1. LEGAL CONSIDERATIONS IN APPRAISAL Chapter 2

2. CHAPTER TERMS AND CONCEPTS Acceptance Appurtenance Base line Bundle of rights Competent parties Consideration Contract Dominant tenement Easement Equity Fixture Government restrictions Government survey Intangible property Leased fee estate Leasehold estate Legal description Life estate Market restrictions Metes and bounds description Mutual obligation Offer Partial interests Personal property 2

3. CHAPTER TERMS AND CONCEPTS Police power Power of eminent domain Power of escheat Power of taxation Principal meridian line Private restrictions Property Range lines Real estate Real property Recorded lot, block, and tract description Recorded map Remainder estate Sections Servient tenement Statute of Frauds Subdivision map Tangible property Township Township lines Tract maps Trade fixtures 3

4. LEARNING OUTCOMES 1.Define real estate, real property, and personal property; give examples; and describe their differences. 2.Define and give examples of the bundle of rights. 3.Explain and provide examples of the three broad categories of restrictions on the use of real property. 4

5. LEARNING OUTCOMES 4.Define the four governmental restrictions on the private ownership of all property. 5.List and provide examples of the major types of legal descriptions. 6.List and explain the five requirements for a valid contract. 5

6. PROPERTY CLASSIFICATIONS Tangible Property  Rights to Physical Objects Intangible Property  Rights to Non-Physical Things 6

7. PROPERTY CLASSIFICATIONS Real Property  Land and Everything Attached To It Personal Property  Anything That Is Movable  Everything Not Real Property 7

8. REAL PROPERTY DEFINED 1.The Land 2.Permanently Affixed Objects 3.Appurtenant Rights 4.That Which Is Immovable By Law 8

9. TESTS OF A FIXTURE 9

10. REAL PROPERTY RIGHTS Fee ownership includes the following “Bundle of Rights”  The Right to : o Occupy o Sell o Borrow Against o Exclude Others o Convey Ownership by Inheritance 10

11. REAL PROPERTY RIGHTS Partial Interests o Leased fee estates o Leasehold estates o Life Estates o Undivided interests in commonly held property o Others 11

12. CATEGORIES OF USE RESTRICTIONS 12

13. GOVERNMENT RESTRICTIONS 13

14. Government Restrictions Police Power  Building and Safety  General Welfare  Community Planning, etc. Eminent Domain  Sovereign body taking back private property for public use and paying “just compensation” 14

15. Government Restrictions Taxation  Sovereign body may imposes taxes as needed as long as they are fair Escheat  The sovereign body will take back the title to the property if the owner dies or disappears and leaves no relatives or heirs 15

16. TYPES OF LEGAL DESCRIPTIONS Recorded Lot, Block & Tract Metes and Bounds Government Survey 16

17. RECORDED SUBDIVISION 17 FIGURE 2-4 An Example of a Subdivision Map

18. RECORDED LOT, BLOCK & TRACT After a Subdivision Map is filed, all Legal Descriptions Refer to the Recorded Map. The Legal Description of Lot 3 is:  Lot 3, Block 4 of Nottingham Forest, Section 7, a subdivision in the William Hardin Survey, Abstract No. 24, Houston, Harris County, Texas, Map recorded in Volume 138, Page 1 of the Map Records of Harris County, Texas 18

19. Metes and Bounds Early Example: Beginning at Joe’s barn, ten hop skips toward the old hickory stump on the ridge, then toward widow Jones’ cabin for a bit, then past the old flour mill, then back to Joe’s Barn 19

20. METES AND BOUNDS 20

21. BASE LINES & MERIDIANS 21 Source: Courtesy of the California Department of Real Estate Figure 2.7

22. Government Survey 22 Figure 2.8 Courtesy of the California Department of Real Estate

23. TOWNSHIP SHOWING SECTIONS 23 Figure 2.9 Courtesy of the California Department of Real Estate

24. MAP OF A SECTION 24 Figure 2.10 Courtesy of the California Department of Real Estate

25. CONTRACTS A Contract is Defined as:  An agreement between two or more persons which creates an obligation to do or not to do a particular act. o Source: Black’s Law Dictionary, 6 th ed., West Publishing Co., St. Paul, 1990 Essential Elements of a Contract  The Offer  The Acceptance  The Consideration 25

26. IMPORTANCE OF CONTRACTS Listing Contracts Sale Contracts Escrow Contracts Private Restrictions Statute of Frauds 26

27. SUMMARY 27 The distinction between real estate and real property was explained. Real estate is defined as the physical object, whereas real property refers to the rights gained by owning the object. Personal property includes all objects on the property that are not real property. When personal property has been permanently affixed to the land, it changes into a category of permanently affixed real property called a fixture. Real property refers to the many rights associated with real estate.

28. SUMMARY 28 When making an appraisal, it is not enough just to look at a property and appraise what you see. Rather, you must first establish what legal rights exist for the property and then identify which rights are to be included in the appraisal. The value of land depends on its potential and logical use. A contract is an agreement between two or more persons, which creates an obligation to do or not to do a particular act. Nearly every appraisal assignment will involve reading one or more contracts.