Property Ownership, Interests, Transfer of Title, and Valuation
Estates and ownership forms
Know the freehold estates (fee simple absolute, fee simple defeasible, life estate) and leaseholds. Co-ownership questions turn on survivorship: tenants in common have no right of survivorship and may hold unequal shares; joint tenants hold equal undivided shares with survivorship; marital co-ownership may take the form of tenancy by the entirety where recognized. Severance of a joint tenancy occurs by conveying one's share.
Encumbrances and liens
Easements may be appurtenant (runs with the land) or in gross (personal benefit); a license is revocable and not an interest in land. Encroachments, deed restrictions, and liens all affect marketability. Mechanic's liens can jump ahead of later-recorded liens, and mortgage liens are extinguished by foreclosure but generally do not wipe out prior tax liens.
Transfer of title
Deeds require a grantor, grantee, words of conveyance, legal description, consideration, the grantor's signature, and delivery plus acceptance; recording protects against later claimants under notice/race-notice recording statutes. Know voluntary versus involuntary transfer, adverse possession, quiet title actions, title insurance, and marketable title.
Valuation
Three approaches: sales comparison (most reliable for residences), cost (replacement cost less depreciation, plus land), and income (NOI ÷ cap rate, or gross rent multiplier for quick comparisons). Highest and best use frames all three.
Traps
Questions swap joint tenancy for tenancy in common, or treat a license as an easement. In valuation, students often forget to add land value in the cost approach.
Worked example
A duplex produces $72,000 net operating income; comparable properties sell at a 9% cap rate. Value = $72,000 ÷ 0.09 = $800,000.