ARIZONA DEPARTMENT OF REAL ESTATE (ADRE) PRE-LICENSING EDUCATION BROKER LIVE CLASSROOM CERTIFICATE OF COURSE APPROVAL APPLICATION (ED-112-PE)

Transcription

1 ARIZONA DEPARTMENT OF REAL ESTATE (ADRE) PRE-LICENSING EDUCATION BROKER LIVE CLASSROOM CERTIFICATE OF COURSE APPROVAL APPLICATION (ED-112-PE) Any school licensed by ADRE, or exempt from licensure under A.A.C. R must present to ADRE for approval, all ADRE Pre-Licensing courses offering credit toward an Arizona real estate license. Only ADRE approved School Administrators of an ADRE approved school may submit a request for course and/or instructor approvals. All ADRE approved course content must be directly related to professional Arizona real estate practice and adhere to all specific guidelines as stated in the current A.R.S , , and the ADRE Detailed Instructor Outline Prescribed Curriculum Broker s License, as well as, serve to protect the public interest by providing relevant education to students to enter the professional practice of Arizona real estate. Broker Live Classroom Pre-Licensing Education Course Application Requirements Definitions: School means a person or entity that offers a course of study towards completion of the education requirements leading to licensure or renewal of licensure. Credit Hour means 50 minutes of instruction, which shall include participation and interaction. A.A.C. R Course means a class, seminar, or presentation. Certificate of Course Approval. Any school offering a course of study for original licensure of a real estate applicant shall apply for and possess a Certificate of Course Approval for each course offered by the School. The school s authorized representative shall submit the requirements listed in A.A.C. R (C). Host/remote location. Instruction/delivery methods for courses may be presented by a host/remote location. The host/remote location instruction delivery method must be classes that are held in a classroom, with synchronized platforms, bi-directional audio and video communication between the host and remote classroom, administered by a live instructor from the host classroom, and monitored by a living onsite monitor present at all times in the classroom at each remote classroom location. Course Application Requirements: Course Orientation: The prospective student shall sign an agreement or application to enroll, presented to the student by the school administrator, that includes in bold type and capital letters: 1) The course, or course segment title within a curriculum; 2) The ADRE approved course number; 3) The total credit hours applicable to licensure; 4) The cost of the course; 5) A statement of the refund policy; 6) A list of any/all required course material, with information on the accessibility and/or required cost of the material; 7) Course completion requirements; 8) Policies regarding attendance and behavior; 9) Topical outline; 10) Learning objectives; and 11) a statement of any job placement services. Instructor Qualifications. All instructors must be listed on application, and, must possess a current Arizona Pre-License Instructor number. The school Administrator shall attest to having identified and ensured that all instructors are an ADRE approved instructor, and that the instructor maintains knowledge and competence of the course content, and has prepared specifically to the course content being taught. A Guest Speaker does not apply to pre-licensure courses. Instructor Methods/Student Participation/Interaction. Each credit hour shall include student participation/interaction with appropriate teaching methods, which go beyond standard lecture, and in addition to lecture, should include at least two of the following based on the topic area: scenarios with interactive discussion; role play activities; simulation, group exercises; quizzes, quiz review; vocabulary review; math exercises, all designed to support the learning objectives of the course, and the topic. Teaching Materials. Any, and all teaching materials, and/or aids used, including any student handouts and textbook titles must be stated on application, confirming adherence to any applicable copyright laws, and that any required permissions have been obtained. Do not submit hard copies of instructional material to ADRE. School End-of-Course (Final) Exam. All Pre-Licensing courses are required to have an end-of-course school examination. Final school exam requirements shall contain a minimum of the following: 1) Not less than 150 questions; 2) Final exam questions must be pulled from a question bank with a 2:1 ratio (300 question bank); 3) Questions must be related to the subject and content of the course and may not contain true/false questions; 4) Exam must consist of multiple choice questions with at least 4 options for each question/item; 4) Questions must be of sufficient rigor that they support the course s learning objectives, test the student s knowledge, and ensure the student s comprehension and retention of the material; 5) Final exam may not count toward the overall time of the course; 6) A minimum 75% passing ratio must be achieved before a school course completion certificate is issued. Student Identity Verification. A student signature roster shall be provided at each class offering, with an ADRE provided attestation, (click here) that by signing, the student attests that the signature indicates student s true identity. In addition, the school shall maintain a record for five years of each student attending the school The record shall include: the name of the student; the dates of attendance; the course title and ADRE course number, credit hours awarded. The original signature roster for each course must be retained by school for five (5) years. Instructions not a part of the Application; do not file with ADRE

2 Student Course Evaluation. Upon completing the 90 hours of classroom instruction the student must complete the ADRE prelicensure course evaluation form, covering both content and instructor delivery (click here), School Administrator must be prepared to demonstrate that end-of-course evaluations are being completed. All course evaluations must be retained according to course number for five years from course completion. Course Completion Certificate. After students pass the school final exam, and after the course evaluation form is completed, each student shall receive a fully completed ADRE required Student Course Completion Certificate (click here), which includes: 1) the name of course provider; 2) the course title; 3) the course number; 4) the course start date; 5) the course completion date; 6) hours awarded; 7) the Student s name; and 8) the School s contact information. Note: Only the School Administrator shall complete and sign the Student Course Completion Certificates. Providers (schools) are not to have a student fill in the information on their own course completion certificate. Credit Hour. The course must contain a minimum of ninety (90) credit hours. A credit hour is 50 minutes of instruction. A credit hour does not include break time, administration of the final examination, nor sponsor presentation time. Maximum of 10 credit hours per day for pre-licensing education. A.A.C. R (E). Course Outline.* All applications must be complete at time of submission. Courses must be organized and divided into fifty (50) minute instructional segments, with those segments organized into multiple units of instruction. Application must include a very detailed course outline of the entire proposed course material with sufficient detail to clearly identify the course scope and content. Each unit of instruction must be delivered in a manner that supports the learning objective of the course. The outline must identify: 1). The nature of each subject matter and each specific topic, according to the ADRE Detailed Instructor Outline Prescribed Curriculum, 2). Specific time allocations for each topic; 3). Topic placement within the instruction; 4). A desired instruction outcome stating the relevant and unique proposed course learning objective for each instructional segment, and, 5). the teaching method(s) applied. The outline must be presented in 12 point type. The ADRE provided School Administrator Attestation must be signed by the authorized School Administrator. *Notice of Substantial Changes to Course Outline The Prelicensure Review Committee is in the process of modifying the 1) 90-Hour Arizona Real Estate Broker Detailed Instructor Outline of Prescribed Curriculum (Outline), 2) Real Estate Broker Examination Content Outline, and 3) Recommended Pre Licensing Education Objectives. ADRE will schedule an industry stakeholder meeting with groups to review the recommended changes for input and feedback, for ADRE consideration, prior to finalization by ADRE in July 2019 (date subject to change). As part of the implementation once the changes are finalized by ADRE, real estate schools will be required to apply for new course approvals using the new Outline, and all existing real estate broker pre licensure courses will expire. Application Timeframe Filing Requirements (A.R.S ) Pre-License classroom course applications must be received by ADRE no less than 30 days prior to the first course presentation and allow ADRE a maximum 30 days for approval process. Host/Remote Location course applications must be received by ADRE no less than 30 days prior to the first course presentation. Should deficiencies still exist after the overall time-frame period expires, the course approval will be denied. The school may advertise a course, before its approval, only as pending approval. A.A.C. R Sale or promotion of products or services are only permitted prior to or after class, or during breaks. Lender programs presented in class must be generic programs, offered through other Arizona lenders, and not proprietary to the presenting lender. A.R.S (E) states, in pertinent part: The commissioner may determine minimal content requirements for approving educational courses.. Instructions not a part of the Application; do not file with ADRE

3 Page 1 of 38 Arizona Department of Real Estate (ADRE) Education Division NORTH 15 th AVENUE STE-201, PHOENIX, AZ DOUGLAS A. DUCEY Governor JUDY LOWE Commissioner PRE-LICENSING EDUCATION - BROKER LIVE CLASSROOM CERTIFICATE OF COURSE APPROVAL APPLICATION (FORM ED-112 PE) Review the course application requirements prior to submitting this form. SECTION I PRE-LICENSING EDUCATION COURSE INFORMATION 1. Course Title: Date Submitted: 2. Course Type: Real Estate Broker Pre-licensure Purpose: New Course Recurring Revised Course Renewal Expiration Date*: (*must file before expiration) Total No. Credit Hours: 3. If applicable, ADRE course number Previously approved for this same submitting School? Yes No 4. Desired Instructional Outcome (a descriptive summary of the course, its objective, and its application to protection of the public interest): 5. School s Legal Name: Phone No.: Address: School Address: City State Zip Code 6. School License No.: School Expiration Mo/Year: 7. Regular Business Hours: a.m. or p.m. through a.m. or p.m. 8. Days of Week with Regular Business Hours (Check all that apply): Monday Tuesday Wednesday Thursday Friday Saturday Sunday 9. Ten (10) Hours Maximum Per Day. Are measures in place to prevent students from receiving credit for more than ten (10) hours of Pre-Licensing education per day? A.A.C. R (E) Yes No 10. Arizona Practices. A.Does the entire course content adhere to the Detailed Instructor Outline Prescribed Curriculum and clearly and exclusively identify current Arizona Practices when it covers areas of practice, law, administrative code, custom or the standard of care? Yes No B. Is the course content accurate, specific to Arizona, timely, relevant, and in accordance with all applicable Arizona statutes, rules and policies? Yes No 11. Approved Instructor(s) who will teach/continue to teach this course: If more names, list on separate sheet and check here Instructor Name (Live Classroom) Approval for Pre-licensure? ADRE Instructor # Expiration Date. Active AZ Real Estate Broker? Yes No Yes No Yes No Yes No Sponsor School (If secondary sponsor, Expedited Instructor Application required ED-103)

4 Page 2 of 38 SECTION II COURSE ORIENTATION 12. Enrollment Agreement or Application. At time of enrollment will each prospective student be presented with an enrollment agreement or application for review and signature which includes: 1) the course or course segment title within a curriculum; 2) ADRE course number; 3) the ADRE course total credit hours applicable to licensure; 4) cost of the course; 5) refund policy; 6) a list of any/all required course material, with information on the accessibility and/or required cost of the material; 7) course completion requirements; 8) policies regarding attendance and behavior; 9) topical outline; 10) learning objectives; and 11) and a statement of any job placement service? Yes No A.A.C. R (E) SECTION III - INSTRUCTION METHODS / TEACHING AIDS 13. Instruction Methods (Check all that apply) Lecture Interactive Discussion Role Play Simulation Group Exercise Quiz Quiz Review Vocabulary Review Math Exercises Other (Describe in outline) In addition to lecture, are at least 2 instruction methods planned for each credit hour? Yes No 14. Teaching Aids (Check all that apply) Text(s) PowerPoint Flip Chart/Whiteboard Quiz Internet/Software Handout(s) DVD/Video Total Class% Other (Describe): 15. Teaching Materials Is a statement attached listing all teaching materials, and/or aids used, including any student handouts and textbook titles and confirming adherence to any applicable copyright laws, and that any/all required permissions have been obtained. Yes No SECTION IV - FINAL EXAMINATION 16. Is student required to pass a comprehensive school test (examination on the course) according to application requirements to receive credit? Yes No a. A copy of test with answer key attached? Yes No 17. Is the pass rate for the comprehensive test at least 75%? Yes No 18. Are there at least 150 questions on the comprehensive test, with a question bank of at least a 2X1 ratio? Yes No SECTION V STUDENT IDENTITY VERIFICATION 19. Is a process in place to maintain the original ADRE required signature roster (click here), including the ADRE student identity verification attestation for each course offering to track every sign-in and sign-out activity to comply with record keeping requirements, etc.? Yes No SECTION VI COURSE EVALUATION 20. Is a process in place for the ADRE required course evaluation form to be distributed to students and collected at the end of the course just before the completion certificate is issued? Yes No ADRE required Course Evaluation Form (click here) SECTION VII COURSE COMPLETION CERTIFICATE 21. Is the ADRE Course Completion Certificate requirement satisfied? See Instructions (click here) for certificate Yes No SECTION VIII REMOTE CLASSROOM 22. Host/Remote Location: Are prelicensure education classes delivered by a live instructor from a host classroom to remote classrooms through synchronous delivery platforms with real time audio and video, such as satellite broadcasting or third party technology facilitators (i.e., Webex, GoToMeeting, NEFSIS)? Yes No N/A 23. Host/Remote Class Location Requirements (a through f below) a. Host/Remote classes will be held in a classroom facility that meets ADRE classroom criteria/guidelines as defined in rule, statute or policy and will comply with applicable local, state and federal regulations regarding safety, health, and disabilities? Yes No N/A b. Host/Remote classrooms have a synchronized platform, which includes bi-directional audio and video communication between the classrooms? Yes No N/A

5 Page 3 of 38 c. Remote classrooms have an onsite monitor in the classroom to monitor attendance and student engagement activities and follow prescribed guidelines? Yes No N/A d. Host classroom is administered by a live instructor? Yes No N/A e. Course administrator is able to visually monitor the remote classrooms? Yes No N/A f. Course contains student-instructor interactivity and allows for students to view material and ask questions to the instructor (i.e. via , chat or VoiP, phoneline, or other electronic means)? Yes No N/A SECTION IX - CLASS LOCATION 24. Class Location: Date: Time: Each course event requires a separate 14 day notice pursuant to A.R.S (G)(1). This application does not serve as the required 14 day notice [A.R.S (G)(1)] visit to submit notice through the ADRE online Real Estate School System. This application does not serve as notice for a course to be held outside of Arizona [A.R.S (I)]. Contact ADRE to submit written request. SECTION X INSTRUCTOR ATTESTATION 25. By my signature below, I attest that I have reviewed the entire course and material and the course is accurate, specific to Arizona, timely, relevant, and does not contain any information that is not applicable in Arizona and is in accordance with all applicable Arizona statutes and rules. (If more than one instructor, attach a separate attestation for each additional instructor) I will maintain a current ADRE Pre Licensure Instructor license during all times of instruction. Instructor Name (print): Instructor Signature: Date: SECTION XI SCHOOL ADMINISTRATOR ATTESTATION 26. School Administrator Attestation (upon School Administrator severance from school, a new Attestation shall be signed) By my signature below I attest that I have thoroughly read and reviewed and hereby approve of the submitted course application, including the application requirements, the outline and all other course materials. I have further thoroughly reviewed and approve each proposed instructor s qualifications and credentials. I will be responsible for ensuring that the course is presented by the School in the manner stated in this application. I understand the potential penalties pursuant to A.R.S (C) and (A)(26). I attest that: The course content adheres to A.R.S , , the requirements of the Application and the ADRE Detailed Instructor Outline Prescribed Curriculum - Broker s License, and that the course content is intended to prepare the student with the appropriate knowledge and understanding of real estate practices and principles in the real estate profession, as well as protecting the public interest. The course content is appropriate for professional real estate education, reflects current Arizona real estate practices or methods, is consistent with the proposed instructional materials and can be taught in the allotted time as stated in the application. Each named proposed instructor for this course is knowledgeable and is a subject matter expert in the prelicensure curriculum, and is, and will be an ADRE-approved pre-licensing instructor at the time of presentation. The course content is, and will remain current, accurate, specific to Arizona, timely, relevant, and in accordance with all applicable Arizona statutes and rules; The course will be updated, or rewritten as necessary during the four (4) year course approval period. All instructional materials used by students reflect accurate and current content according to Arizona real estate practice, and contain no significant errors, in content, typography or grammar, and adhere to all copyright requirements. I further understand that The course may not be taught if the content ceases to be current or is substantially changed. A.R.S (F). I have a full understanding, that should there be any proven misrepresentation, or willful omission in this application, or any of the attachments, any approval, which may have been granted, is subject to suspension or revocation, and disciplinary action could occur. Administrator Name (printed): Title: Administrator Signature: Date:

6 Page 4 of 38 SECTION XII 90 HOUR BROKER PRE-LICENSE COURSE OUTLINES* 27. Is a copy of the School s Official Detailed Broker Pre-License Course Outline included with this Application? Yes No 28. Does the submitted School s Pre-License Course Outline contain all of the mandatory content in the ADRE Detailed Instructor Outline Prescribed Curriculum Broker s License? Yes No 29. Does the School s Pre-License Course Outline contain the nature of each subject matter and each specific topic, according to the ADRE Detailed Instructor Outline Prescribed Curriculum? Yes No 30. Does the School s Pre-License Course Outline contain specific time allocations and placement in course for each topic, and divided into estimated fifty minute instructional segments? Yes No 31. Does the School s Pre-License Course Outline contain topic placement within the instruction? Yes No 32. Does the School s Pre-License Course Outline contain a desired instruction outcome stating the relevant and unique proposed course learning objective for each instructional segment? Yes No 33. Does the School s Pre-License Course Outline contain the teaching method(s) applied? Yes No 34. Complete the following outline matrix in SECTION XIII below which includes the ADRE Detailed Instructor Outline Prescribed Curriculum Broker s License content in the left column. Be sure to include the approximate time for each topic, page and item number of corresponding item on school prelicense course outline, learning objectives, and teaching methods in the appropriate columns. COMPLETE DETAILED BROKER PRELICENSE COURSE OUTLINE AND REFERENCE INFORMATION MATRIX IN NEXT SECTION (XIII) Note: and information is only required for each Subject Matter Topic (Nos ) in the Matrix and is not necessary for each Subtopic item. Schools may attach additional information in the form of an addendum that specifically lists numbered Objectives and Teaching Methods and reference one or more Objectives or Teaching Methods by number in the detailed outline for this Section. Teaching Methods Reference Key 1. Text 2. Graphics 3. Audio 4. Photos 5. Video 6. Interactivity 7. End-of-Module Quizzes 8. Other (Describe in outline) *Notice of Substantial Changes to Course Outline The Prelicensure Review Committee is in the process of modifying the 1) 90-Hour Arizona Real Estate Broker Detailed Instructor Outline of Prescribed Curriculum (Outline), 2) Real Estate Broker Examination Content Outline, and 3) Recommended Pre Licensing Education Objectives. ADRE will schedule an industry stakeholder meeting with groups to review the recommended changes for input and feedback, for ADRE consideration, prior to finalization by ADRE in July 2019 (date subject to change). As part of the implementation once the changes are finalized by ADRE, real estate schools will be required to apply for new course approvals using the new Outline, and all existing real estate broker pre licensure courses will expire.

7 Page 5 of 38 SECTION XIII - DETAILED BROKER PRELICENSE COURSE OUTLINE AND REFERENCE INFORMATION MATRIX 1. Real Estate Statutes 1.1. Sources of Real Estate Law State Constitution - Article 26 Statutes - Federal, State (A.R.S. Title 32, Chapter 20), Administrative Rules Case Law 1.2. Arizona Real Estate Statutes -Title 32 Chapter 20 Real Estate Department Structure - Article 1 Commissioner Advisory Board Licensing -Article 2 Parties required to be licensed License exemptions Broker & Salesperson requirements Licensing fees Multiple licenses License transfer Renewal of license Designation(s) Temporary licenses Practice of Brokerage and Regulations - Article 3 Funds -Trust Account Recordkeeping Cash receipts A ledger for each client Receipts for bank deposits Pre-numbered trust account checkbook Duplicate bank deposit slips Contracts and their folders numbered

8 consecutively, Initialed and dated by broker Escrow instructions and closing statements Location of records Forms Office audit and examinations Location of bank account Employment Agreements ( ) Collecting compensation Grounds for denial of license, civil penalty, license suspension or revocation, provisional license Consent Orders, Cease & Desist Orders, Summary Suspensions Restriction on employment or compensation Requirements for Property Management -Article 3.1 ( ) Agreements Employment Agreements Trust accounts Records Unlicensed employee activities Sale of Subdivided Lands -Article 4 Definition Procedures Issuance of Public Report (see Commissioner's Rules, Article 12) Exemptions Bulk Sales Voidable Sales Advertising Material Inducements Sale of Unsubdivided Land -Article 7 Definition Page 6 of 38

9 Procedure and requirement Issuance of Public Report Real Estate Recovery Fund -Article 5 Definition Brokers responsibilities Current changes and updates Cemetery, Real Estate Timeshares & Membership Camping -Articles 6, 9 & Commissioner's Rules -Arizona Administrative Code 1.2. License Timeframes 2.2. General License Requirements Non-resident Licenses Employing Broker- Sole proprietors, Corporations, Limited Liability Companies and Partnerships Renewal, Reinstatement, Changes, Broker Self-Audit Declaration Department notification. Branch offices, managers Professional Corporations, Professional Limited Liability Companies Temporary Licenses and Certificate of Convenience Unlawful License Activity 2.3. Education Pre-licensure and state examination Continuing education School, course & instructor approval required 2.4. Advertising Requirements Promotional Owner/agent Page 7 of 38

10 Blind ad Subdivisions, Timeshares & Membership Campgrounds 2.5. Commissions -Article Documents -Article 8 Conveying Documents Offer Acceptance Contract Disclosure 2.7. Professional Conduct -Article 11 Practice, Ethics Agency - Duties to Client/Customer Responsibility to Public, Fair Dealing (Duties to all other parties) Duties to other Licensees Fiduciary Responsibility. Written Policy Manual 2.8. Investigations and Administrative Procedures (See also A.R.S , et seq.) 3. Agency Relationships & Managerial Duties 3.1. Law of Agency Types of agents Special General 3.2. Agency Relationships Dual Agency Page 8 of 38 Single Agency Sub Agency 3.3. Fiduciary 3.4. Due Diligence 3.5. Misrepresentation & Fraud Definition

11 Duty to Discover and Disclose Puffing E&O 3.6. Creating an Agency Relationship Expressed Written Oral Implied Ratified Ostensible Estoppel 3.7. Terminating an Agency Relationship 3.8. Employment Agreements Definition Types Requirements for an Employment Agreement Listing Buyer's broker Commissions Multiple Listing Service/Co-brokerage. 4. Contracts and Contract Law 4.1. Contract Essentials and Terminology Expressed contracts versus implied contracts Unilateral Contracts versus bilateral contracts Executed contracts Valid, void, and voidable contracts Enforceable contracts versus unenforceable contracts Elements of a valid contract Competent parties Of legal age ("emancipated minors") Not a ward of the state (mentally ill or Page 9 of 38

12 incarcerated) Not under duress (undue influence/or menace) Not under the influence of drugs Offer and acceptance (and proper notification of acceptance) Lawful objective (no conspiracy) Consideration ("valuable" vs. "good") Adequate description of the property/legal description In writing (Statute of Fraud) Signed by all appropriate parties Joinder for contract amendments 4.2. The Concept "Reasonableness" Implication The ordinary, reasonable and prudent person 4.3. A "Bona Fide" Purchaser Definition Innocent Purchaser for Value 4.4. Real Estate Contract Requirements Broker Responsibilities -General Notification of Acceptance Earnest Money Responsibilities Responsibilities to Present All Offers Arizona Statutes and Commissioner s Rules 4.5. Purchase Contract Concerns Offer and Acceptance Amount of Earnest Deposit Equitable Interest /Equitable Title Close of Escrow -Actual Occurrence Risk of Loss before C.O.E. Marketable Title Page 10 of 38

13 "Time is of the Essence" Contingencies Joinder for Contract Amendments 4.6. Contract Assignability Nominee Assignee Assignability Problems Fiduciary Responsibility; Disclosure as Nominee 4.7. Contract Termination Time -appropriate notice of cancellation Performance Mutual Agreement Alteration of Offer Destruction Acts of Law Mistake Impossibility of Performance Death of the Parties Breach of contract Statute of limitations Remedies Rescission Specific performance Damages Liquidated Actual Punitive 4.8. Options and First Rights of Refusal 5. Property Interests, Estates and Tenancies 5.1. Property Real versus Personal Page 11 of 38

14 When can sell manufactured home Affidavit of Affixture Fixtures/trade Fixtures Characteristics of Real Property Land and its Elements Definitions Mineral Rights Air Rights Horizontal/ Vertical Regimes 5.2. The Estate Concept Estates in Land Freehold Estates Life Estates Homestead 5.3. Easements Appurtenant Ingross Prescription 5.4. Sole Ownership -Severalty 5.5. Co-Ownership -Concurrent Tenancy 5.6. Joint Tenancy with Right of Survivorship 5.7. Tenancy in Common 5.8. Community Property 5.9. Community Property with Right of Survivorship Syndication Modern Types of Common Ownership Cooperative Timeshare Ownership Land Trust Membership Camping Contract Real Estate Investment Trust (REIT) Page 12 of 38

15 Joint Venture Corporations, Limited Liability Companies, Partnerships (General, Limited) Common Areas of HOA Regulations 6. Government Rights in Real Property 6.1. Eminent Domain 6.2. Police Power 6.3. Escheat 6.4. Real Property Taxation Taxes Residential Vacant land Commercial property Tax ratios and tax rates Lien priority Tax Sale Special Tax Assessments/Improvements 7. Tax Implications on Real Estate 7.1. Types of Income Ordinary Capital Gain Passive Portfolio Phantom 7.2. Sale of Principle Residence -Examples Computing Gain Deductibility of Expenses Interest Deductions 7.3. Investment Real Estate Depreciation "Cost Recovery" Tax Shelter Concept Tax Deferred Exchanges - Basic Concepts Page 13 of 38

16 8. Water Law 8.1. Definitions. Erosion and accretion Avulsion, alluvion and alluvium Water table 8.2. Types of Water Sources Aquifers Percolated water Underground rivers Lakes, reservoirs, rivers and streams Central Arizona Project (CAP) Colorado River Effluent 8. 3 Water Users Residential, commercial and industrial Municipal (cities, towns, water districts) and private water companies Special users (golf courses, lake developments, recreational) 8.4. Doctrine of water law applicable to Arizona Riparian Doctrine Navigable Non-navigable Doctrine of Prior Appropriation First in time, first in right Reasonable use Beneficial use Adjudication of Indian Tribe claims 8.5. Arizona Groundwater Act of 1980 Reasons for the act Overdraft Subsidence Page 14 of 38

17 Arizona Department of Water Resources Classification of water Groundwater Surface water Active Management Areas Irrigation Non-expansion Areas Grandfathered rights Irrigation Type I Non-irrigation Type II Non-irrigation Assured water supply versus Adequate Water Supply Transfer of Well Rights Is it required? Transfer request Registration Adjudication Other permits and exemptions Service area rights Storage and recovery permits (recharge/percolation) Withdrawal permits Exempt wells 8.6. Wetlands in Arizona Definition Location in Arizona 9. Environmental Law / Disclosures 9.1. Regulators Environmental Protection Agency (EPA) Arizona Department of Environmental Quality (ADEQ) County and City Health Officials Page 15 of 38

18 9.2. Environmental Laws and Regulations Federal - Comprehensive Environmental Response Compensation & Liability Act (CERCLA) State - Water Quality Assurance Revolving Fund (WQARF) 9.3. Current Issues Mold Radon Asbestos Lead paint -contract requirements Underground storage tanks (UST) Formaldehyde/urea PCB's SBS (sick building syndrome) Pesticides and fertilizers Alternative wastewater systems/bulletin 12 Wood infestation Dry wells and on-site retention 9.4. Due Diligence and Information Sources Public information Phase I-Environmental Phase II-Testing Investigation Phase III-Remediation 9.5. Liabilities Owner and operator Brokers and agents' disclosures 9.6. Remedy Terminology Abatement/remediation Management in place / encapsulation 10. Land Descriptions Monuments and Markers Oldest Method Page 16 of 38

19 Occasionally used today Metes and Bounds Precise Directional Notations Primary System Many States Used as Supplement to Prevailing Descriptive Form Metes Bounds Directional notation P.O.B. (point of Beginning) Rectangular Survey Meridian Baselines Range Lines Township Lines Correction Lines Quadrangles/Checks Sections Fractional Sections Government Lots Subdivision (Lot, Block and Tract) Plat of Survey Filed with government office (zoning) City County Filed with Arizona Department of Real Estate when creating a lawful Subdivision Assessors Maps 11. Land Development & Construction Land Development Growth Patterns - Types Concentric Circles Multiple - Nuclei Theory Page 17 of 38

20 Wedge Sector Theory Central - Axial Theory Land Planning Terminology General Plan Master Planned Community Planned Unit Development (PUD) Transportation Plan Buffer Zones Zoning/Changes Non-Conforming Use Variances Grandfathered Rights Interstate Land Sales-Requirements Construction Fundamentals Soil Preparation Orientation Foundation Roof Framing Styles Joist, Rafters and Load-Bearing Walls Exterior Trim Building Code -Regulations New Home Builders' Warranties Types of Warranties Brokerage Responsibilities, Liabilities and Awareness 12. Encumbrances Non-monetary Easements Deed Restrictions/CC&R's Encroachments Clouds Page 18 of 38

21 12.2. Monetary (lien) Theory General vs. Specific Voluntary vs. Involuntary Equitable vs. Statutory Application Financing Liens Property Tax Liens Mechanic's Liens (1) Justification (2) Who has the lien right? (3) Pre-lien Notices (4) Costs that cannot create a lien on the property (5) What does a mechanic's lien attach to? (6) Priority of mechanic's liens (7) Release or assignment of mechanic's liens (8) Statutory rights/time periods Judgment Liens (1) Creation (2) Recordation (3) Enforcement and Renewal Income Tax Liens 13. Acquisition and Transfer of Title 13.1 Terminology Methods of Transfer Voluntary Involuntary Descent Will Page 19 of 38

22 13.3. Deeds Types Essential Elements Notice Actual Constructive Adverse Possession/Use (Title and Easement) Probate Title Insurance Types of Policies Standard / Residential Extended ALTA Plain language Homeowner's Commitment for Title Insurance Schedule A Schedule B Endorsements 14. Escrow and Settlement (Not Including Math) Definitions Parties to the Escrow Duties of the Escrow Officer Settlement Statements Debits and Credits Sample Statement and Worksheet Seller's disclosures required by law 15. Fair Housing and Americans with Disabilities Act Fair Housing Laws History Page 20 of 38

23 1866 Civil Rights Law 1968 Federal Fair Housing Jones vs. Mayer 1968 Amendments Equal Opportunity Lending Steering Blockbusting Redlining 1988 Fair Housing Legislation Fair Housing Enforcement Provisions Exemptions Federal State Penalties for violations Federal State City Advertising Requirements Americans with Disabilities Act Potential Conflicts Landlord Tenant Act CC&R's / Deed Restrictions 16. Leases and Leasehold Estates Types of Leasehold Estate Essentials of a Valid Lease Types of Leases/Payment Plans Graduated Lease Index Lease Percentage/Participation Lease Net Lease Gross Lease Page 21 of 38

24 Ground Lease Sale And Leaseback Rental Agreement Commercial Lease vs. Residential Lease Commercial Leases Types Gross lease Net lease Modified Full Usable area Rentable area Load factor Pass-through Reappraisal/reevaluation Roof-top leasing Assignment vs. Subleasing Leasehold as Collateral Termination of the Lease Methods Bankruptcy of the Lessee Foreclosure of a Mortgage 17. Arizona Residential Landlord and Tenant Act General Provisions 17.1 General Provisions Purposes Applicability Enforcement Exclusions Jurisdiction/Service of Process Definitions Good Faith Page 22 of 38

25 Unconscionability Notice Terms and Conditions of Rental Agreement Utility Charges Prohibited Provisions in Rental Agreements Separation of Rents and Obligations to Maintain Property Forbidden Discrimination Against Tenants with Children Early Termination for Domestic Violence Conditions Lock Replacement Access Refusal Damages Immunity 17.2 Landlord Obligations Security Deposits Written Agreement Possession Fit Premises Limitation of Liability Regulation of Rents Records Tenant Obligations Maintain Dwelling Unit Rules and Regulations Access Use and Occupancy 17.3 Remedies Page 23 of 38

26 Noncompliance by Landlord Failure to Deliver Possession Self-Help for Minor Defects Withholding Essential Services Landlord s Remedies Fire or Casualty Damages Tenant s Remedies Noncompliance with Rental Agreement by Tenant Failure to Pay Rent Utility Discontinuation Liability for Guests Failure to Maintain Abandonment Partial Payments Landlord Liens; Distraint After Termination Recovery of Possession Holdover Tenants Abuse of Access Forcible Entry and Detainer 17.4 Retaliatory Conduct Prohibited 17.5 Residential Rental Property Recording Temporary Receivers Inspections Slum Property Property Management Training Registration with One-Call Notification Center Page 24 of 38

27 18. Property Management Licensing Requirements Exemptions Owner -Broker Management Agreement Basic Requirements -per Title 32 Chapter 20, Article 3.1 Salesperson Acting as a Property Manager Trust Account -Property Management Specifics Agency Law and the Property Manager Owner/Tenant Associations Residential Commercial General Property Management Issues Credit Issues Privacy Act Bankruptcy Issues Rental Property Registrations, Regulations, Classifications Owner Liability Dangerous Dogs Drugs and Other Current Legal Issues 19. Property Insurance and Warranties Insurance Terminology Types of Properties and Policies Indemnification Warranties Contractors' Homeowners Page 25 of 38

28 19.5. National Flood Insurance Program Claims History (Clue Report) 20. Appraisal -Terminology & Concepts Terminology Appraisal /Appraiser Value Components of Value (Demand, Utility, Scarcity, Transferability) Objective Value versus Subjective Value Market Value (worth) versus Market Price (Value in Exchange) Types of Value Market Value Loan (Mortgage) Value Insurable Value Assessed (Taxable) Value Condemnation Value Salvage/Residual Value Concepts of Measurements Appraisal Concepts and Principles of Value Highest and best use Substitution Change Anticipation Supply and Demand Contribution Increasing and Decreasing Returns (Marginal Returns) 8. Balance Conformity Progression and Regression Competition Integration, Equilibrium, and Disintegration (Growth, Page 26 of 38

29 Stability, Decline, and Renewal) Plottage (Assemblage) Directional Growth Orientation Opportunity Cost Externalities The Appraisal Process Sales comparison analysis approach to value Collection and analysis of data Extraction of component market values Adjustments to comparables for features different from the subject Cost Approach to Value (Appraisal by Summation) Estimation of site value (land value) Estimation of construction costs (building costs) Estimation of accrued depreciation from all sources Income Approach to Value Gross Rent Multipliers versus Gross Income Multipliers Direct Capitalization Correlation Appraiser Licensing and Certification Requirements a. Separate License b. Dual Licensure Competitive Market Analysis ("CMA") Appraisal Broker Price Opinion (Exemption for Real Estate Licensees (A.R.S (A)) 21. Primary Lenders and the Secondary Market Primary Lenders Commercial Banks Page 27 of 38

30 Mortgage Brokers and Bankers Life Insurance Companies Credit Unions Private Investor Secondary Mortgage Market I Federal National Mortgage Association Government National Mortgage Association- Pools - Securities Federal Home Loan Mortgage Corporation Private Investor Paper Terminology/Holder In Due Course Types of Repayment Plans Fixed Rate Loan Level Payment Loan Straight/Term Loan Adjustable Rate Loan Graduated Payment Loan Open Ended Loan Blanket Loan Bi-Weekly Loan Reverse Annuity Mortgage Zero Percent Interest Interest Only 22. Residential Financing FHA Title Programs Qualification of Borrower Requirements of an FHA Insured Loan Veterans Administration Borrower's eligibility Requirements of a V A Guaranteed Loan Conventional Loans Buyer Qualifications Page 28 of 38

31 Private mortgage insurance Seller Carryback/Wraparound Financial Institutions Reform Recovery Enforcement Act (FIRREA) Truth in Lending (Regulation Z) RESPA Prohibited Acts Assumption Policies Federal Reserve impact on interest 23. Commercial Financing Commercial Lending Types of Loans Land Loans - Investors Acquisition and Development ('A&D') Loans - Subdividers Construction ('Interim') Loans Bridge ('Gap') Loans Permanent ('Take-out') Loans Sources of Funds Commercial Banks Mortgage Companies Venture Capitalists Others Government Loan Programs U. S. Department of Commerce U. S. Department of Housing & Urban Development (HUD) Small Business Administration (SBA) Alternative Sources of Commercial Capital Sale of Stock Public Offering Private Placement Page 29 of 38

32 Issuance of Bonds Financial Analysis Property Income & Expense Analysis (Annual Property Operating Data) Capitalization Rates Cash-On-Cash Returns Debt Coverage (Net Income-To-Debt) Ratios Cash Flow Projections Uniform Commercial Code Search (Secretary Of State, Corporation Commission) Seller Carry-Backs 24. Financing Documents FinancingTheory Lien Theory vs. Title Theory Hypothication vs. Pledging Promissory Notes Mortgages Deeds of Trust Agreement for Sale 25. Foreclosure Processes of Foreclosure - Mortgage Filing of legal action Recording Lis Pendens Acceleration of Debt CourtAction Sheriffs sales and bidding Sheriffs Certificate Six-month statutory redemption period Sheriffs Deed and delivery Rights of borrower in possession Difference between equity of redemption and statutory right of redemption Page 30 of 38

33 25.2 Processes of Foreclosure - Deed of Trust Contrasts to a Mortgage Foreclosure Non-Judicial Foreclosure (power of Sale) Preparation and recordation of Notice of Default and Trustee's Sale Parties required to be notified Use of Request for Notice of Default Trustor's right of reinstatement Absence of acceleration of debt Minimum time period prior to day of Trustee's Sale Trustee's sale and bidding h. Delivery of Trustee's Deed Absence of Statutory Right of Redemption Judicial Foreclosure Alternative Deed in Lieu of Foreclosure Cancellation of debt Acquisition by lender subject to prior and subordinate liens Use of Deed in Lieu with estoppel Consideration (Purchaser for Value) Proceeds and Lien Priorities upon Foreclosure Recorded/ Non-recorded Interests Application of Foreclosure Proceeds Post-Foreclosure Remedies Terminology Deficiency Judgments Residential Arizona Anti-deficiency Statutes Exceptions Commercial Recourse versus Non-recourse Page 31 of 38

34 25.6. Forfeiture of Agreement for Sale (aka Land Contract, Contract for Deed, Installment Contract, Land Sales Contract) Difference between foreclosure and forfeiture Default by Vendee Statutory reinstatement periods given to the buyer Notice of Election to Forfeit Notices to persons with recorded interests Completing the forfeiture through the Affidavit of Completion of Forfeiture versus quiet title action Required use of an account servicing agent to avoid quiet title action 26. Bankruptcy and Its Effect on Real Estate Business Types of Bankruptcy Relief Chapter 7 Chapter 11 Chapter 12 Chapter Impacts on Contracts/Transactions 27. Math Proration Calculations Appreciation and Depreciation Calculations Property Tax Calculations Net Proceeds Calculations Loan Interest Calculations Area and Volume Calculations Capitalization Calculations Commission Calculations Ratio Calculations 28. Selling a Business When are Real Estate License Not Required, Area of Specialization, and Designation? Page 32 of 38

35 28.2. Financial Statements Balance Sheet Assets Liabilities Equity Income Statement / Profit & Loss Statement Income from sales Cost of goods sold Operating/manufacturing expenses Selling expenses General and administrative expenses Other income and expenses Net income before income taxes Provision for taxes Net income (loss) after taxes Cash Flow Statement Statement of Changes in Financial Position Disclaimer by Tax Preparer Audited or unaudited Compilation Accounting Systems Used Cash vs. Accrual Value of Inventory (LIFO/FIFO) Depreciation Methods Unreported Items Income or expenses Taxes Pending litigation Page 33 of 38

36 Owner's Compensation and Perks Unrelated Business or Personal Expenses Comparison to Standards of Industry Legal Forms of Ownership Proprietorship Partnership General Joint venture Limited Limited liability company Professional Limited Liability Company Trust (REIT) Corporations Regular "C" Subchapter "S" Public or Private Closely held Stock/equity Common Preferred Voting or nonvoting Treasury Par value Market value Minority interests Value of a Business Comparison Market Value Replacement Cost Net asset value Adjusted income Cash flow analysis Page 34 of 38

37 Returns to owner(s) Goodwill value Excess earnings technique Payback analysis Discounted cash flow analysis Writing an Offer Letter of Intent Offer of Purchase Conditions of Offer Due diligence Inspection Audit of records Covenant not to compete Warranties Search of records Unpaid taxes Ownership/liens on assets Seller to train buyer Assets/liabilities not included Assign purchase price to: Assets Goodwill Covenant not to compete Recording of Interests 29. Real Estate Management Owning/Operating a Real Estate Office Residential Commercial Property Management Meeting Government Requirements Page 35 of 38

38 Federal State Local Payroll Risk Management Written Office Policies Privacy Policies Insurance - Types Mediation Policy Arbitration Policy Employees Independent Contractors State and local taxes Interviewing (EEOC) Supervising, Training and Managing Licensees Americans with Disabilities Act (ADA) Fair Housing Agency Disclosure Environmental Disclosures Assistants Types of Business Ownership Sole Proprietor Corporation/PC Limited Liability Company/PLLC Partnership 'Doing business as' (DBA) Names 30. Disclosure/Consumer Protection Stigmatized Property Law Affiliated Business Relationships Privacy Act Page 36 of 38

39 30.4. Flood hazard areas Military airports and ancillary military facilities Military training routes and military restricted airspace Public and private airports Expansive soils Fissures as shown on earth fissure maps issued by the Arizona geological survey Special tax assessment areas/special assessments Radon gas potential zones Superfund Sites and Water Quality Assurance Revolving Fund Sites Any other condition that affects the real property 31. Cooperative Nature of Real Estate Professional Boards and Associations Functions Standards Multiple Listing Service How it works Who operates it? Types (Residential, other) Ethics and Professional Conduct Practice of Brokerage Compensation Insurance Contractor agreements Expectations Page 37 of 38

40 Performance standards Office policies Related Careers Property management Finance Appraisal (limited to CMA as licensee) Property development Regional Issues Commissioner Hot Topics Page 38 of 38