SOLUTION MANUAL FOR br br
Real Estate Finance And Investments 17th International Edition Jeffrey Fisher Willi
br br br br br br br br br br
am B. Brueggeman
br br
Chapter 1-23 br
Solutions to Questions—Chapter 1 br br br
An Introduction to Real estate Investment: Legal Concepts
br br br br br br br
Question 1-1 br
What is the difference between real property and personal property?
br br br br br br br br br
Real property refers to the ownership rights associated with realty. Realty refers to land and all thi
br br br br br br br br br br br br br br br br
ngs permanently attached. Personal property refers to ownership rights associated with personalt
br br br br br br br br br br br
y. Personalty are all things, tangible, intangible that are movable. This includes all things that are
br br br br br br br br br br br br br br br br
not realty. br
Question 1-2 br
What is meant by an estate? br br br br br
Estate is used to denote a possessory or potentially possessory interest in real estate. However, not
br br br br br br br br br br br br br br br br
all interests in real property are estates. Ownership can be quite different from possession and a vari
br br br br br br br br br br br br br br br br
ety of legal factors affect the ownership rights associated with real estate. The economic benefits e
br br br br br br br br br br br br br br br
xpected by lenders, investors, and other parties in a real estate transaction are affected by these leg
br br br br br br br br br br br br br br br br
al factors. br
Question 1-3 br
How can a leased fee estate have a value that could be transferred to another party?
br br br br br br br br br br br br br br br
The original fee owner can give up some property rights to a lessee. The value of the leased fee est
br br br br br br br br br br br br br br br br br br br
ate will depend on the amount of lease payments expected during the term of the lease plus the val
br br br br br br br br br br br br br br br br br br
ue of the property when the lease terminates, and the original owner receives the reversionary inte
br br br br br br br br br br br br br br br
rest.
Question 1-4 br
What are title records? What is an abstract of title?
br br br br br br br br br
Title records (sometimes referred to as deeds and conveyances records and/or real property recor
br br br br br br br br br br br br br
ds) are created and maintained usually at the county level. These records identify all properties in
br br br br br br br br br br br br br br br br
a county, including location, present ownership and any liens or encumbrances affecting each pro
br br br br br br br br br br br br br
perty. These records are critical to investors who want to identify the owner of specific tracts or la
br br br br br br br br br br br br br br br br br
nd, existing buildings, etc. These records are also important because they contain evidence of enc
br br br br br br br br br br br br br br
umbrances such as mortgage liens, tax liens (to be covered in later chapters), etc. Example: a pros
br br br br br br br br br br br br br br br br
pective investor sees a vacant tract of land that he is interested in purchasing. Because there is no
br br br br br br br br br br br br br br br br br br
signage or any improvements on the land, how can the land owner be identified and contacted? B
br br br br br br br br br br br br br br br br
y going to the county records office (deeds and conveyancers department) the investor can use the
br br br br br br br br br br br br br br br
address to locate a property (usually in plat books), then the current owner. These records are use
br br br br br br br br br br br br br br br br br
d to link a precise property to its owner. At some point, if this investor continues to be interested in
br br br br br br br br br br br br br br br br br br br
purchasing the land, he will likely retain an attorney or abstractor to do a title search and abstract
br br br br br br br br br br br br br br br br br br br
of title. The latter is done to not only
br br br br br br br br
Copyright © 2022 McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill
br br br br br br br br br br br br br br br br br br br
.
18-1
, identify the current owner but to trace all previous owners with commentary on the likelihood of ot
br br br br br br br br br br br br br br br br
her parties who may ownership rights and /or interests in the tract of land.
br br br br br br br br br br br br br
Question 1-5 br
What is a deed? How is it different from the title?
br br br br br br br br br br
The deed is a document usually created by the owner of a property containing the property legal
br br br br br br br br br br br br br br br br
I.D. and location in addition to any improvements that exist on the property. It also describes the e
br br br br br br br br br br br br br br br br br
xtent to which the seller warrants that he is the owner of the property and has the right to convey o
br br br br br br br br br br br br br br br br br br br br
wnership. A deed is used to convey the title from one person (the grantor) to another (the regrante
br br br br br br br br br br br br br br br br br
e) by means of a written instrument. The term ―title‖ is an abstract term frequently used to link a
br br br br br br br br br br br br br br br br br br
n individual or entity who owns property to the property itself. When a person has
br br br br br br br br br br br br br br
―title,‖ he is said to have all the elements, including the documents, records, and acts, that prove ow
br br br br br br br br br br br br br br br br br
nership. Title establishes the quantity of rights in real estate being conveyed from seller to It diffe
br br br br br br br br br br br br br br br br
rs from title because title provides evidence of ownership based on the collective records that exis
br br br br br br br br br br br br br br br
t pertaining to a property.
br br br br
Question 1-6 br
What is meant by a title record? Why are these records so important?
br br br br br br br br br br br br
The title record refers to records on file, usually at the county level, that help to specify tracts of re
br br br br br br br br br br br br br br br br br br br
al estate and determine if a seller has the right to convey ownership of such real property.
br br br br br br br br br br br br br br br br
These records are the most important sources of events affecting real estate ownership over time a
br br br br br br br br br br br br br br br
nd are usually reviewed when trying to identify the ―quality‖ of title that investors will receive if t
br br br br br br br br br br br br br br br br br
hey purchase. After a review of these records (usually by an attorney), if in his opinion, they are c
br br br br br br br br br br br br br br br br br br
omplete, he will indicate that the seller has ownership and title to the property. Most of the instru
br br br br br br br br br br br br br br br br br
ments that affect title to real estate are recorded, in accordance with the recording acts of the vario
br br br br br br br br br br br br br br br br br
us states, at what is typically called the county recorder’s office.
br br br br br br br br br br
Question 1-7 br
What is a future estate? Give an example? br br br br br br br
We think of most real estate transactions as acquiring ownership at the present time. However, o
br br br br br br br br br br br br br br br
wnership can also occur at a later time, say after the current owner dies. The person who becomes
br br br br br br br br br br br br br br br br br br
the owner at that time is said to be a ―remainder‖ estate. Future estates include a reversion and re
br br br br br br br br br br br br br br br br br br
mainder. A reversion results in the state reverting back to the original possessor whereas the remai
br br br br br br br br br br br br br br br
nder results in a third-party obtaining possession at some point in the future.
br br br br br br br br br br br br
Question 1-8 br
Name the three general methods of title assurance and briefly describe each. Which would you re
br br br br br br br br br br br br br br br
commend to a friend purchasing real estate? Why? br br br br br br br
General Warranty Deed - br br br
the grantor warrants that the title he/she conveys to the property is free and clear of all encumbran
br br br br br br br br br br br br br br br br br br
ces, other than those that are specifically listed in the deed.
br br br br br br br br br br
Special Warranty Deed - br br br
makes the same warranties as a general warranty deed except that it limits their application to def
br br br br br br br br br br br br br br br br br
ects and encumbrances which occurred only while the grantor held title to the property.
br br br br br br br br br br br br br
Quitclaim Deed - br br
offers the grantee the least protection in that it imply conveys to the grantee whatever rights,, inte
br br br br br br br br br br br br br br br br br
rests,, and title that the grantor may have in the property. No warranties are made about the nature
br br br br br br br br br br br br br br br br br br
Copyright © 2022 McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill
br br br br br br br br br br br br br br br br br br br
.
18-2
, of these rights and interests or of the quality of the grantor’s title to the property.
br br br br br br br br br br br br br br br
Copyright © 2022 McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill
br br br br br br br br br br br br br br br br br br br
.
18-3
, Would recommend the General Warranty Deed, because it offers the most comprehensive warrant
br br br br br br br br br br br br
ies about the quality of the title.
br br br br br br
Question 1-9 br
Would it be legal for you to give a quitclaim deed for the Statue of Liberty to your friend? Yes
br br br br br br br br br br br br br br br br br br br
, the quitclaim deed simply says that the grantor ―quits‖ whatever claim he has in the propert
br br br br br br br br br br br br br br br br
y (which may well be none) in favor of the grantee.
br br br br br br br br br br
Solutions to Questions— br br
Chapter 2 Financing: Notes and Mor br br br br br
tgages
Question 2-1 br
Distinguish between a mortgage and a note. br br br br br br
A note admits the debt and generally makes the borrower personally liable for the obligation. A m
br br br br br br br br br br br br br br br br
ortgage is usually a separate document which pledges the designated property as security for the d
br br br br br br br br br br br br br br br
ebt.
Question 2-2 br
What does it mean when a lender accelerates on a note? What is meant by forbearance?
br br br br br br br br br br br br br br br
The acceleration clause gives the lender the right or option to demand the loan balance owed if a d
br br br br br br br br br br br br br br br br br br
efault occurs. Forbearance by the lender allows the borrower time to cure a deficiency without the
br br br br br br br br br br br br br br br
lender giving up the right to foreclose at a future time.
br br br br br br br br br br br
Question 2-3 br
Can borrowers pay off, part or all, of loans anytime that they desire?
br br br br br br br br br br br br
No. In general, prepayment is a privilege not a right. In cases of residential/consumer loans made b
br br br br br br br br br br br br br br br br
y federally related lenders, this option is usually provided to borrowers. In commercial real estate l
br br br br br br br br br br br br br br br
oans it is not. br br br
Question 2-4 br
What does non-recourse financing mean? br br br br
The borrower is not personally liable on the note. The lender may look only to the property (securit
br br br br br br br br br br br br br br br br br
y) to satisfy the loan in the event of default.
br br br br br br br br br
Question 2-5 br
What does assignment mean and why would a lender want to assign a mortgage loan? Assignme
br br br br br br br br br br br br br br br
nt gives the lender the right to sell or exchange a mortgage loan to another party without the appro
br br br br br br br br br br br br br br br br br br
val of the borrower. br br br
Question 2-6 br
What is meant by a “purchase money“ mortgage loan? When could a loan not be a purchase mon
br br br br br br br br br br br br br br br br br
ey mortgage?
br
Purchase money means funds from the loan will be used to purchase a property. It will not provide
br br br br br br br br br br br br br br br br br br
funds for other uses such as could be the case with a refinancing.
br br br br br br br br br br br br
Copyright © 2022 McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill
br br br br br br br br br br br br br br br br br br br
.
18-4
Real Estate Finance And Investments 17th International Edition Jeffrey Fisher Willi
br br br br br br br br br br
am B. Brueggeman
br br
Chapter 1-23 br
Solutions to Questions—Chapter 1 br br br
An Introduction to Real estate Investment: Legal Concepts
br br br br br br br
Question 1-1 br
What is the difference between real property and personal property?
br br br br br br br br br
Real property refers to the ownership rights associated with realty. Realty refers to land and all thi
br br br br br br br br br br br br br br br br
ngs permanently attached. Personal property refers to ownership rights associated with personalt
br br br br br br br br br br br
y. Personalty are all things, tangible, intangible that are movable. This includes all things that are
br br br br br br br br br br br br br br br br
not realty. br
Question 1-2 br
What is meant by an estate? br br br br br
Estate is used to denote a possessory or potentially possessory interest in real estate. However, not
br br br br br br br br br br br br br br br br
all interests in real property are estates. Ownership can be quite different from possession and a vari
br br br br br br br br br br br br br br br br
ety of legal factors affect the ownership rights associated with real estate. The economic benefits e
br br br br br br br br br br br br br br br
xpected by lenders, investors, and other parties in a real estate transaction are affected by these leg
br br br br br br br br br br br br br br br br
al factors. br
Question 1-3 br
How can a leased fee estate have a value that could be transferred to another party?
br br br br br br br br br br br br br br br
The original fee owner can give up some property rights to a lessee. The value of the leased fee est
br br br br br br br br br br br br br br br br br br br
ate will depend on the amount of lease payments expected during the term of the lease plus the val
br br br br br br br br br br br br br br br br br br
ue of the property when the lease terminates, and the original owner receives the reversionary inte
br br br br br br br br br br br br br br br
rest.
Question 1-4 br
What are title records? What is an abstract of title?
br br br br br br br br br
Title records (sometimes referred to as deeds and conveyances records and/or real property recor
br br br br br br br br br br br br br
ds) are created and maintained usually at the county level. These records identify all properties in
br br br br br br br br br br br br br br br br
a county, including location, present ownership and any liens or encumbrances affecting each pro
br br br br br br br br br br br br br
perty. These records are critical to investors who want to identify the owner of specific tracts or la
br br br br br br br br br br br br br br br br br
nd, existing buildings, etc. These records are also important because they contain evidence of enc
br br br br br br br br br br br br br br
umbrances such as mortgage liens, tax liens (to be covered in later chapters), etc. Example: a pros
br br br br br br br br br br br br br br br br
pective investor sees a vacant tract of land that he is interested in purchasing. Because there is no
br br br br br br br br br br br br br br br br br br
signage or any improvements on the land, how can the land owner be identified and contacted? B
br br br br br br br br br br br br br br br br
y going to the county records office (deeds and conveyancers department) the investor can use the
br br br br br br br br br br br br br br br
address to locate a property (usually in plat books), then the current owner. These records are use
br br br br br br br br br br br br br br br br br
d to link a precise property to its owner. At some point, if this investor continues to be interested in
br br br br br br br br br br br br br br br br br br br
purchasing the land, he will likely retain an attorney or abstractor to do a title search and abstract
br br br br br br br br br br br br br br br br br br br
of title. The latter is done to not only
br br br br br br br br
Copyright © 2022 McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill
br br br br br br br br br br br br br br br br br br br
.
18-1
, identify the current owner but to trace all previous owners with commentary on the likelihood of ot
br br br br br br br br br br br br br br br br
her parties who may ownership rights and /or interests in the tract of land.
br br br br br br br br br br br br br
Question 1-5 br
What is a deed? How is it different from the title?
br br br br br br br br br br
The deed is a document usually created by the owner of a property containing the property legal
br br br br br br br br br br br br br br br br
I.D. and location in addition to any improvements that exist on the property. It also describes the e
br br br br br br br br br br br br br br br br br
xtent to which the seller warrants that he is the owner of the property and has the right to convey o
br br br br br br br br br br br br br br br br br br br br
wnership. A deed is used to convey the title from one person (the grantor) to another (the regrante
br br br br br br br br br br br br br br br br br
e) by means of a written instrument. The term ―title‖ is an abstract term frequently used to link a
br br br br br br br br br br br br br br br br br br
n individual or entity who owns property to the property itself. When a person has
br br br br br br br br br br br br br br
―title,‖ he is said to have all the elements, including the documents, records, and acts, that prove ow
br br br br br br br br br br br br br br br br br
nership. Title establishes the quantity of rights in real estate being conveyed from seller to It diffe
br br br br br br br br br br br br br br br br
rs from title because title provides evidence of ownership based on the collective records that exis
br br br br br br br br br br br br br br br
t pertaining to a property.
br br br br
Question 1-6 br
What is meant by a title record? Why are these records so important?
br br br br br br br br br br br br
The title record refers to records on file, usually at the county level, that help to specify tracts of re
br br br br br br br br br br br br br br br br br br br
al estate and determine if a seller has the right to convey ownership of such real property.
br br br br br br br br br br br br br br br br
These records are the most important sources of events affecting real estate ownership over time a
br br br br br br br br br br br br br br br
nd are usually reviewed when trying to identify the ―quality‖ of title that investors will receive if t
br br br br br br br br br br br br br br br br br
hey purchase. After a review of these records (usually by an attorney), if in his opinion, they are c
br br br br br br br br br br br br br br br br br br
omplete, he will indicate that the seller has ownership and title to the property. Most of the instru
br br br br br br br br br br br br br br br br br
ments that affect title to real estate are recorded, in accordance with the recording acts of the vario
br br br br br br br br br br br br br br br br br
us states, at what is typically called the county recorder’s office.
br br br br br br br br br br
Question 1-7 br
What is a future estate? Give an example? br br br br br br br
We think of most real estate transactions as acquiring ownership at the present time. However, o
br br br br br br br br br br br br br br br
wnership can also occur at a later time, say after the current owner dies. The person who becomes
br br br br br br br br br br br br br br br br br br
the owner at that time is said to be a ―remainder‖ estate. Future estates include a reversion and re
br br br br br br br br br br br br br br br br br br
mainder. A reversion results in the state reverting back to the original possessor whereas the remai
br br br br br br br br br br br br br br br
nder results in a third-party obtaining possession at some point in the future.
br br br br br br br br br br br br
Question 1-8 br
Name the three general methods of title assurance and briefly describe each. Which would you re
br br br br br br br br br br br br br br br
commend to a friend purchasing real estate? Why? br br br br br br br
General Warranty Deed - br br br
the grantor warrants that the title he/she conveys to the property is free and clear of all encumbran
br br br br br br br br br br br br br br br br br br
ces, other than those that are specifically listed in the deed.
br br br br br br br br br br
Special Warranty Deed - br br br
makes the same warranties as a general warranty deed except that it limits their application to def
br br br br br br br br br br br br br br br br br
ects and encumbrances which occurred only while the grantor held title to the property.
br br br br br br br br br br br br br
Quitclaim Deed - br br
offers the grantee the least protection in that it imply conveys to the grantee whatever rights,, inte
br br br br br br br br br br br br br br br br br
rests,, and title that the grantor may have in the property. No warranties are made about the nature
br br br br br br br br br br br br br br br br br br
Copyright © 2022 McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill
br br br br br br br br br br br br br br br br br br br
.
18-2
, of these rights and interests or of the quality of the grantor’s title to the property.
br br br br br br br br br br br br br br br
Copyright © 2022 McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill
br br br br br br br br br br br br br br br br br br br
.
18-3
, Would recommend the General Warranty Deed, because it offers the most comprehensive warrant
br br br br br br br br br br br br
ies about the quality of the title.
br br br br br br
Question 1-9 br
Would it be legal for you to give a quitclaim deed for the Statue of Liberty to your friend? Yes
br br br br br br br br br br br br br br br br br br br
, the quitclaim deed simply says that the grantor ―quits‖ whatever claim he has in the propert
br br br br br br br br br br br br br br br br
y (which may well be none) in favor of the grantee.
br br br br br br br br br br
Solutions to Questions— br br
Chapter 2 Financing: Notes and Mor br br br br br
tgages
Question 2-1 br
Distinguish between a mortgage and a note. br br br br br br
A note admits the debt and generally makes the borrower personally liable for the obligation. A m
br br br br br br br br br br br br br br br br
ortgage is usually a separate document which pledges the designated property as security for the d
br br br br br br br br br br br br br br br
ebt.
Question 2-2 br
What does it mean when a lender accelerates on a note? What is meant by forbearance?
br br br br br br br br br br br br br br br
The acceleration clause gives the lender the right or option to demand the loan balance owed if a d
br br br br br br br br br br br br br br br br br br
efault occurs. Forbearance by the lender allows the borrower time to cure a deficiency without the
br br br br br br br br br br br br br br br
lender giving up the right to foreclose at a future time.
br br br br br br br br br br br
Question 2-3 br
Can borrowers pay off, part or all, of loans anytime that they desire?
br br br br br br br br br br br br
No. In general, prepayment is a privilege not a right. In cases of residential/consumer loans made b
br br br br br br br br br br br br br br br br
y federally related lenders, this option is usually provided to borrowers. In commercial real estate l
br br br br br br br br br br br br br br br
oans it is not. br br br
Question 2-4 br
What does non-recourse financing mean? br br br br
The borrower is not personally liable on the note. The lender may look only to the property (securit
br br br br br br br br br br br br br br br br br
y) to satisfy the loan in the event of default.
br br br br br br br br br
Question 2-5 br
What does assignment mean and why would a lender want to assign a mortgage loan? Assignme
br br br br br br br br br br br br br br br
nt gives the lender the right to sell or exchange a mortgage loan to another party without the appro
br br br br br br br br br br br br br br br br br br
val of the borrower. br br br
Question 2-6 br
What is meant by a “purchase money“ mortgage loan? When could a loan not be a purchase mon
br br br br br br br br br br br br br br br br br
ey mortgage?
br
Purchase money means funds from the loan will be used to purchase a property. It will not provide
br br br br br br br br br br br br br br br br br br
funds for other uses such as could be the case with a refinancing.
br br br br br br br br br br br br
Copyright © 2022 McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill
br br br br br br br br br br br br br br br br br br br
.
18-4
