Texas Real Estate BK-OCL-JACOBUS_TXRE_PRINCIPLES_13E-190026-FM.indd 1 29/10/19 3:45 PM BK-OCL-JACOBUS_TXRE_PRINCIPLES_13E-190026-FM.indd 2 29/10/19 3:45 PM Texas Real Estate Thirteenth Edition BK-OCL-JACOBUS_TXRE_PRINCIPLES_13E-190026-FM.indd 3 29/10/19 3:45 PM Texas Real Estate, Thirteenth Edition © 2019 OnCourse Learning Charles J. Jacobus ALL RIGHTS RESERVED. No part of this work covered by the copyright herein may be reproduced, transmitted, stored, or used in any form or by Executive Editor: Sara Glassmeyer any means graphic, electronic, or mechanical, including but not limited to photocopying, recording, scanning, digitizing, taping, web distribution, Product Specialist: Deborah Miller information networks, or information storage and retrieval systems, except Project Manager: Elizabeth King, Cenveo Publisher Services as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the publisher. Typesetting: Cenveo Publisher Services Cover Designer: Nicholas Kindt For product information and technology assistance, contact us at OnCourse Learning and Sales Support, 1-855-733-7239. Cover Image: benedek/Getty Images For permission to use material from this text or product, please contact [email protected]. Library of Congress Control Number: 2019944785 ISBN-13: 978-1-62980-234-3 ISBN-10: 1-62980-234-4 OnCourse Learning 20225 Water Tower Blvd, 4th Floor Brookfield, WI 53045 USA Printed in the United States of America 1 2 3 4 5 6 24 23 22 21 20 19 BK-OCL-JACOBUS_TXRE_PRINCIPLES_13E-190026-FM.indd 4 29/10/19 5:13 PM BRIEF CONTENTS Preface xxxi 1 Introduction to Modern Real Estate Practices 1 2 Real Property 24 3 Concepts and Responsibilities of Home Ownership 31 4 Real Estate Brokerage and Law of Agency 56 5 Fair Housing Laws 86 6 Ethics of Practice as a License Holder 103 7 Texas Real Estate License Act 115 8 Legal Descriptions 141 9 Real Estate Contracts 154 10 Interests In Real Estate 204 11 How Ownership is Held: Home and Business 229 12 Listing Agreements 238 13 Real Estate Math 251 14 Real Estate Appraisal 273 15 Mortgage Theory and Law 306 16 Real Estate Financing Principles 345 1 7 Control of Land Use 415 18 Specializations 428 19 Real Estate Investments 437 20 Leases 455 21 Property Management 467 22 Estates, Transfers, and Titles 475 23 Closing Procedures and Closing the Real Estate Transaction 507 24 Condominiums, Cooperatives, PUDs, and Timeshares 530 Appendix A: Rules of the Texas Real Estate Commission: Chapter Canons of Professional Ethics and Conduct for Real Estate License Holders 550 Appendix B: Real Estate Math Review 552 Appendix C: Practice Exam 1 559 Appendix D: Practice Exam 2 567 Appendix E: Answer Key 577 Glossary 584 Index 607 v BK-OCL-JACOBUS_TXRE_PRINCIPLES_13E-190026-FM.indd 5 29/10/19 3:45 PM BK-OCL-JACOBUS_TXRE_PRINCIPLES_13E-190026-FM.indd 6 29/10/19 3:45 PM CONTENTS Preface xxxi 1 Introduction to Modern Real Estate Practices 1 How to Read This Book 1 Transaction Overview 2 Real Estate: A Business of Many Specializations 2 Residential Brokerage 2 Commercial Brokerage 4 Industrial Brokerage 4 Farm Brokerage 4 Property Management 5 Apartment Locators 5 Real Estate Appraising 6 Government Service 6 Land Development 6 Urban Planning 6 Mortgage Financing 7 Securities and Syndications 7 Consulting 7 Title Insurance 7 Full-Time Investor 8 Research and Education 8 Education Committee 8 The Real Estate Market: Characteristics of Real Estate 9 Physical Characteristics of Land 9 Economic Characteristics of Land 10 Real Estate Law 13 Historical Background of the Courts 13 Courts of Law 13 Courts of Equity 13 The Current Civil Court Systems 14 Court Procedure 16 vii BK-OCL-JACOBUS_TXRE_PRINCIPLES_13E-190026-FM.indd 7 29/10/19 3:45 PM viii Contents Professional Organizations 17 National Association of REALTORS® (NAR) 18 Texas REALTORS® (TXR) 18 REALTOR® and NAR 18 Realtist and NAREB 19 Real Estate: The Business of Value 19 Effect of Economic Base on Property Values 20 Demand for Housing 20 The Purpose of Licensing Laws: What a Licensee Can and Cannot Do 21 The Texas Real Estate Commission and Licensing Requirements 21 Commission Membership 22 Commissioners’ Duties 22 2 Real Property 24 Key Terms 24 Land, Real Estate, and Real Property 24 Land 24 Improvements 24 Personal Property 25 Fixtures 25 Tests of a Fixture 26 Prior Liens Against Fixtures 26 Trade Fixtures 27 Plants, Trees, and Crops 27 Appurtenances 27 Ownership of Waterways 28 Groundwater 28 Conflicting Claims 28 State Rights 29 State Water Agencies 29 Review Questions 29 3 Concepts and Responsibilities of Home Ownership 31 Key Terms 31 Types of Home Ownership 31 Tenants in Common 32 Wording of the Conveyance 32 BK-OCL-JACOBUS_TXRE_PRINCIPLES_13E-190026-FM.indd 8 29/10/19 3:45 PM Contents ix No Right of Survivorship 33 Joint Tenancy 33 Four Unities 33 Right of Survivorship 34 “Poor Man’s Will” 35 Tenancy by the Entirety 36 Community Property 37 Community Property, Separate Property 37 Community Property Right of Survivorship 38 Tax Benefits for Homeowners 38 Calculating Gain on the Sale 38 Income Tax Exclusion on Sale 39 Capital Gains 39 Installment Sales 41 Property Tax and Interest Deductions 41 Interest Deduction Limitations 42 Foreign Investment in Real Property Tax Act 42 Below-Market Interest 43 Agent’s Liability for Tax Advice 43 Homeowners Insurance 44 Property Insurance 44 Property Damage 44 Modern Fire Coverage 44 Endorsements 45 Public Liability 45 Homeowner Policies 45 Policy Formats 45 Properties Covered 46 Perils Covered 46 Tenant’s Policy 46 Condominium Policy 47 Real Property Loss 47 Liability Coverage 48 Medical Payments 48 Endorsements 49 New for Old 49 Additional Concepts 50 Lender Requirements 50 BK-OCL-JACOBUS_TXRE_PRINCIPLES_13E-190026-FM.indd 9 29/10/19 3:45 PM x Contents Guaranteed Replacement Cost 50 Flood Insurance 51 Landlord Policies 51 Policy Cancellation 51 Policy Suspension 52 Policy Takeovers 52 Homebuyer’s Insurance 53 CLUE Reports 53 Review Questions 54 4 Real Estate Brokerage and Law of Agency 56 Key Terms 56 The Law of Agency 56 Agency 56 Establishing the Agent’s Authority 57 Agency Positions and Disclosure 58 Buyer Representation 58 Dual Agency 59 Intermediaries 60 The Procedure 61 Brokerage and Nature of the Brokerage Business 63 Listing Brokers 63 Ready, Willing, and Able 63 Buyer’s Brokers 64 License Act Requirements 64 Procuring Cause 65 Terminating the Employment Contract 66 Mutual Agreement 67 Abandonment 67 Bargain Brokers 67 Flat-Fee Brokers 68 Discount Broker 68 Variable Rate Commissions 68 Fiduciary Duties 68 Faithful Performance 68 Loyalty to Principal 69 Protecting the Owner’s Interest 70 Reasonable Care 71 BK-OCL-JACOBUS_TXRE_PRINCIPLES_13E-190026-FM.indd 10 29/10/19 3:45 PM