Real Estate Principals CHAPTER 7

Commission

The compensation paid to a broker for services in connection with a real estate transaction, usually a percentage of the sales price.

Due Diligence

The exercise of care that a reasonable person is expected to use when fulfilling the terms of a contract.

Exclusive Agency Listing

A listing agreement that entitles the broker to a commission if anyone other than the seller finds a buyer for the property during the listing term.

Exclusive Right to Sell Listing

A listing agreement that entitles the broker to a commission if anyone, including the seller, finds a buyer for the property during the listing term.

Listing Agreement

A written agency contract between a seller and a real estate broker, stating that the broker will be paid a commission for finding a buyer for the seller’s property.

Open Listing

A nonexclusive listing, given by a seller to as many brokers as the seller chooses, where the broker is only entitled to a commission if the procuring cause of the sale.

Procuring Cause

The real estate agent who was primarily responsible for bringing about a sale.

Ready, Willing, and Able

A buyer who makes an offer that meets the seller’s stated terms and has the contractual capacity and financial resources to complete the transaction

Good Faith Deposit

A deposit that a prospective buyer gives the seller as evidence of his or her good faith intent to complete the transaction; the listing agreement authorizes the broker to hold the deposit on the seller’s behalf.

Net Listing

A listing agreement in which the seller sets a net amount they are willing to accept for the property; if the actual selling price exceeds that amount, the brokerage is entitled to keep the excess as its commission.

Safety Clause

A clause in a listing agreement providing a specified period after the listing expires, the brokerage will still be entitled to a commission if the property is sold to someone the brokerage dealt with during the listing term.

Termination Date

A set date upon which a listing agreement expires; required on exclusive listings in California.

Amendment

A supplementary agreement changing one or more terms of a contract, which must be signed by all of the parties to the original contract.

Closing Date

The date on which all the terms of a purchase agreement must be met, or the contract will terminate.

Contingency Clause

A provision in a contract that makes the parties’ rights and obligations depend on the occurrence or nonoccurrence of a particular event.

Good Faith Deposit

A deposit that a prospective buyer gives the seller as evidence of their good faith intent to complete the transaction, which is forfeited if the buyer defaults. Also called earnest money.

Liquidated Damages

A sum that the parties to a contract agree in advance (at the time the contract is made) will serve as full compensation in the event of a breach.

Possession Date

The date of actual physical occupation of real property, which may or may not coincide with the closing date.

Purchase Agreement

A contract in which a seller promises to convey title to real property to a buyer in exchange for the purchase price.

Time is of the Essence

A clause in a contract that means performance on or before the exact dates specified is an essential element of the contract and failure to perform is a material breach.

Demise

A conveyance of an interest in real property through the terms of a lease.

Implied Renewal

A renewal of a rental agreement that occurs through continued payment of rent by the tenant and acceptance of payments by the landlord, rather than through a new express agreement.

Lease

A conveyance of a leasehold estate from the fee owner to a tenant, or the contract in which one party pays the other rent in exchange for possession of real estate.

Rental Agreement

A contract between a landlord and tenant that establishes the terms and conditions of a lease.

Security Deposit

Money a tenant gives a landlord at the beginning of a tenancy to protect the landlord in case the tenant fails to comply with the terms of the lease, which may be used to cover unpaid rent or repair costs.

Assignment

Assignment

Constructive Eviction

When a landlord’s act (or failure to act) interferes with a tenant’s quiet enjoyment of the property, or makes the property unfit for its intended use, justifying the tenant to terminate the lease.

Graduated Lease

A lease in which it is agreed that the rental payments will increase at intervals by a specified amount or according to a specified formula.

Gross Lease

A lease in which rent is set at a fixed amount and the landlord pays most or all of the operating expenses.

Ground Lease

A lease of the land only, usually for a long term, to a tenant who intends to construct a building on the property.

Habitability

A warranty implied by law in every residential lease, stating that the property is fit for habitation.

Just Cause

A requirement under state rent control laws that something must occur, such as a tenant default or the owner’s intent to remodel the unit, before the landlord can terminate a lease.

Net Lease

A lease requiring the tenant to pay all or most of the property’s operating expenses, in addition to the rent paid to the landlord.

Novation

The withdrawal of one party to a contract and the substitution of a new party, relieving the withdrawing party of liability.

Quiet Enjoyment

Use and possession of real property without interference from the previous owner, the landlord, or anyone else claiming an interest.

Percentage Lease

A lease in which the rent is based on a percentage of the tenant’s monthly or annual gross sales.

Self-Help Eviction

Physically forcing someone off of real property (or preventing them from re-entering), as opposed to using the legal process to remove them.

Sublease

When a tenant transfers something less than their entire leasehold estate to someone else (a subtenant), usually the right to possession for only part of the remainder of the lease term.

Surrender

Giving up a leasehold estate before it has expired.

Unlawful Detainer

A legal action to regain possession of real property, especially a suit filed by a landlord to evict a defaulting tenant.