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Real Estate Exam > Real Estate Final > Flashcards

Real Estate Final Flashcards

1
Q

Types Of Real Property

A

Residential, Commercial, Mixed-Use, Industrial, Agricultural, and Special-Purpose.

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2
Q

Supply and Demand

A

Prices for goods and services in the market are determined by supply and demand.
If demand increases and supply stays the same, prices increase.
If supply increases and demand stays the same, prices decrease.
Greater supply means attracting more buyers and lower prices.
Greater demand means producers can raise prices and let buyers compete for the product.

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3
Q

Uniqueness and Immobility

A

The two characteristics that affect supply and demand.
Uniqueness- no two parcels of real estate are ever alike and owns it’s own location.
Immobility- the fact that property cannot be relocated to satisfy demand where supply is low.

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4
Q

Factors that affect supply

A

Labor force, construction, and material costs

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5
Q

Factors that affect demand

A

Population, demographics, employment and wages.

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6
Q

Bundle of Legal Rights

A

Rights of Possession, Control within framework of the law, Enjoyment, Exclusion, and Disposition.

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7
Q

Severance and Annexation

A

Severance- An item of real property becomes personal property.
Annexation- The change of personal property into real property.

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8
Q

Fixture

A

Personal property that has been so affixed to land or a building that, by law, it becomes part of real property.

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9
Q

Legals tests of fixtures

A

Method of Annexation- How permanent? Can it be removed without damage?
Adaptation- Is it used as real or personal property? ex. Matching colors, or a refrigerator made for a certain space.
Agreement- Have the parties Agreed on whether the item is real or personal property in the offer?

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10
Q

Trade Fixture

A

Fixtures that include property used in the course of a business. Must be removed before the last day of lease or it becomes the real property of the landlord.

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11
Q

Characteristics of Real Property

A

Economic Characteristics: Scarcity, Improvements, Permanence of Investments, and Area preference (situs).
Physical Characteristics: Immobility, Indestructibility, and Uniqueness.

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12
Q

The Basic Cost of Owning a Home

A

P.I.T.I.

Principal, Interest, Taxes, and Insurance.

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13
Q

Tax Deductions

A

Homeowners may deduct from their gross income:

  • Mortgage interest payments on first and second homes (for mortgage balances below $1 million, or $500,000 if married filing separately)
  • Real estate taxes (but not interest paid on overdue taxes)
  • Certain loan origination fees
  • loan discount points (whether paid by the buyer or the seller)
  • loan prepayment penalties
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14
Q

Agent

A

An individual who is authorized and consents to represent the interests of another person. In the real estate business, a firm’s broker is the agent and shares this responsibility with the licensees who work for the firm.

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15
Q

Principal

A

The individual who hires the agent and delegates to that agent the responsibilities of representing the principal’s interests. In the real estate business, the principal is the buyer or seller between the principal and the agent.

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16
Q

Agency

A

The fiduciary relationship between the principal and the agent wherein the agent is authorized to represent the principal in a certain transaction.

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17
Q

Fiduciary

A

The relationship in which the agent is held in a position of special trust and confidence by the principal.

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18
Q

Client

A

The principal.

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19
Q

Customer

A

The third party or non-represented customer for whom some level of service is provided and who is entitled to fairness and honesty.

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20
Q

Nonagent (also facilitator, intermediary, transactional broker, transaction coordinator, or contract broker)

A

The middleman between a buyer and a seller (or landlord and a tenant), who assists one or both parties with the transaction without representing either party’s interests. Nonagents are often subject to specific statutory responsibilities. Licensees may be known as nonagents with a customer relationship.

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21
Q

Fiduciary Responsibilities

A

An agency agreement usually authorizes the broker to act on the principal’s behalf. The fiduciary relationship of trust and confidence means that the real estate broker owes the principal certain duties. Not simply moral or ethical but the law.
Six Duties:
Care, Obedience, Loyalty, Disclosure, Accounting, and Confidentiality.

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22
Q

Termination of agency

A

7 Ways:

  • Completion of purpose
  • Death or incapacity of either party
  • Destruction or condemnation of the property
  • Expiration of the terms or the agency
  • Mutual Agreement of all parties to cancel
  • Breach by one of the parties
  • By operation of law, as in bankruptcy.
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23
Q

Duel Agency

A

The agency represents two principals in the same transaction. Dual agency requires equal loyalty to two different principals at the same time.

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24
Q

Disclosed Duel Agency

A

Disclosure minimises risks for the broker if conflict exists. It alerts principals that they may need a greater responsibility in protecting themselves. Disclosure and confidentiality are limited by mutual agreement. The principals must be explained to establish informed consent.

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25
Q

Customer Level Service

A

3 Duties:

  • Reasonable care and skill in performance
  • Honest and Fair Dealing
  • Disclosure of all facts that the license knows or should reasonably be expected to know that materially affect the value or desirability of the property.
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26
Q

Opinion vs. Fact

A

Puffing- exaggeration of a property’s benefits.
Fraud- intentional misrepresentation of a material fact in such a way as to harm or take advantage of another person.
Negligent Misrepresentation- occurs when the broker should have known that a statement of a material fact was false.

27
Q

To be entitled to sales commision

A

3 requirements:

  • A licensed real estate broker
  • The procuring cause of the sale
  • Employed by the buyer or seller under a valid contract
28
Q

Procuring cause

A

The person that started the chain of events that resulted in a sale. (Showing houses, placing advertisements, opens houses…)

29
Q

Ready, Willing and Able Buyer

A

A buyer who is prepared to buy on the seller’s terms and ready to complete the transaction.

30
Q

Agent Commissions (Math)

A

$100,000 with a 6% commission…. 2 salespersons: 1 for buyer and one for seller (share 6% commission equally - $3,000 each). Each has to pay a percentage of that percentage to each respective broker.

31
Q

Independent Contractor vs. Employee

A

A real estate salesperson can be either:
Independent Contractor- A broker has more control over an employee than an independent contractor. An independent contractor can be told what to do but not how to do it.
Employee- set working hours, office routine, attendance, assignments, quotas, dress codes.

32
Q

Anti-Trust Laws

A

5 Types:

  • Price-fixing (setting prices instead of fair competition)
  • Group boycotting (two or more businesses conspire to reduce competition by withholding business)
  • Allocation of customers (between brokers picking clients geographically)
  • Allocation of markets (between brokers picking clients based on market such as price range or category)
  • Tie-in agreements
33
Q

Exclusive rights-to-sell listing

A

One broker is appointed as the seller’s sole agent. The broker is given exclusive rights or authorization to the seller’s property. The broker is paid regardless.

34
Q

Exclusive agency listing

A

One broker is appointed as the seller’s sole agent, however, the seller retains the right to sell the property without compensating the broker.

35
Q

Open listing

A

There are multiple agents and only the seller is entitled to commission.

36
Q

Termination of listing agreement

A

6 Things:

  • When the agreements purpose is fulfilled
  • When the agreements term expires
  • If the property is destroyed or changed such as zoning
  • If the title to the property is transferred by operation of law, as in the case of the owner’s bankruptcy or foreclosure
  • If they mutually agree to cancel
  • If either the broker or seller dies. The salesperson doesn’t count.
37
Q

Net listing

A

A provision specifying that the seller will receive a net amount of money from any sale, with the excess going to the listing broker.

38
Q

Automatic extension clause

A

Discouraged by the courts, it is a clause providing for a base of 90 days that “continues thereafter until terminated by either party hereto by 30 days’ notice in writing. (Illegal in MD)

39
Q

Broker protection clause

A

Provision whereas the broker will be paid commission if sold, within a number of days after the lease expires, to an owner originally introduced by the broker.

40
Q

Commission (Math)

A

Two ways:
Multiply sales rate to get commission - $225,000 x 6% = $13,500 commission.
Divide commission to get sales price - $13,500 / .07 or 7 % = $192,857 sales price.
Divide commission by sales rate to get commission rate - $8,200 / $164,000 = .05 or 5%
To calculate net to seller using sales price of $125,000 and a commission rate of 8%, multiply the sales price by 100% minus the commission - $125,000 x (100% - 8%) = $115,000

41
Q

Police power

A

The state’s authority is passed on to municipalities and counties through legislation called enabling acts… government protection laws, zonings, use, size, location, building codes…etc. (Serve the public)

42
Q

Eminent domain vs. condemnation

A

Eminent domain is the government’s RIGHT to acquire property for public use and condemnation is the PROCESS of taking property.

43
Q

Escheat

A

The process by which the state may acquire privately owned real or personal property when an owner dies without heirs or a living trust.

44
Q

Fee simple or Fee simple absolute

A

The highest interest in real estate recognized by law.

45
Q

Freehold estates

A

An estate that last for an indeterminable length of time, such as for a lifetime or forever. It continues for an indefinite period of time and may be passed along to heirs.

46
Q

Fee simple defeasible

A

“as long as”
Estate that is qualified for fee estate that is subject to the occurrence of nonoccurrence of an event.
Fee simple determinable - may revert back to owner with no need to go to court automatically
Fee simple determinable to a condition subsequent - The owner must go court to assert any right pertaining to violation of confiions

47
Q

Life estate

A

limited in duration to the life of the owner or the life of some other designated person or persons (which is pur autre vie). Unlive fee simple, life estate passes to future owners with inheritable provisions.

48
Q

Remainder and Reversion

A

The fee simple owner who creates the life estate must plan for it’s future ownership. When the life estate ends, it is replaced by a fee simple estate in one of two ways:
Remainder - the creator names a remainderman as the person who will receive the property next.
Reversion - If the creator chooses not to name a remainderman, it will revert to the original owner upon the end of life estate.

49
Q

Easments

A

Right to use land of another for a particular purpose.
Appurtenant easement - attached by parcel of land. Must have two separate owners to have one use for another’s land.
Easement in gross - individual or company interest for the betterment of the community such as utility easements.
-Easement by necessity - An owner has no way to reach public road other than another property (the right of ingress and egress)
-Easement by prescription - successive use of another person’s land for a specific reason (must be open, continuous, notorious and without owner permission) “TACKING” is many parties use and combined years are implemented.

50
Q

Deed restictions

A

Private restrictions on the land in a deed such as “must be a church” or “can’t take down statue”. Different than fee simple because it is in a transaction and not a devisee or will.

51
Q

Dominent vs. Servient tenants

A

The dominant is the one using the serivents land for an easement

52
Q

Encroachment

A

Building a building, fence, or driveway illegally extends beyond the land of it’s owner and on to another.

53
Q

License

A

Like an easement for using someone elses land but it can be terminated or cancelled.

54
Q

Water rights

A

Riparian rights - common-law rights granted to owners of land along the course of a stream, river, or similar body of water. Generally unrestricted…
Littoral Rights - commerically navigated lakes, seas, and oceans. Land is up to the high-water mark (high tide).

55
Q

Accretion, Erosion and Avulsion

A

Accretion - increases in land from the water’s action.
Erosion - decreases in land through wearing away
Avulsion - Sudden removal of land by nature like an earthquake, mudslide or a tornado

56
Q

Tenancy in common, Joint tenancy and Severalty

A

Tenancy in common - each tenant holds undivided fraction of the property or uneven.
Joint tenancy - needs (P.I.T.T.) from all parties and each own an equal amount.
Severalty - owned by one individual or corporation

57
Q

P.I.T.T.

A

Possession, Interest, Time and Title

58
Q

Termination of joint tenancy

A

The joint is destroyed when any one of the parties involved is terminated. If new ownership is conveyed from another, they cannot become a part of joint tenancy.

59
Q

Land Trust

A

Used for secrecy, such as an athlete not wanting the official title in their name is in a trustee’s name with the beneficiary is the trustor.

60
Q

Four types of property ownership

A

Condominium - Absolute ownership of a unit in a multi-unit building as well as individual ownership in the common areas which are jointly owned.
Cooperative - a corporation holds title to land and the building. They offer shares of stock to the prospective tenants. They own stock and not real estate.
Town House - A type of dwelling with two floors that is connected to two or more dwellings by a common wall or walls. Owners receive title to the unit and a lot vest with fractional interest in common areas.
Time-Share - A form of ownership interest that may include an estate interest in property for use in a fixed or variable time.

61
Q

Calculate Metes-and-bounds

A

1 box = 640 square acres or 1 sq. mile (5,280 x 5,280)

36 Boxes total

62
Q

Four types of property ownership

A

Condominium - Absolute ownership of a unit in a multi-unit building as well as individual ownership in the common areas which are jointly owned.
Cooperative - a corporation holds title to land and the building. They offer shares of stock to the prospective tenants. They own stock and not real estate.
Town House - A type of dwelling with two floors that is connected to two or more dwellings by a common wall or walls. Owners receive title to the unit and a lot vest with fractional interest in common areas.
Time-Share - A form of ownership interest that may include an estate interest in property for use in a fixed or variable time.

63
Q

Calculate Metes-and-bounds

A

1 box = 640 square acres or 1 sq. mile (5,280 x 5,280)

36 Boxes total

Real Estate Exam (1 decks)

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