Champions School of Real Estate - Exam Prep Flashcards

Champions School of Real Estate - Exam Prep Flashcards Principle of ConformityMaximum value is found when there is a reasonable degree of similarity or homogeneity Principle of RegressionLower valued properties in the neighborhood lead to a decline in value of a subject property Open ListingA listing where a seller reserves the right to list with as many brokers as he chooses - he also reserves the right to sell the property himself - only a broker who brings a contract to the seller will earn a commission Unilateral ContractA contract where only one party made a promise, only one party can be sued - if...then...Square FootageThe finished space of a structure measured by the exterior walls - it never includes unfinished space like garages or attics.Special AgencyA principal gives an agent the power to perform specific acts, but not to bind the principal - also called limited agency.Limited AgencyA principal gives an agent the power to perform specific acts, but not to bind the principal- also called special agency Express Contractwritten or spoken FiduciaryA party acting for another in a position of trust - a broker, an agent Up and Coming NeighborhoodA neighborhood in the revitalization stage of the life cycle Principle of ChangeAppraisers must make adjustments for changes in market conditions and time Dual AgentA broker who has the written permission of both the buyer and the seller to represent both parties in a single transaction D.U.S.T.The four basic characteristics of

value:DemandUtilityScarcityTransferability

Ostensible AgencyAgency as a result of the actions of an agent and the response of other to those actions Offer and acceptanceMeetings of the minds or mutual agreement - all parties concerned understand agree to all the terms the terms of the contract Market ValueThe price a willing seller will sell for and a wiling buyer will pay when neither is acting under exceptional pressure - most probable price.FIRREA (Financial Institutions Reform, Recovery, and Enforcement Act) A Federal law requiring the use of state licensed or state certified appraisers to perform any appraisal used in connection with any federally related transaction involving

property valued at $400,000 or more.

Valid ContractAn agreement that meets all the legal requirements of a contract Agency by EstoppelA principal fails to maintain due diligence over his agent and as a result the court prevents the principal from denying the agency relationship Universal AgencyA principal gives an agent the power to transact matters of all types for him Implied AgencyAgency as a result of customary, usual or typical conditions Life CycleThe stage of growth and development of a community - grow, stabilize, decline and revitalize Principle of ContributionThe value of a part is determined by its contribution to the total vale of the property rather than by the cost of the part.Income ApproachAn appraisal used to determine the value of a property that produces income or rent - (net annual income = rate of return x market value) - also called capitalization method ClientA party represented by a broker in an agency relationship - also called a principal Sherman Anti-Trust ActFederal law that preserves business competition by prohibiting monopolies, monopolistic practices and restraint of trade- in real estate the biggest impact is on commissions- always negotiable (Gross Rent Multiplier) GRMA factor based on location and rent - a price per monthly rent to give an initial estimate of value for a residential rental property Agency by RatificationAgency is established when an agent acts without permission of the principal and the principal accepts or ratifies those actions.Procuring Cause of SaleThe effort that results in the sale of property - the act of bringing a ready, willing and able buyer to a seller resulting the sale of the seller's property General AgencyA principal gives an agent the power to bind him in a particular trade or business Public ResponsibilitiesThe responsibilities a broker has to customers or third parties including honesty, fairness and disclosure of material facts Deferred MaintenancePostponed maintenance on property that results in increased physical depreciation (wear and tear) Mutual RescissionThe parties to a contract agree to cancel the contract Principle of CompetitionIncreased competition results in deceased profits for current providers Void ContractNo contract at all - one of the key elements is missing - invalid contract Bilateral ContractAn exchange of promises binding both parties CounterofferA rejection of an offer and the presentation of a new offer

Physical DeteriorationDepreciation due to ordinary wear and tear - curable - little impact on an appraisal ReconciliationThe final step in the appraisal process using weighted averages to determine an exact number AgencyThe fiduciary relationship between a broker and a principal or a broker and a client Net Annual Income (NAI)Yearly gross rents minus gross expenses.Exclusive Agency ListingA listing where one broker is the exclusive agent and will earn a commission if the property is sold, unless the seller sells it himself- the seller is competing with his broker customerA third party - one a broker is working with, but who is not represented by that broker PriceWhat one must pay for a property - usually very close or equal to market value Management AgreementAn employment contract obligating a broker to act as a fiduciary to a property owner AddendumAdditional material or supplemental information added to an agreement GIM ( )A factor based on location and rent- a price per annual rent used to give an initial estimate of value for a commercial property Reproduction CostThe cost to exactly duplicate a building Listing AgreementAn employment contract obligating a broker to act as a fiduciary to a seller Functional ObsolescenceDepreciation due to factors in the property that do not meet the expectations of buyers Appointed AssociateA licensee appointed by a broker in Texas in an intermediary situation to work with either the buyer or the seller in the transaction Fully Executed ContractA contract that is signed and carried out - sales contract at closing Higher and Best UseThe legal use of property giving the greatest return in money or amenities Straight Line MethodDepreciation of equal annual installment amounts Duties of an AgentAn agent owes his client obedience, loyalty, disclosure, confidentiality, accounting and reasonable care (old car) Effective AgeThe condition of a property measured in years M.A.I.Member, Appraisal Institute - designation earned by a licensed appraiser.Replacement CostThe cost to build a building of similar size and purpose using today's methods and materials.Time is of the EssenceA clause in a contract that allows each party to hold the other to strict performance on the date specified Gross AreaThe area of a building under the roof includes unfinished areas.