Measurement of water

equals 43,569 cu. ft

325,851 gallons

Non-physical attachments-

hereditaments, right-of-way...

Given after all redemption periods (Tax lien sale)

redemption period 3 years + can extend for 1 year after the certificate of purchase was issued

An intangible personal property right - attached or annexed to real estate -

ie. lease

aka: Tenancy in common

Need not be married, may be more than two, each tenant holds and undivided fractional interest - can be disproportionate

Defeasable Fee

(Fee estate-freehold-inheritable)

Ownership can be defeated

Rights of ownership in RE are dependant on the occurance, or non-occurance of a certain event

AKA: fee simple defeasable

Fee Determinable

(fee estate- freehold- inheritable)

Aka: fee simple determinable

Statements "so long as", "while or during" used typically - time/date driven

AUTOMATICALLY terminates rights of new owner

Fee Conditional

(Fee estate-freehold-inheritable)

Dominant

(easement)

In gross

(easement)

Benefits an individual or legal entity, rather than a dominant estate. Not required to own adjacent property

(utilities)

By necessity

(easement)

By prescription

(easement)

Servient property

(easement)

Estate at sufferance

(Types of leasehold estates)

For life

(Life estates-freehold-not inheritable)

Of years

(aka: (leasehold) estate for years)

At will

(aka: Tenancy At Will / leasehold estate)

In remainder

Life estate - future estate)

In reversion

(life estate - future estate)

Inheritable

(Estate of Inheritance)

Actual

(eviction)

Constructive

(eviction)

A complete, unencumbered ownership right in a piece of property

(Freehold concept - allodial)

A freehold estate of inheritance limited so as to descend to a blood relative

NOT IN AZ

Freehold

(allodial system)

Ownership of indefinate duration.

Possession and use

A tract of land that is owned and occupied as a principal residence

(AZ has homestead exemption protection)

Abandonment of

homestead

Lessee (tenant) pays expenses

such as: taxes, maintenance insurance

Less than freehold

estate

Life Estate

Conventional

A formal voluntary agreement

2 or more parties unite to share profits and risks

Period of time an improvement contributes to value

residential= 27 1/2 years

commercial= 39 years

The amount paid above market rent

(contract rent vs economic rent)

The right, which is the distiguishing feature of joint tenancy, of a surviving tenant to become owner of the entire

interest of a dead tenant

At will

(tenancy)

By the entirety

(tenancy)

Marriage unit - each spouse owns the entire estate, cannot do anything with interest independently

NOT in AZ

In common

(tenancy)

Unities

(title)

Time - vested at the same time

Interest- equal interest/one and the conveyanance

Title- Hold title one and same

Possession- must hold same undivided possession of the whole and enjoy same rights until death of one

Agreement for sale

AKA: contract for sale, land contract, contract for deed

The seller (vendor) extends credit to a buyer (vendee), permitting the buyer to make normal down payment and pay the balance in installments. Buyer (vendee) gets "equitable title" vendor has legal title unitl entire amount is paid in full. Buyer should get document recorded - NOTE AND SECURITY IN ONE DOCUMENT!

In case of default:

0-10% equity    30 days

20-29% equity   60 days

30-49% equity   120 days

50% or more    9 months

Deed of Trust

Trust Deed

The buyer (trustor) conveys title to a third party (trustee), who holds it as security for the beneficiary (lender)

Standard trust deed foreclosure proceedings apply

Short term- interim loan

advanced in periodic installments

paid off in balloon payment when complete

Performance Bond needed to get financing

Certificate of occupancy is issued after completion = loan due in full

Transfer of title

to real estate

Four methods:

Voluntary alienation- by choice

Involuntary alienation- foreclosure, eminant domain, escheat(no will or heirs), adverse possession

Descent- dies w/ heirs, but no will

Will- will exists, executor has been chosen

AZ Statue of Frauds

(deeds)

Card 1 of 2

Must be in writing to be enforceable

other requirements:

Competent grantor at least 18, possessing civil rights

Indentifiable grantee, competent or incompetent, status must be stated (minor, married, trustee...)

Granting Clause- affirms grantor is giving up ownership/what is being given up

Habendum Clause- "to have and to hold", extent of ownership being transfered (less than 100%) granting clause prevails if discrepancy

Involuntary Alienation

Can occur through natural causes and law:

Natural causes: erosion or avulsion- violent/sudden loss, flood, earthquake

Law - Propert tax foreclosure, BK sale, mortgage foreclosure, trustee sale, judgement..

Process of aquiring land through soil deosits - movement of rivers/streams called accretion - soil deposited this way is alluvion or alluvium. Reliction is the receding of water from its usual watermark in rivers, streams and "littoral" bodies of water (navigable). Recipients own land

Constructive (legal)  Notice

(title)

A legal notice to the world at large

Notice in a newspaper or public record

Actual Notice

(title)

Direct knowledge (that which is already known), such as the fact that a person is living on a specific parcel. A fact given directly to an individual.

Constructive carries the most weight

Recorded deed/Actual notice= strongest claim

Most widespread 

Owner's policies: (benefits buyer/vendee - pd for by usually seller, has exceptions- can eliminate some by getting ALTA of extended coverage) 

Lender's policies: (ALTA/extended/broad coverage - pd by borrower, coverage based on loan amount, does not insure against: gaps in chain of title, items in the public record)

Voluntary and Involuntary

General (right to all propeties- real & personal) Specific (targets specific parcel)

Voluntary: (All specific)mortgages, trust deeds, seller carrybacks

Involuntary: property taxes S, assessments S, attachments S, judgements G, mechanic's liens S, IRS G, decedent debts G

Laches

(involuntary lien/judgement)

If a plantiff tries to assert a claim after the statutory period has passed, the court bars the claim on the basis of "laches" - the plaintiff waited too long

Judgement= 5yrs to obtain writ of execution- can be extended another 5 yrs if renewed w/in 90 days of expiration

Priority is established based on date it was recorded

10% simple interest rate due on judgement if no rate in prior contract

Mechanics' Lien

(specific lien)

Usually contractors file for unpaid services

"inchoate" means it has not yet been ajudicated, but is in the process.

TIMELINE: 20-day pre-lien notice to subject-who must give written reciept of notice Notice and claim filed/recorded @ County Recorder's w/in 120 days of completion. Completetion= physically finished, used by owner, final inspection & written acceptance by owner.  Priority is then retroactive to the date work BEGAN

After lien is filed- 6mo. statute of limitations on initiating lawsuit "Satisfaction Notice" given by contractor 30 days from payment

Lien Theory

(AZ)

Unconditional written promise to pay - signed in conjunction with a trust deed or mortgage.

Characteristics: Evidence of debt- principal obligation, promissory note itself Borrower liability- personally liable, note is unsecured and unrecorded Negotiable - may be transfered by endorsement (order) or delivery (bearer) to a third party

• FHA- Insured (lender) against loss by the Federal Housing Admin. (founded 1934) Less risk to lender, lower int. rates      VA- Guaranteed partial coverage on loans, no down, low int. rates, may not exceed appraisal, can be assumed by non-vets      Chattle mortgage (aka security agreement) secured by personal property       Package - mortgage or TD covering real estate and all on-site appliances and fixtures     Blanket- mortgage or TD covering many parcels, used by developers to secure financing - "partial release clause"     Open-End- can be expanded up to a specified amount, each advance is secured w/ same mortgage   Junior or subordinate- takes second priority to an existing mortgage. Priority may be exchanged by mutual agreement "subordination agreement"
  

Acceleration Clause

(mortgage)

Alienation Clause

(mortgage)

"due on sale"  clause

Loan balance is due in full when property is sold

Defeasance Clause

(mortgage/TD)

When a mortgage or TD has been repaid, it means the lender's claim has been defeated

In a mortgage, the lender issues a "satisfaction of mortgage"

in a TD, a "deed of reconveyance" is issued

Both cases require recordation to clear the lien

Assumption

Accomplished in 3 ways: Novation - lender releases original borrower and substitues the buyer as primarily liable for debt   Without novation - buyer becomes principal guarantor and primarily liable, but seller is still liable  Subject to- new buyer is NOT personally liable to the lender.

Mortgage Foreclosure

(judicial process)

Default- non-payment of loan/taxes/insurance/damage to property

Notice of acceleration - lender invokes acceleration clause, entire debt due immediately. Mortgagor (borrower) can halt process by paying off mortgage or giving the mortgagee (lender) a "deed in lieu of foreclosure" if the lender agrees.

Court foreclosure action- court reviews evidence and orders property sold

Equitable period of redemtion - mortgagor (borrower) can redeem up to, but not including the foreclosure sale by paying entire debt awarded by court

Sheriff's foreclosure sale - court issues writ of execution, advertise sale in publication for 4wks/once a wk in county property is located. At sale, purchaser is given "cert. of sale" and becomes lien holder for the moment- not owner.

Statutory period of redemtion - in AZ 6mos/180 days after foreclosure sale when mortgagor-in-default can redeem property. Lump sum payment to the purchaser @ sale= price of cert, prorated int, taxes, assessments incurred by purchaser.

Sheriff's Deed- if mortgagor or creditors with subordinate liens do not redeem w/in 6mo/180 days period the purchaser is awarded a sheriff's deed and becomes legal owner.

Differences compared to mortgage foreclosure

Non-Judicial

Power of sale given by trustor/borrower, authorized by beneficiary/lender, trustee (3rd party) carries it out

Beneficiary's notice to Trustee - late=1st notice, statement of breach= 2nd notice

Notice of sale- by trustee

Constructive Notice- recorded/public notice, includes time, date and location of sale

Actual Notice- Copy of trustee's notice to be delivered to trustor/borrower by registered mail/process server w/in 5 days of recordation. Other holders of recorded interest to be notified w/in 30 days; and a copy of notice to be physically posted on property at least 20 days prior to the date of sale- giving notice to any tenant

Trustee's Sale - auctioned off to the highest bidder, awarded a trustee's deed, and instant ownership. Buyer must pay all cash by 5:00PM the next day. NO redemtion period following a trustee's sale!

"Deficiency Judgement"

sales proceeds/foreclosure

Property sells, but proceeds do not cover full loan balance, the lender can obtain a "deficiency judgement" for the shortage.   Permitted in trustee sales only when the property is: more than 2 1/2 acres or more than a duplex    If there is money left over from a foreclosure sale it goes to the mortgagor or trustor (after junior liens, interest and expenses)

Truth-In-Lending

Act

(1969)

Implemented by Reg. Z of the Federal Reserve Board- focuses on residential loans. Requires lenders to fully disclose all finance charges and true annual percentage rate (APR)

Also gives consumers "right to rescind" by simply notifying lender w/in 3 days...only applies to refinancing or home equity loans, not 1st mortgages.

Real Estate Settlement Prodedures Act

(RESPA 1974)

Enacted in 1974 to insure that buyers and sellers in a real estate transaction have full knowledge of settlement costs.

HUD booklet w/in 3 business days from application date, must provide "good faith estimate"

Covers reidential mortgage loans- one- to four-family properties.

DOES NOT APPLY TO REFINANCING

Basis

(real estate taxation/investment)

Adjusted Basis

(Real estate investment/taxation)

The original basis + aquisition costs + capital improvements =

adjusted basis

Adjusted Sales Price

(real estate investment/taxation)

Sales price - cost of sale=

Adjusted sales price

Adjusted purchase price

(real estate investment/taxation)

Purchase price - aquisition costs paid=

adjusted purchase price

"Boot"

(real estate investment/taxation)

Boot is any property received by the taxpayer in the exchange which is not like-kind/or equal or greater value to the relinquished property. Boot is characterized as either "cash" boot or "mortgage" boot.

Replacement property

Must be equal or greater value

A taxpayer has 45 days after COE or transfer to properly identify potential replacement properties. The exchange must be completed by the date that is 180 days (6 mos)  after the COE, or the due date of the taxpayer's federal tax return for the year in which the relinquished property was transferred, whichever is earlier.

"C" Corporation

(Regular Corporation)

Artificial person/legal entity/one or more individuals/managed by a board of directors

Shareholder liability limited to original investment Double taxation- corp. pays and individuals pay on dividends paid out     Exist until dissolved (perpetuity)    Regulated Corporation Commission - If Publicly offered - regulated by FCC

2 or more investors
each shares in profit, risk/liability - personal & real
each maintains control
death of a partner - dissolve and reorganize
Pay taxes on an individual level

For tax puposes should be treated as a partnership

Structure same as "C", but pays no corp. taxes
Stockholders are taxed individually on corporate income, based on % of ownership
Liability = initial investment
no more than 100 investors - must be American
Regulated Corporation Commission

Limited Liability Corporation

(LLC)

Combines best features of corporations, limited and general partnerships

"members" have limited liability
full management participation/control
direct pass through tax advantages
Regulated by Corporation Commission

Real Estate Investment Trust

(REIT)

Capital Gains

(Income subject to tax)

Taxable profits realized from selling capital assets - rental property, land, equipment, stocks.

Capital gain is the difference between adjusted sales price & the basis.

Long-term - held more than 12 mos 15%
Short-term - held 12 mos. or less personal ordinary income rate
Losses = $3000/year and can be carried over NOT ON PRIVATE RESIDENCE

Only investment property can be depreciated - not land or private residences. Allows investors to recoup the expense of income property.

Official Life:

Residential = 27.5 years

Commercial = 39 years

Technically, land does not depreciate   Straight-line method of depreciation:

Adjusted basis / the assets remaining years of life

(only personal property and improvements can be depreciated)

Deed or assignment

(sublease)

Deed: Written document conveying title to an interest in real estate

Assignment: Transfer in writing of an interest in a lease - the lessee transfers all interest to an assignee.

The net spendable income from an investment.

operating expenses, fixed expenses and debt service are deducted

Gross Rent Multiplier

(GRM)

Net Operating Income

(NOI)

Two or more people pool resources - only one (general partner) organizes and operates (syndicate)

Passive investors are called "limited partners" - no voice in management

They share profits, but not losses - only up to amount invested

Profits and losses are taxed at individual level

Subject to state and federal securities laws, unless exempt, must be registered w/ fed. securities and exchange commission (SEC)

Federal Housing Administration

(FHA)

Card 1 of 2

Created 1934

residential/primary residence/insured loans

3 title programs:Title I) modest loans repairs/improvements

Title II) construction/purchase/refinancing/LTV changes w/ loan selected

Title III) Created the Fed. Nat'l Mortgage Accos. "Fannie Mae" to purchase Title II loans from primary lenders

UFMIP= up-front mortgage ins. premium = 1.75% and annual MIP of .55% annually

"budget repayment loan"

PITI

Federal Housing Administration

(FHA)

Card 2 of 2

Buyer must invest 3.5% down - most sellers pay closing costs and prepaids

In Maricopa County, AZ max is: $346,250

FHA appraisal (valid for 120 days) required- buyer can opt out is appraisal is too low

Qualifying hoursing must be one-to-four family

Three "C's" needed to qualify: CASH - COLLATERAL - CREDIT

FHA RATIOS = 31% front end (PITI/gross mo income)

43% back end (long-term debt, cr cards, cars... + new house payment/gross mo income)

FHA 245 Graduated payment mortgage= neg. amoritization

Veterans Administration

Card 1 of 2

Serviceman's Readjustment Act of 1944

VA guarantees loans to purchase or construct owner occupied homes

VA pays lender a dollar amount or % in default

Buyer must apply for "cert of eligibility" to determine loan amount

3 "C's" similar to FHA

Ratios: 41% (house payment, utilities, maintenance)

Must also show residual income for normal living expenses

VA approved appraisal needed - issues a "cert of reasonable value" good for 6 mos on existing housing and 12 mos for proposed housing

Last step is "guaranteed commitment" giving the green light

Veterans Administration

Card 2 of 2

Mortgage payments must be level/ include principal, interest, taxes and insurance. Origination fee cannot exceed 1% of the loan amount and no prepayment penalty is allowed

Points cannot be financed, escrow and termite cannot be charged to vet, loans are assumable w/ VA approval

Lenders do not usually loan more than 4 X the VA eligability. $104,250 on purch. of less than $417K now

Conventional Loan

(Fixed Rate)

Card 1 of 2

Non-government loans made primarily by banks - they are either conforming or non-conforming

A conforming loan fits FMNA (Fannie Mae) & FHLMC (Freddie Mac) requirements, which include:

Max loan of 417K

FMNA & FHLMC approved documents

Meeting underwriters' guidelines

80% LTV - if higher PMI is needed

No escape clause for buyer is appraisal is low

ARM's lender's can decrease or increase the interest rate periodically- w/in prescribed limits by tying it to an economic index

Treasury Bills

11th Dist. of the Fed Home Loan Cost of Funds (COFI)

London Interbank Offered Rate (LIBOR)

Moving Treasury Average (MTA)

ARM's have a "2-6 CAP" which means the interest cannot be adjusted upward more than 2% per yr or more than 6% over the life of the loan from the initial "floor" rate

Usually NOT assumable

NEGATIVE amoritization occurs

Capitalization

Formula

Potential gross income

minus

vacancies/bad debt/credit loss =

Effective/Adjusted gross income

minus

operating expenses

(can't use:debt service/personal income tax/depreciation/improvements) =

Net Operating Income

PGI-BVD=EGI-OE=NOI

Lower CAP rate favors seller (raises price)  Higher CAP rate favors buyer (lowers price)  income/rate= value   income/value= rate    value x rate= income

Cash Flow

Formula

Civil Rights Act

Title VIII

(Fair Housing Act)

1968

Bans discrimination by race/color/religion/or natural origin

Exceptions:

churches/private clubs/private property up to a four-plex

Jones vs. Mayer

1968

Bans discrimination in private and public sectors

Reaffirmed the Civil Rights Act of 1866

Deed restrictions are unenforceable when they discriminate by race

Equal Credit Opportunity Act

of 1974

Encouraging homeowners to sell out by insinuating or predicting minorities are moving into the neighborhood

Allows agents to buy low and sell high

prohibited by the Fair Housing Act 1968

1988 Fair Housing

Amendments Act

Adds as protected classes physically and mentally handicapped people plus families with children

"handicapped" also includes:

alcoholics/AIDS/clinical diseases

Does not include drug abusers or people who have one or more felony drug convictions

Tenant can be reimbursed for 1/2 mo rent or $300 whichever is greater for handicap modifications

Fair Housing Enforcement

Provisions

1988 Amendments Act -

Fair housing laws are enforced by an administrative law judge w/in HUD or through federal courts

First offense 10K    Second offense (w/in 5 yrs) 25K

Third offense (W/in 7 yrs) 50K

*After 7 years, violations are dropped

Federal court fines: 25k,50k & 100k for subsequent

Americans with Disabilities Act

(ADA)

Enacted 1990

Every employer with 15 or more full-time employees will be covered by ADA

Prohibits employers from discriminating against the disabled & requires "reasonable accomodation" that does not create an "undue hardship"

Required:

Picture of home larger than 4 column inches

words only if 6 column inches or larger

flyers/promotional materials

every internet page - without scrolling

Not needed on business cards

Broker office display poster

Protects both parties

Security deposit = 1 1/2 x rent unless tenant agrees to more

A/C is not manditory, but if it has A/C, it must work

Must inform tenant of where they can view the Tenant Act (Sec of State/internet)

Landlord must give 48 hours notice to do improvements to unit - work during business hours M-F

Remedies for non-compliance by

Landlord

Security Deposit: return 14 days from written demand from tenant, if not can owe double the amount + the deposit amount

Failure to supply essential services: 5 days to correct, 14 days after notice with written notice tenant move out & terminate the lease (19 days)

Rent due the 1st, late on the 2nd

5 day notice given

after 5 days landlord can file with the court

Court mails a "detainer" document to tenant ordering the premises to be vacated

Actual Eviction: If the tenant still doen't pay, the landlord returns to court - a "writ of execution" is given

The sheriff tapes eviction notice to door - tenant has until 5pm, if not moved the sheriff can step in.

Landlord can keep security deposit - property can be stored for 10 days, then sold - hold excess for 1 yr

clothing, tools, items needed for their trade, ID, financial docs... cannot be held

Interest in buildings

Condominiums

Owners possess horizontal rights (not above or below)

They own an undivided interest in common areas as tenants in common

Owners possess a deed and fee simple title - the are taxed and assessed, based on the combined value or their unit and a proportionate ownership of common areas - can be separately foreclosed

Interest in buildings

townhouses

Same as condo w/ 2 exceptions:

Owners possess vertical rights

All common areas are owned by HOA and owners belong to the association - they are taxed and assessed as individuals

Timeshares

(Interval Ownership)

Use of property for a specific time

Ownership is as Tenants in Common

Right of recission - 7 days from signature date

Max presentation is 120 mins

*12 or more intervals and you must follow rules

Cannot have a real estate license

5 yrs banking/title/real estate + 3 yrs administrative experience

Duties: issue/suspend/revoke licenses & set rules

Legal Advisor: Attny General's Office

Broker's License

Requirements

Active RE license 3 of last 5 years

21 years old

90 hours education

Recovery Fund $20

Term new license = 2 years

(from last day of month issued)

renewal = 4 years

(24 hrs of continuing ed. are required every 2 years)

Designated & self-employed brokers must repeat the broker management clinic every 2 years

Sales Person License

Requirements

Minimum age: 18yrs

Education: 90 hours + 6 hr contract

Testing: pass school and state tests, fingerprinting

Recovery Fund Fee: $10

New license - 2 yrs

Renewal - 4 yrs

(need 24 hours of continuing ed. every 2 yrs)

Changing brokers requires broker to give notice to AZ Dept of RE inw/in 10 days

6 or more lots improved or unimproved - less than 36 acres

Public report is required before selling

6 or more parcels, at least 36 acres, but less than

160 acres (1/4 section)

Require public reports before selling for residential use

May be taken prior to a public report being issued

Obligates the seller, but not the buyer - until the public report can be reviewed

Deposit cannot be over $5000/lot

Deposits held in neutral escrow acct, NOT trust acct

Deposit refundable until contract is signed

Seller has 15 days to give buyer public report once its isssued

Buyer has 7 business days to review report - and sign contract

Public reports aren't needed - instead Affidavit of Disclosure

5 or fewer parcels - county/unincorporated

Property is NOT in a subdivision

"mini-public report"

recorded with deed - owner is responsible forever

All types of property

AZ Statute of Frauds

Card 2 of 2

Legal Description

Exceptions/Reservations

Legal Consideration

Signature of Grantor (party conveying)

Acknowledgement- cert. by notary

Delivery to Grantee- must be delivered during Grantor's lifetime and accepted by grantee in order to be valid