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practice exam > things to know > Flashcards

things to know Flashcards

1
Q

classes of property

A

Real estate, personal property
fun fact: personal property can become real property and vice versa

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2
Q

property characteristics

A

Physical characteristics and economic characteristics of land.
(area preference, scarcity, immobile, and unique)

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3
Q

types of estates

A

free hold ( fee simple absolute, fee simple defeasible, life estate), Less than free hold estate

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4
Q

types of encumbrances

A

easement, CCRs, Lien, Encroachment, license, lis pendens (suit in pending)

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5
Q

legal descriptions of property

A

metes and bounds, rectangular survey/government survey, recorded map,

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6
Q

Government rights in land

A

Collect property taxes and special assessments, eminent domain, police power, escheat

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7
Q

What are the environmental hazards

A

lead-based paint, radon gas, asbestos, groundwater contamination

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8
Q

what are the environmental regulations

A

environmental impact statement (EIS) , superfund law

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9
Q

what are the water rights

A

Riparian rights, littorial rights

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10
Q

what is accretion

A

is the gradual addition to land through natural causes

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11
Q

What is erosion

A

it is the gradual loss of land through natural causes

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12
Q

what is avulsion

A

is the sudden loss of land through natural causes

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13
Q

what is accession

A

it is an addition to property through the efforts of man or nature.

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14
Q

what is a public land use control

A

zoning

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15
Q

Describe a principal

A

a client (specifically yours)

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16
Q

describe an agent

A

one who is employed to represent a principal

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17
Q

describe the term fiduciary

A

Fiduciary is the highest trust relationship under law - must put the clients interest above ones own

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18
Q

Describe a third party

A

it can be a customer ( you owe fair dealing and disclosure of material facts to third party

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19
Q

types of agency

A

special agency, general agency, attorney in fact

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20
Q

Describe special agency

A

listing agent authorized by a listing agreements

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21
Q

Describe general agency

A

general agent has the authority to perform a series of acts for the principal

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22
Q

What is an attorney in fact

A

A person who is authorized to perform in place of the principal; accomplished through power of attorney

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23
Q

what fiduciary duties does an agent owe to its principal

A

Obedience
loyalty
Disclosure
Confidentiality
Accounting
Reasonable care and skill

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24
Q

types of listings

A

Exclusive right to sell
exclusive agency
open/ nonexclusive
net listing
option listing

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25
Q

Explain market value

A

Market value is the highest probable price in terms of cash

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26
Q

Explain market price

A

The actual price paid in a transaction; price may deviate from value

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27
Q

Describe a specific performance

A

Specific performance is the legal enforcement of a contract, typically after one party has breached the agreement.

EXAMPLE: a seller of a property executes a purchase agreement with a buyer and then decides they do not want to sell the property shortly thereafter

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28
Q

substitution is the basis for what approach

A

comparison approach

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29
Q

what is the first step in the appraisal process

A

identifying the problem

30
Q

how many methods are there to to estimate value

A

comparison approach, cost approach, and income approach

31
Q

describe capitalization rate

A

the expected rate of return on a real estate investment property

32
Q

by applying a capitalization rate to net operating income, the appraiser arrives at an estimate of cash flow.
True or false

A

false
net operating income divided by capitalization rate equals estimated market value

33
Q

The cap rate is the property’s estimated value
true or false

A

false
the cap rate is the property owner’s annual expected rate of return

34
Q

cap rate equals net operating income divided by market value.
true or false

A

true
the capitalization rate can be expressed as the relationship between the net operating income the property produces and its market value

35
Q

The cap rate can be developed by analyzing historical rent data.
True or false

A

false
The cap rate can be developed by analyzing net income and sales prices of comparable properties

36
Q

what are the four great forces that influence real estate value

A

physical, social, economic, and political

37
Q

Greater depth will add to the value of the lot: therefore, “there is no difference in value” and “ the total value of the lot would be less” are false. Greater depth decreases square-foot value; therefore “ the square-foot value increases” is false. “the front-foot value increases” is the only true statement

A
38
Q

what is the economic life of a property?

A

it is the period of time over which improvements to real property contribute to property value

39
Q

Describe a promissory note

A

Evidence of a debt, secured by mortgage or trust deed, and a negotiable instrument considered personal property; cannot be recorded

40
Q

what does a mortgage and deed of trust have in common

A

both security instruments, and includes covenants — causes of foreclosure

41
Q

Describe a mortgage

A

two-party instrument
borrower = mortgagor; lender = mortgagee

42
Q

what usually is included in a deed of trust

A

three party instrument
borrower = trustor; lender = beneficiary; third party = trustee
property is conveyed by borrower to a third party (trustee) as security for loan
trustee holds naked ( bare legal) title on behalf of the lender (beneficiary)
borrower (trustor) holds equitable title, and deed of trust is a lien
Trustee has authority, in case of default, to conduct foreclosure process, sell the property, and sign a deed

43
Q

what is subject to

A

if a buyer purchases property “subject to” a mortgage, the seller remains liable

44
Q

are there points or origination when purchasing a home when assuming or subjecting to a loan?

A

NO

45
Q

facts about land contract/ real property sales contract/ installment contract/ contract for deed ( they are all very similar

A
  1. form of owner financing and security arrangement
  2. Seller (vendor) keep legal title; Buyer (vendee) has equitable title, takes possession, and makes payments, receiving deed when payments are complete
  3. Process used for CalVet loans, where Department of veteran Affairs (VA) purchases property and sells to veteran under a land contract
  4. vendor must use payments from vendee to make any existing loan payments before using it for another purpose
46
Q

Things to know about a trustees sale

A
  1. No lawsuit necessary; foreclosure made by public sale
  2. Requires three months’ notification of default; also, within 10 days of recording notice of default, copy must be sent to trustor
  3. notice of sale
  4. Property sold to high bidder at trustee’s sale; title transferred under a trustee’s deed
  5. Deficiency judgements not allowed on judicial foreclosures
47
Q

What is a deed in lieu of foreclosure

A
  1. an Alternative to foreclosure - mortgagor/ trustor deed to mortgagee/beneficiary
  2. Disadvantage to lender- does not wipe out junior lies
48
Q

what are junior liens

A

Home equity loans and home equity lines of credit (HELOCs)

49
Q

What is loan maturity

A

Loan maturity date refers to the date on which a borrower’s final loan payment is due

50
Q

Describe term (straight) in respect to methods of debt repayment

A
  1. Interest only until maturity at the end of term
  2. Entire principal in one lump sum
51
Q

Describe fully amortized

A
  1. Equal payments of principal and interest such that the balance becomes “zero”
  2. Interest usually paid in arrears
52
Q

Describe graduated payments

A

lower payments in beginning, then they increase, then they level off
May have negative amortization (principal may increase)

53
Q

Describe reverse annuity mortgage/ trust deed

A
  1. Payments paid to mortgagor over specific term
  2. Due upon sale of property, death of mortgagor(s) , or at the end of the term
54
Q

Describe package (type of trust deed/mortgage)

A

More than one property is pledged as security
may be used to finance the purchase of a furnished condominium etc.

55
Q

Describe blanket (type of trust deed/mortgage)

A
  1. more than one property is pledged as security
  2. a release clause allows a subdivider to remove individual parcels as they are sold
56
Q

Describe conventional/ insured conventional (type of trust deed/mortgage)

A
  1. debt repayment is based solely on the borrower’s ability to pay; loans are not insured or guaranteed by the government
  2. Depending on the loan-to-value ratio, the lender may require private mortgage insurance (PMI)
  3. If required, the PMI premium is paid to Mortgage Guarantee Insurance Corporation (MGIC)
57
Q

what is loan to value ratio (LTV ratio)

A
  1. Maximum percentage of value lender will loan
  2. based on price or appraisal, whichever is less
58
Q

the interest rate used to determine the present value of future cash flows in a discounted cash flow (DCF) analys is what is equity

A
  1. Ex (Market value today - total debt today = equity today)
  2. LEVERAGE is the use of debt financing of an investment to maximize the return per dollar of equity invested
59
Q

What is a subordination clause

A

allows a change in the order / priority of mortgages

60
Q

What do commercial banks prefer

A

Short term loans for commercial, business, and new construction

61
Q

is California a title theory state

A

yes because in California, we use trust deed rather than mortgages as the security agreement

62
Q

deed of trust and mortgages are examples of what

A

security agreement

63
Q

what serves as evidence of debt

A

promissory note

64
Q

what does amortization mean

A
  1. the liquidation of a financial obligation on an installment basis or
  2. recovery of cost or value over a period of time
65
Q

What is a discount rate

A

the interest rate used to determine the present value of future cash flows in a discounted cash flow (DCF) analysis

66
Q

what does a deed do?

A

Every deed conveys ( to make a transfer of a property interest to another individual by either sale or gift) whatever interest is held by the grantor
key difference between deeds lies in the extent of promises given by the grantor to the grantee

67
Q

what elements make a valid deed

A
  1. In writing 2. Signed by grantor 3. Competent grantor 4. Granting clause (words of conveyance) 5. Adequate description of property 6. Must designate a grantee
68
Q

elements that aren’t required to make a valid deed

A

Date, signature of grantee, and legal description

69
Q

what does the civil rights act of 1866 prohibit

A

prohibits discrimination based on an individual’s race

70
Q

what does the civil rights act of 1968 prohibit

A

religion, color national origin ( sex was added in 1974, family status was added in 1988, handicap / disability was added in 1988)

practice exam (3 decks)

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