Terminology

80-10-10: A type of blended mortgage loan which avoids private mortgage insurance (PMI). It consists of an 80% – 30 year first lien at market rates, a 10% – 15 year second lien at a slightly higher interest rate, and a 10% down payment. Instead of having to come up with a 20% down payment, a buyer is able to avoid PMI with only 10% down. While the interest rate on the second note is a bit higher, the total monthly payment is usually lower than a 90% mortgage with PMI. In addition, the extra interest paid for the second lien is tax deductible, whereas PMI is not. It is also possible to payoff just the second lien, thereby lowering the future monthly payments. Some lenders also offer 75-15-10 and 80-15-5 programs. This type of mortgage also gives the consumer the option of having a non-escrowing loan without a 20% down payment.

Abandonment: The failure to occupy and use property that may result in a loss of rights.

Abatement of Nuisance: Extinction or termination of a nuisance.

Absolute Ownership: see Fee Simple Estate

Abstract of Judgment: A condensation of the essential provisions of a court judgment

Abstract of Title: A condensed version of the history of title to a piece of land that lists any transfers in ownership, as well as any liabilities attached to it, such as mortgages.

Abstraction: A method of valuing land. The indicated value of the improvement is deducted from the sale price

Abutting: The joining, reaching, or touching of adjoining land. Abutting pieces of land have a common boundary.

Accelerated Cost Recovery System: The system for figuring depreciation (cost recovery) for depreciable real property acquired and placed into service after January 1, 1981. (ACRS)

Accelerated Depreciation: A method of cost write-off in which depreciation allowances are greater in the first few years of ownership than in subsequent years. This permits an earlier recovery of capital and a faster tax write-off of an asset.

Acceleration Clause: A provision in a written mortgage, note, bond or conditional sales contract that, in the event of default, the whole amount of principal and interest may be declared to be due and payable at once.

Acceptance: An offeree’s consent to enter into a contract and be bound by the terms of the offer.

Access Right: The right of an owner to have ingress and egress to and from owner’s property over adjoining property.

Accession: An addition to property through the efforts of man or by natural forces.

Accretion: An addition to land through natural causes.

Accrued Depreciation: The difference between the cost of replacement new as of the date of the appraisal and the present appraised value.

Accrued Interest: Accrue; to grow; to be added to. Accrued interest is interest that has been earned but not due and payable.

Accrued Items of Expense: Those incurred expenses which are not yet payable. The seller’s accrued expenses are credited to the purchaser in a closing statement.

Acknowledgment: A declaration made by a person to a notary public, or other public official authorized to take acknowledgments, that the instrument was executed by him and that it was his free and voluntary act.

Acoustical Tile: Blocks of fiber, mineral or metal, with small holes or rough-textured surface to absorb sound, used as covering for interior walls and ceilings.

Acquisition: The act or process by which a person procures property.

Acre: A measure of land equal to 43,560 square feet.

Action for Specific Performance: A court action to compel a defaulting principal to comply with the provisions of a contract.

Active Income: Any salaries, tips, wages, and commissions the taxpayer earns from actually performing a duty or service.

Actual Cash Value (ACV): Cost to replace an item of personal property, minus the depreciation. Actual cash value represents the value that the item could currently be sold for, which is often less than what it would cost to replace it. Insurance companies sometimes use actual cash value to determine what to pay a policyholder after loss or damage to insured property.

Actual Authority: Authority expressly given by the principal or given by the law and not denied by the principal.

Actual fraud: An act intended to deceive another, e.g., making a false statement, making a promise without intending to perform it, suppressing the truth.

Ad Valorem: Designates an assessment of taxes against property. Literally, according to value.

Addendum: Additional pages of material that are added to and become part of a contract.

Additional Principal Payment: A payment by a borrower of more than the scheduled principal amount due in order to reduce the remaining balance on the loan.

Adjacent: Lying near to but not necessarily in actual contact with.

Adjoining: Contiguous; attaching, in actual contact with.

Adjustable Rate Mortgage (ARM): A mortgage loan whose interest rate fluctuates according to the movements of an assigned index or a designated market indicator–such as the weekly average of one-year U.S. Treasury Bills–over the life of the loan. To avoid constant and drastic fluctuations, ARMs typically limit how often and by how much the interest rate can vary.

Adjusted Basis: The original cost of a property plus the value of any capital expenditures for improvements to the property minus any depreciation taken.

Adjustment Date: The date on which the interest rate changes for an adjustable-rate mortgage (ARM).

Adjustment Period: The period that elapses between the adjustment dates for an adjustable-rate mortgage (ARM).

Adjustments: Money that the buyer and sellers credit each other at the time of closing. Often includes taxes and down payment.

Administrator/Administratrix: A man/woman appointed by a court to settle the estate of a deceased person when there is no will. Contrast with executor/executrix.

ADR: see Alternative Dispute Resolution

Advance: Transfer of funds from a lender to a borrower in advance on a loan.

Advance Commitment: The institutional investor’s prior agreement to provide long-term financing upon completion of construction; also known as a “take-out” loan commitment. ADV

Advance Fees: A fee paid in advance of any services rendered. Sometimes unlawfully charged in connection with that illegal practice of obtaining a fee in advance for the advertising of property or businesses for sale, with no intent to obtain a buyer, by persons representing themselves as real estate licensees, or representatives of licensed real estate firms.

Adverse Possession: The right of an occupant of land to acquire title against the real owner, where possession has been actual, continuous, hostile, visible, and distinct for the statutory period. The requirements for adversely possessing property vary between states, but usually include continuous and open use for a period of five or more years and paying taxes on the property in question.

Affiant: One who makes an affidavit or gives evidence.

Affidavit: Written statement signed and sworn to before some person authorized to take an oath.

Affidavit of Title: A statement, in writing, made under oath by seller or grantor, acknowledged before a Notary Public in which the affiant identifies himself or herself and affiant’s marital status certifying that since the examination of title on the contract date there are no judgments, bankruptcies or divorces, no unrecorded deeds, contracts, unpaid repairs or improvements or defects of title known to affiant and that affiant is in possession of the property.

Affirm: To confirm, to aver, to ratify, to verify. To make a declaration.

After Tax Cash Flow (AFTC): This is commonly referred to as “profit”. It is the amount left after paying all expenses and taxes.

Agency: The legal relationship between a principal and an agent. In real estate transactions, usually the seller is the principal, and the broker is the agent: however, a buyer represented by a broker (i.e., buyer as principal is a growing trend. In an agency relationship, the principal delegates to the agent the right to act on his or her behalf in business transactions and to exercise some discretion while so acting. The agent has a fiduciary relationship with the principal and owes to that principal the duties of accounting, care, loyalty, and obedience. Also see buyer’s broker.

Agent: A person authorized to act for and under the direction of another person when dealing with third parties. The person who appoints an agent is called the principal. An agent can enter into binding agreements on the principal’s behalf and may even create liability for the principal if the agent causes harm while carrying out his or her duties. See also attorney-in- fact.

Agreement: An exchange of promises, a mutual understanding or arrangement; a contract.

Agreement of Sale: A written agreement or contract between seller and purchaser in which they reach a “meeting of minds” on the terms and conditions of the sale. The parties concur; are in harmonious opinion.

Air Rights: The rights in real property to the reasonable use of the air space above the surface of the land.

Alcove: An area adjoining the living room which can be used for a dining area or be separated or closed off to make a bedroom, den or office.

Alienation: The transferring of property to another; the transfer of property and possession of lands, or other things, from one person to another.

Alienation Clause: A clause in a mortgage that gives the lender the right to call the entire loan balance due if the property is sold; due-on-sale clause.

Allodial Tenure: A real property ownership system where ownership may be complete except for those rights held by government. Allodial is in contrast to feudal tenure.

Alluvium: The gradual increase of the earth on a shore of an ocean or bank of a stream resulting from the action of the water.

Alta Owner’s Policy: An owner’s extended coverage policy that provides buyers and owners the same protection the ALTA policy gives to lenders.

Alta Title Policy: (American Land Title Association) A type of title insurance policy issued by title insurance companies which expands the risks normally insured against under the standard type policy to include unrecorded mechanic’s liens; unrecorded physical easements; facts a physical survey would show; water and mineral rights; and rights of parties in possession, such as tenants and buyers under unrecorded instruments.

Alteration Agreement: A document outlining the shareholder’s responsibilities to the corporation when renovating his or her unit.

Alternative dispute resolution (ADR): The resolution of disputes by various means including, but not limited to negotiation, mediation, and arbitration.

Amenities: Non-monetary benefits and satisfactions derived from property ownership, such as a pleasant view, pride in home ownership, etc.

Amendment: A modification to an existing contract, mutually agreed to by all parties. Examples might include a change in the purchase price due to a low appraisal, or a change in the closing date.

Amenities: nice additional features and services offered by apartment complexes, like a swimming pool, gym, broadband internet access, common rooftop deck, etc. These items are not essential to live in an apartment, but make it more attractive and marketable.

Amortization: The operation of paying off indebtedness, such as a mortgage, by installments. The conventional amortization periods are15 or 30 years. (See term)

Amortized Mortgage: A mortgage requiring periodic payments that include both interest and principal. Also see self-amortized loan.

Annexation: The attaching of personal property to land so that the law views it as part of the real property (a fixture). Annexation can be actual or constructive.

Anchor Stores: A major store that is found in a shopping mall creating drawing power to the location

Annual Membership: The amount that is charged annually for having a line of credit available. Often charged regardless of whether or not you use the line.

Annual Percentage Rate (APR): The cost of a loan or other financing as an annual rate. The aaAPR includes the interest rate, points, broker fees, and certain other credit charge a borrower is required to pay.

Annuity: An amount paid yearly or at other regular intervals, often at a guaranteed minimum amount. Also, a type of insurance policy in which the policy holder makes payments for a fixed period or until a stated age, and then receives annuity payments from the insurance company.

Anticipation, principle of: Affirms that value is created by anticipated benefits to be derived in the future.

Antitrust Laws: Federal and state laws prohibiting, among other things, monopolies, monopolistic practices, restraint of trade, and price fixing.

Appellant: A party appealing a court decision or ruling.

Application: An initial statement of personal and financial information, which is required to approve your loan.

Application Fee: Fees that are paid upon application. Charges for property appraisal and a credit report are usually included in the application fee.

Apportion: To set funds apart for a special purpose or distribute according to a plan.

Apportionment: Adjustment of the income, expenses or carrying charges of real estate usually computed to the date of closing of title so that the seller pays all expenses to that date. The buyer assumes all expenses commencing the date the deed is conveyed to the buyer.

Appraisal: A determination of the value of something, such as a house, jewelry or stock. A professional appraiser–a qualified, disinterested expert–makes an estimate by examining the property, and looking at the initial purchase price and comparing it with recent sales of similar property. Courts commonly order appraisals in probate, condemnation, bankruptcy or foreclosure proceedings in order to determine the fair market value of property. Banks and real estate companies use appraisals to ascertain the worth of real estate for lending purposes. And insurance companies require appraisals to determine the amount of damage done to covered property before settling insurance claims.

Appraisal by Cost Approach: Adding together all parts of a property separately appraised to form a whole: e.g., value of the land considered as vacant added to the cost of reproduction of the building, less depreciation.

Appraisal by Income Capitalization Approach: An estimate of value by capitalization of productivity and income.

Appraisal by Sale Comparison Approach: Comparability with the sale prices of other similar properties.

Appraised Value: An estimate of the present worth.

Appraiser: A professional who conducts an analysis of the property, include examples of sales of similar properties in order to develop an estimate of the value of the property. The analysis is called an “appraisal.”

Appreciation: An increase in value or worth of property. Opposite of depreciation.

Appropriation of water: The taking, impounding or diversion of water flowing on the public domain from its natural course and the application of the water to some beneficial use personal and exclusive to the appropriator.

Approved Assessing Unit: An assessing unit in NY State, which has been certified by the NY State Board as having completed a revaluation program implementing a system of real property tax administration, which is eligible for state assistance.

Appurtenance: That which belongs to something, but not immemorially; all those rights, privileges, and improvements which belong to and pass with the transfer of the property, but which are not necessarily a part of the actual property. Appurtenances to real property pass with the real property to which they are appurtenant, unless a contrary intention is manifested. Typical appurtenances are rights-of-way, easements, water rights, and any property improvements.

Appurtenant: Belonging to; adjunct; appended or annexed to. For example, the garage is appurtenant to the house, and the common interest in the common elements of a condominium is appurtenant to each apartment. Appurtenant items pass with the land when the property is transferred.

APR: See ANNUAL PERCENTAGE RATE.

Arbitration: A process where disputes are settled by referring them to a fair and neutral third party (arbitrator). The disputing parties agree in advance to agree with the decision of the arbitrator. There is a hearing where both parties have an opportunity to be heard, after which the arbitrator make a decision.

Architectural Style: Generally the appearance and character of a building’s design and construction. Articles of incorporation: An instrument setting forth the basic rules and purposes under which a private corporation is formed.

Arms-Length Transaction: A sale between two unrelated parties, each acting in their own best interest

Artificial Person: Persons created by law; a corporation.

Asbestos: A toxic material that was once used in housing insulation and fireproofing. Because some forms of asbestos have been linked to certain lung diseases, it is no longer used in new homes. However, some older homes may still have asbestos in these materials.

As-is Condition: tenant or buyer accepts the property in its present condition, with no expectations that the landlord will improve anything before and/or after the sale/lease.

Asking (list) Price: The price placed on property for sale.

Assessed Value: Typically the value placed on property for the purpose of taxation

Assessing Unit: A municipality such as a city, town, county or village with the authority to assess real property

Assessment: The valuation of property for the purpose of levying a tax or the amount of the tax levied. Also, payments made to a common interest subdivision homeowners- association for maintenance and reserves.

Assessment Review Board: An independent board whose primary function is to hear tax appeals (grievances) from taxpayers who believe that their properties are incorrectly assessed. Sometimes known as Grievance Boards.

Assessment Roll: A list of all taxable property in a municipality, which shows the assessed value of each parcel, and is used to establish the tax base. An assessment roll is also known as a “Tax Roll”.

Assessor: A local government official who determines the value of the property for taxation purposes.

Asset: Anything of monetary value that is owned by a person or company. Assets include real property, personal property, stocks, mutual funds, etc.

Assignee: A person to whom a property right is transferred. For example, an assignee may take over a lease from a tenant who wants to permanently move out before the lease expires. The assignee takes control of the property and assumes all the legal rights and responsibilities

of the tenant, including payment of rent. However, the original tenant remains legally responsible if the assignee fails to pay the rent.

Assignment: A transfer of property rights from one person to another, called the assignee.

Assignment of rents: A provision in a deed of trust (or mortgage) under which the beneficiary may, upon default by the trustor, take possession of the property, collect income from the property and apply it to the loan balance and the costs incurred by the beneficiary.

Assignor: One who assigns or transfers property.

Assigns, Assignees: Those to whom property or interests therein shall have been transferred.

Assumable Mortgage: An existing mortgage that can be taken over by the buyer on the same terms given to the original borrower.

Assumption Agreement: An undertaking or adoption of a debt or obligation primarily resting upon another person.

Assumption Fee: A lender’s charge for changing over and processing new records for a new owner who is assuming an existing loan.

Assumption of Mortgage: The transfer of title to property to a grantee wherein he assumes liability for payment of an existing note secured by a mortgage against the property; should the mortgage be foreclosed and the property sold for a lesser amount than that due, the grantee-purchaser who has assumed and agreed to pay the debt secured by the mortgage is personally liable for the deficiency. Before a seller may be relieved of liability under the existing mortgage, the lender must accept the transfer of liability for payment of the note. Also known as simple assumption. Contrast with subject to mortgage.

Assumption Fee: A fee a lender charges a buyer who will assume the seller’s existing mortgage.

Attachment: Method by which a debtor’s property is placed in the custody of the law and held as security pending outcome of a creditor’s suit.

Attest: To affirm to be true or genuine; an official act establishing authenticity.

Attorney in Fact: One who is authorized by another to perform certain acts for another under a power of attorney; power of attorney may be limited to a specific act or acts or be general.

Attorney’s Opinion of Title: An instrument written and signed by the attorney who examines the abstracts of title, stating his opinion as to whether a seller may convey good title.

Attornment: Agreement between property owner and tenant that tenant will remain in the event ownership of the property changes.

Attractive Nuisance: Something on a piece of property that attracts children but also endangers their safety. For example, unfenced swimming pools, open pits, farm equipment and abandoned refrigerators have all qualified as attractive nuisances.

Auction: A public sale of property to the highest bidder.

Automated Underwriting: An automated process performed by a technology application that streamlines the processing of a loan applications and provides a recommendation to the lender to approve the loan or refer it for manual underwriting

Avulsion: A sudden and perceptible loss of land by the action of water as by a sudden change in the course of a river.

Backfill: The replacement of excavated earth into a hole or against a structure.

Balance Sheet: A financial statement that shows assets, liabilities, and net worth as of a specific date.

Balcony: An outdoor space that protrudes from a building.

Balloon Mortgage: A mortgage with monthly payments often based on a 30-year amortization schedule, with the unpaid balance due in a lump sum payment at the end of a specific period of time (usually 5 or 7 years). The mortgage may contain an option to “reset” the interest rate to the current market rate and to extend the due date if certain conditions are met.

Balloon Payment: A final lump sum payment that is due, often at the maturity date of a balloon mortgage.

Bankruptcy: Legally declared unable to pay your debts. Bankruptcy can severely impact your credit and your ability to borrow money.

Bargain and Sale Deed: Any deed that recites a consideration and purports to convey the real estate; a bargain and sale deed with a covenant against the grantor’s act is one in which the grantor warrants that grantor has done nothing to harm or cloud the title.

Base and Median: Imaginary lines used by surveyors to find and describe the location of private or public lands. In government surveys, a base line runs due east and west, meridians run due north and south, and are used to establish township boundaries.

Basement: area of a building below the ground level.

Basis: (1) Cost Basis—The dollar amount assigned to property at the time of acquisition under provisions of the Internal Revenue Code for the purpose of determining gain, loss and depreciation in calculating the income tax to be paid upon the sale or exchange of the property. (2) Adjusted Cost Basis—The cost basis after the application of certain additions for improvements, etc., and deductions for depreciation, etc.

Bay Window: a window that extends outwards from the main walls of a building; thus, forming a bay in a room, usually polygonal or square. Bay windows are often found in turn of the century townhouses and pre-war buildings.

Bearing Wall: A wall or partition which supports a part of a building, usually a roof or floor above.

Before Tax Cash Flow (BTCF): The cash flow before an adjustment for income tax is made. This includes debt service which is the amount paid to retire the mortgage.

Before-Tax Income: Income before taxes are deducted. Also known as “gross income.”

Bench Mark: A monument used to establish the elevation of the point, usually relative to Mean Sea Level, but often to some local datum.

Beneficiary: (1) One entitled to the benefit of a trust; (2) One who receives profit from an estate, the title of which is vested in a trustee; (3) The lender on the security of a note and deed of trust.

Bequeath: To give or hand down by will; to leave by will.

Bequest: Personal property given by the terms of a will.

Betterment: An improvement upon property which increases the property value and is considered as a capital asset as distinguished from repairs or replacements where the original character or cost is unchanged.

Bill of Sale: A written instrument given to pass title to personal property.

Binder: An agreement to consider a down payment for the purchase of real estate as evidence of good faith on the part of the purchaser. Also, a notation of coverage on an insurance policy, issued by an agent, and given to the insured prior to issuing of the policy.

Biweekly Payment Mortgage: A mortgage with payments due every two weeks (instead of monthly).

Black Book: the final acceptance of the offering plan by the attorney general allowing shares in a co-op to be sold.

Blanket Mortgage: One mortgage on a number of parcels of real property.

Blighted Area: A district affected by detrimental influences of such extent or quantity that real property values have seriously declined as a result of adverse land use and/or destructive economic forces; characterized by rapidly depreciating buildings, retrogression and no recognizable prospects for improvement. However, renewal programs and changes in use may lead to resurgence of such areas.

Blockbusting: The illegal practice of inducing panic selling in a neighborhood by making representations of the entry, or prospective entry, of members of a minority group; panic peddling. See Fair Housing.

Board Package: A collection of financial, character, and disclosure documentation that a potential purchaser compiles and submits to a co-op board for review.

Bona Fide: In good faith, without fraud.

Bond: (1) A written agreement purchased from a bonding company that guarantees a person will properly carry out a specific act, such as managing funds, showing up in court, providing good title to a piece of real estate or completing a construction project. If the person who purchased the bond fails at his or her task, the bonding company will pay the aggrieved party an amount up to the value of the bond.

• An interest-bearing document issued by a government or company as evidence of a A bond provides pre-determined payments at a set date to the bond holder. Bonds may be “registered” bonds, which provide payment to the bond holder whose name is recorded with the issuer and appears on the bond certificate, or “bearer” bonds, which provide payments to whomever holds the bond in-hand. Mortgage interest rates are closely related to long term bond interest rates.

Bonus to Selling Agent (BTSA): Compensation, above and beyond the sales commission, offered to the real estate agent who brings the buyer to the transaction. A BTSA is used to provide an extra incentive for real estate agents to show a particular listing. Often the bonus is tied to closing within a certain time period or the property selling for a certain price. A buyer’s agent should not consider the BTSA a factor in any negotiations between buyer and seller. Realistically, most BTSA’s tend to disappear during initial negotiations, even though they should never be considered as negotiable after they have been offered. Any bonus to selling agent should be contained in a written agreement between the seller and listing broker. The BTSA is technically offered by the listing broker, not the seller, and thus should not be a subject of negotiation.

Book Value: The current value for accounting purposes of an asset expressed as original cost plus capital additions minus accumulated depreciation.

Boot:The term used for any property, object, or money a person receives in addition to the like/kind property in a 1031 exchange. While a straight like/kind (or property-for-property) exchange is usually tax-deferred, if you get more boot than you give in the transaction, that extra cash, property, or object will be taxable.

Breach: The breaking of a law, or failure of duty, either by omission or commission.

Breach of Contract: Failure, without legal excuse, of one of the parties to a contract to perform according to the contract.

Breakeven Point: The point at which there is sufficient potential income to cover expenses.

Bridge Loan: A short-term loan secured by the borrower’s current home (which is usually for sale) that allows the proceeds to be used for building or closing on a new house before the current home is sold. Also known as a “swing loan.”

Broker: An individual or firm that acts as an agent between providers and users of products or services, such as a mortgage broker or real estate broker. See also “Mortgage Broker.”

Brokerage: For a commission or fee, bringing together parties interested in buying, selling, exchanging, or leasing real property.

Broker-salesperson Relationship Agreement: A written agreement required by the regulations of the Real Estate Commissioner setting forth the material aspects of the relationship between a real estate broker and each salesperson and broker performing licensed activities in the name of the supervising broker.

Brownstone: A dwelling faced with brownstone, a native New York State stone. Also, a colloquial term for townhouse. Three to five floors. No doorman. Built in the late 1800s and early 1900s as single-family homes. Many were converted during World War II to create multiple apartments (3-10 units per building). Brownstones often have “charm”, high ceilings, architectural details, and often wood-burning fireplaces. Square footage is generally less than a similar room count would provide in a doorman building. Closet space and storage is usually sparse.

BTSA: Acronym – bonus to selling agent.

B.T.U.: British thermal unit. The quantity of heat required to raise the temperature of one pound of water one degree Fahrenheit.

Building Code: Local regulations that set forth the standards and requirements for the construction, maintenance and occupancy of buildings. The codes are designed to provide for the safety, health and welfare of the public.

Building Line: A line fixed at a certain distance from the front and/or sides of a lot beyond which no structure can project. See set back.

Building Loan Agreement: An agreement whereby the lender advances money to an owner primarily in the erection of buildings. Such funds are commonly advanced in installments as the structure is completed.

Building, Market Value of: The sum of money which the presence of that structure adds to or subtracts from the value of the land it occupies. Land valued on the basis of highest and best use.

Building Permit: Written governmental permission for the construction, renovation or substantial repair of a building.

Building Restrictions: Zoning, regulatory requirements or provisions in a deed limiting the type, size and use of a building.

Built: Refers to the actual exterior dimensions of a building on a lot. For instance, a townhouse might be built 20′ x 70′ on a 20′ x 100′ lot. Today, city zoning regulations impose tough restrictions on how large a new building may be built on a lot.

Built-in Appliances – appliances (usually in the kitchen or bathroom) that are permanently attached and installed, like a dishwasher, washing machine, microwave, refrigerator, etc. bundle of rights Ownership in real property implies a group of rights, such as the right of occupancy, use and enjoyment, the right to sell in whole or in part, the right to control the use, the right to bequeath, the right to lease any or all of the rights, the right to the benefits derived by occupancy and use of the property, etc.

Bureau of Land Management: A federal bureau within the Department of the Interior which manages and controls certain lands owned by the United States.

Business Opportunity: The assets for an existing business enterprise including its goodwill. As used in the Real Estate Law, the term includes “the sale or lease of the business and goodwill of an existing business enterprise or opportunity.”

Buydown: An arrangement whereby the property developer or another third party provides an interest subsidy to reduce the borrower’s monthly payments typically in the early years of the loan.

Buydown Account: An account in which funds are held so that they can be applied as part of the monthly mortgage payment as each payment comes due during the period that an interest rate buydown plan is in effect.

Buyer’s Broker: A licensee who has declared to represent only the buyer in a transaction, regardless of whether compensation is paid by the buyer or the listing broker through a commission split. Some brokers conduct their business by representing buyers only.

Buyer’s Market: The condition which exists when a buyer is in a more commanding position as to price and terms because real property offered for sale is in plentiful supply in relation to demand.

Bylaws: Rules for the conduct of the internal affairs of corporations and other organizations.

Calendar Year: A year using the actual number of days in each month for a total of 365 days in a year (366 days in a leap year).

Cal-Vet Program: A program administered by the State Department of Veterans Affairs for the direct financing of farm and home purchases by eligible California veterans of the armed forces.

Cancellation Clause: A provision in a lease or other contract which confers upon one or more of all of the parties to the lease the right to terminate the party’s or parties’ obligations thereunder upon the occurrence of the condition or contingency set forth in the said clause

Cap: The maximum allowable increase, for either payment or interest rate, for a specified amount of time on an adjustable rate mortgage.

Capacity: Your ability to make your mortgage payments on time. This depends on your income and income stability (job history and security), your assets and savings, and the amount of your income each month that is left over after you’ve paid for your housing costs, debts and other obligations.

Capital Appreciation: The appreciation accruing to the benefit of the capital improvement to real estate.

Capital Assets: Assets of a permanent nature used in the production of an income, such as land, buildings, machinery and equipment, etc. Under income tax law, it is usually distinguishable from “inventory” which comprises assets held for sale to customers in ordinary course of the taxpayer’s trade or business.

Capital Expenditure: One time major purchase that extends the economic life of the asset.

Capital Expense: Expenses required for the standard upkeep of a building as well as for any changes or improvements to any of the building’s systems. Some examples of these are expenses for heating and air-conditioning, water systems, parking lots, interior or exterior paint and carpets.

Capital Gain: At resale of a capital item, the amount by which the net sale proceeds exceed the adjusted cost basis (book value). Used for income tax computations. Gains are called short or long term based upon length of holding period after acquisition. Usually taxed at lower rates than ordinary income.

Capital Improvement: Any structure erected as a permanent improvement to real estate, usually extending the useful life and value of a property. (The replacement of a roof would be considered a capital improvement.)

Capital Loss: A loss from the sale of an asset not in the usual course of business.

Capital Reserve Budget: A type of account contained on a company’s balance sheet that is reserved for long-term capital improvement projects or any other large and anticipated expense(s) that will be made in the future. This type of reserve fund is set aside to make sure that the company or municipality has enough funding to at least partially finance the project.

Capital Reserves: Funds set aside for capital expenditures.

Capitalization: In appraising, determining value of property by considering net income and percentage of reasonable return on the investment. The value of an income property is determined by dividing annual net income by the Capitalization Rate.

Capitalization Rate: The rate of interest which is considered a reasonable return on the investment, and used in the process of determining value based upon net income. It may also be described as the yield rate that is necessary to attract the money of the average investor to a particular kind of investment. In the case of land improvements which depreciate, to this yield rate is added a factor to take into consideration the annual amortization factor necessary to recapture the initial investment in improvements. This amortization factor can be determined in various ways — (1) straight-line depreciation method, (2) Inwood Tables and

• Hoskold (To explore this subject in greater depth, the student should refer to current real estate appraisal texts.)

Cap Rate: See LIFE OF LOAN CAP.

Carryback Loan: The extension of credit from the seller to the buyer to finance the purchase of the property, accepting a deed of trust or mortgage instead of cash. Sometimes called a purchase money loan.

Casement Windows: Frames of wood or metal which swing outward.

Cash Flow: The net income generated by a property before depreciation and other noncash expenses.

Cash Flow/Before/After Tax: The net income the property generates which is calculated both before and after tax considerations.

Cash on Cash Return: Can be determined by using the annual before tax cash flow and the amount of cash used to purchase the property. Annual cash flow divided by total cash required for purchase.

Cash-out Refinance: A refinance transaction in which the borrower receives additional funds over and above the amount needed to repay the existing mortgage, closing costs, points, and any subordinate liens.

Caveat Emptor: Let the buyer beware. The buyer must examine the goods or property and buy at his or her own risk, absent misrepresentation.

CC&Rs: Covenants, conditions and restrictions. The basic rules establishing the rights and obligations of owners (and their successors in interest) of real property within a subdivision

or other tract of land in relation to other owners within the same subdivision or tract and in relation to an association of owners organized for the purpose of operating and maintaining property commonly owned by the individual owners.

CCCS: See Consumer Credit Counseling Service.

CCIM: Certified Commercial Investment Member.

Cease and Desist List: Upon the establishment of a cease and desist zone by the Secretary, a list of homeowners who have filed owner’s statements expressing their wish not to be solicited by real estate brokers or salespersons. Soliciting of listed homeowners by licensees is prohibited. Violators of such prohibition are subject to licensure suspension or revocation.

Cease and Desist Zone: A rule adopted by the Secretary of State which prohibits the direct solicitation of homeowners whose names and addresses appear on a cease and desist list maintained by the Secretary. Such rule may be adopted upon the Secretary’s determination that some homeowners within a defined geographic area have been subject to intense and repeated solicitation by real estate brokers and salespersons.

Ceiling: The maximum allowable interest rate over the life of the loan of an adjustable rate mortgage.

Census: An official count of the number of people living in a certain area, such as a district, city, county, state, or nation. The United States Constitution requires the federal government to perform a national census every ten years. The census includes information about the respondents’ sex, age, family, and social and economic status.

Certificate of Completion: An official document issued by the building department, which is proof that a remodeling or renovation project was done in compliance with the law.

Certificate of Deposit: A document issued by a bank or other financial institution that is evidence of a deposit, with the issuer’s promise to return the deposit plus earnings at a specified interest rate within a specified time period.

Certificate of Eligibility: Issued by Department of Veterans Affairs – evidence of individual’s eligibility to obtain VA loan.

Certificate of Occupancy (CO): A document issued by a governmental authority that a building is ready and fit for occupancy.

Certificate of Reasonable Value (CRV): The Federal VA appraisal commitment of property value.

Certificate of Taxes Due: A written statement or guaranty of the condition of the taxes on a certain property made by the County Treasurer of the county wherein the property is located. Any loss resulting to any person from an error in a tax certificate shall be paid by the county which such treasurer represents.

Certificate of Title: A written opinion by an attorney that ownership of the particular parcel of land is as stated in the certificate.

Certiorari: A legal term referring to a judicial review of a property’s assessment.

Chain: A unit of measurement used by surveyors. A chain consists of 100 links equal to 66 feet.

Chain of Title: A history of conveyances and encumbrances affecting the title from the time the original patent was granted, or as far back as records are available, used to determine how title came to be vested in current owner.

Change Orders: A change in the original construction plans ordered by the property owner or general contractor.

Change, Principle of: Holds that it is the future, not the past, which is of prime importance in estimating value. Change is largely result of cause and effect.

Channeling: The illegal practice of directing people to, or away from, certain areas or neighborhoods because of minority status; Steering. See Fair Housing.

Characteristics: Distinguishing features of a (residential) property.

Chattel Mortgage: A claim on personal property (instead of real property) used to secure or guarantee a promissory note. (See definition of Security Agreement and Security Interest.)

Chattel Real: An estate related to real estate, such as a lease on real property.

Chattels: Goods or every species of property movable or immovable which are not real property. Personal property.

Chose in Action: A personal right to something not presently in the owner’s possession, but recoverable by a legal action for possession.

Circuit Breaker: (l) An electrical device which automatically interrupts an electric circuit when an overload occurs; may be used instead of a fuse to protect each circuit and can be reset. (2) In property taxation, a method for granting property tax relief to the elderly and disadvantaged qualified taxpayers by rebate, tax credits or cash payments. Usually limited to homeowners and renters.

Cleaning Fee: A nonrefundable fee charged by a landlord when a tenant moves in. The fee covers the cost of cleaning the rented premises after you move out, even if you leave the place spotless. Cleaning fees are illegal in some states and specifically allowed in others, but most state laws are silent on the issue. Landlords in every state are allowed to use the security deposit to clean a unit that is truly dirty.

Clear Title: A land title that doesn’t have any liens (including a mortgage) against it.

Closing: (l) Process by which all the parties to a real estate transaction conclude the details of a sale or mortgage. The process includes the signing and transfer of documents and distribution of funds. (2) Condition in description of real property by courses and distances at the boundary lines where the lines meet to include all the tract of land.

Closing Agent: The person or entity that coordinates the various closing activities, including the preparation and recordation of closing documents and the disbursement of funds. (May be referred to as an escrow agent or settlement agent in some jurisdictions.) Typically, the closing is conducted by title companies, escrow companies or attorneys.

Closing Costs: The miscellaneous expenses buyers and sellers normally incur in the transfer of ownership of real property over and above the cost of the property.

Closing Date: The date on which the sale of a property is to be finalized and a loan transaction completed. Often, a real estate sales professional coordinates the setting of this date with the buyer, the seller, the closing agent, and the lender.

Closing Statement: An accounting of funds made to the buyer and seller separately. Required by law to be made at the completion of every real estate transaction.

Cloud on Title: A claim, encumbrance or condition which impairs the title to real property until disproved or eliminated as for example through a quitclaim deed or a quiet title legal action.

Cluster Zoning: A type of zoning which permits residential uses to be clustered more closely together than normally allowed. This leaves substantial land area to be devoted to open space or recreational use.

Co-Borrower: Any borrower other than the first borrower whose name appears on the application and mortgage note, even when that person owns the property jointly with the first borrower and shares liability for the note.

Co-Brokership: an arrangement when the broker splits the commission 50%/50% with any other brokerage firm that brings the buyer and completes the transaction. When the broker receives the listing, he or she will promote the property with brokers at-large, maximizing the number of potential buyers. Most of real estate deals are done through co- brokering.

Co-Op: See cooperative housing or cooperative sale.

Co-Tenants: Two or more tenants who rent the same property under the same lease or rental agreement. Each co-tenant is 100% responsible for carrying out the rental agreement, which includes paying the entire rent if the other tenant skips town and paying for damage caused by the other tenant.

Code of Ethics: A set of rules and principles expressing a standard of accepted conduct for a professional group and governing the relationship of members to each other and to the organization.

Collateral: Marketable real or personal property which a borrower pledges as security for a loan. In mortgage transactions, specific land is the collateral. (See definition of Security Interest)

Collateral Security: A separate obligation attached to contract to guarantee its performance; the transfer of property or of other contracts, or valuables, to insure the performance of a principal agreement.

Collusion: An agreement between two or more persons to defraud another of rights by the forms of law, or to obtain an object forbidden by law.

Color of Title: That which appears to be good title but which is not title in fact.

Commercial Acre: A term applied to the remainder of an acre of newly subdivided land after the area devoted to streets, sidewalks and curbs, etc., has been deducted from the acre.

Commercial Loan: A personal loan from a commercial bank, usually unsecured and short term, for other than mortgage purposes.

Commercial Paper: Negotiable instruments such as promissory notes, letters of credit and bills of lading. Instruments developed under the law of merchant.

Commercial Real Estate: Land or property intended to be used for business purposes.

Commingling: The illegal mixing of personal funds with money held in trust on behalf of a client. See CONVERSION.

Commission: An agent’s compensation for performing the duties of the agency; in real estate practice, a percentage of the selling price of property, percentage of rentals, etc. A fee for services.

Commitment: A pledge or a promise or firm agreement to do something in the future, such as a loan company giving a written commitment with specific terms of mortgage loan it will make.

Commitment Letter: A binding offer from your lender that includes the amount of the mortgage, the interest rate, and repayment terms.

Common Area: An entire common interest subdivision except the separate interests therein.

Common Charges: the monthly fee paid by condo owners. This fee covers the building maintenance and repairs, and the salary of the staff.

Common Interest Subdivision: Subdivided lands which include a separate interest in real property combined with an interest in common with other owners. The interest in common may be through membership in an association. Examples are condominiums and stock cooperatives.

Common Law: The body of law that grew from customs and practices developed and used in England “since the memory of man runneth not to the contrary.”

Common Stock: That class of corporate stock to which there is ordinarily attached no preference with respect to the receipt of dividends or the distribution of assets on corporate dissolution.

Community Property: Property acquired by husband and/or wife during a marriage when not acquired as the separate property of either spouse. Each spouse has equal rights of management, alienation and testamentary disposition of community property.

Community Reinvestment Act: The federal law which requires federally regulated lenders to describe the geographical market area they serve. Deposits from that area are to be reinvested in that area whenever practical.

Compaction: Whenever extra soil is added to a lot to fill in low places or to raise the level of the lot, the added soil is often too loose and soft to sustain the weight of the buildings. Therefore, it is necessary to compact the added soil so that it will carry the weight of buildings without the danger of their tilting, settling or cracking.

Comparable Sales: Sales which have similar characteristics as the subject property and are used for analysis in the appraisal process. Commonly called “comparables”, they are recent selling prices of properties similarly situated in a similar market.

Comparison Approach: A real estate comparison method which compares a given property with similar or comparable surrounding properties; also called market comparison.

Competent: Legally qualified.

Competition, Principle of: Holds that profits tend to breed competition and excess profits tend to breed ruinous completion.

Completion Bond: A bond used to guarantee that a proposed subdivision development will be completed.

Compound Interest: Interest paid on original principal and also on the accrued and unpaid interest which has accumulated as the debt matures.

Conclusion: The final estimate of value, realized from facts, data, experience and judgment, set out in an appraisal. Appraiser’s certified conclusion.

Concession: Something given up or agreed to in negotiating the sale of a house. For example, the sellers may agree to help pay for closing costs.

Condemnation: The act of taking private property for public use by a political subdivision upon payment to owner of just compensation. Declaration that a structure is unfit for use.

Condition: In contracts, a future and uncertain event which must happen to create an obligation or which extinguishes an existent obligation. In conveyances of real property conditions in the conveyance may cause an interest to be vested or defeated.

Condition Precedent: A qualification of a contract or transfer of property, providing that unless and until a given event occurs, the full effect of a contract or transfer will not take place.

Conditional Sales Contract: A contract for the sale of property stating that delivery is to be made to the buyer, title to remain vested in the seller until the conditions of the contract have been fulfilled.

Condition Subsequent: A condition attached to an already-vested estate or to a contract whereby the estate is defeated or the contract extinguished through the failure or non- performance of the condition.

Conditional Commitment: A commitment of a definite loan amount for some future unknown purchaser of satisfactory credit standing.

Conditional Estate: Usually called, in California, Fee Simple Defeasible. An estate that is granted subject to a condition subsequent. The estate is terminable on happening of the condition.

Conditional Sale Contract: A contract for the sale of property stating that delivery is to be made to the buyer, title to remain vested in the seller until the conditions of the contract have been fulfilled. (See definition of Security Interest.)

Condominium: An estate in real property wherein there is an undivided interest in common in a portion of real property coupled with a separate interest in space called a unit, the boundaries of which are described on a recorded final map, parcel map or condominium plan. The areas within the boundaries may be filled with air, earth, or water or any combination and need not be attached to land except by easements for access and support.

Condominium Declaration: The document which establishes a condominium and describes the property rights of the unit owners.

Condop: A situation in which one part of a building is a condo, while the other is run by the co-op corporation. Typically, this happens in a property that has both commercial space (condo) and a residential space (co-op).

Confession of Judgment: An entry of judgment upon the debtor’s voluntary admission or confession.

Confirmation of Sale: A court approval of the sale of property by an executor, administrator, guardian or conservator.

Confiscation: The seizing of property without compensation.

Conformity, Principle of: Holds that the maximum of value is realized when a reasonable degree of homogeneity of improvements is present. Use conformity is desirable, creating and maintaining higher values.

Conservation: The process of utilizing resources in such a manner which minimizes their depletion.

Consideration: Anything given or promised by a party to induce another to enter into a contract, e.g., personal services or even love and affection. It may be a benefit conferred upon one party or a detriment suffered by the other.

Constant: The percentage which, when applied directly to the face value of a debt, develops the annual amount of money necessary to pay a specified net rate of interest on the reducing balance and to liquidate the debt in a specified time period. For example, a 6% loan with a 20 year amortization has a constant of approximately 8 1/2%. Thus, a $10,000 loan amortized over 20 years requires an annual payment of approximately $850.00.

Construction exchange: Also known as an “improvement exchange”, this is a situation in which an investor (taxpayer) buys a property and wants to build on it (or construct improvements) before taking it as a replacement property.

Construction Loan: A loan made to finance the actual construction or improvement on land. Funds are usually dispersed in increments as the construction progresses.

Constructive Eviction: The provision of housing that is so substandard that, for all intents and purposes, a landlord has evicted the tenant. For example, the landlord may refuse to provide light, heat, water or other essential services, destroy part of the premises or refuse to clean up an environmental health hazard, such as lead paint dust. Because the premises are unlivable, the tenant has the right to move out and stop paying rent without incurring legal liability for breaking the lease. Usually, the tenant must first bring the problem to the landlord’s attention and allow a reasonable amount of time for the landlord to make repairs.

Constructive Fraud: A breach of duty, as by a person in a fiduciary capacity, without an actual fraudulent intent, which gains an advantage to the person at fault by misleading another to the other’s prejudice. Any act of omission declared by law to be fraudulent, without respect to actual fraud.

Constructive Notice: Notice of the condition of title to real property given by the official records of a government entity which does not require actual knowledge of the information.

Consumer Credit Counseling Service (CCCS): A national non-profit agency that, at no cost, helps debtors plan budgets and repay their debts. One major criticism of CCCS is that each office is primarily funded by voluntary donations from the creditors that receive payments from debtors repaying their debts through that office. The goal of CCCS is to insure that consumers repay the debts that they owe. CCCS may arrange easy payment plans that increase the chances for repayment, but harm a consumer’s credit in the process. Agreeing to a payment plan and following it to the letter may not stop creditors from reporting delinquent repayment information to credit bureaus for each month the payment falls short of the previous minimum amount.

Contiguous: In close proximity.

Contingency: A provision in a contract stating that some or all of the terms of the contract will be altered or voided by the occurrence of a specific event. A common example is a Buyer who enters into the purchase of another home before his current home is sold. The Buyer will usually ask for the Seller to make the sale contingent upon the sale of the Buyer’s current home. If the Seller receives another offer for the property, the first Buyer must either agree to buy the home without any contingency, or step aside and let someone else purchase the home.

Contour: The surface configuration of land. Shown on maps as a line through points of equal elevation.

Contract: An agreement to do or not to do a certain thing. It must have four essential elements — parties capable of contracting, consent of the parties, a lawful object, and consideration. A contract for sale of real property must also be in writing and signed by the party or parties to be charged with performance.

Contract for Deed: A contract for the sale of real estate where the deed (title) of the property is transferred only after all the payments have been made. Also known as a land contract, agreement of sale, conditional sales contract, or installment contract. Buyers should be wary of this type of contract, since they can lose their entire investment if the owner declares bankruptcy, before the deed has been transferred.

Contract for Exchange of Real Estate: A contract for the sale of real estate in which the consideration is paid wholly or partly in real property instead of cash.

Contract of Sale: The agreement between the buyer and seller on the purchase price, terms, and conditions necessary to both parties to convey the title to the buyer.

Contract, Bilateral: A contract in which each party promises to do something.

Contract, Executed: 1) A contract in which both parties have completely performed their contractual obligations. 2) A signed contract.

Contract, Executory: A contract in which one or both parties have not yet completed performance of their obligations.

Contract, Express: A contract that has been put into words, either spoken or written.

Contract, Implied: An agreement that has not been put into words, but is implied by the actions of the parties.

Contract, Unilateral: When one party promises to do something if the other party performs a certain act, but the other party does not promise to perform it; the contract is formed only if the other party does perform the requested act.

Contribution, Principle of: A component part of a property is valued in proportion to its contribution to the value of the whole. Holds that maximum values are achieved when the improvements on a site produce the highest (net) return, commensurate with the investment.

Conventional Mortgage: A mortgage securing a loan made by investors without governmental underwriting, i.e., which is not FHA insured or VA guaranteed. The type customarily made by a bank or savings and loan association.

Conversion: (1) Change from one legal form or use to another, as converting an apartment building to condominium use. (2) The unlawful appropriation of another’s property, as in the conversion of trust funds.

Conversion Option: A provision of some adjustable-rate mortgage (ARM) loans that allows the borrower to change the ARM to a fixed-rate mortgage at specified times after loan origination.

Convertible ARM: An adjustable-rate mortgage (ARM) that allows the borrower to convert the loan to a fixed-rate mortgage under specified conditions.

Conveyance: An instrument in writing used to transfer (convey) title to property from one person to another, such as a deed or a trust deed.

Cooperative (apartment): An apartment building, owned by a corporation and in which tenancy in an apartment unit is obtained by purchase of shares of the stock of the corporation and where the owner of such shares is entitled to occupy a specific apartment in the building. In California, this type of ownership is called a “stock cooperative.”

Cooperative Housing: (1) A form of real estate, usually a dwelling in which residents own shares, but do not directly own the space they inhabit. Rather, owning a share of the building entitles the shareholder with the right to inhabit a certain space within the dwelling, such as an apartment. Shares are usually proportional to the amount of space in each apartment. (2) A living arrangement in which residents must perform certain duties or chores to benefit the entire residence, in addition to paying room and board. A common form of dormitory living.

Cooperative Sale: A sale of property in which the buyer is brought to the transaction by a real estate agent who works for a different real estate broker than the listing agent. Both brokers/companies have agreed to cooperate in closing the property, and typically, splitting the commission. Offers of cooperation and compensation are commonly found in the MLS property listings.

Corner Influence Table: A statistical table that may be used to estimate the added value of a corner lot.

Corporation: An entity established and treated by law as an individual or unit with rights and liabilities, or both, distinct and apart from those of the persons composing it. A corporation is a creature of law having certain powers and duties of a natural person. Being created by law it may continue for any length of time the law prescribes.

Corporeal Rights: Possessory rights in real property.

Correction Lines: A system for compensating inaccuracies in the Government Rectangular Survey System due to the curvature of the earth. Every fourth township line, 24 mile intervals, is used as a correction line on which the intervals between the north and south range lines are remeasured and corrected to a full 6 miles.

Corrective Maintenance: A type of maintenance that is done when a system, equipment, or a machine is faulty. This type of maintenance includes detecting and/or isolating the problem as well as taking the necessary steps to fix the problem. Corrective maintenance is different from preventative maintenance.

Correlation: A step in the appraisal process involving the interpretation of data derived from the three approaches to value (cost, market and income) leading to a single determination of value. Also frequently referred to as “reconciliation.”

Co-Signer: A second party who signs a promissory note together with the primary borrower.

Cost: Amount paid for property plus closing costs and improvements

Cost Approach: One of three methods in the appraisal process. An analysis in which a value estimate of a property is derived by estimating the replacement cost of the improvements, deducting therefrom the estimated accrued depreciation, then adding the market value of the land.

Cost Approach to Value: An estimate of value based on current construction costs, less depreciation, plus land value. Contrast with the income approach to value and the market data approach to value.

Cost of Funds Index (COFI): An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) loans. It is based on the weighted monthly average cost of deposits, advances, and other borrowings of members of the Federal Home Loan Bank of San Francisco.

Cotenancy: Ownership of an interest in a particular parcel of land by more than one person; e.g. tenancy in common, joint tenancy.

Counter Offer: A response to an offer to enter into a contract, changing some of the terms of the terms of the original offer. A counter offer is a rejection of the offer (not a form of acceptance), and does not create a binding contract unless accepted by the original offeror.

County Clerk: A government official who records and files items such as deeds, mortgages and other official records.

Covenant: An agreement or promise to do or not to do a particular act such as a promise to build a house of a particular architectural style or to use or not use property in a certain way.

Covenants, Conditions, & Restrictions (CCR’S): A document that lays out the rights, rules, and responsibilities that a condo unit owner must abide by to live in the community.

CPM©: Certified Property Manager, a designation of the Institute of Real Estate Management.

CPS1: The test-marketing phase of a condo project in which a sponsor gauges public demand for a particular community. Before beginning this phase of a project, the sponsor must submit an application and any proposed advertising materials to the attorney general for approval.

Crawl Hole: Exterior or interior opening permitting access underneath building, as required by building codes.

CRE: Counselor of Real Estate, Member of American Society of Real Estate Counselors.

Credit: A bookkeeping entry on the right side of an account, recording the reduction or elimination of an asset or an expense, or the creation of or addition to a liability or item of equity or revenue.

Credit Bureau: A private, profit-making company that collects and sells information about a person’s credit history. Typical clients include banks, mortgage lenders and credit card companies that use the information to screen applicants for loans and credit cards. There are three major credit bureaus, Equifax, Experian and Trans Union, and they are regulated by the federal Fair Credit Reporting Act.

Credit File: See credit report.

Credit History: Information in the files of a credit bureau, primarily comprised of a list of individual consumer debts and a record of whether or not these debts were paid back on time or “as agreed.” Your credit history is called a credit report when provided by a credit bureau to a lender or other business.

Credit Life Insurance: A type of insurance that pays off a specific amount of debt or a specified credit account if the borrower dies while the policy is in force.

Credit Insurance: Insurance a lender offers or requires a borrower to purchase to cover the loan. If the borrower dies or becomes disabled before paying off the loan, the policy will pay off the remaining balance. Federal and state consumer protection laws require the lender to disclose to existing and potential borrowers the terms and costs of obtaining credit insurance because it can affect the terms of the loan.

Credit Limit: The maximum amount that you can borrow under a home equity plan.

Credit Report: An account of your credit history, prepared by a credit bureau. A credit report will contain both credit history, such as what you owe to whom and whether you make the payments on time, as well as personal history, such as your former addresses, employment record and lawsuits in which you have been involved. An estimated 50% of all credit reports contain errors, such as accounts that don’t belong to you, an incorrect account status or information reported that is older than seven years (ten years in the case of a bankruptcy).

Credit Score: In the mortgage lending world, credit scores either make or break you when it comes to obtaining a home mortgage or getting the best rate you can. There are three different scores available to a mortgage lender each being generated by the three different credit agencies. The most popular, known as a Fico score is from Experian (formally TRW), then there is a Beacon score from Equifax, and finally a Emperica score from Trans Union. This is the “mortgage scoring” system used to get a conventional mortgage. Simply, credit scores are numbers calculated based upon your credit history. The better your credit, the higher your number or score will be – the worse your credit, the lower the score. The number of inquiries or times your credit has been pulled in the past 90 days will also lower your “score”. In some instances, lack of credit results in “no score” on your report requiring you to provide “alternative credit” via your rental, utility or telephone payment histories. There’s plenty you can do to improve your score if you know how the system works. Just don’t expect much help from your lender–most consider the actual formulas a trade secret and don’t want people angling for an advantage. Congress is currently working on legislation to provide consumers with access to their credit scores and the formulas used to calculate these scores. There are some lenders that do not rely on credit scores to the degree that most do. Some times, credit reports contain inaccuracies that lower your score, this is when a lender has to use a common sense approach to approving your loan. In some instances you may have to correct your credit report, wait for your score to improve, then reapply for the loan. Talk with your mortgage broker or lender to understand what your options are.

Creditor: A person or entity (such as a bank) to whom a debt is owed.

Creditworthy: Your ability to qualify for credit and repay debts.

Cul-De-Sac: A dead end street which widens sufficiently at the end to permit an automobile to make a “U” turn.

Curable Depreciation: Items of physical deterioration and functional obsolescence which are customarily repaired or replaced by a prudent property owner.

Cure Period: Time during which borrow can correct a default

Current Index: With regard to an adjustable rate mortgage, the current value of a recognized index as calculated and published nationally or regionally. The current index value changes periodically and is used in calculating the new note rate as of each rate adjustment date.

Current Value: The value usually sought to be estimated in an appraisal.

Curtail Schedule: A listing of the amounts by which the principal sum of an obligation is to be reduced by partial payments and of the dates when each payment will become payable.

Damages: The indemnity recoverable by a person who has sustained an injury, either in his or her person, property, or relative rights, through the act or default of another. Loss sustained or harm done to a person or property.

Data Plant: An appraiser’s file of information on real estate.

DBA: Doing Business As. Business names or aliases filed with the county.

Debenture: Bonds issued without security, an obligation not secured by a specific lien on property.

Debit: A bookkeeping entry on the left side of an account, recording the creation of or addition to an asset or an expense, or the reduction or elimination of a liability or item of equity or revenue.

Debt: That which is due from one person or another; obligation, liability.

Debt Capital: Money borrowed for a particular business purpose.

Debt Consolidation: Replacing several loans with one loan, usually with a lower monthly payment and a longer repayment period.

Debtor: A person who is in debt; the one owing money to another.

Debt Service: The total amount of credit card, auto, mortgage or other debt upon which you must pay.

debt-service ratio: The measurement of debt payments to gross household income which may include, in addition to the main wage earner’s salary, salaries of other wage earners, commissions, bonuses, overtime, etc.

Debt-to-Income Ratio: The percentage of gross monthly income that goes toward paying for your monthly housing expense, alimony, child support, car payments and other installment debts, and payments on revolving or open-ended accounts, such as credit cards

Decedent – One who is dead.

Deceptive Trade Practices Act: Part of the federal Consumer Protection Act originally passed in 1973 and made specifically applicable to real estate in 1975, specifically prohibiting a lengthy number of false, misleading and deceptive acts or practices.

Declaration – An initial deed document for a condo community that describes the property in detail, including plans and proposed pricing.

Declining Balance Depreciation: A method of accelerated depreciation allowed by the IRS in certain circumstances. Double Declining Balance Depreciation is its most common form and is computed by using double the rate used for straight line depreciation.

Decree – Order issued by one in authority; an edict or law; a judicial decision.

Decree of Foreclosure: Decree by a court ordering the sale of mortgaged property and the payment of the debt owing to the lender out of the proceeds.

Dedication: The giving of land by its owner to a public use and the acceptance for such use by authorized officials on behalf of the public.

Deduction: In tax law, an amount that you can subtract from the total amount on which you owe tax. Examples of federal income tax deductions include mortgage interest, charitable contributions and certain state taxes. For example, if Aimee receives an income of $60,000 in 1998 and pays $12,000 in mortgage interest during that same year, she can deduct $12,000 when she fills out her federal tax return, leaving an amount of $48,000 upon which she must pay tax.

Deed: Written instrument which when properly executed and delivered conveys title to real property from one person (grantor) to another (grantee).

Deed In Lieu of Foreclosure: A deed to real property accepted by a lender from a defaulting borrower to avoid the necessity of foreclosure proceedings by the lender.

Deed of Trust: (See Trust Deed.)

Deed Restrictions: Limitations in the deed to a property that dictate certain uses that may or may not be made of the property.

Default: Failure to fulfill a duty or promise or to discharge an obligation; omission or failure to perform any act.

Defeasance Clause: The clause in a mortgage that gives the mortgagor the right to redeem mortgagor’s property upon the payment of mortgagor’s obligations to the mortgagee.

Defeasible Fee: Sometimes called a base fee or qualified fee; a fee simple absolute interest in land that is capable of being defeated or terminated upon the happening of a specified event.

Defendant: A person against whom legal action is initiated for the purpose of obtaining criminal sanctions (criminal defendant) or damages or other appropriate judicial relief (civil defendant) .

Deferred Maintenance: Existing but unfulfilled requirements for repairs and rehabilitation. Postponed or delayed maintenance causing decline in a building’s physical condition.

Deferred Payment Options: The privilege of deferring income payments to take advantage of statutes affording tax benefits.

Deficiency Judgment: A judgment given by a court when the value of security pledged for a loan is insufficient to pay off the debt of the defaulting borrower.

Delayed Exchange: Also known as a “Starker Exchange”, an investor gives up his or her investment property and then receives the replacement property at a later date. This is the most common type of exchange.

Delegation of Powers: The conferring by an agent upon another of all or certain of the powers that have been conferred upon the agent by the principal.

Delinquency: Failure to make a payment when it is due. The condition of a loan when a scheduled payment has not been received by the due date, but generally used to refer to a loan for which payment is 30 or more days past due.

Delivery: The actual transfer of the deed, or an act of a seller showing intent to make a deed effective, without which, there is no transfer of title to the property.

Demand: The amount of opportunity to sell something in a given location at a given price. The lower the demand, the lower the price!

Demand Note: A note which is payable on demand of the holder.

Demising Clause: A clause found in a lease whereby the landlord (lessor) leases and the tenant (leasee) takes the property.

Demolition: The act of completely destroying a building.

Den: a spare bedroom that is used as a home-office, study or a library.

Deposit Receipt: A term used by the real estate industry to describe the written offer to purchase real property upon stated term and conditions, accompanied by a deposit toward the purchase price, which becomes the contract for the sale of the property upon acceptance by the owner.

Depreciation: Loss of value of property brought about by age, physical deterioration or functional or economic obsolescence. The term is also used in accounting to identify the amount of the decrease in value of an asset that is allowed in computing the value of the property for tax purposes.

Depth Table: A statistical table that may be used to estimate the value of the added depth of a lot.

Descent: Acquisition of property through inheritance laws when there is no will (when a person dies intestate).

Desist and Refrain Order: An order directing a person to stop from committing an act in violation of the Real Estate Law.

Determinable Fee: An estate which may end on the happening of an event that may or may not occur.

Devise: A gift or disposal of real property by last will and testament.

Devisee: One who receives a gift of real property by will.

Devisor: One who disposes of real property by will.

Directional Growth: The location or direction toward which the residential sections of a city are destined or determined to grow.

Disclosure: The making known of a fact that had previously been hidden; a revelation. For example, in many states you must disclose major physical defects in a house you are selling, such as a leaky roof or potential flooding problem.

Discount: To sell a promissory note before maturity at a price less than the outstanding principal balance of the note at the time of sale. Also an amount deducted in advance by the lender from the nominal principal of a loan as part of the cost to the borrower of obtaining the loan.

Discount Points: The amount of money the borrower or seller must pay the lender to get a mortgage at a stated interest rate. This amount is equal to the difference between the principal balance on the note and the lesser amount which a purchaser of the note would pay the original lender for it under market conditions. A point equals one percent of the loan.

Discount Rate: (1) The rate charged member banks who borrow from the Federal Reserve System. (2) The rate used to convert future income into present value.

Discretionary Powers of Agency: Those powers conferred upon an agent by the principal which empower the agent in certain circumstances to make decisions based on the agent’s own judgment.

Disintermediation: The relatively sudden withdrawal of substantial sums of money savers have deposited with savings and loan associations, commercial banks, and mutual savings banks. This term can also be considered to include life insurance policy purchasers borrowing against the value of their policies. The essence of this phenomenon is financial intermediaries losing within a short period of time billions of dollars as owners of funds held by those institutional lenders exercise their prerogative of taking them out of the hands of these financial institutions.

Disposable Income: The after-tax income a household receives to spend on personal consumption.

Dispossess: To deprive one of the use of real estate.

Dispossess Proceedings: Summary process by a landlord to oust a tenant and regain possession of the premises for nonpayment of rent or other breach of conditions of the lease or occupancy.

Documentary Transfer Tax: A state enabling act allows a county to adopt a documentary transfer tax to apply on all transfers of real property located in the county. Notice of payment is entered on face of the deed or on a separate paper filed with the deed.

Documentary Evidence: Evidence in the form of written or printed papers.

Documents: Legal instruments such as mortgages, contracts, deeds, options, wills, bills of sale, etc.

Dominant Tenement: Property that carries a right to use a portion of a neighboring property. For example, property that benefits from a beach access trail across another property is the dominant tenement.

Donee: A person who receives a gift.

Donor: A person who makes a gift.

Double Declining Balance Depreciation: (See DECLINING BALANCE DEPRECIATION.)

Down Payment: An amount of money the buyer pays which is the difference between the purchase price and the mortgage amount.

Draw: Usually applies to construction loans when disbursement of a portion of the mortgage is made in advance, as improvements to the property are made.

Dual Agency: An agency relationship in which the agent acts concurrently for both of the principals in a transaction.

Due Diligence: A potential buyer’s investigation of a co-op community, including subjects such as the corporation’s financial well-being, the rules governing the community, and other pertinent issues.

Due on Sale Clause: An acceleration clause granting the lender the right to demand full payment of the mortgage upon a sale of the property.

Duress: Unlawful constraint exercised upon a person whereby he or she is forced to do some act against his or her will.

Earnest Money: Down payment made by a purchaser of real estate as evidence of good faith. A deposit or partial payment.

Earnest Money Contract (EMC): A contract for the sale or purchase of real estate in which the purchaser is required to tender earnest money to evidence good faith in completing the contractual obligations. Also see sales contract and promulgated contracts.

Easement: A right to use another person’s real estate for a specific purpose. The most common type of easement is the right to travel over another person’s land, known as a right of way. In addition, property owners commonly grant easements for the placement of utility poles, utility trenches, water lines or sewer lines. The owner of property that is subject to an easement is said to be “burdened” with the easement, because he or she is not allowed to interfere with its use. For example, if the deed to John’s property permits Sue to travel across John’s main road to reach her own home, John cannot do anything to block the road. On the other hand, Sue cannot do anything that exceeds the scope of her easement, such as widening the roadway.

Easement By Prescription: A right to use property, acquired by a long tradition of open and obvious use. For example, if hikers have been using a trail through your backyard for ten years and you’ve never complained, they probably have an easement by prescription through your yard to the trail.

Economic Life: The period over which a property will yield a return on the investment over and above the economic or ground rent due to land.

Economic Obsolescence: A loss in value due to factors away from the subject property but adversely affecting the value of the subject property.

Economic Rent: The reasonable rental expectancy if the property were available for renting at the time of its valuation.

Effective Age of Improvement: The number of years of age that is indicated by the condition of the structure, distinct from chronological age.

Effective Date of Value: The specific day the conclusion of value applies.

Effective Gross Income: The actual amount of income collected.

Effective Interest Rate: The percentage of interest that is actually being paid by the borrower for the use of the money, distinct from nominal interest.

Effluxion of Time: The normal expiration of a lease due to the passage of time, rather than due to a specific event that might cause the lease to end, such as destruction of the building.

Egress: An exit, or the act of exiting. The most famous use of this word was by P.T. Barnum, who put up a large sign in his circus tent saying “This Way to the Egress.” Thinking an egress was some type of exotic bird, people eagerly went though the passage and found themselves outside the circus tent. Compare ingress.

Ejectment: A form of action to regain possession of real property, with damages for the unlawful retention; used when there is no relationship of landlord and tenant.

Emblements: The crops and other annual plantings considered to be personal property of the cultivator.

Eminent Domain: The right of the government to acquire property for necessary public or quasi-public use by condition; the owner must be fairly compensated and the right of the private citizen to get paid is spelled out in the 5th Amendment to the United States Constitution.

Employer-Assisted Housing: A program in which companies assist their employees in purchasing homes by providing assistance with the down payment, closing costs, or monthly payments.

Enclave Community: Smaller in scope than master-planned communities, enclave communities typically blend different price ranges of residential neighborhoods with amenities such as public recreation areas and parks, neighborhood schools and extensive landscaping. Recreation areas may include public swimming pools, tennis courts, and children’s play grounds. Many offer large water features and gated access.

Encroachment: An unlawful intrusion onto another’s adjacent property by improvements to real property, e.g. a swimming pool built across a property line.

Encumbrance: Anything which affects or limits the fee simple title to or value of property, e.g., mortgages or easements.

Endorsement: Writing one’s name, either with or without additional words, on a negotiable instrument, or on a paper attached to it.

Equal Credit Opportunity Act: The 1974 federal law (Title VII of the Consumer Credit Protection Act) which requires fairness and impartiality without discrimination on the basis of race, color, religion, national origin, sex or marital status, or receipt of income from public assistance programs in the extension of credit, and good faith exercises of any right under the Consumer Credit Protection Act (e.g. the creditor must state reasons for denial of credit).

Equal Treatment/Different Impact: It is possible to be guilty of discrimination even by treating two individuals the same. If the results of the treatment are discriminatory, or tend to exclude or otherwise harm members of a minority group, or have discriminatory impact, they are against the law. For example, an apartment house which rents only to doctors and lawyers, where there are few, if any, minority doctors or lawyers in the area, may be a violation of the Fair Housing Laws.

Equalization Rate: A rate calculated by the State Board of Equalization and Assessment to measure a municipality’s level of assessment.

Equity: The interest or value which an owner has in real estate over and above the liens against it. Branch of remedial justice by and through which relief is afforded to suitors in courts of equity.

Equity Build-Up: The increase of owner’s equity in property due to mortgage principal reduction and value appreciation.

Equity Loan: Junior loan based on a percentage of the equity.

Equity Participation: A mortgage transaction in which the lender, in addition to receiving a fixed rate of interest on the loan acquires an interest in the borrower’s real property, and shares in the profits derived from the real property.

Equity of Redemption: The right to redeem property during the foreclosure period, such as a mortgagor’s right to redeem within either 3 months or 1 year as may be permitted after foreclosure sale.

Erosion: The wearing away of land by the act of water, wind or glacial ice.

Escalation: The right reserved by the lender to increase the amount of the payments and/or interest upon the happening of a certain event.

Escalator Clause: A clause in a contract providing for the upward or downward adjustment of certain items to cover specified contingencies, usually tied to some index or event. Often used in long term leases to provide for rent adjustments, to cover tax and maintenance increases.

Escheat: The reverting of property to the State when heirs capable of inheriting are lacking.

Escrow: The deposit of instruments and/or funds with instructions with a third neutral party to carry out the provisions of an agreement or contract.

Escrow Account: (1) A third party account that holds money safely while a sale is in progress. (2) An account used to save monies required for the payment of an eventual debt. Often used by lenders to save for property taxes, hazard insurance, homeowner’s dues, etc. Escrow accounts are typically non-interest bearing for the contributors, but may pay interest to the entity holding the account (lenders, title companies, lawyers, etc.).

Escrow Analysis: The accounting that a mortgage servicer performs to determine the appropriate balances for the escrow account, compute the borrower’s monthly escrow payments, and determine whether any shortages, surpluses or deficiencies exist in the account.

Escrow Agent: The neutral third party holding funds or something of value in trust for another or others.

Estate: As applied to real estate, the term signifies the quantity of interest, share, right, equity, of which riches or fortune may consist in real property. The degree, quantity, nature and extent of interest which a person has in real property.

Estate at Sufferance: An estate arising when the tenant wrongfully holds over after the expiration of the term. The landlord has the choice of evicting the tenant as a trespasser or accepting such tenant for a similar term and under the conditions of the tenant’s previous holding. Also called a tenancy at sufferance.

Estate at Will: The occupation of lands and tenements by a tenant for an indefinite period, terminable by one or both parties.

Estate for Life: A possessory, freehold estate in land held by a person only for the duration of his or her life or the life or lives of another.

Estate from Period to Period: An interest in land where there is no definite termination date but the rental period is fixed at a certain sum per week, month, or year. Also called a periodic tenancy.

Estate for Years: An interest in lands by virtue of a contract for the possession of them for a definite and limited period of time. May be for a year or less. A lease may be said to be an estate for years.

Estate of Inheritance: An estate which may descend to heirs. All freehold estates are estates of inheritance, except estates for life.

Estate in Reversion: The residue of an estate left for the grantor, to commence in possession after the termination of some particular estate granted by the grantor.

Estimate: A preliminary opinion of value. Appraise, set a value.

Estimate of Value: An appraisal; the appraised value.

Estimated Remaining Life: The period of time (years) it takes for the improvements to become valueless.

Estoppel: A legal theory under which a person is barred from asserting or denying a fact because of the person’s previous acts or words.

Estoppel Certificate: An instrument executed by the mortgagor setting forth the present status and the balance due on the mortgage as of the date of the execution of the certificate.

Ethics: That branch of moral science, idealism, justness, and fairness, which treats of the duties which a member of a profession or craft owes to the public, client or partner, and to professional brethren or members. Accepted standards of right and wrong. Moral conduct, behavior or duty.

ET UX: Abbreviation for “et uxor.” Means “and wife.”

Eviction: Dispossession by process of law. The act of depriving a person of the possession of lands in pursuance of the judgment of a court.

Eviction, Constructive: Any disturbance of the tenant’s possession of the leased premises by the landlord whereby the premises are rendered unfit or unsuitable for the purpose for which they were leased.

Exceptions: Matters affecting title to a particular parcel of real property which are included from coverage of a title insurance policy.

Exchange: A means of trading equities in two or more real properties, treated as a single transaction through a single escrow.

Exclusion: General matters affecting title to real property excluded from coverage of a title insurance policy.

Exclusive Agency Listing: A listing agreement employing a broker as the sole agent for the seller of real property under the terms of which the broker is entitled to a commission if the property is sold through any other broker, but not if a sale is negotiated by the owner without the services of an agent.

Exclusive Listing: a listing promoted by a single broker according to the broker’s agreement with the owner. In an “exclusive right-to sell” agreement, the broker is entitled to a commission even if the owner finds the buyer on their own, without the broker’s assistance. In an “exclusive agency” the owner can market the property and find a buyer without any obligation to the broker.

Exclusive Right to Sell Listing: A listing agreement employing a broker to act as agent for the seller of real property under the terms of which the broker is entitled to a commission if the property is sold during the duration of the listing through another broker or by the owner without the services of an agent.

Exculpatory Clause: A provision in a lease that absolves the landlord from responsibility for all damages, injuries or losses occurring on the property, including those caused by the landlord’s actions. Most states have laws that void exculpatory clauses in rental agreements, which means that a court will not enforce them.

Execute: To complete, to make, to perform, to do, to follow out; to execute a deed, to make a deed, including especially signing, sealing and delivery; to execute a contract is to perform the contract, to follow out to the end, to complete.

Executor: A man named in a will to carry out its provisions as to the disposition of the estate of a deceased person. (A woman is executrix.)

Executory Contract: A contract in which something remains to be done by one or both of the parties.

Executrix: A woman appointed to perform the same duties as an executor.

Exemption: A deduction on property taxes allowed to a taxpayer because of a certain status, such as age, dependents or service in the armed forces.

Expenses: Certain items which appear on a closing statement in connection with a real estate sale.

Expropriation: See eminent domain

Extension Agreement: An agreement that extends the life of a mortgage to a later date.

façade: The front of a building, often used to refer to a false front and as a metaphor.

Fair Credit Reporting Act (FCRA): A consumer protection law that imposes obligations on (1) credit bureaus (and similar agencies) that maintain consumer credit histories, (2) lenders and other businesses that buy reports from credit bureaus, and (3) parties who furnish consumer information to credit bureaus. Among other provisions, the FCRA limits the sale of credit reports by credit bureaus by requiring the purchaser to have a legitimate business need for the data, allows consumers to learn the information on them in credit bureau files (including one annual free credit report), and specifies procedure for challenging errors in that data.

Fair Housing Act & Fair Housing Amendments Act: Federal laws that prohibit housing discrimination on the basis of race or color, national origin, religion, sex, familial status or disability. The federal Acts apply to all aspects of the landlord/tenant relationship, from refusing to rent to members of certain groups to providing different services during tenancy.

Fair Housing Laws: Federal, state, and local laws, particularly Title VIII of the 1968 Civil Rights Act, Title VI of the Civil Rights Act of 1964, and the Civil Rights Act of 1866, which forbid discrimination because of race, sex, color, religion, or national origin, in the selling or renting of homes or apartments, and in other specified transactions. These laws have been recently been expanded to include familial status (having children) and disabilities (Americans with Disabilities Act).

Fair Market Value: This is the amount of money that would be paid for a property offered on the open market for a reasonable period of time with both buyer and seller knowing all the uses to which the property could be put and with neither party being under pressure to buy or sell.

Fannie Mae: An acronymic nickname for Federal National Mortgage Association (FNMA).

Fannie Mae-Seller/Servicer: A lender that Fannie Mae has approved to sell loans to it and to service loans on Fannie Mae’s behalf.

Fannie Mae/Freddie Mac Loan Limit: The current 2006 Fannie Mae/Freddie Mac loan limit for a single-family home is $417,000 and is higher in Alaska, Guam, Hawaii, and the

U.S. Virgin Islands. The Fannie Mae loan limit is $533,850 for a two-unit home; $645,300 for a three-unit home; and $801,950 for a four-unit home. Also referred to as the “conventional loan limit.”

Farmers Home Administration: An agency of the Department of Agriculture. Primary responsibility is to provide financial assistance for farmers and others living in rural areas where financing is not available on reasonable terms from private sources.

Federal Deposit Insurance Corporation (FDIC): Agency of the federal government which insures deposits at commercial banks, savings banks and savings and loans.

Federal Emergency Management Agency (FEMA): FEMA is the governmental unit that has leadership responsibilities for the Nation’s emergency management system. Once the President has declared a major disaster, FEMA coordinates not only its own response activities but also those of as many as 28 other Federal agencies that may participate. FEMA also works with States, territories, and communities during non-disaster periods to help plan for disasters, develop mitigation programs, and anticipate what will be needed when major disasters occur. Among its many responsibilities the agency operates the Federal Insurance Administration, which makes flood insurance available to residents of communities that agree to adopt and enforce sound floodplain management practices.

Federal Home Loan Mortgage Corporation: An independent stock company which creates a secondary market in conventional residential loans and in FHA and VA loans by purchasing mortgages.

Federal Housing Administration (FHA): a wholly owned government corporation, was established under the National Housing Act of 1934 to improve housing standards and conditions; to provide an adequate home financing system through insurance of mortgages; and to stabilize the mortgage market. FHA was consolidated into the newly established Department of Housing and Urban Development (HUD) in 1965. Since 1934, FHA has been extremely successful in achieving these goals. FHA loans require special a appraisal/inspection that determine if a property meet the agency’s minimum property standards. While somewhat more expensive that a conventional loan in terms of interest rates and insurance fees, FHA loans offer slightly more liberal qualifying criteria. The current maximum FHA loan amount in the Houston area, for a single-family home, is $139,650.00

Federal Land Bank System: Federal government agency making long term loans to farmers.

Federal National Mortgage Association (FNMA): “Fannie Mae” Created by Congress in 1938 to bolster the housing industry during the Depression, Fannie Mae was originally part of the Federal Housing Administration (FHA) and authorized to buy only FHA-insured loans to replenish lenders’ supply of money. In 1968, Fannie Mae became a private company operating with private capital on a self-sustaining basis. Its role was expanded to buy mortgages beyond traditional government loan limits, reaching out to a broader cross-section of Americans. Today, Fannie Mae operates under a congressional charter that directs it to channel its efforts into increasing the availability and affordability of homeownership for low-, moderate-, and middleincome Americans. Fannie Mae receives no government funding or backing, and is one of the nation’s largest taxpayers as well as one of the most consistently profitable corporations in America. Fannie Mae establishes strict guidelines for mortgage loans it is willing to purchase. As the largest buyer of mortgage loans in the US, these guidelines have become the industry standard for the majority of home loans. Any loan that meets these Fannie Mae guidelines is called a “conforming loan”.

Federal Reserve System: The federal banking system of the United States under the control of central board of governors (Federal Reserve Board) involving a central bank in each of twelve geographical districts with broad powers in controlling credit and the amount of money in circulation.

Fee: An estate of inheritance in real property.

Fee Absolute: Absolute ownership of real property; a person has this type of estate where the person is entitled to the entire property with unconditional power of disposition during the person’s life and descending to the person’s heirs or distributees.

Fee Simple: The maximum possible estate in land in which the owner holds unconditional power of disposition; an estate freely transferable and inheritable.

Fee Simple Defeasible: An estate in fee subject to the occurrence of a condition subsequent whereby the estate may be terminated.

Fee Simple Estate: The greatest interest that one can have in real property. An estate that is unqualified, of indefinite duration, freely transferable and inheritable.

Feudal Tenure: A real property ownership system in which ownership rests with a sovereign who may grant lesser interests in return for service or loyalty. This is in contrast to allodial tenure.

FHA: The Federal Housing Administration which insures mortgage loans made by approved lenders, in accordance with FHA regulations.

FHA-Insured Loan: A loan that is insured by the Federal Housing Administration (FHA) of the U.S. Department of Housing and Urban Development (HUD).

FHLMC: See FEDERAL HOME LOAN MORTGAGE CORPORATION.

Fidelity Bond: A security posted for the discharge of an obligation of personal services.

Fiduciary: A person in a position of trust and confidence, as between principal and broker; broker as fiduciary owes certain loyalty which cannot be breached under the rules of agency.

Fiduciary Duty: That duty owed by an agent to act in the highest good faith toward the principal and not to obtain any advantage over the latter by the slightest misrepresentation, concealment, duress or pressure.

Filtering: The process whereby higher-priced properties become available to lower income buyers.

Financial Intermediary: Financial institutions such as commercial banks, savings and loan associations, mutual savings banks and life insurance companies which receive relatively small sums of money from the public and invest them in the form of large sums. A considerable portion of these funds are loaned on real estate.

Financing Process: The systematic 5 step procedure followed by major institutional lenders in analyzing a proposed loan, which includes — filing of application by a borrower; lender’s analysis of borrower and property; processing of loan documentation; closing (paying) the loan; and servicing (collection and record keeping).

Financing Statement: The instrument which is filed in order to give public notice of the security interest and thereby protect the interest of the secured parties in the collateral. (See definition of Security Interest and Secured Party.)

Finder’s Fee: A fee charged by real estate brokers and apartment-finding services in exchange for locating a rental property. These fees are permitted by law. Some landlords, however, charge finder’s fees merely for renting a place. This type of charge is not legitimate and, in some areas, is specifically declared illegal.

First Mortgage: A legal document pledging collateral for a loan (See “mortgage”) that has first priority over all other claims against the property except taxes and bonded indebtedness. That mortgage superior to any other.

First Trust Deed: A legal document pledging collateral for a loan (See “trust deed”) that has first priority over all other claims against the property except taxes and bonded indebtedness. That trust deed superior to any other.

First-Time Home Buyer: A person with no ownership interest in a principal residence during the three-year period preceding the purchase of the security property.

Fiscal Controls: Federal tax revenue and expenditure policies used to control the level of economic activity.

Fiscal Year: A business or accounting year as distinguished from a calendar year.

Fixed-Period Adjustable-Rate Mortgage: An adjustable-rate mortgage (ARM) that offers a fixed rate for an initial period, typically three to ten years, and then adjusts every six months, annually, or at another specified period, for the remainder of the term. Also known as a “hybrid loan.”

Fixed-Rate Mortgage: A mortgage with an interest rate that does not change during the entire term of the loan.

Fixity of Location: The physical characteristic of real estate that subjects it to the influence of its surroundings.

Fixtures: Appurtenances attached to the land or improvements, which usually cannot be removed without agreement as they become real property; examples — plumbing fixtures, store fixtures built into the property, etc.

Flip Tax: A fee that a co-op corporation charges a seller at the closing.

Flipping: An investor buys a property, and then sells it as quickly as possible at a profit.

Flood Certification Fee: A fee charged by independent mapping firms to identify properties located in areas designated as flood zones.

Flood Control District: A special taxing district created to provide flood control in specific areas of a county.

Flood Insurance: A special and separate type of homeowner’s insurance the provides coverage for damages resulting from flooding. Flood insurance is required by most lenders only if the property is located within a designated flood plain. The cost of the policy is related to the associated flooding risk. If a property has a small section of land located within a flood plain, but away from the residential improvements (house), the lender will still require a policy, but its cost will be much lower. Likewise, flood insurance policies for properties not located within any floodplain, are fairly inexpensive. Most flood insurance is underwritten by the federal government through FEMA and the National Flood Insurance Program in cooperation with private insurance agencies. More than 18,000 communities participate in the Federal flood insurance program. More than 3.8 million National Flood Insurance Program (NFIP) home and business policies are in effect. The United States experiences flooding threats throughout all four seasons of the year and, in fact, flooding is the most common natural disaster. There are, on average, 1000 floods per year in the U.S. Nearly everyone is at some risk of experiencing the effects of flooding. In the Houston area, 25 percent of flood-insurance claims come from areas outside a designated flood plain.

Flood Plain: Flood plains are by definition subject to periodic flooding. They are generally characterized by relatively flat topography and soil types that were laid down during past inundations by flood waters. If your property is in the 100-year flood plain, there is a 1-in- 100 chance in any given year that your property will flood. If it is in the 25-year flood plain, there is a 1-in-25 chance in any given year that your property will flood. The statistical chance of flooding is not changed by any one flooding event; but repeated flooding may result in the flood plain being recalculated. A 100-year flood plain is always wider than a 25-year flood plain, and the 25-year flood plain is contained within the 100-year flood plain. The flood prone areas of the United States cover approximately 150,000 square miles or 94 million acres of land, an area roughly the size of the State of Montana. People living in flood plains are 26 times more likely to experience a flooding disaster than they are a fire disaster during the life of the 30-year mortgage on their homes. The changes in flood plain maps reflect changes in land use (such as increased building activity), changes in the waterways, and flood control improvements (such as detention ponds or other flood control measures). As more lots are covered with more buildings and parking lots, the amount of water that flows into creeks and lakes increases because there is less vegetation to absorb the water when it rains. This is one reason why buildings that were not originally built in a flood plain are now in the 25-year or 100-year flood plain.

FNMA: Usually referred to as “Fannie Mae,” the acronym stands for the Federal National Mortgage Association.

For Sale By Owner (FSBO): An individual homeowner who is attempting to sell his property without a real estate broker. The acronym, FSBO is pronounced “fizzbo.”

Foreclosure: Procedure whereby property pledged as security for a debt is sold to pay the debt in event of default in payments or terms.

Forfeiture: Loss of money or anything of value, due to failure to perform.

Franchise: A specified privilege awarded by a government or business firm which awards an exclusive dealership.

Fraud: The intentional and successful employment of any cunning, deception, collusion, or artifice, used to circumvent, cheat or deceive another person whereby that person acts upon it to the loss of property and to legal injury. (Actual Fraud — A deliberate misrepresentation or representation made in reckless disregard of its truth or its falsity, the suppression of truth, a promise made without the intention to perform it, or any other act intended to deceive.)

Frauds, Statute of: (See Statute of Frauds.)

“Freddie Mac”: (See FEDERAL HOME LOAN MORTGAGE CORPORATION.)

Freehold Estate: An estate of indeterminable duration, e.g., fee simple or life estate.

Frontage: A term used to describe or identify that part of a parcel of land or an improvement on the land which faces a street. The term is also used to refer to the lineal extent of the land or improvement that is parallel to and facing the street, e.g., a 75-foot frontage.

Front Foot: Property measurement for sale or valuation purposes; the property measured by the front linear foot on its street line—each front foot extending the depth of the lot.

Front Money: The minimum amount of money necessary to initiate a real estate venture, to get the transaction underway.

Frostline: The depth of frost penetration in the soil. Varies in different parts of the country. Footings should be placed below this depth to prevent movement.

FSBO: Acronym – For Sale By Owner

Fully Amortized Mortgage: A mortgage in which the monthly payments are designed to retire the obligation at the end of the mortgage term.

Fully Indexed Note Rate: As related to adjustable rate mortgages, the index value at the time of application plus the gross margin stated in the note.

Functional Obsolescence: A loss of value due to adverse factors from within the structure which affect the utility of the structure, value and marketability.

Future Benefits: The anticipated benefits the present owner will receive from the property in the future.

Gable Roof: A pitched roof with sloping sides.

Gain: A profit, benefit, or value increase.

Gambrel Roof: A curb roof, having a steep lower slope with a flatter upper slope above.

Garden Home: See patio home

Gated Community: A neighborhood or group of neighborhoods, usually surrounded by masonary walls, restricting access through the use of a manned guard station or electronically operated gates. The electronic gates may be opened through the use of individual remote controls and/or a numeric keypad and code. Some gated communities restrict entry at all times, while others only limit access during the evening hours. The City of Houston does not allow public city streets to be gated off, so only neighborhoods with private streets, may have restricted access. The costs associated with maintaining a manned guard gate can significantly impact monthly maintenance fees, depending on the size of the community.

General Agent: An Agent who has the authority to act for a principal’s business within certain limitations.

General Contractor: A person who oversees a home improvement or construction project and handles various aspects such as scheduling workers and ordering supplies.

General Lien: A lien that includes all the property owned by a debtor, rather than a specific property. Contrast with Specific Lien.

General Warranty Deed: A deed in which the grantor fully warrants good and clear title to the property. A general warranty deed offers the most protection of any deed.

Gift Deed: A deed for which there is no consideration.

Gift Letter: A letter that a family member writes verifying that s/he has given you a certain amount of money as a gift and that you don’t have to repay it. You can use this money towards a portion of your down payment with some mortgages.

Ginnie Mae: The common nickname for the Government National Mortgage Association. Ginnie Mae was created in 1968 as a wholly owned corporation within the Department of Housing and Urban Development (HUD), having been separated from Fannie Mae. Ginnie Mae does not loan money for mortgages. Instead, it operate in the secondary mortgage market, buying loans and selling mortgage-backed securities investors, which in turn, increases the availability of mortgage credit.

Goodwill: An intangible but salable asset of a business derived from the expectation of continued public patronage.

Good Faith Estimate: A written estimate of closing costs which a lender must provide you within three days of submitting an application.

Government Mortgage: A mortgage loan that is insured or guaranteed by a federal government entity such as the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA), or the Rural Housing Service (RHS).

Government National Mortgage Association: An agency of HUD, which functions in the secondary mortgage market, primarily in social housing programs. Commonly called by the acronymic nickname “Ginnie Mae” (GNMA).

Government Survey: A method of specifying the location of parcel of land using prime meridians, base lines, standard parallels, guide meridians, townships and sections.

Grace Period: A period of time during which a loan payment may be paid after its due date but not incur a late penalty. Such late payments may be reported on your credit report.

Grade: Ground level at the foundation.

Graduated Lease: Lease which provides for a varying rental rate, often based upon future determination; sometimes rent is based upon result of periodical appraisals; used largely in long-term leases.

Graduated Payment Mortgage: Providing for partially deferred payments of principal at start of loan. (There are a variety of plans.) Usually after the first five years of the loan term the principal and interest payment are substantially higher, to make up principal portion of payments lost at the beginning of the loan. (See Variable Interest Rate.)

Grant: A technical legal term in a deed of conveyance bestowing an interest in real property on another. The words “convey” and “transfer” have the same effect.

Grant Deed: A limited warranty deed using the word “grant” or like words that assures a grantee that the grantor has not already conveyed the land to another and that the estate is free from encumbrances placed by the grantor.

Grantee: A person to whom a grant is made.

Grantor: A person who transfers his or her interest in property to another by grant.

Gratuitous Agent: A person not paid by the principal for services on behalf of the principal, who cannot be forced to act as an agent, but who becomes bound to act in good faith and obey a principal’s instructions once he or she undertakes to act as an agent.

Grid: A chart used in rating the borrower risk, property and the neighborhood.

Gross Debt: service The amount of money needed to pay principal, interest and taxes, and sometimes energy costs. If the dwelling unit is a condominium, all or a portion of common fees are excluded, depending on what expenses are covered.

Gross Income: Total income from property before any expenses are deducted.

Gross Lease: A commercial real estate lease in which the tenant pays a fixed amount of rent per month or year, regardless of the landlord’s operating costs, such as maintenance, taxes and insurance. A gross lease closely resembles the typical residential lease. The tenant may agree to a “gross lease with stops,” meaning that the tenant will pitch in if the landlord’s operating costs rise above a certain level. In real estate lingo, the point when the tenant starts to contribute is called the “stop level,” because that’s where the landlord’s share of the costs stops. Contrast with Net Lease.

Gross Margin: With regard to an adjustable rate mortgage, an amount expressed as percentage points, stated in the note which is added to the current index value on the rate adjustment date to establish the new note rate.

Gross Monthly Income: The income you earn in a month before taxes and other deductions. It also may include rental income, self-employed income, income from alimony, child support, public assistance payments, and retirement benefits.

Gross National Product: The total value of all goods and services produced in an economy during a given period of time.

Gross Potential Income: Total scheduled rental income.

Gross Rate: A method of collecting interest by adding total interest to the principal of the loan at the outset of the term.

Gross Rent Multiplier: A number which, times the gross income of a property, produces an estimate of value of the property. Example — The gross income from an unfurnished apartment building is $200,000 per annum. If an appraiser uses a gross multiplier of 7%, then it is said that based on the gross multiplier the value of the building is $1,400,000.

Ground Lease: An agreement for the use of the land only, sometimes secured by improvements placed on the land by the user.

Ground Rent: Earnings of improved property credited to earnings of the ground itself after allowance is made for earnings of improvements; often termed economic rent.

Group Boycott: An agreement between members of a trade to exclude other members from fair participation in the trade.

Growing-Equity Mortgage (GEM): A fixed-rate mortgage in which the monthly payments increase according to an agreed-upon schedule, with the extra funds applied to reduce the loan balance and loan term.

Habendum Clause: The “to have and to hold” clause which may be found in a deed.

Hard Money Loans: Used by investors who may have a risky credit background. The basis for these loans is solely the “quick sale” value of the property.

Hazard Insurance: A contract between purchaser and an insurer, to compensate the insured for loss of property due to hazards (fire, hail damage, etc.), for a premium. Most common, lender required feature of homeowners insurance.

Hereditaments: Property, personal and real, capable of being inherited.

Heir: One who inherits property at the death of the owner of the land, if the owner has died without a will.

Hidden Fees: Fees put in the contract without being disclosed to the borrower.

High Interest Loans: A loan that is 8% above the yield on a comparable treasury on a first mortgage according to Home Ownership and Equity Protection Act of 1994 (HOEPA) guidelines, or a loan that is 10% above the yield on a comparable treasury on a second mortgage.

High-Rise: A nine-story or taller building containing residential apartments or condominium units. In addition to spectacular views, most high-rises offer their residents a full range of amenities. Building features may include 24-hour concierge service, swimming pools, spas, saunas, tennis courts, exercise areas, party rooms and guest suites. Security is enhanced at these buildings by the manned entry desks and limited access, covered parking garages. Compare with mid-rise.

Highest and Best Use: An appraisal phrase meaning that use which at the time of an appraisal is most likely to produce the greatest net return to the land and/or buildings over a given period of time; that use which will produce the greatest amount of amenities or profit. This is the starting point for appraisal.

Hip Roof: A pitched roof with sloping sides and ends.

Historic District: A geographically definable area that possesses a significant concentration of buildings that are united architecturally, historically or aesthetically.

HOA: Acronym – homeowner’s association

Hold Harmless: In a contract, a promise by one party not to hold the other party responsible if the other party carries out the contract in a way that causes damage to the first party. For example, many leases include a hold harmless clause in which the tenant agrees not to sue the landlord if the tenant is injured due to the landlord’s failure to maintain the premises. In most states, these clauses are illegal in residential tenancies, but may be upheld in commercial settings.

Holder in Due Course: One who has taken a note, check or bill of exchange in due course:

1. before it was overdue; 2. in good faith and for value; and 3. without knowledge that it has been previously dishonored and without notice of any defect at the time it was negotiated to him or her.

Holdover Tenant: Tenant who remains in possession of leased property after the expiration of the lease term.

Home Equity Conversion Mortgage (HECM): A special type of mortgage developed and insured by the Federal Housing Administration (FHA) that enables older home owners to convert the equity they have in their homes into cash, using a variety of payment options to address their specific financial needs. Sometimes called a “reverse mortgage.”

Home Equity Line of Credit (HELOC): A type of revolving loan, that enables a home owner to obtain multiple advances of the loan proceeds at his or her own discretion, up to an amount that represents a specified percentage of the borrower’s equity in the property.

Home Equity Loan: A fixed or adjustable rate loan obtained for a variety of purposes, secured by the equity in your home. Interest paid is usually tax-deductible. Often used for home improvement or freeing of equity for investment in other real estate or investment. Recommended by many to replace or substitute for consumer loans whose interest is not tax- deductible, such as auto or boat loans, credit card debt, medical debt, and education loans.

Home Inspection: A professional inspection of a home to determine the condition of the property. The inspection should include an evaluation of the plumbing, heating and cooling systems, roof, wiring, foundation and pest infestation.

Home Warranty: A service contract that covers a major housing system–for example, plumbing or electrical wiring- -for a set period of time from the date a house is sold. The warranty guarantees repairs to the covered system and is renewable. A basic, one year Buyer’s warranty costs $295 to $350 with additional coverage available for garage door openers, spas, swimming pools, sprinkler system and other appliances.

Homeowners’ Association (HOA): An organization comprising neighbors concerned with managing the common areas of a subdivision or condominium complex. These associations take on issues such as maintaining common land and recreation areas, and collecting dues from residents. The homeowners’ association is also responsible for enforcing any covenants, conditions & restrictions that apply to the property. Payment of dues and participation in the homeowner’s association may be either voluntary or mandatory, depending on the neighborhood.

Homeowners’ Insurance: A type of insurance policy designed to protect homeowners from financial losses related the ownership of real property. In addition to covering losses due to vandalism, fire, hail, etc.(hazard insurance), most policies also provide theft and liability coverage. Flood related damage requires a separate flood insurance policy or rider.

Homeowner’s Warranty (HOW): Insurance offered by a seller that covers certain home repairs and fixtures for a specified period of time.

Homestead: (1) The house in which a family lives, plus any adjoining land and other buildings on that land. (2) Land, and the improvements thereon, designated by the owner as his homestead and, therefore, protected by state law from forced sale by certain creditors of the owner. Homestead protection will not stop foreclosures for delinquent mortgages, taxes or mandatory homeowner’s association dues. (3) Land acquired out of the public lands of the United States. The term “homesteaders” refers to people who got their land by settling it and making it productive, rather than purchasing it outright.

House Closing: The final transfer of the ownership of a house from the seller to the buyer, which occurs after both have met all the terms of their contract and the deed has been recorded. Also known as just “closing“.

House Rules: A document that spells out all of the community and lifestyle rules that co-op tenant shareholders must obey on a daily basis.

Housing Expense Ratio: The percentage of your gross monthly income that goes toward paying for your housing expenses.

Housing Financial Discrimination Act of 1977 (Holden Act): California Health and Safety Code Section 35800, et seq., designed primarily to eliminate discrimination in lending practices based upon the character of the neighborhood in which real property is located. (See Redlining.)

HUD: The Department of Housing and Urban Development which is responsible for the implementation and administration of U.S. government housing and urban development programs.

HUD-1 Settlement Statement: A final listing of the closing costs of the mortgage transaction. It provides the sales price and down payment, as well as the total settlement costs required from the buyer and seller.

Hundred Percent Location: A city retail business location which is considered the best available for attracting business.

Hypothecate: To pledge a thing as security without the necessity of giving up possession of it.

Hybrid Loan: An adjustable-rate mortgage (ARM) that offers a fixed rate for an initial period, typically three to ten years, and then adjusts every six months, annually, or at another specified period, for the remainder of the term.

Immobility and Tangibility: That which sets real estate apart from other goods and services. Real Estate cannot be moved from place to place and is a physical item which can be touched.

Imperative Necessity: Circumstances under which an agent has expanded authority in an emergency, including the power to disobey instructions where it is clearly in the interests of the principal and where there is no time to obtain instructions from the principal.

Implied Warranty of Habitability: A legal doctrine that requires landlords to offer and maintain livable premises for their tenants. If a landlord fails to provide habitable housing, tenants in most states may legally withhold rent or take other measures, including hiring someone to fix the problem or moving out. See constructive eviction.

Improvements: Valuable additions to the land, such as buildings, fences, roads, etc., which increase the value of the property.

Impounds: A trust type account established by lenders for the accumulation of borrowers funds to meet periodic payment of taxes, FHA mortgage insurance premiums, and/or future insurance policy premiums, required to protect their security. Impounds are usually collected with the note payment. The combined principal, interest, taxes and insurance payment is commonly termed a PITI payment.

In Rem: A proceeding against the realty directly; as distinguished from a proceeding against a person. (Used in taking land for nonpayment of taxes, etc.)

Incidents of Ownership: Any control over property. If you give away property but keep an incident of ownership–for example, you give away an apartment building but retain the right to receive rent–then legally, no gift has been made. This distinction can be important if you’re making large gifts to reduce your eventual estate tax.

Income (Capitalization) Approach: One of the three methods of the appraisal process generally applied to income producing property, and involves a three-step process— (1) find net annual income, (2) set an appropriate capitalization rate or “present worth” factor, and (3) capitalize the income dividing the net income by the capitalization rate.

Income Property: Real estate developed or purchased to produce income, such as a rental unit.

Incompetent: One who is mentally incompetent, incapable; any person who, though not insane, is, by reason of old age, disease, weakness of mind, or any other cause, unable, unassisted, to properly manage and take care of self or property and by reason thereof would be likely to be deceived or imposed upon by artful or designing persons.

Incorporeal Rights: Nonpossessory rights in real estate, a rising out of ownership, such as rents.

Increment: An increase. Most frequently used to refer to the increase of value of land that accompanies population growth and increasing wealth in the community. The term “unearned increment” is used in this connection since values are supposed to have increased without effort on the part of the owner.

Indemnity Agreement: An agreement by the maker of the document to repay the addressee of the agreement up to the limit stated for any loss due to the contingency stated on the agreement.

Indenture: A formal written instrument made between two or more persons in different interests, such as a lease.

Independent Contractor: A person who acts for another but who sells final results and whose methods of achieving those results are not subject to the control of another.

Index: A number used to compute the interest rate for an adjustable-rate mortgage (ARM). The index is generally a published number or percentage, such as the average interest rate or yield on U.S. Treasury bills. A margin is added to the index to determine the interest rate that will be charged on the ARM. This interest rate is subject to any caps on the maximum or minimum interest rate that may be charged on the mortgage, stated in the note.

Individual Retirement Account (IRA): A tax-deferred plan that can help you build a retirement nest egg.

Indorsement: The act of signing one’s name on the back of a check or note, with or without further qualification.

Industrial Real Estate: Land or property intended to be used for manufacture or warehouse purposes.

Inflation: An increase in prices.

Infrastructure: The basic features or structure needed for the functioning of a municipality such as roads, bridges, buildings, etc.

Ingress: An entrance, or the act of entering. Compare egress.

Initial Interest Rate: The original interest rate for an adjustable-rate mortgage (ARM). Sometimes known as the “start rate.”

Initial Note Rate: With regard to an adjustable rate mortgage, the note rate upon origination. This rate may differ from the fully indexed note rate.

Initial Rate Discount: As applies to an adjustable rate mortgage, the index value at the time of loan application plus the margin less the initial note rate.

Injunction: A writ or order issued under the seal of a court to restrain one or more parties to a suit or proceeding from doing an act which is deemed to be inequitable or unjust in regard to the rights of some other party or parties in the suit or proceeding.

Inquiry: A request for a copy of your credit report by a lender or other business, often when you fill out a credit application and/or request more credit. Too many inquiries on a credit report can hurt your credit score; however, most credit scores are not affected by multiple inquiries from auto or mortgage lenders within a short period of time.

Inspection Clause: A stipulation in an offer to purchase that makes the sale contingent on the findings of a home inspector.

Installment: The regular periodic payment that a borrower agrees to make to a lender.

Installment Note: A note which provides for a series of periodic payments of principal and interest, until amount borrowed is paid in full. This periodic reduction of principal amortizes the loan.

Installment Debt: A loan that is repaid in accordance with a schedule of payments for a specified term (such as an automobile loan).

Installment Reporting: A method of reporting capital gains by installments for successive tax years to minimize the impact of the totality of the capital gains tax in the year of the sale.

Installment Sales Contract: Commonly called contract of sale or “land contract.” Purchase of real estate wherein the purchase price is paid in installments over a long period of time, title is retained by seller, and upon default by buyer (vendee) the payments may be forfeited.

Institutional Lenders: A financial intermediary or depository, such as a savings and loan association, commercial bank, or life insurance company, which pools money of its depositors and then invests funds in various ways, including trust deed and mortgage loans.

Instrument: A written legal document; created to effect the rights of the parties, giving formal expression to a legal act or agreement for the purpose of creating, modifying or terminating a right. Real estate lenders’ basic instruments are — promissory notes, deeds of trust, mortgages, installment sales contracts, leases, assignments.

Insurable Title: A title which a title company will insure.

Interest: A portion, share or right in something. Partial, not complete ownership. The charge in dollars for the use of money for a period of time. In a sense, the “rent” paid for the use of money.

Interest Accrual Rate: The percentage rate at which interest accumulates or increases on a mortgage loan.

Interest Extra Loan: A loan in which a fixed amount of principal is repaid in installments along with interest accrued each period on the amount of the then outstanding principal only.

Interest Only Loan: A straight, non-amortizing loan in which the lender receives only interest during the term of the loan and principal is repaid in a lump sum at maturity.

Interest Rate: The percentage of a sum of money charged for its use. Rent or charge paid for use of money, expressed as a percentage per month or year of the sum borrowed.

Interest Rate Cap: For an adjustable rate mortgage (ARM), a limitation on the amount the interest rate can change per adjustment or over the lifetime of the loan, as stated in the note.

Interest Rate Ceiling: For an adjustable-rate mortgage (ARM), the maximum interest rate, as specified in the mortgage note.

Interest Rate Floor: For an adjustable-rate mortgage (ARM), the minimum interest rate, as specified in the mortgage note.

Interim Loan: A short-term, temporary loan used until permanent financing is available, e.g., a construction loan.

Intermediation: The process of pooling and supplying funds for investment by financial institutions called intermediaries. The process is dependent on individual savers placing their funds with these institutions and foregoing opportunities to directly invest in the investments selected.

Interpleader: A court proceeding initiated by the stakeholder of property who claims no proprietary interest in it for the purpose of deciding who among claimants is legally entitled to the property.

Interval Ownership: A form of timeshare ownership. (See Timeshare Ownership.)

Intestate: A person who dies having made no will, or one which is defective in form, is said to have died intestate, in which case the estate descends to the heirs at law or next of kin.

Intimidation: As defined in the fair housing laws, it is the illegal act of coercing, intimidating, threatening, or interfering with a person in exercising or enjoying any right granted or protected by federal, state or local fair housing laws.

Introductions: Legislation pending in the City Council

Investment Property: A property purchased to generate rental income, tax benefits, or profitable resale rather than to serve as the borrower’s primary residence. Contrast with “second home.”

Investment Value: Value to an individual in meeting their personal investment objectives, not those of the general market place.

Invitee: A business guest, or someone who enters property held open to members of the public, such as a visitor to a museum. Property owners must protect invitees from dangers on the property. In an example of the perversion of legalese, social guests that you invite into your home are called “licensees.”

Involuntary Lien: A lien imposed against property without consent of an owner; example — taxes, special assessments, federal income tax liens, etc. Irrevocable: Incapable of being recalled or revoked, unchangeable.

Irrigation Districts: Quasi-political districts created under special laws to provide for water services to property owners in the district; an operation governed to a great extent by law.

Joint Note: A note signed by two or more persons who have equal liability for payment.

Joint Tenancy: Undivided ownership of a property interest by two or more persons each of whom has a right to an equal share in the interest and a right of survivorship, i.e., the right to share equally with other surviving joint tenants in the interest of a deceased joint tenant.

Joint Venture: Two or more individuals or firms joining together on a single project as partners.

Judgment: The final determination of a court of competent jurisdiction of a matter presented to it; money judgments provide for the payment of claims presented to the court, or are awarded as damages, etc.

Judgment Lien: A legal claim on all of the property of a judgment debtor which enables the judgment creditor to have the property sold for payment of the amount of the judgment.

Jumbo Loan: A loan that exceeds the mortgage amount eligible for purchase by Fannie Mae or Freddie Mac. Also called “non-conforming loan.”

Junior Mortgage: A mortgage recorded subsequently to another mortgage on the same property or made subordinate by agreement to a later-recorded mortgage.

Jurisdiction: The authority by which judicial officers take cognizance of and decide causes; the power to hear and determine a cause; the right and power which a judicial officer has to enter upon the inquiry.

Keogh Funds: A tax-deferred retirement-savings plan for small business owners or self- employed individuals who have earned income from their trade or business. Contributions to the Keogh plan are tax-deductible

Laches: Delay or negligence in asserting one’s legal rights.

Land: The material of the earth, whatever may be the ingredients of which it is composed, whether soil, rock, or other substance, and includes free or unoccupied space for an indefinite distance upwards as well as downwards.

Land Contract: A contract used in a sale of real property whereby the seller retains title to the property until all or a prescribed part of the purchase price has been paid. Also commonly called a conditional sales contract, installment sales contract or real property sales contract. (See REAL PROPERTY SALES CONTRACT for statutory definition.)

Land and Improvement Loan: A loan obtained by the builder-developer for the purchase of land and to cover expenses for subdividing.

Landlord: One who rents his or her property to another. The lessor under a lease.

Landmark: An item or structure that is at least 30 years old and has notable physical features, historical or cultural significance.

Late Charge: A charge assessed by a lender against a borrower failing to make loan installment payments when due.

Later Date Order: The commitment for an owner’s title insurance policy issued by a title insurance company which covers the seller’s title as of the date of the contract. When the sale closes the purchaser orders the title company to record the deed to purchaser and bring down their examination to cover this later date so as to show purchaser as owner of the property.

Latent Defect: Hidden structural defects and flaws.

Lateral Support: The support which the soil of an adjoining owner gives to a neighbor’s land.

Lease: A contract between owner and tenant, setting forth conditions upon which tenant may occupy and use the property and the term of the occupancy. Sometimes used as an alternative to purchasing property outright, as a method of financing right to occupy and use real property.

Lease-Purchase Option: An option sometimes used by sellers to rent a property to a consumer, who has the option to buy the home within a specified period of time. Typically, part of each rental payment is put aside for the purpose of accumulating funds to pay the down payment and closing costs.

Lease Escalation Clause: Increase in expenses for items such as utilities, tax escalations, increases based on cost of living, or maintenance of the premises often are included in the terms of the lease.

Lease Option: A contract in which an owner leases his house (usually for one to five years) to a tenant for a specific monthly rent, and which gives the tenant the right to buy the house at the end of the lease period for a price established in advance. This allows a potential home buyer move into a house he may wish to eventually buy without having to come up with a down payment or financing at that time.

Lease Purchase: A contract in which an owner leases his house (usually for one to five years) to a tenant for an increased monthly rent, and which gives the tenant the right to buy the house at the end of the lease period for a price established in advance, with the incremental rent increase being used to form a down payment. Buyers should be wary of this type of contract since they may lose their extra rent/down payment money should the owner suffer financial setbacks before the purchase has been completed.

Leasehold Estate: A tenant’s right to occupy real estate during the term of the lease. This is a personal property interest.

Legal Description: A land description recognized by law; a description by which property can be definitely located by reference to government surveys or approved recorded maps.

Legislative Body: Sets policies, approves budgets and passes ordinances regarding land use, zoning, cluster zoning and other important items.

Less Favorable Treatment: Any time a person is treated differently on the basis of race, sex, religion, color, familial status, disability, or national origin, either by action or inaction, in the selling or leasing of real property, it is a violation of the Fair Housing Laws. Also known as unequal treatment or different treatment.

Lender Rebate: A payment made by the lender to the mortgage broker.

Lessee: One who contracts to rent, occupy, and use property under a lease agreement; a tenant.

Lessor: An owner who enters into a lease agreement with a tenant; a landlord.

Letter of Intent: A written expression of a purchaser’s interest in a condo unit. Usually, this nonbinding document covers subjects such as price and completion and closing dates.

Level of Assessment: A rate determined by the assessing unit and applied to the market value of properties, to determine assessed value. The level of assessment is also known as “uniform percentage of value”.

Level-Payment Mortgage: A loan on real estate that is paid off by making a series of equal (or nearly equal) regular payments. Part of the payment is usually interest on the loan and part of it reduces the amount of the unpaid principal balance of the loan. Also sometimes called an “amortized mortgage” or “installment mortgage.”

Leverage: The use of debt financing of an investment to maximize the return per dollar of equity invested.

Levy: To impose a tax.

Levy Improvement District (LID): A type of Water Control and Improvement District, used to build and maintain levies. Levies are used to contain flooding creeks and rivers.

Liabilities: A person’s debts and other financial obligations.

Liability Insurance: Insurance coverage that protects property owners against claims of negligence, personal injury or property damage to another party.

IBOR-Index: An index used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans, based on the average interest rate at which international banks lend to or borrow funds from the London Interbank Market

Licensee: A person licensed by a state real estate commission to engage in real estate brokerage, either as a broker or as a salesman.

LID: Acronym – Levy Improvement District.

Lien: A form of encumbrance which usually makes specific property security for the payment of a debt or discharge of an obligation. Example — judgments, taxes, mortgages, deeds of trust, etc.

Lien Theory State: A state where legal title of mortgaged property resides with the mortgagor (borrower), with the mortgage as a lien against the property. Contrast with title theory state.

Life Estate: An estate or interest in real property, which is held for the duration of the life of some certain person. It may be limited by the life of the person holding it or by the life of some other person.

Life of Loan Cap (Cap Rate): With regard to an adjustable rate mortgage, a ceiling the note rate cannot exceed over the life of the loan.

Life Tenant: One who has a life estate in real property.

Like/kind Property: A property that qualifies for a tax-deferred exchange. Any real estate property can have this designation, as long as that property is either an investment or part of a business.

Limitations, Statute of: The commonly used identifying term for various statutes which require that a legal action be commenced within a prescribed time after the accrual of the right to seek legal relief.

Limited Equity Housing: An arrangement designed to encourage low-and moderate- income families to purchase housing, in which the housing is offered at an extremely favorable price with a low down payment. The catch is that when the owner sells, she gets none of the profit if the market value of the unit has gone up. Any profit returns to the organization that built the home, which then resells the unit at an affordable price.

Limited Partnership: A partnership consisting of a general partner or partners and limited partners in which the general partners manage and control the business affairs of the partnership while limited partners are essentially investors taking no part in the management of the partnership and having no liability for the debts of the partnership in excess of their invested capital.

Lintel: A horizontal board that supports the load over an opening such as a door or window.

Liquid Asset: A cash asset or an asset that is easily converted into cash.

Liquidated Damages: A sum agreed upon by the parties to be full damages if a certain event occurs.

Liquidated Damages Clause: A clause in a contract by which the parties by agreement fix the damages in advance for a breach of the contract.

Liquidity: Holdings in or the ability to convert assets to cash or its equivalent. The ease with which a person is able to pay maturing obligations.

Lis Pendens: A notice filed or recorded for the purpose of warning all persons that the title or right to the possession of certain real property is in litigation; literally “suit pending;” usually recorded so as to give constructive notice of pending litigation.

Listing: An employment contract between principal and agent authorizing the agent to perform services for the principal involving the latter’s property; listing contracts are entered into for the purpose of securing persons to buy, lease, or rent property. Employment of an agent by a prospective purchaser or lessee to locate property for purchase or lease may be considered a listing.

Listing Agreement: The legal agreement between the listing agent/broker and the vendor, setting out the services to be rendered, describing the property for sale, and stating the terms of payment.

Littoral Rights: The right of a property owner whose land borders on a body of water, such as a lake, ocean or sea, to reasonable use and enjoyment of the shore and water the property borders on.

Livery of Seisin (Seizin): The appropriate ceremony at common law for transferring the possession of lands by a grantor to a grantee.

Loan Administration: Also called loan servicing Mortgage bankers not only originate loans, but also “service” them from origination to maturity of the loan through handling of loan payments, delinquencies, impounds, payoffs and releases.

Loan Application: The loan application is a source of information on which the lender bases a decision to make the loan; defines the terms of the loan contract, gives the name of the borrower, place of employment, salary, bank accounts, and credit references, and describes the real estate that is to be mortgaged. It also stipulates the amount of loan being applied for and repayment terms.

Loan Closing: When all conditions have been met, the loan officer authorizes the recording of the trust deed or mortgage. The disbursal procedure of funds is similar to the closing of a real estate sales escrow. The borrower can expect to receive less than the amount of the loan, as title, recording, service, and other fees may be withheld, or can expect to deposit the cost of these items into the loan escrow. This process is sometimes called “funding” the loan.

Loan Commitment: Lender’s contractual commitment to make a loan based on the appraisal and underwriting.

Loan Origination: The process by which a loan is made, which may include taking a loan application, processing and underwriting the application, and closing the loan.

Loan Origination Fees: Fees paid to your mortgage lender or broker for processing the mortgage application. This fee is usually in the form of points. One point equals one percent of the mortgage amount.

Loan-To-Value Ratio (LTV): The percentage of a property’s value that a lender can or may loan to a borrower. For example, if the ratio is 80% this means that a lender may loan 80% of the property’s appraised value to a borrower.

lock or lock In: A commitment you obtain from a lender assuring you a particular interest rate or feature or a definite time period. Provides protection should interest rates rise between the time you apply for a loan, acquire loan approval, and, subsequently, close the loan and receive the funds you have borrowed.

Loft: (1) A style of residential construction. In Houston the term “loft” is used quite liberally. It may refer to an older building that has been converted into residential condominiums, or it may mean a new mid-rise project with a “loft-style” finish to the units. There are also new construction townhomes that are promoted as being “lofts”. A builder creates new loft space by leaving exposed brick walls, bare polished concrete floors and having unhidden heating ducts, trusses, etc. (2) An upstairs room or area that has an open wall, overlooking a room or area below.

Low-Down-Payment Feature: A feature of some mortgages, usually fixed-rate mortgages, that helps you buy a home with a low down payment.

LTV: See loan-to-value ratio.

MAI: Member of the Appraisal Institute. Designates a person who is a member of the American Institute of Real Estate Appraisers.

Maintenance: A monthly fee that shareholders pay the co-op corporation. This money is divided among a number of obligations, including upkeep of the common areas and all budgeted recurring expenses, payments for the building’s underlying mortgage, insurance, and a reserve fund for repairs and renovations.

Management Agreement: A contract between the owner of property and someone who agrees to manage it.

Management Proposal: A proposal or plan detailing the commitments of a property manager regarding a property, should they be hired. The proposal includes a description of the property to be managed, a list of all maintenance required, maintenance records and accounting procedures the manager will use, an operating budget and a proposed management fee.

Mandatory: Requiring strict conformity or obedience.

Manufactured Housing: Homes that are built entirely in a factory in accordance with a federal building code administered by the U.S. Department of Housing and Urban Development (HUD). Manufactured homes may be single or multi-section and are transported from the factory to a site and installed. Homes that are permanently affixed to a foundation often may be classified as real property under applicable state law, and may be financed with a mortgage. Homes that are not permanently affixed to a foundation generally are classified as personal property, and are financed with a retail installment sales agreement.

Margin: An amount, usually a percentage, which is added to the index to determine the interest rate for adjustable rate mortgages.

Margin of Security: The difference between the amount of the mortgage loan (s) and the appraised value of the property.

Marginal Land: Land which barely pays the cost of working or using.

Market Allocation: An agreement between members of a trade to refrain from competition in specific market areas.

Market Approach to Value: An estimate of value based on the actual sales prices of comparable properties. Contrast with cost approach to value and income approach to value.

Market Data Approach: One of the three methods in the appraisal process. A means of comparing similar type properties, which have recently sold, to the subject property. Commonly used in comparing residential properties.

Market Price: The price paid regardless of pressures, motives or intelligence.

Market Value: The highest price in terms of money which a property will bring in a competitive and open market and under all conditions required for a fair sale, i.e., the buyer and seller acting prudently, knowledgeably and neither affected by undue pressures.

Marketable Title: Title which a reasonable purchaser, informed as to the facts and their legal importance and acting with reasonable care, would be willing and ought to accept.

Master-Planned Community: A large scale, mixed use, real estate development that follows a long term, comprehensive plan. Master-planned communities typically blend different price ranges of residential neighborhoods with some commercial properties designed to serve the residents’ needs. Residential properties may include patio homes, townhouses, condominiums and apartment complexes in addition to neighborhoods of single-family homes. Likewise, multiple home builders are included in the construction of the various neighborhoods. Commercial development can consist of retail strip centers and shopping malls, restaurants, entertainment venues and office buildings. In addition, master-planned communities usually offer amenities such as public recreation areas and parks, neighborhood schools and extensive landscaping. Recreation areas may include public swimming pools, tennis courts, children’s play grounds and sports fields. Many offer large water features and public or private golf courses. The term “master-planned” has become somewhat of an overused buzzword in the current market place. True master-planned communities require a multi-year commitment from the developer and contain thousands of homes.

Material Fact: A fact is material if it is one which the agent should realize would be likely to affect the judgment of the principal in giving his or her consent to the agent to enter into the particular transaction on the specified terms.

Maturity Date: The date by which a loan is to be paid in full.

MCE: See mandatory continuing education.

Mechanic’s Lien: A lien created by statute which exists against real property in favor of persons who have performed work or furnished materials for the improvement of the real property.

Mediation: A dispute resolution method designed to help warring parties resolve their own dispute without going to court. In mediation, a neutral third party (the mediator) meets with the opposing sides to help them find a mutually satisfactory solution. Unlike a judge in her courtroom or an arbitrator conducting a binding arbitration, the mediator has no power to impose a solution. No formal rules of evidence or procedure control mediation; the mediator and the parties usually agree on their own informal ways to proceed.

Mediation Clause: A clause in a contract requiring mediation in the event of a dispute.

Meeting of the Minds: Whenever all parties to a contract agree to the substance and terms thereof.

Merged Credit Report: A credit report issued by a credit reporting company that combines information from two or three major credit bureaus.

Meridians: Imaginary north-south lines which intersect base lines to form a starting point for the measurement of land.

Mesne Profits: Profit from land use accruing between two periods as for example moneys owed to the owner of land by a person who has illegally occupied the land after the owner takes title, but before taking possession.

Metes and Bounds: A term used in describing the boundary lines of land, setting forth all the boundary lines together with their terminal points and angles. Metes (length or measurements) and Bounds (boundaries) description is often used when a great deal of accuracy is required.

Mezzanine/ Loft: area is an additional space created in apartments with very high ceilings. The loft area is usually constructed above the living room, accessible by a staircase or ladder. Depending on the height of the ceiling, this space can be used for sleeping, storage or as a den.

Mid-Rise: A 4-story to 8-story tall building that contains residential apartment or condominium units. While not offering the panoramic views of a high-rise, mid-rise buildings can offer comparable levels of amenities and services. Building features may include 24-hour concierge service, swimming pools, spas, saunas, tennis courts, exercise areas, and party rooms. Security is enhanced at these buildings by the manned entry desks and limited access, covered parking garages. Mile: 5,280 feet.

Mineral Rights: An ownership interest in the minerals contained in a particular parcel of land, with or without ownership of the surface of the land. The owner of mineral rights is usually entitled to either take the minerals from the land himself or receive a royalty from the party that actually extracts the minerals.

Minimum Payment: The minimum amount that you must pay, usually monthly, on a home equity loan or line of credit. In some plans, the minimum payment may be “interest only,” (simple interest). In other plans, the minimum payment may include principal and interest (amortized).

Minor: A person under 18 years of age.

Minority: As defined in the Civil Rights Act of 1968 as part of the Fair Housing Laws “‘minority’ means any group, or any member of a group, that can be identified either: (1) by race, color, religion, sex, disability, or national origin; or (2) by any other characteristic (such as familial status) on the basis of which discrimination is prohibited by a federal, state, or local fair housing law.

Misplaced Improvements: Improvements on land which do not conform to the most profitable use of the site.

Misrepresentation: A false or misleading statement or assertion.

Mobilehome: As defined in Business and Professions Code Section 10131.6(c), “mobilehome” means a structure transportable in one or more sections, designed and equipped to contain not more than two dwelling units to be used with or without a foundation system. “Mobilehome” does not include a recreational vehicle, as defined in Section 18010.5 of the Health and Safety Code, a commercial coach, as defined in Section 18012 of the Health and Safety Code, or factory-built housing, as defined in Section 19971 of the Health and Safety Code.

Modification: Any change to the terms of a mortgage loan, including changes to the interest rate, loan balance, or loan term.

Modular: A system for the construction of dwellings and other improvements to real property through the on-site assembly of component parts (modules) that have been mass produced away from the building site.

Moldings: Usually patterned strips used to provide ornamental variation of outline or contour, such as cornices, bases, window and door jambs.

Monetary Controls: Federal Reserve tools for regulating the availability of money and credit to influence the level of economic activity, such as adjusting discount rates, reserve requirements, etc.

Money Market Account: A type of investment in which funds are invested in short-term securities.

Month-to-Month Tenancy: A rental agreement that provides for a one-month tenancy that is automatically renewed each month unless either tenant or landlord gives the other the proper amount of written notice (usually 30 days) to terminate the agreement. Some landlords prefer to use month-to-month tenancies because it gives them the right to raise the rent after giving proper notice. This type of rental also provides a landlord with an easy way to get rid of troublesome tenants, because in most states month-to-month tenancies can be terminated for any reason. It is also common for leases to revert to month-to-month tenancies at the end of the original lease period, if another lease has not been signed.

Monument: A fixed object and point established by surveyors to establish land locations.

Moratorium: The temporary suspension, usually by statute, of the enforcement of liability of debt. Temporary suspension of development or utilities connections imposed by local government.

Mortgage: An instrument recognized by law by which property is hypothecated to secure the payment of a debt or obligation; a procedure for foreclosure in event of default is established by statute.

Mortgage Banker: A person whose principal business is the originating, financing, closing, selling and servicing of loans secured by real property for institutional lenders on a contractual basis.

Mortgage Broker: A person or company having contacts with financial institutions or individuals wishing to invest in mortgages.

Mortgage Broker Dual Agency Disclosure Form: Discloses to the borrower when a real estate broker is also acting as a mortgage broker in the same transaction.

Mortgage Commitment: A formal indication by a lending institution that it will grant a mortgage loan on property in a certain specified amount and on certain specified terms.

Mortgage Contracts with Warrants: Warrants make the mortgage more attractive to the lender by providing both the greater security that goes with a mortgage, and the opportunity of a greater return through the right to buy either stock in the borrower’s company or a portion of the income property itself.

Mortgage Guaranty Insurance: Insurance against financial loss available to mortgage lenders from private mortgage insurance companies (PMICs).

Mortgage Insurance (MI): Insurance that protects lenders against losses caused by a borrower’s default on a mortgage loan. MI typically is required if the borrower’s down payment is less than 20 percent of the purchase price.

Mortgage Insurance Premium (MIP): The amount paid by a borrower for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (PMI) company.

Mortgage Investment Company: A company or group of private investors that buys mortgages for investment purposes.

Mortgage Lender: The lender providing funds for a mortgage. Lenders also manage the credit and financial information review, the property and the loan application process through closing.

Mortgage Life Insurance: A type of insurance that will pay off a mortgage if the borrower dies while the loan is outstanding; a form of credit life insurance.

Mortgage Loan: A loan which utilizes real estate as security or collateral to provide for repayment should you default on the terms of your loan. The mortgage or deed of trust is your agreement to pledge your home or other real estate as security.

Mortgage Loan Disclosure Statement: The statement on a form approved by the Real Estate Commissioner which is required by law to be furnished by a mortgage loan broker to the prospective borrower of loans of a statutorily-prescribed amount before the borrower becomes obligated to complete the loan.

Mortgage Rate: The interest rate you pay to borrow the money to buy your house.

Mortgage Reduction Certificate: An instrument executed by the mortgagee, setting forth the present status and the balance due on the mortgage as of the date of the execution of the instrument.

Mortgagee: One to whom a mortgagor gives a mortgage to secure a loan or performance of an obligation; a lender or creditor. (See definition of secured party.)

Mortgagor: One who gives a mortgage on his or her property to secure a loan or assure performance of an obligation; a borrower.

MUD: See Municipal Utility District.

Multifamily Mortgage: A mortgage loan on a building with five or more dwelling units.

Multifamily Properties: Typically, buildings with five or more dwelling units.

Multiple- Asset Exchange: An exchange that includes both real property and personal property. Farm, hotels, and motels are prime examples of properties that would be involved in such an exchange, because there is a combination of buildings, land, and necessary business equipment involved.

Multiple Listing: A listing, usually an exclusive right to sell, taken by a member of an organization composed of real estate brokers, with the provisions that all members will have the opportunity to find an interested buyer; a cooperative listing insuring owner property will receive a wider market exposure.

Multiple Listing Service (MLS): A system by which a number of real estate firms share information about homes that are for sale. Membership usually provides a monthly book and/or computer service that provides Realtors® with detailed listings of most homes currently on the market.

Municipality: A town, village, city or county with its own local government.

Mutual Funds: A fund that pools the money of its investors to buy a variety of securities.

Mutual Savings Banks: Financial institutions owned by depositors each of whom has rights to net earnings of the bank in proportion to his or her deposits.

Mutual Water Company: A water company organized by or for water users in a given district with the object of securing an ample water supply at a reasonable rate; stock is issued to users.

Narrative Appraisal: A summary of all factual materials, techniques and appraisal methods used by the appraiser in setting forth his or her value conclusion.

Negative Amortization: Occurs when monthly installment payments are insufficient to pay the interest accruing on the principal balance, so that the unpaid interest must be added to the principal due.

Negotiable: Capable of being negotiated, assignable or transferable in the ordinary course of business.

Net Income: The money remaining after expenses are deducted from income; the profit.

Net Effective Income: Income figure after totaling gross income, minus the vacancy/credit loss, plus miscellaneous income.

Net Lease: A commercial real estate lease in which the tenant regularly pays not only for the space (as he does with a gross lease) but for a portion of the landlord’s operating costs as well.

When all three of the usual costs–taxes, maintenance and insurance–are passed on, the arrangement is known as a “triple net lease.” Because these costs are variable and almost never decrease, a net lease favors the landlord. Accordingly, it may be possible for a tenant to bargain for a net lease with caps or ceilings, which limits the amount of rent the tenant must pay. For example, a net lease with caps may specify that an increase in taxes beyond a certain point (or any new taxes) will be paid by the landlord. The same kind of protection can be designed to cover increased insurance premiums and maintenance expenses. Contrast with gross lease.

Net Listing: A listing which provides that the agent may retain as compensation for agent’s services all sums received over and above a net price to the owner.

Net Monthly Income: Your take-home pay after taxes. It is the amount of money that you actually receive in your paycheck.

Net Worth: The value of a company or individual’s assets, including cash, less total liabilities.

Niche: a small recessed area in a wall, traditionally arched at the top.

Nominal Interest Rates: The percentage of interest that is stated in loan documents.

Nonconforming Use: A property use that doesn’t’ conform to current zoning requirements, but is allowed because the property was being used in that way before the present zoning ordinance was enacted.

Non-Escrowing Loan: Typically, mortgage lenders require escrow accounts for property taxes, hazard insurance, and sometimes, homeowner’s association dues. Monthly contributions to these accounts are rolled into a lender’s mortgage payment.

Non-Homestead: Any real property which is not the primary residence of a property owner.

Non-Liquid Asset: An asset that cannot easily be converted into cash.

Non-Recourse: Borrower not personally liable, however, lender will require some protection in the event of a bankruptcy or other default of terms of the loan

Nonsolicitation Order: A rule adopted by the Secretary of State which prohibits any or all types of solicitation directed towards homeowners within a defined geographic area. Such rule may be adopted after a public hearing and upon the Secretary’s determination that homeowners within the subject area have been subject to intense and repeated solicitations by real estate brokers or salespersons and that such solicitations have caused owners to reasonably believe that property values may decrease because persons of different race, ethnic, religious or social backgrounds are moving or about to move into such area.

Notary Public: An appointed officer with authority to take the acknowledgment of persons executing documents, sign the certificate, and affix official seal.

Note: A signed written instrument acknowledging a debt and promising payment, according to the specified terms and conditions. A promissory note.

Note Rate: This rate determines the amount of interest charged on an annual basis to the borrower. Also called the “accrual rate”, “contract rate” or “coupon rate.”

Notice: (l) Actual Notice – Express or implied knowledge of a fact. (2) Constructive notice – A fact, imputed to a person by law, which should have been discovered because of the person’s actual notice of circumstances and the inquiry that a prudent person would have been expected to make. (3) Legal Notice— Information required to be given by law.

Notice of Nonresponsibility: A notice provided by law designed to relieve property owner from responsibility for the cost of unauthorized work done on the property or materials furnished therefor; notice must be verified, recorded and posted.

Notice to Quit: A notice to a tenant to vacate rented property.

Novation: The substitution or exchange of a new obligation or contract for an old one by the mutual agreement of the parties.

Nuisance: Something that interferes with the use of property by being irritating, offensive, obstructive or dangerous. Nuisances include a wide range of conditions, everything from a chemical plant’s noxious odors to a neighbor’s dog barking. The former would be a “public nuisance,” one affecting many people, while the other would be a “private nuisance,” limited to making your life difficult, unless the dog was bothering others. Lawsuits may be brought to abate (remove or reduce) a nuisance. See quiet enjoyment, attractive nuisance.

Null and Void: Of no legal validity or effect.

Obligee: The person in whose favor an obligation is entered into.

Obligor: The person who binds himself/herself to another; one who has engaged to perform some obligation; one who makes a bond.

Obsolescence: Loss in value due to reduced desirability and usefulness of a structure because its design and construction become obsolete; loss because of becoming old-fashioned and not in keeping with modern needs, with consequent loss of income. May be functional or economic.

Offer: A proposal to enter into an agreement with another person. An offer must express the intent of the person making the offer to form a contract, must contain some essential terms– including the price and subject matter of the contract–and must be communicated by the person making the offer. A legally valid acceptance of the offer will create a binding contract.

Offering Plan: A document submitted to the attorney general by the sponsor of a co-op or condo that fully describes the plans, pricing, and rules for a community. Potential buyers are given a copy of this report to read before buying into the co-op or condo community.

Offer to Purchase: The proposal made to an owner of property by a potential buyer to purchase the property under stated terms.

Office of Real Property Services (ORPS): The agency that oversees assessing units in NY State. Their mission is to support local governments in their pursuit of real property tax equity.

Offset Statement: Statement by owner of property or owner of lien against property setting forth the present status of liens against said property.

Open-End Mortgage: A mortgage containing a clause which permits the mortgagor to borrow additional money after the loan has been reduced without rewriting the mortgage.

Open House: An opportunity for prospective buyers to view a house in a low pressure environment.

Open House Law: Congress passed a law in April 1968 which prohibits discrimination in the sale of real estate because of race, color, or religion of buyers.

Open Listing: An authorization given by a property owner to a real estate agent wherein said agent is given the nonexclusive right to secure a purchaser; open listings may be given to any number of agents without liability to compensate any except the one who first secures a buyer ready, willing and able to meet the terms of the listing, or secures the acceptance by the seller of a satisfactory offer.

Operating Budget: A detailed projection of all estimated income and expenses during a given period of time.

Opinion of Title: An attorney’s written evaluation of the condition of the title to a parcel of land after examination of the abstract of title.

Option: A right given for a consideration to purchase or lease a property upon specified terms within a specified time, without obligating the party who receives the right to exercise the right.

Option Fee: An amount of money paid by a prospective Buyer, to a Seller, in order to obtain an option period, as specified in Paragraph 7 of a TREC promulgated earnest money contract. If a Buyer decides to close on the property, the option fee may be credited to his funds at closing.

Oral Contract: A verbal agreement; one which is not reduced to writing.

Ordinance: A statute, law or rule enacted by the government of a municipality.

Orientation: Placing a structure on its lot with regard to its exposure to the rays of the sun, prevailing winds, privacy from the street and protection from outside noises.

Original Principal Balance: The total amount of principal owed on a mortgage before any payments are made.

Origination Fee: A fee charged by lenders, in addition to interest, for services in connection with granting of a loan. Usually a percentage of the loan amount.

Ostensible Authority: That authority which a third person reasonably believes an agent possesses because of the acts or omissions of the principal.

Overimprovement: An improvement which is not the highest and best use for the site on which it is placed by reason of excess size or cost.

Owner Financing: A transaction in which the property seller provides all or part of the financing for the buyer’s purchase of the property.

Option: A property that serves as the borrower’s primary residence.

Ownership: The right of one or more persons to possess and use property to the exclusion of all others. A collection of rights to the use and enjoyment of property.

Package Mortgage: A type of mortgage used in home financing covering real property, improvements, and movable equipment/appliances.

Package Policy: An insurance policy that combines coverage from two or more types of insurance (liability and property for example) into a single policy.

Panic Peddling: The illegal practice of inducing panic selling in a neighborhood by making representations of the entry, or prospective entry, of members of a minority group; blockbusting. See Fair Housing.

Paramount Title: Title which is superior or foremost to all others.

Partial Payment: A payment that is less than the scheduled monthly payment on a mortgage loan.

Participation: Sharing of an interest in a property by a lender. In addition to base interest on mortgage loans on income properties, a percentage of gross income is required, sometimes predicated on certain conditions being fulfilled, such as a minimum occupancy or percentage of net income after expenses, debt service and taxes. Also called equity participation or revenue sharing.

Parties (Party): Those entities taking part in a transaction as a principal, e.g., seller, buyer, or lender in a real estate transaction.

Partition: A division of real or personal property or the proceeds therefrom among co- owners.

Partition Action: Court proceedings by which co-owners seek to sever their joint ownership.

Partnership: A decision of the California Supreme Court has defined a partnership in the following terms — “A partnership as between partners themselves may be defined to be a contract of two or more persons to unite their property, labor or skill, or some of them, in prosecution of some joint or lawful business, and to share the profits in certain proportions.” A voluntary association of two or more persons to carry on a business or venture on terms of mutual participation in profits and losses.

Party Wall: A wall erected on the line between two adjoining properties, which are under different ownership, for the use of both properties.

Par Value: Market value, nominal value.

Patent: Conveyance of title to government land.

Patio: private garden, usually located in the back of a building and available for ground-level apartments.

Patio Home: A single-family home that sits on a small lot, often with one outside wall of the structure sitting on the property line. Patio homes have no common structural walls with adjoining properties, but their zero lot line wall may form part of their neighbors backyard fence/wall. These properties often have a small back or side yard large enough for a patio or garden area. Also known as a garden home.

Passive Activity Income: An activity that results in a profit, but the taxpayer does not physically participate. These would include rental property, limited partnerships or other types of investments.

Payment Adjustment Date: With regard to an adjustable rate mortgage, the date the borrower’s monthly principal and interest payment may change.

Payment Cap: With regard to an adjustable rate mortgage, this limits the amount of increase in the borrower’s monthly principal and interest at the payment adjustment date, if the principal and interest increase called for by the interest rate increase exceeds the payment cap percentage. This limitation is often at the borrower’s option and may result in negative amortization.

Payment Change Date: The date on which a new monthly payment amount takes effect, for example, on an adjustable-rate mortgage (ARM) loan

Payment Rate: With respect to an adjustable rate mortgage, the rate at which the borrower repays the loan—reflects buydowns or payment caps.

Penalty: An extra payment or charge required of the borrower for deviating from the terms of the original loan agreement. Usually levied for being late in making regular payment or for paying off the loan before it is due, known as “late charges” and “prepayment penalties.”

Percentage Lease: Lease on the property, the rental for which is determined by amount of business done by the lessee; usually a percentage of gross receipts from the business with provision for a minimum rental.

Perimeter Heating: Baseboard heating, or any system in which the heat registers are located along the outside walls of a room, especially under the windows.

Periodic Interest Rate Cap: With respect to an adjustable rate mortgage, limits the increase or decrease in the note rate at each rate adjustment, thereby limiting the borrower’s payment increase or decrease at the time of adjustment.

Person: An individual, a partnership, or a corporation, foreign or domestic.

Performance Bond – A bond used to guarantee the specific completion of an endeavor in accordance with a contract.

Personal Property: Any property which is not real property.

Personality: Personal property; chattel. Contrast with Realty.

Physical Deterioration: Impairment of condition. Loss in value brought about by wear and tear, disintegration, use and actions of the elements; termed curable and incurable.

Pied-a-Terre (French): a term that refers to an apartment that is not the primary residence of the owner. The owner of a pied-a-terre typically lives somewhere else and visits New York several times per year.

PITI: Principal, Interest, Taxes and Insurance.

PITI Reserves: A cash amount that a borrower has available after making a down payment and paying closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months.

Plaintiff: In a court action, the one who sues; the complainant.

Planned Development: A subdivision consisting of separately owned parcels of land together with membership in an association which owns common area. Sometimes the owners of separate interests also have an undivided interest in the common area.

Planned Unit Development (PUD): A term sometimes used to describe a planned development. A planning and zoning term describing land not subject to conventional zoning to permit clustering of residences or other characteristics of the project which differ from normal zoning.

Planning Commission: An agency of local government charged with planning the development, redevelopment or preservation of an area.

Plat Book: A record of recorded subdivisions of land.

Plat (of survey): A map of land made by a surveyor showing the boundaries, buildings, and other improvements.

Pledge: The depositing of personal property by a debtor with a creditor as security for a debt or engagement.

Pledgee: One who is given a pledge or a security. (See definition of Secured Party.)

Pledgor: One who offers a pledge or gives security. (See definition of debtor.)

Plottage: A term used in appraising to designate the increased value of two or more contiguous lots when they are joined under single ownership and available for use as a larger single lot. Also called assemblage.

Plottage Increment: The appreciation in unit value created by joining smaller ownerships into one large single ownership.

PMI: Acronym – private mortgage insurance.

Points: See Discount Points.

Police Power: The right of the State to enact laws and enforce them for the order, safety, health, morals and general welfare of the public.

Portfolio Income: Income derived from assets such as stocks, bonds and mutual funds, including dividend income, interest and royalties. Assets are owned by the taxpayer, but usually managed by financial experts.

Power Of Attorney (POA): A written instrument whereby a principal gives authority to an agent. The agent acting under such a grant is sometimes called an attorney in fact.

Power Of Sale: The power of a mortgagee or trustee when the instrument so provides to sell the secured property without judicial proceedings if a borrower defaults in payment of the promissory note or otherwise breaches the terms of the mortgage or deed of trust.

Prefabricated House: A house manufactured and sometimes partly assembled before delivery to building site.

Preferred Stock: A class of corporate stock entitled to preferential treatment such as priority in distribution of dividends.

Prepaid Items of Expense: Prorations of prepaid items of expense which are credited to the seller in the closing escrow statement.

Pre-Approval: A process by which a lender provides a prospective borrower with an indication of how much money he or she will be eligible to borrow when applying for a mortgage loan. This process typically includes a review of the applicant’s credit history and may involve the review and verification of income and assets to close.

Pre-Approval Letter: A letter from a mortgage lender indicating that you qualify for a mortgage of a specific amount. It also shows a home seller that you’re a serious buyer. Pre- Qualification: A preliminary assessment by a lender of the amount it will lend to a potential home buyer. The process of determining how much money a prospective home buyer may be eligible to borrow before he or she applies for a loan.

Pre-Qualification Letter: A letter from a mortgage lender that states that you’re pre- qualified to buy a home, but does not commit the lender to a particular mortgage amount.

Predatory Lending: Abusive lending practices that include making mortgage loans to people who do not have the income to repay them or repeatedly refinancing loans, charging high points and fees each time and “packing” credit insurance onto a loan.

Prepayment Terms: Loan may require a substantial payment in the event the loan is retired before its’ term.

Prepayment Penalty: The charge payable to a lender by a borrower under the terms of the loan agreement if the borrower pays off the outstanding principal balance of the loan prior to its maturity.

Prescription: The means of acquiring incorporeal interests in land, usually an easement, by immemorial or long continued use. The time is ordinarily the term of the statute of limitations.

Presumption: An assumption of fact that the law requires to be made from another fact or group of facts found or otherwise established in the section.

Preventative Maintenance: Regular care and servicing of equipment and facilities that help maintain satisfactory operating condition. Preventative maintenance provides for regular inspection, detection and correction of minor problems before they actually happen or before they develop into major problems.

Price Fixing: Conspiring to establish fixed fees or prices for services or products.

Price: The amount the property would sell for in an arm’s length transaction. Both buyer and seller are interested in getting the best terms for themselves. Both parties are knowledgeable about the current marketplace.

Prima Facie: Latin meaning first sight, a fact presumed to be true until disproved.

Primary Mortgage Market: Lenders who originate loans and makes funds available directly to the borrowers. Contrast with secondary mortgage market.

Primary/Principal Residence -The place where a person lives most of the time, including a house, a manufactured home, a co-op, a condominium and even a house boat.

Prime Rate: The interest, or discount rate charged by a commercial bank to its largest and strongest customers.

Principal: This term is used to mean the employer of an agent; or the amount of money borrowed, or the amount of the loan. Also, one of the main parties in a real estate transaction, such as a buyer, borrower, seller, lessor.

Principle of Conformity: An appraisal principle which holds that the maximum value is realized when a reasonable degree of homogeneity (sameness) exists in a neighborhood.

Principal Note: The promissory note which is secured by the mortgage or trust deed.

Prior Lien: A lien which is senior or superior to others.

Priority of Lien: The order in which liens are given legal precedence or preference.

Private Mortgage Insurance: Mortgage guaranty insurance available to conventional lenders on the first, high risk portion of a loan (PMI).

Privity: Mutual relationship to the same rights of property, contractual relationship.

Privity of Contract: The relationship which exists between the persons who are parties to a contract.

Pro Forma Statement: An analysis of the future of the property and its’ potential as opposed to its’ current use.

Probate:To establish the will of a deceased person.

Procuring Cause: That cause originating from a series of events that, without break in continuity, results in the prime object of an agent’s employment producing a final buyer; the real estate agent who first procures a ready, willing, and able buyer for the agreed upon price and terms and is entitled to the commission.

Progress Payments: Scheduled, periodic, and partial payment of construction loan funds to a builder as each construction stage is completed.

Progression, Principle of: The worth of a lesser valued residence tends to be enhanced by association with higher valued residences in the same area.

Promissory Note: Following a loan commitment from the lender, the borrower signs a note, promising to repay the loan under stipulated terms. The promissory note establishes personal liability for its payment. The evidence of the debt.

Promulgated Contracts: Some state real estate commissions have prepared and authorized various standard contracts that must be used by all licensees when acting as agents in real estate transactions with limited exceptions.

Property: Everything capable of being owned and acquired lawfully. The rights of ownership. The right to use, possess, enjoy, and dispose of a thing in every legal way and to exclude everyone else from interfering with these rights. Property is classified into two groups, personal property and real property.

Property Appreciation: See “Appreciation.”

Property Insurance: Protects the physical property and equipment of an insured from a loss that was a result of fire, theft or other dangers.

Property Management Report: A periodic (typically monthly) report that details all income received and disbursed.

Property Management: A branch of the real estate business involving the marketing, operation, maintenance and day-to-day financing of rental properties.

Property Taxes: Taxes that are paid yearly on real property. Property taxes are ad valorem, based on the assessed value of the real property.

Proprietary Lease: The lease that a tenant shareholder in a co-op receives at closing along with the stock certificate(s) for the unit. This document contains rights and responsibilities for the corporation and the shareholder.

Pro Rata: In proportion; according to a certain percentage or proportion of a whole.

Pro-Rate: To divide or distribute proportionally. At closing, various expenses such as taxes, insurance, interest, rents, etc. are prorated between the seller and buyer.

Proration: Adjustments of interest, taxes, and insurance, etc., on a pro rata basis as of the closing or agreed upon date. Fire insurance is normally paid for three years in advance. If a property is sold during this time, the seller wants a refund on that portion of the advance payment that has not been used at the time the title to the property is transferred. For example, if the property is sold two years later, seller will want to receive 1/3 of the advance premium that was paid. Usually done in escrow by escrow holder at time of closing the transaction.

Proration of Taxes: To divide or prorate the taxes equally or proportionately to time of use, usually between seller and buyer.

Proximate Cause: That cause of an event which, in a natural and continuous sequence unbroken by any new cause, produced that event, and without which the event would not have happened. Also, the procuring cause.

Public Records: Records which by law impart constructive notice of matters relating to land.

Public Trustee: The county public official whose office has been created by statute to whom title to real property in certain states, e.g., Colorado, is conveyed by Trust Deed for the use and benefit of the beneficiary, who usually is the lender.

Public Utility District (PUD): A water district, created by a city or county, promoting development of a designated area by providing water and sewer services. The PUD operates in the same manner as a Municipal Utility District, but is created by a local government, not a private developer.

PUD: Acronym – planned unit development. Acronym – Public Utility District.

Puffing: Non-factual or extravagant statements and opinions made to enhance the perceived desirability of a property. There is a fine line between legal puffing and illegal misrepresentation, and puffing is best avoided. An example of puffing would be, “This home has the best view in the city”. Also known as puffery.

Purchase and Sale Agreement: A document that details the price and conditions for a transaction. In connection with the sale of a residential property, the agreement typically would include: information about the property to be sold, sale price, down payment, earnest money deposit, financing, closing date, occupancy date, length of time the offer is valid, and any special contingencies.

Purchase and Installment Saleback: Involves purchase of the property upon completion of construction and immediate saleback on a long-term installment contract.

Purchase of Land, Leaseback and Leasehold Mortgages: An arrangement whereby land is purchased by the lender and leased back to the developer with a mortgage negotiated on the resulting leasehold of the income property constructed. The lender receives an annual ground rent, plus a percentage of income from the property.

Purchase and Leaseback: Involves the purchase of property by buyer and immediate leaseback to seller.

Purchase Money Mortgage or Trust Deed: A trust deed or mortgage given as part or all of the purchase consideration for real property. In some states the purchase money mortgage or trust deed loan can be made by a seller who extends credit to the buyer of property or by a third party lender (typically a financial institution) that makes a loan to the buyer of real property for a portion of the purchase price to be paid for the property. In many states there are legal limitations upon mortgagees and trust deed beneficiaries collecting deficiency judgments against the purchase money borrower after the collateral hypothecated under such security instruments has been sold through the foreclosure process. Generally no deficiency judgment is allowed if the collateral property under the mortgage or trust deed is residential property of four units or less with the debtor occupying the property as a place of residence.

Purchase Offer: A document that lists the price, terms and conditions under which a buyer is willing to purchase a property.

Qualified Intermediary (QI): Also called an accommodator or exchange facilitator, someone who oversees a tax-deferred exchange to ensure that the transaction meets the standards of the Internal Revenue Code. All qualified intermediaries must be independent in the transactions they facilitate.

Qualify: To meet a mortgage lender’s approval requirements.

Qualifying Guidelines: Criteria used to determine eligibility for a loan.

Qualifying Ratios: Comparisons of a borrower’s debts and gross monthly income.

Quality Control: A system of safeguards to ensure that loans are originated, underwritten and serviced according to the lender’s standards and, if applicable, the standards of the investor, governmental agency, or mortgage insurer.

Quantity Survey: A highly technical process in arriving at cost estimate of new construction and sometimes referred to in the building trade as the “price take-off” method. It involves a detailed estimate of the quantities of raw material (lumber, plaster, brick, cement, etc.,) used as well as the current price of the material and installation costs. These factors are all added together to arrive at the cost of a structure. It is usually used by contractors and experienced estimators.

Quarter Round: A molding that presents a profile of a quarter circle.

Quit Enjoyment: Right of an owner or tenant to the use of the property without interference of possession.

Quiet Title: A court action brought to establish title; to remove a cloud on the title.

Quitclaim Deed: A deed that transfers whatever ownership interest the transferor has in a particular property. The deed does not guarantee anything about what is being transferred, including an actual ownership interest. For example, a divorcing husband may quitclaim his interest in certain real estate to his ex-wife, officially giving up any legal interest in the property. A quit claim deed may also be used to clear up a cloud on the title to the property in cases where there is a question of a possible ownership claim. Compare with grant deed.

Racial Steering: The unlawful practice of influencing a person’s housing choice based on his/her race.

Radiant Heating: A method of heating, usually consisting of coils, or pipes placed in the floor, wall, or ceiling.

Radon: A toxic gas found in the soil beneath a house that can contribute to cancer and other illnesses

Range: A strip or column of land six miles wide, determined by a government survey, running in a northsouth direction, lying east or west of a principal meridian.

Range lines: A series of government survey lines running north and south at six-mile intervals starting with the principal meridian and forming the east and west boundaries of townships.

Rate Adjustment Date: With respect to an adjustable rate mortgage, the date the borrower’s note rate may change.

Rate Cap: The limit on the amount an interest rate on an adjustable-rate mortgage (ARM) can increase or decrease during an adjustment period.

Rate Lock: An agreement in which an interest rate is “locked in” or guaranteed for a specified period of time prior to closing. See also “Lock-in Rate.”

Rate of Return: Annual operating income divided by the amount of capital invested.

Ratification: The adoption or approval of an act performed on behalf of a person without previous authorization, such as the approval by a principal of previously unauthorized acts of an agent, after the acts have been performed.

Ratified Sales Contract: A contract that shows both you and the seller of the house have agreed to your offer. This offer may include sales contingencies, such as obtaining a mortgage of a certain type and rate, getting an acceptable inspection, making repairs, closing by a certain date, etc.

Ready, Willing, and Able Buyer: One who is fully prepared to enter into the contract, really wants to buy, and unquestionably meets the financing requirements of purchase. REAL ESTATE — (See Real Property.)

Real Estate: Refers to land and improvements and the rights to own or use them. “A leasehold, as well as any other interest or estate in land, whether corporeal, incorporeal, freehold, or non-freehold, and whether the real estate is situated in this state or elsewhere.” {TRELA, Section 2(1)} In popular usage, Real Estate is used interchangeably with real property and realty.

Real Estate Agent: A person licensed to negotiate and transact the sale of real estate on behalf of the property owner.

Real Estate Appraiser, licensed: A person licensed to legally appraise real estate property for a fee.

Real Estate Board: An organization whose members consist primarily of real estate brokers and salespersons.

Real Estate Broker, licensed: A person licensed to legally represent a purchaser of real estate property for a fee.

Real Estate Inspector, licensed: In certain states, someone who is licensed who holds himself out to the public as being trained and qualified to inspect property.

Real Estate Investment Trust: (See REIT).

Real Estate Professional: An individual who provides services in buying and selling homes. The real estate professional is paid a percentage of the home sale price by the seller. Unless you’ve specifically contracted with a buyer’s agent, the real estate professional represents the interest of the seller. Real estate professionals may be able to refer you to local lenders or mortgage brokers, but are generally not involved in the lending process.

Real Estate Settlement Procedures Act (RESPA): A federal law requiring the disclosure to borrowers of settlement (closing) procedures and costs by means of a pamphlet and forms prescribed by the United States Department of Housing and Urban Development.

Real Estate Syndicate: An organization of investors usually in the form of a limited partnership who have joined together for the purpose of pooling capital for the acquisition of real property interests.

Real Estate Trust: A special arrangement under Federal and State law whereby investors may pool funds for investments in real estate and mortgages and yet escape corporation taxes, profits being passed to individual investors who are taxed.

Real Property: Land and anything growing on, attached to, or erected on it, excluding anything that may be severed without injury to the land.

Real Property Loan Law: Article 7 of Chapter 3 of the Real Estate Law under which a real estate licensee negotiating loans secured by real property within a specified range is required to give the borrower a statement disclosing the costs and terms of the loan and which also limits the amount of expenses and charges that a borrower may pay with respect to the loan.

Real Property Sales Contract: An agreement to convey title to real property upon satisfaction of specified conditions which does not require conveyance within one year of formation of the contract.

Realization of Gain: The taking of the gain or profit from the sale of property.

Realtor®: A real estate broker or an associate who holds active membership in a local real estate board that is affiliated with the NATIONAL ASSOCIATION OF REALTORS®.

Realty: Refers to land and buildings and other improvements from a physical standpoint. Real Estate and Real Property tend to be used interchangeably with Realty in everyday usage. Contrast with personalty.

Recapture: The process of recovery by an owner of money invested by employing the use of a rate of interest necessary to provide for the return of an investment; not to be confused with interest rate, which is a rate of return on an investment.

Recaptured Depreciation: An owner may deduct depreciation on a property during its taxable lifetime, once the property is sold the previously deducted depreciation is figured up and “recaptured”, or included as taxable income.

Receiver: Court-appointed custodian who holds property for the court, pending final disposition of the matter before the court.

Recognition Agreement: A document that describes the relationship between a lender and the co-op corporation, including in what order each will be repaid in case of a foreclosure.

Reconciliation: The final stage in the appraisal process where the appraiser reviews the data and estimates the subject property’s value.

Reconveyance: The transfer of the title of land from one person to the immediate preceding owner. This instrument of transfer is commonly used to transfer the legal title from the trustee to the trustor (borrower) after a trust deed debt has been paid in full.

Recorded Plat: A subdivision map filed with the county recorder’s office that shows the location and boundaries (lot and block number) of individual parcels of land. Contrast with government survey method and metes and bounds.

Recorder: The public official who keeps records of transactions that affect real property in the area. Sometimes known as a “Registrar of Deeds” or “County Clerk.”

Recording: The process of placing a document on file with a designated public official for public notice. This public official is usually a county officer known as the County Recorder who designates the fact that a document has been presented for recording by placing a recording stamp upon it indicating the time of day and the date when it was officially placed on file. Documents filed with the Recorder are considered to be placed on open notice to the general public of that county. Claims against property usually are given a priority on the basis of the time and the date they are recorded with the most preferred claim going to the earliest one recorded and the next claim going to the next earliest one recorded, and so on. This type of notice is called “constructive notice” or “legal notice”.

Recourse: Borrower is personally liable for repayment of the debt even if the note is in the name of a corporation

Red Herring: Initial offering plan submitted to the attorney general which, when approved, becomes the “black book”

Redeem: To buy back; repurchase; recover.

Redemption: Buying back one’s property after a judicial sale.

Redlining: A lending policy, illegal in California, of denying real estate loans on properties in older, changing urban areas, usually with large minority populations, because of alleged higher lending risks without due consideration being given by the lending institution to the credit worthiness of the individual loan applicant.

Referee’s Deed: Used to convey real property sold pursuant to a judicial order, in an action for the foreclosure of a mortgage or for partition.

Refinance: Getting a new mortgage with all or some portion of the proceeds used to pay off the prior mortgage.

Refinancing: The paying-off of an existing obligation and assuming a new obligation in its place. To finance anew, or extend or renew existing financing.

Reformation: An action to correct a mistake in a deed or other document.

Regulation ‘Z’: Truth in lending law developed by the Federal Reserve System which requires lenders to provide full disclosure of the terms of the loan, including interest rates expressed as an annual percentage rate (APR).

Rehabilitation: The restoration of a property to satisfactory condition without drastically changing the plan, form or style of architecture.

Rehabilitation Mortgage: A mortgage loan made to cover the costs of repairing, improving, and sometimes acquiring an existing property.

REIT: A Real Estate Investment Trust is a business trust which deals principally with interest in land— generally organized to conform to the Internal Revenue Code.

RELA: Real Estate License Act.

Release: To relinquish an interest or claim to a piece of property.

Release Clause: A stipulation that upon the payment of a specific sum of money to the holder of a trust deed or mortgage, the lien of the instrument as to a specifically described lot or area shall be removed from the blanket lien on the whole area involved.

Release Deed: An instrument executed by the mortgagee or the trustee reconveying to the mortgagor or trustor the real estate which secured the loan after the debt has been paid in full.

Relinquished Property: The property given up by an investor (taxpayer) in a 1031 exchange.

Rem: (See In Rem)

Remainder: An estate which takes effect after the termination of the prior estate, such as a life estate. A future possessory interest in real estate.

Remainder Depreciation: The possible future loss in value of an improvement to real property.

Remainderman: The person who is to receive the property after the termination of the prior estate.

Remaining Term: The original number of payments due on the loan minus the number of payments that have been made.

Renegotiable Rate Mortgage: A loan secured by a long term mortgage which provides for renegotiation, at pre-determined intervals, of the interest rate (for a maximum variation of five percent over the life of the mortgage.)

Rent: The compensation paid for the use of real estate.

Rent Control: Laws that limit the amount of rent landlords may charge, and that state when and by how much the rent can be raised. Most rent control laws also require a landlord to provide a good reason, such as repeatedly late rent, for evicting a tenant. Rent control exists in some cities and counties in California, Maryland, New Jersey, New York and Washington, D.C.

Rent Stabilization: tenants in rent-stabilized apartments are guaranteed a maximum rent increase – usually between 2% to 10% – for each lease renewal.

Renunciation: When someone who has been granted something or has accepted something later gives it up or rejects it; as when an agent withdraws from the agency relationship.

Repayment Plan: An arrangement by which a borrower agrees to make additional payments to pay down past due amounts while still making regularly scheduled payments.

Replacement Cost: The cost to replace a structure with one having utility equivalent to that being appraised, but constructed with modern materials and according to current standards, design and layout.

Replacement Property: The property received by an investor (taxpayer) in a 1031 exchange.

Reproduction Cost: The cost of replacing the subject improvement with one that is the exact replica, having the same quality of workmanship, design and layout, or cost to duplicate an asset.

Rescission: The cancellation or annulment of a transaction or contract by operation of law or by mutual consent. Borrowers have a right to cancel certain mortgage refinance and home equity transactions within three business days after closing, or for up to three years in certain instances.

Rescission of Contract: The abrogation or annulling of contract; the revocation or repealing of contract by mutual consent by parties to the contract, or for cause by either party to the contract.

Reservation: A right retained by a grantor in conveying property.

Reserves: 1) In a common interest subdivisions, an accumulation of funds collected from owners for future replacement and major maintenance of the common area and facilities. 2) With regard to mortgage loans, an accumulation of funds, collected by the lender from the borrower as part of each monthly mortgage payment, an amount allocated to pay property taxes and insurance when they are due.

Resident Manager: A person who lives in one of the units of an apartment complex while supervising the care of that complex.

Residential Assessment Ratio (RAR): A rate established annually by the State Office of Real Property Service (ORPS) to measure the equity of the assessed values of residential real property in a municipality.

RESPA: (See Real Estate Settlement Procedures Act.)

Restraint of Trade: Business practices designed to restrict competition, create a monopoly, control prices and otherwise obstruct the free operation of business.

Restriction: A limitation on the use of real property. Property restrictions fall into two general classifications—public and private. Zoning ordinances are examples of the former type. Restrictions may be created by private owners, typically by appropriate clauses in deeds, or in agreements, or in general plans of entire subdivisions. Usually they assume the form of a covenant, or promise to do or not to do a certain thing.

Retrospective Value: The value of the property as of a previous date.

Return: Profit from an investment; the yield.

Return on Investment (ROI): Measure of profitability determined by ratio of money invested to net income after taxes.

Reverse Exchange: When the investor (taxpayer) wants to receive the replacement property and then sell the current investment property at a later date.

Reversion: The right to future possession or enjoyment by a person, or the person’s heirs, creating the preceding estate. (For example, at the end of a lease.)

Reversionary Interest: The interest which a person has in lands or other property, upon the termination of the preceding estate. A future interest.

Revocation: When someone who granted or offered something withdraws it; as when a principal withdraws the authority granted to the agent, an offeror withdraws the offer or the DRE cancels a salesperson or broker license.

Revolving Debt: Credit that is extended by a creditor under a plan in which (1) the creditor contemplates repeated transactions; (2) the creditor may impose a finance charge from time to time on an outstanding unpaid balance; and (3) the amount of credit that may be extended to the consumer during the term of the plan is generally made available to the extent that any outstanding balance is repaid.

Right of First Refusal: A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others.

Right of Survivorship: The right of a surviving tenant or tenants to succeed to the entire interest of the deceased tenant; the distinguishing feature of a joint tenancy.

Right of Way: A privilege operating as an easement upon land, whereby the owner does by grant, or by agreement, give to another the right to pass over owner’s land, to construct a roadway, or use as a roadway, a specific part of the land; or the right to construct through and over the land, telephone, telegraph, or electric power lines; or the right to place underground water mains, gas mains, or sewer mains.

Right, Title and Interest: A term used in deeds to denote that the grantor is conveying all of that to which grantor held claim.

Riparian Rights: The right of a landowner whose land borders on a stream or watercourse to use and enjoy the water which is adjacent to or flows over the owners land provided such use does not injure other riparian owners.

Risk Analysis: A study made, usually by a lender, of the various factors that might affect the repayment of a loan.

Risk Management:The process of identifying, assessing, correcting and controlling risks. .

Risk Rating: A process used by the lender to decide on the soundness of making a loan and to reduce all the various factors affecting the repayment of the loan to a qualified rating of some kind.

Risk vs. Return: Is the risk worth the return? A very personal decision!

Running with The Land: A phrase used in property law to describe a right or duty that remains with a piece of property no matter who owns it. For example, the duty to allow a public beach access path across waterfront property would most likely pass from one owner of the property to the next.

Rural Housing Service (RHS): An agency within the U.S. Department of Agriculture (USDA), which operates a range of programs to help rural communities and individuals by providing loan and grants for housing and community facilities. The agency also works with private lenders to guarantee loans for the purchase or construction of singlefamily housing.

Sale and Leaseback: A financial arrangement where at the time of sale the seller retains occupancy by concurrently agreeing to lease the property from the purchaser. The seller receives cash while the buyer is assured a tenant and a fixed return on buyer’s investment.

Sale-Leaseback-Buy-Back: A sale and leaseback transaction in which the leaseholder has the option to buy back the original property after a specified period of time.

Sales Contract: A contract by which buyer and seller agree to terms of a sale.

Salvage Value: In computing depreciation for tax purposes, the reasonably anticipated fair market value of the property at the end of its useful life and must be considered with all but the declining balance methods of depreciation.

Sandwich Lease: A leasehold interest which lies between the primary lease and the operating lease.

Sash: Wood or metal frames containing one or more window panes.

Satisfaction: Discharge of a mortgage or trust deed from the records upon payment of the debt.

Satisfaction Piece: An instrument for recording and acknowledging payment of an indebtedness secured by a mortgage.

Screening Process: The process a potential co-op buyer will go through to gain approval from the board of directors, including compiling and submitting the board package for review and sitting down for an interview with the board or a screening committee for the co-op.

Scribing: Fitting woodwork to an irregular surface.

Seal: An impression made to attest the execution of an instrument.

Secondary Financing: A loan secured by a second mortgage or trust deed on real property. These can be third, fourth, fifth, sixth mortgages or trust deeds, on and on ad infinitum.

Secondary Market: The buying and selling of existing deeds of trust and promissory notes. The primary market is the one in which lenders loan money to borrowers; the secondary

market is the one in which the lenders sell their loans to the large secondary marketing agencies (FNMA, FHLMC, and GNMA) or to other investors.

Second Mortgage: A mortgage that has a lien position subordinate to the first mortgage.

Secondary Mortgage Market: Buying and selling of existing mortgage loans, designed to provide additional liquidity for lenders. Contrast with primary mortgage market. Also see Fannie Mae, Freddie Mac and Ginnie Mae.

Section: Section of land is established by government survey, contains 640 acres and is one mile square.

Secured Loan: A loan that is backed by property such as a house, car, jewelry, etc.

Secured Party: This is the party having the security interest. Thus the mortgagee, the conditional seller, the pledgee, etc., are all now referred to as the secured party. (Uniform Commercial Code.)

Security: The property that will be given or pledged as collateral for a loan.

Securities: Financial forms that shows the holder owns a share or shares of a company (stocks) or has loaned money to a company or government organization (bonds).

Security Agreement: An agreement between the secured party and the debtor which creates the security interest. (Uniform Commercial Code.)

Security Deposit: A payment required by a landlord to ensure that a tenant pays rent on time and keeps the rental unit in good condition. If the tenant damages the property or leaves owing rent, the landlord can use the security deposit to cover what the tenant owes.

Security Interest: A term designating the interest of the creditor in the property of the debtor in all types of credit transactions. It thus replaces such terms as the following — chattel mortgage; pledge; trust receipt; chattel trust; equipment trust; conditional sale; inventory lien; etc., according to Uniform Commercial Code usage.

Seisin (Seizin): Possession of real estate by one entitled thereto.

Self Amortized Loan: A loan which will retire the debt by systematic payments of principal and interest, so that at the end of the loan period, the balance will be zero.

Seller’s Market: The market condition which exists when a seller is in a more commanding position as to price and terms because demand exceeds supply.

Seller Take-Back: An agreement in which the seller of a property provides financing to the buyer for the home purchase. See also “Owner Financing

Separate Property: Property owned by a married person in his or her own right outside of the community interest including property acquired by the spouse (1) before marriage, (2) by gift or inheritance, (3) from rents and profits on separate property, and (4) with the proceeds from other separate property.

Septic System: A form of onsite sewage treatment in areas with no connection to public sewers

Septic Tank: An underground tank in which sewage from the house is reduced to liquid by bacterial action and drained off.

Servicemembers Civil Relief Act: A federal law that restricts the enforcement of civilian debts against certain military personnel who may not be able to pay because of active military service. It also provides other protections to certain military personel.

Servicer: A firm that performs servicing functions, including collecting mortgage payments, paying the borrower’s taxes and insurance and generally managing borrower escrow accounts.

Servicing: The tasks a lender performs to protect the mortgage investment, including the collection of mortgage payments, escrow administration, and delinquency management.

Servicing Loans: Supervising and administering a loan after it has been made. This involves such things as — collecting the payments, keeping accounting records, computing the interest and principal, foreclosure of defaulted loans, and so on.

Servient Tenement: Property that is subject to use by another for a specific purpose. For example, a beachfront house that has a public walkway to the beach on its premises would be a servient tenement.

Set Back Ordinance: An ordinance requiring improvements built on property to be a specified distance from the property line, street or curb.

Settlement: The process of completing a loan transaction at which time the mortgage documents are signed and then recorded, funds are disbursed, and the property is transferred to the buyer (if applicable). Also called closing or escrow in different jurisdictions. See also “Closing”

Settlement Statement: A document that lists all closing costs on a consumer mortgage transaction.

Severalty Ownership: Owned by one person only. Sole ownership.

Shared Appreciation Mortgage: A loan having a fixed rate of interest set below the market rate for the term of the loan which also provides for contingent interest to be paid to the lender on a certain percentage of appreciation in the value of the property against which the loan is secured upon transfer or sale of the property or the repayment of the loan.

Shared Equity Mortgage: A home loan in which the lender gets a share of the equity of the home in exchange for providing a portion of the down payment. When the home is later sold, the lender is entitled to a portion of the proceeds.

Share Loan: A loan used to finance the purchase of shares in a co-op corporation.

Sheriff’s Deed: Deed given by court order in connection with sale of property to satisfy a judgment.

Short Sale (of house): A sale of a house in which the proceeds fall short of what the owner still owes on the mortgage. Many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments. By accepting a short sale, the lender can avoid a lengthy and costly foreclosure, and the owner is able to pay off the loan for less than what he owes. See also deed in lieu (or foreclosure).

Simple Interest: Interest computed on the principal amount of a loan only as distinguished from compound interest.

Simultaneous Exchange: A straight 1031 exchange in which the property closings happen on the exact same date, and the investors (taxpayers) relinquish and receive their respective properties in, typically, back-to-back closing sessions.

Single-Family Home: A free-standing, residential structure, designed to accommodate one family. Single-family homes include traditional houses, as well as patio homes.

Single-Family Properties: One- to four-unit properties including detached homes, townhouses, condominiums, and cooperatives, and manufactured homes attached to a permanent foundation and classified as real property under applicable state law.

Sinking Fund: Fund set aside from the income from property which, with accrued interest, will eventually pay for replacement of the improvements.

Situs: The location of a property.

Slander of Title: False and malicious statements disparaging an owner’s title to property and resulting in actual pecuniary damage to the owner.

Small Claims Assessment Review: A judicial proceeding for residential taxpayers seeking a reduction in assessed value. SCAR proceedings apply to owner occupied one, two and three family dwellings, or vacant land which is not buildable. SCAR proceedings are not an option for commercial taxpayers.

Soft Second Loan: A second mortgage whose payment is forgiven or is deferred until resale of the property.

Special Assessment: 1) Legal charge against real estate by a public authority to pay cost of public improvements such as street lights, sidewalks, street improvements. 2) In a common interest subdivision, acharge, in addition to the regular assessment, levied by the association against owners in the development, for unanticipated repairs or maintenance on the common area or capital improvement of the common area.

Special Assessment District: A geographic area designated to pay for the cost of specific public improvements which will benefit the properties in that geographic area.

Special Power of Attorney: A written instrument whereby a principal confers limited authority upon an agent to perform certain prescribed acts on behalf of the principal.

Special Use Permit: A permit which allows a specific exception to an existing zoning ordinance for a particular parcel of land. It is also known as a conditional use permit

Special Warranty Deed: A deed in which the grantor warrants or guarantees the title only against defects arising during grantor’s ownership of the property and not against defects existing before the time of grantor’s ownership.

Specific Lien: A claim that only applies to or affects a certain property or group of properties. Contrast with general lien.

Specific Performance: An action to compel performance of an agreement, e.g., sale of land as an alternative to damages or rescission.

Spite Fence: An unsightly fence erected for no other purpose than to irritate a neighbor. Such a fence may be illegal under local fence height and appearance regulations or state laws that specifically bar spite fences. Even if it doesn’t violate regulation or laws, the fence may still be illegal if it was built with malicious intent.

Sponsor: Creator and developer responsible to (among other duties) file all of the initial paperwork, write bylaws, gather investors, and ultimately sell the units (or shares) for a condo or co-op community.

SREA: Society of Real Estate Appraisers.

Stabilized Budget: A forecast of income and expenses that can reasonably be expected for a certain period of time (usually 5 years).

Standard Depth: Generally the most typical lot depth in the neighborhood.

Standby Commitment: The mortgage banker frequently protects a builder by a “standby” agreement, under which banker agrees to make mortgage loans at an agreed price for many months into the future. The builder deposits a “standby fee” with the mortgage banker for this service. Frequently, the mortgage broker protects self by securing a “standby” from a long- term investor for the same period of time, paying a fee for this privilege.

Starker Exchange: Also known as a 1031 Tax-Deferred Exchange (or tax-free property exchange). Allows a property owner to defer paying federal and some state income taxes  by  trading  one  business  type  property  for  another,  as  long  as  both  are  like/kind properties

Statute: A law established by an act of the Legislature.

Statute of Frauds: A state law, based on an old English statute, requiring certain contracts to be in writing and signed before they will be enforceable at law, e.g.. contracts for the sale of real property, contracts not be performed within one year.

Statute of Limitations: A statute barring all right of action after a certain period of time from the time when a cause of action first arises.

Statutory Year: A year composed of twelve months, each with thirty (30) days, for a total of 360 days in a statutory year. Also known as a banker’s year. Contrast with calendar year.

Statutory Warranty Deed: A short term warranty deed which warrants by inference that the seller is the undisputed owner, has the right to convey the property, and will defend the title if necessary. This type of deed protects the purchaser in that the conveyor covenants to defend all claims against the property. If conveyor fails to do so, the new owner can defend said claims and sue the former owner.

Straight- Line Depreciation: A method of calculating a property’s depreciation for income taxes by assuming that the property value will decrease an equal amount every year until it is fully depreciated. Widely considered to be the simplest way to figure depreciation, this type of calculation can be used on a residential income-producing property for a period of 27 ½ years, and non-residential income-producing property for a period of 30 years.

Steering: The illegal practice of directing members of minority groups to, or away from, certain areas or neighborhoods; channeling. See Fair Housing.

Straight Line Depreciation: A method of depreciation under which improvements are depreciated at a constant rate throughout the estimated useful life of the improvement.

Straight Note: A note in which a borrower repays the principal in a lump sum at maturity while interest is paid in installments or at maturity. (See Interest Only Note.)

Subagent: A person upon whom the powers of an agent have been conferred, not by the principal, but by an agent as authorized by the agent’s principal.

Subdivision: A legal definition of those divisions of real property for the purpose of sale, lease or financing which are regulated by law. For examples see — California Business and Professions Code Sections 11000, 11000.1, 11004.5; California Government Code Section 66424; United States Code, Title 15, Section 1402(3).

“Subject To” A Mortgage: When a grantee takes title to real property subject to a mortgage, grantee is not responsible to the holder of the promissory note for the payment of any portion of the amount due. The most that grantee can lose in the event of a foreclosure is grantee’s equity in the property. (See also “assumption of mortgage”.) In neither case is the original maker of the note released from primary responsibility. If liability is to be assumed, the agreement must so state.

Sublease: A lease given by a lessee.

Subletting: A leasing by a tenant to another, who holds under the tenant. SUBORDINATE — To make subject to, or junior or inferior to.

Subordinate Mortgage: A second or third mortgage that has a lower priority in the event of a default than the first mortgage.

Subordination Agreement: An agreement by the holder of an encumbrance against real property to permit that claim to take an inferior position to other encumbrances against the property.

Subordination Clause: A clause which permits the placing of a mortgage at a later date which takes priority over an existing mortgage.

Subordinate Financing: Any mortgage or other lien with lower priority than the first mortgage.

Subpoena: A legal order to cause a witness to appear and give testimony.

Sub-Prime Loans: An industry term used to describe loans with less stringent lending and underwriting terms and conditions. Due to the higher risk; sub-prime loans charge higher interest rates and fees.

Subrogation: Replacing one person with another in regard to a legal right or obligation. The substitution of another person in place of the creditor, to whose rights he or she succeeds in relation to the debt. The doctrine is used very often where one person agrees to stand surety for the performance of a contract by another person.

Subsidy Buydown: Funds provided usually by the builder or seller to temporarily reduce the borrower’s monthly principal and interest payment.

Subscribing Witness: One who writes his/her name as witness to the execution of an instrument.

Substitution, Principle of: Affirms that the maximum value of a property tends to be set by the cost of acquiring an equally desirable and valuable substitute property, assuming no costly delay is encountered in making the substitution.

Succession: The passing of property or legal rights after death. The word commonly refers to the distribution of property under a state’s intestate succession laws, which determine who inherits property when someone dies without a valid will. When used in connection with real estate, the word refers to the passing of property by will or inheritance, as opposed to gift, grant, or purchase.

Suit for Specific Performance: A legal action brought by either a buyer or a seller to enforce performance of the terms of a contract.

Sum of The Years Digits: An accelerated depreciation method.

Supply and Demand, Principle of: In appraising, a valuation principle starting that market value is affected by intersection of supply and demand forces in the market as of the appraisal date.

Surety: One who guarantees the performance of another — Guarantor.

Surplus Productivity, Principle of: The net income that remains after the proper costs of labor, organization and capital have been paid, which surplus is imputable to the land and tends to fix the value thereof.

Surrender: The cancellation of a lease by mutual consent of the lessor and the lessee.

Surrogate’s Court (Probate Court): A court having jurisdiction over the proof of wills, the settling of estates and of citations.

Survey: The process by which a parcel of land is measured and its area is ascertained.

Sweat Equity: A borrower’s contribution to the down payment for the purchase of a property in the form of labor or services rather than cash.

Syndicate: A partnership organized for participation in a real estate venture. Partners may be limited or unlimited in their liability. (See real estate syndicate.)

Take-Out Loan: The loan arranged by the owner or builder developer for a buyer. The construction loan made for construction of the improvements is usually paid in full from the proceeds of this more permanent mortgage loan.

Taking: See eminent domain.

Tax: Enforced charge exacted of persons, corporations and organizations by the government to be used to support government services and programs.

Tax Assessor: Local government official, who is either appointed or elected depending upon the municipality; whose primary function is to estimate the value of all real property within the municipality in which they serve.

Tax Deed: The deed given to a purchaser at a public sale of land held for nonpayment of taxes. It conveys to the purchaser only such title as the defaulting taxpayer had.

Tax Depreciation: An accounting procedure that allows an owner to take a business deduction for a property’s annual depreciation according to tax laws, instead of basing the depreciation on the property’s actual gain or loss of value in the market. This method also shelters income generated by a property from taxation.

Taxes and Insurance: Funds collected as part of the borrower’s monthly payment and held in escrow for the payment of the borrower’s, or funds paid by the borrower for, state and local property taxes and insurance premiums.

Tax-Deferred Exchange (or tax-free property exchange Also 1031  Or Starker): Allows a property owner to defer paying federal and some state income taxes by trading one business type property for another, as long as both are like/kind properties.

Tax-Free Exchange: The trade or exchange of one real property for another without the need to pay income taxes on the gain at the time of trade.

Tax Grievance: complaint filed by a taxpayer to challenge their property’s assessment.

Tax Levy: Amount of money that a taxing authority needs to raise through property taxes.

Tax Lien: An In Rem proceeding, in which the taxing authority places a claim against a property due to the non-payment of taxes. If the taxes are not paid, the taxing authority has the right to take the property.

Tax Map: An official map showing the dimensions of the properties in a municipality

Tax Rate: A ratio or percentage at which a property is taxed which is often multiplied by a property’s assessed value to determine the property tax.

Tax Roll: A list of all taxable property in a municipality, which shows the assessed value of each parcel, and is used to establish the tax base

Tax Sale: Sale of property after a period of nonpayment of taxes.

Tax Shelter: An investment made especially for the purpose of creating income tax deductions in order to reduce taxes resulting from other taxable income sources.

Tenancy at Will: A license to use or occupy lands and tenements at the will of the owner.

Tenancy by The Entirety: A special kind of property ownership that’s only for married couples. Both spouses have the right to enjoy the entire property, and when one spouse dies, the surviving spouse gets title to the property (called a right of survivorship). It is similar to joint tenancy, but it is available in only about half the states.

Tenancy in Common: Co-ownership of property by two or more persons who each hold an undivided interest, without right of survivorship; interests need not be equal.

Tenancy for Years: The term used when a property is leased for a specific amount of time. The time frame can be anything the parties agree to such as: 60 days, 6 months, one year, five years, etc.

Tenant: The party who has legal possession and use of real property belonging to another.

Tenant at Sufferance: One who comes into possession of lands by lawful title and keeps it afterwards without any title at all.

Tenement: Everything that may be occupied under a lease by a tenant.

Tentative Map: The Subdivision Map Act requires subdividers to submit initially a tentative map of their tract to the local planning commission for study. The approval or disapproval of the planning commission is noted on the map. Thereafter, a final map of the tract embodying any changes requested by the planning commission is required to be filed with the planning commission.

Tenure in Land: The mode or manner by which an estate in lands is held. All rights and title rest with owner.

Term: The actual life of a mortgage, at the end of which the mortgage becomes due and payable unless the lender renews the mortgage.

Termite Inspection: An inspection to determine whether a property has termite infestation or termite damage. In many parts of the country, a home must be inspected for termites before it can be sold.

Termites: Ant-like insects which feed on wood and are highly destructive to wooden structures.

Termite Shield: A shield, usually of noncorrodible metal, placed on top of the foundation wall or around pipes to prevent passage of termites.

Terrace: a roof or part of a roof, usually in a setback on a high-rise. Unlike a rooftop deck, the terrace can be enjoyed only by the tenant in the apartment with the access to it.

Testate: Where a person dies leaving a valid will. Testator: One who makes a will.

Third Party: Persons who are not parties to a contract which affects an interest they have in the object of the contract.

Third-Party Origination: A process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package a mortgage loan. See also “Mortgage Broker.”

Threshold: A strip of wood or metal beveled on each edge and used above the finished floor under outside doors.

Tidelands: Lands that are covered and uncovered by the ebb and flow of the tide.

Tie-in Arrangement: A contract where one transaction depends upon another.

Time Is of The Essence: A condition of a contract expressing the essential nature of performance of the contract by a party in a specified period of time.

Time-Share Estate: A right of occupancy in a time-share project (subdivision) which is coupled with an estate in the real property.

Time-Share Project: A form of subdivision of real property into rights to the recurrent, exclusive use or occupancy of a lot, parcel, unit, or segment of real property, on an annual or some other periodic basis, for a specified period of time.

Time-Share Use: A license or contractual or membership right of occupancy in a timeshare project which is not coupled with an estate in the real property.

Time Value of Money:The passage of time has an impact on money through its growth due to earning of interest or appreciation, or loss due to inflation.

Title: Indicates “fee’’ position of lawful ownership and right to property. “Bundle of Rights” possessed by an owner. Combination of all elements constituting proof of ownership.

Title Company: A company that provides title insurance policies. Title companies may also act as escrow agents, conduct title searches, and hold closings.

Title Insurance: Insurance to protect a real property owner or lender up to a specified amount against certain types of loss, e.g., defective or unmarketable title.

Title Report: A report which discloses condition of the title, made by a title company preliminary to issuance of title insurance policy.

Title Search: A check of the public records to ensure that the seller is the legal owner of the property and to identify any liens or claims against the property.

Title Theory: Mortgage arrangement whereby title to mortgaged real property vests in the lender. Some states give greater protection to mortgage lenders and assume lenders have title interest. Distinguished from Lien Theory States.

Topography: Nature of the surface of land; topography may be level, rolling, mountainous. Variation in earth’s surface.

Torrens Tittle: System of title records provided by state law (no longer used in California)

Torrens System: A system of land registration used in some states in which clear title is established with a governmental authority, which issues title certificates to owners.

Tort: Any wrongful act (not involving a breach of contract) for which a civil section will lie for the person wronged.

Town or City Charter: A  legal document establishing a municipality, such as a city or town.

Townhouse: One of a row of houses usually of the same or similar design with common side walls or with a very narrow space between adjacent side walls.

Township: In the survey of public lands of the United States, a territorial subdivision six miles long, six miles wide and containing 36 sections, each one mile square, located between two range lines and two township lines.

Trade Equity: Real estate or assets given to the seller as part of the down payment for the property.

Trade Fixtures: Articles of personal property annexed by a business tenant to real property which are necessary to the carrying on of a trade and are removable by the tenant.

Trade-In: An increasingly popular method of guaranteeing an owner a minimum amount of cash on sale of owner’s present property to permit owner to purchase another. If the property is not sold within a specified time at the listed price, the broker agrees to arrange financing to personally purchase the property at an agreed upon discount.

Transaction Fee: A fee which may be charged each time you draw on a home equity credit line.

Transfer Fee: A charge made by a lending institution holding or collecting on a real estate mortgage to change its records to reflect a different ownership.

Transfer Tax: State or local tax payable when title to property passes from one owner to another.

Transferability: The ease with which possession and/or use will be conveyed from one party to another.

Treasury Index: An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It is based on the results of auctions by the U.S. Treasury of Treasury bills and securities.

Triple Net Lease: See net lease.

Truth-In-Lending Act (TILA): A federal law that requires disclosure of a truth-in-lending statement for consumer credit. The statement includes a summary of the total cost of credit, such as the annual percentage rate (APR) and other specifics of the credit.

Trust Account: An account separate and apart and physically segregated from broker’s own funds, in which broker is required by law to deposit all funds collected for clients.

Trust Deed: Just as with a mortgage this is a legal document by which a borrower pledges certain real property or collateral as guarantee for the repayment of a loan. However, it differs from the mortgage in a number of important respects. For example, instead of there being two parties to the transaction there are three. There is the borrower who signs the trust deed and who is called the trustor. There is the third, neutral party, to whom trustor deeds the property as security for the payment of the debt, who is called the trustee. And, finally, there is the lender who is called the beneficiary, the one who benefits from the pledge agreement in that in the event of a default the trustee can sell the property and transfer the money obtained at the sale to lender as payment of the debt.

Trustee: One who holds property in trust for another to secure the performance of an obligation. Third party under a deed of trust.

Trustor: One who borrows money from a trust deed lender, then deeds the real property securing the loan to a trustee to be held as security until trustor has performed the obligation to the lender under terms of a deed of trust.

Truth in Lending: The name given to the federal statutes and regulations (Regulation Z) which are designed primarily to insure that prospective borrowers and purchasers on credit receive credit cost information before entering into a transaction.

Two- to Four- Family Property: A residential property that provides living space (dwelling units) for two to four families, although ownership of the structure is evidenced by a single deed; a loan secured by such a property is considered to be a single-family mortgage.

Umbrella Policy – Coverage over and above what the policyholder would have in their regular liability insurance.

Underimprovement: An improvement which, because of its deficiency in size or cost, is not the highest and best use of the site.

Underwriting: Insuring something against loss; guaranteeing financially.

Undue Influence: Use of a fiduciary or confidential relationship to obtain a fraudulent or unfair advantage over another’s weakness of mind, or distress or necessity.

Unearned Increment: An increase in value of real estate due to no effort on the part of the owner; often due to increase in population.

Uniform Commercial Code: Establishes a unified and comprehensive method for regulation of security transactions in personal property, superseding the existing statutes on chattel mortgages, conditional sales, trust receipts, assignment of accounts receivable and others in this field.

Uniform Residential Loan Application: A standard mortgage application you will have to complete. The form requests your income, assets, liabilities, and a description of the property you plan to buy, among other things.

Unit-In-Place Method: The cost of erecting a building by estimating the cost of each component part, i.e., foundations, floors, walls, windows, ceilings, roofs, etc., (including labor and overhead).

Unimproved Land: Land that is in a natural state and has not yet had the necessities such as water, sewer, electric, and telephone lines brought to the property. It has not yet been graded and is not ready for building.

Unlawful Detainer: An eviction lawsuit.

Unqualified Buyers: Buyers who do not meet underwriting guidelines due to insufficient income, length of employment, lack of traditional credit lines, not enough money down etc.

Usable/Rentable Square Footage: Usable is the actual square footage that the tenant will occupy as opposed to the rentable which is the square footage on which he is paying. Rentable includes a share of payment for the common areas.

Unsecured Loan: A loan that is not backed by collateral.

Urban Property: City property; closely settled property.

Usufruct: The right to use property—or income from property—that is owned by another.

Usury: On a loan, claiming a rate of interest greater than that permitted by law.

Utilities: Refers to services rendered by public utility companies, such as — water, gas, electricity, telephone.

Utility: The ability to give satisfaction and/or excite desire for possession. An element of value.

Vacancy Factor: The percentage of a building’s space that is not rented over a given period.

Valid: Having force, or binding force; legally sufficient and authorized by law.

Valley: The internal angle formed by the junction of two sloping sides of a roof.

Valuation: Estimated worth or price. Estimation. The act of valuing by appraisal.

VA Loan: A loan made to qualified veterans for the purchase of real property wherein the Department of Veteran’s Affairs guarantees the lender payment of the mortgage.

Value: Present worth of future benefits arising out of ownership to typical users/investors.

Vara: A measurement of length of 33 1/3 inches

Variable Expense: Property operating expenses that increase with occupancy.

Variable Interest Rate: (VlRs or VMRs, Variable Mortgage Rates.) An interest rate in a real estate loan which by the terms of the note varies upward and downward over the term of the loan depending on money market conditions.

Variance: An exception to a zoning ordinance, usually granted by a local government. For example, if you own an oddly shaped lot that could not accommodate a home in accordance with your city’s setback requirement, you could apply at the appropriate office for a variance allowing you to build closer to a boundary line.

Vendee: A purchaser; buyer.

Vendee’s Lien: A lien against property under contract of sale to secure deposit paid by a purchaser.

Vendor: A seller.

Veneer: Thin sheets of wood.

Verification: Sworn statement before a duly qualified officer to correctness of contents of an instrument.

Vested: Bestowed upon someone; secured by someone, such as title to property.

Veterans Affairs (U.S. Department of Veterans Affairs): A federal government agency

View Ordinance: A law adopted by some cities or towns with desirable vistas–such as those in the mountains or overlooking the ocean–that protects a property owner from having his or her view obstructed by growing trees. View ordinances don’t cover buildings or other structures that may block views.

Village Acre: A lot size used in the Houston area to denote a 40,000 square foot parcel. In the Memorial Villages of Bunker Hill, Hedwig, Hillshire, Hunter’s Creek, Piney Point and Spring Valley, lot sizes are often expressed in village acres or a fractions of village acres. The term was coined by developers who successfully lobbied for slightly smaller, minimum lot size requirements, in the cities’ zoning regulations.

Violations: Act, deed or conditions contrary to law or permissible use of real property.

Virtual Home Tour: Any method used to provide internet users with a graphical presentation of a home, or homes. Presentations may include web pages, java applets, streaming video, panoramic images and bubble views.

Void: To have no force or effect; that which is unenforceable.

Voidable: That which is capable of being adjudged void, but is not void unless action is taken to make it so.

Voluntary Lien: Any lien placed on property with consent of, or as a result of, the voluntary act of the owner.

Wainscoting: Wood lining of an interior wall; lower section of a wall when finished differently from the upper part.

Waive: To relinquish, or abandon; to forego a right to enforce or require anything.

Waiver: The intentional or voluntary relinquishment of a known claim or right.

Walk-Through: A common clause in a sales contract that allows the buyer to examine the property being purchased at a specified time immediately before the closing, for example, within the 24 hours before closing.

Warranties: Written guarantees of the quality of a product and the promise to repair or replace defective parts free of charge.

Warranty of Authority: A representation by an agent to third persons that the agent has and is acting within the scope of authority conferred by his or her principal.

Warranty Deed: A deed used to convey real property which contains warranties of title and quiet possession, and the grantor thus agrees to defend the premises against the lawful claims of third persons. It is commonly used in many states but in others the grant deed has supplanted it due to the modern practice of securing title insurance policies which have reduced the importance of express and implied warranty in deeds.

Waste: The destruction, or material alteration of, or injury to premises by a tenant.

Wastewater: Water that has been used by people or in manufacturing that contains waste.

Water Rights: The right of a property owner to use water on, under or adjacent to the land for such purposes as irrigation, power or private consumption.

Water Table: Distance from surface of ground to a depth at which natural groundwater is found.

Wear and Tear: Depreciation of an asset due to ordinary usage.

Will: A written, legal declaration of a person expressing his or her desires for the disposition of that person’s property after his or her death.

Wrap Around Mortgage: A financing device whereby a lender assumes payments on existing trust deeds of a borrower and takes from the borrower a junior trust deed with a face value in an amount equal to the amount outstanding on the old trust deeds and the additional amount of money borrowed.

Writ of Execution: A court order which authorizes and directs the proper officer of the court (usually the sheriff) to carry into effect the judgment or decree of the court.

X: An individual who cannot write may execute a legal document by affixing an “X” (his/her mark) where the signature normally goes. Beneath the mark a witness then writes the person’s name and signs his or her own name as witness.

Yard: A unit of measurement 3 feet long.

Yield: The interest earned by an investor on an investment (or by a bank on the money it has loaned). Also, called return.

Yield Rate: The yield expressed as a percentage of the total investment. Also, called rate of return.

Zero Lot Line: A term generally used to describe the positioning of a structure on a lot so that one side rests directly on the lot’s boundary line (no set back). Where allowed by zoning and/or deed restrictions, it is used for “patio homes.”

Zone: The area set off by the proper authorities for specific use; an area subject to certain restrictions or restraints.

Zoning Ordinance: Act of city or county or other authorities specifying type and use to which property may be put in specific areas.

Zoning: Exercise of police power of city in regulating and controlling the character or use of property. Zoning laws divide cities into different areas according to use, from single-family residences to industrial plants. Zoning ordinances control the size, location, and use of buildings within these different areas.

• https://www.ftc.gov/sites/default/files/documents/one-stops/real-estate-competition/realestateglossary.pdf
• https://sun.iwu.edu/~finance/pages/docs/Glossary.pdf
• https://www.dre.ca.gov/files/pdf/refbook/ref27.pdf
• https://www.newyorkwebschool.com/hyperlms/lms/help/glossary/
• http://www.243nyc.com/glossary/