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CALIFORNIA REAL ESTATE PRINCIPLES
1. CALIFORNIA DIVERSITY
a. Capitalism : an economic system in which most of the economy’s resources are privately owned and managed.
b. California is the 8th largest economy in the world, and generates 13% of the US GDP.
c. Net worth : the value of all assets minus all liabilities.
d. Appreciation : increase in the market value of real estate
e. Inflation : increase in the price of goods/services or decrease in purchasing power
f. Affordability index : measures how many households can afford a median-priced home.
g. Median home price : midway between most expensive and least expensive
h. C.A.R. (California Association or REALTORS) :trade association dedicated to the advancement of professionalism in
real estate.
i. Realtor : someone who is a member of the association
ii. Real estate agent : someone who’s licensed by the D.R.E.
i. List 3 major careers in R.E.
i. Management
ii. Finance
iii. Construction
iv. Brokerage
j. Name 2 types of R.E. licenses
i. R.E. Sales person
ii. R.E. Broker
2. PROPERTY, ESTATES, AND OWNERSHIP: “Who owns this property, and What’s their interest in it?”-
a. Bundle of rights (U.P.T.E.E.):
i. U se: right to use, within law, in any way or purpose
ii. P ossess: right to live on property and keep others out
iii. T ransfer: right to sell, give, or dispose of property
iv. E ncumber: right to borrow against, or use as collateral
v. E njoy: right to peace and quiet enjoyment
b. Personal property vs. Real property
i. Personal aka chattel: moveable, and transferred/sold via Bill of Sale
ii. Real: immoveable, and is transferred/sold via Deed; anything permanently attached to the land
1. Airspace, to a reasonable height
2. Surface rights
3. Mineral rights: gold, precious metals; unless they’re fugitive (non-solid, i.e.: gas, oil)
4. Water rights: streams, underground water
a. Under the Correlative-rights Doctrine, the owner may take only a reasonable share of
the underground H2O
b. Riparian Rights : property bordering a river/stream
c. Littoral rights : property bordering a lake; owns up to the low water mark/edge of the
lake
d. For land bordering oceans, property owners own up to the ordinary high tide mark
e. Appropriation : gov’t right to divert water for a beneficial use
iii. Improvements : anything resting on the land to become permanent, i.e. pools, fences, garages, etc.
iv. Fixtures : anything that’s permanently attached to real property.
1. 5 tests to determine a fixture (M.A.R.I.A.)
a. M ethod of Attachment – moveable or immoveable?
i. Fructus naturales : naturally occurring plant growth, i.e. grass
ii. Emblements : commercial groves/crops for annual harvest/sale
CALIFORNIA REAL ESTATE PRINCIPLES
iii. Fructus indutriales : crops produced by human labor, i.e. corn
b. A daptation – item specially made for property?
c. R elationship of parties – tenant/landlord; lender/borrower
d. I ntention – what was the intent, and was it informed/written
e. A greement of the parties
2. Trade fixtures
a. Personal property used to conduct a business, i.e. shelves, cabinets, refrigerators, etc.
b. Tenants can retain this property, even though landlord owns it, but is responsible for
repairing any damages that result from replacing them.
3. Anything Appurtenant to the Land
a. Appurtenance : anything used with the land for its benefit (belonging to), i.e. easements,
stock rights to mutual water companies
b. Easement : right of way across a parcel of land
c. Types of Estates
i. Estate : ownership interest or claim on real property
1. Freehold Estate
a. Indefinite duration
b. Can be sold or inherited
c. Free from anyone else’s restrictions
d. Types
i. Estates in Fee , aka (Fee Simple Estate or Estate of Inheritance or
Perpetual estate)
1. An estate passed through inheritance or by will after owner’s
death.
2. Fee simple absolute : No conditions or limitations on use
3. Fee simple qualified /defeasible : seller imposes qualifications or
conditions that buyer must/must not do
4. Condition Subsequent : owner mustn’t do something with that
property
a. Penalty: property will go back to former owner
5. Condition Precedent : restriction/condition must occur before
transaction becomes absolute and final
ii. Life Estates : Limited in duration to the life of the owner or designated person
(pur autre vie)
1. Has all rights that go with fee ownership except disposing of the
estate by will
2. Must pay taxes and maintain property
3. May collect all rents and keep profits for the duration of the life
estate
4. Types of Life Estates
a. Estate in Reversion : A deeds estate to B. B dies. The
estate then goes back to A.
b. Reserving a Life Estate : A deeds estate to B for the life
of C. When C dies, estate goes to D.
c. Estate in Remainder : A deeds estate to B, with
provision that when B dies, estate goes to C. C’s
interest is called the “Estate in Remainder”.
CALIFORNIA REAL ESTATE PRINCIPLES
2. Less-than-freehold estate (aka Leasehold Estate): estate owned by a tenant who rents real property.
a. Leasehold Estate aka Chattels real (lease/rental agreement)
i. Moveable document describing temporary possession and use of the
property… PERSONAL PROPERTY
b. Temporary and limited rights of use (lease), fixed amt of time
c. Types of Leasehold estates
i. Estate for years : fixed term lease w/ definite end date stated
ii. Estate from Period to Period : periodic tenancy, i.e. month to month, 30-day
notice to quit, and terminates by either party
iii. Estate at Will : no written agreement between landlord and tenant, can be
ended by unilateral decision, & 30-day notice must be given
iv. Estate by Sufferance : tenant occupies property without paying rent or
permission from landlord (squatters)
d. Ownership of Real Property
i. Tenancy : mode or method of ownership or holding title to property
ii. Title : evidence that owner of land is in lawful possession
iii. Paramount title : right to real property that prevails over any other person’s claim of title
iv. Separate Ownership (aka Ownership in Severalty): ownership by one person/entity
v. Concurrent Ownership : co-ownership (4 types)
1. Tenancy in Common : 2 or more persons whose interests aren’t necessarily equal, but are owners of
undivided interests in a single estate
a. May take title at different times
b. May take title on separate deeds
c. May have unequal interests
d. Have undivided interest or equal right or possession (one unity)
e. Partition Action : asking the courts to decide fate of investment when the owners can’t
come to an agreement
2. Joint Tenancy : 2 or more parties own real property as co owners, with right of survivorship
(meaning that if one of the joint owners pass, then the surviving owner automatically becomes sole
owner of property). i.e. married couple
a. Four Unities of Joint
Tenancy: T-TIP (all 4
must occur)
i. T ime : all parties must become joint tenants at same time
ii. T itle : All parties must take title on the same deed
iii. I nterest : all parties have equal undivided interest in property
iv. P ossession : All parties have equal right of possesion
3. Community Property : all property acquired during a valid marriage except for separate property
a. Separate Property
i. Property owned before marriage
ii. Property acquired by gift or inheritance
iii. Income derived from separate property
b. 3 choices on taking title in CA as married couple
i. Joint Tenancy
1. Right of survivorship
2. May include a tax liability for surviving spouse
ii. Community property
CALIFORNIA REAL ESTATE PRINCIPLES
1. Right of survivorship
2. Includes probate when spouse dies, and costs involved in that
process
iii. Community property with the right of survivorship, but no particular tax
liability because of spouse’s death and no probate
c. Intestate Succession : if there’s no will, spouse inherits all community property
4. Tenancy in Partnership: ownership by 2 or more persons who form a partnership for business
purposes
Joint Tenancy Tenancy in Common Community Property PartnershipParties Any Number Any Number Spouses Only Any NumberInterest Must be equal Equal or unequal Must be equal Mutual consentPossession Equal right Equal right Equal right Equal rightDeath Survivorship No Survivorship Survivorship (no will) No Survivorship
vi. Recording Safeguard Ownership
1. Acknowledgement
a. before a notary public, or certain public official
b. formal declaration by the person (grantor) who executed the instrument that he/she did in
fact the execute the instrument
2. Recording Process
a. copying the instrument to be recorded in proper index
b. filing it in alphabetical order, under names of parties immediately
c. To be valid, documents must be recorded by the county recorder in the county within
which the property is located.
i. Marked “filed for record”
ii. Stamped with the proper time and date of recording and returned to the person
who requested the recording.
d. Constructive Notice: public notice, i.e newspaper, news broadcast, etc.
e. Actual Notice: direct, express information about the ownership interest of a property.
3. Priorities in Recording
a. first one recorded takes precedence
3. Encumbrances and Transfer of Ownership
a. Encumbrances: an interest in real property that is held by someone other than the owner (ALL LIENS ARE
ENCUMBRANCES, BUT NOT ALL EMCUMBRANCES ARE LIENS)
i. MONEY ENCUMBRANCES
1. Voluntary lien: borrowing money, using the property as a security for the loan
2. Involuntary lien: liens placed on property because owner has taxes or debt owed
3. Specific lien: lien placed on a certain property, i.e. mechanic’s lien, trust deed, tax lien
a. Mechanic’s lien : lien against property placed by anyone who supplies labor, services, or
materials used for improvements on real property who didn’t received payment for the
improvements made
i. Must be verified and recorded
ii. Preliminary notice
1. Written notice given to owner within 20 days of first furnishing
labor or materials for a job
iii. Notice of completion
1. If owner records notice of completion within 10 days after project
is finished, contractor has 60 days to file. All others have 30 days.
iv. No notice of completion
CALIFORNIA REAL ESTATE PRINCIPLES
1. If owner doesn’t record notice of completion when project is
finished, then all claimants have 90 days to record mechanic’s lien
v. Foreclosure action
1. After mechanic’s lien is recorded, the claimant has 90 days to
bring foreclosure action to enfoce the lien.
vi. Notice of Non-responsibility:
1. Unauthorized work on property must be recorded and posted on
property to be valid, stating owner’s not responsible for work
being done. Owner must record this notice within 10 days after
discovering it
b. Tax Liens : liens on property because of unpaid taxes
i. Special assignments : taxes levied for specific local purposes
c. Lis Pendens : recorded notice pending litigation affecting title of property
d. Attachment lien : aka writ of attachment, process by which the court holds the real or
personal property of a defendant as security for a possible judgment pending outcome of
lawsuit
i. Judgment : final determination of the rights of parties in a lawsuit
ii. Abstract of Judgment : Court decision
iii. Writ of Execution : aka execution sale, court forced sale of a property to
satisfy the judgment
4. General lien: lien on ALL properties of a debtor
ii. NON-MONEY ENCUMBRANCES : encumbrance that affects use of a property
1. Easements : right to enter or use someone else’s land for specific purpose
a. Ingress : right to enter onto a property using easement
b. Egress : Right to exit a property using easement
c. Appurtenant Easement : An easement that’s used for the benefit of the land
i. Appurtenance : anything used for benefit of the land
ii. Servient tenement : person who’s giving the easement to be used
iii. Dominant tenement : Person receiving the benefit of the easement
d. Easement in Gross : an easement that’s not appurtenant to any one parcel, i.e. public
utilities to install power lines
e. Creating an easement
i. Express grant : grant by deed or express agreement
ii. Express reservation : seller of a parcel who owns adjoining land reserves an
easement over the former property.
iii. Implied Grant or Reservation : existence of an easement is obvious and
necessary at time of conveyance, even though not mentioned in deed.
iv. Necessity : easement made when parcel is completely landlocked and has no
access
f. Prescription : acquiring an interest, not ownership, of certain property
i. Easement by Prescription (a specified interest in property): continuous and
uninterrupted use by a single party for a period of 5 years
1. Must be against the owner’s wishes
2. Be open and notorious
3. Party claiming Easement by Prescription must have reasonable
claim to use the property
CALIFORNIA REAL ESTATE PRINCIPLES
ii. Adverse Possession (Acquires title to the property): payment of taxes for 5
continuous yrs
g. Terminating Easement (A.D.A.M. E. L.E.E.) Adam E. Lee
i. A bandonment: Obvious and intentional surrender of the easement (after 5
years of non-use)
ii. D estruction of the Servient Tenement: Gov’t takes easement for its own use
iii. A dverse Possession: servient tenement owner prevents dominant tenement
owner from using easement for 5 yrs
iv. M erger: servient and dominant tenement owners are the same, i.e. servient
tenement owner buys parcel next that used easement
v. E xpress release: owner of dominant tenement is the one who can release an
easement
vi. L egal proceedings: owner of servient tenement brings action to quiet title
against the owner of the dominant tenement
1. Quiet Title Action (aka Action to Quiet Title): a lawsuit to
establish or settle title to real property
vii. E stoppel: Non-use and the property owner has reason to believe that no
further use is intended.
viii. E xcessive use
iii. RESTRICTIONS : limitations placed on the use of the property
1. Private restriction: restrictions place by a present or past owner and affect only a specific property or
development
a. CC&R’s: Covenants, Conditions, and Restrictions
i. Covenant: A promise to do or not to do certain things
1. Penalties for a Breach
a. Money damages
b. Injunction: court order to do/not do an act
ii. Conditions: a promise to do/not do something (usually a limitation on the use
of the property)
1. Penalties for a Breach
a. Return of the property to the grantor
2. Condition Subsequent
a. A restriction placed in a deed at the time of
conveyance, upon future use of the property. It is a
condition that’s placed on the property that comes into
play subsequent to the transaction.
3. Condition Precedent
a. A restriction that a certain event, or condition, must
occur before title can pass to the new owner.
iii. Restrictions: limitations on use of property
1. Public restriction: (ZONING) promotes public health and general
public welfare, i.e. R1, C1, M1
2. Downzoning : changing from high density use to lower density use
3. Non-Conforming : existing structures that are exempted from
conforming to new regulations because of the “grandfather
clause,” which allows the owner to continue to use the structures.
CALIFORNIA REAL ESTATE PRINCIPLES
If he wants to make changes to the property, then he has to comply
w/ zoning laws.
4. Variance : an allowable difference to the zoning laws for a
structure or land use
2. Zoning (public restriction): government restrictions the benefit the public
3. Encroachments : unauthorized intrusion on the adjoining land, limiting use and reducing size and
value.
iv. Homestead Protection
1. Homestead : limits the amount of liability for certain debts against which a home can be used to
satisfy a judgment. “Declaration of Homestead” is the recorded document that protects a
homeowner from foreclosure by certain judgment creditors. First $75,000 of home’s value may not
be used to satisfy judgment against head of household. $150,000 for mentally disabled or over 65,
and $50,000 for all others
2. Requirements for Valid Homestead : Only one can be valid at a time
a. Claimant must be living on the property at the time of the filing
b. Must state his or her status as head of household or other
c. Must describe the property
d. Give an estimate of value
v. HOW REAL ESTATE IS ACQUIRED OR CONVEYED
1. Will : disposition of property after death
a. Testator : a person who makes a will
b. Testate : means the person who died left a valid will
c. Devise : a gift of real property
d. Bequest (aka legacy) : a gift of money or personal property by will
e. Codicil : Will’s maker may change a will before death
f. Witnessed Will : will that’s usually prepared by an attorney and signed by the maker
(testator) and two witnesses
g. Holographic Will : will that’s written in the maker’s writing, dated, and signed by the
maker
h. Probate : legal process to prove a will is valid, and to determine creditors’ claims and
beneficiaries’ interested in an estate upon owner’s death
i. Executor or Executrix : person named in a will that is appointed as a
representative to handle the estate of the deceased
ii. Administrator or Administratrix : Court appointed person who administers
the estate because there’s no will
2. Succession : legal transfer of a person’s interests in real and personal property under the laws of
descent and distribution.
a. Intestate Succession : inheriting property as a result of someone’s death without a will.
3. Accession : process by which there is an addition to property by the efforts of man or natural forces
a. Alluvium : gradual build-up of soil
b. Accretion : gradual build-up of soil by natural causes on property bordering rivers, lakes,
or oceans
c. Erosion : gradual wearing away of land by water, wind, or glacial ice
d. Avulsion : sudden washing or tearing away of land by water action
e. Reliction : when land covered by water becomes uncovered because of alluvial deposits
along the banks of streams
4. Occupancy: using property (squatting)
CALIFORNIA REAL ESTATE PRINCIPLES
a. Must be occupied without owner’s knowledge
b. Cannot be publicly owned
c. Three steps to acquire property by occupancy:
i. Abandonment
ii. Adverse possession: acquired through continued possession and payment of
taxes (P.A.N.C.H.O.)
1. P ossession must be actual occupation
2. A dverse
3. N otorious
4. C ontinuous and uninterrupted for 5 yrs
5. H ostile to the present owner’s title and wishes
6. O pen
iii. Prescription
d. Transfer: property acquired when title is conveyed (transferred) from one person to
another via a written document
i. Real property may be transferred (alienated) by private grant, public grant,
public declaration, or operation of the law (court action)
1. Private grant: transfer by written instrument (formal legal
documents such as deed, will, or contract), i.e. grant deed,
quitclaim deed, gift deed, warranty deed
2. Grant deed: written document that stransfers title to real property
and must contain granting clause
a. Grantor: person conveying the property
b. Grantee: person receiving the property
c. A grant deed must have a granting clause and has two
implied warranties by the grantor:
i. That the grantor has not already conveyed
title to any other person
ii. That the estate is free from encumbrances
other than those disclosed by the grantor
d. “et ux” : means “and wife”
e. Requirements for a Valid Grant Deed
i. Deed must be in writing, according to the
statutes of frauds
ii. Parties to the transfer must be sufficiently
identified and described
iii. Grantor must be competent to convey
property
iv. Grantee must be capable of holding title
v. Property must be adequately described but
doesn’t require legal description
vi. Words of granting such as grant or convey
must be included
vii. Deed must be executed by grantor
(seller) . Deed may be signed by a witnessed
mark “X”
CALIFORNIA REAL ESTATE PRINCIPLES
viii. Deed must be delivered to and accepted by
the grantee. Deed isn’t effective until it’s
delivered.
ix. Acknowledgement : signed statement made
in front of notary public that the named
person is confirming that the signature on a
document is genuine and was made of free
will
x. Constructive Notice : given notice by
recording a document or taking physical
possession of property
xi. Chain of Title : sequential record of changes
in ownership showing the connection from
one owner to the next
xii. Priority : first to record a deed is the first in
right
3. Quitclaim Deed : transfers any interest at the time the deed is
signed, but doesn’t warranty clear title. Cloud on Title: any
condition that might affect the clear title of real property or minor
defect in the chain of title which needs to be removed.
4. Gift Deed : gift of property to a grantee, where the consideration is
love and affection
5. Warranty Deed : deed used to transfer title, guaranteeing the title
is clear and grantor has right to transfer it. (no longer used in CA)
6. Public Grant : transfer of title by government to private individual.
Patent: document used by the gov’t to transfer title to land instead
of using deed
7. Public Dedication : private property intended for public use
a. Common Law Dedication : property owner implies
through his or her conduct the intent that the public use
the land. To be effective, it must be accepted by public
use/local ordinance
b. Statutory Dedication : dedication by private individual
to the public, using Subdivision Map Act
c. Deed : formal transfer by a party as in a gift deed where
there is no consideration
ii. Operation of Law: involuntary transfer of property
1. Foreclosure : legal process used by a lender to seize property of a
homeowner, usually due to homemaker not making payments on
the mortgage
2. Bankruptcy : court proceeding to relieve a person’s or company’s
financial insolvency (debt exceeds assests)
3. Quiet Title Action : court proceeding to clear a cloud on the title of
real property
4. Executions sale : forced sale under Writ of Execution (legal
document used by courts to forcing sale to satisfy judgement) with
proceeds to satisfy money judgment
CALIFORNIA REAL ESTATE PRINCIPLES
5. Partition Action : court proceeding to settle a dispute between co-
owners about dividing their interests in real property
6. Escheat : legal process in which property reverts to the state
because the deceased owner left no will and has no legal heirs.
State must wait 5 yrs to claim property
7. Eminent Domain : power of gov’t to take private property for
public use after paying just compensation (fair and reasonable
payment) to the owner
a. Condemnation : acquiring private property for public
use… under 5th Amendment
b. Inverse Condemnation : private party forces gov’t to
pay just compensation if property value or use has been
diminished by public entity
CALIFORNIA REAL ESTATE PRINCIPLES
4. Contracts: the Basics
a. Contracts in General
i. Express Contract: the parties declare the terms and put their intentions in words, either oral, or written.
ii. Implied Contract: agreement shown by act and conduct rather than words
iii. Bilateral Contract: agreement in which each person promised to perform an act in exchange for another
person’s promise to perform
iv. Unilateral Contract : contract in which a party promises to perform without expectation of performance by the
other party
v. Executory Contract : contract in which obligations to perform exists on one or both sides
vi. Executed Contract : all parties have performed completely
vii. Void Contract : contract with no legal effect because of lack of capacity or illegal subject matter
viii. Voidable Contract : contract that’s valid and enforceable on its face, but may be rejected by one or both parties
ix. Unenforceable Contract : Valid contract but for some reason cannot be proved by one or both of the parties…
Oral Agreements
x. Valid Contract : binding and enforceable contract
b. Basic Elements of All Contracts
i. Legally Competent Parties
1. Must be 18, unless married, in military, or declared emancipated by courts
2. Mentally competent
3. Power of Attorney : authority given to another person to act on behalf of another
a. When dealing with real property, power of attorney must be recorded to be valid, and is
good for as long as the principal is competent. It can be revoked at any time by recording
revocation
ii. Mutual Consent between both Parties (aka Meeting of the Minds)
1. All parties mutually agree
2. Genuine assent: offer and acceptance is genuine and freely made by all parties
a. No Genuine Assent if:
i. Fraud: act meant to deceive in order to get someone to part with something of
value
ii. Innocent Misrepresentation: unknowingly providing wrong information,
where a contract may be rescinded or revoked by party that felt misled
iii. Mistake: an agreement that was unclear or there was a misunderstanding in
facts
iv. Duress (or menace): use of force which is the threat of violence
v. Undue Influence: using unfair advantage to get agreement
iii. Offer : contractual intent of offeror to enter into a contract
iv. Acceptance : unqualified agreement to the terms of an offer
1. Counteroffer : rejection of original offer that becomes new offer
v. Termination
1. Lapse of time : revoked if the offeree fails to accept it within a prescribed period
2. Communication of Notice of Revocation : notice is filed by the offeror anytime before the other
party has communicated acceptance
3. Failure of offeree to fulfill a condition of acceptance prescribed by the offeror
4. A qualified acceptance, or counteroffer by the offeree
5. Rejection by the offeree
6. Death or insanity of the offeror or offeree
7. Unlawful object of the proposed contract
CALIFORNIA REAL ESTATE PRINCIPLES
vi. Sufficient Consideration
1. Consideration : something of value such as a promise of future payment, money, property, or
personal services
2. Acceptable Consideration : terms that denote acceptable consideration include valuable, adequate,
good, or sufficient consideration
3. Forbearance : forgiving a debt or obligation, or giving up an interest or a right, qualifies as valuable
consideration
c. Contracts that Must be in Writing
i. Statute of Frauds: most contracts are required by law to be in writing, unless it’s a lease for less than a year
1. Purpose is to prevent forgery, perjury, and dishonest conduct of unethical people
ii. Parol Evidence Rule: Oral/word of mouth agreements
d. Discharge of Contracts : the cancellation or termination of a contract
i. Performance: contract fully performed
1. Tender of performance : an offer by one of the parties to carry out his or her part of the contract,
made at time to close escrow
2. Waiver : relinquishment or refusal to accept a right
3. Specific Performance : a court action brought about by one party to force the other (breaching) party
to fulfill the conditions of the contract
ii. Release: person whom an obligation is owed releasing the other party from the obligation to perform the
contract
iii. Mutual Rescission : when all parties to a contract agree to cancel the agreement
iv. Assignment: transfer all the interests of the assignor to the assignee. Assignee takes over assignor’s rights,
remedies, benefits, and duties in the contract.
v. Novation: substitution, by agreement, of a new obligation for an existing one, w/ intent to extinguish the
original contract
vi. Breach: failure to perform on part or all of the terms and conditions of a contract
1. Remedies:
a. Unilateral Rescission: Legal action taken to repeal a contract by one party when the other
party had breached a contract
b. Lawsuit for Money Damages
c. Lawsuit for Specific Performance: forcing the breaching party to carry out remainder of
contract according to agreed-upon terms, price, and conditions
e. Statute of Limitations: set of laws determining civil action time limits prescribed by law
i. 90 Days: civil action to recover personal property left at hotel or apt
ii. 6 Months: action against an officer to recover property seized in an official capacity
iii. 1 year: libel or slander, injury or death caused by wrongful act, or loss to depositor against a bank for the
payment of a forged check
iv. 2 years: action on a contract, not in writing; action based on a policy of title insurance
v. 3 yrs: Action on a liability created by statute; action for trespass on or injury to real property (i.e.
encroachment); action for relief on the grounds of fraud or mistake; attachment
vi. 4 yrs: action on any written contract; includes most real estate contracts
vii. 10 yrs: action on a judgment or decree of any court in the US
5. AGENCY RELATIONSHIPS
a. Agency : legal relationship in which principal authorizes an agent to act as the principal’s representative when dealing with
third parties.
i. Fiduciary relationship : relationship that implies a position of trust or confidence. Agents are bound by agency
acts in the best interests of the principal.
CALIFORNIA REAL ESTATE PRINCIPLES
ii. Special Agent : agent employed to perform a specific task
iii. General Agent : agent authorized by a principal to perform any and all tasks associated with the continued
operation of a particular project
iv. Actual authority : express authority given by principal or given by the law and not denied by the principal
v. Power of Attorney : written document that gives a person legal authority to act on another person’s behalf
vi. Special Power of Attorney : authorizing an agent to do certain specific acts
vii. General Power of Attorney : allows agent to transact all the business of the principal
b. Agency Relationships in Real Estate:
i. The agent is always a licensed real estate broker
ii. Listing Agent : broker who obtains a listing from a seller to act as an agent for compensation
iii. Subagent : Broker delegated by the listing agent (if authorized by seller) who represents the seller in finding a
buyer for the listed property
iv. Buyer’s Agent : broker employed by the buyer to locate a certain kind of real property
v. Dual Agent : broker acting as agent for both the seller and buyer in the same transaction
vi. Selling Agent : broker who finds a buyer and obtains an offer for the real property
vii. Cooperating Broker : selling agent who assists another broker by finding a buyer
Agent (Broker) Principal (Client) Third Party (Customer)
Listing Agent Seller Buyer
Subagent Seller Buyer
Buyer's Agent Buyer Seller
Selling Agent Seller or Buyer Seller or Buyer
Cooperating Broker Seller or Buyer Seller or Buyer
Dual Agent Seller & Buyer No Third Party
viii. MLS (Multiple Listing Service) : a cooperative listing service conducted by a group of brokers, usually
members of a real estate association
ix. Sales Associate (aka associate licensee) : a licensed real estate salesperson or broker whose license is held by
an employing licensed broker.
c. Disclosing the Agency Relationship
i. Agency Relationship Disclosure Act: law that requires an agent supply a written document, called Disclosure
Real Estate Agency Relationship, explaining the nature of agency. Disclosure must be made PRIOR to taking a
listing or writing an offer.
1. Basic requirements:
a. Fiduciary duty of utmost care, integrity, honesty, and loyalty in dealing with the agent’s
principal
b. Reasonable skill and care in performance of agent’s duties
c. Duty of honesty, fair dealing, and good faith
d. Duty to disclose all facts known to the agent materially affecting the value or desirability
of the property not know to the other parties.
ii. Disclosure Process (D.E.C.)
1. D isclose: all parties are made aware that they do have a choice of who is to represent them as their
own agent
2. E lect: all parties involved to confirm that they understand they agent’s role
3. C onfirm: all parties to the transaction are required to acknowledge that they understand who is
representing whom, and sign the agency confirmation form
d. Creating an Agency Relationship
i. Agreement
CALIFORNIA REAL ESTATE PRINCIPLES
1. Must be in writing to be enforceable in the court of law. Two most common are:
a. Listing Agreements : written contract by which a principal, or seller, employs a broker to
sell real estate. MOST COMMON WAY
i. Unilateral: Promise for an action
ii. Bilateral: Promise for a promise
iii. Seller agrees to pay a commission upon presentation of a ready, willing, and
able buyer who meets all the terms of listing, aka “meeting of the minds”
iv. Types of Listing Agreements (RLA, RLAA, and RLAN)
1. RLA (Residential Listing Agent) aka Exclusive Authorization
and Right to Sell Agreement: Agent has EXCLUSIVE right to
sell. Seller must pay listing broker a commission if the property is
sold within the time limit by the listing broker, any other broker, or
even by the owner. Broker gets commission regardless of who sold
it
2. RLAA (Residential Listing Agreement-Agency) aka Exclusive
Agency Listing Agreement: Exclusive agency where the seller
must pay the listing broker a commission if any broker sells the
property. Broker gets commission unless seller sells property
without a broker
3. RLAN (Non-Exclusive (“OPEN”) Agency Residential Listing
Agreement: Open Listing that gives any number of brokers the
right to sell the property. First to secure buyer and meet terms, and
whose offer is accepted gets the commission. That agent is known
as the procuring cause: broker who produces buyer who’s ready,
willing, and able to purchase property for the price and terms
specified by seller, regardless of whether the sale is completed
4. Net Listing : listing in which the commission is not definite…
broker get all proceeds over the asking price
5. Option Listing : listing gives the broker the right to purchase the
property that’s listed
b. Buyer Representation Agreement : same as the listing agreement is to the seller, the
buyer representation agreement is to the buyer. It’s the “Exclusive Right to Represent the
Buyer” Agreement
ii. Ratification : the approval of a previously authorized act, performed on behalf of a person, which makes the act
valid and legally binding. Basically, the agent does something that the principal agrees to and uses the benefit
iii. Estoppel (Ostensible or Implied Agency): legal bar that prevents a person from asserting facts or rights that are
not consistent with what was implied by the person’s previous behavior. Principal’s actions create agency
through their behavior. “Doctrine of Estoppel” i.e. seller allows buyer to believe broker is representing seller,
and buyer believes it, then existence of agency cannot be denied.
e. Terminating an Agency Relationship : principal has right to revoke at any time, but without good reason, seller might be
liable for breach
i. Full performance
ii. Expiration of its term
iii. Agreement of the Parties
iv. Acts of the parties
v. Destruction of the property
vi. Death, incapacity, or insanity of the broker or principal
CALIFORNIA REAL ESTATE PRINCIPLES
vii. Bankruptcy of the principal
f. Obligations an Agent owes to a Principal
i. Loyalty and confidentiality to the principal
ii. Agent is a fiduciary, and may not personally profit from the agency relationship, except on agreed-upon
commission.
iii. Agent is bound by law to show good faith, loyalty, and honesty to principal… (C.O.A.L.D)
1. Care
2. Obedience
3. Accounting
4. Loyalty
5. Disclosure
iv. Broker must present all offers to his or her principal before closing unless expressly instructed otherwise or
unless offer is patently frivolous
v. Listing Violations
1. Every exclusive listing must specify a definite termination date
2. Listing broker must give copy of the listing to seller at the time the seller signs it
3. Listing broker cannot accept a deposit from a buyer unless specifically authorized to do so in the
listing agreement
4. Acceptance of a check, rather than cash or promissory note, as an earnest money deposit must be
disclosed to the seller at the time the offer is presented
5. If buyer instructs the listing broker to hold the check uncashed until the offer is accepted, the fact
must be disclosed to the seller when the offer is presented
6. Commingling : illegal practice of depositing clients’ funds in a broker’s personal or general business
acct. Conversion: broker using client’s money
g. Duties an Agent Owes to Third Parties
i. Fair and honest dealing to the buyer, including full disclosure, which means the listing broker conducts a
reasonably competent and diligent inspection of the property and note anything that would affect its value or
desirability.
ii. May not hold back any material facts that are known to the seller or broker from a prospective buyer. Material
facts: any fact that would seem likely to affect the judgment of the principal in giving consent to the agent to
enter into the particular transaction on the specified terms.
iii. Misrepresentation : making false statements or concealing material fact
1. Innocent misrepresentation : statements not known to be untrue at the time they are made, and
usually carry legal liability for an agent. However, buyer/seller can cancel contract as a result
2. Negligent misrepresentation : untrue statements made without facts to back them up. Agent is
unaware of the falseness of statement at the time, but is liable for them
3. Fraudulent misrepresentation : untrue statements made by agent who knows the he/she is not
telling the truth. Agent may be liable for committing fraud
a. Puffing : statement of opinion that is not factual about the property
b. Tort : violation of a legal right, or civil wrong, such as negligence, libel, or nuisance.
Agent not responsible for seller’s torts, just his/her own.
h. Duties a Principal owes an Agent
i. Seller can’t be forced to sell even after signing agreement, but they can be forced to pay the commission if
broker finds buyer that’s ready, willing, and able (buyer and seller have meeting of the minds)
ii. Negotiating the commission: The amount of commission is not set by law and is ALWAYS negotiable between
sellers and brokers. It’s a violation of the “Sherman Anti-Trust Law” for brokers to discuss or set commission
rates in a community.
CALIFORNIA REAL ESTATE PRINCIPLES
iii. Commissions earned when: 1) agent produces a ready, willing, and able buyer to purchase on the terms and at
the price asked by the seller, and 2) agent secures from a prospective buyer a binding contract with terms and
conditions that are accepted by the seller
iv. Safety Clause : protects the broker’s commission, if the owner personally sells the property to someone who
was shown the property or made an offer during the term of the listing
6. REAL ESTATE CONTRACTS
a. Offer to Purchase: Residential Purchase Agreement and Joint Escrow Instructions, aka deposit receipt or purchase offer
i. This acts as the receipt that earnest money given by the buyer to secure an offer between seller and buyer. Once
all parties execute, or sign, the deposit receipt becomes bilateral contract
ii. This is basically the playbook of the transaction and must include the following:
1. Date of the Agreement
2. Names and addresses of the parties to the contract
3. Description of the property
a. Statutory disclosure: giving buyer several disclosures about property and surrounding
area, which might affect buyer’s decision to purchase property
b. Title and vesting: review preliminary title to check for undisclosed liens or easements
that might affect use of property. Vesting: the way a person takes title
4. The consideration or price
a. Personal property included or excluded from sale??
b. Liquidated damages: agreed-upon predetermined amount of damages to be paid should
either party breach contract
5. Financing and terms: how’s everything being paid, and who pays what (allocation of costs)
6. Date and place of closing
a. Date seller turns over property, and if buyer is allowed to take possession of the property
prior to close of escrow
b. Interim Occupancy Agreement : if buyer wants early possession of the property
c. Prorations : clause telling escrow the buyers’ and sellers’ wishes regarding the prorations
(allocations) of property tax, interest, assessments, and any other charge normally
prorated in escrow
7. Signatures of buyer and seller (must have delivery to be enforced)
iii. Time is of the Essence
iv. Expiration of the Offer: offer not accepted within the time frame, offer is revoked and any deposit is returned to
buyer
v. Acceptance of the Offer: once deposit if accepted and signed by seller, it becomes legally binding, and cannot
be
vi. Termination of offer
1. Buyer withdraws before seller accepted offer
2. The time limit is over
3. Seller counteroffers
a. Counteroffer : the rejection of an original purchase offer and the submission of a new
and different offer. Original offer is automatically terminated
b. Option : a contract to keep open, for a set period of time, an offer to purchase or lease real
property. Optionor: person who owns property (seller) Optionee: person who wants to
purchase or lease property (buyer)
i. For the option to be valid, it must be in writing and must have actual monetary
consideration paid to the owner (optionor)
CALIFORNIA REAL ESTATE PRINCIPLES
ii. Options restricts the rights of the seller (optionor) because he/she can’t sell or
lease property during the option period <unilateral>
iii. The buyer (optionee) is the only one that has a choice
b. Leases : a contract between an owner (lessor), and a lessee (tenant) which give the tenant tenancy (interest of a person
holding property by any right or title.
i. Owner allows another to take exclusive possession of land in consideration of rent. The lessor’s interest is
called a leased fee estate
ii. Reversionary Right : the right of the landlord to reclaim the property
iii. Lessee has the use, possession, and the right of quiet enjoyment of the property for the duration of the lease.
Lessee’s interest is called a less-than-freehold estate
iv. Requirements of a lease (L.A.N.D.)
1. L ength of time
2. A mount of rental payments
3. N ames of parties
4. D escription of the property
v. If lease is for more than 1 yr, it must be in writing
vi. Signed by LESSOR, Lessee doesn’t have to sign lease
vii. Reversionary rights belong to lessor
viii. Possessory rights belong to lessee
ix. Rental is presumed month-to-month, unless specified otherwise
x. Agricultural leases are limited to maximum of 51 yrs
xi. Urban leases limited to max of 99 yrs
xii. Mineral, oil, and gas leases are limited to max of 99 yrs
xiii. Classifications of Leases: Generally classified in 3 ways: 1) type of real estate, 2) length of time, and 3) method
of payment
1. Types of Real Estate
a. Ground lease : a lease for only the land
b. Proprietary lease : used in co-op apt buildings. Lessee is also a stockholder in the
corporation that owns the building.
c. Residential lease : used for all residential property including SF, MF, and duplexes
2. Length of time
a. Short-term. i.e. apt leases
b. Long-term: multiple renewal rights
3. Method of Payments
a. Gross lease (aka flat, fixed, or straight lease) : tenant pays an agreed-upon sum as rent
and the landlord pays any other expenses, such as taxes, maintenance, or insurance
b. Net lease : tenant pays an agreed-upon sum as rent, plus certain agreed-upon expenses per
month. BENEFIT: lessor creates fixed income
c. Percentage lease : tenant pays a percentage of gross monthly receipts in addition to the
base rent
xiv. Rent and Security Deposits
1. Rent is for the use of the property
a. Adjustments in rent are tied to increases in Consumer Price Index, stays up w/ inflation
b. Landlord may not require rent to be paid in cash, unless tenant has defaulted on the rent.
And even then, can only require up to 3 months to be paid in cash
2. Security Deposit: money given to landlord to prepay for any damages that might occur to a property
during a lease term that is more than just normal wear and tear
CALIFORNIA REAL ESTATE PRINCIPLES
a. Maximum deposit allowed on unfurnished property may not exceed 2 months’ rent
b. Maximum deposit allowed on furnished property may not exceed 3 months’ rent
c. Security deposit must be refundable
d. Landlord has 21 days after tenant moves out to return all unused portions of the security
deposit, with a written statement showing how the remainder was used
e. Landlord may only deduct from security deposit the cleaning cost “necessary to return
unit to the same level of cleanliness it was in the beginning of the tenancy”
f. Landlord who keeps deposit for more than 3 wks after tenant moves out without reason is
subject to damages up to $600
3. Responsibility of a Landlord
a. Landlord guarantees that health and safety codes are met. Landlord is usually liable for
injuries occurring due to unsafe condition in common areas.
i. Implied Warranty of Habitability : property will be maintained to meet bare
living requirements
b. Periodic inspection of the property is allowed, but landlord must give reasonable notice
of intent to enter, and only during normal business hrs. 24 hrs is reasonable notice, but it
varies depending on what’s on the lease
c. Obey federal and state fair housing laws
d. CA renters under month-to-month leases must give 30-day notices to move out.
i. Retaliatory eviction : eviction that occurs in revenge for some complaint
made by tenant
e. Tenants have the right to a PRE-MOVE-OUT Inspection of rental property, no earlier
than 2 wks prior to the termination of tenancy. Landlord must give tenant itemized
statement listing any proposed repairs or cleaning.
f. Landlord has 21 days after tenant moves out to return all unused portions of the security
deposit, with a written statement showing how the remainder was used
g. Unlawful Acts by a Landlord (Lessor)
i. Tenant Lockout
ii. Taking Tenant Property
iii. Removing Doors and Windows
iv. Shutting Off Utilities
v. Trepassing
h. Right of Replevin : tenant has the legal right to recover personal property unlawfully
taken by the landlord
4. Responsibilities and Rights of a Tenant
a. Tenant must pay rent when it’s due
b. Must give proper written notice before moving out, unless otherwise agreed-upon. Notice
is based on the number of days between rent payments, i.e. tenant who pays monthly
must give 30-days notice, and a weekly tenant must give 7-days notice.
c. May not interfere with the rights of other tenants
d. Tenant may spend up to one month’s rent to make repairs to problems, if landlord
refuses, and deduct that portion from the monthly rent.
i. Can only do this two times in any 12-month period
ii. Landlord cannot retaliate by eviction or raising rent for 180 days after this
offset is used to make lawful repairs
xv. Transfer of a Lease
CALIFORNIA REAL ESTATE PRINCIPLES
1. Assignment : transfer of the entire leasehold estate to a new person (assignee). Original lessee steps
out of primary responsibility of lease, and assignee becomes primary now.
2. Sublease : transfer possession of a leased property to a new person (sublessee)
a. Original tenant (sublessor) is still primarily liable for paying rent to owner
b. Sublessee is only liable to the sublessor, which is called a sandwich lease: the position in
between the original lessor and the sublessee
xvi. Termination of Lease
1. Mutual agreement between the landlord and tenant
2. Destruction of property
3. Breach of conditions by either lessor or lessee
a.
4. Eviction-Steps in the Eviction Process:
a. Notice to pay or quit served (aka eviction notice)
b. Tenant has 3 days to respond
c. Unlawful detainer filed
d. Tenant has 5 days to respond after being served
e. Writ of Possession granted: authorization given to sheriff, granted by court to the
landlord if the tenant does not move out or answer lawsuit, to send an eviction notice to
the tenant.
f. Sheriff sends eviction notice and physically removes tenant if no response within 5 days
5. Surrender : when tenant voluntarily gives up a lease before the expiration of its term
7. DISCLOSURES IN REAL ESTATE
a. Disclosures required in real estate transfer
i. Required to discuss and complete the Agency Relationship Disclosure form at the first meeting with potential
sellers and buyers, allowing them to determine who will represent them, and if there’s a conflict of interest
ii. Agents have duty of FULL disclosure
iii. Red Flag : something that alerts a reasonably observant person of potential problems
1. Broker has duty to inspect property and disclose any material facts affecting value. Material facts
include:
a. Age, condition, and any defects or malfunctions of the structural components and/or
plumbing, electrical, heating, or other mechanical problems
b. Easements, common driveways, or fences
c. Room additions, structural alterations, repairs, replacements, etc.
d. Zoning violations
e. HOA obligations and deed restrictions or common area problems
f. Citations against property
g. Location of property within known earthquake zone
h. Major damage from fire, earthquake, or landslide
2. No property may be sold “as-is” without complete disclosure of any known/should-have-known and
obvious problems
iv. Transfer Disclosure Statement (TDS) : document that the seller must provide to any buyer of residential
property (1-4 units), detailing what the seller knows about the condition of the property, and must list all known
defects as well as potential problems that might affect property value
1. Transfers exempt from the disclosure requirement
a. Transfers pursuant to court orders
b. Foreclosure sales
c. Court ordered by fiduciary in the administrations of a probate estate or testimony trust
CALIFORNIA REAL ESTATE PRINCIPLES
d. Transfers to spouse or another related person as a result of dissolution of marriage
e. Transfers from one co-owner to another
f. Transfer by state controller for unclaimed property
g. Transfers as a result from failure of unpaid taxes
h. Transfers from or to any government entities
i. Transfer of the first sale of a residential property within a subdivision and a copy of a
public record is delivered to the purchaser
v. Environmental Hazard Disclosure: requires sellers to disclose whether they are aware of the presense of
hazardous substances or materials, i.e. asbestos, formaldehyde, rado gas, lead-based paint, fuel, or chemical
storage tanks, contaminated soil, water, or mold
1. Prop 65: certain businesses may not knowingly or intentionally expose any individual to a cancer-
causing chemical or reproductive toxin without first giving clear, reasonable warning to such
individuals.
vi. Window Security Bars Disclosure: seller must disclose of any bars on windows, and if there are safety latches
vii. Mold Disclosure: No disclosure is required for toxic mold for the time being, but seller must disclose of actual
mold on the property
viii. Drug-Lab Illegal Controlled Substance: must inform buyer in writing of toxic contamination by illegal
controlled substance on property, receipt of Dept of Toxic Substance Control, or another agency. $5,000 civil
penalty can be enforced if seller knowingly didn’t disclose
ix. Industrial Use Disclosure: disclosure if property is affected by or zoned for industrial use of the property
x. Military Ordinance Location Disclosure: seller must give buyer written notice ASAP before transfer of title if
property is within 1 mile from military activities
xi. Local Option Real Estate Transfer Disclosure Statement: disclosure about local conditions that might affect
buyer’s use and enjoyment of residential property, i.e. zoning and use, local ordinances, building codes, etc.
xii. Mello-Roos Ordinance Disclosure: disclosure that property is in an area where a special tax is imposed
xiii. Lead Paint Disclosure: mainly for homes built before 1978
1. Seller/landlord obligations:
a. Give “protect your family from lead in your home” pamphlet
b. Disclose all known lead-based paint and paint hazards in the dwelling, and provide buyer
with any available reports
c. Include standard warning language as attachment to contract/lease
d. Complete and sign statement verifying completion of requirements
e. Retain signed acknowledgement for 3 yrs
f. Give buyers 10 day opportunity to test for lead
2. R.E. Agent responsibilities
a. Make sure seller/landlord is aware of obligations
b. Make sure seller/landlord disclose proper info to buyer/tenants
c. Make sure leases/contracts include proper disclosure language/signatures
d. Make sure seller gives buyer opportunity to conduct inspection for 10 days or mutually
agreed-upon timeframe
xiv. Natural Hazard Disclosure Statement: agent must give prospective buyer a separate Natural Hazard
Disclosure Statement (NHD) if residential property lies within any of the 6 statutorily specified areas:
1. Special flood zone: designated by Federal Emergency Management Agency (FEMA) Designated
2. Area of potential flooding: in event of dam failure, designated by CA Office of Emergency Services
3. Very high fire hazard severity zone: designated by CA Dept of Forestry and Fire Protection (CDF).
Requires 30 ft clearance around dwelling.
CALIFORNIA REAL ESTATE PRINCIPLES
4. Designated wild land fire area: designated by State Board of Forestry, may contain substantial forest
fire risks and hazards
5. Earthquake fault zone: designated by State Geologist
a. Fault creep : caused stress and/or earthquake shaking
6. Seismic hazard zone: designated by State Geologist
xv. Megan’s Law: statutorily defined notice regarding the existence of public access to database of sex offenders in
the neighborhood
xvi. Death and/or AIDS:
1. Stigmatized Property : property that’s been psychologically impacted by an event which occurred,
or suspected to have occurred, on the property
2. Neither agent nor seller has to disclose if there’s a death at the property 3 yrs prior to the current
date, but must be honest about deaths when asked
3. Neither agent nor seller has to voluntarily disclose whether or not a person was afflicted with or
death from AIDS on the property
xvii. Disclosing in Financing
1. Real Estate Settlement Procedures Act (RESPA) : federal law requiring disclosure to borrowers of
settlement (closing) procedures and costs by means of a pamphlet and forms prescribed by the US
Dept of Housing and Urban Development
2. Truth-in-Lending Act (Reg Z) : federal law requiring borrowers to be informed about the cost of
borrowing money
b. Subdivision Disclosure
i. Subdivided Lands Law : law designed to protect buyer from fraud, misrepresentation, or deceit in the
marketing of subdivided lots, parcels, units, and undivided interests in new subdivision
ii. Before any subdivision can be offer for sale in CA, the R.E. Commissioner must determine that the offering
meets certain standards and issue a public report. The report must be give to the prospective buyer for approval.
Seller must keep copy of report for 3 yrs. Report is valid for 5 yrs
1. Violation: max of $10,000 or imprisonment of up to 1 yr, or both
iii. Public Report : document disclosing all important facts about the property, its marketing and the financing of
the subdivision
1. Preliminary Public Report
a. Allows developer to take reservations for the project
b. Developer cannot accept any non-refundable money or enter into any binding contracts
until receiving final report from Commissioner
c. One yr term and may be renewed
iv. Interstate Lands Sales Full Disclosure Act : law regulating land sales when there are two or more states
involved.
1. Subdividers must conform to this law if they have 50 or more lots in one state and want to sell them
in another state.
2. Public report from HUD (US Dept of Housing and Urban Development) must be given to each
prospective buyer as protection from less-than-truthful advertising in far-away places.
v. Smoke Detector Statement of Compliance: seller must provide the buyer with a written statement representing
that the property is in compliance with CA law regarding smoke detectors
1. CA mandates that all existing dwelling must have a smoke detector in a central location outside each
sleeping area. At least 2 smoke detectors in a 2-story home. New construction requires a smoke
detector in each rm.
CALIFORNIA REAL ESTATE PRINCIPLES
vi. Certification Regarding Water Heater’s Security against Earthquakes
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vii. Energy Conservation Retrofit and Thermal Insulation Disclosures: state prescribes minimum conservation for
all new construction
viii. Foreign Investment in Real Property Tax Act (FIRPTA)
1. Buyer is responsible for making sure either the proper disclosures have been made and/or the proper
funds have been set aside
2. Federal law requires that a buyer of real property must withhold and send to the IRS 10% of the
gross sales price if the seller of property is a foreign person
3. CA law requires that if property is sold by a non-citizen of the US, or resident of another state, the
buyer must withhold 3 1/3% of the total sales price as state income tax and deliver the sum withheld
to the State Franchise Tax Board
ix. Home Inspection Notice: borrower must receive and sign the notice called the Importance of a Home Inspection
x. Notice Regarding the Advisability of Title Insurance: buyer must receive and sign the notice as a separate
document in the escrow, where no title insurance is to be issued
xi. Disclosure of Sales Price Information: broker must inform both seller and buyer, in writing, the sale price on a
property within one month of close of escrow… Escrow Closing Statement meets this requirement
xii. Commissions: a notice printed in 10-point type must be given to the person paying the Real Estate Commission
that commissions are negotiable. Broker can share commissions w/ unlicensed person, but has to be disclosed to
all parties
8. ESCROW AND CLOSING
a. Escrow Agent : a neutral 3rd party handling the details of the sale when ownership transfers from one person to another
b. Escrow Holder : a neutral agent of both seller and buyer that follows the directions of the principals, collects, and
distributes documents and money as agreed upon in the purchase agreement. (escrow instructions are subsequent)
c. Escrow : small and short lived trust arrangement
d. Basic requirements for a valid escrow:
i. A binding contract between the buyer and seller
ii. Conditional delivery of transfer documents to a third party
e. The person who opens escrow is the selling agent
f. Vesting: taking title; sole ownership, joint tenancy, tenants in common, tenancy in partnership
g. Title search: searches the records for any encumbrances or liens against the property, checks to make sure the seller is the
owner of record, and inspects the history of ownership, or chain of title. Purpose is to ensure that all transfers of ownership
have been recorded correctly, there are no unexplained gaps, and there are no liens or encumbrances, which will not be
released.
9.