Exam #1 Key Terms & Questions
Terms in this set (121)
Real estate values are determined by interactions in 3 distinct markets/ sectors
User (space) Markets, Capital Markets, Governmental sectors
Real Estate User markets
Characterized by competition among users for physical locations and space.
Buyers receive right to use space
Real Estate Capital Markets
serve to allocate financial resources among households and firms requiring funds
Participants in these markets invest in stocks, bonds, mutual funds, private business enterprises etc.
Real estate competes for scare investment capital with a diverse menu of other investment opportunities available in the capital market
Real Estate Investment Trust.
They are a special type of corporation and a creature of the US Tax Code
Shareholders receive the same limited liability protection as shareholders in regular C corporations, but they are not taxed at the entity level if they satisfy a set of restrictive conditions on an ongoing basis
A custom "site-built" house
Local government has largest influence through zoning codes and land use regulations, fees, building codes etc. Property taxes
State government uses licensing of professionals and agents, statewide building codes (lowest government impact of the three)
Federal government uses income tax policy, housing subsidy programs, federal flood insurance, etc.
A market where tenants negotiate rent and other terms with property owners or their managers is referred to as a
The market in which required rates of return on available investment opportunities are determined is referred to as the
The actions of local, state, and federal governments affect real estate values through
Primarily through User markets,
Primarily through the capital market,
Primarily through their taxation policies.
What is the Proportion of households who own their home?
Of the following asset categories, which has the greatest aggregate market value?
Non-government real estate
Storm water drainage systems are best described as
Improvements to the land
What is the single largest asset category in the portfolio of a typical U.S. Household?
Real Estate have all of the following
Local markets, high transaction costs, segmented markets
Which of the following are important to the location of commercial properties
Access to customers, visibility, and availability of communications infrastructure (schools are not important)
Which of the following attributes of a home are the most difficult to observe and value?
Location attributes are the hardest to value.
A bundle of Rights
What are rights?
Claims that the government is obligated to enforce
Derived from constitution
Non-revocable (Can't cancel in the interest of health safety and welfare)
Enduring (long lasting)
Freedoms guaranteed by the Constitution
Supreme court interpretations of constitution
Enjoyment of the use or benefit
Freedom to dispose as one pleases (within the limits of safety)
Rights in land and its permanent structures
(Surface of the earth and improvements. Air up to tallest structure, beneath earth)
All other property
Personal and Household goods
Real Property that formerly was personal property
Determining when something becomes a fixture
--Manner of attachment
--Character of the article and manner of adaptation
(Custom screens, storm windows, church pews, customer designed furniture)
The right to use land for a specific and limited purpose.
Right of use a parcel of land "enjoys" over an adjacent parcel
Runs with the land: rights and obligations are inseparable from the parcels involved
--Driveway or access (right of way)
--Light and air easement
Easements in Gross (Commercial Easements)
Right to use land, unrelated to any other parcel
--Extract Minerals or oil and gas
--Build a roadway or railway
--Lay a pipeline, powerline or cable
Conveys all rights of the easement
Rights limited to one user only
an interest in real property that serves as security for an obligation.
(Usually a debt)
Arises out of actions unrelated to ownership of the property.
(court awarded damages)
Derives directly from events related to a property
Arise from ownership and use of the property
Property Tax lien
Automatic lien placed by local governments to assure payment of property taxes.
Lien assessment by local governments to ensure that those who receive the primary benefit of neighborhood improvements will be charged their "fair share"
Community development district (CDD) Liens
A quasi-governmental unit with broad powers to finance, create, operate and maintain infrastructure and related services within a private development or community.
Liens that arise from construction and other improvements to real estate
Direct Co-Ownership Types
(A house with multiple owners)
Tenancy in Common
Tenancy by the Entirety
Legal Life Estates
A life estate created by the action of law
Tenancy in Common
The "normal" form of direct co-ownership and is as close to the fee simple absolute estate as is possible
The default form
Each owner can sell or mortgage their interest independently
"right of survivor-ship" restricts inheritance to heirs of the last surviving owner/
Prevented or restricted by law in some states
Tenancy by the entirety
Joint tenancy for husband and wife
Simplifies effect of homestead if minor children are present
Combines single ownership and tenancy in common
Created by condominium declaration
Restrictions on sale or rental
Has been history of owners not understanding the restrictions and obligations
Impose limits on the uses of land
(setback lines, height restrictions for structures, minimum floor area, no chain link fences, no rvs or boats parked in view of the street)
Two methods of creating Restrictive Covenants
Restriction in a deed conveying a single parcel of land to a new owner
Restrictions imposed on an entire subdivision at its creation
How are restrictive covenants enforced?
Enforced by court injunctions and only be "parties at interest"
These type of easements are beneficial to the property or owner
These type of easements are constrained or diminished to the property or owner
What are some forms of property rights?
Lien, Easement, Leasehold, Mineral Rights
What is an example of an easement in gross?
Power line easement
Rules used by courts to determine whether something is a fixture include
Intention of the parties, Manner of attachment, character of the article and manner of adaption, relation of the parties
What are some titled estates?
Fee simple absolute, Fee simple conditional, Conventional life estate, legal life estate
Which of these forms of co-ownership could best be described as "normal ownership" except that multiple owners share identically in one bundle of rights
Tenancy in Common
Which of these marriage related forms of co-ownership gives each spouse a one-half interest in any property that is "fruits of the marriage"?
Which lien has the highest priority
Property tax lien
Restrictive Covenants for a subdivision usually can be enforced by
Subdivision residents, Lenders with mortgage loans in the subdivision
Timeshare programs can involve which of the following claims or interests?
Fee Simple ownership, Leasehold interest, License, Condominium
Every Condominium buyer needs to know the details of which documents
Condominium declaration and bylaws
Requirements of a deed
Grantor and Grantee
Recital of Consideration
Words of conveyance
Exceptions and reservations
Description of land
Grantor and Grantee
Only the grantor must meet the conditions of legal age and legal competency for a deed.
Recital of Consideration
Only the grantor has to make promises to perform
Words of conveyance
"does hereby grant, bargain, sell, and convey unto" This serves two purposes
Legally binding promises for which the grantor becomes liable, this is, if the promises prove to be false, the grantee can sue for damages
defines or limits the type of interest being conveyed
Exception and reservations clause
contains a wide variety of limits on the property interest conveyed
Description of Land
The most important requirement for the land description is that it be unambiguous (Street Address, tax parcel number, reference to bends in rivers, large rocks, ridges, etc)
to confirm that the deed is in fact the intention and action of the grantor
a deed must be "delivered" to be valid
Delivery refers to an observable, verifiable intent that the deed is to be given to the grantee.
Deed that conveys an individual's property rights to another but has none of the covenants of the warranty deed
Involuntary conveyance of real property rights by an individual demonstrating a use that is
(1) hostile to the interests of the owner
(3) open and notorious
Easement of necessity
A created implied right of use that allows the owner of a land-locked parcel the right to use a path across another property for ingress and egress
Easement by estoppel
The right of use created if a landowner gives an adjacent land-owner permission to depend on her land
Statute of Frauds
Contract must be written to be enforceable
(deeds, mortgages, contracts)
Metes and Bounds
A sequence of directed distances
(Compass directed "walk around property")
Most difficult to interpret
Mete is a unit of measure
Bound is a boundary marker
Who needs to be competent for a valid deed?
Just the grantee
The interest being conveyed by a deed is specified in the
Covenant of seizin
A promise that the grantor truly has good title, and that he or she has the right to convey it to the buyer
Covenant of Quiet enjoyment
A promise that the property will not be claimed by someone with a better claim to title
The highest-quality form of deed is the
General Warranty Deed
A deed used mainly to clear up possible "clouds" or encumbrances totitle (Conflicting interests) is the
General Warranty Deeds
Highest form of deed in which the grantor becomes liable for all possible covenants or legal promises assuring good title
If a landowner sells the front part of a parcel of land, retaining the back portion as a "landlocked" parcel, and if there is an existing informal path across the front parcel to the back one the seller is likely to retain the path as a
Implied easement by prior use
If a neighboring landowner drives across a person's land openly and consistently for a number of years, the neighbor may acquire an easement by
If documents conveying interests in real property are properly recorded in the public records, they are binding or enforceable on all persons, regardless of whether those persons are aware of the documents by the
Doctrine of constructive notice
Which of these is a widely used for of "evidence of title"?
Title insurance commitment
The most common form of legal description for urban residential property is the
Play lot and block number
Factors that make it uniquely difficult to establish clear title in real estate compared to most personal property items include
Length of the ownership history in real estate.
Development taking place in rural areas well beyond the urban fringe. Such development can enable builders to offer lower prices than buyers can obtain within developed areas.
School of planning thought that seeks to revise residential neighborhood features of the preautomobile era. including sidewalks houses with front porches located close to streets, narrow grid pattern streets. and support nonresidential services interpresed within neighborhoods
Ordinances have been the main approach to land use regulation in the US.
They use residential, commercial, industrial, automotive.
They use districts on a zoning map
Favorite of economists (in principle)
Charging a fee for using fast land on the high way
Despised by many in the building community
Appear to be used more as revenue source than tool to guide land use
A land use inconsistent with current zoning classification, but which is permitted to remain because it predated the current zoning. To be allowed to remain, the use must be uninterrupted, and the property structures cannot be substantially improved
A permitted deviation for a particular property from the applicable zoning requirements. To be granted only when the zoning ordinance imposes undue hardship to the property owner
Control by a community of an area larger than the community or jurisdiction for planning and zoning purposes, granted by the state legislature, which allows local governments to plan and control urban development outside their boundaries until annexation can occur.
The assessed value less any applicable exemptions to determine the amount of property tax owed
Is the right of government to acquire private property, without the owner's consent for public use in exchange for just compensation
(The legal procedure involved is called condemnation)
Ad valorem taxes
Property taxes that are based on the market value of the property
Zoning is an exercise of which type of general limitation on property rights?
A comprehensive plan usually deals with which of the following elements
Land uses, Population, Public Services, Natural resources.
Property taxes are a major source of revenue for
Both local governments and school districts
The authority for approving site plans for large projects ultimately rests with the
Elected governing commission or council
The most accurate conclusion about the regressivity of the property taz is that it is
Regressive, but when benefits are considered the net result is not regressive
Traditional land use controls (pre 1970) include)
Zoning, Building codes,subdivision regulations
Radon Gas is
A naturally occurring result of geologic activity
New urban ism is a term used to describe
The theory that residential and commercial uses should be integrated, streets and parking should discourage through traffic, and neighborhoods should be pedestrian oriented.
Elements of traditional zoning include
Setback requirements, Bulk limits, Land use categories Provision for special use districts
Externalities in land use include all
Leap frog development
Increase storm runoff from paving
Noise created by a land use
The attractions or important access needs that one land use has for other land uses
Economic efficiencies due to multiple local industries
The emergence of specialized resources in response to demand from multiple industries
Convert percentage rate to Mills
14.5 Mills equals 1.45%
115 Mills equals 11.5%
60 Mills Equals 6%
Economies of scale
Growth of an industry within a city can create special resources and cost advantages for that industry leading to savings per unit
Bid Rent Model
Model of how land users bid for location that reveals the influences on how density of land use is determined, how competing urban land uses sort out their locations, how urban land value is determined and why land uses change over time.
The central business district
Is used in the calculation of the bid-rent model. It is the point zero at which all employment and exchange takes place.
The "gravity" that draws economic activity into clusters is
Demand for access or proximity
Spatial or distance relationships that are important to a land use are called
Cities have tended to grow where
Transportation modes intersect or change
The economic base multiplier of a city tends to be greater if the city is
The best example of a base economic activity would be a
Regional Sales office
Important supply factors affecting a city's growth or growth potential include
Business Leadership, Presence of any industry economies of scale, Labor force characteristics, Education system
True things about agglomeration economies
They result from demand created by multiple industries
They create a readily available supply of highly specialized goods and labor
They tend to reduce risks in real estate
They occur in larger cities
WHich of these influences will decrease the level of a bid rent curve at the center of the city?
Faster Travel Time
In a system of bid-rent curves, assuming that households are identical except for the feature noted, which of these prospective bidders will bid successfully for the sites nearest to the CBD?
Households with the greatest number of commuting workers
A large university is an example of what kind of economic phenomenon?
Industry economies of scale
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