Unit 8 Flashcards
Lien
A charge or claim against a person’s property made to enforce the payment of money. All liens are encumbrances, not all encumbrances are liens. It is only an interest in the ownership. Used when money is borrowed as real estate security. It is also used to recover taxes owed. Includes specific and general and voluntary and involuntary.
Encumbrance
Any charge or claim that attaches to real property and lessens value or impairs it’s use. Transfers with the property. Can include liens, easements or encroachments
Voluntary Lien
Created intentionally by the property owners action such as when someone takes out a mortgage loan.
Involuntary Lien
not a matter of choice. It is created by law and may be either statutory or equitable.
Statutory- Created by statue without any action by the property owner. EX) real estate tax lien
Equitable- arrises out of common law. EX) A court ordered judgement that requires a debtor to pay balance on a delinquent charge account.
General Liens
Affect all property real and personal of a debtor. Involuntary taxes
Specific Lien
covers only the identified property
Vendors Lien
a lien belonging to a vendor for unpaid purchase price of the property, such as mortgage, beyond the personal obligations of the purchaser.
Priority Lien
Order in which claims against the property will be satisfied. First in time first in line. Real estate taxes and special assessments generally take priority over all other liens regardless of the order.
Subordination Agreement
Written agreement between lien holders to change priority of mortgage, judgement, and other liens. Holder of a superior or prior lien agrees to permit a junior lien holders interest to move ahead of his lien.
Two Types of Real Estate Taxes
- General Real Estate Taxes/ Ad Valorem Taxes- Based on the value of the property being taxed and are specific, involuntary, statutory liens. Revenue for local government.
- Special Assessment/ Improvement Taxes-
Exceptions from general taxes
- City, state, and federal government
- Municipal organizations (schools, parks, and playgrounds)
- Religious and charitable institutions
- Hospitals
- Educational institutes
Assessment
Official valuation process to determine real estate value for tax purposes. It is based on the sales price of comparable properties.
Equalization Factor
It is used to correct general inequalities in statewide tax assessments . It is used to achieve uniformity. It can raise or lower assessments in a particular district or country. . Assessed value x equalization factor then the tax rate is applied to the equalized assessment.
Tax Rates
- adaptation of a budget for the fiscal year January through December
- Appropriation: the way a taxing body authorizes the expenditure of funds and provides for the sources of funding
- Amount to be raised from the general tax is then imposed by on property owners through a tax levy (vote)
- A tax rate for each individual taxing body is computed separately to arrive at the tax rate.
- Mill is 1/1,000 of a dollar
- taxes may be payable in 2 installments, 4 installments, or 12 installments
Tax Sale
Delinquent real estate taxes are collected through a tax sale. Bid off property. Some sates allow redemption after the tax sale- defaulted owner may redeem the property. by paying the amount collected at the tax sale plus interest and charges (statutory right to redemption).