California Real Estate Practices Study Guide - Vocabulary Flashcards

Key real estate vocabulary terms and definitions from the California Real Estate Practices Study Guide.

Land

The surface of the earth, including all permanently attached natural features, extending downwards to the center of the earth and upwards to infinity.

Real Estate

Land plus improvements.

Real Property

Land from the surface to the center of the earth and upward into space, all attachments, and the bundle of legal rights of ownership.

Bundle of Rights

Ownership of land with all of the legal rights of possession, control, quiet enjoyment, exclusion, transfer, and encumber.

Improvement

Any non-natural structure built on or affixed to land.

Quiet Enjoyment

A lessee's right to possess a property without interference from lessor, previous owner, or anyone else about the claim to the title.

Title

The actual ownership of a real property that includes the bundle of rights in which a party may own a legal or equitable interest; not an actual document.

Chattel

A commonly used term for personal property in the world of real estate.

Emblements

Crops (or the profit from crops) grown by a farmer that are considered personal property.

Fixture

An object that was once personal property but is now firmly attached to the land in such a way that it is considered to be real property.

Trade Fixture

Personal property that is owned by and needed for a tenant’s business.

Severance

The act of converting real property into personal property.

MARIA

A mnemonic device to help remember the tests to determine whether something is a fixture: Method of attachment, Adaptability, Relationship of the parties, Intent, and Agreement between parties.

Accession

The right to all that one's own property produces, including that which is added, either naturally or by human action, to the property already owned.

Accretion

The process that results in the gradual increase in land area through deposits of soil by natural forces.

Avulsion

The sudden loss of land by flood or when a stream or river changes course.

Erosion

The gradual loss of land over time.

Fixity

The economic principle that says that real estate exists in a fixed location and cannot be moved.

Illiquidity

The relative difficulty of converting an asset to cash without loss of value.

Reliction

A gradual increase in land area when water gradually withdraws.

Scarcity

The economic characteristic that informs the economic principle of supply and demand.

Situs

The economic significance of a property's location.

Associate Licensee

A licensee operating under the sponsorship, authority, and guidance of (and on behalf of) their broker in a brokerage environment.

Broker

A licensee who holds a broker license and who engages in an activity enumerated in the license law for a commission or other valuable consideration.

Broker-Associate

An individual licensed as a real estate broker but who works in the capacity of a salesperson for another responsible broker or corporation.

Independent Contractor

One who contracts to do work according to their own methods, and is responsible to their employer only as to the results of that work.

Commingling

The illegal act of mixing personal funds with a client’s funds.

Conversion

Changing real property to personal property, and vice versa; also the illegal act of appropriating client funds for purposes other than that for which they were intended.

Laws

Rules that are enforced by a local, state, or federal government authority to help create order in society by establishing a “social contract” between citizens and the government.

Ethics

Standards of conduct agreed upon and recognized by a particular group or culture.

Morals

The personal values derived from a system of beliefs.

Blockbusting

The illegal act of causing owners to sell their homes by creating fear that members of a protected class are moving into the area; aka panic peddling.

Arbitration

A formal resolution tactic in which the arbitrator (or arbitrators) hears both sides (including evidence and even cross-examination sometimes) and then issues a verdict.

Mediation

Negotiation tactic that involves sitting down with a neutral third party (the mediator) and finding a resolution to the issue.

Procuring Cause

The defining action or actions that brought a buyer or buyers to purchase a property.

Latent Defect

Any structural defect that cannot be detected by ordinary inspection.

Patent Defect

Any structural defect that is easily discoverable upon inspection.

Material Fact

A fact that, if known, could cause someone to take a different course of action or make a different decision regarding the property to be purchased.

Intentional Misrepresentation

Occurs when a licensee purposely lies about a material fact.

Negligent Misrepresentation

Misrepresentation that occurs when the licensee unintentionally misstates something that they should have known.

Stigmatized Property

Property with suppressed market value unrelated to its physical condition or features; frequently as result of death of an occupant, murder, suicide, or suspected paranormal activity.

Agency Agreement

A mutually binding understanding between two parties that authorizes one party (the agent) to act on the other party's (the client's) behalf to accomplish a specific goal.

First Substantive Contact

The critical point at which agency disclosure is required by a license holder; generally occurs at the first face-to-face meeting with the customer and prior to the sharing of any confidential information or initiation of any action in regards to a specific property.

Open Listing

A nonexclusive listing agreement that gives multiple brokers (and owners themselves) the right to sell the property.

Exclusive Authorization and Right-to-Sell Listing

An agreement in which the seller guarantees the named broker receives a commission if the property is sold, regardless of whom brings the buyer.

Exclusive Agency Listing

An agreement in which the seller has an exclusive relationship with a broker but retains the right to sell the property without having to pay a commission.

Net Listing

An agreement in which the seller names a minimum sales price they will accept for a property, with any excess paid to the broker as commission.

Protection Period

A limited time frame after an employment agreement ends during which an agent can be owed compensation under certain circumstances.

Appraisal

An official valuation given to a property by a licensed appraiser.

Appraised Value

An estimation of property's value as of a specific date, performed by a certified appraiser.

Assessed Value

The value placed on a property by a governmental unit for use in calculating property taxes.

Market Value

The price for which a property will theoretically sell under typical conditions.

Comparative Market Analysis (CMA)

A report that compares the prices of recently sold or listed homes ("comparables") in order to estimate the market value of a similar property (the "subject property") located in the same area.

Sales Comparison Approach

Property appraisal method that estimates value by comparing the subject property to the sales prices of similar properties in the same market area.

Cost-Depreciation Approach

Method of estimating the value of a property by determining how much it would cost to replace the building or other improvements, minus the cost of depreciation, plus the value of the land itself.

Curable

Depreciation that can be fixed at a reasonable cost.

Incurable

Depreciation that cannot be fixed or cannot be fixed at a reasonable cost.

Replacement Cost

The actual cost of replacement without regard to the depreciation of the property.

Reproduction Cost

The cost of procuring exact copies of the building's components, preserving the styles and materials used at the subject property's original construction.

Gross Rent Multiplier (GRM)

The ratio of the price of investment property to its annual rental income before considering expenses like taxes and insurance, etc.

Gross Income Multiplier (GIM)

The ratio of the price of investment property to its annual total income before considering expenses like taxes and insurance, etc.

Income Approach

Method of estimating the value of a property by applying a rate of return to the net income it produces.

Property Management

The vocation of renting or leasing someone else's real property on their behalf in exchange for compensation and in accordance with a property management employee contract.

Capital Expenditure

An expense paid in order to improve a property.

Routine Maintenance

Monitoring, assessing, and attending to the needs of a facility's most necessary features.

Corrective Maintenance

The repair of equipment after it has broken.

Preventative Maintenance

Conducting periodic inspections to catch minor issues before they become major failures.

Implied Warranty of Habitability

A landlord's obligation to provide tenants with livable conditions in the properties they lease.

Lease Agreement

A rental contract between the landlord (lessor) and the tenant (lessee).

Building Envelope

The exterior shell of the building that encloses the interior and acts as a physical separator between the conditioned and unconditioned environment of a building.

Foundation

The architectural structure on which the building sits.

Framing

The skeleton of a house that gives the structure support and shape.

Insulation

Material installed to help regulate the interior temperature.

R-Value

The measure of an insulating material's capacity to resist heat flow.

Pitch

A roof's vertical rise (in inches) divided by its horizontal run (in feet).

Certificate of Occupancy (CO)

A document issued by a code enforcement officer that states that the building is ready and fit for occupancy.

HVAC

An acronym referring to the collective efforts of the heating, ventilation, and air conditioning; is the major system used to control the heating, cooling, and movement of air in indoor environments.

Contract

A legally enforceable and binding agreement between parties wherein a promise to do or not do something is given in exchange for valuable consideration.

Consideration

Something of value exchanged by the parties as evidence of agreement to the terms of a contract.

Statute of Frauds

A law that requires certain types of contracts, including those conveying interest in real property, to be in writing to be enforceable.

Statute of Limitations

A legal concept that establishes time limits for bringing certain kinds of legal actions.

Doctrine of Laches

A legal principle used to bar dated claims; used in conjunction with an unreasonable delay or negligence in asserting or defending one’s rights.

Valid Contract

A contract possessing the essential elements necessary to be legally binding and obligate performance.

Void Contract

A contract lacking legal or binding force.

Voidable Contract

A contract wherein the wronged party has the option to perform, enforce, or void the contract.

Addendum

An addition to a completed contract that specifies supplementary information to the contract; plural is "addenda".

Amendment

A change or modification to an already agreed-upon contract.

Bilateral Contract

A contract wherein both parties are obligated to perform in an exchange of promises.

Unilateral Contract

A contract wherein one party makes a promise and is obligated to perform if a second party chooses to accept the offer and perform in exchange for that which was promised.

Executed Contract

A contract in which all terms have been fulfilled by all parties.

Executory Contract

A contract that has not yet been fully performed (both sides have not yet completed their obligations).

Express Contract

An oral or written contract in which the parties explicitly state or express their intentions and their expectations regarding the contract and the exchange of promises.

Implied Contract

A contract created by the actions of the parties rather than by express agreement.

Counteroffer

A contract proposal submitted in response to a previous offer, modifying the terms of the original offer; considered a rejection of the original offer.

Novation

A mutual agreement of the parties to replace an existing contract with a new one.

Rescission

An attempt to put the parties back in a position as though the contract never existed; aka annulment.

Specific Performance

A legal remedy that requires the party in breach of contract to perform in accordance with the terms of the contract (as opposed to paying damages).

Liquidated Damages

Damages established by the contract to be paid as compensation in the event of default.

Contingency

A provision within a contract that makes performance conditional upon the occurrence of a stated event.

Purchase Contract

A contract used in the sale of real property that outlines the responsibilities of the parties and terms of the sale.