REE First Course Master List

4 types of leasehold estates

1. Estate for years 2. Estate at will 3. Estate from period to period 4. Estate at sufferance

Foreclosure

A legal procedure whereby property used as security for a debt is sold to satisfy the debt in the event of default in payment of the mortgage note or default of other terms in the note.

Graduated Payment Plan

Lower payments first year, then payments increase.

What are some sources for loans?

Savings and Loans, banks, Insurance companies, and mortgage brokers.

Two parts of a mortgage loan

pledge, collateral

Holden Act- Housing Financial Discrimination Act-

prohibits discrimination in lending (redlining).

Conventional Loans

real estate loans that are not insured by the FHA or guaranteed by the VA

Davis-Stirling Common Interest Development Act

-Condominium project: A condominium consists of an undivided interest in common in a portion of real property coupled with a separate interest in space called a unit. -Community apartment project: "A development in which an undivided interest in land is coupled with the right of exclusive occupancy of any apartment located thereon." -Stock Cooperative: "A development in which a corporation is formed for the purpose of holding title to real property, and the shareholders receive a right of occupancy in a portion of the real property." -Planned Development: the common area is owned either by an association or in common by the owners of the separate interests, and/or a power exists in the association to enforce an obligation of an owner of a separate interest, by means of an assessment which may become a lien upon the separate interests.

Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

-If the lessor took the action to obtain possession of the property BEFORE the date the lessee/debtor's bankruptcy petition was filed, the previously-filed proceeding taken by the lessor will remain in effect. -The landlord MAY LEGALLY EVICT the lessee and take possession of the property (provided that the lessor files a certification, under penalty of perjury), based on some type of endangerment on the property or on the illegal use of controlled substances on the property.

Section 4970

-Points and fees: items required to be disclosed as finance charges, not including interest; all compensation paid to mortgage brokers in connection with the loan transaction. -Consumer Loan: consumer credit transaction secured by real property located in California, which is used as the principal dwelling of the consumer. -Original Principal Balance: The total initial amount the consumer is obligated to repay on the loan.

Covered Loans

-The ORIGINAL principal loan balance does NOT EXCEED the MOST CURRENT loan limit for a single-family first mortgage -Mortgage/deed of trust - the APR must be more than 8% over the yield on Treasury securities with comparable periods of maturity. -The total points and fees payable by the consumer must be higher than 6% of the total loan amount.

3 Steps to achieve the general plan

1. A resource analysis (recognize individual characteristics of the community, strong and weak points. 2. Formulation of Community Goals(should take in mind citizens and project goals etc. 3. Plan Implementation: local gov. utilizing land-use controls (eminent domain, taxation, police power etc.)

Clauses in a Mortgage or Deed of Trust Instrument

1. Acceleration clause 2. Alienation clause 3. Satisfaction piece 4. Prepayment penalty clause 5. Subordination clause 6. Subrogation

DIfferent types of listing agreements

1. Exclusive Right to Sell 2. Exclusive Agency 3. Open 4. Net Listing (illegal in most states) 5. Agency Coupled with Interest

10 Principles of Real Estate Value

1. Highest and Best Use (The possible use of a property that would produce the greatest net income and thereby develop the highest value.) 2. Substitution (The maximum value of a property tends to be set by the cost of purchasing an equally desirable and valuable substitute property.) 3. The Law of Supply and Demand (The value of a property increases when the supply is short and decreases when there is too much. Similarly, the value increases when the supply is short, and decreases when there is little demand.) 4. Conformity (An appraisal principle of value based on the concept that the more a property or its components are in harmony with the surrounding properties or components, the greater the contributory value) 5. Regression and Progression (This means the value of the better quality property is affected adversely by the presence of the lesser quality property and a lesser house will benefit from a larger house.) 6. Anticipation (Property can increase or decrease in value in expectation of something in the future, such as appreciation or rezoning) 7. Contribution (Means the value of any component of a property is what it gives to the value of the whole or what its absence detracts from the whole.) 8. Assemblage (The combining of two or more adjoining lots into one larger tract to increase their total value.) 9. Competition (When one business attracts another business of similar type; together they may make more money than they would have singularly.) 10. Change (eal property is constantly changing--expanding, stabilizing, declining or being reborn.)

What are the prerequisites for transforming a mobile home into a real property

1. Obtaining a building permit; 2. Attaching the mobile home to an approved foundation; 3. Recording a document reflecting that the mobile home has been affixed to an approved foundation system 4. Obtaining a certificate of occupancy

What are the ground rules for an Appraiser?

1. Payment must be in cash or its equivalent 2. Buyer and seller must be unrelated and acting without undue influence, menace, or duress

Explain the different types of real estate taxes

1. Special Assessment Taxes: a tax or levy imposed by a city, county, or state only on those specific parcels of real estate that will benefit from a proposed public improvement. 2. General Tax: used for general operation of the gov. agency authorized to impose the tax - "Ad Valorem" : proportional to the value of the underlying asset, unlike a specific tax, where the tax amount remains constant, irrespective of the underlying asset's value.

What are three methods that can be used to determine the costs of buildings and lands?

1. Square foot cost: how many sq ft times a cost for either replacement or reproduction 2. Unit in place: replacement cost of a structure is estimated based on the construction cost per unit of measure of individual building components 3. Quantity survey method: quantity and quality of all materials and labor are estimated on a unit cost basis.

Appraisal Process

1. State the problem (appraiser determines why they have been hired. 2. Gather, record, and verify the necessary data (using market data, sales comparison,. cost, and income approaches 3. Analyze and Interpret - Neighborhood Analysis (gathering of facts about a neighborhood to determine the appeal to the buyer -Neighborhood Cycle (the process of neighborhood change, involving the four phases of change -Site analysis (a gathering of facts about a particular location, highest and best use, identification of key features. 4. Estimate land value (land never depreciates in value 5. Estimate the value of the property by each of the three approaches to value (market data, cost, and income) 6. Reconcile estimated values for the final value estimates 7. Report final value estimates.

exculpatory clause

A clause sometimes inserted in a mortgage note in which the lender waives the right to a deficiency judgment. As used in a lease, a clause that intends to clear or relieve the landlord from liability for tenants' personal injury and property damage. It may not, however, protect the landlord from injuries to third parties.

sales contract

A contract for the sale of goods under which the ownership of goods is transferred from a seller to a buyer for a price.

Truth in Lending Law

A federal law that requires creditors to disclose the annual percentage rate (APR) and the finance charge as a dollar amount to the buyers.

Impounds

A fund of the buyer's money that the lender sets aside for future needs relating to the parcel of property. Most lenders require an impound account to cover future payments of insurance and taxes. Sometimes this is referred to as the buyer's escrow (not the broker's).

Equal Credit Opportunity Act

A law that protects consumers from discrimination in the granting or denying of credit

Subdivision Map Act

A law that requires the mapping of all new subdivisions, which regulates the division of 2 or more lots for the purpose of selling, leasing, or financing said lots, either at that time or in the future.

Street Improvement Act of 1911

A law used by cities and counties for street improvements; a typical example of this is that the local government hires a contractor to improve streets, and then each owner along that street is liable for paying a pro rata share of that cost. The owner might either pay the contractor in full within 30 days, OR the local government might sell bonds to raise revenue to pay the contractor.

The Mello-Roos Community Facilities Act of 1982.

A law used to finance public services, such as waste treatment plants, parks, and schools, in newly developed areas.

Estoppel Certificate

A legal doctrine by which a person is prevented from asserting rights or facts that are inconsistent with a previous position or representation made by act, conduct, or silence.

Adjustable Rate Mortgage (ARM)

A loan characterized by a fluctuating interest rate, usually one tied to a bank or savings and loan association cost-of-funds index.

Straight Term Loan

A loan in which only interest is paid during the term of the loan, with the entire principal amount due with the final interest payment.

FHA loan

A loan insured by the Federal Housing Administration and made by an approved lender in accordance with the FHA's regulations.

fully amortized loan

A loan that requires payments of both principal and interest. When the last payment is made, the loan is retired.

Contract for Deed

A means by which the seller passes possession but retains title to the property until the total or a substantial portion of the purchase price is paid. Installment contract. The two parties here are the vendor (owner) and the vendee (buyer).

Competitive Market Analysis

A method of determining the approximate market value of a home by comparing the subject property to other homes that have sold, are presently for sale, or did not sell in a given area.

Part Purchase Money

A mortgage given as part of the buyer's consideration (cash) for the purchase of real property, and delivered at the same time that the real property is transferred as a simultaneous part of the transaction

Blanket Mortgage

A mortgage which covers more than one piece of real estate. Often used by a developer in the financing of undeveloped lots. Contains a partial release clause.

Budget Mortgage

A mortgage with payments that cover principal and interest, plus taxes, fire insurance, lease rent. PITI

Package Mortgage

A mortgage, used in the purchase of new residential property which, in addition to real property, covers certain personal property items and equipment. (Washer, dryer, drapes, refrigerator, stove)

Common Interest Development

A project in which there are common areas used by all tenants, with the exception of separate interests to use as individual living units, and managed by a nonprofit association.

CC 2985.2

A seller, without the buyer's consent, under an unrecorded contract of sale encumbers the land in an amount exceeding the present contract balance.

Bridge Loan

A short-term loan for borrowers who need more time to find permanent financing.

Construction Loan

A short-term, interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses.

Land Project

A speculative subdivision development of 50 or more vacant lots, that are located in a rural area that has less than 1,500 registered voters within 2 miles.

Sale and leaseback

A transaction in which the owner sells improved property and, as part of the same transaction, signs a long term lease to remain in possession of the premises.

Conditional Approval

A written pledge by a lender to lend a certain amount of money to a qualified borrower on a particular piece of real estate for a specified time under specific terms.

Reverse Annuity Mortgage

Allows borrowers (62 years or older) to borrow against their equity. Loan is due upon the sale of property or death of owner. Homeowner receives monthly payments based on accumulated equity

rectangular survey system

Also called the Public Land Survey, the system was used by the US Land Office Survey to parcel land west of the Appalachian Mountains. The system divides land into a series of rectangular parcels 6x6 using Meridian, Base, Township, and Range Lines.

Participation Mortgage

An agreement between a mortgagee and a mortgagor which provides the lender with a certain percentage of ownership in the project once the lender makes the loan.

Real Estate Appraisal

An appraisal is an opinion of value based on supportable evidence and approved methods. An appraisal report is an opinion of market value on a property given to a lender or client with detailed and accurate information. An appraiser is an independent person trained to provide an unbiased opinion of value in an impartial and objective manner, according to the appraisal process. Appraising is a professional service performed for a fee.

Appraisal Fees

An appraiser's fees are typically based on time and expenses; fees are never based on a percentage of the appraised value.

Given the Taxes and the tax rate, what formula would you use to find the assessed value?

Assessed Value/Market Value

What is a veteran's basic entitlement and what is the maximum amount lenders will loan to a veteran?

Basic entitlement is $104,250 and Lenders often lend up to 4x the available entitlement w/out a down payment. And limit loans to $417,000

Subdivided Lands Act

Defines a subdivision as the division of land into five or more lots for the purpose of sale, lease, or financing, whether now or in the future. The Real Estate Commissioner must issue a public report before the subdivision can be sold, leased, or financed

Developer vs. Subdivider

Developer: one who attempts to put land to its most profitable use through the construction of improvements, such as commercial condominiums or subdivision projects. Subdivider: an owner whose land is divided into two or more lots and offered for disposition.

Two types of REITs

Equity REITs: receive income from rent Mortgage REITS: generate their revenues from the interest that earned on their mortgage loans.

PC 487

Grand Theft - Value Over $950

VA loans are:

Guaranteed by the government

About how many acres of California is owned by governments?

Half of the states million acres are owned by gov. and they are exempt from property taxation

Private Mortgage Insurance (PMI)

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

Balloon or a Partially Amortized Loan

Interest and principal are paid on an equal basis until final payment, which is larger

non-recourse loan

Loan where borrower is not personally liable for any deficiency in the event of foreclosure

What is the unit of measurement for tax rates called

Mills (0.001)

Cost Approach (Summation Approach)

Most effective method for new construction and special-purpose or single-purpose buildings Cost to build - accrued depreciation + land value = estimated value Reproduction Cost (to replace with the same materials as original construction) Replacement Cost (to replace w/ current materials and methods with utility and function similar to original.

Sales Comparison Approach (Market Data Approach)

One of the three methods in the appraisal process. A means of comparing similar type properties, which have recently sold, to the subject property. Commonly used in comparing residential properties or vacant land.

The Three Phases of Syndication

Origination (planning and buying the property, following registration and disclosure mandates, etc.); Operation (in which the sponsor generally manages BOTH the syndicate and the actual property); and Completion or Liquidation (the property's resale).

Article 7 of the Real Estate Law

Part of the Business and Professions Code that limits the commission and fees brokers can charge for brokering loans. For first loans: 5 percent of the principal of a loan of less than 3 years; 10 percent of the principal of a loan of 3 years or more; For second or other junior loans: 5 percent of the principal of a loan of less than 2 years; 10 percent of the principal of a loan of at least 2 years but less than 3 years; 15 percent of the principal of a loan of 3 years or more.

physical vs economic life

Physical - actual age or life of a structure that is considered habitable Economic - estimated period where an improved property will yield a return over and above economic rent

Types of Common CIDs

Planned Development Community Apartment Projects Condominiums Stock Cooperatives

non-recourse clause

Real estate loans are often sold in the financial market. When a non-recourse clause is included in the sale's agreement, the seller of the security is not liable if the borrower defaults.

Lot and Block System

Subdivision system; method of legal description of land using parcel maps identified by tract, block, and lot numbers

Syndicate Equity Financing

Syndicates offer small investors the opportunities to invest in high-yield real estate.

Given the taxes and the assessed value in a problem what formula would you use to obtain the tax rate?

Taxes/Assessed value

Different forms of Syndications

The Corporate Form, The General Partnership, or Joint Venture The Limited Partnership The limited Liability Company

What are the three sets of baselines and meridians in California

The Humboldt Base Line and Meridian in the northwestern part of the State; The Mt. Diablo Base Line and Meridian in the central part of the State; and The San Bernardino Base Line and Meridian in the southern part of the State.

What are the Amendments to the Subdivided Lands Public Report?

The Notice of Intention must include: -The owner's and subdivider's name and address; -The legal description and area of lands; copies of contracts to be used; -Any provisions that have already been made for public utilities in the proposed subdivision. -The location of all existing airports located within two statute miles of the subdivision.

Underwriting

The analysis of the extent of risk assumed in connection with a loan. Underwriting a loan includes the entire process of preparing the conditions of the loan, determining the borrower's ability to repay and subsequently deciding whether to give loan approval.

Real Estate Settlement Procedures Act (RESPA)

The federal law that requires certain disclosures to consumers about mortgage loan settlements. The law also prohibits the payment or receipt of kickbacks and certain kinds of referral fees.

Default

The non-performance of a duty or obligation that is part of a contract. The most common occurrence of default on the part of a buyer or lessee is nonpayment of money when due. A default is normally a breach of contract, and the non-defaulting party can seek legal remedies to recover any loss.

Takeout Loan

The permanent loan that pays off a construction loan.

Disintermediation

The process of individuals investing their funds directly instead of placing money with banks, savings and loans, and other savings institutions.

Equitable Right of Redemption vs Statutory Redemption

The right of a defaulted property owner to recover the property prior to its sale by paying the appropriate fees and charges. Right of the mortgagor to redeem after a foreclosure sale under certain rules

Duties owed by an agent

To Their Principal Care: Taking due care of that which is entrusted to the agent, including writing a contract in such a manner so that the interests of the Principal are protected. Obedience: Lawful instructions of the Principal are followed. Accounting: Handling money (including escrows) with care and closing statement figures. Loyalty: Putting the principal first, confidentiality, and avoidance of dual agency unless agreed to by all parties. Notice (sometimes called Disclosure): Material facts disclosed as well as relationships and important business facts for the principal to make decisions upon. To their Customer Honesty - While a licensee does not owe a "customer" a fiduciary duty we do have an obligation to be honest. If we know of a latent defect or a problem with a property it must be disclosed to the purchaser (customer). Accuracy - A licensee should be sure of the statements made to a customer. Disclosure of defects

The 4 levels of licensing for appraisers

Trainee (AT) - must be supervised by a certified residential or general licensee in good standing at all times Residential (AL) - Can appraise any non-complex 1-4 family property w/ a transaction value up to 1 mil Certified Residential (AR) - Can appraise any 1-4 family property without regard to transaction value or complexity. Also non-residential properties with value up to $250,000 Certified General (AG) - Can appraise all real estate

Types of Agents

Universal Agent: Handles all delegated business of principal. The Universal Agent has Power of Attorney, which is sometimes called an Attorney-in-Fact. An example would be a person who is hired or appointed by an estate to handle the real estate affairs of a deceased individual. General Agent: Handles multiple transactions of a client. The best example in real estate would be property management. Special Agent: Handles one transaction for one seller of one property. The best example would be a licensee who is hired to sell one property for a client. Agency Coupled With an Interest: When the real estate licensee is a partner in the ownership of the property. This type of agency does not allow for cancellation of listings as other types do. Single Agent: A real estate broker who acts as an agent to ONLY the seller or ONLY the buyer. Dual Agent: A real estate agent that represents both the buyer and the seller in the SAME transaction. In California, dual agency IS legal, but only with the knowledge and consent of both parties. Dual agencies are common in California, but are considered by many attorneys as a conflict of interest.

Income Capitalization Approach

Value based on the present value of the rights to future income.

Incurable vs. Curable

When a property needs repairs or updating that is economically feasible, it said to be curable. When the cost is too high, impossible to fix, or due to influences beyond the owner's control, it is said to be incurable.

CC 2985.3

While there is a payment due on an obligation secured by the land, a seller under a contract of sale appropriates a payment received from the buyer to any purpose except payment on that obligation.

Ways that agency is created

Written or expressed Implied Ostensible Agency -An actual agency relationship that arises by the actions of the parties rather than by express agreement Ratification- A method of creating an agency relationship in which the principal (seller or buyer) accepts the conduct of someone who acted without prior authorization as the principal's agent.

Stock Cooperative

a corporation formed or availed of primarily for the purpose of holding title to improved real property either in fee simple or for a term of years.

Agent

a person who acts or does business for another often called a principal, the relationship between the two is called an agency relationship, and the agent is called a Fiduciary

Zoning

dividing an area into zones or sections reserved for different purposes such as residence and business and manufacturing etc

Rural Economic and Community Development (RECD)

formerly known as Farmers Home Administration (FmHA), is a federal lender with the U.S. Department of Agriculture that makes loans for home purchases or construction in rural areas and small communities outside metropolitan areas,having a population of 20,000 or less. (If you see the letters FmHA on your state examination it is always a detractor)

Real Estate Syndication

gives a person the chance to channel his or her private savings into real estate investments for which other financing cannot be obtained or is not available because of the large amount of money involved.

Article 5 Real Estate Law

licensees are prohibited from pooling funds. This means that a broker must NOT accept funds UNLESS the funds are meant, and so noted, to be for a specific loan transaction. Before a broker can accept the lender's money, he must first OWN the loan OR have an unconditional written contract to buy a specific note; AND the broker must also have the authorization from the prospective borrower, giving him permission to negotiate a secured loan for the borrower.

Types of Depreciation

physical deterioration - a reduction in utility or value resulting from an impairment of physical condition, which deterioration can be divided into either curable or incurable types functional obsolescence - loss of value of an improvement due to functional inadequacies, often caused by age or poor design. external or economical obsolescence - loss of value (typically incurable) resulting from extraneous factors that exist outside of the property itself, depreciation caused by environmental, social, or economic forces

Interstate Sales Full Disclosure Act

regulates land sales between two or more states. Under this law, out-of-state buyers have 7 days after receiving the public report to rescind the contract.

Article 6 Real Estate Law

regulations are set forth for a real property securities dealer. A DRE broker license and the following endorsement are required. In California, anyone who wishes to sell real estate investment type security must FIRST obtain a Commissioner's Permit

Two kinds of promissory notes

straight note: borrower agrees to pay the interest and to pay the entire principal in a lump sum on the due date installment note: requires payments that include both principal and interest

metes and bounds system

used to describe irregular pieces of property and land where lot and block cannot be used. Begins and ends at a designated place called a Point of Beginning (POB) and uses monuments for establishing boundaries