Lesson 1: Basic Principles of Real Estate Flashcards
What is “real estate”?
Real estate refers to property consisting of land and the buildings on it, along with its natural resources. It is a tangible asset and a key sector in the economy, influencing residential, commercial, and industrial properties.
Define “personal property”.
Personal property consists of items that are moveable and not fixed permanently to one location, such as furniture and vehicles. Unlike real estate, personal property is easily transportable.
What is the difference between “real property” and “real estate”?
Real property includes the interests, benefits, and rights inherent in the ownership of real estate, whereas real estate refers only to the physical land and improvements.
What does “title” refer to in real estate?
In real estate, “title” refers to a bundle of rights in a piece of property in which a party may own either a legal interest or equitable interest.
What is “market value”?
Market value is the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing.
Explain the term “lien”.
A lien is a legal right or interest that a creditor has in another’s property, typically lasting until the debt that it secures is paid. It is a way to ensure debt repayment via property.
What is “equity” in terms of real estate?
Equity is the difference between the market value of a property and the amount still owed on its mortgage. It represents the owner’s financial stake in the property.
Describe “foreclosure”.
Foreclosure is a legal process in which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments by forcing the sale of the asset used as the collateral for the loan.
What is an “appraisal”?
An appraisal is a professional assessment of a property’s value conducted by an appraiser. It is used to determine how much a home is worth, often in the context of a sale or loan application.
Define “broker”.
A broker is a person or firm licensed to buy, sell, exchange, or lease real property for others and to charge a fee for these services.
What are “property taxes”?
Property taxes are levied by local governments based on the assessed value of the property. These taxes fund various public expenses like schools, roads, and public services.
What is the purpose of a “deed”?
A deed is a legal document that transfers ownership of real estate from one party to another. It must be in writing and typically requires a description of the property and signatures.
Define “lease”.
A lease is a contractual arrangement in which a lessee (tenant) pays the lessor (landlord) for use of an asset. In real estate, this refers to tenancy agreements for properties.
What does “zoning” regulate?
Zoning regulates land use across cities and towns to separate residential property from commercial and industrial areas. It aims to ensure that properties are used in a manner that fits a master plan.
What is an “easement”?
An easement is a right to cross or otherwise use someone else’s land for a specified purpose. It can be for utilities, access, or other uses and does not involve ownership transfer.
What does “MLS” stand for, and what is its purpose?
MLS stands for Multiple Listing Service. It is a database established by cooperating real estate brokers to provide data about properties for sale. It helps brokers find buyers by sharing information.
What is “condemnation”?
Condemnation is the process by which private property is taken for public use by a government, with compensation paid to the owner under eminent domain laws.
Define “fixture”.
A fixture is personal property that has been attached to land or a building and is regarded as an integral part of the real property. It is typically included in the sale or leasing of the property.
Explain the concept of “dual agency”.
Dual agency occurs when a real estate agent represents both the buyer and the seller in the same transaction, which can lead to conflicts of interest and is regulated or prohibited in some states.
What are “covenants” in the context of real estate?
Covenants are written agreements or promises in a deed or lease that stipulate certain uses or actions regarding the property, such as architectural standards in a residential subdivision.
Define “escrow”.
Escrow is a legal concept describing a financial instrument wherein an asset or escrow money is held by a third party while the buyer and seller fulfill the obligations of their deal.
What does it mean to “refinance” a property?
Refinancing a property means replacing an existing mortgage with a new one, typically with better terms, such as a lower interest rate, to reduce monthly payments or alter the loan’s duration.
What is a “cap rate”?
Cap rate, or capitalization rate, is a real estate valuation measure used to compare different real estate investments. It is calculated by dividing the property’s net operating income by the current market value.
Explain “net operating income” in real estate.
Net operating income (NOI) is a calculation used to analyze the profitability of income-generating real estate investments. NOI equals all revenue from the property minus all reasonably necessary operating expenses.
