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Real Estate Glossary
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ABANDONMENT - The voluntary surrender or
relinquishment of possession of real property with the intention of
terminating one's possession or interest, but without vesting this
interest in any other person.
ABATEMENT - A reduction or decrease in
amount, degree, intensity or worth.
ABSORPTION RATE - An estimate of the rate
at which a particular classification of space - such as new office
space, new housing, new condominium units and the like - will be
sold or occupied each year.
ABSTRACT OF TITLE - A concise, summarized
history of the title to a specific parcel of real property, together
with a statement of all liens and encumbrances affecting the
property. The abstract of title does not guarantee or assure the
validity of the title of the property. It merely discloses those
items about the property which are of public record, and thus does
not reveal such things as encroachments, forgeries, and the like.
ACCELERATED DEPRECIATION - A method of
calculating the depreciation of certain property (that property
which is used in a trade or business, or which is held for the
production of income) at a faster rate than would be achieved from
using the straight line method of depreciation.
ACCELERATION CLAUSE - A clause in a
promissory note, agreement of sale, or mortgage which gives the
lender the right to call all sums due and payable in advance of the
fixed payment date upon the occurrence of a specified event, such as
a sale, default, assignment or further encumbrance of the property.
ACCEPTANCE - The expression of the
intention of the person receiving an offer (offeree, usually the
seller) to be bound by the terms of the offer.
ACCESS - A general or specific right of
ingress and egress to a particular property.
ACCRETION - The gradual and imperceptible
addition to land by alluvial deposits of soil through natural
causes, such as shoreline movement caused by streams or rivers.
ACCRUED - That which has accumulated over
a period of time such as accrued depreciation, accrued interest or
accrued expenses.
ACKNOWLEDGEMENT - A formal declaration
made before a duly authorized officer, usually a Notary Public, by a
person who has signed a document.
ACRE - A measure of land equaling 43,560
square feet; 4,840 square yards; 160 square rods.
ADHESION CONTRACT - A contract which is
very one-sided and favors the party who drafted the document.
AD VALOREM - Latin for "according to
valuation," usually referring to a type of tax or assessment.
ADVERSE POSSESSION - The acquiring of
title to real property owned by someone else, by means of open,
notorious and continuous possession for the statutory period of time
(20 years in Hawaii).
AFFIDAVIT - A sworn statement reduced to
writing and made under oath before a Notary Public or other official
authorized by law to administer an oath.
AGENCY - A relationship created when one
person, the "principal," delegates to another, the "agent," the
right to act on the principal's behalf in business transactions and
to exercise some degree of discretion while so acting. An agency
gives rise to a fiduciary relationship and imposes on the agent, as
the fiduciary of the principal, certain duties, obligations and high
standards of good faith and loyalty.
AGENT - One who is authorized to
represent and to act on behalf of another person (called the
principal). A real estate broker is the agent of his client, be it
the seller or buyer, to whom he owes a fiduciary obligation. A
salesman is the agent of his broker and does not have a direct
personal contractual relationship with either the seller or buyer.
AGREEMENT OF SALE - An agreement between
the seller (vendor) and buyer (vendee) for the purchase of real
property.
AIR RIGHTS - The rights to the use of the
open space or vertical plane above a property. Ownership of the land
includes the right to all air above the property.
ALIENATION CLAUSE - A clause in a
promissory note or mortgage which provides that the balance of the
secured debt becomes immediately due and payable at the option of
the mortgagee upon the alienation of the property by the mortgagor.
ALLODIAL SYSTEM - The free ownership of
land by individuals.
AMENITIES - Features, both tangible and
intangible, which enhance and add to the desirability of real
estate.
AMORTIZATION - The gradual repayment of a
debt by means of systematic payments of principal and interest over
a set period, where at the end of the period there is a zero
balance.
ANCHOR TENANT - Major department or chain
stores which are strategically located at shopping centers so as to
give maximum exposure to smaller satellite stores.
ANNUAL PERCENTAGE RATE - The relationship
of the total Finance Charge to the total amount to be finance as
required under the Federal Truth-in-Lending Law.
APPRAISAL - The process of estimating,
fixing, or setting the market value of real property. An appraisal
may take the form of a lengthy report, a completed form, a simple
letter, or even an oral report.
APPRECIATION - An increase in the worth
or value of property due to economic or related causes, which may
prove to be either temporary or permanent.
APPURTENANT - Belonging to; adjunct;
appended or annexed.
ARBITRATION - The non-judicial submission
of a controversy to selected third parties for their determination
in the manner provided by agreement or by law.
ASSESSED VALUATION - The value of real
property as established by the state government for purposes of
computing real property taxes.
ASSESSMENT - A specific levy for a
definite purpose, such as adding curbs or sewers in a neighborhood.
Individual condominium owners are subject to special assessments
benefiting the project as a whole and not funded through regular
maintenance charges.
ASSIGNMENT - The transfer of the right,
title and interest in the property of one person, the assignor, to
another, the assignee. In real estate, there are assignments of
mortgages, contracts, agreements of sale, leases, and options, among
others.
ASSUMPTION OF MORTGAGE - The act of
acquiring title to property which has an existing mortgage on it and
agreeing to be personally liable for the terms and conditions of the
mortgage, including payments.
ATTACHMENT - The legal process of seizing
the real or personal property of a defendant in a lawsuit, by levy
or judicial order, and holding it in the custody of the courts as
security for satisfaction of the judgment which the plaintiff may
recover in any action upon a contract, express or implied.
ATTORNEY-IN-FACT - One who is authorized
by another to act in his place under a power of attorney.
ATTORNMENT - The act of a tenant formally
agreeing to become the tenant of a successor landlord; as in
attorning to a mortgagee who has foreclosed on the leased premises.
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BALLOON PAYMENT - The final payment of a
note or obligation, which is substantially larger than the previous
installment payments, and which repays the debt in full; the
remaining balance which is due at the maturity of a note or
obligation.
BARGAIN AND SALE DEED - A deed which
recites a consideration and conveys all of the grantor's interest in
the property to the grantee.
BASE LINE AND MERIDIAN - An imaginary set
of lines used by surveyors to locate and describe land under the
Rectangular Survey Method of property description used in most
mainland states.
BASIS - The financial interest which IRS
attributes to the owner of an asset for purposes of determining
annual depreciation and gain or loss on sale of the asset.
BENCH MARK - A mark affixed to a
permanent reference or monument, such as an iron post or a brass
marker (usually embedded in a cement sidewalk), used to establish
elevations and altitudes over a surveyed area.
BENEFICIARY - A person who receives the
benefits from the gifts or acts of another, such as one who is
designated to receive the proceeds from a will, insurance policy or
trust.
BILATERAL CONTRACT - A contract in which
each party promises to perform an act in exchange for the other
party's promise to perform.
BILL OF SALE - A written agreement by
which one person sells, assigns or transfers his right to, or
interest in, personal property to another.
BLANKET MORTGAGE - A mortgage which is
secured by several structures or a number of lots. A blanket
mortgage is often used to finance proposed subdivisions or
development projects, especially cooperatives.
BLUE SKY LAWS - State securities laws
designed to protect the public from fraudulent practices in the
promotion and sale of securities, e.g., through limited
partnerships, syndications, bonds.
BOOT - Money or other property given to
make up any difference in value or equity between two exchanged
properties.
BOUNDARIES - The perimeters or limits of
a parcel of land as fixed by legal description which is usually a
metes and bounds description.
BREACH OF CONTRACT - Violation of any of
the terms or conditions of a contract without legal excuse; default,
non-performance, such as failure to make payment when due.
BROKER - One who acts as an intermediary
between parties to a transaction. A real estate broker is a properly
licensed person who, for a valuable consideration, serves as an
agent to others to facilitate the sale or lease of real property.
BROKERAGE - That aspect of the real
estate business which is concerned with bringing together the
parties and completing a real estate transaction. Brokerage involves
exchanges, rentals, trade-ins and management of property, as well as
sales.
BUDGET MORTGAGE - A mortgage with
payments set up to cover more than interest and principal
reductions.
BUFFER ZONE - A strip of land separating
one parcel from another.
BUILDING PERMIT - A written permission
granted by the County Building Department and required prior to
beginning the construction of a new building or other improvement
(including fences, fence walls, retaining walls and swimming pools).
BUILDING RESIDUAL TECHNIQUE - A method of
determining the value of an improvement normally used in appraising
income property.
BULK TRANSFERS - Any transfer in bulk,
and not in the ordinary course of the seller's business, of a major
part of the materials, inventory or supplies of an enterprise.
BUNDLE OF RIGHTS - An ownership concept
describing all those legal rights which attach to the ownership of
real property, including the right to sell, lease, encumber, use,
enjoy, exclude, will, etc.
BUSINESS DAYS - Days of the week
excluding Saturdays, Sundays, and holidays; normal working days.
BUSINESS OPPORTUNITIES - Any type of
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CANTILEVER - A projecting beam or
overhanging portion supported at one end only.
CAPITAL GAIN - The taxable profit derived
from the sale of a capital asset.
CAPITAL IMPROVEMENT - Any structure which
is erected as a permanent improvement to real property; any
improvement which is made to extend the useful life of a property,
or to add to the value of the property.
CAPITALIZATION - A mathematical process
for converting net income into an indication of value, commonly used
in the income approach to appraisal.
CAP RATE (CAPITALIZATION RATE) - The
percentage selected for use in the income approach to valuation of
improved property. The cap rate is designed to reflect the recapture
of the original investment over the economic life of the
improvement, to give the investor an acceptable rate of return
(yield) on the original investment, and to provide for the return on
borrowed capital.
CERTIFICATE OF REASONABLE VALUE (CRV) - A
certificate issued by the Veterans Administration setting forth a
property's current market value estimate, based upon a VA approved
appraisal.
CERTIFIED CHECK - A check which the bank
guarantees to be good, and against which a stop payment is
ineffective.
CERTIFIED PROPERTY MANAGER - A
professional property manager who has qualified for membership in
and is a member of the Institute of Real Estate Management, and is
designated a CPM.
CHAIN OF TITLE - The recorded history of
matters which affect the title to a specific parcel of real
property, such as ownership, encumbrances and liens, usually
beginning with the original recorded source of the title.
CHATTEL - Personal property which is
tangible and moveable.
CLEAR TITLE - Title to property that is
free from liens, defects or other encumbrances, except those which
the buyer has agreed to accept, such as mortgage to be assumed, the
ground lease of record, and the like; established title; title
without clouds.
CLIENT TRUST ACCOUNT - An account set up
by a broker to keep client's monies segregated from the broker's
general funds.
CLOSING - The final stage of consummating
a real estate transaction when the seller delivers title to the
buyer, in exchange for the purchase price.
CLOSING COSTS - Expenses of the sale
which must be paid in addition to the purchase price (in the case of
the buyer's expenses), or be deducted from the proceeds of the sale
(in the case of the seller's expenses).
CLOSING STATEMENT - A detailed cash
accounting of a real estate transaction prepared by an escrow
officer or other person designated to process the mechanics of the
sale, showing all cash that was received, all charges and credits
which were made, and all cash that was paid out in the transaction;
also called a settlement statement.
CLOUD ON TITLE - Any document, claim,
unreleased lien or encumbrance which many impair or injure the title
to property or make the title doubtful because of its apparent or
possible validity.
CLUSTER DEVELOPMENT - The grouping of
housing units on less than normal size homesites, with the remaining
land being devoted to common areas.
CODE OF ETHICS - A written system of
standards of ethical conduct. The Code of Ethics of the National
Association of Realtors, first written in 1913, establishes the high
standards of conduct for members of the Realtor community.
COLLATERAL - Something of value given or
pledged as security for a debt or obligation. The collateral for a
real estate mortgage loan is the mortgaged property itself, which
has been hypothecated.
COLOR OF TITLE - A condition which has
the appearance of good title, but which in fact is not valid title,
as where title is founded on some written document which on its face
appears valid and effective, but which is actually invalid.
COMMERCIAL PROPERTY - A classification of
real estate which includes income producing property such as office
buildings, gasoline stations, restaurants, shopping centers, hotels
and motels, parking lots and stores, and other similar uses.
COMMINGLING - To mingle or mix; for
example, to deposit client funds in the broker's personal or general
account. A licensee found guilty of commingling can have the license
suspended or revoked by the Real Estate Commission.
COMMISSION - The compensation paid to a
real estate broker(usually by the seller) for services rendered in
connection with the sale or exchange of real property.
COMMITMENT - A pledge or promise to do a
certain act, such as the promise of a lending institution to loan a
certain amount of money at a fixed rate of interest to a qualified
buyer, provided the loan is obtained on or before a certain date.
COMMON AREAS - Land or improvements
designated for the use and benefit of all residents, property owners
and tenants.
COMMON ELEMENTS - Parts of the property
which are necessary or convenient to the existence, maintenance and
safety of the condominium, or are normally in common use by all of
the condominium residents.
COMMON LAW - That body of law which is
based on usage, general acceptance, and custom, as manifested in
decrees and judgments of the courts; judge-made law, as opposed to
codified or statutory law.
COMMON WALL - A wall separating two
living units.
COMMUNITY PROPERTY - A system of property
ownership based on the theory that each spouse has an equal interest
in property acquired by the efforts of either spouse during
marriage.
COMPARABLES - Recently sold properties
which are similar to a particular property being evaluated, and
which are used to indicate a reasonable fair market value for the
subject property.
COMPOUND INTEREST - Interest which is
computed upon the principal sum plus accrued interest.
CONCESSIONS - Discounts given by
landlords to prospective tenants to induce them to sign a lease.
CONDEMNATION - Either a judicial or
administrative proceeding to exercise the power of eminent domain,
i.e., the power of the government to take private property for
public use.
CONDOMINIUM OWNERSHIP - An estate in real
property consisting of an individual interest in an apartment or
commercial unit, and an undivided common interest in the common
areas such as the land, parking areas, elevators, stairways, and the
like.
CONSIDERATION - An act or forbearance, or
the promise thereof, which is offered by one party to induce another
to enter into a contract; that which is given in exchange for
something from another.
CONSTRUCTIVE EVICTION - Acts done by a
landlord which so materially disturb or impair the tenant's
enjoyment of the leased premises that a tenant is effectively forced
to move out and terminate the lease without liability for any
further rent.
CONSTRUCTIVE NOTICE - Notice of certain
facts which are implied bylaw to a person because he could have
discovered the fact by reasonable diligence or by inquiry into
public records.
CONTINGENCY - A provision placed in
contract which requires the completion of a certain act or the
happening of a particular event before a contract is binding.
CONTRACT - A legal agreement between
competent parties who agree to perform or refrain from performing
certain acts for a consideration. In real estate, there are many
different types of contracts, including listings, contracts of sale,
options, mortgages, assignments, leases, deeds, escrow agreements,
and loan commitments, among others.
CONVEYANCE - The transfer of title to
real property by means of a written instrument such as a deed or an
assignment of lease.
COOPERATING BROKER - A broker who joins
with another broker in the sale of real property.
COOPERATIVE OWNERSHIP - Cooperative
ownership of an apartment unit means that the apartment owner has
purchased shares in a corporation which holds title to the entire
apartment building.
CO-TENANCY - A form of concurrent
property ownership in which two or more persons own an undivided
interest in the same property.
COUNTER-OFFER - A new offer made as a
reply to an offer received from another; this has the effect of
rejecting the original offer, which cannot thereafter be accepted
unless revived by the offeror's repeating it.
COURTESY TO BROKERS - The practice of
sharing commissions with cooperating brokers.
COVENANT - A written agreement or promise
of two or more parties by which either pledges to perform or not to
perform specified acts on a property, or which specifies certain
uses or non-uses of the property.
COVENANTS AND CONDITIONS - Covenants are
promises contained in contracts, the breach of which would entitle a
person to damages. Conditions, on the other hand, are contingencies,
qualifications or occurrences upon which an estate or property right
would be gained or lost.
COVENANTS RUNNING WITH THE LAND -
Covenants which become part of the property and benefit or bind
successive owners of the property.
CUL DE SAC - A street which is open at
one end only, and which usually has a circular turnaround; a blind
alley.
CUSTOMER TRUST FUND (CTF) - An impound
account maintained for the purpose of setting up a reserve to pay
certain periodic obligations such as real property taxes, insurance
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DEALER - An IRS designation for a person
who regularly buys and sells real property.
DEBT SERVICE - The amount of money needed
to meet the periodic payments of principal and interest when a debt
is amortized.
DECLARATION OF RESTRICTIONS - A statement
of all the covenants, conditions and restrictions ("CC&R's")
which affect a parcel of land.
DEDICATION - The application of privately
owned land to the public for no consideration, with the intent that
the land will be accepted and used for public purposes.
DEED - A written instrument by which a
property owner "grantor" transfers to a "grantee" an ownership in
real property.
DEED OF TRUST - A legal document in which
title to property is transferred to a third party trustee as
security for an obligation owed by the trustor (borrower) to the
beneficiary(lender).
DEFAULT - Failure to fulfill a duty or
promise or failure to perform any obligation or required act. The
most common occurrence of default on the part of a buyer or lessee
is non-payment of money.
DEFERRED COMMISSIONS - Commissions which
are earned but not yet fully paid.
DEFICIENCY JUDGEMENT - A judgment against
a borrower, endorser, or guarantor for the balance of the debt
issued when the security for a loan is insufficient to satisfy the
debt.
DENSITY - A term, frequently used in
connection with zoning requirements, which means the maximum number
of building units per acre or the number of occupants or families
per unit of land area (acre, square mile, etc.); usually the ratio
of land area to improvement area.
DEPOSIT - Money offered by a prospective
buyer as an indication of good faith in entering into a contract to
purchase; earnest money; security for the buyer's performance of a
contract.
DEPRECIATION (APPRAISAL) - A loss in
value due to any cause; any condition which adversely affects the
value of an improvement.
DEPRECIATION (TAX) - For tax purposes,
depreciation is an expense deduction taken for an investment in
depreciable property.
DEPTH TABLE - Tables of percentage
designed to provide a uniform system of measuring the additional
value to lots which accrues because of added depth, with the extra
depth valued according to the added utility which it creates.
DESCENT - The acquisition of an estate by
inheritance, where an heir succeeds to the property by operation of
law. Descent literally means the hereditary succession of an heir to
property of an ancestor who dies intestate.
DESCRIPTION - The portion of a conveyance
document which defines the property being transferred.
DEVELOPER - One who attempts to put land
to its most profitable use by the construction of improvements.
DEVISE - A transfer of real property
under a will.
DISCLAIMER - A statement denying legal
responsibility, frequently found in the form of, "There are no
promises, representations, oral understandings or agreements except
as contained herein."
DISCOUNT POINTS - An added loan fee
charged by a lender to make the yield on a lower-than-market
interest VA or FHA loan competitive with higher interest
conventional loans.
DISCRIMINATION - The act of making a
distinction against or in favor of a person on the basis of the
group or class to which the person belongs; the failure to treat
people equally.
DISTRAINT - The right of a landlord,
pursuant to a court order, to seize a tenants belongings for rents
in arrears.
DOMICILE - The state where an individual
has his true, fixed, permanent home and principal business
establishment and to which place he has the intention of returning
whenever he is absent.
DOUBLE ESCROW - An escrow set up to
handle the concurrent sale of one property and purchase of another
property by same party.
DOWER - The legal right or interest a
wife acquires in property her husband held or acquired anytime
during marriage.
DUAL AGENCY - Representing both
principals (buyer and seller) to a transaction.
DUE ON SALE CLAUSE - A form of
acceleration clause found in some mortgages, especially savings and
loan mortgages, requiring the mortgagor to pay off the mortgage debt
when selling the secured property, thus resulting in automatic
maturity of the note at the lender's option.
DUPLEX - A structure that provides
housing accommodations for two families by having separate
entrances, kitchens, bedrooms, lanais, living rooms and bathrooms. A
two-family dwelling.
DURESS - Unlawful constraint or action
exercised upon a person whereby he is forced to perform some act
against his will. A contract entered into under duress is void.
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EASEMENT - A property interest which one
person has in land owned by another entitling the holder of the
interest to limited use or enjoyment of the other's land.
EASEMENT IN GROSS - The limited right of
one person to use another's land (servient estate), which right is
not created for the benefit of any land owned by the owner of the
easement; that is, there is no dominant estate, as the easement
attaches personally to the owner, not to the land.
EMBLEMENTS - Growing crops (called
"fructus industriales"),such as rice and taro, which are produced
annually through labor and industry.
EMINENT DOMAIN - The right of government,
both state and federal, to take private property for a necessary
public use, with just compensation paid to the owner.
ENCROACHMENT - An unauthorized invasion
or intrusion of a fixture or other real property wholly or partly
upon another's property, thus reducing the size and value of the
invaded property.
ENCUMBRANCE - Any claim, lien, charge or
liability attached to and binding upon real property which may
lessen the value of the property but will not necessarily prevent
transfer of title.
ENTIRETY, TENANCY BY - A form of joint
ownership of property between husband and wife with the right of
survivorship.
ENVIRONMENTAL IMPACT STATEMENT - A report
which includes a detailed description of a proposed development
project with emphasis on the existing environment setting, viewed
from both a local and regional perspective, and a discussion of the
probable impact of the project on the environment during all phases.
EQUITY - That interest or value remaining
in property after payment of all liens or other charges on the
property. A owner's equity is normally the monetary interest over
and above the mortgage indebtedness.
ERRORS AND OMISSIONS INSURANCE - A form
of insurance which covers liabilities for errors, mistakes and
negligence in the usual listing and selling activities of a real
estate office or escrow company.
ESCHEAT - The reversion of property to
the state when a decedent dies intestate and there are no heirs
capable of inheriting, or when the property is abandoned.
ESCROW - The process by which money
and/or documents are held by a disinterested third person (a
"stakeholder") until the satisfaction of the terms and conditions of
the escrow instructions (as prepared by the parties to the escrow).
ESTOPPEL - A legal doctrine by which a
person is prevented from asserting rights or facts which are
inconsistent with a previous position or representation he had made
by his act, conduct or silence.
ETHICS - A system of moral principles,
rules and standards of conduct.
EVICTION - The legal process of removing
a tenant from possession of the premises for some breach of the
lease contract.
EXCHANGE - A transaction in which all or
part of the consideration for the purchase of real property is the
transfer of property of a like kind.
EXCLUSIVE AGENCY - A written listing
agreement giving one agent the right to sell property for a
specified time, but reserving to the owner the right to sell the
property himself without payment of any commission.
EXCLUSIVE LISTING - A written listing of
real property in which the seller agrees to appoint only one broker
to sell the property for a specified period of time. The two types
of exclusive listings are the exclusive agency and the exclusive
right to sell.
EXECUTIVE - The act of making a document
legally valid, such as formalizing a contract by signing, or
acknowledging and delivering a deed.
EXECUTOR - A person appointed by a
testator to carry out the directions and requests in the last will
and testament, and to dispose of property according to the
provisions of the will.
EXECUTORY CONTRACT - A contract in which
one or both of the parties has not yet performed.
EXTENDER CLAUSE - A "carry over" clause
(referred to as a safety clause) contained in a listing which
provides that a broker is still entitled to a commission for a set
of period of time after the listing has expired if the property is
sold to a former prospect of the broker.
EXTENSION - An agreement to continue the
period of performance beyond the specified period.
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FAIR MARKET VALUE - The highest monetary
price which a property would bring, if offered for sale for a
reasonable period of time in a competitive market, to a seller who
is willing but not compelled to sell, from a buyer, willing but not
compelled to buy, both parties being fully informed of all the
purposes to which the property is best adapted and is capable of
being used.
FARM AREA - A selected geographical area
or one specific building to which a real estate salesperson devotes
special attention and study.
FEASIBILITY STUDY - An analysis of a
proposed project with emphasis on the attainable income, probable
expenses, and most advantageous use and design.
FEDERAL HOUSING ADMINISTRATION (FHA) -
The FHA was set up in1934 under the National Housing Act to
encourage improvement in housing standards and conditions, to
provide an adequate home financing system by insurance of housing
mortgages and credit, and to exert a stabilizing influence on the
mortgage market.
FEDERAL TAX LIEN - A federal lien which
attaches to real property, either if the federal estate tax is not
paid, or if the taxpayer has violated the federal income tax or
payroll tax laws.
FEDERAL TRADE COMMISSION (FTC) - A
federal agency created to investigate and eliminate unfair and
deceptive trade practices in business.
FEE SIMPLE - The largest estate one can
possess in real property. A fee simple estate is the least limited
interest and the most complete and absolute ownership in land: it is
of indefinite duration, freely transferable and inheritable. Fee
simple title is sometimes referred to as "the fee.
FIDUCIARY - A relationship which implies
a position of trust or confidence wherein one is usually entrusted
to hold or manage property or money for another. Among the
obligations a fiduciary owes to the principal are duties of loyalty;
obedience; full disclosure; the duty to use skill, care and
diligence; and the duty to account for all monies.
FILLED LAND - An area where the grade has
been raised by depositing or dumping dirt, gravel or lava rock.
FINANCE CHARGE - The total of all costs
imposed directly or indirectly by the creditor and payable either
directly or indirectly by the customer, as defined under the federal
Truth-in-Lending Law.
FINANCE FEE - A mortgage brokerage fee to
cover the expenses incurred in placing the mortgage with a lending
institution; a mortgage service charge or origination fee.
FINANCIAL STATEMENT - A formal statement
of the financial status and net worth of a person or company,
setting forth and classifying assets and liabilities as of a
specified date.
FINDER'S FEE - A fee paid to someone for
producing a buyer to purchase or a seller to list property; also
called a referral fee.
FIRM COMMITMENT - A definite undertaking
by a lender to loan a set amount of money at a specified interest
rate for a certain term.
FIRST REFUSAL, RIGHT OF - The right of a
person to have the first opportunity either to purchase or lease
real property.
FISCAL YEAR - A business year used for
tax, corporate or accounting purposes, as opposed to a calendar
year.
FIXTURE - An article which was once
personal property but has been so affixed to the real estate that it
has become real property (e.g. stoves, bookcases, plumbing, etc.).
If determined to be a fixture, then the article passes with the
property even though it is not mentioned in the deed.
FLAG LOT - A land parcel having the
configuration of an extended flag and pole. The pole represents
access to the site which is usually located to the rear of another
lot fronting a main street.
FLOOR AREA RATIO - The ratio of floor
area to land area expressed as a percent or decimal, which is
determined by dividing the total floor area on a zoning lot by the
lot area.
FLOOR DUTY - A frequent practice in real
estate brokerage offices of assigning one sales agent the
responsibility for handling all telephone calls and office visitors
for a specified period of time.
FORECLOSURE - A legal procedure whereby
property used as security for debt is sold to satisfy the debt in
the event of default in payment of the mortgage note or default of
other terms in the mortgage document.
FRAUD - Any form of deceit, trickery,
breach of confidence or misrepresentation by which one party
attempts to gain some unfair or dishonest advantage over another.
FREE AND CLEAR TITLE - Title to real
property which is absolute and unencumbered by any liens, mortgages,
clouds or other encumbrances.
FRONTAGE - The length of a property
abutting a street or body of water; that is, the number of feet that
"front" the street or water.
FUNCTIONAL OBSOLESCENCE - A loss in value
of an improvement due to functional inadequacies, often caused by
age or poor design. |
G |
GARNISHMENT - A legal process designed to
provide a means for creditors to safeguard for themselves the
personal property of a debtor which is in the hands of a third party
("garnishee").
GENERAL AGENT - One who is authorized to
perform any and all acts associated with the continued operation of
a particular job or a certain business.
GENERAL CONTRACTOR - A construction
specialist who enters into a formal construction contract with a
land owner or master lessee to construct a real estate building or
project.
GENERAL PARTNER - A co-owner of a
partnership who is empowered to enter into contracts on behalf of
the partnership and who is fully liable for all partnership debts.
GIFT TAX - A graduated federal tax paid
by a donor upon making a gift.
GOOD FAITH - Bona fide. An act is done in
good faith if it is in fact done honestly, whether it be done
negligently or not.
GOOD WILL - An intangible, salable asset
arising from the reputation of a business.
GOVERNMENT SURVEY - A system of land
description in which large blocks of land are divided into tracts
bounded by imaginary lines conforming to the true meridian.
GRADUATED RENTAL LEASE - A lease in which
the rent payments commence at a fixed, often low rate, but "step up"
or increase at set intervals as the lease term matures.
GRANDFATHER CLAUSE - Common expression
used to convey the idea that something which was once permissible
continues to be permissible despite changes in the controlling law.
GRANTEE - The person who receives from
the grantor a grant of real property.
GRANTOR - The person transferring title
to, or an interest in, real property. A grantor must be competent to
convey; thus, for example, an insane person cannot convey title to
real property.
GROSS AREA - The total floor area of a
building measured from the exterior of the walls (excluding those
unenclosed).
GROSS INCOME MULTIPLIER - A useful rule
of thumb to estimate market value of income producing residential
property. The multiplier is derived by using comparable sales
divided by the actual or estimated monthly rentals and arriving at
an acceptable average.
GROSS LEASE - A lease of property under
which the lessee pays a fixed rent, and the lessor pays the taxes,
insurance, and other charges regularly incurred through ownership.
GUARDIAN - One who is given the lawful
custody and care of another(called a ward). |
H |
HABENDUM CLAUSE - That part of the deed
beginning with the words "to have and to hold," following the
granting clause and reaffirming the extent of ownership that the
grantor is transferring.
HABITABLE - Being fit to live in. The
residential landlord has an obligation to keep the leased premises
in a habitable condition.
HEIR - A person who inherits under a will
or a person who succeeds to property by the laws of descent if the
decedent dies without a will (intestate).
HIGHEST AND BEST USE - That use which, at
the time of appraising the property, is most likely to produce the
greatest net return to the land and/or the building over a given
period of time.
HIGH RISE - A popular expression for a
condominium or apartment building generally higher than six stories.
HOLD HARMLESS CLAUSE - A clause inserted
in a contract whereby one party agrees to indemnify and protect the
other party from any injuries or lawsuits arising out of the
particular transaction.
HOLDOVER TENANT - One who stays on the
leased premises after his lease has expired. The landlord normally
has the choice of evicting the holdover tenant or permitting him to
remain and continue to pay rent.
HOMEOWNER'S ASSOCIATION - A non-profit
association of homeowners organized pursuant to a declaration of
restrictions or protective covenants for a subdivision, a PUD, or a
condominium.
HOMESTEAD - A home which is used as a
personal residence.
HOTEL - A building or group of attached
or detached buildings containing dwelling or lodging units in which
50 percent or more of the units are lodging units, usually
distinguished by a front desk, dining and other common facilities.
HOUSE RULES - Rules of conduct adopted by
a board of directors of a condominium and designed to promote
harmonious living among the owners and occupants.
HUD - A federal cabinet department
officially known as the Department of Housing and Urban Development.
HYPOTHECATE - To pledge specific real or
personal property as security for an obligation, without
surrendering possession of it. |
I |
IMPLIED WARRANTY OF HABITABILITY - A
legal doctrine imposing on the landlord a duty to make the leased
premises acceptable to live in and ready for occupancy and to
continue to maintain them in a state of repair throughout the entire
term of the lease.
IMPOUND ACCOUNT - A trust account
established to set aside funds for future needs.
IMPROVED LAND - Real property whose value
has been enhanced by the addition of on-site and off-site
improvements such as roads, sewers, utilities, buildings, etc.; as
distinguished from raw land.
IMPROVEMENTS - Valuable additions made to
property, amounting to more than repairs, costing labor and capital
and intended to enhance the value of the property. Improvements of
land would include grading, sidewalks, sewers, streets, utilities,
etc. Improvements on land would include buildings, fences, and the
like.
IMPUTED INTEREST - Interest implied by
the federal tax law.
INCOME APPROACH - An approach to the
valuation or appraisal of real property as determined by the amount
of net income the property will produce over its remaining economic
life.
INCOME PROPERTY - Property purchased
primarily for the income to be derived plus certain tax benefits,
such as accelerated depreciation. Income property can be commercial,
industrial or residential.
INCORPOREAL RIGHTS - Intangible or
non-possessory rights in real property such as easements, licenses,
profits and the like.
INDEPENDENT CONTRACTOR - One who is
retained to perform a certain act, but who is subject to the control
and direction of another only as to the end result and not as how he
performs the act. The critical feature, and what distinguishes an
independent contractor and an employee or agent, is the right to
control.
INDUSTRIAL PARK - An area zoned
industrial and containing sites for many separate industries and
developed and managed as a unit, usually with provisions for common
services for the users.
INJUNCTION - A legal action which forbids
a party defendant from doing some act; it requires a person to whom
it is directed to refrain from doing a particular thing.
INNOCENT PURCHASER FOR VALUE - One who
purchases real property without notice, actual or constructive, of
any superior rights or interests in the real property.
INSPECTION - A visit to and review of the
premises. A prudent purchaser of property always inspects the
premises before closing.
INSTITUTIONAL LENDER - Financial
institutions such as banks, insurance companies, savings and loans
or any lending institution whose loans are regulated by law.
INTEREST - The sum paid or accrued in
return for the use of money.
INTERIM FINANCING - A short-term loan
usually made during the construction phase of a building project;
often referred to as the "construction loan."
INTESTATE - To die without a valid will.
INVENTORY - An itemized list of property.
Many brokers recommend that their clients attach to the sales
contract an inventory of property to be included in the sale of a
residential property, including a condominium dwelling.
INVERSE CONDEMNATION - An action for
"just compensation "brought by one whose property has been
effectively "taken" or substantially interfered with or taken
without just compensation |
J |
JOINT AND SEVERAL LIABILITY - A situation
in which more than one party is liable to repay a debt or obligation
and a creditor can obtain compensation from one or more parties,
either individually or jointly, whichever he chooses.
JOINT TENANCY - A form of property
ownership by two or more persons in which the joint tenants have one
and the same interest, arising by one and the same conveyance,
commencing atone and the same time and held by one and the same
possession(the concept of "four unities").
JOINT VENTURE - The joining of two or
more people in a specific business enterprise such as the
development of a condominium project or a shopping center.
JUDGMENT LIEN - A lien binding on all the
real estate of a judgment-debtor and giving the holder of the
judgment a right to levy (i.e. to seize) the land for satisfaction
of the judgment.
JUDICIAL FORECLOSURE - A method of
foreclosing upon real property by means of a court supervised sale.
After an appraisal, the court determines an upset price below which
no bids to purchase will be accepted.
JUNIOR MORTGAGE - A mortgage which is
subordinate in right or lien priority to an existing mortgage on the
same realty, such as a second mortgage.
JURISDICTION - The authority or power to
act, such as the authority of a court to hear and render a decision
that binds both parties.
JUST COMPENSATION - An amount of
compensation to be received by a party for the taking of property
under the power of eminent domain. |
L |
LAND - The surface of the earth extending
down to the center and upward to the sky, including all natural
things thereon such as trees, crops, or water; plus the minerals
below the surface and the air rights above.
LAND CONTRACT - Another name for an
installment purchase contract, by which the buyer obtains equitable
title (the right to use the property) while the seller retains legal
title (recorded title)as security for payment of the balance of the
purchase price.
LAND DESCRIPTION - A description of a
particular piece of real property.
LAND LEASEBACK - A creative financing
device often used with raw land which a developer wants to improve,
in which the developer sells the land to an investor who leases the
land back to the developer under a long-term net lease and
subordinates his fee ownership to the lender providing development
financing.
LAND, TENEMENTS AND HEREDITAMENTS - A
feudal phrase used to describe all types of immovable realty
including the land, buildings and all appurtenant rights thereto.
LAND TRUST - An association organized by
common owners of real property, which holds title to the real
property in the name of one or more trustees for the benefit of the
owners, whose beneficial interests may be represented by trust
certificates.
LANDLOCKED - Real property having no
access to a public road or way.
LANDLORD - The lessor or the owner of
leased premises. The landlord retains a reversion interest in the
property so that when the lease ends the property will revert to the
landlord.
LANDMARK - A stake, stream, cliff,
monument or other object or feature which is used to fix or define
land boundaries; also a prominent feature of a landscape or property
that is the symbol for the place.
LANDSCAPING - Shrubs, bushes, trees and
the like, on the grounds surrounding a structure.
LATERAL AND SUBJACENT SUPPORT - The
support received by a parcel of real property from the land
adjoining it is called lateral support. Subjacent support is that
support which the surface of the earth receives from its underlying
strata.
LAW DAY - The date an obligation becomes
due; sometimes refers to the closing date.
LEASE - A lease is both a contract
between lessor (landlord)and lessee (tenant) and a conveyance or
demise of the premises by the lessor to the lessee. A lease is a
contract in that item bodies the agreement between the parties.
LEASEHOLD - A less-than-freehold estate
which a tenant possesses in real property.
LEGAL DESCRIPTION - A description which
is complete enough that an independent surveyor could locate and
identify a specific piece of real property.
LEGAL NOTICE - That notice which is
either implied or required by law. Constructive notice under the
recording laws is also referred to as legal notice.
LEGAL RATE OF INTEREST - The maximum
interest rate permitted bylaw, with anything above that rate being
usury.
LESSEE - The person to whom property is
rented or leased; called a "tenant" in most residential leases.
LESSOR - The person who rents or leases
property to another. In residential leasing, the lessor is often
referred to as a landlord.
LESS-THAN-FREEHOLD ESTATE - An estate
held by one who rents or leases property. This classification
includes an estate for years, periodic tenancy, estate at will, and
estate at sufferance.
LETTER OF CREDIT - An agreement or
commitment by a bank("issuer") made at the request of a customer
("account party")that the bank will honor drafts or other demands of
payment from third parties ("beneficiaries") upon compliance with
the conditions specified in the letter of credit.
LETTER OF INTENT - An expression of
intent to invest, develop or purchase without creating any firm
legal obligation to do so.
LEVEL PAYMENT MORTGAGE - A mortgage which
is scheduled to be repaid in equal periodic payments which include
both principal and interest.
LEVERAGE - The use of borrowed funds to
purchase investment property with the anticipation that the property
acquired will increase in return so that the investor will realize a
profit not only on his own investment, but also on the borrowed
funds; the employment of a smaller investment to generate a larger
rate of return through borrowing.
LICENSEE - A person who has a valid
license. A real estate licensee can be a salesperson or a broker,
active or inactive, an individual, a corporation, or a partnership.
LIEN - A charge or claim which one person
(lienor) has upon the property of another (lienee) as security for a
debt or obligation. Liens can be created by agreement of the
parties(mortgage) or by operation of law (tax liens).
LIFE ESTATE - Any estate in real or
personal property which is limited in duration to the life of its
owner or the life of some other designated person.
LIMITED COMMON ELEMENTS - That special
class of common elements in a condominium reserved for the use of a
certain apartment(s) to the exclusion of other apartments.
LIMITED PARTNERSHIP - A partnership
formed by two or more persons having as members one or more general
partners and one or more limited partners.
LINE OF CREDIT - A maximum amount of
money a bank will lend one of its more reliable and credit worthy
customers without need for any formal loan submission.
LIQUIDATED DAMAGES - An amount
predetermined by the parties to an agreement as the total amount of
compensation an injured party should receive in the event the other
party breaches a specified part of the contract.
LIQUIDITY - The ability to sell an asset
and convert it into cash at a price close to its true value.
LIS PENDENS - A legal document recorded
in the Bureau of Conveyances, which gives constructive notice that
an action has been filed in either a state or federal court
affecting a particular piece of property. "Lis Pendens" is a Latin
term which means "action pending" and is in the nature of a
quasi-lien.
LISTING - A written employment agreement
between a property owner and a broker authorizing the broker to find
a buyer or a tenant for a certain real property.
LITTORAL LAND - Land bordering on the
shore of a sea or ocean and thus affected by the tide currents.
LOAN COMMITMENT - A commitment by a
lender of the amount he will loan to a qualified borrower on a
particular piece of real estate for a specified amount of time under
specific terms.
LOAN-TO-VALUE RATIO - The ratio that the
amount of the loan bears to the appraised value of the property or
the sales price, whichever is lower.
LOCUS SIGILLI - Latin for "under seal",
used in the abbreviated form, "L.S.," at the end of signature line
in some formal legal documents; used instead of the actual seal.
LOSS PAYEE - The person designated on an
insurance policy to be paid in case the insured property is damaged
or destroyed. |
M |
MAINTENANCE - The care and work put into
a building to keep it in operation and productive use; the general
repair and upkeep of a building. If maintenance is deferred, the
building will suffer a loss in value.
MALL - A landscaped public area set aside
for pedestrian traffic.
MARGINAL LAND - Land which is of little
value because of some deficiency, such as poor access, lack of
adequate rainfall, or steep terrain.
MARKETABLE TITLE - Good or clear title
reasonably free from risk of litigation over possible defects; also
referred to as merchantable title. Marketable title need not,
however, be perfect title.
MARKET VALUE - The highest price,
estimated in terms of money, which a property will bring if exposed
for sale in the open market, allowing a reasonable time to find a
purchaser who buys with knowledge of all the uses to which the
property is adapted and for which it is capable of being used.
MASTER PLAN - A comprehensive plan to
guide the long-term physical development of a particular area.
MEANDER LINE - An artificial line used by
the surveyors to measure the natural, uneven, winding property line
formed by rivers, streams and other watercourses bordering a
property.
MECHANIC'S LIEN - A statutory lien
created in favor of materialmen and mechanics to secure payment for
materials supplied and services rendered in the improvement, repair
or maintenance of real property.
METES AND BOUNDS - A common method of
land description that identifies a property by specifying the shape
and boundary dimensions of the parcel, using terminal points and
angles.
MILITARY CLAUSE - A clause inserted in
some residential leases to allow the military tenant to terminate
the lease in case of transfer, discharge or other circumstances
making termination appropriate.
MINERAL RIGHTS - Rights to subsurface
land and profits. Normally, when real property is conveyed, the
grantee receives all right and title to the land including
everything above and below the surface, unless excepted by the
grantor.
MISREPRESENTATION - A false statement or
concealment of a material fact made with the intent to induce some
action by another party.
MONEY - The cash deposit (including
initial and additional deposits) paid by the prospective buyer of
real property as evidence of his good faith intention to complete
the transaction; called hand money or a binder in some states.
MONTH-TO-MONTH TENANCY - A periodic
tenancy where the tenant rents for one month at a time. In the
absence of rental agreement (oral or written), a tenancy is deemed
to be month-to-month, or in the case of boarders, week-to-week.
MONUMENTS - Visible markers, both natural
and artificial objects, which are used to establish the lines and
boundaries of a survey.
MORTGAGE - A legal document used to
secure the performance of an obligation. In effect, the mortgage
states that the lender can look to the property in the event the
borrower defaults in payment of the note.
MORTGAGE BANKER - A corporation or firm
which normally provides its own funds for mortgage financing.
MORTGAGE BROKER - A person or firm which
acts as an intermediary between borrower and lender; one who, for
compensation or gain, negotiates, sells or arranges loans and
sometimes continues to service the loans.
MORTGAGEE - The one who receives and
holds a mortgage as security for a debt; the lender; a lender or
creditor who holds a mortgage as security for payment of an
obligation.
MORTGAGOR - The one who gives a mortgage
as security for a debt; the borrower; usually the landowner; the
borrower or debtor who hypothecates or puts up his property as
security for an obligation.
MULTIPLE LISTING SERVICE (MLS) - An
organization created by Realtors to facilitate the sharing of
listings among member brokers. |
N |
NATIONAL ASSOCIATION OF REALTORS -
Formerly known as the National Association of Real Estate Boards
(NAREB), it is the largest and most prestigious real estate
organization in the world.
NEGATIVE CASH FLOW - The investment
situation where cash expenditures to maintain an investment (taxes,
mortgage payments, maintenance, etc.) exceed the cash income
received from the investment.
NEGOTIABLE INSTRUMENT - Any written
instrument which may be transferred by endorsement or delivery so as
to vest legal title in the transferee.
NEGOTIATION - The transaction of business
aimed at reaching a meeting of minds among the parties; bargaining.
NET INCOME - The sum arrived at after
deducting from gross income the expenses of a business or
investment, including taxes and insurance, and allowances for
vacancy and bad debts; what the property will earn in a given year's
operation.
NET LEASE - A lease, usually commercial,
whereby the lessee pays not only the rent for occupancy, but also
pays maintenance and operating expenses such as tax, insurance,
utilities and repairs. Thus the rent paid is "net" to the lessor.
NET WORTH - The value remaining after
deducting liabilities from assets.
NOMINAL CONSIDERATION - A consideration
bearing no relation to the real value of the contract. A deed often
recites a nominal consideration, such as "ten dollars and other
valuable consideration."
NON-COMPETITION CLAUSE - A provision in a
contract or lease prohibiting a person from operating or controlling
a nearby business which would compete with one of the parties to the
contract.
NONCONFORMING USE - A permitted use which
was lawfully established and maintained but which no longer conforms
to the current use regulations because of a change in the zoning.
NONDISTURBANCE CLAUSE - A clause inserted
in a mortgage whereby the mortgagee agrees not to terminate the
tenancies of lessees who pay their rent if the mortgagee forecloses
on the mortgagor-lessor's building.
NORMAL WEAR AND TEAR - That physical
deterioration which occurs in the normal course of the use for which
a property is intended, without negligence, carelessness, accident
or abuse of the premises (or equipment or chattels) by the occupant,
members of household, or their invitees or guests.
NOTE - A document signed by the borrower
of a loan, stating the loan amount, the interest rate, the time and
method of repayment and the obligation to repay. The note is the
evidence of the debt. When secured by a mortgage, it is called a
mortgage note.
NOTICE - (1) Legal notice is notice which
is required to be made by law, or notice which is imparted by
operation of law as a result of the possession of property or the
recording of documents. (2) Notice which is required by contract,
for example, when the parties agree to terminate a contract by the
written notice of either party 30 days prior to termination.
NOTICE OF COMPLETION - Document filed to
give public notice that a construction job has been completed and
that mechanics' liens must be filed within ,say, 45 days to be
valid.
NOTICE OF DEFAULT - A notice to a
defaulting party that there has been a default, usually providing a
grace period in which to cure the default.
NOTICE OF NONRESPONSIBILITY - A legal
notice designed to relieve a property owner from responsibility for
the cost of improvements ordered by another person.
NOTICE TO QUIT - A written notice given
by a landlord to his tenant, stating that the landlord intends to
regain possession of the leased premises and that the tenant is
required to quit and remove himself from the premises either at the
end of the lease term or immediately if there is a breach of lease
or if the tenancy is at will or by sufferance; sometimes refers to
the notice given by the tenant to the landlord that he intends to
give up possession on a stated day.
NOVATION - The substitution of a new
obligation for an old one; substitution of new parties to an
existing obligation, as where the parties to an agreement accept a
new debtor in place of an old one.
NUISANCE - Conduct or activity which
results in an actual physical interference with another person's
reasonable use or enjoyment of his property for any lawful purpose.
NULL & VOID - Having no legal force
or effect; of no worth; unenforceable; not binding. |
O |
OBSOLESCENCE - A type of depreciation of
property.
OFFER - A promise by one party to act or
perform in a specified manner provided the other party will act or
perform in the manner requested.
OFFER AND ACCEPTANCE - The two components
of a valid contract; a "meeting of the minds."
OFFICE EXCLUSIVE - A listing in which the
seller refuses to submit the listing to Multiple Listing Service,
even after being informed of the advantages of MLS, and signs a
certification to that effect.
OFFSITE COSTS - Costs such as for sewers,
streets, utilities, etc., which are incurred in the development of
raw land, but are not connected with the actual construction of the
buildings(onsite costs).
OPEN-END MORTGAGE - A mortgage in which
the borrower is given a limit up to which he may borrow, with any
incremental advances of money up to but not exceeding the original
borrowing limit to be secured by the same mortgage.
OPEN HOUSE - The common real estate
practice of showing a listed home to the public during established
hours, frequently on Sunday afternoons.
OPEN LISTING - A listing given to any
number of brokers. The first broker who secures a buyer ready,
willing and able to purchase at the terms of the listing is the one
who earns the commission.
OPEN SPACE - Certain portion of the
landscape which has not been built upon and which is sought either
to be reserved in its natural state or used for agricultural or
recreational purposes(such as parks, squares, and the like).
OPERATING EXPENSES - Those periodic and
necessary expenses which are essential to the continuous operation
and maintenance of a property.
OPINION OF TITLE - An opinion by a person
competent in examining titles, usually a title attorney, as to the
status of the title of a property.
OPTION - An agreement to keep open, over
a set period, an offer to sell or purchase property.
ORIGINATION FEE - The finance fee charged
by a lender for placing a mortgage, which covers initial costs such
as preparation of documents and credit, inspection and appraisal
fees.
OVERIMPROVEMENT - An improvement which by
reason of excess size or cost is not the highest and best use for
the site on which it is placed.
OVERRIDE - A commission paid to
managerial personnel (e.g. principal broker) on sales made by their
subordinates, usually calculated as a percentage of the gross sales
commissions earned by the salesperson. |
P |
PACKAGE MORTGAGE - A method of financing
in which the loan that finances the purchase of a home also finances
the purchase of personal items such as a washer and dryer,
refrigerator, stove and other specified appliances.
PARCEL - A specific portion of a larger
tract; a lot.
PARTIAL RELEASE - A clause found in a
mortgage which directs the mortgagee to release certain parcels from
the lien of the blanket mortgage upon the payment of a certain sum
of money.
PARTICIPATION MORTGAGE - A mortgage in
which the lender participates in the income of the mortgaged venture
beyond a fixed return, or receives a yield on the loan in addition
to the straight interest rate.
PARTITION - The dividing of common
interests in real property owned jointly by two or more persons.
PARTNERSHIP - "An association of two or
more persons to carry on as co-owners a business for profit," as
defined in the Uniform Partnership Act, which is in force in a
majority of the states.
PARTY WALL - A wall which is located on
or at a boundary line between two adjoining parcels and is used or
is intended to be used by the owners of both properties in the
construction or maintenance of improvements on their respective
lots.
PENTHOUSE - An apartment located on the
roof of a building, or more commonly, an apartment on the top floor
of a building.
PERCENTAGE LEASE - A lease whose rental
is based on a percentage of the monthly or annual gross sales made
on the premises.
PERCOLATION TEST - A hydraulic engineer's
test of soil to determine the ability of the ground to absorb and
drain water.
PERFORMANCE BOND - A bond, usually posted
by one who is to perform work for another, which assures that a
project or undertaking will be completed as per agreement or
contract.
PERIODIC TENANCY - A leasehold estate
which continues from period to period, such as month to month, year
to year. All conditions and terms of the tenancy are carried over
from period to period, and continue for an uncertain time until
proper notice of termination is given.
PERMANENT FINANCING - A long-term loan,
as opposed to an interim loan.
PERSONAL PROPERTY - Things which are
tangible and moveable; property which is not classified as real
property; chattels; personalty.
PIGGYBACK LOAN - A joint loan with two
lenders sharing a single mortgage.
PLANNED UNIT DEVELOPMENT (PUD) - A modern
concept in housing designed to produce a high density of dwellings
and maximum utilization of open spaces.
PLAT - A map or a town, section, or
subdivision indicating the location and boundaries of individual
properties.
PLOTTAGE - The merging or consolidating
of adjacent lots into one larger lot, with the consequent result of
improved usability and increased value; also called assemblage.
POCKET LISTING - A listing which is
retained by the listing broker or salesperson, who does not make it
available to other brokers in the office or to other Multiple
Listing Service members.
POINT OF BEGINNING - The starting point
in a metes and bounds description of property, which is usually a
street intersection or a specific monument.
POINTS - A generic term for a percentage
of the principal loan amount which the lender charges for making the
loan; each point is equal to one percent of the loan amount.
POLICE POWER - The constitutional
authority and inherent power of a state to adopt and enforce laws
and regulations to promote and support the public health, safety,
morals and general welfare.
PORTE COCHERE - A roofed structure
extending from the entrance of a building over an adjacent driveway
to shelter those getting into or out of vehicles.
POSSESSION - The act of either actually
or constructively possessing or occupying property.
POWER OF ATTORNEY - A written instrument
authorizing a person(the attorney-in-fact) to act as the agent on
behalf of another to the extent indicated in the instrument.
POWER OF SALE - A clause written into a
mortgage authorizing the mortgagee to sell the property in the event
of default.
PREMISES - The subject property, such as
the property which is deeded or the unit that is leased.
PREPAID INTEREST - The paying of interest
before it is due.
PREPAYMENT PENALTY - The amount set by
the creditor as a penalty to the debtor for paying off the debt
prior to its maturity. The prepayment penalty is charged by the
lender to recoup a portion of interest that he had planned to earn
when he made the loan.
PREPAYMENT PRIVILEGE - The right of the
debtor to pay off part or all of the debt without penalty prior to
maturity, such as in a mortgage or agreement of sale.
PRE-SALE - A pre-construction sale
program by a condominium developer who is required to sell a certain
percentage of units before a lender will commit to finance
construction of the project.
PRESCRIPTION - The acquiring of a right
in property, usually in the form of an intangible property right
such as an easement or right-of-way, by means of adverse use of
property that is continuous and uninterrupted for the prescriptive
period.
PRESENT VALUE OF ONE DOLLAR - A doctrine
which is based on the fact that money has a time value. The present
worth of a payment to be received at some time in the future is the
amount of the payment less the loss of interest.
PRIME RATE - The minimum interest rate
charged by a commercial bank on short-term loans to its largest and
strongest clients(those with the highest credit standings).
PRINCIPAL - The capital sum; interest is
paid on the principal. NOT spelled principle.
PRINCIPAL BROKER - The licensed broker
directly in charge of and responsible for the real estate operations
conducted by a brokerage company.
PRIVATE MORTGAGE INSURANCE - A special
form of insurance designed to permit lenders to increase their
loan-to-market-value ratio, often up to 95 percent of the market
value of the property.
PROBATE - The formal judicial proceeding
to prove or confirm the validity of a will. The will is presented to
the probate court, and creditors and interested parties are notified
to present their claims or to show cause why the provisions of the
will should not be enforced by the court.
PROCURING CAUSE - That effort which
brings about the desired result, as in producing the buyer for the
listed property.
PRO FORMA STATEMENT - A projection of
future income and expenses.
PROMISSORY NOTE - An unconditional
written promise of one person to pay a certain sum of money to
another, or order, or bearer, at a future specified time.
PROPERTY - The rights or interests a
person has in the thing owned; not, in the technical sense, the
thing itself. These rights include the right to possess, to use, to
encumber, to transfer and to exclude, commonly called the "bundle of
rights."
PROPERTY MANAGEMENT - That aspect of real
estate devoted to the leasing, managing, marketing and overall
maintenance of the property of others.
PROPERTY REPORT - A disclosure document
required under the federal interstate land sales act where
applicable to the interstate sale of subdivided lots.
PROPRIETARY LEASE - A written lease in a
cooperative apartment building, between the owner-corporation and
the tenant-stockholder, in which the tenant is given the right to
occupy a particular unit.
PRORATE - To divide or distribute
proportionately.
PROSPECT - A person or corporation who
may be interested in buying or selling real property. The prospect
does not become a client until the parties establish a fiduciary
relationship, such as upon signing a listing contract or upon
executing a DROA.
PROSPECTUS - A printed statement
distributed to describe, advertise and give advance information on a
business, venture, project or stock issue.
PUFFING - Exaggerated or superlative
comments or opinions not made as representations of fact and thus
not a grounds for misrepresentation. A statement such as "the
apartment has a fantastic view," is puffing because the prospective
buyer can clearly assess the view in each case.
PUNCH LIST - A discrepancy list showing
defects in construction which need some corrective work to bring the
building up to standards set by the plans and specifications.
PURCHASE MONEY MORTGAGE - A mortgage
given to the seller as part of the buyer's consideration for the
purchase of real property, and delivered at the same time that the
real property is transferred as a simultaneous part of the
transaction. |
Q |
QUALIFIED FEE - An estate in fee which is
subject to certain limitations imposed by the owner.
QUANTITY SURVEY - A method of estimating
construction cost or reproduction cost; a highly technical process
used in arriving at the cost estimate of new construction and
sometimes referred to in the building trade as the price take-off
method.
QUIET ENJOYMENT - The right of a new
owner or a lessee legally in possession to uninterrupted use of the
property without interference from the former owner, lessor or any
third party claiming superior title.
QUIET TITLE ACTION - A circuit court
action intended to establish or settle the title to a particular
property, especially where there is a cloud on the title.
QUITCLAIM DEED - A deed of conveyance
which operates, in effect, as a release of whatever interest the
grantor has in the property; sometimes called a release deed.
|
R |
RANGE - A measurement, used in the
government survey system, consisting of a strip of land six miles
wide, running in a north-south direction.
RATE OF RETURN - The relationship
(expressed as a percentage)between the annual net income generated
by a business and the invested capital, or the appraised value, or
the gross income, etc., of the business.
RAW LAND - Unimproved land; land in its
unused natural state prior to the construction of improvements such
as streets, lighting, sewers, and the like.
REAL ESTATE - The physical land and
appurtenances, including any structures; for all practical purposes
synonymous with real property.
REAL PROPERTY - All land and
appurtenances to land, including buildings, structures, fixtures,
fences, and improvements erected upon or affixed to the same;
excluding, however, growing crops.
REALTOR - A registered word which may
only be used by an active real estate broker who is a member of the
state and local real estate board affiliated with the National
Association of Realtors. The use of the name REALTOR and the
distinctive seal in advertising is strictly governed by the rules
and regulations of the National Association.
REALTY - Land and everything permanently
affixed thereto.
REBATE - A reduction or kickback of a
stipulated charge.
RECAPTURE CLAUSE - A clause usually found
in percentage leases, especially in shopping center leases, giving
the landlord the right to terminate the lease (and thus "recapture"
the premises)if the tenant does not maintain a specified minimum
amount of business.
RECEIVER - An independent party appointed
by a court to impartially receive, preserve and manage property
which is involved in litigation, pending final disposition of the
matter before the court.
RECORDING - The act of entering into the
book of public records the written instruments affecting the title
to real property, such as deeds, mortgages, contracts of sale,
options, assignments, and the like. Proper recordation imparts
constructive notice to all the world of the existence of the
recorded document and its contents.
REDEMPTION, EQUITABLE RIGHT OF - The
right of a mortgagor who has defaulted on the mortgage note to
redeem or get back his title to the property by paying off the
entire mortgage note prior to the foreclosure sale.
REDUCTION CERTIFICATE - An instrument
which shows the amount of the unpaid balance of a mortgage, the rate
of interest and the date of maturity.
REFINANCE - The act of obtaining a new
loan to pay off an existing loan; the process of paying off one loan
with the proceeds from another.
REFORMATION - A legal action to correct
or modify a contract or deed which has not accurately reflected the
intentions of the parties due to some mechanical error, such as a
typo graphical error in the legal description.
RELEASE - The discharge or relinquishment
of a right, claim or privilege. Releases involving real property
transactions should be acknowledged and recorded.
RELEASE CLAUSE - A provision found in
many blanket mortgages enabling the mortgagor to obtain partial
releases of specific parcels from the mortgage upon the payment of,
typically, a larger-than-pro-rata portion of the loan.
REMAINDER ESTATE - A future interest in
real estate created at the same time and by the same instrument as
another estate, and limited to arise immediately upon the
termination of the prior estate.
RENEWAL OPTION - A covenant in some
leases which gives the lessee the right to extend the lease term for
a certain period, on specified terms.
RENT - Fixed periodic payment made by a
tenant or occupant of property to the owner for the possession and
use thereof, usually by prior agreement of the parties.
RENT CONTROL - Regulation by state or
local governmental agencies restricting the amount of rent landlords
can charge their tenants; such regulation is a valid exercise of the
state's police power.
RENTAL AGREEMENT - An agreement, written
or oral, which establishes or modifies the terms, conditions, rules,
regulations, or any other provisions concerning the use and
occupancy of a dwelling unit and premises; a lease on residential
property.
RENTAL POOL - A rental arrangement
whereby participating owners of rental apartments agree to have
their apartment units available for rental as determined by the
rental agent, and then share in the profits and losses of all the
rental apartments in the pool according to an agreed formula.
REPRODUCTION COST - The cost, on the
basis of current prices, of reproducing a new replica property with
the same or fairly similar material.
RESCISSION - The legal remedy of
canceling, terminating or annulling a contract and restoring the
parties to their original positions; a return to the status quo.
RESERVE FUND - Monies set aside as a
cushion of capital for future payment of items such as taxes,
insurance, furniture replacement, deferred maintenance, etc.;
sometimes referred to as an impound account.
RESIDUAL PROCESS - An appraisal process
used in the income approach to estimate the value of the land and/or
the building, as indicated by the capitalization of the residual net
income attributable to it.
RESTRICTIONS - Limitations on the use of
property. Private restrictions are created by means of restrictive
covenants written into real property instruments, such as deeds and
leases.
RESTRICTIVE COVENANT - A private
agreement, usually contained in a deed, which restricts the use and
occupancy of real property.
RETALIATORY EVICTION - An act whereby a
landlord evicts the tenant in response to some complaint made by the
tenant.
REVERSION - A future estate in real
property created by operation of law when a grantor conveys a lesser
estate than he has. The residue left in the grantor is called a
reversion which commences in possession in the future upon the end
of a particular estate granted or devised, whether it be freehold or
less-than-freehold.
RIGHT OF SURVIVORSHIP - The distinctive
characteristic of a joint tenancy (also tenancy by entirety) by
which the surviving joint tenant(s) succeeds to all right, title and
interest of the deceased joint tenant without the need for probate
proceedings.
RIGHT-OF-WAY - The right or privilege,
acquired through accepted usage or by contract, to pass over a
designated portion of the property of another.
RIPARIAN - Those rights and obligations
which are incidental to ownership of land adjacent to or abutting on
watercourses such as streams and lakes.
RISK OF LOSS - Responsibility for damages
caused to improvements. The risk of loss passes to the vendee when
either title or possession passes, and he should protect himself by
securing proper insurance.
RUNNING WITH THE LAND - Rights or
covenants which bind or benefit successive owners of a property are
said to run with the land, such as restrictive building covenants in
a recorded deed which would affect all future owners of the
property. |
S |
SALE AND LEASEBACK - A transaction in
which, typically, an owner sells his improved property and as part
of the same transaction signs a long-term lease and remains in
possession.
SCHEMATICS - Preliminary architectural
drawings and sketches; basic layouts not containing the final
details of design.
SECOND MORTGAGE - A mortgage which is
junior or subordinate to a first mortgage; typically, an additional
loan imposed on top of the first mortgage, which is taken out when
the borrower needs more money.
SECONDARY MORTGAGE MARKET - A market for
the purchase and sale of existing mortgages, designed to provide
greater liquidity for mortgages; also called secondary money market.
SECURITY AGREEMENT - A security document
which creates a lien upon chattels, including chattels intended to
be affixed to land as fixtures; known as a chattel mortgage prior to
the adoption of the Uniform Commercial Code.
SECURITY DEPOSIT - Money deposited by or
for the tenant with the landlord, to be held by the landlord for the
following purposes: to remedy tenant defaults for damage to the
premises (be it accidental or intentional), for failure to pay rent
due, or for failure to return all keys at the end of the tenancy.
SEPTIC TANK - A sewage settling tank in
which part of the sewage is converted into gas and liquids before
the remaining waste is discharged by gravity into a leaching bed
underground.
SETBACK - Zoning restrictions on the
amount of land required surrounding improvements; the amount of
space required between the lot line and the building line.
SETTLEMENT - The act of adjusting and
prorating the various credits, charges and settlement costs to
conclude a real estate transaction.
SEVERALTY - Sole ownership of real
property.
SHELL LEASE - A lease wherein a tenant
leases the unfinished shell of a building, as in a new shopping
center, and agrees to complete construction himself by installing
ceilings, plumbing, heating and air conditioning systems, and
electrical wiring.
SHOPPING CENTER - A modern classification
of retail stores, characterized by off-street parking and clusters
of stores, subject to a uniform development plan, and usually with
careful analysis given to the proper merchant mix.
SHORELINE - The dividing line between
private land and public beach on beachfront property.
SIMPLE INTEREST - Interest computed on
the principal balance only.
SPECIAL ASSESSMENT - A tax or levy
customarily imposed against only those specific parcels of realty
which will benefit from a proposed public improvement, as opposed to
a general tax on the entire community.
SPECIAL WARRANTY DEED - A deed in which
the grantor warrants or guarantees the title only against defects
arising during the period of his tenure and ownership of the
property and not against defects existing before the time of his
ownership.
SPECIFIC PERFORMANCE - A legal action
brought in a court of equity to compel a party to carry out the
terms of a contract.
SPOT LOAN - A loan on a particular
property, usually a condominium unit, by a lender who has not
previously financed that particular condominium building.
STANDING LOAN - A commitment by the
interim or construction lender to keep the money already funded in
the project for a specified period of time after the expiration of
the interim loan, usually until permanent take-out financing is
secured.
STATUTE OF FRAUDS - That law which
requires certain contracts to be in writing and signed by the party
to be charged therewith in order to be legally enforceable.
STATUTE OF LIMITATIONS - That law
pertaining to the period of time within which certain actions must
be brought to court.
STEP-UP LEASE - A lease with fixed rent
for an initial term and provision for pre-determined rent increases
at specified intervals and/or increases based upon periodic
appraisals; sometimes called a graduated lease.
STRAIGHT NOTE - A promissory note
evidencing a loan in which "interest only" payments are made
periodically during the term of the note, with the principal payment
due in one lump sum upon maturity.
SUBJECT TO MORTGAGE - A grantee taking
title to real property "subject to mortgage" is not personally
liable to the mortgagee for payment of the mortgage note. In the
event the grantor-mortgagor defaults in paying the note, the grantee
could, however, lose property, and thus his equity, in a foreclosure
sale.
SUBORDINATION AGREEMENT - An agreement
whereby a prior mortgagee agrees to subordinate or give up their
priority position to an existing or anticipated future lien.
SUMMARY POSSESSION - A legal process used
by a landlord to regain possession of the leased premises if the
tenant has breached the lease or is holding over after the
termination of tenancy.
SURRENDER - A premature conveyance of a
possessory estate to a person having a future interest, as when a
lessee surrenders the leasehold interest to the owner of the
reversion interest, the lessor, before the normal expiration of the
lease.
SURVEY - The process by which boundaries
are measured and land areas are determined; the on-site measurement
of lot lines, dimensions, and position of houses in a lot including
the determination of any existing encroachments or easements.
SURVIVORSHIP - The right of survivorship
is that special feature of a joint tenancy whereby all title, right
and interest of a decedent joint tenant in certain property passes
to the surviving joint tenants by operation of law, free from claims
of heirs and creditors of the decedent. |
T |
TAKE-OUT FINANCING - Long-term permanent
financing.
TAX LIEN - A general statutory lien
imposed against real property for failure to pay taxes. There are
federal tax liens and state tax liens.
TAX SHELTER - A phrase often used to
describe some of the tax advantages of real estate investment, such
as deductions for depreciation, interest, taxes, etc., which may
offset the investor's other ordinary income to reduce the investor's
overall tax payment.
TENANCY AT SUFFERANCE - A tenancy which
exists when a tenant wrongfully holds over after the expiration of a
lease, without the landlord's consent, as where the tenant fails to
surrender possession after termination of the lease.
TENANCY AT WILL - A tenancy in which a
person is in possession of real estate with the permission of the
owner, for a term of unspecified or uncertain duration, as when an
owner permits a tenant to occupy a property until it is sold.
TENANCY BY THE ENTIRETY - A special joint
tenancy between a lawfully married husband and wife, which places
all title to the property into the marital unit, with both spouses
having an equal, undivided interest in the whole property.
TENANCY FOR YEARS - A less-than-freehold
estate in which the property is leased for a definite, fixed period
of time, be it for 60 days or any fraction of a year, a year, ten
years, etc.
TENANCY IN COMMON - A form of concurrent
ownership of property between two or more persons, in which each has
an undivided interest in the whole property; frequently found when
the parties acquire title by descent or by will.
TENANCY IN SEVERALTY - Ownership of
property vested in one person alone, and not held jointly with
another; also called Several Tenancy or Sole Tenancy.
TENANT - In general, one who holds or
possesses property, such as a life tenant or a tenant for years;
commonly used to refer to a lessee under a lease.
TIME IS OF THE ESSENCE - The clause in a
contract which emphasizes that punctual performance is an essential
requirement of the contract.
TIME SHARING - A modern approach to
communal ownership and use of real estate which permits multiple
purchasers to buy undivided interests in real property (which is
usually in a resort condominium or hotel) with a right to use the
facility for a fixed or variable time period.
TITLE INSURANCE - A comprehensive
contract of indemnity under which the title company agrees to
reimburse the insured for any loss if title is not as represented in
the policy.
TITLE SEARCH - An examination of the
public records to determine what, if any, defects there are in the
chain of title.
TOWNHOUSE - A type of dwelling unit
normally having two floors, with the living area and kitchen on the
base floor and the bedrooms located on the second floor.
TOWNSHIP - A piece of property, used in
the government survey system of land description, which is 6 miles
square, and contains36 sections, each 1 mile square; and consists of
23,040 acres.
TRADE FIXTURES - Articles of personal
property annexed to leased premises by the tenant, as a necessary
part of the tenant's trade or business.
TRIPLE NET LEASE - A net, net, net lease,
where in addition to the stipulated rent, the lessee assumes payment
of all expenses associated with the operation of the property.
TRUST DEED - A real property security
device (also called a deed of trust) very similar to a mortgage,
except that there are three parties, the trustor, the trustee, and
the beneficiary (the lender).
TRUST FUND ACCOUNT - An account set up by
a broker at a bank or other recognized depository, into which the
broker deposits all funds entrusted to him by his principal or
others.
TURNKEY PROJECT - A development term
meaning the complete construction package from ground breaking to
the completion of the building. All that is left undone is to turn
over the keys to the buyer. |
U |
UNILATERAL CONTRACT - A contract in which
one party makes an obligation to perform without receiving in return
any express promise of performance from the other party, such as an
open listing contract, where the seller agrees to pay a commission
to the first broker who brings in a ready, willing and able buyer.
UPSET PRICE - A minimum price set by a
court in a judicial foreclosure, below which the property may not be
sold by a court appointed commissioner at public auction; the
minimum price which can be accepted for the property after the court
has had the property appraised.
USEFUL LIFE - That period of time over
which an asset, such as a building, is expected to remain
economically feasible to the owner.
USURY - Charging a rate of interest in
excess of that permitted by law. |
V |
VACANCY FACTOR - An allowance or discount
for estimated vacancies(unrented units) in a rental project. The
vacancy rate is the ratio between the number of vacant units and the
total number of units in a specified project or area.
VALUE - The power of a good or service to
command other goods in exchange for the present worth of future
rights to income or amenities; the present worth to typical users
and investors of future benefits arising out of ownership of a
property.
VARIANCE - Permission obtained from
governmental zoning authorities to build a structure or conduct a
use which is expressly prohibited by the current zoning laws; an
exception from the zoning laws.
VENDEE - The purchaser of realty; the
buyer. The buyer under an agreement of sale.
VENDOR - The seller of realty. The seller
under an agreement of sale.
VOID - Having no legal force or binding
effect; a nullity; not enforceable. A contract for an illegal
purpose (i.e. gambling)is void.
VOIDABLE - A contract which appears valid
and enforceable on its face, but is subject to rescission by one of
the parties who acted under a disability, such as being a minor or
being under duress or undue influence; that which may be avoided or
adjudged void but which is not, in itself, void. |
W |
WAIVER - To voluntarily give up or
surrender a right.
WAREHOUSE - A building used to store
merchandise and other materials or equipment.
WAREHOUSING - A term used in financing to
describe the process which loan correspondents employ, assembling
into one package a number of mortgage loans which the correspondent
has originated and selling them in the secondary mortgage market.
WARRANTY - A guaranty by the seller,
covering the title as well as the physical condition of the
property.
WARRANTY DEED - A deed in which the
grantor fully warrants good clear title to the premises. Also called
a general warranty deed.
WASTE - An improper use or abuse of
property by one in possession of land, who holds less than the fee
ownership, such as a tenant, life tenant, mortgagor, or vendee.
WEAR AND TEAR - The gradual physical
deterioration of property, resulting from use, passage of time and
weather. Only property subject to wear and tear is depreciable.
WRAP-AROUND MORTGAGE - A method of
refinancing in which the new mortgage is placed in a secondary or
subordinate position. In essence, it is an additional mortgage in
which another lender refinances a borrower by lending an amount over
the existing first mortgage amount, without cashing out or
distributing the existence of the first mortgage. |
X |
|
Y |
YEAR-TO-YEAR TENANCY - A periodic tenancy
in which the rent is reserved from year to year.
YIELD - The return on an investment or
the amount of profit, stated as a percentage of the amount invested.
|
Z |
ZONING - The regulation of structures and
uses of property within designated districts or zones. Zoning
regulates and affects such things as use of the land, types of
structure permitted, building heights, setbacks, and density (the
ratio of land area to improvement area). | |