Texas Principles of Real Estate 1 Questions and
Answers A+ Graded
Limited Liability Companies - ANSWER Flexible form of a company that blends
elements of partnership and corporation ownership.
Corporations - ANSWER Group of people who are allowed to run their business
in the name of the corporation
Real Estate Investment Trust - ANSWER Many people who can go together and
invest in real estate.
Beneficiaries - ANSWER Individuals who invest in real estate
Beneficial Interset - ANSWER Shares that investors buy in the company
Expressed Contracts - ANSWER Contract that is in writing or in oral where the
parties state the terms and conditions of the contract as well as the duties each will
carry out. .
Implied Contract - ANSWER an understanding between parties
Bilateral Contracts - ANSWER a promise in exchange for a promise: Ex: Seller
and Agent
Unilateral Contract - ANSWER Promise in exchnge for an act: Seller and Buyer
Executed Contract - ANSWER Contract that has been completely performed
Executory Contract - ANSWER Contract that is being carried out
Valid Contract - ANSWER A good contract that meets all of the legal
requirements for a contract and is enforceable in a court of law
Void Contract - ANSWER Was never a contract and will never be a contract.
, Voidable Contract - ANSWER binding against one part but not against the other
party
Unenforceable Contract - ANSWER one that cannot be enforced in a court of law.
Brokerage - ANSWER The business of bringing buyers and sellers together and
assisting in negotiations for the terms of sale of real estate.
Real Estate Broker - ANSWER A person or an organization acting as the agent for
others in negotiating the purchase and sale of real property or other commodities
for a fee.
Real Estate Salesperson - ANSWER A person performing any of the acts included
in the definition of real estate broker but while associated with and supervised by a
broker.
Residential Property - ANSWER A type of property that includes one to four
dwelling units.
Commercial Property - ANSWER Property that produces rental income or that is
used in business. Properties with five or more dwelling units are considered
commercial property.
Industrial Property - ANSWER Property that is used by companies or persons for
manufacturing, warehousing, or the assemblage of components.
Special Purpose Property - ANSWER A category of real property created as a
result of combining the land and its improvements for a single highest and best use.
Mixed-Use Property - ANSWER Any urban, suburban or village development, or
even a single building, that blends a combination of residential, commercial,
cultural, institutional, or industrial uses, where those functions are physically and
functionally integrated, and that provides pedestrian connections.
Improvements - ANSWER Changes or additions made to a property, such as walls
and roads. These typically increase the value of a property, except in some cases of
over improvement.
Non-Homogeneity - ANSWER A physical characteristic of land describing that
land as a unique commodity.
,Value - ANSWER The present worth of future benefits.
Price - ANSWER The amount a purchaser agrees to pay and a seller agrees to
accept under the circumstances surrounding a transaction.
Cost - ANSWER The total dollar expenditure for labor, materials, and other items
related to construction.
Supply - ANSWER The amount of goods offered for sale within a given market at
a given price during a given time period.
Demand - ANSWER The amount of goods consumers are willing and able to buy
at any given price during any given time period.
Demography - ANSWER The study of the social and economic statistics of a
community.
Agent - ANSWER A person authorized to act on behalf of another.
Principal - ANSWER The employer of an agent.
Customer - ANSWER The party the agent brings to the principal as seller or buyer
of the property.
General Agent - ANSWER An agent with full authority over one property of the
principal, such as a property manager.
Special Agent - ANSWER An agent with limited authority to act on behalf of the
principal, such as created by a listing.
Listing Contract - ANSWER A contract in which a property owner employs a real
estate broker to market the property described in the contract.
Fiduciary Duty - ANSWER That duty owed by an agent to act in the highest good
faith toward the principal and not to obtain any advantage over the latter by the
slightest misrepresentation, concealment, duress or pressure.
, Fiduciary - ANSWER A person in a position of trust and confidence, as between
principal and broker; broker as fiduciary owes certain loyalty which cannot be
breached under the rules of agency.
Caveat Emptor - ANSWER Let the buyer beware. The buyer must examine the
goods or property and buy at his or her own risk.
Appraised Value - ANSWER An evaluation of a property's value based on a given
point in time that is performed by a professional appraiser during the mortgage
origination process.
Market Comparison Approach - ANSWER A means of comparing similar type
properties, which have recently sold, to the subject property. Commonly used in
comparing residential properties.
Cost Approach - ANSWER An analysis in which a value estimate of a property is
derived by estimating the replacement cost of the improvements, deducting
therefrom the estimated accrued depreciation, then adding the market value of the
land.
Income Approach - ANSWER One of the three methods of the appraisal process
generally applied to income producing property, and involves a three-step process -
(1) find net annual income, (2) set an appropriate capitalization rate or "present
worth" factor, and (3) capitalize the income dividing the net income by the
capitalization rate.
Assessed Value - ANSWER A valuation placed upon a piece of property by a
public authority as a basis for levying taxes on the property.
Insured Value - ANSWER The cost of replacing a structure completely destroyed
by an insured hazard.
Depreciated Value - ANSWER The basis of a depreciable asset used to compute
the taxable gain from its sale; the basis is acquisition cost plus capital
improvements less accrued depreciation.
Land - ANSWER The material of the earth, whatever may be the ingredients of
which it is composed, whether soil, rock, or other substance, and includes free or
unoccupied space for an indefinite distance upwards as well as downwards.
Answers A+ Graded
Limited Liability Companies - ANSWER Flexible form of a company that blends
elements of partnership and corporation ownership.
Corporations - ANSWER Group of people who are allowed to run their business
in the name of the corporation
Real Estate Investment Trust - ANSWER Many people who can go together and
invest in real estate.
Beneficiaries - ANSWER Individuals who invest in real estate
Beneficial Interset - ANSWER Shares that investors buy in the company
Expressed Contracts - ANSWER Contract that is in writing or in oral where the
parties state the terms and conditions of the contract as well as the duties each will
carry out. .
Implied Contract - ANSWER an understanding between parties
Bilateral Contracts - ANSWER a promise in exchange for a promise: Ex: Seller
and Agent
Unilateral Contract - ANSWER Promise in exchnge for an act: Seller and Buyer
Executed Contract - ANSWER Contract that has been completely performed
Executory Contract - ANSWER Contract that is being carried out
Valid Contract - ANSWER A good contract that meets all of the legal
requirements for a contract and is enforceable in a court of law
Void Contract - ANSWER Was never a contract and will never be a contract.
, Voidable Contract - ANSWER binding against one part but not against the other
party
Unenforceable Contract - ANSWER one that cannot be enforced in a court of law.
Brokerage - ANSWER The business of bringing buyers and sellers together and
assisting in negotiations for the terms of sale of real estate.
Real Estate Broker - ANSWER A person or an organization acting as the agent for
others in negotiating the purchase and sale of real property or other commodities
for a fee.
Real Estate Salesperson - ANSWER A person performing any of the acts included
in the definition of real estate broker but while associated with and supervised by a
broker.
Residential Property - ANSWER A type of property that includes one to four
dwelling units.
Commercial Property - ANSWER Property that produces rental income or that is
used in business. Properties with five or more dwelling units are considered
commercial property.
Industrial Property - ANSWER Property that is used by companies or persons for
manufacturing, warehousing, or the assemblage of components.
Special Purpose Property - ANSWER A category of real property created as a
result of combining the land and its improvements for a single highest and best use.
Mixed-Use Property - ANSWER Any urban, suburban or village development, or
even a single building, that blends a combination of residential, commercial,
cultural, institutional, or industrial uses, where those functions are physically and
functionally integrated, and that provides pedestrian connections.
Improvements - ANSWER Changes or additions made to a property, such as walls
and roads. These typically increase the value of a property, except in some cases of
over improvement.
Non-Homogeneity - ANSWER A physical characteristic of land describing that
land as a unique commodity.
,Value - ANSWER The present worth of future benefits.
Price - ANSWER The amount a purchaser agrees to pay and a seller agrees to
accept under the circumstances surrounding a transaction.
Cost - ANSWER The total dollar expenditure for labor, materials, and other items
related to construction.
Supply - ANSWER The amount of goods offered for sale within a given market at
a given price during a given time period.
Demand - ANSWER The amount of goods consumers are willing and able to buy
at any given price during any given time period.
Demography - ANSWER The study of the social and economic statistics of a
community.
Agent - ANSWER A person authorized to act on behalf of another.
Principal - ANSWER The employer of an agent.
Customer - ANSWER The party the agent brings to the principal as seller or buyer
of the property.
General Agent - ANSWER An agent with full authority over one property of the
principal, such as a property manager.
Special Agent - ANSWER An agent with limited authority to act on behalf of the
principal, such as created by a listing.
Listing Contract - ANSWER A contract in which a property owner employs a real
estate broker to market the property described in the contract.
Fiduciary Duty - ANSWER That duty owed by an agent to act in the highest good
faith toward the principal and not to obtain any advantage over the latter by the
slightest misrepresentation, concealment, duress or pressure.
, Fiduciary - ANSWER A person in a position of trust and confidence, as between
principal and broker; broker as fiduciary owes certain loyalty which cannot be
breached under the rules of agency.
Caveat Emptor - ANSWER Let the buyer beware. The buyer must examine the
goods or property and buy at his or her own risk.
Appraised Value - ANSWER An evaluation of a property's value based on a given
point in time that is performed by a professional appraiser during the mortgage
origination process.
Market Comparison Approach - ANSWER A means of comparing similar type
properties, which have recently sold, to the subject property. Commonly used in
comparing residential properties.
Cost Approach - ANSWER An analysis in which a value estimate of a property is
derived by estimating the replacement cost of the improvements, deducting
therefrom the estimated accrued depreciation, then adding the market value of the
land.
Income Approach - ANSWER One of the three methods of the appraisal process
generally applied to income producing property, and involves a three-step process -
(1) find net annual income, (2) set an appropriate capitalization rate or "present
worth" factor, and (3) capitalize the income dividing the net income by the
capitalization rate.
Assessed Value - ANSWER A valuation placed upon a piece of property by a
public authority as a basis for levying taxes on the property.
Insured Value - ANSWER The cost of replacing a structure completely destroyed
by an insured hazard.
Depreciated Value - ANSWER The basis of a depreciable asset used to compute
the taxable gain from its sale; the basis is acquisition cost plus capital
improvements less accrued depreciation.
Land - ANSWER The material of the earth, whatever may be the ingredients of
which it is composed, whether soil, rock, or other substance, and includes free or
unoccupied space for an indefinite distance upwards as well as downwards.
