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(P.E.T.E.) Police Powers, Escheat, Taxation, Eminent Domain | Real Estate Exam Prep Videos - YouTube
Channel: The Real Estate Classroom
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everybody my name is Paul the Chesky and
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welcome the real estate classroom
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YouTube channel do me a favor before we
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get into the video give this video a
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thumbs up hit that red subscribe button
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click on that little notification bell
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topic of today's video is government
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controls and regulations over your
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personal property remember we talked
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about in a previous video about those
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bundle of rights and if you don't
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understand what a bundle of rights the
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bundle of rights are right up here is a
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video link it's a little I up there in
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the upper right hand corner of your
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screen click on that and watch that
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video and then come back to this one but
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as you learned if you watch that video
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the bundle of Rights gave the landowner
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all of these things all these things
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that they can do and and they could do
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it absolutely but as time has gone on
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over the years what's happened is
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governments have placed controls and
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restrictions on what a private owner can
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do and not do with their property and
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there there's an acronym called peat and
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it stands for police powers a sheet
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taxation and eminent domain those are
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four buckets or four areas where the
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government places government controls
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and regulations on private property and
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I want to talk about each one here
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there's some key terms that we're going
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to learn in this video and those real
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estate key terms are police powers
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escheat taxation eminent domain
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intestate and condemnation or
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condemnation proceedings all right so
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let's get to our first letter of our
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acronym peat it stands for police powers
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a couple of things you got to know about
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police powers number one is there is no
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compensation meaning no compensation
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from any government it's it's what it is
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is the government's going to tell you
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what you can and can't do but there's no
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compensation and title which means
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ownership and real estate does not pass
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it does not pass so when we see police
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powers or when you think about police
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powers we typically correlate it to
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things like zoning laws or building
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codes or fire codes those are all
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examples of where the government has
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placed regulations on what you can and
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can't do with your property and by the
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way no compensation so if those
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regulations have a adverse impact on the
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cash flow of your business or your
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property that's on you you're
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responsible for it the government will
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not compensate you whatsoever
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now these laws and these regulations can
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be much broader and they are much
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broader another example is environmental
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laws such as the Clean Air Act and the
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Clean Water Act I actually had an
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example one time I had a student in my
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class many years ago and him and his
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wife had purchased like 40 or 50 acres
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of timber land in Oregon and they
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actually had like a million dollar a
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million dollar mortgage on it and it was
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based on the value of the logging that
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was on there shortly after they closed
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on the property the federal government
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came in and declared that an off-limits
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property because of the spotted owl owl
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which is was on the endangered species
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list
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so they owned this forty or fifty acres
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they had a million dollar mortgage that
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they were making payments on and they
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had absolutely no right to do anything
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and that's just an example of how
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impactful some of these regulations can
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be on private owners the next part of
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the the the second letter of our acronym
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is e and it stands for escheat and the
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root word of escheat is sheet es CH EA
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te I forgot to put the C in there so
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it's G a couple of things we have to
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know about is cheat number one is no
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compensation so the government's not
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gonna pay you and the other thing you
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need to know is title may pass all right
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the two times that we're gonna see a
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sheet is number one somebody dies
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without a will and when somebody dies
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without a will they have died what we
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call intestate and that's one of our key
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terms intestate they've died without a
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will and there's absolutely no heirs
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there's not even a
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twentieth cousin that they have found
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that can get the estate so we have
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somebody that it's died intestate no
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errors they owned a property they had a
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savings account they had stocks and
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bonds we have to have a mechanism from a
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legal perspective to wrap up that
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person's affairs a sheet is a doctrine
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that basically tasks the government with
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doing that now which government agency
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will do that is based on an individual
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statute within that state every state
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has different requirements as far as
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who's going to do it will be the city
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will it be the county state by state but
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what is uniformed is it's the government
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that will liquidate that estate and then
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all the the money from that liquidation
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goes to the state so it becomes the
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property of the state the second aspect
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of escheat is let me give you an example
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let's say that there is a person that
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owns a piece of property on the corner
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of 12th and main street and it's an
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absentee owner so the owner lives in a
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different state and this property is
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vacant it's becoming a den for drug
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dealers and prostitution the city has
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tried many times to get a hold of the
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owner to say do something with it
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and the owner is just abandon it well
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there has to be a mechanism for this
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city because it's a public nuisance and
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a public hazard too to take care of that
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issue so they're gonna file what's
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called an escheat proceeding and they're
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gonna go in and in the end what's gonna
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happen is title to that property will
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pass to the government agency so then
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the government agency can take care of
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that property whether they tear it down
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or whatever that they do but they have
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to have a mechanism to to take care of
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that public nuisance now in that case
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title will pass and there is no
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compensation whatsoever for that ban
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that owner that abandoned the property
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which makes sense all right the third
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letter in our acronym is called T which
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is for taxation taxation is a government
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control because there is punitive
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damages if you don't pay your property
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tax and what I mean by that is
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you don't pay your property tax then the
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county's probably going to sell a tax
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lien certificate or a tax deed to an
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investor and if you don't as the
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property owner redeem that tax lien
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certificate or that tax Dean deed within
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a statutory period of time you will lose
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ownership you will lose ownership of it
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now we're not going to talk anymore
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about taxation I've done another video
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on taxation and how to calculate
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property taxes so I'm gonna put a link
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right up here at that I just that little
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I in the upper right hand corner go
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ahead and click on that and that will
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explain everything in detail the fourth
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letter in our acronym of peat is eminent
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domain a couple of things we have to
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know about eminent domain number one is
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title and title means ownership title
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passes title passes from the private
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owner to the governor or to the
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government number two just compensation
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the government has to give you just
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compensation in number three it must be
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for public benefit that is the criteria
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for eminent domain so what does eminent
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domain
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eminent domain is a doctrine it's
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actually comes from the United States
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Constitution that says that if the
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government takes private property then
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certain things must happen now let's
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look at it from the fifty thousand foot
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view the government needs to have the
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ability to acquire private property
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because we need military bases we need
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schools we need courthouses we need
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interstates and highways now under the
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Constitution it requires that just
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compensation be paid to that private
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owner so if a school board wants your
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five acres to put a high school they're
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going to notify you of that fact that
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they want it then they're going to use
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eminent domain to get it now the school
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districts gonna have to give you fair
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market value now structurally the way it
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happens you don't need to know this for
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the licensing exam but I want to
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illustrate how the process works they're
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gonna go out typically and get three
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independent
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appraisals done on it and then they're
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gonna average the three and that's the
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fair market value now remember you can
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challenge the eminent domain proceeding
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you can do that you have your right to
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go to court you have your right to due
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process I will tell you most of the time
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you're gonna lose I mean that's been my
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experience you typically what I find in
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eminent domain proceedings it's not so
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much the fact that the government wants
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to buy your property and you don't want
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to sell it's the price and here's why if
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your house is worth fifty thousand
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dollars and you know Warren Buffett
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wants to buy it while all of a sudden
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it's worth a hundred thousand right or
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at least you think so we call that the
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deep pockets syndrome so knowing that
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your property is worth fifty thousand
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bucks but the government must want it so
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now you think the property's worth a
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hundred thousand that's not gonna happen
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you're gonna get the average typically
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of three independent appraisals all
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right so just compensation they have to
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pay you for it
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title does pass remember title means
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ownership so once this proceedings are
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over then the you're gonna pass title
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through a deed from you to that
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government agency and remember it has to
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be for the public benefit obviously
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schools and military bases and highways
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all benefit the public but there is a
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legal process under eminent domain how
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does the government legally proceed to
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do this well it's called the
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condemnation proceedings and that's a
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key real estate term that you need to
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know all right one thing I want you to
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remember here is title pass is just
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compensation given and it's for the
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public benefit but the legal process
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that the government will use to get your
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property is called the condemnation
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proceeding or the condemnation process
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that's the legal process that they that
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they use they actually condemn the
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property and in many jurisdictions
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they'll slap a sticker against the
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window of the house and say it's been
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condemned so anyways that is the four
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doctrines that governments use to
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control and place regulations against
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your personal property if you have any
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questions or you need clarification
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anything please put it down in the
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comment section we'll see you in the
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next video
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