RE – Characteristics, Legal Description an Use

1. Appurtenance - rights, privileges or improvements that belong to and pass with the land
2. Annexation – Process of attaching
3. Emblements are crops. Personal property of farmer, ownership can be transferred using Bill of Sale
4. Characteristics
a. Scarcity is usually based on geographic considerations
b. Modification - land use and value are greatly influenced by improvements made by man
c. Fixity – Land and buildings are not Liquid assets
d. Situs - Location preference from an economic rather than geographic standpoint
5. Government Survey System - takes into consideration base lines, meridians, townships and sections
a. One township contains 36 sections. Each section contains 640 acres, which is 1 square mile.
6. Land Control
a. Non-conforming use is allowed to continue as it is considered grandfathered.
i. Alteration, reconstruction, expansion may not be done without Permission
ii. Non-conforming is not violation, as violation requires variance
iii. Variance approval is given by Zoning committee after hearing including neighbors
iv. Conditional / Special use like PUD – Granted by HOA or Zoning committee
1. Extra tax may apply to property owners in a PUD
7. Buffer zone is located between incompatible uses and it is a transitional use
8. Declaration of Restrictions / Deed Restrictions are imposed by Grantor
a. Violation can result in civil court action brought by other property owners
b. Court will issue an injunction to enforce the restrictions
9. In the case of an encroachment, the injured party has the right to demand the removal of the encroachment
10. Easements can be terminated by abandonment and should be created in writing and recorded
11. License –
a. Similar to an easement, but of much more limited duration
b. It is not a right in land and is often given verbally and easily revoked
12. Adverse Possession (squatter’s rights) – when property is acquired through Statute of Limitations
13. Lis Pendens –
a. Notice against property, may become the responsibility of new owner, if not settled prior to closing

RE – Ownership, Transfer and Recording of Title

a. Tenancy in common – Share goes to your heirs, at probate
b. Joint Tenancy – Share goes to surviving co-owners (right of Survivorship) – Poor Man’s will
i. If the land cannot be physically divided, the court will order the property sold and the proceeds
will be divided among the joint tenants
c. Trust - If a property is held by one party for the benefit of another
d. Syndicate - When two or more parties join together to create and operate a real estate
e. Time Shares – aka Interval Ownership. It is Tenancy in Common
f. Condominiums are established under laws referred to as horizontal property acts
g. In Life Estate, if the life tenant leases the property and then dies, the lease expires.
h. Leases – The lease is personal property
i. Gross Lease - The tenant pays only rent. Landlord pays all the expenses of the property
ii. Net Lease - the tenant pays rent plus some of the expenses of the property.
iii. Percentage Lease - lease in which all or part of the rent amount is based on the receipts of the
tenant’s business (Typical shopping center lease).
i. Lien
i. An involuntary lien is created by law and can be statutory or equitable (common law)
ii. Equitable liens come from common law and include seller (vendor) or buyer (vendee) liens
iii. Vendee’s lien would be used when a buyer has paid, but not yet received a deed. (i.e. at a
foreclosure sale, or in contract for deed)
iv. Liens can be specific or general.
1. Specific lien attaches to one or more properties (Example: a mortgage).
2. General lien attaches to all the property of the debtor, not exempt from forced sale (Ex: a
judgment or IRS lien). Recording is required for a judgment to become lien.
v. Writ of execution - to enforce payment of the lien, if a party wins a judgment and is unable to collect
j. Prior Appropriation - theory of water law based on the idea that “first in time is first in right.”
k. Title Transfer
i. When the government transfers title to an individual it uses a patent
ii. When a developer turns over the streets in a subdivision to the local government, this is called
dedication. This is accomplished by recording the plat plan.
iii. Inheritance by will gives Title by Devise and heir is the Devisee (Beneficiary)
iv. A change of ownership of real property is called alienation
v. Voluntary alienation usually involves a written document called a conveyance
vi. Conveyance - instrument or document that transfers an interest in real property, so ownership is
conveyed using a Deed, Power of Attorney, Will
vii. Involuntary alienation can also occur from natural causes including accretion, reliction which result
in an increase in land, and erosion, avulsion which result in a loss of land.
l. Valid Deed Requirements
i. Consideration can be “good” or “valuable.
1. “Love and affection” is an example of good consideration.
2. Money is valuable consideration
ii. Delivery - title does not pass until the deed is delivered and accepted. Delivery can be into
escrow. Delivery must be made during the life of the grantor.
iii. Legal description of the property
iv. Deeds do not have to be dated, signed by the grantee, or recorded
m. Type of Deeds
i. Special Warranty Deed – Guarantees title for Grantor’s period of ownership only
ii. Quit Claim Deed – No warranty or Guarantee. Used to clear cloud or cure title
iii. Bargain & Sale Deed – No warranty but Promise that Grantor has right to convey Title.
1. Deed with 1 covenant (Ex – trustees, sheriffs, court officers)
n. PROMISES (Covenant)
i. Covenant of seizin – grantor claims to be the owner with the right to sell the property
ii. Covenant of quiet enjoyment – Grantor promises the new owner will not be disturbed with
claims against the property
iii. Covenant of further assurance – Grantor is responsible for any documentation needed to
ensure title is transferred to the grantee
iv. Covenant against encumbrances – Grantor promises that all encumbrances have been
disclosed.
v. Covenant of warranty forever – the grantor’s promises have no expiration date
o. Deed in lieu of foreclosure (aka voluntary deed) – Lender accepts deed and junior liens
i. Junior liens are wiped out in Foreclosure
ii. Notice of foreclosure is sent by certified mail 21 days before the foreclosure sale
p. With a traditional mortgage (not a Deed of Trust) the foreclosure will be recorded as a lis pendens
q. Short sale will result in a negative note on the credit report of the defaulting borrower, but is better than a
foreclosure.
 r. Foreclosure for home equity loans is judicial in Texas others are non judicial.
s. Title Recording gives constructive notice of ownership. Taking possession of property also gives
constructive notice of ownership.
t. Standard title policy will not provide protection for survey or boundary problems
u. Abstract of title is a complete history of title
v. chain of title - a list of all owners from the first until today
w. Attorney views the abstract and renders an opinion of title
x. Quiet title suit - court procedure to cure or quiet the cloud

RE – Value & Appraisal

2. USPAP - Uniform Standards of Professional Appraisal Practice
3. Principle Highest and best use – considered as the most important detail by an appraiser
4. Principle of Substitution - sets an upper limit on price
5. Principle of Increasing and Decreasing Returns - Do not over-improve a property.
6. Cost Approach
a. Used for Churches or when there are no comparable for a particular property
b. Land Value + Replacement Cost - Depreciation = Value
c. Physical Depreciation – has least impact on appraisal
7. Income Approach
a. Gross Income : Actual Rent – vacancies
b. Net rent : Net Operating Income – Expenses
8. BPOs are same as CMA – normally requested by Attorney, company or lender in short sale.
9. Mill rate – Tax per thousand ($25 tax per $1000)
10. TAX
a. Special Assessment tax – Only for properties with special Benefits as curbs or sidewalks
b. Municipal Improvement District Tax – Additional tax until improvement is paid off or removed

RE – Contracts & Agency

1. When an option Contract is exercised the unilateral contract becomes bilateral.
2. For a Contract to be Valid & Enforceable – COLIC
a. In Writing – Contract will be Valid but NOT enforceable
3. Voidable Contract – Contract with a minor, someone who signed under duress, or under the influence of alcohol or
drugs, an injured party, etc.
4. Void Contract – With someone who is documented as Insane
5. Breach of Contract Remedies
a. Liquidated damages – Earnest money
b. Specific performance – Awarded in Court. Only remedy that would possibly result in the full execution
(closing) of the transaction
c. Monetary damages – Awarded by court. Money damages are both compensatory and punitive
6. Partial Performance in Contract - If the contract is not a contract of sale, partial performance may be an acceptable
option – for example in a long term lease
7. Time is of the essence – It is a Choice. if one party cannot perform exactly on time, the contract becomes voidable at
the option of the other party
8. Equitable title - Interest held by a buyer with a signed sales contract, who has not yet gone to closing. The buyer
has an equitable estate, or equitable title.
9. IRS Tax on Real Estate
a. Economic life is set by IRS
 b. Economic life is the period of profitable use
c. Improvements can be depreciated. When the improvements are fully depreciated, that is the end of the
economic life.
d. On income producing property land can never be depreciated
e. Additional capital or property included in a transaction to even out the exchange is called boot
f. Property Tax, Interest on Mortgage, Discount points and Prepayment penalties can be deducted
10. Agency
a. Person with power of attorney is called an attorney-in-fact
11. Type of Agent
a. Transactional broker/facilitator - assists a buyer and seller in reaching an agreement in a real estate
transaction but doesn’t have an Agency relationship
b. Information about your role as an Intermediary or a dual agent should be given before a party reveals any
confidential information
12. Duties of Party
a. CRIP (Compensation, Reimbursement, Indemnification and Performance)
b. OLD CAR
i. Loyalty – Place client’s interest first
ii. Accounting - is the easiest duty of a dual agent
iii. Reasonable Care – Protect property and legal interest of client
13. Cause for Suspension, revocation or loss of commission –
a. failure to advice in writing to have attorney or obtain title insurance

RE Practice
1. Due Diligence period - Usually begins after the contract has been signed and acceptance communicated.
2. Practice of Law - If a client insists on using his/her own wording or contract form, as long as what they want is legal,
you must obey your client
3. Privacy and Do Not Contact
a. Telemarketing - Comply with Federal DNC Registry (Administered by FTC)
b. Emails – Comply with CAN-SPAM Act
c. Social Media – Written Permission from Client required
4. Property Listing
a. List Price – Must be set by Seller using CMA (Appraisal not required)
b. Local MLS – Owned and operated by Board of Realtors
c. Listing Agreements
i. Exclusive Agency – Seller competes with Broker. Ex -Builders
ii. Open Listing – Listing not found in MLS. Can be compared with FSBO
5. Statute of Frauds - All agency agreements must be in writing
6. Termination of employment –
a. Death – although sales contracts and leases survive death, service contracts are terminated by the death
of either party. The broker and seller are the parties to the listing.
b. Zoning - Change in property use by outside forces
c. Protection Period - The length of the protection period is negotiable
7. Property Manager –
a. Management Agreement used to create relationship
b. Maintain Tenant Security Deposits in Trust Account (Rent/ Operating expenses – Checking or Cash)
c. Key Responsibility – Generate income for Owner, Develop Operating budget
d. Operating Expenses DO NOT INCLUDE – Mortgage, Depreciation, Improvement Expenditure
e. Property & Casualty Insurance necessary
8. Fair Housing Law –
a. Race, Religion, Color, National Origin, Sex (not sexual orientation), handicap, familial status
 b. Alcoholics, recovering Drug Users, Aids victims are considered handicapped
c. Senior housing properties are described as having a Familial Status Exemption
i. Senior housing communities can refuse to sell or rent to those who do not meet the age requirement
or to families with children.
d. Landlord can refuse to lease to a mentally handicapped tenant who is a danger to himself and others. Since
there is no federal standard for determining mental handicap, a landlord has to rely on a background check.
e. Exceptions include:
i. FSBO single family homes
1. When Owner owns 3 or less & No discriminatory advertising is used
ii. Rental of Owner Occupied 1-4
1. When no Broker is used & No discriminatory advertising is used
iii. Church Owned Rental
1. Can be restricted to Members as long as Membership is OPEN to ALL
iv. Private Clubs Owned Lodging
1. Can be restricted to Members as long as it is NOT operated commercially
f. Key Terms under Fair Housing
i. Blockbusting/ Panic Peddling – Causing panic selling
ii. Steering / Channeling – Directing buyers based on Race, color
iii. Discrimination in advertising is also a violation of this law, “no Irish”, “no wheelchairs”
9. ECOA
a. Equal housing Poster
i. Every broker must display the Poster in his or her office.
ii. Poster is available from HUD & law is administered by HUD
iii. When a complaint is made to HUD, HUD will try mediation and conciliation to resolve the problem
before pursuing the matter in court
iv. Victims have
1. 1 year to seek mediation through HUD
2. 2 years to file a complaint with the courts
v. Broker is guilty of discrimination, if Poster is not displayed
vi. Failure to display the poster may be considered prima facie evidence of discrimination
1. prima facie - evidence so great that no further investigation is necessary
b. Civil penalties (not criminal)
c. 1st violation - $75k. Each subsequent one - $150k
10. ADA (1990)
a. Individuals with a history of mental impairment who have been declared recovered, continue to be protected
under ADA
b. In Commercial properties, 1st violation - $50k. Each subsequent one - $100k
11. Risk Management for Brokers
a. Copies of TXN Documents – Broker should keep for 4 years
b. Broker should establish Trust account to avoid commingling/ conversion
c. Sales Agents Acting on Behalf - Vicarious liability
d. Anti-Trust Laws (Sherman-Clayton)
i. broker-to-broker commission DISCUSSIONS are prohibited
ii. Listening to broker-to-broker commission DISCUSSIONS is also prohibited
iii. If a broker overhears other brokers discussing commission, that broker should walk away
iv. MLS requirement for a minimum commission on listings would be a violation
v. Boycotting discount brokers is prohibited
e. E & O Insurance – Protects both Broker, Sales Agent for mistakes, negligence
i. Does not protect for fraud, punitive damages or personal actions
f. General Liability – for bodily and property
RE – Disclosures & Environmental Issues
1. Hazards –
a. Lead -
i. Buyer - Lead Inspection (10 days), Termination due to Lead (14 days)
ii. Seller – Keep Disclosure Record 3 years from Sale Date
b. Landfills, UST, Farming Pesticides, waste disposal sites – Recommend Water testing
2. Wetlands (aka Mire, Swamp or marsh) – Link b/w land and water
3. CERCLA – Administered by EPA
a. Created the Superfund to help pay for the cleanup of hazardous spills and waste
b. Federal and State Regulatory Agencies and Indian Tribes have the authority to spend funds
c. Past and present property owners are liable for cleanup
d. Environmental Site Assessment (ESA-Phase 1) for contamination –for Commercial Property
e. Environmental Impact Statement (EIS) – For Government Project
4. Material fact like uninsurable property, known alterations, plumbing/ electric issues should be disclosed
5. Red Flag Issue Examples that should be observed by Agent –
a. Discolored water bubbling up from under the ground at the site of a buried fuel tank
b. An iridescent sheen on the surface of a pond

RE Financing & Settlement

1. Conventional, Non-conventional and Seller Financing
2. Term loan - interest only until the end of the term, when the entire principal is repaid.
a. This is a zero-amortization loan. This is also called a straight-loan or Construction loan.
3. Lien Theory, Title Theory and Deed of Trust
4. Primary and Secondary Market (Fannie – Largest, Freddie and Fannie accept conventional and FHA, VA)
5. Types of Loan
a. Term Loan, Participation Loan, Open End Mortgage (HELOC), Construction Loan
6. FHA (PMI insurance), VA (0 down and VA guarantee)
7. Mortgage Clause
a. Defeasance clause, Subordination clause (allows lender to take lower LIEN position)
8. LTV ratios, Discount points
9. TILA (Reg. Z) – for all RE txn. OR for all non-RE txn. up-to $25k.
a. Regulated Advertising (Trigger Terms) – APR and Cash is fine
10. RESPA – For Residential RE txn.
a. Allows to choose Title company
b. Allows Rebates, referral commission and Referral Gifts (not cash)
11. LE (3 business days of loan application, with 10 days to respond)
12. CD – 3 business days before closing
13. ECOA – Sex, Marital status, race, religion, Age
a. Participation is Public assistance program (SSN) is fine
b. Can be denied if income is Alimony, Child Support, Pension plan, Commission based
14. Redlining prohibited by CFPB for banks and Fair housing laws for Insurance companies
15. Buyer Credit – Loan Amount, Earnest Money
16. Buyer Debit – prepaid taxes, Prepaid Interest, HOA, Fuel in tank, Discount Points
Calculation
Sellers’s NET

1. Total Expenses / (100 – Commission Rate) %

a. Ex – Commission rate is 6%, then Net will be Total Expenses / (100 – 6)%

Appreciation / Depreciation

2. Appreciation - Go over 100%

a. Today's value = (100% + appreciation %) x original cost
3. Depreciation - Go less than 100%
a. Today's value = (100% - depreciation %) x original cost
Math’s
1. 3’ = 1 yard
2. 3’ × 3’ = 9 sq. ft.
3. 9 sq. ft. = 1 sq. yd.
4. 43,560 sq. ft. = 1 acre
5. L × W × H = cubic – answers are always in “cubic” dimensions
6. 3’ × 3’ × 3’ = 27 cu. ft.
7. 27 cu. ft. = 1 cu. yd.
8. ½ L x W = area of a triangle
9. 43,560 square feet/acre
10. 5,280 feet/mile

State Portion
TREC – Duties & Powers
Power & Composition

1. TREC has the power to subpoena books, records, and witnesses.

2. Broker Lawyer committee – 6 brokers, 6 lawyers and 1 public member

Handling Complaints
1. If a license holder, in violation, fails to respond to a summons from TREC, TREC will automatically schedule the
revocation/suspension hearing in Austin.
2. If your license is revoked by TREC, you may appeal the decision to the district court.

Penalties for Violation

1. Unlicensed Activity – considered Class A misdemeanor. County jail < 1 yr. or $4k
2. Violation of TRELA –
a. Civil penalty of up to 3 times
b. TREC administrative penalty - $5k per day (30 days to pay penalty)

RE Recovery Trust Account

1. Funds in Recovery account are invested in safe securities like T-Bills and Notes
2. When any amount is paid out against a licensee, the amount must be paid back with interest
3. TREC plays no part in resolving conflicts between license holders. This is usually handled at the Local Board of
Realtors level.
4. $50,000 per lawsuit and up to $100,000 per license number
5. If the fund ever falls below $1 million,
 a. TREC can assess all licensees $10 or a pro rata share to bring the balance up to $1.7 million.
6. If the balance is above $3.5 million on January 1st,
a. TREC reduces the value to $3.5 million by flushing the excess into the General Fund of Texas where the Texas
Legislature spends it.

Licensing
1. Apartment locators need a License
2. E & O insurance limit for Business Entity
a. If designated Broker has <10% interest, then Entity should have $1 million per occurrence
b. If > 10 %, then $0 insurance
3. Licensing Exception
a. On-site apartment managers
b. An employee leasing or renting property for the owner
4. Assumed name should be filed with (TREC should be notified within 30 days)
a. Secretary of State, TREC and the local county clerk in every county he has office
5. TREC License is not given if –
a. Candidate cannot demonstrate Honesty, Integrity and Trustworthiness
b. Is default on Texas State student loans
6. If an application for licensure is disapproved by TREC, the applicant may make an appeal within 10 days after the
receipt of the notice
7. Educational Requirement
a. Broker License (900 hrs.)
i. Including 30 hrs. Of RE Brokerage in last 2 yrs. Before applying for Broker License
b. Sponsoring Broker or Designated Broker
i. 6-hour Broker responsibility course
8. License Maintenance & Renewal
a. SAE – 90 additional hrs. + 8 hrs. of legal update 1, 2
b. CE - 18-hour class taken once every 2 years
i. CE completed within 60 days - $200 penalty
ii. CE completed after 60 days – License in Inactive now ($50). $200 + $250 penalty

Professional Ethics
1. 5 Canons of professional ethics and conduct
a. Fidelity – a license holder is a fiduciary to his client
b. Integrity – a license holder will avoid misrepresentation
c. Competency – a license holder will be knowledgeable
d. Consumer Information Notice 1-2 - Notifies the public of the recovery trust account
e. Discriminatory Practices
2. Grounds for Suspension
a. Failing to specify a definite termination date in a Buyer’s Agreement or a Listing contract
b. Threatening to sue for a commission you have not earned
c. Failing to notify the TREC about felony charge within 30 days
i. 2nd DWI conviction in TX is NOT a felony
3. If a license is revoked by TREC, the individual must wait at least 2 years before trying for new license.
4. If Broker accepts Earnest/ Security deposit – It must be deposited in his Escrow within 2 days
5. A license holder may rebate a portion of the commission to a customer with the client’s permission
6. IABS and Consumer Information Notice – Publish on website in 10 (large statement or 12 point font)
7. Only Broker/ company name required on each page of website
Agency
1. Senate Bill 489 –
a. Requires disclosure of IABS
b. Requires Disclosure of Representation – After you are Hired and it can be Oral or written
c. Allows Broker to act as Intermediary
i. Statutory Intermediary takes precedence over common law dual agency.
ii. As intermediary, Broker can only disclose facts about Property
2. A license holder may advertise another broker’s listing with the written permission of that broker
3. Broker response to
a. Clients, Agents, Brokers – 2 days
b. Deliver TREC correspondence – 3 days
i. Inform TREC of any Delegated Supervisor who will be supervising for 3 months
ii. Delegated Supervisor will take 6 hr. Broker responsibility course at EACH renewal
4. Unlicensed Assistant
a. can place for sale signs on property, accompany an inspector, place advertisements as directed by the
license holder
b. Assist in arranging financing at the direction of a license holder in an administrative way
c. assist a buyer in obtaining forms or information to apply and qualify for a loan
d. Train and motivate license holders
e. Perform all clerical activities for the broker, such as typing contracts, preparing reports and CMA’s, filing,
copying and organizing information

Contracts
a.Certificate of MOLD remediation – 5 years
b.HOMESTEAD and COMMUNITY PROPERTY is a statutory estate in Texas
c.spouse can waive community property rights by written agreement
d.When a homestead is foreclosed on for
i. Unpaid property taxes, the owner has 2 years to redeem property.
ii. Unpaid HOA/POA taxes, the owner has 6 months to redeem property
e. Homeowners must apply for the exemption and must own and occupy the home on January 1st to qualify.
You can back file for up to two years if you have failed to claim this exemption.
f. Example of DTPA would be - negligent misrepresentation of material fact. 2 yrs to fie
2. Timeframe
a. Option Money Timeframe (PARA 23)
i. Given to Seller within 3 days after the Effective Date or Midnight of 3rd calendar day
ii. Notice to terminate by Buyer, must be given by 5:00 pm on the DATE SPECIFIED in CONTRACT
b. Earnest Money Timeframe
i. Deposited in Escrow Account Within 3 days after the Effective Date
ii. Can be re-disbursed to parties within 15 days if contract fails
c. Title Commitment – 20 days from RECEIPT of Contract
i. Survey – Negotiated days - Buyer’s Review title & Survey – Negotiated days
d. Due Diligence - Negotiable
e. Seller’s Disclosure
i. Must be given before signing the OFFER or Buyer can choose days to receive it
ii. Buyer can Terminate within 7 days after receiving it
f. MUD Disclosure – Seller to deliver & Buyer to sign before final execution
i. Buyer who has not received MUD disclosure can Terminate the contract
3. Paragraph 7.D. (1) – Buyer accepts the Property As Is.
4. Paragraph 11 – SPECIAL PROVISIONS – Factual statements and business details