Real estate terms, grouped by exam topic

Property ownership

• Real property: land, everything permanently attached to it, and the rights that go with ownership (the bundle of rights).
• Personal property: movable things, also called chattels; sold with a bill of sale, not a deed.
• Fixture: an item attached to real property so that it becomes part of it. Courts look at the method of attachment, adaptation to the property and the parties' intent.
• Trade fixture: equipment a commercial tenant installs for its business; it stays the tenant's personal property and may be removed before the lease ends.
• Fee simple absolute: the most complete ownership, unlimited in time and freely transferable.
• Life estate: ownership that lasts for a person's lifetime, then passes to a remainderman or reverts to the grantor.
• Joint tenancy: co-ownership with the right of survivorship; it needs the four unities of time, title, interest and possession.
• Tenancy in common: co-ownership in shares that may be unequal, with no survivorship; a share passes to the owner's heirs.
• Easement: a right to use another's land for a set purpose, such as a driveway or a utility line.
• Encroachment: an improvement that crosses onto a neighbor's land, usually found by a survey.
• Metes and bounds: a legal description that walks the boundary from a point of beginning by distances and directions.

Practice: property ownership questions

Land use controls

• Police power: the government's power to regulate property for public health, safety and welfare; zoning and building codes rest on it.
• Zoning ordinance: local law that sorts land into districts and sets the uses, heights and setbacks allowed in each.
• Nonconforming use: a use that was lawful before a zoning change and may continue, usually with limits on expanding or rebuilding.
• Variance: permission to depart from a zoning standard because of a hardship peculiar to the lot, not the owner's preference.
• Conditional use permit: approval for a use the district allows only case by case, such as a church in a residential zone.
• Deed restrictions: private limits on use written into deeds or a subdivision's covenants (CC&Rs), enforced by owners or an association.
• Eminent domain: the government's power to take private property for public use with just compensation; the court process is condemnation.

Practice: land use controls questions

Transfer of title

• Grantor and grantee: the person conveying title and the person receiving it.
• General warranty deed: the grantor guarantees title against defects from any time in the past; the strongest protection for a buyer.
• Special warranty deed: the guarantee covers only defects that arose while the grantor owned the property.
• Quitclaim deed: conveys whatever interest the grantor has, if any, with no warranty; often used to clear a cloud on title.
• Adverse possession: gaining title by open, hostile, continuous possession for the period state law sets.
• Escheat: property passing to the state when an owner dies with no will and no heirs.
• Constructive notice: notice the law presumes from the public records; recording a deed gives it to everyone.
• Chain of title: the sequence of recorded conveyances from the original owner to the present one.
• Title insurance: a one-time-premium policy protecting the owner or the lender against covered title defects.

Practice: transfer of title questions

Valuation

• Market value: the most probable price in a competitive, open market, with buyer and seller informed and under no pressure.
• Sales comparison approach: value from recent sales of similar properties, adjusted for their differences; the approach for most homes.
• Cost approach: land value plus the cost to build the improvements new, minus depreciation; used for new or special-purpose buildings.
• Income approach: value from the income a property produces: net operating income divided by the capitalization rate.
• Capitalization rate: net operating income divided by value; the return an investor expects.
• Depreciation: loss in value from physical deterioration, functional obsolescence (an outdated design) or external obsolescence (a cause off the property).
• Highest and best use: the legal, physically possible and financially feasible use that gives the land its highest value.
• Comparative market analysis (CMA): a licensee's estimate of a likely price from comparable sales; not an appraisal.

Practice: valuation questions

Contracts

• Bilateral contract: a promise for a promise, such as a purchase agreement. Unilateral contract: a promise for an act, such as an open listing.
• Void: no contract at all, for example one with an illegal purpose. Voidable: valid unless the protected party chooses to cancel, for example a contract signed by a minor.
• Consideration: something of value each party gives, which may be a promise.
• Statute of frauds: the rule that contracts to sell real property must be in writing to be enforceable.
• Counteroffer: a changed reply to an offer; it rejects the original offer.
• Option: a paid right to buy at a set price within a set time; only the seller is bound.
• Contingency: a condition, such as financing or inspection, that must be met before the contract binds.
• Specific performance: a court order to carry out the contract, available because each parcel of land is unique.
• Liquidated damages: an amount agreed in advance, often the earnest money, that the seller keeps if the buyer defaults.

Practice: contracts questions

Agency

• Principal (client): the person the agent represents. Customer: a party the agent works with but does not represent.
• Fiduciary duties: what an agent owes a client: obedience, loyalty, disclosure, confidentiality, accounting and reasonable care.
• Special agent: authorized for one transaction, as a listing agent is. General agent: authorized for a range of matters, as a property manager is.
• Dual agency: one agent or firm representing both buyer and seller, allowed only with informed consent where state law permits it.
• Exclusive right-to-sell listing: the broker earns the commission no matter who sells the property.
• Exclusive agency listing: the broker is paid unless the owner finds the buyer.
• Open listing: any number of brokers may list it, and only the one who brings the buyer is paid.
• Net listing: the broker keeps everything above the seller's set net; illegal or discouraged in many states.

Practice: agency questions

Real estate practice and fair housing

• Protected classes: the federal Fair Housing Act bars housing discrimination because of race, color, religion, sex, national origin, familial status or disability (Department of Justice, checked Oct 24, 2026).
• Steering: guiding buyers toward or away from neighborhoods because of a protected class.
• Blockbusting: pushing owners to sell by claiming people of a protected class are moving in.
• Redlining: refusing loans or insurance in an area because of the people who live there.
• Commingling: mixing client funds with the broker's own money. Conversion: using client funds for oneself.
• Price fixing: competing brokers agreeing on commission rates, a violation of federal antitrust law.
• Errors and omissions insurance: coverage for a licensee's negligent mistakes; required in some states.

Practice: real estate practice questions

Disclosures and environmental issues

• Material fact: a fact that would affect a reasonable buyer's decision or the property's value.
• Latent defect: a hidden defect a normal inspection would not reveal; a known one must be disclosed.
• Lead-based paint disclosure: for most housing built before 1978, sellers and landlords give the EPA pamphlet and disclose known lead paint, and buyers get a 10-day chance to inspect unless they waive it (EPA, checked Oct 24, 2026).
• Radon: a natural radioactive gas from the soil, found by testing.
• Asbestos: a fiber in older insulation and flooring, hazardous when it is disturbed.
• CERCLA (Superfund): the federal law that can make current and past owners liable for cleaning up contamination.
• Phase I environmental site assessment: a records and site review for contamination, done before buying commercial property.

Practice: disclosures and environmental questions

Financing

• Promissory note: the borrower's promise to repay. Mortgage or deed of trust: the document that pledges the property as security.
• Lien theory and title theory: in lien-theory states the borrower holds title and the lender has a lien; in title-theory states a trustee or the lender holds title until payoff.
• Amortized loan: equal payments of principal and interest that pay the loan off by the end of the term.
• Point: a fee of 1% of the loan amount, not of the price.
• Loan-to-value ratio (LTV): the loan divided by the lower of the price or the appraised value.
• Private mortgage insurance (PMI): insurance protecting the lender on a conventional loan with a small down payment.
• Acceleration clause: lets the lender call the whole balance due on default. Alienation (due-on-sale) clause: calls it due when the property is sold.
• Secondary mortgage market: where lenders sell loans to investors such as Fannie Mae and Freddie Mac.
• Loan Estimate and Closing Disclosure: the federal forms under TRID; the lender sends the Loan Estimate within three business days of the application (12 CFR 1026.19, checked Oct 24, 2026).

Practice: financing questions

Real estate math

• Constants: memorize 43,560 square feet per acre and 5,280 feet per mile; Pearson VUE's handbooks say test centers do not provide them.
• Proration: splitting a cost such as taxes or rent between buyer and seller by the days each owns the property.
• Debit and credit: on a settlement statement, a debit is what a party owes and a credit is what a party receives.
• Commission split: the sale price times the rate, then divided between the brokerages and between each broker and agent.
• Gross rent multiplier: the price divided by the gross rent, a quick way to compare rental properties.
• Section and township: in the rectangular survey, a section is one square mile (640 acres) and a township is 36 sections.

Practice: real estate math, with worked steps

Words that belong to one state

The national portion uses general terms; your state portion uses your state's own words.

• Affiliate broker (Tennessee): the entry-level license, the one other states call salesperson; an affiliate broker works under a principal broker. Tennessee exam
• Sales associate (Florida): the salesperson-level license; a sales associate needs 24 months of active licensing before the broker exam. Florida broker exam
• Transaction facilitator (Alabama): a licensee who helps one or more parties without being their agent or fiduciary. HB382, effective October 1, 2025, gave the old transaction broker this name, and it is the relationship that applies until the licensee and the consumer sign a written agency agreement. Alabama exam
• Public report (Arizona): the disclosure report on a subdivision that each first buyer must receive before signing an offer; a buyer who never got it can rescind. Arizona exam
• Sponsoring broker (Georgia): the broker a licensee works under; an active license needs a signed Sponsoring Broker Statement, an inactive one does not. Georgia exam