Chapter 7

What does PITI stand for?

Principal, Interest, Taxes, and Insurance.

What is Loan-to-Value (LTV)?

The percentage of the property’s value that the lender is willing to finance.

What are seller concessions?

Costs the seller agrees to pay on behalf of the buyer, often a percentage of the sale price.

How do you calculate the monthly PITI for a $250,000 home with 80% LTV?

Loan amount: $250,000 × 0.80 = $200,000; Monthly PITI = $1,450.

How do you find the buyer’s loan amount?

By multiplying the sale price by the loan-to-value ratio.

How are seller concessions typically calculated?

As a percentage of the sale price.

What is the down payment in a property transaction?

The portion of the purchase price the buyer pays upfront.

What are discount points?

Prepaid interest to lower the loan rate; one point equals 1% of the loan amount.

What is the loan amount if the LTV is 90% and property value is $180,000?

$162,000.

How do you calculate the down payment?

Sale price - Loan amount.

What are two discount points on a $190,000 loan?

$3,800.

What is the sale price if the buyer’s down payment is $32,250 and LTV is 85%?

$215,000.

What is the formula to calculate discount points?

Percentage of the loan amount.

What does seller's net proceeds include?

Sale price minus commission, transfer tax, closing costs, and loan payoff.

How do you calculate square footage of a property?

Length × Width × Number of Stories.

How much is 1 acre in square feet?

43,560 square feet.

What is property tax proration?

Sellers owe taxes for days they owned the property.

How do you calculate seller’s net proceeds?

Sale price minus various costs.

How do you calculate the seller's taxes due for part of the year?

Daily tax rate multiplied by the number of ownership days.

What does constructive notice mean?

Legal notice to the public through recording a document.

What does the county recorder do?

Notes filing date/time, assigns recording numbers, indexes, and returns originals.

What are the recording requirements for documents?

Must be signed, notarized, and include grantee’s address, parcel number, and value declaration.

What is a marketable title?

Ownership free of reasonable doubt or claims.

What does the term 'cloud on title' refer to?

Any claim or defect that could challenge ownership.

What is an abstract title?

Summary of all recorded documents affecting ownership.

What is the difference between actual notice and constructive notice?

Actual notice is direct knowledge; constructive notice is public record.

What types of documents are commonly recorded?

Deeds, mortgages, contracts, easements, long-term leases.

What is the goal of a buyer regarding the title?

To obtain a marketable title.

What are the two systems of title in Minnesota?

Abstract and Torrens.

What does an abstract of title include?

All recorded documents affecting ownership and chain linking to the original source.

What does a title report show?

Current ownership and recorded claims with exceptions needing action.

What is the Torrens system?

Land title registration through the court system.

What is the purpose of title insurance?

To protect against financial loss from defects in title.

What is the ALTA?

American Land Title Association.

What is a preliminary title report?

Shows current title condition, ownership, and recorded claims.

What is required to subdivide Torrens property?

A Registered Land Survey (RLS).

What is a quiet title suit?

Legal action to resolve ownership disputes.

What is a lis pendens?

Notice filed to alert others that property is involved in a lawsuit.

What is the EPA (environmental protection agency) Guidance for Licensees?

Agents must identify signs of contamination and recommend inspections.

What is asbestos?

Hazardous mineral used in building materials that can cause respiratory disease.

What must sellers disclose about lead-based paint?

Known lead, provide reports, and give EPA pamphlet.

What makes radon dangerous?

It is odorless and invisible and can cause lung cancer indoors.

What does 'friable' mean in terms of asbestos?

Easily crumbled material that releases harmful fibers.

What happens during asbestos abatement?

Professional removal of asbestos.

What are common signs of mold in a property?

Musty smell, water damage, and leaks.

What is an Environmental Impact Statement (EIS)?

Evaluates the future impact of a project on the environment.

What are some other environmental hazards?

Formaldehyde, CFCs, electromagnetic fields, meth labs.

What is required by federal law regarding lead-based paint?

Disclosure for homes built before 1978.

What is a loss payee clause in an insurance policy?

The mortgage company receives insurance payouts first.

What triggers septic system recertification?

Sale of the property.

What must property managers disclose to renters?

Disclose properties about wells and septic systems.

What environmental issues must be disclosed?

Known contamination issues.

When is environmental contamination disclosure required?

If there are known or suspected issues.

How is radon detected in a home?

Through professional testing.

What does CERCLA (Comprehensive Environmental Response, Compensation, and Liability Act) require?

Cleanup of hazardous waste.

What can happen if a property owner can't afford cleanup under CERCLA (Comprehensive Environmental Response, Compensation, and Liability Act)?

The government may cover the costs.

What is encapsulation concerning asbestos?

Sealing asbestos in place to prevent exposure.

What does a seller have to disclose about their well?

Whether it is in use, not in use, or sealed.

What is the Federal law regarding underground tanks?

Disclosure must be made regarding their presence.

What must property disclosures include?

Material facts known to sellers.

When must a seller provide a lead-based paint disclosure?

Before selling properties built before 1978.

Who regulates the disclosure of petroleum tanks?

State pollution control agencies.

What must sellers disclose about septic systems?

Type of sewage system and whether it has been recertified.

What happens in a construction situation that involves hazardous waste?

Compliance with CERCLA (Comprehensive Environmental Response, Compensation, and Liability Act) is required.

What role does the county recorder serve in real estate?

Keeps public records of all real estate transactions.

What information is included in a title insurance policy?

Coverage details about ownership and protection against defects.

What are special exceptions in a title commitment?

Clouds or defects discovered during the title examination.

What is a mortgage policy?

Protects the lender while the loan is active.

What defines a standard exceptions policy?

Covers known issues listed in the title report.