SOLUTION MANUAL FOR g g
Real Estate Finance And Investments 17th International Edition Jeffrey Fisher Willia
g g g g g g g g g g
m B. Brueggeman
g g
Chapterg1-23
Solutions to Questions—Chapter 1
g g g
An Introduction to Real estate Investment: Legal Concepts
g g g g g g g
Questiong1-1
Whatgisgthegdifferencegbetweengrealgpropertygandgpersonalgproperty?
Realgpropertygrefersgtogthegownershipgrightsgassociatedgwithgrealty.gRealtygrefersgtoglandgandgallgthi
ngsgpermanentlygattached.gPersonalgpropertygrefersgtogownershipgrightsgassociatedgwithgpersonalt
y.gPersonaltygaregallgthings,gtangible,gintangiblegthatgaregmovable.gThisgincludesgallgthingsgthatgareg
notgrealty.
Questiong1-2
Whatgisgmeantgbygangestate?
Estategisgusedgtogdenotegagpossessorygorgpotentiallygpossessoryginterestgingrealgestate.gHowever,gnotg
allginterestsgingrealgpropertygaregestates.gOwnershipgcangbegquitegdifferentgfromgpossessiongandgagvar
ietygofglegalgfactorsgaffectgthegownershipgrightsgassociatedgwithgrealgestate.gThegeconomicgbenefitsg
expectedgbyglenders,ginvestors,gandgothergpartiesgingagrealgestategtransactiongaregaffectedgbygthesegle
galgfactors.
Questiong1-3
Howgcangagleasedgfeegestateghavegagvaluegthatgcouldgbegtransferredgtoganothergparty?
Thegoriginalgfeegownergcanggivegupgsomegpropertygrightsgtogaglessee.gThegvaluegofgthegleasedgfeegest
ategwillgdependgongthegamountgofgleasegpaymentsgexpectedgduringgthegtermgofgthegleasegplusgthegval
uegofgthegpropertygwhengthegleasegterminates,gandgthegoriginalgownergreceivesgthegreversionaryginte
rest.
Questiong1-4
Whatgaregtitlegrecords?gWhatgisgangabstractgofgtitle?
Titlegrecordsg(sometimesgreferredgtogasgdeedsgandgconveyancesgrecordsgand/orgrealgpropertygrecor
ds)garegcreatedgandgmaintainedgusuallygatgthegcountyglevel.gThesegrecordsgidentifygallgpropertiesging
agcounty,gincludingglocation,gpresentgownershipgandganygliensgorgencumbrancesgaffectinggeachgpro
perty.gThesegrecordsgaregcriticalgtoginvestorsgwhogwantgtogidentifygthegownergofgspecificgtractsgorgla
nd,gexistinggbuildings,getc.gThesegrecordsgaregalsogimportantgbecausegtheygcontaingevidencegofgenc
umbrancesgsuchgasgmortgagegliens,gtaxgliensg(togbegcoveredginglatergchapters),getc.gExample:gagpros
pectiveginvestorgseesgagvacantgtractgofglandgthatghegisginterestedgingpurchasing.gBecausegtheregisgnog
signagegorganygimprovementsgongthegland,ghowgcangtheglandgownergbegidentifiedgandgcontacted?gB
yggoinggtogthegcountygrecordsgofficeg(deedsgandgconveyancersgdepartment)gtheginvestorgcangusegthe
gaddressgtoglocategagpropertyg(usuallygingplatgbooks),gthengthegcurrentgowner.gThesegrecordsgareguse
dgtoglinkgagprecisegpropertygtogitsgowner.gAtgsomegpoint,gifgthisginvestorgcontinuesgtogbeginterestedgi
ngpurchasinggthegland,ghegwillglikelygretaingangattorneygorgabstractorgtogdogagtitlegsearchgandgabstrac
tgofgtitle.gTheglattergisgdonegtognotgonly
Copyrightg©g2022gMcGrawgHill.gAllgrightsgreserved.gNogreproductiongorgdistributiongwithoutgthegpriorgwrittengconsentgofgMcGrawgHill
.
18-1
, identifygthegcurrentgownergbutgtogtracegallgpreviousgownersgwithgcommentarygongtheglikelihoodgofgo
thergpartiesgwhogmaygownershipgrightsgandg/orginterestsgingthegtractgofgland.
Questiong1-5
Whatgisgagdeed?gHowgisgitgdifferentgfromgthegtitle?
Thegdeedgisgagdocumentgusuallygcreatedgbygthegownergofgagpropertygcontaininggthegpropertyglegal
I.D.gandglocationgingadditiongtoganygimprovementsgthatgexistgongthegproperty.gItgalsogdescribesgthege
xtentgtogwhichgthegsellergwarrantsgthatghegisgthegownergofgthegpropertygandghasgthegrightgtogconveygo
wnership.gAgdeedgisgusedgtogconveygthegtitlegfromgonegpersong(theggrantor)gtoganotherg(thegregrante
e)gbygmeansgofgagwrittenginstrument.gThegtermg―title‖gisgangabstractgtermgfrequentlygusedgtoglinkga
ngindividualgorgentitygwhogownsgpropertygtogthegpropertygitself.gWhengagpersonghas
―title,‖ghegisgsaidgtoghavegallgthegelements,gincludinggthegdocuments,grecords,gandgacts,gthatgprovego
wnership.gTitlegestablishesgthegquantitygofgrightsgingrealgestategbeinggconveyedgfromgsellergtogItgdiff
ersgfromgtitlegbecausegtitlegprovidesgevidencegofgownershipgbasedgongthegcollectivegrecordsgthatgexi
stgpertaininggtogagproperty.
Questiong1-6
Whatgisgmeantgbygagtitlegrecord?gWhygaregthesegrecordsgsogimportant?
Thegtitlegrecordgrefersgtogrecordsgongfile,gusuallygatgthegcountyglevel,gthatghelpgtogspecifygtractsgofgre
algestategandgdeterminegifgagsellerghasgthegrightgtogconveygownershipgofgsuchgrealgproperty.
Thesegrecordsgaregthegmostgimportantgsourcesgofgeventsgaffectinggrealgestategownershipgovergtimega
ndgaregusuallygreviewedgwhengtryinggtogidentifygtheg―quality‖gofgtitlegthatginvestorsgwillgreceivegifgt
heygpurchase.gAftergagreviewgofgthesegrecordsg(usuallygbygangattorney),gifginghisgopinion,gtheygaregc
omplete,ghegwillgindicategthatgthegsellerghasgownershipgandgtitlegtogthegproperty.gMostgofgtheginstru
mentsgthatgaffectgtitlegtogrealgestategaregrecorded,gingaccordancegwithgthegrecordinggactsgofgthegvario
usgstates,gatgwhatgisgtypicallygcalledgthegcountygrecorder’sgoffice.
Questiong1-7
Whatgisgagfuturegestate?gGivegangexample?
Wegthinkgofgmostgrealgestategtransactionsgasgacquiringgownershipgatgthegpresentgtime.gHowever,go
wnershipgcangalsogoccurgatgaglatergtime,gsaygaftergthegcurrentgownergdies.gThegpersongwhogbecomesg
thegownergatgthatgtimegisgsaidgtogbegag―remainder‖gestate.gFuturegestatesgincludegagreversiongandgre
mainder.gAgreversiongresultsgingthegstategrevertinggbackgtogthegoriginalgpossessorgwhereasgthegremai
ndergresultsgingagthird-partygobtaininggpossessiongatgsomegpointgingthegfuture.
Questiong1-8
Namegthegthreeggeneralgmethodsgofgtitlegassurancegandgbrieflygdescribegeach.gWhichgwouldgyougre
commendgtogagfriendgpurchasinggrealgestate?gWhy?
GeneralgWarrantygDeedg-
gtheggrantorgwarrantsgthatgthegtitleghe/shegconveysgtogthegpropertygisgfreegandgcleargofgallgencumbran
ces,gothergthangthosegthatgaregspecificallyglistedgingthegdeed.
SpecialgWarrantygDeedg-
gmakesgthegsamegwarrantiesgasgaggeneralgwarrantygdeedgexceptgthatgitglimitsgtheirgapplicationgtogdef
ectsgandgencumbrancesgwhichgoccurredgonlygwhilegtheggrantorgheldgtitlegtogthegproperty.
QuitclaimgDeedg-
goffersgtheggranteegthegleastgprotectiongingthatgitgimplygconveysgtogtheggranteegwhatevergrights,,ginte
rests,,gandgtitlegthatgtheggrantorgmayghavegingthegproperty.gNogwarrantiesgaregmadegaboutgthegnatureg
Copyrightg©g2022gMcGrawgHill.gAllgrightsgreserved.gNogreproductiongorgdistributiongwithoutgthegpriorgwrittengconsentgofgMcGrawgHill
.
18-2
, ofgthesegrightsgandginterestsgorgofgthegqualitygofgtheggrantor’sgtitlegtogthegproperty.
Copyrightg©g2022gMcGrawgHill.gAllgrightsgreserved.gNogreproductiongorgdistributiongwithoutgthegpriorgwrittengconsentgofgMcGrawgHill
.
18-3
, WouldgrecommendgthegGeneralgWarrantygDeed,gbecausegitgoffersgthegmostgcomprehensivegwarrant
iesgaboutgthegqualitygofgthegtitle.
Questiong1-9
WouldgitgbeglegalgforgyougtoggivegagquitclaimgdeedgforgthegStatuegofgLibertygtogyourgfriend?gYes
,gthegquitclaimgdeedgsimplygsaysgthatgtheggrantorg―quits‖gwhatevergclaimgheghasgingthegpropert
yg(whichgmaygwellgbegnone)gingfavorgofgtheggrantee.
SolutionsgtogQuestions—
Chapterg2gFinancing:gNotesgandgMort
gages
Questiong2-1
Distinguishgbetweengagmortgagegandgagnote.
Agnotegadmitsgthegdebtgandggenerallygmakesgthegborrowergpersonallygliablegforgthegobligation.gAgm
ortgagegisgusuallygagseparategdocumentgwhichgpledgesgthegdesignatedgpropertygasgsecuritygforgthegd
ebt.
Questiong2-2
Whatgdoesgitgmeangwhengaglendergacceleratesgongagnote?gWhatgisgmeantgbygforbearance?
Thegaccelerationgclauseggivesgtheglendergthegrightgorgoptiongtogdemandgthegloangbalancegowedgifgagd
efaultgoccurs.gForbearancegbygtheglendergallowsgthegborrowergtimegtogcuregagdeficiencygwithoutgthe
glenderggivinggupgthegright gtogforeclosegatgagfuturegtime.
Questiong2-3
Cangborrowersgpaygoff,gpartgorgall,gofgloansganytimegthatgtheygdesire?
No.gInggeneral,gprepaymentgisgagprivilegegnotgagright.gIngcasesgofgresidential/consumergloansgmadegb
ygfederallygrelatedglenders,gthisgoptiongisgusuallygprovidedgtogborrowers.gIngcommercialgrealgestategl
oansgitgisgnot.
Questiong2-4
Whatgdoesgnon-recoursegfinancinggmean?
Thegborrowergisgnotgpersonallygliablegongthegnote.gTheglendergmayglookgonlygtogthegpropertyg(securi
ty)gtogsatisfygthegloangingthegeventgofgdefault.
Questiong2-5
Whatgdoesgassignmentgmeangandgwhygwouldgaglendergwantgtogassigngagmortgagegloan?gAssignme
ntggivesgtheglendergthegrightgtogsellgorgexchangegagmortgagegloangtoganothergpartygwithoutgthegappro
valgofgthegborrower.
Questiong2-6
Whatgisgmeantgbygag“purchasegmoney“gmortgagegloan?gWhengcouldgagloangnotgbegagpurchasegmon
eygmortgage?
Purchasegmoneygmeansgfundsgfromgthegloangwillgbegusedgtogpurchasegagproperty.gItgwillgnotgprovide
gfundsgforgothergusesgsuchgasgcouldgbegthegcasegwithgagrefinancing.
Copyrightg©g2022gMcGrawgHill.gAllgrightsgreserved.gNogreproductiongorgdistributiongwithoutgthegpriorgwrittengconsentgofgMcGrawgHill
.
18-4
Real Estate Finance And Investments 17th International Edition Jeffrey Fisher Willia
g g g g g g g g g g
m B. Brueggeman
g g
Chapterg1-23
Solutions to Questions—Chapter 1
g g g
An Introduction to Real estate Investment: Legal Concepts
g g g g g g g
Questiong1-1
Whatgisgthegdifferencegbetweengrealgpropertygandgpersonalgproperty?
Realgpropertygrefersgtogthegownershipgrightsgassociatedgwithgrealty.gRealtygrefersgtoglandgandgallgthi
ngsgpermanentlygattached.gPersonalgpropertygrefersgtogownershipgrightsgassociatedgwithgpersonalt
y.gPersonaltygaregallgthings,gtangible,gintangiblegthatgaregmovable.gThisgincludesgallgthingsgthatgareg
notgrealty.
Questiong1-2
Whatgisgmeantgbygangestate?
Estategisgusedgtogdenotegagpossessorygorgpotentiallygpossessoryginterestgingrealgestate.gHowever,gnotg
allginterestsgingrealgpropertygaregestates.gOwnershipgcangbegquitegdifferentgfromgpossessiongandgagvar
ietygofglegalgfactorsgaffectgthegownershipgrightsgassociatedgwithgrealgestate.gThegeconomicgbenefitsg
expectedgbyglenders,ginvestors,gandgothergpartiesgingagrealgestategtransactiongaregaffectedgbygthesegle
galgfactors.
Questiong1-3
Howgcangagleasedgfeegestateghavegagvaluegthatgcouldgbegtransferredgtoganothergparty?
Thegoriginalgfeegownergcanggivegupgsomegpropertygrightsgtogaglessee.gThegvaluegofgthegleasedgfeegest
ategwillgdependgongthegamountgofgleasegpaymentsgexpectedgduringgthegtermgofgthegleasegplusgthegval
uegofgthegpropertygwhengthegleasegterminates,gandgthegoriginalgownergreceivesgthegreversionaryginte
rest.
Questiong1-4
Whatgaregtitlegrecords?gWhatgisgangabstractgofgtitle?
Titlegrecordsg(sometimesgreferredgtogasgdeedsgandgconveyancesgrecordsgand/orgrealgpropertygrecor
ds)garegcreatedgandgmaintainedgusuallygatgthegcountyglevel.gThesegrecordsgidentifygallgpropertiesging
agcounty,gincludingglocation,gpresentgownershipgandganygliensgorgencumbrancesgaffectinggeachgpro
perty.gThesegrecordsgaregcriticalgtoginvestorsgwhogwantgtogidentifygthegownergofgspecificgtractsgorgla
nd,gexistinggbuildings,getc.gThesegrecordsgaregalsogimportantgbecausegtheygcontaingevidencegofgenc
umbrancesgsuchgasgmortgagegliens,gtaxgliensg(togbegcoveredginglatergchapters),getc.gExample:gagpros
pectiveginvestorgseesgagvacantgtractgofglandgthatghegisginterestedgingpurchasing.gBecausegtheregisgnog
signagegorganygimprovementsgongthegland,ghowgcangtheglandgownergbegidentifiedgandgcontacted?gB
yggoinggtogthegcountygrecordsgofficeg(deedsgandgconveyancersgdepartment)gtheginvestorgcangusegthe
gaddressgtoglocategagpropertyg(usuallygingplatgbooks),gthengthegcurrentgowner.gThesegrecordsgareguse
dgtoglinkgagprecisegpropertygtogitsgowner.gAtgsomegpoint,gifgthisginvestorgcontinuesgtogbeginterestedgi
ngpurchasinggthegland,ghegwillglikelygretaingangattorneygorgabstractorgtogdogagtitlegsearchgandgabstrac
tgofgtitle.gTheglattergisgdonegtognotgonly
Copyrightg©g2022gMcGrawgHill.gAllgrightsgreserved.gNogreproductiongorgdistributiongwithoutgthegpriorgwrittengconsentgofgMcGrawgHill
.
18-1
, identifygthegcurrentgownergbutgtogtracegallgpreviousgownersgwithgcommentarygongtheglikelihoodgofgo
thergpartiesgwhogmaygownershipgrightsgandg/orginterestsgingthegtractgofgland.
Questiong1-5
Whatgisgagdeed?gHowgisgitgdifferentgfromgthegtitle?
Thegdeedgisgagdocumentgusuallygcreatedgbygthegownergofgagpropertygcontaininggthegpropertyglegal
I.D.gandglocationgingadditiongtoganygimprovementsgthatgexistgongthegproperty.gItgalsogdescribesgthege
xtentgtogwhichgthegsellergwarrantsgthatghegisgthegownergofgthegpropertygandghasgthegrightgtogconveygo
wnership.gAgdeedgisgusedgtogconveygthegtitlegfromgonegpersong(theggrantor)gtoganotherg(thegregrante
e)gbygmeansgofgagwrittenginstrument.gThegtermg―title‖gisgangabstractgtermgfrequentlygusedgtoglinkga
ngindividualgorgentitygwhogownsgpropertygtogthegpropertygitself.gWhengagpersonghas
―title,‖ghegisgsaidgtoghavegallgthegelements,gincludinggthegdocuments,grecords,gandgacts,gthatgprovego
wnership.gTitlegestablishesgthegquantitygofgrightsgingrealgestategbeinggconveyedgfromgsellergtogItgdiff
ersgfromgtitlegbecausegtitlegprovidesgevidencegofgownershipgbasedgongthegcollectivegrecordsgthatgexi
stgpertaininggtogagproperty.
Questiong1-6
Whatgisgmeantgbygagtitlegrecord?gWhygaregthesegrecordsgsogimportant?
Thegtitlegrecordgrefersgtogrecordsgongfile,gusuallygatgthegcountyglevel,gthatghelpgtogspecifygtractsgofgre
algestategandgdeterminegifgagsellerghasgthegrightgtogconveygownershipgofgsuchgrealgproperty.
Thesegrecordsgaregthegmostgimportantgsourcesgofgeventsgaffectinggrealgestategownershipgovergtimega
ndgaregusuallygreviewedgwhengtryinggtogidentifygtheg―quality‖gofgtitlegthatginvestorsgwillgreceivegifgt
heygpurchase.gAftergagreviewgofgthesegrecordsg(usuallygbygangattorney),gifginghisgopinion,gtheygaregc
omplete,ghegwillgindicategthatgthegsellerghasgownershipgandgtitlegtogthegproperty.gMostgofgtheginstru
mentsgthatgaffectgtitlegtogrealgestategaregrecorded,gingaccordancegwithgthegrecordinggactsgofgthegvario
usgstates,gatgwhatgisgtypicallygcalledgthegcountygrecorder’sgoffice.
Questiong1-7
Whatgisgagfuturegestate?gGivegangexample?
Wegthinkgofgmostgrealgestategtransactionsgasgacquiringgownershipgatgthegpresentgtime.gHowever,go
wnershipgcangalsogoccurgatgaglatergtime,gsaygaftergthegcurrentgownergdies.gThegpersongwhogbecomesg
thegownergatgthatgtimegisgsaidgtogbegag―remainder‖gestate.gFuturegestatesgincludegagreversiongandgre
mainder.gAgreversiongresultsgingthegstategrevertinggbackgtogthegoriginalgpossessorgwhereasgthegremai
ndergresultsgingagthird-partygobtaininggpossessiongatgsomegpointgingthegfuture.
Questiong1-8
Namegthegthreeggeneralgmethodsgofgtitlegassurancegandgbrieflygdescribegeach.gWhichgwouldgyougre
commendgtogagfriendgpurchasinggrealgestate?gWhy?
GeneralgWarrantygDeedg-
gtheggrantorgwarrantsgthatgthegtitleghe/shegconveysgtogthegpropertygisgfreegandgcleargofgallgencumbran
ces,gothergthangthosegthatgaregspecificallyglistedgingthegdeed.
SpecialgWarrantygDeedg-
gmakesgthegsamegwarrantiesgasgaggeneralgwarrantygdeedgexceptgthatgitglimitsgtheirgapplicationgtogdef
ectsgandgencumbrancesgwhichgoccurredgonlygwhilegtheggrantorgheldgtitlegtogthegproperty.
QuitclaimgDeedg-
goffersgtheggranteegthegleastgprotectiongingthatgitgimplygconveysgtogtheggranteegwhatevergrights,,ginte
rests,,gandgtitlegthatgtheggrantorgmayghavegingthegproperty.gNogwarrantiesgaregmadegaboutgthegnatureg
Copyrightg©g2022gMcGrawgHill.gAllgrightsgreserved.gNogreproductiongorgdistributiongwithoutgthegpriorgwrittengconsentgofgMcGrawgHill
.
18-2
, ofgthesegrightsgandginterestsgorgofgthegqualitygofgtheggrantor’sgtitlegtogthegproperty.
Copyrightg©g2022gMcGrawgHill.gAllgrightsgreserved.gNogreproductiongorgdistributiongwithoutgthegpriorgwrittengconsentgofgMcGrawgHill
.
18-3
, WouldgrecommendgthegGeneralgWarrantygDeed,gbecausegitgoffersgthegmostgcomprehensivegwarrant
iesgaboutgthegqualitygofgthegtitle.
Questiong1-9
WouldgitgbeglegalgforgyougtoggivegagquitclaimgdeedgforgthegStatuegofgLibertygtogyourgfriend?gYes
,gthegquitclaimgdeedgsimplygsaysgthatgtheggrantorg―quits‖gwhatevergclaimgheghasgingthegpropert
yg(whichgmaygwellgbegnone)gingfavorgofgtheggrantee.
SolutionsgtogQuestions—
Chapterg2gFinancing:gNotesgandgMort
gages
Questiong2-1
Distinguishgbetweengagmortgagegandgagnote.
Agnotegadmitsgthegdebtgandggenerallygmakesgthegborrowergpersonallygliablegforgthegobligation.gAgm
ortgagegisgusuallygagseparategdocumentgwhichgpledgesgthegdesignatedgpropertygasgsecuritygforgthegd
ebt.
Questiong2-2
Whatgdoesgitgmeangwhengaglendergacceleratesgongagnote?gWhatgisgmeantgbygforbearance?
Thegaccelerationgclauseggivesgtheglendergthegrightgorgoptiongtogdemandgthegloangbalancegowedgifgagd
efaultgoccurs.gForbearancegbygtheglendergallowsgthegborrowergtimegtogcuregagdeficiencygwithoutgthe
glenderggivinggupgthegright gtogforeclosegatgagfuturegtime.
Questiong2-3
Cangborrowersgpaygoff,gpartgorgall,gofgloansganytimegthatgtheygdesire?
No.gInggeneral,gprepaymentgisgagprivilegegnotgagright.gIngcasesgofgresidential/consumergloansgmadegb
ygfederallygrelatedglenders,gthisgoptiongisgusuallygprovidedgtogborrowers.gIngcommercialgrealgestategl
oansgitgisgnot.
Questiong2-4
Whatgdoesgnon-recoursegfinancinggmean?
Thegborrowergisgnotgpersonallygliablegongthegnote.gTheglendergmayglookgonlygtogthegpropertyg(securi
ty)gtogsatisfygthegloangingthegeventgofgdefault.
Questiong2-5
Whatgdoesgassignmentgmeangandgwhygwouldgaglendergwantgtogassigngagmortgagegloan?gAssignme
ntggivesgtheglendergthegrightgtogsellgorgexchangegagmortgagegloangtoganothergpartygwithoutgthegappro
valgofgthegborrower.
Questiong2-6
Whatgisgmeantgbygag“purchasegmoney“gmortgagegloan?gWhengcouldgagloangnotgbegagpurchasegmon
eygmortgage?
Purchasegmoneygmeansgfundsgfromgthegloangwillgbegusedgtogpurchasegagproperty.gItgwillgnotgprovide
gfundsgforgothergusesgsuchgasgcouldgbegthegcasegwithgagrefinancing.
Copyrightg©g2022gMcGrawgHill.gAllgrightsgreserved.gNogreproductiongorgdistributiongwithoutgthegpriorgwrittengconsentgofgMcGrawgHill
.
18-4
