Pennsylvania Real Estate Exam Prep

Real estate

Land, plus all things permanently attached to it

Real Property

Legal rights that come with owning real estate

Bundle of Rights

1.possession

2.disposition

3.control

4.enjoyment

5.exclusion

Right of Possesion

right to occupy the property and hold title to it

Right of Disposition

to sell, transfer, encumber, or dispose of the property

Right of Control

control how the property is used

Right of Enjoyment

Any legal use of property

Right of Exclusion

the right to decide who may or may not access the property

Chattel

personal property, not included in real estate sale

Fixture

personal property that's been permanently attached to land

MARIA

method of determining fixture

Method of attachment

Adaptability

Relationship

Intention

Agreement

Emblements

crops/personal property

Trade Fixtures

Personal Property in business ex.display cases, industrial oven

Legal Description

accurately and specifically describes where a property is located and the size of the lot

Metes and Bounds

identifies boundaries of a property from one point to the next. Uses monuments. gives distance and direction in between each point.

Lot and Block

uses reference numbers from plat map

Government survey

A method of land description based on townships and sections. (Rectangular survey system).

Area

Area= length x width

Livable area

all heated interior space, excludes attic/ unfinished basements

Rentable area

area tenant lives in plus shared community spaces/stairwells

Useable area

area tenant lives in, not communal spaces

Survey

Licensed surveyor

legal description, map showing exact dimensions and improvements,

1 Acre

43,560 square feet

1 Mile

5280 feet

1 Square Mile

640 acres

Mineral, Air, Water rights

surface, subsurface, and air rights can be sold or leased at owners discretion

Riparian Rights

An owner's rights in land that borders on or includes a stream, river, or lake. These rights include access to and use of the water.

Prior appropriation

state assigns water rights according to a beneficial plan

Encumberance

Limitation on ownership

ex. lien, easement, encroachment

Liens

claim or charge against property

always financial

Voluntary Lien

Lien placed by owner of property

ex. mortgage

Involuntary Lien

Lien placed against owner

ex. mechanics lien

Specific Lien

Runs with property

Attached to specific part of property

General Lien

A lien that attaches to all property owned by an individual. Real and personal. Always involuntary

Mortgage Lien

Borrower (mortgagor) grants the lender (mortgagee) a lien on their property to protect the loan. Voluntary and specific

Mechanic's Lien

Lien placed on property when labor/materials are used to improve a property. involuntary specific

Tax Lien

Used if property taxes aren't paid

involuntary specific

highest importance when being paid back

Judgement Lien

filed by creditor that won monetary charges against property owner

Easement

Right to use someone else's property for a specific purpose.

"right of way"

transfer with the land

Easement Appurtenant

Exists between adjoining properties

dominant tenement= person benefiting, person allowed to cross

servient tenement= property allowing access to be crossed

Easement in gross

does not require adjoining land, mainly used by utility companies

Easement by Grant

Owner of property allows owner of another property access to a specific part of their property

Easement by Necessity

court order allowing access to someone's property to allow another onto their own property

Easement by Prescription

Someone uses property without owner's permission for a continuous amount of time and the court approves the use

Encroachment

improvement that crosses property boundaries

ex. fences

Deed Restrictions

Clauses in a deed limiting the future uses of the property.

Freehold Estate

ownership lasting indefinitely

Fee Simple Absolute

most complete form of ownership, owner is entitled to full bundle of rights until death which is then passed down to their heir

Fee Simple Defeasible

Full ownership of bundle of rights but is limited in the deed by a condition or event that must be met.

ex.school must be used as school, if school closes the property goes to whomever is listed in the deed.

Life Estate

full bundle of rights, but ownership ends when life of owner/other person

Remainderman

person listed in deed to take over life estate after death

Ownership in severalty

Ownership by a single individual, as opposed to co-ownership.

Tenancy in Common

two or more people with (not always equal) shared ownership on a property. if an owner dies their share does not go to the people left alive it is passed to their heir or according to state law.

ex. friends buying a vacation home

Joint Tenancy

A form of co-ownership that includes equal shares of the property and the right of survivorship. when one dies their share is transferred to the remaining owner(s) if one sells their share the people left are joint tenancy and the new owner is tenancy in common

Tenancy by Entirety

Married couples, equal 50/50 split, right of survivorship, if marriage ends ownership becomes tenancy in common, one can't sell their half w/o permission from other spouse

Condominiums

real property but the property owner has fee simple title to the unit and a share in common areas. All condo owners in a complex are tenants-in-common in the common elements.

Cooperatives

person doesn't own property, instead holds stock in the property resulting in the ability to occupy a certain unit by proprietary lease

ex.apartment living

Time-share

fractional interest in property, usually vacation homes, person may occupy property during certain time mapped out in contract.

Taxation

governments right to impose property taxes

Escheat

governments right to acquire title if no will was made or no heir is located

Police Power

right to establish regulations regarding the use of land.

ex. zoning/building departments

Eminent Domain (Condemnation)

right of government to take property for a fair price if the reasoning for taking it is for the public good

Inverse condemnation

An action brought by a property owner seeking just compensation for land affected by the government trying to "better the area"

ex. man needs just compensation to move his farm due to environmental changes from a large government building built next door

Varience

permission to do something on a property that isn't within zoning regulations.

Transfers with title

CERCLA

Comprehensive Environmental Response, Compensation, and Liability Act.

overseen by Environmental Protection Agency (EPA).

requires responsible parties to pay for clean up of hazardous waste sites (superfund sites)

CC&Rs

(covenants, conditions, and restrictions)

restrict style, potential use, and appearance of property in the community

Sales Comparison Approach

most accurate for residential properties

Income Approach

Income and Investment properties

ex.commercial buildings, multifamily buildings

formula: value= net operating income(NOI)/capitalization rate(R)

Cost Approach

used to find replacement/reproduction value of property

ex.church, new construction

Reconsiliation

When the appraiser looks at all three comparison methods and chooses the best to go with, and decides the assessed value of a property

Market Value

most likely price a property will sell for in an arms length transaction on the open market

Insured Value

cost of replacement

Investment Value

Value to investors based on the amount of income a property can generate

Liquidation Value

Price a property will most likely get in a forced sale

ex.foreclosure

Assessed Value

Value used to determine property taxes

DUST

4 components of value

Demand

Utility

Scarcity

Transferability

Demand

higher demand higher price, lower demand lower price

Utilty

the more useful a property the more valuable

Scarcity

Value increases with lack of availability

Transferability

property loses value if it can't be transferred to another

ex.clear title needed

Tax Depreciation

benefit of owning, can take tax deductions each year over the term of its useful life according to the IRS schedule

Comparative Market Analysis (CMA)

Comparing similar properties to one another to get an appropriate listing price, done by agents not licensed assessors.

Primary Mortgage Market

the mortgage market in which loans are originated, consisting of lenders such as commercial banks, savings associations, and mutual savings banks.

Secondary Mortgage Market

A market for the purchase and sale of existing mortgages, how the banks earn their money back, investors

Fannie Mae

Federal National Mortgage Association (gov sponsored)

Freddie Mac

Federal Home Loan Mortgage Corporation (gov sponsored)

Points

fees paid to a lender and computed as a percentage of a loan 1 point=1% of loan

Loan to Value (LTV)

The percentage relationship between the amount of the loan and the appraised value or sales price (whichever is lower). high LTV is higher risk, low LTV is lower risk

Private Mortgage Insurance (PMI)

A type of insurance used to protect lenders if a borrower puts less than 20% down on a home purchase, or if LTV is higher than 80%. PMI is removed once equity reaches 22%

PITI

Principal

Interest

Taxes

Insurance

Deed of Trust

A deed to real property, which serves the same purpose as a mortgage, involving three parties instead of two. The third party holds title until full loan is paid. Beneficiary (Lender), Trustor (Borrower), Trustee (Third Party)

Promissory Note

contract between borrower and lender spelling out terms of loan, borrowers promise to repay

Alienation Clause

Part of promissory note, gives lender right to ask for full return on loan if homeowner transfers property

Acceleration Clause

gives lender right to foreclose on property if homeowner defaults on loan

Assumption Clause

allows a new borrower to take over the payments on an existing loan under specified terms and conditions, most loans don't allow this

Conventional Loans

issued by commercial lenders, typically require at least 20% down payment, often sold to Fannie Mae and Freddie Mac

FHA Insured Loans

A loan insured by the Federal Housing Administration and made by an approved lender in accordance with FHA regulations. allows lenders to offer loans to less qualified buyers. 3.5% downpayment, must pay mortgage insurance premium (MIP) for life of loan

VA guaranteed loans

help veterans obtain home mortgage loans with favorable terms for which they might not otherwise qualify. allows 0% downpayment

USDA loan programs

Administered through the U.S. Department of Agriculture. These programs target rural and low-income borrowers purchasing homes in rural areas and farmers needing loans to purchase or operate family farms.

Amortized Mortgage

borrower pays the same amount each month. Principal and interest payments happen hand in hand so both are paid off by end of loan