CA Real Estate Qs Flashcards
1
Q
What is the purpose of a deed?
A
A deed is a legal document that transfers ownership of real property from one party to another.
2
Q
What is a lien?
A
A lien is a legal right or interest that a lender has in the debtor’s property, granted until the debt obligation is satisfied.
3
Q
What is an encumbrance?
A
An encumbrance is any claim, lien, charge, or liability attached to and binding on real property that may affect the property owner’s rights.
4
Q
What does “fee simple” mean in real estate?
A
Fee simple refers to the most complete form of property ownership, which is not limited in duration and includes all rights to the property.
5
Q
What is an easement?
A
An easement is a legal right to use another person’s land for a specific purpose.
6
Q
What is the difference between a general lien and a specific lien?
A
A general lien affects all of a debtor’s property, while a specific lien applies only to a particular piece of property.
7
Q
What is a mortgage?
A
A mortgage is a loan secured by real estate in which the borrower pledges the property as collateral.
8
Q
What does “amortization” refer to in a mortgage?
A
Amortization refers to the process of paying off a loan through regular payments of principal and interest over a set period.
9
Q
What is title insurance?
A
Title insurance protects against loss or damage caused by defects in the title to a property.
10
Q
What is a real estate appraisal?
A
An appraisal is an assessment of the value of a property conducted by a licensed appraiser.
11
Q
What is the role of a real estate broker?
A
A real estate broker represents buyers or sellers in real estate transactions and is typically licensed to handle complex transactions and manage agents.
12
Q
What is a lease?
A
A lease is a contract that allows a tenant to use and occupy a property for a specified period in exchange for rent.
13
Q
What is an easement appurtenant?
A
An easement appurtenant benefits a specific piece of land (dominant estate) and runs with the land, meaning it remains with the property when sold.
14
Q
What is an easement in gross?
A
An easement in gross benefits a person or entity rather than a piece of land and does not transfer with the property.
15
Q
What is a variance in zoning?
A
A variance is an authorized deviation from zoning laws or regulations to allow a property owner to use their land in a way not normally permitted.
16
Q
What is a deed of trust?
A
A deed of trust is a document that secures a loan by transferring the legal title of the property to a trustee, who holds it as collateral for the loan.
17
Q
What does “encroachment” mean?
A
Encroachment refers to the intrusion of a structure or improvement onto another person’s property.
18
Q
What is the definition of “market value”?
A
Market value is the estimated amount for which a property should sell on the open market, based on comparable sales and other factors.
19
Q
What is the purpose of a property disclosure?
A
A property disclosure is a statement provided by the seller that reveals known issues or defects with the property.
20
Q
What is the difference between a fixed-rate mortgage and an adjustable-rate mortgage?
A
A fixed-rate mortgage has a constant interest rate throughout the life of the loan, while an adjustable-rate mortgage has an interest rate that can change periodically based on market conditions.
21
Q
What is a quitclaim deed?
A
A quitclaim deed transfers any interest the grantor may have in the property without making any guarantees about the title.
22
Q
What is a warranty deed?
A
A warranty deed provides a guarantee of clear title and protection against future claims to the property.
23
Q
What is a tax lien?
A
A tax lien is a claim placed on a property by a government for unpaid taxes, which must be paid before the property can be sold or refinanced.
24
Q
What is the role of an escrow account?
A
An escrow account holds funds or documents by a neutral third party until specific conditions of a transaction are met, such as completing a real estate sale.
25
What is a "right of first refusal"?
A right of first refusal gives an individual or entity the opportunity to purchase or lease a property before the owner accepts another offer.
26
What is a community property?
Community property is property acquired during marriage that is jointly owned by both spouses and is divided equally upon divorce or death.
27
What is a tenancy in common?
Tenancy in common is a form of co-ownership where each owner has an undivided interest in the property, which can be inherited by heirs.
28
What is joint tenancy?
Joint tenancy is a form of co-ownership where each owner has an equal share and the right of survivorship, meaning the surviving owner(s) inherit the deceased owner’s share.
29
What is a deed restriction?
A deed restriction is a provision in a property deed that limits the way the property can be used or developed.
30
What is a "subdivision" in real estate?
A subdivision is the process of dividing a larger parcel of land into smaller lots for development or sale.
31
What is an "assessed value"?
The assessed value is the value of a property as determined by the local tax assessor for the purpose of calculating property taxes.
32
What is a "homestead exemption"?
A homestead exemption is a legal provision that provides tax relief to homeowners by exempting a portion of the home’s value from property taxes.
33
What is a "gross lease"?
A gross lease is a lease agreement where the landlord covers all property expenses, including taxes, insurance, and maintenance.
34
What is a "net lease"?
A net lease is a lease agreement where the tenant pays not only rent but also property taxes, insurance, and maintenance costs.
35
What is a "triple net lease"?
A triple net lease is a lease where the tenant pays for property taxes, insurance, and maintenance in addition to the base rent.
36
What is a "master lease"?
A master lease is a lease agreement where the tenant rents the entire property and has the right to sublease or lease out portions of the property to others.
37
What is an "exclusive right to sell" listing?
An exclusive right to sell listing is an agreement where the real estate agent is entitled to a commission if the property sells, regardless of who finds the buyer.
38
What is an "open listing"?
An open listing is an agreement where the property owner can work with multiple agents and only pays a commission to the agent who finds a buyer.
39
What is a "security deposit"?
A security deposit is an amount of money paid by a tenant to a landlord as a guarantee against damage or unpaid rent.
40
What is a "sublease"?
A sublease is a lease arrangement where the original tenant leases the property to another tenant while retaining some rights and obligations under the original lease.
41
What is a "right of survivorship"?
The right of survivorship means that upon the death of one co-owner, their interest in the property automatically passes to the surviving co-owners.
42
What is a "contract for deed"?
A contract for deed is a type of seller financing where the buyer makes payments directly to the seller until the purchase price is paid in full, at which point the title is transferred.
43
What is "earnest money"?
Earnest money is a deposit made by a buyer to demonstrate their commitment to purchasing the property.
44
What is a "purchase agreement"?
A purchase agreement is a legally binding contract between a buyer and seller outlining the terms and conditions of the sale of a property.
45
What is "depreciation"?
Depreciation is the reduction in value of a property over time due to wear and tear, which can be deducted as an expense for tax purposes.
46
What is "capital improvements"?
Capital improvements are major renovations or upgrades made to a property that increase its value or extend its useful life.
47
What is "gross rent multiplier"?
The gross rent multiplier is a metric used to evaluate rental properties, calculated by dividing the property's purchase price by its gross rental income.
48
What is "net operating income"?
Net operating income is the total income generated from a property minus operating expenses, excluding financing costs and taxes.
49
What are "operating expenses"?
Operating expenses are costs associated with running and maintaining a property, including utilities, maintenance, and property management fees.
50
What is a "subdivision survey"?
A subdivision survey is a type of survey that includes a topographic survey of a parcel of land which will be divided into smaller tracts, lots, or estate divisions.
51
What is the primary purpose of the California Department of Real Estate (DRE)?
The primary purpose of the California Department of Real Estate (DRE) is to protect consumers by regulating the real estate industry through licensing, education, and enforcement of laws and regulations.
52
What is a "lien" in real estate?
A lien is a legal claim or right against a property, typically used as security for the repayment of a debt. If the debt is not repaid, the lienholder may have the right to sell the property to recover the owed amount.
53
What is "tenancy in common"?
Tenancy in common is a form of co-ownership where each owner holds an undivided interest in the property. Owners may have unequal shares, and there is no right of survivorship, meaning the share of a deceased owner passes to their heirs or beneficiaries.
54
What is a "dual agency" in real estate transactions?
A dual agency occurs when a real estate agent or brokerage represents both the buyer and the seller in the same transaction. This is legal in California if both parties are fully informed and consent to the arrangement.
55
What is the difference between "real property" and "personal property"?
Real property refers to land and anything attached to it, such as buildings or trees, while personal property consists of movable items like furniture, cars, or electronics. Real property is immovable, whereas personal property is not.
56
What is "eminent domain"?
Eminent domain is the government's power to take private property for public use, provided the property owner is given just compensation. This is often used for projects such as highways, parks, or other public infrastructure.
57
What does the term "cloud on title" mean?
A cloud on title refers to any claim, lien, or encumbrance that affects the ownership or transferability of the property. A cloud on title must be resolved before a property can be sold with clear title.
58
What is the "Statute of Frauds" in real estate?
The Statute of Frauds is a legal doctrine that requires certain types of contracts, including real estate contracts, to be in writing to be enforceable. This includes contracts for the sale or lease of property for more than one year.
59
What is "equitable title"?
Equitable title refers to the interest held by a buyer under a real estate sales contract who has not yet received legal title to the property. The buyer has the right to obtain full ownership once the terms of the contract are fulfilled.
60
What is the "right of survivorship" in real estate?
The right of survivorship is a feature of joint tenancy, where upon the death of one co-owner, the deceased's interest in the property automatically passes to the surviving co-owner(s), bypassing the probate process.
61
What is a "quitclaim deed"?
A quitclaim deed is a type of deed that transfers any ownership interest the grantor has in a property without providing any warranties or guarantees about the title’s validity. It is often used in transfers between family members or to clear up title issues.
62
What is a "grant deed"?
A grant deed is a legal document used to transfer ownership of real property from one person to another. The grantor guarantees that the property has not been sold to someone else and that the property is free from undisclosed encumbrances.
63
What is "escrow" in a real estate transaction?
Escrow is a neutral third-party process used to hold funds, documents, and instructions between the buyer and seller during a real estate transaction until all conditions are met, ensuring the safe transfer of property and money.
64
What is a "restrictive covenant"?
A restrictive covenant is a legal obligation imposed on a property owner through a deed or contract, restricting the use or development of the property. Common examples include limitations on building height or property use.
65
What is the difference between a "promissory note" and a "mortgage"?
A promissory note is a written promise to repay a loan, while a mortgage is the security instrument that gives the lender the right to foreclose on the property if the borrower defaults on the loan.
66
What does "constructive notice" mean in real estate?
Constructive notice refers to the legal presumption that a person has knowledge of a fact because it is recorded in the public record, such as a deed or lien, even if they do not have actual knowledge of it.
67
What is a "balloon payment"?
A balloon payment is a large, lump-sum payment due at the end of a loan term. It is often seen in loans that require smaller, periodic payments with a large final payment to satisfy the remaining balance.
68
What is the "bundle of rights" in real estate?
The bundle of rights refers to the various legal rights associated with property ownership, including the right to possess, use, transfer, exclude others from, and encumber the property.
69
What is "adverse possession"?
Adverse possession is a legal doctrine that allows a person to claim ownership of land under certain conditions, such as continuous, open, and hostile possession of the property for a statutory period, typically five years in California.
70
What is a "deed of trust"?
A deed of trust is a type of security instrument in which the borrower transfers legal title to a trustee to hold as security for the loan. If the borrower defaults, the trustee may foreclose on the property.
71
What is the difference between "market value" and "market price"?
Market value is the estimated amount a property would sell for under normal conditions, while market price is the actual price at which a property is sold, which may differ from its market value.
72
What is "zoning"?
Zoning refers to government-imposed regulations that control how land in specific areas can be used, such as for residential, commercial, industrial, or agricultural purposes.
73
What is the "Doctrine of Prior Appropriation"?
The Doctrine of Prior Appropriation is a water rights doctrine stating that water rights are granted to the first user to take water from a source for beneficial use. This doctrine is common in states with limited water resources, like California.
74
What is "tenancy by the entirety"?
Tenancy by the entirety is a form of co-ownership available only to married couples, where both spouses hold an equal, undivided interest in the property with the right of survivorship. It is not recognized in California, which uses community property law.
75
What is a "plat map"?
A plat map is a detailed survey map that shows the divisions of land into lots, streets, and public areas. It is used to create a subdivision and is filed with the county to become part of the public record.
76
What is the "Equal Credit Opportunity Act" (ECOA)?
The Equal Credit Opportunity Act (ECOA) is a federal law that prohibits lenders from discriminating against credit applicants based on race, color, religion, national origin, sex, marital status, age, or because they receive public assistance.
77
What is the "Fair Housing Act"?
The Fair Housing Act is a federal law that prohibits discrimination in housing-related transactions based on race, color, religion, sex, disability, familial status, or national origin.
78
What is a "variance" in zoning?
A variance is an exception granted by a local zoning authority that allows property owners to use their land in a way that deviates from current zoning regulations, typically due to unique circumstances or hardships.
79
What is "steering" in real estate?
Steering is the illegal practice of guiding prospective homebuyers or renters to or away from certain neighborhoods based on race, ethnicity, or other protected characteristics, in violation of the Fair Housing Act.
80
What is "blockbusting" in real estate?
Blockbusting is the illegal practice of inducing property owners to sell their homes at a loss by suggesting that people of a particular race, religion, or ethnicity are moving into the neighborhood, causing property values to drop.
81
What is "joint tenancy"?
Joint tenancy is a form of property co-ownership where two or more people hold equal shares and have the right of survivorship. Upon the death of one owner, their share automatically passes to the surviving co-owners.
82
What is a "life estate"?
A life estate is a form of property ownership where the individual, called the life tenant, has the right to use and benefit from the property for the duration of their life. After their death, the property passes to a remainderman or reverts to the grantor.
83
What does "title insurance" cover?
Title insurance protects the property buyer and lender from losses due to defects in the title, such as liens, encumbrances, or claims of ownership that were undiscovered at the time of sale.
84
What is "functional obsolescence"?
Functional obsolescence refers to a reduction in a property’s value due to outdated design or features that are no longer useful or desirable, such as a house with only one bathroom in a neighborhood where multiple bathrooms are standard.
85
What is "economic obsolescence"?
Economic obsolescence is the loss of property value due to external factors, such as changes in the surrounding area, economic downturns, or new zoning regulations, that the property owner cannot control.
86
What is a "short sale" in real estate?
A short sale occurs when a property is sold for less than the outstanding balance on the mortgage, with the lender agreeing to accept less than what is owed. It typically happens when the homeowner is unable to continue making mortgage payments.
87
What is "real estate depreciation"?
Real estate depreciation is the decrease in the value of a property over time due to wear and tear, age, or obsolescence. It is also used as a tax deduction for investment properties.
88
What is "capitalization rate"?
The capitalization rate (cap rate) is the rate of return on a real estate investment property based on the income the property is expected to generate. It is calculated by dividing the property’s net operating income by its current market value.
89
What is a "reverse mortgage"?
A reverse mortgage allows homeowners aged 62 or older to convert part of the equity in their home into cash without having to sell the home. The loan is repaid when the borrower dies, sells the home, or no longer lives in the home.
90
What is "private mortgage insurance" (PMI)?
Private mortgage insurance (PMI) is insurance that lenders require borrowers to purchase if they are making a down payment of less than 20% of the property’s purchase price. It protects the lender in case of borrower default.
91
What is the purpose of a "home inspection"?
A home inspection is conducted to evaluate the condition of a property, including its structural integrity, systems, and appliances. The inspection helps buyers identify any potential problems or repairs needed before finalizing a purchase.
92
What is "dual agency disclosure"?
Dual agency disclosure is the legal requirement that a real estate agent inform both the buyer and seller when they are representing both parties in a transaction. Both parties must consent to the arrangement.
93
What is a "net listing"?
A net listing is a type of listing agreement where the seller sets a minimum acceptable price, and the broker receives any amount above that price as their commission. This type of listing is illegal in many states due to potential conflicts of interest.
94
What is "leasehold estate"?
A leasehold estate is a tenant’s right to occupy and use a property for a specific period as defined in a lease agreement. The tenant does not own the property but has the right to use it under the terms of the lease.
95
What is the "Truth in Lending Act" (TILA)?
The Truth in Lending Act (TILA) is a federal law designed to protect consumers in credit transactions by requiring clear disclosure of key loan terms and costs, including the annual percentage rate (APR) and total finance charges.
96
What is the "Real Estate Settlement Procedures Act" (RESPA)?
RESPA is a federal law that requires lenders to disclose certain information about the real estate settlement process, including the estimated costs of closing, and prohibits kickbacks and unearned fees in real estate transactions.
97
What is a "fixture" in real estate?
A fixture is a piece of personal property that has been attached to land or a building in such a way that it becomes part of the real property, such as built-in appliances or light fixtures.
98
What is "net operating income" (NOI) in real estate?
Net operating income (NOI) is the income generated by a property after operating expenses have been deducted, but before taxes and debt service. It is a key factor in evaluating the profitability of an investment property.
99
What is "abatement"?
Abatement refers to the reduction or elimination of property taxes or rent. It may also refer to the removal of environmental hazards, such as asbestos or lead paint, from a property.
100
What is "alienation" in real estate?
Alienation refers to the transfer of property ownership from one party to another. This can occur through sale, gift, or inheritance.
101
What is "equity" in real estate?
Equity is the difference between the market value of a property and the amount still owed on any mortgage or loan. It represents the homeowner's ownership interest in the property.
102
What is a "balloon mortgage"?
A balloon mortgage is a type of mortgage that requires smaller monthly payments for a set period, followed by a large final payment, or "balloon" payment, to pay off the remaining balance at the end of the term.
103
What is a "deed in lieu of foreclosure"?
A deed in lieu of foreclosure is a process in which a homeowner voluntarily transfers ownership of the property to the lender to avoid foreclosure. The lender may accept the deed to satisfy the mortgage debt.
104
What is a "due-on-sale clause"?
A due-on-sale clause is a provision in a mortgage contract that allows the lender to require full repayment of the loan if the property is sold or transferred without the lender’s consent.
105
What is "probate"?
Probate is the legal process of administering a deceased person’s estate, including distributing assets to heirs and paying off debts. Real property may need to go through probate if it is not transferred through a trust or other means.
106
What is "marketable title"?
Marketable title is a title that is free from significant defects or encumbrances, allowing the owner to sell the property without fear of legal challenges or claims.
107
What is "power of attorney"?
Power of attorney is a legal document that grants one person the authority to act on behalf of another in legal or financial matters, including real estate transactions.
108
What is a "lis pendens"?
A lis pendens is a legal notice that a lawsuit has been filed concerning a claim to ownership or an interest in a property. It warns potential buyers or lenders of the pending litigation.
109
What is "real estate syndication"?
Real estate syndication is a partnership between investors who pool their resources to purchase and manage large real estate projects. It allows individual investors to participate in real estate investments they could not afford on their own.
110
What is "tax-deferred exchange" (1031 Exchange)?
A 1031 exchange allows real estate investors to defer paying capital gains taxes on the sale of an investment property if they reinvest the proceeds into a like-kind property within a specific time frame.
111
What is the "income approach" to property valuation?
The income approach estimates the value of a property based on the income it generates. It is commonly used for commercial properties and rental properties and involves capitalizing the net operating income.
112
What is a "right of way"?
A right of way is an easement that grants someone the right to travel across another person’s land, typically for access to a road or utility lines.
113
What is "cash-on-cash return"?
Cash-on-cash return is a metric used in real estate investment to measure the return on cash invested. It is calculated by dividing the property’s annual pre-tax cash flow by the total cash invested in the property.
114
What is "specific performance" in real estate?
Specific performance is a legal remedy that requires a party to a real estate contract to fulfill their obligations, such as completing the sale, when monetary compensation is insufficient to remedy the breach of contract.
115
What is "community property" in California?
Community property refers to property acquired by a married couple during the course of their marriage, which is owned equally by both spouses. Upon divorce, community property is typically divided equally between the spouses.
116
What is a "homeowner’s association" (HOA)?
A homeowner’s association (HOA) is an organization in a planned community or condominium complex that makes and enforces rules for the properties within its jurisdiction. Members of the community are required to pay fees to support the HOA.
117
What is a "real estate broker"?
A real estate broker is a licensed professional who represents buyers and sellers in real estate transactions. Brokers can work independently or hire real estate agents to work under their supervision.
118
What is "riparian rights"?
Riparian rights are the rights of landowners whose property is adjacent to a natural watercourse, such as a river or stream, to make reasonable use of the water.
119
What is a "fiduciary duty" in real estate?
A fiduciary duty is the obligation of a real estate agent or broker to act in the best interests of their client, including loyalty, confidentiality, full disclosure, and due care.
120
What is the "cost approach" to property valuation?
The cost approach estimates the value of a property by determining the cost to replace or reproduce the structure, minus depreciation, plus the value of the land. This method is often used for unique or new properties.
121
What is a "special assessment"?
A special assessment is a fee levied by a local government or homeowner’s association to pay for specific improvements or services, such as road repairs or new infrastructure, that benefit the property.
122
What is "tenancy in common"?
Tenancy in common is a form of co-ownership where each owner holds an individual, undivided interest in the property. Owners can have unequal shares, and there is no right of survivorship. Upon death, an owner’s share passes to their heirs.
123
What is a "contract for deed"?
A contract for deed is a type of real estate transaction where the buyer takes possession of the property and makes payments to the seller, but the seller retains legal title until the full purchase price is paid.
124
What is "constructive eviction"?
Constructive eviction occurs when a landlord’s actions or failure to maintain the property make it uninhabitable, forcing the tenant to move out. This may release the tenant from the lease agreement.
125
What is "zoning variance"?
A zoning variance is an exception granted by a local zoning authority that allows a property owner to use the land in a way that does not comply with current zoning regulations, often due to unique circumstances or hardships.
126
What is "aesthetic zoning"?
Aesthetic zoning is a form of land-use regulation that controls the appearance of buildings and structures, such as architectural design or landscaping, to maintain the aesthetic appeal of a community.
127
What is "conforming loan"?
A conforming loan is a mortgage that meets the guidelines set by Fannie Mae and Freddie Mac, including limits on the loan amount and borrower qualifications. Conforming loans typically offer lower interest rates.
128
What is "nonconforming use"?
Nonconforming use refers to a property’s use that was legal under previous zoning laws but no longer complies with current zoning regulations. The use is typically allowed to continue as a "grandfathered" use.
129
What is a "land contract"?
A land contract is a type of seller financing where the buyer makes payments directly to the seller while taking possession of the property. The seller retains legal title until the buyer pays the full purchase price.
130
What is "real property"?
Real property refers to land and anything permanently attached to it, such as buildings, trees, or mineral rights. It is immovable and includes both tangible assets (land and buildings) and intangible rights (ownership and use).
131
What is "personal property"?
Personal property refers to movable items that are not permanently attached to the land, such as furniture, vehicles, or appliances. It is distinct from real property, which includes land and structures.
132
What is the "Doctrine of Emblements"?
The Doctrine of Emblements allows a tenant farmer to re-enter the land to harvest crops that were planted before the tenancy ended. It protects the tenant's rights to the crops after termination of the lease.
133
What is a "kick-out clause"?
A kick-out clause is a provision in a real estate contract that allows the seller to continue marketing the property and accept another offer if the current buyer cannot remove certain contingencies, such as financing, within a specified time.
134
What is "encroachment"?
Encroachment occurs when a structure or object, such as a fence or building, extends over a property line onto neighboring land without permission. Encroachments can lead to disputes and legal action.
135
What is a "quiet title action"?
A quiet title action is a legal process used to resolve disputes over property ownership or to clear up title defects, such as unresolved liens or claims. It results in a court ruling that establishes clear ownership of the property.
136
What is "homestead exemption"?
A homestead exemption is a legal provision that protects a homeowner’s primary residence from being seized to satisfy unsecured debts, up to a certain value, in the event of bankruptcy or foreclosure.
137
What is "abatement of nuisance"?
Abatement of nuisance is the removal or elimination of a nuisance, such as noise, pollution, or illegal activities, that affects the use and enjoyment of property. It may be enforced by local governments or through legal action.
138
What is a "wraparound mortgage"?
A wraparound mortgage is a type of secondary financing where the lender assumes responsibility for the existing mortgage and issues a new loan that includes the balance of the original mortgage plus an additional amount. The borrower makes payments to the second lender, who continues paying the first lender.
139
What is a "satisfaction of mortgage"?
A satisfaction of mortgage is a document issued by a lender when a mortgage is fully paid off, releasing the borrower from the debt and clearing the title of the property from the mortgage lien.
140
What is "voluntary lien"?
A voluntary lien is a claim that a property owner willingly gives to a creditor as security for a loan, such as a mortgage. The lien remains in place until the loan is paid off.
141
What is "involuntary lien"?
An involuntary lien is a claim placed on a property without the owner’s consent, often due to unpaid debts such as property taxes, mechanic’s liens, or judgments. It may result in foreclosure if not resolved.
142
What is the "Americans with Disabilities Act" (ADA) in real estate?
The Americans with Disabilities Act (ADA) is a federal law that requires commercial properties and public accommodations to be accessible to individuals with disabilities. This includes providing ramps, elevators, and other accommodations.
143
What is a "letter of intent" (LOI) in real estate?
A letter of intent (LOI) is a non-binding document that outlines the basic terms and conditions of a proposed real estate transaction, such as the purchase price and closing date. It is typically used in commercial real estate negotiations.
144
What is "subordination"?
Subordination is the process by which one lender voluntarily agrees to make their lien junior, or secondary, to another lien, allowing the senior lienholder to have priority in case of foreclosure or liquidation.
145
What is "defeasance clause"?
A defeasance clause is a provision in a mortgage that voids the mortgage once the borrower has fully repaid the loan, ensuring the lender releases the lien on the property.
146
What is "constructive fraud"?
Constructive fraud occurs when a party gains an unfair advantage by deceiving another party, even if the deception was unintentional. It is based on breach of a legal or equitable duty, rather than an intent to defraud.
147
What is "blockbusting" in real estate?
Blockbusting is the illegal practice of encouraging homeowners to sell their properties at a loss by insinuating that people of a particular race or ethnicity are moving into the neighborhood, which is also called "panic selling."
148
What is "steering" in real estate?
Steering is the illegal practice of guiding prospective homebuyers or renters to specific neighborhoods based on their race, religion, or ethnicity, rather than their preferences or financial qualifications.
149
What is "redlining"?
Redlining is the illegal practice of denying loans or insurance to individuals in specific neighborhoods based on their race or ethnicity. It was historically used to segregate communities and limit access to housing for minorities.
150
What is a "declaration of restrictions"?
A declaration of restrictions is a document that outlines covenants, conditions, and restrictions (CC&Rs) placed on a property by a homeowner’s association or developer. These restrictions dictate how the property can be used or altered.
151
What is a "kickback" in real estate?
A kickback is an illegal payment made to someone in return for facilitating a real estate transaction or referral. Kickbacks are prohibited under the Real Estate Settlement Procedures Act (RESPA).
152
What is the "secondary mortgage market"?
The secondary mortgage market is where lenders and investors buy and sell existing mortgages. It allows lenders to free up capital by selling loans to institutions like Fannie Mae and Freddie Mac.
153
What is "procuring cause" in real estate?
Procuring cause refers to the actions taken by a real estate agent that directly lead to a successful transaction. If an agent can prove they were the procuring cause, they are entitled to a commission, even if another agent completes the sale.
154
What is "undivided interest"?
Undivided interest means that each co-owner of a property holds an equal right to use and enjoy the entire property, rather than owning a specific portion of the property. This type of interest is common in joint tenancy and tenancy in common.
155
What is a "bona fide purchaser"?
A bona fide purchaser is someone who buys property in good faith and for fair value, without notice of any existing claims, liens, or other legal defects on the property. This status may protect the purchaser from certain claims.
156
What is "mutual consent" in a real estate contract?
Mutual consent, also known as a "meeting of the minds," occurs when both parties to a real estate contract fully understand and agree to the terms of the agreement, creating a legally binding contract.
157
What is "escheat"?
Escheat is the legal process by which property reverts to the state when a person dies without a will and without any legal heirs. The state takes ownership of the property to prevent it from being abandoned.
158
What is a "latent defect"?
A latent defect is a hidden or concealed issue with a property that is not readily observable during a normal inspection and may not be discovered until after the sale. Sellers are generally required to disclose known latent defects.
159
What is a "statutory lien"?
A statutory lien is a lien imposed by law, such as a tax lien or a mechanic’s lien, to secure payment of a debt. It does not require the property owner’s consent and can lead to foreclosure if the debt is not paid.
160
What is "power of attorney" in real estate?
Power of attorney is a legal document that grants one person (the agent) the authority to act on behalf of another person (the principal) in legal or financial matters, including real estate transactions. It can be specific or broad in scope.
161
What is the "liquidity" of an asset?
Liquidity refers to how quickly and easily an asset, such as real estate, can be converted into cash without significantly affecting its value. Real estate is generally considered a less liquid asset due to the time required to sell it.
162
What is "puffing" in real estate?
Puffing refers to exaggerated or subjective statements made by a seller or agent about a property’s features, such as saying a house has "the best view in town." While puffing is legal, it must not involve factual misrepresentations.
163
What is the "situs" of a property?
Situs refers to the physical location or position of a property. In real estate, it is often used to describe the influence of a property’s location on its value, including factors like neighborhood, schools, and access to amenities.
164
What is "avulsion"?
Avulsion is the sudden loss or addition of land due to natural forces, such as flooding or an earthquake. It can change property boundaries, and the owner may not have the right to claim the lost or gained land.
165
What is "market value" in real estate?
Market value is the estimated price at which a property would sell in an open market, where both buyer and seller are knowledgeable, willing, and not under pressure to complete the transaction.
166
What is "eminent domain"?
Eminent domain is the government's power to take private property for public use, provided that the property owner is given just compensation. It is often used for infrastructure projects like roads or utilities.
167
What is a "life estate"?
A life estate is a form of property ownership where one person, known as the life tenant, has the right to use the property for the duration of their life. Upon their death, the property passes to another person, called the remainderman.
168
What is "net operating income" (NOI)?
Net operating income (NOI) is the total income generated by a property after deducting all operating expenses, but before accounting for taxes, interest, and loan payments. It is often used to assess a property's profitability.
169
What is "subdivision"?
A subdivision is the process of dividing a large parcel of land into smaller, individual lots that can be sold or developed separately. This process typically requires approval from local authorities and adherence to zoning regulations.
170
What is "joint tenancy"?
Joint tenancy is a form of co-ownership where two or more people hold equal shares in a property with the right of survivorship, meaning that when one owner dies, their share automatically passes to the remaining co-owners.
171
What is "tenant improvements"?
Tenant improvements refer to alterations or modifications made to a rental property by a tenant to fit their specific business or personal needs, typically with the landlord’s consent. These can include changes like installing partitions or flooring.
172
What is "inverse condemnation"?
Inverse condemnation occurs when the government takes or significantly diminishes the value of private property without formally exercising its power of eminent domain, and the property owner seeks compensation through legal action.
173
What is a "quitclaim deed"?
A quitclaim deed is a legal document that transfers any interest the grantor has in a property to the grantee, without making any guarantees or warranties about the title's validity. It is often used in family transfers or to clear up title issues.
174
What is "capital gains tax"?
Capital gains tax is a tax on the profit realized from the sale of a property or other investments. In real estate, it applies to the difference between the purchase price and the selling price, subject to certain exemptions for primary residences.
175
What is "blockbusting" in real estate?
Blockbusting is the illegal practice of encouraging homeowners to sell their homes at lower prices by creating fear that people of another race, ethnicity, or class are moving into the neighborhood, leading to decreased property values.
176
What is the "Doctrine of Laches"?
The Doctrine of Laches is a legal principle that bars a claim if there has been an unreasonable delay in pursuing it, which disadvantages the opposing party. It often applies to real estate disputes involving property rights or easements.
177
What is "riparian rights"?
Riparian rights refer to the rights of property owners whose land borders a river or stream to use the water for reasonable and natural purposes, such as irrigation, fishing, and drinking. These rights are often subject to state and local regulations.
178
What is "avulsion" in real estate?
Avulsion is the sudden loss or addition of land caused by a natural event, such as a flood or earthquake, which can alter property boundaries. The original owner usually retains title to the lost land, but this may vary by jurisdiction.
179
What is "escrow"?
Escrow is a neutral third-party service that holds funds and documents during a real estate transaction until all conditions of the contract are met. Once satisfied, the escrow agent distributes the funds and transfers ownership to the buyer.
180
What is "encumbrance"?
An encumbrance is any claim, lien, charge, or liability attached to a property that may affect its use or transfer of title, such as mortgages, easements, or property tax liens. It can impact the property’s value and marketability.
181
What is a "conforming loan"?
A conforming loan is a mortgage that meets the guidelines set by government-sponsored entities like Fannie Mae and Freddie Mac, including maximum loan limits and borrower qualifications. These loans typically have lower interest rates.
182
What is a "nonconforming loan"?
A nonconforming loan is a mortgage that does not meet the standards set by Fannie Mae or Freddie Mac. These loans may have higher interest rates and are often used for borrowers with unique financial situations or for larger loan amounts.
183
What is "hypothecation"?
Hypothecation is the process of pledging property as collateral for a loan without giving up possession of it. In real estate, a mortgage is a common example, where the borrower retains ownership and use of the property while the lender holds a lien.
184
What is "escalation clause"?
An escalation clause in a real estate contract allows a buyer to automatically increase their offer by a certain amount if a higher competing offer is received, up to a specified limit. It is used to make the offer more competitive in a bidding war.
185
What is "depreciation" in real estate?
Depreciation is the decrease in the value of a property over time due to wear and tear, age, or obsolescence. For tax purposes, real estate investors can deduct depreciation to reduce their taxable income.
186
What is a "FHA loan"?
An FHA loan is a mortgage insured by the Federal Housing Administration, designed to help low- to moderate-income buyers with lower credit scores or smaller down payments qualify for home loans. These loans often have more flexible lending standards.
187
What is a "VA loan"?
A VA loan is a mortgage guaranteed by the U.S. Department of Veterans Affairs that is available to military veterans and their families. VA loans typically require no down payment and offer favorable terms like competitive interest rates.
188
What is a "mechanic’s lien"?
A mechanic’s lien is a legal claim placed on a property by a contractor, subcontractor, or supplier who has not been paid for labor or materials provided during the construction or improvement of the property. It can lead to foreclosure if unresolved.
189
What is "exclusive right to sell"?
Exclusive right to sell is a listing agreement in which the real estate agent has the sole right to sell the property, and the agent is entitled to a commission regardless of who finds the buyer, even if the seller finds the buyer independently.
190
What is "dual agency"?
Dual agency occurs when a single real estate agent or brokerage represents both the buyer and the seller in a transaction. In California, dual agency is legal but requires the informed consent of both parties.
191
What is "steering" in real estate?
Steering is the illegal practice of guiding prospective homebuyers or renters toward or away from certain neighborhoods based on their race, religion, ethnicity, or other protected characteristics, which is a violation of fair housing laws.
192
What is a "cloud on title"?
A cloud on title is any claim, lien, or encumbrance that impairs the title to a property, such as a disputed ownership interest or unresolved legal issues. Clearing the cloud is necessary before transferring ownership.
193
What is "title insurance"?
Title insurance protects property buyers and lenders against losses from defects in the title, such as liens, encumbrances, or other legal claims. It ensures that the buyer has a clear title and covers legal fees if disputes arise.
194
What is "due diligence"?
Due diligence in real estate refers to the buyer’s responsibility to thoroughly investigate a property before finalizing a transaction, including inspecting the physical condition, reviewing financial records, and checking for legal issues or encumbrances.
195
What is "reverse mortgage"?
A reverse mortgage allows homeowners, typically over the age of 62, to convert part of their home equity into cash without selling the home. The loan is repaid when the homeowner moves, sells the property, or passes away.
196
What is "chattel"?
Chattel refers to personal property that is movable, as opposed to real property which is immovable. In real estate, chattel can include items like furniture, appliances, or vehicles that are not permanently attached to the land or buildings.
197
What is "gross rent multiplier" (GRM)?
Gross Rent Multiplier (GRM) is a metric used to estimate the value of income-producing property. It is calculated by dividing the property’s price by its annual rental income. GRM is often used as a quick comparison tool in investment property analysis.
198
What is "cash flow" in real estate investing?
Cash flow is the net income generated by a rental property after all operating expenses and mortgage payments have been deducted. Positive cash flow means the property generates more income than expenses, while negative cash flow indicates a loss.
199
What is "contingency" in a real estate contract?
A contingency is a condition in a real estate contract that must be met before the deal can proceed. Common contingencies include financing, home inspection, and appraisal, and if they are not satisfied, the buyer may walk away without penalty.
200
What is a "balloon mortgage"?
A balloon mortgage is a type of loan that requires the borrower to make regular payments for a set period, followed by a larger, lump-sum payment (balloon payment) at the end of the loan term. It is often used in commercial real estate transactions.
201
Property owners can enforce covenants by taking a court action known as?
Injunction. Property owners can file for an injunction to stop or enforce actions related to restrictive covenants, ensuring compliance with the agreed-upon rules.
202
What describes legal rights that are attached to the ownership of a parcel of real estate?
Appurtenances. These are the rights or privileges that are connected to the land, such as easements, water rights, and air rights, which transfer with ownership.
203
What type of property restriction places limits on how a property may be used?
Restrictive covenant. These are rules placed in a property’s deed that restrict the way a property can be used, such as limiting commercial activities in a residential area.
204
Which government action can force a sale of private property for public use?
Eminent domain. The government can take private property for public purposes like building infrastructure, provided the owner receives just compensation.
205
What type of deed provides the least protection for the buyer?
Quitclaim deed. This deed transfers any ownership interest the seller has without warranties, offering little to no protection for the buyer regarding the title's validity.
206
What legal concept gives a person the right to use water from a river or stream on their property?
Riparian rights. These are the rights of landowners whose property is adjacent to a body of water, allowing reasonable use of the water for things like irrigation.
207
What is the legal process called that allows the government to take private land for public use?
Condemnation. This is the process by which the government exercises its power of eminent domain, acquiring private land for public projects.
208
Which property document describes the ownership, history, and rights associated with a piece of land?
Title. A property title outlines the legal ownership and any encumbrances, like liens or easements, attached to the property.
209
What kind of tenancy allows property ownership to pass to surviving co-owners upon the death of an owner?
Joint tenancy. This form of co-ownership includes the right of survivorship, meaning that when one owner dies, their share automatically passes to the surviving co-owners.
210
What is the process called when land is divided into smaller plots for development or sale?
Subdivision. This involves dividing a large parcel of land into smaller lots, often for residential or commercial development, subject to local regulations.
211
What type of loan exceeds the limits set by Fannie Mae or Freddie Mac?
Nonconforming loan. These loans do not meet the underwriting standards set by Fannie Mae or Freddie Mac, often because of higher loan amounts or non-standard borrower qualifications.
212
What kind of easement allows a utility company to access private property for maintenance?
Easement in gross. This type of easement benefits an individual or company rather than a neighboring property, often used for utilities like electricity or water lines.
213
What is the term for a temporary loan that is often used during the construction of a building?
Construction loan. A short-term loan that covers the costs of building a home or other real estate project, typically converting to permanent financing after construction is complete.
214
What is it called when a buyer and seller agree to cancel a real estate contract?
Mutual rescission. This occurs when both parties agree to terminate the contract, releasing each other from any further obligations or claims.
215
What describes the increase in a property’s value due to inflation or market conditions?
Appreciation. This is the rise in a property’s market value over time, which can result from various factors, including market demand and inflation.
216
What type of mortgage allows the borrower to convert home equity into cash without selling the property?
Reverse mortgage. This type of loan allows older homeowners to access their home’s equity in the form of cash, with the loan being repaid when they move, sell, or pass away.
217
What describes the right of a government to regulate the use of private property for the public good?
Police power. This authority allows the government to enforce zoning laws, building codes, and health and safety regulations to ensure community welfare.
218
What kind of lien takes priority over all other claims on a property?
Property tax lien. Property taxes take precedence over other liens, such as mortgages or mechanic’s liens, and must be satisfied before others are paid in a foreclosure.
219
What is the name for an individual’s right to pass property on to heirs after death?
Right of inheritance. This is the legal right to transfer property to heirs or beneficiaries, typically through a will or by state law if no will is present.
220
What type of insurance protects a homeowner from potential losses due to defects in the title?
Title insurance. This policy protects buyers and lenders from financial loss due to defects in the title, such as liens or claims that weren’t discovered during the initial title search.
221
What term refers to the property owner's right to legally own and use the land?
Bundle of rights. This concept refers to the various legal rights associated with property ownership, including the right to use, sell, lease, and enjoy the property.
222
What type of deed offers the most protection to a buyer?
General warranty deed. This deed guarantees that the seller holds clear title to the property and provides the most protection by covering any title defects that may arise.
223
Which appraisal method is most commonly used for residential properties?
Sales comparison approach. This method estimates the value of a property by comparing it to similar properties that have recently sold in the same area.
224
What is the legal term for someone who dies without a will?
Intestate. When a person dies intestate, their assets are distributed according to state law rather than their own wishes, since no valid will exists.
225
What is it called when the government takes property because the owner has died without heirs?
Escheat. This legal process allows the state to claim ownership of a deceased person’s property when no will or legal heirs are identified.
226
What is the process of determining a property’s value for tax purposes called?
Assessment. This is the valuation process local governments use to determine a property’s taxable value, which is then used to calculate property taxes.
227
What kind of contract is legally enforceable, even though not written down?
Oral contract. In some cases, oral contracts can be enforceable, but most real estate transactions must be in writing due to the Statute of Frauds.
228
What term refers to the point at which a buyer officially becomes the new owner of a property?
Closing or settlement. This is the final step in a real estate transaction where the title is transferred from seller to buyer, and all legal documents are signed.
229
What is the legal procedure used to resolve disputes over property ownership?
Quiet title action. This is a lawsuit used to establish clear ownership of property and eliminate any claims or challenges to the title.
230
What type of property ownership involves one person owning the entire property?
Ownership in severalty. This is when a property is owned by one individual or entity, with no shared ownership interests from others.
231
What is the financial term for a buyer’s own funds used to purchase a home?
Down payment. This is the initial payment a buyer makes when purchasing a home, typically expressed as a percentage of the total purchase price.
232
What type of real estate agent agreement gives the broker the exclusive right to market the property?
Exclusive right to sell agreement. In this contract, the listing broker is entitled to a commission regardless of who finds the buyer, including the seller.
233
What legal right allows the government to impose restrictions on private property to ensure public welfare?
Zoning. Zoning laws regulate how land can be used in different areas, ensuring that property use aligns with public interests such as safety, health, and the environment.
234
What is it called when a lender takes possession of a property because the borrower defaults on their mortgage?
Foreclosure. This legal process allows the lender to take ownership of the property and sell it to recover the outstanding loan balance after the borrower defaults.
235
What type of loan does not require a down payment for qualifying veterans?
VA loan. These loans, guaranteed by the Department of Veterans Affairs, provide veterans with favorable terms, often including no down payment.
236
What is the term for a property that does not comply with current zoning regulations but is allowed to continue operating?
Nonconforming use. This is when a property’s existing use does not comply with new zoning laws but is allowed to continue because it was lawful before the regulations changed.
237
What is the primary purpose of a deed in a real estate transaction?
To transfer ownership. A deed is the legal document that conveys ownership of real estate from the seller to the buyer, detailing the property and its boundaries.
238
What happens to a property when its owner passes away and leaves no will or heirs?
Escheat. The property reverts to state ownership if no heirs or beneficiaries can be identified.
239
What real estate principle states that a property's value is influenced by surrounding properties?
Principle of conformity. This principle holds that the value of a property is positively affected when it conforms to the standards and characteristics of the surrounding area.
240
What is the process of combining two or more lots into a single property called?
Assemblage. This is the practice of merging multiple parcels of land into one larger property, often to increase its value or develop it for commercial purposes.
241
What is a "wraparound mortgage"?
A wraparound mortgage is a type of financing where the seller provides a loan to the buyer that wraps around the existing mortgage, allowing the buyer to make payments to the seller, who continues to pay the original loan.
