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276 Cards in this Set
- Front
- Back
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What is the Michigan Occupational Code?
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The law that sets all the rights and obligations of licensees.
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How many members sit on the Real Estate Board?
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Nine members
Four year terms not more that two consecutive Six have real estate licenses Three represent the public |
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How long is a license good for?
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All licenses expire on October 31 of a three year term. 2006
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Latent Defect
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A defect that is hidden but known to the seller. Can not be revealed by ordinary inspection.
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Silent Fraud
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Not disclosing Latent Defect.
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Material Facts
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Have direct effect on value. Bad furnace.
Licensee required to disclose. |
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Non-Material Facts
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Have no effect on value. Seller lost job.
No Duty to disclose. |
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Seller's Disclosure Statement
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Sellers of residential properties(1-4 families) must complete.
Real Estate offices must make available even if not client. If purchaser signs offer without disclosure may back out and get deposit back. |
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Agent's Duty
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Disclose defects KNOWN to agent or should have been known.
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State Position RE: Disclosure
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Disclosure of Material Facts shall not be considered grounds for disciplinary action.
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Patent Defect
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Obvious Defect
Can be discovered as result of a reasonable inspection. |
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Innocent Misrepresentation
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Innocent misstatement of facts
Furnace new so must be OK....bad installation |
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Listing Agreement
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Must be signed by all parties holding title.
Listing owner must be given true copy |
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AD VALORUM
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Taxes are paid according to VALUE
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ASSESSED VALUATION
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Value placed on property for tax purpose.
Not the APPRAISED VALUE |
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ASSESSMENT RATE
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Ratio between Appraised value and Assessed value
50% in Michigan |
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What is 1 mill?
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1 mill is 1/10 of a cent. .001
50 mills = .050 = 5% = $5.00/$100.00 |
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TAX CALCULATION
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TAX DUE
_________________________________ ASSESSED VALUE x TAX MILLAGE |
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Property appraised value is $80,000, tax rate is $6.00/$100.00. How much in tax is paid?
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Assessed Value = $80,000 x 50% = $40,000
Tax = $40,000 x 6% = $2400.00 |
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Tax due is $1200. Appraised value $60,000. What is tax rate?
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$1200.00 / $30,000 = .04 = 4% = 40 mills
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Special Assessments
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Charges assessed for improvements by local government that improve property
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Property appraised at $73,250 and tax rate is $2.80 per hundred of assessed value. What is tax due?
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$73250 / 2 = $36,625
? $1025.50 _____________________________ $36,625 x 2.8% |
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DEED RESTRICTIONS
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Restrictive Covenant
A provision in the deed aimed at controlling the present and future use of the land. Placed by seller (grantor) to restrict buyer's use.(grantee) |
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Which is used..
Deed Restriction or Zoning Ordinance |
The most restrictive
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Three methods of LEGAL DESCRIPTIONS
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Lot-Block-Subdivision Method
Government Rectangular Survey Method Metes and Bounds |
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Lot-Block-Subdivision Method
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Description identifies properties by reference to a subdivision plat filed by developer
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GOVERNMENT RECTANGULAR SURVEY
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Base lines - Latitude - East/West
Meridian Lines - Longitude - North/South Range Lines - North/South every 6 miles Township Lines - East/West every 6 miles Township - 6 square miles 640 acres |
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One Acre
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43,560 Square Feet
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A parcel of land 242ft x 450ft sold for $50,000. What was the price per acre?
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242 x 450 = 108,900
108,900/43,560 = 2.5 acres $50,000/2.5 = $20,000/acre |
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How many acres in the N1/2 of SE1/4 of SE1/4 of SE1/4 of Section 7?
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640 acres in one section
SE1/4 160 acres SE1/4 40 acres SE1/4 10 acres N1/2 5 acres |
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METES AND BOUNDS
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Always starts at POB Point Of Beginning
Surveyor uses a MONUMENT. Discription of distances and angular measurements. |
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Setback Ordinance
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Distance from lot edge where building can be erected
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Gross Living Area
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Area of a structure measured usuing external dimensions
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What is not included in Gross Living Area(GLA)?
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Area below grade
Garages and decks Bathrooms and bedrooms below grade |
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Appurtenances
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Rights, privileges and improvements conveyed when ownership of property is transfered, unless specified.
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Name types of Appurtenances
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Easements
Easement appurtenant Easement in Gross |
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What is an Easement?
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Right to use a part or all of property. Right to install and maintain sewers, phone lines, etc
Right of passage(ingress-egress) |
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Two major types of easements
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Easement Appurtenant
Easement in Gross |
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What is Easement Appurtenant
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Benefits neighboring property
Passes with and is appurtenant to the land Two estates or tenements involved Dominant Servient |
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What are the names of the two estates involved with easment appurtenant?
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Dominant Estate (property that benefits from easement)
Dominant Tenant (owner of dominant estate) Servient Estate (property that is subject to easement and encumbered by it) Servient Tenant (owner of servient estate) |
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What is a Party Driveway?
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Two owners of adjoining lots share all or part of same driveway
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What is a Party Wall?
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Single wall located on a lot line that separates two parcels
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What does Run With The Land mean?
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Easement appurtenant remains as an encumbrance on land after sale, gift etc. even without mention of it
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What is an Easement in Gross?
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Conveys right to use the land of another
May or may not run with the land Belongs to person or entity Servient estate but no dominant Two types Personal Easement Commercial Easement |
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What is a Personal Easement?
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Given to a person
Does nor run with the land May not be assigned Terminates with sale of servient estate or death of holder |
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What is Commercial Easement?
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Runs with the land
Can be assigned Does not terminate with sale of servient estate Granting rights to erect billboards Utility easements for gas and electric |
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Who maintains the easement?
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Negotiated at the time easement is obtained
General rule-Party that benefits maintains Gas company maintains gas line Neighbors sharing driveway will share |
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How are easements gotten?
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A Grant
Easement by Reservation Easement by Necessity Government Condemnation Easement by Prescription |
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Easement by Grant
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Written document that specifically grants an easement to another person
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Easement by Reservation
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A person may transfer ownership in a property but withhold the right to use a portion of the property
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Easement by Necessity
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Court ordered easement for benefit of a landlocked parcel.
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Easement by Government Condemnation
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Easement is obtained by government for public use.
Government purpose only...not developer |
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Easement by Prescription
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Obtained as a result of a trespass situation
Continues for the statutory period. 15 yrs Trespass must be open, continuous and notorious Claimant has burden of proof |
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How do you terminate an Easement?
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Merger of Dominant and Servient Estates
Release by Dominant tenant Necessity no longer exists when by necessity Lack of use abandonment or prolonged non use |
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What are Encumbrances?
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Liens, mortgages, taxes, leases, easements, judgements, deed restrictions, possibly encroachments that may burden the property are said to run with the land.
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What is a Homeowner's Association?
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In condominiums and subdivisions
Provides regulations for maintaining property values ex pets, speed, noise LICENSEE'S ROLE - Make purchaser aware of binding bylaws Inform purchaser of association fee |
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Brokerage Fee
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Broker is free to negotiate any amount of commission agreeable between broker and principal
Salesperson can only receive commision from his employing broker Referral Fee is payable from broker to broker Payment after termination should be done |
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What adds to ASSESSMENT OF PROPERTY VALUE
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LOCATION
DESIRABILITY(DEMAND)- buyers that are willing, able and have financial means SCARCITY(SUPPLY)-Are there other similar properties in same area that will compete UTILITY-The type of use..does it satisfy the need of a certain buyer TRANSFERABILITY- Ease of transfering land |
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What are ANTICIPATED CHANGES?
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Changes known to the community that may have a positive or negative effect.
Examples: new landfill, toxic waste dump new highway, change in zoning Agent should make herself aware of anticipated changes as part of duty. |
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What are the types of DEPRECIATION?
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Physical - Ordinary wear and tear
Functiional Obsolescence - Outdated design, not enough parking, one bathroom Economic Obsolescence - crime, pollution, high unemployment, noise from airport |
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What are the two types of FUNCTIONAL OBSOLESCENCE?
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Curable - can be corrected, house with no garage and enough land to build one
Incurable - Cannot be corrected - no space to build a garage |
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What are the three types of PROPERTY VALUATION?
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Market Value(Fair Market Value) - What a willing buyer will most probably pay a willing seller under no duress
Arm's Length Transaction - transaction in a competitive market that leads to a fair sale with knowedgable buyer and seller Market Price - Actual selling price of property |
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Property Valuation Approaches
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Sales Comparison Approach (Market Data Approach)
Replacement Cost Approach Income Approach Income Approach - Gross Rent Multiplier |
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What is SALES COMPARISON APPROACH?
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Known as Market Data Approach
Value is estimated by using recently solds |
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What is REPLACEMENT COST APPROACH?
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Land is appraised without building
Cost of reconstructing building as a new unit is estimated ACCRUED DEPRECIATION is determined and subtracted from the construction costto arrive at value SQUARE FOOT METHOD |
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What is the INCOME APPROACH?
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Used to estimate value on income property
VALUE=NET OPERATING INCOME/CAPITALIZATION RATE Net operating income(NOI) -Gross rent-Operating Expenses Cash Flow=NOI-Debt Service Capitalization Rate(CAP) Rate of return an investor would receive on investment |
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What is NOI if the gross rent for the for the year was $55,000 and the following expenses were considered: Taxes $4000.00, Insurance $3000.00, Utilities $500.00/mo.
What is cash flow if Debt Service is 1000/mo |
Utilities 500 x 12= 6000/yr
55000-4000-3000-6000= 42000 NOI 42000-12000=30000 CASH FLOW |
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What is INCOME APPROACH (GRM)?
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For small income property such as house or duplex.
VALUE= GRM x Monthly or Yearly rent |
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If property was sold for $250,000 and brought in gross rents of $10,000/yr. What would property be evaluated at with $15,000/yr gross rents?
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GRM = 250,000/10,000 = 25
25 x 15000 = 375,000 |
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What are the two types of PROPERTY?
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Real land, improvements, trees, air above, subsurface rights, water rights, anything attached permanently
Personal (CHATTEL) movable good on real property SEVERANCE = Act of detaching a fixture from real estate turning it once again into chattel |
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How do you determine if /chattel or a FIXTURE?
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Method of attachment
Agreement between parties Intention of the parties (shelving in grocery store even though attached are personal property Plants Annual are personal Perennial are real estate |
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What are RIPARAIN RIGHTS?
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Rights enjoyed by land owners on streams, rivers, inland lakes.
Owners have rights of use may not interrupt flow. |
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What are LITTORAL RIGHTS?
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Rights of owners on large navigable rivers, lakes, oceans.
Owners own land up to high water mark Erosion Accretion-increase in land form deposits Reliction-Land exposed when watrer permanently recedes |
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What are the two types of OWNERSHIP IN REAL ESTATE?
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Severalty - Ownership by one individual or corporation
Concurrent Estate - Held by more that one person |
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What are the types of ownership called CONCURRENT ESTATE?
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Tenants in common
Joint tenancy Tenents by the entireties Community property |
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What is TENANTS IN COMMON?
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Form or real estate ownership
Owners may own differnt share amounts Owners share undivided possession No right of survivorship - gos to heirs Tenants take ownership at same or different times Each may sell PARTITON SUIT - Asking court to split |
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What is a PARTITION SUIT?
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In concurrent estate - Tenets in common
One or more co-tenets ask court to order splitting of interest when voluntary agreement cannot be reached |
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What is JOINT TENANCY?
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In real estate ownership - Concurrent Estate
Right of survivorship Unity of possession - Parties share undivided Unity of interst share equal interest Unity of time-all take title at same time Unity of title-all take title on same deed |
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What are TENANTS BY THE ENTIRETIES?
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In real estate ownership-concurrent estate
Property deeded to husband and wife Each owns ENTIRE property Rights of survivorship Both must sign to sell Each own 100% not 50% like in JTWROS |
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What is COMMUNITY PROPERTY?
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In real estate ownership - concurrent estate
Not in Michigan Both husband and wife equally own property acquired during marriage Inherited property or property purchased with inherited funds exempt Need both signatures to sell |
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In condo ownership what are COMMON ELEMENTS?
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Portions of multi-unit structure owned by as tenents in common
EX: club house, swimming pool, yards |
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In condo ownership-What are LIMITED COMMON ELEMENTS?
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Elements shared by a number of co-owners only
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In condo ownership-What is OWNERSHIP OF CONDOMONIUMS?
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Each condo is owned as a separate parcel
Owned in FEE SIMPLE |
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In condo ownership-What are TYPES AND FORM OF CONDOMINIUMS?
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Offices in an office building
Apartment buidings including high-rises Townhouses Shoppong centers Warehouses Home sites |
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What is Condominium Association and what does it do?
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Consists of owners
Operates development according to BYLAWS Governed by BOARD OF DIRECTORS Responsible for maintenance, cleaning. etc Maintains insurance for common areas and structural portion of property |
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What is a CONDOMINIUM FEE?
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ASSOCIATION FEE
Expense assessed to all to operate condo association Maintenance and insurance of common elements Not tax deductible if primary residence |
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What is TIME-SHARED OWNERSHIP?
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Mutiple owners buy weeks.
Each owner can use it for a certain period through the year Maintenance and other expensed prorated |
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What is the HORIZONTAL PROPERTY ACT?
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The condominium Act
The Strata Act Developers of newly constructed units furnish each buyer with plain talk disclosure. Purchase not binding until 9 business days after disclosure |
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How do you create a condominium?
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Plat map identifying the units
Legal description of the land List of value of land and each unit Percentage of common areas Bylaws and details re: condo association |
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What is a COOPERATIVE?
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Land and improvements owned by corporation
Leaseholders own stock in corporation Stock is personal property not real estate Shareholders called COOPERATORS Leaseholders control cooperative through stock ownership |
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Two types of interests in Real Property
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FREEHOLD ownership in property
it is of an indeterminable length obtained through inheritance or deed NON-FREEHOLD leasehold estate less than a lifetime considered personal interest |
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Types of FREEHOLD ESTATES
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FEE-SIMPLE ESTATES
DEFEASABLE FEE ESTATES LIFE ESTATES LIFE ESTATES GRANTED BY LAW |
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What are FEE-SIMPLE ESTATES?
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Highest form of interest in real estate
Also known as FEE-SIMPLE ABSOLUTE Estate of inheritance can run indefinitely Upon death goes to heirs |
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What are DEFEASABLE FEE ESTATES?
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Also called FEE SIMPLE DEFEASABLE
Can be defeated/terminated Occurence/non-occurence of event may term Consists of FEE SIMPLE DETERMINABLE FEE SIMPLE CONDITIONAL |
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What is FEE SIMPLE DETERINABLE?
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Type of DEFEASABLE FEE ESTATES
Real estate given for a purpose Owner MUST do Ex: Land given to college as long as used for education Title reverts back to grantor or grantor estate if violated |
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What is FEE SIMPLE CONDITIONAL?
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Type of DEFEASABLE FEE ESTATE
Terminates upon violation of a certain activity that owner MUST NOT DO Estate does not terminate until grantor gets court order Ex: Property is conveyed on condition of no alcohol consumption on property. If violated former owner has right to get back property. |
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What are LIFE ESTATES?
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Form of FREEHOLD ESTATES
Granted to a person for their lifetime Not estate of inheritance After death estate can revert or be given elsewhere Two types ORDINARY LIFE ESTATE PUR AUTRE VIE ESTATE |
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What are the two types of LIFE ESTATES?
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ORDINARY LIFE ESTATE-Duration is limited to lifetime or owner
Upon death of owner, property reverts back to grantor PUR AUTRE VIE ESTATE-Granted for life of third party other that present owner and grantor |
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What is ESTATE IN REMAINDER?
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Type of LIFE ESTATE
Third party to whom title will pass upon death of life tenent. Person is called REMAINDERMAN |
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What is ESTATE IN REVERSION?
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Type of LIFE ESTATE
Property reverts back to grantor from life tenent Grantor holds a REVERSIONARY INTEREST |
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What are LIFE ESTATES GRANTED BY LAW?
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called Legal Life Estates
DOWER RIGHTS CURTESY HOMESTEAD |
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What are DOWER RIGHTS?
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Husband owns property alone
Wifes life estate in husbands real property conveyed to her upon death In order to bar wife must sign upon sale even though she does no own property Interest is 1/3 in Michigan Does not apply if husband owns property with other as JTWROS |
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In LIFE ESTATES what are CURTESY RIGHTS?
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Wife owns property alone without husband
Husband's life estate in wife's property conveyed to him upon her death Husband gets ? in Michigan |
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What is NON-CONFORMING USE?
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The use of the land that does match the zoning law
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What is a GRANDFATHER CLAUSE?
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Allows continuation of a non-conforming use because it preceeded a zoning change
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What is a ZONING VARIANCE?
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Allows the introduction(by government) of a non-conforming use.
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What is a SETBACK ORDINANCE?
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Distance from lot edge to where building is erected
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What is a LISTING AGREEMENT?
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Legal employment contract from seller
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What does a buyer sign if the broker is working for him?
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BUYER BROKER AGREEMENT
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Loyalty goes to the ....?
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Client
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Who employs the broker?
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PRINCIPAL (Client)
Opposite party is the customer Principal is owed trust and loyalty Customer is owed fsirness and honesty |
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What is a SUB-AGENCY?
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An agent of an agent.
A salesperson is a sub-agent of the broker. A co-operating(selling )broker becomes a sub-agent of the listing broker |
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What is a FIDUCIARY?
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The relationship between an agent and principal is called a FIDUCIARY
The broker is also called the FIDUCIARY. |
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What does DUAL AGENCY mean?
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Agent represents opposite parties in a transaction.
Legsl with written consent only. |
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What are the different types of AGENCY agreements?
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DESIGNATED AGENCY
SPECIAL AGENCY GENERAL AGENT UNIVERSAL AGENT |
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What is a POWER OF ATTORNEY?
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Legal document that authorizes a person to act on behalf of another as their ATTORNEY-IN-FACT.
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What is a DESIGNATED AGENCY?
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Broker may degisnate individual salespersons as exclusive agents of their clients
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What is SPECIAL AGENCY?
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Principal authorizes agent to represent him in a specific matter and given him limited authority to that effect.
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What is a GENERAL AGENT?
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Agent is authorized to represent principsl in a range of matters.
Uses general power of attorney making agent an ATTORNEY-IN-FACT |
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What is a UNIVERSAL AGENT?
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One who is authorized to represent principal in ALL matters
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How do you CREATE AN AGENCY?
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EXPRESSED AGREEMENT-Written listing or buyer agency contract stating "I am your agent"
IMPLIED AGENCY-Leading a person to believe that agent is representing him |
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What is AGENCY DISCLOSURE?
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Provided by agent to buyers, sellers etc before they disclose any confidential information to agent. Purpose is to state agent's position as to who he represents.
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What is PROCURING CAUSE?
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Effort a agent contributes that results in a sale.
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What are the responsibilities of AGENT to PRINCIPAL?
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TRUSY, LOYALTY, SKILL
CARE AND OBEDIENCE ACCOUNTING FOR FUNDS AND ACTIONS |
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What type of LISTING AGREEMENTS are there?
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EXCLUSIVE RIGHT TO SELL-Broker is employed as SOLE AGENT and promised a fee no matter what if property sells.
EXCLUSIVE AGENCY LISTING-Gives broker right to sell. May sell himself without paying commission. Listing broker protected of other broker sell property OPEN LISTING-Multiple brokers only one gets paid NET LISTING/BUYER AGENCY-Broker can sell or buy at set price. Illegal in Michigan |
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What is a PROTECTION CLAUSE?
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Inserted in listing agreement that protects broker incase a buyer he finds returns after listing expires and buys the property.
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CIVIL RIGHTS ACT OF 1866
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Prohibits discrimination because of RACE, without exceptions
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CIVIL RIGHTS ACT OF 1968
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TITLE 8
Prohibits discriminationbecause of race, color, religion or national origin |
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HOUSING AND COMMUNITY DEVELOPMENT ACT OF 1974
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Prohibits discrimination based on sex, and requires the use of an EQUAL HOUSING OPPORTUNITY poster
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THE MICHIGAN PERSONS WITH DISABILITIES CIVIL RIGHTS ACT
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July 28, 1976
Defines the civil rights of persons with disabilities |
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THE MICHIGAN CIVIL RIGHTS ACT
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ELLIOT LARSON
Approved on January 13,1977 Prohibits discrimination because of age and marital status with regards to emplyment.....height and weight Amended June 9, 1992 to include familial staus |
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FAIR HOUSING ADMENDMENT ACT OF 1988
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Prohibits discrimination because of disability(mental or physical) and familial status (families with children)
REFUSE TO PERMIT-at expense of disabled, reasonable modifications of premises, can require deposit MULT-FAMILY DWELLINGS- after March 13, 1991. A 4 or more unit apartment complex must have ground floor accessible or elevator |
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AMERICANS WITH DISABILITIES ACT(ADA)
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July 26, 1990
Requires public facility and employers to make accomodations for disabled |
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What are the remedies of those who feel they have been discriminated against?
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MICHIGAN CIVIL RIGHTS COMMISSION within 6 months
THE LOCAL COMMISSION OF HUMAN RELATIONS FILING PRIVATE CIVIL LAW SUIT, Circuit Court |
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What are EXEMPTIONS to FEDERAL FAIR HOUSING LAWS?
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Sale of rent of single-family house. Owner can not have interest in more that 3 houses
Rooms in dwelling, not more that four families, owner lives in one unit Religious groups operating for other than commercial reasons Private Clubs,not for commercial use For senior citizens housing against those not 55 if 80% of units comply. |
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What are PROHIBITED ACTS OF DISCRIMINATION?
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ADVERTISING can't indicate preferences
PREVENTING THE INSPECTION of property BLOCKBUSTING DISCRIMINATION BY FINANCIAL INSTITUTIONS |
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What is a contract?
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A binding legal agreement between two or more parties who agree to conduct business.
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What are the contents of a contract?
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1 - Offer and acceptance
2 - Valuable consideration 3 - Legal capacity 4 - Legal objectivity |
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Offer and Acceptance
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Mutual Assent
Meeting of the Minds |
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The person who makes the offer is known as...
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Offeror
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Theperson receiving the offer is....
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the offeree
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Acceptance of an offer or a counter offer must be...
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Absolute not partial
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What is an Amendment?
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A contract used to amend the terms of a purchase agreement that is necessary after offer and acceptance.
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What is a contingent offer?
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An offer that bears a condition...
subject to financing. |
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Time is of the essense
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Time limit expressed on the contract is not flexible
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Valuable Consideration
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May be money or equivalent
Unilateral - Exchanged for an act - Listing Bilateral- Promise is exchanged for another promise - Accepted offer to purchase |
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What is legal capacity?
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Persons entering into contract must be of legal age and sound mind
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What is legal objectivity?
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In contracts
A contract for illegal purpose is void. |
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Enforceability of contracts
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Valid contract - legally binding
Void contract - Missing an essential element - may not be enforced Voidable contract - Entered to under duress or mislead Unenforceable contract - not enforceable by court action |
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What is Statue of Frauds?
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Requirescertain contracts to be in writing in order to be enforcable
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Contract related expressions
Misrepresentation |
Innocent Misrepresentation
An innocent mistatement of fcts |
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Contract related expressions
Fraud |
An intentional mis-statement of facts
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Contract related expressions
Silent Fraud |
Act if wuthholding information regarding concealed property defects
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Contract related expressions
Duress |
Use force against someone to enter a contract
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Contract related expressions
Menace |
To threaten someone with force in order to enter a contract
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Contract related expressions
Undue influence |
A close party has taken advantage of another to influence him so consent and understanding seriously impaired
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Contract related expressions
Reality of consent |
Parties entered contracts with free will
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Contract related expressions
Specific performance |
Court action to make breaching party to perform under terms of contract
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Contract related expressions
Liquidated damages |
Amount of money paid to fully satisfy any damages suffered
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Contract related expressions
Rescission |
The termination of a valid contract turning to status quo
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Contract related expressions
Executory contract |
Contract signed by all parties but not perfomed in full yet.
Once performed the is Executed Contract |
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Contract related expressions
Equitble Title |
Legal interest buyer acquires after signing a sales contract
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Contract related expressions
Uniform vendor and purchaser risk act |
Seller bears any loss before buyer gets leagal title or takes possession
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Contract related expressions
Caveate Emptor |
Latin - Let buyer beware
Buyer buys under own risk and should inspect property before purchase. |
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Methods of Agreements
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Expressed Contract
Implied Contract |
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Expressed Contracts
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Agreed upon explicity between parties
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Implied contracts
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Making it know that you will act to fulfill a certain obligation
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How do you transfer rights in contracts?
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To Assign
Novation of Contract |
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Assignment of a contract
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A legal instrument used to pass rights and obligations from a contract party to another
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Novation of a Contract
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Substitution of a new contract in place of an existing one or substitution of a party with another
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Breach of Contract
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Violation of any of the terms or conditions of a contract without legal excuse
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The innocent party in a breach can:
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Buyer may ask for refund
Seller may keep deposit Either may sue for damages Either may aue for specific performance |
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How can a contract be terminated?
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Performance Recisission
Operation of the Law Legal contingency Expiration Revocation Rejection Impossibility of Performance |
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Termination of a Contract
Performance |
The purpose for which contract was done has been satisfied
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Termination of a Contract
Recission |
Termination of a valis contract and returning to Status Quo
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Termination of a Contract
Operation of the Law |
Termination for a legal reason
Minor, Fraud |
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Termination of a Contract
Legal contingency |
Can not get financing
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Termination of a Contract
Expiration |
Time limit
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Termination of a Contract
Revocation |
Offeror takes back
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Termination of a Contract
Rejection |
Offeree rejects
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Termination of a Contract
Impossibility of Performance |
Cant continue lease when office burns down
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Option Contract
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Optionor give optionee right to buy property at fixed price for a stated time period for a fee
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Bundle of Rights
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Rights to own real eatate as a freehold eatate possession, enjoyment, lease, sell, will, mortgage etc
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Capital Gains on Sale of a Home
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Pricipal residence exempt up to $250,000/$500,000
Must have lived in for 24 mo out of last 60 months |
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Income Tax on Real Eatate Investments
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Income tax - Rents
Tax Shelter - Depreciation Capital Gains - Long term - 1yr 15% Tax Deferred Exchange - like exchange |
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Two types of surveys
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Mortgage Survey(Report) Shows drawing of house and how it sits on land
Stake Survey - Actually establishes boundaries |
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Assessing Buyer's Price Rnge
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Credit Check
Income Verification Job Stability Meeting with Mortgage Officer |
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Current Market Conditons
How effect value |
Employment Trends
Interest Rates New Construction Foreseen enviromental problems (landfill) |
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Services to Landlords
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Advertise Property
Evaluate Rental Market Obtaining Tenents Screening Tenants |
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Property Management
Maintaining Fiduciary Responsibility to Owners |
Manager has written contract
Manager has trust/loyalty to owner/prinicpal Prinipals interest above agents Sepatate accounts for rents/deposits Agency disclosure is required by law Manager to act in good faith showing, collecting, books, maintenance |
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Net Operating Income
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Projected Income-Vacancy-Operating Expenses
Not debt service |
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Return on Investment
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NOI/Investment
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Cash Flow
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NOI-Debt Service
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Enviromental Hazards
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Asbestos
Lead-Based Paint Polycholorinated biphenyls(PCB) Radon Underground storage tanks Urea Formaldehyde Water Quality |
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Lease Agreements used in PM
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Estate at Will
Estate for Years Estate from Period to Period Estate as Sufferance |
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Lease Agreements
Estate at Will |
Estate for undetermined duration usually month to month
Either party can terminate by notice |
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Lease Agreements
Estate for Years |
Lease with predetermined duration
Legal liability if lease contract is violated |
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Lease Agreements
Estate from Period to Period |
Estate from year to year
Automatic equal renewals Might be month/month or yr/yr after lease expires |
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Lease Agreements
Estate at Sufferance |
Tenent occupies with landlord's consent and then consent withdrawn
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Leasehold Estate
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Interest of a tenent in property acquired under a lease
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Leased Fee
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Landlord's interest in leased premises
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Reversionary Right
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Gives landlord right to lease property after tenent vacates
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Types of Leases
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Net
Gross Escalator Percentage Lease Graduate Lease Index Lease Ground Lease Oil and Gas Lease |
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Types of Leases
Net |
Tenent pays lease plus percent of operating expenses...taxes, insurance and maintenance
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Types of Leases
Gross |
Tenent pays fixed rent
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Types of Leases
Escalator |
Escalation Clause
For increased taxes, insurance, maintenance |
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Types of Leases
Percentage Lease |
Reatil store
Base rent plus 1% gross sales |
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Types of Leases
Graduate Lease |
Step-up Lease
Lower first rents Escalation Clause |
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Types of Leases
Index Lease |
Rent adjustments based on predetermined index CPI
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Types of Leases
Ground Lease |
Lease of land
Usually long term Building erected |
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Types of Leases
Oil and Gas Lease |
Owner get percent of profits
Company looks for oil and gas |
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Lease Terms
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Right of First Refusal
Lease with Option Fixtures Clause Sub-Lease Clause Assignment of Lease Clause Lease runs with the land |
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Lease Terms
Right of First Refusal |
Allows tenant to match a purchase price offered by third party
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Lease Terms
Lease with Option |
Lets tenant purchase or obtain additional lease term
Specified price and term Expiration date |
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Lease Terms
Fixtures Clause |
Allows fixtures installed by tenant to be removed
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Lease Terms
Sub-lease Clause |
Can prohibit tenant from sub-leasing
If can sub-lease Sub-lessor Sub-lessor - sandwich lease Sub-lessor not released from liability |
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Lease Terms
Assignment of Lease |
Can prohibit assignment without lessor's consent
If can assign transfers rights and obligations Assignor still liable unless released |
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Lease Terms
Lease runs with the land |
When ownership transfers, lease continues to be binding
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Termination of Lease
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Performance - Expiration
Mutual(Bilateral) agreement Eviction Operation of the Law - Bankruptcy, condemnation tax sale |
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Title Search
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Title is searched by inspecting chain of recorded instruments- deeds, land contracts, assignments, mortgages
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Constructive Notice
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Public notice, results from recording an instrument
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Rules of Constructive Notice
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Does not have to be recorded to be valid
Recorded will have direct effect on search Instuments recorded chronologically Law presumes buyer has checked public record |
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Encumbrances
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Leins, easements, mortgages,
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Marketable Title
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Free from clouds or defects
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Unmarketable Title
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Does not mean non-transferable
Certain defects must be cleared Clouds that must be cleared ex unpaid tax bill |
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Title Insurance
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A policy that protects from:
Unrecorded instruments Forged instruments and deeds Undiscloded or missing heirs Any info attorney might have missed |
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Types of Title Policies
Owner's |
Usually provided by seller - in amount of purchase price - Protects purchaser from losses due to title defects
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Types of Title Policies
Lender's |
Insures lender's interest in property agains?>t losses due to defective title
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Title Problems
Cloud on the Title |
Defects affecting marketability of title
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Title Problems
Quieting Title Suit |
Court ordered hearing held to determine land ownership
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Title Problems
Seller's Affidavit |
Seller required by title insurance company to sign not aware of any clouds
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Title Problems
Subrogation Clause |
Clause in title policy that allows insurance company who pays claim to seek reimbursement from party causing cloud
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Title Abstracts
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Summary of recorded encumbrances ...now title insurance
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Liens
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A charge against property that provides security for debt
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Types of Liens
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Statutory - property tax, income tax
Equitable - Usually placed as result of civil dispute |
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Applicability of Liens
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Specific lien
General(Blanket) lien |
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Specific Lien
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Applies to certain property only
Parcel is subject Mechanic's Lien, Real Estate Tax Liens, Special Assessments, Mortgage Lien |
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General (Blanket) Lien
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Applies to a group of properties an individal owns
Federal/State Income Tax Liens |
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Lis-Pendens
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Legal document giving notice of lawsuit affecting property
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Writ of Attachment
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Obtained to stop owner from selling property until lawsuit re ownership has been settled
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Purpose and Procedure of Settlement
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Licensee's Role
Seller's Role Buyer's Role Closing in Escrow |
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Settlement
Licensee's Role |
Broker must supervise in person or near phone
Broker must prepare closing statement with charges/credits Salesperson should be present but not required Final responsibily with listing broker |
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Settlement
Seller's Role |
Sign documents - Deed, Land Contract etc
Receive funds Pay off liens |
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Settlement
Buyer's Role |
Deliver funds
Sign closing statement |
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Settlement
Closing in Escrow |
Funds and/or documents held with broker until ...
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RESPA
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Real Estate Settement Procedures Act
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RESPA
Definition |
Federal Law regulates and standarize settlement practices
1st or 2nd mortgages on 1-4 family homes Inform buyers and sellers of their chages and credits. |
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Obligation of Settlement Agent
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Verify identity of all parties
Parties to sign all documents Funds and documents distributed to proper people Sent to Register of Deeds Proper IRS and State forms filed |
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Deed
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An instrument used to transfer title to real estate
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Deed Contents
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Names and Adresses
Clause of conveyance To have and to hold(Habendum Clause) How conveyed Deed Restrictions Valuable considreration Legal description Execution Delivery and acceptance Recording |
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Types of Deeds
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Warranty
Quit claim Judicial |
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Types of Deeds - Warranty
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General
Special Warranty Bargain and Sale |
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Types of Deeds - Warranty - General (Full)
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Contains ALL deed covenants
Covenant of Seisin Covenant against emcumbrances Covenant of quiet enjoyment Covenant of warranty of title Covenant of further assurance |
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Types of Deeds - Warranty -Special Warranty
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Conveys title but guarantees only against claims from grantor's period of ownership
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Types of Deeds - Warranty - Bargain and sale deed
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Conveys title only
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Types of Deeds - Quit claim
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Bad News
Used to relinquish interest in property from grantor No assurance of ownership or quality of title |
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Types of Deeds - Judicial
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Ordered by the court
Executor's Deed - Probate Administrator's deed Guardian's deed Trustee's deed Sherriff's deed |
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Other settlement documents
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Bill of Sale
Prommissory note Mortgage Seller financing instruments |
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Transfer Tax
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Revenue Stamps-by seller, .55 per $500.00 None if <$100.00 or no money exchanged
State Tax-by seller, upon recording $3.75 per $500.00 |
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Rights of others
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Easements
License-permission granted to enter land for specific purpose Encroachment Adverse Possession Government Powers |
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Government Powers
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Taxation
Eminent Domain Police powers Escheat -Prop to state when no heirs |
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Adverse possession
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Person occupies land for 15 years (MI) then seeks court order to recieve title.
Quieting Title Suit |
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Types of Financing
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Purchase Money Mortgage-Seller is mortgage holder
Land Contract- Title not transfered. Seller has naked title. Deed of Trust-title transfered to trustee |
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Repayment Methods
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Conventional Mortgage
Unconventional - with gov insur Fully Amortized - Paid off Fixed Rate - Adjustable Rate ARM Chattel Mortgage - Lien on personal Prob |
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Repayment Methods 2
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Open-end - line of credit
Budget - with escrow Wrap-around - 2nd position Junior - 2nd mortgage Construction-short term,draws |
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Repayment 3
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Graduated Payment lower early
Blanket-over mult prop partial release clause Balloon-lump sum at end Reverse-RAM-rev annuity mort |
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Repayment 4
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Nonamortized loan-interest periodically due bal lump sum
Package-home and furniture Bridge-temp loan to buy 2nd house until 1st sold |
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Repayment 5
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Buy down mortgage-extra points to lower interest rate
Shared appreciation lender partic. in future apprec Participation lender gets income |
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Forms of financing
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FHA Federal Housing Authority
FMHA-Farmer's Home Administration VA Veteran's Administration |
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FHA
Fereal Housing Authority |
Under HUD Departent of Housing and Urban Developement Insures loans Appraisal required Owner occupied FHA Conditions(must be fixed
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FMHA
Farmers Home Administration |
Dept of Agriculture
Farming areas Guarrantees loans Insures loans initiated by agency |
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VA
Veterans Administration |
Service readjustment ACT 1944 Must be veteran No downpayment Owner occupiedFunding Fee 2% 0 down, 1.5 5%, 1.25 10%
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Secondary Mortgage Markets
Federally Chatered |
Ginnie Mae(GMNA)
Freddie Mac(FHLMC) Fannie Mae((FNMA) |
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GMNA
Government National Mort Assoc Ginnie Mae |
Government Owned Div of HUD
Purchase FHA low yield high risk |
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FHLMC
Federal Home Loan Mort Corp Freddie Mac |
Orig. for funding of Federal savings and loans
Raises money by selling bonds Primarily conventional loans |
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FNMA
Federal National Mortgage Assoc Fannie Mae |
Purchase FHA,VA and conventional
Buys pool of mort in exchange for mort backed securuities. Federally chartered but acts like corp. |
