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Terms in this set (510)
Who needs a RE license?
for others &/OR for compensation
Who is exempted for RE license?
2. Cooperation, LCC, Partnership- entity
3. W2 salaried employee
4. Attorney-in fact (POA)
5. Attorney-at-law (JD degree)
6. Trustee, guardian, executor--court order
7. trustee for deed of trust (montage)
Provisional Broker (BP):
-need additional post education
Full Broker (non provisional)
-completed all post education
-3 30 hour courses
-1 course per year (3 years total)
-responsible for a particular office location
-licensee who met the requirements but is no longer serving as the BIC
-licensee who met the requirements but is no longer serving as the BIC
-retention of eligibility to be redesigned
-remains BIC-eligible so long as:
-always timely renews
-completes required CE
Residential Unlicensed Can/ Can Not
Property Management Unlicensed Can/Can Not
NC RE Commission
9 total--serves 3 year term
7- governor appointed
2- legislative appointed
3 have licenses
2 are laypeople
chair is elected by commission
NCREC Disciplinary Role
censure- "warn & claim"
does not fine brokers!!
PB to Post Requirements
-complete 3 30 hour courses
-DEADLINE: anniversary date of license
provisional is then removed
-complete 8 hours of CE
-4 hrs of general & 4 hrs of elective
-begins with 2nd renewal of license
-complete by June 10th
-active, non-provisional status
-2 out of the last 5 years (full time)
-complete 12 hour BIC course
-complete 8 hours of CE by June 10th
-must have a BIC at every location
-1 BIC per location
-Generally can be a BIC for only one firm at a time, unless you are using the same address for all locations
Duties of BIC
-copy of all licensee pocket cads
-display of BIC designation
-notify NCREC of address changes
-all PB activity
-conducting of all advertising
-maintenance of the trust account
-compliance with agency
-proper retention of records
What must your license status be to earn any compensation?
Active & Current
Expired vs Inactive
expired: failed to renew, pay $45 fee, wrote a bad check
inactive: did not affiliate with BIC, failed to complete post licensing by anniversary date, failed to complete CE by June 10th
Earned vs Received
RECEIVE: only after the deed has been recorded & R.E attorney issues the funds to my firm. Broker must b active & current
EARN: when broker procured a ready, willing, able buyer
'Offer to Purchase Contract'
a promise or set of promises which the law will enforce
between buyer and seller
Agency Agreement w/ client & principal
Real Property/ Land / Realty
surface land, above land and below land
-attached, natural or artificial
What does Real Estate include?
PLUS, naturally attached components such as; trees, shrubs, minerals, etc....
AND, artificially attached items such as; buildings, fences, structures aka improvements
fences, pools, curb appeal, etc...
What is needed to have evidence of a deed?
title and conveyance
Personal Property/ Chattel/ Personalty
everything not attached to real property
Who can draft a Bill of Sale?
Who can draft a deed?
examples: pools, fences, shopping area near by
an item once personal property now 'annexed' & part of real property
if it is screwed, nailed, glued, attached..it is real property
the process of changing items from personal to real property
Bill of Sale
document used to transfer personal property
think of it as a receipt
opposite of annexation
the process of changing items from real to personal property
Physical Characteristics of Real Estate
-permanence or indestructibility
Heterogeneity vs Nonhomogeneity
heterogeneity: land is NOT the same
non homogeneity: land IS the same
Economic Characteristics of Real Property
L- LOCATION*** (most important)
What is situs?
societal and economic factors of location
Real Estate is always...
regulated based on state laws where the land is located
Highest & Best Use
max use for the best estimate value
Land Use Controls
-Public: public parks, schools
-Government: military base, private parks
Broker vs REALTOR
must be a Broker to become a REALTOR
do not have to be a REALTOR to be a broker
Broker-automatic after passing PSI
REALTOR-must join to become a member
Residential is considered what?
1-4 single family units
Supply & Demand
-supply increases= prices decrease
-demand increases= prices rise
All properties are subjected too...
the economic value changes from the surrounding properties
Bundle of Rights
D- Disposition: sell, will, transfer, convey
E- Enjoyment: hold free & clear title
E- Exclusion: keep others out
P- Possession: use/occupy (most often given up)
C- Control: right of property & profits
-right to build homes
-right to sell
Leases supersedes all...
What is the right that the landlord gives up to a tenant?
everything in the bundle of rights
runs with the land, stays with the land
right of interest or privilege that goes with the land--(easement)
Tenements vs Hereditaments
tenements: all of the rights and interest that go with the land
hereditaments: land and all of the tenements that can be inherited
example: pond is tenements, fish in the pond is hereditaments
trees, bushes, forrest
What are the only 2 forms used in residential selling that the commission provides?
M.O.G (mineral, oil, gas rights)
RPOADS (residential property owners association disclosure statement)
What is RPOADS?
used for residential use only!
Doctrine of Prior Appropriation vs Doctrine of Riparian Rights
Doctrine of Prior Appropriation: 1st in time, 1st in Right
Doctrine of Riparian Rights: regulated based on type of water (NC uses)
Riparian = River
Littoral= Lake or large body of water (beach: landed owned to the highest water mark--tide)
owned to the center of the river
owned the land, river is owned by the public
Erosion vs Avulsion. (decrease)
Erosion: gradual lost of land
Avulsion: sudden lost of land
Accretion vs Reliction (increase)
Accretion: increase of land (sudden)
Reliction: increase of land around a lake
think of 't' as '+' for increase
Total Circumstances Test
I- intent** (major test)
to determine if an item is an fixture
4 Government Rights
P- police power
E- eminent domain
taking property for the public good
right of government to take property for public use
the process by which they do so is condemnation
excursive of right of eminent domain
-terminates existing lease
-compensation to persons involved
raising of public revenue
property to the government when there are no heirs
right or interest in real property
One to buy...
two to sell
Can the grantor and the grantee be the same person?
What are the 2 major categories of estates?
1. freehold estates (ownership)
2. leasehold estates (less than ownership)
Freehold Estate (ownership)
-fee, fee simple, fee simple absolute: highest form of ownership)
-fee defeasible (condition subsequent)
-life estate (based upon someone's life)
-Estate for Years: beginning & end date but does not automatically renewal
-Estate from Year to Year: "periodic tenancy" automatically renewal
-Estate at Will: mutual agreement (ie Starbucks in Bilo)
-Estate at Sufferance: "squatting"
Conventional Life Estate
ex: dad gives me home, as long as I agreed he can stay in home until he passes
Life Estate with Remainder Interest
3rd party interest in the property
wife's right to a life estate
"right of survivorship" took place of dower
husbands right to life estate
"right of survivorship" took place of curtesy
-death to heirs
Tenancy in Common (TIC)
-most common in NC
-each owns a part of the whole
-can be different %
-death to heirs
i.e. owning a condo with tenants
Suit for Partition
-court action to end co-ownership
-court may order sale and proper division of proceeds
-based on % of ownership
Must have all 4 unities
automatic: rights of survivorship (nationally)
----is not for NC unless clients dictate to the RE authority
Tenancy by the Entireties
-limited to husband & wife
-both must sign convey
-automatic right of survivorship
-agreement by the parties
-fee simple ownership
-shared ownership of common area as TIC
NC Condominium Act
-units are separately taxed & assessed
-7 day right of rescission if disclosure is not given prior to purchase contract
-deposit held in trust account
-no penalty if cancelled during period
stock in company
Bob brought a house in severalty. Bob then married Sally, what type of interest in this?
tenancy in common
if you died without a will, you died in...
right or interest in property by someone other than the owner
attached to property
Voluntary: deeds of trust
Involuntary: real estate taxes(#1), assessments, mechanic liens
because you did not do something
Involuntary: judgements, income taxes
What type of lien is always #1?
real property taxation
What time of lien is always #2?
i.e. paving sidewalks, lights on the street, etc
-must file within 120 days of the last date the mechanics on property
-must file lawsuit within 180 days
-effective back to the first day of project
If real property taxes are unpaid...
debit the seller, credit the buyer the exact same amount
If real property taxes are already paid....
credit the seller, debit the buyer the exact the same amount
If real property taxes are to be "collected and paid"
double debit (different amounts)
the day of settlement
When are court judgement used?
-involuntary general lien
"Meeting of the Minds"
NC Homestead Exemption
protect the primary resident from creditor claim against them
Execution of Judgments & Writs of Attachment
general lien against everything you own + everything in the future
renew every 10 years
Pure Race State is..
1st to record lien gets paid first
covenants, conditions & restrictions
enforced by neighbors
when condition is met, new owner can decide if condition continues or stops
buying property w/ understanding of
right to use the land for another for a particular purpose
-appurtenant (run w/ the land)
-easement in gross
-easement by necessity
PERMANENT & IN WRITING
Easement by Prescription
-usually possessed for 20 years
O- Open---- visible
A- Adverse---without consent
N- Notorious---everyone must see it
Andrea is purchasing land. At settlement she was made aware of in easement in gross from the sewer company. She was not made aware of this easement until settlement. Does this give her permission to cancel her contract?
No, this would cause a breach in the contact
Dominant- benefits, who is being served
Servient: who is serving
Easement in Gross
benefits a 3rd party
-permission terminates at death
(ex: giving permission to hunt on my land)
5 ways to create an Easement
1. express grant- "permission"
2. express reservation
4. prescription- usually possession of 20+yrs.
5. condemnation- eminent domain process
Quiet Title Action
"quiet" the dispute between 2 people over title or easement arguments
someone 'encroach' on your property
GET A SURVEY!
NC Machinery Act
-state law sets forth the process
-counties carry out details
remember: police power
-Appraised: every 8 yrs (octennial)
-rates can change EVERY year
What law allows NC to charge annually property taxes?
NC Machinery Act
assessed value = market value
also known as ad valorem
Real Property Taxes
-rates & appraisal change every yr.
-lien on advance on Jan 1 of the current year
-due Sept 1, late the following Jan 5
ALWAYS #1 lien
What is the #1 lien?
Real property taxes
#2= special assessments
Unpaid real property taxes....
Paid real property taxes...
Metes & Bounds
-most common in NC
-metes = distance
-bounds = directions
-MUST have point of beginning & closure
U.S. Government Rectangular Survery
used in the rest of the country
township= 36 sections
each section is 640 acres
How many acres are in a section?
How many feet are in an acre?
How many feet are in a mile?
What is alienation?
transfer/convey your ownership to someone else
voluntary vs involuntary
What is first needed to transfer property of a deceased person's estate?
new listing agreement
Listing agreements ends upon...
death of the client
died with a will
-pass to heirs
-(not for tenancy by the entireties)
died without a will
-pass to heirs
-NC Intestate Succession Act
gift of personal property with a will
gift of cash with a will
gift of real property with a will
gift of real property without a will
heir of the will
transfer of conveyance document
Does the deed need to be recorded?
but to be enforceable in court, yes.
is a material fact
(easement prescription)-20 yrs "squatters rights"
transfer of property when someone dies without heirs
Requirements for Valid Conveyance/Transfer
-legal capacity (the one who owns it)
-identification of parties
-words of conveyance ("FEE")
-property description (lot&block, metes&bounds)
-signed by the grantors
-delivery & acceptance
A deed does not have to be...
What does a deed need to be enforceable?
notarization and recordation
4 types of Deeds
1. General Warranty Deed
-most promises, highest type, most
2. Special Warranty Deed
-limited promises & terms
3. Bargain & Sale Deed
-not used in NC
- only contains covenant of seizen
4. Quit-Claim Deed
-"IF" I have any rights...
owning more $ than the property is worth
Who can draft a deed?
NC real estate attorney
Who gives closing/settlement advice?
-tax seller pays for selling property
-$1 per $500 (round UP to nearest $500)
Chain of title
stack of recorded documents about a particular property
summary of the documents
Who prepares an opinion of title?
seller delivers Marketable Title
marketable title- reasonably free from unknown claims, liens and defects
-when ownership has existed for 30+ years
Title insurance is the best...
Lender Policy protects
Seller Policy protects
notice of a fact on the public record
NC Connor Act
-requires DREAMOILS documents to be recorded to be enforceable
creates race recordation-first to the race wins
What is DREAMOILS
R- restrictive convenants
M- portages (deed of trust)
I- installment land contracts (seller financing)
L- leases longer than 3 yrs
S- Sales Contracts (Statue of Fraud)
refers back to the Old Ship Registration System
Municipality Master Plan
-long term building plan
-usually 20+ years
-types of structures
-style & appearance
-from the street
-from property lines
Types of Zoning
-Legal Use: compliance with zoning
-Legal Non-Conforming Use: (grandfathered in) complied with previous zoning
-Illegal Use: Does Not Comply
'zoning' is a material fact
Variances from Zoning
do not resolve CCR's violations or encroachments
Types of Zoning
a division of land or parcels into two or more lots
-counties develop subdivision requirements
Required prior of final plat approval:
-utilities & services
-roads & streets
1. Initial Planning Stage
2. Final Planning Stage
3. Disposition Start Up
4. Final Plat Approval
Prior to Final Plat Approval, you can...
Final Plat must be recorded prior to any sale
Penalties on Unapproved Subdivisions
if final plat differ materially from the approval stage, purchaser can rescind and get full refund
Subdivision Street Disclosure Statement
-broker is required to provide disclosure
must disclosure if public or private roads
if private, lenders require road maintenance agreements
Interstate Land Sales Full Disclosure Act
-ads must be true & accurate
What is the last stage of any building code process?
receiving a C.O.O
Certificate of Occupancy
Who decides where a flood zone lays?
-change all the times
-National Flood Insurance Program (NFIP): required in certain areas
Who can enforce CCR's?
neighbor to neighbor
Lead Based Paint
-causes brain damage
Prior to signing a purchase or lease agreement buyer gets:
-disclosure of knowledge
-copies of all reports
dumping sewer water into a lake/stream
illegal & MATERIAL FACT
LHMP (NC Lead-Based Paint Hazard Management Program)
-to remove lead-based paint, must be trained
-if owners remove themselves, must disclosed you were untrained
-required report prior to remodeling, renovation or demolition
-must disclosure if asbestos is known in home
-AIRBORNE (breathing in fibers)
-to remove must encapsulation home
i.e. think of a condom (lol)
-odorless, colorless, tasteless, radio-active
-causes: lung cancer (#2 leading cause of lung cancer)
-enters in from the subsurface
-max acceptable= 4.0
Leaky Underground Storage Tanks (L.U.S.T)
-check chain of title to identify past owners who may have contaminated soil
the process off closing a landfill topping with 3-4 ft of soil
What is NCDENAR?
NC Department of Environment & Natural Resources
enforce environmental laws
NC Coastal Area Management Act (CAMA)
protects wetlands & marches
compliance a material fact
What is Agency?
acting on behalf of another
3 Classification of Agency Relationships
1. Universal Agent: anything the principal can do
ex: unlimited POA
2. General Agent: perform acts for particular activity
ex: property manager
3. Special Agent: detailed instructions
ex: listing agents & buyer broker
oral or in writing
What must be in writing by the inception?
-dual/designated agency contract
-property management contract
What determines the start of an Agency Relationship?
-negotiate on their behalf
-act on their behalf
-gathering confidential information
-conducting detailed conversations about personal situation
act on client/customer behaviors
rare in NC
What must you have in writing prior to a presentation agreement?
buyer agency agreement
Under the doctrine of specific performance, the party harmed by breach of a real estate contract can ask a judge to force the breaching party to carry out the terms of the contract rather than order the breaching party to pay monetary damages. Which physical characteristic of land is the basis for the doctrine of specific performance?
In determining the value of a property the location is important. Factors in the community which cause businesses to relocate there and the ability to attract new businesses is known as the:
the economic base
In regard to real estate's role in economic cycles, which of the following statements is correct?
Real estate is a lagging indicator and contains periods of expansion, recession, depression and revival.
Highest and best use would best be defined as:
the one use that provides the greatest return and maximizes the value of the real estate
When the supply of a commodity decreases:
prices tend to rise
The fact that real estate licensees must be licensed in the state where the real estate is located and not where the client is located occurs:
because individual state regulatory agencies create rules that govern their licensees
A trade fixture is considered:
defined by the UCC
A seller is under contract to sell a property using the standard offer to purchase and contract. The elegantly decorated master bedroom has vertical window blinds, hand-painted light switches and electrical outlet covers and draperies fashioned from fabric coordinated with the wallpaper. Which of the following items may the seller legally remove before the close of the transaction?
"So long as..."
A deed conveyed ownership to a grantee "so long as the existing building on the property is not destroyed." Following the transfer, the original grantor has what type of interest?
A woman conveys a life estate to her son-in-law and stipulates that upon his death the estate will pass to her grandson. The grandson has an:
estate in remainder
A brother and sister bought a commercial building and took title as joint tenants with right of survivorship. The brother died. The sister now owns the building:
One of two owners holds an undivided 60% interest and the other holds an undivided 40% interest. The two owners probably hold their interest as:
tenants in common
In North Carolina, what is the rescission period for the purchase of a new condominium?
7 calendar days
In North Carolina, what is the rescission period for the purchase of a new timeshare?
5 calendar days
Five days after signing a contract to purchase a new timeshare, the buyer backs out of the deal. How long does the developer have to refund the purchaser's money?
30 days from the date of purchase contract
The owner of two acres of land sold one acre but retained an appurtenant easement over that land for ingress and egress to his retained lot. The retained lot:
serves as the servient tenement
The ad valorem property tax rates may be adjusted every:
Title to real estate passes when a valid deed is
signed, delivered and accepted
When the grantor does NOT wish to convey certain property rights:
exceptions may be noted in the deed of conveyance
The recording of a deed makes the deed..
The recordation of a warranty deed:
protects the interest of the grantee
Don, a real estate broker, has agreed to prepare a deed for the seller in a transaction in which he is the listing agent. If he does not charge the seller a separate fee for this service: .
He may have his license suspended or revoked by the North Carolina Real Estate Commission.
When the seller of the property gives a deed to a buyer "by, through, or during" the current ownership period of time, what type of deed is given?
special warranty deed
what is important to remember about excise tax?
ROUND UP TO THE NEAREST $500
Writing Requirement in NC
seller/listing- agreement just be in writing to start a relationship
buyer/buyer broker- agreement must be in writing BEFORE an offer is presented
people we represent and owed fiduciary duties to
others in the transaction
D- disclosure (material facts & offers)-immediately
A- accounting (keep track of all money)
R- reasonable Skill & Care & delineate
PROTECT & PROMOTE CLIENT'S INTEREST AT ALL TIMES
Material Fact is only about..
the property or the client's ability to perform
Material Fact Includes:
-defects about the property
-fact relating to the property's surrounding area
-anything affecting a party's ability to perform
-facts known to be of particular importance to a party
NOT material facts:
-sex offender in neighborhood
everything you know and everything you should have known
a Banking Day is...
Monday - Saturday
3D's of Agency Disclosure
When do you use the WWREA (working with real estate agent) Brochure?
at first substantial contact
What is First Substantial Contact?
-wants, needs or desires
If first substantial contact has not occurred with the SELLER, when is your last chance?
beginning of the listing presentation
If first substantial contact has not occurred with the BUYER, when is your last chance?
Before you open a door for them
seller/buyer is represented by 1 Broker or 2 Brokers under 1 firm
MUST HAVE: disclosure & consent
can be difficult and limits your advocate for both clients. CAN NOT:
-motivations of parties
seller to firm
buyer to firm
"Prior to presentation of the offer"
will ALWAYS be the right answer. Circle answer and move on
Designated Dual Agency
BIC can designated 1 broker to represent the seller and 1 broker to represent the buyer
BIC & Broker can never be designated agents in the same transaction
Designated Dual Agency Rules
1. the firm must create policies & procedures to protect the:
-motivational information of the clients
2. You cannot be designated if you already possess:
-motivational information regarding g the other party
3. a BIC & a provisional broker can never be designated agents in the same transaction
Can a BIC and a Broker be in a dual agency together?
Can a BIC and a Broker be in a designated dual agency together?
-buyer remains a customer
-MUST work FOR someone (ie client)
-need both consent to act as seller's subagent
Termination of Agency
-expiration of term
-breach (on behave of broker)
-death of party
(T/F) If a broker breach their fiduciary duties, can a client unilateral get out of their contract?
Residential Property & Owners Association Disclosure Statement (RPOADS)
ONLY implies to 1-4 units (single family)
-given to buyer prior to offer
-a SELLER is not obligated to disclosure
-must complete the form BUT, could choose "no misrepresentation"
-failure to provide= 3 day rescission from receipt of form or date of contact (whichever occurs 1st)
RPOADS & MOG Exemption
-transfers by court order
-deed of trust transfers
-transfers between co-owners &/or spouses
MOG Disclosure (Mineral, Oil & Gas)
buyer gets prior to offer
When to disclose if ownership exists?
REALTOR = disclose
Licensee= no disclose
Licensee w/ ownership interest= disclose
below the required standard of care
deliberate false statement concerning a material fact that is not disclose
deliberate failure to inform party of known material fact
misrepresentation of a material fact that the party did not make knowingly but should have avoided by exercising due skill, care & diligence
unintended failure to communicate a known/unknown material fact by a person responsible for disclosing it bc this person did not exercise the due skill, care & diligence that would have revealed the fact
generalized statements about the property
If I am a licensee and I owned property that I am selling, may I represent ANY buyer interested in my home?
As an licensee and I own property that is for sale, what is considered material fact?
If my house is "for sale by owner," do I have to disclose I am a licensee?
can only be paid by:
-referral & transaction fees
If a BIC does not balance the trust account every 30 minutes, is the firm responsible?
NC Listing Agreement Requirements
-signed by all parties
-licensee's license #
-definite start/end date
-no discriminatory provision
-MUST BE IN WRITING!
paid only the broker who brings the buyer
Exclusive Agency Listing
paid if only broker finds the buyer
no $$ if seller sells themselves
Exclusive Right to Sell Listing
paid regardless of who sells the property
**think of the "right" to commission
Limited Service Agreements & Minimum Services
-can limit services
-cannot get out of basic duties
-limitations of services need to. be clear and in writing
Variations on Fees
-fees don't have to be a %
involved in an unbroken chain of events that caused the sale to happen
-MUST BE IN WRITING (state exam question)
The firm may be entitled to commission even if the seller:
-refuses to sign
-cannot clear title
-colludes with the buyer to cancel
-can't deliver possession
All commissions are...
negotiable by the seller & the firm
commissions are paid by your BIC
Out of State Referral Compensation
-each state has different licensing rules
-commission is from firm to firm
Termination of Listings
-complete the agreement
-expiration of term
-destruction of property
-death of principals
-MUST be clear and conspicuous
What has zero liability when terminating a listing?
expiration of term
Do Not Call
-check registry every 31 days
when it's okay to call...
-up to 18 months for a client
-3 months for a customer
-a FSBO when you have a buyer with a bona fide agency agreement
Junk Fax Prevention Act
can Spam Act allows for an "OPT OUT"*** option
Sherman Anti-Trust Act
-BIC or firm approval
-broker or firms name
Licensee A has a listing, that Licensee B is showing. What is the name of the contract?
buyer broker agreement
Essential Elements of a Contract
C- consideration--money or anything of value
L- legal purpose
A- agreement (mutual)
P- parties (competent)
Minors & Children in Contracts
-can owe property at 18 in NC
-person who lacks capacity has ability to make the contract VOIDABLE
-contracts with minors are legal but VOIDABLE by the minor
Who can make the contract voidable?
the incompetent party
lack one of the four essential elements of CLAP
able to be void
money or anything of value
ex: purchase price
ex: could be services, time, energy or effort
both parties are bound to do something
only one promise by one bound party
all tasks performed
tasks remaining to be done
a residential purchase contract is...
Executory before closing.
Executed after closing.
Offer & Acceptance
-NO money is accepted until contract is made
-an offer can be withdrawn anytime prior to acceptance
-once counteroffer, original offer is died
Statue of Fraud
requires all real estate documents to be in writing
if in writing, it is enforceable
aka: performance agreement
in writing to. be enforceable
Parol Evidence Rule
written takes priority over verbal
Time is of the Essence
time is strictly enforced
substitution of a new contract
transfer all legal rights & duties to another party
Assignor vs Assignee
Assignor- person assigning the obligation
Assignee- receives the obligation
assignee becomes primarily liable
court order to force a party to perform the terms of the contract
do what you promised to do
Licensee Pocket Card
MUST CARRY ON YOU AT ALL TIMES
--> same requirements as regular license
Mandatory NCREC Reporting
10 days to report for name/address change
60 days to report:
-discipline of another occupational license
-restriction, suspension or revocation of a notarial commission
Can a non-provisional broker affiliate with more than 1 BIC?
yes, but all BIC's must approve
Can a non-provisional broke operate without a BIC?
yes, they are considered a sole-proprietor
BUT, if they:
-deposit and maintain tryst monies of another
-engage in advertising and promotion
-hire other licensees
THEN, they MUST become a BIC
How long must brokers maintain all records?
3 years after receiving funds
-just the broker
-no liability or protection
-tax as regular income
Does an entity need a license?
What is an entity?
corporation, LLC, Partnership
every entity must have a licensee (not sole)
Limited Liability Company (LLC)
-simple business entity
-each owner is the manager
general partner: full liability
limited partner: liability to extent of investment
In an partnerships, which has the least protection?
When does every licenses expire?
Qualifying Broker Duties (entity)
-appoint a BIC in each location
-maintain & renew entity license
-retain firm's pocket card
-notify NCREC of any changes within 10 days
Limited Commercial Brokers License
limited license for those outside of NC
-for out-of-state resident
-must be licensed in another state
-wanting to do limited commercial in NC
What are the two employment agreements?
Buyer Agency Agreements and Exclusive Right To Sell
Who is the Purchase Agreement between?
the buyer and the seller
Options to Purchase
-MUST be writing
-Connor Act = requires to be recorded
-"I will sell IF you decide to buy"
-deliver in 3 calendar days (new to retakes**)
-all options are unilateral
Delivery of Instruments Rule
deliver all documents immediately, no later than 3 days (this changed for retakes!!!)
for leases/rental agreements: 45 days of lease execution
Termination of Offers
-by rejection or counteroffer
-within a prescribed time
-by renovAtion prior to acceptance
WHEN WITHDRAWN THERE IS NO PENALTY TO THE BUYER AND ALL MONIES ARE RETURNED
-by death prior to acceptance
Is a street address needed in a purchase contract?
When is a contract binding?
communication of the acceptance
recording of the deed
recording of the deed starts the necessary 3 years of maintaining records
the process of signing all documents and gathering funds
different than the closing date
Risk of Lost
buyer makes the decision if they decide to move forward with contact after natural disaster damages
a condition upon which the contact is based
ex: "you must sell my house before I buy a house"
unmet contingency relieves the parties from liability
Due Diligence Fee
how much $$ the buyer is paying the SELLER to take their home off the market
BUYER has the right to cancel within period
-on effective date
-buyer controls until delivers* (test question)
-to a trust account or escrow within 5 days
-PB delivers to the BIC immediately
-return to buyer IF offer is cancelled or withdrawn PRIOR to acceptance
-transfer to closing attorney no more than 10 days prior to settlement for buyer credit
5:00 PM Importance
BEFORE 5:00 PM:
-SELLER keeps due diligence fee
-BUYER gets earnest money deposit back
AFTER 5:00 PM
-SELLER keeps due diligence fee & earnest money
Are firms required to have a trust account?
no, their attorney could hold money in an escrow account
Handling of Trust Money
firms only need trust accounts if they hold money belonging to other
Earnest money always goes to a trust account
-escrow agent (attorney)
When to deposit cash? check?
check: 3 days from acceptance of contract
What are the only two seller remedies?
Forfeiture of Due Diligence Fee & Earnest Money Deposit
Can you have a delay in settlement up to 14 days without causing a breach?
Additional Provisions Addendum
expiration of offer
Back-Up Contract Addendum
if one party can not perform, another party is waiting
i.e. multiple offers
Present offers at the same time
When can you disclose multiple offer terms?
ONLY with the buyer's consent
What MUST you have to make a offer become a contract?
The primary intent of a zoning ordinance is to:
ensure the health, safety & welfare of the community
When does a contract become binding in NC?
when the acceptance of the offer is COMMUNICATED
Julie and Janelle Enterprises just purchased a vacant lot next to their dress shop. The new owners want to expand their business and hired an architect to draw up plans for the expansion. The plans extend the addition two feet beyond the setback requirements for that location. To construct the building legally, the owners must obtain a:
Communication & Delivery of everything must happen when
immediately but NEVER later than 3 days
usually issued by a Board of Adjustment provides a property owner relief from government restrictions such as zoning which can include setback requirements.
Aesthetic zoning would be an example of:
-communication is measure from when it is SENT, not received
applies to emails, texts & voicemails
Who enforces the zoning requirements
local municipalities through the Enabling Act
a loan where a portion of payment goes towards principal and interest
-paying interest first, principal last
principal is paid all at once before the end of amortization
charging more than the lawful rate of interest
administrative charges for loan (1%)
usually the buyer pays
buyer can buy "DT points" to lower interest over the life of the loan
1 point = 1/8 = 0.125
the bank's profit from the loan
Loan to Value (LTV)
% of loan to home's appraised vale or sales price, whichever is less
the amount of money that is brining into the home
3 C's of Credit
less than 28% (MGI x 28%= ?)
Housing Expenses + Reoccurring Obligations
less than 36% (MGI x 36%= ?)
act of pledging real property as security for payment of a loan without giving up possession or title
In a non judicial state, what kind of deed is delivered?
sheriff's deed (national test)
promise to pay back the money
ONLY the borrower MUST sign the note
bring ALL of your money now
(in the event of default/lost payment)
bring ALL of your money now- sale or transfer of property
(at the time of sale or transfer of property)
one lender voluntarily surrendering their position of priority to a subordinate lien holder
Contents of the Mortgage/Deed of Trust
-signature of property owners
-description of the property
-obligations of borrower
-obligations of the lender
Lien Priorities Reminder
#2- special assessment
#3- mechanic's lien
#4- deed of trust/mortgage
lender releases lien when note is repaid, "defeated"
NC is a Title States
-Promissory Note= IOU
-promise to pay back $
-lien against the property
transfer conveyance document of ownership
GrantOR promising to transfer
Trust Deed/ Deed of Trust
security document creating a lien
Offer to Purchase Contract
seller & buyer promising to contract
Equity Redemption Period
the gap between the Noice of Default & Public Sale
owning more than what the house is worth
Types of Mortgage Loans
-Rural Farm Loan
-LTV is 80%
-28%-36% debt ratios
sold from primary to secondary market
Private Mortgage Insurance (PMI)
required on conventional loans over 80% LTV
-default protection for lender
-charged: upfront premium, monthly amount
FHA Insured Loans
originated by local banks & lenders in the primary market
ANYONE can get FHA loan
HUD/FHA does NOT loan the money
loans limits set by county
most popular loan: 203b
FHA & VA Amendatory Clause
if the property does not appraise for at least the purchase price: buyer can get earnest money back
VA Guaranteed Loans
given by the bank/lender
-any qualified veteran and widows
-14 resident units
-uses DD-214 discharge certificate
-obtains certificate of eligibility
Certificate of Reasonable Value (CRV)
VA verification of property value (appraisal)
maximum amount VA will loan
CRV stays on property for 6months
low to limited income programs
Fixed Rate Level
-rate & payment constant
usually 15 or 30 years
rate may fluctuate
usually tied to an index
most common index used is the T-Bill (treasury bill)
feds set the rate
-lower payments to start
-used by developers
-first time buyers
Straight Term (Term Loan)
only paying interest
balloon payment at the end
Purchase Money Loans
only on down payments
-loan used to acquire a property
-no deficiency judgement in NC for seller financing
H.E.'S A H.E.R.O
How do you lower your annual interest rate?
with discount points
usually a straight or term loan (interest only)
-paid out installments or draws
-most risky for lenders
-takeout permanent loan at end of construction
-FINAL = take out loan
Open End Mortgages
lines of credit or equity lines
includes both personal & real property
common in commercial transactions
What type of loan includes both real property and personal property?
Reverse Annuity Mortgage (RAMs)
cashing in on the equity of the property
Consumer Financial Protection Bureau
-enforce consumer protection statutes
-eliminated previous duplication and confusion
-prohibit kickbacks & illegal referral fees** (test ?)
Truth in Lending Act-- 'TILA'
-regulates true cost of credit
-enforced by CFPB
-TILA= 3 day loan estimate to borrower
What act says the Buyer Closing Disclosure must be given 3 days before settlement?
truth in advertising
Who regulates who?
CFPB --(in forces)--> RESPA
RESPA --(in forces)--> TILA
TILA --(in forces)--> REG. Z
"Your Home Loan Toolkit"
booklet that comes with a loan estimate
the ONLY charge a lender make prior to the loan estimate is the actual cost of the borrower's credit report
ECOA (equal credit opportunity act)
lenders cannot discriminate in line of credit
-race, color, religion, national origin & sex, age, martial status, public assistance income
ONLY implies to lender
NC Residential Mortgage Fraud Act
-makes a misrepresentation or omission to lender
-facilitates the use of such misinformation to a lender
-files or records a false public record
Does title insurance has anything to do with equity?
Lender's insurance protects
Buyer's insurance protects
Conducting the Closing
-review the documents
-sign the documents
-record the transaction
-fund the transaction
-report distributions to IRS
Good Fund Settlement Act
if & when, attorney records the deed, only then can funds be distributed
not the same as closing or settlement
Delay of Settlement
NOT "time of the essence"
14 day delay WITHOUT PENALTY & contract is still enforceable
How many days must the borrower receive the closing disclosure?
3 business days prior to settlement
business day= M-Sat
delivered in person
if mailed or electronically- must be 3 business days after delivery
If the closing disclosure is received by the borrower on Monday, what is the first day on which they can close?
if money is involve it is...
a business/banking day
if no money is involve it is...
a calendar day
Two separate closing disclosure
-buyer's closing disclosure-subject to 3 day delivery
-seller's closing disclosure
to protect both parties & keep confidentiality
ALLLLLL money must be on the closing disclosure
must be above the table
Basic Loan product changes
3 day review of CD
C- courier fee (delivery fee) $85
D- deed prep.
E- excise tax (round up to $500-$1 per $500)
M- mortgage/deed of trust payoff
I- interim interest
Principal of Substitution
when items are similar, usually the one with the lower price is brought first
the presence of greater valued properties will increase the price of lesser valued ones
the presence of lesser valued properties will decrease the price of greater valued ones
the value of component parts add/subtract to value
if the comp is SUPERIOR, then
if the comp is INFERIOR, then
purposes: disclosure, eliminate kickbacks
only applies to residential 1-4
anything of value to settlement service providers
opinion of value by a licensed appraiser on a specific date
BPO can be performed by a PB for free...
but a broker can charge a fee
In an appraisal BPO...
provisional broker may perform but NOT for a fee
BPO is done for a third party
CMA- done for a client
Elements of Value
Prior to Closing
-all due diligence inspections performed
-loan in place & secured
A property owner lists a property for sale with a broker. The owner told the broker during the listing negotiations that he wanted $138,000 for the property, and anything above that amount the broker could keep as commission. The listing with this type of provision is known as:
Net Pricing (profit & loss)
100% + ____% = ??
price x ?? = answer
100% - % = ??
price / ?? = answer
deals with $$$
always banking/business days
What is a bedroom?
-the number of permitted on the waste disposal permit
-licensees must verify the permits prior to advertising # of bedrooms
-liability for over-representing the number of the permits
If a seller and a listing firm have a commission dispute prior to the closing, the listing firm:
must allow transaction to close
Capitalization Formula Requirements
Intro to Cash Flow Analysis
P- poor (potential gross income)
V- violet (vacancy/collection lost)
E- eats (effective gross income)
O- oreos (operating expenses)
N- not (net operating income)
D- dog (debt service)
B- biscuits (before cash flow)
Principal of Assemblage
-an increase in the value of land caused by bringing multiple parcels together or merging them into one larger parcel
Principal of Plottage
-an increase in the value of land caused by dividing larger parcels into multiple smaller ones
3 Approaches to Value
1. comparable sales
is an operating expense, the electricity bill? food for event?
"what would the IRS considering an office/operating expense"
process of bringing together different approaches to arrive at ONE final opinion of value
Cost Approach always...
brings the highest value to the appraiser
A lease always
superseed a contract
lease on a property
Privity of estate
serves the landlord for giving tenant privilege to the estate
Residential Rental Agreements Act
not land, not commercial, not business
Landlord "Fit & Habitable" Obligation
-comply w/ building codes
-keep common areas safe
-maintain appliances (HVAC, plumbing, etc)
Landlord MUST provide smoke & carbon monoxide detectors
tenants MUST replace batteries
What would a landlord need to fix imminently for dangerous conditions?
broken windows or locks
Does a tenant have to let the landlord into the home?
yes w/ reasonable notice
What is a tenant's obligation?
keep plumbing fixtures clean
changing batteries in smoke alarm and carbon monoxide
Two Categories of Evictions
1) Constructive Eviction
-failure to maintain health & safety
-tenant can stop paying & move out!!
2) Actual Eviction
-breach of lease (usually failed to pay rent)
landlord can not retaliate after civil court & evicted tenant
Who pays for the attorney fees & court cost in an eviction?
whoever lost the case
Tenant Security Deposit Act
holding tenant's money in a trust account
-must notified tenant within 30 days on where the $ is held
can a landlord and a tenant agree to a bond?
yes, if it is with a private owner (not a property manager)
Max Deposit Amount
-weekly = 2 weeks
-monthly= 1.5 months
-longer= 2 months
What canNOT be deducted from security deposit?
-normal wear & tear
-small nail holes & other non-intentional damage
Security Deposit - Accounting
-deposit within 3 banking days
-return within 30 days after lease ends
-Final Account Statement= 60 days
-if address/location unknown= hold for 6 months then escheats to state
When a property transfers to the new owner, is the new owner obligated to continue the previous leases?
If the landlord wrongfully withheld the security deposit amount, what could be the consequence?
landlord must pay tenant 3 times the amount
NC Vacation Rental Act
the ONLY time a non-licensee can receive a referral fee is to a travel agent for vacation rental referrals
Vacation Rental Property is defined by how many days?
90 days or less
Leases longer than 3 years should be...
in writing AND recorded
When can a landlord obtain a bond?
NOT Vacation Rental
How many days does the deposit must be returned in an Vacation Rental?
How many days does the new owner have to provide the buyer of the lease agreement within a vacation rental?
Estate for Years
-end date is certain
-no notice needed
Estate from Period to Period
-specific time period
-no notice needed
Which non-freehold estates has an automatic renewal?
estate from period to period
Tenancy at Will
-guests on property
-terminate without notice
Estate at Sufferance
-holding over against wishes of landlord
before problem occurs
after problem occurs
always a problem
In the event of dispute over trust account money, what should happen to the money?
MUST hold money until written consent between parties & deposit with clear of courts
Is a firm/broker required to have a trust account?
is a property manager required to have a trust account?
must have a separate account for each HOA
Real Estate transactions files must be maintained and held for 3 years after...
dispersement of funds
Fair Housing Violations
the most restrictive law applies!!
Civil & Criminal violation
also disciplinary action by NCREC
1866 Civil Rights Act
illegal to discriminate on the basis of race or color
1968 Fair Housing Act
-race, color, religion, national origin
-sex/gender (added 1974)
-handicapped, familial status (added 1988)
protected by HUD**
F- familial status (if children are present)
N- national origin
directing people to move out of a neighborhood due to protected class demographics
ex: did you hear who is moving into the neighborhood?
directing people to or away from certain neighborhoods based on ethnic or racial makeup
ex: this is not a good neighborhood for you
changing loan terms and conditions based on ethnic or racial makeup---only for lenders
If someone is a FSBO, own no more than three residential, with no broker services involved, can they discriminate?
Yes, but not in NC
HOPA (Housing for Older Persons Act)
-must advertise as senior living area
ex: Sun City
Equal Credit Opportunity Act (ECOA)
-applies to lenders
adds: martial status, age, receipt of public assistance
ADA - Americans w/ Disabilites Act
applies ONLY to commercial buildings
ex: parking spaces, handicapped restrooms, etc..
Tax Deductible Expenses
deduct interest & real estate taxes
deduct loan discount points & some origination & lender fees from closing
do NOT deduct: insurance, Maintenance, improvements
IRS taxes gains
1031 Tax Deferred Exchanges
investors may exchange properties of equal value or higher
2. cash flow
3. tax benefits
What is the most expensive type of home to build?
What is the lowest part of a home?
What is the first piece of wood that comes in contact with the foundation?
What is the highest point of a home?
What is the last step to NC Uniform Building Code?
obtaining a Certificate of Occupancy upon completion
A man has posted a $100 reward for anyone who returns his missing dog. This is an example of:
a unilateral contract
The highest part of a home's construction components is the:
a ridge board
Charges levied on a property owner and limited to those living in a particular neighborhood to pay for the installation of sewer and water lines are..?
The ad valorem property tax rates may be adjusted every_____?
THIS SET IS OFTEN IN FOLDERS WITH...
Real Estate Principles & Practices
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