Reality of Real Estate, 3/E Charles P. Nemeth IM with tb

Reality of Real Estate, 3/E Charles P. Nemeth IM with tb

Online Instructor’s Manual and Test Item File

to accompany

Reality of Real Estate

Third Edition

Charles P. Nemeth

California University of Pennsylvania

Prentice Hall

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Copyright © 2011 Pearson Education, Inc., publishing as Prentice Hall, 1 Lake Street, Upper Saddle River, New Jersey 07458. All rights reserved. Manufactured in the United States of America. This publication is protected by Copyright, and permission should be obtained from the publisher prior to any prohibited reproduction, storage in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise. To obtain permission(s) to use material from this work, please submit a written request to Pearson Education, Inc., Permissions Department, One Lake Street, Upper Saddle River, New Jersey.

Many of the designations by manufacturers and seller to distinguish their products are claimed as trademarks. Where those designations appear in this book, and the publisher was aware of a trademark claim, the designations have been printed in initial caps or all caps.

10 9 8 7 6 5 4 3 2 1

ISBN-13: 978-0-13-510416-3

ISBN-10: 0-13-510416-5

Table of Contents

Chapter 1………………………………………………………………………………….. 4

Chapter 2………………………………………………………………………………….. 8

Chapter 3………………………………………………………………………………….. 25

Chapter 4………………………………………………………………………………….. 38

Chapter 5………………………………………………………………………………….. 49

Chapter 6………………………………………………………………………………….. 63

Chapter 7…………………………………………………………………………………...70

Chapter 8…………………………………………………………………………………...74

Chapter 9…………………………………………………………………………………...78

Chapter 10………………………………………………………………………………… 91

Chapter 11………………………………………………………………………………….103

Test Item File……………………………………………………………………………… 112

Test Item File Answer Key……………………………………………………………….. 1-A
Chapter 1: REAL ESTATE PRACTICE

Outline

· Real Estate Competencies

· Basic Parties, Resources and Terminology in the Real Estate Transaction

· The Nature of Real Property

· Real Property Ownership

Keywords

easements

fixtures

license

personal property

real property

realty

riparian rights

estate in fee tail

fee simple absolute

fee simple

determinable

fee simple subject to a

condition subsequent

freehold estate

less-than-freehold

life estate

per autre vie

reversion

estate at sufferance

estate at will

estate for years

community property

concurrent ownership

joint tenants

partition

survivorship

tenancy by the entireties

tenants in common

unity of person

unity of possession

unity of purpose or interest

unity of time

unity of title

condominium

general partnerships

joint stock association

joint venture

limited partnerships

real estate investment trusts

Summary

Chapter One discusses the following topics:

· Various competencies that must be mastered by a real estate paralegal

· Basic parties, resources, and terminology in the real estate field

· The nature of real property and how it differs from personal property

· Fixtures, easements, and licenses

· The various types of real property ownership: specifically, fee simple, life, freehold, and fee tail estates

· The various types of less-than-freehold estates

· Joint ownership and the various unities that must be fulfilled for such an estate to exist

· Concurrent ownership and its various forms and requirements

· Types of joint ownership and the general requirements for each

· The nature of partnerships, limited partnerships, joint ventures, real estate investment trusts, and condominiums

Before extended study of real estate, it is imperative your students understand the basic concepts of real property. Chapter One defines real property, its forms of ownership and interests. Figures 1-2, 1-3 and 1-4 are included to help demonstrate to the student the various rights that can exist in land ownership, from mineral to riparian.

Be sure the students understand the differences in ownership forms. Figures 1-5 and 1-6 should be especially helpful in demonstrating the differences between freehold and less than freehold forms. Also stress the Four Unities of joint ownership.

Easements, licenses and right of ways can be easily confused. Use common examples to demonstrate the differences to your students. Other forms of real estate ownership including partnerships, condominiums, joint ventures and real estate investments trusts should also be discussed.

Review Questions

1. How is real property distinguishable from personal property?

Personal property is movable, transferable in the physical sense, and durationally limited. Personal property can be goods or services, tangible items of value for a fixed price or sum, but exists independently from their setting or location. Its place, therefore, is not fixed, like land or realty. Real property is a right and privilege associated with land, realty and the fixtures thereto, with a longer or even perpetual duration. Real property is also formally bought and sold, transferred by deed, or subject to estate laws and other distribution schemes. On the other hand, personal property carries limited recognition as a perennial or perpetual interest.

2. Define what a fixture is and how it differs from personal property.

Fixtures are objects, other than personal property, that are permanently affixed to the land and/or realty. A fixture, even though it has personal qualities, becomes real because of its integral connection to the realty itself. When real estate is sold the fixture goes with it.

3. Discuss the nature of less-than-freehold estates, including the differences in its various forms.

There are non-leasehold and leasehold types of less than freehold estates. The non-leasehold type is an easement, where the property is not leased, but the holder of the easement is permitted to use the property for the specified reason and period. Leasehold forms of a less than free hold estate are characterized by a permitted use for a certain term of years. The most common non-freehold design is the estate for years; e.g., the lease for an apartment. Another type is an estate at will, which is an informal lease arrangement where the landlord allows a tenant to stay on a month-to-month basis. If the tenant remains after the lease expires, the tenancy reverts to an estate at sufferance if the landlord does not renew the lease or remove the tenant.

4. What is “tenancy by the entireties”?

Husbands and wives, who jointly own real estate that is the primary residence or domicile, own it in only one way: tenancy by the entireties. Since common law and fortified by codification, there has been a presumption of this tenancy in marital parties. Tenancy by the entireties recognizes that marital assets are unified by and through the state of marriage. This tenancy recognizes the jointly, yet mutually concurrent, interest that spouses have.

5. Give and define various examples of an easement.

Easements are rights granted to use, yet not own, a specifically delineated piece of real property. Utility companies, needing access for wire, pole, and pipe, must acquire easement interests. Easements afford limited usage, ownership, right of way access, or permission to cross or enter on land owned by another. This interest is in real, not personal, property. An easement is an intangible right to use, yet not to own, property. Easements may include natural waterways, water courses, drains, trails and paths, roadways, tunnels, party walls, supportive buildings, fences, utility lines, rights of way, burial rights, and access to light and air.

6. Does Concurrent ownership require unity of time, title, interest and possession? Why or Why not?

Yes. To own concurrently, or jointly, one must have a unity of purpose or interest with another party or parties. At common law joint ownership manifests a series of unities:

1. Unity of Time: Co-owners or tenants in land must receive their interests at the same time.

2. Unity of Title: Co-owners or tenants in land must acquire title from the same source.

3. Unity of Interest: Co-owners or tenants must have equal interest in the land except in the case of a tenant in common.

4. Unity of Possession: Co-owners or tenants have an equal right to possess the whole property for possessory purposes only.

5. Unity of Person: Co-owners or tenants are husband and wife and viewed as the same.

7. What is the role of the paralegal in a real estate transaction?

A paralegal assisting in a real estate transaction must understand the following concepts or be able to perform the following tasks:

· Drafting documents

· Reviewing title assessments

· Interpreting surveys

· Analyzing and preparing leases

· Inspecting property

· Assuming closing and settlement responsibilities

· Assuming post-closing responsibilities

· Recording mortgage, deed, assignment release, and other documents

· Preparing tax filings

· Securing zoning permits and applications

· Preparing legal descriptions

· Arranging for payoff of notes and release of mortgages

· Notarizing documents at closing, if qualified

· Gaining an understanding of liability and hazard insurance

· Ordering and conducting lien searches.

· Assessing and analyzing means of ownership, whether sole or joint

· Assessing and analyzing types of realty

· Orchestrating multiple parties to a transaction

· Preparing client form files

· Negotiating and discussing terms of the Agreement of Sale

· Drafting Agreement of Sale

· Drafting loan commitment and attend relevant negotiations

· Drafting Installment Sale Contracts and attending relevant negotiations

· Authoring deeds

· Reviewing title

· Assuring compliance with governmental requirements

· Supervising Closing and Settlement

8. What estate conveys only partial ownership? Explain.

The tenancy in common, even though a concurrent, joint ownership form, has divisible characteristics and thereby a right of survivorship by the tenants’ heirs.

9. Name and discuss which estate is characterized by a wrongful possession?

Tenants who stay beyond either the month-to-month period, or an exact term of years, are deemed within an estate at sufferance. An estate at sufferance is possibly the lowest grade of estate. It is the estate held by one who retains possession of real property with no title at all; for example, a lessee who remains in possession after his lease has expired. He thus becomes a tenant at sufferance so long as the lessor suffers, or permits, him to remain. A tenant at sufferance is distinguished from a mere trespasser or squatter only by the fact that he entered originally by permission of the owner. Sufferance commences only when the tenant had an original right to possess, the right to possess has ended, and the tenant thereafter remains in possession.

10. A reversion exists in what type of estate? How does this differ from other estates?

Not favored in the law because of its survivorship impact, the joint tenancy is a second means of concurrent ownership. When one or the other dies, all remaining interests descend to surviving tenant, not to the heirs of the deceased tenant. The joint tenant owns not some discernible portion, but a unified share in the land. When one joint tenant dies, the other joint tenants take the deceased’s portion. The deceased joint tenants’ heirs have no case for distribution. The harsh survivorship policy of the joint tenancy has induced legislative responses and judicial restrictions on its usage.

Discussion Question

John and Bob want to own property together. Upon their deaths both want the property to pass down to their own families. Discuss the various types of ownership relative to their situation, giving a recommendation as to the best form of ownership for their case.

They could own by either joint tenancy or tenancy in common. Tenancy in common should be the favored choice. Even though a concurrent, joint ownership form, it has divisible characteristics and thereby a right of survivorship by the tenants’ heirs. Hence, if A, B, and C are co-tenants, and if C dies, C’s heirs may inherit C’s divisible portion. By contrast, in a joint tenancy, C’s portion would be swept up by A & B.

Practical Exercise

Ask students to identify an easement on their property or in their locale. Students should describe the easement, its location, purpose and if possible, its owner.

Exercise #1

The students’ answers should minimally address the following:

Similarities:

1. Both real estate transactions for investment purposes;

2. The amount of investor profit is dependent upon their investment;

3. Both may issues shares of stock.

Differences:

1. A joint venture involves one property, while an REIT involves many properties;

2. A joint venture is not incorporated while an REIT is;

3. A joint venture is private in design, while an REIT may be either public or private.

Case Assignment

Students may come up with various options for John and Martha. Evaluate in light of any regional regulations.

Chapter 2: PRELIMINARY ACTIVITIES FOR REAL ESTATE PRACTICE

Outline

· Listings

· Listing Agreement

· Disclosure and Consumer Protection

· Broker/Agent Disclosure

· Initial Client Consultation

Keywords

broker	listings
real estate agents	exclusive agency
exclusive agency	agreement
exclusive listing	exclusive right to sell
flat fee listing	listing
net listing	open listing
caveat emptor	caveat misrepresenter
caveat venditor	implied warranty of habitability
latent defects	patent defects
property disclosure statement	disclosure
fiduciary duty	good faith

Summary

Chapter Two discusses the following topics:

· The difference between brokers and agents

· The various types of listing agreements

· The function of a multiple listing service

· The doctrine of caveat emptor

· Misrepresentation in the real estate transaction

· Broker/agent disclosure, good faith, and fiduciary duty

· Client consultation and information gathering

Chapter Two covers the essentials regarding brokers and agents. Be sure to cover each agreement in the book thoroughly and demonstrate the differences and similarities in each listing agreement. Much confusion can result from not understanding the different forms of Listing Agreements. The case provided on dual agency is a good tool to use to help students gain an understanding of this often confusing agency.

Cover disclosure and consumer protection thoroughly. Be sure to expose students to your state laws on the subject. Cover the types of misrepresentations in depth, giving examples from court cases in your state or personal experience.

Be sure to explain the purpose of the property disclosure statement. This may be the most important tool in preventing any misrepresentations. Use the cases provided on caveat emptor and caveat venditor as a major class discussion point. This edition includes a much expanded discussion of fiduciary duty and the duty to disclose. Be sure the students understand fully the different types of agencies and their corresponding duties. The case provided on fiduciary duty can be used as a class discussion point or as a case to be briefed for an assignment.

You may want to utilize Figures 2-8 and 2-9 in a role playing exercise to help students understand the nuances of initial client consultation.

Review Questions

1. What are the functions of a real estate agent and broker? How do their functions differ?

Listings are generated or held by real estate brokers or agents. The broker, a licensed, state approved professional is directly responsible for a real estate office operation. Real estate agents work under the supervision of the broker. A broker can be an agent and an agent can be a broker, but a real estate agent cannot operate on his or her own, because his or her agency depends on finding a real estate office to generate sales activity. Both brokers and agents have a contractual understanding that specifies how commissions are computed and split, and how expenses are to be allotted. Brokers and agents author listing agreements, whereby a seller engages them to sell the realty in question.