* Deck 3 * Flashcards
(36 cards)
Escrow
Process in which a disinterested third-party holds all money and documents relating to transaction until terms and conditions of escrow have been satisfied
Escrow Agents
Attorneys, banks, brokers, insurance companies etc.
Escrow Process
1) Select escrow company
2) Deliver purchase contract to escrow holder
3) Open the escrow
4) Complete all items outlined in escrow instructions
5) Close escrow
Preliminary Report
Escrow officer orders to start title search. Shows condition of title before the loan/sales transaction
California Land Title Association (CLTA)
The standard policy in California. Maybe issued by lender only, buyer only, or both, called a “joint protection standard coverage policy”. Seller and buyer negotiate who pays
Covers – forgeries, active minors and incompetence, failure of delivery of a prior do you need, federal real estate tax liens, acts of an agent whose authority has terminated.
American Land Title Association (ALTA)
Extended coverage policy, insurance against items in CLTA.
Gives coverage to lender. Buyer can buy an owner’s policy
Includes a survey/physical inspection of property. Usually required by California lenders or out-of-state lender’s that can’t make their own personal inspection.
ALTA-R
Title insurance companies recommend to owners of 1 to 4 unit, owner occupied residence
Policy doesn’t include a survey since property liens are already established by record subdivision maps
Preferred title policy choice for residential properties
County Assessor
Determines the amount of real property taxes call “ad Valorum”
Responsible for collecting these taxes which are paid annually or semiannually
Proposition 13
Maximum annual tax on real property is limited to one percent of full cash value or Market value, plus a maximum of 2% increase in market value per year
Exemptions:
Proposition 58
Proposition 60&90
Proposition 58
Allows transfer of property from one spouse to another or children without triggering reassessment
Proposition 60 & 90
Homeowners may be permitted to transfer their current tax with them if all following apply
•55 years and older
• replacement property purchase within two years of original sale
• New home be equal or lesser value
Change in ownership statement
Anyone who acquires property subject to taxes must notify county recorder by filling change of ownership statement within 45 days of date of recording.
Documentary transfer tax
California tax laws allow city/county tax property that’s transferred
Computed on total price paid, less any assume loans. Rate at $.55 for each $500 of consideration or fraction thereof
Progressive tax
Income tax
When rate increases as the amount to be taxed increases
More money made = higher to be taxed
Regressive tax
Tax that uses the same way regardless of income tax
Example: state sales tax
Installment sale
When buyer makes payment for one property over more than one calendar year. This helps spread game to avoid having entire game taxed in one year.
1031 exchange
Tax deferred exchange
Owners can exchange property for another, as long as transaction qualifies 1031 guidelines, if so the exchange is “tax free”
Foreign investment in real property act (FIRPA)
Requires a buyer to withhold estimated taxes equal to 15% of sale price and any sale of property owned by foreigner.
Financing investment property
- Savings banks
- Commercial Banks
- Life Insurance Companies
- Sellers
- Syndicates
Syndicates
Group of two or more people who combine financial resources to achieve investment objectives Can be: Limited partnership General partnership Corporation Real estate investment trust
Limited partnership
Two or more people. One general partner has UNLIMITED liability’s for debts and obligations of groups projects.
All other partners have LIMITED liability to capital investment and project
General partnership
Two or more people. All partners have UNLIMITED liability for debts and obligations of partnership.
Corporation (Syndicates)
A business entity which is separate and apart from its owners ( stockholders)
Has Board of Directors and the stockholders have liabilities that are limited to capital investment
Real estate investment trust ( REIT)
Type of real estate investment company that sells ownership shares.
REITS receive special tax considerations and offer high-yield’s to investors
REITS often invest in miles, office buildings, apartments, hotels etc.
