re.principles.aggregate.student.12ed real 3305
TRANSCRIPT
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by: Charles J. Jacobus
12th edition
Randall S. Guttery, Ph.D.
Professor of Real Estate
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TABLE OF CONTENTS: PP Slides
Ch. 1 3-10 Ch. 9 144-158 Ch. 17 284-299
Ch. 2 11-31 Ch. 10 159-171 Ch. 18 300-309
Ch. 3 32-63 Ch. 11 172-194 Ch. 19 310-323
Ch. 4 64-82 Ch. 12 195-208 Ch. 20 324-337
Ch. 5 83-94 Ch. 13 209-224 Ch. 21 338-398Ch. 6 95-105 Ch. 14 225-239 Ch. 22 399-411
Ch. 7 106-119 Ch. 15 240-260 Ch. 23 412-422
Ch. 8 120-143 Ch. 16 261-283 Ch. 24 423-434
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Chapter 1
Introduction to Real Estate
_______________________________________
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Property owner
decides to sell
Individual
becomes a
licensed real
estate agent (9)
Listing
Agreement (10)
Offer and
acceptance (8)
Buyer Financing
Closing or
escrow (22)
Ownership
Identify the property (2)
Property rights involved (3)
Value of the property (21)
Contract law (7)
Buyer evaluates property (21) Contract law (7)
Deed of trust (15) Lending practices (15, 16)
Sources of financing (17,18)
Title search and title insurance (14)
Deed preparation (13)
Forms of ownership (4)
Leases (20)
Condo, co-op, and PUD (6)
Taxes and assessments (5)
Land-use control (23)
FIGURE 1.1
A Typical Real Estate
Transaction
4
Title shows ownership
Deed is how ownership is transfered
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Real Estate Business
• Brokerage
• Sub-divider
• _________________
• Builder / Contractor
• Mortgage Banker /
Broker
• Valuation / Appraisal
• Corporate RE
• __________________
• Government Services
• Consulting
• Research and
Education
• __________________
• Secondary Mortgage
Market
5
developer
Property Management
Title Company
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Real Estate Decisions
• Investment
• _____________
• Refinance
• Exchange (IRC
1031)• _____________
• Location
• Rent v. Buy
• Diversification
• _____________
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Renovation
Default
Disposition (Disposing)
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Real Estate Types
• _______________
– SFD, condo, townhouse, cooperative, 2-4 unit, MF,apartment
• _______________ – Office, shopping center, hotel, retail, special-use
• _______________
–
Warehouse, manufacturing, plant, factory• _______________
– Lots, acreage, farm, timber, agriculture
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Residential
Commercial
Industrial
land
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Real Estate Contracts
• ______________ / __________________
• Promissory Note
• ____________________
• Earnest Money Contract
• Lease
• Option
• Mortgage-Backed Securities (MBS)
• ____________ / ________________
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Mortgage Deed of Trust
Listing Agreement
Title Deed
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How to Raise Capital
• Sell Assets
– ______________, but no longer have use of asset
• Increase Liabilities
– ______________: Restrictions and loss of control
– ______________: Financial Risk of subordination
– Issue _______________: Very short-term solution
– Issue _______________: Dilution of ownership
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Raise Capital
Third party borrowing
Sell long term bonds
commercial paper
Stock
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Competitive v. Real Estate Markets
Competitive Real Estate
Free Entry & Exit Restricted Entry & ExitLarge Number of
Buyers and Sellers
Few Buyers and One
Seller
Perfect Information High Information CostsHomogeneous Asset Heterogeneous Asset
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Chapter 2
Nature and Description of Real Estate
_______________________________________
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Economic Characteristics of Land
• Scarcity – uniqueness may make parcel scarce
• ___________ – improvement by development
•
Fixity – permanence due to long economic life• __________ (location preference) – how it
interacts with other parcels
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modification
situs
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Physical Characteristics of Land
• Immobility – fixed in one location
•
_____________________ – land is permanent
• Heterogeneity – unique location
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Indestructibility
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Legal Characteristics of Land(Bundle of Rights)
• Possession: right to _____ and exclude others
• ________________: right to use and enjoy
without interference from others
• Control: right to ________ property physically
• Dispose: right to convey any or all of the
property14
Use and enjoyment
control
occupy
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What is Real Estate?
• Land: sub-surface, surface and air rights
• Improvements: anything permanently affixed
to the land
• _______________: possession, use and enjoy,
control, dispose
•
Realty = land + improvements• Real Property = rights associated with realty
• Real Estate = ________________________
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Bundle of rights
Realty + Real Property
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Real Estate’s Dimensions
Land includes the surface of
the earth, the sky above,and everything to the
center of the earth.
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Appurtenances
• A right, privilege or improvement that belongs
to and passes with the land, but is not
necessarily a part of the land
• E.g., easement, right-of-way
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Water Rights
• __________ Rights – when property borders a
river or stream (navigable?)
• ___________ Rights – when property borders
a lake, sea, pond…
– If navigable, own to the mean high-water mark
• Landowners do not have absolute ownership of water
that flows through or past their land; owned by public
• They do have the right to use it in a reasonable manner
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Riparian
littoral
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Land Descriptions
1. Informal reference – street address and city
2. Metes & Bounds
3. Rectangular Survey System4. Recorded Plat
5. Assessor Parcel Number
6. Reference to documents – refer to anotherpublicly recorded document that contains a
full legal description of the parcel
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2. Metes and Bounds
•
Identifies a parcel by specifying its“_____________________________”
• Point of Beginning (POB) – corner where the
parcel survey begins• Man-made or natural monument is placed at
POB, but may disappear over time
•
Distance and direction to other corners follow ____________________ back to POB
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shape and boundaries
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Moving in a clockwise direction from the point of beginning, set the center
of a circle compass on each corner of the parcel to find the direction of travel
to the next corner.
Naming Directions
for a Metes and Bounds Survey
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Describing Land by Metes and Bounds
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3. Rectangular Survey System
•
Based on latitude lines (E-W) and longitude lines(N-S) North and West of Ohio River
• Certain latitude lines serve as ________________
• Certain longitude lines serve as principal
______________ (See Fig. 2.5 below)
• Quadrangle (check) is 24 miles x 24 miles (See
Figure 2.4 in Jacobus, p. 23)
• Township is 6 miles x 6 miles
• Section is ______________________
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baselines
meridians
1 mile x 1 mile
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The public land survey system of the United States
Parallels and Meridians (Fig. 2.5)
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Fig. 2.6 Township Divided into 36 Sections
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Fig. 2.7 One Section (640 Acres)
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4. Recorded Plat
• Shows the location and boundaries of individual
properties
• A.k.a., Lot-and-Block, Recorded Map, RecordedSurvey
• Based on surveyor’s plat filing
•Each parcel is assigned a lot # and block #
• All plats are placed in Plat Books
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Land Description by Recorded Plat (Fig. 2.8)
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The tax assessor assigns every parcel of land in the county its own parcelnumber. For example, the westernmost parcel (lot 50) in the map wouldcarry the number 34-18-8, meaning Book 34, Page 18, Parcel 8.
5. Assessor’s Map (Fig. 2.9)
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Vertical Land Description (Fig. 2.10)
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Chapter 3
Rights and Interests in Land
_______________________________________
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Relationship Between Participants
•
Investor-Lender: mortgage (DoT) andpromissory note
• Investor-Tenant: ______________
• Investor-Government: _______________
• Lender-Tenant: provider of cash flows toservice the lender’s loan
• Lender-Government: _________________
• Tenant-Government: protection of tenants’safety, health and welfare (SHW)
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Lease
Taxation
Restrictions on what lenders can and cannot do
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Government and Real Estate
•
Impact felt by all• Restricts and influences rules, regulations,
taxation and nature of property rights
•
Taxes both ___________ and _____________• Priority claim over all income
– Ordinary income taxes
– Ad valorem property taxes
– Capital gains taxes
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income property
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Federal, State and Local Government
• Federal: tax RE income
• State: determine most RE laws – Lien theory vs. title theory (Ch. 4 & 15)
– Water rights, tax RE income
•
Local: municipality, city, county – Determine building, fire and safety codes
– _______________ and ____________________
– Ad valorem property taxes
–
Rent controls – Urban planning
– Most significant government agency in RE decisionmaking
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Zoning Setbacks
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Rights and Interests in Land Overview
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• The right to tax _________________________________
• Provides money for schools, fire protection, parks,
libraries, police, museums, etc.
• If property taxes are delinquent, government can seize
ownership and __________________________
1. Property Taxes
Government Limitations (4)
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property to raise revenue
sell the property
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• The right of government (5th Amendment) to take
private property for public use, upon payment of just
compensation•Latin for supreme lordship
• ___________________ = legal proceeding to acquire
the property via E.D.
• Value as of the date of condemnation
• Severance damages & Cost to Cure must be paid, too
2. Eminent Domain
Government Limitations
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Condemnation
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• Right of government to regulate private property
for the protection of general public’s _________,
_____________________
• Building, fire and safety codes, zoning and planning
laws
• Differs from E.D. because no legal “taking,” so no
compensation is paid for restricting the use• Has the most impact on land value
• Laws must be in the public interest and applied
__________________________
3. Police Power
Government Limitations
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Safety
Health, and wellfare
Even handidly
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• Means to “ fall back ”
• Ownership of property passes to the governmentif one dies __________________ without heirs or
lineal descendents
• Government is “owner of last resort”
4. Escheat
Government Limitations
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intestate
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Seven Sources of Law
•
U.S. Constitution• Laws passed by ____________________
• Federal regulations of Congressional
committees and government agencies• State __________________
• State laws
• Local ordinances• ___________________________
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Congress
Constitution
Court cases
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Fee Simple
• Estate: one’s legal interest or rights in land
• Fee Simple: most comprehensive estate one canhold in real estate
• ______________: refers to the ownership
• Encumbrance: any ________________ claim, right,lien, estate or liability that limits the fee simple title toproperty
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Title
nonpossesory
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• Property rights are what give value to the real estate
• Property rights are subject to limitations imposed by
the public (government) and privately (encumbrances)
• _____________ limitations include taxation, eminent
domain, police power and escheat
• ______________ limitations include liens, leases,
encroachments, easements and deed restrictions
Real Estate as a
Bundle of Property Rights
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Public
Private
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Real estate ownership is, in actuality, the ownership of rights to land.The largest bundle available for private ownership is called “fee simple”.
The Fee Simple Bundle of Rights
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Devise real estate by will after death
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Note that the fee simple bundleshrinks as an owner voluntarily
removes rights from it.
Removing Sticks from the Fee
Simple Bundle
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Right or Benefit Stick in Bundle
Control MortgageLeaseImpose covenants or conditionsGrant easementGrant licenseBuild or remove structures
Use & Enjoy Occupy as residenceUse as place of businessFarmMine/drill for oil, etc.Place of recreation
Possession Maintain privacyNon-trespass
Disposition Sell or refuse to sellGiveWill Abandon
Real Estate as a Bundle of
Property Rights
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Private Limitations: Encumbrances (5)
• 1. Easement: Right or privilege one has to use
the land of another
• Created in one of three ways:
– ____________: a written document allowing one
to do something
– Implication: the right to cross over another’s
property to get to your land
– Prescription: a right created by use of another’sproperty as easement for a period of time
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Grant
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Types of Easements (2)
• Easement Appurtenant: the right to cross over aproperty in front in order to get to a property inback (e.g., driveway)
– “runs with the land” and non-personal
–
Servient estate - ____________ lot – Dominant estate - ___________ lot
• Easement in Gross: given to a party and “runs
with the user” (e.g., utility WET PIGS) – No dominant or servient estates
– Holder has right to sell, assign or devise easement
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front
back
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Easement Termination
• Lack of use
• Release from dominant estate owner
• Purpose ___________________________
• Combining the dominant and servient estates
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ceases to exist
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Commonly Found Easements
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Commonly Found Encroachments
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Private Limitations: Encumbrances (5)
•
3. Liens: legal claim against a property by aparty other than the owner that, if not
satisfied, can be enforced in the courts to sell
the property
• Purpose is to __________________________
• Oldest lien satisfied first
•
“Writ of Execution” – petitions sheriff to seizeand sell collateralized property to __________
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secure the payment of a debt
satisfy the debt
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Lien Examples
• Property tax lien
• Mechanic’s lien
• ____________ lien – involuntary and general
• _____________ lien – voluntary and specific
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judgement
Mortgage
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Private Limitations: Encumbrances (5)
• 4. Deed Restrictions: limitations on the use ofreal property created by language in the deedwhen ownership is transferred
•Must be ______________ and ___________
• Right to enforce deed restrictions areconveyed from developer to HOA, generally
•
Examples: minimum sqft of LA, architecturaldesign, fence type, building materials, paintcolor, rear garages, height restrictions, …….
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lawful reasonable
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Private Limitations: Encumbrances (5)
•
5. Leases: leasehold estate with no ownership,but possessory and for a definite duration
• Owner gives up “right of possession” and
“right to use and enjoy” in exchange for rent
• Owner may give up “right of control” for some
property types (e.g., _________________)
•
Owner has reversionary interest• Lease is both a contract and a _____________
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industrial
conveyance
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Leasehold Estates (4)
• Estate for Years: lease with a fixed term
• Estate from Period to Period: when original lease
expires, new lease is “____________________”
• Estate at Will: tenant occupies as long asconvenient for landlord
– May be terminated by ________________at any time
• Estate at Sufferance: holdover tenant who usuallyis not paying FMV rent
– Becomes Periodic Estate if landlord accepts any rent
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month to month
either party
Estates in Land (4)
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Estates in Land (4)
• 1. Freehold Estates
– Life Estates• Pur Autre Vie – “for the life of _______________”
• Regular – for the life of ________________
–
Fee Estates• Fee Simple
• Qualified (Defeasable) Fee
– Reversionary future possessory interest for yourself
–Remainder future possessory interest for remaindermen
– Contingent vs. Vested future interests
– Prohibition of _______________
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the user
another
d ( )
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Estates in Land (4)• 2. Leasehold Estate
• 3. Statutory Estates
– Dower – rights of ___________ as survivor
– Curtesy – rights of _____________ as survivor
–
Community property – 10 states require all propertyacquired during marriage to be community
• At death, 1/2 retained by survivor and 1/2 passes to LD&H
• Terminates upon death or _______________
– Homestead protection – automatic constitutionalright in 42 states prohibiting creditors from forcinghome owners to sell to satisfy debts• Exceptions: purchase money mortgage, tax lien, mechanic’s
lien, materialman’s lien, refinance, home equity lien, RAM, …
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the wife
the husband
H t d Li it ti
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Homestead Limitations
• Urban homestead is a lot or lots of not more
than ___________ acres together with any
improvements
• Rural homestead for a married couple is up to
______ acres and for a single person up to 100
acres
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10
200
E t t i L d (4)
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Estates in Land (4)
•
4. Non-Possessory Estates (not in text) – Easement
– Profit – special type of easement where soiland/or raw materials are allowed to be removed
(e.g., sand pit on river) – License – personal privilege granted to enter
someone’s RE without _____________ (e.g.,hunting rights, sporting event)
– ______________ – promise to do or not dosomething on someone’s RE (e.g., board horse,but not goats)
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trespassing
Covenant
S b f Ri ht
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Subsurface Rights
•This is the ____________ estate in Texas!
• Owner of mineral rights can reasonably enter
upon the property to extract the minerals
• Minerals are part of the RE until they are
removed from the ground, then become ___________________
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dominant
Personal Property
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Chapter 4
Forms of Ownership
_______________________________________
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i
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Equity Investor
• Holds title to the property
• Ultimate decision maker
• Interested in cash flows and _________________
• Debt v. Equity financing (also, see. P. 337)
– Lien Theory = borrower retains title, with lender
having only a security interest (33 states)
– Title Theory = lender holds title to the collateral until
the debt is repaid (14 states + DC) – Intermediate Theory = borrower retains title, but
automatically transfers to lender upon default (3 states)
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H ldi Titl
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Holding Title
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(one owner)
T f E i I
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Types of Equity Investors
• 1. Individuals – Proprietorship
– Simple ownership
– Personal management
– Ordinary income tax rates
– _________________ liability• 2. General Partnership
– Joint decision making
– Risk ______________
–
Ordinary income tax rates – Each partner has ______________ access to RE
– Transferable to surviving partners if decedent’s estate iscompensated
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Unlimited
sharing
equal
T f E i I
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Types of Equity Investors
• 3. Limited Partnership – Limited liability for limited partners
– Ordinary income tax rates
– Requires a GP with unlimited liability
– _________________ income
– No management hassles – Difficult to sell LP interest
– Ceases to exist when GP withdraws
• 4. Joint Venture –
Two or more parties take on any legal ownership form inone project
– Syndication = joint venture in more than one project
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passive
T f E it I t
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Types of Equity Investors
• 5. LLP / LLC
– Limited liability of co-owners = not liable for tort
actions of another co-owner unless you knew of
_______________
• Tort = negligence, errors, omissions, incompetence,malfeasance
– Provides flexibility = all can participate in
management
– Favorable _______________= no double taxation
because cash flows pass through to co-owners
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Limited Liability Company
the tort
Tax Treatment
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T f E it I t
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Types of Equity Investors
• 8. REIT
– Limited liability of REIT shareholders (100 minimum)
– Ordinary income tax rates
– Easily marketable
–Must distribute > ___% of net income to shareholders
– No double taxation if all requirements met
– No tax loss carrybacks, but _____ year carryforward
– Traded on NYSE and NASDAQ
• 9. Land Trust – Trustee holds title
– Disguises true owner from tenants and others
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95
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T f E it I t
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Types of Equity Investors
•
10. Inter Vivos / Testamentary Trusts – Trustor creates trust for benefit of ________________
– Trustee holds title and manages the property
– Inter Vivos takes effect during the trustor’s life
– Testamentary takes effect after trustor’s death • 11. Co-Ownership (details follow)
– Tenants in Common (TC)
– Joint Tenancy
– Tenants by the Entirety (Fig. 4.1 error, p. 78)
– Community Property
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the beneficiaries
T t i C
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Tenants in Common
•
Undivided interest in RE with no right of ________________ to co-owners
• Surviving co-owners may have deceased co-
owner’s heirs as new co-owners
• Right to possess, but not _______, entire interest
• May convey your ownership interest
• May have ____________ ownership interest
• May partition by court order into separate tracts
• Law assumed TC, unless specified otherwise
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survivorship
convey
unequal
Tenants in Common
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A B C
A B C’s LD&H
One parcel of land;Three owners with unity of possession
What happens if C dies?
Tenants in Common
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J i t T
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Joint Tenancy
• Similar to TC, but co-owners have right ofsurvivorship – “JTWROS”
• Undivided, ___________ ownership
• Texas requires JT to be in writing
• Only humans can be JTs
• Creditors cannot seize debtor/co-owner’sinterest until debtor’s ___________
• If one JT conveys his interest, other JTs retainJT status, but new owner is a ___________
75
joint tennancy with the right of survivorship
equal
death
tennant in common
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Joint Tenancy
• Must have four unities:
– Time = all acquire ownership at same moment
– Title = all acquire interests from same source
– ___________ = each has equal interest and rights
– Possession = all have same _________ possession
76
undivided
Joint Tenancy
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A B
C
Joint Tenancy with Right of Survivorship
A B C
One parcel of land;Three owners, four unities (PITT):
Possession, Interest, Time, Title
If C dies?
77
Tenancy by the Entirety
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Tenancy by the Entirety
•
Joint tenancy for ____________________• Fifth unity of Person
• Automatically passes to surviving spouse
• Spouse must approve disposition of yourinterest spouse and new owner are TC
• Divorce changes ownership to _____________
• Texas does NOT recognize TE
78
married couple
tenants in common
C it P t
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Community Property
• Assumes each spouse contributes equally, soproperty acquired with community fundsduring marriage is shared equally
• Each owns undivided ½ interest
• Each liable for _________debts
• Separate Property: acquired before marriage,inheritance, gift, pre-marital agreement
• Earnings on _____________ property arecommunity funds
79
all
separate
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Community Property
• Conveyances require both signatures
• ________ very difficult when separate funds used
for community debts
• Upon death of one spouse, decedent’s ½ interestpasses to LD&H, while survivor retains other half
• Surviving spouse has use over entire community
• 10 states (20%), but 50% of population – AK, AZ, CA, ID, LA, NV, NM, TX, WA, WI
80
divorce
10 C i S
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10 Community Property States
81
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Chapter 5
Issues in Homeownership
Taxes and Assessments
_______________________________________
83
Property Taxes
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Property Taxes
• Ad valorem taxes = according to value
• Source of income for local government
• Tax district appraisers all taxable property
• Assessment by appraisal district
• Tax rate calculation
– Dollars per hundred
84
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Expressing Property Tax RatesMill Rate Dollars perHundred Thousand
Schooldistrict
40 mills $4.00 $40.00
City 30 3.00 30.00
Country 10 1.00 10.00
Total 80 mills $8.00 $80.00
Dollars per
85
Other Taxing Matters
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Other Taxing Matters
• Unpaid property taxes
• Assessment appeal
• Property tax exemption
• Property tax variations
• Special assessments
•
Texas Homestead Exemption• Tax Limitation Measures
86
Special Assessments
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Special Assessments
• AN IMPROVEMENT DISTRICT
• TEXAS HOMESTEAD EXEMPTION
• BOND ISSUES
•
APPORTIONMENT
87
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Federal Income Tax
Basis is the price originally paid forthe home plus any fees paid for
closing and improvements.
88
Capital Gains
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Capital Gains
• To calculate the gain you must take the saleprice and subtract the selling expenses; then
subtract the basis to determine the gain.
• Amount realizes – selling price of home lesssales expense.
89
Long Term Capital Gain
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g p
• Holding period longer than 1 year
• Tax rate 15%
90
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Adjusted Sales PriceSelling price of old home
Less selling expensesLess fix-up costs
Equals adjusted sales price
$250,000
-18,000-7,000
$225,000
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Agent’s Liability for Tax Advice
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g y
• A real estate practitioner must be aware of taxlaws that affect the properties the practitioner
is handling. A real estate agent has a
responsibility to alert clients to potential taxconsequences, liabilities, and advantages
whether they ask for it or not. Lastly, an agent
is responsible for the quality and accuracy oftax information given out by the agent.
94
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Chapter 6
Condominiums, Cooperatives, PUDs, and
Timeshares
_______________________________________
95
Condominiums
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Condominiums
• Each owner has fee estate over the air space
that the unit occupies
• _________: also own air and subsurface rights
• Separate elements – exclusively owned and
used as a fee simple estate
• Common elements – areas owned by all as TC
96
Townhouse
Condominium Declaration
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Condominium Declaration
•
Master Deed - legal framework that converts landinto a condo subdivision
• Covenants, Conditions, and Restrictions (CC&Rs) –
filed list of restrictions by which all owners mustabide
• __________ – rules by which the HOA operates
• Unit deed – each purchaser receives deed
97
Bylaws
Maintenance Fees
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Maintenance Fees
• Costs of maintaining ___________________areallocated among all unit owners
• Generally collected monthly
• Replacement reserves created
•Taxes and Insurance premiums paid
• Condominium management fee
98
the common elements
Legislation Against Abuses
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Legislation Against Abuses
• Uniform Condominium Act
• Conversions (from apartments)
• HOAs
• Cooperative Apartments
• Timesharing
99
Condo Living
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Condo Living
• Advantages – Lower cost
– Low maintenance
– Location
– Amenities
– Ownership
• Disadvantages – Close proximity to all
– Loss of control
– Fees
– Board of Directors
– Bylaws
100
Planned Unit Development
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p
• Ownership in a community association thatowns common areas, along with ownership of
your lot and home
101
Cooperative Apartments
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• Organized by forming a ________ corporation
• Sell shares of stock to each occupant – Purchaser is a “cooperator”
– Own personal property, not real estate
• Corporation borrows money by mortgagingthe building
• Own ____________ interest in entire building
•
Proprietary lease over your unit• Legally ______________
102
nonprofit
discriminate
undivided
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103
Timeshare
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• Method of dividing up and selling a living unitat a vacation facility for specified lengths oftime each year
• Right-to-Use – contractual right to occupy aliving unit for 1-2 weeks a year for 20-40 years
• Fee Simple – right to fee ownership of 1-2weeks each year into perpetuity
104
Texas Timeshare Act
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• Real estate license required to market unit,unless otherwise exempt
• Must register property with _________
• Grants power to investigate all aspects of thedevelopment to TREC
• Right to cancel
– _______ days, which cannot be waived
– Required statement attached to contract (p. 126)
105
6
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Chapter 7
Contract Law
_______________________________________
106
Legally Enforceable Agreement
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• Contract – legally enforceable agreement to
do or not to do something
• Express Contract – parties declare intentions
either _________ or ________________
– Lease: lessor agrees to convey possession / use,
while lessee agrees to pay full rent timely
• __________ Contract - created by actions of
parties, not orally or in writing
– Taxi ride or dining in a restaurant
107
orally in writing
implied
Legally Enforceable Agreement
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g y g
• Bilateral - promise exchanged for a promise
– Buyer promises to pay agreed price
– Seller promises to deliver F&C title
• ______________ - promise exchanged for
performance
– “If you do X, then I will do Y”
• Forbearance – agreement NOT to do something
– Mortgagee agrees NOT to foreclose if
borrower meets all obligations
108
unilateral
Legal Effect of Contracts
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g
• Valid - meets all requirements of law
• Void - no legal effect, so not a contract andnot binding on any party
– Voidable - one party bound, but not the other
• NHL player with option in last year• Commercial tenant with option to renew
• ______________ – may have been valid at anearlier time, but now enforcement is barred
– Beyond Statute of Limitations
– Beyond expiration date of option
109
unenforceable contract
Contract Essentials
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1. Competent parties
2. Mutual agreement
3. Lawful objective
4. Consideration
5. In writing
110
1. Competent Parties
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p
•
Must be of legal age and _______________
• Power of Attorney – giving another party the
power to act on your behalf
• Corporations – person contracting on behalf
of corporation must have authority and be ______________________
111
sound mind
legal age and sound mind
2. Mutual Agreement
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g
• Must be agreement to the contract provisions
• Offeree accepts, rejects or ________________
• Offer and Acceptance – offeror makes offer toofferee, who accepts by communication
• Counter-Offer – offeree makes changes tooriginal offer and submits new offer
112
counter offers
Meeting of the Minds
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Offer
Acceptance Counteroffer
Offer
Acceptance
113
2. Mutual Agreement
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• Prohibits fraud, misrepresentation or mistake
– If so, contract is not valid
• Fraud – act intended _________, so as to haveother party convey something of value
• Innocent Misrepresentation – act NOTintended to deceive, but provided wronginformation (e.g., DART service canceled)
•
Mistake – ambiguity in negotiations (e.g.,wrong parcel) or mistake of fact (e.g., reducedparking spaces via condemnation)
114
to deceive other party
2. Mutual Agreement
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g
• Contractual Intent – all parties must haveintended to contract
• Duress – no party is forced, threatened or put
in an unfair advantage
– If so, offer can be ____________ by harmed party
115
voided
3-5. Lawful Objective;Consideration; In Writing
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Consideration; In Writing
• 3. Lawful Objective - Contract cannot call forperforming illegal act (e.g., paying rent with
weed)
• 4. Consideration – each party must provide _________ to prove a bargain has been made
• 5. In Writing – Statute of Fraud and UCC
require all RE transactions be __________and __________ by all parties
116
something of value
in writing
signed
Electronic Transactions
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• Effective March 1, 2001
• E-sign – electronic signature legal
• Texas requires writing under old Statute of
Frauds for severe transactions like _________
and ____________
117
foreclosure
eviction
Breach of Contract
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• Wronged party has six alternatives:
– Partial performance = accept partially fulfilled K – Unilateral Rescission = rescind K because other
party is not performing
– _________________= sue to force other party toperform
– Money damages = sue for $ if damages can bemonetized
–
Liquidated damages = amount agreed to inadvance, should one party breach K
– Mutual Rescission = parties agree to rescind K
118
specific performance
Statute of Limitations
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• Written contracts have ____ years
• Oral contracts have 2 years limit
119
4
Ch t 8
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Chapter 8
Real Estate Sales Contracts
_______________________________________
120
Earnest Money Contracts
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To be valid in Texas, must:
1. Be in writing
2. Be signed by all parties 3. Be evidence of intent to convey an interest
4. Have identifiable ______________________
5. Legally identify property to be conveyed
121
grantor and grantee
Texas real estate agent must use standard
f l t d b TREC f il bl
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forms promulgated by TREC - forms available
at www.TREC.state.tx.us
122
http://www.trec.state.tx.us/http://www.trec.state.tx.us/
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123
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124
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125
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126
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127
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128
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131
“Time is of the Essence”
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The time limits set by the contract must befaithfully observed or the contract is ________
by the non-defaulting party
Neither buyer nor seller should expect
extensions of time to fulfill their obligations
132
voidable
Federal Clauses
-
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• Amendatory Language Clause:
– Buyer securing ______________loan may terminatecontract if appraisal is significantly below agreed
purchase price
• Insulation Disclosure:
– FTC requires sellers / builders of ____________ to citethe characteristics of insulation installed
133
new houses
FIA or VA
Disclosures
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• Rollback taxes – contract selling vacant land
must disclose potential liability for __ years ofrollback taxes if there is an ag exemption,religious use or open space use
• Pipelines – residential seller must discloselocation of transportation pipelines
• Water districts – seller must disclose ifproperty is in MUD or other drainage area
134
5
Lead-Based Paint in HousingDisclosure
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Disclosure
• 75% of all housing built before 1978 containssome lead-based paint
• __________ law requires seller or landlord to:
– Disclose possibility of lead-based paint hazards
– provide available reports and the pamphlet,“Protect Your Family From Lead in Your Home”
135
Federal
Disclosures
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• Annexation – seller of property outside city limits
must disclose possibility of annexation
• Property Owner’s Association – HOA / POA mustprovide current copies of rules, bylaws, etc. to
seller within ____ days of written request
• Property Located in a Certificated Service Area ofUtility Service Provider – seller disclosure that
buyer may have special charges for water andsewer hook-ups
136
10
Installment Contracts
-
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• A.k.a., land contract, conditional sales
contract, contract for deed, agreement of sale• Buyer given right of use and possession, but
does not receive F&C title until all or most of
price is paid• Buyer is promised that title will be delivered
upon pay-off buyer holds “_________ title”
• Used when buyer cannot obtain a loan and/orhad insufficient capital
137
equitable
Installment Contracts
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• Favors _________ far more than _________:
– Upon default, seller avoids costly foreclosurebecause he already has title
– Seller keeps all payments and retakes possession
–Seller may not be able or willing to deliver title
• Texas provides some relief to defaulting buyer:
– Allowed to cure default within ______ days
–Default after 48 months or 40% + repayment seller must follow general foreclosure laws
138
sellers buyers
60
Deed and Installment
Contract Compared
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Deed Installment Contract
Buyer SellerDeed
Buyer Seller
Buyer SellerBuyer Seller
Buyer Seller
Deed
Contract Compared
139
Lease with Option to Buy
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• A.k.a., lease-purchase agreement
• Seller gives tenant option to buy at a statedprice for a stated time period
• Popular during sluggish __________ markets
• Part of monthly rent applied to purchase price – Caveat: only payment in excess of FMV can apply
to purchase price
– Caveat: tax consequences should be handled bytax professional, only
– Caveat: contract should be __________ to protectall parties
140
bad
recorded in a courthouse
Right of First Refusal
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• Owner gives _________ first right to purchase,should a third party want to buy RE
• Tenant can match offer or allow owner toaccept third party offer
• Caveat: often slows down the closing processbecause two unrelated parties are involved
141
tenant
IRC Sec. 1031 Exchange
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• Investors swap “like-kind” properties, ratherthan buy-sell
• Not available to owner-occupants
• Allows ___________ of capital gain tax on old
property, by reducing basis in new property• No capital gains tax until future property sells
• Sell outright when in lower marginal tax
bracket• “Boot” is assets used to balance the ________
142
deferral
equity
IRC Sec. 1031 Exchange Example • Chris has $100 000 lot F&C with $30 000 basis
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• Chris has $100,000 lot F&C with $30,000 basis
• Terry has $175,000 duplex with $50,000 assumable loan and$110,000 basis
• Exchange:
– Chris has $100,000 equity, while Terry has $___________ equity – Chris assumes $50,000 loan and gives Terry $25,000 cash (or other
asset) to balance equities
– Each receives title to new property
– CG deferred = Value of old property – basis in old property
– New Basis = Value of new property – CG deferred in old property
– Chris defers $70,000 in cap gains and has basis of $_________ induplex
– Terry defers $______ in cap gains and has basis of $35,000 in lot
143
125000
105000
65000
Chapter 9
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Licensing Laws
and Professional Affiliation
_______________________________________
144
Who Must be Licensed?A i d i h l
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• Any person or entity engaged in the real estate
business for another person or entity, and for afee, commission or other valuable consideration
• Engaged in the RE Business – Any person acting for another and for compensation
in the listing for sale, selling, buying or renting (orattempting to do so) an estate or interest in RE
– See 11 acts in Jacobus, 12th ed., pp. 194-195
• Any ____________ person engaging in the REbusiness as a broker or salesperson may be fined
and/or imprisoned – See 12 exemptions in Jacobus, 12th ed., p. 196
145
unlimited
License Types
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• Real Estate Broker
– a person who, for another person and for a fee,commission, or other valuable consideration (or with the
intention or in the expectation or on the promise of
receiving or collecting a fee, commission, or other valuable
consideration from another person) conducts RE brokerageactivities as defined by ___________
• Real Estate Salesperson
– a person associated with a Texas licensed RE broker for the
purposes of performing acts / transactions comprehendedby the definition of “RE broker" as defined by TRELA
146
TRELA
License Eligibility & Procedure
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• Texas resident at least 60 days & _____ years old
•
Broker must have at least ____ years active experienceas licensed salesperson
• Prove honesty, trustworthiness, integrity andcompetency (exams) to the TREC
• Provide fingerprints to obtain criminal history from DPSand FBI
• Conduct of licensees regulated by _________
• License automatically renews every two years
• Non-resident licensees cannot sell in TX, unless allnegotiations occur in licensee’s state
• No license reciprocity in TX for non-TX brokers
147
18
4
Texas Licensee Requirements
Before appl ing for a RE Salesperson License one m st
http://www.trec.state.tx.us/
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Before applying for a RE Salesperson License, one mustfirst furnish TREC satisfactory evidence of successfully
completing the following education (180 classroomhours):
• Principles of RE 1 & 2 courses (60 hours total)
• Law of Agency RE course (30 hours)
• Law of Contracts RE course (30 hours)
• RE Finance course (30 hours)
• Promulgated RE Contracts course (30 hours)
148
Texas Broker License (900 classroom hours)
http://www.trec.state.tx.us/http://www.trec.state.tx.us/
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To be eligible to apply for a Broker License:
• Not less than four (4) years active experience, plus
• 270 classroom hours (18 semester hours) of core
real estate courses, plus
• An additional 630 classroom hours (42 semesterhours) in “related courses” acceptable to TREC
• Four-year college degree qualifies for the “relatedcourses”
149
Continuing Education
http://www.trec.state.tx.us/http://www.trec.state.tx.us/http://www.trec.state.tx.us/http://www.trec.state.tx.us/
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• Complete at least ___ classroom hours of MCE
courses approved by TREC taken during the
two-year term of the current license
• Texas has most stringent licensing
requirements in U.S.
– See Jacobus, 12th ed., Table 9.1, pp. 199-200
150
15
TREC
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• Administers TRELA provisions
• ________ members appointed by Governor
– Hold staggered ______ year terms
– 3 members’ terms expire Jan. 31 of each odd
numbered year
– 6 members must have been brokers for at least
______ years
–
Other 3 members cannot be engaged in REbusiness, so as to represent general public
151
5
9
6
Inspector License Required
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• Issued by TREC for two years
• Professional inspector – person licensed,trained and qualified to perform a REinspection and who accepts employment for
the purpose of performing a RE inspection fora buyer or seller of real property
• ______________inspector - person under theindirect supervision of a professional inspectorwho is held to the same standards
• See Jacobus, 12th ed., p. 205 for six conflicts
152
real estate
License Suspension & Revocation
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•
TREC may suspend or _______ a license or take otherdisciplinary action authorized by TRELA at any time,when it has been determined that the licensee …
•
See Jacobus, 12th ed., pp. 207-208 for 10 reasonswhile NOT performing an act as licensee
• See Jacobus, 12th ed., pp. 208-210 for 33 reasons
while performing an act as licensee
153
revoke
Bond / Recovery Trust Account
Li h b d h if h i
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• Licensee purchases bond that may pay if he is
found liable for loss• Recovery Trust Account may pay damages if a
__________ is obtained against a licensee and
there are no other funds recoverable fromlicensee
– Limits are $50,000 per transaction and $________
aggregate against any one licensee
– Funded by a percentage of licensing fee ($10)
154
judgement
100000
Broker Affiliation
All l b d b
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• All salespersons must be sponsored by ______
• Training – complement, enhance, andencourage your personal development
• Compensation – usually a percentage of
earned commissions – Function of time with broker and _____________
• Support – what services they offer licensees
• Franchised offices – most licensees sponsoredby large franchisors (e.g., REMAX, KW, Ebby)
155
broker
performance
Independent Contractor
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• Licensee is _______________
• Has written contract stating I.C. status
• Paid only if a sale produces a commission
• Responsible for ____________and social security
• Caveat: No paid vacation or holidays, no salary,no benefits, no …
156
self employed
taxes
REALTOR®
• Registered trade name
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• Registered trade name
• Promotes fair dealing and govt. lobbying• Member of __________
• Not synonymous with “real estate agent”
• Code of Ethics (17 articles) – See Jacobus, 12th ed., pp. 219-226
• Must be member of NAR:
–
to be in _________ – if your broker is a member of NAR
– to be a member of TxAR
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MLS
NAR
Texas Association of REALTORS®
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• Represents __________ members statewide
involved in all aspects of RE industry
• www.TexasRealtors.com
• 1115 San Jacinto Blvd., Ste. 200Austin, TX 78701-1906
• 1-800-873-9155
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80,000
Chapter 10
http://www.texasrealtors.com/http://www.texasrealtors.com/
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The Principal-Broker Relationship:
Employment
_______________________________________
159
Listing Agreement
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• A written employment contract between the
owner/seller and _______________
• Creates special agency relationship between
broker (agent) and seller (principal)
• Agent is authorized to represent principal’s RE
for sale, solicit offers and submit offers
• Amount of compensation the owner agrees to
pay the broker is _______________
160
the broker
negotiable
Listing Types
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1. Exclusive right to sell
2. Exclusive agency
3. Open listing
4. Net listing
161
1. Exclusive Right to Sell
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• One broker is appointed as sole agent andgiven exclusive right to represent the RE
• The listing broker is entitled to a commission,no matter who sells the property during the
listing period (even if _________ finds buyer)
• Most common type of listing
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seller
2. Exclusive Agency
• One broker is appointed as sole agent and given
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• One broker is appointed as sole agent and given
exclusive right to represent the RE
• Similar to the exclusive right to sell, except theowner may sell the property himself during the
listing period and not owe a fee to the broker
• Listing broker is paid, even if another broker sellsthe property
• Broker may be _____ enthusiastic under this formof listing
163
less
3. Open Listing
• Seller retains right to employ brokersany number
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Seller retains right to employ __________ brokers
• There are no exclusive rights
• Whoever sells the property will earn the fee
• If seller finds buyer, no fee is due a broker (unlessbroker is _______________)
• Brokers are reluctant to develop a sales effort
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any number
procuring cause
4. Net Listing
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• Owner states price he wants to NET for the
property and agrees to pay the broker theexcess as commission
• Illegal in many states (_________ in TX)
• Concern that broker violates ________ duty to
client to obtain highest price possible
165
legal
feduciary
Buyer Representation
• Exclusive Authority to Purchase agreement
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• Exclusive Authority to Purchase – agreement
where broker works for buyer as his client
• A.k.a., a “___________ agreement”
• Primary responsibility is to buyer as principal
• Buyer owes commission to buyer-broker!
• Seller is just a ___________ owed honest and fairdealing
166
finders
customer
MLS
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• Service among Realtor® members to pool
listings
• Offer compensation to other member-brokers
who sell your listing
• Increases ______________ for listed property
• MLS data on listings and sales available tomembers
167
exposure
Broker Compensation
• Specified in listing or finder’s agreement
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• Specified in listing or finder s agreement
• Commission earned when “ready, willing andable buyer” is prepared to buy on seller’sterms and deed is _____________
•
Entitled to commission if three events occur: – Procuring cause of sale - one whose efforts
originated procurement of sale (up to 24 months)
– Licensed by TREC
– Employed by seller (listing agreement) or buyer(finder’s agreement)
168
delivered
TRELA Requirements for RE Fee
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• Must be licensed RE broker
• Must have written agreement
• Agreement must be signed by parties
• __________ must advise purchasers in writingthey should get abstract or title policy
169
licensees
Terminating the Listing Contract
• Fulfillment of purpose
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• Fulfillment of purpose
• _____________ of listing period
• Breach of contract (abandonment)
• Mutual agreement
• _____ or legal incompetence of agent or principal
• Destruction or change in property by outsideforces 170
expiration
death
Bargain Brokers
• Flat Fee Broker charge low fixed fee and offer
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• Flat-Fee Broker: charge low fixed fee and offer
select services, especially MLS posting
• Discount Broker: list / sell property for ______
than standard rate (e.g., 4% vs. 6%)
• Variable Rate: _________ broker discounts his
commission rate, but pays full rate to selling
broker
171
less
listing
Chapter 11
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The Principal-Broker Relationship: Agency _______________________________________
172
Brokerage
• Business of bringing sellers and buyers (or
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• Business of bringing sellers and buyers (or
landlords and tenants) together• Broker – person licensed to buy, sell, exchange
or lease RE
• Salesperson – ________ who works on behalfof and licensed to represent broker
• Co-operating Broker – works on behalf of
listing broker to procure buyer• Who employs broker? ____________
173
licensee
principal
Law of Agency
• Created when one party delegates to another the
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Created when one party delegates to another theright to act on his behalf (e.g., listing agreement)
– ___________ agency – empowered to represent theprincipal in a range of matters
– Special agency – empowers the agent to perform onlyspecific acts and no others
• Principal = owner = client• Agent = Broker who represents interest of
____________ (seller) in dealing with third party(buyer)
• Subagent = licensee authorized by principal toassist agent
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general
principal
Responsibilities to Customers
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• Owed honest and _______________
• Reasonable care and skill in performance of
agent’s duties
• Disclosure of all material facts affecting value
or desirability of RE of which buyer is _______
175
unaware
good business practice
Traditional Agency Theory
• All licensees are agent / subagent of principal
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• All licensees are agent / subagent of principal
• Seller signs listing agreement with listing broker
• Cooperating broker is employed by listing brokerthrough ________________
• So, ……… all licensees represent the seller
• No licensee represents the buyer!
176
subagency
Traditional Agency
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Listing Broker Selling Broker
Listing Agent Selling Agent
Seller Buyer
177
Fiduciary Duty
• Fiduciary = one placed in position of trust andfid
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confidence
• Care - Competence and expertise – Liable for any loss due to negligence or ________________
• Obedience – Follow lawful instructions• Must act in good faith, but not follow unlawful instruction
•
Accounting - For funds received• Immediately deposit all funds in trust account
• Illegal to _________________ with personal funds
178
incompetence
comingle
Fiduciary Duty
Di l F ll i f i i l
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• Disclosure - Fully inform principal
• Duty of _________: Liable for facts broker knows orshould have known, but did not reveal
• Loyalty - Principal’s interest comes first
• Cannot disclose principal’s information to others
without permission
• Broker must act without ________________
179
discovery
self interest
Buyer Brokerage Agency
hi b k hi b
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• Buyer hires broker to represent his best
interest as fiduciary
• Common in commercial and industrial RE
• Common since early 1990s in residential RE
• Buyer signs “________ agreement” with agent
180
finders
Buyer Brokerage Agency
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Listing Broker Selling Broker
Listing Agent Selling Agent
Seller Buyer
181
Dual Agency
• Agent represents both buyer and seller at same time
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• Agent represents both buyer and seller at same time
• Subagent generally is selling own listing
• Impossible to offer full fiduciary duties to both parties – Obtain highest price for seller
– Obtain lowest price for buyer
• _____________ in Texas (i.e., TREC) and many other states
• Replaced with Intermediation in Texas
• Prohibited without mutual knowledge and consent
182
illegal
Dual Agency
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Listing Broker =
Selling Broker
Selling Broker
Listing Agent =Selling Agent
Selling Agent
Seller Buyer
183
Intermediation Agency
• Broker is middleman representing nobody
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Broker is middleman representing ____________
• Formerly called the Middleman Theory• Broker only brings parties together without
agency
•
Must treat all parties honestly and fairly• Cannot disclose to seller that buyer will pay a
___________ price, unless so instructed
• Cannot disclose to buyer that seller will accept a
lower price, unless so instructed• Broker wants 100% fee for < 100% fiduciary duty!
184
nobody
higher
Intermediation Agency
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Listing Broker
Listing Broker’sAgent #1
Listing Broker’sAgent #2
Seller Buyer
185
Establishing Authority
• Written contractual agreement
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• Written – contractual agreement
• Implied – custom in the industry – Right to advertise or show property at night
• Ostensible – conduct of the parties
–
Showing with principal’s permission, but no listingagreement
• _______________ – agency established after thefact
– Principal accepting offer even with no listingagreement
186
ratification
Said Wrongly
Disclosure Liability
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Said withoutchecking the facts
Not said andfacts not checked
g yto Mislead
Unsaid in Orderto Mislead
A Facts BrokerKnows
BFacts Broker
Does not know
187
Caveats
• Commingling
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Commingling
• Puffing
• Lead base paint disclosure on homes built pre-1978
• Seller’s Disclosure of Property Conditions (Fig. 11.1)
•Home Inspections
188
Agency Disclosure
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•
Consumers must be informed whom the agentrepresents, so there is a clear understanding
of the agent’s role in a transaction
• Many states require disclosure forms
189
Disclosure of representation
• A licensee under this Act who represents a party in a proposed real estate
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transaction shall disclose that representation at the time of the licensee's
first contact with:
• another party to the transaction
• another licensee who represents another party to the transaction
• The disclosure required under Subsection (a) of this section may be made
orally or in writing
• A licensee who represents a party in a real estate transaction acts as that
party's agent
• Except as provided by Subsection (e) of this section, a licensee shall
furnish to a party in a real estate transaction at the time of the first face-to-face meeting with the party the required written statement
190
IF THE BROKER REPRESENTS THE OWNER:
• The broker becomes the owner's agent by entering into anagreement with the owner usually through a written listing
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agreement with the owner, usually through a written listing
agreement, or by agreeing to act as a subagent by acceptingan offer of subagency from the listing broker.
• A subagent may work in a different real estate office. A listing
broker or subagent can assist the buyer, but does notrepresent the buyer and must place the interests of the ________________ first.
• The buyer should not tell the owner's agent anything the
buyer would not want the owner to know because an owner'sagent must disclose to the owner any material informationknown to the agent.
191
Seller
IF THE BROKER REPRESENTS THE BUYER:
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• The broker becomes the buyer's agent by entering intoan agreement to represent the buyer, usually through awritten buyer representation agreement
• A buyer's agent can assist the owner, but does not
represent the owner and must place the interests of the __________ first
• The owner should not tell a buyer's agent anything theowner would not want the buyer to know because a
buyer's agent must disclose to the buyer any materialinformation known to the agent
192
buyer
Intermediary• The broker must obtain the written consent of each party to the transaction to
act as an intermediary. The written consent must state who will pay the brokerd i i b ld d li d i f h h b k ' bli i
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and, in conspicuous bold or underlined print, set forth the broker's obligations
as an intermediary. The broker is required to treat each party honestly and fairlyand to comply with TRELA. A broker who acts as intermediary in a transaction:
1. Shall treat all parties honestly
2. May not disclose that the owner will accept a price less than the asking
price unless authorized in writing to do so by the owner
3. May not disclose that the buyer will pay a price greater than the pricesubmitted in a written offer unless authorized in writing to do so by thebuyer
4. May not disclose any confidential information or any information that aparty specifically instructs the broker in writing not to disclose unlessauthorized in writing to disclose the information or required to do so byTRELA or a court order or if the information materially relates to thecondition of the property
193
If you have a broker represent you:
• Enter into a written agreement with the broker that
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clearly establishes the broker's obligations and yourobligations. The agreement should state how and bywhom the broker will be paid.
• You have the right to choose the type of
representation, if any, you wish to receive. Yourpayment of a fee to a broker does not necessarilyestablish that the broker represents you.
• If you have any questions regarding the duties and
responsibilities of the broker, you should resolvethose questions before proceeding.
194
Chapter 12
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Fair Housing, ADA, Equal Credit,
and Community Reinvestment
_______________________________________
195
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RaceColor
Religion
GenderNational Origin
Handicap
Familial Status
196
Protected Classes
• Race
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• Race
• Color
• Religion
• National origin
• Sex
Fair Housing
1. Family status
2. Handicap
Equal Credit
Opportunity Act
1. Public assistance2. Age
3. Marital status
197
Federal Government Involvement
• Many states found it politically difficult to
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protect everyone’s rights
• Long history of _________ was too difficult to
overcome at state and local levels
• Protected Classes (10): Illegal to discriminatein housing based on race, color, creed,national origin, alienage, sex, marital status,age, familial status and handicap
198
prejudice
Constitutional Protection
• Most real property rights originate from U S
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• Most real property rights originate from U.S.
Constitution, primarily 5th Amendment
• Courts have protected ___ personal attributes
that cannot be changed:
– Race, color, national origin and alienage
– Religion also protected because all entitled topractice religion of his choice
199
Constitutional Protection
• No prohibition in Constitution based on sex, age
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No prohibition in Constitution based on sex, age
or marital status
• 14th Amendment – prohibits any state from
depriving any person of life, liberty or propertywithout ________________
• 13th Amendment – prohibits slavery and
involuntary servitude; discrimination creates a“badge of slavery”
200
due process
Fair Housing Laws
• Civil Rights Act of 1866: all U.S. citizens have
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same rights as white citizens to inherit, purchase,lease, sell, hold and convey RE
• Fair Housing Law of 1968: illegal to discriminate
in housing on the basis of the protected classes
• Steering: illegal to direct home seekers to
particular ______________ based on protected
classes
• Blockbusting: illegal to induce _____________in aneighborhood for financial gain
201
neighborhood
panicked selling
Housing Covered by 1968 Fair Housing Law
A. Multi-Family dwelling with 5+ units or 1-4 units
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y g
when non-owner occupiedB. SFD not owned by an individual (e.g., corp.,
partnership)
C. SFD owned by an individual who:1. owns 4+ such houses or sells at least 2 non-
owner occupied houses in last _____ years
2. bought a house (a) using RE licensee and/or(b) with discriminatory _______________ used
202
2
discriminatory advertising
Acts Exempt from 1968 Fair Housing Law
A. Housing for elderly may prohibit __________children
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B. Lodging for private club membersC. Property of religious organizations
D. Rental of rooms in owner-occupied houses of
2-4 unitsE. Sale/Rental of SFD owned by individual with
< 3 such houses, if (a) no RE licensee wasused, (b) no discriminatory ads used, and (c)0-1 non-owner occupied house sold in last 2years
203
Fair Housing Enforcement
• File complaint with (a) HUD, (b) U.S. District
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Court, state court or local court, (c) U.S. _________________
• Burden of proof on filer of complaint
• Remedies include (a) injunction stopping saleor rental of RE, (b) money damages, (c)
punitive damages, and (d) _______________
• Testers – pose as buyers or tenants to ensurelicensee is following Fair Housing laws
204
attorney general
Texas Fair Housing Law
• Passed in 1989 to parallel Federal Fair Housing
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• Allows for investigating discriminatory housing• Provides for ______________ penalties
• Commission on Human Rights investigates
complaints if: – Lodged in writing
– Under oath
– Using CHR’s forms – Filed within _________of alleged act
205
1 year
criminal
Americans with Disabilities Act
• ADA enacted July 1992
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• Deals with commercial property, not residential, in:
– Public accommodations
– State and local government offices
–
Transportation – Telecommunication
– _____________________
• Provides access requirements and prohibits discrimination
against people with disabilities
• What about tall, overweight, …?
206
employment
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Community Reinvestment Act