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Arizona Real Estate/National study
Arizona state and national study
143
Real Estate & Planning
Professional
04/22/2010

Additional Real Estate & Planning Flashcards

 


 

Cards

Term
Acre foot
Definition

Measurement of water

equals 43,569 cu. ft

325,851 gallons

Term
Corporeal
Definition
Tangible or physical real property
Term
Incorporeal
Definition

Non-physical attachments-

hereditaments, right-of-way...

Term
Emblements
Definition
Crops growing, which require annual care - belong to the tenants
Term
Industrial fruits
Definition
Money crops, can be harvested by prior owner after their departure
Term
Eminent Domain
Definition
Govt's right to take back property(usually through condemnation)for public use. Must pay owner FMV
Term
Narural fruits
Definition
Regarded as part of the RE, permanent, don't require annual planting or care
Term
Private controls
Definition
HOA's, CCR's - restriction on use of property
Term
Prior appropriation
Definition
Water rights- First-time-in is First-in-right
Term
Situs (law of)
Definition
The aspects of location which create the market value of a parcel
Term
Treasurer's Deed
Definition

Given after all redemption periods (Tax lien sale)

 

redemption period 3 years + can extend for 1 year after the certificate of purchase was issued

Term
Chattel Real
Definition

An intangible personal property right - attached or annexed to real estate -

ie. lease

Term
Concurrent tenancy
Definition

aka: Tenancy in common

Need not be married, may be more than two, each tenant holds and undivided fractional interest - can be disproportionate

Term
Co-Tenants
Definition
Co-owners of land, who share an undivided interest - cannot be separated from the whole
Term

Defeasable Fee

(Fee estate-freehold-inheritable)

Definition

Ownership can be defeated

 

Rights of ownership in RE are dependant on the occurance, or non-occurance of a certain event

AKA: fee simple defeasable

Term

Fee Determinable

(fee estate- freehold- inheritable)

Definition

Aka: fee simple determinable

Statements "so long as", "while or during" used typically - time/date driven

 

AUTOMATICALLY terminates rights of new owner

Term

Fee Conditional

(Fee estate-freehold-inheritable)

Definition
"provided that", "on the condition that" statements are typically used. Former owner MAY take legal action
Term

Dominant

(easement)

Definition
Dominant tenement is the land that benefits from an easement
Term

In gross

(easement)

Definition

Benefits an individual or legal entity, rather than a dominant estate. Not required to own adjacent property

(utilities)

Term

By necessity

(easement)

Definition
Needed for access to landlocked parcels.
Term

By prescription

(easement)

Definition
Implied easements - easement holder has used property for 10 yrs - open, notorious, hostile
Term

Servient property

(easement)

Definition
The land that bears the burden of an easement
Term

Estate at sufferance

(Types of leasehold estates)

Definition
The interest an owner has when a tenant holds over w/o the owner's consent after expiration of lease
Term

For life

(Life estates-freehold-not inheritable)

Definition
A possessory freehold estate or interest in real property being held for the duration of the life of a named person. Can be the person holding the estate,  or the life of another
Term
Of inheritance
Definition
All freehold estates can be inherited and can descend to heirs, except life estates
Term

Of years

(aka: (leasehold) estate for years)

Definition
A leasehold interest in land, by virtue of a lease contract - possession for a definite, specified and limited time for 1 year or less - notice to terminate is not required
Term

At will

(aka: Tenancy At Will / leasehold estate)

Definition
leashold for an indefinate or unspecified period - can be terminated by either party
Term

In remainder

Life estate - future estate)

Definition
A future interest given by the grantor to a third person to take effect on the termination of a life estate
Term

In reversion

(life estate - future estate)

Definition
Estate left by the grantor for himself or herself, to begin after the termination of some particular estate granted by him or her. For example, a landlord has an estate in reversion that becomes his to possess when the lease expires.
Term

Inheritable

(Estate of Inheritance)

Definition
All freehold estates are states of inheritance. They can descend to heirs EXCEPT for life estates.
Term
Evicition
Definition
Removal of a tenant from rental property
Term

Actual

(eviction)

Definition
Removal by force or legal process
Term

Constructive

(eviction)

Definition
Property is rendered inuseable because of some action or inaction of the landlord
Term
Fee
Definition
An estate of inheritance in real property
Term
Fee simple
Definition

A complete, unencumbered ownership right in a piece of property

(Freehold concept - allodial)

Term
Fee tail
Definition

A freehold estate of inheritance limited so as to descend to a blood relative

NOT IN AZ

Term

Freehold

(allodial system)

Definition

Ownership of indefinate duration.

Possession and use

Term
Holdover Tenant
Definition
Tenant that does not vacate the property after a lease expires.
Term
Homestead
Definition

A tract of land that is owned and occupied as a principal residence

(AZ has homestead exemption protection)

Term

Abandonment of

homestead

Definition
Homestead exemption is terminated if owner moves out of state, selling the property, renting property out, no longer occupying as residence
Term
Joint tenancy
Definition
An equal and undivided ownership interest of a property by 2 or more natural persons- each has the right of survivorship, auto succession of the title
Term
Gross Lease
Definition
Lessor (owner) would assume all expenses - taxes, maintenance, insurance
Term
Net Lease
Definition

Lessee (tenant) pays expenses

such as: taxes, maintenance insurance

Term
Index Lease
Definition
Rental payment varies according to agreed on index of prices or costs (economy driven)
Term
Percentage Lease
Definition
Calls for a minimum rental payment and lessor also collects a % of lessee's retail sales income
Term
Sandwich Lease
Definition
When the holder of a sublease in turn sublets to another, his position is that of being "sandwiched" between the original lessee and the operating lessee
Term

Less than freehold

estate

Definition
An estate commonly called a leasehold that exists for a definite period, or successive periods of time until terminated
Term

Life Estate

Conventional

Definition
(ordinary) Limited to the duration of the life of the owner or other named person. NOT inheritable, less than fee simple. Could be occupied by heir of the life tenant, if designated person is still living
Term
Life tenant
Definition
A person who is in possession of a life estate
Term
Partnership
Definition

A formal voluntary agreement

2 or more parties unite to share profits and risks

Term
Economic life
Definition

Period of time an improvement contributes to value

residential= 27 1/2 years

commercial= 39 years

Term
Excess rent
Definition

The amount paid above market rent


(contract rent vs economic rent)

Term
Contract rent
Definition
The amount of rent called for in a lease agreement
Term
Economic rent
Definition
The reasonable rental expectancy the property could command if it were available for rent at the time of its valuation
Term
Right of survivorship
Definition

The right, which is the distiguishing feature of joint tenancy, of a surviving tenant to become owner of the entire

interest of a dead tenant

Term
Surrender
Definition
The voluntary cancellation of a lease by mutual consent of lessor and lessee
Term
Tenancy
Definition
An interest in real property giving the right to its possession and use
Term

At will

(tenancy)

Definition
A possession of premises by permission of an owner having no fixed term/ending date
Term

By the entirety

(tenancy)

Definition

Marriage unit - each spouse owns the entire estate, cannot do anything with interest independently

NOT in AZ

Term

In common

(tenancy)

Definition
The co-ownership of property by 2 or more persons. Interest need not be equal and who each hold an undivided interest in the entire property and w/o the rights of survivorship. Hold only one unity: right of possession
Term
Undivided Interest
Definition
An ownership right to use and possession of a property that is shared among co-owners, with no one co-owner having exclusive rights to any portion of the property.
Term

Unities

(title)

Definition

Time - vested at the same time

Interest- equal interest/one and the conveyanance

Title- Hold title one and same

Possession- must hold same undivided possession of the whole and enjoy same rights until death of one

Term

Agreement for sale

AKA: contract for sale, land contract, contract for deed

Definition

The seller (vendor) extends credit to a buyer (vendee), permitting the buyer to make normal down payment and pay the balance in installments. Buyer (vendee) gets "equitable title" vendor has legal title unitl entire amount is paid in full. Buyer should get document recorded - NOTE AND SECURITY IN ONE DOCUMENT!

In case of default:

0-10% equity    30 days

20-29% equity   60 days

30-49% equity   120 days

50% or more    9 months

Term
Purchase Money Mortgage
Definition
Usually fills gap between down and 1st mortgage. The buyer (mortgagor) gives the seller (mortgagee) cash down and/or a note and mortgage. Seller extends credit, but no longer holds title. In foreclosure a PMM takes priority over subsequent liens
Term

Deed of Trust

Trust Deed

Definition

The buyer (trustor) conveys title to a third party (trustee), who holds it as security for the beneficiary (lender)

Standard trust deed foreclosure proceedings apply

Term
Construction loan
Definition

Short term- interim loan

advanced in periodic installments

paid off in balloon payment when complete

Performance Bond needed to get financing

Certificate of occupancy is issued after completion = loan due in full


 

Term
Estoppel Certificate
Definition
Shows the unpaid principal and interest rate of mortgage and any other important details
Term

Transfer of title

to real estate

Definition

Four methods:

 

Voluntary alienation- by choice

Involuntary alienation- foreclosure, eminant domain, escheat(no will or heirs), adverse possession

Descent- dies w/ heirs, but no will

Will- will exists, executor has been chosen

 

Term

AZ Statue of Frauds

(deeds)

 

 

Card 1 of 2

Definition

Must be in writing to be enforceable

other requirements:

Competent grantor at least 18, possessing civil rights

Indentifiable grantee, competent or incompetent, status must be stated (minor, married, trustee...)

Granting Clause- affirms grantor is giving up ownership/what is being given up

Habendum Clause- "to have and to hold", extent of ownership being transfered (less than 100%) granting clause prevails if discrepancy

 

Term

Involuntary Alienation

 

Definition

Can occur through natural causes and law:

Natural causes: erosion or avulsion- violent/sudden loss, flood, earthquake

Law - Propert tax foreclosure, BK sale, mortgage foreclosure, trustee sale, judgement..

Process of aquiring land through soil deosits - movement of rivers/streams called accretion - soil deposited this way is alluvion or alluvium. Reliction is the receding of water from its usual watermark in rivers, streams and "littoral" bodies of water (navigable). Recipients own land

Term

Constructive (legal)  Notice

(title)

Definition

A legal notice to the world at large

Notice in a newspaper or public record

Term

Actual Notice

(title)

Definition

Direct knowledge (that which is already known), such as the fact that a person is living on a specific parcel. A fact given directly to an individual.

Constructive carries the most weight

Recorded deed/Actual notice= strongest claim

Term
Title Insurance
Definition

Most widespread 

Owner's policies: (benefits buyer/vendee - pd for by usually seller, has exceptions- can eliminate some by getting ALTA of extended coverage) 

Lender's policies: (ALTA/extended/broad coverage - pd by borrower, coverage based on loan amount, does not insure against: gaps in chain of title, items in the public record)

Term
Liens
Definition

Voluntary and Involuntary

General (right to all propeties- real & personal) Specific (targets specific parcel)

Voluntary: (All specific)mortgages, trust deeds, seller carrybacks

Involuntary: property taxes S, assessments S, attachments S, judgements G, mechanic's liens S, IRS G, decedent debts G

Term

Laches

(involuntary lien/judgement)

Definition

If a plantiff tries to assert a claim after the statutory period has passed, the court bars the claim on the basis of "laches" - the plaintiff waited too long

Judgement= 5yrs to obtain writ of execution- can be extended another 5 yrs if renewed w/in 90 days of expiration

Priority is established based on date it was recorded

10% simple interest rate due on judgement if no rate in prior contract

Term

Mechanics' Lien

(specific lien)

Definition

Usually contractors file for unpaid services

"inchoate" means it has not yet been ajudicated, but is in the process.

TIMELINE: 20-day pre-lien notice to subject-who must give written reciept of notice Notice and claim filed/recorded @ County Recorder's w/in 120 days of completion. Completetion= physically finished, used by owner, final inspection & written acceptance by owner.  Priority is then retroactive to the date work BEGAN

After lien is filed- 6mo. statute of limitations on initiating lawsuit "Satisfaction Notice" given by contractor 30 days from payment

Term
Title Theory
Definition
The lender has legal title to a mortgaged property, borrower has "equitable" title - gains legal title when mortgage is paid off. In a default lender takes back property automatically
Term

Lien Theory

(AZ)

Definition
The borrower has legal title to a mortgaged property, and lender is the holder of the lien. In a default the lender must foreclose the lien to assert rights of possession.
Term
Promissory Note
Definition

Unconditional written promise to pay - signed in conjunction with a trust deed or mortgage.

Characteristics: Evidence of debt- principal obligation, promissory note itself Borrower liability- personally liable, note is unsecured and unrecorded Negotiable - may be transfered by endorsement (order) or delivery (bearer) to a third party

Term
Types of mortgages
Definition
  • FHA- Insured (lender) against loss by the Federal Housing Admin. (founded 1934) Less risk to lender, lower int. rates      VA- Guaranteed partial coverage on loans, no down, low int. rates, may not exceed appraisal, can be assumed by non-vets      Chattle mortgage (aka security agreement) secured by personal property       Package - mortgage or TD covering real estate and all on-site appliances and fixtures     Blanket- mortgage or TD covering many parcels, used by developers to secure financing - "partial release clause"     Open-End- can be expanded up to a specified amount, each advance is secured w/ same mortgage   Junior or subordinate- takes second priority to an existing mortgage. Priority may be exchanged by mutual agreement "subordination agreement"
Term

Acceleration Clause

(mortgage)

Definition
Borrower must pay 100% immediately if certain conditions occur
Term

Alienation Clause

(mortgage)

Definition

"due on sale"  clause

Loan balance is due in full when property is sold

Term

Defeasance Clause

(mortgage/TD)

Definition

When a mortgage or TD has been repaid, it means the lender's claim has been defeated

In a mortgage, the lender issues a "satisfaction of mortgage"

in a TD, a "deed of reconveyance" is issued

Both cases require recordation to clear the lien

Term

Assumption

 

Definition

Accomplished in 3 ways: Novation - lender releases original borrower and substitues the buyer as primarily liable for debt   Without novation - buyer becomes principal guarantor and primarily liable, but seller is still liable  Subject to- new buyer is NOT personally liable to the lender.

Term

Mortgage Foreclosure

(judicial process)

Definition

Default- non-payment of loan/taxes/insurance/damage to property


Notice of acceleration - lender invokes acceleration clause, entire debt due immediately. Mortgagor (borrower) can halt process by paying off mortgage or giving the mortgagee (lender) a "deed in lieu of foreclosure" if the lender agrees.

Court foreclosure action- court reviews evidence and orders property sold

Equitable period of redemtion - mortgagor (borrower) can redeem up to, but not including the foreclosure sale by paying entire debt awarded by court

Sheriff's foreclosure sale - court issues writ of execution, advertise sale in publication for 4wks/once a wk in county property is located. At sale, purchaser is given "cert. of sale" and becomes lien holder for the moment- not owner.

Statutory period of redemtion - in AZ 6mos/180 days after foreclosure sale when mortgagor-in-default can redeem property. Lump sum payment to the purchaser @ sale= price of cert, prorated int, taxes, assessments incurred by purchaser.

Sheriff's Deed- if mortgagor or creditors with subordinate liens do not redeem w/in 6mo/180 days period the purchaser is awarded a sheriff's deed and becomes legal owner.


Term
Trust Deed Foreclosure
Definition

Differences compared to mortgage foreclosure

Non-Judicial

Power of sale given by trustor/borrower, authorized by beneficiary/lender, trustee (3rd party) carries it out

Beneficiary's notice to Trustee - late=1st notice, statement of breach= 2nd notice

Notice of sale- by trustee

Constructive Notice- recorded/public notice, includes time, date and location of sale

Actual Notice- Copy of trustee's notice to be delivered to trustor/borrower by registered mail/process server w/in 5 days of recordation. Other holders of recorded interest to be notified w/in 30 days; and a copy of notice to be physically posted on property at least 20 days prior to the date of sale- giving notice to any tenant

Trustee's Sale - auctioned off to the highest bidder, awarded a trustee's deed, and instant ownership. Buyer must pay all cash by 5:00PM the next day. NO redemtion period following a trustee's sale!



Term

"Deficiency Judgement"

sales proceeds/foreclosure

Definition

Property sells, but proceeds do not cover full loan balance, the lender can obtain a "deficiency judgement" for the shortage.   Permitted in trustee sales only when the property is: more than 2 1/2 acres or more than a duplex    If there is money left over from a foreclosure sale it goes to the mortgagor or trustor (after junior liens, interest and expenses)

 

Term

Truth-In-Lending

Act

(1969)

Definition

Implemented by Reg. Z of the Federal Reserve Board- focuses on residential loans. Requires lenders to fully disclose all finance charges and true annual percentage rate (APR)

Also gives consumers "right to rescind" by simply notifying lender w/in 3 days...only applies to refinancing or home equity loans, not 1st mortgages.

Term

Real Estate Settlement Prodedures Act

(RESPA 1974)

Definition

Enacted in 1974 to insure that buyers and sellers in a real estate transaction have full knowledge of settlement costs.

HUD booklet w/in 3 business days from application date, must provide "good faith estimate"

Covers reidential mortgage loans- one- to four-family properties.

DOES NOT APPLY TO REFINANCING

Term

Basis

(real estate taxation/investment)

Definition
An investor's initial cost - the $ amount the IRS attributes to an asset in determining annual loss, gain or depreciation, on sale of the asset
Term

Adjusted Basis

(Real estate investment/taxation)

Definition

The original basis + aquisition costs + capital improvements =

adjusted basis

Term

Adjusted Sales Price

(real estate investment/taxation)

Definition

Sales price - cost of sale=

Adjusted sales price

Term

Adjusted purchase price

(real estate investment/taxation)

Definition

Purchase price - aquisition costs paid=

adjusted purchase price

Term

"Boot"

(real estate investment/taxation)

Definition

Boot is any property received by the taxpayer in the exchange which is not like-kind/or equal or greater value to the relinquished property. Boot is characterized as either "cash" boot or "mortgage" boot.

Replacement property

Must be equal or greater value

A taxpayer has 45 days after COE or transfer to properly identify potential replacement properties. The exchange must be completed by the date that is 180 days (6 mos)  after the COE, or the due date of the taxpayer's federal tax return for the year in which the relinquished property was transferred, whichever is earlier.

Term

"C" Corporation

(Regular Corporation)

Definition

Artificial person/legal entity/one or more individuals/managed by a board of directors

Shareholder liability limited to original investment Double taxation- corp. pays and individuals pay on dividends paid out     Exist until dissolved (perpetuity)    Regulated Corporation Commission - If Publicly offered - regulated by FCC

Term
General Partnership
Definition

2 or more investors
each shares in profit, risk/liability - personal & real
each maintains control
death of a partner - dissolve and reorganize
Pay taxes on an individual level

 

Term
"S" Corporation
Definition

For tax puposes should be treated as a partnership

Structure same as "C", but pays no corp. taxes
Stockholders are taxed individually on corporate income, based on % of ownership
Liability = initial investment
no more than 100 investors - must be American
Regulated Corporation Commission

Term

Limited Liability Corporation

(LLC)

Definition

Combines best features of corporations, limited and general partnerships

"members" have limited liability
full management participation/control
direct pass through tax advantages
Regulated by Corporation Commission

Term

Real Estate Investment Trust

(REIT)

Definition
Must have at least 100 members
Exempt from corp. taxes as long as 75% assets in RE and distribute 95% of annual RE ordinary income to investors - investors are not double-taxed
Losses cannot be passed through to investor ie. tax shelters
As passive investments, REIT's are usually large RE transactions
Usually have to register with the Securities and Exchange Commission - expensive and involved
Term

Capital Gains

(Income subject to tax)

Definition

Taxable profits realized from selling capital assets - rental property, land, equipment, stocks.

Capital gain is the difference between adjusted sales price & the basis.

Long-term - held more than 12 mos 15%
Short-term - held 12 mos. or less personal ordinary income rate
Losses = $3000/year and can be carried over NOT ON PRIVATE RESIDENCE

Term
Depreciation
Definition

Only investment property can be depreciated - not land or private residences. Allows investors to recoup the expense of income property.

Official Life:

Residential = 27.5 years

Commercial = 39 years

Technically, land does not depreciate   Straight-line method of depreciation:

Adjusted basis / the assets remaining years of life

(only personal property and improvements can be depreciated)

Term
"Goodwill, "Blue sky", "habit of patronage"
Definition
An intangible asset arising from a good business reputation. A capital but not depreciable asset for tax purposes
Term

Deed or assignment

(sublease)

Definition

Deed: Written document conveying title to an interest in real estate

Assignment: Transfer in writing of an interest in a lease - the lessee transfers all interest to an assignee.

Term
Covenant not to compete
Definition
An agreement given by the transferor of a business not to open a similar business in an agreed area for a specified time. Usually given a value and can be depreciated over the life of the covenant.
Term
Cash flow
Definition

The net spendable income from an investment.

operating expenses, fixed expenses and debt service are deducted

Term
Equity build-up
Definition
Corresponding reduction of principal and growth of equity on a mortgage through amoritized payments. Included are gains in property value through appreciation
Term
Inflation Hedge
Definition
An investment, usually long-term, that keeps pace with inflation (e.g. real estate)
Term
Debt Relief
Definition
When relieved of debts, individuals must report it as income on form 1099
Term
Internal rate of return
Definition
For an income producing property, the internal rate of return or IRR calculation uses the initial amount invested in the property, a series of projected cash flows which are usually after-taxes, and a projected After-Tax Sales Proceeds amount in a given year. 
Term

Gross Rent Multiplier

(GRM)

Definition
The monthly Gross Rent Multiplier is equal to the Sales Price of a property divided by the potential monthly rental income.   Yearly GRM is the Sales Price divided by the yearly potential rental income
Term

Net Operating Income

(NOI)

Definition
Net Operating Income or NOI is equal to a property's yearly gross income less operating expenses.  Gross income includes both rental income and other income such as parking fees, laundry and vending receipts, etc.  All income associated with a property.  Operating expenses are costs incurred during the operation and  maintenance of a property.  They include repairs and maintenance, insurance, management fees, utilities, supplies, property taxes, etc.  The following are not operating expenses: principal and interest, capital expenditures, depreciation, income taxes, and amortization of loan points.
Term
Limited Partnerships
Definition

Two or more people pool resources - only one (general partner) organizes and operates (syndicate)

Passive investors are called "limited partners" - no voice in management

They share profits, but not losses - only up to amount invested

Profits and losses are taxed at individual level

Subject to state and federal securities laws, unless exempt, must be registered w/ fed. securities and exchange commission (SEC)

 

 

Term

Federal Housing Administration

(FHA)

 

 

 

Card 1 of 2

Definition

Created 1934

residential/primary residence/insured loans

3 title programs:Title I) modest loans repairs/improvements

Title II) construction/purchase/refinancing/LTV changes w/ loan selected

Title III) Created the Fed. Nat'l Mortgage Accos. "Fannie Mae" to purchase Title II loans from primary lenders

UFMIP= up-front mortgage ins. premium = 1.75% and annual MIP of .55% annually

"budget repayment loan"

PITI


Term

Federal Housing Administration

(FHA)

 

 

Card 2 of 2

Definition

Buyer must invest 3.5% down - most sellers pay closing costs and prepaids

In Maricopa County, AZ max is: $346,250

FHA appraisal (valid for 120 days) required- buyer can opt out is appraisal is too low

Qualifying hoursing must be one-to-four family

Three "C's" needed to qualify: CASH - COLLATERAL - CREDIT

FHA RATIOS = 31% front end (PITI/gross mo income)

43% back end (long-term debt, cr cards, cars... + new house payment/gross mo income)

FHA 245 Graduated payment mortgage= neg. amoritization


Term

Veterans Administration

 

 

 

Card 1 of 2

Definition

Serviceman's Readjustment Act of 1944

VA guarantees loans to purchase or construct owner occupied homes

VA pays lender a dollar amount or % in default

Buyer must apply for "cert of eligibility" to determine loan amount

3 "C's" similar to FHA

Ratios: 41% (house payment, utilities, maintenance)

Must also show residual income for normal living expenses

VA approved appraisal needed - issues a "cert of reasonable value" good for 6 mos on existing housing and 12 mos for proposed housing

Last step is "guaranteed commitment" giving the green light

Term

Veterans Administration

 

 

 

 

Card 2 of 2

Definition

Mortgage payments must be level/ include principal, interest, taxes and insurance. Origination fee cannot exceed 1% of the loan amount and no prepayment penalty is allowed

Points cannot be financed, escrow and termite cannot be charged to vet, loans are assumable w/ VA approval

Lenders do not usually loan more than 4 X the VA eligability. $104,250 on purch. of less than $417K now


Term

Conventional Loan

(Fixed Rate)

 

 

Card 1 of 2

Definition

Non-government loans made primarily by banks - they are either conforming or non-conforming

A conforming loan fits FMNA (Fannie Mae) & FHLMC (Freddie Mac) requirements, which include:

Max loan of 417K

FMNA & FHLMC approved documents

Meeting underwriters' guidelines

80% LTV - if higher PMI is needed

No escape clause for buyer is appraisal is low

 

Term
Variable Rate Mortgage
Definition

ARM's lender's can decrease or increase the interest rate periodically- w/in prescribed limits by tying it to an economic index

Treasury Bills

11th Dist. of the Fed Home Loan Cost of Funds (COFI)

London Interbank Offered Rate (LIBOR)

Moving Treasury Average (MTA)

ARM's have a "2-6 CAP" which means the interest cannot be adjusted upward more than 2% per yr or more than 6% over the life of the loan from the initial "floor" rate

Usually NOT assumable

NEGATIVE amoritization occurs


Term

Capitalization

Formula

Definition

Potential gross income

minus

vacancies/bad debt/credit loss =

Effective/Adjusted gross income

minus

operating expenses

(can't use:debt service/personal income tax/depreciation/improvements) =

Net Operating Income

PGI-BVD=EGI-OE=NOI

Lower CAP rate favors seller (raises price)  Higher CAP rate favors buyer (lowers price)  income/rate= value   income/value= rate    value x rate= income


Term

Cash Flow

Formula

Definition
NOI - Debt Service = Cash Flow
Term

Civil Rights Act

Title VIII

(Fair Housing Act)

Definition

1968

Bans discrimination by race/color/religion/or natural origin

Exceptions:

churches/private clubs/private property up to a four-plex

Term

Jones vs. Mayer

1968

Definition

Bans discrimination in private and public sectors

Reaffirmed the Civil Rights Act of 1866

Deed restrictions are unenforceable when they discriminate by race

Term

Equal Credit Opportunity Act

of 1974

Definition
Lenders are forbidden from discriminating not only on the basis of race/color/religion/nat'l origin, but also sex/marital status and age as well
Term
Blockbusting
Definition

Encouraging homeowners to sell out by insinuating or predicting minorities are moving into the neighborhood

Allows agents to buy low and sell high

prohibited by the Fair Housing Act 1968

Term

1988 Fair Housing

Amendments Act

Definition

Adds as protected classes physically and mentally handicapped people plus families with children

"handicapped" also includes:

alcoholics/AIDS/clinical diseases

Does not include drug abusers or people who have one or more felony drug convictions

Tenant can be reimbursed for 1/2 mo rent or $300 whichever is greater for handicap modifications

Term

Fair Housing Enforcement

Provisions

Definition

1988 Amendments Act -

Fair housing laws are enforced by an administrative law judge w/in HUD or through federal courts

First offense 10K    Second offense (w/in 5 yrs) 25K

Third offense (W/in 7 yrs) 50K

*After 7 years, violations are dropped

Federal court fines: 25k,50k & 100k for subsequent


Term

Americans with Disabilities Act

(ADA)

Definition

Enacted 1990

Every employer with 15 or more full-time employees will be covered by ADA

Prohibits employers from discriminating against the disabled & requires "reasonable accomodation" that does not create an "undue hardship"

Term
Equal Housing Logo
Definition

Required:

Picture of home larger than 4 column inches

words only if 6 column inches or larger

flyers/promotional materials

every internet page - without scrolling

Not needed on business cards

Broker office display poster


Term
AZ Landlord & Tenant Act
Definition

Protects both parties

Security deposit = 1 1/2 x rent unless tenant agrees to more

A/C is not manditory, but if it has A/C, it must work

Must inform tenant of where they can view the Tenant Act (Sec of State/internet)

Landlord must give 48 hours notice to do improvements to unit - work during business hours M-F


Term

Remedies for non-compliance by

Landlord

Definition

Security Deposit: return 14 days from written demand from tenant, if not can owe double the amount + the deposit amount


Failure to supply essential services: 5 days to correct, 14 days after notice with written notice tenant move out & terminate the lease (19 days)

Term
Remedies for non-compliance Tenant
Definition

Rent due the 1st, late on the 2nd

5 day notice given

after 5 days landlord can file with the court

Court mails a "detainer" document to tenant ordering the premises to be vacated

Actual Eviction: If the tenant still doen't pay, the landlord returns to court - a "writ of execution" is given

The sheriff tapes eviction notice to door - tenant has until 5pm, if not moved the sheriff can step in.

Landlord can keep security deposit - property can be stored for 10 days, then sold - hold excess for 1 yr

clothing, tools, items needed for their trade, ID, financial docs... cannot be held

Term

Interest in buildings

Condominiums

Definition

Owners possess horizontal rights (not above or below)

They own an undivided interest in common areas as tenants in common

Owners possess a deed and fee simple title - the are taxed and assessed, based on the combined value or their unit and a proportionate ownership of common areas - can be separately foreclosed

Term

Interest in buildings

townhouses

Definition

Same as condo w/ 2 exceptions:

Owners possess vertical rights

All common areas are owned by HOA and owners belong to the association - they are taxed and assessed as individuals

 

Term

Timeshares

(Interval Ownership)

Definition

Use of property for a specific time

Ownership is as Tenants in Common

Right of recission - 7 days from signature date

Max presentation is 120 mins

*12 or more intervals and you must follow rules

Term
Moral turpitude
Definition
Contrary to community standards of honesty and good morals
Term
Real Estate Commissioner
Definition

Cannot have a real estate license

5 yrs banking/title/real estate + 3 yrs administrative experience

Duties: issue/suspend/revoke licenses & set rules

Legal Advisor: Attny General's Office

Term

Broker's License

Requirements

Definition

Active RE license 3 of last 5 years

21 years old

90 hours education

Recovery Fund $20

Term new license = 2 years

(from last day of month issued)

renewal = 4 years

(24 hrs of continuing ed. are required every 2 years)

Designated & self-employed brokers must repeat the broker management clinic every 2 years

Term

Sales Person License

Requirements

Definition

Minimum age: 18yrs

Education: 90 hours + 6 hr contract

Testing: pass school and state tests, fingerprinting

Recovery Fund Fee: $10

New license - 2 yrs

Renewal - 4 yrs

(need 24 hours of continuing ed. every 2 yrs)

Changing brokers requires broker to give notice to AZ Dept of RE inw/in 10 days

Term
Subdivided Land
Definition

6 or more lots improved or unimproved - less than 36 acres

 

Public report is required before selling

Term
Unsubdivided Land
Definition

6 or more parcels, at least 36 acres, but less than

160 acres (1/4 section)

Require public reports before selling for residential use

Term
Lot Reservations
Definition

May be taken prior to a public report being issued

Obligates the seller, but not the buyer - until the public report can be reviewed

Deposit cannot be over $5000/lot

Deposits held in neutral escrow acct, NOT trust acct

Deposit refundable until contract is signed

Seller has 15 days to give buyer public report once its isssued

Buyer has 7 business days to review report - and sign contract


Term
Affidavit of Disclosure
Definition

Public reports aren't needed - instead Affidavit of Disclosure

5 or fewer parcels - county/unincorporated

Property is NOT in a subdivision

"mini-public report"

recorded with deed - owner is responsible forever

All types of property

Term

AZ Statute of Frauds

 

 

 

Card 2 of 2

Definition

Legal Description

Exceptions/Reservations

Legal Consideration

Signature of Grantor (party conveying)

Acknowledgement- cert. by notary

Delivery to Grantee- must be delivered during Grantor's lifetime and accepted by grantee in order to be valid

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