After read the materials I provided below to answer the questions (I have uploaded the content of co

  

After read the materials I provided below to answer the questions (I have uploaded the content of course material).The questions are in the document named “Real Estate” and “Personal Property” and please use the documents to answer the question.The file named “Real Estate and the Environment” is the chapter 28 of the textbook, the file named “Personal Property and Fixtures” is the Chapter 29 of the textbook, and the file named “The Transfer of Real Estate by Sale” is the Chapter 31 of the textbook which are what I am learning right now (I have upload below).** The PDF document named “Personal Property and Fixtures” is only used to answer the question in “Personal Property” document.** “Real Estate and the Environment” and “The Transfer of Real Estate by Sale” are material used to answer the question in “Real Estate” document.
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7/5/2019
The Transfer of Real Estate by Sale
Previous Chapter
Table of Contents
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Chapter 31
The Transfer of Real Estate by Sale
LEARNING OBJECTIVES
After reading this chapter, you should understand the following:
1. The various forms of real estate ownership, including fee simple, tenancy in common, and
joint tenancy
2. The mechanics of finding, financing, and closing a real estate transaction
3. How adverse possession may sometimes vest title in real property despite the nonconsent
of the owner
This chapter follows the steps taken when real estate is transferred by sale.
1. The buyer selects a form of ownership.
2. The buyer searches for the real estate to be purchased. In doing so, the buyer will usually deal
with real estate brokers.
3. After a parcel is selected, the seller and buyer will negotiate and sign a sales agreement.
4. The seller will normally be required to provide proof of title.
5. The buyer will acquire property insurance.
6. The buyer will arrange financing.
7. The sale and purchase will be completed at a closing.
During this process, the buyer and seller enter into a series of contracts with each other and with third
parties such as brokers, lenders, and insurance companies. In this chapter, we focus on the unique
features of these contracts, with the exception of mortgages (Chapter 12 “Mortgages and
Nonconsensual Liens”) and property insurance. We conclude by briefly examining adverse
possession a method of acquiring property for free.
31.1 Forms of Ownership
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LEARNING OBJECTIVES
1. Be familiar with the various kinds of interest in real property.
2. Know the ways that two or more people can own property together.
3. Understand the effect of marriage, divorce, and death on various forms of property
ownership.
Overview
The transfer of property begins with the buyer’s selection of a form of ownership. Our emphasis here
is not on what is being acquired (the type of property interest) but on how the property is owned.
One form of ownership of real property is legally quite simple, although lawyers refer to it with a
complicated-sounding name. This is ownership by one individual, known as ownership in severalty.
In purchasing real estate, however, buyers frequently complicate matters by grouping together—
because of marriage, close friendship, or simply in order to finance the purchase more easily
When purchasers group together for investment purposes, they often use the various forms of
organization discussed in Chapter 18 “Partnerships: General Characteristics and Formation”, Chapter
19 “Partnership Operation and Termination”, Chapter 20 “Hybrid Business Forms”, and Chapter 21
“Corporation: General Characteristics and Formation”—corporations, partnerships, limited
partnerships, joint ventures, and business trusts. The most popular of these forms of organization for
owning real estate is the limited partnership. A real estate limited partnership is designed to allow
investors to take substantial deductions that offset current income from the partnership and other
similar investments, while at the same time protecting the investor from personal liability if the
venture fails.
But you do not have to form a limited partnership or other type of business in order to acquire
property with others; many other forms are available for personal or investment purposes. To these
we now turn.
Joint Tenancy
Joint tenancy is an estate in land owned by two or more persons. It is distinguished chiefly by the
right of survivorship. If two people own land as joint tenants, then either becomes the sole owner
when the other dies. For land to be owned jointly, four unities must coexist:
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1. Unity of time. The interests of the joint owners must begin at the same time.
2. Unity of title. The joint tenants must acquire their title in the same conveyance—that is, the
same will or deed.
3. Unity of interest. Each owner must have the same interest in the property; for example, one
may not hold a life estate and the other the remainder interest.
4. Unity of possession. All parties must have an equal right to possession of the property (see
Figure 31.1 “Forms of Ownership and Unities”).
Figure 31.1 Forms of Ownership and Unities
Suppose a woman owns some property and upon marriage wishes to own it jointly with her husband.
She deeds it to herself and her husband “as joint tenants and not tenants in common.” Strictly
speaking, the common law would deny that the resulting form of ownership was joint because the
unities of title and time were missing. The wife owned the property first and originally acquired title
under a different conveyance. But the modern view in most states is that an owner may convey
directly to herself and another in order to create a joint estate.
When one or more of the unities is destroyed, however, the joint tenancy lapses. Fritz and Gary own a
farm as joint tenants. Fritz decides to sell his interest to Jesse (or, because Fritz has gone bankrupt,
the sheriff auctions off his interest at a foreclosure sale). Jesse and Gary would hold as tenants in
common and not as joint tenants. Suppose Fritz had made out his will, leaving his interest in the farm
to Reuben. On Fritz’s death, would the unities be destroyed, leaving Gary and Reuben as tenants in
common? No, because Gary, as joint tenant, would own the entire farm on Fritz’s death, leaving
nothing behind for Reuben to inherit.
Tenancy by the Entirety
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About half the states permit husbands and wives to hold property as tenants by the entirety. This
form of ownership is similar to joint tenancy, except that it is restricted to husbands and wives. This is
sometimes described as the unity of person. In most of the states permitting tenancy by the entirety,
acquisition by husband and wife of property as joint tenants automatically becomes a tenancy by the
entirety. The fundamental importance of tenancy by the entirety is that neither spouse individually
can terminate it; only a joint decision to do so will be effective. One spouse alone cannot sell or lease
an interest in such property without consent of the other, and in many states a creditor of one spouse
cannot seize the individual’s separate interest in the property, because the interest is indivisible.
Tenancy in Common
Two or more people can hold property as tenants in common when the unity of possession is
present, that is, when each is entitled to occupy the property. None of the other unities—of time, title,
or interest—is necessary, though their existence does not impair the common ownership. Note that
the tenants in common do not own a specific portion of the real estate; each has an undivided share in
the whole, and each is entitled to occupy the whole estate. One tenant in common may sell, lease, or
mortgage his undivided interest. When a tenant in common dies, his interest in the property passes to
his heirs, not to the surviving tenants in common.
Because tenancy in common does not require a unity of interest, it has become a popular form of
“mingling,” by which unrelated people pool their resources to purchase a home. If they were joint
tenants, each would be entitled to an equal share in the home, regardless of how much each
contributed, and the survivor would become sole owner when the other owner dies. But with a
tenancy-in-common arrangement, each can own a share in proportion to the amount invested.
Community Property
In ten states—Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas,
Washington, and Wisconsin—property acquired during a marriage is said to be community
property. There are differences among these states, but the general theory is that with certain
exceptions, each spouse has an undivided equal interest in property acquired while the husband and
wife are married to each other. The major exception is for property acquired by gift or inheritance
during the marriage. (By definition, property owned by either spouse before the marriage is not
community property.) Property acquired by gift of inheritance or owned before the marriage is known
as separate property. Community property states recognize other forms of ownership; specifically,
husbands and wives may hold property as joint tenants, permitting the survivor to own the whole.
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The consequence of community property laws is that either the husband or the wife may manage the
community property, borrow against it, and dispose of community personal property. Community
real estate may only be sold or encumbered by both jointly. Each spouse may bequeath only half the
community property in his or her will. In the absence of a will, the one-half property interest will pass
in accordance with the laws of intestate succession. If the couple divorces, the states generally provide
for an equal or near-equal division of the community property, although a few permit the court in its
discretion to divide in a different proportion.
Condominiums
In popular parlance, a condominium is a kind of apartment building, but that is not its technical legal
meaning. Condominium is a form of ownership, not a form of structure, and it can even apply to
space—for example, to parking spaces in a garage. The word condominium means joint ownership or
control, and it has long been used whenever land has been particularly scarce or expensive.
Condominiums were popular in ancient Rome (especially near the Forum) and in the walled cities of
medieval Europe.
In its modern usage, condominium refers to a form of housing involving two elements of ownership.
The first is the living space itself, which may be held in common, in joint tenancy, or in any other form
of ownership. The second is the common space in the building, including the roof, land under the
structure, hallways, swimming pool, and the like. The common space is held by all purchasers as
tenants in common. The living space may not be sold apart from the interest in the common space.
Two documents are necessary in a condominium sale—the master deed and the bylaws. The master
deed (1) describes the condominium units, the common areas, and any restrictions that apply to
them; (2) establishes the unit owner’s interest in the common area, his number of votes at owners’
association meetings, and his share of maintenance and operating expenses (sometimes unit owners
have equal shares, and sometimes their share is determined by computing the ratio of living area or
market price or original price of a single unit to the whole); and (3) creates a board of directors to
administer the affairs of the whole condominium. The bylaws usually establish the owners’
association, set out voting procedures, list the powers and duties of the officers, and state the
obligations of the owners for the use of the units and the common areas.
Cooperatives
Another popular form of owning living quarters with common areas is the cooperative. Unlike the
person who lives in a condominium, the tenant of a cooperative does not own a particular unit.
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Instead, he owns a share of the entire building. Since the building is usually owned by a corporation
(a cooperative corporation, hence the name), this means that the tenant owns stock in the
corporation. A tenant occupies a unit under a lease from the corporation. Together, the lease and
stock in the building corporation are considered personal, not real, property.
In a condominium, an owner of a unit who defaults in paying monthly mortgage bills can face
foreclosure on the unit, but neighbors in the building suffer no direct financial impact, except that the
defaulter probably has not paid monthly maintenance charges either. In a cooperative, however, a
tenant who fails to pay monthly charges can jeopardize the entire building, because the mortgage is
on the building as a whole; consequently, the others will be required to make good the payments or
face foreclosure.
Time-Shares
A time-share is an arrangement by which several people can own the same property while being
entitled to occupy the premises exclusively at different times on a recurring basis. In the typical
vacation property, each owner has the exclusive right to use the apartment unit or cottage for a
specified period of time each year—for example, Mr. and Mrs. Smith may have possession from
December 15 through December 22, Mr. and Mrs. Jones from December 23 through December 30,
and so on. The property is usually owned as a condominium but need not be. The sharers may own
the property in fee simple, hold a joint lease, or even belong to a vacation club that sells time in the
unit.
Time-share resorts have become popular in recent years. But the lure of big money has brought
unscrupulous contractors and salespersons into the market. Sales practices can be unusually coercive,
and as a result, most states have sets of laws specifically to regulate time-share sales. Almost all states
provide a cooling-off period, or rescission period; these periods vary from state to state and provide a
window where buyers can change their minds without forfeiting payments or deposits already made.
K E Y TA K E AWAY
Property is sometimes owned by one person or one entity, but more often two or more
persons will share in the ownership. Various forms of joint ownership are possible, including
joint tenancies, tenancy by the entirety, and tenancy in common. Married persons should be
aware of whether the state they live in is a community property state; if it is, the spouse will
take some interest in any property acquired during the marriage. Beyond traditional
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landholdings, modern real estate ownership may include interests in condominiums,
cooperatives, or time-shares.
EXERCISES
1. Miguel and Maria Ramirez own property in Albuquerque, New Mexico, as tenants by the
entirety. Miguel is a named defendant in a lawsuit that alleges defamation, and an award
is made for $245,000 against Miguel. The property he owns with Maria is worth $320,000
and is owned free of any mortgage interest. To what extent can the successful plaintiff
recover damages by forcing a sale of the property?
2. Miguel and Maria Ramirez own property in Albuquerque, New Mexico, as tenants by the
entirety. They divorce. At the time of the divorce, there are no new deeds signed or
recorded. Are they now tenants in common or joint tenants?
31.2 Brokers, Contracts, Proof of Title, and Closing
LEARNING OBJECTIVES
1. Know the duties of the real estate broker and how brokers are licensed.
2. Be able to discuss the impact of constitutonal and statutory law on real estate sellers and
brokers.
3. Describe the various kinds of listing contracts and their import.
4. Know the elements of a sales agreement and the various types of deeds to real estate.
5. Understand the closing process and how “good title” is obtained through the title search
and insurance process.
Once the buyer (or buyers) knows what form of ownership is most desirable, the search for a suitable
property can begin. This search often involves contact with a broker hired by the seller. The seller’s
contract with the broker, known as the listing agreement, is the first of the series of contracts in a
typical real estate transaction. As you consider these contracts, it is important to keep in mind that
despite the size of the transaction and the dire financial consequences should anything go awry, the
typical person (buyer or seller) usually acts as his or her own attorney. An American Bar Association
committee has noted the following:
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It is probably safe to say that in a high percentage of cases the seller is unrepresented and signs the
contracts of brokerage and sale on the basis of his faith in the broker. The buyer does not employ a
lawyer. He signs the contract of sale without reading it and, once financing has been obtained, leaves
all the details of title search and closing to the lender or broker. The lender or broker may employ an
attorney but, where title insurance is furnished by a company maintaining its own title plant, it is
possible that no lawyer, not even house counsel, will appear.
This being so, the material that follows is especially important for buyers and sellers who are not
represented in the process of buying or selling real estate.
Regulation of the Real Estate Business
State Licensing
Real estate brokers, and the search for real estate generally, are subject to state and federal
government regulation. Every state requires real estate brokers to be licensed. To obtain a license, the
broker must pass an examination covering the principles of real estate practice, transactions, and
instruments. Many states additionally insist that the broker take several courses in finance, appraisal,
law, and real estate practice and apprentice for two years as a salesperson in a real estate broker’s
office.
Civil Rights Act
Two federal civil rights laws also play an important role in the modern real estate transaction. These
are the Civil Rights Act of 1866 and the Civil Rights Act of 1968 (Fair Housing Act). In Jones v. Alfred
H. Mayer Co.,Jones v. Alfred H. Mayer Co., 392 U.S. 409 (1968). the Supreme Court upheld the
constitutionality of the 1866 law, which expressly gives all citizens of the United States the same
rights to inherit, purchase, lease, sell, hold, and convey real and personal property. A minority buyer
or renter who is discriminated against may sue for relief in federal court, which may award damages,
stop the sale of the house, or even direct the seller to convey the property to the plaintiff.
The 1968 Fair Housing Act prohibits discrimination on the grounds of race, color, religion, sex,
national origin, handicap, or family status (i.e., no discrimination against families with children) by
any one of several means, including the following:
1. Refusing to sell or rent to or negotiate with any person
2. Discriminating in the terms of sale or renting
3. Discriminating in advertising
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4. Denying that the housing is available when in fact it is
5. “Blockbusting” (panicking owners into selling or renting by telling them that minority groups are
moving into the neighborhood)
6. Creating different terms for granting or denying home loans by commercial lenders
7. Denying anyone the use of real estate services
However, the 1968 act contains several exemptions:
1. Sale or rental of a single-family house if the seller
a. owns less than four such houses,
b. does not use a broker,
c. does not use discriminatory advertising,
d. within two years sells …
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