Texas Principles of Real Estate 1 (Second Set)

The commission must:

• Administer Chapter 1101 and Chapter 1102. • Adopt rules and establish standards relating to permissible forms of advertising by a license holder acting as a residential rental locator. • Maintain a registry of certificate holders. • Design and adopt a seal. • The Commission in the course of conducting hearings and investigations is empowered to issue subponea

Licensees owe their customers: (3)

1) Honesty and fair dealing- an agent may not deceive, defraud, or take advantage 2)Reasonable care and skill- a licensee should be held to the standards of knowledge, expertise, and ethics that are commonly maintained by other agents 3)Proper disclosure- of agency, property condition, and environmental hazard

The most important factor for a prospective property owner is the answer to the following question:

Affordability

Expressed agency

Agency Relationship based on an expressed agreement either written or oral parties complete a written agreement outlining the relationship.

implied agency

An implied agency is formed when the actions of the parties indicate that they have mutually consented to an agency. The persons involved may not have consciously planned to form an agency relationship. However, their actions may unintentionally, inadvertently or accidentally form the relationship.

Which describes personal property?

Anything that is not Real Property

What does an endorsement do to a policy?

It modifies the policy in some way that is favorable to the insurance company.

What four types of agency positions are recognized in Texas?

Seller's agent (single agent/ Agent only representing seller) Subagent (a person an agent has delegated authority) Buyer's agent (single agent/ only represents buyer) Intermediary: ( Dual Agent: when a broker represents both the seller and the buyer)

fiduciary duties (Coald)

The agency relationship established between the agent and the principal puts these in place C-are (skill and diligence) O-bedience (within realm of legal activity) A-ccountability (retaining documents for at least three years) L-oyalty (confidentiality) D-isclosure/notice including facts that the agent knows and those that the agent should have known, such as facts pertaining to: • Deficiencies in the property. • Contract provision of financing terms that don't suit the buyer's interests. • How long the property has been listed. • Why the seller is selling.

TREC

The commission sets rules for how much and what kind of education licensees may take to renew their licenses. The commission by rule may prescribe the title, content, and duration of continuing education courses that a license holder must attend to renew a license

Education Standards Advisory Committee

The committee consists of twelve (12) members appointed by the commission. Members of the committee serve staggered two year terms

Education Standards Advisory Committee.

The entity within the Real Estate Commission that is responsible for making decisions of education licenses, duration of continuing education that is needed to renew license

Clue Report

The report reveals major damage or repairs covered by insurance. In some cases, it reveals damages about which the owner contacted the insurance company but did not file a claim.the CLUE Report is not available to the insurer until AFTER closing.The buyers should request for the seller to order one so the buyer can review prior to closing.

Real property rights

any of the bundle of rights, can be laterally severed into airspace (air rights), surface (surface rights), and subsurface (subsurface rights).

Judicial regulation

applies case law and common law to disputes.

Property managers

are responsible for finding tenants for properties, collecting rents, rehabbing space for tenants or constructing new space, ordering repairs, and overall maintaining of their properties.

An agent is bound to inform the client of all facts that might affect the client's interests in the transaction. This includes

both the facts that the agent knows and those that the agent should have known. example of a "should have known" would be a crack in a basement wall that the agent failed to notice.

Converted-use property-

buildings that have been renovated for other uses.

Texas Real Estate Commission (TREC)

charged with administering and enforcing license laws, as well as passing regulations that further refine or clarify state statutes. Responsible for administering The Real Estate License Act (TRELA). TREC has the power to create and enforce new rules to help interpret or define TRELA, but cannot amend the law.

Most homeowners policies also have what's called ..... which requires...

co-insurnace This clause requires that the homeowner have insurance that is equal to 80% of the home's replacement value. This does not include the price of the land.

Value components

desire; utility; scarcity (availability in relation to demand); purchasing power (the consumer's ability to pay for the item).

TRELA (Texas Real Estate License Act)

establishes a Real Estate Recovery Fund for the protection of the public against harmful actions by licensees. The fund is maintained and administered by TREC.

Supply: Demand:

goods or services available for sale, lease, or trade goods or services desired for purchase, lease, or trade

Federal regulation

grants overall rights of ownership; controls broad usage standards, discrimination.

Unique Aspects of land:

immobile, indestructible, and heterogeneous.

Differentiation criteria

intention; adaptation; functionality; relationship of parties; contract provisions.

The Association of Real Estate License Law Officials (ARELLO)

international association of real estate regulators, who promotes consistent policies and standards for license law and enforcement of license law

The Comprehensive Loss Underwriting Exchange (CLUE) Report

is a database used by insurance companies that provides five to seven years of prior claim information on properties. It is not available to insurance companies until after closing (at which time the language in the insurance policy may allow them to reject coverage).

broker

is a direct agent of the principal (buyer or seller) who is hired for compensation to perform a stated service, such as negotiating the sale of property

condominium : owner's association :

is a hybrid form of ownership of multi-unit residential or commercial properties. is often created to enforce the bylaws and manage the overall property. Condominium owners bear the costs of all other property expenses, such as maintenance, insurance, management fees, supplies, legal fees, and repairs. An annual operating budget totals these expenses and passes them through as assessments to unit owners, usually on a monthly basis.

license fee

is charged in order to obtain a balance in the trust fund of $1.7 million

Estoppel

is defined as 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. A doctrine of law that stops one from later denying facts which that person once acknowledged were true and others accepted

Personal property

is ownership of anything that is not real estate, and the rights associated with owning the personal property item. Items of personal property are also called chattels or personalty.

Real property

is ownership of real estate and the bundle of rights associated with owning the real estate.

Capital gain

is the amount by which an asset's selling price exceeds its initial purchase price. This Act allows a special exclusion on capital gains for homeowners selling their own home. A seller can exclude up to $250,000 of any capital gain on the sale. If the sellers are a married couple, they can exclude up to $500,000 in gain. This exclusion can be used once every two years.

agent

is the party in an agency relationship (a licensed employee of the broker) who is hired by the principal to perform certain duties.

Real estate

land plus all permanently attached man-made structures, called improvements.

Local regulation

levies real estate taxes; controls specific usage.

Market influences on supply and demand

local economic factors; national economic trends in money supply, inflation; government regulation at all levels

When should Clue Report be provided?

make their offer subject to receiving and approving a copy of the seller's CLUE report during their option period. Option period (time buyers/sellers have to terminate contract without penalty)

Agency relationships are: fiduciary relationship

meaning the agent owes certain duties to the principal

substantive dialogue

meeting or written communication that involves a substantive discussion relating to specific real property.

What are the primary differences between a mobile and manufactured home?

mobile homes did not need construction quality approved seals or to meet updated safety quality guidelines

The National Association of REALTORS® Code of Ethics

not only reflects the law but sets an even higher standard of performance for member brokers and agents.

Dual Agency is....

not permitted in Texas (When a broker represents a buyer and Seller)

cooperative

one owns shares in a non-profit corporation or cooperative association, which in turn acquires and owns an apartment building as its principal asset. Along with this stock, the shareholder acquires a proprietary lease to occupy one of the apartment units.

Mortgage Brokers

paid a fee to bring borrowers and lenders together.

Trade fixtures

personal property items temporarily attached to real estate in order to conduct business; to be removed at some point. Also called "chattel fixtures."

parcel, or tract,

portion of land delineated by boundaries.

The bundle of rights:

possession, use, transfer (Right to sell, lease), encumbrance (The right to mortgage for debt), Exclude (To keep others off the property) . Property is real or personal, tangible (physical) or intangible (abstract)

If supply increases relative to demand..........., if demand increases relative to supply,

price decreases;price increases

State regulation

primary regulatory entities of the real estate business; establish real estate license laws and qualifications and sets regional usage standards.

Price mechanism

quantified value of an exchange

Market imbalances

re caused by changes in supply or demand, resulting in an equilibrium time lag

Fixtures

real property converted from personal property by attachment to real estate.

The Taxpayer Relief Act

reduced several federal taxes in the United States:

retailer

someone who sells manufactured homes sells, exchanges, or lease-purchases at least two manufactured homes to consumers in a 12-month period."

Property

something that is owned by someone, and the associated rights of ownership.

Market Equilibrium

supply and demand tend toward balance where they are equal

Land

surface, all natural things attached to it, subsurface, and air above the surface. Surface rights, subsurface rights, and air rights can be laterally severed. • Air rights in Texas are usually given for a fee, and are not usually bought or sold.

Base employment

the number of persons employed in the businesses that represent the economic foundation of the area

Conversion

transforming real to personal property through severance, or personal to real property through affixing.

(TREC)

was created to enforce license law and enact rules and regulations to support the law. 9 board members: 6 members from real estate industry, 3 members from general public • Appointed by governor • Should a person or their spouse be registered, certified, or licensed by an occupational regulatory agency in the industry, they are deemed ineligible. • Term is 6 calendar years

enforceable lien

( Can be given of condo owners doesn't pay Assessments)

real estate licensees or agents.

Salespersons not associated with NAR are known as

abstract of title

a search of the records in the county where the property is held.

salesperson

any licensed person who is associated with a licensed broker and performs certain real estate services.

What exception exists to the duty of obedience when working with a client?

Not bound to duty if Principals directions are not legal

Littoral and Riparian Rights

Non moving water rights (Lake), Moving water rights (Rivers), Depends if it is Navigal or not

A Texas Real Estate License Isn't required for:

Attorneys-in-fact, Attorneys at Law, An Auctioneer, Receivers/ trustees in bankruptcy, (While acting under court order or under a will), a person employed by an owner in the course of the owners business, resident managers, Federal agency or state government officer, and owner or owners employee who leases the property, a partnership or Limited Liability Partner acting as a broker/salesperson through a partner who is a licensed broker, A transaction involving the sale, lease of mineral or mining interest/ cemetery lot/ Hotel/ Deed of Trust/ Contract Lien

Determines Overall Demand:

Base employment, total employment, and population determine overall demand.

Texas Requirements for Licenses

Be at least 18 years of age, a citizen of the US or lawfully admitted alien, and a resident of this state Satisfy the commission as to Honesty and competence, 3 classroom hours of course work, Finger prints within 6 months, criminal history background check, pay fees

What are some of the better ways for licensees to reduce their chances of personal liability from the sale of a manufactured home?

Be certain that all homes for sale have clear titles, ensure that all retailers and sales people are licensed by the manufacturing housing division, request a proof of purchase that involves the retailers name, the homes label or serial number, and verify that all phone numbers match up

What principles govern an agency relationship?

Both parties must consent to the relationship. Both parties must agree to form the relationship.

Agency Law The duty an owner has to his/her principal are: C- O- A- L- D-

Care (Reasonable care) • Obedience • Accountability • Loyalty • Disclosure or Notice

Documents of title for manufactured housing are called what?

Certificate of Title

An agent's fiduciary responsibilities to a client usually end when the transaction closes. This is not true of which duty? ( COALD)

Confidentiality- This duty extends beyond the termination of the relationship. No personal information gained during the term of the agreement can ever be disclosed to another

An agency relationship is terminated when one of the following occurs

Contract performance • Expiration of the agreement term • Termination of the relationship by mutual agreement of the parties • Termination of the relationship by one party Some reasons why an agency relationship may terminate involuntarily include: • Death or incapacity of either party • Agent abandonment • Condemnation of the property • Destruction of the property through fire, vandalism or natural disaster • Renunciation by the client • Breach of the contract • Bankruptcy • Revocation of the agent's license: If the relationship is terminated in any of these ways, there may be legal and financial ramifications for the party who defaulted or canceled. The Texas Real Estate License Act defines four positions a broker might take with a seller, buyer landlord, or tenant: • Seller's agent (single agent) • Subagent • Buyer's agent (single agent) • Intermediary

minimum price=

Cost+Profit

Real estate professionals perform the following property-related functions:

Creation and improvement- involves capital formation, financing, construction contracting, and regulatory approvals. • Management and maintenance- Property managers and asset managers. • Demolition • Investment ownership • Regulation- of usage, taxation, and housing administration. • Transfer

What obligations do licensees owe to their customers?

Honesty and fair dealing Reasonable care and skill Proper disclosure

As an owner pays down a mortgage

Equity increases

Homeowner's insurance policies for condominiums usually provide liability coverage for what types of losses?

For injuries or losses that occur inside the unit. Outside events or damages to the building are not usually covered.

Economic characteristics of real estate

Governed by supply, demand, price, costs, value components, government influence

Economic characteristics of real estate:

Governed by supply, demand, price, costs, value components, government influence Inherent value; unique appeal; immovable supply; illiquid (cannot always be readily sold for cash); slow response to cycles; decentralized, local market

First-time homebuyers must

Have enough money for a down payment. • Have money for closing costs. • Be eligible for a mortgage loan.

What actions demonstrate exercising CARE when representing a buyer? (Part of COALD)

Helping the buyer locate appropriate housing • Evaluating property values and property conditions • Determining financing alternatives • Presenting offers and counteroffers with the buyer's interests in mind •

The most common type of insurance is Most basic homeowner policies, known as

Homeowners Insurance HO-2 Policies Fire or lightning Hail or windstorm • Explosion • Riot or civil commotion • Damage from aircraft • Vehicle damage • Smoke damage • Vandalism • Theft • Glass breakage • Falling objects • Weight of ice, snow and sleet • Accidental discharge or overflow of water or steam • Sudden accidental tearing apart of heating, air conditioning or hot water systems • Freezing of plumbing, heating, air conditioning systems or household appliances • Sudden accidental damage from artificially-generated electrical current • Property lost that was removed from the premises when in danger from fire or other hazards • Some liability coverage for personal injury and property damage caused by the policy holderFlood insurance is not included in a basic homeowner's policy. Therefore, any homeowner who does not purchase this insurance

Realtors

Members of the National Association of REALTORS® (NAR) are known as

Realtists

Members of the National Association of Real Estate Brokers are known as

An agency relationship can be created in three ways..

Oral and written or implied

Payments from the trust account

Payments from the trust account for claims arising out of a single transaction may not exceed a total of $50,000, regardless of the number of claimants. • Payments from the trust account for claims based on judgments against a single licensee may not exceed a total of $100,000.

Emblements

Plants/ Crops considered personal property since human intervention is necessary for planting, harvesting.

The agent works for the.... and with the ....

Principal/ Customer

A seller's agent must disclose what kinds of things to the seller?

Purchase offers • Who the prospective purchasers are and if the agent has a relationship with them in any way • Ability of the purchaser to complete the transaction • Ability of the purchaser to offer a higher price • Purchaser's intention to resell the property for a profit

Taxpayer Relief Act

Reduced the top rate on profits from 28% to 20% for assets held at least 18 months, retroactive to May 7, 1997. Taxpayers in the 15% bracket now pay 10% tax.

Property Type Specializations

Residential; Commercial and Investment

ostensible agency (Agency ratification and estoppel)

This agency relationship arises by the actions of the parties involved, rather than by a written agreement. For example, Charles is the owner of a vacant property he is selling himself. He knows that broker Hal is showing the property to prospective buyers without the authority to do so. If Charles doesn't stop Hal from doing the showings, the law considers that the prospective buyers have the right to believe that Hal is Charles' agent. example above, if one of broker Hal's buyers indicates an interest in purchasing the property, Broker Hal will contact Charles. If Charles agrees to sell, he "ratifies" an agreement to pay a commission. because on the surface an agency relationship appears to exist. In the example above, once this type of agency is created, Charles is prevented by estoppel* from denying its existence. relationship arises by the actions of the parties involved.

Texas law requires that seller agents provide to a party to a real estate transaction at the time of the first substantive dialogue, a "written statement" that explains in general terms the positions of seller representation, subagency, buyer representation, and the intermediary position. You can meet this requirement with what form:

Trek NO-OPK

Three types of agents

Universal: Agency Authorized to do Everything General:A person authorized to handle a principal's affairs in one area / ongoing tasks/duties Special: Agent with limited authority to act on behalf of the principal, for a specific activity, after agency relationship terminates (most are this!!)