TX Real Estate Finance (4)

Texas Real Estate License Act (TRELA) 1939

Who was the first legislation created to govern the real estate profession in Texas?

Texas Real Estate Commission (TREC) 1949

Which commission was created to enforce TRELA (it's main purpose)? Also regulates educational and licensing programs that maintain standards AND interprets legislation that effects the real estate profession, but these are not it's main function.

1. Inspectors

2. Easement/right of way agents

3. Education providers for real estate and inspection

4. Developers of timeshares

5. Residential service companies

6. Real estate agents and sales brokers

Who does TREC regulate?

Ostensible agency

When a principal allows a license holder to act in such a way as to cause a third party to believe the license holder is the principal's agent?

Agency by estoppel

Agency imposed by law when it is determined that ostensible agency existed; used to create legal accountability for the agent or the principal on whose behalf the agent acted?

Agency by ratification

Created when a license holder acts on behalf of but without prior authorization of a principal and that principal accepts the license holder's action after the fact?

Agency coupled with interest

When an agent is involved in a real estate transaction with a personal interest (either for themselves, a family member, or a business interest)?

Agency by actual authority

Actions taken by an agent for which they have permission whether given through express or implied authority by a principal?

Express authority

When a principal gives an agent authority to act on their behalf by mutual consent either by written or oral agreement?

Implied authority

When an agent takes action that are considered customary for the profession in order to represent their agents interests?

Special agency

A form of agency relationship in which agents are limited in scope and are only authorized to perform acts permitted by their principal (Broker/Client)

General agency

A form of agency relationship in which the principal is responsible for the acts of their agent as long as the agent is acting within the scope of their duties (Broker/ Sales Agent)

Universal agency

A form of agency relationship in which agents have a very broad scope of power to act on behalf of the principal. Agents have the general power of attorney (Child/ Parent)

Honesty and fairness

What are non-fiduciary duties?

1. Have abstract examined by attorney

2. Get a title insurance policy

License holders must advise buyers to do what 2 things?

A loan

What should you advise your buyer client to get pre-approved for before looking at homes in order to put a stronger offer on a home?

Title agent

Who inspects the land titles to ensure there are no liens and seller indeed owns the property?

False - not all third parties are customers

T/F - All customers are third parties and all third parties are customers.

True

T/F - A seller's agent is allowed to help a third party buyer obtain financing?

Material fact

A fact that could possibly persuade a buyer or seller to change their decision if they knew about it.

No

Is TAR's Sales Disclosure Notice (SDN) required to be attached to the sales contract?

Suicide, natural causes, death unrelated to property

What type of deaths on a property do not have to be disclosed when selling a home?

First day property is on market

When should a SDN be filled out?

Stigmatized property

A property on which an event has occurred that is effecting the perceived value of the property?

1. Residential lease less than one year

2. Meeting with a party already represented by a license holder

What are two exceptions to not have to provide a written notice of the IABS?

1. information about broker services notice

2. Opinion about the property’s value

3. The firm’s advertising policy

4. Closing fees that seller pays

5. Net proceeds approximation of sale

6. Firm’s policy on subagency

7. Intermediary consent and broker’s policy on appointments

What are things you will need to discuss before a listing agreement is signed with the seller?

After substantive communication about a specific property

When does TRELA require that an IABS notice be given?

Nothing - you’d be practicing law without a license

What should you enter on Paragraph 15 in the Listing Agreement for Special Provisions?

Day seller signs listing agreement

What is the start date of a listing agreement?

First substantive conversation about a property

When should an IABS notice be given out?

Not licensed under broker’s client, but for opposite party

Who does the subagent work for?

Buyer representation agreement

What is the agreement that is a legal document that represents the relationship between a buyer and broker?

Notice to prospective buyer

What notice should be given to the buyer before acquisition of a property if an agent uses a buyer representation agreement that is does not include the verbiage informing your client to have an attorney review the abstract of title or to obtain a title policy?

Prequalified letter

What is important for the broker to have their prospective buyer obtain from a lender before the enter representation?

OLDCAR

Obedience
Loyalty
Disclosure
Confidentiality
Accounting
Reasonable Care

Actual agency

Actions an agent has been authorized (orally or in writing) to complete on behalf of a principal.

Apparent or ostensible agency

When a principal allows a license holder to act in such a way that allows the third party to believe that the license holder is the principal's agent.

True

T/F? Payment of compensation does not create agency.

True

T/F? Whomever pays the commission does not necessarily dictate the party represented by the agent.

10 days

How long does the broker have to send a notice to the client with the list of houses they showed them in order to meet the requirements of the Protection Period?

First substantive dialogue

IABS should be given to to the buyer at what point?

Statutory dual agency

Amendment in 1993 to the Texas Real Estate License Act to provided guided statutory language to replace the "common law" for dual agency.

True

T/F? In 1996 amendment (Bill 489) took place to introduce intermediary agency as an option.

True

T/F? An act in 2005 made dual representation only possible through a Broker offering through Intermediary process, instead of Dual Agency.

Appointees

What are agents called that represent the seller and the buyer in an Intermediary agency?

Intermediary relationship notice

What notice should be given to the seller and buyer to provide whom the appointers are in the Intermediary agency.

Dual agent

A broker who represents two parties at the same time, acts according to common law obligations and duties, and cannot act against the interest of either party.

Ostensible agency

When a principal allows a licensed agent to act in a way where a third party believes that the license holder is the principal's agent.

Agency by estoppel

An agency that is created by law after the existence of an ostensible agency.

Executory contract

A contract that has not yet been fully performed.

Contract for deed

A contract for the sale of real property in which the seller gives up possession of the property but retains title until the total of the purchase price is paid off.

Mortgage subordination agreement

A legal document used to sort out situations when there are two mortgages on a home, and the homeowner wants to refinance the first mortgage.

Wraparound mortgage

A seller of a property extends a mortgage to a buyer; the seller maintains their original loan and continues to pay it while also receiving mortgage payments from the buyer.

Subject to loan

A loan that gives the buyer the title to the property but lets the seller's financing remain in place.

Exculpatory clause

A clause that relieves the borrower of a personal liability to repay the loan.

Non-recourse clause

A clause that prohibits the lender from seizing any property outside of the property that the loan was secured with.

Recourse clause

A clause that states that if a lender still has a deficit after seizing the secured property, then they have the right to seize other assets of the buyers.

Deed of trust

Borrower grants and conveys to Trustee in trust, with power of sale, or the trustor is conveying the property to the trustee.

Uniform convenant

Standardized terms for mortgage documents used in both mortgages and deeds of trust.

Title theory state

A state where the lender holds legal title to the mortgaged property until the mortgagor satisfies the terms and obligations of the loan. (uses a Deed of Trust)

Lien theory state

A state where the mortgage lender has a lien on the property and the borrower has title. (uses a Mortgage)

Easement appurtenant

An easement created to benefit adjacent land. Runs with the land.

Easement in gross

A personal right to use the land of another.

Express easements

Created by a written agreement between landowners granting or reserving an easement.

Prescriptive easement

An easement created by open, notorious, hostile, and continuous usage.

Lien

Type of security interest that affects the title to the property.

Primary lending discount rate

The interest rate the fed charges

1. Open market activities

2. Reserve requirements

3. Primary lending discount rate

Interest rates are influenced by the Federal Reserve System's what 3 things?

RESPA

Real Estate Settlement Procedures Act

Annual percentage rate (APR)

Ratio of the total cost of financing to the loan amount.

Life time cap % + initial rate % = lifetime

Formula to figure out Maximum Interest Rate?

A portion of an existing loan

What does a lender sell in a participation agreement?

Participant fee

Monthly servicing fee based on the outstanding principal balance of the loan and the participant's percentage shares of any expenses incurred by the lender.

True

T/F? If a lender forecloses on a home and loses money, the borrower will own more income tax if the lender forgives the debt.

No

Is a conventional loan insured and guaranteed by the government?

Housing and urban development

What does HUD stand for?

Mortgage insurance premiums (MIP)

What is used to fund the FEDERAL HOUSING ADMINISTRATION (FHA)?

FHA 203(b)

Under what section of the FHA program insures fixed interest rate loans for owner occupied, one-four family properties AND has more lenient credit requirements?

True

T/F? With a FHA Adjustable Rate Mortgage, can a borrower switch to a fixed-rate loan without refinancing?

Streamline refinance

Process of refinancing a FHA mortgage to get a better rate without having to submit very much documentation and proof of income/employment.

Direct endorsement

A lender that has the approval from FHA to approve without requesting first.

True

T/F? The Housing Expense Ratio is not applicable to VA loans.

Residual income

Amount of monthly income remaining after debts are deducted.

Utility

Does the property fulfill a need, does it have use?

Demand utility scarcity transferability

What does DUST stand for?

Market demand

What does the appraiser focus on when doing a Sales Comparison Approach?

Residential properties and vacant land

Sales Comparison Approach is used for what properties?

Moratorium

A suspension of loan payments for a period of time.

Forbearance

The act of refraining from exercising a legal right.

Recasting

Changing the terms of a loan.

Deficiency judgement

Borrower is held responsible for the remaining amount of debt after the foreclosure sale.

Equitable redemption

The right to redeem property before the foreclosure sale.

Statutory redemption

A specified period in which debtors are allowed to recover their property after a foreclosure sale, and is NOT allowed in Texas.

No

When a third party purchases a foreclosure property at auction, are they encumbered by the debt?

No

Will property inspection information be on the Loan Estimate form?

Yes

A 401K, Retirement, and IRA accounts can be used as credit for income for seniors to qualify for a loan.

Yes

Is PMI (Private Mortgage Insurance) required for a conventional loan with less than 20% down?

Federal home loans bank system (FHLBS)

Which system supports residential mortgage lending and related community investment through its member financial institutions?

Texas department of housing and community affairs (TDHCA)

Which department looks after housing and community development issues such as economic development, infrastructure for rural communities, and energy assistance?

No

Does the Consumer Financial Protection Bureau promote affordable housing opportunities?