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Real Estate Fundamen

Washington State Real Estate Fundamentals for Brokers License

Question	Answer
Beneficiary	One for whom a trust is created and on whose behalf the trustee administers the trust..The lender in a deed of trust transaction...One entitled to receive real or personal property under a will; a trustee or devisee
Reversion	A future interest that becomes possessory when a life estate terminates, and that is held by the grantor of the life estate or the grantor's heirs
Fee Simple	The highest and most complete form of ownership, which is of potentially infinite duration. Also called a fee or a fee simple absolute.
Estate for Years	A leasehold estate set to last for a definite period (one week, three years, etc), after which it terminates automatically. Also called a tenancy for years or term tenancy.
Estate	1. An interest in real property that is or may become possessory; either a freeholder a leasehold. 2. The property left by someone who has died.
Tenancy by the Entireties	A form of joint ownership of property by husband and wife recognized in most states that don't use a community property system; not recognized in Washington
Adverse Possession	Acquiring title to real property that belongs to someone else by taking possession of it without permission, in the manner and for the length of time prescribed by statute
Fee Qualified	A fee simple estate that is subject to termination if a certain condition is not met or if a specified event occurs. Also called a Conditional Fee or defeasible fee
Riparian Rights	The water rights of a landowner whose property is adjacent to or crossed by a body of flowing water
Personal Property	Any property that is not real property; movable property not affixed to land. Also called chattels or personalty.
Appurtencances	Rights that go along with ownership of a particular piece of property, such as air rights or mineral rights; they are ordinarily transferred with the property, but may in some cases, be sold separately.
Trade Fixtures	Articles of personal property annexed to real property by a tenant for use in his or her trade or business, which the tenant is allowed to remove at the end of the lease.
Littoral Rights	The water rights of the owner of land that borders water that is not flowing, such as a lake or ocean
Bill of Sale	A document used to transfer title to personal property from one person to another.
Metes and Bounds Description	A type of legal description that starts at an identifiable point of beginning, then describes the property's boundaries in terms of courses (compass directions) and distances, ultimately returning to point of beginning.
Acceleration Clause	A provision in a promissory note or security instrument allowing the lender to declare the entire debt due immediately if the borrower breaches one or more provisions of the loan agreement. Also referred to as a call provision.
Accession	Any addition to real property from natural or artificial causes, including accretion, reliction and avulsion
Addendum	An attachment to a purchase agreement or other contract that contains additional provisions that apply to that transaction
Ad Valorem	A Latin phrase that means "according to value" used to refer to taxes that are assessed on the value of property.
Agency, Designated	A term used in some states (but not in Washington) to refer to a type of dual agency, in which the seller's agent and the buyer's agent both work for the same brokerage; also known as an in-house transaction.
Alientation	The transfer of ownership or an interest in property from one person to another, by any means.
Alienation Clasue	A provision in a security instrument that gives the lender the right to declare the entire loan balance due immediately if the borrower sells or otherwise transfers the security property. Also called a due-on-sale clause.
Amendment	A written modification to a contract that occurs after both parties have signed the document.
Annual Percentage Rate (APR)	All the charges that the borrower will pay for the loan (including the interest, loan fee, discount points, and mortgage insurance costs), expressed as an annual percentage of the loan amount.
Anticipation, Principle of	An appraisal principle which holds that value is created by the expectation of benefits to be received in the future.
Arm's length transaction	A transaction in which there is no pre-existing family or business relationship between the parties.
Assignment	1. A transfer of contract rights from one person to another.2. When a buyer assumes personal liability for a seller's mortgage.3.In the case of a lease, when the original tenant transfers his or her entire leasehold estate to another
Assessment	The valuation of property for purposes of taxation
Assumption	When a buyer takes on personal liability for paying off the seller's existing mortgage or deed of trust. May also be referred to as an assignment.
Attorney In Fact	Any person authorized to represent another by a power of attorney; not necessarily a lawyer.
Balloon Payment	A payment on a loan (usually the final payment)that is significantly larger than the regular installment payments.
Bequeath	To transfer personal property to another by will.
Blind Ad	An advertisement placed by a real estate licensee that does not include the brokerage's name.
Blockbusting, or inducing Panic selling	Attempting to induce owners to list or sell their homes by predicting that members of another race or ethnic group, or people suffering from some disability, will be moving into the neighborhood; this violates anti-discrimination laws.
Blue Sky Laws	State laws that regulate securities.
Boot	In a tax-free exchange, something given or received that is not like-kind property
Capital Gain	Profit realized from the sale of a capital asset.
Capitalization	A method of appraising real property by converting the anticipated net income from the property into the present value. Also called the income approach to value.
Caveat Emptor	Meaning "let the buyer beware," a term that suggests that the duty to investigate a potential purchase ultimately falls on the buyer.
CC&R's	A declaration of covenants, conditions, and restrictions; usually recorded by a developer to place restrictions on all lots within anew subdivision.
Certificate of Eligibility	A document issued by the Department of Veterans Affairs as evidence of a veteran's eligibility for a VA-guaranteed loan.
Certificate of Reasonable Value	A document issued by the Department of Veterans Affairs, setting forth the current market value of a property, based on a VA-approved loan.
Change, Principle of	An appraisal principle which holds that property values are in a state of flux, increasing and decreasing in response to social, economic, and governmental forces.
Chattel Real	Personal property that is closely associated with real property; the primary example is a lease.
Cloud on Title	A claim, encumbrance, or apparent defect that makes the title to a property unmarketable.
Commingling	Illegally mixing trust funds held on behalf of a client with personal funds.
Common Areas	The land and improvements in a condominium, planned unit development, or other housing development that are owned and used collectively by all the residents, such as parking lots,hallways, rec areas available for common use.
Common Elements, Limited	In a condominium, areas outside of the units (such as balconies or assigned parking spaces)that are designated for the use of particular unit owners, rather than all of the residents.
Community Property	Property owned jointly by a married couple in Washington, California and other community property states, as distinguished from each spouse's separate property; generally any property acquired through the labor or skill of either spouse during marriage.
Comparable	A recently sold and similarly situated property that is used as a point of comparison by an appraiser using the sales comparison approach.
Competitive Market Analysis	A CMA is similar to an appraisal, but performed by a real estate agent, whose goal is to help the seller determine an accurate listing price based on comparable homes that have recently sold.
Condemnation	1.Taking private property for public use through the government's power of eminent domain. 2.A declaration that a structure is a unfit for occupancy and must be closed or demolished.
Condominium	Property developed for concurrent ownership, where each co-owner has a separate interest in an individual unit, combined with an undivided interest in the common areas of the property.
Conformity, Principle of	An appraisal principle which holds that the maximum value of property is realized when there is a reasonable degree of social and economic homogeneity in the neighborhood.
Consideration	Anything of value given to induce another to enter into a contract, such as money, goods, services or a promise.
Contract, Bilateral	A contract in which each party has made a binding promise to perform.
Contract, Executed	A contract in which both parties have completely performed their contractual obligations.
Contract, Executory	A contract in which one or both parties have not yet completed performance of their obligations.
Contract, Land	A contract for the sale of real property in which the buyer (the vendee) pays in installments; the buyer takes possession of the property immediately, but the seller (the vendor) retains legal title until the full price has been paid.
Contract, Unenforceable	Any agreement that a court would refuse to enforce; for example, because its contents can't be proven or the statute of limitations has run out.
Contract, Unilateral	A contract that is accepted by performance; the offeror has promised to perform his or her side of the bargain if the other party performs, but the other party has not promised to do so.
Contract, Void	An agreement that is not an enforceable contract, because it lacks a required element (such as consideration) or is defective in some other respect.
Contract, Voidable	A contract that one of the parties can disaffirm without liability, because of lack of capacity or a negative factor such as fraud or duress.
Contribution, Principle of	An appraisal principle which holds that the value of real property is greatest when the improvements produce the highest return commensurate with their cost (the investment)
Conversion	1. Misapppropriating property or funds belonging to another for example, converting trust funds to ones' own use.2. the process of changing an apartment complex into a condominium or cooperative.
Cooperative	A building owned by a corporation, where the residents are shareholders in the corporation; each shareholder receives a proprietary lease on an individual unit and the right to use the common areas.
Cost, Replacement	In appraisal, the current cost of constructing a building with the same utility as the subject property using modern materials and construction methods.
Cost, Reproduction	In appraisal, the cost of constructing a replica (an exact duplicate) of the subject property, using the same materials and construction methods that were originally used, but at current prices.
Covenant, Restrictive	A promise to do or not do an act relating to real property, especially a promise that runs with the land; usually an owner's promise to not use property in a specified manner.
Covenant of Quiet Enjoyment	A promise that a buyer or tenant's possession will not be disturbed by the previous owner, the lessor, or anyone else making a lawful claim against the property
Damages, Liguidated	A sum that the parties to a contract agree in advance (at the time the contract is made)will serve as full compensation in the event of a breach.
Deed, Quitclaim	A deed that conveys any interest in a property that the grantor has at the time the deed is executed, without warranties.
Deed in Lieu of Foreclosure	A deed given by a borrower to the lender, relinquishing ownership of the security property, to satisfy the debt and avoid foreclosure.
Deed of Reconveyance	The instrument used to release the security property from the lien created by a deed of trust when the debt has been repaid.
Deed of Trust	An instrument that creates a voluntary lien on real property to secure the repayment of a debt, and which includes a power of sale clause permitting nonjudicial foreclosure; the parties are the grantor or trustor, the beneficiary and the trustee.
Defeasance Clause	A clause in a mortgage, deed of trust, or lease that cancels or defeats a certain right upon the occurrence of a particular event.
Delivery	The legal transfer of a deed from the grantor to the grantee, which results in the trasfer of title.
Depreciation	1.A loss in value (caused by deferred maintenance, functional obsolescence, or external obsolescence)2.For the purposes of income tax deductions, apportioning the cost of an asset over a period of time.
Depreciation, Incurable	Deferred maintenance, functional obsolescence, or external obsolescence that is either impossible to correct, or not economically feasible to correct, because the cost could not be recovered in the sales price.
Devise	1(noun)A gift of real property through a will.2.(verb)To transfer real property by will.
Discount Points	A percentage of the principal amount of a loan, collected by the lender at the time a loan is originated, to give the lender an additional yield.
Downzoning	Rezoning land for a more limited use.
Duress	Unlawful force or constraint used to compel someone to do something (such as sign a contract) against his or her will.
Easement	An irrevocable right to use some part of another person's real property for a particular reason.
Easement Appurtenant	An easement that benefits a piece of property, the dominant tenement
Easement in Gross	An easement that benefits a person instead of a piece of land; there is a dominant tenant, but no dominant tenement.
Economic Life	The period during which improved property will yield a return over and above the rent due to the land itself; also called the useful life.
Elements of Value	In appraisal, the four basic attributes of a property that help determine its value: utility, scarcity, demand, and transferability.
Eminent Domain	The government's constitutional power to take (condemn) private property for public use, as long as the owner is paid just compensation.
Encumbrance	A nonpossessory interest in real property; a right or interest held by someone other than the property owner, which may be a lien, an easement, a profit, or a restrictive covenant.
Equity	An owner's unencumbered interest in his or her property; the difference between the value of the property and liens against it.2. A judge's power to soften or set aside strict legal rules, to bring about a fair and just result in a particular case.
Escheat	When property reverts to the state after a person dies intestate and no heirs can be located.
Escrow	An arrangement in which something of value (such as money or deed) is held on behalf of the parties to a transaction by a disinterested third party (an escrow agent) until specified conditions have been fulfilled.
Eviction, Constructive	When a landlord's act (or failure to act) interferes with the tenant's quiet enjoyment of the property, or makes the property unfit for it's intended use, to such an extent that the tenant is forced to move out.
Executor	A person named in a will to carry out it's provisions.
Fiduciary Relationship	A relationship of trust and confidence, where one party owes the other (or both parties owe each other) loyalty and a higher standard of good faith than is owed to third parties.
Fixture	An item that used to be personal property but has been attached to or closely associated with real property in such a way that it has legally become part of the real property.
Foreclosure	When a lienholder causes property to be sold against the owners wishes, so that the unpaid lien can be satisfied from the sale proceeds.
Fraud, Actual	Deceit or misrepresentation with the intention of cheating or defrauding another.
Fraud, Constructive	A breach of duty that misleads the person the duty was owed to, without an intention to deceive.
Granting Clause	Words in a deed that indicate the grantor's intent to transfer an interest in property.
Gross Multiplier Method	A method of appraising residential property by reference to its rental value.
Habendum Clause	A clause included after the granting clause in many deeds; it begins "to have and to hold" and describes the type of estate the grantee will hold.
Habitability, Implied Warranty of	A warranty implied by law in every residential lease, that the property is fit for habitation.
Highest and Best Use	The use which, at the time of appraisal, is most likely to produce the greatest net return from the property over a given period of time.
Holder in Due Course	A person who obtains a negotiable instrument for value, in good faith, without notice that it is overdue or notice of any defenses against it.
Impound Account	A bank account maintained by a lender for payment of property taxes and insurance premiums on the security property; the lender requires the borrower to make regular deposits,a nd pays the expenses out of the account. aka Reserve Account.
Income, Active	As classified by the IRS, income that includes wages, salaries, and commissions earned directly by an individual person.
Income, Effective Gross	A measure of rental property's capacity to generate income; calculated by subtracting a bad debt/vacancy factor from the economic rent (potential gross income)
Income, Net	The income that is capitalized to estimate the property's value; calculated by subtracting the property's operating expenses (fixed expenses, maintenance expenses and reserves for replacement) from the effective gross income.
Income, Passive	As classified by the IRS, income that includes earning from rental property or a limited partnership.
Injunction	A court order prohibiting someone from performing an act, or commanding performance of an act.
Insurance, Title, Extended Coverage	Title insurance that cobers problems that should be discovered by an inspection of the property (such as encroachments and adverse possession), in addition to the problems covered by standard coverage policies.
Insurance, Title, Standard Coverage	Title insurance that protects against latent title defects (such as forged deeds) and undiscovered recorded encumbrances, but does not protect against problems that would only be discovered by an inspection of the property.
Interpleader	A court action filed by someone holding funds that two or more people are claiming. The holder turns the funds over to the court; the court resolves the dispute and delivers the money to the party who is entitled to it.
Intestate Succession	Distribution of the property of a person who died without a will to his or her heirs.
Judgement, Deficiency	A personal judgement entered against a borrower in favor of the lender if the proceeds from a foreclosure sale of the security property are not enough to pay off the debt.
Latent Defects	Defects that are not visible or apparent.
Lease, Fixed	A lease in which the rent is a set amount, and the landlord pays most or all of the operating expenses (such as utilities, taxes, insurance, and maintenance costs). Also called a flat lease, gross lease, or straight lease.
Lease, Graduated	A lease in which it is agreed that the rental payments will increase at intervals by a specified amount or according to a specified formula.
Lease, Percentage	A lease in which at least part of the rent is based on the tenant's monthly or annual gross sales.
Leasehold	A possessory interest in real property that has a limited duration, such as an estate for years or a periodic tenancy. Also called a less-than-freehold-estate.
Leverage	The effective use of borrowed money to finance an investment such as real estate.
License	Official permission to do a particular thing that the law does not allow everyone to do. 2. Revocable, non-assignable permission to use another person's land for a particular purpose.
Lien	A nonpossessory interest in real property, giving the holder the right to foreclose if the owner doesn't pay a debt owed to the holder; a financial encumbrance on the owner's title.
Lien Priority	The order in which liens are paid off out of the proceeds of a foreclosure sale.
Life Estate	A freehold estate that lasts only as long as a specified person lives. That person is referred to as the measuring life.
Life Estate Pure Autre Vie	Meaning "for another life;" a life estate in which the measuring life is someone other than the life tenant.
Life Tenant	Someone who owns a life estate; the person entitled to possession of the property during the measuring life.
Lis Pendensa	A recorded notice stating that there is a lawsuit pending that may affect title to the defendant's real estate.
Listing, Exclusive Agency	A listing agreement that entitles the brokerage to a commission if anyone other than the seller finds a buyer for the property during the listing term.
Listing, Exclusive Right to Sell	A listing agreement that entitles the brokerage to a commission if anyone-including the seller-finds a buyer for the property during the listing term.
Listing, Open	A nonexclusive listing, given by a seller to as many brokerages as he or she chooses. If the property is sold, a brokerage is entitled to a commission only if it was the procuring cause of the sale.
Loan, Amortized	A loan that requires regular installment payments of both principal and interest.
Loan, Construction	A loan to finance the cost of constructing a building, usually providing that the loan funds will be advanced in installments as the work progresses. Also called an interim loan.
Loan, Interest-Only	A loan that requires the borrower to pay only the interest during the loan term, with the principal due at the end of the term. Also called a term loan.
Loan, Take-out	Long-term financing used to replace a construction loan (an interim loan) when construction has been completed. Also called a permanent loan.
Loan-to-Value Ratio (LTV)	The relationship between the loan amount and either the sales price or the appraised value of the property (whichever is less), expressed as a percentage.
Maker	The person who signs a promissory note, promising to repay a debt.
Margin	In an adjustable-rate mortgage, the difference between the index rate and the interest rate charged to the borrower.
Market Price	1.The current price generally being charged for something in the marketplace. 2. The price actually paid for a property.
Material Fact	Information that has a substantial negative impact on the value of the property, on a party's ability to perform, or on the purpose of the transaction.
Merger	1. Uniting two or more separate properties by transferring ownership of all them to one person.2. When the owner of one parcel acquires title to one or more adjacent parcels.
Mortgage	An instrument that creates a voluntary lien on real property to secure repayment of a debt, and which does not include a power of sale, so it can only be foreclosed judicially; the parties are the mortgagor (borrower)and the mortgagee (lender).
Mortgage, Blanket	A mortgage that covers more than one parcel of property.
Mortgage, Budget	A loan in which the monthly payments include a share of the property taxes and insurance, in addition to principal and interest; the lender places the money for taxes and insurance in an impound account.
Mortgage, hard Money	A mortgage given to a lender in exchange for cash, as opposed to one given in exchange for credit.
Mortgage, Open-End	A loan that permits the borrower to reborrow the money she has repaid on the principal, usually up to the original loan amount, without executing a new loan agreement.
Mortgage, Package	A mortgage that is secured by certain items of personal property (such as appliances or carpeting)in addition to the real property.
Mortgage, Purchase Money	When a seller extends credit to a buyer to finance the purchase of the property, accepting a deed of trust or mortgage instead of cash. Sometimes called a carryback loan. 2.In a more general sense, any loan the borrower uses to buy the security property.
Mortgage, Reverse	An arrangement in which a homeowner mortgages the home to a lender in exchange for a monthly check from the lender.
Mortgage, Term	An interest-only loan, in which the borrower's regular payments during the loan term cover the interest on the loan, without paying any of the principal; the entire principal is due as a balloon payment at the end of the loan term.
Mortgage, Wraparound	A purchase money loan arrangement in which the seller uses part of the buyers payments to make the payments on an existing loan (called the underlying loan); the buyer takes title subject to the underlying loan, but does not assume it.
Mortgagee	A lender who accepts a mortgage as security for repayment of the loan.
Mortgagor	A property owner (usually a borrower) who gives a mortgage to another (usually a lender) as security for payment of an obligation.
Nonconforming Use	A property use that does not conform to current zoning requirements, but is allowed because the property was being used that way before the present zoning ordinance was enacted.
Notary Public	Someone who is officially authorized to witness and certify the acknowledgement made by someone signing a legal document.
Note, Installment	A promissory note that calls for regular payments of principal and interest until the debt is fully paid.
Note, Straight	A promissory note that calls for regular payments of interest only, so that the entire principal amount is due in one lump sum at the end of the loan term.
Notice, Constructive	Knowledge of a fact imputed to a person by law. A person is held to have this when s/he should have known the fact (because he/s could have learned it via reasonable diligence or an inspection of the public record),even if he didn't actually know it.
Novation	1.When one party to a contract withdraws and a new party is substituted, relieving the withdrawing party of liability. 2. The substitution of a new obligation for an old one.
Obsolescence, External	Loss in value resulting from factors outside the property itself, such as proximity to an airport. Also called economic obsolescence or external inadequacy.
Obsolescence, Functional	Loss in value due to inadequate or outmoded equipment, or as a result of a poor or outmoded design.
Option	A contract giving one party the right to do something, without obligating him or her to do it.
Origination Fee	A fee a lender charges a borrower upon making a new loan, intended to cover the administrative costs of making the loan. Also called a loan fee.
Partial Reconveyance	The instrument given to the borrower when part of the security property is released from a blanket deed of trust under a partial release clause.
Partnership, General	A partnership in which each member has an equal right to manage the business and share in the profits, as well as equal responsibility for the partnership's debts.
Partnership, Limited	A partnership made up of one or more general partners and one or more limited partners.
Percolation Test	A test that measures the rate at which water passes through soil, usually performed in order to assess whether soil on a property is suitable for a septic system.
Plottage	The increment of value that results when two or more lots are combined to produce greater value
Police Power	The constitutional power of state and local governments to enact and enforce laws for the protection of the public's health, safety, morals, and general welfare.
Possibility of Reverter	In a qualified (or limited) fee estate, the chance that the estate will revert back to the grantor automatically if the condition attached to the estate is violated.
Power of Attorney	An instrument authorizing one person (the attorney in fact) to act as another's agent, to the extent stated in the instrument.
Prepayment Penalty	A penalty charged to a borrower who prepays.
Principal	1.One who grants another person authority to represent him in dealings with 3rd parties.2.One of the parties to a transaction, as opposed to those who are involved as agents.3.In regard to a loan, the amount originally borrowed, as opposed to the interest
Procuring Cause	The real estate agent who is primarily responsible for bringing about a sale (for example, by negotiating the agreement between the buyer and seller).
Probate Court	A court that oversees the distribution of property under a will or intestate succession.
Profit	The right to enter another's land to remove something from the soil, such as oil, gas, or crops.
Proration	The process of dividing or allocating something (especially a sum of money or an expense) proportionately, according to time, interest, or benefit.
Progression, Principle of	An appraisal principle which holds that a property of lesser value tends to be worth more when it is located in an area with properties of greater value than it would be if located elsewhere.
Quiet Title Action	A lawsuit to determine who has title to a piece of property, or to remove a cloud from the title.
Real Estate Investment Trust (REIT)	A real estate investment business with at least 100 investors organized as a trust.
Redemption	1. When a defaulting borrower prevents foreclosure by paying the full amount of the debt, plus costs.2. When a mortgagor regains the property after foreclosure by paying what ever the foreclosure sale purchaser paid for it, plus interest and expenses.
Redlining	When a lender refuses to make loans secured by property in a certain neighborhood because of the racial or ethnic composition of the neighborhood.
Regression, Principle of	An appraisal principle which holds that a valuable property surrounded by properties of lesser value will tend to worth less than it would be in a different location.
Remainder	A future interest that becomes possessory when a life estate terminates, and that is held by someone other than the grantor of the life estate.
Remainderman	The person who has an estate in remainder
Rescission	When a contract is terminated and each party gives anything acquired under the contract back to the other party. (The verb form is rescind.)
RESPA	The Real Estate Settlement Procedures Act; a federal law that requires lenders to disclose certain information about closing costs to loan applicants.
Restriction, Private	A limitation imposed on property by a previous owner, a neighbor, or the subdivision developer.
Sale-Leaseback	A form of real estate financing in which the owner of industrial or commercial property sells the property and leases it back from the buyer; in addition to certain tax advantages, the seller/lessee obtains more cash through the sale than would normally.
Sales Comparison Approach	One of the three main methods of appraisal, in which the sales prices of comparable properties are used to estimate the value of the subject property. Also called the market data approach.
Setback Requirements	Provisions in a zoning ordinance that do not allow structures to be built within a certain distance of the property line.
Settlement Statement	A document that presents a final, detailed accounting for a real estate transaction, listing each party's debits and credits and the amount each will receive or be required to pay at closing. Also called a closing statement.
Ownership in Severalty	Ownership by a single individual.
Special Assessment	A tax levied only against the properties that have benefited from a public improvement(such as a sewer or a street light), to cover the cost of the improvement.
Specific Performance	A legal remedy in which a court orders someone who has breached to actually perform the contract as agreed, rather than simply paying money damages.
Spot Survey	With this report, the surveyor will find an old survey on the property and then go look at the property and update the original survey by adding new structures to the report.
Statute of Frauds	A law that requires certain types of contracts to be in writing and signed in order to be enforceable.
Statute of Limitations	A law requiring a particular type of lawsuit to be filed within a specified time after the event giving rise to the suit occurred.
Steering	Channeling prospective buyers or tenants to or away from particular neighborhoods based on their race, religion, national origin, or ancestry.
Stigmatized Property	When the property (or a neighboring property) was the site of a violent crime, suicide or other death, drug activity, or some other negative occurrence.
Sublease	When a tenant grants someone else the right to possession of the leased property for part of the remainder of the lease term. Also called a sandwich lease.
Subordination Clause	A provision in a mortgage or deed of trust that permits a later mortgage or deed of trust to have higher lien priority than the one containing the clause.
Substitution, Principle of	A principle of appraisal holding that the maximum value of a property is set by how much it would cost to obtain another property that is equally desirable, assuming that there would not be a long delay or significant incidental expenses involved in obtai
Surrender	The giving up an estate (such as a life estate or leasehold) before it has expired.
Survivorship, Right of	A characteristic of joint tenancy; surviving joint tenants automatically acquire a deceased joint tenant's interest in the property.
Tax, Progressive	A tax, such as the federal income tax, that imposes a higher tax rate on a taxpayer who earns a higher income.
Tax, Transfer	The tax paid by the seller at closing, based on the selling price of the property; also known as an excise tax in Washington, or stamp tax or documentary tax in other states.
Tax Credit	A credit that is subtracted directly from the amount of tax owed.
Tax-Deferred Exchange	A transaction in which a piece of property held for investment or used in a trade or business is traded for a piece of like-kind property, thus deferring tax on the gain; also called a tax-free exchange, or a Section 1031 exchange.
Tax Shelter	Any investment that generates income while also serving to shelter investors from tax liability on that income (such as real estate)
Tenancy, Joint	A form of concurrent ownership in which the co-owners have unity of time, title, interest, and possession and the right of survivorship.
Tenancy, Periodic	A leasehold estate that continues for successive periods of equal length (such as from week to week or month to month), until terminated by proper notice from either party. Also called a month-to-month tenancy
Tenancy at Sufferance	When a tenant (who entered into possession of the property lawfully) stays on after the lease ends without the landlord's permission.
Tenancy in Common	A form of concurrent ownership in which two or more persons each have an undivided interest in the entire property but no right of survivorship.
Tenement, Donimant	Property that receives the benefit of an easement appurtenant.
Tenement, Servient	Property burdened by an easement.
Time is of the Essence	A clause in a contract that means performance on the exact dates specified is an essential element of the contract; failure to perform on time is a material breach.
Title, Equitable	The vendee's interest in property under a land contract. Also called an equitable interest.
Lien, Construction	A lien on property in favor of someone who provided labor or materials to improve it. Also called a mechanic's lien or materialman's lien.
Lien, General	A lien against all the property of a debtor, rather than a particular piece of his or her property.
Title, Legal	The vendor's interest in property under a land contract.
Title, Marketable	Title free and clear of objectionable liens, encumbrances or defects, so that a reasonably prudent person with full knowledge of the facts would not hesitate to purchase the property.
Title Report, Preliminary	A report issued by a title company, disclosing the condition of the title to a specific piece of property, before the actual title insurance policy is issued.
Trust Account	A bank account, separate from a real estate brokerage's personal and business accounts, used to segregate trust funds from the brokerage's own funds.
Trustee	1. A person appointed to manage a trust on behalf of the beneficiaries.2. A neutral third party appointed in a deed of trust to handle the nonjudicial foreclosure process in case of default.
Trustor	The borrower in a deed of trust. Also called the grantor.
Truth in Lending Act (TILA)	A federal law that requires lenders and credit arrangers to make disclosures concerning loan costs (including the total finance charge and the annual percentage rate) to consumer loan applicants.
Undue Influence	Exerting excessive pressure on someone so as to overpower the person's free will and prevent him or her from making a rational or prudent decision; often involves abusing a relationship of trust.
Uniform Settlement Statement	A settlement statement required for any transaction involving a loan that is subject to the Real Estate Settlement Procedures Act (RESPA).
Unlawful Detainer	A summary legal action to regain possession of real property; especially, a suit filed by a landlord to evict a defaulting tenant.
Usury	Charging an interest rate that exceeds legal limits.
Value, Assessed	The value placed on property by the taxing authority (the county assessor, for example) for the purposes of taxation.
Value, Market (aka, Value in exchange, or Objective value)	The most probable price which a property should bring in a competitive and open marke under all conditions requisite to a fair sale, the buyer and seller acting prudently and knowledgeably and the price is not affected by undue stimulus.
Value, Utility	The value of a property to its owner or the a user. (A form of subjective value). Also called Value in use.
Variance	Permission (from the local zoning authority) to use property or build a structure in a way that violates the strict terms of the zoning ordinance.
Vendee	A buyer or purchaser; particularly, someone buying property under a land contract.
Vendor	A seller; particularly, someone selling property by means of a land contract.
Waste	Destruction, damage or material alteration of property by someone in possession who holds less than a fee estate (such as a life tenant or lessee), or by a co-owner.
Zoning	Government regulation of the uses of property within specified areas.
Mortgage, Adjustable-Rate (ARM)	A loan in which the interest rate is periodically increased or decreased to reflect changes in the cost of money.
Age, Effective	The age of a structure indicated by its condition and remaining usefulness.
Agency, Dual	When an agent represents both parties to a transaction, as when a real estate agent represents both the buyer and the seller.
Appraisal	An estimate or opinion of the value of a piece of property as of a particular date. Also called valuation.
Capitalization Rate	A percentage used in the capitalization process, believed to represent the proper relationship between the value of the property and the income it produces; the rate that would be a reasonable return on an investment of the type in question
Dedication	A voluntary or involuntary gift of private property for public use; may transfer ownership or simply create an easement.
Foreclosure, Judicial	The sale of property pursuant to court order to satisfy a lien.2. A lawsuit filed by a mortgagee or deed of trust beneficiary to foreclose on the security property when the borrower has defaulted.
Lien, Specific	A lien that attaches only to a particular piece of property.
Lienholder, Junior	A secured creditor whose lien is lower in priority than another's lien.
Mortgage, Balloon	A partially amortized mortgage loan that requires a large balloon payment at the end of the loan term.
Partition	The division of property among its co-owners, so that each owns part of it in severalty; this may occur by agreement of all the co-owners or by court order.
Affiliated Licensee	A real estate agent who is licensed under a particular brokerage firm.
Broker, Designated	A managing broker who is responsible for all the brokerage activities of a real estate firm.
Covenant Against Encumbrances	In a warranty deed, a promise that the property is not burdened by any encumbrances other than those that are disclosed in the deed.
Covenant of Seisin	In a warranty deed, a promise that the grantor actually owns the interest she is conveying to the grantee.
Deed, General Warranty	A deed in which the grantor warrants the title against defects that might have arisen before or during his period of ownership.
Deed, Special Warranty	A deed in which the grantor warrants title only against defects that may have arisen during his period of ownership.
Earnest Money	A deposit that a prospective buyer gives the seller as evidence of her good faith intent to complete the transaction.
Negative Amortization	When unpaid interest on a loan is added to the principal balance, increasing the amount owed.
Return on Investment (ROI)	The after-tax cash flow divided by the amount of equity in the property multiplied by 100%
Right of First Refusal	A right that gives the holder the first opportunity to purchase or lease a particular parcel of real property, should the owner decide to sell or lease it.
Sherman Act	A federal law prohibiting any agreement that has the effect of an unreasonable restraint on trade, such as price fixing and tie-in arrangements.
Subagent	A person that an agent has delegated authority to, so that that person can assist the agent in carrying out the principal's orders; the agent of an agent.
Liability, Vicarious	A legal doctrine stating that a principal can be held liable for harm to third parties resulting from an agent's actions.
Plat	A detailed survey map of a subdivision, recorded in the county where the land is located.
Reconciliation	The final step in an appraisal, when the appraiser assembles and interprets the data in order to arrive at a final value estimate. Also called correlation.
Torrens System	A system of land registration used in some states, which allows title to be verified without the necessity of a title search; registered land is free of all encumbrances or claims not registered with the title registrar.
PCBs	Cancer-causing chemicals that may leak from electrical equipment

Created by: Jennifer Hensley

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