Real Estate Quick Study Review
PROPERTY OWNERSHIP
Classes of Property Real Personal Fixture Trade Fixture Land Characteristics I. Legal Description II. Metes and Bounds III. Lot, Block and Subdivision IV. Monuments V. Rectangular Survey System A. Physical Characteristics a. Non homogenity b. Immobility c. Indestructibility B. Economic Characteristics a. Scarcity b. Modification c. Fixity d. Situs Encumbrances 1. Voluntary Lien 2. Involuntary Lien 3. Covenants, Conditions and Restrictions 4. Reservations 5. Encroachment 6. Easement a. Dominant Estate b. Servient Estate 7. License 8. Adverse Possession Types of Estate Freehold Defeasible or Conditional Fee Life Estate Statutory Estate o Community Property o Homestead Types of Ownership Estate in Severalty Tenancy in Common Joint Tenancy Trust Syndicate LAND USE CONTROLS AND REGULATIONS Government Restrictions (PETE) Police Power Eminent Domain Taxation Escheat Water Rights 1. Riparian Rights – rivers, streams 2. Literal Rights – lakes, oceans Private Control Master Planning – private (deed restrictions) Zoning – government
VALUE AND MARKET ANALYSIS Market Value Value Price Cost
1. 2. 3. 4.
Demand Utility Scarcity Transferability
Price Comparative Market Analysis (CMA) Appraisal 1. Market Data Approach 2. Income Approach 3. Cost Approach Appraisers Principles of Value 1. Highest and Best Use 2. Principle of Substitution 3. Principle of Conformity 4. Principle of Increasing and Decreasing Return 5. Principle of Regression 6. Principle of Competition 7. Principle of Change 8. Principle of Anticipation
FINANCING Mortgage (Deed of Trust is used in Texas) Owner = Trustor (Mortgagor) borrower-buyer lender 3 rd party. Selected by the beneficiary
Mortgagee = Beneficiary Trustee Clauses find in mortgages include Acceleration clause Alienation clause Defeasance clause Escalation clause Prepayment clause Subordination clause
TYPES OF FINANCING Government loans programs – both require owner occupancy 1. FHA – primary purpose is to aide in home financing by insuring the loan. The insurance on the FHA loan is referred to as MIP – mortgage insurance protection. 2. VA – The Veterans Administration GUARANTEES repayment of the loan. The guarantee is for the top 25% of the loan. Lenders call this a 75/25 ratio. Other types of loans: Conventional loans Fixed rate amortized loan Term loan Blanket loan Package loan Budget loan Balloon loan Participation loan Open-end mortgage ARM – adjustable rate mortgage Construction loan Wraparound loan GPM – graduated payment mortgage Reverse annuity mortgage
The primary market is where consumers go to borrow money. It includes: Mortgage Companies Savings and Loans Commercial Banks Mutual Savings Banks Life Insurance Companies State Bonds Credit Unions Owner assisted financing
The secondary market is where lenders go for money. There are three main secondary market warehousing agencies. 1. The largest and most well known is FANNIE MAE – buys and sells FHA, VA and conventional loans. 2. GNMA – Government National Mortgage Association 3. FHLMC – Federal Home Loan Mortgage Corporation – “FREDDIE MAC” – buys mainly conventional loans, but is authorized to by FHA and VA loans. TRUTH-IN-LENDING (TIL) or CONSUMER CREDIT PROTECTION ACT (implemented by Regulation Z or “Reg Z”) – Administered by the FTC. Main purpose of the law is to allow consumers to understand the true cost of borrowing money. EQUAL CREDIT OPPORTUNITY ACT – ECOA This law prohibits discrimination by lenders on the basis of sex, marital status, race, religion, age or participation in public assistance programs. FAIR CREDIT REPORTING ACT – FCRA This law allows individuals to inspect their files at a credit bureau, correct any errors and make/attach explanatory statements to supplement the file. COMMUNITY REINVESTMENT ACT This law states that banks must meet the needs of the community in which they are chartered to do business. Redlining – the refusal to lend in a particular geographic area – is prohibited. Only lenders can be guilty of redlining.