Kaplan University School of Professional and Continuing Education Kaplan University School of Professional and Continuing Education

Real Estate Terms to Know before Your Prelicensing Course Begins

Dictionary of Real Estate Terms

 

Posted by: Kaplan Real Estate Education
Published October 3, 2019

Real estate terms will be used in your prelicensing course from day one. Some will sound familiar but not mean what you think, and others will be completely new. With so much to learn once you start your required classes, why not get familiar with some of these terms beforehand? In this article, we provide a list of some of the most common real estate terms and definitions sourced from, “The Language of Real Estate 8th Edition.” Knowing these definitions should give you a good head start in your course—and maybe even impress your instructor.

Real Estate

Understanding real estate terms starts with learning the definition of real estate, which is the physical land at, above, and below the earth’s surface, including all structures. It is often used interchangeably with the term real property (to separate it from personal property), but real property has a different meaning, which we define later in this article.

Real Estate Agent

A real estate agent is a licensed salesperson working for a licensed broker, and the term is used even if the salesperson has already obtained an individual broker’s license.

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Broker

A broker acts as an intermediary between parties during a transaction. When used in real estate, it refers to a properly licensed party (individual, corporation, or partnership) who serves as a special agent to others to facilitate the sale or lease of real property for a valuable consideration or a promise of consideration. Legal language aside, most real estate brokers are independent business people who set real estate office policies, hire employees and affiliate licensees (either salesperson or broker), determine their compensation, and supervise their activities. They also usually receive part of any commission earned from the sale or purchase of real estate that happens under their management.

(This article goes into more detail about the differences between a real estate agent and broker.)

Salesperson

A real estate salesperson is a licensed individual who, for compensation or valuable consideration, is employed either directly or indirectly by a licensed real estate broker to:

  • Sell, offer to sell, buy, and offer to buy real estate
  • Negotiate the purchase, sale, or exchange of real estate
  • Lease, rent, or offer to rent any real estate
  • Negotiate leases or improvements on real estate

Broker Associate

This real estate license classification is used in some states to describe a person who has qualified as a real estate broker but still works for and is supervised by another broker, sometimes called a “broker-in-charge.” Broker associates are also called broker-salespersons, associate brokers, and affiliate brokers.

Principal

In real estate, there are three definitions of principal:

  • One of the main parties to a transaction. For example, the buyer and the seller are principals in the purchase of real property.
  • In a fiduciary relationship, a person hires a real estate broker to represent him or her in the sale of property. A fiduciary relationship is one where one person is usually entrusted to hold or manage property or money for another.
  • The original or capital sum of money borrowed in a real estate mortgage or loan. Interest is paid on the principal.

Exam—Licensing

In all states, anyone who wants to earn a real estate license must take a written exam and demonstrate a reasonable knowledge of general real property laws and principles, documents, and state licensing laws. Usually, salespeople and brokers have separate exams. Specific requirements vary from state to state. You can find details and qualifications for each state from the appropriate state licensing officials. Licensing exams are also required for state-certified or licensed real estate appraisers.

License Laws

Enacted by the states, District of Columbia, and some Canadian provinces, these laws grant the authority to license and regulate the activities of real estate brokers, salespeople, and appraisers. The general purposes of license laws are to:

  • Protect the public from dishonest or incompetent real estate practitioners
  • Prescribe certain standards and qualifications for licensing
  • Raise the standards of the real estate profession

Certain details of the laws vary from state to state, but the main provisions are similar.

Real Estate Commission/Department/Regulator

These state governmental agencies create rules and regulations to protect the general public involved in real estate transactions, grant licenses to real estate brokers and salespeople, and suspend or revoke licenses for cause. They have different names in each state, but real estate commission and department are the most common.

Real Property

Real property is defined as the earth’s surface, the air above, and the ground below, as well as all appurtenances, which include:

  • Improvements: Items permanently attached to the land, such as buildings, walkways, landscaping, structures, and more
  • Rights: Air, water, and mineral rights
  • Interests: Legal ownership
  • Fixtures: Items that were once personal property but have been permanently attached to an improvement

Personal Property

In real estate terms, personal property is something that is tangible and movable, such as cars, furniture, machinery, computers, and so on. In other words, it is not classified as real property. A bill of sale transfers personal property from an owner to a buyer; however, a deed transfers real property.

Listing Agreement

A listing agreement is a written employment agreement between a property owner and a real estate broker that gives the broker authority to find a buyer or a tenant for certain real property. They are personal service contracts and can’t be assigned to another broker. However, a broker can delegate the task of procuring buyers for the property to a salesperson or associate broker in the broker’s office.

Buyer Representation Agreement

This is an agreement between a broker and buyer that the broker will represent the buyer in a statutory or fiduciary capacity. The broker or broker’s salesperson agrees to put the buyer’s interest above their own, and the buyer agrees that the broker or salesperson will be the sole representative. The broker is paid by the buyer, or through the seller or listing broker at closing, provided all parties consent.

Realtor

Often confused with real estate agent, “realtor” specifically refers to a member of the National Association of REALTORS® (NAR), a real estate organization with more than one million members, all of whom represent all branches of the real estate industry. Active brokers admitted to membership in state and local NAR boards are allowed to use the REALTOR® trademark.

Multiple Listing Service (MLS)

In a multiple listing service (MLS), member brokers pool their listings and offer cooperation and compensation to other member brokers. The result is a sizable inventory of properties for sale that members of the MLS organization can offer to prospective buyers. Usually, but not always, the MLS is operated by a local association of REALTORS®.

Title

In real estate terms, a title is the right to or ownership of land and the evidence of the right to an estate. In other words, if someone owns real property or owns the rights to it, that person is said to have title to it.

Deed

A deed is a written document in which a property owner as “grantor” conveys and transfers ownership interest in real property to a “grantee.” There are all kinds of deeds. The most common type in real estate is a warranty deed. In a warranty deed, the grantor fully warrants that there is a good, clear title to the property.

Get Ready to Learn More Real Estate Terms

By familiarizing yourself with these real estate terms, you’ve taken a great first step toward preparing yourself to earn your license. If you haven’t signed up for a prelicensing course yet, check out our prelicensing packages.