Part 1: Principles of Real Estate Flashcards
7 types of real estate industry
1) Brokerage
2) Appraisal
3) Property Development
4) Property Management
5) Rental Finding Services
6) Urban Planning
7) Property Inspection
Class- Where people live
Residential
Class- Used for business
Commercial
Class- Factories and warehouses
Industrial
Class- Where living things are raised, such as farms and ranches
Agricultural
Class- churches, schools, and hospitals
Special Purpose
The location of the property is always the same; it doesn’t move
Immobility (physical characteristic)
The land itself cannot be completely destroyed or worn out
Indestructibility (physical characteristic)
Each parcel of real estate is unique, if only due to location
Nonhomogeneity (physical characteristic)
There is a fixed supply of land which affects the price of that land
Scarcity (economic characteristic)
Intentional changes to a parcel of land that can either increase or decrease its value
Modification (economic characteristic)
The actual changes made to a parcel of land, regardless of their impact (eg. landscaping)
Improvements
Property owners hold onto their investment/property for a long time
Permanence of Investment, or “Fixity” (economic characteristic)
The site (actual location and surroundings) matter to buyers
Area Preference, or “Situs” (economic characteristic)
Prices increase (seller’s market) when…
a) demand increases
OR
b) supply decreases
Prices decrease (buyer’s market) when…
a) demand decreases
OR
b) supply increases
Segments or layers in any area according to price range or type of property; more demand for one price range than another within one class of real estate
Market Segmentation
Supply is affected over time by 3 things…
1) Supply of construction materials and labor
2) Changes in laws
3) Availability of mortgage money
Demand is driven by 4 things…
1) Population density
2) Age groups and family sizes
3) Employment and wages
4) Other factors that affect the desirability of an area
System of property ownership in the US with all the rights of ownership (as opposed to the feudal system)
Allodial System
Based on court decisions over many years based on customs and common practices that are considered sensible and fair
Common Law
Rights of ownership
Bundle of Rights
Right to occupy the property
Right of Possession
Right to possess the property without interference
Right of Enjoyment
Right to dispose of the property (sell or give it to someone)
Right of Disposition
Right to use the property (legally) as desired
Right of Control
Right to keep others from using the property
Right of Exclusion
Bundle of Rights (5)
1) Possession
2) Enjoyment
3) Disposition
4) Control
5) Exclusion
Extent of rights to a parcel of land
To center of earth and upwards to infinity, along with naturally growing plants and minerals
Rights that may be purchased for walkways, bridges, etc
Air Rights
Landowner can sell the land but retain mineral rights
Subsurface Rights
Land and anything man-made that has been permanently attached to the land
Real Estate
The actual physical real estate plus the bundle of rights
Real Property
Any property that is not real property; property that is moveable
Personal Property, or “Chattel” property, or “Personalty”
When real property becomes personal property (eg. tree cut down and turned into lumber)
Severance
When personal property becomes real property (eg. lumber is used to build a house)
Attachment
Cultivated annual crops are personal property called…
Emblements, or Fruits of Industry
An object that was once personal property but is now attached (eg. dishwasher, cabinets)
Fixture
Fixture used for a business that can be removed if the tenant leaves, although the tenant is responsible for any damages caused by the removal (eg. shelves, signs, counters)
Trade Fixture
4 tests the court uses to determine real vs. personal property
1) Agreement of the Parties
2) Intention of the Parties
3) Method of Attachment
4) Adaption of the Item
Something in writing
Agreement of the parties
Something is clearly labeled as belonging to one of the parties
Intention of the parties
Item is attached in a way suggesting permanence (would cause damage is removed)
Method of attachment
Item is clearly customized to fit a specific space
Adaption of the item
Purpose of police powers
To protect public health and safety
Regulate and control the use of the land
Zoning Ordinances
5 things that zoning ordinances regulate and control
1) Lot sizes
2) Type/style/appearance of structures
3) Building heights
4) Setbacks
5) Density
Distance from the lot line to the building line
Setback
of building in an area
Density
Determines the purpose(s) for which land can be used
Zoning Classifications
4 Zoning Classifications
1) R- Residential
2) C- Commercial
3) I- Industrial
4) A- Agricultural
Zoning powers are conferred on municipal governments in this way…
State enabling acts/legislation
Automatic local governing zoning powers
Home Rule Powers
A new, preplanned area of a city with mixed-use zoning; specific and predetermined portion of a city
Planned Unit Development (PUD)
An area between a residential and commercial zone (or any two classifications of zones)- often parks and playgrounds
Buffer Zone
If the property existed before zoning rules changed, an exception can be made called…
Nonconforming Use, or “Grandfathered Use”
Reducing density in an area; reducing the number of units per building or number of buildings
Downzoning
Increasing density in an area
Upzoning
When a specific property is rezoned to permit use different from other properties in the area to benefit area residents
Spot Zoning
When a property owner appeals to a local zoning appeals board for a variance
Zoning Appeal
An exception given by a local zoning appeals board
Variance
A special-use permit
Conditional-Use Permit
Standards regarding building safety
Building codes
Granted for new construction if building complies with zoning laws and building codes
Building permit
Given after inspection and required for occupation
Certificate of Occupancy
Someone who buys undeveloped land and divides it into smaller lots for sale
Subdivider
A map created by a subdivider showing boundaries
Plat
Putting housing units on smaller lots to create open space in an area
Clustering
Someone who improves the land, constructs buildings, and sells them
Developer
Agency that regulates land sales and requires developers to provide buyers with a comprehensive property report with disclosures
Housing and Urban Development (HUD)
If given a comprehensive property report, length of time the buyer has to revoke the contract
7 days
If not given a comprehensive property report, length of time the buyer has to revoke the contract
2 years
Charge on real estate to meet financial needs of the government
Taxation
Power of the government to seize private land for public good without the owner’s permission
Eminent domain
The process of seizing land through eminent domain
Condemnation
The process of property owners forcing the government to buy their property because a government project has caused significant loss of value
Inverse Condemndation
When a property is reverted to the state and auctioned off due to the owner dying without a will or heir
Escheat
Substance that was used as insulation and material for flooring, roofing, etc but was banned in 1978
Asbestos
Substance that was used in paint but was banned in 1978
Lead
Legislation that requires all prior knowledge of lead/asbestos to be disclosed before a sale
Residential Lead-Based Paint Hazard Act (1978)
Exemptions to the Residential Lead-Based Paint Hazard Act focus on…
Homes that house the elderly; children are most at risk from lead poisoning
Colorless, odorless, tasteless gas produced by decay of radioactive substances
Radon
Substance that can grow anywhere with sufficient moisture
Mold
Legislation that allows states to get financing to clean up industrial sites with toxic waste and protects developers from liability
Brownfields Legislation
Industrial sites with toxic waste
Brownfield
An agreement or circumstance that places restriction of how a property can be used
Encumbrance
Makes something easier or better for someone
Easement
Type of easement that allows something
Positive easement
Type of easement that prevents something
Negative easement
Easement that is in effect between properties next to each other where one is landlocked; about the positions of the properties, not the people; belongs to the land and transfers with the title
Appurtenant Easement
The property that benefits from an appurtenant easement
Dominant Tenement
The property that serves the need of the dominant in an appurtenant easement
Servient Tenement
Easement allowing someone to do something necessary
Easement by Necessity
Easement that is personal/between people and ends when a party dies or the property is sold
Personal Easement in Gross
A temporary agreement to use a property for a specific purpose and time
License to use
Most common type of easement given to railroads, utility companies, etc to maintain their equipment
Commercial Easement in Gross
When another person’s property has been used for 5 or more years, a permanent easement can be given called…
Easement by Prescription, or Prescriptive Easement
3 requirements for an Easement by Prescription
1) Uninterrupted, continuous use of the property
2) Use without the owner’s consent
3) Use was open, visible, and notorious (the property owner was aware of it)
Allows successive owners to use the previous owner’s years of use for easement by prescription
Tacking On
Unauthorized physical intrusion of some type of real property onto an adjoining property (eg. a fence)
Encroachment
Conditions or limitations placed on a property by the owner of the property when transferred to another party- often enforced by 3rd parties like HOA
Deed Restrictions
Residential Lead-Based Paint Hazard Act (1978)
1) Applies to property before 1978
2) Buyers have the right of inspection within 10 days
3) Disclosures must be kept for 3 years
A lender’s claim against a collateral asset which gives the lender the right to sell the home (with a court order) if the borrower fails to repay the loan
Lien
The holder of the loan; the lender
Leinor
The borrower of the loan
Leinee
Classification of lien that refers to a claim against specific property
Specific lien
Classification of lien that refers to a claim against all of a person’s real and personal property
General lien
A general lien resulting from a lawsuit against the owner
Judgment lien
A lien created knowingly and voluntarily by an owner
Voluntary lien
A lien placed on a property without the owner’s consent
Involuntary lien
An involuntary lien created by law
Statutory lien
An involuntary lien created by the court
Equitable lien
If property must be sold to satisfy one or more liens, how are liens prioritized?
1) Real Estate Tax liens and special assessments
2) Other liens are prioritized by date/time they were filed with the county
When the holder of a lien agrees to move it to a lower priority because it will be to their advantage
Subordination Agreement
Assessed value used for real estate taxes
Ad Valorem
3 Exemptions from ad valorem taxes
Government, school, and hospital property
A factor that is multiplied by the assessed value to raise or lower a community’s overall assessed value so it is in line with the entire state
Equalizer
Occurs when taxes on a property have not been paid for a period of time specified by law
Tax sale
When the owner gets a chance to pay what is owed & retain the property BEFORE it goes to auction
Equitable redemption
When the owner gets a chance to pay what is owed & retain the property AFTER it goes to auction
Statutory redemption
Taxes for improvements made in a specific area or neighborhood
Special Assessments
Protections for contractors when they’re not paid for work done or materials supplied
Mechanics lien
A notice in the public records that informs if there is a pending lawsuit involving a property
Lis Pendens
An exact way to describe the location and boundaries of a real estate property
Legal Descriptions
Type of legal description using monuments, degrees, and measurements around the perimeter of a property in a clockwise manner
Metes and Bounds Method
North/South lines in Rectangular Survey System
Principal Meridians
East/West lines in Rectangular Survey System
Baselines
Vertical rows measured from principal meridians
Ranges
Horizontal rows measured from baselines
Townships
Townships- how many square miles? How many sections?
1) 36 square miles
2) 36 sections
of acres in a section
640
Systematic adjustments to every 4th township line (every 24 miles) to compensate for the curvature of the earth
Correction lines
Systematic adjustments to every 4th range line (every 24 miles) to compensate for the curvature of the earth
Guide meridians
Sections in a township that are oversized or undersized to adjust for surveying errors
Fractional sections
Areas of land that are less than a full quarter section in a fractional section (not owned by the government)
Government lots
Used in conjunction with mete and bounds or rectangular survey descriptions that number lots in an urban area
Plat-of-survey method, or “Lot-block-tract method”
An official point (a level surface) in every city from which elevations are measured
Datum
Bronze markers placed throughout the US indicating elevation
Benchmarks
Square miles in a township
36
Square miles in a section
1
Acres in a section
640
Feet in a mile
5,280
Rods in a mile
320
Square feet in an acre
43,560
Square rods in an acre
160
Feet in a rod
16 1/2
Yards in a rod
5 1/2
Feet in a chain
66
Rods in a chain
4
