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Principles of RE 1

Texas Real Estate License Exam Section 1 of 6: Principles of Real Estate 1.

QuestionAnswer
Apartment Locator a real estate license holder who locates dwelling units for prospective tenants
Tenant one who possesses a property under a lease without ownership
Broker someone who assists in buying and selling to receive a commission
Client the person that an agent is representing, made official through a representation document
Sales Agent Apprentice Education (SAE) an educational requirement for courses in the first two years of being licensed as a real estate agent
Consumer a person or company that buys or leases any product or service
Land the surface of the earth, extending down to the center of the earth and up into space
Real Estate includes the land and any natural or manmade improvements attached to it
Real Property includes land and any natural or manmade improvements attached to it, plus the bundle of legal rights of ownership
Personal Property items that can easily be removed from the land
Immobility characteristic of land stating that land has a particular geographical location that will remain constant, barring erosion or slow, geological changes
Puffing the exaggeration of opinions about real estate
Nolo Contendere a plea in a criminal court in which the defendant accepts the punishment without admitting guilt
Allodial System ownership of land in which the land is owned free and clear; it is the opposition of the feudal system
Feudal System a form of ownership from England’s past in which royalty owned the land
Improvement any permanent man-made addition to land
Subsurface Rights ownership of the minerals, gas, or oil beneath the surface of a piece of real estate
Surface Rights ownership of the land in a parcel or real estate but limited only to the plane
Air Rights the right to use the airspace above the surface of land
Water Rights the right to enjoy the water that borders a property
Littoral Rights rights that govern lakefront or oceanfront property and usually allow the property owner to use the water bordering their property
Riparian Rights rights that govern the use of flowing water, such as rivers and streams that pass through or border a property
Personal Property any item that is not real estate, also known as chattel or personalty
Real Estate a part of the surface of land to the center of the earth and upward to space, plus all improvements made by man or nature
Real Property land from the surface to the center of earth and upward into space including everything attached by man or nature as well as the bundle of legal rights of the ownership
Fixture an object that was once personal property, but which has now been firmly attached to the land in such a way that it becomes part of the estate
Trade Fixture personal property attached to real property that is owned by and needed for a tenant’s business
Adaptation the use and modification of a particular item for a specific use in a property
Fructus Naturales trees, bushes, grass, and uncultivated plants, usually considered to be real property because of their permanence
Fructus Industriales annually cultivated crops generally considered to be personal property; also known as emblements
Cooperative a residential building in which the title is held by a corporation, the residents are stockholders in the corporation, and the residents have a lease
Planned Unit Development (PUD) a subdivision or development that includes single-family dwellings along with some common elements such as parks, pools, community recreational centers, or golf courses
Timeshare residence with multiple owners who share the right to possession for a specific period of time with the other owners
Ad Valorem Tax a tax calculated according to the assessed value of real estate
Homestead Tax Exemption reduces the amount of ad valorem taxes assessed on a homestead
Prorate the dividing of expenses for items like taxes, interest, and rent at the closing between the seller and the buyer
Amortization the process of paying off a debt/mortgage in regular installments based on a fixed payment schedule
Arrears payment for an item or service after it is received
CLUE Reports stands for Comprehensive Loss Underwriting Exchange, a database used by insurance agencies that contains information on any claims made in the past five years by property owners on specific properties
PITI stands for Principal, Interest, Taxes, and Insurance, which are the components of most mortgage payments
Agency relationship between a client and a broker
Express Agency agency created by a specific agreement
Implied Agency created when an agent is given permission to act on behalf a client through conduct/communication but permission is not established orally/in writing. Doesn't have to be an action, can be a statement that leads the client to believe the agent is theirs.
Agency by Ratification created when a license holder acts on behalf of but without prior authorization of a principal and that principal accepts the license holder’s action after the fact
Intermediary Broker a broker who negotiates a contract between two parties that are both being represented by that broker
Appointed License Holder a sales agent license holder who was designated to work with a client during an intermediary transaction
Special Agency the relationship between a broker and a principal wherein the broker has restricted authority to act on behalf of the principal to achieve one specific objective
Agent a person who acts on behalf of someone else
Seller’s Disclosure Notice a document filled out by the seller concerning any defects in the improvements on the property
Subagent a license holder from one office who represents the seller through cooperation with the listing broker of another company
Material Fact any fact that is significant or essential to the transaction
Fiduciary Duties a responsibility to act in the best interest of your client — the highest standard
Fraud a misstatement made intentionally to deceive
Civil Rights Act of 1866 the first law that began to promise equal rights for all citizens regardless of race or color
Fair Housing Act a federal law that prohibits discrimination in housing based upon race, color, religion, or national origin and was amended to include sex, disability, and familial status; a.k.a. the Fair Housing Act of 1968
Disability a physical or mental impairment that limits at least one major activity in someone’s life
Steering an illegal act of channeling buyers or tenants to certain areas, either to keep the area demographically the same or to change the demography of the area
American with Disabilities Act a federal law enacted to remove barriers for individuals with disabilities
Equal Opportunity in Housing the concept that everyone will have equal access to housing with no discriminatory actions taking place
Texas Department of Housing and Community Affairs a department that administers assigned programs on Texas housing, invests resources strategically, and develops high quality affordable housing which allows Texas communities to thrive
Reasonable Accommodation a change in rules, policies, or practices that may be necessary to afford a person with a disability an equal opportunity to use or enjoy a dwelling
Protected Classes groups that are illegal to discriminate against, as defined by the Fair Housing Act
Housing and Community Development Act a 1988 amendment to the Fair Housing Act, that added familial status and disability to the list of protected classes
Familial Status protected class that applies to any family with at least one person under 18 years of age with at least one parent or legal guardian
Blockbusting the illegal practice of causing owners to sell their homes by creating fear that minorities are moving into the area; also known as panic peddling
Equal Credit Opportunity Act (ECOA) law prohibiting credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or use of public assistance
Community Reinvestment Act helps commercial banks and savings associations meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods
Redlining the illegal act of an lender denying mortgages in certain areas of town
Home Mortgage Disclosure federal act that requires lenders to disclose specific lending information, which HUD then uses to map lending patterns
Disability a physical or mental impairment that substantially limits one or more of an individual’s major life activities
REALTOR® a registered trademark designed for the sole use of identifying the members of a local board who are affiliated with the National Association of REALTORS®
Code of Ethics a document created by the National Association of REALTORS® that their members pledge to abide by
Canons of Professional Ethics and Conduct the Texas Real Estate Commission’s code of ethics for real estate license holders; contained in Chapter 531 of the Texas Administrative Code
Texas Real Estate License Act (TRELA) a law that governs the licensing, education, and activities of real estate license holders practicing brokerage in this state
Texas Real Estate Commission (TREC) a group of nine people appointed by the governor and confirmed by the state senate that are to set policy and rules from the real estate license act
Broker someone who assists in buying and selling to receive a commission
Sales Agent a person who is licensed to practice real estate and is sponsored by a real estate broker
Attorney a person who is licensed to give legal advice
Real Estate Center located at Texas A&M University to provide the results of research and education to license holders
Promulgated Contracts contracts prepared and authorized by the Texas Real Estate Commission that must be used by real estate license holders. There are a few exceptions to this rule.
Texas Real Estate Broker-Lawyer Committee a committee that creates and corrects contract forms to be used by Texas real estate license holders
Errors and omissions insurance insurance that protects against mistakes a license holder might make in real estate transactions; does not cover acts of fraud or other intentional misconduct
Abstract of Title an abbreviated history of a property, including info on any transfers, grants, wills, conveyances, liens, and encumbrances
Real Estate Recovery Trust Account a fund managed by the Texas Real Estate Commission to provide payment to a party who has been damaged through the violation of The Real Estate License Act by a license holder
Nolo Contendere a plea in a criminal court in which the defendant accepts the punishment without admitting guilt
Commingling an illegal act of mixing personal funds with a client’s funds
Survey a legally valid drawing of the dimensions of a piece of real estate, including its boundaries and the location of improvements
Metes and Bounds a legal land description method identifying a piece of real estate’s exact dimensions and location in reference to a fixed and permanent monument
Point of Beginning the definite starting point for a metes and bounds description
Monument an object used to mark the boundaries of a piece of real estate
Rectangular Survey System a method to describe land by using principal meridians and base lines; also known as the government survey system
Lot and Block a way to describe a piece of land by referring to the lot and block numbers in a subdivision that were assigned by the developer
Plat a map of a subdivision indicating its location and property lines
Longitude Lines/Meridians units of measurement that run north to south to Earth’s poles
Latitude Lines/Parallels units of measurements that run east to west, parallel to the equator
Range a column created by drawing a parallel line every six miles east and west of a principal meridian
Township Lines lines that intersect with range lines to create 36-square-mile parcels (6 x 6 square miles) called townships
Acre a measure of the surface of land (43,560 square feet)
Section a square made up of mile-long boundaries (1 square mile) that equates to 640 acres
Datum a base point from which measurement is taken by moving upward or downward, marking standard heights or depths
Air Lot airspace above a parcel of land
Contour Map a map where curved lines (contour lines) connect contiguous points of equal elevation to define the contours of the land, also called a topographic map
Land Surveying the science of determining points and the distances and angles between them, often for the purpose of establishing land maps and boundaries for ownership transfers of real estate
Contract a legally binding and enforceable agreement to do or not to do a specific thing
Performance Agreement part of a contract that requires the contracting parties either to perform certain actions or to uphold certain contractual promises
Forbearance Agreement part of a contract that requires one or more of the contracting parties to refrain from actions they are otherwise legally entitled to perform
Bilateral Contract an agreement in which both parties give consideration and promise to perform the actions specified in a contract
Unilateral Contract an agreement in which one party promises to perform and the other party accepts this promise, requiring only one party to act
Executed Contract a contract in which all terms have been fulfilled by all parties
Executory Contract a contract that is not completely executed or performed
Addenda documents containing additional terms, information, or obligations that are attached to a contract
Four Corners Doctrine a legal concept stating that the court can only consider information that appears within the four corners of the documents
Amendment changes or makes modifications to an already agreed upon contract
Statute of Frauds a law which requires certain types of contracts to be in writing and to be signed by all parties who are bound by the contract
Parol Evidence Rule a legal term that states that if the important details of an agreement were discussed but fail to make it into the written contract, the written and signed contract is given authority over any word of mouth
Partial Performance this occurs when one or more of the contracting parties perform only a portion of the agreed-upon contractual duties
Substantial Performance occurs when a party performs the majority of the contract’s requirements but does not perform according to the contract’s stipulations
Contingencies stipulations or conditions that must be satisfied before the contract can be performed
Assignment the transference of obligations in a contract from one party to another
Novation the act of replacing an existing contract with a new, modified one
Recording the placing of documents about the claims and ownership of real estate in the county clerk’s office at the courthouse
Abstract of Title a condensed history of title to a tract of land that summarizes the transfers of ownership and encumbrances
Attorney’s Opinion of Title a document written by a lawyer that identifies any defects in an AOT that MOMN state that the seller has marketable title to the property BOS; a document written to pass ownership of personal property to someone else
Title Insurance insurance to protect the owner of a property if any other person proves ownership; covers the insured person’s investment into the property but does not guarantee continued ownership
Estate the degree, quantity, nature, and extent of one’s interest in property
Statutory Estate an estate that is created as a matter of state law
Freehold Estate an estate in land in which ownership will last for an indeterminate duration
Leasehold Estate a type of property interest allowing tenants to occupy and use a property they do not own; contains a reversionary right
Fee Simple Estate maximum ownership of real property, indefinite duration, freely transferable, and freely inheritable; also called a fee or a fee simple absolute; it is of indefinite duration, freely transferable, and freely inheritable
Defeasible Fee Estate also known as a fee simple defeasible or qualified fee, is a type of freehold estate in which the person who has possession of the property is only able to hold the property until an event takes place or does not occur; ...
Fee Simple Subject to Condition Subsequent a defeasible fee estate in which a grantor conveys a parcel of real estate subject to a condition of ownership; the grantor must go to court to assert their right to retake ownership (right of re-entry)
Fee Simple Determinable Estate a defeasible fee estate that will come to an end automatically and immediately upon the occurrence of a designated event, the time of which is uncertain
Life Estate an interest in real estate that will end upon the death of the life tenant or the pur autre vie life
Conventional Life Estate a type of freehold life estate created by a deed or will that lasts for the duration of the tenant’s life
Legal life estate a type of freehold life estate created by an act of law; a Texas homestead would be one example
Pur Autre Vie a type of freehold life estate that grants someone ownership of a property for the duration of another person’s life
Remainder refers to the estate that will pass to another party at the death of the person upon whom the life estate is based
Reversion the portion of an estate that will return to the original grantor when a life estate has ended
Reversionary Interest refers to an an estate wherein, upon the death of the life estate owner, full ownership reverts to the original fee simple owner; also known as a revisionary right
Remainderman refers to recipient of the remainder — either the grantor who set up the life estate or a designated third party
Estate for Years a leased possession of property for a certain, specific period of time; also known as a tenancy for years
Encumbrance any claim or right against a property held by another that is not the fee title owner.
Easement a right to use or cross someone else’s land for a specific purpose
Restriction an outline of what someone may not do on their own personal piece of property
License the permission to use someone else’s property for a temporary period of time
Conveyance a transfer of ownership of a piece of real estate from one person to another
Probate the legal process in which a court decides who will inherit property
Encroachment when an owner’s property (such as a fence, tree, driveway) crosses the property boundaries of another landowner
Statutory Lien a lien brought by a government entity such as a tax lien
General Lien a lien in which the real estate AND personal property may be sold to satisfy the debt
Specific Lien a lien that is against only the real estate
Priority of Liens the order in which debts or taxes levied by the government will be paid off through a court sale
Voluntary Lien a lien that is created on purpose and with the agreement of the owner of the property in question, such as a mortgage
Involuntary Lien a lien that is created without the property owner taking any action to initiate it
Statutory Lien a lien established by local, state, or federal law for a specific set of circumstances
Equitable Lien a right that exists only in equity, with one party charging their property as security for a debt or loan
Mechanic’s Lien a lien created when a worker has not been paid for work done on a property
Execution Lien a lien created by a writ of execution issued by a court to force payment of monies owed from a judgment when a debtor does not pay
Federal Judgment Lien a lien filed by the government for failure to pay certain debts
Lis Pendens a document recording at the courthouse giving notice that a lawsuit is pending on a particular piece of property
Vendor’s Lien a lien the seller has against a buyer as a security for the unpaid balance of the purchase price
Vendee’s Lien a document declaring a claim from a buyer that the seller has not transferred title to the buyer according to the agreement
Bundle of Legal Rights ownership of land with all of the legal rights of possession, control, enjoyment, exclusion, and disposition
Groundwater Rights property owners’ right to use water under the surface through the rule of capture
Accretion the process that results in the gradual increase in land area through deposits of soil by action of water
Avulsion the sudden loss of land by flood, or when a stream or river changes course
Homestead a property that a person or family owns and occupies as their primary residence
Separate Property property owned by either spouse prior to the marriage or by gift or inheritance during the marriage
Individual Ownership a form of property ownership in which one person is the owner of a property and has absolute control over the distribution and use of the land
In Severalty describes undivided ownership of an estate, with an interest that is exclusive from other owners
Co-Ownership ownership of a property by more than one person
Joint Tenancy co-ownership in which the parties have the right of survivorship — when one dies, the others receive that person’s portion of the estate
Tenancy in Common co-ownership in which each co-owner of the property holds their individual portion of the ownership interest in severalty
Community Property property owned by a married couple in which each spouse has half ownership of any property obtained during the marriage, plus a right of survivorship ownership after the death of either spouse
Living Trust a trust created during someone’s life to manage their assets in life and in death
Testamentary Trust a trust created through the use of a will when someone dies
Land Trust a trust in which land is purchased to be held for a long period of time for the benefit of a named party
Real Estate Investment Trust (REIT) an account in which 100 people or more place funds for the trust to invest in real property and then return the profits back to the investors
Corporation an entity that is doing business
Syndicate two or more people or companies that join together to create and run a real estate investment
Limited Liability Corporation (LLC) a type of corporation in which none of the owners of the company can be held personally liable for debt
Listing Agreement a contract between a principal and a broker created for the broker to sell or lease a property
Special Agent an agent that is contracted by the client to perform a certain act; typically the broker of the agent involved in buying/selling transactions
Cooperating Broker the other broker or salesperson that shows the listed property to a buyer who subsequently purchases the property
Municipal Utility District (MUD) rural districts of Texas with lower tax rates that exist to provide developers a way to finance or be reimbursed for utility improvements they make
Public Improvement District (PID) a district where property owners can decide on government financed and approved improvement projects for which they will be taxed
Buyer Representation Agreement a document that creates agency between a broker and a buyer
Arbitration a conflict resolution technique that requires a third party in the room to decide the best method of resolving the conflict
Open Listing an agreement that gives multiple real estate brokers (and the owners themselves) the right to sell the property with the individual considered the procuring cause of the sale of the property getting the commission
Exclusive Right to Sell Listing a listing agreement which gives the agent the sole right to sell the property and guarantees that the broker receives a commission if the property is sold, even if the seller brings the buyer themselves
Exclusive Agency Listing a listing agreement in which the owner retains the right to sell the property themselves without paying a commission, or the commission will be paid to the named broker if the broker or any other party sells the property
Net Listing an agreement in which the seller names an amount they want their property to sell for, and then the broker tries to sell it for more, because they receive the difference (the dollar amount above what the owner wants) as their commission
Created by: imjamesowens