Post on 27-Dec-2015
Phase 1 Exam ReviewChapters 1-3, 5*
Real EstateFIN 331
Fall 2013
Phase 1 Exam Review
Chapter 1: Key Terms1. Real Estate: land and its permanent
improvements2. Capital Markets: providers of funds from
mortgages, also to allocate financial resources among households and terms requiring funds
3. User Markets: represents the competition among users for physical locations and space
4. Property Markets: determine the required property specific investment returns, property values, capitalization rates and construction feasibility
Phase 1 Exam Review
Chapter 1: Key Terms6. Capitalization Rates: the expected rate of
return on an income producing property7. Tangible vs. Intangible Assets: tangible assets
are physical things, intangible assets are nonphysical and include contractual rights
8. Real Property: real property and real estate are interchangeable terms of the and in Tuesday’s and him and
9. Appurtenances: Rights that go along with ownership; e.g. air or mineral rights. May be sold separately
Phase 1 Exam Review
Chapter 1: ConceptsReal Estate can be used in three fundamental ways: Land and improvements, a bundle of rights, and business activities related to land and developmentReal Estate is Unique: real estate is heterogeneous and immobile. Real estate assets are unique and have distinctive characteristics. Real estate is also illiquid and markets are highly localizedThree economic sectors that affect real estate value: user markets, capital markets, and government
Phase 1 Exam Review
General Information RE largest component of global wealth
28% of US GDP Property Taxes = 70% of govt. revenue
Supply and demand are major value factors Users include buyers and renters Capital Markets can be;
Public; prices and rates for all to see Private; limited access to information,
transparency
Phase 1 Exam Review
Chapter 2: Key Terms1. License: Revocable, non-assignable permission to use
another person’s land for a particular purpose.2. Law of Capture: if you can remove it (oil, gas,
minerals) from your beneath your property, it’s yours, even if it is migrating from adjacent property
3. Forms of Titled Estate: a. Fee simple (absolute): highest and most complete form of
ownershipb. Fee simple Defeasible: fee simple estate that is subject to
termination if a certain condition is not met or if a specified event occurs (also called a conditional or qualified fee)
c. Ordinary Life Estate (unbundled rights)d. Legal Life Estate: created by law (statute)
Phase 1 Exam Review
Chapter 2: Key Terms4. Types of Tenancy: (Lawful possession of
property) In Common: 2 or more have undivided ownership
but no right of survivorship Joint: Equal undivided ownership WITH right of
survivorship Entirety: A form of joint ownership of property by
husband and wife in states without community property laws
5. Property rights: Rights to things both tangible and intangible. Rights and property include exclusive possession, use, and disposition
Phase 1 Exam Review
Chapter 2: Key Terms6. Restrictive Covenants: Restrictive covenants
impose limits on the uses of land7. Forms of [Leasehold] Tenancy:
a. Tenancy for years: last for a definite period. b. Periodic tenancy: continues for successive
periods until terminated by proper notice by either party
c. Tenancy at will: tenant remains in possession with landlord’s permission; i.e. until new tenant
d. Tenancy at sufferance: when tenant stays after the lease expires without landlord’s permission
Phase 1 Exam Review
Chapter 2: Key Terms8. Liens: (a non-possessory interest in real
property) in order of priority, by date filleda. Property tax b. Mortgagesc. Mechanics liens
9. Easements: (right to use for particular purpose)a. Easements Appurtenant: burdens one parcel for
benefit of another; i.e. driveway accessb. Easements in Gross: benefits to a person rather
than the land; i.e. A has right to enter b’s land to fish in B’s pond.
Phase 1 Exam Review
Chapter 2: Key Terms10.Common Interest Developments
a. Condominiums: owns unit in severalty (one individual), shares ownership of common elements
b. Townhouses: owner in individual unit plus the land under his/her unit and an undivided interest in the common areas
c. Cooperatives: ownership vested in a single entity – usually a non-profit corporation formed by the unit owners who own shares in the corp.
d. Timeshares: multiple owners purchase interests in a property - a time slot
Timeshare Estate: fee simple interest in property Timeshare Use: purchases the right to use the property – a form of
non-possessory right.
Phase 1 Exam Review
Chapter 2: ConceptsRights:
(1) demands that our government is obligated to enforce, non-revocable,
(2) cannot be canceled ignored or otherwise lessened by other private citizens, and
(3) enduring and do not fade away with time.Permission: revocable rights
Phase 1 Exam Review
Chapter 2: ConceptsRights
Personal: guaranteed by law Property:
Exclusive Possession Quiet enjoyment Freedom to dispose
Real vs. Personal Property Rights Fixtures: attached to real asset (property) Clothing, paintings and pictures
Phase 1 Exam Review
Chapter 2: ConceptsNon-Possessory Rights
Affirmative easements (right of ways, sewer lines)
Easements Appurtenant Dominant Parcel (recipient of benefit) Servient Parcel (rights constrained by easement)
Easements in Gross Commercial easements
Liens Tax and Assessments, Mechanic’s ,Court
Awarded Damages
Phase 1 Exam Review
Forms of C-Ownership* General Partnerships Limited Partnerships LLC’s Coops Trust
* Interests may not be subdivided
Phase 1 Exam Review
Chapter 3: Key Terms1. Accretion vs. Reliction: Accretion is an increase in
the amount of land you own due to deposits by water action. Reliction is an increase in the land you own due to water levels dropping.
2. Adverse Possession: When the owner of land may involuntarily and unknowingly give up rights to land.
3. Covenant of Seizin: The promise that the grantor truly has good title and the right to convey it. Two additional covenants; Covenants against encumbrances, right to convey, and quiet enjoyment.
Phase 1 Exam Review
Chapter 3: Key Terms4. Types of Deeds:
a. General warranty: greatest protection to granteeb. Special warranty: same as above, except to defects
that arose during the grantor’s tenurec. Deed of bargain and sale: grantor offers the grantee
no warrantees or covenants d. Quitclaim deed: no warrantees of any sort, does not
convey an after-acquired title. It does not imply that the grantor owns the property
e. Judicial deeds: by court order to convey title; i.e. sheriff’s deed issued during court-ordered foreclosure sale
Phase 1 Exam Review
Chapter 3: Key Terms5. Doctrine of Constructive Notice: the common law
tradition that holds a person cannot be bound by claims or rules that he or she has no means of knowing.
6. Lis Pendens: a recorded notice stating that there is a lawsuit pending that may affect title to the defendant’s real estate.
7. Encroachment: Unauthorized intrusion of a building or other improvements unto property owned by another.
8. Habendum Clause: a clause that defines or limits the type of interest being conveyed.
Phase 1 Exam Review
Chapter 3: Key Terms9. Metes and Bounds: the course and distances
defining a piece of property.10.Title Abstract / Insurance: An insurance policy
that covers any expenses incurred in proving ownership.
11.Easement by Estoppel: an easement granted to one owner cannot subsequently be removed from a subsequent owner.
12.Encroachment: Unauthorized intrusion of a building or other improvements unto property owned by another
Phase 1 Exam Review
Requirements for a Deed Grantor and grantee Recital of consideration Words of conveyance Covenants
Seizin No Encumbrances Quiet Enjoyment
Habendum Clause
Phase 1 Exam Review
Requirements for a Deed Exceptions / Reservations Description of land Acknowledgement Delivery
Phase 1 Exam Review
Chapter 5: Key Terms: Real Estate ValueA. The 5 Attributes of Land
1. Unique location: no two parcels are the same
2. Unique composition: geological composition varies
3. Durable: long-lasting4. Finite Supply: no more is being created5. Useful: may be put to many uses
Phase 1 Exam Review
Chapter 5: Concepts: Real Estate ValueB. Four Forces
1. Social: population trends, family composition, aging, home offices, security, leisure time activities
2. Economic Forces: income levels, employment opportunities, construction cost, availability and cost of credit, utility costs
Phase 1 Exam Review
A.Chapter 5: Concepts : Real Estate Value
B. Four Forces3. Physical/Environmental Forces:
Location, access to transportation, topography, Climate/Weather
4. Governmental Forces: Taxes (city, county, property), Federal Monetary Policy (cost and availability of credit), quality of schools and services, restrictive covenants, zoning