Nature of Real Estate

Question 1

Real property is defined as the land and everything built or growing on it, and personal property is everything that cannot be categorized as real property.

Question 2

agent (the person hired by a principal to act for and on behalf of, or to represent the principal, and who must always act in the principal’s best interest)

Question 3

acquisition, the act or process by which a person procures property,

Question 4

The next day, the seller accepted the offer and they now had a date for settlement, the date specified in the purchase contract when buyer and seller deliver any monies required, as cleared funds, to the settlement agent and sign the documents applicable to the transaction.

Question 5

acquisition

the act or process by which a person procures property

agent

the person hired by a principal to act for and in behalf of, or to represent the principal, and who must always act in the principal’s best interest

adjustable rate mortgage (ARM)

a loan where the interest rate is periodically adjusted based on a specific economic indicator or financial index

buyer

any potential transferee or purchaser in a real property transaction

buyer’s agent

a real estate broker who acts as the buyer’s agent

closing

the process by which loan funds are received from the lender(s) and the applicable documents are recorded; comes after the settlement

Closing Disclosure

a five-page form that provides final details about the mortgage loan you have selected. It includes the loan terms, your projected monthly payments, and how much you will pay in fees and other costs to get your mortgage (closing costs).

commercial property

a classification of real estate that includes income-producing property such as office buildings, gasoline stations, restaurants, shopping centers, hotels, and motels, parking lots, and stores

contract

an agreement that has four essential elements: (1) the parties are capable of entering into it, (2) the parties consent, (3) a lawful object or purpose, and (4) consideration; if it is for the sale of real property, it must be in writing and signed

conveyance

the act of transferring property ownership from one entity to another; also used to mean a document, such as a deed, that transfers title

deed | conveyance deed | grant deed

a formal written document by which an owner conveys title to real estate during his/her lifetime; it serves as evidence of ownership of real property, as well as the document of conveyance

dual agency

dual agency an agency relationship legal in some states in which a single agent is permitted to represent both of the principals in a transaction

fixed-rate mortgage

a fixed-rate loan secured by real property

investment property

property which is generating a cash flow, such as a strip mall or a single- or multi-family rental property

littoral owner

those who own property adjoining lakes and oceans

market analysis

a method of determining the price for which the subject home should sell based on what purchasers have paid for homes with similar features and in the same general neighborhood

mortgage

a document used to secure a loan; it is a judicial agreement, meaning if nonpayment takes place, the holder of the promissory note can take it to court and the court will order the sheriff to foreclose

non-investment property

a property that has no cash flow; for example, a home or a vacant lot

offer and acceptance

an agreement between the parties; often called a meeting of the minds, mutual consent, or mutual assent

personal property

the opposite of real property; it is moveable and destructible; synonyms are chattel and personality

real estate

lands and any improvements, leaseholds, and all other interests in real property

real estate broker

a person who sells or offers to sell, buys or offers to buy, negotiates the purchase or sale or exchange of real estate, lists or solicits for prospective purchasers, leases or offers to lease, rents or offers to rent, or manages or offers to manage any real estate or its improvements on behalf of others for compensation or a valuable consideration

real estate purchase contract

a state-approved form which must be filled out by all licensees which is used when writing an offer to buy real property; when accepted, it becomes the sales agreement

real property

land and appurtenances, air space to infinity, and the subsurface to the center of the earth

real property transaction

a transaction regarding real property in which the agent is employed by one or more of the clients to act on their behalf in that transaction, to include but not limited to listing agreements, buyers’ service agreements, exclusive representation contracts, and offers to purchase

residential property

property used for housing; includes single-family housing, condos, cooperatives, and apartment buildings

riparian rights

the authority of a property owner to use water from an adjacent waterway

seller

any potential transferor in a real property transaction, to include an owner who enters into a listing agreement with a principal real estate broker, whether or not a transfer results, or that receives an offer from an agent acting on behalf of a buyer to purchase real property of which the entity owns

seller’s agent

an agent who has entered into an agency relationship with only the seller in a real estate transaction

seller disclosure statement

a statement signed by the seller that provides the buyer with the seller’s knowledge about the title, water source and systems, sewer/septic systems, structural concerns, mechanical systems, community associations, geographical hazards, and any known material defects. (CFPB, 2017)

settlement

the date specified in the purchase contract when buyer and seller deliver any monies required, as cleared funds, to the settlement agent and sign the documents applicable to the transaction

settlement process

when parties to a real estate transaction are ready to close the sale, the seller provides the closing agent with a deed, and the buyer provides the funds necessary to close; the process is completed when the deed is recorded and proceeds are delivered to the seller

title

the actual ownership of real property, whether through purchase, inheritance, devise, gift, or foreclosure; not a document

title search

an examination of public records, laws, and court rulings to ensure that no one except the current owner has a valid claim to the property

transaction

any sale, lease, rent, or exchange of real estate (residential, time share, industrial, or commercial) transaction or a sale or exchange of, or option involving, an interest in a residential cooperative housing corporation, but excluding leases for one year or less

Question 6

Riparian rights allow a property owner to use water from an adjacent waterway, mostly rivers and streams. These water rights tend to vary from state to state, but typically, the property owner is permitted access to the water, but only owns the land beneath it to a certain point.

Question 7

littoral rights apply to those property owners who own property adjoining lakes or oceans.

Question 8

Chattel is

Answer 8

material goods that are not real property

Question 9

Personality is

Answer 9

intangible goods such as stocks, bonds, patents, and copyrights, the value of which does not depend on physical existence.

Question 10

dual agency, an agency relationship legal in some states in which a single agent is permitted to represent both of the principals in a transaction.

Question 11

conveyance. which is the act of transferring property ownership from one entity to another. Conveyance can occur through the purchase and sale of property, through an inheritance, or through a gift.

In order to document a conveyance, we must use a deed. A deed | conveyance deed | grant deed is a formal written document by which an owner conveys title to real estate during his/her lifetime. It serves as evidence of ownership of real property, as well as the document of conveyance

Question 12

A Closing Disclosure will tie everything together (CFPB, 2017). You can think it as the final receipt. It balances all of the seller’s expenses and credits (such as paying the agents, outstanding taxes, and paying off their mortgage if they have one, etc.) against the buyer’s expenses and credits (such as paying the seller for overpaid taxes, and money due from the mortgage, closing costs due to the bank, deposits, etc.).

Question 13

Real estate is land that is immovable and everything permanently attached to the land along with rights.

Question 14

Land (or real property) includes more than just the surface boundaries of the earth; it includes the airspace, surface, and subsurface.

Question 15

An appurtenance is anything attached to the land that will then run with, or be conveyed, when the real estate is sold. Appurtenances might include certain easements, air rights, the right of lateral support and adjacent support, mineral rights, the rights to natural drainage, and, in many states, water rights.

Question 16

There are three types of rights that impact ownership of real estate.

They are:

Rights in land;
Rights of ownership; and
Government rights.

Question 17

Conveyance
Real estate is conveyed (sold or transferred) by a deed.

The deed lists only the legal description of the land—that is, the surface boundaries of the land.

Everything else is appurtenant (attached) to the land and automatically transfers (or runs with) the land in the deed. A deed does not describe the improvements, appurtenances, or fixtures included with the land.

Question 18

A fixture is an article of personal property that has become part of the real estate by its attachment to the real estate.

When personal property is attached to a building as a fixture, it is legally part of the real estate.

Once personal property becomes a fixture and part of the real estate, it is conveyed in the deed.

Cabinets, plumbing fixtures, shelves, stoves, and hot water heaters installed in a building are common examples of fixtures.

Question 19

Fixtures
Personal property can be converted to real property by being attached to the real property. Once attached, the item is known as a fixture.

Some items—a remote-control garage door opener, for example—are “legally attached” to a structure. Such items are considered constructively attached.

To determine if an item is a fixture, the following tests are used:

Method of attachment.
Adaptation of the item to the real estate.
Relationship between the parties involved.
Intent of the party attaching.
Agreement between the parties involved.
NOTE: As a mnemonic, remember MARIA.

The two exceptions to the rule of fixtures we discussed were emblements and trade fixtures. Both belong to the tenant who must remove them within the agreed-upon time after the termination of the lease, or they will become the landlord’s property through abandonment.

Question 20

There are three types of legal property descriptions commonly found on deeds, preliminary title reports, and title insurance policies:

Metes and bounds;
Rectangular (or government) survey; and
Lot and block (or recorded plat).

Question 21

The survey will also show the locations of the improvements, recorded easements, violations of setbacks, and encroachments.

The surveyor uses monuments, which are fixed visible objects used to set the property boundaries.

Typically, if acreage is being sold, a survey is provided by the seller, and the buyer may have it updated or verified to make sure it is current or accurate.

Elevations can be identified using benchmarks.

Benchmarks are metal disks set in rock or permanent structures throughout the country by the National Geodetic Survey to precisely identify elevation, specifically the number of feet above sea level of the place marked by the benchmark.

Question 22

One method of describing the boundaries of a property is a metes (measurements) and bounds (boundaries) description.

This system, which came from England, is most prevalent on the East Coast.

A metes and bounds legal description describes the land by providing the measurement and direction of each boundary line.

Question 23

It begins at a permanent reference point, a point of beginning (POB), which is a monument.

If the monument/POB is not part of the property boundary, the description will describe the distance and direction from the POB to a corner of the property, called the true point of beginning (TPOB).

The description will then describe a line that follows the boundary of the property, in a clockwise direction, to a corner or end point, at which the direction of the boundary line changes.

The word “thence” in a description indicates a shift to a new direction.

The distance in feet, miles, and compass points moves in a clockwise direction along each boundary line until the last boundary returns to the true point of beginning to produce a fully enclosed area.

Question 24

The system is based on the same premise as longitude and latitude lines.

Under this system, there are 36 fixed points in the country from which original surveys began. Through each point runs imaginary lines running in a north-south direction, called principal meridians, and imaginary lines running in an east-west direction, called baselines.

Off the meridian lines run parallel north and south lines called range lines, which are six miles apart.

Parallel to baselines running east and west are tier or township lines, which are also six miles apart.

A township grid is pictured in the Property Descriptions Handout (see Figure 1).

The range and tier/township lines create a township. Each township is six miles by six miles, since it is between a set of range and tier lines. The township contains thirty-six sections, which are each 1 mile by 1 mile.

Each township is divided into 36 sections.

A standard section:

Measures 1 mile by 1 mile (5,280 feet × 5,280 feet); and
Contains 640 acres. One acre is 43,560 square feet.

Answer 24

Government survey method

Question 25

To determine the acreage of N 1/2, NE 1/4, SE 1/4, section 12 using a calculator, start with the section (640 acres) and divide by 4, divide by 4 again, divide by 2, then press “=”.

Question 26

lot and block, is the shortest and simplest method for describing real property.

It is most commonly used in urban areas.

It describes parcels in platted subdivisions by referring to the recorded plat (map) for the subdivision.

Hence, it may be referred to as the recorded plat method.

Question 27

1 mile = 5,280 feet

Question 28

1 acre = 43,560 square feet.

Question 29

1 square mile = 640 acres.

Question 30

Square inches to square feet

Divide by 144

Square feet to square yards

Divide by 9

Square feet to acres

Divide by 43,560

Acres to square miles

Divide by 640

Question 31

Area of a triangle

Answer 31

(base x height) / 2

Question 32

Lessor– The owner of the fee interest.
Lessee– The owner of the leased fee interest.
Rent renegotiations– Are stated within the leasehold document; they are typically calculated as a return on the land value.
Surrender clause– Property will be surrendered back to the fee owner (lessor) upon the expiration of the lease.