Real Estate Practice: Midterm

Explanation
An option is a unilateral contract for the right to purchase property at a stipulated price under stipulated terms within a specified period of time. The option instrument is evidence of such a right.

A unilateral contract is an agreement in which one party promises to do something ONLY if another party acts in a certain way. In an "option" contract such as an option to purchase real property, the person giving the option (called the optionor) must act if the person receiving the option (called the optionee) exercises the option.

Explanation
The buyer has the right to sue or cancel for non-performance and have refunded any monies paid in.

Explanation
Contractual ability refers to the competence or legal capacity of the parties involved in a contract. It refers to their ability to understand the terms of the contract and to be legally bound by it. This includes factors such as age, mental capacity, and legal status.

Explanation
If the broker is to receive a fee of 7% of the actual sales price, then the fee would be 7% of $63,000, which is $4,410. If the seller reduces the price by $5,000, the new price would be $58,000. The broker's fee would then be 7% of $58,000, which is $4,060. The difference between the two fees is $4,410 - $4,060 = $350. Therefore, the broker would earn $350 less if the seller reduces the price by $5,000.

Explanation
The seller wishes to net $8,590 from the sale of her property. The broker's fee is 4% of the selling price and there is an allowance of $50 for expenses. To calculate the minimum selling price, we need to add the broker's fee and the allowance to the desired net amount.

Broker's fee = 4% of selling price = 0.04 * selling price
Allowance for expenses = $50

Therefore, the equation becomes:
Selling price + 0.04 * selling price + $50 = $8,590

Simplifying the equation:
1.04 * selling price + $50 = $8,590
1.04 * selling price = $8,540
selling price = $8,540 / 1.04
selling price ≈ $8,211.54

Since the selling price must be at least the minimum amount, the minimum selling price must be $9,000.

Explanation
The lender of a mortgage money is known as the mortgagee. The mortgagee is the party that provides the loan to the borrower, also known as the mortgagor. The mortgagor is the one who borrows the money and uses their property as collateral. The mortgagee has the right to take ownership of the property if the mortgagor fails to repay the loan. The trustee is a separate party that holds the property in trust, and the lessee is the one who rents a property.

Explanation
In a partially amortized loan, any payment larger than the normal periodic payment is considered a balloon payment.

A release payment is the amount needed to remove a lien from the property.

A level payment is an equal payment throughout the life of the loan.

An accelerated payment is one that is required in advance of its normally scheduled due date by the lender.
A mortgage provision called the acceleration provision indicates that if the borrower defaults on the mortgage, the lender may declare the entire debt be immediately due and payable; non-compliance of this provision by a borrower who is in default allows the lender to proceed towards foreclosure.

Explanation
Under a blanket mortgage, an individual parcel may be conveyed free and clear as the release clause is satisfied. Can be used to by a builder/developer to finance many properties in a development. Usually there is a partial release clause that is activiated when each home in the development is sold. Clause provides that when an agreed upon amount of debt on each particular home is paid off at the settlement table from proceeds of the sale price, the mortgage lien is removed on that particular property. The release allows the title for each property to be conveyed by the developer to the new purchaser.

Blanket can also be used if purchasing a vacation or rental home, allowing a substantial amount of equity in first home as the down payment on the second property. That way the lender would encumber both the first and second home as collateral security for repayment of debt.

An open-end mortgage provides for advancement of additional funds against the original note after a portion of the note has been repaid. This type of loan is commonly available today in the form of an equity line of credit. Loan can be opened back up to the end in the sense that a borrower who paid down their mortgage can borrow an amount of money back up to the original amount of the loan.

A wraparound mortgage is a special form of second mortgage financing. It is also referered to as an all-inclusive mortgage. This mortgage encompasses or wraps around all other existing financing on real property. It is also referred to as junior financing in that it is subordinate or junior to a more senior loan. It can be used to finance the purchase of property when a seller is willing to provide financing for the buyer but the seller has a mortgage on the property for sale that cannot or should not be paid off. The seller becomes who becomes the lender receives loan payments from the buyer and is resonsible for making payments to the first lender.

Partially amortized mortgage refers to a method of repayment of a mortgage. It involves blending an amortized mortgage and a term loan because it contains characteristics of both loans. It is a short term loan. In the intial segment, portions of the payment are applied to both interest and principal. At the end of the initial 3, 5, or 7 year segement, the mortgage contains a feature of the term loan that requires a large lump sum balloon payment of principal to be due and payable. Therefore a partially amortized mortgage is a type of balloon financing.

Explanation
A "note" is a written evidence of a promise to repay borrowed money. It is a legal document that outlines the terms and conditions of the loan, including the amount borrowed, interest rate, repayment schedule, and any other relevant details. It serves as proof of the borrower's obligation to repay the borrowed funds and can be used as evidence in case of a dispute or legal action.

Explanation
FDIC insures the deposits of institutions that are membes of the Federal Reserve System.

Explanation
A conventional mortgage refers to a mortgage loan that is not insured or guaranteed by a government agency such as the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA). Instead, it is provided by a private lender, typically a bank. This means that the borrower assumes the full risk and responsibility for repaying the loan. Unlike FHA-insured or VA-insured mortgages, a conventional mortgage does not come with any specific government-backed protections or benefits.

Explanation
A veteran who receives a Veterans Administration (VA) loan on a property is only permitted to sell the property to a non-veteran who may then assume the balance of the loan. They are not allowed to transfer the loan to a new property. Therefore, the correct answer is II only.

Explanation
The man paid an average of $126 a month on interest on his loan for a year. This means he paid a total of $126 x 12 = $1512 in interest for the year. Since the interest is deductible from his taxable income, he can reduce his taxable income by $1512. In the 28 percent income tax bracket, this deduction would result in a tax savings of $1512 x 0.28 = $423. Therefore, his income tax bill would be approximately $423 less as a result of this deduction.

Explanation
Also known as Blockbusting

Explanation
In allegations of discriminatory practices under the Federal Fair Housing Act, the burden of proof is on the complainant. This means that it is the responsibility of the person making the allegation to provide evidence and prove that discrimination has occurred. The complainant must show that they have been treated unfairly or differently based on a protected characteristic, such as race, color, religion, sex, familial status, national origin, or disability. The burden of proof is not on the court, defendant, or Department of Housing and Urban Development, as they are not the ones making the allegation.

Explanation
The agency does not have the authority to fine a broker or bar a broker from participating in various programs.

In PA, complaints filed with HUD would be handled by the PA Human Relations Commission. An aggrieved party may seek a remedy of monetary damages or penalties through an Administrative Law Judge. Another alternative for an aggrieved party is to seek judicial action in a federal court within 2 years of the alleged act.

Explanation
Principal is an individual who has an agent act in his behalf.

Grantor is one who transfers title to real property by deed.

Testator is a person who makes a will.

Explanation
Broker and seller is a tradtional agency relationship.

The relationship between the other pairs listed above, are contractual but none is an agency relationship.

Explanation
No agency relationship exists between buyer and broker unless an arragement is entered into making the broker the buyer's agent.

Explanation
A salesperson has an obligation to disclose both positive and negative facts about a property to a prospective buyer. A salesperson cannot require the seller to repair or cure any defects.

Explanation
If the seller withdraws the property from the market and formally terminates the listing agreement, it means that they no longer want to sell the property and have ended their agreement with the listing broker. This termination of the agreement also terminates the fiduciary relationship between the listing broker and seller. Therefore, the correct answer is I only.

Explanation
In an exclusive right to sell listing, the broker is not responsible for guaranteeing to buy the property if it is not sold within the listing period (option I). The broker's responsibility is to market the property and find a buyer, not to purchase the property themselves. Additionally, the broker is not required to screen offers and refuse those below the listed price (option II). The broker's role is to present all offers to the seller and advise them on the best course of action, but it is ultimately the seller's decision whether to accept or reject an offer. Therefore, neither option I nor option II is the responsibility of the broker in an exclusive right to sell listing.

Explanation
Exclusive right to sell - one exclusive broker office, receives commission no matter who finds the buyer - even if seller finds on his own
Net - if seller doesn't receive certain amount, broker gets no commission
Exclusive agency - one exclusive broker office, but if seller finds the buyer on his own, no commission is due
Open listing - typically oral agreement, open to several brokers, only one who finds buyer gets a commission

Explanation
Mutual consent is a reason for termination of any contract.

In an open listing agreement, a seller may list with as many brokers as he desires. Only the one broker who finds the buyer, gets the commission.

Explanation
Quiet title refers to a legal action taken to remove any clouds or disputes on a property's title. This action is typically initiated in court to establish clear ownership and resolve any conflicting claims or uncertainties regarding the property's title. It is a process that aims to "quiet" or eliminate any doubts or challenges to the property's ownership, ensuring a clear and marketable title.

Explanation
The total expenses for the title insurance, title search, preparing papers, and miscellaneous fees amount to $174.90 + $75 + $15 + $6.10 = $271. The seller paid 60% of this amount, which is 0.6 * $271 = $162.60. The buyer paid the rest, which is $271 - $162.60 = $108.40. Therefore, the seller paid $162.60 - $108.40 = $54 more than the buyer.

Explanation
Eccentric design, changing function, and obsolescence are all contributing factors to functional depreciation. Ordinary wear and tear contributes to physical deterioration.

Explanation
The correct answer is Economic life. Economic life refers to the period of time in which the income generated by a building is enough to justify the cost of maintaining and operating the building. It is the duration during which the building remains economically viable and profitable.

Explanation
When estimating the value of a property using the direct sales comparison approach, an appraiser relies on the market behavior of buyers. This approach involves comparing the property being appraised to similar properties that have recently been sold in the market. By analyzing the behavior of buyers in the market, such as their preferences, trends, and willingness to pay for certain features or locations, the appraiser can determine the value of the property based on the prices at which similar properties have been sold.

Explanation
Since the first semiannual interest payment is $360 and the interest rate is 6 percent per year, we can calculate the loan amount by dividing the interest payment by the interest rate. So, $360 divided by 0.06 equals $6000. Since the loan is 60 percent of the appraised value, we can calculate the appraised value by dividing the loan amount by 0.6. So, $6000 divided by 0.6 equals $10000. Therefore, the appraised value of the property is $20000.

Explanation
The rate of taxation can be calculated by dividing the annual property tax ($600) by the assessed value of the property ($16,000) and then multiplying by 100 to convert it to a percentage. Therefore, the rate of taxation is (600/16000) * 100 = 3.75%.