Chapter 3–5: Real Estate Fundamentals (Control of Land Use, Specializations, and Real Estate Investments)

Vocabulary flashcards covering key terms and concepts from Chapters 3 through 5: Control of Land Use, Specializations, and Real Estate Investments.

Sovereignty of the soil

The concept that title to land in the United States can be traced back to its original owner; land title ultimately derives from the sovereign (the government).

Police power

The government’s right to regulate and control how land is used (e.g., zoning, environmental, health, and fire codes).

Zoning

Local government planning and regulation of land use, specifying permitted uses, density, and development standards.

Variance

Permission to violate zoning rules granted by the authorities to avoid hardship or nonconforming use violations.

Setback

The required distance between the building line and the property line as dictated by zoning or deeds.

Buffer zone

A strip of land separating incompatible land uses, providing a transitional area between uses such as residential and commercial.

Downzoning

Changing the zoning of a property to allow a lower-value use; typically not compensated by the government.

Eminent domain

The government’s right to take private land for public use, with compensation to the owner.

Condemnation

The act of taking private land under eminent domain for public use.

Escheat

Transfer of real estate to the state when an owner dies intestate and without heirs.

Taxation (ad valorem taxes)

The government’s right to tax real estate based on value; property taxes create a lien on the property.”

Assessed value

Property value used to calculate property taxes.

Ad valorem

Taxes assessed according to the value of the property.

Greenfields

Land that has never been commercially developed and is typically free of prior pollution or structures.

Greyfields

Land containing abandoned or underutilized structures that could be redeveloped.

Brownfields

Former commercial/industrial sites with contamination, often requiring cleanup before redevelopment.

Wetlands

Transitional zones between uplands and deep water, regulated by USACE for environmental protection.

Mold

Hazardous indoor growth that states regulate; ventilation and construction practices affect mold risk.

Interstate Land Sales Full Disclosure Act (ILSFDA)

Federal act (1968) protecting consumers in interstate land sales by requiring disclosures and a purchaser cancellation period; administered by CFPB.

Private controls (deed restrictions/CC&Rs)

Private limitations on land use imposed by sellers or developers, enforceable by owners’ associations and may be permanent.

Building codes

Minimum legal construction standards adopted by local governments to ensure health and safety; do not guarantee workmanship quality.

Property codes

State or local rules governing real property transactions and ownership practices.

Easement

A legal right to use another’s land for a specific purpose (e.g., utilities, access).

Phase I Environmental Site Assessment

Initial ESA phase: site inspection, regulatory records review, and interviews to identify potential contamination.

Phase II Environmental Site Assessment

ESA phase involving sampling and testing of soil, water, and groundwater to confirm contamination and identify causes.

Phase III Environmental Site Assessment

Remediation phase with techniques to remove or mitigate contamination (e.g., excavation, treatment).

Environmental Impact Statement (EIS)

NEPA-required detailed report describing project impact on the environment and alternatives.

National Environmental Policy Act (NEPA)

1969 act requiring federal agencies to assess environmental effects of their actions and prepare an EIS.

Clean Air Act

Federal law authorizing the EPA to establish National Ambient Air Quality Standards (NAAQS) and regulate emissions.

Clean Water Act

Federal law regulating pollutant discharges into waters and establishing water quality standards.

Toxic Substances Control Act (TSCA)

EPA authority to regulate and track hazardous chemicals and limit their production and use.

CERCLA (Superfund)

Federal act to clean up hazardous substance releases and recover cleanup costs from responsible parties.

CERCLA Safe Harbor

Rules that protect certain parties from liability under CERCLA if conditions (e.g., good faith purchase) are met.

Texas Commission on Environmental Quality (TCEQ)

State agency responsible for environmental protection programs in Texas (e.g., brownfields, remediation).

Energy Star

EPA/DOE program certifying energy-efficient products and buildings; includes Prescriptive and Performance paths.

LEED (USGBC)

Leadership in Energy and Environmental Design; a voluntary rating system for green buildings and communities.

Real Estate Investment Trust (REIT)

A company that owns/finances income-producing real estate; offers shares to investors and pays most income as dividends.

Real Estate Investment Syndicate

Group investment (often a partnership or corporation) to pool funds for real estate purchases; securities are regulated.

Real Estate Mortgage Investment Conduit (REMIC)

Entity that pools mortgages to issue securities backed by mortgage assets.

1031 exchange

Tax-deferred exchange allowing deferral of capital gains when exchanging like-kind investment properties.

Net Operating Income (NOI)

Property’s gross income minus operating expenses (excluding debt service).

Capitalization rate (cap rate)

Ratio of NOI to property value or purchase price, used to estimate value and returns.

Depreciation

Non-cash deduction for wear and aging of improvements; residential property 27.5 years, commercial 39 years.

Basis and capital gains

Tax basis is the investment value used to calculate gains; capital gains are taxed when property is sold.

Private control vs public control of land use

Private controls (deed restrictions/CC&Rs) supplement public controls (zoning/building codes) over a property.