CA Real Estate cheat sheet

Fee simple absolute is the largest estate: potentially infinite duration, freely alienable, inheritable, and devisable; a fee simple defeasible ends on a stated event.

A life estate is measured by a life (the grantee's or another's, pur autre vie); the life tenant pays taxes, interest, and ordinary maintenance, must not commit waste, and holds no inheritable interest.

Leaseholds: estate for years (fixed term, no notice to end), periodic tenancy (auto-renews, notice required), tenancy at will, and tenancy at sufferance (holdover tenant).

An easement appurtenant requires dominant and servient tenements and runs with the land; an easement in gross benefits a person or entity; a license is revocable and is not an interest in land.

Four government powers over land: police power (zoning, building codes, no compensation), eminent domain (condemnation, just compensation required), taxation, and escheat.

A variance is hardship relief from dimensional standards (setbacks, height, lot coverage); a conditional use permit authorizes a listed use requiring discretionary approval; a nonconforming use is a lawful pre-existing use that may continue.

Subdivision Map Act: tentative map, then final map; a parcel map covers four or fewer lots and a tract map five or more, and the map must be recorded before lots may be sold, leased, or financed.

Adverse possession in California requires five years of actual, open and notorious, exclusive, continuous, and hostile use, plus payment of all property taxes by the claimant.

California's statewide rent cap (Civil Code 1954.52) limits annual increases for covered units older than 15 years to 5% plus CPI, never more than 10%, and requires just cause for eviction.

Fiduciary duties owed to the principal are care, obedience, loyalty, disclosure, accounting, and confidentiality (COLDAC); confidentiality survives termination of the agency.

Agency may be created by express agreement, implication, ostensible conduct, ratification, or estoppel; no written agreement is needed to create a fiduciary duty.

California requires the "Disclosure Regarding Real Estate Agency Relationships" form to be provided before the buyer or seller signs an offer or an agreement to buy, sell, or lease.

Dual agency is lawful in California only with the informed written consent of both principals; the dual agent must not reveal either party's confidential information to the other.

A seller's agent owes the buyer honesty and disclosure of known material facts affecting value or desirability, but owes loyalty, confidentiality, and advocacy only to the seller.

Prohibited conduct includes secret profit, self-dealing, commingling of trust funds, accepting undisclosed compensation from a third party, and acting for more than one party without written consent.

Termination occurs by expiration of term, performance, mutual agreement, revocation, or death or incapacity of the principal; an agency coupled with an interest survives death and cannot be unilaterally revoked.

The listing agent represents the seller, the selling (buyer's) agent represents the buyer, and the commission is negotiable and may be paid by either party to either brokerage.

Sales comparison approach: adjust the comparable to the subject. If the comparable is superior, subtract; if inferior, add. The subject is never adjusted.

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

Income approach: value = NOI ÷ cap rate; cap rate = NOI ÷ value; NOI = effective gross income − operating expenses, excluding debt service, depreciation, capital improvements, and income taxes.

Effective gross income = potential gross income − vacancy and collection loss + other income.

Gross rent multiplier = price ÷ monthly gross rent; estimated value = GRM × the subject's monthly market rent.

Front-end ratio = PITI ÷ gross monthly income; back-end ratio = total monthly obligations ÷ gross monthly income; conventional guidelines are 28%/36% and FHA is 31%/43%.

Cost recovery for income tax is straight line over 27.5 years for residential rental property and 39 years for nonresidential property; land is never depreciated.

Highest and best use must be legally permissible, physically possible, financially feasible, and maximally productive.

Equity = market value − loan balance; return on equity = annual cash flow ÷ equity.

Loan Estimate must be delivered or mailed within three business days of application and received no later than seven business days before consummation; the Closing Disclosure must be received at least three business days before consummation.

TILA/Reg Z right of rescission: three business days to cancel a refinance or home equity loan secured by the borrower's principal residence; unavailable for purchase-money or investment-property loans.

FHA 203(b): 3.5% minimum down payment (580+ credit score), upfront MIP of 1.75% of the base loan, plus annual MIP; VA: 0% down with a funding fee and a Certificate of Eligibility.

Conforming conventional loans are backed by Fannie Mae or Freddie Mac; PMI is required above 80% LTV and ends on borrower request at 80% LTV or automatically at 78% of original value.

ARM fully indexed rate = index + margin; periodic and lifetime caps limit payment increases, and the initial teaser rate is temporary.

LTV = loan amount ÷ the lower of price or appraised value; down payment = purchase price − loan amount.

One discount point = 1% of the loan amount and buys a lower note rate; points are paid at closing and are separate from the origination fee.

California usury limit is 10% per year (Constitution Article XV) on non-exempt loans; purchase-money mortgages on real property and licensed-broker loans over $2,500 are exempt.

California is a deed-of-trust state: after default the beneficiary may pursue nonjudicial foreclosure under the power of sale, with reinstatement rights before the sale and no post-sale right of redemption.

Valid deed requires a writing, a competent grantor, an identifiable grantee, an adequate legal description, the grantor's signature, and delivery plus acceptance; consideration is not required.

California's grant deed carries three implied covenants: the grantor has not previously conveyed the property, the property is free of undisclosed encumbrances, and the grantor will warrant and defend title.

A quitclaim deed conveys only whatever interest the grantor may have and carries no implied warranties.

Acknowledgment is required before recording; recording provides constructive notice of the recorded interest to the world.

California is a race-notice state: a later bona fide purchaser who takes without notice and records first prevails over a prior unrecorded interest.

Documentary transfer tax is $1.10 per $1,000 of consideration ($0.55 per $500); a county may add up to $0.55 per $500.

Section 1031 exchange: like-kind replacement property must be identified within 45 days and acquired within 180 days of closing; California requires clawback reporting when the replacement is out of state.

CLTA standard title coverage protects against record defects; ALTA extended coverage adds off-record risks and requires an inspection of the property.

Community property with right of survivorship passes to the surviving spouse without probate; tenancy in common has no survivorship and each interest is separately inheritable.

A salesperson must act under a responsible broker; only the broker may accept compensation from a client, and the salesperson is paid through the broker.

Advertising and solicitation materials must include the responsible broker's name and license identification number as required by the Business and Professions Code.

Client funds must be held in a trust account and must never be commingled with the broker's own funds; related records must be retained for three years.

California FEHA protected classes include race, color, religion, sex, gender identity and expression, sexual orientation, marital status, national origin, ancestry, familial status, source of income, disability, age, genetic information, and military or veteran status.

RESPA Section 8 prohibits kickbacks and unearned fee splits, and referral fees may not be paid to unlicensed persons.

The Transfer Disclosure Statement must be delivered as soon as practicable before transfer; if delivered after acceptance, the buyer may terminate within three days, or five days if delivered by mail.

The Natural Hazard Disclosure Statement discloses whether the property lies in a statutory flood, fire, seismic fault, landslide, or other hazard zone.

For a one-to-four unit residential sale, the seller's liquidated damages may not exceed 3% of the purchase price.

Commissions are negotiable and not set by law; agreeing with competitors on a rate or splitting the market violates antitrust law.

Elements of a valid contract: mutual assent (offer and acceptance), consideration, capacity, lawful object, and for real property a writing.

Statute of frauds: a contract for the sale of real property, or a lease longer than one year, must be in writing and signed by the party to be charged.

A counteroffer rejects and terminates the original offer; acceptance must be unqualified and communicated to the offeror.

An option requires consideration and is irrevocable for its stated term; the optionor may not revoke before expiration.

"Time is of the essence" makes stated deadlines enforceable; removal of a contingency shifts the associated risk to the buyer.

Remedies for breach: compensatory damages, specific performance (land is unique), rescission, and reasonable liquidated damages.

California statute of limitations is four years for a written contract and two years for an oral contract.

Novation substitutes a new party or obligation and discharges the original; assignment transfers rights, while delegation transfers duties.

Earnest money is credited to the purchase price at closing and is refundable when a contingency is not removed or waived.