Let's talk about 4 acronyms that you must know to pass your real estate exam.
STUD, MARIA, PETE and TTIP
4 Elements of Value: STUD
The acronym STUD is used as a memory aid to keep the 4 elements of value in mind.
They are scarcity, transferability, utility and demand.
- Scarcity has to do with the supply of real estate available. The scarcer the supply of real estate available, the more valuable the property.
- Transferability, The deal is worthless unless the seller can transfer a clear property title to the buyer.
- Utility is the use to which a property can be put. The more uses that a property can be put to the more valuable it is.
- Demand is the number of people that want the property. The more people that want the property, the more valuable the property becomes.
Remember STUD is for scarcity, transferability, utility and demand.
Let's move on to fixtures. Personal property goes with the person and real property goes with the real estate. A fixture is personal property that becomes real property. It was something that once went with the person but, for reasons of its association with the property, now goes with the real estate being sold. An example of a fixture would be a toilet.
The test for a fixture can be remembered with the acronym MARIA.
- The method used to attach and item to the property might make it a fixture. For example if something was put in with a hammer and nail.
- Adaptability means that if the item becomes an integral part of the home, it cannot be removed. For example, a pool covering is a fixture because that cover goes with that pool on the property.
- Relationship of the parties can dictate if something is a fixture. Something might be considered a fixture if the relationship between parties is a buyer / seller as opposed to a landlord / tenant.
- Intention of the party when the item was attached can dictate if an item is now a fixture of the property.
- Most important is the agreement between the parties. Remember, what two people agree upon supersedes the other rules of a fixture.
So when they ask you about a fixture on your exam, remember the acronym MARIA: method, adaptability, relationship, intention, agreement.
Government Powers: PETE
To remember the government powers, think of the acronym PETE.
- Police Power
- Eminent Domain
NOTE: An individual would not have any of these rights.
- Police power is the state's inherent right to regulate an individual's conduct or property to protect the health, safety, welfare, and morals of the community. Common examples of police power are zoning and building codes.
- Eminent domain refers to the power possessed by the state to appropriate property for public use. The owner of any appropriated land is entitled to reasonable compensation, usually defined as the fair market value of the property.
- Taxation is a charge on real estate used to pay for services provided by the government.
- Escheat occurs when property reverts to state ownership when an individual dies without a will and without heirs.
So for government powers, remember the acronym PETE: Police Power, Eminent Domain, Taxation, Escheat.
Joint Tenancy: TTIP
Joint tenancy can be held by two or more people. Making it a form of concurrent ownership as opposed to ownership in severalty (where a person owns a property on their own). There are four unities that must exist in order for a joint tenancy to be created:
- Time: Each person must receive or obtain title to the property at the same time.
- Title: The deed needs to reflect the name of each person on the same document.
- Interest: Each person owns an equal portion of ownership.
- Possession: Each person possesses the same right to occupy the property.
One more note regarding joint tenancy: If one joint tenant dies, that joint tenant's portion of the property cannot be willed to an heir, other surviving relatives, or to anybody else since the remaining join tenants would have the right of survivorship.
Another form of concurrent ownership you should be aware of is tenants in common. In a tenants in common you could will the property as the other tenants would not have the right of survivorship. Also, there is only one unity that is shared: the right of possession.
Those are the 4 acronyms you must know to pass your exam.