Real Estate Prep Agent - Transfer of Property Capture

Jon paid $100,000 cash for a lot and constructed a $500,000 income property on the lot. The construction was financed by paying $100,000 cash and a $400,000 loan at 8% annual interest secured by a lien against the property. How much can Jon depreciate on future income tax returns?

$500,000 Land can't be depreciated, only the building(s)- so Jon can only depreciate the cost or value of the building.

A buyer would want which of the following removed from a preliminary title report:

A mechanic's lien. A preliminary title report is a title report that is issued early in the transaction for the purpose of revealing all matters that presently have an effect on the title. Such as liens or judgments on the property, or easements and covenants

A lis pendens:

A pending notice of a lawsuit giving notice of a possible claim to the property

Although a title insurance policy does cover the risk of loss for many reasons, which of the following risks is not covered in a title insurance policy?

A zoning ordinance, regulation or plan

Define 'Conveyance'.

Conveyance is the transfer of legal title of property from one person to another, or the granting of an encumbrance such as a mortgage or a lien.

The covenant in a deed that states that the grantor is the owner and has the right to convey the title is called the:

Covenant of seisin. "seisen" derives from the French meaning to "sit upon or own".

On a closing statement in a typical real estate transaction, the buyer's earnest money deposit is reflected as a:

Credit to the buyer Debits are costs and credits represent funds deposited. Earnest money deposits are generally considered a credit towards the buyer's purchase of the property, unless it is a situation where the earnest money is returned to the buyer.

When a buyer assumes a mortgage, prepaid insurance and tax reserves will appear on a typical closing statement as a:

Debit to buyer and credit to the seller

When private property is abandoned, the state may acquire title to that property under the right of:

Escheat

As one of the qualifications for a depreciation deduction for income tax purposes, the real property must be:

Improved. [The depreciation deduction is based on the cost of the improvements that were made. The LAND does not depreciate]

If Joe dies without having made a will, it is said to be:

Intestacy is the condition of the estate of a person who dies without having made a valid will or other binding declaration. Alternatively this may also apply where a will or declaration has been made, but only applies to part of the estate; the remaining estate forms the "intestate estate".

Which of the following is required for a valid deed?

Legal Property Description Property deeds are used to convey real property from a grantor (seller) to a grantee (buyer). For a deed to be legally operative, several essentials must exist including the identification of the grantor and grantee, and an adequate legal description of the property.

Ralph sold his house to Oscar, who did not record the deed, but took residency there. Ralph then sold the same property to Larry, who reviewed the county recorder's records, but did not examine the property. Ralph gave Larry a deed, which Larry recorded. Which of the following would be true concerning title to the property?

Oscar maintains title In situations like this, the first person to possess or record gets the property. Possession of the property provides constructive notice, so Oscar maintains possession even though he wasn't the first to record.

Is acknowledgement necessary for a deed to be valid?

No. In most states, a deed does NOT need to be acknowledged by a notary or public official to be valid.

What is treated as a credit on the seller's closing statement?

Prepaid Taxes If a seller has already paid for a period of property tax that must be reimbursed by the buyer, it is a credit on the seller's closing statemen

When a claim is settled by a title insurance company, the company acquires all rights and claims of the insured against any other person who is responsible for the loss. This is known as what?

Sobrogation

"Boot" is a term used in a 1031 Exchange when which of the following happens?

When there is a difference between the equity of properties being exchanged

Are restictive covenants placed by private parties in a deed?

Yes. Restrictive covenants are most commonly associated with subdivisions and community management associations and are intended to maintain consistency within the neighborhood. While viewed as a benefit by most, they do limit the owner's use of the property and are binding on future owners. They are usually put on by the grantor or the developer.

Roberto owns an apartment building and wants to exchange his property in a 1031 tax deferred exchange in order to defer paying taxes in the year of the exchange. He could exchange his apartment building for:

a more valuable apartment building, exchanging loans and paying money to the other party to equalize the values.

An installment sale represents a tax advantage because:

it defers payment of capital gains. An installment sale allows the taxpayer to postpone the receipt and reporting of income tax to future years when his/her other income may be lower. Thus, the seller of a parcel of land in a land installment contract can avoid paying the entire tax on the gain in the year of sale.

An installment sale represents a tax advantage because: (DELAY)

it defers payment of capital gains. An installment sale allows the taxpayer to postpone the receipt and reporting of income tax to future years when his/her other income may be lower. Thus, the seller of a parcel of land in a land installment contract can avoid paying the entire tax on the gain in the year of sale.