GES AD1 Promotion Exam key terms

A legal obligation requiring a broker to act in the client's best interest above the broker's own, encompassing care, obedience, loyalty, disclosure, confidentiality, accounting, and reasonable skill and diligence.

A consensual arrangement in which a broker is authorized to act on behalf of a principal in a real estate transaction, creating legal duties and potential liability for the broker.

A situation where one broker represents both buyer and seller, or both landlord and tenant, in the same transaction. It requires informed written consent and limits the broker's ability to advocate for either party.

A brokerage practice in which different licensees within the same firm are assigned to represent the buyer and the seller separately, so each client receives undivided loyalty from an individual agent.

The duty to reveal information that could affect a reasonable person's decision to buy, sell, or lease, such as known structural defects, zoning changes, or pending litigation affecting the property.

A property associated with events such as a prior death, crime, or illness that may deter buyers but does not physically affect the premises. Disclosure rules vary by state and often require statutory guidance.

A written statement in which the seller reports known conditions and defects of the property, typically delivered to the buyer before or at the time of contract. Accuracy and completeness are legally significant.

A hidden physical flaw in a property that is not readily observable by a reasonable inspection and that may create liability for a seller who knew or should have known of it.

The principle that a buyer purchases at their own risk and must inspect and investigate the property. Modern disclosure statutes and fraud doctrines have substantially narrowed its application in residential sales.

A client's agreement to a brokerage arrangement or conflict of interest after receiving a clear explanation of the consequences. It is usually required in writing for dual agency and similar conflicts.

A circumstance in which a licensee's personal, financial, or familial interest could compromise the duty owed to a client, requiring disclosure and sometimes withdrawal or referral.

A listing agreement in which the broker earns a commission regardless of who procures the buyer, including the seller. It gives the broker the strongest compensation protection of the standard listing types.

A listing agreement granting one broker the right to sell the property, but the seller retains the right to sell without paying a commission if the seller personally finds the buyer.

A non-exclusive listing in which the seller may engage multiple brokers and pays a commission only to the broker who produces a ready, willing, and able buyer.

An arrangement where the broker's commission is the amount by which the sale price exceeds a seller-specified minimum. Many states prohibit or restrict it because it invites abuse of the seller.

The effort that initiates an uninterrupted chain of events leading to a completed sale. It often determines which cooperating broker is entitled to a commission in a dispute.

The division of a brokerage fee between the listing broker and the cooperating broker, and separately between the broker and the individual licensee under the firm's compensation plan.

A buyer who is prepared to purchase on the seller's terms, mentally committed to the transaction, and financially capable of completing it. Producing such a buyer can trigger the commission obligation.

An analysis of recently sold, pending, and active comparable properties used to estimate a listing or offer price. It is not an appraisal and must be presented without implying appraisal authority.

A written opinion of value prepared by a state-licensed or certified appraiser following recognized standards and used by lenders and courts. Licensees generally may not perform appraisals without credentials.

The reasonably probable use of a property that is legally permissible, physically possible, financially feasible, and maximally productive, producing the greatest value.

A valuation method that estimates value by comparing the subject property with similar recent sales and adjusting for differences in features, condition, location, and timing.

Dollar or percentage modifications applied to comparable sales to account for differences from the subject property. If the comparable is superior, its price is adjusted downward toward the subject.

The pace at which available properties are sold in a market over a given period, usually expressed as months of inventory. It indicates whether conditions favor buyers or sellers.

A balanced condition in which supply and demand are roughly equal, typically represented by about five to six months of inventory in many residential markets.

The loan amount divided by the property's appraised value or purchase price, whichever is lower. Higher ratios generally require mortgage insurance and carry greater lender risk.

Insurance protecting a lender against borrower default on loans with a high loan-to-value ratio. It is usually required above 80 percent LTV and may be cancellable under federal law.

A lender-held account into which monthly portions of property taxes and insurance are deposited so the lender can pay those obligations when due.

The lender's process of evaluating a borrower's credit, income, assets, and the collateral property to decide whether to approve a loan and on what terms.

A borrower's total monthly debt payments divided by gross monthly income. Lenders use it to gauge repayment capacity and often cap it for qualified mortgage eligibility.

A federally required form delivered to a borrower at least three business days before closing, itemizing loan terms, closing costs, and cash due at settlement.

The Real Estate Settlement Procedures Act, a federal law governing disclosure of settlement costs, escrow practices, and kickbacks or unearned fees in federally related mortgage transactions.

An unearned fee or thing of value given in exchange for referring settlement service business. Federal law prohibits such payments in federally related mortgage transactions.

Federal, state, and local statutes prohibiting discrimination in the sale, rental, and financing of housing based on protected characteristics such as race, color, religion, sex, disability, and familial status.

Directing prospective buyers or tenants toward or away from neighborhoods based on protected characteristics rather than their stated preferences. It is a prohibited discriminatory practice.

The practice of denying or limiting loans, insurance, or brokerage services in specific neighborhoods, historically based on race. It violates fair lending and fair housing laws.

A change in rules, policies, or practices, or permission to modify a dwelling, that allows a person with a disability equal opportunity to use and enjoy housing.

A written arrangement in which a licensee is engaged by a brokerage as a self-employed contractor rather than an employee, affecting tax withholding, supervision, and benefits.

The broker's legal responsibility to oversee affiliated licensees, review their transactions, provide training, and ensure compliance with licensing laws and regulations.

Professional liability coverage protecting brokers and agents against claims of negligence, mistake, or failure to perform professional duties during a transaction.