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person or company license to buy sell exchange or lease real property for others and to charge a fee for these services
a person who has satisfy the requirement set by a licensing agency for state
a place where goods are bought and sold where supply and demand set the value
a licensee employed by or sociated with a broker who conducts brokerage activities on behalf of the broker
of goods available in the market for sale at a price. when supply increases prices go down.
goods in the market that people are willing and able to buy for a price. when demand increases prices go up.
the business of bringing people together in a real estate transaction
the process of estimating a property market value based on established methods
person or company hired to manage property on behalf of the owner. the scope of the work depends on the management agreement. the basic responsibility is to protect and maximine the return on the owner's investment
Business of providing funds to make real estate transactions possible.
Dividing single property into smaller parcels
Construction of improvements on land
A visual survey of a property's structure system inside conditions prepared in a report
National Association of Realtors
members are entitled to be known as realtors or realtor associates
National Association of real estate brokers
members are known as realtists. arose out of the civil rights movement
types of property
- residential (single/multi family use)
- commercial (office space, Shopping Center, stores theatres, hotels and parking facility)
- mixed use (commercial and residential in the same building)
- industrial (warehouses, factories, land in industrial districts, power plants)
- agricultural (Farms, timberland, ranches, orchards)
- special purpose ( churches, schools, cemetaries, gov't held land)
characteristics of real estate
- uniqueness (no two parcels are ever exactly alike).
- immobility (property cannot be relocated to satisfy demand).
factors affecting supply
- labor force availability (shortage of labor/materials).
- construction and material costs (increased transfer costs, taxes, permits).
- governmental financial policies (the discount rate set by the Fed, FHA & Ginnie Mae affect the amount of money available to lenders for mortgage loans, policies on taxation of real estate)
- government controls ( land use controls, building codes zoning ordinances)
factors affecting demand
- employment and wages levels
a person who helps clients choose among various alternatives involved in purchasing, using or investing in property.
Earth's surface to the center, natural things permanently attached like trees, water, etc, and airspace above to infinity
Real estate (5)
Land plus all things permanently attached whether natural or artificial
Real property (6)
Real estate plus bundle of rights. Conveyed by deed.
Any artificial thing attached to land (building, fence, sewers)
Bundle of rights
- Right to ownership of real property
- Evidence of ownership by deed
Right/Privilege associated with property but not necessarily part of it (parking spaces, easements, wafer rights, improvements)
Use of the surface of the earth. May be transferred without transferring subsurface rights.
Rights to natural resources below the earth's surface
Rights to use the space above the surface
Common-law rights and restrictions of landowners adjacent rivers, lakes, or oceans
- Personalty, chattels.
- Movable property that can be owned and does not fit the definition of real property
- Mobile homes (generally factory built homes before 1976
Not constructed at the site but built off-site and trucked to a building lot where they are installed or assembled.
Annually cultivated crops such as fruit, vegetables, grain.
Annually cultivated crops
Plants do not require annual cultivation-trees and shrubbery.
Changing real property to personal property be separating it from the land.
Changing personal property into real property by attaching it to land. Conveyed by Bill of sale
Personal property permanently affixed to land such that it becomes part of real property. Belongs to the owner and is included in any sale or mortgage
Legal test of fixture
Intent: did the installer intend for it to remain permanently or be movable?
- Method of annexation-can it be removed without damage
- Adaptation to real estate-how is it being used
- Agreement between the parties
Or chattel fixture is owned by the tenant not the landlord. Special category of fixtures. Removable roperty used in conducting a business. Owned by the tenant, attached to the rental space.
Trade fixtures not removed on or before the last day of rental becomes real property of the landlord by accession. Not included in any sale or mortgage.
Characteristics of real property
Economic characteristics of real property
- Scarcity - amount of land is finite
- Improvements can affect land value and use
- Permanence of investment - sewer, electricity, drainage=more permanent investment that just the building.
- Area of preference (situs) - people's preference for a specific location affects value.
Physical characteristics of real property
- Immobility-geographic location of land can never be moved.
- Indestructibility - land is permanent
- Uniqueness (nonhomogeneity) - no two parcels are exactly. the same
types of housing
- apartment complexes are groups of apartment bldgs
- Planned Unit Development-combined housing, recreation and commercial units in one development
- retirement community
- hi rise development-mixed use combining office, retail and residential
- converted use-convereted to residential use
- manufactured housing-mobile home, semi permanent foundation
- modular home-pre assembled at a factory, driven to the site, lowered onto the foundation. permanent foundation.
- Time shares-multiple buyers share ownership/occupancy
Utilities, electricity, natural gas, water, trash removal, sewer charges, maintenance and repairs
Determine whether client can afford
10% down = 28% PITI or 36% PITI plus all debts.
principle, interest, taxes, insurance
- Mortgage interest and real estate taxes
- Married filing jointly-$5000 excluded from capital gains
- Single-$250 excluded from capital gains
- Must have occupied the residence for 2 of the last 5 yrs.
Penalty free IRA withdrawals up to $10k, subject to income tax, all must be used within 120 days.
- Mortgage interest on 1st and 2nd homes
- (Mortgages below $1M or $500 if married, filing separately)
- Real estate taxes
- Certain loan origination fees
- Loan discount points (Paid by buyer or seller)
- Loan repayment penalties
Basic Form policy
- Fire, lightening
- Glass breakage
- Windstorm, hail
- Riot/civil commotion
- Damage from aircraft, vehicles
- Damage fror smoke
- Vandalism, malicious mischief, theft
- Loss of proparty removed from the premises when it is endangered by fire or other perils
Broad Form policy
- Falling objects
- Weight of ice, snow or sleet
- Collapse of all or part of the building
- Bursting, cracking, burning, bulging of steam, water heating system or appliances used to heat water
Usually requires owner to maintain insurance equal to 80% of the replacement cost not including the land. If less than 80%, claim may receive replacement cost less depreciation or claim may be prorated.
Database of 5 years of personal property claims
Exclusive right to sell
One broker is paid regardless of who sells the house.
One broker paid unless seller sells the housd
Procuring cause is paid including the seller
Home warranty that covers things like plumbing, electrical, heating systems, water heaters, duct work, major appliances. May be an option in the listing contract or an offer to purchase.
Broker receives all proceeds after a set price. Illegal
Multiple Listing Service (MLS)
Must have written consent from seller to list property in MLS.
Indemnification wording agreed by seller and broker that they will not sue the other for inaccurate information provided by the other whether intentional or unintentional.
Anti trust laws
- Price fixing
- Group boycotting
- Allocation of markets
- Tie-in agreements
Anti trust penalties
- Individual=maximum $1 million in fines and 10 yrs prison.
- Corporations= up to $100 million
- Injured parties may sue for three times the damages, costs, attorneys fees.
Internet listing display policy
Current Nam policy allowing MLS members equal rights to display MLS data.
Do not call registry
- May call up to 18 months after purchase, unless consumer requests no call-effective 5 yrs.
- May call up to 3 months following inquiry, unless consumer request no call-effective 5 yrs.
- Uniform Electronic Transaction Act:
- Electronic Form has same effect as paper, and electronic signature has legal force and effect.
Contracts enforceable regardless of medium created.
government powers over real estate
Police power-authority to preserve order, protect the public health and safety, and promote the general welfare of citizens.
Taxation-charge on real estate to raise funds for government.
Escheat-ownership transfers to the state when the owner dies with no heirs, no will, or living trust.
Eminent domain-right of government to acquire private property for public use.
process used to take private property
States authority passed on eminent domain rights to cities and counties.
Estate in land
- owner's interest in real property.
- 1) Freehold or
- 2) Lease hold.
- continues for an indefinite period or forever and may be passed on to heirs.
- 1) fee simple estate
- 2) life estate
Fee simple estate
- Highest interest in real estate. May pass to heirs.
- 1) absolute
- 2) defeasible
Fee simple absolute
Highest interest in real estate, entitled to all rights to propertyby law. May pass to heirs.
Fee simple defeasible
- Subject to specified event.
- 1) determinable
- 2) subject to subsequent condition
Fee simple determinable
qualified by a special limitation. "So long as", "while", "during". Possibility of reverter immediately to original owner upon violation. no need for court.
Fee simple subject to subsequent condition.
right to re-entry upon violation of condition but must go through court.
- limited in duration to the life of the owner for the life of another designated person. Not inheritable, passes by provisions of the life estate.
- 1) conventional
- 2) legal
Legal Life Estate
- Not voluntarily created by owner, but by state law.
- 1) Dower
- 2) Curtesy
- 3) Homestead
the life estate that a wife has in the real estate of her deceased husband.
the life estate a husband has in the real estate of his deceased wife.
conventional life estate
- created voluntarily for the duration of the life of the owner or some other designated person.
- 1) Pur autre vie
- 2) remainder and reversion
Pur autre vie
- (French, meaning "for the life of another")
- A life estate based on the lifetime of a person other than the life tenant.
- Designated future ownership in fee simple estate:
- 1) remainder=person to whom the propetry will pass when the life estate ends called the remainderman.
- 2) reversion=if no remainderman is named, ownership reverts to original owner upon end of life estate.
- Legal Life Estate for real estate occupied as family home. Amount of equity protected from most creditors. Not protected from rest estate taxes or mortgage for purchase or improvements. reserve a certain amount of money for the family in the event of a court sale.
- Taxes and lines paid first, then homestead, then unsecured debt.
claim, charge, or liability that attaches to real estate such as restrictions, easements, licenses, and encroachments that affect the condition or use of the property.
a claim that provide security usually for a monetary debt or obligation of the property owner
private restrictions that affect the use of land. Once in the deed they run with the land.
covenants, conditions, and restrictions-private agreements that affect use of the land. May be imposed by the developer or subdivided to maintain specific standards of the subdivision.
- The right to use the land of another for a particular purpose. Created by written agreement between the parties.
- 1) Appurtenant easement
- 2) Easement in gross
- 3) easement by necessity
- 4) easement by prescription
Benefit attached to the ownership of one parcel (dominant tenement) allowing this owner use of the neighbors land (servient tenement). Must be two adjacent parcels owned by two different parties. Runs with the land.
easement in gross
right to use someone else's land for public use
easement by necessity
created over another's property when the land has no access to a street or public way. For necessity not convenience. Based on court order that owners must have right to enter (ingress) and exit (egress) their land.
Easement by prescription
Created when use of another's land is continuous, exclusive, and without owner permission for a period ranging from 10 to 21 years. Must be visible, open, notorious and owner must have been able to learn of it.
Successive periods of continuous occupation by different parties combined to reach the required number of total years to establish easement by prescription.
Terminating an easement
- not automatically terminated. Certainly maybe required.
- -when the need no longer exists
- -when the property become merged under one legal description
- -by release of the right to the owner of the servient tenement
- -by abandonment of the easement
- -by non use of a prescriptive easement
Personal privilege to enter the property of another for a specific purpose. Can be canceled or terminated. Ends with the death of either party or sale of the land.
Structure that extends beyond the land of its owner
Common law rights to owners of land along rivers, streams, etc. Use cannot interrupt or alter flow of water or contaminate it in a any way. In non-navigable waters owners own land under water to the center of the waterway. In navigable waters owners own land to waters edge; the state own submerged land.
Water rights of owners whose land borders navigable lakes, seas, oceans. Land owners own land adjacent only up to the average high water mark. All land below owned by state
gradual increase in land resulting from the deposit of soil by the water's action
the gradual wearing away of land by natural forces such as wind rain and flowing water.
sudden removal of soil by an act of nature.
doctrine of prior appropriation
Use of water (except limited domestic use) is controlled by the state rather than the land owner. To receive a permit landowner must demonstrate beneficial use such and crop irrigation. priority determined by oldest permit date.
- Association of two or more who carry on a business for profit.
- 1) general
- 2) limited
all partners participate in the operation/management of the business and share full liability for losses an obligations
consist of one or more general partners and limited partners. Business run by general partner(s). liable for business losses only to the amount invested. must be dissolved or reorganized if one partner dies withdraws, or goes bankrupt.
Is a legal entity -an artificial person- created by charter. managed and operated by a board of directors. can only real estate in severalty or as a tenant in common. death of an officer does not affect title to the property on by the corporation
Limited Liability Company
members enjoy the limited liability of a corporation and the tax advantages of a partnership.
- be simple title to the unit
- undivided interest in the common elements as tenants in common
- no right to partition
right of first refusal
owner is required to offer the unit at the same price to the other owners of the condominium or the Association before accepting an outside purchase offer
Suit to terminate co-ownership
Time share ownership
Fee simple interest for use of property during limited . Interest never ends unless sold.
Time share use
Right to occupy terminates at end of period.
real estate timeshare act
covers management of timeshare unit and provides consumer protection for purchasers of timeshare
Description of a parcel of land defining the exact boundaries of the property
Meters and bounds
Oldest type of legal description. Refers to linear measurements, natural and artifical landmarks (monuments) and directions. Always begins and ends at the POB (point of beginning). Mets means measure, bounds means linear direction.
Fixed objects used to identify parcel boundaries. Could be a marker set in concrete, piece of steel, metal pipe driven in the soil, wooden stake in the dirt.
Established by congress in 1785. Standardized description of land divided into rectangles based on intersection of principle meridian lines (total 37) running north/south and base lines running east/west.
Land on either side of the principle meridians, divided into six mile wide strips running parallel to the meridians.
Lines running east and west, parallel to the base lines, six miles apart forming strips of land.
Basic units of the rectangular survey. Formed when township lines and range lines intersect measuring one square mile (640 acres). Divided into halves (320 acres) and quarters (160 acres) that may be further divided into halves and quarters.
May be use within the rectangular survey when describing an irregular tract, when a tract is too small to describe, or when the tract does not follow the lot or block lines of a recorded subdivision
Measures six miles square containing 36 sections, each one square mile. Description includes designation of the township tier, designation of the range strip, and the principle meridian for that area. They are numbered right to left, left to right, left to right always starting in the upper right hand or northeast corner. Section 16 always set aside for schools.
Lot and Block System
- Starts with a subdivision plat. Numbers in a plat map indicating location of boundaries of individual property. Always refers to metes/bounds or rectangular survey.
- Lot = number of a particular parcel
- Block = name of subdivision
- Description of lot from subdivision Plat includes:
- Lot and block number,
- number of subdivision plat,
- name of county and state
Division of air space above land.
Brass markers set in concrete or asphault.
Point from which elevations are measured used to determine the height of a structure or establishing a street grade.
9 square feet
144 square inches
Shows the location and dimensions of the parcel.
Shows size shape and buildings on a lot
Charge or claim against property to enforce payment of money. Runs with the land. Lien holder must initiate a legal action to force sale of property to pay debt.
Created intentionally by property owner.
- Created by law.
- 1) statutory
- 2) equitable
Created by statute without the action of the property owner.
Arises out of common law. Court order judgement requiring debtor to pay.
Affect all the property, both real and personal, of debtor. Attaches to real property at time of filing. Attached to personal property at time personal property is seized.
- Covers property used as security.
- 1) vendors Lien
- 2) mechanics Lien
- 3) mortgage liens
- 4) real estate tax liens
- 5) special assessments
- 6) utilities
Lien belonging to vendor or seller of property usually by owner financing with only personal obligation as security.
Priority of liens
- Order in which claims are satisfied, usually by the date liens are recorded in the public record.
- EXCEPT: real estate taxes & special assessments which take priority over all other liens.
Where the holder of a superior lien agrees to permit a junior lien holder's interest to move ahead of the prior/superior lien.
Ad Valorem Tax
According to value - General real estate tax levied for operation of government. Specific, involuntary, statutory.
General Tax Exemptions
- Property owned by
- Schools, parks, playground
- State and federal governments
- Religious/charitable organizations
- Educational institutions
Process to assess value of generally based on sale prices of comparable properties
Factor used to correct inequalities in statewide tax assessment and achieve uniformity. Apply equalization to assessed value before applying tax rate
Begins with determining the budget and appropriations, imposition of tax levy. Based on the total monies needed for the coming fiscal year.
Expressed in mills: 1/$1000 of a dollar or .001
Action taken to impose tax.
Tax rate applied to assessed value
Due date for tax payments
equitable right to redemption
When taxpayer can redeem property by paying delinquent taxes plus interest/charges prior to tax sale.
Statutory right of redemption
When delinquent taxpayer can redeem property after tax sale.
Taxes charged in real estate to fund public improvements
Deed of trust: specific, voluntary, equitable lien of real estate
Must file within a certain time frame. Specific, involuntary, statutory lien for performance of labor or materials provided to improve real property. Must have a contract with the owner, must file in county where property is located. Available to contractors, subcontractors, architects, equipment lessors, surveyors, laborers and other providers who perform labor or furnish material to improve real property
notice of non responsibility
a document executed by the property owner when improvements have begun but were not order by the owner
- Decree that establishes the debt. General, involuntary, equitable lien on both real and personal property owned by the debtor for wrongful act, breach of contract or non payment of debt. Expires but can be renewed indefinitely. Not a lien on personal property until it is seized. Priority established by
- Date judgement entered by court
- Date judgement filed in recorders office
- Date writ of execution issued
Writ of execution
Directs the sheriff to seize and sell debtors property to pay debt and expenses.
Satisfaction of judgement
Filed to clear the records of the lien.
Litigation pending: not a lien itself but notice of possible lien. Onc Ed lien is actually filed it is back dated to listen pendens filing date
Filed to prevent debtor from conveying title to previously unsecured real estate. Wrut where Property becomes custody of court until lawsuit is concluded.
Estate Tax and Inheritance Tax Liens
General, statutory, involuntary liens that encumberance a deceased persons real and personal property.
Liens for utilities
Specific, involuntary, equitable, lien on property for payment of delinquent utility services.
Bail bond lien
Specific, statutory, voluntary lien against property owners real estate to post bail in lieu of cash.
Corporation franchise tax lien
General, statutory, involuntary lien on delinquent tax on corporation as a condition of allowing then to do business in the state
IRS tax lien
General, statutory, involuntary lien on real and presonance property for failure to pay income or withholding taxes.
Subject to clause
Statement in a deed of exception or reservation that affect title to property
- written instrument used to convey title, right or interest in property. To be valid, must contain:
- grantor of legal age and sound mind,
- Grantee name,
- Statement of considerstion,
- Granting clause [words of conveyance],
- Habendum clause (ownership taken by grantee)
- Accurate legal description,
- Subject to clause (relevant exceptions or reservstions),
- Notorious signature of grantor,
- Delivery and acceptance.
- transfer date is date of delivery and acceotance.
Owner who transfers title. Must be of sound mind and legal age-usually 18.
Person who acquires title to property.
Amount or something paid for the property.
States rights, interest, and limitations of conveyance of property.
Defines ownership taken by grantee
- Can convey property on as granted in bylaws
- Deeds signed only by authorized officer
General warranty deed
- Defends title against grantor and all who held title. Protection that the grantor has the right to offer what deed is conveying extending back to origin of title:
- Seisin (possession)-grantor owns the property and has the right to convey title [may sue for full purchase price if covenant is broken];
- Against Encumberances-from liens/encumberances [may sue for cost of removing encumberances];
- Quiet enjoyment-guaranteed against third party claims. [grantor liable for damages];
- Further assurance-grantor promises to delivery any instrument needed to make title good;
- Warranty forever-grantor promises to compensate grantee if title fails.
Defends title against grantor. Guarantees that grantor received title and that property is unencumbered during time grantor held title.
Bargain and Sale deed
No guarantees, only implies grantor hold title and possession.
Least protection. Only conveys . No guarantees, no covenants, would warranties.
Deed of trust
Trustor conveys to trustee.
Returns title from trustee to trustor
Used to covey title from trustee to other than trustor
State law tax payable when deed is recorded. (Stamps may be purchased from the recorded and affixed to the deed)
Transfer tax exemptions
- Gift of real estate
- Change not in connection with a sale
- Conveyance between government bodies
- Charutable, religious and educational institutions
- Securing or releasing property as security for debt
- Tax deeds
- Corporate mergers
- Deeds for cancellation of stock
Voluntary transfer of title
when property is transferred without the owner's consent
- Involuntary transfer of property because of use by non-owner without permission. Use must be uninterrupted for at least five years. claimant must file an action in court to receive undisputed title. Use must be
- Notorious-known to others;
- Continuous and uninterupted;
- Hostile-without the owner's consent;
- Adverse to the true owners possession
a person who has died and prepared a will.
a person who has died without a will.
Gift of money after death
Gift of property after death
person who receives gift of real property
- Judicial process that held in county where property is located:
- prove or confirms the validity of a will;
- Determines the precise assets of the deceased person; and
- Identifies the people to whom the assesses are to pass.
- Must be voluntary,
- Have a legally enforceable promise,
- By legally competent parties,
- Made in exchange for legal consideration,
- For a legal act.
Agreement of the parties expressing terms and intentions of the parties. May be written or oral. Statute of fraud requires real estate contracts to be in writing.
Agreement of the parties as demonstrated by their acts and conduct.
Both parties promise to do something.
One person makes a promise to entice a second party to do something. Second party not obligated, but first party is.
When all parties have fulfilled their promise.
When one or both parties still have an act to perform
- Offer and acceptance,
- Consideration (something of legal value),
- Consent-free and voluntary act of each party,
- Legally competent parties (legal age and mental capacity)
- Legal purpose
Lacks one or more elements of valid contract. Never considered a legal contracg.
Appears on the surface to be valid, but may be rescinded or disaffirmed.
Appears on the surface to be valid, but neither party can sue for performance. However, can sue for damages.
Time is of the essencd
Contract must be performed within a specified time.
Assignment of a contract
Transfer of rights or duties under a contract.
Substitution of a new contract for an existing one.
Novation of the parties
Substitution of one party to a contract for a new party
Breach of contract
Violation of any of the terms of a contract without a legal reason.
Suit for specific performance
If a seller breaches the contact the buyer can ask the court to force the seller to go through with the sale and transfer of property as previously agreed.
If a buyer defaults the seller can sue for damages or for the purchase price.
Agreement that specifies the amount of money to which the no breaching party is entitled in the event of breach of contract.
statute of limitations
States the limits which parties to a contract may bring legal suit to enforce their rights. any rights not enforced within the applicable time period are lost
Termination of a contract
- By partial performance-considered complete even though partial elements remain unperformed. Must have written acceptance.
- substantial performance-contract is substantially performed but not all details are exactly as the contract requires.
- Impossibility of performance-contract cannot be legally accomplished.
- Mutual agreement-parties may agree to cancel the contract.
- Operation of law-voiding a contract with a minor, evidence of fraud, altered without written consent, etc.
- Recission-cancellation or termination of contract as though it never occurred. Returns the parties to their original positions before the contract. Monies exchanged must be returned.
The buyers interest in the property after buyer and seller have executed a sales contract.
- Conditions that must be satisfied before a sales contract is fully enforceable. Includes:
- the action, the time frame and who is responsible for costs. Can be mortgage contingency, inspection contingency, property sale contingency. If contingencies are rejected or not satisfied, the contract is void.
A change or modification to the existing content of a contract.
Provision added to an existing contract without altering the content.
Help consumers make informed decisions
Contract by an owner (optionor) giving a buyer (optionee) the right to buy or lease the owner's property at a fixed price within a certain period.
Installment contract. Buyer (vendee) agrees to amke a down payment and pay monthly interest and principle, taxes and insurance, gaining equitable title, and seller (vendor) retains legal title.
Records anyone interested in a particular property can review.
Placing documents in the record, must be in the county/town where property is located, recorded on first come first serve basis.
Gives constructive notice to the world of the borrowers obligations and establishes lien priority
Notice to the world of property rights and interests. Information may be obtained through due diligence.
Someone who has searched the public record and inspected the property has actual/direct knowledge.
Real estate taxes, special assessments may not be recorded until after past due. Inheritance and franchise taxes are not recorded.
Chain of title
Record of all property owners beginning from the earliest owner. Gap in the chain is a cloud on title. The cloud is resolve by "suit to quiet title".
Examination of all public records to determine any defects. Begins with present owner and is traced backward to its origin.
Abstract of title
Summary report to title search results prepared by an abstractor or attorney.
- No serious defects
- No hazard of litigation
- Owner has right to convey
Certificate of title
Proof of ownership, but not a guarantee of ownership. Evidence of ownership based on examination of public records. Prepared by title company, abstractor or attorney.
Attorneys opinion of title
Evidence of title based on review of the abstract
- Policyholder protected from future losses arising from defects in the title.
- Standard policy-insures title as know from public record and protects against hidden defects such as forged documents, conveyance from incompetent grantors, incorrect marital status, improperly delivered deeds.
- extended coverage-additional coverase against defects found by inspection of the property, survey and certain unrecorded liens.
- Exclusions-zoning ordinances, restrictive covenants, easements, certain water rights, current taxes and special assessments.
Legal registration system used to verify ownership and encumbrances. Relies on the physical title document; a person acquires title on when it is registered.
Mortgagor (borrower) gives legal title to mortgagee (lender) and retains equitable title. Lender has immediate right to possession.
Mortgagor (buyer) retains both legal and equitable title. Property is only security for loan.
Practice of pledging specific real property as security (collateral) for the loan. Creditor receives equitable title.
- Secured by two documents:
- 1) Promissory note stating amount owed,
- 2) Mortgage or deed of trust specifying collateral used as security for the loan. Must be recorded in the recorder's office of the county where the property is located.
Loan orignation fee
Charge to cover expenses of generating a loan. Usually 1% of the loan amount. May range from 1% to 3%.
Clause that requires the lender to execute a satisfaction when the note had been fully paid.
Lender can demand payment in full if property is sold or permit buyer to assume mortgage at an interest rate acceptable to the lender.
When a superior lien holder subordinates to a lower lien holder with a higher amount of debt. Both lenders must sign.
Interest in excess of that allowed by law.
Charge for the use of money. May be fixed or assist with the prime rate.
- Prepaid interest charged at closing. May be paid by buyer or seller.
- Points=charge for points divide by loan amount
A prepayment clause in the mortgage agreement may require payment of a penalty against the unearned portion of interest for any payments made ahead of schedule
Deed of trust
Conveys naked title (title without the right of possession). Trustor (borrower) gives tile to a third party (trustee) to hold on behalf of the beneficiary (lender). Must be recorded in the recorder's office of the county in which the property is located.
Provides a legal description, identifies that the property is security, identifies the lender, the borrower, and should be signed by all parties.
The right of the lender to declare the entire debt due and payable immediately if the borrower defaults on payment, does not pay taxes or insurance premiums, or fails to make necessary repairs.
Assignment of mortgage
When the lender (mortgagee) sells the note to a third party (assignee) without changing the provisions of the contract.
Provision in mortgage contract that lender will show in the public record that the debt has been paid in full and will execute a satisfaction (release or discharge)
Deed of reconveyance
When trustee delivers deed to trustor after debt is paid in full. Should be notarized and recorded.
Impound acct used to hold reserve money to pay taxes and insurance premiums
National Flood Insurance Reform Act of 1994
Requires lenders to set aside funds for flood insurance on new loans for property in flood prone areas.
Subject to mortgage
Buyer purchases property that has an outstanding balance. Buyer is not personally obligated to pay debt in full. Seller not purchaser may be liable in the event a subsequent foreclosure does pay off debt.
Assumption of mortgage
Buyer purchases property and assumes sellers debt. Buyer personally obligated to pay to pay entire debt. Must be approved by the lender.
- Legal procedure where property pledged is sold to satisfy debt.
- 1) judicial-allows for sale after presentation of facts on court and sufficient public notice
- 2) non-judicial-foreclosure can proceed without court action (power of sale).
- 3) strict-papers must be recorded and filed in court, then after notice if the borrower does not pay title is transferred.
Deed in lieu of foreclosure
Friendly foreclosure, carried out by mutual agreement - not by court action.
Deed to purchaser at sale
Provided to purchaser after sale to convey whatever title the delinugent borrower had
A personal judgement against borrower, when the foreclosure sale does not produce enough funds to pay the balance due in full.
Real estate finance market
- Three components:
- Gov't influences - fed reserve system
- Primary market
- Secondary market
Federal Reserve System
Helps to create favorable economic climate. Regulates the flow of money and interest rates by controlling bank reserve amounts and the discount rates.
Primary mortgage market
- Made up of lenders that originate loans. Lenders income comes from finance charges collected at closing and recurring income that is interest collected during the term of the loan and from servicing loans.
- Major lenders:
- Thrifts, svgs/loans, commercial banks;
- Insurance companies;
- Credit unions;
- Pension funds;
- Endowment funds;
- Investment groups;
- Mortgage banking companies;
- Mortgage brokers-not lenders but intermediaries.
Responsibility to protect and presefve the funds of depositors.
FederaL Deposit Insurance Corporation - establishes standards and regulations for fiduciary lenders.
Secondary mortgage market
Loans are bought and sold from banks and savings andloans after funded. Stimulated housing construction and mortgage markets by expanding the types of loans available.
Number of mortgage loans assembled into a package.
Federal government owned enterprise dealing in conventional, FHA and VA loans in the secondary market.
Federal Home Loan Mortgage Corporation: government owned enterprise that provides primarily conventional loans in the secondary market.
Government National Mortgage Association. Government agency that guarantees FHA and VA loans.
Periodic payments of interest only, followed by payment of the principle in full at the end of the term.
Payment of interest only for a stated period, usually 10 or 15 years, with the principle due at the end of the term.
When the final payment is larger than the rest.
Partially pays off both principle and interest. Paid off slowly over time. Each payment first applied to interest with any remaining portion of payment to principle. Usually paid monthly-can be quarterly or semi annually.
Adjustable rate mortgage
ARM loan that originates at one interest rate the fluctuates up or down during the term of the loan.