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673 Cards in this Set
- Front
- Back
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Riparian Rights |
When you own the waterbed to the center |
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Exclusive right to sell |
This type of listing gives you the best chance at collecting a commission |
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$22800 |
Sue is buying a property for 5% less than the list price of $120000. If the loan to value is 80%, what is the down payment? |
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What are fiduciary responsibilities? |
Loyalty Disclosure Obedience |
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Dual agent |
An agent who represents both parties in a transaction without disclosing it |
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If the lessor dies, the lease is generally? |
Not affected |
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Cooperating broker |
Most likely would be a sub-agent |
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Caveat emptor |
Let the buyer beware |
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All listings must: |
Have an expiration date Satisfy the statute of frauds Have an anti-discrimination clause |
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Appraiser |
Estimates value |
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A listing company who does not represent the buyer wants to charge the buyer a transaction fee of $99. This fee |
Should be part of he purchase agreement |
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Freehold |
Life estates Defeasible fee Fee simple |
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Devisee |
A woman who acquires real property in a will |
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Easement in gross |
The right to enter land of another without having to own the adjacent property |
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Inchoate |
During a married man lifetime, his wife's inheritance rights |
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Specific leins |
Mechanics Property taxes Mortgage |
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Broker Anne listed a home and charged 6% to sell it. She gave 40% of that to your broker. Your broker gave you 60% of his share. You set aside 25% for savings ($596.34) How much did the house sell for? |
$165,650 |
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A bill of sale |
A document used to transfer personalty |
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Priority of liens is generally established by |
Order of recording |
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Forms of ownership that may be held |
Entireties Common Joint |
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How many acres are in a description reading: The NW1/4 of the SE1/4 and The S1/2 of the NE1/4 of the SW1/4 Of section 4? |
60 acres 640÷4÷4÷2= 20 640÷4÷4 = 40 |
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An easement 10 yards wide along the entire side of a section contains how many sq. Feet? |
158,400 L×W = area 10×3 = 30 30×5280 = 158400 |
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Not true about life estate |
It is always inheritable |
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True about life estate |
It may be sold to another person It may be leased It may be mortgaged |
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Estate at sufferance |
A tenants lease expires with no renewal rights and he refuses to leave. |
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Easement of appurtenant |
Benefit runs with the land |
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What is N.A.R.? |
National Association of Realtors |
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Independent contractor |
A licensee receiving a 1099 |
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Encroachment |
A tree, which spreads branches and drops fruit over a fence into a neighbors yard |
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Purpose of license law |
To protect the public |
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Heterogeneity |
No two properties are identical |
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Alluvion |
Soil deposited from accretion |
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Common law |
Laws resulting from past decisions |
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Universal agent |
A person appointed to represent another person in all their affairs |
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Implied agency |
When you act as if you represent someone |
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Fiduciary |
Loyalty Care Obedience |
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Brokers commissions |
Are negotiated |
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A broker, in accepting commissions from both buyer and seller in the same transaction without full disclosure, is |
Committing an illegal act |
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A property was constructed 6 months ago with all custom features. It is one mile from a developing commercial area. Which approach would be the best for an appraiser? |
Cost |
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Gina promised $500 to Terry if Terry would paint her garage. Terry does the painting. Which type of contract has been created? |
Unilateral |
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Statute of frauds requires contracts to be in writing to be |
Enforceable |
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Doug owns 40 acres in the Upper Peninsula. He gives Steve permission to photograph the wildlife. Steve has: |
A license |
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A township contains |
36 sections |
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An owners title insurance policy protects the owner against |
Loss due to a claimant with superior right to title |
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An agent with a valid listing is generally considered to have earned a commission |
When a ready, willing and able buyer offers full price and terms |
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Emblements |
Crops that grow on land and require annual planting |
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Devise |
A real estate gift by last testament |
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A "for sale by owner" (FSBO) ad reads, "Buyers only!" What does this probably mean? |
No real estate agents should call |
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Demise |
The conveyance of an estate by lease |
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Deed |
To be valid, there is no time limit for when it has to be recorded |
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A licensee must carry his pocket card: |
When conducting real estate business |
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A broker has a problem subdividing a ten acre parcel into 50×100 ft lots after allowing 85600 sq. Ft. For streets. How many lots will he realize? |
70 10 acres × 43560 = 435600 435600 - 85600 (streets)= 350000 leftover 50×100 = 5000 for each lot 350000÷5000= 70 |
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The department may |
Inspect a brokers files at his office And Issue a citation based upon investigation of a conplaint |
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Lis pendens |
A recorded notice of a lawsuit pending |
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A broker received a commission of $64000 at a rate of 10% on the sale of a property one square mile. What was the price per acre? |
$1000 10% × SP = 64000 SP = 64000÷.10 = 640000 640000÷640 = 1000 |
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Easement by prescription |
An easement arising from Phil's notorious use of Pat's land for a continuous of time |
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Examples of government limitations on the rights of property ownership |
Eminent domain Power covenants Escheat |
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Equitable right of redemption |
The right of a mortgagor to recover the property and obtain legal title to it after default and before foreclosure by paying all monies due |
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A parcel of land has a frontage of 400ft, a backside of 700 ft and a depth of 250 ft. How many acres are in this parcel? |
3.16 acres 400×250=100000 (300×250)÷2=37500 37500+100000=137500÷43560=3.16 |
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A property that is 228ft × 320ft sells for $800 per acre. How much did half of it sell for? |
$669.97 228×320=72960÷43560=1.67 1.67÷2= .84 acres .84×$800= $669.97 |
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If you purchased a property for $80000 Three years ago and it has appreciated 15%, what it is worth today? |
$92000 80000+15%=92000 |
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A seller wishes to net $75000 from the sale of the home. But, he has to pay a 6% commission and $3000 in selling costs. What must the sale price of the home be? |
$82978 75000+3000+6%=100% 78000=94% 78000÷94%=82978 |
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To be valid a deed must be signed by |
Grantor |
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A contract which is signed by a person lacking full legal capacities is generally considered |
Voidable |
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A buyer and seller enter into a purchase agreement but then the seller refuses to sell. If the buyer wishes to force the seller to complete the transaction, the buyer should |
Sue for specific performance |
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Eminent domain |
The right of the government to take private property for he benefit of the public |
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A licensee, James, is asked to list a mobile home. He should: |
Refuse the listing because his license does not cover this type of property. |
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Abstract |
A chronological record of all encumbrances and transfers affecting the title to a property |
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The person who an agent represents in a transaction is determined by: |
The contract and/or conduct of the agent |
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Which deed places grantor Jane in a position with the least liability to grantee Terry? |
Quitclaim |
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Remedy for breach of contract? |
Liquidated damages Specific performance Compensatory damages |
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Asbestos |
A fiber which may cause cancer |
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In a lawsuit Jane wins a judgement against Doris and all of Doris' property. This type of lien is known as |
General lien |
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Type of encumbrances |
Mortgage Attachment Property Taxes Deed restriction |
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Encumbrances that are also liens |
Mortgage Attachment Property taxes |
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What are the annual property taxes on a home with a cash value of $250000 if the city charges 41 mills? |
$5125 250000÷2=125000 .041×125000=5125 |
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Net lease |
A lease where the tenant pays a portion of the buildings operating expenses |
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At will lease |
An open ended lease |
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Ground lease |
Lease of the longest duration |
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Barring any wording to the contrary, the tenant may |
Sublease the property |
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The acronym DUST stands for |
Demand Utility Scarcity Transferability |
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Which of these budgets will address the shortest period of time in a property management analysis |
Operating budget |
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What is outside of a residential property managers authority |
Representing the owner in court for eviction |
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MAI stands for |
Member Appraisers Institute |
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Non-conforming use |
A pre-existing use of land which does not conform to the zoning ordinance but which may legally remain |
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The owner of a condominium holds title to the common areas as |
A tenant in common |
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Upon receipt of a complaint LARA must |
Begin its investigation |
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The uniform vendor and purchasers risk act is designed to protect |
The buyer |
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Before submitting info to the MLS, the agent should |
Verify all date is correct |
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External obsolescence |
Type of depreciation most likely incurable |
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Kind of depreciation is most often used for income tax purposes? |
Straight line |
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A married couple may exclude up to 500k of capital gains on a |
House used primary residence for at least 2 of the last 5 years |
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RESPA is administered by |
The department of housing and Urban development |
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Joe arrives at his leased apartment to find the heat is not working and the pipes have frozen. He may refuse to pay the rent due to |
Constructive eviction |
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What does the adverse possessor actually do to acquire title |
File a suit to quiet title |
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Escheat applies to |
An owner who dies in intestate without heirs |
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The primary purpose of RESPA is |
To inform the buyers and sellers of all the settlement costs |
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USPAP stands for |
Uniform Standards of Professional Appraisal Practice |
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Civil Rights Act of 1866 |
First major piece if legislation to deal with civil rights which managed to withstand the challenge of Judicial scrutiny. "All citizens of the United States shall have the same right in every State and Territory as is enjoyed by white persons, thereof to inherit, purchase, lease, sell, hold, and convey real and personal property." Also all citizens were given the same rights as white citizens to enter into contracts to sue. This act covers race only because "white citizens" referred to race. Therefore, there are no exemptions for discriminations. |
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Federal Fair Housing Act |
The first comprehensive mandate for federal civil rights which includes the following classifications as protected, race, color, religion, sex, national origin, disability, & familial status. |
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Elliot-Larsen |
Michigan's Fair Housing legislation includes essentially the same characteristics as the federal, namely race, color, religion, sex, national origin, & familial status. However disability, which is covered under our version of ADA, is left out and marital status and age are added. Height and weight are also protected under Elliot-Larson but only for employment purposes. |
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Michigan Persons with Disabilities Act |
Prohibits all discrimination based on a disability. Disability is defined as having a physical or mental impairment which substantially limits one or more major life activities, has a record or history of such an impairment, or is regarded as having such an impairment. Landlords and employers are required to make reasonable accommodations for disabled persons. |
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Federal Americans with Disabilities Act |
This act is essentially the same as the Michigan Act of 1976 in terms of the definition of disability and the prohibitions and requirements. |
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Exemptions to laws |
There are exemptions to: Federal Fair Housing Act Elliot-Larson Michigan Persons with Disabilities Act Federal Americans with Disabilities Act But not the Civil Rights Act of 1866. Thus, there are situations in which you may legally discriminate on the basis of all the other protected classifications with the exception of race. |
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Parties protected |
In addition to protecting the buyer/seller/tenant, the parties to the transaction, these acts also protected persons associated with the buyer/seller/tenant or intending to reside in the dwelling after it is leased or sold. |
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Under federal fair housing laws, it is legal to prohibit |
Smoking and drinking alcohol in a housing unit |
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Elliot-Larson is |
Michigan fair housing act |
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Based on fair housing laws, the following would be protected |
A white man |
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Based on the fair housing laws, whom would not be protected |
A divorced person A 50 year old person An overweight person |
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Under Michigan law you can evict a person for |
Not paying the rent Violating the no pet rule with no disability related need for a let Making too much noise |
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Under Michigan law you can not evict a person for |
Damage done by a stalker against whom the tenant had a PPO |
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Who may file a complaint against a seller when they refuse an offer because of the buyers national origin |
The prospective buyer The real estate agent The federal government The other seller The neighbors The selling broker The tester |
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Steering |
Showing properties based on where you think the buyer will be happiest, not necessarily all the houses which fit the buyers stated criteria |
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Disparate impact doctrine |
Any regulation which has a greater statistical impact on a protected classification than the population as a whole is a violation of fair housing laws |
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Features required in ground floor units of a multifamily building of four or more units built after March 1991 |
Accessible and usable common areas Accessible light switches, outlets and thermostats Accessible building entrance |
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When a prospect inquires about the crime rate in the neighborhood you should |
Tell them that you cannot provide them with that information because it would violate fair housing law |
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Shelley vs. Kramer |
Landmark case regarding racially restrictive covenants |
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In advertising the following language IS allowed under fair housing law |
Ideal for a couple or single professional Near playground and senior center Small, cozy home in quiet neighborhood Master bedroom Near shopping mall Apartment complex with chapel Kosher meals available Wheel chair ramp Walk-in closet Mother in law suite Quiet streets Age 65 or older only Perfect for entertaining Mentioning salesperson is bilingual in an English language ad |
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In advertising the following language IS NOT allowed under fair housing law |
Christian home No chdren Near mosque No wheelchairs Polish American residential community Advertising photos showing only Asians Convenient walk to shrine Catholic school |
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A seller tells you he will not sell to someone who is gay. Under Michigan Fair housing law, the agent should: |
Retain the listing because sexlak preference is not a protected classification |
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ECOA refers to |
Equal credit opportunity act Creates exemptions for minors and non-citizens |
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An employer only requires a written pre-employment test of Hispanic applicants |
This is illegal because the pre-employment procedures vary based on race |
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Under the Federal fair housing law the 7 protected classes are: |
Race Color Religion Sex Handicap Familial status National origin |
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Fair housing laws prohibit the following |
Refusal to show, sell or rent a property because of a disability Expressing a preference for young adults in a listing contract Marketing your listing exclusively in a religious publication |
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Jones vs. Mayer |
Restate the Civil Rights Act of 1866 which grants all citizens the same rights as white citizens to own, purchase, transfer, lease or use real property. Effectively prohibits all discrimination in real estate based on race |
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Under fair housing law it IS legal |
For the buyer to refuse to buy based on the racial makeup of the neighborhood To refuse a service animal who poses a threat to other tenants |
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Under fair housing law it IS NOT legal |
To require families with children to occupy only first floor apartments To require tenants to pay for a disability related modifications of dwellings and out $ in escrow to restore premises after vacating Charge a pet deposit/higher security deposit for the service dog |
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The following ARE legal under the Federal fair housing law |
Refusing to rent to someone based on threat to safety Charging a higher rent for chapel use to someone who does not belong to the church Refusal by a female occupant owner of a duplex to rent to a man |
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The following ARE NOT legal under the Federal fair housing law |
Refusing to rent to someone who had AIDS/HIV |
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Illegal acts |
Refusing to hire someone based on age Lowering the appraised value of a property based on the occupants of the neighborhood Charging a higher security deposit because of the service dog |
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The senior citizens housing exemption under federal law applies |
If all occupants are 62 years of age or older If 80% of the units are occupied by at least one person 55 years old or older |
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Examples of reasonable accommodation |
Allowing a disabled man to lay his rent on the 15th instead of the 1st of the month because his check arrives in the 15th Moving tenants to different apartment to avoid second hand smoke Discontinuing practice of holding monthly meetings on golf course which is not accessible to new employee due to her handicap |
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Fair housing laws apply to the following |
Title companies Advertising agencies Appraisers Loan officers Brokers Neighbors Residential insurers Builders News media Sellers Property managers Government agencies |
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The sole signatory on a trust or escrow account |
Associate broker or sales representative |
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If a branch office is located more than 25 miles from the city limits of the Brokers main office it must be under the direct supervision of |
An associate broker |
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Escrow account money must be |
Deposited within two banking days of the Brokers notification of the fully accepted offer to purchase if the broker is holding it in his own trust account In a check, cash is not acceptable In a non interest bearing demand account |
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A brokers license may be issued to a corporation if |
It has at least one principal associate broker |
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Licenses must |
Be returned immediately to the department if suspended or revoked Be returned within 5 days if transferred to another broker |
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The following will terminate a Principal-Agent relationship |
Death of principal Death of the agent Insanity of the salesperson |
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Brokers license |
Is not transferable |
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A broker or salesperson |
May operate anywhere in Michigan |
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A salesperson may legally advertise |
Any properties provided the Brokers D.B.A. is stated |
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A broker who represents a seller at closing must do the following |
Sign the closing statement Furnish the seller wih a detailed closing statement Furnish the buyer with a detailed closing statement Does not need to attend the closing |
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The board may assess the following penalties for a violation of the act with the exception of operating without a license |
A fine of $500 Restitution be made Limitation of a license |
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A person who engages in the sale of real estate must have a license in the following situations |
Holds himself out to the public as being able to sell real estate Is a builder selling homes he built and has only had tenants in Devoted more than 50% of his working time or more than 15 hours per week in any 6 month period to the sales of real estate |
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A broker or salesperson shall not close a transaction contrary to the executed purchase agreement terms without prior written approval of: |
Buyer and seller |
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When a salesperson is advertising a business opportunity, the ad: |
Shall be under the direct supervision if the Broker |
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The following require a Real Estate license: |
Someone leasing property for other for a fee Someone buying easements for others for a fee Someone selling options for others for a fee **Someone appraising real estate for others for a fee does NOT need a license** |
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Exempt from the real estate licensure requirements |
An administrator A receiver Someone appointed by the court to appraise a house ** not exempt: repeated or successive sales of real estate by a trustee under a deed of trust** |
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Licenses issued only to a natural person |
Salesperson Principal associate broker |
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Upon obtaining a service provision agreement the salesperson must do: |
Give a true executed copy to the broker Give a true executed copy to the Buyer/Seller immediately Follow all provisions of the contract as written |
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A salesperson shall |
Not be licensed under more than one broker at a time Be licensed under a broker |
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Citation |
Lists the name and address of the respondent Describes the violation Has a place for the respondent to sign as a receipt for the citation |
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A salespersons license lapsed 6 years ago. Before applying for relicensure they must: |
Retake and pass the state exam OR Retake and pass the 40 hour class OR Make-up continuing education hours |
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A licensee buyer must do: |
Disclose any economic interest in the property to the Seller in writing before the purchase agreement is signed Disclose in writing if the licensee is due a commission for acting as his own agent |
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A licensee may: |
Hold a party at the yacht club for potential customer **may not** Sell potential customer a chance to win a new car Sell raffle tickets when the prize is a piece of vacant land "List with me to win a chance for a trip to Vegas" |
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Sellers disclosure |
A statement of the condition of the house to best of the sellers knowledge |
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Purchase agreement |
The document that establishes the escrow terms and is the template or instructions for the title company for creating the closing documents |
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Non licensed personal assistants |
**CAN** Do clerical tasks **CAN NOT** Show homes without the licensee being present Hold open houses Answer buyer questions over the phone concerning issues not mentioned on preprinted marketing flyers |
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Punishments for practicing without a license |
Considered a misdemeanor $500 fine 1st offense $1000 fine 2nd offense 90 days in jail |
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Selling broker |
Persons that can be described as a subagent |
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Special agencies |
Most relationships in a real estate brokerage |
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Multiple listing service |
System that offers cooperation to agents of all member firms |
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Commissions charged by brokerages may be established by |
% of sales Flat fee Buyer broker agreement |
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An gents fiduciary duty is |
To the client |
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Brokerage |
The process of bringing buyers And sellers together and assisting in the negotiations during real estate transaction |
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Fiduciary |
A person who essentially holds the position of trustee in an agency relationship |
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Listings |
Must have an expiration date, must satisfy the statue of frauds, and must have an anti-discrimination clause |
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MAI |
Members appraisers institute |
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Master plan |
A blueprint for urban development |
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Michigan Land Sales Act |
Regulated the sale of lots and the advertising within subdivided land, protects consumers from unfair practices |
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NAR |
National association of realtors |
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Nonfreehold states |
Provide possession and control but not ownership (leasehold estates) |
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Note |
A true evidence of debt, it is transferable |
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Novation |
The substitution of one debtor for another where the debt remains the same, but the original debtors obligations under the note are extinguished |
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Option |
Seller gives buyer the exclusive right to purchase the home, specified time, predetermined price, unilateral |
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Out of state land sales act |
Land with buildings and vacant (if buildings to be constructed within 2 years), also condos and timeshares if marketed within Michigan and not covered under MI land sales act. 25 or more lots under common promotional plan. All contracts and advertising materials must be submitted to department for approval. Purchaser to get property report before signing agreement. Department may do on-site inspection at brokers expense. Broker cannot represent that department, approves development. Approvals good for 1 year. |
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Payment |
Your broker pays you always |
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Points |
1% of loan, buyer typically pays |
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Police power |
The power of a state to legislate for health safety and welfare |
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Property manager |
People hired by owner of income property to generate income from renting and preserve value through maintenance |
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Quiet enjoyment |
Right to enjoy property without interference |
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Quitclaim deed |
A type of deed conveying title with no guarantees |
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REIT |
Real estate investment trust |
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Requiring a license |
Renting and leasing CMA or BPO Buying an interest Listing and selling Exchanging real estate |
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RESPA |
Real estate settlement procedures act, federal law requiring disclosures of closing costs. Buyer and seller need to know all settlement costs in advance so borrower can compare prices of different lenders. Applies to residential if federally related (not land contract or cash) not commercial. Must be given. 1. Booklet settlement costs and you at time of application 2. Good faith estimate of settlement costs within 3 business days of loan application 3. Uniform settlement statement (HUD) on which all charges related to the transaction is itemized given to buyer and seller at closing. Contains anti-kickback provisions & restricts escrow funds lender can retain. Affiliated business disclosure at time of referral in person or within 3 days if by phone. HUD for must be available for inspection 1 day before closing. Program administered by HUD. |
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Scriveners |
Fill out blanks in pre-printed forms |
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Seller liability |
The subagent |
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Severalty ownership |
Title vested in one owner severed from others. Has one person or legal entity as number of owners. Has one title. Interest is 100% ownership. Yes conveyance to whomever the owner stipulates. There are no co-owners so no right to partition. Passes to heirs or divisee on death. Probate is necessary if there is a will. Unities are: Possession Interest Title Time Termination is by sale or death of owner. |
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Special agent |
An agent hired for a single, specific transaction. |
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Statute |
A formal, written enactment of a state or federal legislative body |
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Statue of frauds |
Law requiring certain contracts to be in writing and enforceable |
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Subdivision |
Containing 25 or more lots |
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Tenancy of entirety |
Concurrent ownership held as husband and wife. Owners are husband and wife only, law presumes they are one. There is one title. Each owns 100% of the property. There is conveyance when both owners agree. There is no right to partition. When one spouse dies, the other spouse owns it in severalty on death. Probate is not necessary. Unities are: Possession Interest Time title and person Termination is by consent of the parties, death of either party or a divorce/common ownership. |
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Tenancy in common |
Concurrent ownership, seperated title undivided interest. There are 2 or more owners (unity of possession only). Each co-owners has separate legal title to his or her undivided interest. Interest in property: shares may be unequal, law will interpret them as equal unless otherwise stipulated. Conveyance is yes, without the consent of the other owners. There is no right to partition. Passes to heirs or divisee on death. Probate is necessary if there is a will. Unities is possession. Termination is by sale or death of the owner (goes to heirs not partners). |
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Title search |
Examination of the public records to determine the state of title |
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Title theory |
Title rather than a lien is transferred in mortgage |
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Transfer tax |
(Based on sales price, seller pays) 1.10 county 7.5 state 8.6 per 1000 |
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Trust/Escrow accounts & Earnest Money |
1. Broker must have at least one trust/escrow account but may have one more than one. 2. Account must be demand in nature such as checking or savings account so money can be withdrawn at any time. 3. Broker may only keep up to $500 of his own money in the account, any more is considered commingling. 4. Account must be non-interest bearing so there would be no reason for a broker to delay closing or refunding money. 5. All checks drawn on account must at least have he brokers signature. Other additional signatures may be present but the Brokers must be. 6. Creates escrow agency-broker holding check is the neutral third party who can only release funds at the consummation of deal, or with signed mutual release or by judges order. 7. If the deposit is in dispute the broker or buyer or seller can take the matter to the judge for a ruling. 8. Salesperson may not accept cash and the check must be made payable to the broker or title company, not to the salesperson. Salesperson must turn check over to broker upon receipt. 9. If the check is made out to the broker, it must be deposited with 2 banking days of the "meeting of the minds" , when the offer has been accepted by all parties. 10. If the check bounces this is considered a material fact and all parties must be informed regardless of agency. 11. The deposit must be entered in two seperate accounting spreadsheets. One is by chronological order (date received/disbursed) and the other is by individual transaction (Street address), these records must be maintained for 3 years. 12. Earnest money is considered liquidated damages but purchase agreement is binding on all parties even without earnest money. |
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U.S. Government Survey System |
The backward "S" system, a.k.a rectangular survey system and public land survey system. |
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USPAP |
Uniform standards of professional appraisal practice |
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VA Mortgage |
Mortgage administered by the Veterans Administration, it is guaranteed |
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Warranty Deed |
Deed in which the grantor guarantees the title is good and marketable. |
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Area |
Length×width > rec square 1/2(base×height) > triangle Height×1/2(s+b) > trapezoid |
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Volume |
Length×width×height |
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Abstract |
A chronological record of a encumbrances and transfers affecting the title to a property |
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Agency disclosure |
Requirement that all consumers be made aware of agency relationship (immediately) |
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Agency law |
In a special agency relationship, the broker can bind the principal to a contract. The principal may be the seller. A universal agency may create an attorney-in-fact. |
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Alluvion |
Soil deposited from accretion |
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Avulsion |
Sudden change in property boundary from the action of wayer |
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Bill of sale |
Personal property transaction receipt, a document used to transfer personalty |
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Board |
9 member - 6 licensed, 3 general public Promulgates rules 1. Make recommendations to the department. 2. Helps Dept. With investigations if asked 3. Accepts or rejects Dept. Penalties of informal conference 4. Assesses own penalties within 60 days of receiving contested case hearing report |
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Broker/salesperson license rules |
1. Salesperson licenses are only issued to individuals not companies. 2. Salespersons license can transfer from one broker to another keeping the same license number for a $10 fee. 3. You may only have one salesperson license at a time 4. You may not hold a broker and salesperson license at the same time. 5. An individual may hold numerous broker licenses at the same time. 6. A brokers license may be issued to a company but only if there is a principal associate broker (living person) license tied to a company's broker license. 7. Principal associate broker makes a decision for company. Only issued to a natural person. 8. You may not hold more than on non-principal associate broker license at a time (you do not want 2 bosses) 9. You may hold more than one principal associate broker license at a time because you could be an officer in more than one company. 10. Non-principal associate brokers may transfer from one company to another but they actually turn in one license and receive a new license with a new license number under the new company and must pay the full license fee. 11. Principal associate broker and broker may not transfer to another company because he may be the only living person tied to company's broker license. 12. Suspended and revoked licenses must be sent back to the state immediately, otherwise broker has 5 days to remove license from wall and return to state. |
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Citus |
Having been summoned |
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Civil rights act of 1966 (federal) |
Law prohibiting racial discrimination |
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Closing documents |
The listing broker is responsible for the preparation of these documents |
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Common law |
Laws resulting from past decisions |
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Community property |
Marital (husband/wife) property owned as an undivided 1/2 interest. Each partner has undivided 1/2 interest. |
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Condos |
9 day right to withdraw (new construction only) |
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Continuing education Relicensure/reinstatement rules |
1. State year November 1st - October 31st. 2. Licenses issued for 3 years (for 1st license you receive whatever is remaining of that 3 year cycle ... Afterwards always for 3 years. 3. Next renewal is 2018 4. If you miss one renewal you have 1 option: make up con-ed and apply for relicensure 5. Lapsing license requirement: make up con-ed, retake and pass 40hr class, retake and pass state exam (one of them) 6. In order to renew you need: 6 hours con-ed for each licensed year (18 hours for a 3 year license) 7. Of the 18 hours, 6 needs to be legal (2 per year) and 12 can be anything. The 2 legal hours per year need to be completed each year, the other 12 can be taken at anytime. 8. The license lapsed on the 31st but you have 60 day grace period to complete the con-ed and pay the fee. Fully expired in December 31st, at this point you can not legally practice real estate 9. If your license is revoked hen it is gone for a minimum of 3 years (reinstatement) but could be gone for good. |
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Courts (dealing with LARA and the board) |
1. Handle unlicensed activity 2. Assesses criminal prosecution (jail and criminal fines) 3. Assesses civil fines |
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Cul-de-sac |
Circle at end of the street, there is only one way to egress |
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Demise |
The conveyance of an estate by lease |
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Designated agency policy |
Limits the number of people in the agency relationship |
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Devise |
A real estate gift by last testimate |
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Devisee |
A woman who acquires real property in a will |
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Disparate impact doctrine |
Any regulation which has a greater statistical impact on a protected classification than the population as a whole is a violation of fair housing law |
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Dower |
A widows estate that vests upon the death of her husband |
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Dual agency |
An agent who represents two principals in one transaction. It can be disclosed or undisclosed. Informed consent of both the buyer and the seller are required by law. The agent owes fiduciary duty to at least 2 clients. |
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DUST |
Demand Utility Scarcity Transferability |
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Earnest money deposit |
A deposit of funds to show good faith |
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ECOA |
Equal Credit Opportunity Act Creates exceptions for minors and non-citizens |
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Encroachment |
Intrusion into the property of another. Best discovered by a survey. |
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Escheat |
Governments right to unclaimed property. Applies to an owner who dies intestate without heirs. |
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Estate at sufference |
Describes the situation in which the tenant continues to occupy property after lawful authority has expired. |
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Estate at will |
A leasehold estate that may be terminated at will by either party |
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Estate for years |
A leasehold estate that automatically renews itself for successive tenancy unless one party terminates. |
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Estate from year to year |
A leasehold estate of definite duration that terminates automatically. |
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Exclusive right to sell |
This listing gives you the best chance at collecting a commission. |
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Exemptions from license requirements |
1. Builders 2. Administrators 3. Operating under signed power of attorney 4. Court orders 5. Selling under deed of trust (REIT) 6. Executor for an estate 7. Attorney at law 8. Receiver in bankruptcy 9. Trustee in bankruptcy 10. Appraisers 11. Referral fee paid to current tenant - not to exceed 1/2 months rent |
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Elliot-Larsen civil rights act of 1976 |
Michigan's Fair housing regulations protections: Rave Color Religion National origin Sex Familial status Age Marital status (Height and weight for employment) |
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External (economic) obsolescence |
Value loss from factors outside property boundaries |
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Federal equal credit opportunity act |
Thus act prohibits lenders and creditors from discriminating in the extending of credit on the basis of race, color, religion, national origin, sex, marital status, age and dependence on public assistant. Exemptions do not exist for non-citizens and person under the age of 18. Lenders must inform, in writing, rejected credit applicants as to why credit was denied or terminated. |
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Federal fair housing act of 1966 |
Prohibits discrimination in housing: Race Color Religion National origin Sex Familial status Mental/physical handicap |
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Federal consumer credit protection act truth in lending Regulation Z |
Personal loans of less than $25000 and residential real estate. Lenders must disclose in writing true costs of credit in dollars and percentages. Must disclose amount of loan & down payment & number, amount, frequency of payments & APR (interest plus cost of financing into an annual figure) & total number of payment (except on first loan on house). 3 day right of recession (except on first loan of house) . Disclose borrower fees related to loan - not necessarily all costs. Triggering language - if specific terms mentioned in advertising then full costs must be disclosed. |
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FHA loan |
Mortgage insured by the federal housing admibistration |
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Fiduciary duties |
Based upon trust and confidence. Loyalty, disclosure, obedience. A person who holds the position of trustee in an agency relationship. |
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Freehold states |
Providence title (ownership). Fee simple (all inheritable) absolute, qualified fee, defeasible. Life estate (not inheritable) remainder, reversion, legal/statutory, dower courtesy. |
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General agent |
An agent with broad authority within a specified range (property manager) |
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HUD |
Department of Housing and Urban Authority |
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Inchoate |
A pending interest |
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Interstate land sales full disclosure act |
Sale and lease of vacant land through interstate commerce. 100 or more lots applies, 25-99 lots do not register but anti-fraud still applies, less than 25 exempt. Developer must register with HUD & copies of documents which are given to purchaser. Purchaser given property report prior to signing contact. Purpose to govern interstate commerce. |
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Joint tenancy |
Ownership characterized by four unities and a right of ownership. Two or more owners with right of survivorship. Has one title. Shares of interest must be equal. Yes to conveyance without he consent of the other owners. There is right to partition. Passes to surviving owners on death. Probate is not necessary. Unities are possession, interest. Time And title. Termination is when any of the unities are broker. |
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Laches |
Defense used to bar a valid, but neglected legal claim. |
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LARA (Licensing and Regulatory Affairs) the department |
Promulgates and enforces rules, Director appointed by Governor 1. Issue, renew and expire all licenses. 2. Conducts investigation 3. Anyone can file a complaint with department, even if not party to issue (15 days to notify complainant) 4. Conducts informal conference (agent attends) 5. Assesses penalties at inform conference (summarily suspend license if imminent threat to public, issue a citation, issue cease and desist order if threat to public) 6. Conducts the contested case hearing and sends the report to the board 7. If board does not assess penalties within 60 days then goes back to director of department. 8. Can assess civil fines (max 10000) revoke suspends deny or limit license 9. Record kept for 5 years 10. Can require restitution and suspend license until it is made |
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Lead base paint |
1978 |
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Lease, truth in lending and security deposit |
Day 1: provide tenant with copy of lease & 2 blank copies of inventory checklist. Within 7 days of moving in checklist filled out by tenant and returned. Within 14 days after taking possession, landlord must contact tenant in writing of name and address where landlord can be contacted and where security deposit is. Within 4 days after moving out tenant must inform landlord in writing of forwarding address. Within 30 days of moving out, landlord must send termination inventory list and cost of damages to tenant and balance of security deposit, tenant has 7 days to object or forfeit the money (detail objection needs to be sent by mail). Within 45 days of termination landlord must bring legal action. Maximum 1+1/2 months security deposit. |
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License law |
Overall purpose is to protect the public |
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Life estate Pu autre vie |
Life estate measured by the life of another. Duration is measured by 3rd party. Life estate for life of another |
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Lis pendens |
A recorded notice of a lawsuit pending |
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Real estate component parts |
When real estate is sold, all component parts are included in the sale. The seller can withhold certain elements from the sale, or sell certain elements separately. 1. Land 2. Improvements 3. Personal property compared to fixtures |
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Land |
The immediate surface area, subsurface area and air above 1. Surface rights 2. Mineral rights 3. Air rights 4. Water - related property rights |
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Surface rights |
The actual surface area, underling soil, and physical objects permanently attached by nature I.e boulders, trees and landscaping |
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Mineral rights |
The owner is entitled to the surface extending downward to the center of the earth including the rights to any minerals |
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Air rights |
Air rights are generally limited to a reasonable distance |
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Water - related property rights |
The exercise of water rights must be reasonable, consistent with other owner's uses, and is subject to the public right of navigation |
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Gassification of lands associated with water |
1. Riparian land 2. Littoral land 3. Prior appropriation |
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Riparian land |
Land which is bounded by or touches a natural watercourse, such as a river or stream |
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Littoral land |
Land that borders an ocean, sea or one of the great lakes. The term riparian may be used to refer to both littoral and riparian rights. |
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Prior appropriation |
A legal firm of water control that does not require contact with a landowners boundary. It is used primarily in western states. |
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Extent of rights |
Riparian owners acquire the right to use the water without owning the water itself. |
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Bottomland |
A riparian owner owns the right to the center of an inland lake. A littoral owner (great lakes for example) owns to the high water mark |
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Accretion of land |
The process of gradual and imperceptible accumulation of land by natural causes |
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Erosion |
An eroding or wearing away, usually of soil, often by the gradual running or washing away action of water. |
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Alluvion |
Name for the soil which is deposited when accretion occurs |
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Dereliction |
The gaining of land when a body of water shrinks below the usual water mark |
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Avulsion |
A sudden loss or addition to land by the action of water or a sudden change in the bed or course of a stream |
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Fixture |
An article of personal property attached to the land or a building so that it is legally regarded to be part of the real party |
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Personal property |
1. All items that are moveable Or 2. The right or interest one holds in moveable (non-attached) things I.e. personalty or chattel |
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Bill of sale |
This is a document used to transfer ownership of personal property items. It accompanies the deed to the real property at closing. |
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Manufactured (mobile) homes |
The purchase and sale of mobile homes falls outside the scope of functions performed by most licensees because: 1. Mobile homes may be personal or real property 2. The controlling statute for mobile homes, "The mobile homes commission act" (MHCA), is seperate from the occupational code (controls real estate license) |
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Mobile home |
A structure built on a chassis, designed to be used as a dwelling after being connected to utilities; may or may not be affixed to a permanent foundation |
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Modular home |
Constructed in the same manner, and at the same off-site factory, as a mobile home with the key difference that the undercarriage or frame is designed to be removed when the unit is installed on a foundation. |
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Panelized or prefabricated home |
A home consisting of multiple components and sections, prefabricated at an off-site factory and then shipped to the building site. Panelized construction is growing in popularity because builders are not as readily affected by weather, labor or materials shortages, or other common obstacles. |
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Statute |
Formal, written enactment of a state or federal legislative body; also know as an Act |
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Common law |
A body of law that stems from judicial decisions |
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Administrative law |
A body of law that administrative agencies such as licensing departments use to carry out its regulatory function I.e license law and rules |
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National Association of Real Estate Brokers |
The nation's oldest minority-owned real estate professional association. |
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Basic agency concepts |
An agency relationship exists between two persons when one of them (the agent) acts on behalf of or represents the other (the principal). It is a three-party relationship because the principal hires the agent to represent his interests to third parties. |
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Principal |
One who hires an agent. Traditionally, the principal is the seller, but a buyer may be a principal by hiring a buyer's broker to represent him. |
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Agent |
A person who is authorized by another (the principal) to act on his behalf in a representative capacity. |
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Universal agent |
An agent empowered to conduct every lawful transaction that a principal can delegate including the right to represent, negotiate,and sign contracts on behalf of his employer I.e power of attorney |
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Power of attorney |
The written instrument which is used to appoint a universal agent. |
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Attorney-in-fact -fact |
The agent named in the power of attorney to act for the granting party. |
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General agent |
One who is authorized to act (with broad negotiating power) for his principal in all matters concerning a particular business venture I.e property manager |
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Special agent |
An agent who is employed to conduct a single transaction or a series of transactions that, once completed, cause the agency to end I.e real estate broker |
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Customer - a non-agent relationship |
A non-represented party. At the onset of any relationship, and before entering a representation agreement, the status of any seller or buyer is that of a customer. |
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Client - an agency relationship |
One who has hired a broker to perform services such as representation. |
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Single agency |
An agent who is authorized by one principal to represent his interests on an exclusive basis. The single agent represents and acts in the best interest of his principal. |
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Dual agency |
A dual agent is authorized to act for two principals in a single transaction, in other words, to represent both a buyer/client and a seller/client who are negotiating a common transaction. The competing duties of confidentially and disclosure of material facts must be balanced. Michigan permits a dual agency with proper disclosures and written consent. |
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Subagent |
An agent to whom another agent shares and transfers his authority to represent a particular principal. Traditionally, another broker, the selling broker, who assists the listing broker in finding a buyer/customer for his seller/client. |
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Vicarious liability |
Liability for one person that arises from the actions of another. A seller may be held liable for certain actions or statements made by his listing broker or subagent. |
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Actual agency |
Any agency where the agent has literally, and in fact, been employed by a principal, whether by express or implied authority I.e the agency created by a listing agreement |
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Express agency/express authority |
The term express means that a writing is involved. I.e a written listing agreement creates an express agency A.k.a express authority |
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Implied agency/implied authority |
An agency that arises from the words, actions, or conduct of a party (the implied agent) suggesting that an agency relationship is involved I.e a listing broker tells an unrepresented buyer "I'll take care of everything for you" A.k.a implied authority |
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Agency by estoppel |
An agency created by operation of law rather than agreement or conduct. I.e a principal allows an agent to exercise more authority than has been granted. Due to his carelessness, the principal may be estopped (meaning prevented) from denying that the agency exists. |
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Ostensible agent |
One who only appears to have actual authority, but, in reality, does not; an apparent agent. |
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Duties an agent owes to the principal |
1. The fiduciary relationship 2. Loyalty 3. Notice of material facts 4. Care 5. Obedience 6. Accounting 7. Breach of fiduciary duty |
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The fiduciary relationship |
The term fiduciary describes the trust-related responsibilities that an agent owes to his principal. It also refers to the person who owes the trust, that is to say, the agent. A fiduciary must act with the highest degree of care and in the best interests of the client. |
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Loyalty |
Faithfulness. Agents must not use their knowledge and expertise to the disadvantage of their principal. Applies equally to brokers and salespersons. |
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Fidelity |
Loyalty to one person |
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Confidentiality |
An agent must preserve the secrets and confidences of his client |
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Profit outside of the agency |
Brokers may not accept payments from anyone else without written permission from the principal and possibly the third party. |
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Unlawful conduct |
The agent does not have to maintain loyalty where the commission of a crime or perpetuation of a fraud exists. |
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Notice of material facts |
The agent must supply the principal with any material information that could affect the principal, his property, or their relationship. Notice of material facts may also be called the duty of disclosure. |
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The meaning of material |
Facts are considered to be material if their disclosure is capable of influencing the decision-making process of a reasonable seller (or buyer) acting under similar circumstances. In other words, would the disclosure impact a buyer's decision to buy or affect the price and terms of his offer? Materiality, in this context, is primarily an economic question. |
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Information qualifying as material |
1. The true market value of a property 2. The financial condition of a buyer (in the case of a represented seller) 3. The status of an offer (in the case of a represented buyer) 4. The Brokers policies on cooperation with subagents, buyers agents, and transaction coordinators 5. The status of an earnest money deposit 6. Property taxes, zoning, building codes, land use restrictions and environmental hazards |
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Duty to present all offers |
A listing agent must present all offers made on a represented sellers property (unless the seller empowers the agent to reject offers below a certain amount) |
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Obedience |
Agents must obey all legitimate instructions including the preparation of all documents necessary to close and the providing of copies to the client. But, does not include, illegal or unethical requests. |
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Accounting |
The agent must account for all money or other possessions belonging to the principal that comes under the agents control. Client funds must not be commingled or mixed with the agents personal funds. |
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Breach of fiduciary duty |
The failure to observe an agent's fiduciary duties make him liable to the principal for any resulting harm. The breaching agent may: 1. Lose his right to sue for an earned commission 2. May be subject to monetary damages And/or 3. May lose his license privileges |
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Duties a principal owes to the agent |
1. Compensation 2. Cooperation |
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Compensation |
A broker is entitled to the negotiated listing commission upon fulfilling all required acts. If a different purchase price is offered or the terms of sale are different from those specified in the listing, the broker has earned a commission only if the seller accepts the buyers offer. A buyer's broker earns a commission when the represented buyer purchases a property. |
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Cooperation |
A listing agreement contains an implied agreement that the principal will cooperate with the agent and not hinder his ability to market the property. |
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Caveat emptor |
Latin for let the buyer beware. A buyer assumes the responsibility and risk for discovering obvious defects and may not be able to sue the seller later for their existence |
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Seller is primary responsible |
As between the seller and his listing broker, the primary duty to disclose property defects to a buyer belongs to the Seller. |
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Latent vs. Patent defects |
A patent defect is obvious and one which a reasonable buyer would be expected to discover. Hidden or latent defects are those of which only a seller would be aware. While all jurisdictions require a seller to disclose hidden defects, a growing number such as Michigan require a seller disclose all defects, whether latent or patent, to a buyer. |
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Seller disclosure statements |
Most state legislatures, including Michigan, now require a seller to complete and distribute property conditions disclosure statement to potential buyers, at least on residential property. |
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Stigmatized Property |
Property wherein certain incidents have occurred that have a high psychological impact I.e murders, suicides, illegal drug activity, other illicit activity, or the fact that the house is claimed to be haunted. The controversy over stigmatized property is whether these events amount to material defects. |
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Puffing |
Statements of opinion made during the sale process. They do not amount to a fraud since they are not intended to be a representation of fact upon which a person can rely I.e a listing agent tells a buyer that a home is located in the "most beautiful" neighborhood in town. |
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Independent contractor |
A person hired to perform specific task or service, according to his own methods, subject to the control of his employer only as to the final result. Employment is for a particular and limited purpose, the completion of which causes the relationship to end. |
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Employment/Policy and procedures manual |
A real estate broker must supervise the activities of his salespeople. In doing so, a policies and procedures manual must be established to address all facets of the broker-salesperson relationship including compliance with legal issues (I.e fair housing, antitrust, environment laws) and practical requirements (I.e listings, open houses, compensation, cooperation, advertising, floor-time) |
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Existing business relationship |
Upon the conclusion of a business transaction, calls may be made to a consumer, meaning past clients or customers, for up to 18 months, even if their names are on the federal registry. Consumer requests not to receive further calls must be honored. |
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Consumer inquiries |
If a consumer makes an inquiry, calls may be made for up to 3 months. This would include calls from sellers about real estate services as well as buyer inquiries about existing listings and other real estate services. |
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Consumer permission |
A consumer may grant written permission to receive calls. It is becoming a common practice upon the conclusion of a real estate transaction or at an open house for licensees to have consumers sign a consent form affording permission to contact the consumer via telephone, fax or e-mail. |
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Unilateral versus bilateral agreement |
Modern listing agreements are viewed as bilateral. The broken promises to use his best efforts and diligence in the performance of his duties in exchange for the seller's (or buyer's) promise to pay a commission. |
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Key provisions |
Listing contracts can vary from broker to broker. Some brokers use standard forms provided either by real estate associations or MLS services. Other brokers prefer tonuse forms drafted with the advice of their corporate (legal) counsel. Common key provisions include: 1. Names of the parties to the agreement 2. Legally sufficient description of the property 3. Type of listing 4. Sale price and terms 5. Items to be included with the sale 6. Brokerage fee (and protection period) 7. Nondiscrimination clause 8. Earnest money deposit (how it is to be disbursed) 9. Right to submit the property to a multiple listing service (and fee-split with a cooperating broker) 10. Mandatory disclosures, certifications and inspections. Note: The failure to include or sufficiently describe some terms and conditions can invalidate a listing agreement including any provisions pertaining to collection of a commission. 11. Expiration date |
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Other listing details |
A number of other details must be considered in connection with a listing agreement. Accuracy depends upon the agent's knowledge of real estate and his skill in obtaining information. Make sure you verify all of the information. 1. Type of property construction 2. Lot size 3. Physical dimensions of the structure (which may have to be physically measured) 4. Appurtenances (such as easements and water rights) 5. Presence of utilities 6. Compliance with health and safety building codes 7. Encumbrances (such as liens) 8. Whether or not the property is subject to a homeowner's or condominium association by-laws and fees 9. Any amenities that may be present Most of these items will be noted on one of the listing-related forms prepared by the listing agent |
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Price fixing |
Federal law (Section 1 of the Sherman Antitrust Act) prohibits any contract, combination, or conspiracy that sets otherwise competitive pricing structures. When discussing commissions with potential clients, brokers must sell the benefits of their services and why they charge the fees they do without referring to other companies |
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Brokerage cooperation and referral fees may be discussed |
Brokers can discuss compensation sharing arrangements on cooperative transactions. |
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"Per SE" violation |
Price fixing is illegal "per se". A per se violation refers to a wrongful act which is actionable (in and of itself) without any defense, justification or proof of special damages. |
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Cash reporting requirements |
IRS Form 8300 must be completed by any person who is engaged in a trade or business and receives more than $10,000 in cash in a single transaction, or two or more related transaction. Transactions conducted between a payer and recipient within 24-hour period are considered related. I.e a licensee who receives a commission payment in excess of $10,000 in cash will be required to file the IRS Form by the 15th day of receipt (and should consult a CPA for the latest in tax rules and filing advice). An exemption exists for an agent who receives qualifying cash from a principal and then applies the cash, within 15 days, to a second transaction where the cash is reported on Form 8300 |
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Carryover provision |
A clause in a listing agreement stating that if anyone to whom the property was shown during the listing period purchases it within a certain period of time after expiration, the seller still owes a commission. It protects the broker and is also as a protection period, extender period or extender clause. |
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Open listing |
The seller retains the option to list his property with any number of brokers at the same time. The first one to find the ready, willing, and able buyer is the procuring cause of sale and receives the commission. |
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Exclusive listing Exclusive agency |
Only one broker is hired to handle the sale. Should another broker find a buyer, the listing broker can demand payment of the commission even though he is not the procuring cause of sale. |
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Exclusive right to sell listing |
Entitles the listing broker to a commission no matter who sells the property during the listing period; it is the most desirable and common form of listing for brokers. |
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Net listing Illegal in michigan |
The owner establishes an amount of cash he wishes to net from the sale. The broker may sell the property for any amount he can and retain the portion that exceeds the owner's net. It is illegal in Michigan. |
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Multiple Listing Service |
At its most basic, an MLS is an information-aggregating service through which a group of participating, member brokers list and sell their properties within a common market area. The broker working with the buyer is also know as the selling broker (as opposed to the listing broker). If a selling broker submits an accepted offer on another broker's listing, the two cooperating brokers share the commission. |
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Procuring cause of sale |
Since brokers compete for a limited number of buyers, commission disputes frequently arise. The procuring cause of sale is the broker who originated a series of events, which without break in continuity (meaning connection), resulted in the sale of the property. In the case of a commission dispute between two members of the National Association of Realtors, the code of Ethics requires the matter to be submitted to arbitration rather than litigation. |
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Termination of an agency relationship |
When termination occurs, the agent's authority to represent the principal ends. |
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Action of parties |
1. Performance 2. Mutual consent 3. Discharge 4. Resignation |
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Performance |
Performance occurs when the purpose of the listing is fulfilled I.e the seller accepts a buyer's offer and the transaction closes. |
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Mutual consent |
Since the listing arises through the mutual agreement of the parties, they may also mutually agree to terminate it. |
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Discharge |
If the principal justifiably believes that his agent is not performing his promised duties, the agent may be discharged (meaning fired); I.e the broker's failure to market the property or abandonment of the listing. |
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Resignation |
The broker's act of resignation must be in good faith; I.e the seller refuses to allow the listing or cooperating broker to show the home to a particular buyer because of national origin. |
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Operation of law |
1. Expiration 2. Destruction of subject matter 3. Material change in circumstances 4. Loss of capacity |
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Expiration |
An agency relationship expires (meaning terminates) at the end of the specified term. |
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Destruction of subject matter |
When the subject matter of an agency is destroyed, the reason for its existence has been lost. |
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Material change in circumstances |
When an agency is created, it is based on a set of facts known to the parties at that time. Should any of these facts change in an extreme and unforeseeable way, it may not be fair to enforce the continuation of the relationship; I.e discovery of oil on a listed property |
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Loss of capacity |
According to contact Las, all parties must have legal capacity; that is, must be of sound mind and legal age. If the principal or agent was insane at the time contracting, the agency relationship should be terminated. Bankruptcy and death re two other capacities. |
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Personal assistants |
Persons whom a real estate agent hires to extend the agent's reach into a marketplace. By delegating certain tasks, especially administrative, to an assistant, the agent can spend more time listing, selling, and negotiating contracts. |
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Avoiding the unauthorized practice of law |
Long-standing law has held that a real estate broker may: 1. Fill in standardized forms 2. If doing is incidental to his real estate business 3. Was done without charging additional compensation. In 2003, Michigan supreme Court held that a person engages in the unauthorized practice of law when counseling or assisting another in matters that require the use of: 1. Legal discretion 2. Profound legal knowledge A real estate licensee should heed the following. |
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MAI |
Member appraisers institute |
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USPAP |
Uniform standards of professional appraisal practices |
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Value |
Value refers to the usefulness (utility) or ability of an object to satisfy the needs and desires of human beings. It is the worth of an object, typically in terms of money. It may also be expressed as the power that a good or service has to command other goods and services in exchange. |
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Market value |
The (1) highest and most likely price a ready, willing, and able buyer would pay, and (2) an unrelated, but equally ready, willing, and able seller would accept, (3) when both are fully informed as to market conditions, and (4) the transaction has had sufficient time to mature |
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Arms length transaction |
A transaction negotiated between two independent and unrelated parties, each working to protect his own best interest, without one being under the influence or control of the other; another factor that affects maket value |
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Value versus price and cost |
Value is not necessarily synonymous with price and cost. |
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Price |
The actual amount of money, including valuable goods or services, which are given in exchange for a property. |
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Cost |
The actual amount of money, labor, and other sacrifices expended to bring a property into existence; I.e the cost of building. A reference to what has happened in the past. |
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Appraisal |
An estimate or opinion of value. As it pertains to real estate, an appraisal is not an expert opinion issued by a disinterested person of suitable qualifications. |
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Independent appraiser |
The appraiser should not have any interest in either the property being appraised or the outcome of the appraisal, and must avoid any temptation to improperly adjust his appraisal figure. Any request by a property owner, lender, buyer or real estate licensee to artificially adjust an appraisal report may constitute mortgage fraud and is improper and illegal. |
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Appraiser |
A person specially trained to estimate the value of real estate or other property such as automobiles, jewelry, and equipment; specific licensing requirements are imposed on appraisers. |
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FIRREA |
Financial Institutions Recovery ReformRecoveryEnforcementAct ReformRecoveryEnforcementAct RecoveryEnforcementAct Enforcement Act |
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Appraisers license law |
To accomplish the goals of FIRREA, States were required to enact appraiser licensing legislation |
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Appraiser license categories |
The four categories under Michigan law 1. Limited real estate appraiser 2. State licensed real estate appraiser 3. Certified residential real estate appraiser 4. Certified general real estate appraiser |
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Qualifying appraisal |
A state-licensed or state-certified appraiser must prepare all appraisals for any transaction that involves a federally-related loan |
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Informal estimates of value |
Not all estimates of value qualify as a formal appraisal for which an appraisers license is required I.e a licensed real estate broker may provide a homeowner with an estimated range of market values based on similar properties that have recently sold (market analysis) |
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DUST |
An acronym for the primary elements that real estate must possess to have value Demand Utility Scarcity Transferability |
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Demand |
Consumer desire. The availability of a ready, willing, and able buyer who is interested in owning or possessing property. |
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Utility |
The usefulness of property. The more useful a property is to nay particular purchaser, the more value it is likely to command. |
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Scarcity |
To create value, there to be a finite supply of any saleable item. |
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Transferability |
The ability of a seller to transfer his legal property rights to another. A buyer's ability to acquire all legal rights is generally a condition to his paying value for a property. |
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Regression versus progression |
Non-conforming properties can affect each other's value in a negative or a positive way |
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Regression |
The value of a large, expensive property can be negatively affected if it is located in a neighborhood with smaller and older homes |
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Progression |
The value of a smaller property naturally increases if it's location is near more expensive properties |
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Highest and best use |
Although there are many uses to which land may be put, the highest and best use is the one that results in the greatest amount of income for the longest period |
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Situs (location) |
The Latin term for location. Situs considers the preference or desirability for a particular location. The fact that some areas are more desirable than others creates value for the properties located there. |
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Economic trends |
Economic trends may be taken into consideration when determining value. I.e the value of income-producing properties depends upon the ability to attract and select economically-viable business tenants. Trends, such as localized housing bubbles, can create problems for appraisers. |
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Housing bubble defined |
The term housing bubble refers to an unsustainable increase in housing prices, to the extend of which, a sudden drop or "bursting" of the bubble could result in a widespread loss of equity. The industry views housing bubbles as localized economic issues. |
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Market data approach |
The subject property is compared to similar properties that have recently sold. Since there are physical differences between the subject property and the comparable properties, the appraiser makes adjustments to the sale price of each comparable. A.k.a sales comparison approach, market approach |
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Comparative market analysis |
Licensees frequently prepare a simplified version of the market data approach called a comparative market analysis (CMA). No adjustments for differences are made and the owner receives a value range rather than an exact figure. A buyer's agent may prepare a CMA for a buyer/client when preparing an offer. |
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Competitive market analysis distinguished |
A full comparative market analysis includes comparisons to: 1. Currently listed properties 2. Recently sold properties 3. Properties where the listing expired By comparison, a competitive market analysis only includes the comparison to (1) currently listed properties. |
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Cost approach |
The appraiser calculates the cost of rebuilding the subject property using present day coats and expenses. This establishes a replacement cost which is adjusted by subtracting the value of any needed repairs (which represents depreciation). The market value of the raw land is estimated and then added back to the adjusted replacement cost. |
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Cost approach Steps |
1. Determine land value 2. Calculate cost of construction 2a. Reproduction cost 2b. Replacement cost 3. Estimate depreciation 3a. Physical deterioration 3a1. Curable deterioration 3a2. Incurable deterioration 3b. Functional obsolescence 3c. External (economic) obsolescence 3c1. No social obsolescence 4. Deduct depreciation 5. Add back value of land |
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Reproduction costs |
As a means of calculating construction cost, reproduction requires the appraiser to calculate an exact duplicate of all improvements. |
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Replacement costs |
Replacement value only duplicates the same space, function, and amenities as found in the subject property; current construction methods, materials, and techniques are used. |
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Physical deterioration |
A form of depreciation resulting from wear and tear I.e improper or deferred (delayed) maintenance, insect infestation, weather damage and owner-caused damage |
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Curable deterioration |
A problem is curable if the cost of repair is lower than the resulting increase in value if the repair is made. |
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Incurable deterioration |
A problem is incurable if the cost of making necessary repairs exceeds any gain in value |
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Functional obsolescence |
Loss in value because a property or component part has become inefficient, outdated, or outmoded and is in need or replacement; also includes features that are no longer desirable. |
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External (economic) obsolescence |
The only category of depreciation that results from factors external to the property I.e a house located in a deteriorating neighborhood or close to a nuisance such as a landfill |
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No social obsolescence |
An appraiser cannot adjust the value of a property due to the composition of a neighborhoods inhabitants. To do so would violate fair housing laws. There is no such thing as social depreciation. An appraiser may consider the fact that homes in a neighborhood are in disrepair, but to suggest that a particular group has anything to do with it is both false and inappropriate. |
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Income capitalization approach |
An approach that expresses the present worth of the subject income property as a function of its income producing potential. It assumes that the worth of the property is a function of its ability to generate rental income I.e as income-producing potential increases, so does value. It is applied exclusively to income-producing properties I.e apartments, commercial/office buildings, and shipping centers. |
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Process of capitalizing income |
1. Determine net operating income (NOI) 2. selecting the capitalization rate 3. Determination of value Value = income ÷ rate |
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Concept of ownership |
The term ownership refers to a group of rights that controls the use and enjoyment of property, including the right to convey it to others. Ownership can be with or without restriction. |
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Title |
An abstract term representing the Union of all elements that comprise ownership. Title is synonymous with ownership. One who holds all rights to property is said to hold title. |
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Requirements of a valid deed |
A deed must meet certain mechanical requirements for validity including 1. Execution by the grantor 2. Delivery to the grantee |
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Warranty deed |
The grantor guarantees (warrants) that the title is food and marketable. The warranties obligate the grantor to cure any problems that arise and affect the grantees interest. A.k.a a general warranty deed |
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Marketable title |
A title which is free from encumbrances and reasonable doubt as to validity, it is clear of any defect that could diminish the quality or quantity of the conveyed interest. It implies that the title will be saleable in the future. |
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Covenants of title |
Warranty deeds contain a series of warranties that provide the greatest protection of any deed and make it the most desirable from the grantees perspective. If the purchase agreement is silent about the type of deed the grantor must give, the law assumes that the parties intend a warranty deed. |
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Special warranty deed. |
The grantor only promises to guarantee and defend the title against defects or claims that have arisen since he originally acquired title. The grantor warrants that he, or anyone claiming under him, has not encumbered the title. No warranties are extended to problems that may have been created by an earlier owner in the chain of title. A.k.a limited warranty deed, covenant deed, C deed |
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Bargain and sale deed |
Describes the consideration that a grantee pays and then conveys whatever interest the grantor has at the time of conveyance, without the use of warranties or guarantees. Although the grantor makes nor promises, it is implied that he has possession and a substantial title interest in the property. |
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Quitclaim deed |
Used to convey an interest in a property by releasing or quitting the grantors claim to it without guarantee. It passes whatever interest that grantor may have in the property at the time of the conveyance. |
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Adverse possession |
Arises when someone other than the true owner possesses land for a statutory period of time and in a way considered to be adverse to the fact that anyone else holds title. A.k.a title by prescription, court ordered transfer after establishing the necessary elements of adverse possession. |
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Statutory period |
Possession must be continuous for the full statutory period of time. In Michigan, fifteen years. |
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Accession |
A legal mechanism that awards an owner title to all that his property produces such as crops, timber, and discovered minerals. Also creates an ownership right to everything that is attached to the owners property, either naturally, artificially, by intention or by mistake. |
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Decendent |
One who has died without leaving a will. May also refer to any deceased person whether he has died with or without leaving a will. |
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Will |
An instrument through which a person disposes of his real and personal property. The difference between a will and a deed is that a will is takes effect upon death whereas a deed takes effect upon delivery. |
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Testate |
One who has prepared a will. Also refers to one who has died leaving a will. |
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Testator |
One who has made a will or who has died leaving one; a male author of a will |
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Testatrix |
A woman who dies leaving a will |
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Devise |
A gift of real property made through a will. To devise also means to dispose of real or personal property through a will. |
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Devisor |
A person who gives his real property through a will, the maker of a will |
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Devisee |
The person to whom the real property is given through a wills devise clause I.e heirs of the devisor or other person's designated to receive the testamentary gift |
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Administrator |
A person appointed by a probate court to take charge of the assets and liabilities of a decedent. A make who performs this function is called an administrator while a female is called an administratix |
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Executor |
A person appointed by the author of a will to carry out the directions and requests of the will. |
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Personal representative |
A term used in Michigan to refer to both administrators and executors |
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Probate |
The legal procedure used to prove whether a will is valid or not. Also refers to the legal process by which a decedent's estate is administered when no will exists. |
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Will substitute |
A device individuals can avoid having their estate go through probate. The property automatically passes to a surviving person without having to be named in a will or being an heir. I.e owning a property as joint tenants, joint bank accounts, certain trusts and life insurance policies. |
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Feudal system |
A system of land where all land was owned by the king who gave possession to regional Lords in exchange for providing services to the kingdom. Feudalism has been abolished in favor of the present-day allodial system. |
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Allodial system |
The modern system of land law whereby land can be individually owned without being subject to any feudal duties or burdens. |
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Estates in land |
The term estate refers to the degree, quantity, nature, and extent of an interest in real or personal property. Synonymous with the terms right, title and interest. |
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Freehold |
An estate that implies ownership and is in the nature of a fee. The interest must involve land and exist for an indeterminable duration. Indeterminable means that a freehold interest lasts for a lifetime or forever. |
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Fee simple |
A fee or fee simple is an interest in land that is possessory and creates an ownership measured in terms of duration (how long it lasts). It is inheritable |
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Fee simple absolute |
Another form of fee created in a person (the grantee) and his heirs and assigns forever, without limitation or condition. The terms fee, fee simple, and fee simple absolute, although technically different, are often used to indicate the same thing. |
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Fee simple defeasible |
A fee interest whereby the grantor sells his property while placing a condition or other restriction on how the new owner (grantee) can use the property. |
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Life estate |
An ownership interest with a duration limited to the life of the owner of the life estate or some other person. Upon the death of the life tenant, the property either reverts to the grantor or transfers to a third party named in the deed. |
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Reversion interest |
A future interest where the estate reverts or returns to the original fee simple owner/grantor. If the original owner is dead or has sold the reversion interest, the owners heirs or assigns take in his place. |
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Remainder interest |
A future interest created in someone other than the original grantor. The party named in the deed to whom property passes upon death is called a remainderman. Should he predecease the life tenant, the remainderman heirs or assigns are entitled to the property and not the original grantor or the life tenant. |
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Ordinary life estate |
Whether the grantor retains a reversionary interest or names a remainderman, the lifetime of the grantee is used as the measuring life for the estate. |
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Pur autre vie |
The grantor names a third party whose life is the measuring life. When this person's life ends, the estate terminates and passes to whatever future interest was created by the grantor, whether reversion or remainder. |
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Rights and responsibilities of life tenant |
1. Duty to make repairs 2. Payment of property taxes 3. Sale, mortgage, or lease: although a life tenant can sell, mortgage, or lease the property, the sale, mortgage, or lease is terminated and reverts back to the grantor or transfers to the remainderman upon the death of the life tenant. |
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Dower |
A provision that the law of most states makes for a widow out of certain lands owned by her deceased husband It creates a life interest in the name of the wife. |
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Inchoate right |
An inchoate right is considered to be partial, unfinished or begum, but not completed. Dower is inchoate because it is contingent upon the husband's death. While the husband is alive, the wife cannot make a claim on her husband's property. The rights vest (are realized) upon death, at which time the widow can avail herself of her benefits. |
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Termination of rights |
Dower can be terminated through a signed release by the wife or by divorce. Further, if the wife predeceases her husband, nothing passes on to her estate. |
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Release |
The wife mist join in any conveyance of her husband's property by signing the purchase agreement and deed. |
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Divorce |
A decree of divorce acts to sever any dower rights the widow would have been entitled to had she been married at the time of her husband's decease. |
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Curtesy |
An estate that entitles a married man to a life interest in the property of his deceased wife. Do not exist in Michigan |
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Land contract as a freehold interest |
Since a land contract vendor (seller) retains the deed pending full payment, the vendee (buyer) holds the true real estate interest or freehold rights. |
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Leasehold |
An estate in the nature of personal property; includes property interests with a fixed term or duration I.e leases As opposed to a freehold, a leasehold is a mere possessory estate. |
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Encumbrances generally |
An encumbrance is any right or interest in real estate that exists in a person other than the owner. Includes any claim, lien, charge or liability that is attached to and binding upon real property. Encumbrances impair the value of the land that it affects. |
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Runs with the land |
Encumbrances usually pass with the title when transferred from one owner to another. A title search can be completed to find out if an encumbrance exists. |
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Easement |
A limited right to use or enjoy the property of another for a particular purpose; includes the right of ingress and egress (the right to enter and exit). Easement rights are non-possessory and do not include the right to remove part of the land. |
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Easement appurtenant |
An easement consisting of two adjoining properties. One property contains the easement that benefits the neighboring property. since it benefits a tract of land rather than a person, it is said to run with the land and pass wih any subsequent conveyance. |
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Dominant estate (tenement) |
The tract that benefits from the easement. The owner of this estate has the right to use the easement. |
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Servient estate (tenement) |
The tract that contains and is burdened but the easement. The owner of this property must allow the owner of the dominant estate to pass over his land. |
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Easement in gross |
An easement that creates a personal interest in the land of another. Since the benefit runs to a person rather than a neighboring tract of land, only a servient estate exists. |
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Easement by implication |
An easement which is implied by law even though the parties to a transaction do not create or reduce it to writing. Due to the circumstances of some transactions, the law may presume the parties intended to include an easement. |
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Easement of necessity |
An easement that is essential to the enjoyment of the dominant estate. It is considered a necessity to the use of the land and not just implied from the owners prior use. |
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Easement by prescription |
An easement that results from the long-term enjoyment and uninterrupted use of the servient land. It is similar to adverse possession except that the use by the claimant only results in an easement instead of possession and ownership. The use must be adverse, open and hostile. |
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Encroachment |
Any illegal intrusion that invades a highway, waterway, or the property of another. When a building, or some part of it, illegally extends beyond its lot line, it encroaches on the adjoining property or street. |
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Detection |
Encroachments are detected be physically inspecting a property or by conducting a formal survey. Since a title search does not involve the physical inspection of a property, it is not used to discover an encroachment. |
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Profit |
A right that one person exercises in the soil of another, accompanied with participation in the monetary profits derived from the use of soil. Commonly granted to take timber by logging, mine minerals, drill for gas and oil, and excavate gravel. |
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Emblements |
Annually produced crops that result from the labor and industry of a tenant rather than appearing spontaneously by nature I.e wheat, vegetables, corn and fruit. A tenant under a lease generally has the right to harvest (take) and carry these items away after the tenancy has ended because they are the result of his own labor
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Liens |
A lien is a claim on the property of another for the payment of some debt, duty, or obligation; a type of encumbrance. A lien gives the creditor a qualified right to force the sale of the debtors property to satisfy the debt. |
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Senior versus junior liens |
A senior lien is one that has precedence over another lien or encumbrance. It is the first lien to attach to the property and the first one satisfied upon foreclosure. All other liens that follow the senior lien are junior liens. |
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General liens |
Liens that attach to all of the property of a particular person. I.e judgement liens, equitable liens, income tax liens, and estate and inheritance liens. A general lien results from the actions of a person; not by way of a property owners prior consent and agreement.
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Specific lien |
Liens that directly affect a particular property despite who the owner is; for example, mortgages, property tax liens (not income tax), construction liens, and vendor/vendees liens. |
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Property taxes and special assessment |
The non-payment of property taxes, special assessments, and public utilities such as water or sewer bill can result in an enforceable lien in favor of the local unit of government. |
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Priority of a property tax lien |
The people of the state of Michigan have a valid lien on land wih delinquent taxes including the right to enforce it as a preferred claim. Subject to certain exceptions, this claim supersedes mortgages, easements and can encumber mineral rights. |
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Construction liens |
The right a contractor acquires to place a lien on a property he builds or improves to secure payment for the value of the work performed. |
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Lien priority |
Since nearly all liens are of equal importance, the issue of priority typically comes down to timing; in other words, who gives first notice as to the existence of his lien is said to have priority |
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Judgement lien |
A lien imposed by a court to satisfy an award in a lawsuit |
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Enforcement of a lien |
To be valid, a lien must be 1. Created for a legal purposes 2. Applied equitably, meaning fairly and 3. Properly levied, meaning enforced. |
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Lis pendens |
Notice of pending lawsuit; a notice filed in the public records to warn all persons, particularly subsequent purchasers, that the title to the property is in litigation and may be bound by an adverse judgement. |
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Attachment |
A court order that acts to legally seize a property and secure a creditors claim after a judgement is entered in his favor. It operates to take a property into court custody until the debt is satisfied. |
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Ownership in severalty |
Ownership created when title to real or personal property is held by one owner, without any other person joining him during his ownership period. |
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Co-ownership |
It is possible for co-owners to hold the same or differing degrees of interest. Co-ownership is synonymous with concurrent ownership. |
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Tenancy in common |
A concurrent form of ownership (meaning two or more persons own the same property at the same time) where each person holds seperate titles and an undivided interest. The ownership interests do not have to be equal; each interest is undivided and fractional. |
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Joint tenancy |
A concurrent form of ownership in which two or more persons own a single estate in land on an entirely equal basis. Equality of ownership is measured by four unities. Unity of time Unity of title Unity of interest Unity of possession Has right of survivorship |
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Tenancy by entireties |
A concurrent form of ownership which is enjoyed exclusively by a husband and wife. It is possible for a husband and wife to own property as tenants in common or as joint tenants providing the deed is clear as to this intent. |
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Trust ownership |
An ownership arrangement by which property is transferred to a third party, the trustee, who controls it for the benefit of another, the beneficiary. The person who creates the trust and transfers legal title of the property to the trustee us the trustor. |
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Trustee |
The person who holds the property for the beneficiary and acts according to the trustor instructions. |
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Trustee |
The person who holds the property for the beneficiary and acts according to the trustor instructions. |
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Beneficiary |
The individual for whom the trust has been created. |
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Partnership |
An association of two or more persons to carry on, as co-owners, a business for profit. Title can be issued directly in the name of both general partnerships and limited partnerships. |
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Corporation |
An artificial person created under state law for the purpose of carrying on a business, including owning property. A corporation is distinct from the individuals (shareholders) who make up And own it. |
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Cooperatives |
A cooperative is a form of ownership in which a corporation (or land trust) is organized to hold title to a multiple-unit dwelling complex. Individuals units are then leased to shareholders in the corporation. |
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Proprietary lease |
The stockholder acquires the exclusive right to occupy a unit in the building owned by the corporation. The term proprietary implies that a type of ownership interest has been created. |
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Condominium |
An estate in real property consisting of seperate fee simple ownerships in individual units, with an undivided interest in the entire development. A system of seperate ownerships of individual units in a multiple-unit building or group of buildings. |
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Site condominium |
A condominium development that looks like a neighborhood with single-family, detached units on seperate, individually-owned lots. They are actually structured as condominiums with each lot qualifying as a limited common element. |
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Title search |
An examination of the public records to determine whether or not the title is good. |
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Public records |
The system of records established in every city, county, and state for protecting owners and potential buyers I.e the office or register of deeds. The records are open to public inspection. |
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Title verification |
When a seller signs a purchase agreement, he promises to convey clear title in exchange for the purchasers promise to pay the purchase price. The focus of this chapter is on how the purchase can find out what the state of the sellers title is before the closing. |
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Chain of title |
The succession of owners of a property from the first to the most recent. A purchaser can determine the quality of title he is about to receive by examining the quality of title each grantor received from the previous owner. |
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Land patent |
A grant of property made by the government to one or more individuals. It is typically the beginning of the chain of private ownership A.k.a land grant |
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Title examiner |
The individual who is responsible for inspection of the public records and assembling the chain of title on a property. |
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Recording |
The act of making an official and permanent entry in a book, file, or other registry. The essential element of a recording system is that it serves legal notice if ones interest in a property. |
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Marketable title act |
A statute that allows an owner or prospective buyer to ignore certain. Title interests wih little or no validity providing the current chain of title is unbroken from present back approximately 40 years; an act limiting the scope of search necessary to verify title to land |
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Torrens system |
A method of assuring the quality of title through a title registration procedure that is similar to the United States system of automobile registration; not uses in michigan |
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Abstract of title |
A condensed and chronological history of a title to real estate; including a summary of all transactions, conveyances, and encumbrances that affect the land. It also includes a brief legal description and other maps, plats, or aids for physically locating the property. |
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Title Insurance |
An insurance policy against title defects. The buyer, as the insured, can recover losses from the title insurance company if the title turns out to be defective for any of several reasons. The form of title insurance most commonly used in Michigan is the American Land Title Association or ALTA Owners Policy. |
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Form HUD-1 versus Brokers Settlement Statement |
Under RESPA, a HUD-1 settlement statement is required with a transactions involving a federally-related mortgage loan; it is typically prepared by a title company or lender. A licensed broker who is involved must also prepare a seperate closing statement. The Brokers clsoing statement is most often prepared by a title company at the Brokers direction. |
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Handling expenses |
Real estate agents are expected to review the expenses for which the purchaser and the seller will be responsible at the closing. If someone else prepares the closing package, the listing and selling brokers can use worksheets to review the figures with each party. The following expenses are those encountered in a typical transaction. 1. Commissions 2. Title verification expenses 3. Revenue stamps and recording expenses 4. Tax and insurance reserves/escrow 5. Mortgage-related expenses 6. Attorney's fees |
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Documents related to transfer of ownership |
1. Deed 2. Land contract 3. Bill of sale |
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Documents related to financing |
1. Mortgage 2. Note 3. Deed of trust 4. Private mortgage insurance policy 5. Transfer of tax, insurance escrows 6. Estoppel certificate |
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Real Estate Settlement Procedures Act |
RESPA is a federal act designed to safeguard consumers who apply for federally-related mortgage loans. Lenders must provide certain information regarding the nature and amount of settlement costs. RESPA allows borrowers to compare lenders and make better-informed decisions about the closing process. The act does not limit the actual amount of finance costs a lender may charge. Administered by HUD |
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Metes and bounds |
An accurate tool for describing g property that specifies the measurements, directions, and exact shape of the lot boundaries. It measured boundaries from a known point of beginning using distances and directions. |
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Point of beginning (POB) |
The starting point from which the entire property boundary is traced with a degree of accuracy that brings the surveyor back to the same point. The POB is typically referenced to a monument or bench mark. |
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Monument |
Any natural or artificial object that contains a physical mark or indication of location. Monuments are sometimes used to signify the lines and boundaries of a survey I.e trees, large boulders, water boundaries, pipes, fences |
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Bench mark |
A mark placed on a fixed object that indicates the elevation of the topography and other surveying information. The most common form is a bronze disk that a government surveyor embeds in the ground, often in a concrete highway. |
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Cul-de-sac |
A street or other passageway with only one means of egress. It typically takes the form of a short Street that ends in a court or turn-around. |
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U.S. Government survey system |
This is a property description method that dates back to 1785. It uses an imaginary grid that was placed over the existing (and after-acquired) portion of the United States considered to be public lands including Michigan. Individual lots are referenced by their specific location within the grid A.k.a the Rectangular Survey System and the Public Land Survey System |
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Lot and block |
A method of describing property that makes use of a previously recorded plat. When the plat is recorded, a permanent record is created which is open to the public. Specific reference can then be made to a particular lot within this plat. |
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Plat |
A scaled down representation of a subdivision which is comparable to a subdivision blueprint. When a tract of land is platted, it is divided into smaller parcels called lits. Each lot is assigned a number. |
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Sidwell number |
A.k.a parcel identification or tax identification numbers Are used to identify individual lots. This number is used in the assessment and taxing of property as well as a substitute on real estate contracts for more formal legal descriptions. |
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Police power |
The right that each state has pursuant to the Tenth Amendment of U.S. Constitution to pass laws designed to promote the health, safety and welfare of its citizens. |
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Master plan |
A comprehensive plan incorporating the goals and recommendations of the planning commission. Once completed, devices such as zoning are then uses to out the master plan into effect and enforce it. |
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Eminent domain |
The power a state, municipality, or other authorized entity has to take private property for public use. Based on the fifth amendment of the u.s Constitution, when private property is taken for public use, the owner must be paid a fair and just compensation. The property is forcibly taken through the process of condemnation. |
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Condemnation |
The actual process used to exercise eminent domain. During the condemnation hearing, a court decides the exact amount of just compensation. |
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Inverse condemnation |
When a land use regulation negatively impacts a property's use or value; the owner may claim that the regulation amounts to a taking thereby entitling him to just compensation
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Zoning |
The division of a local municipality (city, town, etc) into districts or zones where the use of the land is regulated. |
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Use zoning |
1. Residential 2. Commercial 3. Industrial 4. Agricultural Any one of these districts may be further divided into subcategories such as light and heavy industrial |
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Density zoning |
Consists of population restrictions I.e a city passes a residential use zone with three subcategories 1. Detached, single family dwellings 2. One-to-four-unit residential structures 3. Apartment dwellings |
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Set back requirements |
An ordinance regulating how closely a building can be located, typically to the front or side lot line. A setback provides for safety, fire alleys, and proper drainage along with establishing a uniform neighborhood appearance. |
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Buffer zone |
A district or area that separates two districts with different zones. The intent is to make the inconsistent uses blend more easily with one another. I.e park between residential and commercial zone |
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Exclusionary zone |
A zoning restriction that makes it difficult for certain social or low-income groups to locate within the community. Since no legitimate justification can generally be advanced, the zoning can be struck down as illegal. |
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Zoning administration |
The Michigan Zoning Enabling Act transfers common powers and responsibilities to local units of government (county, township, and city/village) for the purpose of zoning land. |
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Non-conforming use |
Land uses in existence before implementation of a zoning change that do not conform to the zone. These pre-existing uses are technically a violation of the new ordinance. Providing the use was valid to start with, the owner may be able to continue with the non-conforming use as a matter of fairness. |
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Variance |
A license or permission that an owner seeks to use property in a way that varies from an existing zone. Although no pre-existing non-conforming use is involved, once a variance is granted, it is administered similarly to a non-conforming use. Since a variance is not granted to a particular owner; it runs with the land and passes with ownership. |
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Special use permits |
Most ordinances list certain uses that are expected from local zoning requirements such as hospitals, churches, private schools, and clubs. The uses are regulated in advance through a zoning ordinance that uses a case-by-case application. |
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Sport zoning |
A change in zoning of a small area to use that is inconsistent with the master plan for the region. Illegal in michigan |
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Cluster zoning |
Lots within traditional zoning schemes frequently are subject to minimum size restrictions. Under cluster zoning, the size of lost and required frontage can be reduced if the overall density of the development does not exceed the master plan. The homes are actually clustered instead of being uniformly spread out, leaving more area available for recreation areas, parks and schools. |
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Planned unit development (PUD) |
A planned unit development is a zoning technique consisting of a mixed-use plan of commercial, industrial, and residential uses; similar to a cluster zone. A developer can locate shopping areas conveniently near residential areas. |
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Building codes |
A form of land use control that establishes minimum standards for new construction. |
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State-wide in nature |
The Michigan Residential Code establishes state-wide standards for new residential construction. It is enforced on a city, township or county level by local building code officials. |
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Building permit required |
Before building or remodeling, an owner or his builder must apply for (also called pulling) a permit with the local building department. A number of different inspections are generally required to make certain that the builder follows the uniform state construction codes. |
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Certificate of use and occupancy (C of O) |
Upon final inspection and prior to the owner taking possession, a certificate of use and occupancy must be issued. It confirms that construction was performed in accordance with the building permit, construction (building) codes and other local ordinances. |
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Fire safety in residential construction |
The Construction Code Act and Housing Law of Michigan were amended in 2004 to include requirements pertaining to fire safety and the installation of smoke detectors in both single and multiple family dwellings. |
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Resale inspections |
Inspections are increasingly being required of properties within municipalities prior to their resale. These inspections are exclusively used to determine compliance with local health and safety codes such as building, electrical, plumbing, and heating; consequently, they are not a substitute for a private home inspection arranged for by the purchaser. |
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Sewage disposal permits |
If the lot upon which an owner seeks to construct a residential dwelling is not connected to the municipal sewer system, a septic system is required. A percolation test is also conducted on the building site in connection with the issuance of a permit. |
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Percolation test |
A test to determine the capability of the soil to absorb and drain water. It involves digging a hole to a depth where ground water is present A.k.a perk test |
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Environmental and land-use regulation |
Real estate development is subject to several other state and federal acts designed to regulate the development of land. Environment laws not only play a critical role in the development process, but also have the potential to affect the purchase or sale of lands upon which existing dwellings exist. |
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Liable parties |
A land owner can be held liable for some or all of the costs incurred by the government in cleaning up a contaminated site. Potential purchasers must determine whether the land contains any hidden problems prior to purchasing. Other person's who may be brought into an action include lending institutions, landlords, tenants, and sellers. |
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Innocent purchaser defense |
A purchaser of a contaminated site can attempt to escape some liability provided that, prior to the purchase, all appropriate inquiries were made into the previous ownership and uses of the property. The court may take into account the knowledge and experience of the purchaser, whether the problem was obvious, and the ability to detect the contamination through an appropriate inspection. |
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Environmental site assessment |
An investigation for the existence of any number of environmental hazards on a property. It is typically handled in three phases as follows 1. A property history 2. Soil boring and groundwater sampling 3. Cleanup if necessary |
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Environmental hazards |
There are a number of hazards that may be found in a property such as Urea formaldehyde, asbestos, radon, leaking underground storage tanks, poly chlorinated biphenyls, groundwater contamination, and hazardous waste dumping and spills. |
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Brownfield and greenfields |
Brownfield are environmentally contaminated properties typically located in core urban areas. Various statues have been enacted to encourage cleanup and redevelopment of these areas through development incentives, tax credits, and tax abatements. A Greenfield is an undeveloped area, generally located with suburban lands, where there are less perceived obstacles to development. |
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Lead-paint disclosure requirements |
Federal law requires sellers or landlords of residential housing prior to 1978 - the year lead based paint was banned in residential dwellings- to disclose the presence of known lead-based paint in their properties |
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Lead-paint Sellers or landlords must |
1. Disclose known lead-based paint hazards and provide inspection reports if available. 2. Provide purchasers and tenants a federal pamphlet titles Protect Your Family From Lead in Your Home 3. Permit purchasers a 10-day period within which to conduct a lead-based paint inspection at their own expense if desired (the number of days can be changed by mutual consent) 4. Include language in the purchase agreement or lease ensuring that disclosure and notification takes place 5. Sellers are not, however, required to test for lead. |
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Toxic mold |
Mild is either an environmental fad or a legitimate concern. For molds to grow in a living environment, oxygen, moisture, and a food source must be present. Although oxygen and food sources cannot be completely eliminated, moisture can easily be controlled by home owners. The full extent of toxic mold as a medical or legal issue is still being determined. |
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Synthetic stucco (EIFS) and mold |
EIFS stands for exterior insulation and finish system and is generically referred to as synthetic stucco. The potential problem with an EIFS system is that it can trap moisture inside the wall system, whether from water migrating as vapor from the homes interior or water penetrating roof joints or door and window frame openings
Around 1997, buildings began using a drainable system to eliminate the potential for water intrusion and resulting mold. While most of the EIFS constructed homes are located in southern climates, there are some in Michigan. |
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Purchase agreement |
The key real estate contract: the real estate purchase agreement is the key contract used by buyers And sellers to transfer ownership and establish new property rights. For purpose of this chapter, the purchase agreement is the model used to understand the elements of contract law. |
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Bilateral contract |
A contract in which the parties enter mutual obligations by exchanging mutual promises; in other words, a promise is exchanged for another promise. It is binding upon acceptance even if performance is not to occur until later. |
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Unilateral contract |
A contract in which the offeror makes a promise without expecting any return promise; in other words, a promise is given for a requested performance. Neither party is bound until the promisee accepts the contract through the act of performance. |
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Contract information |
The following elements must be present to create a valid and enforceable contract; 1. Offer 2. Acceptance 3. Consideration |
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Offer |
A manifestation (expression) of willingness to enter into a bargain; a proposal to do something. The person who gives the offer is the offeror while the person who receives it is the offeree. |
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Acceptance |
A voluntary expression by an offeree that he agrees to be bound by the exact terms and conditions stated in the offer. Acceptance must be in a timely fashion; offers not time-dated lapse after the passage of a reasonable period of time. |
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Communication |
Communication or delivery of the acceptance back to the offeror is the final act necessary to create a contract. Offers generally be revoked prior to the time the acceptance is communicated. |
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Consideration |
The price paid or inducement given by a promise in exchange for a promise received from a promise. It binds the promisor to his promise. A gift promise is one not supported by consideration and is, therefore, revocable. |
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Laches distinguished |
Laches is used to bar a legal claim based upon principles of equity or fairness (rather than legislative pronouncement). It involves a failure or neglect to assert an otherwise valid right or claim in a timely fashion which acts to the detriment of the other party. |
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Contract essentials |
To be valid and enforceable, contracts must contain certain essentials; I.e offer, acceptance, and consideration, legal capacity for all parties, lawful subject matter, reality of consent, and proper legal form. |
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Caveat emptor |
A Latin phrase that means Let The Buyer Beware. It stands for the rule that a purchaser must examine and judge for himself all property that he is about to acquire. A long-evolving trend has been to shift away from caveat emptor and toward requiring sellers to place buyers on notice as to known defects. |
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Statute of frauds |
A law that requires certain classes of contracts to be in writing to be considered enforceable by a court of law classes of contracts to be in writing to be considered enforceable by a court of law of contracts to be in writing to be considered enforceable by a court of law |
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Sufficient memorandum |
According to the statute of frauds, a written agreement (memorandum) must contain certain essential elements as noted below. Along with a sufficient description of the property, look for the following: 1. Names the name of each contracting party 2. Price the purchase price is generally required (along with essential contract terms) 3. Signature the signature of all parties who are charged with performing a promise or other obligation must be on the contract |
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Executory versus executed agreements |
If the promises or obligations in a written contract are fully performed on both sides, the contract is executed. If so, the statute of frauds cannot reverse that which has already been completed. If the obligations are unperformed on either side, the contract is executory. According to the statute of frauds, all written obligations can be enforced. |
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Parole evidence rule |
A rule that protects written contracts by not permitting evidence from prior oral or written negotiations to either explain what the parties intended or to add new terms or provisions. The rule applies to written contracts which the parties intend to be the fin and complete expression of their agreement. He-said-she-said |
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Specific performance |
A court awarded that orders a breaching party to perform specifically what he agreed to in a contract; I.e a defaulting seller under a purchase agreement may be ordered to sell his property The action may also be referred to as a decree of specific performance |
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Earnest money and title companies |
License law requires licensed brokers to place earnest money deposits into a seperate trust account which is maintained by the broker. Brokers and their customers or clients may opt to have the buyers check made payable to a third party escrowee (I.e title company or attorney) instead of the broker. This practice is authorized providing the licensee who receives the check delivers it to the title company or other named escrowee in a timely fashion. |
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Lease |
An agreement by which an owner conveys exclusive occupancy of his real property or exclusive possession of his personal property, to another person. The owner gives up his right to possess, use, and enjoy his property in exchange for valuable consideration or rent. |
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Estate for years |
Any lease created for a definite, fixed period of time; this is the most common type of leasehold. |
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Estate at will |
Any lease for an indefinite period of time. The estate is terminable at the will or desire of either party; A.k.a tenancy at will Termination All that is required to terminated the tenancy at will is sufficient notice by either party; I.e 30 days in the case if a lease requiring monthly payments. |
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Lease essentials |
1. Offer and acceptance 2. Consideration 3. Contractual capacity 4. Legal objective 5. Lease term 6. Execution of lease |
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Index lease |
A lease wherein the rental rate is tied to an economic indicator such as the consumer price index. As economic conditions fluctuate, the index changes and the rent rate can be adjusted accordingly. |
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Property manager |
A person hired by the owner of an income property to 1. Generate income from renting the property 2. Preserve the value of the investment through maintenance |
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Building manager |
One who offers property management services, but limits his activities to one building rather than many different properties. He can be employed by a property management company or directly by an owner and is usually hired S an employee earning compensation on an hourly or salaried basis. |
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Resident manager |
An on-site representative who works for a property management company which has been hired to manage a large apartment complex (often consisting of several hundred units); one or more resident managers may be hired per building |
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Advantages in investing in real estate |
Appreciation - the increase in value of an asset
Equity - difference between market value of a property And it's total indebtedness
Leverage - to finance an investment with a small amount of ones own funds with the balance of the purchase price consisting of borrowed funds |
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Federal securities act of 1933 |
A law requiring that all securities which are to be sold to the public be registered with the appropriate agency. |
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Tax benefits of ownership |
Investors can use monetary losses generated by ownership to shelter income derived from non-real estate sources (such as employment) |
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Universal exclusion |
Married homeowners filing a joint tax return may exclude up to $500,000 of capital gains; single taxpayers filing tax return in their individual capacities may exclude up to $250,000 of capital gains realized from the sales of their property. 1. The residence must have been owned (by at least one of the spouses in the case of married couples) for the 2 year period immediately preceding the resale 2. The taxpayer(s) must have occupied the property as a primary residence for an aggregate period of 2 years out of the five years immediately preceding the resale 3. The taxpayer cannot have used the universal exclusion for any sale within the 2 year period immediately preceding the resale |
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Straight-line depreciation |
Since buildings tend to depreciate evenly, they are afforded straight-line depreciation treatment |
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Homeowners warranty policy |
A policy designed to offer limited protection to a buyer against certain defects in the structure or mechanical items. It is sometimes offered by sellers, builders, and real estate companies. |
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Construction warranty |
Covers: Labor Structure Plumbing Mechanicals and such have own warranty; Windows, appliances |
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Title theory |
When the borrower gives a mortgage in exchange for a loan, the lender holds legal title. If the mortgagor defaults, the mortgagee becomes the new owner. If the loan is repaid, the mortgagor has his title restored. |
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Note |
True evidence of a debt, are transferable |
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Points |
As used in financing, a point is a one-time fee collected by a lending institution at the time a loan is originated and closed. One point equals one percent of the principal amount and is typically laid by the borrower. |
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Deed in lieu of foreclosure |
The mortgagor conveys the property title to the mortgagee in lieu (instead) of being foreclosed |
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Conventional mortgage loans |
Any loan by which a person transfers to a lender a lien in exchange for part of the purchase price. A conventional mortgage is not government insured (FHA) or government guaranteed (VA) which means that the lender assumes the full risk of loss in the event of default. To calculate the probability that any given borrower may default, the lender obtains an appraisal on the property and a credit report on the borrower |
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Balloon payment |
The portion of principal that remains unpaid at maturity. The amount of loan not amortized under a partially amortized loan. Upon maturity, the borrower can pay it off in one lump sum of refinance. |
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Reverse mortgage |
The borrower is able to take the equity out of his home in monthly installments (as a line of credit) or in a lump sum. The loan is based on the lessor of the property value or an area limit; also called reverse annuity mortgage. The intent is to never repay the loan, instead satisfying the debt out of the borrower's estate upon death. If the borrower sells the property, the debt is satisfied out of the sale proceeds. Reverse mortgages are limited to homeowners 62 years of age and older. Advantages: 1. No monthly mortgage payment 2. No transfer of ownership at the time of origination 3. No requirement to repay the loan 4. No tax liability on the funds obtained |
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Blanket loan |
A loan which is designed to cover more than one parcel of property under a single security pledge. In exchange for the loan, the borrower gives the lender one mortgage that covers multiple properties. |
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Package mortgage |
A secured loan that includes fixtures and installed appliances Long with the real property. In residential property, these items may include kitchen appliances and air conditioning. |
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Subordination agreement |
A clause or agreement that switches the order of priority of a senior lien to a junior position I.e a lien holder on a vacant lot subordinates his lien to a subsequently filed construction lien |
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FHA loan |
The Federal Housing Administration (FHA) is an agency, operating under the Department of Housing and Urban Development (HUD), that was created to insure loans made on real property by approved lenders. The FHA does not build homes, provide loan money directly, or insure the physical property. In case of default, the loan is backed by the U.S. government. |
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FHA appraisal |
Properties must be evaluated by an FHA roster (approved) appraiser. This is critical because the loan-to-value ratio may be based upon the appraised value rather than the sale price. If the purchase price exceeds the property FHA-appraised value, the difference must be made up as cash down payment or the seller must lower the purchase price. lower the purchase price. |
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Section 203(b) loan |
This is the most popular and abundant FHA loan type since is covers one-to-four-unit family residential property as well as refinancing. The program is not available for investor loans (meaning loans for individuals who are purchasing rental property). |
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Section 203(k) loan |
This loan is designed for rehabilitation and repair of single-family properties. The borrower obtains the purchase or refinance amount along with the cost of repairs and improvements. The purchase offer should be contingent on loan approval for an FHA section 203(k) loan and based on any additional required repairs by the FHA or lender. |
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Veterans administration (VA) loan |
A loan made to eligible veterans for the purchase or construction of homes, which is guaranteed by the U.S., department of veterans affairs. Except for rare direct loans made in isolated rural areas, the VA does not build homes, make loans, or insure the physical property. VA loans may be obtained for mobile homes and plots. VA loans are also known as Government Issue (GI) loans |
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VA loan certificate of eligibility |
An applicant for a VA loan must be a veteran who has served for a minimum of 90 days during qualifying wartime, and 181 dys during peacetime. Reservists and national guard must have completed 6 years. |
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Concession |
A concession is a financial inducement offered by a seller (or builder, developer or real estate broker) to a buyer to entice the buyer to purchase sellers property A.k.a contributions Concessions can be negotiated in lieu of making lower offers which can ultimately affect overall property values over time. |
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Primary mortgage market |
When a borrower seeks a mortgage loan from a lender, he is dealing in the primary mortgage market. A primary lender often originates a loan and then sells it to another investor (the purchasing bank or investor is acting as a secondary mortgage market participant). |
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Secondary mortgage market |
Secondary investors purchase mortgage loans after they have been originated (funded) by a primary market participant |
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Usury |
A regulation, usually enacted by a state, that establishes ceilings on the interest rates that certain borrowers can be charged. A contract is usurious (and illegal) if the interest rate charged by the lender exceeds what is allowed by state law |
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Truth-in-lending |
An Act designed to assure that every customer who needs consumer credit is given meaningful information with respect to the cost of that credit; A.k.a Regulation Z Requirements: Creditors must disclose to borrowers the true cost of obtaining credit. This information is given in terms of actual percentages and total dollar amounts rather than attempting to hide costs with misleading statistics. The Act does not establish maximum or minimum interest rates or other charges, only the disclosure of what the lender elects to charge. |
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Advertising regulations |
Regulation Z regulates qualifying advertisements Advertisements fall within. The act when specific credit terms are advertised 1. Quoted interest rates must include the APR. Advertising of the APR alone does not trigger the disclosure requirement. 2. If specific I formation such as a required down payment, monthly payment, dollar amount of finance charges, or term of the loan is advertised, then all pertinent information must be disclosed. |
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Credit that triggers the Act |
1. Credit which is extended for personal, family, household uses in amounts of $25,000 or less. 2. All transactions secured by real property or a dwelling (regardless of loan amount). A dwelling is any residential structure containing one-to-four units, including condominiums, cooperatives, and mobile homes/trailers used as a residence. 3. Refinancing transactions (where an existing obligation that was subject to Truth-in-Lending is satisfied and replaced by a new obligation undertaken by the same consumer). |
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Three-day right of rescission |
With consumer credit, the borrower has a cooling-off period or three-day right to rescind the financing transaction by notifying the lender. It does not apply to 1. First mortgages used to finance the purchase of a residential home 2. Loans to finance construction of a principal residence 3. Loans to purchase investment properties It does apply if the dwelling is used as collateral for refinancing or obtaining a second mortgage. |
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Federal Equal Credit Opportunity Act (ECOA) |
An act to prohibit discrimination by lenders on the basis of sex or marital status in credit transactions Purpose: to require fair dealing by prohibiting lenders and individuals who grant or arrange credit to consumers from discriminating against credit applicants Protected classifications: Race Color Religion National origin Sex Marital status Age Dependence of public assistance |
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Fair housing act of 1968 Protected classes under federal law |
Federal law prohibits discrimination based on race, color, religion, national origin, sex, familial status, and handicap. For purposes of state law, the term disability has replaced handicap and person with a disability has replaced handicapper. |
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Race |
A group of persons related by common descent or heredity. Racial discrimination is prohibited despite exemptions that some federal or state laws may attempt to create. |
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Color |
The natural appearance or complexion of the skin of a particular people or race. Color goes beyond race due to variances in skin complexion within the same race. |
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Religion |
The belief or expression of a belief in a divine power which is worshipped by members of the religion. Also includes atheists. |
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National origin |
The country in which a person was born or the nation of ones ancestors. An individual does not have to be a U.S. citizen in order to be protected. |
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Sex |
Includes gender discrimination and sexual harassment, but not sexual orientation. Sexual harassment involves unwelcome sexual advances or other conduct where submission is a condition to obtaining employment, public accommodations, services, education, or housing. |
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Familial status |
Adult families with chdren under the age of 18 years are protected providing they reside with a parent or an adult who has custody. Adults seeking permanent custody of a child and individuals who are pregnant are also protected. |
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Handicap (disability under the ADA) |
A physical or mental impairment that substantially limits one or more major life activities, having a history or record is such impairment, or being regarding as having such impairment. |
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Protected classes under Michigan law |
Michigan recognizes essentially the same classification as federal law with important differences. They add marital status and age. |
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Steering |
The act of directing, channeling, or diverting a person into or away from an area based upon his being, or not being, a member of a protected classification. Even if an agent believes that steering is desired, it is illegal. The only permissable factors for showing or not showing properties are the purchasers actual financial capability or instructions from a seller that no showings take place (gone on vacation). |
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Redlining |
The refusal to make mortgage loans or provide insurance coverage for real estate located in a specified area based on alleged deteriorating conditions. |
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Shelley vs. Kraemer |
The 1948 U.S. supreme Court case holding that judicial enforcement of racially restrictive covenants against unwilling parties amounts to discrimination by the government. |
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Jones vs. Mayer |
The key U.S. supreme Court case upholding the Civil Rights Act of 1866. As a result, all racial discrimination is now prohibited without exception. |
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Civil rights act of 1866 |
The first major piece of legislation dealing with civil rights and fair housing. |
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The fair housing act of 1968 |
The first comprehensive federal civil rights legislation. The act has been amended twice to expand the protected classifications. In 1974, discrimination on the basis of sex was added and the 1988 fair housing amendments act added familial status and physical or mental handicap. |
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Americans with Disabilities Act of 1990 (ADA) |
A federal act that provides a comprehensive mandate for the elimination of discrimination against persons with a disability Purpose: society tends to segregate individuals with disabilities based on stereotypes that may not be representative of the individuals abilities. The ADA establishes a comprehensive prohibition of discrimination on the basis of disability. |
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Elliott-Larsen Civil Rights Act |
Passed in 1976 it prohibits certain types of discrimination in employment and housing.
Protected classifications: Race, color, religion, national origin, sex, familial status, age, or marital status. Height and weight are also protected as they relate to employment opportunities.
Protected activities: protected opportunities include obtaining employment, housing, and other real estate as well as full and equal use of public accommodations, public services, and educational facilities. Civil fines: civil fines may be issued in an amount related to the cost of enforcing the Elliott-Larsen Act not to exceed $10,000 for the 1st violation, $25,000 for the 2nd violation within 5 years, and $50,000 for 2 or more violations within 7 years. |
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The Michigan Persons with Disabilities Act |
Formally known as the Michigan Handicappers Civil Rights Act, The Michigan Persons with Disabilities Act was enacted in 1998. As amended, the term handicap was replaced wih the term disability and the term handicapper was changed to person with a disability. The substance ofnthe original act was essentially not changed. Legislation was also enacted to make similar changes to the Occupational Code. |
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License law |
Protects the public from dishonest licensees by requiring all persons who wish to practice real estate to obtain a license and be placed under the jurisdiction of an administrative agency |
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Michigan agency |
Presently, the official title of Michigan's licensing agency is the Michigan Department of Labor & Economic Growth (department) |
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Censure |
An expression of disapproval of a licensee's professional conduct |
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Formal complaint |
States the charges of an alleged violation |
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Good moral character |
Having a propensity (natural tendency) to serve the public in the licensed area in a fair, honest, and open manner. |
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Sec. 201 |
The department consists of a director as executive along with other employees. The director is appointed by the governor (subject to the advice and consent of the Senate). |
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Sec. 204 |
1. The department must renew the license of a person who fulfills the following requirements; a. Has applied to the department on the proper form before the expiration date b. Has paid the appropriate fees c. Has met the renewal requirements (pertaining to continuing education) 2. A license may be renewed with a limitation. If so, the department must notify and seek approval from the board. A person who receives limitation may have the decision reviewed (like an appeal) 3. A licensee is responsible for renewing his own license a. The renewal application is mailed to the licensees last known Address b. Failure to notify the department of change of address will not extend the expiration date and may result in discipline |
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Sec. 207 |
1. The department my issue an approval to a real estate school 2. The department may grant approval to a continuing education program |
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Sec. 208 |
The department has control over the files of the board and must assure that public access laws are met with regard to the files. The word "control" is also known as "physical dominion" under the occupational code |
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Sec. 301 |
Each board has 9 voting members; 6 are licensed in the occupation and 3 represent the general public. A board member must be 18 years of age and a Michigan resident |
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Sec. 302 |
The governor appoints board members and vacancies |
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Sec. 303 |
1. A board member is appointed to a 4-year term. 2. An individual shall not serve for more than 2 consecutive terms. |
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Sec. 313 |
While the board may recommend whether to grant approval to a school or person offering certain training in real estate, the real estate unit of the department actually approves schools and ensures compliance. The enforcement division regulates by investigating any complaints. |
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Sec. 402 additional definitions |
1. Expiration date - the date set forth in the rules for expiration 2. Reinstatement - the granting of a license, with or without limitation, to a person whose license has been revoked 3. Relicensure - the granting of a license to a person whose license has lapsed for failure to renew within 60 days after expiration. |
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Sec. 411 |
1. A person who does not renew on or before expiration cannot practice real estate once it actually expires. The license actually lapses the day after expiration. A licensee may continue the uninterrupted practice of real estate while awaiting receipt of his new license providing the department has received the renewal application by October 31st and the licensee has completed the required continuing education by that same date. 11. A licensee who is on active duty in the armed forces in a combat zone is temporarily exempt from the requirements of the occupational code including license renewal and continuing education a. The licensee must inform the department via mail or e-mail of their desire to exercise the exemption and include proof of active duty service b. If the licensee acted in a supervisory role, in other words, acted as a broker or principal associate broker, he must also make arrangements for someone else to assume the supervisory and oversight responsibilities of the company. c. The temporary exemption is valid until 90 days from release from active duty, but cannot exceed 36 months from the date of license expiration (which is the period within which any lapsed license can be relicensed without retesting). The licensee must also fulfill all continuing education requirements that accumulated while he was on active duty. |
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Sec. 601 |
1. A person cannot engage in the practice of real estate or call himself a licensee without a license. This, and other provisions of article 6, emphasizes the fact that real estate law applies to both licensed and unlicensed persons. 2. An approval is required to operate a real estate school 3. A person whose license is suspended, revoked or lapsed is considered to be unlicensed. 4. A person or school that violates 1 or 2 is guilty of a misdemeanor punishable by $500 and/or 90 days imprisonment a. A misdemeanor is a breach of criminal law (as opposed to civil law). Under criminal law, offenses are classified into felonies and lesser offenses called misdemeanors. b. Only a court of law can impose a prison sentence. 5. A second offense is punishable by $1,000 and/or 1 year imprisonment. |
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Sec. 602 |
The following penalties can be issued for a violation of the act, rules, or an order: 1. Limitation of license 2. Suspension of license 3. Denial of a license or its renewal 4. Revocation of license 5. In the case of a licensee, a maximum $10,000 civil fine paid to the department 6. Censure 7. Probation 8. A requirement that restitution be made (based upon findings made by a hearing examiner after a contested case hearing). |
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Sec. 603 |
If restitution is required, the respondents license can be suspended until it is made |
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Sec. 604 |
A person who commits 1 or more of the following is subject to section 602 penalties. This is generic in nature d. Lacking good moral character g. Committing an act of incompetence |
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Sec 2501 (g) |
Independent contractor relationship is defined as a relationship that satisfies both of the following conditions: 1. A written agreement exists stating that the broker does not consider the associate broker or salesperson to be an employee for federal and state income tax purposes 2. At least 75% of the annual compensation paid by the broker must be from real estate sales commissions. |
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Sec. 2504 |
1. A broker applicant must complete 90 clock hours of real estate courses, 9 hours of which include fair housing. This is in addition to the salesperson education requirements. A clock hour is a 50- minute segment. 2. A salesperson applicant must complete 40 clock hours of real estate courses, 4 hours of which include fair housing. |
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Sec. 2505 |
3. A broker must maintain a place of business in Michigan. A duplicate license is required for each branch office. a. An associate broker must supervise any branch office located in excess of 25 miles from the city limits where the broker's main office is located. |
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Sec. 2506 |
1. A salesperson's license is mailed to the employing broker who must keep it in his custody a. The broker must conspicuously display all licenses meaning a prominent position b. The department must be given written notice of any change in principal or branch business locations. |
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Sec. 2510 |
A salesperson cannot receive compensation for acting as a salesperson from anyone other than his broker. |
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Sec. 2511 |
Lotteries, contests, games, or drawings cannot be used by a broker or salesperson to promote the same of real estate. |
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Sec. 2512a |
A licensee cannot sue for the non-payment of a commission without first proving that he was licensed when the activity was conducted for which the commission is claimed. |
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Sec. 2512c |
1. All activities of a property manager and his employees must be reduced to a written agreement known as a property management employment contract. 2. Management accounts are governed by the property management contract. a. If a broker/property manager provides traditional brokerage services, his management and brokerage trust accounts cannot be combined. 3. The management contract controls the managers ability to generate interest on the funds of his client. It must also provide how he interest will be handled. 4. Employees of property managers can act as signatories on management accounts. 5. A property manager must maintain a record keeping system for his accounts 6. A property manager must account for and remit funds to the client according to the management agreement. 7. Property management records are subject to inspection by the department. |
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Sec. 2514 |
Residency is not a condition to receiving a Michigan real estate license. The nonresident licensee must, however, agree to abide by Michigan law which includes the occupational code. Michigan does not have a reciprocal real estate licensing agreement with any other states. 1. A nonresident applicant must file an irrevocable consent to service of process from which gives Michigan courts jurisdiction over the nonresidents real estate activities. 2. In the case of a non-michigan corporation, the consent to service of process form must be authenticated by corporate seak or acknowledge by an officer/member. It sha further be accompanied by a certified copy of a resolution authorizing the officer or member to execute the form. |
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Sec. 2515 |
1. All listing agreements must contain a Nondiscrimination clause that discrimination based upon religion, race, color, national origin, age, sex, disability, familial status, or marital status on the part of the licensee, seller, or lessor is prohibited |
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Sec. 2518 |
An action cannot be brought against a broker, associate broker, or salesperson under the following circumstances: A. Neglecting to tell a buyer that the seller has a disability B. Failing to disclose a stigmatizing or psychologically-impacting occurrence which had no material effect on the property. C. For not disclosing any information made available under the Sex Offenders Registration Act |
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Rule 201 |
Licensees must be at least 18 years old. |
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Rule 205 |
1. As required by Sec. 2505(5), a broker applicant must have 3 years relevant, related experience. Varying degrees of credit will be granted for experience as a(n): A. Real estate salesperson or broker (1 year credit for each 12-month period in which 6 or more transactions, as defined in Sec. 2501(b), can be verified); B. Builder (1 year of credit for each 12-month period in which it can be verified that 6 or more residential or commercial units have been built and sold by applicant) |
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Rule 301 |
1. Once a license has been issued by the department, a broker cannot use any name (when conducting business) other than that in which the license was issued. 2. To operate under an assumed name, an applicant for a brokers license must send a copy of the certificate of assumed name to the department |
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Rule 305 |
1. A broker, or licensee acting on behalf of the employing broker, who obtains a service provision agreement with a party, must give a true, executed copy to the party at the time of signing. The service provision agreement must be fully completed by the licensee before it is signed by the party A. A licensee cannot give the owner a blank listing or buyer agency contract and ask him to sign it with the understanding that the blank spaces will be filled in later. must have a definite expiration date. When the expiration date arrives, the agreement must cancel without further action by the party. 2. A service provision agreement must have a definite expiration date. When the expiration date arrives, the agreement must cancel without further action by the party.A. No automatically renewable listings or buyer agency contracts are allowed. In other words, the agent cannot place a provision in the service provision agreement making the client responsible for cancelling the agreement. agreement must have a definite expiration date. When the expiration date arrives, the agreement must cancel without further action by the party.A. No automatically renewable listings or buyer agency contracts are allowed. In other words, the agent cannot place a provision in the service provision agreement making the client responsible for cancelling the agreement. A. No automatically renewable listings or buyer agency contracts are allowed. In other words, the agent cannot place a provision in the service provision agreement making the client responsible for cancelling the agreement. |
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Rule 307 |
3. Upon obtaining a proper acceptance, meaning signed by the seller, the licensee must promptly deliver true executed copies to the Buyer and seller. A. All terms and conditions of the transaction must be included in the offer (because the purchase agreement serves as the template for the closing statement and the deed) 4. A licensee must make certain that all terms and conditions of the transaction are in the purchase agreement. 5. Once a seller accepts an offer to purchase from one buyer (and a fully executed purchase agreement is in hand), a license does not have to submit to the Seller subsequent offers received from other buyers, unless a service provision agreement requires it. A. Most listing agreements contain a provision that parallels this subrule. Even if a service provision agreement was silent on the issue, many offers to purchase contain a provision whereby the seller agrees not to accept further offers. |
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Rule 309 |
At the time of execution of the offer to purchase, the licensee involved must inform the buyer that he is entitled to proof of title clarity from the seller, via title insurance, issued in the amount of the purchased price, and issued to the approximate date of closing. seller, via title insurance, issued in the amount of the purchased price, and issued to the approximate date of closing. |
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Rule 311 |
2c. The Brokers signature may also be affixed by a designated or authorized representative of the broker such as a salesperson, manager, or other administrative person. Care must be taken, however, that the representative execute the closing statement in the Brokers name rather than his own. The department views a signature as any symbol executed or adopted by a party with present intention to authenticate a writing, including a carbon copy of the signature. 4. In a cooperative transaction, the listing or selling broker or associate broker can provide the closing statements. Final responsibilities lies with the listing broker. |
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Rule 315 |
1. When a licensee directly or indirectly buys or acquires an interest in a property, he must disclose the fact that he is licensed to the owner before the owner signs the purchase agreement. Disclosure must be clear and in writing. 2. When a licensee directly or indirectly acquires an option to purchase a property from an owner(who has requested the licensee's services), the licensee must disclose the fact that he is licensed before the owner signs the option agreement. Disclosure must be clear and in writing. 3. A net service provision agreement (net listing) is illegal to he extent the licensee is using it to gain a commission. 4. A licensee must provide written proof of the aforementioned disclosures upon request of the department |
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Rule 317 |
A licensee who directly or indirectly buys or acquires an interest in property, and is due a commission as a result, must comply with the following: 1. Make written disclosure to the Seller or owner that compensation is being received 2. Obtain written permission from the seller or owner to receive the compensation 3. Provide written proof or compliance with the aforementioned to the department upon request |
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Rule 321 |
1. A licensee who receives a commission from the sale of property may not also receive a referral fee or other form of valuable consideration for placing loan in connection with that transaction unless: A. The licensee obtains the prior, written consent of the buyer and the seller, and B. The Dee is not prohibited by RESPA or other applicable law |
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Rule 323 |
1. Although a licensee can work anywhere within Michigan, a broker must maintain an established office where business is transacted and records are maintained. |
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Rule 329 |
1. All advertising by a broker (of non-personally owned property) must include his name (as it appears on the license) along with his telephone number or street address. The advertising must affirmatively indicate to the public that advertising party is a real estate broker. |
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Rule 337 |
The failure to cooperate is not a violation unless the broker has indicated he would cooperate with other brokers. 1. A broker who indicates that he participates in a multiple listing service signifies a policy to cooperate. |
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Rule 339 |
A broker is permitted to pay earned commissions or other earned income to an individual who is no longer licensed or has transferred to another broker. |
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Land division act |
Purpose: to regulate the subdivision of land by imposing requirements as to its development. Application: plats are required to be prepared, submitted for approval, and then recorded before certain lands can be subdivided and sold. Exempt split: splits resulting in lots of 40 acres or more which are accessible; no plat required Not requiring platting: 4. Up to 2 bonus splits if new roads are established (thereby avoiding the need to create additional driveway-accesses to an existing public road) and/or 60% of the parcel is left intact (to preserve farmland and open space). 5. Further splitting can occur after 10 years under a different formula. The number of splits depends on the size of the parcel. Private roads: the seller of land abutting a private road must disclose this fact to a purchaser, in writing, on a seperate document that is attached to the deed stating that the road is private and not required to be maintained by the county road commission. If not, the purchase agreement is void-able. While the private road disclosure is ultimately required in the deed, the purchase agreement (or attached addendum) should reflect the existence of the private road. |
