Real Estate

Real Property

Land or any building on it.

Personal Property

Everything not fixed to real property.

Lessor

Owner of the building; landlord.

Lessee

Tenant in the building; has no ownership rights.

Mortgagor

Homeowner or borrower of funds to buy a house.

Mortgagee

The bank or lender providing the mortgage.

Fee Simple

The complete form of ownership of property.

Leasehold

Right to use property for a long period, such as 50 years or more.

Life Estate

An estate sold to someone else while retaining the right to live on it.

General Warranty Deed

Most comprehensive form of deed, offering full protection to the grantee.

Quitclaim Deed

Transfers property title with little to no buyer protection.

Title Insurance

Protects against defects in the property title.

Promissory Note

A signed document containing a promise to pay back borrowed funds.

Default

Failure to pay a loan.

Foreclosure

Action of taking possession of a mortgaged property when payments fail.

Loan Constant

factor that gives real estate investors an idea of how much amortization they are paying at the given interest date and given amortization period schedule

Negative Amortization

Loan balance increases over time due to insufficient monthly payments.

Balloon Payment

Lump sum payment due at the end of a loan term.

Reverse Mortgage

A loan for older Americans that requires no payments until the homeowner moves.

Market Value

Price that a willing buyer and seller agree upon.

Appraisal

An estimate of a property's market value.

Appraiser

• describes the physical and legal characteristics of the propert

Appraisal Process

• Appraiser- describes the physical and legal characteristics of the property

  • Legal description- metes and bounds- tells exact location

• Identify the rights being appraised-

• Lease hold interest-

• Partial interest-

• Purpose of the appraisal- for state, tax, refinancing purposes

• Date of the appraisal

Methods of Valuation

Sales Comparison Approach, Income Appr

Sales Comparison Approach

Valuation method comparing a subject property to similar properties.

Income Approach

Valuation based on the estimate of future cash flows from the property.

Cost Approach

Valuation method considering vacant land cost plus construction cost.

FAR

floor area ratio- the measurement of a building's floor area in relation to the size of the lot/parcel that the building is located on

Lease hold interest

• a contract in which an individual or entity, or in real estate terms, a lessee, leases a parcel of land from an owner or lessor for a set period of time

partial interest

when two or more individuals own a separate portion of an undivided property, ownership is broken up

Purpose of the appraisal

for state, tax, refinancing purposes

Common mortgage clauses

• acceleration clause- mortgage/deed, debt is due immediately, if the borrower defaults under the terms of the contract

• due on sale clause- pay entire loan if being sold alienation clause

• Subordination clause- o adjust priority of lien, effectively makes the current claim senior to any existing claims that have already been recorded

• If something happens to property bank has insurance to fix property? Homeowners policy doesn’t cover big damages such as a flood? 

• The banks is going to want to make sure you have insurance 

Maintenance

letter of repair

Subordination

establishes the order of repayment of outstanding loans or liens on your property if you stop making your mortgage payments;

all leases are subordinate to their lien--  it takes precedence, so leases can’t say they don’t have to pay  

lien- A lien is a legal claim against the property of a debtor in case they fail to fulfill the terms of a contract or some other financial obligation

Workout

• a contract mutually agreed between a lender and borrower to renegotiate the terms on a loan that's in default, often in the case of a mortgage that is in arrears (overdue). Generally, it includes waiving any existing defaults and restructuring the loan’s terms 

Assumption of mortgage

buyer assumers the mortgage and the seller is relieved of all responsibilities

subject to

seller of property is still liable to terms and conditions of the note if the buyer defaults 

Recording

the act of putting a document into official county records, especially for real estate and property transactions, that provides a traceable chain of title

Deed

• is a legal document that transfers real estate ownership from a seller to a buyer

covenant of a deed

• legally binding promises agreeing to protect the grantee against any prior claims and demands of all persons whomsoever in regards to the conveyed land; Covenant of a deed is there forever- Will occur if it is against the law (statute)

Title

a document) that designates the legal ownership of a property or asset

Recourse clause

• ability of the bank to come after you if you default

  • Commercial loans are not included

Types of deeds

• General Warranty Deed

 

• Special Warranty Deed

• Bargain and Sale Deed

• Sheriff’s Deed-

 

• Quitclaim Deed

 

• Executors Deed

Mortgage

a loan used to purchase or maintain a home, plot of land, or other real estate. The borrower agrees to pay the lender over time, typically in a series of regular payments divided into principal and interest. 

Annuity

series of cash flows overtime

discounted cash flow

price your going to pay for the asset

As the amortization period increases, what happens to the loan constant?

it goes down as you have more time to pay it off

Regardless of the amount of money you borrow you will have the same exact loan constant

Amortization

spreading the cost of an intangible asset over its useful life

Loan closing costs

• fees paid when finalizing a real estate transaction and obtaining a loan

 

Loan fees and re-payments

• Third party costs- inspection, survey, appraisal

• Statutory fees- fees that are governed by law

• Additional financing costs- points (pre-paid interest), application fees, loan document preparation fees deducted out of the loan proceeds

Interest only loans

• only paying interest on the loan, paying nothing in amortization