Principles of Real Estate 1 Study Guide PDF

PRINCIPLES OF REAL ESTATE 1 Study Guide Champions School of Real Estate® www.ChampionsSchool.com  Principles of Real Estate 1: Study Guide CHAPTER 1 INTRODUCTION TO REAL ESTATE Brokerage – overseeing the needs of the parties to a real estate transa...

PRINCIPLES OF REAL ESTATE 1 Study Guide Champions School of Real Estate® www.ChampionsSchool.com  Principles of Real Estate 1: Study Guide CHAPTER 1 INTRODUCTION TO REAL ESTATE Brokerage – overseeing the needs of the parties to a real estate transaction and seeing to its completion Appraisal – providing a professional opinion of the value of real property Appraiser – licensed or certified individuals who provide the informed decisions of the value of real property Mortgage Lending: The business of providing money to individuals or corporations for the condi- tional transfer or pledge of real estate as security for the payment of a debt. PROPERTY MANAGEMENT The management of residential and commercial property on behalf of the investor-owner of the property. Property managers are responsible for:  Day-to-day operations  Maintenance  Tenant relations Keeping proper accounts Apartment Locator: Works for a firm that specializes in locating units for tenants in multifamily complexes. Principles 1 Home inspection: The business of providing a limited visual and general inspection of a property Study Guide by an inspector. Real Estate Development: Involves the acquisition of land for development into residential subdi- visions, retail centers, and other commercial uses. Petroleum landman: Individual who is employed by oil and gas companies to do title work to deter- mine mineral ownership. BENEFITS OF HOMEOWNERSHIP  Security  Investment  Occupancy  Tax Benefits PHYSICAL CHARACTERISTICS OF LAND Indestructibility – land does not wear out; it cannot be destroyed Immobility – land does not move; you must go to the land Nonhomogeneity - no two pieces of land are exactly alike; they don’t occupy the same place ECONOMIC CHARACTERISTICS OF LAND Scarcity – comes from the theory of supply and demand Modification – refers to the fact that value is affected by man-made changes to the land Fixity - refers to the fact that land, and additions to the land such as buildings, take long period to pay for themselves. Situs – refers to the location of the property or land from an economic, not a geographic viewpoint. 2 Copyright © 2023 Champions School of Real Estate® SUPPLY AND DEMAND An economic relationship of the quantity of a commodity a person wants to sell at certain prices and the quantity a consumer wants to buy at various prices. Demand is affected by availability of credit  personal preference growth in employment Common Law – a body of law developed in England and based upon “common sense” and local custom Statutory Law – body of laws and enacted by federal and state legislative bodies Texas Real Estate License Act – passed in 1939 to protect the public against unscrupulous brokers and sales agents in a real estate transaction TEXAS REAL ESTATE COMMISSION A nine-member commission, created in 1949, to carry out the provisions of the License Act May issue or revoke real estate licenses May assess an administrative penalty of up to $5000 per day CHAPTER 2 REAL AND PERSONAL PROPERTY LAND Principles 1 Defined as the surface of the earth, extending downward to the center of the earth and upward Study Guide above the surface to infinity. Includes natural things such as trees, crops, and water. Bundle of rights: Rights that a person has in the land Real estate: Everything that is encompassed with land, including man-made additions (improve- ments) such as roads, houses, and commercial buildings REAL PROPERTY Physical real estate plus the rights an individual has in the land A broader term, stretching beyond the physical real estate that includes the rights that a per- son has in the land IMPROVEMENT Any permanent man-made addition to the land is considered to become part of the land Buildings, landscaping, fences, patios, decks, roads, curbs EMBLEMENTS Annual crops produced with labor Attached to the land  Personal property Belong to the person who planted them 3 Copyright © 2023 Champions School of Real Estate®  SUBSURFACE RIGHTS The rights to oil, gas, and other minerals. Commonly conveyed through a lease, mineral deed, or by reservation. FIXTURE Personal property that has been attached in such a way that it has become part of the real property Ceiling fans, window coverings, wall-to-wall carpet Remain with the property when sold THREE TESTS OF A FIXTURE Method of Attachment – permanent attachment Adaptation – how it fits in Intention of the parties – often considered the most important test AIR RIGHTS Extend above the surface without limitation. Air rights can be leased, sold, or mortgaged Surface rights - The right to develop (improve) the surface and use the resources extracted from or near the surface, including stone, gravel, water, and limestone SEVERABLE To be cut off from Surface rights, subsurface rights, and air rights may be removed from ownership Principles 1 Severance - The process of real property becoming personal property Study Guide WIND RIGHTS Texas leads the country in harnessing renewable wind energy. Farm owners with extensive acreage may lease their land to wind developers who build tur- bines on the property in order to convert the wind into energy. Wind rights: The right to use wind above a property PERSONAL PROPERTY: Chattel or Personality. Something movable or temporary in nature. Everything that is not real property Transferred with a Bill of Sale  Freestanding CHAPTER 3 INTERESTS IN REAL ESTATE Allodial system - land can be privately owned by individuals POLICE POWER The right of the government to regulate and control the way land is used The most common example of police power is zoning A change in a zoning law may create a non-conforming use of the property 4 Copyright © 2023 Champions School of Real Estate® EMINENT DOMAIN The right of the government to take private land for public use. The action of taking the land is called condemnation TAXATION The right the government retains to tax real property Property taxes are ad valorem taxes According to value Create the highest priority lien on real property Always paid first at a foreclosure sale ESCHEAT If a person dies intestate (without a will) and without heirs, the government will take title to his real property under the right of escheat. If the property is abandoned, escheat will also be the solution. The government does not want land to be unowned. Note: Single, without children does not mean without heirs. Buffer zone – separates one land use from another, such as residential use from commercial use FREEHOLD ESTATES Fee Simple or fee simple absolute is ownership with the most rights in land Ownership of real property LEASEHOLD ESTATES Interest in real property that is less than a freehold estate Principles 1 Estate for years Study Guide Specific starting date and ending date Survives the sale of the property and death of the landlord or tenant  Periodic estate Automatically renews for like periods of time  Termination notice needed Estate at will May be terminated by either party at will Terminates upon the landlord’s death Tenancy at sufferance Tenant remains on the property after the lease expires Tenant becomes a “holdover tenant” W hen a landlord accepts rent from a holdover tenant, the landlord creates a holdover tenancy LEASE Gives possession without ownership  Personal Property Binding on the heirs of the landlord and the tenant 5 Copyright © 2023 Champions School of Real Estate®  Statutory estates - Estates created by statute or law HOMESTEAD PROTECTION Protects a property someone lives in from forced sale  Automatic Cannot be waived Exceptions to Homestead Protection Ad Valorem tax foreclosure  HOA/POA foreclosure Mechanics and Materialman’s Lien (M and M Lien)  Purchase loan foreclosure EQUITABLE ESTATES A right or privilege that creates an interest in land that is less than ownership or possession but nonetheless exists  liens, easements CATEGORIES OF LIENS General vs Specific Voluntary vs Involuntary SPECIFIC LIEN Attaches to one or more specific properties  Includes: Principles 1  Mortgage Mechanics and Materialman’s lien Study Guide Ad Valorem Tax lien GENERAL LIEN Attaches to everything a person owns  Includes:  IRS judgment  Judgments Voluntary lien – a lien that is freely given like a mortgage Involuntary lien – a lien that is placed on the property against the wishes of the property owner, like judgments and tax liens ENCUMBRANCE rights or privileges create an interest that is less than ownership or possession but nonetheless exists place limitations on property owners liens, easements, encroachments, restrictions, and leases Covenants, conditions, restrictions Private restrictions that have been placed in the public records that control the use of property. 6 Copyright © 2023 Champions School of Real Estate® APPURTENANCE a right or privilege, or improvement that belongs to and passes with land but is not necessarily a part of the land  Easements Leases that are binding on a new owner when the property is sold  Fixtures Buildings and other improvements Encroachment - The intrusion of one’s property onto another’s property EASEMENT The right to use someone else’s property May be created by: Grant - The easement is specifically given by one party to the other. “A” sold lot “B” and granted the easement in the deed. Reservation - The seller, in granting property to a buyer, reserves an easement in the deed. “B” sold lot “A” and reserved the right to cross over “A” in the deed. Implied grant - In selling lot “B,” “A” did not explicitly grant the easement in writing but implied in word or action that access to property “B” would be by an easement. Prescription - Continuous use of the land over some time without the owner’s permission may establish the right to use the land. (An encroachment is the unauthorized intrusion of another’s property onto an adjoining property. An encroachment that is allowed to remain can eventually acquire the right to be there.) Prescription may also be called limitation. Principles 1 Study Guide Necessity - The court requires the easement or states it is necessary for the benefit of the owner. (Usually in the case of “landlocked” property.) Condemnation - The government, under its power of eminent domain, takes an easement. The government will take an easement for itself, the utilities, or the railroads. MERGER Bringing two or more properties together May terminate an easement WATER RIGHTS The right of a landowner to use water that borders a property. Littoral Rights - The right to use water from a lake, ocean, or sea Riparian Rights - The right to use water from a river or stream Greenfield – a parcel of land that has never been developed Greyfield – a parcel of land capable of redevelopment Brownfield - a site known or suspected to be hazardous that is usually occupied by industrial man- ufacturers or chemical plants. Has the highest potential to be hazardous 7 Copyright © 2023 Champions School of Real Estate®  CHAPTER 4 HOME OWNERSHIP SINGLE FAMILY HOME: A home that is not attached to another dwelling. Often situated in a subdivision of similar properties unattached to each other Condominium: Multifamily complexes containing units with individual fee simple ownership of the unit and interest in common areas Cooperative: Buildings owned by a corporation with shares of the corporation owned by the occupants of the building. The occupants have a proprietary lease on their unit. Not real property. Townhome: Distinct living unit on an individual lot that shares a common wall with another unit Mixed-use development: Building types or combinations of buildings that allow mixed use like residential, office, retail, and entertainment spaces. Timeshare: The owner has the right to occupy a property for a specified time interval, often by the week. Often condominiums that are situated in resort areas. Principles 1 Study Guide CAPITAL GAIN The profit on the sale of an asset Tax Exempt limits $250,000 for an individual return and $500,000 if married and filing jointly Equity - The market value of a property less the outstanding debt HOMEOWNERS INSURANCE A contract between the insurance company and the policyholder covering a private residence covering losses related to the main structure, outbuildings, contents, and personal liability Does not cover flooding Comprehensive Loss Underwriting Exchange (CLUE): A claims history database that enables insurance companies to access consumer claims information when they are underwriting or rating an insurance policy. Windstorm Insurance: Insurance underwritten in Texas by the Texas Windstorm Insurance Asso- ciation (TWIA) to cover wind and hail damage on properties along the gulf coast. Flood insurance: Insurance through the National Flood Insurance Program (NFIP) to cover properties that flood. Standard homeowner insurance does not cover flooding Personal Property Coverage: Insurance for personal property within a building. 8 Copyright © 2023 Champions School of Real Estate® CHAPTER 5 HOW HOME OWNERSHIP IS HELD Estate in Severalty - A sole individual or entity owns real estate Co-ownership - Ownership of real estate by two or more unmarried owners TENANCY IN COMMON Ownership of real estate by two or more entities in the undivided interests The most common type of co-ownership Ownership passes to heirs JOINT TENANCY A type of co-ownership with the right of survivorship Four unities of joint tenancy are time, title, interest, and possession A poor man’s will Tenancy by the Entirety In some states, ownership by spouses is called tenancy by the entirety Not recognized in Texas A type of joint tenancy COMMUNITY PROPERTY A concept of Spanish law, and marriage is regarded as a partnership, rather than husband and wife becoming one as in English law. Most property acquired during a marriage is owned equally by both spouses and cannot be Principles 1 conveyed or sold without the signature of both parties Study Guide Property inherited by one spouse may remain separate property Income or profit from separate property may remain separate property Trusts - Entities An entity created for the benefit of another Sole proprietorships - A business venture that is owned by one individual. Partnership - A business venture created with an agreement between more than one person Corporate ownership - Ownership by a corporation. A corporation is an entity that can own real estate. Timeshare - Gives the owner the right to occupy the property for a certain time period, typically by the week 9 Copyright © 2023 Champions School of Real Estate®  CHAPTER 6 LAW OF AGENCY AND REAL ESTATE BROKERAGE TRELA Texas Real Estate License Act Must be obeyed by license holders Agency: A relationship between one person and another when one person acts for or on behalf of another person. AGENT A person who represents another from whom he has derived authority Represents of works for the principal PRINCIPAL The person an agent works for or on behalf of Hires and gives authority to an agent Client - Another name for principal FIDUCIARY A person who works in an agency relationship for or on behalf of another person. A relationship based on trust Principles 1 FIDUCIARY DUTIES OF AN AGENT TO THE PRINCIPAL Obedience – adhere to given lawful instructions Study Guide Loyalty – place the client’s best interests first Disclosure – reveal all known facts, give advice and opinions Confidentiality – protect the private information of the client Accounting – handle funds with care. Never engage in commingling or conversion Reasonable care – protect the property and legal interest of the client. Note: Trust is NOT a duty. Disclosure of Representation - At the first contact with a party to a potential transaction, a license holder must disclose to that party whom he or she represents. The disclosure of representation may be done orally or in writing. UNIVERSAL AGENCY An agency relationship that allows the agent to transact all matters for the client. Agent may bind their client GENERAL AGENCY An agency relationship that allows the agent to bind/obligate the client into a particular transaction or business. Carry out the affairs or business of another SPECIAL AGENCY The most limited of all the agency relationships Referred to as “limited agency.” Agent may perform only limited duties for the principal. NOT able to bind the principal 10 Copyright © 2023 Champions School of Real Estate® Customer - A person whom an agent does not represent Express Authority - Oral or written instructions IMPLIED AGENCY The behavior of the parties Created by actions or evidence Ostensible Agency - When actions lead another person to assume that one is an agent Agency by ratification - When an agent acts without prior authorization, and upon learning of this action, the principal accepts it Single-Agency Broker: A broker that will only represent one client in a transaction at a time. Transactional Broker: A broker that facilitates a buyer and seller to reach an agreement in a real estate transaction both does not represent either party. Dual Agency Broker: A broker who has written consent to represent both the buyer and the seller in the same transaction. Listing Side: The seller side of the transaction. SELLING SIDE The buyer side of the transaction. The buyer retains the services of a broker Principles 1 Cooperative Sale: A transaction that has one broker working with the seller and another broker Study Guide working with the buyer. Subagency: When one firm sells a property listed by another firm to a buyer it does not represent, the selling firm represents the seller In-House Sale - When a single firm sells one of its listings INTERMEDIARY A set of rules that make it possible to bring client buyers and sellers together while at the same time representing their best interests The broker represents both parties in a single transaction Requires written consent of both parties Appointed associates may give advice and opinion to their respective parties IABS: INFORMATION ABOUT BROKERAGE SERVICES The required method in Texas to provide written notice to consumers regarding information about brokerage services. Must be provided at first substantive dialogue Independent Contractors – most license holders are independent contractors of the brokerage; receive a 1099-NEC for tax purposes Terminate Sponsorship – Broker returns sales agent’s license to TREC immediately upon termination Deceptive Trade Practices Act - Texas consumer protection law 11 Copyright © 2023 Champions School of Real Estate®  COMMISSION Received by a broker Negotiated between the broker and the client (seller or buyer) Not set between brokers UNLICENSED ASSISTANTS ALLOWED ACTIVITIES Answer phone calls  Register prospects Greet prospects and give general information about the area  Type correspondence  Schedule appointments Be a closing or transaction coordinator Telemarket, if not soliciting for listings or buyers AGENCY COUPLED WITH AN INTEREST When a broker or sales agent is the owner of a property being sold or is interested in buying a property. This dual role must be disclosed by the license holder. Texas Real Estate License Act (TRELA) License holders must obey the provisions of the license act. CHAPTER 7 TEXAS REAL ESTATE LICENSE ACT TEXAS REAL ESTATE LICENSE ACT (TRELA) Principles 1 Passed in 1939 Protect the public against unscrupulous brokers and sales agents Study Guide 1101 of the Occupations Code TEXAS REAL ESTATE COMMISSION (TREC) Created in 1949 Protects the consumer from unscrupulous brokers and sales agents Issues and revokes real estate licenses Oversees the provisions of the License Act  Calls witnesses Examines witnesses under oath Inspecting records and documents Broker - A person who, in exchange for a commission or other valuable consideration or with the expectation of receiving a commission or other valuable consideration, performs for another person a brokerage service WHO MUST HAVE A LICENSE? Anyone who “for another person and for a fee, commission, or other valuable consideration, or with the intention or in the expectation or on the promise of receiving or collecting a fee, commission, or other valuable consideration from another person, “engages in a broad variety of real estate activities” must have a license. a real estate sales agent, an attorney participating in a commission split, an auctioneer selling real property for compensation, an apartment locator, Anyone who sells, exchanges, purchases, rents, leases, offers, negotiates, lists, appraises, auc- tions, buys options, aids, locates, procures or assists in procuring properties. 12 Attorneys licensed in other states, but practicing real estate in Texas, Copyright © 2023 Champions School of Real Estate®  Business entities through which licensed individuals operate their brokerages, Individuals or entities who control the collection of rent from residents of a single-family residential property must be license The designated officer of a licensed real estate corporation Business Entity: A domestic entity or foreign entity as defined by Section 1.002, Business Organi- zations Code, that is qualified to transact business in this state. Certificate Holder: A person registered by TREC to sell, buy, lease, or transfer easements or right of way for another for compensation. Commission - A negotiated compensation in a broker’s employment contract License Holder - A broker or sales agent licensed under the Texas Real Estate License Act. Residential Rental Locator: A person who offers for consideration to locate a unit in an apartment complex for lease to a prospective tenant. Sales Agent - A person who is sponsored by a licensed broker for the purpose of performing a bro- kerage service Subagent - A license holder who represents a principal through cooperation with and the consent of a broker representing the principal; and is not sponsored by or associated with the principal’s broker. Texas Sunset Act: Texas legislation providing for the review of the Texas Real Estate Commission and the Texas Appraiser Licensing & Certification Board by the Sunset Commission. Principles 1 Texas Real Estate Research Center: Housed at Texas A&M University, this center collects and Study Guide compiles data relating to real estate in Texas. Broker-Lawyer Committee: Comprised of 13 members, this committee drafts and revises con- tract forms that are capable of being standardized to expedite real estate transactions and minimize controversy. Intermediary: A broker that represents both parties of the transaction. REAL ESTATE RECOVERY TRUST ACCOUNT An aggrieved person who obtains a court judgment against a license or certificate holder for an act described by Section 1101.602 may, after final judgment is entered, execution returned nulla bona, and a judgment lien perfected, file a verified claim in the court that entered the judgment. TREC administers the Recovery Trust Account. The purpose of the account is to protect aggrieved individuals who suffer a monetary loss due to illegal acts of license holders. If a judgment against a license holder is uncollectible, the individual may apply to the Recov- ery Trust Account for payment. Payments can be made from the account only at the direction of the courts. $50,000 is the maximum per transaction, $100,000 is the maximum on behalf of any one license holder. Maximum payment amounts are set by the legislature, not by TREC. If an amount is paid on your behalf, your license can be revoked or suspended. It cannot be reissued until the account has been repaid, with interest. Each applicant for licensure pays $10 towards the Trust Account. 13 Copyright © 2023 Champions School of Real Estate®  If the account balance should fall below $1 million at any time during the calendar year, then TREC is authorized to assess each license holder $10 or a pro rata share, whichever is lower, to bring the balance back to $1.7 million. If the balance is above the minimum, TREC invests the money to offset future claims. TREC invests in Treasury Bills and Notes. If the amount in the account exceeds $3.5 million, the excess goes into the state’s general revenue fund. Complaints - A consumer has 4 years from the date of an incident to file a complaint with TREC against a license holder TREC may suspend or revoke a license issued under this chapter or take other disciplinary action authorized by this chapter if the license holder, while engaged in real estate brokerage: acts negligently or incompetently; engages in conduct that is dishonest or in bad faith or that demonstrates untrustworthiness; makes a material misrepresentation to a potential buyer concerning a significant defect, including a latent structural defect, known to the license holder that would be a significant factor to a reasonable and prudent buyer in making a decision to purchase real property; fails to disclose to a potential buyer a defect described by Subdivision (3) that is known to the license holder makes a false promise that is likely to influence a person to enter into an agreement when the license holder is unable or does not intend to keep the promise; pursues a continued and flagrant course of misrepresentation or makes false promises through an agent or sales agent, through advertising, or otherwise; fails to make clear to all parties to a real estate transaction the party for whom the license Principles 1 holder is acting; receives compensation from more than one party to a real estate transaction without the full Study Guide knowledge and consent of all parties to the transaction; fails within a reasonable time to properly account for or remit money that is received by the license holder and that belongs to another person; commingles money that belongs to another person with the license holder’s own money; pays a commission or a fee to or divides a commission or a fee with a person other than a license holder or a real estate broker or sales agent licensed in another state for compensation for services as a real estate agent; fails to specify a definite termination date that is not subject to prior notice in a contract, other than a contract to perform property management services, in which the license holder agrees to perform services for which a license is required under this chapter; accepts, receives, or charges an undisclosed commission, rebate, or direct profit on an expen- diture made for a principal; solicits, sells, or offers for sale real property by means of a lottery; solicits, sells, or offers for sale real property by means of a deceptive practice; acts in a dual capacity as broker and undisclosed principal in a real estate transaction; guarantees or authorizes or permits a person to guarantee that future profits will result from a resale of real property; places a sign on real property offering the real property for sale or lease without obtaining the written consent of the owner of the real property or the owner’s authorized agent; offers to sell or lease real property without the knowledge and consent of the owner of the real property or the owner’s authorized agent; offers to sell or lease real property on terms other than those authorized by the owner of the real property or the owner’s authorized agent; induces or attempts to induce a party to a contract of sale or lease to break the contract for the purpose of substituting a new contract; negotiates or attempts to negotiate that person is a party to an outstanding written con- 14 tract that grants exclusive agency to another the sale, exchange, or lease of real property Copyright © 2023 Champions School of Real Estate®  with an owner, landlord, buyer, or tenant with knowledge that broker in connection with the transaction; publishes or causes to be published an advertisement that: misleads or is likely to deceive the public; tends to create a misleading impression; implies that a sales agent is responsible for the operation of the broker’s real estate brokerage business; or fails to include the name of the broker as authorized by a law of this state and registered with the commission; withholds from or inserts into a statement of account or invoice a statement that the license holder knows makes the statement of account or invoice inaccurate in a material way; publishes or circulates an unjustified or unwarranted threat of a legal proceeding or other action; (26) establishes an association by employment or otherwise with a person other than a license holder if the person is expected or required to act as a license holder; aids, abets, or conspires with another person to circumvent this chapter; fails or refuses to provide, on request, a copy of a document relating to a real estate transaction to a person who signed the document; fails to advise a buyer in writing before the closing of a real estate transaction that the buyer should: (A) have the abstract covering the real estate that is the subject of the contract exam- ined by an attorney chosen by the buyer; or (B) be provided with or obtain a title insurance policy; fails to deposit, within a reasonable time, money the license holder receives as escrow or trust funds in a real estate transaction: (A) in trust with a title company authorized to do business in this state; or (B) in a custodial, trust, or escrow account maintained for that purpose in a banking institution authorized to do business in this state; Principles 1 disburses money deposited in a custodial, trust, or escrow account, as provided in Subdivision Study Guide (30), before the completion or termination of the real estate transaction; discriminates against an owner, potential buyer, landlord, or potential tenant on the basis of race, color, religion, sex, disability, familial status, national origin, or ancestry, including directing a prospective buyer or tenant interested in equivalent properties to a different area based on the race, color, religion, sex, disability, familial status, national origin, or ancestry of the potential owner or tenant; disregards or violates this chapter Inactive Status - A broker on inactive status: may not perform any real estate activity must pay renewal fees. SUBPOENA AUTHORITY OF TREC Production for inspection and copying of records and documents Calling of witnesses Examination of witnesses under oath May file suit through the attorney general to enforce the subpoena REQUIREMENTS TO OBTAIN A TEXAS REAL ESTATE SALES AGENT LICENSE be a citizen of the United States or a lawfully admitted alien be at least 18 years of age be determined, by the commission, fit to engage in the profession meet the education requirements submit application with or without a sponsoring broker show competency by passing the state test 15 Copyright © 2023 Champions School of Real Estate®  submit fingerprints to TREC using the TREC form complete the educational requirements for the sales agent total 180 hours in qualifying real estate courses TREC Gifts – TREC may solicit and accept gifts, grants and donations from any source CHAPTER 8 ETHICS Canons of Professional Ethics and Conduct: Part of the TREC Rules requiring fidelity, integ- rity, competency, the use of Consumer Information Notice, and the refraining of discriminating practices. Fidelity A real estate broker or sales agent, while acting as an agent for another is a fiduciary and must place the interest of the client of that of the agent. Represent the best interest of the client Meticulously - Marked by extreme or excessive care in the consideration or treatment of details; careful. Scrupulously Acting in strict regard for what is considered right or proper; punctiliously exact; painstaking. Integrity: A real estate broker or sales agent has a special obligation to exercise integrity in the discharge of the license holder’s responsibilities by employing prudence and caution so as to avoid misrepresentation by acts of omission or commission. Competency: The broker or sales agent must be knowledgeable and competent as a real estate bro- Principles 1 kerage practitioner. Study Guide Consumer Protection: A written notice published by TREC to be provided by a broker or a sales agent to a consumer. Discriminatory Practices: No real estate license holder shall inquire about, respond to or facilitate inquiries about, or make disclosure which is intended to indicate any preference, limitation, or dis- crimination of a protected class of people. National Association of REALTORS®: Founded in 1908, the largest trade association in the United States, the National Association of REALTORS supports its members and protects the public through the association’s Code of Ethics. INFORMATION ABOUT BROKERAGE SERVICES A TREC required form that explains the ways a license holder may represent a party in a real estate transaction Referred to as Disclosure of Agency Must be presented at the first substantive discussion about real estate A link to a completed IABS must be posted on the homepage in a readily noticeable location of a broker’s website 16 Copyright © 2023 Champions School of Real Estate® CHAPTER 9 FEDERAL AND STATE LEGISLATION Civil Rights Act of 1866: Federal law that prohibits discrimination based on race or color. Civil Rights Act of 1968 The Federal Fair Housing Act Prohibits discrimination based on race, color, religion, national origin, sex, familial status, and disability Senior Housing is a familial status exemption where 80% of the units must be occupied by someone 55 yrs or older Civil penalties but not criminal penalties Age is not a protected class Familial Status Parents or guardians living with children Protects families from being steered into particular buildings at an apartment complex Steering - Taking buyers or renters to or away from a particular area based on race, religion, etc. Blockbusting Any attempt to induce panic selling in a neighborhood for financial gain Also known as panic peddling Reasonable Accommodation: A change to a rule, policy, or service for a disabled person to be able Principles 1 to use housing. Study Guide VAMA: A voluntary marketing agreement that is negotiated between HUD and national associa- tions that represent the housing industry promoting equal housing opportunities for all. Texas Fair Housing Act Passed in 1989 Protects the same protected classes as federal fair housing Americans with Disabilities Act (ADA): A federal law prohibiting discrimination against people with disabilities by denying them the full and equal enjoyment of goods, facilities, accommodations, services, and privileges. Exemptions from American with Disabilities Act A private club A historic building A single-family home  Religious organizations Consumer Financial Protection Bureau: The federal agency that is responsible for enforcing fed- eral consumer financial law. Equal Credit Opportunity Act A federal law requiring that each credit applicant must be evaluated based on the same infor- mation as every other applicant 17 Copyright © 2023 Champions School of Real Estate®  Prohibits discrimination in lending Community Reinvestment Act: Prohibits redlining by banks Redlining - The refusal to lend money in a particular area because of its location Fair Credit Reporting Act: A federal law designed to protect consumers against unfair credit reporting practices and protect credit privacy. CHAPTER 10 LEGAL DESCRIPTIONS METES AND BOUNDS A legal description that uses terminal points and angles to describe a parcel of land Has a point of beginning on the ground Most common legal description Used instead of Government Survey System Monument - A permanent marker installed on the land by a surveyor used as a reference for the pint of beginning of a metes and bounds survey LOT AND BLOCK A legal description that uses a recorded map or plat to describe land Commonly used in residential subdivisions Recorded Plat - The design of a new subdivision and lay out the streets, lots, utilities, common areas, and easements recorded at the county Principles 1 Study Guide DEED RESTRICTIONS  Restrictive Covenants  Private agreements Covenants, Conditions, and Restrictions (CC&Rs) Recorded in public records GOVERNMENT SURVEY SYSTEM Adopted by Congress in 1785 The system is the overlay of a grid upon the land Also known as the Rectangular Survey System and the Public Lands Survey System Grid: An overlay of vertical and horizontal lines creating a system of squares over land. Ranges Lines: North/south lines at six-mile intervals as part of the government survey system Township Lines: East/west lines at six-mile intervals as part of the government survey system Informal Reference - Street address LAND SURVEYING A technique used to determine the position of points and boundaries of land. The technique, profession, and science of accurately determining the terrestrial or three-di- mensional position of points and the distances and angles between them. Commonly practiced by licensed surveyors and members of various building profession ACRE 43,560 square feet Convert Acres to Feet – multiply acres X 43,560 sq ft Convert Feet to Acres – Divide feet by 43,560 sq ft 18 Copyright © 2023 Champions School of Real Estate® PARTITION Division of a property between multiple owners May require a survey LEGAL DESCRIPTION One of such certainty and accuracy that an individual can go to the ground and identify the land All conveyances of real property must contain a legal description CHAPTER 11 LISTING AGREEMENTS Listing Agreement - An employment contract between a seller or landlord and the broker Open Listing - A listing that gives the seller the right to list the property with multiple competing brokers and to sell the property personally without liability for payment of a commission Exclusive Agency - A listing that the seller agrees to list the property with only one broker during the listing term, with the provision that the seller can sell the property independently, without pay- ing a commission Exclusive Right to Sell The broker is the only listing broker, and a commission is paid even if the property is sold by the owner Avoids a procuring cause controversy Net Listing Principles 1 Study Guide A listing that makes the broker’s commission the difference between the seller’s established net and the price that the buyer is willing to pay Legal in Texas but outlawed in some states MULTIPLE LISTING SERVICE A marketing tool used to expose a listing to the greatest pool of buyers Allows member brokers to share their inventory of listings with other member brokers Comparative Market Analysis - Sales information from the MLS data to show a seller the market value of the property Broker’s Price Opinion - An analysis of price used by a broker and typically requested by an attor- ney, a relocation company, or by a lender. Procuring cause of sale - The individual who, through a series of uninterrupted activities or actions, brought about the completion of a contract Deceptive Trade Practices Act - Texas consumer protection law Puffing Marketing that uses adjectives and opinions rather than details or facts  Not misrepresentation Mold - Fungi that may be found both indoors and outdoors. 19 Copyright © 2023 Champions School of Real Estate®  PRESENTATION OF OFFERS All offers must be presented No required order of presentation DEFAULT If the seller defaults on the contract, the buyer is the injured party TERMINATION OF A LISTING Listings terminate by the expiration of the time period stated in the listing agreement Exceptions for the requirement of a Seller’s Disclosure include: A sale by a bankruptcy trustee A sale from one co-owner to one or more other co-owners A sale to or from any governmental industry Stigmatized properties include allegedly haunted properties CHAPTER 12 REAL ESTATE CONTRACTS Contract: An agreement between two or more parties to do something or to refrain from doing something. Implied Contract: A contract created by behavior, Principles 1 Actions or evidence Study Guide Express Contract: A contract created by acceptance of an offer Bilateral Contract: A contract that is binding on both parties requiring both parties to perform, and creating mutuality. Unilateral Contract: A contract where only one party made a promise, only one party can be sued  Lacks mutuality Valid contract: A contract that meets all of the requirements of law. Void Contract: A contract that does not meet the requirements of law and does not affect the parties. Voidable Contract: A contract that cannot be enforced against one or more of the parties. A minor has a voidable contract Someone under the influence of alcohol may have a voidable contract Unenforceable Contract: A contract that cannot be enforced because a flaw in the contract or some other issue A contract that violates the statute of frauds 20 Copyright © 2023 Champions School of Real Estate® Mutual Rescission: Both parties agree to terminate a contract Statute of Frauds: A law that states that contracts for the conveyance of any interest in real estate must be in writing to be enforceable Executory Contract: The period of time from the effective date of the contract through the closing of the contract. DEFAULT When a party to a contract fails to perform under the contract The defaulting party injures the other party REMEDIES IN TREC’S CONTRACTS Suit for Specific Performance Suit for Monetary Damages Keep earnest money as Liquidated Damages Fully Executed: A contract that has all of its terms and conditions met. A contract is fully executed at closing Assignment: A transfer of all of the rights related to the contract to another party known as the assignee. Novation: A new contract is substituted for an existing one Principles 1 Mediation: The process of dispute resolution as an alternative to settling the dispute in court. Study Guide Option: Gives the buyer the unrestricted right to terminate the contract within the option period The Broker-Lawyer Committee: drafts/writes the contract forms and addenda that TREC promulgates TREC CONTRACTS One-to-Four Family Residential Contract (Resale) Residential Condominium Contract (Resale) New Home Contract (Completed Construction) New Home Contract (Incomplete Construction) Unimproved Property Contract Farm and Ranch Contract TREC has no promulgated contract forms for the sale of cooperatives (co-ops) nor for com- mercial transactions 21 Copyright © 2023 Champions School of Real Estate®