Principles of Real Estate I – Comprehensive Review

Question-and-answer flashcards covering major concepts, laws, definitions, and practices from Principles of Real Estate I lecture notes. Designed for exam preparation and rapid review.

What is the primary role of a real estate brokerage?

Overseeing the needs of the parties to a real estate transaction and seeing it through to completion.

What does an appraiser provide?

A professional opinion of the value of real property.

Define mortgage lending.

The business of providing money secured by real estate for the payment of a debt.

List four key responsibilities of a property manager.

Day-to-day operations, maintenance, tenant relations, and proper accounting.

What type of real estate professional specializes in locating apartments for tenants?

An apartment locator.

Give three benefits of homeownership.

Security, investment, and tax benefits (also occupancy).

Name the three physical characteristics of land.

Indestructibility, immobility, and non-homogeneity.

What economic characteristic of land refers to location from an economic viewpoint?

Situs.

How does scarcity affect land value?

Limited supply relative to demand increases value.

Which law form is based on ‘common sense’ and local custom?

Common law.

What 1939 Texas act protects the public from unscrupulous real estate licensees?

The Texas Real Estate License Act (TRELA).

How many members comprise the Texas Real Estate Commission (TREC)?

Nine.

Define ‘land’ in real estate terms.

The surface of the earth extending downward to the center and upward to infinity, including natural objects.

What rights bundle comes with ownership of real estate?

The bundle of rights (use, sell, lease, encumber, etc.).

What is a fixture?

Personal property that has been permanently attached and becomes real property.

List the three tests of a fixture.

Method of attachment, adaptation, and intention of the parties.

What are subsurface rights?

Rights to minerals such as oil and gas beneath the surface.

What does severance in real estate mean?

The process of converting real property to personal property.

Define police power in real estate.

Government right to regulate land use (e.g., zoning).

What is eminent domain?

Government right to take private land for public use with compensation.

What type of tax lien has highest priority on real property?

Ad valorem (property) taxes.

What happens to property if an owner dies intestate without heirs?

The state takes title through escheat.

Which freehold estate carries the maximum ownership rights?

Fee simple absolute.

Which leasehold estate has a definite beginning and ending date?

Estate for years.

What type of lien is created voluntarily, such as a mortgage?

A voluntary lien.

Give an example of a specific involuntary lien.

Property tax lien or mechanics & materialman’s lien.

What is an encroachment?

The intrusion of a structure or improvement onto another’s property.

Define easement by prescription.

Right acquired through continuous, open use without permission over time.

Which easement termination results from combining two properties?

Merger.

What water right allows use of water from a lake?

Littoral right.

Distinguish greenfield, greyfield, and brownfield.

Never developed land, land capable of redevelopment, and potentially hazardous former industrial site, respectively.

What ownership gives an individual fee simple title to a condominium unit?

Condominium ownership.

How does a cooperative (co-op) differ from condo ownership?

Residents own shares in a corporation and hold a proprietary lease; they do not own real property.

Define capital gain exemption limits for a principal residence.

Up to $250,000 for individuals, $500,000 for married filing jointly.

What database do insurers use to review past property claims?

Comprehensive Loss Underwriting Exchange (CLUE).

What is an estate in severalty?

Ownership of real property by a single individual or entity.

Which co-ownership includes right of survivorship?

Joint tenancy (also tenancy by the entirety in some states).

Explain community property.

Most property acquired during marriage is jointly owned and requires both spouses’ consent to convey.

What type of agency allows an agent to transact all matters for a principal?

Universal agency.

At what point must a Texas license holder disclose whom they represent?

At the first contact with a party to a potential transaction.

Define intermediary in Texas brokerage.

A broker representing both buyer and seller in one transaction with written consent.

Which TRELA form provides written notice of brokerage services?

Information About Brokerage Services (IABS).

What is the penalty TREC may levy per violation per day?

Up to $5,000.

How long does a consumer have to file a TREC complaint?

Four years from the incident date.

What is the maximum payment per transaction from the Real Estate Recovery Trust Account?

$50,000.

List three actions that can lead TREC to suspend or revoke a license.

Misrepresentation, commingling funds, undisclosed dual compensation (many others possible).

Name the three duties under the Canons of Professional Ethics besides fidelity and integrity.

Competency, Consumer Information Notice, and refraining from discriminatory practices.

What federal act first prohibited housing discrimination based on race?

Civil Rights Act of 1866.

Which protected classes were added by the 1968 Federal Fair Housing Act?

Race, color, religion, national origin, sex, familial status, and disability.

Define steering in fair housing.

Directing buyers/renters toward or away from areas based on protected class status.

What is redlining?

A lender’s refusal to lend in specific areas due to location.

Name two exemptions from the Americans with Disabilities Act.

Private clubs and religious organizations (also single-family homes & some historic buildings).

What government system uses township and range lines?

Government Survey System (Rectangular/Public Land Survey).

How many square feet are in one acre?

43,560 square feet.

What is a metes-and-bounds description’s essential starting element?

A point of beginning tied to a monument.

Which listing agreement guarantees a broker commission regardless of who sells the property?

Exclusive Right to Sell listing.

What Texas law protects consumers from deceptive marketing?

Deceptive Trade Practices Act (DTPA).

Who is the procuring cause of sale?

The party whose actions began an uninterrupted chain resulting in a sale.

Define puffing.

Using subjective opinions and exaggerations in marketing rather than facts.

What is a bilateral contract?

A contract binding on both parties, requiring mutual performance.

Give an example of a voidable contract.

A contract with a minor or a party under duress/intoxication.

What Texas committee writes promulgated contract forms?

The Broker-Lawyer Committee.

How many promulgated TREC residential sales contracts exist for resale?

One main: One-to-Four Family Residential Contract (Resale).

When is a contract fully executed?

When all terms are fulfilled, typically at closing.

What remedy allows a buyer to force a seller to convey title?

Suit for specific performance.

What is required to transfer personal property in a sale?

A bill of sale.

Define an option in a real estate contract.

Unilateral right allowing the buyer to terminate within an option period.

What type of lien attaches to all property an individual owns?

A general lien (e.g., IRS judgment).

Name the four unities of joint tenancy.

Time, title, interest, and possession.

Which homestead lien exceptions allow forced sale despite protection?

Ad valorem tax, HOA/POA foreclosure, M&M lien, and purchase-money mortgage foreclosure.

What does ‘fee simple absolute’ signify?

Complete ownership without limitations other than governmental powers.

Who drafts the Code of Ethics for REALTORS®?

The National Association of REALTORS® (NAR).

What is an estate at will?

A leasehold that can be terminated by either party at any time and ends upon landlord’s death.

Explain ‘indestructibility’ of land.

Land cannot be destroyed and is permanent.

What is the purpose of a buffer zone in zoning?

To separate incompatible land uses, e.g., residential from commercial.

How is a net listing commission calculated?

Broker’s commission = Sale price – Seller’s desired net.

Define assignment in contract law.

Transfer of contractual rights and obligations to another party.

What is mould in real estate context?

Fungi that may grow indoors/outdoors and can pose health risks.

Which form of agency is most limited in scope?

Special agency (limited agency).

What does ‘IABS’ stand for?

Information About Brokerage Services.

How many education hours are required for a Texas sales agent license?

180 qualifying hours.

Who invests excess funds from the Real Estate Recovery Trust Account?

TREC, typically in U.S. Treasury bills/notes.

What is the statute of frauds concerning real estate?

Requires contracts conveying interests in land to be in writing to be enforceable.

Define an executory contract.

A contract not yet fully performed; between effective date and closing.

What is a partition in real estate?

Legal division of property among co-owners, often requiring a survey.

Name three allowable tasks for unlicensed assistants in Texas.

Answer phones, type correspondence, and schedule appointments (others include greeting and general info).

What is a transactional broker?

A broker facilitating agreement without representing either party.

How does TREC define a business entity for licensure?

A domestic or foreign entity qualified to transact business in Texas.

What is a certificate holder per TREC?

A person registered to handle easement or right-of-way transactions for compensation.

Which voluntary marketing agreement promotes equal housing?

VAMA—Voluntary Affirmative Marketing Agreement between HUD and housing industry groups.

What is the penalty limit on one licensee from the Recovery Trust Account?

$100,000 aggregate.

What are ‘greyfields’?

Under-used properties ripe for redevelopment.

Define severable rights.

Rights (surface, subsurface, air) that can be separated and conveyed individually.

What Texas insurance association covers wind and hail damage on the Gulf Coast?

Texas Windstorm Insurance Association (TWIA).

What is a CLUE report used for?

Shows past insurance claims on a property for underwriting decisions.

Explain ‘fiduciary duty of loyalty’.

Agent must place client’s interests above all others, including the agent’s.

What is an ostensible agency?

Agency created when principal’s actions lead third parties to assume an agency exists.

How can an easement be terminated by release?

Holder of the easement signs a release back to the servient estate owner.

Who issues a 1099-NEC to independent contractor agents?

Their sponsoring broker.

Which protected class is NOT covered by federal fair housing?

Age.