Transfer of Property 8% Flashcards
Deed Restrictions
rules and regulations that govern one or more lots or parcels of land. Deed restrictions “bind” land. Typically, a deed restriction is created in a document that is recorded with the county register of deeds records where the property is located.
How long are deed restrictions valid for?
Unless there’s a written expiration date, deed restrictions don’t expire automatically and continue in perpetuity.
Marginal tax rate
The marginal tax rate is the ordinary rate of income tax charged on the last dollar of taxable income earned, often used when making calculations for investment decisions.
The marginal tax rate is the percentage of tax applied to your income for each tax bracket in which you qualify. In essence, the marginal tax rate is the percentage taken from your next dollar of taxable income above a pre-defined income threshold. (http://www.investopedia.com/video/play/marginal-tax-rate/)
Property tax installment is due and delinquent when?
memorization tool?
You must know the fiscal tax year for the state exam!
Memorization Aid: No, Darn, Foolin, Around:
November 1st: First installment due;
December 10th: Delinquent date for 1st installment;
February 1st: Second installment due;
April 10th: Delinquent date for 2nd installment.
granting clause
Words in a deed of conveyance that state the grantor’s intention to convey the property at the present time.
A valid deed must have a granting clause or some words to indicate that the grantor wishes to transfer the property to the grantee (“I hereby grant”).
Deeds
A deed is the document a private landowner uses to transfer real property to someone else.
“The most common form of voluntary alienation is transfer by deed.”
“A written instrument that, when properly executed, delivered, and accepted, conveys title or ownership of real property from the grantor to the grantee”
A deed must:
- be in writing and signed;
- identify the parties;
- have a competent grantor;
- specify a living grantee;
- contain words of conveyance; and
- adequately describe the property
- The deed must also be acknowledged, delivered, and accepted.
The deed must identify the parties—the grantor and the grantee. It isn’t absolutely necessary to state the grantee’s name in the deed, as long as it includes a description that makes it possible to identify him or her.
A valid deed must have an adequate property description. Although a complete legal description isn’t required, the deed must make clear what property is being conveyed.
A description is adequate if a surveyor could use it to locate the property. The description does not have to describe the buildings on the property.
adjusted basis
The original cost basis of a property reduced by certain deductions and increased by certain improvement costs. The original basis determined at the time of acquisition is reduced by the amount of allowable depreciation or depletion allowances taken by the taxpayer, and by the amount of any uncompensated property losses suffered by the taxpayer.
In tax accounting, adjusted basis is the net cost of an asset after adjusting for various tax-related items.
Adjusted Basis or Adjusted Tax Basis refers to the original cost or other basis of property, reduced by depreciation deductions and increased by capital expenditures.
Basis (or Cost basis)
Basis (or cost basis), as used in United States tax law, is the original cost of property, adjusted for factors such as depreciation. When property is sold, the taxpayer pays/(saves) taxes on a capital gain/(loss) that equals the amount realized on the sale minus the sold property’s basis.
The tax basis on a personal residence consists of the cost of the property plus capital improvements like the addition of a concrete patio.
*Basis is the value carried on the books of the owner. When the owner deducts $10,000 for depreciation, the book value/basis goes down by $10,000.
Improvement
1) Any structure, usually privately owned, erected on a site to enhance the value of the property—for example, building a fence or a driveway.
2) A publicly owned structure added to or benefiting land, such as a curb, sidewalk, street or sewer.
The adjusted basis of a taxpayer’s residence would be
The correct answer is b: Since you cannot depreciate your personal residence, the adjusted basis would be COST PLUS CAPITAL IMPROVEMENTS.
Who pays for title insurance?
Who pays for title insurance is ultimately a negotiable item.
It is important to understand that this can change based on geographic region and custom.
title insurance
A comprehensive indemnity contract under which a title insurance company warrants to make good a loss arising through defects in title to real estate or any liens or encumbrances thereon. Title insurance protects a policyholder against loss from some occurrence that has already happened. (See extended coverage policy, standard coverage policy)
standard coverage policy
A standard coverage policy normally insures the title as it is known from the public records. In addition, the standard policy insures against such hidden defects as forged documents, conveyances by incompetent grantors, incorrect marital statements and improperly delivered deeds.
EXCLUSIONS:
ZONING IS EXCLUDED from the coverage of title insurance. The standard policy also does not protect the policyholder against defects in title known to the holder to exist at the date of the policy and not previously disclosed to the insurance company.
extended coverage policy
A title insurance policy that covers risks normally excluded by most standard coverage policies. Extended coverage indemnifies the insured against such things as liens, encumbrances, easements, and encroachments, which may not be disclosed by the public records.
lis pendens
*PENDING LEGAL ACTION, OR a FORMAL NOTICE OF THIS.
A lis pendens is recorded to warn anyone interested in the property, that it is subject to a lawsuit. The property can be sold with the lis pendens filed against it, but the sale may be set aside and the property may be used for execution depending on the results of the lawsuit.
*It may affect title to real property based on the results of the lawsuit
A lis pendens is a recorded legal document that gives constructive notice that an action affecting a particular piece of property has been filed in a state or federal court. Lis pendens is Latin for “ACTION PENDING.”
The County Recorders Office must keep an adequate indexes records how
alphabetically by grantee and grantor names
Owner bob owns an apartment complex which is managed by broker X. Owner bob wants to sell his apartments and broker X is the listing broker. Who distributes the security deposit?
Security deposits technically belong to the tenant. However, they are held by the owner until the tenant leaves and the owner inspects the unit. It is probably true that Broker X must hand the deposits to escrow, but escrow distributes everything at the close to the new buyer. This includes all proration of prepaid rent, taxes etc. The security deposits would be a credit to the buyer.
bulk transfer of goods
Bulk transfer of goods is any transfer in bulk of a substantial part of the materials, supplies, merchandise, equipment or other inventory of an applicable enterprise (stock-in-trade) that is not in the ordinary course of the transferor’s business.
A “bulk transfer” is any transfer in bulk (not in the ordinary course of the seller’s business), of a major part of the materials, inventory, or supplies of the business. The main purpose of the bulk transfer law is to afford a merchant’s creditors an opportunity to satisfy their claims against a merchant who owes them money before the merchant can sell assets and vanish with the proceeds.
holographic will
A will that is hand written, dated and signed in the testator’s handwriting, but need NOT BE WITNESSED.
Some states consider a holographic will to be valid even though it was not witnessed, presumably on the theory that the handwriting can be analyzed to verify authenticity and demonstrate competency.
Valid Will
- In writing
- Signed by testator
- Two competent witnesses
escrow
The process by which money and/or documents are held by a disinterested third person until satisfaction of the terms and conditions of the escrow instructions. Once these terms have been satisfied, delivery and transfer of the escrowed funds and documents takes place. (See escrow instructions)
escrow instructions
In a sales transaction, a document signed by buyer and seller detailing the procedures necessary to close a transaction and directs the escrow agent how to proceed. Sometimes the buyer and seller execute separate instructions and sometimes the contract of sale itself serves as the escrow instructions. (See escrow)
close-of-escrow/closing
The consummation of a real estate transaction, when the seller delivers title to the buyer in exchange for payment of the purchase price. Closing in some areas may not occur until the documents are recorded; however, under general rules of real estate law, transfer of title takes place upon delivery of the deed to the grantee. (See escrow)
interim occupancy agreement
Basically, buyer can ask the seller for permission to occupy the property before the closing of escrow and if the seller agrees, an interim occupancy agreement should be signed by the buyer and seller, and the buyer’s personal and liability insurance should be in effect as of the date of occupancy.
Interim Occupancy Agreement Law and Legal Definition. An interim-occupancy contract is a contract that governs an arrangement called a leaseback. In this type of contract, the seller rents back property from the buyer. A leaseback is the sale of property.
When there is a substantial discrepancy between the dates for close of escrow and the new owners occupying the property, the agent must prepare a(n):
Closing delays can occur due to a number of reasons. For example, delays in obtaining a homeowner’s insurance policy or if the funding check from the buyer’s lender isn’t issued in time. Sometimes work on the property needs to be completed before close of escrow. Another common reason for a delay is when two home sales are closing concurrently and a delay in one causes a delay in the other. Ideally, buyers shouldn’t take possession of their new homes until the sale has closed. As a last resort, the buyer can ask the seller for permission to occupy the property before the closing and if the seller agrees, an INTERIM OCCUPANCY AGREEMENT should be signed by the buyer and seller, and the buyer’s personal and liability insurance should be in effect as of the date of occupancy.
arbitration
A NONJUDICIAL method of RESOLVING DISPUTED by selecting a NEUTRAL PARTY to make a final determination. This method was either previously agreed to by the disputing parties or stipulated by law. The decision made by the arbiter is binding.
During escrow, if an unresolved dispute should arise between the seller and buyer preventing the close of escrow, the escrow holder may legally:
The escrow holder does not arbitrate arguments between buyer and seller. He/she would most likely file an INTERPLEADER ACTION in court.
*By filing an interpleader action, the escrow agent is asking the court to accept any money or property he or she holds and distribute it to the rightful claimant.
Valid Escrow
The two essential elements for a valid sale escrow are:
1) BINDING CONTRACT/AGREEMENT between BUYER and SELLER
2) the CONDITIONAL DELIVERY to a NEUTRAL THIRD PARTY of something of value which typically includes written instruments of conveyance (grant deed) or encumbrance (deed of trust) and related documents.
The binding contract/agreement can appear in any legal form, including a deposit receipt (a residential purchase agreement), other forms of agreements of sale, exchange agreements, option agreements, or jointly executed bilateral or individually executed unilateral escrow instructions evidencing a mutual agreement of the buyer and the seller.
2 essential elements of a valid escrow:
Binding contract and conditional delivery
A valid escrow cannot exist without a binding contract between buyer and seller and the conditional delivery of transfer documents to a third party.
preliminary report
A TITLE REPORT that is made before a TITLE INSURANCE POLICY is issued or when escrow is opened.
A preliminary report or policy of title insurance reports only on those documents having an affect on the title and SHOULD NOT BE RELIED ON AS BEING AN ABSTRACT. (See abstract of title)
The preliminary report DESCRIBES THE PROPERTY and CURRENT OWNER OF RECORD, as well as any RECORDED LIENS or OTHER ENCUMBRANCES.
- The ESCROW HOLDER reads the report to verify the LEGAL DESCRIPTION and to determine if there are any child support liens, taxes, or judgments for which a release will be required prior to the close of escrow.
- The buyer is required to review and sign acceptance of the preliminary report.
abstract of title
A FULL SUMMARY of all consecutive grants, conveyances, wills, records and judicial proceedings affecting title to a specific parcel of real estate, together with a statement of all recorded liens and encumbrances affecting the property and their present status.
encumbrance
Any claim, lien, charge or liability attached to and binding on real property that may lessen its value or burden, obstruct or impair the use of a property but not necessarily prevent transfer of title. (See lien)
lien
A charge or claim that one person (lienor) has on the property of another (lienee) as security for a debt or obligation. (See general lien, involuntary lien, mechanics’ lien, statutory lien, tax lien, voluntary lien)
legal description
A description of a specific parcel of real estate complete enough for an independent surveyor to locate and identify it. (See government survey system, lot and block system, metes and bounds system)
government survey system
The government survey system is a system of LAND DESCRIPTION that applies to much of the land in the United States, particularly in the western states; also called the RECTANGULAR SURVEY SYSTEM.
It is based on pairs of principal meridians and base lines, with each pair governing the surveys in a designated area.
baselines and meridians
- Baselines are one of a set of imaginary lines running east and west.
- Meridians run north to south.
- In a government survey system land description methon
lot-and-block (recorded plat) system
A method of describing real property that identifies a parcel of land by REFERENCE TO LOT AND BLOCK NUMBERS within a subdivision, as specified on a recorded subdivision plat map.
metes-and-bounds description
Metes-and-bounds is a legal description of a parcel of land that begins at a well marked point and follows the boundaries, using directions and distances around the tract, back to the point of beginning.
In the metes-and-bounds system, MARKERS are used to clearly mark the point of beginning and the boundaries of a tract of land.
special assessment
A tax or levy customarily imposed against only those specific parcels of realty that will benefit from a proposed public improvement, as opposed to a general tax on the entire community. Common examples of special assessments are water, sidewalk and sewer assessments.
*A special assessment is a tax imposed against only those SPECIFIC PARCELS of realtyTHAT WILL BENEFIT from a proposed PUBLIC IMPROVEMENT
(as opposed to a GENERAL TAX on the entire community.)
levy
To assess, seize or collect. To levy a tax is to assess a property and set the rate of taxation.
To levy an execution is to officially seize the property of a person in order to satisfy an obligation.
Without being licensed as an escrow, handle the escrow on transactions where he or she:
1) a principal to the transaction
2) representing the buyer
3) representing the seller
Intestate
Intestate means dying WITHOUT A WILL or leaving a DEFECTIVE WILL.
The intestate DECEDENT’s (DEAD PERSON’S) property passes to his/her heirs according to the laws of descent in the state where such real property is located.
Who is the escrow agent an agent of?
The escrow agent is the agent of both the BUYER AND the SELLER, and SHOULD RECEIVE INSTRUCTIONS FROM BOTH if EVER A CONFLICT ARISES.
The most important element of proper and effective delivery of a deed is:
INTENT OF THE GRANTOR
The grantor must intend for a deed to be delivered or the deed is not effective. Recording and acknowledgment are not required for the effectiveness of a deed.
A deed must be _____ to be effective
But need not be ______ to be effective.
It is logical to presume that the grantor intended to deliver the deed if his/her signature has been acknowledged by a notary public, which is required for the recording of a deed. A DEED MUST BE DELIVERED TO BE EFFECTIVE, but DOES NOT HAVE TO BE RECORDED.
RECORDING ESTABLISHES PRESUMPTION OF DELIVERY.
How long does a broker have after close of escrow to cause a deed of trust to be recorded?
WITHIN ONE WEEK OF CLOSING of a transaction, the broker must cause a deed of trust to be recorded with the county recorder or cause it to be delivered to the beneficiary with a written recommendation that it be recorded forthwith, unless written instructions not to record are received from the beneficiary.
If the transaction is closed through escrow and the deed of trust is delivered to the escrow holder within one week, that shall be deemed compliance on the part of the broker.
The deed with a provision regarding racial and religious discrimination may be changed:
Effective January, 2000, a county recorder, title insurance company, escrow company, or real estate licensee who provides a declaration, governing documents or deed to any person MUST PROVIDE a STATEMENT ABOUT ILLEGALITY OF DISCRIMINATORY RESTRICTIONS and the right of the homeowners to have such language removed.
The statement must be contained in either a cover page placed over the document or a stamp on the first page.
