Chapter 1 - Intro to Modern Real Estate Practices

Question 1

Brokerage

Answer 1

The business of bringing buyers and sellers together and assisting in negotiations for the terms of sale of real estate.

Question 2

Real Estate Broker

Answer 2

A person or an organization acting as the agent for others in negotiating the purchase and sale of real property or other commodities for a fee.

Question 3

Real Estate Salesperson

Answer 3

A person performing any of the acts included in the definition of real estate broker but while associated with and supervised by a broker.

Question 4

Residential Property

Answer 4

A type of property that includes one to four dwelling units.

Question 5

Commercial Property

Answer 5

Property that produces rental income or that is used in business. Properties with five or more dwelling units are considered commercial property.

Question 6

Industrial Property

Answer 6

Property that is used by companies or persons for manufacturing, warehousing, or the assemblage of components.

Question 7

Special Purpose Property

Answer 7

A category of real property created as a result of combining the land and its improvements for a single highest and best use.

Question 8

Mixed-use Property

Answer 8

Any urban, suburban or village development, or even a single building, that blends a combination of residential, commercial, cultural, institutional, or industrial uses, where those functions are physically and functionally integrated, and that provides pedestrian connections.

Question 9

Education Standard Advisory Committee (ESAC)

Answer 9

to regularly review and revise the curriculum standards, course content requirements, and instructor certification requirements for qualifying and continuing education courses

Question 10

Salesperson License Requirements

Answer 10

180 hours; 60 hours principles of real estate, 30 hours Laws of Agency, 30 hours Law of Contracts, 30 hours Contract Forms, 30 hours Finance

Question 11

Broker License Requirements

Answer 11

3600 ‘points’ of experience -> can be gained by type of sales

Question 12

Economic Characteristics of Land

Answer 12

Scarcity, Improvements, Permanence of Investment, Area Preference

Question 13

Physical Characteristics of Land

Answer 13

Immobility (can’t move it), Indestructibility, Nonhomogenity/Heterogeneity (no two parcels of land are the same)

Question 14

Improvements

Answer 14

Changes or additional made to a property, such as walls and roads. These typically increase the value of a property, except in some cases of over improvement.

Question 15

Non-homogeneity

Answer 15

A physical characteristic of land describing that land as a unique commodity.

Question 16

Value

Answer 16

The present worth of future events

Question 17

Price

Answer 17

The amount a purchaser agrees to pay and a seller agrees to accept under the circumstances surrounding a transaction.

Question 18

Cost

Answer 18

The total dollar expenditure for labor, materials, and other items related to construction.

Question 19

Supply

Answer 19

The amount of goods offered for sale within a given market at a given price during a given time period.

Question 20

Demand

Answer 20

The amount of goods consumers are willing and able to buy at any given price during any given time period.

Question 21

Demography

Answer 21

The study of the social and economic statistics of a community.

Question 22

Sources of Law

Answer 22

US Constitution, Congress, State, Gov’t Agencies, Court Decisions, Common Law

Question 23

TX Real Estate Dealers Act

Answer 23

(est. 1939) was the first law established for the state

Question 24

TX Real Estate License Act

Answer 24

(est. 1949) the current law established for the state and administered by TREC

Question 25

TREC

Answer 25

consists of 9 members; 6 brokers & 3 publicly appointed by state governor for a term of 6 years.

Question 26

TACCB

Answer 26

Appraiser licensing

Question 27

Agent

Answer 27

A person authorized to act on behalf of another.

Question 28

Principal

Answer 28

The employer of an agent.

Question 29

Customer

Answer 29

The party the agent brings to the principal as seller or buyer of the property.

Question 30

General Agent

Answer 30

(broad) salesperson to broker, property manager to landlord. An agent with full authority over one property of the principal, such as a property manager.

Question 31

Special Agent

Answer 31

(most common for salespersons between buyers/sellers). An agent with limited authority to act on behalf of the principal, such as created by a listing.

Question 32

Listing Contract

Answer 32

A contract in which a property owner employs a real estate broker to market the property described in the contract.

Question 33

Fiduciary Duty

Answer 33

That duty owed by an agent to act in the highest good faith toward the principal and not to obtain any advantage over the latter by the slightest misrepresentation, concealment, duress or pressure. (Care, Obedience, Accounting, Loyalty, Disclosure)

Question 34

Fiduciary

Answer 34

A person in a position of trust and confidence, as between principal and broker; broker as fiduciary owes certain loyalty which cannot be breached under the rules of agency.

Question 35

Caveat Emptor

Answer 35

Let the buyer beware. The buyer must examine the goods or property and buy at his or her own risk.

Question 36

Buyer Representation Agreement

Answer 36

same as listing but for the buyer (listing agreement is for the seller)

Question 37

Principle's Responsibilities to Agent

Answer 37

Compensation, Information, Indemnification (re-imburse), Availability

Question 38

Texas Deceptive Trade Practices Laws (DTPA)

Answer 38

governing: can't represent that something is new when it is not, no advertisement with no intention of selling as advertised, work has been done on prop when it has not

Question 39

Nat Association of Realtors (NAR)

Answer 39

est. 1908 - keeping up developments in the real estate field, improve standards and practices

Question 40

Realtor

Answer 40

Only members of NAR may be called this - otherwise called licenses/agents

Question 41

Appraised Value

Answer 41

calculated by an appraiser by one of these methods: market comparison approach, cost approach, income method

Question 42

Market Comparison Approach

Answer 42

A means of comparing similar type properties, which have recently sold, to the subject property. Commonly used in comparing residential properties.

Question 43

Cost Approach

Answer 43

An analysis in which a value estimate of a property is derived by estimating the replacement cost of the improvements, deducting therefrom the estimated accrued depreciation, then adding the market value of the land.

Question 44

Income Approach

Answer 44

One of the three methods of the appraisal process generally applied to income producing property, and involves a three-step process – (1) find net annual income, (2) set an appropriate capitalization rate or “present worth” factor, and (3) capitalize the income dividing the net income by the capitalization rate.

Question 45

Assessed Value

Answer 45

A valuation placed upon a piece of property by a public authority as a basis for levying taxes on the property.

Question 46

Insured Value

Answer 46

The cost of replacing a structure completely destroyed by an insured hazard (similar to cost approach except it involves current pricing). To note, land is indestructible so is not included in calc.

Question 47

Depreciated Value

Answer 47

The basis of a depreciable asset used to compute the taxable gain from its sale; the basis is acquisition cost plus capital improvements less accrued depreciation.

Question 48

Broker Requirements

Answer 48

- Must have a designated office - license must be displayed in place of business