Unit 1: Introduction To Modern Real Estate Practice Flashcards
What is a brokerage and broker?
A brokerage is the business of bringing together people who are interested in making a real estate transaction.
A broker acts as an agent of the buyer and seller (or both) in negotiating the sale, purchase, or rental of property.
What is a sales agent?
A sales agent is a license holder employed by or associated with a broker who conducts brokerage activities on behalf of the broker for a fee or commission.
What is residential brokerage? What are the other types of real estate brokerage?
Residential brokerage involves the sale and purchase of a residential property. Other types of real estate brokerage as property management, apartment
locating, commercial brokerage, and the sale of farm and ranch property, require specialization
and sometimes additional education and experience to maintain competency in that area.
What are some of the real estate discipline?
Some real estate–related disciplines include appraising, lending and financing, property
inspection, property development, real estate counseling, real estate education, title insurance
and abstracting, urban planning, time-share sales, petroleum landsmen and women, and
easement and right-of-way registran
What are the different types of real estate property? The market for each of these types of properties can be further subdivided into ?
—residential—all property used for housing, from small city lots to acreage, both single-family and multifamily, in urban, suburban, and rural areas;
—commercial—business property, including offices, shopping centers, stores, theaters, hotels, and parking facilities;
—industrial—warehouses, factories, and land in industrial districts;
—agricultural—farms, timberland, pastureland, ranches, and orchards;
—special purpose—places of worship, schools, cemeteries, and government-held lands; or
—mixed use—any lawful combination of the other five basic categories of real property permitted by local zoning
The market for each of these types of properties can be further subdivided into (1) the sales
market, which involves the transfer of title, and (2) the rental market, which involves the use
of space on a lease basis.
The Texas Legislature created what by amending the TRELA?
The Texas Legislature created the Education Standards Advisory Committee (ESAC) by
amending the Texas Real Estate License Act (TRELA) in 2011
What is the mission of ESAC?
The mission of the ESAC is to
regularly review and revise curriculum standards, course content requirements, and instructor
certification requirements for qualifying and continuing education courses.
How is the purchase of real estate is an entirely different type of transaction from the purchase of
personal property such as groceries, clothing, fuel, automobiles, etc?
Although
every type of sales transaction creates a change of ownership involving certain relatively simple
legal problems, even the simplest of real estate transactions brings into play a body of complex
laws.
Real estate brokers and sales agents must have a broad understanding of law and how various
laws affect real estate activities.
Generally in the US there are how many sources of real estate law that affect the ownership and transfer of real estate? And what are they?
There are 7 sources of real estate law:
1. These sources are the Constitution of the United States;
2. laws passed by Congress;
3. federal regulations adopted by the various agencies and commissions createdby Congress;
4. state constitutions;
5. laws passed by state legislatures; 6. ordinances passed by cities,
towns, and other local governments; 7. court decisions.
What countries have influenced the development of Texas legal principles? Give example
The Spanish, Mexican, and
French because they among the “six flags over Texas.
Texas has adopted the English common law for
certain rules, such as riparian water rights, and has drawn heavily on Spanish law for doctrines
such as community and separate property.
The primary purpose of the U.S. Constitution and the individual state constitutions?
The primary purpose of the U.S. Constitution and the individual state constitutions is to
establish the rights of citizens and delineate the limits of governmental authority.
Example: 14th amendment
What do Laws passed by Congress and by state and local legislative bodies establish?
Laws passed by Congress and by state and local legislative bodies may establish specific provisions,
or they simply may set broad standards of conduct and establish administrative enforcement
agencies. Federal fair housing laws prohibiting discrimination are examples of laws passed by
the U.S. Congress; the Texas Real Estate License Act, which regulates real estate professionals,
is a state statute passed by the Texas Legisla
What do Laws passed by Congress and by state and local legislative bodies establish?
Laws passed by Congress and by state and local legislative bodies may establish specific provisions,
or they simply may set broad standards of conduct and establish administrative enforcement
agencies. Federal fair housing laws prohibiting discrimination are examples of laws passed by
the U.S. Congress; the Texas Real Estate License Act, which regulates real estate professionals,
is a state statute passed by the Texas Legisla
Governmental agencies that enact rules and regulations range from the federal Consumer
Finance Protection Bureau (CFPB) to the Texas Real Estate Commission to local zoning
boards. The regulations passed by these agencies are a means of implementing and enforcing legislative acts; they provide detailed information regarding legal and illegal actions and
practices; they designate penalties and violations; and they expand on the law and have the
effect of law
What do Decisions handed down by federal, state, and municipal courts establish?
Decisions handed down by federal, state, and municipal courts serve to clarify and interpret laws,
regulations, and constitutional provisions. By applying and interpreting the laws in relation
to a specific event, a court decision expands the meaning of the law, establishing a precedent
that may be used as a standard in subsequent similar cases.
Real estate ownership and transfer is all affected by common law
Real estate ownership and transfer are affected by common law, which is the body of rules
and principles founded on tradition and court decisions. It is derived mainly from practices
developed in England and, as it applies to the United States, dates back to practices in effect
during the American Revoluti
What is courts of equity?
Some remedies provided under common law were considered too harsh, and as a result, courts
of equity evolved to provide relief on the basis of equitable principles. Although Texas does
not have separate courts of law and equity, Texas judges are permitted to grant both legal and
equitable remedies to ensure justice.
The general sources of law encompass what specific areas that are important to the
real estate practitioner?
The general sources of law encompass a number of specific areas that are important to the
real estate practitioner. These include the law of contracts, general property law, landlord-tenant
law, the law of agency (which covers the obligations of a broker to the person who engages
his services), the real estate license law, and consumer protection laws.
In 1949 the Texas Legislature established what? What was it changed to in 1955?
In 1949, the Texas Legislature established the Texas Real Estate Commission (TREC).
.
The act’s name was changed to the Texas Real Estate License Act (TRELA) in 1955. The
purpose of TRELA is to protect the public through regulation of real estate license holders,
real estate inspectors, residential service companies, and entities offering timeshare interests.
What is The Texas Real Estate Commission (Commission) ?
The Commission oversees the licensing
and certification of real estate sales agents and brokers, home inspectors, and right-of-way
registrants; the registration of time-share developments and home warranty companies; the
accreditation of prelicense and continuing education providers; and the approval of real estate
courses and instructors.
What is the Texas Appraiser Licensing and Certification Board (TALCB)?
It is housed within the Texas Real Estate Commission that licenses real estate
appraisers in Texas under state and federal laws.
Who is and isn’t required to have a real estate license?
Persons who deal only with their own property are not required to hold a real estate license.
However, any person who, for compensation or the promise of compensation, lists or offers
to list; sells or offers to sell; buys or offers to buy; negotiates or offers to negotiate—either
directly or indirectly—for the purpose of bringing about the listing, sale, exchange, purchase,
option to purchase, auction, rental, or leasing of real estate is required to hold a valid real
estate broker’s license.
The members of the National Association of Real
Estate Brokers (NAREB) are known a
Realtists
What is the largest real estate trade organization?
.
The largest real estate trade organization is the National Association of REALTORS® (NAR),
founded in 1908. It serves members’ interests by keeping them apprised of developments
in their field, publicizing the services of members, improving standards and practices,
and recommending or taking positions on public legislation and regulations affecting the
operations of members and member firms.
Only members of what may be called Realtors? Other agents are called?
NAR
Only members of NAR may be called REALTORS®; other agents are simply real estate license
holders or agents
What are the seven basic characteristics of real estate that determine its value and affect its use?
relative scarcity, improvements, permanence of investment, area preference, immobility,
indestructibility, and nonhomogeneity. These characteristics fall into two broad categories:
economic and physical.
RIPA & IIN
Describe relative scarcity? Is it a physical or economic characteristic of real estate?
So, scarcity in this sense refers to the fact that although land exists elsewhere, the amount of land available in a high-demand area is limited and therefore valuable.
In economics, “scarcity” doesn’t mean that there’s literally none of something available. It means that the supply of a resource is limited relative to the demand for it. With land, the total amount is fixed because you can’t “make” more land. However, the value or usefulness of land varies by location and quality, which creates scarcity in specific areas.
Describe “Improvements”. Is it a physical or economic characteristic of real estate?
Improvements on land refer to any construction or modification made to a piece of property that can affect its value and potentially impact surrounding areas.
For example, if someone builds a new shopping mall on a vacant piece of land, this could make nearby properties more valuable because they are now closer to amenities. The mall may attract businesses, increase foot traffic, and make the area more appealing for other types of development, which can raise property values in the surrounding neighborhood.
On the other hand, if a factory is built, especially one that produces noise or pollution, it might lower the value of nearby homes or properties because people might not want to live or work near it. This negative impact could ripple through the surrounding area, causing a decrease in property values.
So, improvements affect not only the parcel where the change is made but can also influence surrounding parcels and even whole communities, either positively or negatively, depending on the nature of the improvement.
Describe Permanence of Investment. Is it a physical or economic characteristic of real estate?
“Permanence of investment” in real estate refers to the idea that certain investments made in land or property are long-lasting and can’t easily be moved or changed. When money and labor are spent on things like building a structure or installing essential infrastructure (like water, drainage, and electricity), these improvements are “fixed” — they can’t be picked up and relocated, and they usually last a long time.
For example, when a city installs water lines or electricity in an area, those installations are intended to be used for decades. Similarly, if someone builds a shopping center, they expect it to be useful and profitable over its “economic life,” often 20 to 30 years.
This permanence means that, when investing in real estate or making land-use decisions, it’s crucial to consider not only the current needs but also what might be needed or valuable far into the future. Investors think long-term about how useful and profitable their improvements will be over many years, as changing or removing these fixed investments can be costly or difficult.
Describe Area of Preference. Is it a physical or economic characteristic of real estate?
“Area preference,” or situs, refers to the idea that people value certain areas or locations differently based on their personal preferences and needs, not just on physical characteristics. This concept explains why two similar plots of land, or houses of the same size, can have different values depending on where they are located and how people feel about those locations.
For example, some people might prefer to live on a corner lot because it offers more space, visibility, or access, and they might be willing to pay more for it. On the other hand, someone else might prefer a lot in the middle of a block because it feels quieter or more private, so they’d value it more.
This preference for certain areas influences property values significantly, often making area preference one of the most important economic characteristics of land. It’s not just about physical location but about how desirable people find an area, which can depend on things like schools, safety, convenience, or even aesthetic appeal.
Describe Immobility. Is it a physical or economic characteristic of real estate?
“Immobility” in real estate means that land cannot be moved. While buildings and improvements can be constructed or even removed, the location of a piece of land will always stay the same — it’s fixed geographically.
This characteristic of immobility affects the real estate market in a couple of ways:
- Land Can’t Move: Imagine that each piece of land is “stuck” in one place forever. You can’t pick up a piece of land in Texas and move it to California. This is what “immobility” means in real estate.
- Property Taxes and Government Revenue: Because the amount of land in an area doesn’t change, local governments (like cities and counties) can rely on property taxes from this land to fund public services, like schools and roads. Since they know land won’t go anywhere, they can predict tax revenue and plan long-term. providing stable income for local governments
- he fixed position of land creates local markets, where each area has its own value and demand based on what people in that area want or need. This is why real estate is so “local”; each area has its own distinct market based on what people value about that location.
real estate is very “local.” Different locations have unique markets, values, and characteristics.
Describe Indestructibility. Is it a physical or economic characteristic of real estate?
Here’s an explanation of the concept that land is indestructible and not insurable or depreciable:
- Indestructibility of Land
• Definition: Land itself is considered physically indestructible because it cannot be destroyed or worn out in the same way that buildings or other improvements (such as roads, structures, or landscaping) can. Regardless of natural disasters or human activity, the land’s physical presence remains.
• Impact on Value: While land may retain its physical presence, factors like economic changes, zoning regulations, or environmental damage can reduce its market value. However, this reduction is not due to physical depreciation but external factors. - Depreciation and Improvements
• Improvements (Depreciable): Structures built on land, like buildings, degrade over time due to wear and tear, obsolescence, or environmental factors. These improvements can lose value over time, which is accounted for through depreciation in accounting.
• Land (Non-Depreciable): Unlike improvements, land itself does not deteriorate or wear out, so it cannot be depreciated. In accounting, depreciation applies only to assets that have a limited useful life, which does not include land. - Insurability
• Land is Not Insurable: Insurance typically covers damage or loss of improvements (such as buildings) caused by events like fire, storms, or theft. Since land cannot be physically destroyed, there is no need to insure it. However, improvements on the land (such as houses or other structures) can be insured.
• Land Value Fluctuations: While the market value of land may decrease (due to economic or environmental changes), these changes are not considered insurable risks because they don’t involve physical damage to the land itself.
Summary
Land is considered permanent and indestructible, which means:
1. It cannot be depreciated because it does not physically wear out.
2. It is not insurable since it cannot be destroyed by physical events.
3. Improvements (buildings, infrastructure) on the land, however, can depreciate and can be insured against risks like natural disasters or accidents.
This concept is crucial in real estate investing and accounting, as it affects both risk management and tax treatment of real estate assets.
Describe Nonhomogeneity. Is it a physical or economic characteristic of real estate?
- Nonhomogeneity (or Heterogeneity)
• Definition: Nonhomogeneity means that no two pieces of land are exactly alike. Even if two parcels of land have similar features (size, shape, or usage), they differ because of their location and other unique characteristics (elevation, soil type, surrounding infrastructure, etc.).
• Why It Matters:
• Each property has a unique legal identity, which is reflected in its legal description and address.
• This uniqueness affects property value, as location plays a major role in how desirable a property is.
• When transferring or selling property, the law must clearly define which unique piece of land is being referred to, preventing disputes over ownership or legal rights. - What is a Parcel of Land?
• A parcel is a specific, defined portion of land. It’s essentially a “unit” of land with boundaries and legal identification (like a legal address or description).
• Parcels can vary in size from small residential lots to large agricultural or commercial properties.
• Each parcel is identified in legal documents such as deeds, property tax records, and zoning maps.
Example:
If someone owns a 5-acre lot, that entire 5-acre area is a parcel of land.
- What is a Lien?
• A lien is a legal claim placed on a property by a creditor to ensure that a debt will be repaid.
• How it works:
• If someone borrows money to buy a home (e.g., through a mortgage), the lender places a lien on the property.
• If the borrower fails to repay the loan, the lien gives the lender the right to foreclose on the property and sell it to recover the debt.
• Liens can be placed for various reasons, including:
• Mortgages (most common)
• Unpaid taxes
• Unpaid contractor work (e.g., a mechanic’s lien)
Example:
You take out a $200,000 mortgage. The lender has a lien on your home. If you fail to make payments, the lender can force a sale of the property to recoup their money.
Summary
• Nonhomogeneity: No two parcels of land are identical due to differences in location and features.
• Parcel: A defined portion of land with legal boundaries and identification.
• Lien: A legal claim on property used as collateral for a loan or unpaid debt, which gives the lender rights over the property if debts are not paid.
different land features impact its best use. Some specific physical and economic factors that affect land use include
contour and elevation of the parcel, known as topography;
prevailing winds;
transportation;
public improvements; and
availability of natural resources (such as water) How do physical characteristics like topography and prevailing winds influence the suitability of land for residential versus industrial use?
Hilly or forested land is better for residential use but requires significant work for industrial development.
Flat land near highways may not be suitable for residential areas due to noise but is ideal for industrial, commercial, or office purposes.
Prevailing winds can affect comfort and safety, influencing where homes or factories are built.
