Download FLORIDA REAL ESTATE PREP EXAM Questions and Answers Latest Version 2024 Graded A+ and more Exams Marketing Business-to-business (B2B) in PDF only on Docsity! FLORIDA REAL ESTATE PREP EXAM Questions and Answers Latest Version 2024 Graded A+ Caveat Emptor - Answer Let buyer beware (Pre 1923) Real Estate License Law - Answer Ch. 475 passed to protect public by regulating real estate brokers, sales associates and schools (1923) Real Estate Commission - Answer Created to administer and enforce license law, keep records, investigate, and grant, deny, suspend revoke licenses (1925) DBPR needed when... - Answer -harm to public is potential and unrecognizable -danger greater than anti competitive impact from regulation -other regulations don't protect public -no less restrictive regulations exist Fiduciary - Answer broker in trust and confidence relationship with seller or buyer which duties include: loyalty, confidentiality, obedience, full disclosure, accounting and use of skill, care and deligence Florida resident - Answer 4 months or more Nolo Contendere/no contest - Answer Does not admit guilt but convicted as though guilty through plea Owner-Developer - Answer Unlicensed entity that sells, exchanges or leases its own property Prima Facie Evidence - Answer Evidence sufficient to establish fact, raise presumption of fact or prove case unless rebuted Real Property - Answer interest or estate in land Not real property - Answer cemetary lots, mobile home, or recreational vehicle in mobile home or travel park Reciprocity - Answer agreement in 2 states that allows one licensee in one state to practice real estate in another state (Florida uses "mutual recognition", not reciprocity) Single Agent - Answer Broker who represents (fiduciary) either buyer or seller but not both in the same transaction Transaction broker - Answer Represents buyer, seller or both in real estate transaction but not in fiduciary capacity ( is the neutral go-between) Florida Statute 475 - Answer Regulates real estate people by establishing licenses and appraisers legal rights and responsibilities; interpreted and enforced by FREC; divided into 4 parts Florida Statute 455 - Answer Establishes provisions for DBPR Florida Statute 120 (Administrative Procedure Act) - Answer Establishes regulatory agencies' procedures for deciding and implementing agency action including licensing Florida Statute 20 - Answer Established FL governments executive branch's organizational structure Florida Administrative Code 61J2 - Answer Expansion of 475 provisions; FREC's administrative rules pursuant to Chapter 120 Application Requirements - Answer 30 days to notify applicant of errors and omissions Application approved if not processed within 90 days 21 days for applicant to request hearing if denied Application valid for 2 years Nonresident Requirements - Answer Citizenship and Florida residency not required SSN required 60 days to notify FREC or address change Sales Associate Pre-License Requirements - Answer -63 hours of FREC approved courses or 4 yr. degree -Fingerprints, Application and Fee -75% score on exam to pass Sales Associate Post-License Requirements - Answer -45 hour FREC approved course prior to inital license expiration or 4 yr. degree -Pass end of course exam (75%) Sales Associate Continuing Ed Requirements - Answer -14 classroom hours every 2 years -3 of the 14 to be core law (can be substituted by one time attendance to FREC legal agenda session) +Same as Broker continuing ed requirements Broker Pre-License Requirements - Answer - 24 months real estate experience during previous 5 years as sales associate or broker in another state -72 classroom hours pre-licensing or 4 yr. degree -Application, fingerprints and fee -75% passing exam score -Reinstate w/ continuing ed, fees, & eligibility for renewal -Reinstate after 5 yrs. if revoked due to post/no education or false information on application Ineffective License (FS 475.31) - Answer -Suspended -Voluntary/Involuntary inactive status "Cease to be in force" License (475.23) - Answer -Address or employer change and does not notify FREC within 10 days Multiple Licenses (475.215) - Answer For brokers only May be denied by FREC Group Licenses (61J2-6.006) - Answer -for sales associates or broker associate to sell for all entities owned by owner/developer -for owner/developer of properties through multiple connected entities Mailing Address "Address of Record" - Answer (61J2-10.038) Must notify DBPR in writing within 10 days of address/email/place of practice change -Possible citation & $500 fine from F.S. 455 Universal Agency -Levels of agency - Answer -One who has been given full power to act on behalf of business or a person General Agency -Levels of agency - Answer Authorized by the principal to perform any and all on going business matters Ex. Property manager works for owner (General agent) Special Agency -Levels of agency - Answer Normally agent cannot contract for the principal and is represents in a single business transaction -Characterizes the brokerage relationship Single Agency -Type of agency - Answer -Seller or buyer agency -tenant or landlord representation Subagency -Type of agency - Answer Outside brokers and agents who help listing agent -Listing brokers own agents Dual Agency -Type of agency -Illegal in Florida - Answer -Representing both sides -Conflict of Interest -Must disclose & obtain written consent -All duties except full disclosure & loyalty -Implied agency (involuntary by actions of parties) No Agency -Type of Agency - Answer -"Facilitator" or "Transaction Broker" -Representing neither party in transaction Objectives of Disclosure - Answer Declare, explain, offer choice & obtain documented consent Seller Agent Disclosures to Client - Answer -In Writing -On or before listing is executed Seller Agent Disclosures to Customer - Answer -In Writing -Prior to substantive contact -Oral disclosure permitted, but MUST have written follow-up Buyer Agent Disclosures to Seller - Answer -In Writing -Upon first contact with listing agent or seller -Substantive contact is assumed Dual Agent Disclosures - Answer -"Informed, Written Consent" -May not disclose price or financing positions or motivations unless authorized Facilitator Disclosure - Answer On becoming transaction broker or on substantive contact, whichever is first FL Law of Agency Relationship Laws -Types of Agency -475.255 - Answer Common-from judgement of courts Statutory- written legislative statutes Administrative- rules & regs. by administrative agencies -Regulate by: FREC & RE license laws Brokerage Relationship Disclosure Act (FS 475.2701) - Answer Purpose: To eliminate customer confusion in RE transactions regarding broker relationships & duties -Revokes Dual agency -Allows transaction brokers to provide limited non fiduciary representation to buyer, seller or both in same transaction +Disclosure requirements only to residential Brokerage Relationships - Answer -Transaction broker or single agent allowed in FL -No written disclosure requirement for transaction broker relationship Residential Sale - Answer -4 or less residential units (improved or unimproved) -10 or less acres of agricultural property No disclosure requirements for +nonresidential transactions +real property rental w/ no option to buy +open house +Answer/providing general information +Licensee knows buyer/seller has single agent/trans. Puffing - Answer Licensee boasting about properties benefits Ex. "It's in great shape!" except the leaks Misrepresentation - Answer "Oops" Misstatement or concealing a fact (intentional or negligent) Fraud - Answer INTENTION__Misstatement or failure to disclose material fact Party was damaged by misstatement Florida Law prohibits... (misrepresentaion & fraud) (FS 455.227) - Answer -Selling property covered by mortgage that covers other -Promises of future sale of property -Offering property or discount by solving puzzles -Offering property or price by chance -Obtaining license by bribe or fraud -Contracting for services by unqualified/unlicensed person Code of Ethics & Standards or Practice - Answer -Developed by National Association of Realtors (NAR) -Promotes fair dealings with public, client and other brokers Sales associates cannot be registered or licensed as... - Answer -General Partner -Member/Manager -Officer -Director of brokerage firm Sales Associate--Broker Relationship (FS 475.161;42) - Answer -Must be employed by registered broker - Can be employed by broker as independent contractor -May only collect transaction-related money in name of employer -May only earn transaction-related money by permission of employer Broker Office Requirements (FS 475.22) - Answer -Must have at least 1 enclosed room in stationary building -Must have sign at entrance of each branch +Broker name & licensed real estate broker -For office outside FL, broker follows FREC rules & investigations -Additional offices to be registered as branch offices Advertising Rules (FS 61J2-10.025; 501.2075) - Answer -Must include brokerage name (next to contact info in online ads) -Brokers name as registered with FREC (commission related) - Answer -do anything to earn a commission except on behalf of employer -sue principal over unpaid comission Kickback - Answer rebate for any particular business or servicer without advising all parties in transaction -If fully disclosed to all parties it is known as a shared brokerage compensation, NOT kickback Change of employer - Answer -Notify FREC of change within 10 days on prescribed form -License ceases to be in force until change reported -Confidentiality still in force after termination -No duplication or removal of records Requirements to register as business entity - Answer -One active broker as officer, director, member, manager, or partner of entity -Submit application and fee -No sales associate or broker associate as the above mentioned titles unless upgraded to active broker Forms of Ownership for Brokerage - Answer -Sole proprietorship -General & limited partnerships, not ostensible partnerships -Corporation -LLC (limited liability company) -LLP (Limited Liability Partnership) May not register as brokerage (2 forms) - Answer -Corporation sole -Joint Venture Trade Names must be... (FS 475. 22) - Answer -included on office entrance sign -in FREC records -on brokers license Unlicensed Assistants provide support services such as... - Answer -Submit listings to MLS -Assemble documents -Deposit trust monies -Compute Commission checks -Place signs on properties -Prepare advertising for broker approval Unlicensed Assistants cannot... - Answer -perform RE services without license -be paid for performing RE services (illegal) Administrative Complaint - Answer Contains allegations of facts and related charges against a broker; also known as a formal complaint Breach of Trust - Answer Failure to carry out fiduciary duties Citation - Answer issued to subject of complaint - includes statement of complaint, law violated,imposed penalty, with option to dispute; becomes final order if lack of dispute Culpable Negligence - Answer criminal offense of gross acts of negligence that expose others to harm or threat of harm Legally sufficient - Answer containing ultimate facts that violation occured Moral Turpitude - Answer Conduct contrary to community standards of justice, honesty or good morals Notice of Noncompliance (61J2-24.003) - Answer issued by DBPR as 1st response to a MINOR violation by a licensee, such as failure to maintain the office entrance sign Probable Cause - Answer Reasonable grounds for prosecution Recommended Order - Answer Issued by administrative law judge to include findings and recommended penalty Stipulation - Answer DRE attorneys and licensee agree to case facts & penalty Summary Suspension Order - Answer Issued with serious violation justifies immediately suspending licensee prior to hearing Complaint Process -File Complaint - Answer must be in writing, signed by complainant and legally sufficient Complaint Process -Investigation - Answer -DBPR investigates, even if withdrawn -may provide notice of noncompliance for 1st minor violation -may include summary suspension Complaint Process -Probable Cause - Answer -FREC closed probable hearing within 30 days after final investigative report -No probable cause -Probable cause, formal complaint filed & mailed to licensee Complaint Process -Formal Hearing -Informal Hearing - Answer -licensee does/doesn't dispute allegations, requests or waives hearing -disputes go to formal hearing -non-disputes go to informal hearing -administrative law judge hears case & issues recommended order Complaint Process -Final Order - Answer FREC issues final order of innocence or guilt with appropriate penalty Complaint Process -Judicial Review - Answer -accused licensee may seek appeal via judicial review within 30 days after final order -enforcement of final order may be stayed with conditions via writ of supersedes -judicial review may result in corrective action of FREC or confirmation of findings Suspension of license penalty - Answer -License can be suspended for up to 10 yrs. of 1st offense Grounds for revocation - Answer -2nd suspension for same or different violation -License issued by FREC was a mistake -Sales associates employed by revoked broker placed in involuntary inactive status Administrative Penalties - Answer -Notice of noncompliance -License denial, suspension, revocation -Probation with conditions -Reprimand -Citations -Up to $5000 fine Civil Penalties - Answer -for practicing RE without a license -enforced by courts -loss of commission Misdemeanor of 2nd degree -Criminal Penalty - Answer -violation of FS 475 -up to $500 fine, up to 60 days in jail Misdemeanor of 1st degree -Criminal Penalty - Answer -inaccurate rental info for fee -up to $1000 fine up to 1 year in jail Reasons for felony of 3rd Degree -Criminal Penalty - Answer -False info when applying for license -Theft or copying licensure exam Unlicensed RE practice penalty - Answer -hearing by DBPR; fines up to $5000 -cease & desist order -injunction by circuit court -civil court for unpaid fines -criminal prosecution for felony of 3rd degree; up to $5000 fine; up to 5 years in jail Real Estate Recovery Fund (FS 475.482) - Answer -to reimburse person or entity for adjudged monetary damages by violations of licensed broker -administered & enforced by State Land Planning Agency Big Cypress Conservation Act of 1973 - Answer -720,000 acres in SW FL -designated as area of critical state concern -State Land Planning Agency to recommend land development regulations for this area -Provide continued use of land by Miccosukee & Seminoles FL Keys Area Protection Act - Answer -land use management system to protect, conserve & promote Keys -to provide affordable housing near employment in the Keys -to ensure Keys population can be safely evacuated Florida Coastal Management Act - Answer -to protect, maintain and develop coastal resources -to protect health and safety of tourists and public -to study lighthouses regarding historical significance and restoration needs -administered and enforced by FL DEP Florida Clean Indoor Air Act - Answer -to protect public against health hazards of 2nd hand tobacco smoke -administered and enforced by Department of Health -prohibits smoking near schools by person under 18 and enclosed workplaces Florida Fair Lending Act (494.0078-494.00797) - Answer -to protect against equity based rather than income based -to protect against unreasonable and unnecessary loan terms -certain disclosures to buyer required Florida Fair Lending Act prohibits... - Answer -prepayment penalties -default interest rate -balloon payments for terms less than 10 years -negative amortization -prepaid penalties -extending credit regardless of borrowers payment ability -due-on-demand clause for high-cost loans -refinancing within first 18 months of loan -recommendation of default Deceptive & Unfair Trade Practices Act (501.201-501.213) - Answer -to protect public & businesses from unfair competition and trade practices -to make state consumer protection consistent with federal consumer protection -enforced by STATE ATTORNEY -CIVIL penalties for violation Deceptive & Unfair Trade Practices Act prohibits... - Answer -unfair methods of competition -unconscionable acts or practices -unfair or deceptive acts of practices in conduct of any trade or commerce National Uniform Landlord Tenant Act leases... (URLTA) - Answer -clear lease terms -fair market rent -cannot waive rights National Uniform Landlord Tenant Act deposits... (URLTA) - Answer -limits on amounts -tenants right to interest -rules and deadlines for returning National Uniform Landlord Tenant Act landlord obligation (URLTA) - Answer -bargain in good faith - provide maintenance & repairs -comply with building codes -provide safety and access -procedure for delivery of notices National Uniform Landlord Tenant Act tenant obligations (URLTA) - Answer -maintain condition -abide by rules and regulations -no damage or abuse -abide by approved uses -no disturbance of other tenants Causes of lease termination (Hint: 8 causes) - Answer -default -notice -property destruction -death -term expiration -voluntary agreement -condemnation -abandonment under certain conditions FL Residential Landlord & Tenant Act exclusions (83) - Answer -medical, geriatric, educational, counseling, religious residency or detention; public or private -occupancy under contract of sale of dwelling unit -transient occupancy -cooperative apartment occupancy tenant -condominium owner occupancy FL Residential Landlord & Tenant Act security deposits and advanced rentals to be held.. (Hint: 3 options) - Answer -in non-interest bearing escrow account -in interest bearing account & pay tenant at least 75% of annualized average interest or 5 % simple interest per year -by posting surety bond with clerk of circuit court in same county as dwelling Real Property; Fixtures - Answer -land -fixtures (method, adaptability, relationship, intention & agreement) -attachments Personal Property - Answer -chattels -trade fixtures -emblements Differentation Criteria - Answer -intention -adaptation -functionality -relationship of parties -contract provisions Conversion Property - Answer -real to personal property -- severance -personal to real property -- affixing Emblements - Answer plants or crops considered personal property Ex. If tenant grow a fruit tree, not the landowner they are entitled to harvest the tree when they vacate Trade Fixtures - Answer personal property items temporarily attached to RE in order to conduct business Ex. Display counters, cabinets, etc. Land Rights - Answer surface, all NATURAL things attached to it, subsurface, and air above surface Real Estate Property Rights - Answer Land + MANMADE permanent attachments Real Property Rights - Answer real estate + bundle of rights Bundle of Rights - Answer Possess Use Transfer Exclude Encumber Riparian Rights -rivers and streams - Answer -navigable: own land to waters edge -NOT navigable: own underlying land to midpoint of stream Littoral Rights -lakes and seas - Answer own to high water mark Freehold Estates - Answer interest in RE for which duration is not set (indefinite) Fee simple Absolute (or fee simple) -Freehold estate - Answer entitled to all fees the land could generate Voluntary Transfer - Answer Deed Will Public Grant Notice to acquire legal title - Answer how ownership is evidenced to the public Actual Notice to acquire legal title - Answer knowledge acquired directly through demonstrable evidence -presenting/inspecting a deed -visiting a party in possession Constructive Notice to acquire title - Answer knowledge one could have obtained, as presumed by law; imparted by recording in public records "for all to see" Forms of evidence to prove marketable title & ownership - Answer Title Insurance Attorneys Opinion of Abstract (history of title) Title Certificates Torrens Registration Deed Requirements for Validity (Hint: 9 items) -2 witnesses must sign the deed in FL for validity - Answer -Grantor -Grantee -In writing -Legal Description -Granting Clause -Consideration -Grantors Signature -Acknowledgement -Delivery & Acceptance Deed Clauses - Answer Premises (granting) Habendum (type of estate) Reddendum (restrictions) Tenendum (other property included) Bargain & Sale - Answer "I own but won't defend" General Warranty Deed - Answer "I own and will defend" Special Warranty Deed - Answer "I own and warrant myself only" Quitclaim Deed - Answer "I may or may not own, and won't defend" Special Purposes Deed - Answer Used for different purposes, interest conveyed or by different parties Dies testate with heirs - Answer Creditors--> Homestead --> heirs by WILL Dies intestate with heirs - Answer Creditors --> homestead --> heirs by LAWS of descent Dies intestate, no heirs - Answer creditors--> state by escheat Appurtenant Easement - Answer -attaches to the estate -dominant tenements right to use or restrict adjacent servient tenement (access to public street) -by necessity, to landlocked owners -party wall easement in a shared structure; to not damage or destroy Easement in Gross - Answer -does not attach to the estate Personal -- not transferrable, ends upon the death of easement holder (Bill fishing on Johns river) Commercial -- transferrable, granted to a business Easement by Prescription - Answer obtainable through continuous, open, adverse use over a period (in FL period of time is 20 years) License Easement - Answer -personal right to use a property -does not attach -NON-Transferable -Revocable Gross Lease - Answer landlord pays expenses; tenant pays higher rent than net Net Lease - Answer tenant pays some or all expenses; rent is less than gross Percentage Lease - Answer landlord receives rent minimum plus percentage of retailers sales Residential Lease - Answer gross lease hybrid; short-term; uniform terms reflect landlord-tenant standards Ground Lease - Answer landlord owns and leases ground but does not own improvements (Example: Honolulu) Propreitary Lease - Answer for cooperative unit owners; indefinite term; assigned to new unit owner on sale Leasing of Rights - Answer leasehold transfer of rights for limited use Ex. Air, mineral, water, etc. Voluntary/Involuntary Lien Examples - Answer Mortgage Lien/ Mechanic or Tax Lien General/Specific Lien Examples - Answer against any & all assets/ against car or house(specific) Superior/Junior Lien Examples - Answer paid before juniors/paid after superiors by date of recording Superior Liens by Rank - Answer Real Estate tax liens Special Assessment Liens Federal Estate Tax Liens State Inheritance Tax Liens Junior Liens by date of recording - Answer Federal Income Tax Liens Judgement Liens Mortgage Liens Vendors Liens Mechanics Liens (priority by date work performed) Zoning - Answer "police power" granted by state-level enabling acts; zoning ordinance; creates zones, usage restrictions, regulations, requirements Eminent Domain - Answer allows a government entity to purchase a fee or easement interest in a privately owned real property for the PUBLIC GOOD and for PUBLIC USE in exchange for "just compensation" Subdivision Regulations - Answer -location, grading, alignment, surfacing, street width -sewers and water mains -lot and block dimensions -building and setback lines -public use dedications -utility easements -ground percolation Building Codes - Answer comprehensive onsite and offsite construction and material standards; must be met to receive certificate of occupancy Environmental Restrictions - Answer flood control solid waste disposal air quality water quality noise control marine protection lead paint Deed Restriction - Answer single property use restriction as stipulated in deed Declaration Restriction - Answer use restriction in multiple property declarations; enforced by court injunction Deed Condition - Answer usage restriction that can trigger REPOSSESSION by a previous owner if violated Metes and Bounds - Answer -describes perimeter by landmarks, monuments, etc. -starting at point of beginning (POB), follow perimeter, return to POB -lapse of time -invalidity of contract Rescission - Answer cancel contract; return deposits Forfeiture - Answer defaulting party gives up something according to contract Liquidated damages - Answer damages to to damaged party as stated in contract Suit for damages - Answer civil suit for money damages not covered by contract Statute of Limitations - Answer -restricts the time period for which injured party has the right to rescind or disaffirm contract -a party to a voidable contract must act within the statutory period Statute of Frauds - Answer -requires certain contracts be in writing to be enforceable -real property fee conveyance contracts fall in this category -exception- lease of 1 year duration or less may be oral -exclusive listing agreements must be in writing Contract Parties - Answer -listing broker: fiduciary of buyer client or seller client -subagent: fiduciary of listing broker's client -customer: non fiduciary principal in transaction Fiduciary Duties to... - Answer -client: loyalty; obedience; disclosure; care; diligence; accounting -customer: honesty, care and disclosure Authority characteristics - Answer -limited agency agreement -broker may not contract for client unless specifically authorized -clients liable only for brokers acts within scope of authority Contract Law - Answer -Unilateral contract -oral listing is valid and enforceable -exclusive listing in some states must be written to be enforceable -personal service contract --not assignable Exclusive Right-to-sell - Answer -given to 1 broker -usually must be written -must expire -broker gets commission if property transfers during period Exclusive Agency - Answer -exclusive excepting owner -oral or written -must expire -broker gets commission unless owner sells Open Listing - Answer -non-exclusive -oral or written -no stated expiration -procuring cause gets commission -no commission if client procures customer Net Listing - Answer -all sale proceeds above a seller's minimum price go to the broker (discouraged, if not illegal) Buyer Agency Agreements - Answer -create a fiduciary relationship with the buyer -if exclusive, buyer agrees to only work with the buyer rep. in procuring a property -must expire along with requirements of a valid listing Option Contracts - Answer -Unilateral: seller must perform, not buyer Sale and Purchase Contracts - Answer -Bilateral -expires upon closing Review secondary and primary clauses for contracts - Answer Mandatory Disclosures (475; 404) - Answer -material defects -radon gas -lead-based paint -energy efficient brochure -Homeowners Association -Property Tax -Building Code Radon gas - Answer -no testing required -lease/sale agreement must contain explanation/disclosure of what radon gas is Lead Based Paint - Answer -presence must be disclosed by sellers and landlords -disclosure on sale contracts -EPA pamphlet given to buyer/tenant prior to signing lease or sale contract -buyers allowed 10 days to test for lead -licensee to make seller comply Energy Efficient Brochure - Answer -must be given to buyer prior to sale contract -gives buyer option to receive rating on building Homeowners Association - Answer -sellers to disclose mandatory homeowners association -provide buyer with disclosure of summary of association, existence of restrictive covenants -imposed asessments Property Tax - Answer -ad valorem tax disclosure summary prior to or at sale contract signing -attached to sale contract or as wording in the contract -discloses future tax may be different than current tax Building Code - Answer -disclose previous, unresolved building code violations -include nature of violation, proceedings, copy of pleadings, documents received by seller Lien Theory State - Answer lender of mortgaged property holds equitable title rather than legal title; borrower holds legal title -FL is lien theory Title Theory State - Answer lender holds legal title to the mortgaged property until the mortgagor satisfies the terms and obligations of the loan Hypothecation - Answer use of real property as collateral for a mortgage loan Lien Priority - Answer the highest priority lien is paid by foreclosure proceeds before any other lien Mortgage Promissory Note - Answer promise to repay loan -borrower gives to lender Mortgage - Answer pledge of property as collateral for loan Trust Deed Promissory Note - Answer trustor's promise to repay loan -conveys title from the borrower/truster to 3rd party trustee Deed of trust - Answer title to property as collateral for loan; 3rd party is given power of sale by the borrower Promissory Note - Answer legal instrument executed by borrower stating debt amount, loan term, method and timing of repayment, interest rate, promise to pay; may repeat other provisions from mortgage document or deed of trust; negotiable instrument assignable to 3rd party Point - Answer one percent of the loan amount fee paid/loan amount ($500/$10000) = 0.05 = 5 points 1 point charged raises lenders yield by .125% 8 points charged raises lenders yield by 1% (7% yield - 6.5% loan) / .125% = 0.04 = 4 points Equity - Answer Market Value - Loan Balance Escrow Account - Answer account for periodic payments of taxes & insurance Real Estate Settlement Procedures Act (RESPA) - Answer limits funds the lender can require for this purpose P & I Payment - Answer principal and interest payment from borrower monthly PITI - Answer principal, interest, taxes and insurance payment for escrow Federal Reserve - Answer sets interest rates and discount rates -sells T-bills to reduce money supply and increase interest rates and vice versa -increases reserves to tighten money and raise interest rates and vice versa Federal Home Loan Bank System (FHLBS) - Answer counterpart to FED for savings and loan associations Federal Deposit Insurance Corporation (FDIC) - Answer insures deposits up to $250,000 per depositor, per bank Primary Mortgage Market - Answer loan origination market Secondary Mortgage Market - Answer where mortgage loans are purchased from mortgage originators (Fannie Mae & Freddie Mac) FNMA (Fannie Mae) - Answer buys conventional FHA & VA loans and pooled mortgages -guarantees payment on mortgage backed securities GNMA (Ginnie Mae) - Answer guarantees payment of principal & interest on MBS -does NOT buy and sell large numbers of mortgages FHLMC (Freddie Mac) - Answer buys and pools mortgages sells MBS (mortgage backed securities) Mortgage Loan Originator - Answer solicit, negotiates mortgage loans; requires MLO license Mortgage Broker - Answer brings mortgage borrowers and mortgage lenders together but does not use funds to originate mortgages Mortgage Banker - Answer funds or services loans for others and/or who sells mortgages to secondary market (Fannie Mae, etc.) Real Estate Settlements & Procedures Act (RESPA) - Answer standardizes settlement practices -must provide CFPB booklet explaining loan & procedures -lender must provide CFPB Loan Estimate of settlement costs within 3 days of application -provide CPFB Closing Disclosure 3 days before loan consummation *Loan Constant - Answer monthly payment/ loan amount x 1,000 RESPA applicability - Answer residential property first or second mortgage federally-related mortgage assumption modifying loan terms RESPA fees and kickbacks - Answer -prohibits payment of referral fees/kickbacks -business relationships between firms involved in the transaction must be disclosed Buyers credits - Answer -earnest money -loan amount -seller's share of prorations buyer will pay Buyers debits - Answer -purchase price -expenses (per agreement or custom) -buyer's share of prorations prepaid by seller Sellers Credits - Answer -Purchase Price -Buyers share of prorated items prepaid by seller Seller's Debits - Answer - expenses (per agreement or custom) - seller's share of prorated items the buyer will pay - loan balance and other liens to be paid off Buyer usually pays - Answer -Mortgage recording fees -Documentary stamp tax -Intangible tax on mortgage -Mortgage-related fees; appraisal, credit, survey, loan -Impound reserves: insurance, taxes -Attorney Fees Seller usually pays - Answer -Stamp tax on deed -Title Insurance -Brokerage Fee -Inspection Fees -Title-related expenses -Attorney fees Advance prorated items - Answer -insurance premiums -rents received by seller Prorated Items in arrears - Answer -real estate taxes -mortgage interest -utilities RESPA/Truth-in-Lending Charges - Answer -no limitation in increase over estimate -10% tolerance charges -0 tolerance charges Physical Characteristics of Real Estate (Hint: 3 characteristics) - Answer Immobility: location is forever fixed Indestructibility: cannot be destroyed because it extends below ground and into the sky (land does NOT depreciate) Heterogeneity: No 2 are the same & have different locale Land aspects of Real Estate - Answer -Air -Surface -Subsurface -Natural attachments Government Influences on the Real Estate Market - Answer -Local zoning power -Local control & permitting of new development -Local taxing Power -Federal influence on interest rates -Environmental legislation & regulations Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) - Answer - As of 1993 federally related appraisals must be performed only by state certified appraisers -USPAP FL appraisal license types - Answer -Registered trainee appraiser -Certified residential appraiser Certified general appraiser Contribution - Answer equal to the change in market value that the addition of the improvement causes Highest and Best Use - Answer a property achieves its maximum value when it is put to whichever use generates the greatest income and return -must be legally permissible, physically possible, financially feasible and maximally productive Progression and Regression - Answer the value of a property is influenced by the values of neighboring properties Assemblage - Answer conjoining adjacent properties can create a combined value in excess of the values (plottage value) of the unassembled properties Insured Value - Answer insured value is the face amount a casualty or hazard insurance policy will pay in case a property is rendered unusable Reproduction Value - Answer cost of constructing a PRECISE DUPLICATE of the subject's property's improvements, assuming current construction costs Replacement Value - Answer cost of constructing a FUNCTIONAL EQUIVALENT of the subject's property's improvements, assuming current construction costs Salvage Value - Answer nominal value of a property that has reached the end of its economic life; also an estimate of the price at which a structure will sell if it is dismantled and moved Assessed Value (tax) - Answer value of property as estimated by a taxing authority as the basis for ad valorem taxation Depreciated Value - Answer purchase price- accumulated depreciation