NC Real Estate Exam

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General Lien
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Synthetic Stuccoexterior finish product also known as exterior insulating and finishing system water is not absorbed or released becomes trapped in the walls must disclose, even if removedLead-Based Paint DisclosureFor homes built prior to 1978 must be provide a copy of "protect your family from lead in your home" Buyer has to evaluate during due diligence at the buyer's expenseMaterial factmust be disclosed immediately to all parties have a duty to perform visual inspection looking for defects and request property disclosurePatentplainly visibleLatenthiddenAccountingmust maintain accurate records about transactions must account for all funds handled by broker which the principal has an interest retain records for at least 3 yearsLiving AreaHeated, Finished, Directly AccessibleCommission Composition9 members 7 appointed by the governor, 1 by Speaker of the House, 1 Senate Pro-Tem at least 3 must be brokers at least 2 cannot be involved directly or indirectly in real estateLicense RenewalAll licenses expire on June 30th following the data of issuance may renew up to 45 days prior to expiration renewal fee is $45 payment must be received by June 30th must renew onlineEscheatwhen a person dies intestate (without a will) and leaves no heirs, the title passes to the stateSpecific Performanceenforces buyer's right to acquire the property as agreed in the contractThree Major Types of Foundationcrawl space basement concrete slabComponents of a Foundationfootings foundation walls piersFootingbase of the foundation poured BELOW the frost line under the surface of the ground and used to distribute the weight evenlyFoundationmasonry wall that rests on top of the footing. Used to support the main structure of the houseSilllowest wooden, horizontal, framing member of the house. Usually a 2x4 or 2x6 turned on its side. can also be described as the base of a window "window sill"Girderheavy wooden or steel beam supporting the center to keep from saggingPierfoundation column that supports the floor framing over an open span between the foundation wallsJoistshorizontal framing members of the house can be floor or ceiling joistStudvertical framing members of a house typically 2x4 that are 16'' apart on centerHeadersupport beam located above openingsTrussespre-manufactured roof rafters that allow a house to be built free of load-bearing wallsRidge Boardboard that runs along the roof line at its highest pointGableroof with two slopes that form a triangle at each endEavethe overhang of the roof over the wall studFasciawhere the gutter is attached to on the outside of an eaveSoffitflat board attached to the eaveMullionwooden strips that separate the window panes of a windowCertificate of Occupancyconstruction has been completed in a safe, satisfactory mannerEquitydifference between market value and the amount owedDiscount Pointsfor every point (1% of the loan), buyer receives a discount of 1/8% of the interest rate can be charged on conventional, FHA, or VA loansConventional LoanPMI can be removed when loan reaches 80% LTV automatically removed when LTV reaches 78% Income qualification typically 28% housing/36% debtConstruction Loanvery risky for the lender builder draws funds as milestones are reached - rather than amount spentBlanket MortgageFinancing multiple houses Typical in new construction/subdivision development Builder can sell a lot, pay the bank a negotiated amount to release the lien for that lotOpen Ended Mortgagemortgage that allows additional advances of funds up to a maximum amountFHA loanInsured - gov't backs the mortgage Buyer pays annual MIP prorated monthly Borrower has to only make a small down payment, typically 3.5% (which can go towards the closing costs) Rates set by the bank no prepayment penalty assumable - no due-on-sale clauseLending QualifyingPre-approval - based on income/expenses and credit score Lender determines the max. amount that can be borrowed - based on housing debt and total debtTitle TheoryThird party holds title until debt is satisfiedDue-on-sale/Alienation ClauseLender can demand payment in full upon sale or transfer of the property to another want paid off at closingAcceleration ClauseUpon default the lender can declare the entire debt due Want money paid immediatelyPrepayment PenaltyRight of lender to charge a fee for making payment ahead of scheduleRequirements for collecting commissionlicensed at the time of the transaction to have a written compensation agreement (typically the listing agreement) to be the procuring cause of the saleIndemnity Clausewhere the insurance will reimburse the owner against a loss based upon a title defect identified after closingAppurtenant Easementbenefits a parcel of real estate involves two tracts of land owned by two different peopleEasement in grossA personal interest or right to use the land of another Benefits a person or an entity, not a parcel of property Ex: railroad has in its right-of-way, billboard easement, hunting land, running utility linesCloud on Titleany claim that creates a defect of title or casts doubt on the title's validity incorrect information on the deed, mortgage, etc. becomes the new owner's responsibility claims of ownership Invalid transfer of the deedMarketable Title ActAims to extinguish old defects in the title Titles without conflict for 30 years, then the claims are extinguishedItems of personal property (chattels)tangibles such as furniture, clothing, money, bonds, and bank accounts movabilityNonconforming Useuse of property in a zoned area that is different from the zoning ordinanceHistorical DevelopmentIn 1948 US Supreme Court recognized and enforced restrictive covenants for first time In 1926 the court upheld validity of zoning ordinances + public use controls for the 1st timePowers of Government"PETE Police Power Escheat Taxation Eminent DomainLand Use Controlsgov't regulation of land use through zoning, building codes, subdivision ordinances and environmental regulationsVariancepermitted deviation from specific requirements of the existing zoning ordinance granted to prevent economic hardship Not granted based upon maximizing profitSpot zoningNot favored Typically for the benefit of one owner or more restrictive treatment than is usual under the area zoning ordinanceUrban and Regional Use PlanningEx: power plant, airport, landfill development of water resources and placement of major utilitiesSubdivisiondivision of land into two or more lots, building sites, or other division for the purpose of sale or building developmentProtective covenantsEnforced by HOA or by owners in the neighborhood seeks injunction through the courtsCovenants"run with the land" meaning that they remain when transferred to a new owner Homeowner can take court action Do not have to prove direct harmCERCLA/Superfund Siteestablishes financial liability for cleaning up contaminated siteLead Based Paint - 1978 under 1992 LB Reduction ActSeller is not required to perform a lead inspection, pay for the inspection, or remediation or encapsulationContingencies - Nationalwhere a buyer is allowed to terminate and earnest money is returned can be for financing, appraisal, sale of another home, short sale seller is not obligated to extend the contingency dateFinancing ContingencyBuyer may terminate if not able to obtain financing Denial must be in writing Seller not obligated to extend the contingency dateThe NC Condominium Act of 1986specifies that a condo is created/established when the developer of the property executes and records a declaration of its creation in the county where the property is locatedTime-Shareany right to occupy a unit of real property during five or more separated time periods over a period of at least five yearsPlanned Unit Developmentmethod of real estate development, not ownership flexible zoning buildings may be clustered togetherManufactured HomesBuilt according to HUD and registered with the DMV - Personal PropertyModular HomesTypically delivered in sections and assembled on site Built according to NC General Statutes based on state building codesFructus NaturalesThings that grow naturally Planted trees, flowers, etc. Remains with the propertyFructus IndustrialesThings that are cultivated Annual Crops - corn, wheat, tobacco Previous tenant may re-enter and harvest after property sells unless provided otherwiseFixtureAn item of personal property that is attached to the land or a permanent improvement to the landPersonal PropertyEverything that is NOT land or not permanently attached - can become real property - must be included in the contract in order to convey - often conveyed by a Bill of SaleTotal Circumstance Test"IRMA" INTENTION of the owner RELATION of the attacher (owner vs. renter) METHOD of attachment (will it cause damage to remove) ADAPTATION - custom blinds for non-standard windowsFixtures - National Exam"MARIA" Method Adaptation Relationship Intention AgreementTrade Fixturesused in a trade or business Tenant may remove prior to lease terminationAgricultural FixturesFixtures that REMAIN with property if soldUniform Commercial Codelender retains a security interest in chattel (personal property) until paid in full lender can remove if not paidEstatethe degree, quantity, nature, and extent of a person's interest in land or other property rights to a property which are possessory now or may become possessory in the futureMortgagewritten agreement that pledges real estate as security as for the payment of a debtConstructive Evictionwhen the landlord breaches the lease and the tenant must leave the premises because they have become inhabitableActual Evictionlandlord files a suit for possession because the tenant has breached the leaseAppurtenanceright or privilege that goes with the ownership of land include subsurface rights (mineral, air, water)Covenant of Seisingrantor owns the property and has right to conveyCovenant of Quiet Enjoyment(No cloud on title - someone claiming ownership) The grantor guarantees that the grantor's title will be good against third parties who might bring court actions to establish superior title to the propertyGeneral Warranty Deedstrongest guarantee does not warrant that a title is free and clear of all encumbrances does not guarantee or prove ownershipCovenant against encumbrancesgrantor warrants that the property is free from any liens or encumbrances except those of recordEminent Domain(condemnation) right to take private land for public use Owner is compensated for Fair Market Value of the property lost Owner cannot prevent condemnationAdverse Possession"OCEAN" Open Continuous Exclusive Adverse Notorious with color of title: 7 years without color: 20 yearsCorrection of Deedto correct an error, in a previous deed in the description, names or datesLien Foreclosureconducted without consent of property owner through the courts or under the power of sale clause in deed of trustDelivery and AcceptanceDeed must pass or be offered to the grantee by the grantor while the grantor is aliveEssential Elements of a DeedIn writing Grantor must be competent Property Description Words of Conveyance Execution Delivery and AcceptanceLienlegal right to have the property sold to recover all or some of the money loanedSales Comparison Approachadjustments are made for time, location, physical characteristics property you are valuing is the SUBJECT 3-4 comparables use MLS weight the propertiesSubsurface rightsrights to use space below ground level to extract the natural resources lying below the earth's surfaceRiparian Rightsgranted to owners of land along the course of a river, stream, or lake owner has the unrestricted right to use the water, as long as owners upstream or downstream are not harmed by altering the flow or by contaminating itLittoral Rightsowners whose land borders oceans and large navigable lakes that have a tide own the land adjacent to the water only up to the mean high-water markForeshorestrip of land between high and low tide lines, belongs to the state of NCAcretiona gradual INCREASE in land resulting from the deposit of soil by the waterRelictionif water recedes or disappears permanently, new land is acquiredHomesteadlegal life estate occupied as the family house protected from most creditors during the occupant's lifetimeAbsorption Rateestimate of how quickly homes have sold in the past yearEasement by necessityarises because all owners must have rights of ingress to and egress from their land - CAN NOT BE LANDLOCKEDCession Deeduse to give property to gov't (land for a park)NC Conner Act1. Real Estate documents are NOT valid against third parties until recorded 2. Purchase + option contracts, deeds, mortgage, instruments, leases of more than 3 years, easements + restrictive covenantsFiduciaryrelationship between a principal/client and an agent or trust agent will work in the client's best interestPrincipal/Clientperson(s) you have an agency agreement withThe Agent's Fiduciary RoleAct under the legal direction and control of the principal Act in the principal's behalf Act in the principal's best interestSpecial Agencylisting, buyers agency, and tenant representation agreements limited to one defined task can NOT make decisions about offersImplied Agency By ActionActions of the principal and agent indicate that they have an agency agreementConsumer Employs Broker Sole Practitioner Exclusive/Single AgencyLittle opportunity for confusion cannot represent both a buyer and seller in the same transaction - unless dual agency is authorizedDual Agency DesignatedBoth buyer and seller represented Both must consent Can do as long as firm practices, clients agreeEssential Elements of a ContractOffer and Acceptance Mutual assent - voluntarily consent - agree to terms Consideration - something of value, not necessarily money Capacity of Parties - legally competent Lawful Objective - legal purposeBilateralmutual exchange of promises or acts between the parties (ex: sales contract)Functional Obsolescencecurable Ex: outmoded features, such as plumbingIncome Capitalization ApproachGross Income - Vacancy - Expenses Net Operating IncomeComparative Market Analysisboth comparable - the one with the fewest adjustments recently sold - typically no more than 12 months agoConstructive Noticeoccurs when documents are recorded (mortgage, deeds, long term leases)Gross rent multipliersSales prices/rental incomeUnit-in-place methodreplacement cost of a structure is estimated based on the construction cost per unit of measure of individual building components, including material, labor, overhead, and builder's profitSquare foot methodcost per square foot of a recently built comparable multiplied by the # of square feetTitleright to ownership or the ownership of land - the bundle of rightsDeedtransfers title of a property from a grantor to a grantee NC not required to recordTenancy In Commona parcel of real estate may be owned by two or more people/entities upon death, deceased share goes to theirsFee Simple Conditionalgrantor has restricted the future use of the property and if the condition occurs, ownership does NOT automatically terminate Heirs must re-enter or go to court to obtain possession "On the condition that..."Valid contractcontract is binding and enforceableVoidablefailure to meet some legal requirement one party can terminate, the other is bound to the contract ex: an adult cannot hold a minor to a contract, but a minor can hold an adult to a contractAn easement may be terminatedIF - purpose of easement no longer exists - easement holder becomes owner of the land - by release of the right of easement to the owner of the servient tenement - abandonment of the easement - non-use of a prescriptive easementEasement Appurtenantruns with the land when title is transferred two adjacent tracts of land must be owned by different partiesFee Simple Determinable(defeasible fee or qualified fee) title AUTOMATICALLY terminates if condition occursJoint Tenancyownership shares are usually required to be equal Unity of possession Unity of interest Unity of time Unity of titleEasement by Necessitycreated when a buyer purchases a property that has been landlocked by the sellerEasement by Prescriptioncreated when a claimant uses a property for a statutory period of time use must be open, notorious, continuous, exclusive, and without the owner's approvalFee Simple Absolutehighest form of ownership that the law recognizes ownership is for an indefinite duration ownership is freely transferrable inheritable estateFee Simple Determinableautomatic ownership reversion if specified action stopsTenancy by the entiretyrecognized by North Carolina only available to husband and wife title conveyed only by deed signed by both; and carries right of survivorship, survivor becomes owner in severaltyOwnership in severaltytitle held by one individual/entity - sole rights to ownership - sole discretion to transfer part or all ownership rights to another person - may be a single individual or an artificial person, such as a corporationPur autre vie estatebased on the lifetime of another personSpecific Liensecured by a particular parcel of property and affects only that particular property ex: mortgage or deed of trust liens, real property taxes or special assessments liens, and mechanics' liensMill1/1000 of a dollar or $0.001 Ex: A property tax rate of 0.032 or 3.2% could be expressed as 32 mills Ex: If a property is assessed for tax purposes at $160,000, at a tax rate of 3%, or 30 mills, the tax will be $4,800 ($160,000 x 0.03)NC Taxation TimetableJan 1 Tax lien filed Jan 5 Last year's tax must be paid Jan 31 Taxable property listed July 1 New tax rate set Aug Tax bills mailed Sept 1 Tax due & payableAnnual TaxesTax rate x Assessed ValueAssessed ValueAnnual Taxes/Tax RateTax RateAnnual Taxes/Assessed ValueEasement by prescriptionacquired when a claimant has used another land for 7 to 20 yearsEncroachmentoccurs when all or part of a structure or improvement illegally intrudes on the land of another or beyond legal building linesIllegal nonconforming useviolates the zoning laws at the time it is put into placeTermination of AgencyCompletion or fulfillment Expiration of the terms of agency Mutual agreement to terminate the agency Breach by one of the parties Death of either partyWillful misrepresentationintentionally misinforming any party involved in a transaction about a material factNegligent misrepresentationunintentionally misinforming any party involved in a transaction about a material factWillful omissionintentionally failing to disclose a material fact to any party involved in a transactionNegligent omissionunintentionally failing to disclose a material to any party involved in a transactionWorking with Real Estate Agents brochureReviewed with consumer no later than first substantial contact Does not create agency; only proof of disclosureCommon-law fiduciary dutiesOLD CAR Obedience Loyalty Disclosure Confidentiality Accounting Reasonable skill and carePuffinglegal exaggeration of a property's benefitsLiquidated damagesthe amount of money that will compensate the injured party for beach ex: earnest money deposit, seller is entitled to keep the amount for any injuries caused by the buyer's breach of contractRescind the contractthe contract is declared invalid and both parties return to the position they were in before they entered into the contract ex: may be appropriate when facts were misrepresented or one party entered the contract under duressOpen Listingthe seller retains the right to employ any number of brokers as agents; nonexclusive-type of listingExclusive-agency listingThere is one authorized agent Broker receives a commission if any broker is procuring cause Seller retains the right to sell without obligation to listing brokerExclusive right-to-sell listingThere is one authorized agent Broker receives a commission regardless of who sells the propertyNorth Carolina Oil and Gas Rights Disclosurerequires sellers to disclose the status of oil and gas rights being transferred to buyers mandatory disclosure language verbatim from NC statuteNC Residential Property Disclosure Actmost residential sellers to provide a completed Disclosure Statement to prospective buyers prior to presentation of first offer exempted properties include new construction, bank-owned foreclosures, and lease optionsTermination of offers occursif the offeree rejects the offer or creates a counteroffer if the offer is not accepted by specified time or within reasonable time if the offeror revokes prior to acceptance; or by death of either partyEstate for yearsAutomatic termination after a definite period; no notice to terminate required unless written into the leaseEstate from period to periodIndefinite term; automatically renewsEstate at willIndefinite period; possession with landlord's tenant Terminated by either party at any time with no required noticeEstate at sufferanceLandlord must evict illegal holdover tenantNet leasein addition to the base rent, the tenant pays all or some of the property charges such as maintenance, property taxes, and insurancePercentage lease (Retail lease)provides an rental based on a percentage of the gross or net income received by a tenant doing business on the leased propertyGraduated leaseprovides for increases in rent to occur at set future datesPromissory notethe written promise or agreement to repay a debt in definite installments with interestAcceleration clauseprovides that if a borrower defaults, the lender has the right to accelerate the maturity of the debtCalculating Simple InterestI = P x R x TDeficiency JudgementIf the foreclosure sale of the real estate secured by a mortgage or trust deed does not produce sufficient proceeds to pay the loan balance, the lender may be entitled to a personal judgement against the maker of the noteShort saletransaction where the proceeds from the sale are not sufficient to fully satisfy the outstanding balance on the seller's existing mortgage(s), and the borrow lacks sufficient funds to make up the shortfallDeed in lieu of foreclosureused when a borrower has defaulted on the mortgage loan and wants to avoid a foreclosure actionFully amortized fixed-rate mortgagerequires a constant payment amount that will completely pay off the loan with the last equal paymentDeed of trusttransfers title from the grantor/trustor (property owner) to a trustee, who holds it on behalf of a beneficiary (lender).Percentage lease (Retail lease)