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Cali RE Principles
| Term | Definition |
|---|---|
| Real property | Land, attachments and appurtenances. |
| Personal property | Anything that's not real property. Its main characteristic is movability. |
| Appurtenance | A right incidental to the land that's transferred with it. |
| Riparian rights | The water rights of a landowner whose land borders on a stream or other flowing water (river). Only reasonable use of the water is allowed. |
| Littoral property | Land bordered by a stationary body of water, such as a lake or a pond. |
| Appropriative rights | Water rights established by obtaining a gov't permit and not based on ownership of land beside a body of water. |
| Lateral support | The support that a piece of land receives from the surrounding land. |
| Subjacent support | The support that a piece of land receives from the underlying earth. |
| Emblements | Crops, such as wheat, produced annually through the labor of the cultivator. |
| Trade fixtures | Personal property attached to real property by a tenant for use in his trade or business. Trade fixtures are removable by the tenant. |
| Metes and bounds | A system of land description in which the boundaries of a parcel of land are described by reference to monuments, courses and distances. |
| Monument | A visible marker (natural or artificial) used in a survey or a metes and bounds description to establish the bounderies of a piece of property. |
| Point of beginning | The starting point in a metes and bounds description; a monument or a point described by reference to a monument. |
| Course | In a metes and bounds description, a direction, stated in terms of a compass bearing. |
| Distance | In a metes and bounds description, the length of a boundary, measured in any convenient unit of length. |
| Gov't survey | A system of land description in which the land is divided into squares called townships and each township is, in turn, divided into 36 one square mile or 640 acres. |
| Principle meridian | In the gov't survey system, the main north-south line in a particular grid, used as the starting point in numbering the ranges and township tiers. California's principle meridians are the Humboldt, Mt. Diablo and San Bernardino meridians. |
| Range | In the gov't survey system, a strip of land six miles wide, running north and south. |
| Township | The intersection of a range and a township tier in the gov't survey system. It's a parcel of land that's six miles square and contains 36 sections. |
| Section | One square mile of land, containing 640 acres. There are 36 sections in a township. |
| Gov't lot | In the gov't survey system, a parcel of land that's not a regular section. |
| Recorded map | The system of description used for subdivided land. The properties within a subdivision are assigned lot numbers on a plat map, which is then recorded. The location and dimensions of a particular lot can be determined by consulting the recorded plat. |
| Air lot | A parcel of property above the surface of the earth, not containing any land. For example, a condominium unit on the third floor of the building occupies an air lot. |
| Estate | An interest in land that is or may become possessory. |
| Freehold estate | A possessory interest that has an indeterminable duration. |
| Less-than-freehold (leasehold) estate | A possessory interest with a limited duration. |
| Fee simple absolute | The highest and most complete form of ownership, which is of potentially infinite duration. |
| Fee simple defeasible | A fee simple estate that's subject to termination (returning ownership to the grantor or her heirs) if a specified event occurs or a condition is not met. Also called a defeasible fee. |
| Life estate | A freehold estate whose duration is measured by the lifetime of one or more persons. |
| Waste | Permanent damage to real property caused by the party in possession, harming the interests of other estate holders. |
| Term tenancy (estate for years) | A leasehold estate with a fixed term. |
| Periodic tenancy | A leasehold estate that's renewed at the end of each period unless one party gives notice of termination. Also called periodic estate. |
| Tenancy at will | A leasehold estate that may arise after a periodic tenancy or a term tenancy terminates. Also called an estate at will. |
| Ownership in severalty | Sole ownership of property. |
| Tenancy in common | Joint ownership where there's no right of survivorship. |
| Joint tenancy | Joint ownership with right of survivorship. |
| Right of survivorship | The right by which, upon the death of a co-owner, the surviving co-owner(s) acquire his interest in the property. |
| Community property | Property owned jointly by a married couple (in California and other community property states). |
| Corporation | A form of business entity owned by its shareholders; the shareholders have a limited liability. |
| Limited liability company | A form of business entity that offers limited liability and tax benefits. |
| Real estate investment trust | A real estate investment business that qualifies for tax advantages if certain requirements are met. |
| Condominium | A property that's been developed so that individual unit owners have separate title to their own units, but share ownership of the common elements as tenants in common. |
| Cooperative | A property that's owned by a corporation and tenanted by shareholders in the corporation who have proprietary leases for their units. |
| Alienation | The transfer of title, ownership or an interest in property from one person to another. Alienation may be voluntary or involuntary. |
| Deed | A written instrument that, when properly executed, delivered and accepted, conveys title or ownership of real property from grantor to the grantee. |
| Grant deed | The deed most commonly used in California. It carries two warranties: the covenant of the right to convey and the covenant against encumbrances caused by the grantor. |
| Quitclaim deed | A deed that conveys and releases any interest in a piece of real property that the grantor may have. It contains no warranties of any kind, but does transfer any right, title or interest the grantor has at the time the deed is executed. |
| Acknowledgement | A formal declaration made before an authorized official, such as a notary public or county clerk, by a person who has signed a document; he states that the signature is genuine and voluntary. |
| Will | The written declaration of an individual that designates how her estate will be disposed of after death. |
| Interstate | When a person dies without leaving a valid will, he dies intestate. |
| Escheat | The reversion of property to the state when a person dies without leaving a valid will and without heirs entitled to the property. |
| Adverse possession | A means by which a person may acquire title to property by using it openly and continuously without the owner's permission for the required statutory period. |
| Dedication | When a private owner voluntarily or involuntarily donates real property to the public. |
| Eminent domain | The power of gov't to take (condemn) private property for public use, upon payment of just compensation to the owner. |
| Condemnation | The act of taking private property for public use under the power of eminent domain. |
| Accession | Any addition to real property from natural or artificial causes. |
| Actual notice | Actual knowledge of a fact, as opposed to knowledge imputed by law (constructive notice). |
| Constructive notice | When a person is held by law to have known a fact, whether or not she actually knew it; she had the opportunity to discover the fact in question by searching the public record. |
| Title search | An inspection of the public record to determine all claims and interests affecting a piece of property. |
| Chain of title | A complete history of all of the recorded interests in a piece of real property. Also, the series of deeds that transferred title from one owner to another. |
| Abstract of title | A condensed history of the recorded interests in a piece of real property. |
| Title report | A report issued after a title search by a title insurance company, listing all defects and encumbrances of record. |
| Wild deed | A recorded deed that's outside the property's chain of title. |
| Encumbrance | A nonpossessory interest in real property held by someone other than the property owner. |
| Voluntary lien | A security interest given to a creditor voluntarily. |
| Involuntary lien | A security interest given to a creditor by operation of law. |
| General lien | A lien that attaches to all of a debtor's property. |
| Specific lien | A lien that attaches only to one particular piece of property. |
| Mechanic's lien | A lien on property in favor of someone who provided labor or materials to improve it. Also called a construction lien or materialman's lien. |
| Judgement lien | A lien held by someone who has won a judgment in a lawsuit, attaching to property owned by the person who lost the lawsuit. |
| Easement | The right to use another's land for a particular purpose. |
| Easement appurtenant | An easement that burdens one parcel of land (the servient tenement) for the benefit of another parcel (the dominant tenement). |
| Easement in gross | An easement that benefits a person or business rather than a parcel of land. |
| Easement by implication | An easement created automatically because it's necessary for the enjoyment of the benefited land. |
| Prescriptive easement | An easement created by continuous use for the statutory period, without the landowner's permission. |
| Merger | When both the dominant and servient tenements are acquired by one owner, resulting in termination of the easement. |
| Abandonment | Termination of an easement as a result of action by the holder that shows an intent to abandon it. (In most cases, mere nonuse is not abandonment.) |
| Profit | The right to take something (such as timber) from another's land. |
| License | Revocable permission to enter another's land, which does not create an interest in the property. |
| Encroachment | A physical object that intrudes onto another's property, such as a tree branch or a fence. |
| Nuisance | An activity or condition on nearby property that interferes with a property owner's reasonable use and enjoyment of his property. |
| CC&Rs | Covenants, conditions and restrictions; private restrictions imposed by a subdivision developer. |
| Condition | A restriction on the use of land, the violation of which may result in forfeiture of title. |
| Covenant | A landowner's promise to refrain from using her land in a certain manner. |
| Police power | The power of state governments to regulate for the protection of the public health, safety, morals and general welfare. |
| General plan | A comprehensive, long-term plan of development for a community, which is implemented by zoning and other laws. |
| Zoning | A method of controlling land use by dividing a community into zones for different types of uses. |
| Nonconforming use | A formerly legal use that doesn't conform to a new zoning ordinance, but is nonetheless allowed to continue. |
| Variance | An authorization to deviate from the rules in a zoning ordinance, granted because strict enforcement would cause undue hardship for the property owner. |
| Conditional use permit | A permit that allows special use, such as a school or a hospital, to operate in a neighborhood where it would otherwise be prohibited by zoning. |
| Rezone | An amendment to a zoning ordinance; a property owner who feels his property has been zoned improperly may apply for a rezone. |
| Building codes | Regulations that set minimum standards for construction methods and materials. |
| Subdivision | The division of one parcel of land into two or more parcels. Also, a residential neighborhood created by a developer who subdivided the land. |
| Eminent domain | The government's power to take private property for public use, upon payment of just compensation to the owner. |
| Condemnation | The process of taking property pursuant to the power of eminent domain. |
| Taking | When the gov't uses the power of eminent domain to acquire private property for a public use, it's called "a taking" and the former owner is constitutionally entitled to just compensation for the property taken. |
| General real estate taxes | Taxes levied against real property annually to pay for general gov't services. They're based on the value of property taxed (ad valorem). |
| Special assessment | A tax levied against property that that benefits from a local improvement project, to pay for the project. |
| Documentary transfer tax | A tax levied when a piece of real property is sold. It's based on the selling price of the property. |
| Contract | An agreement between two or more competent persons to do or not do certain things in exchange for consideration. |
| Capacity | The ability to enter into a legally binding contract. A person must be mentally competent and at least 18 years of age to have the capacity to contract. |
| Mutual consent | The agreement of both parties to the terms of the contract, effected by offer and acceptance. |
| Offer | A communication that shows the willingness of the person making it (the offeror) to enter into a contract and that has definite and certain terms. |
| Acceptance | A communication showing the willingness of the offeree to be bound by the terms of the offer. |
| Counteroffer | A qualified acceptance. Technically, it's a rejection of the offer, with a new offer made on slightly different terms. |
| Fraud | The misrepresentation of a material fact to someone who relies on the misrepresentation as the truth in deciding whether to enter into contract. |
| Undue influence | Using excessive persuasion and a position of trust or authority to pressure a vulnerable person to enter into an inequitable contract or take some other inadvisable action. |
| Duress | Compelling someone to enter into a contract with the use or threat of force or constraint. |
| Consideration | Something of value exchanged by the parties to a contract; either a benefit to the party receiving it or a detriment to the party offering it. |
| Statute of frauds | A state law that requires certain types of contracts (including most contracts related to real estate transactions) to be in writing and signed. |
| Valid | When a contract has all of the required elements and is enforceable in court. |
| Void | When a contract lacks an essential element, so that it has no legal force or effect. |
| Voidable | When one of the parties can choose to rescind the contract, because of lack of capacity, fraud, undue influence or distress. |
| Unenforceable | When a contract cannot be enforced in a court of law because its contents cannot be proved, or it's voidable by the other party or the statute of limitations has expired. |
| Rescission | When a contract is terminated and any consideration given is returned, putting the parties as nearly as possible back into the position they were in prior to entering into the contract. |
| Cancellation | When a contract's terminated but previous contractual acts are unaffected. |
| Assignment | When one party transfers her rights and obligations under the contract to another party, but remains secondarily liable. |
| Novation | When one party's completely replaced with another, or one contract's completely replaced with another and all liability under the original contract ends. |
| Damages | Losses that a person suffers because someone else has breached a contract or otherwise failed to fulfill a legal obligation. |
| Compensatory damages | Amount court orders the party who breached a contract to pay the other party, to compensate her for losses suffered due to the breach and put her in the position she would have been in if the breaching party had fulfilled the terms of their contract. |
| Liquidated damages | Amount the parties agree in advance will serve as full compensation if one of them defaults. |
| Specific performance | A remedy for breach of contract in which the court orders the defaulting party to perform as agreed in the contract. |
| Tender | An unconditional offer by one of the parties to perform his part of the agreement, made when it appears that the other party's going to default. |
| Listing agreement | An agreement between a property owner and a real estate broker, in which the owner hires the broker to find a buyer who's ready, willing and able to buy the owner's property on the owner's terms. |
| Open listing | A type of listing that requires the property owner to pay the brokerage firm a commission only if one of the firm's agents is the procuring cause of the sale. |
| Procuring cause | The brokerage firm primarily responsible for bringing about a sale; generally, the firm whose agent actually found the buyer. |
| Exclusive agency listing | Listing requires the property owner to pay the brokerage firm a commission when the property's sold during the listing term by anyone other than the seller. If seller finds the buyer, the firm is not entitled to a commission. AKA seller reserved listing. |
| Exclusive right to sell listing | Listing requires property owner to pay the brokerage firm a commission if the property's sold during listing term, no matter who sells the property. |
| Net listing | A type of listing in which the commission's any amount received from the sale over and above the "net amount" required by the seller. |
| Safety clause | Provision in a listing agreement that obligates seller to pay commission if property's sold within a certain period after listing expires to someone the broker (or one of the broker's agents) negotiated w/during the listing period. AKA protection clause. |
| Buyer representation agreement | An agreement between a prospective property buyer and a real estate broker, in which the buyer hires the broker to find suitable property to purchase. |
| Purchase agreement | A contract between a buyer and a seller of real property. AKA a purchase and sale agreement, a contract for sale or a deposit receipt. |
| Contingency clause | A contract clause which provides that unless some specified event occurs, the contract is null and void. |
| Land contract | A contract for the sale of real property in which the buyer (vendee) pays the purchase price in installments. The vendee takes possession of the property, but the (vendor) retains legal title until the full price has been paid. |
| Option agreement | An agreement that gives one party the right to buy or lease the other party's property at a set price for a certain period of time. |
| Lease | A contract in which one party (the tenant or lessee) pays the other (the landlord or lessor) rent in exchange for the possession of real estate. AKA rental agreement. |
| Unlawful detainer | A court action brought by a landlord to evict a tenant. |
| Principal | The person who authorizes an agent to act on her behalf. |
| Agent | A person authorized to represent another in dealings w/third parties. |
| Third party | A person seeking to to deal with the principal through an agent. |
| Fiduciary | Someone who holds a special position of trust and confidence in relation to another. |
| Agency by ratification | When the principal gives approval to unauthorized actions after they're performed, creating an agency relationship after the fact. |
| Agency by estoppel | When the principal allows a third party to believe an agency relationship exists, so that the principal is estopped (legally precluded) from later denying the agency. |
| Agency by implication | When one person's conduct leads another to believe that they have an agency relationship, so that the supposed agent owes agency duties to the misled party. |
| Actual authority | Authority the principal grants to the agent either expressly or by implication. |
| Apparent Authority | Where no actual authority has been granted, but the principal allows it to appear that the agent's authorized and therefore is estopped from denying the agency. AKA ostensible authority. |
| Material facts | Information that could affect a party's decisions in a transaction, such as information that has a substantial negative impact on the value of the property, or that indicates one of the parties may not be able to perform as agreed. |
| Secret profit | Any profit an agent receives as a result of the agency relationship and doesn't disclose to the principal. |
| Listing agent | The real estate agent who has a listing agreement w/the seller and represents the seller in the transaction. |
| Selling agent | The real estate agent who writes and presents the offer to purchase that the seller accepts. If the buyer has an agent, the selling agent's the buyer's agent. In a dual agency, the selling agent's also the listing agent. |
| Cooperating agent | Any agent other than the listing agent who attempts to find a buyer for a property. |
| In-house transaction | A sale in which the listing salesperson and the selling salesperson both work for the same brokerage firm. |
| Employee | A person who works under the direction and control of the employer. |
| Independent contractor | A person who contracts to do a job for another, but retains control over how he will out the task, instead of having to follow detailed instructions. |
| Federal Reserve Board | The body that regulates commercial banks and sets and implements the federal government's monetary policy; AKA "The Fed". |
| Discount rate and federal funds rate | Two interest rates controlled by the Fed that have an effect on market interest rates. |
| Reserve requirements | The percentage of customer deposits that a commercial bank must keep on reserve with a Federal Reserve Bank. |
| Open market operations | The Fed's activities in buying and selling gov't securities. |
| Primary market | The finance market in which individuals obtain loans from banks, savings and loans and other lenders. |
| Secondary market | The finance market in which mortgage loans are bought and sold as investments. |
| Promissory note | A written promise to repay a debt. |
| Mortgage | A two-party security instrument that gives the lender (mortgagee) the right to foreclose on the security property by judicial process if the borrower (mortgagor) defaults. |
| Deed of trust | A three-party security instrument that includes a power of sale clause, allowing the trustee to foreclose nonjudicially if the borrower (trustor) fails to pay the lender (beneficiary) or otherwise defaults. |
| Acceleration clause | A provision in loan documents that gives the lender the right to demand immediate payment in full if the borrower defaults. |
| Alienation clause | A provision in a security instrument that gives the lender the right to accelerate the loan if the borrower transfers the property. AKA due-on-sale clause. |
| Assumption | When a borrower sells the security property to a buyer who agrees to take on personal liability for repayment of the existing mortgage or deed of trust. |
| Defeasance clause | A provision giving the borrower the right to regain title to the security property when the debt is repaid. |
| Certificate of discharge | The document a mortgagee gives to the mortgagor when the mortgage debt is paid off, releasing the property from the lien. AKA satisfaction of mortgage. |
| Deed of reconveyance | The document a trustee gives the trustor when the debt secured by a deed of trust is paid off, releasing the property from the lien. |
| Land contract | A contract between a real estate seller (vendor) and a buyer (vendee), in which the seller retains legal title to the property while the buyer pays off the purchase price in installments. |
| Mortgage company | A type of lender that isn't a depository institution and that makes loans to sell on the secondary market or on behalf of large investors. |
| Mortgage loan originator | An individual who, for compensation or gain, takes a residential mortgage application or negotiates the terms of a residential mortgage loan. |
| Point | One percent of the principal amount of a loan. |
| Origination fee | A fee that a lender charges to compensate for the administrative costs of processing a loan. |
| Discount points | A fee that a lender may charge to increase the upfront yield on the loan. |
| Truth in Lending Act (TILA) | A federal consumer protection law that requires lenders to give borrowers information about loan costs. |
| TRID rule | Federal regulations that combine the disclosure requirements of the Truth in Lending Act and the Real Estate Settlement Procedures Act. |
| Loan estimate | A form the TRID rule requires a lender to give to a loan applicant, providing detailed information about the loan and estimates of the closing costs. |
| Annual percentage rate (APR) | The relationship of the total cost of a loan to the loan amount, expressed as an annual percentage. |
| Total interest percentage (TIP) | The total amount of interest that the borrower will pay over the loan term, expressed as a percentage of the loan amount. |
| Loan underwriting | Evaluating the creditworthiness of the buyer and the value of the property to determine if a loan should be approved. |
| Credit score | A number that's calculated by applying a statistical model to a loan applicant's credit report, used as an indication of how likely the applicant is to default on the proposed loan. |
| Automated underwriting (AU) | Analysis of a loan application w/a computer program that makes a preliminary recommendation for or against approval. |
| Stable monthly income | Income that satisfies the lender's standards of quality and durability. |
| Income ratios | Percentages used to determine whether a loan applicant's stable monthly income's sufficient. |
| Housing expense to income ratio | A percentage that measures a loan applicant's proposed monthly mortgage payment against her stable monthly income. |
| Debt to income ratio | A percentage that measures all of a loan applicant's monthly obligations (including the proposed mortgage payment) against stable monthly income. |
| Net worth | An individual's total personal assets minus his total personal liabilities. |
| Fully amortized loan | A loan that's fully paid off by the end of its term by means of regular principal and interest payments. |
| Loan-to-value ratio (LTV) | The relationship between the loan amount and the property's appraised value or sales price, whichever is less. |
| Secondary financing | A second loan to help pay the downpayment or closing costs associated with the primary loan. |
| Fixed-rate loan | A loan repaid over its term at an unchanging rate of interest. |
| Adjustable-rate mortgage (ARM) | A loan that allows the lender to periodically adjust the loan's interest rate to reflect changes in market interest rates. |
| Index | A published rate used as a reliable indicator of the current cost of money. |
| Margin | The difference between the index value on an ARM and the interest rate the borrower is charged. |
| Negative amortization | When unpaid interest is added to a loan's principal balance. |
| Conventional loan | Any institutional loan that isn't insured or guaranteed by a gov't agency. |
| Nonconforming loan | A conventional loan that doesn't meet the underwriting standards of Fannie Mae or Freddie Mac. |
| PMI | Private mortgage insurance; insurance designed to protect lenders from the greater risks of high-LTV conventional loans. |
| MIP | The mortgage insurance premiums required for FHA-insured loans. |
| Certificate of Eligibility | The document that establishes a veteran's eligibility to apply for a VA home loan. |
| Notice of Value | The document issued when a home is appraised in connection w/ the underwriting of a VA loan. |
| Residual income | The amount of monthly income a VA borrower has left over after deducting monthly expenses and taxes. |
| Predatory lending | Lending practices used by unscrupulous lenders and mortgage brokers to take advantage of unsophisticated borrowers. |
| Mortgage fraud | Using deception to obtain a mortgage loan by defrauding the lender. |
| Market value | The most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently & knowledgeably & assuming the price isn't affected by undue stimulus. |
| Arm's length transaction | A sale in which there's no pre-existing family or business relationship between the parties. |
| Highest and best use | The most profitable use of the property; a legal and feasible use that provides the greatest net return over time. |
| Principle of change | Real property is in a constant state of change. It goes through a four-phase life cycle of integration, equilibrium, disintegration and rejuvenation. |
| Principle of substitution | No one will pay more for a piece of property than they would have to pay for an equally desirable substitute. |
| Sales comparison approach | The method of appraisal in which the appraiser compares the subject property to recently sold comparable properties. |
| Cost approach | The method of appraisal in which the appraiser estimates the replacement cost of the building, deducts depreciation and adds the value of the site. |
| Depreciation | Loss in value due to any cause. Depreciation is curable if the cost of correcting it could be recovered in the sales price when the property's sold. |
| Physical deterioration | Depreciation caused by wear and tear or damage. Curable physical deterioration is called deferred maintenance. |
| Functional obsolescence | Depreciation caused by functional inadequacies or out-moded design. |
| External obsolescence | Depreciation caused by forces outside the property, such as neighborhood decline or proximity to nuisances. Also called economic obsolescence. |
| Income approach | The method of appraising property in which net income's converted into value using a capitalization rate. |
| Effective gross income | A property's potential gross income, minus a vacancy factor. |
| Net operating income | A property's effective gross income, minus operating expenses. Also called net income. |
| Capitalization rate | The rate of return an investor wants on her investment in the property. |
| Economic rent | The rent that a property would earn on the open market if it were currently available for rent, as distinguished from the rent it's actually earning now (the contract rent). |
| Closing | The final stage of a real estate transaction, in which documents are signed and delivered and funds are transferred. Also called settlement. |
| Escrow | An arrangement in which money and documents are held by a third party on behalf of a buyer and a seller until their transaction is ready to close. |
| Escrow agent | A third party who holds money and documents in trust and carries out the closing process. Also called a closing agent. |
| Escrow instructions | A contract between the buyer and the seller that tells the escrow agent how to proceed and states the conditions each party must fulfill before the transaction can close. |
| 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. |
| Debit | A charge payable by a party, either to the other party or to a third party. |
| Credit | A charge payable to a party, either by the other party or by a third party. |
| Impound account | Funds on deposit with a lender to pay the property taxes, insurance premiums and other recurring costs when due. Also called a reserve account or an escrow account. |
| Prorate | To divide and allocate an expense proportionately, according to time, interest, or benefit, determining what share of it a particular party's responsible for. |
| Prepaid interest | Interest on the buyer's new mortgage loan that the lender requires to be paid at closing, covering the period from the closing date through the last day of the month. |
| Loan estimate | A form that residential lenders are required to give to loan applicant's, providing detailed information about the proposed loan and an estimate of the closing costs. |
| Closing disclosure | A form that residential lenders (or closing agents) are required to give the parties before closing, listing their actual closing costs. |
| Income | Any economic benefit realized by a taxpayer that isn't excluded from income by the tax code. |
| Deduction | An expense that can be used to reduce taxable income. |
| Marginal tax rate | The tax rate that applies to the last dollar that a taxpayer earns. |
| Basis | A taxpayer's investment in his property. |
| Initial basis | The amount of a taxpayer's original investment in a property; how much it cost to acquire the property. Also called the cost basis or the unadjusted basis. |
| Adjusted basis | The initial basis plus capital expenditures and minus allowable depreciation deductions. |
| Realization | A gain or loss is realized when it's separated from the asset; this separation generally occurs when the asset's sold. |
| Recognition | A gain is said to be recognized when it's taxable; it's recognized in the year it's realized, unless recognition's deferred by the tax code. |
| Installment sale | A sale in which less than 100% of the sales price is received in the year of sale. |
| Involuntary conversion | When property is converted to cash w/o the voluntary action of the owner, as when it's destroyed, stolen, lost or condemned and the owner receives insurance proceeds or a condemnation award. |
| Depreciation deductions | Deductions from the taxpayer's income to allow the cost of an asset to be recovered over a period of years. These are allowed only for depreciable property that's held for the production of income or used in a trade or business. |
| Repair expenses | Money spent on repairs to keep property in ordinary, efficient operation conditions. |
| Capital expenditures | Money spent on improvements to property, which add to its value or prolong its economic life. |
| Tax-free exchange | When like-kind property is exchanged, allowing taxation of the gain to be deferred. Also called a Section 1031 exchange. |
| Boot | Something given or received in a tax-free exchange that isn't like-kind property, such as cash. |
| Blockbusting | Attempting to induce homeowners to list or sell their homes by predicting that members of another racial or ethnic group, or people w/some type of disability, will be moving into the neighborhood. AKA panic selling. |
| Steering | Channeling prospective buyers or tenants toward or away from particular neighborhoods based on their race, religion or natural origin in order to maintain or change the character of the neighborhoods. |
| Redlining | Refusing to make a loan because of the racial or ethnic composition of the neighborhood in which the security property is located. |
| Familial status | Refers to those who have children (under 18 years old) living with them. It also includes someone who's pregnant or is in the process of securing custody of a child. |
| Disability | A physical or mental impairment that substantially limits one or more major life activities. |
| Public accommodation | A nonresidential place that's owned, operated or leased by a private entity and is open to the public, if operation of the facility affects commerce. |
| Price fixing | The cooperative setting of prices by competing firms, in violation of antitrust laws. |
| Group boycott | An agreement between two or more business competitors to exclude another competitor from fair participation in business activities. |
| Tie-in arrangement | An agreement in which a seller agrees to sell one product, only on the condition that the buyer also purchases a different product. |
| Market allocation | Two competing businesses cannot agree to limit what products they market or who they market them to. |
| Plans | Detailed technical drawings of the vertical and horizontal cross-sections of a building, used as a guide in its construction. |
| Specifications | Text that accompanies the plans of a building, describing the types of materials and the standards of workmanship to be used in the construction. |
| Investment | An asset that's expected to generate a return (a profit). |
| Portfolio | The mix of investments (plus cash reserves) owned by an individual or a company. |
| Liquidity | An asset's ability to be converted into cash quickly. |
| Appreciation | When an asset increases in value. Appreciation may be due to inflation, or it may occur because the asset is becoming scarcer or demand for it's increasing. |
| Equity | The difference between the value of a property and the liens against it. |
| Leverage | Using borrowed money to invest in an asset. If the asset appreciates, the investor earns money on the borrowed funds as well as the funds she invested. |
| Cash flow | Spendable income; the amount of money left after all of the property's expenses have been paid, including operating costs, mortgage payments and taxes. |
| Real estate investment trust (REIT) | A real estate investment business that qualifies for tax advantages if certain requirements are met. |
| Real Estate Law | A California statute that governs the licensing and business practices of real estate agents. |
| California Department of Real Estate (DRE) | The state agency that administers the Real Estate Law. |
| Real estate broker | A person who is licensed to represent others for compensation in real estate transactions. |
| Real estate salesperson | A person who's licensed to work for and represent a broker in real estate transactions. |
| Mortgage loan originator endorsement | A special endorsement to a real estate license that authorizes the licensee to engage in mortgage loan brokerage and origination activities for compensation. |
| Responsible broker | A broker who has supervisory responsibility over a brokerage firm's salespersons and broker associates. |
| Designated broker | In a corporation licensed as a real estate broker, an individual designated as the responsible broker for the corporation as a whole. |
| Real Estate Fund | In the state treasury, a special account into which all license fees are placed. |
| Recovery Account | An account funded by license fees, used to compensate members of the public injured by the unlawful acts of real estate licensees, when other compensation isn't available. |
| Trust funds | Funds held by a broker on behalf of clients or customers. |
| Commingling | The mixing of trust funds w/the broker's personal or business funds. |
| Trust account | A bank account that a broker uses to keep trust funds segregated from the broker's personal or business funds. |
| Advance fee | Money a broker receives from a client before providing services, either to cover anticipated expenses or as upfront compensation, which must be treated as funds. |
| Like-kind property | In a tax-free exchange, property received that's of the same kind as the property transferred. Any two pieces of real estate are considered to be of like kind. |
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