Real Estate cheat sheet

Real property includes land, attachments (fixtures), and the bundle of rights; personal property is movable and transferred by bill of sale.

Fixtures test: method of attachment, adaptation/integration, and intention of the parties; trade fixtures installed by a tenant generally remain tenant property if removed before lease end.

Riparian rights attach to land bordering a watercourse; littoral rights attach to land bordering a non-flowing body such as a lake or ocean.

Accretion = gradual deposit of soil by water; reliction = water recedes exposing land; erosion = gradual loss; avulsion = sudden change, boundaries unchanged.

Metes and bounds description requires a point of beginning, courses (direction), and distances, and must close.

Rectangular survey: township = 6 miles square = 36 sections; each section = 1 square mile = 640 acres.

Lot-and-block (recorded plat) descriptions reference a subdivision map filed with the county; monuments control over distances when they conflict.

Forms of co-ownership: tenancy in common (no survivorship, may hold unequal shares), joint tenancy (equal shares, four unities, survivorship), tenancy by the entirety (spouses), community property (spouses, nine states).

A life estate terminates at death of the measuring life; a life tenant must pay ordinary taxes and interest but not principal, and may not commit waste.

Agency is created by express agreement, implied agreement, ratification, or estoppel; consideration is not required.

Single agency represents one party; transaction broker or dual agency represents both and requires informed written consent where permitted.

Fiduciary duties (OLD CAR): obedience, loyalty, confidentiality, accountability, reasonable care and skill, plus disclosure.

Confidentiality survives termination of the agency relationship; loyalty and obedience do not.

Designated agency assigns different licensees within one brokerage to each party, avoiding dual agency at the licensee level.

Subagency: a cooperating broker who represents the listing broker's seller client rather than the buyer.

A listing agreement is an employment contract; an exclusive right to sell earns a commission regardless of who procures the buyer.

Termination occurs by performance, expiration, mutual agreement, revocation, renunciation, or operation of law (death, incapacity, bankruptcy, destruction).

Elements of a valid contract: competent parties, mutual assent (offer and acceptance), lawful object, and consideration.

Statute of Frauds requires real estate sale contracts and leases over one year to be in writing and signed by the party to be charged.

An offer may be terminated by revocation, rejection, counteroffer, lapse of time, or death/incapacity before acceptance.

Assignment transfers rights and duties; novation substitutes a new party and extinguishes the original obligation.

Liquidated damages clauses in sale contracts must be reasonable; earnest money is typically the measure.

Contingencies (financing, inspection, appraisal) must be satisfied within stated deadlines or the contract may be voidable.

Breach remedies: specific performance (unique property), damages, rescission, and forfeiture of earnest money.

Time is of the essence clauses make deadlines strictly enforceable; without them, reasonable time applies.

A contract with a minor is voidable by the minor; contracts for an illegal purpose are void.

Loan-to-value ratio = loan amount / property value (or purchase price, whichever is lower).

Conventional loans are not government-insured; FHA, VA, and USDA loans are government-backed with different underwriting rules.

PITI = principal + interest + taxes + insurance, the standard measure of a monthly housing payment.

Discount points are prepaid interest; one point = 1% of the loan amount and lowers the note rate.

Amortization: level payments where early payments are mostly interest; straight loans are interest-only.

Adjustable-rate mortgages have a rate index plus margin, periodic caps, and a lifetime cap.

Truth in Lending (Regulation Z) requires disclosure of APR and finance charges within three business days of application.

RESPA prohibits kickbacks and unearned fees and requires a Loan Estimate and Closing Disclosure.

Redlining (denying credit based on neighborhood demographics) is illegal under the Fair Housing Act and ECOA.

Types of tenancy: estate for years (fixed term, no notice needed), periodic (renews, notice required), at will, and at sufferance (holdover).

Gross lease: tenant pays rent only; net lease: tenant pays rent plus some or all operating expenses (single, double, triple net).

Percentage lease ties rent to tenant's gross sales, common in retail.

Security deposits: many states require separate escrow, an itemized statement, and return within a statutory period; normal wear and tear cannot be charged.

Actual eviction removes the tenant; constructive eviction occurs when conditions render the premises uninhabitable and tenant may vacate and stop rent.

Habitability warranty (implied) requires residential landlords to maintain safe, functioning premises regardless of lease language.

Assignment transfers the entire remaining leasehold; subletting transfers less than the whole term and retains privity with the landlord.

Property manager duties: budgeting, rent collection, maintenance, accounting to the owner, and compliance with fair housing and licensing law.

Area of a rectangle = length x width; one acre = 43,560 square feet.

Commission = sale price x commission rate; split = commission x broker's share.

Loan balance math: amount borrowed = price minus down payment; down payment percent = down payment / price.

Gross rent multiplier = price / gross monthly (or annual) rent; used to estimate value from income.

Capitalization approach: value = net operating income / cap rate; NOI = gross income minus vacancy and operating expenses (not debt service).

Sales comparison approach adjusts comparables to the subject; if the comp is superior, subtract; if inferior, add.

Cost approach: value = replacement cost minus depreciation plus land value.

Real property tax = assessed value x tax rate (mill rate: one mill = $1 per $1,000 of assessed value).

Prorations use the closing date; typical convention charges the day of closing to the buyer for prepaid items and to the seller for accrued items.

Deed requirements: competent grantor, named grantee, words of conveyance, legal description, signature of grantor, and delivery with intent to convey.

General warranty deed contains the broadest covenants: seisin, quiet enjoyment, further assurance, warranty, and encumbrances.

Special warranty deed warrants only against defects created by the grantor; quitclaim deed conveys whatever interest the grantor has with no warranty.

Title passes on delivery and acceptance of the deed, not on recording; recording protects against subsequent bona fide purchasers.

Actual notice, constructive notice (recording), and inquiry notice determine a purchaser's status.

Adverse possession requires actual, open and notorious, exclusive, hostile, and continuous possession for the statutory period.

Title insurance protects against covered title defects; a standard owner's policy excludes matters not of record and survey issues.

Escrow/closing: settlement statement allocates debits and credits; seller typically pays transfer taxes and owner's title policy in many jurisdictions.

Probate transfers property by will or intestate succession; a deed in lieu of foreclosure transfers title to the lender.

Zoning regulates use, height, bulk, and density; a nonconforming use predates the ordinance and may continue.

Variance grants relief from hardship of the ordinance; special/conditional use permit allows a specific use in a zone.

Spot zoning (singling out a parcel for different treatment) is generally invalid; zoning must be reasonably related to public welfare.

Eminent domain requires public purpose and just compensation; inverse condemnation is a taking without compensation.

Police power (zoning, building codes, health codes) regulates without compensation; escheat is reversion to the state.

Wetlands and waterways are regulated under the Clean Water Act; flood zones affect insurance and lending requirements.

CERCLA (Superfund) imposes liability on current owners, past owners at time of disposal, generators, and transporters.

Lead-based paint disclosure is required for pre-1978 housing; asbestos and radon disclosure rules vary by state.

Subdivision regulation includes plat approval, impact fees, and dedications of land for public use.

Licensing is state-based; a salesperson/agent works under a broker, and a broker may operate independently.

Activities requiring a license: listing, selling, buying, leasing, and negotiating for compensation on behalf of another.

Commissions are negotiable and set by agreement; a licensee may not pay a commission to an unlicensed person.

Commingling (mixing client funds with personal/brokerage funds) and conversion (misuse) are prohibited; trust accounts are required.

Dual agency and designated agency rules vary by state; disclosure and consent are typically required.

Continuing education and license renewal are required; failure to renew may require reinstatement or reapplication.

A licensee must disclose material facts, agency relationships, and any interest in the transaction.

Antitrust: price-fixing, group boycotts, and allocation of markets among brokers are illegal.

Referral fees between licensed brokers are generally permitted; fees to unlicensed persons are not.

Fair Housing Act prohibits discrimination based on race, color, religion, sex, national origin, familial status, and disability.

Prohibited acts include refusing to rent/sell, different terms, discriminatory advertising, steering, blockbusting, and redlining.

Disability provisions require reasonable accommodations and reasonable modifications at the tenant's expense (with exceptions for common areas).

Familial status protects households with children under 18, pregnant women, and those securing custody.

Housing for older persons exemption: 80/20 rule or 100% of units occupied by persons 62+ qualifies.

Advertising must avoid discriminatory language; words describing property features are acceptable, preferences for protected classes are not.

ECOA prohibits discrimination in credit based on protected classes and requires adverse action notices.

RESPA prohibits kickbacks and unearned fees and requires disclosure of settlement costs.

Section 1031 exchanges defer capital gains on like-kind investment property; primary residences use Section 121 exclusion.