Free TN Real Estate Exam Flashcards

The most complete form of real property ownership - indefinite duration, freely transferable and inheritable, with no conditions attached. Contrast with a fee simple defeasible, which can automatically terminate if a stated condition is violated.

Gives someone the right to possess and use property only for the duration of a measuring life (usually their own). At that person's death, ownership either passes to a named remainderman or reverts back to the original grantor (a reversion) - the deed language determines which.

Joint tenancy requires equal shares and the four unities (time, title, interest, possession) and carries the right of survivorship - a deceased owner's share passes automatically to the surviving co-owners, bypassing probate. Tenancy in common allows unequal shares acquired at different times, and each owner's interest passes to their heirs, not the co-owners.

Police power lets government regulate land use for health/safety (zoning, building codes) without compensation. Eminent domain lets government force a sale for public use, but requires just compensation. Taxation creates a property tax lien if unpaid. Escheat returns property to the state when an owner dies with no will and no heirs.

Metes-and-bounds traces a property's boundary using directions, distances, and monuments starting and ending at a defined point of beginning - common for irregular parcels. Lot-and-block simply references a lot number on a recorded subdivision plat map, which is faster to read but depends on that plat being on file.

Offer and acceptance (mutual assent), consideration (something of value exchanged), legal capacity of the parties, a legal purpose, and - for real estate specifically - a written form. Missing any element makes the agreement void or unenforceable, not just voidable.

A legal requirement that contracts for the sale or long-term lease of real property must be in writing and signed to be enforceable in court. An oral agreement to sell a house, no matter how sincere, generally cannot be enforced.

A bilateral contract is a mutual exchange of promises - both parties are obligated the moment they agree (a typical purchase agreement). A unilateral contract is one party's promise in exchange for the other party's performance, not a promise - an open listing is unilateral because the seller only pays if a specific act (finding a buyer) actually happens.

A void contract has no legal effect from the start, as if it never existed (e.g., a contract for an illegal purpose). A voidable contract is valid and enforceable unless the party with the legal right to cancel it - often due to fraud, misrepresentation, or lack of capacity - chooses to void it.

Gives a buyer the right, but not the obligation, to purchase a property at a set price within a set time window, in exchange for option money paid to the seller. Unlike a standard purchase contract, only the seller is bound to perform if the buyer exercises the option.

A seller's (listing) agent owes fiduciary duties exclusively to the seller and must negotiate the best price/terms for them. A buyer's agent owes those same fiduciary duties exclusively to the buyer. Neither may favor the other side's interests once representation is established.

Dual agency is ONE licensee representing both the buyer and seller in the same transaction - it requires informed written consent because full fiduciary duty to both sides is impossible. Designated agency assigns two different licensees from the same firm, one to each party, so each client still gets undivided representation.

A subagent works for the listing broker (often through cooperating brokerages via MLS) but owes fiduciary duties to the SELLER, not to the buyer they're physically working with - a frequent exam trap since subagents are commonly mistaken for buyer's agents.

Obedience (follow lawful client instructions), Loyalty (put the client's interests first), Disclosure (reveal material facts to the client), Confidentiality, Accounting (properly handle client funds and property), and Reasonable care/skill. These duties are owed only to a client, not to an unrepresented customer.

A client has signed an agency agreement and is owed full fiduciary duties (loyalty, confidentiality, disclosure). A customer has no agency agreement and is owed only honesty and fair dealing - a licensee still may not lie to or defraud a customer, but does not advocate for their interests.

Agency ends through: completion of the deal, expiration of the listing term, mutual agreement to cancel, revocation by the principal, renunciation by the agent, destruction of the property, or death/incapacity of either party. Terminating early without cause can expose a party to breach-of-contract liability.

Sales comparison approach adjusts recent comparable sales for differences - the primary method for residential appraisals. Cost approach estimates land value plus the cost to rebuild the structure minus depreciation - best for new or unique properties. Income approach capitalizes net operating income - used mainly for income-producing property.

A Comparative Market Analysis (CMA) is an agent-prepared price estimate used for marketing and pricing strategy - it is NOT a legal opinion of value. An appraisal must be performed by a licensed/certified appraiser and is required by lenders before funding a mortgage.

Conventional loans aren't government-backed and typically need stronger credit/higher down payments. FHA loans are government-insured with low down payments but require mortgage insurance. VA loans serve eligible veterans/service members with no down payment required. USDA loans target low-income buyers in eligible rural areas, also with no down payment.

An ARM's interest rate is fixed for an initial period, then adjusts periodically based on a market index plus a margin - payments can rise (or fall) after the fixed period ends. Contrast with a fixed-rate mortgage, where the rate and payment never change over the loan term.

A federal law requiring lenders to disclose the true cost of credit - including the Annual Percentage Rate (APR), finance charges, and total payments - in a standardized format so borrowers can compare loan offers on an apples-to-apples basis.

A federal law requiring lenders to disclose closing/settlement costs to borrowers and strictly prohibiting kickbacks or unearned referral fees between settlement service providers (e.g., a lender paying an agent for referring business).

A general warranty deed guarantees clear title for the ENTIRE history of the property - the strongest buyer protection. A special warranty deed only guarantees against defects arising during the CURRENT owner's period of ownership. A quitclaim deed makes no guarantees at all - it transfers only whatever interest the grantor happens to hold, if any.

A one-time-premium policy that protects against financial loss from title defects (undisclosed liens, forgery, missing heirs) that existed before the policy date but weren't discovered until later. An owner's policy protects the buyer; a lender's policy protects the mortgage holder.

Filing a deed at the county recorder's office creates constructive (legal) notice to the world of the new ownership, establishing priority against later claims. Recording is not what transfers title - a valid, delivered, and accepted deed does that - but skipping it puts the buyer at risk against later purchasers or lien holders.

A material fact is any information that could reasonably influence a buyer's decision or the price they'd pay (a known foundation crack, a title defect) and MUST be disclosed. Puffery is subjective sales opinion ('charming,' 'move-in ready') that isn't a factual claim and doesn't need to be substantiated.

Federal law requires sellers/landlords of housing built BEFORE 1978 to disclose known lead-based paint hazards, provide an EPA pamphlet, and give buyers a 10-day opportunity to test for lead before being bound to the contract. Housing built in 1978 or later is exempt because lead paint was banned that year.

Seven classes are protected under the federal Fair Housing Act: race, color, national origin, religion, sex, familial status, and disability. Many states and cities add further protected classes (e.g., sexual orientation, source of income) on top of the federal floor.

The illegal practice of directing homebuyers toward or away from particular neighborhoods based on a protected class (e.g., only showing certain buyers homes in certain zip codes). It's a Fair Housing Act violation even if the agent believes they're being helpful.

In a gross lease, the landlord pays the property's operating expenses (taxes, insurance, maintenance) out of the rent collected. In a net lease, the tenant pays some or all of those expenses in addition to base rent. A percentage lease (common in retail) charges base rent plus a percentage of the tenant's sales.

LTV = Loan Amount divided by Appraised Value (or purchase price, whichever is lower), expressed as a percentage. A higher LTV means a smaller down payment and higher lender risk - LTVs above roughly 80% typically trigger a private mortgage insurance (PMI) requirement on conventional loans.

The four components of a typical monthly mortgage payment: Principal (reduces loan balance), Interest (cost of borrowing), Taxes (property tax, often escrowed), and Insurance (hazard insurance, sometimes PMI). Lenders use PITI, not just principal and interest, to qualify borrowers.

Commission splits divide a transaction's total commission among the listing broker, buyer's broker, and their agents per their agreements - always calculate the full commission first, then apply the splits in order. Proration divides recurring costs (property taxes, HOA dues) between buyer and seller based on the exact closing date, so each party pays only for the days they actually own the property.

TREC (Tennessee Real Estate Commission) is the state agency that writes and enforces license law, issues licenses, and disciplines licensees. PSI is the private testing vendor TREC contracts with to develop and administer the affiliate broker exam - PSI doesn't set licensing requirements, it just delivers the test.

An affiliate broker is Tennessee's entry-level license - the affiliate must work under the supervision of a principal broker and cannot operate independently. A principal broker supervises affiliate brokers, holds the firm's trust/escrow account, and bears ultimate compliance responsibility for the office.

60 hours of 'Basic Principles of Real Estate' must be completed BEFORE sitting the PSI exam. After passing both exam portions, candidates complete a 30-hour 'Course for New Affiliates' before TREC issues the license - 90 hours total across the two courses.

You need 56 of 80 correct on the national portion and 28 of 40 correct on the state portion - 70% on each section independently. If you fail, PSI lets you reschedule the next day after a first failure, but requires a 30-day wait between attempts starting with the second failure on the same portion.

Every real estate advertisement placed by a Tennessee affiliate broker must include the name of the firm/principal broker they're affiliated with - an ad that omits the supervising brokerage violates TREC advertising rules, regardless of the medium (print, online, yard sign).

A licensee team may market under a team name, but the team name can never substitute for or be confused with the actual brokerage name - the licensed firm name must still appear in the advertisement alongside the team branding.

An advertisement is 'blind' - and prohibited - when it fails to identify the sponsoring broker at all, making it look like the ad comes from a private seller or an unlicensed source. Tennessee requires the responsible brokerage to be identifiable in every ad.

Compensation must flow through the affiliate broker's principal broker/firm - an affiliate broker cannot accept a commission check or referral fee directly from a client, another agent, or a settlement provider. This keeps all compensation traceable through the firm's trust/operating accounts.

When an affiliate broker moves to a new supervising firm, the change must be reported to TREC - the licensee cannot legally practice under the new firm, or continue practicing at all, until TREC's records reflect the new affiliation.

Brokerages must retain complete transaction records for 3 years after the transaction closes (or the listing expires), including offers, counteroffers, disclosures, and closing documents - not just the final signed contract.

Client funds (earnest money, security deposits) must be deposited promptly and kept in a dedicated trust account, completely separate from the brokerage's operating funds. Commingling trust money with company funds - even briefly - is one of the most serious violations TREC investigates.

TREC can require a brokerage to produce its transaction and trust account records on short notice - within 24 hours - as part of a routine audit or complaint investigation. A complete, well-organized transaction file for every deal makes this inspection straightforward instead of a scramble.

Tennessee licensees must disclose which party they represent (or that they represent no one) at the first substantive contact with a consumer - before any meaningful discussion of the consumer's real estate needs, motivations, or finances takes place.

Beyond the verbal disclosure at first substantive contact, Tennessee requires written confirmation of the agency relationship before the parties execute a contract - so all sides have a documented record of who represents whom by the time they're signing binding terms.

When a buyer and seller in the same deal are both represented by the same firm, Tennessee allows the firm to name two different licensees - one 'designated' to each party - so each client still receives full, undivided representation instead of the firm defaulting to dual agency.

If a single Tennessee licensee represents both the buyer and seller in one transaction, that licensee must obtain informed WRITTEN consent from both parties, because dual agency inherently limits the full fiduciary duties (especially undivided loyalty) each side would otherwise receive.

A consumer or another licensee can file a complaint with TREC, which can trigger a formal investigation and, if warranted, a disciplinary hearing. Improper listing agreements, agency-disclosure failures, and escrow mishandling are common complaint triggers that can lead to license suspension or revocation.