Principles of Real Estate I

factors affecting home ownership

Affordability Additional expenses Long-term investment Credit considerations Alternate need for funds Pluses: appreciation, equity (equity = value of home - loan balance,) tax deductions

Why you need a Broker

Everything has to be done through your broker. Only brokers may list properties and conduct other brokerage activities in their name. But don't worry—the commission check you receive from your broker will be in your name. The first law established to regulate real estate brokerage in Texas was the Real Estate Dealers Act. TRELA came along 16 years later.

TREC Fees

Filing an original application for a sales agent or broker license. Annual renewal for a sales agent or broker license. Annual registration. Filing an application for a license examination. Filing a request for a change to your license. Conducting a criminal history check for license renewal or license issuance.

Conventional Financing

Financing that does not give the lender the added security of a government guarantee or insurance. Required for down payment of less than 20 percent

U.S. Dept. of Veterans Affairs (VA) Loans

Guarantees loans for qualified veterans and active military Up to 100% financing (plus closing costs in some cases) Funding fee applies (0.5% to 3.30%) Does not require mortgage insurance

Credit Score

High Credit Score = Reduced Rates = Increased Purchasing Power

I Have a CLUE, Now What?

If you are acting on behalf of the buyer or the seller, the CLUE report must be requested by the property owner.

Five Types of Coverage in Texas

In Texas, homeowners policies combine the following five types of insurance coverage: Structural/Dwelling: Repairs structural damage for the house and any additional out-buildings, such as detached garages, sheds, or accessory dwelling units (e.g., a caretaker's cottage) on the property. Personal property: Repairs or replaces personal belongings and household items, including furniture, appliances, clothing, and more, that are damaged, stolen, or destroyed by a covered cause of loss. Loss of use: Pays for temporary housing while the house is being brought back to habitable condition, if the home were damaged by a covered loss. Medical payments: Pays the medical bills for people injured on the homeowner's property. Liability: Pays legal costs in the event the homeowner is sued and found legally responsible for causing injuries or damage to other people or their property.

Private Mortgage Insurance (PMI)

Insurance provided by a private carrier that protects a lender against a loss in the event of a foreclosure and deficiency.

Federal Housing Administration (FHA)

Insures loans for qualified borrowers Up to 96.5% financing Requires Mortgage Insurance Premium (MIP) for the life of the loa

Flood Insurance

In some areas, flood insurance is also a crucial consideration. It probably won't surprise you to learn that flood insurance protects a homeowner in the event of a flood. A few inches of water in the average house can cost thousands to repair. The National Flood Insurance Act of 1968 established flood mitigation measures for flood-prone areas and subsidies for flood insurance for homeowners in these areas. Lenders who fall under federal regulations must require their borrowers who live in special flood hazard areas (SFHAs) to obtain flood insurance as a condition of obtaining their mortgages. As with other forms of insurance, cost is based on value. Because flood insurance is not usually standard with most homeowners insurance policies, it will have to be purchased separately or bundled with the homeowner policy. You can imagine that some insurers would be hesitant about writing policies for homeowners in flood-prone areas. Because of this, a program called the National Flood Insurance Program (NFIP), which is administered by the Federal Emergency Management Agency (FEMA), was established to help homeowners in flood hazard areas obtain insurance. Communities within an SFHA must have on file a record that demonstrates that all new buildings and improvements are properly elevated. FEMA has developed an elevation certificate for this use. This certificate can also be used by the homeowner to obtain flood insurance. Updated Flood Insurance Laws The Biggert-Waters Flood Insurance Reform Act of 2012 is a law that amended the way FEMA (and other related agencies) manage the NFIP. The provisions of the Biggert-Waters Act enacted the following changes: Making the NFIP more financially stable (this goal was created because the NFIP was $24 billion in debt as of 2014) Changing how updates to the Flood Insurance Rate Map (FIRM) affects policyholders Raising the premium rates under NFIP to reflect the "true risk" of living in high-flood areas In some areas, this law meant substantial increases in flood policies. In addition, the Biggert-Waters Act required that FEMA stop subsidizing flood insurance for second homes, businesses, and properties that had been flooded multiple times. When more than 430,000 policyholders were notified that their policy premiums had shot up (some through the proverbial roof), complaints flooded Congress. Long story short, the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA) was passed in an effort to delay these flood insurance premium increases. Beginning on April 1, 2015, provisions of HFIAA began to take effect. Under this law, every new or renewed NFIP policy will include an HFIAA-required annual surcharge. The amount of this surcharge varies, based on the type of insurance policy and that specific building's use. In general, policies for singlefamily detached buildings and individual condominium units—provided these buildings/units are owneroccupied—will be subject to a $25 HFIAA surcharge. A $25 HFIAA surcharge also applies to contents-only insurance policies for rental units—again, only if this is the lessee's primary residence. (The HFIAA surcharge on policies for all other buildings is a much steeper $250.) Note: Policy holders must complete and return the required documentation to their flood insurance provider as required by law, or the $250 surcharge will apply to their policy. Texas In Texas, all lenders require a flood insurance certificate if any part of the property is located in a flood plain. However, because flood maps are always being updated, most of the larger banks now require a flood insurance certificate for any property—whether or not it is in a flood plain. This is a lending guideline to show proof they are not in a flood plain, or in close proximity to a flood plain. [Sources: FloodSmart.gov: National Flood Insurance Program, NPR: Federal Flood Insurance Program Drowning in Debt, Program Changes Will Affect Flood Insurance Premiums]

mortgage

Is a legally binding document Creates a lien on the property Gives the lender the right to foreclose Note: The property is pledged as collateral

What will a homeowners policy pay for?

Legal costs in the event of a lawsuit that causes injuries or damage to other people or their property. Yes Repair or rebuild structure, as well as the electrical, plumbing, heating, and air conditioning systems if they were damaged by a covered cause of loss. Yes Pay for temporary housing while your house is being brought back to habitable condition. Yes Replace appliances when they fail and cannot be repaired. No Repair structural damage to additional structures. Yes Replace personal belongings that are lost, damaged, or destroyed by a covered event. Yes

Seconday Market

Lenders retain and service loans

Methods of Land Description

Metes and bounds: uses compass headings and directions Lot and block: provides plat references Rectangular (government) survey system: divides land surveyed into six-square-mile townships, which are further subdivided Monument system: permanent land markers are used as point of beginning Reference to a previously recorded document: limited to properties that have not sold since the date of the last survey

Homeowners Policies: What's Covered and What's Not

Most policies cover losses caused by: Fire and/or smoke Lightning Vehicles Aircraft Theft, vandalism, and malicious mischief Explosions Water damage (accidental and sudden) Riots or other civil commotion Wind (or windstorms)* Hurricane* Hail* * These are covered by most policies, they are typically NOT covered for properties on the Gulf Coast Most policies do NOT cover losses caused by any of the following: Flooding Earthquakes Termites, insects, rats, or mice Freezing pipes in an unoccupied house (except in certain conditions) Losses after a house has remained vacant for at least 60 days

Claims Settlement

Now Mrs. Hudson needs to make a claim for repairing her property. During the hurricane, Mrs. Hudson's appliances were damaged. There are two ways she could be reimbursed for the damages. Replacement cost coverage pays for all necessary expenses associated with rebuilding or repairing damaged property, up to the policy limits. Actual cash value coverage factors in depreciation costs and pays only the cost to replace or repair the damaged property. Let's take a look at how the insurance company decided to reimburse her for the damaged items

professional organization

Professional organizations exist at local, state, and national levels. The National Association of REALTORS® (NAR) is the largest professional organization for real estate professionals. NAR members are bound by both the NAR Code of Ethics and Standards of Practice and the code of ethics enforced by the state in which they are licensed.

Serverance

Severance occurs when an item that was real property becomes personal property by detaching it (severing it) from the land. If Mrs. Goldman had, prior to marketing her property for sale, dug up and potted her rose bushes she would've severed them, transforming them from real to personal property.

What TREC does

TREC will investigate all complaints, even when they are anonymous. False A complaint must be filed within four years of the date an incident which is the subject of a complaint occurred. True TREC will investigate complaints in the order in which they are received from consumers. False In most cases, TREC will notify the license holder promptly in writing once a complaint is received. True

Under which circumstances can a homeowner take the full deduction of points in the first year of ownership?

The loan has to be for principal residence and identified as such on the closing statement. The points cannot be more than the amount the buyer has put down. The points have to be usual and customary for the area. The points must be associated with a loan for a second home. The points must be computed as a precentage of the loan. The cash method of accounting must be used to calculate the points percentage.

The TREC commissioners consists of how many public members...?

The nine members are a combination of licensed real estate brokers(6) and unlicensed consumers(3). All are appointed by the governor. Six year terms.

Annexation

The opposite of severance is annexation. This occurs when personal property is attached to real property, which makes it a fixture. So when Mrs. Goldman first brought her rose bushes home from the nursery, they were personal property until she planted them, or annexed them, to the land, making them fixtures and part of the real property.

Types of Property

real property and personal property residential property, commercial properties, industrial properties, and agricultural properties.

Real estate activities

Activities requiring a license: Performing real estate activities for others and for compensation (Note: For others for compensation is key). Common activities include: Selling, buying, leasing, exchanging, listing properties (or offering to) Negotiating a sale, purchase, or exchange of real property Soliciting buyers, sellers, tenants, landlords, and listings

Broker Associate

License held: Broker's license Description: A licensed real estate broker who may perform the acts of a broker but chooses to work under the name and supervision of a licensed broker.

related disciplines

Appraiser, real estate counselor, lender or investor, urban planner, home inspector, title and abstract company, developer, property manager, real estate educator, petroleum landsman/landswoman Licensees must understand the roles of interrelated disciplines in order to provide guidance and referrals to their clients.

brokers and agents

Brokers are responsible for the acts of all licensees who work under them. Every sales agent must work with a broker, and all compensation must go through that broker. Both brokers and sales agents perform brokerage activities and may specialize in one or more types of real property. Real estate brokerage involves bringing buyers and sellers together and negotiating real estate transactions. There are many players in the estate industry. Licensees need to know who they are and what these professionals do in order to provide guidance to their clients.

improving your fico score

Do's Pay bills on-time Pay down total debt Pay down balances on each credit card, not all of one Check your credit reports for errors and resolve any errors quickly Don'ts Don't get turned over to collection Don't close accounts Don't open a new account just prior to applying for a loan Aging of accounts is a factor New accounts lower overall age of credit Don't apply for a lot of cards or loans Fewer credit "pulls" are better Several credit pulls in a short period are okay if you're shopping for a loan Pulling your own credit score is fine

About the license

In Texas, a real estate license expires every 24 months. True If a license is expired for a year, the licensee can still renew the license by paying TREC a fee of twice the required renewal fee. False Continuing education is required for all licensees, including most brokers. True Two legal courses are required for the mandatory CE requirement of 18 hours. Each course is four hours. True You do not need to prove that you have taken 18 hours of CE to TREC. True

Brokerage and Specialization

Brokerage and Specialization Real estate brokerage involves bringing buyers and sellers together and negotiating real estate transactions. Both brokers and sales agents perform brokerage activities and may specialize in one or more types of real property. Every sales agent must work with a broker, and all compensation must go through that broker. Brokers are responsible for the acts of all licensees who work under them.

credit bureau

Equifax Experian TransUnion

liability

Sponsoring broker is accountable for actions, good and bad, and can be held liable by TREC TREC has the authority to bring legal action and criminal charges for violations of TRELA

interest rates

The lower the interest rate, the lower your payment: $100,000 loan— 6% for 30 years: $599.55 OR 5% for 30 years: $536.82 Total savings over 30 years = $22,582.25

What four types of damage does basic homeowners insurance cover?

vandalism, theft, lightning, and fire

Texas Real Estate Commission (TREC)

A group of people appointed by the governor to set policy in implementing the license act.

The Importance of the CLUE Report in Texas

As we mentioned earlier, one of the key factors that insurance companies consider when determining the cost of your homeowners insurance is your homeowners insurance claims history. They can access this information using the Comprehensive Loss Underwriting Exchange (or CLUE) Report, which provides a listing of property insurance claims for the preceding years. While the number of years searched can vary by state and federal laws, a homeowner in Texas will want to run a CLUE report for the preceding five years. (Some of the larger insurance companies may have you run one for a shorter period of time, but the law in Texas says "five" is the magic number.) This history can be searched by the house or the individual. Only the owner of the property or an insurer can order the report. If you are representing a buyer or seller, the request for the report must come from the property seller/owner. Provided the insurer participates in the CLUE program and reports to it, the CLUE report shows: All of the claims on the property, including dates, locations, and general information If the claims were paid, and the amount of payment The types of claims, including the cause of the loss Whether the repair was made or not A CLUE report also shows claims that were paid, even if the homeowner didn't make the necessary repairs. Homeowner Hammie and the Case of the Disappearing Roof Fund So, let's say that Houston Homeowner Hammie filed a claim after his roof sustained substantial damages from a severe thunderstorm. Hammie's insurance company, Insure U R Covered, cut Hammie a check for $10,000. The insurer also noted that, when Hammie had the roof replaced, if it cost more than that $10,000, Hammie could submit an invoice, and the insurer would cover the rest. Sounds great, right? Well, it would have been, had Hammie not put off getting the roof replaced, and then begun to "borrow" from his savings account, where he'd deposited the insurance check for safekeeping until he was ready to hire a roofer. Six months later, Hammie was shocked to see his $10k roof fund was halfway depleted. Before the year was up, Hammie's roof fund showed a paltry balance of $42.50. It didn't take Nancy Drew to figure out this case: Hammie had simply spent his whole roof fund, but not on the roof. Granted, the roof wasn't leaking— through the ceilings, anyway—but Hammie began to panic every time a storm was predicted in the area. What if his roof actually developed a leak, or—Hammie could barely stomach the thought—caved in? A year down the road, Hammie is offered a job in Oklahoma, so he lists his home for sale. During the property's inspection, the inspector says that the property needs a new roof. Because Hammie's insurance company has already paid for a new roof, the company will not pay for another claim. It will be up to the buyers, then, to negotiate with Hammie to see if Hammie will pay the repairs out of his pocket. If he will not, the buyers must either pay for the repairs themselves, or back out of the deal altogether.

What is included in a CLUE report?

Dates of claims Location of loss Amount paid Cause of the loss General information about the insured

Payment from the Real Estate Recovery Trust Account can occur if the consumer suffers damages because a licensee or certificate holder:

Engages in dishonest dealings, fraud, unlawful discrimination, or a deceptive act Makes a misrepresentation Acts in bad faith Demonstrates untrustworthiness Acts as a sales agent or broker, or acts negligently or incompetently Acts as a sales agent or broker, conducts certain activities for which a real estate license can be revoked or suspended

two biggest factors

biggest factors: What kind of mortgage terms can you get? What will be your payment plan?

condominium

Condominium ownership is ownership of air space between the unit's boundaries (as well as a share in common areas). Condominium laws in all states require that land used for condominiums be surveyed by a registered land surveyor and that a plat map be prepared that will show the elevations of the floor and ceiling boundaries as well as the vertical boundaries of each unit. Instead of a point of beginning, these are measured with reference to a data line, point or surface, referred to as a datum. A typical condominium legal description would include reference to the unit number, condominium name, plat map, page and number.

Measuring

Mile: 5,280 feet Acre: 43,560 square feet Square foot: 144 square inches Yard: Three feet Square mile: 640 acres Common Calculations Area for a square = side x side Area for a rectangle = length x width Area for a triangle = (.5 x base) x height Acreage = property size / 43,560 square feet Hectares = property size in acres / 2.47 acres Price per square foot = sales price / area

Real Estate Recovery Trust Account

This account is used to reimburse those who have suffered damages or loss at the hands of any sales agent, broker, or certificate holder—or by any of their employees(aggrevated person). The licensee or certificate holder must have held their real estate license or certificate at the time the act was committed.

renewal

A license will need to be renewed every 24 months In order to renew a license, 18 hours of CE is required

Related Disciplines At a Glance

Appraiser: Estimates property values based on established valuation guidelines Lender or Investor: Provides funds for development and purchase of real estate Home Inspector: Provides visual inspection of a property's structure, systems, and site conditions and provides report to the buyer Developer: Constructs improvements on land Real Estate Educator: Educates on laws, rules, practices in the areas of pre-licensing, continuing education, and post-licensing Real Estate Counselor: Assists clients in making informed real estate decisions Urban Planner: Makes recommendations to local governments for improvements Title and Abstract Company: Ensures good title to the buyer in a real estate transaction Property Manager: Operates properties for others Petroleum Landsman/ Landswoman: Negotiates for and acquires subsurface mineral rights for oil and gas exploration

Legal Description

As a real estate professional, you will find legal descriptions in: Deeds of conveyance Mortgages Claims of title Leases Title insurance policies Easements Offers to purchase Tax assessments, tax rolls and other tax records

Types of Property

Beyond location, location, location, the type of housing is probably the second item on a buyer's "must-have" list. This is often due to affordability, but other factors may be maintenance issues, lifestyle, or nostalgia. There are many more housing types than we can possibly cover in this unit, but we'll hit some of the most common. These include: Single-family detached homes Townhomes Condos Cooperatives PUDs and MUDs Manufactured/modular/mobile housing Retirement communities A non-profit cooperative corporation owns the land, buildings, and all rights and interests in the corporation. Individual shareholders (unit owners/residents) don't own real estate; instead, they own corporate shares, which are considered personal property. Unlike shares in a stock, however, owners can't just divest themselves of their shares. It's a bit more complicated than that. This arrangement means co-op ownership isn't fee simple ownership, like condo ownership would be, or your traditional real estate purchase. Residents each have a proprietary lease (a lease from the corporation) for the units they occupy. The lease provides unit owners with the right to use the property, to live there, and to share in the benefits of living there. Co-op buildings may or may not have amenities similar to condominium buildings. Residents usually pay a monthly or annual maintenance fee to the board of directors that manages the cooperative. The board is responsible for all corporate financial and policy decisions, but may choose to hire an outside management company. Co-op boards operate like most corporation boards. They must follow the rules established in the bylaws and the articles of incorporation, and they have to be good stewards of the shareholders' money and interests.

Identifying property

Datum: Point from which elevations are measured Benchmarks: Serve as permanent reference points, often brass markers Other Ways to Identify Property In the absence of a legal description, there are other ways to identify property. For instance, reference to a prior deed is a quick and secure way to describe property with the required legal certainty. However, it is important to ensure that the seller has not already sold off part of the property. If the seller has, the prior deed reference is no longer valid. Best practice is to include a valid legal description, and the order of priority with the courts is as follows: plat reference (lot and block), metes and bounds, government survey (if your location uses one)

What is a CLUE report

A Comprehensive Loss Underwriting Exchange (CLUE) report is used by insurance companies to review a candidate's claim history. It is important to note that an insurance inquiry does not affect a CLUE report, but a claim does. In other words, if there is a question regarding whether something specific would be covered on an insurance policy, you can contact the insurance company to find out; this inquiry will not show up on your CLUE report.

Texas real estate broker-lawyer committee

13 Members: 6 yr term • 6 Lawyers appointed by the president of the Texas Bar Assoc. • 6 Brokers appointed by TREC • 1 Member of the public, appointed by the gover Responsibility to draft and revise contract forms so they can be standardized for use by licensees. These forms are designed to make real estate transactions more efficient, while minimizing potential problems and containing safeguards to protect the principals in transactions.

timeshare estate

A timeshare estate is fee simple ownership, conveying all the rights of ownership. Timeshare estates are pieces of real estate owned by multiple, unrelated individuals who, in addition to their ownership rights, each hold the right to occupy the dwelling unit in one- to two-week intervals during the year. If there were 52 owners, each owning the right to use the unit for one week a year, each would own 1/52 of the property. Such an estate may be held as a tenancy in common (in which a separate agreement must be executed to establish the specific time period for use) or an interval ownership (which is an estate for years in which the buyer has ownership of and title to the unit for the time selected and the number of years designated upon purchase). Like other forms of owned real estate, timeshare estates can be sold or passed down to heirs. Some buyers of timeshares purchase them not simply for their vacation value, but for their anticipated appreciation over time. Any investment carries risk, however, and timeshares are no exception. Not all properties will appreciate, and some may decline in value. Resale timeshares often do not recoup the buyers' initial investment.

timeshares

A timeshare property is one in which there is multiple shared ownership or multiple shared use of a piece of real estate. More than a hotel room, timeshares are condominium-style units that typically consist of one to three bedrooms, multiple bathrooms, a full kitchen, and a living room. They're nearly always furnished, and amenities such as indoor and outdoor swimming pools are common. Timeshares are nearly always found in resort locations—when else but vacation time would you want the use or ownership of a dwelling for only one to two weeks a year?

Broker

Also known as Broker of Record, or Broker/Owner, if owner of brokerage License held: Broker's license Description: Any person, partnership, association, or corporation who, for another, and for compensation of any kind, negotiates any form of real estate transaction.

Calculating area transcript

As a real estate professional, you will often need to find the area of rooms, buildings, and lots, so it's important to know how to calculate these. Rectangles, Triangles, and Squares Take a rectangular building, for example. Length times width gives you the area. So, if that building were 40 feet by 20 feet, the area would be 800 square feet. A square's area is calculated by multiplying one side times another side. A triangle's area is found by taking half the length of the triangle's base and multiplying by its height. Price Per Square Foot Area, or square feet, is important in calculating price per square foot. This is found by taking the home's sale price and dividing it by the area. So, if we have our 800-square-foot rectangular building, and it sells for $75,000, that equates to $93.75 per square foot ($75,000/800 = $93.75). Knowing the price per square foot can help when you're valuing a listing. If you have the price per square foot of a comparable, and you know the square footage of the building you're listing, you can get an estimated value. So, if local comps are selling for about $93.75 per square foot, and you have a 1,000-square-foot home, an estimated value could be $93,750. Keep in mind, square footage isn't the only factor to consider when valuing a home. The home's location, style, condition, and amenities matter, too! What if the home you're working with isn't a perfect rectangle, or square? Have no fear! Take your odd-shaped building and divide it into familiar shapes. Find the area of each familiar shape, add these together, and you have the area of your odd shape. Acres You may hear the word "acre" used when talking about lot size. An acre is land that contains 43,560 square feet. So, if you need to find out what percentage of an acre a parcel is that has 28,675 square feet, just divide the number of square feet in the property (28,675) by the number of square feet in an acre (43,560) to get .66, or 2/3 of an acre. Hectares When discussing even larger parcels of land, it will be helpful to know about hectares. A hectare is 10,000 square meters, or approximately 2.47 acres in U.S. measurements. So, if you wanted to find out how many hectares were in a 45-acre tract of land, you would divide the total acres by 2.47. So, 45/2.47 = 18.21 hectares. Front Foot Another term you may hear is "front foot." The front foot of a property (often referred to as frontage) is simply the linear portion that abuts a waterway, highway, or street. To determine the front-foot measurement, you simply measure the length or width of the property that abuts this area. So, if you had a 200 x 50-foot property, but it was the 50-foot portion of the property that abutted the road, you would have 50 front feet, or a 50-foot frontage.

Manufactured homes

As defined under the US Code, Title 24, "Housing and Urban Development," Part 3280, a manufactured home is a structure that is at least 320 feet in size, and built on a permanent chassis to be transportable. It is designed to be used as a dwelling—including plumbing, heating, air conditioning, and electrical systems once it is connected to the utilities—with or without a permanent foundation. The construction of manufactured homes became federally regulated with the passage of the National Manufactured Housing Construction and Safety Standards Act of 1974. As a result of this act, the U.S. Department of Housing and Urban Development (HUD) established a Manufactured Housing Program that administers and enforces construction and safety standards for manufactured (mobile) home owners. The standards apply to all manufactured homes produced after June 15, 1976. In the U.S., all transportable sections of manufactured homes that are built after that date must contain a certification label attesting to the fact that the manufacturer build the home according to HUD's Manufactured Home Construction and Safety Standards. These standards cover everything from body and frame requirements and thermal protection to plumbing, electrical, fire safety, and other parts of the home, and are published under 24 CFR Part 3280.

DIFFERENT TYPES OF VALUES TYPES OF VALUE STAKEHOLDERS EXPLANATIONS

Assessed value Tax assessment office The price placed on a home by a municipality to calculate property taxes. Depreciated value IRS Calculated for income tax purposes to determine basis for taxable amount. Accelerated depreciated programs have been used by the federal government to stimulate the economy. Investment value Investor One way to determine investment value is to calculate the return on investment (ROI). The higher the ROI, the better the investment. Another way to determine investment value is to apply a capitalization rate to the net operating income. Again, the higher the better. List price Owner This is the amount for which an ownerhas offered to sell a property. This is what is found in an MLS listing

categories of real estate

Categories of Real Estate Land has both economic and physical characteristics. Economic characteristics of land include its scarcity, improvements, permanence of investment, and situs (location). Physical characteristics of land include its immobility, indestructibility and uniqueness (nonhomogeneity).

Broker Lawyer Committee

Complaint process: Complaint filed with TREC, investigation by TREC to determine if there is a violation of TRELA, informal and formal hearings. Disciplinary actions: License revocation or suspension Possible penalties: Fines, additional education or civil and criminal charges Recovery account: Last resort for victims of licensee violations to obtain payment

Credit Report

Credit report = Credit history used to arrive at credit score/number

Legal description of property

Description of the land that specifies the boundaries and location of a specific piece of real property Where to Find Legal Descriptions Deeds of conveyance Mortgages Claims of title Leases Title insurance policies Easements Offers to purchase Tax assessments, tax rolls and other tax records

Land Acquisition Costs: Transcript

During your career as a real estate licensee, there will be times you need to calculate the cost of purchasing land. To do this, you multiply the land area by the cost per unit. Let's go through a couple examples. We'll start with a fairly easy one. The cost of a parcel of land is $15,000 per acre. You have a client interested in purchasing five acres of land. To calculate the land acquisition cost, multiply $15,000 per acre times five acres and you get $75,000. Now let's take an example that is a bit more complex. The cost of a parcel of land is $0.75 per square foot. Your client wants to purchase two acres. We need to convert two acres to square feet. This is where our 'Calculating Area and Length Cheat Sheet' comes in handy. From our cheat sheet, we know that one acre is equal to 43,560 square feet. Your client wants two acres so we multiply 43,560 times two and get 87,120 square feet. Now we multiply that number by $0.75 per square foot to get a land acquisition cost of $65,340. There you have it. Just remember to convert the land area measurement you're working with to the same unit in which the cost is quoted before calculating the cost to purchase that land.

ESAC

ESAC consists of 12 members: seven licensed real estate professionals; four members who own their own real estate school, are approved instructors, or provide core or continuing education; and one member of the general public. The ESAC reviews existing standards and courses, and makes recommendations to the Texas Real Estate Commission for improvements, but does not offer courses directly. The Texas Legislature formed the ESAC to improve the quality of real estate education. Two year term

Home purchase tax deductions

Eligibility Facts As long as it's a qualified first-time home purchase, the home is eligible. And, good news: this doesn't even mean that it has to be the buyer's first home; it just has to be their first home ownership within the last two years. So if your client owned a home a year-and-a-half ago and sold it, they wouldn't qualify for the penalty exclusion for a withdrawal. Keep this in mind, too: If your buyer took out the funds to purchase a house, and that offer or sale fell through, your buyer would have to identify another home to purchase within 120 days of the distribution from their IRA, or else they'd get stuck paying the penalty. Funds withdrawn under the first-time home buyer program require that the person use them within 120 days to acquire, build, or improve a residence, and for closing costs. Some Points About Points A point is simply a charge the buyer would pay to their lender to arrange the financing for their home loan. These have different names—they might be called loan origination fees or discount points, for example. Usually, the buyer deducts the points over the life of their loan. However, the buyer may be able to take the full deduction in the first year under certain circumstances. For example: The loan involved has to be for their principal residence The points have to be identified as such on the closing statement, and can't be substituted for other charges The points have to be usual and customary for their area The points have to be computed as a percentage of the loan The points can't be more than the amount the buyer puts down, which might include any seller-paid points The buyer has to use the cash method of accounting In addition, current homeowners can also deduct points for a loan they obtained to improve their main home. More About Deductions Most closing costs are just fees—rather than interest—so they're not tax-deductible. The following fees (among others) are not tax-deductible: Loan servicing fees (including notary fees, document preparation fees, etc.) Appraisal fees VA funding fees Private mortgage insurance premiums (these were deductible at one time, but that was phased out in 2014)

Federal Estate Tax

Estate tax may apply to money and property owned at someone's death. Fair market value, and not the value when they were acquired is used. Luckily, most estates aren't subject to estate tax, and spouses can inherit without estate tax applying. In addition, estates with combined gross assets and prior taxable gifts valued at $5.45 million or less in 2016 don't require the filing of an estate tax return. The total of the fair market value of all items owned is used to compute the gross estate value. This will include the value of any cash, securities, real estate, insurance, trusts, annuities, business interests and other assets. The taxable estate value will exclude mortgages and other debts, estate administration costs, property that passes to the surviving spouse and property that passes to qualified charities. Additionally, the value of some operating business interests or farms may be reduced for estates that qualify for the deduction. Next, the value of lifetime taxable gifts (if any) beginning with gifts made in 1977, is added to this number and then the tax is computed. The tax is further reduced by the available unified credit ($5.45 million). When an estate tax return must be filed, it is filed on IRS Form 706. It must be filed within nine months after the deceased person's death. The list that follows gives you an idea of how the estate tax threshold changed between the years 2004 and 2016. 2004 and 2005: $1.5 million 2006 - 2008: $2 million 2009: $3.5 million for decedents dying in this year 2010 and 2011: $5 million or more for decedents dying in these years 2012: $5.12 million 2013: $5.25 million 2014: $5.34 million 2015: $5.43 million

Plants as property

Fruits of nature (fructus naturales) are plants that don't require annual cultivation. These include trees, perennial shrubs, and some grasses. Fruits of nature are considered real estate. Fruits of industry (fructus industriales), on the other hand, are plants that require annual cultivation. These include crops of fruits, vegetables, wheat, and corn. Fruits of industry are also known as emblements, and are considered personal property, even though they're a part of the soil.

Homeowners Insurance Policies and Coverage in Texas

Homeowners insurance is required when financing the purchase of a home, to protect the lender's interests for the loan. But even when buyers pay cash, they should obtain homeowners insurance to protect their own investment. A homeowners policy will combine several types of insurance into one insurance policy.

When do you need a real estate license?

If you're selling your own property or buying property for yourself, you don't need a license. If you're involved in buying and selling property 'on behalf of others, for compensation of any kind,' then you'll need that real estate license to do those things legally. Acting as an executor or performing other roles under a court order is permitted without a real estate license. People handling real estate duties in the commission of their regular jobs—such as attorneys or mortgage brokers—generally do not need to have a real estate license.

Types of Texas Home Insurance Coverage

In Texas, insurance companies may sell several types of policies. Each of these policy types comes with a different level of coverage. Three policy types are standardized, which means that regardless of which provider you choose, the exact same coverage and policy language will be in all of them. The only differences you'll see will be in the rates the companies charge. The three standardized policy forms in Texas are the HO-A, HO-B, and HO-C. Let's take a closer look at these—along with their "amended policy" counterparts—now. HO-A policies provide very limited actual cash value coverage of your home and its contents, nothing more. The only types of damage that are covered are those specifically listed in the policy. HO-A policies are standard fire insurance policies. HO-A amended policies, on the other hand, provide the HO-A standard coverage, as well as some additional coverage. The "additional" coverage varies by company, which is why the HO-A amended policies are considered non-standardized policies. HO-A amended policies provide more than what the HOA standard—or base—policy covers, but still not as much as what the HO-B covers. If you think of these policies as a mini-set of stairs, then this would be a half-step between HO-A, the very bottom step, and HO-B, the second step. HO-B policies provide replacement cost coverage for most forms of damage to the real property (minus any claims that the policy specifically excludes) and actual cash value coverage for personal property (unless the policy is endorsed to provide replacement cost coverage, instead of actual cash value coverage). HO-B policies cover many more losses than HO-A policies do, including losses from falling objects (such as trees); the weight of snow, sleet, or ice; collapse (unless it's caused by earth movement); damage by vehicles; damage by animals (unless they are owned/kept by the home owner), and more. This is the second step on our little flight of stairs. HO-B policies are the most common type of homeowners insurance policies. HO-C policies—known as extended coverage—provide the most extensive coverage for home owners (yay!), but are also, not surprisingly, the most expensive types of policies. These are the top step in our mini flight of stairs. *Want to keep these types of coverage straight in your mind? Remember that the HO-C policies are extended Coverage, and, therefore, are the most Costly—and at the top of our flight of stairs. Every step (or half-step) down from there means less coverage for the homeowner The final type of policies are approved alternative policies—so named because they can be sold only with the Texas Commissioner of Insurance's approval—which offer various levels of coverage, and as such, differ from one insurance company to the next. Because of this, the approved alternative policies are considered non-standardized policies Here are some other important things to remember about these policies: To add or remove coverage, the insurance company uses an endorsement, which is also known as a rider. The minimum coverage Texas requires homeowners to have on their primary residence is 80%. Resources: Texas Department of Insurance, Better Business Bureau: Everything You Needed to Know About Homeowner's Policies in Texas

homeowners' insurance policy

In general, a basic homeowners insurance policy will cover damage caused by: Fire Lightning Theft Vandalism Windstorms* Hail* *In Texas, not all basic policies cover wind and hail damage. Coverage for wind or hail damage usually does not apply to any property on the Gulf Coast. Typically, policies for Gulf Coast properties include an endorsement that excludes wind and hail damage. When an insurance company does exclude wind/hail damage coverage from a homeowners or other property owners policy, the Texas Windstorm Insurance Association (TWIA) provides this coverage for properties that are located within one of the 14 Texas coastal counties and in parts of Harris County on Galveston Bay. In some cases, though, owners of Gulf Coast properties may be required to obtain flood insurance before they're eligible for TWIA coverage.

Questions to a broker

Is the broker a practicing real estate professional? What is the training program like? How many sales agents are affiliated with the broker? How available is the broker as a mentor in real estate?

Land, Real Estate, Real Property, and Personal Property

Land is defined as the earth's surface extending downward to the center of the earth and upward to infinity, including permanently attached natural objects. Real estate includes everything in the definition of land, plus all things permanently attached to it naturally or artificially. Artificial attachments are called improvements and include things such as fencing, buildings, walkways. The definition of real property includes real estate plus the interests, benefits, and rights automatically included with real estate ownership. What are those interests, benefits and rights? Possession: The right to occupy the property Enjoyment: The right to possess the land without harassment or interference Exclusion: The right to refuse other interests in your property Control: The right to determine interest in the property for others Disposition: The right to determine how, when, and if the property is to be sold/transferred

primary market

Lenders lend directly to the consumer Lenders generate the loans and sell them on the secondary market Loans may be either conventional or government.

Sales Agent

License held: Sales agent's license Description: Anyone who performs as a real estate broker for compensation of any kind, but does so only while associated with and supervised by a licensed broker who is his sponsor. May not work independently.

license law

License is required for real estate transactions are "for others, for compensation" 180 course hours required to obtain a license in Texas A sales agent must be 18 years old Two types of licenses: Broker and Sales agent Sales agent must be sponsored by a broker Broker must have at least four years of full time real estate experience out of the previous five Licensees must follow the laws of TRELA

More about fees

More than 300,000 real estate licensees in Texas. Active and inactive licensees have to pay the fees. Money is actually deposited into a separate account, rather than being held by TREC, and can only be used to support and maintain the work of the center. The center is overseen by a nine-member advisory committee—appointed by the governor, just like TREC members are—that provides research guidance, approves the budget, things like that.

fico

Most widely used credit score Based on information obtained from the three credit bureaus

what type of coverage

Mrs. Hudson is an owner of a home on the Gulf Coast. One day, her home suffers damage from a hurricane. She checks her homeowners insurance policy to determine if she is covered and discovers that her home is not covered. This is an example of all risk coverage. Luckily, Mrs. Hudson had added an endorsement to her insurance policy to include actual cash value on her appliances. This is an example of named perils coverage.

NAR

NAR members are bound by both the NAR Code of Ethics and Standards of Practice and also by the real estate code of ethics enforced by the state in which they are licensed. Membership in local or state REALTOR® associations automatically extends to the national (NAR) level. Only members of the National Association of REALTORS® may refer to themselves as REALTORS®. The National Association of REALTORS® is the largest professional organization for real estate professionals with more than 1 million members. State and national professional organizations exist to provide standards, strong ethical practices, advanced designations, specialized knowledge, and resources.

Surveys and land descriptions

Obtaining a survey will clearly define the property and its boundaries and will reveal any potential issues related to those boundaries. In contrast to a mere street address, a legal description is a description of the land that specifies the boundaries and location of a piece of real property. Legal descriptions appear on deeds and other legal documents because the description is sufficient to adequately describe and define a property so the courts can correctly determine ownership boundaries. Legal descriptions are key to identifying the location and boundaries of a piece of property. Many times, a legal description starts or ends with a survey.

Home Ownership Expenses/Deductions

PITI—Your mortgage payment includes not only Principal and Interest but also Taxes and Insurance (PITI). Maintenance Utilities Sewer and Water Repairs (budget for these!) Tax Deductions Interest on loan Prepaid interest/discount points/some fees related to closing Property taxes Note: The tax refund comes once a year. Be sure to budget accordingly.

Water rights

Percolating The right to draw water from underground resources (such as wells) for the landowner's use. Riparian The right to access and use rivers, streams, and other flowing bodies of water adjacent to the property. Littoral The right to access and use ponds, lakes, oceans, and other stationary bodies of water bordering the property. Doctrine of Prior Appropriation The doctrine of prior appropriation is a legal doctrine that grants water rights to the first individual or entity to take water from a source for beneficial use. Unlike littoral and riparian rights, which are based on a given property's adjacency to a body of water, prior appropriation is granted by the state based on need and use rather than adjacency. Prior Appropriation States The doctrine was developed historically in western states, where water was more likely to be a scarce commodity. Current states that subscribe to the doctrine include, but aren't limited to, Alaska, Arizona, California, Colorado, Hawaii, Idaho, New Mexico, Oregon, Utah, and Washington. Details differ between states, but essentially water rights are unconnected to property ownership, and can be sold. In some states, once water rights are granted they are attached to the land of the permit holder. Beneficial Use To secure water rights in prior appropriation states, the requested use must be considered beneficial to some household, agricultural, or household operation. Irrigation, for instance, is a beneficial agricultural use. Hydroelectric power is a beneficial residential, commercial, and industrial use. Single Source, Multiple Rights The rights to a water source are sometimes granted to more than one user. If the first permit holder doesn't need all of the water for its declared use, additional permits may be granted. In times of shortage or drought, the permit holders may be required to reduce their usage, with the first permit holder ensured of access to at least some water.

Taxpayer Relief Act of 1997

Some buyers may decide to use some of their IRA funds toward their down payment on their home, so you'll need to know a little about this topic if it comes up. Normally, a person can't withdraw funds from their IRA until age 59-and-a-half without incurring an early distribution penalty. However, under the Taxpayer Relief Act of 1997, first-time home buyers can use up to $10,000 of their IRA funds to pay the down payment and closing costs of their new home, and that penalty is waived. Keep in mind, though, that if a buyer chooses to do this, the buyer will still have to pay taxes on the distribution, just as they would anytime they withdraw funds from their IRA.

Subsurface, surface and also exception and reservation

Sub-surface rights refer to the rights to the natural resources found beneath the surface of the earth. In Texas, sub-surface rights include: Oil and gas rights Other mineral rights Surface rights, on the other hand, refer to the rights to use the surface of the earth. Surface rights include the following: Underground water Limestone Strip-mined coal Gravel Iron ore An exception, which informs the buyer that there is a deficiency in the seller's title (for example, if a previous owner holds a mineral interest). A reservation, which identifies an interest (for example, a mineral right or access easement) that the seller is going to retain.

Types of Coverage

Sure, a basic homeowners policy covers ordinary stuff like fires. But, what if you have bad luck and suffer a more unusual type of disaster? In this case it is imperative to know if you have a comprehensive coverage plan or a specified perils coverage plan. Let's take a look: All risk (also called comprehensive coverage or open perils coverage) - offers broad protection and covers all risks unless they are specifically excluded by the policy. Named perils (also called specified perils coverage) - offers narrower protection and covers only those risks specifically named by the policy. Here's another important term for you to know: endorsement. An insurance company can change a homeowners policy through an endorsement, which either adds coverage (such as increasing the dollar amount of coverage on pricier items, like jewelry or camera equipment, for example), or excludes coverage (when the coverage for a certain event—such as hail and wind damage for Gulf Coast properties, as we discussed earlier—is not provided).

TREC and applications

TREC will reject an application that doesn't satisfy or meet specific requirements, including submitting fingerprints, satisfying experience, exam, or education requirements, or providing TREC-requested documentation or information within one year of the application being filed. TREC will also reject an application if the applicant doesn't submit the required fee within 20 days of TREC's written request for payment.

Provisions L-Q

TRELA requires that you provide the Information about Brokerage Services form at the time of the "first substantive dialogue with the party." Substantive dialogue is a written or verbal communication in which a discussion about a specific real property is discussed. This includes conversations held in face-to-face meetings or via email, phone, and/or text. The intermediary is defined by TRELA as "a broker who is employed to negotiate a transaction between the parties of a transaction, and for that purpose, may act as the agent of the parties." In more simple terms, an intermediary is a broker who represents both parties to a single real estate transaction: usually the seller and the buyer, although it could be a landlord and a tenant, or two other parties

Deductions Taken During Home Ownership

Tax deductions arising from home ownership extend beyond the closing table, and into the ownership of the property. The Tax Cuts and Jobs Act of 2017 (TCJA) implemented changes for mortgage interest deductions for those who are eligible for these deductions on their income tax returns. For homes purchased between 2018 through 2025, owners can deduct the interest paid on their loan, with certain restrictions. The loan has to be for home acquisition financing, which can be a mortgage to buy, build, or improve a main home or even a second home, and the loan amount has to be secured by the property itself. In addition, the loan has to be only for the purchase and improvement—anything used for other purposes is not deductible. The total amount that's treated as home acquisition debt for tax purposes has to be under $750,000 for married couples filing jointly, or $375,000 if the owners are married and filing separately. For homes purchased before 2018, taxpayers are grandfathered in and may continue to deduct mortgage interest on acquisition costs of up to $1 million. Interest on home equity loans may be strictly restricted or eliminated on tax returns filed in 2019 (for tax year 2018). For homes purchased between 2018 through 2025, owners can deduct the interest paid on their loan, but only the portion that was used to improve a main or second home, and only if the loan amount is secured by the property itself. Interest on home equity funds used to pay other expenses (college tuition, paying off other debts, or the purchase of an automobile, for example) is no longer deductible. Deducting allowable interest payments is easy. Come tax time, homeowners just have to declare the interest as an itemized deduction on Schedule A. Homeowners can also deduct up to $10,000 for SALT taxes (state and local income taxes, which includes property taxes) each year. Property taxes are actually deductible for any type of real property the person owns, including their personal residence, a vacation home, investment property, vacant land, time share, etc. Deducting property taxes is also easy. For the homeowner's own home, property taxes have to be declared as an itemized deduction on Schedule A of their return, just like the interest charges. For a rental property, however, they'd be deducted on Schedule E. TCJA changes may mean that many taxpayers who previously itemized deductions won't benefit from those itemized deductions now and will instead take the standard deduction, eliminating these individual deductions entirely.

types of government powers

Taxation Legal power: Lien Owner compensated? No Eminent Domain Legal power: Involuntary title conveyance for the public good Owner compensated? Yes Escheat Legal power: Involuntary conveyance at death when no will exists and no heirs or creditors are found Owner compensated? No Police Legal power: Governmental authority to do what's right for the public good Owner compensated? Maybe* *Owners are not entitled to compensation as they are with eminent domain

The ESAC

The Education Standards Advisory Committee consists of 12 members appointed to two-year terms. The Texas legislature formed the ESAC to improve the quality of real estate education. The ESAC reviews existing standards and courses, and makes recommendations to the Texas Real Estate Commission for improvements to real estate education.

Credit Score vs. Report

The Fair and Accurate Credit Transactions Act of 2003 requires the credit bureaus to provide you with a free copy of your credit report annually. Credit Report—Free annually through AnnualCreditReport.com Credit Score—Costs and is often unreliable

TRELA

The Texas Real Estate License Act- passed by legislation to protect the public. Began in 1939.

insurance coverage for homeowners

The clause in the homeowners insurance policy that imposes a penalty for under-reporting the value of the property is called the replacement costs clause. False A homeowners policy combines several types of insurance into one insurance policy. True Homeowner policies cover three basic areas: structure, belongings, and liability. False Flood coverage is part of the standard insurance policy. False Buyers who pay cash for their homes don't have to worry about getting homeowners insurance. False You should have enough insurance coverage to allow you to rebuild, if necessary. True

Factors That Affect Your Premium

The following factors can impact your homeowners insurance premium: Your home's age and condition. When it comes to houses, older isn't necessarily better—the older the home, the more costly it can be to insure. Expect the same—increased premiums—if your home is in bad condition. In fact, if your home is in especially poor condition, an insurer may deny you coverage. (This makes sense, because a home with serious risk factors is more likely to become the site of a fire, for example.) An insurer may not refuse to provide coverage based on your home's age or value, though. The home's construction materials. The age and condition aren't the only characteristics of a home that affect the insurance premiums—its building materials also figure into that number. If you have a frame house, it's going to be more expensive to insure than a brick house would. Why? Because a frame house is more flammable. The home's replacement cost. Not surprisingly, the more it would cost to rebuild your house, the higher your premium is going to be. Your insurance policy—and therefore, your premium— will be most costly on homes where the insurer would have to pay more to replace that home in the event it is destroyed. Location, location, location. That's right: your home's location factors into the calculation of your insurance premiums. If you live in an area at a higher risk of tornadoes or hurricanes—yes, unfortunately, this is something your Gulf Coast clients will face—then there is a greater probability that your home will be damaged or destroyed by those risks. The same holds true for areas with a high rate of theft or other property crime. The greater the risk to the insurer, the more cash you'll have to fork over. Local fire protection availability. This factor is similar to the "location" issue, except it solely takes into account your home's proximity to fire protection services. Why? Because if there is a fire in your home, a few extra minutes of driving time for the fire truck increases the amount of damage to your property. The homeowners' claims history. That's right—in this case, the insurance company is looking not at your property, but instead, at you—or rather, the claims you've filed in the past. How can they do this? It's easy: Many insurance companies simply pull up the homeowner's claims history using Comprehensive Loss Underwriting Exchange (or CLUE), which provides a listing of property insurance claims for the preceding three years. This history can be searched by the house or the individual. The homeowners' credit score. Believe it or not, here's yet another reason not to let that MasterCard bill go unpaid: some insurance companies may check your credit score in both determining whether to issue you a policy, and what to charge for that policy. No worries, though: an insurance company cannot refuse to issue or renew a policy—or cancel a policy— based solely on a person's credit score. -

MAIA Method of annexation Adaptability of item to land's use Intention in placing item on land Agreement of the parties

The method of annexation (also known as attachment) simply refers to how and whether the item is attached to the property, and how permanent that attachment is. If, for instance, you purchased an outdoor fireplace kit which involved stacking interlocking blocks together on a level surface on your outdoor patio and you decided to sell your house later, you could take this fireplace with you, even if it weighed several hundred pounds, because it is not attached to the property itself. If, however, to make the fireplace more secure, you cemented it to your patio, it would be a form of permanent attachment that is now part of the real property. Mrs. Goldman's antique light fixtures were attached with wiring, screws, and other methods to the walls and ceiling of the house. As such, they were real property and should not have been removed. Her rosebushes were planted in the ground; they also should not have been removed. You have to ask yourself whether the item can be removed without causing damage to the property to which it is attached. If it cannot, then it's considered real property. The courts used to use the method of attachment as the only test of whether an item was real property or personal property. However,adaptation now also figures in to the equation. Adaptation has to do with how the item is situated or adapted to the real property. Even if your stand-alone fireplace were not cemented in, if it were part of an outdoor entertainment area and fit into it in such a way that other fixed items would have to be dismantled to remove the fireplace, it could be argued that the item had been adapted to the environment, and must not be removed. Mrs. Goldman's custom draperies were adapted to the windows for which they were custom-made, and should not have been removed. Other items that fall under this category are garage door openers or the remote controls of other built-in features that are permanently attached to the property. Often, the intention of the party who put the item on the property is regarded as the most important consideration in determining whether the item should stay or go. However, a person's original intentions may change over time, or an item that was intended to be temporary may end up physically attached to the property, which can change the item from temporary to permanent. Let's say that Mrs. Goldman's bookshelves were originally free-standing, but after her two grandchildren became toddling tornadoes who knocked over anything that wasn't nailed down, she had her son attach the bookshelves to the wall. And voilà, just like that, those bookcases went from personal property to real. Luckily for Mrs. Goldman, she didn't even attempt to take the bookcases when she moved. Agreement is the simplest and first test—if the parties have agreed that an item will stay or go, then that agreement meets the legal test. To be safe, the agreement should be in writing. Mrs. Goldman could have saved herself a lot of trouble had the items she wished to remove been accounted for in the contract between the parties. Even in the case of "usual" items being removed, such as Mrs. Goldman's washer and dryer, it never hurts to be cautious and list any items where there is the possibility of misunderstandings.

Bundle of rights

The right of possession (the property is owned and may be possessed by the title holder) The right of control (the owner controls the use of the property) The right of exclusion (the right to decide who may or may not access the property) The right of enjoyment (the ability of the owner to use the property in any legal manner) The right of disposition (the right to sell or convey the property). Surface rights include both land and water rights. Subsurface rights pertain to the right to use underground resources such as natural gas and minerals. These are often referred to as mineral rights. Air rights involve the right to use the open space above buildings up to a height established by law.

violations

Trust fund violations (shortages, commingling, record keeping) Failure of brokers to properly supervise Unlicensed individuals (assistants) performing licensed activities Misrepresentation

Living in PUDs and MUDs

When I told my family I now lived in a MUD, my mother said, "That doesn't surprise me, Nellie. You never did have sense enough to come in out of the rain." I had to explain to her that MUD stood for mixed-use development. Basically, I live in an apartment above retail space. It's convenient to shopping and mass transit, and I really feel like I'm in the thick of things here. I didn't want to mention it to my mother, because she probably wouldn't understand and would say I was either smarting off or off my rocker—I'm always one of those two things as far as Mom is concerned—but she lives in a PUD. A PUD is a planned unit development, which is also mixed use with both residential and commercial in the same building or group of buildings. In her case, it's a retirement community with shopping, recreation, and, of course, the residential units—all in one fell swoop. It has convenience, of course, but also security, which is important for older people like Mom. I talked to a guy at the deli once about PUDs—he was a developer. He says that PUD developers have to file detailed plat maps with their planning boards that show all of the uses they're going to have in the development, because they're planned under special zoning ordinances. But Mom wouldn't understand all that.

moblie home

When I told my family I now lived in a MUD, my mother said, "That doesn't surprise me, Nellie. You never did have sense enough to come in out of the rain." I had to explain to her that MUD stood for mixed-use development. Basically, I live in an apartment above retail space. It's convenient to shopping and mass transit, and I really feel like I'm in the thick of things here. I didn't want to mention it to my mother, because she probably wouldn't understand and would say I was either smarting off or off my rocker—I'm always one of those two things as far as Mom is concerned—but she lives in a PUD. A PUD is a planned unit development, which is also mixed use with both residential and commercial in the same building or group of buildings. In her case, it's a retirement community with shopping, recreation, and, of course, the residential units—all in one fell swoop. It has convenience, of course, but also security, which is important for older people like Mom. I talked to a guy at the deli once about PUDs—he was a developer. He says that PUD developers have to file detailed plat maps with their planning boards that show all of the uses they're going to have in the development, because they're planned under special zoning ordinances. But Mom wouldn't understand all that.

Understanding Replacement Cost and Actual Cash Value

When reviewing policies, buyers should note whether the insurance covers replacement costs if new. Without this coverage, the policy may only cover the used value of the item (actual cash value). Homeowners should also be aware of the co-insurance clause and the importance of updating the replacement value of their policies as the value of the investment changes. A co-insurance clause is one that imposes a penalty for under-reporting the value of the property, and it's based on a percentage stated in the policy itself and the amount under reported. Example Becky insured her home's value for $200,000. Her insurance policy has an 80% coinsurance clause. If her value rises to $300,000, her co-insurance clause would kick in because her covered value is less than 80% of the replacement value ($200,000/$300,000 = 67%). This means her insurance payout will be subject to an under-reporting penalty. Broader policies will include additional items, such as flood and earthquake.

Systems

While legal descriptions for land come in many forms, three of the most commonly used systems to describe land in the U.S. are: Metes and bounds, which uses compass headings and directions. Lot and block, which provides plat references. Rectangular (government) survey system, which is regulated by the U.S. Department of the Interior, Bureau of Land Management, and divides the land surveyed into six-mile-square townships, which are further subdivided. This system isn't used in the original 13 colonies or in Texas, West Virginia, or Kentucky. A fourth system sometimes used is the monument system. Monuments are permanent land markers and are often used in the metes and bounds system, as well. The monument system uses a monument, which is typically a permanent physical, man-made, or natural feature, as its point of beginning. Metes and bounds property descriptions are frequently found in deeds. But what are metes? And what is a bound? Metes are the direction and distance of a line forming the boundary of the property. To find the direction, a compass was used indicating north, south, east, west as well as the degree of direction between 0 and 90. Bounds refer to the physical features that define the boundaries of the land. Common terms used to reference bounds might be the name of a tree, creek, owners of land bordering the property, and even piles of rocks. A key consideration is the point of beginning. Unless it is easily identifiable, the rest of the description won't be of much use to anyone, because everything is based off of that point. After identifying this point, the surveyor sights the direction to the next point. The lot and block system is also called a plat reference system because it's a description by reference, plat, or lot and block. Lot and block systems are surveyed by first referencing either a rectangular government survey or a metes and bounds description. Then the land is divided into lots with a numerical designation of a parcel. The block refers to the name of the subdivision under which the map is recorded. Gov system The numbers on the grid start with Section 1 in the northeastern corner of the township, and then follow a zigzag pattern, with Section 36 in the southeastern most corner.