LEGAL ASPECTS - Real Estate

TILA-RESPA Integrated Disclosure Rule (TRID)

Lenders must provide: -Loan estimate form within 3 days or reason for denial. -Closing disclosure 3 days before closing -May not charge a fee before offering a Loan Estimate.

7 Federally Protected Classes

Race, Color, National Origin, Religion, Sex, Familial Status, & Disabilities.

Superfund Amendments and Reauthorization Act (SARA) 1986

Reauthorized CERCLA to continue cleanup activities around the country. The big change had to do with liability. It allows truly innocent landowners to have immunity from legal liability of all involvement with a hazardous waste site. SARA also required EPA to revise the Hazard Ranking System to ensure that it accurately assessed the relative degree of risk to human health and the environment posed. Title III authorized EPCRA. (CERCLA expired in 1985. SARA amended CERCLA)

Megan's Law

Requires law enforcement authorities to make information available to the public regarding registered sex offenders.

California Association of Realtors (CAR)

State division of NAR

Commission's Regulation 2270

States that a licensee who advertises online must indicate their license status.

Jones v. Mayer (1968)

Supreme Court Case which strictly prohibits racial discrimination. NO EXEMPTION OR EXCEPTION with regard to race.

Government National Mortgage Association (GNMA)

-Administers special assistance programs and helps Fannie Mae in its activities. -Guarantees payment on Fannie Mae's high-risk, low-yield loans, absorbing the difference between the low yield and the current market rates. -Guarantees securities issued by private entities that are backed by a pool of VA and FHA

Federal Home Loan Mortgage Corporation (FHLMC)

-Buys and pools mortgages. -Sells bonds in the open market, using the mortgages as security. -Does not guarantee payment of Freddie Mac mortgages.

Exemptions from Federal Fair Housing Laws

-Owner occupied building with less than 4 units -Single family home sold or rented without a broker, if the person doing the selling does not have 3 other properties sold also without a broker. -Housing that is controlled by organizations that limit occupancy to members -If the home is part of the housing for older persons act. (built just for the elderly)

Consumer Credit Protection Act of 1968 (CCPA)

-Protects consumers from harm by creditors, banks, and credit card companies. -The federal act mandates disclosure requirements that must be followed by consumer lenders and auto-leasing firms. -Requires that the total cost of a loan or credit product be disclosed, including how interest is calculated and any fees involved. -Prohibits discrimination when considering a loan applicant and bans misleading advertising practices.

Federal National Mortgage Association (FNMA)

-buys conventional, FHA, and VA -buys mortgages from a lender in exchange for mortgage-backed securities, which then sells. -guarantees payment of all interest and principal on mortgage-backed securities.

How to determine a fixture

>>MARIA Method of attachment Adaptation Relationship of parties Intention Agreement

Adverse Possession

>>NACHO Notorious Adverse Continuous Hostile Open

Government Powers

>>PETE Police Power Escheat Taxation Eminent Domain

Elements of Value

>>STUD or DUST Scarcity Transferability Utility Demand

Net Lease

>>TMI Taxes Maintenance Insurance

Comparitive Market Analysis (CMA)

A comparison of prices of recently (3 to 6months) sold homes that are similar to the sellers home.

Easton v. Strassburger 1986

A court case which gave rise to the law requiring the seller and agent to make full disclosure of the condition of the property. Led to state laws requiring real estate agents to conduct "reasonably diligent and competent inspection" of the property for sale.

Specific Performance

A court order requiring a party to perform a contractual duty.

Injunction

A court order to stop certain action(s) by certain individual(s). Prevents the owner or owners from using a property in a way that is contrary to the recorded restrictions. Ex: could be sought by local homeowners to stop another homeowner from putting up a large neon sign over his home that says "Motel".

Federal Housing Administration (FHA)

A federal agency established in 1943 to increase home ownership by providing an insurance program to safeguard the lender against the risk of nonpayment. Currently part of HUD. Provides mortgage insurance on loans that are made by FHA approved lenders. They insure single family homes, multi-family properties, hospitals and residential care facilities.

Statute of Limitations

A federal or state statute setting the maximum time period during which a certain action can be brought or certain rights enforced.

Administrative Law Judge (ALJ)

A judge presiding over hearings for government agencies

Substantive Law

A law that establishes and controls the rights and duties of parties. Laws regarding contracts and real property fall into this category. Ex: a law that prohibits trespassing on someone's property is substantive law.

Mello-Roos Community Facilities Act of 1982

A law used to finance public services, such as waste treatment plants, parks, and schools in newly developed areas. Can result in extra high taxes in addition to the normal property taxes.

Adjustable Rate Loan Disclosure

A lender offering adjustable-rate residential mortgage loans must provide prospective borrowers with a copy of the Consumer Handbook on Adjustable-Rate Mortgages.

Notice of Adverse Action

A lender or creditor who denies an application for credit must provide the applicant with a statement of reasons within 30 days after receiving the completed loan application. Required by ECOA.

Veterans Administration (VA)

A loan guaranteed by the government. Can be used to purchase, build or improve a home. No down payment is required. No monthly insurance premium to pay. No prepayment penalty. Va requires an appraisal of the property and then issues a certificate of reasonable value (CRV)

Compensatory Damages

A monetary award equivalent to the actual value of injuries or damage sustained by the aggrieved party. Must be pursued in court.

Equitable Remedy

A remedy other than money damages, such as specific performance or injunction

For Sale By Owner (FSBO)

A way to sell a house without involving a real estate agent.

CalVet Loans

Actually a land contract. The state purchases the property and resells it to the veteran using a contract of sale. The state retains the title to the property until the loan is paid off.

Fair Housing Amendments Act of 1988

Added Disability and familial status to protected classes.

Housing and Community Development Act of 1974

Added sex and gender to the list of protected classes

Proposition 58

Allows the transfer of property from one spouse to another or to children, without triggering a reassessment.

The Community Reinvestment Act of 1977

An Act passed by Congress in 1977 to prevent redlining and to encourage banks and thrifts to help meet the credit needs of all segments of their communities, including low- and moderate- income neighborhoods.

Privacy Act of 1974

An act that established code of fair information maintenance governing the collection, use and maintenance of individuals that is maintained by federal agencies. The act required the agencies to publicize the records to the Federal Register.

The Home Mortgage Disclosure Act

An act which requires financial institutions to maintain and disclose data about home purchases, home purchase pre-approvals, home improvement and refinance applications involving 1 to 4 unit multifamily dwellings

Residential Listing Agreement (RLA)

An employment contract between a property owner and a real estate broker. It allows the broker to act as an agent and find a buyer for the property on the seller's terms. It also outlines the type of commission the real estate agent will receive once the sale is completed.

Consumer Financial Protective Bureau (CFPB)

An independent federal agency that holds primary responsibility for regulating consumer protection.

Cost of Funds Index (COFI)

An index used to determine interest rate changes for certain adjustable-rate mortgages. It represents the weight-average cost of savings, borrowings, and advances of the financial institutions such as banks and savings and loans, in the 11th District of the Federal Home Loan Bank.

Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) 1989

Appraisals performed as federally related transaction must comply with state standards and be performed by a state certified and licensed appraiser

Natural Hazards Disclosure Statement (NHD) and Combined Hazards Book

California Civil Code requires the disclosure of several natural hazards. Combined Hazards Book satisfies this requirement. Must indicate if property is in these areas: -Special flood hazard area. (designated by Federal -Emergency Management Area) -Area of potential flooding. -Very high fire hazard zone. -State fire responsibility area. (Wildland area that may contain substantial forest fire risks and hazards) -Earthquake fault zone. -Seismic hazard zone.

Agent's Inspection Disclosure

California agents are required to conduct a competent and diligent visual inspection of a one-to-four-unit property and disclose the material facts to a prospective buyer. This form is actually page 3 of the Real Estate Transfer Disclosure Statement.

Smoke Detector Statement of Compliance (SDS-11)

California law requires at least one operable smoke detector in every single-family dwelling. Many local requirements are stricter. This form, signed by the seller, states that the home is in compliance with CA law.

Section 504 of the Rehabilitation Act of 1973

Civil rights given to individuals with disabilities- focused on stopping discrimination in education, employment, or any other community setting. Required compliance for federal funds.

Elements of a Valid Contract

Competent parties Consideration Mutual Agreement Lawful Objective In Writing and Signed by the Parties Contain a Legal Description

Combined Hazards Book

Contains 3 books in 1: 1. The Residential Environmental Hazards Guide - includes a toxic mold update. 2. Protect Your Family From Lead In Your Home - Prepared by the Federal Environmental Protection Agency and required for any homes built prior to 1978. 3. The Homeowners Guide to Earthquake Safety - includes the gas shutoff valve update.

Multiple Listing Service (MLS)

Database for real estate listings

Section 10132

Defines a real estate salesperson and defines the acts requiring licensure and employment by a broker.

Transfer Disclosure Statement (TDS)

Disclosure of the property's condition. Any person who is selling a one-to-four-unit property must provide the buyer with a written disclosure statement that describes the condition of the property. A two-page statement that includes the following sections: Part A - Identifies the items contained in the home and whether or not they are operational. Part B - Describes any significant defects or malfunctions in the home. Part C - Identifies miscellaneous items such as known environmental hazards, easements or encroachments, improvements or alterations to the property, zoning or neighborhood concerns. -There are exemptions to this disclosure.

Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) - 1980

Established a fund called the Superfund, to clean up uncontrolled hazardous waste sites and to respond to spills. It created a process for identifying potential responsible parties (PRPs) and ordering them to take responsibility for the cleanup action. CERCLA is administered and enforced by the EPA. Expired in 1985.

Real Estate Settlement Procedures Act (RESPA)

Established to protect consumers against abusive lending practices. (A standard for closing procedures to make borrowers more aware of costs and charges.) Requires that borrowers receive disclosures regarding proposed loan transaction: --Good Faith Estimate of closing costs within 3 business days, Service Disclosure Statement, Prohibits kickbacks and referral fees.

American Land Title Association (ALTA)

Extended coverage title insurance policy. Insures against many of the items excluded in the CLTA standard policy. This policy gives coverage to the lender, not the buyer. However, a buyer can purchase an owner's policy that provides the extended coverage. The policy includes a survey or physical inspection of the property. Therefore, it is usually required by CA lenders or out-of-state-lenders that cannot make their own personal inspection of the property.

Proposition 90

Extension of prop 60 + allows the privilege to be applied to a home purchased in ANOTHER county, if that county's Board of Supervisors chooses to apply Proposition 90.

Department of Housing and Urban Development (HUD)

Federal agency that has established rules and regulations that further interpret the practices affected by federal law; for example, HUD distributes an equal housing opportunity poster. Responsible for national policy and programs that address America's housing needs, that improve and develop the Nation's communities, and enforce fair housing laws. Oversees the FHA.

Seller Financing Disclosure

Financing disclosure. The seller financing arrangements on all one-to-four-unit residences must be disclosed to both the seller and the buyer using the Seller Financing Addendum and Disclosure form.

Federal Emergency Management Agency (FEMA)

Focuses on promoting the need to work together to support citizens and fast respondents. Its goal is to ensure citizens build and sustain to prepare for and recover from calamities. Controls flood insurance.

Department of Real Estate (DRE)

Headed by the Real Estate Commissioner, administers the real estate license laws, handles advertising, funds, clients and customers.

Proposition 60

Homeowners 55 years of age and over are allowed to transfer their base-year property tax value to another home of equal or lesser value in the same county and keep their low assessment from their former home.

Notice of Transfer of Loan Servicing

If a loan is secured by a one-to-four-unit property, the lender must notify the borrower when the loan collection is transferred to another entity.

Residential Earthquake Hazards Report

In 1993, the California Seismic Safety Commission published a booklet titled The Homeowner's Guide to Earthquake Safety to help buyers, sellers, and agents become familiar with the issues surrounding earthquake safety in California.

Buchanan v. Warley (1917)

In the city of Louisville, Kentucky, a state law prohibited blacks from living in neighborhoods where the majority of homes were occupied by whites and also restricted whites from residing in majority black neighborhoods. A white seller sued a black purchaser who claimed that their contract was void because the law barred him from buying the home. The Supreme Court held that the law violated the fourteenth amendment and therefore was unconstitutional. The court reasoned that while the objective may have been legitimate, laws cannot deny rights protected by the Constitution.

Brown v. Board of Education (1954)

In this landmark case, the Supreme Court prohibited racial segregation of public schools. The court said that the "separate but equal" doctrine adopted in Plessy v. Ferguson had no place in the field of public education.

Truth in Lending Act (TILA) Regulation Z

Intended to inform the borrower of the true cost of obtaining a loan. Disclosures include: amount financed, finance charge, annual percentage rate, total of payments, payment schedule, late payment charge, and the total dollar amount of the loan over 30 years. -Prohibits bait-and-switch advertising. Under the Consumer Credit Protection Act (CCPA)

Procedural Law

Law that establishes the methods of enforcing the rights and duties under substantive law. A specific example of procedural law is a statute of limitations which creates a time limit for filing a civil lawsuit or initiating a criminal prosecution.

Americans with Disabilities Act of 1992 (ADA)

It made accessibility and accommodation for disabled people in housing and public buildings.

National Association of Realtors (NAR)

Largest and most prestigious real estate organization. Requires its members to take mandatory ethics course every 4 years.

Disclosure Regarding Real Estate Agency Relationships (AD)

Licensees will use this form when entering into an agency relationship with their clients. Client must fully understand all three types agent relationships before signing the form. -The listing agent must provide the disclosure to the seller prior to securing the listing agreement. -The selling agent must provide the disclosure to the seller "as soon as practicable" prior to presenting a purchase offer.

Proposition 13

Limits the maximum annual tax on real property to 1% of market value plus the cumulative increase of 2% in market value each year after, due to annual inflation factors.

Home Warranty Application or Waiver

Many sellers offer home warranties as a sales incentive to protect the buyer from any major failures for up to a year after purchase. If seller is not interested in providing this warranty, have the seller sign a waiver indicating the policy was explained and declined.

Punitive Damages

Monetary damages that may be awarded to a plaintiff to punish the defendant and deter similar conduct in the future. Must be pursued in court.

Highest and Best Use (HABU)

Most profitable use to which a property can be adapted given it's legal size and restraints.

National Association of Real Estate Brokers (NAREB)

Oldest and largest minority trade association in the U.S.

Lead-Based Paint Hazard Reduction Act 1992

Owners with homes built before 1978 must disclose known lead based hazards and a pamphlet must be distributed.

Sherman Antitrust Act

Prohibit competing brokers from: Boycotting other brokers in the marketplace, dividing the market to restrict competition, and agreeing to set sales commissions and management rates.

Equal Credit Opportunity Act (ECOA)

Prohibits creditors from discrimination based on race, color, religion, national origin, sex, marital status, age, dependence on public assistance to ensure that all applicants have equal rights of opportunity when being considered for a loan. Regulates how borrowers apply for credit and how lenders evaluate income and grant credit. Under the Consumer Credit Protection Act (CCPA)

Title VIII of the Civil Rights Act of 1968

Prohibits discrimination in housing based on race, color, religion, or national origin. Fair Housing Act of 1968

Civil Rights Act of 1866

Prohibits discrimination in housing based on race.

Holden Act (Housing Discrimination Act)

Prohibits financial institutions from discriminating in loan activities on the basis of race, color, etc and from discriminating against specific neighborhoods.

Rumford Act (Fair Employment and Housing Act)

Provides protection against discrimination in housing by landlords, apartment owners, housing developers, mortgage companies and real estate firms. Ex: eviction of a person in retaliation, refusal to reasonably accommodate a disabled person. California's fair housing law.

Unruh Civil Rights Act

Provides protection from discrimination by all business establishments in California, including housing and public accommodations. Senior housing is exempt. Complaints must be filed within 1 year.

Fair Credit Reporting Act (FCRA) / Reg V

The Act (Title VI of the Consumer Credit Protection Act) protects information collected by consumer reporting agencies such as credit bureaus, medical information companies and tenant screening services. Information in a consumer report cannot be provided to anyone who does not have a purpose specified in the Act. This act that requires each of three nationwide credit reporting companies to give consumers a free copy of their credit report, at their request, once every 12 months. Both the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) are charged with updating and enforcing the act.

ALTA-R Policy

The American Land Title Association has a policy that many title insurance companies recommend to owners of one-to-four unit, owner-occupied residences. This policy does not include a survey since property lines are already established by recorded subdivision maps.

Seller's Affidavit of Nonforeign Status and/or California Withholding Exemption (AS)

This form deals with an IRS requirement that a buyer may need to withhold income tax if the seller is a "foreign person." A seller may need to consult a tax advisor for help filling out the form. The buyer should also get a copy of this form.

Estimated Seller's Proceeds form (ESP-11)

This form estimates the amount a seller will net from the sale of the property. CAR provides this form.

Lead-Based Paint and Lead-Based Paint Hazards Disclosure, Acknowledgment and Addendum (FLD-11)

The federal government requires that owners of homes built prior to 1978 provide to a prospective buyer a booklet entitled Protect Your Family from Lead in Your Home. The California publication Combined Hazards Book contains this booklet and therefore meets the federal requirement.

Civil Law

The law of private rights and duties. Ex: a law providing that all property sale contracts must be in writing. This is a civil law bc it addresses the duties between private parties.

Criminal Law

The law of public rights and duties. Criminal law creates and controls offenses committed against the whole community. Ex: assault, burglary, and robbery.

California Land Title Association (CLTA)

The standard title insurance policy in California that does Not require a property survey. It may be issued to a lender only, a buyer only, or jointly to lender and buyer (called a joint-protection standard coverage policy). Covers items of record as well as some risks that are not of record, such as: -Forgeries -Acts of minors and incompetents -Failure of delivery of a prior deed -Federal estate tax liens -Acts of an agent whose authority has terminated

Housing for Older Persons Act of 1995 (HOPA)

This Fair Housing Act specifically states that communities and facilities that meet certain criteria for providing housing to older persons are legally exempt from familial status discrimination. Such exempt housing facilities or communities can lawfully refuse to sell or rent dwellings to families with minor children only if they qualify for the exemption. The housing must have one person who is age 55 or older residing in at least 80% of its occupied units, and the housing provider must demonstrate that the housing is intended for persons 55 and older.

Plessy v. Ferguson (1896)

This Supreme Court decision allowed the use of "separate but equal" racially-segregated accommodations and facilities. In other words, as long as separate housing for blacks and whites were judged to be equal, they were legal.

Water Heater Statement of Compliance (WHS-11)

This mandatory seller disclosure deals with the law requiring water heaters to be strapped, braced or anchored to resist earthquake motion. It's important to check local ordinances for stricter requirements.

Legal Remedy

To compensate the injured party for the damage done by the other party. Compensatory damages (which is money)

Environmental Protection Agency (EPA)

US federal government agency with a mission to protect people and the environment from significant health risks, to sponsor and conduct research, and to develop and enforce environmental regulations.

Civil suit / civil action / civil litigation

When a person who suffers injury due to the act of another person sues that person for compensation.