psi (copy)

Real property - the land plus the real estate plus the legal rights.

personal property - movable things - also called chattels

conveyances - transferring ownership of property

Land characteristics - Physical:

Indestructability - land cannot be destroyed

Immobility - cannot move the land from one place to another

Non-homogeneity - uniqueness, no parcels of land are the same

Economic:

Scarcity - there is a limited about of land

Situs ( area of preference ) - location

Improvement

Permanence of investment

legal descriptions -Metes and Bounds

• Lot and Block (Recorded Plat)

• Government Survey (Rectangular Survey System)

Encumbrances and effects on property ownership - Lien or charge on a property; creates cloud on title

Types of liens and their effect on the title and value- general or specific/ voluntary or involuntary.

Easements, rights of way and licenses, including their effect on the title, value and use of real property- A right to use the land of another for a specific purpose; right of way is a type of easement that allows travel across another’s property.”;A license is permission to use property and may be revoked at any time

Encroachments and their effect on the title, value and use of real property - crossing over your property line onto some one else’s property

Potential encumbrances on title, such as probate, leases, or adverse possession - lease is an encumbrance that runs with the land;Probate is the court process to settle a deceased person’s estate;Open, notorious, continuous, hostile use for the statutory period

Property rights that may be conveyed separately from use of the land surface, such as mineral and other subsurface rights, air rights, or water rights - all rights can be sold separately

Riparian rights (moving water — rivers, streams)

• Littoral rights (non‑moving water — lakes, oceans)

• Prior appropriation (western states — first in time, first in right)

Types of ownership - Sole ownership (severalty)-Ownership in severalty – owned by one person or entity

• Co‑ownership (concurrent ownership) -Tenants in common – undivided interest; no right of survivorship;Joint tenancy – includes right of survivorship;Tenancy by the entirety – for married couples; includes survivorship.

• Special forms of ownership (trusts, business entities, common‑interest ownership)-Condominium – owner holds fee simple to unit and shared interest in common areas;

• Co‑op – owner buys shares in a corporation and receives a proprietary lease;

• Timeshare – ownership for a specific time period each year.;

• Corporation – legal entity; ownership in severalty;

• LLC – offers liability protection and pass‑through taxation.; Trust-Property may be held in a trust by a trustee for the benefit of a beneficiary.;Property owned by an estate is controlled by the executor or administrator.;Life estate – ownership for the duration of someone’s life

• General partnership → all partners manage and are liable

• Limited partnership → limited partners have limited liability

Ownership in severalty/sole ownership - owned by one person or entity

Implications of ownership as tenants in common - undivided interest; no right of survivorship

Implications of ownership in joint tenancy - includes right of survivorship

Life Estate ownership - owning property for the duration of your life

Government rights in land - Police Powers

E- Eminent Domain-The right of the government to take private land for the

public good. The process by which they exercise the right is called

Condemnation. Government must pay fair compensation.

Inverse Condemnation - owner requests the government to take their land.

T-Taxation- the right of the government to tax the property.

E - Escheat - owner dies intestate (without a will) - government takes the

property

Government rights to impose property taxes and special assessments - T-Taxation- the right of the government to tax the property.

Government rights to acquire land through eminent domain, condemnation and escheat - Condemnation. Government must pay fair compensation. Inverse Condemnation - owner requests the government to take their land. Escheat - owner dies intestate (without a will) - government takes the property

Government controls on land use -Building Codes / Zoning / Environment / Rent Control

The right of the state to make laws to protect the public's health, safety and

welfare.

Comparative Market Analysis (CMA) - an analysis of properties that have sold compared

to the subject property to assist a buyer or seller in determining the listing or offering price

BPO - brokers price opinion

Loan financing (for example, points, LTV, PMI, interest, PITI) - points help buy down interest rate; loan to value is the amount trying to be borrowed compared to the value of the property; private mortgage insurance is to insure the lenders on conventional loans; interest is the amount paid to borrow the money; principle, interest, tax, insurance

Types of Loans -Straight Loans - interest only

Blanket - covers more than one property - developer gets partial release as units

are sold.

Wrap Around - owner holds secondary financing; 1st loan stays in place - buyer

pays seller directly.

Owner Take Back

Reverse Annuity Mortgage - persons age 62+.

Adjustable-Rate Mortgage - ARM - interest rate can change.

Conventional loans - non-federally funded or guaranteed loans

Amortized loans- equal periodic payments; interest portion decreases and principal portion increases.

partially amortized (balloon) loans- loan payments that do not equally pay into the principle and interest where there is a remaining balance at the end of the long-term that is usually bigger than the rest of the payment’s; Partially amortized loan – balloon payment at the end

interest-only loans- only paying the interest payment for the duration of the loan until the final payment

Adjustable-rate mortgage (ARM) loans - interest rate changes

Government Loans - FHA

• VA

• USDA

FHA insured loans - Federal Housing Administration-insures the loan, does not make

the loan.

VA guaranteed loans - Guarantees the loan- if no VA-approved lender in the area, VA will make the loan. Charges a one-time funding fee

USDA/Rural Development loan programs - through Rural Housing Development. Makes loans in rural areas.

Real Estate Settlement Procedures Act (RESPA), including kickbacks - prevents kickbacks and

unearned fees.

Equal Credit Opportunity Act (ECOA) - prohibits discrimination in lending.

TRID

Truth-in-Lending Act (Regulation Z), including advertising - to force the lender to tell the borrower the . true cost of getting the loan. Lender must give borrower a Good Faith

Estimate (GFE) (loan estimate).

Risky loan features, such as prepayment penalties and balloon payments - Pre-payment Clause- there will be a penalty if the borrower pays it early.; balloon payments large lump‑sum payment due at the end of a loan because the monthly payments did not fully pay off the loan.

General Contract Law -in order to be a contract, it must have

preformation elements and those must be voluntary, legally competent parties,

for a legal purpose, must be consideration, offer and acceptance and reality

of consent.

Elements necessary for a contract to be valid - voluntary, legally competent parties,

for a legal purpose, must be consideration, offer and acceptance and reality

of consent.

Void, voidable and unenforceable contracts- Valid: Has all of the required elements - fully enforceable in court.

b. Void: Lacks one or all of the required elements - not legally

enforceable.

c. Voidable: Appears to have all required elements - may be rescinded

or disaffirmed.

d. Enforcement: Parties can be made to comply with the terms of the

contract.

e. Unenforceable: Cannot be enforced in court - oral contract for the

sale of real estate (parol evidence rule).f. Statute of Frauds: Contract for the sale of real property must be in

writing to be enforceable.

g. Statue of Limitations: Timeframe within which legal action must be

taken.

Bilateral- Mean it has gone to settlement.

unilateral contracts - Only one party is bound

Rights and obligations of the parties to a contract

Private controls

Deed conditions or restrictions on property use -A condition is a requirement in the deed that, if violated, may cause loss of title.;Restrictions limit the use of the property and run with the land.”

Subdivision covenants, conditions and restrictions (CC&Rs) on property use - CCR's- Covenant, Conditions and Restrictions - usually placed in a subdivision

by the developer and keep the neighborhood looking nice, keeping the values up.

Appraisals - estimate of a property’s market value performed by a licensed or certified appraiser.

Appraisals for valuation of real property- Sales Comparison

• Cost Approach

• Income Approach

Estimating Value -Sales Comparison Approach - appraisal -compares the subject property to recently sold comparable properties.”

Cost Approach -value = cost to build new minus depreciation plus land value.”

Gross Rent - sales price ÷ gross rent.

Gross Income Multiplier

Economic principles and property characteristics that affect value of real property -D - Desirability - must be a demand (cannot sell something that no one wants

to buy)

U - Utility - must serve a useful purpose

S - Scarcity - must be some degree of available supply

T - Transferability - how easy can you transfer the product

Rights and obligations of the parties to a contract -Both Parties Have the Right To:

• Expect performance

• Receive written, signed changes

• Rely on contingencies

• Receive material facts

• Cancel if conditions fail

Both Parties Have the Obligation To:

• Perform according to contract terms

• Sign all changes in writing

• Act honestly and fairly

• Meet deadlines

• Avoid breach

Buyer Obligations:

• Earnest money

• Financing

• Inspections

Seller Obligations:

• Disclose material facts

• Provide clear title

• Allow contractually required access

Possible remedies for breach or non-performance of contract -Specific Performance

• Liquidated Damages

• Compensatory Damages

• Rescission

• Mediation → neutral third party helps negotiate

• Arbitration → binding decision by arbitrator

Termination, rescission and cancellation of contracts -Termination

• Completion of purpose

• Expiration

• Mutual agreement

• Death/incapacity

• Destruction of property

• Breach

• Operation of law

Rescission

• Both parties agree to cancel

• Return to original positions

• Happens when contingencies fail

Cancellation

• Contract ends but parties may NOT return to original positions

• Often due to breach or expiration

Failed Contingency

• Contract becomes void

Purchase and Lease Contracts -Purchase Contracts

• Created by offer + acceptance

• Must be in writing

• Become executory until conditions met

• Earnest money deposited within 7 business days

• Contingencies must be satisfied or contract is void

  Lease Contracts

  • Transfer possession

  • Must be recorded if over 7 years

  • Include gross, net, percentage, and lease‑option

  • Create leasehold estates

  • End by expiration, breach, destruction, etc.

Contract contingencies and methods for satisfying them -Contingencies Must Be:

• Written

• Signed

• Part of the contract

Types Covered in Your PSI Prep:

• Financing -If the buyer cannot get financing, the contract is void

• Appraisal-If the property does not appraise, the lender will not make the loan.

• Inspection - passing inspection

• Sale of buyer’s home-If they can’t sell their home contract is void

Contingencies Are Satisfied By:

• Performance

• Written waiver

• Or they fail → contract becomes void

Once all contingencies are met:

• Contract becomes executed

• Earnest money stays in escrow

Types of leases - Estate for Years - definite ending date, notice to quit not required.

• Periodic estate - no ending date, as long as rent is paid, it extends itself for

another period. Notice to Quit is required - example - one week notice for

week to week; one month notice for month-to-month; three months' notice

for year-to-year.

• Estate at Sufferance - hold-over tenant, lease expired, tenant did not vacate.

• Gross Lease - tenant pays fixed rent.

• Net Lease - tenant pays rent plus expenses.

• Percentage Lease - tenant pays a base rent plus a percentage of their sales.

• Variable Lease - the rent amount is going to change.

• Sale and Leaseback - the owner sells the building, then rents it back.

• Ground Lease - person owns the house but not the land.

• Lease Purchase- tenant is going to buy the property.

• Lease Option -person has a right to buy the property.

Proper handling of multiple offers and counteroffers - Handling Multiple Offers

• Present all offers promptly

• Seller makes all decisions

• Treat all buyers honestly and fairly

• No discrimination

• Maintain confidentiality

• Follow earnest money rules once ratified

Handling Counteroffers

• A counteroffer kills the original offer

• Only the counteroffer remains active

• Seller decides whether to counter or accept

becomes a contract.

Agency and non-agency relationships -Duty to the Client- COLD AC- Care, Obedience, Loyalty, Disclosure, Accounting, and Confidentiality. To your customer, you owe care, honesty, fair dealings and to disclose all material facts.

Agency relationships and how they are established -Express agreement (written or oral)

• Implied actions -created by the actions of the parties

• Ratification -principal accepts the agent’s actions after the fact.

• Estoppel-when the principal allows a third party to believe an agency exists

• Power of attorney-Power of attorney – written document authorizing one person to act for another.” “Attorney‑in‑fact – the person authorized to act.

Types of listing contracts -Listing Agreements - seller hires a broker to find a buyer that is ready, willing and able to purchase on terms acceptable to the seller.

• Exclusive brokerage agreement

• Non‑exclusive brokerage agreement

Powers of attorney and other assignments of authority- Powers of Attorney

• Written authorization for someone to act for another

• Creates an attorney‑in‑fact

• Can grant special or general authority

  Special agent – authorized to do one thing.” “General agent – authorized to do many things.”

Conditions for termination of agency or brokerage service agreements- Completion of purpose – Death or incapacity of either party – Destruction of property – Expiration of the term – Mutual agreement – Breach – Operation of law (bankruptcy)

B. Agent Duties - Special Agent - handling one thing for a client.

• General Agent - handling many things for a client (i.e., property manager).

• Universal Agent - can do anything the client can do (power of attorney).

Fiduciary duties of agents -COLD AC- Care, Obedience, Loyalty, Disclosure, Accounting,

and Confidentiality.

Agent's duties to customers/non-clients, including honesty and good faith Agency Disclosures - To your customer, you owe care, honesty, fair dealings and to disclose all material facts.

Disclosure of agency/representation -Orally at first contact and in writing at first meeting.

Disclosure of possible conflict of interest or self-interest - If you are going to buy, sell or lease a property for yourself personally, you must disclose in writing that you are a licensee. If a member of your family buys, sells

or leases a property and you are the agent, you must disclose in writing that you are a licensee. If a company in which a licensee has an ownership interest, buys, sells or leases a property, and the licensee is the agent, the licensee must disclose the relationship in writing.

• If any member of a real estate team or group buys, sells or leases real estate

themselves, they must disclose that they are a member of a real estate team or group.

Disclosure of material facts and material defects - all material fact and defects must be disclosed

Types of deeds -General Warranty - gives the most protection to the buyer - has five covenants:

• Seisin - the owner says they own the property.

• Quiet Enjoyment - no third party will claim ownership.

• Encumbrances - there are no encumbrances other than those disclosed to thebuyer.

• Further Assurance - the seller will do whatever necessary to make the title

good.

• Warranty Forever- seller guarantees that the title is good.

Special Warranty Deed has Seisin, Quiet Enjoyment and Encumbrances.

Quit Claim Deed - Gives least protection to the buyer. Has no covenants. Does

not even say that the seller owns the property.

Title Insurance and Searches -A title search is done to determine if there are any defects in the chain of title.;Chain of title” refers to the history of ownership.;Abstract of title – a summary of all recorded documents affecting the title.”

Potential title problems and resolutions -

Marketable and insurable title - marketable title a title with no defects, clouds, or unresolved claims; Insurable Title = a title a title company is willing to insure, even if it has defects, as long as they are listed as exceptions.

Closing Process - Closing - face to face closing - buyer and seller settlement (usually) together.

Closing in Escrow - buyer and seller never meet. Parties deliver required

documents and/or money, etc. to the escrow agent. When the escrow agent

has everything, the deal is done.

Doctrine of Relation Bank - if the seller dies after delivery of the deed to the

escrow agent, the transaction still proceeds.

Federal Fair Housing Act general principles and exemptions Protections against discrimination based on gender identity and sexual orientation -It is unlawful to discriminate in the sale, rental, leasing, trading, or exchanging of

property to any person or group of persons based on race, color, religion, sex, national original, familial status source of income, and disability. MREC added creed as a protected class for licensees. In 2001, Maryland legislature added two protected

classes - sexual orientation and marital status, and in 2014, gender identify was added

Federal (7 classes):

• Race

• Color

• Religion

• Sex

• National origin

• Familial status

• Disability

Maryland adds:

• Marital status

• Sexual orientation

• Gender identity

• Source of income

• Creed

Prohibited conduct under Federal Fair Housing Act (Redlining, Blockbusting, Steering, Disparate Treatment) - Blockbusting - inducing panic selling, putting fear into the minds of the owners

• Steering- when the licensee decides where they should live

• Redlining- lenders - "we will not make loans in that neighborhood." "It's the

appraisers, we will give lower values to homes in that neighborhood. Insurance

companies - "we will not insure homes in that neighborhood."

Fair housing advertising rules Legislation and Regulations -Fair Housing Advertising Rules

• Ads cannot discriminate based on race, color, religion, sex, national origin, familial status, disability, source of income, creed, sexual orientation, marital status, gender identity.

• No discriminatory phrases in ads.

• No blockbusting language.

• No steering through targeted ads.

• No redlining‑type advertising.

Legislation

• 1866 Civil Rights Act (race only, no exceptions)

• 1968 Fair Housing Act (race, color, religion, national origin)

• 1974 Sex Act

• 1988 Amendments (familial status, disability)

• Maryland adds: source of income, creed, sexual orientation, marital status, gender identity

Licensees’ status as employees or independent contractors - They are either an employee or independent contractor.

• Independent contractor must have a current salesperson license. At least 90% of income must come from real estate transactions, not the hours they work.

• Must have a written agreement with broker that for income tax purposes,

they are not treated as an employee.

Antitrust laws and types of violations, fines and penalties - Up to $1 million in fines and up to 10 years in federal prison per violation

Do-Not-Call List rule compliance

Proper use of Social Media and Internet communication and advertising -Ads must include brokerage name + phone number

• Ads must be true and factual

• No lotteries, raffles, contests, drawings

• Coupons must have requirements + expiration date

• Must disclose if you or family are buying/selling

• Team members must disclose team membership

• Ads must comply with Fair Housing laws

Protection of confidential personal information (written, verbal or electronic) - Keep all client information confidential

• Protect written, verbal, and electronic information

• Never reveal anything affecting the client’s bargaining position

• Not share private information with customers or the public

• Maintain confidentiality even inside the brokerage (dual agency rules)

• Act ethically and avoid misuse of client information

Duties when handling funds of others in transactions -Earnest money deposit must be turned in with the contract. Money must be deposited in a bank located in the state of Maryland within seven (7) business days of ratification.

Licensee responsibility for due diligence in real estate transactions -the licensee must take reasonable steps to protect the client’s interests, verify important information, and avoid negligence in a real estate transaction.

Equity - value minus debt.

Loan-to-Value ratio -how much of the property’s value is being financed. Loan Amount ÷ Property Value

Discount points and loan origination fees -Discount points are upfront fees paid to the lender at closing to lower the borrower’s interest rate; is a lender charge for creating, processing, and underwriting a new mortgage loan.