AR Real Estate cheat sheet

Freehold estates: fee simple absolute (indefinite, inheritable, unconditional), fee simple defeasible (ends on a stated event or condition), and life estate (ends at death of the measuring life, which may be the holder or another person). Leaseholds are personal property.

Easement vs. license: an easement is an interest in land that runs with the land and ends only by release, merger, abandonment, prescription, or destruction of the servient estate; a license is revocable permission that creates no interest in land.

Easement by necessity requires former common ownership (unity of title) plus strict necessity after severance; a prescriptive easement requires adverse, open, notorious, and continuous use for the statutory period (7 years in Arkansas).

Co-ownership: tenancy in common (unequal shares, no survivorship), joint tenancy (four unities plus right of survivorship), tenancy by the entirety (spouses only). Arkansas does not recognize community property.

Arkansas retains dower and curtesy, giving a surviving spouse an interest in the deceased spouse's real property; a spouse must join in a deed to release homestead and marital interests.

Government powers over land: police power (zoning, building codes, subdivision rules; no compensation), eminent domain (public use plus just compensation), taxation (ad valorem), and escheat (no heirs or will).

Zoning relief: a variance addresses hardship caused by the ordinance; a conditional or special use permit authorizes a listed use subject to conditions; a legal nonconforming use may continue but generally cannot be expanded.

Fixture tests (MARIA): method of attachment, adaptability to the property's use, relationship of the parties, intention of the annexer, and any agreement; trade fixtures installed by a commercial tenant generally remain the tenant's.

Boundary changes: accretion (gradual deposit) and reliction (gradual water recession) add land to the owner; avulsion (sudden shift) does not move the boundary; riparian owners border streams, littoral owners border seas and lakes.

Fiduciary duties (OLD CAR): Obedience, Loyalty, Disclosure, Confidentiality, Accounting, and Reasonable care and diligence; confidentiality survives termination of the agency.

Agency creation: express (written or oral agreement), implied (from the parties' conduct), ostensible or apparent (the principal's words or conduct lead a third party to believe), or by ratification (the principal accepts the benefit of an unauthorized act).

Single agency represents one client; dual agency represents both sides of one transaction and requires written informed consent from all parties because loyalty duties conflict.

A brokerage agreement should state its term, the compensation, whether it is exclusive, and when compensation is earned; a broker usually earns the fee by producing a ready, willing, and able buyer under the agreed terms.

Agency termination: expiration of the term, performance, mutual agreement, revocation by the principal, renunciation by the agent, death or incapacity of either party, or bankruptcy of the principal as provided by state law.

A property manager owes the owner the same fiduciary duties as any agent; rents, security deposits, and owner reserves must be held in a trust account separate from the manager's personal and business funds.

Commingling (mixing trust funds with personal funds) and conversion (unauthorized use of trust funds) are separate violations even if the money is later restored.

A commission may be paid only to a licensed broker (or through the licensee's principal broker); paying a referral fee or commission to an unlicensed person is prohibited.

An agent may not buy a client's property or sell the client's property to the client without full written disclosure and consent; undisclosed self-dealing breaches the duty of loyalty.

Contract essentials: offer, acceptance, consideration, capacity, lawful objective, and mutual assent; real estate contracts must be in writing and signed by the party to be charged under the statute of frauds.

Void vs. voidable vs. unenforceable: a void contract has no legal effect; a voidable contract may be disaffirmed by one party (for example, a minor); an unenforceable contract meets the elements but cannot be proven in court.

A valid deed requires a grantor, a grantee, words of conveyance, a legal description, the grantor's signature, and delivery with acceptance; acknowledgment is required for recording, not for validity.

Covenants of a general warranty deed: seisin, right to convey, against encumbrances, quiet enjoyment, warranty forever, and further assurance. A quitclaim deed conveys only the grantor's present interest with no warranties.

Arkansas is a race-notice recording state: a later purchaser prevails if it records first and takes without actual, constructive, or inquiry notice of a prior unrecorded interest.

Title evidence is either an abstract with an attorney's opinion or a title insurance commitment followed by a policy; a lender's policy protects the lender only, so the buyer needs a separate owner's policy.

Proration rule: items paid in advance by the seller are credited to the seller; items owed but unpaid at closing are charged to the seller. The 365-day method divides an annual amount by exact days.

Remedies for breach: specific performance (land is unique), liquidated damages (forfeiture of earnest money), rescission, compensatory damages, and a quiet title action to remove a cloud on title.

Federal closing rules: the Closing Disclosure must be delivered at least 3 business days before consummation under TRID, and RESPA prohibits kickbacks and unearned referral fees.

Value = NOI ÷ capitalization rate; NOI = effective gross income − operating expenses, and it excludes debt service, depreciation, capital improvements, and income taxes.

Gross rent multiplier = sale price ÷ gross rent (monthly or annual); it is a quick screening tool for comparing similar income properties.

Cost approach: value = replacement or reproduction cost − accrued depreciation + land value; depreciation is physical deterioration, functional obsolescence, or external (economic) obsolescence.

In the sales comparison approach the comparables are adjusted toward the subject; the subject property is never adjusted.

Qualifying ratios: front-end housing ratio near 28% and back-end total debt ratio near 36–43%; PITI includes principal, interest, taxes, and insurance.

Financing structure: LTV above 80% typically triggers private mortgage insurance; a fully amortized loan retires the balance over its term; a balloon loan matures before its amortization schedule ends; negative amortization increases the balance.

Investment metrics: cash-on-cash return = annual before-tax cash flow ÷ cash invested; DSCR = NOI ÷ annual debt service; positive leverage occurs when the property's return exceeds the cost of borrowed funds.

A Section 1031 exchange requires like-kind real property, identification within 45 days, closing within 180 days, a qualified intermediary, and recognition of gain on any boot received.

The Arkansas Real Estate Commission administers the Real Estate License Law (Ark. Code Title 17, Chapter 42), adopts rules, and may reprimand, probate, suspend, revoke, or fine a licensee.

A salesperson must be affiliated with and supervised by a principal broker; compensation flows to the principal broker, who then pays the affiliated licensee.

Trust funds such as earnest money and security deposits must be deposited in a separate escrow account; commingling with the broker's own funds is prohibited and records must be available for Commission inspection.

Agency disclosure: the licensee must disclose in writing which party the firm represents, and the type of agency, at the first substantive contact and before the parties sign an offer or agreement.

Advertising must include the licensed firm's name and may not be misleading; a licensee may not advertise another broker's listing without that broker's permission.

No person may perform acts of real estate brokerage for compensation without a valid Arkansas license, and a licensee may not share compensation with an unlicensed person.

Fair housing: federal and Arkansas law prohibit discrimination based on race, color, religion, sex, national origin, familial status, or disability; steering and blockbusting are prohibited practices.

Grounds for discipline include misrepresentation, fraud, undisclosed dual agency, commingling, conversion, failure to account, and conviction of a crime involving moral turpitude.

Licensees must complete Commission-approved continuing education each renewal cycle and retain completion records for audit.