1. © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved McGraw-Hill/Irwin Slide 1 CHAPTER ONE AN INTRODUCTION TO REAL ESTATE INVESTMENTS: LEGAL CONCEPTS

2. © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved McGraw-Hill/Irwin Slide 2 Chapter Objectives Define Property Rights and Estates Define types of deeds and titles Methods of title assurance Understand the purpose of a mortgage and a note

3. © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved McGraw-Hill/Irwin Slide 3 Property Rights and Estates Real Estate includes land and improvements that are permanently attached Real Estate also includes certain intangible characteristics known as property rights (real property)

4. © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved McGraw-Hill/Irwin Slide 4 Property Rights and Estates Property rights include the right of a person to: –Possession –Use –Quiet enjoyment (legal term) –disposal

5. © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved McGraw-Hill/Irwin Slide 5 Property Rights and Estates Real Estate can include possessory and non-possessory interests –Easements –Mortgage Freehold (indefinite time period) and non- freehold (definite time period) estates

6. © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved McGraw-Hill/Irwin Slide 6 Freehold Estates Fee simple absolute Life estates Future life estates –Reversion –remainder

7. © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved McGraw-Hill/Irwin Slide 7 Non Freehold Estates (Leasehold) Estate for years (exact duration) Estate from year to year (period to period)

8. © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved McGraw-Hill/Irwin Slide 8 Assurance of Title and Deeds Title is a term used to refer to documents, records, and acts that prove ownership. Abstract of title Deeds convey title –Grantor and grantee

9. © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved McGraw-Hill/Irwin Slide 9 Assurance of Title and Deeds Continued General Warranty Deed Special Warranty Deed Quitclaim Deed

10. © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved McGraw-Hill/Irwin Slide 10 Assurance of Title and Deeds Continued Abstract and Opinion Method Title Insurance Method Owners Policy Lenders Policy

11. © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved McGraw-Hill/Irwin Slide 11 Recording Acts Establishes priority among competing claimants Senior Mortgages vs. Junior Mortgages Mechanics Liens Tax Liens

12. © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved McGraw-Hill/Irwin Slide 12 Limitations on Property Rights Public Restrictions Private Restrictions Police Power