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California Broker Exam Flashcards
Terms and Definitions
456
Real Estate & Planning
07/09/2011

Additional Real Estate & Planning Flashcards

 


 

Cards

Term
Property
Definition

-something that can be owned

-rights and interests in what is owned

-2 categories: real & personal

Term
Real property
Definition

-immovable property

-ownership carries w/ it bundle of rights

Term
Land
Definition
-includes material of the earth, rock, soil, and other substances.
Term
Bundle of Rights
Definition

1.Control

2. Possession

3. Use

4. Disposition

 

(C-PUD)

Term
Fixtures
Definition

-personal property can be come real property if attached to the land in such a way as to become these.

 

ex. naturally growing crops which replenish themselves (fruit trees) are considered real prop. Grow out of the land & are attached by roots.

 

Term
Test for Fixtures
Definition

Method of Attachment

Adaptability of the item

Relationship of the parties

Intention

Agreement between the parties

 

(MARIA)

Term
Appurtenances
Definition

-items incidental to the land

 

ex. Covenants, Water Company Stock, Water rights, Mineral rights & Easements

 

-addt'l thing that runs w/ or is sold w/ the land.

 

-doesn't exist apart from the land to which it belongs

Term
Appropriation
Definition

-the private taking & use of public property.

 

ex. water rights from a river or a lake

 

Term
Riparian Rights
Definition

-rights of a landowner to water flowing adjacent to his/her land w/in the normal activities of a stream or river.

 

Riparian- (R)- River

Term
Littoral Rights
Definition

-rights a landowner to water abutting their land; a shoreline

 

ex. ocean or lake

Term
Personal property
Definition

-movable property

-aka chose

 

ex. Emblements, Leasehold Estates

 

Term
Emblements
Definition

-tenant's crops growing & produced annually through labor & industry

-replanted every year

-personal property

 

-when fruit is removed &/or sold- considered personal property too.

Term
Leasehold Estates
Definition

-called Chattel Real

- personal property

 

Term
Estates
Definition

-concept tells how long someone whas interest in the prop. & what kind of interest it is

 

-2 types: Freehold & Less-than Freehold estates

 

-held by: tenants renting apt. & owners living in condo

Term
Freehold Estates
Definition

-inv. some kind of ownership int. in prop.

 

-3 types:

Fee simple Absolute

Fee Simple Defeasible

Life Estate

Term
Fee simple absolute
Definition

highest degree of ownership

 

indefinite period of time

Term
Fee simple Defeasible
Definition
-title can be defeated b/c ownership is qualified by a condition
Term
Life Estate
Definition

Grantor A conveys to B for life of C.

 

B has right to use, possess, can sell, lease, or encumber estate.

 

upon death of C, it reverts back to original owner

Term
Less-than-freehold Estate
Definition

-inv. leasing or renting int. in the prop.

 

-inv. rights of tenants who rent or lease prop.

 

-considered personal property

Term
Leasehold interest
Definition
-right to exclusive possession & use of real property for a fixed period of time held by lessee & tenant.
Term
Landlord
Definition

-the Lessor in the lease

 

-has parted w/ the right of exclusive possession during the existence of the lease.

Term
Leasehold estate
Definition

-known as chattel real


-considered personal property

Term
Estate for years
Definition

-lease which cont's for definite period of time fixed in advance, as agreed btwn landlord & tenant.

 

-could be less than 1yr

ex. 6 months

Term
Estate from period to period
Definition

-continues for certain periods of time as agreed btwn landlord & tenant.

 

Most commonly found type is:

 

Month to Month (M/M) tenancy

Term
Estate at Sufferance
Definition

-tenant has rightfully come into possession of the prop. but remains in possession after the expiration of the term.

 

-Tenant holds estate at sufferance.

Term
Tenancy
Definition

-method of holding title

 

types:

 

Ownership in severalty

Joint tenancy

Tenancy in common

Community property

Term
Ownership in Severalty
Definition
-owned by one person (1), a single individual.
Term
Joint tenancy
Definition

-owned by 2 or more pers.

-jointly & equaly owners of undivided interest in real property

 

-to create must have: Time, Title, Interest, Possession

 

-right of survivorship:

if 2 J/Ts own prop. & 1 dies, the surviving J/T b/comes sole owner.

 

Term

Joint Tenancy- con't

(rights & obligations)

Definition

-single J/T cannot will his/her int. to another party

-nor is the estate subject to probate

 

-phrase: 'W/ right of survivorship' does not need to appear  in deed

-surviving J/T not liable to creditors of the deceased who hold unforclosed liens on the property.

Term

Joint tenancy- con't 2

(Rights & obligations 2)

Definition

-J/T can sell his/her int. in the prop.

-if 2 J/Ts exist & 1 sells, the joint tenacy is dissolved & the 2 owners now hold title as tenants in common.

 

-if 3 J/Ts , each holding 1/3 int. & 1 sells the new owner comes on title as a Tenant in Common, but teh 2 orig. J/Ts con't w/ their J/T ownership.

Term
Tenancy in Common
Definition

-method of holdin title by 2 or more persons who are owners of undivided int. in the title to real property

-may own an unequal ownership int.

-NO right of survivorship therefore a T in C owner

can will his or her int. to their heirs.

 

-only unity: possession

Term
Community property
Definition

-all property acquired by husband & wife during marriage other than separate property.


-if husb. & wife. are named in a deed & deed does not state that they have taken title as J/T or w/ the right of survivorship, they have taken title simply as Community prop.

Term
Encumberance
Definition

-any right or int. in the land possessed by a non-owner of the prop., which affects the value or use of the owner's estate, but does not prevent thte owner from transferring his/her int.

 

-a burden on the property

 

-2 basic categories:

affect title; money encumberance

affect physical condition; non-money encumberance

Term
Lien
Definition

-an encumberance which affects title

-a charge imposed on property, when the property is made security for the performance of an act, usually the payment of a debt.

-inv.: Money

ex. when lender records deed of trust securing a purchase money loan, the lender creates a lien against the property.

Term
Deed of Trust
Definition

-trust deed-

-used when a buyer borrows money from a lender to purhase a property & the title to the prperty is held in trust by a neutral third party until the loan is paid off.

 

-is a security device, aka security instrument

-used to secure a loan

-recorded in public records & shows there is a lien on the property.

-3 parties:

borrower/trustor(buyer,

lender/beneficiary,

neutral 3rd party/trustee (who holds temp. title, not full title, until the lien is paid)

Term
Reconveyance deed
Definition

-to remove a trust deed lien (i.e. when debt is paid) the lender causes this to be recorded

 

-party to sign the deed: trustee

Term
Second trust deed
Definition

-when a seller carries back a deed & a lien is created against the property

 

Term
General lien
Definition
-when the IRS records a tax lien against a taxpayer, a lien is created on any real property they own.
Term
Specific lien
Definition
-when a tax assessor assesses property taxes against a property a lien is created
Term
Mechanic's lien
Definition

-is placed on prop. by someone who provides labor & material for the prop. and has not been paid.

-must be: verified & recorded to be valid

-may take priority earlier than the date it was recorded

- Preliminary 20-day notice must be filed by claimant prior to recordin a mech. lien.

 

other notices re: mech. liens:
notice of non-responsibility

notice of ceasation

notice of completion

Term
Mechanics lien con't
Definition

-may be filed by:

orig. contractor -w/in 60 days

 

claimant other than contractor- w/in 30 days of filing for record of notice of completion

 

any claimant- if not. of compl. is not recorded w/in 90 days after completion

Term
Involuntary liens
Definition

-lien imposed on aproperty w/o consent of the owner

 

ex.

lis pendens

attachment liens

tax liens

judgemente liens

Term
Lis pendens
Definition

-Latin for "pending law suit"

 

-judicial action brought by one party against another

Term
Attachment lien
Definition

-freezes an asset before the outcome of a lawsuit is known

 

-is good for 3 years

Term
Judgement
Definition
-monetary decision against a defendant to a lawsuit
Term
Abstract of judgement
Definition
-when recorded it creates an involuntary general lien against the defendant
Term
Voluntary liens
Definition

-liens that a property owner voluntarily initiates

 

ex. trust deed or mortgage

Term
Homestead exemption
Definition

-re: as anti-lien

-purpose: to protect the homeowner against creditors proceeding to enforce judgement liens.

 

-protects:

head of the household up to $75,000 from judgement liens

 

others within the household up to $50,000.

Term
Non-money encumberances
Definition
-encumberance that affects the physical condition or use of the propety
Term
Easement
Definition

-right to enter and use another's land

 

-2 types:

Appurtenent easements

Easements in Gross

 

-can be created for any period of time

Term
Servient tenement
Definition
-land burdened by the easement
Term
Dominant tenement
Definition
-land benefited by the easement
Term
Prescription
Definition

-method of obtaining an easement

-requirements:

1. continuous/uniterrupted use for 5 yrs.

2. use is hostile & adverse (w/o license or permission)

3. use is open & notorious (owner knows of use or presumed to have known of use.

Term
Restriction
Definition

-type of encumberance

 

-restricts the free use of land by an owner

 

-originate: from public & private sources

 

public restric.: gen. found in zoning ordinances

private restric.: gen found in the deed, CC&Rs, or memorandum of agreement

Term
CC&R's
Definition

-Covenant, conditions, & restrictions

-usually exist whenever there is a HOA

Term
Covenant
Definition

-a promise

-violation: can involve financial sanctions.

Term
Condition
Definition

-restriction that involves more serious consequences than a covenant,

 

b/c condition may contain forefiture clause

which could bring about change of ownership

Term
Restrictions
Definition

-if public restric. & private restric. pertaining to the same prop. do not read exactly the same...

 

the most restrictive restriction controls.

Term
Injunctions
Definition
-used to enforce private restric.
Term
Public Restrictions
Definition

-have to be developed for the overall benefit of the public, particularly for the protection of:

 

the public health

safety

morals

general welfare

 

-May not be discriminatory

Term
Encroachment
Definition

-form of trespass

-trespass by a structure only (not person)

 

-individ. prop. being encroached upon must take action w/in three(3) years to have it removed.

 

-if friendly agrmnt not possible btwen parties, offended party's remedy is sue neighbor for trespass

Term
Deed
Definition

-Principal instrument of transfer

 

-legal document that transfers ownership or a piece of property.

 

Term
Instrument
Definition

-a device to accomplish something

 

-in real estate: usually a formal legal document created to affect the rights of the parties to an agreement.

Term
Deed transfers title when...
Definition

-it is a valid deed that is:

 

executed

delivered

& accepted

 

 

Term
Executed deed
Definition
-deed that has been signed by the grantor
Term
"Et al."
Definition

-phrase sometimes used in deed

 

-means "and others"

Term
"Et ux."
Definition

-phrase sometimes used in a deed

 

-means "and wife"

Term
Alienation
Definition

-conveyance

 

-is a transfer of title

Term
Acknowledgement
Definition
-formal declaration before a duly authorized officer by a person who has executed an instrument that such execution is indeed his/her doing.
Term
Valid deed does not have to be...
Definition

-acknowledged, notorized, or recorded.

 

-Can still transfer property w/o these things.

Term
Constructive notice
Definition

-given by recording the deed or by taking possession of the prop.

 

-even if an individual is ignorant of the recording or possession, he has still received constructive notice.

 

-1st party to recieve construc. noti. after recieving a deed is the one granted ownership in court.

Term
Actual notice
Definition

-occurs when an individual actually knows of a thing or fact.

 

-it is notice given and received.

Term
Grant deed
Definition

-must contain the word 'grant', and contain two (2) implied warranties:

 

1. that the grantor has not already conveyed to another person

2. that the estate is free from encumbrances suffered by the grantor

 

Term
Quitclaim deed
Definition

-transfers only the int. the grantor has at the time the conveyance is executed.

 

-contains NO express or implied warranties.

Term
Execution of will
Definition
-has no effect on property int. during life; only becomes effective at death
Term
Intestate succession
Definition

-provides that when a married person dies w/o a will, all community property passes to the surviving spouse.

 

-provides that when a married person dies w/o a will, separate property is divided 1/2 to surviving spouse & 1/2  to an only child....or 1/3 to surviving spouse & 2/3 to two or more children.

Term
Holographic will
Definition

-will that is handwritten

 

-one that is entirely written in the maker's own handwriting.

Term
Adverse possession
Definition

-method of acquiring legal title.

-if...

1. P person has possession of prop.

2.O possession is open (A), actual & notorious

3.N possession is notorious

4.C posss. is continuous

5. H possess. is hostile & adverse to the int. of real owner

6. uninterrupted for 5 years, accompanied by payment of real prop tax. for 5 yr period

(PANCHO)

Term
Quiet title action
Definition
-court process by which title issues are resolved and rights of ownership are clarified
Term
Accession
Definition

-add'tn to prop. by man or natural forces.


man- occurs when man builds a fence on neighbor's prop. (fence b/comes neighbors OR acceads to the neighbor if there is no agreement w/ the neighbor for the builder to remove it.

Term
Accretion
Definition
-add'tn to land through natural causes only usually by the forces of water adding soil to land bordering a river, lake, ocean, or other moving water.
Term
Alluvion
Definition

-gradual increase of the earth on the shore of an ocean or the bank of a stream resulting from the action of water.

-the sediment or soil that is deposited is called alluvium.

Term
Reliction
Definition
-increase in land due to the permenant withdrawl of a body of water such as a river or lake.
Term
Avulsion
Definition
-sudden and perceptible loss of land by action of water.
Term
Erosion
Definition
-the gradual wearing away of land by wind or water.
Term
Contract
Definition

-an agreement to do or not to do a certain thing.

 

-2 types: express AND implied

 

-2 types of content: bilateral & unilateral

 

-2 extents of performance: executed & executory

 

-4 classification of legal affect: void, voidable, unenforceable or valid

Term
Express contract
Definition
-where the parties declare the terms and put their intentions in words, either oral or written.
Term
Implied contract
Definition
-one where the agreement is shown by acts and conduct rather than words.
Term
Bilateral contract
Definition

-one in which the promise of one party is given in exchange for the promise of the other party.

 

-both parties have made a committment.

Term
Unilateral contract
Definition
-one in which a promise is given by one party to induce some actual performance by the other party.
Term
Executed contract
Definition
-one in which both parties have completely performed.
Term
Executory contract
Definition
-one in which something remains to be done by one or both parties.
Term
Void
Definition

-agreement lacks any legal effect

 

-is not a contract at all!!

Term
Voidable contract
Definition
-one which is valid and enforceable on its face, but for some reason, one or more of the parties may reject it.
Term
Unenforceable contract
Definition
-is valid but for some reason cannot be proved or sued upon by one or both of the parties.
Term
Valid contract
Definition

-one that is binding and enforceable and has all the essential elements required by law:

 

1. Capable parties

2. Mutual consent

3. Lawful object

4. Consideration

 

CMLC- Cow's Milk Lacks Color

Term
Basic elements of all contracts
Definition

-parties capable of entering into a contract incl: everyone except minors, convicts, & persons of unsound mind.

-minors may acquire title by: gift or inheritance.


Term
Mutual consent
Definition

-in R.E. contracts is evidenced by an offer of one party and acceptance by the other party

 

-must be genuine, free of will, & if clouded by an influence (e.g. fraud, duress, or mistake) the contract may be voidable.

Term
Actual fraud
Definition
-involves intent to decieve.
Term
Duress
Definition
-invl. cohersion or confinement, and deprives the individual of free will.
Term
For contract to be legal it must be...
Definition
-legal in its formation and operation, and its consideration and its object must be legal.
Term
Consideration
Definition

-something of value offered in an agreement, and is required in every executory contract.

 

-referred to by words like: good, sufficient, adequate & valuable.

Term
Statute of frauds
Definition
-states that any agreement that is not to be performed within a year must be in writing.
Term
Novation
Definition
-the substitution by agreement of a new obligation or a new party to an obligation for an existing contract with intent to extinguish the former.
Term
Statute of limitations
Definition

-three(3) years for inverse condemnation & encroachment.

 

-four(4) years for a written contract.

Term
Agency
Definition

-concept found in the civil code

 

-a representation stated herein: law states that an agent is one who represents another called the principal, in dealings with third persons.

 

Term
Agent's Duties
Definition

-Duties to the principal in mnemonic COALD.

Care

Obedience

Accounting

Loyalty

Disclosure

Term
Agency relationship
Definition

-in an agency relationship, the agent has authority to do everything necessary and proper to effect the purpose of the agency, and to make representations as to relevant facts pertaining to the transaction

 

-is usually established by express agreement

-consideration not essential to creation

Term
Express agreement
Definition
-can be written or oral, but to enforce the collection of a commission in a court of law, the agreement must be written.
Term
Actual authority
Definition
-that authority a principal intentionally confers upon an agent, or by want of ordinary care allows the agent to believe that he/she possesses.
Term
Ostensible authority
Definition
-that authority a principal intentionally, or by want of ordinary care, causes, or allows third persons to believe that the agent possesses.
Term
Agency that has been ratified.
Definition
-an agent acts w/o authority of the principal, the agency can be ratified if the principal adopts the agent's act as his own.
Term
Listing
Definition

-sometimes called employment contract

-is usually a bilateral contract where:

the seller is promising compensation and the broker is promising diligence.

 

Term
Exclusive agency listing
Definition
-an employment contract where if the seller sells the property to his own customer on his own efforts, he owes to the listing broker NO commission.
Term
Exclusive right to sell listing
Definition

-set up so that regardless of who sells the property, the listing broker gets paid.


Right to sell= Right to commission.


-procurring cause is not an issue for the listing broker.

Term
Procurring cause
Definition
-the action or person that causes the desired result.
Term
Single agency relationship
Definition

-one in which the agent represents a single client known as the principal.

 

-the principal could be a buyer or a seller

Term
Client
Definition
-the principal to whom the agent owes fiduciary responsibilities.
Term
Fiduciary responsibilities
Definition

-invl. acting w. the utmost care, integrity, honesty, and loyalty towards the client.

 

-In a single agency transaction, the seller's agent regards the buyer as a customer, not a client.

 

-Agent owes a customer honesty & fairness.

Term
Dual agency
Definition
-a relationship in which the agent represents both principals in the transaction.
Term
Subagent
Definition
-the agent of an individual who is already in an agency relationship w/ a principal
Term
Exclusive listing
Definition
-a contract btwn: seller & broker.
Term
Agent of the principal has a duty to...
Definition
-make a complete and full disclosure of all material facts.
Term
Secret profit
Definition

-occurs when a broker makes a low offer on a property, sometimes through a "dummy buyer." He then turns around and sells the prop. to another buyer at a higher price. (the diff. is the sec. prof.)

 

-an agent cannot make a secret profit or any undisclosed compensation when representing a principal

Term
Agents out of line
Definition

-agent acting in excess of authority- may be held liable for damages.

 

-licensee misrepresents a prop to a buyer- could be disciplined, have a civil suit filed against them for $damages, or be prosecuted criminally.

 

-Broker failure to disclose- may result in:

1. civil liability 2. Disciplinary action 3. crim. prosecu.

Term
Actual fraud vs. Constructive fraud
Definition

-actual involves the intent.

 

 

-constructive involves negligence.

Term
Misrepresentation
Definition
-may invl. either actual or constructive fraud; may be either fraudulent or negligent.
Term
Puffing
Definition
-if an agent makes a generalized "sales talk" statement exaggerating the benefits of a property, but an unsophistocated buyer takes the agent literally and considers the info. to be a material fact.
Term
Deposit handling
Definition
-broker must place a deposit rec'vd on behalf of another into the hands of the owner of the funds/into escrow/into a trust fund acct w/in three(3) business days after acceptance of the offer.
Term
Commingling
Definition
-an agent placed a client's money in his/her personal bank acct.
Term
Rec'ving a post-dated check/promissory note as deposit....
Definition
-broker must make full-disclosure to the seller.
Term
Express authority
Definition
-Listing agreement gives this in order to allow broker to accept an earnest money deposit on behalf of the seller.
Term
Liable party when seller gives agent false info which he in turn gives seller?
Definition
-Seller can be held responsible
Term
Attorney in fact
Definition

-a person apppointed to act on behalf of another under a power of attorney.


-cannot act on behalf of his principal if the principal dies or is determined to be incompetent.

Term
Agency disclosure
Definition

-listing agent-must disclose to seller whether he is acting as a single agent for him or as a dual for both...as soon as practicable.

 

-failure to disclose- violation of agency disclosure law b/c it puts seller at a disadvantage.

 

Agent must: Disclose, Elect, and Confirm

(DEC)

-disclosure of dual agency- agent often elects & confirms after initial disclosure to the seller.

-Consent of all parties- Required

Term
Broker/salesperson acts for his/her own acct in a transaction, they are obliged to...
Definition
-act honestly and fairly, in good faith, and w/o fraud or deceit.
Term
In order for a licensee to take his option to buy a prop in which he is a listing agent he must...
Definition
-divest him of the agency role, and disclose that they are acting as principal in the transaction.
Term
Termination of agency
Definition

-may be terminated by:

agreement btwn the parties

expiration

revocation

death/incapacity of either the principal or the agent

accomplishment of purpose

extinction of the subject matter

 

-death of members of a corp. does not terminate and agency or contract

-principal has right to revoke agency but not if agency is coupled with an interest or broker has found a buyer. if done it could make principal liable for damages

Term
R.E. Contracts which must be in writing to be enforceable incl..
Definition

- leasing real property for more than 1 yr

 

-purchasing real property

 

-listing real property

 

- an agreement to pay the debt of another

Term
Enforceable R.E. contracts which can be oral incl...
Definition

-a lease of real property for 1 year or less

 

-a listing for personal property or a business opportunity

 

-brokers sharing a commission

Term
"Advance fee" contracts
Definition

-must be approved by the DRE before being used.

 

-must include the $ amount & due date, & they must incl. wording that does not guarantee the transaction

 

-those collected for credit reports & independent appraisal fees, & any unused portion that is going to be returned, the contract does not require approval by the DRE.

Term
Purchase contract to be binding must contain...
Definition
-an offer and acceptance
Term
Counteroffer
Definition

-an offer to purchase is considered a rejection of the original offer.

-if seller counters an offer, the seller(the offeree) has become the offeror

-a seller may work with multiple counteroffers before an agrmnt is estab. Such negot.should be disclosed to all buyers.

-a contract w/handwritten info. will override pre-printed clauses.

Term
Effective date of a purchase contract
Definition
-the date when final acceptance is delivered to the offeror.
Term
Time is of the essence
Definition

-a concept found in deposit receipts or purchase contracts.

 

-if buyer dies before seller accepts offer: buyer's death constitutes revocation of the offer

-if buyer dies before the seller's acceptance has been communicated to the buyer: also terminates offer

-if a buyer w/drawls before the seller accepts the offer the buyer gets deposit back.

Term
Breach of contract
Definition
-the offended party may sue for specific performance or liquidated damages.
Term
Liquidated damages
Definition

-provision stating if a deposit is to be forfeited upon the breach of contract by the buyer

 

-L.D. in the standard CAR(CA Association of REALTORS) purchase contract is 3% of the purchase price or the amount of the deposit, whichever is less.

Term
Interpleader action
Definition

-turnover of the deposit to the court for resolution by the broker when a dispute involves the disposition of the deposit.

 

-if the buyer and seller are unable to resolve a dispute re: an earnest money deposit, the escrow holder may file an interpleader action to resolve the dispute.

Term
Abrogation
Definition
-the recission or annulling of a contract by mutual consent of the parties to the contract, or for cause.
Term
Listing (contract)
Definition

-a written employment contract btwn a principal & an agent.

 

-establishes a contract btwn a seller & the broker

 

types: exclusive agency listing, exclusive right to sell listing, & open listing

Term
Open listing
Definition

-the kind of listing where the seller of the property can list with multiple brokers.

 

-the only broker to get paid is the procurring cause of the sale.

Term
An exclusive listing must have...
Definition

-a definite termination date.


-a broker may be entitled to a commission after the listing expires due to the protection period clause in a listing.


-to enforce P.P. clause in a listing...broker must submit to seller w/in 5 days of expiration a list of prospec. buyers for which the broker is responsible.

Term
Hold harmless clause
Definition

-found in a listing, protects the agent from liability when a seller gives false information.

 

Term
Copy of contract or disclosure statement must be given to a client/customer....
Definition
-at time of signing
Term
Buyer/broker agreement
Definition

-will resemble in many respects a exclusive listing btwn a seller & broker.

 

-establishes a single agency relationship

 

side note: seller can sue a broker for not fulfilling an ORAL promise.

Term
Option to purchase
Definition

-written agreement stating that the buyer shall have the right to purchase the property at a fixed price w/in a certain time.

 

-does not bind the optionee to performance.

 

-broker with listing & option to purchase must:

disclose all material facts to the principal & receive the seller's written permission to excercise the option.

 

-An option is an agreement to keep an offer open for a set period of time

Term
Surrender
Definition
-the giving up of a lease by mutual agreement
Term
Assign
Definition

-the transfer by a lessee of the lessee's complete leasehold interest.

-the original lessee may still have some obligation under the lease.

-if lease does not prohibit, a tenant may transfer all or a portion of his rights and int. in the leasehold estate.


Term
Sublease
Definition

-occurs when a lessee is the lessor of a portion of a prior lease on the same property.

 

-if a tenant transfers rights to a portion of the premises or for a period of time less than that remaining on the lease.

 

-the orig. tenant remains liable to the landlord for all obligations under the lease and for all acts and omissions committed by the sub-tenant.

Term
Lease validity
Definition

-a lease signed and delivered by the landlord is enforceable by the tenatn even if the tenant fails to sign the lease.

 

-a lease is valid when it has

Length of time

Amount of rent

Names of parties, and

Description of property.

(LAND)

Term
Landlord requirements
Definition

-for furnished residential property- may req. increased SD.

 

-may req. up to two months rent as SD addn'tl for an unfurnished res. prop. & and an equal to 3 months rent as SD for a furnished res. prop.

Term
Lease always incl a law implied covenant...
Definition

-the law implies a covenant on the part of the landlord to provide the tenant w/ possession & quiet enjoyment of the premises.

 

-To a leaseholder, "quiet enjoyment" means possession w/o disturbance by the holder of paramount title.

Term
Landlord obligation to tenant...
Definition

-landlord of residential dwelling has a leagal duty to keep the dwelling in a habitable condition

 

-if landlord is guilty of menace & threats against a tenant, the contract is voidable by the tenant.

 

-a landlord who seeks to remove a defaulting tenant from possession of the premises would bring an unlawful detainer action against the tenant.

 

 

Term
Constructive eviction
Definition

-occurs when circumstances arise which allow the tenant to lawfully abandon the lease.


-incl.. the landlord failing to make necessary repairs, making unwarranted and extensive alterations, actual eviction, or the prop. being condemned through eminent doman.

Term
Abandonment
Definition
-when tenant voluntarily relinquishes possession of a leased prop. w/ no intention of fulfilling the terms of the lease.
Term
New owner w/ existing lease
Definition

-if a landlord transfers his/her interest in a leased prop., the lease remains in force  and effect.



Term
Attornment
Definition
-when a tenant agrees to pay rent to a new owner.
Term
Easton vs. Strassburger
Definition

-court decision (re: disclosure)

-broker in a transaction are req. to make a reasonlably competent and diligent visual inspection of the property and disclose to a buyer all facts materially affecting the value or desireability of the prop. that such an investigation would reveal.

-Red flag items should be noted and disclosed.

-cuz of the E vs. S decision, sellers & agents are req. to provide to buyers a transfer disclosure statement concerning the condition of the property

Term
Transfer disclosure statement
Definition

-must be provided to the buyer of residential prop. (1-4 units) even when the prop. is sold as is.

 

-need not be provided in a case of a transfer between spouses due to:

divorce

transfer due to court order

probate

 

-if a defective transfer disclosure statement is delivered to a buyer, the buyer has 2 years to seek damages.

Term
Mello-Roos assessment
Definition
-seller must make a good faith effort to obtain from the Community Facilities District a notice concerning the special tax and give the notice to a prosp. buyer.
Term
Real Estate Disclosure and Notification Rule
Definition
-req. that owners of residential dwellings built before 1978 disclose to their agents and prosp. buyers the presence of lead-based paint.
Term
Environmental Hazards: A guide for Homeowners, Buyers Landlords, and Tenants
Definition
-If a seller provides this pamphlet to a buyer, neither seller nor agent is req. to say more about environ. hazards, assuming they have no awareness of anything specific.
Term
Alquist-Priolo Earthquake Fault Zoning act
Definition

-the seller and agent must disclose to the buyer that the property is or may be situated in an earthquake faultzone.

 

-Earthquake fault lines on designated maps are 1/4 mile wide.

 

-The Natural Hazards Zone Disclosure Statement will include information about earthquake faultzones.

Term
Homeowner's Guide to Earthquake Safety
Definition
-delivery of this booklet req. on transfer of residential dwelling build prior to January 1, 1960 of conventional light frame construction and a masonry building with wood-frame floor or roof built before January 1, 1975.
Term
Flood Hazards
Definition

-must be disclosed to all potential buyers of residential prop.

 

-Flood Hazard & Boundary Maps are provided by FEMA (Federal Emergency Managment Agency)

 

-frequent flooding-more than 1x in 10 yrs=

-special flood zone area-w/in a 100-yr flood bndry

-Moderate flood hazard-btwn 100 & 500 yr fld bndry

-Minimal risk-above a 500yr fld bndry

Term
Escrow
Definition

-2 essentials: binding contract & conditional delivery of transfer instruments to a third party

-purpose- to impliment and sometimes supplement the original contract.

 

Term
Escrow instructions
Definition
-if escrow instructions are in conflict w/ orig. contract, signed escrow instructions usually prevail.
Term
Escrow holder
Definition

- a stakeholder, not legally concerned w/ the controversies btwn the parties

-could file for an interpleader action to force the litigation of disputes

-doesn't have and must not exercise discretionary authority

 -does not act as mediator, advisor, or participate in customer controversy, or arbitrate disputes.

-doesn't offer legal avice, but must suggest that disagreeing parties consult an attorny or a broker.

-must remain strictly neutral

Term
Escrow concepts
Definition

-an escrow b/comes effective when all parties have signed identical escrow instructions.


-a broker may conduct escrow when the broker is a party to the transaction.

-are voluntarily completed by full performance & closing, or they are terminated by mutual consent & cancellation.

Term
Escrow concepts con't
Definition

-cancellation does not necessarily cancel the purchase contract.

-buyers & sellers rec'v closing statments from escrow.

-buyer -debited for purchase price b/c he agreed to pay

-seller- credited for prepaid prop. tax there might be in transaction

Term
Prorate
Definition

-to assess, distribute, or divide proportionately

-to prorate properly the property taxes, escrow would credit the seller with any prepaic property taxes.

-prorated items in escrow usually refer to recurring costs:taxes, insurance, and interest.

-designed to req. the seller to pay for his share of recurring costs and the buyer to pay for his share.



Term
Short rate
Definition
-refers to a less than prorated refund when an insurance policy is cancelled early in its term.
Term
abstract of title
Definition
-a summary statement of successive conveyances and other facts by which a chain of title is established.
Term
Standard Policy of Title Insurance
Definition

-the most common type of policy acquired by most people purchasing a home.

 

-protects agains risks of record, forgery, and the fact that a deed was not properly delivered.

Term
American Land Title Association (A.L.T.A) Policy of Title Insurance
Definition

-developed to prtect non-resident lenders (out-of-state lenders) and expand the risks normally insured against, beyond risks of record

-has adopted an owners  extended coverage policy.

 

-no policy of T.I. protects against defects in known to the insured to exist at the date of the policy but not previously communicated in writing to the insurer.

-no policy of T.I protects agains zoning b/c zoning regs. concern the conditino of the land rather than the condition of title.

Term
Financing
Definition
-the lifeblood of the real estate business
Term
Consumer price index (CPI)
Definition
-a gov't economic index indicating the inc. or dec. of living costs for the avg. consumer on a monthly basis. Commercial leases often have an escalator clause tied to the CPI.
Term
Hypothecate
Definition
-to place an item as collateral for a loan w/o giving up use and possession of the item.
Term
Pledge
Definition

-to deposit personal property w/ a lender as security for a debt.

 

Term
Tight money market
Definition
-money is scarce and expensive and many sellers have to help w/ financing by carrying back a second trust deed.
Term
Real estate lending
Definition

-an individual working in real estate lending has to have a real estate license if their company is reg. by the Depart. of R. E. (DRE)

 

-an individ. working in real estate lending does ot have to have a real esate license if their company, for ex. a bank, is reg. by the Depart. of Corporations (DOC)

Term
Construction loan
Definition
-an interim loan, a short-term loan designed to pay for the construc. of a building.
Term
Take-out loan
Definition
-the long term loan by which the construc. loan is paid off.
Term
All Inclusive Trust Deed (AITD)
Definition

-a junior mortgage w/ a face value of the amount that it secures, plus the bal. of any senior liens on the prop. It inc. all of that indebtedness.

-trustor on the AITD- pays seller of prop.

-person who signs the note (initial owner of home)- responsible party for the payment to the lender of a senior loan

Term
Hard money loan
Definition
-a real estate secured by the borrowers existing prop. Thfore, a borrowere is taking cash out of the equity of the prop. & a lender may obtain a deficiency judgment against the borrower.
Term
Purchase money loan
Definition
-a loan used to purchase the prop. and no deficiency judgment is allowed.
Term
Adjustable rate mortgage (ARM)
Definition

-allows the int. rate to increase or decrease accord. to a published index.

-allows the int. rate to adjust periodically by a set margin to a certian index.

Term
Renegotiable rate mortgage (RRM)
Definition
-allows the borrower to either prepay or renew (that is, renegotiate the int. rate) @ 3-5 yr intervals.
Term
Fixed rate mortgage
Definition
-offers the borrowers a fully amortized long term loan.
Term
Amortization
Definition
-a method of repaying a loan in equal installments which covers both the principal and the interest.
Term
Fully amortized loan
Definition
-loan where one pays both principal & interest each month for a determined time, usually lengthy, until the loan is paid in full.
Term
Level payment plan loan
Definition
-the part of the pymnt that applies to principal increases over the term of the loan. The part that applies to int. decreases.
Term
Partially amortized loan
Definition
-one pays princ. and int. each month for a determined time, but at the end of the term, the princ. debt has not been liquidated.
Term
Alternative financing instruments
Definition
-use of these shifts the risk of changes in the market rate int. from the lender to the borrower.
Term
Real estate loan
Definition
-when borrower rec'vs one, he/she signs the promissory note & the trust deed .
Term
Promissory note
Definition

-the written commitment of a borrower to a loan obligation.


-a.k.a.- 'I.O.U.'

Term
Security instrument
Definition
-a written legal document securing the payment satisfaction of any debt or other obligation.
Term
Trust deed
Definition
-the security instrument that makes the real property collateral for the loan.
Term
Negotiable instrument
Definition

-a written, unconditional promise or order to pay a certain amount of money, at a definite time, on demand.

 

ex. checks, bank drafts, promissory notes.

Term
Straight note
Definition
-a note which no principal payments are made during the term of the note, but are due and payable on a certain date.
Term
Straight note (partially amortized)
Definition
-may have a ballon payment due at the end of the term.
Term
Discounting a note
Definition
-selling it for less than the balance due. It is the difference btwn the face ballue and the cash value.
Term
Holder in due course
Definition
- a party who has taken a negotiable instrument for value and in good faith, w/o knowledge of any defects.
Term
Security instrument most often usedin CA for R.E. transactions is...
Definition
-trust deed aka deed of trust
Term
first trust deed
Definition
-one that has priority over any trust deeds recorded after.
Term
Judicial foreclosure
Definition
- a personal judgment against a debtor for the diff. btwn the unpaid bal. of the secured debt and the amount of the actual proceeds of the sale.
Term
Deficiency judgment
Definition
-not permitted in CA unless the prop. is foreclosed through a judicial foreclosure and the loan is not a purchase-money loan.
Term
Trust deed obligation
Definition

-when it has been paid, the beneficiary asks the trustee to prepare sign and record a deed of full reconveyance.


-beneficiary- in a trust deed= lender

Term
Trustee
Definition

-in a trust deed loan is the 3rd party who rec'vs naked legal title from the trustor and has the right to sell the prop. in the event of default.

 

-will do 1 of 2 jobs either:

reconvey or foreclose

 

-"trustee" has 2 "E"s, for 2 jobs either reconvey or foreclose

Term
Loan default
Definition

-When the trustor defaults, the beneficiary instructs the trustee to record a notice of default.

- After recorded...the trustee must wait at least 90 days before publishing the date of the sale.

-after 90 days, the trustee publishes a notice of sale in a newspaeper of general circulation and posts a notice on the property.

Term
Trustee rights during loan default
Definition

-is permitted to reinstate the loan up until 5 days before the sale.

-owns the prop. until the sale and would be permiteed to sell it or redeem it until the sale takes place.

-if he does not reinstate, the trustee conducts the trustee sale and issues a trustee's deed to the highest bidder.

-trustor authorizes the trustee's sale through the power of sale clause when he signs the deed of trust.

Term
Rights conveyed by trustor w/ signature on deed of trust
Definition

-if the beneficiary elects a judicial foreclosure in a deed of trust, the trustor has 1 yr equity rights of redemption

-he has conveyed essence of legal title to the trustee, but retains equitable title.

-can reinstate a note secured by a trust deed, but has rights of redemption after a judicial foreclosure

Term
Junior loan
Definition

-obtained when the first trust deed and the buyer's down payment are not sufficient to meet the purchase price.

 

-are made by private individuals loaning money either directly or through a mortgage broker.

Term
Seller carries back
Definition

-when a seller is the source of funding of a note carried back which is secured by a trust deed.

 

Term
Ballon payment loan
Definition
-a loan that is not fully amortized and requires a substantial payment of princ. and int. on the last payment.
Term
Blanket trust deed
Definition
-a loan that secures more than 1 prop. as collateral, and contains a release clause that releases specific parcels from the encumbrance upaon the repayment of part of the loan.
Term
Upon property transfer the buyer does one of these 3 things...
Definition
-obtains a new purchase money loan, assume the existing loan, or takes title subject to the existing loan
Term
Assume the existing loan vs. subject to an existing loan
Definition

-assume-it relieves the seller from being the princl. debtor on the property.

 

-subject to- the seller remains primarily liable  to the lender for the loan repayment


Term
Priority of liens
Definition

-those liens on the same prop. are prioritized based on the time of their recording.

 

Term
Government liens
Definition
-take priority over existing mortgage.
Term
Acceleration clauses
Definition
- gives the lender the right to declare the full amount of the debt due and payable based on the happening of a certian event.
Term
Alienation clause
Definition

-type of acceleration clause in a loan

-aka due on sale clause.

-allows lender to call the loan due and payable if the seller transfers title to the encumbered prop.

-is often not enforced in a tight money market or when houses are not selling well.

Term
Subordination clause
Definition
-an agreement whereby a trust deed is made subordinate to a trust deed recorded later.
Term
Basic simple interest formula
Definition

-states that interest equals princ. x rate x time.

- i=prt

Term
Nominal interest rate
Definition
-the rate stated in the loan documents.
Term
Effective interest rate
Definition

-the rate that the borrower is actually paying.

 

-it is commonly called the (APR) (Annual Percentage Rate)

Term
Conflict btwn note & trust deed
Definition

-if there is conflict in the terms of the note and the deed of trust, the terms of the not will generally control.

 

Term
Private mortgage insurance (PMI)
Definition
-is sometimes req. by a lender for conventional mortgages.
Term
Federal Housing Administration (FHA)
Definition

-part of the US dept. of Housing and Urban Develpement (HUD) & was established in 1934

-does not loan the money, but ensures home loans.

-insures mortgages for the purchase of existing and newly built single-family homes and condos, home improvements, the purchase and repair of houses needing rehab, the purchase of 2  to 4 unit prop. & the refinancing of existing mortgages.

-charges mortgage insurance premium (MIP) to insure a mortgage. NO prepayment penalty!

Term
FHA con't
Definition

-points charged on loans to increase yield for the lender and obtain the market interest rate. The borrowers usually pays FHA points, but this is negotiable btwn buyer & seller.

-req. an impound acct for prepaid items: prop. taxes, & hazard insur.

-type that insures loans for prop. improvement & the purchase of manufactured home: Title I loan.

-Most common for single family homes: Title II loan, section 203B

-type authorizing mortgate ins. for purchase of rehab. of a home: Title II loan, section 203K

Term
VA loan
Definition

-guaranteed by the U.S. Dept. of Veterans Affairs

-will allow a qualified veteran to buy a home or, condo, buy a mobile home, or refinance an existing mortgage on a dwelling owned and occupied by the veteran.

-usually req. no downpayment

-req. no prepayment penalty

-buyer or seller may pay the loan discount points.

-the veteran buyer has a right to rec'v a certificate of reasonable value (CRV) b4 completing the purchase.

-may be obtained through any lending agency.

Term
Certificate of value (CRV)
Definition
-an appraisal completed by a qualified licensed appraiser.
Term
Calvet loan
Definition

-offered through the veterans farm and home purchase program estab. in 1921.

-purpose: enable eligible vets to purchase a home, a farm, or a mobile home to be used as a primary residence.

-arranged under a contract of sale.

-Dept of Veterans Affairs- purchases the home for the vet and retains title until the debt is completely paid.

 

Term
Primary mortgage market
Definition

- inc. savings & loans, commercial banks, mortgage bankers and is where the consumer originates a real estate loan.

-originates mortgage loans by lending directly to borrowers.

Term
Deregulation
Definition
-has eliminated most of the differences btwn savings & loans & commercial banks, and allowed institutional lenders to be competitive in the int. rates they pay on deposits.
Term
Mortgage bankers
Definition

-are privately owned companies often affiliated w/ banks or savings and loans.

-originate conventional and FHA/VA loans.

 

Term
Insurance companies
Definition

-like to make Large commercial loans for the long term.

 

-like to work through mortgage companies and avoid working directly with the borrower.

Term
Savings and loans
Definition
-historically have been the primary source of residential financing.
Term
Secondary mortgage market
Definition

- where investors purchase real estate loans originated by other lenders

- the lenders in the Primary MM replenish their funds by selling loans in the secondary MM.

-Players in M:

Federal National Mortgage Association (FNMA)

Fannie Mae

-Federal Home Loan Mortgage Corporation (FHLMC)

Freddie Mac

-Government National Mortgage Association (GNMA)

Ginnie Mae

Term
Federal National Mortgage Association (FNMA)
Definition
-purchases FHA, VA & Conventional loans from approved lenders and sets property guidelines for acceptance.
Term
Sub-prime loans
Definition
- loans that do not qualify for sale to Fannie Mae or Freddie Mac and cannot be securitezed into a pool guaranteed by Ginnie Mae.
Term
Land contract of sale
Definition

-a device whereby the seller(vendor) agrees to convey title to real property after the buyer(vendee) has met conditions specified in the contract.

-conveys equitable title to the vendee but retains legal title in the vendor.

- aka an installment sales contract, a contract of sale, an agreement of sale, a conditional sales contract, or a land sales contract.

-relationship btwn vendor & vendee like that of beneficiary(lender),  and the trustor(borrower).

-vendor may not use vendee's impound money for any other purpose w/o the vendee's permission.

-CalVet loan-set up as a land contract w/ dept. of Vet affairs holding legal title.

Term
Breach of a land contract
Definition
-by the vendee will cause a cloud on title. if the vendee is available and cooperative, he should sign a quitclaim deed to resolve the cloud on title. If the vendee is not available or cooperative, the vendor should initiate a quiet title suit to resolve the cloud on title.
Term
Real esate settlement procedures act
Definition

-req. that borrowers, buyers, & sellers, rec'v closing cost information for federally related loans for the purchase or refinance of 104 owner-occupied residential units.

-the lender can charge nothing for the prep. of the Uniform Settlement Statement.

-req. that a Good Faith Estimate of the loan costs be given to the borrowere w/in 3 bus. days of the originating broker or lender's receipt of the application.

-prohibits the rec'v of referral fees (kickbacks) when prividing settlement services on residential loans 1-4 units and on federally related loans.

Term
The Truth and Lending Act
Definition

-purpose- req. creditors to disclose credit terms to consumers to enable consumers to make comparisons btwen various credit sources and to make better informed decisions.

-to implement- Board of governors of the federal reserve system issued a reg. known as Regulation Z.


Term
Regulation Z
Definition

-req. the creditor to be responsible for furnishing Truth in Lending disclosures to the consumer.

-Exempt. from coverage under Reg Z is extended primarily for a: business, commercial or agricultural purpose.

-consumer has right to rescind when the loan is secured by a lien against the consumer's existing principal dwelling.

-an ad that refers to the finance charge as a rate must state the annual percentage rate (APR)

Term
Advertising offering a yield
Definition

- when selling a trust deed, if this occurs on a note that is different from the int. rate on the note, must also state the int. rate & the discount.

 

Term
Appraisal
Definition

-refered to by the DRE as Valuation & Market analysis


Term
Value
Definition

-what something is worth in a given marketplace

-two categories: utility value & market value

 

-4 Essential elements of value:

Demand

Utility

Scarcity

Transferability

(DUST)

Term
Appraisal
Definition
-an opinion
Term
Utility value
Definition

-value directed toward a particular use.

-aka subjective value

 

Term
Market value
Definition

-rep. the amount of $ for which a prop. can be sold in prevailing market conditions at a given time and place

-aka objective value

-the most probable price the prop. should bring on the open market with a willing buyer and seller.

Term
Demand
Definition

-the desire in the marketplace for a particular commodity.

-to be effective, must be supported by purchasing power.

Term
Utility
Definition

-the capacity to satisfy a need or a desire.

 

Term
Scarcity
Definition
-the present or anticipated supply of a product in relation to demand for it.
Term
Transferability
Definition
-the ability to convey legally rights or interests to a property.
Term
Appreciation
Definition
-an increasein value w/ the passage of time.
Term
Cost
Definition

-does not nec. equal value.

-is what an indiviudal spent in the past or anticipates spending in the future to acquire or produce a property.

Term
Price
Definition

-does not nec. equal value

-what one pays or asks to rec'v for a property.

Term
Principle of conformity
Definition

-stats that max. value is achieved when land uses are compatible and a reasonable degree of architectural harmony is employed.

-great help in stabilizing values are:

land use regs & zoning.

Term
Principle of substitution
Definition

-states that the value of a prop. will tend to be set by the cost of acquiring an equally desirable substitute property.

-states that values of prop. will change w/ fluctuations in supply and demand.  if supply inc. but demand remains constant, values will decrease. if demand inc. but supply remains constant, values will incr.

Term
Principle of highest and best use
Definition

-states that the highest and best use of land is that use that will produce the greatest net return to the land over a given period of time.

-it is the use that makes the land most profitable.

-it is the 1st step an appraiser must take when appraising vacant land

 

Term
Interim use
Definition
-a temporary and acceptable use of land that is not its highest and best use
Term
Principle of progression
Definition
-states that value of a less expensive house will tend to increase when it is located amongst many more expensive houses.
Term
Principle of regression
Definition
-states that value of a more expensive house will tend to decrease when it is located amongst many less expensive houses.
Term
Principle of contribution
Definition
-states that a component part of a prop. is valued in proportion to its contribution to the value of the whole prop.
Term
Principle of anticipation
Definition
-states that value is created by anticipated future benefits to be obtained from the prop.
Term
Four-stage life cycle
Definition

-Growth, stability, decline, and revitilization

-all props and neighborhoods go through this.

 

Term
Four forces influencing value
Definition

-recog. to create, maintain, modify and destroy value as they interact:

Physical and environmental characterization

Economic influences

Political and Gov'tl regs.

Social ideals and standards

(PEPS)

Term
Physical characteristics (PEPS)
Definition
-public transportation, schools, churches, shopping, and the presence of physical hazards in an area.
Term
Environmental influences (PeEPS)
Definition
-climate, soil, topography, and natural barriers to future development.
Term
Social ideals and standards (PEPS)
Definition
-growth and decline, rates of birth, death, marriage, and divorce and attitude towards education.
Term
Economic influences (PeEPS)
Definition
-natural resources, levels of employment, taxation, economic base, and development trends.
Term
Political and governmental regulations (PeEPS)
Definition
-building codes, zoning laws, environmental restrictions, and rent controls.
Term
Location
Definition
-an extremely important value factor b/c it influences the demand for prop.
Term
Plottage increment
Definition
-an added increment of value is achieved when two or more contiguous units are placed under one ownership.
Term
Appraisal process
Definition

-recognizes certain well-defined steps to arrive at an opinion of value.

-basic steps-6 :

1. Define the problem

2.Make a preliminary survey

3. Collect general and specific data

4. Analyze the data

5. Reconcile the analysis

6. Estimate and report the value

Term
Appraisal report
Definition

-a written statement of the appraiser's opinion of value

-valid for a specific date only

-3 types: Letter form report, Short form report, Narrative report

Term
Letter form report
Definition
-a brief report intended for a single user who is very familiar with the property.
Term
Short form report
Definition
- the report most often used to appraise a single family home.
Term
Narrative report
Definition

-the most comprehensive type of appraisal report.

 

-the type used is heavily used influenced by the intended use of the report.

-would contain a definition of value being given.

-all professional appraisal reports contain a definition of being given...in narrative, its found in the statement of purpose.

Term
Certified general license
Definition
-req. to appraise commercial prop. such as a strip mall in California.
Term
Dates most interesting to...
Definition

-appraiser- date the parties agreed to the contract

-lender- date the property was inspected aka effective date of the appraisal, or date of value.

Term
Approaches to value
Definition

- Market data approach

-Cost approach

-Income approach

(MCI)

Term
Sales comparison approach
Definition

-aka market data method

-simplest & most common approach used by brokers & salespeople

-principle of substitution

-used for appraisal of residences & land.

-data obtained from # of sources:

the appraisers own files

public records,

multiple listing services

buyers & sellers

Term
Adjustments
Definition

-made in teh areas of property characteristics and non-property characteristics.

 

-getting and indication of the value of the subject property from sales in the marketplace is accomplished by making adjustments to the sales prices of the comparables.

Term
Comparable sale property
Definition

-comparable better-subject- if it has a feature that the subject prop. does not have, the appraiser would subtract the value of that feature from the sales price of the comparable sale prop.

 

-subject better-add- if it is lacking a feature that he subject prop. has, the appraiser would add the value of that feature to the sales price of the comparable sale property.

Term
Sales comparison approach
Definition

-limitations occur in times of rapidly changing economic conditions.


-the best comparable sales for the sales comparison approach are the most recent and similar.

Term
Cost approach
Definition

-aka replacement cost approach

-views value as a combination of the value of the land as if vacant, & the cost to reconstruct the building as new, less accrued depreciation.

-tends to set the upper limits of value

-used to appraise unique properties and to offer an additional indication of value on residential prop.

 

Term
Unique properties
Definition
- include properties like schools, churches,city halls, and libraries b/c such props. have no comparables and produce no income stream.
Term
Reproduction cost new
Definition

-the cost of constructing the exact replica of the appraised building

-the cost of constructing a building today of the same size, quality of construction, and use.

 

Term
Methods of estimating building cost
Definition
-square foot method, the cubic foot method, quantity survey method, unit-in-place cost method
Term
Square foot method
Definition
-applies a dollar value per sq. ft. of floor area based on known costs of similar structures, and is the fastest and most common method used by residential appraisers.
Term
Cubic foot method
Definition
-similar to the sq. ft. method, but is used most often on industrial or warehouse buildings.
Term
Unit-in-place cost method
Definition
-inv. the calc of the costs for all unit of construction installed in the building (walls, floor, heating units, etc.). It is detailed and accurate, but rarely used by appraisers.
Term
Quantity survey method
Definition
-inv. a detailed estimate of all labor and materials for each component of the building. It is commonly used by building contractors and professional cost estimators, but rarely by appraisers.
Term
Depreciation
Definition

-appraisal term defined as loss in value from any cause.

 

-the diff btwn:

the replacement cost new of a prop & its value.

 

-caused by 3 gen. influences:

1. physical deterioration

2. functional obselescence

3. external obselescence.

Term
Physical deterioration
Definition

-incl. wear & tear from use, deferred maintenance, and damage

 

-caused by depreciation inherent w/in the prop itself

 

-can be curable or incurable

Term
Functional obselescence
Definition

-are causes of depreciation inherent w/in the prop. itself.

 

-ex. incl. lack of modern facilities, out-of-date equipment, changes in style, and changes in utility demand.

 

-can be curable or incurable

Term
Curable depreciation vs. Incurable depreciation
Definition

-curable- is loss in value that is physically and economically feasible to correct.

-incurable- is loss in value that is physically impossible or too expensive to correct.

Term
External obsolescence
Definition

-is economic obsolescence

- ex. incl. zoning or legislative restrictions, change of locational demand, bad location, or backing up to the freeway, airport, or railroad tracks.

 

-almost always incurable.

Term
Effective age
Definition

-an appraisal concept that tells us how old a structure appears to be.

-based on the quality of construction and maintenance of the structure.

Term
Economic life
Definition
- the period of time a building earns sufficient income to justify its continued operation.
Term
Age-life method
Definition

-attributes an equal amount of depreciation each year of the economic life of a building.

-aka the straight line method

Term
Income approach
Definition

-aka capitalization approach

-value is concerned w/ the present worth of future benefits that may be derived from the prop.

-front 25% of commercial lot regarded to hold 40% value of the lot. (a depth table is used in these calcs)

Term
Capitilization approach
Definition

-based primarily on the appraisal concepts of comparison, substitution and anticipation


-concept of comparison utilized in this approach as the best way to select the capitilization rate.

Term
Concept of substitution
Definition
-utilized in the capitilization approach as one prop. can be substituted for another to achieve a desired rate of return.
Term
Capitilization
Definition
-can be defined as the process of estimating the present value of an income-producing on the prop. on the basis of its capacity to continue to produce a stream of net income. it converts income into value.
Term
Capitilization rate
Definition

- the rate of return based on the capital value of the property.

-it is the relationship btwn the annual net income and the property value.

-determ. by 3 methods:

1. market comparison (preferred)

2. band of investment

3. summation

Term
Formula for Effective Gross income, Annual Net, and Cash flow
Definition

SGI Scheduled gross income            
-VAC vacancy factor                         

EGI Effective (adjusted) gross income

-EXP Expenses                                  

ANI Annual net income                     

-Debt Serf Principle & interest mort. pmt

CASH FLOW                                    

Term
Two figures needed to determine the value of an income-producing prop.
Definition

-1. Capitilization rate & 2. Annual net income

 

-ANI is not provided... must be determined from:

Gross scheduled income

Vacancy factor

Effective gross income

Annual net income

Term
Forecasting
Definition
-occurs when an appraiser estimates on an income producing prop.
Term
Gross scheduled income
Definition
-is all of the income the prop. can possibly produce
Term
Vacancy factor
Definition
-is expressed as a percentage of gross scheduled income.
Term
Effective gross income
Definition
-is the amount of income the prop. owner actually collects.
Term
Expenses
Definition

-incl. fixed expenses & variable expenses.

 

-fixed incl. prop taxes & insurance

-variable incl. management, maintenance, utilities, and replacement reserves.

Term
Annual net income
Definition

-subtract the total of all expenses from effective gross income


-mortgage interest would not be deducted to determine ANI

Term
Value determined...
Definition
-divide the annual net income by the cap rate
Term
Gross rent multiplier
Definition

-an indirect method of capitilization, measuring the value of tangible and intangible factors found in small income props.

-found by dividing the sales price of a small income property by the monthly or annual income.

-under 20  would refer to annual rental income

Term
Gross rent multiplier examples
Definition

-If a small income prop. rented for $1200 per month, & sold for $180,000, the monthly GRM would be 150 ($180,000 / $1200)

-the annual GRM (150) would be 12.5

(1200 / 12=14400. $180,000 / $14,400=12.5)

-using this data, if a small income prop rented for $1,500 per month, the indicated value would be 225000.

(Annual GRM 12.5 x 12 months= 150 monthly GRM;

$1,500 x 150=$225,000)

Term
Property descriptions
Definition

-real prop. that is leased, sold, or morgaged must be adequately described.

-the most prevalent legal descriptions for real prop. are tract map, U.S. Gov't survey systems, & metes and bounds.

Term
Tract map system
Definition
-used for subdivisions.
Term
Metes and bounds
Definition
-is the earliest type of land description, currently based on surveying techniques
Term
Government Survey System
Definition
-involves a grid of intersecting horizontal and vertical lines, which creates townships & sections.
Term
Township
Definition
-a parcel of land that is square six miles on each side. It could be described as 36 sq mi, or a 6 mi. sq.
Term
Section
Definition

-a square parcel of land with each side equaling 1 mile


-contains 640 acres.


Term
Parcel of land
Definition
-1/2 mile by 1/2 mile contains 160 acres
Term
Acre
Definition
-43,560 sq. ft.
Term
Mile
Definition
-5,280 feet
Term
Government controls
Definition

- 4 gen. categories:

Police power

Eminent domain

Taxation

Escheat

(PETE)

 

 

Term
Eminent domain
Definition

-a government right to acquire privately owned real prop. for necessary public use.

 

-In the exercise of ED, just competition must be paid to the owner.

 

-the process by which ED is exercised is condemnation.

Term
Inverse condemnation
Definition

-legal proceedings to force authorities to purchase an owner's home.

-for ex., a large airport changes its flight patterns creating excessive noise, which then renders the home unusable.

Term
Police power
Definition

-the power of hte state to enact laws to promote the order, safety, health, morals, and general welfare of society.

-a gov't right to tell private owners how they may use their property. ex. zoning

Term
Taxation
Definition
-the gov't has the power of taxation on real property
Term
Escheat
Definition
-a gov't power in which a prop. reverts to the state if a person dies w/o a will and w/o any heirs.
Term
Rent control
Definition
-refers to law in some communities that prohibit or regulate rent increases and evictions.
Term
Subdivision map act
Definition

-designed to give local gov'ts control over the types of subdivisions to be built, and the physical improvements to be installed.

sma= something may appear= subdiv. map act

 

-defines a subdivision as a division of improved or unimproved land for the purpose of sale, lease, or financing into two or more parcels.

Term
The planning commission
Definition

-develops and maintains the general plan, and makes recomm. on the zoning of real prop.

 

-2 maj. tools for implementing the general plan:

Subdivision regulations & zoning

Term
The subdivision lands law
Definition

-designed to protect purchasers from fraud, misrepresentation, and deceit in the initial sale of real prop.

SLL=Someone Laid Low= subdivided land law

-defines a subdivision as a division of improved or unimproved land for the purpose of sale, lease, or financing into five or more parcels.

 

-

Term
Standard subdivision
Definition
- one w/ no common or mutual rights of either ownership or use among the owners.
Term
Common interest subdivision
Definition
-incl. condominiums and planned unit developments
Term
Common Interest Developments (CID)
Definition
-is a special category of land that incl. stock cooperatives, time shares, and community apartment projects.
Term
Public report
Definition

-issued by the Dept. of R.E. on each subdivision and must be given to anyone upon request.

-when a developer provides a copy of this to a consumer, the developer must keep a receipt for this report for a period of three years.

Term
Real estate commissioner
Definition
-finds that any person is violating any provision of the Subdivided Lands Law, the Commissioner may issue a desist and refrain.
Term
Downzoning
Definition

-changing the zoning from a higher density of people to a lower density of people.

Ex. changing the zoning from R-3 to R-1 or from commercial to residential.

-R-3- allows for multifamily residential development.

Term
Special land uses
Definition
-may be granted w/in a zoning district w/ the issuance of a conditional use permit.
Term
Variance
Definition
-if a person owns a single lot w/ unusual characteristics that prevent the owner from enjoying development privileges, the owner could seek one of these, to receive the same development privileges as neighboring lots in the subdivision.
Term
Environmental impact report
Definition
-if a subdivider is planning a development that may have a significant impact on the environment, the developer may have to provide one of these to the local authorities.
Term
Negative declaration
Definition

-a statement authorized by the Environmental Quality

Act that building a subdivision at a particuler location will not harm the environment.

Term
Health issues
Definition
-In the development of a subdivision, health issues such as proper drainage, sewage disposal, and water supply are controlled by the local health officer.
Term
Potable water
Definition
-fresh water that is safe and useful for drinking
Term
Infill development
Definition

-redevelopment w/in existing developments.

-an infill developer will take a vacant or underutilized lot located w/in an existing development area and maximize the use of that lot.

Term
Brownfield site
Definition
-defined by law as real prop., the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant.
Term
Agricultural property
Definition
- means property zoned for farming, including growing crops and raised livestock.
Term
Smart growth
Definition

-a term referring to development policies that emphasize "pedestrianised" areas, a less-industrialized lifestyle, higher density, mass transit, cycle paths, and decreasing use of private cars.

-It promotes the smart use of the environment, conservation of the natural habitat, reduction of pollution, and is ecology friendly.

Term
The Clean Water Act of 1977 (CWA)
Definition
-regulates the discharge of pollutants into waters of the United States.
Term
Environmentally sensitive lands
Definition

-are lands containing natural features or ecological functions of special significance

-incl. wetlands and tidelands.

Term
Wetlands
Definition

-are areas where water covers the soil or is present either at or near the surface of the soil all year or for certain periods during the year.

-incl. coastal wetlands

-coastal wetlands- are found along California's Pacific shoreline and estuaries.

Term
Estuary
Definition
-an area where sea water and fresh water mix.
Term
Shoreline
Definition
-marks the location where the land meets the water, the mean high water line.
Term
Inland wetlands
Definition
- are found in deltas, swamps, marshes, low-lying areas of lakes and ponds, and in flood plains along rivers and streams.
Term
Floodplain
Definition
-the low land adjacent to a river, lake or ocean.
Term
Tidelands
Definition
-refer to beaches, areas where the tide ebbs and flows over the land.
Term
Rangelands and grasslands
Definition

-protected by the Rangeland, Grazing Land, and Grassland Protection Act of 2002 and these lands are reserved for agricultural purposes.

 

-This act prevents the conversion of rangeland into non-agriculutural use, and protects livestock grazing areas.

-also preserves benefits to the state of California from livestock grazing, incl. continued wildlife, water quality, watershed, and open space.

Term
HVAC
Definition
-refers to Heating, Venting, and Air Conditioning.
Term
Bearing wall
Definition
- a wall which supports the weight of part of the structure in addition to supporting its own weight.
Term
Backfill
Definition
-soil that is used to brace foundations or replace soil that has been removed from excavation.
Term
Board foot
Definition

-a unit of measurement for lumber.

-it is any three dimensions which when multiplied out contain 144 cubic inches.

-ex. 12" x 12" = 144 cubic inches or 12" x 6" x 2" = 144 cubic inches

Term
Elevation sheet
Definition
-is a sketch that shows the exterior design of a building
Term
Footing
Definition

-a foot-like projection at the base of the foundation wall to stabilize the foundation and reduce settling and shifting.

 

Term
Foundation plan
Definition
-shows footing, piers, and sub flooring of a structure.
Term
Plot plan
Definition
-shows the location of the structures on a lot
Term
The height of the ceiling..
Definition
-standard house- 96 inches
Term
R-value
Definition
-measurement of resistance to heat flow of insulation
Term
Ridgeboard
Definition
-the highest construction member of a roof.
Term
Joists
Definition
-parallel beams that support ceilings and floors.
Term
Kiosk
Definition
-free standing structure in the open area of malls used as an info booth or to sell specialty items.
Term
Turn-key
Definition
-means a structure is ready for the tenant to move-in.
Term
Flashing
Definition
-sheet metal used to prevent water from seeping into a roof, used at the base of chmneys, vent openings, and other locations.
Term
Sill
Definition
-the lowest horizontal member of a frame supporting the vertical members of the frame.
Term
Cornice
Definition
-the crowning member of a wall, the top moulding, generally decorative.
Term
Hip roof
Definition
-a roof with 4 sloping sides which rise to a ridge.
Term
Studs
Definition
-vertical supports in walls and partitions.
Term
I-beam
Definition
-an iron or steel structural member which when viewed from the end or in cross-section, forms the letter "I".
Term
Commercial acre
Definition
-a net buildable acre, an acre less the streets, the sidewalks, and the alleyways.
Term
Commission and Fees
Definition

-obligation to pay compensation to the broker must be in writing.

-one way for a broker to be entitled to a commission is to produce a buyer ready, willing, and able to purchase on the terms and at the price stipulated by the seller.

-another way is to secure from prospec. buyer an offer upon terms and condit. which the seller subsequently accepts.

-normally, only if he/she creates a binding contract during the term of the listing. An exception is found in the protective, where the broker could be entitled when a sale is made to the broker's prospect after the expir. of the listing.

Term
Mobile homes
Definition

-a CA R.E. licensee can sell any mobile home that is registered with the Dept. of housing and Community Devel.

-when sold, must be registered w/  Dept. of Housing and Comm. Devel w/in 10 Calender days.

-when listing terminates, the licensee has 48 hours to stop advertising and remove all signs from teh mobile home.

Term
Trust fund
Definition

-are money or other things of value rec'vd by a broker or salesperson on behalf of a principal.

-purpose is to separate trust funds from non-trust funds

-funds rec'vd must be placed into the hands of the owner of the funds, into a neutral escrow depository, or into a trust account no later than 3 business days following receipt of the funds.

 

Term
Trust fund con't
Definition

-broker must place deposit on behalf of another into the hands of the owner of the funds, or into escrow, or into a trust fund acct w/in 3 business days

-exception- when offeror has given written instruc. that the deposit chk not deposited or cashed until the acceptance of the offer, in this case the broker should deposit no later than 3 bus. days after acceptance

-may hold deposit chk upon instruc. from buyer in the purchase contrac, but must inform the seller b4 the seller accepts.

Term
Trust fund accts Con't 2
Definition

-w/drawls from the trust acct may be made by an employee of the broker who is authorized to do so in writing.

-any int. earned on trust funds must never accrue to the benefit of the broker, either directly or indirectly.

-broker's personal funds- not to exceed $200

-must be reconciled 1x a month

-records must be maintained for a period of 3yrs.

-can combine trust funds from multiple managed businesses however, broker must not use the trust fund acct for moneys associated w/ his own prop.

Term
Commingling
Definition
-occurs when trust funds are deposited into a licensee's business or personal account rather than into the trust acct.
Term
Federal Fair Housing Laws
Definition

-Federal and state laws prohibit discrimination by persions who sell or rent housing and the real estate broker or salesperson.

-Fed & st. laws prohib. discrim. against someone b/c of who they are.


Term
Blockbusting
Definition
-method of acquiring or listing properties by telling owners that minorities are moving into the area, causing property values to fall, and is a violation of law.
Term
Steering
Definition
-the process of guiding homebuyers to certain non-integrated areas and is illegal.
Term
Federal Fair Housing Act of 1968
Definition

-expands the Civil Rights Act of 1866, which is the basis of the 13th amendment

-no one may refuse to sell, lease, or rent, to another b/c of race, color, or on the basis of any other prohibited classification

-violations must be reported to the Dept. of Housing and Urband Develop. (HUD) w/in 1 yr of the alleged violation.

-no R.E. licensee may discriminate, regardless of the principal's direction.

-if a principal seeks to restrict a listing based on any prohib. class. the licensee must refuse to accept such a listing.

Term
The Unruh Civil Rights Act
Definition
-prohibits discrimination in the State of CA by businesses.
Term
The Rumford Act
Definition

-prohibits discrimination by owners in residential properties, incl. renting, leasing, selling, financing, and advertising.

-Complaints for violation of the R.A. must be submitted w/in 1 yr to the department of fair employment and housing.

-penalties: having to go through w/ a rental or sale (or make the next vacancy available if applicable), & a fine of up to $10,000 in damagses.

Term
The Holden Act
Definition

-aka The Housing Financial Discrimination Act, prohibits red lining.

-prohibits the charging of translation fees.

Term
Redlining
Definition
-the practice of a lender to exclude certain high-risk areas from the possibility of rec'v a loan. This means no one living in that area will be considered for a loan, re:less of his/her qualifications.
Term
The Commissioner's Regulations
Definition
- prohib. discrim. by a R.E. licensee in the sale, rental, leasing, financing, or advertising of real prop. or a business opportunity.
Term
False advertising
Definition

-a violation of real estate law and can result in the revocation or suspension of a real estate license.

-Broker's name must appear in all advertising

-omiting the Broker's name-blind advertising

-when licensee promises to advertise in a certain manner when taking a listing & fails to follow thru, the violation is considered actual fraud.

Term
Record keeping requirements
Definition

-broker must keep records & make availabe for inspec. & cooying all listings, deposit receipts, cancelled cks, & trust records for a 3 yr period

-broker may store electronic docs w/ an electron. sig, but must be able to provide the DRE w/ paper, i.e. hard copies, if requested, at the broker's expense.

Term
Agent supervision
Definition

-reasonable supervision over the activities of the broker's salespeople. Failure to do so could result in disciplinary action.

-proper supervision over non-licensees who respnd to queries invl props the broker has advertised on the world wide web.

-unlicensed R.E. assistant may not hand out door fliers or make phone solicitation calls.

-owns the listing. if salesperson leaves employment of the broker in teh middle of a transaction, the listing remains w/ the broker.

- when salesperson choosesleaves a broker, the broker must notify the DRE w/in 10 days. If fired for cause, immediately

Term
Spectrometer
Definition
-the presence of radon gas is best detected.
Term
Timeshare
Definition
-a R.E. develop. in which a buyer can purchase the exclusive right to occupy a unit for a specified period of time each year.
Term
Mansionization
Definition

-the process whereby developers tear down small to medium sized homes in older neighborhoods and build larger, more extravagant ones.

-a response to extremely high land costs.

-regulated in part by planning commissions adopting floor area ratios.

 

Term
Article 7
Definition

-part of the R.E. Loan Law

-establishes maximum commissions that can be earned on 1st trust deed loans less than $30,000 & junior loans less than $20,000.

Term
Real property securities
Definition

-involve secured notes & contracts of sale.

-when a broker is involved in the sale of these items, he or she must obtain a permit valid for one year.

-purchaser must rec'v a "Real Properties Sec. Statemnt" & the broker must retain this doc for four years, along w/ the appraisal.

Term
Guaranteed note
Definition
-a note that guarantees a return or yield.
Term
Promotional note
Definition
-a note less than 3 years old secured by liens on parcels in a subdivision. When the loan has been seasoned beyond 3 years, it is no longer considered a promotional note.
Term
Tax issues
Definition

-homeowner-can deduct 100% of the int. he/she pays on a mortgage for their personal residence.

-also prop taxes on personal residence

Term
Capital gain
Definition

-Upon the sale of real property, it is the taxible profit derived from the sale of a capital asset.

-is calc. as the sales price reduced by the expenses of the sale, closing costs, and adjusted basis.

Term
Adjusted basis
Definition
-the original tax basis of the property adjusted for capital improvements and depreciation if applicable.
Term
Taxpayer Relief Act of 1997
Definition

-granted a $500,000 capital gains exclusion for couples on the sale of their personal residence if they have lived in the house at least 2 out of the last 5 yrs.

-granted $200,000 capital gains exclusion to a single filer on the sale of his/her personal residence if they've met the occupancy req.

Term
Depreciation
Definition

-for fed. income tax purposes, is a deductible periodic accountancy charge that represents the recovery of capital investment over the useful life of a prop.

-applies to trade or business property and income producing property

-never applies to vacant land- must be improved land

-home sold at a loss-owner cannot deduct loss on income tax return.

-

Term
Operational loss
Definition
-suffered by an owner of income property may be used to offset any capital gain rec'v on that prop.
Term
1031 tax-deferred exchange
Definition

-"tax-free" exchange

-the props. invl. in the exchange must be of like kind

 

-"like kind" props.- means any combination of income, trade or business, or vacant land held for investment purposes.

 

-the cost basis of the acquired prop is the cost basis of the relinquished prop.

Term
Boot
Definition
-in a tax-free exchange, is cash, debt relief, or other assets rec'v along w/ the like-kind prop.
Term
Installment sale
Definition
-occurs when the seller of real prop. rec'v one or more payments in later years, thus avoiding tax bunching of gain or income in the year of the sale.
Term
Rent from a lease
Definition

-taxable to the lessor as ordinary income.

-in a sale-leaseback, it may sometiems benefit an owner to sell commerc. prop. to an investor and lease it back. Frees up capital for other ventures and earns tax benefits with rent deduc.

-for non-residential prop.-rnt pd by lessee deduct. as a business expense to the lessee.

-a buyer/investor who buys a commerc. prop. & leases back to the seller would be least concerned w/ the seller's book value.

Term
Foreign Investment in Real Property Tax Act (FIRPTA)
Definition

-a federal law req. a buyer to w/hold 10% of the gross sales price and send it to the Internal Rev. Serv. (IRS) if the seller is a foreign person.

-Exemptions to compliance- incl (1) seller furnishing a non-foreign avidavit stating under penalty of perjury that the seller is not a foreign person, along with the seller's tax ID (2) the buyer is acquir.the prop. as their personal residence & the sales price of that prop. is no more than 300,000.

Term
Bankruptcy trustee
Definition
-job- to assure that the creditors rec'v just compensation for their debts when the debtor's prop. is sold.
Term
Bulk sales law
Definition
-req. that buyers give notice to creditors of the pending sale of a business.
Term
Community Redevelopment Agency (CRA)
Definition
-created when a community is undergoing redevelopment and will rec'v addt'l tax revenue from tax allocation bonds. -this is known as tax increment financing.
Term
Building contractor & license
Definition
-An indivi. performing work as a building contractor does not need a contractors' license if the work does not exceed 500.
Term
Property taxes
Definition

-prop taxes are levied according to the value ad valorem of the prop as of hte date acquired, or hte date of completion of any new construc.

-become liens agnst real prop. Jan 1 of the yr preceding the fiscal tax yr.

-2 installments: 1st due Nov 1 & delinq. Dec 10.

2nd due Feb 1 & delinq. Apr 10

-if prop sold for $400,000, annual taxes $5000. escrow closes apr 1, buyer debited and seller credited $1250.

Term
Fiscal tax year
Definition
-runs from July to June 30
Term
Tax defaulted real prop
Definition
-may be sold at auction if the property has not been redeemed w/in 5 yrs of the initial declaration of default.
Term
Special assessments
Definition

-are levied for the cost of specific local improvements

-are ususally equal in priority to general tax liens.

Term
Documentary transfer tax
Definition

-collected when a deed is recorded.

-based on the selling price of the prop., except for any portion of the price covered by an existing liens, or encumbrance

-rate for computing- $.55 per 500 worth of consideration

-if prop sells 91,000 w/ buyer assuming an existing mortg. of 30,000- the doc trans. tax is 67.10

(91000-30000=61000/500 x .55=$67.10)

Term
Mello-Roos Comomunity Facilities Ac of 1982
Definition

-provides for a wide variety of facilities and services and is like a general prop. tax levy for general fund benefits.

-the assessment must be disclosed to a buuyer in the transaction by the seller

Term
California state sales tax
Definition

-is imposed upon retailers for the privlege of selling tangible personal prop. at retail.

 

Term
Tax clearance
Definition
-the purchaser of a business which utilizes a seller's permit will want one of these from the State Board of Equalization to avoid possible sales tax liability.
Term
Property management
Definition

-dual obligations to owner and to the tenant.

-fees- ususally based on % of gross receipts on the prop.

-broker- party authorized to provide these services to the public.

-for commercial- no max limit on security deposit to be charged.

-non-residential leases- lease agreement holds many details of the obliga. btwn landlord & tenants

Term
Getting & Keeping R.E. license
Definition

-to represent other ppl in R.E. trans., individ. must rec'v license from state agency called Department of Real Estate (DRE)

-they issue 2 types: broker's(most important) & Salesperson's license.

-broker-charged with supervision of all salesppl in employ.

-salespersn-must submit his/her licen to a broker for superv., and may not operate independently on their own acct.

-salesperson- may rec'v compens. from their broker only.

Term
Getting & Keeping R.E. license 2
Definition

-cadidates for broker's must prov. evidence of at least 2 yrs as salesperson

-DRE must ascertain, by written exam. the competency of an applicant

-applicants must submit proof they have legal presence (thru birth certs. and resident alien card) b4 an orig. or renewal license can be issued. & must be submitted one time w/ Public Benefits Form.

-1 set of classifiable prints must be subm. to State Dept. of Justice (DOJ) thru the DOJ's Live Scan program & elec. taking & transmission of fingerprints. 

Term

Real estate commissioner duties/authorities

 

Definition

-after routine screening process, may cause an investi.& and hearing to take place to deter. whether an applicant meets the req. of honesty & truthfulness.

-has authority to deny license if they don't meet the full req. of the law.

Term
Licensing & renewal
Definition

-renewal applicants- must complete a total of 45 clock hours of approved offerngs w/in the 4 yr period immed. preceding license renewal

-must renew evry 4 yrs by filing the proper app., fee, and evidence of completion of continuing educa.

-if does not b4 the expiration, the licensee enters 2 yr grace period where renewal possible w/o testing again.

 

Term
Expiration & restriction
Definition

-licensee w/ an expired license cannot conduct a transaction.

-all licensed activites must cease

-2yrs after expir. all license rights lapse

-R.E. Commissioner duty-bound to enforce provisions of the Real Estate Law.

-restricted license- may be done accord. to time, type of activity, or employment by a particular broker.

 

Term
Suspension
Definition
-suspended license- 'temporary loss' of the license, may rec'v one w/o benefit of a hearing in advance.-commission. may suspend w/o a hearing for anyone who procured license by fraud, misrepresentation, or deceit, or made any material misstatement of fact in teh app., and maydo so w/in 90 days after issuance.
Term
Unlicensed sales assistant/person
Definition

-may perform clerical duties, but may not be compensated for acts that req. a real estate license.

-if he/she performs any act requiring a real estate license, he & the broker who hired him are subject to a fine of up to $10,000.

Term
Worker's compensation insurance
Definition
-even though R.E. licensee is considered an independent contractor for tax purposes, the Dept. of Labor req. the broker to cover the licensee for this insurance.
Term
Fictitious business name
Definition
-can be used by a broker, corporation, or partnership when approved by the Real Estate Commissioner
Term
Child support obligor
Definition
-may be issued a 150 temporary license from the Dept. of R.E.
Term
Recovery Account
Definition

-a fund of last resort for a member of the public who has obtained a final civil judgment or criminal restitution order against a real estate licensee based on fraud or certian other grounds.

-max amnt R.A will pay for any 1 transac- $50,000

-max amnt R.A. will pay for 1 licensee is $250,000

(effective January 1, 2009)

-licensee rec'v a suspended license

-to reinstate-licensee must only pay back the R.A. plus int.

Term
Ethical conduct
Definition

-the course of E.C. set forth in R.E. Law is what a licensee must  observe. Ethics as set forth in the National Association of Realtors (NARs) Code of Ethics, is what all licensees should observe.

-Code of Ethics of the NAR can be summed up in the golden rule, "do unto others as you would have them do unto you"

-from legal & ethic standpt, import. that a licensee disclose all material facts known to a client or customer.

-honesty & fairness-also to non-fiduciary oblig.

-ow E.C. to clients, customers, assoc. & gen. public