Category: 1

A (Real Estate) 04/02/2010

1031 Exchange – An exchange which is officially called an Internal Revenue Code 1031 Exchange which allows an owner to trade one like property for another under very specific guidelines and defer paying income tax.

Abandonment – The voluntary surrender, relinquishment, disclaimer or cession of property ownership claims or rights done with an intention to abandon or give them up or from a failure to use the property.

Abatement –A termination, ending, reduction or decrease which usually applies to the assessed value of ad valorem taxes following their assessment and levy.

Abatement of nuisance – A termination or extinction of a nuisance. See Nuisance.

Abrogate – An act that repeals a law or custom which makes it void.

Absentee owner – An owner who does not live or mange his or her own property but uses the services of a property manager.

Absolute auction – A form of sale where the property is offered without a reserve price and which will be sold to the highest bidder.

Absolute auction with minimum opening bid – A form of sale that has the best features of both an auction with a reserve and an absolute auction.

Absolute ownership – See Fee simple estate.

Absorbtion rate – An estimate of the amount of sales or occupancy that can be anticipated over a determined period.

Abstract –A summary of a finding of facts provided so the reader will not have to read all of the associated documents.

Abstract of judgement – A summary of the essential provisions of a money judgment by a court that when recorded in the recorder’s office becomes a lien on the debtor’s presently-owned or after-acquired property.

Abstract of title – A summary or brief but complete history, which in some areas it is reviewed by an attorney and includes actual copies of the records, of all of the recorded conveyances, transfers, legal proceedings and other facts in the public records that can be relied on as evidence of title and which show continuity of ownership along with any other elements of record which may impair the title.

Abstraction – A land valuing method where the indicated value of the improvement is deducted from the sales price leaving the value of only the land.

Abstractor – A person who, historically, searches out anything affecting the title to real property and summarizes the information in the findings

Abutting – Something touching or bordering like land that is adjoining other land.

Accelerated Cost Recovery System, ACRS – A part of the IRS system designed to recover taxes not paid as a result of depreciation taken on depreciable real property that was acquired and placed into service starting in 1981.

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

Acceleration clause – A clause in a real estate financing instrument that gives the lender the power to declare all sums owed to be immediately due and payable upon the happening of a specific event such as sale of the property or the delinquency of a note payment.

Acceptance – One of the four essential elements of a valid contract whereby the offeree agrees or consents to the terms of an offer therefore establishing the meeting of the minds.

Access right – A right that an owner has over the adjoining owner’s property to ingress and egress his or her real property.

Accessibility – A right that the public has over private real property to reach public or private land maintained for public use.

Accession – An addition to property by the incorporation or union done through natural forces or by the efforts of man.

Accommodating party – An intermediary who holds money or property for a short time to facilitate a Section 1031 exchange. See Qualified intermediary.

Accommodation recording –The recording of instruments by a title company with the county recorder strictly as a convenience to a customer and without assuming any responsibility for their correctness or validity.

Accredited Management Organization, AMO – A property management firm that has been granted special competency status by the Institute of Real Estate Management.

Accretion – The gradual and imperceptible accumulation of land along the shore or banks which is called alluvium that is done by natural forces such as the sea or a river. See Alluvium.

Accrual for depreciation – In appraisal, a provision in the income approach in which areturn of the investment is provided for out of the income by way of the capitalization rate.

Accrual method – An accounting method that calls for income to be booked when the income is earned and expenses when the obligation becomes payable. See Cash method.

Accrued – Something that has been accumulated over a period of time for future disposition or use.

Accrued depreciation – The actual monetary difference between the cost to replace a property as of the date of the original appraisal and the present appraised depreciated value.

Accrued items of expense – Those expenses shown on a balance sheet or closing statement such as real estate taxes that have been incurred but are not yet payable which get credited to the buyer on the closing statement and who will pay them later on behalf of the seller.

Accumulated depreciation – In accounting, the amount of depreciation expense that has been claimed to date. See Accrued depreciation.

Accusation – A written statement delivered by a Real Estate Commissioner to a licensee prior to a disciplinary action hearing regarding the possible revocation or suspension of his or her license setting forth the acts or omissions for which the licensee is being charged.

Acknowledgment – 1. A formal declaration by a person who has executed, signed, an instrument before a state-authorized person such as a notary public stating that the execution was his or her free act. 2. An acknowledgment also is the statement by a notary public who has seen proof that the signer of the instrument is actually the person who is identified in the document which entitles it to be used as evidence without further proof.

Acknowledgment of a deed – A form of authenticating instruments conveying property or otherwise conferring rights whereby a public declaration is made via the signature of the grantor(s) which serve as evidence as being his or her intentional act or deed.

Acoustical tile – A block of fiberous material or metal having small holes or a rough-textured surface that is used to cover interior walls or ceilings to absorb sound.

Acquisition – The act or process by which a person obtains ownership of or an interest in property.

Acquisition cost – The price including all fees paid to purchase a property.

Acre – A unit of land measure equaling 43,560 square feet or a tract about 208.71 feet square or 160 square rods or 4,840 square yards.

ACRS – See Accelerated Cost Recovery System.

Act of God – An unpreventable destructive event resulting from natural world forces.

Action – A lawsuit filed with a court.

Action of the sun – A consideration used in the selection of a location for a retail store which holds that the shadiest sides of the street – the south and west sides – are considered the most desirable.

Active participation – A type of investor position involves things like approving new tenants, rental terms and capital or repair expenditures which is less strict than for material participation which determines how personal income is taxed. See Material participation.

Actual age – The number of years an improvement has existed.

Actual authority – That authority expressly given in words by a principal or given by the law which has not been denied by that principal.

Actual depreciation – The depreciation that has occurred as a result of physical, functional or economic forces and have caused a loss in the value of a building.

Actual eviction – The removal of a tenant by a legal process.

Actual fraud – A deliberate misrepresentation or a representation made in reckless disregard of its truth or its falsity or the suppression of truth or a promise made without any intention to perform it or any other act intended to deceive.

Actual notice – A notice that has been expressed in words, or can be see with the eyes or can be implied by knowledge of a fact.

Ad valorem – A Latin phrase meaning according to value that is usually used in reference to real estate taxation.

Ad valorem tax – A real estate tax that is based according to either a percentage of or actual market value being multiplied by the current tax rate to arrive at the amount of tax to be paid.

ADA – See Americans with Disabilities Act.

Addendum – A thing added or attached to a contract that is sometime called a rider. More than one are called addenda.

Adjacent – A property that is near or in the neighborhood of other property but not necessarily touching that property but it is also sometimes used to refer to adjoining, contiguous or touching property such as the immediately adjacent property.

Adjoining – A property that is touching or contiguous as distinguished from property being near or adjacent.

Adjudged incompetent – A person who has been declared by the courts to be incapable of handling his or her own affairs.

Adjustable Rate Mortgage, ARM – A mortgage loan that bears interest at a rate that is subject to change and therefore adjustable during the term of the loan on a pre or otherwise determined basis that was agreed to at the inception of the loan to make it more closely in alignment with current rates.

Adjusted cost basis – The financial interest of an asset which equals its cost basis plus the value of any capital improvements, less any depreciation, which the IRS attributes to the owner at the time of sale for the purpose of determining any taxable gain or loss. Also know as Adjuested cost basis. See Cost basis.

Adjustments – In appraising, a means by which characteristics of a residential property are regulated or compared using dollar amounts or percentages to have them conform to similar characteristics of another residential property.

Administration – The management of a business, activity or resource.

Administrative Procedure Act – A state law that established the procedures that a Real Estate Commissioner must follow in order to discipline a licensee.

Administrator – A person who has been granted authority by the probate court to administer the estate of a deceased person who died intestate or without a will. Administratrix is the term used for a woman.

Administrator’s deed – A deed used to convey the property of one who has died intestate or without a will by the court-appointed party in charge.

Administratrix – See Administrator.

Adobe house – See Pueblo.

Adult – Someone who has attained the age of majority which is 18 or 21 depending on the state and the circumstances.

Advance – A transfer of funds from a lender to the borrower in advance of a loan.

Advance commitment – A prior agreement by an institutional investor to provide long-term financing upon the completion of a construction project. Also known as a “take-out loan commitment”.

Advance fee – 1. A fee paid in advance of any services rendered such as in obtaining a loan. 2. Sometimes unlawfully charged in connection with the illegal practice of obtaining a fee in advance by a person representing himself as a real estate licensee or a representative of a licensed real estate firm for the advertising of property or businesses for sale but with no intention of trying to obtain a buyer.

Advancement – A gift from a parent to a child in anticipation of the share the child will eventually inherit from the parent’s estate which is intended to be deducted from the inheritance.

Adverse possession – A method of acquiring title to real property through the continued possession of the property under certain conditions for the statutory period by a person who is other than the owner of record.

Advertising – A promotional announcement made to inform the public in order to to produce action and aid in the sale of real property.

Affiant – Any person who makes an affidavit or gives evidence.

Affidavit – A statement or declaration reduced to writing and sworn to or affirmed before a public official who has authority to administer an oath or affirmation.

Affidavit of title – A written statement made by a grantor under oath and acknowledged before a notary public which identifies the grantor and his or her marital status and certifies that since the date of the title examination there have been no known judgments, bankruptcies or divorces, no unrecorded deeds, contracts, unpaid repairs or improvements or defects of title and that the grantor is in possession of the property.

Affirm – To declare, confirm, verify, aver, or ratify.

Affirmation – The confirmation of a former judgment or court order or a principal of an agent’s acts.

Affirmative action program – A detailed plan used to overcome the causes and affects of discriminatory policies in the hiring, employment and/or training of minority members of society.

Affirmative easement – The right to make some positive use of land belonging to another, such as a right of way.

Affirmative lending – A requirment of a federally-chartered lending institution under the Community Reinvestment Act to attempt to make the demographic distribution of loan recipients more closely match that of an area’s residents or depositors.

Affirmative Marketing Agreement, AMA – An agreement originated by the National Association of REALTORS® regarding the manner in which real property is marketed which promotes the letter and spirit of the Federal Fair Housing Law by the cooperation of the real estate profession.

Affordable housing – A comprehensive term applied to the efforts of the public and private sectors to help low- and moderate-income people purchase homes through programs that offer lower down payments, easier loan-qualifying rules, and/or below-market interest rates.

A-frame – A post-World War II housing style shaped like one or more As which was typically used for vacations.

After-acquired title – The receipt of property occurring after a particular date or defined event such as where there has been an execution of a mortgage to property not yet owned but will be owned.

Agency – An expressed contractual relationship which can be created orally or in writing in which a principal authorizes and empowers the agent to act on behalf of the principal in dealing with third parties and further agrees to accept full liability for the agents acts. See Implied agency.

Agency coupled with an interest – An agency relationship where the agent holds an estate or interest in the property which is the subject of the agency relationship.

Agency disclosure statement – A written declaration signed by a prospective seller or buyer informing that party who the licensee will be working for and of the role that the licensee will be playing in a specific transaction.

Agent – A natural or legal person who has either expressed or implied authority to act for and represent another party known as the principal typically in business matters.

Agreement – An exchange of promises, a meeting of the minds, a mutual understanding or arrangement in contract law.

Agreement of sale – A written agreement or contract between a vendor, seller, and a vendee, purchaser, in which they reach a meeting of minds and whereby the purchaser agrees to buy specific real estate and the seller agrees to sell it upon specific terms and conditions set forth in the contract.

Air lot – A specific identifiable parcel of real property located in the air which is capable of being transferred just like a parcel on the ground.

Air rights – The real property rights a party has to the reasonable use of the air space above the surface of the ground.

Air space – The area located above ground level where the title to it belongs to the land. See Air rights.

AIREA – See American Institute of Real Estate Appraisers.

Alienate – To transfer or send away or sell ownership.

Alienation – The voluntary or involuntary transferring of property and possession of land or other things from one party to another.

Alienation clause – A clause in a contract that gives the lender specific rights in the event that the mortgaged property is sold or transferred.

All-inclusive mortgage – A purchase money mortgage that is subordinate to, but also including, the original loan.

All-inclusive rate – A rate which includes charges for title insurance, searching or abstract fees and examination fees.

Allodial land – A typical parcel of land in the U.S today that is held in absolute independence without it being subject to any rent, service or any acknowledgment to a superior other than the state. See opposite Feudal land.

Allodial system – A real property ownership system in the U.S today in which ownership is free and clear of everything except for any governmentally-held rights and which is the opposite of the feudal system.

Allodial tenure – A real property ownership system where ownership may be absolute except for those governmentally-held rights. See contrased Feudal tenure.

Alluvial deposit – The sand or mud transported by water and deposited on land and causing an ownership increase.

Alluvion– The gradual increase of the earth on the shore of an ocean or stream bank resulting from the soil deposited by the action of the water. Also know as Alluvium.

Alluvium – See Alluvion.

ALTA – See American Land Title Association policy.

Alternative minimum tax – An aspect of the federal income tax program which is a flat tax applied on an “alternative minimum taxable income” basis to ensure that everyone with income above a certain level pays some income tax.

Ambulatory – That which is generally movable and when applied to wills meaning revocable.

Amendment – A change either to alter, add to, or correct part of an agreement without changing its principal idea or essence.

Amenities – The satisfaction of enjoyable living derived from a home such as the conditions of agreeable living or a beneficial influence from the location that cannot be measured in money but are tangible and intangible benefits of the property which often result in greater pride of ownership and are sometime referred to as amenity return.

Amenity – The benfits a property offers such as a good neighborhood, schools, parks, a view or other tangible or intangible assets.

America ’s Community Bankers – The member institutions representing a broad diversity of community banking which identify themselves by a variety of names such as savings banks, savings and loan associations, cooperative banks and commercial banks and who can be either state or federally chartered or stock-owned and mutuals.

American Bankers’ Association, ABA – A trade association of commercial bankers.

American Institute of Real Estate Appraisers, ALFA – A trade association of real estate appraisers which conducts educational programs, publishes materials and promotes research on real estate appraisal and confers the MAI, Member Appraisal Institute and the RM, Residential Member designations.

American Land Title Association Homeowner’s policy, ALTA – A title insurance policy that provides buyers and owners with their own protection in much of the same way that the ALTA, American Land Title Association, policy protects lenders.

American Land Title Association policy, ALTA – A type of title insurance policy issued by title insurance companies to protect lenders from the risks normally insured against under the standard type policy but also includes unrecorded mechanic’s liens, unrecorded physical easements, facts a physical survey would show, water and mineral rights, and rights of parties in possession such as tenants and buyers under unrecorded instruments.

American Land Title Association, ALTA – An organization that is composed of title insurance companies which sets the industry standards including the title insurance policy forms used nationally.

American Society of Appraisers, ASA – The national professional and trade association for appraisers and appraisal firms.

American Society of Real Estate Counselors, ASREC – A national professional and trade association of developers, consultants and experienced advisors on all real estate matters which confers the CRE, Counselor of Real Estate designation.

Americans with Disabilities Act, ADA – A federal act that protects the rights of people with disabilities in their employment and their access to public facilities.

AMO – See Accredited Management Organization.

Amortization – The gradual elimination of a liability, such as in a mortgage through regular payments over a specified period of time that are sufficient to cover both the principal and the interest.

Amortization schedule – A table showing the periodic principal and interest payment requirements and the unpaid loan balance for each period for the life of a loan.

Amortization table – A table showing the required equal payment needed to amortize a loan at various interest rates over various periods of time.

Amortized loan – A loan where the principal and interest are repaid according to a plan that calls for a series of equal or nearly equal in monthly or other periodic installment payments and without any special balloon payment prior to maturity. Also known as a level payment loan.

Anchor tenant – The key tenant in a commercial development such as a retail shopping mall whose quality often determines the size of a loan that the owner can obtain.

Annexation – 1. A method of changing personal property into real property. 2. The adding of real property to other adjacent real property to increase its size and value.

Annual cap – A limit on the amount of adjustment that can be made to the interest rate of an adjustable rate mortgage over a twelve-month period. See Cap.

Annual Percentage Rate, APR – The identified annual cost of credit expressed as a percentage in accordance with standards set forth in Regulation Z of the Federal Truth in Lending Act.

Annuity – A sum of money received at regular fixed intervals in certain equal or nearly equal payments such as the installment rent payments due to a landlord under a lease or the installment payments due to a lender over a period of time or paid at times in a lump sum future payment.

Antitrust laws – The laws passed with the intention to protect the free enterprise system of the open market that make certain private conspiracies to establish set commission rates called price-fixing and forming agreements to limit business dealings to fixed areas or markets to minimize competition illegal.

Apartment building – A multifamily rental dwelling of individual housing units called apartments which frequently have a common entrance and hallways.

Apex – The highest point or peak on a triangle from which the altitude is measured from the base.

Appeals board – A governmental body empowered to hear real estate tax appeals from aggrieved petitioners which has the power to overturn local permitting agency and code enforcement agency decisions. Also know as the Board of Zoning Appeals.

Appellant – The party appealing a court decision or ruling.

Application Fee – The part of the closing costs that pre-paid to the lender at time of application to cover the initial expenses.

Apportionment – The division of rights or liabilities among several parties who are entitled to them or liable for them in accordance with their respective interests.

Appraisal – An estimate or opinion of value of a specific property as of a specific date resulting from an analysis of the facts about that property by an qualified impartial third party.

Appraisal date – The date to which the value stated in an appraisal report applies.

Appraisal fee – An amount paid to purchase an appraisal report.

Appraisal Foundation – An organization formed in the 1980s to encourage uniform requirements for appraisal qualifications and reporting standards with two principal boards, the Appraiser Qualifications Board which establishes and publishes qualifications for state licensing and certification of appraisers and the Appraisal Standards Board which promulgates the Uniform Standards of Professional Appraisal Practice, USPAP.

Appraisal Institute – An organization of professional appraisers formed in 1991 by the merger of the American Institute of Real Estate Appraisers and the Society of Real Estate Appraisers which confers the MAI designation to those qualified to appraise any property and SRA designation to those primarily qualified to appraise residences.

Appraisal inventory – A compilation of all of the specific items that make up the property that were valued by the appraiser and included in an appraisal report.

Appraisal report – A report setting forth the estimate and conclusion of appraised value along with the pertinent information concerning the appraised property as well as the evidence and analysis leading to the reported estimate of value.

Appraiser – A person who is in the business of making appraisals for a fee or salary and is qualified to estimate the value of real and personal property based on education, training, experience, judgment of facts and the use of the formal appraisal processes.

Appreciation – The increase in value of property over a time period.

Appropriation – The setting aside land for use by the public.

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

Approved attorney – An attorney acceptable to a title company whose opinion will be the basis for the title insurance company to issue a title insurance policy to the insured.

Appurtenance – Something which passes with the transfer of property but is not necessarily an actual part of it like an easements, rights-of-way, water rights and property improvements which includes all of the rights, privileges unless a contrary intention was stated.

Appurtenant – Something belonging to, adjunct, appended or annexed to property such as the common elements of a condominium unit which pass with the land when transferred.

Appurtenant easement – See Easement appurtenant

APR – See Annual Percentage Rate.

Architectural style –The general appearance and character of a building’s design and construction.

Area – A two-dimensional measurement of a surface which in real estate typically referrs to land.

ARM – See Adjustable Rate Mortgage.

Arm’s length transaction – A transaction in which all parties involved in a property sale are acting in their own best-interest and are under no undue influence or pressure to act from any other parties.

Arrears 1. A payment made at the end of a term. 2. Sometimes used to signify default or a payment overdue.

Arterial highway – A major traffic route into a prime traffic area.

Articles of incorporation – A written instrument that identify the fundamental ways a corporation will operate.

Artificial person – See Legal person.

Artisan’s lien – A lien given under common law to one skilled in some kind of mechanical craft or art as a protection that he or she will be paid the agreed upon charges for his or her work.

As is – 1. A real estate sale where the premises are being accepted by a buyer or tenant as they are without any disclosure of any known material defects or guarantees as to condition and which is currently illegal in most states. 2. A sale where the material defects have been disclosed and the buyer or tenant elects to proceed anyway. 3. A sale made with only the disclosure of latent defects. See Caveat emptor.

Asbestos – A carcogenic mineral previously used as insulation due to its great heat insulating qualties but now illegal.

Asking price – The price that an owner would like to receive which is also called list or listing price.

ASREC – See American Society of Real Estate Counselors.

Assemblage – The act of combining two or more contiguous or touching parcels into one new parcel which results in an increase in value that is called plottage. See Plottage.

Assessed value – An amount that is placed upon a piece of property by a public authority as a basis for levying ad valorem taxes which might be at market value or higher or lower than market value or based upon a percentage of market value.

Assessment – 1. The official valuation placed on property for ad valorem taxation or public improvements. 2. The payments made to a common interest subdivision homeowners association for maintenance and reserves. See Special assessment.

Assessment ratio – The ratio of assessed value when divided by market value.

Assessment roll– See Tax roll.

Assessor – An official whose responsibility is to discover, list and value real property for ad valorem taxation purposes.

Asset – Any real or personal property under ownership and having value.

Assign – The transfer of one party’s property contractual rights under leases, mortgages and trust deeds or contract rights to another.

Assignee – The one to whom a property or interests in a property have been transferred. Also know as Assigns.

Assignment – A written transfer from one party to another of an estate, or right therein, or of the contractual rights of possession and use, or in action.

Assignment of lease – The transfer of the rights and privileges to leased property to an assignee by an assignor who still remains liable unless formally released by the landlord.

Assignment of rents – A mortgage clause under which a lender may, upon the default by the borrower, take possession of the property, collect its income and apply it to the loan balance and the collection costs incurred by the lender.

Assignor – A party who assigns or transfers property.

Assigns – See Assignee.

Associate broker – 1. Generally, a person who holds a broker’s license that is held under the license of another broker. 2. In some areas, it is used to refer to any real estate licensee who holds a salesperson’s license.

Associate licensee – A broker or salesperson who is employed by a real estate broker usually under an independent contractor relationship.

Association of Real Estate License Law Officials, ARELLO – An association of state real estate commissioners and other officers and officials in the U.S. and Canada who are charged with the responsibility of enforcing the license laws of the various states and provinces.

Association of REALTORS – The national, state and local organizations whose members consist primarily of real estate brokers and salespersons. Previously known as Boards of REALTORS.

Assumable loan – A mortgage loan without a due-on-sale clause that allows an owner to sell property to a purchaser who is permitted under the loan documents to undertake the obligation of the loan with no change in loan terms. Most FHA and VA loans are assumable.

Assumed name – A name used by a person that is different than his or her legal name.

Assumption– A voluntarily act by one party to assume primary liability for paying the existing secured note against real property when he or she takes title.

Assumption agreement – A written document in which one party agrees to adopt or take on a debt or contractual obligation primarily resting upon another party.

Assumption clause – A buyer takes over an existing loan obligation and agrees to be fully liable for its repayment.

Assumption fee – A charge by a lender for changing over and processing new records for a new owner who is assuming an existing loan.

Assumption of loan – A situation in which a grantee who is purchasing property accepts the liability for the payment of the existing note secured by a mortgage or trust deed and becomes a co-guarantor with the seller for the payment of the loan unless the seller has been released by the lender. Also known as a loan assumption.

Assumption of mortgage – Also known as a mortgage assumption See assumption of loan.

Attachment – The seizure of real or personal property of a party to a lawsuit by the court for the purpose of acquiring jurisdiction over the property to compel an appearance before the court or to furnish security for a debt or costs arising out of the litigation.

Attest – An official act done by a witnessing party which establishs authenticity or affirms that a statement or document is true, genuine or accurate.

Attestation – An official act done by a witnessing party of the execution of a paper whereby the name of the witness is subscribed as testimony of such fact.

Attorney’s opinion of title – See Opinion of title.

Attorney-in-fact – A party who has been authorized by a principal under a power of attorney to perform a certain limited specific act or general acts. See Power of attorney.

Attractive nuisance – An appealing but potentially hazardous feature or characteristic of real property that could cause ham to passers by and for which the owner must take extra care to avoid liability for causing then harm.

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

Auction with reserve –An offer by a seller to sell property but where the seller keeps or holds the right to establish a minimum opening bid, to accept or reject bids and to withdraw the property at any time before the completion of the auction.

Audit – An inspection done by a CPA or other qualified person of the books, records and procedures used by a business or individual.

Authentication – An attestation of a written instrument by an official so it can be possible for it to be legally admissible as evidence in a court of law.

Automated underwriting – A computerized system that permits lenders to speed up the loan application and approval process which reduces lending costs.

Automatic extension – A listing contract clause that is discouraged or prohibited in most states which automatically continues the contract for a set period of time after its expiration date.

Avulsion – A sudden and noticeable loss of land by the action of water normally by a sudden change in the course of a river.

Axial growth – That growth which moves a city out along main transportation routes and which takes a form of finger like extensions.

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

Backup offer – A real estate purchase contract that only becomes effective if the current contract cannot close.

Bailiff – A official of a court who is usually a sheriff’s officer or deputy.

Bailment – The delivery of personal property to be held in trust for a certain purpose along with a contract under which it is either expressed or implied that the property will be returned or accounted for once the purpose has been accomplished.

Balance – The amount left over after subtracting any principal balance owed on a loan or the amount in an account.

Balance sheet – A statement of the financial condition of a business as of a certain time showing its assets, liabilities and capital.

Balloon mortgage – A mortgage loan where payment is due at some point in the future which is bigger than the normal monthly or periodic payment which also pays off the loan. See Balloon payment.

Balloon payment – An installment payment on a promissory note which is usually the final one and which is significantly larger than the other installment payments provided under the terms of the note that discharges the debt.

Balustrade – A supporting column of a stairway handrail.

Band of investment – A method of developing a capitalization rate by combining the weighted average rates attributable to the different components of the invested capital.

Banker’s rule – The belief used when doing prorations and some other calculations that a month consists of 30 days and a year of 360 days.

Bankruptcy – The inability of a debtor to pay one’s financial debts when due and where relief has been sought and has been granted though a special court action that makes it possible to resolve or eliminate the debtor’s debts.

Bargain and sale deed – A deed that conveys title to real property but which does not guarantee its clarity which is often used by court officials and fiduciaries who are only holding title under law. See Grant deed, Quitclaim deed and Warranty deed.

Barred – A prevention of legal recovery under the Statute of Limitations because the statory time peoiod has passed during which a party may legally assert his or her rights.

Barter – The exchange of goods or commodities by one party for other goods or commodities of another party.

Base – The side or plane upon which the figure is resting, as in the base line of a triangle.

Base and meridian – The imaginary lines in the rectangular survey or the government survey system where the base lines run east and west and the meridian lines run north and south which are used by surveyors to establish township boundaries and serve as a reference to find and describe the location of private or public land.

Base line – A parallel line that serves as a reference for other parallels.

Base line –The parallel lines which serve as a reference line for other parallels as part of the rectangular survey system.

Base molding – The molding used at the top of a baseboard.

Base shoe – The ¼ round molding used where a baseboard meets the floor and is used to hide any irregularities in the floor and which is sometimes known as a carpet strip.

Baseboard – A board placed against the wall next to the floor all around a room.

Baseboard heating – A system of heating in which the radiators or convectors are located in or on the wall that replaces the baseboard itself.

Basic income – That income which is received from outside the community.

Basis – The financial interest that the Internal Revenue Service attributes to an owner of an investment property for the purpose of determining annual depreciation and gain or loss on the sale of the asset. See adjusted cast basis and cost basis.

Batten – The narrow metal or wooden strips used to cover joints in wall surfaces and which may be used for a decorative effect.

Beam – A horizontal load-supporting member.

Bearer instrument – A security document that does not indicate who is the owner and which is payable to whoever possess it.

Bearing wall – A wall or partition that supports in addition to its own weight any load above which is usually another floor or the roof.

Bedroom community – A suburban community in which a large number of workers from a major city live.

Beltline highway – A limited-access highway surrounding a city.

Benchmark – A permanent monument placed on durable objects at important points by surveyors to establish the elevation of the point usually relative to mean sea level for tidal observations or local topographical surveys.

Beneficiary – (1) A party entitled to the benefit of a trust. (2) A party who receives profit from an estate, the title of which is vested in a trustee. (3) The lender on the security of a note and trust deed. (4) A party to whom a insurance policy is payable.

Beneficiary statement – A statement showing the unpaid balance of a trust deed loan and the condition of the debt.

Bequeath – The giving of personal property by will. See Bequest.

Bequest – The personal property given according to the terms of a will. See Bequeath.

Betterment – An improvement to property which increases the value of the property which is considered to be a capital asset rather than maintenance and repair or replacement item whereby the original character or cost basis would remain unchanged.

Biannual – A occurrence that happens twice a year and means the same as semiannual. See Biennial.

Bid – The amount a party offers to pay.

Biennial – A occurrence that happens every second year. See Biannual.

Bilateral – An undertaking by, done or obligating two sides. See Unilateral.

Bilateral contract – A contract under which two parties exchange promises for the performance of certain acts such as when Mr. A promises to buy Mr. B’s house and Mr. B promises to transfer its title to Mr. A.

Bi-level – A house built on two levels where the main entrance is situated above the lower level but below the upper level.

Bill of sale – A written instrument which shows evidence of the transfer of title to personal property from the vendor, seller, to the vendee, buyer.

Binder – 1. A written agreement to consider the down payment for the purchase of real estate as evidence of good faith on the part of the purchaser. 2. A notation of coverage on an insurance policy issued by an agent and given to the insured prior to issuing of the policy. See Title insurance.

Biweekly payment loan – A mortgage which requires principal and interest payments at two-week intervals which is exactly half of what a monthly payment would be which over a year’s time, the 26 payments are equivalent to 13 monthly payments on a comparable mortgage loan and as a result, the loan is amortized much faster than loans with the standard monthly payments.

Blacktop – Another term for asphalt paving.

Blanket mortgage or trust deed – A loan that covers two or more properties and often an entire subdivision where those properties are pledged or conveyed as security for the debt and which permits the borrower to obtain a partial reconveyance when a parcel is sold and to be released from the lien upon payment of a previously agreed-upon amount.

Bleeding a project – 1. In new construction, overstating expenses and fees so as to divert a larger than normal amount of the project costs to the developer’s profit. 2. In managing existing real estate so as to obtain the highest possible current income from it, to the extent that many normal operating expenses are not made which usually results in the rapid deterioration and loss of property value.

Blight – The physical decay caused by the failure to maintain the quality of the real estate and public services in a neighborhood.

Blighted area – A district affected by detrimental influences as a result of adverse land use and/or destructive economic forces to such an extent that real property values are rapidly depreciating and there is no recognizable prospects for improvement without governmental intervention bring used to produce a resurgence.

Blockbusting – An illegal practice of unscrupulous people of inducing an abnormally high turnover or panic selling of homes at prices below market value by exploiting the prejudices of home owners in neighborhoods where the ethnic make-up is or appears to be on the verge of changing.

Blueprint – A detailed set of plans used as the guide for the construction of a property.

Blue-sky laws – The federal and state laws that regulate the registration and sale of investment securities.

Board foot – A unit of measurement for lumber that is 1 foot wide, 1 foot long and 1 inch thick and is 144 cubic inches.

Board of directors – The people elected by stockholders to govern a corporation or nonprofitable organization who establish the day-to-day operation of the organization.

Board of equalization – A state agency that determines assessed value of public utility properties, supervises county assessors and tax collectors in order to create uniformity in tax assessment and also collects state sales taxes.

Board of zoning appeals – See Appeals board.

Boiler plate – The uniformly agreed upon standard language found in contracts which is often seen in preprinted material.

Bona fide – In good faith and being authentic and without fraud or deceit

Bona fide purchaser – A party who purchases a particular property in good faith, paying a fair consideration in the belief that there was no notice of any adverse claims or rights of third parties and that the vendor had a right to sell.

Bond – A written instrument given by a corporation or government entity as evidence of a debt and also indicating a performance guarantee.

Book depreciation – An accounting concept which an allowance is taken to provide for the recovery of invested capital

Book sale – A sale of real property in name only to the state when a taxpayer is delinquent in paying property tax.

Book value – The current value for accounting purposes of an asset that is expressed as the original cost, plus any capital additions and less accumulated depreciation.

Boot – Something not of like kind such as cash or its equivalent or mortgage relief that is given to equalize any difference in value or equity between two properties in a tax deferred exchange.

Borough – A land division of a city having its own Charter.

Bounds – A reference to direction.

Bracing – The lumber nailed at an angle between floor joists or rafters in order to provide rigidity. Also known as Bridging.

Bracketing – The selecting of a value used in the sales comparison approach that falls within the highs and lows of recent selling prices of comparable properties.

Branch office – An additional real estate business location that is different than the main office in which business is also conducted but is managed by another licensed real estate broker on behalf of the broker of record.

Breach – The breaking or violating of a law or duty either by commission, doing, or omission, not doing, or the failure to meet a contractual obligation.

Breach of contract – The failure to perform a contract in whole or part without having any legal excuse such as the failure to make a loan payment when due.

Breakeven point – The amount of income needed to simply meet the total amount of expenses for a project.

Breezeway – A covered passage, open on two sides, connecting a house with a garage or other parts of the house.

Bridge loan – A short-term financing instrument secured by the equity in an as-yet-unsold house with the funds to be used for a down payment and/or closing costs on a new house on which principal and in some cases interest payments may or may not be deferred until the house is sold or the end of the loan term whichever comes first. See Gap loan and Swing loan.

Bridging – The small wood or metal pieces inserted between floor joists to give them lateral rigidity. Also known as Bracing.

British Thermal Unit, BTU – The amount of heat required to raise the temperature of one pound of water one degree Fahrenheit.

Broker – A natural or legal person employed by another for a fee to carry on any legally-identified broker activity.

Brokerage – The business in which brokers are engaged to earn money by assisting people to buy, sell, rent or lease, manage or finance property or a property’s rights.

Broker-salesperson relationship agreement – A written agreement required by state regulations setting forth the material aspects of the relationship between a real estate broker and each salesperson or broker performing licensed activities under the supervising broker.

Broom clean – A description of the condition that property is to be in such as flours cleared of trash and swept when being turned over to the buyer or next tenant.

Brownfields – A commercial or industrial site that has been abandoned by an owner which often contain toxic waste materials.

Brownfields legislation – The federal and states laws that provide funding to localities to facilitate brownfields site clean up.

Brownstone – A nineteenth-century-style house, usually having 4 or 5 stories with a stoop leading up to the first floor with common side walls and with the house on both sides. Also known as Row house or Townhouse

BTU – See British Thermal Unit.

Budget – An itemized list of expected income and expenses prepared on a weekly, monthly or annual basis.

Budget mortgage – A type of amortizing mortgage which includes the principal, interest and other costs such as taxes and fire insurance commonly referred to as PITI in the monthly payment.

Buffer zone – An area of land set aside to separate one type of land use such as residential from another such as commercial and which is often done as a park, jogging or bike trail, etc.

Builder – A party who improves land by erecting structures. See Developer.

Builder warranty – A guarantee as to the quality of construction offered by a building contractor or a developer. Also known as a Homeowners warranty program.

Building capitalization rate – In appraising. the capitalization rate used to convert an income stream into a lump sum value and where the rate for the building usually differs from that of the land because the building is considered to be a wasting asset which loses value over time.

Building codes – A systematic method established by ordinance or law of that regulates and sets minimum construction standards for buildings within a municipality to protect the public’s safety and health.

Building contract – An agreement relating to the construction of a proposed structure between an owner or lessee and a building contractor which sets forth the terms.

Building inspection – 1. A physical review of property as construction progresses to ensure that each major component such as its foundation, plumbing, electrical wiring, roofing, materials meets the building codes. 2. A periodic inspection of existing public buildings for health and safety compliance.

Building line – A line established by law or a deed restriction that determines the distance from a street, sides or back over which an owner cannot build.

Building paper – A heavy, waterproof paper used as sheathing protection in wall or roof construction.

Building permit – An authorization given by a local government for the erection, alteration or remodeling of improvements within its jurisdiction.

Building residual technique – In appraisal, a method of determining the contribution of an improvement to the current value of the entire property. See Land residual technique.

Building restrictions – The limitations established by zoning legislation, covenants or deeds that limits the type, size and use of buildings.

Build-to-suit – A contract whereby an owner of land offers to construct a building on his or her land as specified by a potential tenant and then to lease land and building to that party.

Built-ins – Those features constructed as part of the house such as cabinets, etc.

Bulk Sales Law – Division 6 of the Uniform Commercial Code regulates for the protection of the seller’s creditors and the buyer the sale of the inventory of a business. See Uniform Commercial Code.

Bulk sales transfer – A sale of the entire stock of a business along with its real estate as opposed to it being sold in the ordinary course of its business. See Uniform Commercial Code.

Bundle of rights – A concept or theory of ownership that holds that the entire set of legal rights are included with the land ownership including the rights to possess, use, encumber, dispose and exclude.

Bungalow – A small, early-twentieth-century-style, one-story house noted for having an open or enclosed front porch.

Bureau of Land Management – A federal bureau within the Department of the Interior that manages and controls certain lands owned by the U.S.

Business opportunity – The sale or lease of an existing business enterprise including its goodwill.

Business-government relations – The framework of laws, codes, regulations and contracts between business and government within which business operates.

Buy-back agreement – A contractual provision in which the seller agrees to repurchase the property at a named price upon the occurrence of a specified event within a certain period of time.

Buy-down – A mortgage financing technique in which the interest rate has been reduced over the first few years of the loan because the lender received an initial payment from the builder, seller, buyer, lender, or developer to reduce the rate, or in effect a discount, thus reducing the monthly payments for a fixed time period.

Buyer’s agent – A real estate broker or salesperson who represents a prospective purchaser or tenant in a real estate transaction as a principal and who owes the buyer/tenant/principal common-law or statutory agency duties.

Buyer’s broker – See Buyer’s agent.

Buyer’s market – A market in which buyers can fulfill their desires at lower prices and on more advantageous terms than those existing earlier and which has many properties available and few potential users seeking them at existing prices.

Buyer’s market – The condition which exists when a buyer is in a better position as to price and terms because the real property for sale is in greater supply in relation to demand.

Buyer-agency agreement – A principal-agent relationship in which the broker is the agent for the buyer and owes fiduciary responsibilities to the buyer/principal under the law of agency.

Buying subject to – A phrase used to identify that no personal liability is being assumed regarding the mortgage debt that exists against real estate at the time of its purchase.

Buying, assuming and agreeing to pay – A phrase used to indicate that the buyer is undertaking and promising to pay the seller’s personal liability for a debt upon closing.

Buyout – An agreement by a building owner to take on a tenant’s remaining lease term liability in a different building which releases the tenant from that lease obligation and permits him or her to execute a lease in the owner’s building.

Buy-sell agreement – A pre-established pact among stockholders, partners or co-owners where some will agree to buy out the interests of others upon the happening of some named event.

By-laws – The generally, self-imposed rules for conducting of the internal affairs of a corporation or other organization such as a home owner association to regulate the day-to-day operations and which usually are appendixed to a master deed and recorded.

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CAI – See Community Associations Institute.

Calendar year – A 12-month period starting on January l and continuing through December 31 of a specific year.

California bungalow – An early twentieth-century small, compact, one-story house.

California ranch house – A sprawling one-story house that is easily adapted to floor plan variations.

Call provision – A loan clause that gives the lender the right to accelerate the debt upon the occurrence of a specific event which is normally an attempt to sell. See Acceleration clause and Alienation clause.

Called loan – A loan that is due and payable at the demand of the lender usually as a result of an acceleration or alienation clause becoming effective. See Acceleration clause and Alienation clause.

CAM – See Common Area Maintenance.

Cancellation clause – A provision in a contract that gives a party the right to terminate his or her obligations upon the occurrence of specified conditions or events.

Cap (interest rate) – The maximum interest rate increase allowable on an adjustable rate mortgage placed on the adjustments to protect the borrower from large increases in the interest rate or the payment level and which does not result in negative amortization. See Annual cap, Payment cap and Negative amortization.

Cap (payment rate) – The maximum payment amount increase allowable on an adjustable rate mortgage which may result in negative amortization. See Annual cap, Payment cap and Negative amortization.

Cap rate – See Capitalization rate.

Capacity – The legal ability of a person or entity to enter into a legally binding contract and to perform certain other civil acts such as making a will.

Capacity of parties – A requirement of a valid contract. Parties having less than full capacity include minors, persons adjudged mentally incompetent or are intoxicated.

Cape Cod architecture – A style featuring a steeply sloped gable roof with dormer windows for the second-story rooms, windows with shutters, a square chimney and usually having Early American decor.

Capital – 1. A sum of money used to purchase long-term assets. 2. Stocks, bonds, or mortgages that were sold to raise money to purchase assets, as well as retained earnings. 3. Assets, other than land, used to generate income.

Capital appreciation – That increase in value accruing to the benefit of a capital improvement to the real estate.

Capital assets – Any asset of a permanent nature used for the production of income (land, buildings, machinery, equipment, etc.) which under income tax law, is normally distinguishable from inventory which are assets held for sale to customers in the ordinary course of the taxpayer’s trade or business.

Capital expenditure – The cost of a capital improvement such as investments in land, buildings, machinery, and equipment.

Capital gain – The income earned from a capital item that resulted from the sale of an asset and not in the usual course of business, the amount by which, the net sale proceeds exceeds the adjusted cost basis or its book value and is used for income tax computations and are taxed at a lower rate than ordinary income. See Capital loss.

Capital improvement – A structure erected as a permanent improvement to real estate, usually extending its useful life and the value of a property like a roof replacement.

Capital loss – A tax-deductible loss on real property which has been held for more than six months. See Capital gain.

Capital market – That portion of the funds’ market where equities, mortgages, and bonds are traded.

Capital market – The current activities of all lenders and borrowers of equity and long-term debt funds.

Capital recapture – The manner in which the investment in a property is to be returned to investors which is normally stated as a rate or a dollar amount over a unit of time.

Capitalism – An economic system based on the principles of ownership of private property, equality and personal rights.

Capitalization – A process of reflecting future income as present value by dividing annual net operating income by its capitalization rate which is the most reasonable percentage of return on the investment.

Capitalization in perpetuity – A capitalization without any time limit.

Capitalization rate – The rate made up of the return on the investment plus the return of the original investment that would be considered to be a reasonable return on the investment and which is used in the process of determining value based upon net income.

Capitalize – An estimation of an income stream to determine its present lump sum value. See Capitalization rate.

Carryback Financing – A financing arrangement in which the seller takes back a note for part of the purchase price which is secured by a junior mortgage, a wraparound mortgage or a land contract.

Carrying charges – The charges involved in holding property like the property tax expense paid on vacant land or on property under construction.

Carryover – The adjusted tax basis of the surrendered property in a tax-deferred exchange that is used to determine the tax basis of the property acquired. See Basis.

Casement window – A wood or metal window having frames which swing outward.

Cash disbursements journal – A record of all cash payments actually made.

Cash equivalent – The conversion of the price a piece of property sold for, with either favorable or unfavorable financing, into the price the property would have sold for had the seller accepted an all cash transaction.

Cash flow – The net income generated by a property before depreciation and other non-cash expenses.

Cash method – An accounting method that calls for income and expenses to be booked when the funds are received or the obligation is paid. See Accrual method.

Cash receipts journal – A record of all funds received.

Cash rent – The amount of money given to the landowner as rent under an agricultural lease at the beginning of the lease as opposed to sharecropping.

Casualty insurance – A type of insurance that protects a property owner from claims arising from damage to his or her own property such as fire or theft. See Liability insurance.

Caveat emptor – A common law concept which from the Latin means let the buyer bewarewhich is no longer in use which expresses the general concept that in the absence of any misrepresentation, the buyer must examine the goods or property and purchase at his or her risk and that no express nor implied warranties are being made by the seller.

Cavity wall – A thin, non-load-bearing wall supported by the structure

CC&Rs – See Covenants, Conditions and Restrictions.

CD – Certificate of Deposit.

Cease and desist order – An order by a court or administrative agency prohibiting a person or business from continuing an activity such as when used in real estate brokerage to prevent antitrust behavior among firms or in illegal discrimination.

Census tract – A geographical area mapped by the U.S. government for which demographic information is available for use by retailers, real estate developers, and brokers to estimate consumer purchasing power in a market area.

Central business district – The downtown office and shopping area of a city.

Central city – 1. The downtown area of a city. 2. A city that is the center of a geographic trade area for which it performs certain market and service functions.

Certificate of clearance – A certificate obtained from the state showing that no sales tax is due from the seller of a business and protects the buyer from successor’s liability. Also called a clearance receipt.

Certificate of Deposit, CD – A type of savings account that carries a specified minimum deposit and term and generally provides a higher yield than passbook-type savings accounts.

Certificate of eligibility –The evidence issued by the Department of Veterans Affairs of a veteran’s eligibility to obtain VA loan.

Certificate of insurance – A document issued by an insurance company to verify the existence of coverage.

Certificate of no defense – An instrument executed by the mortgagor – borrower – upon the sale of the mortgage, to the assignee as to the validity of the full mortgage debt. See Estoppel certificate.

Certificate of Occupancy, COO – A document issued by a local government to a developer or in some cases others which permits a structure to be occupied by the general public and generally indicates that the building is in compliance with public health and building codes.

Certificate of Reasonable Value, CRV – A Federal VA appraiser’s written opinion as to the value of a property.

Certificate of sale – A document issued to the highest bidder at a tax foreclosure sale to indicate ownership but which does not convey actual title but indicating that all past due taxes have been paid and that title will pass upon the expiration of thestatutory redemption period.

Certificate of taxes due – A written statement or guaranty of the condition of the taxes on a certain property made by the Treasurer of the county in which the property is located and any loss sustained due to an error in the tax certificate will be paid by the reporting county.

Certificate of title – In areas where attorneys examine abstracts or chains of title, a written document issued by an attorney or a qualified person who has examined the record of the real estate title and stating that the seller has clear legal title and that it is vested as stated in the abstract.

Certificates of beneficial interest – A written document that identifies an owners shares in a business, trust or mutual fund.

Certified general appraiser – A person qualified to appraise any property under the appraiser certification law adopted by most states which requires at least two years of general appraisal experience, specified hours of education and the passing of a state examination.

Certified Property Manager, CPM – A designation granted by the Institute of Real Estate Management that shows competency in the management of real property.

Certified residential appraiser – A person qualified under appraiser certification law to appraise residences of up to four housing units and which requires less education, less experience and a less comprehensive examination than the certified general appraiser.

Certified Residential Specialist, CRS – The designation awarded by the Residential Sales Council based on education and experience in residential sales to candidates holding the GR1 designation.

Certiorari – An appellate court proceeding to reexamination the action of an inferior tribunal or an auxiliary process to enable the appellate court to obtain further information in a pending cause.

Cestui que use – A party who has the right to receive the profits and benefits of the lands or tenements, the legal title and possession of which are held by another person as trustee.

Chain – 1. A chain is composed of interconnected wire links. 2. A surveyor’s chain measures 66 feet in length with each link being 7.92 inches One acre is 10 square chains. An engineer’s chain consists of 100 interconnected wire links each being one foot in length.

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

Chancellor – The name given in some states to the judge of a court of chancery or equity.

Chancery – A court of equity in which the system of jurisdiction is administered.

Change order – The instructions which can be costly to revise completed construction plans.

Character of soil – The nature of land which may be sandy, adobe, rocky, fertile, etc.

Characteristics – The distinguishing features of a property.

Chattel mortgage – A claim on personal property rather than on real property used to secure or guarantee a promissory note used to acquire personal property.

Chattel real – An intangible personal property right which is attached to or annexed to real estate of which a lease on real property is an excellent example.

Chattel –The goods or every type of personal property that is movable or immovable and which are not real property. See Personal property or Chattel real.

Chose – A French word meaning thing and sometimgs used as a legal term for an article of personal property. See Chose in possession and Chose in action.

Chose in action – An intangible personal right to something not presently in the owner’s possession but would be recoverable by a legal action for possession.

Chose in possession – A tangible article of personal property in the owner’s possession.

Chronological age – The age of a something as determined by the number of years it has been in existence.

Circuit breaker – 1. An electrical device replacing fuses that is used to protect electrical circuits and which automatically breaks the circuit when an overload occurs and which can be reset. 2. A method for granting property tax relief to the elderly and disadvantaged qualified taxpayers by rebate, tax credits or cash payments which is usually limited to homeowners and renters.

Circulating fireplace – A type of fireplace which is built around a metal form, containing air ducts to distribute heat by convection.

Circumference – The distance around the exterior boundary of a circle.

Civil action – Any lawsuit between private parties.

Civil Rights Act of 1866 – An Act that prohibits racial discrimination in the sale and rental of housing.

Claim of right – An aspect of adverse possession or easement by prescription whereby a person occupies property even though having no legal right to title but still claiming such a right under a claim of right such as when the adverse user or possessor treats the land as his or her own, or under a color of title such as when they have some reason to believe that they hold title. See Color of title.

Clapboard – The boards used as house siding which are usually thicker one one edge.

Class A building – An attractive and efficient building of high quality that is sought by investors and prestigious tenants and is well designed and constructed with above-average material, workmanship and finishs and is excellently maintained and managed especially and are the most desirable in their markets.

Class B building – An building that offers useful space without special features and has a functional layout and design although not unique and maintenance and management average to good which is usually from 10 to 50 years old.

Class C building – A typically older building that offers space without amenities with average to below-average maintenance and management and having average to poor mechanical, electrical, ventilation systems that attracts moderate- to low-income tenants who need affordable space.

Class of property – A subjective division of buildings as to their desirability to tenants and investors which is based on age, location, construction quality, attractiveness of style, level of maintenance, etc.

Clear title – A title free of any encumbrances or defects.

Clearance receipt –See Certificate of clearance.

Client – A principal.

Close – 1. A parcel of land enclosed by a fence, hedge or visual enclosure. 2. The completing of a transaction at which time real estate formally changes ownership.

Close of Escrow – The date the documents are recorded and title passes from grantor to grantee and becomes the legal owner and when the title insurance becomes effective.

Closed-end loan – A mortgage loan that does not permit additional principal payments during the loan period and is the opposite of an open-end loan.

Closing – 1. A meeting at which all the parties to a real estate transaction conclude their details and deliver the title to real estate and the disburse funds pursuant to the sales contract. 2. The final step in the real estate sales process where the sales and loan process is completed by the execution of documents for recording. In states which use the escrow process, it is known as the closing of escrow. 3. Sometimes referred to as funding the loan. 4 A point in the description of real property by courses and distances at the boundary lines where the lines meet to include the entire tract of land.

Closing costs – The miscellaneous expenses buyers and sellers normally incur at settlement in the transfer of ownership of real property over and above the cost of the property such as recording fees, attorney fees, title insurance premium, etc.

Closing date – See Date of closing.

Closing statement – 1. A separate accounting of funds to the buyer and seller as required by law at the completion of every real estate transaction. 2. In almost all residential loan closings, a HUD-1 statement serves as the closing statement.

Cloud on the title – Any outstanding claim, lien, encumbrance, document or condition usually revealed by a title search which if valid, adversely impairs the title and the marketability of a property until it is removed by a quitclaim deed or quiet title court action.

Cluster development – A housing arrangement in which units are placed close together to allow for larger common or recreational areas.

Clustering – The grouping of home sites within a subdivision on smaller than normal lots where the remaining land is used as common areas.

Code of ethics – A writing of a professional group setting forth a standard of acceptable conduct about the relationship of its members to each other, to the general public and to the organization which the members agree to abide by.

Codicil – An addition to or amendment of a person’s last will and testament.

Cognovit clause – A waiver of any defense to the claim in which the borrower confesses judgment or gives written authority to the lender to secure a judgment that can be attached to the borrower’s property as a lien.

Cognovit note – A note which authorizes a confession of judgment and admission of the validity of a claim for money. See Confession of judgment.

Coinsurance – A clause in a real property fire insurance policy under which each of two or more insurers, one of whom can be the owner, assumes a stated portion of the liability for the actual replacement cost of the property and assumes liability for only their portion of any loss.

Collar beam – A beam that joins together the pairs of opposite roof rafters above the attic floor.

Collateral security – An additional separate obligation of real or personal property having marketable value that in addition to the personal obligation of the borrower is attached to a contract to guarantee its performance such as by agreeing to transfer certain property or valuables to insure the performance of the contractual agreement.

Collusion – A secret agreement or conspiracy between two or more parties to defraud another of his or her lawful rights or to obtain a forbidden lawful object.

Colonial architecture – The traditional design, usually using the characteristics of New England homes that is usually a two-story house with balanced openings along the main facade, with windows constructed of small panes, shutters and dormer windows on the third floor with attention to small detail.

Color of title – A written document that appears to be good title but which in fact is not, usually because the grantor either did not hold title or the document given was a defective mode of conveyance.

Combed plywood – A type of building plywood that is grooved and used mainly for interior finish.

Combination door – A permanent door that uses a screened panel in summer and glass panel in winter.

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

Commercial bank – A national or state-chartered bank which operates on a basis of stock ownership and where the dividends are distributed to the shareholders and where the depositors have no share in the management.

Commercial broker – A party who lists and sells commercial property such as shopping centers, office buildings, industrial complexes and apartment projects. See Residential broker.

Commercial loan – A short-term, unsecured personal loan from a commercial bank for purposes other than a mortgage.

Commercial mortgage banker – A person who works for a bank who is in the business of making commercial mortgage loans and who is typically paid a commission based on a small percentage such as less than one percent of the loan.

Commercial paper – A negotiable instrument such as a promissory note, letter of credit and bills of exchange used in place of money and developed under merchant law.

Commercial property – The land or real property improvements intended for use in a business area.

Commingle – An illegal mix of the of a client’s or customer’s funds with a broker’s own personal funds.

Commingling – An illegal act by a real estate broker of mixing the funds of a client or customer with the broker’s personal funds rather than in a separate trust or escrow account.

Commission – The compensation or fee for services that a broker receives for performing the agreed-upon terms under a brokerage contract which in the practice of real estate is usually a percentage of the selling price of a property, a percentage of rentals, or a flat fee.

Commission split – 1. A previously-agreed upon sharing of funds by a listing broker with one or more cooperating brokers when a commission or funds have been received as a result of a sale. 2. A previously-agreed upon sharing of funds between a broker and a sales-associate when the brokerage office receives a commission or funds as a result of a sale made by an sales associate.

Commitment – A binding contract with a title company to issue a specific title policy showing only those exceptions contained in the commitment and any intervening matters after the date of the commitment and prior to the effective date of the policy which contains all information in the preliminary title report, plus a list of the title company’s requirements to insure as well as the standard exceptions from coverage that will appear in the policy.

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

Commitment fee – A charge made at the time of a loan application by a lender to lock in or guaranty specific terms.

Commitment letter – An official notification by a lender of the intent to grant a loan to a borrower which specifies the terms of the loan and a closing date.

Common area – The entire common interest in a subdivision except for its separately-owned interests.

Common Area Maintenance, CAM – An amount charged to tenants to pay for maintainance expenses such as hallways, restrooms, parking lots and other common areas.

Common elements – The parts of a property that are normally used in common by all of the property’s occupants and which are necessary or convenient to the existence, maintenance, and safety of the peoperty and in which each owner, resident or occupant has an undivided ownership interest. See Common property.

Common interest developments – A project with individual ownership of buildings or units but common ownership of the land as found in condominiums and planned unit developments.

Common interest subdivision – A development with subdivided land such as condominiums and stock cooperatives which include a separate interest in real property as well as an interest in common with other owners which can be through membership in an association.

Common law – 1. The body of law that grew out of the customs and practices and court decisions developed and used in England from as long ago as people can remember. 2. The rules developed by usage and often thought of as judge-made law.

Common property – 1. Land considered to be public property. 2. A legal term denoting an incorporeal hereditament consisting of a right of one person in the land of another such as a right to fish.

Common stock – A class of corporate stock to which ordinarily there is no attached preference as to the receipt of dividends or the distribution of assets on corporate dissolution.

Common wall – A wall which simultaneously serves two dwellings.

Community apartment project – An unincorporated apartment building with multiple owners who each is a tenant in common and who has the right to occupy one of the apartments.

Community association – A general name for an organization of property owners established to manage some common interest subdivision such as a condominium or planned unit development association and is responsible for managing the common elements.

Community association management – A company consisting of property managers, office and bookkeeping staff and consultants formed to manage association type property.

Community Associations Institute, CAI – A national association of homeowners’ associations.

Community driveway – A driveway which is jointly owned, used and maintained by two or more persons where typically a portion of each owner’s property is burdened by it.

Community property – In eight western states, the property acquired by husband and/or wife or both during a marriage which gives each spouse an equal interest in the property whether the other spouse’s name appears in title or not and which was not acquired with the intention of being the separate property of either spouse.

Community Reinvestment Act of 1977, CRA – An Act where financial institutions are charged to meet the deposit and credit needs of their communities; participate in loan programs for housing, small businesses, etc. and invest in local community development and rehabilitation projects. See Financial Institutions Reform, Recovery, and Enforcement Act, FIRREA

Compaction – The act of adding pressure to soil that has been added to fill in low places or to raise the level of the lot so that it will be able to bear the weight of buildings without the danger of their settling, tilting or cracking.

Comparable sales – See Comparables.

Comparables – The properties which are commonly called comps that are used in the appraisal process that have recently sold which have substantially equivalent characteristics and are situated in a similar market as the subject property which are used for value analysis to determine the selling prices of the subject property.

Comparative Market Analysis, CMA – A comparison of recently-sold homes that are substantially equivalent to each other in terms of selling price, location, style and amenities. Also know as a Competitive Market Analysis.

Comparison approach – A real estate method that compares a particular property with similar or comparable surrounding properties in order to determine value of the subject property. Also called market comparison.

Compensating balance – A requirement of a commercial bank for a borrower to keep a specified amount of funds on deposit in the institution as a loan condition or for a line of credit.

Compensation – The money or an equivalent to money that is received for services rendered.

Competence – Something under the law of evidence that is of such form as to be admissible in court for use as evidence.

Competent party – A legal or natural person who is legally qualified and mentally capable to transact business.

Competitive Market Analysis, CMA – See Comparative Market Analysis.

Complainant – The party who instigates or starts a legal action.

Complete appraisal – A professional opinion of value without invoking the departure provision of USPAP because all relevant appraisal approaches have been included and which may be a self-contained appraisal report, a summary appraisal report or a restricted appraisal report and which is different than a limited appraisal.

Completion bond – A bond guaranteeing that the proposed construction of an improvement for which a lender has advanced money to an owner will be completed according to its specifications and be free and clear of all mechanics liens.

Compound interest – The interest paid on original principal and on the accrued and unpaid interest that has accumulated as the debt matures until the time it becomes due.

Comprehensive Environmental Response, Compensation and Liability Act, CERCLA – An act which established the Superfund to clean up uncontrolled hazardous waste sites.

Comprehensive plan – See Master plan.

Comps – An appraisal term meaning comparables.

Computerized loan origination, CLO – A system of electronic loan application networks where computers linked to the remote computers of many lenders.

Concentric circle hypothesis – A belief that transportation is the central force in community growth, thus producing the highest land values where mobility is the greatest.

Concentric circle theory – The rings that go around a nucleus which in real estate are the rings of neighborhoods or business properties surrounding the city center.

Concession – A benefit granted by a seller to induce a buyer to make an offer.

Conclusion – An appraiser’s certified conclusion set out in an appraisal of the final estimate of value realized from facts, data, experience and judgment.

Conclusive evidence – That evidence that is incontrovertible and cannot be disproven.

Condemnation – 1. The act by which property of a private owner is taken for public use by a political subdivision without the owner’s consent but with the owner’s awareness and with the payment of just compensation. 2. A declaration that a structure is unfit for use. See eminent domain.

Condition – 1. In contracts, a future and uncertain event that must happen to create an obligation or which extinguishes an existing obligation. 2. In conveyances of real property, those conditions in the conveyance that may cause an interest to be vested or defeated.

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

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

Conditional commitment – A promise of a definite loan amount for some future unknown purchaser with a satisfactory credit standing.

Conditional estate – Often called a fee simple defeasible estate that is granted subject to a condition subsequent or after transfer of title and which terminates upon the happening of the stated condition.

Conditional mortgage commitment – A written statement by a lender that funds will be provided if certain terms and conditions are met and which permits an owner or developer to begin construction.

Conditional offer – A purchase contract presented to a seller that demands that one or more items be satisfied before the buyer is obligated to buy.

Conditional sale – A sale in which a seller continues to hold title to the goods and where possession is delivered to the buyer and the title is transferred only when the purchase price has been paid in full.

Conditional sales contract – See Land contract.

Conditional use permit – The written governmental permission that allows a use that is inconsistent with current zoning such as allowing a medical office in a predominantly residential area so it can serve the common good.

Conditional vendee – The buyer under a conditional sales contract or land contract.

Conditional vendor – The seller under a conditional sales contract or land contract.

Condo – A short name for a condominium.

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

Condominium conversion – A process by which rental units are turned into individually owned condominium units.

Condominium declaration – A legal document used to create and establishe a condominium which includes a description of the property and the uses to which it is restricted, a description of individual ownership units, common elements and procedures for amending the declaration and describes the property rights of the unit owners.

Conduit – A metal pipe through which electrical wiring is installed.

Confession of judgment – A judgment resulting from a legal proceeding that is placed on a debtor as as result of his or her voluntary admission and without presenting any defense. See Cognovit note.

Confirmation – The ratification of a transaction that is able to be voidable.

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

Confiscation – The seizure of property without compensation.

Conflict of interest – A situation in which an official or fiduciary decision maker is faced with a possible decision from which he or she stands to personally gain and so the decision maker must step down from one role or the other.

Conforming loan – A mortgage that is eligible to be purchased by FMNA or FHLMC.

Consent – 1. An agreement to do or not to do something. 2. Mutual consent of all parties is one of the four essential elements of any valid contract.

Consent decree – A judgment whereby the defendant agrees to stop the aledged illegal activity without admitting any wrongdoing or guilt.

Consequential damage – The impairment of value arising out of an indirect act.

Conservation – The process of saving resources or of using them in such a way that minimizes their depletion.

Conservator A person appointed by the court to administer and care for the person and property of an incompetent adult or an adult unable to care for themselves because of health to ensure that the property will be properly managed.

Consideration – 1. Anything necessary for a contract to be enforceable that is promised or given of value such as money by one party to induce another party to enter into a contract for real property, personal property or personal services which could be a benefit conferred upon one party or a detriment suffered by the other party. 2. That received by the grantor in exchange for his or her deed.

Consolidation loan – A new loan that pays off one or more existing loan and usually provides better repayment terms.

Conspicuousness – A factor of publicity value that is of great importance to a business which is typically dependent upon advertising.

Constant – The percentage which, when applied directly to the face value of a debt, develops the annual amount of money necessary to pay a specified net rate of interest on the reducing balance and to liquidate the debt over a specified period of time.

Constant payment loan – A loan reduction plan whereby the borrower pays a fixed amount each month, a part of which is applied to the payment of interest and the remainder to the repayment of the principal.

Construction lender – A party that makes loans to build improvement. See Permanent lender.

Construction loan – A loan that is made to finance the actual construction of improvements on land and the funds are usually dispersed in three payments as the construction progresses.

Constructive eviction – A breach of a covenant or a warranty or quiet enjoyment like the inability of a lessee to obtain possession because of a major defect in title or a condition making occupancy hazardous or unfit for its intended use.

Constructive fraud – 1. A breach of duty without any fraudulent intent such as when a person in a fiduciary capacity takes advantage of another person by misleading them to into a prejudiced position. 2. Any act of omission declared by law to be fraudulent and not being actual fraud. 3. Also known as passive fraud.

Constructive notice – 1. A fact, imputed or knowable to a person under law which a person could have discovered if the person had actual notice or that a prudent person’s inquiry into the public records of a county would have revealed. 2. Notice of the condition of title to real property given by governmental official records and which does not require actual knowledge of the recorded information.

Constructive severance – A way of separating land from fixtures by contract or from appurtenances such as by selling or mortgaging crops before they are harvested, severed, which converts them into personal property.

Constructive trustee – A trustee by operation of law that is the result of the unlawful possession of someone else’s property.

Consultant – An advisor on matters who receives a fee for his or her services and advice.

Consumer goods – The goods used or purchased primarily for personal, family or household purposes.

Consumer Price Index, CPI – The most widely known of many such measures of price levels and inflation that are reported to the U.S. government it measures and compares, from month to month, the total cost of a statistically determined typical market basket of goods and services consumed by U.S. households.

Contaminant – A hazardous substance, element or compound such as asbestos, benzene, radon, PCBs, perchloroethylene, and lead-based paint that is above acceptable levels and/or in locations where they should not be found that may be harmful to humans or other forms of life if released into the environment.

Contemporary architecture – A modern design being differentiated from traditional functional design.

Contiguous – Something that is adjacent; touching, adjoining or in close proximity.

Contingency – A contractual clause that provides for an uncertain future event to happen or to occur in order for the contract to be binding.

Contingent depreciation – A loss in property value because of expectations of a decline in property services.

Contingent fees – The payment to be made upon future occurrences, conclusions or results of services to be performed.

Contour – The surface configuration of land which is shown on maps as a line through points of equal elevation.

Contour map – A map that shows the topography of an area and the contour lines indicating the various elevations.

Contract – 1. A written or oral agreement to do or not to do certain obligations which has four essential elements (1) Parties who have the capacity or legal ability to contract, (2) Consent of the parties, (3) Consideration and (4) A lawful object. 2. A contract for the sale of real property must also be in writing and signed by the party or parties who have agreed to perform to be enforceable.

Contract broker – See Facilatator.

Contract for deed – See Land contract.

Contract of sale – See Land contract.

Contract rent – The amount of rent called for in a lease agreement.

Contractor – A party who has the responsibility for and who supervises the improvement of land.

Contractual intent – An intent to be bound by an agreement therefore preventing things like jokes from becoming valid contracts.

Contribution – A payment by each or any of several entities having a common interest or liability for his or her share in the loss suffered or in the money necessarily paid by one of the parties in behalf of the others.

Control data – The means of using real properties transactions to adjust the market data used in the comparative appraisal approach in order to segregate certain influences which have caused changes in real estate values, either generally or specifically.

Controlled business arrangement – An arrangement where a package of services such as a real estate firm, title insurance company, mortgage broker and home inspection company is offered to consumers who must buy the entire package to get one.

Controller’s deed – A deed issued by the state, usually when property is sold due to tax delinquency.

Convenience factor – The commonly recognized and easily understood quality offering advantages and values to a particular parcel of real property over other properties as a result of its location.

Conventional home – A home that is constructed totally at the site and which is the opposite of a factory-built, manufactured or mobile home.

Conventional loan – A type of mortgage loan that is customarily made by a bank or other financial institution that is without any governmental underwriting such as FHA insurance, VA guarantee or funded by a government authorized bond sale or grant which conforms to the lender’s own standards and has been modified within legal bounds by the mutual consent of the parties involved.

Conversion – 1. The unlawful appropriation or taking of another’s property such as in the conversion of trust funds to personal use. 2. Change from one legal form or use to another such as converting an apartment building to condominium use.

Conversion value – The value that is created by converting something from one state or use to another.

Convertible ARM – An adjustable rate mortgage that allows the borrower the option to convert at a specified point in time to a fixed-rate schedule for a nominal fee and at a rate that is determined according to the loan documents.

Convey – The title transfer of a real property from one person to another.

Conveyance – A written instrument such as a deed or trust deed, used to transfer the title to land or an interest therein from one party to another.

Cooperating broker – See Listing broker.

Cooperative – Any building, but usually an apartment building, where the property is owned in severalty by a corporation often called a stock cooperative in which ownership of a specific apartment unit is acquired by purchasing shares of the stock of the corporation which places substantial restraints on the alienation, sale, of the units and where their permitted use and occupancy occurs by entering into a proprietary lease with the corporation.

Co-ownership – The ownership of the same property by two or more parties.

Corner influence – The effect a street intersection has upon its adjoining property.

Corner influence table – A statistical table that attempts to reflect the additional value accorded to a lot having a corner location.

Corner lot – A lot located at the intersection of two streets and having frontage on at least two sides.

Corporate securities dealer – A person authorized to engage in the sale of common stock, preferred stock or bonds of a corporation.

Corporation – A legal entity established by a group of people called the stockholders which is endowed with certain rights, privileges, duties and liabilities similar to an individual but is distinct and apart from those natural persons composing it and which under law may continue for any legal length of time.

Corporeal rights – The rights to possess and alter visible or tangible real or personal property.

Correction deed – A written instrument which corrects an error in a recorded deed.

Correction lines – A system for compensating for the inaccuracies in the government survey or the rectangular survey system due to the curvature of the earth in which every fourth township line at 24-mile intervals is used as a correction line on which the intervals between the north and south range lines are remeasured and corrected to a full 6 miles.

Correlate the findings – The interpretation of the data and value estimates so as to bring them together to a final conclusion of appraised value.

Correlation – See Reconciliation.

Cosigner – A second party who signs a promissory note along with a primary borrower.

Cost – That which must be given up to obtain property and which is usually money.

Cost approach – A value estimate of a property by one of three appraisal methods which is arrived at by estimating the replacement cost of the improvements and then deducting the estimated accrued depreciation from it and then adding back the market value of the land.

Cost basis – The dollar value amount assigned to property under provisions of the Internal Revenue Code at the time of acquisition for the purpose of determining gain, loss and depreciation in calculating the income tax to be paid upon the sale or exchange of the property. See Adjusted cost basis.

Cost of capital – That which must be paid to attract money into an investment project.

Cost per front foot – The cost of a parcel of real estate that is expressed in terms of the number of front foot units and where the total sales price is divided by its number of front feet to state the cost per front foot.

Cost recovery – An Internal Revenue Service term for depreciation.

Cost-benefit ratio – The present value of the anticipated investment returns divided by the present value of the capital outlay or cost.

Cost-plus-fixed-fee contract – A construction project agreement in which the contractor is paid a named fixed fee as profit over and above the actual costs of construction.

Cost-plus-percentage contract – A construction project agreement in which the contractor is paid a named percentage as profit over and above the actual costs of construction.

Cotenancy – The ownership of an interest in a particular parcel of land by more than one party as in tenancy in common or joint tenancy.

Council of Real Estate Brokerage Managers, CRB – Their course work emphasizes effective real estate office management practices as well as market trend analyses and awards the Certified Residential Brokerage Manager, CRB designation.

Council of Residential Specialists, CRS – A designation earned by real estate agents who specialize in residential real estate.

Counseling – The act of advising clients on a variety of real estate investment or development matters.

Counselor – A party who assists clients and provides them with advice regarding the use and management of their assets.

Counselor of Real Estate, CRE – A member of and a designation conferred by the American Society of Real Estate Counselors.

Counter flashing – The metal material used on chimneys at the roof line to cover the shingle flashing to prevent moisture from entering.

Counteroffer – A response to an offer to enter into a contract which acts as a rejection of the original offer and introduces a new offer or one with different terms and conditions.

County – A civil division of a territory organized for political and judicial purposes.

Court – 1. A government institution or facility used to decide civil conflicts and disputes or to try criminal prosecution cases brought before it. 2. A place to play a sport which might be located within a subdivision or housing complex. 3. An open area next to or within buildings or other structures such as a courtyard.

Covenant – 1. A contractual promise that may be positive by agreeing to do or negative by agreeing not to do a particular act such as a promising to build a house of a particular size or to not use property in a certain way. 2. Agreements or promises contained in deeds and other instruments for performance or nonperformance of certain acts, or use or nonuse of property in a certain manner.

Covenant for further assurance – An undertaking in the form of a covenant on the part of the vendor of real estate to perform such further acts for the purpose of perfecting the purchaser’s title as the latter may reasonably require.

Covenant not to compete – See Noncompete clause.

Covenant of quiet enjoyment – A covenant implied by law by which a landlord guarantees that a tenant may take possession and use of leased premises and that the landlord will not interfere in the tenant’s enjoyment of the property.

Covenants, Conditions and Restrictions, CC&Rs – A term that refers to a written recorded declaration which establishes certain basic rules established by a subdivider or other landowner to create uniformity of buildings and use within tracts of land or groups of lots which are sometimes thought of as private zoning. The restrictions can be spelled out in the deed.

Co-venture loan – A loan where the lender gets a share of ownership or income from the property.

CPM – See Certified Property Manager

Crawl hole – An exterior or interior opening that permits access to underneath a building as is required by building codes.

Crawl space – A narrow opening between the ground and the underside of a structure which is not tall enough to permit a person to stand but is sufficient to give necessary access to wiring, plumbing and other utilities.

Creative financing – Any financing arrangement other than a traditional mortgage from a third-parry lending institution which include loans from a seller; balloon payment loans; wraparound mortgages, mortgage assumptions, sale-leasebacks, land contracts, and alternative mortgage instruments.

Credit – 1. In lending, the power of an individual to secure money or obtain goods on time, in consequence of the favorable opinion held by the community or by the particular lender, as to his or her solvency and reliability; a debt considered from the creditor’s standpoint or that which is to be incoming or due to one. 2. In accounting, a bookkeeping entry on the right side of a bookkeeping account that records the reduction or the elimination of an asset or an expense or the creation of or addition to a liability or item of equity or revenue.

Credit report – An evaluation of a person’s history or capacity of debt repayment which is generally available for individuals from one of the three retail credit associations and to which individuals have access and for businesses by companies such as Dunn & Bradstreet and for publicly held bonds by Moody’s, Standard & Poors.

Credit scoring – The process of evaluating and rating a mortgage loan applicant according to the quality of his or her credit worthiness based on past use of credit, current indebtedness and frequency of application for credit and where a person’s score may determine whether he or she is eligible for standard conventional loan terms or must obtain a sub-prime loan with less favorable terms.

Creditor – A party who is owed money such as mortgage lenders, credit card companies and bond holders.

Crossroad development – Pattern of city growth characterized by fingerlike extensions moving out along the main transportation routes.

Cube – To cube a number is to take it to its third power or by multiplying it by the square of that number. For example, to cube 2, one would multiply 2 by 2 which equals 4 and then multiply that by 2 which equals 8 (2 x 2 = 4 x 2 = 8). The cube root of 8 is 2.828

Cubic foot – A volume of 1,728 cubic inches which is equivalent to a cube whose length, width and height are each one foot.

Cubic yard – A volume of 27 cubic feet which is equivalent to a cube whose length, width and height are each one yard.

Cubical content – The actual space within the outer surfaces of outside walls and contained between the outer surfaces of the roof and the finished surface of the lowest basement or cellar floor; the actual space that lies within the interior dimensions of a structure.

Cul-de-sac – A dead-end street with a widened circular area at the end enabling a car to make a U-turn.

Curable depreciation – An item of physical deterioration or functional obsolescence which customarily gets corrected by repair or replacement by a prudent property owner and is thus considered to be cured.

Curable penalty – An element of depreciation whose cost of repair or correction is offset by the increase in value of the property resulting from the repair or correction.

Curb appeal – The attractiveness of a property or other land improvement when viewed from the sheet.

Current assets – An asset such as cash, accounts receivable and merchandise inventories that are liquid or can easily be sold and converted to cash.

Current index – An easily-recognized indicator that changes periodically that is published nationally or regionally that is used in adjustable rate mortgages to calculate the new note rate as of each rate adjustment date.

Current liabilities – A short-term debt that is generally a debt due within one year.

Current yield – A measurement of investment returns based on the percentage relationship of annual cash income to the investment cost whose formula is current income divided by investment cost equals current yield.

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

Curtesy – The right a husband has in his wife’s real estate as of her death.

Custodian – A person who is entrusted with the care of something such as a public building.

Custom builder – A party who builds unique houses. See opposite Tract home.

Custom-built home – A house built to an owner’s specifications and sold before the construction begins. See opposite Tract home.

Customer – A third party for whom an agent provides some level of informational service.

Cyclical fluctuation – The variations around a trend in activity that recur from time to time or fluctuations remaining after the removal of the trend or seasonal factors that recur regularly.

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Damages – The payment to a party who has suffered a loss or has been harmed by a sustained injury either to his or her person, property or relative rights through an act or default of another which is used to make up for the wrong.

Data assembly – A process of gathering analyzing and classifying data pertaining to a subject property.

Data plant – A collection of information about real properties that is usually maintained by an appraiser, mortgage lender or title company.

Date of appraisal – See Appraisal date.

Date of closing – The date on which the buyer pays for the property and the seller delivers the deed.

Datum – The horizontal plane from which heights and depths are measured.

DBA – See Doing Business As.

Dealer – In taxation, a party who buys and sells merchandise for his or her own account which is his or her own inventory and consequently any gain on the sale is considered ordinary income by the IRS.

Dealer property – A property classification in the Internal Revenue Code, identifying property that is owned and used in a trade or business such as a builder’s office building or computer.

Dealer-builder – A builder who is usually the local representative of a prefabricated or manufactured houses and who places those homes on lots.

Debenture – A bond issued without security or an obligation not secured by a specific lien on property.

Debit – A bookkeeping entry on the left side of an account, recording the creation or addition to an asset on a balance sheet or an expense on a profit and loss statement or the reduction or elimination of a liability or item of equity or revenue.

Debt – An obligation or liability which is usually money and must be repaid from one person to another.

Debt capital – The money borrowed for a particular business purpose.

Debt service – The annual amount paid by a debtor to repay borrowed money.

Debt service coverage – The requirement that earnings be a percentage or dollar sum higher than debt service.

Debtor – A party who is in debt and owes money to another.

Debtor in possession – A situation arising out of a foreclosure or bankruptcy where the money owing party remains in possession and controls the use of the property.

Debt-to-equity ratio – The relationship of the loan and equity components which for example if the debt is $80,000 and the equity is $20,000 there would be a debt to equity ratio of 4:1 or the equivalent to a 80% loan to value ratio.

Decedent – A deceased person.

Decentralization – The dispersion from a center point or figure.

Deciduous trees – The trees which do not keep their leaves throughout the autumn and winter.

Decimal point – A period that sets a whole number apart from the fractional part of the number

Declaration 1. A recorded document that legally creates a condominium. 2. A statement made out of court. 3. A formal pleading by a plaintiff in a lawsuit as to the facts and circumstances that gave rise to his cause of action.

Declaration of abandonment – A recorded document used to terminate a homestead.

Declaration of condominium ownership – A legal document that legally creates a condominium and allows it to be built or sold under relevant state law. See Condominium declaration.

Declaration of homestead – A legal document that is recorded and protects a homeowner from foreclosure by certain judgment creditors.

Declaration of trust – A written statement by a trustee acknowledging that a property is being held for the benefit of another.

Declining balance depreciation – An accelerated straight line depreciation method allowed by the IRS and used for income tax purposes in certain circumstances.

Decree – The final determination by a court of the rights of the parties to a suit.

Decree of distribution – A probate court decree which determines how the estate of a decedent shall be distributed.

Decree of foreclosure – A decree by a court ordering the sale of mortgaged property to pay out of the proceeds an obligation found to be due and owing to the lender.

Dedication – An offering of land for some public use made by an owner and accepted for such use by or on behalf of the public by authorized officials.

Deductions – Those expense items that can be deducted from income to arrive at a net basis for income tax purposes.

Deed – A written document which transferrs an estate or interest in real property from one person called the grantor to another person called the grantee. Deed examples are grant deeds, administrators’ deeds, executors’ deeds, quitclaim deeds, etc.

Deed – A written instrument which when properly executed signed and delivered acceptedconveys title to real property from one party, the grantor to another party, the grantee.

Deed books – The books, files or record storage of the records in which a county government keeps the filed deeds and other significant real estate-related documents.

Deed covenants – The warranties made by a grantor seller of property to protect the grantee buyer against items such as liens, encumbrances or title defects.

Deed in lieu of foreclosure – A deed to real property from a defaulting borrower and accepted by the lender to avoid the necessity of having the lender go through formal foreclosure proceedings.

Deed in trust – An instrument that grants a trustee under a land trust full power to sell, mortgage and subdivide a parcel of real estate where the beneficiary controls the trustee’s use of these powers under the trust agreement provisions.

Deed money escrow – An agreement where money is held by a third party to be delivered to a seller of real estate upon the receipt of the deed to the sold property.

Deed of Trust – See Trust Deed

Deed restrictions – The limitations in a deed to a property that dictate specific ways that a property may or may not be used.

Deed Restrictions – The limitations in the deed to a property which dictate the uses or limitations that may or not be made with a property.

Default – The failure to fulfill a duty or promise, to discharge an obligation or the failure or omission to perform an act.

Default judgment – A court order issued as a result of a defendant in a lawsuit failing to show up or to respond to a complaint.

Defeasance clause – A clause in a mortgage that gives the mortgagor, borrower, the right to redeem and get back his or her property by paying the mortgagor’s obligations to the mortgagee, lender.

Defeasible fee – A fee simple absolute interest in land that is capable of being defeated or ended or terminated upon the happening of a specified event. Also know as Qualified fee.

Defect – In real estate a defective title is one that is irregular and faulty and having a blemish, imperfection or deficiency.

Defective Title – 1. A title which would be impaired if an outstanding claim proved to be valid. 2. The title to a negotiable instrument obtained by fraud. 3. The title to real property which lacks some of the elements necessary to transfer good title.

Defects in title – Any imperfections that cast a reasonable doubt on the marketability of a title.

Defendant – 1. A person against whom legal action has been initiated for the purpose of obtaining appropriate judicial relief or criminal sanctions or damages.

Deferred charges – The nontangible costs which are anticipated to provide value over a number of years and for accounting or tax purposes are amortized over the life to which they are expected to provide value.

Deferred gain – The gain that does not have to be recognized for tax purposes in the current tax year and gets deferred to a subsequent year(s).

Deferred maintenance – An existing need for maintenance repairs and rehabilitation that has been postponed, unfulfilled or delayed causing a decline in a building’s physical condition and thus value.

Deferred payment options – A privilege used to take advantage of statutes granting tax benefits of deferring or holding back from receiving income payments.

Deferred payments – The monetary payments which will be made at some future date.

Deficiency – In a foreclosure sale of a secured property, those funds still needed to completely release the defaulting borrower after the lender has been paid, the accrued interest, the foreclosure expenses and any damages incurred have been paid. See Deficiency judgment.

Deficiency judgment – A judgment awarded by a court when the proceeds from the sale of the security pledged for a loan is insufficient to pay off the debt of the defaulting borrower.

Deficit financing – A purchase of income property where the net income is not sufficient to cover the all payments required of the property.

Definite and certain – These precise and clearly-stated acts that need to be performed.

Delegation of authority – A transfer of authority by one party to another.

Delegation of powers – The conferring of all or certain powers that have been conferred by a principal to an agent on to another agent.

Delinquency – A financial obligation such as a loan which is in overdue or in default.

Delinquency rate – The number of delinquent payments loans in a portfolio divided by its total number of loans.

Delivery – 1. The implication of the transfer of the actual contract or document to the possession of the another in contracts and leases. 2. The transfer from one party to another of an item, a right or an interest therein which means more than just the physical transfer of possession.

Demand – One of the four essential elements of value which motivates consumers to buy goods or services at various prices and under varying conditions.

Demand note – A note which is payable but is payable upon on the demand of the lender or holder.

Demise – The transfer of interest or conveyance of an estate primarily by lease.

Demised premises – The property that is the subject of a lease.

Demographic – The characteristics pertaining to a population such as age, race, sex, household size, population growth and density.

Demographic characteristics – The specific political, social and economic characteristics common to identifiable groups of people.

Demolition – The necessary destruction and removal of an existing structure from a site in order to make way for new construction.

Demurrer – A legal objection made by one party to the opponent’s pleading, alleging that it should not be answered due to some defect in law or the pleading.

Density – In zoning, the number of units present per area such as dwellings per acre or persons per square mile.

Department of Veterans Affairs, DVA – The current name of the federal government agency that administers GI or VA loans. Formerly known as the Veterans Administration or VA.

Depletion – The exhaustion of a resource such as the removal of a mineral deposit.

Deposit – 1. The money that shows good faith that is commonly used with sales contracts and leases that is paid in good faith to assure a performance which if not done, the depositing party forfeits. 2. A natural accumulation of resources such as coal, oil, gas, etc. which can be commercially removed and marketed. Also called earnest money.

Deposit account – An arrangement whereby an individual or organization may place cash under the safekeeping of a financial institution which may invest the cash and pay the depositor a specified amount of interest and that the depositor can reclaim the full value of the account according to the agreed-upon procedures governing it.

Deposit receipt – A term used in real estate in certain areas of the country to describe a written offer to purchase real estate upon specific terms and conditions that is accompanied by a deposit toward the purchase price which becomes the sales contract for the property upon its acceptance by the owner. See Sales contract.

Depositary – The party receiving a deposit whose obligation it is to hold the item with reasonable care and upon request, restore it to the depositor or otherwise deliver it according to the original agreement.

Depreciable real property – That income producing property or property used in a trade or business which is elegible for the owner to take a deduction for depreciation on ones federal income tax return.

Depreciation – 1. In appraisal, a loss of value due to any cause which can occur due to physical deterioration, functional obsolescence or economic obsolescence. 2. Inaccounting, a method of decreasing the value of an asset for tax purposes by which the cost of improvements are reduced at a constant rate and in equal amounts throughout the estimated useful life of the improvement.

Depreciation allowance – The amount that can be claimed or is allowed for depreciation on ones federal income tax return.

Depreciation base – The cost of acquiring a depreciable asset.

Depreciation methods – 1. In appraising, the methods used which generally are the annuity, the sinking fund and the straight-line methods to measure decreases in the value of an improvement. 2. In accounting, the declining balance method and the variations thereon such as weighted rate and accelerated by which capital impairment is computed.

Depreciation rate – The periodic amount or percentage at which the usefulness of a property is used up and especially in regard to the percentage at which amounts are computed to be set aside as an accrual for future depreciation.

Depression – An economic conditions that causes a severe decline in business activity which is reflected by high unemployment, excess supply and public fear.

Depth – The depth of a lot is the distance between the curb and the rear property boundary line and typically the first dimension stated is the frontage and the second is the depth. The depth of a building is the distance between its front and rear walls.

Depth table – A statistical table used in appraising that is based on the theory that added depth increases the value of land and which can be used to estimate the actual value that the depth added to a lot. Also known as the 4-3-2-1 Rule.

Deregulation – A process where financial institutions which had previously been legally restrained in their lending activities get permitted to compete freely in the marketplace for profits.

Dereliction – A wearing away. See Reliction.

Descent – The process by which a decedent’s property passes to his or her legal heirs.

Description – The exact location of a parcel of real property in a deed, mortgage, trust deed, etc. whose boundaries are shown using a lot, block, tract; metes and bounds; recorded instruments; or U.S. Government survey method. Also known as legal description.

Designated agent – A form of agency used to avoid dual agency that is practiced in some states where by a broker authorizes a licensee to act as the agent to represent a specific principal in a specific transaction.

Desist and refrain order – An order issued by a state real estate commissioner directing a person to stop an action that is in violation of the real estate law. See Cease and desist.

Detached housing – A residential dwelling unit which is surrounded by freestanding walls and is sited on a separate lot. See Duplex, Double, Row house, Townhouse.

Deterioration – A worsening of the condition of a property.

Determinable fee – An estate which is subject to end on the happening of an event that might or might not occur.

Developer – A party who prepares land for income production by making improvements to land and by selling completed projects.

Development – 1. The process of creating improvements on or to a parcel of land which may include subdividing, access, sewer and drainage lines, utilities, buildings and any combination of these elements. 2. A real estate project where improvements are or have been made.

Development method – An appraisal method used to value raw land whereby an appraiser locates comparable improved property having a known value and deducting the cost of the improvements to arrive at the value of the raw land and then estimates the gross sales of the developed lots and deducts the costs of development and expenses leaving the indicated present value of the land.

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

Devisee – A person who receives a gift of real property by last will and testament.

Devisor – A person who disposes of real property by last will and testament.

Diameter – A straight line passing through the center of a circle or a sphere going from one side to the other.

Direct capitalization – A process of dividing the net operating income by an overall capitalization rate to establish value.

Direct costs – Those readily identified costs in the construction of real estate – labor, materials, and a contractor’s overhead and profit. Also known as Hard Costs. See Indirect costs.

Direct reduction mortgage – A secured real estate loan which is to be repaid by periodic, usually equal, amounts that include part of the principal plus the interest that is due on the unpaid balance.

Directional growth – The path or direction in which the residential sections of a city are destined or determined to expand.

Disability – 1. The lack of legal capacity to perform an act. 2. The lack of physical capacity to perform an act.

Disaffirm – To reject or to withdraw a consent once given or to deny the intention of being bound by an previous or earlier transaction.

Discharge – The release of or the performance of a contract or other obligation.

Disciplinary action – An administrative procedure taken by the state’s real estate commissioner against a licensee which could result in the suspension or revocation of his or her real estate license.

Disclaimer – 1. A statement whereby responsibility is rejected. 2. A renunciation of property ownership.

Disclosure statement – A legally-required statement in which the sellers of specific types of real property or under certain circumstances must reveal specified material facts to potential buyers.

Discount – 1. To sell a promissory note before its maturity at a price that is less than the outstanding principal balance of the note at the time of sale. 2. An amount deducted in advance by the lender from the nominal or stated principal amount of a loan that is a cost to the borrower for obtaining the loan.

Discount broker – A licensed broker who provides brokerage services for a lower commission, or for a flat fee rather than for a percentage of the selling price, than what is typical asked in the market and which typically provide less extensive brokerage services than full-service brokers. See Flat fee broker.

Discount points – An amount of money called points where 1 point equals 1 percent of the original principal loan amount which a borrower or a seller must pay to a lender in order to get a loan at a stated lower interest rate.

Discount rate – A rate that expressed the correlation between the dollars transmitted from a lender to a borrower and the dollars that must be repaid by the borrower.

Discounting – A concept which is a means of converting cash flow into present value at a selected rate of return that is based upon the premise that one would pay less than $1 today for the right to receive $1 at some future time.

Discretionary powers of agency – Those powers that a principal confers upon and empowers the agent to have under specific circumstances in order to make decisions based on the agent’s own judgment.

Discrimination – The illegal application of generally-unfavorable special treatment to an individual based solely on the person’s race, religion, sex, or sexual orientation, etc.

Disintegration – The last decline or decay stage in the life cycle of the value of a property.

Disintermediation – The relatively sudden withdrawal by savers of substantial sums of money deposited in savings institutions for reinvestment in other markets that are paying higher rates of return resulting in the financial intermediaries losing billions of dollars within a short period of time.

Displacement – The involuntary movement of people by converting their homes to other uses due to causes such as highway condemnation, urban renewal, redevelopment or natural disasters.

Disposable field – A drainage area not close to a water supply where septic tank refuse is dispersed into the ground through a tile and gravel filtration system.

Disposable income – The after-tax income that a household has left which is available for spending on personal consumption items.

Dispossess – The act of depriving a party of the rights of possession and use of real estate.

Distrain – See Distress.

Distraint – The legal right of a landlord to obtains a court order to seize a tenant’s personal property to satisfy payment of back rent.

Distress – The act of causing pressure or stress by a landlord on a person by taking possession of a tenant’s personal property to satisfy in whole or in part a claim for rent in arrears. Also know as distrain.

Distributee – A party who receives property from a person who died intestate.

Distribution – The division and transfer of the property of a decedent.

District – A city area with a land use that is different from adjacent areas like commercial, industrial or residential areas.

Dividend – The resulting number of one number divided by another number

Divisor – The number by which an original number is divided

Doctrine of correlative user – A legal belief that permits an owner to use a reasonable amount of the total underground water supply for his or her beneficial use

Doctrine of relation back – A legal concept that holds that the title received by the successful bidder at a foreclosure sale relates back to the time when the borrower first signed the security and which causes mmost intervening liens, except for some tax liens, to be uncollectible due to the foreclosure sale.

Documentary evidence – The evidence supplied by written instruments such as contracts, deeds, etc.

Documentary stamps – The revenue stamps issued for payment of a tax on recorded documents such as deeds.

Documentary transfer tax – A tax that applies on all real property transfers located in a county and which the prop of payment is shown on face of the deed or on another separate paper filed with the deed.

Documents – The written legal real estate instruments like mortgages, contracts, deeds, options, wills and bills of sale.

Doing Business As, DBA – A fictitious name used for business purposes that is not the true name of the business owner.

Domicile – A place where a person has his true, fixed, permanent home and principal establishment and the place where he has the intention of returning whenever he is absent. See Primary residence.

Domicile – A place where people live – their home.

Dominant tenement – The reason for which the benefit of an easement exists or is the land which has the right to the use of a right-of-way over other land.

Donee – A person who receives a gift from another.

Donor – A person who gives a gift to another.

Double – Typically two dwellings that are side by side rather than above one and other. See Duplex.

Double declining balance depreciation – An accelerated straight line depreciation method which is arrived at by doubling the straight line rate.

Double declining balance depreciation – See Declining balance depreciation.

Double taxation – The taxation of the same income at two different levels like a corporation which pays corporate income tax and then its shareholders pay an additional tax on the dividend income.

Doubling up – The occupation of a dwelling unit by two or more families usually out of necessity rather then choice.

Dower – The legal rights a widow possesses in her deceased husband’s real estate.

Down payment – An initial partial payment of the total selling price which is difference between the sale price of a property and the mortgage amount.

Downzoning – A public action by a local government which reduces the allowable density for subsequent legal developments from a high to low use such as multifamily to single-family resulting in fewer housing units, fewer stores, etc.

Drainage – The running off of water from the surface of the land.

Draw – A disbursement of a portion of the mortgage funds and typical with construction loans that is made in advance as improvements to the property occur.

Drive-by appraisal – A value estimate made be an appraiser which was prepared without the benefit of an interior inspection and which may not conform to USPAP Standard 1. See Self-contained appraisal report, Summary appraisal report or Limited appraisal.

Dual agency – An agency relationship in which one person acts as an agent for both of the principals at the same time in the same transaction.

Dual agent – An agent who represents both parties a transaction with client level services.

Dual contract – The illegal or unethical practice of providing two different contracts for the same transaction which could raise isssues of attempted fraud.

Due care – The standard of conduct required of an ordinary, prudent and reasonable person.

Due diligence – 1. A study that often precedes the purchase of property, which considers the physical, financial, legal and social characteristics of the property and expected investment performance; the underwriting of a loan or inverstment. 2.The making of every reasonable effort to perform one’s contractual obligations. 3. The making of every reasonable effort to provide accurate, complete information.

Due process – A legal principle stating that when any governmental powers are to be exercised that notice must be given to all affected parties along with an opportunity to be heard.

Due-on-sale clause – An acceleration clause granting the lender the right to demand full payment of the loan balance upon a sale of the property.

Duplex – Typically two dwelling units with one above the other under one roof. See Double.

Duress – The unlawful pressure placed upon a person whereby he or she is forced to do some act against his or her will.

Dutch Colonial – A style of architecture that features a gambrel roof, exterior walls of masonry or wood and porches at the side which is especially suited to flat sites and difficult to place onto a steep slope.

Dwelling – A place where people live such as apartments, hotels, mobile homes, nursing homes and single-family houses.

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Earnest money – A sum of money or other consideration given by a prospective purchaser as a deposit or partial payment as evidence of good faith in conjunction with an offer to purchase real property rights which if accepted will become part of the down payment.

Easement – A limited right, privilege or interest to a specific use, privilege, benefit or control purpose which one party has been granted in the land of another party and which runs with the land and is not a personal right of an individual.

Easement appurtenant – An easement which is annexed to the ownership of one parcel of land that allows one party the use of his or her neighbor’s land and which when is the title is transferred to another party runs with the land. Also know as an appurtenant easement.

Easement by condemnation – An easement created by the government or a governmental agency through the exercise of its rights under eminent domain.

Easement by necessity – An easement granted by a court because of the necessity to give the right of ingress and egress over a grantor’s land so as to permit the full enjoyment of a real estate parcel.

Easement by prescription – An easement acquired by continuous, open, notorious and hostile use of a property for a period of time prescribed by law.

Easement in gross – A personal easement which does not run with the land and therefore does not get transferred by a conveyance of title.

Easy money – A financial situation that occurs when lenders have an abundance of funds available for lending and loan terms are favorable to borrowers.

Eaves – The lowest part of a roof that protrudes or hangs over the exterior walls.

Economic base – The major economic support of a community.

Economic base analysis – A technique for analyzing the major economic supports of a community which is used to help predict population, income or other variables having an affect on real estate value or land use.

Economic goods – The goods that have scarcity and utility that provide desired services but which are not sufficiently abundant to be free.

Economic life – The period of time that is usually stated in years from construction or acquisition during which an improvement will add value to the land or will be depreciated for tax purposes. See also Remaining economic life.

Economic obsolescence – A loss in value due to factors outside the property lines of the subject property that adversely affect the usability and value of the subject property or its actual or potential income and which is always considered incurable. Also known as Social obsolencence and Environmental obsolencence.

Economic rent – The reasonable amount of rental income that a property could expect to command if it were available for rent at the time of its valuation.

Economics – The allocation of scarce resources.

Economy – The efficient use of resources with an eye to productivity.

Effective age – The number of years of age that is indicated from the condition of the improvement rather than from its actual chronological age.

Effective date of value – The specific day to which the conclusion of value applies.

Effective demand – The desire for property backed up by the actual ability to buy it.

Effective gross income – The gross income of a property less an allowance for vacancy and bad debts.

Effective gross revenue – A method to determine income, less an allowance for vacancy, possible contingencies and typically collection losses but before any deductions for operating expenses have been taken.

Effective interest rate – A statement as a percentage of interest that is actually being paid by a borrower for the use of the money as distinct from the nominal or named interest rate.

Egress – A way out, an outlet or an exit. See Ingress.

Ejectment – A legal action brought to regain possession of property and to remove a party who is not legally in possession.

Elasticity – The ability of the real estate supply to respond to price increases over a short period of time.

Elevation – A drawing showing the exterior sides of a building incluing the type and placement of windows and other openings such as doors, dormers, vents and skylights as the building will appear when completed.

Elizabethan or half timber style – An English-style, 2 or 2 ½ story house, often with part of the second story overhanging the first with less stone work and less fort like than a Tudor and where stone and stucco walls with half timbers are quite common.

Ellwood technique – An appraisal technique used to estimate the present value of mortgaged income property where the appraiser determines and discounts to a present value the annual cash flow to the owner and the expected resale proceeds which are added together to obtain the equity value, which gets added to the mortgage balance to offer a property value estimate. The late L. W. Ellwood created capitalization rate tables that speed up this process.

Emancipate – A release by a court that sets a child free from his or her parental controls which grants legal capacity or competency.

Emancipated minor – An under age person who has been legally set free by a court from his or her parental control or supervision

Embezzlement – An illegal act involving a fraudulent conversion of another’s personal property by the party to whom it had been entrusted with the intention of depriving the owner of it and which usually involves a violation of fiduciary duties.

Emblements – The annual crops that require care which are being grown on a property and are usually considered to be a possession of the tenant.

Eminent domain – The right of the government found in the 5th Amendment to the Constitution to take privately owned property for necessary public use under condemnation proceedings upon payment of just compensation. Also see Condemnation.

Employee – A person who works as the direct control of an employer holding employee status and for whom the employer must withhold income and Social Security taxes from his or her compensation. See Independent contractor.

Employment contract – A document serving as evidence of a formal employment arrangement between an employer and an employee or between a principal and an agent which in real estate normally shows up as a management or a agreement listing.

Empty nesters – A married couple whose children have established separate households and who frequently are seeking to reduce their amount of housing space.

Enabling act – A state statute that provides a legal basis for zoning codes or other local governmental actions.

Encapsulation – A method of controlling an environmentally hazardous substance contamination by sealing it off.

Encroachment – An unlawful intrusion onto the adjacent property of another of real property improvements such as a patio, a wall or a fence that overlaps across the property line and which reduces the value of the property intruded upon.

Encumber – The voluntarily or involuntarily placing of a lien or a charge on land or property thus limiting its use.

Encumbrance – Any right or claim upon land held by a party other than the property owner which affects or limits the fee simple title or the value of the property and which are divided into two types: monetary liens like mortgages, deeds of trust, mechanics’ liens, local taxes, assessments, judgments, attachments, etc. and non-monetary like deed restrictions.

Endorsement – 1. The act of signing one’s name. 2. An addition to or modification of an insurance policy which expands or changes coverage of the policy.

Energy efficient – An indication of the existence in buildings of extra insulation, weatherproofing and or special features and equipment designed to reduce the cost of energy for heating, cooling and heating water.

Enforceable – A contract or agreement under which ither party can be compelled to perform by a court of law or equity.

English architecture – A design of large stone houses having Elizabethan or Tudor characteristics or of other English styles which frequently have slate shingles on gabled roofs, mullioned casement windows and wainscoted interiors. Authentic Elizabethan houses had exposed timbers between which there was plaster or brick morter as the structural frame although today the half-timbering is purely decorative.

Entrepreneur – A person who envisions, organizes, operates, manages and assumes responsibility for a business.

Environmental Assessment, EA – A study of land which considers everything from endangered species to existing hazardous waste to historical significance which is made to determine if there are any unique environmental attributes and to see if an Environmental Impact Report, EIR is needed or not.

Environmental Impact Report, EIR – A study of how a development will effect the balance of nature of its surroundings.

Environmental obsolencence – See Economic obsolescence.

Environmental Protection Agency, EPA – A U.S. governmental agency that was created to enforce federal pollution reduction laws and to implement various pollution prevention programs.

Equal Credit Opportunity Act, ECOA – A federal law that prohibits discrimination in the extension of credit due to race, color, religion, national origin, sex, age or marital status.

Equality of economic opportunity – A state of being in which all people have equal chances for the same jobs at equal pay, regard-less of race, creed, color or sex.

Equalization – The raising or lowering of assessed values for tax purposes in a particular county or taxing district to make them equal to assessments in comparable counties or districts. See Equalization factor.

Equalization factor – A numeric factor by which the assessed value of a property is multiplied to arrive at a value for the property that is in line with statewide tax assessments and on which the ad valorem tax is based.

Equilibrium – The static point somewhere around the middle of the life cycle of a property where the peak of value is reached.

Equitable conversion – A legal principle in some states which, under a sales contract, buyers and sellers are treated as though the closing had already taken place in that the seller is in possession but has a legal obligation to continue to take care of the property for the buyer. See Equitable title.

Equitable lien – A lien granted by the court as a result of a legal action taken rather than as a result of statute. See Statutory lien.

Equitable mortgage – A legal document that although it is not technically a mortgage still encumbers a property due to the existence of some legal error.

Equitable right of redemption – The right of a property owner who is in default to recover his or her property prior to its final sale by paying all appropriate fees and charges.

Equitable title – A future right that exists in equity to obtain absolute ownership of property that a court will take notice of even though the title is held in the name of another party.

Equity – 1. A branch of remedial justice based on fairness, rather than strict interpretation of statutes by and through which relief is afforded to suitors in courts of equity. 2. The interest or value which an owner has in real property over and above any liens against it. 3. Any ownership investment in stocks, bond, real estate, etc. as opposed to investing as a lender in bonds, mortgages, etc.

Equity build-up – The increase of owner’s equity in property due to the reduction of the mortgage principal and appreciation in value.

Equity funds – The capital invested to gain a residual ownership interest in property.

Equity interest – The amount of the value or total combined worth of a property minus any debts outstanding against it which may be established from a cash down payment, the property’s debt amortization or any property value appreciation.

Equity justice – The value of the property owner’s interest exclusive of the encumbrances on the property.

Equity of redemption – The interest that a debtor has in real property prior to foreclosure. See Right of redemption.

Equity participation – A mortgage transaction in which the lender in addition to receiving a fixed rate of interest on the loan acquires an interest in the borrower’s real property and shares in the profits derived from the income or upon the sale of the property.

Equity participation loan – See Co-venture loan.

Equity sharing – A contractual arrangement between an owner-occupant and a nonoccupying investor to pool money to buy a home.

Erosion – The gradual wearing away of the ground surface by the act of water, wind or glacial ice.

Errors and Omissions insurance, E&O – A protection for an insured party against the liability for professional mistakes in business dealings or for malpractice.

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

Escalator clause – A contractual clause that provides for the upward or downward adjustment of certain items, often rent, which is used to cover specific contingencies such as increased taxes or maintenance and which is usually tied to a named index or event.

Escalator mortgage – A loan that allows for changes in the interest rate which are normally linked to specific money market or other identifiable rates after a specific period of time.

Escape clause – A contractual provision that permits one or more of the parties to cancel all or part of the contract if certain events or situations do or do not materialize such as a mortgage loan approval.

Escheat – An intestate condition where property reverts back to the state when an owner dies leaving no legal heirs, devisees or claimants capable of inheriting it or no heirs can be found.

Escrow – An independent neutral third party which acts as a disclosed dual agent for a buyer and a seller or for a borrower and a lender to carry out the written instructions of both parties and to disburse documents and funds once the specified conditions have been met and to record all necessary deeds and/or other recordable instruments.

Escrow account – See Trust account.

Escrow agent – A neutral third party who holds something of value such as funds from a grantee or a deed from a grantor in trust for another or others until all of the conditions of the contract have been met.

Escrow contract – An arrangement that is entered into when earnest money is deposited into an escrow account between a buyer, seller and escrow holder that sets forth the rights and responsibilities of each party.

Escrow instructions – A document seting forth the duties, requirements and obligations of all parties including the escrow agent involved in a transaction being closed by escrow.

Estate – 1. The degree, quantity, nature and duration of interest, share, right, equity of which riches or fortune may consist and which a person holds in real property such as a life estate, etc. 2. A large house with substantial grounds surrounding it which gives the impression that it belongs to a wealthy person.

Estate at sufferance – An estate arising out of a tenant wrongfully holding over after the expiration of the term where the landlord has a choice of evicting the trespassing tenant or continuing the tenancy under conditions similar to the tenant’s previous terms. Also known as a Tenancy at sufferance.

Estate at will – The occupation of land and its improvements by a tenant for an indefinite or unspecified period which can be terminated by either party with or without notice depending on the state. Also known as a Tenancy at will.

Estate by the entireties – See Tenancy by the entireties

Estate for life – See Life estate.

Estate for years – A leasehold interest in land created by a lease contract for a definite, specified and limited period of time of possession which may be for one year or less and for which notice to terminate is not required.

Estate from period to period –A leasehold interest in land where the rent is set at a certain amount per period which could be a day, a week, a month or a year and where there is no definite or established termination date and for which notice to terminate is required. Also called a Periodic tenancy.

Estate in expectancy – A classification of estates when possession will be at some future time as to times of enjoyment.

Estate in Fee – The holding of a freehold estate or the most complete form of real property ownership interest possible and one which can be passed by descent or by will after the owners death. Also known as Estate of inheritance or Fee simple estate.

Estate in land – The degree, quantity, nature and extent of interest a party holds in real property

Estate in possession – A classification of estates when possession is present as to the time of enjoyment.

Estate in remainder – A future interest given by the grantor to a third party to take effect upon the termination of a life estate.

Estate in reversion – The remainder of a life estate held by the grantor where possession will begin when a lesser estate granted by himself or herself to another ends.

Estate in severalty – A classification of estates based on the number of owners in which case there is only one number and where the estate is owned by a single party.

Estate of inheritance – All freehold estates except for life estates and are estates of inheritance which permits the estate to descend to one’s heirs. See Estate in fee or Fee simple estate.

Estate taxes – The federal taxes due or paid on a decedent’s real and personal property.

Estimate – 1. A preliminary opinion of value. 2. To set a value or appraise.

Estimated remaining life – The period of time in years that it is believed it will take for an improvement to be reduced to being of no value.

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

Estoppel certificate – A certificate showing the unpaid principal and interest of a mortgage which is used if the principal or interest notes are not produced or if the seller asserts that the amount due under the mortgage is different than shown on record.

Et al – And others.

Et ux – Abbreviation for et uxor which means and wife.

Ethics – An area of moral study concerned with acceptable standards of right and wrong behavior, fairness, justness and ideals which addresses in writing the duties that members of a profession owe to their clients, their associates and to the general public.

Evaluation – A study, which does not determine its present value, of a property’s potential uses such as to feasibility or to marketability which is often to aid in making an investment decision.

Eviction – The act of dispossessing or depriving a party of the possession of land following a court judgment. See Actual eviction and Constructive eviction.

Eviction notice – A notice to a tenant to vacate the premises due to the nonpayment of rent or another violation of of the lease agreement covenants.

Evidence – Anything which tends to prove or to disprove a matter in question or to influence the belief respecting something.

Evidence of title – The proof of property ownership such as a certificate of title, an abstract of title with lawyer’s opinion, title insurance, or a Torrens registration certificate.

Ex officio – The power to act arising out of holding of a particular office.

Ex parte – A one sided action or an act done in behalf of only one person.

Exception – A matter which is excluded from coverage in a title insurance policy such as a reservation, an objection or a contradiction that affects title to a particular parcel of real property.

Excess depreciation – The amount of depreciation being applied beyond the normal rate allowed.

Excess rent – The monetary difference between contract rent and economic rent.

Exchange – A means of trading equities in two or more real properties which are handled as a single transaction and with a single closing.

Exchange brokerage – A real estate activity that brings two or more parties involved in trading real properties together in a real estate transaction.

Exclusion – 1. Any matter that is not included in the coverage of an insurance policy. 2. Any matter affecting title to real property that is not included in the title insurance policy coverage.

Exclusionary zoning – An illegal zoning law that would be used to exclude low- and moderate-income housing in an area.

Exclusive agency listing – A listing agreement where a seller employs one broker to assist the owner to sell the property and as part of that employment appoint him or her to be the exclusive anget of the owner in the transaction and agrees to pay that broker if a buyer is secured under the terms of the contract by the broker or any other broker but not pay a fee if a sale is negotiated directly by the owner without the services of any broker.

Exclusive listing – A general term applied to a listed property where the owner(s) is represented by a broker who is acting exclusively in an agency capacity for the owner under an exclusive right to sell or exclusive agency contract.

Exclusive right to sell listing – A listing agreement where a seller employs a broker and agrees to pay a commission if a buyer is secured under the terms of the contract and if it is sold by anyone including the owner during the term of the agreement and simultaneously also employs and authorizes the broker to act as the sole or exclusive agent in an agency capacity relationship for the owner for the entire transaction process.

Exculpatory clause – A clause often included in leases that clears or relieves the landlord of liability for personal injury to tenants as well as for property damages.

Execute – 1. The signing of a legal document such as a deed or will so as to formalize it and make it binding. 2. The performing or completing of a contract, following it out to the end, making it happen or doing it. 3. A legal order directing an official to enforce a judgment against the property of a debtor.

Executed contract – A contract in which all parties have fulfilled their promises and whose terms have been performed and completed.

Execution – 1. A court order directing a sheriff, constable, marshal or other court-appointed party to enforce a money judgment against a debtor’s property by selling the property if necessary to satisfy the judgment.2. The completion of an act or process such as an escrow

Execution of judgment – The formal action of completing a final judgment decree of a court which usually involves selling property.

Executor – A man named in a will and affirmed by the probate court who has agreed in accordance with the will to carry out its provisions as to the disposition of the deceased person’s estate. See executrix, a woman so appointed. See testator, one who makes the will.

Executor’s deed – A deed given by an executor of an estate.

Executory contract – A contract in which something remains to be done, or executed, by one or more of the parties.

Executrix – A woman named in a will to carry out the provisions of the will as to the disposition of the deceased person’s estate. See Executor.

Exempt – To release, discharge, waive, relieve from liability.

Exemption – In taxation, usually something on which tax does not need to be paid.

Existing mortgage – The debt contract which is to be assumed by the purchaser in which the seller of real estate is the mortgagor.

Exoneration – The right which a party guaranteeing performance or payment has upon paying the principal debtor’s obligation to look back to the principal debtor for reimbursement.

Expansible house – A home created for future additions.

Expansion joint – A flexible metal, rubber, bituminous fiber strip used to separate sections of concrete to prevent cracking caused by expansion due to temperature changes.

Expenses – The items that are a financial burden or outlay which appear on a closing statement in connection with a real estate sale.

Express agency – An agency relationship based on clearly-presented words in a formal oral or written agreement between the parties. See Implied agency.

Express agreement – See Express contract and opposite Implied contract.

Express contract– An oral or written agreement in which the parties have clearly stated their intentions and terms in words. See opposite Implied contract.

Expropriation – The act or process whereby private property or the rights therein is acquired for public use by a sovereignty or any entity vested with the necessary legal authority typically such as under eminent domain.

Extended coverage – A fire insurance policy having an additional endorsement which extends the coverage to include losses caused by windstorm, hail, explosion, riot, aircraft, vehicle and smoke damage.

Extended policy – A casualty, liability, title or other insurance policy with broader coverage than normal.

Extension – An agreement between two or more parties to lengthen the the time period identified in a contract such as when a tenant is unable to vacate at the termination of the lease.

Extensive margin – The extra benefits derived from adding increasing amounts of land to a productive state.

External depreciation – The reduction in a value of a property that are caused by factors outside the property lines and which normally require governmental action to cure.

External obsolescence – The depreciation caused by issues outside the property lines such as environmental, social or economic factors and which are always considered to be incurable.

Extinguishment – The destruction or cancellation of a right, power, contract or estate.

Extra use – The use or activity level in excess of what would be considered to be a real or normal level.

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F (Real Estate) 04/02/2010

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Facade – The real front or face of a building but often also used to refer to a false front.

Facade easement – An historic preservation area arrangement whereby an owner agrees to retain the original facade or face of a building in exchange for the right to alter the interior and other exterior walls.

Face value – The dollar amount shown on a document by words or numbers.

Facilatator – A licensee who acts as an intermediary between a buyer and seller, or landlord and tenant, who assists both parties in the transaction with the paperwork and formalities involved in transferring real property ownership but who is not an agent of either party. Also known as a Transaction broker, Transactional broker, Nonagent and Contract broker.

Factory-built home – See Manufactured homes. Contrast with Site-built homes.

Fair Credit Reporting Act – A federal law that allows individuals to examine and correct credit information about them that is used by credit reporting services.

Fair Housing Act – A federal law that prohibits discrimination in housing based on a person’s race, color, religion, sex, handicap, familial status or national origin.

Fair market rent – The amount that a property would command if it were currently available for lease. Contrast with Contract rent. See Economic rent, Rent control, Section 8 housing.

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

False advertising – A misleading description of property. See Puffing.

Family – A group of people living as one household as an organized unit of society.

Fannie Mae – A quasi-governmental agency established to purchase from the primary lenders any kind of mortgage loans in the secondary mortgage market.

Farm and Land Institute – An association that brings together specialists in the sale, development, planning management and syndication of land to establish professional standards through educational programs for members and confers the AFLM, Accredited Farm and Land Member designation.

Farm Credit System – A agency of the federal Department of Agricultural that offers programs to help families purchase or operate family farms.

Farmer Mac – An agency that operates for agricultural loans like Fannie Mae and Freddie Mac does for residential loans.

Farmers Home Administration, FmHA – An agency of the federal Department of Agriculture whose primary responsibility is to provide financial assistance on reasonable terms from private sources to farmers and others living in rural areas where financing is not available.

Feasibility study – An analysis of the cost-to-benefit ratio of an economic endeavor done prior to purchase and its undertaking.

Fed – An abbreviation for the Federal Reserve Board and often referred to as The Fed.

Federal Deposit Insurance Corporation, FDIC – An agency of the federal government that insures deposits at commercial banks, savings banks and savings and loans.

Federal Emergency Management Agency, FEMA – A former independent agency that had its beginnings from the Congressional Act of 1803 and that became part of the new Department of Homeland Security in March 2003 and which is charged with planning for, mitigating against, responding to, and recovering from disasters such as hurricanes, earthquakes, floods and other natural disasters.

Federal Fair Housing Act of 1968 – A federal law that prohibits discrimination against any person due to race, color, religion, sex, handicap, familial status, or national origin in the sale, rental, leasing, financing and advertising of housing or in the prevention of real estate brokerage services.

Federal Home Loan Bank – A district bank of the Federal Home Loan Bank System that lends only to member financial institutions such as savings and loan associations.

Federal Home Loan Bank Board – The administrative agency that charters federal savings and loan associations and exercises regulatory authority over members of the Federal Home Loan Bank System.

Federal Home Loan Bank System – The network of Federal Home Loan Banks and member financial institutions.

Federal Home Loan Mortgage Corporation, Freddie Mac – An independent stock company that creates a secondary market by purchasing conventional and also FHA and VA residential loans.

Federal Housing Administration, FHA – An agency of the federal government that insures private first mortgage loans for the financing of new and existing homes and home repairs and does not permit second mortgages on insured mortgage loans.

Federal Land Bank, FLB – An agency of the federal government agency that makes long term loans to farmers.

Federal National Mortgage Association, FNMA – A quasi-public agency popularly known as Fannie Mae which was converted into a private corporation and whose primary function is to buy and sell FHA and VA mortgages in the secondary mortgage market.

Federal Reserve System – Also known as the Fed. or The Fed. The federal banking system of the U.S. under the control of central twelve-member board of governors known as the Federal Reserve Board that involves a central bank in each of twelve geographical districts with broad powers in controlling credit and the amount of money in circulation.

Federal Savings and Loan Association – A federally-chartered savings and loan association in contrast to a state-chartered savings and loan association whose charter was issued by the Federal Home Loan Bank Board.

Federal Savings and Loan Insurance Corporation, FSLIC – A federal agency that use to insure the accounts of savings and loan association savers which is now done by the FDIC.

Federal Trade Commission, FTC – An agency of the federal government created by an Act signed into law on September 26, 1914 by President Woodrow Wilson.

Fee – 1. The term fee is of Old English derivation and means an estate of inheritance in real property. See Fee simple and Fee simple estate. 2. A compensation for a particular act.

Fee simple – 1. An estate under which the owner has unrestricted powers to dispose of the property including by gift, will, etc. 2. Today, the terms “fee” and “fee simple” mean substantially the same thing – ownership.

Fee simple absolute – A title that is absolute and unqualified and is the best one can have giving complete ownership and control of real property without any conditions or limitations.

Fee simple defeasible – An estate in fee subject to the occurrence of a condition happening subsequently or afterwards, upon which the estate may be terminated. See Fee simple determinable.

Fee simple determinable – A fee that may terminate upon the occurrence of a specific event that may or may not ever occur or the time of which is uncertain.

Fee simple estate – The greatest interest that one can have in real property which is unqualified, of indefinite duration, freely transferable and inheritable.

Fee simple limited – See Fee simple determinable.

Fee simple qualified – An estate in which the holder has a fee simple title but is subject to be returned to the grantor if a specified condition occurs. See Fee simple determinable.

Fee tail – A freehold estate of inheritance limited so as to descend to a particular class of heirs of the person to whom it is granted.

Fee tail estate – A limited freehold estate which was originally used to insure the restricted passing of land in a direct ancestral line and the property had to pass to the descendants of the owner.

Fee-for-service – An arrangement where a consumer asks a licensee to perform specific real estate services for a set, established, or predetermined fee.

Felony – A crime more serious than one termed a misdemeanor and which is defined by several of the U.S. statutes and codes and includes crimes punishable by imprisonment and or death in a state prison or penitentiary.

Feudal system – A political and social system which prevailed throughout precolonial Europe from the 11th through the 13th centuries under which ownership of land was by the king or other sovereign who held all rights and whose subjects had only the privilege of the use of land where upon death, title passed back to the sovereign and not to the decedent’s heirs and is opposed to allodial or private ownership in the land which gives the owner the full bundle of rights.

Feudal tenure – A real property ownership system in which ownership rests with a sovereign who may grant lesser interests in return for service or loyalty. See contrasted allodial tenure.

Feuds – A grant of land under the feudal system. See Feudal system.

FHA – See Federal Housing Administration.

FHA loan – A loan made by an approved lender in accordance with the Federal Housing Administration’s regulations and insured by the FHA.

FHLMC – See Federal Home Loan Mortgage Corporation.

Fictitious mortgage or trust deed – A recorded generic mortgage or trust deed that is not related to one specific transaction but is used as a reference mortgage or trust deed in order to avoid recording a lengthy mortgage or trust deed for each title transfer.

Fictitious name – A name used for business purposes that is not the true name of the business owner. Also referred to as Doing Business As or a DBA.

Fidelity bond – A bond posted as security for discharging a personal services obligation.

Fiduciary – A party who is an agent in a position of trust and confidence and as a result owes fiduciary duties to a principal or a client which cannot be breached under the rules of agency. See Fiduciary duties.

Fiduciary duties – The duties or responsibilities that an agent owes to his or her principal or client of loyalty, obedience, disclosure of material facts, accountability for funds, confidentiality and to exercise the highest skill level to the principal and not to gain any personal advantage over the principal by even the slightest misrepresentation, concealment, duress or pressure.

Fiduciary relationship – A relationship involving trust and confidence and fiduciary duties like between an attorney and a client an agent and a principal or client or a trustee and a beneficiary.

Fiduciary responsibilities – See Fiduciary duties.

File and Use – In most states, title insurers file mandatory rate schedules, title insurance policies and endorsement forms with the State Insurance Department or other state regulatory agency and may use such items or rates only within a specified period of time after filing.

Filtering – The upward mobility of people of one income group into homes that have recently dropped in price and that were previously occupied by persons in the next higher income group.

Filtering down process – The process of passing the use of real estate housing to successively lower-income groups as the real estate produces less income or has a lower value.

Financial feasibility – 1. The ability of a proposed land use or change of land use to justify itself from an economic point of view. 2. One of but not the only test of the highest and best use of land because it does not necessarily make it the best use of the land.

Financial institutions – The organizations like commercial banks, savings and loan associations, credit unions, savings banks and insurance companies that deal in money or claims to money and serve the function of channeling money from those who wish to lend to those who wish to borrow.

Financial Institutions Reform, Recovery, and Enforcement Act, FIRREA – A federal law passed in 1989, that is often referred to as the S&L bailout, and was in response to the savings and loan crisis of the 1980s and which changed the rules under which federally-regulated S&Ls operated and restructured the S&Ls’ regulatory and deposit insurance program. See Office of Thrift Supervision and Resolution Trust Corporation.

Financial intermediary – The financial institutions like commercial banks, mutual savings banks and life insurance companies that act as an intermediary or go-between for savers and borrowers by selling its own obligations for money and, in turn, lending the accumulated funds to borrowers as real estate loans.

Financial risk – The possibility of losses based on the amount invested and legal provisions concerning borrowed funds.

Financial statement – A presentation as of a specific date that shows a balance sheet with assets, liabilities, and equity as well as a profit and loss statement with income and expenses.

Financing – The use of another party’s money which is typically that of a lending instution to buy something which in real estate is real property. See Creative financing.

Financing expenses – The amounts used to pay the costs of acquiring real estate such as the interest on all loans or the ground rent for leased land and because loan principal payments reduce the debt, they are not technically expenses. Contrast Operating expenses.

Financing process – The systematic five-step procedure followed by major institutional lenders when analyzing a proposed loan: 1. Application filed by a borrower; 2. Analysis of borrower and property by lender; 3. Processing of loan documentation; 4. Closing, funding, the loan; and 5. Servicing through collection and recordkeeping.

Financing statement – An instrument filed in a government office in order to protects the interest of any secured parties in the collateral and to give public notice of a security interest. See Security interest and Secured party.

Finder’s fee – A monetary payment which is prohibited or limited in most states to a party who is other than a licensed broker and who locates an owner of suitable property interested in selling or a purchaser interested in buying.

Finished floor – The final covering such as wood, tile or carpet applied over the wood joists and subflooring.

Fire stop – A solid, tight closure of a concealed space built to prevent the spread of fire and smoke through such a tight space.

Firm commitment – 1. An unqualified written promise as to under what specified terms and conditions a lender will lend money. 2. An FHA commitment to insure a mortgage for a specified mortgagor.

FIRREA – See Financial Institutions Reform, Recovery, and Enforcement Act.

First mortgage – A legal document that is pledged as collateral for a loan that was recored before any others giving it first priority and which will be superior to all other liens or claims against the property except for taxes and bonded indebtedness. See Mortgage.

First trust deed – See First mortgage.

Fiscal controls – The federal tax revenue and expenditure policies used to control the level of economic activity by manipulation of the amount of federal taxation and spending programs and the amount of surplus or deficit.

Fiscal policy – The policy of the federal government regarding taxation and spending programs the balance of which determines the amount of money the government will withdraw from or place into the economy in order to counter any economic peaks or slumps.

Fiscal year – A business or accounting year that is different than a calendar year.

Fixed assets – The tangible property such as buildings, furniture and fixtures and equipment that are used in a business operation that are not for sale and are shown on the financial statement of the company.

Fixed expenses – The regular recurring costs required in owning a property or business such as taxes and fire insurance and are necessary even if the building is unoccupied.

Fixed payment loan – A mortgage secured by real property having the periodic principal and interest payments remain the same over the life of the loan unless the rate changes as in a graduated payment loan.

Fixed rate loan – A mortgage secured by real property having the interest rate remain the same for the life of the loan.

Fixed-rate loan – A mortgage secured by real property featuring a constant interest rate and loan payment over the term of the loan. See Adjustable Rate Mortgage.

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

Fixture – A movable item such as hot water heater and built in store showcases that are attached to land or its improvements which become appurtenances and which under normal circumstances cannot be removed without a prior agreement because the affixing converted them to real property.

Flag lot – A parcel of land which is typically located behind another lot facing a main street that is in the shape of a flag on a pole which provides access to the site.

Flashing – The sheet metal or other material used to protect a building from water leaks.

Flat – 1. A one-level apartment. 2. A level (flat) payment mortgage. See Flat lease.

Flat fee broker – A real estate broker who charges a fixed or flat fee for brokerage services instead of a commission based on a percentage of the sales price of the property. See Discount broker.

Flat lease – A lease in which the rent is a fixed (flat) sum paid periodically throughout the entire lease term.

Flexible payment mortgage – A loan in which the repayment schedule is based on the borrower’s financial position to pay so that payments are usually lower in the earlier years and increase as the borrower’s ability to repay increases.

FLI – See Farm and Land Institute.

Flip – The purchase and immediate resale of property often within hours or days for a quick profit which often carries a negative connotation of people who profit illegally or at the expense of an innocent party and helped give rise to FIRREA.

Float – 1. The interval of time after a deposit or withdrawal is made and before the transaction is credited or deducted. 2. The difference between a variable interest rate and the index to which it is pegged.

Float a loan – The borrorwing of money to fund a project. Also Float a bond issue.

Floating rate – An interest rate that is not fixed over the term of a loan, bond, or other fixed-income security but is allowed to vary according to the change in a specified index.

Flood Certification – An independent agency report required by the lender to determine whether a property is located in a flood hazard zone which would then require a federally mandated flood insurance policy.

Flood insurance – An insurance policy that covers damage to property due to natural flooding which is offered by private insurers but is subsidized by the federal government.

Flood water – The water overflowing a regularly defined channel.

Floodplain – A level land area subject to periodic flooding from a contiguous body of water which is identified as to the anticipated frequency of flooding such as an area designated as an annual floodplain would be expected to flood once annually.

Floor loads – The capabilitiy of weight stated in pounds per square foot that a floor of a building can safely support if uniformly distributed.

Floor plan – A plan drawn to scale indicating wall-to-wall dimensions, room sizes and exposures and the placements of windows, doors, partitions, etc.

Flow of funds – An accounting method used primarily by the Federal Reserve to describe the sources and uses of the nation’s funds as of a given period of time.

FNMA – See Federal National Mortgage Association.

Footing – The base of a building where a foundation wall or column is placed.

For Sale By Owner, FSBO – A term referring to properties on the market that are not listed with a real estate broker because the owner desires to sell the property his or her self without paying a commission.

Forbearance – A tolerant action by a creditor against a borrower who has not received payment once the debt has become due.

Force majeure – A contract clause inserted to protect a party from unavoidable delays or of failure to perform the contractual obligations in a timely manner due to a major force(s) beyond control such as weather, labor disputes or strikes or other unavoidable events.

Forced sale – The act of selling property under a compulsion as to time and often the result of legal proceedings ordering the sale.

Forced sale value – The price realized at the forced sale.

Forecasting – The projection of the future by taking the past and present into consideration and tempering it with the appraiser’s judgment.

Foreclosure – A legal process whereby in the event of a default in loan payments or terms, property pledged as security for a debt is sold to satisfy the debt.

Forfeiture – The loss of money or something of value resulting from the failure to perform.

Forfeiture of title – A common penalty for the violation of conditions or restrictions imposed by the grantor upon the grantee in a deed or other proper document whereby title to the land is forfeited meaning lost by the grantee or a subsequent owner which causes title to revert back to the party that imposed the condition.

Forgery – The legal offense of imitating or counterfeiting documents or signatures in an effort to deceive.

Form appraisal – See Uniform Residential Appraisal Report, URAR.

Forthwith – A performance done at once or promptly.

Foundation – The supporting portion of a structure including the footings that are below the first floor construction.

Foundation Plan – A scale drawing showing the size of footings, size and dimensions of piers and the construction measurements and details of the sub-floor area.

Foundation wall – A wall below or partly below ground which provided support for the exterior or other structural parts of the building.

Four agents in the production of income – The four components of land, capital, management or labor are what produces income.

Four-plex – A building containing four dwelling units in comparison to a duplex which only has two.

Four-three-two-one rule – An appraisal rule for computing value based on the depth factors of lots which is used primarily in retail environments.

Fractional interest – An ownership interest of some but not all real property rights such as leasehold, easement and hunting rights.

Fractional section – A parcel of land less than 160 acres which is usually found at the edge of a rectangular survey.

Frame house – A house constructed with a wooden frame on which some form of siding or veneer is placed.

Franchise – A specific privilege awarded by a government or a business firm which awards exclusive dealerships.

Fraud – The intentional and successful employment of any cunning, deception, collusion or trickery used to cheat, deceive, circumvent or gain an unfair advantage over another person when that party acts upon it to their legal injury or the loss of property.

Freddie Mac – See Federal Home Loan Mortgage Corporation.

Free and clear sale – A fee simple sale of real estate that is unclouded by any encumbrances such as liens, mortgages, etc.

Freehold estate – An fee simple or a life estate that runs forever and whose end cannot be exactly determined.

French architecture – Any one of several very common housing styles originating in France of smaller, rectangular, formal perfectly balanced houses having a steep roof, hipped at the ends, with plaster walls one story high, with dormer windows provided for second-floor rooms.

French farmhouse – A housing style of informal stone, painted brick or plaster which sometimes use half-timbering as an accent.

French Normandy – A housing architecture style that is large in scale and usually can be distinguished by a round tower.

Friable – A crumbly, brittle or dusty substance such as asbestos which can release hazardous fibers or particles that can become airborne and can enter the lungs and cause ill health.

Front feet or foot – The measurement of a parcel of land according to the number of feet facing a street or road abutting the property.

Front money – The minimum amount of money needed to get a real estate venture transaction started.

Frontage – An important property valuation concept used mainly in retail or commercial situations based on the belief that the more frontage certain businesses have is advantageous and where property is identified by its number of linear front feet facing the most important street or road surrounding the property and with imaginary parallel lines one foot apart extending the full depth of the lot.

Frost line – The depth to which frost can penetrate the soil which varies in different parts of the country depending on the winters therefore requiring that footings must be placed below this mark to prevent movement.

FSBO – Pronounced fizzbo. See For Sale By Owner.

FTC – See Federal Trade Commission.

Full disclosure – A requirement in real estate for an owner and the licensee to reveal to the prospective buyer or tenant all material facts about the physical, financial, and economic condition of the subject property that are pertinent to a transaction.

Full face rate of interest – The rate of interest stated in the debt. See Nominal interest rate.

Fully amortized note – A note that is fully repaid at maturity by periodic reductions of the principal amount.

Fully indexed note rate – The rate in adjustable rate mortgages which named indexed is agreed upon at the time of the loan application and to which the gross margin stated in the note will be added.

Functional obsolescence – A loss of value due to adverse factors arising from inside the property lines such as a defect in the layout or design which affects how well the property can be used, function or perform which affects its value and marketability.

Functional plan – An appropriate arrangement of real estate improvements so it relates well to the useability of the property.

Functional utility –A property having attractiveness and usefulness.

Funding – A loan concept whereby the lender provides the cash to pay the seller.

Funds – The cash or other resources having value which maybe sold in order to buy another asset.

Furniture, Fixtures and Equipment, FF&E – A concept frequently used in hotel or motel ownership indicating that which wears out much more rapidly than other the building components causing an owner or prospective buyer to establish a fund for the cost and frequency of replacement.

Furring – The strips of wood or metal applied behind a wall or other surface to make it even, to form an air space or to give the wall an appearance of greater thickness.

Future benefits – The anticipated benefits that the present owner can expect to receive from the property in the future.

Future interest – A party’s present right to an interest in real property such as of reversion or reentry that will not result in possession or enjoyment until some time in the future.

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G (Real Estate) 04/02/2010

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Gable roof – A steeply pitched roof with sloping sides.

Gain – A profit, benefit or an increase in value.

Gambrel roof – A curb type roof having a steep lower slope with a less steep upper slope.

Gap – A defect, such as a missing document or conveyance that raises doubt as to the present ownership of the land, in the chain of title of a particular parcel of real estate;.

Gap loan – A loan that fills in the difference between the first loan and the full amount of the permanent loan. See Bridge loan and Swing loan.

Garden apartments – A housing development where many of the tenants have access to the outside lawn areas.

Gated community – A fenced or walled in housing development which usually has a security guard at the entrance.

Gazebo – A small, partially enclosed roofed structure in a park, garden or shopping mall affording shade and rest which normally gives has attractive views.

Gazumping – A slang term to describe the practice of reneging on an oral commitment to buy or sell a property because a better offer or opportunity was presented after the oral commitment was made but before a legal sales contract was consummated.

General agent – A party who has been authorized by a principal to represent the principal in a broad range of matters such as a property manager.

General contractor – A party who constructs buildings or other improvements for an owner or developer and who might employ his or her own construction labor force or use subcontractors. See Contractor.

General lien – A lien on all of the property of a debtor.

General mortgage bond – A document representing an obligation secured by a mortgage.

General partner – One or more partners in an ordinary partnerships whose liability is unlimited

General partnership – See Partnership.

General real estate tax – A tax levied on real estate by government agencies and municipalities in order to be able to operate the government.

General warranty deed – A deed that guarantees the title quality of conveyed property which undertakes to defend that title and to pay damages if the title is defective.

Generally Accepted Accounting Principles, GAAP – The set of rule considered standard and acceptable by Certified Public Accountants.

Gentrification – The displacement of a neighborhood’s lower-income residents by higher-income residents generally due to an older neighborhood being rehabilitated or revitalized.

Geographic – An area with defined geometry or borders.

Georgian – A large, English-style, formal 2- or 3-story rectangular house that is characterized by its classic lines and ornamentation.

GI loan – See VA loan.

Gift deed – A deed for which the consideration is for love and affection and not for money.

Gift tax – A federal tax imposed on a monetary gift to a relative or friend.

Ginnie Mae – See Government National Mortgage Association, GNMA

Girder – A large beam used to support smaller beams, joists and partitions.

GNP – See Gross National Product.

Good and marketable title – The title to a real estate parcel that generally can be proven by title search or abstract of title to be vested in the owner of record and free of claims or liens which would harm its marketability.

Good consideration – A contractual consideration that is based on love and affectionrather than money and is usually considered to be a gift.

Good faith – An honest intention to abstain from taking conscious advantage of another.

Good faith estimate –An estimate of closing costs including points; origination fees, title, and legal expenses based on the lender’s best estimate that must be given under the Real Estate Sett1ement Procedures Act by a lender to one to four unit residential loan applicants within three days after receiving a loan application.

Good faith mortgagee – A person who lends without notice of any existing problems when money is lent.

Good faith purchaser – A person who buys without notice of any existing problems when the value was paid.

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

Government check – The 24-mile-square parcels composed of 16 townships in the rectangular survey or government survey system of legal descriptions.

Government lot – A fractional section in the rectangular survey or government survey system that is less than a one quarter-section in area.

Government National Mortgage Association, GNMA – Ginnie Mae An agency of HUD which functions in the secondary mortgage market and primarily in social housing programs.

Government survey system – See United States Government Survey System.

Grace Period – An agreed-upon time after the payment of a debt is past due and during which time a party can still perform without being considered in default.

Grade – The level at ground or the foundation of an improvement.

Gradient – The slope or rate of increase or decrease in the elevation of a surface which is typically expressed as a percentage that equals the vertical rise or fall divided by the horizontal distance.

Grading – The process of plowing and raking a lot to give it a desired contour and drainage.

Graduate Realtors Institute, GRI – An educational NAR sponsored program for REALTORS® that awards the Graduate, Realtors Institute, GRI designation.

Graduated lease – A lease used mainly in long-term tenancies which provides for a varying rental rate often based upon a future determination where sometimes the rent is based upon the result of periodical appraisals. See Step-up lease.

Graduated payment loan – A loan that provides for partially-deferred payments of principal during the first five years of the loan term after which the principal and interest payment is substantially higher in order to make up for the principal portion of the payments that were lost at the beginning of the loan. Also called a Variable interest rate loan.

Grandfather clause – A provision in the law that occurs when a law is changed or passed where a specific activity that was legal under the previous law is allowed to continue.

Grant – 1. A specific legal term that mans to “convey” and “transfer” an interest in real property to another. 2. A private grant is the transfer of real property from one person to another. 3. A public grant is a government transfer of ownership of public real property to a private party. 4. A transfer of real estate from a sovereign is done by patent or royal decree.

Grant deed – One of many types of deeds used to transfer real property that contains warranties that the grantor has not already conveyed the land to another and that the estate is free from encumbrances placed by the grantor.

Grantee – A party who receives a transfer of real property by a grant deed. See Deed.

Granting clause – The words in a deed of conveyance such as convey and warrant, grant;grant, bargain and sell that demonstrate the grantor’s intention to convey the property.

Grantor – A party who transfers his or her interest in real property to another by a grant deed. See Deed.

Gratuitous agent – A person who is bound to act in good faith and obey a principal’s instructions once he or she agrees to act as an agent even though he or she is not being paid.

Greenbelt – An area of undeveloped land around a residential area created by covenant, deed restriction or city zoning with the intention of preserving the open space and a natural environment.

GRI – See Graduate Realtors Institute.

Grid – A chart used for rating the borrower risk, property and neighborhood.

Gridiron pattern – A systematic layout of streets in a subdivision that creates blocks of uniform length and width and streets that intersect at right angles.

GRM – See Gross Rent Multiplier.

Gross annual multiplier – A rule of thumb technique using a numerical factor used to determine an estimate of value for smaller commercial properties by dividing the gross annual rental income into the selling or asking price of properties. See Gross Rent Multiplier.

Gross area – The total floor area of a building which is usually measured using the outside walls.

Gross Domestic Product, GDP – The total value of all goods and services generated through production by labor and property which is physically located within the confines of a country during a given period of time.

Gross income – 1. The total income from a property before any expenses are deducted. 2. The normal income of a person including overtime, prior to any payroll deductions that is regular and dependable and which may come from more than one source

Gross income multiplier – A rule of thumb technique used to estimate the market value of residential income-producing property by multiplying a factor arrived at by dividing known sales prices of comparable properties by their annual rental income times the subject property’s annual gross income. See Gross Rent Multiplier.

Gross lease – A lease for property under the terms of which the lessor assumes all of the expenses of the property such as insurance, maintenance and taxes.

Gross leaseable area – See Gross rentable area.

Gross margin – An amount identified in an adjustable rate mortgage that is expressed as percentage points which gets added to the current index value on the rate adjustment date to establish the new rate of the note.

Gross National Product,GNP – The total dollar value of all final goods and services produced in an economy for consumption in society during a particular time period.

Gross profits – The amount of money left after the general expenses have been deducted from all income.

Gross rate – A method of collecting interest by adding the total amount of the interest to the principal of the loan at the outset of the term.

Gross rent – The annual amount of income that is received from rental units before the deduction of expenses.

Gross Rent Multiplier, GRM – A rule of thumb technique used to estimate the market value of residential income-producing property by multiplying a factor arrived at by dividing the known sales prices of comparable properties by their monthly rental income times the subject property’s monthly gross income. See Gross income multiplier.

Gross rentable area – The floor area measurement method used typically with commercial office type buildings to determine tenant rent by measuring from the inside of the outside walls to the center of the partition walls.

Gross revenue – The total revenue from all sources before subtracting any expenses incurred to earn that revenue.

Gross sales – The total amount of sales as shown by invoices before deducting for returns, allowances, etc.

Ground fault interrupter, GFI – A safety device that is a part of special electrical outlets or circuits that immediately breaks the circuit if a short occurs which is required in all areas exposed to water or weather such as bathrooms, kitchens and swimming pools.

Ground lease – An agreement for the use of the land only which is sometimes secured by the improvements the user may erect on the land. See Land lease.

Ground rent – The earnings of improved property credited to the earnings of the ground itself after an allowance has been made for the earnings of the improvements. See Economic rent.

Group home – A residence serving a group of people with special needs which is not considered to be a household.

Growing-equity loan – A mortgage in which the monthly payments increase annually and where the increased amount is used to reduce the outstanding principal balance and therefore shorten the overall term of the loan.

Guarantee of title – An assurance of clear title given by a title company or equivalent that is capable of producing a good title.

Guaranteed inventory – A guarantee given by the seller of a business opportunity that the actual amount of inventory on hand at the close of escrow will equal the value placed upon the inventory at the time the sales agreement was signed.

Guaranteed mortgage – A mortgage in which a party other than the borrower assures payment in the event of default by a mortgagor such as VA-guaranteed mortgages.

Guaranteed sale – The written commitment by a broker that within a specified period of time he or she will in the absence of a sale, purchase the listed property at a specific sum.

Guaranty – The assurance given by one party that another party will fully perform their duties under a contract.

Guardian – A party lawfully appointed by a court who is vested with the power and duty to care for and manage the affairs of a person who is legally incompetent and unable to do so himself.

Guide meridians – The correction lines which run north and south and which compensate for the narrowing of the earth. Used in the Rectangular survey system.

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Habendum clause – The to have and to hold clause in a deed that describes the extent of the interest conveyed, such as fee or life estate and which is no longer an essential part of a deed.

Habitability – The ability to live in according to the interpretations of the courts which is broader than tenantability which only means that it complies with state statutes.

Haec verbs – In the exact words.

Half bath – A room in a home that contains a toilet and sink but no facilities for bathing such as a bathtub or shower stall.

Half-timbering – A style of house construction using exposed timber wall framing over masonry or lath and plaster or with simulated half-timbering using boards on plaster walls as a type of decoration.

Handyman’s special – A classified real estate advertising term pointing to a home that requires extensive repair and or remodeling and which is selling at a relatively low price.

Hard Costs – The direct costs of construction.

Hard money – The cash including the cash proceeds from a loan used in a real estate transaction as distinguished from credit extended by a seller. See Soft money.

Hard money loan – A debt that is taken on in exchange for cash.

Hazard insurance – A form of real estate insurance that protects against certain risks such as from fires or windstorms, some natural causes, vandalism, etc. to which an owner often adds liability insurance and extended coverage for personal property.

Hazardous substance – A type of contaminant regulated under CERCLA.

Header – A beam which is placed perpendicular to floor or ceiling joists and to which studs are nailed when framing a window, doorway, stairway, chimney or other similar opening.

Hedge against inflation – An investment whose value increases at a rate equal to or greater than the present rate of inflation.

Height density – A zoning regulation designed to control the use or occupancy within a certain area by designating the maximum height of the structures.

Heir – A party who inherits property of a land owner who has died intestate or without a will.

Heirs and assigns – A term often found in deeds and wills granting a fee simple estate.

Hereditament – A larger and more comprehensive word than either land or tenements and meaning anything capable of being inherited, whether it be corporeal, incorporeal, real, personal or mixed.

Hidden defects – A title defect that is not apparent from an examination of the public records.

High loan-to-value loan – A home equity refinancing loan at 100% or more of the market value of a home which makes it inherently high-risk and reserved for only the lowest-risk borrowers since a portion of the loan is unsecured and where the lender is gambling on the borrower’s integrity.

Highest and best use – An appraisal principal that is the starting point for appraisal indicating the highest level of improvements that can be built according to the current zoning classifications and then indicating the best use to which the property can be put so it will produce the greatest net return to the land over a given period of time.

Highrise – An indefinite term used to describe the modern apartment building with an elevator and over five stories.

Hip roof – A pitched roof with sloping sides and ends that resemble a person’s hips.

Historic district – A designated area that is eligible for certain federal assistance programs, protection from clearance and where the buildings are considered to have some significant historic character.

Historic structure – A building officially recognized for its historic significance which encourages rehabilitation and discourages demolition or substantial alteration of the structure and so earns special income tax status or is eligible for a tax credit.

Historical age – The actual number of years since a building was constructed which means the same as chronological age. See Effective age.

HOA – See Home Owners Association.

Hold harmless clause – A contractual clause whereby one parry agrees to protect another party in the event of any claims.

Holder – A party to whom a promissory note is made payable

Holder in due course – A party who has taken a note, check or bill of exchange in the due course of a transaction, before it was overdue and in good faith and for value and without knowledge that it has been previously dishonored and without notice of any defect at the time it was negotiated to him or her.

Holding company – An entity that owns or controls another company(ies) which often allows more latitude for business practices than the operating company can achieve alone.

Holding period – The period of time during which a party owns a capital asset.

Holdout – An owner standing in the path of an assemblage who attempts to realize the highest possible price by refusing to sell during the early stages of assemblage.

Holdover tenant – A tenant remaining in possession of leased property after the leased term has expired.

Holographic will – A will written entirely by a testator with his own hand on a blank piece of paper.

Home – 1. A structure or space considered by its occupants to be their residence. 2. A term used especially by REALTORS® and builders pointing to a house.

Home equity loan – A loan sometimes called a line of credit where an owner uses his or her residence as collateral for a loan which permits the draw of funds up to a preset amount..

Home inspector – A professional who in some states must be bonded or licensed who evaluates the structural and mechanical condition of a home prior to title transfer.

Home loan – See Mortgage.

Home office – A portion of a home used for business purposes which has become common with the availability of affordable equipment such as computers, fax machines, copiers, scanners, etc. and electronic communication methods.

Home Owners Association, HOA – A collectivity of home owners into which monthly fees are paid in exchange for the ability to use common areas.

Homeowner’s insurance – A standardized insurance policy package that covers a residential real estate owner against financial loss from fire, theft, liability for property damage, personal liability and other common risks.

Homeowners association – An organized group of homeowners whose members regulate and enforce the rules and standards of their community.

Homeowners warranty program – See Builder warranty.

Homestead – 1. A dwelling with its land and buildings. 2. A statutory protection granted to owners which protects them from being able to lose their title by the occupation of real property by others.

Homestead exemption – A statutory protection on real property used as a home from the claims of certain creditors and judgments up to a specified amount.

Homogeneous – A group of properties having a uniform look or characteristics of like quality which tends to maximize property values versus whereas low-valued or unusual properties are likely to reduce the value of other nearby properties of higher cost.

Horizontal property acts – The laws enacted by states which permit the creation of the condominium form of real property ownership.

Hoskold Sinking Fund Method – A complex formula used in appraisal to estimate today’s value of a series of annual payments of one dollar after discounting for loss of interest on each dollar to the time of its collection which in its simplest form is a method that condominium associations can use today to determine their annual reserve contribution requirements.

House – A generally detached residential structure containing a single dwelling unit unlike an apartment building or townhouse.

Household – A housing unit occupied by one or more persons inhabiting it as their principal residence.

Housing and Urban Development, HUD – A department of the federal government created in 1965 which is responsible for the implementation and administration of the U.S. government Housing and Urban Development programs which include FNMA, FHA, Public Housing Urban Renewal and Community Facilities.

Housing code – A local government ordinance that sets minimum standards of safety and sanitation for existing residential buildings. See Building codes.

Housing starts – The number of newly constructed housing units which includes both single-family and multifamily domiciles.

Housing stock – The total inventory of dwelling units which includes forms both owned and rented.

HUD – See Housing and Urban Development.

HUD-1 Form – See Uniform settlement statement.

HVAC – An abbreviation for Heating, Ventilating, and Air-Conditioning which refers to the climate control system in a building.

Hypotenuse – The side of a right triangle that lies opposite the right angle.

Hypothecate – To pledge something as security without the necessity of giving up it’s possession.

Hypothesis of median location – A theory stating that there is the tendency for businesses and other entities to locate at their lowest time and cost point.

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Identity of interest – The system whereby the builder and sponsor of a housing project subsidized by the government have ownership interests in each other.

Illegal – An act contrary to and in violation of the law.

Illegality of purpose – The actual purpose of the contract is illegal and this is a reason for having a contract be declared void.

Illusory – A thing that is deceptive; deceiving by an illusion or false appearances and not real.

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

Implied – A conclusion that is not actually expressed in words but is suggested, presumed, assumed or deductible by fair inference or implication and is contained in its substance or essence.

Implied agency – An agency relationship that is concluded from the actions of the parties by which a third party might reasonably conclude that an agency relationship has been formed.

Implied contract – A contract that one would conclude exists as a result of the acts and/or conduct of the parties involved.

Implied knowledge – A legal concept that holds as a common understanding that a material fact or information known by a principal has been passed on to and therefore known by the agent.

Implied warranty of habitability – A theory in landlord and tenant law that when a landlord offers residential property for rent that he or she is giving the assurance that the property is actually habitable and fit for its intended use.

Impound account – A trust type account established by lenders for the accumulation of borrowers funds that are usually collected with the note payment to be used for the periodic payment of taxes, FHA mortgage insurance premiums, and/or future insurance policy premiums, which are required to protect the lenders security. See PITI.

Impounds – A trust type of account established by lenders to protect their security and used to accumulate a borrower’s funds to be able to pay their periodic tax, mortgage insurance premium, and hazard insurance policy premium payments.

Improper improvement – An out-of-place building which does not conform to the highest and best use of the site.

Improved land – The land that has had some improvements made in order to be able to serve a useful purpose and and which has been partially or completely developed.

Improved value – The difference between the income-producing ability of a property and the amount required to pay a return on the investment in the property.

Improvement – A building or appurtenance that is erected or constructed upon the land to release its income-earning potential such as a building, garage or wall.

Improvements to land – The publicly owned additions such as curbs, sidewalks, street lighting system and sewers, constructed so as to permit the development of privately owned land for utilization as opposed to improvements on land which are usually privately owned.

Imputed interest – In a loan that shows a nominal or named interest rate that is insufficient, the law will require that the rate be viewed as higher and the principal be viewed as lower and the IRS will consider a portion of the principal paid on the note as imputed interest and tax that portion as ordinary income.

Imputed notice – A legal concept that holds that information communicated to an agent is communicated to the principal because in the client agent relationship and that nothing is held back because it was the duty of the agent to report the information to the principal.

In personam – A court action which imposes upon the defendant a personal obligation, literally against the person, to obey the order, judgment or decree.

In rem – A proceeding against the property which is taken directly from the Latin term meaning against the thing and which is used in taking land for nonpayment of taxes, etc. and is distinguished from a proceeding against a person.

In the business – A term used in connection with transactions in notes and sales contracts where a party acquires for resale to the public and not as an investment eight or more trust deeds or land contracts during one calendar year is considered to be in the business and is required to have a real estate broker’s license.

Incentive – The payment or reward for taking a certain action that is usually in excess of a fixed compensation and based upon better performance than required by the agreement.

Inchoate dower – A wife’s interest in her husband’s real estate during his life which may become a right of dower upon his death.

Including interest – A loan payment term that includes both principal and interest in an amortized loan or a level-payment plan.

Inclusionary zoning – An ordinance that requires a builder of new housing to set aside a designated number of units for low and moderate income people.

Income – A stream of financial benefits generally measured in terms of money as of a certain time or a flow of service which is the origin of value.

Income approach – One of the three appraisal methods that can be used with income producing property that involves a three-step process of finding the annual net income, determining the appropriate capitalization rate and then dividing the net income by the capitalization rate to determine value. See Sales comparison approach and Cost approach.

Income property – A property in which the sole purpose of its existence is to produce income which may come from a variety of sources such as commercial rents or profits attributable to the real estate that is other than rents.

Income statement – A historical financial report prepared on either an accrual or a cash basis that indicates, sources and amounts of revenues, amounts of expense accounts, and profit or loss.

Income stream – A regular flow of money that is generated by a business or an investment.

Income to price ratio – The net income of a property divided by its selling price expressed as a percentage.

Incompetent – Any person who is not insane but is mentally incapable by reason of old age, disease, weakness of mind or any other cause is unable, unless assisted, to properly manage and take care of himself and/or his property and by reason thereof could easily be taken advantage of by skillful or dishonest persons.

Incorporate – 1. The process of forming a corporation under a state’s regulations. 2. The giving to a geographic area the legal status of a political subdivision of the state.

Incorporeal rights – The non-possessory rights arising out of real estate ownership like rents or a right-of-way.

Increment – The increase of land value most frequently used to refer to that which results from population growth and increasing wealth in the community.

Incremental income tax – The additional income tax due because of a given investment.

Incurable depreciation – A defect which cannot be removed or which it is very impractical to remove such as a defect in the bone structure of a building which is measured by age-life tables or life expectancy.

Incurable penalty – What occurs when the cost of repair adds less than its cost to the property’s value.

Indemnify – The taking on of liability by one party by agreeing to compensate another party for any hurt, loss or damage suffered by them.

Indemnity – An insurance against possible loss or damage such as a title insurance policy.

Indemnity agreement – An agreement by the maker to repay the beneficiary of the document up to the stated limit for any loss due to a named unforeseen event.

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

Independent contractor – A person who acts for another but sells final results and whose methods of achieving those results are not subject that person’s control.

Independent fee appraiser – A person who has no personal interest in a property who estimates the value of that property and is not connected to it by any lender.

Index lease – A lease in which the rental payments vary according to variations in an agreed-upon and easily identifiable established index of prices or costs.

Index method – A cost method of appraisal that estimates building costs by multiplying the building components of a property by an established factor to arrive at the current cost of construction.

Indirect costs – The costs such as marketing, administrative costs, professional fees, real estate taxes and insurance not directly associated with creating a structure but incurred during the construction period. Also known as Soft costs. The opposite of Direct costs.

Indirect lighting – The light that is reflected from the ceiling or other object that is other than from its direct source.

Indorsement – The signature on the back of a check or note with or without needing further qualification. Also the same meaning as endorsement. See Endorsement.

Industrial districts – An area in which the primary or major improvements to land are in the nature of factory, warehouse or related property.

Industrial park – An area in which the land is developed specifically for use for industrial purposes.

Industrial property – 1. All the tangible and intangible assets pertinent to the conducting of an enterprise for the manufacturing processing and assembling of finished products from raw or fabricated materials. 2. The land, fixed improvements, machinery and all equipment fixed or movable comprising the facilities devoted to a manufacturing enterprise.

Infant – A minor or a person not of full age who is lacking legal capacity to enter into a contract other than for necessities.

Infiltration – The displacement by persons of a lower economic status.

Inflation – An economic circumstance that occurs when real purchasing is decreased as a result of increases of prices being greater than the increases in productivity.

Infrastructure – The network of public facilities located within the community such as roads, schools, sewers, parks, utilities, etc.

Ingress – A place or means of going in or an entrance. See Egress.

Inheritance – An estate in lands or tenements or other things that are acquired by an heir as a result of the death of a person.

Inheritance taxes – The state-imposed taxes collected on a decedent’s real and personal property.

Initial note rate – The note rate upon origination of an adjustable rate mortgage that usually differs from the fully indexed note rate.

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

Inner city – The generally older and more urbanized area of a large city that surrounds the central business district and which often refers to densely populated blighted areas that are characterized by low-income residents and a high proportion of minority racial and ethnic groups.

Innocent purchaser – A party who is not responsible for the cleanup of a contaminated property such s a purchaser who knew nothing about the contamination and had a Phase I investigation done prior to the purchase.

Input – The information, data and so on that is fed into a computer or other system.

Input-output analysis – A technique for the analysis of an economy using a description of the production and the purchases of specific sectors of the economy.

Inquiry notice – The information the law assumes that a reasonable person would obtain about a property or anything else before buying it.

Inside lot – A lot in a subdivision that is surrounded on each side by other lots and having frontage on only one side as opposed to a corner lot which has frontage on at least two sides.

Inspection – A physical scrutinizing of documents or property done to assure correctness of paperwork such as loan papers, and/or compliance with building codes or absence of termites.

Installment contract – A real estate sales contract whereby the purchase price is paid in periodic installments by the purchaser who is in possession of the property and holds equitable title and where the seller retains legal title until a future date which is typically the final payment. Also known as a Contract for deed or Warranty deed.

Installment loan – See Installment note.

Installment note – An amortized loan note which provides for a series of two or more payments of principal and interest until the amount borrowed is paid in full.

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

Installment sale – The sale of real property on an extended payment basis often used to spread the tax consequence of a sale over a period of years.

Installment sales contract – See Land contract.

Institute of Real Estate Management, IREM – A National organization to professionalize members who are involved in all elements of property management through standards of practice, ethical considerations and educational programs which confers the Certified Property Manager, CPM; the Accredited Management Organization, AMO and the Accredited Resident Manager, ARM designations.

Institutional advertising – The advertising intended to popularize a particular company as opposed to the promotion of its products or services.

Institutional lenders – A financial depository such as a commercial bank, life insurance company or an intermediary, go-between, which pools the money of its depositors and then invests those funds in various ways including secured mortgages and trust deeds loans.

Instrument – A written legal document such as promissory notes, mortgages, trust deeds, installment sales contracts, leases and assignments that are created to affect the rights of the parties, to give formal expression to a legal act or agreement for the purpose of creating, modifying or terminating a right.

Insulation – A heat-retarding material applied in outside walls, top-floor ceilings or roofs to prevent the passage of heat or cold into or out of a building.

Insurable interest – An ownership interest which an insurer holds and is recognized as a property right and where the loss of it will result in a true loss of money or value to the insured party.

Insurable title – A title that a title insurance company is willing to insure.

Insurable value – The value up to which an insurer will recognize as a loss.

Insurance coverage – The total amount of insurance carried.

Insurance rate – The ratio of the insurance premium to the total amount of insurance carried which is usually expressed in dollars per $100 or per $1,000 and sometimes in percent.

Insurance risk – A general or relative term identifying the hazards involved in insuring property which is used to determine the premium or cost of insurance based on the relative risk or hazard considered to be involved.

Insured mortgage – A mortgage in which a party other than the borrower such as with an FHA-insured loan or a loan under PMI, Private Mortgage Insurance assures payment in return for the payment of a premium in the event of a default by the borrower.

Intangible – Anything that cannot be touched such as goodwill in real property.

Intangible assets – The elements in an enterprise which are represented in an established organization doing business, as its goodwill and other rights incident to the enterprise as distinguished from the physical items such as its physical loacation facilities and working capital.

Intangible value – An asset’s worth which is not immediately available in dollars but may be of significant value such as goodwill of an established business.

Integration – The initial or developmental stage in the life cycle of the value of a property.

Intelligent building – A building equipped with computer systems and sensors that monitor the areas needing to be heated and cooled and then to create maximum efficiency, automatically transfer air at the appropriate temperature from one place to another and can also heat and cool different pans of a building simultaneously.

Intensive margin – The extra benefits derived from adding increasing amounts of labor and capital to land.

Inter vivos – A Latin term meaning during one’s life.

Interchange – A system of underpasses and overpasses for routing traffic on and off highways without interfering with through traffic and for linking two or more highways.

Interest – 1. The cost in dollars paid for the use of money for a period of time like rent paid for the use of money. 2. The type and extent or having a portion, share or right in the ownership of something.

Interest extra loan – A loan in which a fixed amount of principal is repaid in installments for each period along with the interest accrued on the amount of the then outstanding principal.

Interest only loan – See Straight loan.

Interest rate – The percentage amount that is always expressed as an annual percentage but it can also be monthly or daily, of a borrowed sum that is charged for the use of the money which is sort of like rent being paid for use of the money.

Interim loan – A temporary or short-term loan secured by a mortgage which is used until permanent financing is available and which is then paid off from the proceeds of permanent financing. Also called Interim financing. See Construction loan or Bridge loan.

Intermediary – A person or entity that acts and moves between parties – a go-between.

Intermediate theory – A theory based on the principles of title theory that has been adopted by a number of states that requires a mortgage foreclosure proceeding to occur in order to be able to obtain legal title.

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

Internal rate of return, IRR – The predetermined earning rate requirement for an investment that is generally established by comparing other return opportunities available to the investor with the anticipated investment.

Internal Revenue Code, IRC – The law passed by Congress that specifies how and what income is to be taxed and what deductions may be taken against taxable income and gets interpreted from court cases, regulations, revenue rules, and revenue procedures.

Internal Revenue Service, IRS – An agency of the federal government that is responsible for administering the agency, collecting taxes and auditing federal income tax returns.

International Real Estate Federation, IREF – This organization promotes understanding of real estate among those involved in the real estate business throughout the world.

Interpleader – A court action or proceeding initiated by someone with no direct interest or ownership in a property, such as an escrow agent, for the purpose of having the court decide which of the claimants is legally entitled to the property.

Interpret – 1. To construe or to seek out the meaning of language. 2., To legally determine the intent of an agreement between parties.

Interstate Land Sales Full Disclosure Act, ILSFDA – A federal law administered by HUD to control the sale of large, unimproved residential subdivisions and which requires certain disclosures and advertising procedures when selling land to purchasers in other states.

Interurbia – A contiguous urban development larger than a city or metropolitan area.

Interval ownership – A form of ownership in contrast to timesharing that creates a sole ownership in a property where a buyer purchases a right to use the property for a specific part of a year.

Intestate – A condition that occurs when a person dies leaving no will or a will which is defective in form in which the estate passes according to law to his or her next of kin or heirs.

Intrinsic value – An appraisal term pointing to the value created in a person’s own mind for a particular type of property.

Inventory – A formal detailed list of articles of the property of a person or estate identifying the description, the quantity and value of each.

Inverse condemnation – An action brought by a property owner seeking just compensation for the use or value of land being so diminished due to the public use of adjacent property when the taking was not done through an eminent domain proceeding.

Inversely related cost – A simply put concept indicating that the more of them that are made the less they cost.

Investiture – See Livery of seisin.

Investment – The money placed in a property with a permanent intention and not as speculation with the expectation of producing a profit and assuming a reasonable degree of safety and the ultimate return of principal.

Investment analysis – A study of the likely return from a proposed real estate investment based on the value to a specific investor and with the objective of evaluating the amount that investor may pay for it, the investment’s suitability to that investor, or the feasibility of a proposed real estate development.

Investment calculation – The estimation of value as to a particular investor or user.

Investment credit – An allowance under federal tax law for certain items designed to assist growth in specific business sectors.

Investment property – 1. A property which is in and of itself a business enterprise consisting of tangible and intangible assets that are considered necessary to the property which have been assembled and or developed into a single unit of use that is for lease or rental in whole or in part to others with the anticipation of profit. 2. A property according to the Internal Revenue Code that is owned and produces no income like vacant land or gold.

Involuntary alienation – A loss of property due to nonpayment of taxes, loan delinquency, etc. See Alienation.

Involuntary conversion – A forced forfeit or disposition of property due to a casualty such as a sudden destruction by nature or theft for which one could receive insurance proceeds or due to condemnation or threat of condemnation in an involuntary conversion in which case most certainly a condemnation award. In contrast with voluntarily disposition ssuch as a sale.

Involuntary lien – A lien imposed against a property without the consent of its owner such as property taxes, special assessments and federal income taxes.

Inwood compound interest method – An appraisal formula used to estimate today’s value of a series of annual principal and interest payments of one dollar.

IREF – See International Real Estate Federation.

IREM – See Institute of Real Estate Management.

Irrevocable – A condition of being incapable of being changed, revoked, recalled, withdrawn or modified.

Irrigation districts – An operation of quasi-political districts created and governed to a great extent under special laws to provide for water services to property owners in the district.

Italian architecture – An architectural style ranging from a completely balanced design to an informal composition with formal treatment and openings which include completely framed window openings, circular heads over exterior openings, high windows and doors and S-shaped red roof tile.

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Jalousie – An exterior slotted blind or shutter window like a Venetian blind used to permit ventilation while avoiding rain penetration and also to control sunlight.

Jamb – The side post or lining of a doorway, window or other similar type opening.

Joint – The space between the two adjacent components surfaces that are connected by nails, glue, cement or mortar.

Joint and several liability – A responsibility where two or more parties are liable for the full payment of a debt or obligation and where the creditor may enforce payment against all of the parties together, jointly, or against each individually, severally.

Joint note – A note signed by two or more parties who have equal liability for its repayment.

Joint tenancy – An equal undivided ownership interest of a property by two or more natural persons each of whom has the right, called the right of survivorship, upon the death of one joint tenant to the automatic succession of the title of the deceased tenant.

Joint venture – A contractual arrangement under which two or more individuals or businesses firms participate as partners to share in the profits and losses of only a single, specific project rather than as a continuing business relationship.

Joist – A series of parallel beams which are supported by larger beams, girders or bearing walls to which the floor boards and ceiling lath, drywall or sheet rock are attached.

Judgment – 1. A final determination of a court of competent jurisdiction of a matter presented before it. 2. A money judgment awarded to a party to compensate for damages or to provide for the payment of a claim presented to the court.

Judgment creditor – A party who has received a decree or judgment from the court against a debtor to to have him or her pay all money due.

Judgment debtor – A party who has been issued a judgment by the court to pay the money owed.

Judgment lien – A legal claim involuntarily placed on all of the real and personal property of a judgment debtor which enables a judgment creditor to have the property of the debtor sold for payment of the amount of the judgment.

Judicial foreclosure – A court action taken to attempt to collect a debt owed.

Judicial notice – The doctrine that a court can assume certain facts to be true without the production of supporting evidence typically because they are common knowledge.

Judicial precedent – A legal concept established by a previous court decision(s).

Judicial sale – A legal process that enforces a judgment lien whereby the debtor’s property is sold to pay the debt.

Jumbo loan – A mortgage whose conforming loan limit or minimum amount is set every January and the limit for single-family homes and condominiums as of 2006 is $417,000

Junior lien – A lien on another loan that involves the same property that is placed by recording after an earlier lien has been placed.

Junior mortgage – A mortgage recorded later than another mortgage on the same property and whose claim against the property will be settled only after the earlier-recorded mortgage has been satisfied.

Jurat – The clause written at the foot of an affidavit stating when, where and before whom such affidavit was sworn.

Jurisdiction – 1. A political subdivision with power to govern its own affairs. 2. The power of a court to hear specific lawsuits.

Just compensation – The amount paid to the owner of a property when it has been acquired under eminent domain. See Condemnation.

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