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TEXAS PROMULGATED CONTRACTS-CHAMPIONS STUDY
The elements of a valid contract are, competent parties, consideration, legal subject matter, in writing, and ___________. (a) Default (b) Mutual c... [Show More] onsent (c) Property condition (d) Recording - correct answer B A(n) __________________ contract is defined as a contract that is binding on the parties, with one or more of the parties having contractual duties that have not yet been performed. (a) Executory (b) Executed (c) Bilateral (d) Void - correct answer A In the business of real estate, ___________ is defined as something given in exchange for a promise. (a) Consideration (b) Mutual assent (c) A bribe (d) Legal subject matter - correct answer A The TREC-promulgated contract forms: (a) Are for optional use by real estate licensees (b) Are drafted by the Broker-Lawyer Committee (c) Are promulgated by the legislature (d) Are used in both commercial and residential transactions - correct answer B In a lease with a "right of first refusal" provision: (a) The price is set when the lease agreement is negotiated (b) The tenant has promised to buy the property (c) The TREC promulgated form must be used (d) The tenant has the right to match or better any offer the landlord receives to prevent the property from being sold to someone else - correct answer D TREC has promulgated forms for: (a) lease purchase transactions (b) cooperatives (c) right of first refusal (d) residential transactions - correct answer D An offer can be communicated by ___________________. (a) Phone (b) Hand delivery (c) E-mail (d) All of the above - correct answer D The Third Party Financing Addendum For Credit Approval is used when: (a) The buyer is obtaining FHA financing (b) Paragraph 4.A(2)(a) is checked in the contract (c) The buyer is obtaining VA financing (d) The buyer is obtaining any kind of financing - correct answer D In the Third Party Financing Addendum for Credit Approval: (a) The buyer has no incentive to obtain financial approval (b) The buyer has a definite time to notify seller of the inability to obtain financing approval (c) The buyer's earnest money will not be returned if the buyer does not obtain financing (d) The option period is explained - correct answer B The Third Party Financing Addendum for Credit Approval cannot be used for: (a) VA guaranteed loans (b) FHA insured loans (c) Seller Financing (d) Texas Veterans Loans - correct answer C According to the Seller Financing Addendum, the interest rate is: (a) Set at 6% (b) Negotiated between the parties (c) Set by TREC (d) Determined at closing - correct answer B ___________________ occurs when a buyer assumes and agrees to pay the seller's existing mortgage. (a) Loan assumption (b) Seller liability (c) Seller lien (d) Credit approval - correct answer A Land, improvements and accessories are collectively referred to as: (a) The estate (b) The property (c) The listing (d) The homestead - correct answer B According to the TREC contract, accessories include: (a) Refrigerators (b) Stoves (c) Washing machines (d) Gas dryers - correct answer B Exclusions to the sale must be removed (a) Prior to delivery of possession (b) At the convenience of the seller (c) When the offer becomes a binding contract (d) Two days prior to closing - correct answer A The loan amount in Paragraph 3.B. of the sales contract includes: (a) The amount of the mortgage insurance (b) The loan plus origination fees (c) Only the amount borrowed by the buyer (d) The loan amount minus the earnest money - correct answer C The sales price in 3.C. is always: (a) The loan amount plus the cash portion (b) 3.A. + 3.B. (c) The amount borrowed plus the down payment (d) All of the above - correct answer D The earnest money is: (a) Always 5% of the purchase price (b) Set by TREC (c) Negotiated between the parties (d) Paid at closing - correct answer C The T-47 Residential Real Property Affidavit is not completed until ________________, in most cases. (a) Funding (b) Inspection (c) Closing (d) The listing is taken - correct answer C The __________________ ensures compliance with TRELA, which requires that license holders advise buyers to have an abstract of title examined or to obtain title insurance. (a) Title commitment (b) Notice to Prospective Buyer (c) Seller's Disclosure (d) Inspection report - correct answer A A Seller's Disclosure Notice is not required (a) When the property being sold is a previously unoccupied new home (b) When the property is sold to an investor (c) When the property has an out of state owner (d) When the property is sold "as is" - correct answer A If a buyer is concerned about the presence of endangered species, toxic substances or wetlands on a property, the agent should (a) Add the Environmental Assessment Addendum to the contract (b) Avoid the property at all costs (c) Add in Paragraph 11, Special Provisions, that the contract is subject to an environmental review (d) Explain to the buyer that environmental issues are rarely a problem - correct answer A How long does a buyer have to object to defects, exceptions and encumbrances to title disclosed in the survey and title commitment? (a) Within 3 days of the effective date of the contract (b) Up to 5 days prior to closing (c) Within 7 days of becoming concerned (d) The negotiated number of days stated in the contract - correct answer D Being within the extraterritorial jurisdiction of a municipality is an indication the property will: (a) Be condemned in the near future (b) Possibly be annexed in the future (c) Be unmarketable (d) Never be annexed by any municipality - correct answer B The Lead-Based Paint Disclosure is: (a) Required for all properties (b) A federal requirement for residential property built prior to 1978 (c) A TREC requirement (d) The responsibility of the buyer's agent - correct answer B If a buyer makes an offer without having received the Seller's Disclosure Notice, how many days does the seller have to provide the notice? (a) Not less than 3 days prior to closing (b) Not more than 5 days after the effective date of the contract (c) Within 7 days of loan approval (d) The number of days negotiated in the contract - correct answer D If a license holder is receiving compensation from a residential service company, the compensation is: (a) Reported to TREC (b) Disclosed to the parties using the appropriate TREC form (c) Never disclosed to anyone (d) Reported to the attorney general for action - correct answer B For a valid option to exist (a) The option fee must be paid directly to the seller or listing broker (b) All of the blanks in paragraph 23 must be filled in (c) The fee must be paid within three days of the effective date of the contract (d) All of the above - correct answer D The special provisions paragraph of the contract allows licensees to insert: (a) Factual business details (b) Statements not addressed in the contract (c) Information for which there is no TREC promulgated addendum, lease or mandatory form (d) All of the above - correct answer D Usual expenses of the seller as stated in the contract include: (a) Appraisal fees (b) VA loan funding fee (c) Release of existing lien (d) Copies of easements and restrictions - correct answer C The process of dividing ongoing expenses between the buyer and seller at the closing is called: (a) assessing (b) prorating (c) collecting expenses (d) accounting - correct answer B If not using a temporary lease, the buyer is entitled to possession of the property: (a) 24 hours before closing [Show Less]
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CHAMPIONS REAL ESTATE MARKETING SAE
Most common reason a property fails to sell is - correct answer price Matching human needs with goods or services to meet those needs is the process of ... [Show More] - correct answer marketing _____________________ is a key personality trait of a successful agent - correct answer problem solving 3 Ways Sales Agents Add Value to the Buying Process - correct answer Counseling, Negotiating, and Managing the transaction Four P's of marketing real estate - correct answer product, promotion, price and place How can you know your product? - correct answer - Inspect company listings • Travel your geographic area • Practice writing offers • Do net sheet calculations on your own house AIDA - correct answer (The four psychological steps of a sale: attention, interest, desire and action). states that rational buyers will pay no more for a property than they would for an equally desirable, comparable property. - correct answer The principle of substitution in real estate valuation Marketing to a specific age group is sometimes called - correct answer generational selling An acronym for the psychological steps of a sale is - correct answer AIDA A willingness to change and grow your marketing plan demonstrates to concept of ____________. - correct answer adaptation To be an effective problem solver, it is beneficial to understand .... - correct answer basic human needs and the psychological steps involved in a sale defined as expected benefits to be received as a result of ownership - correct answer amenities Objectives should be - correct answer measurable and achievable as well as timely. Goals should be - correct answer attainable, flexible, measurable, and time frame shot gun method - correct answer often the preferred choice for new agents until they realize that they can't possibly take on such a large-scale market 4 types of buyers - correct answer -first time buyers -relocators -upgraders -investors communication is - correct answer transmitting and receiving/ talking and listening Marketing budget goals should be set for a minimum of ___________, realistically more - correct answer 6 months _______ drive the market - correct answer consumers Agents should "listen" not only to what the client is saying, but also to ___________________. - correct answer body language To be an effective problem solver, a real estate agent should understand the __________ involved in a sale. - correct answer psychological In which emotional phase is the buyer ready to buy? - correct answer Act Gathering data, analyzing it and drawing conclusions based on it describes - correct answer marketing research Analyzing strengths, weaknesses, opportunities, and threats is referred to as a - correct answer SWOT analysis - market research product, price, placement, promotion A report prepared by an agent to help a seller realistically price their property is a - correct answer CMA SWOT - correct answer strength, weakness, opportunities and threats - marketing research analysis CMA - correct answer comparative market analysis Two kinds of market research - correct answer primary and secondary primary research is ________ focused - correct answer customer, examples email surveys, mail surveys, closed transactions secondary research is more ___________________ and can be ___________________ - correct answer more in depth and can be quite complex, expensive, and time consuming Secondary research is ___________________ and includes ______________ - correct answer ongoing, data tracking , done by major companies found on internet (HAR, NAR) researcher is best served by using ___________________ - correct answer quantitative research employs statistical analysis by measuring values to determine the results - correct answer quantitative This type of analysis "describes" the obtained results. For example, how many people like or dislike a proposed change in a brokerage's marketing approach. - correct answer descriptive data analysis descriptive used in conjunction with quantitative presented charts and tables that illustrate measure of central tendency. can also be employed to compare market segments to see how they respond to an issue, and to provide foresight as to what could possibly occur based upon the compiled data. - correct answer inferential data analysis It is widely held that ________ is the minimum sample size for reliable results - correct answer 30 Payments on your mortgage mean you are acquiring a major possession; instead of rent, you own more and more - correct answer investment More people have started on the road to their goals by home ownership than by any other way. Your principal and interest payments remain the same for the full term of your mortgage while rents usually go up - correct answer financial independence Better than a savings account, your home can appreciate to keep pace with inflation. Should your hobby be carpentry, decorating, etc., you have opportunities to enhance the value of your home. - correct answer cash equity Means, medians, and modes are all measures of - correct answer central tendency Why might a real estate professional perform market research? - correct answer a. To determine the direction of the market b. To monitor current marketing performance c. To identify new market opportunities The acronym FSBO stands for - correct answer For Sale by Owner Another name for telemarketing is called - correct answer Cold-Calling Working a market based on location is called - correct answer Geographical Farming Market research can indicate the - correct answer • sex/gender, • marital status, • lifestyle, • education level, and • income level of the consumers in your target market. Two forms of macro marketing - correct answer geographic farming and demographic farming a great place to kick off your marketing, particularly if your marketing budget is lean, and that tends to be the case for most new agents when launching their new career - correct answer geographic farming A farm is a part of the area that is - correct answer serviced by your firm Canvassing door to door best time is - correct answer Saturday mornings, follow up with email, flyer, etc. once a month The following three-step strategy for prospecting for listings is very effective. - correct answer Telephone call, mail, personal visit What time of day should you cold call? - correct answer evening or late afternoon the housing situation in the country - correct answer macro market the housing situation in the state/city - correct answer metro market the housing situation in specific communities/neighborhoods - correct answer micromarket Why would an agent employ micro marketing strategies? - correct answer Because it can save agents time and money by custom tailoring their marketing campaigns for a specific group of buyers/sellers Which of the following techniques is commonly used in prospecting for listings? a. Cold-calling b. Door-to-door canvassing c. Mailing a note or postcard d. All of these are techniques used in prospecting - correct answer d A broker can keep and protect client records by making use of - correct answer cloud storage A source of information about current and expired listings and sales can be found on the local __________, - correct answer MLS Two popular social networks are ___________ and _____________ - correct answer twitter fb With client permission, an agent could post a video of a listed property on ___________. - correct answer youtube Skyler 360 and Siri are examples of - correct answer artificial intelligence Why is search engine optimization (SEO) important? - correct answer Because without it, your website might end up buried on page 12 or 13 of a Google search, and everyone knows that the majority of web-surfers do not click past page 2 or 3 of the results. SEO employs strategies that promote your site up in the ranks of a search results page, making you more visible to prospective clients MLS stands for - correct answer Multiple Listings Services is an office concept that is catching on in some brokerages, limiting the amount of office space needed for agents - correct answer Hoteling The word blog is a combination of which two words? - correct answer web and log are the largest demographic of customers to sell to due to their sheer volume of numbers - correct answer Millennials The purpose of compiling a market analysis for a seller is to assist the seller in __________ their property competitively. - correct answer pricing Preparing a home for showing can be done professionally or by the sellers. It is often called ___________. - correct answer home staging THE 4CS OF SOCIAL MEDIA MARKETING - correct answer • Creating • Curating • Connecting • Culture created when there is more money in the market and less goods for sale - correct answer Demand-pull inflation occurs when the costs of production and offering services increase, thereby causing manufacturers and tradespeople/vendors to raise their prices accordingly. The costs are then passed on to the consumer - correct answer cost-push inflation More available affordable housing creates what is known as a _________ market. - correct answer buyer's Rather than being employees of their broker, most license holders work as _____________. - correct answer independent contractors tax equity and fiscal responsibility act - hold license -paid on commission basis -written contract with broker The commission is the most common form of ______________. - correct answer agent compensation An independent contractor will have earnings reported to the IRS on a form called a _________. - correct answer 1099-MISC The way a commission is divided between cooperating brokers is called the ____________. - correct answer commission split IRS guidelines state that sales agents that are independent contractors: - correct answer are required to pay their own business fees Which of the following statements is INCORRECT? a. Brokers may offer discounted commission rates to clients. b. Brokers may charge clients a flat fee for services. c. Flat fee charging is illegal in most states. d. Real estate commissions are always negotiable - correct answer c Who determines commission fees and splits? - correct answer The broker of record TREC requires any broker with an exclusive agency agreement to provide the client with _____________. - correct answer minimum levels of service Time in the office providing an agent the opportunity to work with any walk-in or call-in prospects is commonly called _________. - correct answer floor time In-direct approach to marketing is considered - correct answer impersonal direct is personal personality type that gives back to community/yellow - correct answer whale personality type that likes to have fun, they like to talk/blue - correct answer dolphin interested in data, engineers/green - correct answer urchins personality type that is competitve, out for blood, big idea people, big picture people/red - correct answer shark values ideas, innovation, original and new concepts that have long-term implications; inquisitive and imaginative; challenged by problems and finding solutions. forward to future "big picture" - correct answer theorist values actions ("actions speak louder than words"); results oriented; direct; frank about events, situations and people; down to earth and practical in working. here/now/present respond with touch, sell, feel - correct answer driver The best marketing tip for Sofia when dealing with GenX and Millennials would be: - correct answer Make your presentation short, direct and use technology Kathy is a top-producing agent who is very direct in her approach with clients and fellow agents. She is often in a hurry, and keeps her conversations short and to the point. Given this description, it is safe to say that Kathy is probably a __________. - correct answer driver A summary of your personal qualifications, business information and a sample contract are some items that would be included in your ___________________. - correct answer listing presentation kit The mandatory disclosure notice that must be presented to both prospective buyers and sellers is the __________. - correct answer IABS A form prepared by the seller and provided to buyers is the ____________________. - correct answer seller's disclosure A Seller's Disclosure is prepared by the seller and the __________ is responsible for the accuracy of the information. - correct answer seller The underlying theory is that a good sales person must have at least two basic qualities: - correct answer empathy and ego drive empathy is - correct answer the ability to put yourself in someone else's shoes Loans guaranteed by a government agency are ____________. - correct answer VA loans Loans insured by a government agency are _____________. - correct answer FHA Private sector loans without a government guarantee or insurance are ____________. - correct answer conventional An employment contract hiring a broker to represent a buyer is a ____________________. - correct answer buyer representation agreement VA loan must have - correct answer The Veteran must receive a Certificate of Eligibility from the VA prior to applying for the loan. The property must be appraised by the Veterans Administration. A veteran who is applying for a VA loan must sign a document stating that he or she will occupy the property in this loan the borrower makes equal regular payments of principal and interest until the loan is repaid. The term of the loan can be anything from 10 to 30 years, but the most common terms are 15 years and 30 years. This loan is often referred to as a fixed-rate loan. - correct answer amortized loan the interest rate changes or is adjusted periodically. The rate is usually tied to some readily available index, and changes from period to period are usually limited or "capped". This loan can often give the buyer the lowest available monthly payment at the start of the term, but it is important to remember that the rate will fluctuate, and so will the payments. The maximum allowable adjustment over the life of the loan is also usually capped. - correct answer adjustable rate mortgage (ARM) This is an amortized loan in which the loan payments in the early years are set lower than normal, and they gradually rise over the first few years, leveling off at some point, such as the fifth year - correct answer Graduated Payment Mortgage Most lenders will not allow borrowers to spend more than ______% of their monthly income on PITI. - correct answer 28 two types of qualifying - correct answer financial and emotional A federal law that regulates marketing emails is the _____________. - correct answer CAN-SPAM act Taking buyers to or away from a neighborhood based on any protected group is called ___________. - correct answer steering Another name for panic peddling with sellers is ______________ - correct answer block busting [Show Less]
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CHAMPIONS REAL ESTATE FINANCE GRADED A+ ALREADY PASSED 2023
Loan-to-Value Ratio (LTV) - correct answer The percentage of the lesser of the appraised value or sales price that the lender will lend. ex: If a borrow... [Show More] er is approved for an 80% loan, it means that the lender will loan up to 80% of the sales price or appraised value, whichever is lower. Package Mortgage - correct answer Includes both real and personal property ( fixtures and furnishings) Blanket Mortgage - correct answer Covers more than one piece of property. Wraparound Mortgage - correct answer Method of financing which preserves the low, existing interest rate on the original note. Open-End Mortgage - correct answer Permits additional borrowing on the same note. This is sometimes called a credit card mortgage or a home equity line of credit - HELOC. Budget Mortgage - correct answer The monthly house payment includes principal, interest, taxes and insurance (known as PITI) Collateral -Dependent Loans - correct answer A hard money loan is a specific type of asset-based financing in which a borrower receives funds secured by the value of a parcel of real estate. Character - correct answer Is a measure of the willingness of a borrower to make on-time payments. Credit character is revealed in the borrower's credit report. Capacity - correct answer Is a measure of the borrower's ability to repay the debt, and is demonstrated through current earnings and job stability. Capital - correct answer Is the sum of all assets that the borrower has accumulated. Collateral - correct answer Is something of value that can be pledged as security for repayment. Yield - correct answer Is the return that the investor recieves over the life of the loan. (Also known as profit) Originator - correct answer The process of creating a new mortgage loan, including all steps taken by a lender to attract and qualify a borrower. Mortgage Broker - correct answer Typically functions as a middleman between the borrower and the lender, negotiating, selling or arranging loans to be delivered to larger investors. At one time originated up to 80% of all mortgage loans. (Back on the rise) Mortgage Banker - correct answer Entities which provide their own funds for the purpose of providing mortgage financing, as opposed to commercial banks/savings associations. (Held, or "Warehoused") Correspondent Lender - correct answer Usually smaller in scale than mortgage bankers or brokers, these lenders typically extend loans with their own funds, at their own risk. Processing - correct answer Once application is complete the file moves into this phase. Underwriting - correct answer The detailed process of evaluating a borrower's loan application to determine the risk involved for the lender. Closing - correct answer The consummation of a real estate transaction in which all appropriate documents are signed and the proceeds of the mortgage loan are then disbursed by the lender. Servicing - correct answer Includes collecting monthly payments, maintaining records of payments and balances, collecting and paying taxes and insurance ( and managing escrow and impound funds) remitting funds to the note holder, and following up on delinquencies. Supply and Demand - correct answer an economic concept that states that the price of a good rises and falls depending on how many people want it and depending on how much of the good is available. Funding - correct answer The process of transferring funds to a title or escrow company for disbursement The Safe Act - correct answer Designed to enhance consumer protection and reduce fraud. (Key component of HERA) M1 - correct answer Is defined as the sum of currency held by the public and transaction deposits at depository institutions. M2 - correct answer Is defined as M1 plus saving deposits, small-denomination time deposits (those issued in amounts of less than $100,000) and retail money market mutual funds shares. Fiat Money - correct answer Is currency that is not backed by any precious metals at all. Monetary Policy - correct answer Is the maintenance of a stable money supply that provides for growth in the economy while keeping inflation in. The federal reserves is responsible for this policy in the United States. Fiscal Policy - correct answer Federal Government spending. Approved by Congress. At the treasury level, funds can be raised to pay for government spending by raising taxes and increasing borrowing. Federal Reserve (The Fed) - correct answer is the central bank of the United States Monetary inflation - correct answer When there is an excess of money supply in the market. Demand-pull inflation - correct answer When there is more money in the market and less goods for sale. Cost-push inflation - correct answer Occurs when the cost of production and offering services increase, thereby causing manufacturers and tradespeople/vendors to rais their prices accordingly. Discount rate - correct answer The interest rate charged member banks that borrow from the Federal Reserve Systems Federal Funds Rate - correct answer Is the rate that the Federal reserve charges banks for unsecured loans, most of which are for a very short term. Trouble Asset Relief Program (TARP) - correct answer Was created to restore the nations financial stability and restart economic growth. United State Mint - correct answer Created by Congress in 1972 and became part of the Department of the Treasury in 1873. The primary mission is to serve the American people by manufacturing, distributing, and circulating precious metal coins, collecting coins and national medals. Also entrusted with providing security over assets. The Federal Deposit Insurance Corporation (FDIC) - correct answer An agency created in 1933 to insure individuals' bank accounts, protecting people against losses due to bank failures (Insures deposits only) The Federal Home Loan Bank (FHLB) System - correct answer A system of regional banks from which local lending institutions everywhere in America borrow funds to finance housing, economic development, infrastructure and jobs. The Federal Housing Administration (FHA) - correct answer Provides mortgage insurance on loans made by blank- approved lenders throughout the US and its territories. Insures mortgages on single-family and multifamily homes including manufactured homes and hospitals. It is the largest insurer of mortgages in the world, insuring over 34 million properties since its inception in 1934. FHA mortgage insurance - correct answer Provides lenders with protection against losses as the result of homeowners defaulting on their mortgage loans. Community Development Block Grants (CDBG) - correct answer To help communities with economic development, job opportunities and housing rehabilitation HOME Investment Partnership Program - correct answer Block grants to develop and support affordable housing for low-income residents. Rental assistance - correct answer In the form of section 8 certificates or vouchers for low-income households. Ginnie Mae (GNMA) - correct answer Was established in the U.S in 1968 to promote homeownership. It is wholly-owned government association that operates a mortgage-backed securities program designed to facilitate the flow of capital into housing industry. Does not issue, sell or buy pass-through mortgage-backed securities or purchases mortgages loans. It simply guarantees (insures). Federal Fair Housing Act of 1968 - correct answer An act prohibiting discrimination in the sale or rental of housing on the basis of race, color, religion or national origin sex, handicap and familial status. Department of Housing and Urban Development (HUD) - correct answer A federal cabinet department is active in national housing programs. Its mission is to create strong, sustainable, inclusive communities and quality affordable homes. It prevents housing discrimination through public education and enforcement are administered by the Assistant Secretary for Fair Housing and Equal Opportunity (FHEO) NMLSR - correct answer All residential mortgage loan originators must now be registered with the Nationwide Mortgage Licensing System and Registry. Consumer Financial Protection Bureau (CFPB) - correct answer Established by the Dodd-Frank Act. The Bureau has the authority to examine and enforce consumer protection regulations for all mortgage-related businesses, large non-bank financial companies, and banks and credit unions with assets greater than $10 billion. Redlining - correct answer A practice in which banks refuse to make loans to people living in certain geographic locations. Equal Credit Opportunity Act (ECOA) - correct answer The federal law that prohibits discrimination in the extension of credit because of race, color, religion, national origin, sex, age, or marital status. Ensures that all consumers are given an equal chance to obtain credit. Truth in Lending Act (TILA) - correct answer A United States federal law that is designed to protect consumers in any credit transactions by requiring clear disclosure of key terms of lending arrangments all associated cost. Trigger Terms - correct answer Specific credit terms that may not be advertised unless the advertisement includes other detailed information. The Federal Fair Credit Reporting Act (FCRA) - correct answer Sometimes called the Fair Credit Reporting Dispute Act, is a federal law designed to protect consumers against unfair credit reporting practices and protect and credit privacy. To assure the consumer that these agencies are fair, accurate and exhibit confidentiality in their credit reporting methods. U.S. Department of Agriculture (USDA) - correct answer Also referred to a "Section 502 loan" is insured by the U.S. Department of Agriculture. The program offers 100% financing (no down payment) for qualified borrowers. First time and repeat home buyers can obtain this loan. The program is for primary residence only; no second homes or investor financing is available under this program. The program is for purchases and refinancing only and cash-out refinances are Not allowed. USDA Farm Loans (FSA) - correct answer Is an agency of the US Dept of Agriculture. Farm Loan Programs for a farmer or rancher who is unable to obtain credit elsewhere to start, purchase, sustain, or expand a family farm. Office of Consumer Credit Commissioner (OCCC) - correct answer Regulates the credit industry and educates consumers and creditors. Agency efforts help produce a fair, lawful and healthy credit environment for social and economic prosperity in Texas. Texas Department of Housing and Community Affairs (TDHCA) - correct answer Is responsible for affordable housing, housing related and community service programs, and the regulation of the states manufactured housing industry. Texas Veterans Land Board (VLB) - correct answer a division of the General Land Office of Texas that administers three programs to assist Texas veterans in purchasing a principal residence and/or land and in financing home improvements Regulation X - correct answer The Consumer Financial Protection Bureau's (CFPB)( Blank )which implement the Real Estate Settlement Procedures Act (RESPA) Ensures that consumers throughout the nation are provided with more helpful information about the cost of the mortgage settlement and protection from unnecessarily high settlement charges caused by certain abusive practices. RESPA Section 8 - correct answer Prohibits kickbacks, fee-splitting, and unearned fees. Loan Estimate (LE) - correct answer Form replaced the GFE form and the initial TILA disclosures and includes some new disclosures. The form must be provided by the mortgage broker or creditor upon receipt of an application. The creditor or broker must give the form to the consumer no later than 3 business days after the consumer applies for a mortgage loan. Closing Disclosure Delivery Requirement - correct answer The TRID rule requires that the consumer receives the Closing Disclosure no later than 3 business days before consummation. Secondary Market - correct answer Exists for the purchase and sale of existing mortgages to investors. Designed to provide greater liquidity to the residential real estate market by providing for a steady supply of funds from investors. Wherein loan originators such as mortgage bankers and brokers can sell their loans and thus recover cash for originating more loans. Federal National Mortgage Association (FNMA) - correct answer Plays a vital role in financing mortgages and increasing homeownership opportunities in the US. Began in 1938 as an agency of the federal government and was created to bring stability to the US housing market. In 1968, it became a privately owned and managed corporation. US Congress re-chartered it as a private company. Mandating that it operate with private capital on a self-sustaining basis to enhance the flow of funds through the secondary market home buyers.The largest investor in home mortgage today. Freddie Mac (FHLMC) - correct answer Federally chartered corporation. Established in 1970 for the purpose of purchasing mortgages in the secondary market. Is a stockholder-owned corporation chartered by Congress to increase the supply of funds that mortgage lenders, such as commercial banks, mortgage bankers, saving institutions and credit unions can make available to homeowners and multi-family investors. Conservatorship - correct answer Legal right given to a person to manage the property and financial affairs of a person deemed incapable of doing that for himself or herself. The Housing and Economic Recovery Act (HERA) - correct answer Enacted on July 30, 2008, is a major housing law that serves multiple purposes: The modernization of the Federal Housing Administration (FHA) , foreclosure prevention, and the enhancement of consumer protections. The SAFE ACT is a KEY component of HERA : -it is designed to enhance consumer protection and reduce Fraud by requiring national minimum standards for mortgage training, including prelicensing education and annual continuing education Way to Remember: in order to be SAFE, you need a HERA! (female version of a hero) FHFA (Federal Housing Finance Agency) - correct answer On September 7, 2008 this agency placed Fannie Mae and Freddie Mac in Conservatorship. Appoint (blank) as a conservator or receiver of the GSEs. Farmer Mac - correct answer Is a government-sponsored enterprise with the mission of providing secondary market for agriculture real estate mortgage loans, rural housing mortgage loans, and rural utility cooperative loans. Front Ratio - correct answer Is used to qualify a borrower for a loan based upon the proposed house payment and his or her gross monthly income (GMI). The house payment is the monthly payment of principal, interest, taxes and insurance (PITI). Back Ratio - correct answer The ratio of the borrowers total recurring monthly debts. Conventional Loan - correct answer Refers to a loan made with real estate as security and which does not involve government participation in the form of insuring or guaranteeing the loan. Real Estate Mortgage Investment Conduit (REMIC) - correct answer Allows for the indirect investment in mortgages through the sale of securities. Purchases "pools" of mortgages Primary Mortgage Market - correct answer The market where borrowers and lenders come together to create and negotiate terms of a mortgage transaction. Commercial Banks - correct answer Perform a variety of functions, from being a depository institution to providing lines of credit and loan products to the communities in which they are charted. Working capital is primarily generated through deposits from clients. Credit Unions - correct answer Not-for-profit banks set up by organizations that exist to serve their members. Return surplus income to their members in the form of dividends. Bonds - correct answer An instrument of corporate or governmental debt. (An IOU) Real Estate Investment Trust (REIT) - correct answer An investment vehicle created by congress in 1960. The effort to make it possible for small investors to invest in larger commercial properties by purchasing shares in the organization that owns the real estate. Lifting Clause - correct answer A clause which gives the borrower the ability to replace the primary instrument with another without affecting the subordinate instrument's position. Lock-in Clause - correct answer Is a condition of a mortgage loan which prohibits prepayment of the loan prior to a certain date. Alienation (Due on Sale) Clause - correct answer Reserves the right of the lender to call the note (Declare the entire balance due) if the borrower sells the property without repaying the loan. Release Clause - correct answer When included in a loan instrument, a (Blank clause) allows for a portion of the loan to be paid in exchanged for the lender releasing part of the property from the mortgage. Also called blanket Mortgage Subordinate Clause - correct answer A clause in which a holder of a mortgage permits a subsequent mortgage to take priority. Exculpatory clause - correct answer Is used to limit the borrower's personal liability in the event of a default on a loan. Nonrecourse Clause - correct answer Often used by loan originators when selling loans on the secondary market. Protects the seller of the security from liability in the event of a default by the borrower. Acceleration Clause - correct answer A provision in a written mortgage or note, stating that in the event of default, the entire amount of the principal becomes payable. Escalation Clause - correct answer a clause allowing the lender to raise the existing interest rate - although most often associated with an adjustable rate mortgage, it can be used to overcome an alienation clause Assumption Clause - correct answer Allows a new borrower to take over the payments on an existing loan under specified terms and conditions. Interest - correct answer money paid at a particular rate for the use of money loaned to a person or entity, it is the cost of borrowing the money. Interim Interest - correct answer The accounting for amortized home loans assumes that there are only 12 months in a year, consisting of the first day of each month. The account begins on the first day of the month following the day the loan closes. The borrower pays interest for the period between the closing day and the day the principal repayment record begins. (Prepaid interest) Loan Amortization - correct answer the repayment of a loan using equal monthly payments that cover a portion of the principal and the interest on the declining balance. The amount of the monthly payment going toward interest payment starts off large and steadily declines, while the amount going toward the principal starts off small and steadily increases Fixed-Rate Mortgages - correct answer Locks in the borrower's interest rate over the life of the mortgage. Points - correct answer Is a unit of measure. (Discount charges) Margin - correct answer The percent added to the index in order to calculate the payment interest rate. Discounted Initial Rate (teaser rate) - correct answer A lower interest rate is offered by the lender during the first year or more of the loan. Lifetime Cap - correct answer Limits the total amount the interest rate may increase over the life of an adjustable-rate mortgage loan. Initial Adjustment Cap - correct answer ARMs that offer a fixed rate period during the first years of the loan usually have an initial rate cap that is higher than the per adjustment cap Balloon Note - correct answer Partially amortized and most commonly done with secondary mortgages. Sub-Prime Loans - correct answer Have risk-based pricing. The rates are not published on these loans. Borrowers are rated A-F with a prime borrower having an A rating. A minus to F-rated borrowers will pay 1 to 5 % higher than those with good credit. These are non-conforming loans. prepayment penalties - correct answer More than two-thirds of sub-prime loans have this. [Show Less]
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CHAMPIONS PRINCIPLES OF REAL ESTATE 2 | 91 ACTUAL QUESTIONS AND ANSWERS LATEST UPDATE
What does D.U.S.T. stand for? - correct answer Demand, Utility, Scarcity, Transferability the percentage of value or sales price that a lender is willin... [Show More] g to finance - correct answer Loan to Value Ratio (LTV) the value of a property is equal to the sum of the contributory value of each of its component parts. - correct answer principle of contribution the forces acting on a parcel of land are always affecting the value of the land - correct answer PRINCIPLE OF CHANGE the legal use that gives the greatest return in money and/or amenities. - correct answer HIGHEST AND BEST USE the purchase price is affected by the expectation of future appeal and benefits. - correct answer PRINCIPLE OF ANTICIPATION value is maximized when there is a reasonable degree of homogeneity, or sameness, in a neighborhood. - correct answer principle of conformity reduction in value of property from causes such as deterioration or obsolescence. - correct answer Depreciation 1. Physical deterioration 2. functional obsolesce 3. external obsolesce - correct answer Types of depreciation the loss in a property's value due to daily wear and tear. - correct answer Physical deterioration The legal procedure under which property may be sold to satisfy an unpaid promissory note - correct answer Foreclosure the value of a commodity is influenced by the cost of acquiring a substitute or comparable item. - correct answer principle of substitution appraisal - correct answer someones opinion of value. The actual age of the property in years. - correct answer Chronological Age The appraiser's estimate of the age of the house based upon its ongoing maintenance and upgrades. - correct answer Effective Age TYPES OF APPRAISAL REVIEWS - correct answer 1. Desk Review 2. Field Review to improve property when the value added by the improvement exceeds cost of the improvement. - correct answer PRINCIPLE OF INCREASING AND DECREASING RETURNS demand for real estate is great and the supply is short, prices in the marketplace go up. - correct answer PRINCIPLE OF SUPPLY AND DEMAND The presence of lower-priced properties in the area will cause a decline in the value of the subject property - correct answer PRINCIPLE OF REGRESSION The absence of competition will cause prices to increase in the marketplace - correct answer PRINCIPLE OF COMPETITION Acronym for Characteristics of Value - correct answer D.U.S.T. The price a willing seller will sell for and the price a willing buyer will pay. - correct answer Market value Most common misunderstood appraisal concept? - correct answer Market Value Does price equal value? - correct answer No, many factors go into determining the market value of a property. Ad valorem - correct answer according to value What are taxes based on? - correct answer Assessed Value Appraiser must follow what? - correct answer Uniform Standards of Professional Appraisal Practice (USPAP). URAR is commonly referred as - correct answer 1004 Uniform Residential Appraisal Report (URAR) is known as - correct answer Fannie Mae 1004 or Freddie Mac form 70 Standards that have been established by the Appraisal Standards Board of the Appraisal Foundation - correct answer USPAP Value - correct answer Does not always equal price If a type of property in a market area is too abundant, it has reduced value - correct answer Scarcity Many lenders, especially when dealing with high-LTV loans, will order this type of appraisal - correct answer Field Review 3 approaches to value are - correct answer 1. Sales Comparison Approach 2. Cost Approach 3. Income Approach appraiser focuses on recent sales in determining the value of the subject - correct answer SALES COMPARISON APPROACH How many comparison sales will and appraiser gather? - correct answer Minimum of 3. some lenders require 4 The degree to which a comparable is adjusted in 2 ways - correct answer 1. Net adjustment 2. gross adjustment the absolute adjustments made to the comparable, considering those that are positive and negative - correct answer Net Adjustments - the sum of all adjustments, whether or not they are positive or negative - correct answer Gross Adjustments the market value of the property considers how much a new structure of this size and type would currently cost to build. - correct answer COST APPROACH loss in desirability of the style, layout, or function of an element of a property over time. - correct answer Functional obsolescence to the loss in value of a property caused by factors outside of the property itself - correct answer External obsolescence Process of estimating the value of an income-producing property by capitalization of the annual net income. - correct answer INCOME APPROACH Gross Rent Multiplier formula - correct answer GRM = Sales Price ÷ Monthly Rent Value = Income ÷ Return - correct answer Income Capitalization Formula What is the final step in the appraisal process? - correct answer Reconciliation What is the percentage of value or sales price that a lender is willing to finance? - correct answer loan-to-value ratio (LTV) How many hours of education required for Appraiser Trainee? - correct answer 75 hours How many appraiser trainee's can one person sponsor at one time? - correct answer No more than 3 How many Continuing Ed hours are need to renew Appraisar Trainee? - correct answer 28 hours, 7 hours must be USPAP How many education hours to be considered a Licensed Appraiser? - correct answer 150 hours How many hours does a Licensed Appraiser must have that are acceptable and verified? - correct answer 2,000 hours over 12 months How many hours does a Certified residential Appraiser must have that are acceptable and verified? - correct answer 2,500 hours over 24 months How many education hours to be considered a Certified Residential Appraiser? - correct answer 200 hours How many hours does a Certified General Appraiser must have that are acceptable and verified? - correct answer 3,000 hours over 20 months. Minimum of 1,500 hours must be non-residential real property How many education hours to be considered a Certified General Appraiser? - correct answer 300 hours The appraised value of a property is: a. The sale price b. An opinion of value c. A market analysis d. The market value of a property - correct answer b. An opinion of value For tax purposes the _______ is determined by the taxing authority. a. assessed value b. appraised value c. market price d. investment value - correct answer a. assessed value In the appraisal report, the property being appraised is referred to as the _______ property. a. Target property b. Comparable property c. Sold property d. Subject property - correct answer d. Subject property The principle of ___________ suggests that the value of property is equal to the sum of the contributory value of each of its component parts? a. Anticipation b. change c. substitution d. contribution - correct answer d. contribution The market in which borrowers and lenders come together to create and negotiate the terms of a mortgage transaction - correct answer Primary mortgage market The practice of refusing to provide financing in a particular location - correct answer Redlining The process of making a lending decision - correct answer Underwriting The process of creating a new mortgage loan - correct answer Origination a pledge of real estate as security for repayment of a debt - correct answer mortgage The borrower, is known as - correct answer mortgagor. The lender is known as the - correct answer mortgagee. The mortgage "package" actually consists of two major documents: - correct answer 1. promissory note, 2. mortgage, The market in which borrowers and mortgage lenders come together to create and negotiate terms of a mortgage transaction is called the - correct answer primary mortgage market. A major difference between mortgage companies and regulated lenders is - correct answer mortgage companies rely on commercial banks Mortgage loan originators can be broken down into three categories - correct answer 1. mortgage bankers, 2. mortgage brokers 3. correspondent lenders What is Servicing? - correct answer activities include collecting monthly payments, disbursing the funds to pay taxes and property insurance, supervising the loan, preventing delinquencies and coordinating foreclosure activities in the event of a delinquency a person, corporation or firm, not otherwise in banking, that provides its own funds for mortgage financing as opposed to savings and loan associations or commercial banks that use other people's money (depositors) to originate mortgage loans. - correct answer MORTGAGE BANKERS provided consumers with assistance securing hard to place or niche sources of mortgage money. - correct answer MORTGAGE BROKERS The investors assign large blocks of loans into - correct answer loan pools is someone who processes, underwrites, closes and funds his or her own files in his or her name. - correct answer CORRESPONDENT LENDERS The process of creating a new mortgage loan, including all steps taken by a lender to attract and qualify a borrower, are considered - correct answer origination activities detailed process of evaluating a borrower's loan application to determine the risk involved for the lender is defined as - correct answer UNDERWRITING The consummation of a real estate transaction in which all appropriate documents are signed and the proceeds of the mortgage loan are disbursed by the lender is called - correct answer closing The process of transferring funds to a title or escrow company for disbursement is called - correct answer funding includes sending monthly payment statements and collecting monthly payments, maintaining records of payments and balances, collecting and paying taxes and insurance (and managing escrow and impound funds), remitting funds to the note holder, and following up on delinquencies - correct answer Servicing Net basis rates are sometimes identified as the - correct answer "wholesale rate." Real estate license holders often refer buyers to a number of trusted loan originators, now universally referred to as - correct answer Residential Mortgage Loan Originators (RMLOs) is designed to enhance consumer protection and reduce fraud. - correct answer The Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) was established. The Bureau has the authority to examine and enforce consumer protection regulations for all mortgage-related businesses, large non-bank financial companies, and banks and credit unions with assets greater than $10 billion. - correct answer Consumer Financial Protection Bureau (CFPB) Responsible for enforcing "federal consumer financial law" - correct answer Consumer Financial Protection Bureau (CFPB) to ensure that banks would serve the needs of the community in which they were chartered to do business. - correct answer Community Reinvestment Act ensures that all consumers are given an equal chance to obtain credit. - correct answer Equal Credit Opportunity Act (ECOA), Equal Credit Opportunity Act prohibits discrimination in any aspect of - correct answer Race Color Religion National Origin Sex Martial status Age Receipt of income designed to protect consumers in credit transactions by requiring clear disclosure of key terms of the lending arrangement and all costs. - correct answer Truth In Lending Act (TILA) exists for the purchase and sale of existing mortgages to investors. - correct answer secondary market The originator of the loan becomes a - correct answer seller large investing institutions that deal in the secondary market for mortgage loans are called - correct answer purchasers is the return on investment that the investor receives over time - correct answer net yield Fannie Mae and Freddie Mac have jointly developed a series of documents to standardize mortgage loan purchases, and loans prepared on these documents have become known as - correct answer "conforming loans." established in the United States in 1968 to promote home ownership. - correct answer The Government National Mortgage Association (GNMA) Does a Pre-Qualification Letter bind a lender to loan money? - correct answer No, it is to give the buyer a price point of what they may be able to afford. What is the acronym for an application to be considered "COMPLETE" - correct answer PENSIL What does PENSIL stand for? - correct answer Property Address Estimated Value Name of the Borrower Social Security Number Income Loan Amount This is determined by the rate of interest charged on the loan and the discount points charged by the lender at closing. - correct answer The yield A loan with no discount points is known as a - correct answer "par loan" What is a "Par Loan?" - correct answer a loan that is made at the current market rate of interest. is the central banking system of the United States. - correct answer Federal Reserve The Fed uses three primary monetary policy tools to influence the cost of and availability of credit: - correct answer 1. open market operations, 2. the discount rate, and 3. reserve requirements The Fed's most flexible and often-used tool of monetary policy is - correct answer open market operations the FOMC directs the New York Trading Desk to sell government securities, collecting payments from banks by reducing their reserve accounts. - correct answer To tighten money and credit in the economy, TO SAVE MONEY is the interest rate a Reserve Bank charges eligible financial institutions to borrow funds on a short-term basis. - correct answer discount rate discount rate is also know as - correct answer announcement effect reduces the availability of funds for lending, thereby slowing the economy. - correct answer Raising reserve requirements increases the availability of funds for lending, thereby accelerating economic activity. - correct answer Lowering reserve requirements The standard loan application in use is the Uniform Residential Loan Application, better known as - correct answer the Fannie Mae 1003, or just simply a "1003." Amount of money deposited by a prospective buyer as evidence of good faith. - correct answer Earnest Money Deposit ensures that consumers throughout the nation are provided with helpful information about the cost of the mortgage settlement process and protection from unnecessarily high settlement charges caused by certain abusive practices. - correct answer Real Estate Settlement Procedures Act (RESPA) ultimate purpose of this is to protect consumers in their dealings with lenders and creditors and to ensure that consumers are aware of the terms and costs of credit. - correct answer Truth in Lending Act (TILA) A mortgage loan originator must provide, in a clear and concise form, an estimate of the amount of settlement charges the borrower is likely to pay. - correct answer Loan Estimate (LE) the Loan Estimate (LE) must be provided no later than - correct answer 3 days after receipt of the written application What are the penalties for Mortgage Fraud? - correct answer possible prison term and a fine not to exceed $10,000. This increases the penalties for a federal conviction for mortgage fraud to A.) a maximum of 30 years in prison and B.) a fine of up to $1 million. - correct answer Fraud Enforcement and Recovery Act (FERA) rate remaining fixed for the entire term of the loan. - correct answer fixed-rate mortgage the monthly payment includes an amount that is applied first to interest that is due, with the remainder of the loan payment being applied to the outstanding loan balance - correct answer amortizing loan Jill's loan balance on March 1st was report as $127,380. The regular monthly payment of principal and interest is $836.03, and the rate of interest is 4%. 1.When Jill makes her April 1st payment, how much interest will be due? ______ - correct answer $424.60 1.) 127,380 x .04 = $5,095. 20 (yearly interest) 2.) 5,095.20 divided by 12 = $424.60 (monthly interest) Jill's loan balance on March 1st was report as $127,380. The regular monthly payment of principal and interest is $836.03, and the rate of interest is 4%. 2.After the April 1st payment has been applied, what will her new loan balance be? ____________________ - correct answer $127,968.57 1.) 836.03 - 424.60 = $411.43 (Principal Paid) 2.) 127,380 - 411.43 = $127,968.57 (new balance) Mortgage loan in which the interest rate my increase or decrease - correct answer Adjustable Rate Mortgage (ARM) The period between rate changes in an adjustable rate mortgage is called the - correct answer adjustment period. is what the lender uses as an instrument for measuring changes in interest rates in an ARM. - correct answer Index is the world's most widely used benchmark for short-term interest rates. - correct answer London Interbank Offered Rate - LIBOR The percent added to the index in order to calculate the payment interest rate. - correct answer Margin is equal to the margin plus the index and is usually to the nearest one-eighth of a percent. - correct answer Fully Indexed Rate - A lower interest rate is offered by the lender during the first year or more of the loan. - correct answer Discounted Initial Rate (teaser rate) An ___________________ places a limit on the amount the interest rate can increase or decrease at each adjustment date. - correct answer Interest-rate Caps - This caps limits how much a payment may increase or decrease in any subsequent adjustment. - correct answer Per Adjustment Cap - Limits the interest rate increases over the life of the loan. - correct answer Lifetime Cap - ARMs that offer a fixed-rate period during the first years of the loan usually have an initial rate cap that is higher than the per adjustment cap. - correct answer Initial Adjustment Cap - What are these: [Show Less]
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CHAMPIONS SCHOOL OF REAL ESTATE - EXAM PREP 177 QUESTIONS AND ANSWERS 100% VERIFIED LATEST
Default of contract and types of damages - correct answer -In the event of default by the buyer, the seller may have several options, which include: -Liqu... [Show More] idated damages. The seller can choose to accept the buyer's earnest money as liquidated damages, releasing all parties from any further obligation under the contract. Liquidated damages are damages that are established in the contract. -Monetary damages. In addition to specific performance, the injured party may "seek such other relief as may be provided by law." This would be an award of monetary damages by the court. Because monetary damages are awarded by the court, one never knows what they will be until the court rules. -Punitive and compensatory damages must be pursued in court. Punitive damages punish the default- ing party, and compensatory damages are set to cover the actual injury or economic loss. Leases and "right of first refusal" - correct answer Some residential leases contain a right of first refusal, giving the tenant the right to purchase the leased property by matching or bettering any offer before the property will be sold to someone else. Default remedies and their results - correct answer -Liquidated damages. The seller can choose to accept the buyer's earnest money as liquidated damages, releasing all parties from any further obligation under the contract. Liquidated damages are damages that are established in the contract. -Monetary damages. In addition to specific performance, the injured party may "seek such other relief as may be provided by law." This would be an award of monetary damages by the court. Because monetary damages are awarded by the court, one never knows what they will be until the court rules. -Specific performance. The injured party files a court action seeking an order of the court directing the defaulting party to perform according to the terms of the contract. Specific performance is the only remedy that would possibly result in the full execution (closing) of the transaction. Paragraph 11 - legal vs illegal entries - correct answer TVLB programs and provisions - correct answer The Texas Veterans Land Board Housing Assistance Program (VHAP) is a benefit that every buyer with a military background should consider. To participate in the program, the Veteran obtains an FHA, VA, or conventional loan from a participating lender. The qualification process is the same as for any other FHA, VA, or conventional loan. The difference is that the loan is sold to the Texas Veterans Land Board (VLB), as opposed to a secondary market purchaser such as Fannie Mae or Freddie Mac. The primary benefit to the Veteran is that the rate on the Veterans Land Board loan is often up to one percent below prevailing market rates. Economic and physical characteristics of land- physical - correct answer -Indestructibility or durability refers to the fact that land cannot be destroyed. It remains, no matter what happens to it. It may go underwater, become a crater, or be added to. In any case, the land will still be there; it is permanent. -Immobility refers to the fact that land cannot be moved. When personal property is pur- chased, the buyer can move it to a new location. When land or rights in land are purchased, the owner must go to the land. -Nonhomogeneity refers to the fact that no two parcels of land are the same. Even two identi- cal-looking lots in a subdivision at least differ in their position on the earth. Each parcel of land is unique. Economic and physical characteristics of land- Economic - correct answer -Scarcity comes from the theory of supply and demand. When there is a shortage of some- thing that individuals want, the price goes up. For example, in a new golf course commu- nity, only a limited number of lots can be "on" the golf course. The scarcity will increase the value of these lots. Another example is property in cities. Because of the higher demand for this land, it will be more valuable than land in suburban or rural areas. -Modification refers to the fact that value is affected by man-made changes to the land. These changes can be on the land itself or off-site. Examples of modification include improved transportation, which makes land more accessible, such as the railroads crossing the United States or airports. When freeways are extended or widened, land in previously undeveloped areas becomes attractive for new residential and retail development. The most well-known case is probably that of the agricultural land in the Orlando, Florida area that experienced an enormous increase in value after the construction of Disney World®. -Fixity refers to the fact that land, and additions to the land, such as buildings, take long pe- riods to pay for themselves. It may take twenty years for the owner of a new office building to recover the cost of the acquisition of the land, construction, and the cost of financing. Because of this, investors must analyze the long-term nature of owning an investment property. Fixity is also used to refer to the fact that land cannot be moved but is fixed in location. -Situs refers to the location of the property or land from an economic, not a geographic viewpoint. The familiar phrase "location, location, location" is based on the preferences people have for specific characteristics in property and the fact that location dominates those preferences. Both natural and man-made factors will have an impact on preferenc- es. Climate, views, access to natural recreation, as well as schools, job opportunities, and transportation, will all be important. Situs may change over time as society changes and different lifestyles prevail. Responsibility of agents when receiving an offer - correct answer The communication or submission of anoffer should be done promptly because the license holder'sduty is to keep the principal or client informed at all timesof material information. In most cases, the submission ofan offer (or, at least, communication to the principal that anoffer has been received) can easily be made within a shortperiod. Most states (including Texas) recognize the legaldoctrine of imputed notice. Under this concept, an offer ispresumed to have been delivered to the principal when it isdelivered to the agent. A license holder who fails to communicate an offer promptly may be subject to a lawsuit by the seller and may be disciplined by the real estate commission that issued the license. Title policy, abstracts, commitments, opinion of title - correct answer Historically, when an individual was interested in acquiring title, he or she would ask an attorney or abstractor to do a title search, which is an investigation of all the documents that have been recorded about a property. This search would result in an abstract of title. An abstract of title is a complete history of the title of a piece of property that includes deeds, easements, liens, foreclosures, wills, marriages, deaths, life estates, fee simple estates, and anything else that may have ever been recorded about a property. This abstract was then given to an attorney. The attorney would read it and write up an attorney's opinion of title, which is an opinion regarding the state of the title and its ability to be transferred. TREC Temporary lease agreements and features - correct answer -Buyer's Temporary Residential Lease - for use when the buyer occupies the property for no more than 90 days prior to closing. -Seller's Temporary Residential Lease - for use when the seller occupies the property for no more than 90 days after closing. Option contracts - correct answer An option is an agreement between a buyer and seller or landlord and tenant. A seller, in exchange for some form of consideration (an option fee), gives the buyer the right to purchase the property at some preset price and terms for a period. If a buyer has a one-year option to purchase a tract of land at $150,000 cash, the buyer can exercise the option and purchase the property at that price any time during the year. The buyer has the option but is under no obligation to purchase. However, under an option, the seller must sell if the buyer chooses to buy. The contract is said to be a unilateral contract because only one party is obligated to perform. A unilateral contract is said to lack mutuality. Paragraph 11 - Special Provisions - what can an agent write - correct answer For states (like Texas) that use standard contract forms, a blank space is usually provided to allow forspecial provisions to the contract. This space is where terms can be addressed that are not covered in standard contracts or addenda forms. In all states, license holders are barred from the unlawful practice of law. Therefore, license holders should ensure that any special provisions added to a con- tract are factual statements that do not change the legal effect of the contract. Prorations and prorated items at closing - correct answer At closing, prorations for property taxes and property owner association fees will be calculated. Taxes for the year that have not been paid will be deducted from the seller's proceeds, usually through the day of closing. Prepaid items such as property owner association fees will be collected from the buyer from closing to the end of the year. Government rights in land (PETE) - correct answer Police Power Eminent Domain Taxation Escheat Police Power - correct answer the right of the government to regulate and control the way land is used. The most common example of police power is zoning. Other examples include wetlands legislation, environ- mental protection legislation, and health and fire codes. Government programs may include water conservation, land reclamation, crop programs, drought relief, and wildlife conservation. Eminent Domain - correct answer is the right of the government to take private land for public use. The action of taking the land is called condemnation. Land must be taken for the good of all. Examples of valid reasons for taking the land include schools, parks, hospitals, government buildings, roads, and utili- ties. When this occurs, the owner is compensated for the land taken. If an individual is not satisfied with the price placed on his property, he may challenge this amount in court. The court will ask for expert opinions from several qualified appraisers before determining fair value. Taxation - correct answer the government retains the right to tax real property. When the king first gave individu- als the right to own land, it was because land was the primary source of wealth to everyone due to the agrarian-based economy of the time. Those who had land had wealth. In addition, it was impossible to hide land ownership, as opposed to other types of assets. Property taxes are known as ad valorem taxes. That is, they are according to value. The greater the value of the property, the higher the taxes. Escheat - correct answer if a person dies intestate (without a will) and without heirs, the government will take title to his real property under the right of escheat. If a property is abandoned, escheat will also be the solution. The government does not want land to be unowned. (Note: Single, without children does not mean without heirs.) Offers - correct answer Some offers from buyers provide that the seller pays for specific items that are not typical, or that are normally paid by the buyer. Offers often include a provision that the seller pays for a residential ser- vice agreement (home warranty), or perform repairs and upgrades as a condition of the sale. When the seller agrees to this type of condition in a contract, the seller has made a concession. In some cases, a buyer might ask for a seller contribution to the buyer's closing costs. Seller contributions to the buyer's closing costs reduce the amount of cash needed by the buyer at closing. Counteroffer - correct answer A counteroffer is made when a party changes an offer in some way and com- municates that change to the other party. The counteroffer is actually a two-step process: the rejection of theoriginal offer coupled with a new offer.The counteroffer is normally done by one party striking out the provision that is not acceptable and writing the accept- able term next to it. The changed term will then be initialed and sent back to the other party. Rejection - correct answer Inmost cases, a counteroffer is arejection of the original offer.As such, the original offer is no longer available for acceptance by the offeree. For example, consider a potential buyer offering to purchase a property at $245,000. If the seller responds with a counter- offer of $255,000, the original offer of $245,000 is no longer available for acceptance by the seller, because he or she rejected it with the $255,000 counter. Acceptance - correct answer Acceptance of an offer means that the accepting party does so with no change to the contract what- soever. Any change, no matter how trivial, turns the offer into a counteroffer. Real and Personal property transfer documents at closing - correct answer Things of a temporary or movable nature are not part of the real property. They are considered per- sonal property. Personal property is also known as personalty or chattel. If personal property is being transferred along with real property, a bill of sale is generally used to accomplish the transfer, which would normally accompany the deed. Escrow and trust accounts, how they are used and who administers them - correct answer pg 177 RESPA - rules and prohibitions - correct answer RESPA prohibits any person who, pursuant to any agreement or understanding, gives or receives a fee or a thing of value (including payments, commissions, fees, gifts, or special priv- ileges) for the referral of settlement business. Payments in excess of the reasonable value of goods provided or services rendered are considered kickbacks. Ownership estates - severalty - correct answer When a sole individual or entity acquires real estate, an estate in severalty is created. The sole or single owner is "severed" or "set apart" from all others. The advantage of ownership in severalty is total control of the property. The disadvantage is full responsibility. In addition to individuals, com- panies may hold ownership in severalty. A corporation may be composed of many shareholders, but the corporation is viewed, under the law, as a single legal entity. If only one signature is required on a deed conveying full ownership of the property to another, the seller owns an estate in severalty. Ownership Estates- joint tenancy - correct answer A less popular type of ownership by more than one is joint tenancy. The unique aspect of joint tenancy is the right of survivorship of the tenants. When a joint tenant dies, his or her share is equally divided among the surviving joint tenants immediately. In order to create a joint tenancy, four unities are required. Ownership Estates- Syndicate - correct answer When two or more parties join together to create and operate a real estate investment, it is called asyndicate. Ownership Estates- Tenancy in common - correct answer Tenancy in common is ownership of real estate by two or more entities in undivided interests. Because these interests are undivided, all co-owners share the right of possession of the property. If a deed does not make the type of joint ownership clear, Texas courts will always assume that the owners are tenants in common. Ownership Estates- Entirety - correct answer Statute of Frauds - rules and exceptions - correct answer Competent parties Offer and acceptance legal purpose In writing Consideration Competent parties - correct answer The general rule of law is that all parties to a contract have read it and understand it. This rule is true even if they are illiterate or not knowledgeable in the subject of the contract. Certain persons do not have full contractual capacity, including minors, individuals who have had guardians appointed, and those under the influence of drugs or alcohol. Offer and acceptance - correct answer A valid contract must be based upon the consent of the parties. The contract must, therefore, reflect the intent and wishes of the parties. Mutual consent is often referred to as mutual consent or a "meet- ing of the minds." For a contract to exist, there must have been a meeting of the minds (offer and acceptance) between the parties. The determination of mutual consent is usually a question of fact and is completed by the process of offer and acceptance. legal purpose - correct answer A contract for an illegal purpose is void, and the law treats the contract as if it were never created. An example of a void contract would be one to have somebody killed or to deliver illegal drugs. In writing - correct answer In order to comply with the Statute of Frauds, contracts for the conveyance of an interest in real estate or leases for a term of more than one year must be in writing. If the contract is not in writing, it would be valid but not enforceable. Consideration - correct answer Consideration is defined as something given in exchange for a promise. There is no requirement that the consideration be in the form of money. Consideration in a contract could be nothing more than a promise made by one party in exchange for a promise made by the other. In the typical real estate contract, the seller agrees to convey the property to the buyer, and the buyer agrees to pay the nego- tiated sales price. Therefore, the purchase or sales price of the property is the consideration for the contract. As a rule, an earnest money deposit will be collected from the buyer when entering into a contract. The earnest money should not be confused with consideration. Note that earnest money is not one of the requirements of a valid contract. Limits on title - claims, liens, charges - correct answer A lien is a right given by law to certain creditors to have debts paid out of the property of a default- ing debtor, usually through a court sale. A lienholder does not own the property that is encumbered. Instead, the holder has an interest that, in some cases, may result in the foreclosure of the property. Common examples of liens include: • Mortgages and Trust Deeds • Tax Liens • Judgments • Mechanics and Materialman's (M&M) liens Liens may also be categorized as voluntary or involuntary and as statutory or equitable. A voluntary lien is one that is freely given, usually as collateral for a loan. A mortgage lien is a common example of a voluntary lien. An involuntary lien is one that is placed on the property against the wishes of the property owner. Common examples of involuntary liens include judgment and tax liens. Because it is created by law, a tax lien would also be categorized as a statutory lien. Equitable liens arise out of common law. A judgment for unpaid debts would be an example of an involuntary equitable lien against real estate. A required act or event in a contract - correct answer In most cases, contingencies should have a specific date by which the event happens or the task is completed. "Open-ended" contingencies may give a party an easy means by which the contract can be terminated at any time prior to closing. For example, a contract with a proposed closing in 60 days, coupled with a 60-day financing contingency, effectively gives the buyer an easy method of terminating the contract at any time before closing by informing the seller that he is unable to obtain approval. The mortgage - correct answer A mortgage can be one of two forms, depending on state law and custom. A standard mortgage is a contract between two parties: • The borrower (the mortgagor) and • The lender (the mortgagee). If the borrower fails to repay the note, the mortgage allows the lender to foreclose the property. Foreclosure is the legal procedure whereby the secured property may be sold to satisfy the unpaid promissory note. While the process varies from state to state, all states provide that the property be sold in a public auction. If the property fails to sell at the auction, ownership will transfer to the lender. deed of trust vs the note - correct answer In other states, a three-party mortgage known as a deed of trust is used. The parties to a deed of trust include: • The borrower (the mortgagor) • The lender (the mortgagee) • The trustee When this form is used, the borrower signs a promissory note payable to the lender. A deed of trust is signed, conveying the property in trust to the trustee. The duty of the trustee is to release the mortgage when the note has been repaid and to foreclose the property in the event of default. Foreclosure is generally faster and easier in areas that are financed using a deed of trust. In many cases, a deed of trust provides for non-judicial foreclosure, which means that a lender has the ability to foreclose a property without the authorization of the court. Lease clauses and provisions - correct answer A lease option allows a tenant to buy the property at a preset price and terms for a given period. This can also be called a lease with an option to buy. At the time the lease is negotiated, a purchase price is also negotiated. The tenant has the right to purchase the property at the preset price during the term of the lease. While the tenant is not obligated to buy, the landlord is obligated to sell. Clients who wish to enter into a lease-purchase agreement should be referred to an attorney. License holders in Texas are specifically prohibited from writing this type of agreement for their clients. Executed vs executory contracts - correct answer Once all the terms of an offer have been agreed to and signed by the parties and the acceptance communicated to the offeror, the contract becomes binding on the parties. The contract is known as an executory contract from the effective date through the closing. An executory contract is definedas a contract that is binding on the parties, with one or more of the parties having contractual duties that have not yet been performed. The effective date is the date that acceptance was communicated to the offering party. For example, if a seller accepted an offer from the buyer on Monday, January 3rd, and the buyer was notified of the seller's acceptance on Tuesday, January 4th, the effective date of the contract is January 4th. FHA loans - insurance premiums associated with them - correct answer Because the FHA is a mortgage insurance program, premiums are paid into a pool of funds, out of which claims are paid when a borrower defaults on a loan. The cost of the mortgage insurance is passed along to the borrower in the form of a mortgage insurance premium (MIP). The borrower pays two premiums, an upfront premium at closing, and an annual premium. Up-Front Mortgage Insurance Premium (UFMIP): When a loan is funded, the FHA charges an Up-Front Mortgage Insurance Premium. The UFMIP can be paid at closing or added to the loan at funding. The UFMIP can be added to the loan even if it causes the loan to exceed the appraised value of the property. DTPA coverage categories - correct answer -Goods — are defined as tangible chattels (real property is tangible when purchased or leased. Under DTPA, the sale of a house is considered a good). -Services — means work, labor, or repair of goods. Brokerage is a service. -Consumer — an individual, corporation, partnership, or government source who seeks to acquire or purchase the goods or services. Five elements of a valid and enforceable contract - correct answer -Competent parties -Offer and acceptance (mutual agreement) -Legal purpose -In writing (when required by law) -Consideration Common law - correct answer Common law is a body of law developed in England and based upon "common sense" and local custom. Common law expanded over the years as a result of prior court decisions. Under common law, a court looks to the findings of prior courts when rendering a decision. The concept of common law was brought to the American colonies by English settlers. Statutory law - correct answer Statutory law is the body of laws and regulations enacted by federal and state legislatures. Much of what was once embodied in common law is now codified in statutes passed at the state and federal levels. Addendum - correct answer An addendum to a contract is an attachment that adds or further describes the rights and duties of the parties. Many of the contingencies discussed earlier are added to the contract as an addendum. A contract may be subject to the buyer obtaining acceptable financing. A financing addendum may be added that specifies the type of loan the buyer is obtaining, the term, rate of interest, origination fees, and other costs. Amendment - correct answer As a transaction progresses, amendments to the original contract may be needed. Common amend- ments include: • Changes to the closing date • Changes to the sales price, downpayment, and/or amount financed • Repairs that the seller agrees to perform • Removal or waiver of contingencies Appraisal contingency - correct answer Appraisal contingencies are related to financing contingencies because lenders use appraisals to determine the amount of money they will lend on a property. This maximum loan amount is a per- centage of the lesser of the sale price or appraised value. For example, a buyer is purchasing a home for $200,000. If the lender is willing to give the buyer an 80% loan, the buyer must have a 20% downpayment, which amounts to $40,000. The property must appraise for at least $200,000 for the buyer to limit the downpayment to $40,000. Inspection Contingency - correct answer In some states (not Texas), it is common for a contract to be subject to satisfactory inspections. Hav- ing an inspection contingency is a good idea if any of the following are discovered on the property: -Radon - Radon is a colorless, odorless gas that is a concern to some buyers. It is a special concern in the basement areas of certain homes. If a buyer is concerned about the presence of radon, he or she might make a contract subject to satisfactory radon testing. -Lead-based paint - Under federal law, all sellers of homes built prior to 1978 must provide to the buyer a disclosure of their knowledge of possible lead-based paint hazards. Families, par- ticularly those with young children, have a special concern regarding lead-based paint because of the effect of lead on the immune systems of young children. Lead-based paint testing is recommended if this is a concern. In older homes, lead may have leached into the soil in the crawl space under a home or around the foundation as a result of paint peeling and accumu- lating in the soil. Contingency - correct answer A contingency is a provision in a contract that requires that a specific act or event happens for the contract to be binding on the party. A contingency must be specific as to what action needs to take place, who must complete the action, and when it will be completed. Perhaps the most common contingency found in residential real estate contracts is the financing contingency. The term subject to is synonymous with contingent. A contract may be said to be "subject to the buyer obtaining financing." Likewise, a contract with a financing contingency may be said to be "contingent upon the buyer obtaining financing." The SAFE Act - terminology - correct answer -The Secure and Fair Enforcement for Mortgage Licensing Act is designed to enhance consumer protec- tion and reduce fraud. -The SAFE Mortgage Licensing Act was designed to enhance consumer protection and reduce fraud by encouraging states to establish minimum standards for the licensing and registration of state- licensed mortgage loan originators, and the establishment of a nationwide mortgage licensing system and registry for the residential mortgage industry. All residential mortgage loan originators must register with the Nationwide Mortgage Licensing System and Registry (NMLSR). Types of businesses - correct answer -sole proprietorship -PARTNERSHIPS -CORPORATE OWNERSHIP sole proprietorship - correct answer A sole proprietorship is a venture that is owned by one individual. The primary benefit of a sole proprietorship is that the owner has total control of the business. The potential downside of this form of ownership is that the owner also has full liability for the financial and personal obligations of the business. partnership - correct answer Another type of business entity is the partnership. A partnership is more easily created than a cor- poration and can be created with a simple written or oral agreement. -General Partner - The general partner is responsible for the day-to-day operations of the busi- ness and has full liability. At least one general partner is required in a limited partnership. The general partner is most often the "promoter" who brought the limited partners into the venture. -Limited Partners - The limited partner's liability is limited to the amount he or she invested in the partnership. The limited partner has no involvement in the day-to-day operation of the business. The limited partners are the investors in the venture. CORPORATE OWNERSHIP - correct answer In most states, corporations are created with a filing with the Office of the Secretary of State or a similar agency. The corporate entity is comprised of three components: -shareholders (stockholders) who are the owners of the corporation -a board of directors elected by the shareholders who represent the interests of the shareholders -corporate officers who are responsible for the overall management of the operation of the business Contract definition - correct answer an agreement between two or more parties to do something or to refrain from doing something. In many ways, contracts are entered into every day without being given any thought. Everyday transactions, both business and personal, involve creating contracts in a formal or informal manner. When an individual orders a meal in a restaurant, has a car repaired, or has improvements made to a home, the transaction involves a contract that is either a formal written contract or an oral agreement between the parties. Some transactions are sufficiently complex that a written contract is preferred or required by law to avoid disputes and misunderstandings between the parties. Requirements of acceptance - correct answer -Communicated to a specific offeree. Hearsay knowledge does not constitute an offer. For example, if an individual in a public setting said that he or she would be happy to buy the Johnson place for $250,000, it is not an offer because it was not communicated to a specific offeree. -Intended to be a serious offer. An offer made in jest is not a valid offer. -Definite and certain enough to be accepted by the offeree. The offer must be specific so that the offeree, by exercising the power of acceptance, knows exactly what he/she is accepting. In most residential real estate transactions, the offer is usually in the form of a contract com- pleted by the buyer's agent, which is then delivered to the seller's agent. An offer with terms such as "price to be negotiated later" is not a valid offer because it is not specific. Finance laws - ECOA - correct answer The Equal Credit Opportunity Act (ECOA), originally passed in 1974, ensures that all consumers are given an equal chance to obtain credit. The ECOA covers all creditors who regularly extend credit and impacts professionals, such as mortgage originators who are involved in granting credit. Finance laws - TIL - correct answer The Truth In Lending Act (TILA) is a U.S. federal law designed to protect consumers in credit trans- actions by requiring clear disclosure of key terms of the lending arrangement and all costs. Most of the specific requirements imposed by TILA are found in Regulation Z, so a reference to the requirements of TILA usually refers to the requirements contained in Regulation Z as well as the statute itself. Finance laws - RESPA - correct answer The Real Estate Settlement Procedures Act (RESPA) was first passed in 1974. It applies to transactions with loans on residential property (1-4 units). RESPA requires certain disclosures that spell out the costs associated with the transaction, outline lender servicing, and escrow practices, and describe business relationships between settlement service providers. RESPA is intended to: • help consumers become better shoppers for settlement services; and • eliminate kickbacks and referral fees that unnecessarily increase the costs of certain settle- ment services. Finance laws - CRA - correct answer A significant federal law that affects lenders is the Community Reinvestment Act. This federal law was passed to ensure that banks would serve the needs of the community in which they were chartered to do business. It prohibits redlining, which is the practice of refusing to provide financing in a particular area because of the location. Finance laws - Dodd frank act - correct answer The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law by President Obama on July 21, 2010. This landmark legislation represents a sweeping restructuring of U.S. financial regulation in response to the worst financial crisis in the United States since the Great Depression. The act spans over 2,300 pages and affects almost every aspect of the U.S. financial services industry. The official purpose of the law is to promote the financial stability of the United States by improving accountability and transparency in the financial system, to end "too big to fail," to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes. The objectives ascribed to the act by its proponents in Congress and by the President include restoring public confidence in the financial system, prevent- ing another financial crisis, and allowing any future asset bubble to be detected and deflated before another financial crisis develops. Wills and the associated terminology - correct answer -Probate -Natural events that affect title -PUBLIC RECORDS, RECORDING AND ACKNOWLEDGMENT -Deeds probate - correct answer The formal judicial proceeding to prove or confirm the validity of a will, to collect the assets of the decedent's estate, to pay the debts and taxes, and to determine the persons to whom the remainder of the estate is to pass is called probate. Even if there is no will, the estate is still subject to a probate action. Natural events that affect title - correct answer -Accretion, the process that results in a gradual increase in land area through natural forces, is a natu- ral event that can affect title. Examples include soil and other material that flows downstream in a river that is deposited over time on the banks or a delta. Reliction is a gradual increase in land area when water gradually withdraws, as happens when the path of a stream or river changes over time. -Alluvion is the material (soil) that is deposited through the process of accretion that is the result of avulsion, erosion, and reliction. -Avulsion is the sudden addition to or loss of land when a stream or river changes course. Because it is a sudden change, no title is gained or lost. Determining whether an action involving water is accre- tion or avulsion is confusing, and depends on the definition of "sudden" and "gradual," a question often dealt with in the courts. -Erosion is the gradual loss of land over time as the land bordering a river or stream washes away. -Many coastal regions are experiencing subsidence due to the pumping of large quantities of under- ground water and oil. Rising water levels can also result in land being underwater due to submergence. Neither subsidence or submergence result in a loss or gain of title. PUBLIC RECORDS, RECORDING AND ACKNOWLEDGMENT - correct answer -While recording is not a requirement for a valid deed, deeds should be recorded as soon as possible after delivery and acceptance. Deeds are recorded in the public records in the county courthouse in which the land is located. Recording a deed enters it into the public records and gives constructive notice to the world that ownership has been transferred. Constructive notice is the legal concept that a person received notice of a document or event even though the actual notice was not delivered directly to him or her. Constructive notice places a burden on future buyers, lenders, and others who may have an interest in the property. For example, a future buyer considering the purchase of the property is considered to be "constructively notified" of any document entered into the public records. The potential buyer cannot claim ignorance of a deed if it has been properly recorded. Recording also protects the owner against fraudulent claims of others. -In order to record a deed, it must first be acknowledged. An acknowledgment is a statement made to a notary, or one authorized to take oaths, that one's signature was freely given. Because an acknowl- edgment verifies the signature only, it in no way implies that th [Show Less]
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