Exam 2
Types of easements and when/how they might occur - page 80
An easement in gross- belongs to a person or corporation and does not belong to the land. The most common example of this is a utility easement. An easement appurtenant is a right for the benefit of a piece of land. It runs with the land and passes to new owners when the land is sold. The most common use of this easement is for ingress and egress (entering and exiting one's property)
. DTPA coverage categories - page 26
Any consumer can bring an action against a provider of services when the consumer can prove that the servicer was the producing cause of any of the following: •use or employment by any person of a false, misleading, or deceptive act or practice that is specifically identified in the act. • breach of an express or implied warranty. • any unconscionable action or course of action by any person. • the use or employment by any person of an act or practice in violation of the Texas Insurance Code.
. Fair Housing advertisements and protected categories - page 53
Advertising that indicates a limitation or preference based on race, color, national origin, religion, sex, familial status, or handicap is prohibited. This prohibition against discriminatory advertising applies to single-family and owner-occupied housing that is otherwise exempt from the Fair Housing Act. Brokers should be careful about loosely worded ads that would indicate a preference based upon a protected class. Likewise, graphics used in advertising should reflect the diversity of the local population. Use of Racial and Ethnic Terms • Religious Preference • Gender Preference • Handicapped Persons • Familial Status
. FHA loans - insurance premiums associated with them - page 187
Because the FHA is a mortgage insurance program, premiums are paid into a pool of funds, out of which claims are paid when a borrower defaults on a loan. The cost of the mortgage insurance is passed along to the borrower in the form of a mortgage insurance premium (MIP). The borrower pays two premiums, an up-front premium at closing, and an annual premium. Up-Front Mortgage Insurance Premium (UFMIP): When a loan is funded, the FHA charges an Up-Front Mortgage Insurance Premium. The UFMIP can be paid at closing or added to the loan at funding. The UFMIP can be added to the loan even if it causes the loan to exceed the appraised value of the property.
Common law vs statutory law - page 39
Common law - is a body of law developed in England and based upon "common sense" and local custom. Common law expanded over the years as a result of prior court decisions. Under common law, a court looks to the findings of prior courts when rendering a decision. The concept of common law was brought to the American colonies by English settlers. Statutory law is the body of laws and regulations enacted by federal and state legislatures. Much of what was once embodied in common law is now codified in statutes passed at the state and federal level.
. Statute of Frauds - rules and exceptions - page 66
Competent parties, offer and acceptance (mutual agreement), Legal Purpose, In writing, Considersation In order to comply with the Statute of Frauds, contracts for the conveyance of an interest in real estate or leases for a term of more than one year must be in writing. If the contract is not in writing, it would be valid, but not enforceable. Exceptions- . Certain persons do not have full contractual capacity, including minors, individuals who have had guardians appointed, and those under the influence of drugs or alcohol.
Wills and inheritance terminology - page 211
testator- creates the will hereditament- Any property, whether real or personal, that is capable of being inherited
ALSO QUESTION 35
will- A will is a written expression of the desire of a person as to the disposition of that person's property after death. hereditament- Any property, whether real or personal, that is capable of being inherited, is called a hereditament. An individual who dies leaving a valid will is said to have died testate That individual's estate will be settled by an executor chosen by that person and named in the will. A formal or witnessed will, prepared by an attorney, is the best type as it will be accepted in all fifty states and is least likely to be contested. Holographic or handwritten wills are also used in some states, including Texas. testator- An individual who creates a will, known as a testator, is under no legal obligation to leave any property to any particular individual. There is no legal right of a spouse, child, or other relative to be named as a beneficiary in a will. A nuncupative will is an oral or deathbed will. This type, while legal in many states, including Texas, is very vulnerable to being contested. Also, this type of will is only legal for personal property, not real property A codicil is an addition or an amendment to an existing will.
Five elements of a valid and enforceable contract - page 66
1. Competent parties 2. Offer and acceptance (mutual agreement) 3. Legal purpose 4. In writing (when required by law) 5. Consideration
Seller's Disclosure Notice rules and the buyer's rights - page 141
. ACCESS, INSPECTIONS AND UTILITIES: Seller shall permit Buyer and Buyer's agents access to the Property at reasonable times SELLER'S DISCLOSURE NOTICE PURSUANT TO §5.008, TEXAS PROPERTY CODE SELLER'S DISCLOSURE OF LEAD-BASED PAINT AND LEAD-BASED PAINT HAZARDS is required by Federal law for a residential dwelling constructed prior to 1978. ACCEPTANCE OF PROPERTY CONDITION: "As Is" means the present condition of the Property with any and all defects and without warranty except for the warranties of title and the warranties in this contract. LENDER REQUIRED REPAIRS AND TREATMENTS: Unless otherwise agreed in writing, neither party is obligated to pay for lender required repairs, which includes treatment for wood destroying insects. . COMPLETION OF REPAIRS AND TREATMENTS: Unless otherwise agreed in writing: (i) Seller shall complete all agreed repairs and treatments prior to the Closing Date; and (ii) all required permits must be obtained, and repairs and treatments must be performed by persons who are licensed to provide such repairs or treatments or, if no license is required by law, are commercially engaged in the trade of providing such repairs or treatments. ENVIRONMENTAL MATTERS: Buyer is advised that the presence of wetlands, toxic substances, including asbestos and wastes or other environmental hazards, or the presence of a threatened or endangered species or its habitat may affect Buyer's intended use of the Property. RESIDENTIAL SERVICE CONTRACTS: Buyer may purchase a residential service contract from a residential service company licensed by TREC.
Lease terminology - subletting, assignment, option to buy, right of first refusal - page 113
. Subletting- is the transfer of some or all of the tenant's rights and/or leased space to another with liability remaining with the lessee assignment - of a lease occurs when a tenant's rights and liabilities are transferred to another An option agreement-gives a potential buyer or tenant the right to purchase or lease a property. The option agreement is an example of a unilateral contract, a contract, according to which only one of the parties is obligated to perform, unlike a sales agreement, which would require both parties to perform certain actions
Requirements of a valid contract - page 66
1.Competent parties 2. Offer and acceptance (mutual agreement) 3. Legal purpose 4. In writing (when required by law) 5. Consideration
. Prorations and prorated items at closing - page 135
At closing, prorations for property taxes and property owner association fees will be calculated. Taxes for the year that have not been paid will be deducted from the seller's proceeds, usually through the day of closing. Prepaid items such as property owner association fees will be collected from the buyer from closing to the end of the year.
Agent's responsibilities when a client needs legal advice - page 128
An agent should never discourage a party from consulting an attorney for advice in a transaction. If one or both of the parties are represented by an attorney, the attorney's contact information is generally included in the contract.
. Consideration in a valid contract - page 66
Consideration is defined as something given in exchange for a promise. There is no requirement that the consideration be in the form of money. Consideration in a contract could be nothing more than a promise made by one party in exchange for a promise made by the other. In the typical real estate contract, the seller agrees to convey the property to the buyer, and the buyer agrees to pay the negotiated sales price. Therefore, the purchase or sales price of the property is the consideration for the contract.
Offers, counteroffers, rejections, acceptance - page 125
Counteroffer. A counteroffer is made when a party changes an offer in some way and communicates that change to the other party Rejection -of the original offer. In most cases, a counteroffer is a rejection of the original offer. As such, the original offer is no longer available for acceptance by the offeree. Acceptance -of an offer means that the accepting party does so with no change to the contract whatsoever. Any change, no matter how trivial, turns the offer into a counteroffer.
Depositing Earnest Money - page 134
Earnest money is not a requirement of a valid contract. Earnest money is a payment that is placed into escrow to show that the buyer is serious (earnest) in his or her intent to purchase the property. Earnest money serves as a source for the payment of liquidated damages to the seller in the event of default by the buyer. While there is no set requirement for the amount of earnest money to be paid, depending on the market, it ranges from a low of about one percent to as much as ten percent of the sales price. A buyer who wishes to purchase a property with a small deposit (or none at all) would be a source of concern to the seller. Earnest money is deposited in an escrow account when the contract is signed by all parties, and acceptance is communicated
Lender requirements for properties with potential hazardous materials on site - page 87
If a buyer has concerns about possible contamination of a potential property, the buyer or the lender may opt to have an Environmental Site Assessment (ESA) performed on the property to determine if it is environmentally challenged. An ESA is an assessment that is carried out by a qualified environmental professional to determine whether or not a property has been contaminated by any previous or current activities that occur(red) on or near the property.
Option contracts - page 65
In some contracts, only one party must perform. An option is an agreement between a buyer and seller or landlord and tenant. A seller, in exchange for some form of consideration (an option fee), gives the buyer the right to purchase the property at some preset price and terms for a period. If a buyer has a one-year option to purchase a tract of land at $150,000 cash, the buyer can exercise the option and purchase the property at that price any time during the year. The buyer has the option but is under no obligation to purchase. However, under an option, the seller must sell if the buyer chooses to buy. The contract is said to be a unilateral contract because only one party is obligated to perform. A unilateral contract is said to lack mutuality.
Default of contract and types of damages - page 137
Liquidated damages. The seller can choose to accept the buyer's earnest money as liquidated damages, releasing all parties from any further obligation under the contract. Liquidated damages are damages that are established in the contract. • Monetary damages. In addition to specific performance, the injured party may "seek such other relief as may be provided by law." This would be an award of monetary damages by the court. Because monetary damages are awarded by the court, one never knows what they will be until the court rules . • Specific performance. The injured party files a court action seeking an order of the court directing the defaulting party to perform according to the terms of the contract. Specific performance is the only remedy that would possibly result in the full execution (closing) of the transaction.
The mortgage, or deed of trust vs the note - page 168
Mortgage, deed of trust- A mortgage can be one of two forms, depending on state law and custom. A standard mortgage is a contract between two parties: • The borrower (the mortgagor) and • The lender (the mortgagee). VS The note- A promissory note, also known as a real estate lien note, is the borrower's unconditional promise to repay and includes the amount borrowed, payment amount, due date, and rate of interest. The note is not generally recorded. When the note has been repaid, the lender returns it to the borrower along with a release of lien. The release of lien should be recorded in the public records.
Executed vs executory contracts - page 67
Once all the terms of an offer have been agreed to and signed by the parties, and the acceptance communicated to the offeror, the contract becomes binding on the parties. The contract is known as an executory contract from the effective date through the closing. . An executory contract is defined as a contract that is binding on the parties, with one or more of the parties having contractual duties that have not yet been performed. Executed- signing and communication establish the effective date. When the sale finally closes, the contract is fully executed
Cooperatives - page 50
Owners within a cooperative do not own a specific unit. A corporation owns the entire cooperative complex. Those who wish to live in the cooperative buy shares in the corporation and receive proprietary leases on their units. When listing and selling cooperatives, a real estate license is often not required because the sale of a cooperative is the sale of stock rather than real property.
Government rights in land (PETE) - page 73
Police Power - the right of the government to regulate and control the way land is used Eminent Domain - is the right of the government to take private land for public use Taxation - the government retains the right to tax real property. Escheat - if a person dies intestate (without a will) and without heirs, the government will take title to his real property under the right of escheat.
Police power terminology - zoning and associated terms - page 73
Police Power - the right of the government to regulate and control the way land is used The most common example of police power is zoning Downzoning- Changing the zoning of a property to a lower value use Variance permission- If the intended use of a property would violate current zoning, the owners must request a variance - permission to violate the rules. setback - is the amount of space required between the lot line and the building line. The setback can be determined by zoning or deed restrictions A buffer zone - is an area of land separating one land use from another, such as residential from commercial
Wills and the associated terminology - page 213
Probate- The formal judicial proceeding to prove or confirm the validity of a will, to collect the assets of the decedent's estate, to pay the debts and taxes, and to determine the persons to whom the remainder of the estate is to pass is called probate. Accretion- the process that results in a gradual increase in land area through natural forces, is a natural event that can affect title. Reliction is a gradual increase in land area when water gradually withdraws, as happens when the path of a stream or river changes over time. Alluvion is the material (soil) that is deposited through the process of accretion that is the result of avulsion, erosion, and reliction Avulsion is the sudden addition to or loss of land when a stream or river changes course. Erosion is the gradual loss of land over time as the land bordering a river or stream washes away.
Mandatory disclosures and associated dates if applicable - page 154
SALE OF OTHER PROPERTY CONTINGENCY Another contingency is the sale of other property contingency. In this case, the seller and buyer agree that the purchase of the property is contingent on the sale and closing of the buyer's existing property APPRAISAL CONTINGENCY are related to financing contingencies because lenders use appraisals to determine the amount of money they will lend on a property INSPECTION CONTINGENCY In some states (not Texas), it is common for a contract to be subject to satisfactory inspections. Having an inspection contingency is a good idea if any of the following are discovered on the property. Radon, lead-base paint, environmental hazards
Statute of Frauds and leases - page 136
Statute of Frauds- contracts for the conveyance of ownership in real estate must be in writing to be enforceable. A valid and enforceable contract for the sale of real estate, therefore, must be in writing. Because it does not comply with the Statute of Frauds, an oral agreement to convey would be considered voluntary and not enforceable in the case of disagreement. In the case of two agreements, one written and one oral, the written agreement will ALWAYS take precedence in the event of a conflict.
TREC Temporary lease agreements and features - page 18
TREC has only two promulgated lease forms: 1. Buyer's Temporary Residential Lease - for use when the buyer occupies the property for no more than 90 days prior to closing. 2. Seller's Temporary Residential Lease - for use when the seller occupies the property for no more than 90 days after closing.
Escrow and trust accounts, how they are used and who administers them - page 175
The process of transferring funds to a title or escrow company for disbursement is called funding. When a loan is approved, the lender issues a commitment to make the loan at specified terms. A mortgage banker uses money or a line of credit to fund loans when the final closing conditions have been satisfied.
Real and Personal property transfer documents at closing - page 41
Things of a temporary or movable nature are not part of the real property. They are considered personal property. Personal property is also known as personalty or chattel. If personal property is being transferred along with real property, a bill of sale is generally used to accomplish the transfer, which would normally accompany the deed.
. Subrogation - page 238
Title insurance policies contain a subrogation clause that allows the title company to reduce the amount of compensation that they pay by the amount of any damages paid by the seller to the buyer. The subrogation clause enables the title company to assume the rights of a buyer with respect to any claim against a seller if the title company has made payments to that buyer to satisfy that claim. In this manner, the property owner cannot collect from both the title company and the seller for the same issue.
TVLB programs and provisions - page 196
VA FUNDING FEE- With few exceptions, the law requires that the VA be paid a funding fee on guaranteed loans. TEXAS VETERAN'S LOAN PROGRAM The Texas Veterans Land Board Housing Assistance Program (VHAP) is a benefit that every buyer with a military background should consider. US DEPARTMENT OF AGRICULTURE USDA Rural Development Guaranteed Housing Loan program, more commonly referred to as a "USDA loan," or a "Section 502 loan," is insured by the U.S. Department of Agriculture. The program offers 100% financing (no down payment) for qualified borrowers
Types of deed and their uses/benefits - page 216
bargain and sale deed is one with no guarantees or warranties. It is a very basic deed and does nothing to protect the grantee. The grantor implies ownership or the right to transfer title but does not provide a warranty of title. A quitclaim deed- is one with no guarantees, warranties, or covenants. The grantor does not even claim to own the property. The grantor states, "Whatever interest I have, if any, I do hereby grant and convey." This type of deed is most often used to clear up a cloud on the title. It is also used to grant an easement a gift deed- in which the consideration is love and affection a guardian's deed, by which a minor's interest is conveyed sheriff's or trustee's deed, in the case of foreclosure, correction deed, to correct an error in a previously executed deed, tax deed, which is used to convey title to property sold by the government at a tax sale.
Types of mortgage loans and their uses/purposes - page 179
blanket mortgage- covers more than one piece of property. A builder may buy more than one lot in a new subdivision; he will do so with one loan. This type of loan is likely to contain a release clause, allowing the borrower to obtain partial releases of specific lots by making required lump sum payments package mortgage- includes both real and personal property (fixtures and furnishings). Furnished condominiums in resort areas are often sold this way. budget mortgage, the monthly house payment includes principal, interest, taxes, and insurance (known as PITI). Balloon loans are beneficial to some borrowers, especially those who do not plan to stay in their homes for an extended period. COLLATERAL-DEPENDENT LOANS (HARD MONEY LOANS) A hard money loan is a specific type of asset-based financing in which a borrower receives funds secured by the value of a parcel of real estate wraparound mortgage is a method of financing that preserves the low, existing interest rate on the original note open-end mortgage permits additional borrowing on the same note and mortgage participation loan, two or more lenders own a share, allowing lenders to share or distribute the risk. Shared Appreciation Loan- If a lender collects principal and interest and shares in the profits when the property is sold, then it is called a shared appreciation mortgage . Reverse Annuity Mortgage Homeowners who are least 62 years of age can borrow against the equity in their property, using a reverse annuity mortgage. Sub-prime loans have risk-based pricing. The rates are not published on these loans.
Title policy, abstracts, commitments, opinion of title - page 217
patent- The original conveyance of land by the sovereign is usually done with a document known as a patent. An abstract of title- is a complete history of the title of a piece of property that includes deeds, easements, liens, foreclosures, wills, marriages, deaths, life estates, fee simple estates, and anything else that may have ever been recorded about a property attorney's opinion of title- which is an opinion regarding the state of the title and its ability to be transferred.
Types of leases - page 110
• Gross Lease - The gross lease is perhaps the simplest of all leases. In a gross lease, the landlord pays costs regularly incurred in ownership, such as taxes, insurance, utilities, and maintenance. The tenant pays only rent. This type of lease is riskier for the landlord because of the possibility of rising costs during the lease term. Net Lease - A net lease is one in which, in addition to rent, the tenant pays expenses such as taxes, insurance, and maintenance. A net lease shifts the risk of cost increases from the landlord to the tenant. Net leases are often characterized as net (N), double net (NN), and triple net (NNN). Percentage Lease - In the retail environment, a percentage lease obligates the tenant to pay a base rent and a percentage of the gross sales. The percentage may vary, depending on the level of sales, and will be calculated based on breakpoints in the lease.
. Limits on title - claims, liens, charges - page 81
A claim, lien, charge, or liability attached to and binding real property is an encumbrance. Encumbrances place limitations on property owners.s. The property rights of an owner are diminished by an encumbrance. Some encumbrances are desirable because they afford the services people need (i.e., utility easements). In contrast, others are negative because they limit the ability to freely use property, for example, easements for ingress and egress onto another property. Some are freely given, such as mortgage liens, and some are taken, or come with the property, such as deed restrictions. In any case, almost all properties have some encumbrances against them. The legal method of removing an encumbrance is to obtain a release. A lien is a right given by law to certain creditors to have debts paid out of the property of a defaulting debtor, usually through a court sale. A lienholder does not own the property that is encumbered. Instead, the holder has an interest that, in some cases, may result in the foreclosure of the property. Common examples of liens include: • Mortgages and Trust Deeds • Tax Liens • Judgments • Mechanics and Materialman's (M&M) liens
. A required act or event in a contract - page 153
A contingency is a provision in a contract that requires that a specific act or event happens for the contract to be binding on the party. A contingency must be specific as to what action needs to take place, who must complete the action, and when it will be completed. Perhaps the most common contingency found in residential real estate contracts is the financing contingency. The term subject to is synonymous with contingent. A contract may be said to be "subject to the buyer obtaining financing." Likewise, a contract with a financing contingency may be said to be "contingent upon the buyer obtaining financing
Contract definition - page 65
A contract is an agreement between two or more parties to do something or to refrain from doing something. In many ways, contracts are entered into every day without being given any thought. Everyday transactions, both business and personal, involve creating contracts in a formal or informal manner
Causes for contract termination - page 93
A contract is considered discharged when all parties have performed. In real estate sales, performance (full execution) is most often achieved at the closing of the transaction. A contract may also be discharged due to: • A change in the law that makes performance illegal. For example, if a buyer is purchasing or leasing a property contingent on operating a retail store, the contract could be discharged if a zoning change made that activity illegal. • The destruction of property. Examples include fires, earthquakes, acts of war, or hurricanes. Note that, if the seller intentionally destroys the property, he or she is not discharged, and is liable for damages. The death of a party does not necessarily discharge a contract. In many cases, if the seller is deceased, the sale can be completed by the estate. On the other hand, a buyer who dies will likely be discharged from the contract The impossibility of performance may be a cause for the discharge of a contract.
Lease clauses and provisions - page 114
A lease option allows a tenant to buy the property at a preset price and terms for a given period. This can also be called a lease with an option to buy. At the time the lease is negotiated, a purchase price is also negotiated. Clauses and provisions are written to comply with state and local landlord-tenant laws and are written in legal jargon.
Types of businesses - page 48
A sole proprietorship is a venture that is owned by one individual. The primary benefit of a sole proprietorship is that the owner has total control of the business. The potential downside of this form of ownership is that the owner also has full liability for the financial and personal obligations of the business. A partnership is more easily created than a corporation and can be created with a simple written or oral agreement. A partnership must have one or more general partners. A general partner may take part in the dayto-day management of the business and has full personal liability for partnership-related issues, including everything from financial obligations to personal injury lawsuits. Corporate ownership- In most states, corporations are created with a filing with the Office of the Secretary of State or a similar agency. The corporate entity is comprised of three components: • shareholders (stockholders) who are the owners of the corporation • a board of directors elected by the shareholders who represent the interests of the shareholders • corporate officers who are responsible for the overall management of the operation of the business
. Requirements of acceptance - page 125
Acceptance of an offer means that the accepting party does so with no change to the contract whatsoever. Any change, no matter how trivial, turns the offer into a counteroffer. In determining whether or not there was an effective acceptance of the contract, the points generally considered are those of intent, the manner of acceptance, the timeliness of the acceptance, and whether or not that acceptance was unconditional. The manner of acceptance is also important. There must not have been any jest or proposed change in the offeree's mind or in the manner in which the offeree accepted the offer
. Responsibility of agents when receiving an offer - page 123
All offers must be presented! Some states have specific time requirements for the presentation of offers. The rule that requires all offers to be presented means that an offer must be presented no matter how low or ridiculous it might be. The agent does not have the authority to dismiss an offer without presenting it unless the party has given the agent instructions to the contrary. The exception to the "all offers must be presented rule" is that an agent can reject an offer of a certain price if the seller has given the agent written instructions to do so.
Presentation of offers - methods - page 123
All offers must be presented! Some states have specific time requirements for the presentation of offers. The rule that requires all offers to be presented means that an offer must be presented no matter how low or ridiculous it might be. The agent does not have the authority to dismiss an offer without presenting it unless the party has given the agent instructions to the contrary. The exception to the "all offers must be presented rule" is that an agent can reject an offer of a certain price if the seller has given the agent written instructions to do so. The communication or submission of an offer should be done promptly because the license holder's duty is to keep the principal or client informed at all times of material information. A license holder who fails to communicate an offer promptly may be subject to a lawsuit by the seller and may be disciplined by the real estate commission that issued the license.
Contract terms - page 154
Contingencies need to be specific and measurable. A contract that is contingent upon the buyer and seller negotiating seller financing satisfactory to both parties is vague and illusory. Any language that makes the contract subject to the parties agreeing to negotiate a point in the future will most likely render the contract unenforceable. Failure of a contingent event to occur does not invalidate a contract. Consider a contract with a financing contingency. If the buyer fails to obtain approval, he or she has the right to terminate the contract according to its terms. However, a party can always waive a contingency. The buyer who has the means to close without financing can simply proceed with the transaction and close.
. Finance laws - ECOA, TIL, RESPA, CRA, Dodd Frank Act - page 199
ECCOA- The Equal Credit Opportunity Act (ECOA), originally passed in 1974, ensures that all consumers are given an equal chance to obtain credit. • Truth In Lending Act (TILA) Real Estate Settlement Procedures Act (RESPA) CRA- A significant federal law that affects lenders is the Community Reinvestment Act. This federal law was passed to ensure that banks would serve the needs of the community in which they were chartered to do business. (CRA) Dodd Frank Act- This landmark legislation represents a sweeping restructuring of U.S. financial regulation in response to the worst financial crisis in the United States since the Great Depression. . The official purpose of the law is to promote the financial stability of the United States by improving accountability and transparency in the financial system, to end "too big to fail," to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes
. Types of leasehold estates - page 108-109
Estate for years - a lease with a definite beginning date and definite ending date. The lease period does not have to be for years. Periodic tenancy or periodic estate - a lease that renews itself automatically for like periods. Typical examples would be a month-to-month or a week-to-week lease. Tenancy at sufferance - is an interest in leased property created when the holdover tenant (one whose lease has ended and who refuses to leave) is occupying the leased property against the owner's will Tenancy at will or estate at will- a leasehold in which a tenant occupies real estate with the permission of the owner for an uncertain or unspecified length of time; this is a very loose agreement
Contract terms including addendum, amendment, contingency, waiver - page 156
Is the fulfillment of the contingency achievable? Does the contingency, addendum, or amendment conflict with other terms of the contract? A contract that gives the buyer 30 days to obtain financing makes little sense if the closing date is 20 days from the effective date of the contract. Can performance be measured? Provisions in a contract must not be vague. They must be clear enough for all parties to know that each is complying with the terms of the contract.
. Residential financing options - page 134
Financing information may be incorporated entirely in a separate addendum or may be a part of the contract form. The most common type of financing is obtained from a third party, such as a mortgage company or bank. In Texas, financing information is now on a separate addendum. Another possible financing scenario would be the assumption of the seller's existing mortgage. All FHA and VA loans are assumable. Conventional loans are generally not assumable. A third possibility is seller financing, with the seller agreeing to accept a portion of the sales price in the form of a promissory note, which usually calls for the payment of monthly principal and interest.
Methods of creating easements - reservation, prescription, necessity, grant, agreement, condemnation - page 81
Grant - the easement is given specifically by one party to the other. "A" sold lot "B" and granted the easement in the deed. • Reservation - the seller, in granting property to a buyer, reserves an easement in the deed. "B" sold lot "A" and reserved the right to cross over "A" in the deed. • Implied grant - in selling lot "B," "A" did not actually grant the easement in writing but implied in word or action that access to property "B" would be by easement. • Prescription - continuous use of the land over time without the permission of the owner establishes the right to use the land. (An encroachment is the unauthorized intrusion of another's property onto an adjoining property. An encroachment that is allowed to remain can eventually acquire the right to be there.) Prescription may also be called limitation. • Necessity - the courts may award an easement to a property owner who has no legal access to his or her land. (Usually in the case of "landlocked" property.) • Condemnation - The government, under its power of eminent domain, takes an easement
Default remedies and their results - page 137
In the event of default by the seller, the buyer becomes the injured party. The buyer may have the following options: • Specific performance (see above) • Monetary damages (see above) • Refund of earnest money - The buyer's acceptance of an earnest money refund terminates the contract, releasing both parties from any further obligation under the contract. Because this is a refund of the buyer's earnest money, this cannot be considered liquidated damages.
. Paragraph 21 of the 1-4 Family Sales Contract - page 277
No Effective Date - Often, the last agent who obtains a signature on the agreement during the negotiations fails to date the contract on behalf of their broker. Title Policy and Survey -Now that the Standard Printed Exceptions to Title Policy coverage has checkboxes for the agents to show the election of the buyer for an amendment to the language in Paragraph 6, exception #8, too many agents are overlooking that provision altogether and are not showing whether the buyer wants the amendment or not . Notices - Many agents fail or refuse to fill in the contact information for their clients in Paragraph 21 (Notices), or they enter their own contact information so that they can stay in control of the flow of information. Termination Option - The termination option clause requires strict compliance with the deadlines for notices and the deposit of the option fee with either the seller or the listing broker. license holders should not enter their contact information in Paragraph 21.
Economic and physical characteristics of land - page 44
PHYSICAL 1. Indestructibility or durability refers to the fact that land cannot be destroyed. It remains, no matter what happens to it. It may go underwater, become a crater, or be added to. In any case, the land will still be there; it is permanent. 2. Immobility refers to the fact that land cannot be moved. When personal property is purchased, the buyer can move it to a new location. When land or rights in land are purchased, the owner must go to the land. 3. Nonhomogeneity refers to the fact that no two parcels of land are the same. Even two identical-looking lots in a subdivision at least differ in their position on the earth. Each parcel of land is unique. ECONOMIC 1. Scarcity comes from the theory of supply and demand 2. Modification refers to the fact that value is affected by man-made changes to the land. 3. Fixity refers to the fact that land, and additions to the land, such as buildings, take long periods to pay for themselves. 4. Situs refers to the location of the property or land from an economic, not a geographic viewpoint.
. The SAFE Act - terminology - page 197
SECURE AND FAIR ENFORCEMENT FOR MORTGAGE LICENSING ACT (SAFE ACT) The Secure and Fair Enforcement for Mortgage Licensing Act is designed to enhance consumer protection and reduce fraud.
RESPA - rules and prohibitions - page 269
Section 8 of RESPA prohibits any person who, pursuant to any agreement or understanding, gives or receives a fee or a thing of value (including payments, commissions, fees, gifts, or special privileges) for the referral of settlement business. Payments in excess of the reasonable value of goods provided or services rendered are considered kickbacks.
Leases and "right of first refusal" - page 19
Some residential leases contain a right of first refusal, giving the tenant the right to purchase the leased property by matching or bettering any offer before the property will be sold to someone else.
Paragraph 11 - Special Provisions - what can an agent write - page 135
This space is where terms can be addressed that are not covered in standard contracts or addenda forms. In all states, license holders are barred from the unlawful practice of law. Therefore, license holders should ensure that any special provisions added to a contract are factual statements that do not change the legal effect of the contract
Ownership estates - severalty, joint tenancy, syndicate, tenancy in common, entirety - page 45
estate in severalty- involves ownership of real estate by one individual or entity. Joint tenancy- 2 or more UNMARRIED, 50% on everything. less popular syndicate- a group of individuals or organizations combined to promote some common interest. tenancy in common- is ownership of real estate by two or more entities in undivided interests. Because these interests are undivided, all co-owners share the right of possession of the property. Tenancy by the entirety - refers to a form of shared property ownership that is reserved only for married couples. A tenancy by the entirety essentially permits spouses to jointly own property as a single legal entity. This means that each spouse has an equal and undivided interest in the property.