What are the bundle of rights?
Posession
Control
Enjoyment
Exclude
Disposal
Tests of a fixture vs. Real Property?
Adaptation
Contract – can be negotiated
Intent
Attachment
Riparian?
Littoral Rights?
Flowing Water (Help: River)
Non Flowing Water (lake or ocean)
Prior Appropriation?
Adjacent
Land Owner
State government administers the rights.
Adverse Possession?
Use of land without permission, for a period of
time, Court awards OWNERSHIP. Adverse = Ownership
Prescriptive Easement?
Use of land without permission, length of time,
court awards CONTINUED use. Prescriptive = Continued Use
Tacking?
License?
Encroachment?
Encumbrance?
Erosion
Accretion
Avulsion
Escheat?
Combining periods of continued use to establish prescriptive
Easement or Adverse Possession.
Permission or Privilege to use one’s property. REVOCABLE
Illegal use of one’s property (Discovered by SURVEY)
Anything that affects the value of property (Lease, Lien, Gap in
Chain)
Gradual loss of soil or rock
Gradual addition of soil or rock
Sudden, violent loss of soil or rock (natural disaster)
(Hint: Like a convulsion, fast and bad)
Die Intestate (no will, no heirs and reverts to state)
Property Tax Liens?
Get paid back before any other lien.
Eminent Domain:
Power of the Government – Right to take private poperty
What is the Process of Eminent Domain?
CONDEMNATION
DEEDS:
General Warranty Deed
QuiTclaim Deed
- STRONGEST deed, Best for Grantee
Warrants Seisen (in right mind), against undisclosed
encumbrances and enjoyment now and forever.
WEAKEST deed, best for Grantor. Warrants nothing
Sherrifs Deed
Deed given following foreclosure
Limited or Special Deed
Grantor will only guarantee their period of ownership.
TO HAVE A VALID DEED:
1. Grantor (Seller) 2. Grantee (Buyer) 3. Granting
Clause (Defines estate) 4. How Title was taken 5.
Consideration 6. Legal Description 7. Grantor
signature (Grantee not needed)
Legal Description?
Lot and Block, Rectangular Survey Sys., Metes and
Bounds – PO Box and Address are invalid
TITLE INSURANCE:
CLTA (California Land Title Association) – Owner’s policy, protects Grantee
Pay once and policy will cover duration of ownership and heirs
If you pay cash, only need CLTA
ALTA (American Land Title Association) – Mortgagee policy, protects lender
TERMS OF TITLE:
Patent
Dedication
Abstract of Title
Chain of Title
Cloud on Title
Quite Title
Government transfers realty to a private individual
Private individual giving realty to the government (parks,
utilities)
EVERYTHING since the root of title. Should ALWAYS be
accompanied by lawyers opinion
Owners since Patent
Impaired or unperfected title
Court closing gap in title
FREEHOLD Estate or OWNERSHIP Estates:
Fee Simple ABSOLUTE:
Highest Form of Ownership (includes all 5
bundle of rights)
Fee Simple DETERMINABLE:
“so long as” a condition is met. Ownership may
be defeated if not met. ALL FUTURE owners must comply.
Life Estate:
Grantor creates., Grantee (Buyer) is the life
tenant, Ownership reverts back to grantor (seller) upon death
of life tenant. Remainder interest.
Future interest is pre-determined- reversion upon death,
Remainder- anyone else.
GOVERNMENT:
Gives police power for 1. Zoning 2. Agricultural, residential, commercial, industrial
and mixed
ENABLING Acts? Federal gives police power to state and local
Assessments: Payment from benefiting homeowners for
improvements
Up Zoning: Rezone for greater use (res to comml)
Down Zoning: Rezone for lesser use (comml to res)
Buffer Zone: Green Belt Area – Park or land between comml and res.
Non Conforming Use: Grandfathered in. Use old zoning once new
zoning has been changed
If you SELL, EXPAND, DESTROY/REBUILD or CHANGE USE…
You MUST conform to new zoning.
Conditional Use: Allows different use than zoning permits (doesn’t
carry to new owner)
Variance:
Exempt to zoning due to hardship (Roof extended over).
WILL carry to future owners.
Spot Zone: Rezoning one parcel (church, school) Must continue
use for the same thing or zoning WILL REVERT.
WAYS TO TAKE TITLE:
Severalty:
One Person (Natural person) or single legal entity (Corporation
holds title in severalty)
Joint Tenants:
(poor man’s will) HUSBAND and WIFE. Right of survivorship
supersedes will
Tenants in Common: Unequal interests, No ROS, Can be left in a will
Tenants in the Entirety: MUST be married, ROS
Community Property:
All prop acquired during marriage is 50/50
Separate Property: Property owned prior to marriage, a gift or inheritance during
marriage.
General Partnership: All partners participate, share liability
Limited Partnership: General partners (share liability) + limited (silent) partners
(Only liable up to investment)
Cooperative:
Corporation owns real property, tenants own stock and recv a
lease- no deed
CONDO:
TOWNHOME:
TWO TITLES: You own a Cube of air and % of common area.
NEED your own insurance.
You own land
WAYS TO OBTAIN REALTY:
Note?
Mortgage?
LOAN – creates the debt
LIEN – Mortgagor is the borrower
Mortgagee is the lender
Clauses:
Acceleration – Default, FULL balance due.
Alienation – Sold or transferred full balance
Prepayment – Terms for paying portion or full mortgage early
(May be a penalty)
Defeasance Clause – Payments complete – Mortgagee
removes lien
Equitable Redemption – definite period which borrower can
make up payments prior to foreclosure sale.
Statutory Redemption – Borrower may reclaim realty if back
payments are made within so many days after foreclosure.
Mortgage – 2 part instrument
Trust Deed – 3 part instrument
Trustor: Borrower
Beneficiary: Lender
Trustee: Impartial holder of title – Holds naked title (Full
bundle of rights)
Deed of Reconveyance – Loan is paid in full, trustee gives all
rights back to trustor and removes lien.
Trustee’s Deed: Deed issued after foreclosure
By Will: Deceased (devisor) will devise property to devisee
**Devise – Real Property Bequest – Personal Property ( Gifted in personal will)**
Codicil: Can change will until death
Probate: Overlooks distribution of deceased’s assets… w/ or
w/out will. Ownership transfers immediately (CAN’T do
anything with property until probate says)
Points
1 point = 1% ex 2 ½ points = .025 (used to multiply
against loan)
LEASEHOLD ESTATES – NON FREEHOLD (Property reverts back to owner when
lease expires.
Estate for Years – Definite termination date (can be in months).
No notice req’d, death will not terminate.
Landlord dies, tenant can stay – Tenant dies, landlord
can still collect $ per lease
Periodic Estate – Month to Month, Week to Week, Notice of one
period req’d. Death will not terminate. One more . due
Estate at Will – Open ended – terminates by notice or death.
Estate at Sufferance – Tenant holds over without consent –
didn’t get out in time.
Assign (SANDWICH or SUBLEASE) – Assign duties to assignee.
Lessee remains LIABLE. If we rent out our house, we are still
liable.
Novation – RELEASE of liability – complete substitute
TYPES OF LAND SURVEY
Rectangular Government Survey:
Base= East and West
Meridian= North and South
Township= Parallel to Base – 6 Miles N& S of Base
Range Line= Parallel to Meridian- 6 Miles E&W of
Meridi
6 MILES SQUARE, not sq miles
36 Sections
1 mile = 640 ACRES
1 ACRE= 43,560 sf
Section 16 reserved for schools
Metes: Measured in feet and inches
Bounds: Includes angles
*****MUST start and end at the POINT of Beginning to be valid
Monument:
Benchmark or Reference Point
Lot & Block system: RECORDED Plat Map- group on
contiguous lots bound by streets in a city block.
Tax Formula
Fair Market Value x assessment ratio = assessed value
Assessed value x tax rate= annual property tax
New commercial Code:
More than 5 story buildings are prohibited. Pre
existing= Nonconforming Use
Suggested to Take Title as: Consult an atty
Radon:
Undetectable
Judgment levied because borrower with foreclosure could not generate enough
funds at sell… Deficiency Judgement
Reconveyance Deed: trustee returned title to trustor
Trustee Deed: Recv’d a Foreclosure (Sheriff’s Deed)
Property tax lien is always paid back FIRST
Freestanding = personal property
Client wants to open business… CHECK ZONING
A is owner, sells ranch to B with Leaseback… A is Lessee
Leasehold is less than freehold (Fee Simple, Fee Determinable and Life Estate)
Option Contract: Unilateral Contract
Equitable Title = Legal Title
Agent: Represents Interest of Another
Broker: Agent to their client or principal
Salesperson or BS: Agent to the broker they work under
Subagent Broker: Broker from another firm, representing listing broker’s client
Subagent Salesperson or BS: a salesperson or BS’s relationship to their Broker’s
client
Single Agency:
Assigned Agency:
Dual Agency:
Special Agent:
Represents Buyer or Seller- NEVER both
Broker assigns one salesperson to buyer and one
salesperson to seller. NO WRITTEN CONSENT
Broker represents Buyer and Seller – Same Transaction
MUST have WRITTEN CONSENT or illegal. Conflict of
Interest
Agent hired to do one thing and can not bind client.
Seller to Broker or Buyer to Broker
General Agent:
Customer/ Consumer3rd
DUTIES TO CLIENT:
LIMITED Authority – Agent hired to do series of tasks –
the agent has the ability to bind their client.
EX: PM to Owner/Investor or Salesperson/BS to Broker
You do not represent but must be:
FAIR – HONEST – DISCLOSE ALL MATERIAL FACTS –
PROVIDE SKILL AND CARE
CARE –
CONFIDENTIALITY (MOTIVATION, PRICE, TIME AND TERMS)
OBEDIENCE
ACCOUNTING
LOYALTY - #1 DUTY
DILIGENCE
DISCLOSURE
AGENCY (Represent their interest, not your own)
Expressed Agency:
Written or verbal: Listing Agreement – Exchange of
Understanding
Implied Agency:
Actions create ie: looking at Homes. You agree to do
something. Compensation DISCUSSED
Listing Contracts Employment:
Between Seller & Broker
CONTRACTS:
Exclusive Right to Sell:
STRONGEST- Compensation no matter who sells.
Maximum Protection, Maximum Effort
Exclusive Agency:
Seller find their own seller, no commission
Open Listing:
WEAKEST: Whoever finds buyer gets commission
Net Listing:
Broker recv’d all money over set selling price. MUST
disclose true MV or it’s fraud.
****CONTRACT MUST HAVE TERM DATE. NO AUTOMATIC RENEWAL****
Listing Agreement terminates if:
Bankruptcy or death or BROKER or SELLER
Broker loses license
Realty is destroyed
They agree to terminate
Price fixing going on in a meeting, what do you do? LEAVE
Sherman Anti Trust Act
No price fixing – kills competition – ILLEGAL
Puffing:
Exaggerated statement or opinion (NOT
misrepresentation)
OPTIONS:
A seller(optionor) gives buyer (optionee) the right to by
realty within a certain time frame.
UNILATERAL CONTRACT- one promise for
performance.
Latent Defect:
Patent Defect:
Hidden from view- Owner is aware, agent and buyer
can’t see
Everyone can easily see the defect
INSTALLMENT CONTRACT/ LAND CONTRACT/ CONTRACT FOR DEED
Vendor:
Vendee:
Seller- Retains legal title until vendee pays in full
Buyer- takes possession, makes periodic payments, has
equitable title.
Offeror:
Offeree:
Makes the offer
Recv’d the offer.
Offeror changes every time a counter offer is made.
FRAUD:
Fraud damages:
Knowingly misrepresent
Buyer pays 3 x’s the damages
Misrepresentation:
Unintentional misrepresentation
Contract VOID if:
No offer or acceptance
Act of God (Disaster) or Government (Eminent Domain)
Not Legal(ie: Zoning)
No consideration
Contract VOIDABLE if:
Disadvantaged may be:
Disadvantaged party involved
Minor
Under the influence
Fraud
Menace – force or threat
Duress
Undue influence – position of power
Contract UNENFORCEABLE if:
CLASSIFICATION OF CONTRACTS:
Bilateral:
Unilateral:
Executory:
Executed:
Not in writing
Statue of Frauds
**Exception- One Year OR LESS lease (not less
than one year)
Two binding promises (expressed)
One promise for performance (Seller making promise)
Something remains to be done
Complete (at close of escrow – not at signing
TERMINATION OF
SALES CONTRACT:
Agreement
Novation – New Deal
Completion
Death WILL NOT terminate
BREACH
Of Contract:
Rescission –
Liquidated Damagesmoney)
DAMAGES=
Return the parties to original position
Stated in Contract (ie: seller keeps earnest
Court involved
Specific Performance:
Sue to complete Contract
FEDERAL LAWS:
1866
RACE- No exceptions
1968
Exempt
Redlining, Steering and Blockbusting
Owns 3 or less homes, has not sold one 24 months, not
selling the one that they are living in…. Room Rental 1-4
unit dwelling…. Religious Organization
Fair Housing Poster & Gender
Familial status; pregnant, children under 18, adoption
& Handicap
One year to file complaint with HUD, 2 years with a civil
suit in Federal Court
1974
1988
Compliance?
1992: ADA:
Must comply with:
American Disability Act
15 or more employees, Gov Buildings, public trans &
Businesses open to public
Lead Paint
New Home Disc?
ECOA
Can’t discriminate on:
Public Assist.
RESPA
1.
2.
3.
4.
5.
Homes built before 1978, found in soil most likely,
Seller and listing agent responsible to give disclosure to
buyer. Buyer has 10 days to inspect.
Gaming districts: Updated within 6 months &
Sewer and Water rates
Equal Opportunity Employer Act
Protected classes, Old age, Marital status or
Up to 4 – Residential More than 4 – Commercial
Consumers are aware of closings costs
Must be given settlement booklet
Good faith estimate – upon application or w/in 3 bus
days
HUD1 – Settlement Statement (FINAL ACCOUNTING) 1
day prior to closing
NO Kickbacks, unless licensed
Regulation Z
Truth and Lending Law
Laws on Advertisement
Tax Rev 1997
No capital gains if:
1031 Exchange
Who Handles?
Changes to Lease?
MUST BE?
Lenders must provide understandable finance info.
Any info other than APR or price will need a full
disclosure unless vague with no numbers
owned and occupied as principal
Residence for 2 of previous 5 years
Single max 250,000 – Married max 500,000
Realty exchanged to delay BOOT (Capital gains tax), No
money in pocket
Intermediary (Middle Man) to handle exchange
Handwritten changes to priority over typed
Initialed and original crossed through (initial & date,
best)
Zoning at time of contract? Binding
Interest Cap in Contract
If interest rate goes above cap, Contract terminated
Expressed bilateral agency? Listing
Why Trust Account needed?
Avoid Comingling and conversion
Disclose Agency Relationship
Licensee part owner of title company
Commission negotiable?
ALWAYS negotiable between broker and client
Physical charecteristics of Land
Immobile, Indestructible and Heterogeneous or
non homogenous (unique)
Situs:
Location
MAI
Member of Appraisal Institute
Leverage:
Using someone else’s money for profit (HIGH RISK
INVESTMENT)
Economic Good for Real Estate:
1.
Demand- purchasing power
2.
Utility- Usefulness
3.
Scarcity- desirable at location
4.
Transferability- Title clear (more value)
5.
Not a liquid asset
Environmental Concerns:
1.
2.
3.
4.
5.
Asbestos
Lead Base Paint – 1977 and before
Urea Formaldehyde
Radon (wood shed or basement) – undetectable
Underground storage tanks
Price:
Value:
Amount paid
Most probable price
Appraisal Steps (3):
Define Problem, Gather Data and Reconcile
Highest and Best Use:
condo – apt
Most profitable use is not always present use –
Supply and DEMAND:
Must have demand to have value
Regression/ Progression:
Re pulls value down, pro pulls it up
Contribution:
Nothing to do with costs: what something added adds
to value
Plottage:
The ended value of adding contiguous parcels for a
greater value than individually
Process:
Assemblage
APPROACHES TO VALUE:
Market/Sales Comparison-
Compare similar and make adjustments
What needs to be considered:
1.Location 2. Amenties 3. Date of Sale
4. Terms and Conditions of Sale (mother to Dau)
Adjust Subject Property:
NEVER
Cost Approach (Summation)
Used for:
New Homes and Special Use
Special Use?:
Church or School
Replacement cost & Depreciation
Land Value
What is Physical Depreciation
Functional Obsolescence
Anything Broken
design that is outdated=outmoded
Economic/External Obsol. Outside of the property, ALWAYS INCURABLE
Curable:
Incurable:
Cost Effective
Not cost effective to Fix
Income Approach
FORMULA
Net Operating income
Income Producing properties
Property is valued by income it generates
Capitalization Rate = Expected rate of return
Rate x Value= NOI
Mortgage Broker
Mortgage Banker
Makes the match between broker and lender
Funds the Loan w/ their money
FHA
Insures loans, does not make them
Insures lender against default
MIP – Mortgage Insurance Protection
Low Down Payment 3 ½% contribution
Owner Occupied, no prepayment penalty
VA
Guaranteed from Gov’t if Lender defaults
NO DOWN PAYMENT
DD214- Cert of eligibility
CRV – Certificate of Reasonable Value
Owner occupied, no prepayment penalty
Certificates Req’d:
3/1/88 lender approval recq’d to assume loan
Conventional
NO Gov’t backing
Based on ability to repay
PMI – Private mortgage insurance
Secondary Lending
FNMA
GNMA
FHLMC
Fannie Mae (The HO, she does EVERYTHING)
Government – Buys All loans
Ginnie Mae (The Madam) – Covers Fannie
Freddie Mac- Generally only does conventional –
Standard Forms
Usury:
Cap on consumer interest rates – we have no usury
Monthly P&I
Factor
Loan amount/1000 x Factor
Loan/1000 / monthly payment
GRM
Gross Rent Multiplier sales Price/montly rent
MORTGAGE PAYMENT PLANS
Budget or PITI
Amortized
Partially Amortized
Straight/Term
Wraparound
Blanket
Package
Construction:
InterimTake OutGraduated Payment
Subordination
Pricinpal, Interest, Tax and Insurance
Constant payment of interest and principal until paid off
Begins amortized, ends lump sum
Begins interest only, ends lump sum
Buyer creates a new loan created around existing debt.
Seller financing around existing debt
Combining 2 or more pieces of property on one loan,
partial release
Combine personal property and realty on loan
short term for the construction phase
permanent after construction is complete
Lower payments at beginning of loan – does not even
cover payment. Negative amortization – Debt will rise
Reversiving lien position (ie: refi’ing 1st loan, not
second)
Capitalization rate increases, value remains the same, income will increase
Equity
Value-debt= equity… Nothing else matters