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Real Estate
| Term | Definition |
|---|---|
| Voluntary lien | lien placed with owner's consent, like mortgage or trust deed |
| Involuntary lien | lien placed without consent of owner, like judgment |
| Judgment | court's final decision of rights or obligations of involved parties - once filed creates general lien |
| Mechanics Lien | lien placed on property based on work or furnished materials; filed for nonpayment of labor; takes priority over mortgage |
| Statutory Lien | placed on property by law, like real estate property taxes or special assessments (pay for public improvements like sidewalks) |
| Equitable lien | placed on property by written contract |
| Lis pendens | "suit pending"; pending lawsuit, litigation has been recorded; foreclosure wipes this out |
| Deficiency judgment | legal judgment given when deed is not enough to cover debt |
| Junior lien | lien below or after senior lien (senior lien is paid first) |
| General lien | lien on all property - real and personal |
| Specific lien | lien directly tied to property |
| Trust | arrangement where legal title is transferred from trustor to trustee |
| Progression | value of less expensive properties will increase when placed in area of more expensive properties |
| 4 elements of value | scarcity, transferability, utility, demand (STUD) |
| Capitalization (cap) rate | ratio between net operating income and its capital cost (original purchase price); rate of annual return |
| Tenancy by the entirety | joint tenancy only for married couples, created by will or deed; cannot sell interest; in case of divorce becomes tenants in common (& right of survivorship disappears); free from dead spouse's creditors |
| Gross Rent Multiplier (GRM) | purchase price of RE investment / annual rental income before expenses (taxes, insurance, utilities) |
| Economic Obsolescence | social or external deterioration (abandoned gas station next door, etc. - outside control) |
| Functional Obsolescence | functional problems or poor design (within control) |
| Financing | pledge of property to lender as security for payment of debt (mortgagor = borrower) |
| Lien | legal interest that creditor has in person's property |
| Lien theory | state gives lender lien interest in property |
| Title theory | lender holds title to property (lender owns property until debt is repaid) |
| Trust deed | security document used in most title theory states (trustor (borrower) signs deed of trust and gives legal title to trustee (title company/attorney), who holds title for beneficiary (lender) - borrower retains equitable title |
| Equitable title | right to possession with right to acquire legal title once a condition has been met |
| Reconveyance deed | once borrower (trustor) has made all payments to lender, trustee (title co/attorney) issues reconveyance deed to trustor; used in conjunction with trust deed to clear title of any liens pertaining to Note & trust deed |
| Discount point | = 1% of loan amount |
| Origination fee | fee paid to lender for processing loan application |
| Conventional loan | not part of gov't housing program; usually putting less than 20% down; may require PMI |
| Private mortgage insurance (PMI) | insures lender in case of default |
| Amortization | gradual reduction of loan debt thru periodic installment payments (full amortized = paid off at end of loan term; partially amortized = not fully paid off) |
| Promissory note | written contract between borrower and lender, providing evidence of indebtedness |
| Fannie Mae (Fed. National Mortgage Assoc.) | fed sponsored private corp. provides secondary market for housing mortgages |
| Ginnie Mae (Gov't National Mortgage Assoc.) | gov't part of secondary market deals in recycling VA and FHA mortgages, especially ones highly leveraged |
| Mortgage Broker | real estate financing professionals acting as intermediary between consumers and lenders during mortgage transactions; usually originates loans while lender funds them |
| Mortgage banker | direct mortgage lender; no middlemen (= broker and lender in one) |
| Buy down | obtaining a lower interest rate by paying additional points to the lender; results in lower payments which are easier to qualify for |
| Equity | interest or value remaining after payments of all liens on property (money left over after you pay off debt (if house sells for $300k and you owe $200k = $100k equity)) |
| Home equity line of credit (HELOC) | usually has set limit, can be used like credit card; payments are usually interest only and principal amount is due at the end |
| Adjustable rate mortgage (ARM) | mortgage with interest rate that changes over time in line with movements in the index; usually contains rate cap, which limits adjustments that can change over life of loan |
| Payment cap | Maximum adjustment amount for payment |
| Adjustment period | how often rate cap can be changed |
| Blanket mortgage | covers more than one parcel in a lot; may be negotiated by a developer |
| Release clause | provision found in blanket mortgage enabling mortgagor to obtain partial releases of specific parcels from the mortgage upon payment |
| Growing equity mortgage | rapid payoff mortgage; monthly payments increase which applies directly to principal, reduces loan term |
| Graduated payment mortgage | flexible payment plan; payments start low and increase each year for specific amount of years then level off for remaining term |
| Negative amortization | increase in outstanding amount b/c monthly payment does not cover monthly interest due; debt increases as payments are made |
| Open mortgage | borrower can pay off loan before end of term |
| Open end mortgage | allows borrower to secure more funds under original loan w/out redoing paperwork; like a credit card; construction loan is example |
| Construction loan | open end loan, receive money in series of draws, short term/interim loan; only for period of construction |
| Package mortgage | real and personal property; to cover purchase of property and furnishings |
| Shared appreciation loan | lender originates loan at a below market rate in return for share of appreciation once property is sold |
| Purchase money mortgage | extension of credit by seller to buyer (but can refer to any type of financing for purchase of real estate) |
| Participation loan | A) loan requiring interest + portion of profits as payment B) loan made/owned by more than one lender |
| Reverse mortgage | loan for ages 62+; no income qualifications; no monthly payments; loan is repaid when borrower no longer lives at property; if no existing loan, owner can receive monthly payment guaranteed for rest of life while they live in the house; sum or credit line |
| Straight note | mortgage where borrower pays interest due on principal during specified term; principal must be paid at end of term |
| Wraparound loan | refinancing method, new mortgage placed in secondary/subordinate position; new mortgage includes unpaid principal of 1st + additional sums; doesn't disturb 1st mortgage |
| Sale lease back | Simultaneous selling and leasing back of property |
| Acceleration clause | entire debt is due immediately in case of default under contract terms |
| Alienation clause | lender has option to require that balance of loan is immediately due and payable if property is sold or transferred; also called "due-on-sales" clause |
| Prepayment clause | allows borrower to pay debt before due-date |
| Prepayment penalty | charge imposed when borrower pays off loan early; cannot due so without paying fee - based on percentage of loan balance |
| Lock-in clause | borrower cannot repay loan prior to specified date |
| Subordination clause | rights of holder are secondary to future lien |
| Pyramiding | borrowing against one property to invest in another |
| Arbitrage | borrow money at one interest rate and lend at a higher interest rate |
| Syndication | pooling money for investment purposes |
| Security | joining with others for investments; profit is made from efforts of others; ex: stocks and bonds |
| General partnership | all partners must participate in management and are liable |
| Limited partnership | one general partner and other silent partners (only liable to their degree of investment) |
| Joint venture | joining of 2+ ppl in business transaction |
| Bundle of rights | right to: possession, control, enjoyment, exclusion, disposition |
| License | personal privilege to use land of another; can be revoked |
| Inverse condemnation | gov't fails to pay just compensation, owner then sues gov't |
| Escheat | property reverts to state ownership when person dies intestate and w/out heirs |
| Emblements | annual crops |
| Freehold estate | ownership is for undefined length of time |
| Fee simple defeasible/determinable | grantor places condition on fee simple estate in the deed |
| Life estate | interest in real property held for duration of life of designated person |
| Leasehold estate/Less than freehold estate | estate held by one who rents or leases |
| Reversionary right | owner has right to regain possession of property after lease has expired |
| Assignment | transfer of contract rights |
| Estate for years | leasehold interest in land for fixed period of time; tenancy for years (defined end point) |
| Periodic tenancy | estate from years to years- no fixed end point |
| Estate at will | can be ended at any time |
| Estate in sufferance | tenant wrongfully holds over; tenancy at sufferance |
| Gross lease | standard - rental agreement for use of property where tenant pays fixed amount |
| Net lease | tenant pays monthly fee + taxes, insurance and maintenance |
| Percentage lease | rental based on percentage of monthly or annual gross sales made on premises |
| Lease option | option to purchase property during term or at end of lease; owner is then optionor and tenant is optionee |
| Liquidated damage clause | determines in advance the measure of damages if a party breaches agreement (e.g., EMD) |
| General warranty deed | greatest protection, includes: seisin (right to convey title), against encombrances, quiet enjoyment, further assurance, warranty forever |
| Special warranty deed | grantor received title and property was not encumbered while grantor held title |
| Bargain and sale deed | grantor holds title and possession of property & no express warranties against encumbrances |
| Quitclaim deed | least protection; no covenants or warranties; conveys whatever interest the grantor had when deed is delivered |
| Homeowners' insurance policy | standardized package that covers fire, theft, public liability, and other common risks |
| Standard Title Coverage | Insures against: hidden defects (forged docs), conveyances by incompetent, incorrect marital statements, improperly delivered deeds |
| Extended Title Coverage | American Land Title Association (ALTA) includes: defects discovered by inspection, rights of parties in possession, examination of survey, unrecorded liens |
| Front Foot | linear foot (width) |
| Torrens Title System | Person acquires title only once registered; relies on physical title doc; owner submits written app to register title, app submitted to court clerk of county where RE located; once prove ownership, court enters order to register RE; issued cert of title |
| Valid Deed Needs | grantor: legal competency, grantee name, consideration, granting clause, habendum clause, accurate legal des, exceptions, notarized signature of grantor, delivery of deed & acceptance by grantee |
Created by:
teddydesign
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