Texas Real Estate Principles II and Real Estate Glossary Review

Comprehensive vocabulary flashcards covering financing, appraisal, leasing, land use controls, licensing law, agency, fair housing, and core definitions for Texas Real Estate Principles II.

Primary Mortgage Market

The market where home mortgage loans are originated, most commonly by savings associations, commercial banks, mortgage banks, or mortgage brokers.

Mortgage Broker

An intermediary who brings borrowers and lenders together, locates potential borrowers, processes preliminary loan applications, and submits them to lenders for approval without lending own funds or servicing the loans.

Loan-to-Value Ratio (LTV)

The ratio of debt to value of a property, calculated as $\text{Loan} \div (\text{lesser of sales price or appraisal}) = \text{LTV}$.

Private Mortgage Insurance (PMI)

Insurance required by lenders unless the borrower puts $20\%$ or more down on the loan, which protects the lender against default on conventional loans (normally covering the top $20\%$ to $25\%$ of the loan).

Automated Underwriting

The process of electronically evaluating a loan application, assessing a borrower's ability to repay, and providing a recommendation for or against loan approval using computer models.

FHA Loan

A mortgage loan insured by the Federal Housing Administration and made by an approved lender, requiring both an up-front mortgage insurance premium and a monthly premium.

Notice of Value

A document issued by the U.S. Department of Veterans Affairs that sets the maximum VA loan amount and states the current market value of a property appraised for a VA loan.

Texas Home Equity Loan Limit

A statutory restriction in Texas law limiting equity loans to a maximum of $80\%$ of the home's value, factoring in any existing liens.

Reverse Mortgage

A form of mortgage enabling homeowners aged $62$ or older to borrow against the equity in their homes, receiving payments to meet living costs without personal liability (nonrecourse).

Takeout Loan

A long-term loan obtained by a builder or developer to repay or take out the interim construction financing lender once construction is completed.

Contract for Deed

A sales contract wherein the buyer takes possession and equitable title while paying the purchase price in installments, but the seller retains legal title until contract terms are fully satisfied.

Regulation Z

Federal regulations implementing the Truth in Lending Act that require credit institutions to inform prospective borrowers of the true cost of credit and disclose the interest as an annual percentage rate ($\text{APR}$).

Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA)

A $1989$ federal act passed to restore stability to the savings and loan industry and regulate the appraisal industry nationwide by requiring licensed or certified appraisers for most real estate transactions.

Four Characteristics of Value (DUST)

The four elements required for a property to have monetary worth in the real estate market: demand (effective demand), utility, scarcity, and transferability.

Sales Comparison Approach

An appraisal method that estimates value by comparing the subject property with recently sold comparable properties, considered the most reliable method for residential real estate.

Reproduction Cost

The construction cost at current prices to create an exact duplicate of the subject building using the same materials and design.

Replacement Cost

The construction cost at current prices of a property that serves the same function or purpose as the original structure, without being an exact duplicate.

External Obsolescence

A form of depreciation caused by unchangeable negative factors outside the subject property itself, such as environmental, locational, or social forces.

Functional Obsolescence

A loss in property value resulting from outmoded, inadequate, or inappropriate physical design or structural features within the improvements.

Income Approach

An appraisal method that calculates property value by dividing the annual net operating income ($\text{NOI}$) by the capitalization rate: $\text{Value} = \frac{\text{Net Operating Income}}{\text{Capitalization Rate}}$.

Gross Rent Multiplier (GRM)

An informal valuation ratio for single-family or smaller residential rental properties, calculated by dividing the sales price by its gross annual (or monthly) rent.

Reconciliation

The final step in the appraisal process in which an appraiser objectively weighs the reliability and validity of value indications obtained from the sales comparison, cost, and income approaches to reach a single supportable conclusion of value.

Comparative Market Analysis (CMA)

An abbreviated comparison of prices of recently sold homes similar to a subject property prepared by a licensed agent or broker to assist clients in establishing pricing or offers.

Estate for Years

A leasehold interest that continues for a specific, definite period of time with a set beginning and expiration date.

Tenancy at Sufferance

The unauthorized tenancy that arises when a tenant who originally acquired lawful possession continues to occupy the premises without the landlord's consent after lease rights have expired.

Actual Eviction

A legal proceeding (suit for possession or forcible detainer) brought by a landlord to physically remove a defaulted tenant from the premises following a court order.

Constructive Eviction

The right of a tenant to abandon the leased premises and terminate rent liability when the landlord's negligence makes the premises uninhabitable or severely impairs enjoyment.

Texas Security Deposit Return Window

The statutory requirement that a Texas landlord must refund a security deposit or deliver an accounting of damages within $30\text{ days}$ of the tenant surrendering the premises.

Ground Lease

A lease covering only land, on which the tenant typically owns or is required to erect a building, usually running for a long term of $50$ or more years.

Extraterritorial Jurisdiction (ETJ)

The unincorporated land extending $\frac{1}{2}$ to $5\text{ miles}$ beyond the boundary of an incorporated village, town, or city over which the municipality exerts subdivision approval and annexation potential.

Variance

A permitted exception or waiver granted by a zoning board of adjustment allowing a property owner to build or utilize a parcel outside standard compliance with a specific zoning restriction.

Laches

An equitable doctrine barring a claim or legal injunction because of unreasonable delay or failure to assert a right in a timely manner.

Sunset Commission

A Texas statutory agency responsible for periodically evaluating state agencies, commissions, and boards to recommend retaining or abolishing them.

Real Estate Recovery Trust Account Limits

Statutory recovery payment limits in Texas capped at $125,000$ for claims arising from a single transaction and $250,000$ maximum for claims against a single license holder.

TREC Broker-Lawyer Committee

A $13$-member committee that drafts and revises standard contract forms promulgated by TREC, including $6$ members appointed by the Texas Real Estate Commission.

Information About Brokerage Services (IABS)

A written statutory notice summarizing brokerage representation options that license holders in Texas must deliver at the first substantive dialogue concerning a transaction.

Intermediary Broker

A broker in Texas negotiated by written agreement to represent both parties to a transaction in a fair and impartial manner, replacing traditional common-law dual agency.

Civil Rights Act of 1866

The first federal civil rights statute guaranteeing equal property rights to all U.S. citizens and prohibiting all racial discrimination in real property transactions without exception.

Fair Housing Act of 1968

Title VIII of the Civil Rights Act of 1968, which prohibits discrimination in housing on the basis of race, color, religion, sex (including gender identity and sexual orientation), national origin, disability, or familial status.

Blockbusting

The illegal practice of inducing homeowners to sell their properties by implying or stating that members of a protected minority class are entering the neighborhood.

Steering

The illegal practice of channeling prospective home buyers toward or away from specific neighborhoods based on protected-class status to maintain or alter the demographic character.

Redlining

The unlawful practice of lenders or insurers refusing loans or limiting financial services to specific geographic communities without regard to individual qualifications.

Business Interruption Insurance

A commercial insurance policy covering lost rent or income when a property becomes untenable due to a covered disaster.

Casualty Insurance

Insurance protecting property owners against financial losses resulting from theft, vandalism, and the destruction of equipment.

Defeasance Clause

A mortgage or lease provision that cancels the lender's or landlord's specified right or lien upon the complete satisfaction of the debt or contractual condition.

Alienation Clause

A provision in a mortgage or deed of trust (due-on-sale clause) making the entire remaining loan debt due immediately if the mortgagor transfers or sells the secured property.

Habendum Clause

The deed provision beginning with 'to have and to hold' that follows the granting clause and specifies the extent or quantity of the ownership estate conveyed.

Emblements (Fructus Industriales)

Annual crops produced through labor and cultivation that are legally considered personal property and can be harvested by a tenant after lease expiration.

Allodial System

A system of real property ownership in which individuals hold absolute title free and clear of sovereign rents or governmental overlord duties, in contrast to feudal tenure.

Vara

A traditional Texas legal land measurement equal to $33\frac{1}{3}\text{ inches}$.

Subrogation

The substitution of one creditor or insurer into the legal rights and remedies of a claimant after paying an insurance claim or debt.

Novation

The legal act of substituting a new contract or obligation in place of an existing one, or substituting new contracting parties and discharging the original parties.