Real Estate Exam Prep

Easements

The right for another party to enter someone else's property

Appurtenant Easement

Easement attached to a property and benefits neighboring property owner

Party Wall Easements

Easements unique to properties with shared things like walls or driveways

Easement in Gross

Easement that benefits a person without a property, such as power lines or pipes underground

Easement by Necessity

Easement granted by court order, typically for landlocked property

Easement by Prescription

Easement granted by court order due to notorious, open, and persistent access by another party

Appurtenances

Items or rights attached to a property, such as stoves, ceiling fans, light fixtures, etc.

Annexation

Attachment of personal property to real property

Severance

Conversion of real property to personal property, such as cutting down a tree

Mortgagor

Borrower in a mortgage agreement

Mortgagee

Lender in a mortgage agreement

Deed

Physical document signed to transfer ownership of a property

Title

Concept of ownership that gives someone the right to own, sell, and use a property within zone restrictions

Fixtures

Items fixed to the property, such as chandeliers, toilets, flooring, lighting, etc.

Personal Property

Moveable property, such as rugs and furniture

MARIA

Acronym to determine if an item is a fixture: Method of attachment, Adaptability, Relationship of the party, Intention of installation, Agreement

Clauses

Sections of contracts in purchase agreements or lease agreements

Acceleration Clause

Allows lender to accelerate loan repayment if conditions are unmet

Due on Sale Clause

Requires borrower to pay off loan before transferring ownership

Prepayment Penalty Clause

Charges borrower for paying down mortgage significantly in the first five years

Release Clause/Buyout Clause

Releases a creditor from a portion of a collateral claim on real property

STUD

Acronym for the four elements of value: Scarcity, Transferability, Utility, Demand

PETE

Acronym for the four government powers: Police Power, Eminent Domain, Taxation, Escheat

TTIP

Acronym for joint tenancies: Time, Title, Interest, Possessions

Fee Simple Absolute Estate

Highest level of property ownership

PETE

Acronym for the four government powers: Police Power, Eminent Domain, Taxation, Escheat

Conventional Loans

Private loans not secured by government entities, can be insured by Fannie Mae or Freddie Mac

Conforming Loans

Conventional loans that qualify for Fannie Mae and Freddie Mac

Unconventional Loans

Government-backed loans with lower requirements and low to no down payment

FHA Loan

Low down payment and lower credit requirement loan insured by the Federal Housing Administration

VA Loan

Loan for military personnel and families, requires a certificate of eligibility

Depreciation

Accounting method to allocate cost to an asset as it ages

Straight Line Depreciation

Basic form of depreciation where equal parts are depreciated each year

Declining Balance Depreciation

Accelerated form of depreciation calculated by multiplying straight line depreciation by remaining depreciable amount per year

Double Declining Balance (DDB)

Depreciates assets twice as quickly as declining balance method

Agency Relationship

Legally binding relationship between a client and their agent during a transaction

OLDCAR

Acronym summarizing fiduciary responsibilities: Obedience, Loyalty, Disclosure, Confidentiality, Accounting, Reasonable Care

Single Agency

When an agent represents either the buyer or the seller

Dual Agency

When one agent represents both the buyer and the seller

Bundle of Rights

Five rights of property ownership: Possession, Control, Exclusion, Enjoyment, Disposition

Foreclosure

Allows a lender to recover a defaulted loan by taking ownership of the property

Government Survey System

System used to describe and define land using principal meridians, range lines, and townships

Dual Agency

When one agent represents both the buyer and the seller

Gross Rent Multiplier (GRM)

Measure of how profitable an investment property is, calculated by dividing property price by annual gross rental income

Percentage Change

Calculation to determine the percentage increase or decrease between two values

Interest

Calculation of interest based on principal, interest rate, and time period

Commission

Calculation of commission based on commission rate and sale price

Sherman Antitrust Act

Law created to prevent monopolies and protect the open marketplace

OR and EE Rule

OR is the giver (seller), EE is the receiver (buyer) in a mortgage agreement

Metes and Bounds

Legal description of land using monuments and measurements

Freehold Estate

Ownership type where the owner enjoys the property for an unlimited time

Bargain and Sale Deed

Deed indicating only the seller holds title and right to ownership, used in foreclosure or tax sale

Warranty Deed

Deed used to transfer title of a property and includes warranty that the property is free of encumbrances

Secondary Market

Market where lenders and investors buy and sell mortgages and mortgage-backed securities

1031 Exchanges

Allows real estate investors to exchange one property for another while deferring capital gains tax

Practice Exam Strategy

Tips and strategies for taking practice exams

Habendum Clause

Clause detailing the property rights transferred to the purchasing party

Functional Obsolescence

Depreciation of property value due to obsolete features

Gross Lease

Lease where tenant pays a flat rate that includes all property costs

Net Lease

Lease where tenant pays for property costs in addition to rental fee

Agent

Individual who can sell, lease, or help in purchasing a property

Broker

Individual who can work independently and oversee other agents

Realtor

Member of the National Association of Realtors (NAR) who works in a real estate profession

Clean Record

Requirement for being a Realtor, no recent or pending bankruptcy filings

Void Contracts

Contracts missing key elements or containing illegal elements

Voidable Contracts

Contracts that can be voided by either party due to certain conditions

Fee Simple

Best and most common type of ownership, full ownership of bundle of rights

Agency by Estoppel

When a principal does not stop an agent from stepping beyond authorized agencies

Real Property

Land, above the land, below the land, and attached to the land

Personal Property

Moveable property, such as chattels and intangibles

Annexation

Fixing personal property to real property

Severance

Removing personal property from real property

Subordination Clause

Clause that states repayment of debt takes priority over future debts

Deferred payment options

The privilege of deferring income payments to take advantage of statutes affording tax benefits

Graduated payment mortgage

Providing for partially deferred payments of principal at start of loan. There are a variety of plans. After the first five years of the long term the principal and interest payment are substantially higher to make up principal portions of payments lost at the beginning of the loan. See variable interest rate

Interest rate

the percentage of a sum of money charged for its use. Or charge paid for use of money, expressed as a percentage per month or year of the sum borrowed

Fee simple estate

the greatest interest that one can have in real property. That is unqualified of indefinite duration freely transferable and inheritable

Adverse possession

A method of acquiring title to real property through possession of property for a statutory. Certain conditions by a person other than the owner of the record

Wear and tear

Depreciation of an asset due to ordinary usage

interim loan

the short term, temporary loan used until permanent financing is available, EG, a construction loan

Truth in lending

The name given to the federal statutes and regulation (regulation Z) which are designed primarily to ensure that prospective borrowers and purchasers on credit receive credit cost information before entering into a transaction

Real estate syndicate

an organization of investors usually in the form of limited partnership who have joined together for the purpose of pooling capital for the acquisition of real property interests

balance sheet

a statement of the financial condition of a business at a certain time showing assets, liabilities, and capital

Lintel

a horizontal board that supports the load over an opening such as a door or window

Escheat

The reverting of property to the state when air is capable of inheriting are lacking

Net listing

a listing which provides that the agent may retain as compensation for agent services all sums received over and above a net price to the owner

conservation

The process of utilizing resources in such a manner which minimizes their depletion

disintermediation

The relatively sudden withdrawal of substantial sums of money savers have deposited with savings and loan associations, commercial banks, and mutual savings banks. This term can also be considered to include life insurance policy purchasers borrowing against the value of their policies. The essence of this phenomenon is financial intermediaries losing within a short. Time billions of dollars as owners of funds held by those institutional leaders exercise their prerogative of taking them out of the hands of these financial institutions

Certificate of reasonable value (C R V)

the federal VA appraisal commitment of property value

balloon payment

an installment payment on a promissory note - usually the final one for discharging the debt - which is significantly larger than the other installment payments provided under the terms of the promissory note

allodial tenure

a real property ownership system where the owners may be Complete except for those rights held by government. Allodial is in contrast to feudal tenure

Assessed valuation

A valuation placed upon a piece of property by a public authority as a basis for levying taxes on the property

administrator

a person appointed by the probate court to administer the estate of a deceased person who died intestate

First trust deed

a legal document pledging collateral for a loan (see trust deed) that has first priority overall claims against the property except taxes and bonded indebtedness. That trusted superior to any other

Incompetent

one who is mentally incompetent, incapable; any person who, though not insane, is, by reason of old age, diseased, weakness of mind, or any other cause, unable, unassisted, to properly manage and take care of self or property and by reason thereupon would likely be deceived or imposed upon by arc forward designing persons

Covenant

an agreement or promise to do or not do a particular act such as a promise to build a house of a particular architectural style or to use or not use property in a certain way

Pledgee

one who is given a pledge or a security. (See definition of secured party)

Assignment of rents

A provision and a deed of trust or mortgage under which the beneficiary may, upon default by the Trustor, take possession of the property, collect income from the property and apply it to the loan balance and the costs incurred by the beneficiary

Effective date of value

the specific day of the conclusion of value applies

exchange

a means of trading equities in two or more real properties, treated as a single transaction through a single escrow