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R.E.Finance
Chap 1
| Question | Answer |
|---|---|
| real or realty | land and all things permanently attached to it. |
| personalty | all movable things such as autos, stock, bank accounts, patents |
| estate | all that a person owns including realty and personalty |
| real estate | the portions of a persons estate that consists of realty |
| how are terms for real estate enforceable? | by a written signed contract. |
| realty public records | ownership of all realty within a political jurisdiction is catalogued. This created a hx record of all changes in ownership and provide notice of changes to public. |
| property rights | right to control, occupy, develop, improve, exploit, pledge, lease and sell, or the right that a person to the possession, use, enjoument, and disposal of his property |
| real property | ownership rights associated with the real estate. |
| real estate value | the total price individuals are willing to pay for the flow of benefits associated with all the property rights. |
| fee simple estate | represents the most complete form of ownership or real estate, also called a a fee simple absolute estate is a freehold estate the owner my divide up the fee into lesser estates and sell, lease or borrow against as desired. |
| leasehold estate | usually describes rights and interests obtained by tenants when leasing or renting a property |
| estate in possession | a present estate in land, entitles owner to immediate enjoyment of the rights to that estate. |
| estate not in possession | a future estate in land, does not convey the rights of the estate until some time in the future, if at all. |
| two general types of estates in possession | Freehold and leasehold. |
| freehold estate | lasts for and indefinite period of time, that is there is no definitely ascertainable date on which the estate ends |
| leashold estate | expires on a definite date. Aside from this technical distinction, a freehold estate connotes ownership of the property by the estate holder, whereas a leasehold estate implies only the right to posses and use the property owned by another for a time. |
| life estate | freehold estate which is an estate that lasts only as long as the life of the owner of the estate or the life of some other person. Upon death the property reverts back to the original grantor (transferor or property) his heirs or other designated person |
| Two most important types of future estates | reversion and remainder |
| reversion | exists when the holder of and estate in land (the grantor) conveys to another person (grantee) a present estate in the prop. that has fewer ownership right than grantor's own estate and retains for the grantor or the grantor's heirs the right to take back |
| remainder | exists when the grantor of a present estate with fewer ownership right than the grantor's own estate conveys to a thrid person the reversionary interest the grantor or grantor's heirs would otherwise have in the property upon termination of the grantee's |
| two major types of leasehold estates | estates for years and estates from year to year. |
| estates for years | type of leasehold estate investors a& lenders are most likely to encounter, created by a lease that specifies and exact durat for the tenancy, period may be < 1 year and still be an estate for years as long as the lease agreement specifies termin date |
| how long can an estate for years be? | as long as 99 years. |
| Can the lessee borrow against the lease? | yes, if rent is $1000/yr & the fair mkt values is $2000 the $1000 excess represents value to the lessee, which may be borrowed against or sold |
| leased fee estate | while a property is leased, the owner has given up some property rights to the lessee. |
| Estate from year to year | also called estate from period to period or periodic tenancy continues for successive periods until either party gives proper notice or its intent to terminate at end of period (usually mo to mo, but can be yr to yr) |
| t or f since estate from year to year are less than a year the agreement can be oral | true |
| What should buyers of property with leasees be concerned with if they are going to allow those leasing to stay? | with the actual lease agreement itself. They should examine and approve leases to ensure that they are in force, not in default, and are free from undersirable provisions. |
| "interest" in real estate | a right or claim on real property, its revenues or production. |
| pledge of encumber | putting up his or her property for the sake of a loan. (mortgage loan) |
| secured interest | the lender receives only a secured interest on the property, but not posssession, use and so on. |
| easement | this is a nonpossessory interest in land, it is the right to use land thbat is owned or leased by someone else for some special purpose. This gives only limited user privilege and not privileges associated with ownership. |
| title assurance | refers to the means by which buyers of real estate (1) learn in advance whether their sellers have quality title (2) recv if title turns out not to be as represented |
| title | an abstract term frequently used to link an individual or entity who owns property to the property itself. Title proves ownership. |
| abstract of title | a historical summary of the publicly recorded documents that affect a title. The quality of the title conveyed from sellr to buyer depend on the effect these docs have on the seller's rightful possession of his or her property. |
| t or f title exists only for freehold estates? | true |
| deed | title is conveyed from one person (grantor) to another (grantee)by using a deed, to be legal, deed must be in writing |
| marketable title | one that is not merely valid in fact but also free from reasonable doubt, free from litigation and one which readily can be sold or mortgaged. |
| what are some common examples of encomberances? | easements, leases, and mortgages (secured interests) |
| what are 3 ways to which a buyer has assurance that a title is good and marketable? | 1. seller may provide a warranty as part of the deed 2. there may be a search of relevent recorded docs to verify title 3. title insurance to cover unexpected problems |
| general warranty deed | the most commonly used deed in real estate transactions and the most desirable type of deed from the buyer's perspective. |
| what does a general warranty deed state? | 1. grantor has good legally valid title to prop. 2. grantor has right to convey prop. 3. promise to compensate grantee is another has claim to prop 4. promise against encumbrances except those listed in the deed |
| what time period does a general warranty deed cover? | promises or covenents covered in gen warranty deed cover all conveyances from from original source to present. |
| special warranty deed | makesthe same warranties as general warranty deed except that it limits their application to defects and encumberances that occurred only while the grantor held title to the property |
| quitclaim deed | offers the grantee the least protection, this deed conveys to the grantee whatever rights, interests, and title that the grantor may have in the property. No warrant. are made about rights and interests (the grantor quits his claim, in favor of grantee) |
| what are the two methods that buyers employ m0ost often to obtain assurance of title? | Attorney's opinion of title and title insurance. |
| what is the two step method of attorneys opinion? | 1. A search of the title record, which involves locating and examining all of the instruments in the public records that have affect. the title 2. attorney studies docs and forms expert opinion of character of title |
| clouded title | found by attorney's opinion the opinion should state what defects or encumbrancers were uncovered by examination of records and what can be done to fix it. |
| t of f a lawyer can generally be held liable for any defect in the title not disclosed | false. any liability borne by the lawyer is based upon proof of his negligence or lack of professional skill in the exam of docs. If information was missing from docs he is not liable. |
| title insurance | evolved because lawyer's responsibility was limited to what was in the records. Ensures that the title is good and marketable. |
| t or f title insurance is required for any mortgage that is traded in the secondary mortgage market | true |
| What are the two kinds of title insurance? | The owner's policy and the lender's policy. Both Policy's are paid with one premium and may be paid by either the seller or the buyer. |
| Owner's title insurance policy | insures the interests of the new property owner |
| lender's title insurance policy | insures the interests of the mortgagee. |
| recording acts | all states have enacted these statutes. Normally different among the states and provide a publicly accessible for assessing and establishing claims or interests in real estate as against all other parties. |
| construction notice | the recording acts deem a person to have whatever information is contained in public records--information that could be obtained by a reasonably diligent investigation of the records |
| what type of information is covered by recording acts? | deeds, mortgages, assignments of mtgs, liens on real estate, land contracts, long-term leases, easements, restrictive covenants, and options to buy |
| what is an item on the title that may not be listed in the public records? | mechanics lien |
| mechanics' lien | give unpaid contractors, workers, and material suppliers the right to attach a lien on the real estate to which they added their labor or materials. They may even foreclose such liens by forcing judicial sale of the encumbered property. |
| t or f @ closing to protect the new buyer and lender they should require an affidavit stating that all monies have been paid to workers and contractors. | true. This is done because workers and contractors have 60 days to file a lien against the home. If work was not paid for the lien could be against the new owner. |
| deed restrictions | limit the use of property by all owners of that property, including future owners. (ex. like the sale of alchohalic beverages on a property) |
| note | a document which serves a evidence that debt exists between a borrower and a lender and usually contains the terms under which the loan must be repaid and the rights and responsib of both parties |
| what do notes ususally contain? | amount borrowed, rate of interest, due dates, number of payments maturity date, reference to real estate, applic of payments, default (occurs when nonpay of amts due), penalties for late pay |
| forbearance | used by lenders when they believe that borrowers will make up late payments |
| foreclosure | used when borrowers do not pay and often forcing the sale of the property |
| prepayment provision | gen. included in resid. mtg loans. However when financing income producing prop. it may be highly restricted and require payment of a fee. Prepay is used to allow borrowers to make early payments, or to repay the loan in part or full before maturity. |
| notification of default and acceleration clause | in the event of past due payments, the lender must notify the borrower that he is in default. Lender may accelerate the loan and demand full payment |
| nonrecourse clause | provision under which the lender agrees not to or specifies conditions under which it will not hold the borrower personally liable in the event of a default on the note. |
| loan assumability | indicates conditons a borrower wil be allowed to substitute another party in his place who will then assume respons for the remaining loan pay., note will specify whether or not the orig borrower remains personally liable or is clear of loan liability |
| due on sale clause | clause which requires all remaining amounts due be paid upon sale of or transfer of title to the property. |
| assignment clause | gives the lender the right to sell the note to another party without approval of the borrower |
| future advances | give borrower the right to borrow additional funds up to some max. amount or max % of the current property |
| release of lien by lender | lender agrees to release or extinguish it lien on th property when the loan is fully repaid. |
| what is the most common method used in financing the purchase of real estate? | mortgage financing |
| mortgage financing steps | buyer borrows funds from a lender, use funds to purchase property |
| t or false real estate is a poor security for a loan. | false, it is an excellent security for a loan. |
| mortgage | created in a transaction whereby one party pledges real property to another party as security for an obligation owed to that party. |
| promissory note | normally executed contemporaneously with the mortgage. It creates the obligation to repay the loan in accordance with its terms and is secured by the mtg. |
| what are the essential elements of a mtg? | Obligation to pay, perform a pledge of property as security for that obligation. |
Created by:
delorya