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ROCKWELL REAL ESTATE EXAM STUDY GUIDE
Freehold Estate - Answers - Is an interest in real property that has an indeterminable (not fixed or certain) referred to as a owner Fee Simple Estate - Answers - Is the greatest estate that can exist in land, the highest and most complete form of ownership. It is potentially infinite duration and represents the whole "bundle of rights" Estate of Inheritance - Answers - An estate that can pass to the holders heirs, especially a fee simple Defensible fee estate - Answers - A fee simple estate that carries a qualification, so that ownership may revert to the grantor if a specified event occurs or a condition is not met Fee Simple Determinable - Answers - Ends automatically if the condition is violated, the property reverts back to the grantor without legal action by the grantor Fee Simple Subject to Condition Subsequent - Answers - doesn't end automatically when the condition is breached, instead the grantor must take some action Life Estate - Answers - Is a freehold estate whose duration is limited to the lifetime of a specified person or persons pur autre vie - Answers - "For the life of another." A life estate pur autre vie is a life estate that is measured by the life of a person other than the grantee Leasehold Estate - Answers - Has a limited duration (one year less is an example) it is referred to as a tenant Estate - Answers - An interest in land that is or may become possessory Waste - Answers - Permanent damage to real property caused by the party in possession, harming the interests of other estate holders. Estate for years - Answers - A leasehold Estate with a fixed term. Also called a term tenancy Periodic Tenancy - Answers - a leasehold estate that is renewed at the end of each period unless one party gives notice of termination Estate at will - Answers - A leasehold estate without a definite termination date that may arise after a periodic tenancy or an estate for years terminates. Also called a tenancy at will
Ownership in Severalty - Answers - sole ownership of property Tenancy in Common - Answers - Joint ownership where there is no right of survivorship Joint Tenancy - Answers - Joint ownership with right of survivorship Right of Survivorship - Answers - The right by which the surviving joint tenant(s) acquire another joint tenant's interest in the property upon her death Community Property - Answers - property owned jointly by a married couple. Corporation - Answers - A business entity owned by shareholders, governed by a board of directors and managed by corporate officers; the shareholders have limited liability Partnership - Answers - an association of two or more persons to carry on a business for profit as co owners Real Estate Investment Trust (REIT) - Answers - A real estate investment business that qualifies for tax advantages if certain requirements are met Condominium - Answers - A property that has been developed so that individual unit owners have separate title to their own units, but share ownership of the common elements as tenants in common. cooperative - Answers - A property that is owned by a corporation and tenanted by share holders in the corporation who have proprietary leases for their units Timeshare - Answers - Real Property - Answers - land, attachments, and appurtenances Personal Property - Answers - Anything that is not real property, it's main characteristics is movability appurtenance - Answers - A right incidental to the land that is transferred with it Emblements - Answers - Crops, such as wheat, produced annually through the labor of the cultivator Trade Fixtures - Answers - Personal property attached to real property by a tenant for use in a trade or business. Trade fixtures are removable by the tenant. Riparian Land - Answers - Land bordered by flowing water, such as a stream or river
Government lot - Answers - In the government survey system, a parcel of land that is not a regular section. Lot and Block - Answers - The system of description used for subdivided land. The properties within a subdivision are assigned lot numbers on a survey map called a plat, which is then recorded. The location and dimensions of a particular lot can be determined by consulting the recorded plat. Air Lot - Answers - A parcel of property above the surface of the earth, not containing any land: for example, a condominium unit on the third floor. Alienation - Answers - The transfer of title, ownership, or an interest in property from one person to another. Alienation May be voluntary or involuntary Deed - Answers - A written instrument that, when executed and delivered, conveys title to or an interest in real estate. Warranty Deed - Answers - A deed that provides the greatest amount of protection for the grantee, in that the grantor promises that she or he has title to the property conveyed in the deed, that there are no undisclosed encumbrances on the property, and that the grantee will enjoy quiet possession of the property. Quitclaim Deed - Answers - A deed that conveys and releases whatever interest in a piece of real property that the grantor may have. It carries no warranties of kind but does transfer any right, title or interest the grantor has at the time the deed is executed Acknowledgment - Answers - A formal declaration made before a duly authorized officer, usually a notary public, by a person who has signed a document. He states the signature is genuine and voluntary Will - Answers - The written declaration of an individual that designates how his estate will be disposed of after death Intestate - Answers - when a person dies without a valid will Escheat - Answers - The reversion of property to the state or county, as provided by state law, in cases where a decedent dies intestate without heirs capable of inheriting, or when the property is abandoned. Dedication - Answers - When a private owner voluntarily or involuntarily gives real property to the public. eminent domain - Answers - The power of the government to take(condemn) private property for public use, upon payment of just compensation to the owner
condemnation - Answers - The act of taking private property for public use under the power of eminent domain. Adverse Possession - Answers - A means by which a person may acquire title to property by using it openly and continuously without the owner's permission for the period required by state statute. Constructive Notice - Answers - Notice of a fact that a person is held by law to have (as opposed to actual notice) he had the opportunity to discover the fact in question by searching public record title search - Answers - An inspection of the public record to determine all rights and encumbrances affecting title to a piece of property. Chain of Title - Answers - A complete history of all recorded interests in a piece of real property Abstract of Title - Answers - A condensed history of the recorded interests in a piece of real property. Title Insurance - Answers - An insurance policy that indemnifies a buyer or a lender against losses resulting from title defects that have not been excepted from coverage. Title report - Answers - A report issued after a title search by a title insurance company, listing all defects and encumbrances of record Covenants for General Warranty Deed - Answers - Right to convery (the grantor has title to an interest in the proper or authority to transfer title), covenant of seisin (good faith belief in ones ownership), covenant agains encumbrances, covenant of quiet enjoyment, covenant of warranty Special Warranty Deed - Answers - A deed in which the grantor warrants, or guarantees, the title only against defects arising during the period of his or her tenure and ownership of the property and not against defects existing before that time, generally using the language, "by, through, or under the grantor but not otherwise." Habendum Clause - Answers - That part of a deed beginning with the words "to have and to hold," following the granting clause and defining the extent of ownership the grantor is conveying. Owners exact interest in the property Quit title action - Answers - Is a lawsuit to determine who has title to a piece of property or to remove a cloud from the title. This is done when cloud cannot be cleared amicably with a quitclaim deed. partition - Answers - Court ordered division of a property among its co owners and they cannot agree on how to divide it
Merger - Answers - When both the dominant and servient tenements are acquired by one owner resulting in termination of the easement Abandonment - Answers - A way in which an easement may terminate; it requires action by the easement holder, not simply non-use Profit - Answers - The right to take something (such as timber) from another's land License - Answers - Revocable permission to enter another's land, which does not create an interest in the property Encroachment - Answers - A physical object that intrudes onto another's property, such as a tree branch or a fence Nuisance - Answers - An activity or condition on a nearby property that interfers with a property owners reasonable use and enjoyment of her property CC&Rs - Answers - Covenants, conditions, and restrictions; private restrictions imposed by a subdivision developer Condition - Answers - A restriction on the use of land, the violation of which may result in forfeiture of title Covenant - Answers - A promise by a landowner to refrain from using her land in a particular manner Police power - Answers - The power of state government to regulate for the protection of the public health, safety, morale and general welfare Comprehensive plan - Answers - A long-term plan of development for a community, which is implemented by zoning and other laws Zoning - Answers - A method of controlling land use by dividing a community into zones for different types of uses Noncomforming use - Answers - A formerly legal use that does not conform to a new zoning ordinance, but is nonetheless allowed to continue Variance - Answers - An authorization to deviate from the rules in a zoning ordinance, granted because strict enforcement would cause undue hardship for the property owner Conditional Use Permit - Answers - A permit that allows a special use, such as a school or hospital, to operate in a neighborhood where it would otherwise be prohibited by the zoning.
Rezone - Answers - An amendment to a zoning ordinance; a property owner who feels his property has been zoned improperly may apply for a rezone. Building codes - Answers - regulations that set minimum standards for construction methods and materials eminent domain - Answers - the government's power to take private property for public use, upon payment of just compensation to the owner condemnation - Answers - the process of taking property pursuant to the power of eminent domain General real estate taxes - Answers - taxes levied against real property annually to pay for general government services; based on the value of the property taxed (ad valorem) Special assessment - Answers - A tax levied against property that benefits from a local improvement project, to pay for the project Real Estate Excise Tax - Answers - a tax levied when a piece of real property is sold, based on the selling price of property Contract - Answers - An agreement between two or more competent persons to do or not so certain things for consideration Capacity - Answers - A person must be mentally competent and at least 18 years of age to have the capacity to contract Mutual consent - Answers - The agreement of both parties to the terms of the contact, demonstrated by offer and acceptance Offer - Answers - A communication that willingness of the person making it (the offeror) ro enter into a contract, and that has definite and certain terms Acceptance - Answers - A communication showing the willingness of the offeree to be bound by the terms of the offer Counteroffer - Answers - A qualified acceptance; technically a rejection. Of the offer, with a new offer made on slightly different terms Fraud - Answers - The misrepresentation of a material fact to someone who relies on the misrepresentation as the truth in deciding whether to enter into a contract Undue Influence - Answers - Pressuring someone or taking advantage of his weakness or distress to induce him to enter into a contract
Option agreement - Answers - An agreement that gives one party the right to buy or lease property at a set price within a certain period of time Principal - Answers - The person who authorizes an agent to act on his behalf Agent - Answers - A person authorized to represent another in dealings with third parties Third party - Answers - A person seeking to deal with the principal through the agent. Fiduciary - Answers - Someone who holds a special position of trust and confidence in relation to another Ratification - Answers - When the principal gives approval to unauthorized actions after they are performed, creating an agency relationship after the fact Estoppel - Answers - When the principal allows a third party to believe an agency relationship exists, so that the principal is estopped (legally precluded) from denying the agency. Actual Authority - Answers - Authority the principal grants to the agent either expressly or by implication Apparent Authority - Answers - Where no actual authority has been granted, but the principal allows it to appear that the agent is authorized, and therefore is estopped from denying the agency. Also called ostensible authority. Material facts - Answers - Information that has a substantial negative impact on the value of the property or on a party's ability to perform, or that would defeat the purpose of the transaction confidential information - Answers - Information from or concerning a principal that was acquired during the course of an agency relationship, that the principal reasonably expects to be kept confidential, that the principal has not disclosed to third parties, that would operate to the detriment of the principal, and that the principal is not legally obligated to disclose to the other party. Secret Profit - Answers - Any profit an agent receives as a result of the agency relationship and does not disclose to the principal Listing agent - Answers - The agent that takes the listing on a property, and who may or may not be the agent who procures a buyer. Selling agent - Answers - The agent who procures a buyer for a property, and who may or may not have taken the listing.
Subagent - Answers - An "agent of an agent" a broker is a gent of her firm and a sub agent of the principal (the seller or buyer) In-House Transaction - Answers - A sale in which the buyer and the seller are brought together by licensees working for the same brokerage firm Employee - Answers - Someone who works under the direction and control of another Independent Contractor - Answers - A person who contracts to do a job for another, but retains control over how he will carry out the task, rather than following detailed instructions Open Listing - Answers - A non-exclusive listing, given by a seller to as many brokers as he or she chooses. If the property is sold, a broker is only entitled to a commission if he or she is the procuring cause of the sale Procuring Cause - Answers - The person who directly or indirectly brings about a sale Exclusive Agency Listing - Answers - A listing under which the real estate firm is entitled to a commission if any agent sells the property, but the owner may sell the property directly without being obligated to pay a commission Exclusive right to sell listing - Answers - a listing under which the owner must pay the brokerage a commission on the sale of the property, no matter who was the procuring cause Multiple listing service - Answers - A regional cooperative of real estate firms and licensees who exchange listing information and help market the listings of other members Net listing - Answers - A listing in which the commission is any amount received from the sale over and above the "net" required by the seller Extender clause - Answers - A provision in a listing agreement that obligated the seller to pay a commission if the property is sold within a certain period after the listing expires to someone the agent introduced to the property during the listing period. Also called a safety clause or carryover clause Distressed home - Answers - A personal residence that is being foreclosed on, or that is in imminent danger of foreclosure Purchase and Sale Agreement - Answers - A binding contract between a buyer and a seller of real property
Deed of trust - Answers - A three-party security instrument that includes a power of sale clause, allowing the trustee to foreclose nonjudicially if the borrower (trustor) fails to pay the lender (beneficiary) or otherwise defaults. Acceleration Clause - Answers - A provision in loan documents that gives the lender the right to demand immediate payment in full if the borrower defaults. Alienation Clause - Answers - A provision in a security instrument that gives the lender the right to declare the entire loan balance due immediately if the borrower sells of otherwise transfers the security property. Also called a due-on-sale clause Assumption - Answers - When a borrower sells the security property to a buyer who agrees to take on personal liability for replacement of the existing mortgage or deed of trust Defeasance Clause - Answers - A provision giving the borrower the right to regain title to the security property when the debt is repaid Satisfaction of Mortgage - Answers - The document a mortgagee gives the mortgagor when the mortgage debt is paid off, releasing the property from the lien. Also called a satisfaction piece Deed of Reconveyance - Answers - The document the trustee gives the trustor when the debt secured by a deed of trust is paid off, releasing the property from the lien Land contract - Answers - A contract between a seller (vendor) and a buyer (vendee) of real estate, in which the seller regains title to the property while the buyer pays off the purchase prince in installments Mortgage company - Answers - A type of lender that is not a depository institution and that makes and services loans on behalf of large investors. Sometimes called a mortgage banker. Mortgage broker - Answers - An individual or company that arranges loans between borrowers and investors, but does not service the loans. Point - Answers - One percent of the amount of loan Origination fee - Answers - A fee that a lender charges to cover the administrative costs of processing a loan. Discount points - Answers - a fee that a lender may charge to increase the yield on the loan, over and above the interest rate
Truth in Lending Act (TILA) - Answers - A federal consumer protection law that requires lenders to give borrowers information about loan costs Loan Estimate - Answers - A form that TILA and RESPA require a lender to give to a loan applicant, providing detailed information about the loan and estimates of closing costs Annual Percentage Rate (APR) - Answers - The relationship of the total cost of a loan to the loan amount, expressed as an annual percentage Total interest percentage (TIP) - Answers - The total amount of interest that the borrower will pay over the loan term, expressed as a percentage of the loan amount Loan underwriting - Answers - Evaluating the creditworthiness of the buyer and the value of the property to determine if a loan should be approved. Stable monthly income - Answers - income that satisfies the lender's standards of quality and durability Income ratios - Answers - Percentages used to determine whether a loan applicant's stable monthly income is sufficient. Housing expense to income ratio - Answers - A percentage that measures a loan applicants proposed monthly mortgage payment against the applicants stable monthly income Debt to income ratio - Answers - a percentage that measures all of a loan applicant's monthly obligations (including the proposed mortgage payment) against the stable monthly income Net worth - Answers - An individual's total personal assists minus her total personal liabilities Credit score - Answers - A number that is calculated by applying a statistical model to a loan applicant's credit report, used as an indication of how likely the applicant is to default on the proposed loan Automated underwriting (AU) - Answers - analysis of a loan application with a computer program that makes a preliminary recommendation for or against approval fully amortized loan - Answers - A loan that is fully paid off by the end of its term by means of regular principal and interest payments Loan-to-Value Ratio - Answers - the relationship between the loan amount and the property's appraised value or sales price, whichever is less
seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus Highest and best use - Answers - The most profitable use of the property; the one that provides the greatest net return over time. Principle of change - Answers - Real property is in a constant state of change. It goes through a four-phase life cycle of integration, equilibrium, disintegration, and rejuvenation. Price of substitution - Answers - No one will pay more for a piece of property than they would have to pay for an equally desirable substitute Sales Comparison Approach - Answers - The method of appraisal in which the appraiser compares the subject property to recently sold comparable properties Arm's Length Transaction - Answers - A transaction in which there is no pre-existing family or business relationship between the parties. Cost Approach - Answers - The method of appraisal in which the appraiser estimates the replacement cost of the building, deducts depreciation and adds the value of the site Depreciation - Answers - Loss in value due to any cause. Depreciation is curable if the cost of correcting it could recovered in the sales price when the property is sold Physical Deterioration - Answers - depreciation caused by wear and tear, damage, or structural defects. Curable physical deterioration is called deferred maintenance Functional Obsolescence - Answers - Depreciation caused by functional inadequacies or outmoded design. External Obsolescence - Answers - Depreciation caused by forces outside the property, such as neighborhood decline or proximity to nuisances. Also called economic obsolescence. Income Approach - Answers - The method of appraising property in which net income is converted into value by use of a capitalization rate. Effective gross income - Answers - A property's potential gross income, minus vacancy factor Net Operating Income - Answers - A property's effective gross income, minus operating expenses. Also called net income Capitalization rate - Answers - The rate of return an investor wants on her investment in the property
Economic rent - Answers - The rent that a property would earn on the open market if it were currently available for rent, as distinguished from the rent it is actually earning now (the contract rent) I yard is - Answers - 3 feet 1 mile is - Answers - 5280 feet I acre = - Answers - 43,560 feet 1 square yard = - Answers - 9 square feet I square Mile = - Answers - 640 acres 1 yard = - Answers - 3 feet Capitalization formula - Answers - Income = value * cap rate Market value - Answers - the most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus Highest and best use - Answers - The most profitable use of the property; the one that provides the greatest net return over time. Principle of change - Answers - Real property is in a constant state of change. It goes through a four-phase life cycle of integration, equilibrium, disintegration, and rejuvenation. Principal of Substitution - Answers - No one will pay more for a piece of property than they would have to pay for an equally desirable substitute Sales Comparison Approach - Answers - The method of appraisal in which the appraiser compares the subject property to recently sold comparable properties Arm's Length Transaction - Answers - A transaction in which there is no pre-existing family or business relationship between the parties. Cost Approach - Answers - The method of appraisal in which the appraiser estimates the replacement cost of the building, deducts depreciation, and adds the value of the site. Depreciation - Answers - Loss in value due to any cause
installment sale - Answers - A sale in which less than 100% of the sales price is received in the year of sale. Involuntary conversion - Answers - When property is converted to cash without the voluntary action of the owner, as when it is condemned, destroyed, stolen, or lost Depreciation deduction - Answers - Deductions from a tax payers income to allow the cost of an assets to be recovered over a period of years Blockbusting - Answers - Attempting to induce homeowners to list or sell their homes by predicting that members of another race or ethnic group, or people suffering from some disability will be moving into the neighborhood Steering - Answers - Channeling prospective buyers or tenants to particular neighborhoods based upon their race, religion, national origin, or ancestry. Redlinng - Answers - Refusing to make a loan because of the racial or ethnic composition of the neighborhood Price fixing - Answers - The cooperative setting of prices by competing firms Group boycott - Answers - An agreement between two or more business competitors to exclude another competitor from fair participation in business activities Tie-in agreement - Answers - An agreement in which a seller agrees to sell one product only on the condition that the buyer also purchases a different product market allocation - Answers - An agreement between competitors to divide up a market in which the parties agree that one or both won't sell certain products or services in a specific area 1 square mile = - Answers - 640 acres
