Real Estate Study Guide

An institution will lend up to $112,500 for a property appraised at $125,000. What is the loan to value ratio?

$112,500 / $125,000 = .90 or 90% LTV

A 1% loan origination fee will be due at closing on a $125,000 loan. what amount is this?

$125,000 x 0.01 = $1,250 loan origination fee

A property valued at $225,000 today is expected to appreciate 2% each year. By how much would the property's value increase after one year?

$229,500 $225,000 x 0.02 = $4,500 $225,000 + $4,500 = $229,500

A seller and a buyer agreed on the price and terms on the sale of a house. Both seller and buyer signed the sales contract. Before closing, the seller and buyer agreed to change the closing date. Which of the following would both parties need to sign?

An addendum

Appurtenances

Appurtenance in real property means the inherent or automatic ownership rights that are the natural consequences of property ownership. Property owners may keep, sell, or lease these rights. Some of these rights include:

Correlation

Ashton, an appraiser, is estimating a home's value using the sales comparison approach. He applies more weight to two comparables over several others he used. What process is he utilizing?

Which of the following terms BEST describes the practice of encouraging owners to move from an area due to minorities moving in making the neighborhood more integrated?

Blockbusting

The lender can place Bonnie's loan in default

Bonnie has a mortgage on her investment property, but she allows the homeowners insurance to lapse. Which of these is a possible consequence of this action?

Department of Veterans Affairs

Callum is working with Darby, who received an honorable discharge from the Air Force. Callum's preparing to discuss options for down payment assistance with Darby. Which of the following would be Callum's best resource for information for this specific client?

If the subject property has a valuable feature lacking in the comparable property, she adds this value to the comparable property's sales price.

Carol is performing a comparative market analysis (CMA), and is working with three comparable properties. How does she account for differences between the subject property and comparables?

Land Contract

Charles is selling his property to Seth. Charles paid off his own mortgage on the property years ago, so he's in a position to provide 100% financing for Seth's purchase. Seth will make payments to Charles while Charles retains the property title. What's this an example of?

Prescriptive Easement

Created through one party's continued, uninterrupted, exclusive, and adverse use of another's property for a specified period of time

Bilateral

Desmond has a signed listing agreement with his clients, the Harpers. In exchange for helping the Harpers list, market, and sell their home, the Harpers have agreed to pay Desmond a commission. What type of contract do Desmond and the Harpers have?

Planned Unit Development (PUD)

Detached home and townhome owners own both the structure and the land and have responsibility for shared common areas.

Tenancy in Common

Each person is entitled to possession of the whole. If one dies, that person's ownership is inheritable and doesn't necessarily pass to the other owner(s)

Easement in Gross

Granted to a specific individual or business entity

Easement Appurtenant

Granted to a specific parcel of land and transfers with the land

Equal Credit Opportunity Act

Gregory and Dianne are American citizens of Cuban origin, and when they're denied a home loan, they suspect discrimination. Which of the following acts prohibits lender discrimination on the basis of the protected class of national origin?

Fannie Mae and Freddie Mac guidelines

If Acme Bank, a primary lender, wants to sell its loans on the secondary market, it would be easier for it to do so if its loans meet ______.

Disposition

LaTonya's aunt left her a bungalow on the outskirts of the city. For many years, it was the place for family holiday gatherings, and LaTonya's sister was even married there. That's why her family is so upset to learn that she plans to sell the bungalow as soon as she gets it cleaned out. Which real property right allows her to sell the property?

A cooperative

Lance purchased a home, but he won't own any real estate—just shares in a corporation. This is because his new home is _____

Loan Estimate

Lawrence is a buyer closing on a home for which he's obtaining financing. Which document will give Lawrence an estimate of the costs he'll likely pay at closing?

Periodic estate

Malcolm loves his apartment, even though he's rarely there. His job in international development has him on the road for months at a time. He doesn't have to worry about missing out on his lease renewal though, because he has a(n) ________.

Living Trust

Martin placed all of his real estate investments in a trust, and the proceeds are distributed through the trust to his son Nathan. Martin still manages the properties indirectly, and Nathan currently benefits as he's past the required beneficiary age of 18. What type of trust is this?

Personal Property

Mia was surprised to learn that the sellers took the freestanding fountain with them. She hadn't realized that it was personal property.

Progression

Most of the homes in Betty's new neighborhood are valued between $400,000 and $450,000. All of the homes in the neighborhood are very beautiful, the lots are large, and everyone's yard has impeccable landscaping. If Betty's home were in another neighborhood only a few miles away, it might only be valued at $300,000 due to its smaller size. But her home is valued at $400,000 in her neighborhood due to the desirability of the area. Why is her home in this neighborhood worth significantly more?

Real Property

Real property can be segmented into a bundle of rights, with each right sold separately, to different owners. Real property includes the land and the air above it to infinity, the ground below the land to the center of the earth, and anything permanently attached to the land by nature of humans.

The purpose of the Truth in Lending Act (TILA) is to ______.

Require lenders to make disclosures that allow consumers to compare the costs of making a purchase using credit from different lenders, and to compare those with the cost of using cash

A person owned a property next to a stream. The owner's rights to use the stream are referred to as:

Riparian

Conditions of sale

Robin, the appraiser of the Birkenstocks' property, wants to make sure her computations of adjustments on their home are valid. She's using the sales comparison approach, so she'll prioritize the ______ first.

Budget

Sam's not very good with planning for his expenses. He has a mortgage payment that includes his property taxes and property insurance, so he can knock those all out with his mortgage payment every month. Sam's also happy to know that his monthly payment will remain the same for the life of his loan. What type of mortgage does Sam have?

Life estate

Sebastian owns a country house and vacations there every summer and on holiday weekends. As much as he'd like to will it to his niece when he passes, his ownership of the house ends when he dies. What type of estate does Sebastian own?

Whether consent was voluntary

Sondra thinks the new business contract she's signed with her business partner is valid. Both parties are legally competent, the purpose is a business transaction so it's a legal purpose, an offer was made and accepted, and a fee has been negotiated and documented. Which essential element of a valid contract has Sondra not yet considered?

Freddie must deliver the deed to Stu

Stu is buying Freddie's property. What must occur for the transfer of title to take place?

lot and block system

Subdivision system; method of legal description of land using parcel maps identified by tract, block, and lot numbers

Equity Skimming

Ted is in foreclosure but has some equity in his property. An investor suggests that Ted enter into a sales contract with him for a substantially higher price than the investor would actually be paying. The investor pockets the cash and allows the house to be foreclosed on. What sort of scheme is this?

"Assessed value is determined as a percentage of market value. It's used to calculate taxes and is just one factor in determining an offer price."

You're working with Gretchen, a buyer who wants to make an offer on a house that's much lower than the list price. That's because she's seen the tax assessor's value, which is far lower than the list price. What should you tell her?

Executed Contracts

all parties have performed completely

Unenforceable Contract

appears to be valid but is not legally enforceable by either party in a court of law

Deed restrictions

are conditions or limitations placed in a deed by the owner when property is transferred to another party

Riparian rights

are granted to landowners whose land abuts a river or stream. (To remember this, keep in mind that riparian and river both start with R.)

Littoral rights

are granted to landowners whose land borders closed bodies of water, such as lakes and oceans. (An easy way to remember this is that both littoral and lake begin with L.)

Express Contracts

are those in which the parties show their intentions by words ( oral or written) ex. Real estate listings and sales contracts are expressed contracts

A buyer's new loan would show up on the closing statement as a

credit to the buyer

right of enjoyment,

gives the owner the ability to use the property in any legal manner

The right of disposition

gives the owner the right to sell or convey the property

Real estate

includes the land itself, as well as any attached items—such as buildings, pools, and monuments.

Lien

is a claim or charge against property to enforce payment of money

Fixture

is an object that once was personal property but has been attached to the land or a building so that it now is real property.

A license

is the privilege to use the land of another for a specific purpose. ex. A property owner gives someone a license to hunt or fish on the property

Voidable Contract

one in which at least one of the parties has the power to either rescind or enforce the contract at will

Right of Exclusion

provides the owners with the right to decide who may or may not access the property (owners can exclude others from their property)

A broker found a ready, willing and able minority who offered full price for a house. The seller refused to sell because the buyer was a minority. The broker could legally do all of the following EXCEPT

show the property only to non-minorities

Implied Contract

the parties intentions are shown by their acts and conduct

encroachment

unauthorized intrusion of a building or other improvements onto property owned by another ex. A fence extends beyond the boundary line of an owners property onto his neighbors property

right of possession

which simply means that the property is owned by the title holder

Fixtures

Which of the following are included in the transfer of real property unless specifically excluded in writing?

The seller will defend against all claims against the property's title.

Which of these guarantees is offered by a general warranty deed but NOT a special warranty deed?

The legal ownership of the property can be challenged.

Which option is true if a deed is not recorded after closing?

Express Easement

Written documents that typically outline the easement's terms, location, and purpose

A person obtained a $75,000 loan with the lender charging a 1% loan origination fee. What was the amount of the fee?

$750

A court ordered that a transaction be completed. The BEST term to describe this legal situation is:

(A) A court may order someone to "specifically perform" according to the agreement. Lis pendens

What type of interest does the buyer receive in the property after the seller accepts the offer?

(A) When the offer is accepted by the seller, the buyer has the right to receive title at closing. This right to get title in the future is called "equitable title."

A natural occurrence whereby radioactive gases in the ground decay and then possibly infiltrate structures is called:

(B) Radon gas refers to radioactive gases in the ground that decay; radon gas that infiltrates a structure can possibly lead to health issues, such as lung cancer.

A buyer made an offer on a house and the seller accepted the offer as written. The buyer wanted some of the seller's personal property to remain with the house. The personal property would transfer to the buyer under which of the following conditions?

(B) The statute of frauds requires that all terms of a contract be in writing to be enforceable.

A condominium development with a long standing established homes association would be governed by the:

(B) The unit owners govern themselves through a homes association

Which of the following would have the greatest influence on appraisal value?

(C) Local economic conditions such as employment, etc. play a major factor in property values.

In a contract for deed, when does the buyer obtain legal title?

(C) The buyer only obtains the deed (legal title) when the entire contract is fully paid.

Deed of Conveyance

A legal document to show title has been transferred from one person to another. This can be done as a gift, exchange, lease, or mortgage. This is also called a conveyance deed. Ex. A women's father verbally passed his property to her before dying without a will in place a few years later. Without a deed of conveyance, the woman was at risk for losing the ownership and rights to the property. A conveyance deed would have assured her of transferring the property legally.

What does an appraisal actually do?

(D) An appraisal simply estimates value. An appraisal does NOT assure value

When a loan is transferred from one lender to another, this is known as:

(D) Any contract, such as a loan, can be transferred or assigned to someone else unless there is a clause that prevents the assignment.

Which of the following statements is true regarding a condominium?

(D) In a condominium, the owners do have an undivided interest (share possession) in the common areas (pool, hallways, etc.).

In a contract for deed, when does the buyer receive the deed to the property?

(D) In a contract for deed, the buyer only receives the deed to the property after the entire contract sale price has been fully paid.

When ownership is conveyed through the transfer of shares of stock, this is:

(D) Stock is used to transfer rights in a cooperative.

Personal Property

(also called chattel property or personality) includes any property that is not real property. Its movable

What are points?

1 point = 1% of the loan amount. Loan amount x points(%) = points in dollars

Metes and bounds

A method of land description which involves identifying distances and directions and makes use of both the physical boundaries and measurements of the land.

Deed Restrictions

A private control which limits the use or appearance of a given property Ex. Manny's deed restriction prevented him from using his property to raise horses.

Tenancy at Sufferance

A tenancy that occurs when a tenant that is supposed to vacate does not, but continues to pay rent, and the landlord accepts it.

A buyer must pay four points at closing on a $100,000 home loan. How much is this?

4 points = 4% =0.04 $100,000 x 0.04 = $4,000

A fixture would be defined as:

A fixture at one time was personal property but is now attached to a building.

Cooperative

A form of property ownership in which a corporation is established to hold title in property and to lease the property to shareholders in the corporation. Own stock.

encumbance

A Charge, claim, or liability on real estate.

Timeshare use

A _______ gives the purchaser the right to possess the property at given times for a given duration but doesn't convey ownership.

Monthly payment - interest paid = principal amount paid. If $1,145.83 of the total payment is interest, that leaves $896.88 to be applied to the principal ($2,042.71 - $1,145.83 = $896.88).

A buyer with a 15-year, $250,000 loan at a 5.5% interest rate has a monthly mortgage payment of $2,042.71. Assuming he pays taxes and insurance separately, if $1,145.83 of his payment is interest, how much is applied to the loan's principal?

Pay off the existing loan

A closing agent has several duties to perform both before and after the closing. Which of the following is a task the closing agent must complete during or after the closing?

General Warranty Deed

A deed that grants the most protection to the buyer because it carries all the possible covenants of the grantor Ex. Nellie was nervous about accepting a deed that was not a general warranty deed. She was worried that her title might be impacted by someone else's claim or an unknown encumbrance.

The process of removing a fixture before agreement or after negotiation, to designate it personal, rather than real, property.

In the consideration of real property and personal property, severance is _____.

Broker's price opinion (BPO)

In this form of price determination, the real estate professional will often just drive by the property and take photos, then complete paperwork for the lender.

General

Jackie was sued in civil court by one of her creditors. As a result of the judgment against her, her house, car, and art collection are all subject to sale in order to pay the creditor. What type of lien is this?

The taxes are a prepaid expense and will appear as a buyer debit and a seller credit.

Jamison, the seller, is closing on his property with Conrad, the buyer. Jamison paid the current year's property taxes already. Is this a prepaid or accrued expense, and how will it be represented on the settlement statement?

Plat map

Janson Industries worked with architects and engineers to draw up plans for a planned community that will include residential, shopping, dining, and entertainment uses within the community itself. As a property that falls under mixed-use zoning, what does the company have to provide to the planning commission?

$299,000

Jeffrey has accepted an offer of $299,000 for his house. The buyer is making a $50,000 down payment, and the buyer's appraisal came in at $300,000. On what number will the buyer's lender base the loan-to-value ratio?

Market Value

John's home is up for sale. He originally bought it five years ago for $300,000, and its current value is $350,000. His real estate agent notifies him that a buyer just made an offer on his home for $365,000, which is the price other similar homes in the neighborhood are selling for, and John accepts. What does the price of $365,000 represent

Kara may offer a rebate to both Leo and the Melvins.

Kara is representing Leo in the sale of his property. Zoe represents the buyers, Trish and Todd Melvin. The closing officer, Regina, has worked closely with all the parties to bring the transaction to a successful close. Which of these statements about commission rebates under RESPA regulations is true?

Investment value

Kevin's lender just ordered an appraisal on the five-unit apartment building he's contracted to purchase. He's especially interested in hearing about the estimated rate of return the property could pull. What type of value is he interested in?

Which of the following acts would be permitted under the 1968 Federal Fair Housing Act?

Not renting a house to someone because they have a poor credit history

Alan and Kate want to build a 5,000-square-foot rancher on two acres of land they just bought. Once the house is built, how many acres of land will remain undeveloped?

One acre is equal to 43,560 square feet, so their parcel is 87,120 square feet (43,560 × 2). Subtract the house's 5,000 square feet from that, and you get 82,120 square feet. Divide that by 43,560, and you end up with approximately 1.89 acres.

Use adjusted prices from sold comparables, refining the price range with data from active listings, expired listings, and possibly pending sales

One month after Max passed his real estate licensing exam, a couple contacts him via referral, asking him to represent them in the sale of their home. Max meets with his clients at their home, does a walk-through, takes a drive through the neighborhood, and then heads back into the office to conduct a comparative market analysis on the property. They've communicated to him that they'd obviously like to make as much off the sale as possible, but they need to complete the sale in the next three months, in time for the wife to start a new job in another state. To accurately calculate a suggested price range for their property, Max will have to ______.

Timeshare

Ownership of property allows the purchaser to use it for periods of time during the year.

Nevina may be creating an implied agency agreement if she does which of these?

Performs a CMA for an acquaintance and suggests a list price based on other comparable properties in the area

Demand and utility

The Richards' farm is located on a 10-acre parcel of land, which is very rare to come by in their area. However, the house is rundown and in need of many repairs. Buyers in the area looking for a move-in ready home would need to either look elsewhere or wait several months for the home to be renovated. Which factors are negatively impacting the value of the Richards' property?

Condominium

The owner owns a unit within the structure but no land. Condo owners own an interest in the common elements (or common areas).

Townhome

The owner owns both the structure and the land.

Easement

The right to use someone's land. The right may be to use the land surface or the air space above it.

Alistair bought a townhouse for $285,900. He got a 90% loan and the lender charged him three-and-a-half discount points. How much did Alistair pay in discount points?

The sales price is $285,900, and 90% of that (aka our loan amount) is $257,310. The discount amount is three-and-a-half points (.035) multiplied by $257,310 = $9,005.85.

A tenant was leasing a property which rented for $300 per month. On March 20th, the tenant notified the landlord that the tenant was leaving April 20th. The tenant had pre-paid the $300 per month rent on March 1st. The landlord charged the tenant a pro-rated amount of rent for April and a $600 penalty for terminating the lease. What was the total amount owed by the tenant?

The tenant owes 20 days of rent for April (April 1 - April 20). $300 divided by 30 days = $10 per day x 20 days equals $200 prorated April rent. $200 + $600 penalty = $800 total.

Joint Tenancy

This is defined as equal ownership with undivided rights of possession and requires unity of four separate conditions: All owners must have the same type of interest in the property, all must receive their title at the same time from the same source, all must have the same percentage of ownership, and all must have the right to undivided possession in the property.

Tenancy by the Entirety

This type of tenancy also has the right of survivorship. Only available to married couples, this form of ownership also includes unity of time, title, interest, possession, and marriage.

Cost Approach

To estimate value using the cost approach, an appraiser adds the site value to the cost to replace improvements, then subtracts the amount of depreciation. Here, that gives us $100,000 + $25,000 - $15,000 = $110,000.

Easement by way of necessity

Typically created for the purpose of ingress and egress

Prepayment

Upon examination of his mortgage document, Jared finds a clause stating he'll owe additional interest if he pays off his loan within one year of the loan origination date. What type of penalty does this describe

Remove any claims against a property's title.

What's the purpose of a quiet title suit?

Lenders issue the Loan Estimate at application and Closing Disclosure figures should be similar to those on the Loan Estimate.

What's the relationship between the Loan Estimate and the Closing Disclosure?

External Depreciation

When the Browns first purchased their home, the area was primarily agricultural. But over the years, as more homes were built, the area has undergone some major changes. What was once a quiet neighborhood is now on the corner of a major busy intersection with lots of traffic, noise, and light pollution throughout the night. What type of depreciation has the Browns' home undergone?