Real state Flashcards
Five Categories of Real Property
Residential
Commercial
Industrial
Agricultural
Special purpose
Factors That Affect the Demand of Real Estate
Population
Demographics
Employment and wage levels
Land
Land is defined as the earth’s surface extending downward to the center of the earth and upward to infinity.
Real state
Real estate is defined as land at, above, and below the earth’s surface, plus all things permanently attached to it.
Real property
Real property is the interests, benefits, and rights that are automatically included in the ownership of land and real estate
Appurtenance
An appurtenance is anything, tangible or intangible, associated with the property, although not necessarily a direct part of it.
Surface rights & Subsurface rights
The right to use the surface of the earth is called surface rights. However, real property ownership also can include subsurface rights, which are the rights to the natural resources lying below the earth’s surface. The
Immobility
It is true that some of the substances of land are removable and that topography may shift. Nevertheless, the geographic location of any given parcel of land can never be changed. It is fixed or immobile.
Indestructibility
Land is also indestructible. This permanence of land, coupled with the long-term nature of most improvements, tends to stabilize investments in real estate.
The fact that land is indestructible does not change the fact that man-made improvements on land depreciate and can become obsolete, which may dramatically reduce the land’s value.
Uniqueness
No two parcels of land are ever exactly the same. The characteristics of each property, no matter how small, differ from those of every other. At a minimum, all parcels differ geographically because each parcel has its own location.
Bundle of legal rights
right of possession,
right to control the property (within the framework of the law),
right of enjoyment (that is, to use the property as the owner wishes, within the framework of the law),
right of exclusion (to keep others from entering or using the property), and
right of disposition (to sell, will, transfer, or otherwise dispose of or encumber the property).
Personal property
Personal property (or personalty) is property that is movable and not affixed to or associated with the land. Basically, personal property includes all property except real property.
Chattels
Chattels are items of personal property, including such tangibles as chairs, tables, clothing, money, bonds, and bank accounts. Trade fixtures are included in this category.
Severance
An item of real property can become personal property by severance. Ex, a growing tree is real estate until the owner cuts it down, severing it from the property.
Annexation
It also is possible to change personal property into real property through a process called annexation. For example, a landowner buys cement, stones, and sand, mixes them into concrete, and constructs a sidewalk across her land. This landowner has effectively converted personal property (cement, stones, and sand) into real property (a sidewalk).
Deed, bill of sale
Real property is conveyed by deed, while personal property is conveyed by a bill of sale
Fixture
A fixture is personal property that has been so affixed to land or a building that, by law, it becomes part of the real property. Examples of fixtures are heating systems, elevator equipment in highrise buildings, radiators, kitchen cabinets, attached bookcases, light fixtures, doors, and plumbing fixtures.
Trade fixture
course of business. An article owned by a tenant and attached to a rented space or building or used in conducting a business is a trade fixture
The basic costs of owning a home may be remembered by the acronym PITI:
Principal
Interests
Taxes
Insurance
Coinsurance clause & replacement cost
Most homeowners insurance policies contain a coinsurance clause. This provision usually requires the owner to maintain insurance equal to a specified percentage (usually 80%) of the replacement cost of the dwelling (not including the price of the land).
Agency
Agency refers to a strict, defined legal relationship. In real estate, agency refers to the relationship that a broker, managing broker, or residential leasing agent (representing the sponsoring broker) may have with buyers, sellers, landlords, or tenants.
General agency
In a broader sense than the agent-client relationship, the relationship of the broker, managing broker, or residential leasing agent with the sponsoring broker is also called a general agency because they represent the sponsoring broker in all daily actions.
Brokerage agreement
A brokerage agreement is an agreement, written or oral, between a sponsoring broker and a consumer for licensed activities to be provided to a consumer in return for compensation or the right to receive compensation from another. In Illinois, any exclusive brokerage agreement must be in writing.
Consumer
A consumer means a person or entity seeking or receiving licensed activities.
Client
A client means a person who is being represented by a licensee.
Customer
A customer means a consumer who is not being represented by the licensee.
Compensation
Compensation means the valuable consideration given by one person or entity to another person or entity in exchange for the performance of some activity or service. Compensation includes, without limitation: commissions, referral fees, bonuses, prizes, merchandise, finder fees, performance of services, coupons or gift certificates, discounts, rebates, a chance to win a raffle or like game of chance, retainer fee, or salary.
Confidential information
Confidential information means information obtained by a licensee during the term of a brokerage agreement that (i) was made confidential by the written request or written instruction of the client, (ii) deals with the negotiating position of the client, or (iii) is information the disclosure of which could materially harm the negotiating position of the client. This information must not be shared unless the client gives authorization (by word or conduct) for the licensee to share the information, the disclosure is required by law , or the information becomes public
The six common-law fiduciary duties may be remembered by the acronym COLD AC:
The six common-law fiduciary duties may be remembered by the acronym COLD AC: Care
Obedience
Loyalty
Disclosure
Accounting
Confidentiality
Latent defect
A structural defect that would not normally be uncovered over the course of an ordinary inspection (due to the placement or type of defect, for example) is called a latent defect. The seller has a duty to disclose any known latent defects that threaten structural soundness or personal safety.
Express contract
The principal and agent may enter into an express contract (also called an express agreement) in which the parties formally express their intention to establish an agency relationship and state its terms and conditions.
Listing agreement
An agency relationship between a seller and a sponsoring broker is generally created by a written employment contract, commonly called a listing agreement, which authorizes the sponsoring broker (or designated licensees) to find a buyer or a tenant for the owner’s property.
Implied contract
An agency also may be created by implied contract. This occurs when the actions of the licensee indicate that the licensee has formed an agency relationship with a party.
Special agent
special agent is authorized to represent the principal in one specific act or business transaction only, under detailed instructions.
Designated
Finally, a designated agent is a person authorized by the sponsoring broker to act as the agent of a specific principal. A designated agent is the only licensee in the company who has a fiduciary responsibility toward that principal.
Dual agency
In dual agency, the agent represents two principals in the same transaction.
At least 90% of the individual’s income as a licensee must be based on sales production rather than hours worked.
Designated managing broker
The designated managing broker has supervisory responsibilities for all licensees in the sponsoring broker’s office(s).
Fiduciary standard
A fiduciary standard is a legal standard that holds a licensee to the highest ethical standards that the law provides.
Cooperative commission
If another real estate office “brought in” the buyer, the concept of cooperative commission allows the listing brokerage (working with the seller) to pay the buyer’s brokerage (working with the buyer) the amount of cooperative commission advertised in advance on the multiple listing service (MLS) Listing
Procuring cause
To be considered the procuring cause of a sale, the broker must have started or caused a chain of events that resulted in the sale.
Ready,willing and able buyer
A ready, willing, and able buyer is one who is prepared to buy on the seller’s terms and ready to take positive steps toward consummation of the transaction.
Statues of frauds
In most states, either by statutes of frauds or by specific rules from real estate licensing authorities, exclusive brokerage agreements must be in writing to be enforceable in court. Oral agreements are not illegal, but they are not recommended because they cannot be enforced in court.
Exclusive agency listing
In an exclusive-agency listing, one broker is authorized to act as the exclusive agent of the seller-principal.
Open listing
seller retains the right to employ any number of brokers as agents.
Net listing
A net listing provision specifies that the seller will receive a net amount of money from any sale, with the excess going to the listing broker as commission.
Option listing
An option listing provision gives the broker the right to purchase the listed property at some point in the future.
Comparative market analysis
Brokers can help sellers determine a listing price for the property by using a comparative market analysis (CMA). A CMA analyzes properties similar to the subject property in size, location, and amenities.
CMA IS BASED ON
recently closed (sold) properties,
properties currently on the market (properties in competition with the subject property), and
properties that did not sell (expired listings in the area).
Market value
Market value is the most probable price a property would bring in an arm’s-length transaction under normal conditions on the open market. A CMA estimates market value as likely to fall within a range of values
Executed contract
An executed contract is one in which all parties have fulfilled their promises: the contract has been
Elements of contracts
Offer and acceptance,Consideration,Legally competent parties,Consent,Legal purpose
Valid contract
A valid contract meets all the essential elements that make it legally sufficient or enforceable and is binding in a court of law.
Void contract
A void contract has no legal force or effect because it lacks some or all of the essential elements of a contract. A void contract was never a legal contract.
Voidable contract
A voidable contract appears on the surface to be valid but may be rescinded or disaffirmed by one or both parties based on some legal principle.
Breach of contracts
contract may be terminated if it is breached by one of the parties. A breach of contract is a violation of any of the terms or conditions of a contract without legal excuse.
Novation
Substitution of a new contract for an existing contract is called novation
Commingling
Sponsoring brokers are strictly prohibited from commingling, that is, mixing their own funds with funds in special escrow accounts except for the purpose of maintaining a minimum running balance required by the depository.
Liquidated damages
To avoid a lawsuit if one party breaches the contract, the parties may agree on a certain amount of money that will compensate the nonbreaching party. That money is called liquidated damages.
Executory contract
An executory contract exists when one or both parties still have an act to perform.
Contingencies
contingency includes the following three elements:
The specific actions necessary to satisfy the contingency The time frame within which the actions must occur Who is responsible for paying any costs involved
Option
An option is a contract by which an optionor (generally an owner) gives an optionee (a prospective purchaser or lessee) the right to buy or lease the owner’s property at a fixed price within a certain period.
Constructive notice
Constructive notice is the legal presumption that information may be obtained by an individual through due diligence.
Abstract of tittle
An abstract of title is a summary report of what the title search found in the public record. The person who prepares this report is called an abstractor
Marketable tittle
disclose no serious defects and not depend on doubtful questions of law or fact to prove its validity;
not expose a purchaser to the hazard of litigation or threaten the quiet enjoyment of the property; and
convince a reasonably well-informed and prudent purchaser, acting on business principles and with knowledge of the facts and their legal significance, that he could sell or mortgage the property at a later time.
Tittle insurance
Title insurance is a contract under which the policyholder is protected from losses arising from defects in the title.
Express contract
Depending on how a contract is created, it is either express or implied. An express contract (also called an express agreement) exists when the parties state the terms and show their intentions in words.
Blind ads
Blind ads are those not indicating the brokerage firm’s name; not indicating that the advertiser is a licensee; and/or offering only a box number, street address, or telephone number for responses. Blind
Real state recovery fund
The Real Estate Recovery Fund provides a means of compensation for actual monetary losses (as opposed to losses in market value) suffered by any person as a result of
a violation of the Real Estate License Act of 2000, including its rules and regulations; or act of embezzlement of money or property, obtaining money or property by false pretenses, artifice, trickery, forgery, fraud, misrepresentation, deceit, or discrimination by a licensee or a licensee’s unlicensed employee.
Lease
A lease is a contract between an owner of real estate (the lessor) and a tenant (the lessee). It is a contract to transfer the lessor’s rights to exclusive possession and use of the property to the tenant for a specified period.
Periodic tenancy
An estate from period to period (or periodic tenancy) is created when the landlord and the tenant enter into an agreement for an indefinite time—that is, the lease does not contain a specific expiration date.
Holdover tenancy
An estate from period to period also might be created when a tenant with an estate for years remains in possession (estate at sufferance) after the lease term expires. If the landlord accepts the rent and no new lease agreement is made, a holdover tenancy is created. The landlord’s acceptance of the rent is usually considered conclusive proof of acceptance of the holdover tenancy.
Gross lease
In a gross lease, the tenant pays a fixed rent and the landlord pays all taxes, assessments, insurance, maintenance and utilities connected with the property (usually called property charges or operating expenses).
Net lease
In a net lease, the tenant pays all or some of the operating expenses in addition to the rent.
Percentage lease
In a percentage lease, the rent is based on a minimum fixed rental fee plus a percentage of the gross income generated by the tenant doing business on the leased property. This type of lease is usually used for retail businesses and restaurants.
Property manager
income. Achieving this goal involves numerous responsibilities: the physical property must be maintained in good condition; suitable tenants must be found; rent must be collected; and employees must be hired and supervised.
For the four characteristics of value, remember DUST:
Demand Utility Scarcity
Transferability
Conformity
The principle of conformity means that maximum value is created when a property is in harmony with its surroundings. Maximum value is realized if the use of land conforms to existing neighborhood standards. In single-family residential neighborhoods, for example, buildings should be similar in design, construction, size, and age. This is called homogeneity
Fair housing act
The Civil Rights Act of 1866 prohibited discrimination in housing based on race or color. Title VIII of the Civil Rights Act of 1968, usually called the Fair Housing Act, prohibits discrimination in housing based on race,
The fair housing act prohibits discrimination based on
The Fair Housing Act prohibits discrimination based on
race, color, religion, sex, national origin, disability, and familial status.
Blockbusting
Blockbusting (also called panic peddling orpanic selling) is the act of encouraging people to sell or rent their homes by claiming that the entry of a protected class of people into the neighborhood will have some sort of negative impact on property values.
Steering
Steering is the channeling of homeseekers to particular neighborhoods.
Redlining
Redlining is the practice of refusing to make mortgage loans or issue insurance policies in specific areas for reasons other than the applicant’s financial qualifications.
Desperate treatment
discriminatory, as in a rental sign that states, “We do not rent to Cavemen.” The only population affected are Cavemen.
Desperate impact
Disparate Impact is when the effect of one’s actions are discriminatory.
RESPA
The Real Estate Settlement Procedures Act (RESPA) is a federal law that requires certain disclosures about the mortgage and settlement process and prohibits certain practices that increase the cost of settlement services, such as “kickbacks” and referral fees.
Frontage
The term per front foot refers to a lot’s frontage. Frontage is the length of a property along a street or waterfront. If two unlabeled dimensions are given for a parcel of land, the first dimension is the frontage.
Net operating income
When appraising income-producing property, the value is estimated by using the annual net operating income (NOI) and the current market rate of return or capitalization rate. Annual scheduled gross income is adjusted for vacancies and credit losses to arrive at the annual effective gross income.
