Agency
- Six fiduciary duties — Mnemonic: OLD CAR (Obedience, Loyalty, Disclosure, Confidentiality, Accounting, Reasonable care). Owed only to the CLIENT, not the customer.
- Client vs Customer — Client = principal you represent (full fiduciary). Customer = unrepresented party owed only honesty, fairness, and material-fact disclosure.
- Designated Agent — Broker designates one licensee per side; other licensees in the firm are NOT agents of that party. MA default unless other arrangement is signed.
- Facilitator (non-agent) — Assists both parties, owes NO fiduciary duties; must still be honest and disclose material defects. Cannot advocate or advise on price.
- Dual Agent — Represents BOTH buyer and seller in same transaction. Requires WRITTEN informed consent from both. Cannot disclose confidential info (price, motivation) of either side.
- Subagent — Agent of the listing broker (rare in MA post-1990s); owes fiduciary duties to the SELLER, not the buyer they show homes to.
- Disclosure trigger — Mandatory Licensee-Consumer Relationship Disclosure at FIRST personal meeting to discuss a specific property. Not a contract — informational only.
Math Formulas
- T-Method — Part = Whole × Rate. Cover the unknown: Rate = Part ÷ Whole; Whole = Part ÷ Rate. Works for commission, interest, tax, LTV.
- Simple Interest — I = P × R × T (annual). Ex: $200,000 × 6% × 1 yr = $12,000/yr → $1,000/month interest.
- Commission Split — Sale × commission% = total commission; then split listing/selling broker, then broker/agent. Ex: $500,000 × 5% = $25,000 → 50/50 = $12,500 per side.
- Proration (per-day / 365-day method) — Annual amount ÷ 365 × days owed. PSI/MA commonly uses 365-day actual (some use 360/30). Seller pays THROUGH day of closing unless stated otherwise.
- Area — 1 acre = 43,560 sq ft. 1 sq mile = 640 acres. Rectangular lot: length × width = sq ft, then ÷ 43,560 for acres.
- Discount Points — 1 point = 1% of the LOAN amount (NOT sale price). Ex: $300,000 loan × 2 points = $6,000 paid at closing to buy down rate (~0.25% per point rule of thumb).
- LTV — Loan ÷ Value (lower of appraisal or price) × 100. Ex: $240,000 loan on $300,000 home = 80% LTV (no PMI needed).
- Property Tax — Tax = Assessed Value × Mill Rate ÷ 1,000. Ex: $400,000 AV × $14.50 mills ÷ 1,000 = $5,800/yr.
Fair Housing
- Federal 7 protected classes (FHA 1968 + 1988 amend.) — Race, Color, Religion, National Origin, Sex, Familial Status, Disability. Race added by Civil Rights Act of 1866 (no exemptions, ever).
- MA additional classes (MGL c.151B) — Sexual orientation, gender identity, ancestry, age, marital status, military/veteran status, genetic information, source of income (incl. Section 8 vouchers), children, and disability (broader than federal).
- Prohibited acts — Steering, blockbusting, redlining, discriminatory advertising, refusing to show/sell/rent, different terms. Even ONE biased phrase in an ad violates the Act.
- Familial status — Protects households with children under 18, pregnant persons, and those securing custody. Exception: HUD-certified 55+ or 62+ senior housing.
- Disability accommodation — Must allow reasonable modifications (at tenant expense in rentals; at owner expense in sales of public-accom dwellings) and reasonable rule accommodations (e.g. service animals — no pet deposit).
- Enforcement — File with HUD within 1 year; MCAD within 300 days in MA. Penalties up to $27,000+ first offense (federal), unlimited in court.
- Exemptions (federal, very narrow) — Mrs. Murphy (owner-occupied 1–4 units, no broker, no discriminatory ads). Religious org and private club housing in limited cases. NEVER exempt from race. MA c.151B does NOT honor Mrs. Murphy — owner-occupied is still covered.
Contracts
- Essential elements — Offer, Acceptance, Consideration, Legal Capacity (18+ & competent), Lawful Purpose, Mutual Assent (meeting of the minds). Missing any → void.
- Statute of Frauds — Real estate contracts (sale, lease > 1 year) MUST be in writing and signed by the party to be charged. Oral listings may be enforceable but oral sale contracts are NOT.
- Mirror Image Rule — Acceptance must match offer exactly. Any change = counteroffer, which kills the original offer; original offeror becomes the offeree.
- Bilateral vs Unilateral — Bilateral = promise for a promise (most purchase contracts). Unilateral = promise for an act (option contracts, open listings — only performance accepts).
- Void / Voidable / Unenforceable — Void = no contract (illegal purpose). Voidable = one party may rescind (minor, fraud, duress). Unenforceable = valid but court won't enforce (oral, expired statute).
- Liquidated damages — In MA, standard P&S sets deposit as agreed damages on buyer default. Seller default → buyer may sue for specific performance or damages.
- Assignment vs Novation — Assignment = transfer rights, original party still liable. Novation = substitute new party, original RELEASED. Most P&S contracts assignable unless prohibited.
- MA contract workflow — Offer to Purchase (binding contract, ~$1k deposit) → ~10 business days → Purchase & Sale Agreement (5-10% deposit, full terms) → closing. P&S supersedes Offer.
MA State Specifics
- Licensing — Salesperson — 40 hours pre-licensing education + pass PSI state exam + sponsoring broker. Must be 18+, good moral character, SSN required, 3 non-relative character references. License expires on birthday every 2 years (12 hrs CE).
- Licensing — Broker — Must hold active salesperson license 1 year + 40 additional hours + broker exam + $5,000 surety bond.
- Regulating body — MA Board of Registration of Real Estate Brokers and Salespersons under Div. of Occupational Licensure. Rules: 254 CMR (esp. 254 CMR 3.00 — Professional Standards) and MGL c.112 §§87PP–DDD.
- Mandatory Disclosure form — Licensee-Consumer Relationship Disclosure given at FIRST personal meeting to discuss a SPECIFIC property. Not required at open houses for general inquiries, but offered.
- Earnest money / escrow — Held by listing broker in non-interest-bearing escrow account unless parties agree otherwise. Cannot be commingled. Disputed funds: broker holds until written release or court order.
- Advertising — All ads must include the brokerage name. Salespersons cannot advertise in their own name only. No 'net listings' allowed in MA.
- Antitrust — Commissions are ALWAYS negotiable. Never discuss rates with competing brokerages — price-fixing is a federal felony (Sherman Act).
Disclosures
- Lead Paint — Federal (Title X, 1992) — Any residential built BEFORE 1978: provide EPA pamphlet 'Protect Your Family from Lead,' disclose known lead, give 10-day inspection window. Applies to sales AND rentals.
- Lead Paint — MA Lead Law (MGL c.111 §197) — Owner MUST de-lead or bring into interim control any home built pre-1978 where a child UNDER 6 resides. Strict liability — cannot waive. Property Transfer Lead Paint Notification required at sale.
- Material defects — MA is 'caveat emptor' (buyer beware) for sellers, BUT licensees have an AFFIRMATIVE duty to disclose known material defects affecting value/safety. Cannot misrepresent or conceal.
- Stigmatized property — Death, suicide, crime, alleged paranormal: NOT material facts in MA; no duty to disclose. HIV/AIDS history of occupant is PROTECTED — never disclose.
- Megan's Law — Sex offender registry info is publicly available; agent has NO duty to research or disclose, but must direct buyer to the registry if asked.
- Smoke & CO detectors — Seller must obtain municipal Certificate of Compliance for smoke + carbon monoxide detectors before closing on 1–2 family dwellings (MGL c.148 §26F).
- Title 5 (septic) — Private septic system must be inspected within 2 years prior to sale (3 yrs if pumped annually). Failed systems must be upgraded — often a closing deal-killer.
Financing
- LTV & PMI — Conventional loans above 80% LTV require Private Mortgage Insurance. PMI auto-terminates at 78% LTV (Homeowners Protection Act); borrower may request cancel at 80%.
- Conventional vs FHA vs VA — Conventional: not gov't-backed, 3–20% down, PMI > 80%. FHA: 3.5% down, MIP for life of loan if <10% down, 580+ FICO. VA: 0% down, no PMI, funding fee, eligible vets only.
- APR vs Note Rate — Note rate = interest on principal. APR includes interest + points + most fees → always ≥ note rate. APR disclosed in TRID Loan Estimate within 3 business days of application.
- Discount Points — 1 point = 1% of LOAN amount, paid upfront to lower the rate. Rule of thumb: ~0.25% rate reduction per point. Buydown is tax-deductible mortgage interest.
- Loan types — Fixed-rate (amortized, stable P&I), ARM (rate adjusts on index + margin; caps: initial/periodic/lifetime), Interest-only, Balloon (lump-sum due). Negative amortization = balance GROWS.
- Foreclosure in MA — Primarily NON-judicial (Power of Sale under mortgage). Statutory right of redemption ends at foreclosure sale. Deficiency judgments possible but limited.
- RESPA & TRID — RESPA bans kickbacks for referrals (Section 8). TRID = 3-day Loan Estimate + 3-day Closing Disclosure rule. Major changes to CD restart the 3-day clock.
Estates & Tenancies
- Fee Simple Absolute — Highest, most complete ownership: inheritable, no time limit, no conditions. Default estate when none specified.
- Life Estate — Ownership for duration of a life (measuring life). 'Pur autre vie' = measured by someone else's life. Reverts to grantor (reversion) or to a third party (remainderman) at death.
- Leasehold estates — (1) Tenancy for Years — fixed term, ends automatically. (2) Periodic Tenancy — month-to-month, auto-renews until notice. (3) Tenancy at Will — MA default residential; either may terminate with rental-period notice (30 days min). (4) Tenancy at Sufferance — holdover after lease ends; one step from trespasser.
- Tenancy in Common (TIC) — 2+ owners, undivided interest, NO right of survivorship — passes by will/intestacy. Shares may be unequal. Default for non-spouses in MA.
- Joint Tenancy — Equal shares + 4 unities (Time, Title, Interest, Possession = T-TIP) + RIGHT OF SURVIVORSHIP. Must be expressly stated in MA deed.
- Tenancy by the Entirety — JT for MARRIED couples only; adds 5th unity (marriage). Neither spouse can sever without consent; strong creditor protection. MA default for marital home if both on deed.
- Easements — Appurtenant (runs with land, dominant + servient) vs in gross (personal/utility). Created by grant, necessity, prescription (20 yrs in MA), or estoppel. Terminated by merger, release, abandonment.
Government Powers & Land Use
- PETE — Mnemonic for the 4 government powers over private property: Police power, Eminent domain, Taxation, Escheat.
- Police Power — Regulation for public health/safety/welfare WITHOUT compensation. Includes zoning, building codes, subdivision regs, environmental laws, rent control (where allowed).
- Eminent Domain — Gov't TAKES private property for public use WITH just compensation (5th Amendment + MA Art. X). The process is called 'condemnation.'
- Taxation — Ad valorem property tax (based on assessed value). Unpaid → tax lien (super-priority over other liens) → tax sale. MA: Prop 2½ caps tax levy growth at 2.5%/yr.
- Escheat — Property reverts to the STATE when an owner dies with no will and no heirs. Rare but testable.
- Zoning tools — Variance (hardship-based relief), Special Permit (allowed use with conditions), Nonconforming use ('grandfathered'), Spot zoning (generally illegal). MA Zoning Act = MGL c.40A.
- Private restrictions — Deed restrictions and HOA covenants (CC&Rs) are PRIVATE — enforced by injunction, not gov't. Cannot violate fair housing law (race-based covenants unenforceable since 1948 Shelley v. Kraemer).