Terms

Bundle of Rights

  • Definition: The rights and interests associated with having a title.

    • Possession

    • Control

    • Exclusion

    • Sell

    • Enjoyment

Property Types

  • Real Property:

    • Tied to the property.

    • Generally immovable.

  • Personal Property:

    • Associated with the person.

    • Generally movable.

  • Chattel Real:

    • Example: Cows (personal property).

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Fixtures

  • Definition: An object that was personal property but has become part of real property.

    • MARIA Method:

      • M: Method of attachment

      • A: Adaptability

      • R: Relationship

      • I: Intention of the parties

      • A: Agreement

  • Trade Fixture: Items that are personal because they are associated with a business.

Water Rights

  • Riparian Rights: Rights concerning moving bodies of water (rivers).

  • Littoral Rights: Rights concerning standing bodies of water (lakes).

Land Accretion and Loss

  • Accretion: Gradual addition of land.

  • Avulsion: Sudden tearing away of land.

  • Reliction: Gradual recession of water, leaving land permanently uncovered.

Appurtenances

  • Features or rights that run with the land.

Types of Estates

  • Freehold Estate: Ownership with no fixed duration.

  • Fee Simple Estate: Highest form of ownership, also known as fee simple absolute.

  • Fee Simple Defeasible: Ownership under a condition.

  • Life Estate: Ownership for the duration of a person's life.

Less Than Freehold Estate Types

  • Definition: A limited period of ownership.

  • Estate for Years: Specific beginning and ending date (e.g., July 3rd - September 8th).

  • Periodic Tenancy: Month-to-month arrangements.

  • Estate at Will: Can be terminated by either party at any time.

  • Estate at Sufferance: Tenant remains without the landlord’s consent post-agreement.

Leases

  • Lease: Grants possession but not ownership.

    • Types:

      • Percentage Lease: Based on a percentage of gross receipts.

      • Net Lease: Tenant pays taxes, insurance, and maintenance.

      • Gross Lease: Tenant pays fixed rent.

      • Sandwich Lease: Involves three parties where the primary one is a lessee.

Tenant Considerations

  • Tenant Improvement Allowance: Money to customize property, usually for business purposes.

  • Abandonment: Leaving a leased property.

  • Subleases: Grants possession but not responsibility.

  • Assignment: Grants both possession and responsibility.

  • Surrender: Agreement to return property before the lease ends.

  • Constructive Eviction: Landlord fails to fulfill legal obligations.

Deeds

  • Definition: Document evidencing property transfer.

    • Types:

      • Grant Deed: Transfers real property with signature of grantor.

      • Quitclaim Deed: Releases a person's interest with no warranties.

      • Warranty Deed: Guarantees a clear title.

      • Special Warranty Deed: Only covers defects during the owner's period.

      • General Warranty Deed: Covers defects throughout the property's lifetime.

Property Titles

  • Title: Indicates ownership of property.

  • Chain of Title: History of ownership detailing conveyances and encumbrances.

  • Abstract of Title: Summarized version of the title.

  • Cloud on Title: Any defect in title.

  • Quiet Title Action: Lawsuit to establish rightful ownership.

  • Alienation of Title: Ability to sell or transfer property rights.

  • Title Insurance: Protects against title defects.

    • Standard Policy: Covers defects found in public records and other issues.

    • ALTA Policy: Protects against broader defects beyond standard policy.

    • Extended Policy: Includes unrecorded rights and defects not found in inspection.

Ownership Types

  • Severalty: Sole ownership.

  • Concurrent Estate: Joint ownership with others.

    • Types:

      • Joint Tenancy: Includes the right of survivorship.

      • Tenancy in Common: Unity of possession without survivorship.

Encumbrances

  • Definition: Restrictions on property use.

  • Easement: Right to cross another's property.

    • Types:

      • Easement by Prescription: Established through long-term use.

      • Appurtenant Easement: Right for use that transfers with the land.

      • Easement in Gross: No dominant tenement involved.

Government Powers (PETE)

  • Police Power: Regulation for public welfare (e.g., zoning).

  • Escheat: Reversion of property to the state without heirs.

  • Taxation: Financial charges to fund public services.

  • Eminent Domain: Government’s ability to take private property for public use.

Zoning Considerations

  • Variance: Exception to zoning rules.

  • Nonconforming Use: Past usage allowed despite current zoning laws.

  • Building Codes: Set standards for structures to protect health and safety.

Title and Ownership Issues

  • Intestate: Dying without a will.

  • Testate: Dying with a will.

  • Probate: Legal process to settle a deceased person's estate.

  • Holographic Will: Phrased by hand.

  • Taxation: State revenue collection impacting property.

  • Marginal Tax Rate: Tax on the next dollar of income.

  • 1031 Tax Deferred Exchange: Allows deferral of capital gains taxes when selling property.

Eminent Domain and Property Rights

  • Condemnation: Compensation when taking property under eminent domain.

  • Inverse Condemnation: Suing the government for compensation after property is taken.

  • Encroachment: Structure built on a neighbor's property.

Liens

  • Definition: Legal claim against property.

    • Types:

      • General Liens: Against all personal property.

      • Specific Liens: Against a specific property.

      • Voluntary Liens: Created by the debtor's actions.

      • Involuntary Liens: Imposed by law, such as tax liens.

      • Mechanics Lien: For labor or materials involving property improvements.

      • Judgment Lien: Court-ordered claim arising from legal decisions.

Legal Notices and Contracts

  • Constructive Notice: Knowledge that is assumed to be known.

  • Actual Notice: Directly communicated knowledge.

  • Escrow: Neutral third party managing an agreement.

RESPA and Fair Housing Laws

  • RESPA: Eliminates kickbacks and unnecessary fees.

  • TILA: Requires disclosures on consumer credit.

  • Fair Housing Act (1968): Prohibits discrimination in housing.

  • Jones vs. Mayer (1968): Court case barring racial discrimination in property transactions.

Anti-Discrimination Laws

  • Sherman Anti-Trust Act: Bans anti-competitive behavior.

  • Americans with Disabilities Act (1990): Prohibits discrimination against disabled individuals.

Real Estate Practices

  • Steering: Directing buyers to specific neighborhoods based on race.

  • Blockbusting: Selling property based on fear of demographic change.

  • Panic Selling: Urging sellers to sell prematurely due to fear.

  • Redlining: Denying services to residents based on their area.

Fraud and Ethics

  • Misrepresentation: Giving false or misleading information.

  • Actual Fraud: Intentional deception causing harm.

  • Constructive Fraud: Gaining advantage through unfair means without intent.

  • Commingling: Mixing personal funds with business funds.

  • Puffing: Exaggeration of property claims.

  • Caveat Emptor: "Buyer beware" principle.

Contract Essentials

  • Elements of a Valid Contract:

    • Mutual consent

    • Lawful object

    • Consideration

    • Capable parties

  • Void Contract: Lacks essential elements.

  • Voidable Contract: One party has the option to rescind.

  • Bilateral Contract: Mutually agreed promises (e.g., exclusive listing).

  • Unilateral Contract: One-sided promise (e.g., option contract).

  • Executed Contract: Fully performed.

  • Executory Contract: Not fully completed.

  • Statute of Frauds: Contracts that must be written.

  • Statute of Limitations: Timeframes for enforcing contracts.

  • Novation: Replacing an obligation with a new one.

Agency Types

  • Agency (ACOLD):

    • A: Accountability

    • C: Care

    • O: Obedience

    • L: Loyalty

    • D: Disclosure

  • Fiduciary: Trust-based relationship.

  • Authorities:

    • Actual Authority: Explicitly provided.

    • Ostensible Authority: Implied through actions.

    • Dual Agent: Represents both buyer and seller.

    • General Agent: Manages all acts related to a role.

    • Special Agent: Limited role through specific tasks.

Contracts in Real Estate

  • Listing Agreement: Bileteral employment to sell property.

Listing Types

  • Exclusive Listing: One broker can be paid regardless of procuring cause.

  • Exclusive Agency Listing: Owner sells property without broker compensation unless they prove to be the procuring cause.

  • Exclusive Authorization and Right to Sell Listing: Broker receives compensation regardless of procuring cause.

  • Open Listing: Seller can hire multiple brokers.

  • Net Listing: Money exceeding a designated amount goes to the broker.

Lease Clauses

  • Protection Period Clause: Compensates after listing expiry if procuring cause is shown.

  • Contingency Clause: Conditions for contracts to be binding.

  • Hold Harmless Clause: Liability waiver between parties.

  • Interim Occupancy Agreement: Staying in a sold property beyond closing.

  • Deposit: A showing of seriousness in an offer.

Essentials of Value

  • Value Factors (STUD):

    • S: Scarcity

    • T: Transferability

    • U: Utility

    • D: Demand

  • Principles:

    • Substitution: Wisdom of paying less for comparable properties.

    • Contribution: Value addition from specific items.

    • Regression: Overpriced properties decrease in value in cheaper areas.

    • Progression: Cheaper properties gain value in expensive neighborhoods.

    • Highest and Best Use: Evaluating net return on property.

  • Plottage: Combining parcels increases value (1+1=3).

Appraisal Methods

  • Appraisal: Evaluating property value.

    • Methods:

      • Market Data Approach: Comparisons with similar property sales.

      • Cost (Replacement) Approach: Cost to replace a new building.

      • Capitalization (Income) Approach: Converts income potential into value.

Financial Terms in Real Estate

  • Gross Multipliers: Price divided by rent.

  • Cap Rate: Higher rate indicates higher risk.

  • Mortgage: Voluntary, specific lien on property.

  • Mortgage Brokers: Intermediaries between borrowers and lenders.

  • Mortgage Banker: Direct lender.

  • Interest: Cost of borrowing money.

  • Leverage: Using borrowed capital to increase returns.

  • Amortization: Paying off debt over time.

  • Negative Amortization: Paid interest increases debt.

  • Balloon Loan: Large final payment.

  • Appreciation: Increase in property value over time.

  • Construction Loan: Short-term financing for building.

    • Obligatory Advances: Payments made during construction.

  • Participation Loan: Requires interest plus profit sharing.

Loan Types

  • Interim Loan: Short-term financing.

  • Take-Out Loan: Replaces interim loans with long-term financing.

  • Subject To: Buyer not liable while seller remains liable.

  • Assume: Buyer assumes liability.

  • Hypothecate: Pledging assets as collateral while retaining ownership.

  • Subordination Clause: Prioritizes current debts.

  • Prepayment Clause: Allows early debt repayment.

  • Due-on-Sale Clause: Full repayment upon property sale.

Mortgage Markets

  • Primary Mortgage Market: Where lenders originate loans.

  • Secondary Mortgage Market: Resale market.

  • Insurance Companies: Prefer income-producing properties.

  • Savings and Loan Association: Accepts deposits primarily for mortgage loans.

  • FHA Loans: Insured loans with small down payments.

  • VA Loans: No down payment required; government-backed.

  • GNMA: Part of secondary market for VA and FHA mortgages.

  • FNMA: Provides secondary mortgage market for housing.