MT Real Estate cheat sheet

Montana real estate licensing is administered by the Board of Realty Regulation within the Department of Labor and Industry's Business Standards Division.

Montana issues salesperson, broker, and property management licenses; managing or renting another person's property for compensation falls under the property management license.

A salesperson must be affiliated with and supervised by a licensed broker, and the broker is responsible for the salesperson's real estate activity.

Advertising must show the name of the affiliated broker; a salesperson may not advertise property in the salesperson's own name.

Commissions are always negotiable and may not be set by any board, association, or agreement among competitors.

Trust funds such as earnest money and rents must be deposited in a trust account and may not be commingled with the broker's operating or personal funds.

Grounds for discipline include fraud, misrepresentation, undisclosed dual agency, commingling or conversion of trust funds, and unlicensed brokerage activity.

License renewal requires completion of Board-approved continuing education before the expiration date; practicing on a lapsed license is a violation.

Licensing exemptions include owners selling their own property, attorneys performing legal work, and court-appointed fiduciaries acting under court authority.

A written agency disclosure identifying whom the licensee represents must be given to the consumer at the earliest practicable time, before confidential information is shared.

Dual agency requires the informed written consent of both buyer and seller; without that consent the licensee may not represent both parties.

Fiduciary duties owed to a principal are care, obedience, loyalty, disclosure, accounting, and confidentiality.

A customer who is not represented is owed honesty, fairness, and disclosure of known material facts, but not fiduciary duties.

Confidentiality continues after the agency ends; the duties of loyalty and full disclosure generally end when the representation ends.

Compensation does not create agency: a buyer's broker may be paid from the transaction commission and still represent only the buyer.

A licensee must disclose in writing any personal interest in the property or transaction, such as purchasing the listing personally.

An agent must disclose known material facts about the property or about a party's ability to perform, even when the fact may kill the deal.

Buyer agency and listing agreements should be in writing and should state the term, the compensation, and whether the agency is exclusive.

Fee simple absolute is the largest estate of ownership; a defeasible fee can be lost on a stated condition or event, and a life estate ends at the death of the measuring life.

Leasehold estates (estate for years, periodic tenancy, tenancy at will, tenancy at sufferance) are personal property rather than real property.

Liens are money encumbrances (mortgage, tax, judgment, mechanic's lien); easements, covenants, and encroachments are non-money encumbrances.

An easement appurtenant benefits and runs with a dominant parcel; an easement in gross benefits a person or entity and has no dominant tenement.

Real property tax liens and special assessments generally take priority over other liens regardless of recording date.

Government powers over land are police power (zoning), eminent domain (condemnation with compensation), taxation, and escheat.

Montana water rights follow prior appropriation, first in time first in right, administered by the Department of Natural Resources and Conservation.

Montana stream access law allows public recreational use of surface waters up to the ordinary high-water mark, including the bed and banks.

Restrictive covenants run with the land when there is intent, notice, a touch-and-concern purpose, and privity; enforcement can be lost through waiver or changed conditions.

Elements of a valid contract are offer, acceptance, consideration, legality of object, and competent parties.

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

A counteroffer terminates the original offer; rejection or lapse of time also ends the power of acceptance.

Contingencies such as financing, inspection, and appraisal must be satisfied or waived in writing by the stated deadline or the contract may be terminated.

The buyer receives equitable title when the contract is signed; legal title passes on delivery and acceptance of the deed at closing.

Remedies for buyer default commonly include earnest money forfeiture as liquidated damages; for seller default, specific performance and damages.

A time-is-of-the-essence clause makes contract deadlines enforceable rather than merely directory.

Licensees may fill in blanks on preprinted contract forms but may not draft contract language or give legal advice, which is unauthorized practice of law.

Assignment transfers a party's contract rights and duties; novation substitutes a new party and releases the original party from liability.

Montana is a lien theory state: the borrower keeps title and the lender holds a lien, and deeds of trust with a power of sale permit nonjudicial foreclosure.

Monthly housing expense includes PITI plus mortgage insurance, HOA dues, and any payment on secondary financing.

Qualifying ratios compare housing expense to gross monthly income (front end) and total monthly debt to income (back end).

Amortized payment = principal x [i(1+i)^n] / [(1+i)^n - 1], where i is the monthly interest rate and n the number of payments.

One discount point equals one percent of the loan amount, paid at closing to buy down the interest rate.

The Loan Estimate must be delivered within three business days of application; the Closing Disclosure at least three business days before consummation.

Conventional, FHA, VA, and USDA loans differ in mortgage insurance, down payment, and underwriting; VA and USDA commonly allow 100 percent financing.

Loan-to-value = loan amount divided by the lesser of sale price or appraised value; the down payment is the difference.

An adjustable-rate mortgage has an initial fixed period, periodic and lifetime caps, and a margin added to the index.

Market value assumes a willing and informed buyer and seller, no undue stimulus, and reasonable exposure in the open market.

In the sales comparison approach, adjust comparables to the subject: subtract when the comparable is superior, add when it is inferior.

Cost approach: value = replacement or reproduction cost - accrued depreciation + land value; most reliable for new or special-purpose property.

Income approach: value = net operating income / capitalization rate; cap rate = net operating income / value.

Gross rent multiplier = sale price / gross monthly rent; indicated value = GRM x the subject's gross monthly rent.

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

Depreciation takes three forms: physical deterioration, functional obsolescence, and external or economic obsolescence.

A comparative market analysis or broker price opinion is not an appraisal and may not be presented as one; Montana appraisers are licensed by the Board of Real Estate Appraisers.

A valid deed requires a competent grantor, an identifiable grantee, words of conveyance, a legal description, a consideration recital, and the grantor's signature.

Title passes only on delivery of the deed with intent to convey and acceptance by the grantee; recording is not required as between the parties.

A general warranty deed contains six covenants; a special warranty deed covers only the grantor's own acts; a quitclaim deed carries no warranty.

Deeds and mortgages are recorded with the county clerk and recorder, which provides constructive notice to the world.

Montana's recording statute protects a later purchaser who takes without notice of a prior interest and records first (race-notice).

An owner's title policy protects the buyer up to the purchase price; a lender's policy protects only the outstanding loan balance.

On a settlement statement the seller is credited with the sale price and debited for payoff and costs; the buyer is debited with the price and credited with the loan.

Prorations split expenses at closing: annual items are typically prorated on a 365-day year and monthly rent on the actual days in the month.

Federal protected classes are race, color, religion, sex, national origin, familial status, and disability; Montana's Human Rights Act also protects marital status and age.

Prohibited conduct includes steering, blockbusting, redlining, discriminatory advertising, and refusing to show or negotiate for a protected-class buyer.

Exemptions include an owner selling or renting a single-family home without a broker and without discriminatory advertising, owner-occupied buildings of one to four units, religious organizations, and private clubs.

Disability rules require reasonable accommodations in rules and services, reasonable modifications at the tenant's expense, and accessible design in covered new multifamily construction.

Antitrust violations under the Sherman Act include price fixing, group boycotts, market allocation, and tying arrangements; commissions are always negotiable.

CERCLA imposes strict liability on current owners and operators; the innocent landowner defense requires all appropriate inquiries before acquisition.

Sellers and landlords of pre-1978 housing must disclose known lead-based paint hazards and give buyers a 10-day opportunity to test.

Montana's property disclosure act requires sellers of residential property of one to four units to deliver a written disclosure of known defects, subject to statutory exemptions.

Environmental items to investigate or disclose include radon, mold, asbestos, underground storage tanks, wetlands, and floodplains.

A property manager is the owner's general agent whose authority comes from the management agreement and covers leasing, rent collection, and maintenance.

Montana issues a separate property management license for leasing and managing another person's property for compensation.

Tenant deposits and rents must be held in a trust account with owner funds kept separate; no commingling or conversion is permitted.

Montana's Residential Landlord and Tenant Act governs deposit returns, notice to enter, habitability, and eviction procedure.

Nonpayment or lease violations are handled with statutory written notice and court eviction; self-help lockouts and utility shutoffs are prohibited.

An assignment transfers the tenant's entire remaining term and creates privity with the landlord; a sublease transfers part of the term and leaves the original tenant liable.

Lease types include gross (landlord pays expenses), net (tenant pays taxes, insurance, and maintenance), and percentage (base rent plus a share of sales).

Commission = sale price x commission rate, then split between brokers as agreed.

Seller net = sale price - commission - closing costs - loan payoff, adjusted for prorations and credits.

Required sale price to net a target = (desired net + costs + payoff) / (1 - commission rate).

Proration = annual or monthly amount / days in the period x days attributable to the party.

Prepaid interest = loan balance x annual rate / 365 x days from closing to the end of the month.

Points charged = loan amount x point percentage; one point equals one percent of the loan.

Loan-to-value = loan / value; down payment = price - loan amount; percent change = (new - old) / old.

Area conversions: one acre = 43,560 square feet; one section = 640 acres = one square mile.

Price per square foot = sale price / square footage, used to compare properties and adjust comparables.