RE - Exam

piggyback (split) loan

"A legal way for borrowers to avoid having to purchase private mortgage insurance (PMI) when they put less than 20% down; involves two separate loans Ex. Evan has saved $30,000 for a down payment, which isn't quite enough to avoid paying PMI on the loan for his new $200,000 condo. So he gets a piggyback loan to make up the difference.

sub-agent (or subagent)

"A licensee from a competing firm who brings the buyer to the deal, but instead of representing the buyer, works under the listing agent as a representative of the seller Ex. Carol was a sub-agent of Jennifer, the seller, although Jim was Jennifer's listing agent. Carol helped try to find a buyer for Jennifer's property.

right of ingress or egress

"The right to enter (ingress) or leave (egress) a property. Ex. Lila's easement on her neighbor's property gave her the rights of ingress and egress.

ceteris paribus

"other (relevant) factors being equal"— plays an important role in causal analysis. ---> HOLDING OTHER FACTORS EQUAL

1031 Exchange

"under Internal Revenue Code section 1031, a tax-deferred exchange of "like kind" properties."

A parcel of land is 140 feet by 75 feet and the seller is asking $130 per square foot. What is the asking price?

$1,365,000

A homeowner sells his house for $325,000 more than he bought it for. When he files his income taxes, how much of this profit may he exclude from his capital gains if he's filing as a single taxpayer?

$250,000

Garrett sold his primary residence for $595,000, which was a capital gain of $315,000. How much may Garrett exclude on his income tax as a single individual?

$250,000

The most a single individual may exclude on the capital gain of a sale of a primary residence is _____

$250,000

The real estate taxes assessed on Jimmy's property are $785 for the year. The taxes on his property were also paid on January 1 but his closing occurred mid-month, on June 15th. Using the statutory year, how much will Jimmy owe for prepaid taxes at closing?

$425.22 -- $785 ÷ 12 = $65.42 owed in property taxes per month. Next take $65.42 × six months (July 1 - Dec 31) = $392.52. To find the amount owed for the partial month of June, divide the monthly amounts by 30 ($65.42 ÷ 30 = $2.18), then multiply by number of days ($2.18 × 15 = $32.70). Last, add both numbers together - $392.52 (July 1 - Dec 31) + $32.70 (June 16 - 30) = $425.22

Exclusive Right to Sell Listing

1) Only one broker is authorized to sell 2) the broker receives a commission no matter who finds the buyer

Appurtenances include:

1) mineral rights 2) air rights 3) water rights 4) easements 5) natural attachments 6) improvements (man-made attachments)

The Department of Environmental Conservation must approve septic plans for buildings that process more than ______ gallons a day.

1,000

Principal's Duties to Agent

1. Compensation 2. Reimbursement and indemnification 3. Cooperation 4. Safe working conditions

Homebuyers who withdraw individual retirement account (IRA) funds under the first-time homebuyer program must use those funds within how long to acquire, build, or improve a residence, or to contribute toward closing costs?

120 days

John wants to do a 1031 tax exchange. He just sold his property. How many days does he have to close on a new property?

180 Days

How many feet are in a mile?

5,280 feet

How many acres is one square mile?

640 acres

What percentage of a building's replacement value must be covered by fire insurance according to typical coinsurance clauses?

80 percent

Margie needs to know the square footage for the first floor of the condo her client is interested in buying. The kitchen is 10 feet by 15 feet, the living/dining combo is 20 feet by 25 feet, and the office and bedroom are each 10 feet by 10 feet. What's the total square footage?

850 square feet (Find the area of each room to get its square footage, then add the square footage of all four rooms. Kitchen = 150 sq. ft.; living/dining = 500 sq. ft.; office = 100 sq. ft.; and bedroom = 100 sq. ft. = 850 square feet.)

Equal Credit Opportunity Act (ECOA)

A 1974 federal law that prohibits discrimination based on protected class status when providing credit Ex. Due to ECOA, minorities of all types now have equal access to credit at fair terms.

DCR Example

A DCR of .8 indicates that there is only enough income available to pay 80% of the annual mortgage payments. A property with a DCR of 1.2 generates 1.2 times as much annual income as the annual debt service on the property, and creates 20% more income than required to cover the debt service.

Mortgagor

A borrower in a mortgage loan transaction.

real estate investment trust (REIT)

A business owned by shareholders who invest in properties or mortgages Ex. Craig's favorite REIT invested in mortgages.

amendment

A change to an existing contract Ex. Bill decided not to include the washer and dryer since the buyers were asking for the moon in the inspection. He wrote up an amendment to their original agreement, which they reluctantly signed.

right of first refusal

A clause allowing the tenant the opportunity to buy the property before the owner accepts an offer from another party.

mortgage contingency

A clause written into a sales contract that allows the buyer to cancel and receive back the buyer's deposit in the event that the buyer cannot obtain a loan commitment

carbon monoxide (CO)

A colorless, odorless gas that results as a byproduct of combustion of wood, gas, and other heated materials; poses a health hazard when released into the atmosphere and breathed in Ex. Homes with gas appliances and gas heat should be equipped with carbon monoxide detectors which can warn the occupants to get out before escaping fumes result in serious health issues or death.

Comparative Market Analysis (CMA)

A comparison of the prices of recently sold homes that are similar to a listing seller's home in terms of location, style, and amenities.

footing

A concrete base built below the frost line that supports the foundation Ex. The footing supports the foundation wall, and therefore the entire structure of the building.

Express contract vs. implied contract

A contract in which the parties to the contract have definitely agreed on all of the contract terms vs. a contract that's inferred from the parties' actions

functional obsolescence

A decrease in property value resulting from poor or outdated design or material Ex. Because Seamus's property was built using asbestos siding, ceiling tile and floor tile, it was functionally obsolete.

Habendum Clause

A deed clause containing the words "to have and to hold," and which describes the interests and rights of the grantee

material defect

A defect in the property or title that could cause a reasonable person to not purchase a property, or cause the buyer to value the property lower Ex. The fact that the carpeting in the living room was an ugly lime green wasn't considered a material defect, but the leaky roof was.

mortgage broker dual agency disclosure

A disclosure form that allows a mortgage broker who is a licensed real estate broker to serve as a mortgage broker for a buyer and real estate agent for a seller in the same transaction. Ex. Barbara Townsend is a real estate broker and a mortgage broker. When she helped Tim get a loan to purchase Shane's listing, for which she was the listing agent, she had to get Tim and Shane to sign a mortgage broker dual agency disclosure.

certificate of eligibility (COE)

A document issued by the U.S. Department of Veterans Affairs that certifies a veteran's eligibility for a VA loan Ex. Renita had served in the Air Force and decided to apply for a VA loan to purchase a home once she got out. She applied for and received a certificate of eligibility for the loan.

Bill of Sale

A document transferring title to personal property. Ex. When Ginger sold her golf cart to Mary Anne, they used a bill of sale to complete the transaction.

Certificate of Reasonable Value (CRV)

A document used with a VA loan that indicates its appraised value Ex. Because his certificate of reasonable value came in above the sales price, the VA was willing to guarantee the full sales price of George's home.

adverse material fact

A fact that might cause the buyer to change his mind about purchasing the property

material fact

A fact that would influence a reasonable person when making a decision; a person's decision would have been different had the information not been disclosed Ex. A material fact could impact the value of the property if the truth were known, or it could cause a seller not to accept a buyer's offer (e.g., the buyer is actually not financially qualified to complete the transaction).

CAA/Clean Air Act

A federal act designed to control air pollution; requires the EPA to develop and enforce regulations to protect the public from airborne contaminants known to be hazardous to human health Ex. Among other requirements, the Clean Air Act banned the release of CFCs and HCFCs when maintaining, servicing or disposing of refrigerators, air conditioners or other cooling products.

Americans with Disabilities Act of 1990 (ADA)

A federal anti-discrimination law to protect persons with disabilities from discrimination in public accommodations and commercial facilities Ex. John's brokerage firm was required to provide reasonable accommodations in the office building where Terry, who uses a wheelchair, works.

U.S. Department of Housing and Urban Development (HUD)

A federal department that addresses housing needs, homelessness, and discrimination in housing Ex. Every HUD-assisted project must be examined to ensure that it does not negatively impact the surrounding environment and that the site itself will not have adverse effect on end users.

FHA Section 8

A federal housing assistance program for low income Americans. Americans pay a fixed portion of their income in rent, with HUD paying the remainder

Loan Origination Fee

A fee charged to the borrower by the lender for making a mortgage loan. The fee is usually computed as a percentage of the loan amount.

point

A fee equal to 1% of a loan amount. It's typically paid upfront to lower the interest rate on a loan. Ex. For a conventional, 30-year fixed rate loan, the interest rate may be 6% with a charge of 1 point, or 1% of the loan.

Qualified Fee Estate

A fee estate that is subject to certain limitations imposed by the person creating the estate

Asbestos

A fibrous mineral found in rocks and soil, previously used in construction materials for its insulating and fire-retardant strength and currently classified by the EPA as a hazardous material. Ex. Many homes built before 1973 likely contain asbestos products. These might be in insulation, ceiling or floor tiles, or in exterior shingles.

gross income multiplier

A figure used as a multiplier of gross annual income of a property; used to estimate property value for properties of five-plus units. Ex. The GIM represents the ratio between the sales price and effective gross income. GIM = sales price divided by effective gross income.

Mortgage Banker

A financial middleman who, in addition to bringing the borrower and the lender together, makes loans, packages them, and sells the packages to both primary and secondary investors. Also services loans.

Estate for years

A fixed-termination type of lease that may be for a day, week, month, year, several years, or any definite period of time; when the specified date occurs, the lease terminates automatically Ex. Carmine agreed to rent Bill's apartment for 11 days, after which their lease terminated. This is an estate for years, even though it is only for 11 days.

tenancy in common

A form of ownership that includes an undivided interest in the property; owners may sell, convey, mortgage or transfer their interest without the consent of co-owners Ex. Bailey and her brother Bill inherited their uncle's house. The will did not specify how they were to take title, so they were automatically made tenants in common.

Incurable Depreciation

A form of physical depreciation indicated by a loss in value that is not economically feasible to remedy because the increase in value from the "fix" would not equal the cost to fix it Ex. The Bakers had to live with the incurable depreciation of their split level designed home. Even though the design was no longer popular, it was an incurable depreciation they had to face. Fixing it would cost more than they could recoup at sales time.

Wrap-around Mortgage

A form of seller financing in which the seller's mortgage remains in place, but the seller is receiving payments from the new buyer and therefore financing the purchase; generally a relatively short-term arrangement (perhaps five years), made until the buyer is able to qualify for a conventional mortgage Ex. Short term solution until the buyer can acquire a conventional mortgage.

Lawyer's Fund for Client Protection

A fund created by the New York Legislature to protect client funds held in attorney escrow accounts Ex. Clayton placed a down payment of $12,000 as earnest money when he made an offer on a condo. The attorney holding his check deposited it in an escrow account. If Clayton's attorney absconds with his money, Clayton will be reimbursed for his losses by the Lawyer's Fund for Client Protection.

What type of gain is considered long term?

A gain on a property owned more than one year

Curtesy

A husband's interest in the real estate owned by his deceased wife; a form of legal life estate Ex. When his wife died, Abe gained a curtesy estate in their home.

Megan's Law

A law which requires the local authorities to publish the location of registered sex offenders in the area Ex. Due to Megan's law, it was easy for a licensee to point concerned clients to appropriate resources to determine whether registered sex offenders lived nearby.

Proprietary Lease

A lease given by the corporation that owns a cooperative apartment building to the shareholder for the shareholder's right as a tenant to an individual apartment.

subordinate lease

A lease in which the lender retains the right to evict the tenant if the borrower defaults

Estoppel

A legal concept that says that a person may not disavow something that the person had previously affirmed either by action or words Ex. Marjorie told the buyers that Kindra was her agent, even though they had no written agreement. Marjorie cannot later assert that Kindra isn't her agent.

beam

A length of steel or several pieces of wood fastened together that spans the distance from one side of the foundation to the other on which the joists rest for support. This is sometimes called a girder. Ex. Keri couldn't believe it when she returned from an errand on the weekend and saw that her contractor had somehow single-handedly installed the beam that spanned the entire length of their kitchen addition. "Ladders, lifts, and leverage," he explained.

Letter of Intent

A letter of intent is not a contract, but a letter stating that the buyer is intending to create a contractual relationship with the seller.

special assessment

A levy to fund community improvements Ex. Due to the new city park, all property owners were subject to a special assessment.

involuntary lien

A lien imposed on a property or person by someone else, such as for nonpayment of taxes Ex. Becky forgot to pay her taxes, and a lien was placed on her property. This was an involuntary lien.

mechanic's lien

A lien placed by a laborer on a property for nonpayment of work done Ex. Harry's carpenter put a mechanic's lien on his property for nonpayment of his work.

voluntary lien

A lien that is agreed to, such as a mortgage Ex. Scott's mortgage was a voluntary lien against his property.

encumbrance

A limitation on a property title, such as a lien or easement Ex. Cathy was happy to see from the title report that the only encumbrance on the property she was buying was a power company's easement in gross.

exclusive right-to-sell

A listing agreement in which the broker has earned a commission no matter who finds the buyer for the property during the term of the listing Ex. To protect her commission, Amy always asked for an exclusive right-to-sell agreement when working with sellers.

Government Loans

A loan guaranteed, insured, or (in limited cases) made by an agency of the federal government Ex. Both VA and FHA are types of government loans. They're not made directly to consumers, but are instead guaranteed (VA) or insured (FHA) by an agency of the federal government.

Share Loan

A loan in which the borrower purchasing shares in a cooperative. Ex. Myra had difficulty finding a lender who was willing to finance a share loan; when she did, her rates were slightly higher than she'd hoped.

straight loan

A loan in which the periodic payments go to interest only and the entire loan amount is due at the end of the term Ex. A straight term mortgage is a type of balloon mortgage in which the last payment (the balloon) pays off the balance.

subprime loan

A loan offered at a rate above prime to individuals who don't qualify for prime rate loans Ex. Andrea encouraged her buyer clients who needed subprime loans to thoroughly research lenders to make sure they were trustworthy.

Bridge Loan (Swing Loan or GAP Financing)

A loan to bridge the gap between the termination of one mortgage and the beginning of another, such as when a borrower purchases a new home before receiving cash proceeds from the sale of a prior home.

Leasehold Mortgage

A long-term estate for years pledged to the lender instead of the property, often used when the property is vacant land that must be developed

acre

A measure of land equal to 43,560 square feet.

legal description

A method of identifying a property in written words that allows for an unambiguous interpretation of a property's boundaries and location Ex. Although a street address may hold up in court, it's best to include an accurate legal description as best practice when conveying real property.

misdemeanor

A misdemeanor is a crime that is less serious than a felony. Violations of Article 12-A are misdemeanors, punishable by fines of up to $1,000. In addition, the penal system can impose fines of up to $1,000 and/or imprisonment for up to one year. Ex. Vince, a real estate salesperson, violated Article 12-A, a misdemeanor. His punishment may include a fine of $1,000 imposed by both the DOS and the penal system, and up to one year in prison.

due on sale clause

A mortgage clause that requires the borrower to pay off the loan balance when selling the property Ex. Mortgages with due on sale clauses are not assumable.

VA mortgage

A mortgage in which the loan is guaranteed by the U.S. Department of Veterans Affairs Ex. As an active member of the military, Gwen qualified for a VA loan, provided she met the terms of qualification.

Assumable Mortgage

A mortgage that can be assumed by the buyer when a home is sold. Usually, the borrower must "qualify" in order to assume the loan. Ex. When interest rates rise, buyers often prefer assumable mortgages at more favorable rates.

Balloon Mortgage

A mortgage that has lower initial payments that do not fully amortize and provides for a "catch up" lump sum to be paid at a specific time Ex. Jeb agreed to a balloon mortgage because he knew that in 5 years, when the balloon payment was due, he would have money available from his trust fund to pay it off.

Adjustable Mortgage Rate (ARM)

A mortgage with a rate that adjusts based on changes in a market index Ex. Caleb had a 5/1 ARM. His loan had a fixed interest rate for the first five years, and after 5 years, it could change annually depending on changes to the market index.

architectural review board

A municipal agency whose role is to protect the architectural integrity of a community through covenants limiting the types of building materials. The boards are comprised primarily of people with expertise in art, architecture and planning. Local laws can give architectural review boards the authority to review building plans and specifications; these boards can withhold approval of building permits if a proposed construction will be very dissimilar to or inappropriate compared with other structures nearby. Ex. In our story, Mary meets with the Architectural Review Board of Greenville to discuss how the renovations of the Johnson farmhouse will be in keeping with its existing architecture.

monument

A natural or man-made permanent landmark that serves as a point of reference in a metes-and-bounds description Ex. Jill read the metes-and-bounds description of her property, which included the location of an oak tree as a point of reference. This monument had been there for 150 years.

Escrow

A neutral repository for client trust funds Ex. Jillian, a sponsoring broker, deposits all client earnest money funds into a neutral escrow account until the transaction is completed or terminated, at which time she instructs the funds be disbursed according to the contracted terms.

kickback

A payment made (either with money or another item of value) to a real estate professional in exchange for providing a service referral; kickbacks are illegal per RESPA rules Ex. Fred gives real estate professional Ginger a 20% referral fee from his commission as a thank you for sending business his way; this is an illegal practice.

Cash on Cash Return

A percentage return on money invested in a property by an investor. Formula: Cash Flow / Down Payment.

variance

A permitted deviation from zoning Ex. Brandy had to obtain a variance for her property as she had to build three feet closer to the road than was permitted in the zoning ordinance.

Adverse Possession

A person actually and visibly possesses someone else's real property for a statutory length of time and then claims it as his or her own; openly hostile to another's ownership claim Ex. Ralph had been using Kimo's land for nearly two decades before they realized the land actually belong to Kimo. Ralph was able to claim the land through adverse possession.

Remainderman

A person who inherits or is entitled to inherit property upon the termination of the estate of the former owner.

capital reserve budget

A projected budget over the economic life of the property, which includes variable expenses, such as repairs and updates Ex. Corrine believed in having a capital reserve budget that planned for every contingency.

stigmatized property

A property that buyers may shy away from for reasons other than physical defects, such as a property being the site of a murder Ex. Each state has its own laws regarding what stigmas licensees are required to disclose, and which they can keep mum about.

Alienation Clause

A provision in a mortgage that requires the loan to be paid in full by the mortgagor if a transfer of ownership takes place. This is also called a due-on-sale clause. Ex. An alienation clause protects a lender by preventing a borrower from assigning debt without the lender's approval. Alienation may be either voluntary or involuntary.

Lis Pendens

A public notice that a legal issue is pending Ex. Deena was glad she saw the lis pendens notice on the property she was considering making an offer on. She didn't need to get halfway through a transaction and find out there was a judgment against the property!

What type of professional must an investor use to conduct a tax-deferred exchange?

A qualified intermediary

Radon

A radioactive gas found worldwide caused by the natural decay of uranium Ex. Unhealthy levels of radon in a home may be lowered through the installation of a filtration system.

annual percentage rate (APR)

A rate derived to reflect the true cost of financing that allows consumers to compare loan products; includes financing fees, so it will always be higher than the actual interest rate on a loan Ex. An interest rate of 6% may sound better than one of 6.25%, but it's important to also compare annual percentage rate (APR) figures to see the true cost of financing.

circuit breaker

A replacement for fuses which work by switching off when the electrical current increases beyond the system's capacity. Ex. Homes built since the 1960s usually have circuit breakers rather than fuses, which were used in most homes until then.

appurtenance

A right, privilege, or improvement belonging to, and passing with, the land.

Among the following individuals, who would need to provide a judgment of conviction to the Department of State (DOS) within five days after conviction?

A salesperson convicted as a sex offender

Accessory Apartment Uses

A second residential unit that may be contained within an existing single-family home, garage, or carriage house. An accessory apartment is usually required to be a complete housekeeping unit that can function independently with separate access, kitchen, bedroom, and sanitary facilities.

collateralized mortgage obligation (CMO)

A security that uses mortgage-backed securities as collateral Ex. CMOs are subdivided into tranches. Each tranche has specific rules for distributing income received from the collateral, and has differing balances, maturities, and risks.

mortgage broker

A service professional who acts as a liaison between borrowers and lenders for a fee Ex. Mike Jimenez is a mortgage broker working for Lendwell Brokerage. Mike matches borrower needs with lender products for a fee.

headers

A solid wood bridge over the opening of doors and windows Ex. Headers support the ceiling and roof over door and window openings that would otherwise be too weak to carry such a load.

Restrictive Covenants

A statement written into a property deed that restricts the use of the land in some way; often used to prohibit certain groups of people from buying property

"Land divided into lots for development" is the definition of ______.

A subdivision

metes and bounds

A survey system using points of reference and directional indicators to identify and locate a property for legal purposes Ex. Darla laughed when she saw the metes-and-bound description of her property. Although it was a legal description, it contained terms like "west of the widow Fiona Smith's stone wall."

Affidavit of Title

A sworn statement assuring that no title defects have occurred since the date of the last title search Ex. An affidavit of title is often a part of a bring down, a title search performed after closing and before any new documents are filed.

Real Estate Mortgage Investment Conduit (REMIC)

A tax entity that issues multiple classes of investor interests (securities) backed by a pool of mortgages.

joint venture

A temporary organization of two or more people to carry out a single project.

Building Department

A town or city agency that oversees and reviews building applications by licensed professionals to ensure compliance with local building code and zoning ordinances. A building department enforces local building code, and ensures that licensed and insured contractors perform the work. The building department provides building permits for construction and renovation, among other functions.

exclusive agency

A type of agency agreement in which the real estate licensee or firm is the only one allowed to represent the buyer/seller and earns a commission if the sale goes through unless the client finds a buyer/property without the licensee's assistance Ex. Because James had signed an exclusive agency agreement with his broker, Jackie, James had the option of selling his house himself and not paying a commission.

Private Mortgage Insurance (PMI)

A type of insurance used to protect lenders if a borrower puts less than 20% down on a home purchase.

Estate at Sufferance

A type of possession in which a tenant stays after the right to possess has terminated Ex. Bradley's lease was terminated lawfully but Bradley refused to leave. He is not a trespasser, even though he is not there legally; he has an estate at sufferance.

mortgage

A voluntary lien placed on a property as collateral against a loan Ex. Scott's mortgage enabled him to have a house, so he didn't mind this voluntary lien on his property.

bearing wall

A wall that supports the ceiling or roof Ex. When they discussed their remodeling plans with their architect, he told them they could not move a bearing wall unless they wanted their second floor where their first floor currently was.

What is a wrap-around mortgage?

A wrap-around mortgage is one where the buyer's new loan wraps around the seller's existing financing. The seller uses a portion of the buyer's payments to the seller to pay on the original loan.

Exclusive Listing

A written contract between a seller or building owner and a real estate licensee giving the licensee the exclusive right to sell or lease the property during the term of the listing agreement. Ex. Jack had an exclusive listing with Mark to sell his apartment building. When Janice brought Mark a buyer, and the transaction closed, Jack earned the listing commission.

Zoning Board of Appeals

A zoning board of appeals makes zoning ordinances more flexible by keeping zoning legislation out of the courts. One of the main duties of the zoning board of appeals is to maintain the essential character of the neighborhoods; it is an interpreter of the zoning ordinance. The board is appointed by the mayor or city manager, village board of trustees or town board Ex. Mary approached the Zoning Board of Appeals to obtain her special use permit for the B&B.

Act of Waste

Abuse of a property by a person who holds possession through a life estate

Fair Housing Amendments Act of 1988

Added familial status and disability to the protected classes list

When Dashiell received the purchase offer for his bungalow, he was surprised to see a page added to the contract requesting that an attorney review the contract. What is Dashiell looking at?

Addendum

Your buyer, Billy, wants to make an offer on the craftsman house he saw today, but he wants the sellers to start the paperwork for a tax reassessment before closing. This isn't part of the standard sales contract in your area. What will you use to accomplish this request?

Addendum

Your brokerage firm uses pre-printed sales contract forms, but your seller, Marcus, wants to add some language about staying in the house and renting from the buyer for a month after closing. What should you use to add this information?

Addendum - An addendum is a separate page added to a complete contract and becomes part of the original agreement.

OLD CAR

Agent's responsibilities to the principal. 1.) Obedience 2.) Loyalty 3.) Disclosure 4.) Confidentiality 5.) Accounting 6.) Reasonable skill and care - Provide Square Footage, Comparable Market Analysis (CMA), discover and disclose material facts, fill-in the blanks of pre-printed contracts and advise people regarding offers

external depreciation

Aka economic obsolescence; decrease in property value due to external issues such as pollution, traffic, and other nuisances Ex. Lance's investment property diminished in value when a factory belching fumes 24x7 was built nearby. Because external obsolescence cannot be cured, this resulted in a significant loss on his investment.

Tax Relief Act of 1997

Allows first-time homebuyers to use as much as $10,000 of their IRA funds to pay the down payment and closing costs of their new home without incurring an early distribution penalty Ex. Buyers still have to pay taxes on the distribution, and the distribution must be used within 120 days or else the penalty will be charged.

lease with option to buy

Allows the lessee (renter) the option to purchase the property at the end of the lease term

Joe is finally remodeling his parents' home from the late 1960s and, to his mother's delight, it's time to install a new washer and dryer. As he is hooking up the new machines, what type of wiring is he likely to encounter?

Aluminum

Deductible

Amount you must pay before you begin receiving any benefits from your insurance company

DUST

An acronym used in valuation that stands for demand, utility, scarcity and transferability

Retaliatory Eviction

An act whereby a landlord evicts a tenant in response to some complaint made by the tenant

express agency

An agency agreement entered into when both parties agree to and understand the arrangement via written or oral communication between the parties Ex. Although a verbal exchange between the parties can create express agency, it is vital that a real estate agent get an express agency agreement in writing. An oral agreement may not hold up in court if there is a dispute about whether the commission has been earned.

Dava, your landlord, is ready to be your client and wants you to find some tenants. Which form(s) should you both sign?

An agency disclosure form and the exclusive right-to-rent form

cooperating agent

An agent from another firm who assists in the sale of a property Ex. Jan represented, Kimo, the buyer of Chanel's listing. Jan is a cooperating agent.

Alteration Agreement

An agreement between a shareholder and a cooperative which states the extent of allowable remodeling/alterations to the shareholder's unit Ex. James wanted to install built-in bookshelves in his unit, so he requested this modification in his alteration agreement. The cooperative board agreed, so he was able to install the bookshelves.

covenant

An agreement or promise made between the parties Ex. When Miranda agreed to pay rent to Craig for renting his condo, this was a covenant between them.

tie-in arrangement

An antitrust violation in which the provider of a service requires the customer or client to purchase another service

Accessory Apartment

An apartment within a primary residence.

cost approach

An appraisal valuation method based on the cost to replace or reproduce a property Ex. Appraisers often use the cost approach for new construction or for unique properties that do not have recent comparables.

income approach

An approach to determining value used for investment properties based on the income it will produce Ex. Appraisers will use the income approach to value for commercial buildings and multifamily residential. It is seldom used for owner-occupied, single-family residential.

Easement by Prescription

An easement acquired by continuous, open, and hostile use of the property for the period of time prescribed by state law.

Easement by necessity

An easement created to benefit a landlocked property owner. Ex. Burt's property had no access to the main road. To get there, he had to cross his neighbor's property. Luckily his property had an easement by necessity to do so.

Easement by Implication

An easement that is implied by the conduct of the parties. Ex. When Karen sold the mineral rights to her property, she granted the mining company an easement by implication to enter her property and mine for gold.

Easement for Light and Air

An easement to restrict another property owner from blocking your light and air. Ex. Brandy was worried that her neighbors would build up, blocking much of her light and air. She purchased an easement to prevent them from doing so.

mortgage banker

An entity that makes and services mortgage loans Ex. Wells Fargo Mortgage is among the several large lenders who are mortgage bankers.

Easement in Gross

An entity's personal right to use property. The receiver DOES NOT own the adjoining property. Example: utility easement

Freehold Estate

An estate in real property which continues for an indefinite period of time.

broker's price opinion (BPO)

An estimate of property value that is not an appraisal but is developed by a real estate broker based on comparable sales in the area

A person performing real estate activities under the judgment or order of a New York court, such as a trustee in a bankruptcy, is ______.

An exception to the real estate licensing requirement

Redlining

An illegal practice in which lenders refused to lend money to people buying in a specific area, often based on the presence of people who belong to one of the seven classes protected by the federal Fair Housing Act Ex. Decades ago, lenders practiced redlining by drawing a red line around sections of a plat or map where a concentration of minorities lived and denying mortgage loans on homes within those red lines.

freehold estate

An inheritable estate with absolute ownership

Fee Simple Absolute

An inheritable estate with absolute ownership; provides the most complete form of ownership and bundle of rights in real property Ex. When Yvette was investigating condos in Hawaii, her friends told her, "Be sure to look for a fee simple. You don't want a leasehold—you can't pass that on, and it's not worth as much."

latent defect

An issue with a property not immediately recognizable by a layperson; concealed, hidden, or requiring professional evaluation Ex. Barbara was able to get out of her contract to buy a rancher when the home was discovered to have a latent defect - the foundation was unsafely graded.

riparian rights

An owner's rights in land that borders on or includes a stream, river, or lake. These rights include access to and use of the water.

Mineral estate

An ownership interest part of the bundle of rights that come with real property ownership that can be sold or retained with the transfer of property Ex. An oil company purchased the mineral estate rights to a large plot of land where oil shale was discovered.

Cash on cash return formula

Annual Cash Income/Total Cash invested

chattel

Another word for personal property (as opposed to real property)

April and Wayne are the buyer and seller of a condo, respectively. April is represented by Steve. Wayne is represented by Wendy. Who are the principal(s) in this transaction?

April and Wayne

special flood hazard areas (SFHAs)

Areas designated as prone to flooding, mudflows, or flood-related erosion; properties located in SFHAs must carry flood insurance

Article 12-A

Article of New York Real Property Law, which contains most of the laws relevant to real estate brokers and salespeople.

Loose fill insulation might be made of perlite, vermiculite, wood paper, or cotton fibers. What causes concern about this insulation type?

Asbestos was used in some vermiculite manufacturing.

statutory year

Assumes that all months in the year have 30 days; calculations are made based upon a 360-day year Ex. Lenders often use the statutory proration method in their calculations.

Any home improvement contractor who's charging more than $5,000 for the work has to deposit the payments received before completion into an escrow account. Why?

Because of article 36-A of the New York General Business Law

Which of the following statements about insulation is true?

Blanket insulation comes in fiberglass rolls.

Trustor

Borrower under a deed of trust

loan modification

Borrowers work with lender to restructure or modify the terms of their mortgage so they can continue to make payments Ex. The lender will verify borrower's ability to meet any changes to the terms of the loan.

Principals in real estate transaction are:

Buyer/Seller/Landlord/Tenant/Property Owner

CMA

Comparative Market Analysis

CLUE Report

Comprehensive loss underwriting exchange report; helps home insurance underwriters and buyers determine whether a particular property has hidden issues and whether it may be difficult or expensive to obtain insurance

Which loans involve increased risk for the lender and therefore usually come with a higher rate?

Construction -Construction loans involve increased risk because the lender is lending on what's being built and not what's already built. If the builder flaked, the lender would be left with an unfinished building.

appraisal contingency

Contract clause that, if the property doesn't appraise at or above the sales price, the buyer is allowed to terminate Ex. If the appraised value is close to the sales price, often the parties can reach agreement. If not, and an appraisal contingency is in place, the buyer can use the fact that the property didn't appraise to terminate and receive a refund of earnest money deposited.

What are condominium owners' rules and rights called?

Covenants, conditions, and restrictions

Easement by necessity

Created when no other access to land exists...right of ingress & egress

Covenant of Seisin

Deed warranty that the seller is the actual owner of the property being conveyed and has the right to convey it Ex. The covenant of seisin guaranteed that Mary was the rightful owner of the property and had the right to sell it to Sam.

1031 tax-deferred exchange

Defer taxes; identify 45 days, acquire within 180 days of closing previous property

A deed is valid only when it is

Delivered and accepted

The metes and bounds and monuments of a property can be found in what clause in a deed?

Description

Loan Estimate

Disclosure lender gives to the borrower within three days of the borrower applying for a loan; discloses loan terms, estimated interest rate, estimated payment, and estimated closing costs Ex. Carla received the Loan Estimate from her lender two days after applying. She liked how obvious things like the interest rate and approximate payment amount were on the sheet - she really hated having to rifle through her purse for her reading glasses.

intestate

Dying without a will

In investments, each type of depreciation is defined by a particular event. Which of the following best describes a depreciation type and an event it's tied to?

Economic depreciation and physical deterioration

The _______ of New York requires all builders and developers to comply with minimum energy efficiency requirements in the design of new buildings.

Energy Conservation Construction Code

What does DSCR >1 indicate

Entity has sufficient income to pay its current debt. If <1, they may have negative cash flow

When a contract is executory (such as in an installment sales contract), what type of title does the buyer hold?

Equitable

If the New York Secretary of State establishes a cease and desist zone, how often does the zone change?

Every year

capital expenses

Expenses required to improve or maintain a building Ex. The roof replacement was a capital expense John had not bargained o

Fannie Mae

FNMA, the Federal National Mortgage Association; a private, for profit corporation that operates under a congressional charter that buys loans in the secondary mortgage market from lenders in the primary mortgage market Ex. FNMA creates the secondary mortgage market by purchasing and guaranteeing mortgages that meet its funding criteria.

delinquency

Failure to make a payment (e.g., a mortgage payment) when due. Even before a late fee applies, if it's past the due date to pay the loan, the payment is late and the loan is delinquent. A delinquency beyond 30 days prompts a report to the credit bureaus. Ex. Due to frequent delinquencies on her automobile loan, Ruby's credit score declined, and she was unable to qualify for a home loan.

FICO score

Fair Isaac Corporation score; the most widely used credit score, based off information in the credit reports produced by the three credit bureaus (TransUnion, Equifax, and Experian) Ex. FICO scores range from 300-850. The higher the score, the lower the credit risk.

Freddie Mac (FHLMC)

Federal Home Loan Mortgage Corporation only buys conventional loans insures like Ginnie Mae 2nd largest secondary purchaser

long-term capital gain

Gain realized from an investment held for more than one year (receives favorable tax treatment, as compared to short-term capital gains)

FHA (Federal Housing Administration)

Gave loans required less down payment on a house or lower interest rate under the new deal

flood zone

Geographic areas that the FEMA has defined according to varying levels of flood risk Ex. Areas designated as the FEMA's Flood Zone A have a 1% chance of flooding annually.

Ginnie Mae

Government National Mortgage Association (GNMA); a federal agency located within the Department of Housing and Urban Development (HUD) that establishes requirements for loans that can be accepted into its mortgage pool Ex. Ginnie Mae issues guarantee certificates, similar to a U.S. government bond and pays the certificate holder interest rates 1% to 1.5% higher than government bonds.

Proprietary Lease

Grants owners the right to occupy a unit, and, of course, use the common areas and facilities. This is the equivalent of the role filled by a deed on the sale of real property.

Testate

Having made and left a valid will.

In general, a deductible will ______.

Help lower your premium

USDA Rural Housing Service (RHS)

Helps low- and moderate-income individuals attain housing in rural areas through grants, loans, and loan guarantees Ex. The RHS exists to to build or improve housing and essential community facilities in rural areas of the U.S.

Qualified Intermediary

Holds funds in a 1031 exchange, shouldn't be relative or professional associate of the seller of the "replaced" property, uses funds to purchase identified replacement property.

How are real estate transactions affected by the Taxpayer Relief Act of 1997?

Homebuyers may use IRA funds to acquire, build, or improve a residence, or for closing costs, and home sellers may exclude some capital gains from the sale from their income tax.

Homeowners 4 (HO-4)

Homeowners 4 (HO-4) is known as the tenants or cooperative owner policy or rental Insurance, and it provides coverage for the loss of personal property.

Freon

Hydrochlorofluorocarbons Ex. Freon is a non-toxic, extremely stable chemical substance used in most home air conditioning units.

Reversionary Interest

If grantor does not name a remainderman, then ownership returns to the grantor when the life estate terminates.

Commingling

Illegally mixing deposits or monies, collected from a client, with one's personal or business account. Taking money out too soon or putting it into escrow too late (10 banking days).

adjustment

In appraisals or CMAs, the dollar value or percentage added to or subtracted from the sales price of a comparable to arrive at an indicated value for the subject; in closings, the credits and debits made to a settlement statement for accrued or prepaid expenses Ex. The appraiser adjusted the price of the comparable property because it had a three-car garage and the subject property had a two-car garage.

Gross Income

Income before expenses are deducted

Qualified Fee Estate

Inheritable freehold estate that's defeasible (the grantor can terminate the title); e.g., a parent might transfer property to a child as long as the child remained unmarried; also known as fee simple defeasible estate Ex. Zuzu's great aunt Olive gave her a qualified fee estate in the cottage as long as Zuzu continued to work toward and earn her PhD in Egyptology.

Active Fraud

Intentional misstatement of a material fact

Which statement regarding a Veterans Affairs (VA) mortgage is FALSE?

It does not have minimum property requirements

Which of the following is a characteristic of a tax rate?

It is certified by the NYS Office of Real Property Tax Services, and it may be a separate tax rate for homestead vs. non-homestead properties.

Siblings Julia and Gene are co-owners of a small retail building in which a tanning salon is currently operating. Gene really wants to leave his ownership interest to his son when he dies, but the way in which they own the property doesn't allow him to do so. What type of ownership do they have?

Joint tenancy

Which of the following is a mortgagor's responsibility?

Keep the property in good repair.

unimproved land

Land that has no structures built upon it, and no services Ex. The vacant property had no structures, no water, and no utilities. It was unimproved.

subdivision

Land that's been or is being developed and is divided into lots

American Disabilities Act

Law that prohibits employers from discriminating against people with physical disabilities

Residential Lead-Based Paint Hazard Reduction Act

Law that requires sellers, landlords, and their agents to disclose the presence of any known lead hazards in the home Ex. Houses built before 1978 most likely have lead in their paint, so certain safety precautions need to be taken by anyone doing work on the home, and the possibility of lead paint must be disclosed.

Andrea, a commercial developer, is planning to build an apartment complex on a lot in Miami and is using the land, pledged to the lender as an estate for years, as collateral for the loan. What type of mortgage is this?

Leasehold

Estate at will

Leasehold estate in which the duration of the lease is unknown at the time it's created; may be terminated by either the lessor or lessee at any time Ex. Shelby's lease is month-to-month; she has an estate at will.

Dawn owns a bungalow three miles from the city center. She rents it to Bob and Jan Siegel. Bob is a ______.

Lessee

Conventional Life Estate

Life estate granted by an individual for someone's lifetime, created by will or deed Ex. Emma wrote her will out to include possession of her home to her nephew for the term of his life, after which it would pass to her favorite charity, Cats and Canaries.

Sherman Act of 1890

Makes trusts and conspiracies in restraint of trade illegal; makes monopolies and attempts to monopolize misdemeanors

All of the following liens are filed with the county clerk in the county where the property is located.

Mechanic's, materialmen's, income tax

boot

Money or property given to make up for any difference in value in a 1031 exchange Ex. When Candy did her 1031 tax-deferred exchange, her new property was $10,000 less than the property she sold, so she had to pay capital gains tax on the boot.

Mortgage banker vs. mortgage broker

Mortgage Banker: works for the mortgage companies, makes loans, fund loans from their own sources Mortgages Broker: bring borrowers and lenders together but do not lend their own money, charge a fee for their service

Mortgage Insurance Premium (MIP)

Mortgage insurance is due from borrowers who make a down payment of less than 20% on a home mortgage loan. It's paid by the borrower to protect the lender from losses due to potential default. Ex. Jennifer wanted to offer at least 20% as a down payment so her LTV ratio would be 80/20. This would mean she wouldn't have to pay a mortgage insurance premium to the FHA.

Mortgagee vs. Mortgagor

Mortgagee- the lending entity. Mortgagor- the borrowing party

mortgage-backed security (MBS)

Mortgages that are pooled together and sold to investors on the secondary mortgage market Ex. MBSs are considered more appealing on the secondary market if they conform to Fannie Mae/Freddie Mac guidelines.

Another name for the borrower of a loan is ______.

Mortgagor

What type of fair housing discrimination has occurred when persons of South Asian and Middle Eastern descent are denied apartments and told they are unavailable, yet other equally qualified applicants are approved?

National origin

Are tax accessors state government officials?

No

Titus has just discovered that his furnace needs to be replaced—and he's lived in his newly-constructed home in Albany for only a year and 11 months. Will Titus have to pay for the new furnace himself?

No, because of Article 36-B of the New York General Business Law.

The Federal Fair Housing Act of 1968 created the

Office of Fair Housing and Equal Opportunity.

The contract of sale states that the earnest money deposit is to be placed in an interest-bearing account with any interest earned to be given to the buyer. This is:

Okay, because the buyer and seller have agreed to this

Homeowner Sophie moves around the country a lot for her job and has bought and sold several homes over the last decade. If she sells a home for more than she paid for it, how often may she claim the capital gains exclusion?

Once every two years

In New York, property taxes generate ______ of local government revenue.

Over $26 billion

Federal Housing Finance Agency (FHFA)

Oversees Fannie Mae and Freddie Mac and regulates the 12 Federal Home Loan Banks Ex. In addition to its oversight and cleanup responsibilities, FHFA sets limits for conforming loans and percentage targets for loans made to low- and moderate-income borrowers.

Which type of reassessment occurs on a regular basis established by statutes?

Periodic Reassessments

capital improvements

Permanent structural changes, remodels, or restorations that increase a property's value or use Ex. Capital improvements can be deducted from capital gains when a property is sold.

Area Variance

Permission to use the land in a way that is not normally allowed by the dimensional or physical requirements of the current zoning ordinance. Ex. Brandy's permission to have a narrower setback from the street than that called for in the zoning ordinance is an example of an area variance.

The New York town of Greenville is growing, and has decided to make some changes to their zoning ordinances. Which of these entities is responsible for making recommendations about amendments to the town's zoning?

Planning board

government-sponsored enterprises (GSEs)

Private companies such as Fannie Mae, Freddie Mac, and the Federal Home Loan Bank, created by the U.S. Congress to make borrowing easier and more cost effective Ex. GSEs are not government entities, but are backed by the U.S. government.

Elmer died and left a will. Before his estate can be distributed according to his wishes, it must go through ______.

Probate

Probate

Probate is the process of determining if a will is valid, and then supervising the distribution of the estate. Probate is also required when no will exists.

liquidation analysis

Process of determining an amount of money specified in a contract as compensation to be paid if the contact is not satisfactorily completed.

1031 Tax Deferred Exchange

Process which allows investors to sell a property and reinvest the proceeds into a new property (as part of a qualifying like-kind exchange) while postponing the payment of capital gain taxes.

capital gain

Profit on the sale of an asset, such as real estate Ex. Long-term capital gains taxes recently increased from a maximum of 15% to a maximum of 20%.

Federal Fair Housing Act of 1968

Prohibits discrimination based on race, religion, color, and national origin in the sale or rental of residential real estate

joint tenancy

Property is owned by a group of two or more persons; the death of one person simply raises the stake the others have in the property; called right of survivorship Ex. Nell became nervous when three of the joint tenants in the commercial building she owned with Victor died under suspicious circumstances. She and Victor now shared ownership. Was she next?

Real Estate Settlement Procedures Act (RESPA)

Protects borrowers from overcharges by requiring disclosure and prohibiting kickbacks Ex. RESPA requires borrowers to be provided with a good faith estimate within three business days of receiving a completed loan application.

Which of the following describes how brokers/licensees go about obtaining their commission?

Providing the attorney or closing agent with a broker statement that shows how much each broker should receive

recording/recordation

Public filing of a document Ex. Ownership cannot be established until the deed is recorded.

An inheritable freehold estate that's a fee simple defeasible (where the grantor can reclaim ownership) is also known as ______.

Qualified fee

debt-to-income ratio

Qualifying ratio used by mortgage lenders, calculated by dividing the borrower's recurring monthly debt by the borrower's total monthly income

R factors

R-factor or R-value is a term used in insulation and means the degree of resistance to the heat transfer of the walls (how much heat is kept in or out). Ex. The larger the R-factor, the greater the degree of insulation.

special purpose real estate

Real estate with a limited market because of its unique nature Ex. A church, baseball stadium, and car wash would be examples of special purpose properties. Remodeling the properties for other uses would be cost-prohibitive.

Taxpayer Relief Act of 1997

Reduced several federal income taxes on Capital Gains

ad valorem tax

Related to the concept of property taxes. A Latin term that means "according to value." Ex. Ad valorem is a method of charging a tax according to the value of the property instead of by a fixed rate.

When a lease contains an automatic renewal clause, the landlord must remind the tenant of the right to terminate the lease. Section 5-905 of the General Obligations Law governs leases with automatic renewal clauses and states that a _______.

Reminder to the tenant must be given no more than 30 days nor fewer than 15 days before the period for furnishing the notice of termination begins

dual agency

Representing both sides in a real estate transaction Ex. Dual agency may be either singular dual agency, where one agent represents both the buyer and seller in a transaction, or dual agency with designated agents where two agents from the same firm each represent a side of a transaction and their broker is the dual agent.

Good Funds Act

Requires Escrow to clear all funds and checks before closing.

reversionary interest

Right of repossession of the property by the owner after the end of the life estate Ex. Carmen may give her investment home to her great aunt with the provision that at her great aunt's death the ownership returns to Carmen. During her great aunt's life, Carmen has a reversionary interest.

continuing education

Salespersons, brokers and associate brokers must complete 22.5 hours of approved continuing education coursework before their two-year renewal. Ex. Maria is a real estate salesperson coming up for her two-year renewal. Three months prior to her renewal, she receives a reminder postcard from the DOS that she must complete all items for renewal before her expiration date. This includes satisfactory completion of the 22.5 hours of approved continuing education coursework.

Sandy, a 16-year old, enters into a contract to buy a condo from Sue, an adult. Which statement is TRUE?

Sandy can void the entire contract any time before the transaction is closed. was correct.

Gina is a tax assessor. Which of the following is true about her job?

She compares nearby property sales to determine market value.

Trinity has been named executor of her uncle's will. What does this mean?

She's responsible for carrying out the will's provisions.

Gabi owns one parcel measuring one square mile and another parcel measuring one mile by a half mile. She combined the parcels and sold them for $2.5 million. What price per acre did she receive for the land?

Since we know that one square mile is 640 acres, we can convert each parcel to acres. The first parcel is 640 acres (one square mile). The second parcel is half that size (1 mile x 1/2 mile), or 320 acres. Thus, the total acreage is 960. Divide the sales price by the total acreage (2,500,000 ÷ 960), or $2,604.17.

Licensee Arlene is helping a client purchase a property that's suitable for use as a private school, meaning it needs to have classrooms, assembly rooms, and sports fields. She locates two properties in the area that have the required attributes. What category of property is this considered?

Special purpose

Housing for Older Persons Act of 1995 (HOPA)

States that communities and facilities that meet certain criteria for providing housing to older persons are legally exempt from the familial status discrimination Ex. ""55+"" communities are exempt from familial status discrimination as long as at least 80% of their occupied units have at least one person aged 55 or older residing in them.

Your client, Georgette, wants to buy into a cooperative. What is her first step?

Submit the contract of sale to the seller

Loans made to high-risk borrowers, at higher interest rates and with higher fees, are ______.

Subprime Loans

what do tax accessors do?

Tax assessors check similar nearby properties to determine market value.

moratorium

Temporary halt on development Ex. The city of Zippyville decided to put a moratorium on all future building until they could beef up their infrastructure to support a larger population.

Under what policy name is Homeowners 4 (HO-4) known?

Tenants or cooperative owner policy (rental insurance)

wood-destroying insects

Termites, wood-boring beetles, carpenter ants, and other insects that damage a property's wooden structural components Ex. Termites are often referred to as "silent destroyers" because they can munch their way through the cellulose found in anything made of wood—flooring, wallpaper, etc.—without the homeowner noticing.

Farmer Mac

The Federal Agricultural Mortgage Corporation, created by Congress, provides a secondary market for agricultural mortgage and rural utilities loans. Ex. Farmer Mac is not a direct lender, but instead works with lenders to increase availability of long-term credit at stable interest rates to rural America.

Freddie Mac

The Federal Home Loan Mortgage Corporation (FHLMC) which increases the availability of financing for conventional mortgages insured by the federal government by purchasing them from lenders in the primary market. Ex. Because Fannie Mae and Freddie Mac guarantee payments in the event of buyer default (for a fee), investors don't have to worry about credit risk. However, participating lenders must adhere to FNMA and FMAC financing guidelines.

Federal Housing Administration (FHA)

The Federal Housing Administration (FHA) is an agency of the U.S. Department of Housing and Urban Development. It sets underwriting standards for loans it insures, but it doesn't make loans. Ex. Rita obtained an FHA loan, allowing her to put just 3.5% down, and she also appreciated that her loan's credit score requirements weren't as strict as for conventional loans.

Home Mortgage Disclosure Act

The Home Mortgage Disclosure Act (HMDA), enacted by Congress in 1975; requires financial institutions to make mortgage data available to the public Ex. Congress believed that blighted areas were caused in part because financial institutions failed to provide adequate home financing to qualified applicants at reasonable terms and conditions. HMDA requires financial institutions to provide the public with information that demonstrates its actions in serving the housing credit needs of their communities.

legal capacity

The ability to enter into legal contracts Ex. A person who is not mentally competent or who has not yet reached the age of majority is not of legal capacity.

principal

The amount being borrowed, or the amount left to be repaid. Ex. Anita's principal payment was $200 per month. Her interest payment was $800 per month. As she paid on her mortgage loan over time, the amount that applied toward principal increased.

A fire destroyed Meredith's house. Meredith contacted her insurance company, and she was shocked to learn her insurance policy didn't fully cover what she paid for the property. How does the insurance company determine the replacement value of her home?

The amount it would cost to completely replace her home

Return on Investment (ROI)

The amount of income an investor's financial investment is producing; expressed as a ratio: (investment gain - investment cost) ÷ investment cost

millage rate

The amount per $1,000 used to calculate property taxes; one mill represents $1 in tax per $1,000 of assessed value. Ex. Beverly's tax rate is 150 mills and her property's assessed value is $25,000. Her property tax calculation, then, is: $25,000 x .150 = $3,750.

Easement

The authorized use of another's property for a specific purpose; runs with the land Ex. Easement is a non-possessory right to use another's property. It does not involve ownership.

Footings

The base of a foundation wall or column, which is wider to provide a larger bearing surface

What do Internal Revenue Code Section 3508 (a) (b) and 1986 New York Independent Contractor Law specify with regard to a broker's treatment of a licensee?

The broker must not treat the licensee as an employee for federal tax purposes.

The Johnsons sold their house and will close on July 1. The Johnsons paid their full annual town taxes in January. Which statement BEST describes what will occur at closing?

The buyers will owe the Johnsons the unused tax for the balance of the year. was correct. Explanation: At closing, the buyers will reimburse the Johnsons for property taxes paid in advance.

A client terminates a listing agreement before its expiration date. What happens now?

The client may owe a commission anyway.

reproduction cost

The construction costs at the current price point that will be necessary to exactly reproduce existing improvements to a property Ex. When determining the reproduction cost for a property, the appraiser must estimate the cost of reconstructing existing components, such as replacing plaster and lathe walls in an older home.

Which valuation method estimates the value of all types of improvements in order to determine how much it would cost to exactly duplicate the business?

The cost approach

insured value

The cost to replace a destroyed building Ex. Arson was suspected when the house of an investor facing financial difficulties was destroyed. It was later proven the investor lit the fire to receive the insured value of the property.

maturity

The date on which the principal balance of a loan or bond, for example, becomes due and payable. Ex. Alvin purchased a five-year certificate of deposit. Five years later, upon the CD's maturity, Alvin could either reinvest in a new certificate of deposit, or obtain his money and interest earned.

Offering Plan

The developer of a new condominium or cooperative building (or the conversion of a building into a condo/coop) must file an Offering Plan with the NY Attorney General's office. The first part of the Attorney General's review is called the preliminary prospectus or "red herring". the Attorney General can suggest any changes to the project. Once the Attorney General accepts the prospectus, it is known as a black book or offering plan. Although the Attorney General does not regulate price, proper disclosure of price must be accepted by the Attorney General. If the developer of a new condominium building is changing the prices of all (or a group) apartment, he/she must file the changes with the Attorney General for acceptance.

What is a "lender rebate?"

The difference between the wholesale and retail price

Foreign Investment in Real Property Tax Act of 1980 (FIRPTA)

The disposition of a U.S. real property interest by a foreign person (the transferor) is subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) income tax withholding. Ex. Because the seller was from Canada, FIRPTA applied, and the buyer of the property was required to withhold a percentage of the sales price to ensure payment of taxes owed.

assessed value

The dollar amount to which the local tax rate is multiplied to determine property tax owed Ex. Although the appraised value of Myra's bed and breakfast was $600,000, her tax assessed value was only $475,000.

fiduciary duties

The duties of obedience, loyalty, disclosure, confidentiality, accounting and reasonable skill and care comprise the list of fiduciary duties an agent owes the principal. Ex. Fiduciary duties can best remembered by the acronym, OLD CAR.

Easement in Gross

The easement owner does not own land adjacent to the property on which the easement applies. This is typically a governmental easement or a public utility easement. Ex. The power company had an easement by gross on Sam's street. It gave the power company the right to come on to Sam's property, and that of his neighbors, to repair lines.

reconciliation (appraisals)

The final step in the appraisal process in which the appraiser weighs the estimates of value from the three approaches to value (market, cost, income) and arrives at a final number Ex. Because the fourplex was a rental property, the appraiser weighed the estimate from the income approach heaviest when conducting the reconciliation step of the appraisal process.

Civil Rights Act of 1866

The first statute affecting equal housing opportunity largely interpreted to prohibit racial discrimination Ex. Although the Civil Rights Act of 1866 was enacted more than a century ago, it still has relevance and impacts discrimination laws today.

steering

The illegal practice of nudging buyers away or toward a specific area based on the presence or absence of protected class members in the area relative to the buyers Ex. When Jillian told her Asian buyers that they wouldn't be happy in the Irvington neighborhood because of its nearly all-white population, she was illegally steering them away from the neighborhood.

Joint tenancy

The joint ownership of property by two or more co-owners in which each co-owner owns an undivided portion of the property. On the death of one of the joint tenants, his or her interest automatically passes to the surviving joint tenants.

description

The legal description of a property is formal within a deed and may be either metes and bounds, reference to a plat, or lot and block Ex. Attorney Ernie told grantor Gene that his deed would not be acceptable. Instead of a legal description of the property, Gene had written the street address.

conveyance

The legal transfer of property ownership to another

mortgagee

The lender in a mortgage Ex. ABC Bank was John's mortgagee; they held the mortgage on his property.

voluntary alienation

The loss of real property ownership with the owner's consent (e.g., traditional sale)

Regression

The loss of value in a property that occurs when a nearby property's value decreases Ex. Mark was unhappy about the decrease in value to his property that occurred when the adjacent property remained vacant for years.

loan origination

The making of a loan Ex. Often, lenders will charge consumers a loan origination fee to cover the costs of making the loan.

Principle of Substitution

The market value of a property is affected by the cost of obtaining an equally desirable and valuable property as a substitute

Alluvion

The material that creates an increase of soil and thus land parcel size due to accretion. Ex. Water flowing from a creek bordering Jillian's property created a sandbar, and she was able to use the alluvion—the new land mass that formed—as her own property.

village board of trustees

The mayor and trustees of a village make up the village board of trustees, which operates similarly to a city council or town board; it adopts laws and ordinances, the municipal budget, and tax rate; determines whether to invoke eminent domain; approves or disapproves of certain residential or commercial projects; approves or disapproves of infrastructure projects such as roads, schools, water pipes, and roundabouts; and may call a moratorium on building Ex. Mary met with the village board of trustees, which was similar to a town council. The village board of trustees looked at her plans initially, and recommended that she present them to the planning board.

Amortization

The paying off of a debt with regular installments over a fixed repayment schedule Ex. A 30-year fixed rate loan provides amortization for the debt—in 30 years it is fully paid off.

Remainderman

The person receiving title upon the death of the life tenant Ex. When his step-mother followed his father in death, the life estate she had in the family home ended, and it passed to Chad, as a remainderman.

first substantive (substantial) contact

The point at which agency disclosure must be given to a consumer; typically, when the consumer wants or needs to disclose confidential or compromising information Ex. Karen made it a point to treat every first meeting with a consumer in which they discussed real estate as a first substantive contact; in this way she never failed to provide the agency disclosure.

Building Envelope

The portion of a building that encloses the treated environment, including the walls, ceiling or roof, and floor.

straight-line loan

The portion of the payment applied to the principal remains the same with each payment, and the interest amount varies according to the outstanding loan balance Ex. With a straight-line loan, the amount of each payment changes, and the borrower makes higher installment payments at the beginning of the loan when the loan balance is higher and more interest is due. Over time, the amount of each installment payment lowers the outstanding balance.

Which of the following is true regarding value?

The principle of substitution means that people won't pay more for a property than they have to

Probate

The process of proving in court that the will of someone who has died is valid, and of administering the estate of a dead person.

Loan-to-Value Ratio (LTV)

The ratio of a loan amount to the value of the property being purchased Ex. If a loan to value ratio exceeds 80%, the borrower will likely have to purchase private mortgage insurance for the lender.

Addendum

The request to start the reassessment process isn't part of the standard contract, so to include that request language in the contract, you'll need to use an addendum.

capitalization rate / cap rate

The return on investment that other investors in a given marketplace are receiving for a similar property; expresses the income a real estate investment produces as a percentage of its price Ex. When she worked with her investor clients, Maggie regularly calculated cap rates for similar properties.

Quiet Enjoyment

The right of an owner or lessee legally in possession of property, to uninterrupted use of the property without interference from the former owner, lessor or any third party claiming superior title.

Dower

The rights that a wife acquires in her husband's fee simple property.

conditions, covenants, and restrictions (CC&Rs)

The rules of an association, such as a homeowners association or cooperative

Escheat

The state's power to claim the estate of a deceased person who left no will, heirs, or creditors Ex. When Rhonda passed away, she had no will, no heirs, and no creditors. The state took possession of her home through the power of escheat.

tax assessor

The tax assessor is a local government official who estimates the value of real property within a city, town or village. The assessor may be elected or appointed, and serves for six years. In addition to placing value on all taxable property, and listing it on the assessment roll, the assessor maintains tax maps, assists taxpayers with certain exemptions, and maintains property tax records for the municipality. Ex. Once Mary's property is sold, the sales price and permit status will be reviewed by the tax assessor, who will likely update the tax value at the next assessment period.

gross lease

The tenant pays a fixed rent and the landlord pays all operating expenses; most common type of lease used in residential rentals Ex. Matilda made sure her lease would be a gross lease; she wanted a fixed rent and didn't want any part in sharing the operating expenses of the home.

loan servicing

The term for the lender processing payments, sending statements, and managing the escrow/impound account for a loan Ex. Although ABC Bank originated loans, it didn't service loans, and instead turned that responsibility over to City Lender.

involuntary alienation

The transfer of real property ownership without the owner's consent (e.g., foreclosure) Ex. Boris tried everything he could to keep his home, but he just couldn't keep up with his mortgage payments and eventually lost the home to foreclosure, which is a type of involuntary alienation.

Footings should be ________ as wide as the ____________.

The width of the footing must be at least twice the width of the foundation wall that will go on top of it.

loose fill insulation

Thermal insulation in the form of mineral wool fibers, granular vermiculite or perlite, or treated cellulosic fibers, poured by hand or blown through a nozzle into a cavity or over supporting membrane

Income Analysis Approach

This approach bases the current property value on potential income that the property can generate for residential investment rental properties, such as single-family homes or residential buildings that comprise two- to four-family units.

Article 36-b NY general business law

This article in NY general business law says that, implied in all contracts of sale for new housing is a -One-year builder's warranty against defects in construction and a -Two-year warranty for all plumbing, electrical, HVAC systems, and a -Six-year warranty covering material defects."

leasehold estate

This defines the legal relationship between the parties who sign the lease. It grants possession, but not title, to the tenant, and is for a limited period of time.

advance consent to dual agency with designated sales associate

This is an option for a client who wants independent representation. It basically allows the broker to act as a dual agent, while two agents of the broker each represent different sides in a transaction Ex. Sheila was uncomfortable with advanced consent to dual agency because she didn't want her agent working for any buyer that might come along. But once her agent explained advanced consent to dual agency with designated sales associate, she agreed that this was the best of both worlds: she would not restrict potential buyer agents who might be associated with the same broker, and she would have her own representation independent of the buyer's representative.

Easement by Condemnation

This is government taking of private property for public use Ex. The road Karen lived on was being widened; she and all of her neighbors were subject to an easement by condemnation of the front four feet of their property. They were compensated, however, and Karen went to Maui.

Lender Rebate

This is the mortgage broker's fee; it is the difference between the wholesale and retail price.

Article 78 proceeding

This proceeding is the method for appeals against regulatory agencies such as the DOS Ex. At a DOS hearing, Kenny receives a fine of $1,000 for an alleged violation of Article 12-A. If Kenny wishes to appeal this decision, he may do so under the NYS Civil Practice Law and Rules Article 78 proceeding.

Easement Appurtenant

This type of easement involves two landowners with adjoining property; one holds the dominant tenement or estate; the other the servient. Ex. When Mutt agreed to allow Jeff access to his property to reach the bay, they created an easement appurtenant. Mutt's estate became servient.

Easement by Grant

This type of easement is created with the express written agreement of the landowners, often in a deed. Ex. When Gary decided to sell off part of his property, he made sure to include in the deed an easement by grant that allowed him to continue to walk the forest trail.

devise

To leave something to someone in a will Ex. When Milt died, he devised his home to his cat, Cleo.

Real Estate Investment Trust (REIT)

Trust ownership of real estate by a group of individuals who purchase certificates of ownership in the trust, which in turn invests the money in real property and distributes the profits back to the investors free of corporate income tax.

At what point do most lending issues arise?

Underwriting

take-out loan

Used to convert a short-term construction loan to more traditional, long-term financing; aka end loan Ex. Once the Millers received their certificate of occupancy on their new vacation (and one day retirement) home, they converted their construction loan to a take-out loan, a more traditional 30-year mortgage.

comparable sales analysis

Uses sales prices of similar businesses to arrive at a market value

Which of the following can be defined as what a property is worth?

Value

A permitted deviation of the zoning ordinance ________.

Variance

When must a cooperative Board of Directors reveal their reasons for rejecting a potential buyer?

When a complaint is filed with NYC's Human Rights Commission

Inverse Condemnation

When the government takes private property but fails to compensate the owner; property owners are forced to file suit to obtain compensation. The taking may be physical through occupation, or regulatory, where government regulations deprive the owner of the property's beneficial use and cause the property to lose its economic value. Ex. After flooding damaged a county-maintained road, Dee's access to her property was blocked. The county failed to repair the road, so Dee made a claim for inverse condemnation, seeking restitution for the loss of her property rights

Can foreign investors participate in 1031 tax exchange?

Yes

Taxpayer Relief Act of 1997

Your primary residence is sheltered from capital gains tax up to $250,000 for a single person and $500,000 for a married couple

Batt Insulation

a flexible blanket type thermal insulation commonly used between studs or joists in frame construction. It's made from a fibrous material like fiberglass and is two to six inches thick.

Prime Mortgage

a home loan to a borrower with relatively high creditworthiness indicating a relatively high likelihood that mortgage payments will be made when due

Morgagee

a lender in a loan transaction

R-value

a measure of how well insulation resists heat.

condop

a mixed-use building where the developer retains ownership of 20% of the building, which is used for commercial purposes. The remaining 80% is residential, operating as a cooperative.

subprime mortgage

a mortgage made by lenders who charge higher than prime rates to borrowers who have poor or no credit ratings

executor

a person appointed by a testator to carry out the terms of the will

Easement Appurtenant

a right of use that continues from owner to owner that involves a relationship between two parcels of land: a dominant parcel that benefits from a servient parcel

Housing and Community Development Act of 1974

added sex to the list of protected classes

special use permit

allows a property to be used in a way that isn't really in accordance with zoning regulations Ex. Although the 50-acre area was zoned for residential use, the demand for a new golf course was so great that the developer was able to obtain a special use permit to build it.

Real Estate Investment Trust (REIT)

an organization that purchases, owns, and manages real estate for its investors

Fair Credit Reporting Act of 1970

applicant has right to see all the stored information upon which the policy is either approved or denied

Express contracts and implied contracts are:

both genuine contracts equally enforceable

Blanket Insulation

comes one to three inches thick in fiberglass rolls, or some other fibrous materials, in 15 1/2-inch-wide rolls. This is stapled or nailed between the studs and under the rafters or over the ceiling, so it's usually found in the rafters. It's sized to fit in the space between the framing members—joists and studs—and enclosed in paper covers, with one side treated with a vapor barrier to keep moisture out of wall cavities.

Debt Service Coverage Ratio (DSCR)

compares net operating income to the total cost of debt. Used to determine an income-producing property's ability to cover its monthly mortgage payments.

panel data (or longitudinal data)

consists of a time series for each cross-sectional member in the data set. As an example, suppose we have wage, education, and employ- ment history for a set of individuals followed over a ten-year period. Or we might collect information, such as investment and financial data, about the same set of firms over a five-year time period.

A proprietary lease is associated with a

cooperative

CC&Rs

covenants, conditions, and restrictions

Single-license dual agency

exists when one licensee represents both the buyer and seller in a transaction. In that case, the licensee is the dual agent, and his broker is also a dual agent.

Dual-license dual agency (aka designated agency)

exists when the broker—or the broker's designee—assumes the role of dual agent and designates two agents, one to represent the buyer and one to represent the seller.

A listing agreement between a principal and broker is a(n)

express contract.

A Department of Veterans Affairs (VA) mortgage is

guaranteed

When a broker is retained by the buyer, the broker owes the prospective seller

honest, straightforward treatment.

Malcolm just received his salesperson's license and has joined a firm. He will MOST likely be hired for tax purposes as a(n)

independent contractor

addendum to the contract

is an attachment that adds or further describes the rights and duties of the parties

Vermiculite

is safe; however, asbestos may be found in some loose fill insulation, because it used to be used in the manufacturing of this vermiculite. It's good advice to leave vermiculite alone when it's seen in an attic, because asbestos is only a health concern when it's disturbed.

zoning ordinances

local laws or regulations that implement the comprehensive plan by regulating zoning and land use Ex. Zoning ordinances regulate things like lot size, building height, and permitted uses within each zoning classification on a zoning map.

The Federal Housing Administration's (FHA) Section 8 program helps low- and moderate-income people by

paying part of their rent.

The Energy Conservation Construction Code of New York State (ECCCNYS)

regulates building envelopes, which consist of the materials that enclose a building's interior, through which heating, cooling, and fresh air pass in and out.

Gramm-Leach-Bliley Act

requires financial institutions to ensure the security and confidentiality of customer data

Littoral Rights

rights of a landowner adjacent to a lake Remember "L" - Littoral/Lake

condo declaration

the document that must be filed in the public record when property is developed as, or converted to a condo. declaration describes the property, delineates the common elements and boundaries etc.

As of Right Zoning

the landowners' implied bundle of rights. It refers to specific uses or structures that are automatically allowed by the zoning code, although it may require the homeowner to obtain a special permit or variance in certain situations.

deed

the official document transferring ownership from seller to buyer

Underwriting

the process of selecting, classifying, and pricing applicants for insurance

material men's lien

type of mechanic's lien, specific, involving material not paid for, but installed on property. Set by material supplier, must be set within 8 months, renewed after 1 year.

mechanic lien

when a person contracts for labor, services, or materials to be furnished for the purpose of making improvements on real property but does not immediately pay for the improvement

Interstate Succession

when someone dies without a will, he is said to have died "interstate succession". spouse, children and then other relatives.