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Real Estate Economics
Real estate 75 hour course
Terms in this set (126)
What are other services in a real estate transaction(besides brokerage)
Mortage lenders, appraisers, attorneys, title companies, home inspectors, pest/environmental inspectors, contractors
5 property types in real estate
Residential, commercial, industrial, agricultural & special use.
What factors effect demand ?
Population, demographics, emploement/wage levels
What careers besides brokerage/service providers in a transaction are available in the real estate industry?
Real estate development. Education, & counseling
Factors that affect supply:
Labor force, construction costs, govt controls& financial policies
Def of a market
Place where goods can be bought & sold. & a price is established.
What effect does supply/demand havd on a price in a market.
When supply is low, & demand is high/neutral = high price.
When supply is high, & demand is low/neutral= low prices
How does uniqueness&immobility effect supply/demand?
Supply/demand stands on its own. Each parcel of RE is unique and cant be moved to another location to accomadate changes in supply/demand in a different market.
Def of REal estate
Land & all improvements on the land
Def of land
Earrhs surface extending down to the center of the earth & up to infinity.
Def real property
Includes land real estate & legal rights attached to land & real estate
Examples of fixture;
Heating systems, kitchen cabinets, light fixtures, plumbing fixtures
Examples of a trade fixture:
Resturant equiptment, ovens, grills, restyrant tables/booths, office equiptment
Items of personal property that dont become apart of the real property
7 sources of laws governing real estate
US constitution, federal laws, regulatory agencies, state constitution, state laws, local ordinances, common law
7 characteristics of real estate & what category applies:
Economic: scarcity, improvements, permanence of investments, location
Physical:immobility, indestructibility, uniqueness
principal, interest, taxes, insurance --basic costs of owning a home.
8 diff types of housing:
Apartment, condo, cooperative, planned unit development, retirement community, high rise development, converted-use, manufactured housing, modular homes, timeshares
Why do lenders require homeowners to obtain/retain homeowners insurance & sometimes flood insurance
To protect the security interest in the property
What factors a lender will use to evaluate a buyers ability to purachse/ finance a home?
Ability to repay loan, credit history, market value of property, income & other debt
Define designated agent
Sponsored licensee named by a sponsoring broker as the legal agent of a client under section 15-50 of the act
Def designated agency
Contractual relationship between a sponsoring broker and a client under section 15-50 of the act in which one or more licensees associated w/ or employed by the broker are designated agents of the client
Def confidential info
Info obtained by a licensee from a client that was made confidential by written request or instruction by the client, deals with the negociating position of the client, or is information that discloses info that could materially harm the negociating position of the client unless the client at any time permits disclosure of info, its required by law, or the info becomes public by a source other than the licensee
confidential info cant include material info about propertys physical condition
Def dual agency:
Agency relationship in which a licensee is representing both the buyer abd the seller (landlord/tenant).
Acts any licensee can perform for a consumer that are informative or clerical in nature & dont rise to the level of active representation in behalf of a consumer. Examples:
Responding to phone inquiries
Attending open house& responding to questions
Setting appts to view property
Accompanying an apprasier, inspector, contractor to visit property.
Def Real estate brokerage
Bringing together of parties in real estate transaction
Who may contractually enter into a brokerage agreement w a consumer?
Who can compensate a sponsored licensee in a real estate transaction
4 laws that provide protection for consumers in real estate
Anti trust, fair housing, do not call registry, can spam act, junk fas prevention, illiniois real estate license law
Difference btw employee/ independent contractor
Employee is employed by sponsoring broker. Sponsoring broker will w/hold taxes, social security, & medicare payments & can be required to work certain amt of hrs/week
Different types of listing agreements
Exclusive right to sell, exclusive agency, open, net, option
Diff types of buyer representation agreements
Exclusive buyer agency, exclusive agency buyer agency, & open buyer agency
What is the importance of comparative marker analysis to seller
To establish a listing price
3 disclosures normally required of a seller of res prop
Fed lead based paint, illinois radon disclosure, illinois residential real property disclosure
Def of doctrine of prior appropriations
The right to use water w the exception of limited domestic use. Controlled by the state rather than by the landowner adjacent to water
Difference btw riparian rights & littoral rights
Riparian- owners rights in land that borders on or includes a stream river or lake. These rights include access to and use of water.
Littoral- a landowners claim to use water in large navigable lakes & oceans adjacent to the owners property. The ownership right to land bordering these bodies of water up to the high water mark
What are real estate taxes for?
To fund local govt in IL
Difference btw a fee simple & life estate?
Fee simple- maximum possible estate in real estate or right of ownership of real property, continuing forever.
Life estate- an interest in property that's limited in duration to the lifetime of the owner or other designated person.
3 forms of ownership in which real estate may be held?
Severally, co-ownership, and in trust.
What are four forms of co-ownership
Tenancy in common, joint tenancy, tenancy by the entirety, & community property
Difference between a general partner and a limited partner in a partnership
General-all of the partners participate in operation & management
Limited- not permitted to participate in the operation or management
Common elements of a condo
Land, courtyard, lobbies, exterior, hallways, elevators, stairways, & roof
Def real estate investment trust
Trust ownership of real estate by a group of investor who purchase certificates of ownership in the trust, which in turn invests the money in real estate and distributes profits free of taxes.
Def metes & bounds method of survey
Legal description of a parcel of land that begins at a well marked point and follows the boundaries using directions and distances around the tract, back to the point of beginning.
Where would the lot & block method normally be used in describing real estate?
W/in a city or subdivision
Difference btw voluntary and involuntary lien
Voluntary- lien placed on property w the owners knowledge and consent ex: mortgage lien
Involuntary- lien placed on property without the consent of the owner ex: tax lien
4 types of liens that may be filed on real estate
Voluntary, involuntary, statutory, equitable
Def of ad valorem taxes
Taxes apportioned to value
Recorded legal document providing constructive notice that an action affecting a particular property has been filed in state or federal court
What lien has most priority:
Real estate tax
Real estate tax lien
Essential elements of a valid contract
Offer & acceptance, consideration, legally competent parties, consent, & legal purpose
What is real estate licensee allowed to do when preparing a real estate purchase contract
Fill in the blanks on a standard form contract used in the market place
6 different types of contracts used in real estate
Listing & buyer agreements, real estate sales contracts, options agreements, escrow agreements, leases, & land contracts or contracts for deed
Def executed contract
Contract in which all parties have performed and fulfilled their duties and the contract is completed
Difference between a bilateral and unilateral contract
Four methods real estate can be transferred
Voluntary, involuntary, will, & descent
What type of deed provides the most protection to the purchaser
General warranty deed
6 types of deed used to transfer title
General warranty, special warranty, bargain and sale, quitclaim, deed in trust, trustee's deed
What are the requirements for a valid deed
Grantor, grantee, recital of consideration, granting clause, legal description, exceptions, signature of the grantor delivery and acceptance.
5 places where real estate title records are maintained
Recorder of deeds, county clerks, county treasurer, city clerks, city collectors, clerks of the court
Describe the differences between constructive & actual notice
Constructive-legal presumption that notice of information is available through due diligence
Actual- legal notice of information is actually given
Define chain of title
Succession of conveyances, from some accepted starting point, whereby the present holder derives title
6 exemptions from licensure in RELA
Owner, attorney in fact, trustee or executor, resident apartment manager, employee or officer of govt, multiple listing service, railroads& public utilities, advertising media, resident tenant referral, time-share exchange company, & owner referrals, exempt auctioneer, & hotel operator
What are the tyre license categories for an individual to practice real estate in the RELA
Managing broker, broker, and leasing agent
4 categories for business entities for licensure in RELA
Corporation, limited liability company, limited liability partnership, legally formed partnership
How many education hours are required to sit for real estate brokers exam?
Name 6 responsibilities of IDFPR in the administration of the RELA
Conducting license examinations, issuing licenses, preparing application forms, collecting fees for licenses, conducting hearings on RELA violations, imposing penalties for violations, & restoring revoked or suspended licenses
Who appoints members of the READ board
The governor of Illinois
6 responsibilities of the real estate coordinator
Ex officio chairman of the READ board, liaison to the industry, circulating information to licensees, appoint committees, supervise real estate activities? And ex-officio chairman of the education advisory council.
What are the required provisions in a guaranteed sales plan
Provide details of the plan in writing, offer evidence of sufficient resources to purchase the property, market the listing in the same manner as other listings, cancel the listing agreement prior to purchasing the property
6 sanctions that IDFPR can impose for violating RELA
Refuse to issue or renew a license, suspend or revoke a license, censure or reprimand a license, place a license on probation, & impose a civil penalty not to exceed 25,000$ per offense
Difference between a mortgage & a promissory loan
Mortgage is the lien placed on a property to secure a debt
Promissory loan is the instrument that states the terms and obligations, which is signed by the maker to borrow money
Is Illinois a judicial or non-judicial foreclosure state?
What maybe a disadvantage to the borrower in a deed in lieu of foreclosure?
The mortgagee takes the real estate subject to all of the junior liens that may be filed against the property
What is the consumer benefit in PMI
A lower down payment is required
Who regulates the banking system in U.S.?
Federal reserve system
4 different loan programs available to consumers to obtain a mortgage loan
Conventional, FHA insured, VA guaranteed, agricultural rural housing
Name four lenders in the primary mortgage market
Thrifts, saving banks, commercial banks, insurance companies, credit unions, pension funds, endowment funds, investment groups, mortgage banks, mortgage brokers
3 federally sponsored groups in the secondary mortgage market
Fannie Mae, Ginnie Mae, Freddie Mae
Four types of leasehold estates
Estate for years, estate from period to period, estate at will, estate at sufferance
Four elements to a valid lease
Capacity to contract, legal objectives, offer & acceptance, & consideration
3 types of leases
Gross, net, percentage
In Illinois a landlord must file in court to remove a tenant who has breached a lease
Forcible entry & detainer
List 6 elements to a valid property management agreement
Description of property, time period, managements responsibilities, owners purpose, management authority, reporting, management fees, allocation of costs, & equal opportunity statement
6 responsibilities of a property manager
Financial reports, operating budget, income, expenses, cash and flow report, profit and loss statement, budget comparison statement
3 risk management concerns
Security of tenants, security of property, liability
3 approaches to value
Sales comparison, cost and income
6 basic principles affecting the value of property
Anticipation, change, competition, conformity, contribution, & highest and best use
Loss of value due to any cause, such as physical deterioration functional or external obsolescence
4 methods used to determine replacement or reproduction costs
Square foot, unit in place, quantity survey and index
Purpose of a comprehensive plan
Long term plan to provide for orderly growth with due consideration given to land use, housing needs, movements of goods and people, community facilities and utilities and energy conservation
3 basic classifications used in zoning ordinances
Residential, agricultural, industrial, & commercial
6 effects of zoning ordinances
Land use, lot size, permissible structures, building heights, setbacks, style structures, density, & protection of resources
Describe the difference between restrictive covenants & cc&r's
Restrictive covenants are property use controls established by a past or current owner. CC&r's are covenants, conditions and restrictions are use controls established by the developer
List 3 acts that are prohibited by federal fair housing laws
Refuse to sell or lease, changing the terms, discriminatory advertising, making property unavailable, induce panic selling, changing the terms in financing & denying services. Ex listing property in the MLS
Illegal practice of inducing homeowners to panic sell by representing a protected class is entering the neighborhood
Name the 7 protected classes under federal fair housing laws
Race color national origin sex religion familial status & disability
Who is responsible for prosecuting violations of the federal fair housing laws
Dept of justice
7 additional protected classes under the IL human rights act
Order of protection status
Who administers the Illinois human rights act
Illinois human rights commission
Define source of income as a protected class
Discrimination based on the persons source of income (if it's legal income)
Who can adopt source of income as a protected class
Local municipalities in IL ex cities, villages, and countries
What are section 8 vouchers
A voucher issued by the federal govt to subsidize the rent for persons meeting lower income standards
7 environment hazards associated with real estate
Asbestos, lead based paint, radon, formaldehyde, carbon monoxide, mold, groundwater protection
3 govt entities that regulate environmental hazards.
IL emergency management agency
IL dept of natural resources
2 environmental hazards which require disclosure by the seller or landlord of residential housing
Lead based paint, radon
2 laws that establish liability & clean up for environmental issues
Comprehensive environmental response, compensation, and liability act, superfund amendments and re authorization act
What criteria to provide an owner w an exception under the innocent landowners immunity concept
Caused by a 3rd party, property acquired after the fact, no actual or constructive notice, due care or diligence was used when the property was purchased and reasonable precautions were taken
Who holds the highest level of Liability in a real estate transaction where there are liability issues
Licensees and their clients
6 common contingencies in a real estate purchase contract
Prior home sale
Final property inspection
6 other issues which can detail closings
Damaged property-after acceptance/before closing
Personal property inclusions: real estate taxes
List those who may attend closings
Buyer seller title insurance agent closing agent attorney lenders and agents
What is the licensees role in moving the contract to closing
To ensure that their clients meets the deadlines established in the terms of the real estate purchase contract
7 services covered under RESPA
Real estate agents, lender, title insurance agents, attorneys, appraisers, home warranty agents, property inspectors, & closing agents
What is the purpose of the good faith estimate & who must provide it
To provide consumers buyer/seller of the costs associated with the closing of a real estate transaction and loan terms, the lender
What is a controlled business arrangement
Group of service providers who may offer to package services in a real estate settlement. These are legal if the consumer is clearly informed
6 expenses that are listed on the HUD-1
Real estate taxes
Loan origination fees
Closing agent fees
Mortgage insurance fees
What are the prorated taxes on a RE transaction that closed on June 13th and taxes were 6,248 prior year
Calculate the area in square footage of a lot measuring L-135' x W-77'
Calculate the area in square footage of a room measuring L-12' -6' x W-13'-4'
Calculate the area or square footage of a triangle measuring B-360' x H-609
What is the monthly interest on a loan with an interest rate of 3.75% interest rate w a balance of $238,450
What is the interest rate on a loan of 128,000 w a monthly interest payment of $581.25
What is the NOI if the property is worth $350,000 & rate of return is 9.0%
What is the effective gross income on a property w a scheduled gross income of $32,000 and an estimated vacancy of 10%
What is the value of a property w a scheduled gross income of 48,000$ a 12% vacancy rate, operating expenses of 13,500$ per year, & a rate of return of 7.5%?
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