Real Estate License Exam

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abstract of title

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The condensed history of a title to a particular parcel of real estate, consisting of a summary of the original grant and all subsequent conveyances and encumbrances affecting the property and a certification by the abstractor that the history is complete.

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acceleration clause

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The clause in a mortgage or deed of trust that can be enforced to make the entire debt due immediately if the borrower defaults on an installment payment or other covenant.

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accession

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Acquiring title to additions or improvements to real property as a result of the annexation of fixtures or the accretion of alluvial deposits along the banks of streams.

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accretion

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The increase or addition of land by the deposit of sand or soil washed up naturally from a river, lake, or sea.

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accrued items

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On a closing statement, items of expense incurred but not yet payable, such as interest on a mortgage loan or taxes on real property.

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acknowledgment

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A formal declaration made before a duly authorized officer usually a notary public, by a person who has signed a document.

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actual eviction

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The legal process that results in the tenant's being physically removed fom the leased premises.

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actual notice

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Express information or fact; that which is known; direct knowledge.

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adjustable-rate mortgage (ARM)

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A loan characterized by a fluctuating interest rate, usually one tied to a bank or savings and loan association cost of funds index.

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ad valorem

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Latin phrase meaning "to the value."

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ad valorem tax

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A tax levied according to value, generally used to refer to real estate tax. Also called the general tax.

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adverse possession

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The actual open, notorious, hostile, and continuous possession of another's land under a claim of title. Possession for a statutory perios may be a mean of acquireing title.

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affidavit of title

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A written statement, made under oath by a seller or grantor of real property and acknowledged by a notary public, in which the grantor (1) identifies himself or herself and indicates marital status; (2) certifies that since the examination of the tile on the date of the contracts no defects have occurred in the title; and (3) certifies that he or she is in possession of the property (if applicable).

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agency

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The relationship between a principal and an agent, ususally a property owner and a real estate broker.

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agency coupled with an interest

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An agency relationship in which the agent is given an estate or an interest in the subject of the agency (the property.)

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agent

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One who acts or has the power to act for another. A fiduciary relationship is created under the law of agency when a property owner as the principal executes a listing agreement or management contract authorizing a real estate broker to be his or her agent.

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agriculture

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A category of real estate that includes farms, timberland, ranches and orchards.

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air lot

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A designated air space over a piece of land. An air lot, like surface property may be transferred.

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air rights

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The right to use the open space above a property usually allowing the surface to be used for another purpose.

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alienation

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The act of transferring property to another. Alienation may be voluntary, such as by gift, or involuntary, such as by eminent domain or adverse possession.

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alienation clause

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The clause in a mortgage or deed of trust that states that he balance of the secured debt becomes immediately due and payable at the lender's option if the property is sold by the borrower. In effect this clause prevents the borrower from assigning the debt without the lender's approval.

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allodial system

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A system of land ownership in which land is held free and clear of any rent or service due to the government; commonly contrasted to the feudal system. Land is held under an allodial system in the United States.

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American Land Title Association ALTA policy

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A title insurance policy that protects the interes om a collateral property of a mortgage lender who originates a new real estate loan.

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amortized loan

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A loan in which the principal as well as the interest is payable in monthly or other periodic installments over the term of the loan.

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anticipation

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The appraisal principle that holds that value can increase or decrease, based pn the expectation of some future benefit or detriment produced by the property.

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antitrust laws

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Laws designed to preserve the free enterprise of the open marketplace by making illegal ceratin private conspiracies and combinations formed to minimize competition. Most violations of antitrust laws in the real estate business involve either price-fixing (brokers conspiring to set fixed compensation rates) or allocation of customers or markets (brokers agreeing to limit their areas of trade or dealing to certain areas or properties.)

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appraisal

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An estimate of the quantity, quality, or value of something. The process through which conclusions of property values are obtained; also refers to the report that sets forth the process of estimation and conclusion of value.

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appreciation

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An increase in the worth or value of a property due to ecomonic or related causes, which may prove to be either temporary or permanent; the opposite of depreciation.

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appropriation

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An action taken by a taxing body that authorizes the expenditure of funds and provides for the sources of money. Appropriation generally involves the adoption of an ordinace or the passage of a law setting forth the specifics of the propsed taxation.

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area

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The space inside a two-dimension shape; area equals the length times width.

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asbestos

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A mineral once used in insulation and other products that can cause respiratory diseases.

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assemblage

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The combining of two or more adjoining lots into one larger tract to increase their total value.

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assignment

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The transfer in writing of interest in a bond, mortgage, lease or other instrument.

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assumption of mortgage

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Acquiring title to property on which there is an existing mortgage and agreeing to be personally liable for the terms and conditions of the mortgage, including payments.

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attachment

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The act of taking a person's property into legal custody by writ or other judicial order to hold it available for application to that person's debt to a creditor.

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attorney-in-fact

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A person who performs one or more acts for another person according to the authority granted to them in a document known as a power of attorney.

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attorney's opinion of title

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An abstract of title that an attorney has examined and has certified to be, in his or her opinion, an accurate statement of the facts concerning the property ownership.

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automatic extension

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A clause in a listing agreement that states that the agreement will continue automatically for a certain period of time after its expiration date. In many states, use of this cluase is discouraged or prohibited.

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avulsion

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The sudden tearing away of land, as by earthquake, flood, volcanic action or the sudden change in the course of a stream.

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balance

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The appraisal principle that states that the greatest value in a property will occur when the type and size of the improvements are proportional to each other as well as the land.

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baloon payment

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A final payment of a mortgage loan that is considerably larger than the required periodic payment because the loan was not fully amortized

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banker's year

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Statutory year that contains 12 months and 30 days in each month; total number of days in a banker's year are 360.

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bargain and sale deed

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A deed that carries with it no warranties against liens or other encumbrances but that does imply that the grantor has the right to convey title. The grantor may add warranties to the deed at his or her discretion.

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base line

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The main imaginary line running east and west and crossing a princpal meridian at a definite point; used by surveyors for reference in locating and describing land under the rectangular (government) survey system of legal desccription.

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basis

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The financial interest that the Internal Revenue Service attributes to an owner of an investment property for the purpose of determining annual depreciation and gain or loss on the sale of the asset. If a property was accquired by purchase, the owner's basis is the cost of the property plus the value of any capital expenditures for improvements to the property, minus any depreciation allowable or actually taken. The new basis is called the adjusted basis.

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benchmark

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A permanent reference mark or point established for use by surveyors in meansuring differences in elevation.

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beneficiary

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(1) The person for whom a trust operates or in whose behalf the income from a trust estate is drawn; (2) A lender in a deed of trust loan transaction.

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blanket loan

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A mortgage covering more than one parcel of real estate providing for each parcel's partial release from the morgage lien upon repayment of a definite portion of the debt.

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blockbusting

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The illegal practice of inducing homeowners to sell their property by making representations regarding the entry of prospective entry of persons of a particular race or nation al origin into the neighborhood.

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blue-sky laws

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Common name for those state and federal laws that regulate the registration and sale of investment securities.

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boot

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Money or property given to make up any difference in value or equity between two properties in an exchange.

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branch office

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A secondary place of business apart from the principal or main office form which real estate business is conducted. A branch office usually must be run by a licensed real estate broker working on behalf of the broker who operates the principal office.

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breach of contract

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Violation of any terms or conditions in a contract without legal excuse, for example, failure to make a payment when it is due.

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broker

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One who acts as an intermediary on behalf of others for a fee or commission

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brokerage

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The bringing together of parties interested in making a real estate transaction.

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buffer zone

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A strip of land, usually used as a park or designated for a similar use, separating land dedicated to one use from land dedicated for another use (e.g. residential from commercial).

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building code

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An ordinance that specifies minimum standards of construction for buildings to protect public safety and health.

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building permit

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Written governmental permission for the construction, alteration, or demolition of an improvement showing compliance with building codes and zoning ordinances.

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bundle of legal rights

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The concept of lawnownership that includes ownership of al legal rights to the land--for example, possession, control within the law, and enjoyment.

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buydown

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A financing technique used to reduce the monthly payments for the first few years of a loan. Funds in the form of discount points are given to the lender by the builder or seller to "buy down" or lower the effective interest tate paid by the buyer, thrs reducing the monthly payments for a set time.

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buyer agency agreement

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A contract between a buyer (as principal) and a real estate broker (as agent) by which the broker is employed by the by the buyer to find a property for the buyer, on the buyer's terms, for which service the buyer agrees to pay the broker compensation. Under this agreement, the broker represents the buyer, with fiduciary responsibilities.

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buyer-broker

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A broker who has entered into a buyer agency agreement with a buyer.

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buyer's market

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An economic condition occurring when the supply of a good exceeds the demand resulting in a decrease in price.

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calendar year

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The 365-day year with 12 months and 28 to 31 days in each month.

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calendar year

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The 365-day year with 12 months and 28 to 31 days in each month.

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capital gain

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The taxable profit derived from the sale of a capital asset. It is the difference between the sales price and the basis of the property after making adjustments for closing costs, capital improvements, and allowable deprciation.

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capitalization

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A mathematical process for estimating the value of a property using a proper rate of return on the investment and the annual net income expected to be produced by the property. The formula is expressed as: Income/Rate=Value.

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capitalization rate

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The rate of return a property will produce on the owner"s investment.

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carbon monoxide (CO)

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A colorless and odorless gas that occurs as a byproduct of burning types of feuls. CO poses a significant health hazard if not properly ventilated.

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cash flow

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The net spendable income from an investment, determined by deducting all operating and fixed expenses from the gross income. If expenses exceed income, a negative cash flow is the result.

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cash rent

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In an agricultural lease, the amount of money given as rent to the landowner at the outsert of the lease, as opposed to sharecropping.

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caveat emptor

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A Latin phrase meaning "let the buyer beware."

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CC&R

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Covenants, Conditions and Restrictions. Private restrictions on the use of real property founded in a subdivision or condominium project.

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CERCLA

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The Comprehensive Environmental Respose Compensation and Liability Act; a law establishing a Superfund to clean up hazardous waste sites and to collect the costs from certain defined responsible persons associated with the sites.

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certificate of occupancy

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Granted by the government agency when property determined to be in compliance with building coses and ready fof occupancy.

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certificate of sale

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The document generally given to the purchaser at a tax foreclosure slae. A certificate of sale does not convey title; normally it is an instrument certifying that the holder received title to the property after the redemption period passed and that the holder paid the property taxes for that interim period.

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certificate of title

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A statement of opinion on the status of the title to a parcel of real property based on an examination of specified

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chain of title

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The succession of conveyances, from some accepted starting point, whereby the present holder of real property derives title.

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change

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The apprasial principle that holsd that no physical or economic condition remains constant.

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Civil Rights Act of 1866

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The first civil rights act passed in the United States, this law prohibits any type of discrimination based on race. "all citizens of the United States shall have the same right in every state and territory as is enjoyed by white citizens thereof to inherit, purchase, lease, sell, hold, and convey real and personal property." The constitutionality of this law was upheld by the Supreme Court in 1968 when it rendered the decision in Jones v. Mayer Company. This decision, based on the 13th Amendment to the US Constitution, has served as a basis for all subsequent civil rights legislation.

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closing statement

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A detailed cash accounting of a real estate transaction showing all cash received, all charges and credits made, and all cash paid out in the transaction.

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cloud on title

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Any document, claim, unreleased lien, or encumbrance that may impair the title to real property or make the title to real property doubtful; usually revealed by a title search and removed by either a quitclaim deed or suit to quiet title.

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clustering

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The grouping of homesites within a subdivision on smaller lots than normal with the remaining land used as common space.

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codicil

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A suppement or an addition to a will, executed with he sma formalities as the will, that normally does not revoke the entire will.

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coinsurance clause

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A claluse in insurance policies covering real property that reqires the policyholder to maintain fire insurance coverage generally equal to at least 80 percent of the property's actual replacement cost.

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commercial

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A category of business real estate that includes office space, shoppping centers, stores, theaters, hotels, and parking faciiities.

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commercial banks

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Institutional lenders with the following lending characteristics: small loans for short terms, such as construction, home improvement and mobile-home loans; relatively low loan-to-value ratios; regulated by the Federal Reserve Banking Syst;em; and deposits insured by the FDIC (Federal Deposit Insurance Corporation).

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Human Relations Commission

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Nine members appointed by the Governor. Chair is chosen from among its members. Process discrimination complaints.

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Complaint Process for HRC

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Acopy of complaint goes to the respondent and if comlaint is against licensee to the MREC. Maybe conciliation. Must be one year from date of event.

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Alternative Complaint

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May go to court up to two years

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Fair Housing Laws

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If discriminated on account of race, 1866 Civil Rights Act lets you file complaint in federal court. MD has substantially similar procedures, residential complaints are handles by the State agencies and state court.

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Protected Categories Against Discrimination in MD

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race, color, religion, sex, family status, national origin, disability and marital status are protected categories. Sexual orientation was added to the list in 2001.

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Discrimination Exceptions

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Parallel federal: OK in a single family residence sold without a broker, and marketed without discriminatory advertising. Owner occupied single resident may reject roomer. In multifamily with no more than 5 rentals; federal law is a total of four. Also exempt are religious organizations, private clubs; persons convicted of illegal drug distribution and housing for the elderly

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Discrimination in Housing

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Refusing to sell or rent; making available or denying residence when in fact available; different terms and conditions; provision of services; advertizing a preference or limitation; seeking for profit, to induce any person to sell a dwelling by making statements about protected groups coming in.

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Discrimination re Individals With Disabilities

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May not discriminate because prospective purchaser will have disable person living with them; discrimination in terms; refusing to allow reasonable modifications; failing to design multifamily housing for initial occupancy by disabled persons.

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Penalty for Threats

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Persons guilty of threatening coercing people seeking housing may be fined $1,000 or imprisioned for one year; If bodily injury results $10,000 and ten years.

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Discrimination and the Real Estate Broker Act

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Brokers, whether acting for financial gain or not, induce owner to transfer or discourage by blockbusitng; referencing proximity to protected persons, or sale or entry will lower values.

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Discrimination in Financing

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Illegal to discriminate in terms or availability to protected groups