Real Estate Practice: Chapter 3
Purchasers in two types of subdivisions have an unqualified right of rescission
1.Timeshare buyers have a right to rescind the purchase within seven (7) calendar days after receiving the public report or after signing the purchase contract, whichever is later. 2.Undivided interest buyers have a right to rescind the purchase by midnight of the third calendar day following the day the purchaser executed the offer to purchase.
Designated Agency
A broker, with the written consent of the principal, may designate one or more licensees to act exclusively as the agent of the seller or landlord, and designate one or more licensees to act exclusively as the agent of the buyer or tenant in the same transaction. Not recognized in CA
The Truth in Lending Act requires
A creditor to furnish certain disclosures to the consumer before making a contract for a loan.
Notice of Adverse Action - (Equal Credit Opportunity Act)
A lender or creditor who denies an application for credit must provide the applicant with a statement of reasons or a written notification of the applicant's right to obtain such a statement, within 30 days after receiving the completed loan application.
In California an agent is defined
A person licensed as a real estate broker
California's Disclosure Regarding Real Estate Agency Relationships form
Agent (broker) can enter into a single or dual agency relationship with a client. This relationship must be in writing. This form is used.
When is an agency relationship created?
An agency relationship is created when a person (the principal) delegates to another person (an agent) the right to act on his or her behalf in business transactions with third parties.
Easton v. Strassburger decision 1984
An agent is bound to inform the client of all material facts that might affect the client's interests in the transaction. This includes both the facts that the agent knows and those that the agent should have known.
What exception exists to the duty of obedience when working with a client?
An agent is not bound by the duty of if the principal's directions are not legal.
Real Estate Transfer Disclosure Statement
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. •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.
Housing Financial Discrimination Act (Holden Act)
At the time of the loan application, lenders must notify all prospective borrowers of their rights under the Holden Act and its prohibitions against discriminatory practices by lenders.
Mello-Roos Community Facilities Act of 1982
Authorized the formation of community facilities districts, the issuance of bonds, and the levying of special taxes to finance certain public facilities and services. The bonds are issued for streets, sewers and the like in new developments. •The seller of a one-to-four-unit residential property subject to a Mello-Roos bond must make a good faith effort to obtain a disclosure notice from the district concerning the special tax. The seller must give the notice to a prospective buyer. •If the seller fails to provide the notice prior to signing a sales contract or lease, the buyer or tenant has the right to cancel the contract within three days after the receipt of the notice.
Military Ordinance
California Code requires that if a seller knows that his or her residential property is located within one mile of a former military training site, the seller must inform the potential buyer in writing that the ordinance site may contain ammunition or explosives.
Sex Offender Database
California requires that every sales contract or lease contain a notice which states that information about sex offenders registered under Megan's Law is available to the public on an Internet web site maintained by the Department of Justice at www.meganslaw.ca.gov. Depending on the offender's criminal history, the database information will incl
An agent's fiduciary responsibilities to a client usually end when the transaction closes. This is not true of which duty?
Confidentiality. This duty extends beyond the termination of the relationship. No personal information gained during the term of the agreement can ever be disclosed to another party except the broker.
buyer's agent
Conversely, if the principal in the relationship is the buyer, the broker (or the associate licensee representing the broker)
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.
buyer's agent
If the agent enters into an agency agreement with the buyer, the agent becomes the buyer's agent.
seller's agent
If the agent enters into an agency agreement with the seller, the agent becomes the seller's agent
seller's agent
If the principal in the relationship is the seller, then the broker (or the associate licensee representing the broker)
mandated
Information is required by law to be passed from one party to another. Some of these disclosures are required for agents; others are required for principals in the transaction.
What is the Real Estate Transfer Disclosure Statement and who is responsible for providing it?
It is a statement that describes the condition of the property in detail. The seller must complete it, sign it and provide it to the buyer, but there is a section on page three of the form that the seller's agent (if there is one) must complete and sign.
Associate licensees
Licensees who work under the supervision of the broker are designated as associate licensees.
Which disclosures are NOT required to be made when selling residential property?
Natural deaths, unnatural deaths occurring more than three years prior to the sale and information about residents having AIDS or dying from AIDS.
Transaction Broker
Not an agent for either party. These licensees work as facilitators or intermediaries to assist the buyer and seller in the property transfer. Even though they owe no fiduciary responsibilities to their customers, they are obligated to disclose known material defects in the property. Not recognized in CA
Real Estate Settlement Procedures Act (RESPA)
Requires that borrowers receive various disclosures regarding the proposed loan transaction.
Residential Earthquake Hazards Report
Seller fills out and signs and is subsequently signed by the buyer as acknowledgement of receipt. The form has seven questions which will help determine the home's earthquake weaknesses.
Agent Jim needs to do a visual inspection of his listing. What kinds of things should he be looking for?
Structural defects, deterioration, water damage and insect damage
Regulation Z requires
That creditors make certain disclosures for real property secured loans. The disclosures include: •Amount financed •Finance charge •Annual percentage rate •Total of payments •Payment schedule
What does the TRID require of lenders?
That they provide a copy of the booklet, "Your home loan toolkit" to every person at the time of application for a loan, a Loan Estimate of closing costs within three days of the loan application; that they let the borrower know in writing if they expect someone else to service the loan; that they give the Closing Disclosure to the buyer at least three business days before settlement.
Single Agency
The agent can represent only one party in a single transaction. He or she owes fiduciary duties to one principal. All other parties to the transaction receive services as customers, not clients.
California law allows dual agency if
The buyer and seller are informed of the situation and give their written consent
Acronym COALD
The duties that the agent owes her principal: Care Obedience Accountability Loyalty Disclosure
When must a licensee provide an agency disclosure to a prospective client?
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.The selling agent must provide the disclosure to the buyer" as soon as practicable" prior to the execution of the buyer's offer to purchase.
Seller Financing Addendum and Disclosure form
The seller financing arrangements on all one-to-four-unit residences must be disclosed to both the seller and the buyer using this form.
Why should agent Grace give her client a Combined Hazards Book?
This book contains three booklets which meet the seller's and agent's requirements for disclosure of earthquake hazards, lead-based paint and other environmental hazards.
Selling agent
This is the licensee who brings the buyer to complete the transaction.
Listing agent
This is the licensee who lists the seller's property.
Common Interest Development General Information
This statement explains what ownership in a common interest development means with regard to such things as mandatory membership in the association, rights and remedies under the governing documents, payment of assessments, ownership and use of the recreational facilities, responsibilities and powers of the governing body, voting rights and other rights belonging to the members/owners.
Amanda calls broker Tim to schedule a showing of one of his listings. Amanda loves the home and wants to make an offer. What should Tim do next?
Tim must disclose to Amanda his agency relationship with the seller and get her written permission for a dual agency arrangement. He must also inform the seller of his agency relationship with Amanda and get the seller's written permission for the dual agency arrangement. If both parties agree to dual agency, they can proceed. If not, Amanda will have to find other representation.
What is a public report and when must it be provided?
public report is a statement from the Department of Real Estate that discloses to prospective buyers pertinent facts about a subdivision. Purchasers must sign a receipt indicating that they have received and accepted the report before they enter into the purchase transaction.
Dual agency
representing both parties in the same transaction - the seller and the buyer.
An agency relationship is created when
when a person (buyer or seller), also called the principal, delegates to another person, called the agent, the right to act on his or her behalf in business transactions with third parties.
•Adjustable Rate Loan Disclosure
•A lender offering adjustable-rate residential mortgage loans must provide prospective borrowers with a copy of the most recent Federal Reserve Board publication called Consumer Handbook on Adjustable-Rate Mortgages.
•Mortgage Loan Disclosure Statement
•Any real estate broker who solicits or negotiates loans on behalf of borrowers or lenders which will be secured directly or collaterally by liens on real property must deliver a written mortgage loan disclosure statement (MLDS) to the borrower within three business days of receipt of the borrower's written loan application.
What required disclosure is a result of Megan's Law?
•California requires that every sales contract or lease contain a notice which states that information about sex offenders registered under Megan's Law is available to the public on an Internet web site maintained by the Department of Justice.
Combined Hazards Book
•The Residential Environmental Hazards Guide - includes a toxic mold update. •Protect Your Family From Lead In Your Home - Prepared by the Federal Environmental Protection Agency and required for any homes built prior to 1978. •The Homeowners Guide to Earthquake Safety - includes the gas shutoff valve update.
California Code rules of disclosure
•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. •If the selling agent does not deal directly with the seller, the listing agent may deliver the form prepared by the selling agent to the seller (or the selling agent can mail it via certified mail). •The selling agent must provide the disclosure to the buyer "as soon as practicable" prior to the execution of the buyer's offer to purchase.