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Real estate Vocab

Vocab

TermDefinition
1031 EXCHANGE Exchanging like-kind property for like-kind property, resulting in a deferral of capital gains tax; also called a tax-free exchange
1988 AMENDMENTS TO THE FAIR HOUSING ACT A federal law passed adding two new protected classes; Handicap and Familial Status
ABSTRACT Written history of property
ACCELERATION CLAUSE (Due on default clause) A mortgage clause where a lender calls a loan balance due and payable upon the happening of certain event, e.g., non-payment of mortgage
ACCOUNTING A client level duty relating to account of earnest money, actions, etc.
ACCRETION Gradual Build up of soil; person gains title to added land built up on property
ACCURATE A customer level duty relating to disclosure of all material defects (including latent or hidden defects) to any customer; e.g., leaky roofs, leaky basements, etc.
ACKNOWLEDGE Occurs when a document, such as a deed, is signed by the seller in the presence of a notary public, acknowledging that this is a voluntary act
ACTUAL NOTICE A situation where a person has actual or personal knowledge of a transaction, etc.
AD VALOREM Based on value
ADDENDUM A change made to an original contract; e.g., extending closing date on contract; also referred to as an amendment
ADJUSTABLE RATE MORTGAGE (ARM) A note where the interest changes periodically, thereby possibly changing all terms of the loan
ADMINISTRATOR Court appointed person to oversee estate distribution of deceased; only applies when one dies intestate (without a valid will)
ADVERSE POSSESSION Squatter`s Rights; can gain title by using someone else`s property continuously, openly and notoriously (without permission) for a certain period of time
AGENT One who is hired to represent another
ALIENATION Clause In a real estate context, this relates to the word transfer; e.g., in a mortgage, an alienation clause allows the lender to call the loan due and payable if a property is sold or transferred, in other words, making the loan non-assumable
AMENDMENT A change made to an original contract; e.g., extending closing date on contract; also referred to as an addendum
ANNUAL PERCENTAGE RATE (APR) Takes all costs of borrowing and expresses as a percentage
ANTICIPATION Looks to the future for value
APPRAISAL A document that gives an estimate of fair market value; for lenders, owners, etc.
APPURTENANCE A right, privilege or improvement that is permanently attached to the land
APPURTENANT EASEMENT A type of easement that runs with the land - tied to a particular property - given for the benefit of the particular land, e.g., shared driveway
ARMS-LENGTH AGREEMENT Refers to an agreement arrived at under no undue pressure
ARREARS At the end, e.g., May 1st house payment applies to April`s interest
ASSEMBLAGE The total value of combined properties exceeds total value of individual properties; also referred to as a plottage increment
ASSIGNMENT A transfer of rights in contract to another party
ASSIGNMENT OF LEASE A total transfer of rights in a lease where the original tenant and new tenant are both liable to the landlord for the lease payments
ASSUMPTION An assignment of a loan from the seller to the buyer where the buyer becomes primarily liable for debt and the seller remains secondarily liable
ATTORNEY-IN-FACT The title given to someone who has the power of attorney; can sign on others behalf
AVULSION Sudden loss of land
BARGAIN AND SALE DEED A type of deed transferring title from a seller to a buyer where the only promise made by the seller is the covenant of seizing (seller promises ownership of the property and the right to sell)
BENEFICIARY Legal holder of the note (lender)
BEQUEST Transfer of personal property through a will
BI-LATERAL A contract containing a promise for a promise; e.g., buyer and seller in selling and buying a house
BLANKET MORTGAGE Covers more than one property; used by developers, etc. Usually contains a partial release clause to release each property from the blanket mortgage as sold
BLOCKBUSTING The illegal act of making a profit by inducing owners to sell by telling them that persons of a protected class are moving into their neighborhood
BOND Creates the debt; a promise to pay back money that was borrowed; also referred to as a promissory note
BOUNDS Markers in a Metes and Bounds description; e.g., stake, well, etc.
BREACH Where a party to a contract does not perform according to the terms of the agreement
BUFFER ZONE An area separating two incompatible areas
BUYDOWN Similar to discount points; a buydown is where one pays extra money to a lender up front in order to lower the interest rate for the first several years of the loan term; helps buyer qualify for loan
BUYER`S GUIDE TO SETTLEMENT COSTS HUD booklet) A booklet that explains all about closing costs; must be given to buyer within 3 days of loan application
CAPITAL GAIN Profit made on an investment item, such as real estate
CAPITALIZATION APPROACH An approach to value best used on income producing properties such as shopping centers, apartment complexes, etc. This approach uses the net operating income and a capitalization rate to estimate the value. Also referred to as the income approach.
CARE A client level duty exercising knowledge and skill
CHAIN OF TITLE List of recorded documents
CHATTEL Another word for personal property; comes from the word "cattle"
CHRONOLOGICAL AGE Actual Age
CIVIL RIGHTS ACT OF 1866 Banned all racial discrimination
CIVIL RIGHTS ACT OF 1968 Banned discrimination in residential real estate on the basis of race, color, religion, national origin, sex, handicap, or familial status
CLOUD ON THE TITLE Any claim that impairs title; e.g. forged signatures or no signatures on deed, heirs of prior owner claiming title, etc.
COLOR OF TITLE Refers to a squatter`s rights to ownership once time period has been met
COMMERCIAL BANKS A type of lender that historically specialized in making business loans
COMMINGLING Mixing escrow money with personal or business funds; illegal
COMMUNITY PROPERTY Property acquired during marriage; spouses have equal interest in property
COMPETENT PARTIES An essential element of a contract; one must be of legal age and of sound mind
COMPETITION High profits attract competition
COMPETITIVE MARKET ANALYSIS What an agent uses in trying to find a value for a piece of property; a residential agent analyzes sold properties, currently for sale properties, and expired listing properties in an effort to determine a range of value for a particular piece of property
CONCURRENT ESTATES Where two or more own property together at the same time
CONDEMNATION The PROCESS used to take the property when the government exercises the right of Eminent Domain.
CONDITIONAL FEE Property deeded with conditions; e.g., must be used as a school. Also referred to as a defeasible fee
CONDOMINIUM A multi-unit building where the occupants each own their individual units and receive a deed granting ownership of the property
CONFIDENTIALITY A client level duty relating to maintaining confidential information of the client
CONFORMITY Properties should conform to the neighborhood to maintain the greatest value
CONSIDERATION An item of value; one must have consideration to have a valid deed or contract
CONSTANT MORTGAGE PAYMENT PLAN A payment plan where the total principal and interest payment remains the same each month; amount toward principal and interest changes monthly
CONSTRUCTION LOAN A type of loan where the borrower typically pays a down payment of 20%, thus receiving an 80% loan from the lender; there is no government involvement in this type of loan
CONSTRUCTIVE EVICTION In leasing, a situation where the landlord constructively evicts the tenant by not maintaining the premises; e.g., no heat in the wintertime; lessee or tenant must actually leave the premises and is released from lease obligations
CONSTRUCTIVE NOTICE Occurs when a document is recorded on the public record at the county courthouse; a person is responsible for knowing facts because of recording on the public record
CONTRACT FOR DEED Owner financing where the seller keeps the warranty deed for the entire duration of the contract for deed; the seller retains legal title. The buyer gets possession and receives an equitable title upon the signing of the contract.
CONTRIBUTION Value of improvement is equal to what it adds to total value
CONVENTIONAL LOAN A multi-unit building where the people who occupy the units own stock in a corporation, thereby receiving a right to lease the unit from the cooperative itself
CORPORATION A type of syndication where owners can limit their liability; a corporation who purchases real estate takes title in severalty
COST APPROACH An approach to value best used on special purpose properties, such as churches and hospitals; the approach values a property by determining the current replacement cost, less depreciation, plus the current land value
COUNTER-OFFER A rejected offer and a new offer made back to the other party
CUBIC FOOT METHOD A way to determine current replacement cost by taking the cubic footage (length times width times height) of a property times a cost per cubic foot
CURTESY A life estate interest a husband receives in property upon wife`s death, regardless of debts owned on the property
DEBT SERVICE Buyer backs out of a contract, is release from the contract but the seller keeps the earnest money is liquidated or pre-arranged damages
DECREASING RETURNS Money spent on improvement does not add at least that much or more to the total value
DEDICATION Voluntarily giving land to government; typically done by a developer
DEED IN LIEU OF FORECLOSURE An agreement whereby the lender receives the deed to a property from the defaulting borrower rather than foreclosing; this is still referred to as an involuntary alienation; this does help save the borrowers credi
DEED OF RECONVEYANCE A document verifying that a trust deed loan has been paid in full; should be recorded on the public record, thus releasing the property from the trust deed
DEFEASANCE CLAUSE (Null and Void Clause) A mortgage clause that voids the security upon the loan being paid off
DEFEASIBLE FEE Property deeded with conditions; e.g., must be used as a school. Also referred to as a conditional fee
DEFICIENCY JUDGMENT A personal judgment against the defaulting borrower for any other debts owed and not satisfied by a foreclosure sale
DELIVERY AND ACCEPTANCE Title is transferred from seller to buyer when the deed is delivered and accepted
DEMAND An element of value; must be wanted
DEMISE A transfer of rights in real property through a lease
DEPARTMENT OF VETERAN`S AFFAIRS DVA or VA or GI; established by the government in the 1940`s, the VA guarantees loans made by lenders in case of default by the buyers
DESCENT Occurs when one dies intestate; probate judge then determines who receives the property of the deceased, such as children, parents, other family members, etc. In essence, judge determines who property descends or goes to
DESCRIPTION An essential element of a contract; must have an adequate description of the real estate; generally a legal description
DEVELOPER Improves the lots
DEVISE Transfer of real property through a will
DEVISEE Receiver of real property through a will
DISCLOSURE A client level duty relating to disclosing to a client all materials facts regarding the transaction
DISCOUNT POINTS Extra money paid up front in cash to a lender in order for the buyer to receive a lower interest rate; in essence, pre-paid interest; 1 point = 1 percent; discount points are always based on the loan amount
DISCOUNT RATE Interest rate banks pay to borrow money
DISCOUNTING Selling a note for less than face value
DOMINANT TENEMENT Land benefited or in favor of the easement
DOWER A life estate interest a wife receives in property upon husband`s death, regardless of debts owned on the property
DOWNZONING Going from a more active use to a less active use; e.g., multi-family to single family
DUAL AGENCY A situation where a broker represents both buyer and seller at the same time; must have written prior permission from both parties and informed consent
EARNEST MONEY Good faith money
EASEMENT Gives someone else the right to use a part of your property while you still retain the ownership rights
EASEMENT BY PRESCRIPTION Using someone else`s property continuously, openly and notoriously for a certain period of time - the adverse user then gains an easement to use that land
EASEMENT IN GROSS A type of easement not tied to any land but instead that is owned by a person or company, e.g., utilities, railroads
ECONOMIC LIFE Number of years item is profitable; economic life is shorter than the physical life
ECONOMIC OBSOLESCENCE A form of depreciation due to problems outside the property lines; e.g., owning a house next to a factory or sewage treatment plant; also referred to as external obsolescence
EFFECTIVE AGE Apparent age based on condition; generally less than chronological age
EFFECTIVE GROSS INCOME The annual gross income for a property less a vacancy rate; used with the income approach
EMBLEMENTS Growing crops in the field; allows the seller to come back and harvest after the sale
EMINENT DOMAIN The RIGHT of the government to take private property for public good. The property owner is paid compensation for the property.
ENCROACHMENT Trespassing; an improvement or appurtenance that extends across the property line; e.g., fences, tree limbs, etc.
ENCUMBRANCE Something that burdens or limits your title to a property, such as a lien or deed restriction (or) rights held by someone else in your property, such as through an easement
EQUAL CREDIT OPPORTUNITY ACT Bans credit discrimination based on: Race, Color, Religion, National origin, Sex, Age & Marital status
EQUITABLE REDEMPTION The right to redeem property before the foreclosure sale
EQUITABLE TITLE What a buyer receives upon buyer and seller signing a contract to purchase a property; allows buyer to receive deed (or legal title) at a later date, usually at closing
EROSION Gradual wearing away of soil; owner loses title to land eroded away
ESCALATION CLAUSE A lease clause allowing a landlord to pass increased costs along to tenant; i.e., can raise rent to tenant if landlord`s costs go up
ESCALATOR CLAUSE A mortgage clause allowing a lender to increase the interest rate in the event of a late payment or default
ESCHEAT The right of the government to take private property when an owner dies intestate (no will) and has no heirs; also applies if owner abandons the property
ESCROW ACCOUNT A separate account for holding other peoples` money; e.g., a broker holding earnest money in escrow or a lender holding pre-paid taxes and insurance in escrow
ESTATE The degree, quantity, nature and extent of ownership interest in real property.
ESTATE FOR YEARS A lease with a definite beginning and ending date
ESTATE IN REMAINDER A life estate whereby the property goes to a third party (named by the grantor) when the grantee (life tenant) dies
ESTATE IN REVERSION A life estate whereby the property reverts back to the grantor when the grantee (life tenant) dies
ESTOPPEL CERTIFICATE States the current loan balance on a note; used especially when notes are sold to others
EXCEPTIONS AND RESERVATIONS CLAUSE A clause in a deed that lists any encumbrances the buyer is subject to; many times, referred to simply as the reservations clause
EXCLUSION ON HOMES Only for owner-occupied properties; a person can write off up to $250,000 of capital gains if single, $500,000 if married; must have been your personal residence for 2 of the past 5 years; can use exclusion repeatedly, not just once in a lifetime
EXCLUSIVE AGENCY LISTING A type of listing where the owner and one broker are authorized to sell and receive a commission
EXCLUSIVE RIGHT TO SELL LISTING A type of listing where only one broker is authorized to sell and receive a commission
EXECUTED The phase in a contract where the promises have been completed; e.g. contract closing
EXECUTOR One named in will to carry out will
EXECUTOR`S DEED Type of deed used by the executor to transfer property to those named in will
EXECUTORY The phase in a contract where the promises have been made but not completed; e.g. contract pending
EXPRESSED Refers to a contractual obligation where all parties have clearly stated their intentions
EXTENDED POLICY A title insurance policy that may cover more things than a standard policy, such as unrecorded liens, etc.
EXTERNAL OBSOLESCENCE A form of depreciation due to problems outside the property lines; e.g., owning a house next to a factory or sewage treatment plant; also referred to as economic obsolescence
FAIR A customer level duty relating to treating all customers fairly
FAMILIAL STATUS A person with a child under 18; a protected class under the 1988 Amendments to the Fair Housing Act
FEDERAL DEPOSIT INSURANCE CORPORATION Government agency that insures deposits in banks and savings & loans
FEDERAL HOME LOAN MORTGAGE CORPORATION FHLMC, Freddie Mac: An organization in the secondary mortgage market that primarily buys conventional loans from savings & loans
FEDERAL HOUSING ADMINISTRATION FHA; Established by the government in the early 1930`s, FHA insures loans made by lenders in case of default by the buyers
FEDERAL NATIONAL MORTGAGE ASSOCIATION FNMA, Fannie Mae: The largest organization in the secondary mortgage market that buys notes from lenders, thus providing liquidity for lenders; even though a private organization, FNMA raises money by selling government guaranteed bonds; buys all loans
FEE SIMPLE The maximum rights one can have in owning real estate; also called fee simple absolute.
FIDUCIARY Loyalty and trust; what an agent owes to a principal (client)
FIRST MORTGAGE First lender to record a mortgage is first in rights
FIXTURE Going from personal to real property; item that was once personal property but is now attached
FREEHOLD ESTATES What we usually think of as OWNERSHIP. There is no definite ending date and it is for at least a lifetime.
FRONT FOOTAGE Linear (straight) feet along the street line; in essence, the width of your property along the street
FULLY AMORTIZED NOTE A loan where the payments apply to principal and interest; the entire principal loan balance is totally paid off over the term
FUNCTIONAL OBSOLESCENCE A form of depreciation due to problems inside the property lines; does not function the way modern properties do; e.g., outhouses, pumps for water, etc.
FURTHER ASSURANCE A promise made by the seller in a general warranty deed assuring the buyer that the seller will provide or sign documents in the future if necessary to help prove buyer`s title
GENERAL AGENT A person who represents someone else in several areas on an ongoing basis; e.g., property manager to owner; also salesperson to broker GENERAL ASSESSMENT
GENERAL ASSESSMENT Tax on land plus improvements; pays for school, police and fire protection, etc.
GENERAL LIEN A lien that applies to all of one`s property, real and personal
GENERAL WARRANTY DEED The instrument used to transfer title from a seller to a buyer whereby seller gives buyer greatest protection; seller promises the covenant of seizin, quiet enjoyment, against encumbrances, further assurance and warranty forever
GEODETIC SURVEY SYSTEM A form of legal description that uses benchmarks to identify land
GOOD FAITH ESTIMATE OF SETTLEMENT COSTS A preliminary estimate of expected closing costs given to buyer within 3 days of loan application
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION GNMA, Ginnie Mae: An organization in the secondary mortgage market that buys notes from local lenders; government corporation under HUD; buys notes in depressed areas of country; primarily buys FHA & VA loans
GOVERNMENT SURVEY SYSTEM A form of legal description that describes land in America using meridians (north and south) and base (east and west) lines; every six miles range and tier lines are drawn to form townships; also referred to as the rectangular survey system
GRADUATED LEASE A lease where the payments can go up or down, but are pre-determined
GRADUATED PAYMENT NOTE A note where payments start out lower than normal, then go up yearly typically for 5 years, then leveling off for the remaining term; the FHA245 is a type of graduated payment note; sometimes can result in negative amortization
GRANTEE The person receiving title to real property; typically the buyer
GRANTING CLAUSE Words of conveyance in a deed; using property wording and verbiage in a deed
GRANTOR The person transferring title to real property; the seller
GROSS INCOME The possible annual gross income for a property; used with the income approach
GROSS LEASE A lease where the landlord pays taxes, assessments, insurance, etc.
GROSS RENT MULTIPLIER (GRM); This is a form of the income approach used to estimate the value of a rental property. The gross rent multiplier is computed by taking a rental properties sale price and dividing by the rent charged.
GROUND LEASE A lease for ground; usually long-term; e.g., farmers, gas stations, etc.
GROWING EQUITY MORTGAGE A type of mortgage where predetermined amounts, in addition to regular principal and interest payments, apply to principal each month, thus growing equity faster than normal
HABENDUM In a deed, contains just these words: "To have and to hold"
HANDICAP A physical or mental impairment; a protected class under the 1988 Amendments to the Fair Housing Act
HIGHEST AND BEST USE The use of a property that provides greatest net return on land
HOMESTEAD A law that protects a family`s home from creditors; does not apply to real estate taxes or home mortgage
HONEST A customer level duty relating to being honest with customers
HYPOTHECATE The borrower retains item used as security for loan; e.g., house or car loan
IMPLIED Refers to a contractual obligation that is created by one`s actions
INCOME APPROACH An approach to value best used on income producing properties such as shopping centers, apartment complexes, etc. This approach uses the net operating income and a capitalization rate to estimate the value. Also referred to as the capitalization approach.
INCOME TAX LIEN A lien for non-payment of income tax to the IRS (Internal Revenue Service)
INCREASING RETURNS Money spent on improvement adds at least that much or more to the total value
INDEX LEASE A lease where the payments can go up or down but are based on some type of index, such as the consumer price index
NSTALLMENT CONTRACT Owner financing where the seller keeps the warranty deed for the entire duration of the contract for deed; thus the seller retains legal title. The buyer gets possession and receives an equitable title upon the signing of the contract for deed,
INSURANCE COMPANIES Primarily make large loans
INTEREST Rental charge for using someone else`s money
INTESTATE Dying without a valid will
JOINT TENANCY A form of ownership where two or more parties own property together; carries the right of survivorship (when an owner dies, the ownership interest goes to the surviving owners, not the heirs of the deceased)
JONES VS MAYER In 1968, the United States Supreme Court rules that one cannot discriminate racially under any circumstances
JUDGMENT LIEN A lien for personal debts; covers all real and personal property
UDICIAL FORECLOSURE Where a mortgagee/lender has to go to court to foreclose upon breach of contract
JUNIOR MORTGAGE Any mortgage other than a first; also called a second mortgage
LAND A spot on the earth that goes down to the center of the earth and up to infinity
LAND CONTRACT Owner financing where the seller keeps the warranty deed for the entire duration of the contract for deed; thus the seller retains legal title. The buyer gets possession and receives an equitable title upon the signing of the contract for deed,
LEASEHOLD ESTATES What we usually think of as RENTING or LEASING. It is for a definite period of time, i.e., a limited duration.
LEGAL OBJECT An essential element of a contract; must be for a lawful purpose
LEGAL TITLE Refers to party who actually is in possession of warranty deed
LESSEE Receiver of lease (tenant)
LESSOR Giver of lease (landlord)
LEVERAGE Using borrowed money to make money
LICENSE Personal permission to use someone else`s property; does not encumber title as an easement does
LIEN THEORY States that honor this recognize that a homeowner has title; the lender has mortgage lien against property
LIENS A money encumbrance against a property
LIFE ESTATES A property that is deeded to someone for their life or the life of another
LIMITED PARTNERSHIP An arrangement where one can invest money with a general partnership; the limited partner is normally only liable for their investment; basically a financial backer; not involved in day to day running of business
LIQUIDATED DAMAGES A clause in a contract allowing for the earnest money to be forfeited to the seller if a buyer backs out of a contract; also called pre-arranged damages
LIS PENDENS Latin for "pending litigation or action"
LITTORAL Property bordering a lake or ocean
LOAN ORIGINATION FEE A fee charged by a lender for originating and processing a loan
LOAN TO VALUE RATIO The percent the loan is to the total value; e.g., a loan of $80,000 on a property valued at $100,000 would result in an 80% loan to value ratio
LOCK-IN COMMITMENT A lender guarantees a borrower a fixed interest rate and a fixed amount of discount points for a certain time period
LOT AND BLOCK SYSTEM A form of legal description which lists a lot #, block#, subdivision, county and state; recorded on a plat map; used primarily for new subdivisions
LOYALTY (Fiduciary) A client level duty relating to doing what is in your client`s best interest
MARGIN Basically, a lenders` profit; the margin is added to an index in an adjustable rate mortgage to come up with the actual interest rate charged to the borrower; the margin remains the same for the life the loan
MARKET DATA APPROACH An approach to value best used on residential property and vacant land; uses comparable properties to estimate values
MASTER LAND PLAN Plan for a cities future growth
MECHANIC`S LIEN A lien designed for people who make improvements on property and are wrongfully not paid; e.g., contractors, sub-contractors and material vendors who are not paid for work performed or materials supplied
METES Length measurements in a Metes and Bounds description; e.g., feet and inches
METES AND BOUNDS A form of legal description that gives a physical description of the property
MISREPRESENTATION False statement of a material fact
MORTGAGE A document where property is used as security for the debt
MORTGAGE BANKER Acts as a middleman between lender and borrower; mortgage bankers actually make the loans to the borrowers; earns money by servicing loans
MORTGAGE BROKER Earns money by bringing lenders and borrowers together; normally does not actually make loans
MORTGAGE CONTINGENCY CLAUSE A clause in a contract where the buyer is obligated to buy only if loan approval is obtained; usually buyer gets earnest money back if mortgage is denied
MORTGAGE LIEN A voluntary lien where one uses property as security for a loan
MORTGAGE RELEASE A document verifying that a mortgage loan has been paid in full; should be recorded on the public record, thus releasing the property from the mortgage
MORTGAGEE The receiver of a mortgage (lender)
MORTGAGEE`S POLICY (lender) A title insurance policy covering a lender for the outstanding loan balance
MORTGAGOR The giver of a mortgage (borrower)
NEGOTIABLE NEGOTIABLE
NET LEASE A lease where the tenant pays all or part of taxes, assessments, insurance, etc. Taxes paid by tenant would be tax deductible for the tenant.
NET LISTING Normally illegal; this is where the real estate commission is the sale price less the seller`s required proceeds
NET OPERATING INCOME NOI; the annual gross income for a property less a vacancy rate and operating expenses; used with the income approach
NON-CONFORMING USE Before zoning; similar to a grandfather clause; allows continued use of a property that is technically in violation of the current zoning law because the owner was using the property a certain way before the zoning change
NON-DISTURBANCE CLAUSE A clause in a lease and lending document allowing for continuation of a lease even if the property is foreclosed on
NON-JUDICIAL FORECLOSURE In a trust deed state, the trustee sells the property and pays of f the beneficiary (lender) without having to go to court
NOTORIOUS Without permission (hostile); this is a requirement for a person claiming rights to a property either through adverse possession or an easement by prescription
NOVATION New contract takes place of old contract; e.g., an assumption of a loan with a release of liability given by the lender to the seller
OBEDIENCE (Performance) A client level duty following instructions of a client
OFFER In a real estate transaction, the buyer makes the first offer
OFFER AND ACCEPTANCE An essential element of a contract; the parties must agree on the exact same terms
OPEN END MORTGAGE Line of Credit; can borrow again and again on the same loan; e.g., home equity loan; works like a credit card
OPEN LISTING A type of listing where everyone is authorized to sell and receive commission, including the owner; the only one who gets paid is the one who is the procuring cause (found the buyer)
OPEN MARKET OPERATIONS Federal Reserve transactions in buying and selling securities
OPERATING COSTS Costs incurred in a property management situation, such as utilities and repairs; does not include vacancies
OPERATING EXPENSES Used with the income approach, the operating expenses include all operating costs, such as utilities, maintenance, salaries, etc. The one expenses NOT considered is the debt service (mortgage payments).
OPTION A possibility contract where one party is bound to perform but the other party is not
OPTIONEE Receiver of option (possible buyer)
OPTIONOR Giver of option (seller)
OSTENSIBLE Refers to a contractual obligation that is created by what appears to be; similar to implied
PACKAGE MORTGAGE Uses both real and personal property as security
PARTIAL RELEASE CLAUSE A clause in a blanket mortgage allowing each property to be released from the blanket mortgage as sold; however, loan balance must be reduced
PARTIALLY AMORTIZED NOTE A loan where the payments apply to principal and interest; however, the principal loan balance is only partially paid down, thus usually requiring a balloon payment at the end of the loan term
PARTNERSHIP A type of syndication where the partners have unlimited liability and generally share in profits, losses, taxes, etc.
PARTY WALL A situation where two structures share the same wall; e.g., a duplex
PERCENTAGE LEASE A lease where the rent is based on a percentage of sales; normally used in retail leases
PERIODIC TENANCY A lease that runs from period to period; e.g., a month-to-month lease
PERSONAL PROPERTY Anything that is easily movable; e.g., camera, grill, etc.
PERSONAL SERVICES CONTRACT A non-assignable contract; e.g., listing contracts
PHYSICAL DETERIORATION A form of depreciation due to peeling paint, sagging floors, etc.
PHYSICAL LIFE Number of years item is physically sound
PLANNED UNIT DEVELOPMENT (PUD) Diverse uses of land in one area; requires special zoning (referred to as overlay, cluster or density zoning)
PLAT MAP Used with the Lot and Block System, this map is a diagram of a subdivision
PLEDGE The lender retains item used as security for loan; e.g., stocks, bonds, etc.
PLOTTAGE INCREMENT The total value of combined properties exceeds total value of individual properties; also referred to as assemblage
POLICE POWER Keeping things in order; e.g., zoning and building codes fall under police power
POWER OF ATTORNEY A written document authorizing one to sign legal documents on behalf of another
PRE-ARRANGED DAMAGES A clause in a contract allowing for the earnest money to be forfeited to the seller if a buyer backs out of a contract; also called liquidated damages
PRE-PAYMENT PENALTY CLAUSE A mortgage clause where a lender charges a penalty if the loan is paid off early
PRINCIPAL / CLIENT One who hires an agent for representation
PROBATE COURT A special court for handling estates upon one`s death. Court determines who gets what property and in what amounts if the deceased died intestate (without a valid will)
PROMISSORY NOTE Creates the debt; a promise to pay back money that was borrowed; also referred to as a bond
PROPERTY MANAGEMENT AGREEMENT An agreement between an owner and property manager that shows basic duties of the property manager; generally this agreement does not contain a vacancy rate
PROPERTY TAX LIEN A lien for non-payment of real estate taxes; this always takes priority getting paid off at a foreclosure sale
PROTECTIVE PERIOD CLAUSE Protects broker in case negotiations extend past the expiration date of listing; this clause is normally standard in an agency agreement
PUFFING Subjective opinion; e.g., this home has a beautiful view; not a law violation
PUR AUTRE VIE (for another`s life) A life estate where the grantee owns a property based on someone else`s life
PURCHASE MONEY MORTGAGE Owner financing; typically where a seller carries a second mortgage on behalf of the buyer
QUANTITY SURVEY METHOD A way to determine current replacement cost by pricing the rebuilding item by item; every brick, board, etc.
QUIET ENJOYMENT A promise assuring no third party claims; e.g., in a lease, a tenant receives the right of quiet enjoyment from a landlord, thus relieving tenant from having to worry about another party claiming rights to that same space
QUIET TITLE SUIT Court action to clear a cloudy title; e.g., ownership disputes, adverse possession claims, encroachments, etc.
QUITCLAIM DEED A type of deed transferring title from a seller to a buyer where NO promises are made by the seller. The seller says IF I own it, but I`m not saying I do, I give you whatever rights I MAY have. This deed is typically used to quiet cloudy titles.
REAL ESTATE INVESTMENT TRUST (REIT) A type of syndication that is basically a giant mutual fund for real estate investments
REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA) A federal law whose purpose is to inform borrowers ahead of time total closing costs so borrowers can shop around to get the best deal
RECAPTURE Allows owners of investment property to deduct a percentage of the cost of the property each year from their taxable income; also referred to as tax depreciation
RECONCILIATION (Correlation) The final step in the appraisal process; this reconciles differences from among three different approaches to value to arrive at a final dollar amount for the appraisal
RECTANGULAR SURVEY SYSTEM A form of legal description that describes land in America using meridians (north and south) and base (east and west) lines; every six miles range and tier lines are drawn to form townships; also referred to as the government survey system
REDEMPTION Redeem = buy back; defaulting borrower has a certain time period to buy property back at foreclosure sale price plus any other costs owed
REDLINING Lenders refusing to loan in certain areas based upon protected classes
REGULATION Z A federal law pertaining to lenders having to disclose all loan costs to borrowers; also referred to as Truth-In-Lending Laws
REGULATIONS Government regulations relating to subdivisions; e.g., most cities require streets, sewers, easements, etc.
REMAINDERMAN Third party who receives fee simple title upon death of the grantee (life tenant)
REPLACEMENT COST Using the cost of similar materials
REPRODUCTION COST Using the exact replica cost
RESCIND In a contract, this returns the parties to status quo; way they were before contract signed
RESERVATION A form of life estate where the seller sells the property but retains (reserves) a life estate interest in that same property for the seller`s lifetime
RESERVE CONTROLS Percent of funds banks must keep on hand
RESTRICTIONS A private agreement contained in a deed that restricts the use of a property; e.g., certain types of fences or roofs required. Also referred to as restrictive covenants or deed restrictions.
RESTRICTIVE COVENANTS A private agreement contained in a deed that restricts the use of a property; e.g., certain types of fences or roofs required. Also referred to as deed restrictions
REVERSE ANNUITY MORTGAGE RAM; A type of mortgage where the mortgagee (lender) pays the mortgagor (borrower) a fixed amount every month; usually for retired people with home completely paid off
REVERSION Upon expiration of a lease, the property goes back to original lessor (landlord); also, a life estate in reversion is where once a grantee (life tenant) dies, the property goes back to original grantor
RIGHT OF FIRST REFUSAL A contract where one is given the first opportunity to buy if a property is put up for sale
RIGHT OF RESCISSION Allows for a party to rescind or back out of a contract. On many loans, a borrower has a 3-day right to rescind (back out). However, there is no right of rescission with a real estate sales contract.
RIGHT OF SURVIVORSHIP Found in joint tenancy, when one owner dies, the ownership interest passes to the surviving owners
RIPARIAN Property bordering a flowing waterway; e.g., river or stream
SALE / LEASEBACK This is used when owner needs capital (money); owner sells property to a buyer and then leases the same property back from the purchaser
SAVINGS & LOANS A type of lender with their largest investment in residential home loans
SCARCITY An element of value; must be a limited supply
SCHEDULE OF EXCEPTIONS A title insurance clause stating that certain items are excluded from coverage; e.g., government regulations such as zoning
SECOND MORTGAGE Any mortgage other than a first; also called a junior mortgage
SECONDARY MORTGAGE MARKET A place where loans already made by local lenders are bought and sold; the purpose is to provide liquidity for lenders
SECTION A portion of ground measuring one mile square; also one square mile; contains 640 acres; every acre contains 43,560 square feet
SECURITIES LICENSE Required if one sells investments to the general public, such as REIT`s (Real Estate Investment Trust)
SEIZIN Seized of title; A term where seller promises ownership of property and has the right to sell
SEPARATE PROPERTY Property acquired before marriage; individual spouses retain sole ownership interest
SERVIENT TENEMENT Land burdened by the easement
SETBACK LINES Amount of space between lot line and building line
SEVERALTY A situation where one person only owns the property; also, how corporations take title
SEVERANCE Going from real to personal property; e.g., cutting down a tree
SHARED APPRECIATION MORTGAGE SAM; A type of mortgage where the lender shares in appreciation plus interest; a form of a participation loan
SHERIFF`S DEED Transfers property to buyer at foreclosure sale; e.g. for non-payment of mortgage
SHERMAN ANTI-TRUST LAWS A federal law that prohibits groups of brokers setting a fixed price for services
SIGNED An essential element of a contract; must have signatures of all parties to contract
SPECIAL AGENT A person who represents someone else one time in one area; e.g., broker to seller
SPECIAL ASSESSMENT Property tax for improvements that benefit certain properties; e.g., sewers and sidewalks
SPECIAL WARRANTY DEED A type of deed transferring title from a seller to a buyer. However, the seller only makes promises regarding ownership, encumbrances, etc. during the time period in which the seller owned the property, no promises before that.
SPECIFIC LIEN A lien that applies only to one specific property
SPECIFIC PERFORMANCE SUIT Court action to force completion of a contract
SPOT ZONING Changing the zoning of one particular spot; normally for public good
SQUARE FOOT METHOD A way to determine current replacement cost by taking the square footage (length times width) of a property times a cost per square foot; appraisers use outside dimensions in determining square footage
SQUARE FOOTAGE Length times width
STANDARD POLICY A title insurance policy that covers forged documents, undisclosed heirs, etc.
STATE THE PROBLEM The first step in the appraisal process; this defines the purpose of the appraisal
STATUTE OF FRAUDS A law that requires certain documents to be in writing to be enforceable; e.g., real estate sales contracts, deeds, leases over 1 year
STATUTORY REDEMPTION The right to redeem property after the foreclosure sale
STEERING Directing people toward areas based upon their protected class
STRAIGHT LINE METHOD DEPRECIATION A method of depreciation where one depreciates equal amounts each year; what appraisers use
STRAIGHT NOTE (Term Loan) A loan where the payments apply to interest only; usually short-term; e.g., used on construction loans
SUB-AGENCY An agency situation where one agent is authorized to use another agent to represent the client; historically, this is where two brokers, the listing and selling broker, both represent the seller; buyer is a customer and is unrepresented
SUBDIVIDER Divides land into lots for sale
SUBJECT TO An assignment of a loan from the seller to the buyer where the seller remains solely liable for debt
SUBLEASING A partial transfer of rights in a lease where just the original tenant remains liable for the lease payments; the new tenant is a lessee of the original tenant
SUBORDINATION CLAUSE A mortgage clause where lenders change the lien priority that is different than recording date; lender waives their right in favor of another
SUBROGATION Signing over rights in a claim to a title insurance company in return for getting paid off
SUBSTITUTION A property is only worth what one can get another one for just like it
SUIT TO PARTITION A lawsuit where one of the owners institutes court action to force sale of property by all parties
SYNDICATION Two or more people investing together
TAX ASSESSOR A public official who appraises property for tax purposes to determine only the assessed value.
TAX BASE Total of all assessed values
TAX DEED Transfers property to buyer at foreclosure sale for non-payment of taxes
TAX DEPRECIATION Allows owners of investment property to deduct a percentage of the cost of the property each year from their taxable income; also referred to as recapture
TAX-FREE EXCHANGE Exchanging like-kind property for like-kind property, resulting in a deferral of capital gains tax; also called a 1031 exchange
TENANCY AT SUFFERANCE A lease where the tenant stays over without permission; landlord suffers
TENANCY AT WILL A lease where the tenant does have permission to occupy but nothing is in writing; e.g., a landlord continuing to accept rent from a tenant even after expiration of the original lease
TENANCY BY THE ENTIRETIES Very similar to joint tenancy, with the difference being that the owners must be husband and wife
TENANCY IN COMMON An individual interest in group ownership; the ownership interest can be unequal, the parties all share possession, and the heirs of the deceased receive the property upon the death of one of the owners
TESTATE Dying with a valid will
TESTATOR Deceased person who had made a will
TIME IS OF THE ESSENCE CLAUSE States that all terms of the contract must be completed in a timely manner
TIME SHARING Fee simple ownership to a unit for a set period of time each year; interval ownership
TITLE INSURANCE Insures the title to a particular piece of property
TITLE THEORY States that honor this recognize that generally, the lender has title until debt is paid off
TOWNSHIP A portion of ground measuring 6miles square; also 36 square miles
TRADE FIXTURES Item installed by a commercial tenant for business use; e.g. display cases
TRANSFERABILITY An element of value; seller must be able to give to buyer
TRUST ACCOUNT Separate account for holding other people`s money; usually held by broker; also referred to as escrow account
TRUST DEED A document where property is used as security for the debt
TRUSTEE The receiver of a trust deed; a neutral third party whose primary job is to foreclose if payments are not made to the lender or beneficiary
TRUSTOR The giver of the trust deed (borrower)
TRUTH-IN-LENDING LAWS A federal law pertaining to lenders having to disclose all loan costs to borrowers; also referred to as Regulation Z
UNENFORCEABLE A contract that may not be enforceable in court; e.g., an oral contract
UNIFORM SETTLEMENT STATEMENT (HUD - 1 Form) Lists actual final closing costs for seller and buyer
UNI-LATERAL A contract containing a promise for an action; e.g., a lease with an option to buy
UNIT-IN-PLACE METHOD A way to determine current replacement cost by pricing the rebuilding by units; concrete, roof, etc.
USURY LAWS Set the maximum interest rate that can be charged by law; states have their own unique usury laws
UTILITY An element of value; must be useful
VALID AND ENFORCEABLE A contract containing all the essential elements, including being in writing
VALUE DEPRECIATION An item goes down in value due to age, wear and tear, etc.
VARIANCE After zoning; this is a small deviation in the current zoning law that still conforms to the over all general plan for the area. Variances are generally granted for things like setback requirements, front footage requirements, etc.
VENDEE Buyer of property; in a contract for deed, buyer is one who gets possession of property and pays "installments" to the seller until the contract is paid off
VENDOR Seller of property; in a contract for deed, seller is one who retains legal title
VIEW EASEMENT A type of easement for viewing across another`s property
VOID A contract with no legal effect; e.g., one of the parties not of sound mind
VOIDABLE A contract that can be voided by one of the parties; e.g., contract signed by a minor, under duress, or due to misrepresentation
WARRANTY FOREVER A promise made by the seller in a general warranty deed that says if the seller provides faulty title, the seller will return the purchase price money back to the buyer; in essence, a money back guaranty
WATER TABLE Difference between earth`s surface and percolating water
WRAPAROUND MORTGAGE A financing arrangement where typically a 2nd lender assumes the note of a 1st lender on behalf the buyer, advances the buyer additional funds to purchase the property with the buyer then making payments on the entire new mortgage made to 2nd lender
WRIT OF EXECUTION A procedure where a sheriff seizes property and sells to satisfy a judgment
WRITING An essential element of a contract; contract doesn`t have to be in writing, but generally does to be enforceable (an oral contract generally cannot be enforced in court)
ZONING The regulation of structures and uses of property within designated areas
COOPERATIVE A multi-unit building where the people who occupy the units own stock in a corporation, thereby receiving a right to lease the unit from the cooperative itself