Studied by 8 people
What kind of professionals manage the legal aspects of a development project?
Real Estate attorneys, title companies, surveyors, property insurance companies and government regulatory officials
What types of professionals are involved in the transfer of rights and interest in Real Estate?
Titles companies, Real Estate Brokers/ Sales Persons, Mortgage Brokers, Mortgage Bankers, Appraisers, Insurers
Property is classified into what three types?
Residential, Commercial, and Investment properties
Real Estate Agents in Texas would benefit from belonging to which two trade organizations?
NAR - National Association of Realtors Texas Assoc. of Realtors
If a broker chooses to specialize by geographic area, how might the area be defined?
Natural Barriers, Streets/ Highways, By a certain set of Sub Divisions
What are some of the individual brokerage services that one might perform for a pre-set fee?
Comparative price analysis, prospect screening, site analysis, Database search
The laws most relevant to agents and brokers relate to what topics?
Agency, Contracts, Disclosure, Environmental, Impact, Fair housing,
What are the four sources of real estate law?
FederalGovernment, State Government, Local Government, Courts
Members of NAR (National Association of Realtors) Are Known as??
Realtors
What are the two types of Real Estate Managers?
Property Managers and Asset Managers
Which action is often used to define specific aspects of newly created law?
Court Decision
Market Equilibrium:
a market tends toward a state of equilibrium in which supply equals demand, and price, cost, and value are identical.
Absorption
the amount of available property that becomes occupied over a period of time.
What is the definition of value as it applies to real estate?
The present worth of future benefits that would be gained from owning real property
How do elements of supply, demand and price interact in the market?
In a continuous manner
What type of Real Estate User would be interested in the level of trade area competition?
Retail User
If Price Decreases?
Demand is declining in relation to supply
Types of Real Estate Users
Residential, Retail Industrial, office
Residential User: Retail User: Office: Industrial User:
Quality of life, neighborhood, amenities,price
Trade, area, sales, competition 3)Efficiency, costs of Occupancy, Functionality
Labor pool, availability, supplies, Distribution Channels
How Many members in TREC ( Texas Real Estate Commission)
Nine members - six licensed brokers and 3 members of the public
How long are the terms of TREC commission Members?
Staggerd 6 Year Terms,
How long does the term of a commission member last and when does a term expire?
Commission members serve staggered six-year terms with the terms of three members expiring January 31 of each odd-numbered year.
When will a court order a payment to an aggrieved party from the Recovery Fund?
If a licensee cannot pay the full amount of the judgment ordered by the court, the party may apply to the court in which the judgment was rendered for an order to pay the balance due from the real estate recovery fund.
Three parties that don't need a license to sell Real Estate
Attorneys at law, An Auctioneer, Receivers/ trustees of Bankruptcy working under court order
Which of these persons would need a real estate license? • A college graduate advertises he will sell properties of other students to raise tuition money for college. • A person receives and delivers a $500,000 deposit to her principal broker from a buyer. • A company vice president leases one of the company's warehouses to a storage firm
A college graduate advertises he will sell properties of other students to raise tuition money for college.
Which of these persons would need a real estate license? • A homeowner advertises to lease his improved basement to a college student. • A senior citizen charges an advance fee for referring an individual to her son who owns a leasing office in town. • An attorney licensed in Texas advises a client about how to minimize liability in an upcoming Texas real estate transaction.
A senior citizen charges an advance fee for referring an individual to her son who owns a leasing office in town
What is the experience requirement for an applicant for a broker's license?
At least four years of active experience in Texas as a license holder during the 60 months preceding the date the application is filed
How many members in TREC Commission?
9 board members: 6 members from real estate industry, 3 members from general public • Appointed by governor 6 year terms
Payments from the Trust Account may not exceed?
(For claims arising out of a single transaction)/ (Against a single Licensee)
50,000 and 100,000
broker
an individual who performs certain real estate services for another party for compensation. The broker is
The Education Standards advisory committee has how many members?
12, (appointed by the commission) Serve 2 year terms
Payments from the trust account for claims based on judgements against a single licensee may not exceed a total of what amount?
$100,000
A licensee applicant must provide fingerprints to the DPS within?
6 months of filing
The TREC consists of?
9 members
According to state law you need a real estate license if you..
If you buy/sell real estate on the behalf of others
Land
The legal concept of land encompasses: the surface area of the earth, everything beneath the surface of the earth extending downward to its center, all natural things permanently attached to the earth, the air above the surface of the earth extending outward to infinity
Parcel or tract
A portion of land delineated by boundaries is considered a parcel or tract.
Lands 3 Physical characteristics
immobility, indestructibility, and heterogeneity
Real estate
• land • all man-made structures that are "permanently" attached to the land
Improvements
permanently attached man-made structures to the land
Property
property is not only the item that is owned but also a set of rights to the item enjoyed by the owner.
Real property:
Real property is real estate and the bundle of rights associated with owning the real estate.
Littoral rights
these rights concern properties abutting bodies of water that are not moving, such as lakes and seas.
Riparian rights:
these rights concern properties abutting moving water such as streams and rivers. If a property abuts a stream or river, the owner's riparian rights are determined by whether the water is navigable or not navigable.
Fixtures:
Fixtures are real property converted from personal property by attachment to real estate.
Trade Fixtures/Chattel Fixtures
Trade fixtures are personal property items temporarily attached to real estate in order to conduct business. These items are designed to be removed at some point.
Emblements
Emblements are plants or crops considered personal property since human intervention is necessary for planting and harvesting.
Conversion:
Conversion is the act of transforming real to personal property through severance, or personal to real property through affixing.
simple definition of real estate
is that it is air, water, land, and everything affixed to the land. Real estate in the United States may be owned privately by individuals and private entities, or publicly by government entities. Private ownership rights in this country are not absolute.
What does the legal concept of land encompass?
the surface area of the earth • everything beneath the surface of the earth extending downward to its center • all natural things permanently attached to the earth • the air above the surface of the earth extending outward to infinity
What are the three physical characteristics of land?
immobility, indestructibility, and heterogeneity
What does the legal concept of real estate encompass?
land all man-made structures that are "permanently" attached to the land
What are the two classifications of property?
real property and personal property
What are the four important rights associated with owning a parcel of real estate?
Right to use ( Ex. Mine, Landscape, Build property) Right to transfer (Sell/ Lease) Right to encumber (Mortgage for debt) Right to exclude ( To keep others off)
Land can be laterally divided into what classifications of rights?
Surface rights Subsurface rights Air rights
How are air rights delineated?
By imaginary vertical lines extended to infinity
What do water rights concern?
The rights to own and use water found in lakes, streams, rivers, and the ocean
Growing plants may be either real or personal property. How are they differentiated?
Plants and crops that grow naturally, without requiring anyone's labor or machinery, are considered real property. Plants and crops requiring human intervention and labor are called emblements which, despite their attachment to land, are considered personal property.
Which government entity is the primary regulatory entity of the real estate business?
State government
How is a trade fixture different from a fixture?
A trade fixture has been temporarily affixed to a landlord's real property in order to conduct business and may be detached and removed before, or upon surrender, of the leased premises
The bundle of rights
possession, use, transfer, exclusion, and encumbrance. Property is real or personal, tangible (physical) or intangible (abstract)
Personal property
ownership of anything that is not real estate, and the rights associated with owning the personal property item. Items of personal property are also called chattels or personalty.
Differentiation criteria
intention; adaptation; functionality; relationship of parties; contract provisions.
Regulation of Real Property Interests
Federal regulation- grants overall rights of ownership; controls broad usage standards, discrimination. State regulation- primary regulatory entities of the real estate business; establish real estate license laws and qualifications and sets regional usage standards. Local regulation- levies real estate taxes; controls specific usage. Judicial regulation- applies case law and common law to disputes.
What is is called when you convert personal property to real property by affixing it to the Real Estate?
Attachment
What right allows the property owner to keep others off of the property and to prosecute trespassers?
Exclude
What right concerns lakeside properties?
Littoral Rights
Who is the primary regulatory entity in the business of Real Estate?
State Government
Which Property right includes water rights?
Surface Rights
What right allows the property owner to sell, bequeath, lease, donate, assign ownership?
The right to transfer interests
Which describes personal property?
Anything that isn't Real Property
Why do people purchase property?
Financial reasons Psychological reasons To live in As an investment
Which type of housing is distinguished by its form of ownership rather than the style of architecture?
Condominiums/ Cooperatives
What is the major advantage of a Planned Unit Development (PUD)?
Because it is designed to produce a high density of dwellings with maximum use of open spaces, it usually results in lower-priced homes and a minimum of maintenance cost.
What is the most important factor for a prospective homebuyer to consider in the decision to purchase?
Affordability
Net Proceeds From Sale
=sale price
costs of sale amount realized
Larry and Mary sold their home for $175,000. Their selling costs, including the commission they paid Broker Betty and amounts paid to inspectors, a surveyor, and the title company, amounted to ten percent of the selling price, or $17,500. The amount they realized from the sale was...
$175,000
17, 500 $157,500
Basis
Basis is decreased by any amounts the owner received for such things as easements.
is increased by the cost of capital improvements made to the property
The basic formula for adjusted basis is:
Beginning basis
Capital improvements
Exclusions, credits or other amounts received Adjusted basis
beginning basis
the cost of acquiring the property. the cost includes cash and debt obligations, and such other settlement costs as legal and recording fees, abstract fees, surveys, charges for installing utilities, transfer taxes, title insurance, and any other amounts the buyer pays for the seller.
capital improvements
putting on an addition, paving a driveway, replacing a roof, adding central air conditioning, and rewiring the home.
Looking again at our example from the previous screen, Larry and Mary originally paid $100,000 for their home. They spent an additional $5,000 on a new central heating and cooling unit. Their adjusted basis at the time of selling it is
$100,000
5,000 =$105,000
Amount realized (net sales proceeds)
Adjusted basis
Gain on Sale
Selling price of old home $175,000
Selling Costs $17,500 =
Amount Realized $157,500
Amount Realized $157,500
Adjusted Basis $105,000
Gain on sale $52,500
What did the Taxpayer Relief Act do with regard to capital gains?
Reduced the top rate on profits from 28% to 20% for assets held at least 18 months, retroactive to May 7, 1997. Taxpayers in the 15% bracket now pay 10% tax.
How does the IRS definition of a first-time home buyer differ from the standard definition?
Technically, the person doesn't have to be purchasing his or her very first home. The person qualifies under the tax rules as long as that person did not own a principal residence at any time during the two years prior to the acquisition date of the new home.
What is the difference between a realized and an unrealized capital gain?
A realized capital gain is an investment that has been sold at a profit. An unrealized capital gain is an investment that hasn't been sold yet but would result in a profit if sold
John and Grace Palmer bought their home in 1994 for $150,000. They just sold it for $550,000. How much will they pay in capital gains tax and why?
They have no capital gains to pay. Their profit was $400,000 and they are eligible for a $500,000 exclusion.
they are a couple, which is $250,00 per person exclusion ($500,000 exclusion
coinsurance clause
this clause requires that homeowners have insurance that is equal to 80% of the home's replacement value. (This does not include the price of the land)
Clue Report:
The report reveals major damage or repairs covered by insurance. In some cases, it reveals damages about which the owner contacted the insurance company but did not file a claim.the CLUE Report is not available to the insurer until AFTER closing.The buyers should request for the seller to order one so the buyer can review prior to closing.
Homeowner's insurance policies for condominiums usually provide liability coverage for what types of losses?
For injuries or losses that occur inside the unit. Outside events or damages to the building are not usually covered.
Gary carries an insurance policy that equals 60% of the replacement value of his home. He suffers $8,000 in damage on his home after a windstorm. How will his insurance claim be handled?
it will probably be prorated as follows to give him $6,000: 60% ÷ 80% = 75% x $8,000 = $6,000
What does an endorsement do to a policy?
It modifies the policy in some way that is favorable to the insurance company.
What is important to know (and tell your clients) regarding the CLUE Report?
CLUE is a database of insurance claims against a property from the past five to seven years.
It is not available to insurance companies until after closing (at which time the language in the insurance policy may allow them to reject coverage). Buyers should make their offer subject to receiving and approving a copy of the seller's CLUE report during their option period.
CONDO units owners assessment
if a unit represents a 2% share of the property value, that unit owner's assessment will be 2% of the property's common area expenses.
Cooperatives
Own share in non profit or cooperative association, Share holders acquire a proprietary lease to occupy one of the apartment units
How are condominium properties created
By executing and recording a condominium declaration and a master deed
What are a condominium owner's responsibilities relating to the apartment?
Maintaining internal systems Maintaining the property condition Insuring contents of the unit
What does a person own when purchasing a cooperative unit
Shares in a non-profit corporation or cooperative association, which in turn acquires and owns an apartment building as its principal asset
