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189 Cards in this Set
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Real Property |
land, fixtures, anything naturally attached |
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Fixtures |
things that are permanently attached to land 3 tests manner of annexation intention of parties character of article and adaptation of its use for the purpose of the realty |
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physical characteristics of land |
immobility non-homogeneity indestructible nature |
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economic characteristics of land |
improvements scarcity area preference permanence |
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types of legal property descriptions |
legal descriptions always include a caption and a body, and may also include exceptions or reservations. metes and bounds strip sectional reference fractional coordinates |
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encumbrances |
liens claims against a property by non property owners encroachments things built over property lines easements a right held by one person to use the land of another for a specific purpose, such as access to other property |
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types of estates |
freehold estates: highest form of ownership leasehold estates: possession and use but not ownership equitable estates: liens and easements, not possession or ownership statutory rights: created by law, e.g. widows rights |
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bundle of rights |
disposition possession control exclusion |
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estates in fee simple |
type of freehold estate highest type of interest in land freely transferable and inheritable |
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freehold estates |
an estate in which ownership is for an undefined length of time |
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life estate |
estate for life created by a will or deed |
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estate for years |
a leasehold interest in land for a fixed period of time it is often called a tenancy for year |
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estate at will |
landlord can terminate the tenancy at any time with reasonable notice |
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estate on executory limitation |
created by the transfer of an estate in fee, but subject to a provision that upon the occurrence of a stated event, the estate is divested in favor of some person other than the grantor |
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common interest ownership properties |
condos, co-ops, timeshares, townhouses |
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per autre vie |
life estate measured by the life of another person |
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reversion |
property transferring back to someone after a term has expired ending of a lease for example |
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lien |
claim against a property to secure a debt general and specific, voluntary and involuntary, statutory or equitable |
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tax lien |
a lien is placed on all assessed real property in the amount of the tax due |
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general lien |
affects all property of the debtor or all property in a certain class judgement lien estate and inheritance tax liens corporation franchise tax lien irs tax lien |
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specific lien |
affects only special property property tax lien real estate tax lien mortgage lien mechanic liens utility liens bail bond liens |
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property taxes |
can be placed on real property and personal property |
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special assessment tax |
special assessment may be levied only against parcels of real estate which have been identified as having received a direct and unique "benefit" from the public project |
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estate |
degree of ownership in a property |
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deed restrictions |
limits the use of a property paint schemes, additions to homes, etc |
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forms of ownership |
tenancy in common joint tenancy community property trust |
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tenancy in common |
a form of ownership of title to real estate by two or more persons in which, although they have a unity of possession, they each have separate and distinct titles the most common type of ownership. |
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joint tenancy |
a form of ownership in which the tenants own a property equally. If one dies, the other automatically inherits the entire property. This is known as the right of survivorship. |
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community property |
most property acquired during the marriage (except for gifts or inheritances) is owned jointly by both spouses and is divided upon divorce, annulment or death. |
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trust |
an arrangement where legal title is transferred from a trustor to a trustee. |
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homeowners association regulation |
pet ownership, grass height, painting schemes, building structures and additions |
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EPA all inquiries rule |
carries out environmental due diligence interviews with past and present owners or occupiers visual inspections |
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Phase I Environmental Site Assessment |
report prepared for a real estate holding identifying possible or existing contamination liabilities |
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Phase II Environmental Site Assessment |
collection of soil, groundwater, or building materials for examination to see how much contamination exists |
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Phase III Environmental Site Assessment |
investigation involving the remediation of a site |
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nuisance |
created when an owner of land unreasonably uses that land in a way that interferes with the rights of others in the area |
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trespass |
an intentional interference with the property interest of an owner or occupier of land |
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negligence |
occurs when a person fails to exercise the amount of care that would otherwise be exercised by a reasonable person in that situation |
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strict liability |
property owners must prove that a condition or activity is abnormally dangerous and was the cause of the environmental injury done to their property |
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property disclosure form |
filled out by seller to inform buyers of problems associated with property agent must ensure the seller fulfills requirements: age of house lead based paint structural defects encroachments |
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hazardous materials |
radon lead based paint mold asbestos urea formaldehyde |
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market value |
the present worth of one commodity to draw on the open market. |
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market price |
the actual selling price of the property |
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elements of value |
scarcity transferability utility demand |
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scarcity |
how much of there is it? |
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transferability |
can it be sold? |
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utility |
can it be used? |
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demand |
does anyone want it? |
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principles of value |
principle of anticipation |
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principle of anticipation |
the perception that value is created by the expectation of benefits to be derived in the future |
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principle of change |
the area the property is in will effect the value more than the property itself. |
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principle of competition |
competitors will arrive in same area if you achieve success |
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principle of substitution |
no prudent person would pay one million dollars when there is another one readily available that has the same use, design and income for five hundred thousand dollars, the lowest price one is preferred. |
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principle of contribution |
How much does an item contribute to the net income of a property? |
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principle of conformity |
that conformity to land use objectives contributes the most to economic stability in a residential community. |
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sales comparison approach |
using comparable houses to determine the value of a property |
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cost approach |
the process of estimating the value of a property by adding to the estimated land value the appraiser's estimate of the replacement cost of the building, less depreciation. |
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capitalization approach |
focuses on the monetary returns a property can be expected to produce and converts that into a value the property should sell for if placed on the market today. |
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capitalization rate |
an indirect measure of how fast an investment will pay for itself. a measure of the ratio between the net operating income produced by an asset (usually real estate) and its capital cost (the original price paid to buy the asset) or alternatively its current market value annual operating income/cost = cap rate |
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Gross Income Multiplier |
a ratio used to estimate the value of income producing properties sales price/annual rents |
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Gross Rent Multiplier |
the ratio of the price of a real estate investment to its annual rental income before expenses such as property taxes, insurance, and even utilities for vacation rental properties. PURCHASE PRICE/GROSS ANNUAL RENTAL INCOME |
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reconciliation |
The last phase of any valuation assignment in which two or more value indications derived from market data are resolved into a final value opinion, which may be either a final range of value or a single point estimate." |
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market cycles |
market activity picks up, market confidence accelerates, market approaches peak volume, market begins to slow, market approaches bottom |
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FIRREA |
Financial Institutions Reform Recovery and Enforcement Act reated mandatory requirements for certain real estate appraisals. |
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replacement vs reproduction |
replacement uses new methods/materials reproduction is an exact replica |
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depreciation |
loss of value in a property over time |
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economic obsolescence |
external factors that cause depreciation on a property |
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Comparative Market Analysis |
the CMA is meant to determine an estimate of marketable value through conditions such as location, comparable sales, curb appeal, and market history and trends |
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Loan to Value Ratio |
assessments with high LTV ratios are viewed as having a higher risk of default and, therefore, if the mortgage is accepted, the loan will generally cost the borrower more to borrow. Mortgage amount/ appraised value= LTV % |
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discount points |
prepaid interest on the mortgage loan. The more points you pay, the lower the interest rate on the loan and vice versa. |
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origination fee |
An up-front fee charged by a lender for processing a new loan application |
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origination |
The process by which a mortgage is secured by a borrower |
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amortization |
a gradual reduction of a loan debt through periodic installment payments of principal and interest. |
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buy down |
obtaining a lower interest rate by paying additional points to the lender |
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equity |
interest or value remaining in property after payment of all liens or other charges on the property Value of Property minus outstanding loans |
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adjustable rate mortgage ARM |
a mortgage with an interest rate that changes over time in line with movements in the Index |
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balloon mortgage |
a partially amortized loan. At the end of the loan term a large payment is made to pay off the loan |
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blanket mortgage |
covers more than once parcel in a lot and may be negotiated by a developer. |
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growing equity mortgage |
aka rapid pay off loan When borrowers negotiate a growing equity mortgage they know the monthly payments will increase. |
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reverse mortgage |
62 years of age and older, there are no income or credit ration qualifications in order to qualify for a reverse mortgage, and there are no monthly payments made to the lender. The loan is repaid when the borrower no longer resides in the property. |
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conventional vs insured loans |
conventional loans are uninsured by the government Insured loans are backed by the government (FHA or VA) and fixed rate, protect borrower, specific qualifications |
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equity loan |
a type of loan in which the borrower uses theequity of his or her home as collateral |
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subprime mortgage |
higher interest loans to high risk borrowers |
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non conforming loans |
loans offered to those who don't meet criteria for conforming loans |
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seller/owner financed |
loans offered by the seller or owner of the property to the buyer |
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primary market |
Savings associations, credit unions, commercial banks, mortgage bankers, private lenders, government programs |
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secondary market |
the lender recoups the entirety of the funds they lent you through outside investors. |
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Federal Housing Administration |
sets standards for construction and underwriting and insures loans made by banks and other private lenders for home building. |
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assumption |
method of selling real estate where the buyer of the property agrees to become responsible for the repayment of an existing loan on the property |
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due-on sale |
provision of a loan contract that stipulates that if the property is sold the loan balance must be repaid |
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alienation |
that requires full payment of the balance of a mortgage at the lender's discretion if the property is sold or the title to the property changes to another person. |
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acceleration |
contractual provision that gives the lender the right to demand repayment of the entire loan balance in the event that the borrower violates one or more clauses in the note. |
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prepayment |
payment made by the borrower over and above the scheduled mortgage payment. |
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release |
removal of a lender's lien on property |
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deed of trust |
A document that embodies the agreement between a lender and a borrower to transfer an interest in the borrower's land to a neutral third party, a trustee,to secure the payment of a debt by the borrower. |
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note |
document that evidences a debt and a promise to repay |
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title theory |
the borrower does not actually keep title to the property during the loan term. the lender does |
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lien theory |
borrower keeps the title and the mortgage becomes a lien |
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Truth in Lending Act |
A federal law enacted in 1968 with the intention of protecting consumers in their dealings with lenders and creditors disclosures: annual percentage rate (APR), term of the loan and total costs to the borrower |
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Real Estate Settlement Procedures Act |
ensures that consumers throughout the nation are provided with more helpful information about the cost of the mortgage settlement and protected from unnecessarily high settlement charges caused by certain abusive practices. |
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Equal Credit Opportunity |
prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or because you get public assistance when applying for mortgages |
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mortgage fraud |
a crime in which the intent is to materially misrepresent or omit information on a mortgage loan application to obtain a loan or to obtain a larger loan than would have not been obtained had the lender or borrower known the truth. |
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predatory lending practices |
any lending practice that imposes unfair or abusive loan terms on a borrower. Excessive Fees. Abusive Prepayment Penalties. Kickbacks to Brokers (Yield Spread Premiums) |
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usury lending laws |
specifically target the practice of charging excessively high rates on loans by setting caps on the maximum amount of interest that can be levied. |
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single agent |
represent one person, a buy or seller |
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designated agency |
two agents for the same agency represent the opposing people in a transaction |
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transaction agent |
provides real estate services with no agency with a client (aka nonagent) |
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fiduciary responsibilities |
ACOLD Accountable Care and Skill Obedience Loyalty Disclosure |
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termination date |
this clause is a must-have not only because it can be used to protect both parties to the transaction, but also because it is mandated by state statute. A broker cannot enter into an open-ended agency agreement with a client. |
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Express Agency |
A principal tells an agent, either orally or in writing, that he or she would like the agent to act on his or her behalf. |
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Implied Agency |
agent doing activities that implies an agency relationship |
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ostensible agency |
failure to stop an agent from performing duties after learning of their misrepresentation |
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Agent disclosures |
must inform that you are a licensee when you are the principal and have interest in property conflicts of interest: dual agency, designated agency Interstate Land Sales Full Disclosure Act: property report Known Material Defects Accuracy of Representation of Lot (easements and encroachments) interior environmental hazards/natural disaster structural issues, alterations/additions, delivery of disclosure form |
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Duties to client |
give it to them in writing don't advise on things outside expertise |
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expiration |
At the end of the period, the principal's liability for the actions of the agent expires, along with most obligations of the agent. |
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completion |
Once you sell the listing, close it, and get your commission, the agency will expire. |
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mutual agreement |
an amicable agreement to call the whole thing off. |
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abandonment |
a breach of contract and may result in a suit for damages being instituted by the other party One side doesn't fulfill their obligations |
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performance is impossible |
would result, for example, from the death of either party. Also, it could occur if the property were to be destroyed by fire, earthquake, or other natural disaster |
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termination by force of law |
purpose of the agency becomes illegal due to the law change, the agency is terminated.Agency can also be terminated if one of the parties involved files for bankruptcy. |
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home warranty |
covers appliances |
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home inspection process |
a check of a house's structural and mechanical condition but can also encompass tests for radon gas, detection of wood-destroying insects and other services requested by the buyer the inspector creates a report for the home buyer detailing all that was found |
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Red Flags |
Future of the Area, Local School System, Economic/Other Factors, New Subdivision, Vacant Land and Oversize Lots, Adjacent Property Features, Floor Plans and Amenities, Over Investing, Flooding, Additions, Poor Construction and/or Condition, Extended Market Exposure, Negative Environmental Concerns and Hazards |
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Valid Contract |
competent parties mutual agreement consideration lawful objective in writing and signed |
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contract performed or discharged |
perform is when everything goes good (executed) impossibility of performance operation of law (bankruptcy) |
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assignment |
The act of transferring an interest in property or some right (such as contract benefits) to another |
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novation |
Agreement of parties to a contract to substitute a new contract for the old one. It extinguishes (cancels) the old agreement |
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breach of contract |
Failing to perform any term of a contract, written or oral, without a legitimate legal excuse |
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recission |
remedy for a breach of contract
the cancellation of a contract by mutual agreement |
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reformation |
remedy for a breach of contract correction or change of an existing document by court order upon petition of one of the parties to the documents |
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injunction |
remedy for a breach of contract a writ issued by a court ordering someone to do something or prohibiting some act after a court hearing |
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specific performance |
remedy for a breach of contract court ordering someone to do what the contract says |
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compensatory damages |
remedy for a breach of contract payment for actual injuries and economic loss |
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consequential damages |
remedy for a breach of contract damages claimed and or awarded in a lawsuit which were caused as a direct result of wrongdoing |
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attorney's fees and costs |
remedy for a breach of contract only recoverable if they are expressly provided for in the contract |
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liquidated damages |
remedy for a breach of contract an amount of money agreed upon by both parties to a contract which one will pay to the other upon breaching or if a lawsuit arises from the breach |
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punitive damages |
remedy for a breach of contract damages awarded in a lawsuit as a punishment for malicious or evil acts or fraudulent acts |
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clauses in contracts |
as is clause: seller makes no repairs escape clause: back out w/ no penalty mortgage contingency clause: cancels contract if buyer cant get a mortgage inspection contingency: if damages are found the buyer can cancel contract, other version gives seller opportunity to repair damages or lower selling price to cover cost of repairs house sale contingency: buyer needs to sell other home in order to purchase the property |
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Exclusive right to sell listing |
the most common listing type, popular with both sellers and brokers. gives only one broker the right to find a buyer for a house |
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exclusive agency listing |
the owner reserves the right to sell the home him or herself and not pay the broker a commission, but will pay listing commission if someone else sells the home due to listing agents marketing efforts |
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open listing |
It lets an owner sell her home by herself. It is a non-exclusive agreement, meaning the owner may execute open listings with more than one real estate broker and pay only the broker who brings an able buyer whose offer the owner accepts. |
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requirements for valid listing |
A beginning date and a termination date. The list price at which the property will be offered for sale. The initial asking price, The amount of compensation offered to the broker The terms and conditions under which the brokerage fee shall be paid by the seller. Authorization for the broker to cooperate with other brokers as sub-agents or buyer's agents, and details of the compensation to be offered to those brokers in the event they procure a buyer. Authorization for the broker to reveal or not reveal the existence of offers previously received. Services to be Performed |
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agreement of sale components |
Names and addresses of the parties Purchase price The date of the agreement A description of the property and interest to be conveyed The date for payment and conveyance Zoning classification and notice that failure to include the zoning classification shall render the agreement voidable at the option of the buyer A statement of the broker's role and whether services have been provided to another party in the transaction A notice of escrow requirements A statement that access to a public road may require the issuance of a highway occupancy permit from the Department of Transportation |
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notification |
deal with termination of contracts |
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types of leases |
gross, net, percentage, lease option (right to first refusal) |
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use of premises clause |
explain how the property may be used by the lessee |
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Right of First Refusal |
give the lessee the right to purchase a property before it became available to others |
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title insurance |
title insurance protects the policyholder against damages caused by possible defects in a title |
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cloud on the title |
when the title to property is not clear |
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abstract of title |
a summary giving details of the title deeds and documents that prove an owner's right to dispose of land, together with any encumbrances that relate to the property. |
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chain of title |
the sequence of historical transfers of title to a property |
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suit to quiet title |
remove a cloud on the title |
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essential parts of a deed |
Names of grantor and grantee Consideration Words of conveyance (granting clause) Interest or estate being conveyed (habendum clause) Deed restrictionsExceptions and reservations Appurtenances Legal description of property Signature of grantor Delivery and acceptance (clause) |
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deed |
the legal instrument that transfers the interest in the property from the old owner to the new owner |
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quitclaim deed |
lets the transferor give away whatever rights he or she has to the property, but does not guarantee the extent of the interest transferred common in divorces |
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special warranty deed |
contains only the covenant and guarantee against claims that may arise only during the time the seller was the legal owner of the property |
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general warranty deed |
grantor warrants or guarantees against any acts or omissions on his or her part, or on the part of any of his/her predecessors in title that might undermine the quality of the title and interest conveyed |
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escrow agent |
ill secure the property and examine documents to make sure that the terms of the sale are met on each end, serving both the buyer and seller in the transaction |
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transfer taxes |
Transfer taxes are local taxes that must be paid when a property is sold, leased, or otherwise transferred to a new owner |
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prorated items at closing (accrued and prepaid) |
property tax, homeowners insurance, mortgage interest |
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HUD-1 |
form provides a complete record of the transaction, including: Cash in-flows and out-flows Record of who receives payments out of escrow describes any monies paid prior to closing earnest money, pre-paid appraisal, credit report, application fees, inspections, etc |
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IRS Reporting Requirements |
Form 1099-S must be reported: Sales price;The amount of property tax reimbursement credited to the seller; andThe seller's Social Security Number |
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good faith estimate |
allows the borrower the opportunity to see the costs that will be associated with the loan, and must be sent to the potential borrower within three business days after receiving the borrower's application. |
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Real estate owned |
properties owned by the bank |
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earnest money |
must deposit all money belonging to another into an escrow account by the end of the next business day commingling: mixing earnest with personal money conversion: using the earnest money |
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Fair Housing Act protected classes |
Race or color National origin Religion Sex Familial status Handicap |
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violations of Fair Housing |
Steering, improper advertising, equal opportunity logo regulations, |
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exemption from fair housing |
single family housing sold or rented without the use of a broker owner occupied housing with no more than 4 units |
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procuring cause |
multiple people feel entitled to a comission |
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protection clause |
protect the listing agent from having a prospective buyer "go around" him or her by waiting for the listing period to expire and then dealing directly with the seller - thereby taking the commission out of the transaction |
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puffing |
opinion statements made about a property designed to influence the buyer |
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Human Relations Act |
covers real estate discrimination |
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Anti-Trust laws and purpose |
attempt to stop anyone from restraining free trade Sherman Act and Clayton Act |
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Anti-trust violations in Real Estate |
price fixing: commission rates and splits length of listing agreements boycotting customers or businesses locations cant be divided among companies tying arrangements |
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area |
l x w |
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LTV |
simply a comparison of the amount owed on the property (loan), and what the property is worth (its value) loan/ value of house |
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discount points |
Use total mortgage not price of the property 1 point is 1% of total mortgage Multiply how many points by 1 % of mortgage value to determine cost of reducing the interest rate |
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equity |
value an owner has in a property Total Value of property minus amount left on the mortgage |
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debt to income ration |
determined by calculating the total monthly house payment divided by the borrower's total monthly income. |
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down payments |
determine the difference between the sales price and the loan amount |
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sellers proceeds of sale |
total sale price minus the commission. |
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factor |
dollar amount per thousand x times 1000 |
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amount interest paid over life of loan |
Multiply the PI payment X the Term (in months) = Total Paid Total Paid (P&I) - Principal = Interest Paid |
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transfer tax |
(Value ÷ Unit(how many thousands are in the number)) x Rate per Unit = Tax |
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When calculating the living area of a house, we calculate the amount of space |
calculate the amount of space that a person could walk on and (for buildings) that meets certain other criteria. |
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amortization schedule |
table detailing each periodic payment on an amortizing loan, as generated by anamortization calculator |
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net operating income |
calculated by subtracting the total operating expenses of a property from its Effective Gross Income |
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income approach |
i/r=v |
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PA Real estate commission powers and duties |
*Issuing licenses and registration certificates in accordance with RELRA *Approval and regulation of schools offering or conducting any course or courses of study in real estate *Examining applicants - Professional testing services may write and administer examinations on behalf of the Commission, with its guidance and approval *Promulgating rules or regulations to administer and effectuate the purposes of RELRA *Administration and enforcement of the laws of the Commonwealth relating to those activities involving real estate, cemeteries and cemetery companies, or campground memberships for which licensing or registration is required under RELRA *Setting all fees required under RELRA, and reviewing or increasing them when necessary to raise required revenue *Annual submission of a report to the Professional Licensure Committee of the House of Representatives and to the Consumer Protection and Professional Licensure Committee of the Senate describing the types of complaints received, status of cases, board action which has been taken, and the length of time from the initial complaint to final board resolution |
