Freedom Trail practice

APR

includes the interest rate, points, loan fees, finder's fees, and a disclosure of any mortgage penalties. The APR does not include municipal taxes and attorney fees, credit reports, appraisal fees, survey fees, and other closing expenses. As a rule of thumb, if some third party (and not the bank) is charging a fee, it is not included in APR. Note that the APR disclosure requirement is only triggered if specific loan terms are disclosed (e.g. "3% down payment"). It is not triggered if the lender uses vague terms that do not include a specific loan term (e.g. "liberal financing" or "low down payment").

The Statute of Limitations will eventually render a contract:

Unenforceable - The Statute of Limitations (which is the legal time limit for bringing a lawsuit under a contract) renders a contract unenforceable after the legal time limit for enforcement has elapsed.

How long does a home construction warranty last?

For the term stated in the contract

An installment sales contract is also known as

Land Contract, Contract for Deed, Conditional Sales Contract

After the P&S is signed, the sellers of a beach bungalow decide that they would like to bring some of the special sea grasses that they planted around the property with them to their next home. Can the sellers take the sea grasses with them?

Yes, so long as the buyer agrees in writing before closing

Selma, a real estate agent is at a listing consultation with Maria, the seller of a beautiful, brick Tudor home. Maria and Selma discuss getting the property ready for sale and when the property will be listed. Maria gives Selma the authority to put a for sale sign on her property, host open houses and negotiate any offers that come through on her behalf. At the end of the consultation, Maria signs a listing contract with Selma for 3 months. Selma and Maria have what type of agency relationship?

Express Agency: Express agency is when the relationship between two parties is explicitely stated, either in writing or verbally.

Jasper, a real estate agent and June, a seller met one another through a mutual friend at the gym. June casually mentions that sometime in the future she might like to sell her home and move to a sunny location where it never snows. Jasper mentions he might know a friend who would be interested in June's house and could he show it to her sometime. June agrees he can show the house for sale to his friend and any information he wants to know, he can just ask. Neither mentions what their relationship would be in this situation. Which type of agency relationship is this?

Implied Agency: Implied agency is where an agency relationship exists because both parties are acting as though it does, even though it was never explicitely stated what that relationship was. In this case, Jasper is acting as though he is a listing agent and June is allowing it, even though they have not agreed upon that relationship.

Tom represents Rebecca in the sale of her home. Tom's friend, Nick, submits an offer to buy Rebecca's home. Tom knows that Nick would pay a higher price than he submitted an offer for because of a conversation they had over the weekend. He should tell Rebecca:

That Nick would pay a higher price: Tom should tell Rebecca that Nick would pay a higher price, because he has an obligation to disclose to his client (Rebecca) any information that she would want to know in the transaction. This includes information that the agent finds out about the other party to the transaction, including their willingness to pay a higher price.

Sherman Anti Trust laws would make all of the following illegal, except:

Group boycotting, claiming there are "set standard" rates of commission, not allowing for negotiation of commissions and discussing commissions are all violations of the Sherman Antitrust Act. Dual agency is not illegal under the act.

If an appraiser is determining the value of a 17th century church one week and the following week is asked to give an estimate of value for a new construction condo, which method, will be used in both appraisal reports?

Unit in Place Method: The church would likely use the Quantity Survey method to produce a reproduction cost, whereas the new construction condo would likely use the Comparative Unit method to produce a replacement cost. However, both approches will also include the Unit in Place Method, which evaluates the value of the components and the systems, such as HVAC, plumbing, electrical, etc.

A pre-payment penalty clause would most likely be used for which of the following mortgages?

A commercial mortgage: Pre-payment penalty clauses, which require the borrower to pay a penalty for paying off their loan early, are most commonly a feature of commercial loans. They are not common for residential loans.

Maggie applies for a loan at her local bank to buy a home for $300,000. The loan officer tells her that she can get a 30 year loan at a PI factor of 6.12 and an LTV of 80%. What will her monthly payments be?

$1,468.80: We first must calculate Maggie's loan amount based on her 80% loan to value ration: $300,000 x 0.8 = $240,000. Her PI factor is 6.12 ($6.12 payment per $1,000 of borrowed money), so her loan payments are: $240,000 / $1,000 = 240 x 6.12 = $1,468.80.

On August 1st, a seller pays $2,400 for six months of advance taxes. She sells her house on September 1st. What is the proration on the tax bill that she has paid in advance?

Seller gets a credit of $2,000, buyer gets a debit of $2,000: The seller owned the property for one month of the six month period that the taxes have been paid for, so she used $2,400 / 6 months = $400 x 1 month = $400 worth of the taxes, but had paid the full $2,400. She therefore receives a credit of $2,400 - $400 = $2,000, which the buyer owes her at closing.

TILA-RESPA requires that lenders lock in residential home loan terms at least how many day(s) before closing?

3 days: TILA-RESPA requires a 3 day lock-in period before closing for residential loan terms.

In a title theory state, who owns a mortgaged home?

The lender: In title theory states, the lender holds legal title (or ownership) to the home for the duration of the mortgage.

Which of the following hazardous materials must be disclosed by a real estate agent to a potential buyer?

Asbestos

Francine, a Massachusetts real estate broker, is offering residents of Boston, Massachusetts a New Hampshire subdivision for sale. Which of the following statements is most correct?

She must inform the Board of Registration of her acceptance of the listing: Francine must inform the Board of Registration of her acceptance of the out of state property development listing within 7 days of her acceptance. She is not responsible for registering the listing with the Board; the property developer is responsible for the registration.

In the event that the Real Estate Board renders an unfavorable decision against an agent, how many days does the agent have to return his or her license?

7: An agent must forward his or her real estate license to the Board within 7 days of receiving a suspension or revocation notice, even if the agent files an appeal to the Board's decision.

Under the Massachusetts Rivers Protection Act, who would be the one to approve or deny the proposed building of a property along a riverfront?

The local conservation commission: Under the Massachusetts Rivers Protection Act, which amended the Massachusetts Wetlands Protection Act, local conservation commissions have authority over the construction of property in riverfront areas.

A multi-family home in Suffolk County sold for $1,121,075. It was assessed at $1,100,450 and appraised for $1,125,000. What did the seller pay in Massachusetts excise stamps?

First we must round up to the nearest $500 of value: $1,121,500. Then we divide by $500: $1,121,500 / $500 = 2,243 stamps x $2.28 = $5,114

Marty represents a landlord who owns 5 apartment buildings that were all built between 1950-1970. When Marty drafts the leases for the apartments, it's important that which of the following documents are included?

Tenant Lead Law Notification Form

Universal Agent

May represent their principal on any matter. The best example here is a CEO of a business who has been given full board approval to make any decisions for any aspect of the business (hiring, investing, purchasing, product development, etc.).

General Agent

May represent their principal on matters related to one particular business or activity. This could be a property manager who handles all aspects of a client's real estate business or a sport's agent who handles the entirety of someone's career.

Express Agency

Explicitly stated verbally or in writing (e.g. via a listing contract).

Implied Agency

Authority that exists because of the principal and agent's actions, even though it is never directly stated. The equal dignities rule states that an authorization of agency must have the same formality as the services rendered (so if a written final agreement is required, written agency agreements are probably required as well - think of this as the agency corollary to the Statute of Frauds).

Apparent/Ostensible Agency

Authority that does not exist, even though it appears to.

arms-length transaction

a sale with no collusion between the buyer and seller

REITs

Real Estate Investment Trusts are products that derive their value from real estate and mortgages.

REMICs

Real Estate Mortgage Investment Conduits

REMTs

(real estate mortgage trusts) are real estate investment vehicles. They allow indirect investment in either real estate itself (REITs) or real estate loans (REMICs and REMTs), and provide a return that is based on the performance of the national real estate market (or a specific submarket).

Note

The buyer gives the lender a note to evidence their debt

Mortgage

The buyer gives the lender a mortgage to secure the debt (NOTE).

Truth in Lending Act

(also known as Regulation Z or TILA) is a law enforced by the Consumer Financial Protection Bureau (CFPB). Its purpose is to provide consumers with a full disclosure of the costs of credit. This gives the public a way of comparing various lenders. To achieve this, TILA requires lenders to calculate their costs of credit and express them as an annual percentage rate (APR) if they advertise specific loan terms. It also allows a consumer to cancel certain loans within 3 business days (but not on first mortgages for homes).

The Equal Credit Opportunity Act (ECOA)

Passed in 1974, the ECOA prohibits discrimination in lending similar to the Fair Housing Act's protections for real estate, and requires that credit applications only be considered on the basis of income, the stability and source of that income, net worth, and credit rating. ECOA protects against discrimination based on race, color, religion, national origin, gender, age, marital status, and public assistance status. The term redlining is used to refer to any type of credit discrimination. Under the ECOA, it is legal to make lending decisions based on factors other than the protected classes listed in the act. For example, lenders may make or deny loans based on credit score, income amount, source of income (e.g. salary vs commission based), or debt to income ratio.

Title V

Requires septic systems to pass inspection within 2 years prior to a sale (3 years if they are pumped every year), or 6 months after a sale. Seller and buyer decide who brings the system into compliance if it fails inspection. Many people may be approved to perform the inspection, including certified engineers, health officers, home inspectors, Board of Health members, septic installers and haulers, and registered sanitarians.

Mandatory Licensee-Consumer Relationship Disclosure Form

disclosure form is required upon first personal meeting AND when discussing a specific property with any buyers

Tenancy in Common

Tenancy in Common is the default form of co-ownership. Co-owners who purchase property without specifying a type of ownership own in common. Ownership interests may be equal or unequal, but all co-owners have an interest in the entire property that cannot be compromised. This type of co-ownership is inheritable.

Open Listings

Verbal listings are ALWAYS OPEN LISTINGS

If the capitalization rate increases, the value:

Decreases

NOI or Net Operating Income

is calculated by first finding the effective gross income (potential gross income - vacancies = effective gross income) and then substracting the operating expenses (such as day to day maintenance) to get the NOI. Essentially, effective gross income - operating expenses = net operating income. The mortgage is not part of theses equations.

Collateral

The promissory note or note is the evidence of debt. The mortgage is security for the note. Collateral is oftentimes the property and is considered the security for the debt.

Interstate Land Sales Disclosure Act

1) The subdivision contains more than 100 lots or condominiums, 2) They are offering more than 25 lots or condominiums for sale simultaneously, or 3) The subdivision contains lots sized 20 or more acres. This act is designed to avoid fraud when properties are sold without purchasers seeing them, by requiring developers to provide purchasers with a written property report detailing title issues, development details, utility costs, soil conditions, etc., and to provide buyers with a minimum of 7 days to rescind their purchase agreement

Operating Expenses

The costs to run the property. Operating expenses are things like maintenance, insurance, municipal property management, property taxes, etc., and are usually deductible for tax purposes.

Conformity

The idea that maximum value is achieved when a property is more or less in line with the surrounding properties.

Lien theory state

borrower receives deed at closing and lender established lien position

Federal Fair Housing Law

• The Civil Rights Act of 1866 (not a typo!) prohibits discrimination based on race. • The Fair Housing Act of 1968 (the common name for Title VIII of the Civil Rights Act of 1968) extends the Civil Rights Act of 1964's protections to private housing. o It prohibits housing discrimination on the basis of race, color, religion, and national origin. • The Housing and Community Development Act of 1974 added sex to the list of protected classes under the 1968 act. • The Fair Housing Amendments Act of 1988 adds protections for people with disabilities (both mental and physical disability, including HIV/AIDs and drug or alcohol addiction) and for familial status (pregnancy, having children under 18 years old, or adoption). • The Americans with Disabilities Act of 1990 also addresses the rights of people with disabilities. Under the Fair Housing Act and Amendments, there are seven total Federally protected classes: race, color, religion, national origin, sex (including sexual harassment in housing), disability (mental or physical), and familial status.

Metes and bounds

A "metes and bounds survey" is the most common type of land description; it outlines the lot lines (boundaries of the property) by describing directions (bounds) and distances (metes) between monuments (markers, like concrete posts) or benchmarks (permanent markers established throughout the United States), starting and ending at a point of beginning. A datum is a point used to measure elevations, usually defined at the mean sea level of New York Harbor, or some local official datum.

Government Rectangular Survey System

t

Also known as the Public Land Survey System or rectangular survey system. It was established by Congress in the Land Ordinance Act of 1785 to standardize land descriptions, and is used in most of the United States (though not in the original 13 colonies). This method divides land into rectangles using intersection principal meridians (running north to south) and base lines (running east to west). There are 37 principal meridians in the United States, each referenced by name or number, and no parcel of land is described using more than one principal meridian.

Uses Metes and bounds if the tract of land is irregular, too small to describe using quarters or if it does not follow the proscribed lot and block lines, quarter section lines or other fractional lines.

Range and Principal Meridian

Runs north and south

Tiers and Base line

Tiers: Also known as Township lines. Runs east and west

Township

6 x 6 miles and contains 36 square miles (23,040 acres)

Divided into 36 sections 1 x 1 mile and numbered 1-36 running east and west then west to east on alternating lines from north to south. The northeast corner is always is always the 1st section. The 16th section is called the school section.

Section

1 x 1 mile, 1 sq mile or 640 acres.

Quarter section

1/2 x 1/2 mile, 1/4 sq mile, or 160 acres

Quadrangle/check

24 x 24 miles, 576 square miles or 368,640 acres

Half section

1 mile by 1/2 mile, 1/2 s mile or 320 acres

1/2 of a quarter section

1/2 x 1/4 mile, 1/8 sq mile, or 80 acres

1/4 of a quarter section

1/4 x 1/4 miles, 1/16 sq mile or 40 acres

Title insurance insures against:

FOR EXAM: known defects are NOT COVERED by title insurance unless otherwise specified in the question.

Protects against undiscoverable title defects. EX: An undiscovered encroachment, forged deeds, undisclosed heirs, granting party lacked the capacity to grant title. Title insurance Co. perform their own title searches using internal records called title plants and inform the insured of the status of title via preliminary report. DOES NOT COVER: ownership issues that could be discovered by looking at the publicly available records for a property. I.E. zoning issues, publicly recorded restrictions.

Standard Coverage - Title Insurance

Standard coverage covers basic title issues such as forged deeds, incompetent parties, delivery issues, or improper marital settlements

Extended Coverage - Title Insurance

Extended coverage usually adds coverage for issues like tenants and squatters, survey issues, unrecorded easements and liens, and mineral/water right claims.

Title Insurance - 2 separate policies

Mortgagor or Owner Protection - Protection for the purchaser up to the full purchase price of property.

Title Insurance - 2 separate policies

Mortgagee or Lender Protection - Protection for the lender up to the outstanding loan balance

Torrens System - Land Court

is a way of addressing conflicts about property ownership. If petitioned (in an action to quiet title), Land Court will perform a title search and hold hearings to determine who owns a piece of property. In practice, this basically looks like a lawsuit; the parties to the case hire attorneys and go to land court to plead their case. The main difference is that land court cases are often complicated, slow, and rather expensive. Hence why people buy title insurance!

Executor

The executor devises (transfers) real property to the devisees (heirs receiving real property), and bequeaths (transfers) the personal property (the bequest or legacy) to the legatees (heirs receiving personal property).

Codicils

Amendments to a will.

Holographic

Handwritten wills

Nuncupative will

Verbal Will NOT ENFORCEABLE in most stats.

Et ux, et con, et al

Property owned with a wife, with a husband, with others respectively

Adverse Possession

is a legal term for squatter's rights. If a piece of property is used openly and without permission for more than 20 years, the squatter may take legal title to the property. O.N.C.H.A. Open, Nororious, Continuous, Hostile, and Adverse.

Principal

The person hiring an agent. In this context, think of "agent" as a legal term for a person hired to represent you in some matter, and not necessarily a real estate agent. In real estate, the principal could be the client (hiring the broker) or the principal could be the broker (hiring the real estate salesperson), depending on the context

Universal Agent

May represent their principal on any matter. The best example here is a CEO of a business who has been given full board approval to make any decisions for any aspect of the business (hiring, investing, purchasing, product development, etc.)

General Agent

May represent their principal on matters related to one particular business or activity. This could be a property manager who handles all aspects of a client's real estate business or a sport's agent who handles the entirety of someone's career

Special Agent

May only represent their principal on a particular matter or transaction. In real estate, this is the real estate broker. This could be a property manager who handles one single apartment building or a broker who handles the sale of a condo for a client

Subagent

The agent's agent. In real estate, this is the salesperson, co-broker, etc. A subagent works indirectly for the transaction's principal via the special agent's authority, and works directly for the special agent. This is the salesperson who works on behalf of their broker

Express Agency -

Explicitly stated verbally or in writing (e.g. via a listing contract).

Implied Agency -

Authority that exists because of the principal and agent's actions, even though it is never directly stated. The equal dignities rule states that an authorization of agency must have the same formality as the services rendered (so if a written final agreement is required, written agency agreements are probably required as well - think of this as the agency corollary to the Statute of Frauds).

Apparent/Ostensible Agency -

Authority that does not exist, even though it appears to.

O.L.D. C.A.R.:

- Obedience

- Loyalty

- Disclosure

- Confidentiality

- Accountability

- Reasonable Care

FTC (Federal Trade Commission) Do Not Call- fines

Fines for violations of Do Not Call are up to $40,654 per call. As of 2013, pre-recorded calls (robocalls) are also banned without the prior written consent of the consumer being called. Also note that text messages are included under the Do Not Call rules.