Real Estate License Exam: Master Vocabulary Reference

Comprehensive Question and Answer flashcards covering essential real estate vocabulary, legal transfer concepts, agency duties, financing terms, appraisal approaches, leasing types, federal legislation, and land use regulations for the Real Estate License Exam.

What is a Freehold Estate?

Property ownership of unpredictable or open-ended duration.

What is Fee Simple Absolute?

The highest, most complete form of land ownership.

What characterizes a Fee Simple Defeasible estate?

Ownership that terminates if a specific condition is broken.

How is a Life Estate defined?

Ownership lasting only for the lifetime of a designated individual.

What is a Pur Autre Vie life estate?

A life estate measured by the lifetime of a third party.

What is Tenancy in Severalty?

Sole property ownership held by one individual or single entity.

What is Tenancy in Common?

Co-ownership with individual shares passing to heirs (no survivorship).

What are the core characteristics of Joint Tenancy?

Co-ownership with equal shares and right of survivorship.

What is Tenancy by the Entirety?

Joint co-ownership strictly for married couples with survivorship.

What is Community Property?

Equal (50/50) ownership of assets acquired during marriage in select states.

What is the key difference in ownership between a Condominium and a Cooperative (Co-op)?

A condo is fee simple airspace, whereas a co-op is corporate stock with a proprietary lease.

What is a Time-Share?

Purchased right to use resort property for a recurring annual time period.

What rights comprise the Bundle of Rights (PCEED)?

Possession, Control, Enjoyment, Exclusion, Disposition.

What legal control is granted by Air, Mineral, and Surface Rights?

Legal control over space above, minerals below, and land surface.

What is the distinction between Riparian and Littoral water rights?

Riparian covers flowing rivers/streams; Littoral covers static lakes/seas.

What is the doctrine of Prior Appropriation regarding water rights?

Water allocation based on historical beneficial use, not location.

What is the difference between Accretion and Avulsion?

Accretion is gradual soil growth; Avulsion is rapid soil loss by flood.

What is the distinction between Erosion and Reliction?

Erosion is slow soil loss; Reliction is dry land gained as water recedes.

What are Emblemments?

Annual cultivated crops treated as a tenant farmer's personal property.

How do Fixtures differ from Trade Fixtures?

Fixtures are real estate attachments, whereas trade fixtures are commercial tenant business equipment.

What is the difference between a Deed and Title?

A deed is the written document; title is the abstract legal ownership concept.

What roles do the Grantor and Grantee play in a real estate conveyance?

The grantor conveys title (seller); the grantee receives title (buyer).

What protection does a General Warranty Deed provide?

Maximum buyer protection; guarantees entire historical chain of title.

What does a Special Warranty Deed guarantee?

Guarantees title only against defects occurring during seller's tenure.

What is a Quitclaim Deed, and what is its primary use?

Transfers interest with zero warranties; used to clear title defects.

What is a Bargain and Sale Deed?

Conveys title with implied ownership but zero warranties.

What is the difference between a Chain of Title and an Abstract of Title?

Chain of title is a historical owner list; abstract of title is a written report of public title records.

What is Title Insurance?

A policy protecting against financial loss from past hidden title defects.

How do Voluntary Alienation and Involuntary Alienation differ?

Voluntary transfer occurs via sale or gift, whereas involuntary alienation occurs through processes like foreclosure or eminent domain.

How is Adverse Possession defined?

Acquiring legal ownership through open, hostile, continuous land use.

In agency relationships, what duties are owed to a Principal versus a Customer?

An agent represents the Principal, whereas a Customer is owed honesty only.

What is the difference between Express Agency and Implied Agency?

Express agency is created via clear agreement, whereas implied agency is created unintentionally by conduct.

What are the six fiduciary duties represented by the acronym 'OLD CAR'?

Obedience, Loyalty, Disclosure, Confidentiality, Accountability, Care.

What distinguishes Single Agency from Dual Agency?

Single agency represents one party, while dual agency represents both parties in a transaction.

What is an Exclusive Right-to-Sell listing?

A listing agreement where the broker earns a commission regardless of who finds the buyer.

What is an Exclusive Agency Listing?

A listing where the broker earns a commission unless the seller finds their own buyer.

What characterizes an Open Listing?

A unilateral agreement where only the broker who directly produces a buyer gets paid.

What is a Net Listing?

An arrangement where the broker keeps proceeds exceeding a net price target (restricted or illegal in states).

What is the difference between a Bilateral and a Unilateral Contract?

A bilateral contract is a two-way promise exchange, whereas a unilateral contract is a one-way obligation (e.g., an option).

What is the difference between a Void and a Voidable Contract?

A void contract is invalid from inception, whereas a voidable contract is valid but rescindable by a protected party.

What is the difference between an Executory Contract and an Executed Contract?

An executory contract has pending obligations in progress, while an executed contract is fully performed.

What is Consideration in contract law?

An item of legal value (money, promises) exchanged to make a contract binding.

What is a Contingency in a contract?

A contract clause requiring a specific condition to occur for enforceability.

What is the difference between Novation and Assignment?

Novation replaces a contract/party with a new one, whereas assignment transfers rights to a third party.

What is Specific Performance?

A court order forcing a breaching party to fulfill contractual terms.

What is the difference between Co-mingling and Conversion?

Co-mingling is the illegal mixing of client funds, whereas conversion is the illegal spending of client trust funds.

In mortgage financing, who is the Mortgagor and who is the Mortgagee?

The mortgagor is the borrower; the mortgagee is the lending institution.

What is a Promissory Note?

A signed personal agreement promising debt repayment under terms.

How does a Mortgage differ from a Deed of Trust?

A mortgage is a 2-party lien instrument, whereas a deed of trust is a 3-party security document with a neutral trustee.

How is the Loan-to-Value Ratio (LTV) defined?

The loan amount expressed as a percentage of property value/price.

What are Discount Points and what do they cost?

Upfront cash fees paid at closing ($1\text{ point} = 1\%$) to lower the interest rate.

What four elements make up the PITI monthly housing payment?

Principal, Interest, Taxes, Insurance.

What is an Amortized Loan?

Scheduled payments covering both principal and interest to zero balance.

What is a Balloon Mortgage?

Partial amortization ending in a single large final lump-sum payment.

What is an Adjustable-Rate Mortgage (ARM)?

A mortgage where the interest rate fluctuates periodically based on market indices.

What causes Negative Amortization?

A monthly payment below the interest due, causing the loan balance to increase.

What is the difference between a Package Mortgage and a Blanket Mortgage?

A package mortgage covers real + personal property, whereas a blanket mortgage covers multiple parcels under one loan.

What is a Bridge Loan?

A short-term interim loan backed by current equity to buy a new home first.

How do Conventional, FHA, and VA loans differ regarding backing?

Conventional loans are uninsured loans, FHA loans are FHA-insured, and VA loans are VA-guaranteed veteran loans.

What is the difference between the Primary and Secondary Mortgage Markets?

The primary market originates borrower loans, while the secondary market buys and sells existing loans.

What does a Defeasance Clause require?

Requires the lender to clear the mortgage lien upon full loan payoff.

What is the difference between an Acceleration Clause and an Alienation Clause?

An acceleration clause demands full payoff on default, whereas an alienation clause demands full payoff on property sale.

What is Equitable Redemption?

A borrower's legal right to clear default debt before a foreclosure sale.

What is a Buydown?

An upfront payment lowering the interest rate/payments temporarily or permanently.

What is the difference between Market Value and Market Price?

Market value is the estimated probable selling price, whereas market price is the actual final price paid.

What is the difference between an Appraisal and a CMA?

An appraisal is a formal licensed valuation report, whereas a CMA is an informal agent pricing guide.

What is the Principle of Substitution?

The principle that value maximum is set by the cost of purchasing an equal replacement.

How is Highest and Best Use defined?

The single legal, feasible, and most profitable utilization of land.

What is the relationship between Assemblage and Plottage?

Assemblage is the physical combining of plots, while plottage is the resulting increase in overall value.

How does the Sales Comparison Approach determine value?

Value based on comparing recent similar local property sales.

How is value calculated under the Cost Approach?

Land value + building replacement cost minus total accumulated depreciation.

How is property value calculated using the Income Capitalization Approach?

Value is calculated by dividing Net Operating Income by Cap Rate.

What is the difference between Functional Obsolescence and External Obsolescence?

Functional obsolescence is an outdated internal layout, whereas external obsolescence is caused by outside factors like external environmental noise.

In leasing, who is the Lessor and who is the Lessee?

The lessor is the property owner/landlord; the lessee is the tenant/renter.

What defines an Estate for Years?

A lease with an exact fixed start and end date (no notice required).

What defines a Periodic Tenancy?

A lease automatically renewing periodically (e.g., month-to-month).

What is the difference between a Gross Lease and a Net Lease (NNN)?

Under a gross lease, the tenant pays flat rent; under a net lease, the tenant pays rent plus operating expenses.

What is a Percentage Lease?

A retail lease charging base rent plus a percentage of gross monthly sales.

What is the difference between Actual Eviction and Constructive Eviction?

Actual eviction is the legal removal of a tenant, whereas constructive eviction occurs when a tenant leaves due to uninhabitable conditions.

What did the Civil Rights Act of 1866 mandate?

A complete federal ban on race discrimination without exception.

What does the Fair Housing Act of 1968 ban?

Bans discrimination across 7 protected classes (Fresh Corn).

How are Blockbusting, Steering, and Redlining differentiated?

Blockbusting is inducing panic selling; Steering is directing buyers toward or away from areas; Redlining is denying lender loans by geographical area.

What does TILA / Reg Z mandate, and what does APR express?

Mandates full credit disclosures; APR expresses the true annual borrowing cost.

What are the primary mandates of RESPA?

Bans illegal kickbacks and regulates closing disclosure procedures.

What practices are banned by the Sherman Antitrust Act?

Federal law banning price-fixing, market allocation, and boycotts.

What four basic government powers are represented by PETE?

Police Power, Eminent Domain, Taxation, Escheat.

What is Condemnation?

The legal judicial process executing the power of eminent domain.

What is the difference between a Variance and a Nonconforming Use?

A variance is a granted exception to zoning, while a nonconforming use is a grandfathered existing use.

What is the difference between an Ad Valorem tax and a Special Assessment?

Ad Valorem is a general value tax, whereas a special assessment is a tax for local public improvements.

How do Quitclaim Deeds and Quiet Title Suits differ in clearing title defects?

Quitclaim Deeds transfer interest with zero warranties, whereas Quiet Title Suits resolve clouds via judicial decree.

How do Joint Tenancy and Tenancy in Common differ regarding the transfer of shares upon death?

Joint Tenancy features right of survivorship (bypassing heirs); Tenancy in Common passes to heirs via probate.