Real Estate Principles: Property Types, Rights, and Market Structures

Tangible Asset

Land and its permanent improvements.

Bundle of Rights

Intangible rights of ownership (possession, use, disposition).

Industry/Business

Activities like brokerage, development, and finance.

Real Property

Immovable (land, buildings, infrastructure).

Personal Property

Movable (furniture, cars).

Intangible Assets

Non-physical (stocks, patents, mortgages).

User Markets

For physical space (tenants, landlords). Demand and supply are location and property-type specific (heterogeneous).

Capital Markets

For investment (equity and debt).

Equity Participants

Owners/Investors (seek ROI).

Debt Participants

Lenders (seek interest).

Property Markets

Where properties themselves are bought and sold.

Public Debt

One of the four quadrants of real estate capital.

Private Debt

One of the four quadrants of real estate capital.

Public Equity

One of the four quadrants of real estate capital.

Private Equity

One of the four quadrants of real estate capital.

Property Rights

Government-enforced claims (exclusive possession, use/enjoyment, disposition).

Constitutional Protections

5th Amendment (Due Process, Takings Clause) and 14th Amendment (Due Process).

Fixture

An item that was personal property but is now real property due to attachment, adaptation, intention, or relation of the parties.

Freehold Estates

Ownership for an indefinite period.

Fee Simple Absolute

Highest form of ownership.

Life Estate

Ownership for the duration of a person's life.

Leasehold Estates

Possession for a limited time (Tenancy for Years, Periodic Tenancy, Tenancy at Will, Tenancy at Sufferance).

Easement

Right to use another's land for a specific purpose.

Appurtenant

Benefits a neighboring parcel (has Dominant and Servient estates).

In Gross

Benefits a person/entity (e.g., utility easement).

License

Revocable permission to use land.

Restrictive Covenant

Private rule limiting land use (enforced by injunction).

Lien

A charge against property as security for a debt.

Specific Lien

Attached to a specific property (e.g., mortgage, property tax lien).

General Lien

Attached to all assets of a debtor (e.g., judgment lien).

Dower/Curtesy

Historical life estate for a surviving spouse.

Elective Share

Modern statutory share of a decedent's estate.

Community Property

Property acquired during marriage is owned equally (in community property states).

Deed

The written instrument that conveys an interest in real property.

Statute of Frauds (1677)

Requires real estate contracts to be in writing.

Recording a Deed

Provides constructive notice to the public.

Essential Elements of a Valid Deed

Grantor & Grantee, Recital of Consideration, Words of Conveyance, Habendum Clause, Exceptions & Reservations Clause, Legal Description of the Land, Grantor's Signature, Delivery & Acceptance.

Covenants in a Deed

Seizin (good title), Right to Convey, Against Encumbrances, Quiet Enjoyment.

General Warranty Deed

Protects the grantee from title defects for the entire history of the property.

Special Warranty Deed

Protects the grantee only from defects that occurred during the grantor's ownership.

Bargain and Sale Deed

Implies ownership but offers no covenants.

Quitclaim Deed

Offers no covenants and conveys whatever interest the grantor has.

Voluntary Transfers

Sale, gift, patent.

Involuntary Transfers

Foreclosure, condemnation, bankruptcy, adverse possession.

Title Abstract & Opinion

Summary and attorney's opinion on the chain of title.

Title Insurance

Protects against financial loss from title defects. A one-time premium for 'lifetime' coverage.

Metes and Bounds

Uses distances, angles, and reference points.

Plat Lot and Block

Used for subdivided land (most urban property).

Government Rectangular Survey

Uses baselines, meridians, townships, and sections.

Police Power

Regulation for health, safety, and welfare (e.g., zoning, building codes).

Eminent Domain

The right to take private property for public use, with just compensation.

Taxation

The power to levy taxes.

Escheat

The state takes property when an owner dies without a will or heirs.

Kelo v. New London

Expanded 'public use' to include 'public purpose' like economic development.

Pennsylvania Coal v. Mahon

Regulation can be a 'taking' if it goes too far.

Comprehensive Plan

A community's blueprint for future growth.

Zoning

Separates land into use districts (residential, commercial, industrial) and regulates lot size, setbacks, etc.

Variance

Permission to deviate from zoning rules due to hardship.

Nonconforming Use

A pre-existing use that doesn't conform to new zoning.

Ad Valorem Tax

Based on the assessed value of the property.

Calculation of Tax Liability

(Tax Rate) x (Assessed Value) = Tax Liability.

Fixed-Rate Mortgage (FRM)

Interest rate remains constant.

Adjustable-Rate Mortgage (ARM)

Interest rate changes based on an Index Rate + Margin. Has periodic and overall interest rate caps.

Amortization

Paying off the loan over time with level payments.

Prepayment

Paying off the loan early. May have a prepayment penalty.

Acceleration Clause

Lender can demand full payment if borrower defaults.

Primary Mortgage Market

Where loans are originated (lenders).

Secondary Mortgage Market

Where loans are bought and sold (Fannie Mae, Freddie Mac, Ginnie Mae).

Conventional Loans

Not government-insured.

Conforming Loans

Meets GSE (Fannie/Freddie) standards.

Nonconforming/Jumbo Loans

Exceeds GSE loan limits.

Government-Backed Loans

Loans that are insured or guaranteed by the government.

FHA Loans

Mortgage insurance for lenders; allows low down payments (3.5%).

VA Loans

Loan guarantee for veterans; allows for 0% down.

Private Mortgage Insurance (PMI)

Required for conventional loans with LTV > 80%. Can be canceled once LTV reaches 78%.

Home Equity Loan/HELOC

A second mortgage using the home's equity.

Reverse Mortgage

Allows seniors to convert home equity into income. The loan balance increases over time.

Annual Percentage Rate (APR)

The true cost of borrowing, which includes interest and fees. Used to compare loans.

Refinancing Decision

An investment decision. Compare the benefit (monthly payment savings) to the cost (closing fees). Use net benefit analysis.

Law of Agency

Governs the relationship between a principal (client) and an agent (broker).

Agent's Fiduciary Duties (COALDS)

Confidentiality, Obedience, Accounting, Loyalty, Disclosure, Skill & Care.

Seller's Agent

Represents the seller.

Buyer's Agent

Represents the buyer.

Dual Agent

Represents both parties (requires written consent from both).

Licensing

Salespersons must work under a licensed Broker.

Exclusive Right to Sell

Broker gets paid no matter who finds the buyer.

Exclusive Agency Listing

Broker gets paid unless the owner finds the buyer.

Open Listing

Broker only gets paid if they find the buyer.

Anti-Discrimination Laws (Fair Housing)

Prohibit discrimination based on race, color, religion, sex, national origin, familial status, or handicap.

Contract for Sale

The most important document; sets price, terms, and conditions.

Requirements for a Valid Contract

Competent Parties, Mutual Assent (Offer & Acceptance), Lawful Objective, Consideration, In Writing (Statute of Frauds).

Legal vs. Equitable Title

The buyer gets equitable title when the contract is signed; legal title is transferred at closing with the deed.

Advantages of Form Contracts

Neutral, cover standard details, and are up-to-date with local laws.

Contingent Contract

Obligation to perform depends on a condition (e.g., obtaining financing, a satisfactory home inspection).

Escrow

A neutral third party holds funds and documents until closing.

Remedies for Breach of Contract

Suit for Damages, Specific Performance (forcing the sale), Liquidated Damages (keeping the earnest money deposit).

Prorations

At closing, expenses like property taxes and insurance are divided between the buyer and seller based on the closing date.

RESPA/TILA

Require the use of the CFPB's Loan Estimate (within 3 days of application) and Closing Disclosure (3 days before closing).

Industry/Profession

The business activities surrounding real estate, such as development, brokerage, and finance.

Concept & Importance (Real Estate)

This framework shows that real estate is multifaceted. You're not just dealing with dirt and bricks; you're dealing with a legal and financial system built around them. Understanding this helps you see the full scope of the industry.