Real estate terms part 3
timeframe for TRID and RESPA disclosures
-The Loan Estimate(LE) must be delivered or placed in the mail by the lender, no later than the 3rd business day after the lender receives the consumer's application. -The Closing Disclosure(CD) must be provided to the consumer for review at least 3 business days prior to consummation -3 business days- if there is a change in interest rate above 1/8th they are required to stop closing, reissue, and put closing off for 3 days. -If there is any change, then a new CD is required and a new three-day waiting period is instituted.
pick your payment loan
4 options- 1. pay both principal and interest mortgage 2. just pay interest not principal on loan 3. pay principal not interest 4. dont pay anything at all - it will take unpaid intrest and principal and tack it on at end- instead of going down at the end it would go up -caused foreclosures and short sales
Liability under CERCLA is A. limited to the owner of record. B. joint and several and retroactive, but not strict. C. voluntary. D. strict, joint and several, and retroactive.
D. strict, joint and several, and retroactive.
intermediate mortgage theory
Illinois. Lendor gets "qualified title." Mortgagor gets qualified title subject to lien and "defeasance clause" requires title be conveyed when debt fully paid.
Truth in Lending Act (TILA) or (Regulation Z) disclosures
include: -loan fees -finder fees -service charges -points -interests -APR
payee
The lender who holds the note and may transfer the right to receive payment to a third party by signing the instrument over (that is, by assigning it) to the third party or by delivering the instrument to the third party.
what type of loan is a partially amortized loan?
balloon payment
involuntary alienation
Title to property may be transferred without the owner's consent -usually carried out by operation of law—such as by condemnation or a sale to satisfy delinquent tax or mortgage liens
mortgage insurance premium (MIP)
borrow is charged this for all FHA loans. The up-front premium is charged at closing and can be financed into the mortgage loan.
mortgagor
borrower who pledges the land to the lender
Marketable Title
Under the terms of the typical real estate sales contract, the seller is required to deliver this to the buyer at the closing. IT MUST: -disclose no serious defects and not depend on doubtful questions of law or fact to prove its validity -not expose a purchaser to the hazard of litigation or threaten the quiet enjoyment of the property -convince a reasonably well-informed and prudent purchaser, acting on business principles and with knowledge of the facts and their legal significance, that he could sell or mortgage the property at a later time.
Certificate of Reasonable Value (CRV)
VA also issues ____ for the property being purchased. The CRV states the property's current market value based on a VA-approved appraisal and places a ceiling on the amount of a VA loan allowed for the property. If the purchase price is greater than the amount cited in the CRV, the veteran may pay the difference in cash. -appraisal -100% financing
preclosing procedures
closing involves 2 major events: 1. first the promises made in the sales contract are fulfilled; 2. second, the mortgage funds are distributed to the buyer.
Seller's Issues at closing
collecting payments for the property -smooth transfer of ownership
Interest
is a charge for the use of money. -Interest may be due at either the end or the beginning of each payment period. -Payment in advance: payment made at the beginning of each period -Payment in arrears: payment made at the end of a period
Formaldehyde
is a colorless chemical with a strong, pronounced odor. -a chemical that is a suspected carcinogen. -no disclosure required
Carbon monoxide (CO)
is a colorless, odorless gas that occurs due to incomplete combustion as a by-product of burning such fuels as wood, oil, and natural gas. -IL requires that all residences be equipped with working CO detectors. -Detectors must be located within 15 feet of all bedrooms.
Title insurance
is a contract under which the policyholder is protected from losses arising from defects in the title. this type of company determines whether the title is insurable based on a review of the public records. If so, a policy is issued.
legal description
is a detailed way of describing a parcel of land for documents such as deeds and mortgages that will be accepted in a court of law. -The description is based on information collected through a survey—the process by which boundaries are measured by calculating the dimensions and area to determine the exact location of a piece of land. -description is legally sufficient if it allows a surveyor to locate the parcel. -locate means that the surveyor must be able to define the exact boundaries of the property -legal address
Real Estate Settlement Procedures Act (RESPA)
is a federal law that requires certain disclosures about the mortgage and settlement process and prohibits certain practices that increase the cost of settlement services, such as "kickbacks" and referral fees.
Asbestos
is a fire-resistant mineral that was once used extensively as insulation and to strengthen other building materials. -this insulation can create airborne contaminants that may result in respiratory diseases. -is highly friable, meaning that as it ages, asbestos fibers break down easily into tiny filaments and particles. This makes it especially harmful when it is disturbed or exposed and becomes airborne, as often occurs during renovation or remodeling. -banned in 1978 friable -no residential disclosure required
Fannie Mae
is a government-sponsored enterprise that provides a secondary market for mortgage loans, dealing in conventional, Federal Housing Administration (FHA), and Department of Veterans Affairs (VA) loans. -buys a pool of mortgages from a lender, and that pool may then be used as collateral for mortgage-backed securities that are sold on the global market
Foreclosure
is a legal procedure in which property pledged as security for a loan is sold to satisfy the debt. This procedure brings the rights of the parties and all junior lienholders to a conclusion. - when dont pay as agreed this process occurs
percolation test
is used to determine the absorption rate of the soil around a septic tank. -most often associated with septic tank use
mortgage loan interest
is usually simple interest paid in arrears and any interest adjustment should never be for more than a month -buyer and seller must understand that the mortgage payment due on June 1, for example, includes interest due for the month of May. -Thus, the buyer who assumes a mortgage on May 31 and makes the June payment pays for the time the seller occupied the property and should be credited with a month's interest. -On the other hand, the buyer who places a new mortgage loan on May 31 may be pleasantly surprised to hear that he will not need to make a mortgage payment until a month later.
deed in lieu of foreclosure (or friendly foreclosure)
it is carried out by mutual agreement rather than by lawsuit. -turn property back to the bank -subject to all liens and encumbrances -less severe credit affect
when is the premium for the policy paid?
it is paid once, at closing.
Accrued items
payment made after its due. such as water bills, Illinois real estate taxes, and interest on an assumed mortgage that is paid in arrears, are expenses to be prorated that are owed by the seller but later will be paid by the buyer. -seller therefore pays for these items by giving the buyer credits for them at closing. -buyer credits -interest -property taxes
rate
percentage of annual interest charged
beneficiary (also called a legatee).
peson who receives the personal property by will
Priority of documents
refers to the order of rights in time -who recorded first -which party was in possession first -who had actual or constructive notice
what type of legal description uses stones, highways, and streets as legal measurements?
metes-and-bounds method
appraiser
a person trained to provide valuation services competently in an impartial and objective manner, according to the appraisal process.
testate
a person who died has prepared a will indicating how the person's property should be handled
devisee
a person who receives real property by will
Benchmarks
are permanent reference points that have been established throughout the United States. They are usually embossed brass markers set into solid concrete or asphalt bases. While used to some degree for surface measurements, their principal use is for marking datums.
Underground storage tanks (USTs)
are commonly found on sites where petroleum products are used or where gas stations and auto repair shops are located. -they are a latent defect- must disclose exemptions to disclosure: -tanks less than 110 galloons -farm and residential less than 1100 galloons -heating oil tanks above the floor in underground facility -septic or storm water collection
Monuments
are fixed objects used to identify the POB, the ends of boundary segments, or the location of intersecting boundaries. -may be a natural object, such as a large tree, lake, or stream. -may also be a man-made object, such as a street, highway, fence, canal, or markers (iron pins or concrete posts) placed by surveyors. -often include the words "more or less" because the location of the monuments is more important than the distances given in the wording. -actual distance takes preference over linear measurements
Real Estate Settlement Procedures Act (RESPA)
applies to any residential real estate transaction involving a new first mortgage loan. -is designed to ensure that buyer and seller are fully informed of all settlement costs.
Private Mortgage Insurance (PMI)
in this program, the borrower purchases an insurance policy that provides the lender with funds in the event the borrower defaults on the loan. -monthly premium -less than 20% down on loan- have PMI
sales price when dealing with transfer tax
round up to next $500 dollar amount, then divide by $500 x $.75
land contract (also called a contract for deed or installment contract)
the buyer (called the vendee) agrees to make a down payment and a monthly loan payment that includes interest and principal directly to the seller.
in title theory states
the mortgagor actually gives legal title to the mortgagee (or some other designated individual) and retains equitable title. -In theory, the lender actually owns the property until the debt is paid. -not IL
In lien theory states
the mortgagor/borrower holds both legal and equitable title. The mortgagee/lender simply has a lien on the property as security for the mortgage debt. The mortgage is nothing more than collateral for the loan -not IL
principal
the sum of money due to lender
hypothecation
type of pledging- In mortgage lending practice, a borrower is required to pledge specific real property as security (collateral) for the loan. The debtor retains the right of possession and control, while the creditor receives an underlying equitable right in the pledged property.
intestate
when a person died (without a will), real estate and personal property pass to the decedent's heirs according to the state's statute of descent and distribution.
IL Plat Act
when an owner divides a parcel of land into two or more parts, any of which is less than 5 acres, the parts must be surveyed and a plat of subdivision recorded. -show streets, utlities, etc. -topography -an exception to this would be the division of lots or blocks of less than one acre in any recorded subdivision that does not involve the creation of any new streets or easements of access
what is the IL state transfer tax?
$.50 per $500 or fraction there of
whats the transfer tax?
$.75 per $500 or fraction there of
tranfer tax rules
less than $100- no tax -charitable, religious, education facilities -taxable value reduced by the assumed mortgage -subtract personal property -paid prior to recording *just subtract assumed mortgage
A comparative market analysis (CMA)
license marketing tool. looks at properties similar to the subject property in size, location, and amenities and is based: -recently closed properties (solds), -properties currently on the market (competition for the subject property) -properties that did not sell (expired listings in the area). -cant charge for it
licensees role at closing
licensees are not authorized to give legal advice or otherwise engage in the practice of law. -licensee's job is essentially finished as soon as the sales contract is signed. After the contract is signed, the attorneys take over. -licensees generally continues all the way through closing because they have the best interest that the transaction goes smoothly and is successful so -this may mean actively arranging for title evidence, surveys, appraisals, and inspections or repairs for structural conditions, water supplies, sewage facilities, or toxic substances.
range lines
lines parallel to base line, run east and west
township lines
lines running east and west, runs parallel to base line, every 6 miles north and south of base line
what is the IL county transfer tax?
$.25 per $500 or fraction there of
testator
(the person who makes a will) -while they are alive, any property included in the will can still be conveyed by the owner.
appraisal license categories
-Associate real estate trainee appraiser: entry level, all reports must be cosigned by a state-certified residential real estate appraiser or state-certified general real estate appraiser. -Certified residental real estate appraiser: 1-4 residential units without regard to transaction value or complexity, but with restrictions in accordance with Title XI, USPAP, and criteria established by the AQB. may also appraise other types of real property having a transaction value of less than $250,000. -Certified general appraisal: Qualified to appraise all types of real property without restrictions as to the scope of practice subject to USPAP requirements.
Each township is given a legal description. The township's description includes the following:
-Designation of the township tier in which the township is located -Designation of the range strip -Name or number of the principal meridian for that area
typical expenses
-brokers commission: seller pays, debit to seller -attorney fees: debit to both buyer & seller -recording/transfer tax: debit to seller -title expense: debit to seller -loan fees: debit to seller -apprasial fees: buyer debit -survey fees: debit to seller -insurance: debit to buyer -tax and insurance reserve (MIP): debit to buyer
proof of ownership
-certificate of title -abstract & attorney opinion -title insurance: provided by seller, sellers policy -A deed by itself is not considered sufficient evidence of ownership in Illinois.
market value assumptions
-competitive and open market -arms length transaction -most probable price is not the average or median -no unusual circumstances -parties are acting prudently with knowledge of the facts -parties are unrelated and acting without undo influence -parties are well informed -reasonable marketing time -payment made in cash -cash buys you time
Requirements to Record
-grantors name typed or printed -address of the grantee -name and address of preparer -grantor MUST sign, dont need grantee to sign -property identification number -common address -space for recorders stamp -transfer tax declaration payment stamps- state and municipal
interest only loans
-straight term loan: every month pay interest -interest only: was good until market crashed which kicked off the great depression -principal due at end: no equity build up -banks want to be in money loan business
buyers issue in closing
-title evidence: sellers job -deed/lien free: sellers job -survey: sellers job -inspection/final walk through: brokers job -tenants/leases: sellers job
Sales Comparison Approach rule
-use comps within 1 mile radius - for 6 months long -minimum of 3 cops because youre triangularing a price -for seller; never make ajustments on the subject column- only on the comps -comps are required to use this approach -if the comp is better than the subject property you subtract -if the comp is worse than the subject prop. you add -to determine what to list property at, list right around comp. sale but leave a little room for negoiation -you find most numbers in your own research -get comps through MLS
basic principals of value
1. Anticipation: value is created by the expectation that certain events will occur. 2. Competition: interaction of supply and demand 3. Change: relates to the economic and social forces that affect value. nothing remains constant-growth, stability, decline, rebirth (real estate is a cycle) 4. Conformity: maximum value is created when a property is in harmony with its surroundings. Maximum value is realized if the use of land conforms to existing neighborhood standards-homogeneity 5. Contribution: the value of any part of a property is measured by its effect on the value of the whole. 6. Highest and best use: The most profitable single use to which a property may be put, or the use that is most likely to be in demand in the near future. only 1 at a given moment of time. the use must be: legally permitted, physically possible, economically or financially feasible, and the most profitable or maximally productive. 7. Incresing/diminishing returns: as a relator make sure investor doesnt over spend on improving property. improvements increase the asset only to maximum in the value range 8. Plottage: holds that merging or consolidating adjacent lots into a single, larger one produces a greater total land value than the sum of the two sites valued separately. 9. Substitution: the maximum value of a property affected by the ability to purchase an equally desirable and valuable substitute property. 10. Regression and Progression: -regression: the worth of a better-quality property is adversely affected by the presence of a lesser-quality property -progression: the value of a modest home would be higher if it were located among larger, fancier properties 11. Supply and demand: holds that the value of a property depends on the number of properties available in the marketplace—the supply of the product. When supply increases, value decreases and when demand increases, value increases.
The real estate financing market has 3 basic components:
1. Government influences (primarily the Federal Reserve System, but also the Federal Home Loan Banks and the Office of the Comptroller of the Currency) 2. The primary mortgage market: give the loans, originate the market 3. The secondary mortgage market: trade loans
3 identifiers used In describing a lot from a recorded subdivision plat:
1. Lot-and-block number: the land is divided into numbered or lettered lots and blocks, and streets or access roads for public use are indicated 2. Name or number of the subdivision plat: Lot sizes and street details must be described completely and must comply with all local ordinances and requirements. 3. Name of the county and state: When properly signed and approved, the subdivision plat is recorded in the county in which the land is located. -with this 3 identifies, the plat becomes part of the legal description
2 addresses to property
1. common/street address 2. legal address
For appraisal purposes, depreciation is divided into the following three classes, according to its cause:
1. physical deterioration: a curable item is one in need of repair, such as painting (deferred maintenance), that is economically feasible and would result in an increase in value equal to or exceeding the cost. 2. Functional obsolescence: means a loss in value from the market's response to the item. Outmoded or unacceptable physical or design features that are no longer considered desirable by purchasers are considered curable. curbale ex: A bedroom adjacent to a kitchen, for example, may be converted to a family room. incurbale ex: an office building that cannot be economically air-conditioned suffers from incurable functional obsolescence if the cost of adding air-conditioning is greater than its contribution to the building's value. 3. External obsolescence (previously known as economic or environmental obsolescence): is the loss in value caused by factors outside a property. These factors can be zoning, environmental, social, or economic forces. In this case, the depreciation is always incurable.
replacement cost new methods
1. square foot method: The cost per square foot of a recently built comparable structure is multiplied by the number of square feet (using exterior dimensions) in the subject building. 2. unit in place method: (also known as the segregated cost method), the replacement cost of a structure is estimated based on the construction cost per unit of measure of individual building components, including material, labor, overhead, and builder's profit. 3. quantity survey method: the quantity and quality of all materials (e.g., lumber, brick, and plaster) and the labor are estimated on a unit cost basis. These factors are added to indirect costs (e.g., building permit, survey, payroll, taxes, and builder's profit) to arrive at the total cost of the structure. 4. index method: a factor representing the percentage increase of construction costs up to the present time is applied to the original cost of the subject property.
Proration Rules
1.)unless state otherwise, always calculate using statutory year & statutory month (banking) -statutory month (banking year)=360 days statutory= 12 x 30 = 360 days -if (stated) calendar year= 365 days (actual number of days method) 2.) day of closing is a day of EXPENSE to the seller 3.) day of closing is a day of INCOME to the seller 4.) day of closing is a day of INTEREST EXPENSE to the buyer- double dip day for bank 4. paid in advance or arrears
FHA insured loan advantage
100% insured, doesnt give loans -approved appraiser to get FHA loan: send in HUD approved appraiser, looks at value and condition of property for approval. -only wants 3.5% down, 95% loan to value -money can be gifted from a relative -owner occupied: 1-4 units residential -non-occupant co-borrower closing costs: borrowed + gift + seller (not the case for conventional loan) -qualifying ratios: 31/43 31%: allowed to spend on housing 43%: as high as 43% with all debt (7% higher) -The 203(b) fixed-rate loan is a popular FHA home loan, especially among first-time homebuyers.
which of the following is NOT exempt for disclosure in regards to storage tanks?
2,000 galloons on a farm (not exempt only 1100 galloons or under is)
how large is a government check?
24 sqaure miles
how long does a lender or mortgagee have to give release of mortgage?
30 days or 1 month
how long does lenders and creditors have to notify rejected applicant fors principal reasons of rejection?
30 days or 1 month
1 section
= 1 mile x 1 mile (1 square mile) = 640 acres
1 acre
= 43,560 square feet
1 mile
= 5280 feet (one side of a section)
1 township
= 6 miles x 6 miles (36 sqaure miles) = 36 sections
Closing Agent or Closing Officer
A closing agent may be a representative of the title company, the lender, the real estate broker, or the buyer's or the seller's attorney. Some title companies and law firms employ paralegal assistants who conduct closings for their firms. The closing agent orders and reviews the title insurance policy or title certificate, surveys, property insurance policies, and other items. After reviewing the agreement of sale (purchase agreement), the agent prepares a closing statement indicating the division of income and expenses between the parties.
trustee's deed
A deed executed by a trustee. used when a trustee conveys real estate held in the trust to the beneficiary -must state that the trustee is executing the instrument in accordance with the powers and authority granted by the trust instrument. -Conveyance from trustee to third party
loan origination fee
A fee charged by the lender (to the borrower) for making a mortgage loan. The fee is usually computed as a percentage of the loan amount. -covers the expenses of making a loan -increases the yield to the lender
Discount Points
A fee charged by the lender at settlement that results in increasing the lender's effective yield on the money borrowed. One discount point = 1% of the loan amount. effect: reduces interest rate by 1/8th % -benefits buyer
Mortgagee
A lender in a mortgage loan transaction.
plat map
A map of a town, section, or subdivision indicating the location and boundaries of individual properties.
Cost Approach
A method of estimating value based on the economic principle of substitution; the value of a building cannot be greater than the cost of purchasing a similar site and constructing a building of equal utility. -appraisal technique that analyzes cost to built consists of five steps: 1. Estimate the value of the land as though it were vacant and available to be put to its highest and best use. 2. Estimate the current cost of constructing the buildings and improvements. 3. Estimate the amount of accrued depreciation resulting from the property's physical deterioration, functional obsolescence, and external obsolescence. 4. Deduct the accrued depreciation (step 3) from the current construction cost (step 2). 5. Add the estimated land value (step 1) to the depreciated cost of the building and site improvements (step 4) to arrive at the total property value.
Defeasance Clause
A necessary mortgage clause in title theory states. When the debt is satisfied, this clause causes title to pass automatically back to the borrower. -title must be fully reconveyed
Correction Lines
A system for compensating inaccuracies in the Government Rectangular Survey System due to the curvature of the earth. -Every fourth township line (N&S) is a designated correction line -on each correction line, the range lines are measured to the full distance of six miles apart -guide meridians every 24 miles- government checks -adjusted on north and west section boundaries -fractional sections: over or undersized -less than 1/4 section is gov. lot or underwater
exclusions
A title company will not insure a bad title or offer protection against defects that clearly appear in a title search. The policy generally names certain uninsurable losses called _______. -These include zoning ordinances, restrictive covenants, easements, certain water rights, and current taxes and special assessments.
what is the most commonly used evidence that an owner of Illinois real property tenders to a prospective purchaser or lender as proof of good title ?
A title insurance policy
In Illinois, which party customarily prepares the closing statement? A. Seller's attorney B. Buyer's attorney C. Listing broker D. Seller's lender
A. Seller's attorney
final inspection (also called a walk-through)
Accompanied by the licensee, the buyer verifies that necessary repairs have been made, that the property has been well maintained, that all fixtures are in place, and that no unauthorized removal or alteration of any part of the improvements has taken place.
preliminary report of title (also called a commitment to issue a title policy)
After examining the public records, the title company usually issues this. This describes the type of policy that will be issued and includes: -the name of the insured party; -the legal description of the real estate; -the estate or interest covered; -conditions and stipulations under which the policy is issued; and -a schedule of all exceptions, including encumbrances and defects found in the public records and any known unrecorded defects.
standard sections
All other sections are exactly one square mile
Creation of will
Any person 18 or older, and who is of sound mind and memory can make one. -it must be in writing and signed and declared by the maker (the testator) in the presence of two or more witnesses to be her last will and testament. -Witnesses cannot be beneficiaries under the will because their gifts will likely be voided by the probate court.
Notice
Anyone who has an interest in a parcel of real estate can take certain steps, to ensure that others know about the individual's interest. There are two basic types: 1. constructive notice 2. actual notice
Consummation may occur how many days after the issuance of the Closing Disclosure? A. Seven business days B. Three business days C. Three business days after closing D. Three business days before consummation
B. Three business days
In Illinois, the state transfer tax is A. customarily paid by the buyer. B. computed on the sales price less the amount of any existing mortgage to which the property remains subject. C. not required if the actual total consideration is less than $500. D. assessed at the rate of $1 per $1,000 of sales price.
B. computed on the sales price less the amount of any existing mortgage to which the property remains subject.
Capitalization is the process by which annual net operating income is used to A. determine cost. B. estimate value. C. establish depreciation. D. determine potential tax value.
B. estimate value.
Potential Title Issues and Remedies
Before the issuance of a title insurance policy, the insurer will check the title by doing a title search. -Common issues that can hinder a clear title are errors in public records, unknown liens, illegal deeds, missing heirs, forgeries, undiscovered encumbrances, unknown easements, boundary/survey disputes, undiscovered wills, and false impersonation of previous owner.
Escrow Procedures
Buyer and seller deposit all pertinent documents and other items with the escrow agent before the specified date of closing. The seller usually deposits: -the deed conveying the property to the buyer, -title evidence (abstract and attorney's opinion of title, certificate of title, title insurance, or Torrens certificate), -existing hazard insurance policies, -a letter or mortgage reduction certificate from the lender stating the exact principal remaining (if the buyer assumes the seller's loan), -affidavits of title (if required), -a payoff statement (if the seller's loan is to be paid off), -bill of sale, -survey, -transfer tax declarations, paid water bill, -other instruments or documents necessary to clear the title or to complete the transaction. The buyer deposits: -the balance of the cash needed to complete the purchase, usually via wire transfer or in the form of a certified check; -loan documents (if the buyer secures a new loan); -proof of hazard insurance and flood insurance (if required); -other necessary documents, such as inspection reports required by the lender.
In Illinois, when a person dies without a valid will and with no heirs, what happens to the property? A. It is sold at auction B. It escheats to the state C. It escheats to the Illinois county it lies in D. It is foreclosed
C. It escheats to the Illinois county it lies in
A developer received a loan that covers five parcels of real estate and provides for the release of the mortgage lien on each parcel when certain payments are made on the loan. This type of loan arrangement is called a A. purchase money loan. B. package loan. C. blanket loan. D. wraparound loan.
C. blanket loan.
Security deposits are listed on a closing statement as a credit to the: A. seller. B. lender. C. buyer. D. broker.
C. buyer
From the reproduction or replacement cost of a building, the appraiser deducts depreciation, which represents A. the remaining economic life of the building. B. remodeling costs to increase rentals. C. loss of value due to any cause. D. costs to modernize the building.
C. loss of value due to any cause.
Environmental regulations in Illinois are A. all more stringent than federal regulations. B. less restrictive than federal regulations. C. substantially equivalent to federal regulations. D. not subject to federal regulations.
C. substantially equivalent to federal regulations.
Form 1099-S
Certain real estate closings must be reported to the Internal Revenue Service (IRS) on this form Information to be reported includes: -the sales price -the amount of property tax reimbursement credited to the seller -the seller's Social Security number -generally the closing agent is responsible for this
Unrecorded Documents
Certain types of liens are not recorded. -mechanic's lien or real estate taxes -real estate taxes and special assessments are liens on specific parcels of real estate and usually are not recorded until sometime after the taxes or assessments are past due. -Inheritance taxes and franchise taxes are statutory liens. They are placed against all real estate owned by a decedent at the time of death or by a corporation at the time the franchise taxes became a lien. like real estate taxes, they are not recorded. -a mechanic's lien that has not been recorded may nonetheless still have priority over other liens that have been recorded
usury
Charging interest in excess of the maximum rate allowed by law -there is no legal limit specifically imposed by Illinois on the rate of interest that a lender may charge a borrower when the loan is secured by real estate.
what type of loan is an FHA 24S?
Growing equity mortgage (GEM)
The purpose of TRID is to A. make sure buyers do not borrow more than they can repay. B. make real estate licensees more responsive to buyers' needs. C. establish standard escrow and appraisal procedures. D. give more transparency to the loan process.
D. give more transparency to the loan process
The term encapsulation refers to the A. process of sealing a landfill with three to four feet of topsoil. B. way in which asbestos insulation is applied to pipes and wiring systems. C. way in which asbestos becomes airborne. D. method of sealing disintegrating asbestos.
D. method of sealing disintegrating asbestos.
Debit vs. Credit
Debit: an amount an individual owes, expense to transaction (takes money away) Credit: amount that an individual is owed (gives you money)
Deed executed pursuant to a court order
Deeds that are established by state statute and are used to convey title to property that is transferred by court order or will -must conform to the laws of the state in which the property is located. -sheriffs deed -tax deed -adverse possession
Not Covered by Either Policy
Defects and liens listed in policy Defects known to buyer Changes in land use brought about by zoning ordinances
straight-line method of depreciation
Depreciation is assumed to occur at an even rate over a structure's economic life—the period during which it is expected to remain useful for its original intended purpose.
prorations
Expenses, either prepaid or paid in arrears, that are divided or distributed between buyer and seller at the closing. -for such items as loan interest, taxes, rents, fuel, and utility bills. -are necessary to ensure that expenses are divided fairly between the seller and the buyer.
what loan type has 31-43 debt to income ratios?
FHA 203(b)
equitable right of redemption
IL has; which allows the borrower to pay the lender the amount in default plus costs and thereby extinguish the debt. This right begins after the notice but before the foreclosure sale. -a mortgagor in default who wishes to exercise the this to avoid loss of the mortgaged real estate may do so for a period of 7 months after the date of service on the mortgagor or after first publication date. -7 months to pay off
statutory right of reinstatement
IL offers this; This option is applicable when the defaulting mortgagor wishes to cure the default and reinstate the loan as though no acceleration had occurred. The mortgagor has the right to exercise this statutory right for a period of 90 days after service of summons or publication date. -90 days to catch up
Assignment of Rents
If the property involved includes rental units, the borrower may provide for rents to be assigned to the lender in the event of the borrower's default. -The assignment may be included in the mortgage or deed of trust, or it may be a separate document.
Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank)
In 2010, federal legislation, created the TILA-RESPA Integrated Disclosure rule is a consumer protection ruling that gives more transparency to the loan process.It does not apply to cash transactions. -timeline for disclosures -truth in lending -RESPA: prevent mortgage fraud through enticement -remember 3-3-3
Point of beginning (POB)
In a metes-and-bounds legal description, the starting point of the survey, situated in one corner of the parcel; all metes-and-bounds descriptions must follow the boundaries of the parcel back to the point of beginning.
strict foreclosure
In this process, appropriate notice must first be given to the delinquent borrower. -court authorization, property is awarded to lender
how is a lot-and-block survey is performed?
In two steps: -first, a large parcel of land is described either by metes and bounds or by rectangular survey. -once this large parcel is surveyed, it is broken into smaller parcels. -As a result, a lot-and-block legal description is always a smaller part of a metes-and-bounds or rectangular survey description. -For each parcel described under the lot-and-block system, the lot refers to the numerical designation of any particular parcel. -The block refers to the name of the subdivision under which the map is recorded.
Lead-Based Paint (Title X)
Lead from paint or other sources can result in damage to the brain, nervous system, kidneys, and blood. Children younger than six are particularly vulnerable. -federal disclosure required of any property older than 1978
Transfer of a Deceased Person's Property
Legally, when a person dies, ownership of real estate immediately passes either to the heirs by descent or to the persons named in the will. Before these individuals can take full title and possession of the property, however, the estate must go through the judicial process of probate, and any claims against the estate must be satisfied. -If the property was owned by a husband and wife in tenancy by the entirety or was held in joint tenancy, the surviving spouse (or other owner) will automatically be the new owner. If the property was held as a life estate, it automatically reverts to the former owner or passes to a remainderman. In any case, no probate is required. -If the property was not held in joint tenancy, tenancy by the entirety, or as a life estate, and the owner died testate, the devisees named in the will own the real estate. -If the owner died intestate, relatives will inherit the property according to the Illinois Probate Act of 1975 (755 ILCS 5). In effect, the state makes a will for such decedents. -If the owner died intestate and left no heirs, the real property will escheat to the Illinois county it lies in.
Marketable Title vs. Insurable Title
Marketable title means that the chain of ownership is free and clear of defects and should any problem arise, the title insurer will cover the issue as per the insurance policy. In Illinois, a title insurance policy for marketable title is the most common way of assuring a lender and a purchaser that the property has marketable title. Insurable title, which is often offered by banks in a foreclosure sale, means that the title insurance company knows that there are defects on the title, but it believes that the risk of those defects becoming problematic is low
Three basic methods are used to describe real estate:
Metes and bounds method Rectangular (or government) survey Lot and block (recorded plat)
income approach formulas
NOI= rate x value use the T chart -net operating income is the part -current value of prop. is the whole value -the capitaliztion rate is the %
mortgage law
No one can convey more than he actually owns. -licensees must understand principles of financing and stay current on mortgage rates and terms -ex-the owner of a fee simple estate can mortgage the fee simple interest.
Homeowners Protection Act of 1998
PMI must terminate automatically when the borrower reaches a 22% equity position based on the original value of the property at the time the loan was originated with no allowance for appreciation or depreciation if the loan was written after July 29, 1999, and the borrower is current on mortgage payments.
affiliated business arrangement (ABA)
Practice of a company offering a package of services to consumers- to streamline the settlement process, a real estate firm, title insurance company, mortgage broker, home inspection company, or even a moving company -RESPA permits an ABA as long as a consumer is clearly informed of the relationship among the service providers; that participation is not required; that other providers are available; -cant force poeple to use your attorneys, etc; but make sure the attorneys & such have real estate experience
closing escrow
Process of settlement in which the buyer and the seller never meet; the paperwork is handled by an escrow agent. -a third party coordinates the closing activities on behalf of the buyer and seller. -main concerns are that the buyer receives marketable title and the seller receives the purchase price.
terms for real property and personal property
Real property: grantor- legal capacity grantee- reasonable certianty Personal property: vendor vendee
bring-down
Second search of public records to ensure marketable title after closing and before documents are recorded
township tiers
Strips of land designated by consecutive numbers north or south of the base line. -are the very long strips of six-mile-wide land running east and west.
agricultural loans
The Farm Service Agency (FSA) offers programs to help families purchase or operate family farms.
deed
The document by which the owner transfers the title to another -the instrument that conveys property from a grantor to a grantee. -written instrument
bequest (also called a legacy)
The gift of personal property by will
devise
The gift of real property by will
Acceleration Clause (in a mortgage)
The mortgage or deed of trust typically includes this clause to assist the lender in foreclosure. -If a borrower defaults, the lender has the right to "accelerate the maturity of the debt." This means the lender may declare the entire debt due and payable immediately.
grantor
The owner who transfers the title -conveys property to a grantee.
Statutory Right of Redemption
The right of a defaulted property owner to recover the property after its sale by paying the appropriate fees and charges. -IL doesnt have -90 days
tacking
Through this principle, successive periods of different adverse possession by different adverse possessors can be combined, enabling a person who is not in possession for the entire required time to establish a claim. ex-if a woman held a property in adverse possession for 5 years, then the woman's daughter held the same property for 10 years, then the woman's son held the property for 5 more years, the son would be able to claim the property by adverse possession even though she had not personally possessed the property for the full statutory 20 years.
3 approaches to value
To arrive at an accurate opinion of value, appraisers traditionally use the 3 basic valuation techniques: 1. the sales comparison approach 2. the cost approach 3. the income approach. -The three methods serve as checks against each other. Using them narrows the range within which the final estimate of value falls. Each method addresses a specific type of property
fractional sections
Undersized or oversized sections May occur: -ex: the rectangular survey may have been made by separate crews, and gaps less than a section wide remained when the surveys met. -Other errors may have resulted from the physical difficulties encountered in the actual survey. -ex: part of a section may be submerged in water. (Sections 1, 2, 3, 4, 5, 6, 7, 18, 19, 30, and 31).
Transfer of Title by Descent
When a person dies intestate (without a valid will), the person's state's law of descent governs how and to whom her property will be distributed. -In Illinois, the law that governs intestate distribution is the Illinois Law of Descent and Distribution.
Subrogation
When a title company makes a payment to settle a claim covered by a policy, the company generally acquires the right to any remedy or damages available to the insured
satisfaction of mortgage (or a release of mortgage or mortgage discharge)
When all mortgage loan payments have been made and the note has been paid in full, the borrower will want the public record to show that the debt has been satisfied and that the lender is divested of all rights conveyed under the mortgage. By the provisions of the defeasance clause in most mortgage documents, the lender is required to execute _____ when the note has been fully paid -issued by mortgagee -Any mortgagee, or his assignees or agents, who fails to deliver a release to the mortgagor or the grantor of a deed of trust within one month after full payment and satisfaction will be liable to pay the mortgagor or grantor a $200 penalty.
Plat Act applying to Record
When the parcel of land being transferred is a division of a larger parcel and smaller than five acres, the recording provisions of this act apply
balloon payment
When the periodic payments are not enough to fully amortize the loan by the time the final payment is due, the final payment is larger than the others -is a partially amortized loan because principal is still owed at the end of the term. -at closing, 1 lump sum payment
purchased assumed to the mortgage
a buyer who purchases the property and assumes the seller's debt becomes personally obligated for the payment of the entire debt, and the seller (original mortgagor) is still liable until the mortgagee releases the seller.
Pre-payment penalty
a fee charged if you repay a loan before the agreed-upon time. -not insured, guarantee, FNMA
Freddie Mac
a government-sponsored enterprise that provides a secondary market primarily for conventional loans. -sells bonds -securitized by mortgages standardized mortgage forms: every bank uses
Probate
a legal procedure for verifying the validity of a will and accounting for the decedent's assets. -this process can take several months to complete. This process: -determines the precise assets of the deceased person -identifies the persons to whom the assets are to pass. Purpose: is to see that the assets are distributed correctly.
affidavit of title
a sworn statement in which the seller assures the title insurance company (and the buyer) that there have been no judgments, bankruptcies, or divorces involving the seller since the date of the title examination. -promises that no unrecorded deeds or contracts have been made, no repairs or improvements have gone unpaid, and no defects in the title have arisen that the seller knows of.
Ginnie Mae
administers special-assistance programs and guarantees mortgage backed securities using FHA and VA loans as collateral. -pass-through certificate is a security interest in a pool of mortgages that provides for a monthly pass-through of principal and interest payments directly to the certificate holder. -is a wholly owned government corporation within the Department of Housing and Urban Development (HUD).
open-end loan
allows borrower to borrow back the the original loan amount -lender may charge current interest rate
judicial foreclosure
allows the property to be sold by court order after the mortgagee has given sufficient public notice. -foreclosures may be brought about only through a court proceeding. -property sold at public auction IL is this, & NY, NJ -slowest foreclosure process
No Income Verification Loan (NIV) or state loans
also called lier loans. if credit is good enough, they wont ask for income verification, only will ask for your signature -business owners and entrepreneurs use this
townships
always contains 36 sqaure miles (23,040 acres).
Sales Comparison Approach
an estimate of value is obtained by comparing the property being appraised (the subject property) with recently sold comparable properties (properties similar to the subject, called comps). -considered the most reliable approach The elements of comparison for which adjustments must be made include the following: -Financing concessions -market conditions -conditions of sale -Market conditions since the date of sale -location or area preference -Physical features and amenities. - the approach is a good example of the principal of substitution
will
an instrument made by an owner to convey title to real or personal property after the owner's death. -takes effect only after death -only property owned by the testator at the time of death can transferred by this
alienation clause (or resale clause, due-on-sale clause, or call clause)
any attempt to transfer ownership or possession without lenders consent nor satisfaction could result in an acceleration -provides that when the property is sold, the lender may either declare the entire debt due immediately or permit the buyer to assume the loan at the current market interest rate.
which of the follwing would you not use the cost approach method for?
any neighbhorhood with high turn over
Conventional loans
are viewed as the most secure loans because their LTV ratios are often lowest -Usually, the ratio- the borrower puts down 20% so lender gives them 80% (LTV) loan to value -debt to income ratios (qualifying guideliens): 28/36 28: housing or PITI payment 36: represents all long term debt borrow has; (auto loans, student loans, etc.) credit issues: looks at credit worthiness -credit scoring (300-850) -higher score, lower rate
Extended coverage
as provided by an American Land Title Association (ALTA) policy, includes the protections of a standard policy plus additional protections. -An extended or ALTA policy protects a homeowner against defects that may be discovered by inspection of the property (i.e., rights of parties in possession, examination of a survey, and certain unrecorded liens). -Most lenders require extended coverage title policies
Safe Drinking Water Act (SDWA)
authorizes the EPA to set national health-based standards for drinking water. -providers of water must report any potential contamination issues
Mold
can be found almost anywhere and can grow on almost any organic substance, so long as moisture, oxygen, and an organic food source are present. -can infest homes and may produce toxins that cause allergic reactions and asthma attacks. -no disclosure required
comparing loan estimate (LE) to closing disclosure (CD)
cant be more than 10% higher
Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)
commonly called the Superfund, was enacted in 1980. It established a fund of $9 billion to clean up uncontrolled hazardous waste sites and to respond to spills. It created a process for identifying potentially responsible parties (PRPs) and ordering them to take responsibility for the cleanup action. -is administered and enforced by the EPA.
closing statement
completion of a closing statement, now realized in the CD, involves an accounting of the parties' debits and credits. -settlement state -provides for porations -prepaid/unpaid -accured
TRID Disclosures
composed of 2 main disclosures: 1) The Loan Estimate (LE): shows the consumer the amount of money borrowed, the interest rate, the amount of interest paid, the number of payments, the individual amount of those payments, any associated costs for the loan, an estimate of closing costs, and an estimate of the cash needed to close. 2) the Closing Disclosure (CD): shows the loan terms and charges but also shows the costs associated with closing and the cash needed to close. It is the document, which accounts for all debits and credits, that is distributed to participants at the closing.
public records
contain detailed information about each parcel of real estate in a city or a county. -are crucial in establishing ownership, giving notice of encumbrances, and establishing priority of liens. -they protect the interests of real estate owners, taxing bodies, creditors, and the general public Maintained by: -recorders of deeds -county clerks -county treasurers -city clerks -collectors -clerks of court
special warranty deed
contains 2 promises; contains the following two basic warranties: 1) Warranty that the grantor received title 2) Warranty that the property was not encumbered during the time the grantor held title, except as otherwise noted in the deed -granting clause contains the words: "grantor remises, releases, alienates, and conveys."
bargain and sale deed
contains 3 promises/covenants: 1) the grantor holds a fee simple estate 2) the title is free from encumbrances made by the grantor except those listed in the deed 3) the grantor warrants quiet enjoyment. -contains no express warranties against encumbrances. -Implication that grantor holds title and possession granting clause contains the words: "grant, bargain, and sell" -since this deed is less complete in its warranties, the buyer should purchase title insurance for protection.
blanket loan
covers more than one parcel or lot. It is usually used to finance subdivision developments. However, it can be used to finance the purchase of improved properties or to consolidate loans as well. -usually includes a partial release clause, which permits the borrower to obtain the release of any one lot or parcel from the lien by repaying a certain amount of the loan. -20 lots- 1 mortgage -mass closing
mortgage loans
creates a relationship between a debtor and a creditor. In the relationship, the creditor loans the debtor money for some purpose, and the debtor agrees to pay or pledges to pay the principal and interest according to an agreed schedule. -secured loans: -Have two parts: the debt itself and the security for the debt.
closing process
done by title company, lender, or attorney -in IL needs to be face to face -closing agent (disinterested 3rd party) makes sure all documents are signed, and the expenses and prorations of costs to close the transaction are there -main concerns are that the buyer receives marketable title and the seller receives the purchase price.
section
each section is one square mile, or 640 acres. -each section are numbered 1 through 36 -section 1 is always in the northeast, or upper right-hand, corner. -section 16 is always school section
Recorder of deeds
elected in populations of over 60,000 people -county clerk -county treasurer -collector
Wraparound Loan
enables a borrower with an existing mortgage or deed of trust loan to obtain additional financing from a second lender without paying off the first loan. The second lender gives the borrower a new, increased loan at a higher interest rate and assumes payment of the existing loan. -The total amount of the new loan includes the existing loan as well as the additional loan taken out by the borrower. -borrower makes payments to the new lender based on the total amount, and the new lender in turn makes payments on the original loan out of the borrowers' payments.
which is not a protected class in ECOA?
familia status and handicap/disability
Community Reinvestment Act (CRA)
financial institutions are expected to meet the deposit and credit needs of their communities; participate and invest in local community development and rehabilitation projects; and participate in loan programs for housing, small businesses, and small farms. -monitored by FDIC -defined boundaries served
most common deeds
general warranty deed special warranty deed bargain and sale deed quitclaim deed deed in trust trustee's deed deed executed pursuant to a court order.
adjustable rate mortgages (ARMs)
generally originate at one rate of interest, then fluctuate up or down during the loan term, based on some objective economic indicator. -because the interest rateon ARMs may change, the mortgagor's loan repayments also may change. -national index -options because people move a lot common componets of ARMs: -the index -the margin -rate caps: periodic and aggregate -adjustment period -conversion option
what do they call areas smaller than a quarter section surrounding larger bodies of water?
government lots
every deed MUST be signed by who ?
grantor
Bob the veteran bought a house fir $100,000. The CRV comes back at $95,000; how can he buy this house?
if he brings the difference in cash
Cost apporach rules
if you dont have comps, what do you do to figure out the value? RCN (replacement cost new) - accurued depreciation = improvement value + land (vacant) = current property value -physical or functional obsolescenece- curable or in curable -external onsolescence: always incurable -this approach is best used for churchs, schools, government buildings, and new subdivisions
The National Flood Insurance Reform Act of 1994
imposes certain mandatory obligations on lenders and loan servicers to set aside (escrow) funds for flood insurance on new loans. The act also applies to any loan still outstanding on September 23, 1994. -The borrower then has 45 days to purchase flood insurance
Duties of the Mortgagor or Trustor
include: -payment of the debt in accordance with the terms of the note -payment of all real estate taxes on the property given as security -maintenance of adequate insurance to protect the lender if the property is destroyed or damaged by fire, windstorm, or other hazard -maintenance of the property in good repair at all times -receipt of lender authorization before making any major alterations on the property.
package loan
includes real and personal property. usually include furniture, drapes, kitchen range, refrigerator, dishwasher, washer, dryer, freezer, and other appliances as part of the sales price of the home.
RESPA Violations
includes: -kickbacks/refferal fees, anything of value -requirement to buy title insurance -prohibits excess escrow withholdings
adjustable mortgage rate
index: national cost of funds margin: profit due to lender cap: adjustable limitations payment cap: adjust payment
broker's price opinion (BPO)
is a less-expensive alternative of valuating properties often used by lenders working with home equity lines, refinancing, portfolio management, foreclosures, loss mitigation, and collections. -providing estimate value for a fee -not listing but want to know value for there house
depreciation
is a loss in value due to any cause compared with today's cost of replacement. It refers to a condition that adversely affects the value of an improvement to real property. -is the result of a negative condition that affects real property. -is considered curable or incurable
escrow
is a method of closing in which a disinterested third party is authorized to act as escrow agent and to coordinate the closing activities. -The escrow agent (also called the escrow holder) may be an attorney, a title company, a trust company, an escrow company, or the escrow department of a lending institution
Radon
is a naturally occurring, colorless, odorless, tasteless, radioactive gas produced by the decay of other radioactive substances. -naturally occurring gas that is a cause of lung cancer. -state required disclosure -Jan. 1st, 2008 went into place
straight loan (or interest-only loan or term loan)
is a nonamortized loan that essentially divides the loan into two amounts to be paid off separately. The borrower makes periodic payments of interest only, followed by the payment of the principal in full at the end of the term. -every month pay interest
purchase money mortgage (PMM)
is a note and mortgage created at the time of purchase when the seller agrees to finance all or part of the purchase price and consists of a first or junior lien, depending on whether prior mortgage liens exist. -seller financing: for a portion of the purchase price -seller conveys title when close -seller obtains a lien on property -if dont pay lien- can take property to foreclosure
datum
is a point, line, or surface from which elevations are measured or indicated. -surveyor would use a this in determining the height of a structure or establishing the grade of a street.
abstract of title
is a summary report of what the title search found in the public record. -It does not reveal such items as encroachments, forgeries, or any interests or conveyances that have not been recorded. -record of who owned it and when it sold -abstractor- 40 years or 75 years when the posibility of litigation exists
mortgage
is a voluntary lien on real estate.
buydown (3-1-2)
is a way to temporarily (or permanently) lower the initial interest rate on a mortgage or deed of trust loan. -year 1 buy rate down, pay lender to do that, saves buyer out of pocket money -year one, 3% down year two, 2% down, year three, 3% down, year four, 0 -gets you to buy in that property -condos often do this
title search
is an examination of all the public records to determine whether any defects exist in the chain of title. -records of the conveyances of ownership are examined, beginning with the present owner. Then the title is traced backward to its origin. -normal title searches in Illinois, the search goes back 40 years under the Illinois Marketable Title Act -When the possibility of litigation exists, the search must go back 75 years
Adverse Possession (also called squatter's rights)
is another means of involuntary transfer. A person takes possession & use of a property belonging to another. Possession must be open, notorious, hostile, continuous & uninterrupted for a certain period of time, and adverse to the true owner's possession. -uninterrupted possession required to claim title by adverse possession is 20 years. -but if the party whose property is being claimed has color of title (that is, if her apparently good title actually is invalidated by some flaw) and if the real estate taxes on the property are paid while satisfying the other statutory requirements, the possessory period may be shortened to 7 years.
federally related transaction
is any real estate-related financial transaction in which a federal financial institution or regulatory agency engages in, contracts for, or regulates and requires the services of an appraiser.
VA-Guaranteed Loans
is authorized to guarantee loans to purchase or construct homes for eligible veterans and their spouses (including unremarried spouses of veterans whose deaths were service-related). -VA does not normally lend money; rather, it guarantees loans made by lending institutions approved by the agency. -max mortgage: $427, 100 -0% down -100% LTV -no mortgage insurance premium, (dont pay PMI) -qualifying ratio: 41% -owner occupied properties -no payment penalties -no buyer commission: cant charge a vet for commission Eligibility: -90 days wartime -181 days peacetime -2 years for enlisted after sept. 1980 -6 years for reservists and national guard
The Illinois Environmental Protection Agency (IEPA)
is charged with maintaining and enhancing the state's air, land, and water quality through education, inspection, regulation, enforcement, recycling, and prevention activities. -air, land, and water equality
construction loan (or interim financing)
is made to finance the construction of improvements on real estate such as homes, apartments, and office buildings. The lender commits to the full amount of the loan but disburses the funds in payments called draws during construction. -high risk -finance improvement -incremental disbursement (process) -right to inspect -waiver of liens
primary mortgage market
is made up of the lenders that originate mortgage loans. These lenders make money available directly to borrowers and make their income from finance charges and charging interest. Some of the major lenders in the primary market include the following: institutional lenders: -commerical banks -thrifts -saving associations non-institutional lenders: -insurance companies -credit unions -pension funds -endowment funds -investment groups -mortgage banking -mortgage brokers -mutual saving banks
the exchnage
is made when then the parties are satisfied that everything is in order -seller delivers the signed deed to the buyer, who accepts it. -all pertinent documents are then recorded in the correct order to ensure continuity of title. -the buyer's new mortgage or deed of trust must be recorded after the deed because the buyer cannot pledge the property as security for the loan until he owns it.
nonrecourse loan
is one in which the borrower is not held personally responsible for the loan. The lender has no recourse against the borrower personally in the event of a default. -are common in those situations in which the lender is highly confident that the value of the property involved is itself sufficient security. -more common in commercial and investment real estate transactions
Reconciliation
is the act of analyzing and effectively weighing the findings from the three approaches. In this, an appraiser explains not only the appropriateness of each approach but also the relative reliability of the data within each approach in line with the type of value. -The appraiser should also explain how the data reflect the market functions.
Groundwater
is the water that exists under the earth's surface within the tiny spaces or crevices in geological formations. Groundwater forms the water table, the natural level at which the ground is saturated.
Recording
is the act of placing documents in the public record. -essentially provides that any written document that affects any estate, right, title, or interest in land must be recorded in the county where the land is located to serve as public notice. -done at county level -generally gives legal priority to those interests recorded first—the first in time, first in rightor first come, first served principle. - cant be prohibited
romissory note (or a note or financing instrument)
is the borrower's personal promise to repay a debt according to agreed terms. -its negoitable
Reproduction cost
is the construction cost at current prices of an exact duplicate of the subject improvement, including both the benefits and the drawbacks of the property.
Replacement cost
is the cost to construct an improvement similar to the subject property using current construction methods and materials but not necessarily an exact duplicate.
closing
is the culmination of many efforts—finding clients, negotiating offers, solving problems, coordinating inspections, and much more. -title to the real estate is transferred in exchange for payment of the purchase price -final piece of your puzzle -what gets you paid!
government check
is the irregular area created by these corrections; such an area is about 24 miles square. -these lots can be created by the curvature of the earth, by land bordering or surrounding large bodies of water, or by artificial state borders.
Constructive notice
is the legal presumption that information may be obtained by an individual through due diligence. Properly recording documents in the public record serves as constructive notice to the world of an individual's rights or interest -Could or should know with reasonable inquiry
Voluntary alienation
is the legal term for the voluntary transfer of title -gift, will, or sale -to transfer during one's lifetime, the owner must use some form of deed of conveyance.
deed in trust
is the means by which a trustor conveys real estate to a trustee for the benefit of a beneficiary. the real estate is held by the trustee to fulfill the purpose of the trust. -Conveyance from trustor to trustee
market value
is the most probable price that a property should bring in an arm's length transaction or fair sale -range of prices -an opinion of value based on an analysis of data
metes-and-bounds method
is the oldest type of legal description (metes means distance and bounds means compass directions or angles). -grant or convey property in the US -method relies on a property's physical features to determine the boundaries and measurements of the parcel -uses definite point of beginning
loan-to-value (LTV) ratios
is the ratio of debt to value of the property (the sale price or the appraisal value, whichever is less). -mortgage loans are generally classified based on these ratios.
chain of title
is the record of a property's ownership. -complete chronological history of all recorded events; beginning with the earliest owner, each owner is linked to the next so that a chain is formed. -gap in title (cloud on title): If ownership cannot be traced through an unbroken chain -to combat cloud on title --> -Suit to quiet title: a court action intended to establish or settle the title to a particular property, when there is a cloud on the title; it closes the gap saying their must have been a legal title and that its just not recorded -its called perfecting the title
what does the lot-and-block system start with?
it starts with the preparation of a subdivision plat by a licensed surveyor or an engineer
why sell the note?
its how banks make money -its the investors money at risk
short sale
lender accepts less than owed, lender must agree to sell at less net; -lenders are catious of fraud -may consider waiving deficiency -not considered taxable income -selling short of what you owe -usually takes 3 months to a year
impound or escrow account
lender holds funds for taxes and insurance
Assignment of the Mortgage
lenders right to transfer the loan, -continues issuing new loans -mortgagors consent (in promissary note)
The Federal Reserve System (the Fed)
maintains sound credit conditions, helps counteract inflationary and deflationary trends, and creates a favorable economic climate. -way to keep the economy moving in housing -regulates flow of money -controls reserves: makes sure banks have money to lend to keep the economy moving -requirements: requires that each member bank keep a certain level of assets on hand as reserve funds. -discount rate: is the rate charged by the Fed when it lends money to its member banks.prime rate- is the short-term interest rate charged to a bank's largest, most creditworthy customers. -the fed has the ability to increase or decrease the supply of money in the market through the purchase and sale of securities.
lot-and-block system (or recorded plat system)
map of subdivison -uses lot and block number in plat of subdivison or plat map -land surveyed is divided and numbered into lettered blocks and lots -usually detailed streets, easements, and lot layouts -often used to describe property in subdivisions and urban areas -once recorded it becomes part of the description -used in IL
Actual notice (also called direct knowledge)
means not only that the information is available but also that someone has been given the information and actually knows it. An individual who has searched the public records and inspected the property has this type of notice -Knows for certain by personal service -direct knowledge
title
means the right to ownership or actual ownership of the land; it represents the owner's bundle of rights (DEEPC). it also serves as evidence of that ownership. -process not handled by licensee -right to/of ownership -not a printed title
Requirements for a Valid Deed
minimum requirements for IL: -*Signature of all grantors, sometimes with a seal, witness, or acknowledgment -*Delivery of the deed and acceptance by the grantee to pass title -Grantor, who has the legal capacity to execute (sign) the deed (must be 18+ and of sound mind) -Grantee named with reasonable certainty to be identified (doesnt need to sign) -Recital of Consideration -Granting clause (words of conveyance, together with any words of limitation) -Accurate legal description of the property conveyed -Any relevant exceptions or reservations (must specifically note any encumbrances, reservations, or limitations that affect the title being conveyed.)
when must transfer tax be paid?
must be paid before the recording of the deed (or before transferring the beneficial interest in a land trust). -This is done by purchasing tax stamps from the county recorder or the city offices if there are local stamps required. These stamps are literally affixed to the deed.
Non-Judicial Foreclosure
no court invovlment, power of sale clause -FL, Nevada, AZ -most foreclosures occur in these states
does FHA give loans?
no they dont
does the deed prove ownership?
no, it defines quality of title your taking as owner but doesnt prove ownership
are sections larger than townships?
no, they are smaller
term
number of years granted to repay the loan
Truth in Lending Act (TILA) or (Regulation Z)
often called Regulation Z), requires that credit institutions inform borrowers of all finance charges and the true interest rate before a loan is completed. -The regulation does not apply to business or commercial loans or to agricultural loans of any amount. -3 business days right of rescission -not applicable on: - first mortgages -PMM -deed of trust loans
Gross Income Multiplier (GIM)
often used in the appraisal process If the buyer is interested in purchasing five or more units, a commercial, or industrial property formula for GIM: Sales price ÷ gross annual income = gross income multiplier (GIM)
standard coverage
policy normally insures the title as it is known from the public records. In addition, it insures against such hidden defects as forged documents, conveyances by incompetent grantors, incorrect marital statements, and improperly delivered deeds.
measuring elevations
process of describing property above and below the surface -air lots: are composed of the airspace within specific boundaries located over a parcel of land; -condos are usually air lots -subsurface rights: are measured below the datum rather than above it. -subsurface rights are used not only for coal mining, petroleum drilling, and utility line location but also for multistory condominiums—both residential and commercial—that have several floors below ground level.
reverse mortgage
program for older people. allows people 62 or older to borrow money against the equity they have built in their home. -they are the opposite of conventional mortgages in that the homeowner's equity diminishes as the loan amount increases.
Equal Credit Opportunity Act (ECOA)
prohibits lenders and others who grant or arrange credit to consumers from discriminating against credit applicants on the basis of -race, -color, -religion, -national origin, -sex, -marital status, -age (provided the applicant is of legal age) -dependence on public assistance -lenders and other creditors must inform all rejected credit applicants of the principal reasons for the denial or termination of credit. -The notice must be provided in writing within 30 days.
Home equity loans
provide a source of funds using the equity built up in a home -borrow against equity -The original mortgage loan remains in place, and the home equity loan is junior to the original lien -original mortgage remains in tact
Tax and Insurance Reserves
provide escrow account to pay taxes and insurance when come due -cannot withhold more than 150% -at 65% of original amount can terminate escrows -except insured, guaranteed
survey
provides information about the exact location and size of the property. The sales contract specifies who will pay for the survey. -typically, the survey indicates the location of all buildings, driveways, fences, and other improvements located on the premises
quitclaim deed
provides the grantee with the least protection of any deed. -carrys no covenants and warranties -conveys only whatever interest the grantor may have when the deed is delivered. -frequently is used to cure a defect, called a cloud on the title. -used when a grantor allegedly inherits property but is not certain that the decedent's title was valid. -uses the words: "convey and quitclaim" and conveys in fee all the grantor's existing legal and equitable rights held at the time of delivery.
general warranty deed
provides the greatest protection of any deed, best option for buyers. The grantor is legally bound by certain covenants or warranties (promises). -granting clause contains the words: "conveys" and "warrant" Five covenants (promises): 1) Covenant of seisin- grantor warrants possession 2) Covenant against encumbrances- grantor warrants prop is free from liens or encumbrances unless specifically stated in deed 3)Covenant of quiet enjoyment- grantor guarantees that the grantee's title will be good against third parties who might bring court actions to establish superior title to the property. 4) Covenant of further assurance- grantor promises to obtain and deliver any instrument needed to make the title good. 5)Covenant of warranty forever-grantor promises to compensate the grantee for the loss sustained if the title fails at any time in the future.
Bob inherits a parcel of land from his mom, he doesnt know the ownership she has, so what would he use to convey the ownership title?
quitclaim deed
RESPA
regulations apply to first-lien residential mortgage loans made to finance the purchases of one- to four-family homes specifically, cooperatives, and condominiums, for either investment or occupancy, as well as second or subordinate liens for home equity loans when a purchase is financed by a federally related mortgage loan. -federal related mortage loan -doesnt apply to all loans RESPA does not apply to the following settlements: -*Loans for business or agricultural purposes* -*Vacant land (unless a dwelling will be placed on the lot within two years)* -Loans on large properties (i.e., more than 25 acres) -Construction loans or other temporary financing -A transaction financed solely by a purchase money mortgage taken back by the seller -An installment contract (contract for deed) -A buyer's assumption of a seller's existing loan (If the terms of the assumed loan are modified, or if the lender charges more than $50 for the assumption, the transaction is subject to RESPA regulations.)
The federal Lead-Based Paint Hazard Reduction Act of 1992 (LBPHRA)
requires disclosure of the presence of any known lead-based paint hazards to potential buyers or renters in propertys built 1978 and prior requires: -new tenants: written disclosures -buyers 10 day testing period -lead based paint phamplet -renovators: licensed and certified when kids (6 and under) reside on premise licensees- form signed by seller -test results disclosure -cant hide results exemptions: -foreclosed properties -certified "lead free" -leases that are less than 100 days -units with no bedrooms- studios -housing for elderly or disabled
Title XI of the federal Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA)
requires that appraisals used in connection with a federally related transaction be performed by someone who is state certified or licensed.
Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act)
requires that each individual state must license and register mortgage loan originators (MLOs). -MLOs must be licensed -an MLO is anyone who, for compensation or expectation of compensation, takes a residential mortgage loan by phone or in person.
The Illinois Lead Poisoning Prevention Act (410 ILCS 45/)
requires that physicians screen children younger than six years old for lead poisoning when the child lives in an area considered by the state to be at "high risk" for lead exposure. -tenants cannot make owners test for lead exposure but if tenant tests themselves and its found- they can go to the department of housing and force landlord to remidate the paint -90 days to mitigate -30 days to mitigate if a child 6 and younger is present
what is another name for section 16 in every township?
school section
which section is directly west of section 7?
section 12
which section is directly south of section 34?
section 3
what section is directly east of section 35?
section 30
which section is directly north of section 5?
section 32
Title Procedures
seller must provide adequate proof of marketable title -clear of liens or encumbrances -completed prior deed -affidavit of title
Transfer Tax Stamps
seller pays state and country transfer tax. -The Illinois Real Estate Transfer Tax Law (state transfer tax): imposes a tax on conveying title to real estate in the amount of $0.50 per $500 or part thereof, -in all IL Counties: there is an additional transfer tax of $0.25 per $500 or part thereof. -Total transfer tax to state and county combined is $0.75 per $500 or fraction thereof. -number only ever ends in 4 numbers -dont round dollar amount, only round sales price
Amoritized loan (or called a direct reduction loan)
spreds out payment of a loan over various years -partially pays off both principal and interest. -most mortgage and deed of trust loans are these types of loans. -Regular periodic payments are made over a term of years, generally 15 or 30 years, and at the end of the term, the full amount of the principal and all interest due is reduced to zero. -direct reduction -constant payment -principal goes down monthly -banks got money upfront
For title to pass to the devisee(s), what is required?
state laws require that upon the death of a testator, the will must be filed with the court and probated.
The Mortgage Escrow Account Act (765 ILCS 910/)
states that when the principal loan balance has been reduced to 65% of its original amount, borrowers may terminate their escrow account.
trust in lending advertising
strict regulations- must include in all ads: -Cash price -Required down payment -Number, amounts, and due dates of all payments -Annual percentage rate -Total of all payments to be made over the term of the mortgage (unless the advertised credit refers to a first mortgage or deed of trust to finance the acquisition of a dwelling) -must advertise all of terms in same ad -if only advertise 1 term? its a violation because ad needs to contain ALL terms
Prepaid items
such as fuel oil in a tank, are expenses to be prorated that have been prepaid by the seller but not fully used up. -they are therefore credits to the seller. -seller credits
preparing surveys
surveyor prepares 2 documents: a survey and a survey sketch 1. survey: states the property's legal description 2. The survey sketch shows the location and dimensions of the parcel. (indicates the dimensions and boarders) -surveyor locates parcel -spot survey: when a survey also shows the location, size, and shape of buildings on the lot
appraisal
the act or process of developing an opinion of value. -an appraisal report is the written or oral communication of an appraisal. Typically, appraisal reports for lenders, for example, are written in a uniform format.
purchased subject to the mortgage
the buyer is not personally obligated to pay the debt in full. The buyer takes title to the real estate knowing that he must make payments on the existing loan. Upon default, There is a foreclosure sale and because the owner sold the property subject to the mortgage, he (not the buyer) is personally liable if proceeds from the foreclosure sale do not meet the obligations.
Face-to-face
the parties meet face to face closings may be held at a number of locations, including the offices of the title company, the lending institution, an attorney for one of the parties, the broker, the county recorder, or the escrow company.
grantee
the person who acquires the title -receives property from a grantor.
Land in IL is described in its relationship to?
the principal meridian it was assigned to
capitalization rate (or cap rate)
the rate of return and is determined by comparing the relationship of NOI to the sales prices of similar properties that have sold in the current market.
When a person dies intestate and leaves no heirs, who does the title transfer to?
the title to the real estate passes to the county (in Illinois) by the state's power of escheatment.
estoppel certificate or certificate of no defense
this payoff statement notes the unpaid amount of principal, the interest due through the date of payment, the fee for issuing the certificate of satisfaction or release deed, credits (if any) for tax and insurance reserves, and the amount of any prepayment penalties. -once the borrower has executed this the borrower cannot thereafter claim that he did not owe the amount indicated in the payoff or estoppel certificate.
deed of trust (or called a trust deed)
three-party relationship or agreement 1. trustee: holds title on behalf of the lender, legal title holder 2. trustor: creator/rights, borrower 3. beneficiary: lender, "power of sale", holder of the note -A deed of trust conveys naked title or bare legal title—that is, title without the right of possession. deed IN trust is a deed deed OF trust is a relationship
Good funds
title insurnace act of 2010 -ensures funds are "good" -under $5,000- personal check -verifiable funds available -up to $50,000- cashiers check -over $50,000 bank wire transfer -challengers if funds not off wire by 3:00 chicago time -dry closing: money wont be there -dont schedule this on a friday
Theory of mortgage law in IL
title theory- lender: legal title borrower: equitable title Lien theory- lender: lien borrower: legal and equitable title
Value
to have monetary worth based on desirability—a property must have the following 4 characteristics: (DUST memory tip) 1. Demand: The need or desire for possession or ownership backed by the financial means to satisfy that need 2. Utility: The property's usefulness for its intended purposes 3. Scarcity: A finite supply 4. Transferability: The relative ease with which ownership rights are transferred from one person to another
TILA-RESPA Integrated Disclosure rule (TRID)
to implement provisions of the Dodd-Frank Act intended to combine and clarify financing disclosures to consumers.
Lender's Interest in Closing
to protect security in collateral property 1. May require proof of title and hazard insurance 2. May require a survey, appraisal, certificate of occupancy and other information 3. May require escrow account be maintained
Income approach
to value is based on the present value of the rights to future income. It assumes that the income generated by a property will determine the property's value. -used for valuation of income-producing properties such as apartment buildings, office buildings, and shopping centers; not to sell someones single family home appraiser must take 5 steps in this approach: 1. Estimate annual potential gross income. 2. Deduct an appropriate allowance for vacancy and rent loss, based on the appraiser's experience, and arrive at effective gross income. 3. Deduct the annual operating expenses, enumerated in , from the effective gross income to arrive at the annual net operating income (NOI). 4. Estimate the price a typical investor would pay for the income produced by this particular type and class of property 5. Apply the market-derived capitalization rate to the property's annual NOI to arrive at the estimate of the property's value.
Further divisions used in rectangular survey system :
townships range lines sections quarter-section lines
Gross Rent Multiplier (GRM)
used for the appraisal value if a buyer is interested in purchasing a one-to-four-unit residential rental property formula for GRM: Sales price ÷ gross monthly rent x GRM = value
A growing equity mortgage (GEM) (or rapid-payoff mortgage)
uses a fixed interest rate, but payments of principal are increased according to an index or a schedule. -total payment increases and the loan is paid off more quickly -most frequently used when the borrower's income is expected to keep pace with the increasing loan payments.
Secondary Mortgage Market
various agencies purchase existing mortgages from banks and savings associations and assemble those mortgages into packages called blocks or pools.Securities that represent shares in these pooled mortgages are then sold to investors or other agencies. -loans bought and sold -helps to raise captial Fannie Mae Ginnie Mae Freddie Mac
who is eligible for VA loans?
veterans, widows, and unmarried spouses
rectangular survey system (or Public Land Survey)
was established by Congress in 1785 to standardize the description of land acquired by the newly formed federal government. This system is based on two sets of intersecting lines: principal meridians and base lines. -principal meridans: run north and south -base lines: run east and west -both are located by reference to degrees of longitude and latitude. -the 2nd, 3rd, and 4th pricipal meridians are used in IL
market price
what a property actually sells for—its sales price. -use market price to determine the market value of other homes