Course 1 Flashcards
Determines how the deceased’s property is to be distributed when the person died without a will
intestate succession
Ex. Because David died without a will, his home passed to his heir - in this case, his daughter Sarah.
The transformation of a building into condominiums (usually with an apartment building).
condominium conversion
Ex. Ken had been renting an apartment at Brighton Arms for 10 years when the new owner decided to convert the building to condominiums. As a tenant, Ken was given the option to purchase his own unit in the condominium conversion.
Provides financial and technical assistance to landowners who put conservation practices into place on their agricultural and non-industrial private forestland
Environmental Quality Incentives Program (EQIP)
Ex. EQIP practices focus on natural resource concerns, working to improve soil, plant, animal, water, air and other resources, and are financed through contracts of up to 10 years.
Gives state attorneys general the authority to sue on behalf of consumers in their states
Hart-Scott-Rodino Act
Ex. States may recover from violators up to three times the amount of damage suffered as a result of violations of the federal Sherman Act.
An appraiser certified to perform appraisals for one- to four-unit dwellings for federally related real estate transactions.
certified residential real estate appraiser
Ex. Because the transaction was federally related, a certified residential real estate appraiser must be used. If it had been a commercial property, only a certified general real estate appraiser could be used.
Increase in property value as a result of inflation, change in neighborhood directional growth or other external factor
unearned increment
Ex. Staying in her home for 30 years literally paid off for Tenley; property values had increased so much in her neighborhood over the past three decades that she made out like a bandit when she sold her house.
See reverse annuity mortgage
home equity conversion mortgage (HECM)
Ex. See reverse annuity mortgage
Providing information to the principal, or any party to a transaction, that is required to be provided by law. It is one of the duties required of an agent.
disclosure
Ex. Agents have the duty of disclosure of whom they represent, and all material facts relating to the property in a transaction.
Helps low- and moderate-income individuals attain housing in rural areas through grants, loans, and loan guarantees
USDA Rural Housing Service (RHS)
Ex. The RHS exists to to build or improve housing and essential community facilities in rural areas of the U.S.
Areas designated as prone to flooding; used to determine cost of flood insurance
special flood hazard areas (SFHAs)
Ex. Brady lived in a special flood hazard area and was required to carry flood insurance by his lender.
The individual creating the trust
trustor
Ex. Lisa’s parents, as trustors, decided to make Lisa the trustee as she has always been the sensible one of their children.
An easement created through prolonged adverse use
easement by prescription
Ex. Because Joe drove his truck across his neighbor’s property on a regular basis for over seven years (without the neighbor trying to stop him), he created an easement.
A piece of equipment or other item that is on or attached to the real estate which is used in a trade or business. The term “trade fixture” is actually a misnomer, because the item, while attached, may be removed by the business owner as a personal item.
trade fixture
Ex. When she moved her business location, Candy took the neon business sign flashing “Candy’s Chocolates.” Even though it was permanently attached to the building, it was a personal item (as a trade fixture) and could be removed legally.
Required when properties are in designated flood areas; covers the costs of damage resulting from flooding
flood insurance
Ex. Because Nolan’s property was in a designated flood area, he was required to purchase flood insurance. He was glad he did when his property later flooded, and his insurance compensated him for the damage.
When a licensee/brokerage firm acts in a fiduciary capacity for either the buyer/tenant or the seller/landlord in a real estate transaction, but not for both
single agency
Ex. Because North Star was acting as a single agent for the Johnsons in the sale of their home, every agent in the brokerage owed fiduciary responsibilities to them.
The person receiving title upon the death of the life tenant
remainderman
Ex. When his step-mother followed his father in death, the life estate she had in the family home ended, and it passed to Chad, as a remainderman.
A tenant who refuses to leave after the expiration of a lease.
holdover tenant
Ex. When Bradley refused to leave, even though his lease had been terminated, he became a holdover tenant.
Series of HUD-funded housing assistance programs that are administered on the state level
Section 8
Ex. The Housing Choice Voucher program helps voucher recipients get assistance paying their monthly rent costs.
Synthetic liquid compounds used as a cooling and insulating medium in electrical transformers until they were banned
poly-chlorinated byphenols (PCBs)
Ex. PCBs are a suspected carcinogen that can accumulate in human fatty tissue. The Toxic Substances Control Act banned all PCB production in 1976.
A mortgage in secondary position to the first mortgage (e.g., a home equity loan)
second mortgage
Ex. When a foreclosure occurs, the secondary mortgage doesn’t receive proceeds until the first mortgagee is paid off. Sometimes there aren’t enough funds to repay both loans.
The worth of a property as the owner is currently using it
value in use
Ex. Value-in-use may include cash flow and other benefits that a property generates for its owner under a specific use.
People hired to impersonate prospective buyers or prospective tenants to determine whether a landlord or seller is practicing discriminatory behavior.
testers
Ex. When Caucasian testers—who presented the same income level, employment history and credit rating—were treated differently by a landlord than their minority counterparts, this was an example of discrimination.
A lease in which the lender retains the right to evict the tenant if the borrower defaults
subordinate lease
Ex. Jameson was livid! Due to his subordinate lease clause, he was being evicted from his home simply because his landlord–the building’s owner–defaulted on his loan.
A person or entity to who money is owed.
creditor
Ex. In a bankruptcy proceeding, the individual has to demonstrate he can’t repay his creditors to have his debt forgiven by the bankruptcy court.
The right to live or work on a property
possession
Ex. When Sally signed the lease on space for her new candy shop, she immediately took possession.
Also see front foot. The linear measurement of a property that abuts a street, highway, waterway, etc.
frontage
Ex. The houses along Elm street received a special assessment for street improvements based on the frontage measurement of their lots.
An error involving the parties to a contract that would affect their decision to enter into the contract had they known of the error.
mistake
Ex. One of the ways in which a contract can be legally discharged is if it is entered into by mistake of the parties.
A mortgage or loan secondary to another.
subordinate financing
Ex. When Amity took out a home equity line of credit, her lender charged her a premium interest rate because it was subordinate financing, and in the even of a foreclosure, the home equity loan would be paid after her first mortgage.
Items a seller paid in advance and that the buyer must reimburse at closing, e.g., utilities
prepaid items
Ex. Bob had already purchased a winter’s worth of heating oil when he decided to sell his house. The buyer, Jill, will reimburse him for the portion of the oil she’ll use after she buys his house.
The price at which a property can be bought or sold
market price
Ex. Market price is influenced by buyer demand and seller supply.
Rental of floor space for wide open loft type spaces; structural changes are generally not permitted
loft lease
Ex. For his floral design business, Yves signed a loft lease on one of the new renovated warehouses downtown.
Ordinary cleaning and maintenance, such as vacuuming, trash removal, and landscaping
custodial maintenance
Ex. As part of her duties, Layla had to arrange and monitor custodial maintenance for the properties she managed.
Abuse of a property by a person who holds possession through a life estate
act of waste
Ex. When Minerva inherited the historic mansion and turned it into an illegal video gaming parlor, this was an act of waste that caused her to lose title to the property.
A loan guaranteed, insured, or (in limited cases) made by an agency of the federal government
government loan
Ex. Both VA and FHA are types of government loans. They’re not made directly to consumers, but are instead guaranteed (VA) or insured (FHA) by an agency of the federal government.
The rehabilitation or renewal stage of the neighborhood life cycle
revitalization
Ex. The neighborhood gains a renewed appeal for some reason, such as access to jobs or amenities, and the affordable prices allow people to purchase and renovate the homes.
A buyer agrees, in writing, to take over the sellers’ loan payments
assumption
Ex. Nicole assumed Matt’s loan payments when she bought his house.
A listing agreement in which the broker has earned a commission no matter who finds the buyer for the property during the term of the listing
exclusive right to sell
Ex. To protect her commission, Amy always asked for an exclusive right to sell agreement when working with sellers.
A property that buyers may shy away from for reasons other than physical defects, such as a property being the site of a murder
stigmatized property
Ex. Each state has its own laws regarding what stigmas licensees are required to disclose, and which they can keep mum about.
A marketable title (free and clear of liens or question of ownership).
clear title
Ex. Because the seller was unable to provide the buyer with a clear title, the buyer backed out of the sale, and received his earnest money back.
A defect in the property or title that could cause a reasonable person to not purchase a property, or cause the buyer to value the property lower
material defect
Ex. The fact that the carpeting in the living room was an ugly lime green wasn’t considered a material defect, but the leaky roof was.
A clause in a purchase offer that allows buyers to state they’d pay more for the property if a higher competing offer comes in
escalation clause
Ex. Jerome’s escalation clause stated, “The buyer is willing to increase his offer to $1,000 over the highest offer received, with the purchase price limited to $245,000.”
The lender in a mortgage
mortgagee
Ex. ABC Bank was John’s mortgagee; they held the mortgage on his property.
The amount being borrowed, or the amount left to be repaid.
principal
Ex. Anita’s principal payment was $200 per month. Her interest payment was $800 per month. As she paid on her mortgage loan over time, the amount that applied toward principal increased.
A figure used as a multiplier of gross monthly rent of a property; used to estimate property value for properties of one to four units.
gross rent multiplier
Ex. The GRM = Price divided by gross rent.
The spending of escrow funds to pay property taxes, hazard insurance, mortgage insurance, etc., when due.
escrow disbursement
Ex. Michelle’s lender made an escrow disbursement of $547 to pay her annual hazard insurance.
Framing members used vertically for wall construction
studs
Ex. When hanging heavy objects on a wall, it’s wise to nail the hanger for the object into the stud for security.
Established quality standards for surface waters and added a structure to regulate pollutants (e.g., oil) discharged into U.S. waters
Clean Water Act
Ex. Real estate transactions are impacted by this act when the property includes water features protected by the CWA (e.g., a buyer wants to build a guest cottage, but wetlands on the site prevent the plan from being implemented).
A numerical rating that summarizes the likelihood of a person filing an insurance claim during the coverage period
Insurance score
Ex. The buyers’ insurance score helped them choose the best homeowners policy for their new condo.
Services performed that are routine and do not involve judgment, advocacy, or negotiation
ministerial acts
Ex. Keira helped a buyer fill in some of the blanks in their contract offer for her seller’s house, but did not advocate for or advise them in any way.
A building plan with an architect’s or engineer’s stamp that includes the layout of the rooms and their measurements, and indicates location of windows, doors, fixtures, and major appliances
blueprint
Ex. Bradley looked up from the blueprint of his proposed house and told his architect, “I can’t visualize it in 2-D. Can you build me a model in 3-D?”
One who purchases services or products, such as real estate services.
consumer
Ex. A consumer may receive client-level service or customer-level service depending on the nature of their relationship with the licensee and to the transaction.
Establishes the title history or the path and proof of property ownership through a public records search for successive conveyances of title and encumbrances; each owner is considered to be a “link” in the chain
chain of title
Ex. Karen’s chain of title showed no gaps in ownership since the time it was built.
When an investor finds and closes on an investment property and then decides to sell another property, he or she can do a tax deferral “backward.”
reverse exchange
Ex. Margo couldn’t pass up on the amazinf deal she found on a condo downtown, so she closed on it quickly and then sold another property she owned in the suburbs so she could do a reverse exchange.
A framework of rafters, posts, and struts, supporting a roof; usually manufactured offsite
truss
Ex. The truss system has for the most part replaced the rafter system in current construction, in part because its installation can usually be done in a day compared to a week for a rafter-type system.
A contract that would hold up in court
enforceable contract
Ex. Because the Smiths’ contract to purchase a beach house had all of the typical nuts and bolts of a valid contract, it was considered enforceable in court.
Synthetic chemical substances used in cooling products whose release into the atmosphere is blamed for ozone layer depletion
chlorofluorocarbons (CFCs)
Ex. Jane was surprised to learn that Styrofoam was a CFC product, and also that CFC is used in most car air conditioners.
A lender is able to sell a property in the event of buyer default, without going through the court system; usually granted via a power-of-sale clause in the security instrument
non-judicial foreclosure
Ex. Peach Orchard Bank was able to initiate a non-judicial foreclosure on a property when the buyer stopped making payments, which helped them avoid the extra time and expense of going through court proceedings.
Lowland and flat areas adjoining inland and coastal waters; subject to at least a 1% chance of flooding in a given year
floodplain
Ex. Sam made sure to buy flood insurance for his new home, since it was located in a floodplain.
The process of combining separate adjacent parcels of land into one piece
assemblage
Ex. Through the princple of assemblage, by purchasing several adjoining parcels, the combined parcel was worth far more.
Loan balance
principal (loans)
Ex. When paying off a home loan, the payment is applied toward interest on the loan and the principal, or amount borrowed.
A chronic lung disease caused by breathing asbestos fibers
asbestosis
Ex. Asbestosis makes breathing difficult and can lead to death.
Aka Brownfields Law; protects future landowners of contaminated properties from liability under certain conditions
Small Business Liability Relief and Brownfields Revitalization Act
Ex. The Brownfields Law protects buyers, lenders, and insurers from liability from clean-up costs of contaminated properties provided they were unaware of the issues, performed a Phase I environmental assessment prior to the purchase, and met other conditions.
Requires every mortgage loan originator to be fully licensed and carry a mortgage surety bond
Secure and Fair Enforcement Act (SAFE)
Ex. The purpose of the SAFE Act is to provide additional protection for customers and provide anti-fraud measures.
Standard package homeowner’s insurance policy coverage for personal injuries to others resulting from the insured’s acts or negligence; may include medical payments for accidents sustained by guests visiting the property and physical damage to others’ property
liability insurance
Ex. Keri’s liability insurance covered her when an open house visitor tripped and fell down the stairs, breaking his arm. The liability insurance paid for the visitor’s medical expenses.
A reference point marking the beginning point of a metes and bounds description.
point of beginning
Ex. Sometimes, in a metes and bounds description, the point of beginning will be a humorous identifier such as ““Beginning where Standfield’s donkey and goat always stand at the crest of the southmost knoll …””
Economic variables that are inversely proportionate to price
supply and demand
Ex. When supply is low, demand is high and price is high. When supply is high, demand is low and price is low.
As defined in fair housing law, a dwelling occupied by two or more unrelated people with disabilities
group home
Ex. The disabilities may be physical, developmental, or behavioral, and support services may or may not be provided to the individuals.
A number that signifies a borrower’s credit risk to lenders
credit score
Ex. A credit score is calculated from information in the borrower’s credit file, and is used by lenders to assess borrowers’ credit risk at a given moment in time.
A duty owed to a client by an agent, it requires the agent to act at the utmost professional level in serving the client.
reasonable skill and care
Ex. Jason showed reasonable skill and care when he recommended to his client that he have an HVAC specialist inspect the furnace; it looked old and in need of repair.
Dictates the manner in which parties automatically acquire rights or liabilities due to established rules of law, and not through an agreement or act of their own
operation of law
Ex. Even though the recently deceased David bequeathed his home to his brother in his will, the operation of law mandated that the home would pass to David’s wife, since the two of them owned the home in tenancy by the entirety.
Rights related to the use of minerals and other products below the surface of the property
subsurface rights
Ex. In order for someone to extract oil from your property, you would have to lease or sell your subsurface rights.
The process by which the court determines how a deceased person’s estate should be distributed
probate
Ex. To avoid probate, many people put all of their property in a trust.
The amount of value in a property after debts associated with financing have been paid
equity
Ex. After one year, Cameron’s property had increased in value by 20%, and his equity went from $10,000 (his down payment) to $40,000 (the value after his loan balance).
The fee simple ownership of a unit in a multi-unit building
condominium
Ex. In a condominium ownership, the ownership is of the airspace the unit occupies plus an undivided interest in common elements.
A legal form of business relationship between two or more people; may take the form of a limited partnership or a general partnership
partnership
Ex. Common law regards a partnership as a group of individuals rather than a single entity.
The ground saturation point
water table
Ex. Sheri found that her water table was actually 200 feet below the surface, making drilling for a well quite expensive.
The portions of a property shared by common interest owners (e.g., in a condominium property, this would include the pool)
common areas
Ex. Homeowners pay dues to maintain the common areas of the association.
The dollar amount to which the local tax rate is multiplied to determine property tax owed
assessed value
Ex. Although the appraised value of Myra’s bed and breakfast was $600,000, her tax assessed value was only $475,000.
Growing crops, such as Christmas trees or corn, which are produced annually. These are usually not considered fixtures, but are the personal property of the person who planted them.
emblements
Ex. The Swansons grew wine grapes on their property, and when it was time to sell their vineyard, their latest plantings were considered emblements and were not part of the property price; these were sold separately to the buyer.
Anything added to the land which benefits the land, such as a building, driveway, etc.
improvement
Ex. Vacant land increases in value when improvements are added.
Calculations to determine whether a buyer qualifies for financing. The front-end ratio uses the borrower’s monthly housing debt and compares it to the borrower’s gross monthly income. The back-end ratio uses total monthly debt compared to gross monthly income.
qualifying ratio
Ex. Maurice applied for a home loan. He had to qualify both under the front-end and back-end ratios. He qualified on the front-end ratio, but his car payment put him over the limit for the back-end ratio.
Specifies style or architecture of buildings in an area in order to preserve charm, feel, etc.
aesthetic zoning
Ex. Zoning required that all homes in Ocean City be either Victorian or Tudor in design, and no taller than three stories.
A fund set aside for replacement of common property (e.g., a parking lot) in a common interest community, such as a condominium development.
replacement reserve fund
Ex. Because the homeowners association hadn’t collected enough dues for the replacement reserve fund from the owners, when the roofs of the buildings needed to be replaced, each owner was assessed $1,800 to cover the costs.
This is used in legal descriptions on documents such as deeds. The reference is to a subdivision plat map. The page number and subdivision name are provided, the lot and block as well, and the recording authority.
reference to a plat
Ex. The legal description of Hank’s new property was included on his deed by reference to a plat.
The legal process of discharging or restructuring a borrower’s debts
bankruptcy
Ex. Individuals most commonly file Chapter 7 or Chapter 13 bankruptcy.
In a deed, a guarantee that what is stated or promised is true
warranty
Ex. The deed to Paul’s new home included a warranty that there were no outstanding liens on the property.
Maintenance that is done to prevent future damage or deterioration
preventive maintenance
Ex. “A stitch in time saves nine” could be the slogan for preventative maintenance.
Interest in land; alternatively, assets owned by a deceased person
estate
Ex. Rights of ownership in land are determined primarily on the type of estate held. A leasehold estate, merely gives the right of possession, where a freehold estate involves ownership.
The legal concept of property ownership and the rights that go with it
title
Ex. When the transaction between Karen and Vince is closed, Vince will have title to Karen’s property.
The loss of real property ownership with the owner’s consent (e.g., traditional sale)
voluntary alienation
Ex. When Craig sold his property to Yvette, this was an example of voluntary alienation.
Rules to ensure a safe, properly functioning environment for occupants of a building
building code
Ex. The building code specified plumbing, electrical and structural specifications for builders.
The dollar value or percentage added to or subtracted from the sales price of a comparable to arrive at an indicated value for the subject
adjustment
Ex. Whether the adjustment is made for a “good” or a “bad” feature, it is made to the comparable, not to the subject.
Buying real property at deep discounts and immediately selling for a small profit
wholesaling
Ex. Now that Brent had been investing in real estate for a few years, he discovered his real knack was in wholesaling.
Where loans are originated; they are sold on the secondary mortgage market
primary mortgage market
Ex. Most home loans originated in the primary mortgage market end up as part of package of mortgages that are sold on the secondary mortgage market.
The final basis for taxing purposes computed by taking acquisition costs plus capital improvements and subtracting depreciation taken
adjusted basis
Ex. When Mark computed the adjusted basis in his property, he had to subtract $10,000 in depreciation he had taken over the years.
Often a county clerk, this is the public official who records transactions affecting real property.
recorder
Ex. The registrar of deeds is the recorder of real property transfers.
The people who know, like and trust you
sphere of influence
Ex. Beth knew that, to succeed in real estate, she should concentrate most of her marketing efforts on her sphere of influence.
Where a con artist use real estate listing information to fraudulently rent out a property
online rental scam
Ex. Keira created a Google Alert for the address of her new listing, so she’d be sure to see any fraudulent rental ads for it on the internet.
An 1890 act to protect the public from antitrust practices, such as monopolies or combinations that restrain trade
Sherman Act
An 1890 act to protect the public from antitrust practices, such as monopolies or combinations that restrain trade
Ex. The Sherman Act covers trade and commerce with foreign countries and between states (interstate) commerce.
Either a number of trenches or a space lined with gravel or sand that naturally filters septic system water and releases it back into the soil
drainfield
Ex. It’s important that drainfields are kept clear of trees or shrubs so that their roots don’t impede the filtered water from draining out of the septic tank.
Added familial status and disability to the protected classes list
Fair Housing Amendments Act of 1988
Ex. Families and persons with disabilities are now protected classes thanks to the Fair Housing Amendments Act of 1988
A colorless, odorless gas that results as a byproduct of combustion of wood, gas, and other heated materials; poses a health hazard when released into the atmosphere and breathed in
carbon monoxide (CO)
Ex. Homes with gas appliances and gas heat should be equipped with carbon monoxide detectors which can warn the occupants to get out before escaping fumes result in serious health issues or death.
A mix of land uses such as residential and commercial in one contained development
planned unit development (PUD)
Ex. Shari lived in a condo in a PUD. She loved having shopping—and a hair salon—within steps of her front door.
An asset used to secure a loan. With a home mortgage, the home itself acts as collateral. If the borrower defaults, the lender can foreclose and take the property.
collateral
Ex. When Lance purchased a home using financing, he pledged his property as collateral. If he defaults on his loan, his lender can collect what it’s owed by forcing a foreclosure sale on his home.
Provides a standard method for reporting results when appraising single-family homes
Uniform Residential Appraisal Report (URAR)
Ex. The URAR includes sections to report all data collected for the appraisal, and the method used to arrive at a final opinion of value. Lenders require the URAR any time a property is bought or refinanced.
The rights of ownership without the possession of title
equitable title
Ex. When a buyer purchases through a land sales contract, the seller holds the real title until the final payment is made. In the meantime, the buyer has equitable title.
Authority to construct a building or residential property by the local government
building permit
Ex. Builder Barry was issued a building permit to build a home on the empty lot next to his mother’s house.
The agreement between states to allow licensed individuals to do business in both states
reciprocity
Ex. Due to reciprocity, Cindy, who was a broker in Connecticut, was able to perform real estate activities in New York.
The temporary right to use another person’s property
license
Ex. Gabby got a temporary license to install a political billboard on a farmer’s property.
The “wooden skeleton” of a home to which interior and exterior walls are attached
framing
Ex. Once the framing was in place, Martina could actually walk through her new house-to-be and get a good feel for what the finished product would be like.
R-factor or R-value is a term used in insulation and means the degree of resistance to the heat transfer of the walls (how much heat is kept in or out).
R-factor
Ex. The larger the R-factor, the greater the degree of insulation.
Contains a brokerage firm’s best practices, core business processes and procedures, and guidelines and standards by which the members of the firm perform their respective functions
policies and procedures manual
Ex. A good policies and procedures manual will also reinforce and define local, state, or federal laws and regulations applicable to daily real estate practice.
A property with more than one dwelling, e.g., a duplex.
multi-family
Ex. Multi-family homes with five or more dwellings are considered commercial residential properties.
Intentional misstatement of a material fact
active fraud
Ex. “Sure, the foundation is perfectly safe!” Lisa said, even though she knew full well that there was a crack the size of Toledo in it.
A creditor’s legal right to have their debt paid out of the property of a defaulting debtor, usually by a court sale
lien
Ex. When Marcus did not pay his contractor, the contractor put a mechanic’s lien on Marcus’s property.
A condominium project that includes a rental desk; allows short-term occupancy, and is operated similar to a commercial hotel, even though the units are individually owned. Often found in resort areas, such as Hawaii.
condominium hotel, condotel, condo hotel
Ex. Marissa investigated a condo at the Maui Banyan condotel. She liked the idea of having a registration desk, but found that financing was more difficult than with a traditional condo.
One of the fiduciary duties, it means an agent is accountable for any funds or properties entrusted to the agent. This is a duty that survives termination of an agency agreement.
accounting
Ex. Cameron accepted an earnest money deposit from his buyer. His duty of accounting means that he must safeguard the funds and handle them according to the agreement with his client and the policies of his firm.
The power of the government to take private property for public use
eminent domain
Ex. The new highway was going to cut right through a neighborhood; the government took the property for the highway, compensating the property owners at fair market value.
A statement of opinion on the status of a title to real property
certificate of title
Ex. The certificate of title is issued after a review of public records.
A form of ownership that includes an undivided interest in the property; owners may sell, convey, mortgage or transfer their interest without the consent of co-owners
tenancy in common
Ex. Bailey and her brother Bill inherited their uncle’s house. The will did not specify how they were to take title, so they were automatically made tenants in common.
A member of the National Association of REALTORS(R)
REALTOR(R)
Ex. Although often used generically, REALTOR(R) is a registered trademark of the National Association of REALTORS(R) and the term may not be used by non-members.
Dying with a will in place
testate
Ex. Because Rachel died testate, her last wishes were known by all.
A penalty charged by a lender to a borrower for paying off a loan early
pre-payment penalty
Ex. Pre-payment penalties are all but eliminated under new lending rules.
A mortgage in which the borrower makes payments every two weeks, resulting in 13 payments a year instead of 12. Some borrowers use this strategy to pay off their loan earlier.
biweekly mortgage
Ex. Charlene made biweekly payments on her mortgage .She avoided the often expensive independent companies who offer to set up such payment plans for borrowers, and did it herself. She was able to pay off her 30-year mortgage several years early.
A deed executed by a trustee that conveys land held within a trust.
trustee’s deed
Ex. A trustee’s deed is often by a trustee in bankruptcy to sell real property of the debtor.
Manages the closing process, presents and explains all of the closing documents to the parties, and obtains signatures; may be an attorney, broker, or a title company representative
closing agent
Ex. Sandra was glad to learn that the closing agent for her sellers’ closing was going to be Anders Hayes. He always had everything in order for a smooth closing, just as it should be.
The offeror is the person making the offer; the offeree is the person to whom the offer is being made
offeror/offeree
Ex. Sam, the offeror, offered Delilah, the offeree, $1 million for her oceanfront estate.
A cost for an expenditure other than materials and labor.
indirect cost
Ex. Legal fees are indirect costs of construction.
Law related to the agency relationship
agency law
Ex. Agency law defines the rules of conduct of an agent to a client.
The authorized use of another’s property for a specific purpose; runs with the land
easement
Ex. Easement is a non-possessory right to use another’s property. It does not involve ownership.
Land whose slope is 30-45% or steeper, or a % as determined by the local building department to be a ““steep slope.””
steep slope
Ex. When building on steep slopes, flooding is often a consideration.
The amount the interest rate may adjust up upon the first rate adjustment in an adjustable rate loan
initial cap
Ex. A loan has a margin of 2% and is based on an index, which is at 3%. The loan’s initial interest rate is 5%. The loan’s cap structure is 2/2/5. At the first adjustment, the index is at 4%, so the new interest rate is 6%. This is a 1% adjustment, below the initial cap of 2%.
Evidence of a pledge of an asset, to be used as security for a loan
security instrument
Ex. A mortgage and a deed of trust are the two primary security instruments used when financing a home.
The paying off of a debt with regular installments over a fixed repayment schedule
amortization
Ex. A 30-year fixed rate loan provides amortization for the debt—in 30 years it is fully paid off.
A gradual increase in rent, agreed upon at lease signing
step-up/graduated rent
Ex. When Pat rented office space in the Peach Tree Office Park, he signed a 5-year lease, with the increases in rent each year laid out in the lease document.
The lienor is the party holding the lien, such as a lender. The lienee is the person who needs to pay up!
lienor/lienee
Ex. ABC Bank was the lienor who placed a lien on Jamie’s property. Jamie was the lienee.
Foreclosure process requiring court proceedings
judicial foreclosure
Ex. Georgia is not a judicial foreclosure state; the security deed, which is the most commonly used security instrument, provides for a non-judicial foreclosure in the event of buyer default.
Aid low- and very low-income households in setting up savings accounts used to purchase a home
individual development account (IDA) programs
Ex. Part of Claire’s job at the housing agency was to research and identify the best IDAs for their clients.
Flaky, crumbly
friable
Ex. Asbestos that has aged often becomes friable; touching it at all may release dangerous fibers into the air.
Total net floor area divided by the total lot area
floor area ratio (FAR)
Ex. The floor area ratio can be used in zoning to limit the amount of construction in a certain area. For example, if construction must adhere to a 0.10 FAR, then the total area of all floors in all buildings constructed on the parcel must be no more than one-tenth the area of the parcel itself.
The right to use, or an ownership interest in, the surface of a property, including both land and water
surface rights
Ex. Ownership of surface rights do not include air rights or mineral rights; however, most homeownership rights include all three.
Requires you to stop running a deceptive ad or engaging in a deceptive practice; effective immediately upon issuance
cease-and-desist order (advertising)
Ex. Future actions after issuance of a cease-and-desist order may result in fines of up to $16,000 per ad per day.
Fees a developer pays to a municipality as part of the costs of development
municipal fees
Ex. The municipal fees for the development cost the developer an extra $8,500.
Mixing trust funds with business or personal funds
commingling
Mixing trust funds with business or personal funds
Ex. Jack, a real estate broker, is in a hurry. He includes his client’s earnest money check into a deposit into his general business fund. This is commingling, and is illegal.
One of the duties an agent owes to the client, undivided loyalty means the agent puts the client’s interests ahead of all others, including the agent’s own.
undivided loyalty
Ex. Chip is Angelina’s agent. She is about to make a terrible purchasing decision. Chip’s duty of undivided loyalty means that he must put Angelina’s interests ahead of his own, and tell her about the potential problems, even if it means losing a commission.
The slope of a roof.
pitch
Ex. The pitch of a Tudor style home is quite steep, and means reroofing can cost quite a bit more than a flatter roof.
When a covered party grants permission to the title company to pursue a party that caused a claim or loss
subrogation (insurance)
Ex. When the title company is forced to pay a claim against the policy, the covered parties give the title company permission to pursue the party who caused the loss. The covered parties are said to “subrogate” their rights to the title company.
The amount of income an investor’s financial investment is producing; expressed as a ratio: (investment gain - investment cost) ÷ investment cost
return on investment (ROI)
Ex. Corinne’s commercial clients were strongly interested in their potential ROIs.
An incidental or subordinate use to the primary use of the property
accessory use
Ex. Andy’s military bunker in his back yard constituted an accessory use of the property.
Mortgages that are pooled together and sold to investors on the secondary mortgage market
mortgage-backed security (MBS)
Ex. MBSs are considered more appealing on the secondary market if they conform to Fannie Mae/Freddie Mac guidelines.
Intentional nondisclosure; when the law imposes a duty to disclose a known fact and someone intentionally remains silent
passive fraud
Ex. When seller Jose failed to disclose the crack in the foundation of the house he was selling, he was sued for passive fraud.
Managing a property or properties for another
property management
Ex. Ross performs property management services for his clients, like Marion Forks, and takes worries such as maintenance and tenant relations off her hands.
A balancing of both sides of the Closing Disclosure
reconciliation (closing)
Ex. A property prepared closing statement results in a reconciliation with equal balances on both side of the debit/credit columns.
“For the life of another”; a life estate that lasts for the life of someone other than the life tenant
pur autre vie
Ex. Emma granted possession of her home to her nephew for the term of his mother’s life, after which it would pass to her favorite charity, Cats and Canaries.
Trading of business properties or investment properties in order to defer paying taxes on gains from a sale of the property.
tax-deferred exchange
Ex. If Jerome doesn’t identify a property with which to do a tax-deferred exchange, he will have to pay capital gains on the sale of his triplex.
Property is owned by a group of two or more persons; the death of one person simply raises the stake the others have in the property; called right of survivorship
joint tenancy
Ex. Nell became nervous when three of the joint tenants in the commercial building she owned with Victor died under suspicious circumstances. She and Victor now shared ownership. Was she next?
A lease in which the tenant is required to pay rent plus taxes, insurance, and maintenance costs
triple net lease
Ex. Charlene entered into a triple net lease with her landlord, so she’d pay the rent and any associated taxes, insurance, and maintenance costs for renting out the space for her nail salon.
The quantity of goods and services our country produces, which influences demand for commercial properties
gross domestic product (GDP)
Ex. Business in Pottersville was booming, thanks to the upswing in the GDP.
An addition to a real estate contract that’s added before contract acceptance
addendum
Ex. Steve decided to ask for the washer and dryer after all, so he asked his broker to write up an addendum to the sales contract.
An insurance contract insuring the policy owner against financial loss if the title to real estate is defective
title insurance
Ex. Because title defects sometimes are not public record, and are not found in a title search, Vince purchased title insurance to protect his interests.
Volatile organic compounds; emitted as gases from certain solids or liquids
VOCs
Ex. Concentrations of many VOCs are consistently higher indoors (up to 10 times higher) than outdoors.
A title against which there may be known defects (such as easements), but the title company has notified the parties of the defect and has agreed to insure against it (not list it as a policy exception)
insurable title
Ex. A key concern is that sellers who offer insurable title instead of marketable title may not have to clear up title problems that come up before closing.
The fifth unity required to take property as tenants by the entirety, based on the legal principle that married couples constitute a single legal entity
unity of person
Ex. This form of ownership gives each spouse an equal, undivided interest in the property.
Rights of the owners of a bordering property to use a flowing body of water, such as a river or creek
riparian rights
Ex. Keri’s property bordered Tickle Creek. Keri fishes and wades in Tickle Creek, fully enjoying her riparian rights.
An index based on the yield from sales of Treasury bills and securities.
Treasury index
Ex. Phil’s adjustable rate mortgage was indexed by the Treasury bill yield. If the yield went up, his rates would rise at the next rate adjustment period.
The taking of a property under eminent domain
condemnation
Ex. When land is condemned through eminent domain, owners must be paid just compensation and provided with notice and an opportunity to defend their rights.
Temporary halt on development
moratorium
Ex. The city of Zippyville decided to put a moratorium on all future building until they could beef up their infrastructure to support a larger population.
The person to whom a negotiable instrument is intended to pay.
payee
Ex. When Rita wrote a check to her sister, her sister was the payee.
The four expenses in a budget mortgage payment
PITI (principal, interest, taxes, and insurance)
Ex. To determine affordability, borrowers should figure out if the PITI payment each month is within their means.
Income after expenses have been deducted
net income
Ex. Barry’s gross income was $50,000, but once he deducted for expenses, his net income was only $28,750.
The tenant pays a base rent, plus an additional charge based on a percentage of the tenant’s gross sales or income (usually in retail property rentals, like shopping centers and malls)
percentage lease
Ex. Angelina’s Pizzeria gave a percentage of their profit to their landlord as a part of their percentage lease.
The time frame after the foreclosure sale during which the borrower can continue to possess the property and possibly buy back the property
statutory redemption period
Ex. If the borrowers pay the amount the property sold for, plus any accrued interest or costs, within the statutory redemption period, they can retain ownership of the property.
Trickery or deceit to induce someone to do something, especially in a real estate contract; may involve concealment of material facts, providing false information, or using trickery
fraud
Ex. Fraud can involve concealment or omission of material facts in order to induce a party to do or not do something.
Protects licensees in the event of an inadvertent omission or error in real estate practice that causes financial harm to a consumer
errors and omissions (E&O) insurance
Ex. E&O can be purchased from a commercial insurance provider for a relatively small annual fee, and may be used to cover legal costs in the event of a lawsuit.
An estimate of value as of a specific date, and for a specific use
appraised value
Ex. Barbara refinanced her property two years ago. At that time, the appraised value was $450,000. If she puts it on the market today, she can’t use the appraised value as list price, because it’s no longer valid.
Property that is managed for cash flow and income.
income-producing property
Ex. Commercial, industrial, or residential properties leased to tenants create income for the property owner.
An approach to determining value using similar recent sales data
sales comparison approach
Ex. Both licensees and appraisers use a sales comparison approach when arriving at an estimate of value.
A way to protect income from taxes, such as depreciation.
tax shelter
Ex. Because of his depreciation, which reduced his taxes, Scott was able to shelter some of his investment income and use that to make additional investments.
A mortgage that can be assumed when property transfers ownership (requires borrower to qualify for the loan).
assumable mortgage
Ex. When interest rates rise, buyers often prefer assumable mortgages at more favorable rates.
An amount of money the buyer places in escrow or trust to show good faith in the buyer’s intention to purchase the seller’s property
earnest money deposit
Ex. Candace cautioned her sellers not to accept an offer that did not come with earnest money. “If the buyers are sincere,” she told her clients, “they will provide an earnest money deposit to demonstrate that sincerity.”
A lease held by the shareholder of a cooperative which allows the shareholder the right to occupy the shareholder’s unit.
proprietary lease
Ex. When Mary Lou applied became a member of Greener Grass Cooperative, instead of a deed to her unit, she received a proprietary lease to occupy the unit.
Consideration given without reciprocal consideration but which still qualifies as valuable consideration between the parties due to their relationship or the circumstances surrounding the gift
good consideration
Ex. A parent can give a child a house without any payment from the child; although there is no exchange of ““consideration of value”” this is still considered good consideration by the courts.
Some lenders offer no-cost loans; it’s important to determine what this means, exactly - are these lender costs only or other costs, such as escrow fees, title insurance, appraisal, etc?
no-cost loan
Ex. Ruby found that her no-cost loan actually involves several thousand dollars in closing costs!
The illegal practice of a lender to refusing to lend in a specific area, often based on the minority makeup of the area
redlining
Ex. Redlining is illegal under the Fair Housing Act; lenders must make loans based on the creditworthiness of the individual, and not the characteristics of property owners in a given geographical area.
A measure of heat energy (the amount of heat required to raise the temperature of one pound of water by one degree Fahrenheit.
BTU (British Thermal Unit)
Ex. It takes 40 BTUs to cool one cubic foot of space.
An agent whose scope of authority is limited to a specific area
special agent
Ex. Real estate agents usually act as special agents to their clients; they assist with the sale but cannot sign contracts for the client or make decisions regarding the property independent of the client.
Allows owners to lease the rights to the air above their property
sky lease
Ex. Instead of leasing, Donald Trump purchased outright the air rights above the historic Tiffany & Co. store on Fifth Avenue in New York City so he could build his famous Trump Tower next door.
Invests in real estate debt, including mortgage-backed securities
mortgage REIT
Ex. Alistair invested in both mortgage REITs and equity REITs.
Law pertaining to personal property.
personal property law
Ex. Personal property law is addressed in the Uniform Commercial Code and covers items such as trade goods, minerals and timber.
A process of attempting to recover loaned funds when the borrower is in default.
collection
Ex. Because Jewel didn’t pay her credit card bill, the credit card company sent her bill to collections. Jewel now receives almost daily calls from the collection agency asking for payment.
Laws created by statute, as opposed to case law
statutory laws
Ex. Posted speed limits are examples of statutory law.
A federal anti-discrimination law to protect persons with disabilities from discrimination in public accommodations and commercial facilities; also mandates easy access in new multi-family housing with four or more units
Americans with Disabilities Act of 1990
Ex. The Americans with Disabilities Act requires landlords of properties covered under the Act to allow disabled tenants to make reasonable accommodations at their expense.
An appraisal valuation method based on the cost to replace or reproduce a property
cost approach
Ex. Appraisers often use the cost approach for new construction or for unique properties that do not have recent comparables.
Properties used for comparison purposes when valuing property
comparables
Ex. Shelly was careful in selecting the comparables for her CMA; she wanted them to be as similar as possible to the subject property.
Gain realized from an investment held for more than one year (receives favorable tax treatment, as compared to short-term capital gains)
long-term capital gain
Ex. When Frankie and Dave sold their investment condo, they asked the buyer to postpone closing for two weeks, which would put them over the one-year mark, and allow them to pay long-term gains, rather than short-term gains, on the profits.
A specific section of the open space above a property.
air lot
Ex. Just as with land, the air above the land can be divided into air lots.
Addresses abusive practices in refinancing and home equity loans by requiring special disclosures and restrictions on loan terms; an amendment to the Truth in Lending Act
Homeowner and Equity Protection Act (HOEPA)
Ex. HOEPA’s high-cost tests require mortgage loans that fall into that category provide special disclosures and adhere to loan term restrictions.
The term for the lender processing payments, sending statements, and managing the escrow/impound account for a loan
loan servicing
Ex. Although ABC Bank originated loans, it didn’t service loans, and instead turned that responsibility over to City Lender.
Amount of cash a developer puts down that is not financed
owner participation
Ex. Lenders want to see owner participation because it means the developer has some ““skin in the game.””
A written contract between a seller or building owner and a real estate licensee giving the licensee the exclusive right to sell or lease the property during the term of the listing agreement.
exclusive listing
Ex. Jack had an exclusive listing with Mark to sell his apartment building. When Janice brought Mark a buyer, and the transaction closed, Jack earned the listing commission.
Amends TILA to require specific timing related to disclosures that give consumers time to think about the loan they’re about to obtain
Mortgage Disclosure Improvement Act (MDIA)
Ex. MDIA also stipulates that the only advance fee that a creditor can charge a borrower (before disclosing the terms of the loan) is a credit report fee.
A mortgage that has lower initial payments that do not amortize and provide for a “catch up” lump sum to be paid at a specific time
balloon mortgage
Ex. Jeb agreed to a balloon mortgage because he knew that in 5 years, when the balloon payment was due, he would have money available from his trust fund to pay it off.
The length of time in an option contract in which the optionee may act
option period
Ex. When Zara and Clyde signed an option contract for Zara to purchase Clyde’s vacant lot, they set the option period at six months.
Formally conveying a parcel of land to a municipality
dedication by deed
Ex. Developer Dan formalized the green space transfer. His dedication by deed was appreciated by the city.
A single-family home attached to another on one side; often built in a two-story design
townhome (townhouse)
Ex. Maurice loved his townhome. He had a small back yard and, fortunately, the neighbor who shared one wall with him was rarely home.
The person represented by an agent in a real estate transaction
principal (agency)
Ex. Mary is selling her house and is using Kamal as her listing agent. Mary is the principal in the transaction.
A measure of heat energy (the amount of heat required to raise the temperature of one pound of water by one degree Fahrenheit.
British Thermal Unit (BTU)
Ex. It takes 40 BTUs to cool one cubic foot of space.
A person who’s both responsible for the loan and on the title for the property.
co-borrower
Ex. Alice and Jimmy bought a house together. The applied for the loan as co-borrowers, and took title in both of their names.
A development with mixed zoning uses, generally commercial and residential
mixed-use developments
Ex. Tina lived in a mixed-use development. Below her apartment was a deli. She smelled salami all day long.
The unofficial name for a now outdated settlement statement that was provided to borrowers prior to closing
HUD-1
Ex. The HUD-1 form has been replaced by the Closing Disclosure for most residential transactions.
When both parties to a contract have an incorrect belief about an important fact
mutual mistake
Ex. Elizabeth and Joe, the seller and buyer of a property, didn’t realize that the home Elizabeth was selling was subject to ground rent.
The increase or decrease in land value that occurs when several parcels are combined into one large plot, as that value compares to their combined total value if sold individually
plottage
Ex. Plottage frequently results in an increase in value over what the individual parcels could sell for on their own.
A cash award granted to a party as an outcome of a legal action
monetary damages
Ex. The court awarded Steve monetary damages when Becky intentionally ran over his golf clubs.
A change to an existing contract
amendment
Ex. Bill decided not to include the washer and dryer since the buyers were asking for the moon in the inspection. He wrote up an amendment to their original agreement, which they reluctantly signed.
Written narrative of the building plan; describes major systems, construction details, landscaping, and design features not captured in the building plan
building specifications
Ex. While his wife pored over the blueprints for their new house, Bill preferred reading the building specifications, since they included his plans for an antique rose garden.
Administered by the National Oceanic and Atmospheric Administration; designed to “preserve, protect, develop, and where possible, to restore or enhance the resources of the nation’s coastal zone”
Coastal Zone Management Act
Ex. The act encourages coastal states to develop and implement coastal zone management plans. This encompasses the 95,331 miles of the nation’s ocean and Great Lakes coastlines.
Public filing of a document
recording/recordation
Ex. Ownership cannot be established until the deed is recorded.
An asset that’s either cash, or that may easily be converted into cash.
liquid asset
Ex. Lender’s will look at a borrower’s liquid assets to determine the borrower’s ability to pay their mortgage in the event of a temporary loss of employment.
Meeting some, but not all terms of a contract
partial performance
Ex. Although he met all other terms of the contract, Jeffrey failed to meet his contractual deadline; the other party could rescind the contract based on his partial performance.
Local laws or regulations that implement the comprehensive plan by regulating zoning and land use
zoning ordinances
Ex. Zoning ordinances regulate things like lot size, building height, and permitted uses within each zoning classification on a zoning map.
A listing agreement that allows the owner to work with multiple brokers, only paying a commission to the broker who procures the buyer
open listing
Ex. Dwight entered into open listing agreements with five brokers, knowing he’d only pay commission to the one who brought him a buyer.
Popular from the 1930’s to 1980’s, these organizations would pool their savings, loan it to others, then create more loans off of the money that was paid back
savings and loan association (S&L)
Ex. In 1955, Dr. Bennett took out a loan from his local S&L to buy a home for himself and his wife, Betty.
The agent representing the buyer, and only the buyer in a real estate transaction.
buyer’s agent
Ex. Because Sam was a buyer’s agent, he owed undivided loyalty to the buyer.
The legal and feasible use of a property that would return its highest value
highest and best use
Ex. When Shane bought the farm property he knew its highest and best use would be realized by partitioning it; that, however was not his dream.
A limitation on a property title, such as a lien or easement
encumbrance
Ex. Cathy was happy to see from the title report that the only encumbrance on the property she was buying was a power company’s easement in gross.
Expenses realized for the operation of an enterprise.
operating expenses
Ex. Jan’s operating expenses included maintenance and utilities for her fourplex.
Building material used to make walls that consists of large pieces of plaster covered with paper.
plasterboard (aka wallboard)
Ex. One of the messier jobs in construction is the installation of plasterboard, especially when a lot of cutting is involved—the plaster dust goes everywhere.
The increase in equity due to increase in value in a property.
equity buildup
Ex. After one year, Cameron’s property had increased in value by 20%, and his equity went from $10,000 (his down payment) to $40,000 (the value after his loan balance). His equity buildup was $30,000.
The first statute affecting equal housing opportunity largely interpreted to prohibit racial discrimination
Civil Rights Act of 1866
Ex. Although the Civil Rights Act of 1866 was enacted more than a century ago, it still has relevance and impacts discrimination laws today.
The securing of a given interest rate for a specified period of time between a borrower and a lender.
rate lock
Ex. Jerome was concerned when closing was delayed. His rate lock was only good for another two weeks. What if rates rose? He might not be able to qualify for the loan!
An imaginary line that runs east and west and crosses the principal meridian at a specified point; it is used by surveyors as a reference point to locate and describe land under the rectangular survey system.
base line
Ex. Beginning at the initial point and the number 1 on a rectangular system grid, each township is designated as being a number of six-mile units (““Townships””) north or south of the baseline, and so many six-mile units (““Ranges””) east or west of the meridian.
Law pertaining to real property (e.g., real estate).
real property law
Ex. Real property law pertains to the purchase, sale, transfer, possession of an interest in real estate and all accompanying rights.
A lien against a person and all the property owned by that person, whether real or personal (e.g., judgments, estate and inheritance tax liens, income tax liens)
general lien
Ex. When Fred sued his contractor, he won a judgment for a general lien against him.
The electrical pressure that pushes through electrical wires.
voltage
Ex. Power surges, which increase the voltage in your electricity lines, can be caused by lightning striking nearby, increasing the electric pressure by millions of volts (even a surge protector won’t be able to save your computer in this case)
The rules of an association, such as a homeowner’s association or cooperative.
bylaws
Ex. The Greener Grass Cooperative included in its bylaws the process for resolving shareholder disputes.
An appraiser’s estimate of the physical condition of a building (actual age may be shorter or longer).
effective age
Ex. Because the owner of the Babson Village building performed regular maintenance, the appraiser determined its effective age to be 10 years younger than its actual age.
a national banking system that helps to control inflation and deflation by regulating interest rates and reserve fund requirements of its member banks
Federal Reserve System
Ex. Because Amazing Loan Company was not part of the Federal Reserve System, it did not have to adhere to its reserve or interest rate requirements. Borrowers beware–this lender might charge usury rates!
One who performs an appraisal
appraiser
Ex. Vladimir the appraiser is certified to provide real estate appraisals for his clients.
A fact that would influence a reasonable person in making a decision; if not disclosed a person’s decision would have been different
material fact
Ex. A material fact could impact the value of the property if the truth was known, or it could cause a seller not to accept a buyer’s offer (e.g., the buyer is actually not financially qualified to complete the transaction).
A party has the capacity (legal and mental) to enter into a contract
legally competent party
Ex. The judge decided that Sylvia, who suffered from dementia, was not a legally competent party and therefore could not enter into a contract to sell her house.
A deposit held in a bank for a specified term which earns interest (e.g., one-year CD, three-year CD).
certificate of deposit
Ex. Georgio had some extra money in savings and decided to buy a five-year CD. Interest rates were higher than he could get in his savings account, and he had no use for the money for at least five years.
Expenses that are accruing but are not yet payable (e.g., property taxes)
accrued items
Ex. At closing, accrued items must be accounted for on the settlement statement. If the seller has accrued expenses not yet payable, the amount accrued will be a seller debit and buyer credit.
Someone who manages real estate for another for compensation; duties include generating income, budgeting, market analysis, advertising, and negotiating leases
property manager
Ex. Not all property managers deal with tenants on a daily basis. Some simply manage the profitability and safeguard the value of the building.
An ownership situation in which each person shares in the ownership of the entire property
undivided interest
Ex. Tenants in common have an undivided interest in the property. Although one person may own one-half, and another a third, and another a fourth, etc., each shares in the property as a whole.
A fixed-rate mortgage in which the monthly payments increase over time according to a set schedule
growing equity mortgage
Ex. A growing equity mortgage shortens the life of a loan and increases interest savings for the buyer.
When two or more parties hold an interest in the same real property.
Privity of Estate
Ex. Both a landlord and a tenant have an interest in the same property since the landlord owns it, and the tenant lives in it.
An agreement for a new occupant to live in the premises and pay rent to the tenant, who pays the landlord. Requires written permission of the landlord.
sublease
Ex. Randy is going on a European tour and decides to sublease his apartment, with his landlord’s approval. He subleases to Lisa, who pays Randy; Randy remains responsible for paying rent to the landlord.
A concrete base below the frost line that supports the foundation.
footing
Ex. The footing supports the foundation wall, and therefore the entire structure of the building.
Hydrochlorofluorocarbons
Freon
Ex. Freon is a non-toxic, extremely stable chemical substance used in most home air conditioning units.
A dispute resolution process whereby a neutral party hears each side and attempts to get the parties to resolve their differences.
mediation
Ex. Brenda agreed to mediation, but when the mediator told her she should give the bicycle to Harry, Brenda refused.
Rights of the owners of a bordering property to the use of a stationary body of water, such as a lake or sea
littoral rights
Ex. Cal’s property was next to a small lake, and he built a dock where he tied up a canoe in order to take advantage of his littoral rights.
Period in which the parties must complete contract terms, if the date isn’t specified
reasonable time
Ex. Parties may interpret this time differently, which can create issues and a possible claim of breach of contract. In this case, a court may determine a “reasonable time,” or it may consider the contract to be invalid because a specific time or date wasn’t provided.
Possessory interest that is automatically renewed at the end of each period specified in the lease
periodic estate
Ex. Kathy is leasing a house from Wes. It’s a six-month lease that will automatically renew for another six months unless either Kathy or Wes terminate prior to the automatic renewal.
The settlement of a real estate transaction in which a property transfer occurs
closing
Ex. At closing, buyer and seller reconcile expenses, prepaids and prorations; buyer provides seller with sales price and seller transfers ownership to buyer.
Aka economic obsolescence; decrease in property value due to external issues such as pollution, traffic, and other nuisances
external depreciation
Ex. Lance’s investment property diminished in value when a factory belching fumes 24x7 was built nearby. Because external obsolescence cannot be cured, this resulted in a significant loss on his investment.
A law which requires the local authorities to publish the location of registered sex offenders in the area
Megan’s Law
Ex. Due to Megan’s law, it was easy for a licensee to point concerned clients to appropriate resources to determine whether registered sex offenders lived nearby.
An inheritable estate with ownership
fee simple
Ex. When Yvette was investigating condos in Hawaii, her friends told her, “Be sure to look for a fee simple. You don’t want a leasehold—you can’t pass that on, and it’s not worth as much.”
One thirty-sixth of a township. In a government survey system, a township is divided into 36 sections.
section
Ex. A section is a square with mile-long sides and an area of one square mile (640 acres).
Property with unpaid taxes is sold at auction
tax sale
Ex. Licensee Kara helped her investor clients by searching tax sale properties that were going up for auction.
The Federal Agricultural Mortgage Corporation, created by Congress, provides a secondary market for agricultural mortgage and rural utilities loans.
Farmer Mac
Ex. Farmer Mac is not a direct lender,b ut instead works with lenders to increase availability of long-term credit at stable interest rates to rural America.
A natural or man-made permanent landmark that serves as a point of reference in a metes and bounds description.
monument
Ex. Jill read the metes-and-bounds description of her property, which included the location of an oak tree as a point of reference. This monument had been there for 150 years.
The unknowing misstatement of a material fact
innocent misrepresentation
Ex. Charlie told Randy that the house was in tax abatement area; this turned out to be wrong, but because Charlie had based that information on a reliable source, this was a case of innocent misrepresentation.
In the event of a divorce or annulment, a court determines the fair division of the couple’s property.
equitable distribution
Ex. The court presumes that both spouses substantially contributed to the couple’s assets (e.g., income, property) while they were married. If either spouse is a homemaker, the court considers how that contributes to marital property. The court doesn’t consider marital indiscretions or misconduct when distributing property.
Land formations that direct the water “shed” from higher elevations to lakes, streams, and other bodies of water
watershed
Ex. Coastal areas that have heavy clay soil, shallow bedrock, and steep changes in incline are particularly sensitive to changes caused by development or landscape shifts.
An agent who represents one party in a transaction while another agent who works for the same broker represents the other party
designated agent
Ex. Because she was a designated agent, Michelle represented only the seller in the transaction; her colleague, Tim, represented only the buyer in the same transaction, as the buyer’s designated agent. Their broker Jill is a dual agent.
An opinion of value prepared by a real estate licensee; similar to a comparative market analysis, but not as detailed; a lender or relocation company generally orders the BPO
broker’s price opinion (BPO)
Ex. Chico’s broker’s price opinion (BPO) was prepared for XYZ Lending company on a potential foreclosure property.
The equal ownership of property in a marriage; nine states recognize community property: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin
community property
Ex. Under the community property law, each spouse owns equal interest in shared property.
A document used with a VA loan that indicates its appraised value
certificate of reasonable value (CRV)
Ex. Because his certificate of reasonable value came in above the sales price, the VA was willing to guarantee the full sales price of George’s home.
When a landlord evicts or threatens to evict a tenant because of a complaint the tenant made; illegal in many states
retaliatory eviction
Ex. When Mark complained to the health department about the roaches his landlord wouldn’t get rid of, the landlord threatened to evict him.
The transfer of a mortgage from the original lender to another
assignment (mortgages)
Ex. Sima must not have been paying attention to her disclosures because she was surprised with EZ Well Bank assigned her mortgage to another lender.
Pressure, under threat of harm of some sort
duress
Ex. Because Baba signed the contract under duress, it was voidable by her.
Representing more than one party in a transaction without fully disclosing the agency relationships to all parties
undisclosed dual agency
Ex. Several states allow dual agency (representing more than one party in a transaction), but undisclosed dual agency is illegal in all 50 states.
Among other definitions, this includes one or more persons living as a single housekeeping unit
family
Ex. A family as defined by the courts, does not necessarily have to be related by blood.
The rules of an association, such as a homeowners association or cooperative
conditions, covenants, and restrictions (CC&Rs)
Ex. Robby made sure to check the CC&Rs before purchasing his condo. He wanted to make sure his pet iguana, Elvis, would be welcome.
A fixed-termination type of lease that may be for a day, week, month, year, several years, or any definite period of time; when the specified date occurs, the lease terminates automatically
estate for years
Ex. Carmine agreed to rent Bill’s apartment for 11 days, after which their lease terminated. This is an estate for years, even though it is only for 11 days.
Community services such as water, sewer, utilities, schools, roadways, medical, fire and police support
infrastructure
Ex. Because of inadequate infrastructure, a two-year moratorium on new developments was enacted by the planning board.
A type of combination property that includes residential and office zoning in the same place.
residential office
Ex. Because Tiffany lived and worked in a residential office building, she never had to worry about getting caught in the rain on the way to work; her office was just a short elevator ride from her apartment on the 7th floor.
A document outlining that a title insurance policy will be issued to the buyer provided certain conditions are met (usually a required payoff of liens or other title defects)
title commitment
Ex. A title commitment is issued after a detailed title search uncovers any outstanding liens, mortgages, or other title defects that would prevent the title from transferring clearly.
The percentage fee charged on the amount loaned.
interest (financing)
Ex. Annual interest on a loan can be determined by multiplying the rate of interest by the principal balance.
The status of being married or divorced
marital status
Ex. Marital status is a protected class in some localities.
One who acts on a principal’s behalf, but within a very limited scope
limited agent
Ex. An escrow officer is a limited agent to the parties in a transaction.
The amount charged against assessed value of a property
real property tax rate
Ex. Multiply assessed value by tax rate to compute annual property taxes.
A legal action to remove the tenant and the tenant’s belongings from the premises
eviction
Ex. Mona hasn’t paid her rent in months, so her landlord, Ewan, took her to court and won the eviction rights.
History of ownership and conveyance that drives up the price of an auctioned item
provenance
Ex. The guitar’s provenance as once belonging to Chuck Berry drove up its price substantially at the charity auction.
The area of material facing the outer edge of the soffit.
fascia
Ex. The fascia is a board, either 1”x6” or 1”x8” that is perpendicular to the soffit. Gutters are attached to the fascia.
A term that, if used in advertising a loan product, requires the disclosure of all other terms.
trigger term
Ex. Trigger terms require disclosure of all terms to include: the cash price of the home, the amount of the down payment required or that none is required, whatever is applicable, the number of payments necessary to repay the loan, the amount of the payments, due dates or period of payments scheduled to repay the debt, the APR of the finance charge.
A right to occupy the property
possessory
Ex. All homeowners have possessory rights to their property.
The construction costs at current prices to replace a property. It won’t be an exact duplicate, but serves the same purpose or function as the original.
replacement cost/replacement cost new
Ex. Jason, whose mid-century Modern home was destroyed by fire, wished his insurance covered replacement cost. Unfortunately it only paid out the actual cash value, which wasn’t enough for him to rebuild a similar structure.
A deed where there is at most one warranty: that the current owner has not encumbered it
bargain and sale deed
Ex. Clancy purchased a property from his aunt that had been unused for a long period of time. Because his aunt knew nothing about the property, the deed he received was a bargain and sale deed.
An inheritable estate with absolute ownership; provides the most complete form of ownership and bundle of rights in real property
fee simple absolute
Ex. When Yvette was investigating condos in Hawaii, her friends told her, “Be sure to look for a fee simple. You don’t want a leasehold—you can’t pass that on, and it’s not worth as much.”
The disposition of a U.S. real property interest by a foreign person (the transferor) is subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) income tax withholding.
Foreign Investment in Real Property Tax Act of 1980 (FIRPTA)
Ex. Because the seller was from Canada, FIRPTA applied, and the buyer of the property was required to withhold a percentage of the sales price to ensure payment of taxes owed.
The gradual creation of land when adjacent water levels recede
reliction
Ex. Thanks to the receding of the lake, Sammy was now the proud owner of another three feet of mud.
The bump in value that a lower-valued property receives when an adjacent property’s value increases
progression
Ex. David’s neighbor put in new siding, new windows and a new walkway. Although David didn’t like the noise from the construction project, he loved the increase in his value. ““Progression is a beautiful thing,”” he told his spouse.
A financial statement based on assumptions and projections.
pro forma
Ex. Ray wanted to see the effects of different financing options for a new investment. His accountant prepared a pro forma statement with projected balance sheets, income statements, and statements of cash flows.
Beliefs and behaviors that are dependent on a person’s conscience and values
ethics
Ex. With certain exceptions, there is no external punishment for an ethical breach, as there is for breaking a law.
States that communities and facilities that meet certain criteria for providing housing to older persons are legally exempt from the familial status discrimination
Housing for Older Persons Act of 1995
Ex. ““55+”” communities are exempt from familial status discrimination as long as at least 80% of their occupied units have at least one person aged 55 or older residing in them.
An index used to determine interest rate changes for some adjustable rate mortgages.
cost of funds index (COFI)
Ex. , and advances of financial cost of funds index (COFI) represents the weighted average cost of savings, borrowings of certain financial institutions.
A fact that might cause the buyer to change his mind about purchasing the property
adverse material fact
Ex. When Chet learned that a railway was being built behind the property, he withdrew his offerr. That was an adverse material fact he couldn’t live with.
Loss in property value from any cause
depreciation
Ex. After factoring in the depreciation of the building, the appraised value was lower.
A deed which contains no covenants or warranties but does imply ownership (seisin); often used in bankruptcy proceedings and foreclosures
referee’s/sheriff’s deed
Ex. Jan was a real estate investor who frequently purchased foreclosures. Due to the uncertain ownership chain, she often received referee’s deeds, without warranties or covenants.
A lien that is agreed to, such as a mortgage
voluntary lien
Ex. Scott’s mortgage was a voluntary lien against his property.
The construction costs at the current price to exactly reproduce the property
reproduction cost
Ex. When evaluating insurance, be sure to check if you’re covered for replacement cost or reproduction cost, particularly if the property is of historic value.
Testate successor who benefits from the deceased’s will
legatee
Ex. When great-uncle Mauritius finally died, his legatees gathered in great anticipation to hear the reading of the will.
Provides a prospective buyer with the right to purchase a property if the seller decides to sell, or if another buyer comes along
right of first refusal
Ex. Clarisse loves the Victorian house owned by her elderly neighbor, Grace. She knows that at some point, Grace will need to go into assisted living. Clarisse asks Grace for the right of first refusal, and Grace agrees. When it’s time for Grace to sell, if Clarisse cannot buy her property, Grace may offer it to other purchasers.
Aka title defect; any encumbrance, such as a lien or inheritance claim, that impedes the conveyance of a property; may be removed with a quitclaim deed
cloud on title
Ex. Erica was in the process of buying a foreclosure property, when an unknown lien cropped up, creating a cloud on the title. The lien had to be removed before Erica could buy the property.
Using escrow funds for personal or business purposes
conversion
Ex. Joanne engaged in conversion when she borrowed money from her brokerage’s escrow account to pay her rent.
The area under the roof extension.
soffit
Ex. The soffit can be the underside of any construction element, although it is commonly used to mean the area under the roof extension.
A system that pools the listings of all member companies
multiple listing service (MLS)
Ex. Chad has a new listing for a property in his town. One way he markets this listing is through the multiple listing service (MLS). By promoting the property on the MLS, Chad is exposing the property to all MLS members, the general public (such as unlicensed assistants who have permission to access MLS, and any sites that pull from the MLS “feed.”
A legal way for borrowers to avoid having to purchase private mortgage insurance (PMI) when they put less than 20% down; involves two separate loans
piggyback (split) loan
Ex. Evan has saved $30,000 for a down payment, which isn’t quite enough to avoid paying PMI on the loan for his new $200,000 condo. So he gets a piggyback loan to make up the difference.
Personal property, as opposed to real property
chattel
Ex. You might confuse your buyers if you asked them, “Was there any chattel of the sellers you wanted to write into the sales contract?” It’s better to use the term “personal property.”
A physical or mental impairment that limits a major life activity
disability or handicap
Ex. Because of her disability, Megan was allowed to have an assistance animal in her apartment.
The addition of value to property through labor or the addition of new materials, including an increase in land through natural processes
accession
Ex. Jonathan’s property borders a bay. The bay receded, and Jonathan gained an extra 10 feet of property to his land through accession.
Aka subsequent cap or period cap; limits the amount an adjustable rate loan’s interest rate can go up in subsequent adjustments (after the initial adjustment)
periodic cap
Ex. At Sylvia’s next loan adjustment, the index is at 8%, which would put her new rate at 10%. This is more than the periodic cap of 2%, so the adjustment is set at the capped rate of 2% more than the previous rate, making it 8%.
Protects a valid lease from termination in the event of mortgage foreclosure
nondisturbance clause
Ex. When Elena received a foreclosure notice on the door of the house she was renting, she called her attorney to see if the mortgage in question contained a nondisturbance clause, meaning her lease would be honored.
A mortgage clause that requires the borrower to pay off the loan balance when selling the property
due-on-sale clause
Ex. Mortgages with due on sale clauses are not assumable.
A form of physical depreciation indicated by a loss in value that is not economically feasible to remedy because the increase in value from the “fix” would not equal the cost to fix it
incurable depreciation
Ex. The Bakers had to live with the incurable depreciation of their split level designed home. Even though the design was no longer popular, it was an incurable depreciation they had to face. Fixing it would cost more than they could recoup at sales time.
No right to occupy the property; easements are non-possessory rights
non-possessory
Ex. Because Sheena had an easement to cross Barb’s property, but no right to occupy the property, she had a nonpossessory right.
The primary market is where loans are originated; the secondary market is where they are sold
primary market
Ex. Most home loans originated in the primary market end up as part of package of mortgages that are sold on the secondary market.
Measures changes in the price level of consumer goods and services, drawing samples from various marketplaces
Consumer Price Index (CPI)
Ex. The CPI showed that gas prices had risen 10 cents per gallon in the month leading up to Memorial Day.
The portion of the payment applied to the principal remains the same with each payment, and the interest amount varies according to the outstanding loan balance
straight-line loan
Ex. With a straight-line loan, the amount of each payment changes, and the borrower makes higher installment payments at the beginning of the loan when the loan balance is higher and more interest is due. Over time, the amount of each installment payment lowers the outstanding balance.
A type of possession in which a tenant stays after the right to possess has terminated
estate at sufferance
Ex. Bradley’s lease was terminated lawfully but Bradley refused to leave. He is not a trespasser, even though he is not there legally; he has an estate at sufferance.
Created by the International Code Council to provide standards for residential construction across the country;
International Codes® (I-Codes®)
Ex. As a custom home builder, Janice made certain she always complied with not only I-Codes®, but also her state and local building codes.
A refinance in which the borrower assumes a loan balance higher than the current one to pull out money for other use.
cash-out refinance
Ex. Interest rates had dropped, and Avril decided to refinance his home, which had a loan balance of $200,000 but an appraised value of $260,000, at $240,000. He used the $40,000 to pay off his car and credit cards, and ended up saving several hundred dollars each month. However, his new loan balance was now higher, and his payback term reset at 30 years.
A river or other moving body of water that will accommodate commercial shipping.
navigable water
Ex. Private homeowner use of navigable water is necessarily limited as compared to non-navigable water.
Basis used to calculate the tax deduction allowed for a property’s depreciation each year
depreciable basis
Ex. The depreciable basis of an investment property excludes the value of the land it sits on
A buyer’s final inspection of a property to determine if all of the conditions to the purchase agreement have been satisfied and that the home is in the same condition it was in when it went under contract
walk-through
Ex. Evelyn was very eager to do the final walk-through of her new townhome before she bought it; a fireplace was on her list of ““must-haves”” and it wasn’t working at the home inspection. She was eager to see if the required repair had been made.
A type of concurrent estate in real property in which the owners of property are married; each spouse has an equal and undivided interest in the property
tenancy by the entirety
Ex. Often, the default estate when a married couple purchase a property is tenancy by the entirety.
Charge against a property; for instance, condominiums will have periodic assessments for maintenance and repairs of common areas
assessment
Ex. Before a condominium owner can close on a sale of the condo, the owner must bring all assessments up to date so the buyer is not left paying for assessments owed from the time the seller was in possession.
A 1975 law that requires financial institutions to make mortgage data available to the public
Home Mortgage Disclosure Act (HMDA)
Ex. Congress believed that blighted areas were caused in part because financial institutions failed to provide adequate home financing to qualified applicants at reasonable terms and conditions. HMDA requires financial institutions to provide the public with information that demonstrates its actions in serving the housing credit needs of their communities.
