# Real property Start with the land. Add the house and its permanent improvements. Now add the ownership rights associated with that real estate. Together, we are describing real property. Look inside the kitchen. Built-in cabinets ordinarily form part of the real estate as fixtures. The movable cart ordinarily does not. The key distinction is not whether an item is valuable. It is how the item relates to the land and improvements, along with the relevant facts and agreement. Ownership rights can also be divided or limited. Quick check: does every object sitting inside a house automatically become real property? No. A movable item can remain personal property even when it is inside the home. # Personal property Look at this kitchen cart. It sits in the house, but it can ordinarily move with its owner. Personal property, also called chattel, generally means property that is not real property. The cart is our example. Compare it with the built-in cabinets. An item that starts as personal property may become a fixture when incorporated into the real estate. Watch the classification change: a loose cabinet, then a built-in installation. But attachment alone is not the whole analysis. Consider adaptation, intention, the parties' relationship, and the agreement too. Quick check: is the movable cart automatically included just because the house is sold? No. Check the agreement instead of assuming every item stays. # Fixture Look at these two items in the same kitchen. Built-in cabinets, and a cart on wheels. Both are useful. Both may be heavy. But they are not necessarily classified the same way. The cart is ordinarily personal property. It can be moved without becoming part of the building. The cabinets are ordinarily fixtures, incorporated into the kitchen. A fixture began as personal property but is treated as part of the real estate. Attachment and adaptation matter. So do intention, the parties' relationship, and their agreement. Do not decide from weight or appearance alone. Quick check: which item is more likely a fixture? The built-in cabinets. The key is how the item is incorporated into the property, considered with the facts and agreement. # Bundle of rights Owning a home means more than holding a key. Think of ownership as a bundle of rights. Possession: occupy the property. Control: decide how to use it within legal limits. Enjoyment: use its benefits. Exclusion: keep others out, subject to their legal rights. Disposition: transfer your interest. Now watch one right separate from the bundle. A lease can give a tenant possession for a period, while the landlord retains ownership. An easement can grant a limited use right. The rights are not unlimited. Laws, valid restrictions, and other people's interests still matter. Quick check: does granting a driveway easement automatically transfer ownership of the entire parcel? No. A limited use right can be granted separately. # Fee simple absolute Watch this home's ownership move from one person to the next. Fee simple absolute is the broadest private ownership estate. It is potentially perpetual and inheritable. The current owner can transfer it, and an heir can inherit it. Notice that our timeline has no preset ending. Compare that with a life estate, which is measured by a specified person's life. And compare it with a defeasible fee, which may end when a specified condition occurs. The word absolute does not erase legal limits. Taxes, zoning, and valid liens can still apply. Quick check: does fee simple absolute mean an owner can ignore zoning? No. Broad ownership still operates within the law. # Life estate One home. Two successive interests. In this example, Morgan holds a life estate measured by Morgan's own life. Riley holds the remainder. Morgan has the present right to possession. Riley's right to possession comes later. Watch the timeline. When Morgan's measuring life ends, the life estate ends, and Riley's remainder becomes possessory. Now rewind. Suppose Morgan transfers the life estate to Casey. Casey receives only the interest Morgan had. The measuring life is still Morgan's. The transfer does not turn it into permanent ownership. A life estate can also be measured by another specified person's life. Quick check: can transferring a life estate extend it beyond the measuring life? No. The measuring life still sets its duration. # Easement Two homes. One access route. The rear owner needs to reach the public street. In this example, an access easement allows that owner to travel along this driveway, across the front parcel. Follow the route from the street to the rear home. The rear parcel receives the access benefit. The front parcel carries the burden of allowing that use. But watch what does not change. The front owner still owns the land beneath the route. The easement gives a right to use it for the permitted purpose. It does not transfer ownership of the strip. Quick check: does using a neighbor's driveway mean you own it? No. Remember the distinction: a right to use, not ownership of the land. # Encroachment Two neighboring properties. A shed near the boundary. The question is not simply where the fence or hedge appears to be. The question is where the actual property line lies. Look at this simplified plan. The dashed line represents the boundary. Part of the shed extends across it, into the neighboring lot. That physical intrusion is an encroachment. Compare it with an easement. An easement is a legal right to use another's land. An encroachment describes something physically crossing a boundary. One does not automatically create the other or transfer ownership. A survey can help locate the intrusion; documents and applicable law help determine the rights. Quick check: a shed crosses the property line. What describes the physical condition? Encroachment. # Lien Picture a debt connected to a property. A lien is a charge or claim against property that secures payment or performance of an obligation. Follow the connection: an obligation, a claim against the property, and possible enforcement if the obligation is not met. The lien is not the same thing as ownership or possession. A specific lien attaches to identified property. A general lien may reach a debtor's property within its lawful scope. Priority depends on the kind of lien and the governing rules, not a single rule for every situation. Quick check: is a lien itself the same as owning the property? No. It is a claim securing an obligation, with rights determined by the governing law. # Encumbrance An owner can hold property that is also subject to someone else's claim or right. Encumbrance is the broader category for burdens or claims affecting property. Watch the category divide. A lien can secure a debt. An easement can give another person a limited use right. Both can affect the owner's property, but they do different jobs. A driveway easement is our example of a nonfinancial encumbrance. It allows the permitted use without automatically transferring ownership of the strip. Identify the actual right or restriction instead of assuming every encumbrance is a debt. Quick check: is every encumbrance a lien? No. A lien is one type of encumbrance. An easement is another. # Zoning Look at this neighborhood as a map of permitted uses. Zoning divides land into districts and sets public rules for use and development. One district may allow homes. Another may allow commercial uses. Development standards can also control matters such as setbacks, height, or density. The actual ordinance supplies the details. Separate public rules from private restrictions. Zoning comes from government authority. Covenants, conditions, and restrictions are private controls. A variance is specific authorized relief, not an automatic change to the whole zoning district. Quick check: are setbacks commonly an example of zoning controls? Yes. Setbacks regulate development under public authority. # Eminent domain Imagine an authorized government project acquiring private land for a public road. Eminent domain is the power behind that acquisition for public use, with just compensation. Follow the sequence from private property to the public-use taking and compensation. Condemnation is the legal process used to carry out that power. Compare this with ordinary land-use regulation. Zoning usually regulates use rather than acquiring title. Some regulations can raise a takings issue, but not every reduction in property value automatically requires compensation. Quick check: which power underlies acquiring private land for a public road? Eminent domain. Remember the power, the condemnation process, and the just-compensation requirement. # Agency At this meeting, ask one question first: whom does the agent represent? Agency is a relationship in which a principal authorizes an agent to act on the principal's behalf. Follow the authority from the principal to the agent. Duties arise from that relationship. Providing services to someone does not, by itself, mean that person is the represented client. Now separate representation from payment. A seller might pay a buyer broker's fee, but that payment alone does not make the seller the broker's client. Identify the relationship, the agreement, and the governing rules. Quick check: does the source of a fee alone determine the client? No. Representation depends on the agency relationship, not just who writes the check. # Fiduciary An agent serving a principal occupies a position of trust. A fiduciary must act for another's benefit within that relationship. Build the duty set: loyalty, lawful obedience, disclosure, confidentiality, accounting, and reasonable care. These duties guide the agent's conduct, not just the paperwork. Notice the word lawful. A client's instruction to discriminate unlawfully is not an instruction the agent must obey. Confidentiality also does not justify hiding a fact that the law requires the agent to disclose. Quick check: must an agent follow an unlawful discriminatory instruction from a client? No. Obedience applies to lawful instructions. Duties operate together within the law. # Client and customer Two people may receive help in a transaction without having the same relationship with the brokerage. A client is represented through an agency relationship. A customer may receive services without that representation. Picture the agent representing the seller while showing the property to an unrepresented buyer. In this example, the seller is the client and the buyer is a customer. Customer does not mean no protection. Duties required by law still apply. The key is to distinguish representation from assistance, and to explain the actual relationship rather than let someone assume they are represented. Quick check: does answering a buyer's question automatically establish that the agent represents the buyer? No. Identify the agency relationship and governing rules; assistance alone does not settle the question. # Listing agreement Before a buyer makes an offer, the owner may engage a brokerage through a listing agreement. This contract defines the brokerage's employment and specified services. Follow the connection from owner, through the listing contract, to brokerage. Read the duration, services, and compensation terms. Fees and services are negotiable. Keep the listing separate from the purchase contract. The listing establishes the brokerage engagement. A buyer's purchase contract establishes the sale terms. Different listing types also use different compensation triggers. Quick check: does signing a listing agreement itself transfer the owner's title to a buyer? No. The listing creates the brokerage engagement; it is not the deed conveying title. # Earnest money Follow the buyer's good-faith deposit. Earnest money is held and disbursed according to the purchase contract and applicable requirements. The deposit moves into proper custody. At closing it may be credited as the contract provides. Holding the money does not make it the broker's operating cash. Now imagine a transaction that does not close. Do not jump straight to giving the deposit to either party. The contract and lawful release procedures determine the outcome. Earnest money is also different from the consideration supporting the bargain. Quick check: does a buyer's default automatically authorize immediate payment of the deposit to the seller? No. Follow the contract and lawful disbursement requirements. # Contingency A contingency is a contract condition affecting a party's obligation to complete a transaction. An inspection or financing condition is a familiar example. Trace three checkpoints: what condition must be satisfied, when action is due, and what notice is required. These details determine how the contingency operates. An inspection concern does not automatically cancel every contract or guarantee a deposit refund. The agreement may require a timely notice, allow a response, or provide other options. Read the particular clause instead of assuming one universal result. Quick check: where do you find the steps for exercising an inspection contingency? In the contract: its language, deadlines, and notice requirements. # Void and voidable These words look similar but describe different legal situations. A void agreement has no legal effect as a contract. An unlawful purpose is one possible example. A voidable contract generally operates unless a legally protected party properly avoids it. That party may instead affirm it. The right depends on the recognized defect and applicable rules. Watch the difference: void means no effective contract; voidable means a protected party has a choice. It does not mean either party can leave whenever they want. Time limits and exceptions matter. Quick check: does voidable mean either party can always cancel for any reason? No. The relevant rule identifies the protected party and the right to avoid. # Bilateral and unilateral Ask what is exchanged to create the obligation. In a bilateral contract, one promise is exchanged for another promise. A buyer promises to pay, and a seller promises to convey, on the agreed terms. In a unilateral contract, the offer asks for an act in exchange for a promise. Think of a reward offered for returning a lost item. The requested performance is the key to acceptance. Do not count the number of people or signatures to decide the category. Compare promise for promise with promise for performance. Rules about beginning performance and revocation can depend on the circumstances and governing law. Quick check: buyer and seller exchange promises to buy and sell. Which pattern is that? Bilateral. Each side makes a promise. # Mortgage The mortgage and the note do different jobs. A mortgage pledges real property as security for an obligation. The note documents the promise to repay. Follow the direction: the borrower is the mortgagor, giving the mortgage. The lender is the mortgagee, receiving the security interest. Keep those roles separate from the repayment promise. Do not assume identical title consequences in every state. Lien-theory and title-theory systems differ, and some transactions use a deed of trust. For this concept, focus on the security function. Quick check: which document ordinarily contains the promise to repay, the mortgage or the note? The note. The mortgage is the security instrument. # Promissory note Open the promissory note. This document records the borrower's promise to repay the loan. It states terms such as the amount owed, interest rate, and payment requirements. Place the note beside the mortgage or deed of trust. The note addresses the debt and repayment. The security instrument connects the obligation to property securing it. Reading one does not replace reading the other. The documents work together, but their functions are different. Match the exam question to the document's job instead of treating all loan paperwork as one instrument. Quick check: are the promise to repay and the pledge of property the same function? No. The note documents repayment; the security instrument provides the property security. # Amortization Watch a typical fixed-rate, level-payment loan over time. Amortization means scheduled payments reduce the loan's principal balance while also paying interest. Our bars show illustrative payment proportions, not a specific loan quote. Early on, more of the payment goes to interest. As principal falls, the interest portion usually shrinks and the principal portion grows. A fully amortizing loan reaches a zero balance at maturity if paid as scheduled. A partially amortizing loan leaves a balance to be paid at the end. Do not assume every scheduled payment goes entirely toward principal. Quick check: does the entire payment ordinarily reduce principal? No. Payments generally include both principal and interest. # Loan-to-value Loan-to-value compares the loan amount with the property value used by the lender. Start with our example: a two hundred forty thousand dollar loan and a three hundred thousand dollar value. Divide loan by value: two hundred forty thousand divided by three hundred thousand equals zero point eight. Multiply by one hundred to express it as eighty percent. The blue portion shows the loan relative to that value. Use the value basis specified in the problem. In many purchase-loan settings the lender uses the lower of price or appraisal. Mortgage insurance rules depend on the loan program, not the ratio alone. Quick check: what is the loan-to-value ratio in this example? Eighty percent. # Escrow Escrow places money or documents with a third party to be held until specified conditions are met. In a real estate transaction, the escrow holder follows the applicable instructions and requirements. Watch the funds enter custody, remain held while conditions are checked, and move only when release is authorized. Custody does not make the funds the holder's own money. The word also appears in mortgage servicing. A mortgage escrow account can collect amounts for property taxes and insurance. That ongoing account is a different use from holding transaction funds pending closing. Quick check: may an escrow holder treat the buyer's deposit as personal spending money? No. The holder must follow the applicable instructions and rules. # Title and deed Title is the ownership interest. A deed is the written instrument used to convey an interest in real property. The paper and the interest are related, but they are not the same thing. Follow the transfer from grantor to grantee. The grantor conveys; the grantee receives. Effective delivery and acceptance are central to the transfer. Recording concerns public notice and priority. It is not a substitute for every other requirement of a valid conveyance. Execution requirements and legal effects depend on the governing rules. Quick check: who receives the interest conveyed by the deed, the grantor or the grantee? The grantee. Remember: title is the interest; the deed is the instrument. # Appraisal An appraisal is a professionally developed opinion of value supported by analysis. It is not simply the seller's asking price or an unsupported guess. Follow the work: gather property facts, analyze relevant market evidence, and develop a supported value opinion. The assignment and property determine the appropriate analysis. A comparative market analysis from a real estate licensee can also discuss pricing, but it is not automatically an appraisal. The products have different purposes and requirements. A C M A is not a substitute where an appraisal is required. Quick check: does discussing value make every market analysis an appraisal? No. Identify the product, its purpose, and the applicable requirements. # Capitalization rate Capitalization rate connects annual net operating income with property value. For direct capitalization, value equals net operating income divided by the capitalization rate. Use our example: thirty thousand dollars of annual net operating income divided by zero point zero six equals five hundred thousand dollars. Convert six percent to a decimal before dividing. Hold income steady and raise the rate to eight percent. The indicated value falls to three hundred seventy-five thousand dollars. Also remember that net operating income is calculated before debt service; do not subtract mortgage payments to find it. Quick check: with the same income, does a higher cap rate produce a higher indicated value? No. A higher rate produces a lower indicated value when income stays the same. # Proration Proration divides an expense or income item between parties for their respective periods of responsibility. Start with a simple stated example: a three hundred dollar charge for a thirty-day period. The problem assigns ten days to the seller and twenty days to the buyer. Three hundred divided by thirty is ten dollars per day. The seller's share is one hundred dollars; the buyer's share is two hundred dollars. The allocation is only part of the closing entry. Whether the item was paid ahead or remains unpaid affects the debit and credit. Use the stated day-count basis and closing-day convention instead of assuming one universal method. Quick check: in this example, what is the seller's ten-day share? One hundred dollars. Ten days times ten dollars per day. # Closing Closing, or settlement, brings the transaction's documents, funds, and required conditions together. Think of coordinated steps, not merely a ceremonial handover of keys. The parties review and sign the required documents. Funds and conditions are checked. Authorized disbursement, conveyance, and recording occur through the applicable closing process. Their exact order can vary. Keep each document's role clear: the deed conveys an interest, the note promises repayment, and the security instrument secures the obligation. The Closing Disclosure reports final loan terms and costs for covered transactions; it does not itself convey title. Quick check: is the Closing Disclosure the deed transferring ownership? No. Different closing documents perform different functions.