SD Real Estate cheat sheet

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

Agency exists when a principal consents that an agent act on the principal's behalf and subject to the principal's control; real estate brokerage agency must be confirmed in writing in South Dakota.

Agency may be created by express agreement, implication, estoppel, or ratification; an agent who exceeds authority may bind the principal if the principal ratifies the act.

Payment of a commission does not by itself create agency; a broker may be compensated by a party the broker does not represent.

Dual agency or an in-company transaction requires informed written consent of all parties, and one party's confidential information may not be shared with the other.

Agency terminates by performance, expiration, mutual agreement, revocation by the principal, renunciation by the agent, death or incapacity of either party, destruction of the property, or bankruptcy of the principal.

Confidentiality and the duty to account survive termination of the agency relationship.

Material facts affecting the property must be disclosed to all parties regardless of which party the licensee represents.

Elements of a valid contract: offer and acceptance (mutual assent), consideration, legal capacity, and lawful purpose; real property contracts additionally require a writing under the statute of frauds.

A statute-of-frauds writing must identify the parties and the property, state essential terms, and be signed by the party to be charged.

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

An option is a unilateral contract; the optionor may not revoke during the option period when consideration was paid.

Contingencies such as financing, inspection, appraisal, and sale of the buyer's home must be satisfied or waived by the stated deadline to preserve the parties' rights.

A 'time is of the essence' clause makes stated deadlines enforceable; without it a court may allow a reasonable delay.

Remedies for breach include damages, specific performance, rescission, and liquidated damages; a liquidated damages clause must be a reasonable estimate and not a penalty.

Assignment transfers contract rights and duties; novation substitutes a new party and releases the original; the parol evidence rule bars prior oral terms when the writing is complete.

Earnest money is credited to the purchase price at closing and is typically the buyer's exposure for default when no contingency protects the buyer.

Freehold estates: fee simple absolute (largest bundle of rights), life estate, and defeasible fees (determinable, condition subsequent, executory interest).

Leasehold estates: estate for years, periodic tenancy, tenancy at will, and tenancy at sufferance.

Tenancy in common allows unequal undivided shares and no survivorship; joint tenancy requires equal shares, unity of time, title, interest, and possession, plus survivorship.

Tenancy by the entirety may be created only between spouses and includes survivorship; a creditor of one spouse generally cannot reach the property.

Easements arise by express grant, implication, necessity, prescription, or estoppel, and terminate by merger, release, abandonment, or prescription.

Encumbrances include liens (mortgage, tax, judgment, mechanic's), deed restrictions, easements, and encroachments; they burden title without necessarily changing ownership.

Lien priority generally follows recording order, with property tax liens ordinarily taking first; mechanic's liens relate back to the start of work.

Fixtures become realty based on annexation, adaptation, and intention; trade fixtures installed by a tenant remain personal property and are removable.

Severed mineral, oil, gas, and air rights may be owned separately from the surface estate.

LTV = loan amount divided by the lesser of sale price or appraised value; down payment = price minus loan amount.

PITI = principal + interest + taxes + insurance; the housing ratio compares PITI to gross monthly income, and the total-debt ratio adds all recurring obligations.

Common underwriting guidelines: about 28% housing ratio and 36% total debt ratio for conventional loans; FHA uses roughly 31%/43%.

Fully amortized loans retire principal over the term; balloon loans carry a lump-sum due date; interest-only loans produce no principal reduction.

One discount point equals 1% of the loan amount; points paid to buy down the rate are prepaid interest.

An ARM rate equals index plus lender margin, subject to periodic and lifetime caps; the initial rate is a teaser rate.

RESPA/Regulation X: Loan Estimate within 3 business days of application, Closing Disclosure at least 3 business days before consummation, and Section 8 bars fees for referrals.

Truth in Lending/Regulation Z requires APR disclosure and gives a 3-business-day rescission right on refinances and home equity loans secured by a principal residence.

A deed of trust involves trustor, trustee, and beneficiary and can be foreclosed nonjudicially under a power of sale; mortgage foreclosure procedure varies by state.

Market value assumes a willing buyer and seller, both informed, neither under undue pressure, with reasonable market exposure.

Elements of value: demand, utility, scarcity, and transferability (DUST).

Sales comparison approach: adjust each comparable for differences; subtract when the comparable is superior, add when it is inferior.

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

Income approach: value = net operating income divided by capitalization rate; NOI = effective gross income minus operating expenses, excluding debt service and depreciation.

Gross rent multiplier = sale price divided by gross monthly rent; a lower GRM indicates more rental income per dollar of price.

Depreciation types: physical deterioration (curable or incurable), functional obsolescence, and external (economic) obsolescence.

Key principles: substitution, highest and best use, conformity, progression and regression, contribution, anticipation, balance, and supply and demand.

Appraisals for federally related transactions must follow USPAP and be performed by a state-licensed or certified appraiser.

Deed requirements: competent grantor, identifiable grantee, words of conveyance, legal description, consideration (usually), grantor's signature, delivery, and acceptance.

General warranty deed covenants: seisin, right to convey, against encumbrances, quiet enjoyment, and warranty forever.

A special warranty deed covers only defects created by the grantor; a quitclaim deed transfers whatever interest the grantor holds with no warranty.

Recording protects a purchaser; under a race-notice statute the later purchaser prevails only by recording first and taking without notice.

Notice may be actual, constructive (via the recorded record), or inquiry (facts that would prompt further investigation).

Title evidence is an abstract of title with an attorney's opinion or a title insurance commitment and policy; Torrens registration issues a state certificate of title.

Involuntary transfers include foreclosure, tax sale, eminent domain, adverse possession, escheat, bankruptcy, and divorce decrees.

Adverse possession requires open, notorious, hostile, continuous, and exclusive possession for the statutory period, plus tax payment in some states.

Marketable title is title free of reasonable doubt and objectionable encumbrances, as sale contracts typically require at closing.

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

Prohibited practices include refusing to rent or sell, offering different terms, discriminatory advertising, blockbusting, steering, redlining, and denying reasonable accommodations.

Exemptions include an owner selling or renting without an agent and without discriminatory advertising, the owner-occupied four-or-fewer-unit exemption, and housing for older persons.

For disability, a landlord must permit reasonable modifications at the tenant's expense and provide reasonable accommodations in rules, policies, and services.

Housing for older persons qualifies when 100% of units are occupied by persons 62 or older, or at least 80% by persons 55 or older with published policies and age verification.

Lead-based paint rules for pre-1978 housing require disclosure of known hazards, delivery of the EPA pamphlet, and a 10-day opportunity to test.

South Dakota law requires a seller of residential real property to deliver a written property condition disclosure statement to the buyer.

Antitrust law bars price fixing, group boycotting, and market allocation among brokers; commission rates are negotiable.

RESPA Section 8 prohibits paying or receiving anything of value for the referral of settlement service business.

SDCL chapter 36-21A governs real estate licensing in South Dakota and is administered by the South Dakota Real Estate Commission.

A salesperson must be associated with and supervised by a licensed broker and may be compensated only through that broker.

Unlicensed persons may not perform brokerage activity for compensation, but may handle clerical and administrative tasks that do not involve negotiating or advising on price.

A broker must maintain a trust or escrow account for client funds and may not commingle client money with personal or business funds.

Advertising must identify the brokerage or broker by name; blind advertising that omits the broker's identity is prohibited.

Grounds for discipline include misrepresentation, fraud, negligence, conversion of trust funds, and violations of fair housing law or Commission rules; sanctions include fines, probation, suspension, and revocation.

Licensees must complete required continuing education and renew before expiration; practicing on an expired license is a violation.

In-company transactions require the written consent of all parties, and the limited scope of representation and confidentiality must be disclosed in writing.

Failure to account for or deliver funds or documents belonging to a client is a disciplinable violation.