Overview
This lecture covers essential real estate terms and concepts, focusing on property law, contracts, agency, valuation, and government powers relevant for licensing exams.
Key Real Estate Terms & Concepts
- Ad valorem means "according to value" (used for property taxes).
- Novation is the substitution of a new contract.
- Joint tenancy includes right of survivorship and requires time, title, interest, and possession.
- Chattel real refers to personal property.
- Escheat is property reverting to the state if there is no will.
- Elements of a valid contract: mutual consent, lawful object, consideration, capable parties.
- Consideration is anything of value exchanged.
- Protection period clause allows a broker to get paid after listing if the buyer was found during listing.
- General lien affects all property (e.g., income tax); specific lien affects one property (e.g., mechanic’s lien).
- Redlining is illegal discrimination by lenders.
- Secondary mortgage market is the resale marketplace for mortgages.
- Net lease: tenant pays taxes, insurance, maintenance.
- Non-conforming use: property use doesn't match current zoning, often "grandfathered" in.
- Caveat emptor: buyer beware.
- Inverse condemnation: owner sues for compensation when property taken by government.
- Prepayment penalty: fee for early loan payoff.
- Real property: immovable property by law.
- Hold harmless clause: protects broker if seller provides false information.
- Cost replacement approach: property valuation method for special/new properties.
- Listing: employment contract between seller and broker, can be bilateral or unilateral.
- Encumbrance: anything affecting title to property.
- Constructive notice: notice given indirectly, not directly to a person.
- Building codes: minimum standards enforced by police power.
- Agency: relationship between broker and client, can include dual agency.
- Market data approach: property valuation by comparing recent sales.
- Depreciation types: physical deterioration, economic obsolescence, functional obsolescence.
- 1031 exchange: defers taxes by reinvesting proceeds into similar property.
- Fee simple absolute: highest ownership interest, subject to taxes.
- Lis pendens: notice of pending legal action affecting property.
- Void/voidable contracts: lack legal purpose or formed under duress.
- Easement appurtenant: easement that runs with the land.
- Sublease: original tenant leases to another, remains responsible.
- Government powers: police power, eminent domain, escheat, taxation.
- Commingling: mixing client funds with personal/broker funds.
- RESPA: Real Estate Settlement Procedures Act, prohibits kickbacks.
- Accretion: gradual gain of land.
- Deed: document evidencing transfer of title.
- Grant deed: contains implied warranties.
- Quitclaim deed: immediate transfer, no warranties.
- Income approach: property valuation based on income produced.
- Title: legal ownership of property.
- Cloud on title: claim or encumbrance that impairs title.
- Leverage: using borrowed funds for investment.
- Steering: directing buyers to specific areas, a form of discrimination.
- Fair Housing Act (1968): prohibits housing discrimination.
- Unilateral contract: only one party makes a promise.
- Blockbusting/panic peddling: pressuring owners to sell due to incoming groups.
- Statute of Frauds: requires certain contracts to be in writing.
- Amortization: paying off debt in regular installments.
- Gross rent multiplier: relates purchase price to rental income.
- Fiduciary: duty of loyalty and care to a client.
- Statute of Limitations: limits legal action to a set period.
- Lien: claim on property for unpaid debt.
- Periodic tenancy: lease with recurring periods (e.g., month-to-month).
- Downzoning: changing zoning to a lower use (e.g., commercial to residential).
- Abstract of title: summary of property ownership history.
- Agency duties: loyalty, disclosure, confidentiality, accountability.
Key Terms & Definitions
- Ad Valorem — according to value.
- Joint Tenancy — co-ownership with right of survivorship.
- Non-conforming Use — continued property use not aligned with current zoning.
- Easement Appurtenant — easement benefiting a neighboring property.
- Fee Simple — highest property ownership.
- Escheat — reversion of property to state.
- Lis Pendens — lawsuit pending affecting property.
- Amortization — repayment of loan in installments.
- Redlining — illegal loan discrimination.
- Blockbusting — pressuring to sell via fear tactics.
Action Items / Next Steps
- Review timeframes for 1031 tax-deferred exchange.
- Study essential elements of contracts and agency relationships.
- Memorize types of liens and encumbrances.
- Understand differences among deed types.
- Prepare for exam by practicing concise definitions and scenarios.