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273 Cards in this Set

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Real Property (aka Real Estate)

consists of land, improvements attached to the land, benefits, rights, and ownership interests that go with the land.




Ex) Fee simple, easement, lease, life estate...




Mineral, air and water rights are all considered part of real property.




Intangible and tangible

Appurtenance

Something that is outside of the property itself, but is considered as part of the property and adds to its greater enjoyment




is often used to describe rights, privileges or improvements that belong to and pass with the land.




example: easement or right-of-way


the house, a cement swimming pool, fence, outbuildings, shed

Improvements

additions to the land such as buildings, streets sewers, landscaping that tend to increase value


(man made)

Waste (the opposite of improvement)

is the legal term for property abuse, disuse, distruction or damage (often found in a lease, mortgage or life estate contract) which allows the injured party to attempt to terminate the contract and sue the possessor for damages

Land

begins at the center of the earth and extends above the earth. Therefore, we have subsurface, surface and air rights.




legal definitions often distinguish land and water

Mineral rights

The privilege of gaining income from the sale of oil, gas and other resources from the land.




These may or may not be included in the sale of real property




Mineral Deed


Mineral Lease

Air Rights

The rights to use, occupy or control the air space above a property. Air rights can be sold or leased. They can also be transferred by easement as in elevated highways. Air rights can be taxed separately from the land.

Water rights aka Riparian rights or Ususfructuary rights


Water can be used for domestic reasons. The flow cannot be interrupted and the water cannot be contaminated. The state has the right to refuse to grant water rights. One reason for this is a scarcity or shortage of water. The terms riparian, littoral and appropriative all refer to water rights.



Riparian Rights


related: Reparian Owner

Rights pertaining to the use of water on, under or adjacent to one's land. May be qualified to avoid nuisance and pollution. Recognized in most eastern states but rarely in western ones - see Usufructuary rights

Littoral vs Reparian Land

Non-navigable waterfront property

landowners may own to the middle of a body of water.

For navigable waterfront property

landowners own to the vegetation line. Building piers will not extend your property line.




The state owns all navigable water.




Generally, all water in rivers, creeks or streams belongs to the state.

Prior Appropriation

is a theory of water law based on the idea that “first in time is first in right.”


The first landowner to claim water rights has the exclusive right to take all the water for specific beneficial uses. Subsequent owners of nearby properties cannot claim water rights.

Land has three physical characteristics:

1. Nonhomogeneity - no two pieces are exactly alike. A more current term is uniqueness.Each piece of land is unique.


2. Immobility - land cannot be moved - a person must go to the land.


3. Indestructibility - durability - it will always be there.

Land has four economic characteristics:

1. Scarcity


2. Modification


3. Fixity


4. Situs

1. Scarcity

in short supply where demand is great – (a lot in Manhattan is more valuable than a lot in upstate New York.) Scarcity is usually based on geographic considerations.

2. Modification

- land use and value are greatly influenced by improvements made by man to land and to surrounding parcels of land.

3. Fixity -

- land and buildings and other improvements to land are considered fixed or permanent investments – they are not liquid assets.

4. Situs -

- location preference, or location from an economic rather than a geographic standpoint. (This can change over time as people change.)

Personalty aka Chattel or Personal Property

is a right or interest in something that is not fixed to the land and includes anything not classified as real property (realty)




Ownership is transferred by a Bill of Sale. When personal property is included in a sale, an addendum may be attached to the contract to describe the details of the transaction.




mortgage on a house or commercial building ispersonal property of the lending institution it is chattel real

Fixture

Improvements or personalty attached to the land as to become part of the real estate




A fixture is never freestanding.




The process of attaching may also be called annexation.




Tests to determine if it is a fixture: was it intended to remain? how was it affixed? is it expected to be a part of a tenant's business? is it essential to the building?

The word “installed”

often indicates a permanent attachment.

Annexation (accession)

1. The process of attaching. Personal property becomes a fixture, depending in part by the method of annexation


2. Also the process by which an incorporated city increases its boundaries to include a specific area (dictated by state and local law, usually involves public ballot in area to be annexed)

“severed”, or severance.

The process of real property becoming personal will be described


Separating

Tests of a fixture

1) method of attachment how is it affixed?


2) adaptation to the property (custom built as opposed to stock items) is it essential to the building? was it expected to be a part of the tenant's business?


3) and the intention of the parties attaching the fixture i.e. was it intended to remain?





Trade Fixtures

are fixtures installed by a tenant in order to carry out a business, and they may always be removed from leased property prior to the termination of the lease.


If trade fixtures are not removed prior to the termination of the lease, they become real property and pass to the landlord.

Accession

If trade fixtures are not removed prior to the termination of the lease, they become real property and pass to the landlord.




Acquiring fixtures in this way is called ______________________.




Accession and annexation are sometimes used interchangeably.




Acquiring property by alluvial deposits (soil deposited by water or wind legally increasing the size of the land accretion)





A legal description

is created and determined by a surveyor. It is a necessary part of a contract or conveyance (deed, listing, sales contract, etc.) in order for that document to be enforceable.


It is one of such certainty and accuracy that one can go to the ground and identify the land.

The following methods of land description are legal:

1) Metes and bounds (POB, monuments, landmarks)


2) Lot, block, and subdivision descriptions (uses monuments, landmarks,


4) Rectangular Survey System, also known as the Government Survey System,

Metes and bounds (land description)

Metes-and-bounds descriptions were used in the original 13 colonies before the rectangular survey system was developed. A metes-and-boundsdescription uses lengths and angles of boundaries starting at the point of beginning (POB). A mete is a boundary line and bounds is the area enclosed by the metes — hence, the name. Starting at the POB, the length of each boundary is described and the angle that it forms with the previous boundary. This continues to the point of end (POE), which is identical to the point of beginning, since all properties must have enclosed boundaries.Of course, for a metes and bounds description to be legally sufficient, the location of the POB must be specified, and is usually specified by amonument (aka landmark), which can be a large artificial or natural object or other stable structure, including rocks, trees, streams, railroads, roads, and intersections that are recorded by surveyors to locate property. Nowadays, many monuments are iron pins or concrete posts installed by surveyors or by the U.S. Corp of Engineers. The actual placement of the monuments is more important than the lengths and angles specified in the legal description, since the measured lengths and angles have meaning only in reference to the monuments and, additionally, marking the beginning and the end with a monument guarantees that the area will be closed.

Lot, block, and subdivision descriptions



descriptions are derived from a recorded map, called a plat. This is the most common description used in residential listing agreements.

Monuments

are permanent surveyors’ markers. A property is described as being a certain distance and direction from the marker. Monuments are rarely used alone to describe property. Monuments are often the starting point for a metes and bounds description, and can be essential to the accuracy of that description. Monuments can be man-made - an iron pipe, or natural - a stand of timber, an old oak tree, etc.

The Rectangular Survey System (aka Rectangular Survey System and Tier-and-Range System)

Was specified by Congress in 1785 to mark large tracts of land that the United States received in its early years, including the Northwest Territory


takes into consideration base lines, and meridians, townships and sections.




Townships and Sections are located in Ranges.

* One township contains 36 sections.
* Each section contains 640 acres, which is 1 square mile.
* Each acre contains 43,560 square feet.

Principal meridians and base lines partition the land into quadrangles, which are squares of land with each side measuring 24 miles. These quadrangles are further subdivided in 16 townships, with each side of a township measuring 6 miles and covering an area of 36 square miles. Townships are further subdivided into 36 1-square mile sections, with each section equal to 640 acres.

Vertical land descriptions

are used for air rights. The sale of units in multi-story buildings would include vertical descriptions.

A street address

is not a legal description.

A plat

is a map of a town, section or subdivision. Used in government rectangular survey of land description

Plot or "Plot plan"

is a map or layout of improvements on a property site. The property site is also called a lot or parcel.

Physical descriptions of property

specify land and building size, and types of construction.

Land and building area

are measured by square feet, acres, square miles, townships, and sections.

A mile

is 5280 feet long....

Construction

can be on-site - built from the ground up, or off site -




prefabricated buildings often called modules or modular construction.

Types of construction

include masonry, brick, stucco, or framed with cement board or siding.

Property descriptions

should also include utility information, availability, hookups, and water and sewer information.

An encumbrance

is a limitation on your rights.




It may also be a cloud on the title.




Examples include liens, reservations, encroachments, leases, easements, deed restrictions, licenses, adverse possession, and lis pendens.

The legal method of removing an encumbrance

is to release it, or get a release.

A lien

When the mortgage is recorded, if it is the first recorded claim, it will be the first priority lien




A lien is a charge against property as security for a debt.

A voluntary lien

A debt that the property owner agrees to have recorded.


Filing or recording the mortgage creates a lien.

Mortgage

A written instrument that creates a lien on real estate as security for the payment of a specific debt.




Not effective or enforceable until it is recorded.




When the mortgage is recorded, if it is the first recorded claim, it will be the first priority lien.

Involuntary lien

A lien placed on a property without owner's consent i.e. tax liens, special assessments, etc.

Statutory law

always takes precedence over common law.


Examples of statutory liens include federal tax liens, ad valorem (according to value) tax liens, judgment liens, and mechanics and materialmens’ (m&m) liens. (Note: An m&m lien can be placed on a property when materials have been delivered or work has begun.)

Equitable lien aka Equitable Mortgage (common law)

A legal document that encumbers the property but is not technically a mortgage due to some legal error - however is likely to be enforced due to the intention

Liens

can be specific or general i.e. a lien against all of the subject's property or just a specific property

A specific lien

attaches to one or more specific or named properties (Example: a mortgage).

A general lien

attaches to all the property of the debtor, not exempt from forced sale (Example: a judgment or IRS lien).

Recording

the act of entering in a book of public records instruments affecting the title to real property




is required for a judgment to become a lien.

Writ of execution

A writ of execution (also known as an execution) is a court order granted to put in force a judgment of possession obtained by a plaintiff from a court. When issuing a writ of execution, a court typically will order a sheriff or other similar official to take possession of property owned by a judgment debtor.

A reservation

imposed by the grantor, withholds title to a part of the land described in the deed (Example: an easement or mineral rights).

Encroachment

When a structure or improvement overlaps onto another’s property it is an ________________.




Encroachments must be disclosed. The determination of an encroachment requires a survey.

doctrine of laches

A listing agent discloses an encroachment, a buyer’s agent recommends a survey. In the case of an encroachment, the injured party has the right to demand the removal of the encroachment. A failure to assert that right in a timely manner can lead to the loss of that right. In law, this is called __________________.

An easement

allows limited use or enjoyment of another’s land. It is a right in land and should be created in writing and recorded. It is use without possession.

Easements

can be created by express (written or verbal) or implied (by actions or evidence) grant, agreement, reservation, limitation or prescription, necessity, or condemnation.


asements can be terminated by merger (acquiring the adjacent property), release, or abandonment.

Condemnation

1. Government taking private property for public use with consideration to the owner under eminent domain


2. declaring a structure unfit for use

Dominant Estate or Dominant Tenament

If you have two parcels of land with a road across one parcel, the owner who crosses over the other’s land is dominant. The dominant estate would be landlocked without the easement, in most cases.




The dominant estate benefits from the easement

Servient Estate or Servient Tenanment

The property with the road that provides access to the dominant estate




Servient estate is encumbered.

Easement Appurtenant

An easement that benefits one parcel of land, known as the dominant tenement, to the detriment of another parcel of land, known as the servient tenement


It goes with the land, and the landowner owns the easement.

An Easement in Gross

An easement that attaches a particular right to an individual rather than to the property itself. The easement in gross is often considered irrevocable for the life of the individual, but can be revoked if the individual sells the property that grants him or her that easement. For example, a homeowner may have an easement in gross with a neighbor allowing the homeowner to use a path through the neighbor's woods to reach the property. If the homeowner then sells the property, he or she cannot pass the easement in gross to the next property owner. It does not go with the land.

A party wall

A wall built along the line separating two properties. Can also be considered a type of easement. It is shared by owners on both sides. Both owners have rights of ownership and responsibilities for maintenance.

A license

is permission to do a particular act upon the land or property of another. A license is similar to an easement, but of much more limited duration. It is not a right in land. It is often given verbally and easily revoked.

Adverse Possession (squatter’s rights)

occurs when property is acquired from the rightful owner through the Statute Of Limitations. Occupancy must be hostile, visible, actual, continuous, and distinct for the statutory period. Required occupancy time differs from state to state, and can be a minimum of 3 years and a maximum of 25 years depending on circumstances.


It is 10 years in Texas.

Tacking

Adding on to a time period


- may be used to reach the required number of years for adverse possession

Lis pendens

"SUIT PENDING"


is a recorded notice filed against a specific property, meaning that some form of lawsuit has been filed, but not yet resolved in court. A lis pendens may become the responsibility of a new owner, if not settled prior to closing.

An estate

is an interest in real property

A freehold estate

is ownership.




A freehold estate is of indeterminate length (it has no termination date),


**think FEE SIMPLE or LIFE ESTATE

Bundle of Rights Theory

All the legal rights that attach to the ownership of real property including but not limited to the right to sell, lease, encumber, use, enjoy, exclude, will to heirs, bequeath, occupy, etc.

Fee Simple or Fee Simple Absolute

Ownership with the greatest bundle of rights - the best type of ownership - is called _______.




The owner has all the available rights to the property and can always pass it to his or her heirs.

non-freehold estate

(lease-hold) which has a termination date.

Defeasible Fee or Conditional Fee (also called “qualified fee” or “even qualified defeasible fee)



is ownership with conditions or terms, which if violated, could cause the ownership interest to be defeated or terminated. When the ownership is defeated, it reverts, or goes back, to the original grantor or the grantor’s heirs.

life estate

is ownership for the duration of someone’s life.




The owner is called the life tenant.


The life tenant has all the rights and duties of an owner, except the right to choose who will get the property upon his or her death.




If the life tenant leases the property and then dies, the lease expires



Remainderman

The person who gets the property after the life estate is ended is the ____________________.




The remainderman gets fee simple.

life estate pur autre vie

If the life estate is based on the life of someone other than the life tenant, this is called a ______________________

Information on Life tenant

The life tenant has all the rights and duties of an owner, except the right to choose who will get the property upon his or her death. If the life tenant leases the property and then dies, the lease expires. If the life tenant sells his or her interest in the property, this has no effect on the remainderman. In other words, the buyer of the life estate would have to vacate the property upon the death of life tenant and would not receive a refund of the purchase price.

life estate with reversion.

If a life estate is set up so that at the end of the life estate the property goes back to the original owner, this is called a __________________.

Estate in severalty or sole ownership or severally

Ownership by one person is called _________. Corporations orPartnerships often hold title this way. If only one signature is required to sell a piece of property,then there is only one owner.

Tenancy in common

Ownership by two or more without rights of survivorship is called tenancy in common. This is the most common type of joint ownership. It is an estate of inheritance. No right of survivorship

A condominium

is multi-unit housing with individual ownership of apartments and tenancy in common ownership of the common areas.


Upon your death, your share goes to your heirs, at probate. Unequal shares are permitted. You may sell your share without the permission of the other owners of any other instructions, the title company will always assume tenancy in commonwith equal shares.

Joint tenancy.



Ownership by two or more with rights of survivorship is called _________________.


Upon your death, your share goes to surviving co-owners, immediately


This is sometimes called a “poor man’s will” as it eliminates the need for a will. Joint tenancy overrides a will. This is not an estate of inheritance.

To prevent any accidental cases of joint tenancy, there are four unities required for this type of ownership

– time, title, interest and possession.


All owners acquire their interest at the same time, from the same legal document. Their shares are equal and undivided interest and right of survivorship - each owns a percentage of the whole, rather than a piece of the whole.

Partition

is a procedure to divide the co-tenant’s interests in real property. It can be a court or voluntary action. Partition would divide the property into pieces and end the joint tenancy.

trust

If a property is held by one party for the benefit of another then that property is held in ______.




An agreement whereby property is transferred to a trusted third party (trustee) by a grantor (trustor). The trustee holds the property for the benefit of another (beneficiary).

syndicate.

When two or more parties join together to create and operate a real estate investment we call this a ______________.



Ex: Partnership, Limited Partnership, Corporation, Subchapter S Corporation




Related: Syndicator is a person who sells an investment in shares or units



Tenancy by the entirety

is a specific type of joint tenancy where the co-owners are husband and wife. One advantage of this type of ownership is that it avoids probate. (This is also true of joint tenancy.) No one can sell or lease without consent of the other

tenants

can indicate owners, as in joint tenants and tenants in common

Time Share .

- part ownership of a property coupled with the right to exclusive use of it for a specified number of days per year, without the responsibility of full ownership. This can be called “interval ownership.” It is tenancy in common ownership. This is most often used for resort or vacation properties.

Cooperative or “Co-op” –

– land and buildings are owned by a corporation. Tenants own shares in the corporation, and have a proprietary lease on their units. The corporation pays for the mortgage, property taxes and maintenance of the building. The residents have a personal property interest in their units and the common areas.

Condominiums

– laws referred to as horizontal property acts are generally the base for condos. Each unit is a separate legal ownership and each resident arranges his or her own financing. Property taxes are assessed on each unit separately. Taxes are based on the assessed value of the unit, which is based on its market value. It is not necessary for the taxing authority to assess and tax the common areas separately. Monthly condominium fees have nothing to do with taxes for the common areas. Condominium managers work for resident owners and their main responsibility is to preserve property values. Condominium residents are required to observe by-laws.

Zoning

is the most common example of police power. Zoning regulations are local laws to control land use. Zoning can include master planning. A master plan is a comprehensive guideline for the long-term physical development of a particular area. Mixed land use is designed to meet the needs of future residents. Master planning is a process and zoning can be used to implement the plan.

a non-conforming use.

A change in zoning may result in__________.


This use was permissible under former rules, but new rules prohibit it. A non-conforming use is allowed to continue as it is considered grandfathered. The non-conforming use is automatic, no hearing or application process is required. A non-conforming use cannot be altered or expanded without permission, but it can be sold to a party who wishes to continue the existing use. If the property is destroyed, the non-conforming use may not be rebuilt without permission. (Note – there is no violation of zoning here.)

variance

If your property violates zoning, you may request a ____________. A variance may also be requestedprior to construction. Adding on to the front of a building would usually require a variance. Theprocess to obtain a variance is to apply to the zoning committee. A hearing will be scheduledand all neighborhood property owners will be invited to the hearing to voice any objections theymight have to the variance. A variance goes with the property when the property is sold.

A conditional use or special use



Condition Use Permit (CUP) is a variance granted to the owner to allow use otherwise forbidden by zoning restrictions in an area - can be granted by a zoning committee or deed restrictions (HOA). This use would benefit the neighborhood, like a school within a residential neighborhood.

Type of conditional use -

is a PUD – a planned unit development. A PUD zone allows for a higher population density with houses clustered together, leaving more green area open for parks and recreation. A non-profit community association is organized to provide maintenance of the common areas. An extra tax may apply to property owners in a PUD.

permission

A property owner may be given ______________.


to use his property in a particular way prohibited by zoning or HOA rules. This permission belongs to the person, not the property, and zx. In order for zoning rules to be changed, public hearings must be held but the ultimate decision rests with the zoning committee.

A buffer zone

is an area of land separating one land use from another, such as residential from commercial. The buffer zone is located between incompatible uses. The buffer zone is a transitional use. Example: single family, apartments, retail. The apartments are the buffer zone.

Police power

is the power given to a municipality to regulate and control the character and use of property for the health, safety and general welfare of the public.


provides the government with the right to establish building codes. Specific construction requirements are set by building codes (plumbing, electrical, etc.) and zoning

Environmental Impact Statement (EIS)

For government projects, an __________________


will be done. An ____ is done to determine the effect of a project on the community. The report includes a detailed description of the proposed project.

Police power gives the government the right

to regulate special land types for the public good including coastal properties, floodplains and wetlands. It also allows for the regulation of environmental hazards on land.

Eminent Domain

is the right of the government to take private property for public use through the action of condemnation. This is the only time the government must compensate property owners.

inverse condemnation

When an individual forces the government to buy his or her property, this is called _________________. It is done when a government activity has taken or diminished an interest in the property

Taxation – Property taxes

are the highest priority lien on real property. Property taxes are ad valorem (according to the value) taxes,


Unpaid taxes create an automatic lien on property. At foreclosure, property taxes are always paid first.

Assessed value

is the value of your property for tax purposes. The tax rate times the assessed value will tell you the yearly taxes. Lists of assessed values for all the properties in a taxing district are found in the assessment rolls. These can be used for comparison purposes.

Tax rates

are often expressed as dollars per hundred dollar of valuation. In that case, a tax rate of $2.50 means the property owner will pay $2.50 of tax for every $100 of taxable value. In some cases a mill rate is used. This is a tax rate per thousand. Therefore, a rate of 25 mills means the property owner will pay $25 dollars of tax for every $1000 of taxable value.




Millage rate $1 per $1000 of assessed value One mill = 1/10th of a cent

property sales tax

Some states have a ___________, usually paid by the seller of real property at closing.It can be called a “transfer tax” or a “deed tax.” It can be expressed as mills or as a rate perhundred.

a special assessment tax

If the local government is providing a benefit to a limited number of property owners, suchas curbs or sidewalks in a neighborhood, _______________ may be levied against onlythose property owners who benefit from the improvement. In a real estate sale with an unpaidbalance on a special assessment, the special assessment is usually paid by the seller, but couldbe prorated at closing.

municipal improvement district

If property is located in a ____________ the property owner will receive atax bill, similar to a special assessment, until the improvement is paid for, or the improvementdistrict designation is removed. In other words, this can be temporary or permanent.

Local governments

_______________ use property taxes to cover their expenses because real property is an asset that cannot be hidden.

Escheat

Property reverts to the state when someone dies leaving no will and no heirs or kindred. ______________ can also be used if property is abandoned. The purpose of ___________ is to ensure that no land remains unowned.

CC&Rs - deed covenants, conditions and restrictions. CC&R’s

The most common private controls of land use are ___________ are commonly referred to as Deed Restrictions, or Deed Covenants. HOA(Home Owner Association) regulations are like deed restrictions, but usually apply to condominium complexes.




Prevents people from altering their individual properties in unattractive and inharmonious ways - adversely affecting the group

Deed Restrictions

are imposed to control land use, development and methods and materials for construction. Style and appearance requirements can also be enforced (garages facing the rear of the property etc.).

Declaration of Restrictions

Deed Restrictions are found in a recorded document called a _______________. They are imposed by the grantor. Violation can result in civil court action brought by other property owners who are bound by the same deed restrictions. The court will issue an injunction to enforce the restrictions. In some cases, deed restrictions and zoning can both exist. If this is true, whichever is most restrictive or limiting must be obeyed. Deed restrictions are permanent in most cases, and do not expire. They control present and future owners and tenants.

alienation

to convey or transfer title and possession of property involuntarily or voluntarily




by signing a deed, there is an alienation of property

Conveyance

Voluntary alienation usually involves a written document called a _________________.


The medium by which an interest in real property is transferred. Ownershipis most often transferred by deed, patent, power of attorney, or will.

Involuntary alienation

________ usually happens in court as in foreclosure, bankruptcy, condemnation, escheat, adverse possession, reversion of defeasible fee, partition, or inheritance without a will. __________ can also occur from natural causes including accretion, avulsion, erosion, and reliction.


Requirements for a Valid Deed

* Grantor and Grantee -
* Consideration
* Words of conveyance

* Execution - the grantor must sign the deed.
* Delivery
* Legal description of the property

(Requirements for a Valid Deed)


Grantor and Grantee in a valid deed

must be competent

(Requirements for a Valid Deed)


Consideration -

legal consideration can be “good” or “valuable. “Love and affection” is an example of good consideration. Money is valuable consideration.




required for contracts

(Requirements for a Valid Deed)


Words of conveyance

the granting clause - a written statement that indicates transfer of some interest in real property from one person to another.

(Requirements for a Valid Deed)


Execution

the grantor must sign the deed

(Requirements for a Valid Deed)


Delivery

title does not pass until the deed is delivered and accepted. Delivery can be into escrow. Delivery must be made during the life of the grantor.




possessor dies and a deed conveying the land to niece is found but since it was never delivered the deed was not considered valid and the land did not pass to the niece

Deeds

need not be dated, signed by the grantee, or recorded.

General Warranty Deed

- guarantees and protects against defects. It offers the buyer the best protection.

Special Warranty Deed

– guarantees title only against defects arising under the grantor’s period of ownership. Defects existing before that time are not covered.

Bargain and Sale Deed

– a deed with only one covenant. (Trustees, executors, sheriffs, and officers of the court use this.) This deed does not provide any warranties about the condition of the title, but only promises the grantor has the right to convey the title.

Quitclaim Deed -

- a deed that gives NO warranties or guarantees and offers the least protection. It is used to clear a cloud on the title or to cure a defect in title.

Deeds often contain covenants and warranties to the buyer. The five most common are:

1. The covenant of seizin – the grantor claims to be the owner with the right to sell the property2. The covenant of quiet enjoyment – the grantor promises the new owner will not be disturbedwith claims against the property3. The covenant of further assurance – the grantor is responsible for any documentation neededto ensure title is transferred to the grantee4. The covenant against encumbrances – the grantor promises that all encumbrances have beendisclosed5. The covenant of warranty forever – the grantor’s promises have no expiration date

1. The covenant of seizin

– the grantor claims to be the owner with the right to sell the property

2. The covenant of quiet enjoyment

the grantor promises the new owner will not be disturbed with claims against the property

3. The covenant of further assurance

- the grantor is responsible for any documentation needed to ensure title is transferred to the grantee

4. The covenant against encumbrances

– the grantor promises that all encumbrances have been disclosed

5. The covenant of warranty forever

– the grantor’s promises have no expiration date

patent.

When the government transfers title to an individual it uses a ____________.

dedication.

When a developer turns over the streets in a subdivision to the local government, this is called ________. This is accomplished by recording the plat plan.

Real property

can also be transferred to a new owner as part of the estate of the deceased.

testator.

A party who makes a will is the _________.

testate.

One who has a valid will is _____________

executor.

The person named in the will to settle the estate is called the

Title by Devise.

Inheritance by will gives ____________.


The property is the devise and the heir is the devisee.

intestate.

One without a will is _________. The court will appoint an administrator to settle the estate of anintestate person. The heirs will inherit real property according to the Laws of Descent and will haveTitle by Descent.

probate.

The judicial process to prove or confirm a will, or to settle the estate of a party who dies intestate is called ____________.

Involuntary Alienation

occurs when the court orders partition of the property.

Foreclosure

is the legal process instituted by a trustee, lien holder or creditor, after a debtor’s default on his or her payments. In other words, the lender begins the foreclosure. Any excess money left over from the forced sale is given to the debtor. In the event of a shortage, the lender may sue the borrower for a Deficiency Judgment. Foreclosure under the Deed of Trust ends when the trustee delivers Trustee’s Deed to the buyer.

deed in lieu of foreclosure

An alternative to foreclosure is ________. this is sometimes called “friendly foreclosure” or “voluntary deed.” The lender accepts a deed from the borrower. The lender must also accept any junior liens on the property. This would be the fastest way for the lender to get title to the property.

Redemption –

At any time up to the moment of the foreclosure, the borrower has the right to step in and pay what is owed and reclaim property forfeited due to mortgage default. This is his or her equity of redemption, or equitable redemption. A lender would almost always prefer equity of redemption to deed in lieu of foreclosure.

notice of foreclosure by certified mail 21 days before the foreclosure sale.

There are legal guidelines for notices to be provided in the event of a foreclosure. The lender mustsend the____________ There is norequirement that the borrower receive the notice, only that the lender sends it. The notice of foreclosuremust be posted at the door of the county courthouse and filed in the County Clerk’s office.With a traditional mortgage (not a Deed of Trust) the foreclosure will be recorded as a lis pendens.

power of sale clause.

With a traditional mortgage foreclosure is judicial, but with a Deed of Trust it is non-judicial,due to the ________.

Short Sale –

A sale of secured real property that produces less money than is owed the lender – the lender releases its lien so property can be sold to the new purchaser. The lender often requires that brokers adjust their commissions on these transactions. The lender saves the delay and expense of foreclosure. A short sale will result in a negative note on the credit report of the defaulting borrower and a loss of as much as 200 points in credit score, but is better than a foreclosure.

Real-estate owned or REO is a class of property owned by a lender—typically a bank, governmentagency, or government loan insurer

is a class of property owned by a lender—typically a bank, government agency, or government loan insurer—after an unsuccessful sale at a foreclosure auction. A foreclosing beneficiary will typically set the opening bid at a foreclosure auction for at least the outstanding loan amount. If there are no bidders that are interested, then the beneficiary will legally repossess the property. This is commonly the case when the amount owed on the home is higher than the current market value of this foreclosure property, such as with a high loan-to-value mortgage following a real estate bubble. As soon as the beneficiary repossesses the property, it is listed on their books as REO.

RECORDING TITLE •

* Recording is not a requirement of a valid deed.
* Recording gives constructive notice of ownership. This is notice to the world and protectsagainst fraudulent sale. Taking possession of property also gives constructive notice ofownership.
* Recording is always done in the county where the property is located.
* A document must be acknowledged before it can be recorded. It must also be in English.
* An acknowledgment is a declaration to a notary authorized to take oaths that the signature isa free and voluntary act. An acknowledgment verifies the signature.

Title

is both the ownership of something and the legal evidence of that ownership – a deed.

Types of real estate title

include clear or good title, marketable title, and equitable title. Clear or good title can be transferred to another.

Marketable title

is title that a reasonable buyer would accept as clear.

Equitable title

is an interest created by a legal document, such as that held by a buyer with a signedsales contract, who has not yet gone to closing. The buyer has an equitable estate, or equitable title.

A title insurance policy

agrees to compensate or reimburse the insured against any losses sustained as a result of defects in the title, other than those exceptions listed in the policy. Protection is for forged deeds, illegal acts of trustees, guardians, or attorneys, false claims of ownership and human error in copying and recording. The loss or destruction of records is also covered. A standard title policy will not provide protection for survey or boundary problems. Additional coverage can be purchased for these issues.

The title insurance company

will defend the title at its own expense, as well as pay any claims against the property, if the title proves to be defective. Title insurance will not pay for defects known to the buyer prior to the policy being issued.

Title insurance

must compensate owners for defects missed by the title company in its search process.

Premiums

are paid one time. A new policy must be issued each time the property changesownership, or is refinanced.

Title policies

may contain a subrogation clause. This clause allows the title company to assume the rights of a buyer with respect to any claim against a seller, if the title company has made payments to that buyer to satisfy that claim.

Title Policies

Unlike other types of insurance, protection is for the past not the future.

Abstract of Title.

A title search is done. This is an examination of public records to compile an _______. An ______is a complete history. Included in the abstract is a chain of title - a list of all owners from the first until today.

Attorney

A title company_______ views the abstract and renders an opinion of title.

A title report

(snapshot of title at the present time) is prepared. This obligates the title insurance company to issue a title policy when any curative requirements have been met. Payment of premium will result in the policy being issued. The owner’s policy will protect the buyer up to the purchase price. The lender’s or mortgagee’s policy will protect the lender up to the outstanding loan balance. (The lender’s coverage declines as the debt is satisfied.) The policy is received at closing

The State Board of Insurance

sets premiums for Title policies in many states, including Texas.

“cloud on the title”.

Any claim or encumbrance that may superficially injure the title to a property or cast doubt on the title’s validity is called a




Usually, property cannot be conveyed (transferred to another) as long as the cloud exists.

Property cannot be conveyed (transferred to another) as long as the cloud exists. How can one fix.

A quitclaim deed can sometimes be used to fix the problem. Ifno one is available to sign a quitclaim, then a court procedure to cure or quiet the cloud can be used.This is called an “action to quiet title” or a quiet title suit.

Market value

The most significant type of value forreal estate licensees is _________. It is defined as the price a willing seller will sell for,and the price a willing buyer will pay, when neither is acting under exceptional pressure. _______ is also defined as the most probable price._______is most commonly associated with theprice a party pays for a property.

There are four basic characteristics of value:

(DUST)


* Demand – there must be a demand for the item and the purchasing power to acquire it
* Utility – the item must be needed or wanted
* Scarcity – there must be a limited supply
* Transferability – the item must be able to be sold – ownership rights must be transferable

An appraisal

is an opinion. It is an estimate of value. The accuracy of the appraisal depends on the integrity and competency of the appraiser and the availability of the needed information.

Appraisers

use principles of value to help them arrive at their final opinion.

(principles of value)


Highest and Best Use

- the legal use that gives the greatest return in money and/or amenities.(Example: commercial parking is more valuable than residential parking)

(principles of value)


Principle of Substitution

- sets an upper limit on price. Maximum value of a property is set by the cost of acquiring a similar substitute property. This principle is used to demonstrate the need to price correctly. An overpriced property will not sell.

(principles of value)


Principle of Conformity -

states that maximum value is found when there is a reasonable degree ofsimilarity or sameness.

(principles of value)


Principle of Increasing and Decreasing Returns -

invest in property whenever each dollar investedwill return a dollar or more of increased value and stop when each dollar invested returns less thana dollar in value. Do not over-improve a property.

(principles of value)


Principle of Contribution -

-the value of a part is determined by its contribution to the total value ofthe property rather than by its cost.

(principles of value)


The Principle of Regression

the presence of lower-valued properties in the neighborhood leadsto a decline in the value of your property. Conversely, the presence of higher-valued properties willincrease the value of your property and this is called progression.

(principles of value)


The Principle of Competition –

an increase in competition will result in decreased profits for currentproviders. Competition lowers prices.

(principles of value)


The Principle of Change –

change is constant and is reflected in values. Appraisers must makeadjustments for changes in market conditions, and for time. An appraisal is only considered to be goodfor six months.

(principles of value)


The Principle of Anticipation –

purchase price is affected by the expectation of future appeal andbenefits

(principles of value)


The Principle of Balance –

mixed land use should result in maximum value for all propertiesinvolved (master-planned communities demonstrate this principle).

There are three basic approaches to appraisal:

1) market data or sales comparison,


2) income or capitalization method, and


3) replacement or reproduction cost approach.

1. The market data approach

is used primarily in residential appraisals. It involves comparisons with known sales in the same area. An appraiser should have 3-5 sales no more than six months old. In using this approach, the appraiser will add to the value of comparables when the subject property has more amenities, and deduct from the comparables when the subject property has less. In choosing comparables, the best choice will be the one with the least number of adjustments, regardless of cost.

2) The income approach














is used for income-producing properties. The conversion of an income stream into an indication of value is known as capitalization.
Generally, if a property has rent, then use the income approach. 



























is used for income-producing properties. The conversion of an income stream into an indication of value is known as capitalization.


Generally, if a property has rent, then use the income approach.



3. The cost approach

is used for unique properties, (churches or government buildings).It is also used when there are no comparables for a particular property.


Land Value + Building Reproduction Cost - Depreciation = Value-


OR


Land Value + Replacement Cost - Depreciation = Value

Reproduction cost

would be the cost to exactly duplicate a building. ____ is the costto build a building of similar size and usefulness using today’s methods and materials.When using the cost approach, the appraiser uses the market data approach to place a value onthe land, because the value of the land is heavily dependent on location.The cost approach is most accurate for new construction.

The appraiser considers three types of depreciation in the cost approach

1) physical deterioration


2) functional obsolescence and


3) economic or external obsolescence.

1. Physical deterioration

is ordinary wear and tear. It is curable. This has the least impact on the appraisal because all buildings have it (chipped paint, worn flooring).

2. Functional obsolescence

is brought about by factors in the property. It is often or mostly curable (inferior materials to cut costs, curb appeal, not enough baths/bedrooms).

3. Economic obsolescence

is a loss of value due to outside factors. This is also called externalobsolescence, and is incurable (zoning, air pollution, noise, traffic, jobs, etc.) It is also calledenvironmental obsolescence.

In addition to the principles of value, an appraiser

must be aware of the other factors that can affect value including, market cycles, political actions, economic forces, physical or environmental forces and sociological forces.

assemblage or plottage.

Combining several parcels of land into one is called ________. The result is usuallyincreased usability and value of land. Although a______ mean the same thing, assemblageis more often used to describe the action while plottage is used to describe the increased usabilityand price.

The 5 steps in the appraisal process are:

1. State the purpose of the appraisal.


2. Collect and verify information about the property.


3. Estimate value using all three approaches, or as many approaches as needed to get the best result.


4. Reconcile the estimates by determining weighted averages. This step is necessary because the third step will result in up to three different values. Reconciliation completes the process of determining an exact number rather than a range of value.


5. Prepare the report. It may be oral, in a letter, on a form, or a narrative report

Although there is no USPAP (Uniform Standards of Professional Appraisal Practice) requirement for the use of a particular form for an appraisal,

lenders will require the Fannie Mae appraisal formif the purpose of the appraisal is to secure residential financing.

A Comparative Market Analysis (CMA)

is a tool used by licensees to help sellers determine a realistic price for their property – a _______ compares a subject property to current listings, recent sales, and even expired listings of unsold properties. The information from expired listings is the least important part of the____. The result of a ______ is a range of value for a property rather than an exact price. It is not an appraisal. This is also called a competitive market analysis.

Emblements

Crops that are personal property of the tenant; they have the right to harvest the crop despite owner of the property at the time the crop is ready for harvest

Meander Line

The middle of a water way such as a creek. This is a form of Metesand Bounds boundary line.

Fixed Monuments (Fixed Objects)

Sometimes boundaries are marked by rods in the groundon each of the 4 corners of the parcel.

Permanent Reference Marker (PRM)

a Monuments; Permanent point of future reference. This is theitem where we look for the Point of Beginning (POB) can be rods placed in ground; remember that the description must go from POB to POB

Townships

part of Rectangular (Government) Survey System; The township “checkerboard” is made up of units of 6 miles by 6 miles i.e. a township is made up of 36 sections

Section

townships consist of 36 sections; a section is 1sq mi 640 acres

Servient Tenement Easements

When an easement crosses an owner’s property he/she willlose complete use of the property. Others are allowed to use the owner’s property. The owner hasbe servient to the needs of the user; known as a servient tenement. This is an encumbrance to theowner of the property and remains with the land when sold.

Dominant Tenement Easement

The person using the easement (such as a neighbor) is thedominant tenement. This easement right goes with the land (annexed) when the user/dominantsells their property and is an appurtenance to the users land.

Easement by Necessity

Landlocked needs easement can go to court to request one

Easement by prescription

Easement user uses easement for 5 to 20 years can now go to court and gain permanent easement, clear continuous use without permission

Easement in Gross

A utility gains a personal interest in crossing an owner’s land withtelephone lines or a pipeline is installed. This is NOT a dominant estate. The utility doesnot have the right to cross the land; only install lines that cross the land.

License

“permission” by an owner to use his/her property; is an encumberence that can be revoked at any time

Feudal Interest

land owner such as government gives person permission to use land (cattle on government land)

Allodial Interest

American land characteristic; land ownership without government ownership

Limitations of Ownership


Police powers

Construction and use by an owner of his/her land is subject togovernment limitations such as Zoning, Building (construction) Codes, ConstructionFees, Subdivision Approval, etc.

Limitations of Ownership


Taxation

Payment of property tax and road assessments for the needs of government

Limitations of Ownership


Eminent Domain

The right of government to condemnation of private property for theneeds of the public good. Government must pay the owner for seizing (condemnation) theproperty.

Limitations of Ownership


Escheats

Acquiring abandoned property. When property is abandoned or an owner dieswith no apparent heirs, the property is acquired by the State. Heirs can come forwardwithin a 10 year period and claim their right after an escheats action by the State.

Freehold Estate

A person has the use of property for a lifetime or forever for the heirs.

Fee Simple Estate

This is a freehold estate and allows the ownership interest to bepassed on to heirs; the key word being “fee”.

Defeasible Fee Estate

The right has an ending specification. It could be an event thatwill occur in the future or an uncertain event that could occur. EXAMPLE: Heirs have toexist in order for a defeasible fee estate to exist. No heirs … no fee estate

Life Estates

The key word is “life”. An estate is granted for the life of the specified individualand so it is a freehold estate. You cannot grant a life estate to a corporation because it does notdie. The estate terminates at the death of the specified person. The person granting a life estatecan determine the estate rights at the death of the specified person.

Reversionary Interest

The person granting the life estate (grantor) can specify that thepossession right reverts back to the grantor at the life estate holder’s death.

Remainder Interest

The person granting the life estate (grantor) can specify that thepossession right reverts to a 3rd party such as a charity at the death of the life estateholder.

Curtsey

Wife dies, the husband gets all the inheritable rights of the deceased wife.

Dower

The husband dies, the wife gets all the inheritable rights of the deceasedhusband.

Law of Descent and Distribution

Each spouse is able to pass their share of interest toanyone of their choosing.

Inchoate

The power to pass on interest is not determined/perfected in advance. aka intestate

Life Tenant

A holder of a life estate has a freehold estate; possession for life. They cannotpass on the estate to their heirs because it is not a Fee Estate. However, the holder can possess,lease, receive income, mortgage, and sell their life estate. The value is limited because it all endsat the death of the life estate holder.

Tenancy in Common

Each owner has the 4 unities. Each owner can sell their interest,convey it to heirs, mortgage their interest, and transfer by gift without permission fromthe other owners. Owners can “partition” their interest into separated plots and own theseplots in severalty; one owner.

Joint Ownership

When an owner dies, the surviving owner(s) get the deceased ownersinterest; the word “Joint” disallows an owner to pass their interest on to their heirs.

Tenancy by Entirety

Husband and wife ownership (only). When a spouse dies, thesurviving spouse gets 100% ownership; the “entire” parcel.

Community Property

Husband and wife ownership (only). Each spouse has 50%ownership of acquired property during the marriage. When one dies, they can pass theirinterest to anyone of their choosing.

Commercial Ownership

no individual ownership

Trust Ownership

A legal trust owns the property and is managed by a “trustee”; usually alawyer. The people who receive use and/or rental income from the property are the beneficiariesof the trust.

Commercial Business

A legally registered business such as a corporation, LLC, Sub Scorporation, and partnership own the property. It is not a fee estate because a business does notdie.

General Partnership

Each owner participate and are personally liable for losses andlien obligations

Limited Partnership

There must be at least one general partner who is responsible.The other partners can be “limited partners” not personally responsible for losses and lienobligations.

Corporation

Ownership in severalty. A corporation is a single entity. If it owns real estate it isusually in severalty; one owner. Owners (stockholders) are not personally liable. They aregenerally limited to losing the money they paid for the corporate stock.

Syndicate

A partnership of two or more parties to create and operate a real estate investment.

Joint Venture

A “temporary” partnership put together by construction companies to build areal estate project. When the project is completed, the joint venture is disbanded.

REIT

Real Estate Investment Trust - Ownership is investors who buy shares of the trust. Thetrust takes the investor’s money and buys real estate; sometimes called “all cash real estate”. Theinvestors purchase for accumulation OR for income received by tenants paying rent.

Leasehold Estate


Tenancy for Years

This is a lease with a defined termination date. It has nothing to dowith years.

Periodic Tenancy

This is a lease that has no specified ending date. It has nothing to dowith occupancy on a periodic basis. A month to month lease agreement is aperiodic tenancy.

Tenancy at Will

Both the tenant and the landlord have the ability to (at any time)terminate the lease with proper notification. Also terminated at the death of the tenant orlandlord.

Tenancy at Sufferance


(holdover tenancy)

The tenant retains possession without theconsent of the landlord. EXAMPLE: Tenant stops paying rent and remains in the unit.The landlord suffers.

Commercial Leases


Gross Lease

The tenant business pays a fixed amount of rent and that is it. Thelandlord has to pay all expenses of the building such as utilities, property tax, repairs, etc.

Net Lease

The tenant pays rent and some of the expenses of the building. EXAMPLE:Net Net Net Lease would have the tenant paying property tax, building insurance, repairsand maintenance. The landlord would have very few building costs to pay.

Percentage Lease

The tenant pays a low flat rent or a percentage of “gross sales”whichever is greater. This is usually a shopping mall lease agreement.

Graduated Lease

The lease amount is low in the beginning and then increase at statedamounts in a graduated scale stated in the lease. This is usually offered to brand newbusinesses just getting started.

Index Lease

For large businesses that lease space, they might want the lease based onthe measurement indexes of the economy. EXAMPLE: Rent goes up or down based onthe “cost-of-living” index by the government.

Ownership and "Bundle of Rights"

Owners that hold title to property possess what are called their “Bundle of Rights”.These rights are automatically part of the ownership characteristics. An owner can give awaysome of these rights. The government can take away some of these rights under police power.The courts with legal action can take away some of these rights in a lawsuit.

Control of Use


"Bundle of Rights"

The right to sell, give away, exclude others from use (notrespassing), to occupy/possess, and use the land.




Zoning can restrict this


Toxic waste dump status could affect this

Right to Build

To build, develop, or expand the real estate.


can be controlled by building codes and zoning

Right to Finance

Most people purchase with financing from a lender.


Place a lien on the property such as a mortgage or deed of trust

Right to Grant

Owners can grant an easement, license, place covenants, andabandon property




A. Covenants – An owner can place a covenant on the land that future ownersmust abide by. Example: No cutting of old growth timberB. Abandonment – An owner can just leave and let government intervene the useof the property

Right to Pass

The right to pass on their interest to heirs.




A. Inheritable – An owner can dictate (or not) who is receive the land:i. By will – Name the entity to receive the landii. No will – Probate court will name the entity

A lis pendens

Lis pendens is a general lien places on the property of a defendant by the judge/court in alawsuit. Once the lawsuit is settled the general lien is dropped.

Laches

delaying a transaction by a seller or buyer

Tenants in common

Ownership can be uneven. Co-owners have the 4 unities which include the right to sell theirinterest and convey to heirs.

Which of the following title designations would allow two owners to receive unevenincome from commercial property?


A. *Tenants in common


B. Joint and survivor


C. Severalty


D. Tenants by entirety

Tenants in common can be established with any percentage of ownership and income. Severaltyis a single owner. Tenants by entirety and Joint and Survivor are strictly on a 50/50 basis.

Non-Contiguous easement appurtenant

Since Larry and Helens lot does not touch the lot a block away, it is a non-contiguous lot and thenon-contiguous easement. If they touched, it would be a contiguous lot and easement. The 28easement is not necessary to gain entrance to their lot and so this is not a necessity. Easement ingross would be a utility crossing their land.

Tenancy by entirety

Tenancy by entirety is strictly for a married couple vs. joint tenancy which does not have to be married couples

attachment

legal seizure of property to force payment of a debt (mechanics lien)

Seller's disclosure of lead-based paint requires the broker to keep a copy of the form for:

6 month

If the buyer's lender has objections to problems with the seller's property, the seller:

has 15 days to make corrections

The listing agreement:

Is a personal aspect contract


II. between the seller and broker


III. must be in writing




all 3

Broker Barbara is showing a home that she has listed with her firm. Broker Barbara is functioning as:

dual agent

In practicing professional real estate, you owe a fiduciary responsibility to:

all involved parties

A legal name to a contract is:

name appearing on birth record

(Seller's Expenses)

Released of existing liens, including prepayment penalties and recording fees; release of Seller's loan liability; tax statements or certificates; preparation of deed; one-half of Seller's loan liability; tax statements or certificates; preparation of deed; one-half of escrow fee; and other expenses payable by Seller under this contract.

(Buyer's Expenses)

a) Loan origination, discount, buy-down, and commitment fees (Loan Fees).b) Appraisal fees; loan application fees; credit reports; preparation of loan documents; interest on the notes from date of disbursement to one month prior to dates of first monthly payments; recording fees; copies of easements and restrictions; mortgagee title policy with endorsements required by lender; loan-related inspection fees; photos, amortization schedules, one-half of escrow fee; transfer fee for cooperative or association membership for utility services; all prepaid items, including required premiums for flood and hazard insurance, reserve deposits for insurance, ad valorem taxes and special governmental assessments; final compliance inspection; courier fee, repair inspection, underwriting fee and wire transfer, expenses incident to any loan, and other expenses payable by Buyer under this contract.

Accessories

would be included with the purchase. Accessory items are those NOT ATTACHED or not built into the house being purchased. These are moveable items but necessary to live within the house.