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226 Cards in this Set

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Maryland Real Estate Commission
9 members
5 licensees
4 consumers-all appointed by the Governor with advice of MD Sectretary of Labor; Chair elected from Members annually; Executive Director appointed by the MD Secretary of Labor
Brokerage Services
For consideration, for another, selling, buying, exchanging, or leasing or collecting rent.
locating residential real estate; engaging in the business of selling land or lots; act as a consultant above
Brokerage Act Exemptions
Not Governed by Act:
Court Order
Public Officer
Single transaction under power of sale
Licensed auctioneer; owner; receiver, trustee, etc.
Governed but no License Needed
financial institituion, lawyer, not regularly engaged, home building, business broker, subdividing less than 6 lots
Self Employed (IRS Definition)
Licensed real estate agent,
receive substantially all of remuneration based upon production, not hours,and
written contract stating not an employee.
License Fees
Set by MD General Assembly
Guaranty Fund
Must have $250,000 in it.
$20 charged to all new licensees.
Claims to public for up to $25,000 for written under oath, must allege fraud misrepresentation or other violation; not for a deal gone bad; claim made in 3 years; Licensee must repay fund.
Complaint Process
In writing, under oath
may be referred for investigation, if not dismissed. If no Commission Member objects, dismissal is final in 30 days; MREC may use Hearing Panel. Hearing Panel decision is final; may revoke license.
License Certificate and Pocket Cards
Has name, broker affiliation, expiration date, registration number. Pocket card with licensee at all times; Certificate with Broker; 15 clock hours of continuing education; initial term of license is 2 years with 2 year renewals.
Maryland Real Estate Commission Powers
Investigate complaints; conduct hearings; issue subpoenas; take depositions; seek injunctions. $5,000 penalty for unlicensed transaction. Issues, renews and revokes licenses; fines; educational courses and administers the Guaranty Fund.
Inter-Company Agent (ICA) or Dual Agency
Firm must have the written consent of all parties.
Broker appoints two affiliates to represent buyer and seller; broker backs away; each named ICA gives client full representation.
Single Agency Company
A single agency company offering to represent either buyers or sellers, but not both in any given transaction.
Exclusive Seller Agency
A company which offers to represent only sellers in all transactions.
Exclusive Buyer Agency
A company offering to represent only buyers in all transactions.
Seller's Agent
Licensees who are affiliated with or acting as the listing broker for real estate. They represent the seller and assist propective buyers in the acquisition of real estate.
Cooperating Agent
A sub-type of seller's agent, not affiliated with the listing broker. They represent the seller through or under the listing broker.
Buyer's Agent
Represent buyers in the acquistion of real estate. Buyer's agents are not a subagent of the owner-seller.
Dual Agent
Firms that represent not only sellers, but also prospective buyers in the purchase of the same property. All parties must sign the consent to Dual Agency form.
Presumed Buyer's Agency Relationship
The MD Brokers Act makes a licensee that assists a prospective buyer and is not associated with the listing agent presumed by law to act as the agent of the buyer. Either the licensee or the buyer may decline the relationship. A presumed buyer may not make an offer or negotiate on behalf of the buyer. Buyer does not have an obligation to pay anything to the presumed agent.
Presumed Relationship Ended
1. Licensee or the buyer rejects the presumed relationship.
2. The buyer begins to negotiate or causes an offer to be made for the purchase of a specific propery.
3. The buyer wishes to be shown property listed with the presumed agent's broker.
Agency Disclosure
At first contact (preferred) or at the first face-to-face meeting with prospects (required), the licensee should present the MREC form Understanding Who Real Estate Agents Represent. Prospects signature is not required. Presumed clients are free to walk away and purchase through another agency.
Presumed Clients
Have all of the rights to expect client level service, but all of the freedom of customers-prospects.
MREC Notification of Broker
Name of Broker;
a statement that he has been designated broker for the firm; address of the firm's principal place of business and each proposed branch; trade name, a list of all licensed associates.
Form of Brokerage Organization
Corporations,Partnerships or LLC. Note that an individual that provides real estate services through a corporation, partnerhsip or LLC remains liable for the acts, omissions of its agents. Only an individual is licensed.
Limitation on Interests Held
No more tha 50% of the ownership control of any business organization can be held by affiliates.
Office Signs
Signs at each branch must be visible to the public and include the word Realty, Real Estate or if authorized, Realtor.
Change in Office Location
Must notify MREC within 10 days
Advertising
Licensees must show in all advertising the fact that they are licensees, even when selling their own property. Licensees affiliated with a broker must identify the broker under whom they are licensed. A trade name maybe used if registered with the MREC.
Advertising Ground Rent
If property is subject to ground rent, and the price of the leasehold property is stated on an outdoor sign, the ground rent and the capitalization rate must be shown.
Trust Money
Money of others such as earnest money. The owner of the money is the purchaser and the beneficial owner is the seller. Promptly deposited in authorized financial institution in a non-interest bearing account. Promptly is 7 business days by law in MD. Language in the contract may permit deposit to be delayed until seller executes the contract. Authorized institution must be located in the state and deposits insured by FDIC or state equivalent.
Maintenance and Distribution of Trust Money
Stay in account until 1) the transaction is closed, 2) the real estate broker receives prosper written instruction from the owner and the beneficial owner, directing distribution; 3) court order; 4) purchaser or seller fails to complete transaction and notice of intent to distribute has been sent if no protest in 30 days. Notices must be hand-delivered or sent certified mail-RRR; must account and keep secure records in office.
Listing Agreements
Residential must be in writing and signed by the parties; duties of agent; compensation and terms that will make payment due, and MUST have a definite date for termination without further notice from either party. Must set forth if agent is authorized to receive money from persons other than client.
Whose Broker
Payment does not determine whose broker someone is. If the seller pays the buyer's brokerage fee, the buyer's broker is still the buyers broker. A promise of a fee is not necessary to create a brokerage relationship.
Buyer's Broker
Must be disclosed to seller's broker.
Seller's Broker
Must disclose no later than first face-to-face meeting with buyer. Could use AgencyRelationship Information Form.
Contents of Residential Brokerage Agreement
Must be in writing; whether agent is authorized to receive compensation from persons other than the client; may not be a "net" agreement; copy given to principal before any services are performed; Must give sellers, Residential Property Disclosure and Dislcaimer; whether open to dual agency.
Disclosure of Residential Sellers
There is a legal requirement that sellers reveal to any purchaser all material defects in a listed property. Could use Property Condition and Disclosure form. Seller should complete at the time of listing property. All houses built before 1979, should provide lead paint disclosure form. The Brokers Act requires licensees disclose material defects they know or could reasonable know to buyers. "As is' is not an adequate disclosure.
Disclosure of Presumed Buyer's Agent
Must disclose that status, at least orally to any seller or seller's agent contacted. Also Presumed Buyers Agent must tell prospective buyer that it is entitled to Property Disclosure and Disclaimer form.
MREC Code of Ethics
Requires licensees to make reasonable efforts to discover material facts about properties listed.
Stigmatized Property
Previous owner being HIV, and the occurance of a homocide or death are not a material defects.
Rescinding Residential Contracts for No Property Disclosure Form
If buyer get Residential Property Disclosure and Disclaimer form before they enter into the contract, buyer may not rescind; If not before contract, a buyer may rescind for 5 days after receipt or until they apply for a loan, or take occupancy. Lenders must advise buyer of the loss of right to rescind. If lender does not advise, may rescind up to occupancy. If contract goes forward, purchaser may not rescind contract based upon any conditions disclosed in the form.
Brokerage Agreement Termination
Must have definite termination date. Broker has no duty after termination unless agreement says otherwise, except accounting and confidentiality. In Maryland, a trustee sale, foreclosure, or condemnation terminates a brokerage agreement.
Commission
Rate negotiated and must be stated in the agreement; Commission is earned when seller accepts and signs an enforceable agreement.
Cooperating Broker
If broker has an exclusive listing, he should cooperate with other firms if in his client's best interest, and share the commission. Cooperating brokers are subagents of the seller's agent.
Multiple Listing Service
Common source information system. Licensees who participate in such services are not thereby considered to be the agent or the subagent of any client of another broker by reason of the participation.
Freeholds
Fee simple absolute; fee simple determinable; fee simple conditional and life estates, future estates such as remainder and reversion are all interests in real estate.
Leaseholds
Estate for years, from period to period, at will, at sufferance are all recognized.
Easement by Prescription and Adverse Possession
20 years of open hostile continuous and notorious occupancy even under a claim of right gives rise to ownership.
Riparian Rights
If your property borders a navigable waterway, you have a common law right to make a landing, wharf or pier for your use or public use (subject to federal regualtions). Title to land beyond the average high-water mark of navigable waters belongs to the public. High water mark is the highest elevation of the water in a normal period of ebb and flow.
Agricultural Land Preservation Act
MD Agr. Preservation Foundation purchases easements in land restricting its use to agricultural uses.
Co-ownership
Tenancy in common; joint tenancy, tenancy by the entireties, partnership, and trust. Also includes other forms such as condominiums, time shares and cooperatives.
Tenancy in common
Unless otherwise stated in the deed, a tenancy in common is created. To create a joint tenancy, deed must say "as joint tenant and not as tenants in common." May be partitioned at any time.
Joint tenancy
Tenants in common with the right of survivorship. Requires the four unities: Time, Title, Interest and Possession. If one tenant conveys interest, conveyed interest is tenant in common with other joint tenants.
Tenants by the Entirety
Joint tenancy between married couple. A deed to husband and wife is presumed to be T/E. Common law marriage can not be established in Maryland, but will be recognized if established in another state. May not petition for partition. Terminated by the death of either spouse. Surviving spouse has the property in severalty (on his or her own); upon divorce considered tenants in common by operation of law; but court may prevent partition for a period not to exceed three years.
Condominium
A regime on property with owned units and a common area and governed by a council of unit owners with each owning their own unit and a percentage interest in the common elements.
Common elements
Everything but the units. Limited common elements may be just for the use of some unit owners. General common elements are available to all unit owners.
Condo Conversion
Record Declaration, Bylaws and Condo Plat. Declaration is indexed with the County land records. POS is required to be registered with the Secretary of State before sale. The Consumer Division of the Office of the Attorney General also enforces the Condominium Act.
Prior to Condo Sale
Must register regime with Secretary of State
Condominium Declaration Amendment
Requires 80% of the unit owners.
Initial Sale of Residential Condominium
Must register Public Offering Statement with Secretary of State.
Condo Buyer's Right to Rescind
Within 15 days of receipt of the Public Offering Statement for initial sales of condos; or 5 days following the receipt of any amendments to the POS; and entitled to prompt return of the deposit.
Condominium Conversion
Notice to tenant as required by law, after registration with the Secretary of State. Tenant may not be required to vacate for 180 days following notice, except for breach of the lease; but tenant may terminate lease on 30 days notice.
Delaration of Condominium
Recorded declaration must contain the name followed by "a condominium" with a statement of intent to establish a condominium; a description and number for each unit with location; a description of the common elements; percentage interest in common elelments for each unit; and the number of votes for each unit at the condo owners meeting.
Bylaws of Condominium
Must contain the form of administration; whether duties of council may be delegated; mailing address, meeting; and manner of assessing and collecting condominium fee for common element maintenance. Council must be established within 60 days after initial sale of 50% of the units.
Amendment of Bylaws of Condominium
Requires 2/3 vote of unit owners.
Amendment of the Rules of the Condominium
Requires a 50% vote.
Condominium Termination
Requires an 80% vote of the unit owners and unless otherwise provided, the unit owners become tenants in commmon with each owning the same percentage as they had in the condominium.
Common Expenses for Condominiums
Each unit owner is resposible to pay his or her share of common expenses. They are assessed and become a lien on the unit.
Condominium Taxation
Each unit is taxed as a distinct entity.
Condominium Disputes
Under the Consumer Protection Act, the Division of Consumer Protection of the Office of the Attorney General is authorized to provide voluntary mediation of disputes between unit owners and councils of unit owners.
Resale of Unit
Not less than 15 days prior to closing, the unit owner must provide the purchaser with a copy of the declaration, the bylaws, the rules, and a certificate containing monthly expenses, proposed capital improvements, financial statements of the condominium, and insurance coverage. Contact for resale is voidable for 7 days following receipt of the certificate.
Timeshare
Two types: Right to Use or timeshare (license) and purchase of a fractional interest (timeshare estate).
RIght to Use Timeshare
License or right to use timeshare a certain amount of time a year.
Timeshare Estate
Buy a fractional interest for certain designated periods.
Timeshare Sales Regulation
State Securities Commission requires disclosure of the risks of timeshare.
Time-Sharing Act
Provides for creation, sale, lease, management, termination, registration of certain documents, registration of developers, bonding, and advertising.
Timeshare Public Offering Statement
Developers must register timeshares with the Secretary of State prior to sale offered for their own account, including a licensee selling his or her condominium. A timeshare owner not associated with a developer is exempt from filing and dissemination a POS.
Limitation on Creating a Timeshare
At least 34% of condominium unit owners can sign and register a prohibition on timeshares in the condominium project; Residential Community with covenants can limited timeshares with 50% vote.
Timeshare Conversion
If building is more than 5 years old, POS must contain an engineer statemenet on condition, and tenants must get 120 days notice of intention to convert.
Timeshare Sales Cancellation
First time purchasers of timeshares may cancel until the 10th day after, the first to occur of 1) contract date; 2) receipt of all documents required by POS; 3) date unit meets all building code and is ready for occupancy or developer obtains a performance bond and files it with the court--whichever is later.
Timeshare Resale Disclosures
Within 7 days after a resale certificate is received.
Cancellation Periods
Sale of Condo by Developer -15 days after receipt of certificate; condo by Developer 5 days after receipt of amendment; Condo Resale -7 days after receipt of Resale Certificate (given 15 days prior to closing); timeshare by developer- 10 days after receipt of contract, disclosure document or occupancy permit whichever is last; timeshare resale- 7 days after receipt of Certificate. Condo is 15-5-7 and Timeshare is 10-7
Timeshare deposits
Held in escrow for 10 days; may be released to developer if developer maintains a bond. No claim against Real Estate Guaranty Fund if covered by a bond.
Tmeshare Warranty
If sold by a developer, there is an implied warranty of 3 years on common elements and 1 year on structural components and heating and cooling system.
Timeshare Sales Contracts
Must disclose cancellation right, and if there is an exchange program must file required information with the MREC.
Timeshare Registration
Developers, with certain exceptions, are required to register with the MDREC, and receives a certificate of registration and no sales before receipt of certificate.
MREC Timeshare Powers
Issue regulations; investigate violations; bring lawsuits; order violations corrected; revoke certificate of developers;May not make false statements;may not induce the purchaser to leave the state for the purpose of executing a contract in order to circumvent Maryland law.
Maryland Cooperative Housing Act
Coop owners get a proprietary lease, and agreement with the association that gives the co-op member an exclusive possessary interest in a unit and a possessory interest in common elements with other members of the co-op.
Maryland Homeowners Association Act
Must disclose that property is subject to HOA, and gives a right of recission if information is not provided. Time periods for recision varies.
Legal Descriptions
Two Methods-Metes and bounds and recorded plats and must identify the land with reasonable certainty. Metes and bounds must return to the beginning.
The Torrens System
Used in 10 of the 50 States. A written application to register the title is made to the County registrar, a court hearing is held, and if the court is convinced, an order for registration is issued.
Transfers under the Torrens system
With deed, seller must gives the transferee the certificate of registration. The deed does not pass title, only the registration of the transfer; No claims for adverse possession.
Monuments
Fixed objects used to measure boundaries. may be natural or artificial.
Benchmark
FIxed objects established by US Geological survey
Rectangular Survey System
Prinicpal Meridians are the North South lines; Base Lines run east to west. Each prinicpal meridian has a name and a number. Each principal and base line is used to survey a specific area of land.
Ranges
6 mile strips that run parallel to the meridian.
Township Lines
Six mile strips running parallel to the east west base line.
Sections
36 sections in each township number consecutively across left to right and then right to left. Each section is one square mile or 640 acres. An acre is 43,560 square feet. A mile is 5,280 feet.
Assessment
Tax year beginning July 1, 2001, trienial assessment at 100%. There is a 3 year cycle with 1/3 of all properties assessed annually.
Phase in
Only 1/3 of increase in assessment is phased in per year.
Assessment Appeal
May appeal in 45 days
Taxes Due
Twice Yearly. Due July 1, and payable without interest by September 30; and January 1 payable with out interest by January 31st.
Tax Escrows
If lenders are paying the taxes, they are required to pay within 45 days after the 1st due date for taxes or after funds are collected.
Homestead Tax Credit
Automatically provides a credit if the assessment increases over the previous year by a certain percentage set by the legislature. AKA Circuit Breaker.
Tax Credit for Unoccupied Property
May be eligible for a tax credit equal to the tax on the improvements if unoccupied.
Disabled Vet Tax Credit
100% for service disabled veteran from a 100% disability.
Blind Tax Credit
$15,000 if legally blind.
Transfer and Recordation Tax
First time buyers are exempt from State Transfer tax. Buyer's half is reduced and the other half must be paid by the seller.
Tax Delinquency Redemption
6 months by statute; If no redemption, tax sale purchaser may apply to the court for a deed.
Real Estate Taxes Lien
Real Estate taxes are a lien
Maryland Mechanics Lien
Have 6 months from the completion of the work to file.
Contracts for Sale of Improved Residential Property
Must disclose unpaid water and sewer bill or deferred amount, or contract may be voided. Licensee must also indicate if there is ground rent or a leasehold. Notice of what it means not to pay the ground rent must also be in the contract, and finally it must contain a provision that informs that unless provided otherwise, that recordation and transfer taxes will be split equally.
First Time Home Buyers Cost Reduction Act
Reduce State transfer tax from 0.5% to 0.25% with seller paying the 0.25%
Home Owners Association
If property is subject to HOA, that must be disclosed in the contract.
Contract Reference to Closing Assistance
MD Brokers Act requires that the contract provide that buyers of single family dwellings can not be directed to use specific title insurance, escrow, or settlement companies or title attorneys and may choose their own.
Sellers Must Notify re Agricultural Transfer Tax
Seller must include in the contract a notification that land is subject to an agricultural transfer tax, or seller will be liable for the tax.
Lease Option Agreement
In MD, any lease that gives the tenant the option to purchase the land must contain the warning "THIS IS NOT A CONTRACT TO BUY."
Option Agreement
Is a unilateral contract that becomes binding only when the optionee exercises the option.
New Home Warranties
Developer must disclose if they participate in a new warranty security plan or that otherwise homeowners will be afforded only limited warranties.
New Home Disclosures
Contracts must disclose that builders are not licensed or required to be licensed by State. With warning, purchases get 5 working days to rescind. Without warning, voidable at any time.
Misrepresentation on New Home Warranty
Punishable by a fine of up to $5,000 or two years in jail or both.
Deposits Before Construction of New Single Family and Condos
Must be held in escrow until units are complete or a security bond posted for the return of the deposits.
Installment Contracts for Residential Property
Md Law provides many protections beyond common law, including that contract must be recorded within 15 days of execution.
Exemptions to Requirement for Residential Property Disclosure and Disclaimer Statement
Initial Sale of single family residences; if property is exempt under transfer tax; foreclosure and sheriff sales; fidiciary transfer, conversion to non-residential; and umimproved property.
Powers of Attorney
Attorney-in-fact is a person granted the power to sell real estate on behalf of the owner. Must be properly signed and acknowledged. The Power of Attorney may also be recorded before or even sometimes after the deed.
Duties and Obligations of Licensees
Prompt presentation of all written offers; reduction af all agreements to written enforceable form; obtaining proper signatures; giving and retaining copies.
Equitable Title
At contract signing, equitable title passes to buyer. Maryland has not set aside common law principle that risk of accidental damage to property passes to buyer, unless damage is caused by the seller. Most contracts therefore require that sellers maintain insurance between contract and closing.
Passing Title
Descent, devise, adverse possession, gift, escheat, eminent domain, erosion, foreclosure and sheriff's sale.
Transfer of Title by Descent
Maryland eliminated dower and curtesy. There is both testate and intestate. Md law define sucession when owner dies intestate. Upon death, title to all real property passes immediately to the personal representative.
Devisees and Legatees
Devisees are people who receive real property under a will; Legatees are people who receive personal property. Both are call heirs or beneficiaries under the will.
Transfer by Operation of Law (Adverse Possession)
Actual possession, and either alone or in combination with other adverse possessors for 20 years. Must be open, hostile, notorious, and in MD under a claim or color of right. MD does not recognize squatters.
Transfer by Will (Descent))
Testor must be over 18, and of sound mind, in writing and witness as required by law.
Pretermitted Children
Children born between will and death. Excluded under common law, MD has included them by statute and they share with all offsprings.
Nuncupative (Oral) Wills
Not recognized in Maryland. Handwritten or holographic wills are recognized.
Transfer by Deed (Devise)
Deed must be prepared by an attorney or a party; in writing; executed by a competent grantor; state consideration, and legally describe the property
Deed Sign By Grantor
Is effective if delivered and accepted by grantee. Title passes on acceptance of the deed. Transfer of property by corporations and minors require both grantor and grantee signatures in Maryland.
Recordation of Deeds and Mortgages
Transfer of fee interest or any estate beyond 7 years, including leases, must be recorded to be effective. Recordation constitutes constructive notice to the world.
Place of Recordation
Deeds are recorded in the county in which the land is located.
Deed Signatures
Required signature or signatures must be acknowledgement before notary for recordation.
Date of Deed
Date it is signed, sealed and delivered even if acknowledgement is later.
Recordation Tax
Mortgages or Deeds of Trust are exempt if secure home loans for the initial purchase or the renovation of one's residence.
Taxes Upon Transfer
Maryland State Documentary Stamp Tax $.55 Per $500; State Transfer Tax is .05% of full consideration.
Transfer Between Relatives
Only Exempt for mortgage or deed of trust assumed by transferee for recordation and transfer taxes.
Agricultural Transfer Tax
Payable at the time of transfer when land is subject to the agricultural ad valorem tax.
Plat Recordation
Maryland requires all subdivision plats to be recorded. Subsequent references to liber and foli are to the recorded subdivision plat.
Actual Consideration Stated
In Maryland (but not necessarily other states) the deed must state the actual consideration.
One System of Recordation
Maryland does not use the Torrens System; Two indexes. Documents are organized under the names of the grantors; and then under the names of grantees.
Recordation Fees
These vary among the counties, but $3 per page, and $1 per grantor-grantee index name is typical.
Title Evidence
Generally an attorney will abstract title or be an agent for a title insurance company. MD Law requires that the contract advise purchasers that they may select their own title company, settlement company or title attorney.
Prerequisite to Recording
Deed must state that the deed is prepared by a Maryland Attorney or under his or her supervision or it will not be recorded.
Trust Terms
A Deed of Trust or trust deed is different from a deed in trust or a trustee's deed.
Mortgages and Deeds of Trust
Maryland is a title theory state. A properly recorded deed of trust passes legal title to the lender. The owner has equitable title. NB Maryland foreclosure procedures are more similar to lien theory states, however lenders are permitted to collect rents on property being foreclosed.
Power of Sale Clause
Maryland uses power of sale that enables Trustee to sell property upon default without judicial intervention. Only a natural person may be a trustee under a deed of trust.
Default, Foreclosure and Deficiency
Mortgagor is the borrower; mortgagee is the lender; When funds from Trustee sale under a power of sale are insufficient to pay debt, may not seek a deficiency judgment from a court. May seek a court-ordered sale and deficiency judgment. FHA loans do not allow deficiency judgments and VA is reluctant to allow.
Usury Law
None in Maryland in first mortgages. No prepayment penalty is allowed on residential property. On seconds and land installment sales is 24%.
Tax and Insurance Escrows
Maryland S & Ls that require escrow must pay interest at the passbook rate, but not less than 3%.
Release of Mortgage Lien
When a loan is paid in full, a release of lien or satisfaction of mortgage must be filed. If 12 years elapse since the last payment date, loan is presumed to be paid.
No Statutory Right of Redemption in Maryland
Borrower must redeem the property or pay the debt prior to the foreclosure sale, or all interest is lost. Mortgagee may purchase property at sale. Mortgagee may terminate any leases that commenced after the date of the mortgage.
Land Installment Sale Contracts
Must be recorded within 15 days.
Junior Financing
Maximum interest rate is 24%. Maximum origination fee is $250 or 10% whichever is less, and only actual costs may be charged to the borrower. All fees allowed under federal programs are ok if total APR is under 24%. Accelerated payments are only allowed in the event of default; no charges for a release; no assignment of wages.
Ballon Payments
A ballon clause in a secondary mortgage, requires the lender to provide an automatic 6 month extension.
Residential Property Loan Notices
Tell borrowers they can select their own attorney or title insurance company within 3 days of application for loan. Also must be told that application for loan terminates any rights under the Property Disclosure/Disclaimer Notice.
Maryland Ground Rents
May be redeemed and land purchased, sometimes after a specific period and sometimes at any time.
Ground Rent Defined
Money paid to a lessor for the use of the land. Anyone can create. The worth of the reversion is based upon the capitalized value of the ground rent.
Redemption of certain Residential Lots
Set by MD statute. After 1982 12% redemption rate. Defines worth of reversionary interest. If leases are longer than 15 years, may redeem after 5 years.
Redemption of Ground
Redemption is the ground rent divided by the capitalization rate.
Ground Rent Disclosure
If property is subject to Ground Rent must disclose, and that it may result in reversion and termination of lease if defaulted.
Advertising Property Subject To Ground Rent
If sign includes price, must also show ground rent and capitalization rate in same size type.
Residential Lease Security Deposit
May not be more than 2 months or $50 whichever is more. Must be in an account for this sole purpose and be a federally insured bank or MD S & Ls. Must give tenant a written report within 45 days of termination including actual damages.
Residential Lease Property Condition Report
Lessor must give tenant a notice that tenant may demand within 15 days before the lease starts a written property report.
Holdover Tenant
If lessor consents to tenant remaining after the expiration of lease, tenant becomes a periodic tenant for the same term as the lease usually month-to-month.
Landlord's Summary Dispossession
Landlords may get court order to evict tenants after notice of termination of tenancy.
Failure to Demand Rent
If no demand in 20 years, tenant may become a fee simple owner.
Prohibited Provisions of A Residential Lease
Confession of Judgment; waiver of rights against landlord or jury trial; penalty for late rent of more than 5%;shorter notices to quit; landlord self-help provisions; exculpation of landlord provisions; more than month-to-month automatic renewal.
Hazard Conditions
Tenant after notice can pay into escrow, rather than lessor if there is a hazardous condition, not remedied.
No Retaliatory Evictions
Lessor may not raise rent, evict or decrease services because of filing complaints or lawsuit or joining a tenant's organization.
Value
Power of a good or service to command other goods or services.
Land Value
Influenced by four factors: Demand (need); Utility (capacity to satisfy needs); scarcity (supply); and transferability (ease of change in ownership rights)
Market Value
The most probable price a piece of real estate will command in the market. Different from market price. Highest and best use, informed market, arm-length transaction, prudent or knowledgeable parties, and no undue influence by external factors.
Physical Externalities
Physical forces that inflluence land values, climate, topography, proximity to water.
Political Externalities
Government regulations that influence value; zoning; credit policy; building codes, schools and parks.
Economic Externalities
Economic factors that influence value such as employment, wage rates and dependence on one major industry.
Social Externatities
Population growth and decline, family size, lifestyles, divorce, etc.
Highest and Best Use
The most profitable use to which property can be adapted that is likely to be in demand in the near future.
Substitution
Appraisal principle that the maximum value is set by the cost of purchasing equally desireable property.
Supply and Demand
Appraisal principal that holds that the value of a property will increase if supply decreases or stays constant while demand increases.
Balance
The point at which further investment in improvements to land is no longer going to realize offsetting increases in the value of the property as a whole. The point at which there is not sufficient return to justify investment.
Conformity
Appraisal principle that holds that the maximum value is realized when the use of a property is consistent with the neighborhood.
Regression and Progression
Appraisal principles that hold that land may be increased or decreased in value by surrounding neighborhoods.
Anticipation
Appraisal principle that holds that some future benefit or detriment can effect value, like Metrorail is coming to an area.
Plottage
Appraisal principle that an assemblage may be worth more than the sum of its parts.
Contribution
Appraisal principle that holds that value of any component is what its value contributes to the whole value of the property.
Competition
Appraisal value that excess profits attract competitors who take away excess profits.
Sales Approach
Best for residential. Estimating value based upon adjustments to comparable sales.
Cost Approach
Best for schools courthouses, churches, etc. Substitution. Use sales approach for land. Then current cost of construction less depreciation, then add land value,
Reproduction Cost
Dollars required to duplicate the subject property at current costs.
Replacement Cost
Dollars to construct a similar property that serves the same function but is not necessarily a duplicate.
Depreciation
All conditions that adversely affect value including deterioration and obsolence.
Physical Deterioration
Detrimental affect on value from the wear and tear of every day usage.
Functional Obsolescence
Detriment in value from something becoming outmoded or poorly designed given the current state of construction.
External Obsolesence
Detriment in value from factors outside of the property like a polluting factory locating nearby.
Income Approach
Value is fixed by the present worth of the future right to income. Best for income producing properties. Start with potential gross income; deduct loss for vacany and collection-effective gross income; deduct operating expense including taxes and management expenses (excludes motgage principal and interst); determine the capitalization rate; capitalize the income.
Capitalization Rate
Rate of return that a typical investor would demand for investment such as this. The lower the cap rate, the higher the price.
Gross Rent Multiplier
Single family house sometimes use this. It is calculation on a per MONTH basis. Sales price =
GMR times the MONTHLY rental income.
Reconciliation
The appraisal process of looking at all three methods to check each other on value. If done correctly, all three methods should yield the same result.
Negotiable Insturment
A note that is freeely transferable.
Holder in Due Course
A person or entity that buy a negotiable instrument
Amortized Loan
Regular payments are applied first to interest and then the remainder to the balance so that the loan ispaid off over time.
Straight Loan
Periodic payment of interest only with the balance paid at the end.
Installment Loan
Each installment is for interest and a fixed portion of the principal. Payments vary with each installment as principal is paid off.
Fully Amortized Loan
Most common. A fixed amount is paid each month, first to interest and the remainder to principal for a term at the end of which the balance is paid off.
Partially Amortized Loan
Fixed payments for a term where only a portion of the principal is paid off and the balance is paid at the end in a ballon payment.
Adjustable Rate Mortgage or ARM
Loan where interest rate fluctuates with an index such as the rate on US Treasury securities. May have interest caps and rate caps.
Prepayment
Paying a loan before it is due. May sometimes be a penalty (not in MD on residences).
Acceleration Clause
Provision in note and deed of trust that makes the entire indebtness due and payable upon a default.
Alienation Clause or Due-on-Sale
Provision in a deed of trust that makes the entire indebtness due on sale or transfer of the property. Generally prevents assumptions.
Subordination
A lender with a prior lien allowing a subsequent lender to have a greater priority in the event of default.
Redemption Period
Most states give property owners a statutory period before the sale, and in certain states after (not MD) to pay the indebtness and get the property back.
Conventional Loan
Loan to value ratio of about 80%. More with private mortgage insurance. PMI insures only the top 20% of loan.
FHA Insured
FHA only insures loans; does not make them. Most popular program is for residences of 1-4 families. Higher loan to value ratio (97.75%) but monthly fee for FHA insurance. Needs FHA-approved appraiser and many other FHA rules. 1 point in origination fees. 6% limit on seller contributions to closing costs. No pre-payment penalties.
VA Insured
Eligible veterans must apply for certificate of eligibility for maximum guaranty that veteran is entitled to; certificate of reasonable value is market value based on VA-approved appraiser. VA purchaser pays a loan origination fee to lender and funding fee to VA. Reasonable discount points may be charged and either purchaser or seller may pay them. VA loans may be assumed by non-veterans, but veteran remains liable.
Blanket Loan
One loan covers two or more parcels of land
Package Loan
Loan covers real estate and personalty, including all appliances installed on the premises. Commonly used for condominiums.
Open-ended Loan
Secures both note and future advances.
Wrap-Around Note
New lender assumes the existing note and gives the borrower a larger loan. This is used if for example the old loan has a prepayment penalty.
Shared-Appreciation Mortgage
Mortgagor originates a loan at a favorable rate in return for a share of the gain in the value of the property.
Growing-Equity Mortgage
Fixed interest rate with increasing principal payments according to an index or schedule.