REAL ESTATE EXAM
RESPA (Real Estate Settlement Procedures Act)
-protects consumers by disclosing actual closing costs in a timely manner -applies to borrowers for one-to-four family residences -does not apply to loans used to finance the purchase of 25 acres or more, vacant land, or transactions where the buyer assumes, or takes subject to, an existing loan
Mrs. Murphy Exemption
A nickname for the Fair Housing Act exemption for the rental of a unit or a room in an owner-occupied dwelling with four units or less. This exemption is provided only when rental advertising is not discriminatory, a real estate agent is not involved, and there is no discrimination based on race or color. Not recognized in all states.
Periodic estate
An estate for years may be for years—or months or weeks—but it always has a fixed termination date. Option B isn't the correct answer. A periodic estate, however, is automatically renewed at the end of the specified lease period, whatever that may be. Periodic estate, option D, is the correct answer.
Freehold Estate
An estate in real property which continues for an indefinite period of time.
prior appropriation water management system
Bonnie just applied for the right to divert the water from a nearby creek to her own land. If this right is approved, it will be subordinated to earlier rights. This system is also called "first in time, first in right."
Errors and Omissions (E&O) Insurance
Errors and omissions (E&O) insurance is one way to reduce risk, although it doesn't cover all situations.
environmental site assessment or an environmental impact statement
Federally funded construction projects require an environmental impact statement.
File a suit to quiet title.
If a suit is filed, evidence is submitted to a judge for review. The judge will either remove or modify a cloud and will verify ownership.
Mortgage Insurance Premium (MIP)
The amount paid by a mortgagor for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (MI) company.
200% rule
The combined fair market value of the property (or properties) being exchanged into cannot be more than 200% of the relinquished property.
Scarcity
Limited quantities of resources to meet unlimited wants
When a contract doesn't provide specific dates for when the terms need to be met, what should the parties assume regarding performance of the contract?
Performance must take place within a "reasonable time."
A land contract
the seller agrees to provide credit to the buyer for a portion (or sometimes all) of the funds required to close the transaction. The buyer makes payments directly to the seller.
the appraisal came in just under the asking price. Which number will the lender use to calculate the loan-to-value ratio?
the smaller value
fee simple absolute
type of estate gives the owner condition-free interest
tennacy in common
undivided interests in the property and equal rights to possess it. tenancy in common provides for inheritability—the other forms share the rights of survivorship (the existing tenants assume the deceased's share of the property).
survey
used to create, verify, or correct a legal description. It's a professional on-site measurement of the lot lines and dimensions of a property
value in use
value that is directly related to the benefits their owners receive through their use Value in use can be defined as what a property is worth to the person using it. For example, a wheat farm near a thriving metropolis is valued in its present use as $2,000 per acre. But as a subdivision, it might be worth $40,000 per acre.
Title Insurance
will protect him from financial loss if his ownership later comes into question
special concern do foreclosed properties often present
There could be hidden title issues
prepaid for the seller, credit at closing
These taxes have already been paid, so they are a prepaid item. They'll appear as a buyer debit and seller credit at closing.
Department of Housing and Urban Development (HUD)
This department works on national housing needs. It helps poorer families to buy homes.
CMA
Use adjusted prices from comparables and refine a range using active listings, expired listings, and possibly pending listings.
licensee
Working with the lender, she'll prepare the Loan Estimate, which details the costs the buyer and seller will pay at closing
1 acre = ______ square feet
43,560 sq ft
1 square mile = _____ acres
640 acres
Secondary Mortgage Market
A market for the purchase and sale of existing mortgages, designed to provide greater liquidity for mortgages; also called the secondary money market. Mortgages are first originated in the primary mortgage market. Packaging loans into mortgage-backed securities
lot and block
A method of land description frequently used after land has been subdivided into building lots; also referred to as the recorded plat method. (Must have a plat map to find the property)
Purchase money mortgage
A mortgage given by the seller to the buyer to cover all or part of the sale price. Seller financing. allow the buyer to retain title to the property, but the seller has security interest in the property.
Covenant of Warranty
A promise that the grantor will defend the grantee against any claim of superior title
Abstract of title with lawyer's opinion
An abstract of title that a lawyer has examined and has certified to be, in his or her opinion, an accurate statement of fact.
Easement in gross
An easement in gross is granted to a specific individual or company—in this case, the gas utility company.
limitations or a subject to clause in the deed
An easement runs across the property, permitting Jane's neighbors to access the neighborhood boat dock.
Suing for specific performance
DeeAnna thinks she's purchased an investment property, but the seller refuses to deliver the title to her. DeeAnna has met all of her obligations per the written contract that she and the seller signed. She decides to take the seller to court in an effort to force him to hand over the title. This is an example of ______. damages as a means of remedying the breach of contract caused by the contractor's failure to adequately address the repairs.
Special Flood Hazard Area (SFHA)
Defined by FEMA as the area that will be inundated by the flood event having a 1% chance of being equaled or exceeded in any given year. The 1% annual chance flood is also called the base flood or 100-year flood. Areas that have flooded in the last two years
How is the break-even point calculated for a percentage lease?
Divide the monthly base rent by the percentage the landlord established
Fair housing act exemption
Housing operated by religious organizations and private clubs that limit occupancy to members are exempt from the provisions of the Fair Housing Act.
Juan secures a fixed rate amortized 30-year loan for $295,000 at 4.25%. If his monthly P&I payment is $1,750, how much interest does he pay in the second month of the loan?
In the first month, Juan pays $1,044.79 in interest ([$295,000 x .0425] ÷ 12). His monthly payment (stated in the question) is $1,750, so that means he paid the principal down $705.21 ($1,750 - $1,044.79). His new principal balance is $294,294.79 ($295,000 - $705.21). We use the new principal balance amount to calculate interest for the next month. Juan pays $1,042.29 in interest ([$294,294.79 x .0425] ÷ 12).
Which of the following actions concerning tenant rights should real estate licensees take?
Learn and understand tenants' legal rights. Licensees should know and understand landlords' and tenants' legal rights, but should be careful not to advise clients on their rights and responsibilities, as the latter crosses into the unauthorized practice of law.
Living trust
Martin created the trust while still alive, and in fact he is alive now, so this can't be a testamentary trust (which is created after the trustor is deceased). Testamentary trusts must go through probate, but there is no such thing as a probate trust. Option C is incorrect. The type of trust which is created when the trustor is alive is called a living trust.
Tacking (Adverse Possession)
One adverse possessor may tack onto his time his predecessor's time if privity, satisfied by any non-hostile nexus such as blood, contract, deed, will Not allowed when there has been ouster
Permanence of Investment
One four Economic Characteristics of Real Estate. Refers to the long payback period and stable nature of real estate investment. Requires future projections on usage. Zoning can stabilize value as investors can predict future use. -one reason that land can't be depreciated in the way that improvements on the land can.
Sales Comparison Approach (Market Data Approach)
One of the three methods in the appraisal process. A means of comparing similar type properties, which have recently sold, to the subject property. Commonly used in comparing residential properties. financing terms and cash equivalency, conditions of sale, market conditions at the time of contract and closing, location, and physical characteristics.
illegal market allocation
Only an agreement between competing firms to segment the market
Who does the insurance protect?
Private mortgage insurance is protection for the lender in the event of buyer default; it is used when the borrower does not have a large enough (usually 20%) down payment
The methods of income approach he may use when estimating the value are all of the following
Properties that rely heavily on rental income often use the income approach to estimate their value. Three ways to estimate value are the capitalization method, the gross income multiplier, and the gross rent multiplier.
Specific Lien
Property tax liens are specific, because they represent a lien against a specific piece of property.
Real property (realty)
Real property includes real estate, plus all of the interests, benefits, and rights included in ownership.
type of notice provided by recording a change of ownership document
Recording the deed provides constructive notice of the property sale.
Life estate
Sebastian has a fee simple estate, but it's a very special kind of fee simple estate that ends when the owner dies. It's only applicable while the owner is alive. And that's your hint right there: it's only good during Sebastian's lifetime, which makes this a life estate.
existing federal antitrust legislation
The Clayton Act of 1914 supports the Sherman Antitrust Act of 1890 by prohibiting mergers or acquisitions that would result in an unreasonable reduction in competition or the creation of monopolies.
advertising violation penalties
The Federal Trade Commission determines the severity of the penalty based on the severity of the violation. Penalties range from a cease-and-desist order to corrective advertising, civil penalties, consumer and other monetary remedies, and informational remedies.
Procuring Cause
The effort that brings about the desired result. Under an open listing, the broker who is the procuring cause of the sale receives the commission.
Plottage
The increase in value or utility resulting from the consolidation (assemblage) of two or more adjacent lots into one larger lot.
Depreciation loss
The monthly rental difference between a one-bath property and a two-bath property is $180 ($1,000 - $820). Multiply that by the area's GRM to find the loss in income due to the subject property's functional obsolescence ($180 x 147 = $26,460).
promissory note
The promissory note is evidence of the debt that specifies the borrower's financial obligations. Collateral for the note is typically the property on which the loan is made. It's a negotiable instrument.
Why are they asking you about county tax assessment schedules?
The property taxes may change drastically after reassessment. Some property tax assessments are tied to market value and will only change when a property is sold, while others are reassessed on two-, three-, or five-year schedules. Property taxes may increase or decrease dramatically after reassessment, so knowing when this might happen is important for buyers to know.
Under RESPA, a rebate of a licensee's commission may be offered to a transaction party, provided which of the following is true?
The rebate is not required for referral of business.
floor to area ratio
The relationship between the total building floor area and the allowable land area the building can cover. (not the parking lot)
Subrogation
The right acquired by the title company to any remedy or damages available to the insured when a title company makes a payment to settle a claim covered by a policy.
Inverse Condemnation
The taking of private property by the government without payment of just compensation as required by the U.S. Constitution. The owner must sue the government to recover just compensation.
TILA
Truth in Lending Act - Reg Z. Requires lenders to reveal total cost of loan and APR. Under TILA, ads that mention general financing terms, such as "low down payment" or "easy financing," do not require additional disclosure. If Bo had gotten more specific (e.g., "10-year loan with 0% down") he would need to include more information.
Which of the following is a typical accrued adjustment?
Unpaid real estate taxes Accrued expenses are those that the seller owes at the day of closing but that the buyer will eventually pay, such as unpaid real estate taxes.
How long does the borrower have to pay private mortgage insurance?
Until the borrower reaches a 22% equity position. PMI is cancelled when a borrower reaches a 22% equity position. This is based on payments of principal made toward the original loan balance and not on current market value.
kickback
When a settlement service provider accepts anything of value for referring a client, this is considered a kickback under RESPA's Section 8.
Severalty Ownership
When there are only two joint tenants, the death of one dissolves the joint tenancy. Rhonda is now the sole owner of an estate in severalty.
Covenant of Quiet Enjoyment
a promise that the property will not be claimed by someone with a better claim to title promises that the grantee won't have his enjoyment of the property hampered by claims against the title.
general warranty deed vs special warranty deed
With a general warranty deed, the seller will defend against all claims on title; with a special warranty deed, the seller warrants only those claims that stem from when he owned the property.
Acceleration Clause
a statement in a credit contract that requires you to repay the entire loan immediately if you miss a payment
Aesthetic Zoning
Zoning ordinances that regulate the appearance of real property, such as exterior color, exterior construction material, required screening and fencing.
CAN-SPAM Act
a law that sets the rules for commercial email, establishes requirements for commercial messages, gives recipients the right to have you stop emailing them, and spells out tough penalties for violations.
Brownfield site
abandoned or otherwise unused commercial or industrial site that contains suspected contaminants is known as a what
Why disclose personal interest and licensed status when buying property for personal use.
actions is a licensee required to take to fulfill a fiduciary duty the fiduciary duty of disclosure requires that licensees disclose any conflict of interest.
Agency coupled with interest
agent holds an estate (or interest) in a property that is the subject of the agency relationship. Forgoing commission now in turn for listings down the road is an example.
duty of accounting
an agent's obligation to keep an accurate account of the transactions of money and property made on behalf of the principal,
Straight term
requires the borrower to pay the interest for a set term then pay off the loan in a lump sum.
Progression
bump in value that a lower-value property gets by being near a
disposition
right to convey the property.
Servient Estate
the land over which an easement is granted
price fixing
the practice of colluding with other firms to control prices
Brownfields Law
enacted in 2002 to provide funds that help assess and clean brownfields.
budget mortgage
features loan payments that include principal, interest, taxes and insurance (often called PITI)
Defeasance Clause
finished paying off the debt on her loan, so the lender released the property's title to her. A clause used in leases and mortgages that cancels a specified right upon the occurrence of a certain condition, such as cancellation of a mortgage upon repayment of the mortgage loan. means the lender may not pursue the borrower for additional funds when the loan balance is paid in full.
State the problem
first step in the appraisal process is to state the problem. This includes a description of the rights associated with the property.
Possession
gives that person the right to occupy the property, whether it's developed or undeveloped
accretion
growth in size or increase in amount. Alluvion, or new deposits of land, is the result of the process of accretion.
encroachment
intrusion on a person's territory, rights, etc. building, shrub, fence, or other item illegally crosses over into another's property
General lien
involuntary, against her real AND her personal property.
Plottage
is the economic principle that the joining or assemblage of two neighboring land parcels increases the property value.
Substitution
lower-priced option of two properties of equal quality will likely sell first.
TRID
merges TILA and RESPA disclosures TILA and RESPA initially required similar but separate disclosures to be given to consumers. These have been combined and simplified and are referred to as TRID.
Title VIII of Civil Rights Act of 1968 (Federal Fair Housing Act)
prohibits discrimination in the sale, rental, or financing of housing based on race, color, national origin, and religion.
FIRREA (Financial Institutions Reform, Recovery, and Enforcement Act of 1989)
regulate the ways that lenders value real property by requiring that appraisals be done by licensed, qualified personnel, and that the appraisal report be in writing.