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276 Cards in this Set

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What is the Michigan Occupational Code?
The law that sets all the rights and obligations of licensees.
How many members sit on the Real Estate Board?
Nine members

Four year terms not more that two consecutive

Six have real estate licenses
Three represent the public
How long is a license good for?
All licenses expire on October 31 of a three year term. 2006
Latent Defect
A defect that is hidden but known to the seller. Can not be revealed by ordinary inspection.
Silent Fraud
Not disclosing Latent Defect.
Material Facts
Have direct effect on value. Bad furnace.

Licensee required to disclose.
Non-Material Facts
Have no effect on value. Seller lost job.

No Duty to disclose.
Seller's Disclosure Statement
Sellers of residential properties(1-4 families) must complete.

Real Estate offices must make available even if not client.

If purchaser signs offer without disclosure may back out and get deposit back.
Agent's Duty
Disclose defects KNOWN to agent or should have been known.
State Position RE: Disclosure
Disclosure of Material Facts shall not be considered grounds for disciplinary action.
Patent Defect
Obvious Defect

Can be discovered as result of a reasonable inspection.
Innocent Misrepresentation
Innocent misstatement of facts

Furnace new so must be OK....bad installation
Listing Agreement
Must be signed by all parties holding title.

Listing owner must be given true copy
AD VALORUM
Taxes are paid according to VALUE
ASSESSED VALUATION
Value placed on property for tax purpose.

Not the APPRAISED VALUE
ASSESSMENT RATE
Ratio between Appraised value and Assessed value

50% in Michigan
What is 1 mill?
1 mill is 1/10 of a cent. .001

50 mills = .050 = 5% = $5.00/$100.00
TAX CALCULATION
TAX DUE
_________________________________

ASSESSED VALUE x TAX MILLAGE
Property appraised value is $80,000, tax rate is $6.00/$100.00. How much in tax is paid?
Assessed Value = $80,000 x 50% = $40,000
Tax = $40,000 x 6% = $2400.00
Tax due is $1200. Appraised value $60,000. What is tax rate?
$1200.00 / $30,000 = .04 = 4% = 40 mills
Special Assessments
Charges assessed for improvements by local government that improve property
Property appraised at $73,250 and tax rate is $2.80 per hundred of assessed value. What is tax due?
$73250 / 2 = $36,625

? $1025.50
_____________________________

$36,625 x 2.8%
DEED RESTRICTIONS
Restrictive Covenant

A provision in the deed aimed at controlling the present and future use of the land. Placed by seller (grantor) to restrict buyer's use.(grantee)
Which is used..

Deed Restriction or
Zoning Ordinance
The most restrictive
Three methods of LEGAL DESCRIPTIONS
Lot-Block-Subdivision Method
Government Rectangular Survey Method
Metes and Bounds
Lot-Block-Subdivision Method
Description identifies properties by reference to a subdivision plat filed by developer
GOVERNMENT RECTANGULAR SURVEY
Base lines - Latitude - East/West
Meridian Lines - Longitude - North/South

Range Lines - North/South every 6 miles
Township Lines - East/West every 6 miles

Township - 6 square miles 640 acres
One Acre
43,560 Square Feet
A parcel of land 242ft x 450ft sold for $50,000. What was the price per acre?
242 x 450 = 108,900
108,900/43,560 = 2.5 acres

$50,000/2.5 = $20,000/acre
How many acres in the N1/2 of SE1/4 of SE1/4 of SE1/4 of Section 7?
640 acres in one section

SE1/4 160 acres
SE1/4 40 acres
SE1/4 10 acres
N1/2 5 acres
METES AND BOUNDS
Always starts at POB Point Of Beginning

Surveyor uses a MONUMENT.

Discription of distances and angular measurements.
Setback Ordinance
Distance from lot edge where building can be erected
Gross Living Area
Area of a structure measured usuing external dimensions
What is not included in Gross Living Area(GLA)?
Area below grade
Garages and decks
Bathrooms and bedrooms below grade
Appurtenances
Rights, privileges and improvements conveyed when ownership of property is transfered, unless specified.
Name types of Appurtenances
Easements

Easement appurtenant

Easement in Gross
What is an Easement?
Right to use a part or all of property. Right to install and maintain sewers, phone lines, etc
Right of passage(ingress-egress)
Two major types of easements
Easement Appurtenant

Easement in Gross
What is Easement Appurtenant
Benefits neighboring property
Passes with and is appurtenant to the land
Two estates or tenements involved
Dominant
Servient
What are the names of the two estates involved with easment appurtenant?
Dominant Estate (property that benefits from easement)
Dominant Tenant (owner of dominant estate)

Servient Estate (property that is subject to easement and encumbered by it)
Servient Tenant (owner of servient estate)
What is a Party Driveway?
Two owners of adjoining lots share all or part of same driveway
What is a Party Wall?
Single wall located on a lot line that separates two parcels
What does Run With The Land mean?
Easement appurtenant remains as an encumbrance on land after sale, gift etc. even without mention of it
What is an Easement in Gross?
Conveys right to use the land of another
May or may not run with the land
Belongs to person or entity
Servient estate but no dominant
Two types
Personal Easement
Commercial Easement
What is a Personal Easement?
Given to a person
Does nor run with the land
May not be assigned
Terminates with sale of servient estate or death of holder
What is Commercial Easement?
Runs with the land
Can be assigned
Does not terminate with sale of servient estate

Granting rights to erect billboards
Utility easements for gas and electric
Who maintains the easement?
Negotiated at the time easement is obtained
General rule-Party that benefits maintains

Gas company maintains gas line
Neighbors sharing driveway will share
How are easements gotten?
A Grant
Easement by Reservation
Easement by Necessity
Government Condemnation
Easement by Prescription
Easement by Grant
Written document that specifically grants an easement to another person
Easement by Reservation
A person may transfer ownership in a property but withhold the right to use a portion of the property
Easement by Necessity
Court ordered easement for benefit of a landlocked parcel.
Easement by Government Condemnation
Easement is obtained by government for public use.
Government purpose only...not developer
Easement by Prescription
Obtained as a result of a trespass situation
Continues for the statutory period. 15 yrs
Trespass must be open, continuous and notorious
Claimant has burden of proof
How do you terminate an Easement?
Merger of Dominant and Servient Estates

Release by Dominant tenant

Necessity no longer exists when by necessity

Lack of use abandonment or prolonged non use
What are Encumbrances?
Liens, mortgages, taxes, leases, easements, judgements, deed restrictions, possibly encroachments that may burden the property are said to run with the land.
What is a Homeowner's Association?
In condominiums and subdivisions

Provides regulations for maintaining property values ex pets, speed, noise

LICENSEE'S ROLE -
Make purchaser aware of binding bylaws
Inform purchaser of association fee
Brokerage Fee
Broker is free to negotiate any amount of commission agreeable between broker and principal
Salesperson can only receive commision from his employing broker
Referral Fee is payable from broker to broker
Payment after termination should be done
What adds to ASSESSMENT OF PROPERTY VALUE
LOCATION
DESIRABILITY(DEMAND)- buyers that are willing, able and have financial means
SCARCITY(SUPPLY)-Are there other similar properties in same area that will compete
UTILITY-The type of use..does it satisfy the need of a certain buyer
TRANSFERABILITY- Ease of transfering land
What are ANTICIPATED CHANGES?
Changes known to the community that may have a positive or negative effect.
Examples: new landfill, toxic waste dump
new highway, change in zoning

Agent should make herself aware of anticipated changes as part of duty.
What are the types of DEPRECIATION?
Physical - Ordinary wear and tear
Functiional Obsolescence - Outdated design, not enough parking, one bathroom
Economic Obsolescence - crime, pollution, high unemployment, noise from airport
What are the two types of FUNCTIONAL OBSOLESCENCE?
Curable - can be corrected, house with no garage and enough land to build one
Incurable - Cannot be corrected - no space to build a garage
What are the three types of PROPERTY VALUATION?
Market Value(Fair Market Value) - What a willing buyer will most probably pay a willing seller under no duress
Arm's Length Transaction - transaction in a competitive market that leads to a fair sale with knowedgable buyer and seller
Market Price - Actual selling price of property
Property Valuation Approaches
Sales Comparison Approach (Market Data Approach)

Replacement Cost Approach

Income Approach

Income Approach - Gross Rent Multiplier
What is SALES COMPARISON APPROACH?
Known as Market Data Approach
Value is estimated by using recently solds
What is REPLACEMENT COST APPROACH?
Land is appraised without building
Cost of reconstructing building as a new unit is estimated
ACCRUED DEPRECIATION is determined and subtracted from the construction costto arrive at value
SQUARE FOOT METHOD
What is the INCOME APPROACH?
Used to estimate value on income property
VALUE=NET OPERATING INCOME/CAPITALIZATION RATE

Net operating income(NOI)
-Gross rent-Operating Expenses

Cash Flow=NOI-Debt Service

Capitalization Rate(CAP) Rate of return an investor would receive on investment
What is NOI if the gross rent for the for the year was $55,000 and the following expenses were considered: Taxes $4000.00, Insurance $3000.00, Utilities $500.00/mo.

What is cash flow if Debt Service is 1000/mo
Utilities 500 x 12= 6000/yr

55000-4000-3000-6000= 42000 NOI

42000-12000=30000 CASH FLOW
What is INCOME APPROACH (GRM)?
For small income property such as house or duplex.

VALUE= GRM x Monthly or Yearly rent
If property was sold for $250,000 and brought in gross rents of $10,000/yr. What would property be evaluated at with $15,000/yr gross rents?
GRM = 250,000/10,000 = 25

25 x 15000 = 375,000
What are the two types of PROPERTY?
Real land, improvements, trees, air above, subsurface rights, water rights, anything attached permanently

Personal (CHATTEL) movable good on real property

SEVERANCE = Act of detaching a fixture from real estate turning it once again into chattel
How do you determine if /chattel or a FIXTURE?
Method of attachment
Agreement between parties
Intention of the parties (shelving in grocery store even though attached are personal property

Plants Annual are personal Perennial are real estate
What are RIPARAIN RIGHTS?
Rights enjoyed by land owners on streams, rivers, inland lakes.

Owners have rights of use may not interrupt flow.
What are LITTORAL RIGHTS?
Rights of owners on large navigable rivers, lakes, oceans.

Owners own land up to high water mark
Erosion
Accretion-increase in land form deposits
Reliction-Land exposed when watrer permanently recedes
What are the two types of OWNERSHIP IN REAL ESTATE?
Severalty - Ownership by one individual or corporation

Concurrent Estate - Held by more that one person
What are the types of ownership called CONCURRENT ESTATE?
Tenants in common

Joint tenancy

Tenents by the entireties

Community property
What is TENANTS IN COMMON?
Form or real estate ownership

Owners may own differnt share amounts
Owners share undivided possession
No right of survivorship - gos to heirs
Tenants take ownership at same or different times
Each may sell
PARTITON SUIT - Asking court to split
What is a PARTITION SUIT?
In concurrent estate - Tenets in common

One or more co-tenets ask court to order splitting of interest when voluntary agreement cannot be reached
What is JOINT TENANCY?
In real estate ownership - Concurrent Estate

Right of survivorship
Unity of possession - Parties share undivided
Unity of interst share equal interest
Unity of time-all take title at same time
Unity of title-all take title on same deed
What are TENANTS BY THE ENTIRETIES?
In real estate ownership-concurrent estate

Property deeded to husband and wife
Each owns ENTIRE property
Rights of survivorship
Both must sign to sell
Each own 100% not 50% like in JTWROS
What is COMMUNITY PROPERTY?
In real estate ownership - concurrent estate

Not in Michigan
Both husband and wife equally own property acquired during marriage
Inherited property or property purchased with inherited funds exempt
Need both signatures to sell
In condo ownership what are COMMON ELEMENTS?
Portions of multi-unit structure owned by as tenents in common

EX: club house, swimming pool, yards
In condo ownership-What are LIMITED COMMON ELEMENTS?
Elements shared by a number of co-owners only
In condo ownership-What is OWNERSHIP OF CONDOMONIUMS?
Each condo is owned as a separate parcel

Owned in FEE SIMPLE
In condo ownership-What are TYPES AND FORM OF CONDOMINIUMS?
Offices in an office building
Apartment buidings including high-rises
Townhouses
Shoppong centers
Warehouses
Home sites
What is Condominium Association and what does it do?
Consists of owners
Operates development according to BYLAWS
Governed by BOARD OF DIRECTORS
Responsible for maintenance, cleaning. etc
Maintains insurance for common areas and structural portion of property
What is a CONDOMINIUM FEE?
ASSOCIATION FEE
Expense assessed to all to operate condo association
Maintenance and insurance of common elements
Not tax deductible if primary residence
What is TIME-SHARED OWNERSHIP?
Mutiple owners buy weeks.
Each owner can use it for a certain period through the year
Maintenance and other expensed prorated
What is the HORIZONTAL PROPERTY ACT?
The condominium Act
The Strata Act

Developers of newly constructed units furnish each buyer with plain talk disclosure.
Purchase not binding until 9 business days after disclosure
How do you create a condominium?
Plat map identifying the units
Legal description of the land
List of value of land and each unit
Percentage of common areas
Bylaws and details re: condo association
What is a COOPERATIVE?
Land and improvements owned by corporation
Leaseholders own stock in corporation
Stock is personal property not real estate
Shareholders called COOPERATORS
Leaseholders control cooperative through stock ownership
Two types of interests in Real Property
FREEHOLD ownership in property
it is of an indeterminable length
obtained through inheritance or deed

NON-FREEHOLD leasehold estate
less than a lifetime
considered personal interest
Types of FREEHOLD ESTATES
FEE-SIMPLE ESTATES
DEFEASABLE FEE ESTATES
LIFE ESTATES
LIFE ESTATES GRANTED BY LAW
What are FEE-SIMPLE ESTATES?
Highest form of interest in real estate
Also known as FEE-SIMPLE ABSOLUTE
Estate of inheritance can run indefinitely
Upon death goes to heirs
What are DEFEASABLE FEE ESTATES?
Also called FEE SIMPLE DEFEASABLE
Can be defeated/terminated
Occurence/non-occurence of event may term
Consists of FEE SIMPLE DETERMINABLE
FEE SIMPLE CONDITIONAL
What is FEE SIMPLE DETERINABLE?
Type of DEFEASABLE FEE ESTATES
Real estate given for a purpose
Owner MUST do
Ex: Land given to college as long as used for education
Title reverts back to grantor or grantor estate if violated
What is FEE SIMPLE CONDITIONAL?
Type of DEFEASABLE FEE ESTATE
Terminates upon violation of a certain activity that owner MUST NOT DO
Estate does not terminate until grantor gets court order
Ex: Property is conveyed on condition of no alcohol consumption on property. If violated former owner has right to get back property.
What are LIFE ESTATES?
Form of FREEHOLD ESTATES
Granted to a person for their lifetime
Not estate of inheritance
After death estate can revert or be given elsewhere
Two types ORDINARY LIFE ESTATE
PUR AUTRE VIE ESTATE
What are the two types of LIFE ESTATES?
ORDINARY LIFE ESTATE-Duration is limited to lifetime or owner
Upon death of owner, property reverts back to grantor
PUR AUTRE VIE ESTATE-Granted for life of third party other that present owner and grantor
What is ESTATE IN REMAINDER?
Type of LIFE ESTATE
Third party to whom title will pass upon death of life tenent.
Person is called REMAINDERMAN
What is ESTATE IN REVERSION?
Type of LIFE ESTATE
Property reverts back to grantor from life tenent
Grantor holds a REVERSIONARY INTEREST
What are LIFE ESTATES GRANTED BY LAW?
called Legal Life Estates
DOWER RIGHTS
CURTESY
HOMESTEAD
What are DOWER RIGHTS?
Husband owns property alone
Wifes life estate in husbands real property conveyed to her upon death
In order to bar wife must sign upon sale even though she does no own property
Interest is 1/3 in Michigan
Does not apply if husband owns property with other as JTWROS
In LIFE ESTATES what are CURTESY RIGHTS?
Wife owns property alone without husband
Husband's life estate in wife's property conveyed to him upon her death
Husband gets ? in Michigan
What is NON-CONFORMING USE?
The use of the land that does match the zoning law
What is a GRANDFATHER CLAUSE?
Allows continuation of a non-conforming use because it preceeded a zoning change
What is a ZONING VARIANCE?
Allows the introduction(by government) of a non-conforming use.
What is a SETBACK ORDINANCE?
Distance from lot edge to where building is erected
What is a LISTING AGREEMENT?
Legal employment contract from seller
What does a buyer sign if the broker is working for him?
BUYER BROKER AGREEMENT
Loyalty goes to the ....?
Client
Who employs the broker?
PRINCIPAL (Client)

Opposite party is the customer

Principal is owed trust and loyalty
Customer is owed fsirness and honesty
What is a SUB-AGENCY?
An agent of an agent.
A salesperson is a sub-agent of the broker.
A co-operating(selling )broker becomes a sub-agent of the listing broker
What is a FIDUCIARY?
The relationship between an agent and principal is called a FIDUCIARY
The broker is also called the FIDUCIARY.
What does DUAL AGENCY mean?
Agent represents opposite parties in a transaction.
Legsl with written consent only.
What are the different types of AGENCY agreements?
DESIGNATED AGENCY
SPECIAL AGENCY
GENERAL AGENT
UNIVERSAL AGENT
What is a POWER OF ATTORNEY?
Legal document that authorizes a person to act on behalf of another as their ATTORNEY-IN-FACT.
What is a DESIGNATED AGENCY?
Broker may degisnate individual salespersons as exclusive agents of their clients
What is SPECIAL AGENCY?
Principal authorizes agent to represent him in a specific matter and given him limited authority to that effect.
What is a GENERAL AGENT?
Agent is authorized to represent principsl in a range of matters.
Uses general power of attorney making agent an ATTORNEY-IN-FACT
What is a UNIVERSAL AGENT?
One who is authorized to represent principal in ALL matters
How do you CREATE AN AGENCY?
EXPRESSED AGREEMENT-Written listing or buyer agency contract stating "I am your agent"
IMPLIED AGENCY-Leading a person to believe that agent is representing him
What is AGENCY DISCLOSURE?
Provided by agent to buyers, sellers etc before they disclose any confidential information to agent. Purpose is to state agent's position as to who he represents.
What is PROCURING CAUSE?
Effort a agent contributes that results in a sale.
What are the responsibilities of AGENT to PRINCIPAL?
TRUSY, LOYALTY, SKILL
CARE AND OBEDIENCE
ACCOUNTING FOR FUNDS AND ACTIONS
What type of LISTING AGREEMENTS are there?
EXCLUSIVE RIGHT TO SELL-Broker is employed as SOLE AGENT and promised a fee no matter what if property sells.
EXCLUSIVE AGENCY LISTING-Gives broker right to sell. May sell himself without paying commission. Listing broker protected of other broker sell property
OPEN LISTING-Multiple brokers only one gets paid
NET LISTING/BUYER AGENCY-Broker can sell or buy at set price. Illegal in Michigan
What is a PROTECTION CLAUSE?
Inserted in listing agreement that protects broker incase a buyer he finds returns after listing expires and buys the property.
CIVIL RIGHTS ACT OF 1866
Prohibits discrimination because of RACE, without exceptions
CIVIL RIGHTS ACT OF 1968
TITLE 8
Prohibits discriminationbecause of race, color, religion or national origin
HOUSING AND COMMUNITY DEVELOPMENT ACT OF 1974
Prohibits discrimination based on sex, and requires the use of an EQUAL HOUSING OPPORTUNITY poster
THE MICHIGAN PERSONS WITH DISABILITIES CIVIL RIGHTS ACT
July 28, 1976
Defines the civil rights of persons with disabilities
THE MICHIGAN CIVIL RIGHTS ACT
ELLIOT LARSON
Approved on January 13,1977
Prohibits discrimination because of age and marital status with regards to emplyment.....height and weight
Amended June 9, 1992 to include familial staus
FAIR HOUSING ADMENDMENT ACT OF 1988
Prohibits discrimination because of disability(mental or physical) and familial status (families with children)
REFUSE TO PERMIT-at expense of disabled, reasonable modifications of premises, can require deposit
MULT-FAMILY DWELLINGS- after March 13, 1991. A 4 or more unit apartment complex must have ground floor accessible or elevator
AMERICANS WITH DISABILITIES ACT(ADA)
July 26, 1990

Requires public facility and employers to make accomodations for disabled
What are the remedies of those who feel they have been discriminated against?
MICHIGAN CIVIL RIGHTS COMMISSION within 6 months
THE LOCAL COMMISSION OF HUMAN RELATIONS
FILING PRIVATE CIVIL LAW SUIT, Circuit Court
What are EXEMPTIONS to FEDERAL FAIR HOUSING LAWS?
Sale of rent of single-family house. Owner can not have interest in more that 3 houses
Rooms in dwelling, not more that four families, owner lives in one unit
Religious groups operating for other than commercial reasons
Private Clubs,not for commercial use
For senior citizens housing against those not 55 if 80% of units comply.
What are PROHIBITED ACTS OF DISCRIMINATION?
ADVERTISING can't indicate preferences
PREVENTING THE INSPECTION of property
BLOCKBUSTING
DISCRIMINATION BY FINANCIAL INSTITUTIONS
What is a contract?
A binding legal agreement between two or more parties who agree to conduct business.
What are the contents of a contract?
1 - Offer and acceptance
2 - Valuable consideration
3 - Legal capacity
4 - Legal objectivity
Offer and Acceptance
Mutual Assent
Meeting of the Minds
The person who makes the offer is known as...
Offeror
Theperson receiving the offer is....
the offeree
Acceptance of an offer or a counter offer must be...
Absolute not partial
What is an Amendment?
A contract used to amend the terms of a purchase agreement that is necessary after offer and acceptance.
What is a contingent offer?
An offer that bears a condition...
subject to financing.
Time is of the essense
Time limit expressed on the contract is not flexible
Valuable Consideration
May be money or equivalent
Unilateral - Exchanged for an act - Listing

Bilateral- Promise is exchanged for another promise - Accepted offer to purchase
What is legal capacity?
Persons entering into contract must be of legal age and sound mind
What is legal objectivity?
In contracts

A contract for illegal purpose is void.
Enforceability of contracts
Valid contract - legally binding
Void contract - Missing an essential element - may not be enforced
Voidable contract - Entered to under duress or mislead
Unenforceable contract - not enforceable by court action
What is Statue of Frauds?
Requirescertain contracts to be in writing in order to be enforcable
Contract related expressions

Misrepresentation
Innocent Misrepresentation

An innocent mistatement of fcts
Contract related expressions

Fraud
An intentional mis-statement of facts
Contract related expressions

Silent Fraud
Act if wuthholding information regarding concealed property defects
Contract related expressions

Duress
Use force against someone to enter a contract
Contract related expressions

Menace
To threaten someone with force in order to enter a contract
Contract related expressions

Undue influence
A close party has taken advantage of another to influence him so consent and understanding seriously impaired
Contract related expressions

Reality of consent
Parties entered contracts with free will
Contract related expressions

Specific performance
Court action to make breaching party to perform under terms of contract
Contract related expressions

Liquidated damages
Amount of money paid to fully satisfy any damages suffered
Contract related expressions

Rescission
The termination of a valid contract turning to status quo
Contract related expressions

Executory contract
Contract signed by all parties but not perfomed in full yet.

Once performed the is Executed Contract
Contract related expressions

Equitble Title
Legal interest buyer acquires after signing a sales contract
Contract related expressions

Uniform vendor and purchaser risk act
Seller bears any loss before buyer gets leagal title or takes possession
Contract related expressions

Caveate Emptor
Latin - Let buyer beware

Buyer buys under own risk and should inspect property before purchase.
Methods of Agreements
Expressed Contract
Implied Contract
Expressed Contracts
Agreed upon explicity between parties
Implied contracts
Making it know that you will act to fulfill a certain obligation
How do you transfer rights in contracts?
To Assign

Novation of Contract
Assignment of a contract
A legal instrument used to pass rights and obligations from a contract party to another
Novation of a Contract
Substitution of a new contract in place of an existing one or substitution of a party with another
Breach of Contract
Violation of any of the terms or conditions of a contract without legal excuse
The innocent party in a breach can:
Buyer may ask for refund
Seller may keep deposit
Either may sue for damages
Either may aue for specific performance
How can a contract be terminated?
Performance Recisission
Operation of the Law
Legal contingency Expiration
Revocation Rejection
Impossibility of Performance
Termination of a Contract
Performance
The purpose for which contract was done has been satisfied
Termination of a Contract
Recission
Termination of a valis contract and returning to Status Quo
Termination of a Contract
Operation of the Law
Termination for a legal reason
Minor, Fraud
Termination of a Contract
Legal contingency
Can not get financing
Termination of a Contract
Expiration
Time limit
Termination of a Contract
Revocation
Offeror takes back
Termination of a Contract
Rejection
Offeree rejects
Termination of a Contract
Impossibility of Performance
Cant continue lease when office burns down
Option Contract
Optionor give optionee right to buy property at fixed price for a stated time period for a fee
Bundle of Rights
Rights to own real eatate as a freehold eatate possession, enjoyment, lease, sell, will, mortgage etc
Capital Gains on Sale of a Home
Pricipal residence exempt up to $250,000/$500,000
Must have lived in for 24 mo out of last 60 months
Income Tax on Real Eatate Investments
Income tax - Rents
Tax Shelter - Depreciation
Capital Gains - Long term - 1yr
15%
Tax Deferred Exchange - like exchange
Two types of surveys
Mortgage Survey(Report) Shows drawing of house and how it sits on land
Stake Survey - Actually establishes boundaries
Assessing Buyer's Price Rnge
Credit Check
Income Verification
Job Stability
Meeting with Mortgage Officer
Current Market Conditons
How effect value
Employment Trends
Interest Rates
New Construction
Foreseen enviromental problems (landfill)
Services to Landlords
Advertise Property
Evaluate Rental Market
Obtaining Tenents
Screening Tenants
Property Management
Maintaining Fiduciary Responsibility to Owners
Manager has written contract
Manager has trust/loyalty to owner/prinicpal
Prinipals interest above agents
Sepatate accounts for rents/deposits
Agency disclosure is required by law
Manager to act in good faith showing, collecting, books, maintenance
Net Operating Income
Projected Income-Vacancy-Operating Expenses
Not debt service
Return on Investment
NOI/Investment
Cash Flow
NOI-Debt Service
Enviromental Hazards
Asbestos
Lead-Based Paint
Polycholorinated biphenyls(PCB)
Radon
Underground storage tanks
Urea Formaldehyde
Water Quality
Lease Agreements used in PM
Estate at Will
Estate for Years
Estate from Period to Period
Estate as Sufferance
Lease Agreements
Estate at Will
Estate for undetermined duration usually month to month
Either party can terminate by notice
Lease Agreements
Estate for Years
Lease with predetermined duration
Legal liability if lease contract is violated
Lease Agreements
Estate from Period to Period
Estate from year to year
Automatic equal renewals
Might be month/month or yr/yr after lease expires
Lease Agreements
Estate at Sufferance
Tenent occupies with landlord's consent and then consent withdrawn
Leasehold Estate
Interest of a tenent in property acquired under a lease
Leased Fee
Landlord's interest in leased premises
Reversionary Right
Gives landlord right to lease property after tenent vacates
Types of Leases
Net
Gross
Escalator
Percentage Lease
Graduate Lease
Index Lease
Ground Lease
Oil and Gas Lease
Types of Leases
Net
Tenent pays lease plus percent of operating expenses...taxes, insurance and maintenance
Types of Leases
Gross
Tenent pays fixed rent
Types of Leases
Escalator
Escalation Clause
For increased taxes, insurance, maintenance
Types of Leases
Percentage Lease
Reatil store
Base rent plus 1% gross sales
Types of Leases
Graduate Lease
Step-up Lease
Lower first rents
Escalation Clause
Types of Leases
Index Lease
Rent adjustments based on predetermined index CPI
Types of Leases
Ground Lease
Lease of land
Usually long term
Building erected
Types of Leases
Oil and Gas Lease
Owner get percent of profits
Company looks for oil and gas
Lease Terms
Right of First Refusal
Lease with Option
Fixtures Clause
Sub-Lease Clause
Assignment of Lease Clause
Lease runs with the land
Lease Terms
Right of First Refusal
Allows tenant to match a purchase price offered by third party
Lease Terms
Lease with Option
Lets tenant purchase or obtain additional lease term
Specified price and term
Expiration date
Lease Terms
Fixtures Clause
Allows fixtures installed by tenant to be removed
Lease Terms
Sub-lease Clause
Can prohibit tenant from sub-leasing
If can sub-lease Sub-lessor
Sub-lessor - sandwich lease
Sub-lessor not released from liability
Lease Terms
Assignment of Lease
Can prohibit assignment without lessor's consent
If can assign transfers rights and obligations
Assignor still liable unless released
Lease Terms
Lease runs with the land
When ownership transfers, lease continues to be binding
Termination of Lease
Performance - Expiration
Mutual(Bilateral) agreement
Eviction
Operation of the Law - Bankruptcy, condemnation tax sale
Title Search
Title is searched by inspecting chain of recorded instruments- deeds, land contracts, assignments, mortgages
Constructive Notice
Public notice, results from recording an instrument
Rules of Constructive Notice
Does not have to be recorded to be valid
Recorded will have direct effect on search
Instuments recorded chronologically
Law presumes buyer has checked public record
Encumbrances
Leins, easements, mortgages,
Marketable Title
Free from clouds or defects
Unmarketable Title
Does not mean non-transferable
Certain defects must be cleared
Clouds that must be cleared ex unpaid tax bill
Title Insurance
A policy that protects from:
Unrecorded instruments
Forged instruments and deeds
Undiscloded or missing heirs
Any info attorney might have missed
Types of Title Policies
Owner's
Usually provided by seller - in amount of purchase price - Protects purchaser from losses due to title defects
Types of Title Policies
Lender's
Insures lender's interest in property agains?>t losses due to defective title
Title Problems
Cloud on the Title
Defects affecting marketability of title
Title Problems
Quieting Title Suit
Court ordered hearing held to determine land ownership
Title Problems
Seller's Affidavit
Seller required by title insurance company to sign not aware of any clouds
Title Problems
Subrogation Clause
Clause in title policy that allows insurance company who pays claim to seek reimbursement from party causing cloud
Title Abstracts
Summary of recorded encumbrances ...now title insurance
Liens
A charge against property that provides security for debt
Types of Liens
Statutory - property tax, income tax
Equitable - Usually placed as result of civil dispute
Applicability of Liens
Specific lien
General(Blanket) lien
Specific Lien
Applies to certain property only
Parcel is subject

Mechanic's Lien, Real Estate Tax Liens, Special Assessments, Mortgage Lien
General (Blanket) Lien
Applies to a group of properties an individal owns

Federal/State Income Tax Liens
Lis-Pendens
Legal document giving notice of lawsuit affecting property
Writ of Attachment
Obtained to stop owner from selling property until lawsuit re ownership has been settled
Purpose and Procedure of Settlement
Licensee's Role
Seller's Role
Buyer's Role
Closing in Escrow
Settlement
Licensee's Role
Broker must supervise in person or near phone
Broker must prepare closing statement with charges/credits
Salesperson should be present but not required
Final responsibily with listing broker
Settlement
Seller's Role
Sign documents - Deed, Land Contract etc
Receive funds
Pay off liens
Settlement
Buyer's Role
Deliver funds
Sign closing statement
Settlement
Closing in Escrow
Funds and/or documents held with broker until ...
RESPA
Real Estate Settement Procedures Act
RESPA
Definition
Federal Law regulates and standarize settlement practices
1st or 2nd mortgages on 1-4 family homes
Inform buyers and sellers of their chages and credits.
Obligation of Settlement Agent
Verify identity of all parties
Parties to sign all documents
Funds and documents distributed to proper people
Sent to Register of Deeds
Proper IRS and State forms filed
Deed
An instrument used to transfer title to real estate
Deed Contents
Names and Adresses
Clause of conveyance
To have and to hold(Habendum Clause) How conveyed
Deed Restrictions
Valuable considreration
Legal description
Execution
Delivery and acceptance
Recording
Types of Deeds
Warranty
Quit claim
Judicial
Types of Deeds - Warranty
General
Special Warranty
Bargain and Sale
Types of Deeds - Warranty - General (Full)
Contains ALL deed covenants
Covenant of Seisin
Covenant against emcumbrances
Covenant of quiet enjoyment
Covenant of warranty of title
Covenant of further assurance
Types of Deeds - Warranty -Special Warranty
Conveys title but guarantees only against claims from grantor's period of ownership
Types of Deeds - Warranty - Bargain and sale deed
Conveys title only
Types of Deeds - Quit claim
Bad News
Used to relinquish interest in property from grantor
No assurance of ownership or quality of title
Types of Deeds - Judicial
Ordered by the court
Executor's Deed - Probate
Administrator's deed
Guardian's deed
Trustee's deed
Sherriff's deed
Other settlement documents
Bill of Sale
Prommissory note
Mortgage
Seller financing instruments
Transfer Tax
Revenue Stamps-by seller, .55 per $500.00 None if <$100.00 or no money exchanged
State Tax-by seller, upon recording $3.75 per $500.00
Rights of others
Easements
License-permission granted to enter land for specific purpose
Encroachment
Adverse Possession
Government Powers
Government Powers
Taxation
Eminent Domain
Police powers
Escheat -Prop to state when no heirs
Adverse possession
Person occupies land for 15 years (MI) then seeks court order to recieve title.
Quieting Title Suit
Types of Financing
Purchase Money Mortgage-Seller is mortgage holder
Land Contract- Title not transfered. Seller has naked title.
Deed of Trust-title transfered to trustee
Repayment Methods
Conventional Mortgage
Unconventional - with gov insur
Fully Amortized - Paid off
Fixed Rate - Adjustable Rate ARM
Chattel Mortgage - Lien on personal Prob
Repayment Methods 2
Open-end - line of credit
Budget - with escrow
Wrap-around - 2nd position
Junior - 2nd mortgage
Construction-short term,draws
Repayment 3
Graduated Payment lower early
Blanket-over mult prop partial release clause
Balloon-lump sum at end
Reverse-RAM-rev annuity mort
Repayment 4
Nonamortized loan-interest periodically due bal lump sum
Package-home and furniture
Bridge-temp loan to buy 2nd house until 1st sold
Repayment 5
Buy down mortgage-extra points to lower interest rate
Shared appreciation lender partic. in future apprec
Participation lender gets income
Forms of financing
FHA Federal Housing Authority
FMHA-Farmer's Home Administration
VA Veteran's Administration
FHA
Fereal Housing Authority
Under HUD Departent of Housing and Urban Developement Insures loans Appraisal required Owner occupied FHA Conditions(must be fixed
FMHA
Farmers Home Administration
Dept of Agriculture
Farming areas
Guarrantees loans
Insures loans initiated by agency
VA
Veterans Administration
Service readjustment ACT 1944 Must be veteran No downpayment Owner occupiedFunding Fee 2% 0 down, 1.5 5%, 1.25 10%
Secondary Mortgage Markets
Federally Chatered
Ginnie Mae(GMNA)
Freddie Mac(FHLMC)
Fannie Mae((FNMA)
GMNA
Government National Mort Assoc
Ginnie Mae
Government Owned Div of HUD
Purchase FHA low yield high risk
FHLMC
Federal Home Loan Mort Corp
Freddie Mac
Orig. for funding of Federal savings and loans
Raises money by selling bonds
Primarily conventional loans
FNMA
Federal National Mortgage Assoc
Fannie Mae
Purchase FHA,VA and conventional
Buys pool of mort in exchange for mort backed securuities.
Federally chartered but acts like corp.