What defines a Fee Simple Estate?
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It is the greatest interest one can have in real property, unqualified, of indefinite duration, freely transferable and inheritable.
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What defines a Fee Simple Estate?
It is the greatest interest one can have in real property, unqualified, of indefinite duration, freely transferable and inheritable.
What is the purpose of the fees paid by real estate professionals in Georgia?
To pay the expenses associated with operating the Georgia Real Estate Commission's office and enforcement of Georgia statutes.
What happens if a licensee fails the State exam in Georgia?
They will have to pay an additional fee after filing a new application.
What is required to activate a license after passing the State exam in Georgia?
The company the licensee will be working for must pay an additional fee.
What are the consequences of failing to renew a license before it expires in Georgia?
The licensee is entitled to reinstatement for up to two years, requiring payment of renewal fees, late fees, and a reinstatement fee.
What additional requirements must be met if a license is not renewed for two years in Georgia?
The licensee must meet additional educational requirements for up to five years and pay the same fees.
What happens if a license lapses for five years in Georgia?
The licensee must meet education requirements and pass the State exam again.
Can non-resident licensees renew their licenses in Georgia?
Yes, provided they have maintained their license in their home state.
What fees are required to maintain an inactive license status in Georgia?
Licensing fees must be paid to maintain inactive status.
How can planners address the needs of an aging population in community development?
By considering affordability and offering higher densities and small lot sizes when land is limited.
What is the process for changing status from broker to salesperson in Georgia?
The broker can turn in their broker's license and apply for a salesperson's license without passing additional tests, subject to the same fees as an original applicant.
What role does public input play in the comprehensive planning process?
It is vital for ensuring that the needs of every city, district, and neighborhood are met.
What transportation options should be considered in a comprehensive plan to reduce personal car usage?
Public transportation options like local shuttles, trains, and buses.
Why is it important to consider natural areas in the planning process?
To account for historical significance, rare animals and plants, and the impact on future generations.
What is a challenge faced by zoning departments in community development?
Deciding how development will start and progress while balancing various stakeholder needs.
What is a potential modification to land use in response to population changes?
Reducing building lot sizes or changing commercial-only land to mixed-use zones.
Why is zoning and planning necessary for community expansion?
To ensure the health, well-being, and financial stability of everyone involved.
What is a building envelope in zoning terms?
The maximum three-dimensional space on a zoning lot within which a structure can be built, determined by height, setback, and yard controls.
What can a licensee do if their license lapses due to a disaster in Georgia?
They may be able to renew their license for up to two years if they can demonstrate their personal property or place of business were negatively impacted.
What powers does the Georgia Commission have regarding real estate licenses?
The Commission can issue, suspend, or revoke real estate licenses and regulate the rules pertaining to their issuance.
What must applicants agree to regarding the Commission's powers?
Applicants agree that the Commission has the power to regulate all licensing matters as part of their initial application or renewal.
What authority does the Commission have when investigating a broker's trust account?
The Commission can hire or contract experts to assist in the examination of a broker's trust account, maintaining full supervisory authority over them.
What happens to fees collected by the Commission?
Fees may be used to pay experts, but any remaining funds at the end of the year must be turned over to the State Treasurer.
What behavior is expected from real estate license holders according to the Commission?
License holders are expected to act in the interest of the public.
What is the Commission's stance on applicants with prior felony convictions?
Applicants with prior felony convictions are generally denied a license.
Can applicants with prior convictions reapply for a license after a certain period?
Yes, applicants may be reviewed at the Commission's discretion after more than five years if they have fulfilled their debt from the conviction.
What must applicants with prior convictions demonstrate to the Commission?
They must demonstrate competence, honesty, and trustworthiness.
What is the waiting period for an applicant with a conviction involving a financial crime or moral turpitude before being reconsidered for a broker's license in Georgia?
10 years from the time of conviction, release from incarceration, or fulfillment of sentencing, whichever occurs last.
What grounds can lead to the denial of a real estate license in Georgia?
False statements, violation of fair housing law, or pending criminal charges.
What action may the Commission take against an active licensee convicted of a crime?
The Commission may suspend their license within 60 days of the conviction.
What happens to a real estate license if the holder is facing mortgage foreclosure or is in default of child support payments?
Their license will be suspended or their application for an initial or renewal license will be denied until the issue is addressed.
Can applicants for a real estate license in Georgia contest a denial, revocation, or suspension?
Yes, they may have the opportunity to rebut through a hearing.
What does the Floor Area Ratio (FAR) represent?
The ratio of total building floor area to the area of the zoning lot, controlling the size of buildings.
Where do hearings for contesting a license denial or suspension take place in Georgia?
In the location where the Commission has established their primary place of business.
What can an applicant do if they are not satisfied with the outcome of a hearing regarding their license?
They may request the superior court of Georgia to review their case.
How is the maximum floor area of a building determined using FAR?
By multiplying the FAR control by the lot area of the zoning lot.
What is meant by lot coverage in zoning?
The portion of a zoning lot covered by a building when viewed from above.
Where will the court review take place if an applicant contests a license decision?
In the county where the Commission does business.
What is a variance in zoning?
The authorization to improve or develop a property in a manner not authorized by zoning.
What are brokers responsible for in brokerage management?
Overseeing the activities of licensees in their offices and following local business operation rules.
What risk does a qualifying broker face if an affiliate breaks the rules?
They could put their own license at risk.
What must a qualifying broker maintain to prevent risks associated with rule violations?
Written procedures covering advertising, contracts, renting or leasing, and offers on properties.
What is the responsibility of the supervising broker regarding affiliate compensation?
To provide written agreements confirming the affiliate's compensation for completed transactions.
Who must be a licensed broker in a sole proprietorship office?
Only a licensed broker may operate the office as the sole proprietor.
What must the Georgia commission be notified of within 30 days?
Any address changes of the operation.
What must happen if an affiliated broker leaves the firm?
A process must be provided for the license to be forwarded to the new firm or returned to the commission.
What is required for an affiliate to participate in a pending transaction after leaving an office?
A written agreement with the qualifying broker outlining terms, compensation, and liability acceptance.
What types of deposits may a broker be asked to control during their career?
Escrow purposes, good faith deposits, security deposits, and association fees.
What type of account must all funds received by a broker be deposited into?
A federally-insured trust or escrow account.
What must brokers do within 24 hours of receiving funds related to a real estate transaction?
Open a federally-insured trust or escrow account if they do not already maintain one.
What must brokers notify the Commission about regarding trust accounts?
Where the funds for a real estate transaction are being held, including account number or name.
Under what circumstances can the Commission access the records of a trust account?
If there is a concern about any activity in the account or when reviewing licensing requirements.
Where must most bank accounts for brokers be held?
In a bank in Georgia.
Can a broker maintain more than one trust account?
Yes, provided the Commission is notified.
When can earnest money or security deposits be used to pay a broker's commission?
Only after the designated transaction has been completed.
What must happen before funds can be disbursed from a trust account?
They must be properly authorized.
What action may the Attorney General take if there is a suspected problem with a trust account?
Request a judge to issue an order to impound the account and appoint a receiver.
What is the purpose of the real estate recovery fund maintained by the Commission in Georgia?
To provide funds for any person harmed in a real estate transaction who is not a licensee.
What is the minimum balance required for the real estate recovery fund in Georgia?
At least one million dollars.
What is the maximum amount a harmed party can collect from the real estate recovery fund?
$25,000.
How are the funds for the real estate recovery fund collected?
From licensees at the time of obtaining a license, as set by the Commission.
What must happen before funds are disbursed from the recovery fund?
A court must order a judgment and determine the validity of the claim.
What types of media are included in advertising according to rule 520-1-.09?
Photos, print, broadcast, and Internet outlets, including magazines, newspapers, posters, flyers, billboards, business cards, videos, radio, signs, and television.
What is strictly prohibited in real estate advertising?
Misleading advertising that misrepresents real estate property.
What must a licensee obtain before advertising a property?
Written permission from the owner or the owner's authorized agent.
What type of advertising is prohibited regarding discrimination?
Advertising that references a certain color, race, sex, familial status, handicap, religion, or national origin.
What must be included in Internet advertising by real estate licensees in Georgia?
The name and telephone number of the licensee's brokerage on each web page, with limited exceptions.
What is required when advertising specific real estate in Georgia?
Brokers must include the firm name and telephone number, which should be registered with the Commission.
Can licensees advertise as principals in Georgia?
No, licensees cannot advertise in a way that indicates the offer is from a private individual rather than a licensee.
Who must supervise all advertising by licensees under a broker?
The broker must directly supervise all advertising by licensees.
What are yard setbacks?
Required open areas along property lines that must be unobstructed from the lowest level to the sky, ensuring light and air between buildings.
What is zoning?
The separation of a city or town into districts, regulating buildings and structures according to their use and construction.
What is a zoning district?
A mapped area with similar use, bulk, and density regulations.
What do zoning maps indicate?
The location and boundaries of zoning districts within a municipality.
What is a zoning ordinance?
A statement outlining the type of use permitted under each zoning classification and specific compliance requirements.
What are zoning ordinances?
Zoning ordinances are a set of laws and regulations that define how a particular property can be used.
What is the purpose of zoning ordinances?
To protect the health and safety of the population and regulate property use.
What happens if a licensee is found to have acted improperly resulting in a claim paid by the Commission?
They shall have no access to a new license until they have repaid the amount in full, plus interest.
What interest rate applies to unpaid amounts from claims against the recovery fund?
Four percent interest on any amounts which remain unpaid.
What additional fee may licensees in Georgia be assessed to maintain the recovery fund?
Up to $30 per person per year.
What requirement is placed on licensed brokers who act as community association management service providers?
They must maintain a fidelity bond or fidelity insurance to protect the association from potential issues with trust funds.
What must be proven before a real estate professional can collect compensation in Georgia?
The person seeking to recover compensation must be properly licensed in the state of Georgia.
What authority does the Georgia Commission have regarding violations?
The Georgia Commission has the authority to act if a violation occurs and determine the consequences.
What can happen if a licensed real estate professional violates codes of conduct?
Their license may be at risk, and they may face serious consequences determined by the Georgia Commission.
What does the Georgia Administrative Procedure Act allow for licensees accused of violations?
It allows them to follow due process during the hearing process.
What penalties can the Georgia Commission impose for violations?
Penalties can include suspension of licenses, refusal to issue or renew a license, sanctions, fines, and new education requirements.
What types of zoning districts are typically organized in a municipality?
Residential, commercial, and industrial or manufacturing.
How are residential zones designated on zoning maps?
With the letter 'R'.
How are commercial zones designated on zoning maps?
With the letter 'C'.
What types of violations could lead to penalties for a real estate licensee?
Violations of the Fair Housing Act, misrepresentation of property values, failure to disclose dual broker relationships, and improper maintenance of trust accounts.
What is required of real estate professionals regarding ethical conduct?
They must always act ethically in all transactions and have proper authorization to display for sale signs.
What constitutes coercion in real estate transactions?
Coercion includes overstating property value or making promises based on potential future value.
What are licensees prohibited from doing regarding commission agreements in Georgia?
Entering into commission or fee agreements with those who are not licensed in Georgia.
What must a licensee ensure about contracts based on Georgia laws?
All contracts must be legal based on the laws of Georgia.
What is required for a real estate contract to be valid in Georgia?
Contracts must clearly explain the date of expiration and have the proper signatures affixed.
What should a licensee do if a transaction is not completed?
Ensure all good faith deposits and other monies are properly accounted for and returned to the proper parties within 30 days of termination.
What must licensees disclose to clients?
Any conflicts of interest.
What actions can the Commission take if a licensee is found in violation of the code?
Impose fines, require additional education, or suspend licenses if fines or educational requirements are not met.
What happens to prior sanctions when a licensee is found in violation of the code?
The Commission reserves the right to review all prior sanctions and disciplinary actions when determining the severity of new actions.
What right does a licensed real estate professional in Georgia have if found to have violated a rule?
The right to request a hearing.
How is a licensee notified of any action taken by the Commission after a hearing?
Via verifiable mail.
What can a licensee request after an adverse action is taken by the Commission?
Judicial review of the action in the superior court.
Who can be subject to investigation if a sworn complaint is filed?
Any person applying for a license, any person who holds a license, facilities offering courses, and approved instructors.
For how long can the Commission investigate wrongdoing if they become aware of it through a court action?
Up to three years.
What can the Commission issue to gain access to necessary documents during an investigation?
A subpoena.
Who has access to the results of investigations conducted by the Commission?
Only the Commission and the Commissioner.
What information about licensees can the Commission make available on their website?
The names of any licensee, including schools, instructors, and real estate professionals who have been subject to suspension or revocation.
What happens if an applicant or licensee is found guilty of a crime?
They shall be subject to a full review of their potential criminal history, including access to FBI records.
How is the criminal history of applicants and licensees treated by the Commission?
It is maintained in strict confidence and is not part of the public record.
What can the Commission do with actions taken against licensees?
Refer them to the Attorney General for further action when warranted.
What is required for a person to act as a real estate broker in Georgia?
They must be properly licensed.
Who are some exceptions to the licensing requirement in Georgia?
Spouses of licensees, attorneys acting in an incidental manner, property or community association managers, and those not collecting a fee.
What happens if a person attempts to close a transaction without a license in Georgia?
They will be deemed in violation of the rules of the real estate Commission and their actions will be seen as unlawful.
What might happen if zoning ordinances did not exist?
Cities and towns would likely have haphazard buildings without planning, leading to non-cohesive neighborhoods.
Where can zoning ordinances and maps typically be found?
Through the local planning department and/or department of buildings.
What do zoning ordinances commonly regulate?
Allowed uses on a property, minimum and maximum property size, density of development, and maximum building size.
What letter designates industrial or manufacturing zones in zoning districts?
The letter 'M'.
What types of uses are permitted in industrial zoning districts?
Manufacturing uses such as factories or warehouses.
How can primary zoning districts be categorized?
They can be broken down into different densities, such as single family homes or large scale apartment buildings.
What do zoning maps show?
They show which parts of a municipality can include residential, commercial, and industrial uses.
What is the purpose of a municipality's master plan in relation to zoning?
It derives the zoning districts and permitted densities within each district.
What is a zoning resolution?
A written document that describes what can be built on a property based on its zoning.
What can the Georgia Real Estate Commission do if someone acts without a license?
They can issue a cease and desist order and impose a fine of up to $1,000 per transaction.
How is each day of violation treated under the Georgia Code?
Each day such a violation occurs is treated as a separate violation and is subject to judicial review.
What is the consequence for acting as a licensee without proper licensing in Georgia?
The person will be guilty of a misdemeanor.
What is one objective of Chapter 4 on Home Ownership?
To list at least two forms of homeowners insurance.
What is a condominium?
An estate in real property with an undivided interest in common in a portion of real property and a separate interest in a unit.
How is tenancy obtained in a cooperative apartment building?
By purchasing shares of stock in the corporation that owns the building.
What defines a mobile home?
A transportable structure designed to contain not more than two dwelling units, used with or without a foundation system.
What is a modular home?
A dwelling constructed through the on-site assembly of mass-produced component parts (modules).
What is a time-share in real estate?
A subdivision of real property into rights for recurrent, exclusive use of a unit for a specified period of time.
What percentage of first-time home buyers work with a real estate professional today?
88%.
What did Sears and Roebuck sell in the early 1900s?
Ready-to-build house kits.
What was included in the Sears house kits?
Precut lumber, window glass, doors, paint, nails, varnish, carved staircases, flooring, and even a hammer.
What challenges do people face today when investing in real estate?
Zoning laws, lot restrictions, and complex tax codes.
What is the most common property sold and bought on the market today?
The single-family home.
What do zoning maps indicate about a property?
They indicate what uses (residential, commercial, industrial) can be built on that property.
What are bulk regulations in zoning?
They dictate the allowed building envelope for a structure on a property.
What percentage of single-family dwellings compared to all residential units has consistently ranged since the 1940s?
Between 60% and 70%.
What distinguishes a single-family home from multi-family buildings?
A single-family home is not connected to other buildings and has space on all sides.
What are some examples of multi-family buildings?
Duplexes, quads, and apartment buildings.
How does the International Building Code (IBC) classify high-rise buildings?
Any structure with occupied living space higher than 75 feet above the lowest level of fire department vehicle access.
What is a condominium?
A building where each unit is owned individually, with common areas jointly owned by all owners.
What is the main difference between a condominium and a cooperative (co-op)?
In a condominium, each unit is privately owned, while in a co-op, the building is owned by a corporation and residents buy shares for use of a unit.
What are common area maintenance charges in a co-op?
Fees that all shareholders must pay for the maintenance of shared spaces.
What tax benefits are not available to co-op residents?
Some tax benefits of home ownership, as they are considered renters.
What is a planned unit development (PUD)?
A mixed-use area created by commercial land developers that includes individual homes, multi-family housing, retail space, and recreational facilities.
What must a developer submit to get approval for a PUD?
Detailed plans to the appropriate agencies.
What is a common feature of mixed-use developments?
Retail space on the ground floor and apartments on upper floors.
What do consumers look for in neighborhoods today?
High walkability scores and access to food and entertainment.
What percentage of all housing units in the United States are mobile homes?
Roughly 8%.
Where are mobile homes more commonly found?
In rural or non-metro areas, which have three times as many mobile homes compared to metropolitan areas.
What are some advantages of owning a mobile home?
They are easy to move and typically cost less than other new home types.
What is a hidden expense associated with mobile home ownership?
Many mobile home owners do not own the land where their home is parked, leading to additional monthly rent costs.
What types of models do manufactured homes come in?
Single- and two-story models, with a variety of lengths and widths.
What happens to many larger manufactured homes once they are anchored down?
They are never moved again.
What is meant by the building envelope?
The maximum three-dimensional space on a property within which a structure can be built.
What fundamental requirements determine the building envelope?
Yard setbacks, maximum lot coverage, maximum permitted height, and floor area ratio.
What are yard setbacks in zoning districts?
Yard setbacks are required distances that the exterior wall of a building must be from the property line.
What is the purpose of yard requirements in residential zones?
To allow enough light and air to reach a house and prevent neighborhoods from appearing crowded and dark.
What is lot coverage in zoning regulations?
Lot coverage is the portion of a property covered by a building when viewed from above.
How is maximum lot coverage typically expressed in zoning resolutions?
As an actual number of square feet or as a percentage of the property's area.
What is the maximum building height in lower density residential zones?
Typically capped at 25' or 30'.
What does the floor area ratio (FAR) determine?
The maximum allowed 'buildable' square footage on a property.
How is the floor area ratio (FAR) calculated?
By multiplying the FAR by the property's area to produce the maximum allowable floor area.
What additional requirement may zoning resolutions include regarding parking?
A minimum number of parking spaces and possibly a parking garage in the rear yard.
What does it mean for a property to be built 'as-of-right'?
It means the property fully complies with the zoning resolution.
What are modular homes and how are they constructed?
Modular homes are prefabricated homes built in movable sections called modules in a factory according to a buyer's specifications or a particular floor plan.
How quickly can a modular home be ready for occupancy after the modules arrive at the building site?
Professional builders can have the house ready for occupancy in about a week, barring extreme weather events.
What is the difference between modular homes and mobile homes?
Unlike mobile homes, modular homes are assembled on a permanent foundation, so moving is not usually an option.
What are the three main categories of time-shares?
The three main categories are Fee Simple contracts, Right-to-Use (RTU) arrangements, and Leasehold contracts.
What is a Fee Simple contract in the context of time-shares?
A Fee Simple contract results in deeded interest, with a title in perpetuity.
What does the term 'freehold estate' refer to?
The right to own land or an interest derived from land, with no fixed time period associated with the ownership.
What is a Right-to-Use (RTU) arrangement in time-shares?
A basic RTU arrangement gives rights to exclusive use that expire on a given date and revert to the actual owner, usually after ten to twenty years.
What is a Leasehold contract in time-shares?
A Leasehold contract is deeded like a Fee Simple but has an expiration date, similar to the RTU, and may offer a first right to renew clause.
What is a common age requirement for retirement communities?
Most retirement communities have a minimum age requirement of 55 or older.
What types of services are typically available in retirement communities?
Services may include lawn care, housekeeping, laundry, and access to a handyman.
What is the 80-20 rule in some retirement developments?
The 80-20 rule means that 80% of the properties are owned by people over 55, while the other 20% are owned or leased by younger families or singles.
What are the rights of a fee simple estate owner?
They have the right to possess, control, enjoy, sell, transfer, mortgage, encumber, or bequeath the property.
Why is it important to consider clients' reasons for moving to a retirement community?
To recommend specific properties that align with their needs for social engagement, security, and future medical services.
What type of property might clients in a retirement community initially buy?
A private home that allows for future transition to assisted living if needed.
How do homeowner preferences vary in rural versus urban areas?
Rural areas have a higher percentage of ownership (approximately 75%) compared to urban areas (approximately 68%).
What type of homes do people in lower income brackets tend to buy?
More mobile homes.
What do baby boomers typically prefer in a retirement community?
A well-equipped retirement community close to physicians, hospitals, and grocery stores.
What are the three requirements for a fee simple estate?
The property must be alienable, devisable, and have no fixed duration.
What is the significance of understanding homeowner preferences in real estate?
It helps real estate professionals assist clients in finding homes that fit their needs and budget.
What is appreciation in the context of home ownership?
Monetary gain resulting from the increase in the market value of an investment, excluding additions of capital.
What are capital gains?
The amount by which the net sale proceeds exceed the adjusted cost basis at resale of a capital item.
What is straight line depreciation?
A method of depreciation under which improvements are depreciated at a constant rate throughout the estimated useful life of the improvement.
What is a tax-deferred exchange?
The trade or exchange of one real property for another without the need to pay income taxes on the gain at the time of trade.
What do Sub-Surface Rights encompass?
The rights to the area below the earth's surface, such as oil and mineral rights.
How far do a property owner's rights extend?
From the surface of the land downward to the earth's center and upward to infinity.
What is the definition of chattel in real estate terms?
Chattel refers to goods or every species of property movable or immovable which are not real property, essentially personal property.
What are emblements in the context of real estate?
Emblements are the crops and other annual plantings considered to be personal property of the cultivator.
What are fixtures in real estate?
Fixtures are appurtenances attached to the land or improvements that usually cannot be removed without agreement, as they become real property.
How is personal property defined in relation to real estate?
Personal property is any property which is not real property, also known as movable property or chattel.
What does 'alienable' mean in the context of fee simple absolute ownership?
It refers to the property owner's right to transfer or sell the property to someone else.
What tax benefits do homeowners receive?
They can deduct points and interest paid on mortgage, home improvement loans, and HELOC associated with repairs and renovation projects.
What is one financial benefit of home ownership?
Long-term appreciation as home value grows.
What percentage of respondents preferred to own rather than rent to build equity?
44 percent.
What is a common misconception about renting versus owning?
28% of participants believe it is cheaper to rent than to own.
What can individuals borrow against to cover a down payment for a home?
Their 401K savings.
What is the maximum amount homeowners can withdraw from their 401K for a home purchase without penalties?
Up to $50,000.
What does 'devisable' mean regarding fee simple absolute ownership?
It means the owner has the right to create a will that transfers ownership of the property upon their death.
What should you consider before taking a loan from your 401K plan for home ownership?
You may not be allowed to continue making deposits until the loan is satisfied, and if you quit or get fired, you have a two-month window to pay it back or face a 10 percent tax bill.
What are the implications of high interest rates on mortgage payments?
High interest rates can significantly increase monthly payments, making a mortgage less affordable.
What is the minimum down payment required for an FHA loan?
3.5 percent.
How does a shorter loan term affect total mortgage costs?
Shortening the loan term can increase monthly payments but save money in total interest paid over the life of the loan.
What is a potential consequence of having a credit score below 600 when applying for an FHA loan?
You may need to provide a down payment closer to 10 percent to secure the loan.
What factors should be considered when determining if a mortgage is affordable?
Interest rate, length of the loan, and down payment requirements.
What is the benefit of a 3.5 percent down payment for FHA loans?
It is a great solution for people with a strong debt-to-income ratio who may not have a lot of cash for upfront costs.
What percentage of the loan value does Veteran Affairs finance for qualified individuals?
Up to 100 percent.
What is a key benefit of Veteran Affairs loans regarding mortgage insurance?
No PMI or upfront mortgage insurance payments are required.
What is the maximum seller contribution allowed in Veteran Affairs loans?
Capped at 4 percent.
What is the financing percentage available through the Fannie Mae 'Home Ready' mortgage program?
Up to 97 percent financing.
What is the down payment required for the 'HUD Good Neighbor Next Door' program?
Only $100.
What discount do buyers receive when purchasing a designated HUD property through the 'Good Neighbor Next Door' program?
50 percent of the appraised value.
What is the required duration of residence in the house purchased through the 'Good Neighbor Next Door' program?
36 months.
What should real estate professionals consider when advising clients on mortgage options?
They should point clients toward fiscally responsible mortgage solutions.
What are some challenges of home ownership?
Taking responsibility for maintenance issues like overflowing toilets and tree pruning to prevent damage.
What is a potential financial benefit of well-maintained real estate property?
It usually increases in value over time, providing a healthy return on investment.
Why is it important for real estate professionals to stay informed about tax codes?
To guide buyers toward wise investments and ensure they capture all benefits of home ownership.
What are some key finance terms first-time home buyers should understand?
Mortgage interest, discount points, loan origination fees, and private mortgage insurance (PMI).
How is mortgage interest structured?
It is calculated monthly on the remaining principal over the term of the mortgage.
What do loan origination fees cover?
Administrative fees charged by lenders for reviewing loan applications.
What is the typical fee for loan origination based on real estate price?
Typically equals 1% of the loan value.
What does one point equal in mortgage terms?
One point is equal to one percent.
What is a buydown in mortgage terms?
A buydown is used when buyers seek discounted rates for the first years of their mortgage.
What do discount points allow buyers to do?
They allow buyers to prepay interest in exchange for a reduced mortgage interest rate.
How much does one point cost in relation to the loan amount?
Each point will cost about 1% of the loan amount.
What is the tax treatment of discount points and loan origination fees?
Discount points are tax deductible, but origination points are not.
What is private mortgage insurance (PMI)?
PMI is protection for the lender if a buyer fails to make payments.
When is PMI typically required?
When the down payment is less than 20% on conventional loans.
What happens to PMI when the loan balance falls below a certain amount?
PMI may be dropped after the balance falls below a predetermined amount.
What does it mean for fee simple absolute title to be 'descendible'?
It means that the rights of fee simple absolute ownership are inheritable and will pass to subsequent owners.
What is the most common type of voluntary property lien?
A mortgage lien.
Why do mortgage lenders require a lien?
To protect themselves in case the borrower defaults on the loan.
What is a lease where the tenant is responsible for some or all of the property taxes, insurance, or maintenance called?
A net lease.
What factors determine the various types of leases?
The type of business leasing the property or land and their intended use.
What is a Gross Lease?
A lease where the landlord pays all costs of operating and maintaining the property and real property taxes.
What are the responsibilities of the landlord in a Gross Lease?
The landlord pays for taxes, insurance, maintenance, and mortgage.
What type of lease is most commonly used for residential properties?
Gross Leases.
What is a Net Lease?
A lease where the tenant pays a fixed amount of rent plus the costs of operating the property.
In a Net Lease, what does the tenant pay for?
The tenant pays monthly rent and costs such as taxes, insurance, maintenance, and mortgage.
How can clients investing in rental property treat discount and origination points for tax purposes?
They qualify as depreciation expenses and can be amortized over the life of the real property.
What are some federal tax benefits of owning real estate for homeowners who itemize deductions?
Homeowners can usually deduct mortgage interest paid, discount points, some real estate taxes, origination fees, and PMI associated with first and second mortgages, equity loans, and lines of credit.
What qualifies as a home for tax deduction purposes according to the IRS?
Any real property that has sleeping, cooking, and bathroom facilities is considered a qualified home.
Can homeowners deduct mortgage interest on a houseboat or RV?
Yes, as long as the property is used solely for personal use and meets the IRS definition of a qualified home.
How does shared ownership affect mortgage interest deduction?
If ownership is shared, the deduction is divided among the owners based on their ownership percentage.
What is the significance of the 1098 Form for homeowners?
The 1098 Form details the total interest, discount points, and PMI paid in the previous year, which homeowners can use to determine their deductions.
What is a Triple Net Lease (NNN)?
A lease where the tenant pays for capital expenditures, mortgage, taxes, insurance, and maintenance in addition to monthly rent.
Where are Net Leases commonly used?
In office buildings.
What is a Percentage Lease?
A lease where the rental amount is a combination of a fixed amount plus a percentage of the tenant's gross sales.
What happens if Jeffry shares ownership with four other people regarding mortgage interest deduction?
Jeffry can only deduct his share of the total payments, which would be 2000 divided among five owners.
What can happen if a property owner modifies their house without obtaining approvals and building permits?
It may result in an expensive building violation for the owner.
What are the conditions for Jeffry to rent out rooms in his home and still qualify for tax deductions?
He must not lease any part of his home for purposes other than residential living, and the leased space must not be self-contained.
What tax benefits can Jeffry claim for renting part of his home?
He can treat the rented space as part of his personal home for tax purposes and claim full tax benefits based on 1098 figures.
What is the benefit of a Percentage Lease for tenants?
It allows tenants to pay less in rent upfront, giving them more time to become profitable.
Who benefits from a Percentage Lease in the long run?
The landlord benefits by making a percentage of the tenant's gross sales.
What type of tenants commonly use Percentage Leases?
Retail tenants.
What is the purpose of residential real estate leases in Georgia?
To protect both the property owner and the tenant, documenting the terms and obligations of both parties.
What should be recorded in section 1 of the Georgia Lease for Residential Property?
The physical address of the property to be leased, including the unit number if applicable.
What happens if the landlord does not deliver the property on the agreed-upon start date?
The tenant is not responsible for rent for the days they do not have access.
What information is documented in section 3 of the lease agreement?
The amount of rent, who it should be paid to, where payments should be delivered, and the due date each month.
What is the consequence if a tenant pays rent late?
The landlord is not obligated to accept the late rent and could consider the renter to be in default of the lease.
What does section 4 of the lease cover?
The amount and form of payment for the security deposit and where the landlord will keep the deposit.
What should be included if the landlord accepts credit card payments?
Any convenience fee should be included in section 3(d).
What is the provision for terminating the lease if the property owner has not granted possession?
The renter can terminate the lease after a specified time period if the property owner has not granted possession.
What must a landlord do with a renter's security deposit according to Georgia law?
Deposit it into a separate escrow account.
What must a landlord provide to a tenant regarding property damage at the start of the lease?
A list of any damage existing on the lease start date.
What right does a tenant have before taking possession of the property?
The right to inspect the property to confirm all known damage has been documented.
What must a landlord provide to a tenant when they move out regarding the security deposit?
A statement showing why part or all of the security deposit was retained.
What must both the landlord and tenant do with the move-out statement?
Both should sign the move-out statement.
What is required for a renter to give notice of non-renewal of the lease?
The notice must be in writing and delivered according to specific provisions.
What fee can a landlord require after the end of the lease?
A fee to change the locks, known as a 're-key' fee.
What must a landlord indicate regarding pets in the lease?
Whether or not pets will be allowed on the premises.
What is the general rule regarding smoking in the rented premises?
Renters and their guests may not smoke unless specifically authorized.
What is prohibited regarding subletting the rented premises?
Tenants may not sublet the premises, including short-term rentals through services like AirBnB or VRBO.
What must a landlord document if they intend to pay for some utility costs?
Which utilities are included in the lease.
What is the tenant responsible for regarding utilities?
Arranging to connect and pay for utilities within three banking days of the lease start date.
What is the purpose of Section 12 in a lease agreement?
To document the tenant's right to terminate the lease early if allowed by the landlord.
What must be specified if early termination of a lease is allowed?
The notice period, percentage of remaining rent due, and any early termination fee.
What special provisions apply if a tenant is called to active military duty?
Provisions under the Servicemembers' Civil Relief Act of 2003.
What is a limitation on Jeffry's ability to lease his home?
He is not allowed to lease the same space or different parts of his house to more than two renters at any time during the tax year.
What are some IRS publications that provide information beneficial to homeowners?
IRS Publications 936, 17, 550, and 530.
Are real estate taxes deductible?
Yes, real estate taxes are a tax deductible item.
What factors can affect real estate tax rates?
Real estate tax rates vary widely by state, town, and even neighborhoods within cities.
What can homeowners do regarding their assessed property value?
Homeowners can contest the assessed value and participate in open discussions during the proposed assessment phase.
What is the significance of market value in tax assessments?
All tax assessments are based on Market Value and differ according to the benefiting entity.
What does Section 13 of the lease agreement document?
The notice period the landlord must provide to the tenant for early lease termination and any compensation.
What does it mean if a tenant is 'holding over'?
The tenant has not vacated the property at the end of the lease term.
What is documented in Section 14 of the lease agreement?
The daily fee the tenant will owe if they are holding over.
What does Section 15 address in a lease agreement?
A fee for preparing an amendment to the lease agreement.
How is a 'Guest' defined in the context of a lease agreement?
Someone who visits for 14 consecutive days or fewer, or for 28 non-consecutive days or fewer, in a 12-month period.
What is documented in Section 18 regarding maintenance responsibilities?
Who is responsible for providing exterior maintenance and lawn care.
Who is generally responsible for pest control services according to the lease agreement?
The landlord is generally responsible for termite and rodent control.
What should a tenant do if bedbug treatment is necessary?
Use a licensed Georgia pest control remover and permanently remove affected items.
What should be checked if the property has flooded at least three times in the past five years?
The first box in section 20 to notify the tenant of possible flooding or water intrusion.
What must a landlord note if the property was built before 1978?
Specific lead-based paint disclosures and requirements.
What must a tenant receive according to section 21 regarding lead-based paint?
A copy of the Lead-Based Paint Pamphlet and must attach form F316, the Lead-Based Paint Exhibit.
What does section 22(a) allow a landlord to do regarding eviction fees?
It documents the amount of any fees the tenant will need to pay to stop the eviction process.
What is the purpose of section 22(b) in the lease agreement?
It is a fee the tenant must pay if they do not allow the landlord to access the property as required.
What fee is outlined in section 22(c) for tenants?
A fee for having an unauthorized pet on the premises.
What is meant by 'cultivating your farm' in real estate?
It refers to real estate professionals picking a particular subdivision or section to generate future sales by getting to know the residents.
What should real estate professionals maintain to succeed in their farming efforts?
They should maintain contact with residents and have the knowledge and resources to serve the community.
What is capital gain in real estate?
The profit or loss realized based on the difference between the sale price and the cost of acquiring the asset.
What are the two types of capital gains?
Short-term capital gains and long-term capital gains.
How does the holding period of real estate affect capital gains tax rates?
Real estate investments sold within one year have higher tax rates than those held longer than twelve months.
What is the maximum effective tax rate for long-term capital gains?
The maximum rate currently is 23.8% for top earners.
Who qualifies as a top earner for capital gains tax purposes?
A single taxpayer earning more than 250,000 per year.
What happens to the cost basis of inherited property when it becomes a primary residence?
The cost is bumped up to fair market value, eliminating capital gains tax on prior appreciation.
What is tax depreciation?
A gradual reduction in the value of property that allows recovery of part of the cost through tax adjustments.
What is the most common method of depreciation for residential property?
The straight-line method, dividing the value of the house by 27.5 for annual deductions.
Can land be depreciated for tax purposes?
No, only structures and improvements can be depreciated.
What is the life-span of non-residential commercial real estate under GDS and ADS?
39 or 40 years, depending on the depreciation system used.
How is straight-line depreciation calculated for commercial real estate?
By dividing the difference between the salvage value and the purchase price by either 39 or 40.
What is a key consideration for a well-informed real estate agent when buying and selling real estate?
Building equity and exploiting appreciation as the market changes.
How do single-family home values typically change?
Based on market statistics and comparisons (comps).
What strategy do some investors use in multifamily environments to increase property value?
Adding upgrades and amenity packages to boost revenue potential and gradually increasing base rents.
Why might forcing appreciation not work well for personal homes?
Over renovating in a modest neighborhood won't necessarily bring higher returns unless other homeowners follow suit.
What is the best way to grow an equity nest egg when buying a home?
Buying low.
How long does it typically take to pay down half of the original loan principal on a 30-year fixed-rate mortgage?
Approximately 22 years.
What percentage of total payments on a mortgage typically covers interest?
More than 45%.
What can potential buyers do to control how quickly their equity builds up?
By doubling up on their payments or paying a little extra each month designated for reducing the principal.
What is a 1031 Exchange?
A tax-deferred exchange of like-kind properties that allows property owners to trade without paying capital gains taxes.
What types of properties can be exchanged in a 1031 Exchange?
Only business and investment properties can be exchanged; private residences cannot be traded.
What does section 22(d) specify regarding smoking on the premises?
A fee must be paid if smoking is prohibited and occurs on the premises.
What does section 22(e) address regarding utilities?
A fee for unauthorized disconnection of utilities.
What is a variance in the context of zoning ordinances?
A variance is the authorization to improve or develop a property in a manner not originally authorized by zoning.
What is required for a property owner to defer tax liability in a 1031 Exchange?
The exchange must involve like-kind properties, and the net market value and equity of the new property must be equal to or greater than the property sold.
Can you exchange a rental property for a moving van in a 1031 Exchange?
No, you cannot exchange a rental property for non-real estate items like a moving van or construction crane.
What is an example of a valid exchange in a 1031 Exchange?
Trading a four-unit apartment for a single-family rental, provided the values and equity requirements are met.
What is a common challenge in finding a suitable property for a 1031 Exchange?
Finding another business property owner with a similarly valued property who is looking for a quick swap is very difficult.
What are the two primary types of variances?
Area variances and use variances.
Why might investors involve a third party in a 1031 Exchange?
To act as a middleman or hold assets in escrow until a suitable swap can be found.
What is a potential strategy for property owners looking to change their real estate type?
They may want to trade properties, such as exchanging an assisted living property for a high-rise catering to college students.
What is a reason companies might seek a like-kind exchange in different locations?
To invest in real estate in other towns or states.
What is the time limit for a property seller to identify potential properties in a 1031 Exchange?
45 days to identify up to three potential properties.
What is the maximum combined value of properties that can be swapped in a 1031 Exchange?
The combined total must not exceed 200% of the real estate being sold.
What is the overall time limit to complete all transactions in a 1031 Exchange?
All transactions must be completed within six months, or 180 calendar days, of the first closing.
What happens if the property owner needs more time for a 1031 Exchange?
The property owner can file for a tax extension.
What is the role of a real estate agent or broker in 1031 Exchange transactions?
To help clients make wise decisions regarding tax and investment aspects of home ownership.
What is tax depreciation in real estate?
The amount of decrease in value of a property that is allowed for tax purposes.
What method is commonly used for tax depreciation of real property?
The Straight Line method.
Over how many years do residential properties depreciate according to the IRS?
27.5 years.
What is the annual depreciation deduction for a single-family home valued at $200,000?
$7,272.73.
Over how many years do commercial properties depreciate according to the IRS?
39 years.
How is the annual depreciation amount for a commercial property calculated?
By dividing the value of the building by 39.
What is the annual depreciation deduction for a commercial building valued at $1,550,000?
$39,743.59.
What does property insurance protect against?
It provides protection against risks such as fire, theft, and some weather damage.
Why is homeowners insurance important for the average American?
Most Americans do not have the funds or credit to replace their home and belongings if destroyed by fire or other disasters.
What are the three main types of coverage that homeowners' insurance may provide?
Coverage for buildings, contents, and liability.
What is the HO-0 policy in homeowners' insurance?
A limited perils policy that does not provide personal property, medical, or liability coverage.
What types of damage are typically covered by homeowners' insurance?
Damage from smoke, fire, riots, severe weather, explosions, aircraft, and volcanoes.
What options does section 23(a) provide for lease renewal?
The landlord can indicate if the lease automatically renews for a set period or becomes a month-to-month lease.
What is a common requirement from mortgage companies regarding homeowners insurance?
Mortgage companies typically require a minimum amount of insurance to protect their investment in the property.
What is a key consideration for homeowners regarding insurance coverage?
Protecting assets, including the dwelling and contents, is critical unless financial assets are available for replacement after a loss.
What does Homeowners' 1 (HO-1) cover?
It covers the ten listed perils plus glass breakage.
Why is Homeowners' 1 (HO-1) not very popular?
Because it provides too narrow coverage and many agents don't recommend it.
What additional coverage does Homeowners' 2 (HO-2) provide compared to HO-1?
It covers all 11 perils under HO-1 plus six more perils.
What is the main feature of Homeowners' 3 (HO-3) insurance?
It covers everything unless specifically excluded.
What is typically required by mortgage lenders regarding Homeowners' 3 (HO-3) coverage?
HO-3 coverage is the minimum plan required to issue a loan.
What does Homeowners' 4 (HO-4) cover?
It covers content perils typically seen in HO-2 and HO-3 policies.
What is unique about Homeowners' 5 (HO-5) insurance?
It covers everything that isn't listed as an exclusion and allows for endorsements to expand coverage.
What does Homeowners' 6 (HO-6) insurance specifically protect?
It protects condo owners against content loss and covers structural features like walls and ceilings.
What type of residences does Homeowners' 7 (HO-7) insurance cover?
It covers manufactured homes or mobile homes.
What is the HO-8 policy designed for?
It is designed for homeowners living in older residences, especially if replacing the property would be a hardship.
What type of coverage does the HO-8 policy provide?
It covers specific items listed in the policy and pays the actual cash value minus depreciation.
Is water damage covered under the HO-8 policy?
No, water damage is never covered under an HO-8 policy, but a rider can be added for different kinds of water damage.
What does the National Flood Insurance Program (NFIP) cover?
It covers losses initiated from a real flood, defined as excess water covering at least two acres or two properties.
What is a key difference between homeowner policies and flood insurance policies?
Homeowner policies may be value-based, while flood insurance reimbursements are based on the actual cost to repair or replace.
What must be purchased separately in addition to a flood insurance policy?
Content protection must be purchased separately as contents and liability are not covered by standard flood insurance policies.
What is the role of FEMA in relation to flood insurance?
FEMA oversees and manages the National Flood Insurance Program (NFIP).
How is actual cash value calculated in flood insurance?
It is calculated by deducting reasonable depreciation from the replacement cost.
What should homeowners check before buying an insurance policy?
Homeowners should check exclusions and limitations carefully before buying or recommending an insurance policy.
What is the maximum coverage amount for flood-related losses under NFIP for buildings?
$250,000.
What is the average annual cost of NFIP flood insurance policies?
Around $700 a year.
What must a residence be to qualify for replacement cost value (RCV) under a NFIP plan?
A single-family home occupied at least 80% of the time by the homeowner.
What is one item that is typically not covered under NFIP flood insurance?
Refrigerators.
What is the importance of talking with an insurance agent about coverage?
To understand what is covered and to read the fine print.
What is the maximum coverage amount for eligible covered content under NFIP?
$100,000.
What program helps high-risk homeowners gain access to affordable flood insurance?
Fair Access to Insurance Requirements (FAIR) program.
What is a common misconception about flood insurance among homeowners?
That they are adequately insured when many are underinsured.
What should homeowners consider when deciding how much coverage to buy?
Many items are not covered under personal property or building property.
What is a potential benefit of having flood insurance?
The average residential claim for flood damage was more than $42,000.
What does an area variance allow a property owner to do?
It allows the owner to build a structure that does not fully comply with the dimensional requirements of the zoning resolution.
What is a use variance?
It allows the owner to continue using a property in a manner that no longer complies with the most recent zoning resolution.
What should you verify regarding a use variance when a property is sold?
You should verify with local zoning authorities if the use variance will stay in effect after the property is sold.
Why is it beneficial for a real estate agent to have a general understanding of zoning ordinances?
It helps in understanding why a neighborhood is built the way it is and may reveal opportunities that others do not see.
What does the subdivision plat detail regarding services like waste removal?
The rights-of-way and easements necessary to provide these services via streets, alleys, and other types of access.
What is the first step a developer takes when creating a subdivision?
Ordering a survey of the land.
What must proposed developments follow according to local ordinances?
Standards established by the area comprehensive plan.
What is the purpose of a subdivision plat?
To provide a visual layout of the proposed subdivision and individual tracts within it.
What must developers connect each lot to before building homes in a subdivision?
Existing local utilities, water, and sewage systems.
What is the distinction between land, real estate, and real property?
Land refers to the earth's surface, real estate includes land and anything permanently attached to it, while real property encompasses the rights associated with ownership of real estate.
What are fixtures in real estate?
Fixtures are items that are permanently attached to the property, such as built-in appliances or light fixtures.
What are two economic characteristics of real estate?
Scarcity and modification are two economic characteristics of real estate.
What are two physical characteristics of real estate?
Immobility and indestructibility are two physical characteristics of real estate.
What are air rights in real property?
The rights to the reasonable use of the air space above the surface of the land.
What do subdivision regulations dictate about roadways?
They dictate the type of materials used to build streets and roads, as well as their width and placement.
What does the term 'bundle of rights' refer to in real estate?
All of the legal rights incident to ownership of property including rights of use, possession, encumbering, and disposition.
How is land defined in the context of real estate?
The materials of the earth, including soil, rock, or other substances, and includes free or unoccupied space for an indefinite distance upwards and downwards.
What are mineral rights?
A landowner's right to receive a portion of the profits of any minerals that are extracted from the land.
What is the difference between real estate and real property?
Real estate is land plus anything permanently attached to it, while real property includes land, things affixed to land, appurtenances, plus the bundle of rights.
What considerations must developers take into account when deciding where to put roadways?
Anticipated traffic patterns and the impact on arterial roadways.
What landscaping regulations are typically enforced in subdivisions?
Landscaping must not interfere with line-of-sight on roadways and must provide clear views at entrances.
What does owning land imply in terms of ownership rights?
Owning land implies ownership from the air above to the center of the Earth, including the rights to the surface and subsurface.
What safety features are developers responsible for creating in subdivisions?
Traffic signs, guard posts, street name signs, reflectors, and speed bumps.
What guidelines exist for street signs in subdivisions?
Guidelines for size, shape, color, height, and letter case.
What must driveways in subdivisions ensure regarding drainage systems?
They must not block drainage systems and must be user-friendly and safe.
What advice do engineers provide regarding driveways in subdivisions?
Advice about culvert placement, size, and type to ensure safety and usability.
What regulations may govern mailbox placement in subdivisions?
Mailbox placement and design may be governed by subdivision regulations and state transportation standards.
What are restrictive covenants in a subdivision?
Restrictions created by developers that dictate how properties can be used and may prohibit certain commercial activities.
What role do Homeowner Association bylaws play in subdivisions?
They establish rules and regulations for the community created by developers.
What is the purpose of easements in land use?
Easements provide access or restrict improvements to preserve green spaces and wildlife habitats.
What factors do local authorities evaluate in a subdivision plan?
They assess if the subdivision supports the economic, social, and physical needs of current and future residents.
How do developers use demography in planning subdivisions?
They study population dynamics to predict housing needs based on births, deaths, migration, and aging.
What must new developments comply with regarding financing?
They must meet Federal Housing Authority (FHA) guidelines and regulations if FHA financing is anticipated.
What are some local Zoning Ordinances that new developments must comply with?
Lot size, building footprint, minimum parking space per capita, and building height requirements.
How long does it typically take to build a single-family home after receiving a building permit?
About five to eight months.
Why is the process of subdividing land not speedy?
It involves extensive planning and approval processes that can take years, especially in some municipalities.
What is the significance of subdivision regulations?
They ensure that future owners, surrounding neighborhoods, and local municipalities benefit from the expansion.
What is a building code?
A systematic regulation of construction of buildings within a municipality established by ordinance or law.
What is a Certificate of Occupancy?
A document issued by a local government agency after satisfactory inspection of a structure authorizing that the structure can be occupied.
What is the primary purpose of building codes?
To protect the health, safety, and welfare of the general public.
How do most municipalities establish their building codes?
By adopting a State code as the foundation for local building control and modifying regulations through amendments.
What historical events influenced the development of building codes in the US?
The huge conflagrations in San Francisco and Baltimore, and the 1906 San Francisco earthquake.
What was the original motivation behind early building codes?
Financial motives to protect property rather than people.
What recent trend has influenced building codes?
The implementation of sustainability guidelines to protect the environment and reduce energy consumption.
What is a primary focus of building codes regarding construction type?
Establishing building construction rules and guidelines.
What materials are most buildings typically erected with?
Wood, concrete, or steel frame.
What do municipal ordinances and building codes cover besides construction materials?
Paint, types of pipe, and electric wiring.
What is the significance of lead abatement in building regulations?
Multiple agencies contribute laws regarding the removal, disposal, and use of lead-based paint.
What occupancy type is allowed for single-family residences according to building codes?
Wood frame construction.
How does building code determine maximum occupancy per floor?
Based on floor area and intended use, with specific formulas for calculating occupancy rates.
What is the recommended square footage per occupant in an area without concentrated seating according to IBC code?
15 square feet.
What is the maximum occupancy for a 1,000 square foot restaurant with well-spaced tables?
66 patrons.
What is the maximum occupancy for a 1,000 square foot dance club with concentrated seating?
142 customers.
What is a limitation for wood frame structures in terms of height?
Limited to two stories and smaller floor area than concrete or steel structures.
What governs log home construction?
ICC 400-2012.
What do standards for lumber grade and construction include?
Metrics for sustainability, fire resistance, energy conservation, and wall protection.
How does occupancy affect exit requirements in buildings?
Floors with more occupants require more exits than single family homes and small business locations.
What is the recommended minimum doorway width for stair exits according to the IBC?
At least 0.3 inches of doorway per person.
What is the minimum opening size for egress windows?
20 inches by 24 inches (height X width).
What percentage of a room's square footage must the egress window's glass area cover?
At least 8% of the total square footage of the room.
What historical events influenced building code enforcement for fire protection?
The Winecoff Hotel fire and the La Salle Hotel fire, which resulted in significant loss of life.
What is the minimum percentage of square footage that an egress window must open to provide adequate natural ventilation?
At least 4% of the square footage of the room served.
What is a key factor in determining the number and location of egress points in a building?
The type of construction and use of the building.
What does the municipal building code describe regarding travel distance to an exit?
The maximum travel distance is calculated from the most remote point on a floor to a fire exit or stair.
What do building code standards determine for each building type?
Minimum fire protection standards.
What is one fire protection measure for steel frame structures?
Applying spray-on fire-proofing material that provides at least a 2-hour protection window.
What is required between residential and commercial spaces in mixed-use buildings?
A minimum protection wall, such as a 2-hour separation or enhanced fire wall.
What type of walls provide 2-hour fire protection in townhouses or condos?
Gypsum separation walls constructed with steel studs and tracks.
What does the Americans with Disabilities Act (ADA) address in building codes?
Accessibility for disabled persons.
What is the minimum door width under ADA standards?
32 inches, with many municipalities recommending 36 inches.
What is the required slope ratio for ramps under ADA standards?
1:12 slope ratio, requiring one linear foot of ramp for every inch of rise.
What is the standard width for corridors/hallways according to ADA?
36 inches, with some exceptions allowed.
What is the minimum size for a turn/landing platform under ADA standards?
5' X 5', with California code requiring a six foot minimum in the direction of travel.
What is the height requirement for guardrails on ramps in most states?
Between 34 inches and 39 inches, installed on both sides of the ramp.
What must designers consider for protruding objects in circulation paths?
Designers must consider wheelchair-bound persons and people who use a blind-cane or walker.
What is the maximum extension of objects protruding from the wall into a circulation path?
Objects must extend no more than 4 inches into a circulation path, except for handicap rails which may extend up to 4 1/2 inches.
What is a Certificate of Occupancy?
A document certifying that a building is safe for habitation or commercial use after passing required inspections.
What types of inspections are typically required before issuing a Certificate of Occupancy?
Plumbing inspection, fire marshal review, electrical inspection, and possibly a health department certificate and ADA compliance survey.
What happens to property values when a neighborhood is upzoned from an FAR of 5.0 to 6.0?
The properties in that zone become much more valuable since you can now build 20% more square footage.
What is a common reason municipalities rezone areas?
To revitalize a particular part of the town or city.
What types of areas have been rezoned into residential and commercial zones in recent decades?
Historically industrial areas, such as abandoned warehouses and factories.
What can real estate agents identify by following local municipality rezoning activities?
The 'path of progress' in the market.
What is a potential outcome of converting old warehouses and factories?
They can be transformed into trendy apartments and office spaces.
What is the building envelope in zoning regulations?
The outer limits within which a building must be constructed according to zoning regulations.
What does the maximum permitted building height refer to?
The highest point to which a building can be constructed as per zoning regulations.
What are the front yard and rear yard requirements?
Regulations that dictate the space that must be maintained between the building and the property boundaries in the front and back.
What is the significance of parking spaces in the context of building envelope?
Parking spaces are designated areas that must be included within the building envelope as per zoning regulations.
What does the floor area ratio (FAR) control in building regulations?
The size of buildings.
How is the floor area ratio (FAR) defined?
The ratio of the total building floor area to the area of the zoning lot.
What does the FAR determine for a building on a zoning lot?
The maximum floor area allowed in a building.
What are subdivision regulations?
The control of the division of a tract of land into individual lots by requiring development according to specific standards and procedures adopted by local ordinances.
What must developers create before starting construction on a subdivision?
A written diagram called a subdivision plat that details the land division and proposed property improvements.
What is the purpose of subdivision regulations?
To ensure development follows guidelines that protect and promote the general welfare, safety, and health of a community and its residents.
How do building codes impact real estate investments?
Building codes affect land and building investments, which is essential for real estate agents to understand when working with developers, builders, and homeowners.
What can trigger amendments to regional building codes?
Geographic location, community culture, global initiatives, tragic events, innovation, and activism can all trigger amendments to regional codes.
What does the Florida State Building Code govern?
It governs the construction, alteration, repair, use, and occupancy of every public and private building and structure.
What are some building code regulations for coastal communities in Florida?
Standards for elevating homes to protect against tidal surges and beach erosion.
What additional design features are required in Broward and Miami-Dade counties?
Features that protect against wind-borne debris from high-velocity hurricanes.
How does land ownership differ in Israel compared to other countries?
In Israel, a person usually only owns the right to build on the surface of the land, while the government owns the land itself and all subsurface and air rights.
What does ownership of land typically include regarding subsurface rights?
Ownership includes subsurface rights, including any minerals, oil, or dinosaur bones found underground.
What are air rights in real estate?
Air rights allow the owner to build as high as they want, as long as it doesn't conflict with local zoning laws.
What is the definition of real estate?
Real estate means land plus man-made improvements, such as houses, buildings, or fences.
What are fixtures or appurtenances in real estate?
Fixtures or appurtenances are things that are permanently installed on the land, included when real estate is bought and sold.
How are mobile homes classified in relation to real estate?
Mobile homes are considered movable property or chattel and are not included with real estate ownership unless specially purchased.
What is the 'bundle of rights' in real property?
The 'bundle of rights' refers to the rights that come with real property ownership, with each right represented as a stick in the bundle.
What happens to subsurface rights when real estate is sold?
If subsurface rights have been sold to another party, they do not pass to the new owner of the real estate.
What is the first rule of real estate transactions?
You can only convey that which you already have.
What is the right of possession in real estate?
The right of possession means that when you buy real estate, it is exclusively yours, and no one else can possess it unless you share that right.
What is joint tenancy in real estate?
Joint tenancy is when more than one person can possess real property together.
What constitutional amendment protects the right of possession?
The Fifth Amendment protects the right of possession by requiring due process before property can be taken.
Under what circumstances can the government violate the right of possession?
The government can violate the right of possession through criminal acts, civil judgments, or condemnation cases for public good.
What is foreclosure in the context of real estate?
Foreclosure is the violation of the right of possession when real estate is pledged as collateral and the owner fails to make payments.
What does the right of quiet enjoyment entail?
The right of quiet enjoyment means that no one can disturb you on your real estate, and you can sue for damages if this right is violated.
Do property owners have a right to a view according to most courts?
No, most courts do not recognize a right to a pretty view as part of the right of quiet enjoyment.
What was the outcome of the lawsuit involving the condominium towers in Atlanta?
The lawsuit was about whether the second tower violated the first tower's right of quiet enjoyment by blocking the view, but the outcome is not specified in the text.
What was the outcome of the condominium unit owners' lawsuit against the developer regarding the unobstructed view?
The final decision was that no one has a right to an unobstructed view, and no one is entitled to damages.
What is the most important stick in the bundle of rights for a real estate agent?
The right to dispose.
What does the right to dispose allow a property owner to do?
Sell all or part of their property, including rights like leasehold interest or easements.
What is a life estate?
A property ownership that lasts until the owner dies, at which point it reverts to the original owner.
What happens to a property if the owner dies without a will?
The property will pass to the owner's heirs according to state law.
What does granting an easement entail?
It is the sale of a right to use a portion of the land, which may limit the owner's use of that land.
How can undersurface rights be disposed of?
By selling them for mineral mining or oil drilling, often in exchange for a share of the profits.
What are hunting rights in relation to land ownership?
The right to hunt game on the land, which can be sold to multiple people subject to local laws.
What does it mean to encumber a property?
To have a lien placed against the property for payment of a debt, using the property as collateral.
What happens to liens when a property is sold?
All liens are usually paid off before the property is conveyed to a new owner.
What rights does a property owner have regarding their land?
The right to possess, enjoy, and dispose of the land, including using it for various activities like farming or building.
What is the 'pig-farm situation' in real estate law?
It refers to a case where a homeowner complains about a nuisance from a pig farm, but the case is dismissed because the homeowner came to the nuisance.
What is expected of a buyer regarding the surrounding environment of a property?
A buyer is expected to look at their surroundings before purchasing a property.
What can limit the use of land in a residential area?
Local zoning laws can restrict the use of land, such as prohibiting the construction of large commercial buildings in residential areas.
What are restrictive covenants in real estate?
They are rules that limit how property can be used, often found in planned communities or homeowners associations.
What can happen if a homeowner violates restrictive covenants?
The homeowners association can force the owner to dismantle unauthorized structures and pay fines and attorney's fees.
Why is it important for buyers to read restrictive covenants before purchasing a property?
To avoid misunderstandings about their rights and limitations regarding the use of their property.
What is the definition of land?
Land is defined as the materials of the earth, including soil, rock, and free or unoccupied space for an indefinite distance upwards and downwards.
What is raw land?
Raw land is land in its natural state, with no man-made improvements such as cleaning, clearing, digging, or grading.
What does real estate consist of?
Real estate is defined as land plus anything permanently attached to it, including improvements.
What are examples of improvements in real estate?
Improvements include houses, garages, and fences.
What is real property?
Real property is defined as land, things affixed to land, appurtenances, plus the bundle of rights.
What is included in the bundle of rights associated with real property?
The bundle of rights includes the right of possession, right to dispose, right to use, right to encumber, and right of quiet enjoyment.
What does the BUNDLE OF RIGHTS refer to in property ownership?
All of the legal rights associated with the ownership of property.
What is the significance of the 'bundle of sticks' analogy in property rights?
Each stick represents a different legal right associated with property ownership.
What is the RIGHT OF POSSESSION in property ownership?
The owner exclusively owns the property and can share this right with others.
What does the RIGHT TO DISPOSE allow the property owner to do?
The owner has the right to sell or transfer all or part of the property.
What does the RIGHT TO USE entail for a property owner?
The owner can use the property in any legal manner.
What does the RIGHT TO ENCUMBER allow a property owner to do?
The owner may place a lien on the property, such as taking out a mortgage.
What is meant by the RIGHT OF QUIET ENJOYMENT?
The owner can possess and use the property in peace, without outside disturbances.
What are the three types of property rights associated with land?
Air Rights, Surface Rights, and Sub-Surface Rights.
What do Air Rights allow a property owner to do?
Use the airspace above the surface of the land.
What do Surface Rights include?
The rights to the surface, exterior or upper boundary of a parcel of land, including access to water and other substances.
What is a trade fixture?
A trade fixture is an article of personal property annexed by a business tenant to real property, necessary for carrying on a trade and removable by the tenant.
What does real estate include?
Real estate includes raw land plus permanent structures on the land, such as houses, fences, barns, and office towers.
What is the significance of distinguishing between real estate and personal property in transactions?
The distinction matters greatly in real estate transactions as it determines what will be bought and sold besides the land itself.
What does the land aspect of real estate encompass?
The land aspect includes the ground, whatever grows on it, and whatever is underneath it, such as mineral deposits, coal, or oil.
What are appurtenances in real estate?
Appurtenances refer to fixtures or things attached to the land or improvements made to the land that generally cannot be removed without significant damage.
What are examples of fixtures in real estate?
Buildings, plumbing, wiring, built-in cabinets, wells, underground storage tanks, sewer systems, and mines.
What mnemonic device can help determine if something is a fixture?
The mnemonic device 'Maria', which stands for Method, Adaptability, Relationship, Intention, and Agreement.
What does 'M' in the mnemonic 'Maria' stand for?
Method of attachment.
Why are pipes and wiring considered fixtures?
They are built into the house and attached to the local sewer line and electrical systems, making them integral to the structure.
What does 'A' in the mnemonic 'Maria' represent?
Adaptability, which refers to whether an item is custom built for its space and if it can be removed and adapted to a different space.
Why might a television be considered movable property?
Because it can be easily removed and adapted to a new space without significant damage.
What is the significance of adaptability in determining fixtures?
Items that cannot be easily removed or adapted to a different space are more likely to be considered fixtures.
How do HVAC units relate to the concept of fixtures?
Central HVAC units are likely considered fixtures due to their adaptation to the space, while window units are not.
What is a common issue with light fixtures in real estate?
Determining whether they are fixtures or movable property, as some can be easily removed while others cannot.
What does the 'R' in the relationship of the parties refer to in real estate disputes?
It refers to the courts generally favoring the buyer's opinion in disputes about whether an item is a fixture or personal property.
In a dispute over a fixture, what is a key factor that courts consider?
The courts consider whether the item was presented as part of the house and if it looks built-in.
What is the significance of the seller's intent regarding fixtures?
If the seller intended for the item to be permanent, it is likely considered a fixture.
What is the most important factor in determining if an item is a fixture?
The written contract between the parties.
What can happen if a contract is vague about fixtures?
It can lead to disputes and potentially cost clients thousands in court.
What is personal property in the context of real estate?
Personal property is goods that are movable or immovable but are not real property.
What is an example of personal property in real estate?
Furniture, such as beds, couches, and electronics.
How can a microwave be classified in real estate terms?
If it is not built into the wall, it is considered personal property.
What is the difference between real property and personal property in a real estate transaction?
Real property includes the land and anything permanently attached to it, while personal property includes movable items like furniture and appliances.
What should homeowners do to avoid confusion about included items in a real estate sale?
Homeowners should specify in the advertisement and contract exactly what will stay with the property after the sale.
What happens to personal property during a foreclosure?
Personal property remains the property of the prior owner and is not included in the foreclosure of real property.
What is a UCC-1 statement used for?
A UCC-1 statement is used to record liens on personal property, typically when the item is bought with lender financing.
How are fixtures treated differently in commercial property compared to residential property?
In residential property, fixtures are expected to remain with the house, while in commercial property, fixtures are usually removed unless specified otherwise in the contract.
What are trade fixtures?
Trade fixtures are personal property specific to a business and are typically removed when a building is sold or a lease term is completed.
What might happen to abandoned personal property after a foreclosure?
Abandoned personal property may be disposed of by the bank after a certain period of time.
What types of items are typically considered trade fixtures?
Trade fixtures can include display counters, manufacturing equipment, computers, registers, and business signage.
What is a common reason trade fixtures are removed when a prior owner moves out?
Trade fixtures often have a lien on them.
What is the significance of the HVAC unit in commercial property transactions?
It may be considered a trade fixture or part of the permanent structure, depending on the agreement.
Why is careful drafting of the commercial real estate contract crucial?
To account for all existing fixtures and improvements made to the building.
What are emblements in the context of farmland?
Emblements are crops, seasonal and annual plantings, considered personal property.
How can crops be treated in terms of property ownership?
Crops can be pledged as collateral separate from the land itself.
What is the unique status of emblements a consequence of?
The history of farming.
What types of structures on a farm may be considered fixtures?
Barns, chicken coops, smoke houses, equipment sheds, and grain silos.
What is the difference between movable property and fixtures in a farm transaction?
Movable property includes tractors and threshers, while fixtures are typically attached structures.
What is tenant farming?
A system where a tenant farmer rents land from the owner to cultivate crops.
Who typically owns the crops in a tenant farming arrangement?
The tenant cultivator usually owns the crops, but the landlord may have a lien on them.
What common issue arises in tenant farming regarding crop ownership?
Disagreements about whether the crops belong to the landlord or the tenant.
What is a common practice regarding crop payment in tenant farming?
The tenant may give some of the crops to the landowner as part of the rent payment.
What is timber farming?
A business where investors buy land and sell rights to naturally-growing timber, like pine trees.
How is timber harvested in timber farming?
Harvesting is done by professional lumber companies who pay the landlord for the timber.
What types of forests are popular for timber farming in the south?
Pine and bamboo forests.
What are fixtures in real estate?
Items attached to the land or improvements that usually cannot be removed without an agreement between the parties.
How are fixtures classified in terms of property type?
Fixtures are considered real property.
What does the acronym M.A.R.I.A. help determine?
It helps determine if an item is a fixture.
What does the 'Method of Attachment' criterion indicate about fixtures?
If an item is attached using permanent methods like bolts or screws, it is considered a fixture.
What does the 'Adaptability' criterion suggest regarding fixtures?
Items custom built to fit in a particular room are likely considered fixtures.
How does the 'Relationship of the Parties' criterion affect the classification of fixtures?
Courts typically favor the buyer over the seller and the tenant over the landlord in disputes about fixtures.
What does the 'Intention of the Parties' criterion refer to in determining fixtures?
It refers to the seller's intention when installing the item; if intended to be permanent, it is a fixture.
Why is the 'Agreement Between the Parties' criterion important for fixtures?
It clarifies which items are included in the sale and should be stated in writing to avoid misunderstandings.
What is considered personal property?
Everything that is not real estate.
What is another term for personal property?
Chattel.
What is a general rule of thumb for identifying personal property?
That which is movable is considered personal property.
What are trade fixtures?
Items installed by a business or commercial tenant that are removable upon termination of the tenancy.
How are trade fixtures classified in terms of property?
They are considered personal property of the tenant.
What are emblements?
Crops and other annual plantings grown on a property, considered personal property of the cultivator.
What are the legal characteristics of real estate?
Real estate is land with defined boundaries and things upon it.
What does ownership of real estate entail?
It involves a bundle of rights including use, enjoyment, sale, division, and pledging as collateral.
What is the first lesson learned in economics related to real estate?
Economics is the study of scarcity.
How does scarcity affect land availability?
There is a limited amount of land for the population, and once owned, less land is available.
What is the significance of location in real estate?
Location greatly influences the value of real estate, with sought-after places having less available real estate, thus increasing prices.
Why are real estate prices in Manhattan so high?
Because there is limited space on the island and high demand due to its status as a center for commerce, entertainment, and jobs.
What economic factors contribute to the low real estate prices in New York's Southern Tier?
Fewer people, fewer jobs, and most jobs being low-paying contribute to the low real estate prices in this area.
How does the proximity to Manhattan affect real estate values in the suburbs of central Long Island?
Real estate in central Long Island suburbs is valued higher due to its short commute to Manhattan, despite being cheaper than Manhattan itself.
What makes the Hamptons real estate particularly expensive?
The Hamptons has expensive real estate due to its attractive location, wealthy residents, and proximity to luxury amenities, despite being a two-hour commute from NYC.
How does geography impact real estate prices?
Coastal land near beaches tends to be more expensive due to high demand for ocean views and limited availability compared to inland locations.
What are the economic impacts of location on real estate value?
Land near canyons, swamps, steep mountains, deserts, or tundra tends to be less valuable due to difficulties in building and accessibility.
How do improvements affect the value of real estate?
Improvements like houses, pools, fences, and utilities significantly increase the value of real estate compared to raw land.
Why is land considered a permanent investment?
Land is not liquid and cannot be easily exchanged for anything other than cash, making it a long-term investment.
What makes real estate a safe investment?
Real estate is hard to steal because it is immovable and protected by laws regarding ownership and adverse possession.
What distinguishes land from other types of property?
Land is immobile and its boundaries are established in the deed, making it unique compared to personal property.
What happens to ownership rights when the structures on real estate are destroyed?
Ownership rights remain unchanged even if structures are destroyed.
Why is real estate considered indestructible?
The land itself remains the same regardless of any destruction to structures or fixtures on it.
What distinguishes real estate from movable property?
Real estate is unique and indestructible, while movable property can be destroyed and replaced.
What is the significance of land being a permanent commodity?
Land remains within its boundaries and cannot be consumed or destroyed like other commodities.
How does the uniqueness of land affect its economic characteristics?
Land is scarce and cannot be replicated, making each parcel valuable and unique.
What was the outcome of the Johnson v. McIntosh case?
The Supreme Court ruled in favor of the family that received the deed from the United States government, establishing the Law of Conquest.
How can architectural design impact the value of real estate?
The quality and design of structures can significantly increase the property's value.
What is the value of raw land in a suburban area?
Raw land has value due to the potential for building a house.
How does the presence of a large mansion affect the value of real estate compared to a modest home?
A large mansion increases the value significantly due to its premium features and desirability.
What architectural features can increase the value of a home?
Unique design by a known artist or architecturally significant features can increase a home's value.
What can negatively impact the value of a home despite its unique features?
If the home is an eyesore or has awkward design making it difficult to live in, it can decrease the value.
What happened to the value of a home with an indoor pool in a neighborhood of modest homes?
The home sat on the market for a long time and had to be reduced in price because buyers did not want the expensive-to-maintain indoor pool.
How does iconic architecture affect real estate value?
Iconic structures, like the Empire State Building, significantly increase the value of the land they occupy.
What marketing strategy is used to enhance the value of new condominium developments?
Licensing luxury brand names to evoke an image of luxury and increase property value.
What is the purpose of having a comprehensive plan for a municipality?
To guide the development and growth of the municipality.
What are two examples of requirements found in a local zoning ordinance?
Setback requirements and land use designations.
What are two requirements found under a State building code?
Structural integrity standards and fire safety regulations.
What has been part of the American dream since the early 1600s?
Home ownership and having a private piece of land.
What is the purpose of government-owned land?
To protect and serve the citizens.
What rights did landowners have in Colonial America regarding their land?
They thought they had powerful control, but the government retained the right to limit use through regulations.
Why is it important for real estate agents to understand the role of government entities in the real estate marketplace?
Because local, state, and federal agencies own, lease, and manage land and buildings, creating opportunities for private and public transactions.
What are some common municipal buildings?
Public schools, community centers, libraries, and law enforcement centers.
What are common land uses at the municipal level?
City parks, streets, roadways, public boat ramps, and recreational places.
What was often the first permanent building in Texas counties during the 19th century?
County courthouses.
How many historic courthouses does Texas have still in use?
Two-hundred thirty-five.
What is one objective of Chapter 1 in the Real Estate Business course?
To list at least three professionals associated with the real estate industry.
What is another objective of Chapter 1 in the Real Estate Business course?
To list at least three types of property.
What is a real estate broker?
A person or organization acting as an agent for others in negotiating the purchase and sale of real property for a fee.
What is the role of a real estate salesperson?
An individual who is licensed to negotiate and arrange real estate sales; works for a real estate broker.
What historical act allowed people to acquire free land in the U.S.?
The Homestead Act of 1862.
What are the main types of properties included in the real estate industry?
Residential, commercial, industrial property, and land.
What is required to become a licensed real estate broker or agent?
Completion of approved real estate courses and passing an exam in the state where they work.
What types of facilities are included in state government buildings?
Facilities for emergency response teams, maintenance and storage for road equipment, and office complexes for state affairs.
What common buildings and land uses exist at the federal level?
National parks and military installations.
What are the four categories under which government ownership of land usually falls?
What distinguishes a REALTOR® from a regular real estate agent?
Only those who belong to the National Association of REALTORS® (NAR) can use the title of REALTOR® and are pledged to Standards of Practice and a Code of Ethics.
What can a real estate broker do that a real estate agent cannot?
A real estate broker can establish their own business and manage a team of real estate agents.
What is required to become a real estate broker?
Experience as an agent, a broker's license, and additional education depending on the state's requirements.
What do buyer's agents do?
They find properties, show them, negotiate prices and terms, and guide buyers through the purchasing process.
What is the purpose of urban renewal efforts by government agencies?
To revitalize areas of blight or significant decline and improve economic potential and tax revenues.
What percentage of the land in the United States is owned by the federal government?
Roughly one-third.
What is the role of a seller's agent?
They work with sellers to list and market their property, negotiate prices and terms, and guide sellers through the selling process.
What is the National Association of REALTORS®?
An organization that residential and commercial real estate agents can join to become REALTORS®.
What does an appraiser do in real estate?
They assess and report their opinion on the value of a property, which can include various types of real property.
Which agencies manage the majority of federally owned land in the United States?
Bureau of Land Management, Forest Service, National Park Service, and Fish and Wildlife Service.
What is one interesting fact about the ownership of United States Post Offices?
75% of the 35,000 United States Post Offices are privately owned and leased back to the USPS.
What are the responsibilities of a property manager?
They take care of rental property for the owner, screen prospective renters, coordinate repairs, handle maintenance and tenant concerns, and may evict tenants if necessary.
What is the role of government buildings in serving the public interest?
They provide access to services such as health care, financial, and legal assistance.
What is the difference between a mortgage broker and a mortgage banker?
A mortgage banker is a direct lender working for one institution, while a mortgage broker can work with several different lending companies.
What do home inspectors do?
They examine a property before the transaction is completed to check for various issues, allowing buyers to negotiate repairs or adjustments.
What is the role of architects in the real estate business?
Architects design and plan buildings and work with contractors to construct them.
What do contractors do in the construction process?
Contractors build the buildings and coordinate all aspects of construction.
What is the first step the Smith family might take when buying a house?
They might look online to see what's available in the area they like.
What percentage of buyers begin their home search online?
Nearly 50%.
What is the role of a real estate agent in the home buying process?
The agent helps write a purchasing contract and coordinates negotiations.
What happens after the seller accepts the offer on a house?
A home inspection and appraisal will be ordered.
What do sellers typically do when they decide to move?
They contact the agent they worked with when they purchased their home.
What is the Multiple Listing Service (MLS)?
A service that includes 92% of all listed homes on the market.
What does the agent do to promote a property for sale?
The agent promotes and advertises the property, arranges viewings, and markets it to find a buyer.
What role do agents for buyers play in the real estate process?
They present offers and help evaluate and negotiate the best offer for the sellers.
What happens after an agreement is reached in a real estate transaction?
The property undergoes inspection and appraisal, and contractors or architects may be involved if there are serious construction issues.
What occurs when all details are resolved in a real estate transaction?
The property will close and ownership transfers.
How can the overview of the real estate industry be used?
As a starting point to understand how various real estate professionals contribute to the industry.
What is the role of a real estate broker?
To act as an agent for others in negotiating the purchase and sale of real property for a fee.
Who works under the supervision of a sponsoring broker in real estate?
Real estate salespersons.
What is the primary responsibility of an appraiser?
To estimate the value of real and personal property based on experience, judgment, facts, and formal appraisal processes.
What does a property manager do?
Manages properties for an owner as the owner's agent.
What is the function of a home inspector?
To evaluate buildings and their components.
What does a mortgage broker do?
Arranges a loan between a lender and a borrower for a fee.
What is the role of an architect in real estate?
To design buildings with construction documents and specifications.
What is the principal business of a general contractor?
To oversee the construction of structures requiring at least two unrelated building trades or crafts.
How are property types generally categorized?
By the zoning law that applies to that property.
What are the three most common zoning designations?
Residential, commercial, and industrial.
What is included in residential properties?
Single family homes and multi-family buildings.
What defines a single-family home?
A private freestanding residential house.
What is considered a multi-family building?
A building with more than one housing unit, such as an apartment building or duplex.
How do banks classify multi-family properties for loans?
Any property with 5 or more apartments is considered commercial.
What percentage of real estate agents work with residential properties?
Around 63%.
What is commercial property used for?
Profit-driven business purposes, such as retail stores, restaurants, or offices.
What do agents specializing in commercial property need to understand?
The business side of ownership, including leases, rentals, and maintenance.
What factors should be considered when evaluating a location for a restaurant?
Foot traffic, customer entrance, food delivery entrance, and compliance with safety regulations.
What is mixed-use property in real estate?
A combination of commercial and residential real estate, such as storefronts on the ground floor with residential spaces above.
What drives the popularity of mixed-use properties?
The desire of residents to have retail shops and restaurants within walking distance.
How does getting a mortgage for residential property differ from financing for commercial real estate?
The income-generating potential is a consideration for commercial real estate financing.
What types of properties fall under industrial real estate?
Factories and warehouses, which can vary in size and application.
What should agents know when working with industrial properties?
They should understand the business aspects of commercial property and the specific needs based on use.
What is the purpose of agricultural properties?
They are generally intended to be income-producing, used for growing crops or raising livestock.
How does zoning affect agricultural properties?
Zoning helps protect agricultural properties from residential activity that could interfere with farming operations.
What is special purpose real estate?
Real estate characterized by the specific reason it was constructed, such as schools or churches.
Why are special purpose properties challenging to value?
Because they are unusual enough that comparables are not common.
What does vacant land refer to?
Land that has no improvements added to it, also known as raw land.
What should be investigated when purchasing vacant land for development?
The availability of water, gas, electricity, and septic services.
How can zoning affect the use of special purpose properties?
Zoning doesn't necessarily define the category, allowing for flexibility in location with appropriate permits.
What factors can affect the value or attractiveness of vacant land?
Easements for utilities, previous use of the property, and access in all kinds of weather.
What is the significance of zoning classifications in real estate?
They help understand the characteristics of property types in an area and guide specialization.
What are the types of residential properties?
Single Family Homes, Duplexes, Triplexes, Fourplexes.
What types of commercial properties are mentioned?
Office Buildings and Retail Buildings.
What is included in multi-family residential buildings?
5+ Unit Multi-Family Residential Building.
What types of industrial properties are listed?
Factories and Warehouses.
What is a mixed-use property?
A property that combines residential and commercial uses, such as retail on the bottom and apartments above.
What are examples of special purpose properties?
Schools, Churches, and Government Buildings.
What type of property is farmland classified as?
Agricultural property.
What is raw land?
Vacant land that has not been developed.
What is demand in the context of real estate markets?
The supply of willing and able buyers in the marketplace or lack thereof.
What does scarcity refer to in real estate?
A lack of supply.
How is supply defined in real estate?
The amount of a certain good or service that is available in the market.
What factors affect the real estate market?
Demographics, interest rates, costs, pricing, and the economy.
How does supply affect pricing in real estate?
When supply is plentiful and demand is low, pricing drops; when supply is limited and demand is high, pricing escalates.
What analogy is used to explain the relationship between supply and demand?
A teeter-totter or seesaw, where one side goes up or down depending on weight distributions.
What happens when there is high demand for property in a location?
Developers and builders target the area for new homes.
What is the fixed supply of land's effect on demand?
It creates a demand due to scarcity.
What effect can the idea of a shortage have on demand in real estate?
It can bolster demand to crazy extremes, similar to the toilet paper shortage example.
What does the phrase 'location, location, location' signify in real estate?
It signifies that the location of a property directly affects its desirability.
How does limited available land affect property demand?
It creates a finite selection of property in high demand, especially in sought-after areas.
What role does uniqueness play in real estate demand?
Each property is unique, leading to preferences that can create demand and potentially bidding wars.
What are hard costs in construction?
Hard costs are the actual physical construction costs, such as materials and labor.
What are soft costs in construction?
Soft costs include engineering, architectural design, permits, and other non-physical expenses.
How can local and state governments influence real estate prices?
Through zoning issues, building codes, and land-use controls that can increase costs and affect demand.
What can happen if property in a certain zoning area is restricted?
The demand goes up, leading to an increase in price due to scarcity.
How can tax credits and subsidies affect real estate demand?
They can encourage buying and increase demand for properties.
What motivates first-time homebuyers according to the text?
A first-time homebuyers tax credit.
How does population affect real estate demand?
More people lead to more buyers competing for a fixed number of properties, driving prices up.
What demographic is currently affecting housing demand as they enter retirement?
The Baby Boomers.
What type of housing is in demand as Baby Boomers downsize?
Smaller homes, condos, or townhomes.
How does the economy influence home sales?
Areas with good jobs and wages attract people and increase home sales, while areas with low jobs and income see slower sales.
What happens to housing demand when a successful industry shuts down?
Demand can drop suddenly from high to no demand.
How do interest rates affect the real estate market?
When interest rates rise, prices fall to increase demand; when rates are low, more financing is available, increasing supply.
What was the impact of the prime rate reaching 21% in the early 1980s?
Sales plummeted as few could afford the high rates, leading to a stalled market.
Why is understanding supply and demand cycles important for real estate agents?
It helps agents guide buyers and sellers confidently for a positive experience.
What is the definition of supply in real estate?
The amount of a certain good or service that is available in the market, specifically the number of properties for sale.
What happens to prices if supply decreases and demand increases?
Prices will increase.
What happens to prices if supply increases and demand decreases?
Prices will decrease.
What are some factors that affect supply in real estate?
Scarcity, cost of construction, and government controls (zoning, building codes, land-use controls).
How is the annual depreciation amount for a single-family home calculated?
By dividing the value of the house by 27.5.
What factors affect home ownership rates in the United States?
Age, ethnicity, location, the overall economy, personal finances, poor credit, and limited cash on hand.
What did the 2015 study reveal about new renters and home buyers?
New renters across all age groups will outnumber new home buyers in 2030.
What percentage of Millennials are projected to still be renting ten years from now?
62%.
What barriers do people earning less than $40,000 annually cite for not owning homes?
Finance and credit issues.
What do people earning more than $100,000 often cite as reasons for renting?
Personal preferences, particularly for convenience.
What percentage of respondents in the Federal Reserve survey said they would buy a home if they could afford it?
81%.
What percentage of people in the highest wage bracket thought it was cheaper to rent than invest in a homestead?
31 percent.
What are some reasons people choose to rent instead of buy?
Planning to relocate, buying a home in the future, or preferring to rent rather than commit to a long-term contract.
What are some perks of renting?
Not having to maintain a lawn, lower utility bills, and sometimes free internet and cable.
What percentage of the adult population doesn't plan to ever buy a house?
Roughly 10 percent.
What percentage of respondents would buy a house of their own if they could?
81 percent.
What is the definition of demand in real estate?
The supply of willing and able buyers in the marketplace.
What are some factors that affect demand in real estate?
Population, demographics, and employment and wage levels.
What are the four phases in the real estate cycle?
Recovery, Expansion, Hyper Supply, and Recession.
What characterizes the Recovery phase in the real estate cycle?
Low demand, declining vacancies, and no new construction.
What happens during the Expansion phase of the real estate cycle?
Activity resumes, vacancies are down, and new construction begins to meet anticipated need.
What indicates the Hyper Supply phase in the real estate cycle?
New construction is happening, but vacancies are increasing, suggesting potential oversupply.
What occurs during the Recession phase of the real estate cycle?
An excess of available units leads to increasing inventory and a supply-demand imbalance.
What might you observe in a neighborhood during the Recovery phase?
Few real estate signs, existing homes occupied, and no new homes being built.
What signs indicate the Expansion phase in a residential neighborhood?
Empty lots being sold, contractors grading land, and new housing construction beginning.
What is a potential consequence of the Hyper Supply phase?
Sales slow as demand is satisfied, but construction continues, leading to potential oversupply.
What is the Recession phase in real estate characterized by?
A lot of real estate signs in the neighborhood and not a lot of property changing hands.
How can the term 'real estate market' vary?
It can refer to different local markets such as state, county, city, or neighborhood.
What can cause different phases in real estate markets?
Factors unique to a particular area, such as location and type of real estate.
How can perception affect the real estate market?
Homebuyers may think the market is great due to available homes, while sellers may think it's terrible.
What is a key takeaway about real estate markets?
Real estate is local, perception is important, and the market is cyclical.
What is the purpose of the Georgia Real Estate Commission?
To regulate real estate licensing and ensure compliance with the law.
What is Rule 520-1-.04 about?
Obtaining a License.
What does Rule 520-1-.05 cover?
Maintaining a License.
What is the focus of Rule 520-1-.06?
Brokerage Relationships.
What responsibilities are outlined in Rule 520-1-.07?
Management Responsibilities of Real Estate Firms.
What does Rule 520-1-.08 address?
Managing Trust Accounts and Trust Funds.
What is the subject of Rule 520-1-.09?
Advertising.
What does Rule 520-1-.10 pertain to?
Handling Real Estate Transactions.
What topics are covered in Rules 520-1-.11 to 520-1-.13?
Licensees Acting as Principals, Business Brokerage, and Fair Housing.
What are the steps to obtain a real estate salesperson's license in Georgia?
List the steps that need to be taken in order to obtain a real estate salesperson's license in Georgia.
What are two types of brokerage relationships in Georgia?
Identify at least two types of brokerage relationships.
What does Chapter 520-1 of the Georgia Rules and Regulations cover?
Georgia's Licensure and Brokerage laws.
Why is the Georgia Real Estate License Law important for real estate professionals?
It lays out many of the laws and rules that must be followed on a day-to-day basis.
What is defined as a real estate broker's relationship with a client?
Agency, via the client's express written agreement.
What is a Brokerage engagement?
A written contract between a buyer, seller, tenant or landlord and the broker.
What is the significance of maintaining national roadways and transportation infrastructure?
It is imperative for serving the public as it facilitates the travel of food and goods.
What is a master plan in land use controls?
A long-term planning document that establishes the framework and key elements of a site reflecting a clear vision created and adopted in an open process.
What does a comprehensive plan help localities establish?
It helps establish and enforce rules that dictate how development occurs.
What does a comprehensive plan regulate?
It regulates the use of real property by defining certain limits on land use.
What types of contracts are included in Brokerage engagements?
Open listing contract, exclusive listing contract, buyer broker agreement, community association management agreement, property management agreement, and exclusive tenant representation contract.
Who is referred to as a Buyer in real estate terms?
Someone looking to acquire an interest in real estate.
What is a Candidate for Licensure?
Anyone pursuing a license who has completed the requirements.
What is the definition of a client in real estate brokerage?
A client refers to someone in a brokerage engagement with a broker.
What does the term 'customer' mean in real estate?
A customer is a person who has not entered into a brokerage engagement with a broker but for whom a broker may perform ministerial acts in a real estate transaction.
What is the role of dual agents in real estate transactions?
Dual agents represent both the buyer and seller or both the tenant and landlord in the same transaction.
What is meant by 'ministerial acts' in real estate?
Ministerial acts are tasks that don't require a broker's discretion or individual judgment.
What is the structure of the Georgia Real Estate Commission?
The Commission includes a chair and vice chair, elected at the beginning of each year or when the position becomes vacant.
How can someone request to appear before the Georgia Real Estate Commission?
Requests must be in writing and submitted to the Commission's official address.
What is the time limit for scheduled appearances before the Commission?
Scheduled appearances are limited to 15 minutes.
What is required for a petition to amend a rule with the Commission?
The petition must be in writing, signed, and notarized.
What happens if a petition to amend a rule is not properly submitted?
The Commission is not obligated to respond until the petition is submitted in the correct format.
What is a declaratory ruling by the Commission?
A declaratory ruling is a decision made by the Commission on statutory provisions or any Commission Rules.
What can the Georgia Real Estate Commission do when it receives a complex request for a declaratory ruling?
The Commission can seek the advice of the Attorney General rather than announce a decision.
How long does the Georgia Real Estate Commission maintain investigative files where disciplinary action is imposed?
Forty years.
For how many years does the Commission maintain other investigative files?
Fifteen years.
What types of restrictions might a comprehensive plan include?
Restrictions on buildings and structures such as setback, size, height, shape, and other features.
What does the Commission provide upon written request regarding a licensee's records?
A history of the licensee's records for the five years immediately preceding the written request.
What must a broker do if their license is suspended or revoked?
They must surrender their license wall certificate and pocket card to the Commission.
Who typically oversees the development process according to a comprehensive plan?
The local planning department.
What must be approved before any improvement and construction can start in a subdivision?
The subdivision plat must be approved by the local department of building.
What must developers plan for to ensure safe living conditions in a subdivision?
Roadways, utility infrastructure, and drainage systems.
Who is typically responsible for the cost of roadway repair and maintenance in a new subdivision?
The developer is typically responsible for assuming the financial burden for several years.
What do state codes mandate to protect coastal barrier dunes?
Preservation from construction activity that could destabilize the beach-dune ecosystem.
What special requirements may Texas building codes include for rural communities?
Strengthening fire-proofing standards and enhancing design to reduce tornado damage.
What action does the Commission take if a broker's license is suspended or revoked regarding agents under them?
Brokers must turn in the wall certificate of any real estate agent working under them.
What example illustrates the Commission's role in providing records on a licensee?
Tammy Weaver requests records of a broker and finds out the broker was fined for unethical conduct, leading her to choose another broker.
What are the educational requirements to obtain a real estate license in Georgia?
You must successfully complete the educational requirements, take and pass a state exam, find a broker, and apply for your licensure.
What is the activation fee for an individual applying for a real estate license in Georgia?
$45.
What is the renewal fee for a real estate license in Georgia if paid through the Commission's online renewal system?
$100.
What happens if a real estate license is lapsed for more than 5 years in Georgia?
You must retake the state exam.
What is the fee for reinstating a license suspended due to nonpayment if submitted within four months of the lapse?
$100.
What is the fee for failing to notify the Commission of a change of address within 30 days?
$25.
What is the fee for returned checks or disputed credit card charges owed to the Commission?
$100.
When are renewal fees due for new applicants in Georgia?
During your birthday month.
What is the annual renewal fee for individual licensees and instructors in Georgia?
$125.00.
What is the experience requirement for a broker's license in Georgia?
Candidates must prove they had an active license for three out of five years prior to applying, or meet specific conditions if records are incomplete.
What can candidates submit if they do not have complete records for their previous license?
Candidates can submit transaction files, affidavits from licensed brokers, or affidavits from three brokers attesting to their experience.
What must a candidate provide to prove their experience if they were a broker in another state?
An affidavit stating they were licensed, the dates they were licensed, and the number and types of transactions completed.
What is required to obtain a real estate license in Georgia?
Candidates must pass the state exam for a real estate broker or agent.
What does Rule 520-1-.04 (2) summarize?
The required experience for a broker's license in Georgia.
What is the significance of transaction files in the application process?
They show brokerage activity within the past five years and can help fulfill experience requirements.
What is the minimum requirement for the state exam to obtain a real estate license in Georgia?
Candidates must achieve a minimum score as published prior to the test administration.
What credit do active duty military and reservists receive for the Georgia real estate exams?
A 5-point credit added to their overall grade for the community association manager or salesperson exam, and to the Information Gathering and Decision Making sections for the broker exam.
What changes were suggested to minimize damage from tornadoes in Texas?
Reinforcing the roof system and incorporating stronger building envelope elements.
What is a continuous load path in building design?
A structural design that runs from the roof to the foundation to enhance stability.
What types of land uses are covered in a comprehensive plan?
Residential housing, commercial and industrial activities, mixed-use properties, parks, community facilities, and protected habitats.
What considerations are included in residential housing within a comprehensive plan?
Single-family homes, multifamily structures, land for mobile home parks, and assisted living communities.
How do population demographics affect the comprehensive plan?
They may change over time, requiring adjustments to the plan to meet public needs.
What is the difference between commercial and industrial in terms of land use?
They have key differences when it comes to zoning restrictions and planning activities.
What are industrial developments typically established for?
Manufacturing.
Where are factories usually located in relation to residential and commercial areas?
On the edges of a town, away from residential and commercial land use.
What is considered commercial land use?
Any activity, business, or investment that operates for profit.
What are mixed-use properties?
Properties that allow both residential and commercial activities in the same building.
What factors may influence modifications to a comprehensive plan in a locality?
Social, economic, and cultural factors.
What does net migration determine in a community?
The number of schools needed and the type and number of roadways necessary for safe movement.
How many points does a disabled military veteran receive for the broker exam in Georgia?
5 points for each of the Information Gathering and Decision Making sections, in addition to 5 points for the community association manager or sales agent exams.
What is required for a candidate with a license from another state to obtain a Georgia real estate license?
They must provide an original certification issued less than 12 months prior to their Georgia application, and meet specific criteria regarding their previous license.
What are the conditions under which a candidate from another state can obtain a Georgia license without a full examination?
They must have passed an exam for the same type of license, completed all pre-license and continuing education requirements, have a license in good standing, and never had disciplinary action.
What happens if a candidate has received disciplinary action in another state?
They are not eligible to apply for a license in Georgia based on their previous license.
What happens if a candidate violates the rules regarding qualifying exams administered by the Commission?
They may be denied a license and face permitted sanctions.
What is required to take a licensing test in Georgia?
The Commission's written permission is needed unless qualifying for or reinstating a license covered by the exam.
What must be submitted for applications for a license, renewal, change, or transfer of license?
Applications must be submitted on approved forms, which may require the email address and name of your firm.
What can happen if a licensee submits a form on an outdated version?
They may be asked to fill it out again.
How long does the Commission keep paperwork for an original application for approval as a school or instructor?
The Commission must keep the paperwork for 15 years.
What is the retention period for other paper applications submitted to the Commission?
One year.
What is the retention period for electronic licensing records by the Commission?
15 years.
What should candidates do to request reasonable accommodation for exams under the Americans With Disabilities Act?
Submit the request in writing by the application deadline indicated in the Disability Accommodation Guidelines.
What proof must applicants for a community association manager's license submit?
Proof of passing the Community Association Manager's pre-license course.
What proof must applicants for a salesperson's license submit?
Proof they completed the Salesperson's pre-license course.
What must a broker do within 12 months of passing the broker's examination?
Submit an application to become a broker or broker agent.
What is required if a broker's prior licensure was with another state?
They must present the relevant license and certification from the state where they served as brokers.
What must a broker operating as a sole proprietor do regarding their name on the license?
Use the same name on the license as a sole proprietor and on the broker's certificate of licensure.
What must any corporation applying for a broker's license submit?
Its corporate charter registered with the Secretary of State's Corporation Division.
What must any partnership applying for a broker license submit?
A copy of its partnership agreement.
What must a limited liability company (LLC) include to conduct business in Georgia?
Its certificate of authority issued by the Secretary of State's office.
What is required for a franchisee applying for a brokerage?
The franchise name must be included in a way that distinguishes it from other franchisees registered with the Commission.
What must a candidate provide within 60 days of application for licensure?
A certified criminal history report from the Georgia Crime Information Center or equivalent information from their state if from another jurisdiction.
What happens if a criminal history report shows a record in another jurisdiction?
The applicant must provide fees, fingerprints, and authorization for the Commission to obtain a report from the FBI's Federal Crime Information Center.
What must be shown on the brokerage license for a partnership?
The entity name certified for the partnership, such as ABLT Realty.
What must an LLC do if it wants to use a trade name?
Submit a copy of the trade name, certified by the clerk of the county.
What is the significance of Rule 520-1-.04 (7)?
It covers the requirements for criminal history reports for licensure applicants.
What must Darryl Jones provide since he couldn't obtain a criminal history report from Louisiana?
He must provide fingerprints, fees, and authorization for the Commission to obtain the FBI report.
What must a candidate for licensure provide if they have a criminal conviction?
The accusation, citation, information or indictment leading to the conviction, as well as a certified copy of the sentence.
What does Rule 520-1-.04 (9) address?
It addresses applicants with disciplinary actions that must be reported to the Georgia Real Estate Commission.
What must be reported to the Georgia Real Estate Commission if an applicant has faced disciplinary actions?
The allegations and the final order of the licensing agency.
What does Rule 520-1-.04 (10) cover?
It covers incomplete applications and the Commission's discretion to determine if an application is incomplete.
What does Rule 520-1-.04 (11) state about preliminary decisions for convictions or disciplinary actions?
The Commission has the right to deny a license to an applicant with prior criminal convictions or disciplinary actions from any licensing body.
What is required for a preliminary decision request?
A certified copy of the indictment and conviction or the disciplinary action assigned by another licensing authority, along with additional pertinent information.
What happens if an applicant receives an adverse preliminary decision?
It does not prevent them from becoming an applicant by completing the necessary steps.
What rights do applicants have if their application is denied due to a conviction or disciplinary action in Georgia real estate licensing?
They have the right to a hearing for a final determination.
What is the time frame for an applicant to request a hearing after their application is denied in Georgia?
60 days after receiving notification of denial.
What happens if an applicant does not request a hearing within 60 days of application denial?
They cannot request a hearing without retaking the education requirements and exam for licensure.
What does Rule 520-1-.04 (13) address in the context of Georgia real estate licensing?
It covers military spouses and transitioning service member applications.
What is the eligibility for expedited processing for transitioning service members and military spouses as of July 1, 2017?
They might qualify for expedited processing if they have paid the fees and meet the application requirements for the license they wish to obtain.
What is required for Georgia salespersons to maintain their license according to Rule 520-1-.05?
Salespersons must complete a 25-hour post-license course within one year of obtaining their license.
What is the time frame for completing the post-license course if a salesperson qualifies for an extension?
18 months from receiving their license.
What must a non-resident salesperson do if they completed a similar post-license course in another state?
They do not have to take the Georgia post-license course if it was completed prior to receiving a Georgia license.
How many hours of continuing education must a salesperson complete to renew an active license in Georgia?
36 hours during the renewal period.
What specific continuing education requirement must be met within every renewal period?
Three hours covering license law.
What is the difference between an active and inactive license in Georgia?
An active license must be under a Georgia broker, while an inactive license does not require this.
Can an active Georgia licensee affiliate with a broker out-of-state?
Yes, if certain conditions are met.
What is required for a Georgia licensee to affiliate with a broker from another state?
The Georgia licensee must have the written permission of their Georgia broker.
Can Forrest Ellison hold a real estate license in both Georgia and Florida?
No, because Florida doesn't allow dual licensing.
What must a salesperson wait for before beginning real estate activities?
Their broker must receive their wall hanging.
What is required before a licensee can work under another broker?
A 'Change Application' to the Commission is required.
What must salespeople do to activate a license on inactive status?
Complete the continuing education requirements that would have been due if they remained active, or requalify as a new applicant.
What activities can't inactive licensees perform?
They can't practice as a real estate broker, associate broker, salesperson, or community association manager.
What can an inactive licensee do for an unlicensed property owner?
They can perform real estate activities for the unlicensed person who owns the property.
What happens if renewal fees aren't paid for a real estate license?
All licenses will lapse.
What is the reinstatement process for a lapsed license?
Pay the appropriate fee and complete the required continuing education.
What can a salesperson do if their license becomes inactive due to non-payment of renewal fees within two years?
They can reactivate their license within two years of the date the license lapsed.
What is required for a license that has lapsed longer than two years but under five years to be reinstated?
Pay back fees and take the appropriate class.
What course must community association managers take to reactivate their license?
The Community Association Managers Prelicense Course.
What must a broker do if their license lapsed three years ago?
Pay the renewal fee and take the Brokers Prelicense course within a year of paying the renewal fee.
What happens if a license lapses for more than five years?
The applicant must re-qualify as an original applicant.
What must a licensee do if they do not take the 25-hour post-license course and let their license lapse?
They have to reapply as an original applicant.
What is the time frame for notifying the Commission of a final disposition from a court decision?
Within ten days.
What must be included in the notice to the Commission regarding civil or administrative rulings?
A copy of any final order by the agency or court.
What must a licensee do if they change their mailing address or residence?
Notify the Commission within one month.
What is the notification requirement for a change of email address for approved schools or instructors?
They must notify the Commission within one month, if applicable.
What must nonresident licensees do within 30 days of changing their address?
Notify the Commission.
What options do nonresident licensees have regarding their license status?
They can choose to stay active or become inactive.
What must nonresidents do to obtain a nonresident license in Georgia?
Meet all requirements by O.C.G.A. Section 43-40-9 and the Commission.
What must a licensee do to change their status from resident to nonresident?
Request a change in status and sign a Consent to Jurisdiction.
Can a nonresident broker be the qualifying broker for a Georgia corporation?
Yes, they can be the qualifying broker for a limited liability company, corporation, or partnership.
What happens to Georgia licensees who move out of state and do not want to become nonresident licensees?
They can place their licenses on inactive status to prevent termination.
What must a nonresident licensee do to reactivate their license if they didn't pay their renewal?
They must have kept an active license in their own state and complete Georgia continuing education requirements.
What are Georgia licensees restricted to regarding real estate services?
They can only perform real estate services within Georgia unless they have a valid license in another state.
What can a licensee do to keep their wall certificate upon retirement?
Retire after 20 years of actively using their license.
What does Rule 520-1-.06 cover?
Brokerage relationships between a Georgia real estate licensee and their clients.
What are the two main types of brokerage relationships mentioned?
Brokerage engagements and management agreements.
What must each brokerage agreement include according to Rule 520-1-.06?
The terms of the agreement and an expiration date.
Are net brokerage agreements legal in Georgia?
No, they are illegal in Georgia.
What must a management agreement identify?
The property being managed and the terms and conditions of the manager's responsibilities.
What type of reporting is required in a management agreement?
At least an annual report on income and expenses.
What example is given for a management agreement?
Owen's Condos hiring Brook White to manage its commercial multi-family condominium complex.
What responsibilities does Brook White have in the management agreement?
Collecting rent, managing maintenance, and providing profit and loss statements.
What must a management agreement include regarding the broker's commission?
It must specify the commission the broker receives and when it gets paid.
What is required if a community association manager's transactions exceed $60,000?
A fidelity bond or appropriate insurance is required.
What is the minimum coverage amount for a fidelity bond or insurance for community association managers?
It must equal or exceed three months worth of assessments plus the reserve fund total.
What must be included in the contract if a licensee is acting as a dual agent?
The contract must disclose who is paying the licensee.
What is the notification period for canceling or modifying a bond or insurance policy?
A 30-day notice is required, except for nonpayment of premium which requires a 10-day notice.
What must a licensee do if they want to buy a property listed by their firm?
They must clearly reveal their role as buyer to the seller or landlord.
What must be provided to the owner when they sign a management agreement?
A legible copy of each agreement must be provided to the owner or their authorized agent.
What happens if a community association manager collects monthly rents and security deposits exceeding $60,000?
They must obtain a fidelity bond and insurance.
What must be obtained in writing for commissions paid to licensees representing other parties?
Approval from all parties.
What must a broker do if they want to operate under a fictitious name?
The brokerage license must be issued under that fictitious name.
Who is responsible for the licensees affiliated with a real estate brokerage?
The real estate broker is responsible for the licensees affiliated with their brokerage.
What must a broker do if their qualifying broker resigns, dies, or is discharged?
The entity has 60 days to find a new qualifying broker or must stop all real estate services.
What happens if a brokerage does not find a new qualifying broker within 60 days?
The brokerage must stop all real estate services.
What must a broker do if they want to serve as a broker for multiple firms?
They must notify each firm in writing of their intent to do so.
What is required when transferring licenses from one firm to another?
Brokers must enter into a written agreement specifying how a licensee will be compensated.
Can the Commission settle disputes between licensees?
No, the Commission does not settle disputes between licensees.
What is the consequence if a broker refuses to release a licensee based on a dispute?
The dispute cannot serve as grounds for the broker refusing to release the licensee.
What must a broker do upon request by a licensee?
Sign a release form.
What happens to a licensee's pending listings and customers when they leave a brokerage?
They forfeit any pending listings and customers gained while under the broker.
How long does a licensee have to transfer their license to a new broker after leaving?
One month.
What must a licensee do with all keys and related contracts when leaving a brokerage?
Pass them back to the broker.
What types of facilities are included under community facilities in a master plan?
Libraries, public schools, hospitals, parks, and cultural facilities.
Can a licensee contact the broker's customers after terminating their relationship before the contract expires?
No, they cannot contact any of the broker's customers under a listing or management agreement before the contract expires.
What is an example of support personnel in a real estate brokerage?
An administrative assistant.
What activities can support personnel not perform in real estate?
They cannot write real estate contracts or show houses to clients.
Why is it important to understand the rules regarding license transfer?
To avoid pitfalls and getting called to appear before the Commission.
What is Rule 520-1-.08 of the Georgia Real Estate Commission about?
It deals with Trust Accounts and Trust Funds.
What must brokers do when they create a new trust or escrow account?
Inform the Commission with the account information within one month of its creation.
What should licensees do with any cash or checks received?
Give them to their designated broker as soon as possible.
What must brokers do with consideration received in a trust or escrow account?
Keep it in a trust or escrow account registered with the Commission.
What must brokers obtain if their trust or escrow account is interest-bearing?
Instructions on how to distribute any interest received, signed by all parties.
What are the three main factors considered in sustainability goals?
Economic impact, environmental impact, and social factors.
What is the minimum balance a broker can maintain in a trust or escrow account?
The minimum balance required by the financial institution plus a reasonable amount for service charges.
What must brokers do with commissions due to them in a trust or escrow account?
They can place them in the account if properly accounted for and must remove excess funds monthly.
What information must a broker's accounting system include for trust and escrow accounts?
Names of parties, amount and date of funds deposited, identification of property, and details of checks drawn.
What happens if a broker fails to properly identify the property in their accounting?
They fail the accounting requirement for trust and escrow accounts.
What happens if a broker uses trust funds contrary to any contract for real estate?
They will be considered incompetent to safeguard the public interest.
What should city planners evaluate regarding new industrial projects?
The project should serve residents while providing reasonable income without generating harmful pollutants.
What is a key consideration for sustainability in development?
Utilizing renewable natural resources for building materials and promoting local food production.
What factors should city leaders consider when updating building codes?
Environmental factors, recent research on threats, and severe weather events.
What are some circumstances under which a broker can use a trust or escrow account?
Rejection of an offer, withdrawal of an offer, distribution of funds at closing, distribution based on a written agreement, filing of an interpleader action, distribution based on court order, fulfillment of a contract requiring deposit of funds.
What must a broker have before disbursing funds from a trust account?
Reasonable assurance that all funds have been received.
What must happen if a broker disburses funds without the agreement of all parties?
All parties must receive written notice.
Under what conditions can a broker claim earnest money as their commission?
If the tenant has taken possession in a rental agreement, a sales transaction has closed or expired, or if there is written agreement from all parties for the broker to receive a commission.
How are refunds of earnest money handled at closing?
Refunds are credited at closing or paid by check, and the total of all checks should reflect a zero balance except for the broker's commission.
What must a licensee owning an escrow or trust account do if they file for bankruptcy?
They must notify the Commission immediately.
What type of trust accounts can brokers set up for property management?
Property Management or Association Management trust accounts, which must be separate from the broker's other accounts.
What must the Commission be granted access to during the renewal process?
To examine trust accounts.
What is required of a broker regarding trust accounts each month?
The broker has to reconcile the account and provide a written account of the reconciled balance.
What happens if Broker Brody forgets to reconcile his trust and escrow accounts for two months?
He is out of compliance with the reconciliation requirement of the Commission.
What information must a broker submit during the Renewal Trust Account Examination?
A summary of broker's trust account(s) and a report from a Certified Public Accountant.
What happens if Broker Brody submits a CPA report not on an approved form?
He hasn't met the requirements of the Renewal Trust Account Examination.
Under what conditions can a real estate licensee disburse funds from a trust account?
With written authorization, by satisfying the Disposition of Unclaimed Property Act, or by following a court order.
What must be done with trust funds received by a licensee who owns a portion of the property?
Those funds must be placed in a trust account.
Why is it important for all licensees to understand the rules associated with escrow and trust accounts?
Because brokers are responsible for compliance, and salespersons are impacted by their brokers' decisions.
What is defined as 'advertising' under rule 520-1-.09?
Any method, manner or activity conducted to inform the general public of real estate for rent, lease, sale or exchange.
What must licensees do when contacting members of the public?
They must identify themselves as a licensee.
What violation did Joyce O'Keefe commit while contacting prospects?
She posed as a survey taker to build a list of prospects, which is a violation of the law for advertising.
What is the purpose of governmental powers over real estate?
To protect citizens by providing for government action in certain circumstances.
What does the acronym PETE stand for in relation to governmental powers in real property?
Police Power, Eminent Domain, Taxation, Escheat.
What happens if local laws forbid using the firm's name on certain signage?
There is an exception to the requirement of including the firm's name in advertising.
What is the obligation of a licensee when representing a seller or buyer regarding offers?
A licensee is obligated to present any signed offer to procure or lease the property.
What must a licensee include when preparing or signing an offer or brokerage engagement?
The license numbers of each firm and licensee, which must be the six-digit assigned by the Commission.
How long must a broker keep copies of documents related to real estate transactions?
For three years.
What must Glenn Thomas retain related to the sale of the Houstons' home?
All documents related to the sale for at least six more months.
What is prohibited regarding transaction documents?
The falsification of transaction documents and misleading representatives.
What types of misinformation are covered under the rule against falsification?
Any amount other than the real lease, sales, or exchange price, down payment, security deposit, or any contrivance meant to deceive.
When must disclosures required by the OCGA be made by a licensee?
Prior to the transaction.
What must be disclosed in writing to the principal by the date of closing when a licensee refers a principal to another licensee?
The payment of fees, commissions, and other considerations.
What does the term 'licensee's principal' refer to?
Either a client or customer of a real estate broker who is primarily working with the licensee.
What must be disclosed on the closing statement when a licensee rebates any part of a fee or commission?
The rebate itself must be disclosed.
Is a licensee required to disclose gifts or services given to a principal if they are not related to the real estate transaction?
No, no disclosure is required for those items.
What is Police Power in the context of governmental powers?
The right of any political body to enact laws for the order, safety, health, morals, and general welfare of the public.
What is a violation of the rules regarding consideration in a real estate transaction?
Failing to disclose a promise of gifts or services related to the transaction on the closing documents.
What must sales agents and associate brokers do if they have ownership in a property they are buying, selling, or exchanging?
They must notify their broker in writing.
What is required if a licensee makes an offer on a property as part of a brokerage engagement?
The terms and conditions must be set down in a written contract.
What must a person do to sell a business for a client according to Rule 520-1-.12?
They must be a licensed real estate broker or sales agent.
What happens if an unlicensed broker tries to sell a business in Georgia?
They are not authorized to sell, negotiate, or secure prospects for available businesses in return for consideration.
What is Eminent Domain?
The right of the government to acquire property for necessary public use by condemnation, with the owner being fairly compensated.
What is the purpose of Taxation in real estate?
To tax real estate to pay for services and programs supported by the government.
What happens to property when an individual dies without a will and without heirs?
The property reverts back to the State, a process known as Escheat.
What does Rule 520-1-.13 prohibit licensees from doing?
Discriminating against a prospective buyer or seller based on color, religion, sex, race, familial status, national origin, or handicap.
What is prohibited regarding statements about individuals moving into a neighborhood based on protected status?
Licensees cannot insinuate that such individuals might lower property values or change the neighborhood's makeup.
What must a sales agent inform clients who wish to avoid neighborhoods with certain religious residents?
The agent must inform them that they cannot discriminate based on religion.
What are the protected statuses that licensees cannot discriminate against in real estate transactions?
Color, sex, national origin, race, religion, handicap, or familial status.
What powers does the Commission have regarding licenses?
The Commission can issue, suspend, or revoke a license.
What is one requirement regarding escrow accounts?
Students should identify the requirements regarding escrow accounts.
What is the role of the Georgia Real Estate Commission?
To create regulations for those with real estate licenses in Georgia and provide annual reports to the Governor and Assembly.
How many members are on the Georgia Real Estate Commission?
Six members.
What are the qualifications for the majority of the Georgia Real Estate Commission members?
Five members must be real estate professionals with at least five years of active participation in the industry.
Who appoints the members of the Georgia Real Estate Commission?
The Governor.
What must happen if a member of the Georgia Real Estate Commission has a conflict of interest?
They must recuse themselves from voting on the issue.
What is a Fee Simple Absolute in real estate?
An inheritable estate in land providing the greatest interest of any form of title.
What happens to a Fee Simple Determinable estate when the stated event occurs?
It ends automatically and the interest reverts to the grantor or the heirs of the grantor.
What type of report must the Georgia Real Estate Commission provide annually?
A report covering implemented rules, the number of real estate professionals, and a detailed analysis of income and expenses.
What is the stipend for members of the Georgia Real Estate Commission?
$25 per meeting plus actual expenses incurred for travel to meetings.
What authority does the Georgia Real Estate Commission have regarding fees?
The authority to set and collect fees based on direct and indirect costs associated with the Commission.
What guidelines does Section 43-40-3.1 outline for the Commission?
Reduction of paperwork, changes in records retention, and non-standard signature acceptance procedures.
What authority does Section 43-40-4 grant the Commission regarding the Real Estate Commissioner?
The authority to hire a full-time employee to serve as Real Estate Commissioner.
What restriction is placed on the Real Estate Commissioner according to Section 43-40-4?
The Commissioner may not have an ownership interest in any company with ties to the real estate industry.
What must the Commissioner and Commission appointees do with their real estate licenses while serving?
Place their real estate licenses into inactive status.
What does Section 43-40-6 allow the Commission to establish?
A seal with the words 'State Real Estate Commission, State of Georgia'.
What authority does Section 43-40-6 provide regarding record retention?
The Commission has the authority to determine how to handle paper record retention after conversion to electronic records.
What is required for all real estate professionals in Georgia?
To obtain a license.
What is the initial application process for obtaining a real estate license in Georgia?
You must provide basic information about yourself and your business.
What information must be provided if operating under your own name in Georgia?
Your name and the address at which you'll be conducting business.
What must be provided by those operating as a specific entity, such as a partnership or LLC, in Georgia?
The business name and the name and residential address of the members of the company.
What information becomes public once a real estate license is granted in Georgia?
Names, license number and status, information on your business, and any sanctions.
What are the qualifications for a community association manager's license in Georgia?
At least 18 years old, a resident of Georgia, and have a high school diploma or GED.
What is the purpose of a comprehensive plan in community development?
To ensure that the financial, social, and cultural needs of citizens are met while balancing development and sustainability.
What additional requirements must be met for a community association manager's license in Georgia?
Passing a criminal background check, completing 25 hours in an approved study course, and passing an approved real estate exam.
What happens if you cannot meet the requirements for a community association manager's license in Georgia?
Your request for the license will be denied and you will not be entitled to a hearing.
What is the minimum age requirement to apply for a real estate license in Georgia?
At least 21 years old.
What is the minimum active license duration required for a real estate license application in Georgia?
A minimum of three of the last five years.
How many hours of commission-approved coursework are required for real estate licensure in Georgia?
60 hours.
What additional coursework is required for previously licensed community association managers in Georgia?
75 hours of additional approved instruction.
What is the minimum age requirement to become a real estate salesperson in Georgia?
At least 18 years old.
What educational qualification is needed to apply for a real estate salesperson license in Georgia?
A high school diploma or a certificate of equivalency.
How many hours is the Georgia real estate salespersons course?
75 hours.
What must be completed to maintain a real estate license in Georgia after obtaining it?
At least 25 hours of continued education within one year.
What happens if a licensee fails to complete the additional training requirements in Georgia?
They must surrender their license immediately.
What must non-Georgia residents with a license in other states provide to have requirements waived?
Proof of a current license, payment of fees, and attestation of reviewing Georgia's rules and regulations.
What can happen to a broker's license if a firm fails to comply with Georgia code provisions?
The broker's license may be suspended or denied.
What was the primary goal of the Environmental Protection Agency (EPA) when it was created?
To stem the escalating negative impact on human health and the natural environment caused by excessive pollution.
What is the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) also known as?
Superfund.
What does CERCLA provide funding for?
To remediate hazardous conditions at sites identified by the EPA as priorities in need of immediate attention.
What type of taxes fund the Superfund established by CERCLA?
Special taxes collected from the oil and gas industry.
What authority does the EPA have regarding responsible parties who fail to remediate contamination problems?
The EPA can sanction responsible parties and initiate removal actions using Superfund resources.
What are some of the laws established by the EPA aimed at protecting?
Water resources and banning certain chemical compounds that could cause long-term damage.
What is one of the impacts of EPA regulations on real estate development?
They restrict the type of building materials and what types of buildings can be constructed in certain areas.
What responsibility do real estate brokers and agents have regarding the history of a building site?
They must help prospective buyers research the history of the site and any industrial/manufacturing facilities.
What is the second leading cause of cancer in the United States?
Radon, a naturally occurring gas.
What did the EPA recommend for home buyers regarding radon after purchasing a home?
To test for radon as soon as possible after occupancy.
What is the purpose of the Superfund Amendments and Reauthorization Act (SARA) of 1986?
To reinforce objectives related to hazardous waste sites and encourage public involvement in cleanup decisions.
What significant change did SARA bring regarding funding for Superfund sites?
It increased the total Superfund trust to $8.5 billion.
What does the Resource Conservation and Recovery Act (RCRA) regulate?
It provides protocols for underground storage tanks containing petroleum-based products, non-hazardous waste, medical waste, and toxic waste.
What is the purpose of the Safe Drinking Water Act (SDWA)?
To establish safety standards for drinking water supplies.
What should ideally happen to water supplies in commercial and residential properties before ownership transfer?
They should be tested for radon.
What does the Safe Drinking Water Act (SDWA) aim to control?
It aims to control, eliminate, or mitigate both man-made and naturally occurring contaminants in public drinking water.
What significant amendments were made to the SDWA and in which years?
Amendments were made in 1986 and 1996.
What does the EPA not regulate according to the SDWA?
The EPA does not monitor or regulate private or commercial wells that serve fewer than 25 people.
What was the initial focus of the SDWA?
The initial focus was on monitoring and improving water quality at the tap or faucet.
What broader approach was taken in the 1996 amendment of the SDWA?
It addressed threats from improper chemical disposal, pesticides, and waste injected underground.
What are some of the new guidelines established by the 1996 amendment of the SDWA?
Modernizing water systems, providing advanced operator training, access to funding opportunities, expanding public information campaigns, and implementing innovative source water treatments.
What is the primary difference between the SDWA and the Clean Water Act (CWA)?
SDWA governs clean water from the original source to a consumable beverage, while CWA primarily regulates source water bodies like lakes and rivers.
What did the Clean Water Act (CWA) restructure?
It restructured the 1948 Federal Water Pollution Control Act (FWPC).
What is required for an easement to be considered abandoned?
The easement owner must not use it any longer, with the time period for abandonment specified by state statute.
When does an easement by necessity cease to exist?
When a parcel is no longer landlocked, the easement by necessity would cease to exist.
What is an easement?
A non-possessory right to use the land of another.
What is the purpose of the Clean Water State Revolving Fund established by the CWA?
It empowers states to proactively manage water quality within their borders.
What is the main goal of environmental protection laws and clean water regulations?
To protect humans, animals, and aquatic life from contamination due to irresponsible human activity and natural hazards.
What does the Clean Air Act (CAA) regulate?
Air polluting emissions from buildings, cars, trains, airplanes, and other sources.
What authority does the CAA give to the EPA?
To establish nationwide standards to regulate hazardous air pollutants.
What is the role of states under the CAA?
To implement plans to mitigate air pollution by monitoring industrial activity and creating standards.
What changes were made to the CAA in 1977 and 1990?
Revised achievement goals due to many states not meeting the original 1975 deadlines.
What types of heating appliances are governed by environmental protection regulations?
Residential wood burning stoves, hydronic heaters, and forced-air furnaces.
What can some states do regarding air quality laws compared to the EPA?
Enact more stringent laws than the EPA.
What did some states prohibit in 2016 regarding new construction?
Installing any wood-burning appliance, even those approved by the EPA.
What should real estate professionals know about environmental regulations?
Local, state, and federal laws that regulate air and water quality.
Why is it important for real estate agents to research the history of buildings or land?
To become a proactive advocate for every client.
What is the purpose of the Interstate Land Sales Full Disclosure Act of 1968?
To protect consumers from fraud in interstate land transactions.
Who governs the regulations for interstate real estate transactions?
The secretary of the United States Department of Housing & Urban Development (HUD).
What does the term 'lot' refer to under the ILSFDA?
Any undivided interest in vacant land or land with structures that includes exclusive use rights.
What is meant by 'sales' in the context of the ILSFDA?
Any obligation or arrangement for consideration to buy or lease a lot.
What does the term 'subdivision' mean in the context of the ILSFDA?
A land section for sale or lease as part of a shared promotional plan, whether already divided or planned to be divided in the future.
What types of properties are included under the definition of 'lot' by HUD?
Condos, occupancy-ready homes, units in a subdivision, and unimproved land.
What is the significance of the ILSFDA for real estate transactions across state lines?
It ensures that consumers are protected from fraudulent practices in the sale or lease of land across state lines.
What is the purpose of the regulations established by Congress regarding subdivision developers?
To prevent consumer abuse related to fraudulent and deceptive marketing practices.
What must subdivision developers do according to ILSA regulations?
Register complete plans with federal regulators and provide disclosures to prospective buyers.
What is required of developers regarding potential buyers before signing contracts?
Developers must provide certain information, including the right to cancel contract policy and risks associated with buying lots.
What must developers provide to prospective buyers in terms of utility services?
Names and contact information for utility providers to allow verification of services and costs available.
What is included in the comprehensive property report that developers must provide?
Detailed information on construction progress, utility services, and other relevant details for informed purchasing decisions.
What specific construction details are included in the comprehensive property report?
Start date, expected completion date, percentage of project completion, and road surface details.
What information must developers disclose about liens and encumbrances?
A detailed list of all liens and encumbrances on the lot or lots.
What information is included in a comprehensive property report for a pending sale?
Provider's name, contact information, construction details, additional fees, and association details.
What types of documents may be relevant to a pending sale?
Zoning regulations, plats, surveys, environmental impact statements, and permits.
What statements are included regarding climate and subdivision characteristics?
Flood plain data, soil erosion data, drainage plans, environmental hazards, occupancy restrictions, and nuisance ordinances.
What are the penalties for making false statements on interstate sales disclosure forms?
Substantial financial penalties and possible jail terms.
What is the exemption for subdivisions with fewer than twenty-five lots?
They are generally eligible for full statutory exemption.
What should real estate agents advise clients regarding property reports?
To verify the information and thoroughly read the rescission options before signing a purchase contract.
What are the three types of exceptions provided by federal regulations for subdivision oversight?
Full statutory exemptions, partial statutory exemptions, and regulatory exemptions for individual lots.
What is required for improved lots to be eligible for full exemption status?
Construction must be completed within twenty-four months after the sales contract is executed.
Are sales to builders who purchase lots for residential construction exempt from Federal regulations?
Yes, they are exempt.
Is selling land to an individual who plans to build their own home eligible for exemption status under ISLA?
No, it is not eligible for exemption status.
What must local authorities approve for industrial and commercially zoned land to be exempt from the Act?
Access via a public roadway to at least one edge of the legal boundary of the subdivision.
What must the purchaser or lessee be before recording the deed or executing a lease for industrial and commercially zoned land?
A legally organized business entity.
What must the purchaser attest in writing when acquiring industrial or commercial property?
That the property will be used solely for commercial or industrial activities of the entity.
What is the purpose of the Interstate Land Sales Full Disclosure Act?
To protect consumers against fraud and abuse when dealing with out-of-state developers and land investors.
Why is it important for real estate professionals to stay informed about ISLA?
To protect their professional reputation and personal financial assets.
What are the four governmental powers in real estate?
List the four governmental powers in real estate.
What is a freehold estate?
Define a freehold estate.
What is condemnation in real estate?
The act of taking private property for public use by a political subdivision upon payment to the owner of just compensation.
What does escheat mean in the context of real estate?
The reverting of property to the State when heirs capable of inheriting are lacking.
What is eminent domain?
The right of the government to acquire property for necessary public or quasi-public use by condition; the owner must be fairly compensated.
What is police power in relation to real estate?
The right of the State to enact laws and enforce them for the order, safety, health, morals and general welfare of the public.
What is the purpose of taxation in real estate?
An enforced charge extracted from individuals, corporations, and organizations by the government to support government services and programs.
What does the acronym 'PETE' stand for in governmental powers related to real estate?
P stands for Police Power, E for Eminent Domain, T for Taxation, and E for Escheat.
How does police power affect real estate ownership?
It allows the government to regulate how citizens use real property through laws such as zoning and city planning.
What are zoning laws?
Laws that separate or divide areas of land into different districts depending on their use, such as residential, commercial, or industrial.
What is the relationship between city planning laws and police power?
City planning laws, which include regulations about facilities like electrical and sewer systems, fall under the broader category of police power.
What is the purpose of zoning laws in a city?
To designate specific areas for residential, commercial, or industrial use, preventing incompatible developments.
What are some examples of Police Powers related to real estate?
Building codes and health standards.
How do building codes differ between residential and commercial properties?
They vary based on the intended use of the property.
What do building codes regulate in real estate?
They regulate aspects like door widths, stairwell dimensions, materials, plumbing, electrical standards, and occupancy rules.
What authority do city inspectors have regarding building standards?
They have the right and duty to confirm that buildings meet applicable standards and enforce laws if deficiencies are noted.
What is the purpose of rent controls?
To protect the public by limiting the amount landlords can charge tenants for rent.
How do rent controls provide security for tenants?
They ensure that housing remains affordable and limit how much landlords can increase rent.
What concerns do neighbors have when a residential property is converted for commercial use?
Increased traffic, noise, aesthetics, and lighting.
What might happen if a homeowner's business plans violate zoning ordinances?
The plans may be denied to protect the neighborhood's character and residents' interests.
What is eminent domain?
The right of the U.S. federal and state governments to take private land for public use or economic development.
What must property owners receive when their property is taken under eminent domain?
Just compensation.
What does 'just compensation' typically mean in the context of eminent domain?
Fair market value for the property, considering its highest and best use.
What is fair market value?
The price a willing buyer would pay a willing seller in a voluntary sale, with both parties fully informed.
What are some alternative names for eminent domain in different states?
In New York, it is called 'appropriation'; in Louisiana, it is called 'expropriation'.
What does condemnation mean in the context of eminent domain?
The formal taking of title to a parcel of property by the government.
Can eminent domain be used to take only a portion of a property?
Yes, and the property owner may be entitled to severance compensation.
What authority does the federal government have regarding eminent domain?
The federal government can exercise eminent domain powers and take land and property directly through Congressional action.
Can states delegate eminent domain authority?
Yes, states can delegate eminent domain authority to cities, municipalities, or private companies in certain circumstances.
What is a limitation on the use of eminent domain by private entities according to the U.S. Supreme Court?
Eminent domain may not be used for advancing the economic interest of private parties.
What are some examples of public uses for which property can be taken under eminent domain?
Examples include constructing public buildings, expanding railways or roadways, and establishing national parks.
What recourse does a property owner have if they disagree with an eminent domain action?
A property owner can sue the government in court, challenging the action based on the claim that the intended use does not constitute a 'necessary public use.'
What is the compensation property owners are entitled to under eminent domain?
Fair market value of the property.
What happens if a property owner does not agree to sell their property under eminent domain?
The city can use eminent domain authority to take the property and must pay fair market value.
What is a reverse eminent domain situation?
When a homeowner sues the government claiming entitlement to just compensation because the government has effectively seized their property rights.
What is an example of reverse eminent domain?
A homeowner near an airport suing the government after runway changes decrease property values.
What does the 'T' in the 'PETE' acronym stand for?
Taxation.
What is the significance of the 'PETE' acronym in real estate?
It helps remember four important types of governmental actions for real estate: Police Powers, Eminent Domain, Taxation, and Escheat.
What is required of any person or organization that owns real estate in terms of taxes?
They must pay property taxes every year.
Who has the authority to levy property taxes on property owners in the U.S.?
State and local governments.
What determines the assessed value of real estate for property taxes in most states?
The most recent sale of the property, with an inflation adjustment added each year.
What are some public services funded by property tax dollars?
Road construction, police services, fire department services, public schools, and public parks, among others.
What can a property owner do if they feel their property taxes are too high?
They can appeal to the taxing authority for a reassessment.
What happens if a property is reassessed and the new value is higher than expected?
The property owner could face a higher tax burden.
What is the purpose of including 1/12 of the estimated annual property tax bill in monthly mortgage payments?
To set aside money in an escrow account for the lender to handle sending the tax payment to the County.
What happens if a property owner does not pay their property taxes?
The taxing authority can place a lien against the property, and may force a sale if taxes are significantly delinquent.
How do mortgage lenders view failure to pay property taxes?
As equivalent to defaulting on the mortgage loan, which can trigger foreclosure actions.
What is a property tax refund?
A refund provided by some states and local governments to homeowners under certain circumstances, such as income below a specific level or significant property tax increases.
What is the consequence of property tax liens compared to mortgage liens?
Property tax liens have a higher authority over property than mortgage liens, allowing lenders to take foreclosure actions to protect against loss.
What is the example provided for property taxes in the text?
Aaron and Ann Taxpayers own a home valued at 2,775.00.
What does escheat refer to in real estate?
Escheat refers to property that was publicly owned reverting to the state when there are no identifiable heirs capable of assuming ownership.
Under what circumstances does property escheat to the state?
When a property owner dies without a valid will and without identifiable heirs.
What is the role of intestacy laws in the escheat process?
Intestacy laws govern how property will pass when a resident dies without a will, prioritizing spouses and children.
What happens to abandoned property in relation to escheat?
The state can escheat abandoned property when there are no identifiable owners or heirs.
Who has the authority to escheat real property?
Only state governments have the authority to escheat real property.
What happens if a property owner dies intestate and has no identifiable heirs?
The property will escheat to the state after a diligent search for heirs.
What is the significance of creating a will or trust in relation to escheat?
Creating a will or trust allows property owners to control the disposition of their property and avoid escheat.
What happens to George's home if he passes away without identifiable heirs?
Ownership would pass to the state under the state's authority to escheat real property.
What allows owners to reclaim abandoned property before it escheats to the state?
The state's unclaimed property laws allow owners to come forward for a certain time period to reclaim their property.
What are the four types of governmental powers over real estate discussed in this lesson?
Police Powers, Eminent Domain, Taxation, and Escheat powers.
What should lease agreements specify regarding what is included with the rent?
They should outline what is included in the monthly rent and what is the tenant's responsibility, such as utilities.
How should a lease agreement address the termination of the lease?
It should spell out how the lease might end and what happens when it ends, including provisions for early termination.
What are the only restrictions on fee simple absolute ownership?
Restrictions provided by law or private restrictions such as covenants under a homeowner's association agreement, or local zoning ordinances.
What type of property ownership is most commonly encountered in real estate?
Fee simple absolute ownership.
What rights does Maggie have as a fee simple owner of her farmhouse?
She can take out a mortgage, partition the land, sell all or part of her ownership rights, or leave it to someone in her will.
What happens to fee simple absolute ownership when the owner dies?
The ownership rights and responsibilities pass to the heir, who assumes the same rights as the deceased owner.
What is fee simple determinable?
A type of ownership where rights to use and enjoy property end when a pre-defined event or condition occurs.
What happens to ownership rights in a fee simple determinable estate when a specified condition is violated?
The ownership rights revert back to the grantor or their heirs without any action needed.
How is a fee simple determinable estate created?
By specifying conditions in the property deed.
What must a deed specify to create a fee simple determinable estate?
Durational terms like 'until...', 'during...', 'while...', 'so long as...', or 'as long as...'.
What is an example of a fee simple determinable estate?
Rick sells his land to the city with the condition it is used as a public park.
What happens if the city does not use the land as a public park?
Ownership rights would revert back to Rick or his heirs.
What rights does the city have as the owner of the property?
The right to use, mortgage, and develop the property, as long as it is used as a public park.
Why is it important to understand fee simple determinable estates?
To know how they work when encountered, even if they are not as common as fee simple absolute ownership.
What is a Life Estate in real property?
An estate or interest held for the duration of the life of a certain person.
Who is referred to as the Life Tenant?
The owner of a life estate.
What is a Remainder in the context of real estate?
An estate that takes effect after the termination of the prior estate, such as a life estate.
Who is a Remainderman?
A person who inherits or is entitled to inherit property upon the termination of the estate of the former owner.
What is a Reversionary Interest?
The interest a person has in property upon the termination of the preceding estate.
What typically creates a Life Estate?
A deed.
When does a Life Estate end?
At the death of the person whose life the estate is based on.
What are common reasons for creating Life Estates?
To allow property to pass outside of probate court and to protect assets from being considered available for medical assistance.
What rights does a Life Tenant have?
The right to use the property, use crops, and dispose of the life tenancy interest.
What is the measuring life in a Life Estate?
Typically the same as the life tenant's lifetime, but not always.
What is a life tenant's obligation regarding property maintenance?
The life tenant must make repairs and pay taxes and interest when due.
What happens to the property after the life estate ends?
The property interest reverts to the remaindermen, who inherit it in fee simple.
What is a remainder interest in real estate?
A property interest that takes effect after the termination of the prior estate (the life estate).
In the example of Joan, what happens to her home after her death?
Her children will become owners as tenants in common without needing a court proceeding for clear title.
What is a 'per autre vie' life estate?
A life estate based on someone else's lifetime, such as when John created a life estate for Audrey.
What rights do Joan's children have while she is alive?
They do not have any rights to the property as long as Joan is alive.
What document did Joan's attorney draft to create the life estate?
A quitclaim deed that transferred ownership to her children while retaining a life estate for Joan.
What is the typical measuring life for a life estate?
The measuring life is usually the same as the owner's lifetime.
What is a reversionary interest in real estate?
A future interest created by an owner that allows ownership of the property to revert back to them after a certain event, such as the death of another party.
What happens to the property when Audrey dies in the example provided?
Ownership of the property reverts back to John.
What is a Life Estate?
A freehold estate created for the duration of the life, or lives, of certain named persons.
Who is the Grantor in a Life Estate?
An individual who creates a life estate.
Who is the Life Tenant in a Life Estate?
A person receiving a life estate.
What is the role of the Remainderman in a Life Estate?
A person who has a future interest in a life estate, specified by the grantor.
What happens to the property in an Estate in Remainder?
The property passes on to the Remainderman after the Life Tenant passes away, if specified.
What occurs in an Estate in Reversion?
If a Remainderman is not specified, the property reverts back to the Grantor after the Life Tenant passes away.
What is the definition of Accession in real estate?
An addition to property through the efforts of man or by natural forces.
What does Accretion refer to in the context of water rights?
Accession by natural forces, e.g., alluvium.
What is Alluvium?
The gradual increase of the earth on a shore of an ocean or bank of a stream resulting from the action of the water.
What is the meaning of Avulsion in real estate?
A sudden and perceptible loss of land by the action of water as by a sudden change in the course of a river.
What does Erosion mean in the context of land?
The wearing away of land by the act of water, wind, or glacial ice.
What are Littoral Rights?
The right of a property owner whose land borders on a body of water to reasonable use and enjoyment of the shore and water the property borders on.
What are Riparian Rights?
The right of a landowner whose land borders on a stream or watercourse to use and enjoy the water which is adjacent to or flows over the owner's land, provided such use does not injure other riparian owners.
How can you remember the term Riparian Rights?
By associating the 'R' in 'Riparian' with the word 'River', which is a moving body of water.
What does the riparian rights doctrine state?
The water rights for moving bodies of water belong equally to all of the property owners whose land borders the water.
Who is referred to as a riparian owner?
A property owner who has riparian rights.
What are riparian rights?
Rights that allow property owners adjacent to a river to use the water for activities like fishing and boating without interfering with each other's rights.
What legal action can neighbors take if one property owner interferes with riparian rights?
They can take legal action against the property owner who is interfering.
How do riparian rights differ from littoral rights?
Riparian rights are associated with moving bodies of water like rivers, while littoral rights are associated with still bodies of water like lakes.
What does the 'L' in 'Littoral' help to remember?
It helps to associate littoral rights with lakes, which are a type of still body of water.
What rights does a property owner with littoral rights have regarding the land underneath the water?
They own the land underneath the water up to the mean low water mark or 100 rods below the mean high water mark for tidal waters, whichever is less.
What happens to water rights when a property is sold?
Water rights are attached to the land and are transferred to the new owner when the property is sold.
What can a property owner with littoral rights do with their shoreline?
They can use the shoreline for activities like putting in a boat dock or building a boathouse, as long as it does not interfere with other property owners' rights.
How can water rights be affected?
Water rights can be increased or decreased in several ways, despite being attached to the land.
What is accretion in the context of water rights?
Accretion refers to the natural increase of soil or sand level, which can decrease the water level on a property owner's land.
What does the term alluvium refer to?
Alluvium refers to the natural and gradual increase of earth on the shore of a lake or ocean, or on the bank of a river or stream due to water action.
What is accession in relation to water rights?
Accession can refer to accretion or alluvium, and also to the increase of soil or sand level through man-made efforts, affecting water rights.
How does erosion affect property owners' water rights?
Erosion leads to the gradual wearing away of land, resulting in less land adjacent to the water and potentially affecting water rights.
What is the difference between erosion and accretion?
Erosion is the gradual loss of land, while accretion is the gradual increase of land due to natural forces.
What is avulsion in the context of water rights?
Avulsion is the sudden and perceptible loss of land due to the action of water, such as a river changing course.
What rights do property owners have regarding groundwater basins?
Property owners have the rights to draw water from groundwater basins, determined by state laws.
What are water rights in real estate?
The rights of a land owner to use adjacent bodies of water in a reasonable fashion.
What are Riparian Rights?
The right of a landowner whose land borders on a stream or watercourse to use and enjoy the water which is adjacent to or flows over the owner's land.
What are Littoral Rights?
The right of a property owner whose land borders on a body of water, such as a lake, ocean or sea, to reasonable use and enjoyment of the shore and water the property borders on.
What does Accession refer to in real estate?
An addition to property through the efforts of man or by natural forces.
What is Avulsion in the context of real estate?
A sudden loss of land by the action of water as by a sudden change in the course of a river.
What is Alluvium?
The gradual increase of the earth on a shore of an ocean or bank of a stream resulting from the action of the water.
What are two examples of liens on real property?
Examples include mortgage liens and tax liens.
What are two examples of easements?
Examples include right-of-way easements and utility easements.
What is an encumbrance in real estate?
Anything which affects or limits the fee simple title to or value of property, such as mortgages or easements.
What is a general lien?
A lien on all the property of a debtor.
What is an involuntary lien?
A lien imposed against property without consent of an owner.
What is a judgment lien?
A legal claim on all of the property of a judgment debtor which enables the judgment creditor to have the property sold for payment of the amount of the judgment.
What is a mechanic's lien?
A lien created by statute which exists against real property in favor of persons who have performed work or furnished materials for the improvement of the real property.
What does priority of lien refer to?
The order in which liens are given legal precedence or preference.
What is a specific lien?
A lien that attaches to one specific property only.
What is a tax lien?
A lien imposed by law upon a property to secure the payment of taxes.
What is a voluntary lien?
Any lien placed on property with consent of, or as a result of, the voluntary act of the owner.
What is the basic purpose of a lien?
To create a security interest in specific, identifiable real property for payment of the property owner's debt or other financial obligation.
What are the two main types of liens?
General and specific liens.
What is a general lien?
A lien on the entire property owned by a debtor.
What is a specific lien?
A lien that is only tied to a specific piece of a debtor's property.
What is a voluntary property lien?
A lien that the property owner willingly agrees to accept or that results from the property owner's voluntary action.
What happens to property if there is no will according to state law?
It will pass according to state law.
What is a transfer on death deed?
A deed that allows a tenant in common to pass their section of real estate to named beneficiaries outside of probate court at their death.
In what situations is tenancy in common commonly used?
When siblings inherit their parents' property or when business partners purchase real estate together.
Can owners in a tenancy in common have different percentages of ownership?
Yes, they do not need to be equal property owners.
What is the ownership structure when John's cabin passes to his five children?
Each child owns an undivided one-fifth interest in the property.
What happens to ownership if one of John's children dies and leaves their share to their children?
The ownership becomes fractionalized, with the grandchildren owning a one-twentieth share of the real estate.
What is joint tenancy?
A way for more than one party to own real estate together with equal, undivided rights.
What are the four unities of ownership in joint tenancy?
Unity of possession, unity of interest, unity of time, and unity of title.
What does 'rights of survivorship' mean in joint tenancy?
When one joint owner dies, their share passes by law to the other joint owner(s).
What happens to joint tenancy with rights of survivorship when one owner dies?
It is terminated and ownership passes to the surviving owner.
What is a partition in real estate?
A court proceeding that officially severs co-ownership of a parcel of land or property.
What is the effect of tenancy by the entirety on property ownership for married couples?
Both spouses have an equal, undivided interest in the real estate, and ownership passes to the surviving spouse upon death.
What states have specific community property laws?
Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
What is the main characteristic of community property in community property states?
Property owned by married people is considered property of both, or either, of the spouses.
What must happen for tenancy by the entirety to be terminated?
It is terminated when one spouse dies or when both spouses transfer ownership to another party.
Can one spouse sell or transfer ownership of property held in tenancy by the entirety without the other spouse's consent?
No, neither spouse can sell or transfer ownership without the other spouse's consent.
In the example of Amy and Chris, what happens to Amy's property share if she dies?
Her property share will automatically be transferred to Chris, not to their children.
What are the two common exceptions to community property treatment?
What is the main difference between community property and joint tenancy?
In community property, each spouse has an equal right to the property, while in joint tenancy, spouses own the property together in an undivided fashion.
What happens to property ownership in a Community Property state during a divorce?
The court will likely divide the real estate 50/50 between the spouses.
What should a real estate agent do when asked for advice on forms of ownership?
Direct clients to an attorney for legal advice and provide guidance regarding the property instead.
What happens if a borrower defaults on a mortgage lien?
The lender can recoup the amount owed through legal action, but cannot go after other non-real estate assets directly.
In the example of Jimmy and Kim, what percentage of the purchase price are they financing with a mortgage?
80 percent.
What must the lender do as a condition of approving a mortgage loan?
Record or file a mortgage lien with the county where the property is located.
What happens when Jimmy and Kim sell their vacation home in a declining market?
They receive only $1,000 more than what is owed on their mortgage.
What is the function of a mortgage lien in the event of foreclosure?
It acts as a security interest to ensure the bank recoups the sales proceeds up to the amount owed.
What is an involuntary lien?
A lien against property that is filed or recorded without the consent of the property owner.
What is an equitable lien?
A lien imposed on real property by the court system, often due to a civil or criminal judgment against the property owner.
What is another name for an equitable lien?
Judgment lien.
What does a judgment lien enable the creditor to do?
It allows the creditor to have the property sold for payment of the judgment amount.
What type of lien was created against Jill's assets after her conviction?
An equitable lien.
Why is Jill's lien considered a general lien?
Because it is not tied specifically to one asset or piece of real property.
What is a statutory lien?
A lien that arises automatically by law, as opposed to being created through a lawsuit or court judgment.
What is a mechanic's lien?
A lien created by statute that exists against real property in favor of persons who have performed work or furnished materials for the improvement of the property.
Who can file a mechanic's lien?
Anyone working on construction or supplying materials for the construction of real property, such as carpenters, plumbers, electricians, and suppliers.
What happens if a property owner does not pay their contractor or supplier?
The laborer or supplier can file a mechanic's lien against the property to protect the amount they are owed.
What is the purpose of a mechanic's lien?
To give a security interest in the property that benefited from the construction or remodeling project.
What are some other names for mechanic's liens?
Construction liens, laborer's liens, material-men's liens, supplier's liens, artisan's liens, and design professional's liens.
Why are mechanic's liens considered involuntary?
Because the property owner does not need to consent to the filing of a mechanic's lien.
What is an example of a mechanic's lien in practice?
If a contractor files a mechanic's lien against a property when the owner refuses to pay for completed work.
What are tax liens and why are they imposed?
Tax liens are statutory liens imposed by law on property to secure the payment of taxes owed by the property owner.
Are tax liens voluntary or involuntary?
Tax liens are involuntary because the homeowner does not need to provide consent for them to be filed or enforced.
What happens when a tax lien is filed against a property?
The government claims part of the property owner's real estate due to unpaid taxes.
When can tax liens be removed?
Tax liens can be removed when the tax debt has been fully satisfied, or in certain circumstances, the IRS may discharge the lien even if the debt is not fully paid.
What is the priority of liens and why is it important?
Priority establishes the order in which liens are paid; the highest priority liens get paid first, which is crucial for lien holders.
What can happen if a property owner does not pay their taxes?
The government can force a 'tax sale' of the property to recoup unpaid taxes.
What situation did Ken and Amy face regarding tax liens?
Ken and Amy owed additional taxes to the IRS and state, leading to potential tax liens against their property due to unpaid taxes.
What is the general rule regarding the priority of property liens?
Property liens have priority in the order in which they were filed (first in time/first in right).
What type of lien generally takes the highest priority?
Tax liens take the highest priority, regardless of when they were filed.
What priority do mortgage liens have compared to other liens?
Mortgage liens take the next highest priority after tax liens.
How can lenders ensure they are in a high priority position for mortgage liens?
Lenders may require the borrower to close out all existing liens before issuing the loan.
How are remaining liens prioritized after tax and mortgage liens?
Remaining liens take priority based on the date they were filed, with the oldest lien taking the highest priority.
What are Covenants, Conditions, and Restrictions (CC&Rs)?
The basic rules establishing the rights and obligations of owners of real property within a subdivision or tract of land in relation to other owners and an association of owners.
What are deed restrictions?
Limitations in the deed to a property that dictate certain uses that may or may not be made of the property.
Who can impose deed restrictions on a property?
Homeowner's or condo owner's associations, previous property owners, builders, or townships.
What is a common characteristic of deed restrictions?
They are often permanent and difficult to remove, running with the land.
What should potential buyers understand about deed restrictions?
They should fully understand the restrictions as they can impact future use of the property.
What is a common purpose of deed restrictions in neighborhoods?
To keep property values high by regulating what can be kept in front yards.
What is the purpose of restrictions on front yards and driveways in residential areas?
To prohibit homeowners from turning their yards into junk yards.
What might deed restrictions limit in new construction or remodeling?
The number of bedrooms or bathrooms a house can legally include.
What type of property use might be restricted by deed restrictions?
The property may only be used as a single-family dwelling.
What do deed restrictions sometimes limit regarding property additions?
The types of additions or improvements a homeowner can make to their property.
Why might deed restrictions be important in scenic neighborhoods?
To prevent obstructing other homeowners' views and enjoyment of their properties.
What might deed restrictions limit regarding fencing on a property?
The type of fencing homeowners can put on their property, such as high privacy fences that obstruct views.
What is the purpose of business restrictions in property deeds?
To protect the neighborhood from additional vehicle or foot traffic.
What might a deed restriction prohibit for homeowners operating a business from their home?
It might prohibit putting up signs in their yards.
How can deed restrictions affect homeowners who want to rent out a room?
They may prevent homeowners from renting out a room for a night at a time.
What types of restrictions can be placed on the exterior maintenance or decoration of a property?
Restrictions can limit paint colors, siding colors, or holiday decorations.
What do landscaping restrictions in deed restrictions typically limit?
The number and type of trees homeowners can plant or remove.
What common limitations might be included in deed restrictions regarding animals?
Restrictions on the types of animals allowed, such as prohibiting livestock like chickens or sheep.
What types of pets might be restricted by deed restrictions?
Property owners may be prohibited from owning venomous snakes or having more than a certain number of cats or dogs.
What is a limitation of deed restrictions regarding discrimination?
Deed restrictions cannot be used to exclude homeowners based on race or religious beliefs.
What issue might arise with old deed restrictions?
Home buyers may find themselves subject to outdated restrictions that no longer make sense.
What does CC&R stand for in real estate?
Covenants, Conditions, and Restrictions.
How are deed restrictions different from homeowners' association rules?
Deed restrictions are recorded legal documents tied to the land, while association rules are controlled by the association and not tied to the land at the county level.
What is required to invalidate a deed restriction?
A homeowner must go to court to get a judge's ruling.
Do deed restrictions apply if they are not mentioned in a new property deed?
Yes, deed restrictions stay with the land even if not referenced in a new deed.
What can a title search identify regarding real estate?
It can identify whether, and what, deed restrictions apply to a particular piece of real estate.
Why are deed restrictions difficult to change?
They require a court ruling to invalidate, which is time-consuming and costly with no guarantee of success.
What is a dominant tenement in relation to easements?
A parcel of real property that has an easement over another piece of property (the servient estate).
What is an easement?
A right, privilege, or interest limited to a specific purpose which one party has in the land of another.
What is an easement appurtenant?
An easement that benefits the dominant estate and 'runs with the land', transferring automatically when the dominant estate is transferred.
What is an easement by condemnation?
An easement created by the government or government agency that has exercised its right under eminent domain.
What is an easement by grant?
The creation of an easement by one party expressly transferring the easement to another party.
What is an easement by implication?
An easement that is not created by express statements but as a result of surrounding circumstances that dictate that an easement must have been intended by the parties.
What is an easement by necessity?
An easement that allows access over adjacent land if crossing that land is absolutely necessary to reach a landlocked parcel and there was original intent to provide access.
What is an easement by prescription?
Implied easements granted after the dominant estate has used the property in a hostile, continuous, and open manner for a statutorily prescribed number of years.
What is an easement in gross?
An easement that benefits an individual or legal entity, rather than a dominant estate.
What is a servient tenement?
A parcel of real property that is encumbered by an easement of a dominant estate.
What is another common name for an easement?
A 'right of way'.
What does it mean that easements 'run with the land'?
They pass along with ownership rights when property changes hands.
What are the two main categories of easements?
Easements in Gross and Easements Appurtenant.
Who benefits from an Easement in Gross?
An individual, company, or other legal entity.
Can an Easement in Gross be transferred to another party without the property owner's consent?
No, the holder may not transfer its rights without consent.
What is the property that is subject to an Easement Appurtenant called?
Servient Tenement (or Servient Estate).
What is the property that benefits from an Easement Appurtenant called?
Dominant Tenement (or Dominant Estate).
Do easements appurtenant transfer automatically when the dominant estate is transferred?
Yes, they typically transfer automatically.
In the example given, who has the dominant estate when David is granted an easement over Cindy's property?
David has the dominant estate.
What is an example of a legal entity that may hold an easement in gross?
Utility companies or railroads.
What happens to an easement when the dominant estate is sold?
The easement transfers automatically to future owners of the dominant estate.
What are the two main classifications of easements?
Easements in Gross and Easements Appurtenant.
What is an affirmative easement?
An affirmative easement allows the dominant tenement to physically cross the servient estate.
What is a negative easement?
A negative easement restricts some type of activity on, or use of, the servient tenement.
Can you give an example of a negative easement?
An easement that prevents a neighbor from building higher to obstruct a view.
How can easements be created?
Easements can be created in writing, typically through a written agreement between the parties.
Who are the parties involved in an easement appurtenant?
The property owners of the dominant estate and the servient estate.
Why might property owners agree to create an easement?
To allow access or restrict certain activities on the servient estate for various reasons.
Under what condition is an easement by necessity created?
An easement by necessity is created if crossing the servient estate's land is absolutely necessary to reach the landlocked parcel, with original intent to provide access.
What is an example of an easement by necessity?
If Jane's land is surrounded by Tom's land and she has no access to public roads, an easement by necessity would allow her to cross Tom's land to reach the road.
What is an easement by grant?
An easement by grant is a written agreement between property owners that expressly transfers the easement to another party.
How can an easement by grant be created in the example of Jane and Tom?
Jane and Tom might agree that Tom grants Jane an easement for convenience, allowing her to cross his property despite having access via a public road.
What is an easement by prescription?
An easement by prescription is created when the dominant estate has used the servient estate property in a hostile, continuous, and open manner for a number of years as prescribed by state law.
What is an easement by implication?
An easement by implication arises from surrounding circumstances that imply the parties intended to create an easement, even without express statements.
What is an example of an easement by prescription?
If Bob has been gardening on Ann's property for 16 years without her permission, an implied easement by prescription would exist after 15 years of continuous use.
What is an easement by condemnation?
An easement by condemnation occurs when the government exercises its eminent domain rights over real property for the public good.
What is an example of an easement by condemnation?
The government using its eminent domain powers to build a public highway that crosses a private property owner's parcel.
What does it mean that easements 'run with the land'?
It means that if a new property owner acquires either the dominant estate or the servient estate, they will also acquire the rights or limitations of that easement.
How can an easement be terminated?
An easement can be terminated by the dominant estate holder releasing it in writing, combining the dominant and servient estates, abandonment by the easement owner, or when the purpose of the easement no longer exists.
What happens when the dominant and servient estates are combined?
The need for an easement is no longer present, which can lead to the termination of the easement.
What does Section 14, called Tort Liability, state about the landlord's responsibility for damages?
It releases the landlord from damages resulting from third party negligence or tenant fault, unless due to faulty construction.
What does Georgia Code 44-7-14.1 define as utilities?
Utilities are defined as heat, light, and water service.
What is the penalty for a landlord who knowingly disrupts utilities while a tenant has the property?
The penalty can be up to $500.
Does destruction of property from events not caused by the landlord release the obligation of rent?
No, it does not release the obligation of rent.
What does Section 19 of the Georgia Residential Landlord-Tenant Act restrict?
It restricts local governments from enacting regulations on the rent that landlords are allowed to charge.
What must landlords notify tenants about according to Section 20?
Landlords must notify tenants about any likelihood of flooding before the tenant enters into an agreement.
What happens if a landlord fails to notify a tenant about flooding?
The landlord is responsible for damages caused by flooding during the tenant's lease.
What does Section 21 state about written brokerage agreements?
It makes a written brokerage agreement binding as long as all terms are followed.
What is one reason an active service member may cancel their lease early?
They may cancel their lease with 30 days notice for a variety of reasons.
What is an easement in gross?
A right of use in the land of another without the requirement that the holder of the right own adjoining land.
Who commonly uses easements in gross?
Utility companies.
What is an easement appurtenant?
Any easement that is not an easement in gross.
What is required for a landlocked property to gain access to a road?
An easement over the servient tenement property.
What is an encroachment in real estate terms?
An unlawful intrusion onto another's adjacent property by improvements to real property.
What happens in an encroachment situation?
Improvements to one property owner's parcel intrude on a neighboring property owner's parcel.
Does intent matter in determining an encroachment?
No, it does not matter whether the property owner knew where the property line was.
Can an encroachment occur if a structure is not physically on the ground of the neighboring property?
Yes, if something hangs over a neighbor's property, it can still be considered an encroachment.
What is a common example of an encroachment involving a garage?
A garage stall extending onto a neighbor's property is a classic example of an encroachment.
What type of property improvement can lead to an encroachment?
Any type of property improvement, such as a swimming pool or deck, can lead to an encroachment.
What is a common cause of encroachment issues related to fences?
Fences can often lead to encroachment issues when they are placed incorrectly on property lines.
What is an encroachment in real estate terms?
An encroachment occurs when one neighbor's property improvement intrudes on another neighbor's land, often unintentionally.
What might happen when a neighbor realizes their property improvement is encroaching on another's property?
It depends; they may dispute the encroachment, survey the property lines, or take other actions.
What are some possible outcomes when an encroachment is confirmed?
The encroaching neighbor might remove the structure, purchase the encroached-upon land, or the affected neighbor might choose to live with it.
What must a property owner do if they decide to sell their home with an encroachment?
They must fully disclose the encroachment to potential buyers.
What is a 'quiet title action'?
A legal action that may be pursued by the injured homeowner to resolve property disputes related to encroachments.
What is 'adverse possession'?
A legal doctrine that may allow a neighbor who has been using another's property for a long time to prevail in a dispute over encroachment.
What is an 'easement by prescription'?
A type of easement that may be granted through long-term use of another's property, often arising from encroachment situations.
What is a prescriptive easement?
A legal right granted to a property owner whose improvement encroached on a neighbor's property, often established through open, notorious, hostile, and continuous use of the land for a specified period.
What are the requirements for a prescriptive easement to be established?
The use of the land must be open, notorious, hostile, and continuous for a period of years, which varies by state.
In the example, what mistake did John make regarding the fence?
John built the fence six feet over the property line onto Chuck's land.
How long did John's animals use the land within the fenced area?
Continuously and uninterrupted for more than seven years.
What action did Chuck take after discovering the encroachment?
He asked John to remove the fence, but when John refused, Chuck took him to court.
What could be the outcome of the court case regarding the prescriptive easement?
The court may grant a prescriptive easement to John for the encroachment, depending on the established requirements.
What is an encroachment in real estate?
An unlawful intrusion onto a neighbor's adjacent property by improvements to real property.
What are some examples of encroachments?
Fences, trees and plants, driveways, and roof overhangs.
What is a license in the context of real property?
A license is special permission to access or use someone else's real property for a specific purpose.
How do licenses differ from easements?
Licenses can be terminated or canceled and are not considered property rights, while easements are for an indefinite period and are property rights.
Can licenses be created verbally?
Yes, licenses do not need to be in writing and can be created by verbal agreement.
What happens to a license when the real property is sold?
Licenses automatically terminate when the real property is sold.
Are license rights transferable?
No, license rights are personal to the licensee and non-transferable unless the property owner agrees.
What is an example of a license in real property?
George allowing his friends to hunt and fish on his land is an example of a license.
What is another example of a license in real property?
Kate allowing school students to tour her historic home is another example of a license.
What review is included in Chapter 9?
A review of the lease for residential property.
What is one type of leasehold estate?
A specific type of leasehold estate can be described, such as a tenancy for years.
What are two types of leases and their associated tenants?
Examples include residential leases for tenants and commercial leases for business tenants.
What are three elements found in a residential lease agreement?
Common elements include the rental amount, lease duration, and responsibilities for maintenance.
What is an estate at sufferance?
An estate arising when the tenant wrongfully holds over after the expiration of the term, allowing the landlord to evict the tenant or accept them for a similar term.
What defines an estate at will?
The occupation of lands by a tenant for an indefinite period, terminable by one or both parties.
What is an estate for years?
An interest in lands for a definite and limited period of time, typically defined by a lease contract.
What is a leasehold estate?
A tenant's right to occupy real estate during the term of the lease, considered a personal property interest.
Who is a lessee?
One who contracts to rent, occupy, and use property under a lease agreement; a tenant.
Who is a lessor?
An owner who enters into a lease agreement with a tenant; a landlord.
What is a periodic estate?
An interest in land with no definite termination date but with a fixed rental period, such as weekly, monthly, or yearly.
What is the role of Carla in the lease agreement with George?
Carla is the 'Lessor'.
What is the role of George in the lease agreement with Carla?
George is the 'Lessee'.
What is an 'Estate for Years'?
An interest in land that arises by contract for possession for a definite, but limited, period of time.
Can an 'Estate for Years' be for a period shorter than one year?
Yes, it can be for any period of time, even if shorter than one year.
What happens at the end of the pre-determined time period in an 'Estate for Years'?
The lessee must vacate the property.
What is a 'periodic estate'?
A leasehold estate with a rental period defined by the lease but no pre-determined lease termination date.
What is a common example of a periodic estate?
A month-to-month lease.
What must a landlord do to end a periodic estate?
The landlord must give notice to vacate.
What must a tenant do to end a periodic estate?
The tenant must provide notice as specified in the lease.
What are the terms used interchangeably with 'estate for years'?
Fixed term tenancy or tenancy for years.
What happens to an estate for years when the lease ends?
It automatically becomes a periodic estate.
What type of lease did Jack and Chrissy sign with Ralph?
A month-to-month lease.
What was the initial rent amount for Jack and Chrissy's apartment?
$1,200.
What is the new rent amount effective September 1 for Jack and Chrissy?
$1,250/month.
What right do Jack and Chrissy have regarding their lease?
They have the right to terminate the lease with notice to Ralph.
What is an 'Estate at Will'?
An occupation of land for an undefined period that can be terminated by either party.
How can a tenancy at will be created?
Through agreement without a formal lease, no rent required, urgent need, or informal family arrangements.
What can terminate an estate at will?
Transfer of property, death of landlord or tenant, or tenant attempting to assign tenancy.
What is 'committing waste' in the context of leasehold estates?
It refers to a tenant causing change or damage to the property without the landlord's permission.
What is an estate at will?
An informal arrangement where a tenant occupies property without a formal lease agreement, often at the landlord's discretion.
What happens when a tenant refuses to pay rent in an estate at will?
The landlord may need to go to court to start eviction proceedings.
What is an estate at sufferance?
It arises when a tenant continues to occupy the property after the lease has expired without renewing it.
What options does a landlord have under an estate at sufferance?
The landlord can treat the tenant as a trespasser and evict them or accept the tenant for another term under the same conditions.
What can a landlord do if they had previously notified a tenant of a rent increase before the lease expired?
They can charge the higher rent for the holdover tenant.
What is a holdover tenancy?
It occurs when a tenant continues to occupy the property after the lease has expired and continues paying rent.
In the example of George and Carla, what happens when Carla offers George to renew the lease?
George can renew the lease for another year at a rent amount that is five percent higher than before.
What happens if George continues living in Carla's house after the original lease ends?
He becomes a holdover tenant and an estate at sufferance is created.
What can Carla do if George is a holdover tenant?
She can charge him a new, higher monthly rental amount or take him to court for eviction.
What is the legal status of George's occupancy after the lease ends?
There is no lease in place giving him the right to continue possessing, occupying, or using Carla's property.
What is an Estate for Years?
A leasehold estate for any specified period of time that does not automatically renew.
How does a Periodic Tenancy operate?
It automatically renews for successive periods unless terminated by either party.
What is the defining characteristic of an Estate at Will?
It does not have a set term period and is open-ended.
What occurs in an Estate at Sufferance?
It arises when the tenant wrongfully holds over after the expiration of the lease term.
What is a lease?
A contract between an owner and tenant, setting forth conditions for occupancy and use of the property.
Who are the parties involved in a lease contract?
The property owner (lessor) and the tenant (lessee).
What must a lease contract include to be considered valid?
It must be in writing and signed by both the lessor and the lessee (or their agents).
What does the lessor agree to provide in a lease contract?
A specific habitable unit for a specific time period in exchange for rent payments.
What is an example of a lease contract in real estate?
John renting an apartment from Big Apartment Company, Inc. by signing a lease contract.
What is the significance of landlord/tenant law in lease contracts?
It is state-driven, meaning there are state-specific nuances in certain cases.
What is the role of the apartment manager in a lease contract?
To sign the lease on behalf of the property owner as the company's authorized agent.
What types of properties can lease contracts be used for?
Residential properties like apartments and commercial properties like office or retail spaces.
What is required for parties to have legal capacity to contract in lease agreements?
Parties must be at least 18 years old and have the mental capacity to understand the contract.
What happens if one party in a lease agreement is under 18 years old?
The lease contract may not be enforceable.
What are the key components required for a valid lease contract?
Offer and acceptance, and consideration.
What does 'offer and acceptance' mean in the context of a lease contract?
The landlord offers to rent the property, and the tenant accepts by signing the lease.
What does consideration refer to in a lease contract?
The rent for the apartment or space, and possibly a security deposit.
What was the issue with the administrative assistant signing the lease for Jennifer and Amy?
The assistant was not authorized to enter into contracts on behalf of the corporation, making the lease invalid.
In the example, what is the age of Amy, who has the legal capacity to sign the lease?
18 years old.
What is the significance of the lease agreement language in the example provided?
It establishes the parties involved and the property being rented.
What should a lease contract clearly define regarding the parties involved?
It should define who the lessor and the lessee are, including contact information for each party.
What is the legal objective that should be included in a lease agreement?
It should state that the lessor and lessee intend to enter into a valid rental agreement.
What specific information should be included about the space being leased in a lease agreement?
The lease should provide the address and unit number, and define any additional spaces like garage or storage.
What must a lease contract include to be valid?
It must include consideration, specifying the amount of rent, payment frequency, due date, and consequences for late payment.
What is incremental budgeting?
A plan that uses historical data as a base, increasing each line item incrementally.
What might trigger a budget adjustment in an association?
A natural disaster that damages the community clubhouse.
What types of items are included in a budget?
Both income and expense line items.
What are capital reserves in the context of property management?
Monies set aside for future improvements to avoid financial challenges of large expenditures.
What is an example of a capital improvement expense?
Adding a gated entrance or pool.
What do FNMA and FHA require regarding reserve funds for condominium loans?
They require 'adequate' reserve funds prior to funding.
What is a best practice for establishing reserve funding plans?
Determining the life-expectancy of each capital asset and the cost of replacing them.
How much should a corporation set aside each year for a roof replacement costing $20,000 with a 10-year expectancy?
$2,000 each year.
What is the board's responsibility regarding the budget?
Creating the budget and getting it approved by the owners.
What happens if homeowners do not vote on the proposed budget?
The board may act on an unapproved budget or forgo certain projects.
What should boards do to change bylaw phrasing regarding proposed budgets?
Work with members to stipulate that proposed budgets are owner-approved unless voted down.
What is the benefit of a properly adopted budget for an association board?
It reduces legal liability, ensures motivation to follow best practices, and keeps stakeholders responsible for shared property.
What guides the legal actions taken by association boards?
Specific covenant and bylaw language, even if there isn't a Georgia law or statute that requires or denies certain activities.
What are condominium owners in Georgia required to pay?
Assessments.
What is the acceptable path to winning a legal battle for collecting past due fees?
File a lien, start a lawsuit, send a FiFa notice, initiate foreclosure proceedings, and find owner assets for lien attachment.
What rights does a lease contract give to the tenant?
It gives the tenant the right to occupy, possess, and use the property being leased.
What restrictions might be included in a lease agreement?
Restrictions may include prohibiting illegal activities and commercial use of the rented property.
What should a lease specify regarding pets?
It should provide clear language identifying what kind of pets are allowed, how many pets are allowed, and may include an additional security deposit for potential damages.
What are landlords responsible for regarding occupancy controls?
Landlords must ensure the property complies with local ordinances about occupancy, specifying the maximum number of adults who can reside in the unit.
What is a sublease provision in a lease agreement?
It allows a tenant to find someone else to take over the remainder of the lease if they need to break it, but landlords may have specific rules about subleasing.
What is the term of a lease?
The period when the tenant has the right to occupy, possess, and use the rented space.
When does the lease term typically start?
It may start on the day the lease is signed or another specified day.
What happens at the end of a one-year lease term?
The lease will expire at the end of that one year unless extended under specified circumstances.
What is a security deposit in a lease agreement?
An amount of money paid upfront by the tenant to the landlord, which may be returned if the tenant meets lease requirements and returns the unit in good condition.
Under what conditions can a landlord keep the security deposit?
If the tenant damages the property or leaves it in a condition requiring cleaning before renting it out again.
What may be included in lease contracts for commercial real estate?
Provisions specific to commercial leasing, which may differ from residential leases.
What is a confession of judgment clause in a leasehold estate?
It allows the landlord to confess judgment without requiring notice or a hearing if the tenant defaults on their obligations.
What does a confession of judgment clause specify regarding judgment outcomes?
It specifies whether the judgment means evicting tenants, collecting monetary damages, or both.
How do confession of judgment clauses benefit landlords?
They make the process faster, cheaper, and easier when a tenant defaults, as the tenant waives the right to notice and court hearings.
What is actual eviction in leasing terms?
The removal of a tenant by the landlord because the tenant breached a condition of a lease or another rental contract.
What does constructive eviction refer to?
Any disturbance of the tenant's possession of the lease premises by the landlord rendering the premises unfit or unsuitable for the purpose for which they were leased.
What is a sublease?
A lease given by a lessee.
What is the covenant of quiet enjoyment?
The tenant's lawful right to possess the land without substantial interference from the landlord during the lease term.
What is one of the benefits a tenant receives when leasing real estate?
The right to possess the unit or parcel being leased.
What must a lease clearly outline regarding the landlord's access to the premises?
How and under what circumstances the landlord is authorized to enter the premises being leased by the tenant.
What legal standing may a tenant have if their right to quiet enjoyment is violated?
The tenant may have legal standing to claim damages.
What type of leases does the lesson primarily refer to?
Residential real estate leases.
What does the implied covenant of possession allow Debra to do regarding her rented apartment?
It allows her to possess and use the apartment, assuming she has paid the required rent.
What is the implied covenant of quiet enjoyment in a lease agreement?
It means Debra should not worry about Barbara entering the premises without valid reasons once she takes possession.
What happens if Barbara violates the covenant of quiet enjoyment?
Debra may have legal or equitable remedies.
What is meant by 'leasehold improvements' or 'tenant improvements'?
Improvements made by a tenant to the property with the landlord's permission, often specified in the lease.
What rights do tenants with disabilities have regarding property modifications?
They can make reasonable accommodations at their own expense to make the property handicapped-accessible.
What must landlords do in compliance with the Americans with Disabilities Act (ADA)?
They may be required to make certain improvements to commercial properties to comply with the ADA.
What can Debra do if she wants to change the color of the paint or replace the carpeting in her apartment?
She can make these modifications at her own expense with Barbara's permission.
What might Barbara offer Debra in exchange for making improvements to the apartment?
She may decide to give Debra a discount on her rent or some other type of concession.
What is the principle of habitability in residential leases?
It refers to the landlord's obligation to ensure the rental property is livable and meets basic health and safety standards.
What does the implied covenant of habitability require from landlords?
Landlords must take necessary actions at their own expense to provide tenants with a habitable dwelling unit.
Can landlords waive the covenant of habitability in a lease agreement?
No, the parties cannot agree to do away with the covenant of habitability.
What is one exception to a landlord's obligation under the covenant of habitability?
If the tenant is responsible for damage through malicious, willful, or irresponsible actions.
In the scenario with Adam, Bob, and Cindy, what violation did Adam commit?
Adam violated the implied covenant of habitability by not repairing the broken water heater.
What happens if tenants do not report maintenance issues to their landlord?
If tenants do not report issues, they may be held responsible for resulting damages and cannot withhold rent.
What is the consequence of tenant negligence in maintaining a rental property?
Tenants may not have a legal claim to withhold rent if their negligence causes the property to become uninhabitable.
What is a common option given to tenants in a lease agreement?
The right to renew the lease for another term or to extend the original lease term with a periodic tenancy.
What option may a lease provide that allows a tenant to purchase the property?
An option to purchase the property at a pre-determined price within a specified time period.
What does the right of first refusal mean in a lease agreement?
The tenant has the first right to purchase the property before it is offered to the general public.
What did Sandy agree to include in the lease for Jane and Todd?
The right of first refusal for any future sale of the home.
What is a rent-to-own option in a lease?
An option where tenants pay rent for a period and can purchase the house for a previously agreed-upon price at the end of that term.
How can a lease be discharged?
The lease term can end, the premises can be destroyed, or through assignment or subleasing.
What happens to the lease if the rented home is destroyed?
The lease is effectively discharged as the landlord can no longer provide a habitable dwelling.
What are the advantages of a rent-to-own option for tenants?
They do not need to find another place to live if they enjoy the home they are renting.
What is one advantage for landlords of including a rent-to-own option in a lease?
They avoid the cost and hassle of listing and selling the home if tenants decide to purchase it.
What happens when a tenant assigns their lease obligations to someone else?
They terminate their own involvement in the lease, and the assignee becomes responsible for upholding the lease.
What is the main difference between assigning a lease and subleasing?
In an assignment, the original lease is terminated for the original tenant, while in a sublease, the original lease remains in effect and the original tenant is still responsible.
What is the responsibility of the original tenant in a sublease arrangement?
The original tenant is responsible for making rent payments to the landlord and ensuring compliance with the lease requirements.
What occurs if a sublessee damages the property or fails to pay rent?
The original tenant (sublessor) is responsible under the terms of the original lease.
What is actual eviction?
Actual eviction is when a landlord removes a tenant for not meeting lease obligations.
What is constructive eviction?
Constructive eviction occurs when a landlord fails to uphold their end of the agreement, making the premises uninhabitable or unsuitable for the intended purpose.
What is a common cause for breaching a lease?
The tenant not paying rent as agreed.
What rights does a landlord have if a tenant breaches the lease by not paying rent?
The landlord has the right to sue for possession and actual eviction of the tenant.
What does the Uniform Residential Landlord and Tenant Act (URLTA) address?
Issues including the landlord's right to enter leased property and their right to use and maintain the property.
What protections does the URLTA provide to tenants?
Statutory protection against retaliatory actions by the landlord and legal remedies in case of default.
Why is it important for real estate professionals to understand landlord/tenant law?
To navigate the legal aspects in any jurisdiction where they will be working.
What is a graduated lease?
A lease that provides for a varying rental rate, often based on future determinations or periodic appraisals, typically used in long-term leases.
What is a gross lease?
A lease in which the lessor pays all costs of operating and maintaining the property and real estate taxes.
What is a ground lease?
An agreement for the use of land only, sometimes secured by improvements placed on the land by the user.
What is a net lease?
A lease requiring a lessee to pay charges against the property such as taxes, insurance, and maintenance costs in addition to rental payments.
What is a percentage lease?
A lease where the rental is determined by the amount of business done by the lessee, usually a percentage of gross receipts with provisions for a minimum rent.
What are the responsibilities of the landlord in a gross lease?
The landlord is responsible for paying all costs related to operating and maintaining the property, including real estate taxes.
In what types of leases are gross leases most commonly found?
Gross leases are most often found in residential leases and some commercial leases.
What might a modified gross lease require the tenant to pay?
Utility bills.
What is an example of a situation involving a gross lease?
Terry, an insurance agent, rents office space under a gross lease where the landlord pays for property taxes and insurance.
What type of lease is Terry's lease an example of?
A gross lease.
What is a net lease?
A lease where the tenant pays rent plus additional expenses like taxes, insurance, and maintenance costs.
What does a single net lease require the tenant to pay?
Rent plus property taxes.
In a double net lease, what additional costs does the tenant pay besides rent?
Property taxes and insurance premiums.
What is the tenant responsible for in a triple net lease?
Rent, property taxes, insurance, and maintenance including repairs.
Why might a tenant find a low rent amount misleading in a double net lease?
Because they are also responsible for property insurance and property taxes, which can add up quickly.
What is typically lower in a triple net lease compared to single or double net leases?
The monthly rent.
What should John and Jane consider when reviewing their lease for the convenience store?
They should check if they are responsible for additional costs like property taxes and insurance.
What are the responsibilities of tenants in a triple net lease?
Tenants are responsible for maintenance, property taxes, and obtaining commercial property coverage.
What is a percentage lease?
A lease where the rent is based on the tenant's business sales, typically expressed as a percentage of gross receipts.
Why are percentage leases commonly used by retail stores?
Because they allow landlords to negotiate a percentage of sales, benefiting from increased foot traffic from nearby businesses.
What is the minimum/base rental amount in Frannie's lease for her smoothie shop?
48,000/year.
What happens when Frannie's sales exceed the natural breakpoint amount in her lease?
She will have to pay an additional 7% of her business sales to her landlord.
What is a graduated lease?
A lease where rent payments vary periodically instead of being fixed.
What is the purpose of graduated leases for landlords?
To adjust the rent due every few years, protecting the landlord's income over time.
How can graduated leases benefit business owners?
By requiring smaller initial payments, allowing businesses to establish themselves before higher payments kick in.
What is a graduated lease?
A lease where the monthly rent may increase or decrease based on factors like the consumer price index or periodic appraisals, as agreed by the landlord and tenant.
How often can rent increase in a graduated lease example provided?
Every five years, based on the increase in the Consumer Price Index.
What is a ground lease?
An agreement to use land, typically covering a long period (50 to 99 years), where ownership of the land is separate from ownership of any buildings or improvements on it.
Why do corporate tenants often prefer ground leases?
They lower initial out-of-pocket expenses by avoiding the need to purchase land, allowing funds to be used for constructing and running their businesses.
What is a potential benefit for landowners from ground leases?
They provide a predictable, steady income stream.
In the example of Mega Department Stores, what did they do instead of buying the land?
They signed a lease to use the land for 99 years.
What is a key feature of ground leases regarding rent?
Rent can be expected to rise over time, similar to graduated leases.
What responsibilities does Mega Department Stores have as the lessee in their lease agreement?
They are responsible for construction, maintenance, upkeep, hazard insurance, and property taxes.
How often is the rent adjusted in the lease agreement with Mega Department Stores?
Every five years for inflation.
What type of lease has Mega Department Stores signed for their new store?
A ground lease.
What are the three types of payments typically provided in oil and gas leases?
Bonus payment, annual fixed rent payment, and royalty clauses.
What happens to an oil and gas lease if drilling is underway when the lease period expires?
The lease will remain in effect.
What is the primary duration of Patty's oil and gas lease with Oil & Gas R Us, Inc.?
Five years.
What happens if Oil & Gas R Us, Inc. drills a well within the primary lease period?
The lease will continue for a secondary period of ten years or as long as the well produces oil or gas.
What additional benefits might Patty negotiate in her oil and gas lease?
Free gas for household use during the term of the lease.
What is a 'gross lease'?
A lease where the landlord pays all expenses.
Where are UCC-1 forms usually filed?
Separately from real estate records, often handled by the secretary of state or a special section of the real estate clerk.
Why is it important for a UCC-1 lien to be recorded in real estate records?
So that prospective buyers or lenders know there is a lien on the property that must be paid off before it can be sold free and clear.
What is the difference between the primary and secondary mortgage markets?
The primary mortgage market involves lenders who originate loans, while the secondary mortgage market involves the buying and selling of existing mortgages.
What is the difference between a fully amortized loan and a straight-term loan?
A fully amortized loan is paid off in equal installments over its term, while a straight-term loan requires interest payments only, with the principal due at the end.
What is the difference between the mortgagor and mortgagee?
The mortgagor is the borrower who gives the mortgage, while the mortgagee is the lender who receives the mortgage.
What is required from the landlord in section 23(b) regarding rent increases?
The landlord must give at least 90 days' notice of any rent increase under automatic renewal provisions.
What is documented in section 24 of the lease agreement?
The leasing broker and listing broker, and how they are working with their respective customers.
What does section 25 require regarding relationships between parties?
It is a spot to document and disclose any material relationship that could impact the lease.
What information is clarified in section 26 of the lease agreement?
Who owns the property and who manages it, including their names and contact information.
What happens if a tenant defaults on their lease agreement?
The landlord can terminate the lease and pursue legal remedies in court.
What responsibilities does a tenant have regarding the condition of the leased premises?
The tenant must ensure the premises remain in good condition and notify the landlord when repairs are needed.
What minor maintenance tasks are tenants responsible for during the lease period?
Changing light bulbs, HVAC filters, and dealing with clogged plumbing.
What is the landlord's responsibility regarding plumbing issues?
The landlord is responsible for major plumbing issues and needed repairs, including septic tank problems.
What must tenants do to avoid potential hazards like mold or mildew?
Inspect the property regularly and notify the landlord of any potential problems.
What access must landlords provide to tenants regarding security systems?
Landlords must give tenants any and all access codes for security systems or gates.
What must tenants agree to if the property is part of an association-maintained community?
Tenants must comply with all of the association's rules and occupancy restrictions.
What personal property responsibility do tenants have?
Tenants are responsible for their own personal property and should consider renter's insurance.
What is the time limit for filing a personal injury claim against the landlord?
Claims must be filed within one year of the injury.
What does section 5(a) of the lease agreement protect?
It protects brokers, stating that the landlord and tenant will not bring claims against them.
What protections do brokers have regarding claims against them?
Brokers are protected from claims related to their advice, representation, or statements, as well as claims related to the property's condition, uses, zoning, etc.
What does section 5(b) of the lease agreement acknowledge about the property?
It acknowledges that the property may have been constructed when building codes were different than they are currently.
What is the tenant responsible for according to section 5(c) of the lease agreement?
The tenant is responsible for becoming acquainted with the surrounding neighborhood; it is not the landlord's job to describe all possible objectionable conditions.
What legal provisions are included in section 6 of the lease agreement?
Definitions of terms, intent to make the written lease the entire agreement, responsibility for legal fees in disputes, choice of law provision, disclosure rights, and fair housing disclosure.
What happens if the landlord discovers an unauthorized occupant in the property?
The tenant will be considered in default if there is someone staying at the property who is not named in the lease agreement.
What does the 'Indemnification' paragraph in section 6(g) state?
The tenant agrees not to sue the landlord for damages related to the tenant's failure to comply with the lease or injuries sustained due to the tenant's own actions.
What does section 7 address regarding the premises?
It addresses the possibility that the premises could be destroyed or made uninhabitable by hazards, and outlines the rights of the landlord and tenant in such cases.
What is stated about tenant rights in relation to a mortgage on the property in section 8?
Any rights the tenant has are junior or subordinate to the mortgage company's rights.
What does section 9 remind the parties about the lease forms?
It reminds the parties that the forms are standard and may need to be amended or modified to reflect their unique needs and terms.
What additional rules can the landlord document in section 10?
The landlord can document any additional rules that may apply to the leased property, such as rules for a swimming pool.
What does section 11 remind both parties about in lease transactions?
It reminds both parties to be aware that cyber fraud exists with residential real estate lease transactions.
What risks do landlords and renters face according to Chapter 9 on Leasehold Estates?
Cyber criminals may try to defraud them.
What is recommended for landlords and renters to protect themselves?
They should take measures to avoid becoming victims of fraud.
What should you do to have a solid working knowledge of a lease agreement?
Read the entire lease agreement, including all provisions.
Why is it important to understand the lease agreement when completing one for a client?
To understand the questions being asked and to confidently answer them.
What are the security deposit requirements under the Georgia Residential Landlord-Tenant Act?
Students will be able to list the security deposit requirements under the Act.
What is the purpose of the Georgia Residential Landlord-Tenant Act?
To define the relationship between the landlord and tenant and to protect the rights of both.
What type of leases does the Georgia Residential Landlord-Tenant Act apply to?
It applies only to residential leases.
What is the official name of the law governing landlord and tenant relationships in Georgia?
Georgia Code Title 44 Property Chapter 7, Landlord and Tenant.
How many Articles are in the Georgia Residential Landlord-Tenant Act?
There are five Articles.
What does Article 2 of the Georgia Residential Landlord-Tenant Act deal with?
It deals with security deposits.
What is the focus of today's lesson in the Georgia Residential Landlord-Tenant Act?
Article 1, titled 'In General'.
How should sections of the Georgia Residential Landlord-Tenant Act be referenced?
By using Georgia Code, then the title number, a hyphen, then the Chapter number, another hyphen, and finally the section number.
What does Section 1 of the 'In General' Article define?
It defines the relationship of landlord and tenant.
What principle does the landlord-tenant relationship operate on according to Section 1?
The principle of 'quiet enjoyment'.
What happens to the property in a lease for less than a fixed period of 5 years?
The property remains the landlord's unless there is a contract stipulating otherwise.
What is the maximum duration for a landlord-tenant relationship under the Georgia Residential Landlord-Tenant Act without a specific timeframe?
One year.
What must a landlord provide to a tenant at the start of their tenancy according to Section 3?
The legal name and address of the registered owner and the property manager.
What is the notice period required for a landlord to end a Tenancy at Will?
60 days.
What is the notice period required for a tenant to end a Tenancy at Will?
30 days.
What rights do tenants have regarding the use of the property?
They may only use the property for quiet enjoyment and cannot make changes to permanent fixtures or cut down trees.
What happens to trade fixtures after the tenancy ends?
Any remaining trade fixtures are considered abandoned and become the landlord's property.
What is the landlord's duty regarding property maintenance?
To keep the property maintained and in good repair.
What must happen to a deed after it is signed?
It must be given to the grantee and recorded with the county real estate clerk.
What does recording a deed involve?
Scanning or copying the deed into the official books of the county.
What information is included on the stamp placed on a recorded deed?
The deed book and page number.
How were deeds recorded in earlier times?
In a physical book of copies maintained by the county.
What is the significance of the deed book and page number?
It serves as a reference for the deed and can be referred to in other legal documents.
What does recording the deed signify in the transfer of title?
It is considered evidence of delivery by the grantor and acceptance by the grantee.
What does Article Two of the Landlord Tenant Act deal with?
Security deposits.
What is defined as a nonrefundable fee in a rental agreement?
Money that the tenant gives the landlord, specified as non-refundable in the agreement.
What is a residential rental agreement?
Any contract or lease that allows for the rental or use of real property as a place to live.
What is included in the definition of a security deposit?
Any money or security given to the landlord as part of the rental agreement, including damage deposits, advance rent payments, or pet deposits.
What must a landlord do with a security deposit according to Section 31?
Place it in a devoted escrow account and notify the tenant in writing about the account's location.
What is an alternative to holding a security deposit in escrow according to Section 32?
Withdrawing a surety bond registered with the local county court.
What must a landlord provide to a tenant prior to occupancy according to Section 33?
A full list of damages and defects in the apartment for the tenant to inspect and agree upon.
What is the timeframe for a landlord to inspect the property after a tenant moves out?
Within 3 days of the tenant moving out.
How long does a tenant have to inspect the property after moving out?
5 business days.
What can a tenant do if they disagree with the landlord's deductions from the security deposit?
Take the landlord to court to recover security damages.
What is the time frame for a landlord to return the full security deposit after a tenant moves out?
Within 30 days.
What can a landlord not deduct from the security deposit?
Damages from 'normal wear and tear' not due to negligence or accident.
What must a landlord provide if they keep part of the security deposit?
An itemized list of deductions and the remaining security deposit.
What happens if a landlord fails to comply with security deposit rules?
They forfeit their right to keep any of the security deposit for damages.
What is the penalty for a landlord who keeps part of a security deposit owed to the tenant?
They must pay three times the owed amount back to the tenant.
Who is exempt from specific security deposit rules under Section 36?
Landlords with ten or fewer rental units who are natural persons.
What happens if a landlord has a management company acting on their behalf?
They will not be exempt from the security deposit rules under Section 36.
What does Section 37 address regarding military personnel?
Limitations of charges of rent when moving due to station change or active duty.
What is the focus of Article 3 of the Landlord Tenant Act in Georgia?
The laws regarding the eviction of a tenant.
What is a writ of possession?
A legal document issued by a court allowing one person or group the legal right to take possession of real property by forcing those in possession out.
What must a landlord do if a tenant does not vacate the premises after being asked?
The landlord may swear an affidavit before the appropriate judge or notary public of the facts of the case.
What happens if the sheriff cannot serve the tenant with the affidavit and summons?
They may deliver the affidavit and summons to anyone residing on the property, leave a copy at the property, and send it by first class mail.
How long does a tenant have to respond to the summons after it is delivered?
7 days, with extra time if the seventh day falls on a Saturday, Sunday, or legal holiday.
What is the consequence if a tenant does not respond to the summons served by mail?
The court can file a judgment for possession but not for any money owed while the defendant is absent.
What must a landlord do if a tenant pays all allegedly owed rent within 7 days of the affidavit and summons for non-payment?
The landlord must accept the rent, and payment acts as a full defense for the tenant.
How many times can a tenant use the 'full defense' for non-payment of rent in a 12-month period?
One time.
What happens if a tenant fails to pay rent within 3 days?
The landlord will be given a writ of possession.
What is the consequence if a tenant is not under a rental contract but pays owed rent?
It will not stop eviction proceedings but will be factored into financial judgments.
What occurs if a tenant fails to answer the summons and affidavit?
The court can immediately offer a verdict for all rents due and for a writ of possession.
What rights does a tenant have if they answer the summons?
They are entitled to a trial and can stay on the property until the outcome is determined, but must pay rent through the court.
How must a tenant pay rent and utilities during a trial lasting two weeks or longer?
Through the registry of the court.
What happens if the rent amount is in dispute?
The court may take the last rental payment accepted by the landlord as the current rent.
What occurs if a tenant fails to make required payments during the trial?
The court will issue a writ of possession to the landlord.
What happens if a tenant is found at fault in a trial?
A writ of possession is issued, requiring the tenant to vacate and pay any owed money.
What rights does a tenant have if the judgment is in their favor?
The tenant can stay on the property, and the landlord is responsible for costs associated with wrongful dispossessory proceedings.
What is required for either party to appeal a judgment in dispossessory proceedings?
They must file the appeal within 7 days of the judgment.
What does Section 57 of the Georgia Residential Landlord-Tenant Act address?
It applies to croppers and servants who are in possession of property in exchange for goods and services, but remain on the property after employment has ended.
What is considered a misdemeanor according to Section 58 of the Georgia Residential Landlord-Tenant Act?
Any false statements made in the affidavit by either the landlord or tenant.
What does Section 59 of the Georgia Residential Landlord-Tenant Act discuss?
The removal of transportable housing from the land if a tenant leaves behind a mobile home after eviction.
What happens if a tenant leaves a transportable home after eviction according to Section 59?
The landlord can have the transportable housing removed from the property at the tenant's expense after 10 days.
What must a landlord do to remove a transportable home left by an evicted tenant?
Place a lien on the transportable housing as part of the removal process.
What is a distress warrant?
A legal document that allows a court officer to take back the property of a tenant if the tenant fails to pay rent.
What power does Section 70 give to landlords regarding distress warrants?
It allows landlords to 'distrain' immediately if the tenant tries to remove property while owing rent.
What must a landlord do to start the distress warrant process according to Section 71?
The landlord must state the facts to the court when rent is owed or if the tenant is trying to remove their property.
What happens after a landlord gives their affidavit in the distress warrant process as per Section 72?
The judge will give a Marshall the right to serve the affidavit and summons to the tenant, who must respond within 5 to 7 days.
What right does Section 73 give to tenants regarding distress warrants?
It allows tenants to pay the full amount of rent owed plus the cost of the distress warrant to dismiss the case.
What options does a defendant have for responding to a distress warrant according to Section 74?
The defendant can answer in writing before the hearing or orally at the hearing, and their answer may include counterclaims and defenses.
What happens if a tenant does not answer the distress warrant according to Section 74?
The court will find in favor of the landlord, and the affidavit will be entered as fact, with all rent owed without a trial.
What must a tenant do to maintain possession of the property during the trial period as per Section 75?
The tenant must pay all rent owed at the time of their answer or provide receipts showing payment to the landlord.
How is the amount of rent determined if it is in dispute during the distress warrant process?
The court will decide the outcome of the dispute, based on the rental contract or the last accepted payment if no contract exists.
What does Section 75 state about money paid through Dispossessory Proceedings?
It states that money paid for the same purpose through Dispossessory Proceedings will satisfy the tenant's requirement to pay rent for their Distress Warrant.
What must a tenant do to move, conceal, or sell their property during the process outlined in Section 75?
Post a bond.
What happens if a tenant does not pay the court the amount they owe according to Section 75?
They will lose the right to their property but can still fight their case.
What is the purpose of the bond a tenant may post according to Section 76?
To allow unrestricted use of their property while facing a Distress Warrant.
What happens if the trial outcome is against the tenant according to Section 77?
The judgment will be in the landlord's favor for any rent owed, damages claimed, and for the Distress Warrant.
What rights does a tenant have if they appeal a decision according to Section 78?
They have the right to keep their property through the full process, as long as they comply with Sections 75 and 76.
What does Section 79 state about the Execution and Levy of a Distress Warrant?
It gives the Marshall, Sheriff, or Deputy the right to advertise and sell the property once a Distress Warrant has been granted.
How is a landlord paid from a granted Distress Warrant according to Section 80?
Through a lien placed on the property at the time of the affidavit.
What does Section 81 state about third-party claims on property that has been distrained?
A third person may make a claim on the property and will have their own rights to a trial.
How is a mobile home classified under Section 82 of the Act?
As a tenant's personal property, subject to all laws regarding Distress Warrants.
What is ownership in severalty?
Ownership in severalty refers to property owned by a single individual or entity.
What is concurrent ownership?
Concurrent ownership is when two or more individuals own a property together.
What are trusts in the context of property ownership?
Trusts are legal arrangements where one party holds property for the benefit of another.
What is a partnership in terms of property ownership?
A partnership is a business arrangement where two or more individuals share ownership and profits of a property.
What is a corporation in the context of property ownership?
A corporation is a legal entity that can own property, separate from its shareholders.
What is a limited liability company (LLC)?
An LLC is a business structure that combines the benefits of a corporation and a partnership, providing limited liability to its owners.
What are syndicates in property ownership?
Syndicates are groups of investors who come together to invest in real estate properties.
What is condominium ownership?
Condominium ownership is a form of property ownership where individuals own individual units within a larger building or complex.
What is cooperative ownership?
Cooperative ownership is a form of ownership where residents own shares in a corporation that owns the property, rather than owning the property directly.
What is time-share ownership?
Time-share ownership is a property ownership model where multiple owners share the rights to use a property for specific periods.
What is the Georgia Time-Share Act?
The Georgia Time-Share Act regulates the sale and management of time-share properties in Georgia.
What is the difference between ownership in severalty and concurrent ownership?
Ownership in severalty refers to sole ownership by one individual, while concurrent ownership involves multiple individuals sharing ownership rights.
What distinguishes a tenancy in common from a joint tenancy?
A tenancy in common allows for ownership shares that can be unequal and can be inherited, while joint tenancy includes equal shares and the right of survivorship.
What is the difference between a condominium and a cooperative?
A condominium is individually owned units within a shared property, while a cooperative involves ownership of shares in a corporation that owns the property.
What is severalty ownership in real estate?
Real property owned by only one person, also known as sole ownership.
What does ownership in severalty allow the owner to do?
The owner can use the property, allow others to use it, lease or rent it, take out a mortgage, sell it, or gift it.
Can a business entity own property in severalty?
Yes, a business entity or a trust can also own property in severalty.
What does it mean to 'devise' real estate?
To leave it to someone else as a bequest in a will after death.
What tools can an owner in severalty use to transfer property upon death?
They can use 'transfer on death' or 'beneficiary' deeds if authorized in their state.
What is a marital interest in real estate?
A legal consideration that some states recognize, requiring a spouse to sign deeds or conveyances even if the property is owned solely by one spouse.
What happens when one spouse owns property in severalty?
The other spouse may still need to sign deeds or conveyances due to their marital status.
In the example provided, who owns the property after the quit claim deed is executed?
John owns the property in severalty.
If John is married but his wife is not listed on the title, how is the property owned?
The property is still owned by John in severalty.
What is community property?
Property acquired by husband and/or wife during a marriage when not acquired as the separate property of either spouse, with equal rights of management, alienation, and testamentary disposition.
What is joint tenancy?
Undivided ownership of a property interest by two or more persons, each having a right to an equal share and a right of survivorship.
What does partition refer to in real estate?
A division of real or personal property or the proceeds therefrom among co-owners.
What is the right of survivorship?
The right of a surviving tenant or tenants to succeed to the entire interest of the deceased tenant, a distinguishing feature of joint tenancy.
What is tenancy by the entireties?
Ownership of property acquired by a husband and wife during marriage, which is jointly and equally owned, becoming the property of the survivor upon the death of one spouse.
What is tenancy in common?
Co-ownership of property by two or more persons who each hold an undivided interest without right of survivorship; interests need not be equal.
What happens to a deceased owner's share in a tenancy in common?
It does not automatically pass to the other owners but instead passes according to their Will.
What is concurrent ownership in real estate?
Ownership of real estate by more than one owner, which can take different forms including tenancy in common and joint tenancy with rights of survivorship.
What is the nature of ownership in a cooperative compared to a condominium?
Cooperative ownership is considered personal property, while condominium ownership is considered real property.
What is required for a real estate developer to create a cooperative?
The developer must file an offering plan and issue shares of stock (the proprietary leases).
What financing options do people have when buying into a cooperative?
They can buy shares outright or take out a 'share loan', similar to a mortgage.
How are cooperatives managed?
By a board of directors that makes decisions about improvements or repairs.
What is a monthly fee that residents of a cooperative apartment unit pay?
A monthly maintenance fee, similar to condo association fees.
Why might cooperatives be more attractive than renting for some people?
Particularly in metropolitan areas where the cost of living is higher.
Who is generally responsible for maintaining the interior of their units in cooperatives?
Both condo owners and cooperative residents.
What does a corporation do in the context of a cooperative?
The corporation is the owner of the property deed and issues shares of stock for each unit.
What happens when a resident decides to move from a cooperative?
They can re-sell their shares back to the corporation, terminating their lease.
What is the relationship between a resident's name and the property deed in a cooperative?
The resident's name never appears on the property deed; the corporation owns the entire building.
What is a condominium in terms of ownership?
An estate in real property where an owner owns an interest in a single apartment/unit and a shared interest in the common areas of the building.
What type of property is a condominium considered?
Real property.
Why is it important for real estate agents to avoid giving legal advice?
Because it can lead to confusion and potential legal issues, as agents are not qualified to provide legal counsel.
What are the four unities of ownership in concurrent ownership?
Unity of Time, Unity of Title, Unity of Interest, Unity of Possession.
What is Joint Tenancy?
Undivided ownership of a property interest by two or more persons, each with a right to an equal share and a right of survivorship.
What occurs to the interest of a deceased owner in a Joint Tenancy?
It is transferred to the surviving owner, not to the deceased owner's heirs.
What is Tenancy by the Entirety?
Ownership of property acquired by a husband and wife during marriage, equally and jointly owned with the right of survivorship.
What is a beneficiary in the context of a trust?
The lender on the security of a note and deed of trust.
What is a testamentary trust?
A trust which arises upon the death of the testator, specified in his or her will.
What is the role of a trustee?
A person who holds title to property for the benefit of another called a beneficiary.
What does a trustor do?
A person who conveys title to a trustee.
Why are trusts commonly used in estate planning?
To avoid probate court and clear title to real estate and other assets after someone dies.
What is one disadvantage of probate court?
It can be expensive and time-consuming, with lengthy restrictions on selling real estate.
What is one reason for using trusts in estate planning?
To avoid the expense and hassle of probate court.
How can trusts manage assets after the owner's death?
By managing and distributing assets years or even decades after the original owner's death.
Why might blended families use trusts?
To ensure a current spouse has necessary assets while protecting children from previous marriages.
What is a common reason for using trusts related to taxes?
To limit the amount of federal and state estate taxes due after death through provisions like 'credit shelter' or 'disclaimer'.
Who is referred to as the grantor in a trust?
The person creating the trust, also known as the trustor or settlor.
What is the role of the trustee in a trust?
The trustee is responsible for managing the trust assets.
Who are the beneficiaries in a trust?
The people who will inherit the trust assets.
Who can act as a trustee?
A family member, a professional trust company, or another professional fiduciary.
What is a living trust?
A trust created by the grantor during their lifetime, where the grantor transfers ownership of assets into the trust to be managed by a trustee.
When do testamentary trusts come into existence?
They do not exist until the grantor dies, with terms outlined in the grantor's will.
What is the primary purpose of a testamentary trust?
To provide for minor children in the event of the parents' premature deaths.
What is a land trust?
A specific type of living trust used to hold title to real estate for the benefit of someone else.
Why might someone create a land trust?
To safeguard privacy and protect real estate from liens, title claims, or other litigation.
In the example provided, who owns the house?
John Doe, as Trustee for the John Doe Living Trust.
What should happen if John is incapacitated?
The trust agreement should specify who will serve as trustee in his stead.
What document can John's attorney provide to show legal authority to act on behalf of the trust?
A certificate of trust.
What is a land trust?
A legal arrangement where a trustee holds title to property on behalf of the beneficiary.
Why did Sally Smith create a land trust?
To limit exposure and legal liability.
Who acts as the nominal buyer in Sally Smith's land trust?
A professional trust company, acting as her trustee.
Do you need to be an expert on trust law to work in real estate?
No, but understanding how trusts work can be helpful.
What is a partnership in business ownership?
An arrangement in which two or more individuals share the profits and liabilities of a business venture.
What are the two main types of partnerships?
General partnerships and limited partnerships.
What is a general partnership?
A partnership where all partners participate in the day-to-day operations of the business.
What is a limited partner in a limited partnership?
A partner who has a financial stake in the business but is not directly involved in running it.
What is the role of general partners in a limited partnership?
They are the partners who actually run the business.
How is ownership established in a partnership?
Through legal documents that establish the percentage of ownership and voting rights for each partner.
In what name is real estate typically owned when held by a partnership?
In the name of the partnership alone.
What is an example of a general partnership in real estate?
Mary, Susan, and Ann opening a consulting firm called MarSuAn and buying real estate in that name.
What is a corporation?
An entity established and treated by law as an individual or unit with rights and liabilities, distinct from its owners.
What is the liability of shareholders in a corporation?
Shareholders are not liable for the company's debts or obligations beyond the risk of losing the value of their investment.
How can a corporation continue to exist?
A corporation can theoretically live forever, with different people managing it over time.
What is the role of directors and managers in a corporation?
They oversee the business operations of the corporation.
How does a corporation own real estate?
A corporation can own assets, including real estate, in the name of the business, with authorized individuals signing on behalf of the corporation.
What happens when a shareholder retires in a corporation?
The other directors can appoint a new authorized signer to transact business for the corporation.
What is the significance of the corporate charter in a corporation?
It specifies who is authorized to sign on behalf of the company for transactions.
In the example provided, who is the authorized signer for financial transactions in the corporation?
Emily is the authorized signer for financial transactions, including real estate matters.
What does LLC stand for?
Limited Liability Company.
What is a key feature of an LLC regarding owner liability?
It limits the owners' liability to the extent of their investment in the company.
What is required to form an LLC?
Owners must file articles of organization or similar documents with the state.
What is a benefit of LLCs in terms of taxation?
They provide pass-through taxation to the owners.
Why might business owners choose to establish an LLC?
They are easy and inexpensive to set up, require minimal ongoing legal maintenance, and protect owners' investments.
In the example provided, what is the name of the LLC established by John and Jane Sample?
Sample Holdings, LLC.
How do LLCs provide privacy protection for owners?
Transactions are done under the LLC's name, not the owners' individual names.
Why are LLCs popular in real estate investment?
They offer ease of purchasing properties and protection against liabilities.
What is a common use of LLCs in real estate?
They are often used for larger projects or syndications to purchase multi-family and commercial properties.
What is a real estate syndicate?
An organization of investors, usually in the form of a limited partnership, pooling capital for acquiring real property interests.
What is the role of the sponsor in a real estate syndicate?
The sponsor serves as the General Partner, responsible for managing the property and bringing members together.
What is the typical equity contribution percentage from the sponsor in a syndicate?
Between 5 percent and 20 percent of the equity.
What is the definition of 'Accredited Investors' according to the SEC?
Investors who have made at least 300,000 jointly) for the previous two years, or have a net worth of at least $1 million.
What type of real estate is typically associated with syndicates?
Commercial, income-producing real estate.
In a real estate syndicate, who typically serves as limited partners?
The investors who provide the remainder of the capital needed to buy the property.
What legal structures are commonly used to form real estate syndicates?
Typically LLCs (Limited Liability Companies) or LLPs (Limited Liability Partnerships).
What does John do in the example of forming a real estate syndicate?
He puts up 10% of the equity needed to purchase a property and finds investors for the remaining 90%.
What do limited partners earn from their investment in a real estate syndicate?
A quarterly return based on the net income collected from the property.
What happens when the property in a syndicate is sold?
Both the general partner and the limited partners share in the profits from the sale.
What are common elements in a condominium?
Spaces in a building shared by residents, such as lobbies, corridors, stairs, and elevators.
What is a condominium?
An estate in real property with an undivided interest in common areas and a separate interest in a unit.
How is tenancy obtained in a cooperative?
By purchasing shares of stock in a corporation that owns the apartment building.
What document is executed to create a condominium?
A declaration of condominium or master deed.
What type of ownership do condominium owners have?
Fee simple title to their individual unit.
What do condominium owners share ownership of?
Common areas of the condominium, such as lobbies and landscaping.
What types of buildings can be condominiums?
Apartment-style, townhouse, duplex-style, or even free-standing single-family homes.
What additional payments do condominium owners need to make?
Monthly dues for the maintenance of common areas, in addition to mortgage and property tax payments.
What is the role of the homeowners' association (H.O.A.) in a condominium?
The H.O.A. manages the condominium and makes decisions about changes, improvements, or repairs to the common areas.
What are the benefits of condominium ownership for someone like Bob?
Bob can own his home without worrying about maintenance tasks like yard work or snow removal.
What type of ownership does Bob have when he buys a condominium unit?
He owns his individual condo unit and has an undivided interest in the common areas of the condo community.
How does cooperative ownership differ from condominium ownership?
In a cooperative, residents buy shares of stock in a corporation that owns the building, rather than owning real property directly.
What is a proprietary lease in the context of cooperative ownership?
It is the lease that entitles shareholders to occupy a specific apartment unit in the cooperative building.
What percentage of the budget does the city expect to collect from property taxes in the example given?
80%.
What is the total assessed value of all taxable properties in the city in the example?
$200,000,000.
What does 10 mills equal in terms of property value percentage?
1 percent of the property's value.
If a home is assessed at $425,000 and the tax rate is 25 mills, how much is owed in property taxes?
$10,625 in annual taxes.
How do you calculate property tax using mills?
Divide the property's assessed value by 1,000 and multiply by the mills rate.
What do condominium unit owners receive at closing?
A deed.
How is tenancy in a cooperative apartment unit obtained?
By purchasing shares of stock in the corporation that owns the building.
What do cooperative owners own instead of their apartment unit?
Shares of stock in the corporation that owns the cooperative building.
Are shares of stock in a cooperative considered real property?
No, they are considered personal property.
What allows cooperative owners to occupy their apartment unit?
A proprietary lease.
What is a condominium arrangement in Georgia?
A condominium arrangement does not refer to a particular architectural style or location; it involves privately-owned spaces and co-owned common areas.
Can non-residential properties be part of a condominium arrangement in Georgia?
Yes, non-residential properties such as a marina slip, parking space, or hotel room can be part of a condominium arrangement.
What responsibilities do condominium owners have regarding their units?
Condominium owners have total control and financial responsibility over the interior spaces of their units.
Who manages the co-owned spaces within a condominium?
The co-owned spaces are managed by an association board.
What must property owners abide by even if they do not join the HOA?
Property owners must abide by covenants and by-laws.
What is the responsibility of homeowners regarding repairs inside their units?
Homeowners are responsible for repairs inside their units.
What does the association assume responsibility for in a condominium arrangement?
The association assumes responsibility for maintenance and repair of the common elements.
What types of properties can be converted to a condominium regime?
Any property type with clearly defined privately-owned spaces and co-owned common areas can be converted to a condominium regime.
What is a condominium association typically established as?
A non-profit corporation to manage common elements of a condominium project.
How is the percentage of ownership in a condominium calculated?
It may involve assigning each unit owner the same percentage or based on square footage or property type.
What are limited common elements in a condominium?
Elements not available to all owners, such as covered parking or outside storage units.
What are common elements in a condominium?
Everything outside the privately-owned unit, including roadways, elevator shafts, and clubhouses.
What do legal documents in a condominium identify?
Specific unit boundaries and common areas.
What governs condominium communities created before 1975 in Georgia?
The Georgia Apartment Ownership Act (AOA).
What governs condominium communities created after July 1, 1975, in Georgia?
The Georgia Condominium Act (GCA).
What is the first document necessary to create an approved GCA condominium?
Declarative Statement.
What must the Declaration of Condominium include regarding unit boundaries?
A written description of legal boundaries for each unit and for common areas.
What is required in the Declaration of Condominium concerning private encumbrances?
A complete list of private encumbrances, liens, rights, use and management covenants, and easements.
What percentage information must be included in the Declaration of Condominium?
Percentage of common area ownership for each unit.
What are limited common elements in the context of a condominium?
Unit assignment per element.
What do floor plans represent in a condominium project?
An accurate, visual representation of the written description of interior legal boundaries.
What do plats represent in a condominium project?
A visual representation of the condominium project exterior.
What is the first step in creating a condominium community?
Developing articles of incorporation.
What information is included in the articles of incorporation for a condominium community?
Initial directors, organization's physical and mailing address, registered agents, and person(s) initiating the incorporation process.
How often are community by-laws referred to in a condominium association?
At least several times every year.
What do community by-laws detail in a condominium association?
Rules governing special called meetings, regular meetings, proxy, notice, quorum and voting requirements, and board member and officer service guidelines.
What must the declarant of a condominium project disclose to first-time buyers regarding oral representations?
Oral representations cannot be relied upon; correct representations should reference the contract and required documents.
What is the time frame in which a buyer can void a condominium contract after receiving required items?
The contract is voidable until at least seven days after all required items have been received by the buyer.
What are some items included in the disclosure package for condominium buyers?
A floor plan, declaration and amendments, articles of incorporation, budget, and statements regarding seller's commitments.
What font requirements are there for disclaimers in the disclosure package?
Disclaimers must be printed in a font not smaller than the largest font in the disclosure package and be bold or in capital letters.
What evidence is provided by a dated, written acknowledgment of receipt signed by the buyer?
It serves as prima facie evidence of the date of delivery of the required items.
What happens if any items are omitted or changed that materially affect the buyer's rights?
The buyer has an additional seven days to void the contract from the original date of signing.
Can any type of property become a unit in a homeowner association?
Yes, any type of property, residential or commercial, can become a unit in a homeowner association.
What is required for an owner regarding the land under improvements in terms of ownership?
The owner must have title or deed of trust to the land.
What must be stored in a safe, accessible place regarding community associations?
Original by-law and Articles of Incorporation documents.
What is required by law when selling condominium properties?
Full disclosure.
Is association membership mandatory for property owners in community associations?
No, it is optional but beneficial.
What type of corporations are most community associations?
Non-profit corporations.
When is the first community association board typically formed in Georgia?
Before the first lot is sold in a new community.
Who typically files articles of incorporation to create a governing body for a community in Georgia?
The developer or a project investor/owner.
What is the usual size of the first community association board?
Typically 3-5 people.
What governs when a developer-appointed board must turn over to an elected board in Georgia?
Specific state laws.
What are the conditions under which the original board will manage the association until turnover?
Voluntary surrender, three years after recording, or 80% of interest sold.
What is the process for turnover from the original board to the elected board?
Schedule a meeting, hold an election.
What must the community corporation do before a turnover meeting?
Notify property owners, choose date/time/place, decide on meeting type, solicit nominations, establish terms of office, determine number of officers.
Why might some declarants prefer a special meeting for turnover?
To limit discussion to creating a new board and avoid negative comments about current management.
What is a preferred strategy for terms of office for directors in a community association?
Establish staggered term lengths.
What is the typical term length for association officers in Georgia?
One year.
What roles does a president typically fulfill in a community association?
Presides over meetings, sets agendas, appoints committees, and signs legal documents.
What responsibilities does a vice president have in a community association?
Assumes presidential duties when the president resigns or cannot perform their duties.
What is the role of a secretary in a community association?
Maintains books and records, handles internal and external communication, and sends notices of meetings and events.
What are the main duties of a treasurer in a community association?
Maintains budgets, files tax returns, confirms payments for expenses, and provides financial statements to owners.
What is a potential issue with continuous turnover of board members in a community association?
It could lead to inefficiencies as new members learn the rules and regulations.
Can officers of a community association be non-board members according to Georgia law?
Yes, unless bylaws specifically prevent it.
What tasks might a community association manager (CAM) perform?
Paying bills, sending meeting notices, and taking meeting notes.
What are the responsibilities of managing common area elements in a community association?
Maintaining common area elements and property, managing social media and website platforms, depositing payments received, and collecting assessments.
Is compensation for non-profit corporation board members mandatory?
Compensation is optional for non-profit corporation board members.
What must community associations issue to board members with a taxable benefit of $600 or more?
A 1099 form.
Can board members of a community association be compensated with cash or in-kind payments?
No, paid board members should only be paid via association check.
What is required to remove a board member according to standard non-profit corporate code?
A simple majority vote of membership during a meeting called specifically for removal.
What happens if a board-elected director fills a vacancy?
They can be removed for cause by the board.
How can a vacancy on the board be filled?
A positive member vote of corporation membership can fill a vacancy on the board.
What can the bylaws state regarding the removal of a director for missing meetings?
Bylaws can state that any director may be removed for missing three consecutive meetings.
What can members do if a director misses two meetings?
Members can vote to remove the director with or without cause.
What is often a challenge for associations regarding decision-making?
Achieving a quorum.
What does section 14-3-824 of the Georgia Code state about board actions?
No action is permitted unless a quorum is present at the time of the vote.
How is a majority defined in the context of board voting?
A majority is based on the votes cast, not the total body of members present.
In a scenario with 13 directors, how many votes are needed to take action if 9 are present?
Only 5 votes are needed to take action, as it is the lowest count necessary for a majority opinion.
What does GCA stand for in the context of community associations in Georgia?
Georgia Condominium Act
What does POAA refer to in community associations?
Property Owner Association Act
What is an essential part of good governance in managing an HOA or POA?
Properly handling money.
What are the two main accounting methods used by organizations for financial management?
Cash accounting method and accrual basis accounting method.
What is the cash accounting method?
It records expenses and revenue on the date of occurrence.
What is the accrual basis accounting method?
It records transactions on the scheduled date of payment or income.
What is the hybrid accounting method?
It uses a combination of accrual basis and cash accounting methods.
Why do community associations issue periodic financial statements?
To inform owners and investors, and for lenders or potential buyers to assess credit worthiness.
What are examples of financial statements issued by HOAs or POAs?
Annual budget, income statement, profit and loss statement.
What do income statements reflect for a corporation?
The corporation's profitability for a given period.
What does a balance sheet represent?
The assets, liabilities, and shareholder equity at a specific moment in time.
How often can a balance sheet be generated?
At any time, as often as necessary.
What is the purpose of budgeting for a Chief Financial Officer?
To inform spending decisions and help set reasonable membership fees and assessments.
What is the process of budgeting?
Calculating expenditures and income for the entire year in advance.
What is zero-based budgeting?
A strategy where no historical data is used, and each line item is established based on projected necessity.
What is the significance of the property labeled 'LOT 101' in the survey?
It identifies a specific parcel of land within the surveyed area.
What does the length of '40'' indicate in the survey?
It indicates the length of a property line or boundary.
What type of structures are mentioned in the survey?
1 Story Garage, 1 Story Frame (Aluminum Siding), and 1 Story & Attic Frame (Vinyl Siding).
What is the purpose of including distances and angles in a survey?
To accurately define the boundaries and features of a property.
What does 'XYZ AVE.' represent in the survey?
It represents an adjacent street to the property being surveyed.
What does the notation 'N34-55-50"E' signify?
It signifies a specific direction and angle for a property boundary line.
What is the Government Survey Method used for in real estate?
It is used for legal descriptions of land by dividing it into a grid system.
What are the key components of the Government Survey Method?
Principal meridian, baseline, township values, range values, and sections.
How is a township defined in the Government Survey Method?
A township is a 6-mile by 6-mile area, which contains 36 sections.
What is the relationship between sections and townships in the Government Survey Method?
Each township is divided into 36 sections, with each section being 1 mile by 1 mile.
What do the terms T2N and T1S represent in the Government Survey Method?
T2N represents a township located 2 tiers north of the baseline, and T1S represents a township located 1 tier south of the baseline.
What does the term 'principal meridian' refer to in the Government Survey Method?
It is a reference line running north-south used to define land locations in the survey system.
What is the significance of the baseline in the Government Survey Method?
The baseline is a reference line running east-west used to define land locations in the survey system.
What is a condominium in real property terms?
An estate with an undivided interest in common in a portion of real property and a separate interest in a unit.
What do condominium owners share ownership of?
Common areas such as yards, hallways, driveways, and the structure of the building.
What part of the condominium does the owner individually own?
The inside of the unit, typically from the wall surface inward.
What is included in the legal description of a condominium?
The word condo or condominium, Tract number, Lot number, Unit number, and Building number.
Why is it important to determine if a property is a condominium?
It affects insurance, financing, and other factors for a buyer.
What is the best way to determine if a property is a condominium?
By checking the legal description on the deed to the property.
What is a survey in real estate?
A survey is the process of measuring and determining the area of a parcel of land, or the blueprint that describes the measurements and land area.
Who performs surveys?
Surveys are performed by licensed surveyors.
What method do surveyors generally use to describe property?
Surveyors generally use the metes and bounds method.
What information does a survey provide about a property?
A survey describes lot lines, angles, dimensions, building orientations, easements, setbacks, and landscaping.
What can happen if an association does legal actions out of order?
Owners may counter-sue, potentially costing the association thousands to defend in court.
What should a comprehensive collections policy include regarding late fees?
The date late fees apply and the amount of the late fee, which could be a fixed amount or a percentage.
When should a collections policy be established by the board?
As quickly as possible after assuming management rights from the developer.
What should be done before a collections policy takes effect?
The policy should be crafted based on current bylaws and covenants, or documents should be properly amended.
What factors are considered in determining when interest will be charged on assessments?
The date interest will be charged and the way it will be calculated, such as simple interest or compounded daily or annually.
What is the significance of the date of acceleration in property assessments?
It indicates when the total amount due becomes payable after a default.
What is the purpose of sending notices to delinquent property owners?
To inform them of their delinquency and the actions that may follow, such as assessments or legal action.
What triggers the hiring of an attorney in the context of property assessments?
A specific threshold that indicates the need for legal action due to delinquency.
What do the GCA and POAA stipulate regarding attorney fees?
Attorney fees are collectible if assessments and collection processes follow covenants and bylaws.
How can condominium boards reduce legal liability?
By ensuring that policies accurately reflect covenants, bylaws, and Georgia law.
What is the benefit of higher owner compliance rates in condominium associations?
It generally leads to smoother management and fewer legal issues for the association.
What is a time-share in real estate?
A form of subdivision of real property into rights to the recurrent, exclusive use or occupancy for a specified period of time.
What type of properties are time-shares typically located in?
Areas that are popular with tourists or people on vacation.
What does ownership of a time-share in the United States signify?
Ownership rights to use or occupy a lot, parcel, unit, or segment of real property, evidenced by a deed or title showing a fee simple interest.
How is time-share ownership typically structured?
Allows the owner to use the property on an annual or recurring basis for a specific period of time.
What is a common duration for time-share interests?
Most time-share interests are sold as one-week interests.
What is a 'floating' time basis in time-share ownership?
It allows the owner to use their week any time of the year, subject to availability at their resort.
What is one financial advantage of buying a time-share?
It is significantly cheaper than purchasing a separate vacation property.
What do time-share owners typically pay annually?
An annual maintenance fee to their resort.
What is a benefit of the exchange system for time-share owners?
It allows owners to trade time-share weeks and vacation in other locations.
How did Tom and Diane utilize their time-share ownership?
They exchanged their time-share in Florida for a similar property in Spain for their vacation.
What is a time-share program as defined by the Georgia Time-Share Act?
An agreement for the use, occupancy, or possession of real property divided into predetermined and recurring time periods.
What are the two types of ownership arrangements in a time-share program?
Fee simple estate and leasehold arrangement.
What is the rescission period for a time-share contract in Georgia?
Seven days from entering into the contract.
What must a time-share program developer file with the Superior Court?
A set of required documents including county name, legal description of the property, and method for calculating common expenses.
What year was the Georgia Time-Share Act adopted?
What is the significance of the Georgia Time-Share Act amendments in 1995?
They updated the provisions governing time-share programs in Georgia.
What is an estate in fee simple?
An absolute ownership characteristic with no restrictions on use or tenancy, other than those issued by the government.
What is a leasehold arrangement in the context of time-share programs?
An ownership defined in years, such as a 99-year lease that may expire or be renewed.
What rights do time-share buyers have under the Georgia Time-Share Act?
The same rights as condominium buyers, including the right to rescind a contract within seven days.
What is required in the initial document package for a time-share program?
It must include county name(s), legal description of the property, identification of timeshare estates, and method for calculating common expenses.
What documentation must developers provide to prospective buyers under the Georgia Time-Share Act?
Written documentation that describes the property care and maintenance plan.
What is required of developers regarding real estate agents under the Georgia Time-Share Act?
They must only use licensed real estate agents to make the program and negotiate contracts.
What must marketing promotions and contests comply with according to the Georgia Time-Share Act?
The Fair Business Practices Act as administered by the Office of Consumer Affairs.
What does the Time-Share Act prohibit regarding advance fees?
It prohibits any person from charging an advance fee when helping an owner resell a timeshare interval.
To whom must advertising fees be paid according to the Time-Share Act?
To a non-affiliated third-party, not the agent brokering the sale.
Can a real estate agent charge upfront fees for advertising under the Time-Share Act?
No, a real estate agent cannot ask for money upfront to run ads.
What must timeshare documents create according to the Time-Share Act?
An association of timeshare unit owners to manage and operate the program.
What responsibilities does the association of timeshare unit owners have?
Create bylaws, arrange for a program manager, and establish and collect assessments for shared expenses.
What is a legal description of land?
A formal description that defines the boundaries and location of a parcel of land.
Can you provide an example of a legal description of land?
Examples include metes and bounds or a lot and block description.
What are Base and Meridian in land description?
Imaginary lines used by surveyors to find and describe the location of private or public lands.
What is a Government Survey?
A method of specifying the location of a parcel of land using prime meridians, base lines, standard parallels, guide meridians, townships, and sections.
What does Lot and Blocks refer to in legal descriptions?
A legal description of land used for plotted properties, stating the number, lot, and block in a particular subdivision.
What is Metes and Bounds?
A term used in describing the boundary lines of land, setting forth all the boundary lines together with their terminal points and angles.
What is a Section in land measurement?
A section of land established by government survey, containing 640 acres and is one mile square.
What is the purpose of a Survey?
The process by which a parcel of land is measured and its area is ascertained; also the blueprint showing the measurements, boundaries, and area.
What are Townships in the context of land survey?
A territorial subdivision six miles long, six miles wide, containing 36 sections, each one mile square, located between two range lines and two township lines.
Why are natural boundaries not always reliable for land description?
Because they can change over time, such as when a tree blows down or a stream changes course.
What is a limitation of using street addresses for property identification?
Street addresses can change, leading to confusion about property locations.
What is the purpose of a legal description in real estate?
To accurately identify the location of a property.
What are the consequences of using an incorrect legal description?
It can lead to property disputes, such as a building straddling two different properties.
What should a legal description be detailed enough for?
For a surveyor to locate the property using that information alone.
In what documents does a legal description appear?
Sales contracts, mortgage documents, deeds, title information, and more.
What are the three common methods used to describe real estate?
Metes and bounds, government survey, and lot and block.
What does 'metes' refer to in the metes and bounds system?
The length or measurements of the boundary lines.
What does 'bounds' refer to in the metes and bounds system?
The description of the boundary lines, often requiring great accuracy.
What is the point of beginning (POB) in metes and bounds?
The point where the metes and bounds measurement begins and ends.
What are monuments and benchmarks in the context of metes and bounds?
Monuments are visible markers, and benchmarks refer to elevation.
What is the significance of returning to the POB in a legal description?
To close the geometric description and ensure validity.
What is the starting point in a legal description called?
POB (Point of Beginning).
What does the legal description indicate after the POB?
How far and in which direction to go from that point.
What is an example of a compass degree bearing?
S23°W 200 feet.
What system began in 1785 for land description?
The government survey system.
What are the two main lines used in the government survey system?
Baseline and principal meridian.
What are the six-mile by six-mile squares called in the government survey system?
Townships.
How many sections are in a township?
36 sections.
What is the size of a section in acres?
640 acres.
How is the numbering of sections organized in the government survey system?
Alternating lines that go in opposite directions, starting from the top right corner.
What are the north-south lines called in the government survey system?
Range lines.
What are the east-west lines called in the government survey system?
Township lines.
What is the purpose of guide meridians in the government survey system?
They run north from the baseline at 24-mile intervals east and west from the principal meridian.
What is the lot and block survey system used for?
To locate and identify land, usually lots, in subdivisions.
What does a plat map delineate?
The lots in a subdivision.
What is included in a plat map besides lots and blocks?
Details like streets, sections, monuments, and public easements.
What is an example of a legal description in a subdivision?
Lot 2 of Block 3 of the Mountain River Subdivision plat as recorded in Map Book 47, Page 5.
What is the purpose of a preliminary plat map?
To submit to the city or county for review before subdivision approval.
What are the three basic things that surveying land depends on?
Distance, elevation, and angles.
How would you describe a rectangular lot measuring 160 feet by 120 feet?
Start at the southwest corner, go 120 feet north, turn 90 degrees east for 160 feet, turn 90 degrees south for 120 feet, and turn 90 degrees west for 160 feet back to the starting point.
How would you outline a triangular parcel in surveying?
Start at the southwest corner, go 130 feet north, turn 45 degrees southeast for 130 feet, then turn 45 degrees southwest back to the starting point.
What is the importance of understanding property surveying principles for a real estate professional?
It helps in locating lot boundaries and understanding legal descriptions for buyers and sellers.
Who should perform a reliable verification of lot lines?
Licensed surveyors or engineers.
Why is an accurate description of property important?
It helps buyers and sellers understand what they are looking at when reviewing plat maps or legal descriptions.
What is the metes and bounds method used for in real estate?
It is used for legal descriptions of property boundaries.
What does the term 'bearing' refer to in a survey?
It refers to the direction of a property line, expressed in degrees, minutes, and seconds.
What types of loans are commonly used for financing single-family residences?
Common types of loans include conventional loans, FHA insured loans, and VA guaranteed loans.
What is the purpose of usury laws in Georgia?
Usury laws in Georgia are designed to protect borrowers from excessively high-interest rates on loans.
What is the first step in the financing process for a single-family residence?
The first step is the loan application process, which includes completing the Uniform Residential Loan Application.
What is the qualification process in financing a single-family residence?
The qualification process involves assessing the borrower's financial situation to determine their ability to repay the loan.
What is the underwriting process in financing a single-family residence?
The underwriting process involves evaluating the loan application and supporting documents to assess risk and approve the loan.
What happens during the closing of a loan for a single-family residence?
During closing, the final paperwork is signed, funds are disbursed, and ownership of the property is transferred to the buyer.
What is the difference between conventional loans and FHA insured loans?
Conventional loans are not insured or guaranteed by the government, while FHA insured loans are backed by the Federal Housing Administration.
What is the difference between PMI and MIP?
PMI (Private Mortgage Insurance) is typically required for conventional loans when the down payment is less than 20%, while MIP (Mortgage Insurance Premium) is required for FHA loans regardless of the down payment amount.
What are at least four types of loans that a homeowner may receive?
Conventional loans, FHA loans, VA loans, and USDA loans.
What is the difference between a pre-qualification letter and a pre-approval letter?
A pre-qualification letter is an estimate of how much a borrower can afford based on self-reported information, while a pre-approval letter is a more formal process that involves verification of financial information and creditworthiness.
What is yield in the context of lending?
The interest earned by an investor on an investment or by a bank on money it has loaned, also called return.
What is the primary goal of lenders in real estate transactions?
To turn a profit.
Why do real estate agents need to understand lender considerations?
Because lenders play a significant role in determining how much a buyer can offer or how much a seller must list their home for sale.
What do lenders consider before making lending decisions?
They weigh the risk against the profit margins they set.
How do lenders primarily profit from loans?
Through interest rates, which are fees charged to the borrower for borrowing money.
What is the lender's perspective on a loan transaction?
They view it as an investment opportunity rather than a personal decision about the borrower's worthiness.
What is a key factor lenders assess before approving a loan?
Whether the borrower will be able to repay the debt.
What must a lender weigh when considering a loan?
The yield they will receive compared to the amount of risk they are taking on.
What is the relationship between risk and potential reward in investments?
High risk equals high potential reward, but also a higher likelihood of failure.
How do lenders determine the risk a borrower presents?
By analyzing the creditworthiness of the borrower, often through credit scores.
What factors influence a borrower's credit score?
Timely payments, amount of debt, and history of borrowing and repaying on time.
How do lenders primarily make money on home loans?
Through interest applied over time on the home loan.
When should a buyer consider using a survey?
A buyer should consider using a survey to know exactly what they are purchasing and to confirm property boundaries.
What happens if survey stakes are not visible?
If survey stakes are not visible, the seller may have to pay to get the property resurveyed.
What might a buyer do if they find discrepancies in a new survey?
The seller would need to resolve the inconsistencies and usually pay for the survey.
What could happen if a survey reveals a fence is on a neighbor's land?
If it's a minor encroachment, parties might leave it as is; otherwise, they may need to resolve the issue.
What should be done if a fence is replaced or alterations are made to the land?
A new survey should be done to protect the parties and ensure everything is as expected.
What are the types of deeds mentioned in Chapter 13?
Warranty Deed, Special Warranty Deed, Quitclaim Deed, Executor's Deed, Administrator's Deed.
What is a key element of a deed?
Delivery and Acceptance.
What is the purpose of acknowledging and recording a deed?
To provide public notice and establish the validity of the deed.
What is a Security Deed?
A type of deed that secures a loan on real property.
What are transfer taxes?
Taxes imposed on the transfer of property ownership.
What does involuntary alienation refer to?
The transfer of property without the owner's consent, often through legal processes.
What is meant by 'chain of title'?
The history of ownership of a property, showing the sequence of title transfers.
What is marketable title?
A title that is free from significant defects and can be readily sold or mortgaged.
What are title problems and methods to 'quiet' them?
Issues that affect the ownership of property and methods to resolve or clear these issues.
What is the Uniform Commercial Code?
A set of laws that govern commercial transactions in the United States.
What are two types of deeds?
At least two types of deeds include warranty deeds and quitclaim deeds.
What are two elements found in a valid deed?
Two elements found in a valid deed include the grantor's signature and a legal description of the property.
What is the difference between actual and constructive notice?
Actual notice is direct knowledge of a fact, while constructive notice is information that is legally presumed to be known, even if not directly communicated.
What is a Bargain and Sale Deed?
A deed that recites a consideration and purports to convey real estate, with a covenant against the grantor's act ensuring the grantor has not harmed or clouded the title.
What is a Deed?
A written instrument that conveys title to real property from one person (grantor) to another (grantee) when properly executed and delivered.
What does a Grant Deed assure the grantee?
That the grantor has not already conveyed the land to another and that the estate is free from encumbrances placed by the grantor.
Who is a Grantee?
A person to whom a grant is made.
Who is a Grantor?
A person who transfers his or her interest in property to another by grant.
What is a Quitclaim Deed?
A deed to relinquish any interest in property which the grantor may have, without any warranty of title or interest.
What is a Sheriff's Deed?
A deed given by court order in connection with the sale of a property to satisfy a judgment.
What does a Special Warranty Deed guarantee?
Warrants or guarantees the title only against defects arising during the grantor's ownership of the property, not against defects existing before that time.
What is Voluntary Alienation?
Transfer of title to an asset with the consent of the owner.
What does a Warranty Deed contain?
Warranties of title and quiet possession, with the grantor agreeing to defend the premises against lawful claims of third persons.
What is the first rule of real estate conveyance?
You can only convey that which you own.
What happens if a piece of property is pledged as collateral for a loan?
The owner has given up some rights in her bundle of rights.
What is a deed?
A document that conveys or transfers an interest in real property.
What are the two purposes of a deed?
To transfer ownership of land and to prove ownership of a parcel of real estate.
Who are the two parties involved in a deed?
The grantor and the grantee.
What is the role of the grantor in a deed?
The grantor is the person selling the land.
What is the role of the grantee in a deed?
The grantee is the person buying the property.
What does the deed contain?
Names of the grantor and grantee, date of transaction, legal description of the real estate, and the signature of the grantor.
What are warranties in a deed?
Promises about the property made by the grantor regarding ownership and conditions.
Can legal entities own and convey property?
Yes, legal entities like corporations, LLCs, trusts, and partnerships can own and convey property.
What is a general warranty deed?
The most common type of deed in real estate transactions that provides the most protection for the buyer, ensuring no other claims of ownership, no encumbrances, and valid warranties based on prior ownership.
What are the key features of a special warranty deed?
It has fewer warranties than a general warranty deed, where the grantor covenants that the property is not encumbered by mortgages or liens and that they have title to the property.
What does a grant deed assure the grantee?
That the property has not been sold to anyone else and that the grantor has ownership of the property with no liens or encumbrances.
What is the main characteristic of a bargain and sale deed?
The grantor warrants that they have done nothing to harm or cloud the title, but there may be unresolved issues from prior owners.
What is the least protective type of deed for buyers?
A quitclaim deed, where the grantor conveys whatever interest they have, which could be none, urging buyers to conduct a thorough title search.
What is the role of courts in property transfers?
Courts can get involved in real estate disputes and have the power to order the seizure, division, or transfer of real estate based on state law or contracts.
What is the role of the sheriff in a court-ordered sale of real property?
The sheriff conducts the sale, usually through an auction on the courthouse steps, and conveys the property to the buyer by sheriff's deed.
What happens when a court issues a money judgment against a defendant who refuses to pay?
The court can order a sheriff's sale of the defendant's real estate to satisfy the judgment.
What is a tax deed?
A tax deed is issued when property owners do not pay their property taxes, allowing a county official to sell the property to pay off the taxes.
What is a tax lien and how does it affect a property sold under a tax deed?
A tax lien is a 'super-lien' that allows the government to auction off the property even if there are other mortgages or liens; the buyer takes the property subject to all existing liens.
What is a Trustee's Deed?
A Trustee's Deed is used after a foreclosure sale, transferring ownership from the bank to the new owner with limited warranties.
What is the difference between a Trustee's Deed and a Deed Under Power?
Both are types of foreclosure deeds, but a Trustee's Deed is used with a Deed of Trust, while a Deed Under Power is used with a security deed; both have limited warranties.
What is the significance of understanding different types of deeds in real estate?
Understanding the nature and types of deeds helps in navigating the complexities of real estate transactions.
What is an acknowledgment in the context of a deed?
A formal declaration made before an authorized person by a person who has executed an instrument stating that the execution was his or her free act.
What does consideration refer to in a deed?
Anything given or promised by a party to induce another to enter into a contract, such as money or personal services.
What is the role of a grantee in a deed?
A person who receives title to real property by deed.
What is a grantor in the context of a deed?
A person who conveys title to real property by deed.
What is the habendum clause in a deed?
The 'to have and to hold' clause which may be found in a deed.
What is a legal description in a deed?
A land description recognized by law that allows property to be located by reference to government surveys or approved recorded maps.
What are the two main purposes of a deed?
To transfer ownership of real estate and to tell the world who currently owns a parcel of real estate when properly recorded.
Why is it important to know the title of a deed?
It indicates whether more detailed research, like a title search or survey, is needed before the transaction goes forward.
What is the first legally required element of a deed?
The deed must be in writing.
What is the purpose of requiring a deed to be in writing?
To protect against fraud and people stealing land, as established by the Statute of Fraud.
What is a grantor in the context of a deed?
The person conveying title to the property who must have legal capacity to do so.
What happens if a grantor does not own the interest they are conveying?
There hasn't been a transfer of title, and the deed is meaningless.
Who can represent a corporate entity in a real estate transaction?
A person with legal capacity, such as a trustee for a trust or an authorized officer for a corporation.
What must happen for a deed to effectively transfer title to a property?
The deed must be conveyed, meaning handed over to the grantee.
Why is the date on a deed important?
It establishes the order of title history and determines ownership based on when the property was conveyed.
What information is included in a deed regarding the parties involved?
The deed lists the grantor (the seller) and the grantee (the buyer).
What must be noted about the capacity of the grantor and grantee?
It is important to ensure that they have the legal capacity to buy or sell the property; otherwise, there may be issues with the deed.
What is required for a contract to be valid in a real estate transaction?
There has to be consideration, meaning the exchange of something of value.
What must the deed state regarding the exchange of value in a property transaction?
The deed must state that something of value was given by the grantee to the grantor in exchange for title to the property.
What is a nominal consideration in real estate transactions?
It refers to a symbolic amount, such as '$10 paid in hand', used to make a valid contract.
What is the granting clause in a deed?
It states that the property is being transferred, using wording like 'the grantor does hereby convey...'.
What does the habendum clause specify in a deed?
It specifies the type of interest being conveyed to the grantee, usually a 'fee simple' interest.
What must every deed contain regarding the property being conveyed?
A legal description of the property being conveyed.
What is the purpose of the notarized signature of the grantor on a deed?
To verify that the person signing is the grantor listed on the deed, with identification confirmed by a notary public.
What additional requirement may some states have for the signature on a deed?
Some states require one or two non-notary witnesses in addition to the notary signature.
What is the purpose of a notary in the deed process?
To verify the identification of the person signing the deed.
What happens to property when a person dies intestate?
Property passes by state law known as descent.
Who usually receives property first when someone dies intestate?
The deceased's spouse and children.
What must be filed to show the transfer of property from a deceased person?
A deed must be filed.
What is the final outcome of the deed recording process?
It completes the process of transferring title to the new owner.
What is acceptance in the context of real estate transactions?
The act of agreeing or consenting to the terms of an offer, establishing the 'meeting of the minds' essential for a contract.
What must occur for title ownership of real estate to pass from one person to another?
There must be delivery and acceptance of a written deed.
What is required for the grantor's act of signing a deed to be sufficient?
The grantor must deliver the deed to the grantee, who must accept it.
How can delivery of the deed be accomplished?
Delivery can be done through any means, such as mailing, hand delivery, or through an intermediary.
What happens to the deed after it is recorded by the county clerk?
It is returned to the closing attorney, who sends it to the grantee.
What does acceptance of the deed require beyond just taking hold of it?
There must be a 'meeting of the minds' where the grantee understands and agrees to the terms of the deed.
What can happen if there is no meeting of the minds regarding the deed?
The transaction may be voided and have no legal significance.
What must the grantee understand when accepting the deed?
The specific property being transferred, the warranties and covenants made by the grantor, and the rights being transferred.
What is an acknowledgment in the context of real estate documents?
A formal declaration made before an authorized person, stating that the execution of a document was done freely by the person who executed it.
What is the role of a notary public in the acknowledgment process?
A notary public confirms that the party signing the deed is the grantor and that the signing is done voluntarily, placing their official stamp or seal on the document.
What is the purpose of recording a deed?
To place a document on file with a public official for public notice, indicating who owns a parcel of real estate and the date of the transaction.
What does the recording process involve?
Copying and entering a deed into the records of the county office of real estate records, providing notice to the public of the title transfer.
What happens when a deed is recorded?
It is considered that everyone is on notice that the title to the property has transferred to the new owner.
What information is typically stamped on a recorded deed?
The date and time of recording, along with a deed book and page number.
Who usually maintains real estate records in a county?
Typically a county officer known as the County Recorder or, in some states, the superior court clerk.
What is the significance of the notary's seal on a deed?
It verifies the authenticity of the acknowledgment and confirms that the grantor signed the deed voluntarily.
What is the significance of the book number and page in a deed?
It indicates where the deed is saved and appears in the book.
What method have most counties in the United States moved to for recording deeds?
Electronic recording.
What method do many counties still maintain for cataloging real estate records?
The class deed book and page method.
What is required for a clerk to record a deed?
Acknowledgement of the deed.
What is a security deed in real estate financing?
A security deed is a legal document that secures a financing instrument for real estate loans, transferring title to the property to the lender to secure the debt.
How does a security deed differ from a mortgage?
A security deed transfers title to the property, while a mortgage only creates a lien on the property.
What are the benefits of using a security deed for lenders?
It minimizes risk in case of default, allows for non-judicial foreclosure, and speeds up recovery of real estate collateral.
What rights does a borrower retain when a security deed is used?
The borrower retains equitable title, the right of redemption, possession, and all rights of ownership except those that interfere with the lender's legal title.
What is hypothecation in the context of a security deed?
Hypothecation is the process where the owner/borrower appears to 'own' the property but is limited by the lender's rights.
What does Georgia Code section 44-14-60 state about security deeds?
It states that a security deed is an absolute conveyance of title, but the borrower has the right to have the property reconveyed upon repayment of the debt.
What happens when the debt secured by a security deed is satisfied?
The lender marks the original security deed as paid and updates the public records; reconveyance is only required if the original deed is lost.
What key provisions are included in a security deed?
It includes a statement securing indebtedness, a power of attorney for foreclosure, and a statement about canceling the deed upon debt payment.
Who are the two parties to a security deed?
Lender/Grantee and Borrower/Grantor.
What rights does the Lender/Grantee have in a security deed?
Legal title without the right of possession nor obligations of ownership.
What rights does the Borrower/Grantor retain in a security deed?
Equitable title to the property and the right of possession and redemption upon repayment in full.
What are the formal requirements for a security deed to be valid?
Identification of Grantor and Grantee, sufficient language conveying property, valid legal description, proper execution, proper attestation, and effective delivery.
What is the purpose of escrow for taxes and insurance in a security deed?
To protect the lender from the possibility of a tax lien for unpaid taxes and to cover uninsured losses.
What happens if a security deed lacks proper attestation?
It will not affect the validity of the deed between the Grantor and Grantee.
What is the typical length of a security deed?
It can range from a complex 50 pages to a simple single page.
What does effective delivery mean in the context of a security deed?
The Grantor must put the deed into the possession of the Grantee or the Grantee's agent with the intention that it shall pass title to the Grantee.
What happens if a building is destroyed and there is no insurance regarding the lender's rights?
The lender will be able to foreclose on the land only, which will not satisfy the debt on foreclosure.
What is a Due on Sale Clause?
It gives the lender the right to call the entire loan balance due upon the sale or ownership transfer of the property.
What does the Waiver of Homestead entail for the borrower?
The borrower waives the right to claim the benefit of any homestead laws that would affect the rights of the lender to collect the debt.
What is a Non-Recourse Provision in a security deed?
It limits a lender's remedies to foreclosure, meaning the lender cannot sue for a deficiency judgment after the foreclosure sale if the sale price is less than the balance due.
What are Release Provisions in a security deed?
They allow the borrower and lender to negotiate for the lender to release certain tracts of acreage as the loan is paid down, often used by developers.
Is there a legal definition of default in real estate loan instruments?
No, there is no legal definition of default, allowing the borrower and lender to negotiate what acts will constitute a default.
What is a promissory note?
A written instrument in which a borrower promises to pay a lender a sum of money under certain terms and conditions.
What is included in the promise to pay in a promissory note?
A promise by the borrower to repay the debt to the lender.
What does the 'Payee' refer to in a promissory note?
The person or entity who will be receiving the payments.
What information does a promissory note contain regarding interest and payments?
The annual rate of interest, the date when interest begins to accrue, and the amount and due dates of payments.
What is defined as the failure to make payments when due in a loan agreement?
Default.
What may lenders charge if payments are not made on time?
Late fees.
What does an acceleration clause in a loan agreement do?
Makes the entire amount of the note due upon default.
What are recourse notes?
Promissory notes where the lender may look to either the promissory note or the security deed to satisfy the debt.
What is the difference between recourse and nonrecourse notes?
In a recourse note, the lender can sue the borrower or foreclose, while in a nonrecourse note, the lender's remedy is limited to foreclosure only.
What happens if a nonrecourse loan's foreclosure sale does not cover the total debt?
The borrower would not be liable for any deficiency resulting from the foreclosure.
Do borrowers typically have a right of prepayment in residential loans?
Yes, most residential loans allow prepayment.
What may lenders charge in commercial loans regarding prepayment?
A prepayment penalty.
What is the real estate transfer tax?
A tax paid to the local government when real property is transferred from one owner to another.
When is the real estate transfer tax collected?
When the deed vesting title is recorded in the county real estate records.
Who typically pays the real estate transfer tax?
Usually the buyer or grantee of the deed.
Can the responsibility for paying the transfer tax be negotiated?
Yes, it can be negotiable as part of the purchase and sale agreement.
Who collects the real estate transfer tax at closing?
The closing attorney or escrow agent.
What happens if the real estate transfer tax is not paid?
The vesting deed cannot be recorded and unpaid taxes become a liability for the new owner.
How is the amount of transfer tax typically calculated?
As 1,000.00 of the sale price.
Can transfer tax be avoided in the case of a gift?
Yes, transfer tax may be avoided where there is no purchase price.
Why is it important to collect and pay the correct amount of transfer tax?
Unpaid taxes are a liability for the new owner.
What is adverse possession?
A method of acquiring title to real property through possession for a statutory period under certain conditions by a person other than the owner of record.
What is involuntary alienation?
The transfer of title to real property as a result of lien foreclosure sale, adverse possession, bankruptcy, or condemnation.
What is the most common type of involuntary alienation?
Mortgage foreclosure.
What is the role of the 5th Amendment in involuntary alienation?
It states that property cannot be taken without due process of law.
What distinguishes judicial from non-judicial foreclosure states?
Judicial states require court approval for foreclosure, while non-judicial states allow foreclosure after notice is given.
How is property typically sold in a foreclosure auction?
By auction on the county courthouse steps, with the highest bidder winning the property.
What is a 'Deed under Power' or 'Foreclosure Deed'?
It refers to a type of deed used in lien foreclosure situations.
What happens in a tax sale foreclosure?
The property is auctioned to collect unpaid property taxes, and the new owner takes it subject to existing mortgages and liens.
What is the right of redemption in a tax sale?
The prior owner usually has a period of time to pay off the taxes and buy the property back.
What occurs in a levy of a judgment lien?
The sheriff can take and sell the defendant's property to pay off a judgment amount.
What are the two main types of consumer bankruptcy cases?
Chapter 7 and Chapter 13.
What happens in Chapter 7 bankruptcy?
The debtor liquidates property to pay off debts, and any unpaid debts are discharged.
What is eminent domain?
It is the government's power to confiscate private property for public use, requiring payment of fair market value.
What must the government do before taking property under eminent domain?
Pay fair market value for the property.
What is adverse possession?
It is when real property is taken by the open and notorious use of the land by another.
What are the conditions for adverse possession to occur?
The use of the land must be for a specified period (usually seven or twenty years), open and notorious, and the true owner must not have protested during the occupation.
In what situation is adverse possession commonly applied?
In property border disputes, such as when a fence is located on another person's land.
What is an example of adverse possession involving two adjacent lots?
When one lot has no access to the main road and must pass through the other lot to reach it.
What happens to property if a person dies without living relatives?
The property will escheat to the state.
What is escheat in the context of real estate?
Escheat is the process by which property of a deceased person with no living relatives falls to the state.
What is a devise in the context of property transfer?
A gift or disposal of real property by last will and testament.
Who is referred to as the devisee?
One who receives a gift of real property by will.
What does it mean to die intestate?
A person who dies having made no will, or one which is defective in form.
What is probate?
The official proving of a will and the legal process wherein the estate of a decedent is administered.
What is the role of the testator?
One who makes a will.
What document must be obtained by the executor to carry out the instructions in a will?
Letters testamentary.
What happens to a deceased person's property if they die testate?
The property is distributed according to the instructions in their valid will.
What is the purpose of Letters of Administration?
To give a person, usually a relative, the power to catalog and distribute the assets of an intestate estate according to state law.
Who administers the estate of a deceased person with a valid will?
The executor appointed by the testator.
What document does the executor issue to transfer property from the estate to the devisee?
Executor's Deed or similar deed.
What is the difference between a mortgage and a home loan?
A home loan refers to the financial product used to purchase property, while a mortgage refers to the legal process of securing that loan and tying its value to the home as collateral.
What are title theory states and lien theory states?
Title theory states use a Deed of Trust where a trustee holds the legal title, while lien theory states allow the borrower to hold the deed during the loan term.
What happens in a lien theory state during foreclosure?
The foreclosure process is more complex because the borrower maintains legal ownership and title to the property throughout the loan term.
What role does a trustee play in title theory states?
The trustee holds the legal title to the property and sells it at auction if the borrower defaults on the loan.
What does it mean to hypothecate a property?
To hypothecate a property means the borrower uses the home as collateral for the loan.
Why is it important for real estate agents to educate buyers about home loans?
Many first-time homeowners do not realize that obtaining financing should be the first step before shopping for a property.
What is the role of the mortgagee in a mortgage agreement?
The mortgagee is the lender who provides the loan and can utilize the mortgage to obtain ownership if a default occurs.
What are the mortgagor's duties according to the mortgage document?
The mortgagor must pay the debt, pay real estate taxes, maintain adequate home insurance, maintain the property, and obtain permission from the lender for significant changes.
What happens if the mortgagor fails to fulfill their duties?
If the mortgagor fails to fulfill their duties, the loan enters default.
What right does the mortgagor have regarding the property?
The mortgagor has the right to possess and use the property as designed, subject to certain limitations.
What rights does the mortgagee have in a mortgage agreement?
The mortgagee has the right to foreclose on the property if there is cause, generally due to default, and to take possession after foreclosure.
What does REO stand for in real estate financing?
Real Estate Owned.
What is the role of letters of administration in the intestate process?
They provide authority to dispose of the assets of the estate.
What deed does the administrator sign to convey property according to state laws of descent?
Administrator's Deed.
Why is it advisable to consult an estates attorney when dealing with estates and real property?
To ensure that title will pass properly and to avoid problems during and after closing.
What is Actual Notice in real estate terms?
Express or implied knowledge of a fact.
What does Constructive Notice refer to?
Notice of the condition of title to real property given by official records, not requiring actual knowledge.
What is the purpose of Recording in real estate?
To place a document on file with a public official for public notice.
Who typically serves as the County Recorder?
A designated county officer responsible for recording documents.
What must happen for a property transfer by deed to be valid?
The deed must be given by the grantor to the grantee.
What types of documents are included in the recording of deeds?
Documents related to real estate, such as mortgage liens, easements, and tax liens.
Why is an organized system of recording important in real estate?
To know the true owner of real estate and any existing liens or rights.
What is required for a deed to be recordable?
It must be signed by the grantor or lien holder and usually witnessed by a notary public.
How are recorded documents stored in a county?
In books by the county real estate clerk, stamped with a deed book and page number.
What modern change has occurred in the recording of deeds in some states?
Some states have moved to totally electronic recording, using document numbers instead of physical books.
What is the purpose of recording a deed?
To provide constructive notice of a change in ownership or the existence of a lien.
What does constructive notice mean in the context of real estate?
It means everyone is deemed by law to know about the recording, even if they weren't specifically told.
How is priority established among recorded deeds and liens?
Priority is usually established by the time of recording; the first document recorded has the highest priority.
What happens to liens at a typical real estate closing?
All liens are paid off before the new warranty deed is recorded.
What is the consequence of recording a warranty deed while an earlier mortgage lien is on the title?
The warranty deed will be below the mortgage in priority, allowing the mortgage lender to take the property.
What is super-priority in the context of liens?
A concept created by state law where certain liens, like tax liens, may have higher priority than others.
What is the risk for someone who does not check real estate records?
They may be subject to any deeds or liens that have been recorded due to the principle of constructive notice.
What happens if there are multiple judgment liens on a property?
The judgment lien recorded first will have priority over the proceeds from the sale of the property.
What is an equitable lien?
A lien imposed by a court to achieve fairness, particularly when someone possesses property for another.
What is a general lien?
A lien on all of the property of a debtor.
What is an involuntary lien?
A lien imposed against property without the owner's consent, such as taxes or federal income tax liens.
What is a mechanic's lien?
A security interest in the title to property for those who supplied labor or materials that improve the property.
What is a specific lien?
A lien that attaches to one specific property only.
What is a voluntary lien?
A lien placed on property with the consent of the owner, often through a mortgage.
What is the purpose of recording a lien?
To inform the public of claims against property, how much the claim is, and when it was filed, establishing priority.
What is the most common type of voluntary lien?
A mortgage.
What are common types of involuntary liens?
State or local tax liens, IRS liens, homeowners association liens, and judgment liens.
What is a mechanic's lien and why is it important?
A mechanic's lien secures payment for contractors and subcontractors for work done on a property undergoing renovation.
What must a contractor do to enforce a mechanic's lien?
The contractor must file a lawsuit for unpaid bills within one year of filing the lien and notify the real estate records.
What happens if a mechanic's lien is more than one year old?
A title searcher will assume that it is expired as a matter of law.
What is the difference between a general lien and a specific lien?
A specific lien relates to one specific parcel of real property, while a general lien relates to all property owned by a person within the county.
What is a statutory lien?
A statutory lien exists as a matter of law, by operation of a statute, and does not require a lien document to be filed to establish a claim.
What is an equitable lien?
An equitable lien is imposed by a court to maintain fairness, often used when one person is holding the property of another.
What is a judgment lien?
A judgment lien comes into existence when a court issues a money judgment against a defendant, ensuring the judgment is paid before property title is transferred.
How long are liens valid?
The validity of liens varies by state and type, with some expiring in a year, others in four years, and some never expiring.
What is the Chain of Title?
A history of conveyances and encumbrances affecting the title from the time the original patent was granted.
What is an Abstract of Title?
A summary of all transfers, conveyances, legal proceedings, and facts relied on as evidence of title, showing continuity of ownership.
What does an Opinion of Title represent?
An attorney's written evaluation of the condition of the title to a parcel of land after examination of the abstract of title.
Why is checking the chain of title important before closing?
To ensure the current owner is the legal title holder and there are no questions regarding title.
What can happen if a link in the chain of title is broken?
The person who thinks they own the property may not really have it, preventing the closing from going forward.
Who typically conducts the title search?
The closing attorney or title agent conducting the closing, often hiring a company expert in title searches.
What does a title search company do?
They reconnect all the links in the chain from the current owner and check lien records to ensure all liens are canceled or accounted for.
What is the purpose of researching easements during a title search?
To ensure the property can be used as intended.
What is the purpose of a title search in real estate?
To verify the history of ownership, payment of taxes, liens, and easements on a property.
What is an abstract of title?
A summary of the title history showing continuity of ownership and identifying issues that may need resolution.
What does the closing attorney do with the abstract of title?
Reviews it and issues an attorney's opinion of title regarding the condition of the property title.
What is a cloud on title?
An issue that prevents the current owner from claiming ownership of the property 'free and clear.'
What might a cloud on title include?
A deed that is not legally sufficient, property line disputes, pending lawsuits, or unresolved mortgage liens.
What actions might an attorney recommend to resolve a cloud on title?
Filing a corrective deed or a quiet title lawsuit.
How far back can a title search go?
It can vary, sometimes going back ten years or even to the Louisiana Purchase of 1803 in some cases.
What does the attorney's opinion of title determine?
The legal condition of the title to the property and whether it is ready for closing.
What is a marketable title?
A title which a reasonable purchaser would be willing to accept after being informed of the facts and their legal importance.
Why is marketable title important for lenders?
It is a basic standard for lenders to issue a mortgage loan to purchase the property.
What can cause a title to be considered not marketable?
Flaws in the legal description, breaks in the chain of title, unresolved liens, unexpected easements, and encroachments.
What is a break in the chain of title?
A situation where a deed in the title history is cross-referenced incorrectly or where someone thought they had title when they didn't.
What happens if there is an unresolved lien on a property?
It makes the title unmarketable and must be resolved prior to closing.
How can a flaw in the legal description affect marketability?
It may require corrective deeds or legal action to make the title marketable.
What are some examples of liens that can affect marketability?
Mortgages, mechanic's liens, judgment liens, and tax liens.
What issues can unexpected easements cause?
They can create problems for marketable title, especially if there are shifting boundaries or encroachments.
What can cause a title to not be marketable?
A neighboring land owner building a fence into the subject property or gaining an easement by years of using a path through the subject property.
What is the standard for marketable title?
Whether a reasonable person would accept title, given the flaws.
Does the standard for marketable title require a perfect chain of title?
No, it does not require absolute assurance that the chain of title is perfect.
What is an example of a cloud on title that may still allow for marketable title?
An unpaid lien that is well-beyond the statute of limitations for enforcement.
What is a Certificate of Title?
A written opinion by an attorney that ownership of a particular parcel of land is as stated in the certificate.
What is the purpose of Title Insurance?
To protect a real property owner or lender against certain types of losses, such as defective or unmarketable title.
What does a closing or title insurance attorney do before closing?
Issues a certificate of title stating who definitely owns a parcel of real estate by examining the chain of title and available documents.
What does title insurance cover?
Losses incurred if there is a problem with the title after closing.
What are the two types of title insurance policies?
Standard and extended coverage policies.
What does a standard title insurance policy cover?
Defects in the chain of title that can be found off record or in documents filed with the county clerk's office.
What types of mistakes does a standard policy cover?
Forged deeds, deeds with grantors lacking capacity, missing necessary parties, mistakes in legal descriptions, and improperly recorded deeds.
What does extended policy coverage include?
Matters that are not found in the written records.
What are some violations that can affect title insurance?
Violations of community association covenants, claims of adverse possession, unrecorded liens or claims on the property, mistakes in the survey of the property, and encroachment by neighboring buildings.
How does title insurance handle unpaid liens or claims against a property?
Title insurance will try to defend against the claim and will pay it off if necessary.
What legal action does title insurance take regarding property line disputes?
Title insurance will file a quiet title lawsuit to protect the integrity of the property's boundaries.
What happens in worst-case scenarios regarding title insurance?
Title insurance can pay off a loan or repay the value of the property to the owner if title is ultimately lost.
How long does a title insurance policy last?
As long as the owner holds title to the property, and sometimes for several years thereafter.
What factors influence the cost of title insurance?
The cost varies by state and company, usually calculated based on the purchase price or loan amount of the property.
Who typically pays for title insurance?
The purchaser usually pays for title insurance as a closing cost.
Is it mandatory to buy an owner's title insurance policy?
It is entirely voluntary, though strongly encouraged by most closing attorneys and real estate experts.
Is the lender's title insurance policy voluntary?
No, it is not voluntary if you have a mortgage lender.
What is a cloud on title?
A claim, encumbrance, or condition that impairs the title to real property until disproved or eliminated.
What does the chain of title trace?
The history of ownership of a parcel of real property from the current owner backward in time.
What can cause a cloud on title?
Deeds that are out of sequence, unpaid liens, incorrect legal descriptions, or encroachment by an adjoining neighbor.
How can many title issues be resolved?
By filing a corrective deed or paying off a lien.
What is a suit to quiet title?
An equitable action filed by the landowner against a specific person or the entire world to ensure no one has a claim against the property.
What must a landowner show in a quiet title lawsuit?
The cloud on title, how it came to be, and why the law requires that the cloud be lifted.
In the example provided, why did Smith file a quiet title lawsuit?
Because a mortgage from 15 years earlier had never been canceled and the lender was out of business.
What happens if no one answers the quiet title lawsuit?
Smith can present evidence to the judge that the mortgage must have been paid off and ask for an order voiding the mortgage.
What is the outcome of a successful quiet title lawsuit?
The cloud on title is lifted and the order is recorded in the county real estate records.
What is the purpose of the Uniform Commercial Code (UCC)?
To establish a unified and comprehensive method for regulation of security transactions in personal property.
How many sections does the UCC have that deal with commercial transactions of goods?
Nine sections.
What is a UCC-1?
A lien created by the UCC on property used as collateral for a loan.
What types of property can a UCC-1 cover?
Specific goods like inventory or a blanket lien covering all property owned by the borrower.
What must happen for a UCC-1 to be valid?
It must be signed by the borrower.
What types of liens are paid before mortgages?
Tax liens and special assessments are paid before mortgages in most cases.
What happens if a property owner fails to pay a tax lien?
The county or tax lien holder can take ownership of the property through foreclosure.
What are junior liens?
Junior liens are any additional secondary loans on the property, such as a second mortgage or home equity line of credit.
How do home equity loans relate to a home's equity?
Home equity loans take advantage of a home's available equity, which is the un-mortgaged portion of the home's value.
What is the process of subordination in lien priority?
Subordination allows a junior lienholder to move up in priority through an agreement, reducing their risk in case of foreclosure.
Why is it important for real estate agents to understand lien priority?
Agents need to understand lien priority to inform home buyers about the implications of signing mortgage agreements and potential foreclosure outcomes.
What is a tax lien?
An encumbrance against a property filed by the taxing jurisdiction for delinquency in paying real property taxes.
What is a mortgage lien?
A lien against a mortgaged property, which must be paid when the property is sold.
What is a mechanic's lien?
A lien against real property in favor of persons who have performed work or furnished materials for the improvement of the real property.
What is a judgment lien?
A legal claim on the property of a judgment debtor which enables the judgment creditor to have the property sold for payment of the amount of the judgment.
Which lien has the highest priority?
Tax lien, as government liens always take top priority over other liens.
How do judgment liens take priority?
Judgment liens take priority based on the date the lien was filed.
What is the difference between judicial and non-judicial foreclosure?
Judicial foreclosure involves court proceedings, while non-judicial foreclosure does not require court intervention and follows a specified process outlined in the mortgage agreement.
What is the Federal Home Loan Mortgage Corporation (FHLMC) commonly known as?
Freddie Mac
What is the primary function of the Federal National Mortgage Association (FNMA)?
To ensure that mortgage funds are available and affordable by purchasing mortgage loans from institutions.
What does the Federal Reserve System control?
The credit and the amount of money in circulation in the United States.
What is the role of the Government National Mortgage Association (GNMA)?
To guarantee securities backed by mortgages that are insured or guaranteed by other government agencies.
What is the primary mortgage market?
The marketplace where loans are originated.
What is the secondary mortgage market?
The market where lenders sell their loans to large secondary marketing agencies or other investors.
Why is understanding real estate financing important for agents?
Because it is responsible for most purchases today and agents must know current rates and options for borrowers.
What is the Federal Reserve System commonly referred to as?
The Fed.
What role does the Federal Reserve play in real estate financing?
It creates rules that govern how, when, and why lenders lend money.
How many geographical districts does the Federal Reserve have?
What committee within the Federal Reserve sets the target lending rate?
The Federal Open Market Committee (FOMC).
What is the impact of the Federal Reserve's interest rate changes on home buyers?
Changes in the interest rate paid by home buyers stem from changes made by the Federal Reserve.
What happens when the Federal Reserve drops interest rates?
Banks have more money to lend to borrowers, including home buyers.
What is the purpose of the target lending rate set by the Federal Reserve?
To keep banks within their reserve requirements.
What role do mortgage brokers, credit unions, traditional banks, and mortgage bankers play in financing?
They work together to connect with the borrower.
What happens to a loan once it is originated in the primary mortgage market?
It is commonly sold to the secondary mortgage market.
What are mortgage-backed securities?
They are created by packaging originated loans and sold to investors like pension funds and insurance companies.
Who are Fannie Mae, Freddie Mac, and Ginnie Mae?
They are investors within the secondary mortgage market that back certain types of loans.
What is Fannie Mae's role in the mortgage market?
It is the largest financial backer of mortgages in the country, ensuring mortgage funds are available at affordable rates.
Do borrowers apply directly to Fannie Mae for loans?
No, Fannie Mae does not lend directly to borrowers; it helps ensure mortgage funds are available through its investment strategies.
What is Freddie Mac and what does it invest in?
Freddie Mac, or the Federal Home Loan Mortgage Corporation, is an independent company that invests in conventional mortgages as well as FHA and VA loans.
What is the purpose of FHA and VA loans?
FHA and VA loans protect investors from borrower default while reducing interest rates and down payment requirements for borrowers.
Who are FHA and VA loans most likely discussed with?
They are most likely discussed with first-time home buyers or home buyers who are members of the Armed Forces of the United States.
What is Ginnie Mae and what does it do?
Ginnie Mae, or the Government National Mortgage Association, is a government-owned company that guarantees mortgage securities backed by other government agencies.
How should a real estate agent respond to potential interest rate increases?
A real estate agent should encourage home buyers to lock in a loan rate before interest rates increase.
What should a borrower do before seeking help from a real estate agent?
A borrower should seek loan approval as a first step before requesting help from a real estate agent.
Why is it important for real estate agents to stay updated on market changes?
It's important because changes can impact how many people are in the market and what they can afford based on interest rates.
Who are the participants in the primary mortgage market?
Lending institutions such as commercial banks and savings and loans associations.
What role do mortgage brokers play in the primary mortgage market?
They arrange a loan between a lender and a borrower for a fee.
How do lending institutions benefit from the secondary mortgage market?
By selling their existing loans, lenders gain liquidity to make new loans to home buyers and homeowners.
What are some examples of participants in the secondary mortgage market?
Fannie Mae, Freddie Mac, and Ginnie Mae.
What is an acceleration clause in a promissory note?
A condition giving the lender the power to declare all sums owing immediately due upon certain events, like property sale or delinquency in repayment.
What does amortization refer to in financing?
The liquidation of a financial obligation on an installment basis.
What is an amortized loan?
A loan to be repaid, interest and principal, by a series of regular payments that are equal or nearly equal, without special balloon payments prior to maturity.
What are discount points in real estate financing?
The amount of money the borrower or seller must pay the lender to get a mortgage at a stated interest rate.
What is escalation in the context of a loan?
The right reserved by the lender to increase the amount of payments and/or interest upon the happening of a certain event.
What does interest represent in a loan agreement?
The charge in dollars for the use of money for a period of time, essentially the 'rent' paid for the use of money.
What is an interest-only loan?
A non-amortizing loan where the lender receives only interest during the term, with principal repaid in a lump sum at maturity.
What is a prepayment penalty?
A charge payable to a lender by a borrower if the borrower pays off the outstanding principal balance of the loan prior to its maturity.
What is a straight note?
A note where the borrower repays the principal in a lump sum at maturity while interest is paid in installments or at maturity.
What does usury mean in the context of loans?
Claiming a rate of interest greater than that permitted by law.
What are the key components included in a promissory note?
The principal amount, interest rate, maturity date, date and place of issuance, and signatures of all parties.
What does signing a promissory note during the closing process signify for a homebuyer?
It signifies that the homebuyer agrees to the terms of the loan, which is a legal commitment.
What is the difference between secured and unsecured loans?
Secured loans are backed by collateral, while unsecured loans are not and are based on the borrower's creditworthiness.
What typically serves as collateral in home buying?
The home itself serves as collateral for secured loans.
Why is it important for homebuyers to understand their financials before purchasing a home?
It ensures they buy a home within their budget and understand the legal commitment of the loan.
What is the role of a lender in the home buying process?
The lender determines the amount the homebuyer can borrow and the terms of the loan.
What is a critical aspect of the discussion between a real estate agent and a homebuyer?
A frank discussion about the homebuyer's budget and down payment requirements.
What is the cost associated with borrowing money to buy a home called?
Interest.
Why do banks charge interest on loans?
To make a profit in lending to home buyers.
What happens if a borrower fails to make payments on a secured loan?
They will lose the home.
What are usury laws?
Regulations that govern the maximum amount of interest that can be charged on a loan.
How do discount points benefit a client?
They can help lower the overall cost of the loan by pre-paying interest.
What is the effect of a small difference in interest rates on a home loan?
It can make a big difference in the total amount paid for the home.
What is the monthly payment for a $100,000 loan at 4 percent interest over 30 years?
$477.
What is the total cost of a $100,000 home loan at 4.5 percent interest over 30 years?
$182,407.
What does paying points on a home loan do for the borrower?
It lowers the interest rate on the home loan.
What is the cost of 1 point in relation to the mortgage amount?
1 point means paying 1 percent of the mortgage amount.
How much does the borrower save per month by paying 2 points on a $100,000 loan at 4 percent interest?
The borrower saves 477 instead of $497.
What is a loan origination fee?
A fee charged by the lender to obtain a home loan.
What is the typical range for loan origination fees?
Between 0.05 percent and 1 percent of the loan amount.
What does the loan origination fee cover?
It covers paperwork, calculations for loan rate and terms, and verifications.
How can a home buyer estimate the loan origination fee?
By asking for a good faith estimate from the lender.
Can the loan origination fee be rolled into the loan?
Yes, it can be part of the closing costs.
What should a client consider when planning to put down $10,000 on a home sale?
They should consider loan origination fees and other costs that may impact their out-of-pocket expenses.
What is a prepayment clause in a home loan contract?
It is a clause that states a penalty will be paid if the mortgage is paid off within a certain timeframe.
What does a prepayment penalty typically consist of?
It is usually a percentage of the amount borrowed or a certain number of months' worth of interest payments.
What should a home buyer know about prepayment clauses?
They should know if a prepayment clause is in the contract, when it applies, and how much the fee will be.
What is a straight loan?
A straight loan is a type of loan where only interest is paid during the term, and the principal is paid at the end.
What is a balloon payment in the context of a straight loan?
It is the payment of the original principal amount at the end of the loan term after paying only interest.
What is the risk associated with an interest-only loan?
The borrower must be confident they can pay off the principal in full at the end of the term.
What is the benefit of a loan for those unlikely to stay in their home long-term?
It can be beneficial as long as there is no prepayment penalty involved.
What is amortization in the context of home loans?
Amortization is the process that calculates the amount of interest on any home loan.
What is the difference between full amortization and partial amortization?
In full amortization, payments go towards both principal and interest throughout the loan term, while in partial amortization, interest is paid during the term and principal is paid at the end.
What is a balloon payment?
A balloon payment is the final payment at the end of a term in a partially amortized loan.
What is an escalator clause in a promissory note?
An escalator clause allows the lender to decrease or increase the interest rate with given notice.
What triggers an acceleration clause in a promissory note?
An acceleration clause may be triggered by a breach of contract, such as failing to make two monthly payments in a row.
What does a complete amortization schedule outline?
It outlines how much is paid in interest and principal on the loan with each payment.
When is the amortization schedule provided to the home buyer?
At the time of closing, as part of the promissory note.
What should a real estate agent understand about financing terms?
To guide clients in making informed decisions about securing a home.
What is the role of a real estate agent regarding mortgage advice?
They should not give advice on what loans clients should take out and should refer them to a mortgage professional.
When should a real estate agent refer clients to a mortgage professional?
Early in the purchase process, even prior to showing properties.
What is an Acceleration Clause in a mortgage?
A condition giving the lender the power to declare all sums owing immediately due upon certain events, like sale of the property or delinquency in repayment.
What does an Alienation Clause provide in a mortgage contract?
It gives the lender certain rights in the event of a sale or transfer of the mortgaged property.
What is meant by Assignment in real estate?
The transfer to another of any property or rights under a contract.
What is an Assignment of Rents in a mortgage?
A provision allowing the lender to take possession of the property and collect income upon default by the trustor.
What does Assumption of Mortgage entail?
It involves a grantee taking title to property and assuming liability for payment of an existing mortgage note.
What is considered a Default in mortgage terms?
Failure to fulfill a duty or promise or to discharge an obligation.
What is a Defeasance Clause?
A clause that gives the mortgagor the right to redeem their property upon payment of obligations to the mortgagee.
What does it mean to Hypothecate property?
To pledge property as security without giving up possession of it.
What is a Mortgage?
An instrument recognized by law that hypothecates property to secure the payment of a debt or obligation.
Who is a Mortgagee?
The lender or creditor to whom a mortgagor gives a mortgage to secure a loan.
Who is a Mortgagor?
The borrower who gives a mortgage on their property to secure a loan.
What is Satisfaction of Mortgage?
The discharge of a mortgage from the records upon payment of the debt.
What should real estate agents be aware of regarding redlining?
They should understand its seriousness and guide clients who feel discriminated against.
What is one way a lender might deny a loan without a valid reason?
By trying to push for a low appraisal, knowing the buyer may not have cash to cover the price difference.
What does the Fair Housing Act prohibit regarding advertisements from lenders?
It prohibits advertisements that appear to be geared toward a particular race, religion, or age group.
What right does a lender have regarding a mortgage in the secondary mortgage market?
The right to assign the mortgage.
What happens if a borrower defaults on a mortgage?
The lender can exercise the Acceleration Clause and demand the full principal balance.
What is a common cause of default in mortgage payments?
Failure to make on-time payments.
What is the purpose of a grace period in mortgage payments?
To allow the borrower to catch up on all payments to avoid default.
What does the assignment by mortgagee mean?
The interest of the original mortgagee in the loan is assigned or transferred to another bank.
Why do lenders assign mortgages in the secondary mortgage market?
To ensure their assets are liquid enough to invest and make money.
What is recorded when a mortgage is assigned to a new mortgagee?
The assignment is recorded on the county land records.
What is an Alienation Clause in a mortgage contract?
It provides the lender the right to demand full principal balance when the property is sold, preventing the borrower from assigning the loan's debt without lender approval.
What happens when the home is sold under an Alienation Clause?
The loan is paid in full and cannot transfer to another person; the new buyer must obtain their own loan.
What is the Satisfaction of Mortgage document?
It is issued by the lender to the borrower once the last payment is received, indicating that the borrower owns the property free and clear of any loan.
What does the Defeasance Clause state?
It states that the borrower is given full title to the property once they've met their mortgage terms.
What is a reserve account in the context of mortgages?
It is an escrow account controlled by the lender to collect funds for home insurance and real estate taxes, especially when the down payment is under 20%.
What does the acronym PITI stand for?
Principal, Interest, Taxes, and Insurance, which are components of the borrower's loan payment.
Why do lenders maintain a reserve account for taxes and insurance?
To protect the borrower from defaulting due to lack of payment of taxes or insurance by ensuring timely payments are made.
What must home buyers do if they intend to rent out a property they purchase?
They must obtain the lender's agreement to these terms prior to receiving the loan.
What is the purpose of the Assignment of Rent clause in a mortgage document?
It allows the lender to collect rental payments if the borrower defaults on the loan.
What does an Assumption Clause in a mortgage allow?
It allows a third party to assume the loan on the home with the lender's approval.
What must happen for a mortgage to be legally valid?
The mortgage must be recorded under local law and signed by all parties involved.
Who is responsible for ensuring that a mortgage document meets legal requirements for recording?
The lender's representative is responsible for ensuring the document meets all legal requirements.
What is the significance of recording a mortgage?
It legally documents the transaction and clarifies ownership for the borrower.
Why is it important for real estate agents to learn mortgage terminology?
To effectively assist home buyers in understanding the mortgage process.
What should clients do if they do not agree to any terms in their mortgage document?
Consult their attorney before signing the document.
Who should be able to explain any statements in the mortgage document to the buyer?
The lender's agent or Title Company.
What should real estate agents do to ensure home buyers understand their mortgage responsibilities?
Ask them frank questions about their buying process and requirements.
What are the risks involved in obtaining a mortgage that home buyers should understand?
Default and foreclosure.
How do foreclosures impact the value of other homes in the area?
They degrade the value of other homes.
What is essential for home buyers to understand regarding their mortgage?
Their responsibilities in the process and the risks involved.
What is a mortgage?
An instrument by which property is hypothecated to secure the payment of a debt.
Who are the two parties involved in a mortgage?
Lender and Borrower.
What is a mortgagee?
One to whom a mortgagor gives a mortgage to secure a loan or performance of an obligation; a LENDER.
What is a mortgagor?
One who gives a mortgage on his/her property to secure a loan or assure performance of an obligation; a BORROWER.
What does it mean that a mortgage is used in lien theory states?
In a lien theory state, the borrower retains both legal and equitable title.
What is judicial foreclosure?
A court proceeding requiring that property be sold to satisfy a mortgage lien.
What happens if the mortgagor defaults on the loan?
The lender can foreclose on the property by going through the courts.
What are the disadvantages of judicial foreclosure?
It is a lengthy and costly process.
What is a beneficiary in the context of a deed of trust?
The lender on the security of a note and deed of trust.
Who is the trustee in a deed of trust?
The third party under a deed of trust.
What is a trustor?
One who borrows money from a trust deed lender and deeds the real property to a trustee as security until the obligation is performed.
What is the difference between a mortgage and a deed of trust?
A mortgage is a financial transaction, while a deed of trust is a document signed by the buyer.
Why is it important for real estate agents to understand the deed of trust?
To provide potential buyers with insight into the legalities of the home buying process.
What should a real estate agent encourage buyers to do before house hunting?
Obtain a loan to know how much of a home they can afford.
What does a deed of trust signify for home ownership?
The buyer does not outright own the home until the loan obligation is fulfilled.
What is the purpose of a mortgage or deed of trust?
To reclaim the home if the buyer fails to make payments.
What does a buyer sign when obtaining a mortgage?
A basic IOU to the lender, promising to repay the borrowed money.
What is pledged as security for the loan in a mortgage or deed of trust?
The property being financed.
What happens if a buyer fails to make payments on a mortgage?
The lender has the right to foreclose and take ownership of the property.
What are the parties involved in a deed of trust?
The trustor (borrower), beneficiary (lender), and trustee (third party).
What is the role of the trustee in a deed of trust?
The trustee owns the legal title to the property and can sell it at auction if the buyer defaults.
What is the difference between a mortgagor and a mortgagee?
The mortgagor is the home buyer, and the mortgagee is the lender.
What does signing a mortgage document create?
A lien on the home.
What steps do lenders take to protect their loan when financing property?
Lenders use a mortgage or deed of trust to protect their investment in the property.
What is the main difference between a mortgage and a deed of trust?
The main differences are the number of parties involved and the process for the lender to take action if the buyer defaults.
What is a deed of trust in relation to a home loan?
A deed of trust is a lien on the collateral (the home) that provides security to the lender.
What happens after a home buyer secures a loan in a deed of trust state?
The loan goes to underwriting, and once approved, it moves towards closing where the buyer signs the deed of trust.
What should home buyers do during the signing process of a deed of trust?
Home buyers should read the deed of trust and understand the details of the loan.
Who is responsible for recording the deed of trust?
The lender is responsible for holding and recording the deed of trust, not the buyer or real estate agent.
What is the role of underwriting in the loan process?
Underwriting ensures that the borrower is a safe bet for the loan, which can take several weeks.
What document is filed with the county recorder's office in a deed of trust transaction?
The deed of trust document.
What is the role of the trustee in a deed of trust?
The trustee holds a great deal of power throughout the ownership.
What should a real estate agent ask a buyer before completing a transaction?
Whether or not they are confident they can afford the monthly loan payment.
What is the foreclosure process that buyers should be aware of?
It is important to explain the foreclosure process to buyers, as many have concerns about it.
What type of foreclosure is used in a deed of trust case?
Non-judicial foreclosure.
What happens if a borrower misses a payment in a non-judicial foreclosure state?
The trustee sends a letter to the borrower of the missed payment.
What occurs if the borrower fails to make payment after missing a payment?
The trustee lists the property for auction.
How does non-judicial foreclosure favor the lender?
It bypasses the court system, making it more affordable and quicker for the lender.
What happens to the property if it is not bought at auction by the trustee?
It reverts to the lender's ownership.
What can a borrower do in some states after a property sale?
Redeem the property by paying all fees and amounts owed within a specific timeframe.
What is the role of the trustee in the event of a default on a deed of trust?
The trustee sends a notice of default and handles the auction process.
What should a homeowner do upon receiving a notice of sale?
Speak to the trustee to see if they will accept late payment to reinstate the loan.
What is the right to redeem in the context of foreclosure?
The ability of the homeowner to pay missed payments and fees to retain ownership of the property after it has been sold at auction.
What is the responsibility of a real estate agent regarding clients who may not afford a home?
To ensure clients understand the risks of foreclosure and not encourage unaffordable purchases.
What is the role of the Trustee in a Deed of Trust?
The Trustee is the neutral third party who holds title to the property until the Trustor pays off the loan.
Who is the Beneficiary in a Deed of Trust?
The Beneficiary is the lender who grants the loan to the Trustor.
What is the role of the Trustor in a Deed of Trust?
The Trustor is the borrower under a Deed of Trust.
What does a Deed of Trust signify in title theory states?
In title theory states, the borrower gives legal title to the lender but retains equitable title.
What is Non-Judicial Foreclosure?
Non-Judicial Foreclosure allows the Beneficiary to foreclose on the property without going through the courts if the Trustor defaults on the loan.
How does Non-Judicial Foreclosure favor the lender?
It provides a quicker and less costly process for the lender.
What is a junior mortgage?
A mortgage recorded subsequently to another mortgage on the same property or made subordinate by agreement to a later recorded mortgage.
What does priority of lien refer to?
The order in which liens are given legal precedence or preference.
What is the recording process in real estate?
The process of placing a document on file with a designated public official for public notice.
What is a subordination agreement?
An agreement by the holder of an encumbrance against real property to permit that claim to take an inferior position to other encumbrances against the property.
Who is typically responsible for the recording process of mortgages?
The county government, often through a service called 'registrar of deeds' or 'county recorder.'
What happens after a mortgage document is signed?
The recording process begins, making a public record of the transaction.
What is the significance of recording a mortgage?
It publicly documents ownership of the home and the mortgage, as well as who holds the title to the loan.
What type of document is recorded, mortgages or promissory notes?
Mortgages are recorded; promissory notes are not recorded.
What is lien priority important for?
It determines who gets paid first in the event of a default or foreclosure.
What is the priority of liens when a property heads towards default?
Higher priority liens are paid first, while lower priority liens may not receive all owed funds.
What are first priority liens commonly associated with?
They are typically associated with mortgages, which are the first loans on a home.
How do mechanic's liens take priority?
Mechanic's liens take priority based on the date the services were provided, not when the lien was filed.
What is the usual priority of mortgage liens?
Mortgage liens usually take top priority, regardless of the date it was filed, unless there is a government lien.
What is a Deed in Lieu of Foreclosure?
A deed to real property accepted by a lender from a defaulting borrower to avoid foreclosure proceedings.
What is a Deficiency Judgment?
A judgment given by a court when the value of security pledged for a loan is insufficient to pay off the debt of the defaulting borrower.
What is the process of Foreclosure?
Procedure whereby property pledged as security for a debt is sold to pay the debt in event of default in payments or terms.
What does Redemption mean in real estate?
Buying back one's property after a judicial sale.
What is a Short Sale?
A seller's attempt to sell the real estate whereby the liens are greater than the value of the property.
Why is foreclosure often misunderstood in real estate transactions?
Many believe that foreclosures are gold mines, when they could very well be significant problems.
What should real estate agents communicate to buyers about foreclosure?
Agents should explain what foreclosure is, why it happens, and what it means for both homeowners and home buyers.
What is the risk for home buyers regarding foreclosure?
Home buyers should recognize that foreclosure is a real threat if they purchase a home without solid financial means to repay the loan.
What is the foreclosure process dependent on?
State laws outline the specific steps required for foreclosure.
What are the two most common forms of foreclosure?
Judicial foreclosure and non-judicial foreclosure.
What is the main difference between judicial and non-judicial foreclosure?
Judicial foreclosure goes through the court system, while non-judicial foreclosure is handled by a third party.
What must a home buyer understand at the time of signing the mortgage contract?
The terms they must meet to maintain the loan and avoid foreclosure.
Which states require judicial foreclosure?
States like Connecticut, Delaware, Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, New Jersey, New Mexico (in some cases), New York, North Dakota, and Ohio.
What is the most common type of foreclosure process?
Judicial foreclosure.
What does the lender send to the homeowner to inform them of the intent to foreclose?
A letter outlining what the homeowner must do to avoid foreclosure.
What happens if the homeowner does not respond to the foreclosure notice?
The foreclosure will likely go through, and the court will issue a default judgment allowing the lender to sell the home.
What opportunity is given to the homeowner if they respond to the foreclosure lawsuit?
The homeowner can tell the judge why they should keep the property and prove the foreclosure is not warranted.
What burden does the lender have in the foreclosure process?
The lender holds the burden of proof to justify the foreclosure actions.
What can happen if the homeowner contests the foreclosure process?
The process can buy the homeowner time, but unless the loan is paid up to date, foreclosure is likely to continue.
What is required from the homeowner to avoid foreclosure after receiving the lender's letter?
The homeowner must pay all late payments, fees, and interest to catch up on the loan.
What is the first step a lender takes in the foreclosure process?
The lender sends a notice of intent to sell the home.
What are the options for a homeowner to redeem a mortgage after receiving a notice of intent to sell?
Catch up all payments, sell the home, or pay it off in full including foreclosure costs.
What happens to the property if there are no buyers at the auction during foreclosure?
Ownership of the home transfers to the lender.
How long does the judicial foreclosure process typically take?
Between three and four months, sometimes longer.
Can a homeowner remain in the property during the judicial foreclosure process?
Yes, until a written and official eviction notice is sent.
What is the outcome of the foreclosure process if the homeowner cannot redeem the mortgage?
The court grants ownership of the property to the lender.
What is a non-judicial foreclosure?
A type of foreclosure where the court is not involved in the same manner as judicial foreclosure.
Name three states that allow non-judicial foreclosure.
Alabama, California, and Georgia.
What must real estate agents understand regarding foreclosure laws in their operating state?
Whether judicial or non-judicial laws are in place and how that impacts homebuyers if default occurs.
What documents does a homebuyer sign in states with non-judicial foreclosure?
A promissory note and a deed of trust.
What does a deed of trust do in the context of non-judicial foreclosure?
It turns the promissory note into the debt secured by a lien on the property.
What right does a deed of trust give to the lender?
The right to foreclose on the property if the buyer fails to make payments according to the loan terms.
What is a key characteristic of the foreclosure process in non-judicial states?
The foreclosure sale can occur much faster outside of the court system.
What is typically the first step in the non-judicial foreclosure process?
A notice of sale is given.
What are the two common notices required in some states during foreclosure?
Notice of default and notice of sale.
How much time is generally given to homeowners before a foreclosure auction?
Most often, only a month is given.
What options does a homeowner have when facing foreclosure?
Pay off the loan in full or meet the obligations of the lender to reinstate the loan.
What happens to the property if it does not sell at auction during foreclosure?
It becomes the legal property of the lender.
What is a right to redeem in the context of foreclosure?
It gives the property owner time to meet specific requirements set by the lender to redeem the property after foreclosure and auction.
How long does the foreclosure process typically take in this context?
It typically takes just a matter of two or three months.
What is a deed in lieu of foreclosure?
It is a legal transaction where the property owner transfers the title of the property to the lender in exchange for being released from the home loan obligation.
Why might lenders be reluctant to agree to a deed in lieu of foreclosure?
Because lenders are not in the business of owning homes, as it reduces their potential profit.
What is the initial process called when a homeowner requests loss mitigation from the lender?
It is an opportunity for the lender and the homeowner to find better terms for the loan, if possible.
What documentation is typically required from a borrower to prove their financial state during the loan application process?
Financial statements, questionnaires, tax returns, proof of income, and a hardship letter.
What may a lender require a homeowner to do before moving forward with the loan process?
Try to sell the home on the open market for a period of 30 to 90 days.
What is an estoppel affidavit in the context of transferring ownership of a home?
A document that includes a provision that the homeowner is acting freely and voluntarily in the process of transferring ownership to the lender.
What is the legal process called that can take three to six months or longer when a lender takes ownership of a property?
Foreclosure process.
What is the right of redemption in foreclosure?
The ability for a homeowner to get caught up on the loan and redeem the home before or after foreclosure.
How can a homeowner redeem their home during the foreclosure process?
By paying off the debt in full, including the principal and any additional costs and interests, prior to the sale of the property.
What is the statutory right of redemption in foreclosure?
It is a law that gives the homeowner more time to redeem the property after the sale of the home.
How long can the statutory right of redemption last after a foreclosure sale?
It can range from just 30 days to as much as 2 years depending on state laws.
What happens if a home is sold at foreclosure for less than the mortgage owed?
The homeowner may be required to pay the deficiency amount to the lender.
What should agents inform home buyers about regarding foreclosure?
They should inform them about the risk of deficiency judgments after foreclosure.
In non-judicial foreclosure states, how can lenders recover deficiency amounts?
Lenders must create a separate lawsuit against the homeowner to recover deficiency amounts.
What is the potential outcome for homeowners in states that do not protect against deficiencies?
Homeowners may be taken to court by lenders to require payment of the deficiency.
What is the difference in handling deficiencies between judicial and non-judicial foreclosure states?
In judicial states, lenders can seek deficiency judgments directly, while in non-judicial states, they must file a separate lawsuit.
How do some states limit lenders in deficiency judgments?
States may limit lenders to collecting only the difference between the fair market value and the home's sale price.
What should home buyers consider regarding tax obligations after a foreclosure or short sale?
They should consult a tax professional because the lender may forgive part of the loan, creating potential IRS obligations.
What is a short sale?
A short sale occurs when a homeowner sells their property for less than the total debt remaining on the home loan, with lender approval.
What must a homeowner submit to the lender for a short sale approval?
A loss mitigation application, financial statements, proof of income, tax returns, bank statements, and a hardship letter.
Why is it difficult for real estate agents to work with short sales?
Because the lender must receive and approve an offer, which can take a long time and may not be approved at all.
What happens if a homeowner cannot sell their home through a short sale?
They may have to continue making payments or face potential foreclosure.
What does the foreclosure process require from homeowners?
Homeowners must take every step possible to make good on their promise to pay the loan according to the originally agreed terms.
How does the foreclosure process vary?
It differs significantly from one state to the next.
What should real estate agents warn buyers about foreclosure properties?
Agents should warn buyers to avoid the foreclosure process as it can be complicated and not always a good deal.
What must agents inform buyers when selling a home listed as a foreclosure or short sale?
Agents need to inform buyers of the extended timetable in the transaction.
Why is foreclosure considered a legal nightmare?
Foreclosure tends to involve complex legal issues for all parties involved.
What is generally a better situation than foreclosure?
Avoiding the foreclosure process is nearly always a better situation.
What happens when a borrower defaults in Georgia regarding the security deed?
The security deed passes title to the lender.
What foreclosure method is commonly used by lenders in Georgia?
Non-judicial foreclosure method referred to as the 'power of sale'.
What does the power of sale clause in the Security Deed allow the lender to do?
It allows the lender to sell the property upon default.
Is a court judgment required for foreclosure in Georgia?
No, the foreclosure process is non-judicial and does not require a court judgment.
What must the lender do to notify a borrower of an accelerated loan in Georgia?
The lender must provide a notice of sale that appears in the official organ of the county once a week for four consecutive weeks.
What is the consequence of not properly advertising the foreclosure sale in Georgia?
An error in the advertisement could invalidate the subsequent sale.
What information must be included in the advertisement of the foreclosure sale?
The complete legal description, the name of the lender, the name of the attorney conducting the sale, and the place of the proposed sale.
Who can sell the property of a borrower in default in Georgia?
The party identified as the lender in the Security Deed, or an agent, attorney, or representative of the lender.
What happens to the power of sale right if the original lender sells the Security Deed?
The power of sale right transfers to the successor who purchased the Security Deed.
What must happen if the original lender is deceased?
The Security Deed and the power of sale right transfer to the heir of the lender's estate.
What must be included in the advertisement for a public sale of property?
The day and starting time for all sales, application of proceeds to special purposes, and the name of the borrower in default.
Who can conduct the sale of a property in a public auction?
The lender can conduct the sale; there is no requirement for the auctioneer to be a disinterested third party.
What is the lender's duty if circumstances are not favorable for a fair sale?
The lender has a duty to withdraw the property for sale and conduct the sale at another time.
What is a deficiency judgment?
A deficiency judgment occurs when the sales price of the property is less than the unpaid loan balance and expenses of sale.
What happens if a lender seeks a deficiency judgment after a sale?
The lender must file a report of the sale with the judge within 30 days, and a hearing is conducted where the borrower can question the sale's legality and fairness.
In what order are the proceeds of a sale distributed?
Can anyone bid at the sale?
Yes, anyone can bid, including the lender and/or the borrower, but they cannot act to injure the borrower or junior lien holders.
What are the key considerations for lenders when financing a single-family residence?
Lender considerations include evaluating the borrower's creditworthiness, income, debt-to-income ratio, and the property's value.
What is the loan to value ratio requirement for FHA loans if the credit score is below 580?
90 percent or less.
Who qualifies as a first-time home buyer for an FHA loan?
Individuals who have never purchased a home through a mortgage, or those who have not maintained a loan in the last three years.
What is the maximum debt-to-income ratio allowed for FHA loans?
43 percent.
What type of properties can qualify for FHA loans?
Primary residences including detached houses, semi-detached houses, row homes, condominiums, and townhomes.
What is required for a home to qualify for an FHA loan in terms of safety?
The home must meet specific safety, security, and soundness standards, including being pest and mold-free, having safety railings, and being lead-free.
What is the upfront mortgage insurance premium for FHA loans?
1.75 percent of the loan amount borrowed.
How does FHA loan mortgage insurance differ from conventional loans?
FHA loan borrowers must pay mortgage insurance premium coverage for the life of the loan, while conventional loans typically require private mortgage insurance that can be canceled.
What is a requirement for individuals to qualify for FHA loans regarding their credit report?
The credit report must be clear of all delinquencies, and individuals with unpaid debts like child support or back taxes may not qualify.
Why might FHA loans be a good option for home buyers with low down payments and poor credit history?
FHA loans are more accessible than conventional loans, making it easier for those paying high rental costs to qualify for home ownership.
What is a VA Guaranteed Loan?
A loan made to qualified veterans for the purchase of real property, guaranteed by the Department of Veteran's Affairs.
Who can benefit from VA Guaranteed Loans?
Qualified veterans, including those who are Active Duty, Retired, or in Reserves.
What is the role of the Department of Veterans Affairs in VA loans?
The Department of Veterans Affairs guarantees the lender payment of the mortgage.
What is the first step for veterans to obtain a VA loan?
To obtain a Certificate of Eligibility (COE) from the Veterans Affairs Office.
What does the Certificate of Eligibility (COE) verify?
It verifies that the individual has served in the Armed Forces, is currently serving, or has been honorably discharged.
What are origination fees?
Fees charged at the time the loan is obtained, covering costs associated with securing the loan.
What portion of a loan payment goes towards the principal and interest?
With each payment, a portion goes to the principal while another portion goes towards paying interest.
What is the primary source of profit for lenders in home financing?
Interest charged on loans.
What factors influence the interest rate charged by lenders?
The term of the loan, type of loan, loan amount, and lender's cost to borrow money.
How does the term of the loan affect the interest rate?
Longer loan terms typically have higher interest rates due to increased lender risk.
What are the two main types of loans regarding interest rates?
Fixed rate loans and adjustable rate loans.
How do fixed rate loans differ from adjustable rate loans?
Fixed rate loans have a constant interest rate throughout the loan term, while adjustable rate loans can change based on market rates.
What happens to interest rates as the loan amount increases?
Higher loan amounts generally lead to higher interest rates due to increased lender risk.
What is the key interest rate set by the Federal Reserve?
The rate at which banks charge each other to borrow money, which influences borrower interest rates.
What role does a real estate agent play in lender considerations?
They help buyers understand the factors affecting interest rates and encourage good credit management.
Why is it important for buyers to maintain good credit scores?
To secure more attractive interest rates from lenders.
What does the acronym P.I.T.I stand for in mortgage payments?
Principal, Interest, Taxes, Insurance.
What is the largest component of a monthly mortgage payment?
Interest.
What is the smallest component of a monthly mortgage payment?
Insurance.
What portion of a monthly mortgage payment is applied to reduce the mortgage amount?
Principal.
What are taxes in the context of a mortgage payment?
Government charges to property owners to pay for services for public welfare.
In the early stages of a loan, what component makes up most of the monthly loan payment?
Interest.
By the end of the 20th year, which component of the loan payment increases significantly?
Principal.
What is the monthly loan payment amount in the example provided?
$3,220.
What was the interest rate on John’s loan in the example?
5%.
What is a conventional loan?
A mortgage securing a loan made by investors without governmental underwriting, not FHA insured or VA guaranteed.
What does Loan to Value Ratio (LTV) represent?
The percentage of a property's value that a lender can or may loan to a borrower.
What is Private Mortgage Insurance (PMI)?
Mortgage guaranty insurance available to conventional lenders on the first, high risk portion of a loan.
Why should real estate agents understand financing options?
Because home buyers often rely on their agent's direction and influence regarding how to pay for a home.
What is the primary type of loan that home buyers will encounter?
The conventional loan, which is the most commonly used option.
What is the difference between conventional loans and FHA/VA loans?
Conventional loans do not have government backing, while FHA and VA loans are government backed, reducing risk to the lender.
What are conventional loans?
Financial loans given by banks and other financial institutions for the purchase of a home, not issued or guaranteed by any federal agency.
What is a key requirement for conventional loans regarding down payment?
Most conventional loan lenders require a 20 percent down payment on the home purchase.
Who establishes the guidelines for conventional loan lending?
The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).
What is a disadvantage of conventional loans compared to government-backed loans?
Conventional loans are harder to qualify for due to more stringent qualification requirements.
What factors do lenders consider for conventional loans?
Higher credit score, steady income, and an affordable down payment.
How can a home buyer obtain a conventional loan?
By applying through any mortgage lender and demonstrating their ability to meet the loan requirements.
Why might a home buyer prefer a conventional loan?
Conventional loans can be more affordable from the viewpoint of a home seller compared to government-backed loans.
What are the safety requirements a home must pass for a conventional loan?
Safety inspections and lead screening.
Why do conventional loan borrowers need a larger down payment?
Because they are generally well-qualified buyers, making them more likely to purchase the property.
What is the Loan to Value Ratio (LTV)?
A calculation of the risk presented by a borrower compared to the value of the home.
What does a high LTV indicate to lenders?
More risk to the lender compared to a lower LTV.
What might a lender require if the LTV is too high?
The borrower may be required to obtain mortgage insurance.
How is the LTV calculated?
By dividing the loan amount by the sale price or appraised value of the home.
What is the typical down payment required for conventional loans to reduce LTV?
20 percent.
What LTV percentage do Fannie Mae and Freddie Mac currently have on mortgages?
97 percent.
What is the minimum down payment a homeowner can qualify for a loan in some cases?
Three percent down payment.
What type of loan may be better for borrowers with low credit scores?
A government-backed loan such as an FHA loan.
What does Private Mortgage Insurance (PMI) protect?
It protects the lender, not the home buyer.
When is PMI typically required?
Whenever a homebuyer purchases a home with less than 20 percent down payment.
What does PMI provide to the mortgage lender?
Reimbursement up to a certain level for the home loan if the home buyer defaults.
How much should home buyers expect to pay for PMI each month?
Between one-half percent and one percent of the mortgage loan.
Can PMI be canceled?
Yes, after the home buyer has proven they will make their mortgage payments on time.
What is a key factor for home buyers to consider regarding PMI?
The length of time PMI is required.
Who typically pays PMI?
The borrower pays PMI to the lender each month, not directly to the servicing company.
Are conventional loans the best option for every home buyer?
No, they are often best for those with very good credit scores and qualifications.
What should a real estate agent explain to home buyers regarding loans?
The different options available and what they should do to obtain the loan they are looking for.
Why is it important for a borrower to have a loan in place before searching for a home?
To ensure they can move forward with the home search.
How do loan requirements and conditions change over time?
They change as policy changes occur.
What is a fixed-rate mortgage?
A fully amortizing loan where the interest rate remains the same throughout the term of the loan.
What happens to the principal in a fixed-rate mortgage over time?
The principal in each monthly mortgage payment increases until the loan is fully amortized.
What is an interest-only mortgage?
A non-amortizing loan where the lender receives only interest during the term, with principal repaid in a lump sum at maturity.
What is the risk associated with an interest-only mortgage?
The full loan amount is due at maturity, making it riskier than a fixed-rate mortgage.
What characterizes an adjustable-rate mortgage (ARM)?
It bears interest at a rate subject to change during the term of the loan.
What is the risk associated with adjustable-rate mortgages?
The monthly mortgage payment changes at an unpredictable rate, making it difficult to budget.
In a 7/1 ARM, how often does the interest rate adjust after the initial period?
Every 12 months after the first adjustment period of 84 months.
What is the initial monthly mortgage payment for an adjustable-rate mortgage based on?
It is calculated as if the loan is a 30-year fixed-rate mortgage.
What is an FHA-Insured Loan?
A mortgage loan in which payments are insured by the Federal Housing Administration.
What does Mortgage Insurance Premium (MIP) refer to?
The amount paid by a mortgagor for mortgage insurance on an FHA-insured loan.
What is one of the main benefits of FHA loans for first-time homebuyers?
Ease of qualifying for these loans.
Why were FHA loans created in the 1930s?
To help individuals struggling through the Great Depression to get back into homeownership.
How do FHA loans reduce risk for lenders?
The federal government covers some losses if a home buyer defaults on an FHA loan.
What are some key benefits of FHA loans?
Lower interest rates, reduced credit qualifications, and lower down payment requirements.
What is the primary goal of an FHA loan?
To provide access to home lending for those who may not otherwise qualify.
How do FHA loans differ from conventional loans?
FHA loans have fewer requirements and are insured by the federal government, while conventional loans do not have this insurance.
What is the typical down payment requirement for a conventional loan?
20 percent.
What is the reduced down payment requirement for an FHA loan?
3.5 percent.
What is the minimum credit score requirement for an FHA loan?
What credit score is typically required for a conventional loan?
At least 620.
What is the minimum credit score that may allow someone to qualify for an FHA loan with a larger down payment?
What types of properties are FHA loans available for?
Properties that the buyer lives in, not rental properties.
What are the available terms for FHA loans?
15-year loans or 30-year loans.
What is the maximum loan term for FHA loans?
30 years.
Who can typically obtain loans from credit unions?
Loans are typically given only to members of the credit union.
What advantage do credit union members have when seeking mortgages?
Members can secure low-interest mortgages and lower fees by borrowing directly from their credit union.
What are the benefits of VA loans for veterans?
They provide affordable, easier access to a home mortgage loan, often with larger loan amounts at lower costs.
What is a key requirement for veterans to qualify for a VA loan?
They must meet specific eligibility requirements, including service duration.
What is the first step for home buyers to obtain a VA loan?
To direct them to the VA office to obtain the Certificate of Eligibility (COE).
Who is eligible for VA loans?
Veterans, active-duty personnel, National Guard members, Reserve members, and some surviving spouses.
What is a significant benefit of VA loans regarding down payments?
VA loans allow for 100 percent financing, meaning no down payment is required.
How do VA loans typically compare to conventional loans in terms of interest rates?
VA loans usually have lower interest rates due to being backed by the federal government.
What is one way VA loans reduce out-of-pocket expenses for home buyers?
The VA funding fee can be rolled into the loan itself, and closing costs are generally lower.
What is a unique feature of VA loans regarding private mortgage insurance?
VA loans do not require private mortgage insurance premiums, unlike FHA or conventional loans.
What does it mean for a VA loan to be assumable?
It means that the loan can be assumed by others if the property is sold, depending on lender requirements.
What is the maximum borrowing limit for VA loans?
There is no maximum borrowing limit set by the VA, but lenders can limit the amount based on credit qualifications.
How do VA loans benefit veterans in the home buying process?
They cost less than most other types of loans, have fewer credit requirements, and do not require a down payment.
What is the first step for a home buyer to obtain a VA loan?
To obtain the Certificate of Eligibility (COE) from the VA office.
What must a lender be in order to offer VA loans?
Approved by the Department of Veterans Affairs.
What is the goal when working with a home buyer seeking a VA loan?
To ensure the home buyer is pre-approved for the loan and to know how much they can afford to purchase.
What standards must a home meet for a VA loan?
The home must meet safety and health standards, which are assessed during a home inspection.
What should you do if you have a buyer who has served in the military?
Thank them and encourage them to seek a VA loan.
How do VA loans compare to other loan types for home buyers?
VA loans tend to be the best option for most of today's buyers.
What is a blanket mortgage?
A type of loan used to fund the purchase of more than one piece of real property, often used for subdivision financing.
What is a buydown in real estate financing?
Obtaining a lower interest rate by paying additional points to the lender.
What is the purpose of a construction loan?
To fund the construction of improvements or buildings upon the property.
What does a package mortgage finance?
It finances the purchase of a home and personal items such as appliances.
What is a wrap-around mortgage?
A form of secondary financing where the seller extends a junior mortgage that wraps around existing mortgages.
What is a purchase money mortgage?
A type of loan issued to the home buyer by the seller when the buyer cannot qualify for a typical mortgage loan.
What is a key benefit of a purchase money mortgage for buyers?
It often has easier qualifications with reduced credit requirements.
What are some financing options for single-family residence loans?
Interest-only loans, fixed rate terms, and other configurations.
What is a key benefit of financing without an institutional lender?
Fewer closing costs and less time delayed in the application process.
What is an installment land sales contract?
A legally binding contract between the home seller and buyer for payments over time, where the seller retains legal title until terms are met.
What happens if a buyer defaults on an installment land sales contract?
The seller can end the contract and regain possession of the property, keeping all payments made.
What is the difference in handling defaults between installment contracts and traditional mortgage loans?
Installment contracts often have a forfeiture clause, while traditional mortgages go through legal foreclosure.
What are lease-purchase and lease-option agreements?
They are types of alternate financing commonly referred to as lease-to-own agreements.
What is a lease-purchase option in real estate financing?
It allows a potential homebuyer to live in a home while the seller maintains ownership, with a contract to purchase the property after a set time.
What are the two components of a lease-purchase option?
A tenant lease allowing the buyer to live in the home and an obligation defining specific goals for the buyer and seller regarding the sale.
What is the main difference between a lease-option and a lease-purchase?
In a lease-option, the tenant can purchase the property but is not obligated to sign a sale contract at the start, unlike in a lease-purchase.
What rights does a buyer have in a lease-purchase or lease-option agreement?
The buyer has the same rights as a tenant in a rental property and is responsible for maintaining the property and making payments as required.
What is a second mortgage?
A second mortgage is a property-secured loan taken out on the portion of a home that is not under mortgage, also known as a junior lien.
Why might homeowners take out a second mortgage?
Homeowners may take out a second mortgage for home improvements, larger investments, or to consolidate debt.
What is a risk associated with consolidating unsecured debt with a second mortgage?
If loan payments are not made on time, lenders can pursue foreclosure, turning unsecured debt into secured debt against the home.
What happens to first mortgage debt when a home is foreclosed on?
First mortgage debt is repaid first.
What is a blanket mortgage?
A blanket mortgage is a financing agreement that allows the purchase of more than one piece of real estate in a single transaction.
Who commonly uses blanket mortgages?
Builders and developers who plan to purchase a large amount of land.
What is the advantage of a blanket mortgage for property buyers?
It allows the property owner to sell off parcels over time without paying off the entire mortgage each time.
What is a buydown in mortgage financing?
A buydown is a method to lower the interest rate on a loan for at least the first years of the mortgage.
Who typically pays for a buydown?
Generally, the seller of the property or a home builder makes a payment to the lending company on behalf of the buyer.
What is the effect of a buydown on a buyer's mortgage payment?
It reduces the mortgage payment by lowering the interest rate.
What happens to a property under a blanket mortgage when it is sold to a home buyer?
The property is no longer under the blanket mortgage, and the sale pays towards the portion of the mortgage covering that land.
Why would a home seller increase the purchase price of their home?
To compensate for the cost of subsidizing the loan during applicable years.
What is the purpose of placing funds in escrow by the seller?
To help subsidize the loan during the applicable years, reducing the buyer's payments.
What are the two main types of construction loans?
Construction to permanent loans and stand-alone construction loans.
What is a construction to permanent loan?
A loan where the lender pays for construction and rolls that cost into a traditional mortgage once the home is complete.
What is a stand-alone construction loan?
A loan where the lender advances money for construction, and the buyer obtains a mortgage to pay off the construction debt after completion.
What is a wrap around loan?
A type of secondary financing where the seller lends the buyer the difference between the existing loan balance and the purchase price.
What is required for a wrap around loan to be executed?
Consent from the current lender is usually required.
What must lenders approve in addition to the buyer's financials for a construction loan?
They must also approve the home plans and the integrity of the builder.
What is a package loan in real estate financing?
A package loan is a type of mortgage financing used when a buyer wishes to purchase real property and personal property in one transaction.
When might a package loan be commonly used?
During the purchase of a new home that includes appliances, furnishings, and other items within the structure.
What is the difference between a package loan and loan packaging?
A package loan combines real and personal property purchases into one loan, while loan packaging is the process lenders use to bundle mortgages from many people and sell them as investments.
Why might a homeowner charge a higher interest rate to a buyer in certain loan situations?
Because the loan is obtained in situations where the home buyer cannot obtain a traditional loan, making it more expensive.
What is the role of a real estate agent in the financial process of purchasing a home?
To help the home buyer find their home and buy it with the most affordable product possible, while understanding the buyer's financial needs.
What do usury laws in Georgia govern?
The maximum interest rates that may be charged on loans.
What significant change occurred in Georgia's usury laws in 1983?
The Georgia Department of Banking and Finance no longer set a maximum interest rate for loans.
What is the maximum interest rate that applies if a contract does not specify an interest rate in Georgia?
7 percent per annum.
What is the maximum interest rate for loans under $3,000 in Georgia?
16 percent per annum.
What can be the interest rate for loans greater than $3,000 in Georgia?
Any interest rate agreed upon by the lender and borrower.
How are loan origination fees treated in real estate related loans in Georgia?
They cannot be considered in the calculation of interest and are not subject to a rebate.
Can a prepayment penalty be applied to a loan in Georgia?
Not unless agreed upon by the parties.
How must a rate of interest be advertised in Georgia?
In terms of simple interest or in compliance with the Federal Truth-in-Lending Act.
What is the principal business of a mortgage banker?
Originating, financing, closing, selling, and servicing loans secured by real property for institutional lenders.
What does a mortgage broker do?
Arranges a mortgage loan between a lender and a borrower for a fee.
What is the first step home buyers need to take before finding a home?
Arrange their financing, starting with saving money for a down payment.
What should home buyers consider when looking for a loan?
Various types of loans available, their costs, availability, and benefits.
What is one option for home buyers to obtain financing?
Savings and Loan Association.
What services do savings and loan associations provide?
Accept savings at interest and lend money for purchasing a home through mortgage loans, as well as home improvement and investor-related loans.
How do the types of loans and options available to home buyers differ among savings and loan associations?
They differ from one organization to the next.
What type of loans do lenders typically offer for single-family homes?
Conventional loans.
What is the typical loan term for financing single-family residences?
25 to 30 years.
What percentage of the property's value can loans be made for?
Up to 95 percent, though typically around 75 to 80 percent.
What are the two main types of mortgage companies?
Mortgage brokers and mortgage bankers.
What is the role of a mortgage broker?
To bring the borrower and the lender together and find funding based on the client's financial profile.
How are mortgage brokers compensated for their services?
They are typically paid a fee equal to one percent of the loan amount, known as origination points.
What types of loans do commercial banks often focus on?
Construction loans or home improvement loans, typically short-term loans.
What is a key characteristic of federally chartered banks regarding residential loans?
They can offer residential loans of up to 80 percent of the appraised value.
What is the primary function of mortgage companies in the lending process?
To help secure loans for larger financial institutions and sell packages of loans as investments.
What role does a mortgage broker play for borrowers?
A mortgage broker can access loan options from insurance companies for borrowers.
What is a key function of a mortgage banker?
Mortgage bankers can make mortgage loans and package them to sell to third-party investors.
How do mortgage brokers and bankers differ in their representation?
Mortgage bankers work for the bank, while brokers shop around for the best loan for the buyer.
What is a significant difference between banks and credit unions?
Banks are profit-driven and owned by large organizations, while credit unions are member-owned and not profit-driven.
What rights does the ECOA provide to consumers?
It provides consumers with the right to know why their credit application was denied and the right to dispute inaccuracies in their credit report.
What is the focus of Fair Housing Laws in relation to financing?
To prevent discrimination in housing-related transactions, including financing.
What is the purpose of the Real Estate Settlement Procedures Act (RESPA)?
To provide consumers with information about the costs associated with the settlement process and to protect them from abusive practices.
What is one requirement under TILA?
At least one requirement must be listed.
What is one document required by lenders under RESPA?
At least one document must be listed.
What is the purpose of the Truth in Lending Act (TILA)?
To ensure that prospective borrowers receive credit cost information before entering into a transaction.
What are the three main requirements for lenders under TILA?
What does TILA require lenders to disclose to borrowers?
All finance charges, including the true annual interest rate.
What types of loans are covered by TILA?
Residential, federally related, 1 to 4 family properties, non-commercial properties, and family farms.
What type of transactions are not covered by TILA?
Commercial transactions.
What agency was tasked with making changes to TILA after the mortgage crisis?
The Consumer Financial Protection Bureau (C.F.P.B.).
What does TILA ensure regarding disclosures to borrowers?
That borrowers understand the actual cost of borrowing and can compare offers from different lenders.
What is the significance of the three-day right of rescission under TILA?
It allows consumers additional time to make an informed decision before finalizing a loan.
What is the purpose of the TILA-RESPA Integrated Disclosure Rule?
To protect consumers from being unaware of the real cost of lending.
What is the first disclosure that must be made after a purchaser submits specific information to the lender?
The Loan Estimate.
What information is required for the Loan Estimate to be disclosed?
Name, Income, Social Security number, address of the home, estimate of home's value, and amount to borrow.
What is the closing disclosure often referred to as?
The CD.
When must the lender deliver the closing disclosure to the buyer?
3 business days before closing.
What happens if a change is made to the closing disclosure that significantly impacts the buyer's cost of lending?
The disclosure must be redelivered, triggering a new three-day review period.
What are the three top changes that trigger a new review period for the closing disclosure?
What type of organizations can determine membership criteria for credit unions?
Specific labor industries or religious organizations can determine membership criteria.
Do insurance companies provide home loans directly to borrowers?
No, borrowers cannot contact insurance companies directly for loans; they need a broker.
What role do insurance companies play in mortgage lending for real estate?
They provide an important source of capital, often lending through local mortgage brokers and bankers.
How much of the assets of many insurance companies are related to the real estate market?
As much as 30 percent.
How can borrowers connect with insurance companies for lending sources?
They cannot connect directly but can inquire through mortgage brokers or bankers.
What types of organizations are considered third-party investment groups in real estate funding?
Pension funds, finance companies, and real estate investment trusts (REITs).
What is a common investment strategy for pension funds related to real estate?
Investing in loan packages rather than single loans.
How do real estate investment trusts (REITs) operate?
They pool money from investors to purchase real estate, similar to mutual funds.
Who can provide funding for home buyers besides institutional investors?
Individual investors or groups of investors can also provide loans.
What is the common practice for individual investors providing funding?
Most will work with mortgage brokers to find investment opportunities.
What should real estate agents provide guidance on regarding loans?
Where to find a loan, such as through mortgage brokers, commercial banks, savings and loans, and credit unions.
What is an important thing to inform home buyers about their loan options?
They have flexibility and options and are not tied to a single bank or lender.
Why should home buyers seek offers from multiple lenders?
To compare options and find the best offer that fits them.
What is the first step in obtaining a mortgage?
Filling out a mortgage application.
What is the Uniform Loan Application commonly referred to as?
The 1003 mortgage application form.
Who typically uses the Uniform Loan Application?
Most mortgage lenders.
What information does the Uniform Loan Application provide to lenders?
Basic information needed to make loan decisions.
How many times must a borrower complete the Uniform Loan Application?
Twice.
What organizations developed the Uniform Loan Application?
The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corp. (Freddie Mac).
What is the purpose of the Uniform Loan Application in the mortgage process?
To gather necessary information for loan approval and verification.
What do Fannie Mae and Freddie Mac do with the mortgages they purchase?
They hold them in investment portfolios or sell them as mortgage-backed securities.
What information is needed to complete the Uniform Loan Application?
Information to verify identity, employment, financial details, monthly income, expenses, liabilities, and assets.
What is the purpose of the Uniform Loan Application?
To provide the lender with necessary information to decide whether to lend to the home buyer.
What happens after a home buyer requests pre-qualification for a loan?
The lender asks for basic information and provides a ballpark figure of how much they are willing to lend.
What is the significance of being pre-qualified for a home loan?
It ensures the home buyer has the financial means to purchase a home, making them more serious to sellers.
What does the lender do after the home buyer finds a home?
The lender completes the Uniform Application Form and submits it to underwriters for approval.
How long does the application process typically take?
It can take a matter of days to a couple of weeks for the buyer to know if they are pre-qualified.
What role does the buyer's credit report play in the application process?
It serves as a backup to verify the information provided in the Uniform Application Form.
What types of financial information must borrowers disclose on the application?
Total monthly income, expenses, liabilities, assets, stocks, bonds, retirement accounts, and debts.
What is the difference between pre-approval and pre-qualification?
Pre-approval is an evaluation by a lender to determine if a borrower qualifies for a loan, while pre-qualification is a tentative assessment based on information provided by the borrower.
Why should agents encourage home buyers to become pre-qualified?
Pre-qualification indicates that the home buyer is serious about the purchase and that a lender is likely willing to assist them.
What is a pre-qualification letter?
A document provided by the lender indicating that the buyer has gone through a basic or more extensive pre-qualification process.
What should an agent do if a home buyer has not spoken to a lender yet?
The agent should have a formal discussion with the buyer, explain the process, and encourage them to become pre-qualified.
What does a pre-qualification process involve?
A loan officer takes information from a borrower to make a tentative assessment of how much the lending institution is willing to lend.
What is the importance of a pre-qualification letter in the home buying process?
It is the first step indicating the buyer's seriousness and readiness to engage in the home buying process.
What does a pre-qualification letter indicate about a borrower?
It states that the individual has been pre-qualified for a loan but does not guarantee a loan or qualification yet.
What is the main limitation of a pre-qualification letter?
It is based on basic information provided by the buyer and is not verified at a high level.
What information does a borrower typically provide for pre-qualification?
Financial information, including how much they can afford and their expenses.
What is the difference between pre-qualification and pre-approval?
Pre-qualification is a basic assessment, while pre-approval involves a formal mortgage application and more in-depth verification.
What must a home buyer do to obtain a pre-approval letter?
Fill out a formal mortgage application with detailed financial information.
What factors are considered during the pre-approval process?
Credit history, tax returns, income statements, and other financial obligations.
Why might a real estate agent find pre-qualification letters not very useful?
Because they do not provide a strong indication of the buyer's ability to secure a loan.
What is the lender's goal when issuing a pre-qualification letter?
To begin gathering information and entice the home buyer into a loan process.
What is the purpose of a pre-approval letter in home buying?
It indicates the amount a home buyer is likely to obtain and shows sellers that the buyer has financial means.
What is the difference between a pre-approval letter and a pre-qualified letter?
A pre-approval letter contains more detail and is based on in-depth information and review, while a pre-qualified letter is less formal.
Why do home sellers prefer buyers with a pre-approval letter?
Sellers want to ensure their time is spent on buyers who have the financial means to make a purchase.
What might delay the issuance of a pre-approval letter?
Delays can occur due to a lack of submitted information, credit report updates, or the lender not being able to offer a loan.
What is the final step in the loan process after finding a home?
Getting loan commitment from the bank, which involves the lender approving the application after reviewing the buyer's financials and the home's worth.
What should a real estate agent do if a buyer does not have a pre-approval letter?
The agent should explain the importance of pre-approval and ask questions to understand the delay.
What is the significance of loan commitment in home buying?
Loan commitment occurs when the bank is certain it will lend for the purchase of a specific home.
What role do real estate agents play in the financing process for home buyers?
Real estate agents help buyers obtain pre-qualification and pre-approval, encouraging them to move through the process step-by-step.
Why is it important for real estate agents to be knowledgeable about the financing process?
Being knowledgeable helps transform home lookers into home buyers and ensures the best outcome for the purchase.
What is the role of an underwriter in the loan process?
An underwriter determines credit worthiness to qualify an applicant for a loan.
What does underwriting involve in the context of obtaining a loan?
Underwriting involves the criteria used by a lender to determine credit worthiness for loan qualification.
What must happen after a home buyer finds a home they love?
The home must be approved for the loan through the underwriting process.
Who handles the underwriting process?
Large specialist financial institutions, including the home buyer's lender, handle the underwriting process.
What does the underwriter guarantee in the loan process?
The underwriter guarantees the payment to the buyer for the home and takes on the financial risk of the loan.
What does the lender review to approve a mortgage application?
The lender reviews the borrower's financial profile to ensure it matches the loan criteria.
What three main criteria does the underwriter evaluate during the loan process?
The underwriter evaluates the capacity of the buyer, the credit of the buyer, and the collateral itself.
What financial aspect does the underwriter examine regarding the borrower?
The underwriter examines the borrower's capacity to pay off debts, including employment records, income, debt, and assets.
What is the debt-to-income ratio?
The debt-to-income ratio is the percentage of the home buyer's debt compared to their income.
What is the maximum percentage of income that should generally be used for housing costs?
30 percent.
What does PITI stand for in mortgage payments?
Principal, Interest, Taxes, and Insurance.
What does the underwriter verify regarding the home buyer's assets?
All information regarding checking and savings accounts, retirement accounts, and other assets.
What is the significance of the debt to credit ratio in the loan approval process?
It helps determine how much debt the individual has compared to available credit, affecting their ability to make mortgage payments.
What is the highest debt to credit ratio many lenders will approve before moving forward with a loan?
43 percent.
Why are home inspections and appraisals valuable in the underwriting process?
They help ensure the property's value is high enough to cover the loan value and protect the lender.
What does the underwriter want to know about the home buyer's plans for the property?
Whether the home buyer plans to live in the home or use it for rental income.
How can the occupancy of the property affect the mortgage rate?
If the home buyer will occupy the property, it can lead to a potentially lower interest rate compared to purchasing for rental income.
What can cause changes to the interest rate offered by a lender during the mortgage process?
Changes in the conditions of the loan or the borrower's credit qualifications.
What should home buyers avoid doing during the underwriting process?
They should avoid actions that could alter their credit report, income, or debts.
What are the two main laws that prohibit discriminatory lending practices?
The Equal Credit Opportunity Act and the Fair Housing Act.
What does the Equal Credit Opportunity Act forbid?
It forbids lending decisions based on race, color, religion, sex, marital status, age, national origin, or public assistance status.
What does the Fair Housing Act restrict?
It restricts discrimination in lending for buying, building, repairing, or improving a place to live, as well as selling or renting properties.
What is a key responsibility of a real estate agent during the underwriting process?
To explain to the home buyer what is happening during the underwriting process.
What can happen if a home buyer takes out new loans after winning a bid on a property?
The underwriter may require a reconsideration of the buyer's credit qualifications, potentially leading to loan denial.
What are protected classes under the Fair Housing Act?
Race, color, religion, sex, national origin, familial status, or handicaps.
How can neighborhood characteristics affect lending decisions?
Lenders may be limited in making decisions based on the neighborhood's crime rates or demographics.
How long can the underwriting process take for a single-family residence loan?
A few weeks to a few months.
Why is the underwriting process longer for short sales and foreclosure-related properties?
Because it involves more complexities than traditional loans.
What is an important aspect to manage during the underwriting process?
Keeping clients calm throughout the waiting process.
What is the purpose of a loan commitment letter?
To outline the specifics of the loan and agree to the terms of the mortgage.
What information does a loan commitment letter provide?
It includes the amount to be borrowed, names of the borrowers, terms of the loan, interest rates, and property details.
What must happen before a loan can get final approval?
Conditions or contingencies listed in the loan commitment letter must be met.
What are common conditions that may be included in a loan commitment?
Proof of mortgage insurance and proof of homeowners insurance.
What is the significance of the underwriting process in loan approval?
It involves checking and double-checking all loan details before issuing a loan commitment.
What does the loan commitment letter describe about the property?
It describes the property by its address and may include details about the type of structure, size, and use.
What documentation is commonly required to verify a home buyer's financial status?
Documentation to verify income, debts, or assets, or proof that existing debts are paid off.
What is a common condition for home buyers regarding credit card debt?
Home buyers may have to pay off a specific amount of credit card debt to improve their debt to income ratio before the process can move forward.
What types of insurance are typically required for loans?
Proof of homeowners insurance and title insurance.
What can cause delays in the home buying process related to existing homes?
The loan may be dependent on the old home being sold, which can cause delays if the real estate market is slow.
What happens during the property closing process?
The loan is officially closed during the physical signing of documents, and the deed is transferred from the home seller to the lender and home buyer.
What is the role of the title agent during the closing process?
The title agent facilitates the signing of documents and answers any questions the home buyers may have.
What must happen for the property closing to be complete?
The deed must be transferred by the home seller to the lender and home buyer after the lender funds the loan.
What is the final step in the home buying process?
The final step is the property closing, where the loan is officially closed and the deed is transferred.
What should home buyers be educated about regarding their credit report before closing?
Home buyers should be educated that changes in their credit report can stall or eliminate the closing process.
What is the purpose of the Truth in Lending Act (TILA)?
To promote informed use of consumer credit by requiring disclosures about its terms and cost.
What does the Equal Credit Opportunity Act (ECOA) ensure?
It ensures that all consumers have equal access to credit without discrimination.
What are hard costs in construction?
Construction materials, land purchase, and labor.
What are soft costs in construction?
Permits, rezoning costs, and utility connection fees.
How do interest rates affect new home construction?
Higher interest rates reduce the number of consumers eligible for mortgage loans and decrease investor interest in properties.
What physical conditions can impact construction costs?
Land that fails perk tests, wetland restrictions, and other environmental factors.
How do local transportation issues affect property values?
Areas with good public transportation or easy access tend to have higher property values.
Why are properties near interstate highways often valued higher?
Because homeowners prioritize convenience when choosing where to purchase a home.
What climate issues can impact property value?
Flooding, wind, and other natural phenomena can impact property value.
What is the borrower's right of rescission under TILA?
The right to change their mind within three business days when refinancing or taking out a home equity line.
What events must occur to start the three-day right of rescission period?
The credit contract must be signed, the borrower must receive a closing disclosure, and two notices explaining the right to rescind must be received.
What starts the review period for a borrower after certain events occur?
The clock starts ticking for a three business day review period.
What should a borrower do if the lender's notice does not include instructions to exercise their right?
The borrower should put in writing their intent to rescind and send it in a trackable manner.
What is the significance of business days in relation to TILA?
Business days include Saturday even if the lender is closed.
What can a client do under the three-day rule after closing on a home equity loan?
They can cancel the loan to purchase a different home that has come on the market.
What are 'trigger' words in advertising according to TILA?
Words or phrases that require additional disclosures when used in advertisements.
What are the five main triggers that require additional disclosures?
What must be disclosed if any of the five triggers are mentioned in an advertisement?
Terms of repayment, annual percentage rate, total finance charge, total number of payments and due dates, and amount or percentage of a down payment.
Is 'no down payment' considered a trigger according to TILA?
No, 'no down payment' is not a trigger.
What is the minimum number of loans a lender must make annually to be subject to TILA advertising guidelines?
At least 25 times on an annual basis and/or five loans a year must be housing loans.
What should real estate agents ensure their clients have before proceeding with seller financing?
All the necessary information on the transaction.
What are the potential penalties for lenders who violate TILA regulations?
Actual damages incurred by the borrower and statutory damages ranging from 4,000.
What can happen if a lender fails to deliver proper disclosures to a borrower?
The borrower may incur actual damages, such as losing their earnest money deposit.
What are the three tiers of penalties for TILA violations?
First tier: 25,000 per day; Third tier: $1 million per day.
What is the role of the Consumer Financial Protection Bureau regarding TILA violations?
They levy fines for violations of TILA regulations.
Why is it important for real estate agents to have a reputable network of lenders?
To help clients avoid lenders who violate TILA rules.
What is the primary purpose of TILA?
To ensure consumers are provided with appropriate information prior to entering into a loan agreement.
What responsibility does the lender have under TILA?
To ensure the information is provided to the borrower.
What should real estate agents be familiar with to guide their clients effectively?
The rules and requirements of TILA.
What must the final closing statement be provided to the parties involved before settlement?
3 business days before settlement.
What should an agent confirm with the lender, client, and settlement company before the closing statement deadline?
That the final closing statement was provided.
What is crucial for an agent representing the seller to confirm with the buyer's lender and agent?
That the seller will be able to close the transaction as anticipated.
What must an agent provide to the lender regarding credits or commission changes?
Any credits or commission changes that need to be approved for the closing statement.
What can trigger a new three-day review period for the closing statement?
A last minute credit that changes the closing statement significantly.
Under TILA, how many days before closing must the settlement agent provide certain financial information to the lender?
10 to 14 days before closing.
What information must an agent provide to the settlement agent in a timely manner?
Commission, administrative charges, commission credits, and license information.
What is the Equal Credit Opportunity Act (ECOA)?
A law enacted in 1974 that prohibits discrimination in credit lending.
What are the four main parts of the ECOA?
What types of credit transactions does the ECOA cover?
All types of credit transactions, including consumer and commercial loans.
What is prohibited under the ECOA regarding loan applications?
Lenders cannot deny applications based on race, color, religion, national origin, sex, marital status, age, or public assistance status.
Can lenders use an applicant's race or gender in credit decisions under the ECOA?
No, using race, gender, or birthplace as a factor for credit decisions is prohibited.
Is it allowed to ask about an applicant's immigration status under the ECOA?
Yes, asking about immigration status is allowed as it relates to the applicant's ability to repay the loan.
What is an example of prohibited lending terms under the ECOA?
Charging a higher interest rate based on the applicant's race or the neighborhood they are buying in.
What marital status information can lenders ask under the ECOA?
Lenders can ask if a person is married, single, or separated, but not if they are divorced or widowed.
What does ECOA restrict regarding marital status information requests from lenders?
Lenders can ask about marital status only when an applicant seeks an individual account for unsecured debt or when the account is shared with a spouse or used as collateral.
What information about children can lenders request under ECOA?
Lenders cannot request information about children, but they can ask about dependent care costs.
Under what conditions can lenders seek information about child support or alimony?
Lenders can seek this information only if they warn the applicant that providing it is voluntary, but if the applicant is paying support expenses, those can be reviewed.
What age-related criteria can lenders consider when evaluating credit applications?
Lenders can consider if the applicant is under 18 or over 62 years of age, and age can be an indirect factor impacting income.
What is the purpose of the notice provided by lenders under ECOA?
To inform applicants that the Federal Equal Credit Opportunity Act prohibits discrimination based on various factors including race, color, religion, national origin, sex, marital status, age, and income sources.
What is the significance of an applicant's age in credit evaluations?
An applicant's age can be an indirect factor if it impacts their income, such as nearing retirement.
What is an adverse credit decision under the ECOA?
An adverse credit decision can include denial of credit, approving less than requested, denying a credit increase, closing an account, or changing account terms negatively.
Does an across-the-board change by a lender count as an adverse decision under the ECOA?
No, it does not count as an adverse decision if it affects all account holders at the same time.
What must lenders consider regarding communication tools when making credit decisions?
Lenders can consider whether an applicant has a dedicated communication tool, like a confirmed phone account, to ensure they can contact borrowers.
What factors cannot be used by lenders to deny credit under the ECOA?
Lenders cannot deny credit based on gender, marriage status, part-time versus full-time work, or reliance on annuities, pensions, or Social Security.
Can income from alimony or child support be a reason for reducing credit offered?
No, income from alimony, child support, or other legal arrangements cannot be a reason for reducing credit offered.
What documentation can lenders require to validate income sources?
Lenders can require documentation of income sources, such as work and alimony income, to approve credit.
What is the ECOA notice requirement for commercial borrowers generating over $1 million in revenue?
They must receive an ECOA notice, which can be written or verbal, and a credit decision within a reasonable time after application submission.
What must creditors provide in their decision notice to commercial borrowers?
Creditors must provide a clear decision on credit approval, a different offer than requested, or an adverse response.
What is the time frame for providing a written response to an adverse decision under ECOA?
60 days from the adverse decision.
What must be included in the written response to an adverse decision under ECOA?
The reason for denial and the general ECOA notice.
What is the time frame for providing a credit decision to smaller businesses under ECOA?
30 days once an application has been received.
What is a typical hybrid approach for notifying business customers under ECOA?
Provide an ECOA notice in writing, provide the decision notice within 30 days, and provide the reason for any adverse action.
Under ECOA, how many co-applicants need to be notified about a loan decision?
Only one of the co-applicants needs to be notified.
What is the recordkeeping requirement for lenders under ECOA for consumer applications?
Lenders must keep and maintain an applicant's records for up to 25 months.
What is the recordkeeping requirement for commercial applicants generating more than $1 million annually?
Records must be kept at least 60 days after providing an ECOA notice.
How long must lenders keep records if a credit line was not extended and the applicant requests to know why?
For 12 months (a full calendar year).
Why is it important for real estate agents to understand ECOA regulations?
It helps them know the rules lenders follow when determining a homebuyer's loan eligibility.
What percentage of homeowners typically take out a mortgage loan to purchase a property?
About 95%.
What must you be aware of when helping a client purchase a property?
Factors that could impact a borrower's ability to purchase a property.
In most cases, what is necessary for making a sale in real estate?
The client's ability to borrow money for their mortgage.
What is redlining in the context of real estate financing?
An illegal lending policy of denying real estate loans on properties in older, changing urban areas, usually with large minority populations, due to alleged higher lending risks without considering the creditworthiness of the individual loan applicant.
What are lenders prohibited from denying under the Federal Fair Housing Act?
Lenders cannot deny services based on race, color, national origin, religion, sex, familial status, or handicap.
What should a person do if they feel they are denied a mortgage for no apparent reason?
They may want to consider filing a complaint.
Can lenders refuse to provide information about loan programs?
No, lenders cannot refuse to provide information about loan programs.
What is low balling in the context of lending?
It refers to lenders trying to impact an appraisal by undervaluing the property.
What must lenders offer to applicants with identical or similar finances?
Similar terms as anyone else.
What are the three types of lending discrimination recognized by the courts?
Overt evidence of disparate treatment, which can be shown through actual statements or evidence of different treatment that cannot be explained by nondiscriminatory factors.
What is overt evidence of disparate treatment in lending practices?
An example is when a person is denied a loan due to their race.
What is comparative evidence of disparate treatment?
It occurs when applicants with similar qualifications receive different treatment based on discretionary lending decisions.
What can an applicant claim if they are denied a loan while a similarly qualified applicant is approved?
Disparate treatment.
What is disparate impact in lending?
It occurs when a neutral policy results in unfairly burdening or excluding a group of people, even if unintentional.
What is an example of disparate impact in lending?
A lender's policy of a minimum loan amount that excludes many minorities from obtaining loans.
What should clients do if they feel they have been discriminated against in lending?
They can file a formal complaint on the US Department of Housing and Urban Development website and hire an attorney.
What is the role of a real estate agent regarding their client's loan terms?
It is not their responsibility to review loan terms or determine if there has been discrimination, but they should be aware of resources for clients.
What does the Housing Act of 1968 prohibit?
The practice of redlining.
What is redlining?
Denying a person a loan based on race, color, national origin, religion, sex, familial status, or handicap in a particular area.
What factors can lenders consider when approving or denying a loan?
Credit history, income, property condition, neighborhood amenities, and the lender's portfolio.
What was the settlement amount ordered for Hudson City Saving Bank for discriminatory lending practices?
$33 million.
What is lowballing in the context of real estate?
Making a low appraisal based on discrimination, which can force the borrower to cancel the sales contract or pay the difference.
What fee may a creditor or servicer charge for providing the balance due to pay off a home loan under certain conditions?
A processing fee up to $10.00 may be charged if the information is provided by facsimile or within 60 days of a previous request.
What is 'flipping' a home loan?
Flipping a home loan involves a borrower refinancing a home loan that is less than five years old without a reasonable, tangible net benefit to the borrower.
What presumption is made regarding a refinancing transaction that qualifies as 'flipping'?
It is presumed to be flipping if a high-cost home loan refinances an existing loan consummated within the prior five years and meets certain criteria.
What are the conditions under which a refinancing transaction is presumed to be a flipping?
If it involves a high-cost home loan, the original loan was government or nonprofit originated, had beneficial terms, and the borrower loses benefits from the refinancing.
What happens if a borrower alleges a violation of the flipping code section?
The borrower is entitled to costs and attorneys' fees only if the presiding judge determines the defendant willfully engaged in the act and refused to resolve the matter.
What limitations are placed on high-cost home loans regarding prepayment fees?
No prepayment fees or penalties shall be charged after the last day of the twenty-fourth month following the loan closing.
What is a restriction on scheduled payments for high-cost home loans in Georgia?
A scheduled payment shall not be more than twice as large as the average of earlier scheduled payments unless adjusted to the borrower's seasonal or irregular income.
What happens if a high-cost home loan includes terms that increase the principal balance?
It is prohibited if the regular periodic payments do not cover the full amount of interest due.
What is the rule regarding interest rate increases after default in high-cost home loans?
A provision that increases the interest rate after default is not allowed unless it is a variable rate loan and the change is not triggered by the default.
What is considered unconscionable in a high-cost home loan agreement?
Requiring a borrower to assert any claim or defense in a less convenient or more costly forum is unconscionable and void.
What must a creditor obtain before making a high-cost home loan?
Certification from a counselor with an approved nonprofit organization that the borrower has received counseling on the advisability of the loan transaction.
What must a creditor believe before consummating a high-cost home loan?
A reasonable creditor must believe that the borrower can make the scheduled payments based on current and expected income and other financial resources.
What is prohibited regarding contractor payments from high-cost home loan proceeds?
A creditor or servicer shall not pay a contractor under a home improvement contract unless certain exceptions are satisfied.
What fees are prohibited in relation to modifying a high-cost home loan?
A creditor or servicer shall not charge any fees or other charges to modify, renew, extend, or amend a high-cost home loan.
What notice must a creditor provide before initiating foreclosure proceedings?
A written notice of intent to foreclose must be sent by certified mail to the borrower's last known address at least 14 days prior to the legal advertisement.
What right does the borrower have regarding default before foreclosure action is taken?
The borrower or borrower's agent has the right to cure the default at any time up to the time title is transferred by means of foreclosure.
When is the borrower not liable for attorneys' fees related to default?
The borrower shall not be liable for any attorneys' fees incurred by the creditor or servicer prior to the time the creditor or servicer files a foreclosure action.
What should agents inform clients about if they feel discriminated against in the lending process?
They should inform them about the ability to file a claim.
What are lenders prohibited from doing according to the Fair Housing Act?
They cannot make the lending process more difficult based on race, color, national origin, religion, sex, familial status, or handicap.
What is one way the Fair Housing Act prevents discrimination in the lending process?
By ensuring lenders do not apply excessively burdensome qualification standards.
What is prohibited regarding the terms imposed by lenders?
It is illegal for lenders to impose more onerous terms, including higher interest rates.
What should agents do if they notice clients facing more difficulties in the loan application process?
Encourage clients to ask more questions and consult with an attorney.
What is racial steering in the context of lending?
Racial steering is when a lender pushes an applicant towards a particular loan product or geographic area based on race.
What is an example of racial steering?
A lender gives a buyer superior loan terms for one property over another based on the buyer's race.
Is racial steering allowed under the act?
No, racial steering is prohibited under the act.
What does the Real Estate Settlement Procedures Act (RESPA) require from lenders and mortgage servicers?
Disclosure of settlement procedures and costs to borrowers.
What is the purpose of RESPA?
To ensure borrowers receive important information about settlement costs and to prevent kickbacks.
What types of transactions does RESPA cover?
Almost all residential real estate transactions involving federally related loans.
What are some examples of transactions covered by RESPA?
Loans secured by a lien on residential property, loan assumptions, refinancing, home equity credit lines, and reverse mortgages.
What must be disclosed under RESPA regarding business relationships?
Affiliated business relationships, so consumers are aware of financial benefits a party may receive.
What are the penalties for lenders and mortgage brokers who do not comply with RESPA?
They may face penalties for failing to fulfill the Act's requirements.
What guidelines does RESPA establish for lenders?
Various escrow and accounting guidelines.
What must a lender provide to the borrower within three business days of submitting a loan application?
A copy of the loan estimate.
What does a loan estimate help the borrower to do?
Compare various credit offers.
What key information is included in a loan estimate?
Estimated interest rate, estimated monthly payment, closing costs, unique loan charges, and cash needed to close.
What is the purpose of the Closing Disclosure (CD)?
To provide the borrower with the final numbers for the actual loan before closing.
When must the Closing Disclosure be provided to the borrower?
Three business days before closing.
What should a borrower do if there are large differences between the loan estimate and the Closing Disclosure?
Ask questions to understand the discrepancies.
What are some items included in the estimated monthly payment on a loan estimate?
Insurance and taxes, in addition to principal and interest.
What should real estate agents discuss with their clients regarding the loan estimate?
The estimate of the cash needed to close.
What are some services that borrowers cannot shop for according to the loan estimate?
Appraisal fee, credit fee, and fees related to flood monitoring and checks.
What is included in the Closing Disclosure that is critical for the borrower to review?
Loan amount, interest rate, monthly payment, closing costs, and cash needed to close.
What should an agent review on the Closing Disclosure (CD)?
The agent should review the commission portion and the contract portion for any client questions.
What does Section 10 of the RESPA regulation cover?
It covers the rules lenders must follow regarding the buyer's escrow account, including limits on the amount of escrow a lender can require.
What is typically included in a buyer's escrow account?
Payments the lender will make on the borrower's behalf, such as taxes and insurance payments.
What must lenders provide borrowers according to RESPA?
An initial escrow statement and annual reports regarding the escrow account.
What does Section 8 of RESPA prohibit?
It prohibits kickbacks or unearned fees in exchange for settlement services on mortgages covered by RESPA.
What are the four required elements to consider a violation of Section 8?
Why might a seller's mortgage payoff be less than anticipated?
Because the escrow is not released at closing, as lenders typically hold escrow for 30-60 days post closing.
Why might a buyer receive a credit on the closing statement?
Typically because the lender estimated a higher escrow for the buyer than they are allowed to collect.
What does RESPA stand for?
Real Estate Settlement Procedures Act
What is a violation of RESPA related to?
Exchanging things of value for settlement related services.
What is an example of a RESPA violation involving a real estate agent?
A broker offering a higher split on a transaction that closes at a particular settlement company for federally related loans.
What are Affiliated Business Arrangements (AFBA) under RESPA?
When a real estate agent or broker has a financial interest in a settlement provider entity, allowed under specific guidelines.
What must be provided to clients when an AFBA exists?
Specific disclosures that need to be signed by the client.
What are the penalties for violating Section 8 of RESPA?
Criminal and civil penalties, including fines up to $10,000 and up to one year in prison.
How long does a consumer have to file a claim for a kickback violation under RESPA?
One year.
What can the government do regarding claims of RESPA violations?
The government has up to three years to bring a claim.
What is the maximum fine for a RESPA violation?
Up to $10,000 and up to three times the settlement charge involved in the violation.
What should real estate agents be cautious about regarding title companies?
Any gestures from title companies, as they could lead to a RESPA violation.
What is a critical concept of RESPA regarding relationships with settlement service providers?
Be aware of your relationships with entities providing settlement services to your clients and avoid activities that could appear improper.
What should a brokerage ensure if it has an affiliated business arrangement?
Clients must be provided the appropriate disclosures, and the disclosures should be signed by all parties in the transaction.
What is one requirement under the Georgia Residential Mortgage Act?
At least one requirement must be listed.
What is one requirement under the Georgia Residential Mortgage Fraud Act?
At least one requirement must be listed.
What is the purpose of the Georgia Residential Mortgage Act (GRMA)?
To provide oversight within the mortgage industry by requiring licensing for mortgage brokers, lenders, and loan originators.
What sections of the Georgia Code govern the GRMA?
Sections 7-1-1000 through 7-1-1021.
What is required to transact business as a mortgage broker, lender, or loan originator in Georgia?
You must be licensed or registered by the department utilizing the NMLSR.
What must an independent contractor loan processor or underwriter obtain?
A mortgage broker or mortgage lender license and a valid unique identifier from the NMLSR.
What supervision is required for a mortgage loan originator?
They must be supervised daily by a mortgage broker, lender, or exemptee.
How must a mortgage loan originator be compensated?
They must be paid using a W-2 tax form.
What does the GRMA prohibit regarding mortgage loans?
The purchase, sale, or transfer of a mortgage loan from or to an unlicensed mortgage loan originator, broker, or lender.
Who is held responsible for violations of the GRMA?
Anyone who directly or indirectly controls a person who violates the requirements, unless they prove they were unaware of the violation.
What are some exemptions to the licensing requirements under the GRMA?
Federally insured banks, credit card banks, savings institutions, and credit unions.
What is required for a wholly owned subsidiary of a bank holding company in Georgia?
It is subject to the registration requirements.
Who must be registered and obtain a unique identifier with the NMLSR when acting for certain entities?
Registered mortgage loan originators.
Who is considered an immediate family member in the context of negotiating residential mortgage loans?
A spouse, child, sibling, parent, grandparent, or grandchild including stepparents, stepchildren, step siblings, and adoptive relationships.
Under what condition can an attorney negotiate mortgage loan terms without being compensated by a lender?
When negotiating as an ancillary matter to the attorney's representation of the client.
What is the exemption for a Georgia licensed real estate broker or salesperson regarding mortgage loans?
They are exempt if not actively engaged in negotiating mortgage loans and not receiving a separate fee for providing information related to a short sale transaction.
Who is exempt from mortgage loan regulations when making a loan with their own funds?
A person, estate, or trust making a mortgage loan for their own investment.
Which governmental entities are exempt from mortgage loan regulations in Georgia?
The United States of America, the State of Georgia, and any agency or division of any governmental entity.
What is the exemption for making a mortgage loan to an employee?
It is considered an employment benefit.
What type of nonprofit corporations are exempt from mortgage loan regulations?
Nonprofit corporations making mortgage loans to promote home ownership or improvements for the disadvantaged.
What is the limit for a mortgage loan made under the Georgia Industrial Loan Act to be exempt?
$3,000.00 or less.
Who is exempt from licensing requirements when acting under the supervision of a mortgage broker or lender?
An employee acting within the scope of employment and not as an independent contractor.
What is the maximum number of mortgage loans a person can make in a calendar year to be exempt from licensing?
Five or fewer mortgage loans.
What are the requirements for a subsidiary to maintain exemption for independent contractors?
Must provide a surety bond, be licensed, and comply with specific code sections.
What defines a bona fide nonprofit corporation in the context of mortgage loan origination?
Must be tax-exempt, promote affordable housing, serve public purposes, and not incentivize acting against borrowers' best interests.
What must an employee of a bona fide nonprofit corporation do to qualify for exemption?
Act only for the nonprofit and work with favorable mortgage loan terms for borrowers.
What must mortgage loan originators obtain unless specifically exempted?
A mortgage loan originator license.
What is required in the application for a mortgage loan originator license?
It must be made in writing and under oath.
What information must be included in the application for mortgage brokers and lenders?
The legal name and address of the applicant, and for partnerships or corporations, details of every member, officer, and director.
What must mortgage brokers and lenders provide regarding their business locations?
The address of the main office, any other office locations, and the mailing address.
What must be included in the application regarding the registered agent for mortgage brokers and lenders?
The complete name and address of the registered agent and registered office for service of process in Georgia.
What additional information may be requested from mortgage brokers and lenders in their application?
A general plan, character of the business, and a financial statement.
What evidence must mortgage brokers and mortgage loan originators provide in their application?
Evidence of satisfaction of experience or education requirements as required by the regulations of the department.
What fees must be filed with all applications submitted?
Investigation and supervision fees.
What is prohibited regarding misrepresentation in mortgage transactions in Georgia?
It is prohibited to misrepresent material facts, make false statements, or submit false documents likely to influence mortgage applicants or others.
What must be done in accordance with a written commitment for a mortgage loan?
Funds must be disbursed in accordance with the written commitment or agreement.
What is required of mortgage lenders regarding satisfaction of a mortgage loan?
They must not improperly refuse to issue a satisfaction of a mortgage loan.
What must be accounted for in connection with a mortgage loan?
Personal property obtained, such as money, funds, or documents, must be accounted for and delivered.
What type of practices are prohibited in home mortgage underwriting?
Fraudulent home mortgage underwriting practices are prohibited.
What is the rule regarding signing financial documents with blank spaces?
It is prohibited to induce or permit signing of documents with blank spaces, except for incidental information not available at the time.
What intent is presumed if a residential mortgage loan is made with the intent to foreclose?
A presumption of intent to foreclose exists if there is a lack of substantial benefit to the borrower.
What must be disclosed to applicants before accepting an application fee for a mortgage loan?
The fees payable and the conditions under which such fees may be refundable.
What must a mortgage lender provide to an applicant regarding fees at the time of commitment?
A written disclosure of the fees to be paid in connection with the commitment and the loan, or how such fees shall be determined and the conditions for refunds.
What must a mortgage lender disclose to a borrower regarding mortgage loan conditions?
Failure to meet every condition of the mortgage loan may result in the loss of the borrower's property through foreclosure.
When must the borrower sign the disclosure regarding mortgage loan conditions?
At or before the time of the closing of the mortgage loan.
What is the purpose of the Georgia Fair Lending Act (GFLA)?
To protect borrowers of subprime loans from predatory lending practices.
What types of insurance are creditors prohibited from financing in home loans under GFLA?
Credit life, credit accident, credit health, credit personal property, or credit loss-of-income insurance, debt suspension coverage, or debt cancellation coverage.
What is prohibited regarding refinancing existing loans according to GFLA?
A creditor or servicer may not recommend or encourage default on the loan prior to the closing of the refinance.
Under what conditions can a late payment charge be imposed according to GFLA?
The loan documents must specifically authorize the charge, the payment must be past due for ten days or more, and the charge cannot exceed 5 percent of the late payment amount.
How many times can a late payment charge be imposed for the same late payment?
A late payment charge may not be imposed more than once for the same late payment.
What happens if a late payment charge is deducted from a payment and causes a subsequent default?
No late payment charge may be imposed for such default.
How may a lender apply payments made on a home loan according to GFLA?
A lender may apply any payment made in the order of maturity to a prior period's payment due, even if it results in late payment charges accruing on subsequent payments due.
What does the second component of the Georgia taxpayer Bill of Rights focus on?
Enhanced taxpayer rights when appealing property increases.
What must the taxing authority provide when there is a change in property value?
An assessment notice to the property owner, including steps to learn more or appeal.
What additional information must be provided if property value increases by more than 15 percent?
A full breakdown of reasoning for the value change.
Who has the burden of proof in the property value appeal process?
The government or assessor adjusting the value of the taxpayer's property.
What can property owners do regarding hearing and Superior Court proceedings times?
Change the times just once and request hearings as early as 8 a.m. or as late as 7 p.m.
What can property owners recover if their appeal is validated?
Court costs and attorney fees.
What can property owners do with conversations related to the appeals process?
Record conversations with the appraiser or assessing office and use them in the appeals process.
What happens if a default is cured before foreclosure action is initiated?
The creditor or servicer shall not institute the foreclosure proceeding or other action for that default.
What must be included in the notice of the right to cure the default?
The notice must include the nature of the alleged default, the right to cure, the deadline for curing, and contact information for the creditor or servicer.
What is the minimum deadline for curing a default after receiving a notice?
The deadline must be at least 30 days from the effective date of the notice.
What must the creditor or servicer do if a default is cured after foreclosure action has begun?
The creditor or servicer shall take necessary steps to terminate the foreclosure proceeding or other action.
What information must the notice provide regarding the amount to cure the default?
The notice must provide sufficient information to enable the borrower to calculate the amount necessary to cure the default during the 30-day period.
What should the notice inform the borrower about the consequences of not curing the default?
If the default is not cured by the deadline, steps may be taken to terminate the borrower's ownership by commencing foreclosure proceedings.
What must all high-cost home loan documents contain on the first page?
A notice stating that the mortgage is subject to special rules under the 'Georgia Fair Lending Act.'
What rights does a borrower have if a home loan was made by a person selling home improvements?
The borrower may assert all affirmative claims and defenses against the creditor that they may have against the seller or home improvement contractor.
What must a purchaser of a high-cost home loan demonstrate to avoid liability for claims against the creditor?
They must demonstrate that they exercised reasonable due diligence at the time of purchase or within a reasonable time thereafter.
What is the time limit for a borrower to bring an action for a violation of the Georgia Fair Lending Act?
Within one year from the date of the occurrence of the violation.
What constitutes a violation of the Georgia Fair Lending Act regarding loan transactions?
Attempting in bad faith to avoid the rules by dividing a loan transaction or structuring it as an open-end loan to evade provisions of the GFLA.
What are the consequences for a creditor found to have violated the Georgia Fair Lending Act?
The creditor shall be liable to the borrower for damages as determined by the law.
What types of damages may a borrower recover under the GFLA in Georgia?
Actual damages, statutory damages, punitive damages, and costs and reasonable attorneys' fees.
What equitable relief may a high-cost home loan borrower seek under the GFLA?
Injunctive, declaratory, and other equitable relief as deemed appropriate by the court.
Under what conditions can a creditor be exempt from GFLA violations?
If they offer appropriate restitution and adjustments within 90 days of loan closing or discovering a compliance failure, and the failure was not intentional.
What constitutes a bona fide error under the GFLA?
Clerical, calculation, computer malfunction, and programming errors; legal judgment errors do not qualify.
What does the Georgia Residential Mortgage Fraud Act (GRMFA) address?
It addresses issues related to residential mortgage fraud in Georgia.
What is included in the mortgage lending process?
It includes solicitation, application, origination, negotiation of terms, underwriting, signing and closing, and funding of the loan.
What is meant by 'pattern of residential mortgage fraud'?
It refers to one or more misstatements, misrepresentations, or omissions made during the mortgage lending process involving two or more residential properties.
What types of documents are involved in the mortgage lending process?
Documents include loan applications, appraisal reports, HUD-1 settlement statements, W-2 forms, verifications of income and employment, bank statements, tax returns, and payroll stubs.
Who qualifies as a 'person' under the Georgia Residential Mortgage Fraud Act?
A 'person' can be a natural person, corporation, company, limited liability company, partnership, trustee, association, or any other entity.
What is a 'residential mortgage loan'?
It is a loan or agreement to extend credit made to a person, secured by a deed to secure debt, security deed, or mortgage.
What is residential mortgage fraud as defined in Georgia's financial legislation?
Residential mortgage fraud occurs when a person knowingly makes any deliberate misstatement, misrepresentation, or omission during the mortgage lending process with the intent to defraud.
What are the actions that constitute residential mortgage fraud?
Can residential mortgage fraud charges be based solely on information disclosed under federal disclosure laws?
No, an offense of residential mortgage fraud shall not be predicated solely upon information lawfully disclosed under federal disclosure laws.
Where is a violation of the residential mortgage fraud article considered to have been committed?
In the county where the residential property for which a mortgage loan is being sought is located.
What are the conditions under which a violation of the Georgia Residential Mortgage Fraud Act can be prosecuted?
In any county where an act was performed in furtherance of the violation, where a person had control of proceeds, where a closing occurred, or where a document with misstatements is filed.
What is the penalty for violating the Georgia Residential Mortgage Fraud Act?
It is a felony with imprisonment for no less than one year and no more than ten years, and/or a fine not exceeding $5,000.
What is the penalty for engaging in a pattern of residential mortgage fraud under the Georgia Residential Mortgage Fraud Act?
Imprisonment for no less than three years and no more than 20 years, and/or a fine not exceeding $100,000.
How is each residential property transaction treated under the Georgia Residential Mortgage Fraud Act?
Each transaction resulting in a violation is considered a separate offense.
What are assessed values in property taxation?
The value assigned to a property for tax purposes.
How are property tax rates calculated?
By determining the assessed value and applying the local tax rate.
What is the process for protesting assessments?
Property owners can challenge the assessed value of their property if they believe it is incorrect.
What is a special assessment tax?
A tax levied for specific projects or improvements that benefit a property.
What are tax liens?
A legal claim against a property for unpaid taxes.
When are property taxes due in Georgia?
Property taxes in Georgia are typically due on December 20th.
What are property tax exemptions in Georgia?
Reductions in property taxes available to certain qualifying individuals or properties.
What is the Taxpayer Bill of Rights in Georgia?
A set of laws that protect taxpayers' rights regarding property taxation.
What is the process for property tax appeals in Georgia?
Property owners can appeal their property tax assessments to a local board or court.
How are tax rates used in relation to property taxes?
Tax rates are applied to the assessed value of a property to calculate the homeowner's property taxes.
What is the primary purpose of property taxes?
To fund local government services and infrastructure.
What happens if a property owner fails to pay property taxes?
The government can levy fines, liens, or force the sale of the property.
On what basis are property taxes generally calculated?
On the value of the property, including the structure and the land.
How do local governments determine property tax rates?
Based on laws in the region and specific county-based laws.
What is the relationship between property value and property taxes?
The more valuable the home, the more taxes the property owner pays.
What is included in the definition of real property for tax purposes?
The land itself and the structured and fixed buildings on it.
How is the property tax rate set?
Through the laws within the community and refigured each year based on budget needs.
What is not considered when calculating property taxes?
Personal property owned or maintained at the property.
What do property taxes primarily fund in a community?
They primarily fund infrastructure needs such as water and sewer lines, roadways, fire services, law enforcement, and education.
Who establishes property taxes?
State and county laws establish property taxes.
What is the most important source of revenue for local governments and schools?
Property taxes are the most important source of revenue for local governments and schools.
Are property taxes specific to the homeowner's use of the property?
No, property taxes are specific to the parcel of land, not to the homeowner's use of that property.
What types of properties are commonly taxed?
Most real estate, including residential properties, farms, undeveloped areas, and commercial properties, are commonly taxed.
What types of properties are generally exempt from paying property tax?
Properties that are not for-profit or otherwise privately owned, such as government or city-owned properties, are generally exempt.
What types of properties are typically exempt from property tax?
Nonprofit organizations, charitable organizations, and religious organizations.
Under what condition can educational buildings be taxed?
If the educational institution is a for-profit organization or operating out of a leased space.
What is required for property owners to qualify for property tax exemption for nonprofit or religious organizations?
They must file for a nonprofit or religious status with their county or city.
What is an assessed value?
A valuation placed upon a piece of property by a public authority as a basis for levying taxes on the property.
What is an assessing unit?
A city, county, town or village with the authority to value real property for purposes of taxation.
What are assessments in real estate?
A charge against real estate made by a unit of government to cover a proportionate cost of an improvement such as a street or sewer.
What is the role of a tax assessor?
An elected or appointed official of a county, city, town or village whose function is to value real property for the purposes of taxation.
What does 'ad valorem tax' mean?
It means the amount of tax paid is directly related to the value of the property.
How often does the county assess the value of the property?
Generally, one time every year, prior to the property taxes being levied.
Does the assessed value of a property change when it is sold?
Not necessarily; it doesn't change when property changes hands between buyer and seller.
What is the common misconception about assessed value?
It is often confused with the market value of the property, which is the price it could sell for.
Who determines the assessed value of real property?
A tax assessor.
What is the primary role of a tax assessor?
To determine the assessed value of real property within their area.
What are the three main methods used by tax assessors to assess property value?
Sales comparison method, cost method, and income method.
What does the sales comparison method involve?
Comparing the value of the current property to other properties in the immediate area.
What does the cost method consider when assessing property value?
The cost to reproduce the home, including materials, labor, and depreciation.
What type of properties does the income method apply to?
Income-producing properties such as rental properties and commercial spaces.
Why is it important to explain the difference between assessed value and market value to buyers?
Assessed value does not impact how much a home will sell for on the open market.
What factors does a tax assessor consider when determining assessed value?
Overall availability of land, size and features of the property, and community home value increases.
What is the relationship between fair market value and assessed value of a home?
The assessed value is generally less than the fair market value, but in some markets, it may be based partially on the fair market value.
How is assessed value calculated in some jurisdictions?
It may be set as a percentage of the fair market value.
If a property has a fair market value of $420,000 and the assessed value is set at 40 percent, what is the assessed value?
$168,000.
What is the ultimate goal of property taxes?
To pay for the needs of the community.
What factors determine how assessed value is set in a community?
It is determined by local government and rules.
What is the purpose of determining a tax rate in a community?
To collect enough money in taxes to cover the community's budget needs for services like roads and schools.
What is the formula to calculate the tax rate?
Tax Rate = Amount needed in collected taxes divided by total assessed value.
If a city needs to collect 200,000,000, what is the tax rate?
2%.
What does 'per mill' mean in the context of tax rates?
It means the tax rate applies per $1,000 worth of assessed value of the property.
Why is it important for a community to reassess their budget annually?
To ensure they have enough money to pay for various services.
What is a non-exclusive agreement in real estate?
An agreement where services will be performed, but more than one party may be contracted to perform the same services.
Why might an open listing be viable for a broker?
If the property is easy to sell or in a hot market where buyers are willing to pay higher prices.
Why do most brokers ignore open listings on the MLS?
Because there is no guarantee they will earn a commission.
What is a net listing?
A listing where the seller specifies a net price they want, and the agent adds their commission on top of that price.
What are some risks associated with net listings?
The seller may feel unfairly treated if the agent undervalues the home or if the agent receives a low offer close to the net price, yielding little or no commission.
What happened in the example of Donna's open listing?
Donna sold her home by circumventing the broker who facilitated the sale, leading to a lesson learned for the broker.
What was the fair market value of Rosa's home in the net listing example?
$590,000.
What price did Rosa list Donald's home for sale?
$613,000, which included a 4 percent sales commission.
What conflict does Rosa face in the scenario presented?
Rosa faces a conflict between protecting her own financial interests and acting in the best interest of her client, Donald.
What is a better alternative to net listings according to the text?
An exclusive right to sell listing that includes a reasonable listing price formed as the net sales price plus the listing agent's sales commission.
What should agents do to ensure sellers understand the listing contract?
Agents should verbally review the contract with the seller and point out any clauses, especially those related to termination.
What happens if the listing broker fails to procure a buyer within the contract time limit?
The contract is null and void at the end of the stated period.
What clause prevents the seller from canceling a listing agreement?
A clause that requires the real estate agent's written agreement to cancel the listing agreement.
What happens if an agent brings a buyer who is willing and able to close?
The agent has earned her commission at that time, even if the seller unreasonably turns down the offer.
What is a potential consequence of including strict termination clauses in a listing agreement?
An unhappy seller can tarnish an agent and broker's reputation and impact future sales.
What restriction can be included in a listing agreement regarding potential buyers?
The seller will not be able to sell the home to anyone the listing agent has shown it to within 6 months to one year after the contract ends.
What is a Comparative Market Analysis (CMA)?
An analysis of the competition in the marketplace that a property will face upon sale attempts.
What is the total tax rate if a property has a county tax of 15 mills, a city tax of 1 mill, and a local school tax of 12.5 mills?
28.5 mills.
How do you convert mills to a percentage?
Divide the mills by 1,000.
What is the assessed value of a property if it is subject to a tax of 1.5 mills and the annual property tax is $1,120?
$560,000.
What is the total percentage of property tax owed if the total mills is 28.5?
2.85 percent.
How do you calculate the annual property tax owed on a property valued at $325,000 with a tax rate of 0.0285?
Multiply the property's value by the tax rate: 9,262.50.
Why is it important for buyers to understand property tax rates?
Buyers need to understand the various property tax rates to know the overall tax bill they will pay each year.
Why is accuracy critical in property value assessments?
It determines the amount of taxes owed by the property owner.
What can happen if the assessed value of a property is incorrect?
The homeowner could end up paying higher taxes than they should.
What might cause a property's assessed value to be inaccurate?
Changes in the area's population, environmental conditions, or the actual condition of the home.
How often are properties typically assessed for value?
Most properties are assessed on a yearly basis.
What can a property owner do if they believe their property's assessed value is incorrect?
They can challenge the assessment by completing a document explaining the inaccuracies.
What is required for a taxing authority to consider changing an assessment?
Real, accurate information to back up the property owner's claim.
Why might a property owner hire a licensed appraiser?
To gain access to accurate information to support their challenge of the assessed value.
What is a common issue with assessing the interior condition of a home?
The interior is often not accessible during assessments, which can lead to inaccuracies.
What is the appraiser's job in relation to property value?
To determine the value of the home based on available data, including an interior inspection and local real estate market assessment.
What should a homeowner do to challenge an assessment?
Gather evidence to support their claim and possibly pay for an appraiser to provide a full appraisal.
What role does the taxing authority play in property assessments?
The taxing authority verifies the information provided by the homeowner and makes a decision on the assessment.
What is a common first step for property owners after receiving a new assessed home value?
To decide whether to challenge the assessed value based on the notification received from the taxing authority.
What should property owners do if they do not receive a notification about their assessed value?
Visit or call the taxing authority to inquire about the appeals process.
What is a typical time limit for requesting an appeal after receiving an assessment notice?
Some jurisdictions may provide a time period of 60 days for the property owner to respond.
What might the appeals process involve in different jurisdictions?
It may involve completing documentation, a full inspection by the taxing authority, or just a phone call to explain the case.
Why is it important for property owners to follow specific directions provided in assessment notices?
To ensure they properly navigate the appeals process and meet any requirements set by the taxing authority.
What should a property owner do if they feel they are overpaying due to an inaccurate assessed value?
They should take action.
Why is it important to address an inaccurate assessed value now?
Because the assessed value will only increase year-over-year based on inflation and other factors.
What is a special assessment?
An assessment made against a property to pay for a public improvement that benefits the assessed property.
What are special assessment districts?
Geographic areas where the market value of real estate is enhanced due to public improvements, and a tax is apportioned to recover the costs.
What is a tax lien?
A lien imposed by law upon a property to secure the payment of taxes.
Why might a special assessment tax be levied on a property?
To meet a specific funding goal for projects like infrastructure improvements.
Who is responsible for paying a special assessment tax?
Only property owners located within the designated special assessment district.
What might a community use a special assessment tax for?
To fund infrastructure projects, develop new programs, or build facilities like parks or schools.
How can a special assessment tax help a community with new subdivisions?
It can fund the building of new infrastructure like sewer lines and roads for new residents.
What must be made available to home buyers regarding special assessment taxes?
Information on any special assessment tax must be fully made available to those buying a home within the jurisdiction.
Are special assessment taxes generally deductible for income tax purposes?
No, special assessment taxes generally are not deductible.
What indicates that a property owner has not paid their property taxes?
A tax lien indicates that the responsible party has not paid his or her property taxes.
What can happen if a property owner fails to pay their property taxes?
The taxing authority can take legal action, which may include forcing the sale of the property through foreclosure.
Who can initiate the foreclosure process on a property?
Both the mortgage lender and the taxing authority can initiate the foreclosure process.
What happens if a property buyer purchases a home with an existing tax lien?
The property buyer may be held responsible for the tax lien on the property.
What is a potential consequence of a tax lien on a property being sold?
It can lead to a discounted price on the home due to the presence of the tax lien.
Why is it critical for a real estate agent to understand taxes and assessments?
Because they impact the sale of real estate within the jurisdiction.
What type of property taxes does Georgia have?
Ad valorem taxes, based on the value of the property.
What is the assessment percentage for real property in Georgia?
40 percent of the property's cash value.
Who handles property assessments in Georgia?
The Board of Tax Assessors.
What happens if a property owner fails to pay property taxes in Georgia?
The property may be levied and the county can force its sale.
When are property tax returns due in Georgia?
By April 1st each year.
What is the purpose of the funds collected from property taxes in Georgia?
To pay for support services at the local and state government level.
What can a property owner do if they disagree with their assessed property value in Georgia?
They can appeal the decision to the County Board of Equalization.
What is a preferential assessment in Georgia?
A special assessment for historic properties that lasts for nine years without change.
What is a preferential assessment in relation to historic properties?
A preferential assessment is possible if the property's rehabilitation has increased the market value of the structure by at least 50 percent, or 100 percent if it is income producing.
What happens to the value of a rehabilitated historic property after a preferential assessment?
The value is locked in for nine years, providing significant savings.
What is required for a property to qualify for a landmark historic property preferential assessment?
The property must be certified at the local government level to be of landmark value and meet local ordinance conditions.
What types of properties can qualify for special assessment programs?
Agricultural property, conservation use property, environmentally sensitive property, forest land property, brownfield property, and residential transitional property.
How is the assessment value determined for environmentally sensitive property?
The assessment is based on the current value of the property, not the fair market value when maintained or improved.
What is the assessment rate for bona fide agricultural property in Georgia?
It can be assessed at 75 percent of the typical assessment, which is 30 percent of the fair market value.
How is timber taxed in Georgia?
Timber is not taxed until it is sold or harvested, and the tax is based on 100 percent of the value at that time.
What is the assessment rate for equipment, machinery, and fixtures?
They are assessed at 40 percent of their fair market value, subject to limitations and restrictions.
Who sets the tax rate in Georgia?
Each county sets the tax rate, which can be established by the Board of County Commissioners and other governing authorities.
What is a one mill tax rate equivalent to?
One dollar per $1,000 of assessed value.
What is the average millage rate at the county and municipal level in Georgia?
30 mills.
What significant change occurred regarding the state mill rate on property taxes in Georgia effective January 1, 2016?
There is no longer a state levy for property taxes.
How do municipalities in Georgia assess their property taxes?
Municipalities assess property taxes based on the county-assessed value of the property.
In the example provided, what is the assessed value of a home valued at $100,000 at 40 percent of fair market value?
$40,000.
How are property taxes calculated based on the assessed value and millage rate?
Divide the assessed value by 1,000 and multiply by the millage rate.
If a property has an assessed value of $40,000 and is impacted by a millage rate of 25 mills, how much are the taxes paid?
$1,000.
When are property taxes due in Georgia?
Property taxes are due on January 1st for that year and must be paid by December 20th, unless stated otherwise by law.
What is the filing period for property tax returns in Georgia?
Property tax returns must be filed between January 1st and April 1st of that year.
Where should property owners file their property tax returns in Georgia?
In the county where the property is located.
What happens if a property owner does not file a return for the current year after filing the previous year?
They are considered to have filed at the same valuation as the previous year, maintaining any applicable exemptions.
What penalty is assessed for late property tax payments in Georgia?
A 10 percent penalty is assessed on the property for late payments.
What is required for nonresidents regarding property taxes in Georgia?
Nonresidents must file for property taxes in the county where the property is located.
How are property taxes distributed after collection in Georgia?
The county tax commissioner collects the taxes and distributes them to the city, school, state, or other taxing authorities.
What is the requirement for filing property taxes for boats in Georgia?
Boats located in a county other than where the owner lives must be filed in the location where the boat has been kept for at least 180 days or more out of the year.
What is the requirement for filing property taxes for airplanes in Georgia?
Property taxes for airplanes are due in the county where the plane is stored.
What should property owners do if their property is located in more than one county?
The county where the largest portion of the property resides receives the funds.
What is a property tax exemption in Georgia?
A way of reducing or eliminating property taxes on a parcel of land.
What is the most common property tax exemption claimed in Georgia?
The homestead exemption.
What must a homeowner do to qualify for the homestead exemption?
The homeowner must live in the home as their legal residence and file an application.
What is the deadline for filing an application for the homestead exemption to receive it for the current tax year?
The application must be filed by the same date that property tax returns are due for the county.
What happens if a property owner fails to apply for the homestead exemption by the deadline?
The property will lose the exemption for that year.
What is the amount of the standard homestead exemption available in Georgia?
A $2,000 exemption.
What age must a homeowner be to qualify for the additional homestead exemption in Georgia?
65 years and older.
What is the income limit for homeowners 65 years and older to claim a $4,000 exemption from state and county ad valorem taxes?
Their income must not exceed $10,000 for the previous year.
What types of income are excluded from taxation according to Chapter 18?
Pensions, retirement funds, and disability income are excluded, but Social Security income may not be excluded.
What exemption applies to residents aged 62 or older for educational purposes?
An exemption for all ad valorem taxes that can be used to pay off school bond indebtedness, subject to income requirements.
What is the floating inflation-proof exemption for those over 62 years old?
It applies to state and county taxes based on market increases in the property's value, with a maximum exemption of $30,000.
What is the exemption amount available for qualifying disabled veterans?
An exemption of up to $60,000 plus an additional sum based on the current index rate set by the U.S. Department of Veterans Affairs.
Who else can benefit from the disabled veteran exemption?
Surviving spouses and minor children of qualifying disabled veterans can also benefit from this exemption.
What is the homestead exemption for surviving spouses of U.S. Service members?
An exemption for all ad valorem taxes worth $60,000 plus an additional sum, applicable to unmarried surviving spouses of Armed Forces members killed in action.
What is the homestead exemption for surviving spouses of police officers or firefighters?
An exemption worth the full value of the homestead for unmarried surviving spouses of police officers or firefighters who died in the line of duty.
What is the purpose of Senate Bill 177, Act 431 in Georgia?
To define the rights of property owners regarding property tax law.
What does the Taxpayer Bill of Rights in Georgia prevent?
Indirect tax increases due to inflation on existing property values.
What right does the property owner have under the Taxpayer Bill of Rights?
The right to object and appeal an increase made by the taxing authority based on proposed property value.
What is O.C. G.A. 48-5-32.1 related to?
It governs aspects of taxpayer rights, including the rollback of millage rates after property assessments.
What must happen if the taxing authority does not roll back the millage rate after an inflation increase?
They must notify the public about the tax increase.
What are the requirements for a county that decides not to roll back the millage rate?
They must hold three public hearings, issue a press release, and place notices in local newspapers.
What is the goal of rolling back the millage rate according to Georgia law?
To produce the same total revenue for the taxing authority as if no inflation had occurred.
How is equity calculated if a property is valued at 700,000?
The equity will equal 1,000,000 minus $700,000).
What does the initial equity in a property represent?
The initial equity represents the investor's down payment.
How does an investor's equity grow over time?
As the cash flow in the property increases, so does the value of the property, leading to growth in the investor's equity.
When can an investor realize their equity?
An investor can realize their equity if they sell the property or refinance the mortgage.
What is a pro-forma in real estate?
A pro-forma is an income and expense statement for a property, showing current income and expenses along with future projections.
What is the purpose of a pro-forma for an investor?
It helps the investor determine the financial performance of a property and assess its viability as an investment.
What key information is included in a pro-forma?
Key terms related to the property's financial performance and several other details.
What is the purchase price of the commercial real estate property?
$5,225,000
What is the price per unit for the commercial real estate property?
$40,820
What is the Net Operating Income (NOI) for the property?
$492,125
What is the Cash on Cash Return for the first year?
12.30%
What is the Debt Coverage Ratio for the property?
2.1
What is the Capitalization Rate for the property?
9.42%
What is the amount reserved for minor renovations?
$95,000
What is required of the tax commissioner regarding property tax laws?
To provide a full brochure outlining all property tax laws and procedures, including exemptions and assessment programs.
What are the two ways property owners can file their taxes in Georgia?
What is the role of the county tax assessor regarding property tax assessments?
To send out an annual assessment notice to the property owner outlining the valuation and appeal process.
How long does a taxpayer have to file an appeal after receiving the Assessment Notice in Georgia?
45 days from the date the Assessment Notice was mailed.
What form must a property owner use to file an appeal in Georgia?
The Appeal of Assessment Form PT-311-A.
Where should the appeal be mailed to in Georgia?
To the County Board of Tax Assessors, not the Department of Revenue.
What options does a property owner have for appealing a tax assessment in Georgia?
What can a property owner appeal regarding their property tax assessment?
Value, taxability, uniformity of the tax, and denial of an exemption.
What is the role of a hearing officer in property value appeals in Georgia?
A hearing officer addresses concerns in the value of the property or the uniformity of the value on any non-homestead real property, applicable when the value is at least $1,000,000.
What is the time frame for a property owner to appeal an assessment through arbitration in Georgia?
The property owner must appeal within 45 days of receiving the notice of the assessment.
What must a property owner submit when appealing through arbitration?
A certified appraisal of the property within 45 days of filing the notice.
What happens if the Board of Assessors rejects the appraisal submitted during arbitration?
The board must certify the appeal to the County Clerk of the Superior Court for an arbitration hearing.
What is the time frame for a judge to hear an arbitration case after certification?
A judge hears the case within 30 days.
What are the financial responsibilities of the taxpayer if the Board finds the assessor's value correct?
The taxpayer must pay all fees associated with the case, including costs for the arbitrator.
What must a property owner do to appeal to the Superior Court after receiving a notice from the Board of Assessors?
File a written notice of appeal within 30 days and pay ad valorem taxes equal to the last year in which the taxes were determined.
What can a property owner recover if the Superior Court rules in their favor?
The property owner may recover some fees such as attorney fees and appeal hearing fees.
What is the finality of the decision made by the Superior Court in property value appeals?
The decision made by the Superior Court is considered final.
What is the definition of an appraisal?
An appraisal is an assessment of the value of a property.
What is the purpose of an appraisal?
The purpose of an appraisal is to determine the market value of a property.
What factors influence the value of a property?
Factors influencing value include location, condition, and market trends.
What are the principles of value in real estate?
The principles of value include supply and demand, highest and best use, and substitution.
What is the Direct Sales Comparison Approach?
The Direct Sales Comparison Approach is a method of valuing property by comparing it to similar properties that have recently sold.
What is the Cost Approach in property appraisal?
The Cost Approach estimates the value of a property by calculating the cost to replace or reproduce it, minus depreciation.
What is the Income Capitalization Approach?
The Income Capitalization Approach values a property based on the income it generates.
What is reconciliation in the context of property appraisal?
Reconciliation is the process of weighing the results of different appraisal methods to arrive at a final value estimate.
What is one property type commonly valued using the direct sales comparison approach?
Residential properties.
What is one property type commonly valued using the cost approach?
New construction properties.
What is one property type commonly valued using the income capitalization approach?
Commercial properties.
Who is qualified to perform an appraisal?
An appraiser, who has education, training, and experience in estimating property value.
What is the minimum educational requirement for an appraiser?
At least a Bachelor's degree and completion of specific educational requirements.
What is the primary purpose of an appraisal?
To arrive at a market value of a given property at a specific time.
In what situations is an appraisal typically used?
Transfer of property, financial reasons, and tax purposes.
What must an appraiser be certified as on a federal level?
A Certified Residential Real Property Appraiser or Certified General Real Property Appraiser.
Why might a lender require an appraisal?
When a buyer is borrowing money, refinancing, or using the property as collateral.
Why is it important to use a current appraisal?
Because property values fluctuate over time and an old appraisal may not reflect the current market value.
What is a common reason for obtaining a valid appraisal during the estate planning process?
To determine taxes for an inheritance or a gift.
What is the difference between a market valuation and an appraisal?
A market valuation is an estimate of what the seller may reasonably expect to receive when a property is sold, while an appraisal is a formal assessment of property value.
Who typically hires an appraiser in a real estate transaction?
An appraiser may be hired by a buyer, a seller, a lender, or other persons needing property valuation.
What may happen if a buyer or seller hires an appraiser before a purchase and sale agreement is in place?
The lender may not accept that appraisal for loan approval, potentially resulting in two appraisals being ordered for the same property.
What is assessed value in real estate?
A valuation placed upon a piece of property by a public authority as a basis for levying taxes on the property.
What does the term 'cost' refer to in real estate appraisal?
The total dollar expenditure for labor, materials, legal services, architectural design, financing, taxes during construction, interest, contractor's overhead and profit, and entrepreneurial overhead and profit.
What is demand in the context of real estate?
The supply of willing and able buyers in the marketplace or lack thereof.
What is insured value?
The value of an asset or asset group that is covered by an insurance policy, estimated by deducting the cost of non-insurable items from market value.
How is investment value defined?
The specific value of an investment to a particular investor or class of investors based on individual investment requirements.
What does market value represent?
The highest price in terms of money which a property will bring in a competitive and open market under fair sale conditions.
What is the difference between price and market value?
Price is the amount a purchaser agrees to pay and a seller agrees to accept, while market value is the highest price a property will bring in a competitive market.
What does scarcity mean in real estate?
A lack of supply.
What does utility refer to in the context of property value?
The ability to give satisfaction and/or excite desire for possession.
How is value defined in real estate?
Present worth of future benefits arising out of ownership to typical users/investors.
What is the primary purpose of an appraisal in real estate?
To determine the value of a property at a fixed point in time.
What does the acronym 'DUST' stand for in real estate appraisal?
Demand, Utility, Scarcity, Transferability.
How does demand affect the value of real estate?
Higher demand increases value, while lower demand decreases value.
What is an example of utility in property value?
Features like handicap bars in a bathroom for senior housing.
How does scarcity influence property value?
If there are more buyers than available properties, the value increases; if there are more properties than buyers, the value decreases.
What is transferability in real estate?
The ability to transfer property ownership without restrictions, affecting its value.
What is investment value in real estate?
The value determined by factors like financing, terms, and tax rates, varying by investor.
How do insurance companies determine insured value?
By assessing parts of a home that may be destroyed and deducting the land value from the overall home value.
What is value-in-use in commercial properties?
The valuation based on the current use of the property, which may differ for various types of investors.
What is the assessed value of a property?
It is assigned by municipalities for determining the tax rate for a property.
How is mortgage value determined?
It is determined by the amount of the mortgage of the property.
What does market value of real estate represent?
It is based on what the property will sell for within a reasonable period of time in its current condition.
What is the typical time frame for selling a property in a stable market?
Within a 30 to 90-day period.
What does 'arm's length' transaction mean in real estate?
It means the sale is not based on coercion and involves unrelated parties.
What is meant by equal motivation in the context of market value?
Both the seller and buyer must be equally motivated without duress.
Why is it important for both parties to be well-informed about the risks and rewards in a transaction?
To ensure that both parties consider their own interests when making decisions.
What factors contribute to the exposure of a property on the open market?
The property must be listed for a reasonable time and have adequate exposure to potential buyers.
What does consideration refer to in a property transaction?
The buyer must be willing to pay for the property in cash or its equivalent, typically involving a cash down payment.
What must a buyer secure to facilitate the purchase of a home?
Financing considerations.
How can bank lending policies impact market value?
If banks freeze lending to single-family homes with fewer than five bedrooms, it negatively impacts their market value.
What is the relationship between market value and sales price?
Market value is not always tied to sales price; perceived value to a buyer can drive the sales price instead.
What happens to property value when there are more buyers in the market?
The value of a property increases due to higher demand.
How does seasonal demand affect the real estate market?
Demand for properties is often cyclical, with less demand during certain times of the year, such as between Halloween and New Year.
What are the three key terms that can differ in real estate transactions?
Market value, cost, and price.
What factors influence market value?
Condition of the property, knowledge of buyer and seller, and good faith negotiation.
What does the cost of a home include?
Land costs, development costs, architect fees, legal services, contractor costs, taxes, financing costs, materials, and labor.
What determines the price in real estate transactions?
The amount the purchaser agrees to pay.
What factors influence the price a seller agrees to accept for a property?
The price takes into consideration whether the transaction is an arms-length transaction and other factors such as family relationships.
How does a developer determine the selling price of a property?
The developer factors in all costs, adds their projected profit, reviews the market, and makes an analysis of what the property should sell for.
What might cause a developer to receive an offer below their desired selling price?
Market conditions such as increases in interest rates, less demand for property, or other external factors.
What is the typical relationship between buyers and sellers in real estate transactions?
Buyers want to purchase at the best price, while sellers aim to maximize their profit from the sale.
Why is it challenging to establish the value of unique properties?
The uniqueness of the property makes it difficult to compare with other properties, complicating the valuation process.
What role does a professional appraiser play in determining property value?
A professional appraiser provides a firm understanding of the appraised value of a property, which is essential for sellers.
What must real estate professionals be aware of regarding property value?
They must be aware of all factors impacting property value to help sellers determine listing prices and market duration.
What are the four main factors influencing real estate value?
Social forces, economic forces, housing construction costs, and governmental matters.
How do population trends affect housing values?
Stable neighborhoods tend to have stable housing values, while growth can increase prices and decline can decrease them.
What impact does family composition have on real estate demand?
Different family configurations create varying demands for property types, such as larger homes for blended families.
How does an aging population influence real estate values?
Real estate designed for seniors tends to increase in value, while starter homes may decline in value.
What economic changes can negatively impact home values in a neighborhood?
The loss of a large factory or company can decrease employment and income levels, leading to lower home values.
How does employment level in an area affect property values?
Increased employment levels lead to higher incomes and increased property values.
What happens to property values if a large employer in a suburban neighborhood closes?
It may lead to a glut of real estate in the market, resulting in lower prices.
What role does the availability of capital play in property values?
Easily accessible mortgage lending can lead to modest increases in property values.
What economic factors can motivate lenders to lend?
Stable interest rates, low foreclosure rates, and strong employment numbers.
What is the impact of tight lending on property values?
It results in fewer people securing mortgages, leading to lower property values due to decreased demand.
What types of properties is the Cost Approach used to value?
Specialty properties such as schools, places of worship, government buildings, and new construction.
What is the first step in the Cost Approach appraisal process?
Determine the replacement cost of the building.
How is the replacement cost calculated in the Cost Approach?
By multiplying the square footage of the building by the price per square foot for new construction.
What was the market rate for new construction used in the example?
$36.25 per square foot.
What is the estimated depreciation of the existing building in the example?
$346,250.
What is the value of the land in the appraisal example?
$282,000.
What is the final appraised value of the property in the example?
$1,567,000.
What is the Capitalization Rate in property appraisal?
The rate of interest considered a reasonable return on investment, calculated as Net Operating Income (NOI) divided by Purchase Price.
What is the Income Capitalization Approach?
An appraisal method for income-producing properties involving finding net annual income, setting a capitalization rate, and capitalizing the income by dividing net income by the capitalization rate.
When is the income capitalization approach typically used?
For properties expected to generate income, such as office buildings, shopping malls, and large apartment complexes.
How do tornadoes or hurricanes affect property values?
Properties in areas prone to tornadoes or hurricanes are generally believed to be lower in value.
What is a key factor that can negatively impact property values?
Government regulations, including taxes, quality of schools, and quality of services.
How do property taxes affect home buyers?
High property taxes can depress property values and deter potential buyers.
Why is the quality of schools important for property values?
Lacking quality schools can depress property values as parents prefer to live in areas with good schools.
What role do town-supplied services play in property values?
Services like fire and police, sewer, internet access, and trash pickup can significantly affect property values.
How does internet access influence property values?
Lack of reliable internet access can decrease property values as more people work from home.
What does the term 'Highest and Best Use' refer to in property appraisal?
It refers to the use that is most likely to produce the greatest net return to the land and/or buildings over a given period of time.
What is the Principle of Anticipation in property appraisal?
It affirms that value is created by anticipated benefits to be derived in the future.
What does the Principle of Change state regarding property value?
It holds that the future, not the past, is of prime importance in estimating value, with change being a result of cause and effect.
What is the Principle of Conformity in property appraisal?
It holds that maximum value is realized when there is a reasonable degree of homogeneity of improvements present.
What does the Principle of Contribution state?
It states that a component part of a property is valued in proportion to its contribution to the value of the whole.
What is the Principle of Progression?
It states that the worth of a lesser valued residence tends to be enhanced by association with higher valued residences in the same area.
What does the Principle of Substitution affirm?
It affirms that the maximum value of a property tends to be set by the cost of acquiring an equally desirable and valuable substitute property.
How do the principles of value assist in property appraisal?
They help in understanding the value of nearly any property by evaluating various factors beyond just previous sales.
How can the anticipation of future developments affect property values in a neighborhood?
If a playground and a school are planned for a family-designed neighborhood, property values are likely to increase due to anticipation.
What factors can change the estimated value of property over time?
Changing market conditions such as supply and demand, interest rates, and property conditions.
How does the aging of properties affect their value?
Homes built around the same time tend to age similarly, impacting their value; newer homes may have lower value if older homes dominate the area.
What is the Sales Comparison approach in property appraisal?
It is a method used by appraisers to analyze property value based on the sale prices of similar properties in the area.
How does supply and demand influence property valuation?
More buyers increase demand, driving property values up; fewer buyers or more properties decrease values.
What is the Principle of Conformity in property valuation?
A home that is similar to others in the neighborhood typically has a higher value than a unique home.
How can unique features of a home impact its value?
The value of features may vary; what is attractive to one buyer may not be to another, affecting overall property value.
What is an example of the Principle of Contribution in property valuation?
A gourmet kitchen may be valuable to some buyers but not to a single person who prefers eating out.
What amenities might be sought after by potential buyers of properties designed for senior citizens?
Amenities such as a community center and handicap bathrooms.
What is the concept of 'Highest and Best Use' in property appraisal?
It refers to the most profitable legal use of a property that yields the highest net income.
How can the surrounding area's demographics impact income-producing properties?
An arcade may thrive in a family-oriented neighborhood but may not do well in a senior-oriented neighborhood.
What is the effect of property improvements on value?
Property improvements typically increase the value, but excessive improvements may decrease it.
What is the Principle of Substitution in real estate?
It states that real estate values are influenced by the availability of similar properties in the market.
What happens to the value of a home when it is upgraded to match the neighborhood standards?
The value may increase if the upgrades bring the home in line with similar homes in the area.
What might happen if a homeowner adds too many bedrooms beyond the neighborhood standard?
The value may decrease due to non-conformance with other homes in the area.
What happens to the value of a property when similar properties are available for acquisition?
The value assigned to the property may be higher due to scarcity, relating back to supply and demand.
What is the Principle of Regression in real estate?
It states that real estate values are tied to the value of surrounding properties, which can lower the value of higher-valued properties if they are near lower-valued properties.
How does the Principle of Progression affect property values?
It suggests that the value of lesser properties can increase when surrounded by higher-valued properties, as they give a perceived higher value to the neighborhood.
Why is understanding the principles of regression and progression important for real estate professionals?
It helps in assisting sellers to list properties at a price likely to facilitate a sale and understand the overall value impact of surrounding properties.
What role does a professional appraisal play in property valuation?
It considers various factors, including the principles of regression and progression, in determining the property value.
What is the Sales Comparison Approach in property appraisal?
A valuation method that compares a subject property's characteristics with those of comparable properties that have recently sold in similar transactions.
What are the three typical approaches to appraising real estate?
The sales comparison approach, the cost approach, and the income approach.
What does the Cost Approach assume when determining the value of a home?
It assumes that the cost of the home should be nearly equal to the price to build a property that matches it.
What is the Income Capitalization Approach used for?
It is used particularly for neighborhoods with numerous investment properties to determine property value based on potential net operating income.
What is the significance of the capitalization rate in the Income Capitalization Approach?
It is obtained by dividing the market value of the property by the net operating income and is used to calculate property value based on income.
How does the Sales Comparison Approach work in residential property valuation?
It compares a property against the most recent sales of comparable properties in the neighborhood, ideally within the last six months.
What type of properties should be compared in the Sales Comparison Approach?
Properties that are similar in scope and size, such as comparing ranch-style homes to other ranch-style homes.
What sources do appraisers use to identify sold properties?
Appraisers search public records, including records from the county clerk and MLS services.
What is an arms-length transaction in property appraisal?
A transaction where the parties are not related in a way that could influence the price or financing.
What is the primary method an appraiser uses in the sales comparison approach?
To look at other sales of properties in the area that are similar to the subject property.
What factors should be similar when comparing properties for appraisal?
Style, size, location, and age of the homes.
What is the first step in the sales comparison approach?
Property Identification, which involves finding similar properties based on various criteria.
What is the importance of using recent sales in property appraisal?
The most recent sales should not be older than six months to ensure relevance in comparison.
What is a 'fire sale' in the context of property valuation?
A sale that occurs under duress, such as foreclosure, which may indicate the property is worth more than the sale price.
How does an appraiser determine the average square footage value?
By summing the sales prices of three similar properties and dividing by the total square footage of those properties.
How is the average price per square foot calculated in property appraisal?
By dividing the total sales prices by the total square footage.
What is the average price per square foot if the total sales prices are $387,600 and the total square footage is 4,650?
$83.35.
What is the estimated value of a property that is 1,650 square feet based on an average price of $83.35 per square foot?
$137,527.50.
What factors can increase or decrease the value of a home during appraisal?
Home capacity, condition, age, and specific property rights/location.
How does the number of bathrooms affect the appraisal value of a home?
The appraiser adjusts the price based on the cost of construction for additional bathrooms.
What role does the condition and age of a property play in its appraisal?
Debits and credits are applied based on the condition, age of the roof, appliances, and overall maintenance.
How do neighborhood location and financing terms affect property appraisal?
They can influence the value, especially if comparable sales have more favorable financing terms.
What happens after all comparisons are made in the appraisal process?
The appraiser takes all deductions and additions into account for the final valuation.
What is the purpose of the final report issued by an appraiser?
It is used by the buyer, seller, lender, and insurance company.
How can an appraisal affect a real estate broker's marketing approach?
It may change how the broker markets the property if it is for sale.
Why is it important for a seller to have a realistic idea of their property's worth?
To ensure they set a competitive and fair price for the property.
What is the limitation of providing an estimate of property value without an appraiser?
It may not be accepted by lenders, buyers, and sellers as accurate.
What is the benefit of having a property appraisal performed by a trained professional?
It provides an accurate property value that is widely accepted.
What is the Direct Sales Comparison Approach also known as?
The Market Data Approach.
What type of properties is the Direct Sales Comparison Approach commonly used to value?
Residential properties (1-4 dwelling units).
What is the first step in the Direct Sales Comparison Approach?
The appraiser compares the subject property with a minimum of 3 similar properties that have recently sold nearby.
What is the appraised value of the subject property in the example provided?
$235,000.
How much is an extra bedroom worth according to the Principle of Contribution?
$15,000.
How much is a garage worth according to the Principle of Contribution?
$5,000.
What is the age and size of the subject property in the example?
25 years old and 2,200 square feet.
What is the sales price of Comparable Property #1?
$235,000.
What features does the appraiser adjust for when determining the value of the subject property?
The number of bedrooms and the presence of a garage.
What is the cost approach in property appraisal?
An analysis where a value estimate of a property is derived by estimating the replacement cost of improvements, deducting accrued depreciation, and adding the market value of the land.
When is the cost approach typically used in property appraisal?
It is used for buildings with specific uses, such as churches or schools, and for newly constructed homes where comparable sales are difficult to find.
What does the cost approach involve when appraising a property?
Calculating the replacement cost of the property as if new, deducting depreciation, and adding the current value of the land.
Why might appraisers use the cost approach for manufactured housing?
Fannie Mae requires it to ensure homeowners are not overpaying for manufactured homes compared to similar non-manufactured homes.
What is a challenge appraisers face when using the cost approach?
Finding comparable sales for properties with specific uses or newly constructed homes can be difficult.
What is the formula for determining value using the cost approach in property appraisal?
Value = Replacement cost – depreciation + value of land
What is the first step in the cost approach to property appraisal?
Valuation of Land
What factors are considered when valuing the land in the cost approach?
Location, size of the lot, levelness, frontage, and shape of the lot.
What are the two possibilities for determining the cost of improvements in property appraisal?
Reproduction and replacement.
Which cost is typically used when appraising property?
Replacement costs.
What are the three methods for determining the cost of development?
Quantity survey method, unit-in-place method, and square foot method.
Why is the quantity survey method typically avoided by most appraisers?
It requires a lot of work.
What does the appraiser need to estimate when using the cost approach?
The value of the land, the cost of building improvements, and total depreciation.
What is the significance of depreciation in the cost approach?
It accounts for the loss of value over time of the property.
What does the unit-in-place method of appraisal combine for accuracy?
Direct and indirect costs for a specific piece of construction.
What is the basis of the square foot method in property appraisal?
The floor area of the structure.
Why is the square foot method considered the least accurate?
It is based only on the floor area without considering other factors.
What three factors must be considered in the depreciation calculation?
Physical deterioration, functional obsolescence, and location obsolescence.
What formula does the appraiser use to determine the final value of a property?
Value = Replacement cost - depreciation + value of land.
In what cases is the cost approach to appraisal typically necessary?
Primarily for manufactured housing using FNMA for financing.
What appraisal method is most commonly encountered by real estate agents?
The sales comparison approach.
What is the Cost Approach in property appraisal?
An appraisal method that estimates the value of a property by calculating the replacement cost of improvements, deducting accrued depreciation, and adding the market value of the land.
What can a broker NOT do to maintain an independent contractor relationship?
A broker cannot set work hours, set a work location, or pay a salary to a salesperson.
What must a salesperson cover in terms of expenses?
A salesperson must pay for their own expenses, including travel, tools, and marketing.
What are the tax obligations of a broker if a salesperson is considered an employee?
The broker must withhold taxes, pay social security taxes, and provide health insurance.
What is a key characteristic of the relationship between a broker and an independent contractor?
The sponsoring broker cannot control the details of their salesperson's performance.
What is the primary difference between an independent contractor and an employee?
An independent contractor relationship is less regulated and has fewer obligations compared to an employee-employer relationship.
Why is it important to have a clear independent contractor agreement?
It helps define the roles and expectations of both the independent contractor and the client, and clarifies the nature of their relationship.
What role does the IRS play in distinguishing between an employee and an independent contractor?
The IRS provides guidelines that help maintain the distinction between employees and independent contractors, which is important for tax purposes.
What must be included in an independent contractor agreement in real estate?
It should state that the parties are licensed broker and licensed salesperson, and address liability and rights to work created.
What does 'work made for hire' imply in an independent contractor agreement?
It implies that unless stated otherwise, the contractor retains rights to the work they create, including copyright.
What is a common feature of independent contractor agreements?
A statement regarding liability, specifying who is responsible in case of legal challenges.
What happens if a state has stricter regulations regarding independent contractors?
The stricter state regulations must be followed in defining the independent contractor relationship.
What is the formula for determining Market Value using the income capitalization approach?
Net Operating Income divided by Capitalization Rate equals Market Value.
How does the capitalization rate affect property value?
A lower capitalization rate results in a higher property value, while a higher capitalization rate results in a lower property value.
What type of properties are considered commercial properties in the context of income capitalization?
Multi-family apartments with more than four units are considered commercial properties.
What does a higher capitalization rate indicate about a property?
It indicates a higher perceived risk associated with the property.
What is the relationship between capitalization rates and investment risk in real estate?
A real estate investor may use a lower capitalization rate if the property is considered less of an investment risk.
How does the capitalization rate differ between a new luxury apartment building and an older apartment building in a bad neighborhood?
A new luxury apartment building may have a capitalization rate of 5%, while a 30-year old apartment building in a bad neighborhood may have a capitalization rate of 10%.
What is Net Operating Income (NOI) in real estate appraisal?
Net Operating Income is calculated by subtracting normal expenses from the rental amounts generated by the property, excluding mortgage payments.
How is the capitalization rate determined?
The capitalization rate is determined by the anticipated return the investor expects to get on the property.
What formula is used to determine market value using the income approach?
The formula is Net Operating Income divided by Capitalization Rate equals Market Value.
What factors contribute to calculating gross income for a property?
Gross income includes all expected income from rental fees, parking fees, and additional fees like pet fees or laundry income.
Why is effective gross income used instead of gross income for market value calculations?
Effective gross income accounts for the reality of occupancy rates and potential rent collection issues, unlike gross income which assumes 100% occupancy.
What percentage of gross rents is typically lost due to tenant turnover, vacancies, and uncollected rent?
10%
What is the Effective Gross Rent in relation to total gross rents?
90% of the total gross rents.
What types of expenses are included in the overall expenses of a property?
Fixed expenses like taxes and insurance, and variable expenses like reserve requirements and maintenance costs.
What is the formula for calculating the Capitalization Rate?
Net operating income divided by the Sales Price.
What is the first step in the appraisal process for the income capitalization approach?
Determine market rent by assessing average rental rates for similar properties.
How do appraisers estimate vacancy and missed payments?
By using average vacancy rates or typical rates for comparable properties.
What are fixed expenses in property appraisal?
Expenses that do not vary, such as taxes and insurance.
What factors influence variable expenses in property appraisal?
Amenities offered, furnishings, and fixtures in the building.
Why is it important for appraisers to compare similar properties?
To ensure accurate market rent determination and valuation.
What is the first step in the appraisal process for property?
Estimating total operating expenses and deducting them from estimated gross income to arrive at net operating income.
How is the capitalization rate determined in property appraisal?
By reviewing similar properties that have sold in the area and calculating it as net operating income divided by sales price.
What is the formula to calculate the capitalization rate?
Net operating income divided by sales price.
What is the final step in determining the value of a property?
Dividing the net operating income by the capitalization rate.
What type of properties typically use the income capitalization approach for appraisals?
Commercial properties such as large apartment complexes, strip malls, shopping centers, and office buildings.
Why are lenders concerned about funding properties like malls?
Unless there is a long-term lease with a tenant considered an 'anchor', such as Wal-Mart, the property is less valuable.
What might buyers of commercial properties request before signing a purchase agreement?
An appraisal using the income capitalization approach.
What factors can impact the income of commercial properties?
Tax increases, supply and demand, and sales of similar properties.
What is the Income Capitalization Approach in property appraisal?
An appraisal method where the value of a property is derived by applying a market capitalization rate to the property's net operating income.
What types of properties are valued using the Income Capitalization Approach?
Commercial properties such as office buildings, multi-family buildings (5+ units), shopping centers, and mixed-use buildings.
What is the formula for calculating Net Operating Income (NOI)?
Net Operating Income (NOI) = Effective Gross Income - Expenses.
What was the Net Operating Income (NOI) for the subject property?
$150,000.
What is the Capitalization Rate (CAP Rate) for Class A office buildings in this market?
6%.
How is the appraised value calculated using the Income Capitalization Approach?
By dividing the Net Operating Income by the Capitalization Rate.
What is the appraised value of the subject property?
$2,500,000.
What is reconciliation in the appraisal process?
The final stage where the appraiser reviews data and estimates the subject property's value.
What are the three methods used to determine property value in real estate appraisal?
Sales comparison method, cost method, and income approach.
What does the appraiser do during the reconciliation process?
The appraiser reviews all information obtained, ensures its validity, and applies judgment to determine the market value.
What is the first step in the reconciliation process?
Reviewing the accuracy of the information collected during the appraisal.
Why might an appraiser not use the income approach for a residential property?
Because it does not make sense for a residential property with one unit; the sales comparison value is typically used instead.
What is the role of logic and judgment in the reconciliation process?
To determine market value when there are significant differences in values from different approaches without clear discrepancies in data.
What appraisal approach is typically used for income-producing commercial properties?
The income approach value.
What appraisal approach is commonly used for special use properties like schools or government buildings?
The cost approach value.
Why is the reconciliation process important in property appraisal?
It ensures the accuracy of data collected and helps reach a fair market value.
What can happen if the reconciliation process is skipped in property appraisal?
Errors during the initial process could be missed, negatively impacting buyers and sellers.
How can the reconciliation process be described in the context of property appraisal?
As a check and balance process.
What are capitalization rates used for in commercial real estate?
To value income producing properties.
What is the purpose of a pro-forma in commercial real estate?
To provide a financial projection or estimate for a property.
What is the Capitalization Rate in real estate investing?
The rate of interest considered a reasonable return on investment, calculated as NOI / Purchase Price.
What are the two specific benefits that real estate investors typically seek?
Cash flow from the property and long-term appreciation of the property's value.
Why is understanding clients' motivations important for real estate agents?
It helps agents make better decisions about which properties to show, saving time and demonstrating value to buyers.
What is one way real estate investors can generate cash flow?
Through rental agreements or by purchasing and flipping homes.
What is equity in the context of real estate investing?
The increase in the value of the home over time as ownership lengthens, contributing to wealth building.
What types of buyers might real estate agents engage with?
Small investors, individuals buying for REITs, and a range of other buyers from single home purchases to large investment funds.
What is one key reason to invest in real estate?
As a hedge against inflation.
How does real estate generally grow in value compared to inflation?
At a higher rate than inflation.
What are the tax benefits associated with real estate investments?
Interest paid on mortgages can be an income tax deduction.
What is the risk level associated with long-term real estate investments?
It is considered low risk.
What is a potential financial benefit of buying property?
Creating rental income or long-term wealth growth.
What is the role of a real estate agent in helping buyers?
To help buyers find property that offers potential financial rewards.
Why is real estate considered less volatile than stocks?
Because it is more reliable as an investment.
What does the time value of money refer to?
The idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.
What do real estate agents need to understand to effectively work with investors?
How investors think about real estate and the investments they want to make.
What are investors ultimately looking for in real estate?
Real estate that provides the highest rate of return on their invested capital balanced with the right level of risk.
How is risk defined in the context of real estate investing?
The ability of any property to actually produce an expected cash flow, profit, or value to the investor.
What is the relationship between risk and potential returns in real estate?
Often, the higher the risk of a property, the higher the potential for returns.
What are cap rates in real estate?
A ratio of the Net Operating Income (NOI) of a building divided by the value of the property.
What does a higher cap rate indicate about a property?
The higher the cap rate, the higher the risk associated with the property.
What is the implication of a lower cap rate on property value?
A lower cap rate will produce a higher valued property due to reduced risk.
What does a higher cap rate indicate about a multi-family property in a less-desirable neighborhood?
It indicates more risk and leads to a lower purchase price.
What is the time value of money (TVM) in real estate investing?
TVM is the concept that money available now is more valuable than money earned in the future.
Why might an investor prefer to receive 110 in a year?
Because the present cash is more valuable due to the time value of money.
How do investors measure the net present value of a property?
By discounting future cash flows at the minimum rate of return they are willing to accept.
What is a key characteristic of real estate as an asset?
Real estate is generally an illiquid asset, making it difficult to sell quickly.
How does using leverage affect an investor's rate of return?
It can increase the rate of return by allowing the investor to use less of their own capital.
What is the impact of a mortgage on an investor's net operating income?
The mortgage payment must be subtracted from the net operating income to determine the actual return.
What is an example of positive leverage in real estate investing?
Using a mortgage to purchase a property can increase the rate of return on the investor's equity.
What is positive leverage in commercial real estate investment?
Positive leverage occurs when the cap rate of an investment is higher than the interest rate on the mortgage, leading to an increased rate of return for the investor.
What is negative leverage in commercial real estate investment?
Negative leverage occurs when the cap rate is less than the interest rate on the mortgage, resulting in a decreased rate of return for the investor.
What should agents understand to provide insight into investment profit potential?
Agents need to understand the components of cap rates and interest rates to help buyers see better results on their investments.
What is the relationship between cap rate and interest rate in determining leverage?
If the cap rate is higher than the interest rate, it results in positive leverage; if the cap rate is lower, it results in negative leverage.
What does net operating income (NOI) refer to in commercial real estate?
The income a property produces before debt service and any capital expenditures, expressed on an annual basis.
How is net operating income (NOI) calculated?
NOI equals the effective gross income minus any expenses.
What is the significance of net operating income (NOI) for real estate investors?
It is used to determine the value of a commercial property.
What are capitalization rates (CAP rates)?
The rate of return on a real estate investment based on the net operating income of a property.
How is the CAP rate calculated?
CAP Rate = Net Operating Income / Purchase Price (or current market value).
What does a return on investment (cash on cash return) represent?
The annualized return an investor will earn on their initial cash investment.
How can an investor use return on investment to compare opportunities?
By comparing the projected return on investment of different opportunities, such as stocks versus commercial properties.
What is the difference between equity and cash flow in real estate?
Net operating income is the cash flow from a property, but there is also value in the property beyond cash flow.
What is equity in real estate?
Equity equals the current market value of a property minus the loan balance.
What is one option an investor has after five years of owning a commercial property?
To refinance the property and take out equity.
How much equity can an investor create in a commercial property after five years?
Nearly $2,000,000.
What is a 1031 exchange?
A method that allows investors to avoid paying capital gains taxes by reinvesting profits into another property.
What advantage does a 1031 exchange provide to investors?
It provides a tax shelter when purchasing another investment property.
What do investors primarily look for when purchasing commercial properties?
Cash flow and maximum return on investment.
How does the mindset of a commercial property investor differ from that of a residential home buyer?
Commercial property investors focus on financial returns rather than personal preferences.
Why might an investor choose a slightly older and riskier building?
To achieve their desired return on investment.
What is one of the learning objectives of Chapter 21 on Ethics in Real Estate?
To list at least two prohibited acts under the federal anti-trust laws.
What is the definition of ethics in the context of real estate?
Moral principles that govern a person's or group's behavior.
How do ethics differ from laws in the real estate industry?
Ethics hold an individual to a higher standard than the law, guiding the difference between right and wrong.
What role do laws play in the real estate profession?
Laws regulate the activities of real estate professionals and are enforced by penalties if not followed.
What are Fair Housing Laws?
Laws created to prevent real estate professionals from discriminating against protected classes.
Why is it important for real estate professionals to understand the Code of Ethics?
To ensure they conduct their business in a manner that aligns with ethical standards and legal requirements.
What is important for making ethical decisions in a real estate career?
Finding a mentor or an experienced agent to guide you.
What can determine whether you can keep your job and license in real estate?
Following the law and having a strong code of ethics.
What is the impact of a strong code of ethics on a real estate agent's business?
It helps create a strong reputation, which is essential for success.
What is the total acquisition cost of the property?
$2,100,000
What percentage is the down payment for the mortgage?
30%
What is the down payment amount for the mortgage?
$1,567,500
What is the loan amount for the mortgage?
$3,657,500
What is the interest rate for the mortgage?
4.25%
What is the amortization period for the mortgage?
30 years
What is the annual debt service for the mortgage?
$215,912
What is the potential gross income for Year 1 in the pro-forma?
$1,075,200
What is the effective gross income for Year 5?
$1,238,995
What is the total cash flow after debt service for Year 3?
$335,092
What percentage of effective gross income do expenses represent in Year 2?
51%
What is the net operating income (NOI) for Year 4?
$618,992
What is the capital reserves per door for Year 1?
$300
What is the taxable income for Year 4?
$319,473
What is the debt service amount for each year?
$215,912
What is the total expenses for Year 5?
$594,844
What is the cash flow after capital reserves for Year 2?
$499,601
What is the exit price at the end of the 2nd year at a CAP rate of 8.25%?
$6,521,224
What is the cumulative cash flow at the end of the 4th year?
$1,241,818
What is the total return on investment (cumulative) at the end of the 3rd year?
99.98%
What is the owner equity at the end of the 5th year?
$4,096,205
What is the total net income (cash flow + equity) at the end of the 1st year?
$1,105,559
What is the annualized total return on investment at the end of the 4th year?
34.55%
What is the equity created at the end of the 3rd year?
$1,633,287
What is the sales expense percentage listed in the exit strategy?
4.00%
What is the principal pay down at the end of the 5th year?
$336,209
What is the occupancy rate of the 128-unit multi-family complex?
97%.
What class of asset is the multi-family property considered?
Class B.
What is the investor's strategy for the property?
To upgrade the property, increase rents, and add additional sources of income.
What is the purchase price of the property per unit?
$40,820.
What is the current net operating income of the property?
$492,125.
What is the capitalization rate for the property?
9.42%.
What is the age range for Class B assets?
11 to 25 years old.
What are the characteristics of Class A neighborhoods?
Well maintained, good transportation, good schools, low crime rates, and expensive properties.
Why does the investor prefer a Class B asset in a Class A neighborhood?
Because a Class B asset has room to increase in value while the neighborhood's desirability allows for increased rents over time.
What amount is set aside for minor renovations?
$95,000.
What is the total cash investment needed to purchase the property?
$2,100,000
What is the required down payment percentage for the mortgage?
30 percent
How much is the down payment in dollars for the property?
$1,567,500
What is the amount of the loan taken for the property?
$3,657,500
What is the interest rate on the loan?
4.25%
What is the annual debt service for the property?
$215,912
What is the anticipated rent increase for the first two years?
5%
What is the assumed vacancy factor for the property?
6%
What are concessions in the context of property management?
Discounts offered to entice tenants to rent, such as the first month's rent for free.
What is the existing vacancy rate mentioned in the lesson?
3%
What does loss to lease represent in commercial real estate?
The amount of rent below what the landlord could collect if the apartments were rented at full market value.
What is an example of loss to lease?
If an apartment is rented for 1,000, the loss to lease is $100 per month.
What might a landlord do if concessions are not enough to attract renters?
The landlord may have to drop the rent below market value to attract a new tenant more quickly.
What is effective gross income?
Effective gross income equals potential gross income minus vacancies, concessions, and loss to lease, plus other income.
What is the tax rate applied to property taxes in this scenario?
2.543%, which includes city, county, and school district taxes.
How is the property tax calculated?
The tax rate is applied to the assessed value, not the market value.
What is the budget for repairs and maintenance set at?
$54,400, with a 3% increase each year.
What is the property management fee based on?
4% of the effective gross income.
What additional income can an investor collect beyond rent?
Examples include laundry facilities, storage units, and additional parking spaces.
What is the assumed increase in assessed value for property taxes?
The assessed value is assumed to increase at 2% per year.
What is the role of property managers in commercial real estate investment?
They help investors manage properties and find other investment opportunities.
What are electric and utility expenses in commercial real estate?
They include electric, gas, and water bills for common areas, while tenants pay their own utility bills.
How much are electric and utility expenses assumed to increase each year?
3% per year from the base amount of $75,000 in year one.
What do marketing expenses in commercial real estate typically cover?
Expenses incurred to acquire new tenants, primarily online advertising and broker commissions.
What is the initial budget for contract services in commercial real estate?
$32,000, increasing at 3% per year.
What do payroll expenses include in commercial real estate?
Salaries for full-time and part-time employees working at the property.
What is a typical expense ratio for a multi-family property?
Roughly 50% of the effective gross income.
What is net operating income and why is it important?
It is the income linked to the property's value, calculated as net operating income divided by the capitalization rate.
What are capital reserves in commercial real estate?
Funds set aside for major repairs to avoid large emergency repair bills.
How much does the investor set aside for capital reserves per unit per year?
38,400 per year.
What is the annual debt service for the 30-year, fully amortizing loan mentioned?
$215,912 per year.
What is the total cash flow after debt service also known as?
Net cash flow.
What can investors write off according to IRS regulations?
Interest paid on the mortgage and depreciation.
Over how many years can multi-family properties be depreciated according to the IRS?
27.5 years.
What is the assumed value of the land in the example provided?
$1,000,000.
What is the annual depreciation amount calculated from the building's value?
$153,636.
Why is the taxable income less than the cash flow after debt service?
Because capital reserves are not tax deductible and debt service includes a principal payment, which is also not tax deductible.
What is one major benefit of owning an investment property?
It serves as a tax shelter for the investor.
What factors might influence an investor's exit strategy?
Their investing goals, such as selling for equity or holding for cash flow.
What does the exit strategy spreadsheet show?
The return on investment if the property is sold after years two through five, including net cash flow, equity gained, and principal pay down.
What is the formula to determine the exit price of a commercial real estate property?
Divide the net operating income by the capitalization rate.
What are the main components of the sales expenses when selling a property?
Broker's fee and attorney fees.
What percentage of the sales price is assumed for total closing expenses?
5%.
What is the significance of principal pay down in real estate investment?
It represents equity gained by the investor as mortgage payments reduce the loan balance.
How is net equity calculated in a real estate investment?
Subtract the initial investment from the owner's equity after accounting for sales expenses, closing costs, and principal pay down.
What does cumulative cash flow represent in real estate investment?
The total amount of cash received from the current year plus all previous years.
How is the cumulative return on investment calculated?
Divide the total net income by the initial cash investment.
What is the annualized return on investment and how is it calculated?
It is the cumulative return on investment divided by the number of years the property is owned.
What is the impact of taxable income on an investor's profits from commercial real estate?
Taxable income is less than actual income, resulting in lower taxes and greater after-tax cash flow.
What should an investor consider when evaluating the return on investment over five years?
Market conditions and the potential for continued growth in the rental market.
What type of loan is being used for the purchase?
VA Loan
What is the interest rate for the loan?
4.60%
What is the projected closing date for the transaction?
April 15
What are the estimated closing costs for the buyer?
$1,200
What is the total estimate of cost to the buyer?
$4,277.51
What is the estimated monthly payment for principal and interest?
$1,466.27
What is the projected due date of the first payment?
June 1
What is the purchase price of the house the Kennedy's are buying with a VA loan?
$280,000
What is the total loan amount for the Kennedy's VA loan?
$286,020
What percentage of the purchase price can qualified borrowers finance with a VA loan?
Up to 100%
What is the funding fee percentage for the VA loan in this scenario?
2.15%
What are the closing costs for the VA loan in this example?
$1,200
What is one benefit of a VA loan compared to other loans?
No mortgage insurance is required.
How is the prepaid interest calculated for the VA loan?
Multiply the loan amount by the interest rate and divide by 365 days.
What is the intangible tax calculated for the VA loan?
$859.50
What is the total estimate to the buyer for the VA loan?
$4,277.51
What may happen if you do not follow the laws related to ethics in real estate?
You could be banned from practicing real estate or face financial penalties.
What is a group boycott in real estate terms?
An agreement between members of a trade to exclude other members from fair participation in the trade.
What does price fixing refer to in the context of real estate?
Conspiring to establish fixed fees or prices for services or products.
What is market allocation in real estate?
An agreement between members of a trade to refrain from competition in specific market areas.
What is the Sherman Anti-Trust Act?
Federal legislation including imposition of civil and punitive damages for anti-trust activities.
What is a tie-in arrangement?
A contract where a transaction depends upon another.
What is the purpose of antitrust laws in real estate?
To prevent monopolies and encourage competition in the marketplace.
What does the Clayton Antitrust Act of 1914 aim to prevent?
Anti-competitive practices right from the start, including predatory and unfair pricing.
What is the main goal of the Sherman Antitrust Act?
To prevent contracts from forming trusts or conspiracies that could hinder trade or commerce.
What is the purpose of the Federal Trade Commission Act?
To enforce antitrust rules established by the Sherman Antitrust Act and the Clayton Act.
What is price fixing in real estate?
When two or more parties agree to sell or buy at a certain price, creating an artificial price not based on supply and demand.
How does price fixing apply to real estate commissions?
If real estate agencies agree to charge a specific commission rate, such as 8%, instead of the standard maximum of 6%, they are committing price fixing.
What constitutes a group boycott in the context of antitrust regulations?
When companies agree to refuse doing business with another company to eliminate competition or enforce favorable business practices.
Why is cooperation important in the real estate industry?
To best serve the interests of clients and succeed in the industry.
What is an example of a group boycott in real estate?
Existing real estate agencies refuse to use the Multiple Listing Service to block a new agency that charges a lower commission.
What is market allocation in real estate?
When businesses agree not to compete with each other by dividing the market, such as two agencies taking different halves of a town.
What is a tie-in agreement?
An agreement where the sale of a desirable property is contingent upon the purchase of a less desirable property.
What is the most severe penalty for a real estate professional violating state or local law?
The loss of their license.
What are the penalties for violating antitrust laws like the Sherman Antitrust Act?
Individuals can face up to a $100,000 fine and three years in jail; companies can be fined up to one million dollars.
What can an injured party receive in a civil suit for antitrust law violations?
Up to three times the damages caused by the violations.
What is the basis for most prosecutions of trade restrictions in Georgia?
Federal law, as Georgia has not enacted its own version of the Sherman Antitrust Statutes.
What are the three principal means for internal state enforcement of antitrust activities in Georgia?
General business statutes, statutes dealing with fraud and misrepresentation, and the statute empowering the Georgia Real Estate Commission.
What does the Fair Business Practices Act (FBPA) empower the Governor to do?
Prohibit business transactions that would result in substantial actual damage to the citizens of Georgia.
What constitutes a violation of the FBPA by a licensee?
Using fraudulent or misleading information to encourage the sale of real property.
What is an example of misleading information under the FBPA?
Advertising that ten lots in a subdivision have a sewer connection when they actually have septic tanks.
What are the potential penalties for violating the FBPA?
A fine of up to $25,000 per violation, prohibition from engaging in similar activities, and citizens can bring their own actions.
What can individuals do under the Uniform Deceptive Trade Practices Act (UDTPA) if they are victims of fraud?
They can bring civil actions against violators, nullify contracts, and collect up to three times their loss, plus attorney fees and court costs.
What is a key difference between the UDTPA and the FBPA?
Under the UDTPA, no actual consumer transaction has to take place for a violation to occur.
What actions can lead to a violation of the UDTPA?
Conspiring to fix commission rates or divide geographical territory can lead to a violation.
What are the potential penalties under the UDTPA?
Penalties include fines, injunctions, and recovery of three times the amount of loss, plus attorney fees and court costs.
What constitutes fraud in Georgia real estate?
Fraud consists of any artifice intended to deceive another, which can be an act or a failure to act by someone in a position of trust.
What duty does a real estate licensee have towards a client?
A real estate licensee has a duty of loyalty to their client.
What can happen if a real estate licensee breaches their duty of loyalty or honesty?
It can result in nullification of a contract, forfeiture of commissions, civil suits for damages, or sanctions against the licensee.
What can result from withholding important information from a seller regarding a prospective purchaser's offer?
It can result in the failure of a contract and the agent committing fraud.
How does Georgia's approach to antitrust laws differ from other states?
Georgia lacks specific antitrust laws, making licensees more likely to face actions for fraud than for antitrust violations.
What is the difference between an independent contractor and an employee?
An independent contractor operates their own business and is not subject to the same level of control as an employee, who works under the direction of an employer.
What is the primary form of compensation for a broker in real estate?
Commission, which is a percentage of the final sales price.
What must a real estate salesperson do to receive their license?
Have their license filed with a broker who will sponsor it.
What is the relationship between a broker and a salesperson?
The salesperson works under the broker as an independent contractor, not as an employee.
How is a broker's commission determined?
It is negotiated and laid out in the listing agreement, with no set percentage.
What is a common commission percentage in real estate?
6%, although many brokers may offer lower percentages to attract listings.
What alternative commission structures are emerging in the real estate industry?
Some brokerages offer low commissions, such as 1%, or charge a flat fee upon the sale of the house.
What is necessary for a broker to earn a commission on a listing?
The broker needs to find a buyer who is 'ready, able and willing.'
What happens if a seller decides not to sell after a listing agreement is made?
The seller owes the broker the commission if a ready, able, and willing buyer has been found.
Why do brokers rarely collect commissions on sales that do not close?
Collecting such commissions can harm their reputation and often requires a lawsuit, which is not worth the effort.
How is a broker's commission typically split?
The broker usually splits the commission with other brokers, such as a buyer's broker, based on negotiation.
What is an example of a commission split in a real estate transaction?
If a broker earns a 6% commission on a 22,500 and pay the buyer's broker the same amount.
Who can a salesperson collect commissions from?
A salesperson can only be paid directly by their sponsoring broker.
What is illegal for a salesperson in terms of commission collection?
It is illegal for a salesperson to collect a commission or fees directly from a client or from a different brokerage.
How is the commission split between a salesperson and their broker determined?
The split is agreed upon between the salesperson and the broker and can vary widely, such as 50/50 or 60/40.
What are some commission structures that brokerages might offer salespeople?
Brokerages may offer different commission splits or even 100% commission with a monthly desk fee.
What is the total commission paid by the seller for the sale of an $820,000 house?
$49,200
What is the commission split between the seller's agent and buyer's agent in this example?
50/50 split
How much does the seller's broker pay to the buyer's broker?
$24,600
How much does the seller's broker pay to their salesperson?
$12,600
How much does the buyer's broker pay to their salesperson?
$12,600
What is an agent's compensation for performing duties of agency called?
Commission
How is commission typically calculated in real estate transactions?
As a percentage of the sales price or rent.
Are commissions negotiable in real estate transactions?
Yes, commissions are always negotiable.
What agreement describes the commission between the principal and seller's broker?
The Listing Agreement.
In the example provided, what is the total commission for a property sold at $580,000 with a 6% commission rate?
$34,800
What percentage of the commission does the seller's broker agree to split with any broker who secures a buyer?
50%
Can real estate salespersons receive compensation directly from the principal?
No, they can only receive compensation from their sponsoring broker.
What is the commission split between the seller's broker and their salesperson in the example?
60/40 split.
What is the commission split between the buyer's broker and their salesperson in the example?
50/50 split.
What is the commission split between the seller's broker and the buyer's broker?
Always negotiable.
What is an independent contractor?
A person that provides services to another under terms specified in a contract or verbal agreement.
What is the relationship between a real estate salesperson and a broker?
A real estate salesperson is considered an independent contractor, not an employee of the broker.
What agencies define the legal status of a real estate salesperson?
The state licensing board and the IRS.
What is the purpose of an independent contractor agreement in real estate?
It lays out what both the salesperson and the broker can expect from each other.
Can a broker dictate the work hours of an independent contractor?
No, the independent contractor determines their own work schedule.
Can a broker set a work location for an independent contractor?
No, the independent contractor can choose their own work location.
What happens if a broker does not like how an independent contractor conducts business?
The broker can release the contractor's license, effectively firing them.
What tax status must a real estate salesperson file under?
As an independent contractor, not as an employee.
What is the primary compensation structure for real estate salespeople?
Commission-based earnings from dealings with the broker, not the client.
Can a broker pay a salesperson a salary?
No, brokers cannot pay salespeople a salary; all earnings must be commission-based.
What happens if a brokerage offers a weekly draw to new agents?
It is an advance that will be deducted from future earned commissions.
What type of bonuses might a real estate agent receive?
Bonuses for being the top earning agent in an office, but not based on hours worked.
What is the difference between supervision and control in the broker/salesperson relationship?
Brokers can supervise but cannot control the activities of salespeople.
What are some responsibilities of a salesperson in real estate?
Paying for their own expenses, memberships, and education.
What tax responsibilities do independent contractors have compared to employees?
Independent contractors must pay their own taxes, as no taxes are withheld by brokers.
What is the significance of viewing a real estate career as a business?
It emphasizes the salesperson's responsibility to take actions to make their business thrive.
What expenses might a brokerage cover for its salespeople?
Advertising for clients or the company and general office expenses.
What defines an independent contractor according to the IRS?
An independent contractor is a person that provides services to another under terms specified in a contract and is NOT an employee.
How much older is the comparable property compared to the subject property?
20 years older
What positive adjustment is made due to the age of the comparable property?
A positive adjustment of $3,200 is used.
What is the total square footage of the subject property?
1,980 square feet
What negative adjustment is made for the square footage difference?
A negative adjustment of $2,240 is made.
How many bedrooms does the subject property have?
Four bedrooms
What positive adjustment is made for the number of bedrooms?
A positive adjustment of $8,000 is made.
How many bathrooms does the subject property have?
Three bathrooms
What positive adjustment is made for the number of bathrooms?
A positive adjustment of $1,500 is made.
What adjustment is made for the fence component?
A positive adjustment of $1,000 is added.
What type of fireplace does the subject property have?
A gas fireplace
What positive adjustment is made for the fireplace type?
A positive adjustment of $500 is made.
How does the type of financing affect the sales price of a property?
If a buyer uses all cash, the seller may drop the price because the buyer can close more quickly and offers more certainty of closing.
What is the positive net adjustment for comparable property #1?
$10,960.
What is the indicated value of comparable property #1 after adjustments?
$235,960.
What was the sales price of comparable property #2?
$230,000.
What is the negative adjustment for the lot size of comparable property #2?
$1,500.
What is the total negative net adjustment for comparable property #2?
$3,938.
What is the indicated value of comparable property #2 after adjustments?
$226,062.
What is the positive adjustment for the lot size of comparable property #3?
$2,000.
What is the purpose of making adjustments in property valuation?
To account for differences between the subject property and comparable properties.
What is the final net adjustment for comparable #3?
$10,562.
What is the indicated value of the subject property after adding the final net adjustment to the sales price?
$240,562.
How do you determine the fair market value of the subject property?
By finding the average of the three indicated values.
What is the reconciled price based on the average of the three indicated values?
$234,194.67.
What listing price does the broker determine based on the reconciled price?
$234,000.
What is the significance of the target list price for a property?
It is the price where the home should sell the fastest.
What process is commonly conducted by agents to determine property listing prices?
Conducting Comparative Market Analyses (CMAs).
What is the duty of confidentiality in real estate transactions?
An agent must safeguard their principal's lawful confidences and secrets, keeping confidential any information that may weaken the principal's bargaining position.
What should a contract clarify regarding ownership of work created by a salesperson?
The contract should clarify that the client will own the work they are paying the contractor to create.
What happens to the listings created by a salesperson if they leave the agency?
The salesperson cannot take the listings with them when they go.
What should an agreement outline regarding marketing materials created by a salesperson?
It should distinguish between what marketing materials the salesperson has a claim for and which they don't.
What is one benefit of being an independent contractor for a salesperson?
An independent contractor is allowed to hire someone to assist them, such as an assistant or photographer.
How is a salesperson typically compensated under an Independent Contractor Agreement?
A salesperson must be paid primarily by commission, not by the number of hours worked.
What must be included in the Independent Contractor Agreement regarding commission?
The agreement must include how the commission is split between the salesperson and the broker.
How can the relationship between a broker and a salesperson be terminated?
Both the broker and the salesperson have the right to terminate their relationship at any time without needing to provide a reason.
What should the termination clause in the agreement specify?
It should state how much written notice is required to terminate the agreement and the procedure for determining any owed commission.
What is the difference between a principal and a customer in the context of agency law?
A principal is the party who authorizes an agent to act on their behalf, while a customer is the party with whom the agent interacts but does not represent.
What is an example of a universal agent?
A universal agent is someone who has broad authority to act on behalf of the principal in all matters, such as a power of attorney.
What is an example of a general agent?
A general agent is someone who has the authority to act on behalf of the principal in a specific business or trade, such as a property manager.
What is an example of a special agent?
A special agent is someone who is authorized to act on behalf of the principal for a specific transaction or purpose, such as a real estate agent representing a seller.
What is the definition of agency in real estate?
The relationship between principal and the principal's agent, arising out of a contract, where the agent is employed by the principal to act on their behalf with third parties.
Who is referred to as the principal in an agency relationship?
The employer of an agent, such as a buyer or seller.
What is the role of an agent in real estate?
An agent acts for and with authority from the principal to perform certain acts dealing with third parties.
How can an agency relationship be established?
Through a contractual agreement that can be written, oral, or implied.
What is the primary responsibility of an agent towards the principal?
To protect and serve the best interests of the principal.
Why is the principal often referred to as a client in real estate?
Because the principal does not owe the agent any federally or state mandated employee benefits.
Who is in a contractual agreement with the client in real estate transactions?
The broker is in a contractual agreement with the client.
In the agency relationship, who becomes the agent and who becomes the principal?
The broker becomes the agent and the client becomes the principal.
What is the role of a subagent in an agency relationship?
A subagent represents the principal and works to serve their interests, as authorized by the agent.
What must a subagent do if faced with a choice that benefits the agent over the principal?
The subagent must always choose the option that best serves the client (principal).
Who is typically the most common subagent in real estate transactions?
The real estate salesperson is the most common subagent.
What is the loyalty of the agent in an agency relationship?
The loyalty of the agent must always be to the principal and not to the customer.
What should a salesperson do to avoid confusion for the customer regarding agency relationships?
They should disclose in writing who the principal is and where their loyalty lies.
What is dual agency in real estate?
Dual agency allows a single person to serve the interests of both a buyer and a seller.
What is the relationship defined by the Law of Agency?
The relationship between a principal and the principal's agent, arising out of a contract.
What is a listing contract in real estate?
A contract binding the principal and broker.
What fiduciary duties does a broker and salesperson owe to a customer?
To act fair and honestly, disclose all known material facts, and operate with reasonable skill and care.
Who is considered the principal in an agency relationship?
The employer of an agent.
What role does a real estate salesperson play in relation to a broker?
Operates as a sub-agent to the broker.
What defines a general agent?
An agent with full authority over one property of the principal, such as a property manager.
What is a single agent?
An agent who works only for the buyer or the seller.
What is the role of a special agent?
An agent with limited authority to act on behalf of the principal, such as created by a listing contract.
Who is considered a sub-agent?
A person upon whom the powers of an agent have been conferred, not by the principal, but by an agent as authorized by the agent's principal.
What is a universal agent?
The agent who has complete authority over any activity of the principal; for example, power of attorney.
What is an example of a situation where a universal agent might be used?
When one person has the legal right to act fully in all affairs of another, such as making medical decisions.
Why is it rare for a real estate agent to be a universal agent?
Because universal agency powers are typically granted in personal relationships, like family, rather than in real estate transactions.
What is a universal agent in real estate?
A universal agent is someone who has all the legal rights needed to fully execute the sale of a house without needing to consult the principal.
What authority does a general agent have in real estate?
A general agent has full authority over a single property and can make many legal decisions pertaining to that property.
What is a common role for a general agent in real estate?
A property manager is a common role for a general agent, managing the property on behalf of the owner.
What is the role of a special agent in real estate?
A special agent is granted limited authority to act on behalf of the principal for specific business transactions.
How is the authority of a special agent defined?
The authority of a special agent is usually defined in a written contract signed by both the agent and the principal.
What happens if a special agent conducts business outside the scope of their contract?
If a special agent conducts business outside the scope of their contract, they are no longer acting as the principal's agent and are solely liable for any issues that arise.
What is a key difference between general agency and special agency?
General agency allows for broader authority over a property, while special agency is limited to specific activities defined in a contract.
What liability does a general agent have when conducting illegal activities?
If a general agent conducts illegal activities to benefit the principal without the principal's knowledge, the principal may still be liable for those actions.
What is a special agency in real estate?
A special agency is a relationship where a broker acts on behalf of a principal for a specific task or transaction.
What happens if a broker commits fraud as a special agent?
The broker will be solely liable, but the principal may also be held liable if they knew or should have known about the fraud.
What is single agency in real estate?
Single agency is when a broker represents only one client in a transaction and has undivided loyalty to that client.
What is sub-agency in real estate?
Sub-agency occurs when a real estate salesperson or associate broker works under a sponsoring broker to serve the principal's best interests.
What is dual agency in real estate?
Dual agency is when a broker represents both the buyer and the seller in the same transaction, which can lead to conflicts of interest.
Why can dual agency create conflicts of interest?
Because the seller wants the highest price while the buyer wants the lowest price, making it difficult for an agent to serve both interests simultaneously.
Why is dual agency illegal in some states?
Because it can lead to a failure in fiduciary responsibility due to inherent conflicts of interest.
What must be disclosed in writing when dual agency is legal?
The dual agency arrangement must be disclosed in writing.
What is the role of designated agents in a dual agency situation?
Designated agents are sub-agents assigned to each principal, treating them as single principals.
What is the consequence of undisclosed dual agency?
Undisclosed dual agency is illegal in every state.
How can a dual agency relationship be unintentionally formed?
A dual agency relationship can be formed based on implication, even without a written contract.
What should an agent clarify when showing a property to avoid creating an undisclosed dual agency?
The agent should clarify in writing that they are representing the seller's best interests.
What is required for disclosed dual agency to be valid?
Both principals must give written consent for the brokerage to represent them.
What is a universal agent authorized to do?
Perform all acts or duties his/her principal is empowered to perform.
What is an example of a universal agent?
Power of Attorney.
What defines a general agent?
An agent with full authority over one property of the principal.
What is a common example of a general agent in real estate?
A real estate licensee acting as a property manager for a building owner.
What is a special agent?
An agent with limited authority to act on behalf of the principal.
Who operates as a special agent in real estate?
Real estate brokers/salespersons.
How is special agency created in real estate?
Through the signing of a listing contract.
When does the relationship of a special agent end?
When the contract is fully performed.
What is express agency?
An agency relationship created by oral or written agreement between principal and agent.
What is implied agency?
Agency that exists as a result of actions of the parties.
What is ostensible agency?
A person who has been given the appearance of being an employee or agent for another, leading others to reasonably believe so.
What is a key characteristic of express agency?
It is created by a clear oral or written agreement between the principal and the agent.
Can an oral contract be legally binding in agency relationships?
Yes, an oral contract is legally binding, although written documents are preferred in court.
What is a common way to establish agency relationships in real estate?
Through a handshake or informal agreement, especially in smaller stakes deals.
What happens if an agency relationship is established by implication?
It can lead to misunderstandings about the existence of the relationship and potential legal issues.
What is the importance of a listing agreement in express agency?
It serves as a contract that clearly outlines the agency relationship and may include an end date.
What is express agency in real estate?
An agency relationship where the agent agrees to act on behalf of the principal and makes it clear to potential renters that they are acting as the agent of the property owner.
What is implied agency?
An agency relationship created by the actions of the principal and the agent, rather than through a stated agreement, which can arise accidentally.
What can happen if an agent is unaware of an implied agency relationship?
They may fail to fulfill their fiduciary responsibility to the principal.
How can implied agency be created?
Through actions such as giving advice on marketing a property without a formal agreement, leading one party to believe an agency relationship exists.
What is ostensible agency?
A specific kind of implied agency where a third party believes that an agency relationship exists, even if the principal or agent does not.
What should be done to avoid implied agency?
Ensure both the agent and principal are clear on the nature of their relationship and state when no agency relationship exists.
What documents are primarily used to create express agency?
Listing contracts and other formal agreements.
What is the purpose of a listing contract in establishing agency relationships?
It establishes an express agency relationship by outlining the broker's responsibilities and the compensation owed upon successful completion of a sale.
What is a buyer representation agreement?
It establishes the express agency relationship between the broker as the agent and the buyer as the principal.
What is the best way to end an agency relationship?
With full performance or completion of the transaction.
What happens to the agency relationship if the property is destroyed or condemned?
The agency relationship is terminated because the property no longer exists or is severely damaged.
What occurs when a listing contract or buyer representation agreement expires?
The agency relationship is officially over unless extended by mutual agreement.
How can an agency relationship be terminated by mutual agreement?
Both the agent and the principal can agree to officially terminate the agency relationship.
What constitutes a breach of contract in an agency relationship?
If one party wants to exit the relationship and can show that the other party has breached the terms of the contract.
What can supersede an agency relationship according to the law?
An operation of law, such as property being seized as a tax asset by the IRS.
What happens to an agency relationship if either party dies or becomes incapacitated?
The relationship is legally terminated.
What is a commission in real estate?
An agent's compensation for performing the duties of agency, typically a percentage of the selling price of property or rentals.
How is an agent typically compensated in real estate transactions?
Based on a percentage of the total closing costs, whether for sales, rentals, or leases.
Is there a standard commission rate in real estate?
No, the commission rate is always a point of negotiation between the principal and their agent.
What is the typical commission percentage for real estate sales?
Often around 6%, but can range from 4% to 6% depending on negotiations.
How is the commission for rentals typically calculated?
Often equal to one month's rent, but can vary based on market conditions.
What might a commission on a commercial lease be based on?
The total cost of the lease over its full life or a percentage of the first three years.
How is a commission calculated for a sale of a house?
By multiplying the selling price by the commission percentage.
What would be the commission for a house sold at $250,000 with a 5.5% commission rate?
$13,750, calculated as 250,000 times 0.055.
What is a common way commissions might be set in real estate?
As a flat fee, though this is not very common.
When is a real estate agent considered to have earned their commission?
Once they have found a 'ready, willing and able buyer.'
When do most agents actually collect their commission?
Upon the successful completion of a transaction.
In what market conditions is a flat fee commission more common?
In slow rental markets.
What is an example of a flat fee a real estate agent might charge?
$500 to rent apartments.
What are the duties of a broker engaged by a seller according to the Georgia Brokerage Relationships in Real Estate Transactions Act?
To represent the seller's interests and provide necessary services to facilitate the sale of the property.
What is the significance of exclusive representation in real estate transactions?
It ensures that a broker exclusively represents one party's interests, either the buyer or the seller, in a transaction.
What does the term 'dual agent' refer to in the context of real estate brokerage?
A broker who represents both the buyer and the seller in the same transaction.
What are ministerial acts in real estate brokerage?
Actions performed by a broker that do not require the exercise of discretion or judgment, such as providing information or filling out forms.
What is one duty owed by a broker engaged by a seller according to the Georgia Brokerage Relationships in Real Estate Transactions Act?
To act in the best interest of the seller.
What is the purpose of the Georgia Brokerage Relationships in Real Estate Transactions Act?
To prevent harmful misunderstandings and misinterpretations between real estate brokers and their clients.
What must brokers establish for earnest money collected during a real estate transaction?
An escrow account.
What must brokers provide regarding money and property received in a real estate transaction?
A timely accounting of all money and property received in which the seller has an interest.
What must brokers disclose when offering a property for lease?
Any material property defects or potentially negative elements within one mile of the property.
What is an example of a potentially negative element that must be disclosed to prospective tenants?
A railroad track near the property that may interfere with sleep due to noise.
What does the Act clarify regarding the responsibilities of brokers and their affiliate licensees?
It clarifies their responsibilities to clients by providing financial and legal guidance in real estate negotiations.
What rights does the broker have when engaged by property owners under the Act?
The broker has the right to offer more suitable properties if a tenant declines based on disclosed negative situations.
What type of guidance does the Georgia Brokerage Relationships in Real Estate Transactions Act provide?
Detailed guidance for navigating financial, ethical, and legal interactions between brokers and their clients.
What does 'Agency' mean in the context of real estate transactions?
It refers to every relationship in which a real estate broker acts for or represents another as a client by the latter's written authority in a real property transaction.
Who is considered a 'Broker' in Georgia real estate?
Any individual or entity issued a broker's real estate license by the Georgia Real Estate Commission, including the broker's affiliated licensees.
What is meant by 'Brokerage'?
The business or occupation of a real estate broker.
What constitutes a 'Brokerage engagement'?
A written contract wherein the seller, buyer, landlord, or tenant becomes the client of the broker and promises to pay the broker a valuable consideration.
What is a 'Brokerage relationship'?
The agency and non-agency relationships which may be formed between the broker and the broker's clients and customers.
Who is defined as a 'Client' in real estate?
A person who is being represented by a real estate broker in an agency capacity pursuant to a brokerage engagement.
What are 'Common source information companies'?
Any person, firm, or corporation that is a source, compiler, or supplier of information regarding real estate for sale or lease, including multiple listing services.
What is the definition of a 'Customer' in real estate transactions?
A person who is not being represented by a real estate broker in an agency capacity but for whom a broker may perform ministerial acts.
What is a 'Designated agent'?
One or more licensees affiliated with a broker who are assigned by the broker to represent solely one client to the exclusion of all other clients in the same transaction.
What does 'Dual agent' mean?
A broker who simultaneously has a client relationship with both seller and buyer or both landlord and tenant in the same real estate transaction.
What are 'Material facts' in real estate?
Facts that a party does not know, could not reasonably discover, and would reasonably want to know.
What are 'Ministerial acts'?
Acts which do not require the exercise of the broker's or the broker's affiliated licensee's professional judgment or skill.
What does 'Timely' refer to in real estate transactions?
A reasonable time under the particular circumstances.
What is a transaction broker in real estate transactions?
A broker who has not entered into a client relationship with any parties and performs only ministerial acts on behalf of one or more parties.
What are the specific rights and responsibilities of brokers in Georgia's real estate transactions?
Brokers are bound by state statutes and any brokerage engagement agreement signed by both parties.
What is a broker's obligation when a prospect makes a counter offer?
The broker must relay the counter offer to the landlord.
What happens if a broker does not find a qualified tenant for a rental property?
The broker is not held financially responsible for any shortfall.
What must brokers disclose regarding new or modified brokerage relationships?
Brokers must disclose any new or modified relationships that may involve existing clients or customers.
What federal and state laws must brokers follow in their dealings?
Brokers must follow all Fair Housing and civil rights statutes.
What should a broker do if a client asks to avoid selling to certain ethnic groups?
The broker must follow Fair Housing guidelines, even if it means voiding the client agreement.
What type of information must brokers guard during discussions with clients?
Brokers must guard all confidential information unless required to share by Georgia statutes.
What material information must brokers disclose to potential buyers and renters?
Brokers must disclose all material defects, certain financial matters, and other facts that may affect financial decisions.
What does the Georgia Brokerage Relationships in Real Estate Transactions Act establish for brokers?
Legal guidelines for Georgia brokers and their clients.
What is the primary duty of a broker when providing service to a seller?
To exercise reasonable care and skill.
What must a broker disclose to a seller?
All material facts that the broker has actual knowledge about.
Is a broker obligated to discover potential material defects?
No, but they must disclose known problems that could not be reasonably discovered by the seller.
What must a broker do to promote the seller's interest?
Seek a sale under the price and terms established in a broker engagement agreement.
What are brokers required to do with all offers?
Timely present all offers, even if there is a contract in progress.
What must a broker maintain regarding their client?
Client confidentiality.
Can a broker show prospective buyers alternative properties?
Yes, this does not breach any obligation to sellers.
What must brokers follow while performing client services?
All state and federal laws.
What does the Georgia Brokerage Relationships in Real Estate Transactions Act provide for brokers engaged by landlords?
A legal road-map for the broker's duties and responsibilities.
What must a broker do under the terms of the brokerage engagement with a landlord?
Perform duties unless strictly prohibited by local, state, or federal statutes.
What regulations must a broker follow even if the brokerage engagement document implies otherwise?
Fair Housing regulations.
What is a broker's obligation once a contract to lease is in place?
The broker is not required to seek additional prospects but can continue to do so without violating the engagement terms.
What must a broker do if showing a property that is under contract?
Inform all parties with an interest in the property about any activities and cease showing if requested by the landlord.
What must a broker present to the landlord?
All offers to and from the landlord, even if the property is subject to a lease or letter of intent.
What must a broker disclose to the landlord?
All adverse material facts that the broker has actual knowledge of concerning the transaction.
What should a broker advise the landlord regarding matters beyond their knowledge?
To seek professional advice.
What must a broker do with confidential information received during the engagement?
Hold it confidential, except when sharing with licensed associates or affiliates as part of normal business operations.
What must a broker inform prospective tenants about?
Their landlord-broker relationship, promptly.
What does the Georgia Brokerage Relationships in Real Estate Transactions Act establish?
Legal guidelines for Georgia brokers and customers or clients.
What is one responsibility of brokers to buyers under the Act?
To provide services with integrity and honesty, exercising reasonable care and expertise.
What must a broker do regarding properties that meet the buyer's standards?
Look for properties that meet the financial and other standards established by the buyers in the engagement contract.
What must a broker disclose to the buyer?
Any material defects or potential problems known by the broker that may disqualify a property under the engagement.
What obligation does a broker have when showing land that may be converted to commercial property?
To inform the buyer that the undeveloped land may be converted to commercial property.
What must a broker disclose regarding professional relationships?
All professional relationships that may affect the buyer-broker engagement.
What is the broker's obligation regarding offers?
To present all offers to and from the buyer, even when the buyer has already entered a contract to purchase.
What should a broker advise the buyer regarding matters beyond their skill and knowledge?
To seek professional assistance.
What must a broker provide regarding money and assets received?
A timely account of all money and other assets received in which the buyer has (or may have) an interest.
What must a broker inform sellers about?
Any known facts about the buyer's ability to meet obligations.
What are the broker's obligations regarding credit worthiness in transactions involving owner financing or loan assumption?
The broker is not obligated to investigate credit worthiness or guarantee buyer performance.
Does providing ministerial assistance to sellers violate buyer engagement terms?
No, the broker does not violate buyer engagement terms by providing ministerial assistance to sellers.
What is the primary duty of a broker engaged by a tenant under the Act?
To promote the interest of the tenant and perform the terms of the brokerage agreement.
What must a broker provide regarding money received during a transaction?
A prompt accounting of all money received.
What confidentiality standard must a broker maintain?
Strict client confidentiality standards at all times.
What must a broker do with offers related to a tenant-client?
Present all offers to and from a tenant-client.
What skill level is a broker required to exercise according to the engagement agreement?
Ordinary skill and diligence as set forth by the engagement agreement and the duties under the Act.
What regulations must a broker comply with?
All Fair Housing and civil rights regulations.
What must a broker not do regarding property information?
Not knowingly make false statements or attempt to hide negative material facts about a property.
What must a broker inform the landlord about?
The client-broker relationship and any known facts about a prospective tenant's ability to meet financial obligations.
What obligation does a broker have if a tenant reveals negative information about their background?
The broker is obligated to inform the landlord of what is known, even if the tenant declines to authorize a credit report or background check.
Do criminal convictions automatically disqualify a lease applicant under civil rights statutes?
No, criminal convictions do not automatically disqualify a lease applicant and may not affect a tenant's creditworthiness.
What does the Georgia Brokerage Relationships in Real Estate Transactions Act provide guidelines for?
For brokers and their clients or customers in Georgia.
When does the broker-client relationship begin?
At the time a client makes a formal request for services.
When does the broker-client relationship end according to the Act?
When the broker completes performance of the engagement or when one of three specified events occurs.
What are the three events that can terminate the broker-client relationship if there is no transaction?
If a broker-customer relationship begins on May 10, 2018, when would it automatically expire if no end date is stipulated?
On May 10, 2019.
What obligations does a broker have to former clients after the engagement ends?
To account for all money and real property related to the engagement and to keep confidential all information received during the relationship.
Under what conditions can a broker disclose confidential information after the engagement ends?
What does the Georgia Brokerage Relationships in Real Estate Transactions Act require from brokers regarding confidentiality?
Brokers must provide truthful information at all times and are not obligated to maintain silence if the seller reveals confidential information to a third party.
What happens if a broker breaches trust or provides false information according to the Act?
The broker must provide truthful information and is protected from legal action for complying with the Act.
Is there a legal requirement for sellers or agents to disclose information about convicted sex offenders?
No, there is no law requiring disclosure; the responsibility falls on the buyer.
What does the Fair Housing Law prohibit?
Discrimination in home sales, rental, and financing based on protected classes.
What was the significance of the Civil Rights Act of 1866?
It prohibits all discrimination on the basis of race.
What does the Civil Rights Act of 1968 prohibit?
Discrimination in housing on the basis of race, color, national origin, and religion.
What does the Housing and Community Development Act of 1974 prohibit?
Discrimination in programs and activities receiving financial assistance from HUD on the basis of race, color, national origin, religion, and sex.
What additional protections does the Fair Housing Amendments Act of 1988 provide?
It prohibits discrimination on the basis of race, color, national origin, religion, sex, disability, and familial status.
What does the Americans with Disabilities Act of 1990 prohibit?
Discrimination based on disability in programs, services, and activities provided by public entities.
What is the purpose of the Americans with Disabilities Act (ADA)?
To make it illegal to discriminate against people with disabilities.
When was the Americans with Disabilities Act (ADA) passed?
In 1990.
What does Title I of the ADA focus on?
Employment and providing reasonable accommodations for people with disabilities in the workplace.
What does Title II of the ADA prohibit?
Discrimination against the disabled in programs and public entities provided by state and local governments.
What is the focus of Title III of the ADA?
Preventing discrimination in public accommodations owned or leased privately but open to the public.
Which department regulates and enforces Title III of the ADA?
The US Department of Justice.
What does Title IV of the ADA focus on?
Telecommunications and ensuring communication access for people with hearing and speech disabilities.
What does Title V of the ADA cover?
A variety of provisions relating to the ADA, including state immunity and design standards.
How does the ADA relate to transportation?
Public transportation is addressed under Title II, while private transportation is considered a public accommodation under Title III.
What significant change was made to the Fair Housing Act in 1998?
It was amended to include people with disabilities as a protected class.
Who is protected under the Americans with Disabilities Act?
Individuals with physical or mental impairments that limit major life activities, those with a record of such impairments, and those regarded as having such impairments.
What protection does the Act provide to brokers and their affiliated licensees?
The Act protects them from any cause of action for complying with its provisions regarding confidentiality and truthful information.
What must a broker inform potential clients of before entering into a brokerage engagement relationship?
Certain facts including the types of services offered through the broker's agency.
What must broker engagement contracts inform clients about regarding conflicts of interest?
Other relationships which may create a conflict of interest, such as relationships with lenders and zoning officers.
What information about fees must brokers disclose to clients?
The broker's fees and whether those fees are shared with other brokers representing parties to the transaction.
What confidentiality obligations does a broker have under the Act?
The broker must inform clients of the confidentiality afforded under the Act and conditions for sharing confidential information.
Under what circumstances can a broker share confidential information?
When necessary to perform duties established by the engagement, with employees, agency partners, and external parties.
What is the obligation of a broker regarding truthful information in a transaction?
A broker must provide truthful information to all parties in a transaction, including not providing false information about past evictions.
What is required to create an agency relationship under the Georgia Brokerage Relationships in Real Estate Transactions Act?
Both parties must agree to the terms and conditions of an engagement.
Does a promise of payment create an agency relationship under the Act?
No, a promise of payment does not create an agency relationship under the Act.
Can a broker accept or decline an offer of payment without obligation under the Act?
Yes, a broker may accept or decline such an offer without obligation.
What must a broker disclose before an engagement is in effect according to the Act?
Certain facts must be disclosed before an engagement is in effect.
What is required for a broker to act as a dual agent in Georgia?
Written consent of all clients is required.
What must the formal written consent inform all parties about?
Potential conflicts of interest and the different types of services offered.
What must a dual agent disclose according to the Act?
All negative material facts known by the agent, except confidential information not required to be revealed.
What must clients be informed about regarding dual agency?
They have the right to refuse dual agency.
What happens if one party does not sign the written consent for dual agency?
It does not prevent other parties from entering into a dual agent brokerage engagement.
What should an agency have in place regarding dual agency?
A written policy that describes dual agent obligations.
Can a broker withdraw from a dual agency relationship?
Yes, if a client decides not to accept the dual agency terms and conditions.
What happens if a buyer signs a dual agent consent form but the seller declines?
The broker may continue the relationship with the buyer and refer the seller to another brokerage.
Can a broker receive a referral fee if the seller chooses to work with a recommended agency?
Yes, without violating the guidelines of the Act.
What is the purpose of exclusive representation under the Georgia Brokerage Relationships in Real Estate Transactions Act?
To ensure that a broker acts as a dual agent while keeping clients' confidential information private.
What must a broker do to ensure exclusive representation for a client?
Assign an affiliate within the broker's agency or have a written company policy for management level personnel or licensed affiliates.
What are designated agents required to do with privileged information gained from a client?
Keep it confidential, except when sharing with the agency broker, which is not a breach of trust.
Can a seller's agent disclose confidential information to a buyer?
No, unless given permission by the seller.
What must a seller's agent disclose to buyers under the Act?
Known negative material facts, such as a mold infestation.
What happens if a client gives permission to share confidential information?
The agent may share the information as permitted by the client.
Does compliance with the Act create a dual-agent arrangement?
No, compliance does not create a dual-agent arrangement.
What are ministerial acts in real estate transactions?
Services performed without compensation that facilitate a transaction by ensuring all parties are well-informed.
Can a broker acting as a transaction broker provide ministerial acts for all parties?
Yes, a broker can provide ministerial acts for all parties to a transaction.
What is one example of a ministerial act a seller's broker may perform?
Providing prospective buyers with a list of medical facilities near a property.
What must a transaction broker do regarding transfers of money in a real estate transaction?
Timely report transfers of money and other property received on behalf of a party.
What is a transaction broker required to inform clients about?
All known material facts related to defects in the property and required disclosures about environmental contamination.
Are brokers required to conduct extensive research to discover property defects?
No, brokers are not required to do extensive research to discover property defects.
What should a broker do when relaying information about hazards or defects?
Provide the source of any disclosure.
What type of information can a broker share as a ministerial act?
Information about community services, such as places of worship, hospitals, and schools.
What is one duty of a transaction broker regarding honesty?
The transaction broker must be honest with all parties in a real estate transaction based on their knowledge.
If a tenant-client asks about the potability of water in a lease property, what can a broker do?
Provide information about water testing services or refer the tenant-client to the local health department.
What is the status of a broker who belongs to a common source information company?
A broker is considered an independent agent.
What is required for a broker to be designated as a subagent of a common information source?
A written agreement with the common information source is required.
If a buyer's broker finds a property on the multiple listing service, what is their relationship to the seller's broker?
The buyer's broker is not considered a sub-agent of the seller's broker and remains exclusive to the buyer.
What does membership in a common source information company allow a broker to do?
It allows access to information about all properties currently on the market.
What are at least four protected classes under the Fair Housing Act?
Race, color, national origin, religion, sex, familial status, and disability.
What is the difference between blockbusting and steering?
Blockbusting involves inducing property owners to sell by instilling fear of a changing neighborhood, while steering involves guiding prospective buyers to or away from certain neighborhoods based on their protected class status.
What historical event led to the creation of the Civil Rights Act of 1866?
The post-Civil War period and the abolition of slavery through the 13th amendment.
What are the three main ideas of the Civil Rights Act of 1866?
What does the Civil Rights Act of 1866 explicitly ban?
Discrimination based on race in housing transactions.
What is a unique feature of the Civil Rights Act of 1866 regarding discrimination?
There are no exceptions for discrimination based on race in real property transactions.
Where must claims under the Civil Rights Act of 1866 be filed?
Directly in the Federal Courts.
What was the purpose of the Civil Rights Act of 1866?
To protect the rights of newly freed slaves and prevent discrimination based on race.
What was the significance of the Jones versus Alfred H. Mayer Company case?
It reaffirmed the law's goal of prohibiting discrimination based on race by both the private sector and the government.
What does the Fair Housing Act (FHA) prohibit regarding rental and sales negotiations?
It is illegal to refuse to rent, sell, or negotiate with any person.
What is blockbusting in the context of the Fair Housing Act?
Blockbusting occurs when sellers are convinced to sell their homes after being told that members of a protected class are moving into the neighborhood, impacting home values.
What is redlining as it relates to the Fair Housing Act?
Redlining is the illegal practice of denying a loan or offering different terms based on discriminatory factors.
What are the three major activities prohibited under the Fair Housing Act that real estate agents should know?
Blockbusting, steering, and redlining.
What does the Fair Housing Act state about advertising properties?
It is illegal to state or advertise that the property has restrictions based on discrimination.
What is the purpose of the Fair Housing Amendments Act of 1988?
To broaden the original group of people that cannot be discriminated against in housing.
What is the implication of the Fair Housing Act for real estate agents?
Real estate agents must be aware of and comply with laws prohibiting discrimination in housing transactions.
What is blockbusting in real estate?
The practice of encouraging a person to sell their home based on the fear that their home will lose value as a particular group starts moving into the area.
What should a real estate agent do if they witness blockbusting?
They should report it to their supervising broker immediately for further action.
What is steering in the context of real estate?
The practice of guiding a person towards or away from a particular neighborhood based on discriminatory factors.
What should a real estate agent do if a client requests to only see homes in certain neighborhoods based on race?
The agent should not agree to this request and should not work with that client.
What is redlining?
The practice where lenders predetermine certain areas they will not lend to based on the demographic makeup of the area.
What should a real estate agent do if a seller wants to sell their property only to a particular race?
The agent must be prepared to step away from that business and not engage in discriminatory transactions.
What is the Fair Housing Act's applicability to single-family homes?
It applies to all single-family homes if offered by a real estate broker, regardless of the owner's number of properties.
What types of properties are covered under the Fair Housing Act?
Single family homes owned by someone with more than three properties, dwellings with five or more units, federal government properties, and properties financed through government loans.
What should a real estate agent do if a client asks about the demographics of a buyer?
The agent should explain that they cannot share that information and decisions should be based on contract terms.
What agency is responsible for administering and enforcing the Federal Fair Housing Act?
The US Department of Housing and Urban Development (HUD).
What does HUD prohibit in advertising to prevent housing discrimination?
The use of discriminatory words, code words, or catch phrases that imply exclusivity, and obvious discrimination such as 'not suitable for handicapped'.
What must be displayed in the offices of Real Estate Brokers and housing offices to confirm non-discrimination practices?
The Equal Housing Opportunity Poster.
What is the significance of the Equal Housing Opportunity symbol?
It should be on every advertisement to indicate compliance with fair housing laws.
What was the original focus of the Civil Rights Act of 1866 regarding discrimination?
It made it illegal to discriminate on the basis of race.
What is considered a serious offense in relation to the Equal Housing Opportunity Poster?
Not having the poster displayed in an office.
What does HUD's prohibition against using certain media imply?
One cannot advertise in publications that are only read by a certain ethnic or religious group to attract only those groups.
What are the protected classes under the Fair Housing Act?
Race, color, religion, sex, handicap, national origin, and family status.
What was the first act passed by Congress after the Civil Rights Act of 1866?
The Civil Rights Act of 1968.
What does the Civil Rights Act of 1968 prohibit?
It prohibits refusing to rent or sell a property based on race, color, religion, or national origin.
What significant amendment was made to the Civil Rights Act of 1968 in 1974?
The Fair Housing Amendments Act of 1974, which included sex as a protected class.
What new protected classes were added after the 1974 amendment?
Race, color, religion, national origin, and sex.
What did the Fair Housing Act Amendments of 1988 add to the protected classes?
People with disabilities and families with children.
What requirement must landlords meet regarding modifications for tenants with disabilities?
Landlords cannot refuse housing based on the need for modifications, such as widening doorways.
What does the Housing for Older Persons Act (HOPA) allow?
It allows certain housing to be exclusively for older people, defined as 55 years old and up.
What is the occupancy requirement for housing covered by HOPA?
At least 80% of the units must be occupied by a person 55 or older.
Why is it important for real estate agents to understand Fair Housing regulations?
To ensure clients with disabilities know their rights when looking for housing.
What does the Fair Housing Act prohibit in housing matters?
Discrimination based on race, color, national origin, religion, sex, disability, and family status.
What should a real estate agent do if a client feels discriminated against?
Inform them about their right to file a claim with HUD.
What is the 'Mrs. Murphy' exemption in the Fair Housing Act?
It applies to dwellings with 4 or fewer units where the owner lives in one of the units, exempting them from the Fair Housing Act.
Can a landlord with the 'Mrs. Murphy' exemption place discriminatory advertisements?
No, they cannot place advertisements indicating that a particular race or religion should not apply.
What is the exemption for private clubs under the Fair Housing Act?
Private clubs can limit housing to their members as long as they do not offer housing to the general public.
What conditions must be met for the single-family housing exemption to apply?
The owner cannot own more than 3 units, can only sell one house every two years, cannot use discriminatory advertising, and cannot enlist the help of a broker.
How can someone file a claim for discrimination under the Fair Housing Act?
By phone, mail, or through the online portal of HUD, at no cost.
What is the role of HUD in cases of housing discrimination?
HUD provides a process for individuals to file claims and protect their rights against discrimination.
What happens after a claim is filed with HUD?
The claimant is contacted by an intake specialist to collect additional information.
What does HUD do if a claim is accepted?
HUD sends a formal written complaint to the claimant to sign and return.
What is the timeframe for the accused to respond to HUD after being notified of a complaint?
The accused has ten days to respond.
What happens if the parties reach an agreement during the claims process?
They will sign an agreement, and if breached, HUD can have the Department of Justice file suit.
What determination does HUD make if they find no cause for discrimination?
HUD closes the case under the determination 'no reasonable cause.'
What options does a claimant have if they disagree with HUD's determination of 'no reasonable cause'?
They can file a civil suit.
What happens if HUD finds cause for discrimination after the investigation?
HUD charges the accused with breaking the law, and the parties have 20 days to decide if they want the case in Federal court.
What is Megan's Law related to?
It requires law enforcement to make information about convicted sex offenders publicly available.
What is the duty of real estate agents regarding Megan's Law?
Agents should inform buyers about Megan's Law and their ability to search for information on convicted sex offenders.
What happens if a real estate agreement is not in writing?
The contract may be void and cannot be enforced in court.
What are public accommodations according to the Americans with Disabilities Act?
Any private business or nonprofit that is open to the public and offers the sale or lease of goods and services.
What is one category of public accommodations that must comply with the ADA?
Places that serve food or drink.
What type of establishment is included in the public accommodations category related to real estate?
Sales or rental establishments, including real estate brokerage offices.
Does the size of a business affect its compliance with the ADA?
No, even the smallest privately owned company must comply with the ADA.
What is one example of a public accommodation that offers entertainment?
Places that offer entertainment or exhibitions.
What type of public accommodation includes a local gym?
Places of exercise.
What are two exemptions under Title III of the ADA?
The text does not specify the exemptions, but there are two under Title III.
What must public accommodations do to assist people with disabilities?
Make reasonable accommodations to their practices and policies to ensure equal opportunity.
What are the three broad principles of the law regarding public accommodations?
Equal opportunity to participate, benefit, and receive benefits in an accommodating setting.
What must an entity do to create equal opportunity for people with disabilities?
Modify practices and policies, provide auxiliary aids and services, and remove architectural barriers.
What is an example of a reasonable accommodation for a deaf group visiting an art gallery?
Providing a tour guide who uses sign language.
What is a common architectural barrier that can be modified for accessibility?
Steps to enter a store can be replaced with a ramp.
What is a requirement for grab bars in accessible bathrooms according to the ADA?
Grab bars must be fully anchored, smooth, and installed between 34 and 38 inches off the ground.
What is the minimum space requirement for a wheelchair in an accessible bathroom?
The bathroom must allow at least one wheelchair to freely rotate.
What is the minimum width required for doors to be ADA compliant?
At least 32 inches wide.
What is the clearance required around an ADA compliant door?
At least 36 inches.
What types of properties are exempt from ADA requirements?
Properties considered historically significant.
What does the 'readily achievable' standard mean for older buildings under the ADA?
Barriers must be removed if changes can be made easily without major expense.
What is required for new residential buildings under the ADA?
They must provide accessible public and common areas, and individual units must have accessible routes and controls.
What are some features that must be included in individual units of new residential buildings under the ADA?
Accessible routes, light switches, electrical outlets, reinforced bathroom walls, and wheelchair accessible kitchens and bathrooms.
What is blockbusting in real estate?
The practice of persuading homeowners to sell at below market value by exploiting fears of changing racial demographics.
What is redlining?
An illegal lending policy that denies loans in urban areas with large minority populations based on alleged higher risks.
What does steering refer to in real estate practices?
The illegal practice of guiding home buyers towards or away from neighborhoods based on their race.
Who are testers in the context of fair housing?
Volunteers who pose as home seekers to ensure real estate brokers deal fairly with all clients.
What is the purpose of the Fair Housing Act?
To protect certain groups from discrimination in the housing market.
What are prohibited acts under the Fair Housing Act?
Activities that discriminate against individuals in housing transactions, including blockbusting, redlining, and steering.
Why is blockbusting considered illegal?
It exploits racial fears to manipulate homeowners into selling at lower prices, harming communities.
What is a potential consequence of steering in real estate?
It can lead to discriminatory practices that violate fair housing laws.
What is steering in real estate?
Steering is when an agent shows clients homes based on demographic criteria, such as only showing Latino clients homes in Latino neighborhoods.
How can an agent avoid steering?
By having the client define the area they are looking to purchase in by specific cross streets.
What should an agent do if a buyer asks if a neighborhood is safe?
The agent should not confirm the safety but direct the client to the local police department for crime statistics.
What is redlining?
Redlining is when a lender systematically refuses to lend in a particular area based on the racial makeup of that area.
What are the advertising guidelines regarding race in real estate?
You may not reference race, color, or national origin in advertisements.
Can you use religious terms in real estate advertisements?
You cannot use terms that indicate housing is only inclusive of certain religions, but secular terms like 'Happy Easter' are acceptable with caution.
What should be avoided in advertisements regarding gender?
Advertisements should not mention gender to avoid discrimination based on sex.
What is a guideline regarding familial status in advertisements?
Avoid phrases like 'Great for singles' when advertising properties.
What should be avoided in advertisements regarding disabilities?
Advertisements should not reference disabilities, such as 'no wheelchairs', but can mention if a property is a third-floor walk-up.
What should an agent do if unsure about a term to use in advertising?
Check with your broker for guidance on advertising terms.
How does HUD regulate the real estate industry regarding the Fair Housing Act (FHA)?
HUD uses paid testers to ensure agents and landlords are not violating the FHA by participating in prohibited acts.
What is the purpose of the testers hired by HUD in the real estate industry?
To ensure that real estate professionals treat everyone equally and do not provide different treatment to different protected groups.
How do testers typically operate when assessing real estate professionals?
Testers often work in pairs with similar financial profiles to evaluate equal treatment.
What should real estate professionals do to avoid issues with FHA compliance?
Understand the guidelines provided by the FHA and treat all prospects in the same manner.
What is an example scenario used by testers to evaluate equal treatment in real estate?
One tester in a wheelchair and another with an identical financial profile to see if they are treated equally.
What is a key component of pricing the property in real estate?
Conducting a comparative market analysis.
What is the purpose of a fiduciary duty in real estate transactions?
To ensure the agent acts in the best interest of the client.
What is an exclusive seller listing agreement?
A contract that gives one real estate agent the exclusive right to sell a property.
What is the difference between a CMA and an appraisal?
A CMA (Comparative Market Analysis) is used to estimate the value of a property based on similar properties in the area, while an appraisal is a professional assessment of a property's value conducted by a licensed appraiser.
What are fiduciary duties owed by a broker to the principal?
Fiduciary duties include loyalty, disclosure, and obedience, among others, with examples such as acting in the best interest of the client, informing them of all relevant information, and following their lawful instructions.
What is an Exclusive Agency Listing?
A listing agreement where a broker is the sole agent for the seller and entitled to a commission if the property is sold through another broker, but not if sold by the owner without an agent.
What is an Exclusive Right to Sell Agreement?
A listing agreement where the broker is entitled to a commission if the property is sold during the listing period, regardless of whether it is sold by another broker or the owner.
What is a Net Listing?
A listing that allows the agent to retain all sums received over a net price agreed upon with the owner as compensation for services.
What is an Open Listing?
An authorization given by a property owner to a real estate agent that allows multiple agents to secure a purchaser without liability to compensate any except the one who first secures a buyer.
What is the purpose of a listing contract?
To authorize the agent to perform services for the principal involving the latter's property, securing buyers, lessees, or renters.
Who are the parties involved in a listing contract?
The Principal (the seller) and the broker.
Can a real estate agent sign a listing agreement on behalf of the broker?
No, the agent can prepare the agreement but must have the broker sign it as the legal owner of the relationship.
What are the key components of a listing contract?
Duration of the Listing Contract, Sales Price, Sales Commission, Exceptions to commission.
What is the typical duration options for a listing contract?
Three months, six months, a year, or any other period chosen by the seller.
Why might a seller want a short listing contract duration?
To terminate the relationship if no sale occurs.
What is the significance of the sales price in a listing contract?
It should reflect a realistic amount a buyer would be willing to pay.
How is the sales commission determined in a listing contract?
It is always negotiable between the principal and broker.
What happens if a seller finds their own buyer according to the listing contract?
They may be absolved from paying commission if the buyer was listed as a potential buyer in the agreement.
What is the Exclusive Right to Sell Agreement?
A listing agreement where a broker acts as an agent for the seller and is entitled to a commission if the property is sold during the agreement period.
What protection does the Exclusive Right to Sell Agreement offer to the broker?
It ensures the broker receives a commission on the sale of the home for a certain period, even if the seller finds a buyer themselves.
What should a seller do before signing a listing agreement?
Request a lawyer to review it to understand what they are signing.
What must happen for a seller to owe a broker a full commission?
A willing and able buyer must be presented by the broker, and all conditions in the listing agreement must be fulfilled.
What is the role of a broker in an exclusive-right-to-sell listing?
The broker acts as the sole agent of the seller and has exclusive rights to represent the property while the contract is in effect.
What happens if another broker or the owner sells the property in an exclusive-right-to-sell listing?
The broker still receives a commission even if another broker or the owner sells the property.
What is the main difference between an Exclusive Right to Sell Agreement and an Exclusive Agency Agreement?
In an Exclusive Right to Sell Agreement, the broker receives a commission regardless of who sells the property, while in an Exclusive Agency Agreement, the broker only receives a commission if the property is sold through another broker.
What can a seller do if they are unhappy with an offer under an Exclusive Right to Sell Agreement?
The seller can turn down the offer, even with an Exclusive Right to Sell Agreement.
What condition did Broker Justin agree to regarding the commission if Tom buys the home?
Justin agreed to waive the commission if Tom buys the home, provided he is reimbursed for his MLS fees and advertising costs.
What is a potential downside for sellers with an Exclusive Right to Sell Agreement?
It is the most restrictive agreement and gives the seller far less control than other types of agreements.
Under what circumstances does a broker receive a commission in an Exclusive Agency Agreement?
The broker receives a commission if the property is sold through another broker, but not if the sale is negotiated by the owner without an agent.
What recourse does a seller have if the Listing Broker fails to act in their best interest?
The seller has recourse to break the contract if the Listing Broker failed to advertise the property or make a solid effort to act in the seller's best interest.
What is an exclusive right-to-sell agreement?
It offers the listing firm commission if a sale occurs, regardless of who procured the sale.
What is the main difference between an exclusive right-to-sell agreement and an exclusive agency agreement?
In an exclusive agency agreement, the seller only pays commission if the listing firm or another firm finds the buyer.
In an exclusive agency agreement, when is the listing firm entitled to compensation?
Only if the listing firm or another firm secures a buyer.
What happens in the example where Mark sells his property to his cousin John without involving the listing broker?
John will probably not have to pay any commission since he procured the buyer through his own efforts.
How does the situation change if John learned about the property through the Multiple Listing Service?
The listing broker might argue they are entitled to compensation, needing to prove their efforts produced the buyer first.
What is the liability of the owner in an open listing?
The owner is only liable to compensate the agent who first secures a ready, willing, and able buyer.
What type of contract is an open listing?
A non-exclusive, unilateral real estate contract.
What does a unilateral contract obligate one party to do?
To perform a specified legal service for another party.
What level of protection does an open listing offer brokers compared to other types of listing agreements?
The lowest level of protection.
What is the best way to protect yourself from legal problems in real estate transactions?
Understanding the law to avoid legal pitfalls.
What are the three kinds of misrepresentations in real estate?
Fraudulent, negligent, and innocent misrepresentation.
What is an example of a negligent misrepresentation?
Failing to disclose knowledge of material property defects out of ignorance.
How can you legally protect yourself when stating the condition of a roof?
Attribute the information to the source, such as the seller.
What should be disclosed to avoid misrepresentation lawsuits?
Renovations completed with appropriate permits, existence of easements, environmental issues, and title issues.
What is required for seller disclosure forms to be useful?
They must be completely filled out by the seller.
What should be documented regarding the seller's source of information?
Wherever possible, document the seller's source or encourage the use of other professionals for concrete evidence.
What are the potential consequences of misrepresentation for a real estate agent?
Loss of license, regulatory sanctions, civil court penalties, and possibly criminal conviction.
Why should puffing be avoided in real estate marketing?
Because it can lead to dishonest representations and potential legal issues.
What is an example of puffing regarding a home's kitchen?
Claiming a kitchen is 'brand new' while it has a leaking plumbing issue.
What is the legal status of puffing statements?
Puffing is generally not considered a legally binding promise, but it is still dishonest.
What must a real estate agent do if their client commits fraud?
They must attempt to correct it to avoid being seen as participating in the fraudulent behavior.
What is puffing in real estate?
Puffing is stating exaggerated claims about a property, such as calling it 'an oceanside condo with clear views of the Atlantic Ocean from every room.'
Is puffing illegal?
Puffing is not illegal per se, but false advertising is illegal and there is a fine line between exaggeration and fraud.
What must a consumer prove to establish false advertising?
The consumer must show that the statement was deceptive and motivated by a deliberate desire to deceive.
What is negligent misrepresentation in real estate?
Negligent misrepresentation occurs when an agent makes a statement that is not intentionally wrong but is incorrect due to a failure to confirm its accuracy.
What is the role of a broker in setting a sales price?
The broker can suggest a price based on a Comparative Market Analysis and knowledge of recent sales in the area.
What happens after a CMA is completed?
The broker consults with the client to agree on a listing price based on the seller's goals.
What should a broker explain to a seller regarding the CMA?
Each portion of the CMA needs to be thoroughly explained so the seller understands how the suggested sales price was derived.
What can happen if a seller insists on a significantly lower sales price?
The seller may be accepting an amount far below what they could get for the home.
What is the risk of setting a sales price too high?
The property may stay on the market for a long time, making it less likely to sell at the asking price.
What is the final decision regarding the sales price?
The final decision needs to be left up to the seller.
What was the suggested sales price in Gabe Brown's CMA for Wendy Kleinfelter's property?
$260,000.
What price did Gabe suggest to list the property at, despite the CMA?
$280,000.
What was the outcome after Wendy agreed to the inflated listing price?
No offers were made on the home, leading Wendy to lower the price to $240,000.
What is the purpose of a CMA for real estate agents?
To help clients set a listing price for a home to be offered for sale.
How does a CMA differ from a formal appraisal?
A CMA is less official and can be performed by real estate agents, while an appraisal must be done by a licensed appraiser.
What factors do appraisers consider when performing an appraisal?
Surrounding properties, general market conditions, and the condition of the subject property.
In the CMA example, what was the average adjusted sales price of the three comparison properties?
$285,000.
What listing price did Jack decide to set for his home after the CMA?
$290,000.
Why did Carrie place more weight on the first two sales in the CMA?
Because Jack's home has a recently updated bathroom, making it more comparable to those properties.
What type of property was Jack Tanner trying to sell?
A 2,100-square foot single-family home with four bedrooms and three bathrooms.
What is the purpose of a Comparative Market Analysis (CMA)?
To compare properties and determine appropriate listing prices based on market data.
Why is local market knowledge important when preparing a CMA?
Because real estate is local, and familiarity with the area helps in making effective comparisons.
What should you do if there are not enough comparable properties in the same subdivision?
Consider selecting homes from another subdivision or a nearby town.
What is the recommended approach when selecting comparable properties for a CMA?
Throw out the highest and lowest sales prices to even out the trending.
How should you handle older comparable properties in a CMA?
Make subjective adjustments and rely on guidance from brokers if necessary.
What types of properties should be used in a CMA?
Use homes of the same construction type, avoiding mixing one-story with two-story homes.
What should you do with notes on excluded comparable properties?
Save them to justify your decisions if clients question the exclusions.
What is an example of a situation where a realtor might need to widen their search for comparables?
When no homes have been sold in the realtor's small rural town for the past year.
What is the significance of adjusting the suggested sales price for inflation?
To ensure the price reflects current market conditions and value.
Why might single-story homes be in higher demand among seniors?
Because they value the convenience and safety of one floor.
What should be adjusted for when comparing properties?
Any differences that will have a material impact on the sales price, such as major improvements.
What is the most difficult part of completing a Comparative Market Analysis (CMA)?
Performing the comparison of properties to the listing property.
What happens if the subject property does not have a certain improvement during property comparison?
The estimated increase in value for that item is subtracted from the subject property.
What are some common items adjusted for in property comparisons?
Lot size, number of bedrooms and bathrooms, garage size, and kitchen upgrades.
Why should motivated cash buyers be considered in property comparisons?
They may have been willing to pay more for a quick sale, impacting the sales price.
What does 'arm's length' mean in the context of property sales?
It refers to sales without special circumstances that would impact the sale, such as selling to a relative.
Why should short sale or distressed properties be excluded from comparisons?
Because these sales will not reflect true market value.
What is the value of the additional bedroom noted by Abraham in the Comparative Market Analysis?
$15,000
What is the adjusted price range for comparable properties mentioned in the text?
160,000
What factors influence the listing price of a property according to the seller's motivation?
A quick sale may lead to a lower price, while a seller seeking the highest price may list at the top of the range.
What types of listings should be considered when selecting comparison properties for a CMA?
Sold, pending, and expired listings from the past six months.
What is the recommended square footage range for comparable properties?
Within 300 square feet of the listing property.
Why is it important to consider the number of bedrooms when selecting comparison properties?
More bedrooms generally equal a higher listing price, but additional rooms without extra square footage may not add much value.
What should you be aware of regarding how local coding agencies define a bedroom?
In some cases, living rooms, dining rooms, and sun rooms can be considered officially as 'bedroom.'
What is necessary to assess when determining a home's neighborhood?
It is necessary to assess the neighborhood based on online information and local definitions of boundaries.
Why is it important to select homes in the same school district as your listing?
The quality of schools is of paramount interest to interested buyers, especially in areas with young families.
What impact can school district ratings have on property values?
Dramatically different ratings between neighboring school districts can have a sizable impact on property values.
How does lot size affect property value?
Larger lots add to the value of a property; for example, a home on a full acre lot is worth more than a similar home on a quarter acre.
What is the general trend regarding the age of homes and their value?
Older homes are generally worth less than newer ones, unless they have historical significance.
What should you consider when selecting comparison properties based on age?
Select homes within 10-25 years of the listing unless all homes in the neighborhood were built around the same time.
What should you do if new construction is available in the area?
Be familiar with the neighborhood, as new construction may command a higher sales price or drive down the value of your listing.
What is important to consider regarding homes with similar amenities?
Homes with similar amenities should be compared to ensure accurate property valuation.
What is a good indicator for comparing the value of homes?
Price per square foot.
How do you determine the price per square foot for a property?
Divide the price of each comparable property by its total square footage.
What is the suggested price for a listing based on the average price per square foot?
Multiply the average price per square foot by the exact square footage of the listing home.
What should you do before signing the listing agreement?
Walkthrough the listing property to check for any surprises that could affect its value.
What factors should be considered when evaluating the condition of a home?
Condition compared to comparable properties, additions and upgrades, and the state of the property.
What is the average price per square foot calculated from the example properties?
$172.50.
What is the suggested value for a 3,000 square foot home based on the average price per square foot?
$517,500.
What is curb appeal in real estate?
Curb appeal refers to the perceived value of a home based on its exterior appearance.
What factors may require adjusting the price per square foot and sales price of a property?
Differences in property features and conditions revealed during a walkthrough or inspection.
What should be considered when pricing a property in relation to current listings?
You need to adjust your suggested list price to be competitive with current listings in the area.
How does inventory level affect property pricing?
In high inventory periods, prices may need to be adjusted downward, while low inventory may allow for higher sales prices.
What did Realtor Ashleigh Polanski discover about her suggested sales price compared to current listings?
She found that her suggested sales price was below most current listings, prompting an increase in the listing price to remain competitive.
What is the importance of presenting a CMA in an easily digestible format?
It helps the seller to immediately understand the report without being overwhelmed by complex presentation.
What is the benefit of thoroughly understanding the comparative market analysis process?
It simplifies the process of determining the value of a home and ensures no steps are skipped.
What is the list price of Comparable #1?
$234,000.00
What is the sale price of Comparable #2?
$225,000.00
What is the indicated value for Comparable #3?
$240,562.00
What is the total value of the three comparables?
$702,584.00
What is the reconciled price based on the total value of the comparables?
$234,194.67
What is the age of Comparable #1?
10 years
What type of construction is used for all comparables?
Brick
How many bedrooms does Comparable #3 have?
4
What is the condition of Comparable #2?
Very Good
What type of loan is used for Comparable #2?
Conventional Loan
What is the purpose of a Comparative Market Analysis (CMA) in real estate?
To help a home seller arrive at a listing price that will sell their home quickly at the maximum price.
How does the listing price differ from the appraised value of a home?
The listing price is the price point believed to sell the home quickly, while the appraised value is an estimate of the home's worth.
What factors should be considered when selecting comparable properties for a CMA?
Homes sold in the last six months, similar square footage, and similar characteristics such as the number of bedrooms and bathrooms.
What is the significance of making adjustments in a CMA?
Adjustments are made to compare the subject property to comparable properties, determining its value relative to them.
What happens if the subject property has one more bedroom than a comparable property?
A positive adjustment is made to the comparable property, indicating the subject property should sell for more than the comparable property's price.
What should be done if the components of the subject property and comparable property are considered equal?
No adjustment is needed for that component.
What type of home is the subject property described in the example?
A 10-year-old traditional ranch home.
What is the size of the lot for the subject property?
120'-0" x 150'-0".
What is the sale price of Comparable #1 after adjustments?
$225,000
What is the lot size of the subject property?
18,000 square feet
What adjustment is made for the lot size difference between the subject property and Comparable #1?
A negative adjustment of $1,000 is made.
What does the term 'fiduciary' refer to in real estate?
A person in a position of trust and confidence between the principal and broker.
What is a fiduciary duty?
The duty owed by an agent to act in the highest good faith toward the principal without obtaining any advantage through misrepresentation or concealment.
What is the loyalty duty of an agent?
An agent's duty to place the client's interest above those of all others, including their own self-interest.
What does obedience mean in the context of fiduciary duties?
The obligation of the agent to act in good faith at all times and obey the client's instructions according to the contract.
What is meant by reasonable care in fiduciary duties?
The degree of caution and concern for safety that a prudent and rational person would use in similar circumstances, used to determine negligence.
What are fiduciary duties in real estate?
Legal and ethical responsibilities an agent owes to their principal.
What is the main obligation of a real estate agent towards their client?
To always act in the best interests of the client, as long as it does not involve breaking the law or acting unethically.
What does the 'O' in the acronym OLD CAR stand for?
Obedience.
What does the 'L' in the acronym OLD CAR stand for?
Loyalty.
What does the 'D' in the acronym OLD CAR stand for?
Disclosure.
What does the 'C' in the acronym OLD CAR stand for?
Confidentiality.
What does the 'A' in the acronym OLD CAR stand for?
Accounting.
What does the 'R' in the acronym OLD CAR stand for?
Reasonable care.
What should an agent do if a client asks them to perform an illegal act?
The agent must refuse to perform the illegal act, as their duty is to obey legal instructions only.
What should an agent do if a client requests discrimination in selling a property?
The agent must explain that they cannot discriminate and must present all valid offers regardless of race or religion.
What must a listing agent disclose if they are aware of material defects in a property?
They must disclose any material defects to a buyer, such as cracked pipes or flooding.
What is the primary duty of a Seller's Agent regarding the seller's instructions?
The Seller's Agent must obey the lawful instructions of the Seller.
What is the primary duty of an Exclusive Buyer's Agent regarding the buyer's instructions?
The Exclusive Buyer's Agent must obey the lawful instructions of the Buyer.
What fundamental duty does an agent owe to their principal?
Loyalty, requiring the agent to act in the best interests of the client.
What should a Seller's Agent do to further the interests of the Seller?
They are required to do everything in their power to further the interests of the Seller.
What is considered theft of an opportunity for profit in real estate?
When a broker makes a quick profit on a property they are supposed to represent, like flipping a property without the seller's knowledge.
What must an agent disclose to their client as part of the agency relationship?
Everything that pertains to the transaction that impacts them, including facts affecting property value or marketability.
What is the difference between the duty of disclosure and the duty to disclose material defects?
The duty of disclosure pertains to the transaction's impact on the client, while disclosing material defects is about honesty to all parties involved.
What must a Seller's Agent do regarding known material defects in a property?
They must divulge any known material defects in the property.
What must an Exclusive Buyer's Agent disclose to the buyer regarding the seller?
Everything they know about the seller, including motivations to sell and any opportunity for a faster sale.
What information should a buyer's broker share with the buyer about the property area?
Traffic problems, poor schools, crime rates, and declining property values.
What is the fiduciary duty of confidentiality in real estate transactions?
To protect the principal's confidences and secrets unless it is unlawful to do so.
What should a seller's agent not disclose to a buyer?
That the seller must sell a property below the listed price.
What should a buyer's agent not disclose to the buyer?
That their client is willing to pay more than the offer price presented.
What is an exception to the confidentiality rule in real estate?
If the principal gives the agent permission to disclose certain confidential information.
What does the duty of accounting require from an agent?
To account for any property or money entrusted to them by the client.
What should an agent do with a deposit for marketing expenses?
Deposit it into a separate account and be able to account for its use.
What is required to be disclosed regarding material defects?
Known material defects must be revealed by both the listing agent and seller.
What is expected of a real estate agent in terms of care and diligence?
To use reasonable care and diligence in pursuing their client's goals.
What does the standard of care assume about a licensed real estate broker?
That they are a competent professional, knowledgeable in their field.
What should a broker do if they encounter details beyond their licensing requirements?
Acknowledge this and refer the principal to the appropriate expert, such as a lawyer or accountant.
What is expected of seller's agents in terms of preparation?
To prepare themselves through education to competently represent the seller.
What is the role of exclusive buyer's agents?
To prepare themselves through education to competently stand up for the buyer at all times.
What should a listing agent do if a seller discovers a lien on their property?
Refer the seller to a property attorney and municipal authorities to help clear the lien.
How does fiduciary law benefit client confidence?
It assures clients that the agent is bound by law to represent their interests loyally and fully.
What does fiduciary responsibility reduce the likelihood of?
It reduces the likelihood that clients will be taken advantage of by unscrupulous professionals.
What is fiduciary duty in real estate?
The duty owed by an agent to act in the highest good faith toward the principal without obtaining any advantage through misrepresentation or pressure.
What does the acronym O.L.D.C.A.R. stand for in fiduciary duties?
Obedience, Loyalty, Disclosure of Information, Confidentiality, Accountability, Reasonable Care, Skill and Diligence.
What is the obligation of an agent regarding obedience?
The agent must obey all legal instructions from the principal promptly and efficiently.
What does loyalty mean in the context of fiduciary duties?
The agent must act only in the best interests of the principal, excluding their own interests.
What must an agent disclose to the principal?
All pertinent information, including presenting all offers.
What is the agent's responsibility regarding confidentiality?
The agent must protect the principal's confidences and secrets unless it is unlawful to do so.
What does accountability mean for an agent?
The agent must account for any property or money entrusted to them by the principal.
What is required of agents in terms of reasonable care, skill, and diligence?
Agents should only perform services for which they have expertise and meet standards of skill, care, and diligence in transactions.
What is the Multiple Listing Service (MLS)?
An association of real estate agents providing for a pooling of listings and the sharing of commissions.
Why is the MLS important for marketing a property?
It is the best way to market your listing and share information regarding a property.
What type of information is required when filing a listing with the MLS?
Property class, listing price, listing expiration date, commission offered, and other required information.
What should be included in property descriptions for MLS listings?
Desirable features first, and photos that showcase the property's best features.
What is the typical commission offered to another broker in MLS listings?
Typically between 2 to 3.5%.
What is crucial for a quick sale in MLS listings?
Writing great property descriptions and including appealing photos.
What information is typically included in a Product Data Sheet for a home listing?
Address, sales price, county and state, school district, total bedrooms, total bathrooms, and remarks highlighting the main selling points.
What is the purpose of the remarks section in a property listing?
To highlight the property's best features.
What are some tips for taking effective real estate listing photos?
Use natural or artificial lighting, include high-quality indoor and outdoor pictures, and improve curb appeal.
What is Zillow.com known for?
It is the leading real estate marketplace with a wealth of advice and information for selling properties.
What does Trulia.com provide to sellers?
Information and tools to sell homes, insights about neighborhoods for pricing, and connections to agents.
What is the role of Redfin.com in real estate transactions?
Redfin links sellers to reputable and experienced agents.
How much has Redfin facilitated in sales?
Over $20 billion.
What should agents do with online resources provided by their broker?
Get familiarized with as many online resources as possible to make their life easier.
What must a seller do to use a licensed broker in Georgia for listing their property?
Sign a written agreement with the broker.
What is the purpose of the Georgia Exclusive Seller Listing Agreement?
To create an agency relationship between the seller and their real estate professional.
What does signing the Exclusive Seller Listing Agreement promise the broker?
The exclusive right to the listing.
What must the seller represent when signing the listing agreement?
That they have full authority to list the property.
What happens if a purchase and sale agreement is signed before the end date of the listing agreement?
The Listing Period is automatically extended through the date of closing.
What is the Listing Period in the context of the Exclusive Seller Listing Agreement?
The time period defined by the start and end dates of the listing agreement.
What happens to the Listing Period if a purchase and sale agreement falls through?
It is extended by the time period that the purchase and sale agreement was active.
What should Section 3 of the listing agreement document?
The agreed-upon listing price for the property.
What are the broker's responsibilities under the listing agreement?
Make required legal disclosures and use best efforts to find a buyer.
What distinguishes an exclusive agency listing from an exclusive right to sell listing?
In an exclusive agency listing, the agent is not entitled to a fee if the seller sells the property on their own.
What is an open listing in real estate?
It allows the seller to make agreements with multiple agents, and no agent has exclusive rights; agents only earn a fee if they are the first to produce a sale.
Why are net listing agreements often considered illegal or disfavored?
They can create a conflict of interest between the seller and the agent, as the seller may underestimate the property's value, leading to an unfair advantage for the agent.
What is the difference between an employee and an independent contractor in real estate?
Independent contractors control the manner, place, and time of their work, while employees have taxes withheld by their employers.
What are independent contractors responsible for regarding taxes?
They are responsible for managing their own tax responsibilities, as companies do not withhold payroll taxes from their payments.
What is the primary difference between an employee and an independent contractor in real estate?
An independent contractor is responsible for how, when, and where they perform their tasks, while an employee is typically directed by the employer.
What is a common compensation structure for real estate agents?
Real estate agents often earn a commission or fee based on sales, rather than receiving a salary.
What does the IRS consider a real estate agent if they meet certain criteria?
A 'statutory nonemployee'.
What are the seller's responsibilities when listing a property with a broker in Georgia?
The seller must comply with the law, cooperate with the broker, refer inquiries to the broker, and make the property available for showings.
What must a seller do if they want the broker to assist with negotiating the sales price and completing the purchase agreement?
The seller should mark the first box in section 4 of the agreement.
What is documented in Section 5 of the listing agreement?
Where the property will be listed, including which Multiple Listing Service(s) the broker will use.
What is the time frame for a broker to list the property on MLS after signing the agreement?
The broker agrees to list the property within 48 hours.
What rights do sellers give up when their property is listed on an MLS?
Sellers give up some control over the listing, including the property description, photos, and videos being viewable on the MLS platform.
Who is traditionally responsible for paying the real estate broker's commissions when selling property?
The seller is traditionally responsible for paying the commissions.
What scenarios may require the seller to pay commissions even if the property does not sell?
If the seller defaults on a purchase agreement, terminates an agreement without broker consent, or refuses a full-price cash offer without contingencies.
What should sellers be cautious about when terminating an exclusive listing agreement with one broker?
They may owe commissions to both brokers if the property sells after entering into a new agreement with a different broker.
What is the 'Protected Period' in a listing agreement?
A period of time after the listing period ends or after mutual termination, during which the broker may earn commissions if the seller sells to a buyer who learned about the property during the listing period.
What is the relationship between real estate brokers and sellers?
Real estate brokers are independent contractors, not employees of sellers.
What types of agency relationships can a broker provide?
Seller agency, buyer agency, designated agency, dual agency, sub-agency, landlord agency, or tenant agency.
What must brokers disclose when acting as a dual agent?
They must disclose the dual agency relationship to both parties and obtain consent to represent both the seller and buyer.
What circumstances require additional approval for a listing or sale?
Circumstances such as bankruptcy or divorce, where the court must approve the listing or sale.
What does Section 10(b) address in the listing agreement?
It indicates whether a bankruptcy court or divorce court must approve the purchase and sale agreement.
Who is responsible for meeting third-party authorization requirements in a sale?
The seller is responsible for meeting such requirements.
What happens if a seller defaults on the exclusive listing agreement?
The seller is responsible for real estate commissions and owes the broker for out-of-pocket expenses, including mileage, printing, and advertising costs.
What must sellers submit within three days when signing a listing agreement?
A current and complete Seller's Property Disclosure Statement.
What additional form must sellers provide if the property was constructed before 1978?
A completed GAR Form F54.
What do sellers agree to regarding the safety of their property?
Sellers agree to keep their property safe and free of hazardous conditions for prospective buyers and their agents.
What limits are placed on the broker's responsibilities in the listing agreement?
The broker is not responsible for personally inspecting the property or disclosing easily ascertainable information.
What does the seller agree to regarding the broker's liability?
The seller agrees to hold the broker harmless for issues related to the seller's negligent actions or failure to disclose accurate information.
What authority does the seller give the broker concerning suspected fraud?
The seller gives the broker authority to report suspected fraud to government authorities or mortgage lenders.
What is discussed in section 6(a) of the listing agreement?
Arbitration as an alternative means of resolving disputes.
What is the purpose of arbitration in the context of the Exclusive Seller Listing Agreement?
To resolve disputes between the parties without going to court.
What does Section 6(b) of the agreement allow the broker to do?
Refer the seller to other brokers' services and receive compensation for such referrals.
What is included in Section 6 of the agreement regarding contract disputes?
Governing law for disputes, fair housing disclosure, and notice provisions.
What does the seller acknowledge regarding the broker's real estate practice being sold?
The contract can be assigned to the new firm, which must adhere to all terms of the agreement.
What does Section 7 of the agreement warn about?
Fraud in real estate transactions and tips for identifying cyber criminals.
What is the purpose of Section 8 in the agreement?
To document any additional brochures or pamphlets received by the seller related to the agreement.
What is recorded in Section 9 of the listing agreement?
Exhibits and addenda, including legal descriptions and lead-based paint exhibits.
What should be documented in the section after Section 9?
Any special stipulations that conflict with disclosures in exhibits or addenda.
Why is it important to understand the Exclusive Seller Listing Agreement?
To feel comfortable completing the agreement for and with sellers.
What are two fiduciary duties owed by the seller's broker to the customer?
To be loyal and to disclose material facts.
What are two types of buyer representation agreements?
Exclusive buyer agency agreement and non-exclusive buyer agency agreement.
What is a Buyer Agent?
An agent who represents the buyer in a real estate transaction.
What are the basic duties of a buyer's agent?
Finding the appropriate property, negotiating an offer, resolving setbacks, and recommending other professionals.
What should a buyer's agent consider when locating a property for a client?
The buyer's range of requirements, including first picks and acceptable alternatives within their budget.
How should a buyer's agent assess neighborhoods for their clients?
By providing an honest assessment of the relative pros and cons of an area.
What is the role of a buyer's agent in negotiating an offer?
To advise the client on reasonable price ranges and make recommendations on offer prices.
Who ultimately determines the offer price in a real estate transaction?
The buyer.
What is an example of a challenge a buyer's agent might help resolve?
Setbacks that come up during the buying process.
What is the role of the buyer's agent in negotiating deals?
The buyer's agent draws up the offer and presents it to the seller, while advising buyers on the advantages and pitfalls of various properties.
What should a buyer's agent do if a client wants to buy a property with known issues?
The agent should put their own opinions aside and make an offer on the property as requested by the client.
What professionals should a buyer's agent recommend to facilitate a sale?
A buyer's agent should recommend mortgage brokers, real estate attorneys, home inspectors, and project managers among others.
How can a buyer's agent help clients who are not computer savvy?
The agent can connect them with a project manager to help prepare a budget and manage contractors for renovations.
What is a benefit of providing recommendations to clients?
It helps speed up the closing process and builds a reputation as a full-service agent, leading to future referrals.
How should a buyer's agent handle obstacles that arise during the buying process?
The agent should calmly advise the client on how to proceed and act as a buffer between the buyer and seller to keep discussions professional.
What should a buyer's agent do if an inspection reveals several issues with a property?
The agent should review the issues with the client and help them decide how to proceed, ensuring that discussions remain professional.
What is the difference between a client and a customer in real estate transactions?
A client has a legal and binding relationship with the Realtor or Broker, while a customer does not have a formal relationship and has fewer rights.
What is a Buyer Representation Agreement?
It is a signed agreement that governs the relationship between a buyer's agent and the client when obtaining a property listed by another agent.
What does a listing agent do?
A listing agent represents the seller in a real estate transaction.
What should a buyer avoid discussing with a seller's agent?
Personal motivations and urgency to buy, as it may affect negotiation.
What happens when a seller agrees to take repairs off the list price?
It can help in negotiating a better deal for the buyer.
What is the role of a buyer's agent?
To legally help the buyer in the real estate transaction.
What is the significance of the relationship between a buyer and their agent?
It determines the level of duty and representation the agent owes to the buyer.
What is agency law in real estate?
Agency law occurs when one person hires another to represent them for a lawful transaction involving a third person, the customer.
What is the role of a fiduciary in real estate transactions?
A fiduciary can speak for the client in real estate transactions and is typically a licensee.
Who is referred to as the principal in an agency relationship?
The principal is the person represented by an agent, also called the client.
What are the fiduciary duties owed to a customer by the seller's agent?
The seller's agent owes full disclosure of material facts, honesty, and reasonable skill and care to the buyer as a customer.
What is a material defect in real estate?
A material defect is any fact that may have a significant and reasonable impact on the market value of the property.
What is the responsibility of the owner regarding material defects?
The owner is responsible for disclosing known defects to the buyer before the closing occurs on a property.
What are some examples of material defects?
Examples include cracks in the foundation, termites, leaky roofs, environmental hazards, and zoning issues.
What should a seller disclose before closing a property sale?
Any known material defects.
What is the duty of a buyer regarding property inspection?
To exercise due diligence by hiring a contractor to inspect the property.
What happens if a buyer does not conduct a preliminary inspection?
The buyer cannot sue for material defects at a later date.
What is the broker's obligation regarding material defects?
To disclose any material defects to the buyer.
What is the standard of care required from a real estate agent?
To exercise reasonable care and diligence while representing the principal's interest.
What is the consequence for a seller who conceals known defects?
They can be held responsible for damage if defects are not disclosed before closing.
What should agents advise clients to do to catch major issues with a property?
To pay for an inspection.
What is the broker's duty regarding the seller's financial standing?
The broker has no duty to inspect the property or financial standing of the seller.
What is the role of an Exclusive Buyer's Agent in real estate transactions?
To represent the buyer with utmost competence and care in every aspect of the transaction.
What type of compensation can a buyer's broker receive?
A flat fee or a percentage of the sales price.
What should be established before looking for properties for a client?
The percentage of commission.
What are the fiduciary responsibilities owed by a buyer's broker to their client?
Obedience, Loyalty, Disclosure, Confidentiality, Accounting, Reasonable skill and care.
What must a buyer's agent do if a client wants to make an offer above market price?
Follow the client's instructions and make the offer at the asking price.
What must a broker do if a client wishes to make a low offer on a home after being advised against it?
The broker must present the low offer to the seller's agent.
What is a broker's obligation regarding loyalty to their buyer?
A broker must do anything they can to lawfully win an advantage for their buyer.
What should a broker do if a client asks them to falsify a pre-approval letter?
The broker should inform the client that it is illegal and could result in losing their license or going to jail.
What is the broker's duty of confidentiality in the agency relationship?
The broker must keep everything the buyer discloses confidential, including information that may impact their ability to pay more than the asking price.
What is required of a broker in terms of reasonable care?
A broker must prepare through education and ongoing study to maintain expertise in the industry to competently represent the buyer.
What is the broker's obligation regarding accounting for money or documents?
The broker must account for any money or documents given to them and keep them in a separate account related to the transaction.
What is the purpose of a buyer agency agreement?
It defines the type of agency implied by a signed contract.
What is the most common type of agency in real estate transactions?
Exclusive right to sell agency.
In which type of agency does the broker receive commission regardless of who finds the property?
Exclusive right to sell agency.
What is the main difference between Exclusive buyer agency and Exclusive right to sell agency?
In Exclusive buyer agency, the broker only receives commission if they find a property the buyer purchases.
What is a key characteristic of Nonexclusive buyer agency?
Any broker can look for properties for the buyer, and whichever agent finds a property receives a commission.
What is the purpose of a Buyer Representation Agreement?
To prevent misunderstandings and define the agency relationship between the broker and the buyer.
What is a Nonexclusive Not-for-Compensation Contract?
A contract that specifies commission is not due to the broker, allowing the buyer to retain multiple brokers and revoke the contract at any time.
What happens if a broker finds a suitable home under a Nonexclusive Not-for-Compensation Contract?
Commission is paid at that time if the broker finds a suitable home.
What is the main feature of Nonexclusive Right-to-Represent Contracts?
It provides terms of compensation due if the broker finds a suitable home for the buyer.
What defines the Exclusive Right-to-Represent Contracts?
It defines the broker-agent relationship, including obligations, and the buyer cannot retain another broker during the contract.
How long do Nonexclusive contracts typically last?
Usually one to two months.
What is the typical duration of Exclusive agreements?
Generally several months to one year.
What type of contract did the buyer sign with Pearl and Forrest Kennedy?
An Exclusive Right-to-Represent contract.
What was the issue that arose after signing the contract with the Kennedys?
Forrest Kennedy stated they no longer needed the services because they found a buyer.
What did the realtor remind the Kennedys about after they claimed to have found a buyer?
That they have to pay the commission due to the contract they signed.
What was the outcome of the negotiation with the Kennedys?
The Kennedys accepted the realtor's offer, avoiding a court case.
What is the significance of understanding legal duties in real estate transactions?
It helps in fulfilling fiduciary duties to a buyer being represented.
What is the difference between a client and a customer in real estate?
A client is owed fiduciary duties, while a customer is not.
What is the number one reason brokers and agents are sued by clients and customers?
Misrepresentation of property conditions.
What is the formula for calculating depreciation of a property?
Value of the Property x (1 - Rate of Depreciation).
If a property worth $280,000 depreciates by 4%, what will its value be after one year?
The property will be worth $268,800 after one year.
How do you calculate the value of a property after depreciation?
Multiply the current value by (1 - Rate of Depreciation).
How do you calculate the total loss in property value due to depreciation?
Subtract the rate of depreciation from 1, raise that number to the number of years, and multiply by the starting value.
What is the value of a property worth $160,000 after depreciating 3.5% over 5 years?
$133,888.
What is the value of a property worth $590,000 after depreciating 3.5% in year one, 2.5% in year two, and 1.8% in year three?
$545,124.16.
What is the duty of a real estate licensee regarding property defects?
A real estate licensee has a duty to use reasonable care to uncover and reveal property defects, going beyond just disclosing known material defects.
What happens if a realtor makes a boldly false statement?
If a realtor makes a boldly false statement, they may be held liable for false advertising or fraudulent misrepresentation.
What is an example of puffing?
Describing an apartment as 'cozy and rustic' despite it being cramped and having plumbing issues.
What distinguishes puffing from false advertising?
Puffing is generally seen as a matter of opinion aimed at attracting buyers, while false advertising involves deliberate deception.
What is passive fraud in real estate transactions?
Passive fraud is the intentional failure to reveal a material fact that impacts a real estate transaction, also known as negative fraud.
What example illustrates passive fraud involving Lionel Malcolm?
Lionel fails to disclose the presence of asbestos in the basement, which he knows about, to avoid compromising the sales price.
What is active fraud in real estate?
Active fraud occurs when a real estate licensee intentionally deceives a person by misrepresenting a material fact that induces reliance.
How does Lionel Malcolm commit active fraud?
He misrepresents the property as having 2,700 square feet of finished space, while 900 square feet is an unfinished basement requiring remediation.
What legal requirement did Lionel and Morty violate regarding asbestos disclosure?
State law requires that the seller disclose the presence of asbestos.
What motivates Lionel to commit passive fraud?
He wants to avoid compromising the sales price and his commission by not revealing the material defect.
What is the consequence of failing to disclose material defects in real estate?
It can lead to accusations of negligent misrepresentation and legal repercussions for the agent and seller.
What is self-dealing in real estate transactions?
Self-dealing involves a Realtor or broker acting in their own best interest rather than in the best interest of their client.
What fiduciary responsibility does a Realtor owe to their client?
A Realtor owes a fiduciary responsibility to act in the best interest of their client.
What example of fraud is illustrated by Lionel's actions with the Rosenbaums' home?
Lionel's decision to make a discounted offer on the home under his mother's name is an example of self-dealing fraud.
What should a Realtor consider to avoid self-dealing?
A Realtor should ensure that their decisions are in their client's best interest and avoid conflicts of interest.
What is the consequence of intentional misrepresentation in real estate?
Intentional misrepresentation constitutes examples of active fraud.
What is the document called that a buyer signs to hire a Georgia real estate broker?
Exclusive Buyer Brokerage Agreement.
What must a buyer confirm when signing the Exclusive Buyer Brokerage Agreement?
That they have the right to sign and are not subject to an exclusive agreement with another broker.
What happens to the Exclusive Buyer Brokerage Agreement if there is no sales contract on the ending date?
The agreement will end.
What is the relationship between the broker and the buyer in an Exclusive Buyer Brokerage Agreement?
An independent contractor relationship.
What types of agency relationships might a broker disclose in the agreement?
Seller agency, buyer agency, designated agency, dual agency, sub agency, tenant agency, or landlord agency.
What is a dual agent in real estate?
A broker who represents both the buyer and the seller in a transaction.
What must a buyer's signature on the agreement indicate regarding dual agency?
The buyer's understanding of the potential conflict and risks.
What is designated agency in real estate?
A practice where one agent represents the buyer and another agent represents the seller.
What does Part 'A' of Section 5 address in the exclusive brokerage agreement?
The agreed-upon commission that the broker is entitled to at closing.
Who typically pays the real estate commissions in Georgia transactions?
Typically, the seller pays the real estate commissions.
What happens if the seller does not pay all of the commissions?
The buyer agrees to pay the commission as specified in the exclusive brokerage agreement.
What is an 'FSBO' listing?
A property sold by the owner directly without a broker's help.
What is the buyer's responsibility if they default on a purchase contract?
The buyer must immediately pay the real estate commissions to the broker.
What additional commission does a buyer agree to pay if leasing property from the seller?
A separate leasing commission, in addition to the real estate commissions on the sale transaction.
What is the 'Protected Period' in the exclusive buyer brokerage agreement?
A period after the agreement ends during which the buyer is still responsible for paying the broker's commission under certain conditions.
When does the buyer owe commissions during the Protected Period?
If the buyer purchases or enters into a purchase agreement for a property they learned about from the broker during the term of the agreement.
What does Part B of the Buyer Agency agreement provide?
More detailed information about each of the sections in Part A.
What is documented in Section 1 of Part C of the Buyer Agency agreement?
The broker's responsibilities and duties toward the buyer.
What are some duties of the broker toward the buyer?
Making legal disclosures, helping find real estate, complying with laws, and assisting in negotiations.
What responsibilities do buyers have toward the broker according to Section 2?
Make themselves available to view properties, respond to communications, and provide relevant information.
What must buyers do if they want to view FSBO properties?
They must alert the broker so the broker can try to enter into an agreement with the seller.
What does Section 3 of the agreement acknowledge?
The broker's commitment to fair and equal housing opportunities.
What does the Exclusive Buyer Brokerage Agreement state about working with other brokers?
The buyer may not work with another broker during the term of the agreement.
What is the broker's liability limited to under this agreement?
The amount of commissions earned from the buyer's purchase or one hundred dollars if no commission was earned.
What responsibility does the buyer have regarding property inspection?
The buyer is responsible for inspecting the property and obtaining information from other sources.
What does the broker promise regarding false information in the buyer agency agreement?
The broker will not knowingly provide false information.
What authority does the buyer give the broker regarding suspicious activity?
The buyer authorizes the broker to report suspicious activity, including potential mortgage fraud, to appropriate authorities.
What is the purpose of the arbitration provision in the buyer agency agreement?
To reduce the cost, time, and expense associated with litigating disputes in court.
What happens if there is a disagreement about the performance under the agreement?
The dispute will be heard by a mutually-acceptable arbitration company in Georgia.
What does Section 8 of the agreement allow the broker to do?
Authorize the broker to make referrals for the buyer to someone who knows the area better.
What does Section 10 state about the governing law of the agreement?
Georgia law will govern the interpretation of the agreement's terms.
What is documented in Section 11 regarding commissions?
The broker's rights to earn commissions and the buyer's obligations to pay them will continue past the expiration or termination of the agreement.
What does Section 12 of the Georgia Exclusive Buyer Brokerage Agreement state about verbal statements?
It states that the written, signed agreement is the entire agreement and can only be changed by a written amendment or modification signed by the parties.
What are GAR Forms mentioned in Section 13?
GAR Forms are templates intended to help realtors, but may need customization for specific situations.
What is emphasized in Section 14 regarding communication in real estate matters?
The parties acknowledge that communications are time-sensitive and agree to be available to respond in a timely manner.
What does Section 15 reiterate about real estate contracts?
It reiterates that time is of the essence with real estate contracts.
What ongoing concern is highlighted in Section 16?
Cyber fraud in real estate transactions is an ongoing concern, with fraudsters impersonating legitimate parties to steal money.
What does Section 16 provide to help buyers avoid cyber fraud?
It provides a reminder and tips to help buyers avoid becoming victims of fraudsters.
What is the purpose of Section 17 in the agreement?
It indicates which other brochures or exhibits are included with the agreement to help buyers understand the process.
What should you do before using the Exclusive Buyer Brokerage Agreement?
Review the entire agreement to understand and be comfortable with it before using it with clients.
What are the essential elements of a valid contract?
Offer, acceptance, consideration, capacity, and legality.
What is the legal effect of contracts?
Contracts create binding obligations between parties.
What does performance in contract law refer to?
The fulfillment of contractual obligations by the parties involved.
What is the difference between assignment and novation in contract law?
Assignment transfers rights under a contract, while novation replaces one party with another.
What does discharge of contracts mean?
The termination of a contract's obligations, either by performance, agreement, or other legal means.
What is the difference between an express and implied contract?
An express contract is explicitly stated, while an implied contract is formed by the actions or circumstances of the parties involved.
Can you provide an example of a bilateral contract?
A real estate purchase agreement is an example of a bilateral contract, where both parties make promises to each other.
What are three elements of a valid contract?
Offer, acceptance, and consideration are three elements of a valid contract.
What is the difference between a valid, void, and voidable contract?
A valid contract is enforceable by law, a void contract is not legally enforceable, and a voidable contract can be enforced or voided at the discretion of one party.
What is a bilateral contract?
A contract in which each party promises to do something.
What is an express contract?
A contract that has been put into words, either spoken or written.
What defines an implied contract?
An agreement that has not been put into words, but is implied by the actions of the parties.
What is the Statute of Frauds?
A state law requiring certain contracts to be in writing and signed to be enforceable at law.
What is a unilateral contract?
A contract in which one party promises to do something if the other party performs a certain act, but the other party does not promise to perform it.
What role do contracts play in real estate transactions?
Contracts are vital at every step, from listing agreements to sales contracts and mortgage documents.
What is a legally enforceable promise?
A contract that can be enforced in court, requiring parties to fulfill their obligations or pay damages.
What typically occurs in most real estate contracts?
One person gives money to another in exchange for the transfer of some interest in real property.
What is a sales contract in real estate?
An agreement where one person agrees to sell real property to another at a specified price before a specified date.
What must every sales contract specify?
A legal description of the property for sale, the exact price, and the closing date.
How does a legal description differ from a mailing address?
A legal description identifies the exact parcel for sale, while a mailing address does not.
What can a sales contract allow a buyer to do if defects are found during a home inspection?
Withdraw from the sale.
What is a lease in real estate?
A contract that allows someone to possess and use real property for a specified time.
What must a lease specify?
The leased property, the lessee, the duration of possession, and the rent amount.
What happens to the property at the end of a lease?
Possession and use of the property returns to the original owner (lessor).
What is an options contract?
An agreement that gives a party the right to purchase a property at a specified price during a specified time.
What is a right of first refusal?
It gives a person the chance to buy a property before anyone else if a third party makes an offer.
What is the purpose of a listing agreement in real estate?
It creates an agency relationship between an agent and a seller, authorizing the agent to sell a property on the seller's behalf.
What is an exclusive right to sell listing?
It gives an agent the exclusive right to sell a property, and the seller must pay the agent's fee even if they sell the property themselves.
What do local land record offices maintain?
They maintain records of conveyances involving real property, including warranty deeds, mortgage deeds, and liens.
What is the presumption of ownership in real property disputes?
The presumption is that the record owner identified in the land records is the legal owner of the property.
What is marketable title?
Marketable title exists if the land records show that the seller has the legal right to sell the property, though its exact definition varies by state.
Why is it important for a buyer to confirm the seller's ownership before closing?
To ensure that the seller can convey marketable title and that there are no ownership disputes after the transaction.
What does marketable title mean in real estate transactions?
Marketable title means that the seller can convey the property free of any significant claims, encumbrances, or liens by third parties, but it does not mean the property is free of all claims.
What types of claims do not usually affect the marketability of title?
Claims like a power company's right to run power lines, a neighbor's right to draw water from a well, or a neighbor's right to cross a driveway usually do not affect marketability.
What is a common claim that would render title unmarketable?
A mortgage is a common claim that would render title unmarketable if the seller owes money to a lender and the lender holds a mortgage deed on the property.
What must a seller do regarding a mortgage before closing a sale?
The seller must pay off the loan and ensure the lender discharges the mortgage before closing.
Who typically conducts a title search to determine marketable title?
A lawyer, paralegal, or title examiner usually conducts the title search.
What does a title searcher look for in land records?
The title searcher looks for documents that affect title to the property, such as deeds, liens, easements, mortgages, and leases.
How far back do title searches typically cover?
Title searches usually cover a specified period, often the last 40 years, as required by state law.
How are land records indexed for title searches?
Land records are indexed by the names of the people granting and receiving property interests or by the property itself.
What does Jane do when searching Wilbur's title?
Jane searches the index for every record involving Wilbur, noting any mortgages or tax delinquencies that affect marketability.
What is the significance of the prior owners in a title search?
The title searcher looks at prior owners to trace the chain of title and identify any issues that may affect marketability.
What is the chain of title?
The chain of title is the trail of records linking buyer to buyer, showing the transfer of property ownership without breaks.
What makes a title marketable?
A title is considered marketable if the chain of title is unbroken and there are no significant unresolved claims on the property.
What is a cloud on title?
A cloud on title is anything that casts doubt about a seller's title, which must be resolved before a sale can close.
What must a seller do if there is a cloud on title?
The seller must clear up the issue before the sale can close, often by finding and recording missing deeds.
What is an abstract of title?
An abstract of title is a summary of everything found in the land records affecting title, including transfers and legal proceedings.
What does a title opinion provide?
A title opinion provides a legal judgment on whether title is marketable based on the records in a title abstract.
What are the three criteria for a real estate agent to be considered a statutory nonemployee by the IRS?
What is an express contract?
A contract where the parties clearly state all the terms of the agreement, and each party knows what they must do to complete the contract.
What legal requirement necessitates most real estate contracts to be in writing?
The statute of frauds.
What is the historical origin of the statute of frauds?
It was established by an act passed by the English Parliament in 1677.
What is an important exception to the statute of frauds in real estate contracts?
An oral lease for less than a year is enforceable and does not need to be in writing.
What are the two types of implied contracts?
Implied-in-fact and implied-in-law contracts.
What is an implied-in-fact contract based on in the example of Bob and Sally?
It is based on Bob and Sally's long-standing behavior of Bob plowing Sally's drive and her paying him for it.
What is an implied-in-law contract?
It exists when failing to find a contract would be contrary to law, such as when Bob sells a diamond ring given to him by Sally without her consent.
Why are implied contracts generally rare in real estate?
Because the statute of frauds requires almost all real estate contracts to be in writing.
What defines a bilateral contract?
A bilateral contract places obligations on both parties involved in the agreement.
Can you give an example of a bilateral contract in real estate?
A sales contract where the seller promises to provide clear title and the buyer agrees to pay a specified sum.
What is a lease agreement considered in terms of contract type?
A lease agreement is a bilateral contract because both the lessor and lessee have obligations to perform.
What is a common feature of most listing agreements?
They are bilateral contracts where the seller agrees to pay the agent a fee for selling the property, and the agent agrees to use their expertise to sell it.
What type of agreement is an independent contractor agreement between an agent and a brokerage firm?
It is a bilateral agreement.
What are the obligations of the agent in an independent contractor agreement?
To maintain his license, follow state laws and rules for real estate agents, and try to sell properties.
What does the brokerage agree to in an independent contractor agreement?
To pay the agent commissions and fees on the agent's sales and to not treat the agent as an employee for federal tax purposes.
In the example of Bob's lost cat, who is obligated to perform under the unilateral contract?
Only Bob is obligated to pay the reward.
What is an open listing in real estate?
A listing agreement in which the seller agrees to pay a commission or fee to any agent who sells the seller's property.
What obligation does an open listing create for the seller?
The seller is obligated to pay the stated fee if an agent sells the property.
What obligation does an open listing create for the agents?
No obligation on the part of an agent to try to sell the property.
What is a unilateral contract?
A contract in which one party promises to do something if the other party performs a certain act, but the other party does not promise to perform it.
What is a bilateral contract?
A contract between two or more parties in which each party promises to do something.
What is an example of a unilateral contract in real estate?
An open listing.
What is an example of a unilateral contract outside of real estate?
An owner puts up flyers to help find their missing dog and offers a reward.
What are some examples of bilateral contracts in real estate?
Exclusive Right to Sell Contract, Exclusive Agency Contract, Purchase Sale Contract, Lease, Independent Contractor Agreement.
What is an express contract?
A contract that has been put into words, either spoken or written.
What is an implied contract?
An agreement that has not been put into words, but is implied by the actions of the parties.
According to the Statute of Frauds, what type of real estate contracts must be in writing?
Agency Contracts, Purchase Sales Contracts, Long-Term Leases, Independent Contractor Agreement.
What is an example of an implied contract?
When a person sits down and orders food at a restaurant, it is implied they will pay for the food they ordered.
What is consideration in a contract?
Anything given or promised by a party to induce another to enter into a contract, such as money, personal services, or a promise not to do something.
What does the Statute of Frauds require?
Certain contracts to be in writing and signed before they will be enforceable at law, such as contracts for the sale of real property.
What are the essential elements of a legally enforceable contract?
Offer and acceptance, consideration, legal capacity, and legal purpose.
Why is understanding contracts important for a real estate agent?
To ensure every transaction finishes smoothly and to clear up confusion that could stop a sale.
How can the essential elements of a contract be categorized?
They can be divided into various numbers, but for this lesson, they are categorized into four pieces: offer and acceptance, consideration, legal capacity, and legal purpose.
What is the primary engine driving a valid contract?
Bargaining between two people, which involves offer and acceptance.
What is required for an offer to be considered valid in real estate contract law?
The offer must make the important terms clear enough for the other party to accept by saying, 'Yes, I agree.'
What is an 'invitation to treat' in the context of offers?
It is an invitation to negotiate or bargain, rather than a formal offer.
What are some complexities involved in real estate transactions compared to personal property sales?
Real estate transactions involve many terms that are conditional, such as financing, title conveyance, and inspection results.
What must the person making an offer intend for it to be legally binding?
The offer must be sincere and intended to create a legally binding contract.
What happens if the person receiving an offer responds with something other than 'Yes'?
If the response is not an acceptance, then no contract is formed; the offer is either rejected or countered.
In the example of Suzy and Leopold, do they have a contract if Leopold says 'No, thanks'?
No, they do not have a contract because Leopold rejected the offer.
What constitutes a counteroffer in real estate transactions?
A counteroffer occurs when the offeree responds with different terms than those proposed in the original offer.
What is the 'mirror image' rule in contract law?
The terms of an acceptance must mirror the terms of the original offer.
What happens if a response to an offer does not mirror the original offer?
It is considered a rejection of the original offer and a counteroffer.
What can Suzy do after Leopold makes a counteroffer?
Suzy can accept or reject Leopold's counteroffer or make a counteroffer of her own.
What is the significance of negotiation in contract law?
Negotiation clarifies the parties' positions and expectations, increasing the likelihood of a binding contract.
What can happen if there is uncertainty during the bargaining process?
Uncertainty can kill a contract at the closing table if parties realize they have been discussing different agreements.
What must a person do if an offer specifies a method for acceptance?
They must use the specified method to create a binding contract.
What is the consequence of not following the specified method of acceptance in an offer?
A binding contract will not form if the specified method is not used.
What happens if an acceptance is late in a real estate contract offer?
The original offer dies, and the late acceptance becomes a counteroffer.
Can silence be considered acceptance in a real estate contract?
No, a party cannot bind another person by saying silence constitutes acceptance.
What is required for acceptance in contract law?
Acceptance must be clear and affirmative.
What is consideration in the context of a contract?
Consideration represents things of value exchanged between parties as part of the contract.
How does consideration differentiate a contract from a gift?
A contract involves an exchange of value, while a gift does not require anything in return.
What is an example of consideration in a contract?
If one party gives $100 in exchange for a watch, both parties receive something of value.
What obligation does an agent have in an exclusive right to sell agreement?
The agent must perform in good faith and actively try to sell the property.
What is the significance of the bargaining process in contract law?
It ensures that parties freely and mutually agree to the terms of the contract.
What is considered valuable consideration in a real estate contract?
Personal services provided by an agent for the seller can be considered valuable consideration.
What does Henrietta give up in her agreement with Larry?
Henrietta gives up her legal right to build on her property.
What is the legal detriment test for consideration?
Consideration exists if a party agrees to do something they are not legally obligated to do or agrees not to do something they have a legal right to do.
Why did Phil not owe Brian the $500?
Because the law already required Brian to refrain from smoking, his restraint could not be considered as consideration for the contract.
What must consideration be according to courts?
Consideration must be bargained-for, meaning each party must agree to perform their actions under the contract because of the contract.
Can past actions serve as consideration for a contract?
No, past actions usually cannot serve as consideration because they were not bargained-for during negotiation.
Do U.S. courts consider love and affection as consideration?
Generally, U.S. courts do not consider love and affection to be valid consideration in contracts.
What is sufficient consideration to support a contract in the U.S. legal system?
Love and affection are not considered sufficient consideration for a contract in the U.S. legal system.
What is meant by 'legal competence' in contract law?
Legal competence refers to a party's ability to understand the legal consequences of entering into a contract.
What happens if a person does not understand they are entering a legally binding contract?
Courts will not hold that person legally responsible for obligations under the contract.
Who is presumed to have legal capacity to enter a contract?
Every adult is presumed to have the legal capacity to enter a contract.
What categories of people may not have legal capacity to enter a contract?
Legal minors, mentally ill persons, and intoxicated persons may not have legal capacity to enter a contract.
What does it mean for a contract to be voidable?
A voidable contract means that a party lacking legal capacity can choose to either proceed with the contract or void it.
What is the implication if a 15-year-old wants to sell a mansion they inherited?
Any listing or sales contract made with a 15-year-old is likely to be voidable until they turn 18.
What is required for a contract to have a legal purpose?
A contract must have a legal purpose to be enforceable by courts.
What is the legal consequence of a contract with an illegal purpose?
Courts will not enforce it.
What was the ruling of Shelley v. Kraemer regarding restrictive covenants?
They were deemed legally unenforceable due to violation of the Equal Protection Clause.
What does the Fair Housing Act prohibit?
It prohibits refusing to sell, rent, or lease property based on race, color, religion, national origin, sex, disability, or familial status.
What is the statute of frauds in relation to real estate contracts?
It requires that contracts conveying an interest in real property must be in writing to be enforceable.
What is the exception to the statute of frauds for real estate contracts?
A lease lasting less than a year.
What is one purpose of requiring real estate contracts to be in writing?
To make contracting parties think more carefully about their agreements.
What is one advantage of a written real estate contract over an oral contract?
A written contract allows for more thoughtful negotiations.
How does the statute of frauds benefit parties in a real estate contract?
It produces a handy evidentiary record of the parties' agreement.
What does a written contract protect against in real estate transactions?
It protects against loss of memory and minimizes disagreement between the parties.
What is the first essential element of a valid contract in real estate?
Offer and acceptance, where the parties must have a meeting of the minds.
What must an offer in a real estate contract be?
Clear in character, accurately describe the property, and have an exact price.
What is consideration in the context of a real estate contract?
Anything given or promised by a party to induce another to enter into a contract.
What is a common form of consideration in real estate contracts?
Money.
What is required for all parties to have in order to enter into a contract?
Legal capacity.
What does legal capacity include?
Age 18+, sound mind, and other competent parties such as persons acting on behalf of a corporation or with Power of Attorney.
What must a contract have to be considered valid?
A lawful objective.
What happens to contracts that do not have a legal purpose?
They are considered void.
What are some examples of illegal objectives in contracts?
Committing a crime, promoting corruption, or harming public safety.
What is an executed contract?
A contract in which both parties have completely performed their contractual obligations.
What is an executory contract?
A contract in which one or both parties have not yet completed performance of their obligations.
What does it mean when a court order discharges a contract?
It means that a party breached the contract, and the court has ordered the contract to be discharged, with or without a damages award.
Can parties agree to cancel a contract they have made?
Yes, they can agree to be unbound by making a new contract that states the original contract is no longer enforceable.
What is required for parties to discharge a contract by agreement?
Mutual agreement and consideration are required, just like any other contract.
What is the consideration for agreeing not to enforce the original contract if neither party has begun to perform?
Each party's waiver of the other's performance obligation serves as consideration for the agreement.
What happens if one party has already started to perform when they want to discharge the contract?
The party that has performed may be entitled to compensation to avoid unjust enrichment or detriment.
What is the legal result when parties agree to discharge a contract?
The original contract becomes unenforceable, and the new discharge contract is referenced if a party sues on the old contract.
What is novation in the context of contracts?
Novation is the replacement of an existing contract with a new contract, changing the obligations of the parties involved.
What is the preferred method of contract discharge according to the text?
Full performance by both parties.
What happens to a contract once full performance occurs?
The contract is considered 'dead' as no further expectations exist.
What can a non-breaching party do if the other party fails to perform?
They can file suit in court to enforce the contract.
What is substantial performance in contract law?
It means a party has performed to a degree that is close enough to the contract's requirements, making it unreasonable to require further performance.
In what type of contracts is substantial performance often applied?
Construction contracts.
What can discharge a contract besides full performance?
Impossibility of performance.
Under what condition can a contract be discharged due to impossibility?
If the parties played no part in creating the impossibility.
What would happen if a property involved in a contract is destroyed before closing?
The contract would be discharged as it has become impossible to perform.
What happens to a contract if a property is destroyed accidentally?
Impossibility may apply, and the contract could be discharged.
What is the effect of a party intentionally causing a breach of contract?
The court will not discharge the contract based on impossibility and may explore potential damages.
What does it mean for a contract to be valid?
Having force, or binding force; legally sufficient and authorized by law.
What is a void contract?
A contract that has no force or effect; that which is unenforceable.
What is a voidable contract?
That which is capable of being adjudged void, but is not void unless action is taken to make it so.
What is the legal effect of having a contract?
It creates a duty to perform obligations under the contract.
What duty do Tanya and Terry owe each other under their contract?
A duty to perform their obligations in good faith.
What tasks do Tanya and Terry need to perform before the closing date?
Terry needs to find a $200,000 loan, and Tanya needs to replace the furnace.
What is the duty of good faith and fair dealing in a contract?
It is the mutual obligation for parties to work in good faith to perform the contract.
What happens if one party fails to perform their obligations in good faith?
The other party may feel that the first party has behaved wrongly, and courts are likely to rule against the party performing in bad faith.
What is a breach of contract?
A failure to perform obligations under the contract.
What can parties do if they disagree about a contract's meaning?
They can bring a legal action to court to interpret or enforce the contract.
Why do parties typically want to perform their obligations under a contract?
Because each believes they are getting the better end of the deal.
What might motivate Terry to buy Tanya's house?
He may prefer the peace and quiet of her home compared to his current living situation.
What might motivate Tanya to sell her house?
She may be tired of living in one place and want to travel the world.
What role do courts play in contract disputes?
Courts help resolve disputes by interpreting or enforcing the contract if the parties ask for help.
Why might a court need to interpret a contract?
Because parties don't plan for every eventuality and may overlook certain terms or conditions that could arise.
What is an example of a situation that could lead to contract interpretation?
If one party finds financing but at an unacceptable interest rate, leading to a disagreement about contract obligations.
What are the two major ways a court can enforce a contract?
By awarding money damages or by ordering specific performance.
What are expectation damages?
A money award that puts the non-breaching party in the same financial position as if the contract had been performed as promised.
If Terry breaches his contract, how much could Tanya potentially sue for if she sold her house for 200,000?
$20,000 in damages.
What might happen if the parties to a contract overlook certain terms?
They may need to rely on a court to interpret the contract and fill in the gaps.
What is the significance of a court's ability to enforce a contract?
It provides comfort to parties knowing they can seek legal recourse if the other party fails to perform.
What is specific performance in contract law?
Specific performance is a court order directing a party to fulfill their obligations as specified in the contract.
What constitutes a valid contract?
A valid contract has competent parties, offer and acceptance, consideration, mutual agreement, intent to create legal obligations, and a legal purpose.
What is an executed contract?
An executed contract is one where both parties have completely performed their contractual obligations.
What is an executory contract?
An executory contract is one in which one or both parties have not yet completed their performance of obligations.
Why might money damages be insufficient in real estate transactions?
Because no piece of land or house is exactly like another, and the buyer may want to own that specific property.
What happens to a contract once it is executed?
Once a contract is executed, the court will not impose any further legal obligations on the parties as they have fulfilled all requirements.
What is the legal effect of a valid contract?
A valid contract imposes a duty to perform in good faith and can be interpreted or enforced by the courts if requested by the parties.
What must Tanya do after selling her house to Terry?
Get XYZ Bank to discharge her mortgage.
What happens if XYZ Bank does not record the mortgage discharge?
It will cause headaches for Terry if he tries to refinance or sell the house, as Tanya's mortgage will still show as valid in the land records.
What is the difference between an executory contract and an executed contract?
An executory contract is one where some obligations remain to be fulfilled, while an executed contract is one where all obligations have been completed.
What is a void contract?
A void contract is an agreement that has no force or effect and is legally unenforceable.
What can render a contract void when it is made?
Lack of an essential element, such as having an illegal purpose.
Give an example of a void contract.
An agreement between a supplier and a dealer to provide illegal drugs.
What happens to a contract if it is created for an illegal purpose?
It is considered void the moment it is created and cannot be enforced by the courts.
What is an example of a situation that would make a contract void when made?
If Tanya, a renter, offers to sell a house she does not own to Terry without permission.
What legal action might Terry pursue against Tanya if she sold him a house she didn't own?
Terry might have a separate fraud claim against Tanya.
What can cause an otherwise valid contract to become void?
A change in law or circumstance.
What is the difference between void contracts and voidable contracts?
Void contracts are invalid from the start, while voidable contracts are valid but can be avoided by one party.
Who has the choice to avoid a voidable contract?
The person who lacks legal capacity, such as a minor or mentally ill person.
What circumstances can create voidable contracts?
Agreements made under duress, undue influence, fraud, or physical threat.
What is an unconscionable contract?
A contract that no reasonable person would agree to and no honest person would expect to make.
What is an example of an unconscionable contract?
An art expert buying a valuable painting for 50 cents from an unaware seller.
What is an example of an unenforceable contract?
An oral agreement for the sale of real estate that violates the statute of frauds.
What happens when a court deems a contract void or unenforceable?
The parties' legal obligation to perform ends and they lose access to the courts for enforcement.
What is an executory contract?
A contract in which something remains to be done by one or both parties.
What defines an executed contract?
An agreement that has been fully performed.
What is a valid contract?
A contract that is legally binding and enforceable, including all essential elements of a valid contract.
What is a void contract?
A contract that has no legal force or effect, missing one or more essential elements of a valid contract.
What is a voidable contract?
A contract that may be voided by the parties without legal consequences, such as a mortgage or inspection contingency.
What is an enforceable contract?
A contract in which the parties may be legally required to perform, offering a legal remedy if not fulfilled.
What is an unenforceable contract?
A contract that appears valid but cannot be enforced in court, such as an oral contract for purchasing property.
What does the phrase 'Time is of the Essence' mean in a contract?
It expresses the essential nature of performance of the contract by a party in a specified period of time.
What must parties do to fulfill their obligations under a contract?
They need to do whatever the contract says and only what the contract says.
What happens when both parties fully perform their obligations under a contract?
The contract is complete, becomes an executed contract, and terminates.
What is the best way to terminate a contract?
Full performance by both parties.
What occurs when a party commits a breach of contract?
The other party may sue, and the court can decide if there has been a breach and award damages or order specific performance.
What is the least preferred method for terminating a contract?
Court termination and issuing a damages award.
What is the significance of a 'time is of the essence' clause in contracts?
It emphasizes that timely performance is crucial to the contract's validity.
What does a 'time is of the essence' clause require in a real estate contract?
It requires the parties to perform their obligations by a specified time.
What happens if a contract does not contain a 'time is of the essence' clause?
The parties may not be held to strict performance by the specified date, and delays may not be considered a breach unless excessive.
What can Lucy do if Charlie keeps delaying the closing date without a 'time is of the essence' clause?
Lucy may not be able to do much except wait patiently, as the contract does not emphasize the importance of the date.
What is the implication of including a 'time is of the essence' clause for both parties?
It makes failure to perform by the closing date a clear breach for both parties, allowing for legal recourse.
What is meant by 'reasonable time' in contract performance?
It refers to the time frame within which parties must perform their obligations if no specific time is set in the contract.
Why is it important to specify a completion date in a contract?
To avoid disagreements about what constitutes a reasonable performance time and to ensure clarity in the agreement.
What should you do if you notice a contract does not provide a completion date?
Suggest the drafter include a date before the parties sign the contract.
What should parties do if they might miss a deadline in a 'time is of the essence' contract?
Contact the other party and negotiate a new performance date before the deadline.
Why is timing considered an essential material term of a contract?
Because it is important for parties to know when obligations will be fulfilled, ensuring clarity and professionalism.
What is the definition of Assignment in contract law?
A transfer to another of any property in possession or in action, or of any estate or right therein, including a transfer of rights under a contract.
What is Novation in contract law?
The substitution or exchange of a new obligation or contract for an old one by the mutual agreement of the parties.
What happens when one party cannot perform their obligations under a contract?
Through assignment and novation, a person can have someone else perform the contract in their place.
Who is referred to as the assignor in an assignment?
The person who gives the assignment.
Who is referred to as the assignee in an assignment?
The person who receives the rights and benefits under the contract.
In the example of Sue and Ted, what does Sue do when she assigns her rights to Willa?
Sue transfers her rights under the sales contract to Willa, allowing Willa to buy Ted's house instead.
What must Ted do when Willa shows up at closing with the assignment contract?
Unless prohibited by law or contract, Ted must accept Willa's payment and give her a deed for the house.
What is the expected benefit for Ted in the assignment scenario?
Ted receives $250,000 in exchange for his house.
What governs the assignment rights in a contract?
Contract language governs the assignment rights.
Under what circumstances can assignment of contracts be prohibited?
If a law or contract provision prohibits the assignment.
Why are contracts for personal services usually not assignable?
Because they involve unique individual skills that are a material inducement for making the contract.
What is a common limitation on assignments in leases?
Leases often prohibit assignment to ensure the original tenant remains responsible.
What is an example of a situation where assignment can be profitable in real estate?
When a real estate speculator assigns a contract to a more motivated buyer for a profit.
What is novation in the context of contracts?
Novation is the process of substituting a new obligation or contract for an existing one.
What happens if an assignee fails to perform their obligations?
The original party may still be held liable if the assignee fails to perform.
How do lenders commonly use assignments in real estate?
Lenders assign income streams from mortgage loans to third parties, often bundled in mortgage-backed securities.
What is the main difference between novation and assignment in real estate contracts?
Novation requires both parties to agree and usually results in a new contract, while assignment does not require such agreement and does not create a new contract.
What is a prime example of novation in real estate?
The assumption of an existing mortgage by a new buyer.
What happens to the original party's obligations in a novation?
The original party is usually released from their obligations.
What does a novation create between the lender and the new buyer?
A new contract that imposes all existing obligations of the original mortgage loan on the new debtor.
What is novation in real estate contract law?
The substitution or exchange of a new contract for an old one by the mutual agreement of the parties.
What happens during the process of novation?
The existing contract can be mutually terminated for a new contract between the parties.
What is assignment in the context of contracts?
A transfer of benefits and obligations within a contract to a 3rd party who is not originally a party to the contract.
Who is the assignor in a contract assignment?
The one who transfers their interest in a contract to another party.
Who is the assignee in a contract assignment?
The one who receives the interest in a contract from another party and is now liable for the contract.
What are liquidated damages in a real estate contract?
A sum agreed upon by the parties to be full damages if a certain event occurs.
What does rescission mean in the context of contracts?
The cancellation of a contract and restoration of the parties to the same position they held before the contract was entered into.
What is specific performance in real estate contracts?
An action to compel performance of an agreement, e.g., sale of land as an alternative to damages or rescission.
What is the statute of limitations?
A statute prescribing a period of limitations for the bringing of certain kinds of legal actions.
What are the five major ways a contract can be discharged?
What is the first way a contract can be discharged?
When the parties mutually agree to end the contract.
What happens when unexpected events make a contract impossible to perform?
This is one of the ways a contract can be discharged.
What resources does the EPA provide for understanding radon?
The Home Buyer's and Seller's Guide to Radon and the Consumer's Guide to Radon Reduction.
Why is it not recommended for homeowners to mitigate high radon levels themselves?
High levels of radon require special skills and knowledge.
What historical perspective is mentioned about radon?
Radon has not always been considered dangerous and is still used in some treatments in Europe.
What is the purpose of the four mines open to the public in southwest Montana?
They are open for inhalation of radon.
What towns are the radon inhalation mines located near?
Basin and Boulder in southwest Montana.
How much radon exposure do visitors experience in the mines compared to the EPA approved rate?
175 times the approved EPA rate for homes.
What health conditions do visitors believe radon inhalation can help with?
Arthritis, asthma, diabetes, chronic pain, and other disease symptoms.
What do proponents believe about low doses of radiation from radon?
They believe it optimizes hormones used for pain and stress management.
What is the FHA Loan Contingency Exhibit used for?
It is used for home mortgage loans insured by the FHA, the Federal Housing Administration.
What must a seller do if the property was constructed prior to 1978?
The seller must complete and attach a lead-based paint disclosure form.
What is the purpose of the Seller's Property Disclosure Statement?
It allows the seller to identify any material defects in the property to provide transparency to the buyer.
Who can act as closing agents for real estate transactions in Georgia?
Only attorneys can act as closing agents for real estate transactions in Georgia.
What is the purpose of the Closing Attorney Acting as Holder of Earnest Money Exhibit?
It must be completed and attached when the closing agent also holds the earnest money.
What information is provided on the final page of the Purchase and Sale Agreement?
Spots for the buyers' and sellers' contact information and signatures, as well as their brokers' contact information and signatures.
What is the purpose of the Seller's Property Disclosure Statement in Georgia?
To make the buyer aware of any potential defects in the property that the seller knows about.
What is the seller's duty regarding the Seller's Property Disclosure Statement?
To provide accurate and complete answers to the best of their knowledge and to revise statements if the information changes before closing.
What does Section B of the Seller's Property Disclosure Statement inform buyers about?
It informs buyers that they have the right to conduct a full inspection of the property and that the disclosure statement may not be 100 percent accurate.
What type of information is requested in Item 1 of the Seller's Property Disclosure Statement?
General information about the property, including the year constructed, whether it is vacant or leased, and if it is in a historic district.
What must sellers disclose in Item 2 of the Seller's Property Disclosure Statement?
Any covenants, fees, restrictions, and assessments, including information about any applicable condominium community association.
What is required for properties built before 1978 regarding lead-based paint?
Sellers must disclose potential risk from lead-based paint and include a separate 'Lead-Based Paint' exhibit with the sales contract.
What information is covered in Item 4 of the Seller's Property Disclosure Statement?
Questions about the structure, including foundation, structural reinforcements, and potential building code or permit violations.
What does Item 5 of the Seller's Property Disclosure Statement ask the seller to disclose?
The approximate age of the property's HVAC system and any potential issues with the heating and cooling system or fireplaces.
What must the seller indicate if there are potential plumbing issues?
The seller will indicate those in item 6.
What information is documented in item 7 of the Agreement of Sale?
The approximate age of the roof, the date last repaired, and any known issues with the roof, gutters, or downspouts.
What does item 8 ask sellers to disclose?
Information about flooring, draining, moisture, springs, water intrusion, flooding, and any known underground springs or facilities on the property.
What issues are disclosed in item 9?
Any issues with the soil on the property or boundary line disputes with neighbors.
What must sellers disclose in item 10?
Any damage from termites, dry rot, pests, and wood-destroying organisms.
What concerns are addressed in item 11?
Any known environmental, health, or safety concerns, such as asbestos or methamphetamine production.
What does item 12 ask sellers to disclose?
The existence of any previous litigation or insurance issues related to the property.
What is the purpose of item 13 in the Agreement of Sale?
To ask the seller if there are any other hidden defects that have not otherwise been disclosed.
What does item 14 inquire about?
Agricultural or forestry use of the property.
What must sellers indicate on the page listing possible fixtures?
Which fixtures are included in the sale and whether repairs are needed for any of those items.
What is a force majeure clause in a contract?
It provides plans for unforeseen events that make performance difficult, such as delaying or excusing performance.
What can cause a contract to be discharged by operation of law?
A new law declaring previously permitted conduct illegal can make the contract unenforceable.
What is a statute of limitations?
A law that requires legal actions and claims to be brought within a specified time period.
What is the common limitations period for contract claims in many states?
Six years.
When does the statute of limitations period start for contract claims?
From the date of breach.
What happens if a party does not sue within the statute of limitations period?
The court may find the contract legally unenforceable.
Why is the statute of limitations important in legal disputes?
It encourages prompt legal actions and creates finality by closing the door on old claims.
What can a party do in response to a breach of contract?
Bring a lawsuit against the other party.
What is the goal of the court when applying remedies for a breach of contract?
To restore balance to the contractual relationship, not to punish the breaching party.
What is the most common remedy in contract cases?
Compensatory damages, also known as expectation damages.
What do compensatory damages aim to achieve?
To put the parties in the positions they expected to be in if the breach had not occurred.
What is specific performance in contract law?
A court order requiring a party to fulfill their contractual obligations.
When is specific performance typically awarded?
When money damages cannot compensate the non-breaching party for the breach, especially in unique item sales like real estate.
Why might a court not order specific performance for personal services contracts?
Because it would require prolonged monitoring and supervision of the performance.
What is an injunction in contract law?
An order directing a party to do something or not do something.
What must a party seeking an injunction typically show?
That they will suffer irreparable harm if the injunction is not granted.
What is reformation in the context of contract law?
A remedy that modifies the terms of a contract to reflect the true intentions of the parties.
What is the goal of reformation in contract law?
To reshape the parties' contract to align with their original intent.
What happens during rescission of a contract?
The parties return to the positions they held before making the contract.
What is the purpose of restitution in the context of rescission?
To prevent a party from being unjustly enriched when a contract is rescinded.
What is a liquidated damages provision?
A clause that specifies how much will be paid in damages in the event of a breach or unforeseen event.
Under what circumstances might a court refuse to enforce a liquidated damages provision?
If the provision is deemed punitive rather than compensatory.
What factors do courts consider when enforcing liquidated damages provisions?
Whether the contract involves difficult-to-value matters, if the damages are reasonable estimates of potential loss, and if the parties had equal bargaining power.
What are the stages in the lifespan of a contract?
Formation to discharge.
What can happen to contracts that are formed badly?
They may lack any legal effect at all.
What is one way a contract can be discharged?
By agreement of the parties to terminate the contract.
What occurs when all parties fully perform the terms of a contract?
An executed contract.
What is the most common form of discharge of a contract?
Full performance.
What is a defense for breach of contract that involves the inability to perform?
Impossibility of performance.
What are some grounds for impossibility of performance?
Injury or death of a party, destruction of property, or a law making performance illegal.
What does operation of law refer to in contract law?
How the rights and liabilities of parties may be changed by the application of law.
What happens to debt obligations when an individual files for bankruptcy?
They may be terminated due to operation of law.
What is the purpose of a letter of intent in real estate transactions?
To outline the preliminary understanding between parties before a formal agreement is made.
How does the statute of frauds impact real estate contracts?
It requires certain contracts to be in writing to be enforceable.
What is the difference between commingling and conversion in real estate?
Commingling involves mixing client funds with personal funds, while conversion refers to using client funds for personal use.
What are two examples of contingencies that may be found in a real estate sales contract?
Financing contingency and inspection contingency.
What is the difference between an addendum and an amendment in real estate contracts?
An addendum adds new terms to the contract, while an amendment modifies existing terms.
What is an Agreement of Sale in real estate?
A written agreement or contract between seller and purchaser that outlines the terms and conditions of the sale.
What does a real estate sales contract govern?
The transactions between the buyer and seller of real estate.
What are some key components included in a real estate contract?
Warranties regarding ownership, condition, title status, and contingencies for potential issues.
What is the significance of a 'meeting of the minds' in a contract?
It is necessary for a valid contract, indicating that both parties agree on the terms.
What happens if there is no meeting of the minds in a contract?
The courts will not enforce the contract, and specific performance or monetary damages will not be ordered.
Who can prepare a real estate sales contract?
It can be prepared by various individuals, including buyers, sellers, real estate professionals, or lawyers, depending on local laws and customs.
What is a potential risk of individuals drafting their own real estate contracts?
It can lead to conflicts and legal issues due to improper drafting.
What was a notable case regarding the drafting of a real estate contract?
A contract for a $700,000 parcel of commercial real estate was drafted on the back of a napkin.
Who generally drafts real estate contracts in New York?
Licensed attorneys.
What is the role of real estate agents in contract preparation in states where they can draft contracts?
They negotiate basic terms and show the property.
What is a licensee in Pennsylvania real estate?
A licensee is authorized to prepare a real estate contract but cannot negotiate or represent either party.
What type of real estate contracts are usually drafted by attorneys?
Commercial real estate contracts.
What is the consequence of unauthorized practice of law for a licensee?
Their license may be suspended or revoked, and they may be fined.
What is the primary difference between agents and licensees in real estate transactions?
Agents can negotiate and represent parties, while licensees can only prepare contracts without negotiation.
What must agents inform parties about when negotiating contingencies in a real estate contract?
The implications and definition of default.
What is a common characteristic of real estate contracts prepared by agents?
They are usually 'fill in the blank' forms provided by local real estate associations.
What is the risk for a licensee if they engage in unauthorized practice of law?
They may face legal consequences and impact their ability to obtain future licenses.
Who should handle the negotiation and modification of a real estate contract in states where it is the norm?
Attorneys should handle it.
What is a benefit of having attorneys negotiate real estate contracts?
There is never a question about unauthorized practice of law.
What is a counter offer in the context of a contract?
A response to an offer that changes some terms of the original offer, rejecting it and not creating a binding contract unless accepted by the original offeror.
What is a Letter of Intent (LOI)?
An agreement to agree that outlines terms between parties who have not formalized an agreement into a contract, generally not binding and unenforceable.
What are the elements required for the formation of a legally binding contract?
Offer and acceptance, where one person expresses an offer to contract on certain terms and the other indicates acceptance of those terms.
What does a real estate purchase and sale agreement identify?
It identifies the parties to the agreement, sets out the proposed closing date, provides disclosures and warranties, and gives instructions in case of breach.
Who typically negotiates real estate contracts in the US?
It is more common for agents representing each party to negotiate on behalf of their clients.
What is the fiduciary duty of a real estate agent?
To present all offers to their client, including unreasonable offers, and advise on negotiating positions and what is best for the client.
What can vary in length for real estate contracts?
A standard residential real estate contract can be a few pages, while a complex commercial real estate contract can be as long as one hundred pages.
Why might a seller consider a low offer on their property?
There may be circumstances unknown to the agent that could lead the seller to accept even a low offer.
What is required for a real estate contract to be binding?
There must be offer and acceptance, establishing a meeting of the minds.
Who are the parties involved in an offer in real estate transactions?
The offeror (buyer) and the offeree (seller).
What happens if the seller disagrees with certain terms of the offer?
The seller can reject the offer, allow the time for acceptance to elapse, or make a written counteroffer.
What is a counteroffer in real estate?
A counteroffer is an offer made by the seller in response to the buyer's offer, which also acts as a rejection of the original offer.
What must happen for a contract to be formed after a counteroffer is made?
The buyer must accept the counteroffer for a contract to be formed.
What is a Letter of Intent (LOI) in real estate transactions?
A Letter of Intent is an agreement to make a contract, outlining the basic terms of the agreement before a complete contract is drafted.
What information is typically included in a Letter of Intent?
Names of the buyer and seller, property description, purchase price, closing date, and conditions precedent.
What are conditions precedent in a real estate contract?
Conditions that must be met before the contract is signed, such as clearing liens or addressing environmental issues.
What is the significance of a meeting of the minds in a real estate contract?
It ensures that both parties agree to all terms of the contract, making it binding.
What does a seller often require from a buyer before completing a transaction?
Proof of sufficient funds or a loan commitment from an established lender.
What is the purpose of a pre-inspection in a real estate transaction?
To ensure the property is suitable for the buyer's needs.
Is a letter of intent considered a binding contract?
No, it is generally not considered a binding contract.
What happens if the real estate contract is not signed by the deadline specified in the letter of intent?
The entire agreement may be voided unless the parties agree to extend the time period.
In the example provided, what was the buyer concerned about regarding the property?
The HVAC units on the roof were inadequate and old.
What was the agreement between the buyer and seller regarding the HVAC units?
The seller would replace the HVAC units with specific instructions on the type to install.
What issue did the buyer encounter after closing the deal?
There was not enough electricity for the building to operate due to the HVAC units.
What was the seller's argument in court regarding the letter of intent?
The seller argued that the letter of intent was not a binding contract.
What did the buyer argue regarding the HVAC units in court?
The buyer argued that the replacement of the HVAC units was a material condition of the contract.
What is the Statute of Frauds in relation to real estate contracts?
It requires agreements for the transfer of real property to be in writing.
What is the purpose of the Letter of Intent in real estate transactions?
It leads to the drafting and eventual execution of the real estate contract.
Who can draft the real estate contract?
Either the buyer's or seller's attorney, depending on local custom.
What must happen for a real estate contract to be binding?
It must be signed by both parties.
What is the consequence of one party not signing the real estate contract?
It must be assumed that the non-signing party did not agree to the terms.
What is the significance of the real estate contract once signed?
It is a binding agreement that can be enforced in court.
What role do real estate agents play in the signing of the real estate contract?
They often sign the real estate contract as well.
What is the Statute of Frauds?
A state law requiring certain contracts, including real estate sales, to be in writing and signed to be enforceable.
Can a real estate sale be valid with just a handshake?
No, a real estate purchase and sale contract must be in writing to be valid.
What happens if a seller wants more money than originally offered in a handshake deal?
The handshake deal is not enforceable in court without a written agreement.
What is required for a mortgage to be enforceable?
A written document is required for a mortgage to be enforceable.
What is the consequence of an oral mortgage contract?
An oral mortgage contract is unenforceable, but the borrower can still be personally liable for the debt.
What is a tenant at sufferance?
A tenant who leases a property without a written lease document.
What must be done for leases to be enforceable?
Leases must be written out as documents to be enforceable.
What is required for a landlord to make a claim for rent?
Evidence of an agreed-upon sum for the rent.
What types of real estate-related documents require writing?
Option contracts, easements, and conveyance of specific rights.
What does the statute of frauds govern?
Contracts that cannot be performed within one year and certain real estate contracts.
What is an example of a contract that must be in writing according to the statute of frauds?
A contract for the sale of goods for $500 or more.
What happens if a seller delivers goods that are not what the buyer ordered?
The seller can be forced to take back the goods and send the correct items or pay damages.
What is a collateral contract?
An agreement to enter into a contract where money is exchanged for the right to enter into the contract.
What is a letter of intent in real estate?
A list of terms that both parties want to see in a final contract, but it is generally not enforceable by itself.
What must be present for a letter of intent to become enforceable?
Consideration or money exchanged for the right to enter into the final contract.
What is the consequence of not having a written agreement when money is exchanged for a real estate contract?
The agreement to enter into the contract is not enforceable.
What is the parol evidence rule?
It prevents a party from using extrinsic evidence to create ambiguity in a contract or to add to a contract that is whole in its terms.
What does extrinsic evidence refer to in the context of contracts?
Any writing or document, or evidence in general, besides the original contract.
What is the preferred method for resolving ambiguities in a contract according to the parol evidence rule?
To include all terms in a single contract and rely only on that document.