FREC EXAM PRACTICE 1

192 Flashcards

Term/Front	Definition/Back
1 What are the four government powers that affect real estate?	Taxation, Eminent Domain, Police Power, and Escheat.
2 What does the acronym PETE stand for in real estate?	Police Power, Eminent Domain, Taxation, and Escheat.
3 What is taxation in real estate?	The government's power to levy taxes on property owners.
4 What is ad valorem tax?	A tax based on the value of the property.
5 What does ad valorem mean?	According to value.
6 What is a special assessment tax?	A tax charged to properties benefiting from a public improvement.
7 What is millage rate?	The tax rate used to calculate property taxes.
8 What is one mill equal to?	One dollar of tax for every one thousand dollars of taxable value.
9 What is assessed value?	The value assigned to property for tax purposes.
10 What is just value in Florida property taxation?	The fair market value of the property.
11 What is taxable value?	Assessed value minus exemptions.
12 What is the Florida homestead exemption?	A tax exemption available for a primary residence.
13 What is the standard Florida homestead exemption amount?	Up to $50,000.
14 What is the Save Our Homes cap?	A limit on annual increases in assessed value for homesteaded property.
15 What is portability in Florida homestead taxation?	The ability to transfer some tax savings to a new homestead.
16 What is the purpose of a special assessment?	To pay for improvements benefiting specific properties.
17 What is tax certificate sale?	The sale of delinquent property tax liens to investors.
18 What is a tax deed sale?	The sale of property to satisfy unpaid taxes.
19 What is zoning?	Local government regulation of land use.
20 What is downzoning?	Changing zoning to a more restrictive use classification.
21 What is upzoning?	Changing zoning to a less restrictive or more intensive use classification.
22 What is spot zoning?	Applying a zoning classification that benefits a specific parcel differently from surrounding properties.
23 What is a buffer zone?	Land used to separate different land uses from one another.
24 What is a building code?	Regulations establishing minimum construction standards.
25 What is a setback requirement?	The minimum distance a structure must be from property lines.
26 What is a building permit?	Official approval required before construction or major renovation begins.
27 What is a certificate of occupancy?	A document certifying that a building is safe for occupancy.
28 What is a subdivision plat?	A recorded map showing lots, streets, and easements in a subdivision.
29 What is a plat map?	A map showing the layout of a subdivision or parcel divisions.
30 What is highest and best use?	The legal and economically feasible use that produces the greatest value.
31 What are the four tests of highest and best use?	Legally permissible, physically possible, financially feasible, and maximally productive.
32 What is conformity in appraisal?	The principle that properties are more valuable when similar to nearby properties.
33 What is contribution in appraisal?	The value added by a feature or improvement to a property.
34 What is substitution in appraisal?	The principle that buyers will not pay more than the cost of a comparable substitute.
35 Which appraisal approach is most commonly used for residential properties?	Sales comparison approach.
36 Which appraisal approach is most commonly used for new construction?	Cost approach.
37 What is the sales comparison approach?	Estimating value by comparing similar recently sold properties.
38 What is the cost approach?	Estimating value by calculating replacement cost minus depreciation plus land value.
39 What is the income approach?	Estimating value based on the income a property generates.
40 What is depreciation in appraisal?	Loss in value from any cause.
41 What are the three types of depreciation?	Physical deterioration, functional obsolescence, and external obsolescence.
42 What is physical deterioration?	Loss in value due to wear and tear or aging.
43 What is functional obsolescence?	Loss in value caused by outdated design or features.
44 What is external obsolescence?	Loss in value caused by outside influences.
45 What is effective age?	The apparent age of a property based on condition and maintenance.
46 What is economic life?	The period during which improvements contribute value to the property.
47 What is curable depreciation?	Depreciation that costs less to fix than the value it adds.
48 What is incurable depreciation?	Depreciation that costs more to fix than the value it adds.
49 What is replacement cost?	The cost to build a structure with similar utility using modern materials.
50 What is reproduction cost?	The cost to build an exact duplicate using original materials and methods.
51 What is capitalization rate?	The rate used to convert income into value.
52 What is gross income?	The total income a property produces before expenses.
53 What is effective gross income (EGI)?	Gross income minus vacancy and collection losses plus other income.
54 What are operating expenses?	Expenses required to operate and maintain a property.
55 Are mortgage payments considered operating expenses?	No
56 What is capitalization in the income approach?	Converting income into an estimate of value.
57 What is the basic capitalization formula?	Value equals NOI divided by capitalization rate.
58 What is a capitalization rate?	The rate of return expected by an investor.
59 What is gross scheduled income (GSI)?	Total rental income if all units are occupied and rents are fully collected.
60 What is vacancy and collection loss?	Income lost from vacancies or unpaid rent.
61 What is gross operating income (GOI)?	Income remaining after subtracting vacancy losses from gross income.
62 What is cash flow?	Income remaining after all expenses and debt payments are made.
63 What is leverage in investment property?	Using borrowed funds to increase purchasing power.
64 What is appreciation?	An increase in property value over time.
65 What is depreciation for tax purposes?	The deduction allowed for the wear and aging of investment property.
66 What is return on investment (ROI)?	The profit earned compared to the amount invested.
67 What is positive cash flow?	Income exceeding expenses.
68 What is negative cash flow?	Expenses exceeding income.
69 What is an open listing?	A listing where multiple brokers may market the property and only the procuring cause earns a commission.
70 What is an exclusive agency listing?	A listing where one broker represents the seller, but the seller may sell without paying a commission.
71 What is an exclusive right of sale listing?	A listing where the broker earns a commission regardless of who finds the buyer.
72 What is a net listing?	A listing where the broker keeps any amount above the seller's desired price.
73 Are net listings legal in Florida?	Yes, but they are discouraged because of conflicts of interest.
74 What is procuring cause?	The actions that directly lead to the successful sale of a property.
75 What is a comparative market analysis (CMA)?	An estimate of value based on comparable properties.
76 Is a CMA the same as an appraisal?	No
77 Who may perform an appraisal for compensation?	A licensed or certified appraiser.
78 What is a buyer representation agreement?	A contract between a buyer and a broker for representation services.
79 What is a listing price?	The price at which a property is offered for sale.
80 What is the asking price?	The seller's requested sale price.
81 What is market value?	The most probable price a property would bring in an open market.
82 What is market price?	The actual amount paid for a property.
83 What is a purchase offer?	A proposal by a buyer to purchase property under specified terms.
84 What is acceptance in a contract?	Agreement to all terms of an offer without changes.
85 What is a counteroffer?	A rejection of the original offer combined with a new offer.
86 What happens when a counteroffer is made?	The original offer is terminated.
87 What is a fully executed contract?	A contract in which all parties have signed and all obligations have been completed.
88 What are the four essential elements of a valid contract?	Competent parties, mutual consent, lawful purpose, and consideration.
89 What is consideration in a contract?	Something of value exchanged between parties.
90 What is mutual consent?	Agreement between parties through offer and acceptance.
91 What is competent parties?	Parties who have legal capacity to enter a contract.
92 What is a lawful purpose?	The contract must involve legal activities.
93 What is the statute of frauds?	A law requiring certain contracts to be in writing to be enforceable.
94 Must real estate sale contracts be in writing in Florida?	Yes
95 What is a void contract?	A contract that has no legal effect from the beginning.
96 What is a voidable contract?	A contract that may be canceled by one of the parties.
97 What is an unenforceable contract?	A contract that is valid but cannot be enforced in court.
98 What is a breach of contract?	Failure to perform according to contract terms.
99 What is anticipatory breach?	A party indicates in advance they will not perform.
100 What is time is of the essence?	A clause making deadlines strictly enforceable.
101 What is assignment?	The transfer of contractual rights to another party.
102 What is novation?	The substitution of one party for another with everyone's consent.
103 What is mutual rescission?	Both parties agreeing to cancel a contract.
104 What is a default?	Failure to fulfill contractual obligations.
105 What is real property?	Land and anything permanently attached to it.
106 What is a fixture?	Personal property that has become part of the real property.
107 What test helps determine whether an item is a fixture?	MARIA
108 What does MARIA stand for?	Method of attachment, Adaptability, Relationship of parties, Intention, and Agreement.
109 What is trade fixture?	Equipment installed by a tenant for business purposes.
110 Who owns a trade fixture during the lease term?	The tenant.
111 When must a tenant remove trade fixtures?	Before the lease expires.
112 What happens if trade fixtures are not removed before lease expiration?	They become the landlord's property.
113 What is severance?	Converting a fixture into personal property by removing it.
114 What is annexation?	Attaching personal property to real property so it becomes a fixture.
115 What is emblements?	Annual crops grown by labor and cultivation.
116 Who owns emblements if a tenant's lease ends unexpectedly?	The tenant who planted them.
117 What is fructus naturales?	Naturally growing plants and trees.
118 What is fructus industriales?	Crops produced through cultivation and labor.
119 Are trees considered real property or personal property?	Real property until severed.
120 What is accession?	Ownership acquired through natural additions to land.
121 What is alluvion?	Soil deposited gradually by water action.
122 What is avulsion?	The sudden loss or addition of land caused by water action.
123 What is accretion?	The gradual increase of land caused by natural deposits of soil.
124 What is erosion?	The gradual wearing away of land by water, wind, or natural forces.
125 What is reliction?	The gradual exposure of land due to receding water.
126 What is an improvement in real estate?	A permanent addition or change that increases property value.
127 What is an improvement to land?	Any structure or addition attached to the land.
128 What is situs in real estate?	The economic location of a property in relation to its surroundings.
129 What is scarcity in real estate?	The limited supply of land available.
130 What are the four economic characteristics of land?	Scarcity, improvements, permanence of investment, and area preference.
131 What are the three physical characteristics of land?	Immobility, indestructibility, and uniqueness.
132 What is immobility?	Land cannot be moved from one location to another.
133 What is indestructibility?	Land itself cannot be destroyed, although improvements can be.
134 What is uniqueness?	No two parcels of land are exactly alike.
135 What is permanence of investment?	Improvements and public services increase land value over time.
136 What is area preference?	The desirability of a location based on social and economic factors.
137 What is plottage?	The increase in value created by combining adjacent parcels.
138 What is assemblage?	Combining two or more parcels into one larger parcel.
139 What is the economic principle of balance?	Maximum value occurs when land and improvements are in proper proportion.
140 What is the economic principle of competition?	Excess profits attract competitors into the market.
141 What is the principle of increasing and decreasing returns?	Improvements increase value only up to a certain point before returns begin to decline.
142 What is the principle of contribution?	The value of an improvement depends on how much it adds to the property's value.
143 What is the principle of conformity?	Properties achieve maximum value when they are similar to surrounding properties.
144 What is the principle of substitution?	A buyer will not pay more for a property than the cost of a similar substitute.
145 What is the principle of anticipation?	Property value is influenced by expected future benefits.
146 What is the principle of competition?	Excess profits attract competition that can reduce profits.
147 What is the principle of change?	Economic and social conditions continuously affect property values.
148 What is the principle of highest and best use?	Property value is maximized when put to its most profitable legal use.
149 What is a broker price opinion (BPO)?	An estimate of value prepared by a broker.
150 Can a broker perform an appraisal in Florida without an appraisal license?	No
151 What is market data in appraisal?	Information from comparable property sales.
152 What is an adjustment in the sales comparison approach?	A change made to comparable sales to account for differences.
153 What is gross monthly rent multiplier (GRM)?	A number used to estimate value based on rental income.
154 What is capitalization in appraisal?	Converting income into value.
155 What is depreciation in appraisal?	A reduction in value from any cause.
156 What is reconciliation in appraisal?	Combining valuation approaches to reach a final opinion of value.
157 What is a lessor?	The landlord or property owner in a lease agreement.
158 What is a lessee?	The tenant who rents the property.
159 What is estate for years?	A lease with a specific beginning and ending date.
160 What is estate from period to period?	A lease that automatically renews until terminated by notice.
161 What is estate at will?	A tenancy that continues with the consent of both parties and no fixed term.
162 What is estate at sufferance?	A tenancy created when a tenant remains after the lease expires without permission.
163 What is a holdover tenant?	A tenant who remains in possession after the lease ends.
164 What is gross lease?	A lease where the landlord pays most operating expenses.
165 What is net lease?	A lease where the tenant pays rent plus some operating expenses.
166 What is percentage lease?	A lease where rent includes a percentage of business sales.
167 What is a security deposit?	Money held to protect the landlord against damages or default.
168 What is constructive eviction?	A situation where property conditions force a tenant to leave.
169 What is actual eviction?	The physical removal of a tenant from the property.
170 What is quiet enjoyment?	The tenant's right to use the property without interference.
171 What is assignment of lease?	Transfer of the tenant's entire lease interest to another party.
172 What is sublease?	Transfer of less than the tenant's entire lease interest.
173 Who remains liable to the landlord after a sublease?	The original tenant.
174 What is a lease option?	A lease giving the tenant the option to buy the property.
175 What is prorating?	Dividing expenses or income between buyer and seller according to ownership periods.
176 What items are commonly prorated at closing?	Property taxes, rents, interest, and association fees.
177 What is debiting an account at closing?	Recording an amount owed by a party.
178 What is crediting an account at closing?	Recording an amount received by a party.
179 What is the settlement date?	The date ownership transfers and the transaction closes.
180 What is the closing disclosure?	A form summarizing final loan terms and closing costs.
181 Who prepares the Closing Disclosure for financed transactions?	The lender.
182 What is title closing?	The process of transferring ownership and recording documents.
183 What is recording fee?	A charge for entering documents into public records.
184 What is documentary stamp tax on deeds in Florida?	A tax imposed on the transfer of real property ownership.
185 What is the Florida documentary stamp tax rate on deeds in most counties?	$0.70 per $100 of consideration.
186 What is documentary stamp tax on notes?	A tax charged on promissory notes secured by Florida real estate.
187 What is the documentary stamp tax rate on notes in Florida?	$0.35 per $100 of indebtedness.
188 What is intangible tax in Florida?	A tax on new mortgage obligations.
189 What is the Florida intangible tax rate on mortgages?	$0.20 per $100 of indebtedness.
190 Who customarily pays documentary stamp tax on deeds in Florida?	The seller, unless agreed otherwise.
191 Who customarily pays documentary stamp tax on notes in Florida?	The buyer or borrower.
192 Who customarily pays intangible tax in Florida?	The buyer or borrower.

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