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326 Cards in this Set
- Front
- Back
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Encumbrance |
A claim, charge or liability that attaches to and is binding on real estate; anything that affects title to real estate; a right or interest held by a party who is not the fee owner of the property |
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Lien
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Nonpossessory charge against property that provides security for a debt or an obligation of the property owner; its purpose is the right of foreclosure
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The right of foreclosure in order to secure a debt
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What is the purpose of a lien?
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Deed restriction
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Private agreements placed in the public record that affect the use of land; type of encumbrance
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Restrictive Covenant
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-Private agreement usually imposed by the owner when property is sold that limits the way the real estate ownership may be used;-Frequently used by owner/developer to maintain specific standards in a subdivision;-The covenants are appurtenant- Also called protective covenants
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Lis Pendens
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Litigation Pending-A recorded legal document giving constructive notice that an action potentially affecting title to a particular property has been filed in either a state or a federal court;-Title is effectively unmarketable during litigation;
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General Lien
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A lien which affects all the property of a debtor, both real and personal
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Specific Lien
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A lien which affects only a particular parcel of property
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Lien Agent
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In NC, private residential and commercial construction projects costing more than $30k must designate a ....
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Mechanic's Lien
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A specific, involuntary lien secured by interest in real property to give security to contractors, sub-contractors, architects, laborers and others who have performed work or furnished materials in the erection or repair of a building.
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Priority of Liens
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-Property taxes and special assessments take priority of all other liens;
-Generally, the first to record is first in right (Pure Race System) with Mechanic's Lien being exception; |
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Subordination Agreement
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-A written agreement between lien holders on a property that changes the priority of a mortgage, judgment, and other liens under certain circumstances
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Easement
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A non-possessory right to the limited use of land of another for a specific purpose without ownership
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Easement Appurtenant
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An easement that is annexed to the ownership of one parcel of land and used for the benefit of another parcel of land; runs with the land on both parcels of property
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Easement in Gross
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A personal interest in or right to use the land of another which benefits a person or entity, not a parcel of property (no dominant tenement)
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Easement by Necessity
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Easement by implication of law which allows a landlocked land owner the right of ingress and egress over a grantor's land.
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Easement by Prescription
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An easement acquired when a claimant has made continuous, visible, open, notorious and exclusive use of another's land, without the land owner's approval, for a period of 20 years (NC law defined)
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Termination of an Easement
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-need no longer exists;-the two properties come under one ownership;-release of the right of easement to the owner of the servient tenement,-abandonment of easement, or-by the non-use of the prescriptive easement.
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Servient Tenement (or estate)
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The tract of land over which an easement runs
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Dominant Tenement (or estate)
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The tract of land which benefits from an easement
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License
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A personal non-transferable privilege to enter the land of another for a specific purpose; not an encumbrance and does not run with the land
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Encroachment
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An unauthorized intrusion of an improvement, or any part of an improvement, on the real property of another party
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Ad Valorem
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According to Value
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Assessed Value
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An official value based on the sales prices of comparable properties for property tax purposes
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Mortgage or Deed of Trust Lien
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A voluntary specific lien on real estate given to a lender by a borrower as security for a real estate loan.
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Real Property Tax Lien
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A specific involuntary lien placed on real estate for the taxes levied by a city or county
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Special Assessment Tax Lien
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A specific involuntary lien placed on real estate for taxes levied for improvements which benefited the taxed property.
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Tax Liens for Ad Valorem (Real estate taxes) and Special Assessment Taxes
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Which two types of liens are valid for 10 years and have priority over other types of liens?
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NC Commercial Real Estate Broker Lien
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A specific involuntary lien filed by a real estate broker to protect his commission; must have a written agency agreement to represent property owner in a commercial transaction
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Money Judgment
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An involuntary general lien against all current and future real estate and personal property, docketed by county which stems from a decree issued by a court which provides for the awarding of money and sets forth the amount of money owed by the debtor to the creditor
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Personal Property Tax Lien
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An involuntary general lien which takes priority over other types of liens
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Mill
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1/1000 of a dollar or $0.001
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30 mills
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3% or $0.03 is how many mills?
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Octennial Reappraisal
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A process where real property is appraised based on a statutory schedule and then is reappraised every eight years
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September 1
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The date that property taxes are due and payable each year
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January 5
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The date by which current real property taxes (due Sept 1) must be paid in full without penalty
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Assessment
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An official valuation of property for the purpose of establishing value for tax purposes
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January 1, 2014
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If property tax is due and payable on Sept 1, 2014 and is not paid when due, what will be the effective date of the lien? |
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bundle of legal rights
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Real property is often described as a...
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right of Dispositionright of Enjoymentright of Exclusionright of Possessionright of Control
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The rights of ownership include the (list all 5)
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delivery of ownership
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What is livery of seisin?
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Appurtenance
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A right or privilege that goes with the ownership of land.
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Riparian rights
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Granted to owners of land located along the course of a river, stream, or lake
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Littoral rights
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Closely related to riparian rights for owners whose land borders oceans and large, navigable waters.
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foreshore
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The strip of land between high and low tide is called.
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accretion
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A gradual increase in land resulting from deposit of soil by the water.
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reliction
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If water gradually recedes or disappears permanently, new land is acquired by...
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erosion
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The gradual wearing away of land caused by flowing water or other natural forces may cause an owner to lose land.
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avulsion
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When a sudden act of nature such as a flood or avalanche removes soil.
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lateral support
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The owner of real property has the right to have adjacent property support the natural boundaries of the land.
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subjacent support
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Occasionally the landowner severs the subsurface rights from the land and sells them. The property owner is entitled continued support of the land's surface.
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HUD construction standards
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Manufactured homes are built according to...
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NC building codes standards
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Modular homes are built according to...
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fructus naturales
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Trees, perennial bushes and grass that do not require annual cultivation are considered real property and are called...
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fructus industrials
emblements |
Annual crops, such as wheat, corn, vegetables and fruit are generally considered personal property, are know as... (2 names)
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severance
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The process of changing an item of real property to personal property ...
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annexation
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The process of changing an item from personal property into real property ...
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Intention of the annexor
Relationship of the annexor Method of annexation Adaptation to real estate |
Total Circumstances Test has four steps, what are they?
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trade fixtureor chattel fixture
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An article owned by a tenant and attached to a rented space or building for use in conducting a business is...
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accession
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If a trade fixture is not removed at the end of the lease it becomes real property to the landlord through...
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estate (tenancy)
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The degree, quantity, nature, and extent of interest one has in real property...
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estates of indeterminable length of ownership, such as those existing a lifetime or forever
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Freehold estates are ...
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deed when title to real estate is conveyed
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Freehold estates are passed from grantor to grantee via ...
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-fee simple estate (pass by inheritance)-defeasible fee estate (pass by inheritance)-pur autre vie estate (for life of another)-conventional life estate with remainder or reversion (not by inheritance)
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The types of freehold estates that can be transferred are ...
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1) fee simple2) defeasible fee simple3) pur autre vie estate
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3 freehold estates that are for an indefinite period and are inheritable by the heirs of the owner...
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Fee Simple Estate
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Highest type of interest in real estate in which holder is entitled to all rights in the property...
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Fee Simple Absolute
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A fee simple ownership on which there are no limitations (other than governmental restrictions)...
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Fee Simple Defeasible (also known as a qualified fee estate)
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Estate may be lost (or defeated) on the occurrence or nonoccurrence of a specified event...
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1) fee simple subject to a condition subsequent2) fee simple determinable
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Two types of defeasible estates...
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fee simple subject to a condition subsequent
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Estate dictates some action or activity that the new owner must not perform. Former owner retains a reversionary right, so that if the condition is broken, the former owner can retake possession through court proceedings...
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fee simple determinable
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Estate requires that a specified activity or land use continue. Ownership is held "so long as" or "during the period" the condition or limitation is maintained. Former owner, heirs or successors retain automatic revisionary rights...
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Conventional Life Estate
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A life estate created by grant from current owner of a fee simple estate where current owner retains a reversionary interest or names a remainderman...
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Life Estate Pur Autre Vie
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An estate owned for the lifetime of some named third party...
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Estovers
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A life tenant's interest in real property is a true ownership interest. They have the right to use the property resources, this is called...
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Waste
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When a life tenant performs an act that would permanently injure the land or property, this is known as
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severalty
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When title to real estate is owned by one person or a single entity, that person or entity is said to own the property in ...
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concurrent owners or co-owners
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When title to one parcel of real estate is owned by two or more persons or entities, those parties are said to be ...
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1) tenancy in common2) joint tenancy3) tenancy by the entirety
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There are 3 forms of concurrent ownership...
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Passes to the heirs through probate proceeding
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On the death of a tenant in common, what happens to that tenant's undivided interest?
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Joint tenancy has right of survivorship so upon death of one owner the other will hold title in severalty
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With joint tenancy ownership is usually equal shares, what happens upon the death of one owner?
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Tenancy by the entirety
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Special form of tenancy used in many states which the owners must be husband and wife. On the death of one spouse full title automatically passes to surviving spouse through right of survivorship without a probate hearing...
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fee simple absolute title to the unit (airspace)
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In condominium ownership, each occupant holds a ...
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the owner of each unit also owns the land on which the unit is built
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Town house ownership is similar to a condo ownership with one fundamental difference ...
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PUD or Planned Unit Development
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A method of real estate development, not ownership, which features flexible zoning (some residential , some multifamily and some retail or commercial as well)...
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Subsurface Rights
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The rights to use the space below ground level and to extract the natural resources lying below the earth's surface
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-Remove hitch, wheels and axles-Attach home to a permanent foundation on land owned by mfd home owner-File affidavit with DMV confirming other two items were completed ("Killing the DMV Title")
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These must be done in order to convert a manufactured home into real property (3 Things).
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Agricultural Fixtures
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Fixtures, installed by a tenant farmer, used in a farming operation
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Real Property; (these cannot be removed by the tenant at the end of the lease without special written agreement)
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If a tenant farmer installs agricultural fixtures during his tenancy, what type of property is this considered?
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Remainderman
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When the grantor names someone other than himself to receive the title after the termination of a life estate, this grantee is called the...
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Remainder Interest(this future interest can be sold but is nonpossessory until life estate is terminated)
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Future Interest in a Life Estate where someone other than the grantor is named is called THIS type of interest
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Reversionary Interest; reverts back to grantor of estate(If grantor is deceased, ownership passes to heirs or devisees)
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Future Interest in a Life Estate where a remainderman is not named is called THIS type of interest
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Dower and curtseyMarital Interest or Marital Life Estatepartial interest, NOT partial ownership
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A legal life estate which allows a non-owning spouse a lifetime right to partial interest
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Two (even though both do not have ownership, both signatures must be present because both have interest in the estate)
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In a Marital Life Estate how many signatures must there be to sell the estate?
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7 DaysDeveloper must provide "offering statement"
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Someone purchasing a Condominium from the developer has how many days to cancel?
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Tenants in Common
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The type of tenancy where unit owners of a condominium own a share of the common areas (pool, hallways, etc) |
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Land
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-The earth's surface, extends downward to the center of the earth with subsurface rights and stretches upward to infinity with air rights.-Includes things permanently attached to it such as trees and water.
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Real Estate
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-Land at, above and below the earth's surface PLUS all things permanently attached to the land, both natural and man-made.
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Real Property
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-The land itself, the improvements thereon, and the interests, benefits, and rights that are automatically included in the ownership of land and real estate.
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-Immobility-Indestructibility-Uniqueness (nonhomogeneity or heterogeneity)
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The 3 Physical Characteristics of Real Property
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-Scarcity-Location (situs)-Improvements-Permanence of Investment
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The 4 Economic Characteristics of Real Property
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Situs
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-Location-The personal preference of people for one location over another,-not necessarily based on objective facts and knowledge.
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Highest and best use
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-The legally allowed and economically feasible use that gives owners the greatest actual return on their investment. This can change because of socio-economic conditions.
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Chattel
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- Also called personal property or personalty.-Movable items that do not fit into the definition of real property.-Examples are furniture, clothing, jewelry, money, vehicles, etc.
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Broker
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-One who acts as an intermediary on behalf of others for a fee or commission.-One who is licensed to list, lease, buy, exchange, auction, negotiate or sell interest in real estate for others for a fee.
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The upward and downward fluctuations in business activities generally characterized by:-Expansion-Recession -Depression-Revival
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Business Cycle Stages
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Demand
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-The amount of goods people are willing and able to buy at a given price
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Personalty / Chattel
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Same as personal property. All property that does not fit the definition of real property. Movability.
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Provisional Broker
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Operates under the supervision of a real estate broker-in-charge.
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ResidentialCommercialIndustrialAgriculturalSpecial Purpose (churches, Gov)
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Five Categories of Real Property
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...supply increases and demand remains stable
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Supply and Demand: Prices go down when...
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...demand increases and supply remains stable
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Supply and Demand: Prices go up when...
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Labor force and construction costs
Government controls and financial policies |
Factors affecting supply
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Population
Demographics Employment and wage levels |
Factors affecting demand
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Heterogeneity, nonhomogeneity
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uniqueness of land
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Market
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A place where goods are bought and sold, where value for those goods is established and where it is advantageous for buyers and sellers to trade.
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Point of Equilibrium
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The point at which supply and demand are balanced
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Appraisal
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The process of estimating a property's value (typically market value). |
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1) Metes and bounds2) Reference to plat map (lot and block)3) Reference to public document that has a legal description4) Rectangular (Government) survey (NOT IN NC)
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4 methods to describing real estate for legal description
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Metes-and-bounds
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Starts at point of beginning and uses references to linear measurements and compass directions called CALLS; should always end at point of beginning
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POB (Point of Beginning)
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Starting point of metes and bounds
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Calls (metes and bounds)
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Linear measurements of distance and compass directions in metes and bounds system of property description
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Monuments (metes and bounds)
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Fixed objects used to establish real estate boundaries (natural objects as well as streets, highways, and markers placed by surveyors)
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Reference to recorded deed
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Recorded legal description of the property (use only as "additional" info but not as sole legal description)
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Surveys (topographic)
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Legal descriptions of land (topographic has elevations)
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NO. Addresses are INFORMAL descriptions of property. Only good for short-term leases
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Address (valid legal description?)
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Legal Description
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An exact way of describing real estate in a contract, a deed, a mortgage, or another document that will be accepted by a court of law.
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Rectangular Survey System (aka Government Survey System)
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Established in 1785 to standardize the description of land acquired by the newly formed federal government. System of dividing land based on two sets of intersecting lines
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37
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Number of Principal Meridians in the US
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Principal Meridians
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Major dividing lines which run north and south used in the Rectangular (Government) Survey System
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Base Lines
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Major dividing lines which run east and west used in the Rectangular (Government) Survey System
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Range Lines
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Dividing lines which run North and South, parallel to the Meridians and are 6 miles apart
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Township Lines
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Dividing lines which run east and west, parallel to the base line, and are 6 miles apart
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Township Tiers
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Strips of land formed by township lines
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Range Strip
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Strips of land formed by range lines
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Township
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6 Miles square and contain 36 square miles;
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36 square miles in the Rectangular (Government) Survey system
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Township
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One square mile or 640 acres in the Rectangular (Government) Survey System
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Section
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Section
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Township squares in the Rectangular Survey System are subdivided into 36 of these, each containing one square mile or 640 acres
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Multiply all the denominators and divide that number into 640 acres
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To calculate acres in a survey system description...
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Reference to a recorded plat
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A system that uses lot and block numbers placed in the registry of deeds of the county where the land is located; commonly used as acceptable legal description
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Plat map
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The first step in subdividing land is the preparation of this...
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Survey
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Something that should always be recommended to a buyer even if purchasing in a subdivision, even if markers appear on the property, and even if lender is not requiring it
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43,560
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Number of square feet per acre
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Informal reference
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This type of reference, such as a street address or tax ID pin, is not adequate to convey property but is acceptable in a lease
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Legal non-conforming use
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Legally using property in a way that was made illegal (by new zoning)
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Variance
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Permitting prohibited land uses to avoid undue hardship of property owner; asking permission to violate zoning; becomes appurtenant to the property
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Conditional-Use permit
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Using a property for the public good in a way it isn't zoned for (like a hospital or a church)
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Overlay district
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Where a district is subject to multiple zoning restrictions
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Spot zoning
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Zoning based on a specific property or small set of properties; to be legal, must be truly in the public interest rather than being for the benefit of a single property owner (or a few property owners)
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Subdivisions
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All divisions of a tract or parcel of land into two or more lots, building sites, etc
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Plat map
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A map of a subdivision indicating the location and boundaries of individual properties.
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Interstate Land Sales Full Disclosure Act
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A federal law regulating the interstate advertising and sale or lease of lots in subdivisions with 25 or more lots. Developer must provide a property report to buyer and register the subdivision with HUD
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Building codes
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Construction standards
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Certificate of Occupancy
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Certificate issued by a government authority stating that a building is fit for occupancy and there are no building code violations; end result of a successful building permit
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laches
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Waiting too long to enforce restrictive covenants will cause loss of rights to enforce
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Deed restrictions; Restrictive Covenants; Protective Covenants
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Private agreements usually imposed by the owner when property is sold that limits the way the real estate ownership may be used; used by developer to maintain standards; appurtenant
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Police Power
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The authority of the state to create regulations to protect the public health, safety, and welfare of the people
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Enabling Acts
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These allow the power to enact laws authorized by the state's police power to be passed down to municipalities and other local governing authorities
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ETJs (extra-territorial jurisdictions)
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The areas outside an incorporated limits which are still subject to the zoning restrictions of a municipality (population determines whether one mile or three from corporate limits)
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Downzoning
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Such as when land previously zoned for residential construction is rezoned for conservation or recreation purposes only (state not responsible for compensation for loss of value; current uses can remain under grandfather rule)
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Building permits
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Written governmental permission which must be obtained prior to constructing, altering, or demolishing an improvement; shows compliance with building codes and zoning ordinances
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Cluster Zoning
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Under this type of zoning, a developer can provide the same number of housing units as a traditional subdivision plan but with substantially increased tracts of open space; accomplished by reducing size of individual lots and using the extra space as open space
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1) Division results in parcels having 10 or more acres and no street right of way dedication
2) Division of land no larger than two acres into no more than three lots with no street right of way dedication and parcel is owned by single entity |
Exceptions to definition of subdivision
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Held responsible for facts you actually know and facts you should know
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Broker's duty to disclose zoning and other material facts
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Broker's responsibility to disclose who maintains the street to property!
Public (built to DOT standards) vs Private-- Dedication (to public use and built to DOT standards) VS Acceptance (but DOT may not have accepted the obligation to maintain!) |
Subdivision Streets Disclosure Law
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Final approval of the subdivision is granted AND recorded (also...contract on subdivision property ONLY if preliminary plat has been approved)
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The point at which a broker can close a sale on a lot in a subdivision and NOT before...
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Title to land
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The right to or ownership of land; the evidence of ownership of land; summation of all the things property owners possess to prove and protect their ownership interest in property
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Alienation
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Transferring ownership away from you; the act of transferring property to another
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1) Voluntary - giving or willing title2) Involuntary - losing title through legal process
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Types of Alienation (2)
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Deed
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Written instrument by which an owner of real estate intentionally conveys right, title, or interest in a parcel of real estate to another; evidence of title
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Grantor
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The property owner that is transferring title to or an interest in real property away from himself
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Grantee
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The person who receives a conveyance of real property
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1) In writing
2) Grantor must have legal capacity to execute deed 3) Grantor AND Grantee must be identified (and must be in legal existance) 4) Adequate words of conveyance 5) Accurate legal description of the property 6) Deed must be signed by grantor 7) Deed must be delivered and voluntarily accepted by grantee |
Requirements for deed conveyance (7 things)
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Granting Clause
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Words of conveyance called?
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(Deeds) Consideration (amt paid), Recorded, Dated, Notarized, Witnessed
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Things NOT needed for deed to be legal
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Conner Act
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Law which states first grantee to record the deed has legal rights to the property; because of this, NC is considered a "Pure Race" state
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1) General Warranty Deed2) Special Warranty Deed3) Quitclaim Deed
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3 Common forms of deeds
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General Warranty Deeds
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Provides most protection of any deed
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1) Covenant of Seisin and right to convey2) Covenant against Encumbrances - Property is free of liens or encumbrances not on record3) Covenant of Quiet Enjoyment - title is good against 3rd party action4) Covenant of Further Assurance - if error is found in deed, grantor guarantees to correct mistake5) Covenant of Warranty forever - If title fails at any time in the future, grantor will be liable
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Covenants of General Warranty Deed (5)
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Special warranty deed
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Deed that guarantees that the grantor is passing title as he has received it
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1) Grantor holds valid right to transfer property2) Property is unencumbered by grantor
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Warranties of special warranty deed (2)
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Quitclaim deed
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No express or implied warranties or covenants given. Conveys less than fee simple OR cures a title defect
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Called: cloud in the titleCured: Quitclaim deed
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Defect in title (also called and what cures it?)
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Correction deed
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Deed used when previous deed has an error
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Deed of gift
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Property is conveyed as a gift; no excise tax
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2 Years
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Time limit for recording gift of property
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Deed of release
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Releases property from mortgage when paid
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Deed in lieu of foreclosure
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Borrower has defaulted on loan and owner releases ownership prior to foreclosure; lender simply takes ownership instead of going through foreclosure (tax issues)
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Trustee's Deed
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Trustee transferring title to anyone other than trustor
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Excise tax
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Tax paid after selling real property; based on the sales price of the property; also called revenue stamps
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Round sales price up to next 500 increment and then $1 for every $500 the property is sold for (always a whole dollar amount)
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Excise tax / Revenue Stamps calculation
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Gov't transfer of property, transfer by will or intestate succession, deed of gift w/ no consideration, transfer by merger / consolidation, transfer by lease for term of years, transfer by instrument for securing debt (mortgage or deed of trust)
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No need to pay excise taxes (When?)
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Involuntary alienation
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Transfer of ownership without owner's wishes or consent; usually by operation of law
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Escheat
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When person dies intestate (without will) and with no heirs, title reverts to the state
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Eminent domain
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Private property is taken for public use and good
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Condemnation
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How eminent domain is exercised
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Quick take
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When lawful, private property can immediately be transferred to the public good
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Adverse possession
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Making a claim of ownership on someone else's property
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(O.C.E.A.N.)OpenContinuousExclusive (rightful owner not still using)Adverse to true owner's possession, and Notorious (without permission of the owner)
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Requirements for adverse possession
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NC Intestate Succession Act
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Statute of descent and distribution: when someone dies intestate, the decedent's real estate and personal property pass to decedent's heirs according to this statute.
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1) Title is free from encumbrances and liens2) There are no serious defects3) Title is free of doubtful questions to prove validity4) There are no hazards of litigation5) Convinces a reasonable person title can be passed
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5 criteria for marketable title
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Title search
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Examination of public record that might affect chain of title
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Chain of title
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Record of a property's ownership; ownership interests from person to person over a period of time
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Abstract of title
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Condensed history of title of property
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Suit to quiet title
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Lawsuit establishing ownership of title if there is a gap or cloud on the title
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Marketable title act
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If chain of title can be traced back 30 years, there is marketable title
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Title insurance
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Insurance against losses incurred due to defect in the title
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With color of title: 7 yearsWithout color of title: 20 years
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Time requirement for adverse possession (w/ & w/o color of title)
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Notary Signature
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Not needed for a deed to be valid, but needed for deed to be recorded
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Seller at closing
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Excise tax paid by ...
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Devise
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The gift of real property by will
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Devisee
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The person who receives real property by will
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Legacy or bequest
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A gift of personal property by will
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Beneficiary
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The person who receives personal property by will
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Approved Attorney State
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This means that title searches are usually performed by an attorney rather than by a title insurance company
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Constructive notice
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The legal presumption that information may be obtained by an individual through due diligence such as properly recorded documentation
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Actual notice
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Not only is the information available but also someone has been given the information and specifically knows it.
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Opinion of title
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This is given, by attorney only, after a title search has been done and a chain of title has been verified; not a guarantee
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Register of Deeds in the county where the land is located
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All instruments in writing affecting any estate, right, title, or interest in land must be recorded here
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Contract law
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The general body of law that governs the operation of contracts
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Contract
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A legally enforceable promise or set of promises between legally competent parties, supported by legal consideration, to do or refrain from doing a legal act that must be performed and for which the law provides a remedy if a breach of promise occurs
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Express contract
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A contract where the parties state the terms and show their intentions in words to that affect; maybe either oral or written
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Implied contract
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A contract where the agreement of the parties is demonstrated by their actions or conduct
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Bilateral contract
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A contract where BOTH parties promise to do or refrain from doing something; one promise is exchanged for another
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Unilateral contract
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A contract where ONE party makes a promise to induce a second party to do something (I will do this IF you do that)
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Executory contract
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A contract existing when something remains to be done by one or both parties (a sales contract, signed by both parties, pending closing, is an example of this)
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Executed contract
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A contract in which all parties have fulfilled their promises and, therefore, fully performed the contract (such as a closed sales contract)
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Valid contract
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A contract which complies with all the essential elements and is binding and enforceable on both parties
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Void contract
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A contract that has no legal force or effect; unenforceable in a court of law because it does not meet the essential elements of a contract (may still be fully executed unless one of the parties disaffirms it)
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Voidable contract
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A contract that seems, on the surface, to be valid but may be rescinded, or disaffirmed, by one of the parties, based on some legal principle
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Unenforceable contract
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A contract which has all the elements of a valid contract; however, neither party can sue the other to force performance (once fully executed, can be "valid as between the parties")
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1) legally competent parties2) mutual assent or deliberate agreement3) legality of object4) consideration
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Four elements of a valid contract
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Mutual assent (or deliberate agreement)
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An offer by one party that is accepted by the other party
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Consideration
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Something of legal value, bargained for and given in exchange for a promise or an act (earnest money not required in NC for real estate)
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Reality of consent
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If misrepresentation, fraud, mistake of fact, undue influence or duress are absent in contract formation, good contract is formed
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Revocation of an offer
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Withdrawal by the offeror at any time prior to acceptance by offeree
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Counteroffer
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A changing of the proposed terms
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Statute of frauds
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A common law doctrine which requires that certain types of contracts be in writing to be enforceable in a court of law (in NC, this includes all conveyances of interests in real property)
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Parol evidence rule
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A common law rule of evidence that dictates that no oral agreements that contradict the terms of a written contract may be considered in a lawsuit based on the written agreement (written contract assumed to be complete)
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Assignment
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substitution of parties; does not terminate the contract or change the terms
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Novation
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Substitution of new contract; terminates old contract. The new agreement may be between the same parties, or a new party may be substituted for either.
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Time is of the essence
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A clause, written after a date in a contract, which means that the contract must be performed within the time period specified
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Breach of Contract
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A violation, without legal excuse, of any of the terms or conditions of a contract
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Compensatory Damages
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Money awarded to an injured party, following a lawsuit, to compensate (not punish) the party who breached the contract
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Liquidated Damages
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The amount of money that will compensate the injured party for breach, which the parties agree to at the time they enter into the contract (earnest money is considered this and usually the seller will benefit from this option)
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Specific Performance
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To force the other party to perform the contract as agreed (usually the buyer will be benefited by this option)
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Recission
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When a contract is declared invalid and both parties return to the position they were in before they entered into contract (appropriate when facts were misrepresented or one party entered the contract under duress; may include compensatory damages)
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Statute of Limitations
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A specific time limit during which parties to a contract may bring legal suit to enforce their rights.
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The law of agency
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The law which governs the legal responsibilities of the broker to the people the broker represents
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Caveat emptor
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The common law doctrine which states "let the buyer beware"
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Agent
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A person authorized to act on behalf and represent the interests of another
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Subagent
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One who is employed by a person already acting as an agent, an agent of an agent
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Principal
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The person who hires and delegates to the agent through a brokerage contract the responsibility of representing that person's best interests (buyer, seller, landlord or tenant)
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Agency
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The fiduciary relationship between the principal and the agent
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Subagency
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The fiduciary relationship between the sub agent and the principal
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Fiduciary
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A relationship in which the agent is placed in the position of trust and confidence to the principal
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Client
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The principal; the party that the agent has been HIRED to do work for
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Customer
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The third party for whom some level of service is provided by an agent of another party, but who is not hired and therefore not represented by the agent;
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Customer
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A person who is entitled to factual information and fair and honest dealings as a consumer but does not receive advice and counsel or confidential information about the principal
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Brokerage
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The business of bringing buyers and sellers together in the marketplace
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Broker
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A person who is licensed to list, lease, buy, exchange, auction, negotiate, or sell interest in real property for others and to charge a fee for services
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Provisional broker
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A Broker who must work under direct supervision of a broker in charge
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Universal agent
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A person who is empowered to do anything the principal could do personally
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General agent
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A person who may represent the principal in a broad range of matters related to a particular business or activity, such as a property manager
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Special Agent
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A person who is authorized to represent the principal in only one specific act or business transaction, and under limited, detailed instructions with no power to bind the principal; a real estate broker is usually this
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Ratification
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Apparent authority; by performing any act that accepts the conduct of the agent as that of an agent
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Express agreement
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An agreement where the terms have been expressed either in writing or orally
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Written (express) agreement
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In North Carolina, in order for a broker to be entitled to compensation, the broker must have this type of agreement
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Single agency
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An agency where the agent represents only one party in a single transaction
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Buyer agency
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When a person contracts with a firm or broker to locate property and represent his interests in the transaction whereby he is the principal to the firm or broker
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Seller subagency
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Created when one broker or firm, usually the seller's agent, appoints other brokers or firms to assist in performing client-based functions on the principal's behalf
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Dual agency
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An agency where neither side can be favored and must be given fair and equal representation, no help and no harm to either side
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Designated dual agency
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Typically used for in house sales, the broker in charge appoints different agents to the buyer and the seller and each agent fully represents their client
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First substantial contact
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Occurs when conversation between a broker and a consumer shifts from facts about the property to possible confidential information about the consumer's needs, wishes, and abilities; or when the consumer or broker begins to act as if there is a fiduciary relationship
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3 calendar days, and must review with them as soon after as possible
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If first substantial contact occurs other than at a face to face meeting, the broker must send the WREA brochure within this many days
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Oral buyer agency
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A non-exclusive agreement between agent and buyer considered to be of indefinite duration
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Honesty and fairness; material facts; compliance with real estate law and NCREC
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Duties and liabilities of agents to all customers and clients
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Loyalty (and confidentiality)
Obedience Accounting Disclosure Skill, care and diligence |
Agent's responsibilities to principal
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Commingling
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The term used to describe when trust funds and the firm or broker's personal or business funds are placed in the same account
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Puffing
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Opinion statements that exaggerate a property's benefits; legal but must not constitute a misrepresentation of the property
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Fraud
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The intentional misrepresentation of a material fact in such a way as to harm or take advantage of another person; dishonesty calculated for advantage
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Material facts
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Any facts that might affect the principal's decision in a transaction
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Facts about the property itself
Facts relating directly to the property Facts relating to ability of principles to act Facts of specific importance to buyer |
Material facts are...
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Willful misrepresentation
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Intentionally misinforming any party involved in a transaction about a material fact
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Negligent misrepresentation
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Unintentionally misinforming any party involved in a transaction about a material fact
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Willful omission
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Intentionally failing to disclose a material fact to any party involved in a transaction
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Negligent omission
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Unintentionally failing to disclose a material fact to any party involved in a transaction
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Not a material fact requiring disclosure but if answer is given it must be truthful, broker can refuse to answer
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The fact that a registered sex offender resides in or near a property for sale or lease is or is not a material fact requiring disclosure?
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Not a material fact requiring disclosure and agent cannot disclose this condition, even if asked; agent is prohibited by law from answering the question
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The fact that an AIDS related illness or death occurred at a property for sale or lease is or is not a material fact requiring disclosure?
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Not a material fact requiring disclosure but if answer is given it must be truthful, broker can refuse to answer
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The fact that a death, even a violent death, occurred at a property for sale or lease is or is not a material fact requiring disclosure?
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Stigmatized properties
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Those properties branded by society as undesirable because of events that occurred there (not a material fact)
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Tort
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A wrongful act by an agent while representing the principal acting within the scope of the employment agreement that created the agency
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1) Open listing
2) Exclusive-agency listing 3) Exclusive right to sell listing |
The 3 types of agency listing agreements are:
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Open listing
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Multiple agents;Only selling agent is entitled to commission;Seller retains independent right to sell without obligation
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Exclusive agent listing
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One authorized agent;Listing broker receives commission if any broker is procuring cause;Seller retains independent right to sell without obligation
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Exclusive right to sell listing
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One authorized agent;
Listing broker receives commission if any broker is procuring cause |
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Protection agreement
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Agreement for a specific FSBO property guaranteeing commission to agent if particular buyer purchases; specific property, particular buyer
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Override / Extender Clause
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Provision which states that commission is due agent if property is sold, rented, leased, or optioned to someone the owner originally met or made contact with through the broker; specified number of days, list of potential buyers who looked at the property during the listing period must be provided to owner
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Net listing
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Seller wants X for the property and the agent gets everything above that number
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Residential property disclosure act
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Requires that most sellers of most residential properties containing one to four units give the buyer a Residential Property and Owners' Association Disclosure Statement
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Exemptions to the NC RPDA are:
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New non-inhabited construction, foreclosure, rent to own, divorce
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The right to cancel or rescind any resulting real estate contract will all monies returned including due diligence fees; must exercise option within three calendar days after receipt of disclosure OR three calendar days from the date contract was made (whichever comes first)
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If property owner does not give a Disclosure Statement prior to or at the time the purchaser makes an offer to purchase, the contract is voidable and what provisions does this failure allow the buyer?
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Three years
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Retention period of time that a broker must keep tear out panel of "WREA" brochure
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Listing Agreement
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An employment contract whereby the broker/firm is hired to represent the seller-principal.
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>Business relationship - 18 months after purchase, delivery or payment>Consumer - 3 months after inquiry or application>Political, charities, surveys
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Exemptions to Do Not Call Law for numbers listed in registry
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> Actively licensed
-AND- > Be employed by principal under a valid written agency agreement -OR- be the procuring cause of the sale and must produce a ready willing and able buyer |
How a broker is entitled to collect a commission
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Procuring cause
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To have taken action to start (or cause) an unbroken chain of events that resulted in the sale of real estate.
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Antitrust Laws; severe penalties
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> Price Fixing> Group Boycotting> Allocated markets or customers
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Unrepresented Seller Disclosure and Fee Agreement
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Addresses required agency disclosure to a property owner selling their own property (FSBO) and compensation by that property owner to a buyer's agent.
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Comparative Market Analysis (or BPO...broker price opinion)
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Compares prices of recently sold and/or listed properties that are similar in location, style, and amenities to the subject property.
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Seller ONLY; responsibility of broker to advise and assist only
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Who determines the listing price for a property?
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Seller ONLY; but broker can offer insight and advice to seller (such as what it would look like to have all "no rep" boxes checked)
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Who is responsible for filling in the property disclosure statement?
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Buyer must enter express agreement for buyer agency (become buyer-client) or initial the "disclosure of seller subagency" portion of WREA brochure
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The only way a broker can show a property whose listing firm offers seller subagency to a buyer
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Buyer must enter express agreement for buyer agency; the buyer-consumer must enter into a buyer agency agreement with the broker, at least for that property
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The only way a broker can show a listed property whose firm does NOT offer sellers subagency
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Non-exclusive;Open ended with no definite termination date;Must be reduced to writing no later than the time of an offer
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Provisions of oral buyer agency
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(switching teams) Must ask permission from seller client, and disclose to him, any confidential information learned about him (because this information must now be disclosed to buyer as client)
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What must be done in order to switch from representation as a seller's sub-agent to buyer's agent...and what is this called?
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Dual agency
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This involves serving as the agent for two or more parties with adverse interest in the same transaction; no harm and no help to either party
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Offer to Purchase Contract; Real estate sales contract
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Sets forth all details of the agreement between a buyer and a seller for the purchase and sale of a parcel of real estate
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Contingencies
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Conditions set forth in an offer to purchase real estate
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An offer made, an acceptance of that offer, and communication of the acceptance to the other party
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What is required to form a valid real estate sales contract? 3 things
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Offeror
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Anyone who makes an offer to purchase property
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Offeree
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Anyone who receives an offer
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Acceptance
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This occurs when the offeree signs the offer without making any changes to it
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Counteroffer
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When the offeree receives the offer and makes any changes to that offer
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It has been rejected and no longer exists
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When an offeror receives the offer and makes changes to that offer (counteroffer), what is the status of the original offer?
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Mailbox rule, does NOT apply to FedEx or UPS
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If an acceptance is placed into the mail service to the other party or that party's agent, it is considered as having been delivered when mailed
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