National Real Estate Exam Prep

Unilateral Contract
Contract containing ONE promise given in exchange for completing an act. NO obligation to act.
Bilateral Contract
Contract containing TWO promises. Example: A listing agreement is a bilateral contract
Client/Principal
A person who has entered into an agency relationship w/ a licensee & with whom there is a written contract
Customer
Any 3rd party w/ whom a licensee works
In-Company Transaction
Transaction in which the buyer and seller are both represented by the same brokerage.
Management-Level License
A licensee who is employed by or affiliated w/ a brokerage who has supervisory responsibility over other licensees.
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Statute of Frauds requires the following:
1) Certain contracts be in writing to be enforceable, 2) All real estate contracts for the sale of LAND & ALL LEASES for more than one year, options for more than 6 months, must be in writing & signed by all parties.
Novation
Substituting a new obligation for an old one. Also, a transfer of rights and/or duties under contract.
If the original party to an agreement is replaced due to novation, are they liable?
No
Mailbox Rule
Acceptance that becomes effective as soon as it is sent in the mail, unless the contract specified a certain means for delivery.
Grantor is the
Owner
Grantee is the
Buyer
Optionor is the
Seller
Optionee is the
Buyer
Lessor is the
Landlord
Lessee is the
Tenant
Vendor is the
Seller
Vendee is the
Buyer
Mortgagor is the
Buyer
Mortgagee is the
Lender
Trustor is the
Buyer
Trustee is the
3rd Party to the transaction
Regulation Z dictates
Disclosure Requirements in Credit Transactions, including the disclosure of the Annual Percentage Rate (APR)
Regulation Z applies to:
ALL REAL ESTATE credit transactions except for commercial loans. For non-real estate transactions, it covers up to $25,000.
The Cooling Off Period is a condition of:
Regulation Z. It gives the customer the right to rescind the transaction for up to 3 business days following the transaction for liens placed on a principal residence.
RESPA stands for
Real Estate Settlement Procedures Act
RESPA requirements include:
1) Lenders must give borrowers a good faith estimate of closing costs.
2) Lenders must give borrowers a HUD booklet describing closing costs, settlement procedures & borrowers rights.
3) Closing agent must prepare a HUD stmt detailing how much was paid to what companies for what services
4) Borrower must be given right to inspect HUD stmt 1 day before close.
5) Lenders & other parties must give full disclosure of all business relationships.
6) Lender must disclose to borrower if the loan is likely to be sold to another investor.
RESPA prohibits:
1) Kickbacks & fees for services not performed in connection w/ the closing
2) It limits the amount of escrow reserves a lender can hold
3) The sale may not be on the condition on the use of a certain title co or escrow co. chosen by the seller.
Annexation is
the act of bringing something or putting something on the land. When determining annexation, value of the item is RARELY considered. The RELATIONSHIP if the parties is more important.
Doctrine of Emblements
says that a TENANT farmer may return to pick the 1st crop after the land has been sold.
Fixtures
Man made attachments
Bundle of Rights
1) Right of use
2) Right of enjoyment
3) Right of disposal
Riparian Rights
Rights of the landowner ADJACENT to a river
Remember “R” – riparian/river
Littoral Rights
rights of a landowner adjacent to a lake
Remember “L” – Littoral/Lake
Appurtenances are rights that go along with real estate and include:
Air Rights, Water Rights, & Mineral rights to name a few.
Fee Simple (also called Fee Absolute)
The best interest in real estate recognized by law; it represents the most complete ownership.
Life Estate
The estate CANNOT be passed on to the life estate holder’s heirs.
Pur Autre Vie
A life estate that is dependent up the life of another.
Estate for Years is a type of leasehold that:
Has a specific expiration date or specific term.
Period to Period is a type of leasehold that:
Has no specific expiration but the length is specified (like a month to month lease)
Joint Tenancy
2 or more ownership holders own a fraction of UNDIVIDED interest. Rights of survivorship apply.
The types of deeds are:
1) Warranty Deed
2) Special (or limited) Warranty Deed
3) Quitclaim Deed
4) Special Purpose Deed
5) Transfer on Death Deed.
Warranty Deed
Offers the greatest protection that a deed can give.
Special Warranty Deed (Limited warranty deed)
1) Owner warrants only that he has not done harm to the title
2) Covers only the period of time when the sellers owner the property.
Quitclaim Deed
The seller agrees to convey whatever interest, IF ANY, they have in the property.
The reason a deed is recorded is
for protection against a third party.
Elements necessary to a valid deed:
1) signed & acknowledged by grantor
2) Lists marital status of the grantor
3) Use words of conveyance – also called a granting clause
4) Names & addresses of grantees
5) Acknowledged by Grantor in front of Notary Public
6) Signed in front of two witnesses (in most states)
7) Legal description
8) Delivery & acceptance of deed
Lot & Block System
Subdivision
Township
36 Square Miles
Eminent Domain
The RIGHT of the government to condemn & take the property.
Condemnation
The PROCESS of the government taking a property by eminent domain.
Escheat
The state takes property upon an owners death if there is no will & no heirs exist.
Adverse Possession
A person takes possession & use of a property belonging to another. Possession must be open, notorious, hostile & uninterrupted for a certain period of time.
Abstract of Title
A complete history of ownership.
Encumbrance
A claim or liability that attaches to the land & is held by one who is NOT the fee owner.
Examples of Specific Liens
real estate taxes, mortgages, mechanics liens
Easement
Right to use a property for a specific use
Easement in Gross
An entity’s personal right to use property. The receiver DOES NOT own the adjoining property. Example: utility easement
Easement Appurtenant
Runs with the land.
Easement by Necessity
Created when no other access to land exists…right of ingress & egress
Easement by Prescription
Created through continual use over a certain period of time. It must be continual, visible, & w/o approval. Example – a private road becomes public.
License
A privilege granted to an individual for a specific purpose. It is NOT assignable to others.
Accretion
Physical addition to the land by natural forces.
Alluvium (also Alluvion)
The soil on a shore or bank of a river
Lis Pendens
A pending notice of a lawsuit giving notice of a possible claim to the property
Writ of Attachment
A document filed during a lawsuit that prevents a debtor from conveying the property
Fixtures
items of personal property attached to real property that are not removed by the seller
Trade Fixtures
Personal property used in a business and can be removed by the lessee when the lease terminates.
Appraisal
is an estimate or an opinion of value
Market Value
An estimate of probably price on the date of the appraisal.
Market Price
What the property actually sells for
The 3 approaches to value are:
1) Market Data Approach (single family homes)
2) Cost Approach (commercial property)
3) Income Approach (income producing property)
Blockbusting
Encouraging owners to sell their properties because minorities are moving into a neighborhood
Steering
Trying to influence a buyer’s housing choice using race, religion, ethinicity, national origin, or ancestory factors as the reasoning.
Redlining
Denying loans in certain areas due to race, religion, sex, familial status, or a disability.
The Civil Rights Act of 1866 Covers:
1) Race
2) Color
3) Ancestry (it’s the only act that covers this)

It applies to all property (Real & Personal)
There are no exceptions

The Federal Fair Housing Act Covers:
1) Race
2) Color
3) Religion
4) Sex
5) National Origin
6) Disability
7) Familial Status

It applies ONLY to housing & land for housing
Exceptions:
1) FSBO
2) FSBO – 4 plex
3) Religious Groups
4) Private Clubs

The Federal Equal Credit Opportunity Act applies to:
1) Race
2) Color
3) Religion
4) Sex
5) National Origin
6) Age
7) Marital Status
8) Receipt of Public Assistance
A real estate broker is a
Special Agent
Dual Agent
One broker representing both the buyer & the seller in a single transaction
A salesperson
is a subagent of the client, has no direct relationship to the principal, is only responsible to the broker.
Puffing
an opinion or exaggeration of the property’s benefits.
Fraud
Intentional misrepresentation of facts
Violations of the Sherman Antitrust Act include
1) Price Fixing
2) Allocation of the market
Exclusive Right to Sell Listing
1) Only one broker is authorized to sell
2) the broker receives a commission no matter who finds the buyer
Exclusive Agency Listing
1) Only one broker is authorized to sell
2) If the owner finds a buyer, no commission is owed
Open Listing
1) Any # of brokers may be retained
2) The broker who sells the property receives the commission.
After a purchaser signs a sales contract, the salesperson must do which of the following?
1 Keep the original contract & give the purchaser a copy the next day.
2. Give the purchaser a copy immediately
3. Mail the purchaser a copy after the statutory 3 day cooling off period
4. None of the above
Answer: 2, Give the purchaser a copy immediately
Which one of the following is NOT real property?
1 Wall to wall carpeting installed over plywood subfloor
2 Built-in dishwasher
3 drapes
4 sump pump
Answer: 3, Drapes
An unlicensed admin for a property manager can ONLY do which of the following tasks?
1 Collect rents
2 Publish a listing
3 Take a listing
4 Negotiate a contract
Answer: 1, collect rents
All of the following are examples of a specific lien, except:
1 Property Taxes
2 Judgment
3 Mechanic’s lien
4 Mortgage
Answer: 2, Judgment
Baker conveys a life estate to her grandson & stipulates that upon her grandson’s death the title will pass to her nephew. What is the nephew’s interest called?
1 Estate in reversion
2 Estate for years
3 Estate in Remainder
4 Periodic estate
Answer: 3, Estate in Remainder
If a spouse owns a parcel of land separately, the spouse is said to own it:
1 As a joint tenant
2 As a tenant in common
3 As a tenant by the entireties
4 in severalty
Answer: 4, in severalty
Taxes are levied on a property owner to pay for improvements that benefit only that property are called:
1 Fees
2 General Property Taxes
3 Special Excise Taxes
4 Special Assessments
Answer: 4, Special Assessments
The market price of real estate is generally the same as:
1 Sales Price
2 Appraised Value
3 Highest and best use
4 Mortgage loan value
Answer: 1, Sales price
A mortgage note must be:
1 a negotiable instrument
2 Signed by the mortgagor
3 Signed by the mortgagee
4 Recorded to be valid
Answer: 2, Signed by the mortgagor (the borrower)
The Federal Truth in Lending Law:
1 Requires a lender to estimate a borrower’s approximate loan closing costs before accepting a loan.
2 regulates advertising that contains information regarding mortgage terms
3 prevents brokers from using a phrase like “FHA financing available” in any ad
4 Dictates that mortgage applications be made on specific government forms
Answer: 2, regulates advertising that contains information regarding mortgage terms
The rights of the owner with property abutting the bank of a stream are called:
1 Littoral rights
2 riparian rights
3 avulsion
4 dominant tenenments
Answer: 2, riparian rights
What is the primary purpose of a deed?
1 Transfer of title
2 proof of ownership
3 recordation
4 legal evidence
Answer: 1, transfer of title
Who would NOT need a real estate license?
1 An attorney selling real estate in an estate
2 a salesperson working on a commission for a builder
3 a property management company
4 a friend selling a neighbor’s lot for $1,000
Answer: 1, an attorney selling real estate in an estate
The responsibility for recording a deed lies with the:
1 grantor
2 grantee
3 county
4 state
Answer: 2, the grantee