By: Roger K. Sherrill, Real Estate Tutor
1. Real Estate contracts must be in writing to be enforceable according to the Statute of Frauds (except for leases of less than one year)
2. Any contract signed by a person lacking mental capacity is VOIDABLE.
3. The phrase “legally enforceable” means court supported if there is a default.
4. A contract that grossly violates local zoning ordinances and building codes is VOID, in that it violates the law.
5. VALUABLE consideration can be measured in monetary terms. Although it may not actually be money, it could be measured in money.
6. GOOD consideration is usually acceptable in a conveyance to a charity. Most courts allow this as legal consideration.
7. REALITY OF CONSENT means that contract is entered of one’s own free, informed, will.
8. Listings, Sales Contracts, Leases, Property Management Contracts may identify a property by it’s street address only, does not need the entire legal description; but this would not be acceptable for a document which is to be recorded. A document which is to be recorded must have the legal description.
9. Oral contracts are expressed. Words are used to express the intent.
10. In a unilateral contract one party’s obligation is totally contingent upon the other party’s performance. In a bilateral contract both parties are simultaneously obligated.
11. Prior to completion of a contract, it is considered EXECUTORY. A contract becomes EXECUTED when all parties have performed.
12. A contract entered into by a minor with an adult is VOIDABLE only by the minor. The minor has the option of voidability.
13. An unenforceable contract is VOID.
14. Circumstances of a contract can make it voidable. If one party to the contract is placed at a disadvantage, the contract is VOIDABLE.
15. The difference between FRAUD and MISREPRESENTATION is determined by the INTENT.
16. Contracts may be assigned unless specifically prohibited in the contract.
17. The ASSIGNOR still remains liable if an ASSIGNEE defaults.
18. A NOVATION of the parties is an assignment with a release of liability. With a novation, there is no further liability to the assignor.
19. The principal owes INDEMNIFICATION to the agent to protect agent against liability due to the principal’s actions or deceit. If deceit was by the principal/client, the agent should not be held accountable.
20. COALD is the acronym for CARE, OBEDIENCE, ACCOUNTING, LOYALTY, DISCLOSURE, all owed to an owner/principal by an agent (fiduciary). Remember for test purposes that the A in COALD stands for ACCOUNTING and that the most important fiduciary responsibility of an agent to his client/principal is LOYALTY.
21. An agent must deal honestly and fairly with all parties in a transaction, even if it means disobeying his client/principal. The duty of fairness must always come first.
22. A SPECIAL AGENCY is created in a listing contract or buyer brokerage contract, since there is NO POWER to sign a contract. For test purposes, remember real estate agents are considered SPECIAL AGENTS.
23. Because a PROPERTY MANAGER has some contractual powers, he is considered to be a GENERAL AGENT. The property management contract created a GENERAL AGENCY.
24. A statement of opinion is one example of PUFFING. There is however, often a fine line between opinion and fact.
25. The EXCLUSIVE RIGHT (Authorization) TO SELL is a listing where the Broker gets paid regardless of who sells the property including if the owner should sell it him/herself.
26. The EXCLUSIVE AGENCY is a listing where the Broker gets paid if any agent sells the property but the OWNER RESERVES THE RIGHT TO SELL PROPERTY HIM/HERSELF, to a buyer found by the seller.
27. The OPEN LISTING is a listing which may be given to multiple brokers and the only way you will get paid is to BE THE PROCURING CAUSE OF SALE.
28. The NET LISTING is a listing where an owner wants to NET a certain amount from the sale of his/her property and any amount property NETS after seller’s agreed to NET is to be the commission. NET listings can present the broker with a sometimes natural conflict of interest as this pits the broker’s desire for a commission against the seller’s desire for a quick sale.
29. The FLAT FEE LISTING is a listing where broker agrees to sell the property for the owner for a set dollar amount, regardless of what the property sells for.
30. The EXECUTORY period of a sales contract is often referred to as ESCROW. This is the temporary relationship between buyer and seller until closing. Close of escrow is when all parties have performed the duties required under the sales contract. Nothing more remains to be done. This is then considered EXECUTED. The ESCROW is a third party, often a title company.
31. Assume a buyer forces a defaulting seller to sell anyway. This is called a suit for SPECIFIC PERFORMANCE; or likewise if a seller forces a defaulting buyer to buy.
32. An owner may NOT always cancel a listing without liability as they may still be liable for expenses incurred or possibly a full commission.
33. A danger of a seller keeping a buyer’s earnest money is that any new prospective transactions could be lost if the buyer disputes the forfeiture and ties up the seller in litigation.
34. Most commissions are calculated based on Sale Price, NOT List Price.
35. The brokerage owns the listing, NOT the salesperson.
36. Death or Bankruptcy of the seller or broker TERMINATES a listing. Death or bankruptcy of the listing salesperson has no effect on the listing.
37. Earnest Money is NOT necessary for a valid sales contract, although it is customary. The consideration in the contract is simply the promise to close transaction.
38. A Protection Clause in a listing does NOT protect the broker’s commission if the property is re-listed, as this clause is waived if the property is re-listed after expiration.
39. Delivering marketable title is a condition to a purchase agreement. Title must be delivered or the transaction will fail.
40. A FORFEITURE does not require monies to be returned to the buyer. If the buyer forfeits, they WOULD LOSE THEIR MONEY.
41. An Option is a UNILATERAL CONTRACT. An option is NOT VALID unless some type of consideration is paid by the optionee and the optionee is not entitled to a refund if the option is not exercised. An optionee does not have to exercise his/her option but if they want to exercise their option, the optionor MUST perform.
42. TENANCY or ESTATE implies POSSESSION, NOT OWNERSHIP.
43. A LEASE is a TEMPORARY TRANSFER of POSSESSION, but there is no minimum time.
44. An ESTATE FOR YEARS is for a set period of time with a definite ending date, it can be for a day, a week, a month, a year, whatever.
45. An ESTATE AT WILL is open-ended. There is no fixed time of termination.
46. A PERCENTAGE LEASE is common in retail shopping malls. The tenant pays part of their income in exchange for landlord support.
47. An INDEXED LEASE adjusts for inflation.
48. A STEP-UP LEASE calls for periodic raises in the base rent. This is also called a GRADUATED LEASE.
49. A GROSS LEASE means the Tenant pays none of the owner’s normal operating expenses.
50. A NET LEASE means the tenant pays most or all of the operating expenses of the owner. The more nets, the more the tenant pays.
51. EVICTION is to legally dispossess a tenant from the property. There is a proper legal process that must be followed.
52. A PROPERTY MANAGER arranges for the physical care and maintenance of the property. This is their primary function and focus, not the collection of rents, although they do become involved in other functions also.
53. In APPRAISAL, the SALES COMPARISON approach is based primarily upon the principal of SUBSTITUTION, ie. Equally Desirable Substitutes in the marketplace. You are estimating value by comparing a buyer’s alternatives.
54. A REAL ESTATE APPRAISER only deals in FACT so only cares about ACTUAL SALES.
55. Real Estate Salespeople perform what is called a COMPARATIVE MARKET ANALYSIS (CMA) and they even take into consideration Listings, Sold Properties and Expired Listings.
56. A REAL ESTATE APPRAISER adjusts the comparable’s price DOWN if the comp is better than the subject. If the comp is better, they bring the price of the comp down, if the comp does not have a feature that the subject has, then they adjust the comp UP. Remember, you never adjust the subject, you only adjust the comp, UP or DOWN, but NEVER ADJUST THE SUBJECT (property being appraised).
57. It is NEVER advisable to compare a two bedroom home to a three bedroom home even if they are next door to each other. The markets are totally different.
58. RELATED PARTY Sales should NOT BE USED as comparables. The motivation of the parties may sway the selling price.
59. FINANCING CONCESSIONS by a seller (of a comp) should be taken into consideration as this is virtually a lowering of the price.
60. The most common reason for a MARKET DATA APPRAISAL is for RESIDENTIAL financing. The reason this is true is because this is the most common transaction. The whole strength of this approach is the availability of MANY COMPARABLES.
61. To determine the CONDEMNATION VALUE of a home TAKEN for airport expansion, a MARKET DATA survey approach is used. The owner should get FULL MARKET VALUE as if they were choosing to sell, rather than forced to sell.
62. The COST APPROACH would be used if there aren’t many comps, like for example, a museum, fire station, police station, school, etc.
63. LAND CANNOT be appraised by the COST APPROACH. Since land cannot be rebuilt, it MUST BE APPRAISED by the SALES COMPARISON APPROACH.
64. A SITE ANALYSIS would consider things such as frontage, soil conditions, utility connections and topography. These are all physical attributes of the land.
65. RACIAL and ETHNIC composition should NEVER be considered in a neighborhood analysis. This would be a DISCRIMINATORY observation.
66. An AMENITY is something EXTERNAL and intangible such as a VIEW, A TENNIS COURT, A GATED COMMUNITY. A vaulted ceiling or a fireplace is NOT considered an amenity, but is a physical feature.
65. A MASTER-PLANNED community tends to STABILIZE VALUES avoiding regression or progression by maintaining consistency and conformity for the area and values tend to hold up better when there is little variation in the quality.
66. The STABILITY PHASE of a neighborhood is sometimes referred to as EQUILIBRIUM. This is the longest phase. Growth precedes it and then decline follows.
67. One of the major aspects of a neighborhood analysis is the accessibility of the area to schools, shopping and access routes. This explores how well supported are the owner’s needs. This is also called LINKAGE.
68. CAPITALIZATION is the mathematical computation of value based on the income derived. The investor bases his valuation upon the expected income stream. Using the IRV circle here, remember net INCOME divided by cap RATE equals VALUE; INCOME divided by VALUE equals RATE and RATE multiplied by VALUE equals INCOME.
69. RISK represents the chance of loss. Remember, the Higher the Risk, the higher the CAP RATE and a Lower Risk would call for a lower CAP RATE.
70. LIQUIDITY is the ability to quickly convert an investment to cash without significant loss or costs. Remember, the longer one’s money is tied up, the higher the CAP rate must be.
71. Remember, the Higher the CAP RATE, the less the property is VALUED, the Lower the CAP RATE, then the property is valued Higher.
72. The GROSS SCHEDULED INCOME (GSI) or Gross Potential Income is calculated BEFORE deducting vacancy.
73. The ACTUAL COLLECTION of rents is the EFFECTIVE GROSS INCOME (EGI).
74. After deducting Operating Expenses from EFFECTIVE GROSS INCOME, you are left with NET OPERATING INCOME and this is what is actually capitalized. The “bottom line” is what the investor is concerned with.
75. GROSS RENT MULTIPLIERS are sometimes used by appraisers as a rule of thumb method to appraise and do NOT take into consideration any operating expenses.
76. EQUITY is the current value of the property LESS current debts on the property.
77. INTEREST is the compensation to the lender (or seller) for having to wait for repayment of their money. This is the “rent” you pay for using another’s money.
78. The PROMISSORY NOTE is the instrument of credit given to attest a debt. The note outlines the schedule of required payments and interest accruals. This defines Due Dates, Interest Rate, Payments. The note is NOT recorded, but instead a mortgage or deed of trust is given as COLLATERAL for the note and it is the mortgage or deed of trust which is recorded.
79. HYPOTHECATION is the borrowers right to retain possession of property or other assets, while using it as collateral for a debt.
80. A LIEN is a right given by law to certain creditors to have their debt paid out of the property of a defaulting debtor, usually by means of a court sale. A lien is considered only PERSONAL PROPERTY. A lien is not a real property interest. (a lien is paper, like a stock certificate)
81. Remember that a LIEN is always MONETARY.
82. MORTGAGES are VOLUNTARY, SPECIFIC, NON-STATUTORY liens.
83. PROPERTY TAXES are INVOLUNTARY, SPECIFIC, STATUTORY liens.
84. A MORTGAGE has only two parties, the Mortgagor (borrower) and the Mortgagee (lender).
85. A DEED OF TRUST has three parties, the Trustor (borrower), Trustee (3rd party) and the Beneficiary (lender).
86. BENEFICIARY is the person for whom a trust operates, or in whose behalf the income from a trust estate is drawn, OR a lender who lends money on real estate and takes back a note and Deed of Trust from borrower (trustor)
87. The ACCELERATION CLAUSE in a mortgage or deed of trust is what allows lender to FORECLOSE, if you don’t abide by the terms in the mortgage or deed of trust.
88. ALIENATION is the act of transferring property to another. Alienation may be voluntary, such as by gift or sale, or involuntary, such as through eminent domain or adverse possession.
89. The ALIENATION CLAUSE in a mortgage or deed of trust is a DUE-ON-SALE CLAUSE which allows lender to call entire loan due if borrower sells the property. This also prevents borrower from assigning the debt without the mortgagee’s approval.
90. ASSUMPTION is the transfer of title from a grantor to a grantee wherein grantee assumes liability for payment of an existing note secured by a mortgage or deed of trust. Before the seller can be relieved of liability under the existing mortgage or deed of trust, the lender must accept the transfer of liability for payment of the note. To be relieved of this liability, seller would want a NOVATION, which is an assignment of rights and duties under a contract with a FULL RELEASE OF LIABILITY to the assignor.
91. A DEFEASANCE CLAUSE is found in a mortgage. This obligates a lender to release the lien if fully paid. A RECONVEYANCE CLAUSE is found in a deed of trust which obligates lender to release the lien if fully paid.
92. PREPAYMENT PENALTIES are rather rare but not illegal. However certain loan programs such as FHA insured or VA guaranteed loans prohibit them.
93. IMPOUND ACCOUNTS are sometimes called reserve, escrow or budget accounts and are used to collect from borrowers for future payment of taxes, insurance, etc. They are always required on FHA insured or VA guaranteed loans.
94. A seller extending credit to a buyer for part of the purchase price is called a PURCHASE MONEY MORTGAGE.
95. On an FHA 203-B loan, FHA requires a 3% minimum cash contribution on the total purchase price including allowable closing costs, or will insure 97% of the total purchase price including allowable closing costs.
96. Any monies owed on an IRS lien are NOT part of a bid at a foreclosure sale of a mortgage. Also, an IRS lien is NOT a specific lien, but is a general lien which goes against real and personal property.
97. A mortgage loan must have an ASSIGNMENT CLAUSE if it is to be sold to a secondary market warehouse.
100.The maximum VA GUARANTEE, is 60% of the mortgage.
101.A CONVENTIONAL LOAN is NEVER insured by a government agency.
102.A CONVENTIONAL LOAN without a sufficient down payment will probably
require private mortgage insurance (PMI)
103.Remember, FHA insures loans, VA guarantees them, neither make loans as
they are made by FHA or VA approved private lenders.
104.A MECHANIC’S LIEN is a SPECIFIC, STATUTORY LIEN.
105.A GRADUATED PAYMENT MORTGAGE (GPM), an ADJUSTABLE RATE
MORTGAGE (ARM) or a renegotiable rate mortgage could all cause a finan-
cial burden on a borrower in the future.
106.On a fully amortizing loan, the principal and interest payment remain con-
stant over the life of the loan.
107.The purpose of MORTGAGE INSURANCE is to provide the lender with
greater assurance investment will be recovered.
108.LOAN TO VALUE (LTV) ratio determines whether PMI (private mortgage
insurance) will be required.
109.An ADJUSTABLE RATE MORTGAGE (ARM) has interest rate reviews and
adjustments. It has many restrictions: Index, Margin, Interval, Cap,
110.An OPEN END LOAN allows future advances of funds against the property.
A HOME EQUITY Line of Credit is an Open End Loan.
111.A BLANKET MORTGAGE encumbers two or more parcels of property.
Usually RELEASE CLAUSES are used with a Blanket Mortgage.
112.If you pay a property off before the foreclosure sale, you are exercising a
right of redemption during the period of equitable redemption. After the
foreclosure sale, it is called redemption during the period of statutory
113.A POWER OF SALE CLAUSE in a mortgage or deed of trust allows NON-
JUDICIAL FORECLOSURE. JUDICIAL FORECLOSURE involves a court
ordered sale where you must petition a court before foreclosure is allowed
to proceed. STRICT FORECLOSURE is the LEAST COMMON. It was
replaced by those involving an auction.
114.A JUNIOR LIEN is a lien with a lower priority than a senior lien.
115.If a FORECLOSURE sale proceeds are insufficient to pay off the loan(s),
loan holder may file for a DEFICIENCY JUDGMENT. Most deficiency
judgments will be claimed by junior lienholders when proceeds of sale
only cover the first mortgage.
116.A DEED IN LIEU OF FORECLOSURE does NOT have to be accepted by a
lender if offered by borrower. Lender may decline in order to eliminate
junior liens and preserve rights to mortgage insurance or guarantees.
117.A WRAP-AROUND MORTGAGE may NOT be used when there is a Due-On-
118.A REVERSE ANNUITY MORTGAGE (RAM) is marketed primarily to elderly borrowers. In essence, they trade their equity for a right to receive monthly payments.
119.Mortgage BANKERS originate loans, sometimes use their own funds and
also service the loans. Mortgage BROKERS originate loans, usually not
using any of their own long term investment funds and SELL their loans to
the long-term investment market very quickly.
120.BANKS are oriented to shorter-term loans in their portfolios, whereas
SAVINGS & LOAN ASSOCIATIONS are oriented to the longer term real
estate market loans.
121.FNMA (Federal National Mortgage Association) also known as Fannie Mae
was a government agency but is now a private company. They deal in the
secondary mortgage market.
122.FHLC (Federal Home Loan Mortgage Corporation) also known as Freddie
Mac focuses primarily on CONVENTIONAL loans. They were established to
help provide funds for the Savings and Loan industry. They also deal in
the secondary mortgage market.
123.If money is harder to borrow (tight), then interest rates will be Higher.
124.PMI is private mortgage insurance, which would appear on a conventional
loan. MIP is mortgage insurance premium which would appear on an FHA
125.VA (Veteran’s Administration) does NOT offer mortgage insurance.
Remember, VA GUARANTEES a portion of the loan, never more than 60%
of the loan.
126.FHA 203-B loans can NOT be made to investors (non-occupants) For a
new FHA INSURED LOAN, the borrower must intend to occupy the
127.FHA INSURED and VA GUARANTEED LOANS MUST HAVE IMPOUND
128.A VA Guaranteed loan may be made to a serviceman still in the service, if
they have the proper length of service.
129.VA Guaranteed loans are NOT available on vacant land. It must be on a
1-4 unit family dwelling which is to be owner-occupied to get the loan.
130.The VA interest rate is NOT SET by VA. Market conditions determine the
rate at closing.
131.A VA buyer CAN PAY POINTS. They didn’t used to be able to but now can.
132.A VA entitlement can be used more than once. The loan could be assumed
by another veteran who substitutes his entitlement or the loan could be
paid off which would give the veteran back his entitlement.
133.RECD (Rural Economic Community Development) financing is available
ONLY in areas where the population is less than 20,000.
134.A BALLOON LOAN HAS partial amortization.
135.TAXATION is the power of the government to levy assessments against
136.Government TAKING of land is handled through a PROCESS known as a
CONDEMNATION proceeding through the POWER of EMINENT DOMAIN.
137.BUILDING CODES may require permits, inspections and the use of
licensed contractors. This helps assure the QUALITY and SAFETY of
138.Regarding the presence of HAZARDOUS MATERIALS on a property, agents
are expected to be able to research these conditions.
139.ZONING addresses the major uses of property in any given area. So does
city planning, with zoning being a bit more detailed.
140.A MINIMUM DISTANCE required between residential and industrial uses is
called a BUFFER ZONE.
141.If agricultural land was re-zoned for residential apartment use, this would
142.An apparently improper use can be legal if it was used prior to any zoning
ordinance regarding it’s present use. This is called NON-CONFORMING
USE and is “grandfathered” in and permitted to continue.
143.Special permission to use property in a differing fashion is a VARIANCE,
SPOT ZONING or you apply for a SPECIAL USE PERMIT.
144.Property Taxes are usually AD VALOREM (according to value). They vary
with the value of the property.
145.DOCUMENT TRANSFER TAXES are paid to raise revenue. No service is
146.RECORDING FEES are based on how many various documents there are
and how many pages to each, ie the more documents and the more pages
will cost more for recording.
147.Property Taxes are ALWAYS the number one LIEN, regardless of the date
148.Special assessments are NOT DEDUCTIBLE as PROPERTY TAXES when
filing one’s income tax. They may be added to the cost of a property, but
not deducted as a tax. This includes SIDS (Special Improvement District)
and LIDS (Limited Improvement District).
149.If you die without a will (intestate), and no heirs are found, the state
government gets your property by what is called ESCHEAT.
150.The federal Real Estate Settlement Procedures Act (RESPA) is to protect
consumers from abusive lending practices. HUD is the agency that ensures
compliance with RESPA. Kickbacks are prohibited by RESPA.
151.Any professional lender making over $1,000,000 in loans per year must
comply with RESPA.
152.Lender must give a GOOD FAITH ESTIMATE of CLOSING COSTS within 3
days of the loan application but according to the 1968 Fair Housing there is
NO ACCURACY REQUIREMENT.
153.The Fair Housing Act was amended in 1988 to add the issues of familiar
status and handicapped persons. This made 7 protected classes; race,
color, sex, national origin, religion, familial status and handicap.
154.If an owner uses a broker, the exemptions normally allowed under the 1968
Fair Housing Act are NOT ALLOWED. The limited exemptions are lost
when using an agent.
155.The purpose of the ANTITRUST LAW regarding real estate is to prevent
broker collusion. A broker who sets his office’s commission rates HAS
NOT violated antitrust law. A broker may do this within the brokerage, but
collusion with other brokers is ILLEGAL.
156. REGULATION Z is designed to protect consumers. It is called the Consumer
Credit Protection Act. The Federal Trade Commission (FTC) administers Reg
Z. Reg Z regulates credit terms.
157.Regulation Z DOES apply to all consumer real estate loans. Non-real estate
loans over $25,000 are EXEMPT. A shopping center loan would NOT be
covered but a residential loan or a loan for $20,000 to buy a boat WOULD BE.
158.Simple assumptions ARE NOT REQUIRED to be in compliance with Truth-in-
lending at closing because it is not a new loan.
159.Finance charges must be disclosed both in dollars and Annual Percentage
160.Advertising a down payment triggers full disclosure of all credit terms. The
only non-triggering numbers allowed in ads are PRICE and APR.
161.A BORROWER does NOT HAVE THREE DAYS TO REVOKE WHEN HE BUYS
A HOUSE. Three (3) days to revoke ARE ALLOWED on a NON-PURCHASE
162.A divorced woman with no credit in her own name can apply for financing
based on her ex-husband’s credit history. She can use the credit history
from during her marriage.
163.A buyer who is denied credit must be told in writing in ALL CASES, not only if
the decision was based on a poor credit report.
164.A 1099-MISC is used for reporting a salesperson’s commissions. The broker
issues this to the salesperson and to the IRS.
165.A 1099-S requires information about only the SELLER; name, social security
number, sale date, property ID and Gross Sales Price.
166.Foreign sellers of real estate are subject to withholding of 10% of the Gross
167.Like-kind properties in a tax-deferred exchange can be any investment real
estate properties. But they MUST BE U.S. PROPERTIES.
168.An investor who trades DOWN in value will be taxed on the amount he
“STEPPED DOWN” in value.
169.CO-OPERATIVE APARTMENT BUILDINGS is when the tenants form a
corporation to buy the building and then each buys stock in the
corporation. There is only one corporate owner of the building, with only
one mortgage on the building, if any. Each shareholder gets a proprietary
(owner’s) lease for the right to occupy a unit. Shareholders own personal
property only (stock in the corporation).
170. CONDOMINIUMS are allowed under state laws called horizontal property
acts as they have a third dimension (height) in their legal description. In
reality you own a box of air so often they are called air lots. There is fee
simple title to each individual unit with a separate mortgage, tax bill and
liability for each individual owner. There are common areas and all owners
of units are also tenants in common regarding the common areas.
171. TIME SHARES are condos, townhomes, homes or hotel rooms which are
sold with the right to occupy the property for a week at a time, repeating
for the same week each year. This time division creates many co-owners
per unit. As a purchaser, you get a deed and title so this is a FREEHOLD
which lasts indefinitely. A RIGHT TO USE timeshare is a LEASEHOLD
which will terminate in the future.
172. P.U.D.s – Private urban development or PLANNED UNIT DEVELOPMENT or
TOWNHOMES. In this ownership zero lot lines refer to the fact that owners
have no separate land rights outside of units. These are common areas in
the development. But, in this ownership, unlike condos, you DO OWN the
land below and the air above the unit. Often, zero lot lines are only on one
or two sides of the unit. CLUSTER zoning allows violations of individual
setbacks between homes while still complying with density requirements.
173. PRIOR APPROPRIATION WATER RIGHTS are controlled by the state.
They are then distributed on a first come, first served basis to people
showing beneficial uses.
174. An owner of land along a river would have RIPARIAN rights, ie. RIPARIAN
flowing; LITTORAL – non-flowing.
175. A street address is insufficient identification for a document to be
recorded. A legal description is needed. Lot, Block & Subdivision or
Metes & Bounds or U.S. Government Survey.
176. Lot, block and subdivision descriptions make reference to a plat map of
the subdivision. The recorded map shows the location of property, roads,
177. The approval of subdivision plats is part of police power called
subdivision regulations. Before approval (and recording) the subdivision
must meet certain guidelines (road widths, utility access, schools).
178. METES AND BOUNDS descriptions must begin and end at the same point.
If they don’t “close”, the vagueness and uncertainty renders the
179. DEGREES, MINUTES, and SECONDS identify the angle or direction of a
180. The U.S.G.S. uses a principal meridian and base line to establish location
of parcels. Everything is referenced in relation to these two lines.
181. RANGE lines are parallel to meridians. TOWNSHIP lines are parallel to
182. CORRECTION lines are every 24 miles (4 townships). Range and
Township lines are every 6 miles.
183. The combination of a tier and a range is a TOWNSHIP. There are 36
Sections in one Township.
184. You number SECTIONS starting with # 1 in the NE corner of a Township,
numbering across and down in a serpentine fashion all the way through 36
which should end up in the SE corner of the Township.
185. A section is 640 acres and is also one mile square.
186. U.S.G.S. descriptions MUST BE SOLVED BACKWARDS. The largest
portion is at the end of the description. Start there and work backwards to
the smaller portions.
187. BENCHMARKS are used for both elevation measures and points of
reference in legal descriptions. They can be used for surveying
monuments and datum (elevation) planes.
188. VESTING identifies the present ownership characteristics of the owners
and their responsibilities to each other. Their rights and duties are
established by their vesting choice.
189. UNDIVIDED INTEREST means that everybody has EQUAL ACCESS and
POSSESSION. It doesn’t mean that one co-owners share can’t be sold
except to another co-owner.
190. UNEQUAL INTERESTS such as 55% – 45% are allowed with a TENANCY IN
COMMON. This is the only vesting option allowing UNEQUAL INTERESTS.
A TENANCY IN COMMON may be terminated by PARTITION. Two or more
natural persons are required for a TENANCY IN COMMON.
191. The unities of JOINT TENANCY are POSSESSION, INTEREST, TIME and
TITLE. Think of PITT to remember this.
192. JOINT TENANTS MUST HAVE EQUAL SHARES.
193. The major feature of JOINT TENANCY is RIGHT OF SURVIVORSHIP.
194. JOINT TENANCY may be terminated by PARTITION.
195. JOINT TENANCY is available to any TWO or MORE NATURAL PERSONS.
196. COMMUNITY PROPERTY can only be between married persons. This is
also a requirement of TENANCY BY THE ENTIRETY (which is just like Joint
Tenancy with the added provision that Joint Tenants are Husband and
197. GENERAL PARTNERS have UNLIMITED LIABILITY. This is the major
drawback of a General Partnership.
198. LIMITED PARTNERS may NOT be actively involved in partnership
activities and decisions. They must limit involvement (to nothing) or risk
becoming a General Partner. As a Limited Partner, their liability is limited
to the amount of their investment.
199. A CORPORATION holds title ALONE as a TENANT IN SEVERALTY
(severed from all others) Of course a corporation could never be in a Joint
Tenancy because a corporation has perpetual existence.
200. CONDITIONS, COVENANTS, and RESTRICTIONS (CC&Rs) can be more
restrictive than local zoning and building codes, and USUALLY ARE.
201. STEERING is where a broker avoids an older neighborhood that he
believes the buyer will not like or tries to take people into a neighborhood
which he feels would be right for buyer; ie trying to STEER people either
into or away from certain areas. This is DISCRIMINATION.
202. BLOCKBUSTING (Panic Selling) is an attempt to break-up an area. This is
203. REDLINING is when a lender WILL NOT LEND money in certain neighborhoods. This is DISCRIMINATION.
204. The significance of Jones v. Mayer is the 1866 Civil Rights Act supersedes the 1968 Federal Fair Housing law exemptions with respect to racial discrimination, thereby making all racial discrimination in housing illegal.
205. The Equal Credit Opportunity Act allows discrimination based on poor credit even if the applicant’s income would quality him otherwise.
206. FIRPTA is a federal law which deals with tax issues regarding foreigner’s owning United States property, which requires that 10% of gross sales price be withheld from foreign sellers for tax purposes.
207. ENVIRONMENTAL PROTECTION law regarding pollution control is most likely to be enforced at the federal level rather than state or local.
208. A statement of compliance with Fair Housing Laws is required in every broker’s office in the form of a POSTER.
209. Debt Relief or Boot COULD cause a tax-deferred exchange to become at least partially taxable.
210. LAND is considered natural land including surface rights, air rights and subsurface rights.
211. REAL ESTATE is Land plus man-made improvements such as construction of buildings and other improvements and planting of trees, crops and ornamental plants.
212. REAL PROPERTY is Real Estate including Land plus intangible BUNDLE OF RIGHTS of ownership.
213. FIXTURE was formerly personal property which has become affixed to real property and legally becomes part of the real property.
214. TITLE means the right to or ownership of the real estate.
215. DEED essentials are that it be in writing, contain a Granting Clause, Name a Grantee with capacity to hold title, contain an accurate legal description, and signed by a Competent Grantor.
216. RECORDING presumes delivery and protects grantees’ rights by giving CONSTRUCTIVE NOTICE.
217. A WARRANTY DEED provides the greatest protection of any deed because the grantor is legally bound by covenants or warranties.
218. A QUIT CLAIM DEED provides the grantee with the least protection of any deed as it carries NO COVENANTS or WARRANTIES.
219. A WILL is an instrument which disposes of the estate of the Deceased after death, called the “Last Will & Testament”.
220. A CODICIL is used for minor changes in a will.
221. PROBATE is a court proceeding to collect assets and pay taxes and proven debts. PROBATE is used whether you died TESTATE (with a will) or INTESTATE (without a will)
222. Regarding NEVADA LAW:
a. A Broker may pay a finder’s fee to an out of state broker properly licensed in another state.
b. A finder’s fee can NOT be paid to an unlicensed individual in any amount unless they are specifically exempted.
c. Failing to include an expiration date in a written listing is grounds for disciplinary action.
d. Promising Profits on Resale is grounds for disciplinary action.
e. All brokerage agreements must be kept by brokerage (including deals that didn’t go through) for FIVE years from last activity on deal.
f. A licensee may NOT REFUSE to write an offer below listed price. All offers MUST BE WRITTEN.
g. Brokers and Owner-Developers may be Fined UP TO $10,000 for failing to supervise licensees under them.
h. Licensees should NOT provide information outside their area of expertise, especially shouldn’t attempt to answer questions which would be more suitable for an attorney or accountant to answer.
i. Non-residents of Nevada MAY have active Nevada real estate licenses but must sign the Consent to Service of Process form so any disgruntled client may serve papers on the Division Administrator.
j. A CO-OP certificate does NOT authorize out-of-state brokers and salespersons to work in Nevada but they may solicit out-of-state buyers for Nevada property. If they work in Nevada, they must obtain a Nevada Real Estate license.
k. The form Duties Owed by a Nevada licensee is ALWAYS USED. If you represent BOTH sides, you also need a CONSENT TO ACT form.
l. Preparation of the SRPD (Sellers Real Property Disclosure) is the responsibility of the SELLER to prepare. Remember, the SRPD is NOT a warranty, it is only a disclosure.
m. A licensee must deliver all offers and counteroffers promptly or AS SOON AS POSSIBLE.
n. If a brokerage engages in Property Management, two separate TRUST ACCOUNTS must be maintained for property management activity (one for security deposits and one for rental payments)
o. Regarding ERRF, any judgment must be real estate related and no later than one year from judgment date. Maximum payout from ERRF to one claimant is $25,000, most paid out on multiple claims against one licensee is $100,000
p. A Registered Representative is one who solicits attendance for the sales under 119 laws but may NOT SELL and does NOT NEED a license.