Real Estate Exam part 2

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40 Terms

1

Fee simple with executory interest

Automatic reversion to some third name

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2

Fee simple subject to a condition subsequent

No automatic reversion

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3

Fee simple determinable 

Automatic reversion of interest to grantor when violated 

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4

Non-freehold

Created by lease agreement

“Bundle of legal rights”

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5

Remainder

Third party

No rights to occupy the property

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6

Encroachments

intrusion on a person’s territory,  rights, etc.

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7

Variance

permits a change in the specifications required by the zoning ordinance

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8

Restrictive covenants

apply and bind successive owners of the property

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9

Eminent domain

the condemnation of private property for public use

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10

Escheat

reversion of property to state when one dies intestate (no will) with no legal heirs

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11

The cost approach to value

  • estimating buildings replacement costs

    • Requires the value of the land to be calculated separately form the value of the improvements 

    • 5 steps:

      • Estimate value of land

      • Estimate replacement cost

      • Estimate accrued depreciation (economic life)

      • Estimate depreciation from cost new

      • Add depreciation value to the land value

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12

Gross rent multipliers

best for residential 

Used as a guideline for estimating value based on the relationship of sales prices to the rental income

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13

Reconciliation

  • Analyzing the results obtained from the three approaches to value 

    • The sales comparison approach to value

    • The cost approach to value 

    • The income approach to value

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14

Installment contract

Owner financing

Seller keeps title to property

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15

Promissory note

makes the borrower personally liable for the debt 

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16

Satisfaction of mortgage

once loan is paid in full, lender will record a satisfaction piece to have the lien removed from property

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17

Subordination agreement

an existing mortgage loan that can have its lien priority lowered

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18

Secondary

  • Includes:

    • Fannie mae, freddie mac, ginnie mae

      • Buys FHA loans make from primary market

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19

A fully amortized loan

  • Fixed payments and interest

  • Last and first payments are the same

  • Payable in periodic installments that are sufficient to pay the principle in full during the term of the loan

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20

A straight loan

  • Interest only (no principle)

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21

A partially amortized loan

  • Fixed payment and interest

  • Last payments are balloon

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22

Purchase money mortgage

  • Owner financing

  • Buyer gets title

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23

Open-end mortgage 

Borrower is pre-approved for up to a predetermined amount, borrower can make draws on the loan periodically

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24

A lis pendens

a notice that a lawsuit is pending

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25

Statute of frauds

contracts must be in writing

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26

Statute of limitations

sets deadline with in lawsuits can be filed

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27

Substitution

property’s value based on equally desirable substitute properties 

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28

Subordination

makes other debts secondary to the claim of the mortgage lender

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29

Disposition

allows for the tenant to sublet or assign the lease

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30

Repossess

to take back property

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31

Net

requires tenant to pay part or all operational and maintenance costs

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32

Gross

requires landlord to pay all operational cost

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33

Devise

conveyance of title right by will

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34

Deed in trust

a third party holds title to property on behalf of someone else

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35

Demise

conveyance by lease agreement

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36

Eminent domain

the power of the government to take private property for public use

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37

Escheat

the reversion of real estate to the state because of the lack of heirs or other persons legally entitled to own the property

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38

Estoppel

oral expressions of an intent to abandon, do not terminate an easement unless in writing or accompanied by action 

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39

Defeasance clause

ends the mortgage when all payments are made, transferring title to the property back to the mortgagor and terminating lender's interest in the property

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40

Granting clause

in the premises paragraph of the deed that conveys the rights and privileges of ownership

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