National Real Estate Exam Prep

Unilateral Contract

Contract containing ONE promise given in exchange for completing an act. NO obligation to act.

Bilateral Contract

Contract containing TWO promises. Example: A listing agreement is a bilateral contract

Client/Principal

A person who has entered into an agency relationship w/ a licensee & with whom there is a written contract

Customer

Any 3rd party w/ whom a licensee works

In-Company Transaction

Transaction in which the buyer and seller are both represented by the same brokerage.

Management-Level License

A licensee who is employed by or affiliated w/ a brokerage who has supervisory responsibility over other licensees.

Statute of Frauds requires the following:

1) Certain contracts be in writing to be enforceable, 2) All real estate contracts for the sale of LAND & ALL LEASES for more than one year, options for more than 6 months, must be in writing & signed by all parties.

Novation

Substituting a new obligation for an old one. Also, a transfer of rights and/or duties under contract.

If the original party to an agreement is replaced due to novation, are they liable?

No

Mailbox Rule

Acceptance that becomes effective as soon as it is sent in the mail, unless the contract specified a certain means for delivery.

Grantor is the

Owner

Grantee is the

Buyer

Optionor is the

Seller

Optionee is the

Buyer

Lessor is the

Landlord

Lessee is the

Tenant

Vendor is the

Seller

Vendee is the

Buyer

Mortgagor is the

Buyer

Mortgagee is the

Lender

Trustor is the

Buyer

Trustee is the

3rd Party to the transaction

Regulation Z dictates

Disclosure Requirements in Credit Transactions, including the disclosure of the Annual Percentage Rate (APR)

Regulation Z applies to:

ALL REAL ESTATE credit transactions except for commercial loans. For non-real estate transactions, it covers up to $25,000.

The Cooling Off Period is a condition of:

Regulation Z. It gives the customer the right to rescind the transaction for up to 3 business days following the transaction for liens placed on a principal residence.

RESPA stands for

Real Estate Settlement Procedures Act

RESPA requirements include:

1) Lenders must give borrowers a good faith estimate of closing costs.

2) Lenders must give borrowers a HUD booklet describing closing costs, settlement procedures & borrowers rights.

3) Closing agent must prepare a HUD stmt detailing how much was paid to what companies for what services

4) Borrower must be given right to inspect HUD stmt 1 day before close.

5) Lenders & other parties must give full disclosure of all business relationships.

6) Lender must disclose to borrower if the loan is likely to be sold to another investor.

RESPA prohibits:

1) Kickbacks & fees for services not performed in connection w/ the closing

2) It limits the amount of escrow reserves a lender can hold

3) The sale may not be on the condition on the use of a certain title co or escrow co. chosen by the seller.

Annexation is

the act of bringing something or putting something on the land. When determining annexation, value of the item is RARELY considered. The RELATIONSHIP if the parties is more important.

Doctrine of Emblements

says that a TENANT farmer may return to pick the 1st crop after the land has been sold.

Fixtures

Man made attachments

Bundle of Rights

1) Right of use

2) Right of enjoyment

3) Right of disposal

Riparian Rights

Rights of the landowner ADJACENT to a river

Remember "R" - riparian/river

Littoral Rights

rights of a landowner adjacent to a lake

Remember "L" - Littoral/Lake

Appurtenances are rights that go along with real estate and include:

Air Rights, Water Rights, & Mineral rights to name a few.

Fee Simple (also called Fee Absolute)

The best interest in real estate recognized by law; it represents the most complete ownership.

Life Estate

The estate CANNOT be passed on to the life estate holder's heirs.

Pur Autre Vie

A life estate that is dependent up the life of another.

Estate for Years is a type of leasehold that:

Has a specific expiration date or specific term.

Period to Period is a type of leasehold that:

Has no specific expiration but the length is specified (like a month to month lease)

Joint Tenancy

2 or more ownership holders own a fraction of UNDIVIDED interest. Rights of survivorship apply.

The types of deeds are:

1) Warranty Deed

2) Special (or limited) Warranty Deed

3) Quitclaim Deed

4) Special Purpose Deed

5) Transfer on Death Deed.

Warranty Deed

Offers the greatest protection that a deed can give.

Special Warranty Deed (Limited warranty deed)

1) Owner warrants only that he has not done harm to the title

2) Covers only the period of time when the sellers owner the property.

Quitclaim Deed

The seller agrees to convey whatever interest, IF ANY, they have in the property.

The reason a deed is recorded is

for protection against a third party.

Elements necessary to a valid deed:

1) signed & acknowledged by grantor

2) Lists marital status of the grantor

3) Use words of conveyance - also called a granting clause

4) Names & addresses of grantees

5) Acknowledged by Grantor in front of Notary Public

6) Signed in front of two witnesses (in most states)

7) Legal description

8) Delivery & acceptance of deed

Lot & Block System

Subdivision

Township

36 Square Miles

Eminent Domain

The RIGHT of the government to condemn & take the property.

Condemnation

The PROCESS of the government taking a property by eminent domain.

Escheat

The state takes property upon an owners death if there is no will & no heirs exist.

Adverse Possession

A person takes possession & use of a property belonging to another. Possession must be open, notorious, hostile & uninterrupted for a certain period of time.

Abstract of Title

A complete history of ownership.

Encumbrance

A claim or liability that attaches to the land & is held by one who is NOT the fee owner.

Examples of Specific Liens

real estate taxes, mortgages, mechanics liens

Easement

Right to use a property for a specific use

Easement in Gross

An entity's personal right to use property. The receiver DOES NOT own the adjoining property. Example: utility easement

Easement Appurtenant

Runs with the land.

Easement by Necessity

Created when no other access to land exists...right of ingress & egress

Easement by Prescription

Created through continual use over a certain period of time. It must be continual, visible, & w/o approval. Example - a private road becomes public.

License

A privilege granted to an individual for a specific purpose. It is NOT assignable to others.

Accretion

Physical addition to the land by natural forces.

Alluvium (also Alluvion)

The soil on a shore or bank of a river

Lis Pendens

A pending notice of a lawsuit giving notice of a possible claim to the property

Writ of Attachment

A document filed during a lawsuit that prevents a debtor from conveying the property

Fixtures

items of personal property attached to real property that are not removed by the seller

Trade Fixtures

Personal property used in a business and can be removed by the lessee when the lease terminates.

Appraisal

is an estimate or an opinion of value

Market Value

An estimate of probably price on the date of the appraisal.

Market Price

What the property actually sells for

The 3 approaches to value are:

1) Market Data Approach (single family homes)

2) Cost Approach (commercial property)

3) Income Approach (income producing property)

Blockbusting

Encouraging owners to sell their properties because minorities are moving into a neighborhood

Steering

Trying to influence a buyer's housing choice using race, religion, ethinicity, national origin, or ancestory factors as the reasoning.

Redlining

Denying loans in certain areas due to race, religion, sex, familial status, or a disability.

The Civil Rights Act of 1866 Covers:

1) Race

2) Color

3) Ancestry (it's the only act that covers this)

It applies to all property (Real & Personal)

There are no exceptions

The Federal Fair Housing Act Covers:

1) Race

2) Color

3) Religion

4) Sex

5) National Origin

6) Disability

7) Familial Status

It applies ONLY to housing & land for housing

Exceptions:

1) FSBO

2) FSBO - 4 plex

3) Religious Groups

4) Private Clubs

The Federal Equal Credit Opportunity Act applies to:

1) Race

2) Color

3) Religion

4) Sex

5) National Origin

6) Age

7) Marital Status

8) Receipt of Public Assistance

A real estate broker is a

Special Agent

Dual Agent

One broker representing both the buyer & the seller in a single transaction

A salesperson

is a subagent of the client, has no direct relationship to the principal, is only responsible to the broker.

Puffing

an opinion or exaggeration of the property's benefits.

Fraud

Intentional misrepresentation of facts

Violations of the Sherman Antitrust Act include

1) Price Fixing

2) Allocation of the market

Exclusive Right to Sell Listing

1) Only one broker is authorized to sell

2) the broker receives a commission no matter who finds the buyer

Exclusive Agency Listing

1) Only one broker is authorized to sell

2) If the owner finds a buyer, no commission is owed

Open Listing

1) Any # of brokers may be retained

2) The broker who sells the property receives the commission.

After a purchaser signs a sales contract, the salesperson must do which of the following?

1 Keep the original contract & give the purchaser a copy the next day.

2. Give the purchaser a copy immediately

3. Mail the purchaser a copy after the statutory 3 day cooling off period

4. None of the above

Answer: 2, Give the purchaser a copy immediately

Which one of the following is NOT real property?

1 Wall to wall carpeting installed over plywood subfloor

2 Built-in dishwasher

3 drapes

4 sump pump

Answer: 3, Drapes

An unlicensed admin for a property manager can ONLY do which of the following tasks?

1 Collect rents

2 Publish a listing

3 Take a listing

4 Negotiate a contract

Answer: 1, collect rents

All of the following are examples of a specific lien, except:

1 Property Taxes

2 Judgment

3 Mechanic's lien

4 Mortgage

Answer: 2, Judgment

Baker conveys a life estate to her grandson & stipulates that upon her grandson's death the title will pass to her nephew. What is the nephew's interest called?

1 Estate in reversion

2 Estate for years

3 Estate in Remainder

4 Periodic estate

Answer: 3, Estate in Remainder

If a spouse owns a parcel of land separately, the spouse is said to own it:

1 As a joint tenant

2 As a tenant in common

3 As a tenant by the entireties

4 in severalty

Answer: 4, in severalty

Taxes are levied on a property owner to pay for improvements that benefit only that property are called:

1 Fees

2 General Property Taxes

3 Special Excise Taxes

4 Special Assessments

Answer: 4, Special Assessments

The market price of real estate is generally the same as:

1 Sales Price

2 Appraised Value

3 Highest and best use

4 Mortgage loan value

Answer: 1, Sales price

A mortgage note must be:

1 a negotiable instrument

2 Signed by the mortgagor

3 Signed by the mortgagee

4 Recorded to be valid

Answer: 2, Signed by the mortgagor (the borrower)

The Federal Truth in Lending Law:

1 Requires a lender to estimate a borrower's approximate loan closing costs before accepting a loan.

2 regulates advertising that contains information regarding mortgage terms

3 prevents brokers from using a phrase like "FHA financing available" in any ad

4 Dictates that mortgage applications be made on specific government forms

Answer: 2, regulates advertising that contains information regarding mortgage terms

The rights of the owner with property abutting the bank of a stream are called:

1 Littoral rights

2 riparian rights

3 avulsion

4 dominant tenenments

Answer: 2, riparian rights

What is the primary purpose of a deed?

1 Transfer of title

2 proof of ownership

3 recordation

4 legal evidence

Answer: 1, transfer of title

Who would NOT need a real estate license?

1 An attorney selling real estate in an estate

2 a salesperson working on a commission for a builder

3 a property management company

4 a friend selling a neighbor's lot for $1,000

Answer: 1, an attorney selling real estate in an estate