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Four FActors that impact value
- utility
- scarcity
- demand
- transferability
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market approach to appriasial
value based on the sales an purchases of similar properties
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cost approach
value based on how much it would cost to build a comparable property
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Income approach
value based on how much income can be generated from the property
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Levels of certification for appraisal
- trainnee
- licensed residential
- certified residential
- certified general
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What two documents create a mortgage
- 1. Promissory Note: contract to repay the money borrowed
- 2. Mortage: Real property is hypothecated as collateral to promissory note
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Usury
When lener charges in excess of a state's maximum interest rate
higher of 10% or 5% over CA Fed Reserve
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Penalities for Usurious rates
1.
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Lien Theory
- 1. Mortgage does not ransfer title to lender
- 2. Lender has lien on property
- 3. Lender must foreclose to take possesion
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Title Theory
- 1. Mortgage TRANSFERS TITLE from borrower to lender
- 2. Lender retains title for duration of mortgage
borrower has right of posseion until default
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Types of a Mortage
- 1. Apply for loan
- 2. gather necessary docs
- 3. underwriting
- 4. approval/enial
- 5. Lender may sell loan on 2nd market
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Government Backed Loan
Gov. guarantees loan balance in event of default
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Wrap ARound Mortgage
Seller keeps existing mortgage on property and extends to the buyer a junior mortgage that wraps around an dexists in addition to senior
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Piggyback Mortgage
Borrower takes out two motgages for the same property
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Interest only
borrower pays interest only for set period
then payment amount increase to reduce principle
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Wrap-Around Mortgage 2.0
Seller has orginal loan w/lender
Seller creates junior loan w/ buyer
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Taking Subject-To a Mortgage
Buyer purchases home, subject to existing mortgage
- 1. buyer takes title
- 2. seller liable for payment
- 3. Lender can only enforce payment aginst the seller
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Assuming Existing Mortgage
- 1. Buyer assumes the seller mortgage
- 2. Buyer and Seller BOTH liable for debt
- 3. Seller can avoid liability by having lender release them
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Deeds of Trust
Benefiricary (lener) Trustor (borrower) Trustee (financial Institution)
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Regulation Z
1. Requires Disclosures to consumer about terms and costs of loans
Broker and lenders and brokers are subject to it
Not apply to: business transaction, ag, organizational credit transactions, commercial transactions
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REquired Disclosures of Reg Z
- 1. APR
- 2. Finance charge
- 3. Amount financed
- 4. Payment terms
- 5. Right of rescission (right to cancel second mort. or home equity line within 3 days of closing) (Does NOT apply to first mortgage)
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Failure to comply with Reg Z means
Borrower has 3 yr right of recession on ALL mortgage types
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Trigger Terms in Lender ads that require extra disclosures
- 1. amount or number of monthly payment
- 2. amount of down payment
- 3. length of loan
- 4. finance chargers
Must disclose amount for all trigger terms and the APR
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Installment Land Sale Contract
- 1. Seller provides financing to buyer
- 2. Seller retains title unitl debt is paid
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Requirements for Valid Deed
- 1. in Writing
- 2.Grantor/grantee clearly identifed
- 3. granot w/ legal capacity
- 4. property described
- 5. express intent to immediately covey interest to grantee
- 6. type of interest and rights given to grantee
- 7. acknowledgement
- 8. delievery and acceptance
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Indentifying Grantor and Grantee
- proper spelling required
- list aliases
- percentages of ownership must be listed
- give status of grantee (married,unmarried)
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For legal capacity, what must grantors understand
- 1. Legal significance of deed conveyance
- 2. to whom property is conveyed
- 3. nature and value of property
* Grantee does not have to have legal capacity
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What must acknowledgment clause include
- date
- name of notary
- person signin is same as identified in deed
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Constructive delivery
Delivering grant through escrow
Grantee releases all control of deed
Grantor intends to relinquish al control of deed
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3 way to create a presumption of delievery
- 1. actual delivery
- 2. Deed acknowledged by grantor before a notary
- 3. Deed is recorded
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General Warranty Deed
Grantor provides 6 warranties to grantee
- 3 present:
- seisin
- right to convey
- free from encumbrances
- 3 future:
- covenant of warranty
- quiet enjoyment
- further assurances
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Special Warranty Deed
Same warranties as Warranty Deed except
Warranties are limited to only the period of time grantor owned the property
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Grant Deed
Has implied warranties:
Granto has not previously conveyed property to someone other than grantee
Property is free of undisclosed encumbrances made by GRANTOR
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Deed of Bargain and Sale
Grantor IMPLIES that he has title to property
Grantor make no other covenant to granteee
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Quitclaim Deed
- 1. No warranties about tie
- 2. Convey any rights grantor MAY HAVE
- 3. no promoise of ACUTAL right or interest
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When is quitclaim used
- 1. states with power title insurance companies
- 2. gifting real property
- 3. resolve questional title
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Judicial Trustee Deeds
Judicial: result of the court ; NO warranties
Trustee: result of foreclosing: Few, if any, warranties
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Priority of Title Methods
- 1. pure race
- 2. notice
- 3. race.notice
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Pure Race System
First to record take title
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Notice Statue
LAST BFP (Purchaser w/o notice) purchaser keeps title
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Race/Notice System
FIRST BFP that RECORDS (CA uses such system)
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Marketable Titel
Title free form any liens or encumbrances (except ones buyer is aware of and accepts)
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Title must be marketable at....
closing
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Methods of Providing Marketable Title
- 1. Abstract of title w/ attorney's opinion
- 2. purchase title insurance
- 3. Torrens system for title registration
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Abstract of title
- 1. opinon tracing chaing of title
- NOT a guarantee but an opinon
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Title INsurance
Protects only insured buyer name in policy for defects AT TIME of CLOSING
Subsequent purchasers are not given protection
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ALTA
Created Form most widely used by insurers
- Protects Against:
- 1. title held by another perons
- 2. encumbrances
- 3. unmarketable
- 4. no right of access to property (ex. landlocked)
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Title INsurace exclused
- 1. boundary disputes
- 2. nonrecorded easements
- 3. zoning restrictions
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Torrens System
Use certification and deed to identify ownership
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Types of closing
in Person
- escrow (Western states and commercial transaction)
- Escrow agent hold documents in trust unitl conditions are met
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RESPA
1. Consumer info about costs of mortgage and closing
2. Applies to:
mortgage loans on 1-4 unit residential property (1st and 2nd mort., refinance, lines of credit)
- 3. Does not apply to :
- business, commercial loans, or construction loans
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Disclosures Required for RESPA
1. Special Info Bookelet within 3 days of loan application
2. Good FAith Estimate: summary of chares expected as closing (tolerance percentages that final costs can not exceed GFE)
3. Whether it intends to service, assign, sell or transfer the loan
4. HUD 1 statement: Final summary of costs
5. Escrow Statement: est. taxes, insruace, oand other charges incurred in first 12 months of loan
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RESPA Prohibitions
- 1. Kickbacks of any type
- 2. referals by someonw who owns a 1 percent or greater interest in company unless disclosed that:
- referral has such interest
- est. of charges
- use of that provider is not mandatory
- 3. Cannot require the use of specific title company
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