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Level 31

Real Estate: Various VII

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A shorter version of a sales agreement, which upon the seller's acceptance, will be given to an attorney to create a more formal agreement. Also known as an "offer to purchase".
Conditions that must be met before a contract is binding. The most common conditions are the buyer's ability to obtain suitable financing, a satisfactory property inspection, and the ability to obtain adequate insurance on the property.
Multiple Listing Service
An organization of member brokers that agree to share information about their listings to procure a ready, willing, and able buyer more quickly. Members also agree to split commissions between the listing and selling brokers upon sale of the property.
Exculpatory Clauses
Items that excuse a landlord for any negligence in maintaining a leased property. These items are illegal in Massachusetts.
Foreclosure Act of 2009
A law that states tenets can remain in a property that has been foreclosed upon for the remainder of their lease or 90 days, whichever is longer.
Forces outside of a property that affect its value. These forces can be physical, political, economic, or social in nature.
Salvage Value
The worth of an asset after it has been depreciated.
Ad Valorem Taxes
Taxes that are based upon the value of the specific property being taxed.
6D Certificate
If the sale property is a condominium, this document states the amount the seller owes in condominium fees and is used to establish if the unit is free of association fee liens. In Massachusetts, this document is required at the time of closing.
Title 5
An inspection of private, on-site sewage disposal systems, often required in title transfers. Correction of a defective septic system may be required prior to a property being eligible for some mortgages.
A listing agent is considered to have performed this act if they have invested neither time nor money to market a property.
Special Performance Suit
A transfer of title ordered by a court to transfer property to a buyer as promised in a previous contract. It may be done to satisfy a debt.
A legal process in which a court determines who will inherit a decedent's property and what the estate's assets are.
Statute of Descent and Distribution
A set of laws that determine inheritance for a person that dies intestate.
Grant Deed
A type of deed that implies that the grantor has the right to convey the property and that the grantor has not encumbered the property except as noted in the deed document. *This form is not in use in Massachusetts.*
Covenant Against Encumbrances
This warranty states that the grantor of a property guarantees the property is free from liens and encumbrances that are not specifically included in the deed. It is included in a general warranty deed.
Covenant of Warranty Forever
A grantor's guarantee that if the title to the property being conveyed ever fails, they will compensate the grantee. This warranty is included in a general warranty deed.
Covenant of Further Assurance
A grantor's promise to obtain and deliver any instrument necessary to make a title good. This warranty is included in a general warranty deed.
The mixing of a clients' funds with business operating funds. This is an illegal practice in Massachusetts that can result in revocation of an agent's license.
The substitution of one creditor for another, in which the new party receives the legal claims and rights of the original party. This is usually done so a title company can acquire the rights of an injured party to sue and recover any claims the insurers may have paid.
Subprime Loan
A note given to a borrower with less than perfect credit. It usually has a higher interest rate and may require a larger down payment or shorter term.
Abstract of Judgement
The written determination of a judge or jury as a result of a judgement lien. It has no effect on the owner's property until it is recorded, but still creates a cloud on the title.
Writ of Execution
A court order that authorizes an officer of the court to seize and sell the debtor's property in order to satisfy a judgement.
Execution Lien
An involuntary lien that is issued by court order at the same time as a writ of execution, and ends when the property is sold. It is issued to satisfy a money judgement.
Writ of Attachment
The process by which a court takes custody of a piece of land until the outcome of a court suit is determined. It is usually placed on an unencumbered property to prevent a quick sale by the owner, but does not affect homestead exemptions or joint tenets' interests.
Surety Bond
Insurance purchased to cover the loss of monies placed in trusts or escrow accounts. Used by property managers and escrow agents. Can be used to cover a deposit made by a creditor to cover any losses to the debtor that result if a creditor's writ of attachment is found to be invalid.
Covenant of Quiet Possession
A landlord's guarantee that a tenet will not be evicted during the duration of their lease by anyone with a superior claim. This is a warranty is implied in a lease contract.
Principals of Value
Economic elements that affect the value of real estate, including: highest and best use, substitution, supply & demand, balance, conformity, regression, progression, anticipation, plottage, increasing returns, decreasing returns, contribution, completion, and change.
A value principal that states the greatest value of a property will occur when the type and size of the improvements are proportional to each other and to the land.
Increasing Returns
The principal of value that occurs if money spent on an improvement produces an increase in the property's income or value.
Decreasing Returns
The principal of value that occurs if money spent on an improvement does not produce a proportionate increase in the property's income or value. Remodeling a home to standards much higher than neighboring properties will result in this happening.
Valuation Methods
A process to estimate the value of a property in one of three basic systems: sales comparison approach, cost approach, and the income approach.
External Obsolescence
A form of depreciation that results from negative factors outside of the subject property that are incurable because they are beyond the property owner's control. Ex: noisy airports, nearby landfills, pollution, etc. This can also be the result of deteriorating local economics.
Undercover volunteers that visit real estate offices to see whether consumers and clients are being treated equally and being offered a free choice of properties within a given price range without regard to any of the protected classes (ie race, nationality, familial status, gender, etc.).
Protected Classes
Groups of people against whom discrimination is illegal if it is based upon any of the following characteristics: race, color, religion, national origin, sex, disability or handicap, or familial status (per the Federal Fair Housing Act of 1968). The Massachusetts Fair Housing Act (MGL c 151B) adds the following: number of children, age, ancestry, veterans or members of the armed forces, marital status, use of public assistance or rental assistance, genetic information, and any legal sexual orientation.
Masschusetts Fair Housing Act
This law adds the following protected classes to the ones already listed in the Federal Fair Housing Act of 1968: number of children, age, ancestry, veterans or members of the armed forces, marital status, use of public assistance or rental assistance, genetic information, and any legal sexual orientation. A part of the Massachusetts General Laws, Chapter 151B (MGL c 151B).
Massachusetts Commission Against Discrimination
This state agency investigates fair housing complaints and reports directly to the governor's office. If probable cause for the complaint is determined, the accused violator is sent a conciliation agreement ordering him or her to comply with the law, make a specific restitution (up to $2,000 in damages), or take other affirmative action. This agency has the right to suspend and revoke an agent's license.
Legally protected property consisting of waterways around which the Department of Environmental Protection may draw nonencroachment lines to prevent harmful or destructive practices such as dredging, filling, or polluting. Acts that protect these areas include the Coastal Zone Management Act, Ocean Sanctuaries Act, Scenic Rivers Act, Wetlands Restriction Act, and the Clean Waters Act.
Lead-Based Paint
A substance that is hazardous to a homeowner's health and that was banned in 1978. It is still present in older homes, and its known presence must legally be reported to buyers prior to sale. Buyers should also be encouraged to have the home tested if was built prior to 1978. This substance is particularly hazardous to children under the age of 6.
Carbon Monoxide
A colorless, odorless gas produced by water heaters, furnaces, space heaters, and wood stoves. It is a natural result of fuel combustion, but can be hazardous or fatal in areas that are not properly ventilated. MA law states that all residential dwellings containing fuel-burning equipment or that have enclosed parking must have detectors in place to check for this gas.
Unities of Ownership
The name for the four criteria that must be met in order for a property to be considered as held in a valid joint tenancy: unity of time, title, interest, and possession. These criteria stipulate that all parties must have acquired the property at the same time and by the same instrument of conveyance, and they must all hold equal, undivided ownership interests.
A formal court decision regarding the respective rights and claims of involved parties in an action or suit. After it has been entered and recorded with the count recorder, it usually becomes a general lien on the property of the defendant.
Market Rent
The amount of income a leaseable property would command in a fully informed competitive marketplace, based upon the going rate for leased spaces in the area.
Megan's Law
A federal law that requires individuals convicted of certain sex offenses (especially those involving minors) to register their home addresses so that community members may protect themselves and their children from child molesters.
A document that was not part of the original contract. It may contain additional contract terms, and may be known as a rider.
An action taken by a taxing body that authorizes the expenditure of funds and provides for the sources of the money. It generally involves the adoption of an ordinance or the passage of a law setting forth the specifics of the proposed taxation.
Building Code
A set of ordinances that specifies minimum standards of construction for buildings in order to protect public health and safety.
Banker's Year
Statutory period that contains 12 months, with 30 days in each month, for a total of 360 days.
VA-Insured Loan
A loan made to a veteran by an approved lending institution and guaranteed by the Department of Veterans Affairs. These loans usually require little to no down-payment, and may or may not be assumable by a 3rd party.
FHA-Insured Loan
A loan made by an approved lending association and insured against borrower default by the Federal Housing Authority. Their most popular program is the 203(b), and all loans can be prepaid without penalty.
Grantor's Signature
Required to make a document legal. It can be done as a mark "X" if done in the presence of two witnesses. Some applications may require that it is acknowledged by a public official, such as a notary.
Power of Attorney
A specific written document assigning an attorney-in-fact authority to execute and sign legal documents on behalf of a grantor. This document is usually recorded with the county.
Torrens System
A method of evidencing title by registration with the proper public authority (generally called the registrar). A similar system is used in Massachusetts.
Suit to Quiet Title
A legal action in which a court is asked to determine who actually owns a parcel of land and what claims or liens against the property are valid. Sometimes done to remove clouds on a title.
Deed in Trust
An instrument to convey real estate to a trustee, usually to establish a land trust or living trust. It includes full power to sell, mortgage, and subdivide. A beneficiary controls the trustee's use of these powers under the provisions of the trust agreement. *This type of deed is not in use in Massachusetts.*
Failure to meet an obligation when due; the nonperformance of a duty. A term often used to describe a borrower's loan status when they have stopped making payments.
Density Zoning
Local ordinances that restrict the maximum number of houses per acre that may be built within a particular area (generally in a subdivision).
Right of Survivorship
Automatic transference of a deceased's interests in a property to the remaining tenets, without the need for probate. It is a characteristic of joint tenancy.
Testamentary Trust
A trust created after a person's death, as part of a will.
A property containing multiple units, where each unit is owned with a fee simple title, and each owner has a shared of common areas as tenets in common. The units can be used for either residences, office spaces, or retail spaces, as long as all units have the same use type.
Horizontal Property Acts
Another name for condominium laws that have been enacted in every state. The laws outline the elements of condominium ownership.
The process of placing documents into the public record. All records must be filed in the same county as the property, must be in English, and must be drawn and executed in accordance with local statutes.
Properties that are owned by multiple owners that each have an undivided interest and right to use the facility for a fixed or variable period. Ownership can be fee simple or right-to-use.
Evidence of Title
Documented proof that the grantor is the owner of a property and has good title. There are four acceptable documents: abstract of title and lawyer's opinion, title insurance policies, a Torrens certificate, or a certificate of title.
Standard Coverage
A type of title insurance policy that protects the insured against defects found in the public record, forged documents, incompetent grantors, incorrect marital statements, and improperly delivered deeds. Does not cover any defects or liens listed in the policy, defects known by the buyer, or changes in land use resulting from rezoning.
Extended Coverage
Title insurance policy that covers everything under a standard policy, with the additional coverage against defects found through the process of property inspection, unrecorded rights of persons in possession of the property, defects found through examination of a survey, and unrecorded liens not known to the policy holder.
Recovery Fund
A state established account created to protect consumers who have lost money in a transaction due to the negligence or illegal activities of a licensed real estate agent.
Agent's Fiduciary Responsibilities
A term encompassing the obligations of a real estate agent to their principal, which are Care, Obedience, Accounting, Loyalty, and Disclosure (remember COALD).
Stigmatized Properties
Properties that are said to be psychologically impacted by some event, such as a murder, rape, ghosts, or contamination. Disclosure is recommended by not required in most states (including MA).
Latent Defects
Problems with a property that are known only by the seller and that are not discoverable with an ordinary inspection. Disclosure by the seller is mandatory. Ex: basements that flood during rainstorms, termite damage, etc.
Patent Defects
Problems with a property that are readily seen and understood by the buyer or an inspector. Ex: visible water stains, broken stairs, stained carpeting, etc.
Ready, Willing, and Able Buyer
A person who is prepared to buy on the seller's terms and is ready to take positive steps towards finalization of the transaction.
Parol Evidence
Oral agreements, promises, and inducements that are made by parties prior to entering into a written contract. Such statements may not be used in court to dispute or contradict the written contract.
Nominal Damages
A small court-ordered monetary amount (usually $1) given to an injured party to acknowledge that a wrong was committed, but no serious damage was documented.
Punitive Damages
A court-ordered monetary payment to an injured party that is in excess of actual damages, usually meant to send a message to other potential wrong-doers.
Monetary amounts paid to an injured party per a court-order. Can be compensatory, nominal, punitive, or liquidated.
Exclusive Agency Listing
A type of listing agreement in which a broker is specified to act as the seller's only agent. The seller retains the right to sell the property on their own and not pay commission to the agent.
Exclusive Right-to-Sell Listing
A type of listing agreement in which one broker is appointed as the sole agent of the seller and will receive compensation regardless of who produces a buyer. This type of contract is sometimes required for submission of the property to the MLS.
Competitive Market Analysis
A report often compiled by a real estate licensee that compares the prices of recently sold homes that are similar to a listing seller's home in terms of location, style, and amenities, with adjustments made for any dissimilar features.
Home Affordable Modification Program
A government program to help homeowners avoid foreclosure by making their monthly payments more affordable.
Purchase-Money Loan
A loan given at the time of purchase to facilitate the sale of the property. It most often refers to an instrument given by the seller to the buyer, who "takes back" a note for all or part of the purchase price (another words, a seller-financed sale), but the term can refer to any security instrument originating at the time of sale.
Shared-Appreciation Mortgage
A mortgage in which the lender extends a favorable interest rate to the buyer now in exchange for a portion of the profits received when the property is sold again later.
Reverse-Annuity Mortgage
A loan under which the homeowner receives monthly payments, a lump sum, or a line of credit based on the accumulated equity in the property. The loan must be repaid at a prearranged date, upon the death of the owner, or upon the sale of the property.
Balloon Payment Loan
A loan in which the regular, periodic payments will not fully amortize the amount of the loan by the time the final payment is due, so the final payment must be larger to complete repayment.
Common Law Trust
Another name for a Real Estate Investment Trust.
Graduated-Payment Mortgage
A loan for which the payments for the first few years (usually 5) are lower, and then increase with the expectation that the borrower's income will also have increased by then. The lower payments up front can result in negative amortization. This loan type has been mostly replaced by adjustable-rate mortgages (ARMs).
Brokerage Agreements
Employment contracts that establish the relationship between the broker and the consumer. Examples include listing, buyer agency, and management arrangements. In most states, one of these is necessary in writing before a broker can initiate court action to collect on a commission.
Protection Clause
A provision in a brokerage agreement that protects a broker's interests for a stated period after the expiration of the original contract as long as the client has not signed a new agreement with another broker.
Management Agreement
A brokerage contract establishing a general agency relationship between the broker and the owner of a rental property. It outlines the duties that must be performed by the broker, the authority of the broker, and the terms under which a broker earns their fee.
Housing for Older Persons Act
A federal law that made several changes to the provisions against discriminating for familial status if the housing is designated as being for persons 55 and older. This is an exemption from the Fair Housing Act.
Uniform Standards of Professional Appraisal Practice
A set of minimum quality control standards that represent the generally accepted and recognized standards of appraisal practices. It is updated every two years.
Servicemembers Civil Relief Act
It provides a wide range of protections for individuals entering or called to active duty in the military, and deployed servicemembers. It is intended to postpone or suspend certain civil obligations to enable service members to devote full attention to duty and relieve stress on the family members of those deployed servicemembers. It offers protection for terminations of lease, foreclosure, taxes, and mortgage payments, among other things.
Condominium Conversion
The changing of a property from a rental to condominium ownership. In MA, there are specific laws that protect tenets that will be displaced by the sale of the property. They include provisions for offering the right of first refusal to existing tenets, the period allowed to vacate, and reimbursement for moving expenses. Note that all tenets must be allowed to complete their existing leases.
Childhood Lead Poisoning Prevention Program
A division of Massachusett's Dept. of Public Health. They publish a packet that presents information regarding lead-based paint and lead poisoning. This packet must be given to a prospective buyer or tenet along with a state-approved lead disclosure form (the Property Transfer Notification Certification) if the property was built prior to 1978.
Property Transfer Notification Certification
A Massachusetts state-approved lead disclosure form that must be given to a prospective buyer or tenet of a property built prior to 1978, regardless of whether lead-based paint actually exists or is known to exist.
Nonconforming Loan
Any loan that does not meet the Fannie Mae/Freddie Mac loan requirements.
Inter Vivos
A Latin term meaning "during the lifetime of:" Usually used in reference to deed conveyance, which must be during during the lifetime of both the grantor and grantee.
Exceptions and Reservations
Any encumbrances, reservations, or limitations that affect the title, including mortgage liens, easements, taxes, restrictions, and easements. Also called a "subject-to clause."
A husband's right in his wife's property at the time of her death. In Massachusetts, this has been abolished in favor of dower rights, which apply equally to both spouses.
Oceanfront Property
A term for properties that abut against the ocean, also called tidal waters. In MA, the property owner owns the land to the mean low water line, or 100 rods below the mean high water line, whichever is less. The land between low water and high water is reserved for use by the public by state law.