Mortgage and Loan Glossary

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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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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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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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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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)