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Real Estate Practice
Kaplan Modern Real Estate Practice Terms
| Term | Definition |
|---|---|
| Abstract of Title | The condensed history of the recorded ownership of a particular parcel of real estate, consisting of a summary of the original grant and all subsequent conveyances and encumbrances affecting the property and a certification it's complete (122) |
| Accelerated Cost Recovery System (ACRS) | Method for claiming tax deductions for certain property purchased before 1987 in which it was possible to claim greater deductions in the early years of ownership, gradually reducing the amount deducted in each year of useful life. |
| Acceleration Clause | The clause in a mortgage or deed of trust that can be enforced to make the entire debt due immediately if the borrower defaults on an installment payment or other obligation. |
| Accession | Aquiring title to additions or improvements to real property as a result of the annexation of fixtures or the accretion of alluvial deposits along the banks of streams |
| Accretion | The increase or addition of land by the deposit of sand or soil washed up naturally from river, lake, or sea. |
| Accrued Depreciation | Loss in a property's value resulting from physical deterioration, external depreciation, and functional obsolescensce. |
| Accrued Items | On a closing statement, items of expense that are incurred but not yet payable, such as interest on a mortgage loan or taxes on real property. |
| Acknowledgment | A formal declaration made before a duly authorized officer, usually a notary public, by a person who has signed a document. |
| Acre | Measure of land equal to 43,560 square feet |
| Action to Quiet Title | A court action that establishes ownership when ownership cannot be traced through an unbroken chain of title |
| Actual Eviction | The legal process that results in a tenant's being physically removed from the premises |
| Actual Notice | Express information or fact; that which is known; direct knowledge |
| Ad Valorem Tax | A tax levied according to value, generally used to refer to real estate tax. Also called the "general tax" |
| Addendum | Any provision added to an existing contract without altering the content of the original. Must be signed by all parties. |
| Adjustable-Rate Mortgage (ARM) | A loan characterized by a fluctuating interest rate, usually one tied to a bank or savings and loan association cost-of-funds index |
| Administrative Law Judge (ALJ) | The official who presides over a hearing involving government agency and someone affected by a decision of that agency. They hear evidence, including the testimony of witnesses, and renders a decision. |
| Administrator | A court-selected person who assists with the settlement of an estate of a person who died without leaving a will. |
| Adverse Possession | The actual, open, notorious, hostile, and continuous possession of another's land under a claim of title. Possession for a statutory period may be means of acquiring title. |
| Affidavit of Title | A written statement made under oath by seller/grantor of real property & acknowledged by notary public in which grantors identify them and marital stat, certify no defects have occurred in the title since examin., certify they have possession of property |
| Affiliated Business Arrangement (ABA) | Practice of one company offering a package of services to consumers |
| Agency | The relationship between a principal and an agent wherein the agent is authorized to represent the principal in certain transactions |
| Agency by ratification | An agency relationship created after the fact. |
| Agent | One who acts or has the power to act for another. A fiduciary relationship is created under the law of agency when a property owner executes a listing agreement authorizing a RE broker to be their agent. |
| Air Lots | Designated airspace over a piece of land.... like surface property, it must transferred. |
| Air Rights | The right to use the open space above a property, usually allowing the surface to be used for another purpose. |
| Alienation | The act of transferring property to another. It may be voluntary, such as by gift or sale, or involuntary, as through eminent domain or adverse possession. |
| Alienation Clause | The clause in a mortgage/deed of trust stating that the balance of the debt becomes immediately due and payable at the lender's option if the property is sold by the borrower. It prevents the borrower from assigning the debt w/out the lender's approval. |
| Allodial System | A system of land ownership in which land is held free and clear of any rent or service due to the government; commonly contrasted to the feudal system. |
| Amendment | A change to the existing content of a contract. Must be initialed by all parties. |
| American Land Title Association (ALTA) Policy | A title insurance policy that protects the interest in a collateral property of a mortgage lender who originates a new real estate loan. |
| Americans with Disabilities Act (ADA) | Act addresses rights of individuals with disabilities in employment and public accomodations. |
| Amortized Loan | A loan in which the principal, as well as the interest, is payable in monthly or other periodic installments over the term of the loan. |
| Annexation | Process of converting personal property into real property |
| Annual Percentage Rate (APR) | The relationship of the total finance charges associated with a loan. This must me disclosed to borrowers by lenders under the Truth in Lending Act. |
| Anticipation | The appraisal principle holding that value can increase or decrease based on the expectation of some future benefit or or detriment produced by the property |
| Antitrust Laws | Laws designed to preserve the free enterprise of open marketplace by making illegal to certain private conspiracies and combinations formed to minimize competition. |
| Appraisal | An estimate of the quantity, quality, or value of something. The process through which conclusions of property value are obtained. |
| Appraisal Report | An opinion of a property's market value given to a lender or client with detailed market information. |
| Appraiser | An independent person trained to provide an unbiased estimate of value. |
| Appraiser Independence Requirements (AIR) | Regulations issued by Fannie Mae that must be followed by appraisers to ensure accurate and objective appraisals. |
| appreciation | An increase in the worth or value of a property due to economic or related causes, which may prove to be either temporary or permanent. |
| Appurtenance | A right, privilege, or improvement belonging to, and passing with, the land; "runs with the land" |
| Appurtenant Easement | An easement that is annexed to the ownership of one parcel and allows the owner the use of the neighbor's land |
| Area | A level surface or piece of ground; the size of a surface; the amount of a two-dimensional object. |
| Area Preference | People's desire for one area over another, based on a number of factors such as history, reputation, convenience, scenic beauty, and location. |
| Asbestos | A mineral once used in insulation and other materials that can cause respiratory diseases |
| Assemblage | The combining of two or more adjoining lots into one larger tract to increase their total value. |
| Assessed Value | The value set on a property for taxation purposes |
| Assessment | The imposition of a tax, charge, or levy, usually according to established rates. |
| Assessment Equalization Factor | A factor (number) by which the assessed value of a property is multiplied to arrive at a value for the property that is in line with state wide tax assessments. |
| Assignment | The transfer in writing of interest in a bond, mortgage, lease, or other instrument. |
| Associate Licensee | A licensed real estate salesperson who is employed by or associate with the broker to perform brokerage activities on behalf of or for the broker. |
| Assumption of Mortgage | Acquiring title to property on which there is an existing mortgage and agreeing to be personally liable for the terms and conditions of the mortgage, including payments. |
| Attachment | The act of taking a person's property into legal custody by writ or other judicial order to hold it avalable for application to that person's debt to a creditor. |
| Attorney's Opinion of Title | An abstract of title that an attorney has examined and has certified to be, in the attorney's opinion, an accurate statement of the facts concerning the property's ownership. |
| Automated Underwriting | Computer systems that permit lenders to expedite the loan approval process and reduce lending costs. |
| Automatic Extension Clause | A listing agreement clause stating that the agreement will continue automatically for a certain period of time after its expiration date. In many states, the use of this clause is discouraged or prohibited. |
| Avulsion | The sudden tearing away of land, as by earthquake, flood, volcanic action, or the sudden change in the course of a stream. |
| Balance | The appraisal principle state that the greatest value in a property will occur when the type and size of the improvements are proportional to each other as well as the land. |
| Balloon Payment | A final payment of a mortgage loan that is considerably larger than the required periodic payments because the loan amount was not fully amortized. |
| Bargain and Sale Deed | A deed that carries with it no warranties against liens or other encumbrances but that does imply that the grantor has the right to convey title. The grantor may add warranties to the deed. |
| Base Line | The main imaginary line running east and west and crossing a principal meridian at a definite point; used by surveyors for reference in locating and describing land under the rectangular (govt) survey system of legal description. |
| Basis (or Adjusted Basis) | The financial interest the IRS attributes to an owner of investment property for the purpose of determining annual depreciation and gain/loss on sale of asset. It's the cost of property plus value of capital expenditures minus depreciation. |
| Benchmarks | Permanent reference marks or points established for use by surveyors in measuring differences in elevation. |
| Beneficiary | The person for whom a trust operates or in whose behalf the income from a trust estate is drawn. Or a lender in a deed of trust loan transaction. |
| Binder | An agreement that may accompany an earnest money deposit for the purchase of real property as evidence of the purchaser's good faith and intent to complete the transaction. |
| Blanket loan | A mortgage covering more than one parcel of real estate, providing for each parcel's partial release from the mortgage lien upon repayment of a definite portion of the debt. |
| Blockbusting | The illegal practice of inducing home owners to sell their properties by making representations regarding the entry or prospective entry of persons of a particular race or national origin into the neighborhood. |
| Blue-sky Laws | Common name for those state and federal laws that regulate the registration and sale of investment securities. |
| Boot | Money or property given to make up any difference in value or equity between two properties in an exchange. |
| Boycott | When individuals or businesses withhold their patronage to a business as a protest or to reduce competition. |
| Branch Office | A secondary place of business apart from the principal or main office from which real estate business is conducted. |
| Breach of contract | Violation of any terms or conditions in a contract without legal excuse; for example, failure to make a payment when it's due. |
| Bring Down | A second title search that is made after the closing and before any new documents are filed. |
| Broker | One who acts as an intermediary on behalf of others for a fee or commission. |
| Broker Protection Clause | Clause in a contract that protects a broker from losing a commission in the event a transaction is not completed or is intentionally delayed until after the listing expires. |
| Brokerage | The bringing together of parties interested in make a real estate transaction. |
| Broker's Price Opinion (BPO) | An opinion of real estate value commissioned by a bank or an attorney and provided by a broker. |
| Brownsfields | Defunct, derelict, or abandoned commercial or industrial sites; many have toxic wastes |
| Budget Comparison Statement | Compares actual results with the original budget, often giving either percentages or a numerical variance of actual versus projected income and expenses. |
| Buffer Zone | A strip of land, usually used as a park or designated for similar use, separating land dedicated to one use from land dedicated to another use (eg residential from commercial) |
| Building Code | An ordinance that specifies minimum standards of construction for buildings to protect public safety and health |
| Building Permit | Written governmental permission for the construction, alteration, or demolition of an improvement, showing compliance with building codes and zoning ordinances. |
| Building-related illness (BRI) | An illness due to air quality problems, typically toxic substances or pathogens; a clinically diagnosed condition. |
| Bundle of Legal Rights | The concept of land ownership that includes ownership of all legal rights to the land- possession, control within the law, enjoyment, exc |
| Buydown | A financing technique used to reduce the monthly payments for the first few years of a loan. Funds in the form of discount points are given to the lender by the builder or the seller to buy down or or lower the effective interest rate paid by the buyer. |
| Buyer Representation Agreement | A principal-agent relationship in which the real estate professional acts on behalf of the buyer, usually as an agent, with fiduciary responsibilities to the buyer. |
| Buyer's Agent | A real estate professional who is under contract to locate property for a buyer and represent the buyer's interest in a transaction. |
| Buyer's Broker | A residential real estate professional who represents prospective buyers exclusively. |
| Buyer's Representative | A residential real estate professional who represents the prospective purchaser in a transaction, often through a sales associate of the broker. |
| Capital Gain | Profit earned from the sale of an asset. |
| Capitalization | A mathmatical process for estimating the value of a property using a proper rate of return on the investment and the annual net operating income expected to be produced by the property. Formula is income/rate=value |
| Capitalization Rate | The rate of return of a property will produce on the owner's investment. |
| Capping | The process of laying two to four feet of soild over the top of a landfill site and then planting grass to enhance the aesthetic value and prevent errosion |
| Carbon Monoxide (CO) | A colorless, odorless gas that occurs as a by-product of fuel combustion that may result in death in a poorly ventilated area. |
| Cash flow | The net spendable income from an investment, determined by deducting all operating and fixed expenses from the gross income. |
| Cash flow Report | A monthly statement that details the financial status of the property. |
| Caveat Emptor | Latin phrase meaning "buyer beware" |
| Certificate of Occupancy | Permission by the municipal inspector to occupy a completed building structure after being inspected and having complied with building codes. |
| Certificate of Reasonable Value (CRV) | A form indicating the appraised value of a property being financed with a VA loan. |
| Certificate of Sale | The document generally given to the purchaser at a tax foreclosure sale. It does NOT convey title. |
| Certificate of Title | A statement of opinion on the status of the title to a parcel of real property based on an examination of specified public records. |
| Chain of Title | The succession of conveyances, from some accepted starting point, whereby the present holder of real property derives title. |
| Change | The appraisal principle that holds that no physical or economic condition remains constant. |
| Civil Rights Act of 1866 | An act that prohibits racial discrimination in the sale and rental of housing. |
| Client | The principal in an agency relationship of other form of representation |
| Closing | An event where promises made in a sales contract are fulfilled and mortgage loan funds are distributed to the buyer. |
| Closing Disclosure | The CFPB form that itemizes all charges that are normally paid by a borrower and a seller in connection with settlement, whether required by the lender or another party, or paid by the lender or any other person. |
| Closing Escrow | Process of settlement in which the buyer and seller never meet; the paperwork is handled by an escrow agent. |
| Closing Statement | A detailed cash accounting of a real estate transaction showing all cash received, all charges and credits made, and all cash paid out in the transaction. |
| Cloud on the Title | Any document, claim, unreleased lien, or encumbrance that may impair the title to real property or make the title doubtful; usually refealed by a title search. |
| Code of Ethics | A written system of standards for ethical conduct. |
| Codicil | A supplement or an addition to a will, executed with the same formalities as a will, which normally does not revoke the entire will. |
| Coinsurance Clause | A clause in insurance policies covering real property that requires the policyholder to maintain fire insurance coverage generally equal to at least 80% of the property's actual replacement cost. |
| Collateral | Something having value that is given to secure repayment of a debt |
| Commingling | The illegal act by a real estate professional of placing client or customer funds with personal funds. |
| Commission | Payment to a real estate professional for services rendered, such as in the sale or purchase of real property; usually a percentage of the selling price of the property. |
| Common elements | Parts of a property that are necessary or convenient to the existence, maintenance, and safety of a condominium or are normally common use by all the condominium residents. |
| Common Law | The body of law based on custom, usage and court decisions. |
| Community Association Management | Provides a team of property managers, accounting staff, office staff, and property consultants to manage property. |
| Community Property | A system of property ownership based on the theory that each spouse has an equal interest in the property acquired by the efforts of either spouse during marriage. |
| Community Reinvestment Act of 1977 (CRA) | Under the act, which was revised most recently in 2008, financial institutions are expected to meet the deposit and credit needs of their communities; participate and invest in local community development and rehabilitation projects; participate in loans |
| Comparables | Properties used in an appraisal report that are substantially equivalent to the subject property. |
| Comparative Market Analysis (CMA) | A comparison of the prices of recently sold homes that are similar to a listing seller's home in terms of location, style, and amenities. |
| Competent Party | A person who has the capacity to be engaged in a legal contract; beings of sound mind and body. |
| Competition | The appraisal principle stating that excess profits generate competition. |
| Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) | A federal law administered by the Env. Protection Agency that establishes a process for identifying parties responsible for creating hazardous waste sites, forcing liable parties to clean it up. |
| Comprehensive Loss Underwriting Exchange (CLUE) | A database of consumer claims history that allows insurance companies to access prior claims information in the underwriting and rating process |
| Computerized Loan Origination (CLO) | An electronic network for handling loan applications through remote computer terminals linked to various lenders' computers. |
| Conciliation | A form of alternative dispute resolution in which a conciliator meets with each of the parties separately to help them settle their differences voluntarily, without a hearing or trial. |
| Condemnation | A judicial or administrative proceeding to exercise the power of eminent domain, through which a govt. agency takes private property for public use and compensates the owner. |
| Condiitional-use Permit | Written governmental permission allowing a use inconsistent with zoning but necessary for the common good, such as locating an emergency medical facility in a predominantly residential area. |
| Condominium | A aboslute ownership of a unit in a multiunit building based on legal description of the airspace the unit actually occupies, or a separate dwelling unit in a multiunit development, puls and undivided interest in the ownership...... etc |
| Confession of Judgment Clause | Permits judgment to be entered against a debtor without the creditor's having to institute legal proceedings. |
| Conformity | The appraisal principle holding that the greater the similarity among properties in an area, the better they will hold their value. |
| Consent | Expressing or implying permission, approval, or agreement of an action or decision |
| Consideration | 1. That received by the grantor in exchange for the deed, or 2. Something of value that induces a person to enter into a contract. |
| Constructive Annexation | The combination of items into real property that are not fixed or fastened to the property. |
| Constructive Eviction | Actions of a landlord that so materially disturb or impair a tenant's enjoyment of the leased premises that the tenant is effectively forced to move out and terminate the lease without liability for any further rent. |
| Constructive Notice | Notice given to the world by recorded documents. |
| Consumer | An individual who purchases goods or services that are not for resale. |
| Contingencies | Provisions in a contract that require a certain act to be done or a certain event to occur before the contract becomes binding. |
| Contract | A legally enforceable promise or set of promises that must be performed and for which, if a breach of the promise occurs, the law provides a remedy. |
| Contribution | The appraisal principle state that the value of any component of a property is what it gives to the value of the whole or what its absence detracts from that value. |
| Controlled Business Arrangement | An arrangement that offers consumers a package of services. |
| Conventional Loan | A loan that requires no federally sponsored insurance or guarantee. |
| Conversion | The illegal use of money received on behalf of the principal. |
| Conveyance | A term used to refer to any document that transfers title to real property. The term is also used in describing the act of transferring |
| Cooperative | A residential multiunit whose title his held by a trust or corporation that is owned by and operated for the nenefit of the people living within the building who are beneficial owners of the trust or shareholders of the corporation. |
| Co-ownership | Title ownership held by two or more persons. |
| Corporation | An entity or organization, created by operation of law, whos rights of doing business are essentially the same as those of an individual. |
| Corrective Maintenance | Correction of problems after they have occured. |
| Cost | The total amount of money incurred for products or services. |
| Cost Approach | The process of estimating the value of a property by adding to the estimated land value the appraiser's estimate of the reproduction or replacement cost of the building, less depreciation. |
| Cost Recovery | An IRS term for "depreciation" |
| Counteroffer | A new offer made in response to an offer received. |
| Covenant | A written agreement between two or more parties in which a party or parties pledge to perform or not perform specified acts with regard to property; usually found in such real estate documents as deeds, mortgages, leases, and contracts for deed. |
| Covenant of Quiet Enjoyment | The covenant implied by law by which a landlord guarantees that a tenant may take possession of leased premises and that the landlord will not interfere in the tenant's possession or use of the property. |
| Covenants, Conditions, and Restrictions (CC&Rs) | Prinvate agreements that affect land use. They may be enforced by an owner of real estate that benefits from them and can be included in the seller's deed to the buyer. |
| Credit | On a closing statement, an amount entered in a person's favor-either an amount the party has paid or an amount for which the party must be reimbursed. |
| Curtesy | In a life estate, usually a fractional interest, given by some states to the surviving husband in real estate owned by his deceased wife. |
| Customer | The thurd party or nonrepresented consumer for whom some level of service is provided. |
| Datum | A horizontal plane from which heights and depths are measured. |
| Debit | On a closing statement, an amount charged; that is, and amount that the debited party must pay |
| Debt To Income (DTI) | Information about an applicant's gross income and total debt that lenders generally look at as a percentage to determine qualification for a loan. |
| Decedent | A person who has died |
| Deed | A written instrument that, when executed and delivered, conveys title to or an interest in real estate. |
| Deed in Lieu of Foreclosure | A deed given by the mortgagor to the mortgagee when the mortgagor is in default under the terms of the mortgage. If accepted by the mortgagee, this is a way for the mortgagor to avoid foreclosure. |
| Deed in Trust | An instrument that grants a trustee under a land trust full power to sell, mortgage, and subdivide a parcel of real estate. The beneficiary controls the trustee's use of these powers under the provisions of the trust agreement. |
| Deed of Reconveyance | A document that a trustee uses to transfer the title back to the trustor (borrower) when the note is repaid. |
| Deed Restrictions | Clauses in a deed limiting the future uses of the property |
| Default | The nonperformance of a duty, whether arising under a contract or otherwise; failure to meet an obligation when due. |
| Defeasance Clause | A clause used in leases and mortgages that cancels a specified right upon the occurrence of a certain condition, such as a cancellation of a mortgage upon repayment of the mortgage loan. |
| Defeasible Fee Estate | An estate in which the holder has a fee simple title that may be divested upon the occurrence or nonoccurrence of a specified event. |
| Deficiency Judgement | A personal judgement levied against the borrower when a foreclosure sale does not produce sufficient funds to pay the mortgage debt in full. |
| Delinquent Taxes | Taxes that are unpaid and past due. |
| Delivery and Acceptance | When the title to property is delivered by the grantor and accepted by the grantee. |
| Demand | The amount of good people are willing and able to buy at a given price. |
| Demographics | The study and description of a population |
| Denominator | The number written below the line in a fraction |
| Density Zoning | Zoning ordinances that restrict the maximum average number of housing units per acre that may be built within a particular area, generally a subdivision. |
| Department of Housing and Urban Development (HUD) | Federal agency that has established rules and regulations that further interpret the practices affected by federal law. |
| Depreciation | In appraisal, the loss of value in a property. In real estate investment, a deduction for tax purposes taken over the period of ownership of income property, based on the property's acquisition of cost. |
| Descent | Acquisition of an estate by inheritance in which an heir succeeds to the property by operation of law. |
| Designated Agency | A process that accommodates an "in-house sale" in which two different agents are involved. |
Created by:
debbygail2003
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