What is a leasehold estate?
The tenant's right to occupy the property for the term of the lease.
What are the 3 types of leasehold estates?
1. Tenancy at Will
2. Tenancy at Sufferance
3. Estate (Tenancy) for Years
Which leasehold estate requires no notice for termination and why?
Estate for Years
A residential lease with notice required is usually what kind?
Estate from Period to Period or At Will
When you have a lease and it is at will, what does that mean?
The tenant hasn't promised the landlord any period of time and the landlord hasn't promised the
tenant any time either. Either party just has to give 30 days notice to vacate.
When a tenant stays beyond the lease agreement and has been given notice to vacate,
what do we call it?
Tenant at Sufferance
What are the 3 essential parts of a lease?
Competent parties, Mutual Assent and Legality of object
What is the difference between contract rent and economic rent?
Contract rent is on the lease agreement and economic rent is what the market is getting now.
Who's signature is required on a lease by law?
landlords
What does the term Exculpatory Clause mean?
Excuses the landlord from any liability for negligence in maintaining the leased property.
Explain what happens in an assignment?
The original tenant finds a qualified tenant to take his place on the lease with the landlord's
permission. He will stay responsible In case the new tenant defaults.
Explain a sublease?
Sublease is when the tenant finds a sublessee to rent the unit without the landlord's permission
and can charge more than he is paying with the landlord. He collects the rent and then pays the
landlord what they agreed upon.
Who holds the sandwich part of a lease?
The sublessor
If a landlord wants to evict a tenant what do we call that?
Actual eviction
When a tenant wants to break a lease because the unit is uninhabitable what is that
called?
Constructive eviction
What does a gross lease mean?
Tenant pays A fixed amount and the landlord pays all property charges
What is a net lease?
Tenant pays a fixed amount each moth along with some or all property charges. Ex. Taxes,
insurance, water, sewer
What is a percentage lease?
The tenant pays a percentage of the profit he makes with his business that is renting the unit.
What is a graduated lease?
It starts out lower In the beginning and gradually increases at set intervals as the time goes by.
What is an index lease?
Usually a commercial lease that will be based on an indicator to adjust up or down the rent.
What is a ground lease?
A tenant rents the land and erects a building on it, long term 50-100 years +
What is the difference between an lease with option and a lease purchase?
Lease option is the idea of the tenant because they don't have the funds to purchase now. A lease
option is the landlord's idea to sell to the tenant and he is enticing him to sell by naming his price
now and putting so much of the rent toward the down pa
There are 2 ways you can pay for an agricultural lease, what are they?
Cash rent or sharecropping
If I rent a cottage at the beach for one week, what kind of lease is it?
Estate for Years
When the tenant pays a fixed amount of rent and also taxes and insurance what kind of
lease is it?
Net lease
What does Ad Valorem tax mean and what is it?
To the value of, and it is your property tax
Who is exempt from property taxes?
Government agencies, state and federal, schools, parks, playgrounds, religious organizations,
hospitals,
Describe what a specially assessment is and explain the difference between a voluntary
one and an involuntary one.
Special assessment is specific to a property. It should enhance the value so the owner has to help
pay for it. It can be voluntary if the owner requests it ex. A sidewalk or involuntary if the town
wants to do it.
When is an equalization factor used?
To adjust the assessed value up or down depending on what the town needs to operate.
What is a mill rate and what does it equal?
A tax term that equals .001 If the tax rate is 37mills it means for every $1000. The owner will have
to pay $37 dollars in taxes.
What is the equitable right of redemption?
Before an actual tax or foreclosure sale the owner has the right to pay past due and fines and
stop the auction of their property.
What is statutory right of redemption?
After the tax sale of a property depending on the state it allows the owner to pay back expenses
and penalties and reinstate their ownership. In MA it is 6 months.
In MA what is the transfer tax and who pays it?
The seller pays and it is $4.56/$1000.
Capital Gains tax can be deferred on what type of property?
On your primary residence
How long do you have to live in a property in order to defer Capital gains?
2 years
What is the exemption amount for a married couple and a single person?
For a single person it is $250,000 and for a married person it is $500,000
What does the term 1031 tax deferred mean?
A property exchange of like kind with the same or greater value. Used by investors.
What is the tax benefit to an installment sale?
Taxes are paid on the amount the owner receives yearly and not on the entire selling price all at
once.
What is the difference between an appraisal and a comparative market approach?
An appraisal is done by a license appraiser and a cma is done by a real estate person. They are
both a valuation of what you think the property is worth but the appraisal goes into a lot more
detail.
In order to have value you need 4 things?
Demand, Utility, Scarcity, Transferability DUST
What is the difference between market value and market price?
Market value is what you think the property will sell for and market price is what it actually sells
for.
Market value verses cost?
Market value is what you think it will sell for and market cost is what it cost the builder to put it
there. The only time they could be the same is when the construction Is new.
What are the 4 external forces that influence Value?
Physical, political, economic and social
What does highest and best use refer to?
It is the most profitable use to which a property can be adapted. Ex residential or
commercial if it is zoned for either.
What does the substitution principle state?
The maximum value of a property tends to be set by the cost of a similar property that has the
same or similar features and has sold for that value. Why should I pay more is I can get it for less.
Describe a seller's market and a buyer's market. Which do we have now?
A seller's market is what we have now, inventory is low and we have more buyers than property
for sale. A buyer's market is opposite too many houses and not enough buyers.
When is balance achieved?
When the addition of improvements to the land and structure increases the property value.
What does conformity mean and give an example.
When neighborhoods have similar style and house sizes we have conformity but when you have a
smaller home located in a neighborhood with very large homes it does not conform. 2 bedroom
ranch located next to 4 bedroom garrisons.
What is regression and progression?
When dissimilar properties exist in the same neighborhoods, the better quality house is
negatively affected and that is regression and when a lesser value home is located next to a better
quality property than its value would increase and that is progress
Does anticipation influence the value of a property?places
Value can be effected by a future event either positively or negatively.
The value of a component consists of what its addition does to the value, this is called
what?
Contribution
How can competition do to a business?
Too much profit attracts competition and then there are too many similar businesses and not
enough profit to go around and results in closings. Ie. yogurt places
What are the 3 approached an appraiser has to use in his appraisal?
Market approach, Cost approach and Income approach
When making adjustments to comps there are 4 basic categories, what are they?
Sale or financing concessions, date of sale, location, physical features and amenities
If I am doing a market data approach to value and my house has a garage but the comp
doesn't what kind of an adjustment do I make and to what property?
I would make a positive adjustment to the comp. Increase the value to include a garage
How do I arrive at a cost approach?
Determine the value of the land separate. Then figure out the cost of building the property,
probably using the sq. ft. method and a Marshall and Swifts handbook. That would be what it costs
new so then depreciate it back to the condition it is in. Take t
If land can change In value, is it due to depreciation?
NO, land never depreciates it would change in value because of supply and demand that makes
the price of land change.
What is the difference between replacement cost and reproduction cost? Which is more
expensive?
Replacement cost is using todays supplies at today's prices to replace the same utility. While
reproduction is duplicating the same feature with exactly the same product. It is more expensive.
Replacing pipes in an old house instead of lead pipes we would
What is the most popular method when an appraiser does a cost approach?
Square foot method
Name the 3 types of depreciation.
Physical, functional and external obsolescence
Which of the 3 approaches is always incurable and why?
External because it is beyond your control
What approach uses the capitalization rate and what is it?
The income approach and the CAP rate is what the investor wants back yearly as a profit.
Describe what the gross rent multiplier is and when is it used?
The GRM is used in replacement of the income approach for an appraiser when the property
doesn't have a rental market. It is allowed on a single family appraisal. The appraiser discounts it
value because it doesn't contribute to a single family value with
What does reconciliation refer to?
Once an appraiser has completed all 3 approaches of value for his report he will analysis
the findings and determine based on why he was hired to do the appraisal and the facts he
collected what the value will be.
How can a rumor effect the value of a property? What Value principal is that?
It can either decrease or increase its value and the value principal is Anticipation.
If tenants are complaining that they need air conditioning but the landlord can't justify it
because of the cost what value principle is that?
Contribution
If I am doing the cost approach to value and and I want to duplicate the feature in an old
house what do I use?
Reproduction value
Your neighbor is a hoarder and his yard is full of junk, how does that effect your property
and what is it called?
It will decrease its value and it is called external obsolescence
On a closing statement who would be responsible for the commission in a normal
transaction?
Seller
What type of expenses would have to be pro-rated at closing?
Taxes, water, sewer, condo fees, special assessments, oil
Who pays the day of closing?
Seller
What is the difference between a banker's year and an actual year?
A banker's year has 30 days In every month even February for 360 days a year. An actual year is
365 days with every month having its precise number in it.
Who pays a transfer tax in MA and how much is it?
Seller always pays and it is $4.56 /$1000.
What does the word arrears mean and give an example of when we use it.
Arrears means you pay after you have you have been there. The opposite of paying your rent in
advance. You pay your mortgage in arrears so on February 1st you pay for the month of January
and if you were paying rent, the February payment would be for Febr
A couple bought their home 20 years ago for $70,000. The just sold it for $670,000. How
much will they have to pay capital gains on?
$670,000. - 70,000. =600,000. - 500,000. = 100,000.