Unit 1/Chapter 1 Flashcards
The business of bringing people together in a real estate transaction is called __________.
Real estate brokerage
A professional opinion of a property’s market value, based on established methods and using trained judgement, is performed by a __________.
a real estate appraiser
In general, when the supply of a certain commodity increase, the price _______
goes down/tends to drop
What factor primarily affects supply in the real estate market?
Government monetary policy
What factors generally affect demand in the real estate market?
Population
Demographics
Employment and wages
What type of federal law prohibits discrimination in the provision of housing and housing-related services (including lending) based on an individual’s race, color, national origin, religion, sex, familial status, or disability?
Fair Housing
What kinds of activities does a real estate counselor help with?
They are real estate professionals who don’t actively market properties, but instead help clients with activities such as purchasing, using, or investing in property
Nationwide Multistate Licensing System and Registry registers who?
mortgage loan originators
When demand for a commodity decreases and supply remains the same, what happens to price?
Price tends to fall
The difference between the cost basis of property and its net selling price is
capital gain
What is capital gain?
The difference between cost basis and net selling price
The use of borrowed money to finance an investment is called…
leverage
What three things affect how quickly the forces of supply and demand work
uniqueness of the property
immobility of the property
a property’s specific geographic location
A person who performs a visual survey of a property structure and writes a report for a buyer is
A home inspector
Another name for depreciation is…
cost recovery
A person or company responsible for maintaining a client’s property and maximizing the return on the client’s investment is serving as
a property manager
What is financing
the business of providing the funds that make real estate transactions possible
- through loans secured by a mortgage or deed of trust
- provided by banks, thrifts, credit unions, bankers, brokerage companies, etc.
Splitting a single property into smaller parcels is called…
subdividing
Constructing improvements on the land is called…
Development
The factors affecting the supply of real estate include:
labor force availability
material and construction costs
government controls
monetary policy that impacts interest rates and money supply
the factors affecting demand for real estate include:
population
demographics
employment and wages
What are some of the tax benefits to real estate?
depreciation
deductions
1031 property exchange to avoid taxation
treatment of income from a property sale as capital gains
What are some disadvantages of real estate as an investment
lack liquidity
requires active management
What is a Specific Performance law suit?
a law suit to compel a party to carry out the terms of a contract. If the seller and buyer agreed to terms and then the seller changed his mind after a contract was agreed upon, the buyer can take him to court. This goes back to the “uniqueness of the land” argument
Real estate vs. real property
Real estate: the land and its improvements
Real property: the land and its improvements, plus a legal bundle of rights
The legal bundle of rights includes the right to: (PEECD)
possess…
enjoy…
exclude…
control…
dispose of the land
What is title?
What does title include?
Evidence of title can be found where?
Title is the legally recognized ownership in property
Title includes the bundle of rights
Title is found in a deed
What is a deed used for?
A deed is used to transfer title of real estate
What is appurtenance?
Something that is transferred with, or “runs with” the land. It is a right or privilege associated with the property.
An appurtenance is connected to the property and ownership of the appurteance normally transfers to the new owner when the property is sold.
Can by parking spaces in a multitenant building, easements, water rights, decks, underground pools, trees, shrubs, etc.
Can air rights and air lots be sold separately
Yes
What is the difference between a column lot and a caisson lot in regards to air rights?
Column lot is a lot that extends from the surface UP to the air lot
Caisson lot is a lot that extends from the surface DOWN to the center of the earth. Caisson lots are usually easements
What is a trade fixture?
something that gets added by the tenant that, if not removed before the lease expires, becomes property of the landlord
When considering tests that are used to determine if an item is real or personal, it can be said that __________ is the primary test.
the intent of the annexor is the primary test
A tenant is leasing 100 acres of land to grow a crop of corn. One month before harvest time the tenant’s lease exipires. Based on this information, what can you do about the crops
The crops belong to the tenant, so the tenant may harvest the crops even though the lease has expired
When title is conveyed, what items are conveyed with it?
All items on the property at the time the contract was entered into are conveyed to the buyer
Avulsion is…
loss of land due to a violent act of nature
Real property is transferred with a ________. Personal property is transferred with ________
deed
bill of sale
Riparian rights vs. Littoral rights
Riparian means riverbank and are non-navigable
Littoral rights are navigable lakes, sea, or ocean
Explain reasonable use as it pertains to water rights
Both riparian and littoral rights allow a property owner to reasonably use the water. such use may be for irrigation, boating, swimming or fishing. The general rule is that property owners do not own the water, they only have the right to use the water.
what are fixtures and how are they classified?
personal items that have been annexed to the land
carpet, water heaters, shrubbery, etc.
Classified as real property
Equity
The difference between the market value of the property and the amount still owed on it is the homeowners equity in the property
What are the capital gains exclusions
Married couple filing jointly can exclude up to 500,000 from capital gains taxes
Single taxpayer is entitled up to $250,000
Leverage
the use of borrowed money
Depreciation
cost recovery
allows investors to recover the cost of an income-producing asset through tax deductions over the asset’s useful life
*Note: you can’t depreciate land; only the building
Accession
Acquisition of title or improvements as a result of additions being made to the land, or through alluvial deposits by stream.
Example of accession for an improvement would be a neighbor who builds a fence on another’s property. The owner who owns the land now owns the fence, and the neighbor who built the fence could not remove it.
Accretion
Addition of soil to the land through natural causes
i.e. errosion or land slide
Reliction
reliction refers to receding waters. The uncovered land is treated the same as alluvium soil in the sense that the property of the land owner is increased.
Example: when the lowered Lake cumberland 30 feet, the land that was exposed at the bottom of the cliff was “new” and “ours”
Erosion is the opposite of
Accretion
(because soil is lost through erosion)
“Your erosion is my accretion.”
Personal property is also called ____ or _______ and is defined as what? Give examples of each
Personalty
Chattels
Personal property is defined as anything moveable (i.e. couch, chair, rug, etc.)
Chattel is defined as any property that is not real.
Chattel Reali
A personal interest in real property. Example would be a mortgage or lease
Intangible property is property that cannot be touched. Intangible property is also known as _______
Incorporeal property
Examples: contract rights or patents, copyrights,
Severance vs. Annexation
Severance - to remove from the land; “to sever”. This changes real property to personal property
Annexation - to add to the land. This changes personal property to real property
Taxation Math Formulas
Assessed value equals…
Taxes equal…
Assessed value = market value * assessed rate
Taxes = assessed value * Tax Rate
Insurance Math
Premium equals…
Premium = insurance coverage * premium rate
