STUDY GUIDE FOR THE NY REAL ESTATE EXAM Flashcards

STUDY GUIDE FOR THE NY REAL ESTATE EXAM Flashcards Agent's Responsibilities to Third Parties The basis for imposing liability in case of misrepresentation

consists of:Ø a false representation of a material factØ the

fact that the person making the false representation knew or should have known it to be falseØ the fact that the misrepresentation was made with an intent to induce the party to act or refrain from acting in reliance upon the misrepresentationØ the fact that the party relied upon the misrepresentation in acting or failing to actØ the fact that there was damage to the party who relied upon the misrepresentation in acting or not acting Express Agencyan agency relationship created by an oral or written agreement between the principal and agent.Compensation and Fee SplittingØ Salespersons may not accept compensation except from their sponsoring brokersØ If brokers improperly pay any part of compensation to anyone who is not licensed or who is not exempt from the license law, they are in violation of the license law,this payment is called a kickback.Obtaining Informed Consent of Both Parties When the listing takes place,the licensee should give a full explanation of dual agency although neither party should sign an acceptance of dual agency at this time.· A buyer's broker may perform a market analysis and advise the buyer on an offer.Elements of an antitrust violationAny business activity in which there is a monopoly,*a contract, a conspiracy or a combination that negatively impacts an individual or company's ability to do business.This is called restraint of trade.· The Federal Trade Commission-The FTC has the authority to enforce compliance with the Sherman Act and certain sections of the Clayton Act.· The antitrust division of the Department of Justice enforces the Sherman and Clayton Antitrust Acts.· Price Fixing-occurs when competitors in a group conspire to charge a same or similar price for services rendered.A lease isa contract, in which, for a consideration, an owner of property transfers a property interest to the tenant for a prescribed period of time.· The owner of the property is

called the lessor, the tenant is the lessee.· Security deposit:

The security deposit must be held in an escrow account.· Dwellings with 6 or more units, security deposit must be place in an interest-bearing account. Interest belongs to the tenant.· The assignment of the lease involves the transfer of the lease contract from the present tenant to the

assignee.· In a sublease, the original tenant is still responsible to the owner for the lease payments under the lease contract.· Actual eviction is the removal of the tenant from the premises without the aid or control of the court system.· Lease agreement does not terminate when an owner sells, new owner is bound by terms of lease· A gross lease provides for the owner to pay all expenses, such as real property taxes, owner's insurance, liability insurance, and maintenance.· In a net lease, the tenant pays some or all of the expenses.· A percentage lease has a base rent plus an additional rent that is a percentage of the lessee's gross sales. Commercial· A graduated lease is one in which the rent changes from period to period over the term {escalates} Broker's Agent*In the case of the subagent, the principal accepts vicarious liability for the acts of the agents and subagents.* In the case of the broker's agent, the broker accepts vicarious liability for the acts of the agents working for his principal through him.A dual agency existswhen a real estate firm or agent attempts to represent both the buyer and seller in the same transaction.

Real Estate Finance (Mortgages)A mortgage is a loan that constitutes a lien against the real property. The mortgage is a two-party instrument between the lender and borrower.· The borrower who gives the mortgage is called the mortgagor.· The lender who receives the mortgage is called the mortgagee.· Acceleration clause

• enables the lender to declare the entire balance

remaining immediately due and payable if the borrower is in default.· Alienation clause-entitles the lender to declare the principal balance immediately due and payable if the borrower sells the property during the mortgage term and makes the mortgage unassumable.· In making a mortgage, the lender requires the borrower to sign promissory note-providing evidence that a valid debt exists.· Equity of Redemption After default, and up to the time a foreclosure sale is held, the borrower has an equitable right to redeem his property by paying the principal amount of the debt, accrued interest, and lender costs incurred in initiating the foreclosure.· A JUNIOR MORTGAGE REFERS TO ANY

MORTGAGE THAT IS SUBORDINATE TO ANOTHER

MORTGAGE.Negative amortization-when a loan payment amount is not sufficient to cover interest due, the shortfall added back into the principal, causing the principal to grow larger after payment is made.· Graduated payment mortgage-the monthly payments are lower in the early years of the mortgage term and increase at specified intervals until the payment amount is sufficient to amortize the loan over the remaining term.· Blanket mortgage-two or more parcels of real estate are pledged as security for payment of the mortgage debt. The blanket mortgage usually contains a release clause that allows certain parcels of property to be removed from the mortgage lien if the loan balance is reduced by a specified amount.· Purchase Money Mortgage-another type of seller financing, is a mortgage given by a buyer to a seller to cover part of the purchase price. Here the seller becomes the mortgagee and the buyer becomes the mortgagor.· Conventional loansØ In the uninsured conventional loan, the borrower's equity in the property, the difference between the value of the property and its liabilities, provides sufficient security for the lender to make the loan. Therefore, insurance to protect the lender in case of the borrower's default is not necessary.· The Federal Housing Administration (FHA) does not make mortgage loans, instead, FHA-insured loans protect lenders against financial loss.· VA Guaranteed Loan Program -offers a loan that guarantees repayment of the

top portion of the loan to the lender in the event the borrower defaults.· Secondary Mortgage Market-buys and sells mortgages created in the primary mortgage market.·

Truth-in-Lending Act (TILA) - Requires 4 chief disclosures:

annual percentage rate, finance charge, amount financed, and total amount of money to be paid toward the mortgage in both principal and interest payments.· Regulation Z does not regulate interest rates, but instead provides specific consumer protections in mortgage loans for residential real estate, and advertises credit terms available. The only specific thing that may be stated is the annual percentage rate, and it must be spelled out in full.· USURY LAWS are used by New York State to fix a maximum allowable interest rate.· BUY DOWN is an choice given to the borrower to volunteer to pay discount points· Construction loan A real estate brokershall make it clear for which party he is acting and he shall not receive compensation from more than one party -*except with the full knowledge and consent of all parties." The Statute of Frauds,which in New York is codified in the General Obligations Law, state that contracts involving the creation or conveyance of an interest in real property must be written to be enforceable.· Oral testimony is not sufficient to create a contract involving the transfer of title to real property.· A form of agreement that terminates contracts is novation-the substitution of a new contract for a prior contract or the substitution of a new party for an old party.· Assignment is when a new party to the contract agrees to satisfy the former party's obligation.· Statute of LimitationsØ If a party to a contract fails to bring a lawsuit against a defaulting party within a time period set by statute, the injured party loses the right of remedy. In New York, the time limit by statute to bring legal action against a party in a real estate transaction is 6 years.· Specific performance means that the contract will be completed as originally agreed.· Liquidated damages are an amount of money to be paid upon certain breaches of the contract.· The time is of the essence rule means that the closing must take place on or before the exact date stipulated in the contract.· Installment Sales Contract The buyer contracts to obtain legal title to the property by paying the purchase price in installments, and the seller agrees to transfer the legal title to the buyer by delivering a deed upon the buyer's full payment of the purchase price.· Lease With Option To Buy An option is an express unilateral contract.