Archive for the 'Laws' Category
Here’s some terms that I found useful, and their definitions. After failing to get an 80% four times on the practice test (curse you 79%!) I decided I’d actually skim the textbook’s appendix a bit and study. It worked, and I passed the final practice exam. Which means I get to take the real thing now!
curtsey rights - some states are “common law” states - their laws are derived mostly from the old English common laws. Property may be owned individually, regardless of one’s marital status. The spouse in those states does have dower/curtsey rights, and so must sign at closings releasing those rights.
Torrens title - is a system of land title where a register of land holdings maintained by the state guarantees indefeasible title to those included in the register. The system was formulated to combat the problems of uncertainty, complexity and cost associated with old system title, which depends on proof of an unbroken chain of title back to a good root of title.
Square Miles: A measurement of area equal to one mile length by one mile width making an area of 640 acres
RESPA is about closing costs and settlement procedures. RESPA requires that consumers receive disclosures at various times in the transaction and outlaws kickbacks that increase the cost of settlement services.
A Special Assessment is a fee collected by the City for improvements or services the City provides that benefit your property. Special assessments can be used to finance many different types of local improvements.
REVERSIONARY RIGHT. The return of the rights of possession and quiet enjoyment to the lessor at the expiration of a lease.
The Interstate Land Sales program protects consumers from fraud and abuse in the sale or lease of land. In 1968 Congress enacted the Interstate Land Sales Full Disclosure Act, which is patterned after the Securities Law of 1933 and requires land developers to register subdivisions of 100 or more non-exempt lots with HUD and to provide each purchaser with a disclosure document called a Property Report. The Property Report contains relevant information about the subdivision and must be delivered to each purchaser before the signing of the contract or agreement.
Recording of Deeds: Your deed is considered complete once it has been signed, sealed and delivered. Recording the deed is not required by law in order for the transfer to be completed.
What is a “Life Estate” - A “life estate” is an estate whose duration is limited to the life of an individual (usually the party holding the life estate), and a legal arrangement whereby the “life tenant” during his or her life retains use (the rights to rents and profits), possession of the property and costs of maintaining the property. The life tenant cannot sell or waste the property without the consent of the “remaindermen”.
descent and distribution n. the system of laws which determine who will inherit and divide the possessions of a person who has died without a will
Urea-formaldehyde foam insulation (UFFI) is an insulating material formerly used for difficult-to-reach cavities inside house walls.
To be legally correct, joint-tenancy real estate ownership means “joint tenancy with right of survivorship.” A few states require use of those exact words on the deed. But in most states, “joint tenancy” is sufficient.
Survivorship means the joint tenant who outlives the joint tenant co-owner(s) automatically receives the deceased’s share of the property without probate court costs or delays. Probate court avoidance is considered the major joint-tenancy advantage.
mechanics’ lien is a security interest in the title to property for the benefit of those who have supplied labor or materials that improve the property. The lien exists for both real property and personal property. In the realm of real property, it is called by various names, including, generically, construction lien. It is also called a materialman’s lien or supplier’s lien when referring to those supplying materials and a laborer’s lien when referring to those supplying labor. In the realm of personal property, it is also called an artisan’s lien. The term “lien” comes from a French root (via William the Conqueror), with a meaning similar to link; it is related to “liaison.” Mechanics liens on property in the United States date from the 1700s.
A tenancy at will is a leasehold such that either the landlord or the tenant may terminate the tenancy at any time by giving reasonable notice.
A tenancy at sufferance (sometimes called a holdover tenancy) exists when a tenant remains in possession of property after the expiration of his lease, and until the landlord acts to eject the tenant from the property.
SPECIFIC LIEN. A lien affecting or attaching only to a certain, specific parcel of land or piece of property.
The final class today dealt with Utah laws covering property ownership. The instructor shared his experience with partnerships in the past, advising that one always try to have a controlling interest in a partnership, rather than an equal one. A general partnership is the standard shared liability which most people are familiar with. A limited partnership is different, in that it provides limited liability, and is often used to provide extra money.
After discussing the risks and advantages of a partnership, we talked about corporations and their advantages (low liability) and problems (double taxation).
Class then delved into things we’ve already covered regarding Co-ops and condos. Our instructor claimed that many co-ops here used to require that buyers provide a genealogy history before being permitted to buy in.
One thing I found worth noting, that legally, one must provide a list of damages within 30 days of leaving if a landlord plans to keep the security deposit, or any portion thereof. If this is not done, the tenant may sue for their deposit plus $100. This can be done via small claims court, and if the landlord loses, he will be liable for the fees of the other party.
Landlords must give 24 hour notice to enter a home, except when entering for fire or police purposes. One should be sure to specify this in their lease so as to be clear on the landlord’s right to enter a home.
In Utah, a landlord is required to provide tenants with the ability to transfer possession either by assignment (finding a new tenant), subleasing, or by novation (creating a new lease, allowing the old tenant out of their lease)
This brought a story by our instructor who had lost a suit when he tried to refuse other tenants from being assigned the lease on the basis of them not meeting his income requirements. The judge ruled against him stating he could not be as strict given there were only a few months remaining on the lease.
A lease agreement should outline that tenants cannot sublease, but a landlord does have the right to refuse a tenant.
Per Utah law one must permit a tenant to vacate their lease if the landlord enters the home without permission. This brought some interesting stories from classmates, such as one who had a landlord entering while she was away and stealing her clothes.
I myself had a landlord come in with a gun when I was living in Argentina, but I’ll save that story for another day.
Class concluded with a diagram explaining that one must give the tenant opportunity to pay their rent after they miss a payment before seeking court action.
Brokers won’t sue clients, they’ll sue you
As I have already found out firsthand, the Utah state test is more difficult than the national test.
In Utah you cannot start off as an agent without having worked under a broker for three years. Brokers provide such invaluable services as instructing agents to go door to door to find clients (whoops let that secret out!)
If your broker is a Realtor, then an agent must also become one. This means Feeeeees! Hooray for monopolies.
Now in theory, a broker can get in trouble for the actions of his agents. I can see how that could be dicey, but after getting a feel for how this industry likes to pass down the blame, I can’t imagine Brokers actually getting in trouble that much.
Our instructor (the broker where this school takes place) warned us against going with 100% commission brokers, claiming that having to pay for your own training and advertising will eat nearly 25% of the commission alone.
Personally, I’d rather decide how my money was spent than have the broker do so, but to each their own I guess. Now uniquely, agents receive their commissions ONLY from their own principal broker. This means that you as an agent can never sue your clients for not paying their commission because, among other things, they are not your clients-they are the brokers. And Brokers will rarely sue clients because of the bad publicity which doing so could bring.
If one’s broker dies, you lose all your listings, and must renew them. This is apparently a bad thing because many agents rely on their listing agreement to keep clients, as they often upset or annoy their clients after getting the agreement signed.
It’s worth noting that all records on real estate transactions must be held for three years AFTER the year in which they occur. Closing documents are the same. Our instructor mentioned at this time that Title companies will routinely attempt to transfer the liability for closings to the agent, by sometimes even insisting the agent do the closing!
Trust funds such as earnest money MUST be placed in a trust account within three business days of receiving it. Interestingly, if you’re managing more than 6 units, you are required to have access to a trust account.
We were warned against commingling (using the trust account money for any purpose). This can get you in serious trouble, and according to our instructor, is not an uncommon thing here.
Trust account money that for whatever reason never gets settled, gets sent to the state unclaimed funds pool after five years. One can NEVER touch trust funds.
It was at this point that the instructor encouraged that we NOT return earnest money without a fight. We were also warned against creating forms.
We were told several times that we are just form filler outters.
I like that. It seems to describe perfectly just what most real estate agents seem to do to earn their commissions:
They fill out forms.
At the time of signing an offer or a purchase contract, one must present copies of the documents to both sides at the TIME of the signing.
Class concluded with the instructor explaining that we must have written permission BEFORE entering into any contracts if we plan on representing both the buyer and the seller. I’d like to take the time to point out that doing this is a TERRIBLE idea. While the agent will certainly make out well, the clients will not have their best interests protected.
They Can’t Take Your Home
Class began with us being reminded and warned that we should make sure that we pressure lenders to meet deadlines. I can understand this as being excellent advice as personal experience has taught me that most lenders are either incompetent or just very unprofessional. It seems unfortunate that lenders are able to act in this way however, as it’s bad business and needlessly complicates things.
The borrower in Mortgage transactions is considered the mortgagor, and the lender (who receives the mortgage as security from the borrower) is the mortgagee.
Through court action, a bank can foreclose, which requires that the Sheriff give notice of sale. He must post at the property, three public places, at place of sale (usually county courthouse) and publish in local county newspaper three times (once a week).
The property is then auctioned to the highest bidder with proceeds going to the cost of sale, debt, borrower, and any excess goes to the owner. A deficiency judgment can then be issued if the auction comes up short.
Under a mortgage, there exists a six month period of redemption in which a borrower can reclaim his or her property. Deeds of trust here in Utah do not have said period of redemption.
Missing one payment can quickly cause a lender to file a notice of default. This notice is sent to interested parties. This will be provided to anyone who wants a notice as long as they pay $10. They can go down and request a copy for when one is sent out.
90 days after the notice of default a lender may proceed towards a trustee’s sale. Notices of trustee sales are posted in the local newspaper along with times of auction and the names and location of the parties involved.
The morning of an auction requires that buyer be able to pay within 24 hours as well as a $5000 cashier’s check. Trustee’s websites tend to keep details up to date on auctions and cancellation notices.
In addition to foreclosure, Liens can affect your ownership rights to a property. Involuntary liens such as mechanic liens (for work done on a property) and judgment liens resulting from court rulings. A judgment lien can affect ALL of your properties, and can result in your property being seized to satisfy the judgment. The priority behind the liens is based on the date of docketing. Property taxes always get the highest priority as liens, and then priority goes to other liens in the order which they were recorded.
Original workers and subcontractors can file mechanic’s liens within 90 days of completion of the work which they were not fully paid for. Some contractors file liens as soon as they get their contract so as to guarantee early priority in payment.
Interestingly, if you are contracting for more than $2000 work, you must hire a licensed contractor and get a written contract as well as all permits and pay everything in full per contractual terms. You must create a bond in order to avoid being personally liable should anything go wrong. Doing all these things will keep you from being liable to any subcontractors and protect you from mechanic’s liens.
Per the Residence Lien Recovery Act, there exists a fund called the Residence Lien Recovery fund which, assuming you complied with your bonding and contract, will pay any subcontractors who were not paid by your contractor.
After four years a property can be sold for unpaid property taxes. A homestead exemption protects family homes, which the head of family can claim for their primary residence. By filing one, you can be protected against certain types of liens such as lawsuits.
The maximum possible exemption provided by a homestead (which is normally filed before a suit is determined) is $20,000. According to our instructor, there is a ding on your credit as a result of filing one…though I personally doubt that. A possible disadvantage to a homestead is it can prevent lenders from lending on a home with an exemption. This is a wonderful way to protect your equity, as many homes, at least here in Utah tend to have lower amounts of equity within them. Essentially, as long as you have less than $20,000 in equity, you cannot lose your home.
You don’t need an Agent
We are warned that Utah law is a tougher exam than the national exam. In order to be a licensed agent in Utah, as well as most states, one must pass both a state and a national test. Utah law is intended to protect consumers from agents and seems pretty thorough.
25% of the Utah test involves understanding a HUD closing statement. National exams seem to test more common sense whereas Utah law tests one’s knowledge and understanding of Utah statutes.
The executive director of the Real Estate Division in Utah is appointed by the Department of Commerce’s executive director (who is appointed by the governor). This office tends to be rather long, as most directors remain for 5 – 10 years. Currently an attorney heads the position, and will do so until removed by the governor.
The Real Estate Division sets the fee (which is paid every two years) for license renewal, as well as manages and enforces laws applying to agents. They also control licensing, for example ruling that property managers must hold the same real estate license agents hold. They also send out a semiannual newsletter. This newsletter outlines actions taken against licensed agents, mortgage brokers and appraisers which can include fines and license revocation.
The commission has 5 members, one of which is a non licensed agent. They must have at least 5 years experience, and are selected from different counties in order to provide equal representation across the state.
In Utah you need a license in order to deal with any real estate transaction other than your own. This brought about a discussion the mentioned a few interesting things. We were warned to not show more than six homes a day to a client in order to avoid overwhelming them. We were also advised that we could use a broker as a convenient excuse to lie to clients. For example, if a client inquires about a reduced commission, we can insist that our broker prohibits that.
Interestingly, there exists a convenient loophole for those interested in selling a home for another. You ARE permitted to sell a home for a commission IF you have them sign power of attorney over to you. This could get you in trouble if you do it routinely, but it could be convenient in certain circumstances. You would want to be particularly careful to avoid soliciting others to do this however.
The class then began to attack “Fizzbos” (For Sale By Owners) with claims of how agents can sell homes for more than an owner trying to sell themselves. Claims that 90% of all owners end up with an agent eventually, most within the first two weeks sounded lofty and dreamful. To be honest, I have seen quite a few owners sell their homes themselves with good success. The key seems to be pricing right, and knowing the market. If you’re clueless, you probably WILL get more if you get a GOOD agent. A bad agent could be worse than what you’d do yourself.
We were warned not to be a broker. Brokers are broker than the agents the instructor joked. He is the broker of the school and is a millionaire, so he may have a vested interest in reducing competition. In order to be a broker in Utah you must first spend 3 Years being an agent.
Licenses in Utah no longer require High School diplomas. The test costs $68 and can be taken infinitely, but you do have to pay each time you take it. You are not allowed to bring in Solar or programmable calculators. You cannot pay with cash; you must use a cashier’s check or money order in order to take the test. They can be taken either during the morning or the afternoon and you are given up to four and a half hours to test.
Within 90 days of passing the test, you must decide if you want to be an active agent or an inactive one (pay the license fee). A nonresident can be licensed in Utah as long as they have an active license in their home state and pass the Utah licensing exam. One last note of interest is that of irrevocable consent in which you state your address. If you are served, and you haven’t updated that address you are still considered served.
When you come to a brokerage, they take control of and store your license in their office. So until you become a broker, don’t expect to see that baby on the wall.