Real Estate South Carolina Pre-license – Flashcards

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statutes
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state or federal laws
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common law
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decisions and decrees of judges
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agent
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one engaged to represent and be under control of a principal
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principal
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one who contracts with another for representation
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third party
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is a customer until they sign an agreement and then they are a client
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agency relationship
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one in which an agent is hired by a principal to represent him in legal or business dealings with third parties
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attorney-in-fact
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person authorized by a power of attorney
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special agent
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hired for a specific service, limited authority, does not have continuous service
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general agent
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hired for continuous service, hired by a special agent an associated licensee is a general agent/subagent of a special agent, the BIC
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subagent
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an agent of an agent, two types: in-house and cooperative
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dual agent
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a firm that represents both a seller-client and a buyer-client. neither client gets full representation. If same agent reprents both, it MUST be dual agency.
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designated agent
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created by SC statute. on of the individual subagents in a brokerage who is assigned by the BIC to represent one client in a specific in house transaction that would otherwise be a dual agency. Client gets full representation. Must be two licensees, one for the buyer and one for the seller. Agency agreement must be signed before writing offer and before accepting offer. Allowed in SC but is not allowed in common law.
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express agency
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written agreements, mandatory in SC
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implied agency
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created only by the acts of the parties, dangerous - could create an agency relationship accidentally w/o a written agreement. NOT good
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consideration
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something of value in exchange of.. is not required to create an agency relationship
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termination of agency
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legal- i.e. death of principal or client or agent, performance (best), etc acts of parties - mutual agreement, breaches
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exclusive right to sell
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listing broker gets paid if it is sold by ANYONE
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exclusive agency
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listing broker does not get paid if owner sells
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broker protection clause (safety clause)
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obligates seller to pay the broker commission if property is sold to a registered byers after listing expires. Void if lists with another broker
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Fiduciary Duties (OLDCAR)
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Obedience, Loyalty, Disclosure, Confidentiality, Accounting, Reasonable Care
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Common law obligations to third parties
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honesty, fair dealing, material facts
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Lead paint
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built before 1978
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Sherman and Clayton Acts
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anti-trust laws that promote competition. prevents price fixing, group boycotts, agree not to compete,
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Trumps
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State law trumps common law
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Agency agreements (listing/buying agreement)
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must be written, state agents duties/services, amount of compensation, how and when earned, if/how compensation will be divided amount coop brokers, retainer fees, signatures of all parties, price of property. Cannot auto-renew
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Agency disclosure
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must be presented at the first practical opportunity, where there is substantive contact
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SC Dept of LLC (Labor, Licensing and Regulation)
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government under governor, example of police power. Oversees licensing laws
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License Law
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renew every two years by June 30, is to protect public interest
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SC Real Estate Commission
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regulates the real estate industry, sets policy, standards, compliance, conducts disciplinary hearings and decides them. May not get involved with commission disputes. Fines 100-1000 per violation, suspends, revokes licenses, public reprimands.
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real estate license
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negotiating real estate for pay. Broker-150 hours education 3 years in sales, pass broker exam. Salesman- 60 hour pre-license, state exam, 30 hour post license within 1 year, take 8 hours every two years. Can be inactive to avoid the 8 hours, but must still pay renewal fees and you still have to take post license course. expires in two years on June 30. Can only be licensed under one BIC. Must reveal you are an agent in personal transactions.
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Accounting records
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must be kept for 5 years
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trust funds
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earnest money, rent, security deposits. Separate account where only trust funds are deposited, must be separate from personal account, must be a demand account, account name must specify "trust fund". Deposit must be made in 48 hours for cash receipt and 48 hours after acceptance of offer for checks.
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Acre
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43,560 sq ft
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square measure
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Area= length x width
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triangle
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area= base x height /2
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depreciation
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divide 100% by the economic life
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ad valorem
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property tax primary residence 4% other residence 6% assessed value x millage rate = annual property tax
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assessed value
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market value x assessment rate = assessed Value
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mill
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.001
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Federal Fair housing law
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enforced by HUD Civil rights act 1968 - Fresh corn - familial (children under 18 living with parents, pregnant person), religion, sex, handicap, color, race, national origin) Can file a complaint with HUD - 1 year Court - 2 years
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Handicap requirements
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4+ units since 1991 all areas accessbile if more than one floor 1st floor has to have this, remaining floors have to also IF there is an elevator
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steering
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guiding potential buyer or renter away due to protected class
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blockbusting
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scaring people into selling by playing on racial fears
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redlining
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bankers not lending based on a protected class or area where property is located
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fair housing law exemptions
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own no more than 3 houses most recent resident not using a realtor renting a room in your house religious organization private club (none of the above can discriminate based on race though)
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appurtenances
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to appertain improvements, easements, rights of way attaches to the land and passes w/ title
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littoral
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large bodies of water own land up to the high water mark
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riparian
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rivers and streams own land up to center line of water
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personal property
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moveable not attached to land or real property chattel - cattle emblements - crops of tenants manufactured home (not modular) real property can become personal property through severance can become real property i.e. boards into a fence transferred with a bill of sale
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real property
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land plus man made addition transferred with a deed
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trade fixtures
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used in a tenants business ie signs, shelving, coolers, equipment
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Bundle of Rights
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CUP(i)D Control - freedom to build renovate remodel remove or destro Use - hold occupy enjoy possession - impose legal sanctions to preserve or restore one's interest disposition - may sell lease assign or dispose of
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Economic characteristics of real estate
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scarcity - supply and demand improvements permanence of investment location
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Legal description
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informal - street address (can be used for rentals but not for sale) metes and bounds - used by original 13 colonies plat map topo map tax map - most important used in daily real estate - find in tax records rectangular- not used in SC which uses metes and bounds. based on imaginary lines of latitude and longitude
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Police power
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restrictive power used for public good
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Eminent Domain
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right to take for public good given by the government condemnation is the act of taking through eminent domain
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Escheat
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those who die intestate and have no heirs lose their property to the state
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First lien
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ad valorem (property taxes) and special assessments Gov't gets their before all others
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Ordinances
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set of rules and setbacks est. by planning and zoning board
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Non-conforming use
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improvement that is not consistent with current zoning ordinance because it existed before the ordinance passed. can be terminated if damaged more than 50%, abandoned, is a nuisance
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Upzoning and downzoning
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up - more dense use down - less dense use
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Variance
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deviates from zoning requirements
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Deed conditions or restrictions
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owner may restrict use of land so that it creates a defeasible fee (special limitation)
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Encumbrances
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liens (lis pendens), easements, licenses (the right granted to one party to utilize the real property of another and can be terminated at any time. If you allow, verbally or in writing, a neighbor or friend to store a vehicle or boat on your property), and encroachments
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Lien
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a charge against a property to provide security. Can be created by agreement, by law or the court. Priority of payment is usually based on date and time recorded. 2 types: specific - against property i.e. mortgage lien, property tax, mechanics and special assessments general - against individual person (normally involuntary) ie judgement, income tax lien
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Easement
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right to cross property that belongs to another dominant - the property benefiting from the easement servient - the property burdened
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Easement created by prescription
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open, continuous trespass for a period of time usually 10 years
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Easement release
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dominant releases merger of two properties abandonment by dominant
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Easement license
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privilege for specific purpose i.e. hunting, fishing cannot be transferred
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Encroachment
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improvement crosses the property line of the adjoining property
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Freehold Estate
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fee simple - absolute, inheritable (most complete, no restrictions)
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Life Estate
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not inheritable ownership based on as long as a person is alive
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Estate pur autre vie
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for the life of another - other than the life of the tenant
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Tenancy in Severality
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sole ownership
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Tenancy in Common
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two or more owners most common each owner owns a part undivided, upon death transfers to heirs can have separate deeds or just one each owner has a right to transfer his interest to anyone he chooses
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Joint Tenancy
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specified ownership by more than one owner PITT - same rights of Possession, interest, made title at same time, all on same title - if any of these are missing it isn't joint tenancy Any owner may transfer ownership to anyone else but, that new owner is not joint in tenancy they are common tenants. There must be three or more owners for the other owners to keep joint tenancy in such a case.
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Land Trust
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Title held by a trustee - owner retains rights Can be used to hide identity of owner
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Limited partnership
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one general owner, one limited partner (no authority) but both have liability
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General partnership
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all partners have authority and liability
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S corp
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stockholders taxed but corp is not
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C corp
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Corp is taxed, stockholders only taxed on dividends
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LLC
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members taxed like a partnership
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Condo
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collective ownership, own no land just airspace between the walls common elements held by tenants in common square footage is inside not out like regular realty owner has title to unit common elements taxed separately and paid by HOA
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Regime
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HOA
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Securities - Condo
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condos sold and put into a rental pool
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Townhouse
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owner owns land and structure measure interior but assume 6" for exterior wall, 3" for shared walls
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PUD
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planned unit development usually used to cluster homes closer together than would otherwise be allowed by zoning property owners usually own the land under their homes
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Cooperative
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owner buys stock in the corp that owns the building and in turn receives a proprietary lease considered personal property
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Timeshare - interval ownership
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...
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Marketable Title
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title to real estate that is free and clear of liens and title defects
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Insurable Title
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Title can be insurable but doesn't mean it is marketable
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Cloud on title
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outstanding claim on title
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Suit to Quiet title
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court action to settle issues on title
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Deed
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transfers marketable legal title from the Grantor to the Grantee evidence of ownership Legal title passes when deed has been delivered and accepted
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Equitable Title
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it is a right to get legal title at a later date ie purchase and sale contract (most common)
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Land Contract (installment contract)
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buyer gets possession but owner keeps title owner financing is an example
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General Warranty Deed
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most used gives possession (seizen), right to convey, no encumbrances promises further assurance that owner's heirs cannot claim and quiet enjoyment (assurance against defects in title) warranty lasts forever. Only deed that promises further assurance and quiet enjoyment.
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Special or limited warranty deed
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limited to owner's time period no warranty against defects
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Quitclaim Deed
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normally used to remove clouds on title no claim of ownership doesn't warrant anything
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Tax Deed
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received in a tax sale 12 months after sale and previous owner has had a chance to pay taxes
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Gift Deed
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transfers real estate in exchange for love and kindness
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Easements in Gross
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utility easements
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Binding agreement
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2 letters responding to each other is a binding agreement, but must be signed to be sued for performance.
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4 requirements of a valid contract
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mutual assent - offer and acceptance. must have time, date, price, property, communication in writing legal consideration - money or something of value competent parties - no minors, sane, sober, authorized legal purpose - cannot be against public policy
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Termination of Offers
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Rejection counteroffer lapse of time revocation (any period between offer and acceptance) death ALWAYS terminates on offer
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Discharge of Contracts
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Performance -Yeah deal is closed! release - mutual agreement recission - usually requires law suit accord and satisfaction - substitute of terms novation - substitution of parties or terms - original party is totally released from liability assignment - substitution of parties but original party is responsible if assignee defaults statute of limiations - time limits set by law
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Fraud
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misstatement -willful=fraud innocent=misstatement material fact that was considered in decision reliance resulting damage
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Puffing
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exaggeration that does not rise to the level of missrepresentation does not void a contract
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Death
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voids offers but not contracts
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Breach of contract remedies
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liquidated damages - seller keeps earnest money suit for performance - easier to force seller to sell than buyer to buy because the property is unique
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Option to Buy
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example of a unilateral contract because there is only one party making a promise Seller is promising to sell but buyer only has the option isn't committing and may assign to another. Must give valuable consideration. Once the optionee decides to buy a bilateral contract now exists.
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Right of first refusal
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No benefit to seller. When owner decides to sell he must give the holder the 1st right of refusal.
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Property management contract
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creates an agency relationship - OLDCAR fiduciary responsibilities establishes rights and obligations of property owner and manager management fees are usually a percentage of effective gross income
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Non-Freehold Estates
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a leasehold estate created by a lease (estate and tenancy is the same word here)
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Assigning a lease
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all of lessee rights are transferred (best)
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Tenancy for years/terms
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a lease with a definite time period, no notice to terminate is required, expires on last day of the lease. Has full rights (CUPD) - only type of lease that has CUPD
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Sublease
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only a portion of the lessee's rights transfer. Lessee bears liability.
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Periodic tenancy
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stated term, requires notice to end, does not have CUPD only has CUP (does not have disposition - right to assign or sublet)
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Tenancy at will
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no stated term, requires only notice to end, only has CUP not Disposition (right to assign or sublet)
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Tenancy by sufferance
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a tenant holding over with permission of landlord
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Leases/rental agreements
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creates a non-freehold estate.
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distrain
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taking personal property as a pledge for rent
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CUPD
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Control, Use, Possession, Disposition
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demise
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means lease
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abandonment
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unexplained absence for 15 days or more following default in rent
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Constructive eviction
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landlord's actions cause the tenant to vacate and surrender possession
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Sale of property...
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does not usually terminate a lease
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Oral lease
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is not enforceable beyond one year
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Net lease (net-net)
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taxes, insurance, maint paid for by tenant
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Gross lease
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landlord pays taxes, insurance and maint
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Protecting tenants from foreclosure act 2009
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protects tenants from immediate eviction upon foreclosure notice to vacate 90 days before effective date
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Appraisal
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"opinion" estimate that is written and defensible of value as of a specific date. They do not determine or set the value. Market value is the purpose of most appraisals.
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Value
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Always an opinion. There are many kinds: loan value, investment value, salvage value and market value.
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Market value
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opinion. is the value that the typical market sees for something.
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Value in Use
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value determined by its special purpose or use. Not market value
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USPAP
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Uniform Standards of Professional Appraisal Practice - 1980's purpose is to se quality control standards for the valuation of real property, personal and business.
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Elements of value
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DUST Demand Utility Scarcity Transferability
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Value - Factors that influence
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PEPSi Physical - climate, neighbors, topography, infrastructure, condition Economic- local economy Political - zoning, taxes Social - what society is looking for
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Methods of estimating value
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sales comparison replacement cost income producing capability
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Sales comparison
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find at least 3 comps adjust the comps up or down to make them equal never adjust the subject property only the comps the more adjustments - not a good comp
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Income value
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GRM gross rent multiplier based on monthly rental or sales for one to four family dwellings GIM gross income multiplier based on annual rental and sales used for multi-family, commercial or industrial Doesn't consider expenses
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Capitalization
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operating income converted into value. income divided by rate = value
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Economic Life
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depreciation life time over which property can be profitably used
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Causes of accrued depreciation
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physical deterioration functional absolecence external (economic or locational) obsolence
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Appraiser compensation
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is never a percentage of value estimated
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CMA - Competitive Market Analysis
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what agents do. choose 3 listed, sold and expired to compare with subject property. estimate a value range
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South Carolina Fair Housing Enforement
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mirrors Federal law except in enforcement. 6 months to file with SC Human Affairs Commission 1 year to file suit in state court Note that these are 1/2 the times for federal
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Homestead exemption
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over 65 or 100% disabled or totally blind you get a 50,000 reduction in tax appraised (not assessed) value. Must apply for it. Must be owner occupied.
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SC Consumer Protection Code Revision act of 1982
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Governs lenders. There is no mandated (usury) rate of interest. Borrower may select their own attorney, insurance and title ins. Limits assumption fees to 1% or $400 whichever is lesser. If intentionally overcharged, the borrower gets 0% interest on loan for the remainder. Fixed rate and ARMs loans cannot have a prepayment penalty.
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SC Vacation TimeShare Act
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Timeshareing ownership is a freehold ownership estate. Vacation Time leasing is a leasehold estate for a # of years. Unit Week is a period that can be sold. Purchaser can cancel in writing within 5 days. Sunday doesn't count.
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SC LLR Real Estate Commission
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is the enforcement agency for timesharing. Must register with LLR before offering a new timeshare project. Penalties $5000 and jail 6 months to 5 years.
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SC Residential Property Condition Disclosure Law
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Property condition disclosure statement must be given before entering into a contract of sale. This governs owners. It is incumbent upon the seller to provide this. if something changes you can update form and disclose or fix the problem and act like it didn't happen! No adverse info should be hidden from buyer even if sold as is.
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SC Residential Landlord and Tenant Act 1986
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Does not govern all rentals. purposed to encourage landlords and tenants to maintain and improve the quality of housing. Magistrate has jurisdiction over complaints, Circuit Court handles appeals.
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Occupancies not subject to the Landlord and Tenant Act
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occupying under contract of sale frat house transient occupancy employee of landlord condo, co-op, timeshare educational residences, protective shelters
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Essential Services
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water, sewer, elec, gas, hot water and heat
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Rental Agreement
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all agreements, written and oral (oral only legal for 1 year)
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Unconscionability
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Court may refuse to enforce the rental agreement that was unconscionable (grossly one-sided) where the landlord takes advantage of the tenant. may refuse to enforce the unconscionable pares of the lease and require the remainder to be enforced.
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Unsigned or undelivered rental agreement
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valid when landlord accepts rent and tenant accepts possession
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Tenant remedies
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Tenant may terminate the lease in 14 days unless landlord remedies or starts to remedy in 14 days. If tenant created the condition, cannot terminate. If terminated, tenant gets back entire deposit. If cannot posses unit, then lease ends in 5 days. If proven willful tenant may recover 3 months rent and twice damage + attorney fees. Tenant can procure services and deduct from rent, cannot fix things on their own though.
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Retaliation from Landlord
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prohibited unless rent was already below market rate. He can then raise rent up to market rate. Cannot decrease essential services. Retaliation illegally costs 3 months rent or triple actual damages.
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Landlord Remedies
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terminate rental agreement, recover damages + attorney fees. Must give written notice to comply within 14 days. Can enter and have work done when tenant failure involves health and safety or physical condition. Can re-rent if abandoned for 15 days past default of rent. Can dispose of possessions $500 or less.
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Holdover tenant
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landlord must bring action for possession, and may recover 3 months rent or twice damages + attorney fees.
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Distraint
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landlord can take possession to cover rent but tricky
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Loan to Value
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determined by dividing the loan amount by the property value. loan amount/property value used all the time
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Points/discounts
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discount = buying at less than face value point=1% of loan amount buying down the interest rate increases yield to the lender usually 1 pt per 1/8% reduction
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Origination Fee
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fee charged by lender to cover misc expenses. usually 1/2 to 2 %
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Mortgage Broker commissions
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fee paid by the borrower for finding a lender
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Mortgage Insurance - PMI
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Private Mortgage Insurance = PMI Mortgage Ins Premium = MIP
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Equity
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difference between the value (market value or appraisal) and the amount owed.
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Pre-Qual or Pre-Approval
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Pre-qual - nothing is verified Pre-Approval some verification took place
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Uniform Residential Loan Application
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Most lenders use this form.
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Appraisal
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FHA/VA loan appraisals stay with the property for 6 months
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Underwriting
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the IRS of lending qualifies the buyer, the property and the title
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Servicing the load
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collecting payments, making sure taxes and insurance are current
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Types of Loans
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Term or Straight Amortized Fixed Rate ARM Conventional (conforming and non-conforming
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Term or Straight Loan
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Interest only
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Amortized and partially amortized (balloon)
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level or equal payments includes interest and principal which will fully pay the entire loan Partially amortized is a balloon - must be paid all at once after a certain amount of time usually 5 or 7 years.
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Interest structure
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most interest is paid in arrears and usually paid mostly up front in a mortgage
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Fixed rate mortgage
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rate never changes for the life of the loan
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ARM
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Index must be easy for borrow to find out what it is must not be directly influenced by the lender margin - amount lender adds to the index Adjustment interval is typically one, 3 or 5 years Most ARMs are assumable many can convert to fixed CAN have a pre-payment penalty federally but NOT in SC!
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Payment cap
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can result in a negative amortization (increase the balance due)
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ARM caps
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caps- adjustment period/life of the loan ie 1/5 = 1 point in 5 years
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Conventional Loan
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Not gov't backed LTV ratio determines whether loan is insured or not PMI 3 types: standard conforming alternative conforming non-conforming
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PMI
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Private Mortgage Insurance required if less than 20% down expires once 22% is paid down, but may be requested to terminate at 20% down Can avoid if you get a combined 1st and 2nd mortgage 80/10
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Standard conforming conventional loan
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sold on the secondary market. Fannie Mae and Ginnie Mae set the guidelines to ensure uniformity. Assumable only with lender permission. Fannie Mae will NOT purchase a loan with a pre-payment penalty.
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Non-conforming conventional loan
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Jumbo loans over 417,000
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Standard conforming loan qualifying ratios
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28% front end/36% back end allows for 8% debt
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Income Ratio
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total house payment/gross monthly income up to 28% of gross monthly income is allowed
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Debt Ratio
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total house payment + long term debt/gross monthly income. up to 36% of gross monthly income is allowed *debt which will not be paid off in 10 months is long term. all revolving credit is long term.
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Lender financing
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Mortgage = gives lender right to take property - equitable title Trust Deed = lender keeps title until paid in full
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Seller Financing
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Purchase Money Mortgage = seller has equitable title if default Contract for Deed = seller keeps title a.k.a. bond for title, land contract, installment contract
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Mortgagee
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Lender
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Mortgagor
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borrower
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Purchase money mortgage
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owner financing, seller does not retain title but has equitable title
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Installment land contract (contract for deed)
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owner financing, owner keeps title
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Primary Market
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money for consumers portfolio lender mortgage banker commercial banks savings associations mortgage broker private investors
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Secondary market
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money for lenders (who they sell the loans to) Fannie Mae Ginny Mae Freddy Mac
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Fannie Mae - FNMA
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Federal National Mortgage Association purchases conventional, FHA, VA loans and issues mortgage backed securities Largest purchaser in secondary market
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Ginnie Mae - GNMA
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Government National Mortgage Association insurance pools of loans
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Freddie Mac - FHLMC
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Federal Home Loan Mortgage Corporation only buys conventional loans insures like Ginnie Mae 2nd largest secondary purchaser
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FHA
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FHA - Federal housing administration works through approved lenders requires MIP - upfront and monthly. purpose is to pump $ into FHA offers low down payment 3.5% which can come from anywhere qualifying ratios are 29/41 much more lenient than conventional Pre-payment is NOT allowed (not for any Gov't backed loans) must be owner occupied assumable with qualification FHA 203b most common
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VA loan
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works through approved lenders veterans and active duty are eligible must have a certificate of eligibility by the Dept of Veterans Affairs only have to qualify with back end of 41% assumable with release of liability - novation another vet can substitute their entitlement must be owner occupied entitlement is 25% of $417,000 which is $104,250
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Reverse Annuity - reverse mortgage
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bank pays owner (borrowing from equity in home) when you move or die, loan has to be paid off
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Open-End loan
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secured line of credit I.E. Home Equity line of credit
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Package Loan
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has real estate and personal property as collateral (package = personal property) I.E. selling a model home completely furnished
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Blanket loan
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covers several pieces of property with a release for each piece builder uses this for a subdivision
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Sale Leaseback
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Grantor becomes the lessee grantee becomes the lessor
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Mortgage take-over
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assumption - qualified buyer -novation non-qualifying buyer is obligated to lender but seller doesn't get novation Subject to mortgage - buyer has no liability to lender, seller never gets novation
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Wrap Around Mortgage
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Buyer pays seller for 1st mortgage and seller finances equity with buyer. Seller can foreclose. Loan remains in seller name. Buyer makes payments to seller Almost extinct
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Title Theory/Lien Theory
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Lender has title/equitable title respectively Deed of trust (trustees)/Lien equitable title respectively SC is an lien theory state
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Promissory Note
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unsecured maker=borrower payee=lender (paid the money out)
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Security Instruments
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Deed of Trust (rarely used in SC) trustor=borrower trustee=third party beneficiary=lender
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Mortgage
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Dead Pledge mortgagor = borrower mortgagee = lender is a contract, written, may be assigned (secondary market) priority is based on time and date
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Hypothecation
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type of pledge mortgage is a type of pledge or hypothecation
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Acceleration Clause
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causes entire note to be paid at once default clause - failure to keep mortgagor convenants Due on Sale clause - alienation or assumption clause
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Mortgagor's Covenants
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pay ad valorem (taxes) keep insured do not remove anything attached to the house keep in good repair allow mortgagee right of entry
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Mortgage Fraud
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foreclosure rescues loan modification scams unusual upfront fees Borrower falsifying documents
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Predatory lending
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unfair, deceptive or fraudulent practices. Rob owners of equity, encourage refinancing for their own advantage
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Subprime lending
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loans made to those who do not qualify, lenders require high rates and fees
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Usury and Predatory lending laws
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usury laws make it illegal to charge high rates. SC doesn't have usury.
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National Consumer Credit Protection Act
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aka Truth in lending - TIL or Regulation Z must provide the true cost of lending information APR includes interest, orig fees, points and mortgage ins do not have to disclose third party fees
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Mortgage Disclosure Improvement Act MDIA 3-7-3
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good faith est within 3 days wait 7 days after providing to close the loan modifications to APR wait 3 days to close
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Equal Credit Opportunity Act
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make loans available to all creditworthy borrows regardless of ... even protects marital status
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Fair Credit Reporting Act
answer
keeps wrong info off of credit reports, gives right to inspect their file, and correct wrong info
question
Foreclosure
answer
Default is first step Equity redemption - can redeem before foreclosure Right of redemption - can redeem after auction (not in SC) Deficiency Judgments not enough money to cover mortgage
question
Distribution of Funds after Foreclosure
answer
delinquent taxes court costs plantiff mortgagee junior lien holders in the order in which they were recorded
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