Real Estate License Exams For Dummies Cheat Sheet

As you prepare for your real estate license exam, understand that listing agreements establish the relationship between the real estate agent and the property seller. Remember that similar agreements may be used between a buyer and an agent when buyer representation is desired.

• Exclusive right to sell listing: In this agreement, the agent gets paid no matter who sells the property, regardless of whether it’s the agent or the seller.

• Exclusive agency listing: Agents get paid in this type of agreement only if they sell the property. No fee is earned if the owner alone sells the property.

• Open listing: In this type of agreement, sellers have the right to use as many brokers as they want. However, the seller isn’t obligated to pay any of them if he or she sells the property without the broker’s help.

• Net listing: This type of agreement may be illegal in your state. The agent gets to keep everything he can get that’s more than the sale price the owner wants.

Before you take your real estate license exam, it’s important that you understand the difference between similar-sounding terms. The following real-estate terms are the most often confused; get these memorized and you’re well on your way to more correct answers.

• Condominium/cooperative: A condominium owner actually owns real estate. This ownership is usually the air space and an interest as a tenant in common of the land. A cooperative owner owns shares in a corporation that owns a building. The shareholder also gets a proprietary lease, which enables the shareholder to occupy a unit.

• Foreclosure/forfeiture: Foreclosure is the loss of property to pay off a debt. Forfeiture is losing the property because of disobeying a condition in the deed.

• Grantor/grantee: The grantor gives, sells, or transfers the property to the grantee. The grantee receives the property.

• Leasehold/leased fee: The leasehold interest is the tenant’s interest in the property. The tenant holds the lease. The leased fee interest is the owner or landlord’s interest.

• Mortgagor/mortgagee: The mortgagor is the borrower. The mortgagee is the lender. The borrower gives a mortgage to the lender. The lender gives money to the borrower.

• Replacement cost/reproduction cost: These terms are associated with the cost approach to valuing a property. Replacement cost is the cost to produce a structure that is essentially the same as the existing structure but using modern materials and standards. Reproduction cost is an estimate of the cost to produce exactly the same structure with the same materials.

• Tax credit/tax deduction: A tax credit is subtracted from taxes due. A tax deduction is subtracted from income. If all things are equal, a tax credit generally is more valuable than a tax deduction of the same amount.

Until you started your real estate career, you may have assumed there was just one kind of property ownership — you either owned the property or you didn’t. Well, there are several types of property ownership, and you need to know about them to pass the real estate license exam.

Here are the four most common types of property ownership:

• Tenancy in severalty: Although it may sound like more, this type of ownership is by one person or a corporation.

• Tenancy in common: Equal or unequal undivided ownership between two or more people is what characterizes this type of ownership. If an owner dies, the deceased person’s share is conveyed to his or her heirs, not the other owners.

• Joint tenancy:

  The four unities that must exist for this type of ownership to exist are

  • Interest: Each owner has the same interest.

  • Possession: All owners hold an undivided interest.

  • Time: All owners receive their interest at the same time.

  • Title: All owners acquire their interest with the same deed.

  If one owner of a joint tenancy dies, that owner’s interest reverts to the other owners. This right of survivorship may vary by state.

• Tenancy by the entirety: Ownership that’s available only to married couples, tenancy by the entirety means that property may not be sold without the agreement of both parties. The right of survivorship exists to the extent that if one spouse dies, his/her interest reverts to the other spouse.

Prepare for your real estate license exam by studying the precise meanings of words used for property that’s conveyed or transferred voluntarily — through a number of means. Property can also be lost involuntarily through the forces of nature, law, or the government. And finally — in fact, very finally — property is usually transferred after you die.

Become familiar with these real estate words for giving up and losing property:

• Dedication: When you dedicate property, you essentially give it up voluntarily to the government. An example is a developer giving up streets in a subdivision.

• Public grant: A public grant of land is just the opposite of dedication; the government actually is giving property to private individuals.

• Adverse possession: When someone uses your property for a long period of time, you may end up losing the property or having your rights to the property restricted.

• Avulsion: Avulsion is the sudden loss of land by an act of nature like a landslide.

• Erosion: A little like avulsion, erosion is the gradual loss of land by an act of nature, like property lost along the bank of a river.

• Partition: A partition is a legal proceeding to divide property owned by two or more people.

The relationship between a real estate agent and a client is called a fiduciary relationship. Fiduciary means faithful servant, and an agent is a fiduciary of the client. In real estate, a broker or a salesperson can be the agent of a seller or a buyer.

Here’s a list of the fiduciary duties that an agent owes her client:

• Accounting: The agent must account for all funds entrusted to her and not commingle (combine) client/customer funds with her personal and/or business funds.

• Care: The agent must use all of her skills to the best of her ability on behalf of the client.

• Confidentiality: The agent must keep confidential any information given to her by her client, especially information that may be damaging to the client in a negotiation.

• Disclosure: The agent must disclose to the client any information she receives that may benefit the client’s position in a negotiation.

• Loyalty: The agent owes undivided loyalty to the client and puts the client’s interests above her own.

• Obedience: The agent must obey all lawful orders that the client gives her.