Principle of Real Estate 1
Canons of professional ethics definitions
Canons of ethics means prescribed Standards of ethical conduct or Code of Professional Responsibility which sets forth the standards of conduct prescribed for lawyers in their professional dealings.
Community Reinvestment Act - provisions
The Community Reinvestment Act (CRA), enacted in 1977, requires the Federal Reserve and other federal banking regulators to encourage financial institutions to help meet the credit needs of the communities in which they do business, including low- and moderate-income (LMI) neighborhoods.
Features of agency agreements
The purpose of a listing agreement is to place a seller's property on the market in order to find a buyer. • The signatures of all of the owners and the listing agent • The property description • The list price that is decided by the seller • Compensation for the broker • A definite starting and ending date
Types of ownership or freehold estates
1. Fee simple absolute- An estate under which the owner is entitled to unrestricted powers to dispose of the property, and which can be left by will or inherited. 2. Fee simple defeasible- An ownership that is dependent on specific conditions. If the conditions of ownership are violated, the property may be returned to the grantor or to a specified third party. 3. Life estate- An estate in real property for the life of a living person. The estate then reverts back to the grantor or on to a third party (remainderman).
Legal descriptions - terminology
A legal description can take different forms including reference to a government survey, metes and bounds, or a lot and block of a subdivision. Government Survey Government survey means a survey made by a governmental entity of tracts of land including townships, sections and quarter sections of land Metes and Bounds Metes and bounds are the boundaries of a parcel of real estate that identified by its natural landmarks For example, rivers, roads, trees, etc. Lot and Block A lot is an individual piece of land which is intended to be conveyed in its entirety to a buyer. A block is generally a group of contiguous lots. bounded by streets, such as a city block.
TREC Grounds for revocation or suspension of license
Commission shall revoke the license of the broker or salesperson by procuring a license by fraud, misrepresentation, or deceit. Having paid commissions or fees to, or divided commissions or fees with, anyone not licensed as a real estate broker or salesperson.
Ownership terminology - cooperatives, timeshares, condominiums
Condominium a building in which each unit is owned by an individual but the grounds, structure etc is owned jointly; a unit or apartment in such a complex; the legal tenure involved; joint sovereignty over a territory Cooperative a jointly owned commercial enterprise (usually organized by farmers or consumers) that produces and distributes goods and services and is run for the benefit of its owners Timeshare Purchaser buys a specific, floating time period of property use. It is a form of communal ownership.
Creating and terminating easements
Created by: GRANT To transfer an interest in real property; either the fee or a lesser interest, such as an easement. RESERVATION A right created and retained by a grantor. The reservation may be temporary (such as a life estate) or permanent (such as an easement running with the land). PRESCRITION Continuous use of the land over some time without the permission of the owner may establish the right to use the land. Prescription may also be called limitation. NECESSITY The court requires the easement or states it is necessary for the benefit of the owner. (Usually in the case of "landlocked" property.) CONDEMNATION The taking of private property for public use. Consent of the owner is not required but fair compensation must be paid. Terminated by: MERGER If the two properties become one, the easement terminates. RELEASE A written agreement can release the servient estate from the easement against it. For example, a property owner might want to negotiate the termination of an easement. ABANDONMENT The voluntary relinquishment of rights of ownership or another interest (such as an easement) by failure to use the property, coupled with an intent to abandon (give up the interest). DEATH If an easement was a personally held right to come onto a property for a specific reason (sometimes called a license), the death of the holder will terminate the easement. An example would be the right to hunt on a property, given by the owner to a friend.
The IABS form and the required use
IABS provides consumers with necessary information regarding agency relationships with license holders. All potential partners to a transaction must be provided with the IABS at the first substantive discussion of a possible transaction. A substantive discussion would include any information that is not easily accessed by public records and does not always occur at the first face to face meeting.
Encumbrances - liens, easements, encroachments, etc.
LIENS A lien represents a monetary claim levied against property to secure payment—the settlement of an obligation from the property owner. EASEMENTS Easement is a real estate concept that defines a scenario in which one party uses the property of another party, where a fee is paid to the owner of the property in return for the right of easement. ENCROACHMENTS An encroachment is an unauthorized intrusion of one property onto another, and it is an encumbrance on both properties until court action or agreement resolves the issue.
Fixtures - terminology - adding/removing
Personal property that has become attached to the land in such a way as to become real property is called a fixture. This process of attaching personal property so that it becomes real property is called annexation. Removing fixtures (by detaching them from real property or by uninstalling them) to create personal property is severance.
Fixtures - ownership and transfer
Personal property that has become attached to the land in such a way as to become real property is called a fixture. This process of attaching personal property so that it becomes real property is called annexation. Removing fixtures (by detaching them from real property or by uninstalling them) to create personal property is severance. Examples of fixtures include wall-to-wall carpeting, ceiling fans, window coverings, and built-in appliances. Fixtures are generally considered to be part of the real property and are transferred to the new owner unless specifically excluded
Seller's Disclosure Notice exceptions
Pursuant to a court order or foreclosure sale by a bankruptcy trustee To a lienholder by the owner of a property by a mortgagee (lender) who has acquired the property through a foreclosure or a deed in lieu of foreclosure By a fiduciary (e.g., an executor, trustee or guardian) in the course of administration of a decedent's estate, guardianship, conservatorship or trust From one co-owner to one or more other co-owners To a spouse or a person in the lineal line of consanguinity (e.g., parents, grandparents, children) of one or more of the transferors Between spouses resulting from a divorce decree or a property settlement agreement incident to a divorce decree To or from any governmental entity Of a new residence which has not previously been occupied for residential purposes Where the value of the dwelling does not exceed five percent of the value of the property
Categories of real estate development and the most common land uses
Real Estate Development most often involves the acquisition of land for development into residential subdivisions, retail centers, and other commercial uses. Those types include recreational, transport, agricultural, residential, and commercial.
Redlining
Redlining- is a practice of refusing to provide financing in a particular area because of location.
Water Rights Terminology
Riparian rights give an owner the right to use water from a river or a stream on or next to the property. Littoral rights give an owner the right to use water from a lake, ocean, or sea on or next to the property.
Texas Homestead foreclosure rules
State homestead protection laws help prevent people from becoming homeless in the event of a foreclosure or change in economic circumstances. In Texas, every family and every single adult person is entitled to a homestead exempt from seizure passed on the claims of creditors, except for a pre-existing mortgage or lien.
Intermediary vs appointed associates
The Intermediary process is a set of rules that make it possible to bring client buyers and sellers together while at the same time representing their best interests. When this type of transaction occurs, the broker becomes the Intermediary.
TREC complaint rules and time limits
The commission can only investigate complaints related to issues within its jurisdiction. The time limit for complaints is 4 years from the date of the incident.
Causes for revocation or suspension of license
The commission may suspend or revoke a certificate of registration issued under this chapter if the certificate holder: (1) engages in dishonest dealing, fraud, unlawful discrimination, or a deceptive act; (2) makes a misrepresentation;(3) acts in bad faith;(4) demonstrates untrustworthiness; (5) fails to honor, within a reasonable time, a check issued to the commission after the commis- sion has mailed a request for payment to the certificate holder's last known address according to the commission's records; (6) fails to provide to a party to a transaction a written notice prescribed by the commission (7) disregards or violates this chapter or a commission rule relating to certificate holders.
Recovery Trust Account and payment limits
The commission shall maintain a real estate recovery trust account to reimburse aggrieved persons who suffer actual damages. The maximum payment, which is $100,000 per license holder and $50,000 per transaction.
Fair Housing - prohibited activities
The fundamental concept of fair-housing legislation is that housing should be available to all on an equal basis, subject only to the purchaser's ability to pay. It is illegal to discriminate in the sale or rental of housing, including against individuals seeking a mortgage or housing assistance, or in other housing-related activities. The Fair Housing Act prohibits this discrimination because of race, color, national origin, religion, sex, familial status, and disability.
Fair Housing violation penalties
The maximum civil penalties are: $16,000, for a first violation of the Act; $37,500 if a previous violation has occurred within the preceding five-year period; and $65,000 if two or more previous violations have occurred within the preceding seven-year period.
Remedies for default of contract including types of damages
There are several remedies for breach of contract, such as award of damages, specific performance, rescission, andrestitution. In courts of limited jurisdiction, the main remedy is an award of damages.
When is a real estate license required?
To be eligible to become a licensed real estate salesperson or agent, you must: Be at least 18 or 19 years old (depends on the state) Have legal US residency. Complete your required prelicense education (find your state's requirements)
Requirements for Intermediary
To practice Intermediary, the broker must have the written consent of both parties, stating the source of any anticipated compensation. Agents most often obtain these consents in the listing agreement and the buyer representation agreement. In that written consent, the seller is giving the broker permission to show their property to buyers whom the broker also represents.
Community property rules
Under community property laws, most property acquired during the marriage is owned equally by both spouses and cannot be conveyed or sold without the signature of both parties. Property acquired before marriage is separate, as is inherited property and property purchased with inherited funds. Any profit or income from separate property is considered community property.
Contract terminology - valid, void, voidable, unenforceable
VALID CONTRACT One that meets all of the requirements of law. VOID CONTRACT Is invalid from the beginning and does not affect on the parties. A contract to perform an illegal act is a void contract. VOIDABLE CONTRACT One that cannot be enforced against one or more of the parties. Most contracts entered into with minors are voidable at the option of the minor. UNENFORCEABLE CONTRACT is one that cannot be enforced due to some flaw in the contract, passage of time, or other issues that make enforcement impossible.
Inactive Status for licenses
What is an inactive license? You will receive an inactive license after passing the state exam and completing all of the requirements of your license application. With an inactive license, you will technically be a licensed Texas real agent; however, you will not be able to perform any real estate related activities.
Listing agreement termination
When the purpose of the agency is completed (i.e., the property is sold) The expiration of the period stated in the list- ing contract Death or incapacity of either party Bankruptcy of either party Abandonment by the agent At any time by mutual rescission Condemnation or destruction of the property Revocation of the broker's license At any time by broker or principal` When that "continuing consent" is withdrawn, the list- ing must be terminated. When the broker receives notice of termination, the broker must: Cease all marketing activities. Remove signs and lockboxes. Remove the listing from websites and other advertising media.
Legal descriptions of real property
A legal description is the geographical description of real estate that identifies its precise location, boundaries and any easements for the purpose of a legal transaction, such as a transfer of ownership. A legal description is kept with the deed and filed with the county clerk or county tax assessor.
TREC and administrative penalties
Administrative penalties are not revenue -- the Commission doesn't make money from administrative penalties. Instead, the money goes to a trust account to pay consumers for judgments against a license holder.
Legal descriptions and when/how they are used
A method of geographically identifying a parcel of land, which is acceptable in a court of law. A legal description can take different forms including reference to a government survey, metes and bounds, or a lot and block of a subdivision. Lot-and-Block (recorded plat) Description- A method of describing real property that identifies a parcel of land by reference to lot and block numbers within a subdivision, as specified on a recorded subdivision plat. Metes-and-Bounds Description- A legal description of a parcel of land hat begins at a well-marked point and follows the boundaries, using directions and distances around the tract, back to the place of beginning.
Ad valorem taxes
Ad valorem is Latin for "according to value." An ad valorem tax is a form of taxation based on the value of a transaction or a property, either real estate or personal property. It is generally calculated as a percentage of the value of the property, rather than on size, weight, or quantity.
Agency relationship termination - agent, broker, client, customer, subagent, principal
Agency relationship termination- An agency relationship will automatically terminate upon the occurrence of certain events. Such events include death, insanity, or bankruptcy of either the principal or agent. A court of law will usually step in and terminate the agency relationship if one of the parties refuses to do so. Agent- One who is authorized to act for or represent another (principal), usually in business matters. Authority may be express or implied. Broker- One who is licensed by the state to carry on the business of dealing in real estate. A broker may receive a commission for his or her part in bringing together a buyer and seller, landlord and tenant, or parties to an exchange. Client- Traditionally one who employs an attorney. Has loosely been used to refer to the principal (another name for the principal) of a real estate agent, insurance agent, stock broker, etc. Customer- A buyer of goods or services. Subagent- A subagent is a real estate agent or broker who brings in the buyer to purchase a property, but he is not the property's listing agent. The subagent usually earns a portion of the commission. Principal- A principal is any person involved in a contract, such as a seller, buyer, principalbroker, or an owner who has hired an agent as a property manager.
Real Estate business terminology - agency, brokerage, closings, sales
Agency- The relationship that exists between the principal and the agent representing them. Brokerage- Overseeing the needs of the parties to a real estate transaction and seeing it to its completion Closing- Is the final step in executing a real estate transaction Sales- A transaction between two or more parties in which the buyer receives goods, services or assets in exchange for money
Emblements/Crops
Annual crops produced with labor fall into a special category, emblements. Ex: Shrubs, trees and landscaping are considered improvements and go with the property. Even though they are attached to the land, are considered personal property and may be harvested by the owner of the crop.
Requirements for attorneys to earn a commission
Attorneys licensed in Texas may represent clients in real estate transactions without a license. Out-of-state attorneys must have a real estate license. Generally no. As long as the attorney is licensed in Texas, they are exempt from the licensure requirements. The Texas licensed attorney can do everything a broker can do except sponsor sales agents, or act as the designated broker for a business entity licensed by TREC. In addition, attorneys should be aware that Texas law prohibits a license holder from splitting a commission or fee for brokerage services with any person who is not a license holder.
Intermediary and appointed associates - roles and responsibilities
Brokers have a conflict of interest when representing both sides of a transaction. The Intermediary process is a set of rules that make it possible to bring client buyers and sellers together while at the same time representing their best interests. Intermediary With Appointments occurs when a broker appoints two separate associates to represent each side independently. One associate is appointed to represent their client and by all means, can provide advice and opinions to their client. The broker has to be neutral and make sure each agent is representing their client. The second type of Intermediary is Without Appointments. In this formation, an associate FACILITATES the transaction between the principals (the buyer and the seller) and can by no means provide any advice nor any opinions. What documentation you provide to one principal, you have to provide the other.
Types of easements - definitions
Easement in gross- belongs to a person or corporation and does not belong to the land. The most common example of this is a utility easement. Easement appurtenant- is a right for the benefit of a piece of land. It runs with the land and passes to new owners when the land is sold. The most common use of this easement is for ingress and egress, or to enter and exit one's property.
Types of leases and features - termination
Estate for Years- Has a specific lease term (specific starting and end date) Estate from period to period- The lease term automatically renews (no present term date) Estate at Will- Has no specified lease term (a very loose agreement). Landlord or tenant may agree to terminate the lease. This is also the only lease that will term on the landlords death or the sale of the property. Estate at Sufferance- A tenancy without consent (when a lease expires and tenant remains on the premises.
Types of leases/leasehold estates
Estate for years or Fixed term tenancy. Periodic tenancy. Estate at will. Estate at sufferance.
Types of listings and features of each
Exclusive right to sell listing: In this agreement, the agent gets paid no matter who sells the property, regardless of whether it's the agent or the seller. Exclusive agency listing: Agents get paid in this type of agreement only if they sell the property. No fee is earned if the owner alone sells the property. Open listing: In this type of agreement, sellers have the right to use as many brokers as they want. However, the seller isn't obligated to pay any of them if he or she sells the property without the broker's help. Net listing: This type of agreement may be illegal in your state. The agent gets to keep everything he can get that's more than the sale price the owner wants.
Canons of ethics definitions
FIDELITY A real estate broker or sales agent, while acting as an agent for another, is a fiduciary. Special obliga- tions are imposed when such fiduciary relationships are created. INTEGRITY A real estate broker or sales agent has a special obligation to exercise integrity in the discharge of his or her responsibilities, including employment of prudence and caution to avoid misrepresentation, in any way, by acts of commission or omission. COMPETENCY A license holder is obligated to be knowledgeable and competent as a real estate brokerage practitioner. CONSUMER INFORMATION Each real estate inspector or active real estate broker licensed by the Texas Real Estate Commission shall display Con- sumer Protection Notice TREC No. CN 1-2 in a prominent location in each place of business the broker maintains, and provide a link to it in a readily noticeable place on the homepage of each business website labeled: "Texas Real Estate Commission Consumer Protection Notice," in at least 10-pt font; or "TREC Consumer Protection Notice" in at least 12-pt font. For social media, the link may be located on the account holder's profile or a separate page through a direct link. DISCRIMINATORY PRACTICES No real estate license holder shallinquire about, respond to or facilitate inquiries about, or make a disclosure which indicates or is intended to indicate any preference, limitation or discrimination based on the following: race, color, religion, sex, national origin, ancestry, familial status, or handicap of an owner, previous or current occupant, potential purchaser, lessor, or potential lessee of real property.
Terminology associated with real property - fixtures, improvements, encumbrances, encroachments, additions
Fixture- means any physical property that is permanently attached (fixed) to real property (usually land). This means it will be sold with the house and it will not be removed by the seller before the house is transferred to the buyer. Improvements- Improvements may include things like fences, paved walkways or buildings. If it is of a permanent and immovable nature. Encumbrances- An encumbrance in real estate, which is also sometimes called an incumbrance, is anything that impedes what a property owner can do with that property. An encumbrance can affect whether that property is eligible to be transferred to another owner. Encumbrances can include things like liens, deed restrictions, easements and leases. Encroachments- an encroachment occurs when a neighbor builds something either on or overhanging your property. An encroachment is a problem because it impedes the use of the property for the person whose land is being encroached upon. Additions- Additions are defined as an increase or expansion of these assets and the cost is typically capitalized.
Broker sponsorship and termination of sponsorship - requirements
If a broker wishes to terminate the sponsorship of a licensed sales agent, he/she must notify the agent in writing and return the agent's license to TREC immediately. Likewise, a licensed sales agent who wishes to terminate his/her association with his/her sponsoring broker must do so in writing. If a broker wishes to terminate a sales agent's sponsorship, it must be done in writing, and the license must be returned to the Texas Real Estate Commission immediately. A sales agent, whose license has been returned to the Commission, may not engage in the business until he or she has found a new spon- soring broker. A sales agent license holder who wishes to terminate his or her association with a broker must notify the broker in writing.
Physical Characteristics of Real Property
Land has three physical characteristics that differentiate it from other assets in the economy: Immobility. While some parts of land are removable and the topography can be altered, the geographic location of any parcel of land can never be changed. Indestructibility. Land is durable and indestructible (permanent). Uniqueness. No two parcels of land can be exactly the same. Even though they may share similarities, every parcel differs geographically.
Termination of listing agreements
Listings are terminated by any of the following: • When the purpose of the agency is completed • (i.e., the property is sold) The expiration of the period stated in the listing contract Death or incapacity of either party Bankruptcy of either party Abandonment by the agent At any time by mutual rescission Condemnation or destruction of the property Revocation of the broker's license At any time by broker or principal Listing agreements are traditionally bilateral contracts, meaning that both agent and seller must perform. If the agent performs, typically meaning that your home (as the seller) is sold within a specific timeframe, the agent receives commission. If the agent does not perform, typically in the form of poor communication, little to no marketing, no showings, or generally unethical behavior, then the listing agreement can be terminated.
Stigmatized properties - causes
Stigmatized properties are homes that some buyers find undesirable due to emotional or psychological reasons. Typically, homes are stigmatized when emotionally upsetting events such as murder, suicide, and sexual assaults occur on or near the property.
Rights in land - subsurface, surface, air, water, etc
Subsurface- The rights, whether by fee or easement, to oil, gas, or minerals, below a certain depth beneath the surface of land. The right of surface entry may or may not be excluded, and is important to the value of the surface land for improvement purposes. Surface- The rights (easements) to use the surface of land, including the right to drill or mine through the surface when subsurface rights are involved. Air- The right to the use of the air space above property without the right to use the surface of the property. However, air rights may restrict surface rights, especially height of improvements. Water- Any right to the use and/or control of water, whether for irrigation, hydro electric power, personal use, etc.
TREC forms
Texas Real Estate Commission (TREC) established the Broker-Lawyer Committee to write residential contract forms that, with few exceptions, are mandatory for license holders. These forms are known as promulgated forms. The term promulgated means "to make known by open declaration; publish." If the license holder uses TREC-promulgated forms correctly, the unlawful practice of law issue is more easily avoided. License holders may also use a form prepared and approved by a licensed Texas attorney for the particular transaction involved. A form prepared by the property owner or prepared by an attorney and required by the property owner is also authorized. Failure of a license holder to use these forms, a form written by an attorney, or required by the parties, can result in revocation or suspension of a license.
Civil Rights Acts - dates
The Civil Rights Act of 1866 essentially prohibited discrimination in housing based on race or color by affording all persons in the United States the right to make and enforce contracts. The act made it clear that the law protects all people, regardless of race or color. The next major legislation affecting housing is the Federal Fair Housing Law, officially called Title VIII of the Civil Rights Act of 1968. It prohibits discrimination based on race, color, religion, and national origin. The Civil Rights Act of 1968 had a significant impact on the real estate community. While there are some exceptions to this law, real estate license holders must ALWAYS comply.
TRELA - its purpose
The Texas real estate act (TRELA) is a legislation that sets standards for how real estate agents conduct themselves in Texas. The purpose of the act is to protect the public against unscrupulous brokers and sales agents.
Texas Homestead rules
The first is to prevent the forced sale of the home by creditors, and the second to provide a surviving spouse with shelter. In Texas, homestead protection is automatic when a home is purchased, and no document or claim needs to be registered by the owner to get this protection. The law prevents the forced sale of the homestead for payment of all debts, with five exceptions: Non-payment of property taxes Non-payment of a mortgage lien Non-payment of mechanic's and materialman's lien Non-payment of property owner association fees or dues Non-payment of a home equity loan A rural homestead is limited to 200 acres for a family unit and is limited to 100 acres for an individual. If a family lives on property greater than 200 acres, they may designate 200 (including the house) acres as a homestead. An urban homestead is limited to ten acres of land and the improvements on it. Homestead protection is limited to one property per person or family.
Types of listing agreements and features of each
The four major types of listing agreements are: Open listing Exclusive agency Exclusive right to sell Net listing OPEN LISTING A written authorization to a real estate agent by a property owner, stating that a commission will be paid to the agent upon presentation of an offer which meets a specified price and terms. However, the agent has no exclusive right to sell and must bring in his offer before any other offer is presented or accepted. EXCLUSIVE AGENCY The seller agrees to list the property with only one broker during the listing term, with the provision that the seller can sell the property independently, without paying a commission. EXCLUSIVE RIGHT TO SELL Real estate brokers recommend this listing, which grants an exclusive right to sell the property during the listing term because they receive a commission even if the owner sells the property. NET LISTING A listing under which a real estate agent receives any amount over a given net amount to the seller. Illegal in some states.
Contract terminology - unilateral, bilateral, assignment, novation, specific performance
Unilateral- A unilateral contract is a one-sided agreement-that is, only one party makes a promise to perform. In a listing contract, the seller promises to pay if the agent promises to procure a purchaser. Bilateral- Contract in which the buyer and seller exchange reciprocal promises respectively to buy and sell the property. The usual real estate sales contract. Assignment- An assignment of contract happens when one party to a contract (the assignor) signs over their rights and responsibilities in the contract to a third party. The party who receives the assignment (the assignee) essentially steps into the shoes of the assignor and fulfills their terms of the contract. In real estate terms, an assignment of contract is a way to profit from a real estate transaction without ever becoming the owner of the property. Novation- Occurs when a party, term, or obligation in a contract is replaced with another. When this happens -- and it happens quite often in both residential and commercial real estate transactions -- the original contract is voided and replaced with the new agreement. Specific Performance- Specific performance is a remedy in contract law that is most often applied in real estate litigation and disputes where a court issues an order requiring a party to perform a specific act, and to specifically perform according to the terms of a contract. The most common cases where specific performance is applied is in real estate litigation where a reluctant seller (or buyer) can be ordered by the court to complete the sale transaction. This is called specific performance.
Fair Housing and Senior Housing - familial status exemption requirements
Unless a building or community qualifies as housing for older persons, it may not discriminate based on familial status. That is, it may not discriminate against families in which one or more children under 18 live with: A parent; A person who has legal custody of the child or children; or The designee of the parent or legal custodian, with the parent or legal custodian's written permission. Familial status protection also applies to pregnant women and anyone securing legal custody of a child under 18. Housing for older persons is exempt from the prohibition against familial status discrimination if: HUD has determined that it is specifically designed for and occupied by elderly persons under a federal, state or local government program; or It is occupied solely by persons who are 62 or older; It houses at least one person who is 55 or older in at least 80 percent of the occupied units and adheres to a policy that demonstrates an intent to house persons who are 55 or older.
In-house vs cooperative sales
When a brokerage firm sells a property, two possibilities exist: The property is sold by a firm other than the listing firm, which is referred to as a coopera- tive sale. The property is sold by the listing firm, which is referred to as an in-house sale.
