1. Exam Overview
| Component | Details |
|---|
| National Portion | 80-100 multiple-choice questions |
| State Portion | 30-50 questions (varies by state) |
| Total Questions | Typically 100-150 combined |
| Time Limit | 2-4 hours (varies by state) |
| Passing Score | 70-75% (varies by state) |
| Test Provider | PSI or Pearson VUE |
| Format | Computer-based at a testing center |
| Calculator | On-screen calculator provided |
| Cost | $50-$100 per attempt (varies by state) |
| Retake Policy | Most states allow unlimited retakes with a waiting period |
National Exam Topic Weights (Approximate)
| Topic Area | Weight |
|---|
| Property Ownership | 15-20% |
| Land Use Controls & Regulations | 10-15% |
| Valuation & Market Analysis | 10-15% |
| Financing | 10-15% |
| Agency & Contracts | 15-20% |
| Practice of Real Estate | 10-15% |
| Fair Housing & Ethics | 10-15% |
| Math Calculations | 5-10% |
2. Property Ownership Types
Freehold Estates (Ownership Estates)
| Estate Type | Description | Key Feature |
|---|
| Fee Simple Absolute | Highest form of ownership | Unlimited duration, freely transferable, inheritable |
| Fee Simple Defeasible | Ownership with a condition | Reverts to grantor if condition is violated |
| Life Estate | Ownership for the duration of someone's life | Measured by a life; remainder or reversion follows |
Life Estate Key Rules:
- The life tenant can use, lease, and mortgage the property
- The life tenant cannot commit waste (damage that reduces property value)
- Pur autre vie: life estate measured by the life of someone other than the tenant
- Remainderman: person who receives the property after the life tenant dies
- Reversionary interest: property returns to the original grantor
Leasehold Estates (Tenant Estates)
| Estate Type | Description | Termination |
|---|
| Estate for Years | Fixed start and end date | Automatically expires; no notice required |
| Periodic Tenancy | Renews automatically (month-to-month, year-to-year) | Requires proper notice to terminate |
| Estate at Will | No fixed term; either party can end it | Terminated by either party at any time |
| Estate at Sufferance | Tenant stays after lease expires without permission | Landlord can evict or create new tenancy |
Exam Tip: An "estate for years" does NOT have to last a year. A 6-month lease with a definite end date is still an estate for years.
3. Forms of Co-Ownership
The Big Four
| Feature | Tenancy in Common | Joint Tenancy | Tenancy by the Entirety | Community Property |
|---|
| Ownership shares | Can be unequal | Must be equal | Must be equal | Must be equal |
| Right of survivorship | No | Yes | Yes | Varies by state |
| Can sell without consent | Yes | Yes (breaks joint tenancy) | No (both must agree) | Varies by state |
| Who can hold | Anyone | Anyone | Married couples only | Married couples only |
| Creditor access | Owner's share only | Owner's share only | Requires both spouses' debt | Varies by state |
| Default if unspecified | Yes (default) | No (must be stated) | No (must be married) | No (state law) |
Joint Tenancy: The TTIP Unities
All four unities must be present to create a joint tenancy:
| Unity | Meaning |
|---|
| T - Time | All owners acquire interest at the same time |
| T - Title | All owners acquire interest through the same deed |
| I - Interest | All owners hold equal shares |
| P - Possession | All owners have equal right to possess the whole property |
Exam Tip: If ANY unity is broken, the joint tenancy converts to a tenancy in common. For example, if one joint tenant sells their share to a third party, the new owner holds as a tenant in common with the remaining joint tenant(s).
Other Ownership Forms
- Condominium: Own individual unit + undivided share of common areas
- Cooperative (Co-op): Own shares in a corporation that owns the building; proprietary lease
- Timeshare: Own a right to use property for a specific period each year
- Trust: Property held by a trustee for the benefit of a beneficiary
4. Essential Math Formulas
The T-Bar Method
The T-bar (or "T" formula) works for most real estate math problems:
Total (top)
_______________
Part | Rate
(left) | (right)
- Total = Part x Rate
- Part = Total / Rate
- Rate = Part / Total
Commission Calculations
Formula: Sale Price x Commission Rate = Commission Amount
| Example | Calculation |
|---|
| $300,000 sale at 6% | $300,000 x 0.06 = $18,000 total commission |
| Listing broker gets 60% | $18,000 x 0.60 = $10,800 to listing broker |
| Agent gets 50% of broker's share | $10,800 x 0.50 = $5,400 to listing agent |
If you know the commission and need the sale price:
- Agent earned $9,000 at 3% = $9,000 / 0.03 = $300,000 sale price
Gross Rent Multiplier (GRM)
Formula: GRM = Sale Price / Gross Annual Rent
| Example | Calculation |
|---|
| Property sells for $240,000; gross annual rent is $24,000 | GRM = $240,000 / $24,000 = 10 |
| Estimate value with GRM of 10 and $30,000 annual rent | Value = $30,000 x 10 = $300,000 |
Note: GRM can also use gross monthly rent. If the exam says "monthly," use monthly figures. GRM = Price / Gross Monthly Rent.
Capitalization Rate (Cap Rate)
Formula: Cap Rate = Net Operating Income (NOI) / Property Value
| Example | Calculation |
|---|
| NOI = $50,000; Value = $500,000 | Cap Rate = $50,000 / $500,000 = 10% |
| NOI = $50,000; Cap Rate = 8% | Value = $50,000 / 0.08 = $625,000 |
| Value = $400,000; Cap Rate = 7% | NOI = $400,000 x 0.07 = $28,000 |
NOI = Gross Income - Vacancy Loss - Operating Expenses
Important: NOI does NOT include mortgage payments (debt service). Mortgage is a financing cost, not an operating expense.
Loan-to-Value Ratio (LTV)
Formula: LTV = Loan Amount / Appraised Value (or Sale Price, whichever is lower)
| Example | Calculation |
|---|
| $320,000 loan on a $400,000 property | LTV = $320,000 / $400,000 = 80% |
| 90% LTV on $250,000 property | Loan = $250,000 x 0.90 = $225,000 |
- LTV above 80% on conventional loans typically requires Private Mortgage Insurance (PMI)
Equity
Formula: Equity = Market Value - Mortgage Balance
| Example | Calculation |
|---|
| Home worth $350,000; mortgage balance $220,000 | Equity = $350,000 - $220,000 = $130,000 |
Property Tax
Formula: Property Tax = Assessed Value x Tax Rate (Mill Rate)
Mill Rate Conversion: 1 mill = $0.001 = $1 per $1,000 of assessed value
| Example | Calculation |
|---|
| Assessed value $200,000; mill rate 45 mills | Tax = $200,000 x (45/1000) = $9,000 |
| Assessed value $200,000; rate is $4.50 per $100 | Tax = ($200,000 / $100) x $4.50 = $9,000 |
If the jurisdiction uses an assessment ratio:
- Market value $300,000 at 80% assessment ratio = Assessed value of $240,000
Proration Calculations
Prorations divide expenses between buyer and seller at closing based on the date of ownership transfer.
Key Rules:
- Use a 365-day year (or 360 if the exam specifies "banker's year")
- The seller typically owns the property on the day of closing (check exam instructions)
- Prepaid items are credited to the seller (seller paid ahead; buyer reimburses)
- Accrued items are debited to the seller (seller owes; buyer gets credit)
Example - Property Tax Proration:
Annual property tax: $3,650. Closing date: April 1. Seller owns through March 31 (90 days). Taxes are paid in arrears.
- Daily rate: $3,650 / 365 = $10.00/day
- Seller's share: 90 days x $10.00 = $900.00
- Seller owes buyer $900.00 at closing (debit seller, credit buyer)
Area and Measurement Calculations
| Conversion | Value |
|---|
| 1 acre | 43,560 square feet |
| 1 square mile (section) | 640 acres |
| 1 township | 36 sections (36 square miles) |
| 1 mile | 5,280 feet |
Area formulas:
- Rectangle: Length x Width
- Triangle: (Base x Height) / 2
- Trapezoid: ((Base1 + Base2) / 2) x Height
Example: A lot is 150 ft x 200 ft. Area = 150 x 200 = 30,000 sq ft. Convert to acres: 30,000 / 43,560 = 0.689 acres.
Discount Points
1 discount point = 1% of the loan amount (NOT the sale price)
| Example | Calculation |
|---|
| 2 points on a $240,000 loan | 2 x ($240,000 x 0.01) = $4,800 |
| Each point typically reduces the interest rate by | approximately 0.25% |
Qualifying Ratios (28/36 Rule for Conventional Loans)
| Ratio | Formula | Max |
|---|
| Front-end (housing) ratio | Monthly PITI / Gross Monthly Income | 28% |
| Back-end (debt) ratio | (Monthly PITI + All Debt Payments) / Gross Monthly Income | 36% |
PITI = Principal + Interest + Taxes + Insurance
Example: Borrower earns $6,000/month gross.
- Max housing payment: $6,000 x 0.28 = $1,680/month
- Max total debt: $6,000 x 0.36 = $2,160/month
FHA qualifying ratios: 31/43. VA loans: No front-end ratio; back-end typically 41%.
Net to Seller
Formula: Net to Seller = Sale Price - Commission - Closing Costs - Mortgage Payoff
Reverse calculation (seller wants a specific net):
- Desired net / (1 - Commission Rate) = Required Sale Price
- Example: Seller wants $280,000 net after 6% commission
- $280,000 / (1 - 0.06) = $280,000 / 0.94 = $297,872.34 minimum sale price
5. Agency Relationships
Types of Agency
| Type | Description |
|---|
| Seller's Agent (Listing Agent) | Represents the seller exclusively |
| Buyer's Agent | Represents the buyer exclusively |
| Dual Agent | Represents both buyer and seller (requires informed consent from both) |
| Designated Agent | Broker designates different agents for buyer and seller within same firm |
| Transaction Broker | Facilitates the transaction without representing either party |
| Subagent | Agent of the listing broker who works with the buyer but represents the seller |
Fiduciary Duties: OLD CAR
Every agent owes their principal these six fiduciary duties:
| Letter | Duty | Meaning |
|---|
| O | Obedience | Follow all lawful instructions of the principal |
| L | Loyalty | Place the principal's interests above all others (including your own) |
| D | Disclosure | Reveal all material facts that could affect the principal's decisions |
| C | Confidentiality | Keep the principal's private information secret (survives the agency relationship) |
| A | Accountability | Account for all money and property received on behalf of the principal |
| R | Reasonable Care | Exercise competence and diligence in all actions |
Exam Tip: Confidentiality survives the termination of the agency relationship. Even after the transaction closes, you cannot reveal your former client's private information.
Agency Creation and Termination
Agency can be created by:
- Express agreement (written listing or buyer agreement)
- Implied agreement (through actions)
- Ratification (after the fact)
- Estoppel (third party reasonably believes agency exists)
Agency can be terminated by:
- Completion of the objective
- Expiration of the term
- Mutual agreement
- Revocation by the principal (may owe damages)
- Renunciation by the agent (may owe damages)
- Death or incapacity of either party
- Destruction of the property
- Bankruptcy of either party
6. Contracts
Elements of a Valid Contract: COIL
| Letter | Element | Details |
|---|
| C | Competent Parties | Legal age (18+), mentally sound, not under duress |
| O | Offer and Acceptance | Meeting of the minds (mutual assent) |
| I | In Writing / Consideration | Real estate contracts must be in writing (Statute of Frauds); something of value exchanged |
| L | Lawful Purpose | The contract must be for a legal objective |
Contract Classifications
| Classification | Description |
|---|
| Valid | Meets all legal requirements; enforceable |
| Void | Has no legal effect; cannot be enforced (e.g., contract for illegal purpose) |
| Voidable | Valid but one party can choose to enforce or withdraw (e.g., minor signs contract) |
| Unenforceable | Valid on its face but cannot be enforced in court (e.g., oral real estate contract) |
Types of Real Estate Contracts
| Contract Type | Description |
|---|
| Purchase Agreement | Agreement to buy/sell property; most common real estate contract |
| Listing Agreement | Employs the broker to find a buyer |
| Option Contract | Right (not obligation) to buy at a set price within a set time |
| Installment Contract (Land Contract) | Buyer makes payments directly to seller; seller retains title until paid |
| Lease | Right to use and possess property for a period |
| Right of First Refusal | Right to match any offer before property is sold to another |
Listing Agreement Types
| Type | Commission Earned When |
|---|
| Exclusive Right to Sell | Broker earns commission regardless of who finds the buyer (most protective for broker) |
| Exclusive Agency | Broker earns commission unless the owner finds the buyer independently |
| Open Listing | Only the broker who procures the buyer earns a commission |
| Net Listing | Broker keeps anything above the seller's minimum net (illegal in many states) |
Statute of Frauds
The Statute of Frauds requires these contracts to be in writing to be enforceable:
- Real estate sales contracts
- Leases longer than one year
- Contracts that cannot be performed within one year
- Promises to pay the debt of another
Contract Performance
| Term | Meaning |
|---|
| Executed contract | All parties have fully performed |
| Executory contract | One or more obligations remain |
| Time is of the essence | Deadlines are strictly enforced |
| Specific performance | Court orders a party to fulfill the contract (common in real estate) |
| Liquidated damages | Pre-agreed amount for breach (often the earnest money) |
7. Fair Housing Act
The Seven Federal Protected Classes
- Race
- Color
- Religion
- National Origin
- Sex (includes sexual orientation and gender identity per 2021 HUD guidance)
- Familial Status (families with children under 18, pregnant women)
- Disability (physical or mental)
Memory Tip: The original Civil Rights Act of 1866 protects race only with NO exceptions. The Fair Housing Act of 1968 added color, religion, national origin, and sex. The 1988 amendments added familial status and disability.
Prohibited Practices
| Practice | Definition |
|---|
| Steering | Directing buyers toward or away from neighborhoods based on protected class |
| Blockbusting | Inducing panic selling by claiming a protected class is moving into the neighborhood |
| Redlining | Refusing to lend or insure in certain areas based on racial/ethnic composition |
| Discriminatory Advertising | Ads that express preference based on a protected class |
Exemptions from the Fair Housing Act
| Exemption | Conditions |
|---|
| Owner-occupied small building | 1-4 units, owner lives in one, no broker used, no discriminatory advertising |
| Single-family home (FSBO) | Owner owns no more than 3 homes, no broker, no discriminatory advertising |
| Religious organizations | Can limit occupancy to members (non-commercial) |
| Private clubs | Can limit rentals to members for non-commercial purposes |
| Senior housing | 62+ communities or 55+ (80% of units occupied by 55+) |
Critical: The exemption for race (Civil Rights Act of 1866) does NOT exist. Race is ALWAYS protected with NO exceptions.
Disability Accommodations
- Landlords must allow reasonable modifications at the tenant's expense (e.g., grab bars, ramps)
- Landlords must make reasonable accommodations to rules and policies (e.g., allowing service animals)
- New multifamily construction (4+ units, built after March 1991) must meet accessibility requirements
Enforcement
- Complaints filed with HUD within 1 year of the violation
- Federal court lawsuits within 2 years of the violation
- Penalties: fines up to $16,000 (first offense), $37,500 (repeat), $65,000 (pattern of discrimination)
8. Financing
Loan Types Comparison
| Feature | Conventional | FHA | VA | USDA |
|---|
| Down Payment | 3-20%+ | 3.5% minimum | 0% (no down payment) | 0% (no down payment) |
| Credit Score | 620+ typical | 580+ (3.5% down) | No VA minimum (lenders vary) | 640+ typical |
| Mortgage Insurance | PMI (if LTV > 80%) | MIP (upfront + annual) | Funding fee (one-time) | Guarantee fee |
| Loan Limits | Conforming limits apply | FHA limits by county | No limit for eligible veterans | Income and area limits |
| Assumable | Generally no | Yes | Yes | Yes |
| Eligible Properties | Any | Primary residence | Primary residence | Rural areas only |
| Government Backed | No | FHA insured | VA guaranteed | USDA guaranteed |
Mortgage Types
| Type | Description |
|---|
| Fixed-Rate | Same interest rate and payment for the life of the loan (15 or 30 year typical) |
| Adjustable-Rate (ARM) | Rate changes periodically based on index + margin; has rate caps |
| Balloon | Lower payments for a set term, then entire balance due at once |
| Interest-Only | Pay only interest for a period, then principal + interest |
| Reverse Mortgage (HECM) | For 62+ homeowners; lender pays borrower; repaid when borrower leaves |
| Blanket Mortgage | Covers multiple properties; partial release clause allows individual sales |
| Package Mortgage | Includes real and personal property |
| Purchase Money Mortgage | Seller financing; seller acts as the lender |
| Wraparound Mortgage | New mortgage wraps around existing one; seller continues paying original |
ARM Components
| Term | Definition |
|---|
| Index | Benchmark rate the ARM is tied to (e.g., SOFR, Treasury) |
| Margin | Fixed percentage added to the index to determine the interest rate |
| Adjustment period | How often the rate changes (e.g., annually) |
| Rate caps | Limit on how much the rate can change per period and over the life of the loan |
| Payment cap | Limit on how much the monthly payment can change |
| Negative amortization | When payment cap causes payments to be less than interest owed |
Key Lending Laws
| Law | Purpose |
|---|
| TILA (Truth in Lending Act / Reg Z) | Requires disclosure of APR, total cost, right of rescission (3 business days for refinances) |
| RESPA (Real Estate Settlement Procedures Act) | Requires Loan Estimate within 3 days of application; Closing Disclosure 3 days before closing; prohibits kickbacks |
| ECOA (Equal Credit Opportunity Act) | Prohibits credit discrimination based on race, color, religion, national origin, sex, marital status, age, public assistance |
| HMDA (Home Mortgage Disclosure Act) | Requires lenders to report lending data to detect discrimination patterns |
| TRID (TILA-RESPA Integrated Disclosure) | Combined Loan Estimate and Closing Disclosure rule; "Know Before You Owe" |
| Dodd-Frank Act | Created CFPB; Qualified Mortgage (QM) rules; Ability to Repay (ATR) requirements |
TRID Timeline
- Within 3 business days of loan application - Lender provides Loan Estimate (LE)
- At least 3 business days before closing - Lender provides Closing Disclosure (CD)
- After closing (refinance only) - 3-day right of rescission
Mortgage Clauses
| Clause | Purpose |
|---|
| Acceleration | Lender can demand full balance due if borrower defaults |
| Alienation (Due-on-Sale) | Full balance due if property is transferred |
| Defeasance | Mortgage is voided when loan is fully paid |
| Subordination | Allows a later mortgage to take priority |
| Prepayment Penalty | Fee for paying off the loan early (not allowed on QM loans) |
| Escalation | Allows interest rate adjustment based on specified conditions |
9. Appraisal Methods
Three Approaches to Value
| Approach | Best Used For | Formula |
|---|
| Sales Comparison (Market) | Residential properties with comparable sales | Adjust comps to match subject |
| Cost Approach | New/unique properties, special-purpose buildings | Land + Replacement Cost - Depreciation |
| Income Approach | Investment/income-producing properties | NOI / Cap Rate or GRM method |
Sales Comparison Approach
Key Rules:
- Always adjust the comparable to the subject (never adjust the subject)
- CBS rule: "Comp Better, Subtract" / "Comp Worse, Add"
- Need at least 3 comparable sales (ideally within the last 6 months and 1 mile)
- The most reliable approach for residential properties
Example:
- Subject has 3 bedrooms; Comp has 4 bedrooms (comp is better)
- Adjustment: subtract the value of the extra bedroom from the comp's sale price
Cost Approach
Formula: Value = Land Value + Replacement/Reproduction Cost - Depreciation
| Cost Type | Definition |
|---|
| Replacement Cost | Cost to build a building with equal utility using modern methods/materials |
| Reproduction Cost | Cost to build an exact replica of the building |
Three Types of Depreciation
| Type | Description | Curable? |
|---|
| Physical Deterioration | Wear and tear, deferred maintenance | Often curable |
| Functional Obsolescence | Outdated design, poor floor plan, inadequate features | Sometimes curable |
| External (Economic) Obsolescence | Factors outside the property (freeway noise, declining neighborhood) | Never curable |
Exam Tip: External obsolescence is ALWAYS incurable because it comes from forces outside the property that the owner cannot control.
Income Approach Methods
Gross Rent Multiplier (GRM):
- Value = Gross Rent x GRM
- Used for residential income properties (simple method)
Capitalization Rate (Cap Rate):
- Value = NOI / Cap Rate
- Used for commercial income properties (more sophisticated)
- Higher cap rate = higher risk = lower price
- Lower cap rate = lower risk = higher price
Appraisal Principles
| Principle | Definition |
|---|
| Highest and Best Use | The most profitable, legally permitted, physically possible, financially feasible use |
| Substitution | A buyer will not pay more than the cost of acquiring an equivalent substitute property |
| Contribution | The value of an improvement is what it adds to the total value, not what it costs |
| Conformity | Maximum value when properties in an area are similar (homogeneous) |
| Regression | Higher-value property loses value when surrounded by lower-value properties |
| Progression | Lower-value property gains value when surrounded by higher-value properties |
| Anticipation | Value is based on expected future benefits |
| Supply and Demand | Prices rise when demand exceeds supply; fall when supply exceeds demand |
| Change | All properties and neighborhoods are in a constant state of change |
10. Title and Closing
Title Search and Insurance
| Type | Protects | Required By |
|---|
| Owner's Title Insurance | Buyer/owner against title defects | Optional (but highly recommended) |
| Lender's Title Insurance | Lender's mortgage interest | Required by lender |
Title insurance is a one-time premium paid at closing (not an annual premium).
Common Title Defects
- Forged deeds
- Undisclosed heirs
- Errors in the public record
- Missing signatures
- Prior liens not discovered in search
- Incorrect legal descriptions
Types of Deeds
| Deed Type | Warranties | Use Case |
|---|
| General Warranty Deed | Highest protection; warrants against all title defects, past and present | Most common in sales |
| Special Warranty Deed | Warrants only against defects during grantor's ownership | Common in commercial |
| Bargain and Sale Deed | Implies grantor holds title but makes no warranties | Foreclosure sales |
| Quitclaim Deed | No warranties whatsoever; transfers whatever interest grantor may have | Between family, clear clouds |
General Warranty Deed Covenants
| Covenant | Promise |
|---|
| Covenant of Seisin | Grantor owns the property and has the right to convey |
| Covenant Against Encumbrances | No undisclosed liens, easements, or restrictions |
| Covenant of Quiet Enjoyment | Buyer will not be disturbed by superior claims |
| Covenant of Further Assurance | Grantor will do whatever is needed to perfect the title |
| Covenant of Warranty Forever | Grantor will defend the title against all claims |
Requirements for a Valid Deed
- Competent grantor (grantee does not need to be competent)
- Written instrument
- Adequate legal description
- Granting clause (words of conveyance)
- Consideration stated
- Signature of the grantor (grantee does NOT sign)
- Delivery and acceptance
- Recording is NOT required for a valid deed (but is necessary to give constructive notice)
Closing Costs (Typical Allocations)
| Cost | Typically Paid By |
|---|
| Loan origination fee | Buyer |
| Appraisal | Buyer |
| Credit report | Buyer |
| Title search | Varies (buyer or seller) |
| Owner's title insurance | Varies by state |
| Lender's title insurance | Buyer |
| Transfer tax/stamps | Varies by state (often seller) |
| Recording fees | Buyer (deed), Seller (satisfaction of mortgage) |
| Broker commission | Seller |
| Prorated property taxes | Split at closing |
| Prorated HOA dues | Split at closing |
11. Land Use Controls and Regulations
Government Powers: PETE
| Letter | Power | Description |
|---|
| P | Police Power | Government's right to regulate for health, safety, and welfare (zoning, building codes) |
| E | Eminent Domain | Government's right to take private property for public use with just compensation |
| T | Taxation | Government's right to levy property taxes |
| E | Escheat | Government takes property when owner dies without heirs and without a will |
Zoning
| Concept | Definition |
|---|
| Zoning Ordinance | Local law that divides a community into districts with specific land uses |
| Variance | Permission to deviate from zoning requirements (e.g., setback variance) |
| Conditional Use Permit (CUP) | Permission for a special use within a zone (e.g., church in residential area) |
| Nonconforming Use | Existing use that was legal before zoning change; grandfathered in |
| Spot Zoning | Rezoning a small parcel differently from surrounding area (often illegal) |
| Downzoning | Changing zoning to a more restrictive use |
| Buffer Zone | Transition area between different zoning types |
Private Land Use Controls
| Control | Description |
|---|
| Deed Restrictions (CC&Rs) | Private rules placed on property by a developer or HOA |
| Easements | Right to use another's land for a specific purpose |
| Liens | Financial claims against property |
Easement Types
| Type | Description |
|---|
| Easement Appurtenant | Benefits a neighboring property (dominant tenement); runs with the land |
| Easement in Gross | Benefits a person or company (e.g., utility easement); does not run with the land for personal easements |
| Easement by Prescription | Gained through open, notorious, hostile, and continuous use for the statutory period |
| Easement by Necessity | Created when a parcel is landlocked |
Legal Descriptions
| Method | Description |
|---|
| Metes and Bounds | Uses compass directions and distances from a point of beginning (POB); always returns to POB |
| Rectangular (Government) Survey | Uses townships, ranges, sections; based on principal meridians and baselines |
| Lot and Block (Recorded Plat) | References a recorded subdivision map with lot and block numbers |
Rectangular Survey Key Facts
- A township = 6 miles x 6 miles = 36 square miles = 36 sections
- A section = 1 square mile = 640 acres
- Quarter section = 160 acres
- Quarter of a quarter section = 40 acres
- Sections are numbered starting at the northeast corner, going left, then snaking back
12. Environmental Issues
Required Disclosures and Key Environmental Hazards
| Issue | Key Facts |
|---|
| Lead-Based Paint | Disclosure required for homes built before 1978; buyer gets 10-day inspection period; seller must provide EPA pamphlet "Protect Your Family From Lead in Your Home" |
| Asbestos | Common in insulation, floor tiles, roofing in older buildings; dangerous when friable (crumbling/airborne) |
| Radon | Colorless, odorless radioactive gas from soil; #1 cause of lung cancer among non-smokers; tested at lowest livable level |
| Mold | Can cause health issues; results from moisture problems; disclosure varies by state |
| Underground Storage Tanks (USTs) | Common at gas stations; can contaminate soil and groundwater; EPA regulates |
| Urea Formaldehyde | Found in insulation (UFFI) and some building materials |
| Wetlands | Protected by the Clean Water Act; cannot be developed without Army Corps of Engineers permit |
| Endangered Species | Endangered Species Act can restrict development on affected land |
Environmental Laws
| Law | Purpose |
|---|
| CERCLA (Superfund) | Identifies and cleans up contaminated sites; creates liability for current and past owners |
| Clean Water Act | Regulates discharges into waterways; protects wetlands |
| Clean Air Act | Regulates air quality and emissions |
| NEPA | Requires environmental impact statements for federal projects |
CERCLA Liability: Current owners can be held liable for contamination even if they did not cause it. The "innocent landowner defense" requires a Phase I Environmental Site Assessment before purchase.
13. Key Numbers to Remember
| Number | What It Represents |
|---|
| 43,560 | Square feet in 1 acre |
| 640 | Acres in 1 section (1 square mile) |
| 36 | Sections in 1 township |
| 5,280 | Feet in 1 mile |
| 1978 | Homes built before this year require lead-based paint disclosure |
| 1866 | Civil Rights Act (race only, NO exceptions) |
| 1968 | Fair Housing Act (added color, religion, national origin, sex) |
| 1988 | Fair Housing Act amendments (added familial status, disability) |
| 3 business days | Lender must provide Loan Estimate after application (TRID) |
| 3 business days | Closing Disclosure must be provided before closing (TRID) |
| 3 business days | Right of rescission for refinance (TILA) |
| 1 year | Deadline to file Fair Housing complaint with HUD |
| 2 years | Deadline to file Fair Housing lawsuit in federal court |
| 10 days | Buyer's lead-based paint inspection period |
| 28/36 | Conventional loan qualifying ratios (housing/total debt) |
| 31/43 | FHA loan qualifying ratios |
| 41 | VA back-end qualifying ratio |
| 3.5% | Minimum FHA down payment |
| 0% | VA and USDA down payment |
| 20% | Down payment to avoid PMI on conventional loans |
| 80% | Maximum LTV before PMI is required (conventional) |
| 62+ | Age for reverse mortgage (HECM) eligibility |
| 55+ | Age for senior housing exemption (80% of units) |
| $1 per $1,000 | 1 mill in property tax |
| 1 point | 1% of the loan amount (discount points) |
14. Additional Must-Know Concepts
Liens
| Type | Priority | Description |
|---|
| Property Tax Lien | Always first (superior) | Government claim for unpaid taxes |
| Special Assessment | Usually second | Government lien for public improvements benefiting the property |
| First Mortgage | After tax liens | Primary lender's security interest |
| Second Mortgage | After first mortgage | Junior lien; higher risk for lender |
| Mechanic's Lien | Varies by state | Filed by contractors/suppliers for unpaid work; priority may date to start of work |
| Judgment Lien | General lien | Court-ordered lien for unpaid debts; attaches to all property |
Lien Priority Rule: "First in time, first in right" -- except property tax liens always come first regardless of recording date.
Real Property vs. Personal Property
| Real Property (Realty) | Personal Property (Personalty) |
|---|
| Land and anything permanently attached | Movable items not attached to land |
| Fixtures (once attached, become real property) | Trade fixtures (tenant-installed, remain personal) |
| Appurtenances (rights that go with the land) | Emblements (annual crops, personal property of tenant farmers) |
| Transferred by deed | Transferred by bill of sale |
Tests for Fixtures (MARIA)
| Letter | Test |
|---|
| M | Method of attachment |
| A | Adaptability to the property |
| R | Relationship of the parties (buyer vs. seller disputes favor buyer) |
| I | Intent of the party who attached it |
| A | Agreement of the parties |
Water Rights
| Type | Description |
|---|
| Riparian Rights | Rights of owners along rivers, streams, and other flowing water |
| Littoral Rights | Rights of owners along lakes, oceans, and other bodies of standing water |
| Prior Appropriation | "First in time, first in right" - common in western states |
| Accretion | Gradual addition of land by natural water deposit (alluvion) |
| Erosion | Gradual loss of land from water action |
| Avulsion | Sudden loss of land (e.g., earthquake, flood) |
| Reliction | Land exposed by receding water |
Study Strategy for Exam Day
- Review this cheat sheet the night before and morning of your exam
- Do a brain dump - write down all formulas and mnemonics as soon as the exam starts
- Answer easy questions first - skip difficult ones and come back
- Eliminate wrong answers - usually 2 of 4 options are clearly wrong
- Watch for absolute words - "always," "never," "all," "none" are often wrong
- Trust your first instinct - do not change answers unless you are certain
- Manage your time - do not spend more than 90 seconds per question
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