Principles of Real Estate Test 1--Kenneth Roskelley--mississippi state

how is real estate used in 3 fundamental ways?

1. most common use is to identify the tangible assets of land and buildings

2. used to denote the "bundle" of rights with ownership and use of physical assets

3. used to refer to the industry or business activities related to the acquisition, operation, and disposition of the physical assets

raw land

larger area of land that does not include any improvements

when can real estate be viewed as a "bundle" of rights?

services or benefits that real estate provides its users

ex. real estate provides owners with the rights to shelter, security, and privacy and location that facilitates business or residential activities

what percent of the value of the US housing stock is financed with home mortgage debt?

6%

real estate values derive from the interaction of 3 different sectors:

1. local user markets (real world)

2. capital markets (financial world)

3. property markets

capital market categories

equity and debt interests

equity: "owners of the real estate"

-receive a return on their investment through rent and price appreciation

debt: "lenders"

-hold claims to the interest on borrowed funds that are seccure by individuals, businesses, property

how state government effects real estate?

statewide building codes

disclosure laws and fair housing laws

government land use controls

-protection of environmentally sensitive land

provision of public services

ways national government effects real estate?

income tax policy

housing subsidy programs

federal flood insurance programs

federal financing reporting and disclosure requirements

consumer protection laws

endangered species

in what market are rental rates for commercial real estate assets determined?

local user (space) markets

property values are determined largely in the local property market

characteristics of real estate markets?

Heterogeneous products

Immobile products

Localized markets

Segmented markets

Privately negotiated deals with high transaction costs

investment-grade properties

AKA

institutional-grade real estate

segment of the property market targeted by institutional investors

such as: pension funds, publicly traded real estate companies, and real estate private equity funds

4 ways real estate markets differ from the market for publicly traded stocks?

1. real estate is heterogeneous

2. real estate is immobile

3. real estate is localized

4. the transactions have high transfer costs

-most deals are privately negotiated

A market where tenants negotiate rent and other terms with property owners or their managers is referred to as a:

user market

market where required rates of return on available investment opportunities are determined:

capital markets

what has the greatest aggregate market value?

nongovernment real estate

what attributes of a home are the most difficult to observe and value?

location attributes

how to rights to an object differ from attaining it by force or intimidation?

rights are claims or demands that government is obligated to enforce

claims that are obtained by threat or force aren't honored or supported by gov.

3 components of property rights:

1. exclusive possession

2. use (enjoyment)

3. disposition

dominant rule for determining whether something is a fixture:

intention of the parties

ex: microwave

estates

interests (bundle of rights) in real property that include possession

Fee Simple Absolute

an estate in land that provides the owner with a complete set of legal rights, limited only by the powers of government

fee simple conditional

ownership that is subject to a condition or trigger event

Ordinary Life Estate

Estate in which the property owner retains all rights of exclusive possession, use, and enjoyment for life while a subsequent owner holds a remainder interest that follows the life estate.

Remainder Estate

An estate in which the right of possession comes into being upon the termination of a lesser estate, such as a life estate. The right of future possession is vested in someone other than the grantor of the lesser estate.

ex: give house to university after death

leasehold estates

An estate for a limited time (e.g., renting, leasing)

How do leasehold estates differ from freehold estates?

limited in time

property ultimately reverts to landlord

not titled interests

nonpossessory interest

a situation in which a person holds an interest in another person's property without actually owning any part of the property

ex:

easements

restrictive covenants

liens

easement

the right to use land for a specific and limited purpose

Easement Appurtenant

a right of use that continues from owner to owner that involves a relationship between two parcels of land: a dominant parcel that benefits from a servient parcel

easement in gross

the right to use land for a specific, limited purpose unrelated to any adjacent parcel

transferrable to another owner without transfer of any parcel of land

declaration of covenants

A document recorded in the public records together with the plat map of a subdivision. It lists the restrictive covenants for the subdivision.

Who can enforce a restrictive covenant? How is it done?

strictly private

can be enforced by those holding a legal interest in the property

enforced by filing suit for an injunction against a violation

lien

a right to keep possession of property belonging to another person until a debt owed by that person is discharged.

general lien

A lien that attaches to all property owned by an individual. Real and personal.

arises out of actions unrelated to ownership of property

specific lien

A lien affecting or attaching only to a certain, specific parcel of land or piece of property.

ex: property tax and assessment liens, CDD liens, mortgages, mechanics liens

Mechanic's Lien

A statutory lien on the real property of another, created to ensure payment for work performed and materials furnished in the repair or improvement of real property, such as a building.

what liens have senior priority?

property tax lien

assessment liens

CDD liens

community development district (CDD) lien

secures financing for improvements within a private community

direct co-ownership

Individual actually holds title to the property along with one or more other individuals

tenancy in common

joint tenancy

-tenancy by the entirety

condo

indirect co-ownership

real estate is owned by corporation or business that the individual owns shares in

limited liability co.

partnership

corporation

real estate investment trust

cooperative

a business organization owned and operated by a group of individuals for their mutual benefit

elective share

Provision that gives a surviving spouse a share of most of the wealth of the decedent.

community property

Any property acquired in certain states by purchase, or as compensation by either spouse during the period of marriage, is considered to be owned in an undivided half interest by each.

what are the 3 levels (qualities) of property rights found in timeshare arrangements?

1. part of a fee simple interest

2. leasehold interest for a tenancy for years

3. license for partial use of the timeshare