How can we help?

You can also find more resources in our Help Center.

447 terms

Crash Course

STUDY
PLAY
Appraisal
An estimate or opinion of value based on supportable evidence
Land
Earth surface extending downward to center of earth & upward into space including permanent natural objects such as trees and water
What are the intangible rights of ownership
Air rights (aka super surface rights), surface rights, & subsurface rights (aka below ground level)
Physical characteristics of land
Immobile, indestructible & uniqueness ( no 2 parcels are exactly the same)
Real estate
Land at, above & below the earths surface & all things permanently attached whether natural or artificial perm man-made improvements
Deed
Evidence of title to real estate or the land
Economic characteristics of real estate
Scarcity, improvement, permanence of the investment & area preference
Improvements
Any artificial man made thing attached to the land as in building, utilities
Situs
Persons preference for given area
Real property
The physical land or real estate plus the interests, benefits and rights that are associated with it's ownership
What are the 5 bundle of rights
Possession, control, enjoyment, exclusion, disposition
Right of disposition
To sell, will or otherwise convey property
Chattels
Personal property that are moveable objects which do not fit into definition of real property as in chairs, clothing or money
Bill of sale
Evidence of title now to personal property
Classifications of personal property
Chattels personal, chattels real, trade fixture, emblements & severance
Chattels Personal
Personal property that don't stay with the sale
Chattels Real
Personal property that stay after closing
Trade fixture
An article that is attached to a rented space or building for use in conducting a business but is the personal property of the tenant
Emblements
Annual plants such as crops that are generally considered personal property
What happens to emblements if a property is sold?
Former owner can reenter to harvest crop for that season
Severance
To change an item of real estate to personal property
Fixture
An article that was once personal property but has been affixed to the land or a building in such of a way that the law now construed it to be a part of real estate
Name the 4 legal tests of a fixture
Method of annexation, intention, adaptation and essentialness, existence of an agreement
Alludial system
Recognizes the free & full ownership of land by private individuals
What system is the basis of real property law in united states?
The alluvial system
What does PETE stand for?
Police power, eminent domain, taxation, escheat
Police power
Refers to the state inherent authority to adopt regulations necessary to protect the public health, safety, and welfare
How do municipalities come up with building codes and zoning ordiances.
Through enabling acts
Enabling acts
When states delegate authority to counties and municipalities through these types of laws
Eminent domain
The right of the government to acquire privately owned real estate for a public use with just compensation
Condemnation
The process by which the government exercises this right
Taxation
The charge on real estate to raise funds to meet the public needs of a government
Escheat
When privately owned real or personal property transfers to the state or county when an owner dies & leaves no heirs and no will
Two categories of easements
Appurtenant & Gross
Appurtenant
Provides the owner of one lot access to the neighboring lot
Servient Tenement
The parcel over which an easement runs
Dominant Tenement
The neighboring parcel that benefits from the easement
Easement by prescription
Created when the person claiming the easement has made use of another's land for a time period defined by state law which is 21 years in Pennsylvania
Conditions to claim a prescriptive easement
Continuous, adverse, notorious, open & exclusive
Easement in Gross
An individual interest in or limited right to use someone's land
Reason Easements in Gross exist
To provide entities such as utilities & sewage authorities a necessary right of way through people's real estate
Easement by condemnation
Created under the governments right of eminent domain and is for public use
License
Personals privilege to enter the land of another for a specific purpose
Encroachment
Occurs when all or part of an improvement illegally extends beyond the land of it's owner beyond the legal building lines
Estate in land
Define an owners extent of interest in real estate
Freehold estates
Ownership interests that last for an indeterminable length of time such as for a lifetime or forever
Fee simple estate
Complete ownership that continues forever
Various fee simple estates
Fee, fee simple absolute, indefeasible fee, estate of inheritance
Highest quality of inters tin real estate
Fee simple estate
Fee simple defeasible
Qualified estate and may be lost
Condition subsequent with right of recovery
Dictates an activity that the new owner must not perform
Right of reentry
Provides the Former owner can retake possession of property through legal action via a court of law
Fee simple determinable
Estate ends automatically if Failure to comply and former owner reacquires full ownership with no need to go to court
Life estate
Limited in duration to the life of the owner or to the life of some other designated person or persons and not inheritable
Conventional life estate
Ends with the death of the person to whom it was granted
Life tenant
Person in possession of a life estate
Reversionary interest
Ownership reverts to the original owner
Remainder interest
The deed or will names someone else to whom title will pass
Pur autre vie
A to b for as long as c is alive
Legal life estates
Dower, curtesy, homestead
Dower
The life estate that a wife has in the real estate of her deceased husband
Curtesy
The life estate that a husband has in the real estate of his deceased wife
Homestead
The property owned and occupied as the family home that prevents eviction from creditors
Types of water rights
Riparian rights, littoral rights, doctrine of prior appropriation
Riparian rights
Common law rights granted to owners of land along the course of a river , stream or similar body of water
Riparian rights -non navigable waterway
Owns the land under the water to the exact center of the waterway
Riparian rights - navigable rivers
Usually owned to the waters edge with the state holding the title to the submerged land.
Littoral rights
Apply to owners whose land borders commercially navigable lakes, seas and oceans and they own up to the average hi water mark
Doctrine of prior appropriation
The state rather than the adjacent landowner controls the right to use any water with the exception of limited domestic use
Accretion
Owner is entitled to all land created by increases in the land from the deposit of soil by the waters actions
Erosion
The gradual wearing away of the land by natural forces such as wind rain and flowing water
Avulsion
The sudden removal of soil by an act of nature
Leasehold
Tenants right to possess & occupy
Estate (tenancy) for Years
Continues for a definite period of time - specific start & end date and no notice is required to terminate
Holdover tenancy
When a tenant with an estate for years tenancy remain in possession or holds over after the lease term expires
Estate from Period to Period
Creted initially to run for a definite term but continues indefinitely until proper notice of termination is given
Estate at Will
An agreement that gives the tenant the right to possess property with the landlord's consent for an unspecified or uncertain term.
Estate at Sufferance
Arises when a tenant continues in possession of the premises without the landlord's consent
What is the lowest interest in Real Estate
Estate at Sufferance
Primary Types of Leases
Gross Lease, Net Lease and Percentage Lease
Gross Lease
Tenant pays a fixed rental amt, landloard pays the property charges (taxes, utilities) and is typically used in residential leasing
Net Lease
Tenant pays all or some of operating expenses in addition to rent and leases for commercial or industrial bldgs leases
Triple Net
Label given to leases where the tenant pays all operating & other expenses such as taxes, insurance & repairs
Percentage Lease
Tenant usually pays a minimum fixed rental fee, tenant pays a percentage of gross or net income received to the landlord and usually used for retail business
Variable Lease
Allows for increases in the fixed rental charge during the lease period
Graduated Lease
Provides for increases in the rent at set future dates
Index Lease
Allows the rent to be increased or decreased periodically based on changes in the consumer price index
Ground Lease
Landowner leases unimproved land to a tenant who agrees to erect a building on the land - usually a very long term lease (often 50 to 99 yrs)
Oil & Gass Lease
Oil companies lease land to explore for oil and/or gas and if found the landowner usually receives a small percentage of its value as a royalty
Ownership in Severalty
Title is owned by one person or one entity (sole owner)
Trust Ownership
A device by which a person transfers ownership of property to someone else to hold or manage for the benefit of a third person
Trustor (Settlor)
Create the trust & is the original owner of the property
Trustee
A fiduciary who holds legal title & carrier out the trustor's instructions
Beneficiary
The person(s) who reap the benefits from the trust
Living Trust
A trust created by agreement during a property owner's lifetime
Testamentary Trust
A trust established by will after death
Co-Ownership
Title to real estate is held by 2 or more persons or entities
Joint Tenancy
2 or more parties own with a unity of ownership
4 Unites of Ownership(PITT)
Unity of possession, unity of interest, unity of time, unity of title
Unity of Possession
All joint tenants hold an undivided right to possession
Unity of Interest
All joint tenants hold equal ownership interests
Unity of Time
All joint tenants acquire their interest at the same time
Unity of Title
All joint tenants acquire their interest by the same document (deed or will)
Right of Survivorship
Remaining owners in joint tenancy receive the interest of the deceased owner
Tenancy in Common
2 or more people own an undivided fractional interest & ea can sell their interest w/o the consent of the other and when a co-owner dies that tenants undivided interest passes to their heirs
Tenancy by the Entirety
A special joint tenancy between husband & wife in Pennsylvania (when co-owner dies the surviving spouse automatically becomes sole owner)
Condominium
Consists of a fee simple estate (complete ownership) to the individual unit and a specified share of the common areas and owner receives a deed and pays their own taxes
Cooperative
A corporation holds title to the land & buildings then offers shares of stock to prospective tenants and becomes a proprietary (owner's) lease and stock is personal property and does not own real estate
Time Sharing
Permits multiple purchasers to buy an interest in real estate (usually in resort areas)
Time Share Estate
Real property interest with a condominium form of ownership (for your week for forever)
Time Share Use
A contract right to use the real estate owned by the developer for a certain number of years
Will
An instrument made by owner to convey title to property after the owner's death
Intestate
A person dies without leaving a will
Testate
A person dies and left a will
Testator (Devisor)
The person who makes the will
Devise
A gift of real property by will
Devisee
The person who reeives the gift of real property by will
Legacy of bequest
A gift of personal property by will
Codicil
Any modification, amendment or addition to a previously executed will
Descent
A person dies intestate, title to their property passes to the decendent's heirs according to Pennsylvania's law of descent and distribution
Probate
The formal judicial processess the proves or confirms the validity of a will
Involuntary Alienation
Title to property is transferred without the owner's consent (eminent domain, foreclosure)
Adverse Possession
Method of claiming title to property by taking uninterrupted possession for a period of 21 yrs
Adverse Possession must include
Open (obvious), Notorious (known by others), Continuous (uniterrupted), Hostile (without true owner's consent) & Adverse (to the true owner's possession)
Voluntary Alienation
A voluntary transfer of title by a gift or a sale during the lifetime of the owner which requires a deed of conveyance
Habendum clause
explains the ownership to be enjoyed by grantee and begins with words "to have and to hold"
Signature of Grantor
To be valid, a deed must be signed by all grantors named in the deed
Delivery & Acceptance
Title only passes when a valid deed is delivered by the grantor and then accepted by the grantee
General Warranty Deed
Provides the grantee with the greatest estate or greatest protection of any deed
Covenant of Seisin (Possession)
The grantor warrants that they are the owner of the property & has the right to convey it's title
Covenant of Quite Enjoyment
The grantor guarantees the title will be good against any 3rd party who might bring court action to establish superior title
Covenant against Encumbrances
The grantor warrants that the property is free from any liens or encumbrances, except those specifically referenced in the deed
Covenant of Further Assurane
Grantor promises to obtain & deliver any document needed to make the title good
Covenant of Warranty Forever
Greatest Protection where the grantor guarantees to compensate the grantee if any title problems arisse in the future and a loss is sustained
Special Warranty Deed
The grantor warrants the title is free and clear but only for the time they owned the property
Bargain & Sale Deed
Contains no express (written) warranties against encumbrances (foreclosures or tax sells)
Quitclaim Deed
Provides no convenants or warranties and therefore gives the least protection to the grantee of any deed (is frequently used to cure a title defect)
Deed In Trust
The trustor conveys the real estate title into the turst (goes with Truestee's Deed)
Trustee's Deed
The trustee conveys the real estate title out of the trust & to the beneficiary (goes with Deed in Trust)
Judicial Deed
Executed persuant to a Court Order and is a statutory deed used to convey title to property that is transferred by court order or a will
Identiy of Land
Expressed by a legal description that is a precise, legally acceptable way of identifying a parcel of land so that its location may be known with certainty
Metes and Bounds
Relies on the physical features of a property to determine the boundaries & measurements of the parcel of land
Metes measure what
Length (100 ft, 200 ft etc)
Bounds measure what
Boundaries (N, S, E & W)
Point of Beginning (POB)
The designated place on the parcel where the description start & ends
Monuments
Fixed objects used to locate point of beginning boundaries (can be natural object or man-mde markers)
Datum
A point, line or surface from which elevations are measured (defined as the mean sea level at New York harbor)
Benchmarks
Are permanent reference points established throughout the United States
Government Survey Method
Rectangular Survey System which is based on intersecting lines (form checker board pattern)
Principal (or Prime) Meridians
North & South
Base (or Parellel) lines
East & West
Latitude
North/South distance as measured from the equator
Longitude
East/West circle around the earth
Lot & Block System
Recorded Plat System which starts with a subdivision plat map prepared by a licenses surveyor or an engineer and are assigned numbers & letters
Survey
Sets forth the legal description of the property (and is used to determine if there are any encroachments)
Survey Sketch
shows the location & dimension of the parcel
Spot Survey
shows the location, size & shape of buildings located on the lots
Contract
A voluntary agreement or promise between legally competent parties to perform or refrain from performing some legal act, supported by legal consideration
Listing Agreements
Between the owner and the real estate broker
Agreements of Sale
Between the seller and buyer
Options (to buy or sell)
Owner is the Optionor and Buyer or Tenant is the Optionee
Optionor
Is consider the owner
Optionee
Is considered the Buyer or Tenant
Installment Contracts (Contracts for Deed)
Seller is the Vendor and Buyer is the Vendee
Vendor
Is considered the Seller
Vendee
Is considered the Buyer
What are the 2 things for a legally compentent parties to a valid contract
18 years of age and mentally capable
Who if the offeror in a contract?
The person who make s the offer
Who if the offeree in a contract?
The person who accepts the offer
What is consideration in a valid contract?
Something of a legal value - usually money but could be cattle, wheat, gold etc.
What is a Legality of the Object (in a valid contract)?
It indictes the contract must be for a legal purpose
Reality of Consent (in a valid contract)
It must be a free and voluntary act
Express Contracts
The parties state the terms and show their intentions in words (it may be oral or written as in a listing agreement)
Implied Contracts
Agreements that are demonstrated by actions and conduct
Bilateral Contracts
One promise is given in exchange for another (ie Real Estate Sales Agreement)
Unilateral Contracts (one-sided agreements)
one party makes a promise to induce a second part to act (ie an option to buy)
Executed Contracts
All parties have fulfilled their promises and therefore the contract has been performed (ie we close the deal)
Executory Contracts
When something remains to be done by one or both parties
What are the legal effect of contracts?
Valid, Void, Voidable and Unenforceable
Valid Contract
Meets all the essential elements that make it legally enforceable
Void Contract
No legal forces or effect and is therefore not binding on the parties
Voidable Contract
Appears valid but may be rescinded based on a legal principle
Unenforceable Contract
Valid between the parties, but a court can't force the parties to perform (an oral contract is binding but 1 party can't sue the other since it wasn't in writing)
Terminated Contract (Discharge of Contract)
A contract is discharged when the agreement is terminated
Breached Contract (Discharge of Contract)
A contract can terminate when it is breached or broken
Fulfilled Contract (Discharge of Contracts)
Most desirable case is when the contract is fulfilled
Assignment (Discharge of Contracts)
A transfer of rights and/or duties under a contract to a 3rd party (assignee) unless contract forbids it
Novation (Discharge of Contracts)
The substitution of a new contract in place of the original one (ie buyer assumes the seller's existing mortgage loan)
2 types of loans that are an assumable mortgage loans
VA & FHA
Breach of Contract (Discharge of Contracts)
A violation of any of the terms or conditions without legal excuse
Suit for Specific Performance
The seller defualts, then the buyer asks the court to force the seller to complete the transaction
Sue for Damages
If seller or buyer defaults, the other party is asked to pay for any costs and hardships suffered by the seller or buyer (going for personal judgement in court)
Sue for the Purchase Price
If buyer defaults, the sellers asks the court to compel the buyer to pay the agreed price (conveyed or sold as agreed)
Liquidted Damages Clause
Permits the seller to keep the earnest money deposit & any other payments received from the defaulting buyer as the seller's remedy
Statute of Frauds
States all contracts for the sale of real estate must be in writing and signed to be enforceable in a court of law
Statute of Limitations
A state law that limits the time within wiich parties to a contract may bring legal suit to enforce their rights
Statute of Limitations in PA
4 years from the date the contract is breached; 2 years for fraud or misrepresentation; 1 yr from date of delivery for home inspection claims
Doctrine of Laches
If you don't bring claim during correct time could cause you to loose your rights
Open Listing (Nonexclusive or Simple Listing)
Seller employs any # of brokers as agents simultaneously, seller pays a commission only to the broker who procures a buyer; seller can personally sell the property and pay zero commission; a broker must give a written memo for oral open listings
Eclusive Agency Listing
Seller employes 1 broker as exclusive agent of the principal; sellers pays commission, if the exclusive broker or any other broker sells the property; seller retains the right to sell the property and pay zero commission
Exclusive-Right-to-Sell Listing
Seller employes 1 broker as sole exclusive agent; seller pays a commission regardless of who sells the property (including owner); offer the broker the greatest opportunity to receive compensation
Multiple Listing Service
Broker is authorized to register and distribute listing information to other cooperating brokers (ie West Penn Multi-list)
Net Listing
Specifies that the seller will receive a net amount of money from a sale, with the excess going to the listing broker as commission; not prohibited in PA but is discouraged; creates a conflict of interest
Offer
A proposal is written and signed by the buyer then presented to the seller
Acceptance
The seller agrees to the offer exactly as it was made and signs the contract
Counteroffer
Any attempts by the seller to change the terms proposed by the buyers
Within what time may an offer or counteroffer by withdrawn
At any time an offer or counteroffer my be withdrawn before it has been accepted by all parties
Earnest Money (Hand Money)
Given in good faith to demonstrate the seriousness of the buyer's intent to perform on the contract; is customary but not a legal reqirement; amount is negotiated by the parties
Equitable Title
After both parties have executed an agreement of sale, the buyer acquires an interest in the property
What is the time period of an Equitable Title
The time period from the signing of sales agreement until closing (buyer acquires an insurable interest in the property)
Time is of the Essence
Clause in a contract that requires the performance of a certain act within a stated period of time (date of inspection, martgage approval & closing); contract can be voidable if the time period passes
Addendum (Addenda or Riders)
Additional signed agreements that are attached to & made part of an existing contract
Options
A contract for the right to buy or lease the owner's property at a fixed price in a stated period of time; enforceable only the the optioneer (prospective purchaser or lessee); unilateral contract
Installment Contract (Contract for Deed, Land Contract of Sale)
Buyer agrees to give the seller a down payment & agrees to pay regular installments of principal and interest over a # of years; buyer pays the real estate taxes, insurance premiums, repairs and upkeep; balloon payment can be inforced; seller retains legal title until terms of contract are satisfied
Balloon Payment
When the periodic payments are insufficient to fully amortize the loan by the time the final pament is due
Purchase Money Mortgage (PMM)
A mortgage and note are created at the time of purchase; buyer receives the deed at closing
Appraisale
An estimate or opinion of value based on supportable evidence
Appraiser
Imartial 3rd party who prepares the appraisal
DUST (Characteristics of Value of Property)
Demand (effective); Utility; Scarcity and Transferability
Demand (effective)
The need or desire for possession or ownership backed by the financial means
Utility
The capacity to satisfy human needs and desires (property has a usefulness)
Scarcity
The limited nature of society's resources
Transferability
The relative ease with which ownership rights are transferred
Market Value
The goal of the appraiser; the most probable price, not the average or highest price that a property should bring in a fair sale
Market Price
What a property actually sells for
Supply & Demand (basic principles of value)
Value increase/decreases if the supply increases/decreases
Highest & Best Use (basic principles of value)
The most profitable single use to which the property may be adapted
Substitution (basic principles of value
Maximum value tends to be set by the cost of purchasing an equally desirable & valuable substitue property
Conformity (basic principles of value)
Value is created when the components of the property are in harmony with its surroundings
Anticipation (basic principles of value)
Value is created by the expectation that certain benefits or detriments will be realized in the future
Laws of Increasing & Diminishing Returns (basic principles of value)
Increasing returns when money is spent on improvements that produce an increase in value or income; diminishing returns when additional improvements won't product a proportionate increase in value or income
Regression (basic principles of value)
The worth of better quality property is adversely affected by the presence of lesser-quality property
Progression (basic principles of value)
The worth of lesser quality property tends to increase if located among better properties
Plottage (basic principles of value)
The merging of adjacent lots held by separate landowners into one larger lot
Assemblage
The process of merging the lots under one owner
Contribution (basic principles of value)
The value of any component of a property is measured by the amout it contributes to the value of the whoe (or the amount its absence detracts from value)
Competition (basic principles of value)
The interation of supply & demand
Change (basic principles of value)
Natural phonemena (fires tornadoes, hurricanes) and routine wear & tear (all properties are subject to this)
What are the 3 approaches to value
Sales Comparison (Market Data); Income (Capitalization); Cost Approach
What is the most reliable Sales Comparison (Market Data) Approach
Comparing recently sold properties
The principal factors for adjustments of comparables
Date of Sale (time - if economic changes have occurred); location (proximity - different neighborhoods are more valuable); Property Rights (easements, deed restrictions or encroachments); Physical Features (size, condition); Financing Concessions (seller assist); Condition of Sale (mortgage vs. cash)
When is Income (Capitalization) Approach used?
Primarily used to evaluate income-producing properties (office bldgs, shopping centers)
How do you estimate value (in income approach)?
Estimate Annual Potential Gross Rntal Income; Deduct a vacancy factor (to achieve effective gross income); Deduct annual operating expenses (to attain annual net operting income); Estimate the rate of return (yield or capitalization rate) and Capitalization rate applied to annual net operating cime (equals the estimate of value)
What is the Capitalization Formulas?
Income Divided by Rate = Value; Income Divided by Value = Rate; Value times Rate = Income
Cost Approach
Most helpful in the appraisal of newer building or special-purpose buildings (schools, churches, public bldgs)
What are the 5 steps to Cost Approach?
Estimate the value of land as if it were vacant; estimate the current cost to construct the bldg & site improvements (replacement costs and reproduction cost); Estimate the amount of accrued depreciation; Deduct accrued depreciation from estimated current construction cost, Add estimated land value to depreciated cost to arrive at total property value
Replacement Cost
Construction cost at current prices of improvements but not necessarily building an exact duplicate
Reproduction Cost
The dollar amount to construct an exact duplicate at current prices
What cost approach due Appraisers typically use?
The Replacement Cost approach
Physical Deterioration (Curable)
When an item in need of repair that is economically feasible
Physical Deterioration (Incurable)
Caused by physical wear & tear and it's correction would not be economically feasible or contribute comparable value
Functional Obsolescence (Curable)
Unacceptable physical or design features that are no longr considered desirable but could be replace or redesigned at a relatively low cost
Functional Obsolescence (Incurable)
Undesirable physical or design featurs that can't be easily remedied due to cost factors
External Depreciation (Usually Incurable)
Caused by negative factors that are not on the subject of property (murder in house)
What is the Cost Approach Formula?
Land + Replacement Cost - Depreciation = Estimate of Value
Land-Use Controls
Ownership rights that are subject to governmental laws(public) or a previous owners controls (private)
Public Land-Use Controls
Comprehensive Plan; Zoning; Building Codes; Subdivision & Land Development Ordinance; Environmental Protection Legislation
Comprehensive Plan (Master Plan)
An ovreall plan for control and development plans of the community
Zoning
Local laws that regulate and control the use and purpose of land and structures (local zoning ordinances implement master plan)
How are zoning powers conferred on municipal governments?
By state enabling acts
Nonconforming Use (grandfathered in)
An improvement established prior to the enactment of the zoning ordinance
Conditional-use Permit (Special-use Zoning)
An allowable, conditional use (ie church, temple, mosque)
Variance
Granted to provide relief if zoning regulations deprive an owner of reasonable use of the land or building
What are the 2 categories of Vanriances?
Dimensional Variance and Use Variance
Dimensional Variance
Covers physical dimensions
Use Variance
Covers the specific uses of land (ie multi-unit in residential area)
Buffer Zones
Provide transitional use, to screen residential from nonresidential areas
Building Codes
Ordinances that specify minimum construction standards (electrical, safety, plumbing & fire codes)
Building Permit
Written governmental permission for the construction, substantial repair or alteration of a structure (then after inspection a certificate of occupy maybe required)
Subdivision & Land Development Ordinances
Local regulations when new areas are developed
Environmental Protection Legislation
Laws to improve and preserve America's natural resources
Private Land-Use Controls
Restrictions where a previous owner controls some of the rights of the present owner (may have time limitations)
Injunction
(law) a judicial remedy issued in order to prohibit a party from doing or continuing to do a certain activity
What are the 2 catagories of Private Land-Use Controls?
Deed Restrictions and Restrictive Covenants
Deed Restrictions
Provisions placed in a deed to control the future use of that property
Restrictive Covenants (Covenants, Conditions & Restrictions - CC&Rs)
Declarations of conditions and restrictions that affect the use of all parcels of land within a specified development or subdivision plat ( sheds, pets, contruction methods)
Direct Public Ownership
Land owned by the government (municiple bldgs, schools, state parks)
What are the 2 types of Real Estate taxes?
General Real Estate Taxes and Special Assessment (improvement taxes)
What are General Real Estate Taxes also called?
Ad Valorem taxes(meaning according to value)
General Real Estate Taxes
Taxes levied on real estate by various government bodies and municipalities (and based on the value of the property being taxed)
Assessment (or assessed value)
The official value of real estate that is used for tax purposes
Assessment x Millage = ?
Taxes
What are the 3 Millages in a community?
Local, County and School
Special Assessments (Improvement Taxes)
Property owners are taxed to fund public improvements that benefit their real estate (sidewalks, sewers, street lights)
How are special assessments taxes figured?
Typically each property will be charged on a fractional basis or on a cost-of-front foot basis (sidewalk, sewers)
What is the old law on Capital Gain?
Prior to 5/7/1997 55 yrs or older on the day of sales, owned and occupied house 3 or past 5 years you can eliminate up to $125,000 of the gain - ONCE in a lifetime
What is the new law on Capital Gain?
After 5/7/1997 if owned and occupied house as primary for 2 years of the 5 years prior to the sale, you can eliminate up to $250,000 of the gain - unlimited times in your life
Capital Gain
The amount by which the selling price of an asset exceeds the purchase price
Mortgage (Security Instrument)
It give creditor the right to sue for forclosure, creates the lien on the propertu and conditionally conveys title
Hypothecation
The term used to describe the pledging of the property as security for payment of a loan
Note (Financing Instrument)
The borrower's personal promise to repay a debt at the stipulated terms
Obligor (borrower or payor)
The maker of the note
Obligee (lender or payee)
The one to whom an obligation (a promise) is owed
What are the major parts of a mortgage payment
Principal, Interest, Taxes, Homeowners Insurance
Principal
The amount of debt, not including interest
Interest
A charge for the use of money
Taxes
The real estate taxes on the property
Homeowners Insurance
Protect the investment and insures the lender
Private Mortgage Insurance (PMI)
Usually used when the down payment is less than 20%
Conventional Loan
Requires the borrower to qualify using an appraisal and credit report
VA Mortgage
A private approved lender loan that's guaranteed under the Dept of Veterans Affairs which doesn't require a down payment
Certificate of Eligibility
To determine eligibility & the amt of loan the VA will guarantee (the veteran must apply for this). It sets forth the maximum guarantee for which the veteran is entitled
Certificate of Resonable Value (CRV)
The VA issues for the property being purchased. It states the property's current market value based on a VA approved appraisal
Discount Points
Are chaged to make up the difference between the state interest rate and the yield the investor requires (the lender charges the points not the VA)
What is 1 point equivalent too?
1% of the moan or mortgage amount
Assumption
Freely assumable to anyone with a credit check is whose is a VA
Federal ?Housing Administration (FHA) Mortgages
An private approved lender loan that is an insured loan under the Dept of Housing & Urban Development (HUD)
Cost-Mortgage Insurance Premium (MIP)
Protects the lender against loss from a borrower's default (under FHA Mortgage)
Blanket Mortgage
Usually used to finance sub-division development; covers more than one parcel or lot
Partial Release Clause
Permits the borrower to obtain the release of any lot from the lien by repaying a certain mount of the Blanket Mortgage loan
First Mortgage (Senior Mortgage)
A mortgage loan that takes 1st lien position because it was recorded 1st (when property is sold it gets paid 1st)
Junior Mortgage
A Mortgage which is subordinate to a prior lien (can't be higher than 2nd mortgage)
Reverse Annuity Mortgage (RAM)
Regular monthly payments are made to the borrower based on equity the homeowner has in the property
Shared Appreciation Martgage (SAM)
In exchange for a favorable interest rate, a lender receives a guaranteed share of the borrower's appreciation when the property is sold
Package Mortgage
Includes no only real estate but also any personal property and appliance installed on the premises
Type of Mortgage not permitted in Pennsylvania
Package Mortgage
Mortgage Banking Companies
Originate mortgage loans with the intention of later selling them to investors & receive a fee for servicing the loan
Mortgage Brokers
Not a lender, they act as intermediaries to bring borrowers and lenders together
Secondary Mortgage Market
Where loans are bought and sold
Federal National Mortgage Association (FNMA)
Fannie Mae
Government National Mortgage Association (GNMA)
Ginnie Mae
Federal Home Loan Mortgage Corporation (FHLMC)
Freddie Mac
Warehousing Agencies
Investment brokers purchase mortgage loans then assemble them into packages of loans (called pools) for resale to investors
Truth-in-Lending Act (Regulation Z)
Requires credit institutions to inform borrowers of the true cost of obtaining credit (to permit borrowers to compare cost)
Disclosure (in Truth-in Lending Act)
Consumer must be informed of all finance charges and the annual percentage rate
Recision Period (in Truth-in-Lending Act)
The borrower has 3 days to rescind certain credit transactions, doesn't apply to owner-occupied residential 1st mortgage but does apply to refinancing or home equity
Trigger Terms
refers to credit terms and if used in advertising then ad must include cash price, required down payment, number, amt and due dates of al payments, annual percentgage rate and total of all payments to be made over the term of the loan
Equal Credit Opportunity Act (ECOA)
Prohibits lenders from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age or dependency upon public assistance
Real Estate Settlement Procedures Act (RESPA)
Applies to any residential transaction involving a new first mortgage loan and protects consumers from abusive lending practices
Disclosure Requirements
Lenders and settlement agents are required to disclose certain obligations at the time of a loan application
Special Information Booklet
under RESPA - lenders are required to provide a copy of Settlement Costs and You HUD booklet
Good-faith Estimate of Settlement Costs
Under RESPA - a copy must be provided to the borrower no later than 3 business days after the receipt of the loan application
Settlement Statement (HUD-1 Form)
RESPA requires that a special HUD form be completed to itemize all charges to be paid b the borrower and seller (to the penny) in connection with settlement
Community Reinvestment ACT (CRA)
Refers to the responsibility of financial institutions to help meet their communities' needs for low and moderate income housing
Civil Rights Acto of 1866
Prohibits any type of discrimination based on race without exception
Jones vs. Mayer (1968)
The case the supreme court upheld the civil rights act of 1866
The Americans with Disabilities Act (ADA)
Requires resonable accommodations for disabled peope in employment and access to goods, services and public buildings
Federal Fair Housing Act
Prohibits discrimination in housing based on race, color, religion and national origin with certain exceptions
Housing & Community Development Act (1974)
Extends prohibitions to discrimination in housign based on sex
Fair Housing Amendments Act (1988)
Further prohibits discriminator housing practices based on handicap and familial status and national origin (which are known as the protected classes)
Puffing
Statements that exaggerate a property's benefits
Latent Defect
A hidden structural defect that is known to the owner but would not be normally discovered by an ordinary inspection (mine subsidence, terminite damage)
Fraud
An intentional misrepresentation of a material fact inteded to deceive and/or gain an advantage over another person (consealing important facts
Misrepresentation
An unitentional misstatement or omission (failure to verify_
Blockbusing
The unlawful act of inducing people to sell or rent by claiming that the entry of a protected class into the neighborhood will have a negative impact on property values
Panic Selling
The blockbuster causes fear of decline in value then purchases the property at a depressed price and resells at a higher price
Redlining
Lenders refuse to make mortgage loans in a specific area without regard to the economic qualifications of the applicant
Steering
Giding or channeling buyers or renters either to or away frm particular neighborhoods
What is the Amount of Commission
Rate of Commission x Selling Price
What is the Rate of Commission
Amount of Commission divided by Selling Price
What is Selling Price
The amount of commission divided by rate of commission
Depreciation
The loss in value, price or cost
Appreciation
A growth or increase in value, price or cost
Area of a rectangle measurement
Area = Length x Width
Volume of a rectangle measurement
Volume = lenthg x width x height
Area of a triangle measurement
Base x height divided by two
1 Foot equals what?
12 inches
1 Yard equals what?
3 Feet
1 Mile equals what?
5, 280 Linear Feet
1 Square Foot equals what?
144 Square Inches
1 Square Yard equals what?
9 square feet
1 Cubic Yard equals what?
27 cubic feet
1 Square Mile equals what?
640 Acres
1 Acre equals what?
43,560 Square Feet
Interest Calculation
Interest = Principal x Rate x Time
Taxes calculation equals what?
Assessed Value x Millage
What does the Law of Agency Define?
The rights and the duties of the Principal and the Agent
Principal
One who delegates authority and employees another to act for him (can be the buyer, seller, landlord or the tenant)
Agent
One who is authorized & consents to represent the interest of another
Broker
The agent of the seller and/or buyer
Salesperson
The agent of the broker
Client
The principal whom the agent represents
Customer
The 3rd party from whom some level of service is provided, though without representation
General Agent
Represents the principal in a broad range of matters and can be created by a general Power of Attorney
Special Agent
Represents the principal in one specific act with detailed instructions from the principal and created by contract
Single Agency
The agrent represents only 1 party in any single transaction; broker represents either buyer or seller, never both
Subagency
The agent of the principal can authorize other agents to act on the principal's behalf
Dual Agency
The agent represents both principals to a transaction simultaneously
Disclosed Dual Agency (informed consent)
Requires knowledge and written consent of all parties being represented
Seller as Principal (Seller Agent)
Briker is an agent of the seller, broker's client is the seller, buyer is a customer
Buyer as Principal (Buyer Agent)
Broker is an agent of the buyer, broker's client is the buyer, seller is a customer
Landlord as Principal
A broker may be employed to market a property for rent or the owner may employ a broker to manage property under property management agreement
Tenant as Principal
A tenant contracts with a broker to locate property suitable for the tenant's purposes
Designated Agent
One of more licensees diesignated by the employing broker w/consent of the principal to act exclusively as an agent on behalf of the principal (broker is dual agent the designated agents are not), this is the exception to the license law rule
Transaction Licensee
The licensee doen't represent the buyer or seller in the transaction. Provides communication or document prepraration services and assists both parties without being an agent of advocate of either party
Fiducairy Relationship
Relationship of trust and confidence to the principal
Agents Fiduciary Duties
OLD CAR - Obedience, Loyalty,Disclosure, Confidentiality, Accounting, Resonable Skill & Care
Termination of Listing Agency
Completion, expiration (1 yr is max), Mutual agreement, breach, incapacity of death, operation of law (bankruptcy), destruction of property
Broker's Compensation
normally specified in a listing, buyer agency or management agreement, usually a percentage, paid at closing
Procuring Cause
The broker must have started an unbroken chain of events that ultimately results in a sale
Ready, Willing & Able Buyer
One who is prepared to buy on the seller's terms and ready to complete the transaction
Commission
Always negotiable
Salesperson Compensation
Set by contract between broker & salesperson
Independent Contractor
The broker controls what the salesperson does, but not how it is done
Employee
A person who works under more direct supervision and control of another
100% Commission Plan
The salesperson pays a monthly service charge to the broker, then the sales associate receives 100% of the commission earned
Anti-Trust Law (Sherman Anti-trust Act)
A law that prohibits monopolies and conspiracies which unreasonably restrain trade
Price Fixing Violation
Bokers collectively agree to set uniform prices for services
Group Boycotting Violation
2 or more businesses conspire against other businesses or agree to withhold their patronagle to reduce competition
Allocating markets or territories violation
Brokers agree to divide the markets and refrain from competing for each other's business
Tying Agreements (Tie-in Agreements) Violation
A party agrees to sell one product on condition that the buyer also purchases a different or tied product
Recording
The act of placing documents in the public record
Constructive Notice
The legal presumption that information concerning inspecting the property and searching public records is available
Acutal Notice
An individual who has searched public records and inspected the property has direct knowledge of the information
Chain of Title
The record of ownership of the property over a period of time, each owner is linked ot the next so that a chain is formed
Abstract of Title
A condensed summary report that provides a chronological list of recorded documents
Title Search
An examination of recorded documents to determine defects and the present condition of title
2 Types of Ownership in PA
Certificate of Title and Title Insurance, evidence that the title is marketable
Certificate of Title
A title company or an attorney examines public records, prepars an abstract of title and expresses an opinion of the status of title
Title Insurance
A contract under which the policyholder is protected from losses arising from defects in title, is considered to be the best legal defense of title
Closing
The gathering of the parties for settlement, the promises made in the sales agreement are now kept, location can be anywhere
Closing Officer
Handles the administrative duties of closing, function is to calculate the HUD-1 form and make sure the conveyance is proper
Buyers Duties
Approve their side of the HUD-1 form and sign loan documents if there is financing
Sellers Duties
Approve their side of the HUD-1 form and all owners must sign the deed
Agents Duties
Give legendary service, order and coordinate the various closing documents, follow up after closing, recome a real estate resource and create a client for life
Real Estate Brokers and Salespeople can not do what?
Cannot offer legal advice
How many members are on the Real Estate Commission board
11 and are apointed by the Governor for a period of 5 years
Criminal Penalties for practing real estate w/o a license
Guilty of a Summary offense - 1st time $500 or up to 3 mos in jail or both, 2nd offense guilty of a felony and a fine of not less than $2000 but no more the $5,000 and can be jailed for not less than 1 yr no more then 2yrs or both
What type of map is MOST useful for describing the terrain of a very hilly lot?
Contour map
Two lots of the same size are sold on a street. The lot on the corner sells for $20,000 more than the lot in the middle of the street. What characteristic MOST likely explains the price difference?
Situs
How does a creditor who has obtained a judgment get satisfaction against a debtor who will not pay?
Notice of Lien
Although states make specific laws governing water rights & the rights in land that borders water, most states generally follow one of two basic doctrines regarding water rights. Either riparian and littoral rights are automatically conveyed w/property, or all water rights are controlled by the state under the doctrine of prior appropriation. The doctrine of prior appropriation is MOST likely to be followed in state where?
water is scarce
An appraiser MUST be licensed or certified to handle federally related work on residential property valued at more than
$250,000
When a property owner uses his home as collateral for a loan and creates a lien in favor of the lender, title is held by the?
Mortgagor
How are discounts points computed?
By a percentage of the selling price
Usury laws were enacted to protect?
Borrower
An adjustable rate loan should not include?
Negative amortization
A broker has brought a ready, willing and able buyer to a seller. In MOST listing contracts, the broker has earned his commission when?
The seller accepts the offer
A couple listed their home with a broker. After 2 months, the seller found a buyer and the sale closed. The seller was not obligated to pay a commission to the borker. This list was MOST likely
An exclusive agency listing
The relationship in which the agent is placed in the position of trust and confidence to the principal is know by what term?
Fiduciary
A salesperson lists a property with a contract that allows for subagency and dual-agency. The salesperson is?
An agent to the broker and subagent to the principal.
A broker supplies the financing for a project to build condominium with the stipulation that he has the exclusive right to sell the completed condos. What is this relationship?
Agency coupled with an interest
The day after a broker's listing on a house expired, it was listed with another borker and offered in the MLS. Several days later, a 3rd licensee called the first broker and asked for the key to show the home. The broker should inform the caller that?
He in no longer the listing agent
The real estate broker who is listing a house for sale should personally verify what?
The number of square feet in the building
At the time of listing, the seller tells the listing agent they are moving because the neighbor has loud parties every weekend. The agent should do what?
Tell potential buyers about the parties
The Dept of Housig & Urban Dev. estimates that most private homes built before 1978 contain potentially dangerous levels of lead. Because of this, some federal agencies (such as FHA) require what?
Require the buyer to acknowledge disclosure of the presence of any known lead paint.
The real estate contract for a specific property for use as an unlicensed whiskey sales operation was forced to terminate. The termination was the result of what?
Impossibility of performance
While an agent is showing a listed property, the seller and the buyer enter into an oral agreement for the purchase of the home. If a dispute over the terms arises later, the agreement may be unenforceable because?
The agreement does not comply with the statute of frauds
Depreciation is calculated based on the?
Cost of the building only
What is NOT usually prorated at closing?
Special tax assessments
At the closing on June 15, the buyer is assuming a mortgage presently on the property, on which the monthly interest charge is currently $600. The seller made the payment due on June 1. Assuming a VA mortgage, what is the adjustment made at closing?
Debit seller $300; credit buyer $300
The buyer is assuming a mortgage presently on the property in the amt of $110,000. What is the adjustment made at closing?
Credit buyer $110,000; debit seller $110,000
The buyer wants to make the purchase offer contingent on a comlex mortgage arrangement. The buyer's agent who is drawing up the contract should do what?
Suggest the buyer ask a lawyer to furnish the wording
An equal housing opportunity notice must be?
Displayed in the brokerage office
When is racial discrimination in the rental of rooms or apartments permitted?
Under no circumstances
Ownership of common stock in a corporation gives what?
An interest that is classified as personal property
A major reason for buying and owning a condominium rather than a detached single-family home is what?
A condiminium tends to be affordable