer breach the contract. Liquidated damages typically do not exceed 3% of the purchase price. … It also protects the buyer by limiting the damages to a ‘reasonable’ amount.
Differentiation from specific performance: With respect to remedies upon breach of contract, specific performance is a legal action brought in a court of equity to compel a party to carry out the terms of a contract, whereas liquidated damages is an amount predetermined by the parties to an agreement as the total amount of compensation an injured party should receive if the other party breaches a specified part of the contract.
How many square feet are in 1 acre?
43,560 sq ft
Metes & bounds
Metes and bounds is a system of describing land that originated in England. The system uses:
Monuments, which can may be man-made objects (e.g. a survey marker, post, or road) or natural objects (e.g. lake, river, tree, or rock).
Courses or directions from a compass reading (known as compass bearings)
Distances
Government survey
Rectangular survey method.
Township
The area of one of the 6 mile by 6 mile rectangles (totaling 36 square miles) in the government/rectangular survey method.
Section
1 by 1 mile subsection of a township (there are 36 sections per township). Starting in the top right corner (NE) and snaking. 1-6, 7-12, etc., and section 36 is always in the SE corner.
Hierarchy in the government (rectangular) survey method
1 township = 6 miles by 6 miles (36 square miles)
1 township = 36 sections
1 section = 1 square mile or 640 acres
How many acres are in a square mile?
640
How many feet are in a mile?
5,280
Mill levy
The mill levy is the tax rate levied on your property value, with one mill representing one-tenth of one cent. So, for $1,000 of assessed property value, one mill would be equal to $1.
Assessment rate
What Is Assessed Value? An assessed value is the dollar value assigned to a property to measure applicable taxes. … It is the price placed on a home by the corresponding government municipality to calculate property taxes. In general, the assessed value tends to be lower than the appraised fair market value of property
Variance (zoning)
Essentially, a property owner requests a variance when their planned use of their property deviates from local zoning laws designed to protect property values. If granted, a variance acts as a waiver to some aspect of the zoning law or regulations.
Exception (zoning)
A variance is permission granted to use a specific piece of property in a more flexible manner than allowed by the ordinance. A special exception is a specific, permitted land use that is allowed when clearly defined criteria and conditions contained in the ordinance are met
Setback
A distance from a curb, property line, or structure within which building is prohibited. Setbacks form boundaries by establishing an exact distance from a fixed point, such as a property line or an adjacent structure, within which building is prohibited.
Non-conforming use (zoning)
“non-conforming use” generally refers to a type of zoning variance wherein a person’s property is exempt or excepted from city zoning ordinances. This occurs because the owner had made improvements to the land prior to the current zoning laws being put into effect.
Fixture
A fixture, as a legal concept, means any physical property that is permanently attached (fixed) to real property (usually land). Property not affixed to real property is considered chattel property. Fixtures are treated as a part of real property, particularly in the case of a security interest.
Periodic tenancy
What is a periodic tenancy? A periodic tenancy is a tenancy referring to a specific period, whether that is weekly, monthly, quarterly or yearly. It may also be referred to as a ‘rolling contract’ because it rolls from one period to the next. They commonly occur when a fixed-term tenancy expires.
Tenancy for years
Also called an estate for years or tenancy for a definite term, this is an estate that is created by a lease. A lease is a contractual agreement where a tenant takes a leasehold interest in a real property for a specified duration.
Lis pendens
a pending legal action, or a formal notice of this.
Allodial rights
The allodial system of ownership gives individuals the rights to own property without proprietary control by the government. It is one of the foundations under which the US was built.
Bundle of rights
What are the real estate bundle of rights?
The bundle of rights or bundle of rights theory is a concept that has long been associated with real estate ownership. It is a concept describing all the legal rights that attach to the ownership of real property. They include the right to lease, sell, use, encumber, exclude, enjoy and devise by will.
Covenant of quiet enjoyment
A covenant of quiet enjoyment insures an owner or tenant against a disturbance of his or her right to possess or use property. For example, a covenant of quiet enjoyment could prevent a tenant from being evicted by a person with superior title. Also called covenant for quiet enjoyment.
Covenant against encumbrances
The covenant against encumbrances promises to the grantee that the property being conveyed is not subject to any outstanding rights or interests by other parties, such as mortgages, liens, easements, profits, or restrictions on its. A sample covenant not to sue. use that would diminish its value.
Covenant of warranty forever
The covenant of warranty forever assures that the title is good and makes the grantor responsible to pay to clear up any future title issues that might come up.
Covenant of seisin
The covenant of seisin (also seizin) is a promise that the grantor owns the property and has the right to convey title.
Covenant of habitability
Promise (sometimes implied) that the property is habitable. Often implied in leases.
Accession
In property law, accession is a method of acquiring property by adding value to other property through labor or new raw materials. Through a property law doctrine known as ‘accession’, ownership of property naturally carries with it the right to possess all of the things that are added to or produced by that property.
Accord and satisfaction clause
An accord and satisfaction is a legal contract whereby two parties agree to discharge a tort claim, contract, or other liability for an amount based on terms that differ from the original amount of the contract or claim.
Alienation clause
In real estate, an alienation clause, or due-on-sale clause, refers to contract language that requires the borrower to pay the full mortgage balance, as well as accrued interest, back to the lender before they can transfer the property to a new buyer.
Acceleration clause
An acceleration clause is a condition inside a contract that allows a lender to “accelerate” the repayment of your loan if certain conditions aren’t met. The acceleration clause will outline the different situations a lender can demand loan repayment and how much repayment is required.
Principle of substitution (appraisal)
The Principle of Substitution is the basis for the market data approach to appraisal. This principle says that the maximum value of a property usually is established by the cost of acquiring an equivalent substitute property that has the same use, design, and income.
Principles of value (appraisal)
Conformity Change Substitution Supply and demand Highest and best use Progression Regression Contribution Anticipation Competition Balance Four-stage life cycle
Lien theory vs. title theory
In title theory or mortgage states title is held in the lender’s name until the final payment is made, when title is passed or re-conveyed to the borrower. In lien theory states, title to the property is held in the name of the borrower with a security interest or lien to the property being granted to the lender.
Lien theory vs. title theory
In title theory or mortgage states title is held in the lender’s name until the final payment is made, when title is passed or re-conveyed to the borrower. In lien theory states, title to the property is held in the name of the borrower with a security interest or lien to the property being granted to the lender.
Appraisal methods
The Sales Comparison Approach.
The Cost Approach.
The Income Approach.
Loan to value ratio
Loan amount / appraised value (not necessarily purchase price)
Assessed value
Assessment rate is a uniform percentage, varies by tax jurisdiction, and could be any percentage.
Assessed value is arrived at by multiplying the actual value by the assessment rate.
