N.C. Real estate pre-licensing Questions with Verified Solutions

N.C. Real estate pre-licensing Questions with Verified Solutions Real property ✔✔Land & everything that is permanetly attached to the land & everything that is appurtenant to the land Personal property (personalty) ✔ ...

N.C. Real estate pre-licensing Questions with Verified Solutions Real property ✔✔Land & everything that is permanetly attached to the land & everything that is appurtenant to the land Personal property (personalty) ✔✔All propery that doesn't fit the definition of real property. CHATTLES are moveable Land ✔✔The earth's surface extending downwards to the center of the earth & upward to infinity Real estate (realty) ✔✔Land at, above, or below the earth's surface, including all things permanently attached to it, whether artificial or natural Real property ✔✔The land itself, the improvements there on, & the interests, benefits, & rights inherent in the ownership of real estate Economic characteristics of real property ✔✔Scarcity Location Improvements Permanence of investment (SLIP) Physical characteristics of real property ✔✔Immobility Indestructibility Uniqueness Improvement ON the land ✔✔Improvements of a private nature (i.e. house, pool) Improvements TO the land ✔✔Improvements of public nature (i.e. sidewalks, parks, streets) Highest & best use ✔✔The use that will give the owners the greatest actual return on their investment Broker ✔✔Acts as an agent who negotiated the sale, purchase or rental of property on behalf of others for a fee/commission Categories of real estate ✔✔1)residential 2)commercial 3)industrial 4)agricultural 5)special purpose Point of equilibrium ✔✔Point when supply & demand are balanced Bundle of Legal Rights ✔✔Disposition Enjoyment Exclusion Possession Control (DEEP C) Appurtenance ✔✔A right or privilege that goes w/ ownership of the land (includes mineral/subsurface, air & water rights) Surface rights ✔✔The rights to use the surface of the earth Subsurface rights (mineral rights) ✔✔The rights to use the space below ground level & to extract the natural resources lying below the earth's surface Air rigts ✔✔Rights to use the air above the land Riparian rights ✔✔Non-navigable bodies of water bordering owner's land, has rights to middle of water Littoral rights ✔✔Navigable bodies of water w/ a tide owners have rights to the mean high water mark Foreshore ✔✔The strip of land btwn high & low tide. Owned by the state of N.C. Accretion ✔✔A gradual increase in land from the deposit of soil by the water Reliction ✔✔Water gradually recedes or disappears permanently; new land is gained Erosion ✔✔Loss of land due to nature over time. Cannot reclaim land Avulsion ✔✔Loss of land due to a catastrophic act of nature. Can potentially be reclaimed by owner. Lateral support ✔✔The right to have adjacent property support the natural boundaries of the land Subjacent support ✔✔When a land owner severs subsurface rights, whoever obtains them must ensure surface support of the landowner's property is maintained Manufactured home (mobile homes) ✔✔Built according to H.U.D. construction standards & affixed w/ H.U.D. label Steps to convert a manufactured home to real property ✔✔Wheels & hitch must be removed, affixed to a permanent foundation on land owned by the homeowner Modular homes ✔✔Pieces constructed in factories. Once erected at site are automatically real property. Must be affixed w/ H.U.D. label Emblements ✔✔Annual crops. Usually considered real property. Severance ✔✔Converting real property to personal property by removal (i.e. cutting down a tree) Annexation ✔✔Converting personal property to real property by permanent attachment Total circumstances test ✔✔A legal test applied by the courts to determine whether an item is a fixture or personal property 4 parts of total circumstances test IRMA ✔✔1)Intention of annexor 2)Relationship of annexor 3)Methods of annexor 4)Adaptation to real estate Trade fixtures ✔✔An article owned by a tenant & attached to a rented space or building for use in conducting business Agricultural fixtures (NC LAW) ✔✔Fixtures installed during lease are considered real property & cannot be removed Uniform Commercial Code (UCC) ✔✔If a homeowner purchases an item on credit & gives the creditor a security agreement, that item remains personal property & may be removed by creditor in event of default. Becomes real property when paid in full. Must be disclosed when selling a property. Estate in land ✔✔The amount & kind of interest a person has in real property Freehold estates ✔✔Estates of indeterminable length of ownership (such as those existing for a lifetime or forever) Nonfreehold/Leasehold estates ✔✔Any real estate that isn't a freehold estate Fee simple absolute ✔✔No limitations other than what's conveyed by law. Highest form of land ownership Fee simple defeasible ✔✔Estate may be lost (or defeated) on occurrence or nonoccurrence of a specified event. Previous owner enforces restrictions that current owner must adhere to maintain ownership Fee simple subject to a condition subsequent ✔✔Estate dictates some action or activity that the new owner must not perform. If owner violates former owner can take them to court to regain control of property. Fee simple determinable ✔✔Estate requires that a specific activity or land use continue. If activity or use isn't complied w/ owner or heirs regain control of property automatically Future interest ✔✔The rights of re-entry & reversion Life estate ✔✔Ownership of land is tied to duration of life of owner Life estate pur autre vie ✔✔Estate for life of another. When a 3rd party's life term measures ownership of the estate. Remainder interest ✔✔Grantor can name a successor (remainderman) to the property Reversionary interest ✔✔When a grantor doesn't name a remainderman, property reverts back to them when life estate expires Estovers ✔✔Right to use property resources in regards to tenant. Cannot waste land. Homestead ✔✔Legal life estate in real estate occupied as the family home. Protected from creditors during occupants lifetime. Tenancy in common ✔✔2+ own same property; undivided possession of property; ownership doesn't have to be equal; each owner may encumber or convey their interest; survivorship NOT possible; right to partition Joint tenancy ✔✔2+ own same property; undivided unity of possession; ownership USUALLY equal; all tenants must be present @ time of purchase & sign deed; survivorship is automatic (must be added w/ exact wording NC) Tenancy by entirety ✔✔MUST be married; ownership MUST be equal; both must be present @ time of purchase & sign deed; undivided unity of possession; survivorship is automatic NC condo act ✔✔When new condo is being sold by developer, buyer has 7 day right of recision NC real estate commission (NCREC) ✔✔9 members; 7 appointed by governor; 1 by senate; 1 by house of reps; 2 must have NO interest in real estate; 3 must be licensed real estate brokers. 3 year terms. Qualifications to be NC real estate broker ✔✔1)Must be 18 2)US citizen or right to work 3)social security # 4)75 hour pre-licensing course 5)file app/pay fee 6)pass state exam 7)good moral character New home builder employees ✔✔DO NOT need license to sell Working w/ real estate agents ✔✔Pamphlet must be given @ first substantial contact. No later than 3 days. Signed & retained (if refuse to sign must make note) Real estate year ✔✔July 1-June 30 Yearly license renewal requirements ✔✔8 hour continuing education course; $45 fer Doesn't have to take continuing education during 1st year of licensing ✔✔Provisional broker Income tax exclusion for sale of personal home ✔✔>$250,000 for single >$500,000 for married Broker In Charge requirments ✔✔Work full time (or part time for 5 years) take BIC course All records must be kept for ✔✔3 years Lien ✔✔A non possessory charge against property that provides security for a debt or an obligation of the property owner. Type of encumbrance Voluntary lien ✔✔Contractual or consensual (i.e. a mortgage) Involuntary lien ✔✔Created by law (i.e. tax lien) Specific lien ✔✔Secured by a specific parcel of property & affects only that particular property (a mortgage is a voluntary specific lien) General lien ✔✔Affects all property of a debtor, both real & personal Ad valorem ✔✔Property taxes according to value Special assessment ✔✔Levied to cover improvements which add property value Lengths of NC tax liens ✔✔10 years, takes priority over all other liens Mechanic lien ✔✔Gives security to those who perform labor or furnish materials in the improvement of real property. Must be within 120 days of project completion. Judgement ✔✔A decree issued by a court Deed restrictions ✔✔Private agreements placed in the public record that affect the use of land (type of encumbrance) Lis pendens ✔✔Pending litigation Writ of attachment ✔✔Type of encumbrance on real property, recorded for a debt or mortgage, unsecured property that can potentially be used Writ of execution ✔✔Judgement is recorded, then directs the county sherif to sell property to satisfy judgement Easement ✔✔Non possessory right to use the land for a particular purpose Easement appurtenant ✔✔Annexed to the ownership of one parcel of land & used for the benefit of another parcel of land Servient tenement ✔✔Tract over which easement runs Dominant tenement ✔✔Tract that benefits from the easement Easement in gross ✔✔A personal interest in or right to use the land of another. Benefits a person or entity. If company closes, easement is dead Easement by necessity/implication of law ✔✔All owners must have rights of ingress & egress from their land Easement by prescription ✔✔When a claimant has made use of another's land for a certain period of time (20 yrs in NC). Must be done in visible/open view, must be continuous & exclusive License ✔✔A personal non-transferable privilege to enter the land of another. Can be terminated or revoked Encroachment ✔✔When an improvement or any portion of extends beyond the land of its owner & covers some land of an adjoining owner, street or alley Machinery act ✔✔Regulates standards for real property taxation, standards for property tax assessments, standards for property tax appraisal & requirements for tax-exempt status Assessment ✔✔Official valuation process Assessed value ✔✔Generally based on the sale prices of comparable properties Assessed value in NC ✔✔100% of market value Octennial reappraisal ✔✔Real property is assessed based on a statutory schedule & then reappraised every 8 years September 1st ✔✔Property tax bill sent out, can pay as late as january Mass appraisal ✔✔Technique that determines assessed value for all lands in a given area by applying an overall % increase or decrease 4 types of leasehold estates ✔✔1)estate for years 2)estate from period to period 3)estate at will 4)estate at sufferance Grantor ✔✔Person who gives the property Conventional life estate ✔✔Ownership terminates once tenant dies, can't be willed, but can have successive life tenants Severalty ✔✔Sole ownership Legal description ✔✔An exact way of describing real estate in a contract, a deed or another document that will be accepted by a court of law Metes-bounds description ✔✔Earliest form of legal description used in US (used in NC) Point of beginning ✔✔Where measurement starts, proceeds around boundaries of tract. Measurement must end at this same point. Uses monuments. Calls ✔✔References of linear measurement & compass directions Monuments ✔✔Fixed objects used to establish real estate boundaries Rectangular survey system ✔✔Divides land into rectangles, principal meridians & base lines Principal meridians ✔✔Run north & south (N⬆️)(S⬇️) 37 in the US Base lines ✔✔Run east & west (E➡️)(W⬅️) Townships ✔✔36 square miles (23,040 acres) Sections ✔✔640 acres Reference to a recorded plat ✔✔Uses lot & block #s of land location registered w/ registry of deeds Plat map ✔✔Land is divided into numbered or lettered blocks & lots & streets or access roads for public use are indicated. MUST BE RECORDED IN PUBLIC RECORD Survey ✔✔Legal description of property Topographic survey ✔✔Shows the lay of the land (trees, water) Title ✔✔Right to or ownership of the land Alienation ✔✔Act of transferring property to another Deed ✔✔A written instrument by which an owner of real estate intentionally conveys right, title, or interest in the the parcel of real estate to another Deed is executed by ✔✔(SIGNED) by the grantor Voidable ✔✔Conveyed while mentally impaired Void ✔✔Conveyed while mentally incompetent or not of legal age Acceptance ✔✔Recordation of deed by buyer or agent is considered General warranty deed ✔✔Provides greatest protection for buyer, most liable for seller. Protects against encumbrances. Guarantees right to convey, quiet enjoyment, further assurance, warrant forever Special warranty deed ✔✔Conveyance that only guarantees grantor received title & free of encumbrances during ownership Bargain & sale deed ✔✔No express warranties against encumbrances, does imply grantor holds title/real property Quitclaim deed ✔✔(Non-warranty deed) carries no covenant/warranties only conveys interest that grantor may have when deed is delivered Excise tax ✔✔$1 for every $500 of the sale of property Deed of gift ✔✔When grantor conveys property as a gift. Must be recorded within 2 years or becomes void Intestate ✔✔When a person dies without a will. Testate ✔✔When a person dies with a will Escheat ✔✔Person dies intestate (leaves no heirs) title to that person's property passes to the state Eminent domain ✔✔The right of the government to acquire privately owned real estate for public use Condemnation ✔✔The process by which government exercises eminent domain. Owner is compensated fair market value Lien foreclosure ✔✔Land may be transferred without owner's consent to satisfy debts contracted by the owner Adverse possession ✔✔Involuntary transfer. Person must have reason to believe property is theirs to make claim of ownership. Owner can lose property due to non-use & by use of another (O.C.E.A.N.) O.C.E.A.N. ✔✔Open Continuous Exclusive Adverse Notorious Action to quiet title ✔✔Lawsuit to obtain legal title by adverse possessor NC intestate succession act ✔✔Court appoints person to distribute the deceased's property Public notice ✔✔Recording written documents in county records Constructive notice ✔✔The legal presumption that info may be obtained by an individual through due dilligence Actual notice ✔✔Info is available & someone had been given the info & actually knows it Chain of title ✔✔Record of property's ownership Marketable title ✔✔Must; be free of lines or encumbrances, disclose no serious defects, be legally valid, protect purchasers right of quiet enjoyment, property should be able to be sold at fair market value Title search ✔✔The examination of all public records that might affect a title Opinion of title ✔✔Attorney establishes chain of title & certifies clear Abstract of title ✔✔A thorough history of title NC marketable title act ✔✔If title can be traced back 30 years & no other claims are present, is marketable American land title association policy ✔✔Title insurance + coverage of risks discovered through inspection or survey Conner act (NC) ✔✔Law that many types of real estate docs aren't valid against 3rd party claims unless recorded Pure race state ✔✔Whomever records first prevails Torrent system ✔✔Provides evidence of title w/o additional search of public records Statute of frauds ✔✔All interest or contracts in real estate must be in writing to be enforceable Master plan ✔✔Primary method by which local government recognizes development goal Zoning ordinances ✔✔Laws imposed by local government authorities that regulate & control use of land & structures within designated zones. Local in nature Buffer zones ✔✔Areas used to separate or screen residential areas from nonresidential areas Extra-territorial jurisdictions ✔✔Areas outside of the incorporated limits that are subject to zoning of municipality Nonconforming use ✔✔When a property is grandfathered in to a new zoning law Illegal nonconforming use ✔✔One that violates the zoning laws at the time structure is erected Conditional use permit (aka special-use) ✔✔Granted to a property owner who wishes to use property in a special way that's in the public interest Variance ✔✔May be sought to allow a deviation from an ordinance due to unique circumstances Overlay disteict ✔✔A type of zoning that's superimposed over another type of zoning Aesthetic zoning ✔✔When surfaces of structures are restricted to a particular color palette or construction material Spot zoning ✔✔When a particular property or group of properties is record to permit a use different from the neighboring properties use Subdivisions ✔✔All divisions of a tract or parcel of land into 2 or more lots, building sites, or other divisions for the purpose of sale or development Subdivision street use ✔✔Must disclose if street is for public or private use Building permit ✔✔Most communities require issuance by a city clerk or other official before construction can begin Certificate of occupancy ✔✔Received when structure has been completed & passed inspection Conventional loan qualifying rations ✔✔Housing no more than 28% GMI or 36%-reoccurring monthly debt Specific performance ✔✔Remedy for buyer against seller to force sale b/c property is unique January 5 ✔✔Last day to pay property taxes w/o penalty Ft in a mile ✔✔5280 1 acre ✔✔43560 ft Valid deed conveyance ✔✔Must; be in writing, grantor has legal capacity, name grantee, legal description, signed by grantors, delivery & acceptance Amortize ✔✔Kill Time of 1st buying offer ✔✔When oral agency must be in writing Loan factor ✔✔Multiply the interest rate factor by the amount of 1000s in the loan Caveat emptor ✔✔Buyer beware (NC) Simple interest formula ✔✔Interest=principal x rate divided by time Fiduciary ✔✔A relationship in which the agent is placed in the position of trust & confidence to the principal General agent ✔✔May represent the principal in a broad range of matters Universal agent ✔✔A person who is empowered to do anything the principal could do personally Special agent ✔✔Authorized to represent the principal in only one specific act or business transaction. Real estate broker Agency agreement may be terminated ✔✔Completion/fulfillment, expiration, mutual agreement, breach by parties, operation of law, destruction or condemnation, death or incapacity Single agency ✔✔Agent represents only one party in any single transaction Dual agency ✔✔Broker/firm represents buyer & seller in the same transaction Disclosed dual agency ✔✔Created when 2 brokers from the same firm represent buyer & seller. Must be expressed in writing. Both parties must agree. Designated dual agency ✔✔Appointing one or more broker or the same firm to exclusively represent the buyer or seller as an agent in the same real estate transaction. Must be done with express approval Oral buyer agency ✔✔Option a firm may use when the consumer is unwilling to commit to a written agreement. No exclusive. Can be terminated at any time. Fiduciary responsibilities brokers owes to client ✔✔Obedience Loyalty Disclosure Confidentiality Accounting Reasonable skill care & dilligence Residential property disclosure ✔✔Seller must fill out & disclose all known facts about property Commingling ✔✔When trust funds & the firm/broker's personal/business funds are placed in the same account. ILLEGAL. Puffing ✔✔Opinion statements that exaggerate a property's benefits. Fraud ✔✔Intention misrepresentation of a material fact in such a way as to harm or take advantage of another person Willful misrepresentation ✔✔When brokers have actual knowledge of a material fact deliberately misinform a buyer seller tenant or landlord concerning such fact Negligent misrepresentation ✔✔When broker intentionally misinforms a buyer seller tenant landlord concerning a material fact b/c they don't have actual knowledge of the fact, b/c they have incorrect info or mistake by the agent Willful omission ✔✔When brokers have actual knowledge of a material fact & a duty to disclose such a fact to a buyer seller tenant landlord but deliberately failed to disclose such fact Negligent omission ✔✔Takes place when brokers don't have actual knowledge of a material fact but should've reasonably known of such fact Stigmatized properties ✔✔Properties that have been branded as undesirable by society b/c of past events Tort ✔✔A wrongful act by an agent while representing the principal Auctioneer ✔✔Can bind seller. Acts as universal agent Assignment ✔✔Substitution of parties Novation ✔✔Substitution of contracts Constructive notice ✔✔Written & recorded in public record Valid contract ✔✔Voluntary, agreement or promise, legally competent parties, supported by legal consideration ($), about a legal act Express contract ✔✔Parties state the terms & show their intentions in words to that affect. NC REAL ESTATE EXPRESSED WRITTEN Bilateral contract ✔✔Both parties promise to do or refrain from doing something; one promised is exchanged for another Unilateral contract ✔✔One party makes a promise to induce a 2nd party to do something. 2nd party isn't legally obligated to act, but 1st party must keep promise Executory contract ✔✔Exists when something remains to be done by one or more parties Executed conteact ✔✔One in which all parties have fulfilled their promises & contract is fully performed Void contract ✔✔One that has no legal force or effect Voidable contract ✔✔One that seems to be valid but may be rescinded or dis affirmed by one of the parties, based on a legal principal Enforceable contract ✔✔Offer & acceptance, meeting of the minds, reality of consent Counteroffer ✔✔Any attempt by the offered to change any of the terms proposed by the offeror. Rescinds previous offer. ASAP, but no later than 5 days ✔✔When broker should present offer to client Time is of the essence ✔✔Specified time limit on contract fulfillment. Must be in exact words. Civil rights act of 1866 ✔✔Prohibits any discrimination based on race Civil rights act if 1968 (FHA act) ✔✔Prohibits discrimination based on race color religion of national origin 1974 ✔✔Prohibits discrimination based on sex 1988 ✔✔Prohibits discrimination based on handicap status Protected class ✔✔Any group of people designated as such by statute in consideration of federal & state civil rights & lending legislation Categories of protected classes (FRESH CORN) ✔✔Familial status Race Ethnicity Sex Handicap Color Opportunity Religion National Origin NOT MARRIED COUPLES!! HUD general occupancy standards ✔✔2 heartbeats per a room FHA exemptions ✔✔Owner-occupied 1-4 family dwelling. Certain church owned properties(as long as church doesn't discriminate again members) Membership clubs if not operates commercially Equal Credit Opportunity Act (ECOA) ✔✔Guarantees no discrimination in gathering of credit of protected classes + recipients of public assistance NC fair housing act of 1983 ✔✔Same as federal. Private owners can't discriminate. Exemptions extend to single sex dormitory Blockbusting aka panic peddling ✔✔Act of encouraging people to sell or rent their homes by claiming that the entry of a protected class into the neighborhood will negatively affect property value Steering ✔✔Channeling of home seekers to particular neighborhoods based on the presence or absence of a protected class; or discouraging buyers from area b/c of protected class Redlining ✔✔Practice of refusing to make mortgage loans or issue insurance policies in specific areas for reasons other than the economic qualifications of the applicants or collateral All written agency agreemebts ✔✔Must be signed by all parties; include brokers license #; have a definite termination date; contain nondiscrimination provision Listing agreement ✔✔Employment contract where the firm/broker is hired to represent principal but real property isn't transferred Pays the provisional broker ✔✔BIC, never the principal Ready willing & able buyer ✔✔One who is financially qualified, prepared to buy on sellers terms, & ready to take positive steps towards consummation of the transaction by showing willingness to enter into an enforceable contract Procuring cause (of sale) ✔✔Broker must've taken action to start/cause an unbroken chain of events that resulted in the sale Antitrust laws ✔✔Prohibits monopolies & contracts, combinations & conspiracies that unreasonably restrain trade Allocating markets/customers ✔✔Agreement btwn brokers to divide their markets & refrain from competing w/ each other for business Open listing ✔✔NONEXCLUSIVE LISTING. Seller retains the right to employ any # of brokers as agents; seller is only obligated to pay commission to agent that secures ready willing & able buyer. If owner finds buyer, doesn't pay. Exclusive agency listing ✔✔1 broker is specifically authorized to act as the exclusive agent on behalf of the principal. seller retains right to procure buyer, if they do no commission Exclusive right to sell listing ✔✔1 brokerage firm is appointed as sole exclusive agent or the seller & is given authorization to represent the property in question. Seller must pay commission either way. Midnjght ✔✔When listing agreement automatically terminates if property isn't sold Net listing ✔✔The amount of money the seller will recieve if property is sold. Once seller's net is met & liens are paid, broker keeps remainder Override/extender clause ✔✔Property owner will pay listing broker a commission if within the specified # of days they sell/rent/option the property through someone the broker procured 15 days Must be in writing & signed ✔✔All offer to purchase contracts Real estate contracts must include ✔✔Price,terms,legal description of property,kind&condition of title,who will provide title,state all terms of agreement& list al contingencies or conditions Uniform electronic transactions act ✔✔E-commerce includes real estate transactions contracts can be created electronically Acceptance ✔✔Occurs when the offerer signs the offer without making any changes to it Mailbox rule ✔✔If an acceptance is placed in to the ma service to the other party's agent, it's considered having been delivered. Cannot revoke once in mail Cash at closing ✔✔Any outstanding balance that must be paid by buyer or seller at closing table Return of earnest money ✔✔If offer doesn't mature into a contract Buyer can terminate option to purchase ✔✔No later than 5 pm on end of due diligence period Due diligence period ✔✔Right NOT to purchase by a certain date During due diligence period ✔✔Buyer is encouraged to secure financing & negotiate repairs or changes in the contract Broker must present ___ offers to seller ✔✔ALL Multiple offers on a property ✔✔Not a material fact. If one buyer is notified, all must be. Must have permission from seller & other buyers (if disclosing details) Installment land contract ✔✔Seller agrees to owner financing, seller retains legal title, buyer secures possession & equitable title Conventional option ✔✔A contract by which an optioner(owner) gives an optioner (prospective purchaser or leasee) the irrevocable right to buy or lease the owners property at a fixed price within a stated period of time Preemptive right ✔✔Gives a party first right to purchase real property Right to refusal ✔✔Created when a property owner promises to give the contracting party first chance to buy the property or to match the bonafide offer of a third party (should owner decide to sell in future) Mill rate ✔✔$ for every 1,000 of assessed value NC minimum lease termination notice ✔✔Week-week:2 days Month-month:7 days Year-year:one month Greater than 3 years must be in witting ✔✔Leases Earnest $ deposit timeframe ✔✔In escrow immediately, but no later than 3 banking days Property management purpose ✔✔General agents. To obtain highest & best use for client. Must have license unless they're the title holder of property Net Operating Income (NOI) ✔✔SGI-vacancy-collection losses= EGI-operating expenses=NOI Before tax cash flow ✔✔NOI-debt service Estate for years ✔✔Leasehold estate that continues for a "definite period of time". Must have specific beginning & end date. Terminates automatically Estate from period to period ✔✔Leasehold estate that continues for a specific period of time, auto-renews, no specific end date Estate @ will ✔✔Gives tenant "right to possess property w/ consent of landlord for unspecified duration" can be terminated by either party at any time, w/o notice Estate @ sufferance ✔✔When a tenant who lawfully came into possession of real property continues after rights have expired to hold possession w/o consent of landlord Fixed/Gross lesse ✔✔Tenants obligation to pay a fixed amount & landlord pays all taxes, insurance,mortgage, repair costs, etc. Percentage lease ✔✔Provides for rental based on a percentage of the gross or net income recorded by tenant during business on leased property Net lease ✔✔In addition to base rent tenant pays all or some of the property charges such as maintenance taxes & insurance Graduated lease ✔✔Provides for increased in rent to occur @ set future dates Index lease ✔✔Allows rent to be increased or decreased periodically based on changes in a stipulated index Ground leade ✔✔Landlord leases land to a tenant who agrees to erect a building on the land. Usually 99 year term Full service leades ✔✔Commercial leases that are often used in a large office of multi-tenant building where tenants share job overall operating expenses for common areas Implied warranty of habitability ✔✔To supply fit & habitable premises Constructive eviction ✔✔Gives tenant right to cancel remainder of lease due to landlords breach of contract Summary ejectment ✔✔When landlord wishes to evict tenant must obtain through judicial system Title theory (NC) ✔✔3-party deed of trust instrument as security for a debt. Borrower retains equitable title. Trustee holds legal title. Lender requests trustee to initiate power of sale foreclosure in event of default Lien theory ✔✔2-party mortgage instrument is used as security for a debt. Borrower retains legal & equitable title. Must use judicial foreclosure in event of default Promissory note ✔✔Written agreement to repay the debit in installments w/ jnterest. Includes; amount of debt,time & method of payment& interest rate. Isn't recorded Mortgage or deed of trust ✔✔Security instrument document that pledges the property to the lender as security or collateral for a debt Hypothecation ✔✔Act of pledging real property as security for a payment of a land w/o giving up possession of the property Naked/bare legal title (NC) ✔✔Type of title given to the trustee under title theory Essential element of a valid promissory note ✔✔1)term 2)promise to pay 3)signature of borrower(s) Negotiable instrument ✔✔A written promise or order to pay a specific sum of $. Must be in writing & signed by lender Prepayment penalty ✔✔Prohibited on all FHA loans. In NC prohibited on $150k or less for first time buyers Princiaol ✔✔Money borrowed Interest ✔✔A change for the use of money borrowed Amortized loans ✔✔As regular payments are made,each payment is broken down&dappled first to the interest owed,w/ the rest of the payment applied to the principal amojnt Direct reduction loans ✔✔Require a fixed amount of principal to be paid in each payment w/ amount applied to interest varying as principal is reduced PITI ✔✔Principal Interest Taxes Insurance Fully amoritized fixed rate mortgage ✔✔Requires that the mortgagor pay a constant amount that will completely pay off the loan amount w/ last equal payment Partially amoritized fixed rate mortgage ✔✔Monthly principal & interest payments are constant amount but the payment amount isn't suffice t to completely pay off the loan within loan term must make balloon payment Usury ✔✔Charging interest in excess of rate is illegal Yield ✔✔Return or profit on a loan Discount points ✔✔Rate of interest the lender charges for a mortgage loan might be less than the rate of return required by the lender or by an investor who might purchase that loan from the lender. Can charge discount points to make up difference btwn mortgage interest rate & required investor yield. Discount points = ✔✔1 point=1% of loan must be done in 1/8 Loan origination fee ✔✔1% of original loan amount Term/straight loan ✔✔Interest only payment plan that calls for periodic payments of interest only, w/ principal to be paid in full @ end of loan term Adjustable rate mortgage ✔✔Generally originate at one interest rate, w/ rate fluctuating up/down during loan term based on the movement of published index Graduated payment loan ✔✔Allows a mortgagor to make lower monthly payments for the first few years & larger payments for the remainder of term Satisfaction of mortgage ✔✔When note has been fully paid, trustee must issue a satisfaction of mortgage;aka deed of release,recon enhance deed, release of mortgage or mortgage discharge Equity of redemption ✔✔Foreclosure process extinguished the borrowers right to regain the property during the foreclosure proceedings,but before the confirmation,borrower can raise funds to pay back payments interest & costs,to stop foreclosure®ain property. 10 days in NC Deficiency judgment ✔✔When foreclosure sale doesn't satisfy loan balance lender may be entitled to personal judgment of unpaid balance Deed in lieu of foreclosure ✔✔W/ agreement of lender,borrower gives over title instead of foreclosure Short sale ✔✔When proceeds from the sale aren't enough to satisfy seller's deb,&buyer lacks funds to cover difference.the borrower sells the property for less& remaining debt is forgiven Federal reserve system ✔✔To maintain sound credit conditions,help counteract inflationary&defamatory trends&create a favorable economic climate.12 districts in US Primary mortgage market ✔✔Made up of the lenders that originate mortgage loans Secondary mortgage markets ✔✔Purchases,services&sometimes resells existing mortgages&mortgage-backed securities created by primary market lenders FANNIE MAE ✔✔Formerly Federal National Mortgage Association. Federally owned-- conventional loans,VA loans&FHA insured loans. FM buys block or pool of mortgages in exchange for mortgage backed securities GINNIE MAE ✔✔Formerly Government National Mortgage Association,division of HUD,designed to administer special-assessment programs FREDDIE MAC ✔✔originally the Federal Home Loan Mortgage Corporation, government owned specializes in conventional loan Subprime loan ✔✔A loan made to a borrower w/ a credit rating below what's required for regular loans creating greater risk liability for the lender that's countered by higher interest rates & fees Conventional loan ✔✔Loan that isn't backed/insured by government agency Loan-to-value ration (LTV) ✔✔Ratio of debt to value of the property Nonconforming loqns ✔✔Mortgage loans that don't meet all conventional guidelines Jumbo loans ✔✔Loans that exceed maximum limits for conforming loans FHA insured loans ✔✔Most popular are fixed-interest rate loans for 10-30yrs. Borrower must pay one time insurance premium @ settlement loans can't exceed 98.75% discount points available FHA loan assumption ✔✔Buyer must qualify w/ FHA to assume loan VA guaranteed loans ✔✔Act of 1944 guarantees loans to purchase or construct to qualifying veterans. Eligibility depends on time served,can't have dishonorable discharge,no prepayment penalty, Certificate of Reasonable Value (CRV) ✔✔In VA loans, instead of an appraisal a CRV is obtained Purchase money mortgage ✔✔Owner-financing given at the time of purchase to facilitate the sale&refers to the instrument "given by the purchaser to a seller who takes back a note &mortgage for part or all of the purchase price" Package loan ✔✔Includes not only the real estate,but also all fixtures&apploanxe a installed on the premises Blanket mortgage ✔✔Covers more than one parcel of land& usually is used to finance subdivision developments Open-end mortgages ✔✔Act as a line of credit or equity line, allowing the mortgage to make additional future advances of funds to the mortgagor Construction loans ✔✔Made to finance he construction of improvements on real estate Sale-and-leaseback ✔✔Arrangements are used rather extensively as a means of financing large commercial or industrial plants Home equity loans ✔✔Are a source of funds for homeowners who wish to finance the purchase of expensive items Reverse mortgage ✔✔One in which regular monthly payments are made to the borrower,based on the equity the homeowner has invested in the property given as security for the loan Front end/Back end ratios ✔✔Conventional 28% or 36% FHA 31% or 43% VA (front end only) 41% Due diligence period ✔✔Buyers opportunity to investigate the property & transaction completed by this contract & decide whether buyer will proceed w/ or terminate the transaction end @ 5pm of date Survey ✔✔Known for verifying property lines & possible encroachments,but also identifies easements&setbacks Soil-sustainability test ✔✔Measures the soils ability to absorb& drain water Broker must deliver settlement statement ✔✔At closing or within 5 days Documents seller must provide ✔✔Deed,affidavit to mechanics liens,bill of sale for personal property,leases, statement from lender,proof of repairs Documents buyer must provide ✔✔Financing docs,title insurance policy, property insurance policy,insect report, property survey Settlement agent or officer ✔✔Conducts closing proceedings & calculates division of money Real Estate Settlement Proceedings Act (RESPA) ✔✔Enacted to protect consumers from abusive lending practices& aids consumers during residential mortgage loan settlement process. Eliminates kickbacks Good Faith Estimate (GFE) ✔✔Gives buyer estimates on loan related costs. Must contain the exact language specified by HUD,making it easier for borrowers to understand. 3 day waiting period if changed Credit report ✔✔Only fee lender may collect before GFE No tolerance (GFE) ✔✔Fees may NOT increase before closing 10% tolerance (GFE) ✔✔Fees can increase by 10% Unlimited tolerance (GFE) ✔✔Fees that are in buyers control,buyers shops for Uniform settlement statement (HUD-1) ✔✔RESPA requires that the uniform settlement statement itemize all changes that normally paid by a borrower&seller in connection w/ settlement Yield spread premium ✔✔A substantial fee that is/was paid to the mortgage brokers for making loans to subprime borrowers @ above-market interest rates RESPA escrow account restrictions ✔✔Monthly basis;1/12 of yearly disbursements + amount to cover shortage,no more than 1/6 of yearly disbursements maybe held as cushion, once a year must perform analysis & return any amount over $50 to borrower Debit ✔✔A charge; an amount the party owes& must pay @ settlement Credit ✔✔An amount entered in a persons favor Double entry/debit ✔✔When both parties are involved in a bill or an expense Title preparation fee ✔✔Seller pays to make sure title is marketable Title/deed recording fee ✔✔Buyer/borrower pays Accrued jtsms ✔✔Unpaid items to be prorated that are owed by the seller but will be later paid by the buyer Prepaid items ✔✔Expenses that have already been paid by the seller prior to settlement & the buyer needs rebate that portion to the seller Bankers year method ✔✔360 days a year/30 days a month Who is responsible for day of closing ✔✔Seller NC department of insurance ✔✔Has jurisdiction over building codes Interim interest ✔✔Interest paid until end of month Comparative market analysis a.k.a. broker price opinion ✔✔PB can't perform. Can be done for a fee, as long as there's no promise of business Characteristics of value (DUST) ✔✔Demand Utility Scarcity Tranferability Income capitalization approach ✔✔Income divided by rate=value Appraisal ✔✔An estimate or opinion of value completed by a licensed appraiser of a specific property as of a specific date Value ✔✔The relationship between an object desired and a potential purchaser Market value ✔✔The most probable price of the property and will bring in a competitive and open market Market price ✔✔What the property actually sells for 4 forces that affect property calue ✔✔1)social forces 2)economic forces 3)political forces 4)physical forces 3 different appraisal methods ✔✔1)sales comparison approach 2)cost approach 3)income capitulation approach Sales comparison approach ✔✔An estimate of value is obtained by comparing subject property w/ recently sold comparable property Arms length transaction ✔✔Property did not sell for an unusually high or low price because of the special relationship between the buyer and seller Cost approach ✔✔Based on the principle of substitution the maximum value of the property tends to be set by the cost of acquiring an equally desirable valuable substitute property Reproduction cost ✔✔Dollar amount required to construct an exact duplicate of the subject building at current prices Replacement cost ✔✔The cost at current prices and using modern materials and the methodology of a property that isn't necessarily an exact duplicate but serves the same purpose as original property Depreciation ✔✔Any condition that adversely affects the value of an improvement to real property Depreciation classes (3) ✔✔Physical deterioration-curable/incurable, functional obsolescencecurable/incurable, economic obsolescence economic life ✔✔Period during which a structure is expected to remain original intended purpose Gross rent multiplier ✔✔Sales price divided by rental income=GRM Reconciliation ✔✔The art of analyzing ineffectively weighing the findings from the different approaches used during the appraisal process Property/casualty insurance ✔✔Policy protects the insured from losses caused by damage to the property & the improvements on that property Liability insurance ✔✔Policy protects the insured from losses caused to 3rd persons on their property Package insurance ✔✔Policy protects insured from both types of losses Homeowners insurance policy ✔✔Insurers owner against the destruction of their property I named perils, injury to others that occurs on the property, and theft from the premises of any personal property that's owned by the insured or members of the insureds immediate family Condition (insurance) ✔✔A limitation on the coverage of a specific insured property Endorsement ✔✔Coverage for a specific property or perils that aren't covered in the original policy, aka a rider Exclusion ✔✔Some item,or loss due to a specific event, that isn't covered by the policy Coinsurance clause ✔✔Penalizes the policyholder for under insuring the property. Usually required to carry amount equal to 80% of replacement cost Capital gain ✔✔When a person sells real property for more than what they paid for it. If held longer than 12 months long term 15% Cost basis ✔✔The owner's initial cost for the real estate Adjusted basis ✔✔The cost of any physical capital improvements that add value to the property, or prolong its life Amount realized ✔✔Sales price-allowable closing costs Adjusted basis formula ✔✔Purchase price + allowable closing costs + capital improvements= adjusted basis Capital gain formula ✔✔Amount realized- adjusted basis= capital gain/loss Capital gain exeptions ✔✔Only if primary residence, allowed every 2 yrs, $500k or less for married couple, $250k or less for single person Vacation home deductions ✔✔Can deduct if rented to others at all times, or less than 14 days or less than 10% of total # of days which property is rented Tax-deferred exchange ✔✔Property must be exchanged, NOT sold, must be like-kind properties. Real estate must be exchanged for real estate Boot ✔✔If one property exchanged is worth more cash or personal property may be included Depreciation ✔✔Allows an investor to recover the cost of an income-producing asset by taking tax deductions over the period of the assets useful life Improvement depreciation life ✔✔27.5/ residential 39.5/non-residential Asbestos ✔✔A mineral that was once used as insulation. Banned in 1978. Only harmful if exposed or disturbed Encapsulation ✔✔The sealing off of asbestos Lead-based paint ✔✔Approx. 75% of homes built before 1975 contain it. Banned in 1978. Must be disclosed & given records. Radon ✔✔A radioactive gas produced as a byproduct of the natural decay of other radioactive substances. Found in every NC county, highest in mountains. Reduction by means of mitigation Urea-formaldehyde foam insulation (UFFI) ✔✔Insulation used mainly in 1970s, gas can leak into walls while hardening Carbon monoxide (CO) ✔✔A colorless,odorless gas that occurs as a byproduct of burning such fuels as wood, oil & natural gas if combustion is incomplete. Must have CO detector on any floor w/ appliances Electromagnetic fields (EMFs) ✔✔Generated by the movement of electrical currents Groundwater ✔✔H2O that exists under the earth's surface within tiny spaces or crevices in geological formations Water table ✔✔The natural level @ which the ground is saturated Underground storage tabks ✔✔Storage tanks found underground, now illegal Comprehensive Environmental Response Compensation & Liability Act (CERCLA) ✔✔Landowner is liable when a release or a threat of release of a hazardous substance has occurred on their property CERCLA 1980 ✔✔Superfund for cleanup is created NC Coastal Area Mgmt Act (CAMA) ✔✔Designed to protect & preserve the coast The Mountain Blue Ridge Protection Act ✔✔Allows a municipality to adopt & enforce construction regulations NC dredge & fill act ✔✔Property owner must obtain permission to dig on the coast Liquidity ✔✔How fast an asset can be converted into cash Inflation ✔✔The increase in the amount of money in circulatkon Cash flow ✔✔The total amount of money remaining after all expenditures have been paid. Leverage ✔✔The use of borrowed money to finance an investment Equity buildup ✔✔A result of the loan payment directed towards the principal rather than the interest, plus any gain in property value due to appreciation Scheduled gross income ✔✔The maximum income the property would produce in a year if there were no vacancies and a prevailing market rental rate was charged Effective gross income ✔✔The more realistic amount of income to actually be collected. Evaluated by the subtraction vacancy and collection losses from the SGI Before tax cahs flow or cash throw odd ✔✔NOI - debt service Corporation ✔✔A separate legal entity that can own and sell real estate in its own name September 1st ✔✔Tax bill released. Ad valorem. Normally mill rate, $1(or what's stated)for every $1000 Trust accounts rules ✔✔Direct demand account. In NC. Not interest bearing. No more than $100 dollar of firms money. Time share act ✔✔Must obtain registration. $1500 app fee. Must record sale contract 6-45 days. Fines $500 for each infraction. Must disclose public offering statement. Prorating through the day of closing ✔✔Seller is responsible for day of closing Prorating to the day of closing ✔✔Buyer is responsible for day of closing