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Real Estate Exam > Unit 2/Chapter 2 > Flashcards

Unit 2/Chapter 2 Flashcards

1
Q

The term nonhomogeneity refers to

A

uniqueness

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2
Q

Another term for personal property is

A

Chattel

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3
Q

Besides riparian and littoral rights, you also have doctrine of prior appropriation. What is that?

A

This is used in areas where water is scarce. Its a way to determin ownership and use of water. Under this doctrine, the right to use water for other than domestic use is controlled by the state rather than by the landowner adjacent to the water.

The owner and potential user must submit and application and obtain a permit. Priority for water rights is usually determined by the oldest recorded permit date.

Under some state laws, water rights once granted attach to the land of the permit holder. Now, the permit holder may also sell their water rights to another.

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4
Q

When determining whether an item is real or personal, a court would consider what things?

A

Intent
Whether the removal would case damage to the real estate
is the item adapted to the real estate
relevant agreement of the parties in their contract of sale

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5
Q

What describes the act by which real property can be converted into personal property?

A

Severance A

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6
Q

Appurtenances are right or privileges that come with the property. What are some examples?

A

Parking spaces in a multitenant building
water rights
similar things of value that convey with the property

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7
Q

According to law, a trade fixture is treated as ______

A

personalty, or personal realty

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8
Q

Land has what three physical characteristics?

A

Immobility
Indestructibility
Uniqueness

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9
Q

Traditionally, ownership rights of real property are described as a ______

A

bundle of legal rights

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10
Q

The word title has what two meanings?

A

(1) The right to or ownership of the property, including the owner’s bundle of rights
(2) evidence of that ownership by a deed
* Title refers to ownership of a property, not a piece of paper

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11
Q

What does it mean if something is “common-law”

A

historical

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12
Q

Water rights are what “kind” of rights

A

Common-law or statutory rights

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13
Q

What are the four economic characteristics of real property that affect its value as a product in the marketplace?

A

Scarcity
Improvements
Permanence of Investment
Area Preference

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14
Q

what are the two distinct differences in personal property and real property?

A

Personal property can be moved and is transferred by bill of sale

Real Property is not moveable and is transferred by deed

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15
Q

Annually cultivated crops such as fruit, vegetables, and grain are known as _______ or ______, and are generally considered personal property.

A

Emblements or Fructus Industriales

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16
Q

what is a fixture?

Examples?

A

A fixture is personal property that has been so attached to land or building that, by law, it becomes part of the real property.

Examples: ceiling fan, water heater, cabinets, plumbing. Almost any item that has been added as a permanent part of the building is considered a fixture.

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17
Q

What are the legal tests to determine if something is a fixture?

A 
Method of annexation
Adaptability of the item for the land's ordinary use
relationship of the parties
intent
agreement of the parties
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18
Q

Trade fixtures are also called ___________ fixtures.

A

chattel fixtures

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19
Q

What is the difference between fixtures and trade fixtures?

A

Fixtures are usually owned by the owner of the real estate and are considered permanent.

Trade fixtures are owned by the leasee and are removeable

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20
Q

Qualifying ratios: as a rule of thumb, mortgage payments should not exceed ___% of the owner’s gross monthly income. with a large majority of lenders, the monthly payment plus monthly interest should not exceed 36% of the gross monthly income.

A

28%

the 36% includes principal, interest, taxes, and insurance

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21
Q

What is a coinsurance clause

A

An insurance policy that requires property owners to insure the property for at least 80% of the replacement cost of the improvement to receive full benefits for a loss.

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22
Q

What does recording do?

What are the requirements?

A

Establishes official ownership, lien priority, and notice of encumbrances/constructive notice

Requirements:
acknowledged/notarized
state the name and address of the person preparing the document

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23
Q

What is constructive notice? how is this different than actual notice?

A

notice that the law presumes someone to have, regardless of their actual knowledge

Legal ads, possession of property and things that could have been found by inspection give constructive notice.

Actual notice is if you know a fact, see something or hear something

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24
Q

What is title and how is it transfered

A

Title is the right to or the ownership of land. (evidence of ownership)

Title is transferred by a deed

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25
Q

Chain of title

A

A history of the title and title transfers

26
Q

Abstract of Title

A

a condensed history or summary of all recorded transactions that affect title

Gives a detailed summary of all the information discovered during title earch

27
Q

Title search

A

A title search is an examination of pubic records.

Shuld reveal defects in a title

Records examined during a title search include tax records, lien records, death and birth records, marriage records and lis pendants.

28
Q

Marketable title

A

A title that is free from objections, liens or clouds.

29
Q

After a deed is recorded, it can be said that…

A

title conveyance is official.

when the deed is recorded it is called actual notice

30
Q

The process of removing clouds from a title is called…

A

perfecting a title

31
Q

What is a certificate of title?

A

A document that states the condition of the title; an opinion of the title

32
Q

An Affidavit of title states what

A

A grantor’s marital status and states that the grantor has the possession and/or legal interest in the property

33
Q

What does title insurance do?

A

Insures the owner’s title against defects.

Examples: missing heirs, forged documents, undisclosed spouse, etc.

34
Q

The two types of mortgage insurance policies are:

A

morrgagee policy: covers a lenders interest to the extent of the mortgage debt

Owner’s policy: covers the owner’s interest, usually for the value of the property

35
Q

Tax benefits for the home owners: Interest expenses paid on a maximum mortgage debt up to ________ on a first or second home can be itemized.

A

$750,000

$350,000 if filing separate

36
Q

Is loss to property a tax deductible item?

A

Losses to properties are only deductible if the loss is classified as a federally-declared disaster

37
Q

Combined real estate taxes, state and local income taxes are deductible up to a limit of _____

A

$10,000

38
Q

Standard deductions are ____ for joint filers

A

$24,000

39
Q

Capital gain

A

Profit made from the sale of a capital asset

40
Q

Long term gans (assets held longer than 12 months) are taxed at 0%, 15% or 20% depending on what?

A

filing status, tax bracket and taxable income level of the taxpayer

41
Q

Short term gains are taxed as _______

A

ordinary income

(long term capital gain rate is all relative to your income amount and what tax bracket you fall in).

42
Q

In order to exclude up to $500,000 for capital gain, you must have lived in the house as your primary residence for how long

A

At least 2 years.

2 of the last 5 years

43
Q

How do you calculate capital gain?

A

Subtract the adjusted basis from the net sales price of a property.

The net sales price (the big number) is what you sold the house for minus the commission and attorney fees. that is the NET Sales price.

To find your adjusted basis, you do original purchase price plus improvements (and depreciation if youre an investor)

To find the gain, take your net sales price MINUS the adjusted basis

44
Q

Recapture of depreciation: When investment property is sold, the amount of depreciation must be recaptured, i.e. tax must be paid on the depreciation. The investor will pay _____ % on recaptured deprecation and then the capital gain tax rate on the gain.

A

25%

45
Q

A 1031 exchange is an example of ____________

A

Deferment of gain.

When property is exchanged for like kind property capital gains taxes may be deferred. Like kind property is property held for investment or used in a trade or business. If boot is given in exchange, taxes will be paid on the value of the boot. Boot is any money or property added to equalize the net value of the properties.

Most exchanges occur when a property is sold and then another one is purchased within specific time periods and both properties meet all IRS rules for exchange.

46
Q

Depreciation: Land is not depreciable, but residential investment property is depreciated over ____ years. Commercial investment property is depreciated over ___ years. Homeowners cannot depreciate their homes.

As an investor, what can you deduct?

A

27.5 years
39 years

Mortgage interest, real estate taxes, maintenance and expenses.

47
Q

When doing a 1031 exchange, how do you know what pricepoint to look at?

A

The individual is looking for property of equal or greater value

48
Q

What is an installment sale?

A

The payment of capital gains may be spread out through an installment sale. a property owner who sells his property through an installment sale pays his capital gain as he receives payment from the sale of the property.

Can pay month-to-month, similar to a land contract

49
Q

A tax credit reduces the ______, not the ________

A

A tax credit reduces the TAX not the TAXABLE INCOME

50
Q

What is more valuable - a tax credit or a deduction?

A

Tax credit

51
Q

What is a syndication?

A

a syndication is a business venture where investors pool their money.

i.e. everyone put in $5,000

52
Q

Securities

A

Investors who pool their money and expect to make a profit from the effort of someone else are most likely purchasing a security. One example would be rent pooling. The owners of condo units are required to allow the management to rent out their units. All rents go into a pool and at the end of the year, all owners receive a portion of the pool.

Cliff Notes:

  • put money in a common enterprise
  • expect to make a profit
  • Profit is made through the efforts of someone else (servicers)
53
Q

What laws regulate securities that are offered inside state boundary lines.

A

Blue Sky Laws.

Unless exempted, securities must be registered and the issuer of the security must be licensed.

54
Q

What is a “like kind exchange”

A

Trading an income producing property for another income producing property

55
Q

A married couple, who file joint taxes each year, have sold the home they have lived in for the past two years. If they make a profit of $510,000. How much do they owe?

A

The will owe taxes on $10,000

56
Q

What are some correct statements about recording of documents?

A

Record in the county that the property is located
must be notarized
name of the party preparing the document must be listed

57
Q

A buyer purchasing 100 acres of land who wants to make sure that his rights and interests, such as his mineral rights, are protected should do what?

A

Purchase an owner’s title policy

58
Q

Cash flow can be best defined as:

A

spendable income

59
Q

Depreciation that is allowed as a deduction on investment property can be viewed as

A

A tax shelter

60
Q

A licensed real estate agent would most likely need a securities license if the agent were selling:

A

Condominiums with rent pool plants

Real Estate Exam (19 decks)

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