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Chapters 1-2

Basic Concepts, Property Ownership & Interests

QuestionAnswer
Bill of Sale An instrument that may be used to transfer ownership of personal property
Chattel Synonymous with personalty and personal property. Everything that is not land or that is not permanently attached to land.
Closing The consummation of a real estate contract. Possession is conveyed on the day of closing (the day the transaction is recorded and funded).
Free market One in which the buyer and seller negotiate a purchase and sale without undue pressure, agency, or outside influence other than the principle of supply and demand.
Highest and best use That use which will provide the property owner the best possible return on an investment over a specified time period.
Immobility Physical characteristic of land. Land cannot be relocated from one place to another.
Improvements Structures, walls, roads and so on. Included in the definition of real estate.
Indestructibility Physical characteristic of land. Land is a permanent commodity and it cannot be destroyed.
Land use controls May be public or private. Public include: zoning, building codes, environmental control laws. Private: protective/restrictive convenants, deed restrictions
Listing contract An agreement whereby a property owner employs a real estate broker to look for a buyer for the property described in the contract and promises to compensate the agent.
Nonhomogeneity Physical characteristic of land. Uniqueness. No two parcels are alike.
Offer to Purchase and Contract (OTP or OPTC) A bilateral enforceable contract for the sale or real property.
Personal Property Everything that is not land or that is not permanently attached to land. Synonyms: chattel, personalty.
Personalty Synonymous with chattel and personal property. Everything that is not land or that is not permanently attached to land.
Real Estate Land and everything permanently attached to land. Synonyms: real property, realty
Real Property Synonymous with real estate and realty. Land and everything permanently attached to land.
REALTOR A licensee who is also a member of the local, state, and national associations of REALTORS. Three memberships in one.
Realty Synonymous with real estate and real property. Land and everything permanently attached to land.
Scarcity An economic characteristic of land. In short supply in comparison with demand.
Situs An economic characteristic of land. LOCATION. Has the greatest effect on property value.
Specific performance Arises from nonhomogeneity. If a seller contracts to sell real property, the law does not consider money a substitute for this duty.
Real property includes The surface of the land, all improvements that are attached to the property, everything beneath the surface, and the airspace above the land.
Personal property is the opposite of Real property. Personal property is readily moveable.
Physical characteristics of real property PIN: Permanence, Immobility, Nonhomogeneity
Economic characteristics of real property SLIP: Scarcity, Location, Improvement (modification through), Permanence
Real property has unique economic characteristics based on physical location (situs).
Failure to make the highest and best use of land results in a lower value
Why are land controls necessary? To protect the vested interests of the general public as well as of the surrounding landowners.
Are all land controls public? No.
The real estate profession requires knowledge of many fields, but is a _________ based profession. Service
A real estate market is local and is an example of the _________ concept. Free market
True or false: The real estate market is local and responds immediately to fluctuations in supply and demand. False. It IS local, but its response tends to be slow.
True or false: The real estate industry may feel the effects of depressed economic conditions before other segments of the economy. True
True or false: The real estate agent must have specialized knowledge of a variety of topics which include legal advice. False. Offering legal advice without holding a license to practice law is committing the unauthorized practice of law (UPL).
How are licensees and brokers related in NC? They're the same thing. The terms have been considered synonymous since NC became an all-broker state on April 1, 2006.
What causes the real estate market to be local in character? The immobility and nonhomogeneity of land.
Zoning: public or private? Public
Deed restriction: public or private? Private
Real estate investment objectives To produce income or profit through: 1) appreciation; 2) positive cash flow; and 3) tax advantages.
What is appreciation? Increase in market value
Positive cash flow - when gross effective _______ exceeds total of operating __________. Income, expenses
Can depreciation (lessening of market value) have a positive effect for an investor? Yes. It may provide an annual tax reduction, postponing tax on the depreciated amount until the property is sold.
North Carolina adopted its Real Estate License Law statute in 1957
True or false: Government regulations can affect supply and demand in the real estate market. True
How does a provisional broker (PB) become an independent (full) broker? S/he must work under the supervision of a broker-in-charge (BIC) until completing all post-licensing requirements.
A BIC must have a minimum of _______ years of full-time real estate experience. two
Can a broker obtain the minimum experience requirement to become a BIC while still in provisional status? Yes. But s/he cannot become a BIC until the provisional status is removed.
Air rights Rights in the air space above the surface of land.
Alienation Transfer of title to real property.
Appurtenance All rights or privileges that result from ownership of a particular property and that move with the title ("run with the land").
Appurtenant easement A right of use in the adjoining land of another that moves with the title to the property benefiting from the easement.
Bundle of rights DEEPC: Disposition, Enjoyment, Exclusion, Possession, Control
Condemnation The act of taking a property by eminent domain. Fair compensation MUST be provided.
Cooperative A form of ownership in which stockholders in a corporation occupy property owned by the corporation under a lease.
Co-ownership Title to real property held by two more more persons (co-owners) at the same time. Examples: tenancy in common, tenancy by the entirety
Curtesy The husband's interest in the real property of his wife.
Declaration of restrictions The instrument used to record restrictive covenants on the public record.
Defeasible fee Fee simple determinable. Also called "qualified fee". Inheritable. Associated phrase... "so long as". Title may be revoked and revert to the grantor if property is not used for its specified purpose.
Dower The wife's interest in the real property of her husband.
Easement A right of use in the land of another.
Easements in gross A personal right of use in the land of another without the requirement that the holder of the right own adjoining land.
Emblements Personal property that requires planting and cultivation. (fruits of industry) Also the right of former owners to re-enter property to cultivate and harvest annual crops they grew.
Eminent domain The right of the government (i.e., a municipality) to take private land for public use.
Encroachment A trespass on land belonging to another as the result of intrusion by some structure or other object.
Encumbrance A claim, lien, charge, or liability attached to and binding upon real property.
Escheat The power of government to take possession of property left behind by a decedent who died intestate (without a will) or without qualified heirs.
Estate An interest in real property sufficient to give the owner the right to possession.
Estovers The right of a life tenant to cut and use a reasonable amount of timber to repair buildings or use for fuel. Does not allow harvest and sale for profit.
Fee simple absolute The highest form of ownership. Provides the bundle of rights.
Fixture An item of personal property attached to the land or which constitutes a permanent improvement on the land such that the law deems it to be part of the real property to which it is attached. (See total circumstance test: IRMA)
Foreshore The land between the mean high watermark and the low watermark; owned by the state. See littoral rights.
Freehold estate An interest in land of at least a lifetime. Generally identified with the concept of title or ownership. May be fee simple or life.
Fructus industriales Fruits of industry. Growing things on real estate which require planting and cultivation annually. Typically considered personal property.
Fructus naturales "Fruits of the land." Considered real property. Products of the soil which do not require cultivation. Are considered real property as long as they are attached to the soil.
Hereditament All the corporeal and incorporeal attributes of real estate which can be inherited.
Intestate succession When the decedent dies intestate (without a will): the distribution of a decedent's property according to statute.
Joint tenancy A form of ownership in which two or more people own equal shares of a property. Requires the unities of possession, interest, time, and title (PITT).
Severalty Sole ownership. Title is held by only one person.
Total circumstance test: IRMA Intention, Relation, Method, Adaption.
Condition subsequent A fee simple estate conveyed with conditions set by the grantor. Associated phrase: "can never [be used as]"... Acts upon or usage by the property are limited by the grantor. "Can never be used as a landfill." "You can never sell fireworks." Etc.
Judgment lien A general lien against all real and personal property the judgment debtor owns in the county in which the lien is recorded. Notice of the lien may be filed in other counties as well.
Land The surface of the earth, the area above and below the surface, and everything attached naturally thereto.
Lateral support The right of land to be supported in its natural state by adjacent land.
Leasehold estates Of limited duration. Provides the right to possession and control, but not title.
Levy Imposition of a tax executing a lien.
Lien A claim or charge against property arising from a contractual agreement or the operation of law. Examples: mechanic's lien, judgment lien
Life estate Noninheritable freehold estate. Created only for the life of the named life tenant.
Life tenant One who holds a life estate.
Lis pendens L., "lawsuit pending". Recorded notice of an existing lawsuit that affects title to all or part of the property of the named defendant.
Littoral rights The rights of landowners whose property borders a navigable body of water (ocean or lake). Ownership to mean high water mark if one exists.
Marital life estates Created by intestate succession statutes. Surviving spouse may choose one-third interest in real property owned in severalty. If chosen, interest in willed or inherited property is forfeited.
Mineral lease A leasehold estate in the area below the surface of land.
Nonfreehold esate (leasehold estate) Provide possession and control, but not title.
Types of nonfreehold estates For years, from year to year, at will, at sufferance.
NC Condominium Act Applies to condos created on or after 10/1/86. Offers protections which may be waived if condo is non-residential.
Protections offered by the NC Condominium Act Public offering statement; 7 day right of rescission; escrow of deposit; resale certificates; and warranties.
Partition A legal proceeding by which co-ownership of property is divided so that each individual holds title in severalty to a specific portion of the property.
Party wall A common wall used by two adjoining structures.
Police power The governmental right to regulate the use of real property for the public interest.
Prescription A method of obtaining an easement. User must prove in court that use is open, notorious, and continued and uninterrupted for the required prescription period.
Profit/profit a prendre Intangible rights in the land of another (e.g. minerals, soils, timber, fish or game). See tenements.
pur autre vie "For the life of another". A life estate granted to an individual for the life span of another. Inheritable during the measuring life. Grantee is "life interest" person.
Remainderman Has a remainder, or future, interest in a life estate (conventional) upon the death of the original grantor.
Reversionary interest The interest held in a conventional life estate by the grantor or his heirs, assigns, etc. Estate reverts once the life interest person dies.
Riparian rights Appurtenant rights of an owner of property bordering a flowing body of water.
If a property owner owns all the land surrounding a non-navigable body of water, s/he owns all of the land under the water.
If there is a non-navigable body of water and more than one owner, ownership extends to the center of the water, unless the deed states otherwise.
If the body of water is navigable, the ownership extends to the mean high water mark if one exists.
Subjacent support The right to have one's land supported from below.
Survivorship Surviving partner automatically takes over the share of a deceased partner without probate.
Tenancy by the entirety Limited to legally married couples. Includes survivorship. Requires five unities of marriage, possession, interest, time, and title.
Tenancy in common Most common form of ownership for unmarried co-owners. Title is held by two or more persons. No survivorship. Each holds undivided interests; shares need not be equal. Inheritable.
Settlement The date on which buyer and seller sign all documents related to the consummation of the real estate transaction. SETTLEMENT IS NOT CLOSING.
Tenements All those things included in the definition of land and include both corporeal and incorporeal rights in the land as well as profit/profit a prendre. (See profit/profit a prendre.)
Time sharing Any right to occupy a property for five or more separated time periods over a span of five or more years.
Townhouse Ownership of unit and footprint thereof. Attached horizontally.
Condominium Ownership of airspace of individual unit and co-ownership in common areas. May be attached vertically.
Uniform Commercial Code (UCC) Provides for the lender to retain a security interest in chattel until the lender is paid in full. Notice of such interest is recorded using a document called a financing statement.
Total circumstance test: IRMA Intention, Relation (of attacher), Method, Adaptation. Used to determine whether an item is a fixture (real property) or personal property in the absence of a contractual agreement by the parties.
What is the most important factor in IRMA? Intention. Was it intended to be permanent?
Another word for attacher is Annexor
How do easements arise? Express (in writing, statute of frauds); Implied (actions of parties); Operation of law (court order)
Express easements should be ______________. recorded
Implied easements have no _____________. documentation
Easement by ___________: implied (for example, seller conveys title to landlocked property). necessity
How may an easement be terminated? Release; combination of involved parcels; abandonment; cessation of purpose; expiration of specific period for which easement was created.
Rights in the land of another provide a right, but not title or _________________. possession
Fee simple estates are _______________; most life estates are not. inheritable
If a decedent dies intestate and without qualified heir(s), his/her property ____________ to the state. escheats
A ___________ cannot defeat the marital interest of a surviving spouse. will
Created by: PoeticVine