Archive for April, 2007
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.
Wrapping up with the Utah state law courses, we had a mortgage broker who had taught a previous course of ours come in. He announced that he would again be giving out a $20 gift certificate to a random member of the class. He attempted to give out two certificates but found the same person won each time.
I must confess that I appreciate when an instructor who is attempting to schmooze the class is open about it. Many of the guest instructors whom we’ve had appear fake or forced when they teach, always reminding us why their services are the best, and that we shouldn’t even bother comparing them to the competition. Open bribery is much easier than listening to silly rhetoric
Class began with the explanation of what a purchase money mortgage is (taking a mortgage in order to purchase a home), which can often be used to supplement the payment on a seller financed/assumed mortgage home.
We then learned about reverse mortgages, which one member of the class assumed was a means of pulling infinite money out of a home. Kind of like when I was young and assumed that adults could get unlimited money from their magical credit cards. Sadly, the member of the class was in her thirties.
He announced that there were 50 year mortgages now, which resulted in a terrified look from the class.
We then went through a few dozen sample test questions together. Here are some terms worth highlighting from the review.
A balloon mortgage is one which has a variable sized final payment, unlike an Arm which is generally amortized normally.
A blanket loan is one which covers multiple properties, and is paid off as parts of the property are sold. Builders often use these when building multiple properties.
Class concluded with the instructor explaining how the handouts he had given us would be so valuable to our dealing with clients in need of a mortgage. Conveniently the pages were covered with business cards, and included a ‘survey’ of the school which is obviously a silly attempt to get our contact information by pretending to care how we feel about the real estate school. Smart way to hook some agents I’d imagine. At least he offered us all a free lunch if we come to his office.
Taking a bit of a break to get taxes in by the 17th. Thank goodness for emancipation day.
This is probably as good a time as any to outline some of the tax benefits of owning property. While you do get taxed on rental income, the ability to depreciate the property often allows one to completely neutralize any rental income.
Feel free to read more here.
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.