principal broker
an individual who performs certain real estate services for another party for compensation. ultimately responsible for the company's activities, notably the activities of other licensees as well as the business's trust accounts.
real estate duties not requiring license
Delivery of a lease application or lease.
Receiving a lease or lease application for delivery to the principal broker, real estate firm, or owner.
Receiving a security deposit, rent payment or related payment for delivery to the principal broker, real est
executive broker
a licensed broker employed and supervised by a principal broker as an employee or independent contractor who can perform real estate services under the auspices of the principal broker, but who also has the authority to supervise associate brokers and sal
associate broker
licensed broker who, as an employee or independent contractor, may perform real estate services under the supervision of a principal broker or executive broker. The associate broker may not supervise any other licensee
to qualify for a Arkansas license
Be of majority age (18 years old).
Satisfy educational requirements.
Satisfy experience requirements.
Pass the appropriate licensing examination.
Demonstrate a record of professional conduct.
Provide evidence of honesty, trustworthiness and integrity.
Com
requirement for brokers license
60 classroom hours in real estate within a 3-year period prior to the date of application, documented by the approved school or other satisfactory evidence
Two years experience as a licensed Arkansas salesperson, or salesperson or broker from another stat
application procedure for initial licensure
for documentation evidencing fulfillment of the requirements previously identified concerning education, experience, character, age, etc
submit payment for the non-refundable application fee as well as the license examination fee.
requested the criminal b
invalidate the results of exam and applicant must reapply an retest
Applicants who pass the exam must pay the license fee and Real Estate Recovery Fund fee within 90 days from the date of the examination. Failure to pay these fees will:
90 days following exam date
Upon successful completion of the examination, the applicant must submit the proper forms and fees to the Commission no later than
a six-month extension
if an applicant fails one of the sections of the exam, he or she is granted a _____ re-take and pass the failed portion. misses deadline he or she must re-take the entire exam.
if the examinee waits more than one year
he or she must re-take the exam and re-apply for the license.
exempt from general portion of exam if:
They passed the general portion in another state, subject to Commission approval; and
The passing grade for such section is no lower; and
The examinee is licensed in another state at the time he or she takes the Arkansas exam.
requirements for non-resident licensure are:
Meet the same requirements as residents; or follow commissions non-resident regulations and meet requirements such as Affiliate with a resident or non-resident principal broker licensed by the Commission etc.
If a resident or non-resident licensee terminates affiliation with a principal briker
the person's license is terminated until such time as a re-affiliation occurs with another principal broker and the nonresident/resident places his or her license on inactive status.
December 31
All Arkansas real estate licenses, active or inactive, expire on___ even in the initial year of licensure
september 30
The deadline for renewing the license without paying additional fees
90 prior to expiration
the Commission will issue a renewed license upon receipt of the application no later than
7 days
Inactive licensees must notify the Commission of any change in name or address within
To activate an inactive license
must complete 6 hours of CE for every year the licensee was inactive, up to a total of 30 hours.
If a license has been expired in excess of 3 years
the reactivation requirement will be the same as a new applicant.
to reactivate an expired license
submit a renewal application, pay the appropriate fee, and satisfy continuing education and any other requirements
On or about July 15th
the Commission sends licensees notice to renew licenses for the upcoming year.
in a specific topic identified by the Commission
At least one hour of the 6-hour requirement will be
the first partial year, nor the following full year of licensure
New licensees are not required to complete the CE requirement in:
At least one hour of the 6-hour requirement
will be in a specific topic identified by the Commission (courses may not be taken twice to meet the requirement)
courses exempt from SBPCE approval are:
Courses offered by Realtor Associations or affiliated councils.
Courses approved by the Commission.
3+-hour real estate-related courses offered by universities or colleges.
new salesperson requirement:
complete 18-hour AREC Post-license course w/in one year following the end of the month of the date of the issuance of the initial license
new broker requirement
complete 30-hour broker course w/in 1 year following the end of the month of the date of the issuance of the initial license. if the broker had completed the SP's post-license course w/in 3 yrs prior to date of licensure, need only take an additional 12-h
no more than 30 days
Commission may issue temporary licenses pending issuance of the permanent license, valid for __
When a licensee leaves the employment of a principal broker he/she must
immediately surrender his or her pocket card to the principal broker
7 days following the termination
principal broker must within _____ notify the Commission of the termination, and surrender the license and card to the Commission. This automatically de-activates the license
to transfer an inactive licenses to another principal broker and Commission issue the a temporary license, licensee must:
file a transfer application signed by the new principal broker, pay fee, and submit a statement attesting to not take listings or other proprietary property of previous broker to the new principal broker
When a principal broker discontinues business operations, or is terminated by an owner
must surrender the license and all licenses of employed brokers and salespersons of the firm to the Commission for conversion to inactive status, and all signage must be dismantled.
licenses of the principal broker and all licensees employed or affiliated with the principal broker
must be retained by the principal broker and displayed in the broker's principal place of business
broker's business identification requirements are:
permanently attached and clear sign bearing the firm's name.
Clear terms that indicate the company is in the real estate business (broker must notify the Commission of any change signage, and furnish photographs for approval)
executive broker
the principal broker must designate an ____to be licensed at the branch as supervisor of all licensees, designation of responsibility must be submitted in writing to the Commission (may not be employed in non-real estate related field)
principal broker
party responsible for all inflows and outflows from the branch's trust account.
independent dealing
license law that licensees are not allowed to practice real estate independently from their principal broker or executive broker
independent dealing
A licensee representing themselves as a principal broker when he/ she is not, is an example of:
Self dealing
license law that licensees in a real estate transaction on behalf of themselves, or a business entity they have an interest, must disclose that they are licensed real estate practitioners (serves to protect the public, notifies principal parties that they
self dealing disclosure must be
made in writing and prior to entering into sale or lease contract
Interference with licensee relationships
violation of license law to improperly interfere w/ licensee's relationship w/ a principal for the purpose of obtaining a referral fee
relationship interference
the party desiring the referral interferes to cause a referral to be paid, or cause the transaction to fail if no referral fee is to be paid (may bring civil action against the offender)
reasonable cause for a referral payment
a cooperative or subagency relationship has been made between the licensees
actual introduction
a referral of a principal to a licensee that occurs prior to the licensee and principal having any material discussions about a specific transaction.
referral fee
any mutually agreed upon consideration to be paid by a licensee to any person or entity
subject to disciplinary action by the Commission: (10)
Obtaining license via fraud; violating rules/regulations of license laws; substantial misrepresentation; inducing parties to take action based on false statements, descriptions or promises; failure to account for moneys in a timely fashion; committing or
executive broker delegations
Sign offer and acceptance forms.
Train and supervise subordinate brokers and salespersons.
Discharge administrative duties including signing and handling transfer documents.
Both principal broker and executive broker
responsible for strict supervision of real estate activities performed by all licensees in the firm or branch
Both principal broker and executive broker responsible for training subordinate licensees in areas of:
Real estate practice; Professional ethics; Changes in laws and regulations of the Commission
the principal broker
consummation of a transaction, including the preparation of documents and the closing itself, must be supervised by ____
the principal broker, OR the executive broker, and the licensee
If principal parties elect to have a 3rd party close the transaction, such as an attorney or title company, provide written closing instructions to the third party; review the client's closing statement, if available; and assurance that the closing is con
immediately delivered to the principal broker
all monies received by licensees in connection with a transaction belonging to others must be
Advance fees
monies charged and received in advance of the performance of any real estate service, such as fees for advertising, listing, or offering a property for sale.
The principal broker must deposit all advance fees
in trust account
the owner of the funds; refund the fee
disbursement of advance fees must be in accordance with the written agreement signed by _____. If an agreement is not completed within a reasonable time following receipt of the funds the broker must ____
Trust funds
monies or other consideration given to the principal broker or subordinate licensees by other parties in connection with a transaction or the rendering of real estate services; Monies deposited in a trust fund account.
No commingling
It is illegal for the principal broker to deposit non-trust fund monies into the trust account, including personal funds or the firm's operating funds, and to place trust funds into a non-trust personal or business account.
principal broker may keep non-trust monies in a trust account in order to:
maintain a minimum balance and to cover service charges
sole responsibility
principal broker maintains ________for all trust funds deposited into and withdrawn from the trust account therefore remains accountable for trust fund activity if designates an escrow agent.
principal broker NOT responsible for T.F accounting if
the parties to a transaction select another, third party escrow agent.
Arkansas Real Estate Foundation, Inc.
Trust funds in Arkansas may bear interest if the principal broker elects to follow the "Interest on Real Estate Brokers' Trust Account Program," the recipient of the interest earned by the account must be
trust or escrow; federally-insured depository institution
All trust fund accounts must bear the terms ___ or ___. The account must be within a____
Principal brokers are required to provide the Commission with a written report of each trust account, including the account's: (5)
Name and number, Bank name and address,Opening date. (also required to report changes affecting the trust account, including firm name changes, changes in principal broker status, and changes to or closing of the account itself)
3 days following the execution of a real estate contract
Trust funds received by the principal broker or designated escrow agent must be deposited into the trust account no later than__.
(or deposited according to written instructions of principal parties)
The lender must charge 4 points to raise the interest rate �% to 5%.
The borrower must pay 4% x $50,000, or $2,000.
A lender wants to yield 5% on a 4.5% loan of $50,000. How many points must the lender charge, and what will this cost the borrower?
monthly
Trust fund accounts must be reconciled ___ to bank statements in writing.
3 years
Reconciliations records must be made available for inspection by the Commission and kept for
deposited in the trust account
All security deposits for leases must be _____.
company trust account
deposits received for lease agreements in properties OWNED BY EMPLOYED LICENSEES unless specifically authorized in writing by the tenant, must be deposited in
A broker may properly disburse funds from an escrow or trust account upon: (7)
1.Interpretation of the contract which authorizes him to hold funds.
2.Securing a written agreement signed by all parties having an interest in funds, and is separate from the contract which authorizes him to hold funds.
3. At the closing of the transacti
the receiving agent and the principal or executive broker
All offers received must be signed by
the listing agent and the supervising broker
all ACCEPTANCES of offers must be signed prior to closing by
(acceptances A-S)
approved by an Arkansas attorney
All forms used to document agreements, prior to use, must be approved by a licensed Arkansas attorney
obtain permission from such listing agent
In order for a selling agent to show or negotiate the sale of a property listed with another licensee, the selling agent must first
the close of the following business day
Offers received by selling agents must be presented to the listing firm by
Time-share estate
A separate estate or interest in property, except for property tax purposes. leasehold or fee interest in property devoted to time- sharing, such as a tenancy in common, time span ownership, or interval ownership, and a time-share lease.
Time share instrument
Any document which creates or regulates time-share programs
Time-share developer
Any person or entity engaged in selling its own time-share estates or time-share use - excluding persons who are acting solely as sales agents
violations of time-share law
Filing false or misleading documents.
Engaging in unlawful practice.
Conducting false or misleading advertising.
Improper handling of purchaser's funds.
Violation of license laws.
Failure to properly register the time-share program.
conducting hearings and suspending the licenses may also revoke the registration of a time-share program in the event the developer fails to comply with the suspension
The enforcement powers of the Commission for violations of time-share law include
Violators of time-share laws are
guilty of a misdemeanor and face fines up to $5,000 and one year incarceration. In addition, they may be sued in civil court and subjected to punitive damages.
Public offering statements; the date of the sale contract
__must be provided to purchasers of a time-share; deadline for furnishing is __ (sale contract voidable if purchaser hasn't received)
5 days
statement of rescission rights declaring that purchaser has ___ after contract execution to cancel the contract.There is no penalty for cancellation.
5 days
following execution of the sales contract, the developer may cancel the contract without penalty Within
Disbursement from the Time-share trust account may only be made when
The rescission period has elapsed on a contract; or
The purchaser has defaulted, at which time the developer may receive the funds; or the monies are refunded to the purchaser.
The three accepted methods of legally describing parcels of real estate are:
recorded plat method, or lot and block method
metes and bounds
rectangular survey system, or government survey method
The description of a recorded plat property presents (3)
the property's lot number or letter, then the block identifier and the subdivision name.
metes and bounds system
must BEGIN AND END at the point of beginning
the government survey system or Rectangular Survey System
is based on sets of intersecting lines.
Principal Meridians
run north and south.
Township lines
are lines running east and west, parallel with the base line and six miles apart.
Base Lines
run east and west
Range Lines
are lines on either side of a principal meridian and are divided into six mile wide strips by lines that run north and south parallel to the meridian.
36 Sections; 640 acres
Each township square is divided into ___ one mile square. One section is also equal to__
sales comparison approach
compares the subject property to similar properties and makes adjustments on the basis of the date of the sale, the location, the physical features and/or amenities.
cost approach
relies on the original cost of the property's land and improvements, the cost to reproduce or replace the property's improvements, and the degree to which the improvements have depreciated. Primarily used for properties with limited comparable data or inc
PHYSICAL DETERIORATION
a form of depreciation caused by the action of the physical elements, such as wind or snow, or just ordinary wear and tear.
Functional obsolescence
a loss of value of an improvement due to functional inadequacies, often caused by age or poor design; may be curable or incurable
Economic obsolescence
a loss of value resulting from extraneous factors that exist outside of the property itself over which an owner has little or no control. Causes might be proximity to nuisances, changes in land use or population, change in zoning
Chronological Age
Actual age in years of the building, based on building date
economic life
Estimated period where an improved property will yield a return over and above economic rent. In the case of an older structure, refers to the period during which the remaining improvements are depreciated for tax purposes. The period which an improvement
Income Capitalization Approach
a value based on the present value of the rights to future income. This is for income generating properties.
Capitalization (Cap) Rate.
the rate of return that an investor would demand for this investment.
An investor wants to purchase a 20 unit apartment complex. Monthly, ten units rent for $900, five for $975, and five for $1,050. Vacancy and collection losses are estimated to be 5% of the potential gross income. Operating expenses are expected to be $95,
The formula for solving for value is V= I/R
To derive (annual) net income, identify potential rent, subtract out vacancy and expenses.Potential income less vacancy = gross income.Gross income - expenses = net income. solve for value by dividing net income
A property purchased for $3,600,000. has a gross income of $500,000 and expenses of $200,000. What is the cap rate, or rate of return for this property?
Net Income divided by Value = Cap Rate.Solve for net income by subtracting expenses from gross income. Next divide net income by the value.The cap rate for this property is 8.33%
An apartment complex is valued at $480,000. The property was appraised using a 10% cap rate. What is the property's net income?
V x R = I Value = $480,000, and the cap rate is 10%.
Multiply $480,000 times 10%. Net income is $48,000.
A man owns a building with 6 apartments. Three of the 6 apartments net him $200 per month and the other three net him $150 each month. For what amount should he sell the building to net 9%?
Income divided by Cap Rate = Value
Total net income = ($200 X 3 = $600 a month X 12 =$7,200) plus ($150 X 3 = $450 a month X 12 =5,400). $7,200 + $5,400 = $12,600 total annual income. Next, divide the net income by the 9% cap rate: $12,600 / 9% = $140,000
10 Principals of Real Estate Value
Highest and Best Use, substitution, law of supply and demand,Regression and Progression,anticipation, conformity, Assemblage, competition, contribution, change
Assemblage
the combining of two or more adjoining lots into one larger tract to increase their total value
contribution
the value of any component of a property is what it gives to the value of the whole or what its absence detracts from the whole
anticipation
Property can increase or decrease in value in expectation of something in the future such as appreciation or rezoning
regression and progression
regression and progression occurs between dissimilar properties. This means the value of the better quality property is affected adversely by the presence of the lesser quality property and a lesser house will benefit from a larger house
conformity
The more the properties are alike, the more they retain value
ad valorem basis
General property taxes are levied on this basis; based on the assessed value of the property
homestead
a parcel of real property that is owned and occupied as a family home
A special assessment
a tax levied against specific properties that will benefit from a public improvement.
Competitive Market Analysis
Real estate salespeople are called upon to provide comparable sales to a seller who wants to list a property for sale
Appraisal Process:
State the problem
Analyze and Interpret using the following information:
Neighborhood Analysis
Neighborhood Cycle
Site Analysis
Estimate Land Value
Estimate the value of the property by the three approaches to value
Reconcile estimated values for the fina
bulk zoning
Controls density and avoids overcrowding, such as restrictions on setback, building height, and percentage of open area, as its primary purpose
Aesthetic Zoning
Requires that new buildings conform to specific types of architecture
directive zoning
Encourages zoning as a planning tool to use land for its highest and best use
nonconforming use
An improvement that does not comply with the zoning ordinances because it was constructed prior to the adoption of the zoning laws, and its use is one that clearly differs from current zoning
gross rent multiplier and gross income multiplier
method used to get general estimates of value based on property's monthly or annual gross income. Value � Monthly rent = Gross Rent Multiplier and Value � Annual rent = Gross Income Multiplier
reserves
the amounts of money (assets) banks are required to keep on hand
lending laws (3)
laws that are for consumer protection in lending. Equal Credit Opportunity Law, Truth in Lending (Regulation Z), and the Real Estate Settlement Procedures Act
The purpose of the secondary mortgage market
to provide liquidity (funds) for the primary market (institutional lenders)
PERSONAL PROPERTY; secondary mortgage market
The promissory note considered to be ___ (readily negotiable) that can be bought and sold. Lenders sell their notes in the ___ to free up money so they can make more loans.
promissory notes
The Secondary Mortgage Market is the market in which these notes are exchanged and funds are provided directly to institutional lenders
holding warehouse agencies
purchase a number of mortgage loans and assemble them into one or more packages of loans for resale to investors
Major warehousing agencies in the Secondary Mortgage Market are: (3)
Federal National Mortgage Association, Fannie Mae (FNMA)
Government National Mortgage Association, Ginnie Mae (GNMA)
Federal Home Loan Mortgage Corporation, Freddie Mac (FHLM)
Federal National Mortgage Association (FNMA)
Sells seasoned mortgages and deeds of trust to individual investors and financial institutions; established in 1938 for purchasing FHA loans from loan originators to provide some liquidity for government insured loans
A seasoned mortgage
mortgage that has been in existence for some time and has a good record of repayment by the mortgagor
Fannie Mae (private!!)
Largest purchaser in secondary market; Quasi-private corp - was government when originally formed, but is now a private corporation
Fannie Mae (Federal National Mortgage Association) (fANNie buys ALL)
Buys FHA loans, VA loans, and conventional loans in secondary market.
more; increase; decrease
when reserve requirements increase: lender is required to keep ___ money in reserve; interest rates __; economic effect: ____ in money available to loan;
less;decrease; increase
when reserve requirements DECREASE: Lender is allowed to keep __ money in reserve; interest rates__ ; economic effect: ___ in money available to loan
Discount rates
the rate at which the "Fed" charges banks for money
more;more; slow down
Discount Rate Paid by Banks INCREASE - Lenders pay __to borrow money; Interest Rates Charged to Consumers: The lender pays more so the consumer will be charged__ ; Effect on Economy:__ economy b/c fewer consumers will be able to qualify for loans
less;less- down; speed up
Discount Rate Paid by Banks DECREASE - Lenders pay __to borrow money; Interest Rates Charged to Consumers: The lender pays more so the consumer will be charged__ so interest rates will go __ ; Effect on Economy: __ economy b/c more consumers will be able
the federal reserve
buys or sells securities or bonds to manage the nation's economy
more,decrease,sped up
When the Fed is buying bonds, there is __ money in the market, interest rates __, and the economy is ___
less; increase; slows
When the Fed is selling bonds, there is __ money available in the market, interest rates __, and the economy __.
mortgage broker
A person, corporation, or firm not otherwise in banking & finance, that either provides its own funds for loans or negotiates, sells, or arranges loans for compensation.
Participation financing; insurance companies
mortgage in which the lender participates in the income of the mortgaged property beyond a fixed return, or receives a yield on the loan in addition to the straight interest rate. ___ partner with developers
To tighten the economy, the Federal Reserve would: (ssir id)
increases discount rates ,Sell securities, increase reserve requirements
Government National Mortgage Association (GNMA) (Ginnie mae buys FHVA)
Buys FHA loans or VA loans. "Ginnie Mae.
Ginnie Mae
controlled by an agency of the Department of Housing and Urban Development
Tandem Plan
a mortgage subsidy program offered by Congress from time to time through the Government National Mortgage Association. "Ginnie" and "Fannie" work together (Maes)
GNMA,GNMA, FNMA
Tandem Plan: ___ is authorized to purchase certain mortgages at below market interest rates so that borrowers can be granted low interest loans. __ then sells these loans at deep discounts, the discount loss being the amount of the subsidy. When these pro
Federal Home Loan Mortgage Corporation, Freddie Mac (FHLMC) (Mac buys"C")
Buys conventional loans.
HUD (Department of Housing and Urban Development)
is the regulator of Ginnie Mae and Freddie Mac (not fannie mae b/c theyre private)
interest; percentage per year
___ is the amount of money that a lender charges for the use of money; always expressed as a ___
simple interest
type of interest charged on a mortgage loan.
principal
loan balance
state law
The maximum rate of interest that can be charged on loans may be set by ____.
USURY
Charging interest in excess of this rate; illegal interest
Discount Points
additional interest,not deducted from the loan, that is charged (debited) at the creation of the loan to increase lenders yield on loans and encourage a lower interest rate
Service Points or Loan Origination Fees
synonym for Discount Points
at closing
Points or discount points are a one-time fee paid __
prepaid interest
total dollar amount of interest and points paid by borrower at closing
One discount point =
One Percent (1%) of the loan balance.
8 points
How many discount points are required to increase the percentage yield 1%?
Multiply $250,000.00 X 2% = $5000.00 debit to the buyer
On a $250,000 loan, the lender charges a 2 point service charge. How much does the buyer have to pay at closing, and how will it appear on the settlement statement?
leverage
principal of using other people's money to make investments, such as buying homes
higher,higher
The lower the down payment, the __ the risk to lender, the__ the "leverage" obtained by the borrower
Loan to Value Ratio (LTV)
the amount of a loan expressed as a percentage of the value of the real estate offered as security
equity
value in a property held by the owner in excess of any liens against it is called
A Factor
the cost per thousand that is required to create the principal and interest payment necessary to pay off the loan
50 times factor of 8.78 = $439 per month for 30 years.
A buyer got a 30 year loan of $50,000 with an interest rate of 10%, a factor of 8.78. What will the buyer's monthly P & I, be?
If the loan is for $150,000 at 7% interest for 30 years and the payment is $998 per month (including principal and interest), what is the principal balance after one payment?
1:Determine the annual amount of interest paid based on the loan balance. 2: Divide the annual amount of interest by twelve to determine the monthly interest amount.3: If the payment of $998 includes both interest and principal, then we can subtract the i
forclosure
legal process whereby the property pledged as security in the mortgage documents or the deed of trust is sold to satisfy the debt
ORDER OF PAYMENT IN FORECLOSURE (4)
1.Cost of Sale
2. Special assessment taxes, and general taxes"ad valorem",
3.The first mortgage, which is determined by the order of recording.
4.Whatever is recorded next would then be paid
judicial forclosure (mortgage=judicial; MJ)
type of foreclosure required to foreclose a Mortgage.
non-judicial forclosure
type of foreclosure required to foreclose on a Deed of Trust
Naked Legal Title (one without possessory rights)
The trustee, in a Deed of Trust, holds a ______ and can claim the property without going through the courts.
Equitable Right of Redemption
gives the borrower the right to clear up the debt prior to the foreclosure sale. right to reclaim the property forfeited due to mortgage default.
Statutory Right of Redemption
the right of a mortgagor to redeem after a foreclosure sale under certain rules and conditions
before, after (ER then SR)
Equitable Right is the right ___foreclosure, and the Statutory right would be ___ foreclosure.
Deficiency judgment against the borrower
If the proceeds from the foreclosure sale are not sufficient to cover the debt, the lender can go to court and seek a GENERAL LEIN applied to borrower's assets.
Deed in lieu of foreclosure
friendly foreclosure" Lender and borrower agree that the lender will become the owner of the property instead of going through the formal foreclosure process. does not clear any junior liens
Federal Housing Administration (FHA) (FHA Insures Loans- FHAIL)
insures loans on real property made by qualified or approved lending institutions
The Department of Housing and Urban Development
who oversees the FHA?
FHA loans
There are no prepayment penalties allowed on
FHA loans are ____ . (1 word)
assumable (no alienation)
one-time mortgage insurance premium
With an FHA loan, the borrower is charged a ______at closing which provides security to the lender in addition to the real estate in case of borrower default on the loan; paid by the borrower or some other party (seller).
FHA, FHA Loan
does NOT build homes nor does it lend money itself. The term ___refers to a loan that is insured by the agency.
The Veterans Administration (VA)
_______will guarantee that a loan made by an approved lending institution will be paid.
Guaranteed Loans
VA Loans; guarantee repayment of loans up to a specific amount
No maximum; $417,000
There is____maximum VA loan but lenders will generally limit VA loans to ___. This is because lenders sell VA loans in the secondary market, which currently places a _____ limit on the loans.
no down payment
it is usually possible for qualified veterans to obtain____ financing
assume liability
VA requires that a veteran ___ for the loan
Certificate of Eligibility
Veteran must first apply for a: __ in order to obtain a VA loan
The VA
what agency will lend money in rural areas where there is no financial institution available?
VA & FHA does not allow
prepayment penalties to be charged
they pay the difference in CASH.
FHA and VA will allow buyer to pay more than appraised value, if __
alienation (assume)
FHA & VA loans cannot have an___clause in the promissory note, mortgage or deed of trust.
The Rural Economic and Community Development (RECD)
formerly known as Farmers Home Administration (FmHA), is a federal lender with the U.S. Department of Agriculture that makes loans for home purchases or construction in rural areas and small communities outside metropolitan areas,having a population of 20
The RECD
requires that borrowers demonstrate a limited income record and a need for housing.
The RECD
Loans are either made directly by ___ or made by a private lender with __ guaranteeing a certain percentage
FHA has an
Adjustable Rate Mortgage Program (ARM)
condominiums ;Graduated Payment Plan Mortgage; rehabilitate a property
FHA has other programs:
FHA 234 - for loans on ___
FHA 245 - ______
FHA 203K - Allows the purchaser to borrow enough money to __
The "standard" and most popular type of FHA loan.
The FHA section 203 B program requires a minimum down payment with the maximum loan based on local market conditions, which vary across the nation.
one-to four-family housing.
FHA insures loans only for
Conventional Loans
-loans w/ No government guarantees or insurance; obtained at local savings and loans, mortgage brokers and mortgage bankers.
Conventional Loans
loans that normally require a larger down payment than FHA or VA
Conventional Loans
loans that do not require insurance with 20% minimum down payments
Mortgage Insurance Premium (MIP).
there are conventional loans available with lower down payments if the buyer is willing to pay a ___.
Conventional Insured Loans -
No government guarantees of insurance but insurance from private insurance companies.
Private Mortgage Insurance (PMI)
is insurance provided by a private insurer that protects the lender against loss in the event of a foreclosure and deficiency.
20% down payment
Insurance is required for all loans with less than
(M.G.I.C.) MORTGAGE GUARANTEE INSURANCE CORPORATION
Largest private insurer is
the appraised value for loan purposes or the sale price
The amount a lender will loan is generally based on_____or____ whichever is lower.
loan applicant's need of financial assistance
A lender or investor is really not interested or concerned with the
qualified buyer
one who has demonstrated the financial capacity and credit worthiness required to afford the asking price
stable income, net worth and credit history
Assessing the buyers' price range depends on three basic factors:
Mortgage to income ratio -
The ratio between the monthly housing expense and stable monthly income.
debt coverage ratio
The ratio of annual net income to annual debt service. For example, a lender may require that a qualified corporate borrower have net income of 1.5 times the debt service of the loan being approved.
items a lender will look at when deciding to qualify a property:
Type of property (residential, commercial, agricultural)
Location Area zoning Value range Neighborhood
Actual age/Effective age/Remaining economic life
Condition (repairs and predications)
Special clearances (code compliance, well and septic certification
abstract and opinion
full summary of all consecutive grants, conveyances, wills, records and judicial proceedings, with a statement of all recorded liens and encumbrances affecting the property and their present status.
encroachments and forgeries
abstract does not reveal such things as
chain of title
recorded history of matters that affect the title, such as ownership, encumbrances and liens, usually beginning with the original recorded source of the title
title insurance
protects a policyholder against loss from some occurrence that has already happened, such as a forged deed somewhere in the chain of title, defects in title to real estate or any liens or encumbrances thereon
A loan underwriter
evaluates a loan application to determine the desirability of the loan; a person working for a lender who reviews a loan application and makes recommendations to the loan committee.
NON-RECOURSE LOAN:
A loan in which the borrower is not held personally liable on the note. The lender feels confident that the property used as collateral will be adequate security for the loan.
NON-RECOURSE CLAUSE
when included in the sale's agreement, the seller of the security is not liable if the borrower defaults.
conditional approval
A written pledge by a lender to lend a certain amount of money to a qualified borrower on a particular piece of real estate for a specified time under specific terms.
impounds
A fund of the buyer's money that the lender sets aside for future needs relating to the parcel of property. Most lenders require it to cover future payments of insurance and taxes.
DISINTERMEDIATION
process of individuals investing their funds directly instead of placing money with banks, savings and loans and other savings institutions.
ESTOPPEL CERTIFICATE
A legal doctrine by which a person is prevented from asserting rights or facts that are inconsistent with a previous position or representation made by act, conduct or silence
EXCULPATORY CLAUSE
A clause sometimes inserted in a mortgage note in which the lender waives the right to a deficiency judgment.
short sale
sale of a secured real property where the sale price is less than what is owed to the lender. Lenders will agree to avoid the delay and expense of a foreclosure action, because it can result in the bank owning the asset and thus carrying a Real Estate Own
MORTGAGOR =
Borrower
MORTGAGEE =
Lender
debenture
long-term note that is NOT secured by a specific property.
Deed of Trust, there are three parties involved. They are:
trustor,benificiary,trustee
trustor
borrower
trustee
Bank Vice President or anyone else designated by the lender (holds naked legal title the right to foreclose with directions from the beneficiary)
beneficiary
bank
acceleration clause
If a borrower defaults on the loan (misses payments, etc.) the lender can call the entire balance due and payable immediately.
acceleration clause
Without this clause in the mortgage or deed of trust the lender would not have the power or right to foreclose
escalation clause
In a mortgage, it allows the interest rate to adjust over the life of the loan. In a lease, it allows the lease payment to adjust over the life of the lease.
alienation clause
Due on Sale Clause". The mortgagee or beneficiary declares the entire balance of the loan due and payable when the property is transferred
alienation clause
When this clause is contained in the Mortgage or Deed of Trust, it prevents the assumption of the loan by a new purchase (*aliens cant assume)
alienation clause
no one can assume this loan or have any interest in the property without permission from me!"
not allowed in FHA or VA
satisfaction piece
puts on public record that the loan was paid, and that the lender no longer has a lien on your property.
recording releases the Mortgage or Deed of Trust lien
deed of conveyance
A document used to transfer legal title from the trustee back to the borrower (trustor) after a debt secured by a deed of trust has been paid to the lender (beneficiary.)
subordination clause
a clause in a Mortgage or Deed of Trust wherein a subsequent mortgage or deed of trust takes priority
assumption
is when the buyer takes over the original payment, the original loan and the original interest rate of the seller's existing loan
subject to
clause in the deed states that the buyers are purchasing the property "subject to the existing loan" the buyers acknowledge the existing loan, and promises to pay the obligation. If the buyer does not pay the original borrower will be held responsible.
assummed
the purchaser is accepting the debt and is, therefore, personally liable for the entire debt
novation
is a second contract to assume liability for the debt for the purchaser and relieve the liability to the seller.
Budget Mortgage or Deed of Trust
a lender requiring tax and/or insurance escrows, By placing money in the account, the lender is assured that the bills will be paid.
disadvantages of real estate investment
Real estate is not highly liquid.
The purchaser of investment property must be prepared to "invest" for the long haul.
There is a high degree of risk in buying and selling investment real estate because market conditions are changing all the time.
the Securities and Exchange Commission (SEC)
Real property securities must be registered with
section 107 of license law
provides that salespersons, executive brokers, and associate brokers can only sue their principal broker for recovery of commissions
has 20 days to file a written answer, signed and dated under oath.
If the director deems that the complaint represents a violation of license law or regulations, the complaint is forwarded to the licensee along with instructions as to how the complaint is to be answered. Upon receipt, the licensee:
Filing a written appeal within 60 days. Paying an appeal filing fee and costs associated with the appeal review.
Complaints that are dismissed without a hearing may be appealed by:
within three years of the alleged occurrence of the violation.
Note that any hearing or investigation of a licensee for an alleged violation of license law or regulation must occur:
30 days prior to the date of the hearing
The director is required to issue notice of an upcoming hearing to all affected parties:.
The notice of a hearing must contain
a synopsis of the charges, the laws or regulations violated, and the place and time of the hearing.
10 days in advance of the hearing date.
the accused licensee may elicit the assistance of the Commission in procuring relevant documents or witnesses the licensee wishes to be present. The filer must demonstrate he or she has distributed copies of the motion to affected parties or their legal r
Any appeal of a ruling must be filed within
15 days from the ruling date.
If a licensee has been found guilty of violating a license law or regulation, the Commission impose any one or more of the following penalties:
License suspension, revocation, or denial of renewal.
Fines up to $1,000 for each violation.
Completion of educational programs.
Completion of the licensing examination.
Placement of conditions on the license or licensee's practice.
Other penalties as dee
actual, compensatory damages
Once a law or regulation violation has been affirmed, the Commission must then determine the amount of damages to be paid.Damages in such cases are limited to
if there are damages in a case, the licensee must pay the amount of the damages awarded within
30 days
real estate recovery fund, 25000 ,75000
If the licensee has not paid within that time frame, the Commission may pay the amount of the damages from the------.The maximum amount the Commission may pay from the Recovery Fund is ----- per violation, to a maximum of -----
the licensee's license is suspended until
the Commission has been reimbursed by the licensee for the damages paid, with interest.
single agency
is when a licensee represents a seller, buyer, landlord or tenant directly and exclusively as an agent.
agents; subagents
All licensees working for the principal broker are __ of the broker and __of the client.
the agent owes the client fiduciary duties
cornerstone of single agency relationship is that
Subagency
when a licensee is acting under the delegated authority of the agent;
Subagents
practice between brokerage firms where "cooperating" licensees are ----- of the listing principal broker
listing broker
since the subagent owes a seller represented by another firm the same fiduciary duties as the lister, there is increased liability placed upon the ----- for the actions of all of the subagents.
dual agency
where the principal broker or a single licensee represents both parties, or where one of the principal broker's agents represents a seller and another of his agents represents a buyer
licensees cannot accept compensation from more than one party without
full written disclosure to all parties to the transaction
Suspension, revocation.$1,000 penalty.Other penalties as appropriate, by case.
Licensees who fail to disclose their agency relationship properly and in a timely fashion are in violation of license law and subject to �17-42-312 sanctions, including:
cash flow
total amount of money remaining after all expenditures have been paid including taxes, operating costs, and mortgage payments.
Livery of Seisin
I own it and I have the right to sell it."
When you sell the entire bundle of rights it is known as
A Freehold Estates
I own the property," it is what we think of as "Ownership."no definite ending date. The estate lasts at least a lifetime, because the property can be willed to a person's heirs, and can be enjoyed without the interference of others.
five ECONOMIC characteristics of land
demand, utility, scarcity,transferrablility,situs
three PHYSICAL characteristics of land:
IMMOBILITY - real estate is permanent
INDESTRUCTIBLE - land is permanent
NONHOMOGENEOUS- (Uniqueness)
SPECIFIC PERFORMANCE
BECAUSE NO TWO PROPERTIES ARE THE SAME, A BUYER CAN SUE A SELLER OR A SELLER CAN SUE A BUYER FOR ___ IF ONE OF THEM REFUSES TO CLOSE.
Uniform Commercial Code
regulates the transfer of chattels and the use of chattels as security for debts
fixture
something which once was personal, but has been installed. Therefore, it becomes real property
Appurtenance (fixture)
a right, privilege, or improvement that belongs to and passes with the transfer of property, but are not necessarily a part of the actual property
ANNEXATION
changes personal property to real property.
SEVERANCE
changes real property to personal property.
Emblements or fructus industriales
Annual crops such as wheat, corn, and vegetables, and are considered personal property
Fructus naturales
Perennial trees, perennial bushes, and grasses that do not require annual cultivation and are considered real property
trade fixture
the personal property of a tenant that is installed, and is necessary for their trade or business, and can be removed by the tenant any time before the end of the lease term
Allodial System
individuals are entitled to own property without proprietary control of the King/Government. All property in the United States
unmarketable
Violation of zoning regulations renders a title
building codes
designed to provide minimum standards. The goal is to safeguard the health, safety, and welfare of the public by regulating and controlling the design, construction, quality, use and occupancy, location, and maintenance of all buildings and structures.
The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)
established a fund called the Superfund, to clean up uncontrolled hazardous waste sites and to respond to spills. It created a process for identifying potential responsible parties (PRPs) and ordering them to take responsibility for the cleanup action. Ad
lead-based paint hazards
The EPA and the Department of Housing and Urban Development (HUD) issued final regulations requiring disclosure of the presence of any known __ to potential buyers or renters
condemnation
is the process by which property is acquired through Eminent Domain
Eminent Domain
_________ _________ is the right of the government (federal and state) to take private property for a necessary public use, with just compensation paid to the owner
escheat
property cannot be without an owner; if an owner dies w/o a WILL and w/o HEIRS, or if the property is abandoned (through lack of paying taxes), the ownership of the property goes to the state.
To take property voluntarily from an owner, the government must do 3 things:
The property owner must be paid compensation for the property.
The property must be for the public good or use.
The owner must have due process in the courts system
leasehold estate
Less than Freehold Estates. I rent the property, There is usually a definite ending date.
Fee Simple (Fee Simple Absolute)
Owns the bundle of rights. Highest degree of ownership .Has unlimited duration .Is inheritable .Is subject to only the government powers
Fee Simple Defeasable
based on an occurrence or a non-occurrence of a specified event;
Fee simple conditional; An estate that dictates, "on the condition that..." An estate that provides the "right to re-enter
Pur Autre Vie
This is a life estate, based on the life of another, rather than the life tenant.
Life Estate in Reversion
The life tenant possesses an incomplete bundle of rights for his/her lifetime. Once the life tenant dies, the life estate portion reverts back to the grantor, who once again has the complete bundle of rights.
Life Estate in Remainder
life tenant owns an incomplete bundle of rights, once the life tenant dies, the remainderman owns the property fee simple, since he now possesses the complete bundle of rights).
Will the property to anyone else.
Waste or destroy the property.
Because a life tenant only owns an incomplete bundle of rights he/she cannot:
Involuntary Life Estates
Legal Life Estates, also called marital rights. Include:
Dower - a wife's interest in the husband's property
Curtesy - a husband's interest in a wife's property
Homestead - protection against unsecured debts for the party who did not sign for the loan
An Estate for Years
has a definite beginning and ending date.
It is not necessary to give notice to the landlord to terminate an estate for years.
Renewal is NOT automatic, when this type of lease is over, it's over.
Many commercial leases and some apartment leases
this type
Estate from Period to Period
Also known as periodic tenancy, or a month-to-month lease.
Proper notice is required to terminate
No definite ending date (this type of lease renews itself).
Most apartment leases, if the tenant is required to give notice to terminate
Estate at Will
Landlord lets you stay without a lease.
Notice can be given by either party without warning.
Death of either party immediately terminates
Estate at Sufferance
Tenant stays past the term of his lease. This tenant is known as a:
Holdover tenant because he/she are unlawfully in possession of the property.The landlord must evict tenant through the courts
Actual Eviction
The landlord's remedy to regain possession of property.
Constructive Eviction
The tenant's remedy if the property is not habitable. The tenant must vacate the property, send notice to the landlord telling him of the problem and put the rent money in escrow until the issue can be resolved.
Gross Lease
apartment; lessee pays flat fee, lessor pays all expenses
Net Lease
Commercial;lessee pays flat fee and a % of expenses,lessor pays balance of expenses
Percentage Lease
shopping mall, lessee pays flat fee and a % of gross sales, lessor pays all expenses
LESSOR
Landlord
LESSEE
Tenant
Ground lease
long term lease, usually 99 years, tenant may build on a property with a ground lease, but the property is still the landlord's.
Index lease
lease is based on some type of index such as Cost of Living etc. Usually adjusts upward.
Appraisal lease
a lease which states a date in the future for a new appraisal. If the appraisal is higher than last appraisal, the rent will go up accordingly.
Graduated lease
cost goes up at regular intervals.
Net lease
the tenant has agreed to pay ownership expenses, usually utilities, property taxes and special assessments.
Escalator Clause
a clause in a lease in which the parties agree to an adjustment of rent based on set increases in taxes, insurance, maintenance and other operating costs.
Non-disturbance Clause
a mortgage clause which Requires that tenants cannot be disturbed if the property is foreclosed upon.
Economic Rent
currently referred to as MARKET RENT, it is the rental income that real estate can command in an open, competitive market at any given time, in contrast with contract rent, or the income actually received under a lease agreement.
Interest equals
Principal X Interest Rate
Solution: The item is paid in arrears, so the seller will be charged and the buyer will be credited.
The number of days the seller owns is 3 months times 30 days plus 10 days in April, or 100 days
The daily proration amount is $1,500 divided by 360, or $4
Assume a simple tax proration using the 360-day method. The closing takes place April 10, and the seller owns the day of closing. The taxes are $1,500 per year, payable in arrears. What is the prorated tax charge and credit at closing, and who is charged
The number of seller days is 23.
The daily rent amount is ($950 � 31) or $30.65
The proration amount is $704.84 ($30.65 x 23)
Subtract the proration amount in #3, $704.84 from the total rent amount $950, which equals $245.05.
Credit the buyer and debit th
A closing is set for March 23, and the tenant's rent is $950 per month. The seller owns the day of closing. How much rent credit does the buyer receive using the 365-day method?
Seller days = 16
Daily cost = $350 � 28 = $12.50
Total proration amount = $12.50 x 16 days = $200
Charge the seller and credit the buyer $200
assume a power bill will be $350 in the month of closing, closing is set for February 16th, the seller owns the day of closing, and the 365-day method is used. The proration will be:
The number of buyer days is 11
The daily interest charge is
$200,000 x .05 = $10,000 interest per year
$10,000 � 360 = $27.78 interest per day
$27.78 daily interest x 11 days = $305.58 interest charge to the buyer.
Assume a buyer's new loan is for $200,000 at 5% interest and the day of closing is August 20th. The interest charge will be for the period between closing and the end of the month. If the buyer owns the day of closing, and the method to be used is the 360
The number of seller days is 13.
The daily interest charge is
$50,000 x .06 (6%) = $3,000 interest per year
$3,000 � 360 = $8.33 interest per day
$8.33 daily interest x 13 days = $108.33 interest charge to the seller.
assume closing is on the 13th of September, the loan principal is $50,000, the rate is 6%, the seller owns the day of closing, and the 360-day method is used. What is the seller's interest charge for the month of closing?
The borrower will owe one month's payment on 6.5% of $300,000, or $1,625. (6.5% x $300,000 � 12).
The monthly payment of $1,896 - interest paid of $1,625 = $271 principal paid.
The new principal balance is $300,000 - 271, or $299,729.
Assume a loan balance for April 1st is $300,000, the interest rate is 6.5%, and the monthly payment is $1,896. What will the principal payment and the ending principal balance be after the next payment on May 1st?
The penalty would then be $50,000 X 1%, or $500. Debit the seller only. The buyer would not be involved in this charge.
assume a seller has owned a property for 20 years and owes the lender $50,000 on the day of closing. The lender is charging a 1% prepayment penalty.
to 'gross up' the seller's proceeds
Price = (Net + Mortgage balance + closing costs)
(100% - X%)
seller's "net
the amount of cash that a seller will walk away from the closing table with after all closing costs, loans and fees have been disbursed
The LTV ratio is expressed as
LTV ratio = (Loan amount � Value)
LTV = $90,000 � $150,000 = 60%
assume a property has a $150,000 and a loan is placed on it for $90,000. What is the LTV ratio?
Tenants in Common
Individual interests in group ownership. Presumed by law unless otherwise stated!
Interests MAY be unequal or equal.
Undivided interest in the property.
All owners have an interest in the whole property.
CAN sell one's interest WITHOUT getting approval of
Partition Law Suit
If other share holders will not buy the interests of a share holder who wants to sell out, and no-one can be found to buy the shares, an individual can request that the courts sell either his/her shares (seek an equitable distribution) or the whole proper
joint tenancy
all owners must take title at the same time.
one deed transferred property from the grantor (seller) to the grantee (buyer)
INTEREST each must have equal interest
undivided interest in the whole property as in Tenants in Common
Grantor (seller)
only the ___ signs a deed to transfer property.
joint tenancy is terminated when any of the four unities are broken:
One sells his/her interest in the property: If there are three joint tenants and one sells his interest to a fourth party, this fourth party becomes a tenant in common with the remaining two joint tenants.
Partition Law Suit
Bankruptcy
Foreclosure
Tenancy By the Entireties
Essentially this is Joint Tenancy plus marriage!
Owners must be husband and wife
Right of Survivorship
Equal Undivided Interest
Inheritable
How can Tenancy by the Entirety be terminated?
Death of either spouse - survivor now owns the property
Divorce - parties become tenants in common
Mutual agreement to sell the property
Foreclosure
No Right of Partition
Yes, married couples may for personal reasons take title as Tenants in Common, or as Joint Tenants.
Can a married couple take title any other way than Tenancy by the Entireties?
Community Property
Another form of ownership in some states for married people
laws have Spanish origin and are therefore more prevalent in the Southwestern United States.
straw man
One who purchases property for another so as to conceal the identity of the real purchaser; a dummy purchaser; a nominee, a front.
direct them to their attorney
if you are asked by a consumer, "How should I take title to my property" how would you reply?