Real Estate Salesperson Exam
RHS mortgage payments are based on the _____.
household's adjusted income
When speaking with a customer, emphasis should be on _____.
housing needs and wants
Individuals who apply pesticides for wood-eating pests _____ licensed.
must be licensed
The ratio of total debt to total equity is the _____ ratio.
Debt to equity ratio
To create a condominium, the owner of the property signs a condominium _____.
Declaration
The page of the insurance policy (typically the first page) that identifies the basic terms of the contract is called the _____.
Declarations page
Which of the following is NOT prohibited by predatory lending laws?
Discount points
The discount points on a conventional loan may be paid by _____.
Discount points may be paid by the buyer or the seller.
Condominium statutes are called _____.
Horizontal property acts
The type(s) of heating system utilizing boilers, pipes, and radiators or convectors is(are) _____.
Hot water and steam systems
Corrine is prohibited from advertising her graphic arts business from a window sign in her cooperative apartment. This prohibition is mostly likely found in the _____.
House rules
Issues such as garbage disposal, maintenance, noise, and conflict resolution are covered in the _____.
House rules
The Fair Housing Act of 1968 prohibits discrimination in the purchase, sale, or lease of _____.
Housing only
Section II of a typical homeowner's policy covers _____.
Personality liability
The purpose of insulation is to _____.
Resist the flow of heat from one area to another
The highest part of the roof framing, which forms the apex or top line of the roof, is the _____
Ridge beam The ridge beam is the highest part of the framing and forms the apex, or top line, of the roof.
The process by which properties in formerly middle- or upper-income neighborhoods decline in value, allowing people with lower incomes to purchase these properties, is known as _____.
Filtering down
The person responsible for the collection of taxes on real property in New York City is the _____.
Finance commissioner
A board package, submitted to the cooperative board of directors, consists mainly of:
Financial data
One of the most important issues in deciding if a cooperative (or condominium) apartment is a wise investment is to know the _____.
Financial status of the building itself
Most towns in New York with a population of 10,000 or more are classified as towns of the _____.
First class
A town or village planning board consists of how many members?
Five to seven
A city engineer must be a civil engineer with at least _____ practical experience.
Five years
In most cases, the New York Attorney General requires sponsors to promise in the offering plan to give up their control of the board after they sell more than 50 percent of the common interest, or after _____ years have passed since the closing, whichever comes first.
Five years
The zoning board of appeals makes zoning ordinances more _____.
Flexible
Cooperative
Forms when people join to own or control the housing and related facilities in which they live. A cooperative forms for the benefit of its members who participate equally in governing the cooperative. The cooperative is a not-for-profit corporation. The title to the land, building, and all improvements is held by a not-for-profit corporation. Cooperatives are located in the same types of buildings that house condominiums and may be residential or commercial. The main difference between cooperatives and condominiums is the form of ownership. With a cooperative, a cooperative corporation usually owns the land, buildings, and property rights and all interests in the corporation. The title to the property, as shown on the deed, is in the name of the corporation.
A building may be covered under the provisions of the 1988 Amendments Act if it has _____ units.
Four or more units
Due diligence reviews or assessments of property may go through how many phases?
Four phases
The term of office for trustees in a village is generally _____.
Four years
Highly sensitive circuit breakers that sense small current leakages across a circuit are _____.
GFCIs
Installment Sales Contract: Cash Flow for the Buyer
Helpful when the buyer does not qualify for conventional loans. In addition, the seller may not require a down payment, as do many other types of loans. If one is required, it may be less than a lending institution requires.
Compared to interest rates on permanent financing, interest rates on home equity loans are usually _____.
Higher
Generally, in times of inflation, real estate prices are _____ and borrowing costs _____.
Higher/increase
An agent should do which of the following when listing a unit in a condominium?
Read the bylaws
Maintaining a Fair Housing Office: Reporting Fair Housing Misconduct
Real estate agents must always report discriminatory behavior by customers, clients, or other agents to their broker. Brokers and agents may not feel comfortable reporting discriminatory behavior by other licensees. Office policy should decide who makes the report to the proper authority. Agents should not take listings or work with customers who refuse to follow fair housing laws. Real estate agents should take notes regarding discussions with prospective purchasers and sellers in which statements of a discriminatory nature arise. Agents should be careful how they respond to these questions. Salespersons and associate brokers should immediately report discriminatory behavior or conversations to their broker. If an agent cannot lawfully deal with a prospective seller or prospective purchaser, the agent should not represent this individual. In New York, one can report illegal discriminatory behavior to the NYS Division of Human Rights, or, in various cities, to the human rights commission.
Maintaining a Fair Housing Office: Ongoing Training and Education
Real estate brokers should provide fair housing training within the firm through seminars, discussions, online content, and guest speakers. Agents can participate in other programs offered by NAR, the NYS Division of Human Rights, state and local boards, and proprietary schools. Subjects should include prohibited discriminatory behavior, fair housing laws, procedures for providing equal service, and record keeping. Required Fair Housing Continuing Education: DOS regulations require that New York licensees complete three-hours of approved continuing education in fair housing and/or discrimination, in the sale or rental of real property, as part of their two-year, 22.5-hour continuing education requirement.
Regulation Z Advertising: Effect on RE Licensees
Real estate licensees must not violate the advertising requirements of Regulation Z. Statements of a general nature about the financing may not be made by licensees without full disclosure. Statements such as "good financing available," "FHA financing available," and "loan assumption available" are satisfactory.
Reflective Insulation
Reflective accordion insulation receives its value from its reflective surface. It must be exposed to an air space and is installed in up to four layers that open to provide the air space.
If a tenant has a disability, a property owner may not:
Refuse to let the tenant make reasonable modifications to the dwelling or common use areas, at his/her expense, if necessary, so he/she can use the housing (Where reasonable, the property owner may permit changes only if the tenant agrees to restore the property to its original condition when he/she moves.) Refuse to make reasonable accommodations in rules, policies, practices, or services if necessary for the disabled person to use the housing However, housing need not be made available to a person who is a direct threat to the health or safety of others or who currently uses illegal drugs.
Borrower's Ability to Repay A Loan: Verification and Documentation
Regardless of the type of loan (conventional, FHA, or VA), at the time of loan application, the borrower verifies certain documents and signs authorization forms. They include: verification of employment (if the borrower is self-employed, the most recent two or three years' tax returns [personal and business] are usually required in place of this verification) Other verifications including rent or mortgage, the bank account balance, outstanding loans, the sales contract deposit, and the pension (if applicable) The borrower must give authorization to release information and consent to a credit check and other verifications.
A retail space that has 300,000 to one million square feet and is anchored by three or more department stores is a _____.
Regional mall
When a property changes ownership, it is likely that the assessment will _____.
Remain unchanged, for the time being
When a wraparound mortgage is used, the existing loan _____.
Remains in effect
Rent adjustments for rent-stabilized apartments are set by the _____.
Rent Guidelines Board
Which of the following is NOT a condition required for a property to reach full potential gross income?
Rent must be higher than comparable properties.
The square footage on which a tenant's rent is based is _____.
Rentable square footage
The usable square footage of a building, plus the tenant's prorated share of the building's common areas, such as the lobby, hallways, and restrooms, is known as the _____ square footage.
Rentable square footage
When offering available square footage to tenants, property owners generally charge for which of the following?
Rentable square footage
A person confined to a wheelchair requests that an apartment be modified to meet her physical needs. At the end of the tenancy, the _____ must pay to return the premises to its original condition.
Renter
If an insured is covered and reimbursed for the actual cost of replacing the lost or damaged property, it is referred to as _____.
Replacement cost
A CMA is similar in concept to the _____ approach.
Sales comparison
The appraisal approach that most closely resembles the comparative market analysis is the _____ approach.
Sales comparison
Rachel is moving into a new condominium. Which of the following documents does NOT apply to her purchase?
Stock certificate
Which of the following are NOT assessing units in New York?
Subdivisions
A clause in a lease stating that the tenant's lease is subordinate to all mortgages, past and future, is the _____ clause.
Subordination clause
A letter of intent, which is used with condominiums, is similar in purpose to a(n) _____, which is used with cooperatives.
Subscription agreement
The contracts used to purchase shares of stock in a cooperative corporation are the _____.
Subscription agreements
The principle that states that the maximum value of a property is determined by what it would cost to buy a similar property that is equally desirable is the principle of _____.
Substitution
A comparable has an extra bedroom that the subject property does not have. What adjustment do you make?
Subtract from the price of the comparable
Tireless Developers lowers the price of vacant homes in their subdivision to near cost because there are not enough buyers. This problem demonstrates the principle of _____.
Supply and demand
The type of slab that is poured separately from the rest of the foundation, but rests on foundation walls, is a(n) _____.
Supported slab
Professionals who provide detailed descriptions of the boundaries and divisions of land are called _____.
Surveyors
Betty borrower obtains a loan using the equity she has in one property to obtain funds for a new property.What kind of loan does Betty have?
Swing Loan
In New York, real property tax liens _____.
Take priority over all other liens
Undue Influence
Taking advantage of someone in the execution of a contract
Property owners may enforce deed restrictions by _____.
Taking court to action
Tankless Water Heaters
Tankless (or instantaneous) water heating units do not have a tank, but rather a compact unit affixed to the wall. The flow of water activates an electric, gas, or propane heating device. Once activated, the heater provides a constant supply of hot water. The capacity of the heater determines the maximum flow rate at the desired temperature. Large units intended for whole-house water heating are located centrally in the house. Units for a specific place usually sit in a closet or under a sink.
Under the Human Rights Law, after a Commissioner's Order has been issued, either party may appeal the Order to _____.
The NYS Supreme Court
Specified distances from the front property line or the interior property lines to the building line are called _____.
Setback requirements
For the storage and handling of above and underground storage tanks, NYSDEC _____.
Sets the standard
Under Article 9-A, a purchaser or lessee has the right to cancel a contract or agreement for the sale or lease of subdivided lands within _____ days of signing.
Seven The law requires that every contract or agreement for the sale or lease of subdivided lands allows the purchaser or lessee the right to cancel the contract or agreement within seven days following its signing.
Water Heaters
Several types of hot-water systems are found in residential construction. Gas (including propane) and electric systems are the most common. Typically, single-family structures require at least a 40- to 60-gallon hot-water tank. Sometimes a larger tank or a second tank is used.
An amendment in the Housing and Community Development Act of 1974 added the prohibition of discrimination based on _____.
Sex An amendment in the Housing and Community Development Act of 1974 added the prohibition of discrimination based on sex.The Fair Housing Amendments Act of 1988 added provisions to prevent discrimination based on mental or physical handicap or familial status.
The types of loans where shares of stock are collateral are called _____ loans.
Share loans
A plywood covering placed over the exterior wall framing members is _____.
Sheathing
Failure to Adhere to Mortgage Covenants
Should the mortgagor (borrower) fail to adhere to these covenants, the mortgagee (the lender) may invoke the acceleration clause and demand full and immediate payment.
Which government agency does NOT rely on zoning ordinances to enforce its decisions?
Since zoning deals with property use, not value, the tax assessor's office does not rely on zoning ordinances.
The usable square footage of a development site includes _____.
Buildable lots
For an FHA loan, the ratio of the total monthly installment debts to the stable monthly income should not exceed _____.
41 percent
The blueprint provides the "map" for _____.
Builders and subcontractors
A small claims assessment review hearing must be held within _____ of the final filing date.
45 days
Structural, equipment, material, and similar requirements are established by _____.
Building codes
The Community Reinvestment Act (CRA)
(1977, revised 1995), called the Fair Lending Law, was enacted to encourage lenders to help meet the credit needs of all communities where they are located, including low- and moderate-income neighborhoods. This Act was passed to prevent lenders from providing services in some areas but not other areas. The CRA requires that each lender's record in helping meet the credit needs of its entire community be periodically evaluated.
The local agency that provides guidelines for well and wastewater construction is the _____.
County department of health
Mortgage principal and interest payments are called _____.
Debt service
Under the New York Human Rights Law, a complaint alleging discriminatory behavior is filed with the _____.
DHR
Article 9-A of the Real Property Law is regulated by ______.
DOS
The public water supply is tested for bacterial contamination _____.
Daily
The disclosure statement required by the Truth-In-Lending Act must be given to the borrower _____.
At the time of application or within three days thereafter
According to the _____, places open to the public cannot treat individuals differently because of disability.
According to the ADA
"Ad valorem" means _____.
According to valuation
Wages or salaries from employment are considered _____ income.
Active income
City Engineer
Acts as the superintendent of public buildings, streets, bridges, docks, and wharves. In cities of the second class, the mayor appoints the city engineer for a two-year term. A city engineer must be a civil engineer with at least five years' practical experience. He/She supervises engineering work under the direction of the commissioner of public works.
If an insured is reimbursed for the replacement cost minus the physical depreciation of lost or damaged property, it is referred to as _____.
Actual cash value
If the insured is reimbursed for the replacement cost minus the physical depreciation of the lost or damaged property, it is referred to as _____.
Actual cash value
In a typical homeowners policy, coverage for contents is usually based on _____.
Actual cash value
The primary source of general revenues on which local governments operate normally is from _____ taxes.
Ad valorem taxes
A comparable lacks a garage that the subject property has. What adjustment do you make?
Add to the price of the comparable
Riders
Addenda that cover supplemental issues of the agreement. If a broker prepares these documents from scratch, it could constitute the illegal practice of law. These additions, amendments, agreements, contingencies, and caveats are annexed to the contract and incorporated into its terms. These preprinted forms are available through Boards of REALTORS® and the MLS, in hard copy or online.
The profit from income-producing property, less income taxes, if any, attributable to the property's income is called _____
After tax cash flow
Meeting of the Minds
Also called offer and acceptance Occurs when the parties to the contract reach agreement on the contract terms.
Experts discovered that _____ wiring in branch circuits caused a great deal of overheating in outlets and switches.
Aluminium wiring
Installment Land Contract
An installment sales contract in some parts of upstate NY Cannot be foreclosed for nonpayment, because the purchaser does not generally hold title until he/she makes the final payment.
Members of a village planning board are _____.
Appointed by the mayor
Grounds for Review: Unequal Assessment or Assessment Ratio
As previously discussed, New York law requires that assessments be made at a uniform percentage of value. A complainant may believe that his/her property is assessed at a higher percentage of value than the average of all other properties on the same assessment roll. To show that the property is unequally assessed, the property value must first be established.
Special Assessments
At times, taxing units levy special assessments in addition to real property taxes. These assessments are to collect payment for a share of improvements costs made to areas nearby or adjoining the property. These assessments can be levied against property only if they are for local benefits. Examples of assessments for local benefits are streets, sidewalks, sewers, rural drainage ditches, and other public improvements. The special assessment is a specific lien against the property until paid. If the lien is not paid, the taxing unit may execute on the lien. The execution of the lien forces a sale of the property for payment of the assessments. These assessments may be calculated on an ad valorem basis. Alternative methods could be length of road frontage or percentage of cost. Though special assessments resemble property taxes because they are collected and often calculated in the same way, they are different. Special assessments are not always tax deductible. Property taxes are tax deductible.
The consent to a transfer of a right is referred to as _____.
Attornment
Reassessment upon Sale: Back Taxes
Back taxes are unpaid real property taxes. If title to a property is to be transferred, the back taxes or tax arrears are paid at closing. Generally, the owing of back taxes does not affect the reassessment of a property one way or the other. However, if a property owner takes title to a new property not yet assessed when he/she moves in, when the property is fully assessed, the town is not entitled to the back taxes.
Public Municipal Water Supply: Bacteria
Bacteria consist of microbiological organisms. These organisms are the most frequent contaminant in the water supply and cause the most illness. The public water supply is tested daily for bacterial contamination. NYSDOH establishes the contaminant level for both inorganic and organic substances in the water.
The type of framing in which each wall stud runs the entire height of the building, from the floor of the lowest story to the roof of the building is called _____.
Balloon framing
Sometimes, bank statements may substitute for verification of _____.
Bank account balance
The year of a lease agreement that is followed by an escalation clause is known as the _____.
Base year
Replacement Cost
Based on constructing a building of comparable utility using modern building techniques and materials.
Which type of foundation is the most commonly used in New York State?
Basement
Alienage, a protected class under NYC law, refers to _____.
Citizenship or immigration status
Xavier is seeking information about constructing a property near a wetland. He can find information and guidance from which of the following?
Conservation advisory council
The real name of the "Truth-in-Lending Act" is the _____.
Consumer Credit Protection Act
Gus believes that the cooperative board of directors has discriminated against him and a prospective lessee. The board has refused to allow him to sublet his apartment to his cousin, who is also an African American. Which of the following is TRUE?
Cooperatives may refuse to allow tenant-shareholders to sublet their apartments if there is policy to this effect.
Phase III of a due diligence assessment is the _____ phase.
Coordinated clean-up phase
Most new construction uses _____ wiring for circuit wiring.
Copper wiring
The type of planning board that is regional in scope and helps to coordinate projects among the different municipalities is the _____ planning board.
County planning board
In the income capitalization approach, as the capitalization rate increases, the value of the property _____.
Decreases As the capitalization rate increases, the price of the property decreases. Conversely, as the capitalization rate decreases, the price of the property increases.
The amount the insured must pay towards a claim before receiving any policy benefits is the _____.
Deductible
If the corporation does not receive maintenance, common charges, or assessments in excess of the operating expenses, the result will be a _____.
Deficit
The study of the social and economic statistics of a community is called _____.
Demography
The New York state agency that oversees wetland regulations is the:
Department of Environmental Conservation
Well construction is generally regulated by the local _____.
Department of health
With a real estate investment, the earnings can be sheltered because the buildings and equipment can be _____.
Depreciated
A loss in value of a property due to any cause is called _____.
Depreciation
A loss of value from any cause is called _____.
Depreciation
The tax deduction that is based on the concept that all property loses its value over time and must be replaced is _____.
Depreciation
Operation of Law
Describes how the rights and liabilities of parties may be changed by the application of law. This occurs without the agreement of the affected parties.
Human Rights & Fair Housing: Pressure from Society
Despite the 1866 and the 1968 civil rights acts to provide equal housing opportunity for all citizens, this goal is not achieved in practice. Some examples of discrimination that you may encounter as a licensee are: - Owners and sellers who request only specific types of people be shown their housing - Sellers' concerns about what the neighbors will think, say, or do if a family of a particular race, religion, or ethnic origin moves into their home - Discriminatory statements by buyers and renters about certain sections of the community - Buyers and renters asking pointed questions of a discriminatory nature about the neighborhood - Buyers and renters refusing to view houses if certain types of people live in that part of the community
The initial costs for site development are generally paid for by the _____.
Developer The initial costs of site development are generally paid for by the developer. Depending on zoning ordinances and planning regulations, however, the municipality may participate in the implementation and costs of site development.
An advertisement states that the owner of a small apartment complex prefers young African American female tenants with no children.This advertisement is _____.
Discriminatory and illegal
The difference between the purchase price and the amount of the loan is the _____.
Down payment
Drilled Wells
Drilled wells are constructed by rotary-drilling machines or cable tools.
An investigation and review of a property before purchase is known as _____.
Due diligence
Which of the following statements is permitted when advertising the sale or rental of housing?
Easy access to public transit Options: perfect for singles easy access to public transit walking distance to St. Bartholomew's church historically black community
The lowest part of the roof that projects beyond the walls of the structure is the _____.
Eave
The Salesperson's Role: Effective Communication
Effective communication refers to the salesperson's ability to: - provide information to the sellers in a professional manner - keep the sellers informed about the market activity on their property - communicate with and obtain feedback from other agents who have shown the property and relate this information to the sellers
The estimated total income from a property (including rent and other income) after vacancy and collection losses are deducted is _____.
Effective gross income
Electric Water Heaters
Electric water heaters are insulated tanks. With this type of tank, a heating element is immersed inside the tank and heats the water. Electric heaters are constructed to take 120 or 240 volts of electricity; 240-volt currents are more efficient and economical.
The Homeowner's Protection Act of 1998 (PMI Act)
Enables mortgagors with new loans who meet certain requirements to have their PMI canceled. The two cancellation situations are: when the homeowner's equity position reaches 22 percent of the original value of the property, the mortgage servicer must automatically cancel the PMI or by request from the mortgagor when his/her equity position reaches 20 percent of the property's original value
Passive Income
Encompasses income usually associated with a trade or business activity or investment where the individual is passive and not actively in charge of the day-to-day management of that investment. Examples include: - limited partnerships - income from income-producing real property - investments (e.g., rental property) where the individual receives profits but is not actively engaged in the real estate business - profits from the sale of stocks Losses from passive investments are generally not used to offset ordinary income. The taxpayer may deduct losses from passive investments only against the income from passive investments. The losses are not applied against active or portfolio income.
A document attached to an insurance policy that modifies or changes the original policy in some way is a(n) _____.
Endorsement
The primary purpose of building codes is to _____.
Ensure a safe, properly functioning environment
The average percentage of market value at which assessments in a municipality are set at a given point in time is called the _____.
Equalization rate
The ratio of total equity to total assets is the _____ ratio.
Equity ratio
In 1962, President John F. Kennedy issued an Executive Order guaranteeing nondiscrimination in housing for _____.
FHA and VA loans
FHA: Loan Amounts
FHA does not set a maximum sales price, only a maximum loan amount. FHA loans cannot exceed the maximum loan limit for each county. The loan limits may vary frequently. A buyer may purchase a home for more than the FHA maximum loan amount but will have to pay anything above the maximum loan amount in cash. The maximum loan amount is based on acquisition cost. This cost is the combination of the FHA-appraised price or sales price (whichever is lower) and the buyer's closing costs that FHA allows to be financed.
With an FHA loan, the borrower is required to pay a monthly mortgage insurance premium (MIP) if _____.
FHA requires the payment of mortgage insurance premiums (MIP) if the borrower makes a down payment of less than 20 percent of the purchase price of the home.
After the board of directors has reviewed and accepted an applicant's package, the next step usually is a _____.
Face-to-face interview
The Community Reinvestment Act (CRA) is also called the _____.
Fair Lending Act
Assumption Methods
If the mortgage is not satisfied at closing, there are two ways the buyer can take over the seller's mortgage: - taking (the property) subject to an existing loan - assuming the debt
Mortgage Contingency Clause: Purchaser Terms
If the purchaser complies with the terms of the clause but does not obtain a commitment, the contract may be canceled and the deposit returned The contract usually gives the purchaser between 45 and 60 days to obtain a loan commitment from the date of signing of the contract A purchaser must act in good faith, promptly apply for a mortgage loan, and fully cooperate with the request of the lender during this process.
NY Statute of Limitations
In New York, the time limit to bring action against a party in a real estate action is 6 years.
Types of Heating Fuel and Power
In most heating systems, a furnace is used to heat the air that is then discharged into the space being heated directly or through ducts. All warm-air furnaces consist of a blower, a heat exchanger, a casing, and controls. There are three different types of heating fuel for warm air furnaces, or hydronic (hot water) boilers: - electric - oil-fired - gas-fired
Portfolio Income
Includes interest, annuities, dividends, and royalties.
Direct insurance policy writers that use only their own employees or sales representatives are _____.
Insurance companies
Insurance Policy Deductibles
Insurance companies may also offer premium discounts for using dead bolt locks, smoke alarms, fire extinguishers, sprinkler systems, and security systems. Insurers are required to offer premium discounts if a policyholder has installed hurricane/storm shutters and/or hurricane resistant laminated glass windows and doors.
The main function of FHA is to _____.
Insure loans to protect lenders against financial loss.
A person entitled to benefit under the terms of an insurance policy is a(n) _____.
Insured
Which of the following statements about commercial property ownership is true?
It may be held in fee simple or leased.
Steam heat is only found in _____.
Older homes
The purpose of the Interstate Land Sales Full Disclosure Act of 1968 is to _____.
Prevent fraudulent marketing schemes that sell land sight unseen
In Kelo v. United States (2005), the U. S. Supreme court ruled that cities can exercise the power of eminent domain to promote private economic development, even though the constitution prohibits the government from taking private property except for a _____.
Public use
Rigid Insulation
Rigid insulation is fibrous material made of lightweight wallboards that combine strength with heat and acoustical insulating properties. These boards are used in roof and wall sheathing and concrete slab flooring.
Building departments CANNOT perform which of the following:
Rule on variance applications
After a sale of a one- or two-family dwelling, if the smoke alarm or carbon monoxide detector is not operable, the buyer must notify the _____ within 10 days.
Seller
When a buyer uses a wraparound mortgage, the payment on the existing loan is made by the _____.
Seller
Electricity enters the home at the _____.
Service entrance
Property tax exemptions are set by _____.
State law
Mortgage Insurance Premium
This insurance enables lenders to provide financing when the loan-to-value ratio is high. With a high ratio, the borrower has made only a small down payment.
Units used for roof framing that are assembled at a factory and usually consist of several triangle shaped sections are called _____.
Trusses
The Consumer Credit Protection Act is commonly referred to as _____.
Truth in Lending Act
If owners find underground storage tank leakage, they must call the spill hotline within _____.
Two hours
Under the 1988 Amendments Act, "children" means persons _____.
Under the age of 18
The most common appraisal form used by appraisers is the _____.
Uniform Residential Appraisal Report
Ad valorem taxes are based on the _____ of real property.
Value
Right to Rescind
"Cooling Off Period" If the borrower is refinancing an existing mortgage loan or obtaining a new mortgage loan on a residence already owned, the disclosure statement must provide for a "cooling-off period," or a three-day right of rescission for the loan transaction. The borrower has the right to rescind, or cancel, the loan before midnight of the third business day after the date the transaction is closed. The three-day right of rescission does not apply to the purchase of a dwelling used as a principal residence, or refinancing of an investment property.
Signing of the Contract: Electronic Communication
A 2010 NYS appellate court case addressing certain real estate issues concluded that emailed communications and electronic signatures satisfy the New York Statute of Frauds (amended in 1994) requirement that real estate contracts be in writing. However, in this appellate court case and others, there has been litigation over whether emails are binding or not and enforceable in court. Therefore, any casual email could require that a paper copy or authorized PDF be signed by all parties before they are bound by the agreement.
The CMA and the Listing Presentation
A CMA is generally a major part of a listing presentation. A packaged listing presentation generally includes information about the real estate agent and the firm he/she represents. The agent can present the CMA in a folder containing details and data regarding the comparables. The data may include colored photos of the comparables. The CMA is most often generated through a computerized MLS search. A sample multiple listing CMA is included in your handouts. This is a computer generated comparative market analysis. It was based on a search of active, withdrawn, pending, and expired listings in the range of $310,000-$330,000 within a given area within the previous 180 days. Software programs are also available to real estate agents to prepare the CMA and track the listing. The software programs allow an agent to generate his/her resume, a marketing schedule, suggested price and net to the seller, an analysis of market conditions, and a register of all those who attend open houses. Brochures detailing the firm's services in performing the listing, a listing contract, and required disclosure forms complete the package.
According to the guidelines for site location for a well, when a well is located next to a building, it should clear any projection from the building by at least _____.
At least 5 feet
Official actions of a zoning board of appeals are made _____.
At public meetings
The board that can review building plans to see if a project has design similarities to other properties is the _____.
Architectural review board
A site composed of several parcels, purchased separately and combined into one development, is an example of _____.
Assemblage
Differences in tax bills within a municipality are due to differences in _____.
Assessed value
Counties, cities, towns, villages, school districts, and special assessment districts are examples of _____.
Assessing units
The percentage of a property's market value, calculated for tax purposes, is called a(n) _____.
Assessment
The calculation of assessed value divided by sales price produces the _____.
Assessment ratio
The document containing each property assessment for a city, town, or village is the _____.
Assessment roll
The document containing each property's assessment in a municipality is the:
Assessment roll
Making a loan based on the assets of the borrower is referred to as _____.
Asset-based lending
Doug buys a house from Phillip, who has not paid his property taxes for the last two years. The property taxes must be paid _____.
At closing
When making price adjustments in completing a market analysis, you adjust the price of _____.
Comparable properties only
A method of determining a property's market value that is not an appraisal is a(n) _____.
Comparative market analysis
An analysis of the competition in the market place that a property will face upon sale attempts is called a(n):
Comparative market analysis
An analysis of the competition in the marketplace that a property will face upon sale attempts is called a(n) _____.
Comparative market analysis
Sales Comparison Approach
Compares the subject to similar properties and makes appropriate adjustments Also called the market data approach, is the primary appraisal approach for estimating the value of single-family, owner-occupied dwellings and vacant land. It involves comparing the property that is the subject of the appraisal with other properties offering similar utility that have sold recently. The sales comparison approach follows the principles of SUBSTITUTION and CONTRIBUTION.
A salesperson who presents a well-researched listing presentation to the sellers demonstrates _____.
Competence
Consumer Credit Protection Act: Exclusions
Compliance with the Act and Regulation Z is required of ALL firms or persons that regularly provide credit, unless they are excluded under the conditions listed below. The types of credit transactions EXCLUDED from the provisions of the Act include: - business or commercial loans - loans to government agencies - loans in amounts over $25,000 when secured by personal property - loans made without finance charges (including interest) and paid with four or fewer installment payments - residential properties containing more than four units
A program used to identify sites containing hazardous substances, seek reimbursement from the responsible party, and ensure cleanup by the responsible parties or the government was created by the _____.
Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) Under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) (1980), a program exists to identify sites containing hazardous substances, seek reimbursement from the responsible party, and ensure cleanup by the parties responsible or by the government.
The actual taking of property under eminent domain is called _____.
Condemnation
Contingencies in which a property right may be won or lost if the condition is violated are called _____.
Conditions
A form of community ownership in which owners own both separate property and common property is a _____ development.
Condominium
The right of first refusal clause in a contract for purchase of a condominium is in favor of the _____.
Condominium association
Condominium Closing Costs: Right of First Refusal
Condominium contracts are similar to other fee simple interest real estate contracts except they may contain a right of first refusal clause for the board of managers of a condominium association. This clause allows the condominium association to have the first opportunity to purchase the condominium when it goes up for sale. The seller, at the closing, may have to present a waiver of this right issued by the board of managers of the condominium association.
Real estate taxes for a condominium unit are paid directly by the _____.
Condominium owner
The ownership of the unit and a proportionate ownership share of the common elements apply to _____.
Condominium ownership only
Condominium Closing Costs: Real Estate Tax
Condominium properties are assessed for tax purposes like other properties. Condominium owners are responsible for paying real property taxes on their unit.
Functional Obsolescence
Flawed or faulty property, made inferior because of technical advances and changes. Some areas in which functional obsolescence may be seen are: - inadequacy of wiring, plumbing, and heating and cooling systems - exposed wiring or plumbing, lack of automatic controls for furnaces and hot-water heaters, inadequate insulation - outdated equipment - faulty design - insufficient number of bathrooms or closets Functional obsolescence also refers to any loss in value due to an over improvement to the property (too costly for the general market area). An over improvement is also referred to as superadequacy.
Flexible Insulation
Flexible insulation is available in two types: blanket (or quilt) and batt. Blanket insulation is from 1" to 3" thick and comes in rolls of fiberglass or other fibrous material in 15 1/2 inch-wide rolls. The insulation is stapled or nailed between the studs and under the rafters or over the ceiling. It is designed to fit in the space between the framing members such as joists and studs. Blanket insulation is enclosed in paper covers. One side may be treated for a vapor barrier to keep moisture out of wall cavities. This cover sheet is often surfaced with aluminum foil or other reflective insulation to keep out heat. Batts refer to sheets of insulation, whereas blankets refer to insulation that comes in rolls. Batt insulation is made of fibrous material such as fiberglass and ranges from 2" to 6" thick. It is widely used in New York.
Lev has owned four condominiums in the past two years. He generally lives in them for a few months until he sells at a profit. This is called _____.
Flipping
Turning quick profits by buying a property at a certain price and immediately selling the property at a higher price is called _____.
Flipping
The type of slab that is constructed by pouring the footings first, then the slab, so the slab is not connected to the footings is a(n) _____.
Floating slab
The foundation walls and, therefore, the entire weight of a structure are supported by the _____.
Footing
The part of the structure that is below the frost line and supports the foundation is the _____.
Footing
Permitted Deductions: Mortgage Interest
For a taxpayer to take a home mortgage interest deduction, there must be a mortgage that secures a debt on a qualified home. A qualified home is the main home or second home. A secured debt is one in which the taxpayer signs a legal document such as a mortgage or land contract. The mortgage is the collateral that protects the lender's interest. In most cases, a taxpayer can deduct all of the home mortgage interest. The loan may be a debt to buy a home (acquisition loan) or refinance a home. The loan can be for construction, home improvement, a line of credit, or a home equity loan. To deduct home mortgage interest, the following requirements apply: - the filing of Form 1040 and itemizing deductions on Schedule A (Form 1040) - being legally liable for the loan - The taxpayer cannot deduct payments he/she makes for someone else if he/she is not legally liable for the payments.
FHA Guidelines: Qualifying Ratios
For an FHA loan, the ratio of the monthly mortgage payment to the stable monthly income should not exceed 29 percent. The ratio of the total monthly installment debts to the stable monthly income should not exceed 41 percent.
Deficiency Judgment Examples
For example, if the fair market value is $100,000 and the amount due the lender is $110,000, the lender can obtain a deficiency judgment. Conversely, if the highest bid at the auction is only $75,000, the fair market value is $100,000, and the bank is owed $96,000, the lender is not entitled to a deficiency judgment on the property. In this case, the fair market value exceeds the amount due.
Types of Discrimination: Advertising Awareness
Discriminatory advertising directed at any of the groups protected by the Fair Housing Act is prohibited. It is illegal to make, print, or publish, or cause to be made, printed, or published any notice, statement, or advertisement concerning the sale or rental of a dwelling that discriminates against the protected groups.
Maintaining a Fair Housing Office: Advertising
Discriminatory advertising directed at any of the groups protected by the Fair Housing Act, as well as New York State and local laws, is prohibited. Under the Fair Housing Act, it is illegal to make or cause to be made, printed, or published any notice, statement, or advertisement concerning the sale or rental of a dwelling that discriminates against the protected groups. The law extends to notices and statements on listings on the MLS and any other statement connected with the sale or rental of housing. A general rule for advertising housing is to describe the property, not the tenant, purchaser, seller, owner, or neighbor. Examples of discriminatory advertising are: - An advertisement for the sale of condominium units or rental apartments containing pictures that show owners or tenants of only one race on the property - An advertisement stating that the owner prefers tenants who are male college students When creating ads, the real estate agent should consider: the message's intent the exclusion of any groups Discrimination includes specific directions to a property that refer to well known racial, ethnic, or religious landmarks, or other landmarks indicating a preference for a specific type of person or community. Advertisements should not target one specific segment of a community.
After construction and before using the water, the well should be _____ according to health department guidelines.
Disinfected
To reduce exposure to electromagnetic fields (EMFs), the key is _____.
Distance
What is the ratio of the total monthly mortgage payment to gross monthly income?
Divide the total monthly housing cost (mortgage payment) by the total monthly income. Example: $939.80 ÷ $4,583.33 = 20.5%
In New York, the agency that regulates and enforces anti-discrimination law is the _____.
Division of Human Rights
The doctrine stating that if landowners are lax in protecting their rights they may lose the rights is known as the _____.
Doctrine of Laches
If a property transfers from owner to owner and the use does not change, government approval is not necessary. In this case, the SEQR process ______ apply.
Does not
When a real estate agent has a fiduciary relationship with the client, caveat emptor _____.
Does not apply; "caveat emptor" does not apply when the real estate agent has a fiduciary relationship with the client.
A dollar limit above which the tenant agrees to pay operating expenses is called a(n) _____.
Dollar stop
Site Use: Drainage
Drainage is one of the first considerations in preparing a construction site. A site composed of slightly rolling hills and valleys provides more natural drainage than do flat or steep sites. Grading of the site, the arrangement and preparation of the soil for construction, places drainage areas where needed for water runoff. Proper grading ensures that surface water is directed away from the foundation. Footing drain tile is used around concrete or masonry foundations. Crawl spaces are graded to ensure positive drainage.
Dug Wells
Dug wells can be excavated by hand or by mechanical equipment.
Insulation Requirements
ECCCNYS mandates minimum R-values for insulation and indicates the areas where insulation must be installed in a residential structure. Insulation is placed wherever the interior walls, ceilings, or floors are exposed to exterior temperatures such as roofs, ceilings, floors, foundation walls, and slab edges. The required performance of the insulation depends on the heating system type.
The Federal National Mortgage Association is commonly referred to as _____.
Fannie Mae
The oldest and largest member of the secondary mortgage market is _____.
Fannie Mae
The component of the eave that makes up the area of material facing the outer edge of the soffit is the _____.
Fascia
The National Flood Insurance Program (NFIP) is administered by the _____.
Federal Emergency Management Agency (FEMA)
The Consumer Credit Protection Act was implemented by the _____.
Federal Reserve Board
Ginnie Mae is a _____.
Federal agency within HUD
Federal Anti-discrimination Laws
Federal laws that prohibit housing discrimination are: - The Civil Rights Act of 1866 - The Civil Rights Act of 1964 - The Fair Housing Act of 1968, with its important 1974 and 1988 amendments In addition, several important U.S. Supreme Court decisions shaped civil rights policy. Another federal anti-discrimination law, the Americans with Disabilities Act of 1990, protects the rights of individuals with disabilities.
Under Article 9-A, if a subdivision is offered for sale before the offering plan approval by DOS, the offeror is guilty of a _____.
Felony
New York law has _____ federal law.
Fewer exceptions than
Phase IV of a due diligence assessment is the _____ phase.
Management phase
Which of the following defines when an investment will generate a positive return?
Natural breakeven point
Covenants are _____.
Promises between parties that appear in legal documents COVENANTS are agreements or promises between two or more parties that appear in legal documents.
In New York, increasing the interest rate on a high-cost loan if the borrower defaults is _____.
Prohibited
The relationship between the cooperative and other entities is described in _____ agreements.
Recognition agreements
A transaction on which the taxpayer must pay taxes on the gains or profits is known as a(n) _____.
Recognized gain Recognized gain means that the taxpayer must pay taxes on the gain or profit.
Which of the following modifications to a property would NOT be cause for reassessment?
Replacing the roof
Permission to use the land for a purpose prohibited by the current zoning restrictions is called a(n) _____ variance.
Use variance
The area contained within the space that the tenant occupies is _____.
Useable square footage
Taxes and Assessment: Market Value
Used to determine the assessed value of property located in the jurisdiction. The assessor applies the level of assessment (LOA) to each parcel to determine the assessed value and to produce an assessment roll. The LOA is the percentage of market value at which properties are assessed.
Gap/Interim Mortgage
Usually a short-term loan, or one that provides funds over and above an already existing loan until more permanent financing is in place. It can provide temporary funds to a purchaser until permanent financing is available.
Terms of Payment
Usually, the purchaser makes an earnest money deposit or down payment upon signing. An additional down payment might be paid upon the seller's acceptance of the contract. The buyer pays the remaining balance when title transfers at the closing. Without a deposit, the purchaser's promise/offer is the consideration for the seller's promise to sell.
VA Guaranteed Loans: Eligible Property
VA guaranteed loans are for the purchase, improvement, or construction of one- to four-family dwellings. Veterans obtaining a VA guaranteed loan must certify that they will personally occupy the property. The only exception is an interest rate reduction loan, where the veteran need only certify that he/she previously occupied the home.
Value by Income Capitalization: Value
Value (represented as V) is defined as the total amount of worth or cost of the unit. The most common applications of value is the sale price of a property.
An owner who uses a residential property for vacation purposes only may attribute which type of value to this property?
Value in use
Formulas in the Capitalization Process
Value x Capitalization Rate = Annual Net Income Annual Net Income ÷ Value = Rate Annual Net Income ÷ Capitalization Rate = Value These formulas are often abbreviated as follows: V x R = I I ÷ V = R I ÷ R = V These formulas are collectively known as IRV.
The material that prevents the warm interior air from mixing with the cold exterior air, thusly forming condensation within the wall, is _____.
Vapor Barrier
Compared to other types of taxes, which of the following is NOT an advantage of property taxes?
Variable revenues
A permitted deviation from specific requirements of the zoning ordinance is called a _____.
Variation
The system that consists of pipes installed in a sanitary wastewater drainage system to provide a flow of air to and from a drainage system is the _____ system.
Vent system
Which of the following agencies/boards are elected?
Village board of trustees
Judith wants to build a subdivision in a small village in New York. Where should she first make her proposal?
Village or town planning board
Illegal Legal Practice by Real Estate Agents
Violates both the New York Judiciary law AND DOS regulations
The electrical force that "pushes" electricity through the wires is called _____.
Voltage
The requirement that a tenant is entitled to a livable, safe, and sanitary apartment is known as the _____.
Warranty of Habitability
The New York Uniform Fire Prevention and Building Code and the National Building Code require that foundation walls in contact with soil be treated for _____.
Water penetration
Physical Deterioration
Wear and tear resulting from normal use and lack of adequate maintenance. For example, a frame house that needs a new coat of paint is suffering from physical deterioration. Physical deterioration could also be caused by unrepaired damage to the structure caused by fire, explosion, vandalism, windstorm, or insects.
Punishment for a second or subsequent violation of the Americans with Disabilities Act is _____.
a $150,000 fine
Punishment for a second or subsequent violation of the Americans with Disabilities Act is _____.
A $150,000 fine
Lis Pendens
A legal notice that indicates a lawsuit is pending affecting title or possession of a specific property
Home heating oil tanks under 1,100 gallons in capacity _____ regulated by the state of New York.
Are not
A double top plate that ties the walls together and provides additional support for the ceiling and roof system is called a _____.
Flitch beam
Mistake of Fact
An error of a material fact by both parties
Insulation is rated by a(n) _____.
R-Factor
Fannie Mae is a _____.
federally chartered private organization
A measure of the amount of electricity or "current" flowing through a wire is called _____.
Amperage
Properties that do not sell within the time of the listing agreement are called _____.
Expired listings
Interest-Only Loans
Interest-only loans are common for investors looking for short-term financing.
The slope of a roof is called the _____.
Pitch
The town officer that collects real property taxes is the _____.
Receiver of taxes
The legislative power of a city is vested in:
The city council
The main difference between a condominium and a cooperative is the _____.
form of ownership
Ginnie Mae provides funds by _____.
guaranteeing securities issued by others
Under VA guidelines, income available after taxes are deducted is known as _____.
residual income
Aluminum wiring is mostly used _____.
where the current is heaviest
When investment or other types of property are sold at a loss, it is referred to as a _____.
Capital loss
The process for converting future income into a current value is known as _____.
Capitalization
The process of converting future income into current value is _____.
Capitalization
The process used to convert future income into a current value is known as _____.
Capitalization
Assume that the replacement cost of a porch is $10,000. If the porch is five years old and has an expected useful life of 25 years, what is the amount of depreciation?
$2,000
The maximum exclusion of gain from the sale of a principal residence for a single taxpayer is _____.
$250,000 Home sellers may be eligible to exclude up to $250,000 if single, or up to $500,000 if married filing jointly, of the capital gain on the sale of the residence.
A property owner's tax rate is .03598, and the tax bill is $9,500. What is the assessed value of the property (rounded off)?
$264,036 $9,500 ÷ 0.03598 = $264,036
A loan covered by the New York Anti-Predatory Lending Law can have a maximum indebtedness of _____.
$300,000
Sally's insurance policy has a liability limit of $200,000. In addition, Sally purchases a personal umbrella policy with liability limits of $1,000,000. While in Sally's home, Gloria is severely injured and sues Sally for $500,000. If Gloria wins, how much is paid out under the umbrella coverage?
$300,000
Most insurance professionals and mortgage lenders advise or require liability coverage amounting to _____.
$300,000 to $500,000
Article 36-A of the New York General Business Law provides that home improvement contractors who enter into contracts exceeding _____ must deposit payments received before completion into an escrow account.
$500 Article 36-A of the New York General Business Law provides that home improvement contractors who enter into contracts exceeding $500 must deposit payments received before completion into an escrow account.
The New York State "Mansion Tax" applies to home purchases of _____.
$1 million or more
Under the Human Rights Law, in housing discrimination only, punitive damages not exceeding _____ may be awarded to the complainant.
$10,000
A property is assessed at 100 percent of its value, the assessment is $250,000, and the tax rate is .04265. What is the amount of the property tax (rounded)?
$10,663 $250,000 x 0.04265 = $10,663
A standard homeowner's policy typically includes how much liability coverage?
$100,000
A standard homeowner's policy typically includes liability coverage amounting to _____.
$100,000 A standard homeowner's policy typically includes $100,000 worth of liability coverage. But most insurance professionals and mortgage lenders advise or require $300,000 to $500,000 in liability coverage.
A property whose market value is $150,000 in a community where the uniform percentage for assessment is 70 percent will have an assessed value of _____.
$105,000
A house valued at $400,000 is assessed at a uniform percentage rate of 50 percent. The tax rate is $60 per $1,000 of assessed value. The property tax bill is _____.
$12,000 $400,000 x 0.50 = $200,000 $200,000 ÷ $1,000 = 200 200 x $60 = $12,000
A house valued at $215,000 is assessed at a uniform percentage rate of 60 percent. The assessed value of the house is _____.
$129,000
An investor purchases a $2,000,000 multi-family apartment complex with a $500,000 down payment. Each month, the cash flow from rentals, less expenses, is $15,000. What is the cash-on-cash return?
$15,000 x 12 = $180,000 $180,000 ÷ $500,000 = 36%
As of 2014, what is the maximum amount of civil damages that may be imposed for a second or subsequent violation of the fair housing laws if HUD files a complaint?
$150,000 In 2014, the U.S. Department of Justice increased the civil monetary penalties for violations of the Fair Housing Act to a maximum civil penalty for a first violation to $75,000, and $150,000 for subsequent violations. There is no limit on the amount of punitive damages a federal court may impose, but there are limits on the amount of civil damages that may be imposed, depending on the number of previous violations, if HUD files the complaint.
The maximum exclusion of gain from the sale of a principal residence for married taxpayers filing jointly is _____.
$500,000
Mario's home is assessed at its full market value of $200,000. The tax rate is $30 per $1,000 of assessed value. Mario's property tax bill is _____.
$6,000
The Town of Taxsylvania has an annual tax levy of $4.48 million. The taxable assessed value of the property in town is $70 million. The tax rate is _____ per $1,000 of assessed value.
$64
As of 2014, the U.S. maximum civil monetary penalty for a first violation of the Fair Housing Act is _____.
$75,000 In 2014, the U.S. Department of Justice increased the civil monetary penalties for violations of the Fair Housing Act to a maximum civil penalty for a first violation to $75,000, and $150,000 for subsequent violations. There is no limit on the amount of punitive damages a federal court may impose, but there are limits on the amount of civil damages that may be imposed, depending on the number of previous violations, if HUD files the complaint.
Assume that the replacement cost of a porch is $10,000. If the porch is five years old and has an expected useful life of 25 years, what is the actual cash value of the porch?
$8,000 (5 / 25) x $10,000 = .20 x $10,000 = $2,000 depreciation$10,000 - $2,000 = $8,000
A house valued at $200,000 is assessed at a uniform percentage rate of 40 percent. The assessed value of the house is _____.
$80,000 $200,000 x 0.40 = $80,000
The value of an income property is $850,000 and the capitalization rate is 12%. What is the projected annual net income?
$850,000 x .012 = $102,000
Assume that the replacement cost of a porch is $10,000. If the porch is five years old and has an expected useful life of 25 years, what is the amount of depreciation?
(5 / 25) x $10,000 = .20 x $10,000 = $2,000
Conditions Affecting Title
(The "subject to" provision) states that the purchaser will accept the property subject to covenants, deed restrictions, easements, and environmental protection or zoning laws, as long as the property does not violate these items or prevent the purchaser from using the property for its intended purpose.
Coverage for Contents
(as opposed to the property structure) is usually issued on an actual cash basis in homeowner's and tenant's policies. This means that the insured probably will not receive the full amount needed to replace or repair the damaged or stolen property. However, some insurance companies may sell the insured an endorsement that provides replacement cost coverage for the contents of the insured's home. Replacement cost coverage generally costs an additional 10 percent to 15 percent.
The loss factor is calculated as _____.
(rentable area - usable area) ÷ rentable area
The add-on factor is calculated as _____.
(rentable area - usable area) ÷ usable area
For which types of property are property taxes deductible?
* all of the answers shown * a second home a personal residence income-producing property
Which of the following is a disadvantage of investing in unimproved land?
*all of the answers shown* Financing may be difficult to obtain. The property cannot be depreciated for tax purposes. It may be a long time before the investor sees a profit.
The role of the real estate agent, with regard to property insurance, includes all of the following EXCEPT _____.
*ensuring that the client or customer is fully covered* explaining the lender escrowing the property insurance explaining the purpose and costs of property insurance explaining the lender's interest in property insurance
Buildings ready for first occupancy after March 13, 1991, that have an elevator and four or more units must have, in all, units _____.
- Accessible light switches and thermostats - An accessible route into and through the unit - Reinforced bathroom walls
Functions of a Conservation Advisory Council/Wetlands Commission
- Advising municipal agencies and conducting studies regarding preservation, development, and use of natural and physical features - Developing a public information program including maps and other publications - Working with the planning boards and other agencies to include environmental improvement in the master plan - Accepting by gift, grant, devise, bequest, or other ways, property, both real and personal, for the municipality to further environmental standards - Overseeing regulations regarding construction on or near a wetland
Installment Sales Contract: Tax Advantages for the Seller
- Although he/she provides the financing, he/she also maintains title to the property. - The seller can still claim depreciation on the property, as he/she is still the owner. - Moreover, the seller does not have to pay any federal capital gains tax in one payment. - The total capital gains tax would normally be due on the sale of a property sold in the usual way. - The seller can pay a percentage each year as he/she receives payments from the buyer.
Building specifications may include _____.
- An explanation of the systems in the structure - Materials used in the construction - Design features not entirely visible in the plan
TILA: Chief Disclosures
- Annual percentage rate - Finance charge - Amount financed - Total amount of money to be paid toward the mortgage in principal and interest payments
Types of Pipes
- Cast iron - Copper - PVC and PEX (plastic) - Brass - Galvanized steel
Advantages of FHA Financing
- Credit criteria for a borrower are not as strict as FNMA or FHLMC (conventional loans). - Borrower's allowable costs may be partially wrapped into the loan. - 100 percent of the down payment and closing costs may be gifted. - Loans are assumable, allowing a person to take over the mortgage without the additional cost of obtaining a new loan. - The FHA makes housing affordable for many low-income buyers. With the 3.5 percent FHA down payment on a $50,000 home, the down payment is $1,750 compared with $5,000 to $10,000 for most conventional loans.
Types of Insulation
- Flexible - Loose fill - Rigid or wallboard - Reflective - Sprayed
Residential Heating Systems: Types
- Forced hot water - Steam - Forced warm air - Electric
A party not liable for the presence of hazardous waste on a property under the Superfund Amendment includes _____.
- Landowners who made inquiries at purchase to find out if property was contaminated - Landowners that did not know the property was contaminated when it was purchased - Landowners that reacted responsibly to the contamination when found
RHS Purpose
- Makes direct loans - Guarantees loans made by private lenders - Provides a limited number of grants, mostly to low-income individuals
Most Common Types of Steam Systems
- One-pipe systems in which the steam and condensate (evaporation) are carried in one pipe--the steam is carried to the heating elements and the condensate is returned to the boiler for reheating - Two-pipe systems in which the steam and condensate are carried in two different pipes - Vapor steam systems, which are low-pressure two-pipe systems
Functions of a Tax Assessor
- Placing value on all taxable property and listing it on the assessment roll - Maintaining the tax maps - Assisting taxpayers with certain exemptions - Maintaining property tax records for the municipality
FHA: Purpose
- Promote improved housing standards - Assist in the stabilization of the mortgage market - Provide mortgage loan insurance
Building Departments: Functions
- Providing building permits for construction and renovation - Providing certificates of occupancy (CO) once construction or renovation is in compliance - Overseeing building code compliance - Sending building inspectors onsite during construction or renovation to oversee code compliance
RHS: Two Main Housing Programs
- Section 502, the Direct Loan Program, for guaranteed loans for one-family housing - Section 515, Rural Rental Housing Loans, that provides funds directly to the owners for the benefit of the low-income tenants The Housing and Community Facilities Program (HCFP) is the agency that administers the Direct Loan Program, mostly to low-income individuals. The government directly funds Rural Housing Direct Loans.
Architectural Review Board: Basic Functions
- approving new construction and remodeling following local zoning ordinance laws - promoting the orderly and harmonious development of the municipality - protecting a municipality's cultural heritage
SONYMA Eligible Properties
- be located in New York - have a sales price not exceeding SONYMA's purchase price limit that varies according to area - not be used for business or commercial purchases - be a maximum of five acres (exceptions considered) - have at least 500 square feet of living space meet SONYMA's project requirements, if a condo or coop
Receiver of Taxes and Assessments and Treasurer: Functions
- billing for and collecting property and school taxes - collecting other fees such as water fees and permit fees - tracking payments for the municipality and performs other accounting functions
Office procedures should outline the initial contact with customers and clients including:
- discussing the services offered by the firm - assigning agents to the customer - obtaining initial customer information
Zoning Board of Appeals: Basic Functions
- interpreting the zoning ordinance - granting use and area variances In addition, in many areas, the zoning board of appeals may grant special use permits. In some places, other agencies grant special use permits.
The fair housing officer in a real estate firm is responsible for:
- overseeing fair housing training - keeping up to date on fair housing developments - tracking the firm's compliance - finding answers to policy questions
In the capitalization process, the rate of return that an investor expects is called the _____.
Capitalization rate
To develop a CMA, a licensee uses _____ properties.
Comparable properties
A landlord with more than six units puts all security deposits in an interest-bearing account. In this case, the landlord is entitled to annual administrative expenses of _____.
1 percent of the deposit
One discount point equals _____.
1 percent of the loan amount
NYSDEC lists over _____ chemicals that are hazardous.
1,000 NYSDEC lists over 1,000 chemicals that are hazardous, ranging from chlorine used in pools to fertilizers, acids, alkalis, and pesticides.
A conventional loan for more than $50,000 is covered by the New York Anti-Predatory Lending Law if it has points and fees exceeding _____.
5 percent
Secondary financing is usually allowed with a conventional loan as long as the cash down payment is at least _____.
10 percent of the sales price
Most single-family dwellings have amp service of at least _____.
100
An acre of land has a width of 425 feet. If this acre of land is rectangular in shape, what is its length?
102.5 feet
Individual branch circuits can be from _____ to _____ amps.
15 to 50 amps
A city of the first class has a population of _____.
175,000 or more
The Federal Fair Housing Act became law in _____.
1968 The Federal Fair Housing Act became law in 1968.
New York Public Health Law guidelines state that there must be how many feet of usable soil above rock for the installation of the absorption field?
4 feet There must be 4 feet of usable soil available above rock for the installation of the absorption field.
Typically, single-family structures require a _____ gallon hot-water tank.
40 to 60 gallon
To preserve root systems, a structure is best situated at least _____ feet from any existing vegetation, especially mature trees.
20 feet
If an insured obtains insurance through the New York Property Insurance Underwriting Association, the premium cost may be how much more than a voluntary insurer?
20 percent
Same-sex marriage became legal in New York in _____.
2011
According to the Homeowner's Protection Act of 1998, the mortgage servicer must automatically cancel the PMI when the homeowner's equity position reaches _____.
22 percent
If the equalized value of a property is more than $450,000, the total reduction in assessment requested when an assessment is protested may not exceed _____.
25 percent of the assessed value
The period over which residential rental property can be depreciated is _____.
27.5 Years For residential rental property, the law allows the improvements to be depreciated over a period of 27.5 years.
Under Fannie Mae/Freddie Mac guidelines, the amount of the mortgage payment should not exceed _____ of the borrower's stable monthly income.
28 percent
For an FHA loan, the ratio of the monthly mortgage payment to the stable monthly income should not exceed _____.
29 percent
After a policy has been in effect for 60 days, it may not be cancelled or non-renewed for _____, except for specific reasons.
3 years
For an FHA loan, the minimum cash investment the borrower can make is _____ of the sales price or appraised value, whichever is less.
3.5 percent
Following an Environmental Impact Statement (EIS), there is a public hearing and a comment period of _____.
30 days There is a minimum 30-day comment period and a public hearing.
The New York Public Service Commission has enacted a limit of _____ kilovolts for a given power line.
345 kilovaults
Under Fannie Mae/Freddie Mac guidelines, the amount of the total monthly debt payments should not exceed _____ of stable monthly income.
36 percent
In most cases, the New York Attorney General requires sponsors to promise in the offering plan to give up their control of the board after they sell over _____ of the common interest, or after five years have passed since the closing, whichever comes first.
50 percent
Qualified senior citizens may have the assessed value of their property reduced by as much as _____.
50 percent
The total assessed value of the property in Panthersville is $60 million, while the total market value is $120 million. The equalization rate in this case is _____.
50 percent
New York Public Health Law guidelines state that a septic tank must be at least _____ feet from a well and the absorption field at least _____ feet from the well.
50; 100 Wastewater systems must be separated from buildings, property lines, and wells and waterways according to specified minimum distances. A septic tank must be at least 50 feet from a well and the absorption field at least 100 feet from the well.
The New York City Council is comprised of _____ members.
51 members
The roof should extend at least _____ beyond the exterior of the structure.
6 inches The roof should extend at least 6" beyond the exterior of the structure. Common construction practices use a 12" overhang on the front and rear, with a 6" overhang on the side.
An FHA or a VA loan for more than $50,000 is covered by the New York Anti-Predatory Lending Law if it has points and fees exceeding _____.
6 percent
Under New York law, an insurance company may cancel a homeowners or tenants policy by issuing a cancellation notice during the first _____ it is in effect, as long as the notice states the specific reason for the cancellation.
60 days
Under the Human Rights Law, after a Commissioner's Order has been issued, either party has _____ to appeal the Order to the NYS Supreme Court.
60 days
Under the Human Rights Law, after a Commissioner's Order has been issued, either party has _____ to appeal the Order to the NYS Supreme Court.
60 days After a Commissioner's Order has been issued, either party may appeal the Order to the NYS Supreme Court within 60 days.
A conventional first mortgage is covered by the New York Anti-Predatory Lending Law if it has an interest rate of more than _____.
8 percent
Generally, insurance is automatically issued on a replacement cost basis if the insured purchases coverage on a replacement cost basis and insures the home for at least _____percent of its replacement cost.
80 percent
IRS regulations state that for a shareholder in a cooperative to qualify for the same tax benefits available to other residential property owners, at least _____ of the cooperative's gross revenues must be from its shareholders.
80 percent
What percentage of municipalities in New York has one appointed tax assessor?
80 percent
A junior mortgage is covered by the New York Anti-Predatory Lending Law if it has an interest rate of more than _____.
9 percent
Which conventional loans usually require private mortgage insurance?
90 and 95 percent loans
In NYC, the expiration date for a temporary certificate of occupancy is usually _____ after its date of issuance.
90 days
Which conventional loans usually require monthly escrow payments for taxes and insurance?
90 percent and 95 percent loans
Exemptions for Property Owners: The School Tax Relief Program (STAR)
A School Tax Relief (STAR) program provides a partial exemption from school property taxes for owner-occupied primary residences. These include one- to three-family homes, condominiums, and cooperatives, manufactured homes, or farm dwellings. The Basic STAR exemption is available for owner-occupied, primary residences, regardless of the owners' age. The property is eligible for the Basic STAR exemption if the homeowner and his/her spouse have an income of less than $500,000 per year. Basic STAR works by exempting the first $30,000 of the full value of a home from school taxes. The Enhanced STAR exemption is available for the primary residences of senior citizens (age 65 and older) with yearly incomes of $84,550 or less. This amount increases annually according to a cost-of-living adjustment (COLA). For qualifying senior citizens, the Enhanced STAR program works by exempting the first $65,300 of the full value of their home from school property taxes. In counties where the median home value is higher than the statewide median home value, this exemption increases proportionally. The homeowners in these areas realize equivalent tax relief. For property owned by a husband and wife, or by siblings, only one of them must be at least 65 years of age as of December 31 of the year in which the exemption begins to qualify for the Enhanced exemption. Their combined annual income must not exceed the STAR income standard.
Deed in Lieu of Foreclosure
A borrower in default conveys the title to the property to the lender, to avoid record of foreclosure. The disadvantage is that it does not eliminate other liens against the property. In addition, the lender may lose the right to claim against mortgage insurance or guarantee programs such as FHA or VA. (The FHA insurance program and the VA guarantee program are described elsewhere.)
Which of the following characterizes a condop?
A building that has both condominium and cooperative ownership
Pest Infestation: Chlordane
A chemical insecticide and termiticide that was banned in the early 1980s because of its toxicity. Its use as a termiticide can negatively affect indoor air quality.
Lien
A claim one has against the property of another for a debt or charge
Lease Clauses: Nondisturbance Clause
A clause that states that the landlord's lender and future owners of the building cannot terminate the lease as long as the tenant fulfills lease obligations. An agreement can be added to a mortgage contract on income-producing properties that provides for the continuation of leases/rents in case of foreclosure of a loan.
CMA Process
A comparison of the property with other similar properties that have sold recently (within the last six months), those currently listed for sale, and evaluation of expired listings, determines the price. No two properties are exactly alike. However, many are comparable or similar in quality, location, and utility. When comparing the listed property and the selected comparables, there are allowances for differences. It often takes experience and time for new licensees to extract and analyze appropriate comparables, and create a comparative market analysis (CMA). Computer generated multiple listing service reports streamline the procedure.
Article 15 of the New York Executive Law: Enforcement and Penalties
A complaint alleging discriminatory behavior is filed with the NYS Division of Human Rights (DHR) within one year after the alleged discriminatory behavior. Complaint forms can be downloaded from the DHR website. If appropriate, the DHR attempts to settle the matter through conciliation. If requested, the DHR forwards a copy of the complaint to the Equal Employment Opportunity Commission (EEOC) or HUD. After an investigation, if there is cause, the DHR proposes terms of conciliation. If conciliation does not work, there is a public hearing presided over by an administrative law judge. A Commissioner's Order either dismisses the complaint or finds discrimination. In the latter case, it orders the respondent to cease, desist, and take appropriate action. The DHR may order damages and/or back pay. Either party may appeal the Order to the NYS Supreme Court within 60 days. If an individual is found guilty of discrimination, an order requiring the guilty party to cease and desist from engaging in the discriminatory practice may be issued. An order may be issued requiring the guilty party to initiate affirmative action to right the discriminatory act, such as granting credit, if that was the subject of the complaint. Compensatory damages may be awarded; that is, repayment to the person who was harmed by the discriminatory act. In housing discrimination only, punitive damages not exceeding $10,000 may be awarded to the complainant.
Contingency
A condition in a contract relieving a party of liability if a specified event occurs or fails to occur. A contingency generally contains provisions for inspection or remediation before the parties become obligated under the contract.
Reformation
A doctrine that permits the court to rewrite a contract that expresses the true intentions of the parties. It is most often used when the parties to a contract sign without realizing that the contract contains a clerical error.
Title Issues in the Purchase of Condominiums
A condominium purchaser receives a deed to his/her own unit plus an undivided interest in the common areas. Just as any other fee simple purchase, a condominium purchaser needs a title insurance policy to protect his/her title. A lender also requires title insurance to protect their interest in the condominium unit. Often special condominium "endorsements" are required that attach to the title insurance policy. The search reveals any defects in the title of the unit along with any problems or liens against the condominium building or the complex itself. The search protects the purchaser against any unpaid bills or liens against the condominium association. If there are unpaid bills on the common areas, the association could prepare an affidavit stating that the bill is its responsibility. The condominium documents, including the covenants, conditions, and restrictions (CCRs), are normally incorporated into the deed. The CCRs set forth all the rights, duties, and obligations of the unit owners. The title report shows the book and page where these documents are recorded in the official country records. The homeowner's association or the county clerk's office can provide a copy.
Mortgage Contingency: Lack of Financing
A contract of sale includes a mortgage contingency. The buyer acts in good faith, promptly applies for a mortgage loan, and fully cooperates with the request of the lender. If the buyer is unable to obtain financing, the buyer may cancel the contract and have his/her deposit returned
Voidable Con
A contract that is capable of being voided by one of the parties. A voidable contract may occur when the contracting parties do not meet a legal requirement when negotiating the agreement. The parties to a voidable contract are not required to void the contract. The parties may fulfill their obligations under the contract and receive their benefits. The parties can voluntarily perform a voidable contract. That is, it is valid until action is taken by one party to make it void.
Executed Contract
A contract that is fully performed. All contingencies and conditions are met, and closing takes place. After the closing, nothing more is to be performed under the sales contract.
Valid Contract
A contract that is legally sufficient and meets all the requirements of the law. It contains all the essential elements of a contract. The parties to a valid contract are legally obligated to abide by the contract terms.
Executory Contract
A contract that is not fully performed or completed. A real estate contract that has been signed by both parties but has not "closed" is an executory contract, because all the requirements of the contract have not been completed (e.g. transfer of title, payment of purchase price, etc.).
Unenforceable Contract
A contract that meets the requirements for validity but is not enforceable in court. These contracts may still be valid between the parties if they wish to complete performance.
Cooperative: Shares of Stock
A cooperative ownership is not a fee simple ownership. The shareholders do not own real estate but a proportionate number of shares of stock in a cooperative corporation. These shares entitle the shareholder to a lease. Shares of stock are securities and considered personal property. Ownership of shares in a cooperative unit entitles the shareholders to a lease and is treated as ownership of personal property. The purchaser becomes a shareholder of the corporation and a tenant in the building. The tenant-shareholder has the right of occupancy. A cooperative purchaser does not obtain a deed but a proprietary lease issued by the cooperative corporation. Cooperative ownership is ownership of shares of stock in a corporation plus a long-term lease for the apartment or space. As lessees, the shareholders pay a monthly maintenance fee - the rent.
Injunction
A court order stating that a party must discontinue a specific act or behavior.
Wastewater Treatment Systems: Septic Systems
A design professional, such as a NYS licensed engineer or architect, must design and submit plans for the wastewater treatment systems to the health department for approval if the design is different from the designs outlined in New York regulations. The design professional must submit as-built plans of the system. These are drawings or renderings of the finished system. The design professional must supervise the construction. He/She must certify that the system is built according to the approved plan. Before construction, the design professional must certify that the system will not have an adverse environmental impact. In New York, contracts for purchase and sale may include a septic system contingency agreement. This contingency provides for a test of the system by a qualified professional or health department inspector.
The limits for personal liability and medical payments are likely to be _____.
A fixed dollar amount
Forced Warm Air System
A forced warm air system consists of a furnace that contains a burner (either gas or oil fueled), controls, a blower, ducts, registers, and filters. The warmed air is blown through ducts to the rooms. Heated air enters the room through the registers. The system often provides cooling as well as heating through the same ducts.
Construction Mortgage
A form of interim, or temporary, short-term financing for creating improvements on land. The applicant for a construction loan submits, for the lender's appraisal, the plans for the proposed project. The lender makes the loan based on the value resulting from a property appraisal and the construction plans and specifications. The loan contract specifies that disbursements be made as specified stages of construction are completed. Interest is not charged until the money is disbursed. Upon completion, the lender makes a final inspection and closes out the construction loan. The loan is converted to permanent, long-term financing. The loan may later be replaced by financing obtained by the property's buyer. A construction loan is one of the hardest loans to underwrite because of the lender's risk. The borrower is asking for funds for a project that does not exist. A lender strictly controls the terms of a construction loan so that the least amount of funds are paid to the mortgagor.
Lease Escalation Clauses: Porter's Wage Escalation Formula
A form of rent escalation for commercial tenants in buildings in New York City, Chicago, and other cities, the Porter's Wage Escalation Formula ties rent escalation to the wage rate of cleaning and maintenance personnel (classified as "porters"). The formula provides that the rent will increase a specific amount per square foot for a specified increase in the porter's hourly wage. The rational for the formula is that wage increases for this labor category closely track overall operating cost increases for the building. The formula is simple and the tenant does not have to inspect the property owner's books to confirm that the increase is correct.
Capital Gain on the Sale of Investment Property
A gain or loss realized from a sale or exchange of property usually is a recognized gain or loss for tax purposes. RECOGNIZED GAIN means that the taxpayer must pay taxes on the gain or profit. Recognized gains must be included in gross income. However, the gain or loss realized from certain exchanges of property is not recognized, and can be deferred for tax purposes. (Tax-deferred exchanges are discussed later.) In addition, a loss from the sale or other disposition of property held for personal use is not deductible, except in the case of casualty or theft. When real property is sold or exchanged, the capital gain which is subject to taxation is the difference between the AMOUNT REALIZED on the sale or exchange of the property and the ADJUSTED BASIS of the property: Amount Realized - Adjusted Basis --------------------- Capital Gain The amount realized from the sale or exchange is the total of all monies received (sales price) plus the fair market value of any additional property or services received (such as in a property exchange). The amount realized from the sale also includes any liabilities that are assumed by the buyer or against the property. Examples are real estate taxes or a mortgage. The second item in the formula is the adjusted basis. The basis is usually the original cost of the property. If a property is a gift, the basis is usually the same as the adjusted basis of the person who gifted the property. If the property is inherited, the fair market value at the date of the decedent's death is generally the basis.
Compared to coverage sold in the voluntary market, coverage offered through New York Property Insurance Underwriting Association (NYPIUA) is sold at _____.
A higher premium
An investment with a greater potential rate of return is likely to have _____.
A higher risk of loss
Jumbo loans typically have ____.
A larger down payment, a lower loan-to-value ratio, a higher interest rate
Deficiency Judgment: New York
A lender can obtain a deficiency judgment only if the fair market value of the property at the time of the foreclosure auction is less than the amount due the lender
How to Submit Letters of Intent
A letter of intent is forwarded to the sponsor or the sponsor's selling agent. The sponsor or selling agent prepares and revises the letter, if needed. The purchaser should show the letter of intent to an attorney.
Home Equity Loan
A loan against the equity in a home. It may be a first mortgage if the property is owned free and clear. It may be a second (junior) mortgage if there is an existing first mortgage. Usually, the interest rates are higher on a home equity loan because the loan is for a shorter term than for other mortgage types. Some home equity loans are term loans for which one pays interest only at first, and then the later payments are attributable to the principal. Home equity loans can exceed the purchase price of a house since it may appreciate in value. However, the IRS does not allow the homeowner to deduct interest on a loan amount that exceeds the original purchase price of the house plus improvements.
Mortgage
A loan that is a lien against the real property. The mortgage is a two-party document between the lender and borrower. The mortgage pledges a property as security for loan under certain terms and conditions.
Tax Assessor
A local government official who estimates the value of real property within a city, town, or village's boundaries. The tax assessor may be elected or appointed. An elected tax assessor serves for six years. Some municipalities have three-member elected or appointed assessment boards but a municipality may enact a local law to switch to one assessor. In New York, approximately 80 percent of the municipalities have one appointed assessor. Many municipalities in New York are currently sharing the same assessor under a coordinated assessing program. The assessor must maintain assessments at a uniform percentage of market value each year. This value is converted into an assessment. An assessment is one component in the computation of real property tax bills. The assessor must keep the physical description and value estimate of every parcel current.
Compared to other types of investment property, with unimproved land, the investor typically has to hold the property for _____.
A longer period of time
Depreciation
A loss in value from any cause. One estimates the loss in value by the difference in the present market value and the cost to build new. Depreciation may result from any or all of the following: - physical deterioration - functional obsolescence - economic obsolescence
In a gas-fired furnace, combustion takes place in _____.
A metal heat exchanger
Amortized Mortgage
A mortgage that provides for paying the debt by monthly payments of principal and interest, and in which the interest portion of the payments decreases as the principal portion increases
Counteroffer
A new offer substituted for the original offer. If the seller makes a counteroffer, no contract exists regarding the first offer. The counteroffer terminates the original offer. This is similar to rejection of the offer. The seller has now become the offeror, and the buyer is the offeree.
Assignment of Contract
A new party to the contract agrees to satisfy the former contracting party's obligation. If there is not a novation (new contract), the original parties may remain liable on the contract.
In a cooperative, the title to the land, buildings, and property rights is held by _____.
A not-for-profit corporation
Interest-only Note
A note may be an interest-only note. The interest is paid periodically until the note matures and the entire principal balance is paid at maturity.
Mortgages and Notes
A note without a mortgage means the note is unsecured. A mortgage without a note is meaningless since a mortgage is simply security for a note.
Breach of Contract
A party to a contract does not complete the contract and has no legal reason. Does not terminate the contract obligations of the breaching party (defaulting) party.
Under the Federal Fair Housing Act, an administrative law judge may impose which penalty for a "pattern of discrimination"?
A penalty of up to $50,000 Under the Federal Fair Housing Act, an administrative law judge may impose up to a $50,000 fine for a "pattern of discrimination."
Disability Definition
A person is considered an individual with a disability under the ADA if he/she meets one of the following three conditions: - He/She has a physical or mental impairment that substantially limits one or more major life activities; OR - He/She has a RECORD of a physical or mental impairment that substantially limits one or more major life activities; OR - He/She is REGARDED AS having a physical or mental impairment that substantially limits one or more major life activities A person is considered an individual with a disability if he/she has a physical or mental impairment that substantially limits one or more major life activities. - First, an impairment is considered a disability only if it SUBSTANTIALLY limits one or more major life activities. - Also, to be considered a disability, an impairment must affect one or more MAJOR LIFE ACTIVITIES A person is considered an individual with a disability if he/she has a RECORD of a physical or mental impairment that substantially limits one or more major life activities. Not only does the ADA cover individuals who currently have a disability, it also covers any individual who has a history of such a disability. By including "having a record of an impairment" in the definition of disability, the ADA prohibits discrimination against an individual because of a previous impairment. Therefore, an individual who has been misdiagnosed as having an emotional illness is covered by the ADA. (Emotional illness is considered a disability under the ADA.) A person is considered an individual with a disability if he/she is REGARDED AS having a physical or mental impairment that substantially limits one or more major life activities. According to this last provision, an individual is covered by the ADA if he/she is treated by others as having an impairment that substantially limits one or more major life activities. The ADA also prohibits discrimination against an individual because he/she has a relationship or association with an individual with a disability. The ADA does not provide a comprehensive list identifying all impairments that are considered disabilities. It would not be possible to develop a comprehensive list of disabilities because new disorders are continually being discovered and/or recognized.
Deficiency Judgment
A personal judgment levied against the borrower when a foreclosure sale does not produce sufficient funds to pay the mortgage debt in full a court order stating that the borrower still owes the lender money
Which of the following properties is not eligible for a like-kind, tax-deferred exchange?
A personal residence
The New York Property Insurance Underwriting Association (NYPIUA)
A pool of all insurance companies writing fire insurance in New York. It offers fire and extended coverage, as well as coverage for vandalism, malicious mischief, and sprinkler leakage to consumers who are unable to purchase this type of insurance from individual insurance companies. However, since coverage offered through NYPIUA is sold at a higher premium than coverage offered in the voluntary market (generally 20 percent more), the insurance agent or broker should try to obtain this insurance from a voluntary insurer.
Filtering Down
A process where middle- and upper-income households move to higher-valued properties. The properties in formerly middle- or upper-income neighborhoods decline in value allowing people with lower incomes to purchase these properties. If lenders do not make loans available to lower-income purchasers, these communities can rapidly deteriorate.
Covenant of Quiet Enjoyment
A promise that no one has superior or paramount title to that of the grantor; assures the grantee of peaceful possession without fear of being ousted by a person with a superior claim to the property.
Property Assessment
A property's ASSESSMENT is a percentage of its market value. The market value is the amount for which a property would sell under normal conditions. The ASSESSED VALUE of property, the value established for the purpose of determining taxes, is the market value multiplied by the assessment rate. For example, if the property assessment rate is 60 percent, and the market value of the property is $100,000, the assessed value is: $100,000 x 0.60 = $60,000 After the assessed value is established, the appropriate tax rate is applied to determine the property taxes.
A tenant who purchases a cooperative receives _____.
A proprietary lease to the unit
Alienation Clause
A provision in a mortgage requiring full payment of the debt upon the transfer of title to the property, due on sale. Prevents loan assumptions. allows a lender to declare the balance due if the borrower sells the property
Under the Human Rights Law, after a complaint is filed and an investigation is conducted, if there is cause for discrimination, the DHR proposes terms of conciliation. If conciliation is unsuccessful, there is _____.
A public hearing
Public Municipal Water Supply
A public water supply system can be water from a municipality such as a city, village, or town. The New York Sanitary Code: - Defines maximum contaminant levels - Establishes design criteria - Requires licensing of operators - Enforces the code to make sure the water meets - Federal standards When a contaminant level in the water is violated, the water supplier notifies NYSDOH. The media may issue a public notice. The water supplier submits a water sample for laboratory analysis and takes corrective measures.
Like-Kind Exchanges: Qualified Intermediary (QI)
A qualified intermediary accepts the funds from the exchange and handles the contracts. There are no licensing requirements for qualified intermediaries. In order to be qualified, an intermediary must not be "unqualified" according to the IRS Code. For example, the QI cannot be the taxpayer. In addition, the Code prohibits certain agents of the taxpayer from being qualified. The taxpayer's accountant, attorney, and real estate agent who have worked with the taxpayer within the prior two years are disqualified from serving as a qualified intermediary.
Certiorari Proceedings (Typically Commercial Property)
A real estate tax certiorari proceeding is the legal process by which a property owner can challenge the real estate tax assessment on his/her property. The proceeding, like the SCAR review, is an attempt to reduce the property's assessment and real estate taxes. A judicial review of an assessment is a proceeding brought under Article 7 of the Real Property Tax Law (RPTL). If a grievance complaint is not filed, then there cannot be a judicial review under Article 7. The proceeding begins by filing of a Notice of Petition in the county clerk's office in the county where the property is located. New York Supreme Court hears the case. The taxpayer must hire an attorney. This proceeding must be filed in State Supreme Court no later than 30 days after the date the final assessment roll is filed. Most Article 7 proceedings involve commercial property.
Refrigerant
A refrigerant is any substance that produces a cooling effect by absorbing heat as it vaporizes (disperses into the air). The refrigerant must be nontoxic and nonflammable. Today, the most common refrigerant used in air conditioners is a substance called R-410A, known as Puron. Freon (R-22), which was widely used as a refrigerant in the past, is no longer manufactured because it is a hydrochlorofluorocarbon (HCFC) and was phased out by Federal mandate.
Environmental Impact Statement
A report that describes and analyzes a proposed action that may have an important effect on the environment. The SEQR process uses the EIS to consider ways to avoid and reduce negative environmental impacts and to consider an alternative. There is a minimum 30-day comment period, and a public hearing. The lead agency reviews all comments. The final environmental impact statement includes all material relating to the action.
Residential Market Analysis
A residential market analysis is a study of the factors affecting a property's value. The analysis views the property as it stands on its own and in light of the conditions in the marketplace. These conditions determine how the agent should market the property. The more knowledge a licensee has of these conditions, the better his/her chances of selling the property in an appropriate period at or near market value.
Which of the following types of property is classified as non-homestead property?
A retail store
Which of the following is NOT an example of a mixed-use building?
A retail strip mall
Secondary Mortgage Market: Sale of a Mortgage
A sale of a mortgage by the lender does not affect the borrower's rights or obligations. The original mortgagor may not be aware that the mortgage is sold because the original lending institution often continues to service the loan. The mortgagor continues to make mortgage payments to the same lending institution. If the purchaser of the mortgage prefers to collect the mortgage payments directly, the original lender notifies the mortgagor to make payments to the new lender at a different address.
The Salesperson's Role: Competence
A salesperson should be able to handle all aspects of marketing competently. At the onset, the salesperson presents a well-researched listing presentation to the sellers with appropriate examples from the marketplace. The salesperson should be prepared with justifiable and appropriate data. He/She should be able to verify the data with knowledge of the marketed area and the nature of the competition. If the client has questions that a salesperson cannot answer, the salesperson will look toward his/her broker for guidance.
Freddie Mac Guidelines: Employment History
A second factor in evaluating the borrower's income is his/her employment record. The borrower's employment history for the prior two years is verified. Generally, the longer a borrower has been continuously employed by the same employer, the more favorable the record. Frequent changes in employment are generally perceived as a negative factor, unless they demonstrate a pattern of improvement in employment. The anticipated stability of continued employment is also a factor, so the identity and stability of the employer may also be considered.
A horizontal base plate that serves as the foundation for the wall system is also called a _____.
A sole plate
Sale of a Primary/Principal Residence
A special exclusion in the IRS law gives home sellers a tax break on capital gains when selling their home. Home sellers may be eligible to exclude up $250,000 if single, or up to $500,000 if married filing jointly, of the capital gain on the sale of the residence. To claim the entire exclusion, the home seller must have owned and resided in the home for at least two years of the last five years before the sale of the residence. If eligible for the exclusion, it may be claimed once every two years. If the home is sold because of a change in employment, health, or other unforeseen event, home sellers may be eligible to claim a partial exclusion of capital gains even if they did not live in the home for a total of two years of the last five before the sale. The portion of the partial exclusion is figured based on how long the home sellers lived in and owned the home. This exclusion relates to the gain only, not to the gross sale price. A single taxpayer, who sells his/her home for $725,000 after paying $560,000 five years ago, has a gain of $165,000, which may be entirely excluded from his/her income. Those taxpayers with gains totaling over $250,000 for singles and $500,000 for married couples must pay the capital gains tax. Gains from real estate are reported on Schedule D, Capital Gains and Losses, of the income tax return.
New Development: Special Risks
A special risk involved in purchasing a new development is that what the sponsor promises is not necessarily what the purchaser receives. Purchasers and the agents who represent them should not rely on advertising brochures, verbal statements from salespeople representing the condominium, pictures, and architect's renderings alone. For instance, in most developments, sponsors install minimal but adequate landscaping, and when purchasers want an upgrade of this item they must pay for it themselves.
Primary Residency v. Subletting Issues: Sponsor Shares, Holder of Unsold Shares, and Sold Shares
A sponsor who owns the shares allocated to an apartment may be permitted under the bylaws or rules to sublet or rent a unit, even though a unit owner cannot. In addition, when a purchaser buys from a sponsor, there is no board approval. The rules for sponsor subletting are generally a part of the offering plan. By law, the sponsor of a cooperative generally holds the UNSOLD shares allotted for the units in the cooperative that are not purchased. If a building converts to a cooperative, a number of units may be available. A buyer may purchase the shares allocated to the unit directly from the sponsor. A sponsor may hold SOLD shares when there is a foreclosure on a unit and the owner had to forfeit his/her shares.
Standard Homeowners Policy Coverage
A standard homeowner's policy typically includes $100,000 worth of liability coverage. But most insurance professionals and mortgage lenders advise or require $300,000 to $500,000 in liability coverage.
The Truth-In-Lending Act requires that the lender give the borrower _____.
A statement disclosing credit costs
Steam System
A steam system consists of a boiler, where steam is produced, and a system of pipes that convey steam to radiators, convectors, or other heating elements. Steam can produce a large amount of heat with a small amount of circulating fluid. Steam heat is only found in older homes, as it ceased being installed in the mid-1990s.
Land divided into lots for development purposes is called _____.
A subdivision
Which type of impairment would be considered a disability?
A substantially limiting impairment
Lease Escalation Clauses: Real Property Tax Clause
A tax escalation clause in a commercial lease is a provision in a lease for the tenant to pay for any increase in real estate taxes imposed on the leased property. In addition, some leases include a rent escalation clause for other types of owner-expense increases. This lease clause allows a property owner to increase rent at a specified future date.
Taxing Unit or Jurisdiction
A taxing unit may be a county, city, town, or village.
Sales Leaseback Financing
A transaction in which a property owner sells a property to an investor who immediately leases back the property to the seller as agreed in the sales contract. A business property owner who wishes to free up capital invested in the real estate and retain possession and control of the property under a lease uses this transaction. The sale-leaseback also offers an alternative to a mortgage. Whereas a mortgage might provide 70 percent or 80 percent, a sale-leaseback provides 100 percent financing. The purchaser-investor obtains the income tax benefits of ownership and the security of owning the property. The seller pays rent, which may include real estate taxes, insurance, and maintenance, for a fixed, predetermined number of years.
A support member constructed in a factory by nailing a number of smaller members together in triangular patterns to provide maximum strength is called a _____.
A truss
Shared Equity Mortgage
A type of participation mortgage With a shared equity loan (also known as a shared appreciation loan), the buyer receives favorable loan terms from the lender. In exchange, the lender receives a portion of the appreciation from the property, usually when the property is sold. In other types of participation mortgages, the lender on a commercial property participates in the profits generated by the property. The borrower agrees to the lender's participation in the net income.
Wraparound Mortgage
A type of seller financing It is a subordinate mortgage that includes the same principal obligation secured by a superior mortgage against the same property. That is, the seller makes a loan to the buyer. A new loan is created, but the existing loan stays in effect. This mortgage "wraps around" the existing first mortgage that stays in place. The seller of the property makes a wraparound loan to the buyer, who takes title to the property subject to the existing first mortgage. The seller continues to make the payments on the first mortgage, and the buyer makes the payments to the seller on the wraparound.
Purchase Money Mortgage
A type of seller financing, is a mortgage given by a buyer to the seller to cover all or part of the purchase price. The seller (grantor) becomes the mortgagee and the buyer (grantee) becomes the mortgagor. The seller conveys title to the buyer, who immediately pledges it as security for all or part of the purchase price. The seller is financing the sale of his/her property for the buyer in the amount of the purchase money mortgage. May be used as a downpayment. The purchase money mortgage may be a first mortgage, a typical junior mortgage, or a junior mortgage in the form of a wraparound.
Lease Clauses: Use Clause
A use clause defines how the tenant can and cannot use the space. A tenant will want the permitted use clause to be as broad as possible. A property owner will generally want to keep it narrow, in order to maintain as much control as possible. A tenant may have problems if the use clause is not somewhat flexible.
As-Of-Right Zoning
A use of land that is permitted as a principal use in a zoning district. In a single-family district, the construction of a single-family home is an as-of-right use of the lot.
Enforceable Contract
A valid contract that can be enforced in a court of law.
Vapor barrier
A vapor barrier on the insulation protects building envelope materials that could absorb moisture. The barrier is applied to the warm inside of the exterior walls. The vapor barrier prevents the warm interior air from mixing with the cold exterior air and forming condensation within the wall. Should condensation occur, the structure, in effect, "sweats" and causes the wood framing members to rot
VA Guaranteed Loan Amount
A veteran's "entitlement" is the amount of guarantee he/she is eligible to receive on a guaranteed loan. The maximum entitlement is $104,250 (the maximum guarantee). There is no maximum amount for a VA loan set by law. In general, however, lenders will not loan more than four times the guaranteed amount, or $417,000 (4 x $104,250). The veteran may buy a home for more than $417,000 with a VA loan, but the lender will require a down payment, usually 25 percent of the amount above $417,000. Qualifying applicants can apply for a regular VA Loan with a $0 down payment up to a certain county loan limit, which in most upstate counties of New York is $417,000, and $625,500 in downstate counties of New York.
Village Planning Board
A village planning board consists of five or seven members. The village mayor appoints the board members subject to the approval of the board of trustees. Members are appointed to terms equal in years to the number of members on the board.
New York On-Site Well Requirements
A well utilizes groundwater that is water from underground. A private well may serve one home in a rural area. The New York State Department of Health (NYSDOH) furnishes guidelines for well construction. Community wells refer to two or more wells that may serve several different residences. If a community well serves 25 or more people or it has more than five service connections (five homes, for example), it is regulated by NYSDOH and the New York State Department of Environmental Conservation (NYSDEC). In New York City, all of the water supply is public except for a few private wells in Staten Island. Outside of New York City, millions of people depend on individual well water. NYSDOH furnishes guidelines for the proper location, construction, and protection of well water. If guidelines are not followed or an area becomes heavily populated, the sanitary quality of the well water can be compromised.
Under New York law, insurance companies must disclose which of the following?
A windstorm deductible
Wraparound Mortgage: Cautions
A wraparound mortgage may be used with any existing seller's first mortgage that does not have an alienation (due on sale) clause. If the seller's mortgage has such a clause, a wraparound mortgage may only be used with permission of the first mortgage lender. Some mortgages include a clause that allows the lender to accelerate payments (call the note due and payable) if a second mortgage is placed on the property. The parties should make sure that the seller's first mortgage does not include such a clause before using a wraparound mortgage.
Binder
A written outline of the scope of the real estate transaction. All the parties to the transaction may sign it. In certain areas of New York, licensees use a written document for the purchase and sale of real property does not always contain all of the essential elements of a valid contract. It creates a framework for the contract. May be a valid contract and may be enforceable in court. It may set up a time for the contract to be written and signed but may lack specifics, such as mortgage contingencies. It might contain a checklist of contingencies and other items. After the parties sign the binder, an attorney draws a sales contract.
According to the _____, places open to the public cannot treat individuals differently because of disability.
ADA
According to Regulation Z, any advertising about credit may state the _____ without triggering additional disclosure.
APR; The only specific item that may be stated in the advertisement without making a full disclosure is the annual percentage rate (spelled out, not abbreviated as APR).
The clause in a note that enables the lender to declare the entire balance immediately due and payable if the borrower is in default is the _____ clause.
Acceleration Clause
Uses of property that are incidental or subordinate to the main use of the property are called _____ uses.
Accessory uses
Implied Warranties on the Sale of a New Home
According to Article 36-B of the New York General Business Law, implied in all contracts of sale for new housing are the following warranties: - a one-year builder's warranty against defects due to the builder's failure to construct in a skillful manner - a two-year warranty for all plumbing, electrical, heating, cooling and ventilation systems due to improper installation by the builder - a six-year warranty covering material defects
Real property that is subject to assessment includes _____.
All real property
80-20 Rule Concerning Passive Income Activities
According to IRS rules, a passive investment activity can be a rental activity. The IRS regulation, known as the 80-20 rule, states that for a shareholder in a cooperative to qualify for the same tax benefits available to other residential property owners, at least 80% of the cooperative's gross revenues must be from its shareholders. A recent provision in the Mortgage Debt Forgiveness Act of 2010 (which has been extended) expanded the rule favorably to the cooperative to also include other qualifying choices under the 80-20 rule. They include 80 percent of the total square footage of the building that is used for residential purposes or 90 percent of the costs of operating the building that are for the tenant stockholders' benefit. The tax benefits for following the 80-20 include deducting mortgage interest and a portion of the interest on the underlying cooperative mortgage on the taxpayer's income tax return. The revenues, including maintenance and assessment charges, are known as "good income" according to the rule. Revenues from other sources, such as rent from commercial businesses that use a portion of a building, are known as "bad income." The rule does not apply to condominiums. The creation of a condop allows property owners like Sal, in the previous example, to collect a sizable portion of rent from a non-shareholder building tenant and not violate the 80-20 rule.
Use of IRA Funds without Penalty
According to a rule called the "Age 59½ Rule," a taxpayer must pay a 10% additional tax on the distribution of any assets from a traditional IRA made before the age of 59½. However, there are some exceptions to this rule. One of these exceptions applies to home ownership. The "Age 59½ Rule" allows first-time homebuyers to use IRA distributions to fund up to $10,000 ($20,000 for couples) of their new home cost. They do not have to pay the 10% early distribution penalty. A first-time homebuyer may be the individual holding the IRA or a spouse, child, grandchild, or parent of the individual or spouse. To qualify, a buyer must have had no present ownership interest in a principal residence during the two-year period ending on the date they acquire the new residence. The acquisition date is the date of transfer of title of the property. Special rules apply to armed forces members or owners of property outside the U.S. IRA disbursements can be used to pay the costs of acquiring, constructing, or improving a residence. The disbursements can be used to pay any reasonable closing costs. The amount withdrawn from the IRA must be used to pay qualified acquisition costs within 120 days of the date of withdrawal.
Maintaining a Fair Housing Office: Record Keeping
Activities such as greeting people, obtaining listings, holding open houses, record keeping, and follow-up should ensure that each individual receives the same professional treatment. The emphasis should be on housing needs and wants. The discussion should be about the price, size, special features, and location of a property. The agent should determine if the customer knows his/her financial capabilities. Many brokers have forms for phone conversations, in-person interviews and conversations, open-house activity, listing and contract presentation with sellers and prospective purchasers. These documents are important, should there be a discrimination charge or lawsuit. Various forms, such as those provided by NAR can be used to document certain customer information, needs and wants for housing. A copy of the NAR Needs and Wants Checklist can be found in your course handouts. Discussion should be limited to housing availability, methods of finance and financial qualification, and items such as schools, hospitals, transportation, or employment.
The original cost or other basis, plus certain additions, such as improvements, minus certain deductions, such as deprecation and casualty losses, is called the _____.
Adjusted basis
When real property is sold, the capital gain that is subject to taxation is the difference between the amount realized and the _____ of the property.
Adjusted basis
Exemptions to Cancellation and Non-Renewal of a Policy
After a policy has been in effect for 60 days, it may not be cancelled or non-renewed for a three-year period, except for following reasons: - nonpayment of premium (however, if payment is received by the company within 15 days of the mailing of the cancellation notice, the policy is not cancelled) - conviction of a crime arising out of acts increasing the hazard insured against - discovery of fraud or material misrepresentation in obtaining the policy or in the presentation of a claim under the policy - discovery of willful or reckless acts of omissions increasing the hazard insured against physical changes in the property insured occurring after issuance or last annual anniversary date of the policy that cause the property to become uninsurable - a ruling by the Superintendent of Insurance that the policy's continuation violates the insurance law
Equity of Redemption
After default, and up to the time a foreclosure sale is held, the borrower has an equitable right to redeem his/her property by paying the principal amount of the debt, accrued interest, and lender costs in initiating the foreclosure.
Protesting Assessments: Final Assessment Roll
After grievances are filed and the Board of Assessment Review renders its decision, the FINAL ASSESSMENT ROLL is filed. In most TOWNS, the final assessment roll is filed by July 1st, with the following exceptions: In towns in SUFFOLK COUNTY, it must be filed no later than September 1st. In towns in WESTCHESTER COUNTY, it must be filed no later than September 15th. In towns in ERIE and NASSAU COUNTIES, it must be filed no later than April 1st. In CITIES, the date for filing of final assessment rolls varies. It is based upon provisions of each city's charter. The assessor's office or the city clerk has this information. In most VILLAGES, final assessment rolls must be filed by April 1. Some village assessment calendars vary. The village clerk's office has this information.
Residential Market Analysis: Market Value Range
After researching the market, a price range for the subject property is determined. A market analysis may consist of a high, middle, and low price. In a higher-priced property, the span or price range may be greater than that of a lower-priced property. A price is usually determined for the period that the property will remain on the market. The agent can offer the seller a choice. For example, a property will sell more quickly if the property price is in the low end of the price range. The property will sell more slowly if the property price is on the high end. The agent should continuously evaluate and adjust the price to ensure continued market activity. If the sellers are reluctant to accept a suggested price range after a well-researched market analysis, the licensee should consider refusing to market the property. A listing that does not take into account the market conditions is unlikely to produce a timely sale.
Small Claims Assessment Reviews (Residential Only): Hearing Procedure
After the petition is filed, the assessment review clerk in state supreme court assigns a hearing officer to decide the case. The hearing is held within 45 days of the final date for filing the petitions. Licensed real estate brokers and licensed appraisers may qualify as SCAR hearing officers. Training is required.
In addition to federal law, protected classes under the New York Human Rights Law include:
Age and marital status
Margaret is purchasing a cooperative apartment in an eight-unit building built in 1972. She is represented by agent Tammi. Tammi has also negotiated a mortgage for Margaret as a mortgage broker. Tammi need NOT present Margaret with which of the following documents:
Agency disclosure form
New York City Commission on Human Rights: Occupancy
Alienage or citizenship status is the citizenship of any person or the immigration status of any person who is not a citizen or national of the United States. Partnership status means the status of being in a domestic partnership. Lawful occupation means any lawful trade, occupation, profession, or specialization. People may not be denied housing based on what they lawfully do to earn a living. Lawful source of income refers to income derived from social security or any form of federal, state, or local public or housing assistance, including Section 8 vouchers. Also, in NYC, the class of disability includes pregnancy.
The due on sale clause is the same thing as the _____ clause.
Alienation Clause
Under the New York Mortgage Foreclosure Law of 2009, the 90-day pre-foreclosure notice provision applies to _____.
All New York home loans
Conventional Loans: Down Payment
All conventional loans require that a down payment be made. Typically, the minimum down payment required on a conventional loan is 20 percent (80 percent loan) without private mortgage insurance and 5 percent (95 percent loan) with private mortgage insurance (covered in the next screen). The down payment on any conventional loan is determined by the amount of the loan that the lender approves. From the borrower's standpoint, the HIGHER the loan-to-value ratio, the more favorable the loan, since a higher LTV means a LOWER down payment.
Ventilation
All ventilation systems have a central exhaust fan and ducts to remove stale air. This fan is usually installed in the basement or attic, keeping fan noise away from the living space. Systems differ in how fresh air is introduced to replace exhausted air and depend upon the structure's heating or air-cooling system. The systems differ in how fresh air is circulated throughout the structure. Additional exhaust fans may be located in the kitchen, bathrooms, and other locations where pollutant concentrations are highest.
Reverse Annuity Mortgage
Allows a homeowner to borrow against the equity in his/her home. Reverse annuity loans are often used by retirees who have built up equity in their homes but need additional income to meet living expenses. Under this type of mortgage, the lender makes payments to the borrower for a contracted time. Upon the death of the homeowner or the sale of the property, the lender recaptures the equity or amount paid during the mortgage term. Closing costs and finance fees for taking out a reverse annuity mortgage may be high— sometimes 5 to 6 percent of the property's value. If it is a short-term loan, the loan rate may be high. It also must be a first mortgage on the house, so other debts must be paid off first. Failure to pay property taxes may put the loan in default, and the lender may demand immediate repayment.
Right of First Refusal
Allows the holder a right to purchase (or lease) a property if the seller decides to sell and another purchaser (or lessee) comes along. Commercial tenants may desire a right of first refusal on additional leasable space to allow the business to expand into the additional space before it is leased to another. This option right may be at a different rental rate than originally agreed. In a right of first refusal, the owner must have first put the property up for sale or lease. Second, he/she must have an offer from another party. The holder of the right of first refusal can either match the offer from this other third party or forfeit his/her claim to purchase or lease the property. At this point, the owner may sell or lease the property to the third party.
New York's Four Protected Classes (Housing)
Along with the groups protected under federal law, New York has four more protected classes that affect housing: - age--persons 18 years or older - marital status--defined as individuals who are married or divorced - sexual orientation--the Sexual Orientation Non-Discrimination Act (SONDA) (2002) added sexual orientation as a protected class under the Human Rights Law - military status--defined as a person's participation in the U.S. or state armed services
The Income Approach
Also called appraisal by capitalization, is the primary method to estimate the present value of properties that produce income, such as office buildings and apartment buildings. With the income approach, the value of the property is estimated by converting net annual income into an indication of present value by application of a capitalization rate. The capitalization, or cap rate, is the rate that other investors are achieving on like investments in the market area. The income approach is based on a process known as capitalization.
Square Footage: Add-on Factors
Also known as load factor, tells you how much bigger the rentable area is than the usable area. The add-on factor is calculated as: (rentable area - usable area) ÷ usable area Again, the tenant pays for this add-on space even though it is used as a common area.
The document that describes the terms under which a cooperative gives permission to a shareholder before making any changes or improvements to the unit the shareholder occupies is a(n) _____.
Alteration agreement
Secondary Financing: Conditions
Although individual lender's policies may vary, the borrower is usually allowed to use secondary financing if the following conditions are met: - At least 10 percent of the sales price must be paid by the borrower in cash. - The second mortgage must not exceed the amount of cash invested by the borrower. In practice, this means that only loans with an LTV of 80 percent or lower may have secondary financing along with them.
Although landmark preservation ordinances are a type of zoning ordinance, they are directed at _____.
Although landmark preservation ordinances are a type of zoning ordinance, they are directed at preserving buildings rather than the use of buildings on the land.
Historic Preservation/Landmark Commissions: Zoning
Although landmark preservation ordinances are a type of zoning ordinance, they are directed at preserving buildings rather than the use of buildings on the land. Therefore, these regulations are different from traditional zoning. An owner, other than a charitable organization, may be prevented from tearing down a structure that is designated a historic landmark. To do so, he/she must show that the property cannot be used for any viable economic purpose without destroying its value as a landmark. Under the General Municipal Law, a municipality cannot require a landowner to restore and rehabilitate a historic building.
Mortgage Covenants
Always contains a covenant specifying that the mortgagor promises to maintain a good and marketable title to the property pledged to secure payment of the note.
When real property is sold, the capital gain that is subject to taxation is the difference between the adjusted basis of the property and the _____.
Amount realized
Alteration Agreements
An ALTERATION AGREEMENT describes the terms under which the cooperative gives permission to a shareholder before making any changes or improvements to the unit the shareholder occupies. The alteration agreement is generally a separate agreement between the cooperative corporation and the tenant shareholder. The New York City Bar Association has developed a model form of Alteration Agreement for Residential Cooperatives.
Assessment Roll
An ASSESSMENT ROLL is a list of the assessed value of all real property in a taxing district. Once the roll is produced, local officials responsible for budgets can determine tax rates (as described later).
Operating Statement
An OPERATING STATEMENT is a statement of income and expenses for a property for a specific period of time. An operating statement for a property includes: - income - vacancy rates - expenses An operating statement is also known as an income and expense statement.
Offer and Acceptance
An accepted sales contract.
Regulation Z: Advertising Downpayment Disclosures
An advertisement mentioning a down payment "triggers" the requirement to make a complete disclosure of all of the following credit terms: - purchase price of the property - annual percentage rate - amount of down payment - amount of each payment, date when each payment is due, and total number of payments over the mortgage term If the annual percentage rate is not a fixed rate but a variable rate, the ad must state the variable rate.
Covenant
An agreement or promise between two or more parties in a lease
Letter of Intent
An agreement to purchase a condominium. This is the same as a cooperative subscription agreement. The letter of intent is a written offer to reserve a specific unit that may be under construction. Certain sections of the letter may be non-binding when written, such as the unit's final price. Generally, the purchase agreement is drawn from the letter of intent. Tenants in a building undergoing conversion also use a letter of intent. The letter is a statement that the tenant wishes to buy the apartment when the conversion is complete.
Maintaining a Fair Housing Office: Equal Housing Opportunity Poster
An amendment to the Fair Housing Act of 1968 requires real estate offices to prominently display the HUD Equal Housing Opportunity poster. Upon investigation of a discrimination complaint, failure to display the poster could be proof of noncompliance with federal law.
An amendment to the NY Real Property Law requires every residential lease to provide notice as to the existence or non-existence of a _____.
An amendment to the NY Real Property Law that took effect in December 2014 requires that every residential lease provide conspicuous notice in boldface type as to the existence or non-existence of a maintained and operative sprinkler system in the leased premises.
Amortized Mortgage Loan
An amortized mortgage is one in which both principal and interest are paid during the term of the loan. A portion of each payment on an amortized mortgage is applied first to the payment of interest. The remainder reduces the principal.
Comparative Market Analysis (CMA)
An analysis of the competition in the marketplace that a property will face upon sale attempts. Real estate agents perform a CMA to derive a market value range for a property. The CMA is generally presented to the seller at a listing of the property. The agent and seller discuss the agent's findings and the seller agrees to a listing price for the property. Although a CMA is an opinion of value, this procedure is not an appraisal. A CMA considers other properties currently on the market, as well as properties that have recently sold, and in many cases, expired or withdrawn listings. A CMA is similar in concept to the sales comparison approach, which is one approach to valuing property (described in more detail elsewhere). This is because both methods are a comparison of properties. However, the analysis and techniques to arrive at a value are different.
Treasurer
An elected official that collects revenue and keeps tax records. In the case of village taxes. The village board of trustees may pass a resolution allowing the village clerk instead of the treasurer to collect the taxes.
A seller tells the licensee she's concerned about what the neighbors will say or do if an Iranian family moves into her home. This is _____.
An example of discrimination
Placing tenants with disabilities in a separate building is _____
An example of steering
Umbrella Policies
An excess liability policy, providing additional coverage above that offered by primary policies. If property owners have assets worth more than $300,000 to $500,000, they may want personal umbrella coverage. This insurance kicks in once a homeowner's or automobile coverage is exhausted. It is extra protection. In addition, if an insured purchases a personal umbrella policy with liability limits of $1,000,000 or higher covering homeowner's and automobile liability policies, it might be subject to a multi-policy discount. The typical cost of a $1 million personal umbrella can be $200 to $300 or more annually.
Protesting Assessments: Tentative Assessment Roll
An important date in the assessment grievance process is the "tentative roll date." The assessor must file the TENTATIVE ASSESSMENT ROLL that he/she uses for taxing purposes by that date. For most towns, the tentative roll date is May 1. This date varies among cities, villages, and some towns. The assessor's office or the municipal clerk of the municipality can furnish the date. Property owners in New York may meet with their local assessors to discuss their property assessment at any time in an informal meeting. If a property owner wishes to protest his/her assessment, he/she must file a standard complaint form with the board of assessment review for the municipality. Complaint forms (RP-524) are available at the assessor's office, the real property tax service agency of the county, or the Office of Real Property Tax Services (ORPTS) website. The completed complaint must be mailed or delivered to the assessor on or before the first day the board of assessment review (BAR) meets to hear complaints (also known as "grievance day").
Which of the following is NOT considered to be part of a borrower's stable monthly income?
An inheritance
Fraud
An intentional false statement of a material fact or intentionally withholding material information
A "black book" refers to _____.
An offering plan
Lease with Option to Buy
An option is often tied to a lease. In this case, there are additional terms. All or part of the rent may apply toward the property's purchase price. The option may expire at the lease expiration. The lease option includes the option expiration date and the transfer date. A breach of the lease may cancel the option. This breach may forfeit all credits toward the purchase price.
An owner, other than a charitable organization, may be prevented from tearing down a structure that is _____.
An owner, other than a charitable organization, may be prevented from tearing down a structure that is designated a historic landmark.
Innocent Misrepresentation
An unintentional false statement or omission of a material fact
A major department store or supermarket in a regional mall is called a(n) _____ store.
Anchor store ANCHOR TENANTS are major stores such as large department stores, supermarkets, clothing stores, and furniture stores.
Fair Housing Amendments Act of 1988: Families with Children
Another added protected class is FAMILIAL STATUS. 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 - the designee of the parent or legal custodian, with the parent or custodian's written permission Familial status protection also applies to pregnant women and anyone securing legal custody of a child under 18. Some landlords try to circumvent the anti-discrimination laws against families by setting unreasonably low occupancy limits, such as only two people for a two-bedroom unit. This is illegal because it serves to exclude families. Federal law, through an opinion letter by HUD, has established minimum occupancy standards that regulate how low an occupancy can go and still be legal. In general, landlords must allow at least two persons per bedroom. There are some limits on the obligations of property owners when it comes to dealing with children. First, owners of covered rental property may implement rules for use of associated facilities such as exercise rooms, swimming pools, saunas, etc., that limit use by children. However, these rules must be based on safety or health considerations.
Freddie Mac Guidelines: Employment History (Business Enterprise)
Another factor to consider when evaluating the borrower's income is if the borrower's income comes from a business enterprise. The lender must know if the operation is organized through a sole proprietorship, partnership, or corporation: - If the business is a sole proprietorship and the borrower is the owner, the income is controlled by the borrower. - If the business is a partnership, other parties have an income interest. The business income is not under the full control of the borrower. A corporate enterprise is controlled by a majority vote of the stockholders. If the borrower receives no salary or dividends, then the borrower's income is questionable.
Heat Pumps
Another type of heating and cooling system is the heat pump. Heat pumps are distinguished from one another according to how they draw on the heat source Ground-source heat pumps draw on the consistent temperature of the ground to bring heating and cooling into the structure. Air source heat pumps extract heat from the outside, even in moderately cold weather, and transfer the heat into the building. This heat transfer cycle is reversed in the warmer months to extract heat from the interior of a building and transfer it to the outdoors, and produce air conditioning (cooling). In most of New York, ground-source heat pumps are more efficient than air-source heat pumps.
If an attorney makes changes to a contract that the real estate agent prepares, what is necessary?
Any changes to a contract must be initialed by all parties.
Jumbo Mortgages: Financing Requirements
Applicants for conventional mortgages generally require credit scores of 620 or higher. For jumbo mortgagees, if the mortgage is sold to Fannie Mae or Freddie Mac, borrowers need credit scores above 660. Borrowers financing more than 75 percent of the purchase price must score more than 700. Although FHA uses different guidelines for jumbo loans in high-priced areas, home prices may still exceed the conforming loan limit.
New York Mortgage Banker License and Requirements: Financial Statements
Applicants must submit audited corporate financial statements for the past three years and unaudited financial statements for the most recent quarter. Also required are personal financial statements for control persons, the three most senior executive officers and, if different from these individuals, the qualifier. If there are only two executive officers, the compliance officer must substitute for the third executive officer.
Members of a town planning board are _____.
Appointed by the town board
An unbiased estimate of the nature, quality, value, or utility of an interest of real estate, based on factual data as of a certain date, is a(n) _____.
Appraisal
An unbiased estimate of the nature, quality, value, or utility, based on factual data, of an interest in or aspect of identified real estate and related personalty as of a certain date is called a(n) _____.
Appraisal
What is a value estimate of real property?
Appraisal of a single family home
If calculated in arrears, a monthly payment due May 1 includes interest for _____.
April
The water supply system and the drainage system _____ linked to one another.
Are not linked to one another The water supply and drainage systems are separated from each other to prevent contamination.
Permission to use the land that is not normally allowed by the dimensional or physical requirements of the current zoning ordinance is called a(n) _____ variance.
Area variance
A transaction in which a buyer and seller are not related and are considered equal in terms of bargaining power is referred to as a(n) _____ transaction.
Arm's length
In New York, wetlands are protected by what legislation passed in 1975?
Article 24 of the Environmental Conservation Law, the Freshwater Wetlands Act
f the request for an exception to a zoning ordinance is denied, the property owner may petition the New York Supreme Court through a(n) _____.
Article 78 proceeding
Square Footage: Common Areas
As an alternative to including common areas in the rentable area, a tenant may be charged for common area maintenance or CAM. Common area maintenance or CAM charges are amounts charged to tenants for expenses to maintain hallways, restrooms, parking lots, and other mutually used areas. Because of competition in the commercial market place, common-area maintenance (CAM) charges are under increasing scrutiny by tenants. This scrutiny has forced building owners to be competitive and pay for some of these charges. Tenants are also asking property owners to document the charges and show them exactly how their usage is tracked. One of the negotiating points in a commercial lease is the charges, if any, that are assessed for the common areas and their add-on cost to the lease (discussed previously).
Lease Escalation Clauses: Operating Stop/Tax Stop
As you learned earlier, with an expense stop lease, the property owner pays a predetermined amount for property expenses, and the tenant pays expenses above that amount. An expense stop, also called a dollar stop or full stop, is a dollar limit above which the tenant agrees to pay operating expenses. An estimated dollar amount (dollar stop) for operating expenses and insurance and another for real estate taxes are determined at the beginning of the lease. The actual expenditure for the year is compared to the dollar stop. Any difference between the actual cost and the dollar stop is debited or credited to the tenant on a pro-rata basis. The estimated expenses determine the expense stop for the first operating year. With this arrangement, the tenant pays any increased expenses over the lease term.
A use of land that is permitted as a principal use in a zoning district is _____.
As-of-right zoning
In general, interest earned on a security deposit belongs to _____.
Aside from a 1 percent administrative fee that the landlord may retain, interest on a security deposit belongs to the tenant.
Consumer Credit Protection Act: Disclosure
At the time of a loan application, or within three days thereafter, the lender must provide the borrower with a disclosure statement. The disclosure statement must specify the finance charges. In addition, the disclosure must state the true, effective, annual interest rate on a loan, called the annual percentage rate (APR). The APR rate may be higher than the interest as expressed in the mortgage. For example, when certain fees and discount points charged by the lender are subtracted from the loan amount, the result is an increase in the true interest rate. Because of the subtraction, the borrower receives a smaller loan amount and pays interest on a larger amount. The effect is to increase the interest rate.
Blockbusting
BLOCKBUSTING is also illegal under fair housing laws. Blockbusting occurs when real estate salespersons induce owners to list property for sale or rent by telling them that persons of a particular race, color, national origin, sex, religion, handicap, familial status, or other protected class are moving into the area. The agent represents either directly or indirectly that this change will result in a lowering of property values, an increase in criminal or anti-social behavior, or a decline in the quality of schools or other facilities. Blockbusting also occurs when real estate firms sell a home in a neighborhood to a person from one of the protected classes with the intent to cause property owners to panic and place their property for sale at reduced prices.
The most frequent contaminant in the water supply, which causes the most illnesses, is _____.
Bacteria
Hot Water System
Baseboard convectors are the most common heating medium in newer homes. A convector is a heat-emitting unit. The heat is produced by the convective movement of air around a heated metal surface. Older homes have cased convectors that look like radiators or cast iron radiators. The more common type is the finned tube convectors that run along the baseboards. One or more walls may have convectors or radiators, depending on a room's size and shape.
Coverage protection against fire, lightning, explosion, windstorm or hail, smoke, aircraft or vehicles, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action is _____.
Basic form coverage
Temporary wood members on posts that form an L-shape outside the corners of the foundation are _____.
Batter boards
Covenants, conditions, and restrictions, also known as CC and Rs, must _____.
Be reasonable and benefit all property owners
Post and Beam Framing
Beams that support the building rest on posts or columns rather than bearing walls. With post-and-beam framing, the members are much larger than ordinary studs and may be 4" or 6" inches square. The larger posts can be placed several feet apart instead of 16" or 24" on center. Like balloon framing, this type of framing is seldom used in residential construction.
Due Diligence Issues
Because a prospective tenant shareholder owns a piece of the cooperative corporation, he/she should know the financial health of the cooperative before purchase. One of the most important issues in deciding whether a cooperative (or condominium) apartment is a wise investment is to know the financial status of the building itself. An important document that potential buyers should review is the annual financial statement. This review, known as DUE DILIGENCE, should be performed by an attorney or an accountant before the purchaser signs a contract.
Legal Responsibilities of the Office and Individual Agent
Because of the strict rules, penalties, and fines for discriminatory behavior, real estate brokers and agents must be vigilant about not violating fair housing laws. Legal fees, fines, hearings, and court appearances can have a very negative impact on the cash flow and operation of the brokerage firm. The reputation of the firm is also at stake. Errors and omissions policies, which are policies that cover liability issues for professionals including real estate brokers, may not cover fair housing issues.
Square Footage: Loss Factors
Because rentable square footage often includes the tenant's prorated share of the common areas, usable square footage is typically less than the rentable square footage. One way of measuring the difference between the rentable and useable area in a commercial space is by the LOSS FACTOR. (rentable area - usable area) ÷ rentable area The "lost" areas are the elevators, hallways, and other common areas. The tenant pays rent according to the square footage that includes the lost area.
Deriving the Before Tax Cash Flow (BTCF) Disadvantage of the Cash-on-Cash Return Formula
Because the cash-on-cash formula is based on before tax cash flow, it does not account for the investor's tax situation. The formula does not include appreciation or depreciation. It does not account for other risks associated with the underlying property. It is a simple interest calculation, and ignores the effect of compounding interest. An investment with a lower rate of compound interest may be better than an investment with a higher cash-on-cash return. It is possible to perform an after-tax cash-on-cash calculation, but the adjusted taxable income figures are needed to compute how much tax payment is being saved through depreciation and other losses.
Risk: The Time Value of Money
Before investing, investors should consider what return their money would produce in a safe, risk-free, fixed-return investment as opposed to a real estate investment. Then investors can measure the risk versus the reward of the investment. Money left alone in a certificate of deposit (CD) multiplies without risk, but the return may be insufficient for future needs. The TIME VALUE OF MONEY is a process that calculates the value of an asset in the past, present, or future. It is based on the idea that the original investment or principal increases in value over a certain time. The present value of the investment is the principal. For example, if an investor deposits $5,000 in a CD, that $5,000 is the present value. The future value is the interest earned together with the principal.
New Development: Reading an Offering Plan
Before purchasing a newly developed or converted condominium, the buyer should read the offering plan. The offering plan contains the specifics regarding: - the size of the units - the construction - the floor plans of the units and the recreation areas - the size and materials for the construction of such things as pools and tennis courts - plans of recreational buildings - the make and model of the appliances, windows, and other items - the scope of the landscaping - the land on which the condominium is situated Purchasers must carefully read the "Description of Property" section in the offering plan to determine the sponsor's obligations. If the offering plan does not specify the item, then the sponsor is not obligated to provide it.
Jumbo Mortgages: Down Payments
Besides a lower loan-to-value and larger down payment, borrowers generally pay higher interest rates for jumbo loans that may be 1.5 percent higher or more than conforming rates. Lenders charge higher rates as greater mortgage amounts are an increased default risk for the lender. Note that the loan amounts, rate, percentage, and credit score requirements may change over time but can be verified online.
Site Use: Landscaping
Besides adding natural beauty, landscaping conceals unsightly areas, serves as a noise barrier, defines certain spaces, prevents soil erosion, and removes pollutants. A structure is best situated at least 20 feet from any existing vegetation, especially mature trees, so the root system is undisturbed. Surveys show that older trees improve value and salability. The structure's placement on the property determines its exposure to sunlight at different times.
A loan in which two or more parcels of real estate are pledged as security for payment of the mortgage debt is a(n) _____ mortgage.
Blanket
Agent Agnes tells Mr. Flannigan he ought to list his property for sale because Cuban immigrants are moving into his neighborhood.What type of illegal discriminatory practice has the agent committed?
Blockbusting
The maintenance, finances, and policy decisions of a cooperative corporation are overseen by the _____.
Board of directors
To purchase a cooperative, the prospective purchaser is approved by which of the following?
Board of directors
Who oversees the finances and decision-making policy regarding a condominium property?
Board of directors or board of managers
The entity that manages the business of a village is the _____.
Board of trustees
The portfolio of mostly financial documents submitted to a cooperative's board of directors for approval of the purchaser prior to purchase is called a(n) _____.
Board package
The governing bodies of local health departments are _____.
Boards of health
When one party in a tax-deferred exchange pays money to the other party along with the property exchanged, this money is called _____.
Boot When the values of the two properties are not the same, the party trading the lower valued property usually gives the other party some additional money or item of value in addition to the real property exchanged. This additional money is called "boot."
VA Guaranteed Loan: Eligible Buyers
Borrowers must be veterans under Department of Veteran Affairs rules. Veterans must undergo a qualification process to obtain a loan and receive a VA Certificate of Eligibility. They are not automatically eligible for the program.
To comply with the American with Disabilities Act, _____ are to be designed, constructed, and altered to meet the standards of the law, if readily achievable.
Both commercial facilities and public accommodations
The Civil Rights Act of 1866 prohibits discrimination in the purchase, sale, or lease of _____.
Both housing and personal property
To comply with the American with Disabilities Act, _____ are to be designed, constructed, and altered to meet the standards of the law, if readily achievable.
Both public accommodations and commercial facilities
Subprime loans are risky for _____.
Both the borrower and the lender
An individual has a disability. The ADA prohibits discrimination against _____.
Both the person with the disability and anyone related to the person with the disability
An individual has a disability.The ADA prohibits discrimination against _____.
Both the person with the disability and anyone related to the person with the disability
Which of the following types of real property is exempt from taxation?
Both types of property -- government-owned property and property owned by religious organizations
BX and Romex cable are used for _____.
Branch circuit wiring only
Steel pipe has generally been replaced by _____.
Brass pipe
Brass Pipe
Brass pipe is no longer used in many plumbing installations. Brass is expensive and has been replaced by other materials that do the job just as well. In some homes, brass pipe is found in exposed pipes that are chrome-plated. It is used for cosmetic reasons only.
The most common materials used in the final exterior covering of a house in New York are _____.
Brick and siding
BTU stands for _____.
British Thermal Unit BTU stands for British Thermal Unit, a measure of heat energy, and is the amount of heat required to raise the temperature of one pound of water by one degree Fahrenheit.The capacity of an air-conditioning unit is rated in tons of refrigeration, and 12,000 BTUs are equal to a one-ton capacity.
Coverage that protects against fire, breakage of glass, falling objects, weight of snow, ice, or sleet, and water damage is _____.
Broad form coverage
In what case did the Supreme Court rule that separate facilities were, by their nature, unequal?
Brown v. Board of Education
The Federal Fair Housing Act of 1968: Supreme Court Decisions - Brown v. Board of Education
Brown v. Board of Education. In this 1954 landmark decision, the Supreme Court reversed its ruling on Plessy v. Ferguson. It found that separate facilities were, by their nature, unequal. This case was significant in causing the integration of public schools.
What case decided that city ordinances denying minorities the right to occupy housing where whites live are unconstitutional?
Buchanan v. Warley
The Federal Fair Housing Act of 1968: Supreme Court Decisions - Buchanan v. Warley
Buchanan v. Warley (245 U.S. 60). At the turn of the century, there were local zoning laws requiring block-by-block segregation. Many states ascribed to these ordinances. In the Buchanan case, the court decided that city ordinances that denied minorities the right to occupy housing in blocks where whites lived was unconstitutional. Despite this 1917 decision, many communities tried to maintain racial zoning laws into the 1950s.
Site Use: Walkways and Paths
Building codes mostly call for a walkway from the structure's front door to the street or driveway. The minimum HUD standards require walkways to all dwellings and facilities within a development. Walkways are usually constructed of concrete, brick, or tile. Within a specific lot, the site plan may require walkways. The planning board may require the developer to construct walkways around or through the subdivision for public use. A developer, as part of the subdivision site plan, may have to dedicate to the municipality certain areas for public use.
Solange wants to build an addition to her two-family property. Who should be consulted?
Building department
Building codes are enforced by _____.
Building departments
Why a condop is created
Building owner Sal owns a multi-unit apartment building that includes a store on the street level. Sal records the Declaration of Condominium dividing the property into two condominium units: Condo A (the commercial unit) and Condo B (the residential unit.) Sal continues to own fee title to the commercial condominium unit and collects rent from the store. As fee title owner to Condo B, Sal deeds the residential unit to Big City Co-op Corp. in exchange for the shares of Big City Co-op Corp. Various blocks of shares are allocated to the different apartments. Sal now sells the block of shares allocated to each unit (together with a proprietary lease) to individual purchasers.
Business Owner's Policy package (BOP)
Bundles property and liability insurance together through one premium. The coverage is relatively broad and is meant for small businesses with 100 or fewer employees.
The profit realized from the sale of any capital investment, including real estate, is called _____.
Capital gains
A lease escalation clause that requires the tenant to pay for any increase in direct operating costs should specifically exclude _____.
Capital improvements
A package that bundles business property and liability insurance together through one premium is called a _____.
Business Owner's Policy (BOP) package
An insurance policy that covers expenses incurred if a business is suspended due to a disaster-related event is _____.
Business interruption coverage
The interest paid on a mortgage debt other than the main or second home may be deductible if the loan proceeds are for _____ purposes.
Business or investment
Borrowers sometimes volunteer to pay discount points to _____ a mortgage interest rate. pay off
Buy down
Residential Market Analysis: Buyer Appeal
Buyer appeal is subjective and focuses on the property's visual aspects. A property that appears larger from the street, compared with one that looks smaller but is actually the same size inside, may have greater buyer appeal. Buyers also look at the distance from the house to the road, the landscaping, the entry or approach to the property, the color, and the construction materials. Some properties have so-called inferior curb appeal, and yet may offer better amenities than visually appealing ones.
"Caveat emptor" means _____.
Buyer beware
Taxes and Assessments: Equalization
By law, the Office of Real Property Tax Services must administer an equalization program to assure equitable property tax allocation among nearly 4,000 taxing jurisdictions in New York. The program assures the property allocation of state aid to education funds and other functions. Equalization seeks to measure the relationship of locally assessed values to an ever-changing real estate market. ORPTS annually calculates the equalization rates for each of the state's 1,200 assessing units. The law does not specify any particular percentage for assessment purposes. Therefore, homes in one town may be assessed at 5% of value. Those in a neighboring town may be assessed at 50% of value. In two neighboring towns, homes that have identical market values will have greatly different assessed values. This can be a problem when a taxing jurisdiction such as a county or a school district contains more than one assessing jurisdiction (several cities or towns). Some common denominator must be used to apportion or appropriate taxes fairly. APPROPRIATION occurs when a government agency sets aside funds for a certain purpose.
Instructions for reviewing the documents submitted by the purchaser for approval to buy a cooperative development are contained in the cooperative's _____.
Bylaws
Pet restrictions, repair obligations, and use of the common elements are disclosed in a condominium's:
Bylaws
The shareholder's rights and obligations are in the condominium's _____.
Bylaws
A prospective purchaser _____ review minutes from regularly scheduled meetings of the cooperative board.
Can and should
Shirley has a net capital loss of $5,000, of which she can deduct a maximum of $3,000. The unused capital loss _____.
Can be carried forward to future years
According to health department rules, if soil and site conditions are adequate for absorption trenches, seepage pits _____ be used.
Cannot According to health department rules, if soil and site conditions are adequate for absorption trenches, seepage pits cannot be used.
Unimproved land _____ be depreciated for tax purposes.
Cannot be depreciated Because there are no improvements on land, the property cannot be depreciated for tax purposes.
Most loans, including FHA, VA, and conforming loans, _____a prepayment penalty.
Cannot have
The annual return that an investor expects to receive, which is the primary method for estimating the present value of income-producing properties, is the _____.
Capitalization rate
In the capitalization process, the annual return that an investor expects to receive is the _____.
Capitalization rate A capitalization, or cap rate, is the annual return that an investor expects to receive.
The space that is covered by carpet or flooring and walked upon within the interior walls of the space is _____.
Carpetable area
Fixed Rate Mortgage
Carries the same rate of interest for the entire loan term.
The net proceeds remaining after all expenses and debt services are paid is called the _____.
Cash flow
Forecasting Cash Flows
Cash flows, or income dollars received, are the most important considerations in evaluating an investment. There are two types of income to consider: 1) cash flows during the holding period of the investment 2) cash generated when the property is sold at the end of the holding period The holding period is the time that the investor owns the property. If the holding period is only one year, the investment analysis is simple. It does not require a complex mathematical computer analysis as does more long-term investments. Mostly, investors hold onto property for many years and sell when they think it is best. A complex investment analysis helps the investor to decide the optimum holding period.
The amount of uninvested money held by a cooperative corporation or a condominium at year's end is the _____.
Cash on hand The cash on hand is the amount of uninvested money held by the apartment corporation or the condominium at year's end.
A value measurement for a property that considers the equity in the property measured against the cash flow is called the _____.
Cash-on-cash return
The ratio of annual before tax cash flow to the total amount of cash invested, expressed as a percentage, is called the _____.
Cash-on-cash return
The ratio of annual before-tax cash flow to the total amount of cash invested, expressed as a percentage, is called the _____.
Cash-on-cash return
Deriving the Before Tax Cash Flow (BTCF) Formula for Equity Dividend Rate--Cash-on-Cash Return
Cash-on-cash return is often used to evaluate the cash flow from income-producing property. Investors looking for properties with a large cash flow generally use cash-on-cash analyses. Some investors use it to determine if a property is underpriced, which would give the investor quick equity.
Cast Iron Pipe
Cast-iron pipe is used for underground plumbing in the drainage system because it is strong and durable. It is available in light and heavy weights. Building codes specify the required weight for the application. The disadvantage of cast iron pipe is that it is heavy, time-consuming to install, and can rust on the inside.
After determining that some homeowners within a certain geographic area are subject to intense and repeated solicitation by real estate agents, the Secretary of State can establish a(n) _____.
Cease and desist zone
An area designated by the Department of State where salesperson and brokers may not solicit listings is called a(n):
Cease and desist zone
The right of all citizens to "purchase, lease, sell, hold, and convey real and personal property" was guaranteed by the _____.
Civil Rights Act of 1866 The Civil Rights Act of 1866 guaranteed the right of all citizens to "purchase, lease, sell, hold, and convey real and personal property."
Professionals who provide topographical descriptions of land and map out roadways are called _____.
Civil engineers
A demand for payment in accordance with an insurance policy is a _____.
Claim
Residential Market Analysis: Assets and Drawbacks
Certain assets that buyers want in a property are universal: good to excellent condition, a desirable location, and a tolerable traffic pattern. In general, cul-de-sacs that are dead-end streets have more appeal than through-streets because there is less traffic noise. In analyzing the marketplace, the assets of the subject property should be compared with competing properties. Most properties, however, are not perfect and may have some undesirable features. High-traffic areas, lack of trees or landscaping problems, and close proximity to other properties are some of the drawbacks that can affect a property's marketability. When evaluating current competing listings, expired listings, and sold properties, licensees should consider the assets and drawbacks for each property. This analysis shows how the assets and drawbacks affect the sale, price range, or final sales price of these properties
Market Analysis: The Salesperson's Role
Certain responsibilities are essential to the residential market analysis process, specifically: - Competence - Diligence - Documentation - Effective communication
What is used to document the legal use and/or occupancy of a building?
Certificate of occupancy
After a policy has been in effect for 60 days, it may not be cancelled or non-renewed for a three-year period, except for specific reasons. Which of the following is NOT one of the acceptable reasons for cancellation?
Change in familial status of the insured
Changes in the appearance or taste of well water can be a sign of _____.
Changes in the appearance or taste of well water can be a sign of contamination.
Chlorofluorocarbons (CFCs)
Chlorofluorocarbons are manmade chemical substances used in: - refrigerators and air conditioners - Styrofoam products - aerosol dispensers - cleansing agents
Historic Preservation/Landmark Commissions
Cities, towns, villages, and counties can regulate and protect places and objects that have a special character, historical, or aesthetic interest. Buildings may be exterior and/or interior landmarks. A building designated as an interior landmark may include hangings, sculptures, railings, and ceiling panels. Many cities have adopted landmark preservation ordinances setting up preservation commissions to identify and protect historic landmarks.
A property manager refuses to rent an office because the rental applicant is an African American. The applicant has legal recourse under the _____.
Civil Rights Act of 1866
The first federal civil rights statute, known as the ___, specifically prohibits discrimination based on race.
Civil Rights Act of 1866
The first important statute affecting equal housing opportunity is the federal _____.
Civil Rights Act of 1866
Multi-use zoning where there are a number of residential uses allowed in one zone is called _____ zoning.
Cluster zoning. Multi-use zoning where there are a number of residential uses allowed in one zone is called cluster zoning.
The C-MAP program helps people obtain insurance in which of the following areas?
Coastal
A voluntary network of insurers that assist New York homeowners in coastal areas with finding insurance coverage is known as _____.
Coastal Market Assistance Program (C-MAP)
Gas-Fired Furnace
Combustion takes place within a metal heat exchanger. The products of the combustion are exhausted through a flue or vent. Gas furnaces burn natural gas or propane gas. Gas-fired heating is a popular heating source in New York because it is economical, convenient, and clean burning. High-efficiency gas-fired furnaces vent to the outdoors through PVC pipe.
A taxpayer who is dissatisfied with the decision of the small claims hearing officer in a small claims assessment review may _____.
Commence an Article 78 proceeding
A basic liability policy for businesses that covers bodily injury, property damage, personal injury, and advertising injury is known as a _____ policy.
Commercial General Liability (CGL)
Blanket Mortgage
Commercial mortgage two or more parcels of real estate are pledged as security for payment of the mortgage debt. The blanket mortgage usually contains a RELEASE CLAUSE. The mortgage should provide that sufficient property value remain subject to the mortgage lien to secure the remaining principal balance. The mortgagor can obtain the release of certain parcels from the mortgage lien and convey clear title to subsequent purchasers.
Types of Investment Properties: Fee Simple Ownership versus Leaseholds
Commercial property can be: - owned (fee simple) by the business - under a long-term lease on the land A type of long-term lease commonly used for commercial property is the ground lease A ground lease is a long-term lease of unimproved land, usually for construction purposes. The ground lease normally contains a provision that the lessee will construct a building on the land. However, the owner-lessor retains his/her interest in the land. Ownership of the land and improvements are separate. Another type of commercial lease is the sale-leaseback. In a sale and leaseback arrangement, the property owner sells the property to an investor. The investor then leases the property back to the original owner. This type of arrangement is often used by an owner of commercial property who wants to free up capital to use for other purposes.
Lease Escalation Clauses: Fixed Percentage Increase--Indexed Escalation
Commercial rents are often tied to a government index such as the Consumer Price Index (CPI). With this escalation clause, the rent increases each year by a fixed percentage or by the percentage increase in the CPI. The CPI clause in the lease allows anywhere from 20 to 100 percent of the rent to be adjusted annually based on fluctuations in the index. The index clause protects property owners from the effects of inflation. In a slow market, prospective tenants are less likely to accept an index clause in a lease.
In New York City, the head of the department of buildings is the _____.
Commissioner of buildings
Amounts charged to tenants for expenses to maintain hallways, restrooms, parking lots, and other mutually used areas are called _____ charges.
Common area maintenance
Condominium Closing Costs: Common Charges
Common charges pay for upkeep, insurance, and building-staff salaries. This is a monthly charge paid by the purchaser to the board of managers. It is typical in condominium or cooperative conversions that the budget set by the sponsor is not always the budget passed by the board. Sometimes common charges (or maintenance charges) increase in the first year by 15 percent to 20 percent. This may be because the owners require more services. Common charges may include trash pickup, landscaping, and snow removal. The seller must bring any outstanding seller obligations up to date. There are adjustments made for services already paid for by the seller and to be used by the purchaser.
In a condominium development, each unit owner holds an undivided interest with others in _____ property.
Common property
In a condominium development, the land and the walls of the property are called _____ property.
Common property
Federal Home Loan Mortgage Act (FHLMA)
Commonly known as "Freddie Mac." Its key purpose is to increase the supply of residential financing by purchasing loans. It now deals primarily in conventional mortgages and, to a lesser extent, FHA and VA mortgages. Freddie Mac purchases mortgages and packages them into securities that are sold to investors. In its single-family mortgage business, FHLMC uses securitization to fund home loans. Securitization is a process by which FHLMC purchases home loans that lenders originate, puts these loans into mortgage securities that are sold in global capital markets, and recycles the proceeds back to lenders ensuring that lenders have mortgage money to lend. Freddie Mac is a private corporation that was created by Congress to establish a reliable market for the sale of conventional mortgages. Any member of the Federal Home Loan Bank and any other financial institution whose deposits or accounts are insured by a federal government agency can sell mortgages to Freddie Mac.
Government National Mortgage Association (GNMA)
Commonly known as "Ginnie Mae," this agency of HUD operates in the secondary mortgage market. It is involved with special government financing programs. An agency of the Department of Housing and Urban Development (HUD), Ginnie Mae guarantees (insures) the timely payment of principal and interest from government-guaranteed/insured mortgages including those insured by the FHA, VA, USDA Rural Development, and HUD's Office of Public and Indian Housing (PIH). Although Ginnie Mae does not issue, sell, or buy mortgage-backed securities, or purchase mortgage loans, its primary function is to operate its mortgage-backed securities program that increases the liquidity and efficiency of mortgage loan funding. The securities are issued by private institutions approved by Ginnie Mae.
The law that was enacted to encourage lenders to help meet the credit needs of all communities where they are located, including low- and moderate-income neighborhoods is the _____.
Community Reinvestment Act
The law that was enacted to encourage lenders to help meet the credit needs of all communities where they are located, including low- and moderate-income neighborhoods is the _____.
Community reinvestment act
"Community wells" refer to _____ wells that may serve several different residences.
Community wells refer to two or more wells that may serve several different residences.
Subprime Lenders
Companies that provide loans to homebuyers who do not have good credit histories or, because of their income, are riskier candidates for loans. Subprime loans are risky for lenders and borrowers. Lenders charge a higher interest rate and high closing costs to compensate for potential losses from customers who may later default. While these loans have increased home ownership, they are at the center of a surge in mortgage defaults and foreclosures. Some subprime lenders take advantage of people who attempt to consolidate their debt, especially through home equity loans. These loans can be at very high interest rates. Undisciplined borrowers, who cannot pay back the debt, risk losing their homes. Predatory lenders may encourage the borrower to increase the debt as the equity in the home increases. This is a dangerous practice because the home value is dependent on the real estate market that fluctuates.
Definition of Condominium
Condominiums may be residential, industrial, or commercial. They may be newly constructed or conversions of existing structures. A condominium is a structure of two or more units. A condominium is a form of individual fee ownership of a unit within a multiple-unit development. The distinguishing features of a condominium are: - ownership of both separate and common property - a system of self-government Unlike a cooperative that is considered personal property, condominiums are real property. A condominium transaction is a fee simple transaction just as is the transfer of any other property. The closing includes a title search, transfer of the property by a deed, and appropriate transfer fees and recordation. The individual condominium unit is owned like other types of real property: in severalty, as a joint tenancy, as tenants in common, or as tenants by the entirety Condominium statutes are called horizontal property acts. This is because they describe a three-dimensional property description, with a property line above and below the condominium. These horizontal property lines create a cube of air space that is the privately owned condominium. A condominium is created and managed in New York according to Article 9B of the Real Property Law.
A building that includes condominium and cooperative ownership in the same structure is called a _____.
Condop
A building that includes condominium and cooperative ownership in the same structure is known as a _____.
Condop
A pipe-like enclosure, made of galvanized steel, plastic, or aluminum, used to enclose current-carrying conductors (wires), is called _____.
Conduit
A loan made according to Fannie Mae/Freddie Mac guidelines are known as _____ loans.
Conforming
The local legislative body of any city, town, or village can appoint a(n) ______ to advise the development, management, and protection of its natural resources.
Conservation advisory council
Before building or renovation can begin, _____.
Construction plans must be approved Construction plans must be approved before building or renovation can begin.
Offer to Purchase
Contains a written outline of the scope of the real estate transaction.
Full Covenant and Warranty Deed
Contains the strongest and broadest form of guarantee of title of any type of deed & provides the greatest protection of any deed to the grantee
Contemporary Environmental Issues
Contemporary issues include the use of chemical contaminants such as asbestos, lead, PCBs, and indoor air quality, including mold and radon. Because of these contaminants, environmental assessments may be necessary. Other present concerns are human-made chemicals that are by-products of today's society. Underground storage tanks, electromagnetic fields, and mold can affect the sale of real property. Chlorofluorocarbons found in refrigerator and air conditioning equipment threaten the ozone layer.
An insurance policy is a(n) _____.
Contract
An agreement between competent legal parties to do or refrain from doing a legal act in exchange for consideration is called a(n) _____.
Contract; A contract is an agreement between competent legal parties to do or refrain from doing a legal act in exchange for consideration.
The principle behind adjusting comparables in an appraisal by the sales comparison approach is _____.
Contribution
The principle that states that various elements of a property add value to the entire property is the principle of _____.
Contribution
Seller Concessions
Contributions are an arrangement in which the seller pays certain financing or closing costs for the buyer. If there is a seller concession in place, the seller pays for part or all of these costs, which may be thousands of dollars. The seller concession amount depends on certain factors, including the seller's willingness to participate, the extent of participation, and the geographic location and purchase price of the property.
Investment Quality of the Property: Eligible Property
Conventional loans are available for most residential properties. The availability of these loans may be subject to some limitations, such as: Location Condition Age and Size Loan Amount As mentioned previously, one consideration the lender evaluates is type of property, including the number of units and whether it is owner-occupied or income-producing. In a one- to four-unit rental property, the lender can add in a percentage of the rent as the borrower's income, qualifying the buyer for a higher loan amount. With owner-occupied property, the lender may require less money for a down payment. From a lender's view, there is less risk involved because the property is probably better maintained with an owner-occupant. A non-owner-occupied rental property would most likely require a larger down payment.
Copper Pipe
Copper pipe is used for both water supply and drainage systems. Copper pipe is longer lasting than brass or steel pipe, is corrosion resistant, and is easy to work with. In the water supply system, copper pipe is used for hot- and cold-water lines and for branch pipes to fixtures such as sinks and washing machines. In the drainage system, copper pipe is used for the main soil stack, soil pipes, and vent pipes. For plumbing applications, copper pipe is available in rigid or flexible form in different thicknesses. Building and plumbing codes determine what type is used for a certain application.
Public Municipal Water Supply: Corrosiveness
Corrosiveness versus noncorrosiveness. Water hardness is not directly monitored in drinking water. The water's corrosiveness, which includes its pH level, and the number of minerals in the water are measured. The pH of water measures its degree of alkalinity. A high pH means that the water is very alkaline. A low pH means that the water is more acidic. Water that is noncorrosive is soft water with a low pH. Noncorrosive water also has a low number of total dissolved substances (TDS). Total dissolved substances are the number of different minerals in the water. Corrosive water is hard water with a high pH and a large number of TDS. One of the biggest concerns about water safety is that highly corrosive water may contain dangerous amounts of lead. A 1986 amendment to the Safe Drinking Water Act includes guidelines for the safe amount of lead and copper in the water supply.
The total dollar value to construct a property is its _____.
Cost
The main method for estimating the value of properties that have few, if any, comparables, is the _____ approach
Cost approach
The main method of estimating the value of properties that have few, if any, comparables and are not income producing is the _____ approach.
Cost approach
The most likely approach to pricing that would be used for a school or fire station is the _____ approach.
Cost approach
Which of the following items may be added to the original cost when calculating the adjusted basis?
Cost of improvements
Agreements or promises between two or more parties that appear in legal documents are called _____.
Covenants
The extent of what an insurance policy covers in case of an accident or need for reimbursement is called _____.
Coverage
An individual does not have a disability, but she is treated by others as if she has one. This individual is _____.
Covered by the ADA
An individual does not have a disability, but she is treated by others as if she has one.This individual is _____.
Covered by the ADA
An individual has been misdiagnosed as having a particular disability. This individual is _____.
Covered by the ADA
An individual has been misdiagnosed as having a particular disability.This individual is _____.
Covered by the ADA
In the past, an individual had an impairment that substantially limited major life activities. This individual is _____.
Covered by the ADA
In the past, an individual had an impairment that substantially limited major life activities.This individual is _____.
Covered by the ADA
Federal Housing Administration (FHA) Financing
Created in 1937 for insuring mortgage loans to protect lenders in case of borrower default. These loans are called FHA MORTGAGES. FHA is an agency of the U.S. Department of Housing and Urban Development (HUD). FHA does not make mortgage loans. Instead, FHA insured loans protect lenders against financial loss. The buyer pays for this insurance protection by paying an up-front MORTGAGE INSURANCE PREMIUM (MIP) at closing and an annual mortgage insurance premium prorated monthly and paid with the monthly mortgage payment. The amount of insurance protection to the lender is always sufficient to protect the lender from financial loss in the event of a foreclosure sale. This is because FHA loans are insured for 100 percent of the loan amount.
The ratio of total debt to total assets is the _____ ratio.
Debt ratio
Mortgage principal and interest payments are referred to as _____.
Debt service
Which conditions are considered a disability under the ADA?
Diabetes, HIV disease, emotional illness and mental retardation
Which of the following conditions is considered a disability under the ADA?
Diabetes, HIV, mental illness and mental retardation
In the sales comparison approach to pricing, the prices of the comparable properties are adjusted for _____.
Differences from the subject property
The Salesperson's Role: Diligence
Diligence involves doing one's homework. Once a salesperson has a listing, he/she must follow through to ensure that he/she markets the property correctly. This involves contacting agents who showed the property and obtaining feedback both from the agents who showed the property and their prospective purchasers. This helps to evaluate the property's assets and drawbacks. Diligence also refers to communicating with the sellers. The salesperson should inform sellers as to the activity on the property, track the market, continuously analyze the activity of the competing properties, and readjust the marketing focus when needed.
Each separate unit has a meter connected to the electric company. Each tenant receives a separate bill from the utility company. In this case, the electric service is being handled by a _____.
Direct meter
Underground Storage of Chemicals: Leaking, Testing, and Remediation
EPA regulations require that contaminated underground storage tank (UST) sites be cleaned up. Gasoline and other petroleum products contain a substance called MTBE. At certain levels, MTBE makes groundwater unpleasant and unsafe to drink. Releases of the substance can cause fire, explosion, and health problems. Older tanks, worn by age, corrode due to their chemical content or from a reaction between the tank and the soil. Owners of underground tanks must test the tanks periodically for leakage. NYSDEC can also inspect. If owners find leakage, they must call the spill hotline within two hours. The product must be removed from the tank. The owner must repair or replace the tank. If there is contamination, the owner may need to restore the environment. The NYSDEC, Division of Spills Management, oversees and assists with the clean-up process. The agency maintains a 24-hour daily hotline number at 1-800-457-7362.
New York Mortgage Banker License and Requirements: Qualified Person
Each applicant must designate a person or persons to serve as the Qualified Person ("Qualifier") in charge of the mortgage origination activities and be actively engaged in the applicant's operations. The Qualifier must have five years of experience in making or underwriting residential mortgage loans or have similar lending and credit evaluation experience. The designated person must be an owner, general partner, trustee or officer of the applicant. NYS qualifiers must be licensed mortgage loan originators.
Rating Territories
Each of New York City's five boroughs constitutes a separate rating territory for homeowner's insurance. In the remainder of New York, rating territories are based upon the quality of the community's public fire protection, ranging from Class 1 (the best protection) to Class 10 (unprotected).
Tax Rate
Each taxing unit of government--counties, cities, towns, villages, schools, and special districts--adopts an annual budget. The proposed expenditures are determined. The revenues from various sources such as state and federal aid are estimated. The difference between the two represents the amount that the municipality must raise by taxes on real property. This is the tax levy. Expenditures - Revenues from sources excluding property taxes =Tax dollars required, or tax levy The amount of the tax levy divided by the taxable assessed and nonexempt value of all the real property within that jurisdiction produces the tax rate for that year. The formula for the tax rate is: Tax dollars required, or tax levy ÷ Total taxable assessed value = Tax rate The tax rate is set by the municipality to meet its budgetary requirements The tax rate is usually expressed as a certain number of tax dollars per $1,000 of assessed value. Different localities use different tax rates--for example, dollars per hundred or thousand, mills, or percentages. The tax rate is stated in dollars or mills. (One mill equals 1/1,000 of one dollar. One mill also equals 1/10 of one cent.) Real estate licensees should find out the standard in their area.
Equalization Rate Uses
Equalization would be unnecessary if all municipalities assessed all property at 100 percent of market value every year. There are many uses for equalization rates, including: - allocation of costs, such as for jointly operated hospitals among participating localities or an injury to a volunteer firefighter, among others - determination of level of STAR exemptions - apportionment of sales tax revenues and joint indebtedness - as evidence in court proceedings for assessment inequity and small claims assessment review hearings
The high frequency radio waves in which the electric and magnetic fields are inseparable are generally referred to as _____.
Electromagnetic fields
Electromagnetic Fields (EMFs)
Electromagnetic fields occur wherever there is electricity; such as near: - radio and microwave towers - high voltage transmission lines - low power electrical distribution lines - household appliances - office electrical equipment The term electromagnetic fields generally refers to the high frequency radio waves in which the electric and magnetic fields are inseparable. At low frequencies, including the 60 hertz at which most electric power is delivered to homes and factories, electric and magnetic fields are independent and measured separately. An electric field exists when an appliance is plugged in. The magnetic field only exists when the appliance is turned on and operating. No federal laws currently regulate EMF emissions. New York has adopted a prudent avoidance policy. That is, New York advises people to exercise caution and to avoid exposure to these fields when possible. New York has no regulation for small power lines in neighborhoods or households. For the protection of the public health, in 1990 the New York Public Service Commission enacted a limit of 345 kilovolts for a given power line. Kilovolts are a measure of voltage or juice flowing through a power line. Magnetic field strength (measured in milligauss) is limited to a 200 milligauss strength at the edge of a right of way. (The right of way is the strip of land on which a power line is built.)
The power of the government or its agencies to take private property for public use is called _____.
Eminent domain
The design and construction of energy-efficient building envelopes and the installation of energy-efficient mechanical, lighting, and power systems are regulated by the _____.
Energy Conservation Construction Code of New York State
Building Departments
Enforces the building code. Its role is to protect the public by ensuring that code restrictions are followed. It assures that licensed and insured contractors perform the work. Oversees other building codes such as the electrical, plumbing, and energy codes.
A report that describes and analyzes a proposed action that may have important effect on the environment is the _____.
Environmental Impact Statement (EIS)
Professionals who evaluate environmental issues associated with land use to ensure lawful compliance are called _____.
Environmental engineers
A statement describing and analyzing a proposed action that may greatly affect the environment is a(n) _____.
Environmental impact statement
Environmental Issues: Agent's Role
Environmental issues are an important consideration in the real estate transaction. The agent must know the mandatory environmental disclosures and be familiar with the various issues regarding a property or nearby areas. The agent should realize that the following environment-related contingencies might be necessary: lead based paint disclosure and contingency well condition and water flow contingency septic system contingency radon contingency (radon can enter the house through the well) If there is an underground storage tank, the buyers may want to have it inspected for leakage. Knowing about contingencies is very important, especially in areas where the agent initially fills in the contract of sale.
If an owner dies intestate (without having a valid will) and no heirs or creditors are located, the decedent's property _____.
Escheats to the state
Mr. Reynaud is planning to sell his office building, which is fully leased. Before he does so, the prospective buyer wants to confirm the terms of the tenants' leases. In this situation, Mr. Reynaud must provide a(n) _____.
Estoppel certificate
The study of the nature, quality, or utility of certain property interests in which a value estimate is not necessarily required is called a(n) _____.
Evaluation
Lease Escalation Clauses: Base Year
Every escalation clause specifies a "base year," after which escalations apply. Negotiations of the base year are important. The tenant does not have to pay increases under lease escalation clauses until the base year has passed.
Mortgage Documents
Every mortgage loan has two documents: the note and the mortgage.A personal IOU is another name for the note.
Smoke Detectors
Every one- or two-family dwelling in New York, including residential condominiums or cooperative must have an installed operable single station smoke detector. The smoke detector must be installed so that it is clearly audible in each bedroom or other room used for sleeping purposes, with intervening doors closed. Each apartment in a multiple dwelling (three or more apartments) must be equipped with at least one smoke detector that is clearly audible in any sleeping area. Battery operated devices are permitted. In new construction, smoke alarms must be wired to the main electrical system when feasible and be installed in each bedroom, and near sleeping areas, on each level of the structure, including the basement.
Relationship of the Building Permit Process to Reassessment: Old vs. New Construction
Examples of construction projects that may subject a property to reassessment include: a basement finished into a living space a garage addition a new swimming pool If an assessor discovers that these or similar improvements are not in the assessor's tax record, he/she can reassess the property to reflect those changes that increase value.
A property owner who believes that the property's assessed value is greater than the property's full value may protest on the grounds of _____.
Excessive assessment
Under the Consumer Credit Protection Act, a loan made without finance charges and paid in four or fewer payments is _____.
Excluded from coverage
Under the Consumer Credit Protection Act, business and commercial loans are _____.
Excluded from coverage
The New York Human Rights Law contains _____.
Exemptions in certain situations
A dollar limit above which a tenant agrees to pay operating expanses is a(n)________.
Expense stop
Marlon leases office space from Meryl. The lease provides that, in the first year, Meryl pays the first $500 per month in expenses, while Marlon pays anything over that amount. In each subsequent year, if expenses increase, Marlon's share increases, while Meryl's stays at $500. This is an example of a(n) _____ lease.
Expense stop lease
Residential Market Analysis: Recently Expired Listings
Expired listings are properties that do not sell within the term of the listing agreement. Often, the prices of these listings are too high for market conditions. A search of the expired listings' prices along with the full history of the listing can reveal valuable information regarding an acceptable price range for the subject property.
The Human Rights Law _____ stockholders, officers, and employees of individuals applying for credit for housing, land, or commercial space.
Extends protection to
Insulation is placed wherever the interior walls, ceilings, or floors are exposed to _____.
Exterior temperatures
The relationship between the amount of useable floor area permitted in a building (or buildings) and the area of the lot where it is situated is expressed as a(n) _____ ratio.
FAR
The Community Reinvestment Act (CRA) is also called the _____.
Fair Lending Law
Loft Lease
For the rental of floor space that is not generally divided into rooms. The lease might state "the entire rentable portion of the eighth floor." Because the space has few or no room divisions, a loft tenant may want to make some changes. The loft lease generally has clauses that address this issue. The lease may provide that the tenant cannot make any changes to the rental space without the written permission of the property owner. The lease may provide for nonstructural changes only and changes that do not affect the utility services.
Duress
Forcing someone to do something against his/her will in the execution of a contract
Trusses
Framing units that are assembled at a factory and usually consist of several triangle shaped sections. The shape allows the trusses to support the weight of the roof across a long area. If a roof truss system is used, the truss carries the load-bearing function to the outer walls. This feature provides freedom of placement of the inner walls. Since a roof truss is made up of a number of smaller members (usually 2" x 4"s), the attic space is sometimes lost. Most homes are built with trusses, eliminating the ridge beam.
The Federal Home Loan Mortgage Corporation is commonly referred to as _____.
Freddie Mac
The federal law that provides that meetings of governmental agencies and departments be open to the public is known as the _____.
Freedom of Information Law
The wooden framing member that is fastened directly under the soffit, against the top of the wall, is the _____.
Frieze board
VA loans typically require the payment of a _____.
Funding fee There is no mortgage insurance premium; there is, however, a VA funding fee.
A roof with a single slope on two sides is a _____ roof.
Gable A gable roof is a roof sloping on two sides. A hip roof is a roof with a single slope on all four sides.
Cooperative Board Application and Interview Preparation
Gaining the approval of the cooperative board is probably the most difficult hurdle to overcome in the purchase process. The agent needs to work closely with the purchaser and his/her attorney to assure that the purchaser presents a favorable picture to the board. Boards can refuse an applicant and do not have to give a reason for the refusal. However, cooperative boards must obey all fair housing and equal opportunity laws.
Capital Gains: Long-Term Capital Gains
Gains on capital assets held for longer than 12 months before sale are called long-term capital gains. The capital gains tax is 15 percent for taxpayers in the 25 to 35 percent income brackets and 20 percent for taxpayers in the 39.6 percent income bracket. There is no capital gains tax if the taxpayer is in the 10 to 15 percent income brackets.
Capital Gains: Short-Term Capital Gains
Gains on capital assets held less than one year before sale are called short-term capital gains. They are taxed at the marginal rate for the taxpayer's income.
Gas Water Heaters
Gas water heaters consist of a vertical storage tank enclosed in an insulated metal tank. The gas is automatically controlled by a thermostat inside of the tank so that the incoming cold water turns on the gas. When the water is fully heated, the thermostat shuts off.
The Fair Housing Amendments Act of 1988 extends anti-discrimination coverage to the individuals with:
Handicaps and families with children
Personal Liability
Generally, all homeowners' policies insure the property owner for personal liability when another person suffers bodily injury or property damage due to the negligence of anyone who is an insured under the homeowner's policy.
Impossibility of Performance
Generally, even if a party to a contract is unable to perform the contract obligations, the party is still liable. One who cannot perform should have included in the contract a provision for relief in the event of this impossibility.
Insuring the Structure
Generally, if the insured purchases coverage on a replacement cost basis and insures the home for at least 80 percent of its replacement cost, the insurance is automatically issued on a replacement cost basis. Therefore, if an insured suffers a loss, the insurer would pay the amount it would cost to replace or repair the home without deducting anything for depreciation. If the insured does not insure the home/structure for at least 80 percent of its replacement cost, he/she will not receive full payment of his/her loss.
Deriving the After-Tax Cash Flow (ATCF): Offsetting Income from Other Sources
Generally, positive after-tax cash flow indicates a profit, whereas a negative after-tax cash flow indicates that the investor has to put money into the property to keep it going. However, a loss from one income property can create a tax savings when used as a shelter against income from another source. In that case, the tax savings from the possible shelter of income earned outside the property is added to the cash flow that is earned by the property when calculating the after-tax cash flow.
Assessed Value: Reassessment upon Sale
Generally, the assessment of a property does not change when ownership changes. For example, if Laura pays $250,000 for a ranch house in Woodstock assessed at $150,000, the house must still be equitably compared to other similar houses. So if the Woodstock tax assessor raises Laura's assessment to $250,000 (which may be the fair market value of the house, because she paid that amount), the assessor would technically have to increase the assessment on other similar houses to that amount. This change may not happen right away. In some cases an assessor is within legal rights to change an assessment. A taxpayer has the right to protest assessments he/she believes may be unequal or unlawful.
Board Package Checklist
Generally, the attorney for the seller draws up the cooperative contract of sale. A cooperative contract of sale is based on a purchaser offer, which can be an oral offer or a binder supplied by the real estate agent. Once the buyer and seller agree to the contract and sign it, the purchaser assembles the board package. A board package checklist includes: - purchase application form - This application includes basic information about the purchaser. There might also be a separate form for the seller. The seller's form can include the number of shares allotted to the apartment, the purchase price and monthly maintenance, and the most effective selling point of the unit. - signed contract of sale - financial statement (verification of all assets) - The purchaser must authorize a credit and financial search and sign a document giving permission to conduct it. - appropriate NYS disclosure forms
Board Packages: What Information Does the Board Look For?
Generally, the board wants a full financial picture of the purchaser(s). They want to know if the purchaser can afford the cooperative unit and pay the required maintenance each month. They are also concerned that the purchaser has enough savings and/or income to cover any special assessments or increased maintenance payments. The board verifies the finances using the purchaser's financial documents. The board also wants a general picture of the applicant.
Price Changes: Why and When Developers Raise Prices
Generally, the price of a new condominium is based on the price per square foot of the unit. Typically, the developer offers a few apartments at a time, so that if the units sell quickly, the developer will amend the offering plan and release more units at a higher price. Other reasons for raising prices may be that the developer has underestimated the cost to construct or convert the building. In addition to a price increase, monthly common charges may also increase.
The Government National Mortgage Association is commonly referred to as _____.
Ginnie Mae
Covenant of Seisin
Gives the assurance that the grantor has the exact estate in the quantity and quality which is being conveyed. "I own and I have the right to sell it."
Defeasance Clause
Gives the borrower the right to defeat and remove the lien by paying the indebtedness in full
Which of the statements shown would NOT require full disclosure?
Good financing available
A mortgage payment due on the first of the month may be paid up until the 15th day of the month without the borrower being in default. This is allowed under a _____.
Grace period
A larger R-factor means the insulation has a ______ degree of insulation.
Greater
A type of conduit that looks like BX cable but has no conductors (wires) inside until they are put in is called _____.
Greenfield
If a property owner believes the assessment is wrong, he/she may go to the local board of assessment review and file a written complaint known as a(n) _____.
Grievance
Income received without deducting expenses is known as _____.
Gross income
The type of lease in which the landlord pays all expenses, such as property taxes, insurance, and maintenance, is a(n) _____ lease.
Gross lease
A long-term lease of unimproved land, usually for construction purposes, is called a(n) _____ lease.
Ground lease A GROUND LEASE is the lease of unimproved land, usually for construction purposes.
Gasoline and other petroleum products contain a substance called MTBE, which can affect _____, making it unsafe.
Groundwater
A residential facility for five or more adults who have been institutionalized for various reasons and then released is called a(n) _____ home.
Group home
The VA promotes home ownership for military veterans by _____ loans.
Guaranteeing
Generally, lenders favor which of the following homeowner's insurance policies?
HO-3
HVAC
HVAC stands for heating, ventilation, and air conditioning. In HVAC systems, whenever liquids such as water, sometimes mixed with propylene glycol (antifreeze), are heated or cooled, the process is referred to as a hydronic system. A hot water system consists of pipes, a boiler, and room-heating units such as radiators or convectors. The water is heated in the boiler and travels through the pipes by one or more circulator pumps to the radiators or convectors, where the heat is transferred to the air in the rooms.
Direct costs are also known as _____.
Hard costs
Electric Furnace
Has a resistance-heating element that heats the circulating air directly or through a metal sheath enclosing the element. There are several styles of electric furnaces, depending on the areas heated and the furnace location.
The Enhanced STAR program that provides relief from school taxes is available to homeowners who _____.
Have a household income of $84,550 or less and are age 65 or older
If property owners are not satisfied with the compensation they receive when property is taken under eminent domain, they _____.
Have the right to due process
Openings in the wall, such as doors and windows, are reinforced to support the vertical load with _____.
Headers Openings in the wall for doors or windows are reinforced to support the vertical load with framing members known as headers, or lintels, erected over the top of the opening.
Assessment Review Commission (ARC)
Hears grievances in New York City and Nassau County. Complainants must make a case that the assessor or assessing body is wrong. The complaint must name a specific figure that he/she believes is the accurate assessment. The law presumes that the assessor is correct. The burden of proof is on the complainant to prove the assessor incorrect.
A convector is a _____.
Heat-emitting unit
New Development: Hidden Costs
Hidden costs may occur when a purchaser believes he/she is receiving one item, but he/she receives something else in its place. For example, a sponsor may include a certain make appliance and the purchaser wants a different model. Offering plans frequently state that the sponsor can substitute equal or better appliances. Additionally, the purchaser may want better landscaping. The developer will provide these items but at a higher cost. The purchaser should decide through reading the offering plan, what he/she is receiving, and what is considered an upgrade.
Septic Tank: Division of Materials
Inside the tank, the waste tends to separate into three parts: solid waste, which sinks to the bottom grease, which rises to the top the remaining waste, which is liquid
A roof with a single slope on four sides is a _____ roof.
Hip roof
New York has a state register of historic places and receives federal preservation funding grants for _____.
Historic preservation
The length of time an investor owns a property is called the _____ period.
Holding period
Homeowners and Tenants Policies in New York
Homeowners and tenants policies in New York range from a basic package to more expensive comprehensive packages. The more expensive packages provide greater coverage against more perils for real property and personal property. In insurance terms, a PERIL is a cause of a loss. Perils are events caused by weather or people that do damage. Lightning strikes and theft are perils. The property owner must decide on any coverage above a basic policy. Some of the coverage excluded under a policy, such as earthquake damage and power interruption, can be "bought back" for an additional premium. In addition, some insurance coverage listed under a policy can be excluded. These exclusions sometimes, but not always, result in a premium reduction. Some coverage, such as flood insurance is always excluded and the only way to obtain it is through federal insurance programs.
Adding to a Basic Policy By Increasing Limits: Personal Property and Other Property Structures
Homeowners can receive coverage for personal property and structures incidental to the main property such as a storage shed. The amount of coverage available for personal property losses and other losses is generally related, by percentage, to the amount for which the dwelling is insured. In addition to these limits on general categories of property, there are further claim limitations for specific types of property. These special limits represent the total amount that a company will pay for a loss of all property in that category. Therefore, if the insured has items such as expensive jewelry or sports card collection, he/she should consider insuring them separately by endorsement with a higher limit of coverage. The insured could also purchase a separate policy, called a personal articles floater.
Homeowners who are dissatisfied with the board of assessment review's decision on their assessment may go before _____.
Homeowners may seek a further review in state Supreme Court or before a specially appointed small claims hearing officer.
In New York, the basic policy is _____.
Homeowners-1
In New York, the most widely used homeowners policy is _____.
Homeowners-3
The classification of real property for residential purposes, such as one-, two-, or three-family residential parcels, is _____.
Homestead
Joists
Horizontal parallel beams located below the rafters The ceiling is attached to the joists. The ceiling joists rest on the top plate of the wall. These joists are placed directly over the vertical wall studs for maximum bearing strength. The joists span the structure between the outer walls. In traditional framing, these joists are usually 2" x 8"s, and the inner walls are important in helping to bear the load of the roof. In some situations, the roof is supported directly by the joists, such as with a flat roof.
One of the additional protected groups under the New York City Human Rights Law is _____.
Lawful occupation
Deriving the Before Tax Cash Flow (BTCF)
Ideally, an investment property yields a positive cash flow. The CASH FLOW represents the net proceeds or cash remaining after all expenses and debt services are paid. The cash flow may be measured before or after taxes are considered.
Closing Location with a Mortgage
If a mortgage is involved in the contract, the closing takes place at the office of the lender's attorney. If not, the closing takes place at the office of the attorney for the seller.
Assessment Phases: Phase III
If a problem exists, Phase III begins--the coordinated clean-up phase. Clean-up activity may involve state, federal, and private agencies.
Grounds for Review: Excessive Assessment--Full Value Disagreement
If a property owner believes that the property's assessed value is greater than the property's full value, he/she may claim excessive assessment. This category also includes complaints that a portion of a partial exemption was denied.
Real Property Tax Liens
If a taxpayer is delinquent in paying property taxes, a TAX LIEN attaches against the property. Like other types of liens, a property tax lien creates an encumbrance against the property. However, a property tax lien takes first priority over all other liens. When a transfer of title takes place, any tax lien against the property should be paid first. However, in certain instances, the property can be sold subject to the tax lien.
Regulation Z: Advertising "Specific Credit Term" Disclosures
If an ad mentions ANY other "specific credit term" from the following list of "triggering terms," then additional disclosures must be made: - the down payment - the amount of any payment - the number of payments - the period of repayment - the amount of the finance charge (or the statement that there is no charge for credit) (A good rule is "specific credit term" involves a dollar amount.)
Relationship of the Building Permit Process to Reassessment: Undiscovered Improvements Discovered
If building permit applications are regularly cross-checked, the tax assessor may find and investigate completed improvements to a property. Building permits are regularly reviewed and property records updated to reflect new construction. The International Association of Assessing Officers (IAAO) guidelines require that all properties be field inspected at least every six years to ensure that data is current and consistent. Physical inspection is required at least once every six years for a municipality to qualify for annual state aid.
Protesting Assessments: Protesting BAR Decisions
If homeowners who protest their assessments are dissatisfied with the board of assessment review's decision, they have options. There can be a further review before a specially appointed small claims hearing officer or in state Supreme Court. A tax certiorari proceeding is a judicial review of the case in state Supreme Court (also called an Article 7 review). The Supreme Court review is costly for most homeowners; therefore, the small claims assessment review process is generally the next step.
NY Public Health Law: Guidelines for On-Site Individual Wastewater Treatment Systems
If individual wastewater systems overlay a drinking water aquifer, the local health departments may establish population density limits and minimum lot sizes. There must be 4 feet of usable soil available above rock for the installation of the absorption field. Soils with rapid percolation rates should be blended with other less permeable soils to slow down the infiltration rate. Percolation is the movement of water through soil. Wastewater systems must be separated from buildings, property lines, and wells and waterways according to specified minimum distances. A septic tank must be at least 50 feet from a well and the absorption field at least 100 feet from the well. These distances can be changed only if plans are submitted by a design professional or an engineer and approved by the local health department. An additional usable area of 50 percent of the system should be set aside for replacement or expansion of the system if possible. (Before construction, an environmental assessment determines if the site will cause environmental problems).
Mill Rate
If taxes are assessed based on a mill rate, the formula for calculating property tax is: assessed value x mill rate = annual taxes The MILL RATE is expressed as thousandths of a dollar. One mill equals 1/1,000 of one dollar. (One mill also equals 1/10 of one cent.)
Dollars Per Hundred
If taxes are assessed based on dollars per hundred, the formula for calculating property tax is: (assessed value ÷ $100) x tax rate = annual taxes Example: If the assessed value of a property is $80,000, what is the annual tax if the rate is $1.50 per $100? Solution: (assessed value ÷ $100) x tax rate = annual taxes $80,000 ÷ $100 = 800 800 x $1.50 = $1,200
Public Municipal Water Supply: Testing and Remediation
If tests reveal that there is a violation of a state drinking water standard, the water supplier must correct the situation and notify the state or local health department. If the home water supply is a well, laboratory testing of a water sample is the only way to determine contamination. In New York, a sanitary survey and water sampling service is available to residents of some counties. A specialist from the county health department surveys the area surrounding a private water supply. When private wells supply the home, treatment of the contaminated water may solve the problem. In New York, a contract for purchase and sale generally includes a contingency to test well-water flow and quality when there is a private water supply.
CIA Rule: Comparing Properties
If the COMPARABLE is INFERIOR to the subject property, you ADD to the price of the comparable. This rule is easy to remember by using, CIA, the first letter of each key word: C - comparable I - inferior A - add If you remember the CIA rule, then you also know that if the comparable is SUPERIOR to the subject property, you SUBTRACT.
In rem legal proceeding
If the assessed real estate property taxes are not paid when due, the local official can bring legal action to collect the taxes. This procedure is called an IN REM legal proceeding. It happens when an action is brought against the REAL PROPERTY directly and not against an individual and his/her personal property. The typical action for collection is the forced sale of the property at a tax sale.
New York Anti-Predatory Lending Law: Penalties for Violations
If the borrower proves that the lender or broker violated the New York Anti-Predatory Lending Law, the borrower is entitled to damages and attorney fees. A borrower can bring an affirmative action against a lender or mortgage broker within six years from the date of the loan origination. The borrower can use violations at any time as a defense to a foreclosure action.
Assessment Phases: Phase II
If the investigation indicates Phase II, the testing phase begins. The appropriate party goes to the property to determine if there is a problem. If testing does not show any significant problems, then the assessment ends.
Secondary Financing
If the purchaser does not have enough cash to pay all of the necessary down payment in cash at closing, he/she may be allowed to use secondary financing. Secondary financing includes one or more mortgages that are subordinate to the first mortgage. Secondary financing may be obtained from a number of sources, including banks, finance companies, individuals, or the seller. If financing is obtained from the seller, the mortgage is called a "purchase money mortgage."
In New York, spot zoning is _____.
Illegal
In New York, a subdivision covenant that does not allow residents over the age of 55 is _____.
Illegal age discrimination
Under the 1988 amendments, a disability or handicap is defined as a mental or physical impairment that _____.
Impedes any of the person's life functions
Depreciation is based on _____.
Improvements to land only
The Civil Rights Act of 1964
In 1962, President John F. Kennedy issued an Executive Order guaranteeing nondiscrimination in housing for FHA and VA loans. Shortly afterward, Title VI of the Civil Rights Act of 1964 was enacted prohibiting discrimination in any program receiving federal money. These laws, unfortunately, did not apply to privately financed housing.
Fair Housing Amendments Act of 1988
In 1988, Congress passed amendments to the Fair Housing Act, effective March 12, 1989. This law amended the federal Fair Housing Act (the Civil Rights Act) of 1968. There are two major provisions of the 1988 Amendments Act: - It extended the list of categories of protected groups. - It strengthened enforcement mechanisms. The first major provision of the Amendments Act was to add two new categories of protected groups to the list included in the Fair Housing Act of 1968. Discrimination is now also prohibited against: - individuals with handicaps - families with children The first new category of protected individuals under the Fair Housing Amendments Act is the disabled or handicapped. A disabled or handicapped individual is defined as a person having a mental or physical impairment that impedes any of their life functions.
Air Conditioners and Aerosols: 1990 Amendment to the Federal Clean Air Act (CAA)
In 1990, an amendment to the federal Clean Air Act (CAA) curtailed the use of CFCs, calling for an end to the production of all chemicals that deplete the ozone layer. There has been no production of CFCs since 1995. Under the law, HCFCs can replace CFCs in some air conditioning systems. Although there are a number of controlled HCFCs, only a few are used. HCFCs may be produced until 2030.
Carbon Monoxide Detectors: NYC Law
In NYC, at least one carbon monoxide detector must be placed within 15 feet of the main entrance to bedroom(s) in covered buildings. Owners must file a certificate of installation with the Department of Housing Preservation and Development (HPD) within 10 days of installation. The NYC law requires carbon monoxide detectors in other types of buildings such as hotels, school dormitories, hospitals, and schools.
Finance Commissioner
In New York City, the Finance Commissioner presides over the Department of Finance. The Finance Commissioner: - collects revenues for the city - values properties - records property-related documents - maintains the city's treasury - acts as the city's chief civil law enforcement officer
The Purpose of Taxation: Exemptions for Property Owners
In New York, certain groups of property owners, such as veterans and senior citizens, may be partially exempt.
Types of Discrimination: Financing of Housing — Redlining
In the past, areas populated by culturally diverse persons were "redlined." That is, before the Fair Housing Act, some lending institutions circled certain local areas with a red line on the map, refusing to make loans within the circled areas based upon some characteristics of property owners in the area. The Act prohibits lending institutions from REDLINING, or refusing to make loans for the purchase, construction, or repair of a dwelling because the area in which the dwelling is located is integrated or populated by people of a protected class.
Real Property Tax Liens: Tax Foreclosure and Tax Sale
In New York, the taxing district can FORECLOSE on the property and hold an administrative tax sale--sell the property to collect the taxes owed. When a real property tax remains unpaid for a specified time according to local statutes, a list of delinquent properties is published. A notice of tax sale is also sent to the property owner. On the date specified on the notice, the property is sold, and the purchaser assumes any interest and penalties against the property. In New York, the taxing district can FORECLOSE on the property and hold an administrative tax sale--sell the property to collect the taxes owed. When a real property tax remains unpaid for a specified time according to local statutes, a list of delinquent properties is published. A notice of tax sale is also sent to the property owner. On the date specified on the notice, the property is sold, and the purchaser assumes any interest and penalties against the property. A situation may occur when a tax district holds a tax lien for more than four years (this time may be reduced by local statutes). With proper notice to the property owner, and publication of the delinquent property, the tax lien is sold to the taxing district. The enforcing officer executes a deed to the taxing district. The deed is executed, delivered, and recorded. The proceeding concludes two years after the recorded date of the deed. The taxing district may then sell and deed the property over to a purchaser. The time for foreclosure of a tax lien may vary according to local tax districts. This procedure is the most popular method of tax foreclosure because it is inexpensive and timely.
Tax Rate: Multiple Tax Districts
In New York, with some exceptions, all types of property WITHIN a municipality pay taxes using the same tax rate. Only differences in assessed value account for differences in tax bills among properties. The exceptions to the single rate tax system are "special assessing units" in New York City and Nassau County. These places use four classified tax rates, depending on the property type. Some approved assessing units use two tax rates.
Legal Ramifications of Discrimination Fines and Penalties
In addition to the fines levied because of fair housing violations, the penalties may be very injurious to the brokerage firm. For example, if the court orders an injunction, the order may prohibit the firm from doing business in a certain area. This area may be the main source of business for the brokerage firm. In addition, a New York violation, although resolved, allows the DHR to reinvestigate one year later. Therefore, a brokerage firm is subject to a reinvestigation even though the matter may be resolved.
Amortized Mortgage Loan Interest
In an amortized mortgage, the interest rate is an annual percentage rate as specified by the note and mortgage. The interest in a payment is applied against the outstanding principal balance unpaid at the time of an installment payment. To determine the amount of interest due for each monthly installment, the annual percentage rate is multiplied by the unpaid principal balance and the result divided by 12.
For all loans sold in the secondary mortgage market, interest is paid _____.
In arrears
Balloon Framing
In balloon framing, a single system of wall studs runs from the foundation through the first and second floors to the ceiling support. Balloon framing is different from platform framing, where separate, shorter wall studs are used for each story. That is, with platform framing, a wall stud for the first story runs from the floor of the first story to the ceiling of that story. A wall stud for the second story, runs from the floor of the second story to the ceiling of that story. Balloon framing is rarely used in residential construction.
Freddie Mac Guidelines: Secondary Income/Salary
In order to determine whether secondary sources of financing will be accepted in evaluating the borrower's ability to repay a loan, the lender will evaluate the reliability of the income as well as the extent to which it will likely continue on an ongoing basis. When properly documented, secondary sources of income, such as bonuses, overtime pay, commissions paid on a regular basis, and part-time employment, are usually acceptable as part of the borrower's qualifying income. Other secondary income, such as alimony and child support payments may or may not be acceptable, depending on the reliability of the payments, the qualifications of the person making the payments, and the time period over which they will be paid. Some sources of secondary income, such as unemployment or welfare payments, are almost never allowed as part of the borrower's stable monthly income, since they are considered to be temporary income and, therefore, not reliable over time.
Building Departments: Second Class Cities
In second-class cities, there is an appointed superintendent of buildings. In towns with a building code, plumbing code, electrical code, or housing code, town boards may appoint a town building inspector. The inspector enforces the code.
Enforcement through the Office of Fair Housing and Equal Opportunity (FHEO), Department of Housing and Urban Development (HUD)
In cases involving discrimination in mortgage or home improvement loans, the U.S. Department of Justice (DOJ) may file suit under the Fair Housing Act and the Equal Credit Opportunity Act. Under the Fair Housing Act, the DOJ may bring lawsuits where it is believed that a person or entity is engaged in a "pattern or practice" of discrimination or where a denial of rights to a group of persons raises an issue of general public importance. Where force or threat of force is used to deny or interfere with fair housing rights, the DOJ may institute criminal proceedings. The Fair Housing Act also provides procedures for handling individual discrimination complaints. The DOJ brings suits on behalf of individuals based on referrals from HUD. Individuals who believe that they have been victims of an illegal housing practice may also file a complaint with HUD or file their own lawsuit in federal or state court. The complainant may bring a civil suit in federal court within one year of the alleged violation unless the complaint is filed with HUD; then the period is two years. The Fair Housing Act may be enforced through the Office of Fair Housing and Equal Opportunity (FHEO), Department of Housing and Urban Development (HUD). If HUD receives a complaint, it must act in response to that complaint. In addition, HUD may act on its own information and initiative and file a complaint whenever it feels that a violation has occurred. If HUD is unable to obtain voluntary conciliation, a charge is filed, and the case is referred to an administrative law judge.
Flood Insurance
In certain New York counties, properties may fall within the area of the 100-year flood plain (the area likely to be flooded over the next 100 years). The Federal Emergency Management Agency (FEMA) administers the National Flood Insurance Program (NFIP). The NFIP program helps those in Special Flood Hazard Areas (SFHA) to obtain coverage. Federally regulated lenders must require borrowers in SFHAs to buy flood insurance as a condition of their mortgage. Flood insurance is often not included in a homeowner's insurance plan. It may be purchased separately.
Architectural Review Board
In certain municipalities, an architectural review board's purpose is to oversee and uphold the quality and appearance of the environment. In addition to covenants limiting the types of building materials, covenants are sometimes included in deeds to restrict the architectural style. If structures do not conform to a general design and style for a certain development, they violate the covenants. Composed mostly of people with expertise in art, architecture, or planning, oversee these design issues. Local laws can give architectural review boards the authority to review building plans and specifications. These boards can withhold approval of building permits. This happens if a proposed construction will be very dissimilar or inappropriate compared with other structures within a certain distance from the proposed site.
Boards of Health: Members
In cities with populations less than 50,000, the board of health consists of the mayor, who is the president, and six other persons. One member must be a physician appointed by the common or city council. The term is three years, although members may be appointed for shorter terms so that two appointed members' terms expire annually.
In a cooperative, the corporation owns the common areas _____.
In fee simple
Sale Free and Clear (Cash Sale)
In many real estate sales transactions, there is an existing mortgage on the property. In these cases, the mortgage is often "satisfied" or paid off in full when the seller receives the sales price from the buyer or the buyer's lender. It is more common for the funds to come from the buyer's lender, as opposed to cash from the buyer. Although strictly cash sales are the exception, they are perhaps the simplest financial transaction. With attorney representation, the seller provides a deed and the buyer provides the cash.
Classification of Homestead and Non-homestead Properties
In most places, all properties, regardless of type must be assessed at a uniform percentage. In New York City and Nassau County, however, different classes of property--residential, vacant land, commercial, industrial, and so on--are assessed at different percentages of market value. However, all property within a certain class, such as one-, two-, and three-family homes, must be assessed at the same uniform percentage.
Board Packages
In order for a cooperative board to approve a purchaser, there are two processes: 1) submission and acceptance of the BOARD PACKAGE by the cooperative board of directors (described in more detail shortly) 2) a private interview between the prospective purchaser and the board of directors If the board is satisfied that the purchaser meets the requirements of the cooperative, the closing on the property can occur. This process may take several weeks or more to complete. A board package includes mostly financial documents. It also includes personal data such the purchaser's social security number and a list of who will be living in the apartment. The board package must be complete before the board reviews it. This means the package includes: - a signed contract of sale - a mortgage commitment - all documents related to the purchaser's finances
Federalism
In the U.S., we have a federal type of government that oversees and creates a great many laws.
Smoke Alarm and Carbon Monoxide Detector Affidavit
In the sale of one and two-family dwellings as well as residential condominiums or cooperatives, the seller must deliver an affidavit to the buyer indicating the presence of a smoke alarm and carbon monoxide detector. The buyer has 10 days from the date of the deed to notify the seller if the alarm or alarms are not operable. Upon notification, the seller must pay to fix or replace the alarms.
Signing of the Contract: Deposit of the Down Payment
In upstate New York, if the broker fills in the contract, the real estate agent immediately delivers the deposit to the broker for deposit in the broker's escrow account. If the broker is not holding the deposit, then the broker delivers the deposit to the seller's attorney. In downstate New York, if the seller's attorney prepares the contract, the buyer draws a check payable to the seller's attorney to be held in escrow in the seller's attorney escrow account.
Boards of Health: Villages and Towns
In villages, the board of health consists of the board of trustees of the village. In towns, it consists of the town board. In some places, a health commissioner substitutes for a board of health. If there is no local board of health, a town board may use a nonprofit agency to furnish public health services.
A type of zoning offered to developers and property owners to construct amenities that provide uses and enjoyment for the municipality's residents are called _____ zoning.
Incentive zoning. A type of zoning offered to developers and property owners to construct amenities that provide uses and enjoyment for the municipality's residents are called incentive zoning.
Oil-Fired Furnace
Include a burner, and controls are available in various styles. Oil-fired furnaces create warm air or deliver cool air when combined with an air conditioning system. Oil-fired heat is becoming quite expensive to the consumer and requires that fuel be delivered to the property and stored in aboveground or underground tanks.
Time of Essence Rule
Included in a sales contract if desired by either party. If the rule is applied, the contract will state next to the closing date "Time is of the essence." This means that the closing must take place ON OR BEFORE the exact date stipulated in the contract.
Value by Income Capitalization: Income
Income (represented as I) is monies received. The most common application of income is monies received for rents, commission, or other monies. Although income can be received on a monthly basis, for purposes of this section, all monthly income must be converted to annual income. To do that, simply multiply the amount by 12 if it is not already converted to the annual figure.
The appraisal approach to value used for properties that produce income is the _____ approach.
Income approach
The primary method to estimate the present value of properties that produce income is the _____ approach.
Income approach
The primary method of estimating the present value of income-producing properties is the _____ approach.
Income capitalization
In the income capitalization approach, as the capitalization rate decreases, the value of the property _____.
Increases
With an adjustable rate mortgage, the rate of interest is tied to a(n) _____.
Index
Condition of Premises
Indicates that the buildings are sold "as is," without warranty as to condition." Buyers agree to take title to the buildings "in their present condition subject to reasonable use, wear, tear and natural deterioration" between the date of the contract and the closing date, except in the case of destruction.
Which of the following is NOT a condition in determining the market value of property?
Indirect costs are no more than 10 percent of the price. Market value is the most probable price, as of a specific date, in cash or in other terms, for which the property should be sold after reasonable exposure in a competitive market, under conditions requisite to a fair sale, with the buyer and seller acting prudently, knowledgeably, and for self-interest, and assuming that neither is under undue duress.
Indirect Water Heaters
Indirect water heaters consist of a highly insulated storage tank piped to a gas or oil-fired burner. Heat is transferred to the tank from the boiler when its sensor detects a drop in its internal temperature. Oil-fired water heaters systems look like a gas or electric hot water heater, with an oil burner attached to the lower portion of the tank.
Interest in a Condominium
Individual unit owners hold two types of interest in a condominium: a fee simple title to their individual unit - These individual units are called "separate property." an undivided interest (shared ownership) in the remaining elements in the development as tenants in common - These remaining elements are called "common elements." Thus, the interior space is individually owned, and the remaining property is owned in common by the owners of the individual units.
Protesting Assessments: Small Claims Assessment Reviews (Residential Only)
Individuals who own and live in one-, two-, or three-family homes used for residential purposes may file for a small claims assessment review (SCAR.) Owners of vacant land that is too small for a one-, two-, or three-family dwelling may also use this review process. Complainants may not request a reduction greater than that already sought from the board of assessment review.
Industrial (Manufacturing) Properties: Land Use
Industrial LAND USE is usually confined to specific industrial areas, industrial parks, or business parks. Business parks are a combination of industrial and office uses. Buildings with large loft areas and no walls can also support light manufacturing and other industrial uses.
Which of the following does NOT belong to the homestead class of properties?
Industrial parks
Implied Contract
Inferred from the conduct and actions of the parties, without express agreement. Arises when the conduct of the parties clearly shows the intention to contract.
Inflation
Inflation is an increase in money and credit relative to available goods, resulting in higher prices. Inflation causes: - government to borrow more to meet current debts - businesses to borrow more to meet costs of operations - individuals to borrow more to pay for the higher cost of goods and services When there is a high demand for housing, and therefore high demand for mortgages, coupled with rapid inflation, credit demand rises to abnormal highs. Generally, inflation negatively affects the real estate market because real estate prices rise and borrowing costs increase. Real estate purchased before inflationary trends provides a hedge against inflation.
Water usage, sewers, utilities, schools, roadways, medical services, and additional police and fire department support are the services that make up the community's _____.
Infrastructure
Punishments for violations include _____. (human rights & fair housing)
Injunctions against a business Punishments for violations include injunctions against operation of a business, a fine of up to $75,000 for the first offense, and a maximum of $150,000 for subsequent offenses.
Due Diligence: Innocent Homeowners
Innocent landowners may include: - landowners who did not know the property was contaminated when it was purchased - landowners who reacted responsibly to the contamination when found - property owners who made inquiries into past usage to see if the property was contaminated at the time of purchase
R-Factor
Insulation is rated by an R-factor. The R-factor means the degree of resistance to heat transfer (heat is kept in or out); the larger the R-factor, the greater the degree of insulation. Most brand-name insulation is marked with its R-factor. The Department of Energy has established insulation recommendations for homeowners. The recommended level of insulation, expressed in R value, differs for different areas of the house (e.g., under the roof, inside exterior walls, etc.).
Insulation
Insulation resists the flow of heat from one area to another. It provides the double benefit of preventing heat loss in the winter and protecting against heat load in the summer. The ceiling, walls, and floor are insulated.
When purchasing insurance, property owners are most likely to be represented by _____.
Insurance brokers
The money paid for the privilege of using a lender's principal is called _____.
Interest
IOLA
Interest on Lawyer Account A state agency that uses interest on attorney trust accounts to fund non-profit agencies and to reimburse parties for attorney misconduct
FHA: Interest Rates
Interest rates on FHA loans are slightly higher than market rates. Down payment requirements are lower than for conventional loans. The minimum cash investment the borrower can make is 3.5 percent of the sales price or appraised value, whichever is less. In many cases, closing costs are wrapped into the mortgage. The applicant need not be a first time homebuyer to qualify for an FHA residential one-to-four family home mortgage.
Buildings may be _____ landmarks.
Interior and exterior landmarks
The main purpose of the zoning board of appeals is to _____.
Interpret the zoning ordinance
Phase I of a due diligence assessment is the _____ phase.
Investigative phase
Unimproved Land
Investment in unimproved (undeveloped) land is one of the more risky forms of investment. An investor may have to hold the property for a longer time than other improved investments to realize a land's potential. It is often difficult to obtain lender financing for this type of investment. Because the land has no improvements, the property cannot be depreciated for tax purposes. Landowners have to work with zoning regulations, master plans, and complex governmental approvals. In addition to the land's cost, investors who hold the land for development purposes must invest more dollars in the approval and development process. While the investor waits to see his/her profits realized, he/she also, in theory, loses money. The dollars invested in the land could be producing interest or profits if invested elsewhere. When evaluating an investment, an investor must consider the income loss from the money invested and add that to the actual dollar cost of the investment to determine the rate of return. Site acquisition as well as pre-leased commercial space should involve the services of a real estate agent knowledgeable in land development and commercial leasing.
Characteristics of Real Estate Investments: Risk
Investment includes considering a RISK factor. Risk refers to the potential for loss. The greater the risk of loss, the greater potential rate of return the investor can expect. Conversely, the lower the risk of loss, the lower the potential rate of return the investor can expect. Often, after looking at other factors, a prospective investor may decide that the risk is not worth the potential return on the investment.
Future Land Use: Safety Concerns
Involve the neighborhood as well as the property. They include codes for electrical, plumbing, and fire prevention. Regulations address traffic patterns, sidewalks, and smoke and carbon monoxide detectors in buildings.
Expense Stop Lease
Is a dollar limit above which the tenant agrees to pay operating expenses. The expense stop lease provides a way that expenses are shared between the tenant and the owner. The property owner pays a predetermined amount for property expenses. The tenant pays expenses above that amount. The estimated expenses determine the expense stop for the first operating year. With this arrangement, the tenant pays any increased expenses over the lease term.
The Promissory Note
Is essentially only a promise to repay a loan. It does not provide any collateral as security that the loan will be repaid.
The New York State human rights law _____ the federal laws.
Is more restrictive than
If a sponsor does not specify an item in the offering plan, then the sponsor _____.
Is not obligated to provide it
Any cash that an exchanger retains from a like-kind exchange _____.
Is taxable When a "boot" is paid along with the exchange of real property, the person who receives the boot is usually liable for taxes on the amount (or monetary value) of the boot.
Commercial Policies: All-Risk Policy Coverage
Is usually included in a Business Owner's Policy package, includes both basic form and broad from coverage (just described). It is often called an umbrella policy.
Once a building's electrical installations are inspected and approved, the inspecting organization _____ stating that the installation is in compliance with the National Electric Code.
Issues a certification
Which of the following statements about Regulation Z is FALSE?
It applies to commercial loans. Business and commercial loans are EXCLUDED from the provisions of Regulation Z.
What is TRUE regarding the mansion tax?
It applies to one-, two-, and three-unit residential properties as well as condos and co-ops sold for $1 million or more.
Which of the following is an advantage of the cash-on-cash formula?
It can help investors identify properties with large cash flow.
Deriving the Net Operating Income (NOI): Vacancy and Collection Losses
It is almost impossible for a large property to reach its full potential gross income. To reach full potential gross income, the property must have no vacancies, all rent is fully collected, and no space is undergoing renovation. Vacancy and credit losses in retail centers and other income properties are usually expressed as a percentage loss. The loss may be typically 5-10 percent of the potential gross income. When the occupancy rate is 90 percent, the property experiences a 10 percent vacancy and collection loss.
Sunny Life Properties proposes to build a planned unit development (PUD) limited to people 55 years old and older in Buffalo, New York. Which of the following does NOT apply to Sunny Life Properties?
It is in violation of the Federal Fair Housing Act of 1968. Sunny Life Properties is NOT in violation of the Federal Fair Housing Act of 1968.
Why are brass pipes no longer used in many plumbing installations?
It is more expensive
Liza transferred title to her townhouse to her mother. Which of the following is TRUE?
It is not an arm's length transaction.
Tenants or Cooperative Owners Policies (HO-4)
It is not necessary for a tenant to insure the building in which he or she lives since that is the landlord's responsibility. The HO-6 policy provides property coverage for any alterations, appliances, fixtures, and improvements within the insured unit. However, condominium and cooperative buildings, and their common areas, should be insured through policies issued to the cooperative owners' and the condominium owners' associations. The homeowner's and tenant's policies reimburse the tenant for increases in living expenses if the home becomes uninhabitable because of damage caused by one of the covered perils.
New Development: Real Estate Tax Validation
It may be difficult to validate the exact amount of property taxes unless the project is complete. It is subject to change when the development is completed. The projected real estate taxes are included in the financial portion of the offering plan. The taxes are based on how the municipality assesses the property, the tax rate, and if the developer receives any tax abatements. An incentive for investors is that many projects receive tax abatements because they are new construction. Investors, in some projects, may pay very little or nothing in real estate taxes for the first 10 years the building exists.
What is the priority of a property tax lien compared to other liens?
It takes first priority over all other liens
Horizontal parallel beams located below the rafters are _____.
Joists
In a roof system, the ceiling is attached to the _____.
Joists The ceiling is attached to the joists. Rafters are sloping parallel beams that support the roof; joists are located below the rafters.
In the 1968 case of _____, the U.S. Supreme Court applied the older Civil Rights Act of 1866 to prohibit any racially based discrimination in housing.
Jones v. Alfred H. Mayer Company
Junior Mortgage
Junior mortgages are usually for a shorter term and at a higher interest rate than first mortgages. This is because they pose a greater risk to the lender. Second mortgages are the most common form of junior mortgages.
The case in which the U. S. Supreme court ruled that cities can exercise the power of eminent domain to promote private economic development was _____.
Kelo vs. United States
Lease Escalation Clauses
LEASE ESCALATION CLAUSES call for increased costs to the tenant for different reasons at specified times during the lease term. These clauses were developed to protect the property owner against increases in operating costs. A commercial real estate broker should assist by projecting and attempting to contain future operating costs.
If a home's water supply is a well, how is contamination determined?
Laboratory testing of a sample
Building Departments: First Class Cities
Large (first class) cities have their own building departments. In New York City, there is a department of buildings in each borough. The head of the department is the commissioner of buildings.
NYC Department of Health and Mental Hygiene
Larger, first class cities generally have their own health departments. A commissioner of health who is appointed by the mayor heads the New York City Department of Health And Mental Hygiene. There is an 11-member board of health that includes the commissioner. Most members are appointed by the mayor with the consent of the city council and serve six-year terms.
Caveat
Latin for a warning or caution that may be addended to a contract of sale. In New York, properties that lie within an agricultural district must have a disclosure attached stating that fact.
Caveat Emptor
Latin for let the buyer beware, is a handy catch phrase used to describe a general legal environment in which the burden of obtaining information about a property was almost entirely on the buyer, not the seller or his/her agent does not apply when the real estate agent has a fiduciary relationship with the client
Broker's Responsibility to Uphold Fair Housing
Laws, HUD regulations, recommendations by the National Association of REALTORS® (NAR), and court rulings define the broker's responsibility to comply with fair housing policy.
Under the State Environmental Quality Review Act, the agency that oversees the entire project involved in the preparation of an environmental impact statement and makes final decisions is the _____.
Lead agency The agency that oversees the entire project involved in the preparation of an environmental impact statement and makes final decisions is the lead agency.
Lease Escalation Clauses: Proportionate Shares of Occupancy
Lease increases depend on the proportionate shares of occupancy. The lease specifics the percentage of the property occupied by the tenant. This percentage should be verified because the increase or escalation may be based on the percentage the tenant occupies. For example, with a tax pass-through escalation clause, if property taxes go up, the tenant is charged a proportionate share of the increase.
The only real property interest the shareholders have in a cooperative is a _____ estate.
Leasehold
A deed in lieu of foreclosure conveys a title to which of the following?
Lender
Coops/Condos: Understanding a Financial Statement
Lenders often require financial statements before approving individual loans to cooperative or condominium apartment buyers. Any shareholder, upon request, can receive an annual balance sheet and profit and loss statement for the past fiscal year. This information can be shared with the purchaser's agent and/or attorney. Sometimes these statements are not prepared until several months after the end of a fiscal year. The managing agent of the co-op or condo usually provides updated information. A financial statement should include a balance sheet describing assets and liabilities, income and expenses statement (statement of operations) and a cash flow statement. For a cooperative, the status of the underlying mortgage is very important
Discount Point
Lending institutions may charge DISCOUNT POINTS when making mortgage loans. Each point that the lender charges costs someone (the buyer or the seller, depending upon the situation) 1 percent of the loan amount, paid at the time of loan closing. At times of high interest rates and short supply of money for making mortgage loans, lenders often charge one or two points when making 90 percent and 95 percent conventional loans.
A document that is not a contract but is used to reserve a condominium for purchase is a(n) _____.
Letter of intent
An agreement to purchase a condominium is called a(n) _____.
Letter of intent
The percentage of market value at which properties are assessed within a taxing unit is called the _____.
Level of assessment (LOA)
Town Planning Board
Levels plan for the region's future. The boards consider the available natural and supplied resources of the community. The planning board may recommend regulations for planning to the town board. The town board may stipulate that it will not take action on a planning issue until the planning board submits a report. The planning board may review and make recommendations on a proposed town comprehensive plan or an amendment to a plan. The planning board can investigate, map, report, and recommend items about town development and growth.
The use of borrowed funds to invest is known as _____.
Leverage
Leverage: Debt-to-Equity Ratio and Leveraging
Leverage can be described by the ratio of debt to equity. Debt is what the investor owes. Equity is the investor's interest in the property. If a business property has an asset value of $1 million with a debt of $750,000, the debt-to-equity ratio is calculated as follows: $1,000,000 - $750,000 = $250,000 equity $750,000 ÷ $250,000 = 3:1 debt to equity ratio
Insurance coverage that protects against claims that one's negligence resulted in bodily injury or property damage is _____.
Liability insurance
Insurance coverage to protect against claims alleging that one's negligence or inappropriate action resulted in bodily injury or property damage is called _____ insurance.
Liability insurance
A town engineer must be a _____.
Licensed professional engineer
Commercial Leases
Like other contracts, a commercial lease is binding. Unlike residential leases, there is no standard commercial lease agreement. Each lease conforms to the particular space and tenant. However, most buildings have their own lease agreement. Corporate tenants may have their own lease form. These forms serve as a starting point for negotiations and may be revised.
Article 15 of the New York Executive Law: Exemptions
Like the federal Fair Housing Law, the New York Human Rights Law contains exceptions or exemptions in certain situations. (In other words, in some situations, the provisions of the New York Human Rights Law do not apply.) The law has no exemptions for discrimination based on race. New York exemptions include: - rental of an apartment in an owner-occupied two-family house - restriction of all rooms in a housing accommodation to individuals of the same sex - rental of a room by the occupant of a house or apartment - restriction to sale, rental, or lease of accommodations of housing exclusively to persons 55 years of age or older, and the spouse of such persons Salespersons and brokers in New York may not participate in the exemptions listed above except those that allow restriction of the sale, rental, or lease of housing accommodations, land, or commercial space exclusively to persons 55 or older. Commercial boycotts and blockbusting are prohibited.
The purpose of a deed restriction is to _____.
Limit the use or appearance of a given property. The purpose of a deed restriction is to limit the use or appearance of a given property.
Payment Cap
Limits the amount of the increase in the monthly payment. If the index rises, the interest rate increases and the monthly payments will also increase. However, once the payment cap is reached, the monthly payment remains the same. In this situation, the money for the higher interest rate is added to the principal balance. This interest accumulates onto the principal that eventually has to be paid. This is an example of NEGATIVE AMORTIZATION.
Liquidity
Liquidity refers to the ability of an investment to be converted easily to cash. Real estate is NOT a liquid asset because it cannot be transferred, even at a loss, as easily as stocks or other cash-type investments. Before investing in a property, the investor must decide if the investment is short- or long-term. Does the investor wish to hold the property permanently? Alternatively, at the first opportunity, does the investor wish to sell and go to a new project? The answer depends on the investor's personality, financial goals, borrowing power, and the nature of the investment, and ultimately the success of the investment. Because real estate investments can fluctuate because of market trends, investors should analyze their goals before starting a project. If the investor buys with the intention of selling, or if conditions develop that necessitate a sale, economic conditions might not be right. Investors should have reserves to cover losses so that they can wait out a low period.
The practice of encouraging the borrower to obtain additional cash by refinancing their mortgage repeatedly is known as _____.
Loan Flipping
Loan Eligibility: Condition
Loans may be limited because of the poor condition of the property.
Loan Eligibility: Location
Loans may be limited because of unpaved streets or inappropriate zoning. Other homes in the area should be similar in value and quality. Problems could arise if the property is located near factories or commercial areas.
Which conventional loans usually do NOT require private mortgage insurance?
Loans of 80 percent and below only
Conventional Loans
Loans that are NOT insured or guaranteed by a government agency. They are made by private sector financial institutions or by individuals. If a conventional loan is sold to a government agency in the secondary mortgage market, it is still considered a conventional loan. Conventional loans are divided into different types based on their LOAN-TO-VALUE (LTV) ratio. May be insured or uninsured
Jumbo Mortgages
Loans that exceed the loan limit are nonconforming loans, also called jumbo mortgages. The FHA defines mortgages of more than $417,000 as nonconforming or jumbo mortgages. Definitions of jumbo mortgages vary from county to county in each state. Certain areas of New York, mainly downstate, are considered high-costs areas where conforming mortgage maximums are higher than average. In most New York counties, mortgages of more than $417,000 are considered jumbo loans. But in areas in and around New York City, conforming limits are up to 125 percent of the national average. The FHA designates jumbo mortgages as loans of more than $729,750 in NYC (Manhattan) and in Queens, the Bronx, Nassau, Putnam, Richmond, Rockland, and Westchester counties. In Orange and Dutchess counties, jumbo mortgages are loans above $443,750. All other counties in New York use the $417,000 or $729,750 figure.
Although New York has control over certain public lands and open spaces, planning and zoning are the province of _____.
Local governments and their respective planning boards
Wetland Commissions
Local governments have a vital role in monitoring activities near or in wetlands within their boundaries. They generally have access to all related project plans and permit requirements to assist in monitoring. The NYS Department of Environmental Conservation (NYSDEC) is the New York agency that oversees wetlands according to the New York Environmental Conservation Law (ECL).
The Tax Map
Local governments use TAX MAPS to maintain a current inventory of all parcels in a city, town, or village. The tax map is drawn to scale showing all the real property parcels within an assessing unit, such as a city, town, or village. These maps are used to locate parcels and obtain information required for assessments. The size, shape, and dimensions (or acreage) of a parcel may be found on a tax map.
Architectural review boards are given authority by _____.
Local laws
The rental of floor space that is not divided into rooms is called a(n) _____ lease.
Loft lease
Long-Standing Environmental Issues
Long-standing issues include such issues as clean air and water, wastewater treatment facilities, and pest infestation. Although the issues of clean air and water, wastewater treatment facilities, and pest infestation are well known, public policy is still evolving. Environmental concerns include preserving our natural resources such as wetlands. Include: clean water, wastewater treatment facilities, and pest infestation.
Loose Fill Insulation
Loose-fill insulation is composed of lightweight materials such as perlite, vermiculite, wood paper, or cotton fibers. It is poured or blown in to fill spaces between studs on a horizontal surface or in hard-to-reach areas. It is often used on attic floors.
Increasing a deductible will _____ the premium.
Lower the premium
The system under which rent control operates in New York City is called the _____ system.
MBR
Calculating Mortgage Insurance Premium
MIPS are calculated using Basis Points (bps). A Basis Point equals 1/100th of 1 percent. A fee of 60 basis points equals 0.6 percent of the loan.
Future Land Use: Health Concerns
Maintaining the health of the residents. Sanitary codes and regulations help prevent the spread of disease and unsafe living conditions.
Board of Directors
Manages the cooperative. The board oversees the maintenance, finances, and policy decisions of the corporation. The board may hire a management company or others to carry out the functions that it oversees.
Price Changes: Current Market Practice
Many developers believe that purchasers are willing to pay more for a unit once the new development begins to sell out. However, price increases in new buildings can also happen when the units are initially marketed. Sometimes, a condominium greatly appreciates during its contract period. When first putting the apartments on the market, a developer may not be sure how to price the unit. He/She sets a price according to what he/she thinks the buyer will pay. Other factors can drive up prices. In NYC, for example, if a celebrity buys into a luxury condominium development, prices can go up 10 percent or more immediately. Unlike resale, it is difficult for a buyer to picture what he/she is buying. To overcome this, many developers try to simulate what an apartment will look like through scale models, model apartments, videos, and computer imaging. There are many, in NYC especially, who buy an apartment based only on floor plans, models, or even sight unseen.
With an adjustable rate loan, the amount added to the index to get the interest rate on the loan is called the _____.
Margin
Residential Market Analysis: Area Market Conditions
Market conditions fluctuate greatly. They depend on the economy, on supply-and-demand factors, as well as on seasonal considerations. Supply and demand implies that if properties are in short supply there will be greater demand for those few available. If properties are plentiful, there will be more competition. Seasonal considerations include holidays, weather, and back-to-school. Buyers often prefer to move in the summer so the children can start the school year in their new school. The winter holiday season is often slow because people are busy with holiday plans. Bad weather also keeps potential buyers from going out to look at properties. Based on these considerations, licensees must draw up a marketing plan. If market conditions are favorable, the property will likely sell in a shorter period. A good indicator of market conditions is the number of pending and sold properties.
The number of similar properties available in the same price range is referred to as _____.
Market position
Residential Market Analysis: Market Position
Market position refers to the number of similar properties available in the same price range. A residential analysis must ask how the subject property is different from these other properties. It should consider how to market the subject property to make this difference known in the marketplace.
Property tax assessment is based on each parcel of land's _____.
Market value
The probable price that a property will bring in a competitive and open market is the property's _____
Market value
Credit applications may NOT contain boxes where individuals check whether they are _____.
Married or single
Wetland Regulations
Marshes, swamps, bogs, wet meadows, or flats are other names for wetlands. Wetlands are protected areas because they provide flood and storm water control, surface and groundwater protection, erosion control, pollution treatment, a place for fish and wildlife, and natural beauty. Article 24 of the New York Environmental Conservation Law, the Freshwater Wetlands Act (1975), protects wetlands in New York. The agency overseeing wetland protection is NYSDEC. Wetlands protected under the Freshwater Wetlands Act must be larger than 12.4 acres or smaller wetlands of unusual appearance. A connected area of 100 feet outside the wetland is also a protected area because it provides a buffer zone.
The first step in urban planning is to develop a _____.
Master plan
One of the most important documents for a city or town planning board is the _____.
Master plan A municipal planning board is responsible for preparing and amending a master plan for the community as well as implementing the master plan through site plan and subdivision ordinances and recommendations to other agencies.
Which word or phrase is prohibited in advertising because of the inappropriate reference to disability or familial status?
Mature persons
In most towns, the assessor must file the tentative assessment roll that he/she uses for taxing purposes by _____.
May 1st
PITI Loan: Insurance
May be the smallest component in PITI. Insurance may include mortgage insurance, flood insurance (discussed later), and homeowner's insurance. These payments may be prorated into the monthly mortgage payment.
The down payment on a VA loan _____.
May be zero. One of the most distinguishing characteristics of a VA loan is that, typically, no down payment is required (LTV = 100 percent).
The New York State Power Lines Project has found that electromagnetic fields (EMFs) _____.
May cause a number of health problems
Rescission
May occur when a contract is not performed by either party or when a party breaches it. The court orders the parties placed back in their original positions as if the contract had never existed.
Board of Assessment Review (BAR) Meeting Dates
Meets to hear complaints (also known as "grievance day"). In most TOWNS, the BAR meets on the fourth Tuesday of May, except as follows: In ERIE COUNTY, town BARs meet on the first Tuesday of June. In SUFFOLK COUNTY, town BARs meet on the third Tuesday of May. In WESTCHESTER COUNTY, town BARs meet on the third Tuesday in June. In NASSAU COUNTY, the Assessment Review Commission meets throughout the year, but complaints must be filed by March 1. In CITIES, the date for the meeting of the BAR is included in specific charter provisions or the assessor's or the city clerk's office has this information. In MOST VILLAGES that assess real property, the BAR meets on the third Tuesday of February. The village assessment calendars may vary so the taxpayer should consult the village clerk.
A public registry of known sex offenders is required by _____.
Megan's Law
Megan's Law
Megan's Law (1996), an amendment to the 1994 federal Violent Crime Control and Law Enforcement Act, requires a public registry of known sex offenders. In New York, the duty of real estate agents to disclose the presence of sex offenders in a neighborhood has been tested by the courts. In Glazer v. LoPreste, (278 A.D. 2nd 198), the court dismissed a lawsuit by the buyers against the sellers and sales agents where the buyers were not informed that a convicted sex offender lived across the street. The court ruled that, under the doctrine of "caveat emptor," (buyer beware), neither the sellers nor the sales agents had a duty to disclose this information to the buyers since there was no active concealment and the information was available to the buyers in newspapers. New York courts uphold the doctrine of caveat emptor. This means that unless there is a confidential or fiduciary relationship between the parties, there is no duty for the seller or seller's agent to furnish information about the property. In this case, there was no specific inquiry made by the purchasers regarding the existence of a sex offender. If they had asked, the agent would have to respond or refer the purchaser to local law enforcement. On the other hand, a buyer's broker, who has a fiduciary relationship with the buyer, would have a duty to disclose the sex offender's presence.
Flashing
Metallic or rubberized strips called flashing are installed near the edge of the eave and other corners of the roof, such as around the chimney. Flashing prevents water from seeping into the structure.
Darin operates an apple orchard on 10 acres of land, on which he also has a home. His tax assessment classifies the property as non-homestead. Darin can protest the assessment on the grounds of _____.
Misclassification
Under Article 9-A, if the offering statement is violated after a subdivision is approved by DOS, the offeror is guilty of a _____.
Misdemeanor
The type of slab that consists of a concrete floor and footings poured all at once is a(n) _____.
Monolithic slab
Freddie Mac Guidelines: Qualifying Ratios (Monthly Housing Expense)
Monthly housing expense includes: - principal and interest of mortgage payment plus escrow deposits for hazard insurance premium - real estate taxes and mortgage insurance premium - owner or condominium association charges, less the utility charge portion - any ground rents or special assessments - payments under any secondary financing for the subject property The debt ratios are not absolute. A borrower's excellent credit history or capability for future increased earnings and savings may be considered.
A delay imposed by a municipality in allowing the development of property within the municipality is known as a _____.
Moratorium
House rules are generally _____ items in the proprietary lease.
More detailed than
Compared to other types of investment property, with unimproved land, obtaining lender financing is typically _____.
More difficult
Where freshwater wetlands regulations applying to wetlands already mapped and under the jurisdiction of DEC are adopted under local government control, the local regulations must be _____ current state regulations
More protective than current state regulations
According to the guidelines for site location for a well, a well should be built at a depth of _____ below ground surface.
More than 20 feet
FHA Mortgage Insurance
Mortgage insurance is a policy that protects lenders against losses that result from defaults on home mortgages. FHA requirements include mortgage insurance mainly for borrowers making a down payment of less than 20 percent. These annual premiums are paid monthly and are called mortgage insurance premiums or MIPs. The premium amount is calculated based on the loan-to-value (LTV) ratio of the loan, its term, and size. The premium is paid monthly but remains fixed for the loan duration. Mortgage insurance charged on FHA loans is sometimes higher than the insurance premium charged on conventional loans.
Condominium Closing Costs: Tax Deductions
Mortgage interest is tax deductible for condominium mortgages just as with other home mortgage loans.
Mortgage Loan Calulations
Mortgage loan interest usually is calculated in arrears, although sometimes calculated in advance. If calculated in arrears, a monthly payment due June 1 includes interest for use of the money during May, the previous month. If calculated in advance, a monthly payment due on June 1 includes interest for use of the money in June.
Conforming Loans
Mortgage loans that meet Fannie Mae and Freddie Mac criteria such as loan amount limits for a certain area are known as conforming loans. the FHA regards loans of up to $729,750 as conforming.
When one party in a tax-deferred exchange receives a lower mortgage balance as part of the exchange, this is referred to as _____.
Mortgage relief
Priority of Mortgages
Mortgages usually take priority based on the date on which they are recorded in the public records. The exception to this rule would be a clause which waives the right to priority. This clause is called a subordination clause. When two or more mortgages exist you may see their priorities expressed as "superior" mortgage and "junior mortgage."
BTU Ratings
Most components of an HVAC system are assigned a BTU rating. BTU stands for BRITISH THERMAL UNIT, a measure of heat energy, and is the amount of heat required to raise the temperature of one pound of water by one degree Fahrenheit. The capacity of an air-conditioning unit is rated in tons of refrigeration, and 12,000 BTUs are equal to a one-ton capacity. Therefore, an air conditioner rated at 12,000 BTUs would melt one ton of ice per day. A heating system's efficiency is rated by A.F.U.E (Annual Fuel Utilization Estimate). A cooling system's efficiency is rated by SEER (Seasonal Energy Efficiency Rating). These are Federal standards, and in both cases, the higher the number, the more efficient the equipment operates because it utilizes the fuel with less waste.
Chlorofluorocarbons (CFCs): Air Conditioners and Aerosols
Most home air-conditioning units formerly used hydro chlorofluorocarbons (HCFCs), known as Freon (discussed previously), that is now banned. Since 1986, air conditioning units generally use Puron, a chemical that acts like Freon but does not deplete the ozone layer. Since the late 1970s, spray cans no longer uses CFCs. Chemically, CFCs and HCFCs are nontoxic and extremely stable. However, they deplete the ozone layer. The ozone layer is a layer of gas that screens us from the sun's ultraviolet (UV-B) radiation. CFCs are expelled into the air and migrate some 30 miles above Earth to the upper atmosphere. There, they enter the stratospheric ozone layer. Since CFCs are chemically stable, they may last for 100 years or more. In the stratosphere, the ultraviolet rays of the sun break up the CFCs and the chlorine portions expel into the stratosphere. These portions breakup ozone molecules and form an ozone hole. In 1985, scientists discovered a giant ozone hole over Antarctica. Scientific data reveals that the ozone layer over the North Pole is depleting. The ozone layer is eroding above North America, Europe, and other populated areas. The thinner ozone layer allows more of the UV-B radiation to reach Earth and may result in an increase in skin cancer and cataracts. Damage to crops and marine ecosystems, which in turn reduces our food supply, may also occur.
The national, uniform standard for all electric installation and service to safeguard people and property from hazards in using electricity is the _____.
National Electric Code
Under the Fair Housing Amendments Act of 1988, a building with a "no pets" policy _____ a service assistance animal.
Must allow
The regulations for the New York City Council are set forth in the _____.
NYC Charter
The New York agency that oversees wetlands according to the New York Environmental Conservation Law (ECL) is the _____.
NYS Department of Environmental Conservation
The agency that oversees the State Environmental Quality Review Act, including laws, regulations, and policy regarding environmental impacts, is the _____.
NYS Department of Environmental Conservation
In New York, which agencies regulates wetlands?
NYS Department of Environmental Conservation local conservation advisory boards local wetlands' commissions The NYS Department of Environmental Conservation (NYSDEC) is the New York agency that oversees wetlands according to the New York Environmental Conservation Law (ECL). In addition, a municipality may regulate wetlands by setting up a separate wetlands commission, or the conservation advisory council may monitor the wetlands.
Condominium Closing Costs: Mansion Tax
NYS collects a 1 percent tax from buyers who purchase a one-, two-, or three- family home or an individual condominium or cooperative unit for $1 million or more. The "Mansion Tax" applies to residential property. The tax was passed when the average price of a NYC apartment was far less than the million dollars or more it may be today.
If the design plans for a wastewater treatment system differ from the designs outlined in New York regulations, plans for the system must be submitted to the health department by a design professional, such as a _____.
NYS licensed engineer or architect
Plans for wastewater treatment systems, other than those outlined in New York regulations, must be designed and submitted to the health department by a professional such as a _____.
NYS licensed engineer or architect
Residential Above- and Underground Home Heating Oil Tanks
NYSDEC does not regulate most home heating oil tanks--those that are not over 1,100 gallons in capacity. Certain designated counties in New York do have their own regulations. They are Nassau, Suffolk, Rockland, Cortland, and Westchester. However, an owner must report all leaks and spills and remediate the problem. When a home underground tank or pipe leaks, the cleanup can cost $20,000 or more. A tank that is less than 10-15 years old should not cause problems. If a homeowner finds that their above- or underground tank is leaking, the best choice is to remove it. However, New York laws also allow it to be emptied, cleaned, and purged of all vapors and left in place. The homeowner must provide written proof to the local government that the tank is properly closed. Real estate licensees should disclose the known presence of an underground oil tank to prospective purchasers.
Underground Storage of Chemicals
NYSDEC lists over 1,000 chemicals that are hazardous, ranging from chlorine used in pools to fertilizers, acids, alkalis, and pesticides. Most of the facilities where these tanks are stored are commercial or industrial businesses. NYSDEC sets the standards for storage and handling. NYSDEC does not decide the site of the tanks. Sites comply with local zoning ordinances. Owners of regulated storage tanks containing petroleum and chemicals must register with NYSDEC, pay a fee, provide information about the site, and indicate the material that is stored there.
A retail space that has 30,000 to 100,000 square feet and is anchored by a supermarket is a _____.
Neighborhood center
Under the Real Property Law, a property owner may evict a tenant who _____ while occupying the premises.
Neither has a child or becomes pregnant The Real Property Law prohibits evicting a tenant if the tenant becomes pregnant or has a child while occupying the premises.
Which of the following features must an owner include in a newly constructed property first placed into service after March 13, 1991?
Neither; a flashing light instead of a door bell or grab bars in bathrooms The units must have reinforced bathroom walls to allow later installation of grab bars, but the grab bars need not be installed. A landlord must allow a handicapped tenant to add these features if he/she bears the cost, but they need not be built into new construction.
The process of capitalization is based on _____ income.
Net income
Calculating Federal Tax on Income Derived from Operations
Net income is the profit from a business or investment. It is the money left over after all business expenses are subtracted from income or revenues. The calculation of net income is performed by certain accounting rules known as GAAP or Generally Accepted Accounting Principles. When the same accounting rules are used to report net income, it is easier for regulating authorities to evaluate a business. This standard also allows investors to make direct comparisons between businesses. A simplified formula for calculating net income for tax purposes is: Income - Expenses = Net Income
The type of lease in which the tenant pays some or all of the expenses in addition to rent is a(n) _____ lease.
Net lease
The effective gross income of a property, less vacancy and collection losses, less operating expenses, is its _____.
Net operating income
The money left over after all business expenses are subtracted from income or revenues is called _____ income.
Net operating income
Underground and Aboveground Storage Tanks
New York Department of Environmental Conservation (NYSDEC) regulates the bulk storage of chemicals and petroleum both above- and underground. New York follows federal regulations that EPA oversees. Business and industry use underground storage tanks because the tanks are out of sight and not subject to vandalism and fire.
Omar Prince, an African American, wants to open a vegetarian restaurant in Syracuse, New York. A leasing agent tells him that minority applicants must fill out an addendum to the lease. The addendum guarantees 9 percent of Mr. Prince's gross to the leasing company instead of the 6 percent required of other applicants. The leasing agent is in violation of the _____.
New York Human Rights Law and the Civil Rights Act of 1866
A pool of all insurance companies writing fire insurance in New York that offers fire and extended coverage, as well as coverage for vandalism, malicious mischief, and sprinkler leakage to consumers who are unable to purchase this type of insurance from individual insurance companies is the _____.
New York Property Insurance Underwriting Association
Exemptions for Property Owners: Disability Exemptions
New York Real Property Tax Law gives local governments and public school districts the option of granting a reduction in property taxes paid by qualifying persons with disabilities. To qualify, persons with disabilities must have certain documented evidence of their disability. They must meet certain income limitations and other requirements. They also must file the exemption application with their local assessor by a certain filing date. The basic exemption is a 50 percent reduction in the assessed value of the legal residence of the qualifying person with a disability. For the basic exemption, the law allows each county, city, town, village, or school district to set the maximum income limit at any figure between $3,000 and $29,000. Localities have the further option of giving exemptions of less than 50 percent to persons with qualifying disabilities whose incomes are more than $29,000. Under this "sliding-scale" option, a qualifying owner can have a yearly income as high as $37,399.99 and have a 5 percent exemption in places that are using the maximum limit.
In New York, the agency whose standards apply to buildings or residences that process 1,000 or more gallons of wastewater per day is the _____.
New York State Department of Environmental Conservation
The agency overseeing wetland protection is the ______.
New York State Department of Environmental Conservation (NYSDEC)
The bulk storage of chemicals and petroleum, above- and below ground, is regulated by the _____.
New York State Department of Environmental Conservation (NYSDEC)
If a community well serves 25 or more people or it has more than five service connections, it is regulated by the _____.
New York State Department of Environmental Conservation and the New York State Department of Health
Guidelines for the proper location, construction, and protection of well water are provided by _____.
New York State Department of Health
In New York, the agency that regulates the installation and approval of individual residential on-site wastewater treatment systems of less than 1,000 gallons per day is the _____.
New York State Department of Health
The agency that oversees drinking water safety is the _____.
New York State Department of Health
The state regulatory agency that oversees health issues in New York is the _____.
New York State Department of Health
The regulatory agency that oversees all types of insurance in New York is the _____.
New York State Insurance Department
The New York code that follows the National Building Code and provides minimum standards for all building types in New York is the _____.
New York Uniform Fire Prevention and Building Code
Discount Points: New York
New York has usury laws that fix a maximum allowable interest rate. This maximum rate fluctuates. Borrowers sometimes volunteer to pay discount points to buy down or reduce a mortgage interest rate at the time of making the loan.
Exemptions for Property Owners: Senior Citizens' Exemptions
New York law gives local governments and public school districts the option of granting a reduction in property taxes paid by qualifying senior citizens. The assessed value of residential property owned by seniors can be reduced by 50 percent. To qualify, seniors must be 65 or older and show that they have owned the property for at least 12 consecutive months before the date of filing the application (unless the owner received a senior citizen exemption for his/her previous residence, in which case 12-month requirement is considered satisfied). For the 50 percent exemption, the law allows each assessing unit to set the maximum income limit at any figure between $3,000 and $29,000. Localities have the further option of giving exemptions of less than 50 percent to seniors whose incomes are more than $29,000. Under this option, called the "sliding-scale" option, the owner can have a yearly income as high as $37,399.99 and obtain a 5 percent exemption in places that are using the maximum limit.
Price Changes: Offering Plan Amendments
New developments must have an offering plan submitted to the attorney general's office, with a listed value for every apartment. The price cannot be increased unless the there is an amendment to the offering plan. The offering plan is amended according to the rules stated in the condominium bylaws. The new amendments are filed with the attorney general.
During the CPS1 period or phase, what is true when marketing condominiums or cooperatives?
No firm price can be declared by the developer for individual units.
Down Payment: Holding
No matter who holds a down payment, whether an attorney or real estate agent, the monies must be placed in a separate escrow account used only for the purpose of holding other people's money. The practice of a broker holding the deposit is more customary upstate than downstate. Downstate, it is customary for the seller's attorney to receive and hold the deposit (in his/her escrow account).
Discrimination in Mortgage Lending
No one may take any of the following actions with regard to lending when based on any of the federal and state protected classes. - refusing to make a mortgage loan - refusing to provide information regarding loans - imposing different terms or conditions on a loan, such as different interest rates, points, or fees - discriminating in appraising property - refusing to purchase a loan - setting different terms or conditions for purchasing a loan In addition, it is illegal for anyone to: - threaten, coerce, intimidate, or interfere with anyone exercising a fair housing right or assisting others who exercise that right - advertise or make any statement that indicates a limitation or preference based on any of the protected classes - This prohibition against discriminatory advertising applies to single-family and owner-occupied housing that is otherwise exempt from the Fair Housing Act
In a cooperative, the individual unit occupant owns _____.
No real property
Lori signed a contract of sale that is contingent upon her obtaining a mortgage commitment. Lori makes no attempt to obtain a mortgage commitment. She tells her real estate agent that she has not obtained a mortgage. Can Lori get her deposit back?
No, she has not met the terms of the mortgage contingency.
The classification of real property that is not for residential purposes and includes commercial, industrial, special franchise, and utility property is _____.
Non-homestead
The New York Department of State, Division of Licensing Services, may issue a(n) _____ in a certain geographical area to prevent the practice of blockbusting by licensees.
Non-solicitation order
When zoning is first imposed on an area or when property is rezoned and a preexisting use of property in the area is different from that specified by the zoning, it is called _____.
Nonconforming use
A lease clause stating that the landlord's lender and future owners of the building cannot terminate the lease as long as the tenant fulfills lease obligations is called a(n) _____ clause.
Nondisturbance clause
A lease clause that states that the landlord's lender and future owners of the building cannot terminate the lease as long as the tenant fulfills lease obligations is called a(n):
Nondisturbance clause
The Secretary of State can prohibit licensees from soliciting listings for the sale, purchase, or rental of real property, in certain specified areas of the state. This is known as a _____ order.
Nonsolicitation
Which of the following is NOT a basis of discrimination prohibited by the 1968 act?
Occupation race religion *occupation* national origin
Loan Flipping
Occurs when the lender encourages borrowers to obtain additional cash by refinancing their mortgage repeatedly. This tactic greatly increases the debt because fees (often very high) are tacked on to each loan transaction. The borrower may pay a higher interest rate than with the original loan.
Closing Costs on Conventional Loans
Often calculated as a percentage of the loan amount: - lender's title insurance - origination fee usually charged as a flat fee: - appraisal fee - credit report fee - attorney's fees - survey recording fees - pictures - payment schedule Any of the items listed earlier as closing costs may be paid by either the buyer or the seller.
Construction Mortgage: Bond
Often the lender requires the builder to be bonded for completion of the property. The bond is made payable to the lender in case the builder goes bankrupt and does not complete construction. The lender can then obtain the funds to complete the project, sell the property, and recover the monies extended under the loan.
Fair Housing Act of 1968: Same-Sex Marriage
On June 26, 2015, the U.S. Supreme Court ruled that same-sex marriage is legal in all 50 states, giving same-sex couples the same legal rights and protections under the law as any married couple. It has been legal in New York since voted in by the NYS Legislature under the Marriage Equality Act passed on July 24, 2011. Same-sex marriage has been recognized in New York since 2008, even if the couple married in another eligible jurisdiction.
The taxpayer may deduct losses from passive investments against income from _____.
Passive investments only
Disadvantages of FHA Financing
On a 30- or 15-year FHA home loan, the upfront mortgage insurance premium (MIP) equals up to 1.50 percent of the loan amount in addition to the 0.5 percent annual renewal premium that a borrower pays for the life of the loan. FHA limits the amount that can be borrowed
In order to qualify for annual state aid, tax assessors are required to physically inspect all property at least _____.
Once every six years
Walls/House Wrap
Once the framing members are in place, including the roof rafters (described later), a plywood covering called sheathing is placed over the exterior wall framing members. OSB board, also known as wafer board, may be used for the sheathing. House wrap is installed over the sheathing and behind the exterior siding. Current house wrap materials are a replacement for the older asphalt saturated felt. Today materials such as polyethylene or Tyvek, which are impermeable to moisture, are used. A final covering is placed over the sheathing. This covering is generally brick or siding in New York. Siding may be metal (such as aluminum), wood, or vinyl. Often a combination of materials, including fieldstone, brick, vinyl, wood or other siding materials, are applied. Some subdivisions have regulations for exterior materials. Licensees working with new construction should know about these restrictions. For the interior walls of the structure, a material called sheetrock, wallboard, or plasterboard is installed.
Roof Sheating
Once the structural skeleton of the roof system is in place, it is covered with plywood or particle-board decking (the roof sheathing). On top of this, roofing paper is applied for weatherproofing. On top of the roofing paper, shingles are applied. Most construction uses fiberglass shingles, but tile and wood shingles are also used.
Steps in the Sales Comparison Approach: Assigning "Weights"
Once you have adjusted the price of each comparable, the next step is to assign a "weight" to each comparable. The purpose of the weight is to reflect your assessment of the similarity of each comparable to the subject property. A property that is more similar to the subject property should be given a higher weight than one that is less similar to the subject property. The weight will be assigned using percentages. Example: Let's assume that, in your opinion, House D was the most similar to the subject property, so you decide to give it a "60%" weight as shown above. House A was the next closest, so you gave it a 20%. Houses B and C were the least similar, and you gave them each a 10%. The next step is to multiply the adjusted price of each comparable by its weight. Next, you ADD up the numbers of all the weighted properties. (Note that you DO NOT AVERAGE any numbers in this process, just add them up.) The last step is to round your answer off to the nearest $100. (Property A x .20) + (Property B x .10) + (Property C x .10) + (Property D x .60) = Total Price of Subject Property
Novation
One form of agreement that terminates contracts. Novation is the substitution of a new contract for a prior contract. The new contract terminates the original contract and the original party's liability. May also be the substitution of a new party for a former party.
One of the inherent burdens on private land ownership is _____.
One of the inherent burdens on private land ownership is taxation.
VA Guaranteed Loans: Down Payments
One of the most distinguishing characteristics of a VA loan is that, typically, no down payment is required (LTV = 100 percent). The guaranty replaces the protection the lender normally receives by requiring a down payment. This allows the veteran to obtain favorable financing terms. If the lender is approved under VA's Lender Appraisal Processing Program (LAPP), the lender may review the appraisal completed by a VA-assigned appraiser and close the loan based on that review. The loan amount may be for 100 percent of the VA appraisal of the property or for 100 percent of the sales price, whichever is less. The VA's certificate of reasonable value (CRV) indicates the appraised amount and establishes the maximum property value. The VA provides this certificate, sometimes called the VA appraisal, to the lending institution as a basis for making the loan.
Underlying Mortgage
One of the most important issues in deciding to purchase a cooperative apartment is the status of the building's underlying mortgage. There may be a discussion of this subject in the minutes. A majority of apartment corporations own their building with one or more mortgages. The purchaser should determine what type of mortgage exists, how many mortgages there are, and when they will mature. The financial statement includes the details of the underlying mortgage. If the mortgage is maturing soon with a large payment due, it will most likely have to be refinanced at a large expense to the apartment corporation. (If it is a small amount, the shareholders may pay off any principal balance remaining at maturity.) A long-term mortgage is more favorable to a shareholder because it reduces the risk of needing to find a new lender and incurring a large expense in a short time. If the underlying mortgage is maturing soon, it may be difficult to locate a lender to provide a co-op loan to an individual purchaser. Many lenders require a minimum of two years remaining on the underlying mortgage before it will make a loan to a purchaser of a co-op apartment.
In New York City, for multiple dwellings, how many approved smoke detectors must be installed in each apartment near each room used for sleeping?
One or more
To be considered a disability, an impairment must affect _____.
One or more major life activities
Unilateral Contract
One party makes a promise in order to induce a second party to do something. The party making the promise is obligated under the contract after the other party completes the contract. The other party has made no promise. He/She is not obligated to perform or act.
A borrower who suffers a financial loss due to a Regulation Z violation may sue the violator in federal district court within _____.
One year
A complaint alleging discriminatory behavior must be filed with the New York Division of Human Rights within _____.
One year
Under the Human Rights Law, an individual has _____ to file a complaint alleging discriminatory behavior.
One year A complaint alleging discriminatory behavior is filed with the NYS Division of Human Rights (DHR) within one year after the alleged discriminatory behavior.
A magnetic field exists _____
Only if an appliance is turned on
A type of mortgage that permits the borrower to demand that the lender advance additional funds without rewriting the mortgage or charging additional closing costs is a(n) _____ mortgage.
Open-ended mortgage
Wall Openings
Openings in the wall for doors or windows are reinforced to support the vertical load. The openings are constructed with framing members known as headers, or lintels, erected over the top of the opening. Headers form a solid wood bridge over the opening and extend to the bottom of the top plate. They support the ceiling and the roof over the door and window openings.
Deriving the Net Operating Income (NOI)
Operating expenses are deducted from effective gross income. The result of deducting operating expenses is NET OPERATING INCOME. Potential Gross Income (income at 100 percent occupancy) - Vacancy and Collection Losses = Effective Gross Income - Operating Expenses = Net Operating Income
A statement of income and expenses for a property for a specific period of time is called a(n) _____.
Operating statement
Fair Housing Act of 1968
Originally enacted by Congress as Title VIII of the Civil Rights Act of 1968, the Fair Housing Act prohibits discrimination in housing based on race, color, religion, or national origin. An amendment in the Housing and Community Development Act of 1974 added the prohibition of discrimination based on sex. The Fair Housing Amendments Act of 1988 added provisions to prevent discrimination based on mental or physical handicap or familial status.
Personal property loans are excluded from the coverage of the Consumer Credit Protection Act if they are _____.
Over $25,000
Before property can be taken through condemnation under eminent domain, the government must _____.
Pay the fair market value of the property
The most common type of framing used in residential construction is _____.
Platform framing
Tax Rate on Recaptured Depreciation
Over the life of an investment property, a property owner may take certain tax deductions known as depreciation. When a property sells at a gain, some part of that gain is attributable to the depreciation deductions taken in prior years. When a property owner disposes of the property, a tax on the income or gain realized because of the allowed depreciation is recaptured as income up to the amount of the depreciation. Recapture means to be included as taxable income. Depreciation is subtracted from the basis, which decreases the adjusted tax basis of the property. Because gain is the difference between the amount realized and this adjusted basis, the amount of profit or gain for tax purposes is increased by the amount of depreciation, which increases the amount of tax that must be paid. This process is called RECAPTURED DEPRECIATION. Real estate is recaptured at a 25% rate. To compute any gain that must be reported as income, a property owner must keep records needed to figure the depreciation or amortization allowed on the property. This includes the date and manner of acquisition, cost or other basis, and depreciation or amortization.
When CFCs are trapped in the stratospheric ozone layer, ultraviolet light breaks them up, and these broken up CFC particles in turn damage the _____.
Ozone layer
A mixed-use development that permits residential and commercial development is called a _____.
PUD A mixed-use development that permits residential and commercial development is called a planned unit development or PUD.
Which of the following is NOT a common charge item for condos?
Package delivery
Homeowner's and tenant's policies are typically _____ policies.
Package policies
An insurance policy that includes several different types of coverage, such as property insurance and liability insurance, is a(n) _____ policy.
Package policy
Several different types of coverage, such as property insurance and liability insurance, are included in a(n) _____.
Package policy
Income produced by any trade or business in which the taxpayer does not actively participate is considered to be _____ income.
Passive income
Amortized Mortgage Loan Payments
Payments are for the same total amount throughout the term of the loan. The amount of each payment going to interest decreases. The amount of each payment going to principal increases. The amount of interest paid with each installment declines because the interest rate is applied against a smaller and smaller amount of principal. In this way, the loan is amortized. The final payment in a fully amortized mortgage pays any remaining interest and principal.
Chlorofluorocarbons (CFCs): Remediation
People dispose of millions of refrigerators and freezers containing Freon. Without refrigerant recovery, about four million pounds of ozone-depleting chemicals escape from these appliances. The national program to protect the ozone layer requires: recycling of CFC and HCFC developing substitute chemicals banning nonessential uses enforcing product labeling Technicians may not open a valve and vent refrigerant when servicing a unit. Refrigerant recovery machines draw the refrigerant into a holding tank. The refrigerant is purified and sold for reuse. The appliance is discarded without harm to the ozone layer.
The loan-to-value ratio is expressed as a _____.
Percentage
A type of lease that has a base rent plus an additional monthly rent that is a portion of the lessee's gross sales is known as a(n) _____ lease.
Percentage lease
A type of lease that can assist the owner in reaching a natural break-even point is a(n) _____.
Percentage lease A natural break-even point defines when an investment will generate a positive return. The percentage that a lessor charges on a percentage lease can be lowered to assist the retailer in reaching a break-even point.
In insurance terms, a cause of a loss is called a(n) _____.
Peril
In insurance terms, events that do damage are called _____.
Perils
Amortized Note
Periodic principal and interest payments are made until the principal is paid. Most mortgage loans are of this type. The original principal is the total amount of the note. This amount remains the same in an interest-only or a one-payment loan until the entire principal is paid. With an amortized loan, this amount decrease over the term of the loan.
Package Mortgage
Personal property, in addition to real property, is pledged to secure payment of the mortgage loan. Typical examples of personal property are major household appliances and furnishings. A sale of furnished condominium apartments may use a package mortgage. In this case, the mortgage includes the condo (real property) and the furnishings (personal property). A package mortgage gives the borrower the advantage of financing those items at a lower rate of interest by including them in a "package" with the home loan. A package mortgage is common in commercial real estate lending where the business assets may be collateral.
Assessment Phases: Phase I
Phase I is the investigative phase, when the due diligence work takes place. There is an examination and review of the property's history. There may be an examination of properties near the subject property.
Assessment Phases: Phase IV
Phase IV, the management phase, includes periodic monitoring by responsible parties and future remediation.
The wear and tear that comes from normal use is a type of depreciation called _____.
Physical Deterioration
A developer wants to build a 30,000 square foot building on a 31,000 square foot site. This project may fail which of the tests for highest and best use?
Physically possible
What is an accommodation to remove a barrier?
Placing ramps
Which of the following is an accommodation to remove a barrier?
Placing ramps
The orderly growth of a community resulting in the greatest social and economic benefit to the people living there is accomplished through _____.
Planning
What pipes are used where there is a hard-water problem?
Plastic Plastic is lightweight, economical, resistant to corrosion, and easy to install. It is used where there is a hard-water problem.
Plastic Pipe
Plastic pipe is lightweight, economical, resistant to corrosion, and easy to install. It is used where there is a hard-water problem. When compared to metal pipe, plastic is less resistant to heat, expands and contracts more when heated and cooled, has less crush resistance, withstands the same internal pressure, and does require more support because of its flexibility. PEX pipe is a very flexible pipe that is either all plastic or consists of layers of plastic with aluminum centered between the plastic layers. It is used for plumbing and heating. For home plumbing, four types of plastic pipe are used: PVC, PEX, ABS, and CPVC. In New York City and other municipalities, there are restrictions on plastic pipe use.
A recorded subdivision map that shows a rendering of the lots, their sizes, and where they are situated on the property is known as a _____.
Plat A recorded map that shows a rendering of the lots, their sizes, and where they are situated on the property is known as a plat.
The type of framing in which separate wall studs are used for each story of the building, and each story is built as a separate unit, is called _____.
Platform framing
A mortgage in which the purchaser's down payment is deposited in a savings account with the lender is known as a(n) _____.
Pledged Account Mortgage
Brown v. Board of Education reversed the Supreme Court ruling on _____, finding that separate facilities were, by nature, unequal.
Plessy v. Ferguson
In what case did the Supreme Court rule that separate but equal was legally acceptable?
Plessy v. Ferguson
The increase in value when two or more adjacent properties are combined into one parcel is called _____.
Plottage
What empowers all government levels to provide for the public health, safety, and welfare of its citizens?
Police power
The plan an insured receives through an insurance agency detailing all the terms and conditions of the insurance coverage is the _____.
Policy
The person (or persons) whose name appears on an insurance policy is the _____.
Policyholder
A formula for rent escalation that is based on the amount paid to cleaning and maintenance personnel is called the _____ formula.
Porter's wage escalation
Which of the following is a type of lease escalation clause?
Porter's wage formula
Income derived from dividends, interest, or royalties is considered _____ income.
Portfolio income
The type of framing in which supporting beams rest on posts or columns rather than bearing walls is called _____.
Post-and-beam framing
The total income that a property would generate at full (100 percent) occupancy is _____.
Potential gross income
Predatory Lending
Practices typically involve at least one, and sometimes all three, of the following: - Making unaffordable loans based on the borrower's assets, rather than on the borrower's ability to repay an obligation ("asset-based lending"). - Inducing a borrower to refinance a loan repeatedly in order to charge high points and fees each time the loan is refinanced. - Engaging in fraud or deception to conceal the true nature of the loan obligation from an unsuspecting borrower.
Balloon Mortgages
Predatory lending often involves the use of BALLOON mortgages. A balloon mortgage provides for installment payments that are not enough to pay off the principal and interest over the mortgage term. At the end of the term, there is still a balance due on the principal amount. Therefore, the remaining principal balance is paid in one lump sum at the end of the term. The final payment, called a balloon payment, is much larger than any previous payment. A balloon mortgage is also called a partially amortized mortgage because the loan does not amortize out at the due date. Balloon mortgages can be trouble for homebuyers once the mortgage period ends. During the term of the balloon mortgage, most of the money the borrower has paid covered the interest, and the principal has decreased only slightly--or not at all in the case of an interest-only loan. The borrower may have to get another loan to make the balloon payment. The later loan may carry a higher interest rate and a shorter term than the original balloon mortgage, resulting in a much higher monthly payment, which the borrower may not be able to afford.
The amount of money a property owner must pay for insurance coverage is the _____.
Premium
Governments address specific concerns and plan for the future in order to _____.
Preserve the value, safety, and health of private citizens
Capitalization Formula: Price
Price = annual net income divided by capitalization rate Price = income divided by rate
Condominiums: Price Changes
Price changes and increases occur in condominium offerings. Sometimes, the sponsor offers the condominium at an initial or first phase price. A purchaser may see this price and submit a letter of intent. By the time the letter reaches the developer, the price may have increased.
What element of the price of a property is TRUE?
Price is not always equivalent to the market value of a property.
Lending institutions making mortgage loans directly to individual borrowers are the _____.
Primary mortgage market
Private land use controls can be initiated through _____.
Private land use controls can be initiated through deed restrictions.
Insurance that protects lending institutions making conventional loans is _____.
Private mortgage insurance is insurance that protects the lender against losses if the borrower defaults on a conventional loan.
A reconstructed operating statement used to project income and expenses for a future period is a _____ statement.
Proforma statement
A reconstructed operating statement used to project income and expenses for a future period is a(n) _____.
Proforma statement
An income tax structure in which higher income taxpayers pay taxes at a higher rate is said to be _____.
Progressive
Commercial boycotts and blockbusting are _____.
Prohibited
Equity Issues and Why Assessments Differ
Properties become under-assessed over time when assessed values are not updated. The more a property increases in value in contrast to its neighbors without its assessed value being adjusted, the more it will be under-assessed.
Which element is not an appropriate comparable for a comparative market analysis?
Properties yet to be built
Advantages of Property Taxation
Property taxation has several advantages over other types of taxes, such as sales tax and income tax: - predictability - hard to conceal - historic relationship to wealth and land productivity - low administrative costs Predictability: Property market values are generally not subject to the whims of the stock market or the economy. Hard to conceal: Because property tax is secured by the property, the payment of property tax has a high compliance rate. Property owners pay more than 95 percent of the tax levied. Very few owners do not pay their property tax. Many lenders require that property tax be escrowed as part of the monthly mortgage. Historic relationship to wealth and land productivity: Since the middle ages, land ownership has evolved as an indicator of wealth. Because land is productive in some way, government participates in its productivity. Property tax reaches all sectors of the economy: residential, agricultural, forestry, commercial, industrial, and utility. This adds to the stability of the tax. It generates more than one-third of the revenues received by local governments. Low administrative costs: The taxation process costs less than $7 per $1,000 raised in property taxes.
Economic (External) Obsolescence
Property that is outdated for external, environmental, or locational reasons: - external obsolescence where there are changes in surrounding land-use patterns resulting in increased traffic, air pollution, and other hazards and nuisances - failure to adhere to the principle of highest and best use - changes in zoning and building regulations that adversely affect property use - reduction in demand for property in the area caused by local economic factors
Recording the Mortgage
Protects those with any present or future interest in the property by providing constructive notice to the public of ownership and any other interest in the property. If mortgage is not recorded, someone obtaining and recording a future interest in the property may have an interest superior to that of the person who gained an interest earlier but did not record the document.
Mortgage: Right of Foreclosure
Provided to the lender if the borrower fails to make payments as scheduled or does not fulfill other mortgage obligations.
Zoning Board of Appeals
Provides a "safety valve" for the zoning ordinances. The zoning board of appeals exists because it is difficult to draft a perfect zoning ordinance. The zoning board of appeals makes the zoning ordinances more flexible. It keeps zoning legislation out of the courts. One of the main duties of a zoning board of appeals is to maintain the essential character of the neighborhoods. It is an interpreter of the zoning ordinance. The mayor or city manager of a city, the village board of trustees, or the town board appoints a zoning board of appeals. Zoning enabling acts provide for the number of members of the particular zoning board of appeals and the terms of office of its members. A zoning board of appeals generally consists of three or five members. Each member's term is generally equal in years to the number of members on the board. All official board actions are at a public meeting, although the board can meet privately.
The most common refrigerant used in air conditioners today is _____.
Puron (R-410A)
Financing: Lender/Co-op Recognition Agreements
RECOGNITION AGREEMENTS describe the relationship between the cooperative and other entities. These entities include government agencies or financial institutions. A lender signs a recognition agreement with the cooperative corporation. This agreement is an understanding between a cooperative and the lender that provides share loans to the cooperative's shareholders. The recognition agreement outlines the responsibilities between the cooperative corporation and the lender. It describes the actions by each party if a shareholder/member defaults on the loan. It should require the corporation to notify the lender if the member misses a monthly maintenance payment.
Cost Approach To Pricing: Formula
REPLACEMENT or REPRODUCTION COST - DEPRECIATION + VALUE OF LAND ----------------------------------- = ESTIMATED PRICE
The Civil Rights Act of 1866 prohibits discrimination based on _____.
Race This 1866 law prohibits racial discrimination in the purchase, sale, or lease of both housing and personal property.
Heat is transferred evenly to the surrounding objects and people rather than to the air with _____.
Radiant panels
Radiant Panels
Radiant panels are composed of tubes carrying electricity, steam, or hot water as a heat source. These tubes are embedded in ceilings, walls, or floors. Heat is transferred evenly to the surrounding objects and people rather than to the air.
Value by Income Capitalization: Rate
Rate (represented as R) is always a percentage. The most common application of rate is an interest rate, a capitalization rate, or a commission rate. Once again, rate is always calculated on an annual percentage.
Adjustable rate mortgages are structured with _____ that limit the annual and total adjustment during the lifetime of the loan.
Rate caps
Like-Kind Exchanges
Real estate exchanges often involve the deferment of taxes that would otherwise be due if the property were sold. Exchanges of real property are often referred to as "tax-free" exchanges, but they are not really tax-free; they just postpone the payment of taxes. The correct label for an exchange is "TAX-DEFERRED" EXCHANGE, not "tax-free" exchange. A tax-deferred exchange is also known as a 1031 exchange, named after the section of the Internal Revenue Service Code that defines it. Performing a 1031 tax-deferred exchange allows an individual to defer capital gains taxes on real estate bought and sold for investment purposes. The IRS Code provides that for qualified exchange of property, some or all of the capital gain need not be recognized for tax purposes in that year. The property exchanged must be investment property or business property.
When granting use variances and area variances, the zoning board of appeals can impose _____.
Reasonable conditions and restrictions
A residential lease usually provides that the premises be used _____.
Reasonably for its intended purpose
Relationship of the Building Permit Process to Reassessment
Reassessment of property for tax purposes occurs on a regular basis established by statutes. Reassessment also occurs when improvements are made to the real estate. Tax assessors are not permitted to do "spot" reassessments on a single property unless it is apparent or reported that there is a material change to the property. If a property owner undertakes major renovations, even without increasing the "footprint" of the property, the market value is likely to be increased. Then the assessor may have cause to increase the assessment above other similar sized houses.
When a depreciated property is sold, the income or gain realized due to depreciation is taxed as income. This process is called _____.
Recaptured depreciation
In some cities and towns, the official or agency that collects fees for water usage and other permits is the:
Receiver of taxes
In towns of the first class, the collecting officer who receives real property taxes and assessments during a specified collection period is called the _____.
Receiver of taxes and assessments
When developing a CMA, a comparable is more valuable when it is _____.
Recent
Residential Market Analysis: Items to Consider
Recently sold properties Current competing properties Recent expired listings Buyer appeal Market position Assets Drawbacks Area market conditions Recommended terms
Residential Market Analysis: Recently Sold Properties
Recently sold properties should be located in the same general vicinity as the subject property and be similar in age and located in the same living area. The agent should analyze from three to six sold properties in the same neighborhood. He/She should compare the properties in terms of type of structure, age, size, number of rooms, lot size, location, condition, number of days on the market, the listed price, and the final selling price. He/She can compare other items such as landscaping and HVAC.
A description of the arrangement between a lender and the cooperative, in case a shareholder is in default, is included in the _____.
Recognition agreement
An agreement that outlines the responsibilities between the cooperative corporation and the lender is called a(n):
Recognition agreement
Historic Preservation/Landmark Commissions: Functions
Recommending to the municipality the adoption of ordinances preserving historic districts, landmarks, and historic sites Reviewing and approving applications for construction, alteration, demolition, or relocation of a historical property or object Recognizing sub-districts within a preservation district. This allows the commission to adopt guidelines regulating properties in the sub-district.
The adjusted operating statement used by appraisers to estimate income and expenses for a property is referred to as a(n) _____.
Reconstructed operating statement
A lender refuses to make a home loan because the area in which the home is located is integrated or populated by people of a protected class. This practice is known as _____.
Redlining
Before the Fair Housing Act, some lending institutions refused to make loans within the circled areas on a map based upon some characteristics of property owners in the area.Illegal today, this practice became known as _____.
Redlining
The Consumer Credit Protection Act is administered through a set of regulations known as _____.
Regulation Z
Regulation Z
Regulation Z is a set of regulations used to implement the Consumer Credit Protection Act. Established by The Federal Reserve Board. Regulation Z does not regulate interest rates. Instead, it provides consumer protections in mortgage loans for residential real estate. Regulation Z covers all real estate loans for personal, family, household, or agricultural purposes. It requires that the borrower be informed regarding the loan transaction. In addition, the regulation addresses any advertisement of credit terms available for residential real estate.
Replacement Cost Reimbursement
Reimbursement for the actual cost of replacing the damaged property. For instance, if a refrigerator were destroyed in a fire, the replacement cost would be the cost of buying another refrigerator. The replacement cost of the insured's home must be estimated when the insured purchases a homeowner's policy.
Actual Cash Value
Reimbursement for the replacement cost minus the physical depreciation of the lost or damaged property. There is no set formula for calculating depreciation. Insurers use different formulas. In addition, different formulas may be used for items such as furniture, clothing, and appliances.
A clause that allows certain parcels of property to be removed from a blanket mortgage lien if the loan balance is reduced by a certain amount is called a(n) _____ clause.
Release clause
The cost of replacing a building by constructing a building of comparable utility using modern building techniques and materials is the _____ cost.
Replacement cost
Which appraisal method uses the cost of constructing a building of comparable utility using modern techniques and materials?
Replacement cost
Mortgage Backed Securities (MBS)
Represent ownership interests in a pool of mortgage loans secured by single-family (one- to four-unit) residential properties. MBSs entitle an investor to an undivided interest in the underlying mortgage loan pool. Thus, an investor receives a pro rata share of the interest and principal on the underlying mortgage loans. An individual Single-Family MBS pool may hold mortgage loans that are either fixed-rate or adjustable-rate loans but not both. Fannie Mae also creates mortgage-backed securities for multi-family residential properties (five or more units) and other types of properties.
Property Insurance: Insurance Brokers
Represent the property owner and not the insurance company. A broker may or may not have the power to issue policies or bind insurance companies to issue a policy. However, once a broker has found a company willing to issue a policy, any premium payments the property owners pay to the broker are the same as if the property owner had paid the insurance company directly.
The cost of replacing a building by constructing an exact duplicate of the property when it was new is the _____ cost.
Reproduction cost
Historic preservation boards in New York do NOT have the power to _____.
Require landowners to restore historic buildings Under the General Municipal Law, a municipality cannot require a landowner to restore and rehabilitate a historic building.
Warranty of Habitability
Requires that tenants have a livable, safe, and sanitary apartment. This warranty also covers public areas of the building. This warranty does not apply to condominiums.
The amount of invested monies used for repairs or capital improvements to a cooperative or condominium building is the _____.
Reserve fund
The New York Uniform Fire Prevention and Building Code provides minimum standards for _____.
Residential and commercial buildings
The calculation used by assessors as a general measure of assessment equity is called the _____.
Residential assessment ratios (RARs)
Electric Heating System
Residential electric heating is usually in the form of baseboard heaters placed directly along the walls of a room. It can also be in the form of strip heat in an air handler that is usually used as a backup to a heat pump. When electricity passes through a wire, the molecules are stirred up and create heat. The unit consists of three basic elements: a resistor, the material used to produce heat by passing current through it; insulated protective metal sheathing where the resistor is embedded; and a terminal that connects the unit to the power supply. Electric heat can be economical in some areas, since it does not require a furnace or duct work, but the cost in New York is more expensive than other fuels.
Residential Single-Family and Multi-Family Buildings
Residential investment may involve single-family houses and multifamily dwellings, including condominium or cooperatives. Investment in residential property, especially larger multi-family units, generally involves the services of a resident manager or onsite management team. The investor requires the drive and personality to deal with tenant issues and maintenance. A popular form of residential investment is the rehabilitation of properties. The property is fixed up and then sold, hopefully at a profit. Some residential investors flip property. They purchase the property and then immediately sell to realize quick profits.
A careful study of a residential subject property being listed, as it stands on its own and in light of the conditions in the marketplace, is known as a(n) _____.
Residential market analysis
Reverse annuity loans are frequently used by _____.
Retirees
Refrigerant recovery draws refrigerant from the unit, then purifies it for _____.
Reuse
A mortgage used by older people to draw down the equity in their home is called a(n) _____.
Reverse Annuity Mortgage
A lender is allowed to sell the mortgage and obtain the money invested rather than wait for payment of the loan over an extended time under the right of _____.
Right of assignment
The clause that allows a condominium association to have the first opportunity to purchase a condominium when it goes up for sale is the _____ clause.
Right of first refusal
Risk: Special Risks
Risk is not limited to just one factor. In addition to the financial risk associated with debt, an investor considers other risk factors. These can include a downturn in the real estate market or an investment that is not liquid. With development projects, an investor initially may have to invest dollars into the idea and project approval. The approval process may involve many government agencies. The parcel of land may have environmental problems. The State Environmental Quality Review (SEQR) process alone (discussed elsewhere) combined with possible public opposition, may push back the timetable for development, or terminate the concept. After looking at the risk, an investor may decide that the project is not worth the effort. Think of efforts you know about where a project is abandoned because of the risks.
Perry has $350,000 equity in his building. He wants to free up this equity but retain possession and control of the building, since he has his offices there. What type of transaction might meet his objectives?
SALE LEASEBACK is a transaction in which a property owner sells a property to an investor who immediately leases back the property to the seller as agreed in the sales contract. Commercial property owners often use SALE AND LEASEBACK arrangements to free up capital to use for other purposes.
Sexual orientation was added as a protected class by _____ under the Human Rights Law.
SONDA
SONYMA Maximum Purchase Prices
SONYMA mortgages define maximum purchase prices as well as purchaser income limits. These amounts vary from county to county in New York.
SONYMA Features
SONYMA, also known as Sonny Mae, features: - competitive interest rates - low down payment requirements - flexible underwriting guidelines - no prepayment penalties - down payment assistance SONYMA raises money from the sale of New York tax-exempt bonds and applies the money toward mortgage loans. To maintain the tax-exempt status of its bonds, all loans, borrowers, and properties must comply with certain federal laws and regulations.
Steps in the Sales Comparison Approach
STEP 1 - Locate and gather information on similar properties that have sold recently in the same neighborhood or area. STEP 2 - Compare the comparables to the subject property and make adjustments in the price of the comparable properties for any differences between them and the subject property. STEP 3 - Reconcile all the data from the comparables by assigning "weights" and arrive at a price for the subject property.
A transaction in which the owner sells the property to an investor who then leases the property back to the original owner is called a _____ arrangement.
Sale and leaseback arrangement
The appraisal approach to value that receives the most emphasis in the appraisal of single-family homes is the _____ approach.
Sales comparison
The approach to value that involves comparing the property that is the subject of the appraisal with other properties offering similar utility that have sold recently is the _____ approach.
Sales comparison
The primary appraisal approach for estimating the value of single-family, owner-occupied dwellings and vacant land is the _____ approach.
Sales comparison
Families with Children: Amendments Act
Second, if there are reasonable local laws which limit the number of individuals who may occupy a dwelling unit, the provisions of the Fair Housing Amendments Act will not override those local laws. Under the Amendments Act, "reasonable" local laws limiting the number of occupants are those which are legitimately based on safety or health considerations.
Disclosure of Deductibles for Windstorm Damage
Section 3445 of the New York Insurance Law requires that insurers provide proper disclosure to their insured of any windstorm deductibles attached to their homeowner's policies. The NYSDFS requires specific information to be contained in the notice. Insurers must attach this notice to all new and renewal homeowner's policies. Windstorm deductible programs approved by the NYS Insurance Department provide windstorm coverage subject to certain mandatory deductibles depending on the geographical location of the risk. The mandatory deductibles range from 1 percent to 5 percent of the insured amount, with optional deductibles available at higher percentages.
RHS: Section 515
Section 515 is the principal source of financing for rental housing in rural areas. Under Section 515, non-profit and for-profit entities can receive one percent loans for acquisition, rehabilitation, or construction of rental housing and related facilities. The loan term is 30 years. Most Section 515 loans go to for-profit entities such as developers who combine the subsidized loan with rental assistance and tax subsidies to finance housing. The USDA has experienced severe budget cutbacks that have limited its ability to finance this program.
Separate Property vs. Common Property
Separate Property consists of the individual dwelling units. Technically, a dwelling unit consists of only the space between the walls, floor, and ceiling of the building. COMMON PROPERTY is everything else, including: - land - interior and exterior walls - any other improvements such as pools and tennis courts - hallways and stairs - recreation areas and landscaping - parking lots
In a condominium development, each unit owner holds a fee interest in _____ property.
Separate interest
In a condominium, the air space between the walls, floor, and ceiling of a unit is called _____ property.
Separate property
A private system used for removing waste from a property that utilizes a concrete tank and an absorption field is a _____.
Septic system
An aboveground cable that comes from the nearest pole connecting to the service entrance conductors of the building is called the _____.
Service drop
Underground wiring connecting the structure is called the _____.
Service lateral
Solar Water Heaters
Solar water heaters employ a closed loop antifreeze system. The system has three major components: the solar collectors, a storage tank, and a heat exchanger. A back-up electric, oil, or gas system is sometimes necessary and activates when the system does not provide the required amount of hot water.
A parcel of unimproved land that can be improved for different uses is called a(n) _____.
Site
In cities with populations less than 50,000, the board of health consists of the mayor, who is the president, and _____.
Six other persons
Under the New York Anti-Predatory Lending Law, a borrower can bring an affirmative action against a lender up to _____ from the date of the loan origination.
Six years
Walk-out basements are typically associated with _____.
Sloping lots
Rafters
Sloping parallel beams that support the roof. They are fastened to the ends of the ceiling joists and form the gables of the roof. The ridge beam is the highest part of the framing and forms the apex, or top line, of the roof. The rafters are fastened to the ridge at the peak of the gable.
Small Claims Assessment Reviews (Residential Only): Filing with the County Clerk
Small claims assessment review (SCAR) petitions are available through the county clerk's office. The fee for filing is $30. The petition must be filed within 30 days of the last date allowed for filing a final assessment roll for the assessing unit where the property is located.
Mixed Use Buildings
Small multi-use buildings combine a number of different uses under one roof.
Wetlands that are deemed not of "unusual importance" and are _____ in size fall under control of the municipalities where they are located.
Smaller than 12.4 acres
The component of the eave that makes up the area under the roof extension is the _____.
Soffit
A system that converts the sun's rays into electrical current using a positive and a negative semiconductor is called _____.
Solar Panels
Solar Panels
Solar panels convert the sun's rays into electrical current using a positive and a negative semiconductor.
Coastal Residents Assistance
Some New York homeowners located near shore or waterfront areas find it difficult to obtain or keep homeowners insurance. To address this problem, the NYS Insurance Department has: 1) a hotline where Insurance Department personnel help consumers find coverage. 2) guidelines for windstorm deductible notices that must accompany any policy that contains this deductible (described shortly). 3) a Coastal Market Assistance Program (C-MAP). This program was established by NYSDFS and is administered by the New York Property Insurance Underwriting Association (NYPIUA). The program is made up of a voluntary network of insurers that assist New York homeowners living in coastal areas with finding insurance coverage. The program is for owner-occupied, one- to four-family dwellings, apartment units, and condominiums near the shoreline in parts of Westchester County, the Bronx, Brooklyn, Queens, and Long Island.
Special assessment property taxes are usually used to provide funds for special projects that benefit _____.
Some citizens
Property Insurance: Insurance Comapny
Some companies are direct writers that use only their own employees or sales representatives and Internet websites. Consumers can do business with a direct insurance writer by phone, internet, mail, or a visit to the sales office
Loan Eligibility: Age and Size
Some lenders may have age and size requirements in order to make a loan.
Loan Eligibility: Loan Amount
Some lenders may have minimum and/or maximum loan amounts.
Investment Quality of the Property
Some of the considerations the lender evaluates regarding the value and eligibility of the property are: - sales price and appraisal - neighborhood and location - condition of the property improvements - comparable value to other similar properties - eligible property - loan-to-value ratio - type of property, including the number of units and whether it is owner-occupied or income-producing
Electromagnetic Fields (EMFs): Testing and Remediation
Some power lines are stronger than others. Exposure decreases with distance. Walls, trees, or hills can shield electric fields. However, magnetic fields cannot be shielded. To reduce exposure, distance is the key. To reduce exposure electrical appliances should not be placed close to where people sleep, work, or sit. Computer users should sit at arm's length from a terminal, or pull the keyboard back still further, since magnetic fields fall rapidly with distance. Video display terminals (VDT screens) should be turned off when not in use. Some local power companies offer home testing, or a private consulting engineer can be hired. Because opposing magnetic fields can cancel each other out, a knowledgeable electrician can rewire a home to reduce magnetic fields.
Flipping/Simultaneous Closing Developer's Policy
Some real estate investors or speculators believe they can turn quick profits by buying the property at a certain price and immediately selling the property at a higher price. The practice is called FLIPPING. Investors sometimes hide their intention to flip property. Some investors have simultaneous closings scheduled. When they purchase the property from the developer, they already have a buyer lined up and ready to close on the property they have just purchased. This practice was once associated with traditional single-family housing units but is now happening a great deal with condominiums. Flipping can be a problem because it can drive up prices. The investor attempts to buy low and sell high. It can cause major losses for people who buy the flipped property from the investor and end up paying more than if they bought it from the developer. In addition, prospective homeowners want stability in their housing, and a community full of investors contradicts this. To curb the problem, some developers have policies to stop this practice. Sometimes condominiums allow a certain percentage of units to sell to investors, for example, 30 percent. The remainder is reserved for live-in homeowners. Another solution is to have a clause in a sales contract requiring that investors live in the project for a year (or more) before they can rent or sell their unit. Under their right of first refusal, depending on what is stated, the developers may have a right to buy the unit back at the price the investor paid for it. The investor may also have to pay for all the closing costs and transfer taxes.
Borrower's Ability to Repay A Loan: Substitute Verification and Documentation
Sometimes substitute documentation is used. Pay stubs or employee year-end W-2 statements are sometimes used in place of employment verification. Bank statements for two months before the loan application may substitute for bank account verification. The verified borrower's deposit on the sales contract plus verified bank balances must equal the down payment plus closing costs and prepaid items.
SONYMA Loan Features
Sonny Mae mortgages are available through participating lenders at lower interest rates than are most conventional loans. Sonny Mae mortgages are insured by private mortgage insurance. A percentage of the mortgage money available through Sonny Mae must be for certain target or economically distressed areas in New York. Sonny Mae mortgages have various restrictions for target and nontarget areas. To obtain a Sonny Mae mortgage in a nontarget area, the purchaser must be a first-time buyer or not have owned a residence for the prior three years. These restrictions do not apply to target areas. Sonny Mae offers five mortgage programs to assist first-time buyers with a home purchase in New York. Except for the Achieving the Dream Program, the first-time homebuyer requirement is waived for eligible military veterans and their spouses or co-borrowers and also for those who purchase a home in a federally designated target area. Sonny Mae mortgages are generally set at a fixed rate that runs 2 to 3 percentage points lower than conventional rates.
The history of the Oneida and other Indian nations' land claims are based on the Indian nations' right of _____.
Sovereignty
A tax that is levied only against properties that benefit from the improvement, such as construction of a sidewalk, is called a _____.
Special assessment
A use that is not permitted in the zone except with the special permission of the planning board or other legislative body is allowed with a(n) _____.
Special use permit
An individual or entity that develops an offering plan for a cooperative or condominium is called a(n) _____.
Sponsor
When a specific property within a zoned area is rezoned to permit a use different from the zoning requirements for that zoned area, this is known as _____.
Spot zoning
The type of insulation that is a heated mixture that is sprayed into the inside of the sheathing, where it becomes solid, is _____.
Spray on insulation
Spray-On Insulation
Spray-on insulation is a heated mixture sprayed into the inside of the sheathing, where it becomes solid. Urea-formaldehyde foam insulation (UFFI), an example of this type of insulation, is no longer used.
Spring Wells
Spring wells are similar to dug wells, except the water is not pumped because the water level rises above the top of the general ground level. Springs are classified as rock or earth springs, depending on the source.
In New York, government has environmental control over privately developed land under the _____.
State Environmental Quality Review Act
Local Boards of Health and Health Departments: Functions
State and local health departments oversee a large number of issues having to do with disease control as well as environmental concerns. Real estate issues include: - Drinking water safety including standards for private and community well construction and well water safety and regulation - Septic system approval - Certain wastewater treatment approval
Principal of Substitution
States that the maximum value of a property is determined by what it would cost to buy a similar property that is equally desirable, since one property can "substitute" for another. For example, if two equally desirable homes are for sale in the same neighborhood and one is priced higher than the other, the lower priced one will generally sell first. Since the two homes are "substitutable", the lower priced one represents the same value for a lower price, and therefore, will likely sell first.
Principal of Contribution
States that various elements of a property add value to the entire property. If a buyer is willing to pay $5,500 more for a property with a garage than for the same property without the garage, we infer that the garage adds a value of $5,500 by itself.
Survival Clause
Stating that the agreement shall apply to and bind all heirs, legal representatives, and successors of the parties to the contract.
Prepayment Penalty Clause
Stating that the borrower can pay off the loan at any time before the expiration of the full mortgage term without a financial penalty for early payoff. Or, it may state that a borrower pays a prepayment penalty if the debt is satisfied before the expiration of the full term.
Merger Clause
Stating that this "contract contains all agreements of the parties hereto." This clause means that whatever may have been promised or discussed in prior negotiations is of no importance. The parties are bound only by what is in the written contract.
Steel Pipe
Steel pipe was used 40 or more years ago for the water supply and, less frequently, in drainage systems. It has been replaced by brass. In water supplies, steel pipe is used for hot and cold water and for branch pipes to fixtures. It is infrequently used in the drainage system and for the main soil stack, soil pipes from fixtures, and vent pipes. Steel is not used for underground plumbing.
A real estate salesperson shows white prospects homes only in white areas. This discriminatory practice is called _____.
Steering
Influencing buyers to buy in certain areas only when done on the basis of race, color, religion, sex, or national origin is _____.
Steering
Showing a white prospect properties in areas populated by white people only is an example of _____.
Steering
Steering
Steering refers to the practice of influencing potential buyers to buy only in certain areas or neighborhoods on the basis of race, color, religion, sex, or national origin. Steering is a violation of fair housing laws. Steering occurs when licensees direct prospective purchasers from culturally diverse backgrounds to presently integrated areas to avoid integration of nonintegrated areas. The prohibition against steering falls under the prohibition of refusing to sell, rent, or negotiate the sale or rental of housing or residential lots.
A paper loss that allows an investor to reduce the amount of income on which taxes are paid is known as a(n) _____.
Tax shelter
A type of water heater that provides a constant supply of hot water through a compact unit affixed to the wall is known as a _____ water heater.
Tankless or instantaneous
The local government official who estimates the value of real property within a city, town, or village's boundaries is the _____.
Tax Assessor
A local government official who estimates the value of real property within a city, town, or village is the _____.
Tax assessor
Which of the following is a benefit that depreciation provides?
Tax deduction
A transaction that allows an individual to defer capital gains taxes on real estate bought and sold for investment purposes is called a(n) _____.
Tax deferred exchange
The difference between a unit of government's annual budget (expenditures) and the amount they receive from state aid and other sources (excluding property taxes) is the _____.
Tax levy The difference between a unit of government's annual budget and the amount they receive from state aid and other sources is the tax levy.
If a taxpayer is delinquent in paying property taxes, the taxing jurisdiction may initiate a legal procedure against a property, known as a(n) _____.
Tax lien
Leverage
Tax-exempt and taxable investors use LEVERAGE to improve profit and purchase property when capital is not otherwise available. Leverage is the use of borrowed funds. Taxable investors may also use leverage (debt) to increase tax benefits. By using "other people's money" (OPM), the investor's buying power increases. The investor wants to put the least possible amount down. He/She wants the lowest possible available interest rate over the longest period. Leverage allows the investor to accumulate the maximum amount of real estate with the minimum amount of personal funds. However, for the investor expecting a cash flow, the expenses and mortgage costs may exceed the returns if too much leverage is used. The figures on investment/financing in the table are based on the rate of return on the investment. To many investors, this method is more meaningful because it considers only the amount of cash invested. The investment is growing in equity and, ideally, appreciating.
Deriving the After-Tax Cash Flow (ATCF): Tax Shelters
Taxable income may be partially or completely sheltered from tax liability because of the deductible expenses, including depreciation. After the deductions, it is possible for an investment property to have no taxable income. If the deductible expenses, including depreciation of a property, are greater than the income, for tax purposes, a loss will result. To some investors, this loss is desirable because their main concern is to have a TAX SHELTER. A tax shelter is best defined as a paper loss; it is a phrase used to describe some of the advantages of real estate investments. Income shelters for taxpayer/owners are deductible allowances from net income used to arrive at the amount of taxable income.
Deriving the Income Tax
Taxes are calculated based on the amount of the property's income. Tax allowed deductions are subtracted including depreciation, mortgage interest, and property taxes. To the taxable income amount, the tax bracket of the taxpayer is applied to compute the taxes owed on the property. Once the potential taxes are calculated, allowable credits are subtracted. Allowable credit may be tax credits from a municipality given to the owner for certain improvements to the property or services the property provides.
Ad Valorem Taxes
Taxes based on the value of land and the improvements to the land. Ad valorem taxes usually provide funds for all citizens' benefit. "Ad valorem" is a Latin term that means "according to valuation." In New York, real property tax is based on the fair market value of real property. Ad valorem taxes are: - assessed on real property on a regular basis (usually annually) - used by the government as a primary source of revenue to fund normal operations
Under the Fair Housing Amendments Act of 1988, if a tenant has a disability, a property owner must allow the tenant to make reasonable modifications to the dwelling at the expense of the _____.
Tenant Under the Fair Housing Amendments Act of 1988, if a tenant has a disability, a property owner may not refuse to let the tenant make reasonable modifications to the dwelling or common use areas, at his/her expense, if necessary, so he/she can use the housing
Pest Infestation
Termites, carpenter ants, powder post beetles, and carpenter bees are insects that eat wood. Wood eating pests can eat into the wood-frame construction and the building's wood flooring. As they infest and multiply, the damage they cause can cost thousands of dollars to repair. An unlicensed individual may test for pest infestation by examining the affected area for infestation and damage. Only an individual licensed by NYSDEC may apply pesticides. Contracts for purchase and sale in New York may be contingent upon a pest inspection. The purchaser may cancel the contract within a stated time if there is pest infestation.
Volunteers who pose as prospective home seekers to investigate discriminatory practices in real estate brokerage firms are called _____.
Testers
One way that fair housing law is enforced in a real estate office is through _____.
Testing
Phase II of a due diligence assessment is the _____ phase.
Testing phase
When a lease names only one tenant, that tenant may share the apartment with _____.
That tenant may share the apartment with his/her immediate family, one additional occupant, and the occupant's dependent children as long as the tenant or the tenant's spouse occupies the premises as his/her primary residence.
Deriving the After-Tax Cash Flow (ATCF)
The AFTER-TAX CASH FLOW is the before tax cash flow from income-producing property less income taxes paid, if any, attributable to the property's income.
Federal Income Tax
The American Taxpayer Relief Act of 2012, enacted January 2, 2013, made many tax laws permanent and extended other provisions through 2013-2014. Other recent laws also affect taxpayer obligations. Most people pay tax on less than they earn because of tax deductions. The tax rate applied to income is called the marginal tax bracket. New York's state income tax rates range from 4 percent to 8.82 percent over eight income brackets.
The Americans with Disabilities Act
The Americans with Disabilities Act (ADA, 1990, 2010) prohibits discrimination and ensures equal opportunity for individuals with disabilities who cannot be denied access to public transportation or any commercial facility or public accommodation. The Act applies to owners and operators of public accommodations and commercial facilities, regardless of the size or number of employees, and to local and state governments. In 2010, the ADA regulations were revised, broadening the definition of those who are regarded as having a disability, expanding the definition of "major life activities," and addressing standards for accessible design. Both the ADA and the Fair Housing Amendments Act of 1988 prohibit discrimination based on disability. However these two laws address different types of discrimination: - The ADA prohibits discrimination based on disability by employers and places open to the public. - The Fair Housing Amendments Act prohibits discrimination based on disability in the purchase, sale, lease, or other conveyance of real property.
The Federal Fair Housing Act of 1968: Supreme Court Decisions - Plessy v. Ferguson
The Civil Rights Act of 1866 guaranteed the right of all citizens to "purchase, lease, sell, hold, and convey real and personal property." The following important Supreme Court issues shaped U.S. policy during the 100 years after the passage of the Civil Rights Act of 1866. Plessy v. Ferguson (163 U.S. 537). In this 1896 case, the Supreme Court ruled that separate but equal is legally acceptable. Therefore, as long as separate housing accommodations or facilities for African-Americans and whites were deemed equal, they were legal.
Human Rights & Fair Housing: Testers
The Civil Rights Division of the U.S. Department of Justice established the Fair Housing Testing Program within its Housing and Civil Enforcement Section in 1992. Testing is a method used to detect if fair housing is enforced in a real estate office. Testers, who may be volunteers, employees of federal programs, or people from civil rights groups, visit real estate offices posing as prospective homebuyers to see if race influences the information or services that the real estate agent offers. There are often four testers, a white couple, and a culturally diverse couple, matched as to buyer qualifications such as income and down payment. After each couple visits a real estate office, they compare the treatment received to see if it was equal with respect to the price, location, and number of listings offered, the quality of service, and the attitudes of the broker or salesperson. The U.S. Supreme Court and DOS have recognized investigations by testers as a legitimate method of gathering evidence of fair housing violations. Testers look for unlawful racial STEERING practices.
The Clean Air Act
The Clean Air Act bans the release of CFCs and HCFCs during the service, maintenance, and disposal of air conditioners and other equipment that use refrigerants. Refrigerants must be recovered from the appliance before disposal. Individuals who work on such equipment must follow EPA regulations for ozone-safe practices, including the recovery and recycling of refrigerant. EPA can assess fines of up to $25,000 per day for violation of this Act.
The Interstate Land Sales Full Disclosure Act of 1968 is administered by _____.
The Consumer Financial Protection Bureau
Cease and Desist Lists and Nonsolicitation Orders
The Department of State (DOS), Division of Licensing Services, may investigate complaints of discriminatory behavior by its licensees. It may suspend or revoke a license charging incompetence and untrustworthiness in accordance with the provisions of Article 12-A of the Real Property Law. The Secretary of State can issue a NONSOLICITATION ORDER, prohibiting licensees from soliciting listings for the sale, purchase, or rental of real property in certain specified areas of the state. This order is to stop the practice of blockbusting. This solicitation includes the phone, mail, personal contact, and so on. The Secretary of State can establish a CEASE AND DESIST ZONE. This zone is established after the Secretary determines that some homeowners within a certain geographic area are subject to intense and repeated solicitation by real estate agents. Upon establishment of the cease and desist zone, homeowners may file a request with DOS to be placed on a CEASE AND DESIST LIST, indicating that they do not desire to sell, lease, or list their residential property and do not wish to be solicited by real estate agents. All of Queens and Bronx Counties and portions of Kings County are designated as cease and desist zones. If real estate agents solicit these homeowners, DOS can take disciplinary action. Lists can be downloaded from the DOS website or requested by mail.
VA Guaranteed Loan Program
The Department of Veterans Affairs (VA) is also a U.S. government agency that provides assistance in the financing of housing. While FHA programs insure loans, the VA promotes home ownership for eligible veterans of military service by providing loan guarantees to lenders. The VA guarantees to the lender a maximum of 25 percent of a home loan amount, up to a certain limit, in case the borrower defaults.
Lease Clauses: Estoppel
The ESTOPPEL CERTIFICATE is standard in a commercial lease. A property owner's request for a lease estoppel certificate from a tenant usually arises in connection with the landlord's sale or financing of the building. The estoppel certificate generally contains statements by the tenant confirming the lessee's term, the rent, any prepaid rent, and security deposit, and the existence of options to purchase, expand, or renew in favor of the tenant. The prospective purchaser or lender is often relying on the existence of the tenant's lease in making its purchase or lending decision. To confirm issues concerning the lease, the prospective purchaser or lender may ask the landlord to obtain an estoppel from the tenant. The estoppel addresses important terms of the lease.
The Energy Conservation Construction Code of NYS
The Energy Conservation Construction Code of New York State (ECCCNYS) sets minimum requirements for the design of new buildings and renovations and additions to existing buildings. The ECCCNYS is applicable to renovations involving building system replacement. ECCCNYS addresses the design and construction of energy-efficient building envelopes and the installation of energy-efficient mechanical, lighting, and power systems. The code establishes minimum requirements for energy-efficient buildings with performance-related provisions. It makes possible the use of new materials and innovative techniques that conserve energy. Effective January 2015, updates were added to the code regarding commercial structures.
Industrial (Manufacturing) Properties: Function and Building Type
The FUNCTIONS and BUILDING TYPES of industrial property include: - warehouses and distribution centers - manufacturing facilities - research and development (R &D) and high - technology facilities - wholesale-retail products and services - office space that may include a warehouse - traditional industrial plants Investment in industrial property requires specialized knowledge of tenant needs and technical knowledge of building specifications for manufacturing or other industrial use.
Fair Housing Amendments Act of 1988: Real Estate Brokerage Services
The Fair Housing Act makes it illegal to deny membership, special terms, or conditions of membership in any real estate organization on discriminatory grounds. This prohibition extends to access to multiple listing service. The New York Human Rights Law contains a similar provision. The Federal Fair Housing Act has certain exceptions, but New York laws that are more restrictive preempt these exceptions.
Fair Housing Act of 1968: The Fair Housing Initiatives Program
The Fair Housing Initiatives Program (FHIP), established by the Housing and Community Development Act (1974, 1987, amended 1992), provides funding to public and private entities for programs that prevent or eliminate discriminatory housing practices. FHIP supports projects to enhance compliance with the Act and equivalent state and local laws prohibiting housing discrimination. The program's focus is to: - further the purposes of the Fair Housing Act - guarantee that all who seek housing find an open market free of discrimination - inform the public of their rights and obligations under the Fair Housing Act
National Flood Insurance Program (NFIP)
The Federal Emergency Management Agency (FEMA) administers the National Flood Insurance Program (NFIP). Insurance coverage for losses resulting from floods is generally not provided in homeowners or tenants policies. Property owners can purchase insurance protection against losses from flooding through NFIP if they reside in a community designated as a special flood hazard area that has measures to reduce future flood risks. Residents of participating communities are eligible for an Emergency Program that provides a limited amount of insurance at federally subsidized rates. Once a community adheres to the requirements of NFIP, residents are eligible for the Regular Program under which they can purchase much higher amounts of insurance. Most towns, villages, and cities in New York participate in NFIP.
Fair Housing Act of 1968: Exemptions
The Federal Fair Housing Act has certain exemptions or exceptions, but New York laws that are more restrictive preempt these exceptions. These exceptions, under the New York Human Rights Law, are discussed in another lesson. Exceptions to the 1968 Federal Fair Housing Act include: - An owner in the sale or rental of up to three single-family dwellings at any one time is exempt. If the owner was not living in the dwelling at the time of the transaction or was not the last occupant, the owner is then limited to one exemption in any 24-month period. - An owner of an apartment building containing up to four units is exempt in the rental of the units, provided that the owner occupies one of the units as a personal residence. - Properties owned and operated by religious organizations for the benefit of their membership and for noncommercial purposes may give preference to members of their own religion, provided that membership in the religion is not restricted on the basis of race, color, national origin, gender, handicap, or familial status. - Private clubs that do not operate for commercial purposes are exempt as along as they provide lodging for the benefit of their members only and not to the general public. None of these exemptions is available if either of the following has occurred: - discriminatory advertising has been used; OR - the services of a real estate licensee or any person in the business of selling or renting dwellings are used.
Federal National Mortgage Association (FNMA)
The Federal National Mortgage Association (FNMA) is commonly referred to as "Fannie Mae." It is the oldest secondary mortgage institution and the single largest holder of home mortgages. It is now a privately owned profit-making organization. It was started as a government-owned corporation in the 1930s. In 1968, it became a private, for-profit corporation, owned by stockholders and operated independently of the government. To create liquidity in the mortgage market, Fannie Mae purchases conventional and government mortgage loans (FHA and VA loans) and mortgage-backed securities (MBSs).
The Freshwater Wetlands Act
The Freshwater Wetlands Act requires NYSDEC to map all protected wetlands. Certain activities are exempt from regulation and do not require a permit. Other activities require a permit or a letter of permission. The act allows local governments to govern wetlands once NYSDEC has filed a map for their area. Under the act, activities in wetlands requiring a permit are: - restoring, modifying, or expanding existing structures - draining, except for agriculture - installing docks, piers, or wharves - constructing bulkheads, dikes, and dams - installing utilities - applying pesticides
Homestead Properties
The HOMESTEAD class includes: - one-, two-, or three-family residential parcels residential condominiums - mixed-use parcels if they are used mostly for residential purposes - mobile homes and trailers, only if they are owner-occupied and separately assessed - all vacant land parcels not exceeding 10 acres that are located in an assessing unit with a zoning law These parcels must be in a zone that only allows a residential use for one-, two-, or three-family residential properties. - farm dwellings - land used for agricultural production and farm buildings and structures on this land
The Housing for Older Persons Act of 1995 (HOPA)
The Housing for Older Persons Act of 1995 (HOPA) made several changes to the 55 and older exemption. Housing for older persons is exempt from the prohibition against familial status discrimination if: - 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, or - 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 A transition period permits residents on or before September 13, 1988, to continue living in the housing, regardless of their age, without interfering with the exemption. Families with children can live in the housing.
Article 15 of the New York Executive Law: Credit for Housing, Land, or Commercial Space
The Human Rights Law provides sanctions against discriminatory practices with respect to obtaining credit for the "purchase, acquisition, construction, rehabilitation, repair, or maintenance" of housing accommodations, land, or commercial space. Applicants may not be discriminated against because of race, creed, color, national origin, age, sex, marital status, sexual orientation, military status, or disability. Stockholders, officers, or employees of the applicant are covered under the law, as well as prospective tenants or occupants of the housing, land, or commercial space. Discrimination in the "granting, withholding, extending of or renewing credit, or fixing of credit rates is prohibited." It is unlawful to use a credit application that records or inquires about information that is discriminatory. For example, credit applications that discriminate contain boxes where individuals check whether they are married or single, or indicate their age or religion.
Our Town Multiple Listing Service refuses to accept a listing because the home's owner is Russian. Which of the following is CORRECT?
The MLS is in violation of the 1968 act.
Non-Homestead Properties
The NON-HOMESTEAD class includes all other real property. Non-homestead properties include: - commercial property - industrial property - special franchise property - utility property - some vacant land
State of New York Mortgage Agency (SONYMA)
The NYS Homes and Community Renewal (HCR) is an agency that consists of all the state's major housing and community renewal agencies, including the Affordable Housing Corporation, the Division of Housing and Community Renewal, Housing Finance Agency, Housing Trust Fund Corporation, State of New York Mortgage Agency (SONYMA), and others.
National Electric Code
The National Electric Code (NEC) is a national, uniform standard for all electric installation and service to safeguard people and property from hazards in using electricity. The National Fire Protection Association developed the Code, which is renewed every three years. The Code sets minimum requirements, but municipalities may have additional restrictions.
New York Anti-Predatory Lending Law
The New York Anti-Predatory Lending Law places many restrictions on high cost (subprime) loans that are first or junior (second) mortgages. The loans covered under the New York law are those that meet all of the following conditions: - has a maximum indebtedness of $300,000 - is used for family or personal reasons - is secured by a one-to-four unit property that is the borrower's personal residence
New York City Commission on Human Rights
The New York City Commission on Human Rights governs New York City residents living in the five boroughs. New York City has its own law governing discrimination - the New York City Human Rights Law. Like the state law, New York City law covers discrimination in the sale, rental, or lease of housing, land, and commercial space. The alleged discrimination must have taken place within, or have sufficient connection to, NYC's five boroughs for a complaint to be filed with the NYC Commission. The New York City Human Rights Law prohibits discrimination in employment, housing and public accommodations based on: race color creed age national origin familial status gender, including gender identity and sexual harassment sexual orientation disability marital status Thus, under NYC law, the classes of gender and sexual orientation expand to include gender identity and sexual harassment. In addition, the Commission has defined four additional protected groups: - alienage or citizenship status - partnership status - lawful occupation - lawful source of income Complaints of discrimination must be filed with the Commission within one year after the alleged discriminatory behavior or may be filed with the NYS Division of Human Rights.
Environmental management councils that review and advise local and state agencies on using and conserving the environment are provided for by _____.
The New York Environmental Law
New York Environmental Law
The New York Environmental Law provides for environmental management councils that review and advise local and state agencies on using and conserving the environment. These include the Environmental Management Council, the Conservation Advisory Council, and the Wetlands Commission. If a county is involved, these agencies also advise federal government agencies.
Local Boards of Health and Health Departments
The Public Health Law provides for local boards of health and departments of health in counties, cities, towns, and villages.
New York Mortgage Foreclosure Law (2009)
The New York Mortgage Foreclosure Law enhanced the 2008 subprime lending reform law. The law: - expands the 90-day pre-foreclosure notice currently set for subprime loans to include all New York home loans, including loans on cooperative apartments - expands the scope of early mandatory settlement conferences to include all New York residential borrowers, not only those with subprime loans - requires the parties to the foreclosure to reach a mutually agreeable resolution, including a loan modification (short sale) when possible - provides that NY tenants receive written notice of the foreclosure action and allows them to remain in their home for the remainder of their lease term or 90 days, whichever is longer (as long as the rent specified in the lease is not greatly below market value) - requires plaintiffs in a New York foreclosure action who obtain a judgment of foreclosure and sale to maintain in good condition the foreclosed property so that it does not pose a nuisance to neighboring properties. This applies to tenants who are living at the property. - prevents brokers who perform distressed property consulting services from accepting upfront fees
Assessed Value: Relationship to Full or Market Value
The New York Real Property Tax Law requires all properties in a municipality to be assessed at a uniform percentage of market value each year. That percentage of market value or full value at which properties are assessed within a community is called the level of assessment (LOA). For example, an LOA of 50 percent indicates that assessments are at half of the market value. An LOA of 100 percent represents a community that is assessing at full value. If a town chooses to assess at 40 percent of market value, then all of the properties in the town should be assessed at 40 percent. (Only New York City and Nassau County are allowed by New York law to assess each of four specific classes of property at different levels.) The best way to ensure that assessments are fair and uniform is for the assessing unit to keep assessments up-to-date annually. To encourage compliance with state law, New York provides state aid of $5 per eligible parcel to municipalities that keep assessments at 100 percent of market value each year.
Public Municipal Water Supply: Health Related Issues
The New York Sanitary Code provides for the testing of the following: - Bacteria - Mineral content - Corrossiveness
Drinking Water
The New York State Department of Health (NYSDOH) is the agency that oversees drinking water safety. Local health departments are agents of NYSDOH and may have laws that are more restrictive. One long-standing issue is that of the Public Municipal Water Supply. The federal Safe Drinking Water Act of 1974 is New York's guideline for drinking water regulations.
Local Health Departments
The New York State Department of Health (NYSDOH) is the state regulatory agency that oversees health issues in New York. Local county health departments cooperate with the NYSDOH. These local agencies may have laws that are more restrictive than state law. The local health department upholds all federal, state, and local public health laws.
On-Site Sanitary Waste System Requirements
The New York State Department of Health (NYSDOH) regulates the installation and approval of individual residential on-site wastewater treatment systems of LESS than 1,000 gallons per day. NYSDOH also reviews and approves site and construction plans for wastewater treatment systems in residential subdivisions. Plans for wastewater treatment systems, other than those outlined in the New York regulations, must be designed and submitted to the health department for approval by a professional such as a NYS licensed engineer or architect. The design professional must submit as-built plans of the system. These are drawings of the finished system. The construction must be supervised by the design professional, who certifies that the system is built following the approved plan. The New York State Department of Environmental Conservation (NYSDEC) has standards that apply to buildings or residences that process 1,000 or MORE gallons of wastewater per day. NYSDEC also approves plans for community and public wastewater.
Article 15 of the New York Executive Law
The New York State Human Rights Law is broader than the federal laws as it prohibits discriminatory practices in areas besides housing. The law created a New York State Division of Human Rights (DHR) to "eliminate and prevent discrimination" in: employment public accommodations places of amusement such as movie theaters and parks educational institutions housing accommodations commercial space land credit transactions New York law covers discrimination in the sale, lease, and rental of COMMERCIAL space as well as residential and public housing. New York law has fewer exemptions than federal law and the exemptions themselves are more restrictive. New York also includes retaliation in its list of protected classes for all categories of discrimination. This means that under the Human Rights Law, complainants and their witnesses are protected against retaliation when making discrimination charges. In transactions involving housing, land, and commercial space, it is unlawful for an owner, lessee, or agent (including real estate salespersons and brokers) to "refuse to sell, rent, lease, or otherwise deny any person or group of persons because of race, creed, color, national origin, sex, age, disability, marital status, familial status, sexual orientation or military status." Discrimination regarding the terms or conditions of the sale, lease, or rental is unlawful.
Electromagnetic Fields: Health Effects
The New York State Power Lines Project and numerous other groups have found that EMFs may cause a number of health problems, including certain cancers. These studies are not conclusive and are ongoing. Other groups throughout New York claim that, along with possible health effects, existing power lines disturb the beauty of the landscape and decrease real estate values.
Carbon Monoxide Detectors
The New York Uniform Fire Prevention and Building Code requires that at least one carbon monoxide detector be installed in all one- and two-family houses, condominiums, and cooperatives. Local laws may be more restrictive. The Code covers structures built on or after December 1, 2002, that are constructed or offered for sale The location for the detector is near the bedroom(s) on the lowest floor level of the dwelling unit containing bedroom(s). The detectors can be permanently connected to the building wiring system, by cord or plug, or battery operated. For apartment buildings, each carbon monoxide detector installed before April 25, 2012, must have been replaced after the time elapsed, since installation exceeded the manufacturer's suggested useful life, or by October 25, 2012, whichever was later. Detectors installed after April 25, 2012, must be replaced as described above, generally every five to seven years.
New York Real Property Law and DOS Regulations
The Real Property Law prohibits evicting a tenant if the tenant becomes pregnant or has a child while occupying the premises. This law prohibits property owners from refusing rental to families with children. The law covers mobile home parks.
Rural Housing Services (RHS)
The Rural Housing Service is an agency of the U.S. Department of Agriculture (USDA). The agency operates federal loan programs that strengthen family farms and finance rural housing. The programs help low and moderate rural Americans by offering direct loans, grants, and loan guarantees for home purchase and repairs for single and multi-family houses. The program also supports childcare centers, fire and police stations, schools, and other facilities.
Condominiums: Role of the Sponsor
The SPONSOR is the owner or developer of the condominium. The sponsor must: appoint the board of managers or directors appoint the managing agent place a limitation on sponsor control of the board When the condominium is effective, the sponsor usually owns most of the units and controls the board of managers or directors. In most cases, the New York Attorney General requires sponsors to promise in the offering plan to give up their control of the board after they sell more than 50 percent of the common interest, or after five years have passed since the closing, whichever comes first.
Three Appraisal Approaches
The Sales Comparison The Cost Approach The Income Approach
RAR: The State Board of Real Property Services
The State Board of Real Property Services is a five member board that oversees administration of real property assessments in New York. The State Board of Real Property Services certifies the RAR no later than 60 days before the last day provided by law for the filing of the tentative assessment roll. The certified RAR and the number of sales used in its calculation are sent to the Office of Court Administration. The RAR is also sent to the appropriate county director, county clerk, and assessor. When an RAR is established for New York City, it is certified to the New York City Tax Commission. In all cases, an informational copy is forwarded to the Chief Executive Officer of the assessing unit.
The process requiring all levels of government to assess the environmental importance of actions for which they have discretion to review, approve, fund, or undertake is _____.
The State Environmental Quality Review (SEQR)
The Americans with Disabilities Act: Penalties for Violations
The U.S. Attorney General enforces the Americans with Disabilities Act. Punishments for violations include injunctions against operation of a business, a fine of up to $75,000 for the first offense, and a maximum of $150,000 for subsequent offenses.
Fair Housing Amendments Act of 1988: Enforcement through the U.S. attorney general
The U.S. attorney general may file a civil suit in any U.S. district court. If a complainant prevails in a discrimination lawsuit, the court may issue an injunction or restraining order against the violator and award actual and punitive damages. In 2014, the U.S. Department of Justice increased the civil monetary penalties for violations of the Fair Housing Act to a maximum civil penalty for a first violation to $75,000, and $150,000 for subsequent violations.
Uniform Residential Appraisal Report
The Uniform Residential Appraisal Report (URAR) is the most common appraisal form used by appraisers. A copy of the URAR is included in your handouts. This form gives a brief overview of the property and the site, a neighborhood analysis, and a detailed analysis of all three approaches. On the URAR form, the sales comparison approach has the most emphasis. Appraisers also use longer narrative reports especially for commercial appraisals.
Forebearance
The act of refraining from taking legal action for payment of a mortgage despite the fact that it is due. The lending institution holding the mortgage may declare the execution of an installment contract and a transfer of the property and require the seller to pay off the mortgage. Usually, a lender grants a forbearance if the owner is a strong credit risk, and the interest rate on the mortgage is favorable to the lender.
The following ad appears in a local New York newspaper: "Rooms for rent in my home; limited to nonsmoking female; 2 bedrooms; 1 bath." Which of the following is correct?
The ad does not violate the New York Human Rights Law. The ad does not violate the New York Human Rights Law. The restriction of all rooms in a housing accommodation to individuals of the same sex is an exemption under the law.
In an advertisement offering the other unit in her duplex for rent in West Seneca, NY, the owner states that she will give preference to renters who are white females, pay cash, and are members of the Catholic religion. She subsequently refuses a rental because the offeror is a male Presbyterian. Which of the following is CORRECT?
The ad is discriminatory, so the owner is not exempt under the law.
Like Kind Exchanges: Basis
The basis of the property an exchanger receives is the basis of the property given up in exchange plus new expenditures or debt incurred. Therefore, an exchanger does not change the basis of an asset because of the exchange.
Heat Pumps: Advantages and Disadvantages
The advantage of the heat pump is that the air cooling and heating systems are built into the same unit. A disadvantage of older heat pumps is that they operate efficiently only in moderately cold weather. Older units may only heat well when outdoor temperatures are above 35 degrees. The limitation of the air-to-air heat pump system is that the temperature of the air outside is typically the lowest when the need for heat inside is the greatest. The ground-source system may be troublesome in winter because the frozen ground around the pump insulates it and prevents it from extracting heat. However, newer heat pumps are capable of heating a home quite efficiently, even when the outdoor temperature is 0 degrees. In climates with cold winters, homeowners who use a heat pump often have a back-up heating system such as gas heat or electric strip heat.
Compensatory Damages
The amount of money actually lost in a breach of contract that the court awards.
FHA Guidelines: Loan Amount
The amount of the down payment on an FHA loan is equal to the sales price less the loan amount. The formula that the FHA uses for determining the loan amount has been changed several times in recent years and currently involves a complex set of calculations. However, you should remember that the minimum cash investment the borrower can make is 3.5 percent of the sales price or appraised value, whichever is less.
In the income approach using capitalization, the price for a property is determined by dividing the _____ by the capitalization rate.
The annual net income
Tax Rate: Determination of the Property Tax Bill
The annual property tax bill is calculated by multiplying the assessed value by the tax rate. Thus, the formula for calculating property tax is: assessed value x tax rate = annual taxes
Finding the Assessment Ratio
The assessment ratio can be calculated using a three-step process. Step 1: The following ratio is applied to individual properties: assessed value ÷ sales price = assessment ratio Step 2: The ratios are arrayed in ascending order (smallest to largest). Step 3: The median, or middle value, of the arrayed ratios is identified. This median value is the RAR.
Due Diligence: Assessment Phases
The assessments may go through four phases--Phase I, Phase II, Phase III, and Phase IV. These phases are not always uniform. Phases may depend on what parties (lender, purchaser, or tenant) ask for in the assessment.
The value of each parcel in an assessing unit is determined by _____.
The assessor
Protesting Assessments
The assessor determines assessments. The assessor is an elected or appointed local official who has the legal authority to estimate independently the value of real property in an assessing unit. Some municipalities have a single appointed assessor. Some have an elected three-person board of assessors. Most municipalities that previously had elected three-person boards of assessors have switched to appointed assessors. In addition, village assessing units have decreased. New York is the only state where property owners can receive two separate assessments for the same property. Property owners who receive separate village and town assessments, and make a protest, must pursue separate assessment grievances on separate dates. Sometimes, there are factual errors in deriving the assessment. Taxpayers have the right to look at the assessment of their property. They can compare it with other properties on the assessment roll. If a property owner believes the assessment is wrong, the owner may file a written complaint, called a grievance, with the local board of assessment review. The property owner may make the protest on his/her behalf or have someone, such as an attorney, represent him/her. The decision of the board of assessment review appears on the final assessment roll.
One type of predatory lending involves making unaffordable loans based on _____.
The assets of the borrower
Who generally draws up the cooperative contract of sale?
The attorney for the seller
Walls
The bearing walls support the ceiling and/or the roof and include the outside wall frame. They are erected first. Nonbearing walls or partitions are walls that enclose interior space but do not support the structure. A horizontal base plate, called a sole plate, serves as the foundation for the wall system. A double top plate called a flitch beam, ties the walls together and provides additional support for the ceiling and roof system. The flitch beam is composed of two or more structural timbers bolted together with a metal plate sandwiched between for additional strength.
Zoning Board of Appeals: Restrictions and Decisions
The board can hear appeals from citizens and review administrative decisions. It can grant variances and may have the power to grant or deny special permits. When granting use and area variances, the board can impose reasonable conditions and restrictions. These conditions are to minimize any adverse impact on the neighborhood or community. When a town zoning board of appeals imposes conditions for a variance, the town board may not change it.
Board of Assessment Review (BAR)
The board consists of three to five members appointed by the governing body of the municipality. The board does not include the assessor or any of the assessor's staff. They hear assessment grievances. Property owners who file a protest may appear in person before the board, assign an agent to appear on their behalf, such as an attorney, or not appear at all. The complaint is still considered. Assessors are required to attend all formal hearings of the board. They can comment on any complaint.
Board of Directors: Legal Obligations
The board must follow the co-op's internal rules. These rules are in the by-laws, the proprietary lease, the certificate of incorporation, and the house rules. It must also exercise good business judgment in making decisions, just like any other corporate board.
VA Guarantee Loan: Pre-Payment
The borrower may prepay a VA loan without penalty. Other funding fees and down payment requirements apply to other loan types such as construction loans.
Mortgage Responsibilities: Borrower (Mortgagor)
The borrower must pay all real property taxes and assessments on a timely basis and keep the property repaired. The borrower protects against loss by fire or other casualty by an insurance policy written in an amount at least 80 percent of the structure's value. Many lenders require insurance for 100 percent of the loan value minus the lot value.
Covenant Against Removal
The borrower promises not to remove any of the improvements to the property, which would reduce its value as collateral.
Covenant of Re-Entry
The borrower promises to allow the lender to enter the premises at reasonable hours to ascertain that all other covenants are being adhered to.
Covenant to Pay Taxes
The borrower promises to keep all taxes paid as they come due.
Covenant of Insurance
The borrower promises to keep the property adequately insured during the life of the mortgage.
Covenant of Good Repair
The borrower promises to maintain all improvements in good repair and not to permit them to deteriorate.
Uninsured Conventional Loan
The borrower's equity in the property, which is the difference between the value of the property and its liabilities (debt), provides security for the lender to make the loan. With many uninsured loans, the borrower obtains a loan that does not exceed 75 percent to 80 percent of the property value and has equity of 20 percent or 25 percent. Most lenders make these loans routinely and judge that their risks are acceptable if the borrower defaults. Because of this, they do not require private mortgage insurance (PMI) on these loans.
The major factor in evaluating a loan application is _____.
The borrower's income
Freddie Mac Guidelines: Liquid Assets and Closing Funds
The borrower's net worth is the difference between his/her total assets and his/her total liabilities. It is a value that provides a good indicator of the borrower's overall financial strength. If the borrower has a high net worth, it can offset some weakness in one or both of the ratios just covered. When a substantial part of the borrower's net worth is in the form of "liquid" assets, such as savings, money market certificates, etc., it provides additional strength to the borrower's ability to repay a loan, since these assets are readily available to meet financial demands in emergencies. Under Fannie Mae/Freddie Mac guidelines, the borrower is required to have available a minimum amount of highly liquid assets (cash or its equivalent) equal to two months' mortgage payments. This amount must be available over and above the amount needed for the down payment and any costs of closing the loan. Gift funds from a family member are acceptable to meet cash requirements for closing FHA or VA loans if they are actually transferred to borrowers and verified. With conventional loans, borrowers must invest 5 percent of the sales price from their own funds. A family member may put up additional money required above that 5 precent. Stocks and bonds are acceptable as closing funds if the market value is verified and the borrowers make a 5 percent cash down payment. Securities must be separately appraised.
Requirements for Obtaining a CO
The building department issues a final CO when all of the following conditions are met: - the completed work complies with the submitted plans and applicable laws - the paperwork is completed - necessary approvals are obtained from other municipal agencies - fees owed to the building department are paid - relevant violations are resolved There must be a final or a temporary CO before a new building can be legally occupied. If a temporary certificate of occupancy (TCO) is issued, the TCO will have an expiration date. In NYC, for example, the expiration date is usually 90 days after its date of issuance. This means that although the building department believes that the unit is safe to occupy, the approval is temporary and subject to expiration. If a TCO expires and is not renewed, a new buyer may find it difficult or impossible to renew homeowner's insurance policies or to sell or refinance the unit. A lender normally requires a minimum of a temporary CO before closing the loan.
A property will probably NOT sell for market value under which condition?
The buyer and seller are related to each other
A buyer assumed the seller's mortgage without obtaining a release of liability. The seller then defaults. Which of the following is TRUE?
The buyer and the seller may be personally liable for payment of the note. When a buyer assumes the seller's existing mortgage, the purchaser assumes liability for the mortgage and personal liability for payment of the note. The seller whose mortgage is assumed also remains liable for the mortgage and payment of the note unless released from liability by the lender.
Installment Sales Contract
The buyer contracts to obtain legal title to the property by paying the purchase price in installments. The seller agrees to transfer the legal title to the buyer by delivering a deed upon the buyer's full payment of the purchase price. The seller receives full payment of the purchase price from the buyer over the term of the contract. The seller holds legal title. The buyer holds equitable title until the property is paid for. May be used when a seller has an existing mortgage on the property that is being sold.
Freddie Mac Guidelines: Income/Salary
The buyer's (borrower's) income is a major factor in evaluating a loan application, because income largely determines the borrower's ability to repay the loan. In evaluating the borrower's income, the lender will determine the amount of the borrower's "stable monthly income." This amount is the borrower's base monthly income, plus any acceptable secondary sources of income, such as: - bonuses - commissions paid in addition to regular income - overtime pay - part-time employment - social security payments - interest earned on savings and/or investments - alimony or child support
Borrower's Willingness to Repay a Loan
The buyer's willingness to pay is reflected by credit history. The borrower's mortgage payment record, along with the number, amount of outstanding credit obligations, and payment history on other credit obligations show this history.
In the income approach using capitalization, the price for a property is determined by dividing the annual net income by _____.
The capitalization rate
New Development: The Closing Date
The closing date is sometimes questionable in a new development or conversion because delays in construction may hold up a closing. There are generally clauses in the letter of intent (described elsewhere) or contract of sale providing for closing delays and the rights of the parties should a delay occur.
Receiver of Taxes and Assessments
The collecting officer for each city and town receives real property taxes and assessments during a specified collection period. This person is known as a RECEIVER OF TAXES in towns of the first class. In certain counties, the town receiver of taxes may collect the village taxes. In certain towns, the town receiver of taxes and assessments must collect school taxes. Unless a town has other laws, the town receiver of taxes collects water rates, sewer rentals, permit fees, and other fees and charges payable to the town. A deputy may assist the receiver of taxes.
Fair Housing Amendments Act of 1988: Enforcement by filing an action in a federal district court
The complainant, with or without filing a complaint to HUD, may bring a civil suit in a federal district court within one year of the alleged violation unless a complaint has been filed with HUD, then the period is two years.
Cooperative: Subscription Agreements
The contracts to purchase shares of stock in the cooperative corporation. A cooperative developer prepares a subscription agreement when he/she initially sells each cooperative unit. The subscription agreements are included in the offering plan filed with the Attorney General.
Cooperative: House Rules
The cooperative members develop HOUSE RULES for the operation of the cooperative. House rules cover such issues as garbage disposal, maintenance, noise, and conflict resolution. House rules are generally more detailed than items in the proprietary lease and deal with day-to-day behavior and operations. These rules are very important to the real estate agent because the agent must share these rules with the purchaser. Think of house rules in a similar way as deed restrictions. If there is a rule that a purchaser finds objectionable, he/she may not wish to purchase the apartment. Better to find out sooner, rather than later.
In the construction of a property, if time schedules are not met or other construction problems occur, which of the following would most likely apply?
The cost would exceed the market value
The County Environmental Management Council consists of how many members from each city, town, and village conservation advisory council within the county?
The council consists of one member of each city, town, and village conservation advisory council within the county.
Environmental Law Management Councils: County Level
The county governing body can establish a County Environmental Management Council. The council consists of one member of each city, town, and village conservation advisory council within the county. It might include other members as directed by the governing body.
County Planning Board
The county planning board's purpose is to offer professional advisement to all agencies and boards within the county. The county legislature determines the members and officers of a county planning board. Members represent a cross-section of interests within the county or region. Board representation should include members from places within the county of varying population size, geographic location, and type of municipality Members are not compensated. Elected or appointed people from the county or municipality may serve on the board.
A deed restriction may be removed by _____.
The courts The originator of the restriction
Comps/Comparables
The data compiled on comparables include: - date of sale - sale price - location - terms of sale - physical characteristics - amenities (extra features that add value)
Debt Ratio vs Equity Ratio
The debt ratio is the total debt divided by the total assets. The equity ratio is the total equity divided by the total assets. Debt Ratio: total debt divided by total assets Equity ratio: total equity divided by total assets
A business property has an asset value of $2,000,000, with a debt of $1,200,000. What is the debt ratio for this property?
The debt ratio is the total debt divided by the total assets. $1,200,000 ÷ $2,000,000 = 0.60 or 60%
A business property has an asset value of $2,000,000, with a debt of $1,200,000. What is the debt to equity ratio for this property?
The debt to equity ratio is total debt divided by total equity. $2,000,000 - $1,200,000 = $800,000 equity $1,200,000 ÷ $800,000 = 1.5
Declarations Page
The declarations page of the policy identifies the basic terms of the contract and summarizes the coverage. Although most of the policy is preprinted, the declarations page (usually the first page) presents information customized to the policyholder.
Borrower's Ability to Repay A Loan: Freddie Mac Guidelines
The guidelines that you are likely to encounter most often are those developed by the Federal Home Loan Mortgage Corporation (also known as FHLMC or Freddie Mac). The Freddie Mac guidelines were developed for use with any loans purchased by Freddie Mac from a lender in the primary mortgage market. Because Freddie Mac is the largest purchaser of conventional loans in the secondary mortgage market, these guidelines are often used by a lender when making a conventional loan. These guidelines are often called the Fannie Mae/Freddie Mac guidelines, because they are used by Fannie Mae as well.
Offering Plan
The developer who constructs a cooperative or converts a building into a cooperative corporation must file a declaration and disclosure statement with the New York Attorney General's office. The first part of the declaration includes the scope of the project, a description of the corporate setup, and other required information. In the initial declaration, a schedule is included that describes the price of units, the pro-rata indebtedness of each unit, and the amount of predicted tax deductions. This first part of the review is called the preliminary prospectus. At this point, the attorney general can suggest any changes to the project except for the price of shares. Once the attorney general accepts the prospectus for filing, it is an offering plan or "black book." At that point, the cooperative units may be offered for sale to the public. Note: An individual or entity that develops an offering plan for a cooperative or condominium is called a sponsor. When a unit is offered for sale, the purchaser's attorney should review the offering plan. This is especially important if the unit is in a newly formed cooperative.
Evaporator, Compressor, Condenser and Air Handler
The evaporator absorbs heat from the structure's warm air and transfers it to the refrigerant system. The compressor creates a flow of refrigerant from one part of the system to the other. The condenser releases heat to the outdoors, cooling the refrigerant. The air handler blows air across the evaporator coil. A furnace may also be the air handler.
Coverage
The extent of what an insurance policy covers in case of an accident or need for reimbursement.
Freddie Mac Guidelines: Qualifying Ratios
The final element in evaluating the borrower's income is the use of qualifying (debt) ratios to evaluate directly the borrower's ability to repay a loan. Under the Fannie Mae/Freddie Mac guidelines (and the FHA and VA guidelines to be covered later), there are two debt ratios used for evaluation purposes: - the ratio of the mortgage payment to stable monthly income (also known as the monthly housing obligations to income ratio) - the ratio of all installment debts to stable monthly income (also known as the monthly total obligations to income ratio)
New York Anti-Predatory Lending Law: Conditions
The high-cost loans covered under the New York law also must meet one or more of the following conditions: - a conventional first mortgage that has an interest rate of more than 8 percent - a junior mortgage that has an interest rate of more than 9 percent - a conventional loan for more than $50,000 with the points and fees exceeding 5 percent of the loan - an FHA or VA loan for more than $50,000 with the points and fees exceeding 6 percent of the loan - a loan below $50,000 with the points and fees exceeding 6 percent of the loan or $1,500, whichever is greater
Federal Anti-discrimination Laws: The Civil Rights Act of 1866
The first important statute affecting equal housing opportunity is the federal Civil Rights Act of 1866. This 1866 law prohibits racial discrimination in the purchase, sale, or lease of both housing and personal property. Far from being obsolete, this statute has had a major impact on fair housing because of a landmark case in 1968, the year the Federal Fair Housing Act became law. Although the 1968 Act (described later) provides for a number of exemptions, the 1866 law has no exemptions and contains the blanket statement that citizens of all races have the same rights to inherit, buy, sell, or lease real and personal property. In the 1968 case of Jones v. Alfred H. Mayer Company, the U.S. Supreme Court applied the older Civil Rights Act of 1866 to prohibit any racially based discrimination in housing. This court ruling is important because the Federal Fair Housing Act provides exemptions under certain circumstances. Because of the court's determination in Jones v. Mayer, exemptions in the Fair Housing Act cannot be used to allow racial discrimination under any circumstances.
Freddie Mac Guidelines: Qualifying Ratios (Monthly Mortgage Payment)
The first ratio is that of the monthly mortgage payment (housing costs) to the stable monthly income. Under Fannie Mae/Freddie Mac guidelines, the amount of the mortgage payment should not exceed 28% of the borrower's stable monthly income. For example, if the borrower's stable monthly income is $2,000, the mortgage payment should not exceed $560, which is 28% of $2,000. If the mortgage payment exceeds 28% of the stable monthly income, the borrower's income is not considered adequate for the repayment of the loan.
Steps in the Cost Approach
The first step in the cost approach is to estimate the value of the site as if it were vacant. The site value is estimated by the sales comparison approach that uses comparable parcels of land to arrive at the value estimate. That is, to estimate the site value, the site is compared to comparable parcels of land that have sold recently. The second step in the cost approach is to estimate the cost of reproducing or replacing the structure. The cost approach relies heavily on depreciation of a property. The third step in the cost approach is to make deductions for depreciation on the existing improvements.
New York Anti-Predatory Lending Law: High-Cost (Subprime) Loans
The following are prohibited practices in high-cost (subprime) loans: Hidden fees: A lender may not finance points and fees that exceed 3 percent of the total loan amount. Unqualified buyers: The loan cannot be made without regard for the borrower's ability to repay the loan. Refinancing/flipping: Loan flipping is prohibited. A lender may not refinance an existing home loan unless the new loan provides a real benefit to the borrower. There are no points and fees when a lender refinances its own high-cost home loan. Kickbacks to mortgage brokers. Negative amortization: A high-cost home loan may not contain a payment schedule where the principal balance increases over time. For example, interest only loans and balloon payments are prohibited. A lender may not accelerate the indebtedness, unless the borrower fails to make payments. A lender may not increase the interest rate because of borrower default.
Protesting Assessments: Grounds for Review
The four grounds for review in New York are: - unequal assessment - excessive assessment - unlawful assessment - misclassification
Functions of Councils and Boards
The functions of city councils, town boards, and village boards of trustees may vary depending upon the other agencies that are set up within the municipality. These functions may include: - adoption of laws and ordinances including the zoning - ordinance and cluster zoning approval - adoption of the municipal budget - adoption of the tax rate - decisions to take private property for public use (eminent domain) - approval or disapproval of certain residential or commercial projects in the municipality - approval or disapproval of infrastructure projects in the municipality. This includes roads, schools, water pipes, roundabouts, etc. - the calling of a moratorium to halt building projects for a specified time
Consideration
The giving of value. Can also be when each party refrains from doing something he/she has a legal right to do. Must be present for a contract to be valid includes anything of value, such as money, property, rent, or a promise of performance.
Public Municipal Water Supply: Mineral Content
The goal of the water supply is water that is not devoid of minerals but does not have too many minerals.
Covenant of Further Assurance
The grantor must perform any acts necessary to correct any defect in the title being conveyed and any errors or deficiencies in the deed itself
Covenant of Right to Convey
The grantor provides an assurance to the grantee that the grantor has legal capacity to convey the title and has the title to convey
Generally, with a real estate investment, the greater the risk of loss:
The greater the return on investment
If a purchaser is concerned about making changes to a historic property in a town, which agency (agencies) should most likely be consulted first?
The historical preservation council and the architectural review board
Residential Market Analysis: Current Competing Properties
The histories of competing properties are considered: - How long have the properties been on the market? - How many competing properties are on the market? - Has the original listing price been reduced? - If so, what is the adjusted price? - Is the price adjusted more than once? With pending sales, the sold price may not be available. The most recent listing price can give the agent an idea of the most current price of the property under contract. It is not generally accepted practice to compare properties to be built with existing homes. New construction does not have the same value as existing properties. This is because there is a waiting time before they are ready for sale.
Maintenance and Assessment History
The income and expenses section of the financial statement shows if the corporation receives maintenance, common charges, or assessments in excess of the operating expenses . If it does, the result will be a cash surplus to the building. If it does not, the result is a deficit. The deficit can be supplemented with monies from flip taxes, sublet fees, interest from reserve funds, assessments, laundry income, garage income, and commercial rent, if any. During scheduled meetings, the board may discuss whether the maintenance charge is enough to cover the expenses of the cooperative corporation. Over the year, special assessments may also be charged to cover extra expenses for a specified time. The minutes should reveal the items of concern to the cooperative. If operating expenses exceed maintenance charges, the maintenance charges may be increased. In addition, a special assessment may be charged to all unit owners/shareholders to cover excess costs for a special purpose. By studying the meeting minutes, prospective purchasers can evaluate what their situation might be after purchase.
If homeowners do not take out a policy that covers at least 80 percent of the property's replacement cost, should there be a claim, which of the following applies?
The insured may have a co-pay.
When creating ads, the real estate agent should consider:
The intent of the message and the exclusion of any groups
Mortgage Interest: Other Mortgage Interest Deductions
The interest paid on a mortgage debt other than the main or second home may be deductible if the loan proceeds are for business, investment, or other deductible purposes. Otherwise, the interest is considered personal interest and not deductible.
What element is usually NOT a factor considered when determining which property is eligible for a conventional loan?
The interest rate
PITI Loan: Interest
The largest part of the total amount paid on a note. It is the lender's fee for the loan. In the early stages, the major portion of the payment goes toward interest. Over time, as the principal decreases, the interest payment decreases, and more of the payment credits toward the principal.
Boards of Health
The law sets forth the powers and duties of local boards of health. Boards of health are the governing body of the local health department.
Statute of Frauds
The law that states that contracts that create an interest in real estate must be in writing to be enforceable in court
Adjustable Rate Mortgage Calculations
The lender designates an index and then adds a MARGIN (measure of profit) above this index to determine the interest rate. For example, if the Treasury bill (T-Bill) index is 3% and the lender's margin is 2%, the ARM has an interest rate of 5%. Margins sometimes are expressed in basis points. Each basis point represents 0.01 of a percent. 0.01% = 1 basis point 2% change in interest rate = 200 basis points In the example above, the 2% margin equals 200 basis points.
Letter of Intent: Contents
The letter of intent includes the following: - price and deposits - The letter of intent states the purchase price. Also included with the letter is a Reservation Deposit to be held in escrow. The purchaser makes an additional - deposit upon signing the contract of sale. - completion date and closing date - use of the unit - For example, the letter may state that the unit is for residential single-family purposes. - nonexclusivity - The buyer agrees that in the absence of a signed contract, the seller may continue to market the unit. Additionally, buyers may have the right to deliver a contract to the seller if any other contract comes in.
Adding to a Basic Policy By Increasing Limits: Medical and Personal Limits
The limits for personal liability and medical payments are not offered as a percentage of the residence limit. The medical payments limit is included within the personal liability limit. Generally, personal liability limits of $100,000 per occurrence and medical payments limits of $1,000 per person are available. Higher limits of liability for these two coverages can be purchased.
Commission Entitlement
The listing agreement defines the relationship between the real estate broker and the seller. It specifies the point at which the broker is to have earned his/her commission. Although a broker is generally entitled to a commission when he/she produces a buyer ready, willing, and able to purchase the subject property on terms acceptable to the seller, the broker's right to a commission may be varied by agreement. Courts have concluded that a broker earns the commission upon procuring a purchaser who had reached agreement with seller on essential terms and is ready, willing, and able to perform.
When analyzing competing property to complete a residential market analysis, the agent should NOT consider _____.
The listing price of properties under construction
Environmental Law Management Councils: City/Town/Village Level
The local legislative body of any city, town, or village can appoint a Conservation Advisory Council to advise in the development, management, and protection of its natural resources. - The council can conduct research regarding environment projects. - It can assist municipal organizations in preparing plans or reports. - It can review proposals or applications as directed by the county. - Coordinates activities of other environmental organizations within the municipality - Advertises, prepares, prints, and distributes books, maps, charts, plans, and pamphlets about environmental issues - Inventories and maps open areas, marshlands, swamps, and other wetlands within the municipality and recommends proper use - Recommends to the municipality a program for ecologically suitable use of these areas The legislature can make this council into a conservation board with enhanced powers. If a conservation advisory council or conservation board performs services for several villages within a town, as well as part of the town outside the villages, there is usually a joint agreement among the various municipalities.
A steel beam or several wooden members fastened together that span the distance from one side of the foundation to the other is called _____.
The main carrying beam and girder
With a public wastewater system, the building sewer extends from the house drain and connects to _____.
The main municipal sewer system
Board Packages: Who Reads the Board Packages?
The managing agent of the cooperative first reviews the package. This is to ensure that all of the required documents are included. There is generally a fee for the package review by the managing agent and board. The fee is submitted with the package. After review by the managing agent, the board of directors receives the package. Some cooperatives have all board members read the packages. Others have a committee that is part of the board review them. There is generally a vote and a certain number of members have to approve the package for the purchaser to gain approval. The bylaws contain instructions for these procedures.
Village Board of Trustees
The mayor and the trustees of a village. They are all elected officers. The mayor serves a two-year term. According to statute, there are four trustees in each village board. The board may change the number of trustees. The term of office for trustees is generally four years. Under the New York Municipal Home Rule Law, a village has the power to adopt and amend local laws as long as they do not violate the New York Constitution or any general law. The board of trustees manages the business of the village just as a town board does.
Air Conditioning: Components
The mechanical components of an air conditioner are: - liquid refrigerant - evaporator - compressor - condenser - air handler Because an air-conditioning unit conditions air, a single forced-air heating system can include cooling, ventilating, and dehumidifying systems. Cooled air, fresh air from outdoors, and dehumidified air can travel through the same ducts as the heated air. Because the same duct work is used for all functions, this is one of the most economical types of installations.
Express Contract
The parties to the contract have definitely agreed on all the contract terms. The intent of the parties is stated (expressed) in the contract itself.
Pipe Size for Adequate Pressure
The minimum pressure in a water distribution system is the lowest pressure that permits safe and efficient operation. The maximum pressure is the highest pressure that will not damage the system. Building codes dictate the minimum pressure for plumbing fixtures as well as maximum allowable pressure. A pipe that is sized too small does not allow an adequate volume of water to flow through to the fixture. Sometimes problems occur in older structures where the pipes become clogged, mainly with mineral buildup. Water pressure is regulated through systems within the structure. A booster pump or other similar system increases water pressure. A pressure-regulating valve (PRV), also called a pressure reducing valve, reduces and maintains water pressure within predetermined ranges.
Minors and Contracts
The minor may hold an adult to a contract, but the adult cannot legally hold the minor to a contract.
Reserve Fund
The minutes may include the amount of cash the cooperative corporation or condominium holds in the reserve fund. (This information may also be in the financial statement.) The cash on hand is the amount of uninvested money held by the apartment corporation or the condominium at year's end. The reserve fund consists of invested monies used for repairs or capital improvements to the building. The general rule followed by accountants is that the reserve fund should equal one-third of the annual maintenance income. Many cooperative reserve funds receive income from a flip tax, a charge levied when units change hands. Some but not all cooperatives charge a flip tax imposed when a unit is sold or otherwise transferred. This tax, paid by the seller, is the amount assessed on the transfer of the property. The tax is sometimes based on a fixed percentage of the purchase price of the apartment. The flip tax may be 1 percent-5 percent of the purchase price. The cooperative corporation does not pay the tax to the government.
Graduated Payment Mortgage
The monthly payments are lower in the early years of the mortgage term. The payments increase at specified intervals. Eventually, the payment amount is sufficient to amortize the loan over the remaining term. In the early years of the loan, the repayment schedule may result in negative amortization. The monthly payments are low in the early years, not enough to cover all of the interest, which is then added to the principal balance.
Residential Market Analysis: Recommended Terms
The more favorable the terms are to a buyer, the more quickly a property will sell. Some of the circumstances involved in the terms of sale are: - Will the house be available immediately on transfer of title or are the sellers buying a home not available until a later date? - This sometimes occurs with new construction where there may be delays. - Do the buyers have a property to sell? Is the sale contingent on the buyers selling their property first? - A seller may not want to wait several months until the buyer sells his/her property and then perhaps have the sale fall through if the buyers do not sell in the time agreed. - What are the financing terms? - Is the mortgage assumable and are the interest rates favorable? - Are mortgages readily available with terms that are attractive to buyers? - Will the sellers offer financing directly to the buyer?
CMA Process: Making Adjustments
The more recent the sale date of the comparable, the more valuable the comparable. The agent should give emphasis to the similarity between the physical characteristics and location of the comparables to the subject property. In addition to knowing what has sold recently, the agent should inform the seller about what is currently available. Competing properties may influence pricing and marketing strategies. Once the agent searches the comparables through the MLS or other means, he/she can analyze and adjust the comparables based on the positive or negative adjustment used in the sales comparison approach discussed earlier. The agent will then apply general principles of a residential market analysis to arrive at a market value range.
Mortgage Contingency Clause
The mortgage contingency clause specifies the terms of any new mortgage, including: loan amount interest rate number of years of the loan (loan term) Also, if the sale is subject to, or contingent on, the buyer obtaining a mortgage, the date by which the buyer must notify the seller of his/her inability to obtain financing is included.
Essential Elements of a Mortgage
The mortgage is dated and contains the names of the mortgagor and mortgagee. The note, or bond, signed by the borrower appears in the mortgage. The note includes an ACCELERATION CLAUSE enabling the lender to declare the remaining balance immediately due and payable if the borrower is in DEFAULT.
If a letter of intent to purchase a condominium is binding, _____.
it should outline the damages to either party
Elements of the Promissory Note
The note contains a promise that the borrower is personally liable for paying the amount of money stated in the note. The note specifies how the debt is to be paid. Payment is typically in monthly installments of a stated amount, beginning on a certain date. The note states the annual interest rate on the outstanding principal balance.
Single-Payment Note
The note may be a single-payment loan with no payments on principal or interest until the note matures, and the entire principal and interest is paid at maturity.
Sales Comparison Approach: Making Adjustments
The objective in making adjustments is to adjust the price of each COMPARABLE property so that the price of that comparable more accurately reflects the features of the subject property. When making adjustments, you ALWAYS adjust the price of the comparable to bring it in line with the subject property. You NEVER adjust the price of the subject property. (You determine the price of the subject property from the adjusted comparables, which will be covered in a later step.) If the COMPARABLE is INFERIOR to the subject property, you ADD to the price of the comparable. This rule is easy to remember by using, CIA, the first letter of each key word: C - comparable I - inferior A - add If you remember the CIA rule, then you also know that if the comparable is SUPERIOR to the subject property, you SUBTRACT. In order to make actual adjustments of the type we have just covered, you will need to know an approximate value for each feature that differs in the subject and comparable properties.
Small Claims Assessment Reviews (Residential Only): Appeal
The only choice for the taxpayer who is dissatisfied with the decision of the small claims hearing officer is to commence an Article 78 proceeding. This is a type of appeal process according to the New York Civil Practice Law and Rules (CPLR) for administrative decisions. Those who file a small claims assessment review waive their rights to a tax certiorari proceeding in State Supreme Court.
Like-Kind Exchanges: Eligible Property for an Exchange
The only properties eligible for tax-deferred exchanges include real property held for investment, income, trade, or business. Personal residences are not eligible. (Residential investment property, such as an apartment complex, is eligible because is it considered investment property.) If properties are to be exchanged on a tax-deferred basis, both properties must be one of these eligible types of property. This is referred to as a "like-kind" or "like for like" trade, since the two properties traded are both from the eligible category. Within the general category of eligible properties, any specific type of property may be traded for any other specific type of property. Examples of like-kind real property exchanges may be an office building for a shopping mall, an apartment house for a tract of land, or an office building for an apartment building. Personal residences and property outside the U.S. do not qualify for exchanges. Property held for personal use does not qualify. An exchange of residences by homeowners does not qualify as a tax-deferred exchange. It is treated as a sale and a purchase. In addition, the property exchanged must not be sold to customers in the regular course of business, such as lots held for sale by a developer.
Is Ownership Fee Simple or Leasehold?
The only real property interest the shareholders have in the cooperative is a leasehold estate. The leasehold estate gives the right to possession of an apartment and use of the common areas. As lessees, the shareholders pay a monthly maintenance fee that is rent. This fee covers building maintenance and operation costs for the building, real property taxes, and debt service (if the corporation has a mortgage against the real estate.) The IRS allows mortgage interest and property tax deductions for personal loans for each unit and allows a proportionate share of the underlying mortgage interest to be deducted. There is no tenancy in common ownership in the common areas (as there is in condominiums), even though all tenants can use the common areas. The corporation owns the common areas, as all of the building, in fee simple.
Option Contract
The option is for a particular price for a specified time. An option is an express unilateral contract. Only one party to the option contract makes a promise. The optionor promises to allow the optionee the sole right to purchase the real estate during the specified time. The optionee pays for this right but makes no promise to purchase the real estate. The optionee is buying time to decide, arranging financing, or producing required permits for the desired property use.
Adjusted basis
The original cost or other basis, plus certain additions, such as improvements, minus certain deductions, such as deprecation and casualty losses.
Under a sublease, if the sublessee fails to pay the rent, who is liable to the original landlord for payment?
The original lessee
Structure wiring, or branch circuit wiring, runs from the distribution panel to _____.
The outlets
Roof Overhang
The overhang or eave is made up of three parts: the soffit, the fascia, and the frieze board. The soffit is the area under the roof extension. This is made of wood, aluminum, or vinyl (depending upon the type of siding). The area of material facing the outer edge of the soffit is called the fascia. The fascia is typically a 1"x6" or a 1"x8" board and is perpendicular to the soffit. If guttering is installed on the roof, it is fastened to the fascia.
If there is a leak or spill from a home heating oil tank, it must be reported by _____.
The owner
Optioner/Optionee
The owner of the property (optionor) cannot force the optionee to purchase the property, but the optionor must sell if the optionee chooses to buy.
Any shareholder, upon request, can receive an annual balance sheet and profit and loss statement for _____.
The past fiscal year Any shareholder, upon request, can receive an annual balance sheet and profit and loss statement for the past fiscal year.
Approving a subdivision plat is a function of _____.
The planning board
Demising Clause
The portion of the lease that specifies when the lessee may take possession of the premises
Reproduction Cost
The price to construct an exact duplicate of the property when it was new, using the same materials and construction techniques as the original. If the subject property was constructed many years ago, estimating the cost of reproducing that property today may be impossible. The materials and quality may not be available. Therefore, the basis of the cost approach for older structures is replacement cost new. Reproduction cost new may be used for properties constructed recently.
Sale of a Primary/Principal Residence: Second Home Capital Gains Exclusion
The primary home sale exclusion does not apply in the same way when taxpayers sell their second home. If they make the second home their primary residence for at least two years before they sell it, they may have some tax benefit. Under the Housing and Economic Recovery Act of 2008, taxpayers can still make the second home a primary home before they sell it, but they will owe taxes for the time frame that the property was used as a second home after January 1, 2009. The IRS currently uses a ratio of the years the taxpayer occupied the home as a primary residence and the years the home was used as a rental (or other than a primary residence) to calculate the capital gain amount to be excluded from the sale. The home sale exclusion may include gain from the sale of vacant land that was used as part of the residence, if the land sale occurs within two years before or after the sale of the residence.
Investment Quality of the Property: Loan-to-Value Ratio
The primary lender or the secondary mortgage market determines loan-to-value ratios. The loan-to-value ratio is important in determining the down payment. The down payment is the difference between the purchase price and the amount of the loan. Generally, if the loan-to-value ratio is greater than 80 percent, a purchaser must obtain private mortgage insurance (PMI).
Value by Income Capitalization
The primary method of estimating the present value of income-producing properties is the INCOME CAPITALIZATION approach. CAPITALIZATION refers to the process of converting future income into current value. Thus, the value of the property is estimated by converting net annual income into an indication of present value by application of a capitalization rate. A CAPITALIZATION RATE, or cap rate, is the annual return that an investor expects to receive.
Primary Mortgage Market
The primary mortgage market consists of lending institutions, such as banks and savings and loan associations, that make loans directly to borrowers. They make conventional AND government backed loans.
Cooperatives: Primary Residency v. Subletting Issues
The primary resident is the owner of the cooperative unit. A selling point of cooperatives is that they offer stability. The tenancy is not transitory. There are certain reasons why subletting is discouraged in a cooperative. Shareholders-owners generally tend to take better care of their own property than subtenants do. Cooperatives with too high a percentage of sublets may not be able to borrow money or refinance their underlying mortgages except at much higher rates than normal. Purchasers may not be able to secure share loans, or if they do, they are at higher rates. Fannie Mae, Freddie Mac, and the FHA require high primary tenant occupancy. On the other hand, subletting allows shareholders more flexibility in ownership. Sometimes people need to get out of their apartment but cannot sell it. A sublet allows them to obtain rent to pay their maintenance. Most boards will look at the sublet applicant's financials to see if that person can pay the sublet rent to the shareholder. The shareholder is still responsible for maintenance payments to the cooperative. To keep subletting from overtaking the building, a cooperative may adopt a ceiling on the number of sublets permitted in the building at any one time. When the number of sublets reaches the ceiling, all sublet applications are rejected. The board may also require that shareholders reside in the building for a certain number of years before they can sublet. Most cooperatives that allow subletting limit the term of the sublet. In addition, they may limit the time a shareholder can sublet a unit within a specific time. For example, they may only allow shareholders to sublet a unit for two years in a five-year period. A board may prohibit subletting completely if allowed by the governing documents. As with prospective purchasers, the board has the right to deny sublet applicants without giving a reason. The only time a board must defend its decision is if challenged in court or by local or state human rights agencies. This usually occurs when there is a discrimination claim.
Underwriting
The process of determining whether a lending institution will make the loan, and if so for how much, is called underwriting. The underwriter is responsible for evaluating two things: - the value of the property as collateral for a loan - the borrowers' ability to make the down payment and repay the loan
Capitalization
The process used to convert future income into current value, which is used to determine a price for a property. The steps in this process are: - Obtain accurate figures on gross income for the property. Gross income is the number of units times the monthly income per unit times 12 months. - From the gross income, deduct the amount of all expected expenses to get the net income. The net income is used in the capitalization process. - Determine the desired capitalization rate. The capitalization rate is the rate of return on investment desired by the investor, expressed as a percentage. For example, if an investor wants a return of 10 percent on his/her investment, the capitalization rate would be 10% or .10. - Capitalize the net income by dividing it by the capitalization rate to get a price for the property.
Capital Gains
The profit realized from the sale of any capital investment including real estate. A capital gain occurs if an investor sells the asset for more than the basis (discussed later in the lesson). Different types of income are taxed differently. Most income is taxed at the taxpayer's marginal bracket, as discussed previously. Some income and gains are tax-deferred. Some income is taxed at a lower rate than other types of income. This last category includes capital gains. Assets such as stocks, real property, and collectibles fall into the category of capital assets. If these items are held over one year before sale, the profits receive a reduced tax rate.
Section I of a typical homeowner's policy covers _____.
The property of the insured
"Subject To" Clause
The provision of the sample contract for purchase and sale that states the purchaser will accept the property subject to covenants, deed restrictions, easements, and environmental protection or zoning laws
Sale "Subject To" A Mortgage
The purchaser does NOT become liable for payment of the note. If property is sold subject to the lien of an existing mortgage (but that lien is not actually assumed), the lender can still foreclose against the property in the event of a default in mortgage payments. However, the lender cannot sue the purchaser for a deficiency judgment. The lender must obtain a deficiency judgment only against the seller who is still responsible for that mortgage. The seller is the one who remains personally liable for paying the debt.
Assessed Value: Community-Wide Reassessment
The purpose of a community-wide reassessment is to restore fairness within the community. A property's assessment is supposed to reflect its market value. Market values may increase or decrease. As discussed earlier, if assessments do not reflect these changes, some property taxpayers could pay more or less than their fair share. A reassessment does not always mean that property assessments or taxes increase. If the assessment does increase, it does not necessarily mean the property taxes will increase. Sometimes, taxes are shifted among types of property. In some cases during a reassessment, a municipality will go from a fractional level of assessment to 100 percent. If the original level of assessment was 10 percent, the assessed value could go from $9,000 to $90,000, but there might not be any increase in taxes. Of course, market values of properties also go down. This means that such properties should see a decrease in assessed values
City Council
The purpose of the city council is to preserve order, peace, health, safety, and the welfare of its people. The term of office of the council members and the president of the common or city council of second-class cities is two years. The council enacts ordinances for the government of the city and the management of its business. These ordinances must not violate other laws. The New York City Council is the law-making body of the City of New York. The NYC Charter sets forth the regulations for the council. The New York City Council is comprised of 51 members from 51 different Council Districts throughout the five boroughs. The term of office of a council member of the New York City Council is currently four years. The Council has full power over the municipal budget, authority over zoning, land use, and franchises.
Graduated Payment Mortgage Purpose
The purpose of the graduated payment mortgage is to enable individuals to buy properties because they can afford the lower initial monthly payments. The assumption is that the borrowers' income will increase over the years as the payments increase.
Cash-on-cash Return
The ratio of annual before tax cash flow to the total amount of cash invested, expressed as a percentage. Annual before tax cash flow divided by total cash invested = cash-on-cash return
Loan to Value Ratio (LTV)
The ratio of the loan amount to the property value. It is calculated as the loan amount divided by the sales price or the appraised value, whichever is less. May vary based on: whether private mortgage insurance is required; the discount points charged whether an escrow payment is required for taxes and insurance; whether secondary financing is allowed As the LTV on a conventional loan increases (and the down payment decreases), the lender's risk in making a loan is increased.
Retail Centers
The regional mall and specialty center attract business from outside the immediate community. Regional malls offer a very large mix of retail stores and services. They can contain large ANCHOR TENANTS, such as large department stores, supermarkets, clothing stores, and/or furniture stores. Both the neighborhood center and regional mall are more complicated investments than are the strip centers.
Actual Eviction
The removal of the tenant from the leased property because he/she violates some provision of the lease
When Donna Sheehan signed her rental agreement for Valley View Apartments, a 50-unit complex, the rental agent told her that because she has two children she would have to pay an extra month's security deposit instead of one. Which of the following is correct?
The rental agent's request is in violation of federal and New York State human rights laws.
New York Mortgage Banker License and Requirements
The requirements for a mortgage banker license are: - a net worth of at least $250,000 - an existing line of credit of at least $1 million provided by an unaffiliated banking institution, insurance company, or similar credit facility approved by the Superintendent of Banking - filing of a surety bond for $50,000 or the execution of a deposit agreement coupled with a pledged deposit of securities or other assets for $50,000 - demonstration of good character - a background report, provided by a selection of agencies chosen by the banking department - a set of fingerprints, a fingerprint fee, and an investigation fee Surety bond or deposit agreements are monies held by a third party who promises to be liable for the payment of another person's debt. The surety bond need not be filed until the application has been approved. NYSDFS uses the surety bond or deposit to reimburse improperly charged consumer fees or to cover banking department fees in case of liquidation by the licensee.
Proprietary Lease
The rights and obligations of a resident-shareholder and the cooperative corporation are included in the proprietary lease and corporation bylaws. A tenant who purchases a cooperative does not receive a deed to his/her unit. Instead, he/she receives a proprietary lease to the unit. This proprietary lease is an occupancy agreement that defines the conditions to occupy a unit. The proprietary lease is generally a long-term lease or estate for years. The seller at closing delivers the proprietary lease to the buyer. In some ways, the proprietary lease is similar to basic leases for apartment rental. The proprietary lease also addresses occupancy requirements. Occupancy requirements can include the number of people who can live in the apartment. Occupancy requirements can also state if relatives or others can live in an apartment with or without the owner's presence.
Ceiling Framing and Roof Construction
The roof is one of the most easily identifiable structural components. Construction technique, style, and the pitch of the roof all identify roof types. The pitch is the slope of the roof. In contemporary residential construction, two varieties of roof styles are used: the traditional gable roof and the hip roof. A hip roof is a roof sloping on four sides. A gable roof is a roof sloping on two sides.
Ceiling Framing and Roof Construction: Length Requirements
The roof should extend at least 6" beyond the structure's exterior. Common construction practices use a 12" overhang on the front and rear, with a 6" overhang on the side. These overhangs that are part of a sloped roof are called the eaves. The eaves are the lowest part of the roof that project beyond the walls of the structure. A larger overhang provides more protection from sun and rain for the exterior walls, windows, and doors.
Investment Quality of the Property: Sales Price
The sales price should be comparable with the recent sales prices of other similar properties in an area as near as possible to the subject property. An appraisal is performed for the subject property. The appraiser makes a final reconciliation of value. This is the appraised value. After reviewing the appraisal, the lender makes a conclusion as to the actual value.
The Salesperson's Role: Documentation
The salesperson must keep records of: - agents who show the property - preview caravans (groups of agents viewing the property) from both the salesperson's firm and other companies - people who appear at open houses, and notes of follow-up interviews with them The salesperson should document and review new listings daily and note those that are competitive. He/She should also track competitive older listings that have sales pending. From this daily documentation, the salesperson may wish to adjust the list price if a similar property is under contract for a lower price than the subject property.
Septic Systems
The sanitary waste or drainage system carries wastewater from the structure and deposits it into the public sewer system or private septic tank. In most rural and some suburban residential areas, individual wastewater treatment systems dispose of household wastes. A typical wastewater treatment system consists of a sewer, septic tank, distribution box, and an absorption field or seepage pit. With a septic system, the sewer is the pipeline connecting the structure to the drain and septic tank. Untreated liquid waste clogs the absorption field if not properly treated. The septic tank provides this needed treatment.
Negative Amortization
The scheduled loan payment is not large enough to cover all the interest due. The unpaid interest each month is added to the principal balance. The result is that the principal balance increases after each monthly payment, rather than decreasing as in a regular amortized loan. Many ARMs prohibit negative amortization.
Fair Housing Act of 1968: Fair Housing Amendments Act of 1988 - Enforcement and Penalties
The second major set of provisions in the 1988 Fair Housing Amendments Act is designed to reduce the violations of the law by strengthening: - the enforcement mechanisms - the penalties for violations Until 1988, the role of the Department of Housing and Urban Development (HUD) was limited to trying to negotiate a voluntary agreement between the affected parties. The Fair Housing Act may now be enforced in three ways: - through the Office of Fair Housing and Equal Opportunity (FHEO), Department of Housing and Urban Development (HUD) - by filing an action in a federal district court - through the U.S. attorney general
Freddie Mac Guidelines: Qualifying Ratios (Monthly Debt Payment)
The second ratio is that of the borrower's total monthly installment debt payments to the stable monthly income. Under Fannie Mae/Freddie Mac guidelines, the amount of the total monthly debt payments should not exceed 36 percent of the stable monthly income. For example, if the borrower's stable monthly income is $2,000, the total debt payments should not exceed $720, which is 36 percent of $2,000. If the total debt payments exceed 36 percent of the stable monthly income, the borrower's income is not considered adequate to meet all debt requirements and repay the loan. This second ratio between total monthly installment debt payments and the stable monthly income is often referred to as the "total debt service ratio."
Purpose of the Secondary Mortgage Market
The secondary mortgage market is necessary to the loan process. It buys and sells mortgages created in the primary mortgage market. A mortgage is generally assignable if not stated otherwise. Assignability allows the original lender to assign or sell the rights in the mortgage to another. The money invested in the mortgage is freed from the original lender without the lender waiting for the borrower to repay the debt over the long mortgage term. This process keeps funds flowing back into the primary market so the funds can be loaned to others.
Septic Tank: Depositing Materials
The septic tank contains bacteria, which decompose the solid wastes and grease. A relatively clear liquid flows out the opposite end of the tank into a distribution box. The distribution box evenly distributes the flow from the septic tank to the absorption field or seepage pits. An absorption field is a system of narrow trenches partially filled with a bed of washed gravel into which perforated joint pipe is placed. The discharge from the septic tank is distributed through these pipes into the trenches and surrounding soil. A seepage pit is a covered pit with a perforated lining through which discharge from the septic tank infiltrates the surrounding soil. According to health department rules, if soil and site conditions are adequate for absorption trenches, seepage pits cannot be used.
Creation of a Condominium
The set up of a condominium is similar to that of the cooperative. To create a condominium, the owner of the property (the declarant) signs a condominium DECLARATION. The declaration includes certain provisions required by statute. This includes a description of the property and each unit, how the condominium is governed and dues assessed, repair and maintenance responsibilities, and ownership interest between the condominium association and owner. The declaration becomes effective when recorded in the public records of the county where the property is located.
When a condominium is set up, who appoints the condominium's board of managers or directors?
The sponsor
If a building converts to a cooperative, a number of units may be available. By law, the unsold shares allotted for the units in the cooperative that are not purchased are generally held by _____.
The sponsor of the cooperative
Which of the following does NOT receive revenue from property taxes?
The state
Assessed Value: Assessment Ratio
The state tax law requires the calculation of residential assessment ratios (RARs) annually. RARs are calculated by finding recent sales in the taxing unit and comparing the sales prices to the assessed values. RARs are used by assessors as a general measure of assessment equity. RARs are also used by taxpayers in board of assessment review grievances and/or small claims hearings. RARs are NOT issued for: - municipalities currently conducting revaluation projects, or - municipalities that have less than five residential usable sales that year
A town tax assessor performs which duties?
The tax assessor is a local government official who estimates the value of real property within a city, town, or village's boundaries.
Exemptions for Property Owners: Veterans' Exemptions
The tax law provides a partial exemption to veterans who purchase their property with a veterans' pension, bonus, or insurance monies. These monies are referred to as eligible funds. Another exemption, known as the alternative veterans' exemption, is available only for residential property of veterans who served during wartime or have received a medal. This exemption provides a tax exemption of 15 percent of assessed value to veterans who served during wartime and an additional 10 percent to those who served in a combat zone. Each municipality in New York was given the option of not granting this alternative exemption. Residents must check to see if the alternative exemption is available in their municipality. The eligible funds exemption generally carries a maximum $5,000 deduction of a property's assessed value. It applies to general municipal taxes but not to school districts or special district levies. Exemptions are not automatic. An application must be filed with the local assessing unit.
Lease escalation clauses call for increased costs to _____.
The tenant
When a lease names more than one tenant, these tenants may share their apartment with _____.
The tenant's immediate family
Frieze Board
The third component of the overhang is the frieze board. This is a wooden framing member that is fastened directly under the soffit, against the top of the wall. The purpose of the frieze board is both decorative and functional. The frieze board prevents wind and moisture from penetrating the junction of the soffit and sheathing.
Town Engineer
The town board of every town may appoint a town engineer. The town engineer must be a licensed professional engineer. In addition to having its own engineer, town boards may employ other engineering services as needed. A town of the first class may appoint deputy engineers as well. The town engineer and assistants may survey or examine any lands, or waterways, public or private, within the town.
Types of Framing
The underlying structure of a building is collectively referred to as the framing. Although steel framing is occasionally used, most residences are built with wood frame construction. There are several types of framing, including: - Platform framing - Balloon framing - Post-and-beam framing
Full Performance
The usual and most desirable manner of terminating a contract is by complete performance of all contract terms.
The underwriter is responsible for evaluating the borrower's ability to make a down payment and repay the loan and _____.
The value of the property as collateral for the loan
VA Guaranteed Loan: How it Works
The veteran borrower defaults on the VA loan. The lender forecloses. The property is sold. If the proceeds from the sale are less than the outstanding balance on the loan, the VA pays the difference, UP TO A LIMIT, which is covered next.
The floor system serves as a stage or platform for _____.
The wall systems
Venting Requirements
The waste and water from the plumbing fixtures move down the fixture drain through soil pipes to the main soil stack. The main soil stack connects to the structure drain, where the waste leaves the system. A vent system consists of pipes installed in a sanitary wastewater drainage system to provide a flow of air to and from a drainage system. These vent pipes allow air to circulate to ensure rapid and silent flow of waste and stop back pressure. Vent piping permits gases and odors to circulate up through the system and escape into the air. Every plumbing fixture is connected to a vent pipe that is connected to a roof vent pipe. The main vent is the top of the main soil stack and connects to all the toilets in the structure. Secondary vents connect to other fixtures such as sink traps. Building codes specify venting requirements.
Guidelines for Site Location for a Well
The well should be constructed in an accessible location not subject to flooding. It should be located a good distance from potential sources of pollution. NYSDOH suggests a minimum distance between water supply and certain contaminants. When a well is located next to a building, it should clear any projection from the building by at least five feet. Wells should be built at a depth of more than 20 feet below the ground surface. After construction and before using the water, the well should be disinfected according to health department guidelines. Changes in the appearance or taste of the water can be a sign of contamination. If there is pollution, the well should be filled in or made inaccessible.
TILA Penalties
There are a wide range of penalties to a lender, creditor, or other violator of TILA depending on the nature of the violation. Violations include any actual damages sustained by a person because of a violation. In addition, with an individual action relating to a transaction involving a dwelling or other real property, there is a minimum fine of $400, and a maximum $4,000 fine. Class action (group) lawsuits allow for more substantial penalties. A borrower who has a financial loss because of the violation may sue the violator for damages within one year (with some exceptions) in federal district court.
Various Taxing Jurisdictions
There are no statewide real property taxes. Assessing units (taxing jurisdictions) follow municipal boundaries: county, city, town, or village. All cities and towns in New York are assessing units and have assessors. Exceptions are Nassau and Tompkins Counties that have county assessing. Villages in New York are also assessing units. Villages have the option of ceasing to be assessing units. Villages can levy their taxes on the village portion of the town roll. School districts and special districts use assessment rolls prepared by the various assessing units as the basis for collecting taxes.
Ways to Express Property Tax Rates
There are several ways that property tax rates may be expressed, including: mill rate dollars per hundred
Possible Assessment Review Board Decisions
There are three potential outcomes of assessment review board decisions: - full denial of claim - full re-assessment of the property - partial re-assessment of the property In certain cases, a property owner may not request an assessment reduction of more than 25 percent of his/her current assessment. If the equalized value is greater than $450,000, the total reduction in assessment requested may not exceed 25 percent of the assessed value.
Wastewater Treatment Systems
There are two agencies that regulate wastewater treatment systems: New York State Department of Health (NYSDOH) - NYSDOH regulates the installation and approval of individual residential on-site wastewater treatment systems of less than 1,000 gallons per day. - NYSDOH also reviews and approves plans for wastewater treatment systems in residential subdivisions. - There are minimum standards for individual residential wastewater treatment systems. - They include site requirements and design and construction guidelines for different types of systems. New York State Department of Environmental Conservation (NYSDEC) - NYSDEC standards apply to buildings or residences that process 1,000 or more gallons of wastewater per day. - NYSDEC approves plans for community and public wastewater.
Small Claims Assessment Reviews (Residential Only): Types of Evidence
There are two issues in a tax assessment dispute: - the fair market value of the property that is proved by appraisal testimony - the ratio of assessed to full market value The residential assessment ratio is intended only for use in small claims assessment review for one-, two-, and three-family, owner-occupied residences. It may not be used in an Article 7 tax certiorari proceeding.
One of the disadvantages of heat pumps is what?
They operate only in moderate climates.
Like Kind Exchanges: Taxable Realized Gain
There are two possible trade situations--one in which the values of the two properties are the same and one in which they are different. When the values of the two properties are the same, neither party will be required to pay income tax resulting from the exchange. In this situation, the "cost basis" for tax purposes is the same for the two properties, and no tax is due since there is no gain or loss for either party. When the values of the two properties are not the same, the party trading the lower valued property usually gives the other party some additional money or item of value in addition to the real property exchanged. This additional money is called "boot." In this situation, the party who trades a lower valued property for a higher valued one ("trades up"), will not have to pay taxes resulting from the exchange. The party who trades a higher valued property for a lower valued one ("trades down") will usually have to pay taxes resulting from the exchange. This can occur for either of two reasons: - the payment of "boot" - the exchange of mortgages with different balances When a "boot" is paid along with the exchange of real property, the person who receives the boot is usually liable for taxes on the amount (or monetary value) of the boot. A tax liability can also occur when two properties are exchanged that have two different mortgage balances, even if no boot is paid. If a taxpayer receives a smaller mortgage balance in exchange for a larger one, the difference in the balances is considered income to that taxpayer and is called "mortgage relief." The amount of the mortgage relief (reduction in mortgage balance) is taxable.
When a purchaser buys from a sponsor, _____.
There is no board approval
VA Guaranteed Loans: Funding Fee
There is no monthly mortgage insurance premium. There is a VA funding fee required by law. The fee is currently 2.15 percent on no down payment loans for first-time users. The funding fee for second time users who do not make a down payment is 3.3 percent.
Subprime Borrowers
These are borrowers with a less than perfect credit report.
Condominium Unit Owners Policies (HO-6)
These policies insure against damage to the contents of the apartment, cooperative, or condominium and for personal liability of the insured when people are injured or suffer property damage in the insured's unit.
Regulation Z: Advertising
These provisions apply to anyone who advertises "consumer credit," not just creditors. Therefore, any builder or real estate broker who advertises credit must comply. The only specific item that may be stated in the advertisement without making a full disclosure is the annual percentage rate (spelled out, not abbreviated as APR).
Fair Housing Amendments Act of 1988: Persons with Handicaps
These same standards apply to buildings ready for first occupancy after March 13, 1991, that do not have an elevator but have four or more units on the ground floor. These requirements apply to most public and private housing. However, there are limited exemptions for owner-occupied buildings with up to four units, single-family housing sold or rented without the use of a broker, and housing operated by organizations and private clubs that limit occupancy to members. These requirements for new buildings do not replace standards that are more restrictive in state or local law, such as in New York.
Special Assessment Tax
These taxes are usually levied to fund a specific project that benefits only some of the citizens in a government jurisdiction. Examples of uses for special assessment taxes might include: - street paving in a neighborhood - water and sewer installation - street lights for a street or neighborhood The amount of the tax is based on the benefits received, not necessarily on the value of the property owned.
Homeowners-1 (HO-1) Policy
This Basic Policy insures the home and its contents against listed perils. Very few insurers sell this policy and most offer more comprehensive policies, such as the Homeowners-3, that include these and other perils.
Homeowners-1 (HO-2) Policy
This Broad Form Policy, insures a home and contents against the perils in the HO-1 policy and other additional listed perils such as falling objects; weight of ice, snow and sleet; damage resulting from an accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning or automatic fire sprinkler system.
Homeowners-5 (HO-5) Policy
This Comprehensive Form Policy protects the home against the same perils as the HO-3 policy. In addition, the personal possessions are covered for all risks of physical loss, except those specifically excluded. An HO-3 policy with the "Special Personal Property" endorsement may also provide this extra protection.
Homeowners-8 (HO-8) Policy
This Market Value Policy is a modified version of the HO-1 policy, providing actual cash value coverage in place of replacement cost coverage for a building. The company's settlement figure will not exceed the amount necessary to repair or replace the dwelling. This policy form is generally used when the replacement value of the property exceeds its market value, as in the case of older homes.
Homeowners-3 (HO-3) Policy
This Special Form Policy is the most widely used homeowners policy. It is becoming the standard homeowner's policy and many lending institutions recommend it. This policy covers the home for all risks of physical loss, except those excluded, such as flood, earthquake, war, or nuclear accident. The policy lists the excluded perils. Coverage for loss of the home's contents is also covered for many of the same perils as the home.
Grounds for Review: Unlawful Assessment
This category includes properties that under law are fully exempt from real property taxation. If a property is located outside the boundaries of the city, town, village, school district, or special district indicated on the assessment roll, the assessment is unlawful. Other unlawful assessments include property entered on the assessment roll by someone other than the assessing unit. It also includes inaccurate identification of a property.
Business Interruption Insurance
This is also usually included in a Business Owner's Policy package. Business interruption covers expenses incurred if the business is suspended due to a disaster-related event such as a tornado. The policy can include coverage for costs such as rent, payroll, and utilities.
Grounds for Review: Misclassification of Homestead and Non-homestead Classes
This protest can be used only in approved assessing units that have adopted homestead and non-homestead classes, as discussed earlier. The two possible types of claims of misclassification are: 1) the parcel has been designated in the wrong class on the assessment roll 2) the allocation of the parcel's total assessed value between the homestead part and the non-homestead part is incorrect For example, suppose a 100-acre parcel is assessed for $800,000. The assessor allocates $400,000 of that amount to the residence and its surrounding 10 acres. The other $400,000 is allocated to the remaining 90 acres. The protester may believe that the $800,000 total assessment is correct. But he/she may also believe that the residence and 10 acres are worth more than one-half of that total, for example, $536,000. The question of allocation becomes important because of the different tax rates assigned for the homestead and non-homestead classes. In these cases, the protester can claim that the property is misclassified. He/She can request that the assessed value be allocated differently between the residence and surrounding 10 acres and the remaining 90 acres.
Mortgage: Lender`
This title is encumbered by the lien created by the mortgage in favor of the lender (mortgagee). If the lender is not paid according to the mortgage and note terms, the lender can foreclose the lien.
The Purpose of Taxation: Exempt Properties
Though all real property in an assessing unit is assessed, not all of it is taxable. Tax exemptions are set by state law. In some cases, the law allows municipalities to determine whether to grant exemptions and to decide their amounts. Exemptions are either full or partial exemptions. Properties owned by religious organizations and government-owned property are completely exempt. Other exemptions may include farms or nonprofit, educational, and charitable organizations. Lesser-known exemptions may exist for water and wastewater treatment facilities, business and industrial development, solar and wind energy, and specific types of housing.
The TILA gives the borrower the right, in some cases, to rescind a contract for up to _____ days.
Three
New York licensees are required to complete _____ hours of approved continuing education in fair housing as part of their 22.5-hour continuing education requirement.
Three DOS regulations require that New York licensees complete three hours of approved continuing education in fair housing and/or discrimination, in the sale or rental of real property, as part of their 22.5-hour continuing education requirement.
The Board of Assessment Review consists of _____.
Three to five appointed members
The distribution panel distributes electricity _____.
Throughout the home
The process that calculates the value of an asset in the past, present, or future is called the _____.
Time value of money
Truth-in-Lending Act (TILA)
Title I of the Consumer Credit Protection Act (1980), addresses the informed use of consumer credit. It has two purposes: - to require full disclosure of the cost of credit - to allow the borrower to rescind credit transactions under some circumstances
Letter of Intent: Legal Issues
To avoid legal issues regarding offer and acceptance and therefore formation of a binding contract, a clause may state that the letter is not a specific offer or legally binding obligation. However, the letter of intent is an obligation to continue to negotiate in good faith. If one or the other party defaults on the letter of intent, the legal problems depend on if the letter is binding or non-binding. If the terms of the letter are binding, the letter should outline the damages to either party. If the letter is non-binding on all parties, then there are no legal damages to any of the parties.
CMA Process: Data Collection
To create a CMA, the real estate agent needs to obtain the date the comparable home sold, verified sales price, length of time on the market, and method of financing used. The agent needs to compare the basic physical characteristics for each comparable sale including the comparable square footage, number of bedrooms, number of bathrooms, garage, age of home, and location. Comparables should be as similar as possible to the subject property. Real estate agents can find comparables from many sources, such as: office files tax assessment data online MLS listing and sales data appraisers Many agents do not like to use comparables that go back more than six months.
Deriving the After-Tax Cash Flow (ATCF): Determining Taxable Income
To determine income taxes paid, taxable income must be calculated. Certain expenses related to real estate ownership may be deducted from income when calculating income taxes. These expenses are referred to as DEDUCTIBLE EXPENSES. As you learned earlier, operating expenses are deducted from gross income to determine net operating income. Mortgage principal and interest payments are collective referred to as DEBT SERVICE. The interest, which is a deductible expense, is deducted from net operating income when calculating taxable income. Depreciation is another deductible expense for investment property. Depreciation is based on the concept that all property loses its value over time and must be replaced. Consequently, the tax law allows a business or investor to deduct the cost of the property over a period of years. For tax purposes, depreciation can be thought of as the deduction of a certain percentage of the cost of any improvements to land over a period of years set by the tax law. (Improvements to land are things like buildings.) Note that depreciation is based ONLY on the cost of improvements to real estate, not the land itself. Land is never depreciated.
Calculating Amount of Interest Due (Monthly Installment)
To determine the amount of interest due for each monthly installment, the annual percentage rate is multiplied by the unpaid principal balance and the result divided by 12.
Maintaining a Fair Housing Office
To ensure fair housing compliance, NAR recommends that agents sign a policy statement that includes an affirmative commitment to equal opportunity. The firm should designate a fair housing officer, the broker, or another agent. This individual: - oversees fair housing training - keeps up to date on fair housing developments - tracks the firm's compliance - finds answers to policy questions Office procedures should emphasize proper record keeping. Procedures should outline the initial contact with customers and clients including: - discussing the services offered by the firm - assigning agents to the customer - obtaining initial customer information
Risk: Rate of Return
To evaluate an investment, investors should determine the percentage of return they want on their investment and examine the return on the actual investment. If they know they can receive 5 percent risk-free return on a certificate of deposit or a treasury bond, they will expect more from a real estate investment because of the risks involved. However, income tax must be paid on the interest earned from savings. With an income producing real estate investment, the earnings might be sheltered since the buildings and equipment can be depreciated. That depreciated dollar amount can be deducted from the income. In the income approach technique for evaluating property investments, the property's income is divided by the desired rate of return. If an investor requires a 12 percent annual return and the property has a $15,000 net annual income, the investor should pay no more than $125,000: $15,000 ÷ 0.12 = $125,000 The rate of return relates net operating income to the investment.
Financing: Cooperative Lien Search
To finance a cooperative, the lender performs many of the same tasks as for a fee simple mortgage. One of these tasks is a cooperative lien search so that a title policy on the unit can be issued. A cooperative lien search, also called a UCC lien search, provides the name of the cooperative corporation and the names of the owners of shares of stock associated with a specific unit within that co-op. The search includes a lien search against the building, the unit, and owner.
Documents Needed for the Sale/Purchase of Cooperatives: Financing
To finance the purchase of a cooperative, the cooperative purchaser uses both the shares of stock assigned to the apartment as well as the proprietary lease as collateral for the loan. This type of loan where shares of stock are collateral is a SHARE LOAN. Security for repayment of the share loan is a pledge of the shares in the cooperative corporation. The shares are pledged by a security agreement. Instead of recording a mortgage, a Uniform Commercial Code (UCC) Financing Statement is filed with the county clerk. The lender will take possession of the stock or membership certificate evidencing the ownership of shares in the cooperative corporation. The proprietary lease is conditionally assigned to the lender as additional security for repayment of the share loan.
Maintaining a Fair Housing Office: Salespersons' Responsibilities
To offer equal opportunity for all, salespersons should: - Know fair housing laws and responsibilities - Always act in accordance with the law - Learn excellent record-keeping skills - Attend fair housing training seminars - Know how to report fair housing misconduct
The Need to Plan for Future
To preserve the value, safety, and health of private citizens, governments address specific concerns and plan for the future. If property is privately owned, the property owner must follow all applicable laws and regulations.
In Kelo v. United States (2005), the U. S. Supreme court ruled that cities can exercise the power of eminent domain _____.
To promote private economic development In Kelo v. United States (2005), the U. S. Supreme court ruled that cities can exercise the power of eminent domain to promote private economic development, even though the constitution prohibits the government from taking private property except for a "public use."
New York Lawyers Fund for Client Protection
To protect the down payment monies from dishonest practices by attorneys One of its purposes is to reimburse client money that is misused in the practice of law. The fund is financed by the members of the legal profession in New York State through a registration fee required by law and from interest from attorneys' IOLA accounts (or Interest on Lawyer Account). The fund may reimburse losses caused by the dishonest conduct of New York lawyers up to a maximum of $300,000 for each client loss. An attorney may have many escrow accounts.
Equalization Rate
To remedy this problem, the New York Office of Real Property Tax Services (NYORPTS or ORPTS) has developed an equalization rate to determine at what percent of market value different municipalities are assessing. The rate is the result of the appraisal of all properties in every city, town, and village, and the comparison of these appraised market values with assessed values. At its simplest, an equalization rate is the state's measure of a municipality's level of assessment (LOA). This calculation provides the ratio of total assessed value (AV) to the municipality's total market value (MV). The equalization rate formula is: total assessed value ÷ total market value = equalization rate Equalization rates DO NOT indicate the degree of uniformity among assessments within a municipality. - An equalization rate of 100 means that the municipality is assessing property at 100 percent of market value. - An equalization rate of less than 100 means that the municipality's total market value is greater than its assessed value. - An equalization rate of greater than 100 means that the total assessed value for the municipality is greater than its total market value.
The ratio between total monthly installment debt payments and the stable monthly income is often referred to as the _____.
Total debt service ratio
Programs that encourage a shift in growth away from agricultural, environmentally sensitive, or open space regions of a municipality to more appropriate areas are called _____ programs.
Transfer of Development Rights Programs that encourage a shift in growth away from agricultural, environmentally sensitive, or open space regions of a municipality to more appropriate areas are called Transfer of Development Rights programs.
In the case of village taxes, the _____ receives taxes.
Treasurer
To claim the entire capital gains exclusion on the sale of a home, the home seller must have owned and resided in the home for _____.
Two of the previous five years
Bilateral Contract
Two parties have made promises of some kind to each other. Because both parties make promises, the contract binds the parties.
New York City Commission on Human Rights: Two Family Homes
Two-family owner-occupied housing is exempt from the law in New York City only if the housing is not made available through advertising, real estate listings, or some other kind of public notice. The rental of rooms in an owner-occupied housing accommodation other than publicly assisted housing is also exempt.
Swing Loan
Type of Gap Financing (also a type of interim or bridge loan) Usually not secured by a mortgage. A borrower uses the equity that he/she has in one property to obtain the funds to purchase another property. When the property borrowed against is sold, the money from the sale pays back the loan. A solid credit background is generally needed to obtain this type of loan.
Bridge Loan
Type of Gap Financing Allows a buyer to obtain the new property without having to sell the existing property. Usually the mortgage amount on the buyer's current house plus the bridge loan must not exceed 85% of the appraised value of the buyer's current property. Bridge loans typically run 90 days in maturity because it is assumed that the buyer's property will close soon. The 90 days can be rolled over. Lenders believe that bridge financing works well only when the buyer's property is already under contract.
Insured Conventional Loan
Typically is a conventional loan in which the borrower makes less than a 20 percent down payment and borrows 90 percent to 95 percent of the property value. Insuring repayment of the top portion of the loan to the lender is necessary in the event the borrower defaults. The top portion of the loan is the amount that the mortgage insurance covers, which, in most cases, is the top 25 percent or 30 percent of the loan.
A home equity loan _____.
may be the only mortgage on the property if the property is owned free and clear
The Rural Housing Service is an agency of the _____.
U.S. Department of Agriculture
A cooperative lien search is also called a _____ lien search.
UCC
The most common appraisal report form is the _____.
URAR
NY Constructive Eviction/Unlivable Residence
Unless there is an agreement to the contrary and the tenant did not cause the problem, he/she can leave the leased premises and forsake his/her lease obligations (rent payment) if the building becomes unlivable
An excess liability policy, providing additional coverage above that offered by primary policies, is a(n) _____ policy.
Umbrella
An excess liability policy providing additional coverage above that offered by primary policies is a(n) _____.
Umbrella policy
Federal Income Tax Treatment: Permitted Deductions
Under IRS regulations, certain items can be deducted on the income tax return. These deductions save the taxpayer money. They are an incentive to purchase real estate. Let's take a look at some of the most common deductions--property taxes and mortgage interest. Property taxes are deductible for any type of real property. The list includes the personal residence, second home, time-share, vacant land, income property, or inherited property. Taxes paid on non-investment real property are deducted as an itemized deduction on the tax return. Itemized deductions are those that appear on the tax return form on Schedule A. Taxes paid on investment property are deducted on Schedule E.
Cancellation and Non-Renewals of a Policy
Under New York law, an insurance company may cancel a homeowner's or tenant's policy by issuing a cancellation notice during the first 60 days it is in effect, as long as the notice states the specific reason for the cancellation. After a policy has been in effect for 60 days, it may not be cancelled or non-renewed for a three-year period, except for specific reasons, which are listed next. At the end of this three-year period, the insurance company may refuse to renew a policy. However, by law, they must provide a notice of non-renewal at least 45 days, but not more than 60 days, before the policy's termination date.
Lease Escalation Clauses: Direct Operating Costs
Under some leases, if operating costs (heat, power, maintenance, security, etc.) go up, the tenant is charged proportionately. The lease should specifically exclude capital improvements, management fees and many other costs from this calculation.
Rights of Individuals with Disabilities
Under the Americans with Disabilities Act, individuals with disabilities cannot be denied access to public transportation, any commercial facility, or public accommodation. This act applies to owners and operators of public accommodations and commercial facilities, regardless of the size or number of employees. It applies to local and state governments. To comply with the ADA, public accommodations and commercial facilities are to be designed, constructed, and altered to meet the standards of the law, if readily achievable. "Readily achievable" means easily accomplished and able to be carried out without much difficulty or expense. Public accommodations must remove structural, architectural, and communication barriers in existing facilities if the removal is readily achievable. Commercial facilities are not required to remove the barriers in existing facilities. Beginning January 1993, in the construction of new public accommodations and commercial facilities, areas must be readily accessible and usable by individuals with disabilities. The Act requires new multi-family housing developments with at least four units to have easy access for people with disabilities and the elderly.
What is NOT an example of functional obsolescence?
Unrepaired damage due to a fire
Stock Certificate
Upon closing, the purchaser receives stock certificate(s) in his/her name. The total shares may be stated on one certificate or there may be a certificate for each individual share.
A lease clause that defines how the tenant can and cannot use the space is called a(n) _____ clause.
Use clause
Due Diligence
Under the Comprehensive Environmental Response, Compensation, and Liability Act (1980) a program exists to: - identify sites containing hazardous substances - seek reimbursement from the responsible party - ensure cleanup by the parties responsible or by the government The Superfund Amendments and Reauthorization Act (SARA) (1986), an amendment to CERCLA, expanded the definition of persons liable for clean-up costs. If a property transfers, liability for environmental contamination could pass to the new owners. Liability may include the cost of cleaning up the property. When the Superfund Amendment was passed, the innocent landowner defense was also added to CERCLA. An innocent landowner would be a party that was not liable for the presence of hazardous waste under the Act. Because of this liability, in the sale of large tracts of land or other types of commercial property, lenders, purchasers, and tenants often conduct due diligence assessments of the property. The parties to the transfer of property evaluate these assessments. A private engineer or consultant can conduct these assessments or audits.
RHS Loan Features
Under the Direct Loan Program, applicants may obtain 100 percent financing to purchase an existing dwelling, purchase a site and construct a dwelling, or purchase a newly constructed dwelling located in rural areas. The loan provides financing at reasonable rates and terms with no down payment and no private mortgage insurance. Mortgage payments, including taxes and insurance, are based on the household's adjusted income and are typically with 22 percent to 26 percent of an applicant's income. Families must be without adequate housing but be able to afford the mortgage payments, including taxes and insurance. Applicants may have an income of up to 115 percent of the median income for the area. Loans are for up to 33 years (38 years for those with incomes below 60 percent of the area median income, or for AMI, who cannot afford 33-year terms). For manufactured homes, the term is 30 years. The promissory note interest rate is set by HCFP based on the government's cost of money and is modified by payment assistance subsidies. There is no maximum loan amount, and the interest can be as low as 1 percent per year (plus taxes, insurance, and amortization) or 20 percent of family income (for mortgage principal/interest, taxes, and insurance), whichever is greater.
Town Board
Under the New York Constitution, every town must have an elected town board. The town has the power to adopt and amend local laws relating to the membership and makeup of the board. The town board is the legislative or governing body for the town. The supervisor and the town council make up the town board. It sometimes acts as a quasi-judicial body because it has both legislative and administrative powers.
Environmental Assessments
Under the State Environmental Quality Review Act (SEQRA) (1976), the State Environmental Quality Review (SEQR) is a process requiring all levels of government to assess the environmental importance of actions for which they have discretion to review, approve, fund, or undertake. For example, if a developer wants to create a subdivision and this requires approval by the local planning board, then the SEQR process is necessary. The SEQR process applies to residential, commercial, and industrial structures. The agency that coordinates the investigation is the lead agency. If a property transfers from owner to owner and the use does not change, so that governmental approval is not necessary, the SEQR process does not apply. The process begins with a three-part environmental assessment form.
Fair Housing Amendments Act of 1988: Families with Children - Provisions of the Act
Under the provisions of the Act, it is illegal to discriminate against any family with children under the age of 18, when providing housing. This means, among other things, that an owner of an apartment complex: - May not advertise itself for "adults only" - May not rent solely to individuals without children - May not refuse to rent to a family because of the presence of children - May not impose stricter requirements on families with children, such as requiring a larger security deposit In addition, HUD regulations, which implement the law, specifically prohibit an owner from establishing "dual purpose" developments in which one section of a complex is designated for occupancy by "adults only" and a separate section is for "families with children."
The process of determining whether a lender will make a loan, and if so for how much, is known as _____.
Underwriting
A complainant who believes that his/her property is assessed at a higher percentage of value than the average of all other properties on the same assessment roll is protesting on the grounds of _____.
Unequal assessment
Sandy protests the school tax portion of her property tax assessment because she believes her property is outside the boundaries of the school district. She is protesting on the grounds of _____.
Unlawful assessment
In which county or counties are all towns classified as towns of the first class?
Westchester county
Wetland Commissions: Regulations
Wetlands that are smaller than 12.4 acres and not deemed of "unusual importance" are under the control of the municipalities where the wetlands are located. A local government may enact a Freshwater Wetlands Protection Law to assume control over all freshwater wetlands within its jurisdiction from the Department of Environmental Conservation. The local law must be as protective of wetlands as stated in Article 24 of the ECL. Sometimes, counties can assume wetlands control if the local government declines. Local governments can adopt freshwater wetland regulations applying to wetlands already mapped and under the jurisdiction of DEC. The local regulations must be more protective of wetlands than the current state regulations. A municipality may regulate wetlands by setting up a separate Wetlands Commission or the Conservation Advisory Council may monitor the wetlands.
Escrow Account
When a 90 percent or 95 percent conventional loan is used, the borrower is usually required to pay an amount into escrow each month to cover property taxes, homeowner's insurance, and private mortgage insurance if it is financed. On an 80 percent loan, these escrow payments may or may not be required by the lender. The monthly escrow payments for these items are paid along with the regular monthly mortgage payment. The amount of the monthly escrow payment is equal to 1/12 of the annual payment for the items covered. The escrow accounts for these payments are established on the day of closing. Loans that require payments into escrow are sometimes referred to as "budget mortgages" or PITI payments (principal, interest, taxes, and insurance).
Sale in Which Buyer Assumes Mortgage Debt
When a buyer assumes the seller's existing mortgage, the PURCHASER assumes liability for the mortgage and personal liability for payment of the note. The seller whose mortgage is assumed also remains liable for the mortgage and payment of the note unless released from liability by the lender. The seller's attorney should inform the seller of a property sold under a loan assumption of any liability. The attorney should have the seller obtain a release of liability from the lender at the time of sale, if possible. Although most conventional fixed-rate real estate loans are not assumable, some are, along with some FHA-insured and VA-guaranteed loans.
Operating Statement: Reconstructing the Operating Statement
When analyzing an investment property, the operating statement is a starting point. In some cases, the owner's operating statement will need to be adjusted. For example: - The owner's operating statement may list mortgage payments as expenses. However, for evaluation and appraisal purposes, these expenses are NOT considered operating expenses. Mortgage payments are not considered operating expenses because mortgage payments only apply when the property is subject to a loan. - The operating statement may also need to be adjusted if some of the income or expenses are out of line with those of similar properties. An adjusted operating statement used by appraisers when evaluating a property is referred to as a RECONSTRUCTED OPERATING STATEMENT. If a reconstructed operating statement is used to project income and expenses for a future period, it is referred to as a PROFORMA STATEMENT or schedule. This is an operating statement adjusted to reflect a potential change in income and expenses based upon the investor's knowledge of the real estate market. Before investing, a prudent investor must create a proforma statement or have an expert create one. The proforma statement analyzes a property's potential (or possible lack of potential).
GFCIs are typically located _____.
Where water is present
Air Conditioning: Air-Cooled and Water-Cooled
Whether the system is air-cooled or water-cooled depends on the type of condenser used in the system. An air-cooled condenser consists of a fan or a natural draft that blows air across a large surfaced coil. This type of condenser is used in smaller units. In a water-cooled condenser, water circulates through tubes or coils inside of a shell. Refrigerant circulates through the space between the tubes or coils. The water-cooled condenser is suited to medium-sized units. Sometimes air-conditioning condensers are a combination of water-cooled and air-cooled and are called evaporative condensers.
Title to a condominium may be transferred by which of the following?
Will
Section 3445 of the New York Insurance Law requires that insurers provide proper disclosure to their insured of any _____ deductibles attached to their homeowners policies.
Windstorm
Lease Clauses: Sublease/Assignment
With an ASSIGNMENT of the lease, the tenant transfers the property to another and vacates the leased premises. The original tenant may still be responsible for the lease unless the landlord agrees to release him/her. With a SUBLEASE, the tenant may vacate all or part of the leased premises. A sublessee uses all or part of the leased premises and pays the original lessee, who in turn pays the landlord. The original lessee is still liable under the lease. Most leases do not permit sublease or assignment unless the landlord consents. A clause allowing an assignment or sublease is obviously favorable to the tenant.
Electric: Direct Meter
With direct metering, each unit in a building has its own meter for measuring electric usage. A direct meter is connected to the utility company and the service is billed by and comes directly from the utility company such as Con Edison in NYC. Each tenant pays the electric bill directly to the utility company.
Platform Framing
With platform, each story of the building is built as a separate unit. Each story then serves as a platform for the next story. Called platform framing because the framing of the structure rests on a subfloor platform. Platform framing is the most common type of framing used in residential construction.
Municipal Wastewater and Water Systems
With structures that are part of a municipal wastewater system, the wastewater drains through the structure drainage system into a sewer pipe. The building sewer extends from the house drain and connects to the main municipal sewer system. A public water supply system is one provided by a municipality such as a city, village, or town. The water supply system in the structure delivers hot and cold fresh water to all the fixtures. Water is brought under pressure from a municipal water main or a private or community well into the building pipes. All water fixtures should have separate cutoffs so that repairs can be made without shutting down the entire system.
Electric: Sub Meter
With sub-metering, the service comes through a single master meter for the entire building. A sub-meter is installed in each rental unit. The utility company reads the master meter, and the property owner buys electrical service from the utility service. The property owner owns the sub-meters and usually employs a sub-metering company that reads the sub-meters and prepares separate bills, based on usage, which are distributed to the tenants. In effect, the property owner sells the service to the tenants.
Air Conditioning
With the inclusion of HVAC systems into home construction, central air conditioning is sometimes standard equipment. Central air-conditioning units locate the condensing unit outside of the air-conditioned space, usually on the roof or adjacent to the structure's outside walls.
As defined by the New York courts, a "taking" occurs when private property is regulated by a government authority to the economic detriment of the owner, _____.
Without compensation
Sally seller makes a loan to Beth buyer. Sally seller continues to make the payments on her original mortgage, while Beth buyer makes payments to Sally seller on the new loan.What type of mortgage loan is this?
Wraparound Mortgage Loan
An agent indirectly implies that a particular race of people moving into the neighborhood will lower property values. Is the agent's action illegal under fair housing laws?
Yes, such implications, whether direct or indirect, are illegal
Tom and Viv are a married couple in the 33% tax bracket. They bought their home 7 years ago for $310,000 (adjusted basis), lived in it for the entire 7 years, and sold it recently for $530,000 (amount realized). At a capital gains tax rate of 15%, the amount of capital gains tax they owe is _____.
Zero
The entity that has the power to review administrative rulings made by the planning board, grant or deny exceptions and special permits, and process applications for variances is the _____.
Zoning board of appeals
The government agency that grants use and area variances is the ______.
Zoning board of appeals
Which of the following government agencies may grant a variance?
Zoning board of appeals
Locations of zoning districts throughout a municipality are found on _____.
Zoning maps
Commercial General Liability (CGL) Insurance
a basic liability policy that covers four forms of injury: - bodily injury that results in actual physical damage or loss - property damage that results in actual physical damage or loss - personal injury - advertising injury Most companies need to supplement their CGL with automobile insurance and worker's compensation.
Illegal blockbusting
a broker tells homeowners that a member of a protected class is moving into the neighborhood, causing them to sell their homes
Condop
a building that includes condominium and cooperative ownership in the same structure.
Arm's Length Sale
a buyer and seller are not related by business interest or familial relationship and are considered equal in terms of bargaining power. Neither party can be acting under duress (forced to enter into the sale)
Lease Clauses: Subordination Clause
a clause in a lease that generally states that the tenant's lease is subordinate to all mortgages, past and future.
Members of a county planning board represent _____ within the county or region.
a cross-section of interests
Endorsement
a document attached to the policy that modifies or changes the original policy in some way.
Punishment for a first violation of the Americans with Disabilities Act is _____.
a fine of up to $75,00 Punishments for violations include injunctions against operation of a business, a fine of up to $75,000 for the first offense, and a maximum of $150,000 for subsequent offenses.
Punishment for a first violation of the Americans with Disabilities Act is _____.
a fine of up to $75,000
The type(s) of heating system utilizing blowers, ducts, and registers is(are) _____.
a forced warm air system
Open-End Mortgage
a form of junior financing, the borrower has the right to demand that the lender advance additional funds without rewriting the mortgage or charging additional closing costs. After the loan balance is reduced, the original mortgage provides the security for additional funds to be advanced to the borrower. The open-end mortgage sometimes functions as a line of credit. This is not a typical residential first mortgage. Open-end mortgage are often used in home equity loans.
A forced warm air system consists of _____.
a furnace, a blower, ducts, registers, and filters
Water that is corrosive is hard water with _____.
a high pH
NYC Bedbug Disclosure Act
a landlord must provide information about bedbug infestation in the past year to prospective tenants only
Which of the following residential real estate investments is most likely to require the services of a resident manager or on-site management team?
a large multi-family residential property
Foreclosure
a legal procedure that is implemented when a borrower defaults on a loan secured by real property The lender's ultimate power is to foreclose. Foreclosure is the process leading to the sale of real property pledged to secure the mortgage debt. Foreclosure by action in equity and sale is the standard type of foreclosure in New York. A lawsuit is brought against the mortgagor by the lender and the property is sold at auction. The proceeds are distributed among parties who have mortgages or other types of liens against the property.
Water that is noncorrosive is soft water with _____.
a low pH
If a homeowners policy covers a structure, such as a shed, that is incidental to the main property, the amount of coverage is likely to be _____.
a percentage of the amount for which the dwelling is insured
If property owners believe their assessment is wrong, they _____.
may file a grievance with the local board of review
Earnest Money
accompanies most sales contracts, is money that is paid by the buyer at the time the sales contract is signed. It is not legally required for a valid sales contract. A buyer's promise to purchase is sometimes considered consideration enough.
Upon the closing of the sale of a cooperative, the purchaser receives _____.
a proprietary lease and one or more stock certificates
According to the "Age 59½ Rule," penalty-free distributions can be used to pay the costs of _____.
acquiring, constructing, or improving a first home
A secondary purpose of the Consumer Credit Protection Act is to _____.
allow the borrower to rescind credit transactions under some circumstances
The residential assessment ratio may be used in _____.
a small claims assessment review
Mortgage Broker
a sole proprietor or company registered by the NYS Department of Financial Services (NYSDFS) that solicits, processes, places, or negotiates a residential (one-to-four family) mortgage loan. A mortgage broker is an intermediary who finds or sources loans for a purchaser.
Release Clause
allows certain parcels of property to be removed from the mortgage lien if the loan balance is reduced by a certain amount
Until it is paid, a special assessment is _____.
a specific lien against the property
Which type of impairment would be considered a disability?
a substantially limiting impairment
The three-day cancellation policy allowed for home improvement contracts can be forfeited if an owner has initiated the contract for an emergency repair and furnishes the contractor with _____.
a written statement waiving the right to the three-day cancellation
The underwriter is responsible for evaluating the value of the property as collateral for a loan and the borrower's _____.
ability to make the down payment and repay the loan
Readily achievable means _____.
able to be carried out without much difficulty or expense and easily accomplished
In a typical homeowners policy, coverage for contents is usually based on _____.
actual cash value
Duties of a planning board include _____.
advising other agencies in the municipality on land use
If the borrower defaults on mortgage payments, the lender can take possession of the property _____.
after foreclosure if the lender is the purchaser at the sale
In a real estate transaction, environmental issues are important because _____.
agents must be familiar with issues pertaining to the property and agents must know mandatory environmental disclosures
A local health department is responsible for upholding _____.
all federal, state, and local public health laws
The Basic STAR program that provides relief from school taxes is available to _____.
all homeowners regardless of age or income The Basic STAR exemption is available for owner-occupied, primary residences, regardless of the owners' age or income.
Race is a protected class under _____
all of the answers shown the Civil Rights Act of 1866 the Federal Fair Housing Act of 1968 the New York State Human Rights Law
A housing development for the elderly is exempt from the laws regulating discrimination against families with children if _____.
all units are occupied by persons over age 62 To be exempt, a development for the elderly must have only occupants over age 62 or have 80 percent of the units occupied by one person over age 55 and be developed and marketed for, and provide special services to, those over 55.
PITI Loans
also referred to as budget loans principal interest taxes insurance
Compared to actual cash value coverage, replacement cost coverage for the contents of a home generally costs _____
an additional 10 percent to 15 percent
Contract
an agreement between competent legal parties to do or refrain from doing some legal act in exchange for consideration
Which of the following pairs of properties is eligible for a like-kind, tax-deferred exchange?
an apartment building for an office building
Mortgage Banker
an individual or company licensed by NYSDFS to engage in the business of making residential mortgage loans. Mortgage bankers, also called mortgage companies, make mortgage loans for housing construction and the purchase of existing housing. They often specialize in FHA-insured loans and VA-guaranteed loans. A mortgage banker may act as a mortgage broker.
A landlord of an apartment building with six or more units must place security deposits in _____.
an interest-bearing New York bank account
Fixture
an item that initially was personal property but has become real property after being attached to the house. Fixtures are part of the real property and pass with the deed unless specifically excluded.
Which of the following is exempt from the provisions of the New York Human Rights Law?
an owner/lessor occupying one of two apartments in his building One of the exemptions is the rental of an apartment in an owner-occupied two-family house. Thus, an owner/lessor occupying one of two apartments in his/her building is exempt from the provisions of the New York Human Rights Law.
One type of escalation clause in a lease requires the tenant to pay _____.
any increase in real estate taxes
Under the 1988 Amendments Act, who may bring a charge against an individual for violating the fair housing laws?
any individual who is discriminated against and/or HUD
In the income approach using capitalization, the price for a property is determined by dividing the capitalization rate into _____.
annual net income
Income Approach
applies capitalization formula to forecast income or income produced (rent)
Cooperatives are generally more difficult to market than condominiums because _____.
approval for ownership is more restrictive in a cooperative
Which of the following is NOT an enforcement procedure for the Federal Fair Housing Act of 1968?
arbitration with the National Labor Relations Board administrative procedures through HUD * arbitration with the National Labor Relations Board * action by the U.S. attorney general a civil suit for damages in federal court
Expired listings are often properties that have not sold because they _____.
are priced too high for market conditions
Comparables used in the creation of a comparative market analysis should be:
as similar as possible to the subject property
The value of a property for tax purposes is its _____
assessed value
If all properties in a community are reassessed at once, then _____.
assessments and taxes may increase OR decrease
An issue addressed in the proprietary lease includes _____.
assignment of lease, subletting and death of a lessee
When a buyer assumes the seller's existing mortgage, the buyer _____.
assumes personal liability for payment of the note and assumes liability for the mortgage
After a policy has been in effect for three years, the insurance company may refuse to renew a policy, but they must provide a notice of non-renewal _____ before the policy's termination date.
at least 45 days, but not more than 60 days
A city of the second class has a population of _____.
at least 50,000 and less than 175,000
The New York Uniform Fire Prevention and Building Code requires that _____ be installed in all one- and two-family houses, condominiums, and cooperatives.
at least one carbon monoxide detector
Which of the following features is generally considered an asset in a property?
being on a cul-de-sac
When a town zoning board of appeals imposes conditions for a variance, the town board _____ change it.
may not
A property will usually sell more quickly if its price is _____.
at the low end of the price range
The central exhaust fan is usually installed in the _____
basement or attic
Wetlands protected under the Freshwater Wetlands Act must _____.
be larger than 12.4 acres and/or be smaller wetlands of unusual appearance
Which of the following is not a possible condominium closing cost for either a buyer or seller?
fee for preparation of a stock certificate and proprietary lease
Grievances or protests against an assessment are heard by the _____
board of assessment review
Tax assessments may be done by a _____.
board of elected assessors, single appointed assessor and/or a single elected assessor
New York taxpayers pay _____.
both state and federal income tax
A property tax bill is determined by _____.
both the tax rate and the property's assessed value
A homeowner, not living in New York, avails herself of the exemption provided by the 1968 act and refuses to accept an offer because the prospect is a white person. The prospect may do which of the following?
bring suit in federal district court under the Civil Rights Act of 1866
The Americans with Disabilities Act covers what?
buildings open to the public as well as multi-family dwellings
Town Engineer: Functions
estimating the costs of paving, sewers and sidewalks, and other public works projects supervising streets and other public works activities issuing permits for street openings, curb and gutter construction to private contractors assuming responsibility for sewage, water supply and distribution systems
Fannie Mae's primary function is to _____ loans.
buy conventional, FHA, and VA
The major function of the secondary mortgage market is to _____.
buy loans from primary lenders
The primary purpose of Freddie Mac is to increase the availability of financing for residential real estate by _____.
buying primarily conventional loans
In a cooperative, someone becomes a unit occupant by _____.
buying stock to obtain a proprietary lease
A public water supply system is one provided _____.
by a municipality such as a city, village, or town
Under the New York Anti-Predatory Lending Law, a borrower _____ use violations as a defense to a foreclosure action.
can
Liquidity refers to an investment that _____.
can easily be converted to cash
What are the main types of pipes that appear in water distribution and plumbing systems?
cast iron, galvanized steel, copper, PVC, and brass
Under a building permit, after the completion of a project and before the structure can be occupied, the owner or developer applies to the municipality for a(n) _____.
certificate of occupancy
A VA appraisal is also known as a _____.
certificate of reasonable value The VA's certificate of reasonable value (CRV) indicates the appraised amount and establishes the maximum property value.
What is an example of economic obsolescence?
changes in surrounding land use patterns
One reason that properties become under- assessed is because of _____.
changes in value over a period of time without reassessment
The manmade chemical substances used in refrigerators, air conditioners, Styrofoam products, cleansing agents and aerosol dispensers are _____.
chlorofluorocarbons (CFCs)
According to the New York Uniform Fire Prevention and Building Code, each smoke detector must be installed so that it is _____ in each bedroom or other room used for sleeping purposes, with intervening doors closed.
clearly audible
SONYMA mortgages feature:
competitive interest rates, low down payment requirements, no prepayment penalties, and closing cost assistance.
An analysis of the competition in the marketplace that a property will face upon sale attempts is called a(n) _____.
comparative market analysis
Which method is NOT used for appraisal purposes?
comparative market analysis The income, sales, and cost approach are all appraisal approaches to value. The comparative market analysis is not.
Most commercial real estate brokers _____.
concentrate on one or two property types
Because of potential liability under CERCLA and SARA for hazardous waste located on a property, in the sale of large tracts of land and other types of commercial property, lenders, purchasers, and tenants often _____.
conduct due diligence reviews of the property
An unequal increase in property values is one reason to _____.
conduct more frequent reassessments
Examples of Illegal Contracts
contracts in restraint of trade or contracts to stifle or promote litigation
Property Insurance: Section I
covers the property of the insured. That is, it covers physical damage to the property as a result of specific events.
A forced-air system can include _____.
cooling, ventilating, and dehumidifying Because an air-conditioning unit conditions air, a single forced-air heating system can include cooling, ventilating, and dehumidifying systems. Because the same duct work is used for all functions, this is one of the most economical types of installations.
The total dollar value expenditure to construct the property is known as its _____.
cost
Under CERCLA and SARA, if a property transfers, liability for environmental contamination _____ pass to the new owners.
could pass to the new owners
Which of the following define the broker's responsibility to comply with fair housing policy?
court rulings HUD regulations laws
A major difference between the New York Human Rights Law and the Federal Fair Housing Act of 1968 is that the New York law _____.
covers both residential and commercial sales and rentals
An All-Risk policy _____.
covers expenses incurred if business is suspended due to a disaster-related event
The closing date is sometimes questionable in a new development or conversion because _____.
delays in construction may hold up a closing
A brokerage firm has engaged in a fair housing violation in New York. The firm is subject to a reinvestigation by DHR, one year later, _____.
even if the fair housing violation has been resolved
Usually, when a veteran pays no down payment on a VA loan, the lender will not loan more than the guaranteed amount multiplied by _____.
four
The agent should determine if the _____.
customer knows what he/she can afford to purchase
Real estate agents must always report to their broker any discriminatory behavior by _____.
customers, clients, or other agents
The components of a roof covering system, from interior to exterior, are _____.
decking, roofing paper, and shingles
The developer who constructs a cooperative or converts a building into a cooperative corporation must file a(n) _____ with the New York Attorney General's office.
declaration and disclosure statement
If the sale proceeds available to the lender after foreclosure do not satisfy the debt, the lender may sue for _____.
deficiency judgment; If the proceeds of a foreclosure sale do not satisfy the balance due the lender, the lender can sue for a deficiency judgment on the note.
Redlining
denying or restricting loans in a certain area by a lending institution
Taxable income is derived by taking total property income and subtracting _____.
depreciation, property taxes and mortgage interest
The construction of wastewater treatment systems must be supervised by the _____, who certifies that the system is built following the approved plan.
design professional
The final tax assessment roll must be filed by _____.
different dates in different taxing jurisdictions In most towns, the final tax assessment roll must be filed by July 1, but the date varies in other jurisdictions.
The purpose of proper site grading is to _____.
direct surface water away from the foundation
The satisfaction of mortgage document is recorded and called a _____.
discharge of mortgage
A real estate agent can assist a buyer by _____
disclosing the amount of property taxes to the purchaser, knowing the amount of the property taxes and discussing tax exemptions that may apply to the purchaser
Individuals testing for pest infestation by examining the affected area for infestation and damage _____ licensed.
do not have to be licensed
Certificate of Occupancy (CO)
documents the legal use and/or occupancy of a building. If a construction project creates a new building, or results in a change of use, egress, or occupancy for an existing building, a new or amended certificate of occupancy is necessary. Upon completion of construction of the condominium, the building and each unit undergoes a thorough inspection by an inspector from the municipal building department. The building department issues a certificate of occupancy for each unit that complies with the building code.
At the time a loan is originated, the owner's equity is equal to the _____.
down payment
Types of Wells
drilled wells dug wells spring wells
Real estate issues that state and local health departments oversee include _____.
drinking water safety certain wastewater treatment approval septic system approval
Every one- or two-family dwelling in New York, including residential condominiums or cooperatives, must have an installed operable single station smoke detector that it is clearly audible in _____.
each bedroom or other room used for sleeping
Office procedures should ensure that _____.
each person receives the same professional treatment
Platform framing refers to a type of framing in which _____.
each story of the building is built as a separate unit
Balloon framing refers to a type of framing in which _____.
each wall stud runs the entire height of the building
Active Income
earned by salaries or in a business in which the taxpayer actively participates. Active income includes compensation derived from employment activities, such as: salary/wages commissions gratuities
The Superfund Amendments and Reauthorization Act (SARA), an amendment to CERCLA, did what?
expanded the definition of persons liable for clean-up costs The Superfund Amendments and Reauthorization Act (SARA), an amendment to CERCLA, expanded the definition of persons liable for clean-up costs.
A parcel of property that loses value when an airport is built nearby is an example of _____.
economic obsolescence
The type of depreciation that arises from external, environmental, or locational reasons is _____.
economic obsolescence
The type of depreciation which arises from external, environmental, or locational reasons is _____.
economic obsolescence
Providing information to the seller in a professional manner and keeping the seller informed about market activity on the property are examples of _____.
effective communication Effective communication refers to the salesperson's ability to provide information to the seller in a professional manner and to keep the sellers informed about the market activity on their property.
A broker's compensation in a commercial real estate deal may consist of _____.
either a percentage of the total lease agreement or a combination of fees and commission
Acceleration Clause
enabling the lender to declare the remaining balance immediately due and payable if the borrower is in DEFAULT.
If a tax lien is placed against a property, it creates a(n) _____.
encumbrance
Property tax exemption is for homeowners with qualifying disabilities who _____.
fall within certain income guidelines
The verified borrower's deposit on the sales contract plus verified bank balances must _____.
equal the down payment plus closing costs and prepaid items
Under the Clean Air Act (CAA), CFCs and HCFCs cannot be released during the service, maintenance, and disposal of _____.
equipment that uses refrigerants and air conditioners
The difference between the market value and the outstanding principal balance on any loans against the property is called the owner's _____.
equity
The New York Human Rights Law contains _____.
exemptions in certain situations
A clause in a lease that charges the tenant for increases in operating expenses over a specified amount during the lease term is a(n) _____ clause.
expense/dollar stop
Which of the following is a disadvantage of leverage?
expenses may exceed returns For the investor expecting a cash flow, the expenses and mortgage costs may exceed the returns if too much leverage is used.
Two of the important 1988 amendments to the federal Fair Housing Act outlaw discrimination based on _____.
familial status and disability or handicap
Functional obsolescence results from _____.
faulty design and inefficient use of space
An analysis done to determine whether a project will meet the objectives of the investor is a _____.
feasibility study
Freddie Mac is a __________
federally chartered private corporation
Property owners who wish to protest their assessment must _____.
file a complaint with the Board of Assessment Review
The act of refraining from taking legal action for payment of a mortgage despite the fact that it is due is called _____.
forebearance
In New York, if a property tax lien remains unpaid, the taxing district may _____.
foreclose the property and force a sale
Rights of the Lender
foreclosing on the property if the borrower defaults taking possession of the property (after foreclosure) if the borrower defaults in the mortgage payments and the lender is the purchaser at the sale right to assign mortgage - enables the lender to sell the mortgage and free up the money invested. The right of assignment provides liquidity to mortgages because the lender can sell the mortgage at any time. The lender obtains the money invested rather than waiting for payment of the loan over an extended time.
Building codes mostly require walkways _____.
from the front door to the street or driveway
The purpose of reviewing a board package is to give the board a _____.
full financial picture of the purchaser
A reduction in value due to outdated features of the property itself is a type of depreciation called _____.
functional obsolescence
What is the order in which wastewater flows in a wastewater treatment system?
home, sewer pipe, septic tank, distribution box, then absorption field or seepage pit
The primary purpose of real estate investment is to _____.
generate income without substantial risk
PITI Loan: Taxes
government charges to the public for services for public welfare. Property taxes are based on property value and are calculated by dividing the cost of providing services by the value of property throughout a certain area.
The veterans' alternative exemption from property taxes is _____.
granted at the option of each municipality
GFCI stands for _____.
ground fault circuit interrupter
Subprime loans typically carry _____.
higher interest rates and higher fees
The two ways of valuing highest and best use are:
highest and best use as vacant highest and best use as improved
The advantage of selling loans to the secondary mortgage market is that primary lenders _____.
have more money to loan; Selling loans to the secondary mortgage market keeps the funds flowing back into the primary market so the funds can be loaned to others.
With regard to a condominium or cooperative, whether or not a tenant can advertise from their apartment window, is included in the:
house rules
In New York, a lender may refinance an existing high-cost home loan _____.
if the new loan provides a real benefit to the borrower
Property owners who reside in a community designated as a special flood hazard area are protected against losses from flooding _____.
if they purchase insurance protection through NFIP
A building with an elevator is covered under the provisions of the 1988 Amendments Act if it has four or more units _____.
in the entire complex A building with an elevator is covered if it has four or more units in the entire complex. A building without an elevator is covered if it has four or more units on the ground floor.
All of the following mortgage lending practices are prohibited EXCEPT _____.
imposing different interest rates on a loan based on ethnicity * considering the applicant's credit history * = permitted discriminating in appraising property refusing to purchase a loan based on race
One reason a property might be reassessed is because _____.
improvements have been made to the property
Owners of regulated storage tanks containing petroleum and chemicals must register with NYSDEC, pay a fee, provide information about the site, and _____.
indicate the material that is stored there Owners of regulated storage tanks containing petroleum and chemicals must register with NYSDEC, pay a fee, provide information about the site, and indicate the material that is stored there.
A legal proceeding in which an action is brought against the real property directly and not against an individual and his/her personal property is called a(n) _____ proceeding.
in rem
Package Policy
includes several different types of coverage, such as property insurance and liability insurance generally less expensive than insurance coverage purchased separately
The primary method used to estimate the present value of properties that produce income is the _____ approach.
income approach
In the IRV formulas, value equals _____.
income divided by rate
In the IRV formulas, rate equals _____.
income divided by value
Gross Income
income received without deducting expenses.
In the construction of a property, the costs of architectural and engineering fees are called:
indirect costs
The declarations page of an insurance policy usually contains _____.
information customized for the policyholder
Which of the following is NOT included in a condominium offering plan?
initial declaration initial price of the units prospectus *proprietary lease* The proprietary lease is given to a cooperative shareholder upon purchase of the unit.The declaration, prospectus, and initial price of the units are included in the condominium offering plan.
Punishments for violations against the americans with disabilities act include _____.
injunctions against a business
A liability policy covers which of the following?
injury to the insured or others
Liability Insurance
insurance coverage to protect against claims alleging that one's negligence or inappropriate action resulted in bodily injury or property damage.
Private Mortgage Insurance
insurance that protects the lender against losses if the borrower defaults on the loan Private mortgage insurance is normally charged by a lender on all 90 percent and 95 percent loans. It is not normally charged on 80 percent loans. Private mortgage insurance companies insure more mortgage loans than FHA does.
If an insured has items such as expensive jewelry or a sports card collection, he/she should _____.
insure them separately by endorsement or buy a personal articles floater
The cost of replacing or reproducing a structure in the event of a total loss because of an insured hazard is called _____.
insured value
The value a property has to a particular investor based on individual investment requirements is called _____.
investment value
Christine is a mortgage broker and real estate broker. Her clients agree to hold a small purchase money mortgage from the purchasers in addition to the purchasers obtaining traditional financing. Christine offers to draft the mortgage for them when she fills in the contract of sale. In this situation, Christine _____.
is engaging in the illegal practice of law
Broker Harry prepares a contract of sale and deposits the client's earnest money deposit in his office operating account. In this situation, Harry _____.
is illegally commingling the deposit money
A comparative market analysis (CMA) _____ an appraisal.
is not A CMA is not an appraisal. An appraisal is an unbiased estimate of the nature, quality, value, or utility, based on factual data, of an interest in or aspect of identified real estate and related personalty as of a certain date.
If the board of directors of a cooperative apartment denies a purchaser's application, the board _____.
is not required to give a reason for the denial
The main function of a city or town planning board is to advise on:
land use matters
The conversion of agricultural land to other uses and the conveyance or donation of land to government agencies are common aspects of a _____.
land utilization study
Property Insurance: Independent Agents
may represent one or more licensed insurance companies
Additional protected groups under the New York City Human Rights Law include _____.
lawful occupation, partnership status and alienage or citizenship status
Illegal Steering
leading prospective homeowners toward or away from certain areas
To offer equal opportunity for all, salespersons should _____.
learn excellent record-keeping skills and know how to report fair housing misconduct
A lease clause that calls for increased costs to the tenant for different reasons at specified times during the lease term is called a(n) _____ clause.
lease escalation
Usable square footage is typically _____ rentable square footage.
less than
The use of OPM, or other people's money, describes which investment concept?
leverage Leverage, or borrowed funds, describes the use of other people's money. The more leverage an investor has, the less of his own funds he needs to put into the investment.
The Village of Camelot decides to install sewers in a neighborhood that previously relied on septic systems. To pay for this, the village will _____.
levy a special assessment on that neighborhood
Secondary sources of income, such as overtime pay, commissions, and part-time employment, are likely to be acceptable if they are _____
likely to continue on an ongoing basis
Rate Caps
limit the amount the interest rate may change periodic, or annual, adjustment cap--the maximum amount the interest rate can increase in one year lifetime cap--the maximum amount the interest rate can increase during the lifetime of the loan For example, annual increases could be limited to 1 or 2 percent interest, and the lifetime cap might be no higher than 5 or 6 percent.
Cash or cash equivalents, such as money market accounts, are known as _____ assets.
liquid assets
CMAs are often a major part of a(n) _____.
listing presentation
CMAs are often a major part of a(n) _________
listing presentation
A tax map is used by the assessing unit to _____.
locate parcels and obtain information for assessments
The proprietary lease a tenant in a cooperative receives is generally a _____.
long-term lease or estate for years
The VA guarantees against _____.
losses due to borrower default
Mortgage interest may be deducted when it is paid on the property owner's _____.
main or second home
If a property owner uses dead bolt locks, smoke alarms, fire extinguishers, and/or a security system, the insurance company _____ offer premium discounts.
may offer
Bonnie and Jed own a second home that they plan to sell. They may be able to take a partial exclusion of capital gains if, before the sale, they _____.
make the home their primary residence for two years
To reconcile the differences between the subject property and comparable properties and arrive at a value estimate for the subject property using the sales comparison approach, the appraiser _____.
makes positive and/or negative adjustments
The Consumer Price Index is important to commercial clients because it _____.
may be the basis of lease increases With an indexed escalation clause, the rent increases each year by a fixed percentage or by the percentage increase in the CPI.
Which of the following area market conditions is likely to mean the property will be slower to sell?
many similar properties on the market
The amount of money a property will bring in the marketplace is its _____.
market value
The most probable price, as of a specific date, in cash or in other terms, for which the property should be sold after reasonable exposure in a competitive market, under conditions requisite to a fair sale, with the buyer and seller acting prudently, knowledgeably, and for self-interest, and assuming that neither is under undue duress is _____.
market value
A study that examines if a property can be effectively presented and marketed, given current conditions, is a _____.
marketability study
Cameron, a real estate agent, completes a fill-in the blanks contract of sale. The local Board of REALTORS® or local Bar Association does not approve the contract. In this situation, Cameron _____.
may use the contract with an attorney approval clause
The village board of trustees is comprised of the _____.
mayor and trustees of the village
A disabled or handicapped individual is defined as a person having a _____.
mental or physical impairment
Which of the following is NOT a protected class that affects housing under New York law?
military status sexual orientation age (persons 18 or older) * political affiliation * = right answer
An insurance policy that contains only one type of coverage is a(n) _____ policy.
monoline policy
The ratio of mortgage payment to stable monthly income is also known as the _____.
monthly housing obligations to income ratio
The ratio of all installment debts to stable monthly income is also known as the _____.
monthly total obligations to income ratio
Lifetime Cap
the maximum amount the interest rate can increase during the lifetime of the loan
If a local building code is more restrictive than the state code, the _____.
more restrictive local regulations apply
What is not a tax deductible expense for a business property?
mortgage principal
The amount a lender believes a property will bring at a foreclosure sale or subsequent resale is its _____.
mortgage value
"Due on Sale"/Alienation Clause
most mortgage documents today contain a clause specifying that the entire principal balance due on the mortgage be paid in full if a property transfer takes place.
The annual property tax bill is calculated by _____.
multiplying the assessed value by the tax rate
An offering plan for a new condominium development is submitted to the attorney general's office. If the developer wishes to increase the prices of the units being offered, the developer _____.
must file an amended offering plan with the attorney general
If a property owner has installed hurricane/storm shutters and/or hurricane resistant laminated glass windows and doors, the insurance company _____ offer premium discounts.
must offer
Periodic Adjustment Cap
the maximum amount the interest rate can increase in one year
Under the State Environmental Quality Review Act, before project approval, certain factors are considered, including _____.
nearness to historically designated properties the presence of wetlands visual appearance of the project
The process of capitalization is based on _____ income.
net income
The difference between a borrower's total assets and his/her total liabilities is called _____.
net worth; The borrower's net worth is the difference between his/her total assets and his/her total liabilities. Liquid assets are cash or cash equivalents, such as savings and money market certificates.
What is NOT an accurate source of data for developing a CMA?
newspaper classified ads
In a cooperative, the individual unit occupant owns _____.
no real property
Loans: Interest
the money paid for the privilege of using someone else's money (i.e., the lender's money)
Except in some high-cost areas, such as parts of downstate New York, mortgages of more than $417,000 are considered _____.
nonconforming or jumbo mortgages
Nancy owns and lives in a duplex in Rochester, New York. She wishes to rent out the other apartment. Nancy must:
not discriminate against individuals because they are a certain race
The Whitleys, who live in Albany, New York, refuse to accept an offer on their single-family home from Nancy Delaney, a financially qualified buyer who is divorced. The Whitleys are _____.
not exempt under the New York Human Rights Law
The maximum amount allowed on VA loans is _____.
not limited by law; There is no maximum amount for a VA loan set by law. In general, however, lenders will not loan more than four times the guaranteed amount.
Real estate is typically considered _____.
not liquid Liquidity refers to the ability of an investment to be converted easily to cash. Real estate is NOT a liquid asset because it cannot be transferred, even at a loss, as easily as stocks or other cash-type investments.
If the business is a partnership, the business income is _____.
not under the borrower's full control
Capital Gains: Capital Loss
occurs when investment or other types of property are sold at a loss. Capital gains can be reduced by capital losses. Net capital loss may be deducted from taxable income up to a $3,000 maximum, annually. Any unused capital loss can be carried forward to future years.
Self Help
occurs when the landlord violates statutory law by physically removing the tenants and their belongings from the premises or prevents tenant-access to the premises
Constructive Eviction
occurs when the tenant is prevented from the quiet enjoyment of the premises the tenant can claim constructive eviction and be relieved of the obligation to pay rent
The property's tax rate is determined by the amount _____.
of the tax levy
The provisions of the New York Uniform Fire Prevention and Building Code pertaining to carbon monoxide detectors cover structures built _____ that are constructed or offered for sale.
on or after December 1, 2002
When determining market value, financing, if any, is assumed to be _____.
on terms generally available in the community
A building that does not have an elevator is covered under the provisions of the 1988 Amendments Act if it has four or more units _____.
on the ground floor A building with an elevator is covered if it has four or more units in the entire complex. A building without an elevator is covered if it has four or more units on the ground floor.
Independent agents represent _____.
one or more licensed insurance companies
To be considered a disability, an impairment must affect _____.
one or more major life activities
According to Article 36-B of the New York General Business Law, implied in contracts of sale for all new housing is a builder's warranty against defects due to the builder's failure to construct in a skillful manner for _____.
one year
The New York Uniform Fire Prevention and Building Code requires that at least one carbon monoxide detector be installed in all _____.
one- and two-family houses, condominiums, and cooperatives
The senior citizens' property tax exemption is _____.
optional for municipalities and school districts
Central air-conditioning units are located _____ the air-conditioned space.
outside of Central air-conditioning units are located outside of the air-conditioned space and can be placed indoors, in the basement, on the roof, or adjacent to the outside walls of the structure.
An important duty of a city engineer is to _____.
oversee roadway construction
Prepayment penalties are most common with _____.
owner financing or commercial loans
Which of the following are eligible to request a Small Claims Assessment Review?
owners of single-family homes Among those NOT eligible to file for a Small Claims Assessment Review are owners of cooperatives, apartment renters, some condominium owners, owners of buildings not used for residential purposes, most owners of vacant land, owners of farm buildings, and owners of commercial property.
Under the 1988 Amendments Act, "family" means _____.
parents with children under 18 and pregnant women
Salespeople should keep records of _____.
pending sales of competing listings, agents who show the property, and visitors to open houses
Under the Human Rights Law, if the DHR finds that the respondent is still committing discriminatory acts after reaching agreement, it may _____
petition the Supreme Court for a restraining order
Under the Human Rights Law, if the DHR finds that the respondent is still committing discriminatory acts after reaching agreement, it may _____
petition the Supreme Court for a restraining order If the DHR finds that the respondent is still committing discriminatory acts after reaching an agreement, it may petition the Supreme Court for a restraining order.
A hot water system consists of _____.
pipes, a boiler, and room-heating units
Monoline Policy
policy contains only one type of coverage, such as liability insurance
Prepayment penalties on VA loans are _____.
prohibited; The borrower can prepay a VA loan without penalty.
The Civil Rights Act of 1866
prohibits all discrimination based on race
A form of commercial rent escalation formula is known as _____.
porter's wage
Rights of the Borrower
possession of the property during the mortgage term as long as the borrower is not in default redemption of the title and the mortgage lien released at any time before default by paying the debt in full (defeasance clause)
Municipal Planning Board Duties
preparing and amending a master plan for the community implementing the master plan through site plan and subdivision ordinances and recommendations to other agencies making investigations, maps and reports, and recommendations that relate to the planning and development of the municipality advising community government and all other community organizations how to implement the master plan recommending amendments to the zoning ordinance or map
The Fair Housing Initiatives Program (FHIP) provides funding to public and private entities for programs that _____.
prevent or eliminate discriminatory housing practices
The purpose of flashing is to _____.
prevent water from seeping into the structure
The purpose of the frieze board is to _____.
prevent wind and moisture from penetrating the junction of soffit and sheathing
An owner, other than a charitable organization, may be _____.
prevented from tearing down a designated historic landmark
The amount a particular purchaser agrees to pay and a particular seller agrees to accept under the circumstances surrounding a real estate transaction is known as the _____.
price
The letter of intent includes _____.
price and deposits, use of unit and completion date and closing date
Generally, the price of a new condominium is based on the _____.
price per square foot of the unit
Who determines the loan-to-value ratios?
primary lender or the secondary mortgage market
When a property owner appeals an assessment, the burden of proof is on the _____.
property owner
GFCIs are highly sensitive circuit breakers that sense small current leakages across a circuit and _____.
protect against electrocution hazard
The purpose of tying commercial rents to the Consumer Price Index is to _____.
protect the property owner from the effects of inflation
Property Insurance Defintion
protects a home or income/business property against any physical damage or loss of assets in the case of fire, theft, or vandalism.
Commercial Policies: Broad Form Coverage
protects against the following perils: fire; breakage of glass; falling objects; weight of snow, ice, or sleet; water damage
Commercial Policies: Basic Form Coverage
protects against the following perils: fire; lightning; explosion; windstorm or hail; smoke; aircraft or vehicles; riot or civil commotion; vandalism; sprinkler leakage; sinkhole collapse; volcanic action
Secondary Mortgage
provides an outlet where those who originate loans may sell their loans in order to secure capital to make more loans
Gross Lease
provides for the landlord (lessor) to pay all expenses. Expenses may include property taxes, landlord's insurance, liability insurance, and maintenance. A gross lease to the landlord means that expenses have to be deducted from the payment he/she receives.
Property Insurance: Section II
provides personal liability coverage. Liability coverage protects against claims alleging that one's negligence or inappropriate action resulted in bodily injury or property damage.
Which of the following may be a type of seller financing?
purchase money mortgage
In New York, Article 9-A of the Real Property Law regulates ______.
purchase or lease of vacant subdivided lands
Which of the following sources may be used to support a charge of unequal assessment?
purchase price of comparable property recently sold, professional appraisal of the property and purchase price of the property if recent
The Fair Housing Act of 1968 prohibits discrimination in housing based on _____.
race, color, religion, or national origin The Civil Rights Act of 1968, or Fair Housing Act, prohibits discrimination in housing based on race, color, religion, or national origin.
For a rural home built before 1978, the real estate salesperson or broker would need to know that contingencies may be necessary related to _____.
radon, well condition and water flow, and lead-based paint disclosure
Whose responsibility is it to be vigilant about not violating fair housing laws?
real estate agents and real estate brokers
Attornment
refers to the consent to a transfer of a right. It usually describes a situation where a tenant accepts being a tenant of the new landlord by staying on after the sale of the leased property.
If the insured is covered and reimbursed for the actual cost of replacing the damaged property, it is referred to as _____.
replacement cost
Which of the following represents the price of a property using the cost approach?
replacement or reproduction cost - depreciation + land
The primary purpose of the Consumer Credit Protection Act is to _____.
require full disclosure of the cost of credit
A New York salesperson or broker real estate license covers the practice of _____.
residential and commercial real estate
Typical deed restrictions for the use of property might include _____.
residential purposes no accessory uses aesthetic features
The State Environmental Quality Review (SEQR) applies to _____.
residential, commercial, and industrial structures
The purpose of community wide reassessments is to _____.
restore fairness within the community The purpose of community-wide reassessments is to restore fairness within the community.
When calculating the rate of return on an investment, the investor first considers the _____.
risk factor
Lally columns are _____.
round steel columns filled with concrete
The primary appraisal method for estimating the value of vacant land is the _____.
sales comparison approach
The only sure indicator of service size is found on the _____.
service entrance cables The only sure indicator of service size is found on the service entrance cables.
Approved assessing units may _____.
set separate tax rates for homestead and non-homestead properties
Which of the following is NOT a use for the equalization rate?
setting state property tax rates New York does not collect property taxes at the state level.
A typical wastewater treatment system consists of _____.
sewer, septic tank, distribution box, and absorption field or seepage pit A typical wastewater treatment system consists of a sewer, septic tank, distribution box, and absorption field or seepage pit.
The collateral for a loan on a cooperative unit is the _____.
shares of stock and the proprietary lease
Which of the following is an advantage of real estate investment compared to a certificate of deposit or treasury bond?
sheltering income from taxation through depreciation Income from an investment property is taxable; however, the earnings might be sheltered, since the buildings and equipment can be depreciated. While rate of return on a real estate investment can be predicted, it is not guaranteed.
Elements of Earnest Money
shows the buyer's sincerity shows the financial ability to raise the money called for in the agreement serves as possible liquidated damages to the seller if the buyer defaults
When conducting a residential market analysis, an agent should compare recently sold properties that are _____.
similar to the subject property in age and living area and located in the same general vicinity as the subject property
According to Article 36-B of the New York General Business Law, implied in all contracts of sale for new housing is a warranty covering material defects for _____.
six years
The down payment required on FHA loans is typically _____.
smaller than on conventional loans
Mortgage insurance on FHA loans is _____ the insurance premium on conventional loans.
sometimes higher than
Remedies for Breach of Contract
specific performance rescission compensatory damages liquidated damages reformation injunction
One of the most important items in the finances of the cooperative corporation is the _____.
status of the underlying mortgage
Private control can be achieved through rules placed on subdivisions to ensure compliance with zoning, ensure public safety, and preserve real property value, called _____.
subdivision regulations Private control can be achieved through rules placed on subdivisions to ensure compliance with zoning, ensure public safety, and preserve real property value, called subdivision regulations.
The buyer appeal of a property, including its landscaping, entry, and apparent size, is _____.
subjective
A clause in a mortgage that waives a priority of recordation is called a _____ clause.
subordination clause
The clause in a commercial lease that protects a tenant in case the property is foreclosed is a(n) _____.
subordination, nondisturbance, and attornment agreement
The tax rate in a taxing district must be _____
sufficient to meet the budget needs of the government unit
Post-and-beam framing refers to a type of framing in which _____.
supporting beams rest on posts rather than bearing walls
A judicial review of a decision of a local taxing unit in Supreme Court is called a(n) _____ proceeding.
tax certiorari
The legal process by which a property owner can challenge the real estate tax assessment on his/her property is called a(n) _____.
tax certiorari proceeding
After protesting an assessment, commercial property owners who are dissatisfied with the determination of the board of assessment review may file for a(n) _____.
tax certiorari proceeding in state Supreme Court
Which of the following is an objective of owning investment property?
tax savings from passive losses or depreciation
Gains on capital assets held longer than one year are _____.
taxed at a special lower rate than short-term gains
Gains on capital assets held less than one year are _____.
taxed at the marginal rate for the taxpayer's income
In New York, when there is a private water supply, a contract for purchase and sale generally includes a contingency to _____.
test well-water flow and quality
Carlos Ortega, a Hispanic, has paid the mortgage on his townhouse in the Bronx and wishes to take out a loan to repair his roof. Although he has a steady income and a perfect credit record, he applies to four local banks for a $2,000 loan and is refused. The bank tells him that he is not credit-qualified, and gives no further explanation. If Carlos sues these banks, what might be the grounds?
that the banks are guilty of redlining, that discrimination on a credit application has occurred and that discrimination based on race has occurred
Loans: Principal
the amount of money borrowed on which interest is paid or received
Which of the following is NOT a term of sale that may affect how quickly a property may sell?
the amount of property taxes on the property
Loans: Principal Balance
the amount of the principal remaining to be repaid at a given point in time
To comply with the federal Fair Housing Act of 1968, real estate brokers must prominently display _____ in their place of business.
the HUD poster
Under the Human Rights Law, after a Commissioner's Order has been issued, either party may appeal the Order to _____.
the NYS Supreme Court After a Commissioner's Order has been issued, either party may appeal the Order to the NYS Supreme Court.
Age is a protected class under _____.
the New York State Human Rights Law
Sexual orientation is a protected class under _____.
the New York State Human Rights Law
Race is a protected class under _____.
the New York State Human Rights Law, the Federal Fair Housing Act of 1968 and the Civil Rights Act of 1866
One of the differences between the federal Fair Housing Law and the New York Human Rights Law is that:
the New York law covers commercial property as well as residential
VA Guidelines
the VA considers what is called the "residual income" available after taxes are deducted
A homeowner's porch is damaged during a tornado. The homeowner's insurance policy coverage is based on replacement cost. In this case, the amount of coverage would equal _____.
the actual cost of replacing the damaged porch
Which of these is NOT a factor in considering whether alimony and child support are acceptable sources of income?
the age of the person making the payments
Secondary financing is usually allowed with a conventional loan as long as the second mortgage loan does not exceed _____.
the amount of cash invested by the borrower
Deductible
the amount the insured must pay towards a claim before receiving any policy benefits. If a policy contains a standard all peril deductible, such as $250, the insured would collect the amount of any covered property loss, less $250. With a deductible, the premium cost of the policy is lower than if there were no deductible. Increasing a deductible from $250 to $500 will lower a premium, sometimes by as much as 5 percent or 10 percent.
Useable Square Footage
the area contained within the space that the tenant occupies
Straight/Term Mortgage
the borrower pays interest only for a specified term. At the end of the term, the borrower pays the principal in full. This is known as a balloon payment. NOTE: FHA will insure only amortized mortgages (mortgages that retire the debt). Because of this and of the potential hardship for borrowers to come up with the balloon payment under the term mortgage, the typical home mortgage loan is the amortized mortgage, whether the loan is FHA, VA, or conventional.
One advantage of FHA financing is that _____.
the borrower's allowable costs may be wrapped into the loan
The bearing walls support what part of the building?
the ceiling and/or walls
The phrase "16-inches on center" means that _____.
the center of one 2" x 4" stud is 16 inches away from the center of the next
In a complaint regarding an assessment, the burden of proof is on _____.
the complainant
What is NOT an item that a broker needs to verify with the client?
the composition of the family that is purchasing the property
What makes a contract void
the contract's purpose is illegal the contract is impossible to complete because of an act of God or operation of law
A homeowner's porch is damaged during a tornado. The homeowner's insurance policy coverage is based on actual cash value. In this case, the amount of coverage would equal _____.
the cost of replacing the damaged porch minus physical depreciation
Small claims assessment review (SCAR) petitions are available from _____.
the county clerk's office
Loans: Equity
the difference between the market value of a property and the principal balance on any loans against it At the time of purchase, equity is equal to the down payment.
Effective Gross Income
the estimated total income from the property after vacancy and collection losses are deducted. (Vacancy and collection losses are losses caused by vacancies in the property and non-payment of rent.)
The foundation sill plate rests on top of _____.
the foundation wall and a course of solid masonry
It is a dangerous practice to encourage the borrower to increase his/her debt as the equity in his/her home increases because _____.
the home value is dependent on the real estate market
In New York, illegal discriminatory behavior can be reported to _____.
the human rights commission in various cities and NYS Division of Human Rights
Special assessments can only be levied against a property if _____.
the improvement benefits the property
The property tax rate is set by _____.
the individual municipality to meet its budgetary needs
Specific Performance
the innocent party may sue the other party in court to carry out the requirements of the contract.
Interest-Only Note
the interest is paid periodically until the note matures, and the entire principal balance is paid at maturity
Adjustable Rate Mortgage (ARM)
the interest rate floats based on the fluctuations of a standard index. As the index changes, the interest rate on the loan changes at preset intervals. Common indices include: - the cost of funds for savings and loan institutions - the national average mortgage rate - the one-year rate for the government's sale of Treasury bills (the most popular index used) The ARM mortgage is one solution to the uncertainty of future financial rates. ARMs are structured with RATE CAPS (ceilings or lifetime caps), limiting interest rate increase May also have a PAYMENT CAP
Installment Sales Contract: Disadvantages for the Buyer
the lack of equity if he/she defaults on payments
What element does NOT apply to a promissory note?
the lender signs it; the borrower has to sign it
Percentage Lease
the lessee (tenant) pays a base rent plus an additional monthly rent that is a percentage of the lessee's gross sales. Retail leases may often be percentage leases. A natural break-even point defines when an investment will generate a positive return. The percentage that a lessor charges on a percentage lease can be lowered to assist the retailer in reaching a break-even point. Then the percentage may be gradually raised as the business starts to do better.
An owner of an apartment building containing up to four units is exempt from provisions of the 1968 Fair Housing Act in the rental of the units provided that _____.
the owner occupies one of the units as a personal residence
Liquidated Damages
the parties may determine in advance a sum to be paid to the innocent party in the event of a breach. Damages agreed to in advance, in the contract itself.
Before signing a lease that requires payment of individual heating and cooling bills, tenants are entitled to receive from the landlord a complete set, or summary, of _____.
the past two years' bills
Loans: Term
the period of time over which the loan is repaid
Policy
the plan the insured receives for a home or business through an insurance agency It is a legal contract detailing all the terms and conditions of the insurance coverage.
Down Payment
the portion of a property's purchase price that is paid in cash and is not part of the mortgage loan. In certain upstate areas and most of northern New York, the term used for down payment is deposit. If the buyer defaults, the down payment may be the amount of liquidated damages to which the seller is entitled.
PITI Loan: Principal
the portion of the monthly payment applied to reduce the mortgage amount. The amount of the principal payment applied to the mortgage payment increases over time as the interest amount decreases
In a home, the item that reduces and maintains water pressure within predetermined ranges is called _____.
the pressure-regulating valve (PRV) and the pressure-reducing valve A pressure-regulating valve (PRV), also called a pressure-reducing valve, reduces and maintains water pressure within predetermined ranges.
Types of Secondary Mortgage Markets
the purchase and sale of mortgages between lending institutions the sale of mortgages by lending institutions to three organizations that provide a market for this purpose--FNMA (Fannie Mae), GNMA (Ginnie Mae), and FHLMC (Freddie Mac)
Pledged Account Mortgage (PAM)
the purchaser's down payment is deposited in a savings account with the lender. The borrower makes escalating payments to which are added withdrawals from the savings account in the early years. Over time, the account is exhausted, but by then the mortgagor's payments increase enough to amortize the remaining balance. Another type of pledged account arrangement can include a third party.
The money Freddie Mac uses to buy mortgages comes from _____.
the sale of its own securities
Who is responsible for paying the debt when a property is sold "subject to" the lien of an existing mortgage?
the seller
To finance the purchase of a cooperative, the cooperative purchaser uses _____ as collateral for the loan.
the shares of stock and the proprietary lease
Carpetable Square Footage
the space that is covered by carpet or flooring and walked upon within the interior walls of the space. Carpetable area does not include columns, closets, built-in cabinets, etc.
If a building converts to a cooperative, a number of units may be available. By law, the unsold shares allotted for the units in the cooperative that are not purchased are generally held by _____.
the sponsor of the cooperative
Rentable Square Footage
the square footage on which the tenant's rent is based. In multi-tenant buildings, tenants often share some rental costs with other tenants for the common areas, such as lobbies, hallways, and restrooms. Rentable square footage is often calculated as the useable square footage plus the tenant's prorated share of the building's common areas. The tenant pays a specified rental rate multiplied by the rentable square footage.
Net Lease
the tenant (lessee) pays some or all of the expenses. Sometimes net leases are called net, double net, or triple net. It depends on how many property expenses the tenant pays. A lessee who contracts for a TRIPLE NET LEASE pays all the expenses associated with the property in addition to the rent, except for the debt service. A net lease to the landlord means that expenses do not have to be deducted from the payment received from the tenant. The money received is NET to the landlord.
Depending on the governing documents, a cooperative may limit _____.
the time a shareholder can sublet a unit within a specific time, the term of any sublet and the number of sublets permitted in the building at any one time
Potential Gross Income
the total income that the property would generate at full (100 percent) occupancy
Assignment of a Lease
the transfer of the lease contract from the present tenant to the assignee transfer of ALL rights that the tenant holds in the property
Cost Approach
theoretically rebuilds the structure new, and then adjusts to its present condition The main method for estimating the value of properties that have few, if any, comparables and are not income producing. Types of structures appraised by this method include schools, hospitals, and government office buildings. New construction can be appraised using the cost approach.
If a letter of intent to purchase a condominium is non-binding, _____.
there are no legal damages to any of the parties in breach
The purchaser can cancel a contract for purchase and sale within a set time if _____.
there is a pest infestation contingency
Government Loans
those that are guaranteed, insured, or funded by a government agency
An owner may cancel a home improvement contract, with a written notice to the contractor, up to _____ business days after signing the contract.
three business days
Lenders often require the escrow of funds to pay homeowners insurance premiums for which of the following reasons?
to protect their collateral
If expenses and mortgage costs exceed the returns on an investment, it may mean that _____.
too much leverage has been used Excessive use of leverage can cause the expenses and mortgage costs to exceed the returns on an investment.
According to Article 36-B of the New York General Business Law, implied in all contracts of sale for new housing is a builder's warranty for all plumbing, electrical, heating, cooling, and ventilation systems due to improper installation by the builder for _____.
two years
A property's assessment is _____.
typically a percentage of its market value
A property is assessed at a higher percentage of value than the average of all other properties on the same assessment roll. This is an example of a(n) _____.
unequal assessment A property that is assessed at a higher percentage of value than the average of all other properties on the same assessment roll is considered to have an unequal assessment.
Investment in land is a more risky form of investment than other types of real estate investments because _____.
unimproved land cannot be depreciated for tax purposes
Negative amortization results from _____.
unpaid interest
The "Age 59½ Rule" allows first-time homebuyers to _____.
use IRA distributions to pay for their new home
The equalization rate is _____.
used in the setting of municipal tax and debt limits, the average percentage of market value at which assessments are set and computed by NYORPS
Industrial land use is _____.
usually confined to specific areas, such as industrial parks
The process of estimating the market value of an identified interest in a specific property as of a given date is called _____.
valuation VALUATION is the process of estimating the market value of an identified interest in a specific property as of a given date.
The present worth of all rights to current and future benefits of ownership is known as _____.
value
The basis of market value is most typically _____.
value determined between a willing buyer and willing seller
The value of a property based on a specific use for a specific owner or investor is called _____.
value in use
In the IRV formulas, income equals _____.
value x rate
The premiums charged for homeowners and tenants insurance _____.
varies from company to company and from location to location
A plumbing system is comprised of which two systems?
water supply and drainage
When is an agent obligated to inform the buyer of the existence of a sex offender?
when a confidential or fiduciary relationship exists between the parties or when the buyer asks
An electric field exists _____.
when an appliance is plugged in
Credit history is used to determine the buyer's _____.
willingness to pay
Evaluation is different from valuation because it is made _____.
without reference to a specific estimate of value