Enforce zoning, building codes, property taxes, infrastructure, etc
Segmentation of User/Space markets
Causes rental prices for physically "similar" space to be different because of location, approximation to commodities, property type.
RE Markets are localized because
-Heterogeneous (no perfect substitute)
RE market characteristics
-Markets hardly ever in balance
-Incomplete market information
-High transaction costs
-RE is illiquid- doesnt sell quickly
-Decisions are around for a long time
Rights that give RE value
-Right to prevent trespass
-Right to use and be free of others interference AKA freedom of nuisance
-Right to dispose of our property, or alienate it
Personal Property VS Real Estate
Personal property can be picked up and move around without rules and regulations set by the government. Real estate is the land, and permanent fixtures attached to it (like a house)
Fee Simple Conditional
Ownership is subject to a condition. Like someone may have an interest in an apartment building as long as they only permit certain people to occupy it. If that condition is broken then the previous owner can take the apartment building back.
Ordinary life estate and remainder
When someone may sell or donate their property (for compensation) to another party, however, they get to keep all the rights up until they die. Then after they die it becomes a fee simple absolute estate after the persons death.
A right of use (or a restriction) that burdens a parcel of land (the servient) for the benefit of another parcel of land (the dominant parcel). For example, a driveway crossing one parcel of land from another.
Easement in gross
When there is more than one servient parcel and not necessarily a dominant parcel. For example like a telephone or utility wire being run across multiple properties
A grant of permission to use RE. Like a ticket that says it is okay to park on a parking ramp is a license.
These covenants arel ike another set of rights drawn from the bundle that prohibit conduct on a property. For example, setback lines, height restrictions, limitations on pets, etc.
How restrictive covenants are created
-Restriction in a deed conveying a single parcel of land to a new owner
-Restrictions imposed on an entire subdivision before any lots are sold (by CCR's [conditions, covenants and restrictions])
An interest in real property that serves as security for an obligation.
1) Property tax lein is always first priority
2) Mortgage and mechanics leins
3) Judgment leins
Indirect co ownership
When more than one person or a business company owns it all together. It's not owned by just one person but the company as one whole creates this artificial entity that owns it.
Tenancy in Common
"Normal" form of direct co ownerhsip and is as close to the fee simple absolute estate as possible. Each co owner retains full rights of disposition and is free to morgage, or to convey his or her ownership share to a new owner.
The interest of a decedent co owner divides equally among the surviving co owners and nothing passes to the heirs of the decedent. Difficult to create and less beneficial.
Tenancy by the entirety
Form of joint tenancy for husband and wife. At the death of a spouse TBTE can reduce probate costs and complications since no disposition of property occurs in the eyes of the law. It is easy to create and less fragile.
Form of ownership combing single person ownership with tenancy in common. Owner holds fee simple interest as an individual owner to a certain space, like an apartment.
Reasons for complexity of the conveyance of RE
-Real property is a complex bundle of rights
-Rights to land are enduring: Rights available today depend on transactions long ago
-Land is a continuous surface... Boundaries are not always obvoius or natural
-A special written contract for conveying permanent interest in real property.
-Must be in writing to be upheld by a court
-Name of grantor and grantee
-Consideration and conveyance
-Contain certain covenants and clauses
-Contain exceptions and/or reservations and physical descriptions
-Acknowledgement and delivery
Defines/limits interest(s) conveyed
-Must be of legal age
-Must sign the deed
-Only needs to be identifiable
Legally binding promises
Three Main Covenants
-Seizin: Grantor has good title and right to convey it
-Against encumbrances: No encumbrances except as noted in deed (leins, easements)
-Quiet enjoyment: No one with a better claim to title
Property descriptions must
-Be unambiguous and enduring
-Described in 1 of 3 ways: Metes and bounds, plat lot and block #, gov't rectangular survey
Unacceptable descriptions in deeds
Street address and tax parcel number
Confirmation that grantor acted voluntarily
Observable, verifiable intent that deed is to be given to grantor
(General) Warranty deed
Includes all the covenants (seizin, no encumbrances, quiet enjoyment). Considered the best deed to have.
Special Warranty deed
Time limit on no encumbrances. The grantor asserts only that he or she has created no undisclosed encumbrances during ownership, but asserts nothing about encumbrances from previous owners.
Deed of bargain and sale
No covenants, implies claim of ownership, used by businesses
No covenants. It is used to clear clouds on the title and make it a marketable title.
One that is free of reasonable doubt
Voluntary conveyance by deed
Ordinary sale and transfer of title
Involuntary conveyance by deed
-Probate (distribution of estate)
Voluntary conveyances without a deed
When there is an implied easement or easement by prior use or necessity. Easement by prior use or necessity is caused when an owner subdivides land and creates a parcel of land to be landlocked.
Involuntary conveyance without deed
Must meet 5 conditions:
1) Hostile to owner's interests
2) Actual: the land must be employed in some natural use
3) Open and notorious: there can be no effort to disguise or hide the use from the owner
Statute of frauds
Contract must be written to be enforceable
A contract recorded in public records is considered known
Doctrine of constructive notice
Cannot be bound by what you cannot know... OR can be bound by what you COULD know
Collection of evidence indicating a particular person(s) as holder of the "fee"
Evidence of title
Assurance of a good or marketable title
2 forms of evidence of title
1) Title abstract with attorney's opinion
2) Title insurance commitment
Metes and bounds
-A sequence of directed distances
-Most flexible and difficult to interpret
Plat lot and block number
Lot and block number sufficient to describe parcel
Government Rectangular Survey
There is a baseline and principal meridian. Range lines go north and south, tier lines go east to west.
Impact of one land use on neighbors (spillover effects)
RE Market failures
3 basic powers of regulation
Police powers as a power of regulation by gov't
-Regulate land use and set minimum standards for safe construction like zoning, and building codes.
Right of government to acquire private land, without the owner's consent, for public use, with due process and just compensation.
Specifies allowable land uses. Eliminates some uncertainty.
Types of public plans
-Special area or issue plans
Neighborhood plans are for
Neighborhood development plans are for
New growth areas
-Cul-de-sac hierarchy in neighborhoods
New urban planning
-More public transportation oriented
-Pedestrian oriented (sidewalks, houses close to street, rear alleys, grid streets)
-"Bulk" or density limits (minimum lot size, height limits, etc)
-Special use districts: Service stations, hospitals, churches
-Standards for streets, swers and water systems
-Adequate water supply for fire safety
-Adequate drainage and run off retention
-Easements for utilities
3 Planning and zoning commissions
-Zoning board of appeal: Request a varience from the current zoning code
-Plan commission: Review plans (building location, water run off, etc)
-Urban Design Commission (UDC): Review plans for design
Land Use Control: Planned Unit Development (PUD)
-No setback requirements
-Open community spaces and community facilities
Land use control: performance standards
-Noise and emission limits
-Tree removal restrictions
Land Use Control: Growth fees
-Older than zoning
-Issues of safety: Fire, sanitation, injury
-How the buildings are made to prevent injury or sickness
Legal procedure for exercising the right of eminent domain
-Primary source of local government revenue
-Many taxing authorities: City, county, schools, improvement districts, etc.
-Based on assessed value and tax rate (mill rate)
Property tax exemptions
Assessed value for property tax
-Generaly market value
-Assessor estimates value of property annually
Tax Incremental Financing (TIF)
-Mechanism for funding development and redevelopment projects
-Attempt to stimulate growth and employment through urban redevelopment projects
-Provides mechanism for the benefitees to share costs such as schools
Ad valorem taxes
They are applied in relation to the value of the property
Most critical idea in market value
Understand that some locations (markets) are better than others
High risk projects
-Restaurants and entertainment facilities
Avoid projects with prospective major change such as
-Lease rollover for major tenants
What is location?
1) Proximity, access to what is important such as stores, schools, etc
One land uses locational relationship to other land uses
Why are there cities?
-Close to everything
-Human settlement clustered together so people can gather quickly and efficiently
-Clustering provides better access to goods and services which creates competition
Where cities form
-At major intersections of different transportation modes like
-Major natural resource
Transition points in trade routes
-River to ocean (NYC, New Orleans)
-Intersection of rivers (Pittsburgh, St. Louis)
-Water to rail (NYC, Chicago, Minneapolis)
Economic activities that the city provides for the world beyond its boundaries. They provide income and jobs. EX: Wisconsin=Miller Brewing Co., Cheese
Activities that re-circulate income in a city (local government, local merchants and services)
Base (export) income is re-spent, producing additional income. Drives local economic activity and land use through a multiplier process.
Multiplier effect is greater as city is
-The base activity uses more local goods and services
Industry economies of scale
Efficiencies of production due to scale of local industry. More resistant to downturns due to the cost advantages
Emergence of specialized resources in response to demand from multiple industries. Have long term advantages: Incubator for new businesses and cost advantage for emergiing industries. Generally "safer" places for RE investment.
Central City... Central Business District?Traditionally focal points of businesses. Land is most valuable at the center.
Factors that affect a bid-rent curve
-Number of bidders
-Wage rate (time cost) of commuters
-Speed of travel
-Frequency of trips
Technical changes from 1920 that pushed employment outside CBD
-Production revolution: Assembly lines, horizontal rather than vertical processes
-Advances for offices and retailing: A/C, fluorescent lighting, self service retailing
-Data processing and communications: Advances in phones, birth of computers
-Comparison goods and clustering: people like to compare and shop
-Industry economies of scale and clustering: research universities, tourist attractions
RE Market Analysis
-Economic base of urban market is important
-Location within the system is important
-Urban growth is not uniform
Demand factors for RE
-Population growth and composition
-Employment characteristics and income level
-Characteristics of product
Supply factors of RE
-Lease rates and vacancies
-Amount of available land
Tools for market research
-Geographic information systems (GIS)
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