Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
299 Cards in this Set
- Front
- Back
|
Texas Real Estate License Act (TRELA) was first passed in: |
1939 |
|
|
The purpose of the Texas Real Estate Act (TRELA) is to: |
-protect the public against unscrupulous brokers and salesman |
|
|
Brokerage |
-for a commission or fee, bringing together parties interested in buying, selling, exchanging or leasing real property |
|
|
How long does a consumer have to file a complaint with TREC against a licensee? |
-in writing, 4 years from the date of the incident |
|
|
The Texas Real Estate Commission (TREC) was created by legislature in: |
1949 |
|
|
TREC's primary purpose is to: |
carry out the provisions of the license act |
|
|
How many members in TREC? |
9 members -6 brokers -3 public members |
|
|
Who writes the TREC promulgated forms? |
the Broker Lawyer Committee formed in 1974 |
|
|
How many members in Broker Lawyer Committee? |
13 members -6 brokers -6 attorneys -1 public member |
|
|
Real Estate Recovery Trust Account |
-protects consumers who suffer a loss due to illegal acts of licensees -has 2 maximum payment amounts: $50,000 and $100,000 -must transfer any amount over $3.5 million to the State's General Fund |
|
|
3 physical characteristics of land (real property): |
-Indestructibility: the fact that land cannot be destroyed -Immobility: the fact that land cannot be moved -Nonhomogeniety: the fact that no two pieces of land are the same |
|
|
4 economic characteristics of land (real property): |
-Scarcity -Modification -Fixity -Situs |
|
|
Improvements |
-any addition to the land held to improve or develop the land ex: buildings, landscaping, fences, patios, decks, roads, curbs, etc. |
|
|
Chattel (personal property; personalty) |
-things of temporary or movable nature |
|
|
Deed |
-document used to transfer real property |
|
|
Bill of Sale |
-document used to transfer personal property -accompanies the deed |
|
|
Fixture |
-a piece of personal property that has become attached to the land in such a way to become as to become real property ex: wall-to-wall carpeting, ceiling fans, custom made blinds, and built-in appliances |
|
|
Annexation |
-the process of attaching personal property so that it becomes real property |
|
|
Severance |
-removing fixtures (by unattaching or uninstalling them from real property) to create personal property |
|
|
3 Tests to determine if something is a Fixture |
1. Method of attachment 2. Adaptation to the property 3. Intention of the parties (the most important test) |
|
|
Trade Fixture |
-items necessary for an individual to carry out his trade or profession -may be removed and taken with tenant prior to lease expiration ex: barber chairs, medical examining tables, grocer's refrigerated cases, checkout counters |
|
|
Emblements |
-Growing crops, such as grapes and corn, that are produced annually through labor and industry -Considered personal property and may be harvested by the owner |
|
|
Riparian Rights |
-the rights to use water from a river or a stream on or next to your property |
|
|
Littoral Rights |
-the rights to use water from a lake, ocean, or sea next to your property |
|
|
Legal Descriptions of Property |
1. Metes and bounds-terminal points and angles 2. Lot and block-a recorded map or plat 3. Government Survey System-baselines, meridians, ranges, townships, and sections 4. Appraisal District's parcel number 5. Street Address (informal reference) |
|
|
Police Power |
-the right of the government to regulate and control the way you use your land -the most common example is ZONING ex: wetlands legislation, environmental protection legislation, and health and fire codes |
|
|
Eminent Domain |
- the right of the government to take private land for public use -the process of taking the land is CONDEMNATION ex. for valid reasons: schools, parks, hospitals, government buildings, roads, and utilities |
|
|
Taxation Escheat |
-the government retains the right to tax your land -if a person dies intestate (without a will) and without heirs, the government will take title to his real property |
|
|
Property Taxes |
-are AD VALOREM, or according to value. The greater the value of your land, the higher the taxes. -create the highest lien against your property -will always be paid first at foreclosure |
|
|
Assessed Value |
-property value for tax purposes |
|
|
Private Controls of Land (Property) Use |
-Deed Covenants -Conditions and Restrictions (CC&R) -Home Owner Association (HOA) regulations |
|
|
Estate |
-the interest, or nature of the interest, a person has in real property |
|
|
4 categories of Estates |
-Freehold Estates -Leasehold Estates -Statutory Estates -Equitable Estates |
|
|
Fee Simple |
-ownership in which a person has the most rights in his/her property |
|
|
Conditional, Defeasible, or Determinable Fee |
-ownership that could be voided if a condition is not met, or if a requirement is violated |
|
|
Life Estate |
-ownership for the duration of someone's life |
|
|
Estate in Severalty |
-ownership by one person or one legal entity |
|
|
Community Property Texas is a community property state. |
-ownership based on Spanish Law, which states that marriage is partnership, all property acquired during the marriage is owned equally by both spouses -both signatures are required to sell -if one spouse dies, one half goes to surviving spouse, other half to heirs of deceased |
|
|
Tenancy in Common |
-ownership of property held by two or more unmarried owners -ownership passes to heirs at probate |
|
|
Joint Tenancy |
-least popular type of ownership -Four unities required: -Time -Title -Interest -Possession |
|
|
Right of Survivorship |
-When a joint tenant dies, his share is equally divided among the surviving joint tenants, immediately -Heirs have no claim on the property |
|
|
Estate for years |
-any lease with a specific starting and ending date ex: week, month, year, ten years -No notice is required for the estate to end |
|
|
Periodic Tenancy or periodic estate |
-lease that automatically renews itself for like periods ex: month-to-month or week-to-week |
|
|
Estate at Will |
-either the landlord or tenant may agree to terminate the lease "at will" -this is the only lease that is easily terminated by the death of the landlord or sale of the property |
|
|
Tenancy of Sufferance |
-created when a lease expires and the tenant remains on the premises -the holdover tenant no longer has the right to remain on the property. He is not paying rent and landlord does not accept his presence. |
|
|
Holdover Tenancy |
-created when landlord accepts rent from the holdover tenant; sometimes considered periodic estate |
|
|
Types of Leases |
-Gross lease: landlord pays all the expenses of the property; tenant simply pays rent -Net lease: tenant pays rent plus portion of the expenses of the property; taxes, maintenance, utilities -Percentage lease: tenant's rent is based in whole or in part on the receipts of his business |
|
|
The two most familiar statutory estates to Texas are: |
-Community property -Homestead |
|
|
Tenancy by Entirety |
-basically joint tenancy, but tenants must be married to one another -when one dies, the other immediately becomes the owner in severalty |
|
|
Homestead Law has two main purposes: |
1. To prevent forced sale of the home by creditors 2. To provide a surviving spouse with shelter |
|
|
5 exceptions to Homestead protection: |
1. Non-payment of property taxes 2. Non-payment of mortgage lien 3. Non-payment of mechanic's and material man's lien 4. Non-payment of HOA fees or dues 5. Non-payment of Home equity loan |
|
|
Dower |
-the legal right or interest a wife has in the property her husband held or acquired during their marriage -during the husband's lifetime it is only a possibility of interest: upon his death it can become an interest in land -Dower is not recognized in Texas. |
|
|
Curtesy |
-the legal right or interest the husband has in the property of his wife -follows the same rules as dower rights |
|
|
Encumbrance |
-a claim, lien, charge, or liability attached to and binding real property |
|
|
Lien |
-a claim against property to secure payment for a debt -is an encumbrance -can be created voluntarily by agreement of the parties (mortgage lien) or involuntary or statutory through the operation of law (judgement lien) |
|
|
Easement |
-the right to use or pass over another's property for a specific purpose |
|
|
Easement in Gross |
-belongs to a person or corporation and does not belong to the land -most common example: utility easement |
|
|
Easement Appurtenant |
-runs with the land and passes to new owners when the land is sold -most common use is for ingress or egress, or to enter and exit one's property -can be terminated by merger, release, abandonment, or death in the case of personal easement |
|
|
Option Contract |
-the right to purchase a property within a preset time period at a preset price -the buyer is under no obligation to purchase, but if the buyer decides to buy, the seller must sell to him. During the term of the option, the seller cannot sell to another. |
|
|
Alienation |
-any change in the ownership of real property -can be voluntary ex: gift, sale, or will *accompanied by conveyances (deeds, patents, wills) -can be involuntary ex: foreclosure, bankruptcy, condemnation proceedings, adverse possession, or escheat ex: acts of nature |
|
|
Adverse Possession |
-occurs when an individual acquires title from the rightful owner through hostile, actual, continuous occupation of the land for the statutory period *Most often 10 years in Texas -a shorter time will be sufficient with a Color of Title, some indication of a right to be there ex: paid ad valorem taxes or old deed |
|
|
Statute of Frauds |
-statute that requires the transfer of ownership of real property to be accomplished in writing and signed in order to be enforceable in a court of law |
|
|
Title |
-the evidence an individual has of his right to possess land (the right to or ownership of real property) -A deed is used to coney title |
|
|
Abstract of Title |
-a complete history of the title of a piece of property -includes deeds, easements, liens, foreclosures, wills, marriages, deaths, life estates, fee simple estates, and anything else that may have been recorded about a property |
|
|
Attorney's Opinion of Title |
-after given the abstract of title, the attorney's opinion regarding the state of the title and its ability to be transferred |
|
|
Chain of Title |
-a history or list of all recorded owners since title was first transferred from the government to an individual -insures that there are no missing "links" or breaks in the chain (cloud on a title) |
|
|
Title Insurance |
-a policy that protects the insured "against a loss resulting from defects of title" -In Texas, the State Board of Insurance regulates title insurance. |
|
|
Title Commitment (Title Report) |
-a statement of the condition of title at a moment of time -title company has 20 days after they receive the contract and earnest money which to issue a title commitment. |
|
|
5 requirements for Valid Deed |
1. Must have grantor and grantee 2. Consideration 3. Words of Conveyance 4. Legal description of Property (street address not sufficient) 5. Must be executed (signed by the grantor) |
|
|
Consideration |
-something of value given in exchange for the land -valuable consideration ex: money or other personal property or real property -good consideration ex: love and affection |
|
|
Words of Conveyance |
-words that indicate the grantor's knowledge that an interest in real property is being conveyed, or given, to another -often found in the granting clause -Habendum clause: indicates the extent of the premises being conveyed; "to have and to hold clause" |
|
|
Covenant of Seizin |
-states that the grantor owns the property, has the right to convey it to the grantee, and has not previously conveyed it to another |
|
|
Covenant against Encumbrances |
-states that the only limitations to title are those listed in the deed |
|
|
Covenant of Quiet Enjoyment |
-promises the grantee uninterrupted use of the property |
|
|
Restriction |
-in a deed, a limitation placed on the new owner by the grantor ex: requirement that the property only be used for residential purposes |
|
|
Reservation |
-in a deed, reserves rights for the grantor ex: may reserve or keep the mineral rights for himself, or he may reserve an easement for himself |
|
|
Record the deed |
-means entering it into the public records -it is considered giving constructive notice (give notice to the world of ownership and protect against fraudulent claims of others) -deed must first be acknowledged |
|
|
Acknowledgement |
-statement made to a notary, or one authorized to take oaths, that one's signature was freely given -verifies the signature |
|
|
General Warranty Deed |
-most common type of deed in Texas -offers the purchaser the greatest degree of protection -states that the grantor will warrant and defend the grantee's interest in the property, back to the sovereignty of the soil |
|
|
Special Warranty Deed |
-states that the grantor will warrant and defend title but only against claims which may have risen during his period of ownership |
|
|
Bargain and Sale Deed |
-deed with no guarantees or warranties -very basic deed and does nothing to protect the grantee |
|
|
Quit Claim Deed |
-deed with no guarantees, warranties, or covenants; grantor does not even claim to own the property -most often used to clear up a cloud on the title -also used to grant an easement |
|
|
Less commonly used deeds |
-gift deed: consideration is love and affection -guardian's deed: minor's interest is conveyed -sheriff or trustee's deed: in case of foreclosure -correction deed: to correct an error in a previously executed deed -tax deed: to convey title to property sold by the government at a tax sale |
|
|
Partition |
-division or split of property by the court -may also be by voluntary agreement of the parties |
|
|
Assemblage or Plottage |
-the combination of two or more properties into one |
|
|
Will |
-A written expression of the desire of a person as to the disposition of that person's property after death |
|
|
Hereditament |
-any property, real or personal, that is capable of being inherited -should be handled or disposed of by will |
|
|
Intestate |
-someone who dies without a will -his property will be handled by court appointed administrator -property will be passed to his heirs at probate |
|
|
Testate |
-someone who dies leaving a valid will -estate will be settled by an executor chosen by that person and named in the will -property will be passed to his heirs at probate |
|
|
Formal (Witnessed) Will |
-prepared by an attorney -is the best type as it will be accepted in all 50 states -least likely to be contested |
|
|
Holographic (Handwritten) Will |
-perfectly legal, but more easily contested -used in some states including Texas -unless the person was an attorney, it is possible that this type of will may not conform exactly to he state's legal requirements |
|
|
Nuncupative Will |
-an oral or deathbed will -while legal in Texas, is very vulnerable to being contested -only legal for personal property, not real property |
|
|
Codicil |
-an addition or amendment to an existing will -must be done in the same way as the original will ex: formal will requires formal codicil, holographic will must have holographic codicil, etc. |
|
|
Devise |
-real property conveyed by will -the person inheriting (devisee) it is said to have acquired title by devise |
|
|
Title by Descent |
-real property inherited without a will -personal property that is inherited is a bequest; money is a legacy |
|
|
Beneficiary |
-one who receives property through a will |
|
|
Probate |
-the formal judicial proceeding to prove or confirm the validity of a will, to collect the assets of the decedent's estate, to pay the debts and taxes, and to determine the persons to whom the remainder of the estate is to pass -even if there is no will, the estate is still subject to probate action |
|
|
Patent |
-title conveyed from the state to an individual |
|
|
Dedication |
-the voluntary transfer of private property by its owner to the government |
|
|
Agency |
-a relationship in which one party acts for another who has authorized him to do so -the two parties in the relationship: principal (client) and the agent (the one who acts for the principal) |
|
|
Fiduciary Relationship |
-a relationship based on trust and binds both parties to certain standards of behavior or duties to one another |
|
|
Agency Relationships |
-most often created by a listing agreement or a buyer's representation agreement -should always be in writing to be enforceable and to protect the parties -considered employment contracts |
|
|
Creation of Agency |
-Actual authority: occurs when agent has been appointed in writing or orally by the principal -Implied authority: specific behaviors haven't been listed but are implied if they are necessary ex: broker sending out flyers of property -Ostensible authority: created when agent acts as if he has the right to represent a principal (can lead to serious difficulties for the agent and is not recommended) |
|
|
3 Types of Agency |
-Universal agency (unlimited authority) -General agency (has the power to bind) -Special agency (limited authority, can not bind) |
|
|
Duties of the Principal |
Compensation Reimbursement Indemnification Performance |
|
|
Duties of the Agent |
Obedience Loyalty Disclosure Confidentiality Accounting Reasonable care |
|
|
Contract |
-a legally enforceable agreement to do ro refrain from doing a particular thing -can be verbal, written, or implied which means the actions involved created the contract -can be valid, void, viable, and unenforceable |
|
|
Bilateral Contract |
-exists when both parties to a contract make promises that can be enforced by a court of law -both parties have duties to perform |
|
|
Unilateral Contract |
-exists when only one party can be obligated to perform -ex: option contract which lacks morality |
|
|
Valid Contract |
-one that meets all the requirements of the law, and is therefore able to be enforced in court |
|
|
Void Contract |
-one that has no effect on the parties signing it -it does not necessarily have to be illegal, but it does not meet all the requirements and is therefore no contract at all |
|
|
Voidable Contract |
-one that can be cancelled or voided by one of the parties -in other words, only one party is bound by the contract, and the other is not |
|
|
Unenforceable Contract |
-one that will not hold up in a court of law |
|
|
5 Requirements of a Valid Contract |
1. Competent parties (18 yr and of sound mind) 2. Offer and acceptance (mutual consent) 3. Legal Purpose (purpose of agreement must be legal) 4. In writing, where required by law 5. Consideration (promise, money, property, or personal services) |
|
|
Statute of Frauds |
-purpose of this law is to prevent fraud by requiring contracts to be in writing and signed in order to be enforceable -Lease agreements for one year or less are the exception to the Statute of Frauds. |
|
|
Executory contracts |
-those that binding to the parties, with one or more of the parties having contractual duties that have not yet been performed. |
|
|
Assignment |
-total transfer of rights and liabilities under a contract |
|
|
Novation |
-occurs when the original contract is cancelled and a new contract replaces it |
|
|
Breach of Contract, Default |
-when one party fails to perform as promised in a contract |
|
|
Partial Performance |
-innocent party settles for the performance completed to date and does not sue the other party for full performance |
|
|
Unilateral Rescission |
-occurs when the injured party retaliates by his failure to perform as promised |
|
|
Suit for Specific Performance |
-the injured party sues the defaulting party, asking the judge to force that party to perform exactly as promised in the contract |
|
|
Legal action for performance or damages must begin: |
-within 4 years of the date of a written contract -within 2 years of the date of an oral contract |
|
|
Mutual Rescission |
-agreement by the parties to walk away from the contract |
|
|
Primary Market |
-institutional lenders, mortgage companies, commercial banks, insurance companies, and individual investors |
|
|
Secondary Market |
-Fannie Mae, Freddie Mac, Ginnie Mae, pension funds, insurance companies, individuals, and mutual savings banks -Fannie Mae is the most important source of funds in secondary market. |
|
|
Mortgage brokers |
-specialists in bringing together borrowers and lenders |
|
|
Point |
-1% of the loan |
|
|
Conforming loans |
-loans that meet Fannie Mae underwriting standards |
|
|
Non-Conforming loans |
-loans that do not meet Fannie Mae requirements |
|
|
Mortgage |
-an instrument that pledges real property as security for a debt |
|
|
The mortgage instrument has two parts: |
-the mortgage (the pledge) - the note (promissory note) the actual evidence of the debt and the personal promise to repay |
|
|
General Lien |
-lien that attaches to all the non-exempt property of the debtor ex: IRS liens and judgements |
|
|
Specific Lien |
-lien that attaches to one or more specific or listed properties |
|
|
Recording means: |
-entering something into public records -gives constructive notice (notice to the world) |
|
|
Deed of Trust |
-a three party mortgage: -borrower (trustor) -mortgagor;lender (beneficiary) -a third party (trustee) |
|
|
"Power of Sale" Clause |
-clause that allows the trustee to foreclose on the property, in the event of default, without going to court |
|
|
Assumption |
-when a buyer takes over the existing loan when purchasing a property -assumption "subject to": buyer takes over payments, not liability -standard assumption: buyer takes over payments and liability |
|
|
Budget loan |
-one where the lender collects principal, interest, taxes, and insurance as part of the monthly payment (PITI) |
|
|
Amortized loan |
-a loan with equal regular payments over the life of the loan -most common is a fixed rate loan |
|
|
Adjustable Rate Mortgage (ARM) |
-a mortgage loan in which the interest rate may increase or decrease at specified intervals over the life of the loan -% added to the index is the margin -limit on how much of an adjustment is allowed is the cap or ceiling |
|
|
VA Loan |
-guaranteed by the Veteran's Administration, does not lend money only insures loan -no money down, must obtain certificate of eligibility, property must meet VA standards, and veteran must occupy the property -Certificate of Reasonable Value (CRV) is the VA appraisal |
|
|
Federal Housing Administration (FHA) |
-does not lend only insures, requires low down payment, with insurance for lender paid for by the borrower -charges an UFMIP that can be added to the loan or paid at closing; 1/12 of the annual insurance premium will be added to each monthly payment |
|
|
Balloon Loan (Partial Amortization) |
-loan that is set up like a fixed rate amortized loan, however after some point short of the full term (1,3,5 years), the balance of the loan is due |
|
|
Blanket loan |
-loan that covers two or more pieces of property |
|
|
Package loan |
-loan that includes both real and personal property as security |
|
|
Term loan |
-loan where the payments are interest only and the full amount of the debt is due at the end of the term ex: construction loan -also called straight loan or zero amortization loan |
|
|
Equity loan or Home Equity Loan |
-loan that allows a homeowner to borrow against the equity in his property |
|
|
Wraparound Mortgage |
-preserves an existing low rate loan and wraps a larger loan around it |
|
|
Graduated Payment Mortgage (GPM) |
-one where payments rise over a period of years and then level off for the remaining term of the loan |
|
|
Seasoned Mortgage |
-one with a history of on-time payments |
|
|
Contract for Deed |
-seller financing in which the seller does not transfer title to the buyer until the final payment is made ad the loan balance is zero -if the buyer defaults on the loan, the seller can evict him and all money paid up to that date is considered rent |
|
|
Loan to Value Ratio(LTV) |
-the percent of market value that a lender is willing to lend |
|
|
Market Value |
-the price a willing buyer will pay and a willing seller will sell for, if neither is under pressure -To a lender, market value is the sales price or the appraised value whichever is lower |
|
|
Leverage |
-using minimum cash down and maximum financing |
|
|
Appraisal |
-an estimate or opinion of value -it is neither a sales price nor a guarantee of any kind |
|
|
Appraisals come in 3 main varieties: |
-letter appraisal: "drive-by appraisal" simplest, quickest, least expensive, least accurate -form appraisal: most often used by lenders -formal appraisal: used in court cases and large development projects, an in-depth analysis of the property |
|
|
3 Methods of Appraisal |
-Market Data Approach -Cost Approach -Income Approach |
|
|
Market Data Approach (Sales Comparison Approach) |
-most often used for residential properties -based on comparison of the subject property to similar properties in the area |
|
|
Cost Approach |
-a mathematical formula for calculating the replacement value for unique, one-of-a-kind properties, where there are no comparables *cost approach = land + building replacement cost - depreciation |
|
|
Appraiser looks at 3 different types of Depreciation: |
-physical deterioration: loss of value due to daily wear and tear -functional obsolescence: loss of value due to changes in styles and outdated fixtures; lack of modernization to property -external obsolescence: loss of value caused by external factors such as declining neighborhoods |
|
|
Income Approach |
-involves converting an income stream not an indication of value; used for rental properties -referred to as capitalization -market value = net annual income / capitalization rate |
|
|
Capitalization Rate |
-the required rate of return of the investor |
|
|
(RESPA) Real Estate Settlement Procedures Act |
-1975 -regulates closings on one to four family residential properties with federally related financing |
|
|
Civil Rights Act of 1866 |
-first fair housing law -prohibits discrimination in housing based on race and color |
|
|
Federal Fair Housing Law (Title VIII of the Civil Rights Act of 1968) |
-prohibits discrimination on the basis of race, color, religion, sex, national origin, physical handicap, or familial status |
|
|
Steering |
-taking buyers or renters to, or away from, a particular area based on the race, religion, etc. of the buyer or renter -also know as channeling |
|
|
Blockbusting |
-trying to induce panic selling in a neighborhood for financial gain -also known as panic peddling |
|
|
If an individual feels he has been discriminated against, he may: |
-file a complaint with HUD, the courts, or the U.S. Attorney General within 1 year |
|
|
Texas Fair Housing Act |
-passed in 1989 -closely parallels the Federal Fair Housing Act |
|
|
Americans with Disabilities Act (ADA) |
-passed in 1990 -prohibits discrimination against those with disabilities by denying them the full and equal enjoyment of goods, facilities, accommodations, services, and privileges. |
|
|
Equal Credit Opportunity Act |
-passed in 1974; ensures that all consumers are given an equal chance to obtain credit -prohibits discrimination in lending based on race, color, religion, national origin, sex, marital status, age or the receipt of income from a public assistance program |
|
|
Community Reinvestment Act |
-passed to insure that banks would serve the needs of the community in which they were chartered to do business -prohibits redlining |
|
|
Redlining |
-a practice of refusing to provide financing in a particular area because of location -Only banks can be guilty of redlining. |
|
|
Fair Credit Reporting Act |
-allows an individual access to his/her credit reports and the right to offer an explanation about any exceptional item in the report |
|
|
Truth-In-Lending Act |
-part of the Consumer Credit Protection Act implemented by Regulation Z -protects consumers by providing them with complete information regarding loans and the actual cost of borrowing -most significant aid is APR, Annual Percentage Rate |
|
|
Anti-Trust Laws |
-the Sherman and Clayton Anti-Trust Acts -promote competition, and prohibit activities that limit it -biggest impact is in the area of commissions |
|
|
Federal Do Not Call list |
-regulates interstate and international calls -those engaging in telemarketing or cold calling are permitted to contact someone whose name is on the list if there is a past business relationship with that person |
|
|
Licensing Requirements |
-be 18 years of age -be a resident of Texas at time of application -demonstrate competency by passing exam -submit fingerprints to TREC for background check -demonstrate integrity |
|
|
Code of Ethics |
-Fidelity -Integrity -Competency |
|
|
Protected classes include: |
-race, color, religion, sex, national origin, ancestry, familial status, and handicap |
|
|
Most common instruments used to create agency: |
- Listing agreement -Buyer representation agreement -Property management agreement |
|
|
Information About Brokerage Services (IABS) |
-required by Senate Bill 489 -form that explains the role of the agent in a real estate transaction in Texas |
|
|
Provide the IABS: |
-At the first substantive dialogue with a prospect -Before a listing agreement is discussed -Before a buyer representation agreement is discussed -In person, by phone, or by email |
|
|
Dual Agency |
-buyer represents both buyer and seller -set of rules and guidelines that brokers must follow in order to protect the interests of both parties -In Texas we must use Intermediary instead. |
|
|
Intermediary |
-replaces dual agency -broker must obtain written consent from both parties to act as an intermediary -written consent must include the source of any compensation paid to the broker |
|
|
Intermediary Without Appointments |
-when there is only one associate of the broker working with both the buyer and the seller in the same transaction |
|
|
Intermediary With Appointments |
-with the parties' consent, one associate of the broker is working with one party and another associate is working with the other party |
|
|
4 Different types of Listing Contracts: |
-Net Listing -Open Listing -Exclusive Rights to Sell Listing -Exclusive Agency Listing |
|
|
Net Listing |
-the seller states a desired amount for the sale of the property and anything above and beyond that desired sales price is the broker's commission -not allowed in the MLS |
|
|
Open Listing |
-the seller may give the listing of a property to any number of brokers. The broker who finds a buyer first is entitled to the sales commission. -the seller also retains the right to sell the property himself without paying a commission to anyone -not allowed in the MLS |
|
|
Exclusive Right to Sell Listing |
-the seller lists a property with one broker. The seller pays the broker a commission even if the seller sells the property himself -mostly used in the MLS -offers the broker the most protection |
|
|
Exclusive Agency Listing |
-the seller lists his property with one broker. The seller reserves the right to sell the property without the broker's assistance and without paying a commission. -described as one in which the seller is competing with the broker -allowable in the MLS |
|
|
Listings may be terminated: |
-automatically on the termination date -fulfillment of purpose (property sold & closed) -mutual agreement -abandonment of the listing -the broker or principal files bankruptcy, is legally insane, or death of either party -acts of the parties |
|
|
Bundle of Rights |
-all the rights that an owner possesses -the right to sell, mortgage, lease, exchange, use, abandon, and gift the property to others |
|
|
Alienation |
-the transfer of ownership of real property |
|
|
Voluntary Alienation |
-when one party chooses to transfer ownership to another -involves written document such as deed, patent, or will |
|
|
Involuntary Alienation |
-usually involves the courts; foreclosure, bankruptcy, eminent domain, adverse possession, inheritance -can also be results of acts of nature; water, earthquakes, volcanoes, etc. |
|
|
Accretion |
-water deposits soil, called alluvion, onto the property and the property grows |
|
|
Erosion |
-water washes away land and the property loses size |
|
|
Avulsion |
-a river or stream changes direction resulting in one side gaining land and the other side gaining water |
|
|
Reliction |
-water dies up and land appears |
|
|
HUD-1 Statement |
-the closing statement presented to divide charges and expenses between the buyer and the seller |
|
|
Proration |
-the division of an ongoing expense between the parties -indicated on the HUD-1 |
|
|
Debit |
-when a party is paying for an item |
|
|
Credit |
-when a party is receiving funds |
|
|
Procedural Rule 53 (P-53) |
-regulates some of the activities of Title Insurance Companies |
|
|
Power of Attorney |
-when an individual gives another the power to act on his/her behalf |
|
|
Attorney-In-Fact |
-the person holding the power of attorney |
|
|
Assessed Value |
-the official value of a property determined by the local taxing authority |
|
|
CMA (comparative market analysis) |
-an estimate of market value of a property given by a real estate licensee -not an appraisal |
|
|
Range of Value |
-As licensees, we never give an exact dollar amount, we always provide a range. |
|
|
Tax Lien |
-lien for unpaid property taxes (a specific lien) and/or IRS taxes (a general lien) |
|
|
Mechanic's and Materialman's Lien (M&M Lien) |
-lien for the purpose of securing payment for work or materials furnished in erecting or repairing a property |
|
|
Judgement Lien |
-lien that arises from lawsuits where money damages were awarded |
|
|
In-House Sale |
-the property is sold by the listing firm |
|
|
Cooperative Sale |
-the property is sold by a firm other than the listing firm |
|
|
Cooperative Broker |
-a broker selling the listing of another broker |
|
|
Subagency relationship |
-buyer must be an unrepresented customer -sale must be a cooperative sale |
|
|
Subagent |
-A licensee not associated with the seller's broker but is representing the seller through a cooperative agreement |
|
|
A licensee is not required to provide the IABS if: |
-the proposed transaction is for a residential lease for not more than one year and no sale is being considered -the licensee meets with a party who is represented by another party |
|
|
Commingling |
-mixing client's funds with the business, operating, or personal funds of a broker -serious violation of License Act |
|
|
Conversion |
-when a broker spends their client's funds without authorization -serious violation of License Act |
|
|
Funds must be promptly deposited in an escrow account by: |
-the end of second business day after the date of receipt. |
|
|
Deceptive Trade Practices Act (DTPA) |
-Texas law passed in 1973 -allows an aggrieved consumer to sue a seller of goods for damages |
|
|
Puffing (Puffery) |
-the use of adjectives/opinions rather than details or facts; overstating the positive features of a property ex: most beautiful landscaping; best water in the world -is not misrepresentation; is marketing Exaggerated puffing can lead to misrepresentation. |
|
|
Stigmatized |
-a property where there has been a murder or alleged haunting; property in the vicinity of a known sex offender -Licensees are not required to disclose the information but should refer buyers to local information sources if buyers ask about this. |
|
|
Remediation |
-the removal of mold -Owners can assess and remove without a license; contractors must be licensed by Texas Department of State Health Services. |
|
|
Additional Hazardous Substances and Conditions Law of Agency p.122-123 |
-Radon -Asbestos -UFFI - Urea Formaldehyde Foam Insulation -Lead -Landfills or waste disposal sites -Underground storage fuel tanks -Farming herbicides and pesticides -EMF's - electromagnetic fields |
|
|
Lead - in paint, pipes, and soil |
-use the lead paint disclosure for all properties built before 1978 |
|
|
Buyer's Temporary Residential Lease |
-for use when the buyer occupies the property for no more than 90 prior to closing |
|
|
Seller's Temporary Residential Lease |
-for use when the seller occupies the property for no more than 90 days after closing |
|
|
Right of First Refusal |
-gives the tenant the right to purchase the leased property by matching or bettering an offer before the property will be sold to anyone else |
|
|
Lease-Purchase Agreement |
-lease with an option to purchase -gives the tenant occupancy in the present time and the right to purchase at a future date; the price is set when the lease agreement is negotiated |
|
|
TREC specifically prohibits license holders in Texas from writing any lease with an option to purchase or a right of first refusal. |
If a license holder has a client interested in this type of transaction, the assistance of an attorney is required. |
|
|
Intentionally |
-means with actual awareness, or flagrant disregard of prudent and fair business practices |
|
|
Knowingly |
-means with actual awareness of a falsity, deception, or unfairness of an act |
|
|
Laws and legal customs in the U.S. are derived from two sources: |
-Common Law: body of law developed in England and based upon common sense and local custom; court looks to the findings of prior courts when rendering a decision -Statutory Law: body of laws and regulations enacted by federal and state legislatures |
|
|
Syndicate |
-when two or more parties join together to create and operate a real estate investment |
|
|
Testamentary Trust |
-a trust that is created by will and is effective upon the death of the decedent (deceased person) |
|
|
Inter Vivos Trust |
-a trust created during the lifetime of the trustor |
|
|
Sole Proprietorship |
-business venture that is owned by one individual |
|
|
Partnership |
-has one or more general partners -can be created with a simple written or oral agreement |
|
|
General Partner |
-responsible for day-to-day operations and has full liability |
|
|
Limited Partner |
-limited to the amount he/she invested in the partnership -no involvement in day-to-day operation -are the investors in the venture |
|
|
Corporate Ownership |
-ownership comprised of 3 components: -Shareholders -Board of Directors -Corporate Officers |
|
|
Timeshare |
-part ownership of a property coupled with the right to its exclusive use for a specified number of days per year, without the responsibility of full ownership -often referred to as interval ownership |
|
|
Prior Appropriation |
-a theory of water law based on the idea that "first in time is first in right" -the first owner to claim riparian rights has the exclusive right to take all the water for specific beneficial uses |
|
|
Appurtenance |
-a right or privilege or improvement that belongs to and passes with land, but is not necessarily a part of the land ex: easements, leases, fixtures, buildings and other improvements |
|
|
Encroachment |
-the intrusion of one's property onto another's property ex: a neighbor's fence that crosses a boundary or tree limbs extending over a boundary |
|
|
Pur Autre Vie |
-a life estate based on the life of another |
|
|
Sublet |
-the transfer of some or all of the tenant's rights and/or leased space to another with liability remaining with the tenant ex: a tenant rents out 5,000 sqft. of their 15,000 sqft. office space to a new tenant. Sublessee pays rent to the lessee, who in turn, pays the landlord. |
|
|
Addendum |
-an additional form that is attached to and incorporated into the contract -adds or further describes the rights and duties of the party |
|
|
Remedies for Buyer Default: |
-Specific Performance -Monetary Damages -Liquidated Damages |
|
|
Remedies for Seller Default: |
-Specific Performance -Monetary Damages -Refund of Earnest Money |
|
|
Contingency |
-a provision in a contract that requires that a certain act or event happens in order for the contract to be binding on the party -the term subject to is synonymous with contingent |
|
|
Promissory Note |
-the borrower's unconditional promise to repay -real estate lien note |
|
|
Short Sale |
-when seller is unable to sell his property at or above what the seller owes the lender |
|
|
Federal Reserve |
-the central banking system of the United States |
|
|
Secondary market |
-exists for the purchase and sale of existing mortgages to investors |
|
|
Hard-Money Loan |
-type of asset-based financing in which a borrower receives funds secured by the value of a parcel (piece) of real estate |
|
|
Open-End Mortgage |
-permits additional borrowing on the same note and mortgage |
|
|
Reverse Annuity Mortgage |
-homeowners who are at least 62 years of age can borrow against the equity in their property -loan becomes due upon sale of the property or death of the owner |
|
|
Four C's of good lending |
-Character: measure of willingness of buyer to make on-time payments -Capacity: measure of the borrower's ability to repay the debt -Capital: the sum of all assets that the borrower has accumulated -Collateral: something of value that can be pledged as security for repayment of the loan |
|
|
Front Ratio |
-used to qualify borrower based on the proposed PITI and GMI |
|
|
Back Ratio |
-ratio of the borrower's total recurring monthly debts |
|
|
Up-Front Mortgage Insurance Premium |
-when loan is funded, FHA charges an UFMIP -can be paid at closing or added to the loan at funded |
|
|
Down Payment |
-amount equal to, but not less than 3.5% of the appraised value of the property |
|
|
Habendum Clause |
-a clause in a deed that indicates the extent of the premises being conveyed |
|
|
Restriction |
-in a deed, a limitation placed on the new owner by the grantor |
|
|
Reservation |
-in a deed, reserves rights for the grantor |
|
|
Abstract of Title |
-a complete history of the title of a piece of property that includes deeds, easements, liens, foreclosures, wills, marriages, deaths, life estates, fee simple estates, and other documents affecting title |
|
|
Chain of Title |
-a completes history or list of all recorded owners all the way back to the sovereignty of the soil -a break would create a cloud on the title |
|
|
Kickbacks |
-Payments in excess of the reasonable value goods provided or services rendered -prohibited by Section 8 of RESPA |
|
|
Servicing |
-collecting monthly payments, disbursing the funds to pay taxes and property insurance, supervising the loan, preventing delinquencies and coordinating foreclosure activities in the event of a delinquency |
|
|
Underwriting |
-the detailed process of evaluating a borrower's loan application to determine the risk involved for the lender |
|
|
SAFE Act |
-designed to enhance consumer protection and reduce fraud -ensure that individuals acting as RMLOs (loan originators) receive training on and can demonstrate understanding of their legal and ethical obligations |
|
|
Consumer Financial Protection Bureau (CFPB) |
-established under Dodd-Frank -responsible for enforcing "federal consumer financial law" including but not limited to Truth In Lending Act, Fair Credit Reporting Act, RESPA, Equal Credit Opportunity Act |
|
|
Federal Reserve |
-the central banking system of the United States |
|
|
Discount Rate |
-the interest rate a Reserve Bank charges eligible financial institutes to borrow funds on a short-term basis |
|
|
Good Faith Estimate (GFE) |
-a detailed breakdown of the cost of the loan, including all fees and charges -mandatory |
|
|
Index |
-an instrument for measuring changes in interest rates |
|
|
Margin |
-the percent added to the index to calculate the payment interest rate |
|
|
Fully Index Rate |
-is equal to the margin plus the index and is usually to the nearest one-eighth of a percent |
|
|
Chronological Age |
-the actual age of the property in years. If the house is 20 years old, it has a chronological age of 20. |
|
|
Effective Age |
-the appraiser's estimate of the age of the house based upon its ongoing maintenance and upgrades |
|
|
Gross Rent Multiplier (GRM) |
GRM = Sales Price / Monthly Rent |
|
|
Cash Deposit |
-the amount of earnest money the borrower paid to the title company, as stated in the contract |
|
|
Churning |
-excessive selling/lending activity for the purpose of generating fees and commissions |
|
|
Chunking |
-occurs when a fraudster promises to show investors how to get rich buying investment properties |
|
|
Equity Theft |
-occurs when fraudsters forge a deed transfer or a satisfaction of lien, and then obtain new liens on the property |
|
|
Property Flipping |
-occurs when a property is refinanced or resold immediately after purchase for an artificially inflated value |
|
|
Straw Buyer |
-a person who is used to buy property in order to conceal the actual owner |
|
|
Fraud Enforcement and Recovery Act (FERA) |
-increases the penalties for a federal conviction for mortgage fraud to a maximum of 30 years in prison and a fine of up to $1 million and increases the state of limitations from 5 years to 10 years |
|
|
Mutual Consent |
-referred to as "meeting of the minds" |
|
|
"Time is of the essence" |
-"on time" -license holders who add this language may be engaging in the unlawful practice of law. |
|
|
Good funds |
-cash, cashier's check, or wire transfer |
|
|
Rollback Taxes |
-amount to a "penalty" applied to properties where the use has changed ex: agricultural land for subdivisions or commercial developments |
|
|
Equity |
-the difference between market value and the outstanding debt |
