Unit 14 Flashcards
Uniqueness and Immobility
2 characteristics of land that have the most impact on market value.
Uniqueness- No two parcels of real estate are exactly alike. Each occupies it’s own geographic region
Immobility- Property cannot be relocated to satisfy demand where supply is low
Factors Affecting the Supply of Real Estate
- labor force
- construction materials
- government controls
- government fiscal policies: Interest rates depend on federal reserve boards discount rate on interest.
Factors Affecting the Demand of Real Estate
- Population
- Demographics
- Employment Wages
- Wage levels
Cooperative
A corporation holds title to the real estate itself and the unit owner purchases a share of stock in the corporation not the individual unit. Owners receive proprietary leases and and a share of stock.
Planned Unit Development PUD
master planned communities marge diverse land uses as housing, recreation, and commercial unites in one self contained development. Planned under special zoning ordinances. Owners do not have direct ownership interest in the common areas.
High Rise developments/ mixed use developments
combine office space, stores, theaters, and apartment units in a single vertical community. Self contained developments and offer things such as laundry facilities, restaurants, stores…
Manufactured Homes/ Mobile Homes
Have a TRA # on paper on furnace or in a cabinet. Need TRA # or title to sell it,
Expenses of Mortgage
Principle
Interest
Taxes
Insurance
Formula for homebuyers
10% of purchase price at down
mortgage payments, taxes, and insurance cannot exceed 28% of gross months income
debt could not exceed 36% of monthly income.
Investment considerations
- Property value may increase
- Build equity as you pay off the mortgage
- income tax reductions for homeowners
Tax Benefits
Married taxpayers who file jointly- $500,000 excluded from capital gains tax for profits on the sale of a principal residence.
Single- $250,000 exclusion
Must occupy the property for 2 out of the past 5 years. It must be a primary residency
First time home buyers can use IRA retirement fund to pay for a down payment penalty free. Limit of 10,000 and it must be spent entirely within 120 days.
Tax Deductions:
- Mortgage interest payments
- Real estate taxes
- certain loan origination fees
- Discount points
- Loan repayment penalties
Homeowners Insurance Policy
Basic- covers fire, lightening, glass breakage, windstorm or hail, explosion, riot or civil commotion, aircraft or vehicle damage, smoke, vandalism, theft, or loss of property
Broad Form- falling objects, weight of ice snow or sleet, collapse, damage from water heater, freezing of plumbing, damage from generated currents, and leaking from splices
Coinsurance clause- Requires the homeowner maintain insurance equal to a specified percentage (80%) of the replacement cost new of the dwelling.
Flood Insurance
Special policy that only covers damage due to flooding. FEMA regulated. Special flood hazard areas require flood insurance when using federally related loans. Rated based on risk. Elevation certificate is a notarized form that determines rates based on floodplain.
When flood insurance is required by a lender as a condition of the mortgage loan the coverage is immediate. Otherwise coverage is not effective until 30 days after the purchase of the policy.
Comprehensive List Underwriting Exchange (CLUE)
Database of consumer claims history that enables insurance companies to access prior claims information in the underwriting and rating process. 5 years of claims history.
Mine Subsidence Insurance
Property owners can get this insurance through coal mines subsidence insurance fund administered by PA department of environmental protection. Only covers damage to the structure. Separate policy for each structure. Bureau of mines can provide info about location of mines and will help property owners evaluate the likelihood of subsidence.
