Hot Terms & Tips

Taxation

Ad valorem:  According to value – sales tax

Progressive tax:  Rates increase with income – Federal Income Tax

Tax Shelter:  To shelter income from taxation – defer taxes

Fiscal Tax Year: No Darn Foolin Around – Nov 1st, Dec. 10th, Feb. 1st, Apr. 10th

Boot:  Money or property of unlike kind given in exchange.

Proposition 90:  Allows elderly person to transfer cost basis to another property.

Veteran’s property tax exemption:  $100,000

Homeowner’s tax exemption:  $7,000

Capital gain:  The taxable profit derived from the sale of a capital asset.

Special assessments:  Assessed to each property owner based on benefits derived.

Installment sale: Payment of capital gains over the entire contract period.

Street Improvements Act of 1911: Off-street improvements including sewers.  Owner must pay bill 30 days after receipt of funds.

Unadjusted basis:  Original cost

Adjusted basis:  Cost plus capital improvements.

Financing

Late payment penalty: Lenders cannot impose a late payment penalty until payment is more than 10 days late.

Promissory Note vs. Trust Deed: The terms of the promissory note will control if there is a conflict between the terms of the promissory note and the terms of the trust deed.

Incident of the debt: The trust deed is a mere incident of the debt.

Pledge:  The transfer or delivery of property to a lender to be held as security for repayment of a debt.  Opposite of hypothecate.

Mortgage vs. Trust Deed: When comparing mortgages and trust deeds, they differ in:

  1. number of parties
  2. statute of limitations
  3. transfer of title  

Foreclosure

Notice of Default:  Minimum time between the Notice of Default and the trustee’s sale is three months plus 20 days.

Right of Reinstatement: Trustor (borrower) has right of reinstatement (bring the loan current) up until five days prior to the trustee’s sale.

Deficiency Judgments: Deficiency judgments are only possible with a judicial (court) foreclosure on a non-purchase money loan.

Reconveyance deed:  The instrument used upon payment of the loan to reconvey title from the trustee to the trustor.

Government Regulations

Annual Percentage Rate (APR):  The relative cost of credit expressed in percentage terms.

RESPA:  Lender CANNOT charge the borrower for preparing the Uniform Settlement Statement.

RESPA: Uniform Settlement Statement must be given to the borrower at or before closing.

RESPA:  Referral fees (kickbacks) are prohibited.

Truth-in-Lending:  Borrower has the right to rescind until midnight of the third business day after the promissory note is signed, except on purchase-money loans.

Blind Ad:  An ad in which the name of the person placing the ad is not included.

Deeds

Reservation in a deed:  Retention of interest by the grantor. 

Exception in a deed:  Grantor withdraws or holds back part of the title.

Gift Deed:  A deed in which the consideration is “love and affection.”  May be voided by creditors of the grantor if the grantor was insolvent at the time of the gift.Quitclaim Deed:  Releases whatever interest the grantor has in the property.  Does not convey after-acquired title.

Methods of Acquiring Title

Testate: Dying with a will.

Intestate:  Dying without a will.  Property usually is distributed to the deceased’s heirs.  When no heirs claim the deceased property, it reverts to the State by escheat.

Escheat:  When a person dies without a will (intestate) and there are no heirs, the property reverts to the State.

Holographic Will: A will that is written, dated and signed in the testator’s handwriting. There is no such thing as a typed holographic will.  May not be signed with an “X”.

Nuncupative Will:  An oral will – No longer valid in California.

Legacy:  A gift of money or personal property by will, as in a bequest.

Devise:  A transfer of real property by will.  The donor is the devisor and the recipient is the devisee.

Ambulatory:  Not fixed; alterable.  A will is considered ambulatory because it can be changed.

Requirements of a formal will:  Signature and witness.

Know These Measurements

One township = 36 square miles

One section = 640 acres

One mile = 5,280 feet

One acre = 43,560 square feet

One square acre = approx. 208.7 square feet

One rod = 16.5 linear feet

One chain = 66 linear feet

One board foot = 144 cubic inches of wood

One cubic yard = 27 cubic feet

One square yard = 9 square feet

Listing of Real Property

Brokers earn their commissions when they find a buyer ready, willing and able to buy. The listing price is most likely a high market value.

Interpleader action:  Filed by broker when both the buyer and seller make demands on the broker for the buyer’s deposit after the sale falls apart.

Board Arbitration:  Settles disputes between agents.

Puffing: Exaggerated comments or opinions that paint an overly optimistic picture.

Brokers would be least likely to spend their advertising dollars on newspaper ads on open listings.

Optionor: owner; the person who gives the option.

Optionee: buyer; the person who may exercise the option. Novation:the substitution of a new obligation for an old one. 

The rate of commission for selling a business is determined by agreement between broker and owner (negotiable).

A broker that takes a listing that does not include an authorization to take a deposit, accepts a deposit as the agent of the buyer.

Escrow and Title Insurance

Prorations in escrow are based on a 360 day year and 30 day month.

Recurring Costs:  Pertain to impound account items such as taxes and insurance.

Escrow companies are primarily under the jurisdiction of the Corporations Commissioner.

Impound accounts belong to the trustor.

The escrow agent has primary responsibility for reporting sale information to the IRS.

Title Plant refers to all records of a title company relative to real estate transactions in a county.     Consists of all recorded documents on micro film stored as a grantor/grantee index.

Chain of Title: The exact history of conveyances and encumbrances affecting title to a property.

ALTA (American Land Title Association) Lender Policy: Protects lenders, usually requires a survey.

Color of Title: No title at all, just an appearance of ownership.

Cloud on Title: Any condition discovered by a title search that could affect the title.

Short Rate: The increased premium charged by an insurance company upon early cancellation of a  policy to compensate the insuror for the fact that the original rate charged was calculated on the full    period of the policy. 

Interim Use: The uses to which sites and improved properties may be utilized until they are ready for a more productive, highest, and best use.

Office Administration

Realtists®: A national organization of predominately black real estate brokers, known as the National Association of Real Estate Brokers (NAREB). Founded in 1947.

Turn-key project: Construction of a project from groundbreaking to completion.