BUSA 410 Real Estate Finance & Principles Final Exam Study Guide

A set of vocabulary flashcards derived from the lecture notes on Real Estate Finance & Principles, covering key concepts, terms, and definitions relevant for exam preparation.

Law of Agency

Gives a real estate broker the legal right to act on behalf of another individual.

Principal

The person granting authority to the broker.

Agent

The broker acting on behalf of the principal.

Special Agent

Authorized for ONE specific transaction only.

General Agent

Authorized to act within a business/employment relationship.

Universal Agent

Authorized to act on ALL matters that can be delegated in place of the principal.

Fiduciary Relationship

Special legal responsibilities a broker must uphold throughout the transaction.

Subagency

When brokers share listings via MLS, cooperating brokers become subagents of the listing broker.

OLDCAR

An acronym summarizing the six fiduciary duties (Obedience, Loyalty, Disclosure, Confidentiality, Accounting, Reasonable Care).

Single Agency

Broker represents either the buyer OR seller, not both.

Dual Agency

Broker represents both Buyer AND Seller; requires disclosure and consent.

Exclusive Right of Sale

Owner cannot sell independently without owing commission; most comprehensive protection for broker.

Earnest Money

Typically 5-10% of purchase price, paid to demonstrate serious intent when signing an offer.

Constructive Notice

Recording documents in public records to inform potential interested parties.

Level-Payment Mortgage

Fully amortizing, equal payments over the loan life.

Adjustable-Rate Mortgage (ARM)

Rate changes after an introductory fixed period, tied to an index.

Effective Borrowing Cost (EBC)

IRR on the mortgage from the borrower's perspective, including all loan costs.

Truth-in-Lending Act (TILA)

Requires lenders to report the Annual Percentage Rate (APR) to borrowers.

Property Manager

Handles day-to-day operations and tenant relations.

Asset Manager

Makes decisions affecting financial or ownership structure.

Hard Costs

Physical construction costs, the largest component of the construction budget.

Construction Loan

Short-term loan funding the build.

NPV Analysis

Primary financial feasibility tool; positive NPV indicates a project creates value.

Cash Multiple

Sum of all projected net cash flows divided by total equity invested.