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A comprehensive overview of key concepts related to buyer contracts and financing in real estate. It covers essential terms, definitions, and procedures, including agency relationships, mortgage types, loan terms, and foreclosure processes. The document also includes questions and answers that can be used for exam preparation.
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Buyer's agent ✔✔The agent representing the buyer, and only the buyer, in a real estate transaction
Buyer agency agreement ✔✔An agency agreement between a buyer and an agent to provide representation; it explains the duties of the agent to the buyer and the duties of the buyer to the agent.
Client ✔✔The principal in a transaction who is represented by an agent
Customer ✔✔A person related to the transaction who is not represented by the agent. For instance, a prospective buyer of a listing.
Prequalification ✔✔A letter from a lender stating that, on the face of information provided by the borrower, the borrower will likely qualify for the loan
Open agency ✔✔Limits the amount of representation received in exchange for flexibility
Exclusive agency ✔✔Offers agent representation and self-representation
Exclusive right to represent ✔✔Offers the highest level of representation
Override clause ✔✔Prevents buyers from reaching an agreement with a seller on a property and then discarding their broker so that neither party has to pay a broker commission
Protective list ✔✔List of properties the licensee has shown the client and are therefore underneath the protection umbrella. Must be provided to client within 72 hours of agreement expiration.
When should the agency disclosure form be presented to a potential client? ✔✔At the first face- to-face meeting
What three forms should a buyer's agent present at the first meeting with a potential client? ✔✔Agency Relationships in Real Estate Transactions, Dual Agency Disclosure to Addendum to Purchase Agreement, and buyer representation agreement
What are the ways a lease can be terminated? ✔✔Expiration, Mutual agreement, and Eviction
PMI vs. MIP ✔✔PMI: Private mortgage insurance. It protects lenders when they approve a loan with more than 75%-80% of the purchase being financed.
MIP: Mortgage insurance premium. It's specific to FHA-insured loans.
Primary vs. secondary mortgage market ✔✔Primary is where loans are originated; they're sold on the secondary mortgage market.
Savings and loan association (S&L) ✔✔Popular from the 1930s to 1980s, these organizations would pool their savings, loan it to others, then create more loans off of the money that was paid back. Also known as thrifts.
Mortgage banker vs. mortgage broker ✔✔A mortgage banker makes and services mortgage loans.
A mortgage broker acts as a liaison between borrowers and lenders for a fee.
Fixed-rate vs. adjustable-rate mortgage (ARM) ✔✔In fixed-rate loans, principal and interest payment remains the same over the life of the loan.
In ARMs, interest rate adjusts based on changes in a market index.
Amortization ✔✔The paying off of a debt with regular installments over a fixed repayment schedule
Appraisal ✔✔An estimate of value as of a specific date, and for a specific use
Loan-to-value ratio (LTVR) ✔✔The ratio of a loan to the value of the property being purchased
Truth in Lending Act (TILA) ✔✔Requires disclosure of loan term and costs
RESPA ✔✔The Real Estate Settlement Procedures Act requires written disclosure of estimated settlement costs to the borrower.
Predatory lending ✔✔Lending that involves unfair or abusive loan terms for the borrower
Proration ✔✔A division of expenses and income between buyer and seller according to who owes what to whom
Net-to-seller formula ✔✔Sales price x Percent to seller (100% minus the commission rate)
What is an acceleration clause? ✔✔Mortgage clause that allows the lender to call all amounts owed immediately due; may be used in case of borrower default
What does it mean when a loan is in default? ✔✔Borrower does not meet mortgage terms; may lead to foreclosure
What is a moratorium (a.k.a. forbearance)? ✔✔Temporary halt; sometimes lenders will agree to a moratorium on borrower payments to allow the borrower time to recover (payments not made are added to the end of the loan)
What is recasting? ✔✔Reconfiguring the outstanding loan balance
What is non-judicial foreclosure? ✔✔No lawsuit; power-of-sale clause protects the lender's right to foreclose
What is judicial foreclosure? ✔✔Lender files suit in court and receives judgment allowing sale; public is notified, and property is sold at public auction to the highest bidder
What is a deficiency judgment? ✔✔Lender's pursuit of amount still owing after foreclosure or short sale
What is a short sale? ✔✔Lender agrees to allow the property to be sold for an amount that is less than the amount the borrower owes
What is a deed in lieu? ✔✔Borrower voluntarily conveys property to lender and walks away from mortgage to avoid foreclosure
What type of foreclosure is required when a security instrument doesn't have a power-of-sale clause? ✔✔Judicial
Which type of foreclosure doesn't permit a lender to seek a deficiency judgment? ✔✔Non- judicial