Real Estate Terminology Quiz

Real Estate Basics

• PITI stands for Principal, Interest, Taxes, and Insurance.

Agency Relationships

• Agent Anna has a home listed for sale and shows the home to the Quinns, whom she does not have a buyer’s agency agreement with; the Quinns are considered customers.
• Larry listed his home for sale with an agent, and the property was exposed to an open and free market; this type of sale would be considered an arm’s length transaction.
• The duty of obedience requires a licensee to follow the principal's orders and requests as long as they are not unethical or illegal.

Real Estate Definition

• Real Estate is defined as land and all items within the improvements.

Disclosures

• Melissa, an agent, should suggest that the sellers seek legal counsel when they ask legal questions she feels certain she knows the answers to.
• A fence that extends onto the land of another from a neighboring property is called an encumbrance.
• Matt, an agent, should have the seller complete a Lead-Based Paint Disclosure due to the age of the home (built in 1965).
• A seller's property disclosure is generally not required in a residential foreclosure transaction.

Listing Agreements

• A listing agreement in writing creates an express agency.
• Part of agent Connie's listing packet includes a form for the seller to complete that covers the components of the home for sale and the seller's knowledge of the condition of such items; this form is referred to as the Seller's Disclosure.

Fair Housing and Landlord-Tenant Laws

• The Fair Housing Act aims to promote fair and equal access to housing opportunities for all residents of Michigan, regardless of their background or characteristics.
• Michigan law specifies a notice period landlords must adhere to before entering the property for non-emergency reasons.
• Lead-based paint can pose serious health risks, especially to young children and pregnant women; Michigan law mandates certain disclosures to ensure tenants are informed about potential hazards in older rental properties.

Contracts and Insurance

• Undisclosed Dual Agency is created by representing both parties in a transaction without disclosing the relationship to all parties.
• Net Listings, which are illegal in most states, occur when a seller sets a minimum net proceeds amount and the agent may keep any amount over that as commission.
• Errors and Omissions Insurance does not cover intentional acts or negligence of a Broker selling property he owns.

Property Valuation

• The income approach to property valuation considers the potential rental income and expenses associated with the property.
• The cost approach to property valuation involves determining the replacement cost of the property and subtracting depreciation to arrive at an estimate of value.
• A title search is conducted to ensure the property has a clear and marketable title, free from any liens or claims that could affect ownership.

Mortgage and Financing

• The Debt-to-Income Ratio (DTI) is used to assess a borrower's ability to repay a loan by comparing their monthly debt payments to their gross monthly income.
• A down payment is provided by the buyer to demonstrate their serious intent to purchase the property and is typically a percentage of the purchase price.
• The adjustment period in adjustable-rate mortgages (ARMs) refers to the frequency at which the interest rate can change, typically specified in terms of years.
• Private mortgage insurance (PMI) is used to protect the lender in case the borrower defaults on a loan, especially when the down payment is less than 20%.