Chapter Summaries

Chapter 9 Summary

Estates: An estate in land is the degree and type of ownership interest that someone has in a particular piece of property. A freehold is the outright ownership of land or real property for an unending period of time, whereas a leasehold is the ownership of the right to hold land or real property for a specific period of time, after which the land or property reverts to the original owner. A freehold estate means "I own the property." It is what we think of as "ownership." There is no definite ending date. The estate lasts at least a lifetime, because the property can be willed to a person's heirs. There are 4 types of freehold estates: Fee simple, also called fee simple absolute Fee defeasible Life estate Fee tail Leasehold Estates: A leasehold estate means "I rent the property." It is what we typically think of as "renting" or "leasing." Under a leasehold a landlord owns the property in freehold but rents or leases it to the tenant in leasehold. There is usually a definite ending date to a leasehold. There are 4 types of leasehold estates: Estate for years, also called tenancy for years Estate for period, also called periodic tenancy Estate at will, also called tenancy at will Estate at sufferance, also called tenancy at sufferance Freehold Estates: A fee simple, or fee simple absolute is an estate in land and is the highest degree of ownership possible in land or real property. Under a fee simple estate the owner owns the bundle of rights. Highest degree of ownership. Has unlimited duration. Is inheritable. Is subject to only the government powers. A fee simple defeasible an estate in land that is identical to a fee simple estate but has a condition or conditions placed upon it and is therefore subject to that condition or conditions. It is a conditional fee simple estate. It is an estate that dictates "on the condition that..." The words of conveyance will be durational "so long as..." or "while..." A life estate is the freehold ownership of land or real estate that is limited to the duration of a specified person's lifetime. A life estate in non-inheritable and ends when the life tenant dies, at which point the ownership reverts back to the previous owner. There are 2 types of life estate: Voluntary life estate Legal life estate, also called Involuntary life estate There are 3 types of voluntary life estate: Estate in reversion Estate in remainder Estate in reservation A legal life estate is created by the process of laws and NOT by the owner of property. Legal life estates are also known as involuntary life estates or marital right. There are 3 types of legal life estate: Dower Curtesy Homestead A fee tail is a freehold estate that restricts the current owner from selling or willing a property. Under fee tail the right of inheritance is limited to a fixed line of succession, consisting of the direct "blood relatives." The incumbent owner of a property CANNOT sell or dispose of the property, and the property MUST be willed to a direct descendant of the current owner. Fee tail was only recognized in the U.S. by a few states and was abolished in those that did many years ago. Taking Title: In a typical real estate transaction the grantor is the seller and a grantee is the buyer. The grantor decides what type of estate is to be transferred and the grantee decides how to take title to an estate. Title is the legal right of ownership of land or real property. ALL property has an owner, and broadly speaking, an estate in real property may be owned in the following ways: Separate ownership, or ownership in severalty; Co-ownership including; Tenancy in common; Joint tenancy; or Community property. Separate ownership is ownership by a single individual. It is often called ownership in severalty because means being separate. Therefore ownership in severalty refers to the ownership being separate from everyone else. Co-Ownership: Co-ownership exists when two or more persons or organizations take title to an estate at the same time. There are 3 main forms of co-ownership: Tenancy in common Joint tenancy Community property Tenancy in common occurs when 2 or more people hold ownership concurrently, with each having the right to individually possess, will, or sell their interest in the property. Each tenant in common's interest does NOT have to be equal to the other tenants in common. Joint tenancy occurs when 2 or more people hold ownership concurrently, with each having an EQUAL interest in the whole property, with the same rights of possession and the right of survivorship as one another. Joint tenancy CANNOT be willed and CANNOT be created by operation of law. In order to have a joint tenancy and the right of survivorship, the 4 unities of ownership must take place. Time: All the co-owners must take title at the same time. Title: One deed transfers property from the grantor (seller) to the grantee (buyer). Interest: Each co-owner must have equal interest. There cannot be unequal interests in a joint tenancy. Possession: Each co-owner must have an undivided interest in the whole property as in tenancy in common. Community property refers to all property acquired by a husband and wife DURING a marriage. Nevada is a community property state and so any property acquired during a marriage must be shared EQUALLY between the partners. Under the community property laws, there are 2 types of property: Community property is anything that is acquired DURING a marriage. Separate property is anything that a spouse acquired before a marriage, after a marriage ends, or acquires by gift or inheritance during a marriage. Homesteads: A homestead is a piece of property that is owned, occupied and used as a family's home. Although not valid in all states, homestead exemption laws ARE valid in Nevada. The homestead exemption laws are designed to protect a portion of the value of a family's home against judgment debts, taxes, or the death of the homeowner. Encumbrances: An encumbrance is anything that burdens or limits a person's title to a property. It could be described as the right one person has in the property of another person. There are 2 ways an encumbrance affects the title to a property: By money owed; or By items that affect the physical use of the property. Typical examples of encumbrances include: Liens Easements Encroachments Deed Restrictions Building Restrictions and Zoning Licenses Leases Liens: A lien is an interest in a property that is used to secure a payment for a debt or the discharge of an obligation owed. Examples: Type of Lien General or Specific Voluntary or Involuntary Statutory or Equitable Judgment Lien General Involuntary Equitable Income Tax Lien General Involuntary Statutory Mortgage Lien Specific Voluntary Equitable Mechanic's Lien Specific Involuntary Statutory Property Tax Lien Specific Involuntary Statutory A voluntary lien is a money debt that the owner agrees to pay. Voluntary liens are created by a person taking out a loan to finance the purchase of a property. An involuntary lien is an unpaid money obligation (a debt) that creates a burden (a lien) on a property belonging to the debtor (the person owing the debt). A specific lien is a lien that is applied to a specific piece of property and affects only that piece of property. A general lien is a lien against a person and all that person's assets (all real and personal property) as a result of a lawsuit when the court awards a judgment. A trust deed, also known as a deed of trust, is a written instrument that makes real property collateral for a loan. This is a type of security device that is both voluntary and specific. In Nevada, a deed of trust is the USUAL security device for real property. A Mortgage is a lien that is used to secure real property for the payment of a promissory note, or debt. Like a trust deed, a mortgage is both voluntary and specific. In Nevada, a mortgage is RARELY used in financing real property. A tax lien may occur due to the non-payment of any form of tax, although the most common types are income and property taxes. If the lien isn't settled, the property may have to be sold in order to pay delinquent taxes owed to the government. A special assessment occurs when a public authority levies a "one-time" tax to cover the cost of a specific local improvement. The tax is only levied upon those properties that will receive a direct benefit from the improvement. An attachment lien occurs when a court issues a judgment against a property owner and the judgment is attached to the property in order to ensure the owner pays the judgment. Liens are paid in the order of priority as set by law as follows: Cost of sale Property taxes Mechanic's liens First mortgage or deed of trust All other mortgages and liens Easements: An easement is an interest in another's land. It is not a lien, but rather, it is a RIGHT. Easements give a third party the right to USE a part of an owner's property while the owner retains all the ownership rights. An easement can be created in several ways. The most common of these are: Implication. An easement that arises the acts or conduct of the parties that implies an easement exists. Reservation. A grantor grants property to another but in doing so a new right (easement) is created. Necessity. An easement that is created by a court of law in cases of justice, or if an easement becomes necessary for a party's wellbeing. Condemnation. A judicial or administrative proceeding to exercise the power of eminent domain. The agency taking the property is the condemner, and the person whose property is being taken is the condemnee. There are 4 types of easements: Appurtenant In Gross Necessity Prescription Encroachments: An encroachment is an unauthorized intrusion into another person's property. Usually the cause of an encroachment is a building or other improvement on one owner's land that intrudes (encroaches) into the land of another owner. Typical examples of an encroachment include: A fence placed on a neighbor's side of a property line. Tree limbs hanging over a neighbor's property line. The eaves of a roof protruding over a neighbor's property line. Deed Restrictions: A restriction is an encumbrance on the use of a property. A deed restriction is a condition, covenant, or restriction that is written into the deed of a property. The conditions, covenants, or restrictions written into a deed are referred to as CC&Rs. Restrictive covenants are usually placed in a deed by the grantor of the deed, thereby binding not only the new owners, but also all future owners of the property. A restrictive covenant limits the use of a property and may be a limiting restriction or an affirmative restriction. Marketable Title and Title Insurance: Evidence of titleis needed the by owner and the lender to provide a marketable title to a buyer. In Nevada, title insurance is used to provide evidence of both the title and the marketability of the title. There are two main groups of title insurance policies: A Standard Policy covers ONLY those things that appear on the public record. This is the most widely used policy, and can be divided into three sub-categories: An Extended Policy covers things that do NOT appear on the public record, such as encroachments and can be divided into two sub-categories: Title Defects. Title defects are hidden risks in a title that are not apparent or known to the buyer or his or her agent. A title insurance policy will protect the insured party against losses arising from title defects. Cooperatives and Condominiums: In a cooperative the cooperative owns he entire property, whereas in a condominium each individual person owns his or her individual unit. In a cooperative the members own stock in the cooperative, whereas in a condominium the individual owners can have fee simple ownership. In a cooperative the members (stockholders) have long-term leases (proprietary leases), whereas in a condominium each individual owns his or her individual unit. In a cooperative the members make monthly payments for rent, taxes, insurance, management, and maintenance to the cooperative, whereas in a condominium each individual makes his or her own mortgage, insurance and tax payments.

Chapter 20 Summary

FHA VA Who? Anyone with qualified income. Eligible Veterans only or widows of veterans who have not remarried. Govt. Support FHA is a Federal Agency under HUD. It insures the lender against loss due to small down payment. VA guarantees loans by making the veteran personally liable. Who lends the money? Any lending institution approved by FHA. Any lending institution approved by VA or, on rare occasions, VA itself will lend directly. Interest rates Negotiable between lender and borrower. Free-flowing in the market place. Negotiable between lender and borrower. Free-flowing in the market place. Points Prepaid interest payable by either buyer or seller or both. Points vary in the market by lender. Prepaid interest payable by either buyer or seller or both. Points vary in the market by lender. Types of Properties 1-4 family, owner-occupied. 1-4 family, owner occupied. Down payment Averages 5% down. Down payment is subtracted and closing cost added to establish an ACQUISITION COST. NO DOWN PAYMENT REQUIRED. Appraisal House must appraise at Acquisition Cost or sale price, whichever is lower. House must appraise at either the sale price or the CERTIFICATE OF REASONABLE VALUE, whichever is lower. Assumptions Allowable under some conditions. Must have FHA approval for all loans after 1987. Allowable but must be a QUALIFIED VETERAN for the seller to be relieved of liability. Requires substitution of eligibility of new veteran. If non-veteran or non-approved veteran assumes, the original veteran is still liable. If a veteran sells and pays off a VA loan his/her eligibility may be used again without restriction. FHA Loans: The Federal Housing Administration, or FHA, is an agency of the U.S. federal government that was created in 1934. The FHA is overseen by the U.S. Department of Housing and Urban Development (HUD). The FHA insures loans on real property made by qualified or approved lending institutions. The FHA does NOT build homes and it does NOT lend money itself.The term "FHA loan" refers to a loan that is insured by the FHA, not lent by the FHA. VA Loans: The U.S. Department of Veterans Affairs, or VA, is an agency of the U.S. federal government. The VA guarantees loans for real property that are issued by qualified lenders in order to provide long-term financing to veterans, or the surviving spouse of a veteran. A veteran borrower must fulfill certain requirements in order to qualify for a VA loan, these requirements include: Must have served 181 days active service in the military during peacetime; or Must have served 90 days active service in the military during wartime; or Must have served 6 years or more in the National Guard or Reserves; or Must be the spouse of a service member who died in the line of active duty. A veteran's basic entitlement is $104,250. Lenders will generally lend up to four times a veteran's available entitlement without requiring a down payment. There is NO maximum VA loan, but lenders will generally limit VA loans to $417,000. The property must be owner-occupied for at least one year. A qualified veteran may borrow up to 100% of the loan with no down payment. Veteran must first apply for a Certificate of Eligibility in order to obtain a VA loan. The property must qualify with an appraisal and be issued a Certificate of Reasonable Value. USDA Rural Development: USDA Rural Development is a federal government agency responsible for initiating and overseeing programs designed to enhance the quality of life and the economy in rural areas of the U.S. USDA Rural Development is overseen by the U.S. Department of Agriculture (USDA). USDA Rural Development provides grants, loans and loan guarantees to support housing and economic development throughout rural America. USDA Rural Development operates over 50 financial assistance programs. The most popular for individuals and families are the Single Family Housing Direct Home Loan and the Single Family Housing Guaranteed Loan Program. Qualifying a Buyer: A qualified buyer is a person who has demonstrated that he or she has the financial capacity and credit worthiness to afford to purchase a property within a certain price range. To determine the loan amount a buyer will qualify for, the lender will assess three basic factors: Does the buyer have a stable income? What is the buyer's net worth? What is the buyer's credit history? Debt service coverage ratio (DSCR), otherwise known as the debt coverage ratio is the ratio of the purchaser's annual net income compared to the purchaser's annual debt service. Qualifying a Property: The lender will want to qualify the property because the property is the security, or collateral, used to secure the loan. If the property does not meet certain standards, it may not be sufficient to cover any debt owed to the lender is the buyer defaults. To qualify a property the lender will assess many factors, including: Type of property (residential, commercial, agricultural); Location; Area zoning; Value range; Neighborhood; Actual age, effective age and remaining economic life; Condition (repairs and predications); Special clearances (code compliance, well and septic certifications etc.); and Overall marketability. Qualifying a Title: By qualifying the title the lender is assured of the true ownership of the property, and is therefore reassured that the property cannot be seized by another party claiming ownership. A lender will qualify the title by studying: Abstract and opinion. A history of the title deeds and documents associated with a piece of real estate. These documents include mortgages, deeds, grants, conveyances, wills, records and judicial proceedings affecting title. Chain of Title.The list, or chain, of consecutive owners of a piece of real estate, from the current owner and going back to the original owner. Title Insurance. A comprehensive indemnity contract under which a title insurance company warrants to make good any loss caused by a defect in the title, or any liens or encumbrances on a piece of real estate. Loan Definitions: NON-RECOURSE LOAN - A loan in which the borrower is not held personally liable on the note. NON-RECOURSE CLAUSE - When a non-recourse clause is included in the sale's agreement, the seller of the security is not liable if the borrower defaults. DEFAULT - The non-performance of a duty or obligation that is part of a contract. The most common occurrence of default on the part of a buyer or lessee is nonpayment of money when due CONDITIONAL APPROVAL - A written pledge by a lender to lend a certain amount of money to a qualified borrower on a particular piece of real estate for a specified time under specific terms UNDERWRITING - The analysis of the extent of risk assumed in connection with a loan. APPRAISAL FEES - An appraiser's fees are typically based on time and expenses. ESTOPPEL CERTIFICATE - A legal doctrine by which a person is prevented from asserting rights or facts that are inconsistent with a previous position or representation made by act, conduct or silence. EXCULPATORY CLAUSE - A clause sometimes inserted in a mortgage note in which the lender waives the right to a deficiency judgment. IMPOUNDS - A fund of the buyer's money that the lender sets aside for future needs relating to the parcel of property. Most lenders require an impound account to cover future payments of insurance and taxes. DISINTERMEDIATION - The process of individuals investing their funds directly instead of placing money with banks, savings and loans and other savings institutions. Disintermediation has a direct influence on the scarcity of money or surplus of money available for mortgages. Loan Sources: Loan sources include: Savings and Loan Association: Also known as savings and loans, S&L, or thrift institutions, they specialize in long-term residential loans. Commercial Banks: Have become highly active in providing home mortgage, FHA and VA loans. Today, commercial banks provide the largest number of loans in the housing market. Insurance Companies: Typically prefer large commercial projects but they do make residential loans. Insurance companies like to have an equity position. Mortgage Broker: Sometimes a mortgage broker (person or firm) continues to service a loan(s). Mutual Savings Bank: Mutual savings banks are lenders in the primary mortgage market. However, mutual savings banks primarily operate in the Eastern states. Federal Reserve System: The Federal Reserve System, more commonly known as the Federal Reserve or simply the Fed, is the central banking system of the U.S. The Federal Reserve is comprised of a Board of Governors in Washington, D.C. and 12 independent regional Reserve banks that account for the economic conditions of all areas of the country when making monetary policy. The methods the Fed uses to maintain a stable economy are: The Reserve Requirement The Discount Rate Open Market Operations The Fed impacts investment in real estate through its policy on the banks' reserve requirement. Reserves are the amounts of money (assets) that banks are required to keep on hand and not lend out. Reserve Requirements Interest Rates Effect on Economy INCREASED - Lender is required to keep more money in reserve. Will go Up - Less money available to loan. Decrease in available loan funds. DECREASED - Lender is allowed to keep less money in reserve. Down - More money available to loan. Increase in available loan funds. Another way in which the Fed impacts the real estate market is by its policies over the discount rate. The discount rate is the interest rate at which the Fed charges commercial banks for borrowing money. Discount Rate Paid by Banks Interest Rates Charged to Consumers Effect on Economy INCREASED- Lenders pay more to borrow money The lender pays more, so the lender charges the consumers more The economy slows because fewer consumers will be able to qualify for loans DECREASED - Lenders pay less to borrow money The lender pays less, so the lender charges the consumers less, so interest rates will go down The economy speeds up because more consumers will be able to qualify for lower interest rate loans The Fed also influences the economy, and therefore the real estate market, by its open market operations. Open market operations (OMO) are the Fed's practice of buying and selling of government securities in order to control the amount of money in the national economy. By buying treasury bonds, the Federal Reserve is putting more money in the economy because it exchanges the bonds for cash. More money in the economy means the money supply increases, which causes interest rates to drop and the economy to boom. When the Federal Reserve sells treasury bonds the money supply decreases because cash is removed from the economy in exchange for The Fed's treasury bonds. Less money in circulation causes interest rates to rise and the economy to slow or stagnate. When the Fed adopts courses of action designed to increase spending within the economy it is known as Easy Money When the Fed adopts courses of action designed to control spending within the economy it is known as Tight Money

Chapter 12 Summary

Federal Fair Housing Laws: Civil Rights Act of 1866 - prohibits discrimination in housing based on race. Executive Order 11063 - prevents discrimination in residential properties financed by FHA and VA loans. Civil Rights Act of 1968 Title VIII - known today as the Fair Housing Act, prohibits discrimination in housing based on race, color, religion, or national origin. Housing and Community Development Act -added "sex" to the protected classes in 1974. Fair Housing Amendments Act - added "disability" and "familial status" to the protected classes. A protected class is any group of people that HUD has designated as protected under the Fair Housing laws. Today the seven protected classes under federal fair housing law are: Race Color National origin Religion Sex Disability Familial status The Department of Housing and Urban Development (HUD) is a department of the federal government, established in 1965 to develop and implement policies regarding housing and home financing. The Office of Fair Housing and Equal Opportunity (FHEO) is a federal agency within HUD, responsible for establishing policies and the administration and enforcement of federal fair housing laws. The "Equal Access to Housing in HUD Programs - Regardless of Sexual Orientation or Gender Identity" regulation added lesbian, gay, bisexual, and transgender (LGBT) individuals to the protected classes for HUD programs' purposes. Discriminatory Actions: Forms of illegal discrimination when selling or renting housing include: Refuse to rent or sell housing; Refuse to negotiate for housing; Make housing unavailable; Deny a dwelling; Set different terms, conditions or privileges for sale or rental of a dwelling; Provide different housing services or facilities; Falsely deny that housing is available for inspection, sale, or rental; For profit, persuade owners to sell or rent (blockbusting); or Deny anyone access to or membership in a facility or service (such as a multiple listing service) related to the sale or rental of housing. Forms of illegal discrimination when lending money to finance the purchase of housing include: Refuse to make a mortgage loan; Refuse to provide information regarding loans; Impose different terms or conditions on a loan, such as different interest rates, points, or fees; Discriminate in appraising property; Refuse to purchase a loan; or Set different terms or conditions for purchasing a loan. The Fair Housing Act specifically prohibits the following activities in residential brokerage and financing: Discriminatory misrepresentation. An agent may not conceal available properties, represent that they are not for sale or rent, or change the sale terms for the purpose of discriminating. Discriminatory advertising.An agent may not advertise residential properties in such a way as to restrict their availability to any prospective buyer or tenant. Providing unequal services. An agent may not alter the nature or quality of brokerage services to any party based on race, color, sex, national origin, or religion. Steering.Steering is the practice of directly or indirectly channeling customers toward or away from specific homes and/or specific neighborhoods. Broadly interpreted, steering occurs if an agent describes an area in such an opinionated way as to encourage or discourage a buyer about the suitability of the area. Blockbusting. Blockbusting is the practice of an agent inducing property owners to sell their property by telling them that members of a protected class are moving onto the area and causing house values to decrease. The agent then resells the property at higher price and profits by doing so. Restricting MLS participation. It is discriminatory to restrict a person's participation in any multiple listing services based on that person's race, color, sex, national origin, religion, sex, disability, or familial status. Redlining. Redlining is the practice of a home financing provider refusing to provide loans or services to people living within specific areas based upon the racial or ethnic composition of the area. The refusal of the loan or services is NOT based on the applicant's financial qualifications, and in effect, the lender draws a red line around an area on the map and denies all financing to applicants within the outlined area. HUD and FHEO: Administration of the Fair Housing Act is the responsibility of the Department of Housing and Urban Development, although HUD delegates this authority to the Office of Fair Housing and Equal Opportunity (FHEO). The Housing for Older Persons Act of 1995, otherwise known as HOPA, made a couple of amendments to the Fair Housing Act regarding the 55 and older exemption. Fair Housing Complaints: Complaints alleging fair housing violations must be filed with the Office of Fair Housing and Equal Opportunity within one year of the occurrence of the violation. Once it has received a complaint, HUD will then initiate an investigation in conjunction with federal or local enforcement authorities. If HUD decides that the complaint does merit further action, it will attempt to resolve the matter out of court through conciliation. If these efforts of conciliation fail to resolve the problem, then the aggrieved party may file suit in state or federal court. If neither party elects to have the case go to a U.S. District Court, then a HUD Administrative Law Judge (ALJ) will hear the case. If that ALJ finds that housing discrimination has occurred or is about to occur, the ALJ has the authority to award a maximum civil penalty of $11,000 per violation for a first offense, in addition to actual damages for the complainant, injunctive or other equitable relief, and attorneys' fees. Americans With Disabilities Act: The Americans with Disabilities Act (ADA) prohibits discrimination against, and ensures equal opportunity for, persons with disabilities in the following areas: Employment; State and local government services; Public accommodations; Commercial facilities; and Transportation The Equal Employment Opportunities Commission (EEOC) that administers the ADA states that an individual is considered to have a disability if: He or she has a physical or mental impairment that substantially limits one or more major life activities; Has a record of such an impairment; or Is regarded as having such an impairment. Nevada Fair Housing Act: The Nevada Fair Housing Act is very similar to the federal Fair Housing Act, and the protected classes under the Nevada Act include the same protected classes as those covered under the Federal Fair Housing Act: Race Color National origin Religious creed Sex Disability Familial status The Nevada Fair Housing Act also adds the protected classes of: Ancestry Sexual orientation Gender identity or expression Fair Financing Laws: There are three major laws regarding financing: The Equal Credit Opportunity Act The Truth in Lending Act The Real Estate Settlement Procedures Act Equal Credit Opportunity Act (ECO) requires lenders to be fair and impartial in determining who qualifies for a loan and prohibits lenders from discrimination against applicants for financing or loans. Truth In Lending Act (TILA) protects the public from inaccurate and unfair practices and billing by lenders and requires lenders to disclose information about their true terms and the actual costs of obtaining credit. TILA requires lenders to provide borrowers with a standardized yardstick that expresses the true annual cost of borrowing. This cost is expressed as the Annual Percentage Rate, or APR. Real Estate Settlement Procedures Act (RESPA) protects the public from unscrupulous real estate service providers and ensures the public is well educated when shopping for real estate services. RESPA prohibits all kickbacks, referral fees, or any other unearned fees paid by lending institutions to real estate licensees, title companies, etc. for referring customers.

Chapter 2 Summary

In Nevada, there are 3 types of real estate licenses that are regulated by NRS 645 and NAC 645: Salesperson Broker-salesperson Broker An applicant for a real estate salesperson license must: Be at least 18 years of age; and Submit an application to the Division along with The fee and A fingerprint card Proof that he or she has met all educational requirements A child support statement Proof that he received a passing grade on the licensing examination Any additional information required The basic requirements for applicants for broker or broker-salesperson licenses is the same as those for a salesperson, except that the applicant must meet the educational requirements for either a broker or broker-salesperson, as applicable. An applicant for a broker license must get the Division's approval that his or her financial condition is acceptable and must provide proof that he or she satisfies the experience requirements necessary to become a broker. The application form for ALL license applicants must include: Name, age, and address (including the information for others if the applicant is a group or partnership). Whether the applicant has ever been convicted of OR is under indictment for a felony OR has entered a plea of guilty, or nolo contendere to a charge of felony and, if so, the nature of that felony. Whether the applicant has been convicted of or entered a plea of nolo contendere to forgery, embezzlement, obtaining money under false pretenses, larceny, extortion, conspiracy to defraud, engaging in the business of selling real estate without a license or any crime involving moral turpitude. Whether the applicant has ever been refused a real estate broker's, broker-salesperson's or salesperson's license in any state; OR whether his or her license as a broker or salesperson has been revoked or suspended. If the applicant is a member of a LLC, partnership or association, or an officer of a corporation, the application must include the name and address of the office of the organization of which the applicant is a member or officer. If the applicant is applying for a broker's license, the application must include the name under which the business is to be conducted. For a broker applicant, the place or places - complete with street number, city, and county - where he will conduct business. ALL real estate license applicants (salesperson, broker-salesperson and broker) must submit a fingerprint card with an application for licensure in Nevada. ALL real estate license applicants (salesperson, broker-salesperson and broker) must submit a statement regarding child support, as prescribed by the Division of Welfare and Supportive Services. If this statement is NOT included, or if the applicant is NOT in compliance with his child support court order, the applicant's license WILL BE DENIED. A person may NOT be licensed as a broker unless he or she has been actively engaged as a full-time broker-salesperson or salesperson for at least 2 of the 4 years immediately preceding the issuance of a broker's license. To ensure licensees have a good moral character and to protect the public, the Division requires applicants for licenses to have a reputation for honesty, trustworthiness and integrity and be able to offer proof of this. The Division has the authority to deny an application for a license. Reasons for denial include convictions for: Forgery Embezzlement Obtaining money under false pretenses Larceny Extortion Conspiracy to defraud Engaging in a real estate business without a license Possessing for the purpose of sale any controlled substance, or ANY crime involving moral turpitude The Division may also deny a license because: The application is not in proper form The application is not accompanied by the required fees The accompanying forms are incomplete or otherwise unsatisfactory; The application contains any false statement(s) An investigation into the applicant's character and history shows that the applicant does NOT possess the necessary qualifications The applicant has willfully acted or attempted to act in any violation of the license laws If the Division denies an application, the applicant must receive notice of this denial within 15 days of the ruling, order, or decision. The applicant has 30 days after the receipt of the denial notice to file a written request for a hearing. The Commission must give a written decision on any appeal within 60 days after the final hearing and must notify all parties of that decision within 15 days of the decision being made. If an applicant for a certificate, approval, accreditation, or other type of authorization to engage in real estate submits a check or draft that is subsequently returned to the Division because of insufficient funds: If the applicant HAS received the certificate, approval, accreditation or authorization from the Division, it is involuntarily inactivated; or If the applicant has NOT received his or her certificate or other approval, the Division may refuse to issue or reinstate that authorization. All real estate salesperson applicants must successfully complete a course of instruction in real estate principles, practices, procedures, law and ethics. The course to obtain a salesperson license is 90-hours of classroom work and must include: At least 45 hours on the principles and practices of real estate, which must include: Brokerage and laws of agency, 21 hours Valuation and economics, 12 hours Finance, 12 hours At least 45 hours on the law of property and the regulation of brokers and salespersons and the ethics of selling real estate, which must include: Ownership, transfer and use of property, 25 hours State laws regarding selling real estate, ownership, subdivisions, timeshares, brokers and salespersons, appraisals, inspections and the applicable NAC, 18 hours Applied practice and statutory disclosures, 2 hours The course to obtain a broker or broker-salesperson license is comprised of 64 semester credits and must include: Any applicant for an original real estate broker's or broker-salesman's license must successfully complete 45 semester units or the equivalent in quarter units of college-level courses. This 45-hour requirement includes the following: 45 hours or 3 semester credits Real Estate Principles 45 hours or 3 semester credits Real Estate Law, which must include 18 hours Nevada law 45 hours or 3 semester credits Real Estate Appraisal 45 hours or 3 semester credits Broker Management (Nevada specific course) 15 college semester credits in other real estate related courses such as business, economics, management, accounting, finance, and marketing 37 semester level units from any college, military education, technical school, etc. Under Nevada Real Estate Law "semester credits" are "courses offered by any accredited college or university or by any other institution which meets the standards of education established by the Commission." For every 2 years of experience as a real estate licensee, an applicant is allowed 16 college credits towards the education requirements. This can be accumulated in 2-year increments. Any school that wants to offer courses designed to meet the NRS educational requirements must first apply to the Commission for its approval. This application must be submitted annually and submitted with a fee, and should include information about the school, its ownership, a list of the instructors, a proposed schedule of courses for one year, all required textbook information, and copies of all examinations (with answers). Distance learning IS approved for real estate education in Nevada. The Commission has the authority to decide whether or not to approve a distance education course. To make this determination, the Commission will consider whether: The course is made up of at least 3 hours of instruction. Students must complete a written exam that is proctored by either a person or a secure electronic method, both of which the Division must specifically approve. **IMPORTANT NOTE: This chapter included the introduction of new key terms and definitions. Be sure to familiarize yourself with this new terminology.**

Chapter 17 Summary

Leasehold Estates: Leasehold estate is the temporary right to hold and use real property. Leasehold estates are sometimes called less than freehold estates. Leasehold estates are what we often think of as renting or leasing. In a leasehold estate the owner of the property is the LESSOR, often called the landlord. In a leasehold estate the renter of the property is the LESSEE, often called the tenant. The four main types of leasehold estates are: Estate for Years - has a definite beginning and ending date. Estate From Period to Period - periodic tenancy, periodic estate, or a month-to-month lease. Estate at Will - death of either party immediately terminates an estate at will. Estate at Sufferance - when a tenant stays past the term of his lease and the landlord has the option to evict the tenant at any time. In the most simple of terms a lease is a contract between a tenant and a landlord that states the rent the tenant will pay and for how long the tenant will have possession of the property. The three primary types of leases are: Gross lease: A lease in which the lessee agrees to pay a fixed rental fee, while the lessor is responsible for paying all property fees and ownership expenses. Net lease: A lease in which the tenant agrees to pay the agreed upon rent PLUS the ownership expenses such as the utility bills, property taxes, and special assessments. Percentage lease: Bases the amount of the rent to be paid on a percentage of the gross income the lessee receives through his or her business at that specific location. Additional types of leases include: Ground Lease Index Lease Appraisal Lease Oil and Gas Lease A lease option is a lease that gives the tenant the right to buy the leased property. If the tenant does NOT exercise his or her option to buy within the set time frame, the landlord may sell the property to another buyer. A lease purchase is another means by which a lessee can purchase the property being leased. Under a lease purchase a portion of the rental payments is put towards a down payment on the property. The elements of a valid lease include: Legally competent parties: Both parties must be of sound mind, sound body, and be at least 18 years old. Mutual agreement: Both parties to a lease must agree on the lease's terms and provisions of their own free will and without duress or coercion. Written contract: Under the Nevada Statute of Frauds, all leases that are for terms of over one year must be in writing to be legally enforceable. Legality of object: All contracts, including leases, must be created with legal terms and objectives. Signatures: All leases must be signed by the landlord (lessor) AND the tenant (lessee) to be considered valid. Property Description: Leases must include a description of the property to be leased. Valuable consideration: All valid leases must include some type of consideration (something that is of legal value) offered from one party to another to induce the second party to perform a certain action. Lease Term: The lease term is the period of time from the beginning of the lease until the expiration of the lease. Residential Landlord Tenant Act: NRS 118A is known as the Residential Landlord and Tenant Act. If a landlord and a tenant have a WRITTEN lease agreement, the landlord is required to provide one copy of that written lease agreement to the tenant, by law. The Residential Landlord and Tenant Act stipulates that the rent owed by a tenant to a landlord, as set out in a written lease agreement, must be paid without the landlord having to make specific demands or notice upon the tenant. Landlords are prohibited by the Residential Landlord and Tenant Act from increasing rental rates without first serving the tenant with advance written notice. After a tenancy is terminated by either party the landlord MAY keep a portion of the security deposit that is deemed "reasonably necessary" to: Remedy any tenant default in rent payments; Repair any damage to the property (other than normal wear) caused by the tenant; and Pay for the property to be cleaned. When a landlord keeps a portion of a security deposit, he or she is required to provide the tenant with an itemized written account of how that portion of the security deposit is to be used. If, following the termination of a tenancy, a landlord does NOT return the remainder of the security deposit, the landlord will be liable to the tenant for damages: In the amount of the total security deposit; and For a court-ordered sum (not to exceed the entire deposit amount). A landlord must always keep a rented dwelling unit in habitable condition. Under the Residential Landlord and Tenant Act, a dwelling unit is considered not habitable if it violates any regulations set forth under Nevada housing or health codes that relate to the: Health; Safety; Sanitation; or Fitness for habitation of the dwelling unit. The Residential Landlord and Tenant Act also sets forth the basic obligations of a tenant under a lease agreement. NRS 18A.310 states the tenant must: Keep his or her part of the premises (dwelling unit) as clean and safe as possible; Properly dispose of all trash, ashes, and other waste in a clean and safe manner; Keep the unit's plumbing fixtures as clean as possible; Use all systems, facilities and appliances in the unit and otherwise on the premises in a reasonable manner. Never, whether intentionally or through negligence, do anything that destroys, defaces or removes any part of the premises, or that renders the premises uninhabitable. Ensure that he or she and/or his or her guests behave in a way that is considerate of others, so as not to disturb the peaceful enjoyment of the premises by neighbors or other tenants. The Nevada Residential Landlord and Tenant Act gives all Nevada landlords the authority to adopt specific regulations regarding the tenant's occupancy and use of a rental property. These rules are only enforceable against a tenant if the objectives of the additional rules are: To promote the safety, welfare and/or convenience of the landlord and/or tenants in their residing on and using the premises; or To help preserve the property from use that will damage it; or To fairly distribute the services/facilities for the tenants. A landlord has the right, by law, to enter a tenant's unit without the tenant's consent in the case of an emergency. Except in an emergency situation, the landlord must provide at least 24 hours' notice of his or her intent to enter the property. The landlord may only schedule such entries onto the premises at "reasonable times during normal business hours." A landlord must NEVER abuse the rights of access or use them in any way to harass a tenant. If a landlord does NOT comply with a rental agreement, the tenant will give the landlord written notice outlining the landlord's acts or omissions that are in breach. If the landlord fixes or otherwise corrects the problem(s) within 14 days of receiving the notice, the agreement will NOT terminate because of the breach. If the landlord does NOT attempt to correct the breach within 14 days, the tenant may: Immediately terminate the agreement; Recover actual damages suffered; Apply to a court to receive additional relief and/or damages as the court sees fit. If a landlord does not keep a rental property in a habitable condition the tenant will give the landlord written notice outlining the specific failures of the landlord to maintain the property in habitable condition. If the landlord does NOT attempt to correct the breach within 14 days, the tenant may: Immediately terminate the agreement; Recover actual damages suffered; Apply to a court to receive additional relief and/or damages as the court sees fit. Withhold any due rent without incurring late fees or any other charge until the landlord has corrected the failure. Additional rental agreement violations by a landlord include: The failure to provide essential services. Unlawfully removing or excluding the tenant from the premises, or allowing the interruption of an essential service. Failing to disclose any required information to the tenant. If a tenant violates a rental agreement or any applicable provision of the Residential Landlord and Tenant Act, a landlord may seek appropriate remedies. Failure of a tenant to comply with a rental agreement or perform his or her basic obligations. If the tenant does not remedy this issue within 5 days after written notice, the landlord may terminate the rental agreement. Failure of the tenant to perform his or her basic obligations that causes a physical problem with the property. If the tenant does not remedy this issue within 14 days the landlord may cause the work to be done and bill the costs to the tenant. The tenant's abandonment of the property without proper notice and without rent paid up to date. The landlord has the right to dispose of the tenant's property within specific ways as set forth under NRS 118A. Holding over by the tenant. This occurs when a tenant stays past the expiration date of the rental agreement without the landlord's approval. The landlord has the right to bring about legal action for possession, rent, and actual damages. A landlord CANNOT ordinarily take possession of a rental unit or attempt to do so by turning off essential services, or locking the tenant out of a rental unit. However, a landlord CAN act to repossess a rental unit in certain circumstances under the Residential Landlord and Tenant Act. These are: By an action for possession or other civil action or proceeding that determines the right of possession; If the tenant surrenders possession of the dwelling unit to the landlord; or If the tenant abandons the dwelling unit without proper notice and without the current rent being paid for a period equal to (or more than) half of the periodic rental period. Under the Residential Landlord and Tenant Act, the following actions are also prohibited: A tenant is prohibited from refusing to allow lawful access to the rental unit by the landlord. A landlord is prohibited from making an unlawful entry into the rental unit, or a lawful entry in an unreasonable way, or otherwise harassing a tenant. A landlord is prohibited from taking actions to terminate a rental agreement, refusing to renew a tenancy, increasing rent, or decreasing an essential service in RETALIATION to certain actions of a tenant.

Chapter 16 Summary

Listing Agreements: A listing agreement is an employment contract between a seller and a real estate broker. A listing agreement grants a broker the authority to act on the seller's behalf for the purposes set forth in the agreement. By acting on the seller's behalf the broker is acting as the seller's agent. In Nevada ALL agency agreements are between the client/principal and the broker, NOT between the client/principal and the real estate salesperson. In Nevada, "AGENCY AGREEMENTS" are referred to as "BROKERAGE AGREEMENTS." There are four primary types of listing agreements. These are: Exclusive Right to Sell Listing Exclusive Agency Agreement Open Listing Net Listing The Exclusive Right to Sell Listing - a single broker is hired by the seller to act as the seller's listing agent, and the seller agrees to pay the broker a commission regardless of who provides a ready willing and able buyer (the procuring cause). The listing broker is ALWAYS entitled to a fee. The Exclusive Agency Agreement - a single broker is hired by the seller to act as the seller's listing agent, and the seller agrees to pay the broker a commission IF the broker provides a ready willing and able buyer. However, if the seller sells the property him or herself without the broker's assistance, the listing broker is NOT entitled to a fee. Open Listing - the seller may hire as many brokers as he or she wishes. The seller agrees to pay a commission ONLY to the broker who provides a ready willing and able buyer. If the seller sells the property him or herself NO broker is entitled to a fee. Net Listing - the seller agrees with the listing broker that the seller will receive a specified amount of money from the sale (the net amount) and the broker will keep the amount earned from the sale over that specified net amount. Net listings are permitted in Nevada. There must have been some type of written employment agreement, such as a listing agreement and the broker must have been the procuring cause of the sale for a broker to receive a commission. Terminating Listings: Listing agreements may be terminated in any of the following ways: Fulfillment of the purpose of the listing - he broker sells the property and the property transfers. Expiration of time as stated in the agreement. Cancellation by one of the parties. Transfer of title to the property by operation of law, such as bankruptcy or foreclosure. Mutual consent. Death or incapacitation of either party. Destruction of the property or a change in property use by outside forces. Change in use of the property by outside forces. Brokers do not usually hire salespersons as full-time employees and most salespersons are independent contractors. Buyer Agency Agreements: A buyer agency agreement is an agreement in which a real estate broker agrees to legally represent a buyer. The three types of buyer agency agreements are: Exclusive Buyer Agency Agreement Exclusive-Agency Buyer Agency Agreement Open Buyer Agency Agreement Exclusive Buyer Agency Agreement: The buyer hires a single broker to represent him or her exclusively. The buyer MUST pay the broker the commission if the buyer finds and purchases a property. Exclusive-Agency Buyer Agency Agreement: The buyer hires a single broker to represent him or her exclusively. The buyer MUST pay the broker the commission if the buyer finds and purchases a property through the agent during the term of the agreement. However, the buyer does NOT owe the broker a commission if the buyer finds and purchases a property him or herself. Open Buyer Agency Agreement: The buyer hires as many brokers as he or she wishes. The buyer agrees to pay a commission ONLY to the broker who finds a suitable property. If the buyer finds and purchases a property him or herself NO broker is entitled to a fee. Sales Contracts: The contract between the seller of a property and the buyer of that property is a real estate sales contract. A real estate sales contract is more commonly referred to as: Purchase and sales agreement; or Purchase agreement. When one party makes a specific proposal to buy a property to the other party, such as saying that he will pay the list price, it is an OFFER. When the party who received an offer accepts the offer it then becomes a CONTRACT. ANY change to an offer, even the smallest, simplest alteration, turns the offer into a COUNTEROFFER. The person making the offer is the offeror. The person receiving an offer is the offeree. It is also worth noting that a sales contract must always include at least two parties - a buyer and a seller. A sales contract sets forth many details, including: The price; Earnest money deposit amount and type; Financing terms; A legal description of the land, AND the street address of the property; The kind and condition of title; The form of deed; The title evidence required and who will provide it; All terms and conditions of the purchase, including all details of any contingencies; Which items of personal property are included in the transfer of property; The homeowner's insurance information; The date of loan commitment; The date of closing (the close of escrow); Additional terms/clauses regarding home warranties, walk-through inspections before closing, bonds and assessments, disclosures and more; Terms of the closing, including which party will be responsible for which fees; Prorations, which include any rents, taxes, homeowner association fees, utilities, security deposits and more, and who is responsible for each; Inspections, including pest inspection, physical inspection, well and septic inspection, oil tank test, wood-burning device inspection, fireplace inspection, surveys, and more; and Land use regulations, environmental conditions, tax withholding, and investment property information. In Nevada, the following disclosures must be attached to the sales contract and incorporated into the terms of the contract: The Confirmation Regarding Real Estate Agent Relationship. The Consent to Act, when applicable. The Common-Interest Ownership Properties Addendum (if applicable). The Common-Interest Community Information Statement "Before You Purchase Property in a Common Interest Community Did You Know..." The Lead-Based Paint Addendum (if the property was built before 1978 - we will discuss this disclosure shortly). Any financing addendum. Escrow: In Nevada, real estate closings are handled through the escrow process. The escrow process is more commonly known as the closing process. The escrow process is the period between the acceptance of an offer and the buyer receiving ownership of - "the keys to" - the property. In the escrow agreement, the parties to the transaction set forth the duties of the escrow agent, as well as the duties and obligations of the parties to the transaction. In a real estate sale, the purpose of the escrow agreement is to close the sale transaction, so the escrow agreement must follow the same terms as are set forth in the sales contract. The escrow agent's responsibilities are: To make sure the transaction is closed according to the terms of the sales contract; or To make sure the transaction is NOT closed before the buyer and seller agree to the contract term changes.

Chapter 8 Summary

Ownership: Land is the surface of the Earth and the natural attachments that are attached to it. Real estate is the land PLUS any artificial attachments that are attached to it. Natural attachments are generally the trees and plants that are attached to the land, but include most natural resources such as minerals, crops or water. Artificial attachments are generally the houses or buildings that are attached to the land, but include most man-made structures. Legally, in land ownership, you not only own the land itself, but also the area beneath the land's surface, things naturally attached to the land's surface, and the air and space above the lands surface. Ownership gives the owner the rights to these areas, although there are other factors involved. The owner of a piece of land owns the area beneath that land going down to the earth's core, and the area above that land stretching up into space. Appurtenances and Rights: An appurtenance is anything that is attached to a piece of land, or a structure upon that land, that becomes a part of the overall piece of property and will transfer to the new owner when the property is sold. Natural appurtenances include trees, creeks, streams, bushes, etc.; or Artificial appurtenances include tangible objects such as houses, in-ground swimming pools, fences, barns, and garages, or abstract things such as easements and rights-of-way. Rights include the following: air rights, gas rights, light and sound rights, surface and subsurface rights, mineral rights, solar rights, and water rights including littoral, riparian, and prior appropriation water rights. There can be 3 different owners of a single piece of land, with each individual owner owning a different right to the land. The 3 different ownerships would be: The subsurface (mineral) rights. These are the rights to the minerals, such as gold, coal, or oil, found beneath the surface of the land. The surface rights. These are the rights to build on the land's surface and to use that surface. The air rights. These are the rights to utilize the air above the land's surface, such as building a structure up into the sky, including an office block or condo building. When a buyer purchases real property, he or she is deemed to have also purchased specific rights of ownership. These specific rights are known collectively as the bundle of rights. The bundle of rights includes the following: The right of possession of the property; The right of control of the property (for legal purposes only); The right of exclusion (this gives you the right to keep other people from going onto or otherwise using your property - again, with some exclusions, including police and utility persons); The right of enjoyment (as long as this is for legal purposes only - this doesn't give you the right to grow and use illegal drugs, for example, simply because you own the property and have this right); and The right of disposition of the property, which means you may, within the law, choose to rent, lease, sell, will, otherwise transfer or convey, encumber (through a loan) or dispose of the property. Personal Property and Real Property: Real property includes both land and real estate. Real property is known as the rights, benefits and interests that are automatically included in land and real estate ownership. Real property is immovable and permanently attached to the land. Also known as personalty or chattels, personal property can best be distinguished from real property because personal property is movable. In Nevada, the state law requires that ONLY real estate licensees sell manufactured or mobile homes, and ONLY under the following conditions: The licensee must either possess his or her own limited dealer's license, or must be affiliated with a broker who has a limited dealer's license that was issued by the Nevada Manufactured Housing Division; The licensee must only sell USED manufactured or mobile homes, never NEW manufactured or mobile homes;and The sale of a manufactured home must include the fee simple interest sale in the land on which the manufactured home is located. Determining whether property is real or personal is not always straightforward, and sometimes property will change classification from real to personal or vice-versa. Fructus naturales are any plants, trees, perennial shrubs, or grasses that do NOT require regular annual cultivation. Fructus naturales are considered real property or real estate. Fructus industrials are any crops or plants that DO require regular annual planting and cultivation. Fructus industrials are considered personal property or emblements. The process of taking real property and un-affixing it from the land so it becomes personal property is known as severance. The process of taking personal property and permanently affixing it to the land so it becomes real property is known as annexation. Fixtures and Trade Fixtures: Fixtures are personal property that became permanently affixed to land, thereby making them real property. Fixtures include any item that has been added permanently to a building, such as: Built-in appliances; Heating and cooling systems; Plumbing systems; Light fixtures; Kitchen and bathroom cabinets. How can you determine whether a piece of property is legally considered a fixture? Remembering the term MARIA should help you. MARIA is the acronym for: Method of Annexation or Method of Attachment Adaptability of the item Relationship between the parties Intent of the parties Agreement between the parties A fixture is considered real property, but a trade fixture is considered personal property and is NOT included in the sale of the building to which the trade fixture is attached. In most cases a tenant must remove a trade fixture at any time before the end of the lease. Failure to do so will see the trade fixture become the personal property of the landlord. Water Rights: Water rights in the United States can be broken down into 3 primary groups: Riparian Rights Littoral Rights Doctrine of Prior Appropriation Riparian Rights are those concerning the water rights to rivers. If a river is navigable then all the land under the water is considered the property of the state and the landowner will only own the land up to the edge of the river. If a river is non-navigable then the property owner is considered to own the land to the exact centerline of the river. Littoral Rights are those concerning water rights to non-flowing bodies of water such as lakes and oceans. The laws state that a property owner adjacent to such a body of water owns the land to the average high-water mark, and the landowner is permitted to make "reasonable" use of these waters. Doctrine of Prior Appropriation is a legal doctrine governing water rights. The Doctrine of Prior Appropriation states that a landowner's right to use the available water is based on the permission of the state government, rather than any rights of the owners of the lands adjacent to bodies of water. Government Rights, Powers and Restrictions: The two methods available to the government to seize land are: Eminent domain Condemnation Eminent Domain is right of the federal and/or state government to take private property in order to put the land to necessary public use, with just compensation paid to the owner. Condemnation is the process by which all levels of the government (including public utilities and railroads) exercise the right of eminent domain to acquire private property. The most common form of government power over privately owned land and property is that of property tax. The government has the right to tax privately held property and uses two forms of property taxes: General real estate taxes Special assessment taxes Zoning laws regulate the use of property by creating various restrictions that limit what the property can be used for. The three most common zoning classifications are: Residential Commercial Industrial Although residential, commercial and industrial zoning are the most common categories, there are other zoning classifications such as multiple-use, or cluster zoning, aesthetic, bulk, cluster, and spot zoning. Building codes are similar to zoning restrictions in that building codes also establish a set of specific standards that a property must adhere to. But while zoning restrictions dictate where a building must be constructed, building codes dictate to what standard a building must be constructed. Building codes or ordinances include the following: Plumbing codes Electrical codes Fire codes Escheat: Escheat is the reversion of a private property back to the state if the owner dies without heirs. If a property owner dies without any heirs, or without any heirs that are "capable" of inheriting the property, the property will automatically revert to the state's ownership through escheat. Private property will also revert to the state under escheat if the owner abandons the property with no heirs.

Chapter 3 Summary

Post-license Education: All initial salesperson, broker-salesperson and broker licenses issued in Nevada are valid for 12 months, at the end of which the license must be renewed for a first time. First time licensees are required to take 30 hours of post-licensing education within the initial year of licensure after receiving a license. Post-licensing education is completed during the first year of licensure, whereas continuing education is completed during each subsequent 2-year license renewal period. The post-licensing curriculum must contain a minimum of 15 modules. Every licensee who takes the course must receive at least 75% on a closed-book proctored final exam and complete the entire course to receive credit. Continuing Education: A real estate salesperson who wishes to renew his or her license must complete at set amount of continuing education at approved educational courses, seminars or conferences during the license period for the license. A license issued or renewed in Nevada BEFORE July 1, 2015 is valid for 4 years. A license issued or renewed in Nevada AFTER July 1, 2015 is valid for 2 years. Licensees must complete 24 hours of continuing education every 2 years for a total of 48 hours of continuing education if the license is valid for a 4-year period. Licensees must complete a total of 24 hours of continuing education if the license is valid for a 2-year period. At least 12 of these 24 hours must be devoted to ethics, professional conduct, or the legal aspects of real estate. The continuing education requirements for broker and broker-salesperson license holders is very similar to that of salesperson license holders. Inactive License Status: If a license was inactive for 1 year or less, during the initial license period then the licensee must complete the 30-hour post-licensing course to reinstate the license. If a license was inactive for between 1-2 years with any part during the initial license period then the licensee must complete the 30-hour post-licensing course and a minimum of 18 hours of continuing education, not less than 12 hours of which must be devoted to ethics, professional conduct, or the legal aspects of real estate, to reinstate the license. If a license was on inactive status for 2 years or less,and NO part of that time was during the initial license period, the licensee must complete at least 24 hours of continuing education, with at least 12 hours devoted to ethics, professional conduct or the legal aspects of real estate, to reinstate the license. If a license was on inactive status for more than 2 years, with any part of that inactive status occurring during the initial license period, the licensee must complete the 30-hour post-licensing course, as well as a minimum of 24 hours of continuing education, with at least 12 of those hours devoted to ethics, professional conduct or the legal aspects of real estate, to reinstate the license. If a license was on inactive status for more than 2 years, and NO part of that time was during the initial license period, then the licensee must complete at least 48 hours of continuing education with at least 24 hours devoted to ethics, professional conduct, or the legal aspects of real estate, to reinstate the license. Other Continuing Education Regulations: All continuing education (CE) courses must contain current information on real estate that improves the licensee's professional knowledge and help him or her better serve the public. The Commission does NOT approve move than: 7 full hours of credit per day of instruction in a course for continuing education if a final examination is NOT given; or 8 full hours of creditper day of instruction in a course for continuing education if a final examination IS given. Course sponsors must maintain records of class attendance for credit courses by licensees, and course completion by distance education licensees for at least 4 years. Distance education students are required to take a final examination at a sponsor-designated site and receive at least a 75% to pass the course. Once a licensee has successfully completed an approved course, the sponsor must provide a record of attendance or record of completion. If the course sponsor is a professional organization that's been approved for CE, the sponsor must not restrict the course attendance to that organization's members. A course may not be taken for credit to meet CE requirements more than once during any two consecutive renewal periods. Any courses taken to satisfy renewal or reinstatement requirements must be completed within the 2 years immediately before the latest date for the renewal or reinstatement of the license. A licensee must attend and complete at least 90% of a course to receive CE credit for it. The Real Estate Education Research and Recovery Fund: The Real Estate Education Research and Recovery Fund is also referred to as ERRF or the Fund. The Fund is a special revenue fund created under NRS 645.842 and must maintain a balance of at least $300,000 at all times. These funds are used to satisfy claims against real estate licensees. At the end of each fiscal year, any Fund balance of over $300,000 must be set aside and used by the Administrator for real estate education and research purposes. At the time of every initial real estate license and license renewal, the licensee must pay a fee. These fees form the funding of the Real Estate Education Research and Recovery Fund. The Fund may cover unpaid actual damages up to a maximum of $25,000 per judgment, with a maximum liability of $100,000 for any one real estate licensee. Once payment is made from the Fund to satisfy a judgment against a licensee, that licensee's license will be automatically suspended. The license must NOT be reinstated until the licensee has repaid the Fund in FULL, plus interest. A payment from the Fund does not limit the Commission's authority to pursue other disciplinary actions against a licensee for his violation of license laws. Licensing Exams, Licensing Periods & Renewal: All applicants for a real estate license must first pass a written licensing exam. The fee for the broker, broker-salesperson, or salesperson licensing exam is $100 per exam. The Real Estate Division must hold licensing exams at least bimonthly. ALL initial real estate licenses are valid for 12 months, at which time the license must be renewed for the first time. This is known as the initial license period. All licenses renewed BEFORE July 1, 2015 are valid for 4 years. All licenses renewed AFTER July 1, 2015 are valid for 2 years. Each license must be renewed with the Division BEFORE the license period expires. Licensing Fees: Familiarize yourself with various licensing fees in Nevada, which can be found in NRS 645.830 and the Nevada Real Estate Division (NRED) website. Non-resident Licensees: A non-resident licensee who wishes to become licensed in Nevada must first: Appoint, in writing, the Administrator to be his or her agent before he or she can be issued a license. Owner-Developers: An owner-developer is a person who owns 5 or more lots within a recorded subdivision, upon each of which is a previously unsold single-family home. The Commission does NOT establish or require specific education or examinations for owner-developers. The Commission DOES provide certain standards of good moral character and financial stability. An owner-developer must obtain a registration for EACH recorded subdivision he or she intends to sell. An owner-developer registration is valid for 1 year. Once an owner-developer registers with the Division, he is legally allowed to directly hire real estate salesmen or broker-salesmen to sell the homes covered by the owner-developer's registration. An owner-developer may ONLY employ a real estate PROVIDED the owner-developer engages a real estate broker-salesperson as a sales manager and oversees the real estate salesperson's activities.

Chapter 1 Summary

Prelicense Course: The prelicense course for a real estate license is 90 hours. This is broken down into: At least 45 hours on the principles and practices of real estate. At least 45 hours on the law of property, the regulation of real estate brokers and salespeople, and the ethics of selling real estate. The Nevada Revised Statutes, or NRS, is the official title of the document in which the Nevada statutes (laws) are published. The Nevada Administrative Code, or NAC, is the official name of the document in which the Nevada regulations are published. STATUTES are the statutory LAWS we must adhere to. REGULATIONS are the RULES that govern how the laws are enforced. Terms and Definitions: There are many important new terms to become familiar with, including: Agency: A relationship between a principal and an agent arising out of a brokerage agreement whereby the agent is engaged to do certain acts on behalf of the principal in dealings with a third party. Brokerage Agreement: An oral or written contract between a client and a broker in which the broker agrees to accept valuable consideration from the client or another person for assisting, soliciting or negotiating the sale, purchase, option, rental or lease of real property, or the sale, exchange, option or purchase of a business. Business: The tangible assets and goodwill of an existing enterprise. Business Broker: A person who, while acting as a real estate broker, real estate broker-salesperson or real estate salesperson for another and for compensation or with the intention or expectation of receiving compensation: 1. Sells, exchanges, options or purchases a business; 2. Negotiates or offers, attempts or agrees to negotiate the sale, exchange, option or purchase of a business; or 3. Lists or solicits prospective purchasers of a business. Client: A person who has entered into a brokerage agreement with a broker or a property management agreement with a broker. Commission: As defined in this section of the law, this term refers to the Real Estate Commission in Nevada. Designated Property Manager: A person who has the qualifications required under Nevada law to be a designated property manager and who is appointed as the designated property manager for an office. Director: The Director of the Department of Business and Industry. Owner-developer: A person who owns five or more lots within a recorded subdivision, shown on an approved parcel map, or the parceling of which has been approved by the county, on each of which there is a single-family residence not previously sold. Property Management: The physical, administrative or financial maintenance and management of real property, or the supervision of such activities for a fee, commission or other compensation or valuable consideration, pursuant to a property management agreement. Property Management Agreement: A written contract between a client and a broker in which the broker agrees to accept valuable consideration from the client or another person for providing property management for the client. Property Manager: A person engaged in property management who, as an employee or independent contractor, is associated with a licensed real estate broker, whether or not for compensation. Real Estate: Every interest or estate in real property including but not limited to freeholds, leaseholds and interests in condominiums, town houses or planned unit developments, whether corporeal or incorporeal, and whether the real property is situated in Nevada or elsewhere. Real Estate Broker: A person who, for another and for compensation or with the intention or expectation of receiving compensation: Sells, exchanges, options, purchases, rents or leases, or negotiates or offers, attempts or agrees to negotiate the sale, exchange, option, purchase, rental or lease of, or lists or solicits prospective purchasers, lessees or renters of, any real estate or the improvements thereon or any modular homes, used manufactured homes, used mobile homes or other housing offered or conveyed with any interest in real estate; Engages in or offers to engage in the business of claiming, demanding, charging, receiving, collecting or contracting for the collection of an advance fee in connection with any employment undertaken to promote the sale or lease of business opportunities or real estate by advance fee listing advertising or other offerings to sell, lease, exchange or rent property; Any person who, for another and for compensation, aids, assists, solicits or negotiates the procurement, sale, purchase, rental or lease of public lands is a real estate broker within the meaning of this chapter. Real Estate Broker-Salesperson: Any person who holds a real estate broker's license, or who has passed the real estate broker's examination, but who, as an employee or as an independent contractor, for compensation or otherwise, is associated with: A licensed real estate broker in the capacity of a salesperson, to do or to deal in any act, acts or transactions included within the definition of a real estate broker in the law; or A registered owner-developer in the capacity of a sales manager. Real Estate Division and Division: The Real Estate Division of the Department of Business and Industry. Real Estate Salesperson: Any person who, as an employee or as an independent contractor, is associated with a licensed real estate broker or registered owner-developer to do or to deal in any act, acts or transactions set out or comprehended by the definition of a real estate broker, whether for a compensation or otherwise. Used Manufactured Home or Used Mobile Home: A manufactured home or mobile home, respectively, which has been: Sold, rented or leased, and which was occupied before or after the sale, rental or lease; or Registered with or been the subject of a certificate of title issued by the appropriate agency of authority of Nevada, any other state, or elsewhere. **There are additional key terms discussed in Chapter One that you will be responsible for knowing. Please review all new terminology and be sure to fully understand these terms before moving forward.** The Nevada Real Estate Division and the Nevada Real Estate Commission: The Nevada Real Estate Division is responsible for administering to the provisions of Nevada laws governing real estate as set out in NRS Chapter 645. The Nevada Real Estate Commissionis responsible for regulating the practice of real estate in Nevada by adopting regulations to help enforce NRS 645. The Nevada Real Estate Commission was created by NRS 645.050. The Commission acts in an advisory capacity to the Division. As such, the Real Estate Commission has the authority to: Adopt the regulations that establish the standards for the operation of real estate licensees' offices, as well as the licensees' business conduct and ethics; Conduct disciplinary matter hearings; Delegate any of its authority to the Division Administrator. The Real Estate Commission has 5 members, all appointed by Governor of Nevada Residential Landlord and Tenant Act. All members must be U.S. citizens, residents of Nevada for at least 5 years, and meet additional requirements. The Real Estate Division has the power to do "all things necessary and convenient" to carry out the rules set forth within NRS 645. The Division is also responsible for conducting regular inspections of real estate brokers' and owner-developers' records to ensure compliance with the laws. A violation of Nevada Real Estate Licensing Laws will lead to a penalty handed down from the Commission, as well as the possible imposition of an administrative fine against any person who knowingly commits such an act. This fine shall not exceed the amount of any gain or economic benefit gained from this violation, OR $10,000 per violation, whichever amount is GREATER. NRS 645.0445: NRS 645.0445 states those individuals to whom Nevada licensing laws and regulations do NOT apply. Familiarize yourself with these.

Chapter 11 Summary

Professional Conduct and Professional Practices: Professional conduct and high ethical standards are important to a licensee's success and are often legal requirements when engaging in the business of real estate. The trade associations that represent the real estate industry have adopted and instituted their own codes of ethics and professional practices that cover every facet of real estate brokerage activity. The standards of most of these codes concern the following general areas of practice: job performance, duties to clients, disclosure, and non-discrimination. Most codes of ethics uphold the licensee's commitment to fulfill the fiduciary duties he or she owes to a client: An agent's fiduciary duties are: Confidentiality Obedience Accounting Loyalty Disclosure Care and Diligence A person with an agency agreement with a licensee is the client and the licensee is the agent. A person without an agency agreement with a licensee is a customer and the licensee is the NOT his or her agent. Real Estate Associations: The primary objective of a trade association is to achieve collaboration and consensus between the various individual businesses that make up the organization. However, trade associations also engage in promoting the industry, educating those working within the industry, enhancing the services provided by the industry, and resolving issues within the industry. The main trade association that represents real estate in the U.S. is the National Association of REALTORS®, or NAR. www.realtor.org The main trade association that represents real estate in Nevada is the Nevada Association of REALTORS®, or NVAR. www.nvar.org The National Association of REALTORS® unites and unifies the real estate interests of the nation and presents a common cause and program regarding national issues affecting real property. A REALTOR® is a person engaged in the real estate business who is a member of the National Association of REALTORS®. The National Association of Real Estate Brokers, or NAREB, is comprised primarily of African-American real estate brokers and the organization has local boards in most major cities of most states. NAREB members are known as REALTISTS. Most associations/boards operate a multiple listing service, usually referred to as a MLS, which serves consumers and brokers as a marketing tool. An MLS is a facility for the orderly correlation and dissemination of listing information among the participants so that they may better serve their clients and the public. Ethics: Ethics are different from laws. In very basic terms: Laws govern the actions of an individual or a group. Ethics govern the behavior of an individual or a group. The National Association of REALTORS'® Code of Ethics establishes the ethical obligations that all REALTORS® must abide by. A licensee is anyone who is licensed to practice real estate. A REALTOR® is anyone who is a member of the NAR. The most significant difference between a REALTOR® and any other real estate licensee is that a REALTOR® has pledged to follow the very strict Code of Ethics and Standards of Practice subscribed to by all members of the National Association of REALTORS®. The ultimate goal of the Code of Ethics is to encourage the highest standard of ethical business practice by all of the members of the NAR. A secondary goal is to provide protection for the public using a formal complaint process whereby a member can be sanctioned for improper actions through an informed peer process as opposed to court litigation. The range of sanctions for violations of the Code of Ethics that may be imposed by a hearing panel include: Letter of reprimand; Warning notice; Required attendance at an ethics class; Monetary fine of up to $2,500; Probation; Suspension; or Expulsion from the association. The Articles of the Code of Ethics: REALTORS® must protect the best interests of the client. REALTORS® must avoid concealing pertinent facts. REALTORS® must cooperate with other brokers unless that cooperation is not in the client's best interest. REALTORS® must provide written disclosure of any interest they have in a property they're selling. REALTORS® must not attempt to provide professional services concerning a property or its value if they have a current or possible future interest in that property. REALTORS® must not accept any commission, rebate, or profit on expenditures made for their client, without the client first giving his knowledge and consent. REALTORS® must not accept compensation from more than one party in a transaction without first making disclosure of this fact to all parties. REALTORS® must keep the monies of others that came into the REALTORS'® possession in trust for these other people, in a special account in an appropriate financial institution. REALTORS® must ensure that all agreements are in writing whenever possible. REALTORS® must not deny equal professional services or equal employment practices in their firm to anyone for reasons of race, color, religion, sex, handicap, familial status, or national origin. Any of the services provided by REALTORS® to their clients and customers must conform to the standards of practice and competence that are "reasonably expected." REALTORS® must always be honest and truthful in their real estate communications and shall present a true picture in their advertising, REALTORS® must never engage in activities that would constitute the unauthorized practice of law. If a REALTOR® is charged with unethical practice, or is otherwise asked to cooperate or provide evidence for any professional standards proceeding, investigation, or hearing, they must do so. A REALTOR® must not knowingly or recklessly make false or misleading statements about competitors. REALTORS® must never interfere with the agency relationship another REALTOR® has with a client. If there is a contractual dispute between REALTORS® associated with different firms, and the dispute has arisen out of their relationship as REALTORS®, then they must submit that dispute to arbitration and not take the matter to litigation. The Nevada Association of REALTORS® (NVAR) has adopted the National Association of REALTORS® (NAR) Code of Ethics. Accordingly, the NVAR's bylaws state that whenever the NAR's Code of Ethics is amended, the same amendments will apply to the NVAR and therefore will apply to all Nevada REALTORS®.

Chapter 10 Summary

Deeds: A deed is the legal document that transfers title form one party to another in a real estate transaction. A title is the document that provides proof of a person's ownership interest in a property. A deed is NOT the title, but a deed IS evidence of the title. A deed is the written document, often referred to as an instrument, which transfers ownership from the grantor to the grantee. The grantor is the person who is the current owner in a real estate transaction - the seller. The grantee is the person who is to be the new owner in a real estate transaction - the buyer. There are several requirements that are necessary for a deed to be considered valid in Nevada. These requirements are: The grantor must be of sound mind and body, and must be at least 18 years old to sign or "execute" the deed under Nevada law. The grantee must be specifically named in the deed. The deed must contain a clear legal description of the property. The deed must contain a granting clause. This clause contains the words of conveyance that clearly state the grantor's intention to transfer the property. The deed must contain a habendum clause. This clause defines the ownership taken by the grantee. A deed must specify any exceptions and reservations that exist, such as encumbrances, liens, easements or other limitations that affect the property or title. There are several different types of deed that are used in the transfer of real property: General Warranty Deed Special Warranty Deed Bargain and Sale Deed Quitclaim Deed Deed of Trust Trustee's Deed Reconveyance Deed Grant, Bargain, and Sale Deed Court-ordered Deed A general warranty deed protects the buyer against ALL title defects that may arise at ANY time, from the origination of the property all the way through to the future. A general warranty deed contains all six of the title covenants. These covenants are promises from the seller to the buyer that ensure the buyer will be receiving precisely what he or she is expecting. There are six covenants: Present Covenants: Covenant of Seisin. Covenant of Right to Convey. Covenant Against Encumbrances. Future Covenants: Covenant of Quiet Enjoyment. Covenant of Further Assurance. Covenant of a Warranty Forever. A special warranty deed protects the buyer ONLY against any title defects that may arise due to the actions or omissions of the seller. Using a bargain and sale deed the seller states that he or she has the right to sell the property, but makes NO other guarantees or warranties beyond that. A quitclaim deed offers the least amount of protection for the buyer because the seller makes absolutely NO promises or warranties whatsoever. The seller does NOT guarantee that he or she owns the property and does NOT guarantee the title. A deed of trust conveys a property title to a trustee who then holds the title as a security against a loan made by a lender to a borrower to purchase the property. The lender is the beneficiary and the borrower/buyer is the trustor. When the trustor pays off the debt the title is transferred to him or her. In a trustee's deed the deed is executed by the trustee (the holder of the security) and NOT the trustor (the borrower/buyer). A trustee's deed is used when a trustee transfers the trust to anyone other than the trustor. Clouds on a Title: A problem with a title is known as a cloud on the title. These may be minor issues such as a misspelled name, or may be more serious such as a claim by a third party to ownership rights. Methods to clear a cloud on a title include: Action to quiet title, also known a quiet the title lawsuit. Parol evidence rule Statute of frauds Principle of laches Recording Documents: Recording is the act of placing a document or documents in the official public records. A deed does NOT need to be recorded for it to be valid, but recording DOES protect the ownership interests of the grantee (buyer). An easement does NOT need to be recorded for it to be valid, but it is best to record easements to prevent any misunderstandings at a later date. Even if it is not mandatory to record a document, it is best to do so because recording establishes priority in the order of rights in time. It shows which party was first to record his or her rights or which party was in possession of the property at a specific time. Recording also provides a constructive record. By recording an instrument a person is considered to have given constructive notice because recorded documents are held in the public records and so the legal presumption is that any other parties "know" all the information contained in a recorded document because the document is readily available for viewing. Actual knowledge is information that has not actually been recorded but has been presented to a recipient in such as way that he or she has actual knowledge of the information, such as by hand or recorded mail. Under caveat emptor a buyer (or buyer's agent) is responsible for checking for defects in a property before the closing and is NOT entitled to recover damages if defects are discovered after the closing, unless those defects were known to the seller but not properly disclosed. Syndications: A real estate syndication gives a person the chance to invest his or her money by purchasing real estate that he or she would otherwise not have been able to afford. Syndication is accomplished through three phases: Origination. The planning and buying the property, while following registration and disclosure mandates, etc.; Operation. During which the professional management service usually manages both the syndicate and the actual property; Completion or Liquidation. At which time the property is resold, hopefully having generated a profit while it was held (through rents or leases) and a further profit upon the sale (though appreciation in value). A real estate investment trust, or REIT, is: "Any corporation, trust or association that acts as an investment agent specializing in real estate and real estate mortgages." To qualify as a REIT a company must meet certain qualifications including: Being taxed as a domestic corporation. Be jointly owned by at least 100 people. Pay out at least 90% of the REIT's income as dividends to shareholders. Have at least 50% of the shares held by more than five individuals during the final half of a tax year. Have at least 75% of the REIT's total assets invested in real estate. Generate at least 75% of the REIT's gross income from rents or mortgage interests. There are two types of REITs: An Equity Trust. A company that invests in real estate itself or in several real estate projects. A Mortgage Trust. A company that invests in mortgages and other types of real estate loans and obligations

Chapter 18 Summary

A property manager is a person who is engaged by a property owner to operate and manage the owner's property for a fee. A property manager coordinates the everyday management of a property and also serves to preserve the value of the investment property, while ensuring the property is generating the maximum possible income for the owner. Property management is considered a real estate activity in Nevada, so a person wishing to be a property manager MUST have a real estate license. A property management agreement should contain: A property description Term of the agreement Definition of both parties' responsibilities Extent of the agent's authority Reporting requirements of the agent The management fee Allocation of costs A property manager can be compensated by: A percentage of the property's income; A salary; or A flat fee. Usually, a property management firm is paid by a percentage of the rents collected. Typical functions of a property manager include: Budgeting expenses Record keeping Attracting new tenants Showing units Screening tenants Renting the property Maintaining good relations with the tenants Evicting tenants Setting rent rates Adjusting rent rates Collecting rents Maintaining the property Repairing the property Handling environmental concerns Supervising employees The agency relationship between a property manager and a property owner is that of a general agent. This is because of the authority given to the agent (property manager) by the principal (property owner). A property manager's duties to an owner include: Advertising the property; Evaluating the rental market; Obtaining tenants; Screening applicants; Resolving complaints and conflicts; and Fiduciary responsibilities to the principal of: Confidentiality Obedience Accounting Loyalty Disclosure Care and Diligence A property manager's primary responsibility to the principal is to realize the maximum profit on the owner's property. To achieve this a good property manager will always be working to achieve the highest rate of return for the owner as possible. The rate of return is the profit (or loss) on an investment over a specific period of time. A property manager must be sure that the costs of improvements will be less than the increase in income that the improvements generate. A property manager should ensure that there are two main types of maintenance programs in place: Preventative maintenance; and Corrective maintenance. Preventative Maintenance. Preventative maintenance is also known as routine maintenance. It is a regular, or routine inspection and servicing schedule of the mechanical systems that make up a property. By maintaining the systems in the best working order, preventative maintenance aims to prevent failures or breakdowns. Corrective Maintenance. Corrective maintenance rectifies problems once they have been identified. Corrective maintenance also covers the maintenance and repairs that become necessary when tenants report problems with their individual units. Preventative maintenance is conducted BEFORE a problem occurs and corrective maintenance is conducted AFTER a problem occurs. A property does NOT owe the tenants any fiduciary duties. However, a property manager owes a tenant the same duties that a licensee owes to a buyer when the licensee is acting as the seller's agent. These duties are: Honesty Accuracy Disclosure When selecting tenants, a property manager should look for situations in which: The size of the unit meets the tenant's requirements. The tenant has the ability to, and is capable of paying for the unit. The tenant's business will be compatible with the building and the other tenants within it. There is space available if the tenant needs room for expansion in the future. The unit will satisfy the tenant for the purposes of his or her fair business dealings. Because property management is considered a real estate activity in Nevada, a property manager MUST have a valid real estate license AND have a valid property management permit.

Chapter 4 Summary

Agency: An agent, also known as a fiduciary, is a person's representative in a transaction. In the case of a real estate agent, the agent has been given the authority by a consumer to handle certain real estate-related actions on the consumer's behalf. In an agency relationship, the agent is the real estate licensee, and the consumer is the principal. A real estate representation agreement is usually a listing agreement (to sell a house) or a brokerage agreement (to search for a home for purchase). An agent has certain responsibilities to not only his or her principal, but also to other parties in the relationship. Among these responsibilities is the requirement to disclose certain information. License law (NRS 645) requires an agent to disclose the following: Any material and relevant facts or information about the property in the transaction that he or she either knows, or should have known; Each source from which the agent will receive compensation as a result of the transaction; The fact that the agent is a principal to the transaction or that has an interest in a principal to the transaction; If there are any changes in his relationship to any party to the transaction; If a licensee acts for more than one party to the real estate transaction, he or she must obtain the written consent of each party to the transaction. In addition to the duty of disclosure, a licensee who acts as an agent in a real estate transaction owes the following duties to ALL of the parties in a transaction: To exercise reasonable care and skill with respect to every party involved in the transaction; To provide the appropriate form to each party for whom the licensee is acting as an agent in the transaction, and to any unrepresented parties to the transaction, if applicable. Any licensee who has entered into a brokerage agreement to represent a client in a real estate transaction has the following duties to his or her principal: A real estate licensee must exercise reasonable skill and care to carry out his or her duties. The real estate licensee must not disclose ANY confidential information about his or her client for 1 year after the brokerage agreement's termination or revocation. The licensee must work for his or her client to seek a sale, purchase, option, rental, or lease of real property at the price and terms that were set forth in the brokerage agreement. The licensee, regardless of her opinion of any offer, must present ALL offers (reasonable or not) made to or by his or her client as soon as is practicable. The licensee must disclose any and all material facts about the transaction of which the licensee has actual knowledge. The licensee must advise his or her client to seek advice from an expert in any areas that are not within the licensee's expertise. The licensee must account for ALL money and property she receives in which the client has or may have an interest, and this must be done as soon as is practicable. Under Nevada law, even a SINGLE act that requires a person to hold a real estate broker's or salesperson's license MUST be performed by a person with a valid real estate license. Otherwise, regardless of the situation, if a person (or organization) acts in the capacity of a real estate licensee and earns compensation for any of the acts of a licensee, he or she will have acted illegally. Misrepresentation and Compensation Laws: A licensee will NOT be held liable for his or her client's misrepresentations provided: The licensee didn't know that client made the misrepresentation; and When the licensee found out the client made a misrepresentation, the licensee immediately informed the person to whom the client made the misrepresentation. If a seller does not make the disclosures required by law BUT the information that should have been disclosed is a public record that is readily available to the client. If a person without a license acts in the capacity of a real estate licensee - regardless of the situation - and earns compensation for any of the acts of a licensee, he or she will have acted illegally. Compensation paid in conjunction with a real estate transaction in Nevada is strictly regulated by the license law (NRS 645.280) that states: It is illegal for any licensee to directly or indirectly offer, promise, allow, give or pay ANY part of his or her commission from a real estate transaction to any unlicensed person, in consideration for any act/service that unlicensed person performed. It is illegal for any real estate broker-salesperson or salesperson to be associated with or accept compensation from any person EXCEPT for the broker or owner-developer under whom he or she is licensed. It is illegal for any licensed real estate broker-salesperson or salesperson to pay a commission to any person EXCEPT through the broker or owner-developer under whom that broker-salesperson or salesperson is licensed. Trust Account Obligations: All deposits accepted by a broker or owner-developer to be held by that broker or owner-developer must be accounted for IN FULL once the consummation or termination occurs. Any money received by real estate salesmen and broker-salesmen on behalf of the broker or owner-developer must be promptly handed over to that broker or owner-developer. The commingling of money or property - mixing a client's money with another client's money or with the broker's own personal funds - is against the law. If a broker is entrusted with money that belongs to others, it is his or her responsibility to promptly deposit that money in a separate checking account in a Nevada bank or credit union. The broker is personally responsible and liable for these deposits at all times. A broker must not allow advance payment of money that belongs to others to be deposited into the broker's account. All Nevada real estate brokers that are required to maintain a separate trust account must keep records of all monies deposited into these accounts. The Division may investigate and audit any financial accounts (including trust accounts) that are related to the broker's business, if the Division has a reasonable cause to believe the broker is misusing the account. Advertising Requirements: Whenever a real estate licensee in Nevada wishes to advertise to perform the services for which a license is required, that licensee must obey these two requirements: If that licensee is a broker, then she must disclose the name of the brokerage under which he or she does business; or If that licensee is a broker-salesperson or salesperson, he or she must disclose the name of the brokerage with whom he or she is associated. The term "advertisement" as used in these regulations, includes all of the following: any unsolicited printed material and any broadcast made by radio, television or electronic means, including, without limitation, by unsolicited electronic mail and the Internet, billboards and signs; and all business cards, stationery, forms and other documents used in real estate transactions. Advance Fees: Advance fees may only be accepted by real estate brokers, broker-salespersons, and salespersons. Should someone collect or charge an advance fee, he or she must furnish his or her client with an accounting of how that money was used, within 3 months of the receipt of that money. Every agreement for an advance fee must: Be written; Include a complete and definite description of the services to be rendered by the licensee; Give the specific fee total and state clearly when that fee is due; State the specific date by which all contracted services will be completed in full; Include a provision stating that a full refund will be made to the customer if the promised services (for which the advance fee was intended) are not completed - and the related material provided to the customer or client. Displaying Licenses and Places of Business: It is the Division that issues real estate licenses. Each license must: Show the licensee's name and address; If the license is for a broker-salesperson or salesperson, the license must show the name of the broker with whom the broker-salesperson or salesperson will be associated; Must include the imprinted Division seal; and Must contain any other matter as dictated by the Division Every real estate broker must display his or her own license conspicuously in his or her business place. Should the broker have more than one place of business, additional licenses must be applied for and issued for display conspicuously in each branch office the broker maintains. The broker must also prominently display the licenses of ALL salespersons and broker-salespersons associated with him or her. All real estate brokers in Nevada must maintain a definite place of business within Nevada. Nevada code states that a broker is required to establish an office in a location that is "easily accessible" to the public. A broker is permitted to establish an office in a private home or in conjunction with another business. Inactive Status: The Division has the authority to place a license on inactive status for any of the following reasons: If the licensee requests that his or her license be placed on inactive status; If the license is a broker's license or a corporate officer's license, and if that licensee failed to immediately inform the Division in writing about the firm's name or business location change; If a broker-salesperson or a sales person licensee, failed to notify the Division of a change in the broker or owner-developer with whom he or she will be associated within 30 days after his or her previous association was terminated; If the licensee did not apply for renewal (and pay the fee for renewal) before his or her license expired; If the broker under whom that licensee worked had his or her license placed on inactive status; or As a disciplinary action. If a license is placed on inactive status, the licensee may not conduct any real estate business until he or she has met all the requirements to have the license reinstated to active status. Termination of Broker Association: When a broker-salesperson or salesperson decides to end his or her association or employment with the real estate broker with whom he or she has been practicing under, the law says that it is the responsibility of the broker to: Deliver the broker-salesperson's or salesperson's license to the Division within 10 days after the termination occurs.The broker must also include with a written statement of the reason for the end of the association; and Send a notification to the broker-salesperson's or salesperson's last known address informing the licensee that his or her license was sent to the Division. Within 30 days after the termination of his or her association with his previous broker or owner-developer, the broker-salesperson or salesperson must become associated with another broker, OR must request that his license be placed on inactive status. Business Brokers and Designated Business Brokers: Anyone who is licensed as a broker, broker-salesperson or salesperson can apply for a permit to do business as a business broker. A business broker is a person who, while acting as a real estate broker, real estate broker-salesperson or real estate salesperson for another and for compensation or with the intention or expectation of receiving compensation: Sells, exchanges, options or purchases a business; Negotiates or offers, attempts or agrees to negotiate the sale, exchange, option or purchase of a business; or Lists or solicits prospective purchasers of a business. A partnership, corporation, LLC or sole-proprietor may designate a person to be the business broker on behalf of that organization. A designated business broker permit gives the Division's permission for a designated person to do business as a business broker on behalf of the organization with which he or she is affiliated or employed. NO organization (partnership, corporation, LLC, or sole proprietor) may engage in business as a business broker unless the designated person for that organization has been issued a business broker permit. Depository Financial Institutions: Under the NRS, depository financial institutions, their holding companies, affiliates, or other related company, may NOT be licensed to sell real estate in Nevada. A depository financial institution means: Any bank, savings and loan association, savings bank, thrift company, credit union or other institution that: Holds or receives deposits, savings or share accounts; Issues certificates of deposit; or Provides to its customers other depository accounts which are subject to withdrawal by checks, drafts or other instruments or by electronic means to effect payment to a third party.

Chapter 15 Summary

Agency: The Nevada Revised Statutes define agency as: "A relationship between a principal and an agent arising out of a brokerage agreement whereby the agent is engaged to do certain acts on behalf of the principal in dealings with a third party." In an agency relationship the licensee who represents a client is known as an agent. In an agency relationship the client who is represented by an agent is known as the principal. In an agency relationship the licensee is known as the agent and the fiduciary. In an agency relationship the person being represented is known as the principal and the client. There are four ways in which agency is created: Written or expressed: An oral or written contract in which the parties state the contract's terms and express their intentions in words. Implied: A contract under which the agreement of the parties is demonstrated by their acts and conduct. Ostensible Agency: An actual agency relationship that arises by the actions of the parties rather than by express agreement. This situation is called an ostensible agency because on the surface an agency appears to exist. Once this type of agency is created, the owner is prevented by estoppel* from denying its existence. (*Estoppel: A legal doctrine by which a person is prevented from asserting rights or facts that are inconsistent with a previous position or representation made by act, conduct or silence.) Ratification: A method of creating an agency relationship in which the principal (seller or buyer) accepts the conduct of someone who acted without prior authorization as the principal's agent. The two primary forms of creating agency in Nevada are express agency and implied agency. Compensation or money NEVER determines or creates agency. A person who is represented by a licensee is known as a client. A person who is not represented by a licensee is known as a customer. Types of Agents: Universal Agent: An individual who handles ALL the business of the principal. This agent is legally empowered to do anything the principal can do. Universal agency is usually appointed by power of attorney, which then makes the universal agent an attorney-in-fact. General Agent: An individual who handles multiple transactions for a client. A general agent usually has broad authority to handle many transactions regarding one particular facet of someone's business or business activity. Special Agent (also known as a Limited Agent): An individual who handles a single business transaction under very specific instructions, for the principal. Agent Coupled with an Interest: This type of agency occurs when a real estate licensee is a partner in the ownership of the subject property. This type of agency does not allow for cancellation of listings as other types do. In Nevada, there are three ways in which a client can be represented in a real estate transaction. These are: Single Agency, or as a Single Agent; Dual Agency, or as a Dual Agent; and Assigned Agency, or as an Assigned Agent. Duties Owed by Agents: The fiduciary duties owed to a principal/client are: Care Obedience Accounting Loyalty Disclosure or Notice Confidentiality The non-fiduciary duties owed to a customer are: Honesty Accuracy Disclosure Puffing, Fraud and Defects: Puffing is the making of an exaggeration, a superlative comment, or a subjective opinion that is NOT made as a statement of fact. Fraud is a false representation of a fact. It is a purposeful deception intended to cause a person to act upon that deception to his or her own detriment or injury. Fraud is also commonly known as intentional misrepresentation. Material Defects: A material defect is defect or fault in a property that, if it was known to the buyer, would influence the buyers decision on whether to buy the property or not. Latent Defects: A latent defect is a defect or fault in a property that would NOT be readily discoverable by a reasonable inspection. Required Disclosure Forms: Another disclosure form required by Nevada law is Form 525 - Duties Owed By A Nevada Real Estate Licensee. This form must be provided to the client or unrepresented parties to the transaction before any real estate documents are signed by the client or other parties. The purpose of this form is to inform the buyer and seller of any obligations the real estate licensee owes to all parties in the transaction. Nevada law requires a specific disclosure from a real estate broker who acts for more than one party in a transaction. Form 524 - Consent to Act, is designed so that a real estate licensee can obtain the parties' written consent to act for more than one party in a transaction (basically, this is a "dual agency" consent, though the term "dual agency" is not used in Nevada). Compensation: All agency representation agreements in Nevada are between the broker and the client. Under an agency agreement, the client promises to pay the broker a commission if the broker fulfills his or her part of the contract. The broker uses his or her affiliated real estate licensees to help complete these contracts and in return pays the licensees a commission if their work is successful. Most commonly a commission will be: A percentage of the sale price, which will be whatever percentage the broker chooses to charge for company services. Flat fee, which will be whatever full amount the broker chooses to charge for company services. A salesperson licensee can ONLY ever receive a commission from a BROKER. A salesperson licensee may NEVER receive a commission directly from a client, even if the licensee was the client's agent. A salesperson licensee who is the procuring cause is entitled to receive a commission. In real estate, the procuring cause is the person that originated the chain of events that lead to the successful sale of a property. Generally the procuring cause is the person who produces a ready, willing and able buyer under the terms and conditions of a listing agreement, then he or she is entitled to a commission. The Sherman Antitrust Act is a federal law passed in 1890 that prohibits business practices that the government sees as anti-competitive. The Sherman Antitrust Act prohibits: Price Fixing:This occurs when two or more competing companies get together and collude to set predetermined rates or prices between themselves. Price fixing is illegal. Group Boycotts: This occurs when two or more companies join together and refuse to do business with a rival company. Group boycotts are illegal. Market Division: This occurs when two or more companies agree to the division of a particular market area, so as not to be in direct competition with one another in specific areas. Market division is illegal. The Sherman Antitrust Act imposes criminal penalties of: Up to $1 million for an individual; and Up to 10 years in prison for an individual; or Up to $100 million for a corporation.

Chapter 22 Summary

Characteristics of Land: Land has three PHYSICAL CHARACTERISTICS: Indestructibility: Because it cannot be consumed, used up, or significantly changed, land is considered to be indestructible. This indestructibility gives land permanence, which in turn gives land value. Immobility: Because it cannot be moved, land is considered to be immobile. This immobility also gives land permanence, which contributes to the value of a piece of land. Non-homogeneous: Because no two pieces of land are quite the same, each individual piece of land is unique and is considered to be non-homogenous. This uniqueness will give the land a value depending upon the precise characteristics making up the uniqueness. Land has four main ECONOMIC CHARACTERISTICS: Scarcity: A purchaser usually requires land in a specific location and for a specific purpose and it is these factors that make land scarce. As demand for land in certain locations and demand for land for certain uses increases, so the scarcity of that type of land will increase. Location: The location of an area of land has a huge impact on its desirability and its value. No two locations are ever quite the same. Improvements: The suitability of the land to be improved and the ease by which it may be improved by adding buildings and structures will affect the desirability and value of a piece of land. Permanence of Investment: Improvements to land are permanently fixed to the land and cannot be moved. In effect the improvements become part of the land, and as such will affect the value of the land. The economic characteristics of LAND should not be confused with the economic characteristics of PROPERTY. Property has five economic characteristics, which are: Demand: The more demand there is for a particular property, the more valuable it is to consumers looking for real estate. Utility: A three-bedroom house is more useful to consumers than a one or two-bedroom house. Scarcity: One property will sell quickly if only a few properties in a particular area are on the market. Transferability: When loans are available and rates are low, real estate is readily transferable from seller to buyer. Situs: The site/location of a particular property will play a big role in determining its value. Legal descriptions of property: Lot and block system, also known as the recorded plat system: This legal description refers to a recorded subdivision plat map filed in the public records. Using the lot and block system, a parcel of land is identified by the lot number and the block number as recorded on the subdivision plat map. The metes and bounds system begins at a designated place called the point of beginning, or POB. The metes and bounds system is a series of linear measurements of boundary lines connected by varying angles to form the complete boundary around the outside of a tract of land. A property description using the metes and bounds system must BEGIN AND END at the point of beginning. The fixed objects used to locate the POB are called monuments. The Rectangular Survey System, also referred to as the government survey system, is based on sets of intersecting lines running north to south and east to west in a grid pattern. Principal Meridians are the lines running north and south. Base Lines are the lines running east and west. Guide meridians are the lines running parallel to the principal meridian. Standard parallels are the lines running parallel to the base line. Guide meridians and standard parallels are spaced 24 miles either side of the principal meridian and base line to create a square block of 24 miles per side. Each 24-mile block is divided by range lines running parallel to the guide meridians at 6 mile intervals parallel to the guide meridians and township lines at 6 mile intervals running parallel to the standard parallels. This divides the block into 16 smaller square blocks of 6 miles per side called a township. Each township is 36 square miles in size. Townships are subdivided north-south and east-west to create 36 blocks of 1 square mile each, called sections. Each section is 1 square mile in size, which is 640 acres. Interstate Sales Full-Disclosure Act: The Interstate Land Sales Full Disclosure Act of 1968 regulates the sale of land across state lines in order to protect the public from fraud or misrepresentation when buying land in another state. Federal and State Planning Control: The federal government has passed many laws designed to control environmental hazards, such as: The National Environmental Policy Act, or NEPA, requires all federal agencies to produce environmental impact statements and environmental assessments regarding potential effects on the environment by any projects that use federal funding. The Clean Air Act was enacted as a measure to control air pollution nationwide. This federal law makes it mandatory for all businesses, including real estate developers, to meet specific air quality standards. The US Environmental Protection Agency (EPA) also has a Wetland Program Plan that aims to control wetlands management and protection. Environmental Regulation and Environmental Hazards: Environmental protection standards are set by the US Environmental Protection Agency, or EPA, in order to control air, water, and noise pollution, as well as other environmental conditions, including the cleanup of hazardous substances. The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) was passed in order to clean up uncontrolled hazardous waste sites and to respond to future hazardous materials spills. CERCLA established a program to achieve this goal called Superfund. The Superfund program authorizes the immediate removal of the hazard and authorizes actions to remedy any damage caused by the environmental hazard. To fund the removal and remedy of hazardous waste contaminations, Superfund created a process for identifying potential responsible parties (PRPs) and ordering them to take responsibility - and to pay - for the cleanup actions. Asbestos is a mineral that was used to insulate ceilings, walls, air ducts and heating units, but exposure to asbestos causes both severe and fatal illnesses. Any building constructed before 1978 has a high probability of containing asbestos. Under Nevada law, all sellers of residential real property MUST disclose known asbestos in the property. Lead is extremely harmful to humans when ingested. Under Nevada law, lead-based paint disclosure is mandatory for any residential structures built before 1978. The Residential Lead-Based Paint Hazard Reduction Act requires affirmative action on the part of property owners, landlords, and real estate agents and renovators when disturbing more than two square feet of old paint in houses built before 1978. Radon is an odorless, tasteless, colorless gas that is radioactive. When the radon is trapped in high concentrations inside buildings it can cause serious health problems. The mandatory Seller's Real Property Disclosure Form includes a disclosure regarding the knowledge of any radon in a subject property. Carbon monoxide is a colorless and odorless toxic gas. Exposure to carbon monoxide causes severe sickness and even a short exposure to it can result in death. Most states have introduced laws and statutes regarding carbon monoxide detectors. These laws include the requirement that carbon monoxide detectors be installed in all new homes. Electromagnetic fields (EMFs) are caused by the movement of electrical currents and can be emitted by overhead power lines and underground electrical cables. The public is increasingly concerned with EMFs to the point where it affects property prices. Therefore a client's concerns over EMFs should be taken very seriously by licensees. Underground storage tanks (USTs) are tanks that are designed to hold hazardous materials. USTs built before the 1980s are prone to corrosion, which leads to leaking and environmental contamination of the surrounding area. Nevada has adopted the federal government's regulation 40 CFR 280 that regulates USTs.

Chapter 13 Summary

Contracts: A contract is a voluntary agreement between two or more legally competent parties, which is enforceable by law, to perform or refrain from performing some legal act. A contract may be an: Express Agreement: An oral or written contract in which the parties state the contract's terms and express their intentions in words. Implied Agreement: A contract under which the agreement of the parties is demonstrated by their acts and conduct. Bilateral: In which both parties promise to do something (a promise for a promise). Unilateral: A one-sided contract, in which one party promises to do something if the other party acts. Contracts may also be: Executory: Something remains to be completed in the contract. Executed: Everything has been done, all promises fulfilled and have performed under the contract. Elements of a Contract: The requirements for a valid contract are: Offer and Acceptance: A contract is created when an offer by one party to another party is accepted by that other party. Consideration: Consideration is something that is of value. Consideration MUST be offered in a contract to prove the intent of the parties. Mutuality: Both parties must agree on the contract's purpose, terms and conditions. Competency and Capacity: All the parties to a contract must be considered legally competent and therefore have the legal capacity to sign a contract. Legality of Purpose: The object or purpose of a contract must be legal for the contract to be valid. The person making an offer is the offeror, and the parson receiving an offer is the offeree. An offer is a specific proposal made by an offeror to an offeree that has not yet been accepted or refused. A contract occurs when an offer is accepted by the offeree and the offeror is notified of the acceptance. Performance and Breach, Valid, Void, Voidable and Unenforceable Contracts: A contract is executed when all the terms of the contract are performed. A contract is breached (broken) when one of the parties defaults. Type of Contract Legal Effect Example Valid Binding and Enforceable on all parties. Agreement complying with the essential elements of a valid contract (offer and acceptance, consideration, mutuality, competency and capacity, legality of purpose). Void No legal effect. Contract for an illegal purpose, such as a non-approved gambling casino, a drug deal, etc. Voidable Valid, but may be rejected by one party. Contract with a person without the capacity to sign a contract (a minor, someone who has been placed under duress) is voidable by the party without capacity to sign a contract. Unenforceable Valid between the parties, but neither may force performance. Certain oral agreements that, under the Statute of Frauds must be in writing to be enforceable. For example, an oral real estate transaction agreement could close, but if one party decides not to close, the courts will not enforce the agreement because it is oral. Most Commonly Used Real Estate Contracts: Listing agreements: Agreements between sellers/landlords and brokers; Buyer agency agreements: Agreements in which the broker agrees to represent the buyer as the buyer's agent, setting forth a principal-agent relationship between the two parties. Options: Agreements between a seller (optionor) who must sell, and buyer (optionee) who may decide not to buy a property. Property management agreements: Agreements between landlords and property managers (brokers). Land contracts/contracts for deed/installment contracts/land sales contracts: Under this type of contract, the vendor (the seller in a land contract) retains the legal title to the property, while the vendee (the buyer in a land contract) takes possession of the property, and gets equitable title to the property. Sale contracts: Agreements between sellers and buyers. Leases: Agreements between an owner (lessor) and a tenant (lessee) to lease a property. Escrow agreements: Agreements between the escrow agent, the buyer, and the seller, in which the rights and responsibilities of each are set forth. Buyers/tenants agency agreements: Agreements between buyers/tenants and brokers. Statute of Limitations and Laches: The statute of limitations is the period of time within which certain actions must be brought to court, or else any rights that have not been enforced up until that time are lost. The doctrine of laches are laws that set a specific period of time within which certain legal actions must be initiated in court. Failure to enforce the right to legal action within the time stipulated by the statute of limitations will result in those rights to action being lost. Involuntary Alienation: Sometimes property is transferred from one party to another party without the voluntary act or consent of the grantor. In most cases this involuntary transfer occurs when the government has seized the land or the owner has died. The transfer of real property without the owner's consent is known as involuntary alienation. Involuntary alienation can be accomplished by any one of several methods: Escheat occurs when a property owner dies without a will (known as intestate) AND without any heirs. Eminent Domain is the right of the government to seize privately held property, provided that the land will then be used for the good of the public. Adverse possession is a form of involuntary transfer in which someone who has occupied a property for a period of time then makes a claim to the property and ultimately takes the property title from the true owner. Foreclosure is the legal process through which property is sold against the owner's wishes in order to raise funds to satisfy a debt. Usually. Bankruptcy occurs when a person can no longer afford to repay his or her debts. Once bankruptcy is declared, the title to that person's real property will be given to a court-appointed trustee. The trustee will sell the property and use the funds to pay the debts. Wills: A will is a written document that provides for the transfer of property that is owned by the deceased. Anyone who has made a valid will is known as having died in testate, but when someone dies without a valid will, they are known as having died intestate. If a grantor dies without a will (intestate) and without any heirs, then the property escheats back to the state. If a grantor dies without a will but WITH heirs, then the property will be transferred to the heirs according to the intestacy laws known as the Statute of Descent and Distribution. If the grantor dies with a will, possession of the property will be transferred to the heir or heirs named in the will, once the estate has been probated. There are several requirements that a will must fulfill in order to be valid: The testator (the person who made the will) must be of legal age. In Nevada, that age is 18. The testator must be of sound mind. The will must contain proper wording. The testator must not be under any undue influence, duress or act of fraud when executing the will. Witnesses must be present. Under NRS 133 there must be two witnesses. The will must be signed by testator or, at the testator's express direction, by an attending person.

Chapter 21 Summary.

Conventional Loans: Conventional loans have NO government guarantees or insurance. Usually the borrower is required to pay a 20% down payment with a conventional loan. Conventional loans account for about 60% of all applicants for a mortgage. Conventional loans can be either fixed rate or adjustable rate (ARM), and the term of the loan may be for any duration. About 50% of all conventional loans are packaged by the lenders and sold on the secondary market. A conventional loan that conforms to the standards of Fannie Mae and Freddie Mac is called a conforming loan. A conventional loan that does NOT conform to the standards of Fannie Mae and Freddie Mac is called a non-conforming loan. A conventional loan that is larger than the limits of Fannie Mae and Freddie Mac is called a jumbo loan. Borrowers can obtain conventional loans with down payments that are less than 20%, but in these cases the borrower will generally be required to pay private mortgage insurance (PMI). PMI is an insurance policy provided by a private insurer and used for conventional loans. The total amount a lender is willing to loan is generally based on the appraised value or the sales price of the subject property, whichever is lower. Secondary Mortgage Market: The market in which loans are sold by lenders and bought by investors is called the secondary mortgage market. The purpose of the secondary mortgage market is to provide liquidity (funds) for the primary market (the institutional lenders). Mortgages are NOT sold individually on the secondary mortgage market, but are bundled together into mortgage-backed securities (MBS). The agencies that assemble packages or bundles of loans for resale to investors are known as holding warehouse agencies. There are three major warehousing agencies within the secondary mortgage market: The Federal National Mortgage Association (FNMA), or Fannie Mae The Federal Home Loan Mortgage Corporation (FHLMC), or Freddie Mac The Government National Mortgage Association (GNMA), or Ginnie Mae Fannie Mae: The Federal National Mortgage Association (FNMA) is more commonly known as Fannie Mae. The purpose of Fannie Mae was to stimulate local banks into providing financing and home mortgages in order to increase the availability of affordable housing. Fannie Mae repackages mortgages into investments, known as mortgage-backed securities, and then sells these MBS investments to investors. Fannie Mae does NOT provide or originate mortgages. Fannie Mae buys FHA loans, VA loans, and conventional loans, and is the largest purchaser in the secondary mortgage market. Freddie Mac: The Federal Home Loan Mortgage Corporation (FHLMC) is more commonly known as Freddie Mac. Freddie Mac buys mortgages from lenders and repackages these mortgages into mortgage-backed securities (MBS) that it then sells to investors on the secondary mortgage market. Freddie Mac was established in order to expand the secondary mortgage market. Freddie Mac ONLY buys conventional loans and does NOT buy FHA or VA loans. Freddie Mac is the second largest purchaser in the secondary mortgage market after Fannie Mae. Ginnie Mae: The Government National Mortgage Association (GNMA) is more commonly known as Ginnie Mae. Ginnie Mae does NOT buy, sell, or issue mortgage loans or mortgage backed securities (MBS), Ginnie Mae insures or guarantees government-back loans. Ginnie Mae ONLY deals with government-backed loans, such as FHA loans, VA loans and USDA Rural Development loans. Ginnie Mae does NOT buy mortgage loans. Ginnie Mae does NOT sell mortgage backed securities. Ginnie Mae INSURES government-backed loans. When Ginnie Mae works together with Fannie Mae or Freddie Mac it is known as the Tandem Plan. Financing Laws and Regulations: There are three major laws regarding financing: Truth in Lending Act (TILA) also referred to as Regulation Z Real Estate Settlement Procedures Act(RESPA) Equal Credit Opportunity Act (ECOA) Truth in Lending Act: The Truth in Lending Act, or TILA, is often referred to as Regulation Z. The purpose of this law is to require disclosure by lenders to buyers regarding the true cost and terms of credit. TILA requires lenders to provide written disclosures regarding the true cost of obtaining credit so that the borrower can compare the costs of various lenders. The Truth in Lending Act can be broken down into two main sections that deal with the provisions of: Advertising Annual Percentage Rate (APR) The disclosure requirements of TILA apply to all advertising made by lenders. Under TILA there are certain "trigger terms," which are terms that MUST be accompanied by certain disclosures. The Annual Percentage Rate, or APR, is a calculation method used to express the relationship of the total finance charge compared to the total amount to be financed. Use of APR permits a consumer to compare the rates charged by competing lenders. Real Estate Settlement Procedures Act: The Real Estate Settlement Procedures Act, or RESPA, is a law to ensure buyers and sellers in real estate transactions are better informed when shopping for real estate services and have better knowledge of all settlement costs. RESPA also outlaws unnecessary costs such as kickbacks and referral fees between real estate service providers. RESPA makes it illegal for a person to give or receive any form of fee or thing of value for referring mortgage loan settlement business to another party or entity. TRID: The TILA-RESPA Integrated Disclosure, or TRID, went into effect in 2015 and incorporated the existing disclosures required by TILA and RESPA with new requirements. According to the TRID rule: Lenders must give a copy of the booklet 'Your Home Loan Toolkit' to every loan applicant at the time of that person's application for a loan. Lenders must provide a loan estimate of settlement costs at the time of a loan application, or within three business days of an application. A closing disclosure, a form designed to detail all financial particulars of a transaction, must be delivered to the borrower at least three days before closing. The settlement agent must also provide the seller with the closing disclosure, which may be done at consummation. Equal Credit Opportunity Act: The Equal Credit Opportunity Act, or ECOA, is a law that makes it illegal for lenders to discriminate against applicants for credit due to the applicant's race, color, religion, national origin, gender, marital status, age, or dependency on public assistance in the granting of credit to consumers. Under the ECOA a lender CAN base its lending decisions on an applicant's income, net worth, job stability, and credit rating.

Chapter 24 Summary

Prorations Expenses associated with real estate (mortgage interest, property taxes, rent) are paid either in advance or in arrears. When real property closes, it is necessary to prorate these expenses between the seller and the buyer. Proration means to divide, assess, or distribute a sum of money proportionately between the parties involved. Proration is calculated using the 365-day year method, or the 360-day year method. The 365-day year method is calculated assuming all the months have 31 days except April, June, September and November, which have 30 days, and February that has 28 days. Leap years do not apply to the 365-day method. The 360-day year method is calculated assuming all the months have 30 days, so 12 months x 30 days = 360 days. Part-Whole Rate The "Part-Whole Rate" formula works on all types of real estate math problems. The "T" structure of the Part-Whole Rate says that all math problems require three items to complete the task (or six in the case of taxation). The basic formula uses the parts of the "T" as Part, Whole and Rate: Part is always a "part" or piece of something, such as a commission is always part of the sales price. Whole is always the complete unit such as sale price, market value, or loan balance. Rate is always a percentage. In the "T" formation, the Part is always put into the calculator first. After this is entered, you must use the divide button, and then enter the Whole or Rate (whichever is listed in the problem). The resulting number will be the Whole or Rate that was not listed in the problem and is the figure or sum you are trying to determine. The lines two lines that make up the letter "T" are the horizontal line, which is the divide line, and the vertical line which is the multiply line. If you have the part and the whole, the part is divided by the whole. If you have the rate, the rate is multiplied by the sale price. Commissions Usually commissions are a percentage of the sale price. Commission Sale Price Commission Price % This chart illustrates whether you are to DIVIDE (where the top variable 'commission' is over the other two variables) or MULTIPLY (where variables are NEXT TO each other). Interest Rates Interest rates are expressed in annual rates. Use the "T" to remember the formula for determining the interest on a loan. INTEREST LOAN AMOUNT $ INTEREST RATE %

Chapter 19 Summary

Real Estate Financing: A mortgage loan, or mortgage, is a device that is used by consumers to raise the funds required to purchase real property. A promissory note is a financial instrument that contains the written promise from one party to pay a specific sum of money to another party. There are two parts to a mortgage loan: a promissory note, or promise to pay, and the mortgage, which allows a lender the right to foreclose on the secured property if the borrower does not pay. Most real estate loans are collateralized loans. A collateralized loan means that lenders will demand a security instrument (the collateral) to assure that if the borrower does not pay the promise made in the note, then the lender can take the collateral to settle the debt. There are two types of security instruments: Mortgage deed Deed of Trust Promissory Notes: There are two types of promissory notes: the straight note or interest only note in which the borrower agrees to pay the interest and to pay the entire principal in a lump sum on the due date, and the installment note which requires payments that include both principal and interest. Principal is the actual amount of money that was borrowed under a loan. Interest is what the lender charges for providing the principal. Mortgages and Deeds of Trust: In a mortgage there are two parties involved. They are: The borrower is the MORTGAGOR The lender is the MORTGAGEE In a deed of trust there are three parties involved. They are: The borrower is the TRUSTOR The lender is the BENEFICIARY The holder of the title to the property is the TRUSTEE Under a deed of trust, or trust deed, the property is used as a security for a borrower to obtain a loan from a lender. The LEGAL title to the property is transferred to a third party, who holds the legal title in trust, while the EQUITABLE title to the property remains with the borrower. Once the loan is fully repaid to the lender (beneficiary), the legal title is transferred from the third party (trustee) to the borrower (trustor). Legal title is the actual ownership of a property. Equitable title is the right to obtain full ownership of a property. Under a deed of trust, the beneficiary (lender) holds the promise to repay the debt (promissory note) from the borrower and the trustee holds the security (deed of trust) for the debt. Clauses in a Mortgage or Deed of Trust: Acceleration Clause: If a borrower defaults on the loan, the lender can call the entire balance due and payable immediately. Alienation Clause (also known as a Due on Sale Clause: The mortgagee or beneficiary declares that the entire balance of the loan becomes due and payable when the property is transferred. Satisfaction Piece: When the borrower has paid the entire balance, the lender is required to execute a satisfaction of mortgage or release deed of trust such as a Satisfaction of Mortgage or Deed of Reconveyance. Defeasance Clause: A provision in a mortgage that states the borrower will receive the title to the property when he or she has fulfilled all of the terms of the mortgage. Prepayment Penalty Clause: A clause that allows a lender to charge extra interest if the loan is paid off before the normal completion date. Subordination Clause: A clause in a Mortgage or Deed of Trust wherein a subsequent mortgage or deed of trust takes priority. Subrogation Clause: A clause generally used in insurance policies under which the insurance company takes on the rights to pursue a third party for damages after the insurance company has paid out for a loss caused by that third party. "Subject to" and Assumption: A mortgage assumption is the transference of an existing loan's balance, terms and conditions from the seller to the buyer. In an assumption the buyer takes over, or assumes, full responsibility for the original payment, the original loan and the original interest rate of the existing loan. When a clause in the deed states that the buyers are purchasing the property "subject to the existing loan," then the buyers acknowledge the existing loan and promise to pay it. However, if the buyer defaults and does not pay, the original borrower is still held responsible. Loan Payments: A monthly loan payment consists of principal, interest, taxes, and insurance. Foreclosure: A foreclosure is the legal process under which a lienholder can seize possession of a mortgaged property if the borrower defaults on repaying the mortgage debt. When a lender initiates a foreclosure, the property is sold under a court order and the proceeds are used to repay the loan balance owed by the borrower to the lender. The order in which loans are paid in a foreclosure is the oldest taking first priority, and continuing down to the newest taking last priority. The order in which payments are made is as follows: The costs of the sale: this includes advertising, attorney fees, trustee fees, etc. Special assessment taxes, and general taxes: After the costs of the sale have been paid, taxes are paid according to their value. The senior mortgage: Next the senior, or first mortgage is paid. The order of recording determines which is the senior mortgage. The junior mortgages: Finally the rest of the mortgages are now paid. There are two types of foreclosure: Judicial foreclosure Non-judicial foreclosure Rights of Redemption: After a foreclosure is initiated a defaulting borrower has the right to prevent the foreclosure sale and thus retain his of her property. This right is known as the right of redemption. There are two rights of redemption: The equitable right of redemption gives the borrower the right to repay the debt before the foreclosure sale and thus reclaim the property. The statutory right of redemption gives the borrower a certain amount of time after the foreclosure sale to repay the debt and thus reclaim the property. Interest and Discount Points: Interest is the amount of money that a lender charges to a borrower for the loaned sum of money. Interest is always expressed as a percentage per year. Discount points, more commonly known simply as points, are a form of prepaid interest that is charged at the creation of the loan. One discount point typically equals 1% of the loan balance. In general, a single discount point lowers the interest rate of a loan by one eighth of a percent (1/8%), so eight discount points are required to decrease the percentage of interest on a loan by 1%. Leverage: Leverage is the principle of a person using other people's money to make investments that would otherwise be beyond the financial means of that individual person. The less of his or her own money a borrower uses, the higher the "leverage" obtained by the borrower. The less of his or her own money a borrower uses, the more money the lender is required to provide, and the more money the lender has to provide the higher the risk to the lender. The ratio of the loan amount compared to the value of the property is called the loan to value ratio, or LTV. P&I Payments: Most monthly mortgage payments are put towards both the principal (the outstanding loan balance) and the interest charged by the lender. A portion of the monthly mortgage payment will be assigned to repaying the principal and a portion to paying the interest. This is known as the P&I payment. Seller's Net: Seller's net is the amount of money the seller will receive from selling his or her home once all the taxes, commissions and costs have been paid. Types of Loans: Straight-Term Loan, or Interest-Only Loan: Only the interest is paid off. Partially Amortized Loan, or Balloon Loan: Small payments towards the interest and principal are made, with a large "balloon" payment at the end of the loan period. Fully Amortized Loan: Regular payments towards the principal and interest are made and the entire loan is paid off by the end of the term. Budget Mortgage: Regular payments towards the principal and interest are made PLUS payments towards taxes and insurance (or other fees beyond P&I). Adjustable Rate Loan (ARM): Interest rate fluctuates and is usually tied to an index, with increases are capped for each period and for the term of the loan. Graduated Payment Plan: Lower payments initially, then payments increase. Reverse Annuity Mortgage (RAM): Homeowner receives monthly payments based on accumulated equity rather than a lump sum. Part Purchase Money or Purchase Money Mortgage (PMM): A mortgage given as part of the buyer's consideration (cash) for the purchase of real property, and delivered at the same time that the real property is transferred as a simultaneous part of the transaction. Package Mortgage: Loan on real estate plus the fixtures and appliances. Package mortgage always includes personal property as well as real property. Blanket Mortgage: Loan on several pieces of land. Open-End Mortgage, or Open-End Deed of Trust: Allows the borrower to borrow an additional sum of money at a later date, up to a maximum figure. Wraparound: A borrower with an existing loan approaches a second lender to secure an additional loan. The second lender assumes the payment of the first loan and issues the additional loan to the borrower, but charges a higher interest rate. Buydown. Can be achieved by having the developer or builder subsidize the mortgage payments, or by the buyer purchasing discount points upfront to reduce the loan's interest rate. Construction Loan. A loan taken out by a borrower to finance the construction of a home. Construction loans vary. Takeout Loan: Long-term permanent financing for large construction projects, usually commercial. Sale-Leaseback: Owner sells his or her property but, at the same time, leases the property back from the new owner. Participation Mortgage: The lender participates in the income of the mortgaged property beyond a fixed return, or receives a yield on the loan in addition to the straight interest rate. Bridge Loan: A short-term, interim loan for a buyer, usually six months to 1 year in duration. Contract for Deed, or Installment Land Contract, or Land Contract: The buyer does not receive legal title until the final payment is made. The seller is the vendor and the buyer is the vendee. Seller keeps legal title until the debt is paid in full. Buyer receives equitable title until debt is paid in full. Nevada Law: Nevada is a lien theory state. This means that the mortgagor holds both legal and equitable title on the property. In Nevada a deed of trust is the typical security instrument in a home purchase. Mortgages ARE permitted in Nevada but are very rarely actually used. Deeds of trust are often called"mortgages" in Nevada, even though they are not really mortgages. There is NO statutory limit set forth by Nevada law on the amount of interest charged for a loan. In Nevada, escrow accounts are commonly used in association with real estate purchases to provide for future real estate taxes or property insurance premium payments. These escrow accounts are also known as trusts.

Chapter 6 Summary

The Uniform Act: NRS 113 sets forth the Uniform Vendor and Purchaser Risk Act, or the Uniform Act. The party in a real estate transaction purchasing the property is known and the buyer or purchaser. The party in a real estate transaction selling the property is known and the seller or vendor. Under the Uniform Act: If the subject property, or part of it, is destroyed BEFORE either the legal title or possession of the subject property has been transferred, the VENDOR may NOT enforce the contract to sell the property, and the purchaser is entitled to recover any price he or she has paid up to that point. If the subject property, or part of it, is destroyed AFTER either the legal title or possession of the subject property has been transferred, the BUYER may NOT be relieved of his or her responsibility to honor the contract to sell the property, and must pay the agreed price and is not entitled to recover any portion of the price he or she has paid up to that point. Disclosures: Anyone selling a previously unsold home or an improved lot for which water or sewerage services will be provided by a public utility must disclose the current rates for those water and sewage services (certain exceptions apply). Anyone selling a home or an improved or unimproved lot that is adjacent to any open range must disclose this fact in a written document before the purchaser signs a sales contract. Under NRS 113, disclosures regarding zoning and land use must be made by certain sellers. When a residential property is offered for sale, the seller is required to make certain disclosures regarding the condition of the property for sale. The Division has adopted regulations under NAC 113 that set forth the regulations prescribing the format and contents of the form used for disclosing the condition of residential property offered for sale. Familiarize yourself with the information this form must include, as well as when and how to properly serve form. Common Interest Ownership: Chapter 116 of the NRS set forth the laws governing common interest ownership and define a common interest community as: "Real estate described in a declaration with respect to which a person, by virtue of his or her ownership of a unit, is obligated to pay for a share of the real estate taxes, insurance premiums, maintenance or improvement of, or services or other expenses related to, common elements, other units or other real estate described in the declaration." When selling a unit within a common interest development, the unit's owner is required under NRS 116 to provide the purchaser with a resale package and an information statement. Familiarize yourself with the contents of both of these items. Subdivided Land: NRS 119 sets forth the laws and regulations regarding subdivided land in Nevada. NRS 119 ONLY applies to land that is divided, or is proposed to be divided, into 35 or more parcels. NRS 119 does NOT apply to any subdivision in which all lots, parcels, units or interests of the subdivision are restricted exclusively to nonresidential use. Anyone who wishes to offer subdivided land for sale in Nevada is known as a developer and must first earn a license to sell such land. A license to sell subdivided land is also referred to as a permit. A person or real estate broker who wishes to offer or sell any subdivision or lot, parcel, unit or interest therein must first submit a package of information is known as the statement of record or resale package to the Division. Before issuing a license to sell subdivided land, the Division must investigate all information provided on the application and inspect the property. The Administrator will then either: Issue a license to sell the subdivided land; or Issue a temporary license valid for 6 months; or Deny the issuance of a license. After the Administrator has examined and approved a subdivision, the Administrator will issue the applicant a property report. A property report authorizes the sale or lease, or the offer for sale or lease, of the lots or parcels in a subdivision. Familiarize yourself with the contents of the property report cover sheet. If subdivided land is to be offered for sale or sold through a broker, the name of the broker, or his or her real estate salesperson, must first be placed on file with the Division before any subdivided property can be offered or sold. This broker becomes the broker of record. A developer may also engage a registered representative to represent him or her. A registered representative is NOT a real estate broker or salesperson, and is limited in the duties he or she can perform. The broker of record supervises all sales of subdivided lands and the registered representatives solicit people to attend meetings and provide people with literature. Before any form of advertising may be used to offer a subdivision unit for sale, the Division must review and approve the advertisement. ALL advertising must: Be truthful and accurate; Fully state all factual material; Be consistent with information in the property report. In regard to promotional meetings, the nature of such meetings must be included in the written plan submitted with the permit application, and must follow specific NAC regulations. ALL advertising used in promotional meetings is subject to the standards of advertising set forth in the Nevada Administrative Code (NAC). Violations and Penalties: It is the responsibility of the Division to enforce the laws and regulations governing subdivided land. The Division has the authority to suspend, revoke, place specific conditions upon, or deny the issuance or renewal of a license or registration. Before a license or registration is revoked, the alleged violator will have the right to a hearing. It is a violation of the law for an unlicensed person to carry out the actions of NRS 119 for which a license or permit is required. In addition to any other penalty or remedy imposed on someone who is not properly licensed, the Administrator also has the authority to impose an administrative fine against anyone who knowingly acts in this manner. The administrative fine must not exceed either the amount of the gain that the person realized from the violation, or $5,000, whichever is greater. A "natural person" (a person acting as an individual and not acting as an LLC or corporation) who violates the provisions of NRS 119 is guilty of a gross misdemeanor. If the violator is a co-partnership, association or corporation, a fine of up to $10,000 per offense will be imposed on that organization. Any person who sells or attempts to sell any subdivision through intentional misrepresentation, deceit or fraud; or obtains or tries to obtain a license through intentional misrepresentation, deceit or fraud, that person is guilty of a category C felony. There are several situations in which a subdivision developer is partially or fully exempt from the registration process set forth in NRS 119. Familiarize yourself with these exemptions.

Chapter 7 Summary

The sale and purchase of time-shares in Nevada is governed by NRS 119A and its corresponding administrative code NAC 119A. The sale and purchase of campground memberships in Nevada is governed by NRS 119B and its corresponding administrative code NAC 119B. Time-Shares: A time-share refers to "the right to use and occupy a unit on a recurrent periodic basis according to an arrangement allocating this right among various owners, whether or not there is an additional charge to the owner for occupying the unit." Time-share laws were designed to protect the public through the prevention of oppressive sales practices and by requiring that all material facts about a property be disclosed to a purchaser. Any person licensed as a real estate salesperson is NOT required to obtain a separate time-share sales agent license as set out in NRS 119A. A DEVELOPER is a person who creates a time-share plan and is in the business of offering to sell or selling time-shares. A developer MUST first obtain a PERMIT from the Division before he or she can offer to sell time-shares. A PROJECT BROKER is a person who coordinates the sale of time-shares for a developer. A project broker MUST be licensed as a real estate broker under NRS 645. A SALES AGENT is a person who offers to sell or sells a time-share ON BEHALF of a developer. A sales agent selling time-shares MUST be under the direct supervision of a licensed real estate broker acting in the capacity of a project broker. A SALESPERSON is a person who is licensed under NRS 645 as a salesperson or broker-salesperson and who is employed or engaged by a licensed real estate broker to perform any act or transaction under NRS 645 and NRS 119A. A salesperson selling time-shares MUST be under the direct supervision of a licensed real estate broker acting in the capacity of a project broker. A REPRESENTATIVE is a person who is NOT a sales agent but who, on behalf of a developer, induces other persons to attend a sales presentation. A representative CANNOT offer to sell or sell time-shares on behalf of a developer. Before a person applies for a sales agent license, he or she must complete 14 hours of prelicense instruction. The Division requires the instruction to comprise: Ethics; Time-share laws and regulations; and The principles and practices of selling time-shares. A sales agent is only permitted to work for 1 broker at any given time and may only work at a single location at any given time. The Administrator has the authority to impose disciplinary actions upon a sales agent who is found guilty of any the following actions: Fraudulently obtaining his or her license through misrepresentation or other false means; Making any material misrepresentations; Making false character promises that were intended or likely to influence or induce someone to act in a certain way; Attempting any fraudulent, misleading or oppressive sales techniques; Accepting compensation (including consideration) as a sales agent from anyone other than the agent's project broker; Failing to account for or turn over to his or her broker any money that belongs to others but was entrusted to him or her; Violating any other provision under NRS 119A, NRS 119B, NAC 119A, or NAC 119B, or helping someone else commit such a violation; or Any felony that relates to a sales agent's practice, or any other crime that involves moral turpitude, or, if that person has entered a plea of "nolo contendere" (no contest) to a felony of these types. Under NRS 119A the association of a sales agent with a project broker must follow these requirements: If there is a change of a sales agent's association with a project broker, it is the responsibility of the project broker to provide written notice to the Division within 10 days after that change. At any time that the sales agent's employment with the project broker ends, the broker must send that agent's license to the Division. If the sales agent decides to change his or her association with his or her project broker, or if he or she decides to change the location at which he or she works for that project broker, it is the sales agent's responsibility to submit his or her application for this change to the Division, along with the required fee. A sales agent must only become associated with a project broker who will attest to the agent's good reputation, honesty, and trustworthiness. A sales agent must promptly deliver every good faith offer (complete with purchase terms and conditions) that he or she obtains to the project broker, and must also promptly deliver to the purchaser and seller a copy of each acceptance of an offer or counteroffer. Time-share developers can hire representatives, which are persons who are not sales agents, but who can induce people, on behalf of the developer, to attend sales presentations, to act on their behalf under specific conditions. If a permit is granted to the time-share developer, the Division will issue the public offering statement in the form of a book that summarizes the permit application information that the Division feels is necessary to disclose to prospective buyers. The terms and conditions of any documents or agreement regarding the time-share plan creation and management as well as the time-share sales to which the applicant is a party must be described within thepublic offering statement. A developer is required to provide a Division-approved public offering statement to every proposed purchaser of a time-share. Time-share permits expire annually and must be renewed by filing an application with the Administrator and paying the required fee. The filing of the renewal and the fee must be completed at least 30 days before the permit expires. If any developer, project broker, manager, sales agent, or representative is convicted of or pleads guilty or no contest to any felony or crime of moral turpitude, he must notify the Division within 10 days after the conviction or plea; AND with each subsequent renewal application of his or her license, permit, or registration. Permits, registration, or licenses may be renewed through the Division's website for an additional fee on top of the required standard renewal fee. Although time-shares and time-share plans and projects are subject to the regulations prescribed in the statutes and codes prescribed at state level, time-shares and time-share plans and projects are subject to local government licensing in terms of revenue. Any regulation within the time-share laws does NOT invalidate any zoning, building usage, or other regulation of real estate at local government level. The time-share laws do NOT apply to an owner (except if that owner is also a developer) who earns compensation through the referral of prospective purchasers to a developer, as long as that owner refers 20 or fewer prospective purchasers within 1 calendar year, and if that owner does NOT show or negotiate the time-share sale. A developer may establish branch offices, provided each office is operated and supervised by: A project broker; or A broker-salesperson with at least 2 years of experience as an active real estate broker, broker-salesperson or salesperson. A project broker is required to keep records of all transactions. The project broker must notify the Division of the location of these records. Records of all transactions must include the details of: Deposits; Disbursements; Names of purchasers; Names of salespersons and sales agents; Relevant dates; and Other important information. These records should all be numbered consecutively or indexed according to Division audit requirements. If a project broker fails to renew his or her license, or it is cancelled, suspended, or revoked for any reason, the licenses of EVERY salesperson in his or her employ will be immediately suspended until the employee applies for and meets the qualifications for reinstatement of his or her license and pays the proper fees. Familiarize yourself with the various fees pertaining to time-shares. All time-share plans must be created by one or more time-share instruments. Time-share instruments provide information on the time-share development, and when combined together these instruments form the time-share plan. A time-share instrument is any document creating or regulating time-shares, excluding any law, ordinance or governmental regulation. A reservation to purchase a time-share must include a provision that gives the prospective purchaser the right of cancellation with a full refund of the deposit he or she paid. This right of cancellation may be made at any time before the contract of sale is executed. A right of cancellation must also include provisions that: State the prospective purchaser's deposit will be placed in escrow until the permit is issued for the time-share sale; Guarantee a specific purchase price for a certain time period after the permit has been issued; and Require that if any interest is earned on the deposit, it be paid to the prospective purchaser. A purchaser of a time-share has the right to cancel a time-share contract of sale made before midnight of the 5th calendar day following the date a contract was fully executed under NRS 119A. Any person who wants to list, advertise, promote or solicit prospective buyers, on behalf of an owner of a time-share who is NOT the developer must hold a real estate broker's license and register as a time-share resale broker with the Division. A time-share resale broker must renew his or her registration with the Division every year. The following persons do NOT need to register as a time-share resale broker (as long as that person is not using a method to evade the time-share laws in Nevada): A purchaser who buys time-shares for his or her personal use and then resells fewer than 12 time-shares within a 12-month period; A project broker who resells time-shares as an agent for a developer who holds a permit of the time-share project; or An owner, operator, or publisher of a newspaper, periodical or website, unless that owner, operator, or publisher derives more than 10% of its gross revenue from providing advance fee listings. When a purchaser of a previously sold time-share purchases the time-share through a time-share resale broker, the sales contract MUST show that the purchaser may cancel the contract until midnight of the 5th calendar day after the date of execution of the contract. During any period in which the Developer is also the manager of a time-share project, the developer MUST have a written agreement that provides for the management of the time-share plan and the project with the owners association. This agreement must set forth the following: That the manager or a majority of the owners has the authority to terminate the agreement for cause. That the manager's resignation will only be accepted 90 days after the association has received it. That the manager must deliver a fidelity bond to the association. A detailed, itemized schedule of all fees, compensation, or property due to the manager for his services. If the developer continues to hold a property interest in the project, then he or she must also be a party to the agreement, and the agreement must state that the project will be maintained in good condition, including provisions for dispute resolution for the developer and manager or association, and for the assessment collection from the owners if the agreement to keep the property in good condition is breached. The Nevada Real Estate Division is responsible for enforcing the time-share laws and regulations in Nevada. Action against a developer or his agent may be taken by the Administrator or by a purchaser for: A misrepresentation or uncorrected misrepresentation in the statement of record; Improperly or illegally selling time-shares; or Selling time-shares by offering a public information statement that contained a misrepresentation, whether the misrepresentation was an untruth or an omission. The remedies and penalties available to the Division against a person for engaging in the unlawful acts, include the suspension, revocation, or placement of conditions on a license or permit, or an administrative fine. The amount of the administrative fine for acting without a license or not having registered with the Division may not exceed the amount of economic benefit that the violator gained from the violation or $5,000, whichever amount is greater. Anyone who knowingly submits any false or misleading information in an application for a permit to sell time-shares, or does not submit an annual report on a time-share exchange program, or both, is guilty of a misdemeanor. It is also illegal for anyone to knowingly use false or misleading information to advertise the sale of time-shares. It is unlawful to use unfair methods of competition or deceptive acts in an attempt to sell time-shares. Such actions include: Misrepresenting or failing to disclose any material fact concerning a time-share. Including in a sales agreement provisions purporting to waive any right or benefit provided for purchasers under NRS 119A. Receiving from a prospective purchaser any money or other valuable consideration before the purchaser has received a statement of public offering. Misrepresenting the amount of time or period of time the unit will be available to a purchaser. Misrepresenting the location or locations of the unit. Misrepresenting the size, nature, extent, qualities or characteristics of the unit. Misrepresenting the conditions under which a purchaser may exchange occupancy rights to a unit in one location for occupancy rights to a unit in another location. Failing to disclose up-front that any promised inducements are being offered to solicit the sale of a time-share. Failing to disclose up-front to a prospective purchaser any agreement between the project broker or sales agent and the developer that results in a sharing of sales proceeds in excess of a minimum sales price for a time-share. Any act or practice considered an unfair method of competition or an unfair or deceptive act or practice under the Nevada Revised Statutes. Campground Memberships: The regulations that govern memberships in campgrounds are set out in NRS 119B. These regulations are very similar to those of NRS 119A governing time-shares. Campground: Any real property which has camping sites available for use, occupancy or ownership, unless all the camping sites are open to the general public for a daily or other periodic fee. The term does not include any residential structure affixed to the land. Membership: An agreement offered or sold within this state evidencing a purchaser's right or license to use, for more than 30 days, a campground or its recreational facilities. Anyone who is NOT exempt under NRS 119B to sell campground memberships must apply to the Administrator for a permit to offer campground memberships. The applicant must provide: A disclosure setting forth specific property information; The campground's rules, restrictions, and covenants (CC&Rs) that govern the member's use of the campground; The developer's financial information; and The method used to determine the number of memberships to be sold. Having received an application for a permit to sell campground memberships, the Administrator will investigate all the submitted information and may inspect the property that is the subject of the application. Familiarize yourself with the various fees pertaining to campground memberships. For campground membership sales it is the broker of record that is responsible for supervising all the sales agents associated with him or her, whereas with time-shares it is the project broker. No one may sell any campground membership without a permit and without designating and using a broker of record to do so. A purchaser of a campground membership has up until midnight of the 5th day following the execution of a contract of sale to cancel the contract and receive a full refund of monies paid. NRS 119B is enforced by the Administrator, except in the event of a real estate licensee selling campground memberships, in which case the Real Estate Commission will take action against a licensee violates any law under NRS 119B or NRS 645.

Chapter 5 Summary

This concludes Chapter 5. Below is a brief summary that you should review before taking your quiz. Brokerage Agreements Involving Commercial Real Estate: Exclusive agency representation is the most common form of representation. Under the Nevada statutes, a brokerage agreement that includes the option for exclusive agency representation must follow these requirements: Be in writing; Set forth definite, specific and complete termination terms; Must NOT contain a provision that requires the client to notify the broker if the client intends to cancel the exclusive agency features of the brokerage agreement once that brokerage agreement has been terminated; and Include the signatures of BOTH the client and the broker. In addition, under the Standards of Practice section of NAC 645, the following regulations apply to exclusive agency agreements: Any licensee working in cooperation with a broker who has an exclusive agency agreement is prohibited from asking another licensee to also cooperate in the agreement, unless the listing broker has given his or her consent. Signs advertising a property for sale, lease, exchange, or rent can only be placed there by ONE licensee unless the owner allows otherwise. Anyone who wants to negotiate a sale or lease with the property owner must first obtain the consent of the broker who holds the exclusive agency agreement. A broker with an exclusive agency agreement must cooperate with other brokers when it is in the best interests of his client. NRS 645.8701-8811 covers Brokerage Agreements Involving Commercial Real Estate. Commercial real estate is "ANY real estate located in Nevada" but does NOT include: Improved real estate that consists of 4 units or LESS; Unimproved real estate for which 4 units or less may be developed or constructed; or Any single-family residential unit, which includes a condominium, townhouse or home within a subdivision, if that unit is sold, leased or otherwise conveyed on a unit-by-unit basis, regardless of whether the unit is part of a larger building or parcel that consists of more than 4 units. A broker is deemed to have earned a commission when the real estate broker has performed all of the duties as set forth in the brokerage agreement. Once a broker has earned his or her commission, the broker a claim upon the owner's net proceeds from the sale or transfer of commercial real estate for which the commission was earned. Claims relating to Commissions: If a real estate broker wants to enforce a claim in order to receive his or her commission from an owner, the broker must, within 7 days after the commission has been earned, provide written notice of the claim to: The owner of the commercial real estate involved in the transaction; and The escrow agent who is in charge of closing the transaction for the commercial real estate. (Only applicable if the broker knows the identity of the escrow agent at the time he or she sends out this notice.) This claim is upon personal property and a does not attach to any real property title. Once the owner receives the broker's notice, the owner must, within 5 days after the notice is served, confirm or deny the claim in the notice and notify the broker in writing. If an owner's net proceeds are reserved because of a broker's claim, the escrow agent must not release those proceeds until the rights of the owner and broker have been determined through a civil action. When a hearing is held the court will make a preliminary determination about which party, with reasonable probability, is entitled to the amount of the owner's net proceeds claimed by the broker. If the court determines reasonable probability that the broker is entitled to the amount he or she claimed of the owner's net proceeds, then the court will take the following actions: If the proceeds have been deposited with the court by the escrow agent, the court will release the proceeds to the real estate broker; or If the proceeds have NOT been deposited with the court by the escrow agent, the court will order the escrow agent to release the proceeds to the real estate broker. If the court determines reasonable probability that the owner is entitled to his or her own net proceeds that were claimed by the broker, then the court will take the following actions: If the proceeds have been deposited with the court by the escrow agent, the court will release the proceeds to the owner; or If the proceeds have NOT been deposited with the court by the escrow agent, the court will order the escrow agent to release the proceeds to the owner. Under NRS 645.321 it is illegal in Nevada to discriminate against a person based upon that person's: race, religion, color, national origin, disability, ancestry, familial status, gender, sexual orientation, or gender identity or expression. Anyone caught violating the provisions of NRS 645.321 will be liable for: A fine for the first offense. Be required to show cause as to why he or she should not have his or her real estate license revoked by the Commission for a second offense. Notification to the Division: Licensees must not deal with any party to a real estate transaction in a manner that is deceitful, fraudulent or dishonest. License law requires all licensees to notify the division if he or she is convicted of, or enters a plea of guilty, guilty but mentally ill, or nolo contendere to: A felony relating to the practice of the licensee. Any crime involving fraud, deceit, misrepresentation or moral turpitude. Disciplinary Action: Disciplinary actions for real estate law violations vary, depending on the act committed, the severity of that act, and other factors as determined by the Commission. The Commission may impose disciplinary actions on a licensee, property manager or owner-developer and levy administrative fines if that person is found guilty of certain violations. An administrative fine must not exceed the maximum of $10,000 per violation. Disciplinary actions available to the Commission include suspending, revoking, denying the renewal of, or placing limiting conditions upon, a person's license, permit or registration. The Commission may impose disciplinary actions or levy administrative fines on a licensee, property manager or owner-developer at any time for the following violations: Fraudulently obtaining a Nevada real estate license, permit or registration. Making any material misrepresentations. Making any false promises about a licensee's character as a way to influence, persuade or induce someone else. Accepting any commission or other consideration as a broker-salesperson or salesperson from anyone other than the broker with whom he or she is associated. Representing any real estate broker other than the one with whom the licensee is associated Failing to maintain, for review and audit by the Division, each brokerage agreement and property management agreement entered into by the licensee. Not accounting for or remitting any money that belongs to others, but is in the licensee's possession, within a reasonable time. If the licensee maintains a trust account; NOT balancing the trust account at least once a month, and/or NOT submitting the trust account's annual accounting to the Division. Commingling (mixing together) a client's money or property with the licensee's own. Converting other people's money for the licensee's own use. If the licensee is a broker-salesperson or salesperson; NOT turning over any deposit or other money or consideration to his or her broker or owner-developer as soon as possible. Taking any payment or consideration that is NOT cash as earnest money, if this consideration was not approved by the owner. NOTE: There are many more violations for which disciplinary action will be taken. These are listed earlier in this chapter and you should familiarize yourself with them. The Commission's Authority: The Commission has the authority to impose any and all of the disciplinary actions, or administrative fines for violations of license law. Disciplinary actions available to the Commission include suspending, revoking, denying the renewal of, or placing limiting conditions upon, a person's license, permit or registration. Administrative fines may be up to a maximum of $10,000 per violation. Violations Showing Unprofessional and Improper Conduct: The Commission is authorized to take disciplinary actions against those persons who have committed any violation that falls under the topic of "unprofessional and improper conduct relating to real estate transactions." These violations are set out in NRS 645.635 and are listed earlier in this chapter. You should familiarize yourself with them. Disciplinary Hearings: Before the Commission can revoke, suspend or deny the renewal of a real estate license, or permit or registration of an owner-developer, a set procedure must be followed. A proceeding against a licensee must be initiated within 5 years after the date the violation was The Commission has the authority to administer oaths, certify all official acts and issue subpoenas for the attendance of witnesses and the production of papers and books. The Commission must render an informal decision within 15 days after a final hearing. Written notice of this decision must be sent to the subject of the hearing within 60 days after the final hearing. If the decision is made in the licensee's favor, it is a final decision. If the decision is NOT in the licensee's favor, the licensee is entitled to a rehearing. Other Illegal Activities: Anyone who takes the following actions is guilty of a category D felony and will be punished accordingly under Nevada law: If a person obtains a real estate license through intentional misrepresentation, fraud or deceit, or If a person sells or tries to sell any interest in real property in Nevada by using intentional misrepresentation, deceit or fraud. Any "natural" person who violates the provisions of the Nevada real estate licensing law (NRS 645) is guilty of a gross misdemeanor and will face the applicable punishment. It is ILLEGAL for anyone to file a complaint, notice or other statement with the Division or Commission if that complaint, notice, or statement is FALSE. Anyone who files such a fraudulent notice is guilty of a gross misdemeanor. The provisions and disciplinary actions set forth in license law (NRS 645) are in ADDITION to any civil liability or criminal prosecution that a person may face for violating the general Nevada State laws.

Chapter 23 Summary

Types of Valuation: There are three main types of valuation that are used in the real estate business. These are: Comparative Market Analysis Broker's Price Opinion Appraisal A Competitive Market Analysis (CMA) is conducted by looking at the properties that have recently sold in the market area of the subject property, as well as current active listings, pending sales and expired listings. The purpose of the CMA is to help the seller identify the market value of the subject property. A Broker's Price Opinion (BPO) is an assemblage of recent sales of comparable properties in the general location of the subject property, as well as estimated costs for such items as repairs to the subject property, and data on sales trends such as what types of properties are most in demand. A BPO is based on the characteristics of the subject property. A Real Estate Appraisal is an estimate or opinion of value as made by an authorized person, known as an appraiser. An appraisal is one of the most important functions in the entire chain of selling and purchasing a property. The appraised market value of a property relies on data from an open market in which certain conditions or ground rules are met. The Appraisal Process: Determine the problem. Gather, record and verify the necessary data. Analyze and Interpret the Data EstimateLand Value Estimate Property Value Using the Three Approaches to Value Reconcile the Value Report Final Value Estimates The Principles of Value: Highest and Best Use: A specific use of a property will produce the greatest net income and thereby develop the highest value. Substitution: A principle of value in which the maximum value of a property is set by the cost of purchasing an equally desirable and valuable substitute property. Similar properties will bring similar values. The Law of Supply and Demand: The value of a commodity increases when the supply is low, but decreases when the supply is high. Similarly, the value increases when the demand is high, and decreases when the demand is low. Conformity: The more a property is in harmony with the surrounding properties, the greater the value the properties give one another. The more properties are alike, the more they retain their value. Regression and Progression: The value of a better quality property is affected adversely by the presence of a lesser quality property and a lesser quality property will benefit from a better quality property. Anticipation: A property can increase or decrease in value due to the expectations of something happening in the future. Contribution: The value of a particular component or improvement is what it gives (contributes) to the overall market value of the property as a whole, or what the component or improvement's absence detracts from the overall value. Assemblage: The combining of two or more adjoining lots into one larger lot will increase the total combined value of the lots. Competition: When one business attracts another business of a similar type into the same area, together they will make more money than they would have singularly. Change: Real property is constantly changing within the four stages of the real estate cycle. The Approaches to Value: The sales comparison approach, or market data approach, is the estimate of value that is most commonly used for appraising residential property and vacant land. The sales approach is based upon the principle of substitution. The sales comparison approach compares the subject property to similar properties in the area that have recently been sold, and makes adjustments based on the date of the sale, the location, the physical features and the physical amenities. The cost approach, or summation approach, is the estimate of value most commonly used on properties that do not have any comparable market data, such as schools, libraries, courthouses, etc., newly constructed properties, and non-income producing properties. The cost approach is based upon the principle of substitution. The cost approach estimates the cost it would take to build an equivalent property and uses this cost to determine the property's value. To determine value using the cost approach: Estimate the value of the land itself, as if it was vacant, raw land. Determine either the replacement or reproduction cost of the building. Deduct all accrued depreciation from the replacement cost. Add the estimated land value to the depreciated replacement or reproduction cost to get the appraised market value. Depreciation is the loss in value to a property. The three types of depreciation are: Physical deterioration: A reduction in utility or value resulting from an impairment of physical condition, which can be divided into curable or incurable types. Functional obsolescence: The loss of value of a property due to functional inadequacies generally caused by age and poor design. Also divided into curable or incurable types. Economic (external) obsolescence: A loss of value (typically incurable) resulting from extraneous factors outside the property itself or the owner's control. Usually caused by environmental, social, or economic forces. The income approach, or income capitalization approach, is the estimate of value most commonly used for appraising income-generating properties. The income approach is based on the current value of the rights to all future income that the subject property will generate. The income approach uses the net operating income (NOI) of a property and divides it by the capitalization rate to determine the property's current fair market value. The capitalization rate, or cap rate, is the rate of return that an investor wants to receive from the subject property in return for his or her investment. Appraisers: In Nevada, there are three levels of appraisers: Licensed Residential Appraiser: Only authorized to perform an appraisal of real estate suitable for or comprised of: A maximum of four residential units in any one transaction, if: The total appraised value does not exceed $1,000,000; The transaction is not so complicated as to fall under the scope of a certified appraiser's duties; or The property is not a complex property. Certified Residential Appraiser:Authorized to perform an appraisal of real estate suitable for or comprised of: A maximum of four residential units in any one transaction regardless of the transaction's value or complexity. Certified General Appraiser: Authorized to perform: ANY appraisal.

Chapter 14 Summary

Under Nevada law, there are four major disclosures that apply specifically to residential real estate sellers in Nevada. These are: The Seller's Real Property Disclosure; The Disclosure for Property Located in a Common Interest Community; The Open Range Disclosure; and The Construction Defect Disclosure. Seller's Real Property Disclosure Form: The Nevada Real Estate Division has created and distributed a 32-page document, or booklet, entitled, Nevada Real Estate Division Residential Disclosure Guide. The Nevada Real Estate Division has created Seller's Real Property Disclosure Form, Form 547. The purpose of the Seller's Real Property Disclosure is to disclosure any known defects of the property, the property's condition, or any other details about the property that could affect how it is used or its value, both now and in the future. Be sure that you fully understand this document and are familiar with it. If a seller refuses to disclose the required information, the buyer has the right to rescind the sales contract on the basis of non-disclosure. If a seller conveys a residential property without providing the disclosure notice before the property is conveyed, and there were no limitations in the disclosure or other agreement that specified a monetary limit on the repair or replacement costs for those defects, the purchaser is entitled to recover: TRIPLE the amount necessary to fix this defect, plus Court costs, and Reasonable attorney's fees. Common-Interest Communities Disclosure Form: The Common-interest Communities Disclosure is designed to make the buyer aware of what he or she is getting into by buying a unit in a common-interest community. This includes both his or her rights and his obligations as an owner. The Common-Interest Communities Disclosure must be made using the Nevada Real Estate Division's approved Form 584 Form entitled, BEFORE YOU PURCHASE PROPERTY IN A COMMON-INTEREST COMMUNITY DID YOU KNOW... The seller of a common-interest community unit must provide the prospective buyer with a resale package, in addition to the information statement/disclosure. The resale package must be delivered to a prospective buyer: As soon as is practicable; or Before the unit is conveyed to the buyer. A prospective buyer of a unit in a common-interest community must be provided with a public offering statement in any of the following situations: If the property being offered for sale is a new unit within a common-interest community; If the common-interest community is subject to any developmental rights; If the common-interest community contains converted buildings; If the common-interest community contains any units that may be in a time share; or If the common-interest community is registered with the Securities and Exchange Commission. Construction Defects Disclosures: Construction Defects Disclosures exist to inform a buyer of any construction defects in a property. If such a defect exists, the contractor must disclose the information in understandable language that is underlined, in bold-faced type, and in all capital letters. There are actually two categories of Construction Defect Disclosures: The first applies to both new sales and resales; The second applies to new sales only. Open Range Disclosures: The purpose of the Open Range Disclosure is to inform the buyer that he or she might be purchasing a property adjacent to open range land, and that therefore there is a possibility of roaming livestock. All open range disclosures must be made using the Nevada Real Estate Division's Form 551, entitled OPEN RANGE DISCLOSURE. An Open Range Disclosure must be provided to the buyer before the sales agreement is signed.