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Mortgage and Loan Glossary |
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Select the first letter
of the word:
A B
C D E
F G H
I J K
L M N
O P Q
R S T
U V W
X Y Z
- A
- Abandonment
- The voluntary relinquishment of rights of
ownership or other interest (such as an easement)
by failure to use the property, coupled with
an intent to abandon (give up the interest).
- Abatement
- A reduction or decrease. Usually applies to
a decrease of assessed valuation of ad valorem
taxes after the assessment and levy.
- Abstract
- A summary, an abridgement. Before the use
of photo static copying, public records were
kept by abstracts of recorded documents.
- Abstracter's Certificate
- A certificate contained in an abstract which
shows the time period and scope of the search
of public records done by the abstracter.
- Abstract Of Judgment
- A summary of the essential provisions of a
court judgment, which when recorded in the county
recorder's office, creates a lien upon the property
of the defendant in that county, both presently
owned or after acquired.
- Abstract Of Title
- A compilation of the recorded documents relating
to a parcel of land, from which an attorney
may give an opinion as to the condition of title.
Still in use in some states, but giving way
to the use of title insurance.
- Acceleration Clause
- Clause used in an installment note and mortgage
(or deed of trust), which gives the lender the
right to demand payment in full upon the happening
of a certain event, such as failure to pay an
installment by a certain date, change of ownership
without the lender's consent, destruction of
the property, or other event which endangers
the security of the loan.
- Accessibility
- The location of a site in terms of how easily
it may be reached by customers. employees, carriers,
and others necessary to the intended use of
the property
- Accord
- An agreement by which one accepts something
different (usually less) from what is owed as
full satisfaction The amount owed may be in
dispute or simply accepted as full satisfaction
by the creditor or claimant. The agreement and
acceptance is called "Accord and Satisfaction."
- Accretion
- The gradual addition to the shore or bank
of a waterway. The land generally becomes the
property of the owner of the shore or bank,
except where statutes specify otherwise.
- Accrued Depreciation
- (1) The amount reserved each year in the accounting
system for replacement of a building or other
asset. (2) The useful life of a property at
any given time.
- Acknowledgement
- A written declaration by a person executing
an instrument, given before an officer authorized
to give an oath (usually a notary public), stating
that the execution is of his own volition.
- Acquisition Costs
- Costs of acquiring property other than purchase
price: escrow fees, title insurance, lenders
fees, etc.
- Act Of God
- Damage caused by nature (floods. winds. etc.)
rather than destruction by man.
- Add on Interest
- A method of charging interest usually used
in the financing of automobiles, but not generally
used in real estate financing. Interest is computed
on the total amount borrowed and added on to
the principal. Each payment is then deducted
from this total amount. Interest on real estate
loans is usually figured based on the balance
owing after each payment is made (declining
balance).
- Adjusted Gross Income
- Gross income of a building it fully rented,
less an allowance for estimated vacancies.
- Adjustable Rate Mortgages
(arm's)
- Mortgage loans under which the interest rate
is periodically adjusted to more closely coincide
with current rates. The amounts and times of
adjustment are agreed to at the inception of
the loan. Also called: Adjustable Rate Loans,
Adjustable Mortgage Loans (AML'S), Flexible
Rate Loans, Variable Rate Loans.
- Ad Valorem
- "According to value." A method of
taxation using the value of the thing taxed
to determine the amount of tax. Taxes can be
either "Ad Valorem" or "Specific."
Example: A tax of $5.00 per $1000.00 of value
per house is "Ad Valorom," A tax of
S5.00 per house (irrespective of value) is "Specific."
- Advance Fee
- A fee charged by a broker to a seller to cover
all ora portion of the broker's costs of promoting
the property. The fee is generally credited
against commissions but is not refunded if no
commissions are received. Most frequently used
in connection with large offerings which require
a substantial outlay of funds for promotion.
- Agency
- A relationship created when one person (the
principal) delegates to another (the agent)
the fight to act on his or her behalf in business
transactions.
- All inclusive Trust Deed
(wrap-around mortgage)
- A financing technique which involves the creation
of a new trust deed which includes the balance
due on the existing note plus any new funds
advanced.
- American Land Title
Association (ALTA)
- A national association of title insurance
companies, abstractors, and agents. The association
adopts standard title policy forms.
- Amortization
- Payment of a debt in equal installments of
principal and interest, rather than interest
only payments.
- Annual Percentage Rate (a.p.r.)
- The yearly interest percentage of a loan,
as expressed by the actual rate of interest
paid. For example: 6% add-on interest would
be much more than 6% simple interest, even though
both would say 6%. The A.P.R. is disclosed as
a requirement of federal truth in lending statutes
and should include all finance charges.
- Appel Loan (Accelerating
Payoff Progressive Equity Loan)
- A residential property loan which calls for
a payment increase over the first 6 years. Level
payments are made for the remaining years and
the loan paid off during the 15th year. There
is no prepayment penalty and P.M.I. is required.
- Appraisal
- An opinion of value based upon a factual analysis.
Legally, an estimation of value by two disinterested
persons of suitable qualifications.
- Appraisal Methods
- Generally, three major methods of appraisal:
Cost Approach, Income Approach, Market Value
(comparables) Approach.
- Arrears
- (1) Payment made after it is due is in arrears.
(2) Interest is said to be paid in arrears since
it is paid to the date of payment rather than
in advance, as is rent. Example: A rental payment
made July 1 pays the rent to August 1. An interest
payment made July 1 Pays the interest to July
1.
- Assumable
- A mortgage loan which can be transferred to
another person without a change in the terms
of the loan. VA and FHA loans are assumable,
FHLMC and FNMA are not.
- Assumption of Note
- Agreement by a buyer to assume the liability
under an existing note secured by a mortgage
or deed of trust. The lender usually must approve
the new debtor in order to release the existing
debtor (usually the seller) from liability.
- Avigation Easement
- An easement over private property abut-ting
an airport runway, which limits the height of
crops, trees, structures. etc., in the aircraft's
take off and landing path.
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- B
- Balloon Note
- A note calling for periodic payments which
are insufficient to fully amortize the face
amount of the note prior to maturity, so that
a principal sum known as a "balloon"
is due at maturity.
- Balloon Payment
- The unpaid principal amount of a loan due
on a specific date in the future. Usually the
amount that must be paid in a lump sum at the
end of the term.
- Bankrupt
- One who is adjudicated a bankrupt by a court
having proper jurisdiction. The bankruptcy may
be voluntary (petitioned by the bankrupt) or
involuntary (petitioned by the creditors of
the bankrupt).
- Bankruptcy
- Proceedings under federal bankruptcy statutes
to relieve a debtor (bankrupt) from insurmountable
debt. The bankrupt's property is distributed
by the court to the creditors as full satisfactions
of the debts, in accordance with certain priorities
and exemptions. Voluntary bankruptcy is petitioned
by the debtor for, involuntary by the creditors.
- Before And After Method
- An appraisal method used in both condemnation
and modernization. In condemnation the method
is used in a partial taking. The value of the
total land owned by A, for example, is $1.00
per sq. ft. After a partial taking, the remaining
land of A is worth $.75 per sq. ft. A should
receive $1.00 per sq. ft. for the property taken
plus $.25 per sq. ft. for the remaining parcel.
In the event the remaining property is worth
$1.25 after the taking (increased value), the
payment to A could be less than the value of
the property taken. In modernization, an appraiser
may take the value of property before and after
remodeling to determine if the value increased
more than modernization costs.
- Beneficiary
- The Person who is entitled to receive funds
of property under the terms and provisions of
a will, trust, insurance policy or security
instrument. In connection with a mortgage loan
the beneficiary is the lender.
- Bill Of Sale
- An instrument by which title to personal property
is transferred or conveyed.
- Biweekly
- Also known as accelerated mortgages. Biweeklies
reduce interest expense and build home equity
faster than monthly payments.
- Blanket Mortgage
- (1) A mortgage covering more than one property
of the mortgagor, such as a mortgage covering
all the lots of a builder in a subdivision.
(2) A mortgage covering all real property of
the mortgagor, both present and future. When
used in this meaning it is also called a "general
mortgage".
- Bona Fide Purchaser
- A purchaser in good faith. for valuable consideration,
without notice or knowledge of adverse claims
of others. Sometimes abbreviated B.F.P.
- Book Depreciation
- Depreciation reserved (on the books) by an
owner for future replacement or retirement of
an asset.
- Borough
- A part of a city, having authority over certain
local matters. The best known boroughs are the
five boroughs of New York City.
- Breach Of Warranty
- In real property, the failure of the seller
to pass title as either expressed or implied
(by law) in the conveyancing document.
- Breast Height
- The height at which the diameter of a tree
is measured. A height of 4 1/2 feet above the
ground level. The abbreviation D.B.H. (diameter-breast-height)
is usually used.
- Broker, Real Estate
- One who is licensed by the state to carry
on the business of dealing in real estate. A
broker may receive a commission for his or her
part in bringing together a buyer and seller,
landlord and tenant, or parties to an exchange.
- Building And Loan Association
- An organization for the purpose of accumulating
a fund by subscription and savings of its members,
to assist them with loans for building or purchasing
real estate.
- Buydown
- A payment to the lender from the seller, buyer,
third party, or some combination of these, causing
the lender to reduce the interest rate during
the early years of a loan. The buydown is usually
for the first 1 to 5 years of the loan.
- Buy-Sell Offer
- An offer by one owner of a business or real
estate to buy out the interest of another owner
of the same business or real estate (a partner
or other shareholder), or to sell the offerer's
interest at the same price or proportionate
price if unequal ownership. Example: A and B
each own a 112 interest in lot 1. A offers to
buy B's interest for $10,000 or to sell A's
interest to B for $10,000. Theoretically very
fair, since B has the option to buy or sell.
However, B's interest may be worth $12,000,
but B is financially unable to buy A's interest
(also worth $12,000).
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- C
- Califomia Land Title
Association (CLTA)
- A statewide association of tide insurers and
underwritten title companies. The association
adopts standard title policy forms.
- Call
- In a metes and bounds description, the angle
and distance of a given line or arc. Each call
is usually preceeded by the word then or thence.
Example: N 220 E 100' (lst. call), thence N
800 E 1W (2nd. call).
- Cancellation Clause
- A clause in a lease or other contract, setting
forth the conditions under which each party
may cancel or terminate the agreement. The conditions
may be as simple as giving notice or complex
and require payment by the party desiring to
cancel.
- Cap
- The maximum which an adjustable rate mortgage
may increase, regardless of index changes.
- Capital Assets
- Assets of a permanent nature used to produce
income, such as machinery, buildings, equipment,
land, etc. Must be distinguished from inventory.
A machine which makes pencils, for example,
would be a capital asset to a pencil manufacturer,
but inventory to the company whose business
is to sell such machines.
- Capital Gains
- Gains realized from the sale of capital assets.
Generally, the difference between cost and selling
price, less certain deductible expenses. Used
mainly for income tax purposes.
- Caravan
- An inspection of newly listed properties,
either by the entire sales staff of an office
or by sales personnel from more than one office
in conjunction with a multiple listing group.
Generally conducted on a regular basis.
- Carrying Charges
- The costs involved in keeping a property which
is intended to produce income (either by sale
or rent) but has not yet done so.
- Caveat Emptor
- "Let the buyer beware." Legal maxim
stating that the buyer takes the risk regarding
quality or condition of the item purchased,
unless protected by warranty or there is misrepresentation.
Modernly, consumer protection laws have placed
more responsibility for disclosure on the seller
and broker.
- CC and Rs (Covenants, Conditions
and Restrictions)
- Limitations placed on the use and enjoyment
of real property. These are found most often
in condominiums and planned unit developments.
- Certificate Of Title
- In areas where attorneys examine abstractor
chains of title, a written opinion, executed
by the examining attorney, stating that title
is vested as stated in the abstract.
- Chain of Title
- A chronological list of recorded instruments
tracing title to land, from the original owner
to the present owner.
- Chains And Links
- Measurements. In real estate measurements
(surveying) a chain is 66' long or 100 links,
each link being 7.92." The measurement
may change when used in fields other than surveying.
- Classified Property
Tax
- Property tax which varies in rate depending
on the use (zoning classification) of the property.
- Clear Title
- Title to property which is free from liens,
defects or other encumbrances.
- Closing
- (1) In real estate sales, the final procedure
in which documents are executed and/or recorded,
and the sale (or loan) is completed. (2) A selling
term meaning the point at which the client or
customer is asked to agree to the sale or purchase
and sign the contract. (3) The final call in
a metes and bounds legal description which "closes"
the boundaries of the property.
- Closing Costs
- Expenses, beyond the selling price, such as
loan fees, title fees, etc. Paid when documents
are executed and/or recorded and the sale is
complete.
- Closing Statement
- A summary, in the form of a balance sheet,
showing the amounts of debits and credits to
which each party to a real estate transaction
is entitled upon closing.
- Cloud On Title
- An invalid encumbrance on real property, which,
if valid, would affect the rights of the owner.
For example: A sells lot 1, tract 1. to B. The
deed is mistakenly drawn to read lot 2 by the
recording of the erroneous deed. The cloud may
be removed by quitclaim deed, or, it necessary,
by court action.
- Coinsurance
- A sharing of the risk of an insurance policy
by more than one insurer. Usually one insurer
is liable up to a certain amount, the other
liable over that amount.
- Commercial Property
- Property which is zoned "commercial"
(for business use). Property such as stores,
restaurants, etc., falling between residential
and industrial.
- Commingling
- To mix funds held in trust with other funds.
For example: A broker or builder mixes deposits
(should be in a trust account) with his funds
by putting the deposits in his general account.
Although commingling is in itself a violation
for which a broker may lose his license, it
does not mean that, by commingling, the broker
or builder intended to misappropriate the funds.
- Commission
- Compensation due a real estate broker for
acting on behalf of the principal.
- Community Property
- Property acquired during a marriage by either
a husband or wife, or both, which is not separate
property.
- Comparables (Comps)
- An abbreviation for comparable properties
used for comparative purposes in the appraisal
process.
- Conditional Sales
Contract
- A sale in which the title to property or goods
remains with the seller until the purchaser
has fulfilled the terms of the contract, usually
payment in full.
- Condominium
- A structure of two or more units, the interior
space of which are individually owned: the balance
of the property (both land and building) is
owned in common by the owners of the individual
units. The size of each unit is measured from
the interior surfaces (exclusive of paint or
other finishes) of the exterior walls, floors,
and ceiling. The balance of the property is
called the common area.
- Consideration
- A required element in all contracts by which
some-thing of value, including a promise, is
exchanged for the act or promise of another.
- Contingency
- Action conditioned upon a certain event. Acceptance
of the terms of a contract based on something
else happening or certain conditions being met.
- Conveyance
- The transfer of title or an interest in real
property by means of a written instrument such
as a deed of trust.
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- D
- Declaration Of Trust
- A written acknowledgement by one holding legal
title to property that the property is held
in trust for the benefit of another.
- Declining Balance Method
Of Depreciation
- Depreciation by a fixed annual percentage
of the balance after deducting each yearly depreciation
amount.
- Deed
- Actually, any one of many conveyancing or
financing instruments, but generally a conveyancing
instrument, given to pass fee title to property
upon sale.
- Deed Of Trust
- An instrument used in many states in place
of a mortgage. Property is transferred to a
trustee by the borrower (trustor) in favor of
the lender (beneficiary), and reconveyed upon
payment in full.
- Defeasible Title
- Title which is not absolute but possibly may
be annulled or voided at a later date. For example:
Title conveyed to A with condition that if A
marries before age 30, title will go to B. A's
title may be good (doesn't marry) or may be
defeated (marries before 30).
- Deficiency Judgment
- Commonly the amount for which the borrower
is personally liable on a note and mortgage
if the foreclosure sale does not bring enough
to cover the debt. Actually the judgment is
for the total amount and not for the deficiency,
the recovery from the foreclosure sale being
deducted from this amount.
- Delivery
- In conveyancing, the placing of the property
in the actual or constructive possession of
the grantee. Usually accomplished by delivery
of a deed to the buyer, or by recording said
deed.
- Demand
- The lender's statement of the amount due to
pay of a loan.
- Demand Note
- A note having no date for repayment, but due
on demand of the lender.
- Deposit
- (1) Money given by the buyer with an offer
to purchase. Shows good faith. Also called earnest
money. (2) A natural accumulation of resources
(oil, gold, etc.) which may be commercially
recovered and marketed.
- Depreciation
- (1) Decrease in value to real property improve-ments
caused by deterioration or obsolescence. (2)
A loss in value as an accounting procedure to
use as a deduction for income tax purposes.
- Direct Reduction Mortgage
- An amortized mortgage. One on which principal
and interest payments are paid at the same time
(usually monthly) with interest being computed
on the remaining balance.
- Discount Points
- The fee associated with the note rate for
your loan, the more discount points you pay
the lower the rate you can buy, the fewer you
pay, the higher your rate. If the rate is high
enough, the loan is priced above par and these
premium points are available to pay closing
costs creating a no or low fee loan.
- Disposition of Real
Estate Statement
- A statement that the buyer will occupy the
property being purchased even though the buyer
owns other property. The buyer states that the
other property will be sold or rented. Particulars
must be given as to any loan on the property
and the equity or rent to payment amounts.
- Documentary Transfer
Tax
- The tax, based on sales price, less loans
which are being assumed, which is charged by
the city and/or county on the transfer of real
property.
- Double Declining Balance
Method Of Depreciation
- A use of the declining balance method, but
with double the depreciation allowable by straight
line. An accelerated method.
- Double Escrow
- Two concurrent escrows on the same property,
having the same party as buyer and seller of
the property. Example: Escrow 1 -A buys from
B. Escrow 2 -A sells the same property to C.
A is using C's money to buy B's property. The
process is illegal in many states unless full
disclosure is made.
- Dual Agency
- The representation of opposing principals
(buyer and seller) at the same time. In brokerage
many states get around this by saying that the
agent aids the buyer but is the agent of the
seller only. A problem arises if both buyer
and seller pay the broker, Then full disclosure
must be made. An escrow agent is the agent of
buyer and seller and usually paid by both. This
is why an escrow agent must be neutral.
- Due on-Sale-Clause
- A clause in a mortgage loan which gives the
lender the right to demand payment in full when
the property changes ownership. Not applicable
to FHA or VA loans.
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- E
- Easement
- A right created by grant, reservation, agreement,
prescription, or necessary implication, which
one has in the land of another. It is either
for the benefit of land (appurtenant), such
as right to cross A to get to B. or "in
gross," such as a public utility easement.
- Easement of Necessity
- An easement granted by a court when itis determined
that said easement is absolutely necessary for
the use and enjoyment of the land. Commonly
given to landlocked parcels.
- Egress
- A term concerning a right to come and go across
the land (public or private) of another. Usually
part of the term ingress and egress.
- Eleemosynary Corporation
- A corporation created for charitable purposes.
There are tax advantages accorded to such corporations.
The corporation may operate the same as a profit
making corporation. Commonly called a nonprofit
corporation.
- Encumbrance, Incumbrance
- A claim, lien, charge, or liability attached
to and binding real property. Any right to,
or interest in, land which may exist in one
other than the owner, but which will not prevent
the transfer of fee title.
- Equitable Conversion
- A legal fiction applied to a land contract
which treats the vendee's (buyer's) interest
as a real property interest even though the
seller holds legal title, and the seller's interest
as a security interest (personal property).
This enables the buyer to act as the "owner"
of the property without having "legal"
title.
- Equitable Mortgage
- (1) A lien against real property (mortgage)which
is enforceable in a court of equity, but does
not legally constitute a mortgage. (2) A deed
given as security for a debt will be held to
be a mortgage rather than a transfer of title.
Also called a constructive mortgage.
- Equity
- The value of a person's interest in real property
after all liens and charges have been deducted.
- Equity Line Of Credit
- A combination of a line of credit and equity
loan. A maximum loan amount is established based
on credit and equity. A mortgage (deed of trust)
is recorded against the potential borrower's
property for said maximum loan amount. The potential
borrower has the right to borrow, as needed,
up to the amount of the mortgage.
- Escalation Clause
- A clause in a lease providing for an increased
rental at a future time. May be accomplished
by several types of clauses, such as (1) Fixed
increase - A clause which calls for a definite,
periodic rental increase. (2) Cost of living
- A clause which ties the rent to a government
cost of living index, with periodic adjustments
as the index changes. (3) Direct expense - The
rent is adjusted according to changes in the
expenses of the property paid by the lessor,
such as tax increases. increased maintenance
costs, etc.
- Escrow
- Delivery of a deed by a grantor to a third
party for delivery to the grantee upon the happening
of a contingent event, Modernly, in some states,
all instruments necessary to the sale (including
funds) are delivered to a third (neutral) party,
with instructions as to their use.
- Excess Condemnation
- Taking by right of eminent domain, more property
than actually necessary for the intended purpose.
This happens frequently, the excess property
being sold at auction after completion of the
project.
- Exception
- A provision in a title insurance binder or
policy excludes liability for a specified title
defect or an outstanding encumbrance.
- Exclusive Listing
- A written contract between a property ownerand
a real estate broker, whereby the owner promises
to pay a fee or commission to the broker it
certain real property of the owner is sold during
a stated period, regardless of whether the broker
is or is not the cause of the sale. The broker
promises to put forth his or her best efforts
to sell the property, and may make specific
promises as to advertising or other promotion
in certain instances.
- Exemplary Damages
- Damages to punish (make an example of) the
offender. This is done when the wrong is deliberate
or grossly negligent and compensatory damages
do not appear to be sufficient.
- Expert Testimony
- Testimony by one acknowledged to have special
training and knowledge in a particular subject.
Only testimony on the subject in which the witness
is "expert" is considered expert testimony.
- Exposure
- (1) The degree to which a property for sale,
lease, etc., is made noticeable (exposed) to
potential buyers, tenants, etc., through advertising,
multiple listing groups, etc. (2) The direction
in which a property faces. For example: Does
a store depending on walk-in trade face the
sun in the morning when people walk in the sun
to get warm (eastern exposure), or face the
sun in the afternoon when people walk in the
shade to keep cool (western exposure).
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- F
- Fair Market Value
- An appraisal term for the price which a property
would bring in a competitive market given a
willing seller and willing buyer, each of whom
has a reasonable knowledge of all pertinent
facts, with neither being under any compulsion
to buy or sell.
- Fee Simple
- An estate under which the owner owns a contract
interest in the property and is entitled to
the unrestricted enjoyment of the property,
including the right to dispose property.
- Federal Deposit Insurance
Corporation (f.d.i.c)
- The federal corporation which insures against
loss of deposits in banks, up to a maximum amount.
- Federal Home Loan Banks
- Banks created under the Federal Home Loan
Bank Act of 1932, in order to keep a permanent
supply of money available for home financing.
The banks are controlled by the Federal Home
Loan Bank Board. Savings and loans, insurance
companies, and other similar companies making
long term mortgage loans may become members
of the Federal Home Loan Bank System, and thus
may borrow from one of the regional banks throughout
the country.
- Federal National Mortgage
Association
- (Fannie Mae): A tax paying corporation created
by Congress to support the secondary mortgage
market. It purchases and sells residential mortgages
insured by FHA or guaranteed by VA as conventional
home mortgages.
- Fee
- (1) Modernly, and not in strict legal terms,
synonymous with fee simple or "ownership."
(2) A charge made by a landlord to a tenant,
which is not refundable. For example: A cleaning
deposit would be refunded if the tenant left
the rented property reasonably clean. A cleaning
fee would be a charge by the landlord for cleaning
the rented property and would not be refunded
regardless of the condition of the property.
- FHA (Federal Housing Admininistration)
- A federal agency which insures first mortgages,
enabling lenders to loan a very high percentage
of the sale price.
- FHLMC (Freddie Mac)
- Federal Home Loan Mortgage Corporation - A
federal agency purchasing first mortgages, both
conventional and federally insured, from members
of the Federal Reserve System, and the Federal
Home Loan Bank System.
- Finance Charge
- A total of all costs imposed directly or indirectly
by the creditor and payable either directly
or indirectly by the customer, as defined by
the federal Truth-In-Lending laws.
- Financial Statement
- An accounting statement showing assets and
liabilities of a person or company. Used generally
for large loans or other instances when the
credit report (history of payment of debts)
in itself is not sufficient.
- Finder's Fee
- A fee paid to someone who finds a buyer or
property for a broker, buyer, etc. The term
is sometimes used to attempt to pay a commission
to an unlicensed person. Generally, a finder's
fee is considered a commission and may only
be paid to one who holds a real estate license.
- First Mortgage
- A mortgage on property that is superior in
position to any other mortgage.
- First Refusal Right
- A right, usually given by an owner to a lessee,
which gives the lessee a first chance to buy
the property if the owner decides to sell. The
owner must have a legitimate offer which the
lessee can match or refuse. It the lessee refuses,
the property can then be sold to the offeror.
- First User
- A tax term signifying the one who builds or
buys property and is the first one to put the
buildings to use. Certain tax (depreciation)
advantages are given to a first user. The term
concerns only depreciable property (improvements)
and prior use of the land only (farming) would
not be considered.
- Fixed Rate Loan
- A loan on which the same rate of interest
is charged for the life of the loan.
- Fixture
- Personal property which is permanently attached
to the property, and, as such, becomes part
of the real property.
- FNMA Buydown
- FNMA (Federal National Mortgage Association)
accepts loans containing a buy down provision
on single family residential, owner occupied
properties. A prepayment (points) will buy a
lower rate of interest during the first one
to five years of the loan. Restrictions apply
as to the amount of the buydown and rise in
payment amount as the loan progresses.
- Forfiture
- The taking of an individual's properly by
a government, because the individual has committed
a crime. In the United States, private property
cannot be taken, except by eminent domain upon
payment of just compensation, or for nonpayment
of taxes.
- Franchise
- (1) A statutory right which could not be exercised
in the absence of the statute, such as the statutes
enabling persons to form a corporation. Since
a corporation is created by the statute, it
could not be formed except by the grant of the
legislature. (2) A combination of individual
ownership and central control. One may own a
fast food restaurant, hotel, hardware store,
etc., yet use the name of a national company.
Each individual owner pays for the name use,
advertising, and may be required to make certain
purchases (napkins, buns, etc.) from the national
company. The real estate brokerage business
was slow to use the franchise method, but now
has many companies operating in this manner.
- Front Foot Cost
- A determination of the value of real property
based on a value per foot as measured along
the frontage of a parcel. Usually used with
commercial property or waterfront.
- Full Disclosure
- In real estate, revealing all the known facts
which may affect the decision of a buyer or
tenant. A broker must disclose known defects
in the property for sale or lease. A builder
must give to a potential buyer the facts of
his new development (are there adequate school
facilities?" sewer facilities? (an airport
nearby?, etc.). A broker cannot charge a commission
to buyer and seller unless both know (disclosure)
and agree.
- Future Acquired Property
- Property acquired after a loan or sale. For
example: A loan agreement may state that the
loan is a lien on all property presently owned
or which the borrower may acquire in the future.
- Future Interest
- A present interest, but only a future right
to possession and enjoyment of the land, such
as a remainder interest, reversionary interest,
etc.
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- G
- Garnishment
- A legal proceeding under which a person's
money in control of another (such as salary)
is taken for payment of a debt. The amount which
may be taken is set by statute (usually as a
percentage), and, in most states, a judgment
is necessary before garnishment.
- General Lien
- (1) A lien such as a tax lien or judgment
lien which attaches to all property of the debtor
rather than the lien of, for example, a trust
deed, which attaches only to specific property.
(2) The right of a creditor to hold personal
property of a debtor for payment of a debt not
associated with the property being held. Must
be done under an agreement since against general
precepts of law.
- General Membership
- A partnership made up of general partners,
without special (limited) partners.
- Georgian Architecture
- A colonial style of architecture dating back
to the eighteenth century. Characterized by
first floor windows extending to the ground,
its exterior placements (windows, doors. etc.)
are simple and well balanced yet formal in appearance.
- Gerrymander
- To divide an area into districts, against
the obvious natural divisions, in order to accomplish
an unlawful purpose. For example: To divide
a school district to keep out certain people
for reasons of race or religion, to divide a
political voting district so as to give power
to a political party.
- Gnma (government National
Mortgage Association) Options
- A method of purchasing GNMA securities through
"puts" and calls." A GNMA Call
Option is the right to buy GNMA securities at
a specific yield for a specified time, A Put
Option is the right to sell GNMA securities
at a specific yield for a specified time. The
buyer pays for the option and may exercise it,
not exercise it, or sell it.
- Graduated Payment Mortgage
- A mortgage or deed or trust calling for increasingly
higher payments over the term of the loan. This
allows the buyer low beginning payments. The
payments then increase as (theoretically) the
buyer's earnings increase.
- Grantee
- One to whom a grant is made. The purchaser
of real property.
- Grantor
- One who has made a grant. The seller of real
property.
- Grantor Grantee Index
- The record of the passing of title to all
the properties in a county as kept by the county
recorder's office. Property is checked by tracing
the names of the sellers and buyers (chain of
title). Title companies usually have more efficient
methods by keeping records according to property
description, rather than peoples names.
- Gross Income
- The scheduled (total) income, either actual
or estimated, derived from a business or property.
- Gross Income Multiplier
- A figure which, when multiplied by the annual
gross income, will theoretically determine the
market value. A general rule of thumb which
varies with specific properties and areas.
- Gross Lease
- A lease which obligates the lessor to pay
all or part of the expenses of the leased property,
such as taxes, insurance, maintenance. utilities,
etc.
- Grout
- (1) Thin mortar used in masonry work to fill
joints between bricks, blocks, tiles. etc. (2)
A variety of plaster used to finish ceilings
of superior quality.
- Growing Equity Mortgage (g.e.m.)
- A fixed rate, graduated payment loan allowing
low beginning payments and a shorter term because
of higher payments as the loan progress. Based
on the theory of increasing income by the buyer
and, therefore. ability to make higher future
payments. When state law applies, usury laws
in some states may not presently allow such
loans when less than interest only payments
create interest on interest.
- Guaranty
- Agreement to pay the debt or perform the obligation
of another in the event the debt is not paid
or obligation not performed. Differs from a
surety agreement in that there must be a failure
to pay or perform before the guaranty can be
in effect.
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- H
- Hard Money Mortgage
- A mortgage given in return for cash, rather
than to secure a portion of the purchase price,
as with a purchase money mortgage.
- Heir
- One who by law, rather than by will, receives
the estate of a deceased person.
- Hereditaments
- (1) Anything which could be considered real
property. (2) Anything which may be inherited.
- Hidden Defect
- An encumbrance on a title that is not apparent
in the public records; for example, unknown
heirs, secret marriages and forged instruments.
- Holdback
- Portion of a loan held back by the lender
until a contingency is met. In the sale of a
home insured by V.A. or F.H.A., funds may be
held back to make necessary improvements to
bring the property to V.A. or F.H.A. standards.
The money to make "these" repairs
may not be available until closing. One and
one halt to double the estimated amount necessary
is held back. If repairs are not made in the
time allowed. these funds are used to make the
repairs. In construction financing, funds are
held back until, for example, a certain percentage
of a subdivision has been sold, or a certain
portion of a building has been constructed.
- Holder In Due Course
- A holder of a check or note who takes, for
value and in good faith, the note before it
is overdue or the check without knowledge that
it has bounced, if, in fact it has.
- Holding Period
- The time period used by the IRS to determine
along or short term capital gain. The period
during which the taxpayer owns the capital asset.
- Homestead
- The dwelling (house and contiguous land) of
the head of a family. Some states grant statutory
exemptions, protecting homestead property (usually
to a set maximum amount) against the rights
of creditors. Property tax exemptions (for all
or part of the tax) are also available in some
states. Statutory requirements to establish
a homestead may include a formal declaration
to be recorded.
- Home Warranty Insurance
- Private insurance insuring a buyer against
defects (usually in plumbing, heating, and electrical)
in the home he has purchased. The period of
insurance varies and both new and used homes
may be insured.
- Housing Starts
- Number of houses on which construction has
begun. The figures are used to determine the
availability of housing, need for real estate
loans, need for labor and materials, etc.
- Hypothecate
- To mortgage or pledge without delivery of
the security to the lender.
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- I
- Impound Account
- Account held by a lender for payment of taxes,
insurance, or other periodic debts against real
property. The mortgagor or trustor pays a portion
of, for example, the yearly taxes, with each
monthly payment. The lender pays the tax bill
from the accumulated funds.
- Improvements
- Generally, buildings, but may include any
permanent structure or other development. such
as a street, utilities. etc.
- Inchoate Instrument
- An unrecorded instrument (such as a deed)
which is valid only between the parties and
those having actual notice: but not against
"the world" as it would be after recording.
- Income Averaging
- A method of figuring income tax by paying
tax on the average income per year for the past
five years. For example: A, a real estate salesperson,
earns $10,000 taxable income for 4 years. In
the fifth year, A sells a shopping center and
earns $100,000 taxable income. A-could take
the total income for 5 years ($140,000), divide
by 5 ($28,000), and pay tax on $28,000 for the
past 5 years, less what A has already paid.
- Increasing And Diminishing
Returns
- An economic theory that an increase in capital
or manpower will not increase production proportionately
(five workers may do less than five times the
work of one worker; and two workers may do more
than twice the work of one worker). When the
increase in production is proportionately greater
than the addition, there is an increasing return,
when production is proportionately less than
the addition. the return diminishes.
- Industrial Tax Exemption
- An exemption from local property taxes granted
to encourage industries to come into an area.
Has been used successfully in the South. Usually
granted for a definite period.
- Inheritance Tax
- A tax on the transfer of property from a deceased
person: based on the right to acquire the property
rather than the property itself.
- Installment Contract
- A method of purchasing by installment (usually
monthly) payments. When referring to real property,
it is usually called a land contract.
- Institutional Lenders
- Banks, savings and loan associations and other
businesses which make loans to the public in
the ordinary course of business, rather than
individuals, or companies which may make loans
to employees.
- Insured Mortgage
- A mortgage insured against loss to the mortgagee
in the event of default and a failure of the
mortgaged property to satisfy the balance owing
plus costs of foreclosure. May be insured by
F.H.A., V.A., or by private mortgage insurance
companies.
- Interest Cap
- The maximum interest rate increase of an Adjustable
Mortgage Loan. For example: a 120% loan with
a 5% interest rate cap would have maximum interest
for the life of the loan which would not exceed
17%.
- Interpleader
- A court action which may be filed in an existing
case to be the initial action. One holding funds
which are in dispute, but not having an interest
in the funds, would file an inter- pleader.
For example: An escrow agent is holding a deposit
of a buyer which funds both buyer and seller
claim to be entitled. Escrow is willing to give
the funds to either buyer or seller but does
not want to be liable for giving the funds to
the wrong party. The interpleader filed by the
escrow agent asks the court to determine to
whom the funds should be awarded.
- Interstate Land Sales
- Sales of land to a buyer in another state.
Because the buyer is usually totally dependent
on the seller for information regarding the
property, federal disclosure laws have been
passed to aid the buyer. The buyer also has
a period (now 3 days) after singing a purchase
agreement, in which to rescind. The laws were
passed because of the large promotional land
sales of the 50's and early 60's, some of which
sold worthless desert and swamp land.
- Involuntary Conversion
- Conversion of real property to personal property
(money) without the voluntary act of the owner.
This occurs when property is taken by eminent
domain (condemnation). The owner is allowed
to convert back to real property (buy another
property) without paying tax on the gain from
the condemnation. This must be done within a
set time (3 years) and the prices of the old
and new property are considered to form a new
tax base.
- IRA (individual Retirement
Account)
- Savings programs available to individuals.
The plans allow for a certain amount to be deposited
each year. This money is not subject to income
tax for that year or following years as long
as it is not withdrawn. The money is taxed as
withdrawn upon retirement, usually when the
depositor is in a lower tax bracket. During
the life of the account, the money may be put
into various interest bearing investments. Securities
dealers as well as banking institutions now
offer IRA'S.
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- J
- Jetty
- (1) A pier or other structure (usually of
stones), built out into a body of water to hinder
the currents and so protect a harbor. (2) A
part of a building which projects out beyond
the exterior walls, such as an overhanging second
story, a balcony, etc.
- Joint Appraisal
- An appraisal by more than one appraiser, but
one which states common conclusions of all.
- Joint Tenancy
- An undivided interest in property, taken by
two or more joint tenants. The interests must
be equal, accruing under the same conveyance,
and beginning at the same time. Upon the death
of a joint tenant, the interest passes to the
surviving joint tenants, rather than to the
heirs of the deceased.
- Judgment (judgement)
- The decision of a court of law. Money judgments,
when recorded, become a lien on real property
of the defendant.
- Judgment Lien
- A lien against the property of a judgment
debtor. An involuntary lien.
- Judgment Proof
- One against whom a judgment creditor cannot
collect (no assets). If one can show he was
defrauded by a "judgment proof" real
estate licensee, he may recover from the state
fund in states having such a fund,
- Jumbo Va Loan
- A loan for an amount greater than the allowable100%
financed amount. It is determined by subtracting
the maximum allowable 100% financed amount from
the purchase price and financing 75% of the
difference. Example: maximum allowable VA Loan-$110,000.
Sale price-$130.000. Difference $20,000: 75%
of the difference is $15,000. Total jumbo loan-$110,000
plus $15.000 = $125,000. Required down payment-$5,000.
- Just Compensation
- In condemnation the amount paid to the property
owner. The theory is that in order to be "just,"
the property owner should be no richer or poorer
than before the taking.
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- K
- Keene's Cement
- An unusually tough and durable gypsum plaster
to which alum has been added. Used primarily
for walls of commercial buildings.
- Keogh Plan
- A retirement plan whereby a self-employed
person may set aside a certain portion of income
(tax deferred) into a retirement account. The
money is taxable upon withdrawal at retirement
when the person's tax bracket is often lower.
- Keyman Insurance
- Insurance through loss (through death or disability)
of a "key" (important) person in a
company. The liability is the estimated cost
of the loss (in business lost, and replacement
of the individual). Some lenders require this
insurance before lending to small companies
which rely on one or a few "key" people.
- Knock Down
- Any parts of a building which can be easily
assembled, installed, or removed, such as certain
types of window frames, partitions, etc.
- Knot
- (1)The hard, irregular shaped defects in boards,
caused by cutting at the point where the branch
of the tree meets the trunk. (2) A measure of
speed, equal to one nautical mile (approximately
6,076 ft.) per hour.
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- L
- Laches
- An unreasonable delay by a party making a
claim or bringing an action, so that the rights
of said party are waived. Laches are not controlled
by a statute of limitations.
- Landowner's Royalty
- In oil and gas leases, the portion of the
value of each barrel of oil which goes to the
property owner.
- Land Residual Technique
- An appraisal technique by which land value
is determined by first determining the net return
attributable to the building only, and deducting
it from the total return to the property (may
be estimated), the residual amount is capitalized
to find the land value. The building value may
be determined by construction costs (new building),
depreciated construction costs (it only a few
years old), or estimated present construction
costs (if an older building).
- Late Charge
- A penalty for failure to pay an installment
payment on time. Usually not allowed as interest
for tax deductions. May or may not be included
as usury. If not, the amount of late charge
is either set by statute or must be "reasonable."
- Lateral Support
- The right of a landowner to the natural support
of his land by adjoining land. The adjoining
owner has the duty not to change his land (such
as lowering it) so as to cause this support
to be weakened or removed.
- Lease With Option To Purchase
- A lease under which the lessee has the right
to purchase the property. The price and terms
of the purchase must be set forth for the option
to be valid. The option may run for the length
of the lease or only for a portion of the lease
period. Legal Description: A description by
which property can be definitely located by
reference to surveys or recorded maps. Sometimes
referred to simply as the legal.
- Legal Owner
- The term has come to be used as a technical
difference from the equitable owner, and not
as opposed to an illegal owner. The legal owner
has title to the property, although the title
may actually carry no rights to the property
other than a lien.
- Lessee's Interest
- In appraising the value of a lessees interest
to determine the value of a potential sublease
of assignment (sale) of the lease, the value
is the market value of the property, less the
interest of the lessor. The lessor's interest
would be largely determined by the ratio of
the return on the lease to the market value
without the lease. Lien: A recorded document
which claims an interest in real property as
security for a debt owed. Such liability may
be created by contract, such as a deed of trust,
or by a court judgment.
- Lien Waiver (waiver Of Liens)
- For our purposes, a waiver of mechanic's lien
rights, signed by subcontractors so that the
owner or general contractor can receive a draw
on a construction loan.
- Liquidated Damages
- A definite amount of damages, set forth in
a contract, to be paid by the party breaching
the contract. A predetermined estimate of actual
damages from a breach.
- Lis Pendens
- Legal notice that a lawsuit is pending. Also
called a notice of action.
- Loan Constant
- The yearly percentage of interest which remains
the same over the life of an amortized loan,
based on the monthly payment in relation to
the principal originally loaned. For example:
A $1000 loan at 9% interest for 20 years can
be amortized at $9.00 per month. The constant
interest rate is figured by finding one year's
payments ($9.00 x 12 months = $108,00), and
expressing this amount as a percentage of the
principal originally borrowed (10.8% of $1000).
- Loan Policy
- A title insurance policy insuring a mortgagee,
or beneficiary under a deed of trust, against
loss caused by invalid title in the borrower,
or loss caused by invalid title in the borrower,
or loss of priority of the mortgage or deed
of trust.
- Loan Ratio
- The ratio, expressed as a percentage, of the
amount of a loan to the value or selling price
of real property. Usually, the higher the percentage,
the greater the interest charged. Maximum percentages
for banks, savings and loans, or government
insured loans, is set by statute.
- Loan toValue Ratio
- The ratio of the mortgage loan's principal
to the property's appraised value or its sales
price, whichever is lower.
- Long Term Capital Gain
- Gain on the sale of a capital asset which
has been held for a specified time or longer.
Long term capital gain is taxed at a special
rate and not as ordinary income.
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- M
- Made Land
- Artificially formed land, either by filling
or dredging.
- Marketable Title
- Title which can be readily marketed (sold)
to a reasonably prudent purchaser aware of the
facts and their legal meaning concerning liens
and encumbrances.
- Market Value
- The highest price a willing buyer would pay
and a willing seller accept, both being fully
informed, and the property exposed for a reasonable
period of time. The market value may be different
from the price a property can actually be sold
for at a given time (market price),
- Market Value
Approach
- Appraising the value of a property by comparing
the price of similar properties (comparables)
recently sold. The degree of simiality of the
properties and circumstances of the sale are
the important characteristics to consider,
- Maturity
- (1) Termination period of a note. For example:
A 30 year mortgage has maturity of 30 years.
(2) In sales law, the date a note becomes due.
- Mechanic's Lien
- A lien created by statute for the purpose
ofsecuring priority of payment for the price
or value of work performed and materials furnished
in construction or repair of improvements to
land, and which attaches to the land as well
as the improvements.
- Merger Of Title
- A lesser interest in real property being merged
(absorbed) into a greater interest. For example:
A lessee purchases the property being leased.
The interest as a lessee is merged into the
interest as an owner, thus ending the leasehold
interest.
- Metes and Bounds
- A form of land description in which boundaries
are described by courses, directions, distances
and monuments.
- Mile
- A linear measurement equal to 5280 feet on
land and 6076 feet across water (nautical mile).
- Money Market Mutual
- Funds which invest in the "Money Market,"
a variety of interest bearing securities such
as treasury bills and bank certificates of deposit.
None is invested directly into real property
or real property securities.
- Month To Month Tenancy
- A tenancy where no written lease is involved,
rent being paid monthly. Some obligations as
to notice of moving or eviction may exist by
statute.
- Mortgage
- (1) To hypothecate as security, real property
for the payment of a debt. The borrower (mortgagor)
retains possession and use of the property.
(2) The instrument by which real estate is hypothecated
as security for the repayment of a loan.
- Mortgage Banker
- A company providing mortgage financing with
its own funds rather than simply bringing together
lender and borrower, as does a mortgage broker.
Although the mortgage banker used its own funds,
these funds are generally borrowed and the financing
is either short term or, it long term, the mortgages
are sold to investors (many times insurance
companies) within a short time.
- Mortgage Bonds
- Bonds issued by corporations, which offer
first mortgages on real property of the corporation
as security for the payment of the bonds.
- Mortgage Broker
- One who, for a fee, brings together a borrower
and lender, and handles the necessary applications
for the borrower to obtain a loan against real
property by giving a mortgage or deed of trust
as security. Also called a loan broker.
- Mortgage Company
- A company authorized to service real estate
loans, charging a fee for this service.
- Mortgagee
- The party lending the money and receiving
the mortgage. Some states treat the mortgagee
as the "legal" owner, entitled to
rents from the property. Other states treat
the mortgagee as a secured creditor, the mortgagor
being the owner. The latter is the more modern
and accepted view.
- Mortgage Insurance
- Insurance written by a private mortgage insurance
company (referred to as an 'PIC') protecting
the mortgage lender against loss incurred by
a mortgage default, thus enabling the lender
to lend a higher percentage of the sale price.
The Federal Government writes this form of insurance
through the FHA and the VA.
- Mortgage
Life Insurance
- A term life insurance policy for theamount
of the declining balance of a loan secured by
a mortgage or deed of trust. The beneficiary
under the policy is the mortgagee. In the event
of death (some policies also cover disability)
of the insured (mortgagor), the mortgage is
paid in full.
- Mortgage Servicing
- Controlling the necessary duties of a mortgagee,
such as collecting payments, releasing the lien
upon payment in full, foreclosing if in default,
and making sure the taxes are paid, insurance
is in force, etc. Servicing may be done by the
lender or a company acting for the lender, for
a servicing fee.
- Mutual Savings Bank
- An institution owned by its depositors, as
evidenced by certificates of deposit rather
than stock. These institutions are active in
long term real estate financing, as opposed
to commercial banks, which concentrates more
on short term loans.
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- N
- Negative Amortization
- A condition created when a loan payment is
less than interest alone. Even though payments
are made on time, the amount owing increases.
- Negotiable Instrument
- According to the Uniform Negotiable Instruments
Act, an instrument is negotiable when it is
in writing and signed, containing an unconditional
promise or order to pay a certain amount of
money, on demand, or at a definite future date,
to the bearer, to order, or to a named or certain
drawee.
- Net Lease
- A lease requiring the tenant to pay, in addition
to a fixed rental, the expenses of the property
leased, such as taxes, insurance, maintenance,
etc. In some states the terms net net, net net
net, triple net, and other such repetitions
are used.
- Net Worth
- The difference between total assets and liabilities
of an individual, corporations, etc.
- No Bonus Clause
- A clause under the eminent domain section
of a lease, giving the lessee the right to recover
only the value of his physical improvements
in the event of a taking, and not the value
of the leasehold interest (the difference between
the fixed rent of the lease and current market
rental value). Not applicable in all states.
- Nonbearing Wall
- A wall used only to separate areas, and which
carries only its own weight
- Nonexclusive Listing
- A listing under which the real estate broker
has an exclusive listing as opposed to other
agents, but the owner may sell the property
without using an agent, and not be liable to
pay a commission. Also called an agency agreement.
- Nonrecourse Loan
- A loan not allowing for a deficiency judgment.
The lender's only recourse in the event of default
is the security (property) and the borrower
is not personally liable.
- Notarization
- The certification by a Notary Public that
a person signing a document has been properly
identified. Notarization does not certify the
content of a document, only validity of signature.
- Notice Of Cessation
- A notice stating that work has stopped on
a construction project. Done to accelerate the
period for filing a mechanic's lien.
- Notorious Possession
- A requirement for adverse possession. Possession
so open (notorious) that the owner is presumed
to have notice of it and its extent.
- Nuncupative Will
- An oral will, usually in a deathbed situation,
before witnesses who later testify to its authenticity.
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- Oath
- An attestation by a person which binds him
or her legally and morally. Usually attesting
to the truth of something, as an affidavit,
or the validity of one's signature. A promise
to tell the truth. Also, a promise to carry
out a duty with high morality (oath of office),
An oath has religious connotations and usually
involves the word "swear," and may
contain the phrase "so help me God,"
or require the one taking the oath to put his
or her hand on a bible. An affirmation (see
which) is still legally binding.
- Office
- A zoning designation allowing businesses to
carry on their paperwork rather than manufacturing
of sale of inventory to the public on the site.
Some businesses may be conducted entirely out
of such space, when only paperwork is involved,
such as insurance companies, law firms, accounting
firms, etc.
- Offset Statement
- (1) A statement given to a buyer of rental
property by a tenant, setting forth the amount
of rent and terms of the rental agreement. (2)
A statement by an owner or lien-holder to a
buyer, setting forth the balance due on existing
liens against the property being purchased.
-
"Once in a Lifetime" Tax Exclusion
- A forgiveness of a portion of the tax due
on the sale of a residence by a senior citizen.
As the term denotes, the exclusion can be taken
only once.
- "One, Two, Three"
Financing
- A method of creative financing by which the
buyer (1) assumes an existing loan, (2) secures
a second loan from a third party lender, (3)
takes a third loan from the seller.
- Open End Mortgage
- A mortgage permitting the mortgagor to borrow
additional money under the same mortgage, with
certain conditions, usually as to the assets
of the mortgage.
- Origination Fee
- The fee that the lender charges to originate
the loan, this fee is typically 1 point.
- Override
- A rental amount paid due to sales of the tenant.
For example: A lease for a service station may
contain a provision for a certain addition to
the rent for every gallon of gasoline over a
certain amount sold each month. The amount over
is called the override, such as two cents per
gallon for every gallon over fifty thousand
sold each month.
- Ownership
- Rights to the use, enjoyment, and alienation
of property, to the exclusion of others. Concerning
real property, absolute rights are rare, being
restricted by zoning laws, restrictions, liens,
etc.
- Owner Will Carry
Mortgage
- A term used to indicate that the seller is
willing to take back a purchase money mortgage.
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- P
- Partial Release
- A release of a portion of property covered
by a mortgage. A subdivider will obtain a partial
release as each lot is sold, upon payment of
an agreed upon amount. In areas where the subdivider
is not usually the builder, it may be necessary
to sell groups of lots to obtain a partial release.
In areas where deeds of trust are used instead
of mortgages, a "partial reconveyance"
is the document used.
- Participation Certificates
- Mortgage securities, rather than mortgages.
The advantage of the certificate is that it
is readily marketable or pledgeable.
- Partition
- (1) Any division of real or personal property
between co-owners, resulting in individual ownership
of the interests of each. (2) A wall, sometimes
moveable, and not load-bearing, used to divide
a room or building.
- Patent Defect
- A defect plainly visible or as would be discovered
by the exercise of ordinary care. A patent defect
in a legal description is one which cannot be
corrected on its face, and a new description
must be used.
- Payment Cap
- A maximum amount for a payment under an Adjustable
Mortgage Loan, regardless of the increase in
the interest rate. If the payment is less than
the interest alone, negative amortization is
created.
- Payoff
- The payment in full of an existing loan or
other lien.
- Payoff Escrow
- An escrow, specifically for the purpose of
paying off an existing lien. Usually part of
an existing escrow, and called a sub escrow.
- Perfecting Title
- Process involving the elimination of any adverse
claims against a title.
- Personal Property Loan
- A loan which is secured by both real and personal
property. The minimum ratio of personal to real
property is set by law. The credit of the borrower
is a major consideration in making the loan.
- PITI
- Refers to principal, interest, taxes and insurance,
the four major components of a usual monthly
mortgage payment.
- PITI Ratio
- The principal, interest, tax and insurance
payment to income ratio. Used in mortgage lending
decisions.
- Plaintiff
- The party bringing a civil action against
a defendant.
- Planned (unit) Development
(PUD)
- A subdivision of five or more individually
owned lots with one or more other parcels owned
in common or with reciprocal rights in one or
more other parcels. The lots are generally small,
being the exact size of the improvements, or
slightly larger.
- Point
- One percent. When referring to mortgages or
deeds of trust, the term is used to describe
the percentage of discount rather than interest
(for which the word "percent" is used).
The points are paid by the seller in F.H.A.
and V.A. insured loans, and by either buyer
or seller (or both) in conventional loans.
- Points
- A fee charged by the lender to fund a loan,
in addition to and separate from other fees
charged. One Point equals one percent of the
amount of the loan. Discount points are charged
or are received based on the note rate the borrower
selects. Additionally a one point origination
fee is typically charged by a lender to underwrite
a residential loan.
- Possibility of Reverter
- The term shows no estate (interest) in property,
but only the chance that an estate will exist
at a future time. If a property were sold on
the condition that it be used for a park, and,
it not used for a park, would revert back to
the seller, the seller would have a possibility
of reverter.
- Power of Attorney
- An authority by which one person (principal)
enables another (attorney in fact) to act for
him. (1) General power - Authorizes sale, mortgaging,
etc. of all property of the principal. Invalid
in some jurisdictions. (2) Special power - Specifies
property, buyers, price and terms. How specific
it must be varies in each state.
- Prescriptive Easement
- The granting of an easement by a court, based
on the presumption that a written easement was
given (although none existed), after a period
of open and continuous use of land.
- Principal
- The sum of money outstanding upon which interest
is payable. Also refers to one who is served
by an agent. Private Mortgage Insurance (PMI):
Insurance written by a private mortgage insurance
company protecting the mortgage lender against
loss occasioned by a mortgage default and foreclosure.
- Private Mortgage Insurance
- Insurance against a loss by a lender in the
event of default by a borrower (mortgagor).
The insurance is similar to insurance by a governmental
agency such as FHA, except that it is issued
by a private insurance company. The premium
is paid by the borrower and is included in the
mortgage payment.
- Property Management
- The branch of the real estate business dealing
with the management of property. The property
may be a rented house or a large office or industrial
complex. The duties may range from merely collecting
rents to complete management of all maintenance
and may also include being leasing agent or
sales agent.
- Proration
- The method used in dividing charges into that
portion which applies only to a party's ownership
up to particular date.
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- Q
- Quadrant
- (1) A quarter section of a circle. (2) One
of the quarters created by two intersecting
roads or streets.
- Qualification
- The process of reviewing a prospective borrower's
credit and payment capacity prior to approving
a loan.
- Quantity Survey Method
- Also called "price take-off" method.
A process of arriving at an estimate of new
construction costs by a detailed estimate of
quantities of necessary building materials plus
labor costs.
- Quarter Section
- One quarter of a section. A quarter section
(commonly called a quarter) contains 160 acres.
- Question Of Law
- Given the facts, what laws, it any, are applicable
- decided by a judge, even in a jury trial.
- Quietus
- Final disposition of a claim or debt.
- Quitclaim Deed
- A deed operating as a release, intended to
pass any title, interest, or claim which the
grantor may have in the property, but not containing
any warranty of a valid interest or title in
the grantor.
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- R
- Rate Index
- An index used to adjust the interest rate
of an adjustable mortgage loan. For example:
the change in U.S. Treasury securities (T-Bills)
with a 1 year maturity. The weekly average yield
on said securities, adjusted to a constant maturity
of one year, which is the result of weekly sales,
may be obtained weekly from the Federal Reserve
Statistical Release H.15 (519). This change
in interest rates is the "index" for
the change in the specific Adjustable Mortgage
Loan.
- Rate Of Return
- The annual percentage of return on investment
on income property.
- Ratification
- Affirming a prior act which was not legally
binding; the affirmation gives the act legal
effect. Occurs when an unauthorized agent acts,
and the principal later affirms the action,
giving authority retroactively.
- Real Estate
- (1) Land and anything permanently affixed
to the land. such as buildings, fences, and
those things attached to the buildings, such
as light fixtures, plumbing and heating fixtures,
or other such items which would be personal
property it not attached. The term is generally
synonymous with real property, although in some
states a fine distinction may be made. (2) May
refer to rights in real property as well as
the property itself.
- Real Estate Settlement
Procedures Act (RESPA)
- A federal statute requiring disclosure of
certain costs in the sale of residential, improved
property which is to be financed by a federally
insured lender.
- Rebate
- A discount or reduction in price of a product
or interest, not given in advance, but handed
back because of prompt payment or other reason.
Many states regulate gifts and educational aids
given to real estate brokers by supporting companies
such as title companies, calling these in effect,
a price discount (rebate).
- Recapture Of Depreciation
- Taxing as ordinary income, upon the sale of
property, the amount of depreciation taken above
straight line depreciation.
- Reconveyance
- The conveyance to the landowner of the title,
held by a trustee under a deed of trust, when
the performance of the debt is satisfied.
- Recordation
- Involves filing for record in the office of
the county recorder for the purpose of giving
constructive notice of title, claim or interest
in real property.
- Record Owner
- The owner of property as shown by an examination
of the public record.
- Redemption
- The process of canceling a defeasable title
to land, such as is created by a mortgage foreclosure
or tax sale.
- Redemption Period
- A time period during which a mortgage, landcontract,
deed of trust, etc., can be redeemed. Usually
set by statute, and after judicial foreclosure.
- Refinance
- (1) The renewing of an existing loan with
the same borrower and lender. (2) A loan on
the same property by either the same lender
or borrower. (3) The selling of loans by the
original lender.
- Reinstatement
- (1) Payment of a note, mortgage, deed of trust,
etc., to bring it from default to good standing.
(2) Restoring the previously used entitlement
of a veteran to enable the veteran to purchase
property under a VA program. (Also called Restoration
of Eligibility).
- Reinsurance
- The transferring of a portion of the liability
to other insurers. Example: Insurer A insures
for $200,000, A insures for $100,000 and reinsures
the "second" $100,000 through B insurer,
The "first" $100,000 is called "primary
liability."
- Renegotiable Rate
Mortgage
- A real property loan calling for an adjustment
in the interest rate at a given time. Example:
A loan with a 15 year amortization is adjusted
to current interest rates after 2 years. The
lender agrees to make the adjusted loan at the
new rate as long as the old loan is not in default.
The Federal Reserve Board allows the original
loan to be treated either as a balloon payment
loan or a variable rate loan. However, points
must be figured into the A.P.R. based on the
time or renegotiation (2 years rather than 15).
- Reservation
- (1) A right created and retained by a grantor.
The reservation may be temporary (such as a
life estate) or permanent (such as an easement
running with the land). (2) Public land reserved
for a special purpose, such as an Indian reservation.
- Restraint of Alienation
- Restrictions placed against the transfer (vesting)
or sale of property. Certain restrictions are
allowed but must conform to the rule against
perpetuities and free right of an owner to sell.
For example: Selling on the condition that the
grantee could resell only to members of a certain
family would be too restrictive and not valid.
- Right Of Way
- A strip of land which is used as a roadbed,
either for a street or railway. The land is
set aside as an easement or in fee, either by
agreement or condemnation. May also be used
to describe the right itself to pass over the
land of another.
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- S
- Safety Clause
- A clause in a listing protecting the broker
from having buyer and seller wait until the
listing expires to make a deal, thereby avoiding
the payment of commission. The clause states
that if the property is sold during a specified
period after the expiration of the listing (or
any extension thereof) to a buyer provided during
the listing period by the broker, the commission
shall be paid.
- Savings And Loan Association
- Originally an association chartered to hold
savings and make real estate loans. Federally
insured and regulated. Active in long term financing
rather than construction loans. Recent changes
in federal controls have enabled these associations
to offer checking accounts, consumer loans,
and other services traditionally offered by
banks.
- Secondary Financing
- A loan secured by a mortgage or trust deed,
which lien is junior (secondary) to another
mortgage or trust deed.
- Secondary Mortgage
Market
- The buying and selling of first mortgages
of trust deeds by banks, insurance companies,
government agencies, and other mortgagees. This
enables lenders to keep an adequate supply of
money for new loans. The mortgages may be sold
at full value (par) or above, but are usually
sold at discount. The secondary mortgage market
should not be confused with second mortgage.
- Second Mortgage
- A mortgage which ranks after a first mortgage
in priority. Properties may have two, three,
or more Mortgages, deeds of trust, or land contracts,
as liens at the same time. Legal priority would
determine whether they are called a first, second,
third, etc. lien.
- Sequestration,
Writ Of
- The taking custody of one's property (real
or personal) to force compliance with a court
order.
- Shared Appreciation
- The gaining or retaining of equity in a property
by someone other than the buyer. For example:
the seller retains a 25% interest in the property.
This makes the buyer responsible for only 75%
of the purchase price and, therefore, lowers
the necessary financing by 25%. This obviously
makes the property more affordable. By agreement,
expenses are shared as well as any increase
in value when the property is sold. Statement
of Information (SI): A confidential information
statement completed by the buyer, seller and
borrower in every transaction where a policy
or policies of title insurance are requested.
Allows the title company to competently search
documents affecting the property to be insured,
documents which may not refer to said property.
Allows title companies to differentiate between
parties with similar names when searching matters
such as liens and court decrees.
- "Subject To"
Clause
- A clause in a deed, stating that the grantee
takes title "subject to" an existing
mortgage. The original mortgagor is alone responsible
for any deficiency, should there be foreclosure
of the mortgage. Differs from an "assumption"
clause, whereby the grantee "assumes"
and agrees to pay the existing mortgage.
- Surface Rights
- The rights (easements) to use the surface
of land, including the right to drill or mine
through the surface when subsurface rights are
involved.
- Sweat Equity
- A program which allows a purchaser to do work
on the property in place of all or part of the
down payment and other costs of purchase.
- Subordination Agreement
- An agreement under which a prior or superior
lien is made inferior or subject to an otherwise
junior lien.
- Survey
- The measurement of the boundaries of a parcel
of land, its area, and sometimes its topography.
- Syndicate
- An association of individuals, formed for
the purpose of carrying on some particular business
venture in which the members are mutually interested.
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- T
- Tacking
- (1) Annexing a lien to one superior to it
in order to gain the priority of the superior
lien and defeat an intermediate lien. Generally
not allowed. (2) Annexing periods of possession
to add up to enough time for successful adverse
possession. For example; A begins adverse possession,
A dies and A's son takes up possession, adding
A's time to his own. Not always allowed.
- Take Out Commitment
- Agreement by a lender to place a long term
(take out) loan on real property after completion
of construction.
- Tax Base
- The assessed valuation of real property, which
is multiplied by the tax rate to determine the
amount of tax due.
- Tax Deed
- (1) Deed from tax collector to governmental
body after a period of non-payment of taxes
according to statute. (2) Deed to a purchaser
at a public sale of land taken for delinquent
taxes. The purchaser receives only such title
as the former owners had and strict procedures
must be followed to prevent attachment of prior
liens.
- Tax Lien
- A statutory lien imposed against real property
for nonpayment of taxes.
- Tenancy In Common
- An undivided ownership in real estate by two
or more persons. The interests need not be equal.
and, in the event of the death of one of the
owners, no right of survivorship in the other
owners exists.
- Tenant At Will
- One who holds possession of premises by permission
of the owner or landlord, but without agreement
for a fixed term of possession.
- Terra Cotta Lumber
- Very porous earthenware which can hold a nail
and be cut without breaking or shattering.
- Title Plant
- The information warehouse of a fide company
in which it has accumulated and is constantly
updating the records of properties in its area
which it can use to search title to real property.
- Time Sharing
- A concept of ownership increasing in popularity
as real estate prices rise. The purchase of
an undivided interest (usually in a resort area
condominium) for a fixed or variable time period.
For example: Fifty-two different purchasers
buy one condominium: each agrees to possession
for one week per year. Costs (taxes, insurance,
maintenance, etc.) are shared equally. Possession
may be fixed, or by reservation, by lease, license,
etc. Some developers provide several projects
in different parts of the world, so that a person
owning one week in a project in Hawaii could
elect to spend that week in a connected project
in France or other area.
- Ton
- (1) A measure of weight; two thousand pounds.
(2) A measure of capacity of an air conditioner.
One ton equally twelve thousand British thermal
units (B.T.U.'s).
- Townhouse
- Originally a house in a city as opposed to
a country estate. More recently the term is
applied to certain types of row houses, whether
planned unit developments or condominiums.
- Transfer Tax
- State tax on the transfer of real property.
Based on purchase price or money changing hands.
Check statutes for each state. Also called documentary
transfer tax.
- Treasury Bills
- Interest bearing U.S. Government obligations
sold at a weekly sale. The change in interest
rates paid on these obligations is frequently
used as the Rate Index of Adjustable Mortgage
Loans.
- Trustee
- A person who holds title in trust for the
benefit of another. In a deed of trust, the
trustee is the person named to hold title in
trust for the benefit of the lender until the
loan is paid off.
- Trustee In Bankruptcy
- One appointed by a bankruptcy court, and in
whom the property of the bankrupt vests. The
trustee holds the property in trust, not for
the bankrupt, but for the creditors.
- Trustor
- The borrower under a deed of trust. One who
deeds their property to a trustee as security
for repayment of a loan.
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- U
- Unavoidable Cause
- A cause which reasonable prudence and care
could not have prevented, such as death, illness,
papers lost in the mail, etc.
- Underlying Financing
- A mortgage, deed of trust, etc., prior to
(underlying) a land contract, mortgage, etc
, on the same property.
- Undisclosed Principal
- A principal whose identity is not revealed
by an agent.
- Uniform Laws
- Laws approved by the National Conference of
Commissioners on Uniform State Laws. Many have
been adopted in one or more states. Among these
are the Uniform Commercial Code, Uniform Negotiable
Instruments Act, Uniform Partnership Act, Uniform
Residential Landlord and Tenant Act, etc.
- Uniform Settlement
Statement
- The Standard HUD Form 1 required to be given
to the borrower, lender and seller at, or prior
to, settlement.
- Unilateral Contract
- A contract under which one party expressly
makes a promise, the other party, although making
no reciprocal promise, may be obligated by law
or may have already given consideration.
- Unity Of Possession
- In joint tenancy, the joint tenants must have
equal rights to posesion.
- Unmarketable Title
- Title which contains defects that would allow
a purchaser to be released from his obligation
to purchase.
- Unrecorded Instrument
- A deed, mortgage, etc., which is not recorded
in the county recorder's office and, therefore,
not protected under recording statutes. Valid
between the parties involved, but not against
innocent third parties.
- Useful Life
- (1) In appraisal for sale purposes, the true
economic value of a building in terms of years
of use to the owner. (2) For tax purposes, the
life set for depreciation. At any time during
that period, a new life could begin for a new
owner.
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- V
- Vacancy Factor
- The estimated percentage of vacancies in a
rental project. May be based on past records
of the property, or a professional guess if
a new project. Surrounding area buildings, it
similar, may be used for comparison.
- Variable Interest Rate
- An interest rate which fluctuates as the prevailing
rate moves up or down. In mortgages there are
usually maximums as to the frequency and amount
of fluctuation. Also called "flexible interest
rate."
- Veneered Construction
- The placing of a facing material over the
external surface of a structure.
- Venue
- (1) The county (or other geographical division)
in which an action or prosecution is brought
for trial and which is to furnish the panel
of jurors. (2) The county in which an acknowledgement
(notorization) is made.
- Vesting
- Denotes the manner in which title is held.
Examples of common vestings are: Community Property,
Joint Tenancy and Tenancy in Common.
- Vital Statistics
- Data regarding births, deaths, marriages,
health records, etc., and usually kept by a
governmental bureau. Federally, the Bureau of
Vital Statistics.
- Volt
- A term in electronics, being the force necessary
to cause one ampere to flow through a conductor
with a resistance of one ohm. Common household
current is 110 volts, with a 220 volt circuit
used for some heavy appliances. Industrial uses
may require higher voltage.
- Voluntary Lein
- A lien placed against real property by the
voluntary act of the owner. Most commonly, a
mortgage or deed of trust
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- W
- Waive
- To knowingly abandon, relinquish, or surrender
a right, benefit, or claim.
- Wall Bearing Construction
- Weight of roofs and floors supported entirely
by the exterior walls, with no load-bearing
partitions. Posts and pillars are used at points
where the span is too wide for exterior wall
support.
- Warranty
- A legal, binding, promise, given at the time
of a sale, whereby the seller gives the buyer
certain assurances as to the condition of the
property being sold. Warranties as to real property
have taken on a lessor role with the increase
of the use of title insurance.
- Warranty Deed
- A deed used in many states to convey fee title
to real property. Until the wide spread use
of title insurance, the warranties by the grantor
were very important to the grantee. When title
insurance is purchased, the warranties become
less important as a practical means of recovery
by the grantee for defective title.
- Wasting Assets
- Assets which, by use or lapse of time, are
consumed or reduced in book value, irrespective
of market fluctuation. Includes oil, minerals,
patent rights, franchises for a fixed term,
etc. Also called "diminishing assets",
"wasting property."
- Watt Hour
- The basis used to determine electric bills.
Example: A 100 watt light bulb means if the
bulb burns for one hour, it will use 100 watts
of electricity.
- Weep Holes
- Small holes in a retaining wall or other wall
where it may be necessary to drain off excess
water to avoid pressure build-up.
- Wild Interest
- An interest of record which cannot be traced
in the chain of title. Frequently occurs when
an incorrect legal description appears on a
document. An apparent wild interest may occur
if a woman who changes her name through marriage
after acquiring property, sells the property
using her married name only.
- Without Recourse
- A finance term. A mortgage or deed of trust
securing a note without recourse allows the
lender to look only to the security (property)
for repayment in the event of default, and not
personally to the borrower.
- Working Drawing
- Drawing used by workman in construction.Shows
all structural detail such as electric, plumbing,
partitions, etc.
- Wrap-Around Mortgage
- A second or junior mortgage with a face value
of both the amount it secures and the balance
due under the first mortgage. The mortgagee
under the wrap-around collects a payment based
on its face value and then pays the first mortgagee.
It is most effective when the first has a lower
interest rate than the second, since the mortgagee
under the wrap-around gains the difference between
the interest rates, or the mortgagor under the
wrap-around may obtain a lower rate then if
refinancing.
- Wrought Iron
- An easily molded form of iron used for decorative
railings, gates, furniture, etc. The term is
loosely used to describe steel or aluminum used
in the same manner.
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- Y
- Yacht Basin
- A system of docks and channels used for the
keeping of yachts and similar boats.
- Yard
- (1) A measure of 36". (2) The area between
the building and property line of a residential
property (back yard, side yard, front yard).
(3) An enclosure, in or out of a building, used
for a business purpose (lumber yard, etc.)
- Yard Lumber
- Lumber generally found in a lumber yard, that
is, lumber graded for general building purposes.
- Yield
- Ratio of income from an investment to the
total cost of the investment over a given period
of time.
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- Z
- Zero Lot Line
- The consruction of a building on any of the
boundary lines of a lot. Usually built on the
front line such as a store built to the sidewalk.
- Zero Side Yard
- The building of a subdivision with each house
built on a side boundary line. This gives more
usable yard space on narrow lots. An easement
for maintenance is given over a portion of the
lot adjoining each house.
- Zone
- (1) An area of a county or city in which the
use of the land is restricted by law (zoning
ordinance). (2) An area designated by a number
for the delivery of mail. Zip codes incorporate
the zones.
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