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What is Real Estate?
land at, above and below the earth surface, plus everything attached to it.
Supply and demand
- more supply =lower prices
- More demand = higher prices
What are the factors that affect real estate supply?
Labor force availability, construction and material costs, govt controls, financial policies.
What are the factors that affect demand?
population, demographics, and employment and wage levels.
What does real property?
It includes both land and real estate. It is defined as the interests, benefits, and rights that are automatically included in the ownership of land and real estate.
What is annexation?
where personal property changes into real property,
What is the overall test to determine if property is personal or real?
Question of intent.
What are the economic Characteristics of Real property?
- Scarcity-land is scare
- Improvements- Building an improvement on land can improve the value of property.
- Premanance of Investment- The return on investments such as electricty, water, and sewage are long term.
- Area preference or situs- Location is the single most eco characteristic of land.
What are the physical characteristics of real property?
- Immobility- Geographic location of land can never change.
- Indestructibility- Land is indestructible.
- Uniqueness- no 2 properties are the same.
What are the different types of housing?
- Apt. complexes- groups of apt buildings, low rise or high rise. may include parking, security, clubhouses, pools, tennis crts and golf courses.
- Condos-owns property but doesnt have to do maintanance on them. Share common elements like: halls, elevators, pools, etc.
- A Cooperative-units that share common walls and facilities. The ownters dont own the units, a coorporation holds title. the owners purchase shares of strock in the corp.
- PUD's-merge land uses as housing, recreation, and commercial units into one self contained development. (a planned city).
- Retirement communities-like PUDS they provide shopping, recreational opportunites, and healthcare facilites.
- High rise developments-MUDS-Mixed use develp. combine office space, stores, theaters and apt units in a verticle community. Usually self contained.
- Converted-use properties-factories, warehouse etc that have been converted to residential homes.
- Manufactored housing or mobile homes-
- modular homes or prefab homes-built somewhere else and brought in and set on foundation.
- Time shares-
What is PITI?
Principal, interest, taxes and insurance. This is the basic cost of owning a home.
What determines whether a person can afford a house?
- Their payment depends on thier monthly gross income X .28= their total housing allowance.
- Thier payment also depends on thier debt. Monthly gross income X .36 = total housing AND debt allowance. Their house payment and debts added together cant exceed 36% of their income.
What are the tax benefits to owning a home?
Deduct mortgage interest paid as well as real estate taxes and other expenses.
What is included in the basic form insurance policy?
- -fire & lightning -windstorm & hail
- -glass breakage -explosion
- -riot - damage by aircraft, vehicles, smoke
- -vandalism and theft
- -loss of property removed from the premises when endagered by fire or other perils.
What is covered in a broad form insurance policy?
- -falling objects -damage from the weight of ice, snow, sleet
- -collapse of building -bursting, cracking, burning of water heater or appliances used to heat water. -accidental discharge leak, or overflow of water
- -freezing of plumbing,heating, and air conditioning systems
- -damage to appliances from short circuits or accidental currents.
What is a coinsurance clause?
Most insurance policies contain it. It requires the owner to maintain insurance equal to 80% of the replacement cost of the dwelling.
What is an agency?
It is the Fiduciary relationship that the agent is held in a position of special trust and confidence with the principal.
What is a customer?
a nonrepresented party for whom some level of service is provided.
What is a nonagent?
Also known as a facilitator, intermdiary,transactional broker, transactional coordinator or contract broker. They assist one or both parties with the transaction without representing either partys interests.
What is a real estate agency relationship?
They are governed by common law, which is established by tradition and court and court decisions and statutory law,which is passed by state legislatures and other governing bodies.
What is Disclosure?
Is required in every state by real estate brokers of agency relationships.
Agency relationships require what?
- Express agency- based on formal agreement between parties.
- Implied agency- results from the behavior of the parties.
- The compensation- the source does not determine agency because
- -the agent may be compensated by someone other than the agents client and
- -agency can exist even if no compensation is involved- gratuitous agency.
What are the 6 common laws of fiduciary duties?
- Care- An agent must exercise a reasonable degree of care.
- Obedience- An agent must act in good faith with obedience toward the principals instructions.
- Loyalty-Must place the principals interest above eveyones, including the agent.
- Disclosure-agent is duty bound to inform the principal of certain relevant facts concerning the transaction, particulary those mandated by state law.
- Accounting- Agent must be able to report the status of all funds received from or on behalf of the principal.
- Confidentiality- Agent owes the principal confidentiality in carrying out agency obligations.
How do you terminate the agency?
- -completion of fulfillment of purpose of agency.
- -destruction or condemnation of property.
- -expiration of the terms of the agency.
- -mutual agreement to end contract.
- -breach by one party who may be liable for damages
- -operation of law, such as a brupt of the principal.
Agency coupled with interest cannot...
This means that the agency has some sort of personal interest in the property and cannot be revoked by the principal or terninated by principals death.
What is universal agent?
is enpowered to do anything the principal could do themselves personally.
What is a general agent?
represents the principal in a broad range of matters.
What is a special agent or limited agent?
represents the principal in one specific act or business transaction only, under detailed instructions.
What is a designated agent?
authorized by the broker to act as agent to a specific principal.
What is a single agency?
Agent only represnts one party in a transaction.
What is a dual agency or limited agency?
where an agent represents two principals in the same transaction.
What is a buyers broker?
represents a buyer as an agent to find property that meets the buyers specifications, as set out in the buyer-broker agreement.
Make sure and be distinct about opinion or fact...
- -Puffing is a legal exxageration of a propertys benefits.
- -Fraud is the intentional misrepresentation of a material fact to harm another person.
- - Negligant misreprentation occurs when a brojer SHOULD HAVE KNOWN that a statement was false.
What is a stigmatized property?
A property that society has deemed undesirable due to events that have happened there or because of a knwon sex offender in the area.
A broker is licensed to buy, sell, exchange or lease real property for others for a fee and may operate as...
- -Sole proprietorship
- -partnership or
What is the Uniform Electronic Transactions Act (UETA)?
adopted in most states, does not require electronic communications but if its used, the contract cannot be denied a legal document.
What is E-sign?
electronic transactions law in states that have not enacted UETA and makes contracts legally enforcable.
How is a broker entitled to compensation?
- must be licensed
- employed by the buyer or seller under a valid contract and
- the procurring cause of the sale by starting or causing a chain of events that resulted in the sale.
What are the antitrust laws?
- They are both state and federal they prohibit..
- monopolies and
- contracts, combos, and conspiricies that unreasonably restrain trade including:
- price fixing
- group boycotting
- allocation of customers markets and
- tie-in agreements forcing customers to purchase a product when only another was wanted.
What are the penalties for any antitrust violation?
- can face up to 1 million fine and 10 years in prison, corporate fines up to 100 million.
- in civil suit, the successful plantiff may recover triple damages plus attorneys fees and costs.
What is a listing agreement?
Its an employment contract between a broker and seller. Must be in writing to hold up in court.
What are the characteristics of an exclusive-right-to-sell listing?
- one broker is appointed as the sellers sole agent
- If the property is sold while the listing is in effect the broker gets commision no matter who sells it.
What is an exclusive agency listing?
one broker is sole agent to the seller but allows the seller to sell property themselves and not have to pay broker.
In an open listing or nonexclusive listing...
the seller can employ any number of brokers and only has to pay the sucessful broker and does not have to pay any broker if the seller sales it himself.
What are the characteristics of a net listing?
- The excess over the net sale will go to broker as commision.
- The broker can pick any price to sell the property at as long as it is over the net amount owed.
- Net listings may be prohibited by state law
When can a listing agreement be terminated?
- the purpose is fulfilled
- the agreement expires
- the property is destroyed
- the owner files brupt or transfer of title
- they broker and seller mutually agree to terminate
- either party dies
- either party breaches contract
What is a broker protection clause?
preserves the brokers commision within a certain number of days, if the owner transfers the property to someone the broker introduces them to.
What are the government powers?
- Police power-states authority passed to cities and counties. to enact nondiscriminatory legislation to
- preserve order
- protect the public heatlh and safety and
- promote the general welfare of citizens
- Eminent domain-govt right to aquire privetely owned real estate for public or economically beneicial use through
- condemnation-process that begins judicially or
- just compensation- must be paid to the property owner.
- -Taxation is the charge on real estate to raise funds to meet public needs.
- - Escheat occurs when a deceased has no will or lawful heirs.
A freehold estate lasts an indetermined length of time and includes?
- Fee simple- is the highest estate recongnized by law.
- Fee simple defeasable- is a qualified estate subject to occurance or nonoccurance of some specified event
- Life estate is based on the lifetime of a person.
What is an encumberance?
- a claim, charge, or liability that attaches to real estate and may be one of the following...
- Liens-charges against property for a debt or obligation of the owner.
- Covenants, conditions, and restrictions (CC&R's)- private agreements that affect the use of the land.
Easements are rights to use the land of another..what types?
- An appurtenant easement- IS said to run with the land when the title is transferred.
- Easement in gross-an individual or company interest in or right to use anothers land.
- All are usually written agreements between parties.
- Easement by neccesity-When no access to a street or public way.
- Easement by prescription-acquired when a claimant has used anothers land for 10-21 years. The use must be visible, open, and notorious.
How can an easement be terminated?
- when the need no longer exists
- when the owner of either the dominant or the servient teneant becomes the sole owner.
- when the owner or servient releases the right of easement.
- if the easement is abandoned or
- by the nonuse of a prescriptive easement.
What is a license?
a perosnal privlidge to enter the land of another for a specific purpose.
What is an encroachment?
when all or part of a strucutre illegally intrudes on he land of another or beyond legal building lines.
What are the types of water rights?
- Riperian rights- common law rights granted to owners od land along rivers, streams, or similar bodies of water.
- Littoral rights- belong to owners of land that borders commercially navigable lakes, seas, and oceans.
- The doctorine of prior appropriation- some states allows owners to use water tha tis adjacent to their land if its for beneficial use, such as irrigation of crops.
What is Ownership in severalty?
- title held by one individual and can be
- sole rights to ownership
- sole discretion to transfer part or all ownership to another person.
- single individual or atrificial one, such as a corp.
What is a co-ownership title?
- title held by two or more individuals, up to 4 people.
- -Tenancy in common
- each tenant holds an undivided fractional interest
- have unity of possesion, right to occupy enitre property
- each interest can be sold, conveyed, mortgaged, or transferred and
- interest passes by will when a co-owner dies
What is a Joint tenancy?
- tenents enjoy 4 unities(PITT)
- Unity of possession- all have undivided right to possession
- Unity of Interest- all own an equal interest
- Unity of time- all acquire their interest at the same time
- Unity of title- title is conveyed to all joint tenants by the same document.
- Right of survivorship- death of a joint tenant, interest passes to other tenants.
What is tenancy by the entirety?
- only available to husband and wife
- title conveyed only by deed signed by both
- carries right of survivorship- survivor becomes owner in severalty.
What is community property?
- general property acquired during marriage that is not seperate property.
- Seperate property- is property owned by a spouse before marriage. Only needs on spouses sig.
- Community property- requires the signatures of both spouses to be conveyed.
- Upon death of a spouse, the other spouse owns one half of community property, other half is divided according to will or by state law.
What is a partnership?
- 2 or more persons who have a business and are co owners.
- General partnership- all particiapte in operation and managment and share full liability for bus losses and obligations. General partners run the business.
- Limited partnership- has both general partners and limited partners. Limited partners dont run the business and are only liable for losses up to the amount they have invested.
What is a limited liabilty company (LLC)?
- Limited liabilty offered by a copr. form of ownership
- tax advantages- no double taxation
- Flexible management structure- no requirements or restrictions of a corp.
What is the metes and bounds method?
- measures distances (metes)
- Starts from POB
- follows compass directions or angles(bounds)
- arrive at POE,which must be the same as POB and
- uses monuments (fixed objects or markers) to identify the POX and corners or places where boundary lines change direction.
What is the rectangular survey system (Govt survey system)?
- divides land into rectangles
- is measured from the intersection of principal merididans and base lines
- referenced by degrees of lat and long.
- uses township lines, which run east to west parallel to and counted from base lines that are
- -6 miles apart
- -in units called townships of 36 sq miles each
- -in rows of townships called tiers and
- -arranged so each township is divided into 36n sections of one mile sq(640 acres), counted from northeast and running right to left then left to right and so on and
- -uses range lines, which run north to south parallel to and counted from principal meridian that are
- 6 miles apart and
- -in rows called ranges
What is the lot and block (recorded plat) system?
- divides a larger parcel further into block (subdivison)and lot (individual parcel) numbers and
- refrences all data in a subdivision plat map, notinglot sizes,st names, and other required information that is
- approved by the governing body and
- filed in public records of the county where the land is located.
What is survey preperation?
includes a legal description and survey sketch.
How do you calculate the cost of purchasing land?
- 43,560 sq ft per acre X the amount of ac= sq ft
- amount of sq ft X price per sq ft= price of land
What is the calculation to calculate acres in a survey system?
- EX: SE1/4 of SE1/4 of SE1/4 of section 1
- 4X4X4=64; 640/64= 10 acres
- So take the demoniator of the fractions and multiply them and then divide it by 640 to get the acres.
What is a lien?
- a claim of a creditor or taxing authority against real property that is held by debtor for repayment.
- is an encumbrance that transfers with it and lessens the value or impairs its use because it binds all owners until paid and cleared.
Creation of a lien may be?
- Voluntary- property owner such as a mortgage.
- Involuntary-created without property owners permission
- Statutory- created by state
- Equitable- created by a court based on the common law
What is a general lien?
affects all of a debtors property, both real and personal. Includes judgments, estate and inheritance taxes, decedents debts, corp. franchise taxes, and IRS taxes.
What is a specific lien?
affects only identified property. specific liens include vendors lien, mechanics lien, mortgage lien,real estate tax lien, and lien for specific assesments and utilities.
What is the order in which claims will be satisfied?
- generally,first to record is first in right.
- Real estate taxes and special assessment take PRIORITY.
- A sub. agreement between lienholders can be used to change order of priority.
What is the ad valorem taxes?
Based on value of property taxed, they are specific involuntary statuatory lienslvied by states, counties, municipalities, etc.
Tax exemptions are available for whom?
schools, parks,hospitals, or property owned by municipal, state, or fed govt, or religious or charitable orgs.
Property assesments (valuations) are ?
- conducted by county or township tax assessors or appraisers.
- Assessed value- based on sales price of other comparable properties. Land value may be assessed seperatly from building values. Diff methods may be used on diff types of porperty.
- Equalization factor- may be applied to correct inequalities in statewide tax assesments.
What is a special assesment tax?
charged on real estate for pubnlic improvments top the property. like paved streets, curbs, gutters, etc.
What is a mechanic lien?
a lien that is filed against the owner of a property for not paying contractors or suppliers for work done on the property.
What is a voluntary agreement?
- based on consent.
- If a mistake, misinterpretation, fraud, undue influence, or duress ocurrs it is viodable by the injured person.
What is a bilateral and a unilateral contract?
Bilateral is having obligations on both sides. Unilateral a promise by one side that can be accepted or rejected by the other side.
How can contracts be discharged?
- Performance, completes the contract terms
- Partial performance, if agreeable to both parties
- Substantial performance
- novation-subs a new contract or party for the original
- Mutual agreement
- recission-cancellation by one or both parties
The agreement or promise is based on an offer by one party ( the offeror) that is accepted by the other (offeree). A counteroffer terminates the original offer and initiates a new one.
Real estate sales contract is
- usually accompanied by earnest money deposit held in a trust or escrow account to avoid commingling with brokers own money
- Contingencies of the sale include mortgage, inspection, and sale contingencies, mus tbe stated in the contract.
- Land contract,contract for deed, bond for titile, installment contract, land sales contract, articles of agreement.
What is title?
ownership, or the right to ownership, of land and evidence of that ownership.
What is voluntary alienation?
the vountary transfer of title to real estateby gift or sale using some form of deed (the actual document showing title).
What is a grantor?
person who tranfers title. Must be legal age and legally competent to sign deed. Executed by a minor is voidable and so is mental impairment. If the grantor is declared incompetant by a judge the deed is void.
What is required to be on a deed?
- grantors all names including previous
- consideration (payment) form must be stated
- Granting clause( Words of conveyance) must be used
- Habendum Clause must define ownership interst taken by grantee, it specifies limits on ownership, like with a time share
- Legal decription
- Exceptions or reservations of any relevance
- Signature of grantors must be ackknowledged by a notary public or other official authorized by the state in which property is located
- Delivery of the deed and acceptance by the grantee are necessary.
What are the types of deeds?
- General warranty deed provides the greatest protection to the grantee and includes:
- Covenant of seisin-warrants the grantor hs the right to convey title
- convenant against encumrances- warrants the property is free from liens or encumbrnces, unless stated.
- convenant of quiet enjoyment- makes the grantor liable for damages if the grantees title is found to be inferior.
- covenant of further assurance-grantors promise to obtain any other document necessary to convey good title
- covenant of warranty forever- grantors promise to comensate the grantee if title fails in future.
What is a special warranty deed?
includes the warranities that the grantor received title and that the property was not encumbered when the grantor held title.
What is a bargain and sales deed?
implies the grantor holds title and pocession of property and no express warranities against encumberances.
What is quitclaim deed?
least protection of any deed, carrie sno covenents or warranties, and conveys only the interst the grantor may have when deed is delivered.
What is involuntary alienation?
- transfer of title to property is usually by operation of law.
- Escheat-property taken by state when deceased has no heirs
- Eminent domain-property taken by public or govt agency
- Adverse possession- property seizure occuring when someone who is not hte owner takes possesion of property for the length of time specified by state law.
When does transfer of title by will occur?
- when deceased dies testate(leaving will).
- When they die intestate(no will) a states statute of descent and disitribution occurs. Probate preceedings take place.
What is constructive notice?
the legal presumption that info may be obtained by an individual through due diligance.
What is Actual notice?
means the person has direct knowledge of documents in the public records and facts about the inspection of property.
What is a mortgagor?
The owner who borrows money from the mortgagee(lender).
What is a deed of trust?
- It is a three party instrument used to transfer title from the trustor (property Owner) to a trustee, who holds it on behalf of a beneficiary(lender).
- The mortgagor tranfers title to the mortgagee but retains the equitable title and has the right to possesion and use of the property.
- when the loan is paid in full, a defeasance clause requires the beneficiary to request the trustee to execute and deliver to trustor a release deed to return title to trustor.
What is an alienation clause?
in a loan doc it will prevent future purchasers of the property from assuming the loan.
What is a novation agreement?
may be used to release the seller from any liability on loans secured by the property.
What is a straight loan?
interest only loan, principal in full at the end of the loan term.
What is a balloon payment?
partially amortized loan, payments of interest and principal are not large enough to pay entire amount down, so by th eend of the loan a big payment is needed to be made.
What is a Growing equity mortgage?
rapid payoff loan, fixed rate, but payments of principal increase according to a schedule so the loan is paid off more quickly.
What is PMI?
Private mortgage insurance, may be required for LTV's higher then 80%.
What is MIP?
Mortgage insurance premium, an up front fee along with monthly payments, usually financed wiht loan.
What is a purchase money mortgage?
a note and mortgage created at the time of purchase.
What is a package loan?
includes all personal property and appliances as well as the real estate.
What is a blanket loan?
covers more then one parcel or lot, and a partial release clause allows a borrow to pay off part of the loan to remove liens from one parcel or lot at a time.
What is wraparound loan?
allows the borrower to obtain additional financing, retaining the first loan on the property.
What is an open end loan?
secures the current loan to the borrower and future advances made by the lender to the borrower.
What is a sale and leaseback loan?
used to finance large commercial or industrial properties.
What is a buydown?
a payment made at closing to reduce interest rate on the loan
What is a holdover tenancy?
created when a tenant with an estate for years stays on after lease expires and landlord accepts rent.
What is an estate of will?
(tenancy at will) no specific initial terms, created by express agreement or operation of law and can be terminated by the landlord or the tenant at anytime with proper notice.
What is an estate at sufference?
- created when a tenent stays on without the landlords consent after termination.
- The landlords acceptance of rent creates a holdover tenancy.
- the landlord can treat them as trespasser and evict
What is a gross lease?
tenant pays basic rent and landlord pays expenses of ownership
What is a net lease?
tenant pays basic rent plus all or most property expenses, landlord pays some expenses.
What is a percentage lease?
tenant pays basic rent and plus a percentage of gross sales and may pay property expenses.
What is a variable lease?
- allows increase of rent.
- A graduated lease states specific rent increases.
- An index lease allows rent changes, up or down based on the consumer price index.
Value is created by?
- demand, utility, scarcity, and transferability of property.
What is Market Value?
is the most probable price that property should bring in a fair sale, but sometimes not the same price paid or cost to construct.
What is a sales comparison approach ( market data approach)?
makes use of sales of properties comparible to the property that is being appraised by adding or subtracting the value of a feature present or absent in the subject property versus the comparible.
What is a comprehensive plan?
usually covers land use, housing needs, movement of people and goods, community facilities and utilities, and energy conservation.