REAL ESTATE
PRINCIPLES
By Michael Lustig
Copyright 2011 Real Estate License Services, Inc.
Smashwords Edition
REAL
ESTATE
PRINCIPLES
4th Edition
By Michael Lustig
Contributing
Editors:
Denise Iona and Charles Jackson
Textbook and Student Workbook, Combined
Course
by Correspondence.
For Qualification For a California
Real
Estate Sales and/or Broker License
(D.R.E. Approval #1118-89)
REAL
ESTATE LICENSE SERVICES
5059 Newport Avenue, #209
San Diego, CA
92107
(619) 222-2425
Includes “Student Instructions,” Quiz Questions and Answers, and Page References for the Quiz Questions for the Course “Real Estate Principles.” Please Read and follow the complete “Student Instructions” just after this page.
Copyright © 2011, 2003, 2000, 1991, 1990, 1989, 1988, 1987, 1983 Real Estate License Services, Inc. Copyright registered. All rights reserved. No part of this material may be reprinted, reproduced, transmitted, stored in a retrieval system, placed in a computer or on the Internet, or otherwise utilized, in any form or by any means electronic or mechanical, including photocopying or recording, now existing or hereinafter invented, nor may any part of this course be used for teaching without permission from the copyright holder.
STUDENT INSTRUCTIONS/GENERAL INFORMATION
The California Department of Real Estate DOES NOT REQUIRE COMPLETION OF QUIZZES OR ESSAYS PRIOR TO YOUR FINAL EXAM. Study the "Written Assignment" questions based on the chapter readings as well as the answers with page references that are on the following page. YOU DO NOT NEED TO SEND IN ANY "WRITTEN ASSIGNMENT" ANSWERS. To complete this course, just study the practice questions and answers, take the final exam online or on paper and, if on paper, make sure the final exam question sheets and completed Scantron answer forms are returned to us along with the completed "Certification of Test Administrator." THE FINAL EXAM IS OPEN BOOK. If you have any questions, please call (619) 222-2421.
1) This course consists of text reading and a final examination.
2) Practice questions ("Written Assignments") covering most of the chapters in the book are based on the text reading in each chapter. Answers to those practice questions (with page references) are included for your convenience and may be found on the page after this page. The "Written Assignments" are for your practice only. NO QUIZ QUESTIONS ARE REQUIRED PRIOR TO YOUR FINAL EXAM.
3) The minimum time limit to complete one course is 20 days from the date of enrollment. The maximum time limit to complete one course is six (6) months from the date of enrollment. Two three (3) month extensions may be obtained (see section below on Extensions and Re-enrollments). Under no circumstances can your enrollment last beyond twelve (12) months.
FINAL EXAMINATION: When you are ready to take the final test, please fill out the form "Request To Take Final Exam." You may mail it to Real Estate License Services, 5059 Newport Ave., #209, San Diego, California 92107, or fax to (619) 222-8593. Real Estate License Services will arrange for your final examination online or with a test administrator. If your final exam is not online, you may suggest who your test administrator will be. The examination consists of 100 multiple choice questions and you must complete it within 150 minutes (2.5 hours). When you finish the test, If your final exam is not online, turn it in to the test administrator, who will mail it to Real Estate License Services. The questions used for the final exam must be mailed to Real Estate License Services along with the answers.
GRADING OF THE FINAL EXAM AND ISSUING OF CERTIFICATES: A passing grade is based on a minimum passing score of 60% on the final examination. Only the final examination grade is used in determining the student's overall grade. Students will be assigned a letter grade, but the grading system reflects the 60% passing requirements.
% OF POINTS = GRADE
100% - 90% = A
89%
- 80% = B
79% - 70% = C
69% - 60% = D
59% - 0% = Fail. In
this case the course would have to be repeated and passed in order to
receive credit.
An official certificate of your course grade will be mailed to you within two weeks after receipt of your completed final examination if taken with a test administrator. Additional certificates are $15.00 each.
REFUNDS: Students may apply in writing to REAL ESTATE LICENSE SERVICES, mailing address, 5059 Newport Ave., #209, San Diego, California 92107 within 15 days from the date of enrollment and cancel and receive a refund for the full tuition. All REAL ESTATE LICENSE SERVICES materials must be returned in good condition at the time of cancellation; the materials should not be soiled, torn or marked upon. Refunds are not allowed if any work has been submitted.
EXTENSIONS AND RE-ENROLLMENTS: If the course has not been completed within six (6) months of enrollment, the student may receive an extension of three (3) months by paying an extension fee of $35.00. If at the end of that three month extension the student still has not completed the course, a second three (3) month extension may be obtained by paying an additional fee of $30.00. IN NO CASE MAY THE PERIOD OF ENROLLMENT EXTEND BEYOND TWELVE (12) MONTHS. If the student has not completed the course within 12 months from the original date of enrollment, the enrollment expires and no further extensions are allowed. The student must re-enroll and begin the course over again in order to complete the course. The student may re-enroll under such circumstances for a discounted re-enrollment of $40.00 per course.
TRANSFERS: Courses may be transferred to another person by paying a transfer fee of $30.00 per course. Transfers are not allowed if any work has already been submitted.
REAL ESTATE PRINCIPLES
To finish this course, you need to do the following:
1. Quizzes are NOT required. Included below are the answers to the questions at the end of each chapter. Page references for topics in each question and answer are also listed. Read the book and study the questions and answers. You may take your final exam 18 days after having possession of the textbook.
2. When you are ready to take the final exam, please fill out the form "Request To Take Final Exam," and fax to (619) 222-8593 or mail to: Real Estate License Services, 5059 Newport Ave, #209, San Diego, CA 92107. Real Estate License Services will arrange for your final exam online or with a test administrator.
Answers with Page References to Practice Questions at the end of Each Chapter in the Textbook:
Contents
CHAPTER ONE INTRODUCTION TO THE STUDY OF REAL ESTATE
CHAPTER TWO OWNERSHIP OF REAL PROPERTY
CHAPTER FOUR TRANSFERS AND DEEDS
CHAPTER FIVE ENCUMBRANCES AND TITLE INSURANCE
CHAPTER EIGHT REAL PROPERTY CONTRACTS AND ESCROW
CHAPTER NINE REAL ESTATE LICENSING
CHAPTER TEN REAL ESTATE FINANCE
CHAPTER ELEVEN LENDING INSTITUTIONS AND THE GOVERNMENT’S ROLE IN REAL ESTATE FINANCE
CHAPTER TWELVE SPECIALIZED REAL ESTATE
CHAPTER THIRTEEN PUBLIC CONTROLS
CHAPTER SIXTEEN REAL ESTATE MATH
CHAPTER
ONE
INTRODUCTION TO THE STUDY
OF REAL ESTATE
OUTLINE OF CHAPTER ONE
1.1 TERMS USED IN THIS CHAPTER
1.2 INTRODUCTION
1.3 BACKGROUND OF REAL ESTATE OWNERSHIP IN CALIFORNIA
1.3.1 THE SPANISH PERIOD: 1513 - 1822
1.3.2 THE MEXICAN PERIOD: 1822 - 1846
1.3.3 THE AMERICAN PERIOD: 1846 TO THE PRESENT
1.4 DEVELOPMENT OF OWNERSHIP RIGHTS
1.4.1 FEUDAL SYSTEM
1.4.2 ALLODIAL TENURE SYSTEM
1.5 ORIGINS OF COMMON LAW AND CIVIL LAW
1.6 EARLY METHODS OF MEASUREMENTS AND LAND SURVEY AND DESCRIPTION
1.6.1 MONUMENTS AND MARKINGS
1.6.2 INFORMAL REFERENCES
1.7 ASSESSMENT AND RECORDATION OF LAND AND IMPROVEMENTS
1.8 PRESENT METHODS OF DESCRIBING REAL PROPERTY
1.8.1 METES AND BOUNDS
1.8.2 U.S. GOVERNMENT SURVEY
1.8.3 BASE LINE AND MERIDIANS
1.8.4 TOWNSHIPS
1.8.5 SECTIONS
1.8.6 LOT, BLOCK, AND TRACT OR TRACT REFERENCE
1.9 CURRENT OWNERSHIP OF CALIFORNIA LAND
1.10 MEASUREMENTS TABLE
1.11 GLOSSARY - CHAPTER ONE
CHAPTER
ONE
INTRODUCTION
TO THE STUDY OF REAL ESTATE
NOTE: The bold face text in this chapter is the text of greatest importance.
1.1 TERMS USED IN THIS CHAPTER
Most italicized words are explained in the Chapter Glossary on page 15
Allodial
System
Assessor
Base Line
Correction Lines
Feudal
System
Lot, Block and Tract System
Meridians
Metes and
Bounds
Range
Range Lines
Section
Township
1.2 INTRODUCTION
In order to understand the development of property rights and the rules and principles of California real estate, we must have an understanding of California history. The history of real estate in California traces its roots through four cultures:
A. American Indian
B. Spanish
C. Mexican
D. American
Certain laws relating to rights in property were inherited from Spain and Mexico, but others originated in medieval England. Legal land descriptions have also evolved through the years. This chapter will cover the historical background of land titles in California and examine the methods of measuring and describing real property.
1.3 BACKGROUND OF REAL ESTATE OWNERSHIP IN CALIFORNIA
The earliest inhabitants of California were the American Indians. Prior to European colonization land was held by the native Americans who lived here.
1.3.1 THE SPANISH PERIOD: 1513 - 1822
The Spanish period began with Balboa’s discovery of the Pacific Ocean (1513) and lasted until Mexico’s independence from Spain (1822). In 1513 the Spanish explorer Vasco Nunez de Balboa sighted the Pacific Ocean and claimed its waters and shores, including the land we now call California, for the King of Spain. From 1513 until 1822 all the land in California was held in the name of the King of Spain, and technically belonged to him. Ownership and transfer of property rights were governed by Spanish law which was an outgrowth of Roman Civil Law, as distinguished from the Common Law followed in England and its American colonies.
Briefly, under the Civil Law, judges were guided by elaborate codes imposed by the sovereign, usually the King or Queen or their representative. Under Common Law judges gave weight to both the unwritten law of custom and usage of the people as well as the written law of the sovereign and legislature. Specifically, under the Civil Law of Spanish Rule in California, the use of land could be acquired only by political or military agencies of the King. The grants were not outright transfers of title but instead were limited to specific usages such as agriculture or grazing.
1.3.2 THE MEXICAN PERIOD: 1822 - 1846
Mexican Rule of California began with the Mexican independence from Spain (1822) and ended with the military and political victory of Americans over Mexico in California (1846). Upon independence from Spain, the Mexican government encouraged the colonization of California and established governors who had absolute discretion in the selection of persons who could receive land. These grants were made through a system that included an application to the governor, and upon his approval, ratification by the Mexican legislature. These grants, known as “expedientes,” were filed and recorded in government archives. The shapes and names of many California communities were determined long ago by these Mexican land grants. Many communities today in Central and Southern California trace their boundaries and histories back to these original Mexican land grants.
1.3.3 THE AMERICAN PERIOD: 1846 TO THE PRESENT
American Rule in California starts with the period of the victory of Americans over Mexico in California 1846 and includes the admission of California to the Union in 1850. Mexico’s inability to maintain its sovereignty in California and other areas of the current Southwestern United States, coupled with the impetus of American settlers into those territories, led to tension and finally to the Mexican-American War (1846-1848).
In those early days of American presence in California, the difficulty of making land surveys and the lack of an adequate land recording system resulted in land title problems to the extent that for a time accredited landowners were required to keep the evidence of their titles in their physical possession.
California’s transition from Mexican to American sovereignty became final with the Treaty of Guadalupe Hidalgo (1848) under which California became an American possession. The Treaty required that existing property rights under Mexican rule be respected. California was admitted to the Union in 1850. To resolve land title disputes growing out of this period, Congress established the Board of Land Commissioners (1851) to hear and determine all private land title claims, subject to final review by the courts. The adjudications of this Board uniformly has been held to be conclusive as to the validity of the grants of title and of the boundaries involved.
1.4 DEVELOPMENT OF OWNERSHIP RIGHTS
Two historical models of land holding developed in Europe and are of historical significance, the feudal system and the allodial system.
1.4.1 FEUDAL SYSTEM
The feudal land holding system influenced all of the early Common Law concerning real property, and despite the fact that the feudal system never existed in the United States, it has played a vital role in shaping modern land law. The feudal system was both a system of government and a means of holding property in medieval Europe, especially in England. Under this system, the King owned all the property and parcelled out holdings to royal vassals or lords for their use and occupancy in return for their pledge of loyalty and services. In return, the vassals also parcelled out this land to their subordinates under similar terms. This process ultimately resulted in a chain of relationships that stretched from the King down to the lowliest vassal. The king however never relinquished ownership of the land. The land held by the vassal under this system was called a “fief” or “feud,” the source for the word “feudal.”
1.4.2 ALLODIAL TENURE SYSTEM
As the feudal system decayed, it was replaced by the allodial tenure system of landholding. The allodial system reflected the decline of the power of the Crown and the growth of the power of the individual. This system recognizes the right of the individual to own land freely and absolutely without obligation to any political superior. The unit of land under this system was called an “allod” or “allodium.” Under this system, every parcel of land has a title which legally confers ownership. Whoever holds title to the land owns the land itself and all the rights that attach to it. The allodial system is the system by which all real properly is held in the United States today.
1.5 ORIGINS OF COMMON LAW AND CIVIL LAW
There are basically two systems of law in the Western World. Common Law, which originated in medieval England and Civil Law which grew out of Roman law and from which Spanish and Mexican law developed. Common Law recognized local customs and popular beliefs and standards of conduct. Precedents developed over time as the courts were called upon to hear the various disputes and grievances that arose and a body of rules and precepts was established. This gradual development differed from Civil Law which attempted to cover every possible dispute that might arise. In the absence of some constitutional or statutory provisions specifically applicable, Common Law prevails in California.
1.6 EARLY METHODS OF MEASUREMENTS AND LAND SURVEY AND DESCRIPTION
Measuring land accurately has always posed difficulties with impreciseness leading to practical problems and disputes. With one early land measurement technique, the circumference of a wheel was measured and a leather strip tied to a spoke. As the wheel was rolled on the ground the revolutions of the wheel could be seen and the distance recorded. Another method utilized two men on horseback with a rawhide thong. One rider would remain stationary while the other rode past. This was repeated by the other rider as the length of the thong was reached. At the end of the property the number of thong lengths exchanged would be counted.
Of the land measurement methods in use today metes and bounds descriptions is one of the oldest. It is described in section 1.8.1 on page 8.
When California gained statehood in 1850 certain base lines and meridians were established in order to locate and describe lands under the U.S. Government section and township system.
1.6.1 MONUMENTS AND MARKINGS
An early form of land description was the method known as monuments and markings. Under this system, natural and man-made features were used as points of reference for property descriptions. Monuments and markers are visible objects set by the government or surveyors which are used to establish the lines and boundaries of a survey. The boundaries of a parcel might be described by reference to objects that stand at the corners or border the edge of the property, such as an oak tree, a creek, a fence or a winding road. This method was often used in frontier and rural areas. While the method was convenient, it failed to permanently describe the land because both natural and man-made references were subject to change: the tree might topple in a storm, the creek change course, the fence removed, or the road straightened.