REAL ESTATE FINAL EXAM REVIEW

Which of the following is NOT true regarding the Maryland Commission on Civil Rights?

Commission members serve four-year termsMCCR is made up of nine governor-appointed members and an executive director who serve six-year terms.

Three covenants provide present warranties:

1) Covenant of Seisin 2) Covenant of Right to Convey 3) Covenant Against Encumbrances

3 appraisal approaches

1) Income Analysis Approach 2) Cost Approach 3) Sales/Market Comparison

Types of Loans (8)

1) conventional loans 2) FHA insured loans 3) VA guaranteed loans 4) USDA/rural loan programs 5) amortized loans 6) adjustable-rate mortgage loans 7) bridge loans 8) owner financing (installment and land contract/contract for deed)

Licensees may call consumers with whom they have had an established business relationship for

18 months after the last interaction.

Lenders must provide the CD minimum _____ days before closing

3

What is a void contract?

A contract with no legal force or effect

Under a land trust, the owner directs a _________ to hold title to the real estate

Corporate fiduciary

void posting information, photos, or descriptions in online ads that put you or your clients at risk:

Criminals may use online information to target homes or individuals.

Equity Example

Example Property value = $350,000. Loan amount = $315,000. Equity = $350,000 - $315,000 = $35,000. Appreciation in value increases equity. Depreciation in value reduces equity.

Kavita is hosting her first open house. She's put out some refreshments, some printouts of the public MLS listing, and a sign-in sheet so she can (hopefully) get some viable buyer leads from the open house attendees. What other document does she need to display?

MREC's open house notice

Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 states that its purpose, in part, is to require that real estate appraisals used in connection with federally related transactions be performed ______.

In writing, and in accordance with uniform standards

Which body of law contains the rules governing the relationship between a real estate professional and the person being represented?

Law of agency covers items such as an agent's duties to the client, handling of trust funds, etc.

Disclosure when acting as principal or other conflict of interest

Licensees are required to disclose agency relationships to ensure that relevant parties understand whom the licensee represents. Licensees must disclose their professional status when buying or selling property for themselves. If a licensee has an ownership interest in a given property or has a family or organizational connection to the property owner, this should be disclosed to all parties in the transaction.

Special Closing Processes (distressed property sales)

1) Foreclosure and 2) short sale transactions may cause special title and closing issues that licensees and buyers need to take into consideration. These sales may be referred to as distressed sales, because the property owner is under financial stress to sell. 3) REOs (real estate owned property)

Types of Agents and Agencies

1) consumer 2) customer 3) principal 4) client 5) fiduciary 6) agent 7) universal agent 8) special agent (limited agent) 9) general agent 10) single agency 11) dual agency 12) sub-agency

Other types of deeds include

1) court-ordered deeds, such as the executor's deed (to convey property from a decedent's estate) 2) sheriff's or referee's deed (used to convey foreclosed property or property sold for tax liens).

3 types of agency agreements

1) exclusive 2) exclusive-right-to-sell 3) open listing

Financing Instruments

1) financing instruments 2) promissory note 3) security instruments (accompanied to a promissory note) 4) deed of trust 5) mortgage 6) security intrustment clauses

3 most common deed types

1) general warranty 2) special warranty 3) quitclaim deeds

Other less common types of commercial leases

1) ground lease 2) loft lease 3) lease purchase 4) sale and leaseback 5) sub-surface leasing rights

Four most common commercial lease types

1) net 2) gross 3) percentage 4) graduated

There are two categories of comparison when conducting an appraisal

1)elements, which look at physical and locational characteristics 2) units, which look at the numbers.

Jane is purchasing a property for $310,000 and plans to finance $250,000. What is the loan-to-value ratio? (Round to the nearest percentage.)

2. 81%250,000 / 310,000 = 81%

Any interest rate change of more than one-eighth of a percent requires a new CD, triggering a

new three-day waiting period.

Lenders NEED to respond to all loan applications within

30 DAYS

Jared has a 70/30 split with his brokerage firm, and his firm has a 50/50 split with cooperating brokerages. Last month, he earned $12,239.50 in commissions from his home sales, which totaled $538,000. What is the brokerage's commission rate?

6.5% Jared's take of $12,239.50 is 70% of the commission, so his firm's commission is $12,239.50 ÷ .70 = $17,485. Multiply that amount by two to get the total commission the firm grossed: $34,970. Divide that amount by the total sales amount to find the brokerage's commission rate: $34,970 ÷ $538,000 = 0.065, or 6.5%.

Any funds borrowed for a down payment are included in

the debt-to-income calculation.

Interest is calculated on

the outstanding principal (loan) balance. The principal portion of each monthly payment reduces the outstanding principal balance, so the amount of interest due with each payment decreases each month.

Bridge/Swing Loans

A bridge or swing loan is a temporary, short-term loan that provides funds until buyers can obtain permanent financing. Some borrowers who qualify financially may obtain a bridge loan when their current home hasn't yet sold but they are ready to purchase a new home. The bridge loan basically covers the down payment. A bridge loan is typically secured by the borrower's existing home. Lenders may structure the bridge loan so that borrowers make only interest payments during the loan term and then pay off the entire loan when the previous home sale closes.

What is a voidable contract?

A contract that may be cancelled by one or more parties

special agent (limited agent)

has limited authority to act on a client's behalf, such as a real estate agent or an escrow officer. This type of agent can't bind a client to a contract.

Marketable title

has no defects or clouds to which a reasonable buyer would object. It's not necessarily a perfect title. Sellers can convey marketable title if the title search reveals no doubt about property ownership and there aren't any liens or encumbrances that won't be cleared at closing.

sub-agnecy

has traditionally been recognized as a situation in which a licensee brings an unrepresented buyer to a transaction. In states where sub-agency is permitted, that licensee represents and owes fiduciary duties to the seller. Today's buyers are typically represented by a licensee, thus eliminating sub-agency of this type in most transactions.

Thad received multiple offers on his property and is reviewing them with his agent Nora. All of the offers have at least one contingency. Nora recommends that they reject the second offer, because it has a _______ contingency, which is generally the most risky.

home sale (when buyer needs to sell their home first before buying a new home)

In caveat emptor states, sellers must

honestly respond to property condition questions and disclose any items required by law, and it's the licensee's responsibility to inform clients of these requirements.

Which of the following duties are owed to customers and other parties to a real estate transaction?

honesty and fairness

Suspected fair housing violations may be investigated by a civil rights organization using a

paired testing system to determine if discrimination has taken place.

Acknowledgement

the party signing (in the case of a deed, the grantor) has gone before a competent party (typically a notary) and indicated that the signature is their own and that they signed voluntarily.

Disability/handicap is a

physical or mental impairment that substantially limits one or more of a person's major life activities.

Which document is used to give a buyer an overview of the title history and information about what is or isn't covered in an insurance policy?

preliminary report

Reverse redlining

the practice of charging non-white borrowers higher fees or interest rates

If earnest money is less than the down payment

the purchaser brings the remainder of the down payment to closing.

Fair housing laws are designed to

protect citizens from discrimination. States can't make laws that remove rights that federal laws grant to citizens, though they can pass more restrictive laws or add additional classes to those protected by federal law.

Administered and enforced by the Department of Housing and Urban Development (HUD), Title II of the Americans with Disabilities Actof 1990 prohibits

protected class-based discrimination in the delivery of commercial and public programs, services, and activities.

Curable depreciation

refers to an item of physical deterioration or functional obsolescence where the cost to cure the item is less than or the same as the anticipated increase in the property's value after the item is cured.

Severability

refers to the concept that if a court deems a term in the contract to be unenforceable, the remainder of the contract remains enforceable.

A purchase money mortgage

A mortgage given by the seller to the buyer to cover all or part of the sale price. Seller financing.

Mortgage

A mortgage involves two parties: the lender and the borrower. - States that use a mortgage as the security instrument are referred to as lien theory states because the mortgage places a lien against the property it secures. - The lender holds the lien, and the borrower holds legal title to the property. - If foreclosure becomes necessary, the lender may have to use a judicial foreclosure process; e.g., the lender must go through the courts to foreclose. - If the mortgage document includes a power of sale clause, however, the lender may use a non-judicial foreclosure process. - Mortgage lenders issue a satisfaction or release of mortgage to acknowledge the borrower's loan payoff. - Lenders also mark the promissory note "paid" and return it to the borrower.

Monument

A permanent physical marker used in a metes-and-bounds description that can be man-made or natural. It may be a tree, creek, rock, or a stake placed in the ground. Monuments are used within a metes-and-bounds description to mark points at which there is a change in direction as one follows the boundary of the parcel. A monument is also the point of beginning of a legal description in the monuments system, which is infrequently used.

Jim decides to refinance his three-year-old mortgage with a loan balance of $300,000. He has to pay a fee of 5% of the loan amount to the original lender for paying off the mortgage early. What is this fee called?

A prepayment penalty

Right-of-way with Easements

A right of way provides a pass-through to other property but doesn't allow usage of the land.

For existing homes, either buyers or sellers may purchase home warranties:

A seller might offer a warranty because they protect sellers from any claims after closing if appliances or systems need to be fixed.

Title Abstract

A title abstract (abstract of title) is a summary of the property's title history. Attorneys and title companies who prepare abstracts research public records as well as other information to identify the title history. Few states require an abstract of title.

Void, voidable, and unenforceable contracts

A voidable contract is one that appears valid, but one or both parties have a legal right to disaffirm it. This could be because one of the parties lacks legal competence, or because there was a mistake or misrepresentation, causing a failure of reality in consent. 1) The contract is voidable by the incompetent or misled party but enforceable against the other party. 2) A void contract isn't a contract at all because it lacks one or more of the requirements for a valid contract. It has no legal force or effect; it's UNENFORCEABLE. Oral contracts may be valid but unenforceable or difficult to enforce

Made Voluntarily (Requirement for contract validity)

A voluntary contract means the parties entered into the agreement voluntarily. Mistakes, misrepresentation, fraud, duress, or undue influence create a situation in which the consent is not real.

Termination of Agency

Agency agreements can terminate in one of five basic ways: expiration, completion (performance), by force of law, through destruction of the property or death of the principal, and by mutual agreement. In addition, a client may revoke the agency relationship before the agreement's fulfillment or expiration due to lack of trust in the agent or agency (which may be accomplished without penalty) or without good cause (which likely constitutes a breach of contract). An agent may renounce the relationship before the agreement fulfillment or expiration. The licensee may have duties that must still be fulfilled. Sellers who terminate an agency agreement before it expires may still owe the agent a commission. The duty of confidentiality extends beyond the termination of the agency relationship.

Jeung gave her agent an earnest money check, and the seller accepted Jeung's offer. What will happen to the check now?

An escrow agent will hold the funds in a trust account until the agreement's terms are satisfied.

The Equal Credit Opportunity Act(ECOA) of 1974

requires lenders to give consumers equal access to credit. The act prohibits discrimination based on race, color, religion, national origin, sex, marital status, or age with respect to granting credit and requires lenders to respond to all loan applications within 30 days, giving reasons for any application rejections.

The ADA requires business owners to make a reasonable effort to

resolve usage barriers for people with disabilities. For example, lifts or ramps should be in place for wheelchair accessibility.

Licensees should not attempt to provide any specialized service that's outside their area of competence unless they work with someone who is competent in that area or unless

they disclose the facts of their experience with the area to the client.

How many parties does a deed of trust involve?

Borrower, lender and trustee

Prorate rent in an occupied unit to pay seller rent through closing day and pay buyer rent for the day after closing through the month's end.

Daily rent = monthly rent ÷ days in month. Prorated rent = daily rent × number of days lessee occupied the unit.

Title VIII (title 9) =

Fair Housing Act

Leon and Beth own 1/13 of a timeshare estate. They own weeks 20 and 21, and also weeks 40 and 41. These weeks are inheritable. What type of ownership is this?

Fee simple

Termination of an agency relationship through TERMINATION BY FORCE OF LAW

Force of law terminations include events that are beyond the control of the parties, such as bankruptcy of the broker or principal, property destruction, or incapacitation of the agent or principal.

A credit is a charge that a party has already paid, an amount that will be reimbursed, or an amount that is promised. COMMON SELLER CREDITS include

sale price of the property, prepaid taxes or utilities.

Online rental scams are created by con artists by stealing or _________ information about properties from online real estate listing

scraping

Homeowners association regulations

Homeowners association (HOA) regulations are typically set up as a covenant (an agreement between the homeowner and the association). HOA regulations subject property owners to certain rights, responsibilities, and obligations, including the obligation to pay the HOA fee. HOAs may regulate aesthetic choices for structures (such as paint or shingle color), or for landscaping (such as the type and number of trees and shrubs that owners may plant). HOAs typically have the authority to levy fines against residents who don't comply with HOA regulations. Any member of the HOA may pursue enforcement in a civil court of law if a resident isn't complying with regulations.

The most common title defect in a real estate transaction is the

seller's existing mortgage lien. That lien is usually resolved at closing when the seller's proceeds are used to pay off the loan.

how are deeds acknowledged?

IF THEY'RE RECORDED

Amount of annual interest formula

Loan balance × interest rate = amount of annual interest

Which type of pest may make mud tubes—tunnels that run along your walls—or shed tiny wings?

termites

Other brokerage relationships (non-agents)

Non-agency relationships (aka transactional or facilitator roles) are those in which the licensee doesn't represent the consumer in an agency capacity but instead provides non-agency assistance that doesn't require the licensee to exercise judgment or discretion. State statutes govern non-agent duties. Both facilitator and transaction broker roles can be different from state to state based on statutory law. In fact, some states may use other terms to describe a non-agency relationship between a licensee and consumer. When it comes to general (not state-specific) concepts, the terms "facilitator" and "transaction broker" are used interchangeably to describe a non-agency relationship.

Buyers with a new loan also usually owe interest at closing because the first monthly payment is generally made on the first day of the second month after closing:

The interest is based on a per diem. So, if closing is on June 15th, the first monthly payment is made on August 1 and interest is calculated during all of July. Since closing was June 15, the purchaser will owe interest on this loan from the day of closing through the last day of the month.

Escheat

The state's power to take the property of a decedent who dies without a will, heirs, or creditors.When the state claims property through escheat, it can dispose of the property to benefit the public.

Taking

The taking of private property by the government for public use through the power of eminent domain.

Title Search

The title insurance company performs a search of public records in an attempt to discover any potential claims against the property and issues a preliminary report (also called a title commitment) that's a promise to insure the property as long as certain conditions are met.

General Info on Calculations

There are 43,560 square feet per acre. There are 5,280 feet in a mile. Round off calculations (where applicable). If a question requires the calculation of prorated amounts, the question will specify: Whether the calculation should be made on the basis of 360 or 365 days a year; and Whether the day of closing belongs to the buyer or seller.

What type of value may consumers be interested in if they are looking for the potential rate of return?

investment value

Market allocation (antitrust violation)

involves an agreement between brokers to divide up the market and then refrain from competing for business.

Functional Obsolescence

is a form of depreciation or loss in value caused by defects in design and can occur with outdated structures or systems or when a property is overbuilt for the area.

What is the goal of the Maryland Real Estate Commission in declaring an area a real estate conservation area?

To curb threats to the racial stability of an area.

Responsibilities of Agent to Customers and third parties, including disclosure, honesty, integrity, accounting for money

To parties other than your client, you owe the duties of honesty, integrity, fairness, and accounting. You owe the duty of cooperating on showings to other licensees who are part of a transaction. The duty to disclose all known facts (material and/or adverse material) is generally dictated by state law. Licensees need to be aware of state disclosure requirements. The obligations of fairness and integrity requires licensees to disclose their agency relationship with the client to customers they assist, before the third party reveals anything confidential. Licensees have the duty of accounting to customers. Accounting means proper handling of client property, which includes keys, funds, and paperwork.

Which of the following is a reason a lender might charge a prepayment penalty?

To recover the money lost in anticipated interest

Total amount of interest on a loan Formula

Total amount of interest on a loan = (monthly payment x total payments) - original loan value

Total amount paid on a loan Formula

Total amount paid on a loan = monthly payment x total number of payments

Effect of economic principles and property characteristics

Types of value that appraisers may be asked to estimate include market value, insurance value, and replacement value. Generally, in real estate, the appraiser is asked to estimate market value. The principle of highest and best use refers to a property's legal and feasible use that would be the most profitable. Four characteristics of value: Demand, utility, scarcity, and transferability (DUST).

The doctrine of laches refers to the ______ of restrictive covenants/deed restrictions.

TypesThe doctrine of laches refers to the enforcement of restrictive covenants. If property owners don't protect their rights to enforce these covenants, they can lose them.

Single-family housing sold or rented without a broker's assistance (if the owner doesn't own more than three properties at one time) - (exemptions/exceptions to federal fair housing laws)

is exempt. No real estate licensee may be involved, and no discriminatory advertising is permitted.

Credit History

Underwriters also look at credit history, including several factors: -Length of time borrowers have maintained credit -Length of time borrowers have maintained good credit -Late payment history -Available credit used -Types of credit extended (banks, credit card companies, mortgage loans).

Which of these was enacted to give electronic signatures, records, and contracts legal recognition equal to that of paper records and signatures?

Uniform Electronic Transactions Act

fiduciary

is someone in a position of trust who owes loyalty to another.

consumer

is someone who uses or purchases a product or service.

customer

is someone who's working with a real estate licensee but who isn't represented by that licensee (nor owed the full range of agency responsibilities); the customer may or may not be represented by another licensee.

Consideration (Requirement for contract validity)

is something of legal value offered by one party and accepted by another, e.g., the buyer's promise to pay the full purchase price, and the seller's promise to transfer marketable title through delivery of a deed.

Title VIII of the Civil Rights Act of 1968

is the Fair Housing Act. This act prohibits housing discrimination based on race, color, national origin, and religion.

Steering

is the act of guiding prospective buyer/tenants to or away from a location based on their membership in a protected class. Licensees who engage in this practice are guilty of a fair housing violation. Buyers and tenants are free to select properties based on demographics as long as licensees don't use demographics as a basis for showing properties. Landlords may refuse to rent to individuals on the basis of creditworthiness.

Equity

is the amount of value or interest a homeowner has in a property less debts against the property (such as a mortgage loan). Equity = value - amount owed.

Promissory Note

is the borrower's promise to repay the mortgage loan. Promissory notes are negotiable instruments, which means they can be transferred to another holder.

Net to seller formula calculates

the amount the seller receives after paying commission and other expenses. The closing officer ensures that the seller's loan and all interest is paid unless the buyer is assuming the loan. The seller pays per diem interest for the month of closing. Percent to seller = 100% of sale price - commission %. Net to seller = sales price × percent to seller.

SUBROGATION

When a covered party—such as the property owner or the lender—gives the title insurance company the right to pursue the party who caused the loss instead of the covered party

dual agency

is the representation of both the buyer and the seller in the same transaction. 1) Single licensee dual agency is when a single licensee represents both the buyer and the seller in the same transaction. 2) Designated/appointed agency (aka dual-licensed dual agency) is when two separate licensees from a single firm each represent one party (buyer or seller) in the same transaction. Licensees may legally engage in dual agency only if they practice in a state that permits it, if their brokerage firm permits it, and if they've made the proper disclosures to and written consent received from the buyer(s) and seller(s). If both parties don't agree to dual agency, then the licensee won't be permitted to represent both parties in the transaction. One party would need to work with a different agent or brokerage. As an agent with two clients in the same transaction, you owe fiduciary duties to both parties. One duty that is impossible to provide in dual agency is undivided loyalty. This is why informed consent is so important. The other duty that may be impossible to deliver is full disclosure of any information relevant to the transaction. Dual agents must take care to keep all confidential information truly confidential. This means they may not disclose one client's confidential information to the other.

Lease purchase (Other less common types of commercial leases)

When a tenant wants to buy a property but can't (either due to financing, title, or tax issues), a lease purchase may be an option. There's both a purchase and lease component to this arrangement. The tenant makes rental payments, and a portion of that payment is applied to the property's purchase price. This continues until the tenant can purchase the property outright.

Victor buys a property from Yolanda for $200,000. Using a land contract, Victor agrees to pay Yolanda in monthly installments of $4,000 over the course of 50 months. Until Victor pays Yolanda the $200,000, who retains the title?

Yolanda

Licensees should understand activities requiring a license versus clerical tasks that don't required a license. A common real estate violation occurs when

licensees delegate activities requiring a license to an unlicensed assistant

Failure to satisfy contingencies before closing is considered

a breach of the agreement. The original offer is no longer legally binding.

Licensees can, for others and for compensation:

list or offer to list, sell or offer to sell, buy or offer to buy, negotiate or offer to negotiate the sale, purchase, transfer, etc. of real property. The compensation can be in the form of a commission.

Which of the following strategies would help to make a 'Choose Your Neighbor' marketing letter non-discriminatory in its effect?

listing property on MLS

Eminent Domain

Power of a government to take private property for public use.

Underwriting

Primary factors in loan underwriting include the income, debt ratio, credit score, and credit history.

Loft lease (Other less common types of commercial leases)

Provides for rental of floor space of wide-open loft spaces. The tenant may divide the space but can't make structural changes.

Competitive/comparative market analysis (CMA)

Real estate licensees perform comparative market analyses (CMAs) to help clients make price decisions. They help seller clients decide how to price the property and buyer clients decide how much they're willing to pay. CMAs are not appraisals; instead, they're an informal estimate of market value.

The Housing and Community Development Act of 1974

added SEX to the list of protected classes Protected classes now read: -Race -color -religion -sex -disability -familial status -national origin -SEX

Market cycles and other factors affecting property value

Reduced consumer confidence makes new buyers wary of purchasing and homeowners hesitant to trade up. Higher unemployment reduces the number of buyers, putting downward pressure on housing prices. Higher taxes decrease buying power; lower taxes increase buying power. Higher interest rates reduce buyer affordability. Lower interest rates increase buyer affordability. Supply and demand significantly affect property value. More demand than supply means buyers are competing for the same properties, driving prices up. Less demand, or fewer buyers, puts downward pressure on housing prices.

Equal Credit Opportunity

The Equal Credit Opportunity Act (ECOA) of 1974 prohibits lenders from making credit unavailable or offering less-favorable terms based on protected class status (race, color, religion, national origin, sex, marital status, or income source) vs. creditworthiness.

When advertising real estate or real estate services online, licensees affiliated with a broker or brokerage firm must

make their affiliation apparent.

Fiduciary duty of Obedience

means following a client's lawful instructions. Licensees may not obey a client's illegal or unethical instructions.

Fiduciary duty of Loyalty

means putting your client's interests ahead of others, including your own. It also means working in the client's best interests.

"Time is of the essence"

means that both parties faithfully agree to perform responsibilities within the time limits of the contract.

Debra's listing agent, Raj, just called to tell her that he'd received an offer on her house and an earnest money check for $4,500. "I'm on my way over to go through the offer with you. I think you'll like it!" Debra's excited, and she knows exactly what she wants to spend that $4,500 on. What's wrong with Debra's thought process?

The earnest money doesn't belong to Debra. It will be held in an escrow account.

Mortgage interest and insurance are only prorated between buyer and seller if

the buyer is assuming the seller's loan.

Loan payments can be determined from an

amortization chart. To use an amortization chart to calculate a monthly principal and interest payment, find the point in the amortization chart where the interest rate and the term of the loan intersect. This location yields the factor (a number that will appear as a decimal such as 6.43509) you'll use in computing the payment. This factor is per $1,000 of the mortgage.

Per diem rate

amount to be prorated ÷ either 360 or 365.

Covenant of Seisin

The grantor holds title to and possession of the property.

Covenant of Further Assurances

The grantor promises to take whatever actions necessary (within his power) to correct any title defects.

Discount points

are pre-paid interest paid by or on behalf of borrowers at the beginning of the loan to reduce monthly mortgage payments. Discount points (pre-paid interest) = 1% of the loan amount per point. To lower an interest rate, borrowers can purchase discount points. Each discount point costs 1% of the loan amount, and means a discount of 0.25% off the mortgage rate. For example, to lower the mortgage interest rate from 5% to 4.25%, the borrower would need to pay 3 discount points, which would then lower the mortgage interest rate 0.75%. Amount paid for points = loan amount × number of points (followed by a % sign).

Payments on a FULLY AMORTIZED LOAN

are sufficient to pay off the loan by the end of the loan term.

Legally and Competent Parties (Requirement for contract validity)

are those who have the legal and mental capacity to enter into a contract. Contracts entered into with legally incompetent parties are voidable at the option of the incompetent party, but may be enforced against the competent party

When considering loan risk, which two items will lenders consider in equal measure?

borrower and property

If using a statutory or calendar year isn't specified

calculate rents based on actual days.

If instructed to allocate closing day to the buyer

calculate the seller share up to closing day

Which of these agreement terms is typically a standard part of the sales contract?

Which of these agreement terms is typically a standard part of the sales contract? Buyer's option to purchase a home warranty

Under certain circumstances (antitrust violations), penalties may be increased to

a fine of twice the perpetrator's gain or the victim's loss.

Brokerage firm policies and procedures around the use of technology can help licensees avoid litigation. Brokerage firms found guilty of violations may be subject to

court-ordered supervision for up to 10 years.

Brokerage firms found guilty of antitrust violations may be subject to

court-ordered supervision for up to 10 years.

Avoid real estate-targeted wire fraud by

ensuring that clients never wire funds to unverified recipients.

Buyers will owe ________ at closing

closing costs, lender fees, a portion of the upcoming year's property taxes and insurance, recording fees, etc.

Incurable Depreciation

includes items not practical to correct.

A per se antitrust violation

is one in which the competing firms agreed to violate antitrust laws. A per se violation means that authorities don't need to make any additional inquiries about the violation to impose penalties. The fact that collusion existed is enough.

Gross lease (commercial lease)

is one in which the landlord pays all expenses related to the property, such as taxes, repairs, insurance, utilities, maintenance) while the tenant pays a fixed rent. These are sometimes called full-service leases. ***Gross leases are often used for office space.

BACK UP CONTRACT

is one that has been accepted contingent on the disposition of the primary contract. Licensees should recommend that clients get legal advice before entering into a back-up contract.

general agent

is responsible for handling all dealings in a given area for a client, such as a property manager. This type of agent may bind a client to a contract.

Legal Purpose (Requirement for contract validity)

means that the contract results in a legal outcome.

The first course of action for disputed home warranty claims is typically

mediation If this is unsuccessful, disputed claims will go to arbitration.

The Sherman Antitrust Act (1890)

primary purpose is to prevent monopolies that would cause a restraint of trade.

Housing operated by religious organizations or private clubs that limit occupancy to members (exemptions/exceptions to federal fair housing laws)

provided the membership rules do not discriminate.

If earnest money exceeds the down payment plus closing costs

the overage is refunded to the buyer at closing.

Percentage lease (commercial lease)

the tenant pays a base rent plus an additional charge that's a percentage of the tenant's gross sales once a specific 'breakpoint' is met. The landlord usually pays all the property's costs (as seen in a gross lease), but this may not always be the case. ***Percentage leases are often used for retail businesses and malls.

Prepaid expenses

those already paid by the seller but that the buyer should pay a portion of (such as prepaid real estate taxes, utilities paid in advance). **These items are credited to the seller and debited to the buyer.

Unfair ads

those that advertise any business practice or product that's likely to cause injury.

Deceptive ads

those that are likely to mislead a reasonable consumer.

In non-full disclosure states (caveat emptor states), licensees should encourage buyers

to perform their due diligence on a property.

A debit is a charge that a party must pay. Common SELLER debts at closing include

transfer taxes, broker commission, attorney's fees, recording documents to clear title, existing mortgage satisfaction.

The CD identifies

who pays what at closing.

In some states, listing licensees must make a reasonable effort to discover material and adverse material facts. In these states, licensees may be required to disclose what they

"know or should know" about a property. In other states, licensees and principals are only responsible for actual knowledge of material and adverse material facts.

Penalties for antitrust violations may be as much as

$1 million and 10 years in prison; for corporations, penalties may be as much as $100 million.

Your clients are looking at buying a $200,000 property with a 30-year loan at a 5% interest rate. How much would their principal and interest payment be per month? Plug in the numbers using the amortization chart in your resources see what the payment per month would be. Remember: The monthly payment multiplier is per $1,000 of the mortgage.

$1,073.64 - REVIEW HOW TO DO THIS

A seller wants to break even after the broker's commission of 5% and loan balance of $300,000 are paid. At what price must the house sell?

$315,789 In order to calculate this, start with 100% minus a 5% commission, which is 95% or .95. Take $300,000 and divide this amount by .95.Question 7 of 150

Which loans involve increased risk for the lender and therefore usually come with a higher rate?

construction

In a residential real estate sale involving a federally related loan, what entity is required to provide Real Estate Settlement Procedures Act disclosures to the consumer?

consumer's lender

The Federal Trade Commission Act protects

consumers from unfair and deceptive advertising.

Phyllis bought a beach townhouse for $475,000 and put down $50,000 in earnest money. At closing, she paid $150,000, the balance of her intended down payment. The mortgage tax in the area is $.35 per $100 (or portion thereof). Calculate what Phyllis will pay for the mortgage tax.

$962.50 - FIGURE OUT HOW TO DO THIS

How would you calculate the transfer tax if it's $.35 per $1,000 of the sales price ($400,000)?400,000 x .35 x 1,000(400,000 ÷ 1,000) x .35(400,000 ÷ 1,000) x 35400,000 ÷ 35 x 1,000

(400,000 ÷ 1,000) x .35Divide the sales price by 1,000 (400,000 ÷ 1000= 400), then multiply by .35 (400 x .35 = 140).

Federal Trade Commission Act (1914)

created by the Federal Trade Commission Act, investigates antitrust violations and penalizes violators.

Which type of lender is a member-based non cooperative that provides credit for auto loans and home loans, takes deposits and offers savings vehicles and money markets?

credit unions

In an amortized mortgage, the monthly payment is the same each month. The part used to pay the principal increases each month, while the amount going toward interest ______.

decreases

Contingency clauses

define a condition or action that a party must meet in order to not be in breach of contract.

Types of Legal Descriptions

-Metes & Bounds -Monument -Rectangular Government Survey System -Lot & Block

Federal laws outline seven protected classes (Fair Housing):

-Race -color -religion -sex -disability -familial status -national origin Some courts have upheld that discrimination based on sexual identity is protected under the prohibition of discrimination based on sex.

Some exemptions/exceptions to federal fair housing laws exist, though some states have laws disallowing some or all of these exemptions.

-The Housing for Older Persons Act of 1995 -Owner-occupied buildings with no more than four units -Single-family housing sold or rented without a broker's assistance (if the owner doesn't own more than three properties at one time) -Housing operated by religious organizations or private clubs that limit occupancy to members

Most simply, a buyer's 'cash to close' is

down payment and closing costs, minus earnest money and other credits.

Example of Estoppel

e.g., if Kara creates an implied agency relationship with a client and performs agency tasks for the client, estoppel prevents her from later claiming she wasn't in an agency relationship.

A credit is a charge that a party has already paid, an amount that will be reimbursed, or an amount that is promised. COMMON BUYER CREDITS include

earnest money, mortgage amount, seller concessions (such as a seller paying some of the buyer's closing costs).

Most licensees practice real estate as independent contractors. Some firms, however, hire licensees as

employees

Three covenants provide future warranties:

1) Covenant of Quiet Enjoyment 2) Covenant of Further Assurances 3) Covenant of Warranty or Warranty Forever

Taxes and rents are generally prorated regardless of

financing method

Which of these would void a deed intended to convey property?

grantor is not legally competent

While walking around the exterior of a rural home she's inspecting, Juanita noticed a metal vent pipe sticking out of the ground 25 feet from the house. She documents this because it may be a sign of what potential environmental hazard?

underground storage tank

Assuming licensee Shannon has actual knowledge of all of the following property issues, which should she disclose to prospective buyers?

upstairs bathroom has a leaky toilet

Habendum clause

which defines the type of interest and rights the grantee will have. Not every deed needs the habendum clause, but if the interest is less than fee simple, this is generally where it is described.

Pamela has had her real estate broker's license for years. Which agency regulates the rules and requirements Pamela must follow to keep her license?

MREC

Which of the following scenarios best describes a net listing?

Maeve wants to get at least $350,000 when she sells her property and tells her listing agent, Stan, that he can keep anything above that amount.

_______ is a standardized measure for interest rates and other costs of the loan.

annual percentage rate

Fiduciary duty of Confidentiality

any information that could harm your client's negotiating position in a transaction. This includes your client's motivations, time frames, willingness to settle for terms/price other than those offered, and any other information your client deems confidential (unless disclosure is required by law).

A fair housing specialist reviews the complaint, determines if a violation exists, and, if so,

assists the victim in filing an official complaint.

Sue and Jim are hoping to expand their family, which means moving to a larger home. They're closing on their new home soon, but haven't yet sold their current one. Which type of loan will help them afford both homes for a short period of time?

bridge loan A bridge loan is best used when the buyer's current home is already under contract.

Which of the following is most likely to establish workmanship standards when someone is building an addition to their property?

building code

One area of town has maximum building height requirements and setbacks for the front, side and rear yards. These requirements are all indicative of__________.

bulk zoning

The TRID-required settlement statement is called

the Closing Disclosure (CD). Working with the lender, the closing officer prepares the CD, incorporating all the figures and calculations required for the loan and other closing costs.

The greater the number of contingencies on an offer

the less attractive it is to the seller.

Property taxes are calculated based on

the property's assessed value. Governments like property taxes as a revenue base because they're a stable, reliable revenue source.

Legal Description

A legal description permits a specific parcel of property to be located by a trained surveyor. Three primary types of legal descriptions are metes and bounds, lot and block (also known as recorded plat), and rectangular government survey system (RGSS). Note: Be sure to review the additional resource titled The Rectangular Government Survey System provided in your exam prep lesson.

Building codes

Building codes are rules that specify the standards to which certain building projects must comply. These codes help ensure safe, properly functioning buildings for their occupants. Building codes address the method of construction, materials used, and the building's safety and sanitary standards. State building codes provide bare minimum standards for all residential and commercial buildings in the state, while local codes provide additional regulation. If there is no state or local code, builders must comply with the federal building code. Building permits are issued locally as a signal to a builder or contractor that building codes must be adhered to. During or after completion, building inspectors review work to ensure building code compliance. Most municipalities permit existing construction to be sold and occupied without meeting current building codes.

Categories of easements (2)

Easement appurtenant: Attached to a specific parcel of land, transfers ("runs") with the land, and gives the "dominant tenement" rights to use adjoining property/servient tenement Easement in gross: Granted to a specific individual or business rather than attached to the property itself

Types of Easements Include:

Easement by necessity: This easement type can only be created for the purpose of ingress and egress. Easement by prescription: This easement isn't legal, and is created through the continued, uninterrupted, obvious, exclusive, and adverse use of someone's property without permission.

More on Easements

Easements are specific to the person or persons to whom the easement is granted. A right-of-way benefits anyone who needs to use it. The property's deed and title history should list known easements. Plat maps may also show easements. A license is temporary permission for one person, at the discretion of the property owner, to do something on another's land without actually possessing any interest or ownership in the land. A license is not assignable or inheritable.

Ownership in Severalty/Sole Ownership

With ownership in severalty, one person owns the property with no joint interest by any other person. With the death of an estate owned in severalty, the estate passes either according to instructions in the owner's will or according to state law.

Measuring Structures

Structure area is stated in square units, i.e. square feet, square yards, etc. Area of rectangle = length × width (6 × 4) Area of square = side × side (4 × 4) Area of triangle = 1/2 base length × height Break irregular shapes into basic shapes (square, rectangle, triangle), calculate area of each, then add for total area. Measurements and conversions:One square yard = nine square feetSquare feet ÷ nine = square yardsSquare yards × nine = square feet Structure measurement may be used to perform per-square-foot property calculations. ANSI sets standards for measuring structures. Spaces must be contiguous, meaning finished and unfinished spaces must be attached to one another to be included in the total measurement calculation. - Finished spaces can only be included if attached to the main property via stairways or hallways. If Cheryl's She-Shed is in the backyard of a property, but isn't attached, it doesn't count as finished square footage.

Covenants, conditions, and restrictions (CC&Rs)

Subdivision developers may place covenants, conditions, and restrictions (CC&Rs) (aka restrictive covenants) on all properties within a development. CC&Rs are rules established by developers or homeowners associations that govern properties and owners in the community covered by the CC&Rs. Restrictions imposed by CC&Rs may take the form of covenants in the property deed or by a separate document that's referenced in the deed and recorded. The purpose of CC&Rs is to maintain specific subdivision standards; e.g., architectural, design, or setback (distance from property lines) requirements. CC&Rs are usually set up to expire within a certain number of years. CC&Rs are enforced by the homeowners association.

Property taxes and special assessments

Taxation: A governmental police power that permits it to meet the need for public works by funding through a stable source of income that shares the burden among many citizens 1) Ad valorem taxes are based on the value of the real estate. General property taxes may pay for items such as schools, police, fire, etc. 2) Special assessment taxes are imposed only on properties that benefit from the improvement, such as a tax to install a sewer line or city water line on one specific street. Other examples may include paved streets, curbs, sidewalks, or street lighting.Property tax liens take priority over all other property liens in most states.

Air lot diameters are measured based on

the perimeter of the land parcel directly beneath. Air lot heights are established by the city or other governing authority that has jurisdiction

"I understand why you want a buyer representation agreement," your buyer tells you. "But what's in it for me?" You answer:

"Without it, you are unrepresented."Without a buyer representation agreement, a buyer is unrepresented.

Nico is buying a home for $625,000. His earnest money deposit is 8%. He wants to avoid private mortgage insurance (PMI) on his conventional loan, and he owes 5% in closing costs. How much money should he bring to closing?

$106,250 Conventional loans often require 20% down to avoid PMI ($125,000), and Nico has paid a $50,000 deposit ($625,000 x .08). Closing costs are $31,250 ($625,000 x .05). He needs $106,250 to close ([$125,000 - $50,000] + $31,250).

A buyer is purchasing a property for $400,000. His lender's loan-to-value ratio is 80%. How much is the loan origination fee?

$320,000 400,000 /.8 = 320,000

Those who violate the DNC may be subject to penalties in excess of

$40,000 per violation/separate call.

CFPB/TRID rules on financing and risky loan features (Cont.)

***Predatory lending is unfair or abusive lending to buyers. Predatory lenders impose deceptive, coercive, and exploitive practices to take advantage of consumers to increase their debt while financing risky loans. - Fraudulent lending practices take advantage of consumers, encourage debt, don't consider affordability, encourage multiple refinancing, hide fees from borrowers, and often occurs in the subprime loan market. - The most common mortgage fraud schemes are illegal property flipping, loan flipping, inflated appraisals, silent second, nominee loans/straw buyers, equity skimming, and false identity 1) Illegal property flipping: Property falsely appraised at a higher value, then quickly sold, with the buyer taking the "equity" in the property 2) Equity skimming: When an investor receives title to a property— often by using a straw buyer—doesn't make the mortgage payments, and usually rents out the home until foreclosure occurs. 3) Straw buyers: Conceal their real identity behind someone else's name and credit 4) Inflated appraisals: An appraiser secretly works with a borrower and provides a misleading appraisal report to the lender ***Usury is lending money at an excessive (illegal) rateMost states have laws designed to protect consumers from exorbitant fees and interest rates by limiting what lenders charge to reasonable amounts.Credit cards, retail installment contracts, and consumer leases are typically exempt from usury laws.

Material facts and defect disclosure (part 1)

**Material facts may have a different impact on different buyers depending on their needs, interests, and values. **An adverse material fact is negative property information that could reduce the property's value. **A latent defect is a hidden property condition that's not likely to be discovered through a general review or inspection. The property owner's and licensee's role regarding property condition is generally dictated by state law. Some states require the seller and the licensee to affirmatively (proactively) disclose all known "material facts" and latent defects about the property. Other states subscribe to a "buyer beware" (aka caveat emptor) doctrine and are not considered full disclosure states. In these states, the seller makes no representations about property conditions, and the burden is on the buyer to perform due diligence. Many states fall somewhere in between. The seller may not be required to make affirmative disclosure but may be compelled to give information if specifically asked; sellers may be required to disclose only known "adverse material facts." Even the disclosure of latent (not visible or easily detected in a cursory inspection) defects may or may not be required, depending on state law. Most jurisdictions have some sort of written disclosure or disclaimer form that sellers are required to complete and provide to buyers. Licensees may not complete these forms or advise sellers how to complete them other than to remind them to be honest.

Secondary mortgage market payers purchase lender loan packages and re-package them into mortgage-backed securities (MBS). They sell the MBSs to investors.

- Fannie Mae, Freddie Mac, Farmer Mac, and Ginnie Mae, and lending institutions that buy loans from other lenders and investors make up the secondary market. - Fannie Mae and Freddie Mac are Government Sponsored Enterprises (GSEs), which is a privately-held corporation that has a public purpose. GSEs are corporations that are traded on major stock market exchanges (FNMA and FMCC). - Fannie Mae and Freddie Mac purchase mortgage loan packages from lenders. Ginnie Mae guarantees MBSs that are made up of government insured or guaranteed loans. Farmer Mac functions in the secondary market by buying qualified agricultural loans from lenders.

A landlord's duties—and by extension, the duties a property manager will perform—vary, depending on the property management agreement. However, unlike the landlord or owner, the property manager's license may be at stake. These general duties Include (PART 1):

-Abide by fair housing, civil rights, and Americans with Disabilities Act (ADA) laws. -Prepare and oversee budgets as outlined in the property management agreement. -Properly receive, account for, and disburse security deposits. -Properly account for prepaid rent and rent received. -Disclose names and addresses of those responsible for building management, rent collection, repairs, complaints, and issue notices as required by the state. -Ensure a unit is vacant for a new tenant. -Check vacated units for damage and cleanliness. -Keep the property safe, clean, and habitable. -Adhere to building codes. -Perform or arrange for necessary repairs. -Oversee common area maintenance. -Manage serviceability of all major systems. -Provide adequate notice to tenants regarding entry for repairs or maintenance (except in case of emergency). -Adhere to legal eviction processes when an eviction due to failure to pay rent or other breaches of the lease agreement becomes necessary.

A landlord's duties—and by extension, the duties a property manager will perform—vary, depending on the property management agreement. However, unlike the landlord or owner, the property manager's license may be at stake. These general duties Include (PART 2):

-All parties (landlord, property manager, and tenants) are obligated to abide by the lease terms. -Landlords may restrict a lessee's use of the premises to those activities for which the property is intended; i.e., prohibiting any use other than residential or a specific type of business. -Tenants are afforded the rights of quiet enjoyment and possession during the lease term. *Quiet enjoyment of the leased property means the right to use the property without undue interference from the landlord or others and the right to live in safety and comfort *Tenants have the right to possess (use) the property for its legal intended purpose. -Neither the landlord nor the tenant is required to make improvements to the property. Tenants must receive the landlord's permission to make property improvements. -Residential tenants aren't required to perform maintenance but must maintain the property in the same condition in which they received it. Tenants should promptly report all maintenance or safety issues. A tenant, either commercial or residential, is generally responsible for those areas of the property under his direct control. In general, most states require that tenants: * Keep the property safe, clean, and sanitary. * Avoid damaging the property and report maintenance, infestation, or safety issues. * Allow landlords or maintenance staff to enter the property as required. * Pay rent and adhere to lease terms. * Obey local laws and regulations.

Types of Antitrust Violations

-price fixing -market allocation -tie-in arrangements -group boycotting -a per se antitrust violation

Property management agreements should include:

1) A description of the property to be managed 2) The term of the agreement (definite beginning and ending dates, and provisions for termination) 3) A description of all of the manager's duties (and any restrictions on the manager's duties, if any) 4) A statement describing the owner's purpose (what the owner wants the manager to accomplish) 5) A description of the owner's responsibilities 6) An explanation of the manager's authority 7) Any reporting the manager owes (frequency, types of reports, and details to be included in reports; state property management rules and laws often dictate which of these will need to be included) 8) Compensation to be paid (management fee or compensation calculation)An antitrust provision (as with other real estate-related compensation, compensation and fees are negotiable) 9) A statement of management costs the manager will pay (such as office rent, employees, etc.) vs. what the owner will pay 10) An equal opportunity statement (residential property management activities must comply with fair housing laws)

Owner financing (installment and land contract/contract for deed)

1) A land contract/contract for deed requires the buyer to make installment payments to the seller for property purchase. The seller retains the title while buyer gets equitable title. 2) A purchase money mortgage is a loan a seller issues to the buyer as part of the purchase transaction. This typically occurs in situations where the buyer cannot qualify for a mortgage through traditional means. 3) With a wrap-around mortgage the seller holds a mortgage that wraps the new buyer's mortgage around the seller's existing mortgage. The seller continues to make payments on the first mortgage, and buyer makes payments to the seller on the wrap-around mortgage.

Legal eviction processes when an eviction due to failure to pay rent or other breaches of the lease agreement becomes necessary (3 types of eviction):

1) Actual eviction: This is the legal process used to physically remove the tenant. 2) Constructive eviction: The tenant is prohibited from quiet enjoyment of the premises and vacates prior to termination of the lease agreement. 3) Self-help eviction: The landlord takes matters into his own hands and evicts the tenant without using legal procedures.

3 Types of leaseholds/leases

1) ESTATE AT SUFFERANCE: The tenant stays after the right to possess has terminated. The tenant is known as a holdover tenant. 2) ESTATE AT WILL: The lease's duration is unknown when it's created. 3) ESTATE FOR YEARS: The lease terminates automatically when the specified period (day, week, month, year, etc.) ends. 4) PERIODIC ESTATE: The lease automatically renews at the end of each period specified in the lease.

Agency and agency agreements

1) EXPRESS AGENCY is an agency relationship that's understood and agreed to by the parties. Spoken or written words create express agency. 2) Actions of the parties may create IMPLIED AGNECY, which is to be avoided. All agency agreements should be in writing. General real estate discussions are safe. However, to avoid implied agency situations, refrain from making statements that may be taken as your expert opinion. Don't perform actions that only and agent should perform. Licensees must take care to not create an implied agency situation that may also be considered illegal dual agency. **Ratification is acceptance after the fact, either through signing paperwork or through the parties' actions. If the parties choose, implied agency can be ratified through signing an agency agreement after the implied agency relationship has been created. **Estoppel prevents one party from suing another, because the party's actions or statements implied that he or she agreed with the other party; Agency is created solely through the agency agreement—not through compensation. Paying a commission does not create an agency relationship between the payer and the licensee. Licensees who receive compensation from someone other than the client must disclose that to the client.

Appraisers will make adjustments for a number of factors, applying the elements of comparison in this specific order, including:

1) Financing terms and cash equivalency Example A house that sold for $300,000 but for which the seller paid $12,000 toward customary buyers' closing costs has the equivalency of $288,000. 2) Conditions of sale 3) Market conditions at the time of contract and closing 4) Location 5) Physical characteristics

Common property manager duties can include:

1) Maintaining and delivering financial reports (such as the operating budget, cash flow reports, profit statements, and budget comparisons) 2) Renting properties (including researching the market and setting rental rates) 3) Marketing properties (such as performing advertising and promotional activities) 4) Screening and selecting tenants (again, residential property managers must be sure to comply with local, state, and federal fair housing laws) 5) Handling security deposits and collecting rent (following strict guidelines for these trust funds, avoiding conversion and commingling, and maintaining records of these funds) 6) Maintaining relations with tenants and handling tenant problems 7) Maintaining the property (through preventive, corrective, and routine maintenance) 8) Complying with local, state, and federal regulations

Estimating Value

1) Market value is the most probable price a property will sell for in an open market if neither the buyer nor the seller is under duress. 2) Value is a property's objective worth and may not equal price or cost. 3) Cost is the amount to recreate that property if it disappeared off the face of the earth today. 4) Market price is the amount a buyer paid for a property and the seller accepted.

Property managers may also be required to produce regular reports for the property owner. Report details and frequency will be set by the terms of the management agreement. Common reports include:

1) OPERATING BUDGET: Usually covering a one-year period, this report projects the income and expenses of operating the property. 2) CASH FLOW REPORT: Usually created monthly, this report shows the current financial status of a property. It accounts for income received (such as rent, late fees, etc.) and expenses paid (such as utilities, personnel, repairs, etc.). 3) PROFIT AND LOSS STATEMENT: Prepared on a monthly, quarterly, semi-annual, or annual basis, this report shows whether the property profited during the period or suffered a loss. 4) BUDGET COMPARISON STATEMENT: This report compares actual results from the profit and loss statement to those projected on the operating budget.

Zoning classifications (8)

1) Residential 2) Commercial 3) Combination/mixed use 4) Industrial 5) Agricultural 6) Open space 7) Parkland 8) Recreation area

Security Instrument Clauses

1) The defeasance clause orders the lender or trustee to immediately release full title to the borrower once the loan is paid in full. The lender is then prevented from pursuing additional payment after the payoff. 2) An acceleration clause makes the entire debt due immediately if there's borrower default. Before a foreclosure occurs, lenders must send an Acceleration Letter to the borrower (often not sent until two to three months in default). 3) A due-on-sale clause (also known as alienation clause) requires the borrower to repay the loan when transferring ownership to another. 4) A pre-payment penalty clause permits the lender to charge a specified amount for interest lost when a borrower sells or pays off a loan early. Prepayment penalties are rare in today's mortgage market.

Financing and Lending - lending process application through closing

1) The residential loan process begins with the potential borrower's loan application. 2) Lenders may prequalify borrowers based on borrower-provided (not lender-verified) information. 3) Lenders may preapprove borrowers based on verified loan application information. 4) During loan processing, the lender collects information about the borrower's income and credit. 5) Lenders also review the property's value (as the collateral for the mortgage loan), typically through the appraisal process. 6) When a borrower has an accepted offer on a property, the full application process begins. The lender will continue the loan processing steps, likely asking for additional buyer documentation as necessary. The borrower will also select the loan product (FHA, VA, conventional, etc.) and financing terms desired. 7) A loan processor verifies that correct information and documentation are in place, including W-2 forms or other income-verifying documents and property-related information, such as appraisals and title reports. 8) When application materials are complete, the lender submits the loan package to underwriting. 9) The underwriter analyzes the loan documentation and recommends approval, denial, or a conditional approval pending additional information from the buyer. 10) When the loan is approved, the buyer is cleared to go to closing.

Requirements for contract validity

1) statute of frauds 2) offer and acceptance 3) consideration 4) legally competent parties 5) legal purpose 6) voluntary

Financing and Lending - lending process application through closing (Cont.)

11) Prior to closing, the lender and closing officer confer so the closing agent can include necessary loan information on the buyer's settlement sheet. 12) Immediately prior to closing, the lender may run additional credit and employment reviews to verify employment and determine if the borrower has incurred additional debt. 13) Most lenders require that borrowers maintain current fire and hazard insurance policies and that the policy name the lender as a co-insured party. 14) If the property is located in a designated flood zone, the lender will require that borrowers maintain flood insurance. 15) At closing, the buyer signs all loan and real estate documents. The lender funds the loan when the seller has conveyed the property. 16) Lender funds and buyer funds (the original earnest money deposit and the down payment) combine to pay off the seller's existing mortgage loan, pay the buyer's closing expenses, and provide the balance due to the seller. - Keep in mind, if a mortgaged property is being sold, the alienation (or due-on-sale) clause gives the lender (so the seller's lender for the existing mortgage) the right to declare the entire amount due (in which case the funds are used to pay off the existing mortgage) or allowing the buyer to assume the loan. A buyer's assumption of the seller's existing loan is something that must be written into the contract and the buyer would still need to be approved by the lender's underwriting process. Under an assumption arrangement, the seller's name is still on the promissory note, and the buyer promises the seller (in writing, of course) to pay the loan. In the event of default, the lender looks to both the seller and buyer.

Reba is selling a three unit property and makes an offer of sale to the tenants. Within how many days must the tenants submit a statement of interest to exercise their right to purchase?

15 days if the tenants are collectively exercising the right, an additional seven days if tenants are acting individually

Conventional loans often require _____% down to _____

20% down to avoid PMI

Wrap around mortgage

A junior mortgage which provides an owner additional capital without refinancing the first mortgage. (The original mortgage is not disturbed)

FHA loans require a minimum down payment of

3.5%

A lot measuring three-fourths of an acre is for sale. How many square feet is this?

32,670

statutory year

360 days

actual/calendar year

365 days

Private mortgage insurance is required on conventional loans where the loan-to-value ratio is in excess of ______%.

80%

Alistair bought a townhouse for $285,900. He got a 90% loan and the lender charged him 3-1/2 discount points. How much did Alistair pay in discount points?

9,005.85 The sales price is $285,900, and 90% of that (aka our loan amount) is $257,310. The discount amount is 3-1/2 points, (.035) multiplied by $257,310 = $9,005.85.

Contingencies (PART 2)

A financing or mortgage contingency makes the sale contingent on the buyer obtaining financing, and an appraisal contingency makes it contingent on the property appraising at or above the sales price. The greater the number of contingencies on an offer, the less attractive it is to the seller. If a buyer misses a contingency deadline, they may lose their earnest money. If the seller misses a contingency deadline, the buyer may have the right to terminate the contract. Contract termination based on the inability to meet a contingency or on the other party's failure to meet a deadline typically requires written notice to the other party. A buyer's agent should caution buyers to use contingencies to protect themselves, but not kill the deal with too many contingencies.

Potential title problems and resolution

A cloud on title (title defect) is any encumbrances, such as a lien or inheritance claim, that prevents the seller from providing clear, marketable title. The most common title defect in a real estate transaction is the seller's existing mortgage lien. That lien is usually resolved at closing when the seller's proceeds are used to pay off the loan. Other financial liens against the title may include mechanic's liens (liens filed by someone who worked on the property but didn't get paid) and property tax liens. Sellers must pay off all financial liens against the property before conveying title. Lack of sole ownership can create title defects. For example, if a divorce decree stipulates that one party retains ownership of the couple's property but no deed is recorded to convey the other party's ownership rights, the seller must track down the non-owner party to have that party execute a quit claim deed to clear the title. Unknown heirs to property conveyed upon or after the owner's death can become an issue when those heirs step forward to claim an interest in the property. Typically attorneys or the courts must step in to assist in settling this type of ownership issues. Taxes, unrecorded liens, and unrecorded deeds are all potential title problems that may not be discovered in a title search.

Which of the following is considered a foreign person according to FIRPTA?

A company incorporated in France with regional development offices in the U.S. Corporate entities that are formed outside the U.S. are considered foreign persons for the sake of the Foreign Investment in Real Estate Property Tax Act (FIRPTA).

Selecting comparables in a CMA

A comparable property (called a comparable or comp) is one that's quite similar to the subject property in terms of size, style, condition, number of rooms, and location. In general, properties sold as foreclosures, short sales, or other distressed property sales shouldn't be used as comps unless the licensee is pricing a property for sale under similar conditions. Properties used as comps should also be arm's length transactions, which means that the parties to the sale are unrelated and that no one is under duress or pressure to complete the sale. An example of a non-arm's length transaction is parents selling to their child. If possible from the comparable sale information located, licensees should take into account any seller concessions (closing costs paid by the seller, etc.) or creative or special financing considerations. Recent sales (properties that have sold in the last three to six months) carry more weight as comparables than older sales. Especially when the market is changing, licensees should use more recently-sold comps. A couple of months' time can make a big pricing difference if the market is heating up or cooling down. To get an idea of current competition, licensees may also review comparables that are currently on the market (active listings). Reviewing properties that listed but did not sell (expired listings) can give licensees an idea of how pricing impacted the listing. Information about under-contract (pending) properties may provide insights about the number of days on market (DOM) compared to price as well as general market conditions. These properties aren't true comparables because the final sales price isn't yet known. Licensees should use at least three comparables. More may be necessary if good comparables are difficult to find.

Contract clauses, including amendments and addenda (PART 1)

A contract clause is a section or provision within a contract that addresses a specific point of law or aspect of the agreement. Common contract clauses include: -"Time is of the essence" means that both parties faithfully agree to perform responsibilities within the time limits of the contract. -Choice of law specifies that any dispute arising under the contract shall be determined in accordance with the law in a particular jurisdiction. -Indemnification means one or both parties commit to compensate the other for any harm, liability, or loss arising out of the contract. -Contingency clauses define a condition or action that a party must meet in order to not be in breach of contract. -An arbitration clause requires the parties to resolve or attempt to resolve their disputes through an arbitration process. -A mediation clause requires the parties to attempt mediation prior to engaging in arbitration or a legal action. -A statute of limitations clause in the contract states the time frame in which a party can file a lawsuit relative to the contract.

Purpose of deed when title passes

A deed is a written and signed legal instrument of conveyance. The deed is the document that legally transfers (conveys) title to real property from the owner (grantor) to the new owner (grantee). Title officially changes hands when the grantor delivers the deed to the grantee and the grantee accepts it.

Lamar closes on his new home next week. It's a 37-year-old split level, so his agent asked if he's interested in purchasing a home warranty. "Why would I need a warranty?" he wondered. "Didn't the home inspection identify all of the issues?" What's the agent's best response to Lamar's question?

A home warranty covers things the inspection didn't address, like appliances, as well as structural issues that occur within the first year.

A lease with OPTION TO BUY may be used by prospective purchasers who can't purchase immediately but would like to in the future.

A lease with option to buy consists of2 DIFFERENT AGREEMENTS between the parties. One is a lease, and the other is an option to purchase. The lessor/optionor and lessee/optionee agree to specific terms that will govern the sales contract in the event the optionee decides to exercise the right to purchase during the term of the option. The optionor is obligated to sell if the optionee decides to exercise the right to buy, but the optionee is not obligated to buy. The lease is a bilateral contract, and the option is an example of a unilateral contract. A lease with an obligation to buy is often called a LEASE/PURCHASE AGREEMENT. It's similar to an option in that it's really two agreements: 1) One is a lease 2) A purchase agreement at some time in the future. The difference between a lease option and a lease purchase is that in a lease purchase, the lessee/buyer is obligated to buy, just as the lessor/seller is obligated to sell. Both the lease and purchase agreement are bilateral contracts.

What describes a situation of self dealing?

A licensee sells her own property without informing all properties that she's licensed

According to the Code of Ethics, which of these statements is most accurate when accepting compensation?

A licensee shall not accept compensation from more than one party to a transaction without the full knowledge and consent of all parties.

Fiduciary responsibilities

A licensee's fiduciary responsibilities (duties) include obedience, loyalty, disclosure, confidentiality, accounting, and reasonable skill and care (OLD CAR). Fiduciary duties are owed to clients, but not customers. Non-agents don't have fiduciary duties. 1) obedience 2) disclosure 3) confidentialty 4) accounting 5) reasonable skill and care 6) loyalty *These duties end with termination of the agency relationship, except for the duties of confidentiality and accounting.The duty of confidentiality remains forever.The duty of accounting ends when all transaction-related property for which the licensee was responsible has been properly accounted for.

Powers of attorney and other delegation of authority

A power of attorney (POA) is a legal document that grants legal rights and powers from one person (the principal) to another (the agent or attorney-in-fact) to make decisions on behalf of the principal. The agent's decisions must reflect the principal's preferences and can't exceed the authority granted by the specific power of attorney document. **An agent may never override the principal's wishes. - A general power of attorney gives broad powers to the agent to act in someone else's behalf. - A special power of attorney is more narrow in scope and authorizes the agent to act in specific circumstances or transactions. A special power of attorney grants authority similar to that of an agency agreement between a licensee and a client. Usually, a POA may be granted to a spouse, family member, friend, or neutral third party. There are a number of risks and conflicts of interest if a licensee were to be granted a power of attorney by a client. For this reason, the situation is generally avoided by many brokers. If used, there must be a paper trail and the POA is usually limited to signing on behalf of a client at closing if the client can't attend. However, many brokerages strongly believe that another party could be granted POA so that a licensee doesn't need to act in that capacity. Licensees should discuss POA situations with their broker before participating in any POA situation. A power of attorney terminates upon the death of the principal or when the principal revokes the POA. Divorce terminates a power of attorney if one had been granted to the former spouse.

Property Manager's Fiduciary Duties

A property management agreement formalizes the agency relationship between a licensee/property manager and owner, and outlines each party's duties and rights. A property manager is usually considered a general agent. As a general agent and fiduciary for the owner, a property manager is authorized to perform all day-to-day property management-related duties on the owner's behalf. Common fiduciary duties performed by property managers include (OLD CAR): -obedience -loyalty -disclosure -confidentiality -accounting -reasonable skill and care

Basic Concepts/Duties of Property Management

A property manager's primary goal is to produce the greatest net return for the owner. If a real estate licensee wants to be paid to manage properties for others, a written property management agreement must be in place. The licensee and the property owner are the parties to a property management agreement that establishes a general agency relationship. The agreement serves as the guide for managing the property and outlines the duties and responsibilities of both the property manager and the owner.

Example of transfer tax

A property sells for $350,000 with a transfer tax rate of .03%. Convert .03% to a decimal (.03 ÷ 100 = .0003). Multiply sales price by rate: $350,000 × .0003 = $105. A property sells for $225,000 with a transfer tax rate of $1.25 per $1,000 of the sales price. ($225,000 ÷ 1,000) × $1.25 = $281.25.

Deeds must be in writing and must include the following elements:

A specifically named and identified legally competent grantor (possesses mental capacity and is of legal age). The grantor's name must be exactly the same throughout the deed. A specifically named grantee who can be identified based on the name in the deed. Act of conveyance (the granting clause such as "... does hereby bargain, grant, deed, and convey ...") which signifies the grantors intent to convey the property. Named consideration, such as "for one dollar" or "for good and valuable consideration;" the consideration indicates that the grantor received something of value in exchange for the title. Legal description Any limitations or subject to clauses. This clause describes any interest that the grantor has reserved for him-/herself. It also describes deed restrictions and encumbrances that "run with the land." Habendum clause, which defines the type of interest and rights the grantee will have. Not every deed needs the habendum clause, but if the interest is less than fee simple, this is generally where it is described. Grantor's signature. The signed deed is delivered to and accepted by the grantee. Deeds are acknowledged in order to be suitable for recording. Acknowledgement means that the party signing (in the case of a deed, the grantor) has gone before a competent party (typically a notary) and indicated that the signature is their own and that they signed voluntarily.

Negligent Misrepresentation

A statement made by a person who should have known it to be false; becomes fraud when it's intentional.

Misrepresentation

A statement, photo, or ad that a reasonable buyer would consider to be reliable. Misrepresentations, even when unintentional, can lead to a voidable contract. Licensees must use caution to avoid misrepresentations in advertising.

Subleases

A sublease is a new lease agreement between the tenant/lessee as sublessor and a third party as sublessee for all or a portion of the leased premises. A sublease can be for less than all of the leased premises. An assignment that transfers the entire lease must be for all of the premises. Leases are assignable unless the lease prohibits assignment.

Situations requiring appraisal by certified appraiser (Cont.)

AIR also prohibits lenders from attempting to influence or coerce an appraiser with respect to the opinion of value. Lenders who want to sell their conventional mortgage loans to Fannie Mae must comply with AIR. AIR permits lenders to select residential appraisers from an approved list or panel if the lender employee(s) involved in the selection have no involvement in loan approval. To help ensure they're in compliance with AIR standards, some lenders contract with third-party companies to manage appraisals.

Termination, rescission, and cancellation of contracts (PART 2)

ASSIGNMENT means to transfer contractual rights or duties to a new party. Some contracts have provisions either permitting or prohibiting assignment. Unless the contract specifically prohibits assignment, contracts are generally assignable. Unless the parties agree that the original buyer or tenant is to be released from contract obligations, the original party remains liable if the new party fails to meet the contract's obligations. NOVATION occurs when one contract is substituted for another. The agreement may be between the same parties, or a new party may be substituted (this is novation of the parties). The intent between the parties is to discharge the old obligation, releasing the original party from those obligations.

When offer becomes binding (notification)

Acceptance occurs when all parties have signed a contract, while binding acceptance happens when the signed contract is delivered back to the offeror. Acceptance and binding acceptance must take place within the dates outlined in the contract. If dates aren't specified, then they must occur within a "reasonable time." Reasonable time can be interpreted differently by the courts, but the courts generally favor the buyers.

Your client, Cassandra, asks you at what stage in her property ownership life cycle she'll be impacted by income tax issues. You tell her that it's likely that she'll be affected at _____________.

Acquisition, ownership, and reversion

Unauthorized practice of law

Acting outside the scope of your license by offering legal advice and may result in you losing your license. This includes drafting contract language. Licensees should use forms and language prepared by attorneys. Such forms are generally available from the broker, the local REALTOR® association, or the state.

Licensees are also responsible for adhering to all fair housing laws related to advertising:

Advertising practices may not limit or attempt to limit access to properties or services on the basis of any protected class. Licensees should be careful not to discriminate in advertising. This includes not using exclusive or discriminatory language or images, as well as not advertising exclusively in a publication that is likely to exclude people based on any protected class.

When is an earnest money check deposited?

After the purchase offer is accepted by the seller

Counter-offer cancels original offer

All offers and counter offers must be presented. If the counter offer is signed, it becomes a contract. Counter-offers kill the original offer and should only be used to counter unacceptable terms. Counter-offers are active until they are either accepted, rejected, or withdrawn. "Acceptance" of an offer, but with some changes to that offer, isn't actually acceptance at all. It's essentially a counter-offer. Finalize any counter-offer terms before responding to all of the other buyers/offers.

Graduated lease (commercial lease)

Allows specific rent increases at future dates. It's a TYPE OF VARIABLE LEASE that permits an increase/decrease in rent during the lease period. The increase can be based on a number of factors, such as changes to appraised value, index, or time. Graduated leases are often used for longer terms than other common lease types. Tenants may be able to get into a lease at a lower cost that gradually increases over time. This can be beneficial for new businesses. The lease also provides protection to property owners, who can increase rent as property values or costs increase over time.

Per Diem Interest Formula

Amount of annual interest ÷ number of days in a year (360 in a statutory year; 365 in a calendar year) = per diem interest.

Down payment/amount to be financed

Amount of down payment + earnest money deposit + loan amount being assumed or obtained = sale price. The down payment is calculated as a percentage of the sales price based on the lender-required LTV. Sales price - down payment - earnest money deposit = amount to be financed

Executory and executed contracts

An EXECUTED contract is one in which all parties to a contract have met all contract term. A contract for the sale of real estate is executed by the delivery and acceptance of the deed and the payment of the purchase price. (Note that you may also see the term "executed" used to refer a document that's been signed.) Contracts are EXECUTORY until all of the promises in the contract have been completed. A contract for the sale of real estate is executory until the deed is delivered and accepted.

Adjustable-rate mortgage loans

An adjustable-rate mortgages (ARM) is one in which the interest rate fluctuates based on some selected economic index. Rate adjustments are based on index rates, such as London Interbank Offered Rate (LIBOR), from which lenders determine their margins and the rate charged per adjustment. ARMs typically have a lower interest rate for an initial period of one to several years. A special type of ARM is the fixed/adjustable rate note. It's a legal agreement that permits the borrower to convert a fixed rate mortgage to an ARM or an ARM to a fixed rate mortgage under certain conditions. **Negative amortization may be experienced with some ARMs. This occurs when a payment fails to cover the amount of interest due. When this happens the difference between interest owed and interest paid is added to the loan's principal.

Amortized Loans

An amortized loan is one in which the loan principal is paid down over the life of the loan. 1) A fully amortized loan will be paid in full after the last scheduled loan payment (or sooner if the borrower makes additional principal payments during the loan term). The monthly principal and interest payment amount is the same each month. The principal portion of the payment increases each month, while the interest portion decreases. 2) A partially amortized loan includes partial amortization over the loan term and a balloon payment at the end of the term, where the borrower pays off the loan in one lump sum.

Antitrust and purpose

Antitrust involves businesses that conspire to restrict competition or trade, resulting in diminished choices or higher prices (or both) for the consumer.

General steps in the appraisal process

Appraisers follow the Uniform Standards of Professional Appraisal Practice (USPAP) and use these steps: 1) State the problem. This means to identify the specific property, the rights associated with it, the purpose of the appraisal, and what type of value needs to be estimated. 2) Identify data needed. 3) Gather and analyze data. Appraisers look at general city, neighborhood, demographic, and other data, as well as property-specific data. 4) Determine highest and best use. What would the best use of the property be if there were no existing building on it? This matters more for commercial properties, though residential properties in a mixed-use neighborhood can be impacted. 5) Estimate the land value (as if the land were vacant). 6) Use one or more of the three approaches to valuation (sales comparison, cost, or income approach), depending on property type. 7) Reconcile values to determine the final appraised value. This isn't an average of the various estimates calculated. Through a reconciliation (correlation) process, the most weight may be given to one or two of the comparable properties or even to the appraisal method used (sales comparison, income, or cost approach) and how well it matches the subject property. 8) Develop and deliver the appraisal report.

Regulation of environmental hazards

As a licensee, you don't have to know how to investigate environmental issues, but should know how, where, and when to seek expert assistance. Licensees should be aware of a variety of hazardous substances that might be present in or on properties they show, list, or sell.

Sunshine Act

At the federal level, the Sunshine Act is part of the Freedom of Information Act (FOIA). Each state usually has its own version of FOIA or a sunshine law. (public has the right to know about urban/zoning planning)

Breach of contract and remedies for breach

BREACH OF CONTRACT occurs when one party fails to meet contract obligations. The innocent party may take any one of several actions as a remedy to the breached contract. When a breach occurs, the innocent party may unilaterally terminate the contract. This is known as UNILATERAL rescission. PARTIAL PERFORMANCE is when one party meets some, but not all, of the terms of the contract. The innocent party may agree to accept partial performance, perhaps in return for some sort of compensation. The innocent party can sue for DAMAGES. This is a means of seeking monetary compensation to make up for any harm caused. A SPECIFIC PERFORMANCE SUIT seeks to force a party to make good on the promises made in some way. Many real estate contracts include a LIQUIDATED DAMAGES clause that limits buyer damages to a return of the earnest money if the seller breaches the contract.

The purchase, ownership, and sale of real property has tax implications for buyers and sellers.

Be sure not to overstep your bounds and give any kind of tax advice to clients. Instead, refer them to a financial expert. There are property tax implications for real property owners at each stage of the property ownership lifecycle: acquisition, ownership, and sale (reversion).

Lot and Block

Begin with a reference to either metes and bounds or RGSS, then divide the land into lots with numerical descriptions of each parcel. A plat with the lot descriptions is recorded in the land records. Lot-and-block divisions include streets, access roads, and other important features. A lot and block legal description looks like this: Lot 6 of Block 3 of the East Subdivision plat as recorded in Map Book 18, Page 11 at the Recorder of Deeds

Why is it important for a buyer to know if any easements or encroachments exist on a property?

Both easements and encroachments affect the property's lot size, enjoyment, and use, which can affect a property's value.

Transfer Tax Formula

Both taxes are usually quoted as an amount per $100 or an amount per $1,000 and the method for calculating is similar to taxes. Amount per $100 = (sale price/loan amount ÷ 100) × tax rate. Amount per $1,000 = (sale price/loan amount ÷ $1,000) × tax rate.

Proposed uses or changes in uses that should trigger inquiry about public or private land use controls

Buyers should inquire about the location of the property and whether it's currently or will in the future be located in a protected zone, such as a wetland or a historical district. Buyers should also inquire about the property's zoning classification and whether there are any anticipated changes in the current classification of the property itself or the surrounding neighborhood. Some sellers disclose tax abatements, but buyers should check this independently. A tax abatement program lowers the property's taxes for a set amount of time. These are typically offered for new construction or when a property lies in an area designated for rehabilitation or renovation. Tax abatements for elderly homeowners are also common. Buyers may receive an unhappy surprise when the unrevealed abatement ends and their property taxes skyrocket. Sellers and licensees may be required to disclose if the property currently is or is planned to be in a flight path.

Dean and Michael have an oral contract. Dean said he would sell Michael his bike in return for Michael's vinyl album collection. What does the record collection represent?

Consideration

Contingencies (PART 1)

Contingencies are conditions that must be met before the agreement of sale is complete and enforceable. -For example, a purchase may be contingent for a number of days upon the buyer receiving a loan commitment. Contingencies usually include the actions necessary to remove the condition, a deadline for its removal, and the party responsible for taking the actions to remove the condition. All contingencies to the contract must be satisfied at the specific times and dates called for in the agreement. Failure to do so is a breach of the agreement. The original offer is no longer legally binding. A home sale contingency makes the sale contingent on the buyer selling an existing home or property. A home inspection contingency makes the sale contingent upon a satisfactory home inspection.

LTV Examples

Example Buyer borrows $315,000 to purchase $350,000 property. LTVR = $315,000 ÷ $350,000 = .9 or 90%. Loan amount = LTVR × value. Example Property value is $350,000. LTVR is 90%. Loan = $350,000 × 90% = $315,000. Value = loan amount ÷ LTVR. Example Buyer borrows $315,000. LTVR is 90%. Value = $315,000 ÷ 90% = $350,000.

When using the sales comparison approach, appraisers consider elements in a specific order. What is that order?

Financing terms and cash equivalency, conditions of sale, market conditions at the time of contract and closing, location and physical characteristics

Chrissy lives in Lake Ridge Estates, a neighborhood in which vinyl siding may not be used on homes. This HOA regulation is what kind of private land control?

CC&R

Termination, rescission, and cancellation of contracts (PART 1)

CONTRACT DISCHARGE (aka performance, execution) means that the parties have met all contract terms and are discharged from their contractual obligations. CONTRACT TERMINATION generally means that one of the parties ends the contract before it's fully performed. The terminating party may owe duties or compensation to the other party. When one party to a contract agrees in writing that the other party is no longer held to the provisions of the agreement, this is called RELEASE. CONTRACT RESCISSION (cancellation) generally results from an operation of law, such as breach of contract, destruction of the object of the contract, etc. If the contract is rescinded, it is terminated, and the parties are legally returned to their position before there was a contract. For example, if one party breaches the agreement, the other may legally have the right to rescind the agreement. Parties to the contract may terminate the contract through MUTUAL AGREEMENT. This is best accomplished through mutual written release.

Which of the following is defined as what it would take to recreate that property if it disappeared off the face of the earth today?

COST Replacement cost is the entire term. The cost approach works with this idea: What would it cost to replace the building on the land as it is now?

What kind of loans are exempt from RESPA requirements?

Commercial and business loans

Commingling and conversion are two primary ways licensees can go wrong when handling earnest money.

Commingling is when trust (escrow) funds are mixed with personal or brokerage firm funds. Conversion is using trust funds for anything other than their intended purpose.

Margaret has received her Closing Disclosure from the lender. To best protect her interests, what should she do with it?

Compare it to the Loan Estimate

Factors affecting enforceability of contracts

Contracts may be valid but unenforceable. ***For example, a voidable contract is valid, but may not enforceable in a court of law. Contracts signed under the following circumstances are unenforceable: - Contract is for an illegal purpose - One or more of the contract parties was under duress or undue influence - One or more of the contract parties committed misrepresentation - Contract terms are patently unfair or violate public policy - Contract contains errors **Severability refers to the concept that if a court deems a term in the contract to be unenforceable, the remainder of the contract remains enforceable.

Conventional Loans

Conventional loans aren't government insured or guaranteed. Lenders view conventional loans as some of the most secure because they may require a down payment of 20%, thus reducing the LTV to 80% Conventional loans can be conforming or non-conforming.The Federal Housing Financing Agency (FHFA) imposes loan limits (maximum loan amounts) on the amount homebuyers may borrow. These loan limits vary by region based on the agency's determination of whether a given market is an average or a high-cost area - A CONFORMING LOAN meets the loan limit and other criteria (related to borrower qualifications) that Fannie Mae and Freddie Mac set. Lenders can sell conforming loans to Fannie Mae or Freddie Mac. Homebuyers who wish to borrow more than the loan limit must make up the difference through a larger down payment or finance with a jumbo loan. A conventional loan THAT FAILS to meet Fannie Mae and Freddie Mac guidelines for credit scores, LTV, and/or loan amount is considered non-conforming. Lenders may still fund non-conforming loans but will usually charge a higher interest rate and/or require mortgage insurance to minimize the risk. A JUMBO LOAN is a conventional non-conforming loan because it exceeds conforming loan limits but meets other conforming loan requirements.

Examples of Points

Example One point = 1% of the loan amount; so if a lender charges two points on a $250,000 loan, the cost to purchase the discount would be $250,000 x .02 = $5,000 **Buydown: Interest pre-payment at closing to temporarily reduce interest rate, usually for a period of one to three years. Example A 3-2-1 buydown: 3% interest rate reduction year one, 2% year two, and 1% year three; interest rate returns in full year four

principal

is usually the party to the transaction who is represented (the client).

Commission Examples

Example Property sells for $350,000 with a 5% commission. Commission = $350,000 × .05 (or 5%) = $17,500. Sale price = total commission ÷ commission rate. Example Broker earns a 5% commission of $17,500. Sale price = $17,500 ÷ 5% = $350,000. Commission rate = total commission ÷ sale price. Example Broker earns $17,500 for selling a $350,000 property. Commission rate = $17,500 ÷ $350,000 = .05 or 5%.

How to determine a loan payment using the amortization table and interest EXAMPLE

Example A 2.000 (rate %) for a 15-year loan term = a factor of 6.43509. Monthly payment = (loan amount ÷ 1,000) × factor.

Discount Point Example

Example A buyer purchases a $350,000 property and gets a $315,000 loan. Two discount points is 2% × $315,000 = $6,300.

How are principal meridians and baselines used in the rectangular government survey system?

Each legal description in this system originates at the intersection of a principal meridian and a baseline.

The earnest money deposit given in good faith with the contract is NOT the down payment:

Earnest money is applied to the property purchase price.

Property tax example

Example A property worth $350,000 is assessed at 40%. The tax rate is $30 per $1,000, or 30 mills. Annual taxes = $350,000 × 40% = $140,000. × .03 = $4,200.

Four characteristics of value: Demand, utility, scarcity, and transferability (DUST).

Demand: How popular or desirable a property is. Utility: The property's function. Scarcity: Relates to market supply. Transferability: The ease with which another person can purchase the property; a property with a title defect may suffer a loss of value because of the difficulty of being able to transfer title to another.

Which agency enforces Title II under the Americans with Disabilities Act of 1990, when it relates to state and local public housing, housing assistance, and housing referrals?

Department of Housing and Urban Development

Property Managers and Escrow Accounts (PART 2)

Depending on the terms of the property management agreement, property managers may be required to get the landlord's explicit permission to disburse funds from a trust account. Commissions or fees are typically drawn from a trust account on a schedule outlined in the property management agreement. Monthly and quarterly are common commission schedules. The property manager should have an accounting system in place to document all cash received and disbursed through the trust accounts. This is in addition to any cash accounting system used for operating accounts.

Callum is working with Darby, who received an honorable discharge from the Air Force. Callum is preparing to discuss options for down payment assistance with Darby. Which of the following would be Callum's best resource for information for this specific client?

Dept. of Veteran Affairs

Due diligence and the duty of reasonable skill and care also means that licensees shouldn't offer advice on real estate topics in which they have no

EXPERTISE residential and commercial sales are separate areas of expertise. It also means that licensees should seek assistance when operating outside of their geographic area of expertise.

Property condition that may warrant inspections and surveys (part 5)

Electrical, plumbing, and other major property systems, as well as appliances, should be carefully inspected because of the danger they present and the cost to repair or replace them. - Rooms that are too hot or cold, furnace or a/c that won't turn on when temperature is adjusted, or pilot light that won't stay litElectrical switches that are warm to the touch, lights that dim when others are in use, burned or discolored outlets, faulty appliances, and old or damaged circuit breakers - Water damage on ceilings or walls, leaking or blocked drains, clogged or leaking toilets, reduced water pressure, or soggy ground around the home - Galvanized plumbing pipes corrode and rust over time, restricting water flow and resulting in bits of debris and mineral deposits appearing in water.

Which type of communication does the CAN-SPAM Act outlaw?

Email marketing with no "unsubscribe" option

Marketable title vs. Insurable title

Even though marketable title is the higher standard, there could be title defects that aren't discovered in even the most stringent title search. The safest decision for buyers is to receive marketable title that's backed by a title insurance policy.

Net to Seller Examples

Example Sale price is $150,000 with a 7% commission rate. Percent to seller is 93% or 0.93. Net to the seller = $150,000 × .93 = $139,500. Number of days in the month of closing × per diem interest = seller interest owed at closing. Example Using a statutory year, seller's loan balance is $60,000 with a 5% interest rate. The sale closes on June 15, with the last payment made on June 1. Seller interest owed = ($60,000 × 5%) ÷ 360 = $8.33 × 15 = $124.95.

Examples of using ADJUSTMENTS to help determine value

Example Subject and comparable property attributes are nearly identical except the subject has a two-car garage and the comparable has a three-car garage. In the given area, an additional garage bay is worth approximately $7,000. The comparable sold for $328,500. The goal is to determine what the comp would have sold for if it were identical to the subject, so subtract $7,000 from the comparable's sales price, making the value of the subject property $321,500. Example Subject and comparable property attributes are nearly identical except the subject has a three-car garage and a swimming pool (in a climate where a pool is a highly desirable attribute). Garage bays are worth approximately $6,000 and the pool is valued at approximately $22,000. The comparable sold for $422,000. Since the subject is superior to the comp, add the garage bay and swimming pool value to the comp's sales price, for a subject value of $450,000.

Closing Cost Example

Example Using a statutory year, the buyer's loan is $315,000 with a 4% interest rate. The sale closes on June 15. Buyer interest owed = ($315,000 × 4%) ÷ 360 = $35 × 16 = $560.

Interest and Loan Payment Calculations Example

Example Loan amount is $315,000 with a 5% interest rate and a 30-year term. Monthly principal and interest payment is $1,890. To calculate the amount owed after the first payment is made: 1. Loan balance × interest rate = annual interest amount ($315,000 × 5% = $15,750). 2. $15,750 ÷ 12 (months)= $1,312.50 (monthly interest). 3. Monthly principal and interest - first month's interest = amount applied to principal ($1,890 - $1,312.50 = $577.50). Loan amount - amount applied o principal = remaining loan balance ($315,000 - $577.50 =$314,422.50).

Environmental issues requiring disclosure

External environmental hazards may be difficult to detect. Most states require that sellers disclose known environmental issues, including: 1) Underground storage tanks 2) Groundwater contamination 3) The presence of former waste disposal sites 4) Mining activities 5) Use of agricultural pesticides

Goldie and Kurt are looking at purchasing their first home. Their credit history is a little shaky and they don't have enough money saved to put down 20%. What type of loan seems most appropriate?

FHA

Local authorities lack police power over which of the following?

Federal government construction projects

Unlicensed individuals can't be paid on a per-transaction basis (so can't receive a commission like a licensee) and they can't perform any of the activities listed above. Unlicensed assistants can support these activities through clerical tasks:

For example, an unlicensed individual may not be allowed to host an open house or showings but could schedule those events or make copies of listing information. An unlicensed assistant could also follow up on transaction party items (such as appraisal, financing, inspection).

Stu is buying Freddie's property. What must occur for the transfer of title to take place?

Freddie must intend to convey the property to Stu.

Purpose of home or construction warranty programs

Home warranty programs provide peace of mind by covering system or appliance problems that may develop after a home is purchased. Home construction warranties for new construction generally also cover structural issues.

Notice, delivery, and acceptance of contracts

How and when parties to a contract send notice regarding contract terms is critical for avoiding breach of contract situations. - Most contracts include aNOTICES CLAUSE that describes how contract-related notice may be made and when notice is considered to have been received. i.e. a purchase or listing contract may permit contract parties to select whether notices may be delivered electronically. - Notice from one party to the other may become necessary during contract negotiation or with a breach of contract and termination situation. - Delivery and acceptance most often comes into play after a buyer makes an offer and while the contract is still being negotiated. - An offer isn't a contract until it's signed (accepted by) the seller and delivered (physically or electronically) to the buyer or the buyer's agent. - If a seller counter-offers a buyer's offer, the original offer is no longer in effect; the counter-offer becomes a contract if it's signed by the buyer and accepted by the seller. - Delivery and acceptance relies heavily on the "time is of the essence" concept. i.e. if a buyer submits an offer with an acceptance deadline and the seller fails to respond by that deadline, the offer is technically void; if a seller presents a counter-offer with an acceptance deadline and the buyer fails to respond by that deadline, the counter-offer is technically void.

Related to reasonable accommodation of being allowed to have an assistance animal, which statement is true?

If the disability for which the tenant is making the request is obvious, the landlord may not ask why it is needed

Termination of an agency relationship through DESTRUCTION OF PROPERTY/DEATH OF PRINCIPAL

If the property is destroyed, or if the broker or principal dies or becomes incapacitated, then the agency relationship ends.

Termination of an agency relationship through COMPLETION/PERFORMANCE

If the real estate transaction with which the agent was assisting closes, then the agency relationship terminates.

Commingling

Illegally mixing deposits or monies, collected from a client, with one's personal or business account. Taking money out too soon or putting it into escrow too late (10 banking days).

Bilateral vs. unilateral contracts (option agreement)

In a BILATERAL contract, both parties have obligations. Most real estate contracts are bilateral. -For example, a purchase contract contains promises by both parties, so it's bilateral. In a UNILATERAL contract, only one party makes a promise. An option contract is one example of a unilateral real estate contract. - An OPTION CONTRACT, or option, is an offer to purchase a specific piece of real estate without the obligation to buy it.In an option contract the potential buyer (optionee) is usually required to pay an option fee to the seller (optionor). If the optionee decides not to exercise the option and purchase the property, the optionor typically retains the option fee. - If the optionee decides to exercise the option, the optionor is required to perform the contract terms, and the contract then becomes a bilateral contract. - Some option agreements are a lease with the option to buy. The lessees have an option to purchase the leased property should they choose to exercise the option. If they violate any of the lease terms while the option is active, they lessor may terminate the option contract.

Example of reconciling values to determine the final appraised value (step 7 in appraisal process)

In a market data approach to value, the appraiser may use three comparable properties. One suggests a value of $276,000, another suggests $301,000, and the third indicates $310,000. The appraiser will weigh the one which is most like the subject property more heavily than the other comparables in estimating value.

Which one of these would not be an element of comparison an appraiser would use when applying the sales comparison approach to a property valuation?

Income generated

Adjusting comparables in a CMA

In order to arrive at a value or range of values, licensees must adjust prices for differences in property attributes between the subject property and the selected comparables. Licensees adjust the comparable sales price, not the subject property's list price (or potential list price). The comparable's sales price is a known factor, and the goal is to determine a price or price range for the subject based on what the comparable would have sold for with the same characteristics as the subject property. If a comparable is inferior to the subject property (e.g., next to a busy street), adjust upward. If it's superior (e.g., in a secluded, quiet neighborhood), adjust downward. Adjustments may be made for location, property attributes, and market conditions.

"buyer beware" (aka caveat emptor) doctrine

In these states, the seller makes no representations about property conditions, and the burden is on the buyer to perform due diligence.

Covenant of Warranty or Warranty Forever (MOST IMPORTANT)

In this most important covenant, the grantor promises to protect and defend the title against lawful claims made by others.

REOs (real estate owned)

In this type of sale, ownership has reverted to the lender because of a failed foreclosure sale or because the borrower surrendered ownership of the property to the lender through a deed in lieu of foreclosure are called real estate-owned (REO). REOs may still be subject to homeowner's rights of redemption depending on the state. Owner redemption periods have often expired by the time lenders put an REO property on the market. Time from offer to closing may be lengthy because of the more complicated processes involved, including potential lender foreclosure audits to ensure that the foreclosure process was completed properly. Clouds on title aren't uncommon, though lenders hoping to unload the property may clear those up before putting it on the market.

Independent Contractor (at brokerages)

Independent contractors (ICs) set their own hours, pay their own expenses, and determine how best to meet their own goals. Brokerage firms must supervise them related to licensing law, but they operate independently related to how they perform their tasks. Firms can require that licensees maintain membership in a REALTORS®association. Many licensees work as ICs so they can deduct business expenses on their income tax returns. This benefits the brokerage firm, too, because it's not required to pay workers compensation, Medicare, social security, or unemployment insurance for ICs. The Internal Revenue Service (IRS) regulates the independent contractor/brokerage firm relationship and requires a written agreement between the IC and the firm indicating that the firm will not treat the individual as an employee for federal tax purposes. The IRS will review a number of factors to determine whether or not a firm has misclassified any individual as an IC when that person has been treated as an employee.

Which one of the following tasks must a licensee perform for seller clients?

Inform sellers of their responsibility to make all required property condition disclosures.

Interest

Interest is a fee paid back to a lender for the use of its money; the amount of interest paid with each mortgage payment typically decreases over the life of the mortgage. Interest rates are stated as an annual percentage; e.g., 6% interest rate is 6% for the period of one year, or .5% per month. APR (annual percentage rate) is a measure of both the interest rate and other fees associated with a mortgage loan. Lenders lock-in interest rates for a period of no more than 90 days. If the closing process takes more than 90 days, borrowers may face an interest rate change.

The Uniform Residential Landlord Tenant Act (URLTA)

Is a sample law that states may follow in enacting their own landlord-tenant legislation. The purpose of this act is to base landlord-tenant law on contract law instead of common law, thereby providing more specific guidance to both landlords and tenants. Many states have patterned their landlord-tenant regulations after URLTA's provisions. URLTA provides tenant rights if the landlord fails to meet obligations. First and foremost, tenants need to provide the landlords with written notice of the issue and that they'll exercise their rights under the act if not resolved in a timely matter. Tenants could: - Make repairs and deduct the repair costs from rent (keep receipts and submit with the rent payment) - Find alternative temporary housing (if current housing lacks essential services, rent may be waived until the issue is resolved) - Sue to recover damages (may be done in serious cases) - Terminate the lease agreement The act also provides landlord rights if the tenant fails to meet obligations. URLTA provides protections to tenants, such as proper advance notice and time to remedy any obligation breaches. The time allotted may vary, depending on the type of tenant noncompliance. Landlords may be able to: -Sue for unpaid rent. -Terminate the lease agreement. -Begin eviction proceedings.

Net listing

Is one in which the broker contracts with the seller to receive all net proceeds from a sale above a specified sale price. Net listings are illegal in most jurisdictions because they create a conflict of interest and encourage unethical behavior such as trying to sell a property for more than its value.

Net lease and an Absolute net lease (commercial lease)

Is one in which the tenant pays some or all of the property's costs in addition to rent. When the tenant is paying for property taxes, insurance, and maintenance along with the rent, the lease is generally referred to as a triple net lease (NNN). **An absolute net lease is a triple net lease in which the tenant is also responsible for all building expenses and repairs, including roofing and structural repairs. ***Net leases are often used for large commercial and industrial leases. These leases TEND TO FAVOR THE LANDLORD'S INTEREST because property costs fall on the tenant.

Krening Realty has been found guilty of running deceptive ads. Which of these statements about the potential penalty is NOT true?

Krening's broker may face jail time.

ADA and Fair Housing Compliance in Property Management (PART 1)

Landlords and property managers are subject to federal, state, and local fair housing laws. It's illegal to use race, color, religion, national origin, sex, familial status, or disability to discriminate in the sale, lease, or financing of housing. The following real estate activities are subject to anti-discrimination laws: 1) Sale or rental of housing or residential lots 2) Provision of real estate brokerage services 3) Housing appraisals and financing 4) Advertising housing for sale or rent It's illegal to perform any of the following acts if the action discriminates against anyone in a protected class: 1) Refuse to sell or rent a house. 2) Offer different terms, conditions, or privileges when selling or renting a house. 3) Indicate a preference or limitation when advertising a home for sale or rent. 4) Coerce, threaten, intimidate, or interfere with a person's housing rights.

ADA and Fair Housing Compliance in Property Management (PART 4)

Landlords are required to make reasonable accommodations in order to ensure that people with disabilities are not discriminated against. Reasonable accommodations include permitting tenants to make reasonable disability-based modifications at the tenant's expense and deviating from policies that would interfere with the tenant's ability to enjoy the property. Common deviations include assigning a parking space close to the building when the parking policy is that there are no assigned spaces, permitting transfers to a ground-floor unit, adding grab bars, and allowing assistance animals when there is a "no pets" policy. *** Assistance animals are not considered pets, and landlords may not charge a pet deposit or additional rent due to the presence of an assistance animal.

PMI (Private Mortgage Insurance)

Lenders may require private mortgage insurance (PMI) on conventional loans when the down payment is less than 20% and loan-to-value ratio is in excess of 80%. Loans with an LTV in excess of 80% don't conform to Fannie Mae/Freddie Mac guidelines, so lenders may require PMI to offset the risk. PMI protects the lender in case of borrower default. Lenders must terminate PMI when the principal balance is scheduled to reach 78% of the original property value or when the mortgage loan reaches its originally scheduled amortization midpoint. Borrowers may request PMI termination when the principal balance drops below 80% of the loan balance. Depending on market conditions and property updates, this may permit borrowers to remove PMI earlier in the mortgage loan term.

TILA/RESPA Integrated (TRID) disclosures

Lenders must provide the Loan Estimate (LE) to applicants within three business days of loan application. The Loan Estimate provides buyers with the costs they are likely to pay at settlement and discloses the mortgage loan specifics, such as its key features, costs, and risks. Lenders must provide the Closing Disclosure (CD) at least three business days before closing, provides final loan details, including the loan terms, projected monthly payments, fees and other closing costs. TRID disclosures apply to financed home purchases, most loan assumptions, refinances, and home improvement loans. Reverse mortgages, home equity lines of credit (HELOCS) and manufactured housing loans that aren't secured by real estate are exempt from TRID disclosures rules, other RESPA still otherwise applies. Most commercial and business loans are also exempt from RESPA, unless the loan is made to purchase or improve a rental property of one to four units.

Material facts and defect disclosure (part 4)

Licensee disclosure responsibilities vary depending on the state. -Some states limit required property disclosure to adverse material facts physically located on the property; others specifically call for the disclosure of any material fact that would influence decisions about the property. -Licensees must be aware of state law regarding disclosures. In non-full-disclosure states, the buyer's agent has a responsibility to counsel the buyer about due diligence and home inspections and to follow up on red flags. -The buyer's agent's responsibilities are the same as in caveat emptor states, with the added tasks of obtaining and reviewing the property disclosure statement. -In many states, both the buyer's and seller's agent have the responsibility to disclose something discovered during the inspection to all parties if it's material, adverse, actual, and affects the physical condition of the property (MAAP). -Some states have laws exempting inspection findings from disclosure. -The inspection report is the property of the buyer. If the listing agent requests a copy, the report can only be released with the buyer's permission. -Sellers and listing agents often choose not to review the inspection report, especially if the buyers terminate the contract based on the report, because they are then liable to report any adverse findings. -There is typically no obligation to share a prior inspection report with a new prospective buyer.

Material facts and defect disclosure (part 3)

Licensee disclosure responsibilities vary depending on the state. -Some states make it the responsibility of the listing agent at the time of listing a property for sale to ask their clients about red flags in order to be in a position to know about material facts. -A licensee is required to disclose either known adverse material facts or all known material facts according to specific state laws. Disclosure should be made before contractual agreement takes place. -Information that must be disclosed by the licensee is anything that meets the MAAP standard: material, adverse, actually known, and related to physical condition. -Adverse means negative information about a property that might lower the value of the property. -Information is material if it affects a buyer's decision to buy a given property. Different information will be weighted differently based on the buyer. -Actual knowledge is information that's known about the physical condition of a property or that which could be plainly noticed. -In states that don't require full disclosure, the seller's agent has a responsibility to notify the seller of the following duties: to disclose items that are required to be disclosed, to be honest, and to not hide defects. -In full disclosure states, the seller's agent has a responsibility to notify the seller of the duty to disclose all known material facts.

Requirements for confidential information - Use of technology

Licensees and brokerage firms are responsible for ensuring the safety and confidentiality of client information and must take appropriate precautions to protect information from hackers and identity thieves. Firms can reduce the risk of compromising client data by reducing risk to the firm's computer systems. Standard security system policies and procedures should be in place, communicated, and enforced. Licensees and brokerage firms should identify the methods they use to protect client information. Confidential information that brokerage firms collect and/or store must be disposed of in a secure manner.

Responsibility for trust monies, including commingling/conversion

Licensees and brokerage firms must follow all state regulations regarding handling trust monies. Licensees must turn over trust monies to the broker, who is ultimately responsible for the money. Earnest money funds must be deposited into the proper trust account after the seller accepts the purchase offer and according to the timeline established by the state. Earnest money funds are specific to the purchase contract for which they're written. Buyers must submit earnest money funds for each offer they submit. If the transaction goes to closing, the escrow agent disburses escrow funds when all parties to the transaction, including the lender, are satisfied that all conditions have been met. If the transaction does not go to closing, the escrow agent needs written directions from both parties indicating how to disburse the funds. In the absence of agreement, state laws dictate how funds should be handled. Commingling and conversion are two primary ways licensees can go wrong when handling earnest money.

Property condition that may warrant inspections and surveys (part 1)

Licensees should encourage all buyers to obtain home inspections and additional tests as necessary, even on new construction. Seller disclosures aren't always accurate, and sellers might not be aware of all defects. Home inspections can help determine the true condition of a property. A home inspection contingency is one of the best ways to protect the buyer's earnest money. Inspectors will seek to uncover any safety or health hazards on a property during a home inspection, as well as defects that could jeopardize a structure's integrity, such as moisture or pest infestation. Licensees aren't required to perform inspections, though some states do require that licensees disclose known material facts (information that might have resulted in a different buyer or seller decision related to performing or terminating the contract or the price paid or received) as well as those they should have known.

Key elements of different types of listing contracts

Listing contracts (agreements) should be written for the greatest level of licensee and client protection. Agreements are generally written, but some jurisdictions consider oral listing agreements to be binding. They almost always require a definite end date. Listing agreements document the licensee's and the seller's duties. Licensee duties documented in the listing agreement include confidentiality, the disclosure of material facts, the obligation to market the property, and the obligation to promptly present all offers and counteroffers. Clauses in the listing agreement specify whether the property can be placed on the Multiple Listing Service (MLS), marketed on the internet, or marketed via yard signage. *** A net listing is one in which the broker contracts with the seller to receive all net proceeds from a sale above a specified sale price. Net listings are illegal in most jurisdictions because they create a conflict of interest and encourage unethical behavior such as trying to sell a property for more than its value. *** Exclusive agency agreements allow only one brokerage to market and sell the property. However, if the seller finds her own buyer, she doesn't pay commission to the brokerage. *** An exclusive right-to-sell agreement provides the listing agent with a commission no matter who brings the buyer to the transaction. Exclusive right-to-sell agreements include definite start and end dates. *** Open listing agreements allow the seller to work with multiple agents. They don't always result in a listing agent earning a commission, as only the agent who successfully brings a buyer will be paid.

Lawrence is a buyer closing on a home for which he's obtaining financing. Which document will give Lawrence an estimate of the costs he'll likely pay at closing?

Loan Estimate The Loan Estimate, required by the Dodd-Frank Act, provides buyers with the costs they're likely to pay at settlement and discloses the mortgage loan specifics, such as its key features, costs, and risks.

You may be asked to perform a number of interest and payment calculations on your exam:

Loan balance × interest rate = annual interest. Annual interest ÷ loan balance = interest rate. Annual payment ÷ loan balance = interest rate (convert to a %) Annual interest ÷ interest rate = loan balance. Divide annual interest by 12 = monthly interest. Monthly payment × total number payments - original loan value = total loan interest amount. The monthly payment credited toward principal = interest portion - interest from the payment. The remainder goes toward principal.

Property transfer fees that aren't included in the sales price are called closing costs. These costs may include:

Loan fees Appraisal and survey fees Title insurance Legal fees Real estate commissions Tax and insurance prepayments Transfer fees The LE furnished by lenders provides an estimate of closing costs the buyer will pay.

Debt Ratios

Loan underwriters analyze the borrower's credit, capacity, and collateral. They'll review loan documentation to determine the borrower's ability to repay the loan (capacity), ensure that the property value is adequate to support the loan (collateral), and verify the borrower's financial ratios (credit). Lenders (and underwriters) want to see solid property values (as supported by the appraisal), strong buyer credit scores, and a steady credit and employment history. Underwriters will calculate TWO RATIOS: 1) HOUSING RATIO - The housing ratio (aka the front-end ratio) is the borrower's projected monthly housing expense (principal, interest, taxes, insurance, second liens, and association fees) divided by income. - - required ratio will vary depending on loan type and lender. - Conventional loan: Typically 25% - 28% - FHA loan: Typically 31% - 40% - VA loan: Lenders ignore the front-end ratio 2) DEBT RATIO - The debt ratio (aka debt-to-income ratio or the back-end ratio) is the total of all the buyer's debt obligations divided by income. The required ratio will vary depending on loan type and lender. - Conventional loan: Typically 33% - 36% - FHA loan: Typically 43% - 50% - VA loan: Typically can't exceed 41% After loan package analysis, the underwriter will recommend application approval or denial or may request more documentation.

What is a benefit to business owners for leasing instead of buying real estate for their business?

Monthly rent is a tax deduction as a business expense

Rights and obligations of parties to a contract

Most contracts include many pages of information about the terms and conditions that contracting parties must meet. Contract law also includes some implied rights and obligations of parties to a contract. These rights and obligations are not necessarily specified within the contract. - A contract is a legally binding agreement. All parties to a contract must perform the contract terms or be considered in breach of contract. - The parties have a right to form and execute the contract free from undue influence (taking advantage of someone based on a relationship) or duress (wrongful pressure, coercion, or force involving a threat). - The parties should operate in good faith to execute the contract with no deceptive practices. - All parties must comply with contract terms in a timely manner (time is of the essence). - All parties have the right to a transaction that's free from fraud or misrepresentation.

Employees (at brokerages)

Most licensees practice real estate as independent contractors. Some firms, however, hire licensees as employees. As a brokerage firm employee, licensees are expected to adhere to the firm's rules regarding work hours, work processes, required training, etc. Firms compensate employee licensees based on time worked and must deduct federal and state income taxes from the licensee's paychecks. Firms are also responsible for unemployment and worker's compensation payments and may provide benefits to employees. Brokerage firms and the managing or supervising broker are responsible for proper supervision of unlicensed employees and must be particularly careful to not allow unlicensed assistants to perform tasks that require a license.

Nelson manages a building with a strict "no pets" policy. Shanna, who is disabled and uses an assistance animal, wants to rent a unit in the building. What action can Nelson legally take?

Nelson can allow Shanna to rent the unit but can't charge a pet deposit or any extra fees.

What are the main benefits to veterans of the VA loan program?

No down payment, no mortgage insurance and no prepayment penalty

Aggrieved parties, including licensees, can file fair housing complaints through the

Office of Fair Housing and Equal Opportunity for up to one year following the time the alleged discrimination occurred. Licensees may not file on behalf of any other aggrieved party.

Sub-surface leasing rights (Other less common types of commercial leases)

Often used for minerals, oil, or gas, a company will enter into a lease agreement with the landowner. The company explores the land, looking for minerals, oil, or gas in exchange for a cash payment to the landowner. If the company finds the item, the landowner usually gets a percentage of the item's value. If nothing is found, the lease expires.

Many new construction homes come with home warranties backed by the builder. These may cover workmanship and materials, as well as systems and appliances:

On average, construction warranties cover structural damage or major construction defects (such as foundation issues) for 10 years. Major systems (heating, air conditioning, electrical, etc.) may also be covered for a period of time, such as two to five years. Both the FHA and VA require new-home builders to provide a Warranty of Completion of Construction to protect buyers of newly built homes financed with FHA or VA loans. The warranty assures that the property was built according to plan and protects the buyer against equipment, material, or workmanship defects. The warrantor (likely a third-party home warranty provider) agrees to repair and pay for covered defects and restore any portion of the home damaged by fulfilling warranty obligations. The one-year warranty begins when title is conveyed to the buyer, the date construction is finished, or upon occupancy, whichever is first.

Offers/purchase agreement names

Once signed, the sales contract is a binding, written agreement between the buyer and the seller. Other names forms (drafted by a licensed attorney) used to write a sales contract are: 1) Offer to purchase 2) Sales agreement 3) Contract of purchase and sale 4) Purchase agreement 5) Earnest money agreement 6) Agreement of sale

Points

One loan point is equal to 1% of the borrower's loan amount. Lenders charge loan points (aka loan origination fees) as compensation for processing a new mortgage loan. Origination fees are typically between 1% and 3% and typically can't be more than 3% of the loan value; these fees may be negotiable between the lender and borrower. Borrowers may choose pay discount points at closing to permanently reduce a loan's interest rate.

Ground lease (Other less common types of commercial leases)

One party owns the land and a different party owns the improvements. Land is leased on a long-term basis, often 50-99 years. The lessee builds and owns an improvement, such as an office building, on the leased land. The rent paid is referred to as ground rent. At the conclusion of the ground lease, the improvements become the lessor's property

Bonnie is calculating the square footage of a listing. The upper level of the home is 450 square feet. The main floor is 1,200 square feet, including an unfinished laundry area that's 225 square feet. The 1,200-square-foot basement is finished. Bonnie's MLS system disregards below-grade square footage. What square footage will Bonnie mention in her MLS listing and marketing materials?

Only finished above-ground space should be counted in Bonnie's MLS listing. That means the square footage of the upper floor plus the main floor (minus the unfinished laundry area). Bonnie should report 1,425 square feet (450 + 1,200 - 225). 1,425

Property managers may be responsible for both operating funds and funds belonging to others, including prepaid rent and security deposits.

Operating accounts are used to pay expenses related to managing the property, such as maintenance, utilities, contractor expenses, or staff salaries. Rent is deposited into these accounts. Trust accounts, also called escrow accounts, hold funds belonging to others.

Key elements of buyer brokerage/tenant representation contracts

Other licensees can't represent the buyer during the term of an exclusive right-to-represent agreement. Non-exclusive/open buyer representationagreements allow the buyer to work with many agents during the home search process. If a buyer enters into an exclusive agreement with a broker, any open agreements are terminated. The agreement should address compensation as well as obligations the parties have to one another. Other common elements of a buyer representation agreement include a general description of the property sought by the buyer including price, location, size, etc. The buyer's duties per a representation agreement include authorizing the agent to locate and show properties, while the agent's duties include showing properties, assisting in negotiations, notifying the buyer of any material changes, and providing guidance.

Income tax implications for homeowners include:

Potential deduction of points paid and prepaid interest at acquisition. Potential deduction of property taxes, mortgage interest, and depreciation during the ownership phase. Exclusion of some or all of the gain on the sale of a personal residence, depending on circumstances.

PITI

Principal, Interest, Taxes, Insurance

Security Instrument

Promissory notes are almost always accompanied by a security instrument that pledges the financed property as collateral for the mortgage loan and gives lenders the right to foreclose if the borrower defaults on the mortgage loan. The security instrument may be either a deed of trust or a mortgage.

Property condition that may warrant inspections and surveys (part 6)

Properties that are located within the boundaries of a natural hazard, a specifically regulated area, or an area designated by insurance companies as high hazard may be difficult and expensive to insure. - Sellers might not disclose issues that make a property uninsurable, so buyers should perform due diligence. - Issues that may make a property difficult or impossible to insure include homes that have had a history of claims based on high-risk issues, such as mold, or those located in areas in which there are high claim rates for weather events, such as high wind and hail storms.Insurance companies check the Comprehensive Loss Underwriting Exchange database to help determine insurability of property.Insurance contingencies are common in sales contracts. Any obvious property additions or alterations deserve an investigation as to whether permits were obtained and work was performed correctly. Unpermitted work could result in partial or full disassembly of the work to inspect it, as well as possible correction or restoration to the original state.

ADA and Fair Housing Compliance in Property Management (PART 2)

Property managers must be familiar with fair housing laws, especially when attracting and selecting tenants or when working with property owners. Blockbusting and steering are illegal under the federal Fair Housing Act and must be avoided. Blockbusting manipulates owners into the fear that the entry of a protected class will negatively impact property values to encourage an owner to rent or sell. - This fear is used to convince owners to sell or rent at a lower price. Steering occurs when members of protected classes are guided (or steered) toward certain areas, buildings, or neighborhoods by a property manager or real estate licensee. - For example, only showing families with children units on the first floor is an example of steering. Even phrases like "kid friendly" could be perceived as steering. - Basically, prospective tenants have the right to see all available housing options and to select the option of their choice. - Property managers should not attempt to steer the tenant one way or another on the basis of a protected class.

Property Managers and Escrow Accounts (PART 1)

Property managers use trust accounts for moneys collected from tenants, such as security deposits or property management commissions collected in advance from property owners. Security deposits are used to make repairs if the tenant moves out and leaves the unit in poor condition. Rents that tenants paid in advance should also be kept in escrow until they're due. In many states, having a single clearing account to serve as the trust account for all property owners is acceptable. Some states, or a specific property management agreement, may require the property owner to set up an account for an individual property owner. Funds must be deposited within the length of time outlined in state laws and regulations. This is typically one, two, or three business days from receipt. State laws strictly regulate the use of trust funds. It's illegal for trust funds to be mixed with operating funds (commingling) or for trust funds to be used for any operating or personal purposes (conversion).

Property tax calculations

Property taxes are the largest funding source for local services such as schools, roads, and police and fire protection. Calculating property taxes requires knowing the appraised value, tax assessment ratio (may vary by state), and tax rate. Value × assessment ratio = assessed value. Assessed value × tax rate = annual property tax. Divide by 12 (months in a year) to get the monthly property tax amount. Tax rates are expressed as a rate per dollar amount of value, such as $3 per $100. Divide $3 by $100 to calculate the tax rate. So, $3 ÷ $100 = .03. Tax rates can also be expressed as mills. When mills are used, it's a rate per $1,000. So, 30 mills is the same as $30 ÷ $1,000.

Which of the following situations may result in inverse condemnation?

Property values decrease because adjacent property was rezoned.

Prorated items

Prorations are shared expenses that either party owes at closing are prorated (divided between) the parties depending on when closing occurs. Typical prorations include: - Property taxes and HOA dues - Fuel (propane or oil tank) - Water and sewer charges Prorated items will be either accrued or prepaid. Accrued expenses are items the seller owes on closing day but that will eventually be paid by the buyer (unpaid current property taxes, for example) and appear in the seller's debit column and the buyer's credit column. Prepaid expenses are those already paid by the seller but that the buyer should pay a portion of (such as prepaid real estate taxes, utilities paid in advance). These items are credited to the seller and debited to the buyer.

Purpose and definition of trust accounts, including monies held in trust accounts

Real estate escrow accounts hold money on behalf of others. This includes buyers' earnest money deposits, rental security deposits, and any other funds being held in trust. The account in which this money is deposited must be separate from the broker's general operating account. Escrow agents oversee trust or escrow account money. Often the broker acts as the escrow agent; a title company representative or attorney may also serve as the escrow officer. Buyers offer earnest money to show they intend to follow through with a transaction. Escrow funds (earnest money) don't belong to the seller, but instead should be kept in an escrow/trust account until all contractual conditions have been met. Ideally, earnest money is credited to the purchase price of the property, but it may be used to compensate the seller if the buyer breaches the contract.

What is an example of a BPO?

Real estate professional will often just drive by the property and take photos, then complete paperwork for the lender

Real property

Real estate, plus all of the interests, benefits, and rights included in ownership

The Real Estate Settlement Procedures Act (RESPA) ensures that buyers

Receive an estimate of closing costs (on the Loan Estimate (LE) form) from the lender within three days of loan application and a final disclosure of closing costs (on the CD) at least three business days before closing. This gives the buyer the opportunity to compare the LE with the CD and determine what, if any, changes may have occurred.

It's illegal to perform any of the following acts if the action is based on discriminatory factors:

Refuse to sell or rent a house Offer different terms, conditions, or privileges when selling or renting a house Indicate a preference or limitation when advertising a home for sale or rent Coerce, threaten, intimidate, or interfere with a person's housing rights

What is the community reinvestment act?

Requires lenders to meet the needs of their communities by investing in development and rehabilitation efforts including those that enable low and moderate income neighborhoods.

To avoid compromising a licensee's independent contractor status, brokerage firms should avoid:

Requiring that licensees work set hours, perform work at a specific location, or attend staff or training meetings Providing 401k, health insurance, or other benefits Compensating licensees based on time worked rather than sales output Supplying tools and materials to the licensee

Which of these statements about the homeowner's rights of redemption is true?

Rights of redemption with REOs may be less of a problem than with other distressed properties

In full seller disclosure states, whose responsibility is it to complete the seller disclosure form which will be reviewed by prospective buyers?

SELLER

Ari owned an acreage in a rural area. He sold a small portion of it to a neighbor in an informal transaction. There's no record of the sale or change of ownership. A developer has offered Ari several million dollars for the entire acreage, and Ari eagerly accepts the offer. What covenant is Ari in danger of violating?

Seisin The covenant of seisin guarantees that the grantor owns the property that appears in the deed. Because the sale of property to Ari's neighbor was never recorded, his deed still shows that he owns the entire parcel.

The following activities are considered covered transactions related to anti-discrimination laws:

Selling or renting housing or residential lots Providing real estate brokerage services Performing appraisals or providing financing Advertising housing for sale or rent

Property condition that may warrant inspections and surveys (part 4)

Some structural issues are fairly simple to spot, while others are hidden. The presence of any of these issues indicates a need for further investigation by a trained specialist: 1) Discolored or curling shingles, water buildup or ice damming in gutters, damage to flashing, water damage along the fascia, and cracks, holes, or rot on the soffit 2) Missing, cracked, displaced, or otherwise damaged roof components 3) Creosote buildup on the exterior of the chimney, drafts near the fireplace, a cracked or sloping hearth or firebox, and loose or crumbling bricks 4) Cracks in foundation or basement walls, moisture in the basement, misaligned doors and windows, cracks in drywall, and separation around garage doors 5) Damaged or broken window glass and screens, windows that stick or won't stay open, damaged hardware, and leaking or damaged seals 6) Soft or uneven floors along with discoloration along walls and a musty odor 7) Discoloration in the attic or around windows and doors

Electronic signature and paperless transactions

State laws govern the use of electronic documents and signatures. The Uniform Electronic Transactions Act (UETA) is an attempt to bring some degree of standardization to state laws regarding use of electronic documents and signatures. It gives electronic signatures, records, and contracts the same legal weight as paper records with "wet" signatures (signed by hand in ink). The UETA defines an electronic signature as "an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign." In many states, electronic documents and signatures can be used only if the parties to the contract agree.

Puffery

Statement that appears to a reasonable person as an exaggeration that wouldn't be relied on. Puffing is permissible (though perhaps not wise).

What is novation?

Substitution of one party for another, with the full and complete release of the original party from any obligations under the terms of the contract

Eva, Stella, and Lynn own a vacation home two blocks from the beach. Sadly, Stella passed away this winter, and so when summer arrives Eva and Lynn will be sharing the home with Stella's nephew Drew, to whom Stella willed her share of the property. What type of ownership is this?

Tenancy in common This is a form of shared ownership, but only tenancy in common provides for inheritability—the other forms share the rights of survivorship (the existing tenants assume the deceased's share of the property).

ADA and Fair Housing Compliance in Property Management (PART 3)

The Americans with Disabilities Act, or ADA, is also important for property managers. While the ADA is important in commercial property management, apartment buildings are generally subject to ADA regulations. - ADA requirements impact any organization that provides goods or services to the general public. - ADA standards for accessible design (SAD) apply to new construction and remodeling of public accommodations and commercial buildings. - Community spaces in apartments built before 1990 must be ADA compliant. All public spaces must be fully accessible in apartments built after 1990. - The U.S. Department of Housing and Urban Development (HUD) enforces the ADA as it relates to public housing, housing assistance, and housing referrals. - Landlords and property managers must modify existing practices and rules to accommodate tenants with disabilities. - Tenants with disabilities must be allowed to reasonably modify their residences to accommodate their disabilities. - Commercial tenants may be responsible for providing necessary accommodations as provided in the lease agreement.

FHA Insured Loans

The Federal Housing Administration (FHA) insures lenders against loss in case of borrower default. FHA borrowers must pay a minimum down payment of 3.5% A mortgage insurance premium (MIP) applies to all FHA loans for the life of the loan; it's paid as an upfront charge at closing then as an annual premium until the loan is paid off or refinanced. FHA loans are available to anyone who qualifies but may be more attractive to borrowers who have lower credit scores and down payments. FHA imposes a maximum loan amount (aka FHA lending limit) that it will guarantee for each borrower. These loan limits typically mimic conventional conforming loan limits. Buyers who wish to borrow more than these limits must make up the difference with their down payment.

Situations requiring appraisal by certified appraiser

The Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) of 1989 requires that appraisals performed in conjunction with federally related transactions must be completed by state-certified or licensed appraisers. Federally related transactions are not FHA insured or VA guaranteed and will not be sold to a GSE such as Fannie Mae or Freddie Mac. Residential properties valued at $400,000 or less are EXEMPT from federal appraisal requirements. Purchases financed with a loan insured by the Federal Housing Administration (FHA) must be appraised by a state-licensed appraiser who's approved by the U.S. Department of Housing and Urban Development Purchases financed with a loan guaranteed by the U.S. Department of Veterans Affairs (VA) must be appraised by a VA certified, state-licensed appraiser. Key mortgage industry players, including Fannie Mae, Freddie Mac, and the Federal Housing Finance Agency (FHFA) implemented the Appraiser Independence Requirements (AIR) in 2010. AIR's intent is to ensure that appraisals reflect an accurate, unbiased property value by requiring that appraisers be: -Certified or licensed in the state in which the appraised property is located -Knowledgeable about the local real estate market -Qualified to appraise the subject property

There are some exceptions or special circumstances allowing for the exclusion of some prospective renters that would otherwise be protected. For example:

The Housing for Older Persons Act of 1995 specifically permits some housing facilities to discriminate based on familial status. This exemption permits senior housing facilities and communities to refuse to sell or rent homes to families with minor children. The facilities must meet certain requirements to be eligible for the exemption. A private club that restricts its membership may rent or sell housing to its members only as long as it doesn't offer housing to the general public. Religious organizations that sponsor housing may restrict residency to members of that organization as long as the religion doesn't discriminate against protected classes when allowing membership to the organization. The Mrs. Murphy exemption (if a dwelling has four or fewer rental units and one of the units is owner-occupied, the property is exempt from the federal Fair Housing Act if the owner doesn't run discriminatory advertising) doesn't apply if the property owner is represented by a real estate licensee.

ADA and Fair Housing Compliance in Property Management (PART 5)

The Office of Fair Housing and Equal Opportunity (OFHEO), a subdivision of HUD, enforces fair housing laws, including ADA and the federal Fair Housing Act. - Aggrieved parties, including licensees, can file fair housing complaints through FHEO for up to one year following the time the alleged discrimination occurred. Licensees may not file on behalf of another aggrieved party. - A fair housing specialist reviews the complaint, determines if a potential violation exists, and, if so, files a formal complaint. - The formal complaint may be referred to a local or state agency, or may be investigated by FHEO after HUD assigns investigators. - The investigation involves notifying the alleged violator and gathering evidence needed to determine whether a violation did occur. - If found guilty of federal fair housing violations, licensees may face lawsuits and payment of compensatory damages, attorney fees, or civil penalties. Real estate licenses may also be subject to license suspension or revocation.

RESPA

The Real Estate Settlement Procedures Act (RESPA) of 1974 is a consumer protection statute designed to protect homebuyers from unscrupulous lending and settlement practices. - The Dodd-Frank Wall Street Reform Act of 2010 (Dodd-Frank Act) handed RESPA responsibility to the Consumer Protection Finance Bureau (CFPB). Licensees are prohibited from paying or receiving a fee, kickback, or anything of value based on referring customers or clients to a settlement service provider. Third-party settlement providers may compensate licensees and brokerage firms only for actual services rendered to licensees and brokerage firms. Licensees and brokerage firms may distribute service provider marketing materials (pens, calendars, etc.) with the service provider's name and contact information. Under certain circumstances, service providers may sponsor educational events for and offer continuing education credits to licensees as long as any costs traditionally borne by the licensee aren't defrayed by the event. This exemption refers to short-term events (a lunch-and learn event, for example), but not necessarily to an all-expense-paid trip to Tahiti in which a short period of time is devoted to training.

Truth in Lending

The Truth in Lending Act (TILA) of 1968 requires lenders to disclose credit terms and conditions when advertising triggers loan terms, so as not to mislead consumers. Trigger terms in ads that would require the full disclosure of all terms include down payment, payment amount, number of payments, and interest rate (other than APR). Regulation Z requires mortgage lenders to follow TILA disclosure requirements for real estate advertisements that include credit terms.

USDA/rural loan programs

The U.S. Department of Agriculture (USDA)offers some state and local mortgage loan programs. The USDA Farm Service Agency (FSA) offers direct guaranteed loans to farmers and ranchers and for rural housing. Congressional appropriation funds these loans. Rural development loans are government loans specifically for family farms and rural home financing. They offer a longer payback period to reduce monthly payments. FSA loans can be up to 100% of the purchase price, set for 33 years (38 for very low-income borrowers), and provide loan guarantees for up to 95% of the loss of principal and interest.

VA Guaranteed Loans

The U.S. Department of Veterans Affairs (VA) guarantees loans made to qualifying veterans. VA loans don't require down payments or mortgage insurance and have no pre-payment penalties. VA loan eligibility depends on the length and type of service, but in general are available to military members who have served 181 days active duty or three months during war time. Most VA lenders adhere to conventional conforming loan limits. This doesn't limit the amount that buyers may borrow, but borrowers whose loans exceed these limits must make a down payment. The VA guarantees up to a quarter of the loan limit amount should the buyer default; this minimizes risk for lenders to make up for the no-down-payment VA loan structure.

The primary impact on licensees comes from the Do Not Call Registry (DNC)

The act prohibits calls to consumers before 8 a.m. or after 9 p.m., anonymous and robo calls, and calls to cell phones. The DNC requires licensees to check the DNC registry at least every 31 days and drop any disconnected, registered, or reassigned phone numbers from their contact lists. Licensees may call consumers with whom they have had an established business relationship for 18 months after the last interaction. Those who violate the DNC may be subject to penalties in excess of $40,000 per violation/separate call.

Termination of an agency relationship through EXPIRATION

The agency relationship will end if the agency agreement between agent and client expires.

The property tax aspects of transferring real property include:

The calculation of property tax owed by both the buyer and seller at closing. The possibility that a sale will trigger reassessment of the property and increase taxes. Review of the title commitment to ensure that there are no tax liens against the property. The buyer's potential income tax deduction for property taxes and mortgage interest paid. The seller's potential capital gains tax paid on the financial gain resulting from the property sale. Federal tax laws may permit sellers to exclude proceeds (up to $250,000 or $500,000 if married and filing jointly) of the sale of their primary residence from capital gains taxes.

Chain of Title

The chain of title establishes the path of property ownership from its first owner to the current owner. The chain begins with the current owner and works backwards. The grantor-grantee index establishes chain of title. When the last grantee is not the next grantor, a gap exists in the chain. Gaps must be resolved, sometimes by branching out from public records, in order for clear title to be given.

Bart just toured his fourth patio home of the day. To help him remember what he saw in each one, he's making notes about décor, updates, and inclusions that will stay with the property. Which of the following items is NOT considered personal property and would therefore stay with a home?

The chimenea on the back patio? The area rug in the dining room? The banker's lamps in the den? The chandelier in the foyer? CHANDELIER - The chimenea, area rug, and banker's lamps are all free-standing and easily removed. The chandelier, however, is not a free-standing light fixture and should be considered real property.

Cost Approach

The cost approach is based on the concept that the entire property is worth the sum of the value of the land and the value of the improvements on that land. Appraisers use and rely on this approach when the property is unique and is not being used to generate rental income. A movie theater, hospital, church, or school fall into this category. It is also used in newly constructed or unique high-value homes. The value of land (as though it were vacant with no improvements on it) plus the depreciated cost of recreating the existing improvement equals the market value. The cost of recreating the existing structure/improvement is adjusted based on depreciation since the structure being sold is not brand new. Depreciation, as it relates to appraisals, is unrelated to tax depreciation. There are 3 causes of depreciation: external depreciation, functional obsolescence, and physical deterioration. Looks at curable depreciation, incurable depreciation, replacement cost and reproduction cost ***The cost approach assumes the land is vacant and bases the opinion of value on highest and best use.

Deed of Trust

The deed of trust (or trust deed) involves 3 parties: the trustor (borrower), the beneficiary (the lender) and the trustee (an independent third party who holds the deed of trust). States that use a deed of trust as the primary security instrument are referred to as title theory states because the lender/trustee holds legal title to the property until the mortgage loan is paid in full. Borrowers hold equitable title, which means that they have possessory rights (can live in and use the property) and have the right to obtain legal title once they've paid the loan off. If foreclosure becomes necessary, a power of sale clause in the deed of trust permits the lender to use a non-judicial foreclosure process; e.g., the lender doesn't have to go to court to enforce foreclosure proceedings. When the loan is paid in full, the lender issues a release of deed of trust and the trustee issues a reconveyance deed. The reconveyance deed is required because the trustee retains the legal property title until the loan is paid.Lenders also mark the promissory note "paid" and return it to the borrower.

Responsibilities of escrow agent

The escrow agent may be a broker, title representative, escrow officer, or attorney, though the most common is likely to be a title company representative. This individual is also called the closing agent and has many responsibilities, including: - Properly manage any escrow funds, including distributing escrow funds (based on instructions from the parties or the court) in case of a dispute. - Manage transaction documents and instructions from the parties. - Perform (or delegate the performance of) the title search. - Work with lenders and other necessary third parties to get required information. - Manage contract instructions, broker commissions, and title policy. - Prepare closing documents and conduct the closing meeting. - Record required documents. - Verify funding of buyer's loan and arrange payoff of seller's loan. - Distribute funds. - File 1099-S forms as necessary.

Government disclosure requirements (LEAD)

The federal government doesn't mandate disclosure on many issues (states typically step in to fill this void), but it does strictly enforce disclosures regarding lead hazards. Lead is most often found in water and paint. Sellers in residential real estate transactions involving properties built before 1978 must provide a lead-based paint disclosure and EPA-produced "Protect Your Family ... " lead safety pamphlet to the buyer. The seller must disclose any known presence of lead-based paint or any property reports that have been prepared related to testing for the presence of lead. The presence of lead is most dangerous for children. Sufficient quantities of Inhaled or ingested lead-based products may cause behavioral problems, learning disabilities, seizures, and, in extreme cases, death. Licensees representing sellers must ensure that they and their sellers are complying with the lead disclosure requirements (providing the pamphlet, prior test results, etc. Licensees representing buyers should make sure that if a property was built before 1978 that the safety pamphlet is provided and request any prior test results. They should also ensure buyers know they have a 10-day window to have a lead inspection or risk assessment performed, if they'd like.

Covenant of Quiet Enjoyment

The grantor assures that the grantee's use and enjoyment of the property will be unimpaired and unrestricted, subject to public police powers and private deed restrictions.

Covenant Against Encumbrances

The grantor assures the grantee that there are no encumbrances against the title other than those identified in public records or the deed itself.

Covenant of Right to Convey

The grantor has the right to convey both title to and possession of the property.

Traditional Agency Duties (COALD)

The law of agency describes rules related to agency—the relationship between a real estate professional and the person or persons being represented. Traditional agency duties that spring from old English common law are the foundation for today's six fiduciary duties. Thus, the duties are quite similar: 1) Act in the principal's best interests 2) Disclose any compensation or profit 3) Maintain confidentiality 4) Act with reasonable care and skill 5) Account and care for any property received from or on behalf of the client 6) Obey lawful and reasonable instructions from the principal 7) Do not delegate authority or duty without the principal's consent 8) Avoid and disclose any conflict of interest Based on these general duties, licensees have many specific duties, including: 1) Seek a sale at a price and on terms acceptable to the seller 2) Showing buyers properties that meet their criteria 3) Ensure that all offers and counter-offers are presented in a timely fashion 4) Ensure that clients receive copies of all signed documents

Loan-to-value ratio (LTV)

The loan-to-value (LTV) ratio is the percentage of a property's value the bank loaned/will loan on. It's the ratio of the loan amount to the property's value, where value is the lesser of either appraised value or sales price. LTVR = (loan amount ÷ value) × 100.

LTV

The loan-to-value ratio (LTV) is the ratio of the loan amount to the property value (sales price or appraised value, whichever is LOWER); e.g., a $160,000 loan on a $200,000 home gives us an LTV of 80% ($160,000 ÷ $200,000 = .8, or 80%). Stated another way, a 20% down payment on a $200,000 loan is equal to $40,000 ($200,000 × .2 = $40,000). This gives borrowers an LTV of 80%. Lenders use LTV to determine required down payment amounts when initially writing mortgage loans or when homeowners apply for a home equity loan or a home equity line of credit. - LTV may also be a factor in the loan's interest rate, payment, PMI requirement, and loan type.

Alison and Brent are financing their house purchase of $232,500 with an FHA loan. Their credit score qualifies them for the minimum down payment. What do they need to put down?

The minimum down payment for an FHA loan is 3.5%, so Alison and Brent's down payment needs to be $8,137.50 ($232,500 x 0.035).

General warranty deed

The most common deed types are general warranty, special warranty, and quitclaim deeds. 1) A general warranty deed (also called a full covenant and warranty deed) offers the greatest warranty to buyers and is the preferred type of deed in most situations. 2) The general warranty deed provides six covenants (promises). By statute, some states have combined the covenant of seisin and the covenant of the right to convey; in those states, only five covenants exist): *Three covenants provide present warranties: - Covenant of Seisin - Covenant of Right to Convey - Covenant Against Encumbrances *Three covenants provide future warranties: - Covenant of Quiet Enjoyment - Covenant of Further Assurances - Covenant of Warranty or Warranty Forever 3) A quitclaim deed carries with it no warranties to the grantee. It only releases any of the grantor's property rights to the grantee. The quitclaim deed is typically used to clear up a simple cloud on title.

PITI (principal, interest, taxes, and insurance)

The most common mortgage loan payment includes a portion of the principal balance, current accrued interest, and a 1/12th portion of the expected annual property tax and homeowner's insurance balances due (principal, interest, taxes, and insurance, or PITI). This may also be referred to as a budget mortgage, because it's easy to budget around the known monthly payment. Lenders place the property tax and insurance amounts collected each month in an escrow account and pay the annual tax and insurance bills when they come due.

When a leased property is sold, the existing leases remain in force. The new owner can't just kick existing tenants out. The tenant can continue to occupy the property through the end of the term. Additionally, if the lease agreement includes the right to renew the lease, the new owner must honor that right and allow the tenants to renew at the end of the term.

The original property owner must disclose to any prospective buyers that an existing lease for the property is in place. The new owners have to take property ownership subject to the terms of the existing lease and effectively become the tenants' new landlord, with all the benefits (rent payments) and responsibilities (property management) that come with that role.

Sale and leaseback (Other less common types of commercial leases)

The owner of a building sells the building (usually to an investor) and then leases the building back. Owners will usually do this as a way to raise extra capital. The original owner gains access to the equity, and the new owner has a reliable source of rental income.

Property condition that may warrant inspections and surveys (part 3)

The presence of pests (e.g., of the insect or arachnid variety), mold, and other interior hazards often have telltale signs. - Common wood-eating pests include termites, carpenter ants, and powderpost beetles. - The presence of mud tunnels in walls may indicate termite infestation. - Carpenter ants leave behind a sawdust-like material called frass when they burrow through wood. - Many small holes through wooden beams could indicate the presence of wood-boring beetles. Interior environmental hazards may include radon, asbestos, and mold. Testing can determine the presence of any of these hazards. - RADON occurs naturally in the environment and can be found in soil and well water. - ASBESTOS, a fibrous material that becomes dangerous when it deteriorates and becomes friable (easily crumbled) was used in many materials before the 1970s because of its fire-retardant qualities. Inhaled particles can damage the lungs over time. Only licensed professionals should handle asbestos. - MOLD growth is promoted by excessive moisture and lack of air circulation.Lead can be found in paint, plumbing, dust, soil, and drinking water. - LEAD causes many health issues, particularly among infants, children, and the elderly. In children, lead-related issues can include behavioral problems, learning disabilities, seizures, and even death.

Termination of an agency relationship through MUTUAL AGREEMENT

The principal(s) and agent may mutually agree to terminate an agency agreement.

The value of a property is affected by certain ECONOMIC PRINCIPLES OF VALUE. Some of these are:

The principle of CONFORMITY: A property's value is determined in part by how well it conforms to its surrounding area (how similar it is to other properties in the neighborhood). The principle of COMPETITION: A property's value is determined in part based on what else is available. The principle of SUBSTITUTION: A reasonable person will not pay more for a property if a comparable one can be had for less. The principle of CONTRIBUTION: The value of any given change to the property is dependent on the value of the property as a whole. Because of this, the same improvement to different houses may result in an increase in value in one, while the other sees no appreciable change. The principle of PLOTTAGE: An increase in value that occurs by combining adjacent parcels of land into a single parcel The principle of ASSEMBLAGE: The process of combing the parcels The principle of REGRESSION: A decline in value due to the decline in value of neighboring properties The principle of PROGRESSION: The increase in property value from increased surrounding property values The principle of ANTICIPATION: Changes in value may be caused by the expectation of events. A suburban residential property that is located near the site of a proposed public transportation facility may see an increase in value before the actual benefit is realized.

Offers/purchase agreements general requirements

The process of the buyer and the seller entering into a contract of sale typically begins when a potential buyer makes a written offer to a seller. Although the form used to make the offer may be titled sales contract, it is not a contract but an offer that isn't a contract until the parties come to acceptance. The party EXTENDING THE OFFER is an offeror. The party REXEIVING is an offeree. In the event the seller accepts the buyer's offer, there is a contract. In the event the seller does not accept the buyer's offer, typically the seller will extend a counter-offer to the buyer. When this happens, the seller becomes the offeror, and the buyer is the offeree. The sales contract identifies the parties and establishes the transaction's terms and conditions. The sales contract documents the earnest money amount, which the buyer and seller negotiate. Licensees may fill in the blanks on a sales contract form. ***Information often included in a sales contract include the earnest money deposit amount, specific closing instructions, closing agent selection, deed type to be presented by the seller, the proration method for rent, taxes, and other closing costs, buyer possession timeline, home warranty transfer, if available, and seller warranty specifics, if offered. Licensees should be careful to use only approved forms for additional terms. Drafting contract language may be considered practicing law without a license.

Why does the bank own REO properties?

The properties went through foreclosure process and didn't sell at auction

Financing and Lending - lending process application through closing (Cont. Again)

The real estate mortgage industry functions through collaboration between the primary and secondary mortgage markets. - The primary mortgage market provides loans to borrowers (mortgagors) and is made up of several lender types: 1) Commercial banks: National banks that offer consumer and business loans for resale on the secondary mortgage market 2) Savings and loan associations: Take savings deposits and make loans 3) Credit unions: Member-based cooperatives that take deposits, offer savings vehicles, and provide credit for auto and home loans 4) Mortgage brokers: Match consumers with lenders; don't fund loans 5) Mortgage bankers: Make loans using in-house loan processors and underwriters Lenders in the primary mortgage market put together packages of conforming loans and sell them to the secondary mortgage market to free up funds that provide additional consumer loans. Secondary mortgage market payers purchase lender loan packages and re-package them into mortgage-backed securities (MBS). They sell the MBSs to investors. - Fannie Mae, Freddie Mac, Farmer Mac, and Ginnie Mae, and lending institutions that buy loans from other lenders and investors make up the secondary market. - Fannie Mae and Freddie Mac are Government Sponsored Enterprises (GSEs), which is a privately-held corporation that has a public purpose. GSEs are corporations that are traded on major stock market exchanges (FNMA and FMCC). - Fannie Mae and Freddie Mac purchase mortgage loan packages from lenders. Ginnie Mae guarantees MBSs that are made up of government insured or guaranteed loans. Farmer Mac functions in the secondary market by buying qualified agricultural loans from lenders.

Sales or market comparison approach

The sales comparison appraisal approach is based on the principle of substitution and uses the prices for which similar properties have sold recently to estimate the subject property's market value. The similar properties are referred to as "comps" or "comparables." The property being appraised is called "subject property." This approach is most commonly used when appraising single-family homes. Since comparable properties are never exactly the same as the subject property, comparable properties must be selected and compared both qualitatively and quantitatively. Appraisers make adjustments to the comparable properties' sales prices in order to make the appraised value reflect the differences in features, location, condition, and even timing of the sale. So if the subject property has 2,400 square feet of living space and the comparable has 2,600 square feet, the appraiser will subtract from the comparable property's sales price to reflect the value of the 200-square-foot difference. Appraisers look for the most recent sales of the most similar houses possible. The fewer adjustments that need to be made, the less subjective the appraiser needs to be with respect to the value (not cost) of those differences.

Material facts and defect disclosure (part 2)

The seller in some states is required to disclose all items listed on the seller disclosure form and known latent defects not on the form; in other states, the seller may have the option to either answer the questions on the form or "disclaim" and say he or she will make no representations. Buyers who learn about undisclosed adverse issues prior to closing may terminate the agreement and try to get their earnest money back. ***Stigmatized properties are locations where a death (either homicide or suicide), crime, or haunting or other paranormal activity occurred. Most states do not consider these disclosable issues, but a few states do. Disclosing that a previous owner or resident had HIV or AIDS is a fair housing violation. Licensees should never disclose this information. Sellers and licensees need not disclose the presence of nearby sexual offenders. Buyers can be directed to websites or other resources to research information made available by Megan's Law.

Multiple offers

There are several strategies for responding to multiple offers. Countering more than one offer at the same time puts the seller at risk of having agreed to sell one property to two different buyers, which is illegal. A BACK UP CONTRACT is one that has been accepted contingent on the disposition of the primary contract. Licensees should recommend that clients get legal advice before entering into a back-up contract. An ESCALATOR OFFER is one where the buyer offers to top any existing offer by a certain amount, up to a specified cap. A licensee should encourage seller clients to counter-offer an escalator offer with one at the buyer's maximum price (which you can tell because of the cap). Again, licenses must present all offers, even if there are multiple for the same property, and even after an offer has been accepted.

Income analysis approach

This approach bases the current property value on potential income that the property can generate for residential investment rental properties, such as single-family homes or residential buildings that comprise two- to four-family units. ***This is the most reliable approach to value when the property being appraised is primarily used to generate rental income, which includes shopping centers, apartment buildings, and office buildings. Investment value can tell an investor the expected rate of return for a property. **There are 3 different methods for estimating value within the income approach: the gross rent multiplier, the gross income multiplier, and the capitalization method. -Gross rent multiplier (GRM) is used for the appraised value of four or fewer units. GRM = Sales price ÷ the gross monthly rent. Gross monthly rent x GRM = value. -Gross income multiplier (GIM) is used for the appraised value of five or more units (considered "commercial" property). GIM = Sale price ÷ gross annual income. Gross annual income x GIM = value. -Capitalization rate or cap rate: An annual rate of return from an income-producing property. Used by appraisers to estimate value of rent generating properties. Used by investors to compare one investment to another. Determine cap rate: Divide net operating income by value (or sales price) (I ÷ V = R).Determine value using the cap rate formula: Divide net operating income by cap rate (I ÷ R = V). Determine net operating income using the cap rate formula: Multiply cap rate by value (R x V = I). Capitalization is always based on net annual operating income numbers. Annual is not likely to be stated in the exam question. Determine net operating income: Begin with potential gross income, asking if every unit were rented for a full year, what could the owner expect to collect in rent? Subtract the probable loss as a result of projected vacancy from potential gross income to estimate effective gross income. Subtract operating expenses from effective gross income to arrive at net operating income.

Charlie represents Sue, a buyer. Charlie is being paid by Claude, the seller, through his brokerage. What's true about this situation?

This doesn't change the agency relationships.

In marketing her new listing, Alice asks the photographer to "touch-up" the photos of the house so that the old roof and siding look as though they are new. Which statement about this is true?

This is deceptive advertising for which both Alice and her broker may be disciplined. This is deceptive advertising for which Alice may be disciplined. Because her broker is responsible for Alice's license-related behaviors, the broker may also be disciplined.

When a non-U.S. resident (foreign person) sells real property in the U.S., the Foreign Investment in Real Property Tax Act (FIRPTA) requires that buyers withhold 15% of the gross sales price at closing.

This withholding is typically handled by the closing agent, but the buyer is responsible for ensuring that the funds are withheld and submitted to the IRS. The withholding is designed to ensure that the IRS receives any capital gains tax owed on the sale. When the seller submits a U.S. tax return, the amount withheld at closing may be refunded in full or in part, depending on the taxes owed with the return. A foreign person under FIRPTA is any person who is either not a resident alien (i.e., holder of a green card) or not a U.S. citizen.

Title Insurance

Title insurance protects buyers and lenders (through separate policies) against financial loss that might be incurred because of title defects discovered after closing. Sellers are required to provide clear, marketable title to properties conveyed. Title insurance protects sellers by enabling them to do so. The lender's policy offers protection of as much as the mortgage loan balance. The title policy will include a schedule of exceptions, which describes items the policy doesn't cover, such as: -Any liens recorded after the effective date of the title policy, including mechanic's liens, taxes, and special assessments -Any claims not shown in public records -Claims against a title by anyone who lives or lived on the property unless there's a recorded record of tenancy In the event of a claim, the title company will either pay the debt or take the claimant to court. If the title company pays the claim, it may seek reimbursement from the at-fault party. When a covered party—such as the property owner or the lender—gives the title insurance company the right to pursue the party who caused the loss instead of the covered party, it is called SUBROGATION

Importance of recording

Title transfers when the grantor delivers and the grantee accepts the deed. Once the grantor's signature has been acknowledged, the deed is recorded in the land records of the jurisdiction in which the property is located. Recordation ensures that the buyer's ownership (title) is protected. It provides constructive notice of the sale/purchase, which means that the record is publicly available to anyone who does a records search. This is in contrast to actual notice, which means that the parties have personal knowledge of a particular event.

TRID

Together, the LE and CD form what's referred to as TRID: TILA/RESPA Integrated Disclosures. The Dodd-Frank Act implemented use of these forms for all federally related mortgage transactions. These forms aren't required for home equity lines of credit (HELOCs), seller financing, or reverse mortgages.

Commission and commission splits

Total commission = sales price × commission rate.

Total number of loan payments Formula

Total number of loan payments = 12 (months per year) x number of years of the loan

In some states, a real property sale triggers a TRANSFER TAX that's collected at closing and payable when the deed is recorded.

Transfer tax may be paid by either the buyer or seller, as negotiated between them. Transfer tax rates vary by location, but the rate is usually a percentage of the total sale price or a dollar amount per $1,000 of the sale price.

CFPB/TRID rules on financing and risky loan features

Under provisions of the Dodd-Frank Act, the CFPB enforces regulations that prohibit lenders from funding higher-priced mortgage loans without regard for a borrower's ability to repay the loan. Lenders must take reasonable steps to ensure that consumers have the financial ability to repay a loan that uses a dwelling as collateral. Lenders comply with these provisions by writing what's referred to as qualified mortgage loans. A qualified mortgage is a loan category that has certain affordability features. Certain loan attributes are prohibited, including:Interest-only loans or interest-only periods on a loanNegative amortization (periodic payments that aren't sufficient to completely amortize the loan by the end of the loan term)Balloon (lump sum) payments that are required at the end of a loan term to pay the loan offLoan terms of more than 30 years Qualified mortgages also must adhere to standard lending ratios and can't exceed specified amounts for up-front loan points and fees. In addition to its prohibition on kickbacks and referral fees among service providers, RESPA requires that lenders provide written disclosures to help to make estimated and final settlement costs clear and fair to consumers. This is accomplished through the TILA/RESPA Integrated (TRID) disclosures.

Credit Scoring

Underwriters will review borrower credit scores to ensure they fall within the ranges outlined for a given loan product. Credit scores requirements vary depending on whether the borrower is seeking a conventional, FHA, or VA loan.Individual lenders may require higher credit scores that the stated minimum scores as long as they don't do so based on any discriminatory factor. - Credit scores impact interest rates and other loan terms. - Conventional loans typically require credit scores of 620 and above. - FHA borrowers must have a minimum credit score of 580 to qualify for a 3.5% down payment; borrowers with credit scores between 500 and 579 may have to put down as much as 10%. - Borrowers with higher credit scores and other compensating factors such as cash reserves or additional income sources may qualify for higher front-end and back-end loan ratios.

Other types of value:

Value in use: What a property is worth to the person using it. Assessed value: What the local taxing authority thinks a property is worth. Mortgage value: Price at which the property can be loaned on or sold for at a foreclosure sale Insured value: Cost to replace or rebuild a property Investment Value: The return on investment a property may provide

Property condition that may warrant inspections and surveys (part 2)

Various land/soil conditions may warrant further inspection.Standing water present more than 24 hours after heavy rain or ground sloping toward the house may indicate drainage problems. - Mulch mounded against a house or other structure with wood frame siding can hold moisture against the siding, leading to wood rot. - A sinkhole or settling beyond what's typically expected may be a sign of mine subsidence (a gradual sinking or caving in), underground storage tanks, or other buried hazards. - A vent pipe protruding from the ground may also be a sign of an underground storage tank.Soft spots and mounds may indicate that the property was used for waste disposal. Property line location, encroachments, and easements may be a concern. - An on-site survey can help determine easements, encroachments, boundaries, and lot size. - An encroachment occurs when someone illegally places an object or structure on another person's property. - The property's deed and title history should list known easements. Subdivision maps may also show known easements. - As known easements and encroachments are material facts, licensees and sellers are required to disclose them based on existing state laws. - It's important for the buyers to know of any easements or encroachments because they can affect a property's enjoyment, use, and value.

Licensees who choose independent contractor status must complete a

W-9 for IRS reporting purposes.

When does escheat occur?

When a property owner dies without a will in place and no heirs or creditors can be found

Contract clauses, including amendments and addenda (PART 2)

When parties agree to other terms that are outside a main contract, these terms are included in an AMENDMENT OR AN ADDENDUM. All these documents together form the complete agreement between the parties. -An ADDENDUM is an addition to an existing document, such as an offer to purchase. It adds terms not addressed in the main body of the contract form. -An AMENDMENT is a change to an existing contract between parties. It changes one or more of the original contract terms. For example, if the closing date must be changed, or the buyer decides she wants the curtains to remain and the seller agrees (after the original contract noted the seller was taking them), the parties can execute an amendment outlining the additional agreement between them. Addendum and amendment forms should be recommended and/or approved by the broker.

Jared wants to purchase property. One of the properties his agent shows him was formerly zoned for commercial use. It has a steep drop off at the back of the property, as well as some soft spots and mounds. Should his agent recommend that he have a home inspector investigate it?

Yes, these are clues that the property may have been used as a waste disposal site.

Imagine that you're an active real estate licensee as well as an architect, and you'd like to partner with a builder who's just beginning a development. Which of these creates agency coupled with interest?

You agree to design the houses for this builder in return for getting the listings when the properties are finished.

Martha made an offer to buy Drake's home, and he accepted it. Under the terms of the agreement, Martha was supposed to make an earnest money deposit of $10,000, but she only put down $5,000. Drake accepted the lesser deposit, and the sale was ultimately finalized. This is an example of ______.

accepting partial performance

Licensees must avoid providing services that should be provided by other professionals, such as

advice on how to remedy a structural defect or regarding income tax ramifications of sale or purchase.

Unless told otherwise, calculate prorations with the seller responsible for expenses and income on closing day. The seller pays expenses through closing day and

all rents due from tenants are credited to the seller through closing day.

External Depreciation

also known as economic obsolescence, is caused by factors outside the property (e.g., an airport is nearby, causing noise).

Buyer Daphne and seller Kurt signed a sales contract with a definite closing date of May 15. Daphne then learned that she needs to move the closing date to June 15. She'll accomplish this with an ________ to the sales contract.

amendment

A debit is a charge that a party must pay. Common BUYER debts at closing include

appraisal and credit report fees, inspection costs, mortgage recording tax, title insurance, loan fees, attorney's fees.

Replacement Cost

approach bases value on the cost to build a functionally equivalent property.

Reproduction Cost

approach determines the cost to build an exact replica of the property with the same materials and deficiencies.

The Sherman Act (1890), the Clayton Act (1914), and the Federal Trade Commission Act (1914)

are all federal antitrust laws that protect consumers from tie-in arrangements, group boycotting, price fixing, and market allocation.

Stigmatized properties

are locations where a death (either homicide or suicide), crime, or haunting or other paranormal activity occurred. Most states do not consider these disclosable issues, but a few states do.

Quitclaim Deed

carries with it no warranties to the grantee. It only releases any of the grantor's property rights to the grantee. The quitclaim deed is typically used to clear up a simple cloud on title.

The primary advertising- and marketing-related technology issues are related to

client security and confidentiality. Mistakes in these areas can expose clients, licensees, and brokers to potential harm and litigation.

Financing Instrument documents

documents that are executed (signed) when a borrower receives a mortgage loan. These instruments include a promissory note and a security instrument.

The Office of Fair Housing and Equal Opportunity, which is a part of the Department of Housing and Urban Development (HUD)

enforces federal fair housing laws.

he Fair Housing Amendments Act of 1988

extended fair housing protection to cover familial status and disability and provides remedies to victims of housing discrimination. It requires that owners make reasonable accommodations to property rules, policies, and practices to provide persons with disabilities appropriate access. Familial status references protection given to persons under the age of 18 living with a parent or guardian. The coverage extends to pregnancy or the process of taking custody of a child/children. Protected classes now read: -Race -color -religion -sex -disability -familial status -national origin -SEX -FAMILIAL STATUS DISABILITY

There are 3 causes of depreciation

external depreciation, functional obsolescence, and physical deterioration

universal agent

has broad authority to act for the principal, such as someone who has power of attorney.

To meet the requirements of the statute of frauds, an agreement must clearly identify the contract's subject matter, present the contract's essential terms and conditions, and ______ to be enforceable.

identify the contracting parties

Layla, a licensee, has had a few casual meetings with a potential client, Marcus. Marcus has told Layla the type of home and locations he's interested in. Layla has mentioned a few homes that she thinks Marcus might be interested in. Although Layla hasn't said that she will continue to look for homes for Marcus, Marcus believes she'll do just that. Which of these statements about this situation is correct?

implied agency

A statute of limitations clause

in the contract states the time frame in which a party can file a lawsuit relative to the contract.

Tie-in arrangements (antitrust violation)

include providing a service dependent on the customer/client obtaining (or not obtaining) another service from a specific provider.

Omission of a material fact is considered

intentional misrepresentation

Price fixing (antitrust violation)

involves an agreement (or collusion) between competitors (brokers) to fix contract terms, services, or products at a specific price or level, such as suggesting there's a "standard" fee for broker compensation.

Bracketing

is a process in which an appraiser uses both superior and inferior units of comparison such as age, transaction price, etc., to determine a probable range of values for a property.

ESCALATOR OFFER

is one where the buyer offers to top any existing offer by a certain amount, up to a specified cap. A licensee should encourage seller clients to counter-offer an escalator offer with one at the buyer's maximum price (which you can tell because of the cap).

Foreclosure

is a property that is being sold by the lender due to the buyer's default. The lender will usually sell the property at auction after proper notice has been provided, and often after allowing the borrower the right to cure the default. An acceleration clause may be in effect once a borrower defaults. This clause allows the lender to make the entire loan amount due immediately. If the foreclosure sale doesn't cover the debt owed by the borrower, the lender may seek a deficiency judgment against the borrower to pay the shortage. A borrow in default may avoid foreclosure through a deed in lieu of foreclosure, which gives a deed to the lender or mortgagee.

Group boycotting (antitrust violation)

is an agreement between two or more parties who conspire to not do business with a particular person or company.

Redlining

is an illegal, discriminatory practice by lenders or insurance companies that refuse or limit business within specific geographic areas based on the demographics of the area rather than on the creditworthiness of the specific borrower, figuratively drawing a "red line" around an area to indicate unwillingness to lend or insure homes in that area.

Cloud on title

is any encumbrances, such as a lien or inheritance claim, that prevents the seller from providing clear, marketable title.

Transfer Tax

is applied when real property is sold. Rates vary by state and perhaps even locality. Payment may be negotiable between the parties. It is typically paid on the sale price. A mortgage/deed of trust recording tax is a tax on the recordation of the mortgage/deed of trust and is based on the loan amount.

Proration

is calculating what "pro-rata" amount is owed by (or to) each party at closing for expenses or income generated by the real estate sale. Prorated items are either accrued or prepaid.

The federal Telephone Consumer Protection Act, overseen by the Federal Communications Commission

is intended to protect consumers from unwanted telephone solicitations.

Bargain and Sale Deed

is most often used in tax or foreclosure sales. It generally has no expressed warranty against encumbrances but does typically imply a warranty that the grantor has title and the right to covey.

Insurable title

is one against which there may be known defects (such as easements), but the title company has notified the parties of the defect and has agreed to insure against it (not list it as a policy exception). As the less rigid title standard, insurable title is still acceptable to most buyers. A key concern is that sellers who offer insurable title instead of marketable title may not have to clear up title problems that come up before closing.

agent

is someone who acts on behalf of someone else.

client

is someone who's represented by a real estate licensee (and owed certain agency responsibilities).

Blockbusting

is the act of inducing property sales by threatening that the changing demographics or the entry of a minority resident will decrease values. Licensees who engage in this behavior for their own profit are guilty of violating fair housing laws.

single agency

is when a licensee represents one party, either the buyer or the seller, in a transaction. Single agency firms don't permit licensees to engage in dual agency, even if the state permits it.

Accrued

items are amounts allocated to both buyer and seller that haven't yet been paid but will be paid by the buyer after closing. These items are credited to the buyer and debited to the seller.

Prepaid

items are amounts allocated to both buyer and seller that were paid by the seller before closing. These items are credited to the seller and debited to the buyer.

Accrued expenses

items the seller owes on closing day but that will eventually be paid by the buyer (unpaid current property taxes, for example) and appear in the seller's debit column and the buyer's credit column***

Lenders establish an escrow account into which 1/12 of the anticipated property taxes and homeowner's insurance is paid each month. The lender then pays these bills when they come due, protecting the

lender's interest in the property

If found guilty of federal fair housing violations, licensees may face

license suspension or revocation, lawsuits, and payment of compensatory damages.

tax abatement program

lowers the property's taxes for a set amount of time. These are typically offered for new construction or when a property lies in an area designated for rehabilitation or renovation. Tax abatements for elderly homeowners are also common. Buyers may receive an unhappy surprise when the unrevealed abatement ends and their property taxes skyrocket.

The Federal Trade Commission (FTC) pays particular attention to ads that

make health and safety claims. Deceptive ads are those that are likely to mislead a reasonable consumer. Unfair ads are those that advertise any business practice or product that's likely to cause injury. The FTC determines the severity of penalties based on the violation's severity. Penalties range from a cease-and-desist order (which becomes effective immediately) to corrective advertising, civil penalties, consumer and other monetary remedies, and informational remedies.

Owner-occupied buildings with no more than four units (exemptions/exceptions to federal fair housing laws)

may be exempt (commonly known as the Mrs. Murphy exemption). The exemption is disallowed if the owner uses discriminatory advertising or if a licensee becomes involved in the transaction in any way. Similarly, roommates who share a rental unit may show preference when selecting a roommate, but not when advertising for one.

Indemnification

means one or both parties commit to compensate the other for any harm, liability, or loss arising out of the contract.

Fiduciary duty of Accounting

means proper handling of client property, which includes keys, funds, paperwork, and the property itself. This means no commingling or conversion of the earnest money, among other requirements.

Agency coupled with interest

means that the agent has some form of ownership of, security interest in, or possession of the principal's property. The agent's compensation depends on continuance of the agency agreement. For example, a licensee sells an undeveloped acreage for a reduced cash price plus the right to an exclusive-right-to-sell listing agreement on the developed lots. Agency coupled with interest continues until the interest in the property ends. Death or incapacitation of the principal doesn't void an agency coupled with interest arrangement.

Fiduciary duty of Disclosure

means that you must disclose to your client any facts that are relevant to the transaction (aka material facts; e.g., any information, including agency-related information, that might have an impact on the transaction).

Short Sale

mission, is selling for less than the seller owes against the property. Licensees should encourage buyers to opt for owner's extended title coverage for all distressed property sales. Properties may be in less-than-ideal condition. Unpaid taxes and other liens or encumbrances are more likely to require resolution. More complicated transaction paperwork and the need for additional experts, such as attorneys, may increase costs. Individual states' redemption processes may permit previous owners to buy the property back during a certain period of time after the foreclosure sale. This isn't an issue with short sales. Time from offer to closing may be lengthy because it takes time to work through all the processes. Title issues are less common with short sales than with foreclosures.

Conversion

money in trust funds to be used for any operating or personal purposes

Prevent potential loss of client data by

never opening unknown emails or clicking unknown links.

Offer and Acceptance (Requirement for contract validity)

occurs when the parties enter into an agreement voluntarily with full understanding of contract terms.

Physical Deterioration

occurs with wear and tear, damage, and improper maintenance

An arbitration clause

requires the parties to resolve or attempt to resolve their disputes through an arbitration process.

Civil Rights Act of 1866

prohibits housing discrimination based on race or color. There are no exemptions under this law. It is never legal to discriminate on the basis of race. This act protects the rights of U.S. citizens to buy, sell, convey, inherit, and possess property. The act failed to have an immediate impact on discrimination because no agency was assigned to enforce it.

The Housing for Older Persons Act of 1995 (exemptions/exceptions to federal fair housing laws)

provided exceptions for housing specifically designed for seniors. The exception allows those who live in senior developments in which at least 80% of the units are occupied by at least one person who is 55 or older to discriminate on the basis of age. They may not discriminate on the basis of any other protected class.

A deed in trust (or deed of trust) conveys

real estate to a trustee for the beneficiary named in the trust agreement. For example, in states that use a non-judicial foreclosure process, the deed is conveyed to a trustee who holds it until the mortgage loan is paid in full OR until the borrower defaults and the lender must foreclose.

Whether based on fiduciary or common law duties and responsibilities or on statutory duties imposed by a state, licensees must practice

reasonable skill and care, which includes performing any required due diligence.

Housing providers may inquire as to the nature of a non-apparent disability if an applicant

requests ADA-related accommodations or services

Fiduciary duty of Reasonable Skill and Care

requires agents to operate within the scope of their expertise and advise clients to seek expert advice on matters that are outside of the agent's scope of knowledge. It also refers to the expert performance of a licensee's tasks. Licensees should always encourage clients to seek an attorney's advice before signing contracts.

statute of frauds

requires that certain types of contracts, such as for a property ownership transfer, be in writing to be legally enforceable and to prevent injury from fraudulent conduct. An oral contract for the sale of real estate is unenforceable in court, even though it has the following requirements for a valid contract, which include: -Offer and acceptance -Consideration -Legally competent parties -Legal purpose -Made voluntarily

A land contract/contract for deed

requires the buyer to make installment payments to the seller for property purchase. The seller retains the title while buyer gets equitable title.

A mediation clause

requires the parties to attempt mediation prior to engaging in arbitration or a legal action.

Choice of law

specifies that any dispute arising under the contract shall be determined in accordance with the law in a particular jurisdiction.

The Clayton Act (1914)

supports the Sherman Act by prohibiting mergers that would result in a monopoly.

Amortized loans

that are those that are paid off over time. Each periodic payment (usually monthly) is credited first towards current monthly interest on the loan with the remainder used to pay off a portion of the principal.

What establishes chain of title?

the grantor-grantee index establishes chain of title. When the last grantee is not the next grantor, a gap exists in the chain. Gaps must be resolved, sometimes by branching out from public records, in order for clear title to be given.

Special Warranty Deed

typically warrants only against title defects acquired during the grantor's ownership of the property. It guarantees that the grantor owns and may convey the property, and warranties that the property is free of any debts or encumbrances not noted in the deed. A special warranty deed is most often used in conveying commercial properties.

Easements

An easement is a non-possessory right acquired by one party to use another party's land for a special use. These are often acquired through written agreement. Because an easement affects use of a property, they have the potential to diminish the property's value. The property on which the easement lies is the SERVIENT estate; it's said that the SERVIENT ESTATE SUFFERS THE EASEMENT The property or individual who uses the easement holds the DOMINANT estate; it's said that the DOMINANT ESTATE ENJOYS THE EASEMENT.

Whose responsibility is it to ensure that a prospective buyer receives a copy of the Maryland Residential Property Disclosure and Disclaimer Statement prior to the buyer making a written offer to the seller?

Buyer's or seller's agent

Fresh out of community college and newly licensed as a real estate salesperson, Ben just took on a short sale as his first listing. Ben told his broker, Janine, that he could handle the transaction and had just advised his seller client that he could do it with minimal damage to the client's credit rating. Janine immediately took Ben off the listing and assigned it to a more experienced licensee. Why?

By predicting the seller's credit rating outcome, Ben crossed the line into giving advice that requires additional licensure.

Rectangular Government Survey System in Detail

(WEIRD ZIG ZAG ONE) The rectangular government survey system (also known as the Public Land Survey System (PLSS), because it was originally used to survey federally owned blocks of land) is regulated by the U.S. Department of the Interior, Bureau of Land Management. The rectangular government survey system is only used in 30 western and southern states; it is not used by east coast states except Florida; it is also not used by Texas. Some states, like Missouri, used this method of land surveying in their original land surveys, as opposed to the metes and bounds method. The PLSS system is actually a series of surveys that divide land into townships that are six miles by six miles square (for a total area of 36 square miles or 23,040 acres). Townships are further subdivided into 36 one-mile-square (640 acres) sections (each section is one square mile or 640 acres) then into quarter sections, quarter-quarter sections, or irregular government lots. Beginning at an initial point, townships are surveyed in all directions. The north-south line that runs through the initial point is a true meridian called the principal meridian.There are 37 principal meridians in the United States, each referred to by name or number. For example, all land in Missouri is referenced to the Fifth Principal Meridian. The east-west lines that cross the principal meridians are called base lines; the north-south lines that run parallel to the principal meridians in six-mile-wide strips are called range lines. Lines that run east and west, parallel to the base line and six miles apart, are called township lines. The township lines form strips of land known as tiers. *****When land is mapped on the rectangular survey system, you read the directions beginning from right to left. Therefore, in Section 2, we look for the northwest 1⁄4, and from that we find the southeast 1⁄4, and from there we find the south 1⁄2, which is the highlighted portion. EXAMPLE: If you were saying it out loud, you'd say: "The southern half of the southeast quarter of the northwest quarter of Section 2 of Township Clarkson." S½ SE¼ NW¼ Section 2, Township Clarkson.

Flood Zones

(aka floodplains)are an additional environmental concern for homeowners and buyers. Floodplains are low-lying areas of property that are susceptible to flooding because of their proximity to a water source. - Flood zones may be either base (100-year floodplain or 1% chance of a flood in a specific area in a given year) or moderate (500-year floodplain or a .2% chance of flooding in a specific area in a given year). - Lenders that fall under federal regulations must require borrowers who live in special flood hazard areas (SFHAs) to obtain flood insurance as a condition of obtaining their mortgages. - Traditional homeowner's insurance policies don't cover flooding. Homeowners must purchase a separate policy or bundle flood insurance with their homeowner's policy. The National Flood Insurance Program (NFIP) helps homeowners in flood zones obtain affordable flood insurance. The Federal Emergency Management Agency (FEMA) provides a search service that homeowners can use to determine if their property lies in a flood zone.

Types of Zoning

1) Incentive zoning allows otherwise prohibited development in return for the developer providing a community benefit. 2) Bulk zoning regulates the density of a given area by requiring certain building height limitations, lot width, setback requirements, etc. - Bulk zoning applies to both residential and commercial zoning. 3) Aesthetic zoning is a way to ensure the visual and architectural consistency of an area. 4) Downzoning is the process of assigning a lower-density use zone to an area previously allowing a higher density. 5) Density zoning refers to a number of things per unit, such as houses per acre. Spot zoning rezones a specific property for use within another zoning area.

Datums and benchmarks are used to measure elevation.

A datum is a horizontal point of reference from which surveyors measure depth and height of various land elevations. A benchmark is a point where the exact elevation is known and marked with a brass or aluminum plate. Surveyors can use this as a starting point to measure other elevations.

Types of Ownership

A freehold estate is an interest in real property where the owner's possession of the property isn't of fixed duration, as it would be in a lease (leasehold estate). 3 types of freehold estates exist. 1) Fee simple estate (aka fee simple absolute) is a type of freehold estate that conveys the most rights available. Property held as a fee simple can be sold and is inheritable. - Fee simple estates may be limited by both public and private restrictions, such as zoning ordinances or restrictive covenants. - The owner holds rights to the property on the surface of the land, above the land, and below the land (unless those rights have been separated from the property and conveyed to a different owner). - Fee simple estates must pass through the probate process before legal distribution to heirs. - Survivorship and inherited rights vary according to state and local laws and by how the title is held. Fee simple defeasible is a type of freehold estate in which ownership is subject to either the occurrence or non-occurrence of a particular event. The 2 categories of fee simple defeasible estates are fee simple determinable and fee simple subject to condition subsequent.With a fee simple determinable estate, the current property owner conveys ownership to a new owner as long as some event does or doesn't occur. For example, Morris gives a plot of land to a local parks district as long as the district only uses it for youth soccer fields. He gives the possibility of reverter to his son Joe, someone else named by Joe, or Joe's heirs if the parks district changes the property's use. If the use changes, the estate automaticallyends and the property reverts to whomever holds the possibility of reverter.With a fee simple subject to condition subsequent estate, the current property owner conveys ownership to a new owner on a specific condition. For example, Trinity conveys her home to her son, Gabriel, on the condition that the property remain residential. If Gabriel converts the property to some other use, the estate doesn't automatically revert to the original owner; however, Trinity (or her other heirs or successors) has the right to re-acquire full ownership. But she'll have to go to court to do so. A leasehold estate is an estate in which the holder has a possessory interest in a property but no ownership. - An estate for years is a lease that ends on a specific date and must be renewed by mutual agreement between the landlord and tenant. - A periodic estate (aka estate from period to period) is a lease that automatically renews at the end of its term (such as a month-to-month lease). - An estate at will is a lease without an established ending that can be terminated by either party. - An estate at sufferance is one in which a tenant (referred to as a holdover tenant) didn't leave when the lease expired.

Life Estate Ownership

A life estate is a type of freehold estate in which ownership is limited to someone's lifetime. The future owner is determined based on the life estate's terms. An ordinary life estate is based on the life of the estate holder/life tenant. For example, Christine gives her son an ordinary life estate in a property, and the estate lasts until her son's death. Pur Autre Vie is based on the life of someone other than the holder of the life estate/life tenant. For example, Jarrod grants his ex-wife, Margo, a life estate pur autre vie in a house where Jarrod's mother Rose and Margo, who cares for Rose, both reside. The life estate stipulates that Margo's interest in the property will cease when Jarrod's mother dies. During the term of a life estate, the estate holder must keep the property in good repair. Any act by the estate holder that significantly reduces the value of the property at the end of the life estate is called an act of waste. The estate holder or another party with an interest in the property (for exam, heirs to the estate holder) may file a lawsuit to stop the waste and/or seek damages. When a life estate ends, ownership of and interest in the property is determined in 1 of 2 ways. 1) Remainder: Ownership will pass to a remainderman instead of the party who established the life estate. 2) Reversion: Ownership will revert to the life estate originator (or the originator's successors and heirs). When a life estate ends, the remainderman or reversion holder holds the estate in fee simple.

Examples of Land Measurement

A parcel of land is three-quarters of a mile by 2,800 feet. The price is $2,500 per acre. How much is the land worth? 5,280 × .75 (3/4 of a mile) = 3,960 feet 3,960 x 2,800 feet, or 11,088,000 square feet 11,088,000 ÷ 43,560 (square feet in an acre) = 254.55 acres $2,500 × 254.55 = $636,375 Example A land parcel is 7,500 s.f. It's 75 feet deep. What is the frontage? 7,500 ÷ 75 = 100. The property is 75 feet deep by 100 feet long (frontage). Example Trinity owns a land parcel that is a half mile square. How many acres is it? Each side of the parcel is 2,640 linear feet (5,280 feet in a mile). 2,640 × 2.640 = 6,969,600 square feet 6,969,600 ÷ 43,560 (square feet in an acre) = 160 acres

Bundle of Rights

A term that you may hear on your exam or in other conversations is bundle of rights. This refers to the rights extended to a property owner to use the physical components of land, such as the surface, sub-surface, and air rights. When purchasing property, the buyer may or may not receive all the property rights in the bundle of rights; e.g., the property may be leased to someone else, thus denying the owner some of the rights. The mineral, air, or water rights may have been split off and sold separately. The bundle of rights includes: 1) Possession: This means that the title holder may possess (be on) the property. 2) Control: The owner controls the use of the property. 3) Exclusion: The owner may decide who may or may not access the property. 4) Enjoyment: The owner may use the property in any legal matter. 5) Disposition: The owner has the right to sell or convey the property.

Appraisals

An appraisal is a formal opinion of value that a real estate appraiser assigns, based on supportable evidence, for a specific purpose, party, and property, as of a specific date, and in accordance with Uniform Standards of Professional Appraisal Practice (USPAP). Generally, appraisals aren't performed or offered by real estate licensees. Appraisers estimate the value of a building or a piece of land. They may specialize in either commercial or residential property. Appraisers typically appraise a property before it's sold, mortgaged, or taxed. Valuation (formal appraisal) is the process of forming an opinion of a property's value. The real estate and mortgage industries rely on appraisals to ensure that the value of a mortgaged property is sufficient to support the loan amount. Lenders or appraisal management companies generally select and hire appraisers, but the buyer generally pays.

Types of Hazards (Asbestos, Lead, Radon)

Asbestos, a fibrous material that's dangerous when it begins to deteriorate and becomes friable (easily crumbled or reduced to dust), was used in many materials before the 1970s because of its fire-retardant qualities. Inhaled particles can cause lung damage. - The EPA regulates asbestos use and disposal; some states have enacted laws related to asbestos handling and disposal. - Only licensed professionals should handle asbestos. - No federal laws require abatement of asbestos in residential properties. Lead can be found in paint, plumbing, dust, soil, and drinking water. Lead causes many health issues, particularly among infants, children, and the elderly. In children, lead-related issues can include behavioral problems, learning disabilities, seizures, and even death. - The federal government doesn't require lead abatement in homes, but some states do require it. - The federal Lead Renovation, Repair, and Painting (RRP) Rule requires contractors who perform tasks that may disturb lead-based paint to be certified and to follow lead-safe work practices. Radon occurs naturally in the environment and can be found in soil and well water. - Radon enters a home through the building's cracks and crevices, and experts believe it can cause lung cancer. - Homeowners can purchase radon self-test kits and then send them to a lab for analysis. - Results are measured in picocuries. - If the home tests at or above a level of 4 picocuries per liter, experts recommend mitigation, which can include sealing cracks and other foundation or basement openings and installing a vent system. - Radon mitigation isn't required by federal law; some states may have mitigation requirements.

Which of these incentives would be legal according to Maryland license law?

Ben runs a "Spring into Summer" ad offering sellers a reduced commission rate for the next three months. Licensees can't use contests or offer prizes to influence someone to enter into a brokerage agreement. Nor can they use them to influence a buyer to make an offer. Incentives may be offered provided they are available to all on the same basis.

Other Potential Encumbrances of Title

Deed restrictions and covenants, conditions, and restrictions (CC&Rs) are encumbrances affecting land use. Leases usually run with the land, which means that if property ownership changes, lease terms remain in effect until the lease expires (unless the lease provisions state otherwise). - If the lease agreement includes the right to renew the lease, the new owner must honor that right and allow tenants to renew at the end of the term based on the renewal terms and negotiations between the parties. - Tenants must be notified of the change in ownership. - The financing instrument in many mortgaged leased properties includes a non-disturbance clause. If this provision is included, the mortgagee agrees not to evict tenants who are current on their rent if the mortgagee has to foreclose on the property.

Eminent domain, condemnation, escheat

Eminent domain: The government's power to take private land for public use *For example, eminent domain could be used to take private property needed for a planned freeway project. -The government must fairly compensate private owners for property taken through eminent domain. -Taking -Condemnation action -Inverse condemnation Escheat: The state's power to take the property of a decedent who dies without a will, heirs, or creditors.When the state claims property through escheat, it can dispose of the property to benefit the public.

Enroachments

Encroachments are structures or objects built on another's land without permission. Encroachments are always by definition illegal. A survey establishes the boundary lines of a property and may help identify both encroachments and easements.

The Planning Board (zoning)

Ensures that community growth is controlled and orderly; the board develops the master plan *****(also known as comprehensive plan), which includes a budget. In a city, this is known as urban planning. Planners often account for topography (the physical and natural features of an area).

In Maryland, you could be fined up to $1,000 per solicitation if you use this method to advertise and a prior business relationship does not exist.

FAX MACHINE

Measuring Structures (Cont.)

For detached structures, measurements are taken at floor level to the exterior finished surface of the outside walls. When measuring, round to the nearest inch or tenth of a foot. Report square footage as a whole number. - Garages can't be included in the finished square footage. - Stairwells are included in square footage measurements. Treads and landings are counted in the upper floor's square footage. - Ceiling height must be at least 7 feet (beamed ceilings must be at least 6 feet 4 inches under the beam, and slanted ceilings must have at least a 7 foot ceiling over 50% of the finished floor area) to be included as finished square footage. Example The living room of Trixie's house is 15 feet by 13 feet. The dining room is 12 feet by 13 feet. How many square feet is this entire area? (15 × 13) + (12 × 13) = 195 + 156 = 351 square feet Example Jonathan's 3,200 square foot home sold for $425,000. The price per square foot is $425,000 ÷ 3,200, or $132.81.

Types of Hazards (Formaldehyde, Polychlorinated biphenyls (PCBs) )

Formaldehyde, used in a variety of building products, is a colorless chemical with a strong odor. It's emitted as a gas and is classified as a volatile organic compound (VOC). It's considered to be a "probable" carcinogen, and in a substantial portion of the population, is a respiratory, eye, and skin irritant. Pressed wood products (including laminated furniture and plywood), carpeting, and ceiling tiles are the most common offenders. Recent EPA regulations require use of certified products and labeling of certain products to reduce the impact of this chemical. Polychlorinated biphenyls (PCBs) are mixtures of a number of man-made chemicals. PCBs are odorless, tasteless solids or liquids and, prior to being banned in 1979, were used in industrial products and chemicals such as caulking compounds, transformers (including those in fluorescent lighting fixtures), and hydraulic oil. PCBs are classified as carcinogens. Though their use has been banned for many years, products containing PCBs may still be found. In addition, PCBs are thought to build up and remain in the environment (most often in water). Consuming fish from PCB-contaminated water is still a source of concern.

Types of Hazards (Groundwater, Waste Disposal Sites)

Groundwater is water that is under the earth's surface. Mining activities, landfill drainage, leaking underground storage tanks, contaminated storm drains, and agricultural pesticides contribute to groundwater contamination (and therefore, potential contamination of private and public drinking water sources). A variety of federal and state laws protect groundwater. _________________________________________________________ Waste disposal sites (landfills) are typically huge excavated areas where waste is buried underground. Federal, state, and local governments regulate waste site placement, construction, and content. Rural properties or properties that were once in rural areas but have been swallowed up by a metro area may also contain sites where property owners once dumped trash.Inactive waste sites are often capped (covered with soil). Ventilation pipes are placed from the base of the waste site through the cap to expel accumulated natural gases caused by decomposition of the waste. Test wells are installed and monitored to test for groundwater contamination. Golf courses, parks, and housing and office complexes are often constructed on these capped disposal sites.Properties that have been contaminated by commercial or industrial use may be referred to as brownfields. The Brownfields Law, enacted in 2002, provides direct funds, mostly in the form of grants, to assess and clean up brownfields. Contaminants at these sites include petroleum, industrial waste, and even waste and biproducts from methamphetamine labs. You should recommend that clients engage the appropriate experts to perform interior home inspections as well as soil, air, and water tests, particularly regarding commercial property. An environmental audit is a good idea for commercial or industrial properties. Always document your recommendations to your client, particularly if the client declines environmental testing.

Dexter has been managing Holly's 10-unit apartment building for five years. Holly's on vacation in Europe for a month, but before she left she approved Dexter's plan to sell six of the building's washing machines in order to buy new ones. Dexter got a great deal from the hardware store because his cousin is the manager and there ended up being a surplus of $1,000. Dexter deposited the surplus into his personal account as a bonus to himself for striking such a good deal. What did Dexter do wrong?

He didn't get Holly's approval before pocketing the profits from the sale of the washers.

Jerome let his license expire four years ago when his wife had twins and he decided to become a stay-at-home dad. Now that the twins have started preschool, Jerome would like to resume his real estate practice. What does he have to do in order to reinstate his license?

His license has been expired too long. He has to start the pre-licensing process from scratch. Expired licenses can be reinstated within three years of the expiration date if CE requirements are met. If a license is expired for more than three years, the former licensee must complete all pre-licensing requirements again and be issued a new license.

Rectangular Government Survey System Example

How large is this parcel? If we know that each side of a section is 1 mile long (1×1=1 square mile), then the NW 1⁄4 is 0.5×0.5 miles, or 0.25 square miles. One-fourth of that (the SE 1⁄4 of the NW 1⁄4) would be 0.0625 square miles. One-half of 0.0625 square miles (the S 1⁄2 of the SE 1⁄4) would be 0.03125 square miles, or 20 acres.One acre is 0.0015625 of a square mile, so: 0.03125 sq mi ÷ 0.0015625 = 20 acres An easier way to compute this is to start with acres in the first place. As you know, the entire section is 640 acres. The shaded parcel, we can see, is 1/32 of 640 acres. But if you didn't have the diagram to look at, you can easily see what portion of 640 acres we're talking about using the directions themselves: 1⁄2 × 1⁄4 × 1⁄4 = 1/32 Now, you simply take 640 acres and divide it by 32 and you get 20 acres. 640 acres ÷ 32 = 20 acres

After the seller backed out of the contract at the last minute, Maryland broker Melody determined that the buyer's earnest money, which she'd deposited in her firm's trust account, should be returned to the buyer. She sent certified letters to the buyer and the seller detailing this decision. What happens next?

If neither party sends Melody a protest within 30 days, she may disburse the funds to the buyer as stated in her letter.If the broker decides to disburse disputed funds, the broker must give the parties 30 days' notice as to how the funds will be distributed. If no one protests in 30 days, the broker may disburse the funds.

Restrictions on contaminated property

If the EPA determines that hazardous contamination has occurred on a project site, it can shut down development and begin remedial action. This may impact development time and cost. Regardless of the EPA's actions, builders or developers will likely be required to do cleanup prior to developing a contaminated site. The presence of industrial chemicals, underground storage tanks, or pathogenic contamination of groundwater will induce restrictions.

Easements may be removed through express agreement, the dominant estate owner's abandonment, merger of estates, or when there's no longer a need for the easement.

In order to remove an easement through abandonment, the dominant estate owner must take some action that shows a clear intent to stop using the easement. Easement termination by merger occurs when the owner of either the servient or dominant estate purchases the other property. A property owner can't have an easement over his or her own land.

Deed conditions or restrictions

Individual owners or grantors of a deed may place deed conditions that apply to that specific property being conveyed. Deed restrictions may run with the land forever or may have a time limit. Deed restrictions may not violate any laws, including fair housing laws. Such a restriction would be illegal and unenforceable.

Tenancy in Common

Is a form of co-ownership in which each co-owner is entitled to possession of the whole. An owner's ownership is inheritable and, upon the owner's death, doesn't necessarily pass to the other owners. Tenancy in common is generally considered the default arrangement if the deed doesn't specify the tenancy of co-owners. A tenancy in common owner's debts can attach to that owner's ownership interest. Termination of a tenancy in common can occur by conversion to tenancy in severalty or by sale or partition. If co-ownership is terminated by partition, then the property is divided into portions, called partitions, and each tenant owns a specific partition.

Four years ago, licensee Gustav assisted a buyer in her purchase of a foreclosed three-bedroom townhome in Hanover. The buyer recently called Gustav, telling him that she filed a complaint with MREC, claiming that Gustav knew the plumbing was faulty, but didn't disclose this to her. As a result, she's racked up more than $35,000 in plumbing bills since her home purchase. Panicked, Gustav begins searching for the transaction file until his broker tells him he can stop. Why?

It took place 4 years ago Would have had to have been under 3 years ago

Joint Tenancy

Joint tenancy is a form of co-ownership in which equal ownership requires unity of time, title, interest, and possession. Just as with tenancy in common, any owner's debt can attach to the ownership interest of that owner. Joint tenancy includes the right of survivorship, which means that the surviving co-owner(s) will own the property of a joint tenant who dies. If there are only two joint tenants, the death of one dissolves the joint tenancy. The remaining tenant becomes the owner of an estate in severalty. If there are more than two joint tenants, a deceased tenant's ownership transfers in equal parts to the remaining joint owners. Survivorship takes precedence over any devisees named in a will, as well as any heirs named by laws of descent and distribution. If a joint tenant sells his or her interest, the buyer doesn't become a joint tenant with the other owners; the buyer is a tenant in common with the remaining joint owners. That's because the unities of time and possession don't apply.

Land Measurement

Land measurements are stated in terms of square feet, square miles, perimeter, frontage foot, linear miles, acres, and hectares. One acre = 43,560 square feet (memorize this for your exam) Square feet ÷ 43,560 = acresAcres × 43,560 = square feet One mile = 5,280 linear feetLinear feet ÷ 5,280 = miles Miles × 5,280 = linear feet (memorize this for your exam) One hectare = approximately 2.47 acres Front foot (frontage) = length of property along a street, highway, or waterway Perimeter = length and width of all sides added together One square mile = 640 acres

Encumbrances on a Property (Liens)

Liens are a financial claim or encumbrance against a property. Some of the common sources of liens are mortgages, unpaid taxes, unpaid services, and judgments. General liens affect real and personal property and include judgment liens, federal and state tax liens, and decedent's debts. Specific liens affect the specific real property/properties to which they're attached by agreement or law and include mortgage liens, real property tax liens, mechanic's liens, special assessment liens, vendor and vendee liens, and HOA liens. Another way to classify liens is as voluntary or involuntary. A mortgage lien, because the property owner chooses to have a mortgage, is voluntary. An involuntary lien is one created without the property owner's consent, like a property tax lien. A mechanic's lien is one a vendor of goods or services places on the property and creates a cloud on the property's title. An attachment lien is when the courts place an encumbrance on the property of a defendant in a lawsuit for monetary damages (also known as a judgment). The typical priority of liens is: property tax lien, mechanic's liens (if work began before the mortgage lien was recorded), first mortgage lien, and all other liens by date of recording. Many states give HOA liens a statutory super lien status, meaning that HOA liens take priority over all other types.

Real Versus Personal Property/Conveyances

Land: The earth's surface extending downward to the center of the earth and upward to infinity, including permanently attached natural objects Real estate: Land, plus all things permanently attached to it naturally or artificially Real property: Real estate, plus the interests, benefits, and rights included with real estate ownership Improvements: Artificial attachments to land that include things such as fencing, buildings, and walkways Ownership rights: Enjoyment, disposition, possession, control, and exclusion; often referred to as "bundle of rights" Personal property: Everything owned that is not real property, aka chattel Five basic tests to determine if an item is real or personal property: MARIA - Method of annexation: This refers to whether the item is attached to the property and how permanent the attachment is. - Adaptability for use: This refers to how an item is adapted to the real property. If removing an item would change or eliminate the use of the property, it's likely real property. - Relationship of the parties: In general, the courts tend to favor a tenant's take on an item over the landlord's, and a buyer over a seller. - Intention in placing: If an item was intended to be temporary, then it's less likely to be considered real property. - Agreement of the parties: If the parties have agreed whether an item will stay or go, this is the simplest and first test. Fixture: Anything permanently attached to the land or to permanent structures on the land (the MARIA test helps classify items as fixtures rather than personal property) - Fixtures are part of real property and are included (conveyed) with a sale of real property unless the parties negotiate differently. - If a fixture should be excluded from the transfer, the sales contract should clearly identify that the item is excluded from the transaction. - If the fixture's status is debatable, the contract should clarify whether the item will stay or go. - Fixtures that are removed from the improvement before an agreement of sale become personal property again through the process of severance. Cultivated crops are called emblements and are considered personal property, even though they're part of the soil. Owners don't need to dig up the crops and take them when the land is conveyed, but those owners are entitled to the fruits of their labor and can harvest the crop when it's ready (even if the land has transferred to a new owner). Annexation: The process of converting personal property to real property. Trade fixture: This is anything that's attached to leased land or structures that's used in conducting business. Rights and responsibilities differ depending on the commercial lease agreement, but usually tenants may remove trade fixtures when the lease terminates. They must repair any damage created by removing the fixtures. - Real property is conveyed from one owner to another using a deed. Personal property is transferred using a bill of sale or receipt.

Other Special Land Types - Lands Contaminated with Hazardous Waste

Lands Contaminated with Hazardous Waste: Special purpose landfills contain hazardous waste, such as radioactive materials from nuclear power plants and toxic chemicals. These sites are usually located in remote areas away from human contact and are subject to strict regulation to prevent the escape of toxic substances. Particularly toxic material is often placed in sealed containers and buried far underground in "tombs" that are designed to remain impermeable for thousands of years. Brownfields are abandoned commercial or industrial sites suspected to contain toxic waste. The Small Business Liability Relief and Brownfields Revitalization Act encourages the clean-up and development of brownfields by providing funds for assessment and clean-up efforts, and protects buyers or developers from liability if the site were contaminated prior to ownership.

Ellen just completed a whirlwind continuing education marathon, taking all 15 of her required CE hours in the span of one weekend with a company called Last Minute Real Estate Education. It's just in the nick of time, too: Ellen's license is set to expire the following week. How will the CE hours get reported to the commission?

Last Minute Real Estate Education must electronically submit Ellen's completion data to the commission.

Other Special Land Types - Protected Habitats

Laws seeking to conserve, protect, or restore habitats aim to prevent the extinction of animals that live in those habitats or to protect the natural habitat itself from further destruction. While habitat loss and destruction can occur due to natural causes, human action contributes to the destruction. Local, state, and federal actions seek to prevent further loss of habitats (and the beings that live in them) and to reverse destruction that has already taken place. The Endangered Species Act seeks to protect species and their habitats and is administered by the U.S. Fish and Wildlife Service and the National Marine Fisheries Service. Public and private lands may be protected by law, but private lands can also have conservation easements applied to specific areas. Protected lands and those under conservation easements may restrict development and prevent certain uses that may be destructive. A conservation easement runs with the land, is recorded in local land records, and becomes part of the chain of title for the property.

Which of these documents does NOT provide appropriate agency disclosure?

Listing agreement formThe purpose of agency disclosure is to warn the unrepresented party that the licensee represents the other party. The listing agreement doesn't do this; it establishes the agency relationship between the seller and the seller's broker.

Livable, Rentable, and Usable Area

Livable square footage or area (aka gross living area or GLA) may be defined differently depending on the purpose of the measurement. - GLA may include stairways and closets.GLA may include finished attic or basement square footage if ceiling height is at least seven feet. - Covered, enclosed exterior areas are included only if they're heated using the same heat system as the other areas of the property. - Additional finished buildings are usually included only if they're attached to the main house by a hallway or stairway. - Questions on your national exam will tell you what to include in your calculation. Rentable area is that actual area a tenant may rent and on which the landlord bases the rent. - Rentable area typically excludes common areas, elevator shafts, stairways, and HVAC and other system equipment areas. - It may include corridors, meeting rooms, lobbies, restrooms, and a proportionate share of any common areas. Usable area includes the specific area(s) the tenant will use. - If the lease area doesn't encompass an entire floor, usable area includes all office or retail space plus storage areas and private restrooms. - If the lease area does encompass an entire floor, the usable square feet encompasses everything inside the exterior walls of the building except for stairwells and elevator shafts.

MREC received Shanice's complaint against licensee Nick two years and eight months after he helped her buy her one-bedroom condo in Silver Spring. Nick and his broker responded to the copy of the complaint MREC sent them. Three weeks later, Nick and his broker received notice via certified mail that Shanice's claim warranted a hearing, which would take place in a week. What's wrong with this scenario?

MREC must give 10 days' notice before a hearing

Zoning Appeals Board

Many localities have a zoning appeals board which oversees challenges to zoning actions.

Other Special Land Types - Historical Landmarks

Many localities have enacted land use regulations to protect the historic character of the area, either due to architectural or historic landmark significance. Some municipalities set up historic preservation commissions whose role is to identify and help preserve historic landmarks. In contrast to other zoning ordinances, landmark preservation ordinances are designed to protect buildings rather than the use of the land. Owners of some designated buildings may be prevented from demolishing or drastically changing the building's exterior, or even interior. Landmark and historic preservation commissions accomplish their objectives by recommending ordinances to preserve certain historic neighborhoods, landmarks, buildings, and sites. They also review and approve applications for changes to an existing landmarks that involve construction, demolition, or relocation.

Which choice correctly identifies the three classes that Maryland protects in addition to the seven federally protected classes?

Marital status, sexual orientation, and gender identity

Which of these parties WOULD need a real estate license in Maryland?

Marsha, an attorney who is selling a client's home, as this is something she typically does as part of her practice

Metes and Bounds

Metes are the direction and distance of a line forming the property's boundary; bounds are physical features that define the boundaries of the property. Metes-and-bounds descriptions are characterized by a point of beginning, which is where the description both begins and ends. It also uses monuments to mark boundaries. The monuments are thought to have more credibility than the measurements. A metes and bounds legal description looks like this: Beginning at a stake and stones about 30 feet from the center of the brook that runs across the road South westerly from the dwelling house of the late Jebediah Smith now occupied by the widow Callie Thornton and in the west line of the highway leading by the dwelling house now occupied by the widow Callie Thornton ...

Which of these unlicensed assistants may NOT be compensated for their activities in Maryland?

Michael, who shows properties when salesperson Janine is out of town. Commissions may not be paid to unlicensed individuals based on their performance of real estate activities for which a license is required. If Michael does get paid for this, he, Janine, and Janine's broker could all be cited for violating license law.

Mineral, Air, and Water Rights

Mineral rights, aka subsurface rights, are the rights to drill or dig for minerals on the property. Air rights refer to the right to use the area in the sky above a property. Water rights are especially important for agricultural use or in areas where a well is needed or water is scarce. The three categories of water rights include riparian rights, littoral rights, and the doctrine of prior appropriation. 1) Riparian rights address water that moves through a property, such a river or stream. Riparian rights are classified into one of two categories based on the type of water: navigable or non-navigable. 2) Littoral rights address static water, such as a pond, lake, or ocean. Owners with littoral rights have the right to use and enjoy the static water but not divert or contain it. 3) Prior appropriation says that the first party to physically take water from a source and put it to beneficial household, agricultural, or industrial use will continue to have a claim to the water.Accretion, alluvion, erosion, avulsion, and reliction are all terms describing natural processes associated with water rights. -Accretion: Process by which water carries rock, sand, and soil and causes land build-up -Alluvion: New deposits of land that are the result of accretionErosion: Gradual loss of land due to a natural force -Avulsion: A sudden loss of land by a swift, large-scale change in water flowReliction: When water gradually recedes and uncovers new land

Types of Hazards (Mold, CO2, Chlorofluorocarbons (CFCs) )

Mold growth is promoted by excessive moisture and lack of air circulation. Excessive levels of mold can cause allergic reactions or act as a respiratory irritant in individuals who are sensitive to it or immune-compromised. In some cases, molds may release potentially toxic substances. - In residential environments, no federal regulations exist regarding mold testing or abatement. Some states have laws that govern mold remediation. The EPA recommends that an expert be engaged to remediate affected areas of over 10 square feet. Carbon monoxide is an odorless, colorless toxic gas that's formed whenever fuel is burned. Gas and oil furnaces, gas refrigerators, clothes dryers, ranges, water heaters, and space heaters produce carbon monoxide, as can fireplaces, charcoal grills, and wood-burning stoves. The federal government doesn't regulate use and placement of carbon monoxide detectors in residential or commercial real estate, though most states have strict regulations. Chlorofluorocarbons (CFCs) are organic compounds that contain carbon, chlorine, and fluorine. CFCs haven't been linked to health concerns, but they have been linked to ozone depletion. The primary CFC-related concern in real estate is Freon®, which is a coolant used in older refrigerated systems. Amendments to the Clean Air Act in 1990 established new regulations regarding ozone-depleting chemicals, which govern the manufacture, use, and disposal of certain air conditioning, refrigeration, and cooling appliances. The EPA limits use of Freon® (aka R22 refrigerant) and plans a complete ban by 2020, so home warranties may exclude coverage of older HVAC systems that use R22, and homeowners may be required to update, rather than repair, systems that use R22 if they break.

Zoning Actions Include

Nonconforming use: Deviates from current zoning but is grandfathered in (such as a home built years ago in an area that's now commercially zoned). Moratorium: Temporarily halts new property development Special use permit (aka conditional use permit): Allows use that's not normally permitted but is considered an "allowable" use within that zoning, such as a church within a residentially zoned area Variance (aka use variance) Permitted deviation in the zoning ordinance requirements; typically granted when the zoning has created a hardship or burden on the property owner. Both special use permits and variances require a public hearing before they're granted. - Prospective buyers should be aware of zoning ordinances and any potential challenges they may present for desired uses (for example, running a business out of a home)

Monique received four offers on her client's listing. Offer A is a written offer that the buyer's agent dropped off at Monique's office. Offer B is an offer that the buyer's agent communicated to Monique over the phone. Offer C is a written offer that Monique received via email. Offer D is a written counter-offer from a buyer that Monique's client countered earlier in the week. Which offers must Monique present to her client?

Offers A, C, and D, since they're all in writing Licensees must present all written offers and counter-offers to their clients in full, in hard copy or electronic format. Since offer B isn't in writing, Monique isn't required to present it, but it would be prudent for her to request it in writing.

Land Characteristics

Physical characteristics of land: 1) Immobility: The geographic location of land is fixed and can't be changed. 2) Indestructibility: Improvements may deteriorate over time, but not land itself. 3) Uniqueness/nonhomogeneity: One piece of land is never exactly like another. Economic characteristics of land 1) Scarcity: You can't make more land; what we have now is what we'll always have. 2) Improvements: A land's value can be positively or negatively affected by the improvements made on it. 3) Permanence of investment: Some improvements are long-term, stable investments with stable returns over time. 4) Situs/location/area preference: A property's value depends in large part on its location.

Government Controls

Police power is the government's authority, at any level, to do what it can to ensure the health, safety, and welfare of its citizens. Police power includes licensing, public services, zoning, and building codes.

Private controls

Private land use controls include easements, liens, deed restrictions, and subdivision regulations or HOA rules. Private land use controls place restrictions on the appearance or use of land by individuals or private entities, as opposed to those placed by a government body. If a property faces both a public and private restriction regarding the same issue, the most restrictive one takes precedence.

Rectangular Government Survey System

Regulated by the U.S. Department of the Interior's Bureau of Land Management, divides land into townships and further into sections and fractions called sections. The principal meridian is the north-south line that runs through an initial point in the RGSS. These descriptions also use compass point directions (northwest; southeast; etc.). The base line is the east-west line from which measurements originate. East-west lines of a survey are called township lines; north-south lines are called range lines. There are 37 named principal meridians in the U.S. Each parcel is described by referencing the principal meridian and base line that is appropriate to the township in which the parcel is located. Every township is six miles square or 36 square miles. Every section is one square mile, which is also one mile squared. A rectangular government survey system legal description looks like this (and is read right to left): S ½ SE ¼ NW ¼ Section 14, Township Clarkson

Ron prides himself on providing his buyer clients with consistently stellar representation. His latest buyer client, Tammy, is purchasing a fixer-upper on Walnut Street, just a stone's throw from the railroad tracks. What's Ron's responsibility regarding making sure Tammy is informed about the property's condition?

Ron should make sure that Tammy understands her rights and obligations regarding the property disclosure/disclaimer statement.

Meetings held by planning and zoning boards must be open to the public because of

SUNSHINE LAWS

Dorothy, a Maryland broker, deposited her buyer client's earnest money funds a month ago. The seller backed out of the contract two days before closing and claimed she was owed the earnest money because of the time the property had been taken off the market during contract negotiations. The buyer wants his earnest money back. Which of the following is NOT an option that Dorothy has regarding the dispute?

She can file a claim with the Maryland Real Estate Commission, which would then decide how the funds should be disbursed. Brokers may: hold disputed funds until both parties authorize their disbursement, file a bill of interpleader and deposit the funds with the courts to decide their disbursement, or hold the funds until one party files suit and a court orders disbursement.

Cheyenne has been working with a buyer, though they don't have a signed agency agreement. When he finds a house he likes, Cheyenne helps him fill out the offer paperwork and submits it to the seller's agent. In what capacity is Cheyenne contributing to this transaction?-As an agent for the buyer-As a non-agent for the seller-As a sub-agent for the buyer-As a sub-agent for the seller

She is a sub-agent for the seller

Monica's business is booming. She's representing an owner who's selling a $500,000 home on one side of town, and a buyer who's purchasing a $300,000 property on the other side of town. As it happens, the seller and buyer both know each other from church and have been talking to others about Monica's talents, which has brought in several new leads for her to pursue. What type of agency relationship does Monica have with the seller and buyer?

She is each party's agent

Abatement and mitigation

The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) was established to clean up closed, abandoned, or uncontrolled hazardous waste sites and spills. The Superfunds Amendments and Reauthorization Act (SARA) added an "innocent landowner" defense to CERCLA. Landowners who performed their due diligence when purchasing a property may be held innocent of clean-up liability if the property is found to be contaminated. - Either buyers or sellers may be liable for cleaning up contaminated property. Strict liability: The property owner is responsible for cleanup, regardless of who's at fault. Joint and several liability: Each of the responsible parties is personally responsible for damages. Retroactive liability: Both the current owner and prior owners are liable. - If liable parties aren't doing cleanup, the EPA can hire its own contractors, do the clean-up work, and then bill the parties.

Maryland salesperson Claire has been licensed for a little over a year. She's a bit of an overachiever, so she's already completed 12 hours of her required continuing education. Her broker Darnell's license is renewing on August 28. Claire must make sure that her license is renewed by ______.The date printed on her licenseSeptember 29 (one month after her broker's license must be renewedAugust 28 (the same date that broker's license must be renewed)July 28 (one month before her broker's license must be renewed)

The date printed on her licenseMaryland salespersons, associate brokers, and brokers renew their licenses every two years on the same date their license was issued. The license's expiration date is printed on the license.

Inverse condemnation

The government takes private property but fails to compensate the owner; property owners are forced to file suit to obtain compensation. The taking may be physical through occupation, or regulatory, where government regulations cause the property to lose economic value.

Seo-yun completed all of her Maryland salesperson licensure requirements and submitted her documentation and licensing fees to the commission. A few days later, her broker presented her with her new license. What's wrong with this scenario?

The license should have also come with a pocket card

Justine's seller client needs to repair the property's roof, and Justine has recommended a contractor to her. In addition to the contractor's name and the date that Justine verified his registration with the Maryland Home Improvement Commission, what else does Justine need to give her seller client?

The link to the Maryland Home Improvement License Search on the DLLR website

Keisha is a real estate salesperson in Maryland. She's got a new listing and is anxious to advertise it for sale. What must she have first so she can do this?

The owner's permission to advertise the property

Condemnation action

The process of taking title and physical possession of private property using the government's power of eminent domain; the property owner is paid just compensation for the value of the property.

Common-Interest Ownership

Timeshares, condominiums, and cooperatives are primary examples of common-interest ownership. Often, these types of ownership require additional documentation and disclosures so it's clear to purchasers what is owned and any responsibilities individual owners share in regards to the property and common areas. A timeshare is owned by several joint owners, each of whom has the right to use the property under the specific terms of a time-sharing agreement. - Timeshares may be sold a couple of different ways. Fee simple ownership is more widely used than the right-to-use format, which simply provides rights to occupy the property during a specified time frame. - Timeshare ownership is typically split into 52 weeks. A 1/13th interest means 1/13 of 52 weeks, or four weeks (52 ÷ 13 = 4). - The fee simple ownership type of timeshare is called a timeshare estate. The right-to-use type of timeshare is called a timeshare use. Timeshare estates may be sold or inherited. Right-to-use timeshares can't be inherited since no actual ownership is involved. - A twist on timeshares is a vacation ownership. Buyers agree to a one-time purchase price and an annual maintenance fee, and in return get a selected accommodation time and have the right to use the unit for a specified number of years. - Timeshares or vacation memberships may sometimes allow owners or members to exchange their specified time slot for another.Someone who purchases a campground membership buys the right to use the developer's facilities and may use the campground at any time when it's open. Condominium ownership typically involves ownership of a unit within a building and not the structure itself or any land. It also includes undivided shared interest in the common spaces. - Each unit has a separate legal description and each owner gets his/her own tax bill. - A condo association or homeowners association handles common area and exterior maintenance issues. Owners pay HOA fees that go toward maintenance costs. Cooperative (co-op) members own shares in a corporation that owns the building. Members don't own real estate. Each owner's right of possession of his/her individual unit comes from a proprietary lease. The corporation that owns the real estate pays the single property tax bill.

Other Types of Ownership

Townhomes are single-family homes but typically share walls with neighbors. An owner owns both the structure and the land. Ownership in a planned unit development (PUD), a mixed-use development that has both residential and commercial units, consists of a parcel of land, any improvements, and shared common areas. Developers who are building PUDs must often submit plat maps for their developments. Like other common-interest properties, shared common areas are jointly owned.

Wetlands

Wetlands are areas that are saturated by water in an amount sufficient to support vegetation that grows in the saturated soil. Many states have wetlands regulations, and various federal government agencies share responsibility for protecting U.S. wetlands. - The presence of a wetlands area on a property may impact property value and should be considered in the property appraisal. - Licensees should be familiar with the concept of development limitations on wetlands so they can properly advise clients. - The Clean Water Act provides guidelines for waters, including wetlands. - Only certain structures can be built on wetlands.

Jorge's firm has just been assigned as the listing brokerage for a foreclosed condo unit in Jorge's own building. Jorge knows that given the unit's condition, it's bound to sell for far less than market value of a nicer unit such as his. Worried that the new listing will bring down his unit's value, Jorge quickly lists his unit at current market price and sells it before the foreclosed listing hits the market—at a price $100,000 less than Jorge sold his unit for. Has Jorge done anything wrong?

Yes, he engaged in self-dealing

You recently listed an historic home more than 100 years old, which was the site of a suicide many years ago. A spirit is believed to roam the grounds, but the current owner doesn't want this shared with prospective buyers. Which action best demonstrates good faith?

You follow the owner's wishes because the suicide and haunting don't need to be disclosed.

Zoning

Zoning is a police power exercised by a state, county, city, or town government that classifies land based on its current or intended usage. Zoning ordinances are local laws or regulations that implement the comprehensive plan by regulating zoning and land use and are usually enforced at the city level. Zoning ordinances regulate things like lot size, building height, and permitted uses within each zoning classification on a zoning map. Zoning ordinances may not violate the federal Fair Housing Act. Zoning compliance is often monitored by requiring developers to make application for permits, which are only granted if they're not at odds with zoning ordinances. Zoning classifications: 1) Residential 2) Commercial 3) Combination/mixed use 4) Industrial 5) Agricultural 6) Open space 7) Parkland 8) Recreation area Other permitted uses for structures zoned residential may include a group home, a home occupation, or an accessory use. Zoning should adhere to the area's master plan.

Subdivision

land that's divided into lots for development

Plat Map

map of a subdivision that represents a tract of land, showing the boundaries and location of individual properties, streets, easements, and other pertinent information. A developer submits the plat map to a planning board or zoning commission.