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Real Estate Finance (FIN 3365) > Chapter 1 (Real Estate Investment: Basic Legal Concepts) > Flashcards

Chapter 1 (Real Estate Investment: Basic Legal Concepts) Flashcards

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1
Q
  • all that a person owns
  • based on rights
  • possession and use of real estate
A

estate

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2
Q
  • estates in possession

- estates not (yet) in possession (future estates)

A

estates

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3
Q

(Estates rights)

- estates in possession

A

possessory rights

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4
Q

What are 2 types of possessory rights?

A
  • freehold (ownership)

- leasehold (I just rent the space, owned by someone else)

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5
Q

What are 2 examples of freehold?

A
  • fee simple (most complete form of ownership)
  • life estates (selling the house and the seller stays there till he/she passes away. thats when the title goes to the owner)
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6
Q

What are 2 examples of leasehold?

A
  • estate for years (typical commercial lease)

- periodic tenancy or estate from period to period (months, years)

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7
Q

simplest most complete; i own my house

A

fee simple estate

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8
Q

subject to leases; renting your house

A

leased fee estate

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9
Q

the tenant’s rights; the one that rents the house; renter’s rights

A

leasehold estate

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10
Q

future estates

A

non-possessory estates

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11
Q

What are 2 types of non-possessory estates?

A
  • reversion (prehaps due to condition)

- remainder (future, say after a “life estate”)

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12
Q

Example:
Owning a parking lot and donating it to the city for a park; contribute and donate but with a condition being only if you use it for a park; if it ever fails from being used as a park and converted to a parking garage it would fall back to the owner who donated it.

A

reversion (prehaps due to condition)

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13
Q

Example:

splitting ownership in time, having ownership but as soon as you die, it passes to UTD

A

remainder (future, say after a “life estate”)

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14
Q

anything that might have a right

A

encumbers

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15
Q

secured interest is also referred to as a ___.

A

lien

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16
Q

a secured interest for a debt

A

lien

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17
Q

a non-possessory interest in land. the right is for the use of the land for a special purpose

A

easement

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18
Q

What is an example of an easement?

A
  • rights of way for road access and utility lines
  • AT&T comes and digs on your lawn because they have a wire that needs to be repaired and it passes through your property
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19
Q

Example:
when an owner of real estate pledges or encumbers his property as a condition for obtaining a (mortgage) loan. the lender is said to have a secured interest.

A

interest; a right to claim on real property, its revenues, or production

20
Q
  1. trust the seller
  2. due diligence search
  3. title insurance
A

title assurance

21
Q
  • covenants in “Deed” (the document that conveys title)

- different “qualities of deeds

A

trust the seller

22
Q
  • an outside expert gives you a chain of abstracts that lists what was said and the legal opinion is agreeing that it is fine.
  • third party opinion
A

abstract and legal opinion (due diligence search)

23
Q
  • contrast with title assurance

- company will underwrite the title; basically replaces the due diligence search

A

title insurance (insurance)

24
Q

used for conveyance/transfer between a Grantor & Grantee

A

Deeds

25
Q

What are the types of Deeds?

A
  • General Warranty Deed
  • Special Warranty Deed
  • Bargain and Sale Deed
  • Sheriff’s Deed-Trustee Deed
  • Quitclaim Deed
26
Q

(Type of Deed)

  • highest quality deed you can get
  • covenant that the grantor has a good title
  • covenant that the grantor has the right to convey the property
  • covenant to compensate the grantee for loss of property or eviction as a result of a superior claim
  • no encumbrances on title except those noted
A

general warranty deed

27
Q

(Type of Deed)

  • less quality deed if you are the buyer but it is still acceptable (I can tell you that for the past 10 years it has been taken care of but i do not know who owned it 40 years ago)
  • limits the covenants to the ownership duration of the current grantor
  • no guarantees on the ownership of prior grantors
A

special warranty deed

28
Q

(Type of Deed)

  • conveys property without seller warranties
  • sometimes called an “as-is” deed
A

bargain and sale deed

29
Q

(Type of Deed)

  • bargain and sale deed received by a buyer from a foreclosure or other forced sale by sheriff or trustee
  • no warranties are added
  • example: county takes over the property and sells it off at an auction process (buyer beware deed)
A

sheriff’s deed-trustee deed

30
Q

(Type of Deed)

  • no covenants
  • the least protection to the grantee
  • grantor conveys whatever right “may exist”
  • the seller makes no covenants what so ever and does not give you any coverage
  • example: buying a hose form Mr. Smith and you find out that the title has Mrs. Smith on it too. A lawyer might advise you that she did not sign a ___ saying that she will sign the deed to him so it would clear out the title to make the buyer happy
A

quitclaim deed

31
Q
  • documentation of chain of title meaning who owned this property
  • title search
  • study of relevant records
  • lawyer’s opinion on title
A

abstract and opinion

32
Q

Example:

if someone is not sure that they spouse/partner did not sign a quitclaim deed

A

clouds on title

33
Q
  • one time premium
  • unseen hazards in the public record (risk is spread among many property owners)
  • owner’s policy (insures the interest of a new owner)
  • lender’s policy (insures the interest of the lender)
A

title insurance

34
Q

usually the owner pays for this policy; if you have a mortgage on your property the lender is also going to want a separate policy

A

owners policy

35
Q

while an abstract and opinion method may still be used because of cost considerations, in general title insurance is used. As a genera rule, ___

A

lenders will require that a buyer use title insurance

36
Q
  • recording documents protects the interest of the owner
  • constructive notice
  • mechanics liens
A

recording acts

37
Q

a person is deemed to have whatever information is in the public records
- later you can not say that you did not know because the information is out there

A

constructive notice

38
Q
  • may be recorded “after the fact” (usually 60 days)
  • seller’s affidavit (sworn statement that no liens exist)
  • lien waiver (requested from contractors and suppliers if applicable)
A

mechanics liens

39
Q
  • small little details but important. someone has an interest in the property and it is usually the lender, other groups can also have a lien on the property which is a property that has had construction, if the owner says he or she does not like the work and tells the builder that they don’t want it
  • they can be backdated; work done 12 months ago, the date of the lien is the day he/she did the work and would jump ahead of any finance that has been done; holds up closing on major deals
A

mechanics liens

40
Q
  • police power

- eminent domain

A

government restriction

41
Q

Examples:

zoning and building codes (these are limits)

A

police power

42
Q

a relatively expansive; depending on the state, government has relatively broad powers on what property they may take possession of through eminent domain and for what purpose

A

eminent domain

43
Q

protected by the government and they can impose zoning but you could not turn around and build a power plant because they are zoning

A

property rights

44
Q

the right for the government to take your property if they need it; should be used for public good and not unncessary

A

eminent domain

45
Q
  • deed restriction
  • subdivision restrictions
  • CC&Rs (covenants, codes and restrictions): rules that are put on the deed that are not able to broken
A

private restrictions

Real Estate Finance (FIN 3365) (5 decks)

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