Maryland Real Estate Licensing Exam Review

A complete set of vocabulary flashcards covering finance, law, ownership, ethics, and environmental issues for the Maryland Real Estate licensing exam.

USURY

In Maryland, charging interest at a rate higher than $24\%$ on second mortgages and land installments.

MORTGAGOR

The borrower in a real estate financing transaction.

MORTGAGEE

The lender in a real estate financing transaction.

PITI

The short way to say principal, interest, taxes, and insurance.

DEFICIENCY JUDGEMENT

A judgement a bank may be able to secure against a borrower if the bank takes back a property and is not able to sell it for what was owed on the note.

DEFEASANCE CLAUSE

A clause requiring the lender to execute a release or discharge that is recorded when the loan is paid off.

SUBORDINATION

An example of when an existing first trust is put in a junior position to a new loan, such as a construction loan.

SHORT SALE

An agreement by the lender to accept less than what is owed on a property when it is likely to sell for less than the debt.

ESCROW

An account where typically $\frac{1}{12}$ of a property's real estate taxes and insurance are paid monthly and held by the bank.

EQUITABLE RIGHT OF REDEMPTION

The provision that if, after default but before the foreclosure sale, the borrower pays the lender the amount in default, the borrower can redeem their property.

FANNIE MAE

An entity that creates mortgage-backed securities containing conventional, FHA, or VA loans.

SECONDARY MORTGAGE MARKET

The market where mortgage loans are sold after they have been made to consumers.

PRIVATE MORTGAGE INSURANCE

Insurance that may be required if a loan has a loan to value ratio higher than $80\%$.

CONVENTIONAL

Loans that are not government insured or guaranteed.

TRUTH IN LENDING ACT

An act requiring a lender making residential loans to inform the borrower of the true cost of obtaining credit.

AMORTIZED

A loan where each payment is applied first to the interest due and then to principal reduction.

VA LOAN

A loan backed but not funded by the U.S. Department of Veterans Affairs.

BLANKET LOAN

A loan typically obtained by a builder covering all the lots in a subdivision.

7% 30 year monthly payment factor

$\$6.65$ per $\$1000$ of loan amount.

7% 15 year monthly payment factor

$\$8.98$ per $\$1000$ of loan amount.

CODE OF MARYLAND REGULATIONS

The source of administrative law that, along with statutory law like the Brokers Act, governs real estate brokerage.

ASSOCIATE BROKER

One of the three levels of licenses issued by the Real Estate Commission, alongside broker and salesperson.

PSI EXAM

The exam candidates must pass within $12$ months after completing the $60$ hour education requirement.

MARYLAND REAL ESTATE COMMISSION (MREC)

A body consisting of nine members, five of whom hold real estate licenses.

MAXIMUM MREC PENALTY

A penalty not to exceed $\$5,000$ for the first proven violation.

EXECUTIVE DIRECTOR

The individual who directs the day-to-day operations of the Maryland Real Estate Commission.

GUARANTY FUND MAXIMUM

The maximum payout from this fund is $\$50,000$.

IRREVOCABLE CONSENT

A submission required for salesperson, associate broker, and broker applicants who are not residents of Maryland.

INACTIVE STATUS

A status in which a licensee may not provide real estate brokerage services through that license.

ETHICS VS. LAW

Ethics often require a higher standard than the law.

PRESENTATION OF OFFERS

The requirement that even ridiculously low offers must be presented to the seller.

AGENT FIDUCIARY

A real estate agent is a fiduciary to a buyer client, while a loan officer is not.

MD DEPARTMENT OF THE ENVIRONMENT

The agency with which residential rental properties built before $1978$ must be registered.

TRIENNIAL ASSESSMENT

The procedure used in Maryland for assessing property.

ASBESTOS FRIABILITY

When asbestos begins to break or crumble.

FIRST TIME HOMEBUYER IN MD

An individual who does not pay the State Transfer taxes.

MOLD

A substance that can cause serious health problems if it contains mycotoxins.

MECHANICS LIEN

A specific, involuntary lien giving security interest to those who perform labor or furnish material to improve a property.

LEAD BASED PAINT

A substance found in many houses built before $1978$.

GENERAL LIEN

A lien that affects all of a debtor's property.

SPECIFIC LIEN

A lien that affects only identified property.

SUPERFUND

A fund established by the Comprehensive Environmental Response Compensation, and Liability Act to clean up uncontrolled hazardous waste sites.

JUDGMENT

A general, involuntary, equitable lien issued by a court on all real and personal property owned by a debtor.

GROUND LEASE/GROUND RENT

A situation where tenants own the improvements on the land, but not the land itself.

MD SECURITY DEPOSIT LIMIT

A deposit that can total no more than two months' rent.

MD LEAD BASED PAINT COMPLIANCE

Includes registering the property with the Maryland Department of the Environment and providing tenants with a pass certificate.

STATUTE OF FRAUDS

The law requiring all leases for more than one year to be in writing to be enforceable.

FIXTURE

An item, such as a ceiling fan installed by a tenant, that becomes the property of the landlord.

NET LEASE

A lease where the tenant pays rent plus all or most of the property expenses.

GENERAL AGENT

The role of a property manager when administering an investment property for an owner.

PREVENTATIVE MAINTENANCE

Regularly scheduled activities like painting and seasonal servicing of HVAC systems.

RISK MANAGEMENT STRATEGIES

The four strategies are avoid, control, transfer, or retain.

CASH FLOW REPORT

A summary of income and expense for a rental management property.

COMPARATIVE MARKET ANALYSIS

A report by a real estate professional examining market statistics to provide likely property value, but it is not an appraisal.

CLOSING DISCLOSURE

A document given to the borrower and seller itemizing all charges related to the closing.

SALES COMPARISON APPROACH

An appraisal method based on the principle of substitution.

LOAN ESTIMATE

A document that must be given to the borrower no later than $3$ days after loan application.

PLOTTAGE

When joining two or more properties results in a larger increase in value than the sum of their individual prices.

PRORATED

The typical method for dividing real estate taxes based on the settlement date.

BUYER'S RIGHT OF SELECTION

The Maryland law stating buyers are entitled to select their own title insurance, settlement company, escrow company, or title attorney.

INCOME APPROACH

An appraisal method well suited for a residential $10$ unit apartment building.

OUT OF STATE OWNER TAX

In Maryland, if property is sold by an individual out of state owner, $8\%$ of the total payment must be withheld.

FUNCTIONAL OBSOLESCENCE

A condition where a house suffers from design flaws, such as a $2000$ square foot house with only one bathroom.

CONDOMINIUM

Fee simple ownership of an individual unit with a shared tenancy-in-common interest in common elements.

SEVERALTY

Sole ownership; property owned by one person only.

COMMUNITY PROPERTY

A system where married couples are considered equal parties and property acquired during marriage is owned equally.

COOPERATIVE

A development owned by a corporation where owners receive a proprietary lease to their unit.

PARTITION

A lawsuit that can be a remedy for a joint tenant who wants to sell when other tenants do not agree.

RIGHT OF SURVIVORSHIP

The feature of joint tenancy and tenancy by the entirety that makes them not inheritable.

GENERAL PARTNERSHIP

A business form where all owners participate in management and can be held equally liable.

INTRA-COMPANY AGENTS

The two persons (other than the broker) a Maryland broker must appoint to represent each party in a dual agency transaction.

STIGMATIZED PROPERTY

A property that may be less desirable because of an event like a murder.

MINISTERIAL ACT

An act that assists another person to fulfill a contract but does not involve discretion or the licensee's own judgement.

JONES V. MAYER

The court case that reaffirmed the Civil Rights Act of 1866, establishing no discrimination based on race.

BLOCKBUSTING

Using scare tactics regarding a protected group to persuade someone to sell their house.

REDLINING

When a lender refuses to loan money to a certain area based on demographic makeup.

AMERICANS WITH DISABILITIES ACT (ADA)

The law requiring businesses and public services to be fully accessible.

MD EARNEST MONEY DEPOSIT

Funds that must be deposited no later than $7$ business days from contract acceptance.

LEVERAGE

The use of borrowed money to finance investments.

APPURTENANCE

A benefit that goes along with ownership of a property and transfers to the new owner when sold.

ACCRETION

The process where land is gained by deposits from a river, lake, or sea.

SEVERANCE

The process of changing real property into personal property.

RIPARIAN RIGHTS

The legal concept determining property lines for land located along the banks of a river.

EMINENT DOMAIN

The right of government to take property for public usage with fair compensation.

METES & BOUNDS

A method of describing property starting and ending at a point of beginning.

POLICE POWERS

The right of government to pass laws affecting the usage of property.

ESCHEAT

The right of the government to take property when someone dies with no will and no heirs.

REMAINDERMAN

The person to whom a property goes when a life estate ends, other than the original grantor.

GRANTOR

The party in a deed who is selling or giving away the property.

PROBATE

The court process intended to properly allocate and distribute assets of a deceased individual.

ACTUAL NOTICE

When information of interest in a property is available and someone is specifically aware of it.

ACKNOWLEDGEMENT

The notarization of a deed to verify the grantor is transferring property of their own free will.

NON-CONFORMING USE

A provision allowing a property owner to continue a usage no longer allowed by current zoning laws.

VARIANCE

A request to develop a property in a way that would otherwise be prohibited by existing zoning.

CERTIFICATE OF OCCUPANCY

A document issued after all construction inspections are completed on a new house.

BUFFER ZONES

Areas used to transition between differing land use zones, such as commercial to residential.