RE.principles.aggregate.student.12ed Real 3305

8/18/2019 RE.principles.aggregate.student.12ed Real 3305

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by: Charles J. Jacobus

12th edition

Randall S. Guttery, Ph.D.

Professor of Real Estate

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TABLE OF CONTENTS: PP Slides

Ch. 1 3-10 Ch. 9 144-158 Ch. 17 284-299

Ch. 2 11-31 Ch. 10 159-171 Ch. 18 300-309

Ch. 3 32-63 Ch. 11 172-194 Ch. 19 310-323

Ch. 4 64-82 Ch. 12 195-208 Ch. 20 324-337

Ch. 5 83-94 Ch. 13 209-224 Ch. 21 338-398Ch. 6 95-105 Ch. 14 225-239 Ch. 22 399-411

Ch. 7 106-119 Ch. 15 240-260 Ch. 23 412-422

Ch. 8 120-143 Ch. 16 261-283 Ch. 24 423-434


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Chapter 1

Introduction to Real Estate

_______________________________________

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Property owner

decides to sell

Individual

becomes a

licensed real

estate agent (9)

Listing

Agreement (10)

Offer and

acceptance (8)

Buyer Financing

Closing or

escrow (22)

Ownership

Identify the property (2)

Property rights involved (3)

Value of the property (21)

Contract law (7)

Buyer evaluates property (21) Contract law (7)

Deed of trust (15) Lending practices (15, 16)

Sources of financing (17,18)

Title search and title insurance (14)

Deed preparation (13)

Forms of ownership (4)

Leases (20)

Condo, co-op, and PUD (6)

Taxes and assessments (5)

Land-use control (23)

FIGURE 1.1

A Typical Real Estate

Transaction

4

Title shows ownership

Deed is how ownership is transfered


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Real Estate Business

• Brokerage

• Sub-divider

• _________________

• Builder / Contractor

• Mortgage Banker /

Broker

• Valuation / Appraisal

• Corporate RE

• __________________

• Government Services

• Consulting

• Research and

Education

• __________________

• Secondary Mortgage

Market

5

developer

Property Management

Title Company


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Real Estate Decisions

• Investment

• _____________

• Refinance

• Exchange (IRC

1031)• _____________

• Location

• Rent v. Buy

• Diversification

• _____________

6

Renovation

Default

Disposition (Disposing)


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Real Estate Types

• _______________

– SFD, condo, townhouse, cooperative, 2-4 unit, MF,apartment

• _______________ – Office, shopping center, hotel, retail, special-use

• _______________

–

Warehouse, manufacturing, plant, factory• _______________

– Lots, acreage, farm, timber, agriculture

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Residential

Commercial

Industrial

land


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Real Estate Contracts

• ______________ / __________________

• Promissory Note

• ____________________

• Earnest Money Contract

• Lease

• Option

• Mortgage-Backed Securities (MBS)

• ____________ / ________________

8

Mortgage Deed of Trust

Listing Agreement

Title Deed


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How to Raise Capital

• Sell Assets

– ______________, but no longer have use of asset

• Increase Liabilities

– ______________: Restrictions and loss of control

– ______________: Financial Risk of subordination

– Issue _______________: Very short-term solution

– Issue _______________: Dilution of ownership

9

Raise Capital

Third party borrowing

Sell long term bonds

commercial paper

Stock


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Competitive v. Real Estate Markets

Competitive Real Estate

Free Entry & Exit Restricted Entry & ExitLarge Number of

Buyers and Sellers

Few Buyers and One

Seller

Perfect Information High Information CostsHomogeneous Asset Heterogeneous Asset

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Chapter 2

Nature and Description of Real Estate

_______________________________________

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Economic Characteristics of Land

• Scarcity – uniqueness may make parcel scarce

• ___________ – improvement by development

•

Fixity – permanence due to long economic life• __________ (location preference) – how it

interacts with other parcels

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modification

situs


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Physical Characteristics of Land

• Immobility – fixed in one location

•

_____________________ – land is permanent

• Heterogeneity – unique location

13

Indestructibility


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Legal Characteristics of Land(Bundle of Rights)

• Possession: right to _____ and exclude others

• ________________: right to use and enjoy

without interference from others

• Control: right to ________ property physically

• Dispose: right to convey any or all of the

property14

Use and enjoyment

control

occupy


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What is Real Estate?

• Land: sub-surface, surface and air rights

• Improvements: anything permanently affixed

to the land

• _______________: possession, use and enjoy,

control, dispose

•

Realty = land + improvements• Real Property = rights associated with realty

• Real Estate = ________________________

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Bundle of rights

Realty + Real Property


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Real Estate’s Dimensions

Land includes the surface of

the earth, the sky above,and everything to the

center of the earth.

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Appurtenances

• A right, privilege or improvement that belongs

to and passes with the land, but is not

necessarily a part of the land

• E.g., easement, right-of-way

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Water Rights

• __________ Rights – when property borders a

river or stream (navigable?)

• ___________ Rights – when property borders

a lake, sea, pond…

– If navigable, own to the mean high-water mark

• Landowners do not have absolute ownership of water

that flows through or past their land; owned by public

• They do have the right to use it in a reasonable manner

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Riparian

littoral


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Land Descriptions

1. Informal reference – street address and city

2. Metes & Bounds

3. Rectangular Survey System4. Recorded Plat

5. Assessor Parcel Number

6. Reference to documents – refer to anotherpublicly recorded document that contains a

full legal description of the parcel

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2. Metes and Bounds

•

Identifies a parcel by specifying its“_____________________________”

• Point of Beginning (POB) – corner where the

parcel survey begins• Man-made or natural monument is placed at

POB, but may disappear over time

•

Distance and direction to other corners follow ____________________ back to POB

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shape and boundaries


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Moving in a clockwise direction from the point of beginning, set the center

of a circle compass on each corner of the parcel to find the direction of travel

to the next corner.

Naming Directions

for a Metes and Bounds Survey

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Describing Land by Metes and Bounds

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3. Rectangular Survey System

•

Based on latitude lines (E-W) and longitude lines(N-S) North and West of Ohio River

• Certain latitude lines serve as ________________

• Certain longitude lines serve as principal

______________ (See Fig. 2.5 below)

• Quadrangle (check) is 24 miles x 24 miles (See

Figure 2.4 in Jacobus, p. 23)

• Township is 6 miles x 6 miles

• Section is ______________________

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baselines

meridians

1 mile x 1 mile


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The public land survey system of the United States

Parallels and Meridians (Fig. 2.5)

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Fig. 2.6 Township Divided into 36 Sections

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Fig. 2.7 One Section (640 Acres)

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4. Recorded Plat

• Shows the location and boundaries of individual

properties

• A.k.a., Lot-and-Block, Recorded Map, RecordedSurvey

• Based on surveyor’s plat filing

•Each parcel is assigned a lot # and block #

• All plats are placed in Plat Books

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Land Description by Recorded Plat (Fig. 2.8)

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The tax assessor assigns every parcel of land in the county its own parcelnumber. For example, the westernmost parcel (lot 50) in the map wouldcarry the number 34-18-8, meaning Book 34, Page 18, Parcel 8.

5. Assessor’s Map (Fig. 2.9)

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Vertical Land Description (Fig. 2.10)

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Chapter 3

Rights and Interests in Land

_______________________________________

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Relationship Between Participants

•

Investor-Lender: mortgage (DoT) andpromissory note

• Investor-Tenant: ______________

• Investor-Government: _______________

• Lender-Tenant: provider of cash flows toservice the lender’s loan

• Lender-Government: _________________

• Tenant-Government: protection of tenants’safety, health and welfare (SHW)

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Lease

Taxation

Restrictions on what lenders can and cannot do


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Government and Real Estate

•

Impact felt by all• Restricts and influences rules, regulations,

taxation and nature of property rights

•

Taxes both ___________ and _____________• Priority claim over all income

– Ordinary income taxes

– Ad valorem property taxes

– Capital gains taxes

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income property


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Federal, State and Local Government

• Federal: tax RE income

• State: determine most RE laws – Lien theory vs. title theory (Ch. 4 & 15)

– Water rights, tax RE income

•

Local: municipality, city, county – Determine building, fire and safety codes

– _______________ and ____________________

– Ad valorem property taxes

–

Rent controls – Urban planning

– Most significant government agency in RE decisionmaking

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Zoning Setbacks


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Rights and Interests in Land Overview

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• The right to tax _________________________________

• Provides money for schools, fire protection, parks,

libraries, police, museums, etc.

• If property taxes are delinquent, government can seize

ownership and __________________________

1. Property Taxes

Government Limitations (4)

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property to raise revenue

sell the property


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• The right of government (5th Amendment) to take

private property for public use, upon payment of just

compensation•Latin for supreme lordship

• ___________________ = legal proceeding to acquire

the property via E.D.

• Value as of the date of condemnation

• Severance damages & Cost to Cure must be paid, too

2. Eminent Domain

Government Limitations

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Condemnation


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• Right of government to regulate private property

for the protection of general public’s _________,

_____________________

• Building, fire and safety codes, zoning and planning

laws

• Differs from E.D. because no legal “taking,” so no

compensation is paid for restricting the use• Has the most impact on land value

• Laws must be in the public interest and applied

__________________________

3. Police Power


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Safety

Health, and wellfare

Even handidly


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• Means to “ fall back ”

• Ownership of property passes to the governmentif one dies __________________ without heirs or

lineal descendents

• Government is “owner of last resort”

4. Escheat


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intestate


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Seven Sources of Law

•

U.S. Constitution• Laws passed by ____________________

• Federal regulations of Congressional

committees and government agencies• State __________________

• State laws

• Local ordinances• ___________________________

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Congress

Constitution

Court cases


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Fee Simple

• Estate: one’s legal interest or rights in land

• Fee Simple: most comprehensive estate one canhold in real estate

• ______________: refers to the ownership

• Encumbrance: any ________________ claim, right,lien, estate or liability that limits the fee simple title toproperty

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Title

nonpossesory


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• Property rights are what give value to the real estate

• Property rights are subject to limitations imposed by

the public (government) and privately (encumbrances)

• _____________ limitations include taxation, eminent

domain, police power and escheat

• ______________ limitations include liens, leases,

encroachments, easements and deed restrictions

Real Estate as a

Bundle of Property Rights

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Public

Private


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Real estate ownership is, in actuality, the ownership of rights to land.The largest bundle available for private ownership is called “fee simple”.

The Fee Simple Bundle of Rights

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Devise real estate by will after death


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Note that the fee simple bundleshrinks as an owner voluntarily

removes rights from it.

Removing Sticks from the Fee

Simple Bundle

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Right or Benefit Stick in Bundle

Control MortgageLeaseImpose covenants or conditionsGrant easementGrant licenseBuild or remove structures

Use & Enjoy Occupy as residenceUse as place of businessFarmMine/drill for oil, etc.Place of recreation

Possession Maintain privacyNon-trespass

Disposition Sell or refuse to sellGiveWill Abandon

Real Estate as a Bundle of

Property Rights

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Private Limitations: Encumbrances (5)

• 1. Easement: Right or privilege one has to use

the land of another

• Created in one of three ways:

– ____________: a written document allowing one

to do something

– Implication: the right to cross over another’s

property to get to your land

– Prescription: a right created by use of another’sproperty as easement for a period of time

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Grant


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Types of Easements (2)

• Easement Appurtenant: the right to cross over aproperty in front in order to get to a property inback (e.g., driveway)

– “runs with the land” and non-personal

–

Servient estate - ____________ lot – Dominant estate - ___________ lot

• Easement in Gross: given to a party and “runs

with the user” (e.g., utility WET PIGS) – No dominant or servient estates

– Holder has right to sell, assign or devise easement

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front

back


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Easement Termination

• Lack of use

• Release from dominant estate owner

• Purpose ___________________________

• Combining the dominant and servient estates

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ceases to exist


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Commonly Found Easements

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Commonly Found Encroachments

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•

3. Liens: legal claim against a property by aparty other than the owner that, if not

satisfied, can be enforced in the courts to sell

the property

• Purpose is to __________________________

• Oldest lien satisfied first

•

“Writ of Execution” – petitions sheriff to seizeand sell collateralized property to __________

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secure the payment of a debt

satisfy the debt


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Lien Examples

• Property tax lien

• Mechanic’s lien

• ____________ lien – involuntary and general

• _____________ lien – voluntary and specific

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judgement

Mortgage


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• 4. Deed Restrictions: limitations on the use ofreal property created by language in the deedwhen ownership is transferred

•Must be ______________ and ___________

• Right to enforce deed restrictions areconveyed from developer to HOA, generally

•

Examples: minimum sqft of LA, architecturaldesign, fence type, building materials, paintcolor, rear garages, height restrictions, …….

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lawful reasonable


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•

5. Leases: leasehold estate with no ownership,but possessory and for a definite duration

• Owner gives up “right of possession” and

“right to use and enjoy” in exchange for rent

• Owner may give up “right of control” for some

property types (e.g., _________________)

•

Owner has reversionary interest• Lease is both a contract and a _____________

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industrial

conveyance


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Leasehold Estates (4)

• Estate for Years: lease with a fixed term

• Estate from Period to Period: when original lease

expires, new lease is “____________________”

• Estate at Will: tenant occupies as long asconvenient for landlord

– May be terminated by ________________at any time

• Estate at Sufferance: holdover tenant who usuallyis not paying FMV rent

– Becomes Periodic Estate if landlord accepts any rent

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month to month

either party

Estates in Land (4)


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Estates in Land (4)

• 1. Freehold Estates

– Life Estates• Pur Autre Vie – “for the life of _______________”

• Regular – for the life of ________________

–

Fee Estates• Fee Simple

• Qualified (Defeasable) Fee

– Reversionary future possessory interest for yourself

–Remainder future possessory interest for remaindermen

– Contingent vs. Vested future interests

– Prohibition of _______________

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the user

another

d ( )


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Estates in Land (4)• 2. Leasehold Estate

• 3. Statutory Estates

– Dower – rights of ___________ as survivor

– Curtesy – rights of _____________ as survivor

–

Community property – 10 states require all propertyacquired during marriage to be community

• At death, 1/2 retained by survivor and 1/2 passes to LD&H

• Terminates upon death or _______________

– Homestead protection – automatic constitutionalright in 42 states prohibiting creditors from forcinghome owners to sell to satisfy debts• Exceptions: purchase money mortgage, tax lien, mechanic’s

lien, materialman’s lien, refinance, home equity lien, RAM, …

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the wife

the husband

H t d Li it ti


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Homestead Limitations

• Urban homestead is a lot or lots of not more

than ___________ acres together with any

improvements

• Rural homestead for a married couple is up to

______ acres and for a single person up to 100

acres

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10

200

E t t i L d (4)


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Estates in Land (4)

•

4. Non-Possessory Estates (not in text) – Easement

– Profit – special type of easement where soiland/or raw materials are allowed to be removed

(e.g., sand pit on river) – License – personal privilege granted to enter

someone’s RE without _____________ (e.g.,hunting rights, sporting event)

– ______________ – promise to do or not dosomething on someone’s RE (e.g., board horse,but not goats)

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trespassing

Covenant

S b f Ri ht


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Subsurface Rights

•This is the ____________ estate in Texas!

• Owner of mineral rights can reasonably enter

upon the property to extract the minerals

• Minerals are part of the RE until they are

removed from the ground, then become ___________________

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dominant

Personal Property


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Chapter 4

Forms of Ownership

_______________________________________

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i


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Equity Investor

• Holds title to the property

• Ultimate decision maker

• Interested in cash flows and _________________

• Debt v. Equity financing (also, see. P. 337)

– Lien Theory = borrower retains title, with lender

having only a security interest (33 states)

– Title Theory = lender holds title to the collateral until

the debt is repaid (14 states + DC) – Intermediate Theory = borrower retains title, but

automatically transfers to lender upon default (3 states)

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H ldi Titl


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Holding Title

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(one owner)

T f E i I


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Types of Equity Investors

• 1. Individuals – Proprietorship

– Simple ownership

– Personal management

– Ordinary income tax rates

– _________________ liability• 2. General Partnership

– Joint decision making

– Risk ______________

–

Ordinary income tax rates – Each partner has ______________ access to RE

– Transferable to surviving partners if decedent’s estate iscompensated

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Unlimited

sharing

equal

T f E i I


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• 3. Limited Partnership – Limited liability for limited partners


– Requires a GP with unlimited liability

– _________________ income

– No management hassles – Difficult to sell LP interest

– Ceases to exist when GP withdraws

• 4. Joint Venture –

Two or more parties take on any legal ownership form inone project

– Syndication = joint venture in more than one project

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passive

T f E it I t


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• 5. LLP / LLC

– Limited liability of co-owners = not liable for tort

actions of another co-owner unless you knew of

_______________

• Tort = negligence, errors, omissions, incompetence,malfeasance

– Provides flexibility = all can participate in

management

– Favorable _______________= no double taxation

because cash flows pass through to co-owners

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Limited Liability Company

the tort

Tax Treatment


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T f E it I t


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• 8. REIT

– Limited liability of REIT shareholders (100 minimum)


– Easily marketable

–Must distribute > ___% of net income to shareholders

– No double taxation if all requirements met

– No tax loss carrybacks, but _____ year carryforward

– Traded on NYSE and NASDAQ

• 9. Land Trust – Trustee holds title

– Disguises true owner from tenants and others

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95

15

T f E it I t


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•

10. Inter Vivos / Testamentary Trusts – Trustor creates trust for benefit of ________________

– Trustee holds title and manages the property

– Inter Vivos takes effect during the trustor’s life

– Testamentary takes effect after trustor’s death • 11. Co-Ownership (details follow)

– Tenants in Common (TC)

– Joint Tenancy

– Tenants by the Entirety (Fig. 4.1 error, p. 78)

– Community Property

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the beneficiaries

T t i C


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Tenants in Common

•

Undivided interest in RE with no right of ________________ to co-owners

• Surviving co-owners may have deceased co-

owner’s heirs as new co-owners

• Right to possess, but not _______, entire interest

• May convey your ownership interest

• May have ____________ ownership interest

• May partition by court order into separate tracts

• Law assumed TC, unless specified otherwise

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survivorship

convey

unequal

Tenants in Common


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A B C

A B C’s LD&H

One parcel of land;Three owners with unity of possession

What happens if C dies?

Tenants in Common

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J i t T


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Joint Tenancy

• Similar to TC, but co-owners have right ofsurvivorship – “JTWROS”

• Undivided, ___________ ownership

• Texas requires JT to be in writing

• Only humans can be JTs

• Creditors cannot seize debtor/co-owner’sinterest until debtor’s ___________

• If one JT conveys his interest, other JTs retainJT status, but new owner is a ___________

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joint tennancy with the right of survivorship

equal

death

tennant in common


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Joint Tenancy

• Must have four unities:

– Time = all acquire ownership at same moment

– Title = all acquire interests from same source

– ___________ = each has equal interest and rights

– Possession = all have same _________ possession

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undivided

Joint Tenancy


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A B

C

Joint Tenancy with Right of Survivorship

A B C

One parcel of land;Three owners, four unities (PITT):

Possession, Interest, Time, Title

If C dies?

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Tenancy by the Entirety


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Tenancy by the Entirety

•

Joint tenancy for ____________________• Fifth unity of Person

• Automatically passes to surviving spouse

• Spouse must approve disposition of yourinterest spouse and new owner are TC

• Divorce changes ownership to _____________

• Texas does NOT recognize TE

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married couple

tenants in common

C it P t


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Community Property

• Assumes each spouse contributes equally, soproperty acquired with community fundsduring marriage is shared equally

• Each owns undivided ½ interest

• Each liable for _________debts

• Separate Property: acquired before marriage,inheritance, gift, pre-marital agreement

• Earnings on _____________ property arecommunity funds

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all

separate


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Community Property

• Conveyances require both signatures

• ________ very difficult when separate funds used

for community debts

• Upon death of one spouse, decedent’s ½ interestpasses to LD&H, while survivor retains other half

• Surviving spouse has use over entire community

• 10 states (20%), but 50% of population – AK, AZ, CA, ID, LA, NV, NM, TX, WA, WI

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divorce

10 C i S


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10 Community Property States

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Chapter 5

Issues in Homeownership

Taxes and Assessments

_______________________________________

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Property Taxes


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Property Taxes

• Ad valorem taxes = according to value

• Source of income for local government

• Tax district appraisers all taxable property

• Assessment by appraisal district

• Tax rate calculation

– Dollars per hundred

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Expressing Property Tax RatesMill Rate Dollars perHundred Thousand

Schooldistrict

40 mills $4.00 $40.00

City 30 3.00 30.00

Country 10 1.00 10.00

Total 80 mills $8.00 $80.00

Dollars per

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Other Taxing Matters


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Other Taxing Matters

• Unpaid property taxes

• Assessment appeal

• Property tax exemption

• Property tax variations

• Special assessments

•

Texas Homestead Exemption• Tax Limitation Measures

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Special Assessments


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Special Assessments

• AN IMPROVEMENT DISTRICT

• TEXAS HOMESTEAD EXEMPTION

• BOND ISSUES

•

APPORTIONMENT

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Federal Income Tax

Basis is the price originally paid forthe home plus any fees paid for

closing and improvements.

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Capital Gains


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Capital Gains

• To calculate the gain you must take the saleprice and subtract the selling expenses; then

subtract the basis to determine the gain.

• Amount realizes – selling price of home lesssales expense.

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Long Term Capital Gain


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g p

• Holding period longer than 1 year

• Tax rate 15%

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Adjusted Sales PriceSelling price of old home

Less selling expensesLess fix-up costs

Equals adjusted sales price

$250,000

-18,000-7,000

$225,000

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Agent’s Liability for Tax Advice


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g y

• A real estate practitioner must be aware of taxlaws that affect the properties the practitioner

is handling. A real estate agent has a

responsibility to alert clients to potential taxconsequences, liabilities, and advantages

whether they ask for it or not. Lastly, an agent

is responsible for the quality and accuracy oftax information given out by the agent.

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Chapter 6

Condominiums, Cooperatives, PUDs, and

Timeshares

_______________________________________

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Condominiums


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Condominiums

• Each owner has fee estate over the air space

that the unit occupies

• _________: also own air and subsurface rights

• Separate elements – exclusively owned and

used as a fee simple estate

• Common elements – areas owned by all as TC

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Townhouse

Condominium Declaration


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Condominium Declaration

•

Master Deed - legal framework that converts landinto a condo subdivision

• Covenants, Conditions, and Restrictions (CC&Rs) –

filed list of restrictions by which all owners mustabide

• __________ – rules by which the HOA operates

• Unit deed – each purchaser receives deed

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Bylaws

Maintenance Fees


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Maintenance Fees

• Costs of maintaining ___________________areallocated among all unit owners

• Generally collected monthly

• Replacement reserves created

•Taxes and Insurance premiums paid

• Condominium management fee

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the common elements

Legislation Against Abuses


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Legislation Against Abuses

• Uniform Condominium Act

• Conversions (from apartments)

• HOAs

• Cooperative Apartments

• Timesharing

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Condo Living


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Condo Living

• Advantages – Lower cost

– Low maintenance

– Location

– Amenities

– Ownership

• Disadvantages – Close proximity to all

– Loss of control

– Fees

– Board of Directors

– Bylaws

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Planned Unit Development


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p

• Ownership in a community association thatowns common areas, along with ownership of

your lot and home

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Cooperative Apartments


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• Organized by forming a ________ corporation

• Sell shares of stock to each occupant – Purchaser is a “cooperator”

– Own personal property, not real estate

• Corporation borrows money by mortgagingthe building

• Own ____________ interest in entire building

•

Proprietary lease over your unit• Legally ______________

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nonprofit

discriminate

undivided


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Timeshare


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• Method of dividing up and selling a living unitat a vacation facility for specified lengths oftime each year

• Right-to-Use – contractual right to occupy aliving unit for 1-2 weeks a year for 20-40 years

• Fee Simple – right to fee ownership of 1-2weeks each year into perpetuity

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Texas Timeshare Act


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• Real estate license required to market unit,unless otherwise exempt

• Must register property with _________

• Grants power to investigate all aspects of thedevelopment to TREC

• Right to cancel

– _______ days, which cannot be waived

– Required statement attached to contract (p. 126)

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Chapter 7

Contract Law

_______________________________________

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Legally Enforceable Agreement


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• Contract – legally enforceable agreement to

do or not to do something

• Express Contract – parties declare intentions

either _________ or ________________

– Lease: lessor agrees to convey possession / use,

while lessee agrees to pay full rent timely

• __________ Contract - created by actions of

parties, not orally or in writing

– Taxi ride or dining in a restaurant

107

orally in writing

implied

Legally Enforceable Agreement


108/433

g y g

• Bilateral - promise exchanged for a promise

– Buyer promises to pay agreed price

– Seller promises to deliver F&C title

• ______________ - promise exchanged for

performance

– “If you do X, then I will do Y”

• Forbearance – agreement NOT to do something

– Mortgagee agrees NOT to foreclose if

borrower meets all obligations

108

unilateral

Legal Effect of Contracts


109/433

g

• Valid - meets all requirements of law

• Void - no legal effect, so not a contract andnot binding on any party

– Voidable - one party bound, but not the other

• NHL player with option in last year• Commercial tenant with option to renew

• ______________ – may have been valid at anearlier time, but now enforcement is barred

– Beyond Statute of Limitations

– Beyond expiration date of option

109

unenforceable contract

Contract Essentials


110/433

1. Competent parties

2. Mutual agreement

3. Lawful objective

4. Consideration

5. In writing

110

1. Competent Parties


111/433

p

•

Must be of legal age and _______________

• Power of Attorney – giving another party the

power to act on your behalf

• Corporations – person contracting on behalf

of corporation must have authority and be ______________________

111

sound mind

legal age and sound mind

2. Mutual Agreement


112/433

g

• Must be agreement to the contract provisions

• Offeree accepts, rejects or ________________

• Offer and Acceptance – offeror makes offer toofferee, who accepts by communication

• Counter-Offer – offeree makes changes tooriginal offer and submits new offer

112

counter offers

Meeting of the Minds


113/433

Offer

Acceptance Counteroffer

Offer

Acceptance

113

2. Mutual Agreement


114/433

• Prohibits fraud, misrepresentation or mistake

– If so, contract is not valid

• Fraud – act intended _________, so as to haveother party convey something of value

• Innocent Misrepresentation – act NOTintended to deceive, but provided wronginformation (e.g., DART service canceled)

•

Mistake – ambiguity in negotiations (e.g.,wrong parcel) or mistake of fact (e.g., reducedparking spaces via condemnation)

114

to deceive other party

2. Mutual Agreement


115/433

g

• Contractual Intent – all parties must haveintended to contract

• Duress – no party is forced, threatened or put

in an unfair advantage

– If so, offer can be ____________ by harmed party

115

voided

3-5. Lawful Objective;Consideration; In Writing


116/433

Consideration; In Writing

• 3. Lawful Objective - Contract cannot call forperforming illegal act (e.g., paying rent with

weed)

• 4. Consideration – each party must provide _________ to prove a bargain has been made

• 5. In Writing – Statute of Fraud and UCC

require all RE transactions be __________and __________ by all parties

116

something of value

in writing

signed

Electronic Transactions


117/433

• Effective March 1, 2001

• E-sign – electronic signature legal

• Texas requires writing under old Statute of

Frauds for severe transactions like _________

and ____________

117

foreclosure

eviction

Breach of Contract


118/433

• Wronged party has six alternatives:

– Partial performance = accept partially fulfilled K – Unilateral Rescission = rescind K because other

party is not performing

– _________________= sue to force other party toperform

– Money damages = sue for $ if damages can bemonetized

–

Liquidated damages = amount agreed to inadvance, should one party breach K

– Mutual Rescission = parties agree to rescind K

118

specific performance

Statute of Limitations


119/433

• Written contracts have ____ years

• Oral contracts have 2 years limit

119

4

Ch t 8


120/433

Chapter 8

Real Estate Sales Contracts

_______________________________________

120

Earnest Money Contracts


121/433

To be valid in Texas, must:

1. Be in writing

2. Be signed by all parties 3. Be evidence of intent to convey an interest

4. Have identifiable ______________________

5. Legally identify property to be conveyed

121

grantor and grantee

Texas real estate agent must use standard

f l t d b TREC f il bl


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forms promulgated by TREC - forms available

at www.TREC.state.tx.us

122

http://www.trec.state.tx.us/http://www.trec.state.tx.us/


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123


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124


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125


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126


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127


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128


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131

“Time is of the Essence”


132/433

The time limits set by the contract must befaithfully observed or the contract is ________

by the non-defaulting party

Neither buyer nor seller should expect

extensions of time to fulfill their obligations

132

voidable

Federal Clauses


133/433

• Amendatory Language Clause:

– Buyer securing ______________loan may terminatecontract if appraisal is significantly below agreed

purchase price

• Insulation Disclosure:

– FTC requires sellers / builders of ____________ to citethe characteristics of insulation installed

133

new houses

FIA or VA

Disclosures


134/433

• Rollback taxes – contract selling vacant land

must disclose potential liability for __ years ofrollback taxes if there is an ag exemption,religious use or open space use

• Pipelines – residential seller must discloselocation of transportation pipelines

• Water districts – seller must disclose ifproperty is in MUD or other drainage area

134

5

Lead-Based Paint in HousingDisclosure


135/433

Disclosure

• 75% of all housing built before 1978 containssome lead-based paint

• __________ law requires seller or landlord to:

– Disclose possibility of lead-based paint hazards

– provide available reports and the pamphlet,“Protect Your Family From Lead in Your Home”

135

Federal

Disclosures


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• Annexation – seller of property outside city limits

must disclose possibility of annexation

• Property Owner’s Association – HOA / POA mustprovide current copies of rules, bylaws, etc. to

seller within ____ days of written request

• Property Located in a Certificated Service Area ofUtility Service Provider – seller disclosure that

buyer may have special charges for water andsewer hook-ups

136

10

Installment Contracts


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• A.k.a., land contract, conditional sales

contract, contract for deed, agreement of sale• Buyer given right of use and possession, but

does not receive F&C title until all or most of

price is paid• Buyer is promised that title will be delivered

upon pay-off buyer holds “_________ title”

• Used when buyer cannot obtain a loan and/orhad insufficient capital

137

equitable

Installment Contracts


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• Favors _________ far more than _________:

– Upon default, seller avoids costly foreclosurebecause he already has title

– Seller keeps all payments and retakes possession

–Seller may not be able or willing to deliver title

• Texas provides some relief to defaulting buyer:

– Allowed to cure default within ______ days

–Default after 48 months or 40% + repayment seller must follow general foreclosure laws

138

sellers buyers

60

Deed and Installment

Contract Compared


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Deed Installment Contract

Buyer SellerDeed

Buyer Seller

Buyer SellerBuyer Seller

Buyer Seller

Deed

Contract Compared

139

Lease with Option to Buy


140/433

• A.k.a., lease-purchase agreement

• Seller gives tenant option to buy at a statedprice for a stated time period

• Popular during sluggish __________ markets

• Part of monthly rent applied to purchase price – Caveat: only payment in excess of FMV can apply

to purchase price

– Caveat: tax consequences should be handled bytax professional, only

– Caveat: contract should be __________ to protectall parties

140

bad

recorded in a courthouse

Right of First Refusal


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• Owner gives _________ first right to purchase,should a third party want to buy RE

• Tenant can match offer or allow owner toaccept third party offer

• Caveat: often slows down the closing processbecause two unrelated parties are involved

141

tenant

IRC Sec. 1031 Exchange


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• Investors swap “like-kind” properties, ratherthan buy-sell

• Not available to owner-occupants

• Allows ___________ of capital gain tax on old

property, by reducing basis in new property• No capital gains tax until future property sells

• Sell outright when in lower marginal tax

bracket• “Boot” is assets used to balance the ________

142

deferral

equity

IRC Sec. 1031 Exchange Example • Chris has $100 000 lot F&C with $30 000 basis


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• Chris has $100,000 lot F&C with $30,000 basis

• Terry has $175,000 duplex with $50,000 assumable loan and$110,000 basis

• Exchange:

– Chris has $100,000 equity, while Terry has $___________ equity – Chris assumes $50,000 loan and gives Terry $25,000 cash (or other

asset) to balance equities

– Each receives title to new property

– CG deferred = Value of old property – basis in old property

– New Basis = Value of new property – CG deferred in old property

– Chris defers $70,000 in cap gains and has basis of $_________ induplex

– Terry defers $______ in cap gains and has basis of $35,000 in lot

143

125000

105000

65000

Chapter 9


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Licensing Laws

and Professional Affiliation

_______________________________________

144

Who Must be Licensed?A i d i h l


145/433

• Any person or entity engaged in the real estate

business for another person or entity, and for afee, commission or other valuable consideration

• Engaged in the RE Business – Any person acting for another and for compensation

in the listing for sale, selling, buying or renting (orattempting to do so) an estate or interest in RE

– See 11 acts in Jacobus, 12th ed., pp. 194-195

• Any ____________ person engaging in the REbusiness as a broker or salesperson may be fined

and/or imprisoned – See 12 exemptions in Jacobus, 12th ed., p. 196

145

unlimited

License Types


146/433

• Real Estate Broker

– a person who, for another person and for a fee,commission, or other valuable consideration (or with the

intention or in the expectation or on the promise of

receiving or collecting a fee, commission, or other valuable

consideration from another person) conducts RE brokerageactivities as defined by ___________

• Real Estate Salesperson

– a person associated with a Texas licensed RE broker for the

purposes of performing acts / transactions comprehendedby the definition of “RE broker" as defined by TRELA

146

TRELA

License Eligibility & Procedure


147/433

• Texas resident at least 60 days & _____ years old

•

Broker must have at least ____ years active experienceas licensed salesperson

• Prove honesty, trustworthiness, integrity andcompetency (exams) to the TREC

• Provide fingerprints to obtain criminal history from DPSand FBI

• Conduct of licensees regulated by _________

• License automatically renews every two years

• Non-resident licensees cannot sell in TX, unless allnegotiations occur in licensee’s state

• No license reciprocity in TX for non-TX brokers

147

18

4

Texas Licensee Requirements

Before appl ing for a RE Salesperson License one m st

http://www.trec.state.tx.us/


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Before applying for a RE Salesperson License, one mustfirst furnish TREC satisfactory evidence of successfully

completing the following education (180 classroomhours):

• Principles of RE 1 & 2 courses (60 hours total)

• Law of Agency RE course (30 hours)

• Law of Contracts RE course (30 hours)

• RE Finance course (30 hours)

• Promulgated RE Contracts course (30 hours)

148

Texas Broker License (900 classroom hours)

http://www.trec.state.tx.us/http://www.trec.state.tx.us/


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To be eligible to apply for a Broker License:

• Not less than four (4) years active experience, plus

• 270 classroom hours (18 semester hours) of core

real estate courses, plus

• An additional 630 classroom hours (42 semesterhours) in “related courses” acceptable to TREC

• Four-year college degree qualifies for the “relatedcourses”

149

Continuing Education

http://www.trec.state.tx.us/http://www.trec.state.tx.us/http://www.trec.state.tx.us/http://www.trec.state.tx.us/


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• Complete at least ___ classroom hours of MCE

courses approved by TREC taken during the

two-year term of the current license

• Texas has most stringent licensing

requirements in U.S.

– See Jacobus, 12th ed., Table 9.1, pp. 199-200

150

15

TREC


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• Administers TRELA provisions

• ________ members appointed by Governor

– Hold staggered ______ year terms

– 3 members’ terms expire Jan. 31 of each odd

numbered year

– 6 members must have been brokers for at least

______ years

–

Other 3 members cannot be engaged in REbusiness, so as to represent general public

151

5

9

6

Inspector License Required


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• Issued by TREC for two years

• Professional inspector – person licensed,trained and qualified to perform a REinspection and who accepts employment for

the purpose of performing a RE inspection fora buyer or seller of real property

• ______________inspector - person under theindirect supervision of a professional inspectorwho is held to the same standards

• See Jacobus, 12th ed., p. 205 for six conflicts

152

real estate

License Suspension & Revocation


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•

TREC may suspend or _______ a license or take otherdisciplinary action authorized by TRELA at any time,when it has been determined that the licensee …

•

See Jacobus, 12th ed., pp. 207-208 for 10 reasonswhile NOT performing an act as licensee

• See Jacobus, 12th ed., pp. 208-210 for 33 reasons

while performing an act as licensee

153

revoke

Bond / Recovery Trust Account

Li h b d h if h i


154/433

• Licensee purchases bond that may pay if he is

found liable for loss• Recovery Trust Account may pay damages if a

__________ is obtained against a licensee and

there are no other funds recoverable fromlicensee

– Limits are $50,000 per transaction and $________

aggregate against any one licensee

– Funded by a percentage of licensing fee ($10)

154

judgement

100000

Broker Affiliation

All l b d b


155/433

• All salespersons must be sponsored by ______

• Training – complement, enhance, andencourage your personal development

• Compensation – usually a percentage of

earned commissions – Function of time with broker and _____________

• Support – what services they offer licensees

• Franchised offices – most licensees sponsoredby large franchisors (e.g., REMAX, KW, Ebby)

155

broker

performance

Independent Contractor


156/433

• Licensee is _______________

• Has written contract stating I.C. status

• Paid only if a sale produces a commission

• Responsible for ____________and social security

• Caveat: No paid vacation or holidays, no salary,no benefits, no …

156

self employed

taxes

REALTOR®

• Registered trade name


157/433

• Registered trade name

• Promotes fair dealing and govt. lobbying• Member of __________

• Not synonymous with “real estate agent”

• Code of Ethics (17 articles) – See Jacobus, 12th ed., pp. 219-226

• Must be member of NAR:

–

to be in _________ – if your broker is a member of NAR

– to be a member of TxAR

157

MLS

NAR

Texas Association of REALTORS®


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• Represents __________ members statewide

involved in all aspects of RE industry

• www.TexasRealtors.com

• 1115 San Jacinto Blvd., Ste. 200Austin, TX 78701-1906

• 1-800-873-9155

158

80,000

Chapter 10

http://www.texasrealtors.com/http://www.texasrealtors.com/


159/433

The Principal-Broker Relationship:

Employment

_______________________________________

159

Listing Agreement


160/433

• A written employment contract between the

owner/seller and _______________

• Creates special agency relationship between

broker (agent) and seller (principal)

• Agent is authorized to represent principal’s RE

for sale, solicit offers and submit offers

• Amount of compensation the owner agrees to

pay the broker is _______________

160

the broker

negotiable

Listing Types


161/433

1. Exclusive right to sell

2. Exclusive agency

3. Open listing

4. Net listing

161

1. Exclusive Right to Sell


162/433

• One broker is appointed as sole agent andgiven exclusive right to represent the RE

• The listing broker is entitled to a commission,no matter who sells the property during the

listing period (even if _________ finds buyer)

• Most common type of listing

162

seller

2. Exclusive Agency

• One broker is appointed as sole agent and given


163/433

• One broker is appointed as sole agent and given

exclusive right to represent the RE

• Similar to the exclusive right to sell, except theowner may sell the property himself during the

listing period and not owe a fee to the broker

• Listing broker is paid, even if another broker sellsthe property

• Broker may be _____ enthusiastic under this formof listing

163

less

3. Open Listing

• Seller retains right to employ brokersany number


164/433

Seller retains right to employ __________ brokers

• There are no exclusive rights

• Whoever sells the property will earn the fee

• If seller finds buyer, no fee is due a broker (unlessbroker is _______________)

• Brokers are reluctant to develop a sales effort

164

any number

procuring cause

4. Net Listing


165/433

• Owner states price he wants to NET for the

property and agrees to pay the broker theexcess as commission

• Illegal in many states (_________ in TX)

• Concern that broker violates ________ duty to

client to obtain highest price possible

165

legal

feduciary

Buyer Representation

• Exclusive Authority to Purchase agreement


166/433

• Exclusive Authority to Purchase – agreement

where broker works for buyer as his client

• A.k.a., a “___________ agreement”

• Primary responsibility is to buyer as principal

• Buyer owes commission to buyer-broker!

• Seller is just a ___________ owed honest and fairdealing

166

finders

customer

MLS


167/433

• Service among Realtor® members to pool

listings

• Offer compensation to other member-brokers

who sell your listing

• Increases ______________ for listed property

• MLS data on listings and sales available tomembers

167

exposure

Broker Compensation

• Specified in listing or finder’s agreement


168/433

• Specified in listing or finder s agreement

• Commission earned when “ready, willing andable buyer” is prepared to buy on seller’sterms and deed is _____________

•

Entitled to commission if three events occur: – Procuring cause of sale - one whose efforts

originated procurement of sale (up to 24 months)

– Licensed by TREC

– Employed by seller (listing agreement) or buyer(finder’s agreement)

168

delivered

TRELA Requirements for RE Fee


169/433

• Must be licensed RE broker

• Must have written agreement

• Agreement must be signed by parties

• __________ must advise purchasers in writingthey should get abstract or title policy

169

licensees

Terminating the Listing Contract

• Fulfillment of purpose


170/433

• Fulfillment of purpose

• _____________ of listing period

• Breach of contract (abandonment)

• Mutual agreement

• _____ or legal incompetence of agent or principal

• Destruction or change in property by outsideforces 170

expiration

death

Bargain Brokers

• Flat Fee Broker charge low fixed fee and offer


171/433

• Flat-Fee Broker: charge low fixed fee and offer

select services, especially MLS posting

• Discount Broker: list / sell property for ______

than standard rate (e.g., 4% vs. 6%)

• Variable Rate: _________ broker discounts his

commission rate, but pays full rate to selling

broker

171

less

listing

Chapter 11


172/433

The Principal-Broker Relationship: Agency _______________________________________

172

Brokerage

• Business of bringing sellers and buyers (or


173/433

• Business of bringing sellers and buyers (or

landlords and tenants) together• Broker – person licensed to buy, sell, exchange

or lease RE

• Salesperson – ________ who works on behalfof and licensed to represent broker

• Co-operating Broker – works on behalf of

listing broker to procure buyer• Who employs broker? ____________

173

licensee

principal

Law of Agency

• Created when one party delegates to another the


174/433

Created when one party delegates to another theright to act on his behalf (e.g., listing agreement)

– ___________ agency – empowered to represent theprincipal in a range of matters

– Special agency – empowers the agent to perform onlyspecific acts and no others

• Principal = owner = client• Agent = Broker who represents interest of

____________ (seller) in dealing with third party(buyer)

• Subagent = licensee authorized by principal toassist agent

174

general

principal

Responsibilities to Customers


175/433

• Owed honest and _______________

• Reasonable care and skill in performance of

agent’s duties

• Disclosure of all material facts affecting value

or desirability of RE of which buyer is _______

175

unaware

good business practice

Traditional Agency Theory

• All licensees are agent / subagent of principal


176/433

• All licensees are agent / subagent of principal

• Seller signs listing agreement with listing broker

• Cooperating broker is employed by listing brokerthrough ________________

• So, ……… all licensees represent the seller

• No licensee represents the buyer!

176

subagency

Traditional Agency


177/433

Listing Broker Selling Broker

Listing Agent Selling Agent

Seller Buyer

177

Fiduciary Duty

• Fiduciary = one placed in position of trust andfid


178/433

confidence

• Care - Competence and expertise – Liable for any loss due to negligence or ________________

• Obedience – Follow lawful instructions• Must act in good faith, but not follow unlawful instruction

•

Accounting - For funds received• Immediately deposit all funds in trust account

• Illegal to _________________ with personal funds

178

incompetence

comingle

Fiduciary Duty

Di l F ll i f i i l


179/433

• Disclosure - Fully inform principal

• Duty of _________: Liable for facts broker knows orshould have known, but did not reveal

• Loyalty - Principal’s interest comes first

• Cannot disclose principal’s information to others

without permission

• Broker must act without ________________

179

discovery

self interest

Buyer Brokerage Agency

hi b k hi b


180/433

• Buyer hires broker to represent his best

interest as fiduciary

• Common in commercial and industrial RE

• Common since early 1990s in residential RE

• Buyer signs “________ agreement” with agent

180

finders

Buyer Brokerage Agency


181/433

Listing Broker Selling Broker

Listing Agent Selling Agent

Seller Buyer

181

Dual Agency

• Agent represents both buyer and seller at same time


182/433

• Agent represents both buyer and seller at same time

• Subagent generally is selling own listing

• Impossible to offer full fiduciary duties to both parties – Obtain highest price for seller

– Obtain lowest price for buyer

• _____________ in Texas (i.e., TREC) and many other states

• Replaced with Intermediation in Texas

• Prohibited without mutual knowledge and consent

182

illegal

Dual Agency


183/433

Listing Broker =

Selling Broker

Selling Broker

Listing Agent =Selling Agent

Selling Agent

Seller Buyer

183

Intermediation Agency

• Broker is middleman representing nobody


184/433

Broker is middleman representing ____________

• Formerly called the Middleman Theory• Broker only brings parties together without

agency

•

Must treat all parties honestly and fairly• Cannot disclose to seller that buyer will pay a

___________ price, unless so instructed

• Cannot disclose to buyer that seller will accept a

lower price, unless so instructed• Broker wants 100% fee for < 100% fiduciary duty!

184

nobody

higher

Intermediation Agency


185/433

Listing Broker

Listing Broker’sAgent #1

Listing Broker’sAgent #2

Seller Buyer

185

Establishing Authority

• Written contractual agreement


186/433

• Written – contractual agreement

• Implied – custom in the industry – Right to advertise or show property at night

• Ostensible – conduct of the parties

–

Showing with principal’s permission, but no listingagreement

• _______________ – agency established after thefact

– Principal accepting offer even with no listingagreement

186

ratification

Said Wrongly

Disclosure Liability


187/433

Said withoutchecking the facts

Not said andfacts not checked

g yto Mislead

Unsaid in Orderto Mislead

A Facts BrokerKnows

BFacts Broker

Does not know

187

Caveats

• Commingling


188/433

Commingling

• Puffing

• Lead base paint disclosure on homes built pre-1978

• Seller’s Disclosure of Property Conditions (Fig. 11.1)

•Home Inspections

188

Agency Disclosure


189/433

•

Consumers must be informed whom the agentrepresents, so there is a clear understanding

of the agent’s role in a transaction

• Many states require disclosure forms

189

Disclosure of representation

• A licensee under this Act who represents a party in a proposed real estate


190/433

transaction shall disclose that representation at the time of the licensee's

first contact with:

• another party to the transaction

• another licensee who represents another party to the transaction

• The disclosure required under Subsection (a) of this section may be made

orally or in writing

• A licensee who represents a party in a real estate transaction acts as that

party's agent

• Except as provided by Subsection (e) of this section, a licensee shall

furnish to a party in a real estate transaction at the time of the first face-to-face meeting with the party the required written statement

190

IF THE BROKER REPRESENTS THE OWNER:

• The broker becomes the owner's agent by entering into anagreement with the owner usually through a written listing


191/433

agreement with the owner, usually through a written listing

agreement, or by agreeing to act as a subagent by acceptingan offer of subagency from the listing broker.

• A subagent may work in a different real estate office. A listing

broker or subagent can assist the buyer, but does notrepresent the buyer and must place the interests of the ________________ first.

• The buyer should not tell the owner's agent anything the

buyer would not want the owner to know because an owner'sagent must disclose to the owner any material informationknown to the agent.

191

Seller

IF THE BROKER REPRESENTS THE BUYER:


192/433

• The broker becomes the buyer's agent by entering intoan agreement to represent the buyer, usually through awritten buyer representation agreement

• A buyer's agent can assist the owner, but does not

represent the owner and must place the interests of the __________ first

• The owner should not tell a buyer's agent anything theowner would not want the buyer to know because a

buyer's agent must disclose to the buyer any materialinformation known to the agent

192

buyer

Intermediary• The broker must obtain the written consent of each party to the transaction to

act as an intermediary. The written consent must state who will pay the brokerd i i b ld d li d i f h h b k ' bli i


193/433

and, in conspicuous bold or underlined print, set forth the broker's obligations

as an intermediary. The broker is required to treat each party honestly and fairlyand to comply with TRELA. A broker who acts as intermediary in a transaction:

1. Shall treat all parties honestly

2. May not disclose that the owner will accept a price less than the asking

price unless authorized in writing to do so by the owner

3. May not disclose that the buyer will pay a price greater than the pricesubmitted in a written offer unless authorized in writing to do so by thebuyer

4. May not disclose any confidential information or any information that aparty specifically instructs the broker in writing not to disclose unlessauthorized in writing to disclose the information or required to do so byTRELA or a court order or if the information materially relates to thecondition of the property

193

If you have a broker represent you:

• Enter into a written agreement with the broker that


194/433

clearly establishes the broker's obligations and yourobligations. The agreement should state how and bywhom the broker will be paid.

• You have the right to choose the type of

representation, if any, you wish to receive. Yourpayment of a fee to a broker does not necessarilyestablish that the broker represents you.

• If you have any questions regarding the duties and

responsibilities of the broker, you should resolvethose questions before proceeding.

194

Chapter 12


195/433

Fair Housing, ADA, Equal Credit,

and Community Reinvestment

_______________________________________

195


196/433

RaceColor

Religion

GenderNational Origin

Handicap

Familial Status

196

Protected Classes

• Race


197/433

• Race

• Color

• Religion

• National origin

• Sex

Fair Housing

1. Family status

2. Handicap

Equal Credit

Opportunity Act

1. Public assistance2. Age

3. Marital status

197

Federal Government Involvement

• Many states found it politically difficult to


198/433

protect everyone’s rights

• Long history of _________ was too difficult to

overcome at state and local levels

• Protected Classes (10): Illegal to discriminatein housing based on race, color, creed,national origin, alienage, sex, marital status,age, familial status and handicap

198

prejudice

Constitutional Protection

• Most real property rights originate from U S


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• Most real property rights originate from U.S.

Constitution, primarily 5th Amendment

• Courts have protected ___ personal attributes

that cannot be changed:

– Race, color, national origin and alienage

– Religion also protected because all entitled topractice religion of his choice

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Constitutional Protection

• No prohibition in Constitution based on sex, age


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No prohibition in Constitution based on sex, age

or marital status

• 14th Amendment – prohibits any state from

depriving any person of life, liberty or propertywithout ________________

• 13th Amendment – prohibits slavery and

involuntary servitude; discrimination creates a“badge of slavery”

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due process

Fair Housing Laws

• Civil Rights Act of 1866: all U.S. citizens have


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same rights as white citizens to inherit, purchase,lease, sell, hold and convey RE

• Fair Housing Law of 1968: illegal to discriminate

in housing on the basis of the protected classes

• Steering: illegal to direct home seekers to

particular ______________ based on protected

classes

• Blockbusting: illegal to induce _____________in aneighborhood for financial gain

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neighborhood

panicked selling

Housing Covered by 1968 Fair Housing Law

A. Multi-Family dwelling with 5+ units or 1-4 units


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y g

when non-owner occupiedB. SFD not owned by an individual (e.g., corp.,

partnership)

C. SFD owned by an individual who:1. owns 4+ such houses or sells at least 2 non-

owner occupied houses in last _____ years

2. bought a house (a) using RE licensee and/or(b) with discriminatory _______________ used

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2

discriminatory advertising

Acts Exempt from 1968 Fair Housing Law

A. Housing for elderly may prohibit __________children


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B. Lodging for private club membersC. Property of religious organizations

D. Rental of rooms in owner-occupied houses of

2-4 unitsE. Sale/Rental of SFD owned by individual with

< 3 such houses, if (a) no RE licensee wasused, (b) no discriminatory ads used, and (c)0-1 non-owner occupied house sold in last 2years

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Fair Housing Enforcement

• File complaint with (a) HUD, (b) U.S. District


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Court, state court or local court, (c) U.S. _________________

• Burden of proof on filer of complaint

• Remedies include (a) injunction stopping saleor rental of RE, (b) money damages, (c)

punitive damages, and (d) _______________

• Testers – pose as buyers or tenants to ensurelicensee is following Fair Housing laws

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attorney general

Texas Fair Housing Law

• Passed in 1989 to parallel Federal Fair Housing


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• Allows for investigating discriminatory housing• Provides for ______________ penalties

• Commission on Human Rights investigates

complaints if: – Lodged in writing

– Under oath

– Using CHR’s forms – Filed within _________of alleged act

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1 year

criminal

Americans with Disabilities Act

• ADA enacted July 1992


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• Deals with commercial property, not residential, in:

– Public accommodations

– State and local government offices

–

Transportation – Telecommunication

– _____________________

• Provides access requirements and prohibits discrimination

against people with disabilities

• What about tall, overweight, …?

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employment


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Community Reinvestment Act

RE.principles.aggregate.student.12ed Real 3305

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