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Real estate exam glossary CE SHOP questions and answers
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Real estate exam glossary CE SHOP questions and answers
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Real estate exam glossary CE SHOPquestions and answers
1031 tax-deferred exchange - Answer -Section 1031 of the Internal Revenue Code
allows the owner of real property to sell that property and then reinvest in a "like-kind"
property and defer paying any capital gains taxes; strict IRS rules regulate this type of
exchange
Ex. Real estate investors can take advantage of the 1031 tax-deferred exchange to
defer capital gains taxes when selling a property, provided the money is rolled into
another "like" purchase
abutting - Answer -Land parcels that share a common border
Ex. Many neighbors find that fences make abutting properties more tolerable.
acceleration clause - Answer -Allows a lender to demand immediate and full payment of
all debt owed if a buyer defaults or fails to meet certain conditions that apply to the loan
When Wendy stopped making home loan payments, her lender told her she must pay
off her entire balance or risk foreclosure.
accession - Answer -The addition of value to property through labor or the addition of
new materials, including an increase in land through natural processes
Ex. Jonathan's property borders a bay. The bay receded, and Jonathan gained an extra
10 feet of property to his land through accession; also, Chris built a fence on his
neighbor's property with no agreement allowing Chris to remove the fence. The
neighbor now owns the fence.
accessory use - Answer -An incidental or subordinate use to the primary use of the
property
Ex. Andy's military bunker in his back yard constituted an accessory use of the property.
,accounting - Answer -One of the fiduciary duties, accounting means an agent is
accountable for any funds or properties entrusted to the agent. This is a duty that
survives termination of an agency agreement
Ex. Cameron accepted an earnest money deposit from his buyer. His duty of accounting
means that he must safeguard the funds and handle them according to the agreement
with his client and the policies of his firm.
accretion - Answer -The gradual growth in the size of a land parcel due to water-
deposited sand, silt, or gravel
Ex. Jillian's property grew through accretion when the creek flow created a long
sandbar.
accrued items - Answer -Expenses that have been incurred but aren't due yet, e.g.
property taxes
Ex. At closing, accrued items must be accounted for on the settlement statement. If the
seller has accrued expenses not yet payable, the amount accrued will be a seller debit
and buyer credit.
acknowledgment - Answer -A requirement for deed transfer; a public official must
acknowledge, usually by a notary public, the grantor's signature
Ex. Gary purchased a duplex. The grantor signed the deed; a notary public
acknowledged his signature.
acre - Answer -A unit of land that is equal to 43,560 square feet
Ex. The Jones farmhouse was on 10 acres. Their parcel had 435,600 square feet.
active fraud - Answer -Intentional misstatement of a material fact; action taken by one
party to deceive a second party in an attempt to consummate a contract or transaction
Ex. "Sure, the foundation is perfectly safe!" Lisa said, even though she knew full well
that there was a crack the size of Toledo in it.
act of waste - Answer -Abuse of a property by a person who holds possession through a
life estate
, Ex. Minerva inherited a life estate to a historic mansion and turned it into an illegal video
gaming parlor. Also, Charles, who is in possession of real property as a life estate,
failed to maintain the property.
actual notice - Answer -Express notice given directly to a person or actual knowledge
that is known
Ex. Karen told her neighbors she would be moving.
adjustable rate mortgage (ARM) - Answer -A mortgage with a rate that adjusts based on
changes in a market index
Ex. Caleb had a 5/1 ARM. His loan had a fixed interest rate for the first five years, and
after 5 years, it could change annually depending on changes to the market index.
adjusted basis - Answer -The final basis for taxing purposes, computed by taking
acquisition costs plus capital improvements and less certain deductions such as
depreciation
Ex. When Mark computed the adjusted basis in his property, he had to subtract $10,000
in depreciation he had taken over the year
adjustment - Answer -In appraisals or CMAs, the dollar value or percentage added to or
subtracted from the sales price of a comparable to arrive at an indicated value for the
subject; in closings, the credits and debits made to a settlement statement for accrued
or prepaid expenses
Ex. The appraiser adjusted the price of the comparable property because it had a three-
car garage and the subject property had a two-car garage.
adjustment date - Answer -The date on which the interest rate changes on an
adjustable rate mortgage
Ex. Karey made sure to refinance before her adjustment date. Rates had dropped and
she could get a better rate than the one she'd face once her ARM adjusted.
adjustment (loan) - Answer -"A debit or credit at closing to coincide with appropriate
closing costs
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