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113 Cards in this Set

  • Front
  • Back
A voluntary agreement between legally competent parties to perform some legal act
Contracts created by words
Express contract
Contracts created by actions or conduct
Implied contract
Contract with two promises being exchanged
Contract based on only one party promising to perform
Contract where all parties have completely fulfilled their obligations
Executed contract
One or both parties still have an act to perform
executory contract
Contract which meets all the essential requirements and is legally sufficient to be enforceable in court
Valid contract
Contract with no legal force or effect
Void – has no legal existence
Contract which APPEARS valid but may be rescinded
Voidable contract
Valid contract which court cannot force parties to perform
Unenforceable contract
Essentials of a contract
Offer and acceptance
Competent parties
Reality of consent (free and voluntary act of each party)
Legal purpose
Contract must be in writing to be enforceable
Statute of frauds
Agreement is terminated
Contract must be performed within the time limit specified
Time is of the essence (when no time is specified, should be performed within a reasonable time)
Transfer of rights and\or duties under a contract
Assignment (original party is still obligated unless specifically released)
Substitution of a new contract in place of the original one
Violation of terms or conditions without legal excuse
Breach of contract
Buyer asks court to force seller to sell and convey property as agreed
Suit for specific performance
Permits seller to keep earnest money in event of buyer default
Liquidated damages clause
State law limits time within which parties may bring a legal suit to enforce rights
Statute of limitations – Rights not enforced with FOUR YEARS from breach are lost
Contracts frequently used in Real Estate business:
Agreements of sale
Installment contracts
Escrow agreements
Agreements that must be written under the Plain Language Consumer Contract Act
For Borrowing money
To Buy, leasing or renting personal or real property
To Engaging services for cash or on credit for personal, family purposes
*NOT COVERED ARE: Deeds, Mortgages, certificates of title and title insurance documents, Documents used by state or federal financial institutions, contracts to buy securities, insurance policies and commercial leases
Law which provides for procedures for electronic records and signatures
Uniform Electronic Transaction Act (federal) & Electronic Transaction Act of 2000 (PA law)
Three basic components of the financing market
Federal Reserve System
Primary Mortgage market
Secondary Mortgage Market
Two ways the fed controls the flow of money
Reserve requirements

Discount rates
The Federal Reserve system is divided into how many federal reserve districts?
12 - each served by the a federal reserve bank.
Federal Open Market Committe, which buys and sells US govt. securities on the open market
Each member bank of the federal reserve must keep a certain amount of funds on hand.
Reserve requirements. These are unavailable for loans or any other use
When amount of money available for lending decreases, interest rates...
Interest rate that the district reserve banks charge for the use of their money
Discount rate
Market where borrowers directly interact with lenders
Primary mortgage market
Income realized from what two sources in the primary mortgage market?
Finance charges collected at closing &
Recurring income or interest collected during the term
Income realized from what two sources in the primary mortgage market?
Finance charges collected at closing &
Recurring income or interest collected during the term
Two lenders in the primary mortgage market that must be licensed.
Mortgage Banking Companies &
Morgage Brokers
Market where loans are bought and sold only after they have been funded.
Secondary mortgage market
Market where lenders and investors interact
Secondary mortgage market
Warehousing agencies purchase a number of loans assembled into packages called...
Fannie Mae
Federal national Mortgage Association - a quasi-governmental agency organized as a privately owned corporation that provides a secondary market for loans
Buys a block of loans from a lender in exchange for mortgage-backed securities
Fannie Mae - Guarantees payment
Ginnie Mae - Government agency. a pass through certificate is a security interest in a mortgage pool. Certificates guaranteed by Ginnie Mae
Division of HUD
GNMA (Ginnie Mae)
Federal Home Loan Mortgage Corporation (Freddie mac) - provides a secondary market for loans. Does not guarantee payment of Freddie mac mortgages
Borrower is called a....
Lender is called a....
States that view a mortgage as a conveyance are called...
Title theory states
States that view a mortgage as nothing more than collateral for the loan are called....
Lien theory states
States (including PA) that have adopted a hybrid philosophy based on both title theory and lien theory states
Intermediary theory states
Two parts of a mortage loan:
Note - the finance instrument &
The mortgage - the security instrument
Pledging property as security for payment of a loan without surrending possession of the property
With Trust Deed, who is lender and who is borrower?
Lender is Beneficiary (holder of the note) and the borrower is the Trustor.
This method has faster and simpler foreclosure procedures.
Two parties to a Note
Payor = borrower
Payee = Lender
Interest payments made at the end of a period
Arrears. Payments made at the beginning of each period are in advance.
Charging interest that exceeds the permissible maximum rate is called...
Fee charged to cover the lender's initial cost of generation the loan -
Loan origination fee
Principal is directly reduced over the life of the loan
Periodic payments are allocated only to interest. Entire principal is paid at the end of the loan term
Straight loan (term loan)
Amortized loan where the borrower pays a different (rather than the same) amount for each installment
Straight-line amortized loans
Clause which allows the lender to accelearate the maturity of the debt upon borrower's default
Acceleration clause. Means the entire debt can be declared payable immediately
By the provisions of this clause, Lender is required to execute a satisfaction of mortgage (release of mortgage).
Defeasance Clause
Basic recurring components of a borrower's monthly loan payment

Buyer is not personally obligated to pay the debt in full. Buyer takes possession and makes payments on the existing loan
Subject to
If the mortgage is foreclosed and court sale doesn't bring enough money to pay entire debt, this may be obtained...
Deficiency judgement
To prevent a future purchaser from assuming a loan, the lender may declare the balance of the debt due immediately or permit the buyer to assume the loan upon the property's sale.
Alienation Clause (due-on-sale)
Agreement that changes the priority of mortgage liens.
Subordination agreement
Legal procedure in which property pledged as security is sold to satisfy the debt.
Three types of foreclosure proceedings
Judicial, nonjudicial, strict foreclosure
Type of foreclosure that allows the property to be sold by court order
Judicial foreclosure
Foreclosure done in deed of trust states. Contains a power of sale clause. No court action required.
Nonjudicial foreclosure
Appropriate notice is given. Court establishes a deadline. If borrower is not payed off, court simply awards legal title to lender. No sale takes place
Strict foreclosure
Friendly foreclosure which is carried out by mutual agreement.
Deed in lieu of foreclosure. Mortgagee takes real estate subject to all junior liens (which is unusual for foreclosures)
After default but before the foreclosure sale, borrower may pay the lender what is owed and the debt will be reinstated.
Equitable right of redemption
Two types of redemption rights
Equitable - Before the foreclosure sale
Statutory - After the foreclosure sale
Allows defaulted borrowers a period to redeem their real estate after the sale. (up to 2 years)
Statutory right of redemption (not in PA)
Association of Real Estate License Law Officials
Administration and enforcement of Uniform policies re: real estate laws
Standards whose objective is to protect the rights of purchasers, sellers, tenants and landlords
Real Estate Licensing and Registration Act
Who supervises activities of licensees in PA?
State Real Estate Commission
Within the dept of state, under where does the State real Estate Commission operate?
Bureau of Professional and Occupational Affairs
State Real Estate commission is comprised of....
11 members
Commissioner (of Professional & Occupational affairs)
Director (Bureau of Consumer Protection)
3 members representing the Public
5 licensed brokers (10 yrs experience)
one cemetary broker (5 yrs. experience)
Appraisal activities are governed by
State Board of Certified Appraisers
(not Real Estate Board)
One who buys & sells for another for a commission.
Broker. Must be properly licensed to perform certain activities and collect compensation
Applicant for a broker license must...
Be 21. High school grad or equivalent.
*Complete 240 hours (16 credits) within 10 years of passing licensing exam
*Salesperson for 3 years
*Pass both portions of a written exam within 3 years of application
*Submit written application
Individual broker employed by another broker
Associate broker
Accountable and considered employees of a broker
NOT permitted to independently negotiate terms of a lease on behalf of a lessor.
Licensed Salesperson
Education requirements for cemetary brokers & salespersons
Broker - 60 hrs. & 3 years as salesperson & pass exam
Salesperson - no education. must be 18 yrs. old
Builder-owner salespeople must be...
full time employees by builder-owner (who is not licensed)
No education requirement
Rental listing referral agent requirements:
Does not need to be listed with broker.
Otherwise, same as salesperson requirements.
Current license period for real estate licenses
Two years.
Continuing education requirement for licenses
14 hours
Status of license when individual fails to properly renew
Inactive. May be reactivated within 5 years of inactivity. Must obtain 14 hours of education before reactivating
State Real Estate Commission has authority to...
Suspend a license
Revoke a license
Levy fines not exceeding $1k
Maximum Penalty for Engaging in unlicensed activities
First offense- fine up to $500 and/or imprisonment, not to exceed three months

Second/Subsequent offenses - fine of $2,000 to $5000 and/or imprisonment for one to two years
A revocation of a license lasts for at least....
5 years
Civil penalties for licensees violating the Act or person practicing without a license.
Up to $1,000
Fund established to provide a means for aggrieved persons to collect judgments awarded in civil court from real estate licensees for fraud.
Real Estate Recovery Fund
Maximum Amount Payable from Recovery Fund
$20,000 per claim
$100,000 per licensee

Licensee is automatically suspended and cannot be reinstated until licensee repays amount of claim plus 10% interest.
A person who is the recipient of any real estate service
A consumer of real estate services who has entered into an agency relationship with broker
Licensee who has entered into an agency relationship with a seller of real estate
Seller agent
A broker, not employ of the listing broker, who is engaged to act for or coorporate with the listing broker in selling property as an agent of the seller. A subagent is deemed to have an agency relationship with the seller.
A broker engaged as a seller's agent, dual agent, or the ansaction licensee to market the property of a seller/landlord
Listing broker
Licensee who acts as an agent for the buyer and seller or lessee and landlord in the same transaction
Dual agent
One or more licensees designated by the employing broker with the consent of the principal to act as agents on behalf of the principal to the exclusion of all other licensees within the broker's employ.
Designated agent
Licensed broker or salesperson who provides communication or document prep services
Transaction licensee
What must brokers do with funds pending consumation or termination of the transaction?
Deposit funds who belong together in an escrow account in a federally or state insured bank
If funds are held in escrow for more than 6 mos., they must be deposited where?
In an interest bearing account.
Who assumes the escrow duty for funds? Listing or selling broker?
Generally whoever recieves the funds. In a cobrokerage transaction, notice must be given to the buyer as to where the funds are going.
When is a broker responsible for depositing funds in escrow?
By the next business day following receipt. Broker may with written permission from both buyer and seller refrain from depositing monies until acceptance of offer.
When is a broker responsible for depositing funds in escrow?
By the next business day following receipt. Broker may with written permission from both buyer and seller refrain from depositing monies until acceptance of offer.
If resolution of a dispute appears remote without legal action,the broker may petition the court to interplead when?
30 days. Broker may not appropriate any part for commission
If licensee represents more than one party (dual agency), all parties must give what?
Written consent and notification of conflicts
Registration not required for promotional property that involves...
fewer than 50 lots or shares or land areas of less than 25 acres.