NJ Real Estate Exam

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salespersonworks under a sponsoring licensed broker doing business in the name of the brokerbranch officemust be under the direct supervisor of a broker or broker salesperson and must have a duplicate licensecomminglingbrokers are prohibited from mixing their own funds with money in the trust accountduplicate originalmultiple original copies for the parties signatures. required for all listing contracts, sales contracts and leasesescrow accountalso known as trust account. must be in an authorized financial institution in NJ to be used for depositing all money belonging to other personsguilty knowledgeknew what was going on and did not attempt to stop itprobationfirst step after a complaint against a licensee. fine of up to $5000suspensionsuspend a license fine up to $10,000revocationpermanently revoke licence. Fine up to $10,000waiver of broker cooperationwhat a seller must sign if they direct the broker not to cooperate with any other brokersprincipalclientagencya fiduciary relationship that falls within in the requirements of the law of agencyfiduciary relationshipone of trust and confidence in which an agent is responsible for the money and/or property of others. It requires putting the principal's interest above all others, including the broker's own interest.fiduciaryagentCOALDCare, obedience, accounting, loyalty, disclosuregeneral agentempowered to represent the principal in a broad range of matters (ex: property manager)universal agenthas authority to represent the principal in all matters that can be delegated (ex: power of attorney)special agentauthorized to represent that principal in one specific capacity only (most broker relationships)standard of carethe quality of service a normal person would expect from a broker or salespersondisclosureagent's duty to pass on to the principal all the facts and information obtained that could affect the principal's business or decisions, whether or not the client askssubagentthe salesperson's relationship to the principal as the agent of the brokerindependent contractorpay own taxes, receive no insurance, get nothing from brokerage that could be considered an employee benefitready, willing and able buyerone who is prepared to buy on the seller's terms, is financially capable and is ready to take positive steps towards the consummation of the transactionprocuring causethe person who brings about a ready, willing and able buyer or brings about a meeting of the mindsmeeting of the mindstakes place when the parties are in agreement on price, down payment and financing methodconsumer information statementa form of disclosure to all sellers, buyers, landlords and tenants on the sale of all 1-4 family residential properties or vacant one family lots. Describes the types of business relationships a real estate agent can enter into with a clientdual agencybroker represents both parties in a transaction at the same timedisclosed dual agencylegal as long as consent to dual agency agreement is signedconflict of interestconflict between brokers own interest and that of the sellerlatent defecthidden defect not discoverable by ordinary inspectionMegan's Lawrequires communities to be alerted to the presence of convicted sexual offenders. Buyers can not get information until the close of the salepuffingextravagant statements of opinionfraudulent misrepresentationdeliberate lie intended to mislead someoneinnocent misrepresentationfalse statement by someone who believes it to be true and is not expected to have expertise in the subjectnegligent misrepresentationfalse statements made by someone who should know betterantitrust lawsfdederal and state laws in regard to price fixing and allocation of customers or marketserrors and omissions insurancemalpractice insurance for the real estate industryoff site conditionsnot on the property purchased. New construction has 5 days for you to cancel the contract existing properties do not have a similar right of rescissionCivil Rights act of 1866Prohibits any discrimination based on race and color, no exceptionsFederal Fair Housing Act of 1968Unlawful to discriminate on the basis of race, color, religion or national origin when selling or leasing residential properties. Certain exemptions applyTitle VIIIThe portion of the Civil Rights Act of 1968 in which the Federal Fair Housing act is containedRedliningRefusing to make mortgage loans or issue insurance policies in specific geographic areas without regard to the economic qualifications of the applicantSteeringchanneling homeseekers either to or away from a particular area on the basis of race, religion, country of origin or other protected classDepartment of Housing and Urban Development (HUD)Federal agency in which you would file a charge of discriminationNJ Law Against DiscriminationPassed by the legislature in 1945 and broadened over the years, applies to all real property.Protected classesrace, creed, color, religion, national origin, ancestry, gender, marital or familial status, lawful source of income, affectional or sexual orientation and mental or physical disibilityBlockbustinginducing homeowners to sell by making representations regarding the entry or prospective entry of minorities into the neighborhoodAttorney General's Memorandumnotice of anti-discrimination that must be given to the homeowner when the property is listedMount Laurel I and IIsuit filed by the NAACP against a NJ town for illegal discrimination against low income and moderate income persons through the act of exclusionary zoning. As a result all municipalities must provide a range of housingreverse discriminationthe result of well meaning quotas intended to preserve racial balance in given areastestersundercover volunteers who visit real estate offices to make sure all customers and clients are being treated the same and are being given the same free choice of housing within a given price rangebundle of rightswhat you are actually purchasing when you purchase a parcel of real estate: possession, use, enjoyment, exclusion, dispositiondeviseleave by willandthe surface of the earth, including water and anything attached to it by nature. The minerals and substances below the earth's surface to the center of the earth, and upward to infinity.parcelspecific tract of landreal estateland plus all manmade improvementsimprovementsbuildings erected on land and streets, utilities, sewers and other manufactured additions to the propertycorporealtangibleincorporealintangible (i.e. views or rights)subsurface rightsaka mineral rights - rights to natural resources lying below the earth's surface. May be owned separatelyair rightsthe rights to use the air above the land. May be sold or leased independently of the land itselfLittoral rightsrights of landowners bordering on oceans, seas or large lakesRiparian rightsrights of landowners bordering on rivers, streams and waterwaysavulsionprocess in which a stream suddenly changes its courseaccretionincrease of land cased by the gradual depositing of solid material (alluvion)alluvionthe gradual depositing of solid material that causes accretionhereditamentanything that can be inheritedpersonal propertyaka personalty, all property that does not fit into the definition of real property. This property is movablechattelstangible personal propertydeedhow real property ownership is transferredbill of salehow personal property is transferredemblementsannual crops and garden vegetables. considered personal propertyerosionthe gradual wearing away of land by water, wind and general weather conditionsrelictioncreation of dry land caused by the gradual withdrawal of water from the land by the lowering of it's surface levelfixturean article that once was personal property but has now been so attached to land or building that is now considered part of the real estatetrade fixturean article owned by a tenant and attached to a rented space for use in conducting businessDepartment of Housing and Urban Development (HUD)estate in landthe amount and kind of ownership interest that a person has in real property. Divided into two types: Freehold estates and leasehold estatesfreehold estatesestates of indeterminable lengths, can own for a lifetime or forever. Three types: fee simple, fee determinable and life estatesleasehold estatesinvolve tenants and are estates for a period of time. Considered to be personal property, not real propertyfee simplehighest type of interest in real estate recognized by law. the owner is entitled to all rights in the propertyfee determinableaka conditional free or defeasible fee. estate in land that can terminate on the occurrence or nonoccurrence of a specified event.remaindermana third party who would get the property after the death of a life tenantlife estatelimited to the life of a specific personreversionary interestan owner's right to regain possession of leased property upon termination of the lease agreementdowerwife's interest in husband's real estate if purchased before May 28, 1980curtesyhusband's interest in wife's real estate if purchased before May 28, 1980encumbranceclaim, lien, charge or liability attached to and binding on real property, it affects or limits its use, value or titleliena financial claim against property that provides security for a debt or obligation of the property ownervoluntary liencreated by the property owner (mortgage)involuntary lienfinancial claim against the property that is imposed without the owner's consent (property taxes)general lienaffects ALL the property someone ownsspecific lienplaced on one parcel of real estate onlyprioritythe order in which liens will be paid, real estate taxes take priority over all othersmortgage lienvoluntary lien on real estate given to a lender by a borrower as security for a mortgage loanconstruction lienplaced against real estate by workers who contributed labor or material and have not been paid aka mechanics lienlis pendensa notice of possible future legal action against the property. recorded when a suit is filed that could potentially affect title to a specified parcel of real estateeasementright acquired by one party to use the land of another party for a particular purposeeasement appurtenantan easement that grants rights to the owner of an adjacent parcel of landservient estatethe tract over which the easement runsdominant estatethe tract that benefits from the easementeasement in grosssimple right to use the land of others (power lines, etc)easement by necessityif the only access to the parcel is another'seasement by prescriptionwhen someone has used someone's land for a certain period of time as defined by state laws (in NJ 20 years). Claimants use must have been continuous, hostile, adverse to the owner's title, exclusive and without the owner's approval. Must be visible, open and notorioustackingsuccessive periods of continuous, uninterrupted occupation by different parties combined to reach the prescriptive period.party wallwall of a building that straddles the boundary lines between two owner's lots. Each lot owner owns half of the wall and each has an easement right on the other half of the wall for support of the buildingencroachmentillegal extension beyond the land of an owner and covers some land of an adjoining ownerlicensepermission to enter the land of another for a specific purposetenancy in severaltysole ownershipdeviseeperson named in a willtenants in common2 or more persons own property together. Can sell, convey, mortgage, or transfer the interest without the consent of the co-owners. Passes on to heirspartitionland divided into separate parcels if one tenant in common wants to dissolve an ownership and the other doesn't.joint tenancytwo or more owners of a property. Carries with it right of survivorship, can't be devised in will, goes to remaining ownerstenancy by entiretyowned by husband and wifesole proprietorshipbusiness owned by one individualpartnershipan association of two or more people to carry on a businessgeneral partnershipall partners participate in the business to some extent and may be held personally liable for the business' losses and obligations, beyond the amount of their initial investmentlimited partnershipbusiness run by a general partner and limited partners who do not participate in the day to day operation, and who can only be held liable for the amount they investedcorporationan artificial person or legal entity created under the laws of the state from which it receives its charterboard of directorsmanage and operate corporationslimited liability corporation (LLC)corporation with flexible management structure and tax advantages of partnershipscondominiumform of ownership. Shared housing complex. Deed conveying fee simple ownership of the living unit and a portion of the common elementscooperativepurchaser receives stock in the corporation and a proprietary leasehomeowners associationwrites the bylaws for condominiumshorizontal properties actNJ law that regulates the creation of condominiumscommon elementsshared areas of a condominium (stairwells, elevators, etc)conversionwhen an apartment becomes a condominiumtown housearchitectural style in which buildings share a party walltime sharingown a fraction of a year's ownership or use of a propertyright of survivorshipin joint tenancy where the other owners get the share of deceased owners, can't be passed on to heirsreservesa substantial fund for payment of future repairs of a cooperativetitleownershiptax lienimposed to pay for governmental functionsad valorem taxgeneral tax based on the value of the property being taxedspecial assessmentspecial taxes that property owners pay for improvement on the real estate they own - street lighting, alleys, etcassessed valuethe amount that the year;s taxes are based uponratabletaxable property in a municipalityfull value assessmentassessing real estate at 100% of true market value, almost impossible to attainrevaluationperiodically an outside appraisal company comes and assesses every ratable to bring everyone's assessment up to current valueequalization factormay be used to raise or lower assessments in a particular district or county. Assessed value is multiplied by itassessment rolltotal assessments of all real estate within the jurisdiction of the taxing bodymillone one-thousandth of a dollar. $.001redemption periodtime in which a foreclosed owner can regain propertytax foreclosurecan happen when taxes are unpaid six months after the end of the tax yeartax salecollection of overdue taxes through public auction of propertydeed restrictionan imposed restriction in a deed for the purpose of limiting the use of the land by future ownersasbestosa mineral once used in insulation and other materials that has been linked to respiratory diseasebuilding codesregulations established by state and local governments setting forth the structural requirements for buildingCERCLAthe Comprehensive Environmental Response, Compensation and Liability Act. Federal law administered by the EPA identifies parties responsible for cleaning up hazardous waste sites. AKA Superfundcertificate of complianceinspectors certificate that the property is fit for human habitancecertificate of occupancyissued by municipal authority stating that a building complies with building, health and safety codes and may be occupiedcondemnationcourt action in which government takes private property, exercising the right of eminent domaineminent domainthe right of government to acquire property for public use through a court action called condemnation. Must receive just compensationescheatthe reversion of property to the state or county, as provided by state law, when someone dies and there are no heirs or when a property is abandonedexclusionary zoninglocal regulations that discriminate, usually against low income housinglead based paintbanned since 1978master plana comprehensive pan to guide the long term physical development of a particular areanonconforming usea use of property that is permitted to continue after a zoning ordinance prohibiting it has been established for an arearadona naturally occurring radioactive gas that is suspected of causing lung cancervariancepermission gained from zoning authority to build a structure or conduct a use that is expressly prohibited by the current zoning lawszoning ordinancean exercise in police power by a municipality to regulate the control and character and use of propertypolice powerpower vested in the state to establish legislation to preserve order, protect the general public health and safety and to promote the general welfarecomparative market analysiscomparison of the prices of recently sold homes that are similar in location, style and amenities. Brokers can provide this, not an appraisalopen listingseller agrees to pay broker only if they procure a buyer for the property. Seller can enter in to multiple agreements with brokersexclusive agency listingonly one broker is specifically authorized to act as the exclusive agent of the principal. Seller has no obligation to pay if they find own brokerexclusive right to sell listingbroker is sole agent of the seller and must receive a commission regardless of who sells the property while the listing is in effectnet listingbased on the amount of money the seller will receive after the property is sold. It is illegal in NJcontractvoluntary agreement between legally competent parties to perform or refrain from performing some legal act, supported by legal considerationcompetent partiesover 18 and of sound mind. married persons under 18 are considered adults.offer and acceptancemutual assent, means there is a meeting of the minds on each term of the contractNJ Statute of fraudsall real estate contracts (and leases of over 3 years) must be in writing and signed to be enforceable. Oral contracts are allowed where there is "clear and convincing evidence" that they buyer and seller had agreed orally on the exact real estate to be transferredconsiderationwhat the parties promise to give or receive from each other. Legal tender, exchange of value or love and affection. In a sales contract, the consideration is the entire purchase priceparol evidence rulestates that written contracts take precedence over oral agreements or promisesexpress contractthe parties state the terms and show intentions in words, oral or writtenimplied contractthe agreement of the parties is shown by actions and conduct (i.e. ordering food in restaurant is implied contract that you will pay)bilateral contractboth parties promise to do something (I will do this, and you will do that)unilateral contractone sided agreement where one party makes a promise to induce a second party to do something (I will do this, IF you do that)executed contractone in which both parties have fulfilled their promises and thus performed the contractexecutory contractexists when something in contract remains to be done by one or both parties. Real estate contracts are this before final settlementvalid contractcontains all essential elements of a contract and is binding on and enforceable by all partiesvoid contractone that has no legal force or effect because it does not meet all legal elements for a contract.voidable contractone that seems on the surface to be valid but may be rescinded or disaffirmed by one of the parties (i.e. contract with minor)unenforceable contractseems to be valid on the surface but neither party can successfully sue the other to force performance. Valid between the parties (ie drunk when signed - Can choose to go through with transaction, but not legally bound to)time is of the essencecontract must be performed by a specific time limit, after that it is breach of contract. Must be done by attorneysassignmenttransfer of rights through a contractnovationsubstitution of a new contract for an existing agreementbreach of contractviolation of any terms of a contract without legal excusespecific performancethe action in which a buyer files a court suit to force the seller to perform the contractliquidated damagessum agreed upon to serve as compensation if one party defaultsstatute of limitationsNJ allows 6 yearsrescissionthe right to change your mind. Usually 3 days while under attorney reviewNJ Planned real estate development full disclosure actin planned unit developments purchasers have 7 day right of rescissionoptioncontract in which an owner gives the right to buy or lease the property at a fixed price within a stated period of time. Owner is bound to sell, optionee is not bound to buyland contractcontract for deed or installment sale contract. Typically a means of seller financing. Seller retains fee ownership and the buyer gets possession and equitable interest in the property. Pays taxes and upkeep.equitable titlethe interest held by a vendee under a land contract or installment contract. The equitable right to obtain absolute ownership to property when legal title is held in another's namecontingencycertain happening without which a contract will not be validcounteroffera new offer made as a reply to an offer receivedearnest moneymoney deposited by a buyer that is applied to the purchase price if the sale is closedescape clauseprotection for seller when the contract is subject to the sale of the buyer's homeleasetransfers the right to possession and use of a property for a specified period of timedemisetransfer of property by leaseestate for yearslease for a definite period of timeperiodic estateautomatically renews at end of lease periodtenancy at willfor an indefinite amount of time needs 3 months notice to terminatetenancy at sufferancewithout the landlords consent, lowest estate in the landleasehold estatetenants right to occupy land: 4 types estate for years, estate from period to period, estate at will, estate at sufferanceholdover tenancywhereby a lessee retains possession of a leased property after his/her lease has expired and the landlord, by continuing to collect rent, agrees to the tenants continued occupancylesseetenantlessorlandlordimplied warranty of habitabilitylandlord guarantees the property is fit for habilitation and guarantees to make any necessary repairs to common elementsassignment of leasetenant who transfers entire lease. New tenant has responsibility for payment of lease but old tenant maintains secondary liabilitytruth in rentinglandlords must give a copy to all tenants and post a copy on property. States rights and duties of residential landlords and tenants. Not required for terms of less than one month, one or two family houses or three family if the landlord lives thereADAdisabled must have full and equal access to facilities and services with reasonably achievable accomodationsconstructive evictionif a landlord fails to provide basic services for habitation, tenant may move out and cease paying rentsuit for possessionaka summary proceeding when a tenant breaches a lease or improperly retains possession of leased premises, landlord can regain possession through this process.actual evictionafter summary proceeding and suit for possession when a landlord regains possession of a leased propertygross leasetenant pays rent, landlord pays taxes, insurance, mortgage, repairs (property charges)net leasein addition to the rent, tenant pays some or all property charges (usually commercial leases)triple net leasetenant pays taxes, insurance and all other expenses except debt servicespercentage leaserental based on a percentage of the gross income received by a tenant doing business on the propertyground leaseowner leases land to a tenant who agrees to erect a building on it.property managersomeone who preserves the value of an investment property while generating income for the ownersmanagement agreementcreates an agency relationship between the owner and property managersubleaseto transfer a portion of a leasemortgagepledge of real property that serves as collateral for a loan, creates a lienbond(aka note) the financing instrument signed by the borrower that states the terms of the loan. It's what makes the borrower personally liable for the entire amount borrowed, and creates the personal obligationnote(aka bond) the financing instrument signed by the borrower that states the terms of the loan. It's what makes the borrower personally liable for the entire amount borrowed, and creates the personal obligationmortgageelendermortgagorborrowerhypothecationpledging of property as security for payment of a loan without surrendering possession of the propertydefaultfailure to meet any of the obligations in the mortgage documentacceleration clauseif a borrower defaults, the lender has the right to ask for the entire debt to be due. First step to foreclosuredefeasance clauseensures that when the debt is paid, the mortgagee has no further claim on the propertyestoppel certificatea document in which a borrower certifies the amount they owe on a mortgage loan and the rate of interest. used when mortgage is sold to a new lenderusurycharging an unreasonably high rate of interestsubordination agreementagreement as to the priority of mortgage lienssatisfaction of mortgageentered into the public record to show that the mortgage lien has been removed from this propertyreduction certificatewhen a mortgage is assumed or paid off, borrower requires statement detailing current amount duealienation clauseprovides that on the sale of the property the lender has the choice of either declaring the entire amount due, or permitting the buyer to assume the loanforeclosurewhen a borrower defaults in making payments or fulfilling any of the obligations set forth in the mortgagesheriff's salewhen house is sold at an auction when foreclosedsheriff's deedgiven 10 days after purchase at sheriff's saleshort salelender agrees to accept whatever the house sells for on the open market rather than foreclosedeficiency judgementif the foreclosure sale doesn't bring enough cash to pay the loan balance, can get a personal judgement against the holder of the note for the unpaid balancereal estate owned (REO)properties acquired by the lender through foreclosureLoan to value ratio (LTV)the amount of a mortgage in relation in value to a homeFederal Housing Administatration (FHA)operates under HUD and insures loans on real property made by lending institutions. Low down payment and allow for relatives or the seller to furnish some of the cash required at closingamortized loankill off slowly over timestraight (term) loanperiodic payments of interest only, with the principal to be paid in full at the end of the term. Used for home improvements or second mortgageballoon paymentperiodic payments that do not fully amortize the amount of the loan by the time the final payment is due, the final payment is a larger amount than the othersbiweekly mortgagepay every 2 weeks instead of once a month. 26 payments a year, the extra money helps to reduce time on a fixed rate loanadjustable rate mortgage (ARM)shift the risk or reward of changing interest rates from the lender to the borrower. The adjustment period is the anniversary on which interest rate adjustments can be made.indexthe interest rate on an ARM may go up or down based upon the key changes in a national indicator. The most common one is the rate on US Treasury Billsceilingthe maximum allowable interest rate on an ARMcapthe loan agreement may set a maximum percentage an interest rate may go up in an adjustment period of an arm. The add'l percentage are either: saved by the lender to use the next time, absorbed by the lender or added to the principalnegative amortizationprincipal increases instead of decreasesassumablemortgage transferred to the next owner of the propertyinterestcharge for the use of someone else's moneyamortization schedulepayment schedule showing how much principal and interest is being paid in every payment of a fully amortized loantax deductionhomeowners may deduct all property taxes, prepaid interest points and mortgage prepayment penaltiespointsprepaid interest paid to compensate for a low interest rate, can be paid by buyer or sellerbuydownlending institutions lower the interest rate in exchange for extra payment of pointsPITIPrincipal, Interest, Taxes and Insurance - all included in monthly loan payment. Taxes and insurance kept in escrow until neededbudget loanPITI loanconventional loanmade between a borrower and lending institutionPrivate mortgage insurance (PMI)must get if down payment is less than 20% protects lender from loss in case of foreclosurebroker's price opinionwritten estimate that resembles a comparative market analysis. Used to show when payments equal 20% of home price so you can stop paying PMIFHA 203Bmost widely used FHA loan, 1-4 family residences. Single upfront PMI charge paid in cash or added to loan. Allows all or some of down payment to be a gift from relativesamendatory clauseIn all FHA and VA loans, says that if the house appraises for less than the agreed upon sale price, the buyer is not obligated to complete the purchaseVA Mortgageonly owner occupied residences owned or co-owned by the veteran on 1-4 family residences. Guaranteed by the govt but loan is from a local lending institutioncertificate of reasonable value (CRV)a VA appraisal. If property doesn't appraise for purchase price, buyer can get out of the contractNew Jersey Housing and Mortgage Finance Agency (NJHMFA)offers below market interest loans with low or no down payment to qualified buyers who purchase homes in urban target areas.target areaurban areas where low cost loans are offered by NJHMFApurchase money mortgagea note secured by a mortgage given by a buyer, as a mortgagor, to a seller, as a mortgagee. Also any mortgage for a purpose other than refinancingreverse mortgageregular monthly payments are made to the borrower, based on the equity the homeowner has in the property given as security for the loan. Mostly for senior citizenshome equity loana form of second mortgage where owners whose property has appreciated in value may borrow up to new loan to value ratios, or establish a line of creditinterim financingbridge loan or swing loan. Temporary loan, usually interest only to bridge gap between selling of two residencesshared equity mortgagepurchaser receives some financial help in the form of a contribution towards the down payment, a concessionary interest rate or assistance with the monthly payments. The "partner" may be a lending institution, the seller, the government or a relative. Typically the partner receives a share of the profit when the property is soldpackage mortgageincludes real estate and all fixtures and appliances on the property (furnished condos)blanket mortgagecovers more than one parcel of land and is used to finance subdivisions developmentswraparound mortgagefrequently used as a method of refinancing real property or financing the purchase of real property when an existing mortgage is retained.open end mortgageused by borrowers to obtain additional funds to improve their property.construction loanfinance the construction of improvements on real estatemortgage bankerwork for financial institutions and loan moneymortgage brokerlicensed intermediaries who bring mortgage bankers and borrowers together. Charge a fee, often of the borrower, for their servicesunderwritingwhen a lender carefully investigates application informationqualifying ratiospercentage of income a borrower is allowed to spend on mortgage paymentsprimary mortgage marketlenders who supply funds to borrowers and keep the loans or who sell them to investorssecondary mortgage marketloans that are bought and sold, not originatedFannie MaeFNMA Privately owned corp that provides a secondary market for mortgage loans. Largest purchaser of mortgages, and sets guidelines. Loans that meet their standards are called conforming loansGinnie MaeGovernment National Mortgage Association Government corporation that was formed to assist with low income, moderate income and high risk mortages. Guaranteed by the governmentFreddie MacFederal Home Loan Mortgage Corporation warehouses packages of mortgagesjumbo loannon conforming loan - larger than Fannie Mae guidelinesportfolio loanlending institution is planning on keeping it's mortgages rather than selling to the secondary marketregulation ZTruth in lending act requires that the borrower be fully informed of all finance charges, as well as the annual interest rate, before a transaction is consummated.triggering termsif any of them are used in mortgage advertising, three further items of information must be included