Real Estate Exam: Top 10 Concepts

1. Real vs. Personal Property

• Real Property: Immovable, goes with the real estate (e.g., house).
• Personal Property: Movable, goes with the person (e.g., keys, lease).

2. Estates in Property

• Freehold Estates: Indefinite in duration, implies ownership.
  • Fee Simple Absolute: Highest degree of ownership.
  • Fee Simple Defeasible: Can be lost upon a condition (e.g., selling alcohol).
  • Life Estate: Ownership based on another's life.
• Less than Freehold Estates: Limited time lease.
  • Estate for Years: Defined period (e.g., summer rental).
  • Periodic Tenancy: Recurring timeframe (e.g., month-to-month).
  • Estate at Will: Ends at any time.
  • Estate at Sufferance: Tenant stays too long (landlord's suffering).

3. Government Powers

• P.E.T.E.: Police Power, Eminent Domain, Taxation, Escheat.
  • Police Power: Usage regulations (e.g., zoning, building codes).
  • Eminent Domain: Government takes property with just compensation (condemnation).
  • Taxation: Obligation to pay taxes.
  • Escheat: Property reverts to the state if no heirs.

4. Types of Ownership

• Severalty: Ownership by one person.
• Concurrent Estates: Ownership shared with others.
  • Joint Tenancy: Unity of time, title, interest, and possession; right of survivorship.
  • Tenancy in Common: Unity of possession; no right of survivorship.

5. Essential Elements of Value

• S.T.U.D.: Scarcity, Transferability, Utility, Demand.
  • Scarcity: Limited availability.
  • Transferability: Ability to sell.
  • Utility: Usability.
  • Demand: Desire for the property.

6. Types of Depreciation

• Economic Obsolescence: Loss due to external factors (e.g., nearby airport).
• Functional Obsolescence: Poor design (e.g., 5-bedroom house with 1 bathroom).
• Physical Deterioration: Aging and wear.

7. Appraisal Methods

• Market Data Approach: Uses comparable sales (comps).
• Cost Replacement Approach: Cost to replace a building.
• Capitalization Income Approach: Income contribution to property value.

8. Deeds vs. Title

• Deed: Evidence of transfer.
• Title: Ownership.

9. Liens

• Lien: Debt obligation.
  • Specific Lien: Targets one asset (e.g., mortgage).
  • General Lien: Affects all assets (e.g., income tax).

10. Fair Housing Laws

• Enacted in 1968 to prevent discrimination.
• Violations:
  • Steering: Directing buyers based on race/ethnicity.
  • Blockbusting/Panic Peddling: Encouraging selling based on racial changes.
  • Redlining: Denying loans based on area demographics.

Conclusion

• Understanding these concepts forms the foundation for passing the real estate exam.
• For further study, visit prepagent.com.