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Avery Yarbrough & Associates Real Estate License Cram Course Review Thursday & Friday 9 till 4 with an hour for lunch. House Keeping Rules Cell Phones -Off Computers - Off Breaks – each hour -Be back at 10 minutes Restrooms are in break room

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Presentation Transcript
slide1

Avery Yarbrough & Associates

Real Estate License

Cram Course Review

Thursday & Friday

9 till 4 with an hour for lunch

slide2

House Keeping Rules

  • Cell Phones -Off
  • Computers - Off
  • Breaks – each hour -Be back at 10 minutes
    • Restrooms are in break room
    • No smoking at front door – go to end of building
  • Mindful of your classmates
    • We have a lot of material to cover
    • Hold questions till breaks
slide3

Welcome

    • Everyone, classroom students, online, other schools
  • Materials
    • Green Book
    • Law Booklet & Law Test
    • Handout Packet
    • Handouts
  • We need your contact information
    • Fill out at break
slide4

Lots of different material to cover in 2 days

      • Acres to Zoning
    • Need to know about acres and zoning to pass test
    • 140 questions – can miss 42 and still pass
    • 100 general & 40 Alabama Law
    • More than one answer may look right
      • Test taking anxiety
        • Think long, think wrong
      • Analytical personalities think too hard
        • Don’t read anything into question
      • Any test you don’t study for will be hard
slide5

6 sections 100 Questions & 40 on Alabama law

  • 1 Listing Property 31% of general knowledge test
  • 2 Selling Property 21%
  • 3 Property Management 14%
  • 4 Settlement/ Transfer of Ownership 14%
  • 5 Financing 10%
  • 6 Professional Responsibilities 10%
  • Law is 28% of total test
  • We will have lecture then short test
    • Do better with this method
slide6

65% to &70% pass test on first try

  • Only about 60% online pass on first try
  • About 80% of our students pass on first try
  • Second test try – pass rates drop
    • And drops even more on third try, only 20% pass
  • Test should be difficult
    • Dealing with important subjects
    • Do it right the first time
      • $71 per test
    • It is important that you take this seriously
slide7

Look at the packet on the right

  • Outline of class
  • Words – Know vocabulary
    • Nerd Words on test
    • Obscure words Reliction, Riparian, Reentry, Remainderman, Recording, Range, Reconciliation, Rectangular System, Redlining, Regression
  • The way we studied as children is the way to learn
  • Read, Study, Test
  • Our other classes
    • Post License, Broker, CE
slide8

Test taking tips

    • 80% of those that fail get between 65 to 69
    • Only 1 point between success and failure
    • Listen to lecture
      • Make notes
slide9

Schedule a morning test

  • Anxiety is less in AM – no time to worry
  • Brain sharper in AM
  • Review night before
    • Eat fruit night before – brain food - 12 hours
  • Don’t study past 9PM
  • Go to sleep early and let your brain rest
slide10

On the day of test

  • Get up early and be relaxed , not rushed
  • Don’t read paper or listen to news
  • Eat a good breakfast
  • No more studying
  • Get to test site early –
    • 15 minutes late and you can’t take test
slide11

At test site

  • Have photo ID and 1 more with signature
    • Do practice questions on computer
    • Maintain pace throughout exam
    • Don’t wrestle with a question
    • Read question twice
    • Read answers twice
      • You will know answer in your brain
      • If you don’t know, then bookmark and move on
      • Bookmark math and skip -- work them last
    • DO NOT GO BACK AND CHANGE AN ANSWER
      • Will usually get it wrong
slide12

Finance has 10 questions

    • Most students have trouble with real estate math
  • We go over math, but don’t teach math
    • We will help as much as you need
  • Having Trouble?
    • Call us for extra help – this is what we do
    • No extra charge for this
    • We want you to do well on the test
slide13

Power Point Handout is your Outline

  • Take notes on handout
  • Study them later
  • More important to listen to lecture
  • Story about Finance
    • Elementary concept
slide14

1934 Mortgage industry began under FDR

  • Horrible economy – end of Depression
  • Housing - the way to make economy grow
    • 50% down payment at that time
  • FHA created 3% down payment
    • More likely to default
      • Walk away if times get tough
      • Insures lender
slide15

FHA insures loans –

    • Does not loan money or build homes
  • FHA mortgage defaults - FHA pays
  • FHA set maximum loan amounts
    • People started buying homes
      • Economy began to recover
    • Lenders ran out of money
    • What could they do?
slide16

Secondary market created to buy mortgages

  • Primary lenders sold pools of mortgages
  • Fanny Mae bought these mortgages
  • Primary lenders collected payments
    • Escrow for taxes and insurance
    • Service loan for a fee
    • Lenders also charged closing cost to make money
      • Origination, Discount, Service fee
  • Fanny Mae sold mortgage backed securities to investors
slide17

I950’s more buyers wanted a piece of the pie

    • Private Mortgage Insurance – PMI
    • 5% down payment on larger loans
  • Saving & Loan Banks needed secondary source
  • Freddie Mac created
  • Today they both buy the same loans
  • 1960’s government realized it was in trouble
  • Turned into private companies
  • Didn’t want risky mortgages
  • Ginnie Mae came about to buy risky loans
    • Government owned
    • Guarantees loans
slide18

3 Financial Intermediaries

    • Primary Lenders
  • Institutional Retail Banker
    • Loan their own money - Fiduciary
  • Non- Institutional Wholesale Broker
    • Loan money that is not their own
  • Insurance companies and pension plans
    • Have lots of money to invest
    • Alabama retirement fund
slide19

Mortgage Brokers

    • Not their money
    • Get it from non - institutional source
      • They know someone who has money
  • Insurers
    • FHA , VA, PMI
  • Secondary Market
  • FAMA, FRMAC, GNMA
slide20

Loan products

    • Blanket Mortgage – think of a quilt with patches
      • Developer buys land, puts lien on entire development
      • When house is built on one parcel and sold
        • Partial release clause – releases lien on that parcel (patch)
    • Package Mortgage – Real and Personal property
      • Includes Appliances, Furniture
      • Popular at beach (condo and furniture)
      • Farm Equipment
slide21

Open end mortgage – Like credit card

    • Leave mortgage open to add to in future
  • Graduated payment mortgage (FHA245)
    • Goes up about 5% each year for 5 years
      • Negative Amortization
      • Adds to principle – will owe more than borrowed for years
  • Reverse Annuity Mortgage
    • Senior Citizen gets check for part of equity each month
    • Upon death, home is sold by family and debt paid
slide22

Adjustable Rate Mortgage

  • Protects lender from interest rate changes
    • Changes Each year (up or down)
      • Principle
      • Plus
      • Margin – profit to lender - Fixed during life of loan
      • Plus
      • Index- measure of change such as Consumer Price Index
    • Cap per year/life 2/6
slide23

Amortized Loan –Equal payments until note dies

    • Also called - direct reduction loan - Includes:
      • Principle – the amount borrowed
      • Interest - Rate remains constant through life of loan
  • Mortgage payment also will include:
    • Escrow for Taxes & Insurance
    • PITI Principle, Interest, Taxes, Insurance
    • Interest is paid in arrears – ( at end of period when )
  • Straight loan – pay (interest only) each year (rare)
    • Loan would renew each year
      • Pay off principle later
  • Balloon – Amortized over 30 years, but
  • Balance is paid off with a big lump payment at 5 years
  • * Most owner financing is Balloon
slide24

Acceleration Clause (like accelerator petal on car)

    • Miss 3 payments and lender speeds up loan
      • Foreclosure starts and borrower (mortgagor) has:
  • Equitable Right of Redemption
    • Pay off loan before foreclosure sale
  • Statutory Right of Redemption
    • Pay back loan plus cost of sale within one year
  • Don’t ignore lender- work with them
    • They don’t want the house
  • Short Sale – Bank agrees to take less than owed
slide25

Defeasance Clause

      • Clause says lender must record satisfaction of mortgage
    • Alienation Clause
      • Clause says mortgage must be paid off at time of sale
    • Acknowledgement = Notarize
      • Necessary for recording
      • Record in county where property located
slide26

OR

    • Gives
  • EE
    • Gets
  • Confusing --- Mortgagor & Mortgagee
  • Mortgage is a promise backed by security instrument
    • Mortgagor (Borrower) gives promise to pay
    • Mortgagee (Lender) gets promise
slide27

Title Theory - Alabama

    • Lender has legal title
    • Borrower has equitable title
  • Lien Theory
    • Lender has equitable title
    • Borrower has legal title
  • Title record shows evidence of ownership
    • Not a piece of paper
slide28

Mortgages -- local Alabama custom

    • Negotiable Instrument – will be sold
    • Two parties
      • Lender and borrower
  • Trust Deed
    • Three parties
      • Trustor – Lender
      • Trustee – Holds title
      • Beneficiary -- Borrower
  • Usury Law – Limits the amount of interest charged
slide29

Priority of liens first to record, first to collect

    • Constructive notice (recorded)
    • Actual notice (actual knowledge)
  • Primary – gets first money from foreclosure
  • Secondary – may not get any money
    • Subordinate or junior
    • Prefix sub- means beneath
  • Alabama is a deficiency state
    • Lender will get judgment claim against borrower
  • Property taxes always have first priority
slide30

Title

    • Chain of ownership on property
    • Marketable Title – 40 years – no challenges
  • Seller makes promise to deliver marketable title
  • Cloud on Title
    • Break in chain of title
      • Forgery
  • Title Insurance – insures chain against defects
    • Will have exclusions not covered – easements
    • ALTA – unrecorded liens – materialman
slide31

Points - 1 point is 1 % of loan

    • Origination – Bank commission for selling loan
    • Discount - % of upfront $ paid to reduce rate on loan
      • Builder buy down for a couple of years
      • Permanent buy-down for length of loan
      • 1 point increases yield to bank about 1/8%
  • Assumptions of Mortgage
    • Rules vary by loan type
  • Assume – Seller still responsible for debt
  • Subject to – Seller not responsible for debt
  • Novation – new note
slide32

Owner Finance

    • Purchase Money Mortgage 2nd Mortgage
      • Purchaser has title
  • Owner Finance
    • Seller keeps legal title until paid off
      • Bond for title
      • Land sale contract
      • Contract of deed
      • Installment Contract
slide33

FHA insures (% upfront + % each month)

    • Ends when principle < 80% of original appraisal
  • VA guarantees (government)
    • CRV Certificate of reasonable value
      • Same as appraisal
  • Veteran must qualify & property must qualify
    • Can substitute another’s guarantee
  • Conventional – PMI (private mortgage insurance)
    • On amount more than 80% of appraisal value
slide34

Sale- Lease Back

    • Owner needs money to expand operations
    • Will sell building to investor and lease back
  • Owner Finance
    • Vendor - Seller (retains title)
    • Vendee – Purchaser (gets equitable title)
slide35

Test on page 146

    • About an hour
    • You must be comfortable with the way test is worded
    • In front of green book are pages with confusing words
    • Except, Not, Least, Best, Difference, Most Likely, ect.
  • Put exam answers on separate page
    • Later highlight correct answers to use as review
slide36

Alabama License Law

  • 40 of the 140 -- 29% of test
    • Know the violations! Page 16 – 18
    • AREC can suspend or revoke license
    • Fines $100 to $2500
  • Straight forward information – memorize
  • Concepts of common law
  • Know fees
slide37

RECAD Real Estate Consumer Agency Disclosure

  • 4 ways to have relationship with consumer
    • Written disclosure to consumer to alleviate distrust
  • Single Agent -- Agency with one party work For - Advise
  • Limited Consensual Dual Agent --
    • Agency for both Seller & Buyer
  • Transaction Broker -- Non Agency work With - Assist
  • Sub-Agent -- Pre-RECAD way things worked
    • All agents worked for the seller
  • All relationships start as Transaction Broker
    • Until:
  • A written agreement is signed with consumer
slide38

RECAD

  • Must be presented at first contact with consumer, before any confidential information is disclosed to another
  • Must be signed by agent and kept in file for 3 years
    • Consumer not required to sign
  • Keep all real estate contracts, listings, ect. for 3 Years
slide39

Consumers are either:

  • Customer NON-client / NON-Agent
    • No advice
    • Working With
    • Transaction Broker
  • Client - Agency Relationship
    • Give Advice
    • Working For
    • Fiduciary
slide40

Agency Duties - Fiduciary

  • Drive clients in OLD CAR
  • Obedience - Obey lawful commands
  • Loyalty - Put clients interest above your own
  • Disclosure – Everything you know about transaction
  • Confidentiality - Keep confidential information confidential
  • Accounting – Account for all funds
  • Reasonable Care – Use reasonable care
slide41

Customers – Non Agency – No fiduciary

Must answer their HARD?

  • Honesty
  • Accountable
  • Reasonable Care
  • Disclosure
  • ? Questions must be answered truthfully
slide42

Law Test

  • Go over even # questions
  • Answer on separate paper then later:
    • Highlight correct answers to use as study guide
slide43

Lunch 1 Hour – Please be back on time

  • Nearby Restaurants
    • Mexican – at end of this building
    • Green Valley Drug Store – On down hill from here
    • Subway - In parking lot across from Outback
    • Salvador's - Next to Subway
    • Golden Rule - Across Highway form Salvador’s
    • McAlister’s - On Hwy on right ½ mile to the left
    • McDonald’s - Just past McAlister’s
    • Burger King Just before McAlister’s
    • Chinese - Shopping center across from McAlister’s
    • Krystal – Across from Burger King
slide44

Review Alabama Law Test

  • Know the violations!
slide45

Easements

    • Right of one person to use the property of another
    • Necessity – was necessary to get to property
    • Appurtenant – legally attached – runs with the land - deeded
          • Commercial easements in gross
          • Utility easements look “gross”
    • Prescription used for a length of time – 20 years
      • Adverse Possession
    • Servient tenement– Serves another property
    • Dominant tenement – Property that benefits from easement
      • Ingress & Egress from landlocked property
    • Personal easement terminates upon death of either party
    • Encroachment – Illegal extension on another’s property
slide46

Life Estate – use for the life of a person

  • Reversion – goes back to original grantor
  • Remainderman – goes to another at termination
  • In either case
    • Can not waste property
    • Can do anything else in bundle of rights UPEED
    • All rights under life estate are limited by someone’s life
      • Pur Autre Vie – Based on the life of another
slide47

Deed – To transfer title

  • Must have:
    • In writing
    • Identify parties and property
    • Conveyance language
    • Consideration – something for something
      • Amount not necessary to state
    • Grantor’s signature
      • Grantee (buyer) signature not needed
    • Must be delivered during grantor’s lifetime
slide48

Condominium

    • Fee simple (absolutely best ownership – all rights)
      • Own interior of unit fee simple
      • Own common area as tenants in common
        • Swimming in the condo pool with the common people
    • Developer must record condominium declaration
    • Includes:
      • Legal Description
      • Bylaws
      • Covenants & Restrictions and bylaws
      • Survey
slide49

Co-operative

    • Apartment converted to ownership
    • Building owned as a corporation
      • Own stock in corporation
      • May get loan to buy this stock, secured by lease
    • Proprietary lease on apartment
slide50

Co- ownership

    • Joint Tenancy (Husband and wife joined together at the arm PITT)
      • Usually family
      • Right of survivorship –
        • At death interest goes to other party
      • PITTPossession, Interest, Time, Title
      • If ownership changes,
        • PITT doesn’t change – new owner is a tenant in common
    • Tenants in Common(In the condo pool with the common people)
      • Usually investment
      • Interest % may be different
      • If ownership changes nothing else changes
      • At death of owner, their ownership goes to heirs
slide51

Community property - Not in Alabama

  • Tenancy by the entirety – Not in Alabama
  • Separate property bought before marriage stays separate
    • Property may be bought separately during marriage
  • Property inherited stays separate
slide52

Obsolescence

    • Economic – town is dying
      • Not curable
    • Functional - 6 bedroom, 1 bath (or an outhouse)
      • Curable – can be fixed economically
      • In-Curable – cost more to fix than is worth
slide53

Methods for determining value

    • Appraiser is a CSI investigator
  • Cost – What it cost to build
    • Special purpose - church
  • Sales Comparison – what have other similar homes sold for
  • Income – Income producing properties
    • Capitalization rate = Net Income / Price
  • Real Estate Agents perform:
    • Comparative Market Analysis (using Sales Comparisons)
    • May not call it an appraisal
slide54

Appraisals

  • CIA doesn’t want CBS watching them
  • Comparable Inferior Add
  • Comparable Better Subtract
  • Never adjust subject value, only comparable
    • The comparable next door has an extra bedroom worth $10,000
    • Adjust its sold price down to get the market value for your subject
slide55

Cost approach –

    • New construction, special purpose
    • White House - cost approach (2008) $130,000,000
  • Cost = Total of Materials + Land + Labor + Profit
    • Reproduction Cost = exact duplicate Your DNA
    • Replacement Cost = similar Adopt
  • Capitalization Rate
    • Rate investment will return
  • GIVEN
  • Gross Income – Vacancy – Expenses = Net Income
    • Remember to change all #’s to annual
slide56

Certificate of Occupancy

    • All inspections have passed – ready to move in
slide57

Legal Descriptions 3 methods

      • Definition - A surveyor can find boundary of property
  • Metes & Bounds - Plymouth Rock 1st monument
      • Meters & Directions
    • POBPoint Of Beginning and around to starting point
  • Rectangular Survey – government (Squares)
    • Townships - 6 miles X 6 miles
    • Sections – 1 mile square - 36 sections in a township
  • Plat – Lot & Block - Recorded survey (subdivision)
    • Must include, lot #, subdivision name, county & state
slide58

Township tier starts at Tennessee line (Base Line)

    • 6 miles south of Tennessee line is another line
  • Running north and south every 6 miles are range lines
    • Intersections of township & range lines are called
    • Townships – these are 6 miles square
      • Townships are numbered by where they are:
      • First tier south of the Tennessee line is T1S
        • T1S = Township 1South
      • The north and south lines, Called Range Lines
        • start in Huntsville, so
        • The first one west of Huntsville is R1W

R1W = Range 1 West

slide59

Section is 640 Acres

¼ section has 160 acres

¼ of ¼ of ¼ has 10 acres

Acre 43,560 square feet -- 208.71’ X 208.71’

7 11 Ask at the 7-11 store about an acre

Mile is 5,280 feet

Oak Mountain is 5 miles down Highway 280

slide60

Day 2

  • Page 73 -- Property Management
  • Property Manager (General Agent)
    • Works FOR owner – fiduciary (agency) of owner
  • Objectives
    • Make money (return on investment)
    • Maintain property
  • Property Manager supervises
    • Resident Manager
    • Maintenance Manager
slide61

Property Owner Must

    • Provide Habitable Premises
    • Provide Quite Enjoyment
  • Eviction
    • Actual Eviction –
      • not paying rent
    • Constructive eviction -
      • Landlord doesn't provide habitable premise
        • Not providing heat when needed
slide62

Personal Property - personalty

    • Not attached to real estate
    • Ceiling fan in box
      • Can move it around
      • May become Real Property – appurtenant as a fixture
  • Real Property
    • Attached to property
    • Ceiling fan attached to ceiling
  • Buy seed at Lowes – personal property
  • Plant seed & it becomes a tree – real property – appurtenant
      • Fructus naturales (no annual cultivation) – tree
      • Fructus industriales (emblements) - crops
  • Cut tree (severance) – now personal property
  • Processed into lumber – personal property - sold at Lowes
  • Used to build house – becomes real property upon attachment
slide63

Trade Fixtures

    • Equipment to operate a business
      • Big refrigerator, Stainless Steel sinks
      • Attached, but not considered Real Property
    • Must be removed before lease expires
      • Damage must be repaired
      • If not removed, becomes property of owner
slide64

Leases

  • Estate for years or Tenancy for years
    • It begins and it ends
      • Period of time doesn’t matter
      • 30 minutes or 30 days or 30 years
  • Periodic Tenancy
    • Period to Period – no ending date –
      • Month to Month, Year to Year
      • Requires 1 period notice to terminate
  • Estate at will
    • Understanding to stay for a while (At will)
      • Verbal agreement – likely family or friend
  • Estate at Sufferance
    • Holdover Tenancy
    • Tenant remains after lease expires
    • If landlord accepts next months rent it becomes:
      • Periodic Tenancy
slide65

Lease can be either Gross or Net

  • Net lease charges tenant for following in addition to rent:
    • Taxes, Insurance, Maintenance - TIM
  • Gross lease includes TIM in payment
  • Percentage lease also charges a percentage of sales
    • Includes a fixed rate, plus
    • A percentage of tenants sales over a set amount
  • CAM - Common Area Maintenance
    • Some net commercial leases may have CAM charge
slide66

Percentage Lease on 10,000 square foot store

  • Base rent of $20 per Square Foot, plus
  • 5% on store sales over $1,000,000
    • What if Store sales are $1,500,000
  • Base Rent per year is 10,000 X $20 = $200,000
  • Plus 5% on sales over $1,000,000
  • $1,500,000 -$1,000,000 = $500,000 X 5% = $25,000
  • Rent = Base $200,000 + $25,000 = $225,000
  • Monthly Rent $225,000 / 12 = $18,750
slide67

Commercial rental space is graded:

  • A – New building in great location
  • B - Older building in great location that has been rehabbed
  • C - Older building, may not be in great location or condition
  • D - Run down building
  • Rent is charged per square foot per year
  • Class A space may be $20 per square foot
  • 1500 sf. X $20 X 12 months = $30,000 per year
    • Monthly rent would be $2,500
slide68

Statute of Frauds

    • Contracts involving real estate must be in writing
      • To be enforceable
    • Except a lease less than one year, may be oral (parol)
  • 20 years or more must be recorded in first year to be enforceable
  • Maximum lease is 99 years
  • Escalation Lease will be go up over time to cover increased cost
    • Tied to an index (Consumer Price Index)
  • Statute of Limitation
    • Time limit to bring action
slide69

Accounting reports

    • Balance Sheet
      • List Assets & Liabilities
    • Profit & Loss
      • List net profit after expenses
slide70

Sub- lease

    • Assignment of
      • privilege of use
      • Responsibility to pay rent
    • Original tenant has a sandwich lease
  • Novation
      • Replaces agreement with another
slide71

Environmental Hazards

  • Lead Paint (Written disclosure required- LPD)
    • Must also give pamphlet about danger to family
    • No lead paint used in residential built after 1978
  • PCB – hazardous chemical in electrical transformers
  • Radon – Decomposing soil builds up gas under home
        • Colorless, Odorless, Gas Collects in home and may cause cancer
  • Carbon Monoxide-
    • Gas from using natural gas heat that may build up and kill you
  • Asbestos – Cancer causing insulation
    • Encapsulate – Seal it and leave it alone
slide72

Contract –

  • Execute- to sign a contract
  • Executed Contract is fulfilled – closed
  • Offer & Acceptance
    • Agreement to do or not do something
      • Seller promises to deliver good title
      • Buyer promises to pay money
slide73

Option

  • Unilateral contract - One promise
    • Right to buy a property for a period
    • Optionor – person giving promise to sell
    • Optioner – person may buy or not
      • Gives money for right to buy
  • Lease Purchase is 2 agreements:
    • Lease
    • Option
      • May buy at end of lease or not
slide74

Unilateral Contract

    • One person has made promise
    • Listing Agreement
  • Bi- lateral
    • Two parties have agreed to contract
    • Sales Contract
slide75

Contract - Must Have: COLA

    • Consideration – Something for Something
      • Valuable – Money or equivalent
      • Good – Love & affection – Family situation
    • Offer & Acceptance – Mutual, genuine assent
            • Not under duress
    • Legal
      • Age
      • Purpose
      • Capacity
        • Power of Attorney
    • Agreement – set of promises
slide76

Legal remedies

  • Breach of Contract
    • One party to contract does not perform
      • Aggrieved party
        • Suit for damages
        • Specific performance
  • Contract date to close is a target date
    • May be circumstances that prevent closing
  • “Time is of the essence” means:
    • All times MUST be adhered to, or breach occurs
  • One may lose rights through “latches” (sleeping on rights)
      • Inspection date missed – one week
slide77

Earnest Money is not required for a valid contract

    • If earnest money is included
      • Seller may accept earnest money as liquidated damages
        • If contract breached by purchaser
    • Money must be held in Escrow Account in
      • An FDIC insured bank in Alabama
  • Must be turned in to broker immediately
  • Must be deposited in escrow account
      • When offer becomes contract
        • Offer (unilateral) becomes contract (bilateral)
        • Unless contract states differently
  • Money belongs to contract
      • Creates equitable interest in property for purchaser
  • Postdated check must be approved by seller
slide78

Offer

    • May be accepted by seller
      • Becomes a bi-lateral ( 2 sided) contract
    • May be rejected
      • Offer dies
    • May be countered
      • If seller makes a mark other than signature
      • This creates a new unilateral contract (counter-offer)
      • Sometimes one party may put a time limit (by Friday @5)
slide79

Bundle of Rights (Sticks in a bundle)

    • UPEED
    • Use
    • Possession
    • Encumber
    • Exclude others
    • Disposition
    • Subject to Government rights (PETE)
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Zoning (Primary Purpose is to protect the health, safety and welfare of the public)

  • RCA IS Zoning Districts
  • Residential
  • Commercial
  • Agricultural
  • Industrial
  • Special Purpose ( Hospital, Library, Church)
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Non Conforming Use (Zoning)

    • Use that does not conform to surrounding properties
      • Day care center in residential zoning
    • Grandfather Clause
      • Use that may continue when surrounding zoning changes
      • Home on highway where commercial has expanded
    • Variance
      • A property owner needs to build on a lot that is too small
  • Building Codes are not Zoning
    • Set minimum standards for material & workmanship

Health & Safety - GFI plugs, ect.

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Ordinary Income

    • Money for working
  • Capital Gains
    • Profit on gains from the sale of property or stocks
      • Short term – owned less than a year
      • Long term – owned more than a year
        • Lower tax rates
slide83

Income Deductions

    • Depreciation
      • Accounting Deduction per year of % of improvement
        • Land does not depreciate
      • Actual Depreciation – paint, roof
  • 1031 Tax Exchange – will be handled by intermediary
    • Tax code that allows the exchange of like property
      • Income property for income property
    • May not be even exchange
      • One party may pay boot
        • Money in addition to property – this money is taxed
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Securities (regulated by SEC)

    • Stocks – ownership position in company
  • REIT – Real Estate Investment Trust
    • Colonial Properties is a REIT
    • Get benefit of investment without management
      • No say in management
    • Securities sales requires a securities license
      • Not a real estate sales license
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Interstate commerce (regulated by SEC)

    • Regulated by federal government
  • Intrastate commerce ( Alabama Blue Sky Law)
    • Not regulated by federal government, but Alabama
slide86

Testament - Will

  • Die leaving a will is Testate
  • Die without a will is Intestate
    • State Statute of Descent and Distribution
    • State law determines how property is distributed
  • Die without heirs
    • Escheat = State get property ( One of PETE power)
  • Will must be written to transfer interest in RE
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Devise

    • Gift of real property by will
  • Bequeath – Bouquet
    • Gift of personal property by will
  • Legacy
    • Gift of money by will
slide88

Government Powers

  • PETE works for the government
  • Police - Zoning is one police power
  • Eminent Domain (right), Condemnation (Process)
  • Taxation
  • Escheat - Person dies without heirs or will
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Restrictions on use of property

  • Private restrictions – CC&R
    • Covenants –
      • To maintain uniformity – homogeneity
      • ARC - Architectural Review Committee must approve
      • Mailbox, color of house, trees
      • May be forced to conform
    • Can not take owners property under covenants
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Fee Simple Defeasible (Defeatable)

  • Conditions –
    • Restricts use of future owner
      • Previous owner may have future rights
  • Conditions Subsequent
    • New owner must not perform some action (sell alcohol)
      • Former owner retains “right of reentry” if condition is broken
      • Must go through courts
  • Fee Simple Determinable - Special Limitations
    • Estate ends automatically due to violation of limitation
      • “Possibility of Reverter”
      • No court action required
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Deeds

    • Warranty against title defects
  • Could have been issues in past that affect title
  • General Warranty Deed or Warranty Deed
    • Bumper to Bumper warranty on car
    • If there is a issue against title in future it will be fixed
  • Special or Statutory Warranty Deed
    • Limits to warranty
    • Covers issues that may have happened during grantor’s ownership of property
  • Quit Claim – no warranty
    • As is
    • Used to quiet a cloud on title
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Title Insurance

    • Protects against something in the past
      • Different from other insurance that protects against event in future
    • One time premium
  • Opinion of Title – Attorney does Abstract
    • Checks the chain of title – no warranty
    • Will not know about unrecorded liens
    • Will not know about forgery
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Liens

  • Voluntary Lien
    • Owner ask for it - Mortgage
  • Involuntary Lien
    • Owner didn’t ask for it – Property tax lien
  • Specific
    • Lien on a specific piece of property
  • General
    • Lien on all property, personal and real of a person
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RESPA Real Estate Settlement & Procedures Act

    • 1 to 4 unit family residential property
    • Federally related loan
    • Must use HUD1 form (24 hours before closing)
    • Required Good Faith Estimate (GFE) within 3 days
    • No Steering
    • No Kickbacks
    • Maximum 2 months escrow for taxes and insurance
  • Fair Credit Act (truth in lending) Regulation Z
    • Disclose the APR ( true annual percentage rate )
    • Truth in Advertising - Trigger words are %, payment
    • 3 day right of recession on junior mortgages
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Debits are bad

    • Debt owed
    • Takes money away
  • Credits are good
    • Credit to an account
slide96

Important Dates

  • Civil Rights Act 1866
    • Prohibits discrimination based on race
  • Civil Rights Act 1968 – Expands protected classes
  • Fair Housing Act of 1988
    • Protects FRESH CORN
    • E&O insurance doesn’t cover, Equal Opportunity
  • Familial, Race, Sex, Handicap, Color, Religion, National Origin
  • Doesn’t protect age
  • Handicap includes physical and mental
    • Includes AIDS
    • Includes recovering addicts
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Redlining

    • Insurance or Lender draws a red line around an area and refuses to do business there
  • Steering
    • Pushing people to a certain area
      • Catholics to a Catholic neighborhood
  • Blockbusting
    • Telling people they need to move because a protected class is moving into the area and the property values are going to fall
slide98

Can discriminate if:

    • Owns a 4 plex or less and lives in one unit
    • Owns less than 3 homes
    • Churches can discriminate based on religion
  • Can not advertise the discrimination
  • Race discrimination is never allowed
  • Handicap reasonable accommodations must be made
    • May require tenant return to original condition
  • Exempt
    • Churches – Membership may not discriminate
    • Housing for older persons
      • 62 or older
      • 80% must be over 55
slide99

ADA Americans with Disability Act

    • Must make reasonable accommodations
      • Assigned Handicap spot near door
      • Service animals in a no pet building
    • May require premises to be returned to original
slide100

Fair Credit Act

  • Most of FRESH CORN
  • ProtectsMarital Status instead of Familial
  • No Age discrimination
  • Includes dependence on public assistance
slide101

Independent Contractor

    • Employer doesn’t have to
      • Pay Social Security Tax
    • Employer May not:
    • Dictate hours worked
    • Dictate how work is to be done
  • 90% of compensation must come from commissions and not hours worked
slide102

Anti-Trust Prohibits (Sherman Act)

    • Allocation of markets
    • Price Fixing (or even taking about it between competitors)
    • Group Boycotting
  • Broker may:
    • Set commission rate of office
    • Set commission splits
slide103

Can a seller refuse to accept a full price offer?

    • Yes
    • But, broker has earned commission
      • Delivered a ready, willing, able buyer
        • Show License
        • Show permission to sell – Listing agreement
        • Show to be procuring cause
slide104

Progression

    • Home price is positively affected by nice new homes around it
  • Regression
    • Home price is negatively affected by run down homes around it
slide105

Federal Reserve Policy controls interest rates

    • Selling Bonds Takes cash out of the system
      • Causing interest rates to increase due to less supply of money
        • Due to Supply and Demand of money
    • Buying Bonds Puts cash into the system
      • Causing interest rates to drop because there is more money
    • Reserve Requirements
      • Banks must hold a percentage of cash in reserve
      • More reserve requirement means less money in circulation
        • More demand for money increases interest rates
    • Discount Points – Rates banks charge each other
      • Higher rates mean less money to lend –
        • Means higher demand and higher interest rates