CE MD Exam Prep: Section 15

encroachment

the intrusion of some structure or object across a property's boundary line. won't be recorded, but will appear on surveys

What's included in a CLUE Report?

- Insurance company names and policy numbers - Claim information, including dates, loss types, and loss payments

Radon is found in which two places? A) Soil B) Public water system C) Private wells D) Wastewater system

A) Soil and C) Wells

Which of these scenarios does NOT require a Maryland licensee to disclose their licensed status? A) Carol's brother is representing Carol in her purchase of a condo in Columbia. B) Deirdre just put her niece's house on the market. C) Pat is selling a property that his investment company flipped. D) Paul has listed his parents' Ocean City beach house for sale.

B) Nieces house on the market. Licensees must disclose when they're acting on behalf of an immediate family member, an entity in which they have an ownership interest, or another affiliated licensee/employee of their brokerage or in their team/group.

tax abatement

Can increase taxes

Common roof problems:

Discolored/curling shingles, water buildup or ice damming in gutters, damage to flashing, water damage along the fascia, and cracks, holes, or rotting on the soffit

True or False: In most states, if an inspection uncovers adverse material facts about the property, licensees have the responsibility to disclose those facts to all parties involved in the transaction.

False

the DISCLOSURE statement must..

- Disclose the items that the Maryland Real Estate Commission (MREC) requires to be disclosed about a property's physical condition. - Include a list of defects, including latent defects, or information about which the seller has actual knowledge related to: Water and sewer systems, including the source of household water, water treatment systems, and sprinkler systemsInsulationStructural systems, including the roof, walls, floors, foundation, and any basementPlumbing, electrical, heating, and air conditioning systemsWood-destroying insectsLand use mattersHazardous or regulated materials, including asbestos, lead-based paint, radon, underground storage tanks, and licensed landfillsAny other material defects about which the seller has actual knowledgeThe smoke detectors Whether a carbon monoxide alarm is installed on the property (if the property relies on the combustion of a fossil fuel for heat, ventilation, hot water, or clothes dryer operation)

types of seller deceits:

- Failing to provide disclosure statements - Lying on the disclosure form - Refusing to answer buyers' direct questions regarding property condition - Lying about property condition - Concealing a defect with the intent to deceive the buyer

Exterior Property Conditions

- Mulch mounded against a house or other structure with wood frame siding can hold moisture against the siding, leading to wood rot. - A sinkhole or settling beyond what's typically expected may be a sign of mine subsidence (a gradual sinking or caving in), underground storage tanks, or other buried hazards. - A vent pipe protruding from the ground may also be a sign of an underground storage tank. - Soft spots and mounds may indicate that the property was used for waste disposal.

Duties to seller for Maryland Property Disclosure and Disclaimer Statement:

- Provide the seller with the most current version of the disclosure/disclaimer form. - Ensure the seller marks every item in the form, so that the form is considered "complete." - Advise the seller to confer with legal counsel or consult with professionals in specific areas if the seller is uncertain how to respond to the questions posed in the disclosure form. - Ensure they understand their rights and obligations with regard to the disclosure/disclaimer statement. Submit both parts of the form to prospective buyers.

Duties to buyers for MD Disclosure:

- Provide them with the disclosure/disclaimer on or before they enter into the sales contract. - Ensure they understand their rights and obligations with regard to the disclosure/disclaimer statement.

mediation of warranties

- a neutral third party helps the homeowner and the company resolve the problem by facilitating discussion between them. - if mediation fails, homeowner can go to arbitration (listens to both sides)

What do warranties cover?

- repairs and replacements of most major home appliances and system components due to failure, standard usage, and other problems associated with age or wear and tear. - workmanship and materials related to specific components, such as the HVAC system, plumbing, electrical, and structural issues.

what can a buyer do if a seller doesn't disclose all?

- terminate the agreement (if seller didn't disclose in timeframe) and get earnest money refunded - ask seller to make repairs if it's discovered after closing - issue of deceit after closing, buyer can sue for breach of contract or fraud

the DISCLAIMER statement must

-Disclose any latent defects that the seller knows about about but that a purchaser would not reasonably be expected to discover by a careful visual inspection of the premises, and that would pose a direct threat to the purchasers' or occupants' health or safety - State that, except for latent defects, the seller makes no representations or warranties as to the real property's or its improvements' condition - State that the purchaser will receive the real property "as is," with all defects, including latent defects, that may exist, except as otherwise provided in the contract of sale for that property

Common Electrical Problems

-switches that are warm to the touch -lights that burn out frequently or dim when other items are used -burnt out or discolored outlets -faulty appliances -old or damaged circuit breaker panels

Comprehensive Loss Underwriting Exchange (CLUE)

A report that summarizes all insurance claims filed relative to the property within the last seven years

Charlie and his girlfriend, Frankie, are buying a house together. Having found the perfect home, they made an offer without first having seen the seller's property disclosure/disclaimer statement. The statement arrived two days after they entered into the contract with the seller. How many days do Charlie and his girlfriend have to rescind their offer if they find something in the disclosure that makes them uncertain about the property? A) Five days B) Seven days C) Ten days D) Three days

A) Five days

Which of the following specifically states that all licensees are required to disclose material facts that they know—or should know—to every prospective buyer? A) Maryland Broker's Act B) Maryland Real Estate Commission's Code of Ethics C) Maryland Residential Property Disclosure and Disclaimer Statement D) Maryland's Multiple Listing Service

A) Maryland Broker's Act.

If the seller elects to complete the disclosure section of the Maryland Residential Property Disclosure and Disclaimer Statement form, who is required to sign and date it? A) The buyer and seller only B) The buyer only C) The buyer, seller, and their agents D) The seller only

A) The buyer and seller only. The seller is verifying that the form is complete and accurate as of the date it is signed, and acknowledging that they've been informed of their rights under Section 10-702. The buyer is acknowledging that they've received the disclosure, and that they've also been informed of their rights under Section 10-702.

As you've learned, the seller must provide the Maryland Residential Property Disclosure and Disclaimer Statement to the buyer upon or before entering into a contract of sale with the buyer. However, there are exceptions to this requirement. In what two situations must the statement be delivered before the contract is executed? A) In the case of an option to purchase agreement, or a lease agreement containing an option to purchase provision B) In the case of a sale by a lender or the lender's affiliate or subsidiary C) In the case of a transfer by a fiduciary while administering a decedent's estate, guardianship, conservatorship, or trust D) In the case of a land installment contract

A) purchase agreement and D) land installment

Wendell just listed Barb's home. Barb told him that there weren't any easements on the property, and Wendell hasn't seen a copy of the survey. What is Wendell's responsibility relative to the disclosure of any easements? A)He only needs to disclose easements if they're known. B)He should commission a survey if an existing one can't be found. C) He should do a title search to confirm any easements. D) He should require his seller to do online research in the county records database.

A)He only needs to disclose easements if they're known. (Sellers and listing agents must only disclose easements of which they have actual knowledge. If neither are aware of any easements, then the buyer will typically discover them during due diligence.)

How can you actively gather information about a property's material facts without acting outside of the scope of your expertise? Select all that apply. A) Have the seller complete the disclosure/disclaimer forms B) Pay for a professional inspector to inspect the property C) Perform your own self-inspection of the property D) Review the property's survey data to verify its accuracy E) Verify the seller's information by checking public records F) Question the seller about every item she discloses

A, C, D, E

Common HVAC Problems

AC (doesn't kick when temp is adjusted), furnace (kick on when temp. adjust or pilot won't stay on), hot or cold rooms (duct problem or temp control), heating and cooling (Type and age

Why might a CLUE report be blank? (2 choices) A) Someone deleted it B) it was filed more than seven years ago C) property insurance company doesn't participate in CLUE

B and C

Your home inspector Mason found some discoloration in the attic and near the windows on the second floor. Why does he think this may be a concern? A) Dark stains in the attic could mean plumbing problems. B) It could be a sign of fire damage. C) It means that the homeowners haven't insulated well. D) It's indicative of insect activity.

B) It could be a sign of fire damage. (Discoloration in the attic or around windows and doors can be signs of a previous fire. The discoloration could be from smoke moving to the highest level of the house or escaping out openings in the home.)

What would you tell your clients that the disclosure statement is? A) It is the warranty by the seller that the property is in good condition. B) It is the seller's representation of the property's condition. C) It is a substitute for a home inspection of the property. D) It is the findings of the seller's own careful inspection of the property.

B) It is the seller's representation of the property's condition.

Which of the following specifically states that real estate licensees must make reasonable efforts to discover all material facts about each property they list? A) Maryland Broker's Act B) Maryland Real Estate Commission's Code of Ethics C) Maryland Residential Property Disclosure and Disclaimer Statement D) Maryland's Multiple Listing Service

B) Maryland Real Estate Commission's Code of Ethics. The Maryland Real Estate Commission's Code of Ethics states that real estate licensees must make reasonable efforts to discover all material facts about each property they list.

What three actions may the city (or county) require to rectify the situation if a permit wasn't pulled? A) No action would be required, as the sunroom isn't considered "living" space B) Partial disassembly to inspect the work C) Full disassembly back to the original state D)Correcting issues associated with the addition

B) Partial disassembly to inspect the work C) Full disassembly back to the original state D)Correcting issues associated with the addition

How often can property owners obtain a free copy of the CLUE report? A) twice a year B) once a year C) every five years

B) once a year

What is the purpose of a home inspection? A) To assist the seller with completing any required property disclosures B)To provide the buyer with a true picture of a property's condition C) To support the home inspection industry

B)To provide the buyer with a true picture of a property's condition

Before she can count her commissions, though, she's got some paperwork to get through. Since she wants to stay on the right side of the Maryland Property Condition Disclosure Law, which of these sellers does Amelia need to remind about completing the Residential Property Disclosure/Disclaimer Statement? A) Bryce, who, as the executor of his deceased mother's will, is selling her house B) Erica, who's selling her five-unit apartment building to an investor who will be converting it to retail space C) Mikey, an investor who's selling a property that he converted into a three-unit apartment building D) Tessa, who represents a lender that's selling a foreclosed four-bedroom ranch-style home that sits on three acres

C) Mikey, an investor who's selling a property that he converted into a three-unit apartment building. Unimproved properties, new construction, transfer tax-exempt properties, foreclosures/REOs, sheriff's/tax sales, court-appointed transfers, and properties that will be converted to commercial use or demolished are exempt from the disclosure requirement.

Stan is a home inspector who's evaluating a home for potential buyers. He pointed out that neither of the two bathrooms had vent fans installed. Why is this a potential problem that will be noted on the inspection report? A) Bathroom fans can mitigate lead paint particles. B) Bathroom fans vent radon to the exterior of the home. C) The lack of air circulation in a moist room can lead to mold growth. D) Unseemly smells located that close to the kitchen are a problem.

C) The lack of air circulation in a moist room can lead to mold growth.

What is the most common way that asbestos enters the body? A) Asbestos coating in water pipes can contaminate drinking water, which is then ingested. B) Asbestos in paint can be released into the air as the paint peels, which is then inhaled or ingested. C) When asbestos fibers decay or are disturbed, the friable particles can be inhaled. D) When rocks and soil decay, asbestos gas is released, which is then inhaled.

C) When asbestos fibers decay or are disturbed, the friable particles can be inhaled.

Can or Can't Rescind? Trevor received the seller's disclaimer statement from the listing agent two days before entering into the sales contract...

Cannot rescind. A purchaser who receives the disclaimer statement on or before entering into the sales contract does not have the right to rescind the sales contract based on the information contained in that statement.

Maryland's Property Disclosure Law

Code of Maryland Section 10-702, establishes the requirements for the residential property condition disclosure and disclaimer statements. Under this law, sellers of single-family residential real properties that include four or fewer single-family units must provide buyers with one of the following: - A written residential property condition disclosure statement - A written residential property disclaimer statement

When a buyer finances a newly built home with a Federal Housing Administration loan, what does the FHA require the builder to do? A) Create a fund equaling 20% of the home's cost set aside to cover construction defects for the next 10 years B) Provide a builder-backed home warranty C) Provide the buyer with a 30% discount on materials and labor for home repairs D) Purchase a third-party home warranty to protect the buyer

D) Purchase a third-party home warranty to protect the buyer

All of the homes on Elm Street are currently on septic systems. However, the county plans to extend the sewer lines to Elm Street within the next two years. What's the biggest reason why it's important for your buyers to know this? A) Public sewers have a better safety record than septic systems. B) Sewer installation means construction traffic. C) Some people prefer septic systems to having to tie into public sewers. D) The county will likely impose an installation fee on Elm Street residents to cover the costs.

D) The county will likely impose an installation fee on Elm Street residents to cover the costs.

Bridget represents Colin, who's buying Hugh's house. Darcy represents Hugh. Hugh completed and signed the Residential Property Disclosure/Disclaimer Statement, and Colin reviewed and signed it. Hugh and Colin also signed the Section 10-702 notice form, and their agents made sure a copy of the form and the disclosure statement were included in the finalized contract. What's missing from this scenario? A) Only the disclosure statement needs to be included in the final contract. B) Only the notice form needs to be included in the final contract. C) The buyer and seller don't need to sign the notice form, the licensees do. D) The licensees also need to sign the notice form.

D) The licensees also need to sign the notice form.

What's the purpose of the warranty? A) To allow the buyer to change cosmetic features of a home B) To provide a guarantee to the buyer that the developer will buy back the property at fair market value if the buyer isn't happy with the purchase C) To allow the buyer the option to customize features of the home D)To protect the buyer in the event that certain defects or adverse actions occur

D)To protect the buyer in the event that certain defects or adverse actions occur

Which of these items could contain asbestos? A) Rocks and soil B) Flooring C) Walls D) Heating systems E) Roofs F) All of the above

F) all of the above

True or False: Regardless of whether a buyer is represented by a licensee or not, the seller agent is responsible for explaining to the buyer the buyer's rights and obligations with regard to the disclosure.

False

True or False: Per the Maryland Broker's Act, you are required to disclose only the material facts that you know about to prospective buyers.

False. This statement is false. The Maryland Broker's Act requires all licensees to disclose material facts that they know—or should know—to every prospective buyer. This means that you need to do more than just accept the seller's information at face value. You need to check the information that the seller provides.

Which personal interests require disclosure?

Licensed status disclosure applies when the licensee is acting on behalf of: an immediate family member, an entity in which the licensee has an ownership interest, or another affiliated licensee or employee of the licensee's brokerage or a team/group of which the licensee is a member.

What do licensees have to disclose?

MAAP: Material - info that could determine what course of action to take Adverse - negative, could reduce property value Actual - have actual knowledge of property Physical - foundations that may not be immediately apparent

True or false: buyers who DO NOT receive the disclosure or disclaimer statement before or upon entering into a sales contract have the unconditional right (upon providing written notice to the seller or seller's agent) to rescind the sales contract any time before receiving the disclosure or disclaimer, or within five days after they receive it.

TRUE

True or False: Buyer's agents must request permission from the buyers to provide copies of inspection reports.

True

True or False: In caveat emptor states, buyers will usually identify easements and encroachments while doing due diligence.

True

Common plumbing problems

Water damage on ceilings/walls, leaking/blocked drains, clogged/leaking toilets, reduced water pressure, and soggy ground around the home

easement

a right to cross over or otherwise use another person's land for a specified purpose. A common type of easement is a utility company's right to access a property's lot to maintain its power lines.

National Flood Insurance Program (NFIP)

administered by the Federal Emergency Management Agency (FEMA), was established to help homeowners in flood hazard areas obtain insurance.

material fact

any fact that, if known to the buyer, would likely influence the buyer's decision to purchase the property, or to purchase it at a certain price, or with certain conditions in place.

Common Foundation Problems

basement wall cracks/leaks (indicate foundation problem), interior like misaligned doors and windows, exterior (separation around garage door)

seller responsibilities

caveat emptor: disclose only required by law but don't like or cover up full seller disclosure: disclosure of ALL things on form

licensee representing seller responsibilities

caveat emptor: notify seller of items that must be disclosed/to not lie or hie full seller disclosure: disclose ALL known stuff

licensee representing buyer responsibilities

caveat emptor:obtain seller disclosure to provide to buyer; seller disclosure is insufficient for due diligence; counsel buyer to obtain inspection full seller disclosure: same as above

buyer responsibilities

caveat emptor:review disclosure, investigate, ask questions, get an inspection full seller disclosure: all of the above but ask about red flags

Common Fireplace and Chimney Problems

creosote (stains on outside that can indicate unlined flue), drafts (flue or ventilation problems), cracked or sloping fireboxes and hearths

What did the National Flood Insurance Act of 1968 do?

established flood mitigation measures for flood-prone areas and subsidies for flood insurance for homeowners in these areas.

caveat emptor

he buyer is responsible for performing due diligence on the property, and the seller isn't responsible for disclosing everything, or for protecting the buyer; sellers aren't obligated to point out flaws or defects to buyers. seller doesn't need to say anything unless the buyer asks

when do you need a lead disclosure?

if the property is residential and built prior to 1978,

latent defects

negative conditions about a property that may not be readily visible to everyone.

full seller disclosure state

the seller must put the buyer on notice if there is a flaw or defect like a leak in the roof