Real Estate Chapter 1 Unit 11
Paying the price for violating the anti trust act:
The Clayton Antitrust Act of 1914 allowed private inviduals to sue and individuals can recover three times (or treble) the damages incurred plus court costs and attorneys' fees -The FTC can enforce compliance with the Sherman Act and some sections of the Clayton Act. -In June of 2004, President George W. Bush signed into law the Criminal Antitrust Penalty Enhancement and Reform Act, increasing the maximum criminal penalty for individuals to 10 years' imprisonment and a $1 million fine, and the maximum penalty for corporations to a $100 million fine. -Since the errors and omissions insurance held by most brokers and licensees does NOT COVER violations of federal laws, we're talking about some serious out-of-pocket fines!
How is the Intangible Recording Tax calculated
The tax for recording the note is at the rate of $1.50 for each $500.00 or fractional part of the face amount of the note. To compute the tax due on a note of $124, 950, do the following: $124, 950 ÷ $500 = 249.9 (round up to 250) 250 X $1.50 = $375 is the tax due Karen just bought and closed on a new home that cost $195,000. Her mortgage amount is $165,500. How much is the intangible recording tax on Karen's property? $165,500 ÷ $500 = 331, 331 x $1.50 = $496.50
Fire and Hazard Insurance
The three general categories are: -Destruction of the premises -Injury to others on the premises -Theft of personal property of the homeowner or family members Most homeowner insurance policies contain a coinsurance clause that requires that the homeowner maintain insurance equal to at least 80% of the replacement cost of the dwelling - homeowner may choose to insure 100% of the value of the improvements but failure to insure at the 80% level may cause a penalty to be imposed when a claim is filed on an underinsured property -Note: Insurance is always paid in advance. If it is paid with the mortgage payment, it is being paid for the next year.
The Georgia Uniform Deceptive Trade Practices Act
This covers a much wider scope of deceptive practices. With this law, it is not necessary for an actual consumer transaction to take place. Also, any of the following can file a suit under this act: -The state of Georgia -Another broker -An individual
The Real Estate Settlement Procedures Act
Was created to ensure that the buyer and seller in a residential real estate transaction involving a new first mortgage loan have knowledge of all settlement costs. -prohibits kickbacks to real estate agents for any kind of referral, IF the licensee will receive the fee JUST for the referral -It is also a consumer protection statute which is enforced by the Department of Housing and Urban Development (HUD).
The Equal Credit Opportunity Act (ECOA)
a law for lenders that prohibits them from discriminating against race, color, religion, national origin, sex, marital status, age or dependency on public assistance in the granting of credit to consumers.
Example of real estate transfer tax payment:
property sells for $100,000. The seller would pay $1.00 for the first $1000. $99,000 divided by $100 = 990 X .10 = $99.00 or a total of $100.00. A home sold for $175,000. The buyers assumed a $60,000 mortgage. What will the transfer tax be on this sale? $175,000 - $60,000 = $115,000, $1 for the first $1,000, $114,000 ÷ $100 = $1,140, $1,140 x 0.10 = $114, $114 + $1 = $115
Fair Housing Laws
the categories of Fair Housing are: race, color, religion, sex, familial status, national origin, handicap -There are exceptions for the other categories if a person lives in and owns a 1-4 family property. Those exceptions will be covered in the Brokerage section of the course.
In completing a lease or a written offer to buy, sell, lease, rent, or exchange real property, the licensee must include:
-A description of the property involved -The method of payment -Any special stipulations or addenda the offer requires -Whatever dates are necessary to determine whether the parties have acted timely in meeting their responsibilities under the lease, offer or contract
The metes-and-bounds method or the short-form description
-A sales contract or listing form is not enforceable unless it contains a proper legal description -A licensee can compose a short-form description, from the recorded subdivision plat. -Only surveyors, attorneys, and other qualified individuals are permitted to compose a metes-and-bounds description.
Paying the Real Estate Transfer Tax
-Before a deed, security instrument, or other writing can be recorded in the office of the clerk of the superior court, the real estate transfer tax must be paid. -Once the tax has been paid the clerk of the superior court or their deputy will attach to the deed, instrument or other writing a certification that the tax has been paid. -The real estate transfer tax is based upon the property's sale price at the rate of $1 for the first $1,000 or fractional part of $1,000 and at the rate of 10 cents for each additional $100 or fractional part of $100. -Any liens or encumbrances not removed by the transfer, including assumed loans, are deducted from the sale price prior to computing the transfer tax.
What is the Georgia Fair Business Practices Act
-Designed to protect the public by focusing on deceptive advertising. This act deals mostly with fraudulent or otherwise misleading advertisements. -This law, administered by the governor through the Office of Consumer Affairs, deals with any media -An actual transaction must occur in order to prosecute someone for breaking this law. -The advertising must have an impact on the public as a whole.
Listing and Sales Contracts
-Georgia law allows licensees to complete listing or sales contracts or leases whose form has been prepared by legal counsel
Private Mortgage Insurance
-If a borrower has less than a 20% down payment, the lender may require that the borrower purchase private mortgage insurance (PMI). -Payment for PMI can be a one-time premium, but typically it is a percentage added to each monthly payment. When the loan balance is paid down to 80% of the total value, the PMI payment will be dropped. Note: Mortgage payments are made in arrears. -Should the borrower default, the lender may foreclose on the property. If the property sells at foreclosure for less than the mortgage balance, the PMI pays the lender up to the amount of the insurance, typically the top 20% to 25% of the loan.
There are three exceptions to the need to use an existing legal description.
-If the seller isn't selling the entire tract. In this case, a new survey will be needed. -When a recent survey conflicts with the deed description. -When the seller has previously sold a portion of the land. Again, in this case, a new survey will be needed.
Where do security deposits from tenants need to be held?
-In a seperate escrow account specifically for that purpose. -The landlord is obligated to inform the tenants in writing of the location and account number of the escrow account. -Prior to accepting a security deposit, the landlord must give the tenant a comprehensive list of any existing damage to the premises, for the tenant to keep. -Within three (3) business days after the tenant terminates occupancy, the landlord will inspect the premises and make a list of any damages (and their estimated dollar value) which are the basis for any charge against the security deposit. -If the tenant disputes the accuracy of the final damage list, he or she may bring an action to recover the portion of the security deposit which the tenant believes was wrongfully withheld for damages to the premises.
Landlord-Tenant Issues
-In any contract or lease for the use or rental of real property as a dwelling place, a landlord or a tenant may not waive, assign or transfer any of the rights, duties or remedies relating to the: +Duties of the landlord to keep the property in good repair and make improvements +Liability of the landlord for failure to repair or improve the property +Rules regarding collection, safekeeping and return of security deposits - Before a tenancy begins, the landlord must disclose to the tenant, in writing, the names and addresses of the property owner and the person who will manage the property. ++If there is a change in the names and/or addresses of either of these persons, the landlord must advise each tenant of the change within 30 days after the change, either in writing or by posting a notice of the change in a conspicuous place. -A landlord must keep the premises in repair and is liable for all substantial improvements made to the premises by his consent. -It is against the law for any landlord knowingly and willfully to suspend utilities (heat, light and water service) to a tenant until after the final disposition of any eviction proceedings the landlord has against the tenant. -If a lease contains no expiration or termination date, the law considers the tenancy to be a tenancy at will. Terminating a tenancy at will requires sixty (60) days' notice from the landlord or thirty (30) days' notice from the tenant.
The Sherman Antitrust Act prohibits:
-Price Fixing - Collusion between brokers and sales people with competing companies to set commission rates is illegal. "Everyone charges the same so you might as well list with me," would be an illegal statement, and a violation of the Sherman Antitrust Act. -Group Boycotts - Licensees should never "get together" and boycott a company because of their business practices. "Let's not do business with AVC Real Estate Company. They discount their commissions," would also be a statement in violation of the Sherman Antitrust Act. -Division of markets by location or price - "Why don't you take the south side of town and our company will take the north side," is another statement that would violate the Sherman Antitrust Act.
Puffing vs Misrepresentation
-Puffing is exaggerated or superlative comments or opinions not made as representations of fact and thus not grounds for misrepresentations "This house has a fantastic view" -"This house has a fantastic view of the mountains," when in fact all the windows face the street, would be misrepresentation.
Truth in Lending Act
-The main purpose of the law is disclosure. The law requires lenders to disclose to buyers the true cost of obtaining credit so that the borrower can compare the costs of various lenders. -Truth In Lending applies to residential loans, federally-related 1-4 family properties, non-commercial properties and family farms.
Please note the following stipulations regarding Georgia listing contracts.
-There are a number of forms used for listing contracts in Georgia. -There is a safety clause, often called an "extender" or "carryover" clause, on the listing contract from the Georgia Association of Realtors. This clause provides that a broker is still entitled to a commission for a set period of time after the listing has expired, if the property is sold to someone the broker introduced to the property during the time he or she had it listed. The time period set is usually 60-90 days but is negotiable between broker and seller. Note: This clause does not apply if the property has been relisted with another broker. -One clause of a Georgia Purchase and Sale Agreement stipulates that the Buyer shall be solely responsible for inspecting for any wood destroying organisms and obtaining any Official Georgia Wood Infestation Report that may be of interest to Buyer or required by Buyer's Mortgage Lender(s).
Here are some ways to keep in compliance with the antitrust laws.
-Train licensees to comply with the antitrust standards. For example, make sure they know that the critical terms of a contract are never "standard" or nonnegotiable. A licensee should never make a statement like, "Let's make the listing period 3 months, because everyone in this city does that," or "I have to charge a 7% commission, because that's what all brokers do." A licensee is permitted to say, however, "This is my company's policy." -Avoid contract forms that have pre-printed information, such as commission rates or a predetermined "listing duration." -Don't compare commissions, prices, or territories when talking with other licensees. For example, never say, "If that broker lists for a 6 percent commission, then we just won't work with him again," or "Let's all agree not to take any listings for less than 90 days.
What are Net Listings
-When the seller has a specific amount money that he wants to net from the sale of the property, and he authorizes the broker to market the property for any price he'd like, so long as the net amount is received -"Keep the change" -ILLEGAL IN GA - the broker's commission is dependent on the sale price of the property, and it's up to him to make this decision
Title Search
A title search involves tracing the chain of ownership of the property. -The search covers 50 years -The searcher looks to see that no one else besides the seller has any claim or right to the property. -checks that there are no defects in the seller's title, such as taxes owed on the property or the right of other people to use part of the property as a driveway -In other words, a title defect concerns anything that might interfere with the purchaser's use and enjoyment of the property.
Under antitrust laws, the following parties can be held liable.
Brokers Agents Real estate boards Companies Associations Multiple listing services
Intangible Recording Tax
Every holder (lender) of a long-term note must record the security instrument in the county in which the real estate is located within 90 days from the date of the instrument executed to secure the note. -NOTE: Even though the holder of the note is responsible for the payment of the tax, the holder can (and usually does) pass the amount of tax on to the borrower. If this is done, it cannot be considered a finance charge in connection with the loan transaction. -This tax is only for NEW loans
Regulation Z
Explains how to comply with the consumer portions of the law. The regulation requires that the consumer be fully informed of all finance charges, as well as the true annual interest rate, before a transaction is consummated.
When does the deposit need to be returned
If the tenant gives proper notice and vacates without owing any rent or damages, the landlord must return the security deposit to the tenant within thirty (30) days. -If the landlord is retaining all or part of the security deposit, he or she must send the tenant a statement specifying the exact reasons why the security deposit is being retained -The statement must be sent within the thirty (30) day period, accompanied by the remainder of the security deposit (the difference between what was deposited and what the landlord is retaining for damages).
Transfer Taxes in Georgia
Real estate transfer tax is an excise tax on transactions involving the sale of real property where title to the property is transferred from the seller to the buyer.
