McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved CHAPTER1CHAPTER1 CHAPTER1CHAPTER1 Introduction to Real Estate Finance and Investments

1-2 Copyright ©2008 by The McGraw-Hill Companies, Inc. All Rights Reserved Rights Realty vs. Personalty Statute of Frauds Property Rights  Possess, Use, Enjoy, Dispose Holder of an interest in property right

1-3 Copyright ©2008 by The McGraw-Hill Companies, Inc. All Rights Reserved Estates Possessory estates  Freehold Fee Simple Estates Qualified Estates Life Estates  NonFreehold: Leasehold Estates Estate for Years Estate from Year to Year

1-4 Copyright ©2008 by The McGraw-Hill Companies, Inc. All Rights Reserved Estates Nonpossessory Estates: Future Estates  Reversion The right retained by a grantor or grantors heirs  Remainder Contingent  Example: Must graduate from college Vested  No contingency attached

1-5 Copyright ©2008 by The McGraw-Hill Companies, Inc. All Rights Reserved Additional Interests Easements: Right of Use  Easement in Gross Example: Utility company easement Servient estate only  Appurtenant Easement Dominant and servient estates Encumbrance

1-6 Copyright ©2008 by The McGraw-Hill Companies, Inc. All Rights Reserved Title Assurance A Good & Marketable Title What is title?  Abstract Term  Quantity of Rights Conveyed  Abstract of Title  Title Chain

1-7 Copyright ©2008 by The McGraw-Hill Companies, Inc. All Rights Reserved Title Assurance Deeds  Grantor & Grantee  General Warranty Deed Covenants: Seisin, Quiet Enjoyment, Against Encumbrances, Further Assurance, Warranty Forever Strongest deed for a grantee to receive No encumbrances on title except those noted

1-8 Copyright ©2008 by The McGraw-Hill Companies, Inc. All Rights Reserved Title Assurance Deeds  Special Warranty Deed Limits the covenants to the ownership duration of the current grantor. No guarantees on the ownership of prior grantors.  Quit Claim Deed No Covenants The least protection to the grantee Grantor conveys whatever right “may exist”

1-9 Copyright ©2008 by The McGraw-Hill Companies, Inc. All Rights Reserved Title Assurance Abstract & Opinion  Title Search Grantor-Grantee Index Mortgagor-Mortgagee Index  Lawyer’s Opinion on Title Is it good and marketable? Are there any title clouds? Is there a break in the title chain?

1-10 Copyright ©2008 by The McGraw-Hill Companies, Inc. All Rights Reserved Title Assurance Title Insurance  One time premium  Unseen Hazards in the Public Record Risk is spread among many property owners  Owners’ Policy Insures the interest of a new owner  Lender’s Policy Insures the interest of the lender

1-11 Copyright ©2008 by The McGraw-Hill Companies, Inc. All Rights Reserved Recording Acts Recording protects the interest of the owner Constructive Notice  A person has whatever information is in the public record Mechanics Liens  Relation Back Doctrine  Affidavit of Title

1-12 Copyright ©2008 by The McGraw-Hill Companies, Inc. All Rights Reserved Limitations on Property Rights Government (Public) Restrictions  Police Power Zoning: land use restriction Building Codes  Eminent Domain Private Restrictions  Deed Restrictions: Qualified Fees  Subdivision Restrictions