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60 Cards in this Set

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Residential Rental Agreements Act: Landlord Duties
-Keep unit fit & habitable
-Commons area safe (Law of Negligence)
-Agent is considered landlord
Rental Agreements Act: Tenant Duties
Responsible for damages, disposal of trash, cleanliness
-Comply w/ building code
-Batteries for smoke detector
-Pay rent, unless court order or constructive eviction
Retaliatory Eviction
-Renters have right to:
-Complain to govrtnmrnt agency
-Request repairs
-Exercise legal rights under lease, state & federal law
-Orgainze together (w/ other tenants)
Constructive Eviction
Common law doctrine, if unit is uninhabitable landlord is given proper notice, the tenant can leave & quit paying rent
Eviction Procedures: Summary Ejectment
-Summary Ejectment filed through district court
-Tried before magistrate in small claims court
-Criminal activity can bring about an "expited eviction"
Permitted Use of Tenant Security Deposits
May keep....
-Nonpayment of rent
-Damage (not normal wear & tear)
-Breach of lease term
-Cost of re-renting (if unit no rented)
-Unpaid bills
Tenant Security Deposit Act
Landlord/Agent Duties
-Return deposit w/in 30 days
-Week to week: 2 weeks deposit
-Month to month: 1 1/2 months
-Aything more, 2 months max
-Per fees OK UNLESS it's a service animal
Eviction Procedures: Wrong Way
-No "self help" evictions
-"Kick them out"
-Change the locks
-Post false legal notice
-Seize or destroy personal property
Vacation Rental Act
-Applies to landlords/agents
-Rent < 90 days
-Tenant has permanent residence elsewhere-Rental must be fore vacation or leisure
-Licinsee may pay referral to non-licensee
-Expidited eviction procedure
Vacation: Trust Funds
-Tenant refund if property not avaiable
-Deposits in trust account
-May charge cancelation/reservation fee
-New owner must comply w/ leases for 6 months
Transient Occupancy
Stay in hotel NOT covered under NC Residential Ental Agreement Act
Public Housing Section 8
-Tenants in government subsidized housing
-More rights
-Can only be evicted for "good cause", for example loss of job is NOT good cause
-Entitled to "procedrual due process"
Gross versus NET Lease
-Gross, fixed or flat: Landlord pays for some or all operating expenses (residential)
-NET LEASE: tenant pays some or all operating expenses (commercial) same as NET TENANT
Lessee's Right to Quiet Enjoyment
A good, clean non-defective title held by Landlord will provide "quiet enjoyment"' and continued possession.
Property Management
-Established though agency contract
-LOADS principle
-Property manager gets paid a % effective gross income (gross rents - vacancy)
-Must meet statutory requirements & laws
Property Management: Fair Housing
-Cannot say apartment is rented if not
-Can discriminate based on credit/finances
-Can NOT differ terms based on protected classess
-Can NOT advertise in discriminatory manner
Lien Theory vs Title Theory
Lien:
-Promissory note
-NOT used in NC
-2 party mortgage:Mortgagee(lender, right to foreclose)/Mortgagor(buyer holds title)
-Lender goes to court for foreclosure

Title theory:
-Deed of Trust
-3 party mortgage:Beneficiary(lender, can ask trustee to foreclose), Grantor(borrower, equitable title), Trustee (holds legal title),
-Lender uses "Power of Sale Foreclosure"
Borrower's Right (Equity) of Redemption
Defaulted borrower has right to pay off the full mortgage + expenses prior to foreclosure,
Statutory Redemption Period
-After the foreclosure sale, 10 day redemption period during which mortgagor can pay full balance+expenses.... Or another qualified buyer can submit bid 5% (called upset bid) more than last bid.
Acceleration Clause
Lender "speeds up" debt repayment (i.e., if borrower makes late payments), usually forcing borrower to sell. (Without, lender would have to sue everytime payments are late)
Deficiency Judgment
If foreclosure proceedings doesn't satisfy the lender's expense, they may file a personal judgment against the defaulting borrower.
Prepayment Penalty Clause
If a borrower pays off a loan early, they have to a a penalty.

Not allowed...
-in NC for loans < 170K. Or
-Principal dweling
-1-4 family dwelling
-FHA, VA or loans sold to the 2ndary mortgage market.
Due on Sale Clause (Alienation Clause)
-Triggered by sale, seller must pay off loan immidiately,
-A loan without is assumable
-Without release of liability, seller is liable under loan assumption
Promissory Note vs Dead of Trust
Promissory note (lien theory):
-A personal promise is given to lender
-Allows for a deficiency judgment against the buyer
-Made good only by the Deed of Trust

Deed of Trust (title theory):
-3 Party Mortage
-Property is put up as collateral for loan
-"Power of Sale" gives trustee right to foreclose.
Interest Rates & Federal Reserve Board
-Interest rates profound effect on real estate
-Federal Reserve Board controls $ supply & interest rates
-Purpose: growth w/out inflation or unemployment
Federal Reserve: Money Supply
-Controls % reserve deposit funds, amount of funds for lending
-Controls money supply by buying os selling goverment securities
Federal Reserve: Discount Rate
-The rate of interest members borrow from the Federal Reserve
-Altering discount rate effects all other interest rates
Types of Mortgages
Conventional (non-governemt)
-28%(PITI/Loan)/36%(PITI+installment debt)/Loan
-20% down, no PMI

FHA:
-29%/41%
-MIP
-Assumable w/out release of liability. Aft 12/1989, buyer must be qualified

VA:
-41%
-Certificate of Eligibility, given to veterans
-Certificate of Reasonable, VA's Appariased Value
-Restoration of entitlement, when loan paid off, veteran can get another loan
Assumable. After 3/1988, buyer must be qualified.

-Rural Economic & Community Development (formerly Farmer's Home Administration or FmHA): direct loan from the government

-Purchase Money Mortgages or Purchase Money Deeds of Trust: Seller Financing. Borrower hold title.

-Installment land sale: seller financing. SELLER hold title.
Adjustable Rate Mortgages
-Interest Rate fixed for a few years (perhaps below market), then increase fixed % per year up to a fixed total amount.
-Possibility of negative amortization, i.e. balance increases
Construction Loans
-House under construction is collateral
-High Risk Loan = Higher intereest rate & shorter term
Mortgage Banker vs Mortgage Broker
-Banker: full line of lending service
-Broker: Agent or broker of a lender that brings together a borrower and a lender
Secondary Mortgage Market
-FNMA (fannie mae) buys FHA, VA and coventional mortgages
-GNMA (ginnie mae) only buys FHA & VA. Government owned.
-FHLMC (freddie mac) buys mostly conventional
Underwriting
Process of reviewing...
-Borrower;s credit
-Credit Report
-Verification of deposits/assets
-Income stability/odds of continued employment
-Income verified
-Value of collateral
-Evaluating risks
Property Analysis
-Appraisal done to verify market value & LTV
-Title opinion
-Title insurance protects lender
-No insurance - no loan
Loan Analysis
-Lender will look at "yield" or "profit"
-Longer loan term - higher risk
-Lender will look how much borrower is investing (down payment)
-PMI <= 20%
Truth in Lending
-Lender must give "full disclosure" of all credit charges
-Regulation Z: truthful advertising
-Must disclose APR
-Disclosure w/in 3 buisiness days
Market Value
Highest price a property should bring in a fair, open market
Price vs Value vs Cost
-Price: actual sales price
-Value: what the public is willing to pay in an open market
-Cost: cost of labor & materials
Highest & Best Use
The most probable and profitable use of the property. i.e., commercial use vs residential.
What is a CMA?
-CMA IS informal estimate of value used by agents
-NOT an apparaisal by a State Licensed Appraiser
-DO NOT CALL A CMA AN APPRAISAL
Sales Comparison Approach Review
-most COMMON appraisal
-select 3 closed COMPARABLE properties much like the SUBJECT
-LOCATION most imprtant factor
-make all adjustments to COMPARABLES
-If comparable is superior, SUBTRACT
-If comprab;e is inferior, ADD
-
Cost Approach
-Used for unique propertie: schools, churches...
-Estimate value of land (sales comparison)
-calculate current cost of improvments (reproduction cost: exact duplicate vs replacement cost: similar-same purpose), less accrued depreciation
-Considers the effective age
-Use the breakdown method of depreciation

Square foot method vs Unit-in-place method vs quantity survey method
Types of Depreciation
-Physical deterioration (curable or incurable)
-Function obsolescence (curable or incurable)
-Economic or locational(environmental or external) (incurable), i.e., next to a nuclear plant
Income Approach
(NOI) NET OPERATING INCOME=gross rents/other income - vacancy losses-operating expenses

Operating expenses: taxes, insurance, maintenance, repairs... Does NOT include mortgage payment.

Capitilization rate: NOI/Sales Price for comparable.


-A smaller capitilization will increase value
-A larger capitilization will decrease value
Gross Rent Multiplier
Sales Price/Rental Income = Gross Rent Multiplier

Monthly rental: 650, Sales price: 82,000. GRM=126.2
Discovering Reconcialtion
-Process by which an appraiser uses different appraisal methods to discover value of property
-Sales comparison approach deemed best
Property Insurance
-Property/casualty insurance: protects insured from lossess to property/improvements
-Liability insurance: covers losses to third persons ot their property
-Package insurance: includes both types

-Condition: limits/qualifies insuree or insured, i.e. theft reported to police
-Exclusion:eliminates coverage for certain item, i.e. tornado
-Endorsement:includes coverage for a certain item
Types of Home Owners Insurance
-HO-1: basic form. Included liability.
-HO-2: Named peril policy. Only named perils are covered. Better than HO-1.
-HO-3: All risk form, most common. Better than HO-2, because perils do not need to be named.
-HO-4: tenants/renters policy. Covers tenants personal property & damage they cause to landlord's proeprty.
-HO-6: condominium owners
-HE-7 all-risk form, for very expensive properties
RESPA - Real Estate Settlement Procedures Act
Consumer protection:
-Information booklet
-"Good faith Estimate of Closing Costs" at time of loan application
-Standard HUD 1 Closing Form
-Review closing doc: 24 hours prior to closing
-Escrow account restrictions
-No referral fees or gift to agents
Types of Leases
-Gross, Flat or Fixed: land lord pays all operating expenses (residential)
-Net: tenant pays some or all operating expenses (commercial)
-Percentage lease: owner get's % if gross or net income. Usually in addition to a based net lease.
-Graduated lease:lease amount will increase in the future
-Index lease:increased or decreased based on some index, such as cost of living
-Ground lease:Land lease so tenant can build a building.
-Oil & Mineral Lease
-Full Service:base amount + prorated share of common operating expenses, like in a shopping mall
Usury Laws
Prevents overcharging on interest rates. Colorado & Delaware: no usury laws, why credit card companies are based there.
Finance Terms
-Debt Service (P&I) principal & interest
-Amortization: killing(paying) off the loan
-Loan factor:monthly debt service (P&I) for every $1,000 borrowed
-Equity: difference between market value & what is owed
-Usry laws: prevent overcharging on interest rates
-Discount points: interest paid up front
-Yield: investor's profits
-Origination fee: admin fee to process loan. Usually % of loan amount
-Loan to Value Ratio (LTV): loan value/sales price.
Types of Loan Repayment Terms
-Fixed Rate/Level Payment
-Adjustable Rate (ARM) - probable negative ammortization
-Graduated Payment (GPM), negative amortization on early payments
-Growing Equity Mortgage (GEM): fixed interest rate, but principal payments increase.
-Term (straight): interest only
-Shared appreciation mortgage (SAM): lender provides sub-market interest rates in exchange for profits from future sale
-Baloon: interest & principal payments w/ baloon payment at end of term
-Buydown: points paid to temporarily or permanantly reduce interest rate. 1 point 1/8% decrease in interest rate.
Appraisal Concepts: Concepts of Value
DUST:
Demand
Utility
Scarcity
Transferability
Appraisal Concepts: Factors influencing Property Value
-Social Ideas & standards (1950: 2BD/2BA/no garage; 2000:3BD2.5BA/2 car garage)
-Economic forces (interest rates, money supply, employment)
-Government activities (monetary policy, taxes, zoning, schools)
-Physical or Environmental Forces (water supply, climate)
Types of Leasehold Estates
-Estate for Years: automatic termination after some period of time (weeks, months, years
-Estate from period to period: automatic renewal after a definite initial period, until terminated by either party w/ required notice
-Estate at will: termianted by any party at anytime w/ no required notice
-Estate at sufferance: landloard must evict illegal holdover tenant
Lease
A conveyance from a landlord, the owner of real estate (lessor) to a tenant (lessee) that transfers right of possession and use of an owner's property for a specified period of time.

Leases > 3 years must be written.
Mortgage Loan Instruments
-Promissory note, or financing instrument. Written promise owner signs agreeing to repay debt. A promissory note is negotiable, i.e. can be transferred to a 3rd party.
-mortgage, or deed of trust. Security investment that pledges property to lender as security or colatteral for a debt.
Types of Loans
-Purchase money mortgages: owner financing, borrower holds title. Seller hold lien on property. NOT entitled to a deficiency judgment.

-Package loans: loan for real property, fictures and appliances. Popular for furnished condo units.

-Blanket mortgages: covers more than 1 parcel of land, used to finance subdivision developments.

-Wraparound loans, also called overriding or all-inclusive. Lender/seller offers loan to buyer to pay for a smaller loan at lower interest rate.

-Open end mortgage: line of credit or equity line.

-Construction loan

-Sale & lease back: used by business that need cash for working capital

-Reverse annuity: regular payments made to borrower based on principal. Used buy retirees.
PMI (Private Mortgage Insurance)
Initial policy: .4% of loan amount (goes on line 902 on HUD).

PMI renewal policy: .35% loan balance. 1+ months in escrow (line 1002 of HUD)