REAL ESTATE PRINCIPLES CHAPTER 1 KEYTERMS

Agent

Someone who acts on behalf of another, such as a real estate licensee when representing a client.

Broker

A real estate licensee with several years of experience who has received advanced training and has passed a broker exam.  

Brokerage

A firm where consumers can retain real estate licensees to negotiate the purchase and sale of real property.

Comparative Market Analysis (CMA)

A method of determining the probable selling price of a property by comparing it to similar properties that have sold, are presently for sale, or did not sell in a given area.

Employing Broker

A broker under whose license affiliated licensees are contracted to work.

Employment Agreement (Independent Contractor Agreement)

A written contract between a self-employed real estate licensee and a broker under whose license the licensee will work.

Error and Omissions Insurance

A type of liability insurance that helps cover the expenses of a lawsuit if a client claims a real estate licensee’s work was at fault.

Farm Area

A focused area, such as a neighborhood, that a real estate licensee continues to prospect (multiple contacts over time increase the likelihood of success).

Floor Duty

An assignment to take calls from consumers who call the brokerage assistance or who walk into the brokerage looking for help.

Independent Contractor

A term often erroneously applied to real estate licensees who are actually self-employed individuals under the supervision of their brokers.

Listing Agreement

A written agency contract between a seller and a broker, stating that the broker will be paid a commission for finding (or attempting to find) a buyer for the seller’s real property.

Principal

A party to a real estate transaction. A principial is also called the client.

Prospecting

Attempting to find business through any number of methods: phone calls, networking, direct mail, etc.

Sale Fail

When a fully signed transaction between the parties falls apart before closing.

Salesperson

A real estate licensee who works under the supervision of a broker.

Showing

Touring a property with a buyer.

Sphere of Influence

A group of people known to a salesperson who know, trust, and are likely to do business with the salesperson, including referring business.

Statutory Nonemployee

A special IRS category of workers that applies to most real estate licensees; although they work independently and are self-employed, they are subject to their broker’s supervision, so they are not independent contractors for tax purposes.

Air Rights

The right to undisturbed use and control of the airspace over a parcel of land; these may be transferred separately from the land.

Appropriative Rights

A system of allocating water rights, in which a person who wants to use water from a certain lake or river is required to apply for a permit.

Appurtenances

Rights that go along with ownership of a particular piece of property, such as air rights or mineral rights.

Bundle of Rights

The rights inherent in ownership of property, including the right to use, lease, enjoy, encumber, will, sell, or do nothing with the property.

Littoral Rights

The water rights of an owner of land that borders on a stationary body of water, such as a lake, as opposed to a river or stream.

Mineral Rights

Rights to the minerals located on or beneath the surface of a property.

Personal Property

Any property that isn’t real property; movable property not affixed to land.

Real Property

Land and everything attached to or appurtenant to it.

Riparian Rights

The water rights of a landowner whose property is adjacent to or crossed by a body of water.

Rule of Capture

A legal rule that gives a landowner the right to all oil and gas produced from wells on his land, even if it migrated from underneath land belonging to someone else.

Support Rights

The right to have one’s land supported by the land adjacent to it and beneath it.

Water Rights

The right to use water from a particular body of water.

Annexation

Attaching personal property to real property so that it becomes part of the real property (a fixture) in the eyes of the law.

Attachment

An object, either natural or manmade, that is permanently attached to the land.

Bill of Sale

A document used to transfer title to personal property from one person to another.

Doctrine of Emblements

A legal rule that gives an agricultural tenant the right to enter the land to harvest crops after the lease ends.

Fixture

An item that used to be personal property but has been attached to or closely associated with the real property in such a way that it has legally become part of the real property.

Fixture Tests

Four tests that are used by a court to determine whether an item is personal property or real property, in the absence of a written agreement; the tests used are the adaptation test, intention test, method of attachment test, and relationship test.

Natural Attachment

Plants growing on a piece of land, such as trees, shrubs, or crops.

Severance

Permanent removal of a natural attachment, fixture, or appurtenance from real property, which transforms the item into personal property.

Trade Fixture

Articles of personal property annexed to real property by a tenant for use in a trade or business, which the tenant is allowed to remove at the end of the lease.

Government Survey Method

A legal description method that identifies a property by its position within a particular section, township, and range, in relation to a particular principal meridian and base line.

Legal Description

A description that enables a person to precisely identify the location and boundaries of a property.

Metes and Bounds Method

A legal description method that uses monuments, courses, and distances to define the property’s boundaries, which must start at and return to a point of beginning.

Principal Meridian

The main north-south line within a particular survey grid.

Recorded Map Method

A legal description method used in developed areas that identifies a property by its lot and block numbers on a plat map recorded by a developer.

Section

A one square mile area of land located within a township, numbered in a manner that snakes back and forth through the township.

Township

A 36-square-mile area of land located at the intersection of township and range lines on a government survey grid.