California Real Estate Practices Flashcards
Learn Real Estate Key Terms
Acceptance
an offeree’s agreement to the terms of an offer.
Accession
The right to all that one’s own property produces, including that which is added, either naturally or by human action, to the property already owned.
Accord and Satisfaction
An agreement in which the parties agree to discharge the original contract in favor of a new one, wherein accepted performance is often less than what was initially owed.
Accretion
The process that results in the gradual increase in land area through deposits of soil by natural forces.
Addendum
An addition to a completed contract that specifies supplementary information to the contract; plural is “addenda”
Agency Agreement
A mutually binding understanding between two parties that authorizes one party (the agent) to act on the other party’s (the client’s) behalf to accomplish a specific goal.
Agency disclosure
The act of explicitly informing all parties about whom an agent is representing.
Air Conditioning
A major system in home construction that cools the interior of the structure, usually through the use of an air-cooled or water-cooled process
Amendment
A change or modification to an already agreed-upon contract.
Appraisal
An official valuation given to a property by a licensed appraiser
appraised value
An estimation of property’s value as of a specific date, performed by a certified appraiser
Appraiser
An individual who is trained and licensed to perform appraisals, which estimate the value of real property.
Arbitration
A formal resolution tactic in which the arbitrator hears both sides( including evidence and even cross-examination sometimes) and then issues a verdict.
As is Clause
If this clause is included in a contract, then the buyer agrees to accept the property in the condition visible or observable to them; however, the seller must still disclose known material facts.
Asbestos
A naturally occurring mineral fiber that is commonly used in insulation but if airborne or inhaled, can cause severe respiratory health issues.
aasemblage
the combining of multiple contiguous pieces of real property into a single tract of land, often resulting in an increase in value.
assed value
the value placed on a property by a governmental unit for use in calculating property taxes.
assignee
Person to whom the assignment is made.
assignment
the transference of rights and obligations in a contract from one party to another.
assignor
the person assigning a contract.
associate licensee
a licensee operating under the sponsorship, authority, and guidance of ( and on behalf of) their broker in a brokerage environment
attachments
physical objects permanently attached to land (can be human made or natural).
avulsion
the sudden loss of land by flood or when a stream or river changes course.
basement
the bottom floor of a building that is partially or completely below ground level.
Beams
long horizontal pieces of squared wood or metal that span an opening or part of a building.
bearing wall
a wall that bears the weight of a roof, ceiling, or floor.
bilateral contract
a contract wherein both parties are obligated to perform in an exchange of promises
blockbusting
the illegal act of causing owners to sell their homes by creating fear that members of a protected class are moving into the area; aka panic peddling.
branch office
any office where business is conducted other than the principal office.
broker associate
an individual licensed as a real estate broker but who works in the capacity of a salesperson for another responsible broker corporation
building envelope
the exterior shell of the building that encloses the interior and acts as a physical separator between the conditioned and unconditioned environment of a building
building permit
a legal document from a local authority that authorizes a construction or remodeling project.
bundle of rights
ownership of land with all of the legal right of possession, control, quiet enjoyment, exclusion, transfer, and encumber
buyer representation agreement
an agency agreement between a broker and a buyer wherein the broker represents the buyer in their effort to purchase or lease a property.
capital expenditure
an expense paid in order to improve a property
capital improvement
an upgrade or improvement to a property that falls outside the scope of normal repair and maintenance, usually with the intention of increasing value
cash flow
measures the amount of cash flowing in and out of a business
certificate of occupancy
a document issues by a code enforcement officer that states that the building is ready and fit for occupancy.
chattel
a commonly used term for personal property in the world of real estate.
close of escrow(COE)
in California, the date the grant deed, or other evidence of transfer of title, is recorded for any real property.
commingling
the illegal act of mixing personal funds with a client’s funds
comparable ( comp)
any property which has sold and is similar enough in features, location, and proximity in time to inform the value of a subject property.
comparable market analysis (CMA)
a report that compares the prices of recently sold or listed homes in order to estimate the market value of a similar property located in the same area.
compensatory damages
the award given to a wronged party as compensation for actual injury or loss; aka actual damages
concealment
withholding information or a material fact
consideration
something of value exchanged by the parties as evidence of agreement to the terms of a contract
contingency
a provision within a contract that makes performance conditional upon the occurrence of a stated fact
contract
a legally enforceable and binding agreement between parties wherein to do or not do something is given in exchange for valuable consideration
contract for deed
a sales contract in which the buyer pays the seller for the property in multiple installments for a predetermined length of time, and the seller holds the title until the property has been fully paid for; aka installment sales contract or land contract
contribution
the amount of market value added to a property by an addition or improvement to the property; not necessarily the same as the cost of the improvement
conversion
changing real property to personal property, and vice versa; also the illegal act of appropriating client funds for purposes other than for which they were intended
corrective maintenance
the repair of equipment after it has broken
cost approach
a method of estimating the value of a property by determining how much it would cost to replace the building or other improvements, minus the cost of depreciation, plus the value of the land itself
cost-depreciation approach
method of estimating the value of a property by determining how much it would cost to replace the building or other improvements, minus the cost of depreciation, plus the value of the land itself
counteroffer
a contract proposal submitted in response to a previous offer, modifying the terms of the original offer; considered a rejection of the original offer.
crawl space
a hollow, unfinished space found underneath a house between the ground and the first floor
curable
depreciation that can be fixed at a reasonable cost
demand
a measure of the general desire for an asses or commodity at a given time
depreciation
a reduction in value for any reason
doctrine of laches
a legal principle used to bar dated claims; used in conjunction with an unreasonable delay or negligence in asserting or defending one’s rights
domestic water
water used for indoor household purposes
drain trap
a device used in a waste system to prevent the passage of sewer gas into the structure
drywall
a board made of gypsum plaster pressed between thick sheets of coarse paper
due diligence
a legal term used to describe the reasonable steps a person must take in order to satisfy a legal requirement
due process
a fundamental principle of fairness in legal proceedings
duress
the unlawful effort, such as threats of physical violence or other pressure, to coerce a party to perform an act
earnest money
funds paid to confirm or commit to a contract
eaves
the lowest edges of a roof that overhang the face of a wall and project beyond the side walls of a building.
economic life
the length of time for which an improvement on property is expected to remain functional and useful.
effective gross income
the total annual income that a property produces; does not account for any expenses
electrical system
refers to the major system in residential construction that allows the distribution of electricity from an outside power source to safely flow throughout a home.
emblements
crops ( or the profit from crops) grown by a farmer that are considered personal property.
erosion
the gradual loss of land over time
ethics
standards of conduct agreed upon and recognized by a particular group or culture.
exclusive agency listing
an agreement in which the seller has an exclusive relationship with a broker but retains the right to sell the property without having to pay a commission
exclusive authorization and right-to-sell listing
an agreement in which the seller guarantees the named broker receives a commission if the property is sold, regardless of whom bring the buyer
executed contract
a contract in which all terms have been fulfilled by all parties
executory contract
a contract that has not yet been fully performed (both sides have not yet completed their obligations)
express contract
an oral or written contract in which the parties explicitly state or express their intentions and their expectations regarding the contract and the exchange of promises
financing contingency
requires that the buyer get approved for a loan before being able to complete the purchase of a home
first substantive contact
the critical point at which agency disclosure is required by a license holder; generally occurs at the first face-to-face meeting with the customer and prior to the sharing of any confidential information or initiation of any action in regards to a specific property
fixity
the economic principle that says that real estate exists in a fixed location and cannot be moved.
fixture
an object that was once personal property but is now firmly attached to the land in such a way that it is considered to be real property.
foundation
the architectural structure on which the building sits
framing
the skeleton of a house that gives the structure support and shape
fraud
wrongful or criminal deception intended to result in financial or personal gain.
girder
the main horizontal support beam of a structure
goodwill
good consideration, such as love and affection, that can be exchanged for valuable consideration in a contract or agreement; the exchange of which is generally seen as a gift on the part of the party giving up the valuable consideration
gross income multiplier (GIM)
the ratio of the price of investment property to its annual total income before considering expenses like taxes and insurance, etc.
gross rent multiplier
the ratio of the investment property to its annual rental income considering expenses like taxes and insurance, etc.
hazard insurance
insurance against loss or damage to real improvements often required by lenders
heat pump
an energy-efficient alternative to furnaces and air conditioners that works by moving heat rather than generating it.
heating system
a major system in residential construction that generates and/or distributes heat throughout greatest yield.
highest and best use
the use of property that is legal, physically possible, financially viable, and produces the greatest yield.
home warranty plan
covers the costs to repair or replace items or systems that might break after the buyer takes possession (plumbing, HVAC, etc.)
HVAC
an acronym referring to the collective efforts of the heating, ventilation, and air conditioning; is the major system used to control the heating, cooling, and movement of air in indoor environments.
illiquidity
the relative difficulty of converting an asses to cash without loss of value
implicit bias
a form of bias that occurs automatically and unintentionally, that nevertheless affects judgments, decisions, and behaviors.
implied contract
a contract created by the actions of the parties rather than by express agreement
improvement
any non-natural structure built on or affixed to land
income approach
method of estimating the value of a property by applying a rate of return to the net income it procudes.
income capitalization approach
the method of estimating the value of a property by applying a rate of return to the net income it produces
incurable
depreciation that cannot be fixed or cannot be fixed at a reasonable cost.
independent contractor
one who contracts to do work according to their own methods, and is responsible to their employer only as to the results of that work
informed consent
the principle that a client or customer must understand and agree to certain actions or agency relationships prior to implementation
inspection contigency
gives the buyer the right to get the home inspected and negotiate further if there are repair issues.
insulation
material installed to help regulate the interior temperature
intentional misrepresentation
occurs when a licensee purposely lies about a material fact.
joists
long beams of wood or steel arranged horizontally and parallel to support a floor or ceiling
land
the surface of the earth, including all permanently attached natural features, extending downwards to the center of the earth and upwards to infinity
latent defect
any structural defect that cannot be detected by ordinary inspection
laws
rules that are enforced by a local state, or federal government authority to help create order in society by establishing a “social contract” between citizens and the government.
lead
a naturally occurring mineral that has been used in the manufacturing of paint and water
lease agreement
a rental contract between the landlord (lessor) and the tenant (lessee)
liability
the state of being responsible for something
liquidated damages
damages established by the contract to to be paid as compensation int he event of default
listing presentation
a listing agent’s opportunity to show a prospective seller client what their property could sell for and how it should be marketed; the agent’s goal is to sign a listing agreement with the client.
management agreement
a written contract between a property owner and a property manager to establish all duties of the property manager, including operation and leasing activities.
management proposal
a plan that a property manager creates for managing the property that includes an analysis of the market along with the financial standing, operating budget, and other important factors of the property
market value
the price for which a property will theoretically sell under typical conditions
marketing plan
a plan created to secure the other party needed to carry out a real estate transaction that includes sales and advising
material fact
a fact that, if known, could cause someone to take a different course of action or make a different decision regarding the property to be purchased
mediation
negotiation tactic that involves sitting down with a neutral third party (the mediator) and finding a resolution to the issue
morals
the personal values derived from a system of beliefs
multiple offer
occurs when more than one party submits an offer on a single property
mutual agreement
a means of canceling a contract in which all parties agree to the cancelation
mutual assent
the fully agreed-upon exchange of promises by the parties; aka offer and acceptance
negligent misrepresentation
misrepresentation that occurs when the licensee unintentionally misstates something that they should have known
net listing
an agreement in which the seller names a minimum sales price they will accept for a property, with any excess paid to the broker as commission
net operating income (NOI)
a property’s annual income that remains after paying its operating expenses
net sheet
prepared by the agent with every offer; gives a seller all possible net profits; gives a buyer all possible net costs
novation
a mutual agreement of the parties to replace an existing contract with a new one
offer
a proposition made by an offeror to an offeree to agree to the terms of a binding contract; becomes a contract upon acceptance
offeree
party receiving the offer
offeror
party making the offer
open listing
a nonexclusive listing agreement that gives multiple brokers (and owners themselves) the right to sell the property
option agreement
a listing agreement that includes an option for the agent to b the buyer of the property at an agreed price
option to purchase
a unilateral contract that gives the optionee a window of opportunity during which they can exercise an exclusive right to buy a property; an option fee is paid for this right
parol evidence rule
prohibits the introduction of any extrinsic evidence (oral or written) to very/add to the terms of a contract, deed, or other integrated written instrument; means that when a contract is expressed in writing, it’s intended to be the complete and final expression of the rights and duties of the parties; parol evidence is not admissible as evidence.
patent defect
any structural defect that is easily discoverable upon inspection
personal property
any unattached, moveable asset on the property not considered real estate (land plus improvements); ala chattel or personalty
pitch
a roof’s vertical rise (in inches) divided by its horizontal run (in feet)
plottage
an increase in overall value resulting from the successful assemblage of multiple plots
plumbing system
the major system in residential construction having to do with the piping for hot water, cold water, and wastewater lines
potential gross income (PGI)
the total rental income a property would receive if the property was 100% leased
preliminary title report
a response to an application for title insurance, identifies the title and lists any defects, restrictions, liens, and encumbrances that would be excluded from coverage if the policy were to be issues that very day; does not provide any insurance and may not contain every item affecting title.
preventative maintenance
conducting periodic inspections to catch minor issues before they become major failures
principle of anticipation
states that the present value of a property is affected by the anticipated income or utility that property will give its property owner
principle of contribution
states that the value of each component contributes to the total value
principle of substitution
the idea that the value of something is affected by the cost of getting a similar (substitute) item elsewhere
procuring cause
the defining action or actions that brought a buyer or buyers to purchase a property
property management
the vocation of renting or leasing someone else’s real property on their behalf in exchange for compensation and in accordance with a property management employee contract
protection period
a limited time frame after an employment agreement ends during which an agent can be owed compensation under certain circumstances.
purchase contract
a contract used in the sale of real property that outlines the responsibilities of the parties and terms of the sale
quiet enjoyment
a lessee’s right to possess a property without interference from lessor, previous owner, or anyone else about the claim to the title.
R-value
the measure of an insulating material’s capacity to resist heat flow
radon
an odorless, radioactive gas produced by the decay of other radioactive materials in rocks under the surface of the earth can cause lung cancer
rafters
a series of sloped internal beams that extend from the eaves to the peak of a roof, running parallel to the roof’s pitch.
real estate
land plus improvements
real property
land from the surface to the center of the earth and upward into space, all attachments, and the bundle of legal rights of ownership
reconciliation
the finding of a fair value using multiple appraised values, whether they be of different approaches or the same
reliction
a gradual increase in land area when water gradually withdraws
replacement cost
the actual cost of replacement without regard to the depreciation of the property
reproduction cost
the cost of procuring exact copies of the building’s components, preserving the styles and materials used at the subject property’s original construction.
rescission
an attempt to put the parties back in a position as though the contract never existed
roof ridge beam
a horizontal beam at the peak of the roof to which rafters are attached
rough-ins
the first interior work that must be done; includes such things as wiring, plumbing, and HVAC systems
routine maintenance
monitoring, assessing, and attending to the needs of a facility’s most necessary features
sale of other property contingency
makes the transaction contingent on the buyer selling their current property first
sales comparison approach
property appraisal method that estimates value by comparing the subject property to the sales prices of similar properties in the same market area
scarcity
the economic characteristic that informs the economic principle of supply and demand
severance
the act of converting real property into personal property
sheathing
the structural wood panel material used to cover wall, floor, and roof assemblies of buildings
siding
the finished protective material attached to the exterior walls of a building, commonly made of vinyl, wood, brick, stucco, stone, or metal
situs
the economic significance of a property’s location
slab-on-grade
a type of foundation comprised of a concrete slab constructed at ground level
specific performance
a legal remedy that requires certain types of contracts, including those conveying interest in real property, to be in writing to be enforceable
statute of frauds
a law that requires certain types of contracts, including those conveying interest in real property, to be in writing to be enforceable
statute of limitations
a legal concept that establishes time limits for bringing certain kinds of legal actions
stigmatized property
property with suppressed market value unrelated to its physical condition or features; frequently as result of death of an occupant, murder, suicide, or suspected paranormal activity
studs
a vertical board used in construction to frame and support a building
subject property
the property whose value is begin determined
substitution
an economic principle stating that the value of a good or service is affected by the cost of getting a similar (substitute) item elsewhere
supply
in real estate, the amount of properties that are vacant or are available for sale or rent
tankless water heater
a water system that operates without the use of a storage tank, rather heating water as needed
time is of the essence
communicates to parties of a contract that they must perform their contractual duties by a specific date and time in order to avoid a breach of contract
title
the actual ownership of a real property that includes the bundle of rights which a party may own a legal or equitable interest; not an actual document
trade fixture
personal property that is owned by and needed for a tenant’s business
unilateral contract
a contract wherein one party makes a promise and is obligated to perform if a second party chooses to accept the offer and perform in exchange for that which was promised
utility
the degree to which something performs a desired function
valid contract
a contract possessing the essential elements necessary to be legally binding and obligate performance
value
the price for which a property will theoretically sell under typical conditions
ventilation
refers to the major system in residential construction that circulates fresh air throughout the home; assists in the mitigation of damage from the accumulation of moisture
void
lacking legal or binding force; used to describe a contract that is either illegal or impossible to complete
void contract
la contract lacking legal force; often used with phrase “null and void”
voidable contract
a contract wherein the wronged party has the option to perform, enforce, or void the contract
