Real Estate Principles and Practices Exam 1 Flashcards

Real Estate Principles and Practices Exam 1 Flashcards Lawspecializing in real estate Special Purpose-type of real propertyGovernment land: parks, fire department, churches, schools, cemeteries, military bases-Educational land is public land and doesn't pay real estate taxes Real Estate Salespersonany person licensed to perform real estate activities on behalf of a licensed real estate broker-broker is responsible for the actions performed under his licensure

• Common Law Fiduciary Duties of a contract 1. Obedience2. Loyalty3. Disclosure4. Care5. Accounting:

keeping $ in escrow6. Responsibility/Confidentiality: due

diligence Co-opowner in the company that owns the building can choose the tenants bases on lifestyle and attitudes Co-insurance Clauserequired to maintain insurance coverage of at least 80% of value of home (replacement cost) in insurance Government Controls and Financial Policies-factor affecting supply -fed reserve establishes the discount rate of interest for the money it lends to commercial banks. This rate has a direct impact on interest rates- Federal Housing Admin, Gov.National Mortgage Association and the Federal Home Loan Mortgage Corporation all affect the money available to lenders for mortgage loans-gov environmental action has some effect-real estate taxation is one of the primary sources of revenue for local governments (high taxes deter investors but incentives attract)-market shaped by local controls such as school zones, land use controls and building codes Commercial-type of real propertybusiness real estate, office space, shopping centers, stores, theaters, hotels, parking facilities-leasing/renting space for business dual Agencywhen one agent represents both the seller and the buyer in the same transaction Market Valuethe most probable price that a property would bring in a fair sale Real Estateland + attachments + legal rights-land at, above, and below the earth's surface, plus all things perm. attached to it, whether natural or man made Demographics-factor that affects demand of RE -the study and description of a population-family size, the ratio of adults to children, the ages of children, the number of retirees, fam income, lifestyle, single parent families growth, empty nesters---> contribute to type of house needed

Apartmentowns clothing and belongings-have rights: if building gets

sold, can still live there Real Propertythe interests, benefits, and bundle of rights that are automatically included in the ownership of land and real estate-real estate plus bundle of rights Fee Simple Absolutehighest form, absolute ownership, no strings attached-personal/business

• ways to get around huge down payment1. FHA: federal housing admin.Loan from bank, gov.

insures the down p2. Veteran: could borrow 100%3. PMI:

private mortgage insurance: insurance to protect bank from

d payment they didnt put down. Typically 5% Canon of Ethicsethical guidelines for RE professionals in the State of Ohio-failing to do so will result in disciplinary action Conventional life estatepick someone and deed legal ownership to them when you die-better than trusts because you can live in property until death.-created by life tenant and is given to whoever they designate Exclusive-Agency Buyer Agency (EABA)-type of buyer agency agreement-only using one broker-reserves the right to find a house on own and pay the broker no commission Multiple- Listing-type of listing agreement-brokers take houses on listings together for one big listing for other brokers to try and sell

as well-exposure-Multiple Listing Services: marketing org.

whose broker members make their own exclusive listings available to other brokers and gain access to other brokers' listed properties Dowerthe life estate that a wife or husband has in the RE of the deceased spouse

4. Bundle of rightsExclusion: can't keep out the meter reader, cops, fire

department supply may not be able to meet demand b/c... development and construction times Closing Costs1 time up front fees associated with getting the loan-4-6% of amount of loan-attorney fees, appraisal fees, filing fees, bank/lender fees=points-lender is required to give estimate of closing costs w/n 3 bus days

PITI: components of monthly paymentsthe basic costs of owning a

home-Principle-Interest-Taxes-Insurance Employment and Wage Levels-factor that affects demand of RE when jobs are scarce and wages low, demand for RE drops Debt to Income Ratio-whats common?monthly debt/monthly income-common= 28/33 Manufactured Housing"mobile/modular homes"-stationary vacation homes-housing parks-some have semi-permanent foundations and hookups for gas, water, and electricity-in ohio, not necessary to have a degree to sell mobile

homes-modular homes: preassembled at a factory

Latent Defecta hidden structural defect that would not be discovered by ordinary inspection-under the surface, must disclose

Life Estateownership in somebody elses real state1. Legal:

involuntary, if you get married you get a 50% stake in RE,

est by state law2. Conventional: created by the property

owner, either by deed or will. Passes along in death of Life tenant to who ever is designated Brokeragethe business of bringing parties together Highrise Developments"mixed-unit developments"-combine offices, stores, theaters and apartments in single vertical community-laundry, self contained, beauty parlors valet shops, barbershops, swimming pools, and other attractive and convenient features Industrial-type of real propertywarehouses, factories, land in industrial districts, and power plants-wholesale, factories Educationlicensing programs/ technical aspects of tax and exchange law seminars Landthe Earth's surface extending downward to the center o the earth and upward to infinity, including permanent natural objects such as trees and water-air, surface and subsurface rights-can lease airspace rights Bundle of Rights (5) *limited by law1. Possession2. Control: within the law3. Enjoyment4.

Exclusion: can't keep out the meter reader, cops, fire

dept5. Disposition: to sell, will, transfer, or otherwise

dispose of or encumber the property. in writing: a deed

Agentsales person/representative-can do nothing by himself, not even take the test without a broker sponsor Competitive Market Analysis (CMA)-not an appraisal-courtesy estimate of market value- a salesperson can help the seller determine a listing price for the property-buyer's agent should also prepare one on a property before the buyer makes an offer on it Exclusive Right to Sell-type of listing agreementonly using you for length of contract and all found houses $ goes to Broker-one broker is appointed seller's sole agent

• Bundle of rightspossession

Real Estate Developmentadding value to land-must like diversity, strategy/visualization, marketing, finance, legal, get in get out and move on-on-site: new homes, pools-off-site: water lines and storm sewers made on public land Counselinginspector, loan hand holding, how to negotiate-wave of the future! to balance the playing field Open Buyer Agency-type of buyer agency agreement-can reserve the right to use other brokers-can find a house on own and the broker wont get commission

2. Bundle of rightscontrol: continuity (deed restrictions) preserve value

Appraisalattempting to assign value-must be licensed in Ohio Post Licensing Requirementsno later than 12 months after gaining RE license, must complete 10 hour course and give proof to Ohio RE commission

• Point=1% of amount borrowed
• Bundle of rightsEnjoyment

Percentage of sales price-salesperson commission =commission-illegal to ask what standard commission is-broker gets commission and gives portion to sales agent

• Bundle of rightsDisposition: too sell, will, transfer, or otherwise dispose of

or encumber the property Equitycurrent market value- property debt= Real Estate adjustment time period to supply and demandvery slow reactions to changes in supply/demand Population-factor that affects demand of RE demand grows with number of people-some areas more in demand and others have dropped off Salesperson Licensing Procedure-be 18-get a broker sponsor-no felonies-high school diploma-40 hrs P and P-40 hrs Law-20 hrs appraising-20 hrs finance-$60 Salesperson Exam Application-copy of transcripts-Pass test with minimum of 70% Freehold Estates-last for an indeterminable length of time-consist offee simple [absolute (highest form, no strings), defeasible (ownership with a condition)]andlife estates [legal life estate and conventional ]

Taxeson value of properety-escrow: holding acct for taxes and

insurance (bank helping insure you can pay taxes) Listing Agreementagreement between broker and seller that authorizes the broker to try and find a seller, agreed upon commission Employee-when, where and what-outlining duties-employer must

have employee sign W-4 and W-2-employment will state:

small companies with less than a certain amount of employees can fire employees without a reason-take taxes out on them-given a place to work Leasehold Estatesno ownership interest in (a specific length of time) Capital Gains-what's excluded?difference of amount you bought an asset for and amount you sold it for-you pay income tax on diff-excluded on own personal residence Factors affecting the supply side of real estate 1. Labor Force and Construction and Material Costs3.Government Controls and Financial Policies Commercial and Residential RE1. Planned unit developments2. Mix Use Developments:

battery park city: stores, apts, business buildings, movie

theaters, housing Dual Agencybroker represents both buyer and seller in the same deal-both sides need full knowledge Property Managementmanaging a rental property-good way to learn investment reality-finding new tenants, collecting rent,