Real Estate Terms
ABANDONMENT – The voluntary surrender of property rights, with no intention of reclaiming them and without vesting interest in another person. Nonuse is not necessarily abandonment.
ABATEMENT – The reduction of property tax assessment.
ABSTRACT – A history of the ownership of a property, showing transfers in ownership and factors affecting ownership, such as mortgages.
ACCELERATION CLAUSE – A clause in a promissory note, agreement of sale, or mortgage which gives the lender the right to call all sums due and payable in advance of the fixed payment date upon the occurrence of a specified event, such as a sale, default, assignment or further encumbrance of the property.
ACCEPTANCE – The expression of the intention of the person receiving an offer (offeree, usually the seller) to be bound by the terms of the offer. The acceptance must be communicated to the offeror and must be in writing to be enforceable. The buyer has the right to revoke the offer any time before the seller’s acceptance.
ACCESS OF RIGHT – The right of ingress and egress to and from property.
ACCOMODATION PARTY – A party who signs a negotiable instrument (not or bill) as maker, acceptor, or endorser, without receiving any consideration to accommodate another party and enhance the credit worthiness of the note.
ACCRETION – A build-up of land by natural forces such as wind, wave, or the flow of water.
ACCRUED DEPRECIATION – The difference between the present worth of improvements and the reproduction or replacement cost new, both measured on the appraisal date.
ACCRUED INTEREST – The interest earned for the period of time that has elapsed since interest was last paid.
ACKNOWLEDGEMENT – A formal declaration attached to or a part of an instrument, made before duly authorized officer (usually a notary public) by the person who has executed the instrument, the execution being a free act and deed (see AFFIDAVIT).
ACQUISITION – The act of becoming the owner of certain property; used also of the thing or property acquired.
ACRE – A measure of land equaling 43,560 square feet; or 4,840 square yards; or 160 square rods; or a tract about 208.71 feet square
AD VALOREM – “According to the Value”; used in connection with taxation.
ADD ON INTEREST – The full amount of interest calculated on the original principle for the term of a loan. It is added to the principal, thereby becoming a part of the face amount of the promissory note.
ADDENDUM – An addition to a written document. Addenda is the plural.
ADEQUATE PROTECTION – To protect the value of the creditors interest in the property being used by the debtor in possession.
ADJUSTABLE RATE MORTGAGE (ARM) – A mortgage in which the interest rate is adjusted periodically based on a pre-selected index. Also sometimes known as the renegotiable rate mortgage, the variable rate mortgage or the Canadian roll-over mortgage.
ADJUSTED BASIS – The cost of a property plus the value of any capital expenditures for improvements to the property minus any depreciation taken.
ADJUSTMENT INTERVAL – On an adjustable rate mortgage, the time between changes in the interest rate and/or monthly payment, typically one, three or five years depending on the index.
ADJUSTMENT PERIOD – The period elapsing between adjustment dates for an adjustable-rate mortgage (ARM).
ADMINISTRATOR – A person appointed by the court to manage and settle the estate of a deceased person who has left no will.
ADVANCE – In real estate, a partial disbursement of funds under a note. Most often used in connection with construction lending.
ADVANCE COMMITMENT – A written promise to make an investment at some time in the future if specified conditions are met.
ADVERSE POSSESSION – Acquisition of title to real property owned by someone else, by open, notorious, and continuous possession for the statutory period of time. Burden to prove title is on the possessor, who does not have a marketable title until he obtains and records a judicial decree quieting title. No right of adverse possession may be obtained against the United States.
AFFIDAVIT – A written declaration, sworn before an officer who has authority to administer oaths.
AFFORDABILITY ANALYSIS – An analysis of a buyers ability to afford the purchase of a home. Reviews income, liabilities, and available funds, and considers the type of mortgage you plan to use, the area were you want to purchase a home and the closing costs that are likely.
AFTER REPAIR VALUE (ARV) –The value of a property after it’s been improved, renovated, or fixed up. It’s the estimated future value of the property after repair. ARV is determined by referencing nearby comparable properties (comps).
AGENT – One who legally represents another, called a principal, from whom authority has been derived.
AGREEMENT OF SALE – A written agreement whereby the purchaser agrees to buy certain real estate and the seller agrees to sell upon terms and conditions set forth in the agreement.
ALIENATION – To transfer the title to real property from one person to another.
ALIENATION CLAUSE – A special type of acceleration clause that demands payment of the entire loan balance upon sale or other transfer of interest in property.
ALL-INCLUSIVE TRUST DEED – (aka– Wraparound Mortgage) A Trust Deed that includes the remaining balance on an existing first mortgage plus an additional amount requested by the mortgagor. Full payments on both mortgages are made to the mortgagee, who then forwards the payments on the first mortgage to the first mortgagee.
ALLOTMENT – Authorization by the head of an agency to subordinates to incur financial obligations up to a specified amount. An agency makes allotments under the regulations in OMB Circular No. A-34, and not to exceed the amount allowed by OMB.
ALLUVIUM – Also alluvion. Soil deposited by accretion, the increase in land on a shore or bank of a river due to change in the flow of a stream.
AMENITIES – Tangible and intangible benefits generated and received through exercise of rights to real property, not necessarily in the form of money.
AMENITY – An aspect of a property than enhances its value. Off-street reserved parking within a condominium community; the nearness of good public transportation, tennis courts, or a swimming pool are examples.
AMORTIZATION TERM – The length of time required to amortize the mortgage loan expressed as a number of months. For example, 360 months is the amortization term for a 30-year fixed-rate mortgage.
AMORTIZATION SCHEDULE – A table showing the amounts of principal and interest due at regular intervals and the unpaid balance of the loan after each payment is made.
AMORTIZATION PERIOD – The period of time for economic recovery of the net investment in a project. This period is the lesser of 1) the period of time over which the plan can be expected to serve a useful purpose, or 2) the period of time when further discounting of beneficial and adverse effects will not appreciably influence design.
AMORTIZATION -A reduction of debt on an installment basis over a fixed period of time.
ANALYZED PRINT OUT – A summary page on a piece of property generated from Turbo Bidder (a real estate investing tool).
ANGLE – A measure of rotation about a point, generally used in surveys to show the relationship of one line to another. Angles are usually measured in degrees, 360 degrees to a full circle or one full rotation back to the point of beginning. Each degree is broken down into 60 minutes, and each minute into 60 seconds.
ANIMAL UNIT – A measure of numbers of livestock equivalent to a mature cow. One A.U. equals 1,000 pounds live weight, or one cow, horse, or mule; five sheep or swine; six goats.
ANNEXATION – The act of attaching, adding or joining one thing to another, generally a smaller or subordinate thing with a large or principal thing. Usually with respect to land or fixtures.
ANNUAL MORTGAGE STATEMENT – A report by the lender or servicing agent to the mortgagor telling what taxes and interest were paid during the year, and how much principal balance remains.
ANNUAL PERCENTAGE RATE – Corresponding sometimes to a nominal APR and sometimes to an effective APR (or EAPR), describes the interest rate for a whole year (annualized), rather than just a monthly fee/rate, as applied on a loan, mortgage loan, credit card, etc.
ANNUITY – An amount paid yearly or at other regular intervals often on a guaranteed dollar basis.
APARTMENT – A complete and separate living unit in a building containing other units, usually at least four.
APPLICATION – A form used to apply for a mortgage loan, containing information about the borrower’s income, savings, assets, debts etc.
APPORTIONMENT – A distribution by OMB of amounts available for obligation in an appropriation or fund account, including budgetary reserves established by law. An apportionment divides amounts by specific time periods (quarters), activities, projects, objects, or a combination
APPRAISAL – A written estimate and opinion of value; a conclusion resulting from the analysis of facts.
APPRAISED VALUE – An opinion of a property’s fair market value, based on an appraiser’s knowledge, experience, and analysis of the property.
APPRAISER – One qualified by education, training, and experience that is hired to estimate the value of real and personal property based upon experience, judgment, facts, and the use of the formal appraisal processes.
APPRECIATION – An increased conversion value of property or mediums of exchange due to economic or related causes which may prove to be either temporary or permanent.
APPROPRIATION – Authorization by act of Congress permitting Federal agencies to incur obligations and make payments out of the ‘treasury for specific purposes.
APPURTENANCE – Anything: concrete or abstract: attached to the land and thus part of the property, such as a barn, garage, or an easement.
ARBITRATION – The determination of a dispute by a disinterested third party.
ARV (After Repair Value) – Real estate investing, particularly flipping properties, frequently requires that a purchased property be rehabilitated in some way. Usually it’s cosmetic work and repairs.
ASKING PRICE (LIST) – The price placed on property for sale.
ASSESSED VALUATION – An assessment of property values, by a unit of Government, for purposes of taxation.
ASSESSMENT – A charge against real estate made by a unit of government to cover a proportionate cost of an improvement, such as street or sewer.
ASSESSOR – A public official who establishes the value of a property for tax purposes.
ASSETS – All valuable things owned by a person, corporation, or other entity, encumbered or not.
ASSIGNEMENT OF MORTGAGE – A document that evidences a transfer of ownership of a mortgage from one party to another.
ASSIGNEMENT OF RENTS – An agreement signed between the property owner and mortgages specifically fixing the rights and obligations of each under a lease affecting the property. Usually provides that mortgagee may collect rents in the event of default by mortgagor; and apply rents to delinquent payments.
ASSIGNMENT (OF LEASE) – A transfer to another of rights, interest, or claim in or to real or personal property. The party who assigns or transfers his interest is the assignor, and the assignee is the one to whom the assignment is made.
ASSIGNMENT OF LEASES – The absolute or conditional transfer of the rights of either party to a lease.
ASSIGNOR – One who transfers, assigns, or sets over real property or an interest therein to another.
ASSOCIATE BROKER – A person who has qualified as a real estate broker but works for a principal broker licensed in the state.
ASSUMABILITY – An assumable mortgage can be transferred from the seller to the new buyer. Generally requires a credit review of the new borrower and lenders may charge a fee for the assumption. If a mortgage contains a due-on-sale clause, it may not be assumed by a new buyer.
ASSUMABLE LOAN OR MORTGAGE – A mortgage that allows a new buyer to take over payments with the same terms given to the original buyer.
ASSUMPTION – The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. Assuming a loan can usually save the buyer money since this is an existing mortgage debt, unlike a new mortgage where closing cost and new, probably higher, market-rate interest charges will apply.
ASSUMPTION AGREEMENT – An undertaking of a debt or obligation primarily resting upon another person.
ASSUMPTION FEE – The fee paid to a lender (usually by the purchaser of real property) when an assumption takes place.
ASSUMPTION OF MORTGAGE – The taking of title to property by a grantee wherein he assumes liability for payment of an existing note secured by a mortgage or deed of trust against the property. He becomes a co-guarantor for the payment of the mortgage or deed of trust along with the original maker of the note, who is not released from his responsibility.
ATTACHMENT – The legal process of seizing the real or personal property of a defendant in a law suit, by levy or judicial order, and holding it in the custody of the court as security for satisfaction of the judgment.
ATTEST – To witness or testify. To affirm that a document is true and genuine.
ATTORNEY IN FACT – A person authorized to perform certain acts for another person, under power of attorney.
AUCTION – A public sale of property to the highest bidder.
AUDIT – An examination of records of real estate transactions to verify accuracy and adequacy.
AVERAGE RATE OF RETURN – The return of an investment calculated by averaging the total cash flow over the years during which the cash flow is received by the investor.
AVM – Automated valuation model (AVM) is the name given to a service that can provide real estate property valuations using a mathmatic model combined with a database. AVMs may calculate a property’s value at a specific point in time by analyzing values of comparable properties. Some may take into account previous surveyor valuations, historical house price movements and user inputs like the number of bedrooms, improvements.
BALANCE SHEET – A statement of financial condition of a business organization showing assets, liabilities, capital, and including net worth as of a given date.
BALLOON PAYMENT – A final payment on a note. It is usually substantially larger than any of the preceding installments.
BANKRUPT – A person, firm, or corporation who, through a court proceeding is relieved from the payment of all debts after the surrender of all assets to a court appointed trustee, for the protection of creditors.
BANKRUPTCY – The state of being bankrupt.
BASERENT – The minimum fixed guaranteed rent in a commercial property lease.
BASICRENT – The rent charged in a subsidized housing project and computed on the basis of a maximum subsidy.
BASISPOINT – One one-hundredth of one percent. Used to describe the amount of change in yield in many debt instruments, including mortgages.
BENCH MARKS – A mark on permanent object indicating elevation and serving as a reference in land surveys.
BENEFICIARY – A person who receives and benefits from the gifts or acts of another, such as one who is designated to receive the proceeds from a will or trust.
BENEFICIARY STATEMENT – The statement of a lender that shows the remaining principal balance and other information about the loan. It is usually obtained when an owner wishes to sell or refinance. Often referred to as a “bene” statement, offset statement, ore estoppel certificate, and requested by escrow or title companies.
BEQUEATH – To leave personal property to another by will. To leave real property by will is to devise.
BETTERMENT – An improvement that increases property values as distinguished from repair or replacements that simply maintain value.
BID – An offering of money in exchange for property placed for sale. At an ordinary auction sale, a bid is an offer to purchase.
BILL OF SALE – A written instrument transferring title, right, and interest in personal property to another.
BINDER – An agreement to cover an earnest money deposit for the purchase of real property as evidence of the purchaser’s good faith and intention to complete the transaction.
BIWEEKLY PAYMENT MORTGAGE – A plan to reduce the debt every two weeks (instead of the standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half of the monthly payment required if the loan were a standard 30-year fixed rate mortgage. The result for the borrower is a substantial savings in interest.
BLANKET MORTGAGE – A single mortgage which covets more than one piece of real estate.
BLIGHTED AREA – A declining area in which property values are adversely affected by destructive natural or economic forces, such as encroachments, inharmonious property usages, changing social and economic neighborhoods, or rapidly depreciating buildings.
BLOCK – A rectangular portion of a city or town enclosed by streets, whether partially or wholly occupied buildings or containing only vacant lots as defined in the plot. Frequently used in legal descriptions.
BOMA International – BOMA is an acronym designating the Building Owners and Managers Association International, which is the oldest and largest professional organization of property managers and owners. It was founded in 1907 under the name “National Association of Building Owners and Managers,” and assumed its present name in 1968 when it expanded to include chapters outside of the United States.
BONA FIDE – in good faith; without fraud.
BOND – Any obligation under seal. A real estate bond is a written obligation, usually issued on security of a mortgage or a trust deed.
BOOK COST – The actual costs of assets purchase or acquired.
BOOK VALUE – The capitalized cost of an asset less depreciation taken for accounting purposes based upon the method used for the computation of depreciation over the useful life of the asset. Also, the actual value of an asset after the deduction of depreciation and all liabilities is the net book value.
BORROWER (Mortgagor) – One who applies for and receives a loan in the form of a mortgage with the intention of repaying the loan in full.
BREACH – A violation of any legal obligation.
Breach of Lease: A lessor or lessee breaches a lease contract when he or she violates the terms of that contract.
BREACH OF CONTRACT – Violation of any of the terms or conditions of a contract without legal excuse.
BREAK EVEN RATIO – Represents the sales amount—in either unit or revenue terms—that is required to cover total costs (both fixed and variable). Profit at break-even is zero. Break-even is only possible if a firm’s prices are higher than its variable costs per unit. If so, then each unit of the product sold, will generate some “contribution” toward covering fixed costs.
BREAK-EVEN POINT – In residential or commercial property, the figure at which occupancy income is equal to all required expenses and debt service.
BRIDGE LOAN – A second trust that is collateralized by the borrower’s present home, allowing the proceeds to be used to close on a new house before the present home is sold. Also known as “swing loan.”
BROKER – A person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them. See mortgage broker.
BUILDER’S RISK INSURANCE – Fire and extended coverage insurance for a building under construction. Coverage increases automatically as the building progresses and terminates at completion. Such a policy should be replaced by permanent insurance when the building is ready for occupancy.
BUILDING CODE – The local regulations that control design, construction, and materials used in construction. Building codes are based on safety and health standards.
BUILDING EFFICIENCY – A percentage ratio of net rentable area to gross building area.
BUILDING SITE – a lot on which there are no permanent buildings.
BUILT-INS – Cabinets, ranges, and ovens, or similar features that are part of the structure.
BUNDLE OF RIGHTS – The rights or interests that a person has in property. It is the exclusive right of an individual to own, possess, use, enjoy, and dispose of real property.
BUREAU RATE (STANDARD RATE) – For hazard insurance, and for title insurance in some states, a standard rate established by a rating bureau for all companies writing policies in a specific area.
BURNOUT – A home that has been damaged or destroyed by a fire.
BUY-DOWN – When the lender and/or the home builder subsidized the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires.
BUY-SELL AGREEMENT – An agreement entered into by an interim and a permanent lender for the sale and assignment of the mortgage to the permanent lender when a building has been completed. Often the mortgagor is a party to this agreement on theory that mortgagor should have a contractual right to insist the permanent lender buy the mortgage.
BUYER’S BROKER – A broker or agent who represents the buyer in a real estate transaction.
BUYER’S DOWN MARKET – A real estate cycle where there are more sellers of properties than there are buyers. This situation can occasionally give buyers more opportunities to buy choice properties at lower prices.
CALL PROVISION – In the mortgage or deed of trust, a clause giving the mortgagee or beneficiary the right to accelerate payment of the mortgage debt in full on a certain date or on the happening of specified conditions.
CAPITAL – The money and/or property comprising the wealth owned or used by a person or business enterprise. The accumulated wealth of a person or business. The net worth of a business represented by the amount that its assets exceed liabilities.
CAPITALIZATION RATE (CAP RATE) – This is used in commercial real estate to indicate the rate od return that is generated on real estate investment rental property. The Cap Rate is calculated based on net income. This is calculated by dividing net operating by the property asset value and is calculated as a percentage. Investors use this to estimate the potential return on their investment (ROI).
CAPITALIZATION – In appraising, determining value of property by considering net income and percentage of reasonable return on the investment.
CAPS (INTEREST) – Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage, which may charge per year and/or the life of the loan.
CAPS (PAYMENT) – Consumer safeguards which limit the amount monthly payments on an adjustable rate mortgage may change.
CARRYING CHARGES – Costs incurred by a developer or builder. Principally interest on land and construction loans and property taxes to cover expenses until the point of sale.
CARTOGRAPHY – The science or act of making maps.
CASH AFTER DEBT SERVICE – A ratio that measures the amount of cash a company has on hand as compared to its debt service obligations. Debt service obligations include all current interest payments due, as well as all current principal repayments due.
CASH FLOW – The amount of cash derived over a certain period of time from an income-producing property. The cash flow should be large enough to pay the expenses of the income producing property (mortgage payment, maintenance, utilities, etc.).
CASH VALUE – The actual money that an Asset will bring on the open market without any lengthy delay.
CASH-ON-CASH RETURN – Is the ratio of annual before-tax cash flow to the total amount of cash invested, expressed as a percentage.
CAVEAT EMPTOR – “Let the buyer beware” is Latin. Summarizes the rule that the buyer must examine, judge and test merchandise/property for himself.
CD – (see HUD-1 Statement)
CERTIFICATE OF CLAIM – A contingent promise to reimburse an insured mortgagee for certain costs incurred during foreclosure of an insured mortgage, provided the proceeds from the sale of the property acquired are sufficient to cover these costs.
CERTIFICATE OF DEPOSIT – A written document issued by a bank or other financial institution that is evidence of a deposit with the issuer’s promise to return the deposit plus earnings at a specified rate of interest (see NEGOTIABLE CERTIFICATE OF DEPOSIT).
CERTIFICATE OF ELIGIBILITY – The document given to qualified veterans which entitles them to VA guaranteed loans for homes, business, and mobile homes. Certificates of eligibility may be obtained by sending form DD-214 (Separation Paper) to the local VA office with VA form1880 (request for Certificate of Eligibility).
CERTIFICATE OF OCCUPANCY – Written authorization given by a local municipality that allows a newly completed or substantially completed, structure to be inhabited.
CERTIFICATE OF SALE – A certificate issued to the buyer of real property at a judicial sale.
CERTIFICATE OF TITLE – A document stating that title to a particular property is clear. It is prepared by an attorney or qualified person who has examined the abstract of title, but is not to be confused with title insurance. It is only an opinion that title is good. Usually given to a homeowner with the deed.
CHANGE OF FREQUENCY – The frequency (in months) of payment and/or interest rate changes in an adjustable –rate mortgage (ARM).
CHANGE ORDER – A change in the original plan of construction by a building owner or the general contractor.
CHATTEL – Personal property which is tangible and movable. (The word “chattel” evolved from the word “cattle”, one of man’s early important possessions.)
CLEAR TITLE – A title free and clear of all encumbrances.
CLEARING ACCOUNT – A bank account used by a mortgage servicer for temporary, short-term deposit of mortgage payments collected for transmittal to investors or for deposit in escrow accounts.
CLOSED PERIOD – That portion of the term of a mortgage loan during which the loan cannot be prepaid.
CLOSING COSTS – Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include an origination fee, an attorney’s fee, taxes, an amount placed in escrow, and charges for obtaining title insurance and a survey. Closing costs percentage will vary according to the area of the country; lenders or realtors often provide estimates of closing costs to prospective homebuyers.
CLOSING STATEMENT – An accounting by a broker of funds in a real estate sale, made to the seller and to the buyer.
CLOSING – A meeting at which a sale of a property is finalized by the buyer signing the mortgage documents and paying closing costs.
CLOUD ON TITLE – An outstanding claim or encumbrance which would affect or impair the owner’s title, if valid. A judgment or dower interest.
COINSURANCE – A relative division of risk between the insurer and insured, depending on relative amount of the policy and the actual value of the property insured. Takes effect only with partial loss, less than the amount of the policy coinsurance clauses induce the owner to carry full or nearly full coverage.
COLLATERAL – Property pledged as security for a debt, such as the real estate securing a mortgage.
COLLATERAL SECURITY – A separate obligation attached to a contract to guarantee its performance; the transfer of property or of other contracts or valuables, to ensure the performance of a principal agreement.
COLLECTION – The procedure followed to bring a delinquent mortgage account current.
COLLECTION REPORT – The form used by the correspondent (servicer) in reporting collection from mortgagors, including payments in full, repayment of advances, tax and insurance funds for foreclosed mortgages, and any other items not remitted as regular installment payments.
COLLOCATE – Sharing of one property by more than one user; especially armed forces recruiting facilities.
COMMERCIAL LOAN– A mortgage loan on a property that produces income.
COMMERCIAL PAPER – Short-term unsecured notes that are sold to meet short term capital needs.
COMMISSION – An agent’s compensation (fee) for negotiating a real estate or loan transaction, often expressed as a percentage of the sales price or mortgage amount.
COMMITMENT – An agreement between a lender and a borrower to loan money at a future date subject to compliance with stated conditions (see CONDITIONAL, FIRM, STANDBY, & TAKEOUT COMMITMENT).
COMMON ELEMENT – In a condominium, land and parts of buildings used by all owners for mutual convenience and safety.
COMMUNITY PROPERTY – Property accumulated through joint efforts of husband and wife, or by either one, during their marriage and owned in common.
COMPARABLE – Properties listed in an appraisal report which are substantially equivalent to the subject property, comparable in selling price, rental, income or similar measure.
COMPARATIVE MARKET ANALYSIS (CMA) – A demographic and economic analysis of the real estate market in which a property is situated. The analysis assesses a specific property and compares it to other properties with similar features to determine an informal value range and market standing for that particular property. The similar properties that are compared to the subject property are sometimes referred to as “Comparable’s.”
COMPENSABLE INTEREST – Interest of parties that is to be compensated.
COMPENSATING BALANCE – A deposit usually required by a commercial bank as a condition for extending a line of credit or a bank loan, whereby the deposit is not collateral for the loan.
COMPLETION BOND – A bond furnished by a contractor to guarantee completion of construction.
COMPLIANCE INSPECTION – Inspection of outgrants, military and civil, for compliance with terms of the outgrant and to review management/development of the property, particularly of outgrants which provide services to the general public.
COMPOUND INTEREST – Interest paid both on the original principal and on interest accrued from the time it fell due.
CONDEMNATION – In real property law, the process by which property of a private owner is taken for public use, with just compensation to the owner. Condemnation occurs under the right of eminent domain.
CONDITIONAL COMMITMENT – A commitment for a loan subject to one or more conditions.
CONDITIONAL SALE CONTRACT – A contract whereby the owner retains title to the property until the purchaser has met all of the terms and conditions of the contract.
CONDOMINIUM COMMON EXPENSE – In a condominium, expenses of operation and sums declared by the bylaws to be common expense.
CONDOMINIUM – Fee ownership of a unit in multi-unit building with joint ownership of common areas.
CONSIDERATION – An act or forbearance, or the promise thereof, which is offered by one party to induce another to enter into a contract; that which is given in exchange for something from another. Consideration is usually something of value, such as the purchase price in money, though it may be personal services or exchanged property. It is the price bargained for and paid for a promise.
CONSTRUCTION LOAN – A short-term interim loan to pay for the construction of buildings or homes. These are usually designed to provide periodic disbursements to the builder as they progress.
CONSUMER REPORTING AGENCY (or Bureau) – An organization that handles the preparation or reports used by lenders to determine a potential borrower’s credit history. The agency gets data for these reports from a credit repository and from other sources.
CONTAMINATION – Presence of unexploded conventional ordiance, or of biological, radioactive, toxic chemical, or hazardous substances (defined in comprehensive Environmental Response Compensation and Liability Act of 1980) at levels that present a public hazard or exceed applicable standards.
CONTINGENCIES –Any one of a number of common clauses added to real estate agreements that provide buyer or seller rights during various stages of a transaction.
CONTINGENCY – A condition that must be met before a contract is legally binding.
CONTRACT FOR DEED – A ‘land contract’ (sometimes known as a “contract for deed,” “agreement for deed,” “land installment contract” or an “installment sale agreement”) is a contract between a seller and buyer of real property in which the seller provides financing to buyer to purchase the property for an agreed-upon purchase price and the buyer repays the loan ininstallments. Under a land contract, the seller retains the legal title to the property, while permitting the buyer to take possession of it for most purposes other than legal ownership. The sale price is typically paid in periodic installments, often with a balloon payment at the end to make the timelength of payments shorter than a corresponding fully amortized loan without a final balloon payment. When the full purchase price has been paid including any interest, the seller is obligated to convey legal title to the property to the buyer. An initial down payment from the buyer to the seller is usually also required by a land contract. The legal status of land contracts varies from region to region.
CONTRACT RENT – Payment for use of property, as specified in a lease.
CONTRACT – An agreement, either oral or written to do or not to do certain things. In real estate, there are many different types of contracts, including listings, contracts of sale, options, mortgages, assignments, leases, deeds, escrow agreements, and loan commitments, among others.
CONVENTIONAL MORTGAGE – A mortgage on real estate securing a loan made by a private investor, not guaranteed by a Government agency such as FHA or VA.
CONVERSION CLAUSE – A provision in an ARM allowing the loan to be converted to a fixed-rate at some point during the term. Usually conversion is allowed at the end of the first adjustment period. The conversion feature may cost extra.
CONVEYANCE – The transfer of title to real property by means of a written instrument, such as a deed.
COST CERTIFICATION – A condition often placed, in the contract requiring a certification of cost by the architect, contractor, or owners; must sometimes be audited by a third party.
COST OF REPRODUCTION – The normal cost of exact duplication of a property with the same or closely similar materials as of a certain date or period.
COST, OVERRUN – The amount of money required or expended over and above budgeted costs, including such items as labor, interest, materials and land.
COST-PLUS CONTRACT – A construction contract in which the contract price is equal to the cost of construction plus a profit allowance to the builder; as opposed to a fixed price contract.
COUNTER OFFER – A response to an offer that effectively rejects the original offer and introduces a new offer with different terms and conditions.
COVENANT – A written agreement in a deed which pledges that either party will perform or abstain from specified acts on a certain property, or which specifies or forbids certain uses of the property.
CREDIT HISTORY – A record of an individual’s open and fully repaid debts. A credit history helps a lender determine whether a potential borrower has a history of repaying debts in a timely manner.
CREDIT RATING – A rating given to a person or company to establish credit worthiness based upon present financial condition, experience and past credit history.
CREDIT REPORT – A report of an individual’s credit history prepared by a credit bureau and used by a lender in determining a loan applicant’s creditworthiness.
CREDIT RISK SCORE – A credit risk score is a statistical summary of the information contained in a consumer’s credit report. The most well known type of credit risk score is the Fair Isaac or FICO score. This form of credit scoring is a mathematical summary calculation that assigns numerical values to various pieces of information in the credit report. The overall credit risk score is highly relative in the credit underwriting process for a mortgage loan.
CREDIT – An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.
CRITERIA – The standards you set for the real estate you choose to invest in.
CRITICAL MASS – The amount you need to live-on from the interest on your investments.
CROWDFUNDING – The practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the Internet. Or raising funds from two or more people over the internet towards a common Service, Project, Product, Investment, or Cause.
CUL DE SAC – A street with a dead end usually with adequate space at the end for vehicles to turn around.
CURTILAGE – Area of land occupied by a building and its yard and outbuildings, actually enclosed or considered enclosed.
CUSTODIAL ACCOUNTS – Bank accounts deposit of funds belongings to others (see ESCROW ACCOUNT).
CUSTODY – Responsibility for a property, as when the mortgagee turns a foreclosed property over to VA. This is a specialized VA term that may, but does not necessarily, include the legal right to physical possession of the property.
DAMAGES – Compensation or indemnity recovered through the courts by any person who has suffered loss, detriment or injury to person, property or rights. A sum of money awarded to a person injured by an act of another. May be compensatory or punitive.
DEBT COVERAGE RATIO – Also known as “debt coverage ratio,” (DCR) is the ratio of cash available for debt servicing to interest, principal and lease payments. It is a popular benchmark used in the measurement of an entity’s (person or corporation) ability to produce enough cash to cover its debt (including lease) payments. The higher this ratio is, the easier it is to obtain a loan.
DEBT SERVICE – Periodic payment on a debt, for interest on and retirement of the principal.
DEBT TO INCOME RATIO – Is the percentage of a consumer’s monthly gross income that goes toward paying debts. (Speaking precisely, DTIs often cover more than just debts; they can include principal, taxes, fees, and insurance premiums as well. Nevertheless, the term is a set phrase that serves as a convenient, well-understood shorthand.) There are two main kinds of DTI, as discussed below.
DEED OF RECONVEYANCE – The transfer of legal title from the trustee to the trustor (also called the borrower) after the trust deed debt is paid in full.
DEED OF TRUST – A document that embodies the agreement between a lender and a borrower to transfer an interest in the borrower’s land to a neutral third party, a trustee, to secure the payment of a debt by the borrower.
DEED RESTRICTION – A provision in a deed controlling or limiting the use of the land.
DEED – A legal instrument in writing, duly executed, sealed, and delivered, whereby the owner of real property (grantor) conveys to another (grantee) some right, title, or interest in real estate
DEED IN LIEU OF FORECLOSURE – is a deed instrument in which a mortgagor (i.e. the borrower) conveys all interest in a real property to the mortgagee (i.e. the lender) to satisfy a loan that is indefault and avoid foreclosure proceedings.
DEFAULT – Failure to perform a specific, required legal duty.
DEFERRED INTEREST – When a mortgage is written with a monthly payment that is less that required to satisfy the note rate, the unpaid interest is deferred by adding it to the loan balance. See negative amortization.
DEFERRED MAINTENANCE – Existing but unfulfilled requirements for repairs and rehabilitation, deferred until a later date.
DEFICIENCY JUDGMENT – At a foreclosure sale, the difference between the indebtedness sued upon and the sale price or market value of the real estate.
DEFICIENCY PAYMENT – Additional compensation required in a final judgment in condemnation proceedings. See also DEFICIENCY JUDGMENT.
DELINQUENCY – The failure to make payments on time. This can lead to foreclosure.
DELIVERY – The legal, final and absolute transfer of a deed from seller to buyer in such a manner that it cannot be recalled by the seller. A necessary requisite to the transfer of title. In mortgage banking, the physical delivery of loan documents to an investor or agent in conformance with the commitment.
DEMAND NOTE – A note that is due whenever the holder demands payment.
DEPOSIT RECEIPT – A form used to accept earnest money that binds an offer to purchase real property.
DEPOSIT – A sum of money given to bind the sale of real estate, or a sum of money given to insure payment or an advance of funds in the processing of a loan.
DEPRECIATION ALLOWANCE – The accounting charge made to allow for the fact that the asset may become economically obsolete before its physical deterioration. The purpose is to write off the original cost by distributing it over the estimated useful life of the asset. It appears in both the profit and loss statement and the balance sheet.
DEPRECIATION – (1) A lowering of value. A reduction; lessening. The decline in value of property. Loss in market value. Deterioration over a period of time. The opposite of appreciation. (2) In appraising, depreciation is the reduction on value of a property as measured from the cost to replace it. It is the difference between the replacement cost and the market value. (3) In accounting, it is a write-off (usually annually) of a portion of an asset on the records.
DETERIORATION – Impairment of condition. One of the causes of depreciation and reflecting the loss in value brought about by wear and tear, disintegration, use in service, and the action of the elements. To diminish or impair in quality.
DEVELOPER – A person or entity who prepares raw land for building sites, and sometimes builds on the sites.
DEVISE – A transfer of real property under a will. The donor is the devisor and the recipient is the devisee. Where there is no will, the real property “descends” to the heirs.
DISBURESEMENTS – The payment of monies on a previously agreed basis. Used to describe construction loan draws.
DISCLOSURE DOCUMET – A notice regarding problems with or defects in a property to acquaint tenants and other people who use a leased property with the hazards or expenses they may face. Disclosure documents may include information about environmental hazards or other property conditions. Some disclosures are mandated by federal law (such as the lead-based paint warnings required by the Environmental Protection Agency) and that others may be required by the laws of their state.
DISCOUNT POINT – A type of prepaid interest mortgage borrowers can purchase that lowers the amount of interest they will have to pay on subsequent payments. Each discount point generally costs 1% of the total loan amount and depending on the borrower, each point lowers your interest rate by one-eighth to one one-quarter of your interest rate. Discount points are tax deductible only for the year in which they were paid.
DISCOUNT – That which can be taken off the established amount. Mortgages, for example, are frequently discounted when paid in advance of maturity. (2) A sum paid to obtain certain preferred mortgages, as the payment of points to a lending institution for FHA and VA mortgages.
DISPOSSESS – To deprive a person of possession and/or use of real property.
DISSTRESSED PROPERTY – Property in poor physical condition that is often priced.
DOWER – The rights that a widow has in the property of her husband at this death.
DOWN PAYMENT – The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.
DUAL AGENT – An agent who represents both the buyer and the seller.
DUE DILIGENCE – Due diligence means taking caution, performing calculations, reviewing documents, procuring insurance, walking the property, etc. — essentially doing your homework for the property BEFORE you actually make the purchase. If there are too many issues with the property — and that means too much potential risk and cost — then you can cancel your purchase agreement and look for a better property.
DUE-ON-SALE PROVISION – A provision in a mortgage that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the mortgage.
DUPLEX – A single structure designed with two separate housing units.
DURESS – in contract law relates to where a person enters an agreement as a result of threats. Where a party enters a contract because of duress they may have the contract set aside. Originally, the common law only recognized threats of unlawful physical violence, however, in more recent times the courts have recognized economic duress as giving rise to a valid claim. Where the threat is to goods, the courts have been less willing to intervene, although analogous claims in restitution suggest that this position of the law may change. The basis of the duress as a vitiating factor in contract law is that there is an absence of free consent. Duress operates at common law. Pressure not amounting to duress may give rise to an action for undue influence in equity. The effect of a finding of duress and undue influence is that the contract is voidable. The innocent party may rescind the contract and claim damages. The normal bars to rescission operate
DWELLING UNIT – The living quarters occupied, or intended for occupancy, by a household.
EARNEST MONEY – The cash deposit made by a purchaser of real estate as evidence of good faith.
EASEMENT – A privilege or right which the owner of one parcel of land may have to use or enjoy the lands of another, i.e., a right-of-way.
EBAY – An online auction site www.ebay.com.
EXEMPT PROPERTY – Real estate that is not subject to property taxation. Religious, educational, and charitable organizations generally hold exempt property.
EFFECTIVE GROSS INCOME (PERSONAL) – Normal annual income including overtime that is regular and guaranteed. It may be from more than one source. Salary is generally the principle source, but other income may be significant and stable, and thus qualify.
EFFECTIVE GROSS INCOME (PROPERTY) – Stabilized income that a property is expected to generate after a vacancy and collection and allowance.
EFFECTIVE RATE – The actual rate of return to the investor. It may vary from the contract rate for a variety of reasons. Also called yield (see YIELD).
EGRESS – To go out. It is used with the word ingress to describe the right of access to land.
EMINENT DOMAIN – The right of the government, both state and federal, to take private property for a necessary public use, with just compensation paid to the owner.
ENCROACHMENT – Trespass; the building of a structure or any improvements partly or wholly intruding upon the property of another.
ENCUMBRANCE – Any claim, lien, charge or liability attached to and binding upon real property which may lessen the value of the property but will not necessarily prevent transfer of title.
ENDORSEMENT – A writing on negotiable instrument by which title to property mentioned therein is assigned and transferred. A notation added to an instrument after execution to change or clarify its contents. In insurance, coverage may be restricted or enlarged by endorsing a policy. In FHA loans, a notation placed on the note by the FHA indicating that the loan is insured under the National Housing Act.
ENTITLEMENT – The VA home loan benefit is called an entitlement (i.e. entitlement for a VA guaranteed home loan). This is also known as eligibility.
ENVIRONMENT IMPACT STATEMENT (EIS) – A statement required by many federal, state, and local environmental and land use laws. It contains an analysis of the impact that a proposed change may have on the environment of a specific geographic region. It examines a wide variety of physical, social, and economic conditions that would be affected by the proposed development. The analysis covers affects that cannot be avoided, alternatives to the proposed change, short-term vs, long-term uses and long-term productivity, irreversible commitments of resources, and the benefits to be derived.
ENVIRONMENT PROTECTION AGENCY (EPA) – Regulatory agency created to coordinate governmental efforts to protect the environment by abating and controlling pollution on a systematic basis. EPA is primarily responsible for administrating laws regarding air, noise, and water quality.
EQUAL CREDIT OPPORTUNITY ACT (ECOA) – Is a federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.
EQUITY PARTICIPATION – Partial ownership of income property, given by the owner to the lender, as part of the consideration for making the loan, also called EQUITY SHARING.
EQUITY – In real estate, the interest or value of the real estate over and above the amount of the indebtedness thereon.
ESCALATION CLAUSE – A clause in a lease which causes a rent increase, contingent on a specific action.
ESCHEAT – The reversion of property to the state if the owner dies intestate and without heirs.
ESCROW – To put money, a deed or other valuables, in the custody of a neutral third party until certain conditions are met.
ESCROW ACCOUNT – The segregated trust account in which escrow funds are held.
ESCROW AGENT/OFFICER – The person organization having a fiduciary responsibility to both the buyer and seller (or lender and borrower) to see that the terms of the purchase/sale (or loan) are carried out. Synonyms: escrow company and escrow depository (see CLOSING STATEMENT).
ESCROW AGREEMENT – A written agreement between two or more parties whereby the grantor, promisor or obligor, delivers certain instruments or property into the hands of a third party, the escrow agent, to be held by said third party until the happening of a contingency or performance of a condition, and then to be delivered to the grantee, promisee, or obligee.
ESCROW ANALYSIS – The periodic examination of escrow accounts to determine if current monthly deposits will provide sufficient funds to pay tax, insurance and other bills when due.
ESCROW COMPANY – A corporation established to act as an escrow agent (see ESCROW AGENT).
ESCROW CONTRACT – A three-party agreement of the buyer, seller, and the escrow holder specifying the rights and duties of each other.
ESCROW COSTS – All of the costs to the buyer and seller individually that are associated with the purchase, sale, or financing of real property. These include, but are not limited to, prorating of agreed items such as taxes and rents, the cost of title insurance policies, the cost of credit reports, recording fees, and escrow fee, Synonyms: closing costs, settlement costs.
ESCROW FEES – Fees charged by the escrow holder for services (see ESCROW COSTS).
ESCROW OVERAGE OR SHORTAGE – The differences, determined by escrow analysis, between escrow funds on deposit and escrow funds required.
ESCROW PAYMENT – That portion of a mortgagor’s monthly payments held in trust by the lender to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Known as impounds in some states.
ESTATE – In real estate it refers to the degree, quantity, nature, and extent of interest which a person has in real property, such as a fee simple absolute estate, an estate for years.
ESTOPPEL LETTER – Letter from lender with payoff.
EVICTION – The forcible removal of a tenant from leased premises, along with his or her personal property. When a tenant violates the terms and conditions of his or her lease, he or she may be subject to a legal process that results in what is called “actual eviction.” When a landlord acts in such a way (or alters property in such a way) that a tenant is effectively forced to leave the property and terminate his or her lease, what occurs is called “constructive eviction.”
EXAMINATION OF TITLE – The review of the chain of title as revealed by an abstract of the title or public records (see TITLE SEARCH).
EXCEPTION – In legal descriptions, that portion of the land to be deleted or excluded. The term is often used in a different sense to mean an objection to title or encumbrance on title (see ENCUMBRANCE).
EXCHANGE – Disposal of any real interest by exchanging it for another real interest of equal value instead of cash.
EXCLUSIVE RIGHT TO SELL – The same as exclusive agency listing, but the owner agrees to pay a full commission to the broker even though the owner may sell the property.
EXCULPATORY CLAUSE – A clause in the contract holding one party harmless in the event of some default. For example, the provision in a note that the debtor will not be held personally liable in the event of a default.
EXECUTE – To complete, finish, or in real estate deeds, to sign, seal, deliver.
EXECUTION – A judicial order directing an appropriate officer of the court to enforce judgment against the property or person of the judgment debtor in order to attempt to satisfy the judgment.
EXECUTOR – An individual or institution designated in a will and appointed by a court to settle the estate of the testator.
EX PARTE – A decision by a judge without all parties present. Used by Real Estate Investors to challenge and remove false liens.
EXTENDED COVERAGE ENDORSEMENT – An endorsement that may be attached to fire insurance policies. It generally includes coverage against the peril of windstorm, hail, explosion, riot, civil commotion, damage by aircraft or vehicles, and smoke.
EXTENSION – Continuation past original maturity date; continuation of a commitment.
EZ RENT TO OWN – The process of renting a house to someone with a Rental Agreement and a Purchase Agreement. The rent and deposit is applied to the purchase price.
FAIR MARKET VALUE – Legal term synonymous with MARKET VALUE.
FANNIE MAE – see Federal National Mortgage Association.
FARMERS HOME ADMINISTRATION (FmHA) – Provides financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere.
FEDERAL HOUSING ADMINISTRATION (FHA) – A division of the Department of Housing and Urban Development. Its main activity is the insuring of residential mortgage loans made by private lenders. FHA also sets standards for underwriting mortgages.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) – also known as “Fannie Mae”: A tax-paying corporation created by Congress that purchases and sells conventional residential mortgages as well as those insured by FHA or guaranteed by VA. This institution, which provides funds for on in seven mortgages, makes mortgage money more available and more affordable.
FHA LOAN – A loan insured by the Federal Housing Administration open to all qualified home purchasers. While there are limits to the size of the FHA loans, they are generous enough to handle moderately-priced homes almost anywhere in the country.
FHA MORTGAGE INSURANCE – A required fee paid at closing to insure the loan with FHA. In addition, FHA mortgage insurance requires an annual feed paid in monthly installments. The lower the down payment, the more years the fee must be paid.
FIDUCIARY RELATIONSHIP – A relationship of trust and confidence that generally imposes special obligations and is usually created by a legal agreement. For example, the relationship between a trustee and a beneficiary is a fiduciary relationship, as is the relationship between an attorney and his or her client. Property managers have this kind of relationship with the people who have hired them to oversee property.
FINANCING – The use of another party’s funding (such as a loan from a financial institution) to purchase property.
FINANCING PACKAGE – The total of all financial interest in a project. It may include mortgages, partnerships, joint venture capital interests, stock ownership, or any financial arrangement used to carry a project to completion.
FINANCING STATEMENT – Under the Uniform Commercial Code, a prescribed form filed by a lender with the registrar of deeds, or secretary of state. It gives the name and address of the debtor and the secured party (lender), along with a description of the personal property securing the loan. It may show the amount of indebtedness.
FINDERS FEE – A fee or commission paid to a broker for obtaining a mortgage for a client or for referring a mortgage loan to a broker. It may also refer to a commission paid to a broker for locating property.
FIRM COMMITMENT – A promise by FHA to insure a mortgage loan for a specified property and borrower. A promise from a lender to make a mortgage loan.
FIRST MORTGAGE – The mortgage on property that is superior in right to any other mortgage.
FIX AND FLIP – A money-making strategy in which you buy a house, fix it up, and then sell it a short time later for a profit.
FIXED INSTALLMENT – The monthly payment due on a mortgage including payment of both principle and interest.
FIXED RATE –An interest rate that remains constant over the term of the loan, such as fifteen or thirty years.
FIXED RATE MORTGAGE – The mortgage interest rate will remain the same on these mortgages throughout the term of the mortgage for the original borrower.
FIXTURE – A chattel which is affixed to and becomes a part of realproperty.
FLAT FEE LISTING – When a seller lists a property with a real estate broker who accepts a flat fee rather than a percentage of the sale price for the listing side of the transaction. When the home is sold the buyer’s broker is still usually offered a percentage of the sale price but that could also be a flat fee rather than a percentage.
FLOOR PLAN – Scale architectural drawing(s) showing details of a floor design and layout.
FOURPLEX – Having four apartments, divisions, or floors: a fourplex apartment building.
FORBEARANCE – The act of refraining from taking legal action despite the fact that a mortgage is in arrears. It is usually granted only when a mortgagor makes a satisfactory arrangement by which the arrears will be paid at a future date.
FORECLOSURE – Procedure whereby property pledged as security for a debt is sold to pay the debt in event of default in payments or terms.
FORFEITURE – The loss of money or anything of value due to a failure to perform.
FRANCHISE – The authorization to do business using the name and operating methods of another. In income property lending, a franchise may have a value as an additional security. It may also be assigned to the lender.
FRONTAGE – The property line abutting the most important adjacent property, usually a street, a lake, river or ocean.
FRONT-FOOT – A measurement (one foot in length) of the frontage of real property.
FULLY AMORTIZED ARM – An adjustable-rate mortgage (ARM) with a monthly payment that is sufficient to amortize the remaining balance, at the interest accrual rate, over the amortization term.
G. I. LOAN – Colloquial term given to a mortgage loan guaranteed by the Veterans Administration.
GAP FINANCING – A interim loan given to finance the difference between the floor plan and the maximum permanent loan as committed (see FLOOR PLAN).
GARNISHMENT – A proceeding that applies specified monies, wages, or property to a debt or creditor by proper statutory process against a debtor.
GENERAL CONTRACTOR – A party that performs or supervises the construction or development of a property pursuant to the terms of a primary contract with the owner. The general contractor may use its own employees for this work and/or the services of other contractors (sub-contractors).
GENERAL LIEN – A lien which attaches to all property owned by the debtor.
GENERAL WARRANTY – A covenant in the deed whereby the grantor agrees to protect the grantee against the world.
GINNIE MAE – See Government National Mortgage Association.
GOOD OFFER – A good offer is one that—when accepted, is low enough to guarantee an excellent return on the investment of time and money.
GOVERNMENT NATIONAL MORTGAGE ASSOCTIATION (GNMA) – A organization that provides sources of funds for residential mortgages, insured or guaranteed by FHA or VA. Also known as “Ginnie Mae.”
GRADUATED PAYMENT MORTGAGE (GPM) – A type of flexible-payment mortgage where the payments increase for a specified period of time and then level off. This type of mortgage has negative amortization built in to it.
GRANT – The act of conveying or transferring real property, the operative words in a conveyance of real estate are to “grant, bargain, and sell”. The grantor (the person who conveys the real estate) delivers the grant, in the form of a deed, to the grantee.
GRANTEE – Entity to whom a grant is made, or to whom real estate is conveyed. The buyer.
GRANTOR – Entity who makes a grant, conveys real estate by deed. The seller.
GREEN BELT – Forests, woods, parks or fields surrounding or enclosing urban areas (see COMMON AREAS).
GROSS AREA – The total floor area of a building, except that of un-enclosed areas, measured from the outside of the exterior walls.
GROSS INCOME – The projected annual income from operation of a business or from management of a property.
GROSS RENT MULTIPLIER – Ratio of sales price to monthly rental income for single family residential properties.
GROUND LEASE – A lease to use land for a stated period; may be secured by improvements which the tenant will provide.
GROWING-EQUITY MORTGAGE (GEM) – A fixed-rate mortgage that provides scheduled payment increases over an established period of time. The increased amount of the monthly payment is applied directly toward reducing the remaining balance of the mortgage.
GUARANTY – A promise by one party to pay a debt or perform an Obligation contracted by another in the event that the original obligor fails to pay or perform as contracted.
GUARDIAN – One appointed by the court to administer the affairs of an individual not capable of doing so by reason of age, understanding or self-control.
HARD MONEY LOANS – Also known as private money loans, they are usually made by private, non banking organizations which are generally secured by real estate and command interest rates higher than a typical bank would require because they usually carry more risk.
HARD MONEY – Hard terms.
HAZARD INSURANCE – Insurance coverage that in the event of physical damage to a property from fire, wind, vandalism, or other hazards.
HARD PAPER – NOTES WITH BANKS OR MORTGAGE CO’S
HIDDEN DEFECT – Any encumbrance on E title that is not apparent in the public records: for example, unknown heirs, secret marriages, forged instruments, mental incompetency or infancy of a grantor.
HIGHEST AND BEST USE – a concept used in a real estate appraisal that shows how the highest value for a property is arrived at. Value must be based on its highest and best use. Highest and best use is always that use that would produce the highest value for a property, regardless of its actual current use.
HOA – A collectivity of home owners into which monthly fees are paid in exchange for the ability to use common areas.
HOLDBACK – (1) That portion of a loan commitment not funded until some additional requirement, such as rental or completion, is attained (see FLOOR PLAN). (2) In construction or interim lending, a percentage of the contractor’s draw held back to provide additional protection for the interim lender, often an amount equal to the contractor’s profit given over when the interim loan is closed (see RETAINAGE).
HOLDOVER TENANT – A tenant who remains in possession of leased property after the expiration date of the lease term.
HOME INSPECTION – An examination of a home’s construction, condition, and internal systems by an inspector or contractor before purchase.
HOME LOAN – A mortgage loan secured by a residence for one, two, three or four families.
HOME STEAD – A home that is used as a personal residence. Where there is homestead protection, the homeowner generally files a homestead declaration with the county recorder, setting forth his marital status, describing the land and estimating the value of the homestead. The homestead is then exempt from creditor’s claims up to the statutory amount.
HOMEOWNERS ASSOCIATION – A nonprofit association that manages the common areas of a planned unit development (PUD) or condominium project. In a condominium project, it has no ownership interest in the common elements. In a PUD project, it holds title to the common elements.
HOMEOWNERS POLICY – A multiple peril policy commonly called “package policy.” It is available to owners of private dwellings and covers the dwelling and contents in the case of fire or wind damage, theft, liability for property damage, and personal liability.
HOUSING CODE – Local standards that ensure that maintenance and improvements of housing meet accepted standards and are adequate for occupancy.
HUD (Housing and Urban Development) – The federal department responsible for the major housing programs in the U.S. including HUD auctions.
HUD-1 STATEMENT ALSO KNOW AS CD – CLOSING DISCLOUSURE – – A document that provides an itemized listing of the funds that were paid at closing. Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow (impound) amounts. Each type of expense goes on a specific numbered line on the sheet. The totals at the bottom of the HUD-1 statement define the seller’s net proceeds and the buyer’s net payment at closing. It is called a HUD1 because the form is printed by the Department of Housing and Urban Development (HUD). The HUD1 statement is also known as the “closing statement” or “settlement sheet.” A HUD-1 is your Closing Spreadsheet that will have all the debits and credits in the closing transaction from the Title Company, Attorney or Escrow Agent.
HVAC – An abbreviation for Heat, Ventilation and Air conditioning and refers to the climate control system in a building.
HYPOTHECATION –is the practice where (usually through a letter of hypothecation) a borrower pledges collateral to secure a debt or a borrower, as a condition precedent to a loan, has a third party (usually an affiliate) pledge collateral for the borrower. The borrower retains ownership of the collateral, but the creditor has the right to seize possession if the borrower defaults. A common example occurs when a consumer enters into a mortgage agreement, in which the consumer’s house becomes collateral until the mortgage loan is paid off.
The detailed practice and rules regulating hypothecation vary depending on context and on the jurisdiction where it takes place. In the US, the legal right for the creditor to take ownership of the collateral if the debtor defaults is classified as a lien.
IMPOUND – That portion of a borrower’s monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as reserves.
IMPROVED LAND – Land having utilities, roads, or other improvements (see RAW LAND).
IMPROVEMENTS – An addition to land which costs labor or capital (buildings, pavements, etc.), more or less permanently attached. More than repair or replacement.
INCOME AND EXPENSE STATEMENT – The actual or estimated schedule of income and expense items reflecting net gain or loss during a specified period.
INCOME PROPERTY – Real estate developed or improved to produce income.
INCOME PROPERTY – Property owned or purchased primarily for the monetary return it will bring. It may be classified as commercial, industrial, or residential.
INDEMNIFY – To protect against or keep free from loss/ damage. To insure. To repay for loss/damage. To compensate for loss, reimburse.
INDEPENDENT CONTRACTOR AGGREMENT – In the United States, any company or organization engaged in a trade or business that pays more than $600 to an independent contractor in one year is required to report this to the Internal Revenue Service (IRS) as well as to the contractor, using Form 1099-MISC. This form is merely a report of monies paid; independent contractors do not have income taxes withheld from their pay as regular employees do. When computing taxable income on the federal income tax return, the independent contractor can deduct, from his gross income amount, the amount work related expenses, such as tools or safety gear needed for the work that were purchased by the contractor himself.
INDEX – the measure of interest rate changes that the lender uses to decide how much the interest rate of an ARM will change over time. No one can be sure when an index rate will go up or down. If a lender bases interest rate adjustments on the average value of an index over time, your interest rate would not be as volatile. You should ask your lender how the index for any ARM you are considering has changed in recent years, and where it is reported.
INDEXED RATE – The sum of published index plus the margin. For example, if the index were 9% and the margin 2.75%, the indexed rate would be 11.75%. Often, lenders charge less than the indexed rate the first year of an adjustable mortgage.
INFLATION – A rise in the prices of goods and services, as happens when spending increases relative to the supply of goods on the market.
INITIAL INTEREST RATE – The interest rate that is initially assessed on an adjustable-rate mortgage (ARM) and advertised in the origination process. The initial interest rate will be in force for a limited period of time, typically between 12 and 24 months. After this window of time is closed, the interest rate will reset itself to an index plus spread value that is higher than the initial rate. May also be called a “teaser rate”.
INJUCTION – An order of a court of equity prohibiting an act or compelling an act to be done.
INSPECTION CERTIFICATE – Certification by a correspondent or designated agent that a property has been inspected and is accurately represented in a submission. A certificate is sometimes accepted in lieu of a survey.
INSTALLED BUILDING EQUIPMENT – Equipment and furnishings required to make a building usable and attached as a permanent part of the structure (e.g., docks, overhead crane, etc.).
INSTALLMENT – The regular periodic payment that a borrower agrees to make to a lender.
INSTALLMENT CONTRACT – Purchase of real estate upon an installment basis; upon default, payments are forfeited. Often called a LAND CONTRACT, the deed to the property is not given to the purchaser until either all or a certain portion of the purchase price has been paid.
INSTALLMENT NOTE – A note requiring periodic payment or a specified sum to satisfy a debt.
INSTITUTIONAL LENDER – Financial intermediaries who invest in loans and other securities on behalf of investors or depositors; loans made by institutional lenders are regulated by law.
INSTRUMENT – A written legal document created to affect the rights of the parties.
INSURABLE INTEREST – The beneficiary who would suffer loss if the event insured against occurs; without an insurable interest, an insurance company will not issue a policy.
INSURABLE TITLE -A title that can be insured by a title insurance company.
INSURABLE VALUE – The net value of property being insured, after land and other exclusions have been deducted.
INSURABLE WITH REPAIR ESCROW: A property that requires no more than $5,000 for repairs to meet FHA’s MPR or MPS as estimated by the PCR and as reviewed and determined to be reasonable by the appraiser, is eligible to be marketed for sale in its as-is condition with FHA mortgage insuranceaavailable, provided the purchaser(s) establishes a cash escrow to ensure the completion of the required repairs. Purchaser(s) are permitted to include in the mortgage an amount equal to 110% of the estimated cost of the repairs.
INSURANCE – A contract for indemnification against loss.
INSURANCE IMDEMNIFACATION/MINIMUM/IN FORCE/CURRENT ON JOB – Indemnity insurance compensates the beneficiaries of the policies for their actual economic losses, up to the limiting amount of the insurance policy. It generally requires the insured to prove the amount of its loss before it can recover. Recovery is limited to the amount of the provable loss even if the face amount of the policy is higher. This is in contrast to, for example, life insurance, where the amount of the beneficiary’s economic loss is irrelevant. The death of the person whose life is insured for reasons not excluded from the policy obligate the insurer to pay the entire policy amount to the beneficiary.
INSURED MORTGAGE – A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (MI).
INTEREST ACCRUAL RATE – The percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments.
INTEREST RATE FLOOR – For an adjustable-rate (ARM), the minimum interest rate, as specified in the mortgage note.
INTEREST RATE – The rate of interest in effect for the monthly payment due.
INTEREST – The fee charged for borrowing money.
INTERIM FINANCING – A construction loan made during completion of a building or a project. A permanent loan usually replaces this loan after completion.
INVENTORY – A list of Real Estate deals that are currently available for sale or rent.
INVESTOR – A money source for a lender.
INVOLUNTARY LEN – A lien imposed against property without consent of the owner; example: special assessments and Federal income tax.
JOINT AND SEVERAL – An obligation which binds two or more persons individually and jointly. This type of obligation can be enforced by joint action against all or separate actions against one or more.
JOINT TENANCY – Co-ownership of real property by two or more persons, whereby the joint tenancy have equal interest, accruing by the same conveyance, commencing at the same time, and held by equal and undivided possession. Joint tenancy includes the right of survivorship, by which interest of a deceased tenant passes to survivors.
JOINT VENTURE – A contractual agreement joining together two or more parties for the purpose of executing a particular business undertaking. All parties agree to share in the profits and losses of the enterprise.
JUDGMENT – The final determination of the rights and liabilities of the parties in an action, as decreed by a court.
JUMBO LOAN – A loan of $417,000 or more, or a loan which exceeds the size limit set for purchase or securitization by the appropriate agency, such as Fannie Mae or Freddie Mac.
JUNIOR LIEN – A lien placed upon property after a previous lien has been made and recorded.
JUST COMPENSATION – Market value paid for real estate taken in a condemnation action.
LAND ACQUISITION LOAN – A loan that provides the mortgagor funds to acquire land.
LAND BANK – Land purchased and held for future development.
LAND SPECULATION – The purchase of unimproved land for investment purposes with expectations for rapid value increases.
LAND TRUST – These simple title holding trusts were originally started in Illinois, so they are often called Illinois Land Trusts. The purpose of a land trust is to allow one to have the legal title to his property held by another person, or trusteewhile retaining all of the rights and privileges of property ownership (the beneficial interest). The trustee acts only upon the beneficiaries direction. The property owner still retains all rights, such as the right to possession, to collect rent, mortgage the property, homestead exemption, and any other benefit he now has.
LANDLORD – One who rents property to others.
LANDMARK – In land surveys, any conspicuous object that helps establish land boundaries.
LATE CHARGE – An additional charge a borrower is required to pay as a penalty for failure to pay a regular installment when due.
LAW OF 72 – Take the constant (72) and divide it by the (rate of return) to find out how many years it will take your money to double.
LEASE – A written document by which the owner transfers the rights of use and occupancy of land and/or structures to another person or entity for a specified period of time in return for a specified rental.
LEASEHOLD – An estate or interest in an estate in real property held by virtue of a lease.
LEASEHOLD ESTATE – as opposed to property conveyed in a manner that transfers full ownership rights to the property.
LEASEHOLD MORTGAGE – A loan to a lessee secured by a leasehold interest in a property.
LEASE OPTION – An agreement between two parties in which the party who owns the property sells to the second party the right to purchase the property at a future date.
LEASE PENDENSE – Latin for “a suit pending,” a written notice that a lawsuit has been filed which concerns the title to real property or some interest in that real property.
LEASE PURCHASE CONTRACT –is a shortened name for lease with option to purchase contract. It is a form of real estate purchase which combines elements of a traditional rental agreement with an exclusive option of right of first refusal to later purchase the home.
These contracts are commonly used where a buyer wants to purchase a home, but due to credit issues would not qualify for a conventional mortgage and does not wish to, or would not qualify, for FHA or VA financing.
LEASE-PURCHASE MORTGAGE LOAN – An alternative financing option that allows low-and moderate-income home buyers to lease a home with an option to buy. Each month’s rent payment consists of principal, interest, taxes, and insurance (PITP) payments on the first mortgage plus an extra amount that accumulates in a savings account for a down payment.
LEGAL DESCRIPTION – A statement containing a designation by which land is identified according to a system set up by law or approved by law.
LESSEE ALSO CALLED ‘TENANT’ – A person/entity to whom property is rented under terms of a lease.
LESSOR – A person who rents property under a lease; the landlord.
LETTER OF CREDIT – A letter authorizing a person or company to draw on a bank, or stating that the bank will honor their credit up to the stated amount.
LEVERAGE – The use of debt financing of an investment to maximize the return per dollar of equity invested.
LIABILITY – Any drawback, debt, or obligation. Something that acts as a disadvantage. An obligation or duty that must be performed. The opposite of asset.
LICENSE – Authority to enter or use another person’s land or property, without possessing estate in it; revocable. Would otherwise constitute a trespass.
LIEN – A hold or claim which one person has upon the property of another as a security for some debt or charge.
LIMITED PARTNERSHIP – A business organization with one or more general partners, who manage the business and assume legal debts and obligations, and one or more limited partners, who are liable only to the extent of their investments. Limited partners also enjoy rights to the partnership’s cash flow, but are not liable for company obligations.
LINE OF CREDIT – An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain time to a specific borrower.
LIQUIDITY – The ability of an individual or business to quickly convert assets into cash without incurring a considerable loss.
LIS PENDENS- Latin for “a suit pending.” The term may refer to any pending lawsuit. (2) A written notice that a lawsuit has been filed concerning real estate, involving either the title to the property or a claimed ownership interest in it. The notice is usually filed in the county land records office. Recording a lis pendens alerts a potential purchaser or lender that the propertys title is in question, which makes the property less attractive to a buyer or lender. After the notice is filed, anyone who nevertheless purchases the land or property described in the notice takes it subject to the ultimate decision of the lawsuit.
LIST OF REPAIRS – A summary of repairs that need to be made on a house before renting or selling it.
LISTING – A written authorization to or lease real estate.
LISTING BROKER – A broker who has contracted with a seller to offer the property for sale at a specified price in exchange for a commission or some other consideration.
LOAN PACKAGE – A package of pertinent papers and documents regarding specific property or properties. It is delivered to a prospective lender for review and consideration for the purpose of making a mortgage loan.
LOAN TO VALUE RATIO – Is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased.
LOAN SERVICER – Loan servicing is the process performed by a company who will collect payments, calculate interest, principle and escrow payments from a borrower. The servicer will hold the escrows for property taxes and insurance, it is their obligation to pay the property tax and insurance when due.
LOCAL HOUSING AUTHORITY – A city agency that monitors and implements community housing development needs. Local agencies do not necessarily possess renewal or redevelopment authority.
MANAGEMENT AGREEMENT – An employment contract between an individual who owns real estate (generally called the owner or landlord) and the property manager or property management firm hired to manage property.
MANAGEMENT PLAN – A written description of what the person or firm managing the property will accomplish for the property and a plan for how these goals will be achieved.
MARGIN – The amount the lender adds to the index on an adjustable rate mortgage to establish the adjusted interest rate.
MARKET PRICE – The price paid regardless of pressures, motives, or intelligence.
MARKET RENT – The price a tenant pays a landlord for the use and occupancy of real property, based upon current prices for comparable property.
MARKET VALUE – The price at which a willing seller would sell and a willing buyer would buy, neither being under abnormal pressure.
MARKETABLE TITLE – A title that may not be completely clear, but has only minor objections that a well-informed and prudent buyer of real estate would accept.
MATURITY – The terminating or due date on a note, time draft, acceptance, bill of exchange, or bond. The date a time instrument of indebtedness becomes due and payable.
MAVEN – (also mavin) is a trusted expert in a particular field, who seeks to pass knowledge on to others. The word maven comes from the Hebrew, via Yiddish, and means one who understands, based on an accumulation of knowledge.
MAXIUM ALLOWABLE OFFER (MAO Formula) – Concept provides beginner investors a framework for making offers and buying distressed properties
MECHANICS LIEN – A statutory lien to secure payment to material men and mechanics for materials and services used to repair, improve, or maintain real property.
MILL – One-tenth of one percent, the measure used to state the property tax rate.
MIMIMUM PROPERTY STANDARDS – FHA regulations that set forth minimum acceptable technical standards for insurable loans.
MINERAL RIGHTS – The right to extract minerals from land. Does not include right to use the surface of the land to conduct mineral extraction. This must be obtained from the surface owner.
MLS (Multiple Listing Service) – An association of real estate agents providing for a pooling of listings and the sharing of commissions of a specified basis.
MOBILE HOME PARK – A tract of land providing roads, utility connections; and concrete slabs for mobile homes.
MODULAR HOUSE – A factory assembled residence built in units or sections, transported to a permanent site an erected on a foundation. The term excludes mobile homes.
MORATORIUM – A period in which a borrower is granted the right to delay fulfillment of an obligation.
MORTGAGE – A legal instrument pledging a described property for repayment of a loan under certain terms.
MORTGAGEE – one to whom a mortgage is made; the lender.
MORTGAGE BACKED SECURITIES – Bond-type investment securities representing an undivided interest in a pool of mortgages or trust deeds. Income from the underlying mortgage is used to payoff the securities.
MORTGAGE BANKER – A firm or individual active in the field of mortgage banking. Mortgage bankers, as local representatives of regional or national institutional lenders act as correspondent system is the foundation of the mortgage banking industry.
MORTGAGE BANKING – The packaging of mortgage loans secured by real property to be sold to a permanent investor with servicing retained for the life of the loan for a fee. The origination, sale, and servicing of mortgage loans by a firm or individual. The investor-correspondent system is the foundation of the mortgage banking industry.
MORTGAGE BROKER – An individual or firm that makes mortgage loans on its own behalf, with its own funds, usually expecting to re-sell the loans to lenders at a profit.
MORTGAGE DISCOUNT – The difference between the principal amount of a mortgage and the amount it actually sells for. Sometimes called points, loan brokerage fee, or new loan fee, the discount is computed on the amount of the loan, not the sales price.
MORTGAGE INSURANCE PREMIUM (MIP) – The amount charged for mortgage insurance, either to a government agency or to a private MI company. On an FHA loan, the payment is one half of one percent annually on the declining balance of the mortgage. It is a part of the regular monthly payment and used by FHA to meet operating expenses and provide loss reserves.
MORTGAGE NOTE – A written promise to pay a sum of money at a stated interest rate during a specified term. It is secured by a mortgage.
MORTGAGE LOAN – is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan. However, the word mortgage alone, in everyday usage, is most often used to mean mortgage loan.
MORTGAGE PORTFOLIO – The aggregate of mortgage loans held by an investor, or serviced by a mortgage banker.
MORTGAGOR – One who makes a mortgage, the borrower.
NEGATIVE AMORTIZATION – This occurs when monthly payments are not large enough to pay all the interest due on a loan. This unpaid interest is added to the unpaid balance of the loan. The danger of negative amortization is that the home buyer ends up owing more than the original amount of the loan.
NEGATIVE CASH FLOW – Chas expenditures of an income producing property in excess of the cash receipts.
NEGOTIABLE – A promissory note, or similar instrument, is said to be negotiable if title to the instrument, and the money it represents, can be transferred by mere endorsement and delivery by the holder, or by delivery only.
NET INCOME – The difference: between effective gross income (property) and the expenses including taxes and insurance. The term is qualified as net income before depreciation and debt services.
NET LEASE – A lease agreement whereby the lessee pays all property charges (taxes, insurance, maintenance) in addition to rent. Local market customs and terms vary, in some areas, “net, net” and “net, net, net” are used.
NET OPERATING INCOME (NOI) – in general, synonymous with net earnings, but considered a broader and better term; the balance remaining, after deducting from the gross income all operating expenses, maintenance, taxes, and losses pertaining to operating properties excepting interest or other financial charges on borrowed or other capital.
NET WORTH – Assets minus liabilities.
NET YIELD – That part of gross yield that remains after the deductions of all costs, such as servicing, and any reserves for losses.
NOTE – A written instrument acknowledging a debt and promising payment.
NOTE SEASONING – Describes the amount of time a payer has been making payments. As a general rule the longer the better.
NOTICE OF COMPLETION – Notice recorded after completion of construction. Mechanics liens must be filed within a specified period thereafter.
NOTICE OF DEFAULT – (1) A notice recorded after the occurrence of a default under a deed of trust or mortgage; (2) a notice required by an interested third party who has insured or guaranteed a loan (FHA, VA or PMI).
NOTICE TO QUIT – A written notice from a landlord to a tenant that the tenant must vacate the premises at the end of the term or immediately, if the lease is at will.
NUISANCE – Something unauthorized that is injurious to the community
OBLIGATION – Legal reservation of funds based on known requirements (a contract, for example), or a realistic estimate of costs.
OBSOLESCENCE – The loss of value of a property occasioned by going out of style, by becoming less suitable for use, or by other economic influences.
OCCUPANCY RATE – The percentage of space or units which are leased or occupied.
OFFER – A promise by one party to act in a certain manner provided the other party will act in the manner requested. The offeror is the one who makes the offer to the offeree.
OFFERING SHEET – A one-page loan summary that points out its important features. This summary assists the investor in evaluating the mortgage loan being submitted by the loan correspondent.
OFFISTE IMPROVMENTS – Improvements outside the boundaries of a property, such as sidewalks, streets, curbs, and gutters that enhance its value.
ONSITE IMPROVEMENTS – Any construction of buildings or other improvements within boundaries of a property that would increase its value.
OPEN-END MORTGAGE – A mortgage containing a clause that permits the mortgagor to borrow money after the loan has been reduced without rewriting the mortgage.
OPERATING BUDGET – A detailed projection of all income and expensed for a given period.
OPERATING EXPENSES – Generally regarded as all expenses of a property with the exception of real estate taxes, depreciation, interest, and amortization.
OPERATING RATIO – The percentage relationship between budgeted or actual operating expenses, plus taxes, and effective gross income.
OPTION – A privilege, acquired for a consideration, of demanding within a specified time the carrying out of a transaction upon stipulated terms. The optionor grants an option to an optionee.
ORIGINATION FEE – A fee or charge for the work involved in the evaluation, preparation, and submission of a proposed mortgage loan.
ORIGNIATOR – A person who solicits builders, brokers, and others to obtain applications for mortgage loans. Origination is the process by which the mortgage banker brings into being a mortgage secured by real property.
OWNER FINANCING – A property purchase that is partly or wholly financed by the seller.
PARTIAL PAYMENT – In loan collection less than full payment due, usually not credited until the balance is received.
PARTICIPATION LOAN – (1) A mortgage made by one lender in which one or more lenders own a part interest; (2) a mortgage originated by two or more lenders.
PARTY WALL – A wall built on a line between two adjoining properties and used by both owners.
PAST DUE LOAN – A mortgage loan that is delinquent or has matured and not been paid in full.
PAY OFF – To satisfy in full an existing indebtedness.
PAYMENT SCHEDULE/WITH MILE STONES AND BENCHMARKS – The payment schedule of financial instruments defines the dates at which payments are made by one party to another on for example a bond or derivative. It can be either customised or parameterised.
PERFORMANCE BOND – A bond to guarantee performance of specified acts, such as the completion of property or off-site improvements.
PERFORMANCE CLAUSE – A clause requiring the Specific Performance, Equitable Relief, or Injunctive Relief. The clause requires a defaulting party to perform the contractual obligations in accordance with the terms of the bargain.
PERSONAL PROPERTY – All physical objects of a personal or movable nature subject to ownership, except real estate (real property). See also PROPERTY and REAL PROPERTY. PLAT – Map of town, section, or subdivision, showing location and boundaries of individual properties.
PERPETUITY – An annuity in which the periodic payments begin on a fixed date and continue indefinitely.
PITI (PRINCIPLE, INTEREST, TAXES AND INSURANCE) – The Principle and Interest payment on most loans is fixed for the term of the loan; the Tax and Insurance portion may be adjusted to reflect changes in taxes or insurance costs.
PLANNING COMMISSION – A local or regional organization, normally a government agency responsible for the preparation and adoption of comprehensive long-term general plans for the physical development of property within its jurisdiction.
PLAT BOOK – A book showing the lots and legal descriptions of the subdivisions of an area, usually recorded and kept in the office of the city or county.
PLOT PLAN – A diagram showing the proposed or existing use of a specific parcel of land. Typically shows the location, dimensions, parking areas, and landscaping.
PLOT – A piece of land.
POINT – An amount equal to one percent of the principle amount of an investment or note. Loan discounts are a one-time charge assessed at closing by the lender to increase the yield on the mortgage loan to a comprehensive position.
POSITIVE CASH FLOW – When rental and other income more than covers the operating expenses and debt service of the property.
POWER OF ATTORNEY – An instrument authorizing someone to act as another person’s agent or attorney. The agent is attorney in fact, and his power is revoked at the death of the principal by operation of law. Power of attorney may be general or special.
PRE-APPROVAL – The process of determining how much money the buyer will be eligible to borrow before they apply.
PRELIMINARY TITLE REPORT – A title search by a title company prior to issuance of a title binder or commitment to insure.
PREMISES – A defined portion of land and the improvements thereon as usually described in a deed, deed of trust, or a mortgage.
PREMIUM – The amount, often stated as a percentage, paid in addition to the face vale of a note or bond. Also, the charge for insurance coverage.
PREPAYMENT PENALTY – Penalty for the payment of a mortgage or deed of trust note before it actually becomes due. PRICE – The amount paid in legal tender, goods, or services; the consideration; purchase price. The terms for which a thing is done.
PRIME RATE – The interest rate that the banks charge their best corporate customers.
PRINCIPAL – Amount of a loan balance. In a mortgage payment of principal and interest, the principal repays the loan.
PRINCIPAL AMORTIZATION – The reduction of the amount of the loan through periodic installment payments.
PRINCIPLE BALANCE – The outstanding balance of principle on a mortgage not including interest or any other charges.
PRINCIPLE, INTREST, TAXES AND INSURANCE (PITI) – The four components of a monthly mortgage payment. Principle refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the monthly cost of property taxes and homeowners insurance, whether these amounts that are paid into an escrow account each month or not. Also called monthly housing expense.
PRIVATE MORTGAGE INSURANCE (PMI) – Insurance written by a private company protecting the mortgage lender against loss occasioned by a mortgage default.
PROBATE – a court-supervised process by which the deceased person’s property is distributed to pay off the deceased person’s debts and then to give the remaining money and property to the rightful heirs.
PROCESSING – The preparation of a mortgage loan application and supporting documents for consideration by a lender or insurer.
PROFORMA STATEMENT– A financial or accounting statement projecting income and performance of real estate within a period of time (usually one year) based upon estimates and assumptions.
PROMISSORY NOTE – See MORTGAGE NOTE.
PROOF OF LOSS – A statement taken from the insured by the insurer, regarding the details of their loss. The insurer uses the information gained to determine their liability for the loss.
PROPERTY – The rights or interests a person has in the thing he owns; not, in the technical sense, the thing itself. These rights include the right to possess, to use, to encumber, to transfer and to exclude, commonly called the bundle of rights. In modern understanding, however, property has come to mean the thing itself to which certain ownership rights are attached. Property is either real or personal.
PROPERTY ANALYSIS – A description of the current fiscal and physical condition of a particular property
PROPERTY MANAGER – The individual overseeing the physical and financial maintenance of an owner’s property, often employed by a real estate brokerage firm or a property management firm.
PROPERTY MANAGMENT – The operation and oversight of an owner’s property carried out by a professional property manager for compensation. Property management operations generally include marketing the property; advertising and rental activities; collecting, recording, and remitting rents; maintaining the property; tenant relations; hiring employees; keeping proper accounts; and providing periodic reports to the owner. Other obligations can be imposed by specific clauses in a management agreement.
PROPERTY MANAGMENT COMPANY – A company that finds and screens tenants, pays for routine maintenance, and collects rent from tenants for a percentage of the monthly rental income.
PROSPECTUS – A legal document offering securities or mutual fund shares for sale, required by the Securities Act of 1933. It must explain the offer, including the terms, issuer, objectives (if mutual fund) or planned use of the money (if securities), historical financial statements, and other information that could help an individual decide whether the investment is appropriate for him/her.
PUNCH LIST – A list of discrepancies in building plans or other construction flaws written by the original architect during his final inspection of the structure.
PULLING A PERMIT– Getting permission form the city or county goverment to do work or install plumbing or electricity.
PURCHASE AGREEMENT– See AGREEMENT FOR SALE.
PURCHASE MONEY MORTGAGE – A mortgage given by the grantee to the grantor, on the same land and concurrently with the conveyance, to secure the unpaid balance of the purchase price.
The “estate” is composed of everything the decedent owned including real estate, cars, bank accounts, furniture, etc.
QUITCLAIM DEED – A deed of conveyance with conveys to the grantee without warranty of title whatever interest, title, or claim the grantor possesses.
QUALIFIED INVESTOR – A qualified investor (or an accredited investor), must either have a net worth of a million dollars or an annual income of $200,000 or more. Companies wishing to raise capital form individuals without issuing registered securities are forced to limit their search to people who meet these thresholds. Although there are rules that affect Private Money lenders being at qualified investor is not one of those rules.
Note always check with an attorney before doing any real estate transaction.
RATE OF RETURN – In finance, return is a profit on an investment.It comprises any change in value, and interest or dividends from the investment.
REAL ESATE SYNDICATE – A group of investors who pool funds for investment foreclosure.
REAL ESTATE AGENT – A person licensed to negotiate and transact the sale of real estate on behalf of the property owner. REALTY – A term sometimes used as a collective noun for real property or real estate.
REAL ESTATE INVESTMENT TRUST (REIT) – REIT. A corporation or trust that uses the pooled capital of many investors to purchase and manage income property (equity REIT) and/or mortgage loans (mortgage REIT). REITs are traded on major exchanges just like stocks. They are also granted special tax considerations. REITs offer several benefits over actually owning properties. First, they are highly liquid, unlike traditional real estate. Second, REITs enable sharing in non-residential properties as well, such as hotels, malls, and other commercial or industrial properties. Third, there’s no minimum investment with REITs. REITs do not necessarily increase and decrease in value along with the broader market. However, they pay yields in the form of dividends no matter how the shares perform. REITs can be valued based upon fundamental measures, similar to the valuation of stocks, but different numbers tend to be important for REITs than for stocks.
REAL ESTATE OWNED (REO) – A term frequently used by lending institutions as applied to ownership of real property acquired for investments or as a result of foreclosure.
REAL ESTATE – Land and anything built on, growing on, or affixed to land.
REAL ESTATE TAX LIEN – A lien that is the result fo a real estate tax payment default and is generally always in first position above all other liens.
REAL PROPERTY – A land and appurtenances including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits and inherent rights thereof.
REALTOR – A real estate broker or an associate holding active membership in a local real state board affiliated with National Association of Realtors.
REALTY – A brief term for real property and the business involved in the buying and selling of real property.
RECAPTURE – An owner’s recovery of money invested in real estate, usually referring to a deprecation allowance.
RECEIVER – An appointee of a court to collect rents and manage and protect the interest of the lender of creditors during foreclosure or other litigation.
RECISSION – The cancellation of a contract. With respect to mortgage financing, the law that gives the homeowner three days to cancel a contract in some cases once it is signed if the transaction uses equity in home as security.
RECORDING – The noting in the registrar’s office of the details of a properly executed legal document, such as a deed, mortgage, a satisfaction of mortgage, or an extension of mortgage, thereby making it part of the public record.
RECOURSE NOTE – A debt instrument under which the lender can take action against the borrower or endorser personally, in addition to foreclosure.
REDEMPTION PERIOD – The time allowed by the law in some states during which a mortgagor buy back property by paying the amount owed on a foreclosed mortgage, including interest and fees (see EQUITY OF REDEMPTION).
REDEMPTION – The right to redeem property during the foreclosure period; the right of an owner to redeem his property after a sale for taxes. Often referred to as Equity of Redemption.
REFINANCING – The repayment of a debt from the proceeds of a new loan using the same property as security.
REHABILITATION (REHAB) – The restoration to good use, through repair of structures or improvements of public facilities, of a declining area of neighborhood to arrest and reverse deteriorating influences.
REINSTATEMENT – The acknowledgement by mortgage that an accelerated loan has been brought current by the mortgagor.
REIT – See REAL ESTATE INVESTMENT TRUST.
RELATED FURNISHINGS – Property which is not fixed to or part of a building: furniture, furnishings, equipment.
RELEASE OF CLAUSE – A stipulation in the mortgage or deed of trust that a portion of the security may be released from the lien if certain conditions are met.
RELEASE OF LIABILITY – An agreement by a lender to terminate the personal obligation of a mortgagor in connection with the payment of a debt. FHA and VA require approval by regulatory agencies for a release of liability.
RELEASE OF LIEN – The discharge of certain property from the lien of a judgment, mortgage, or claim.
RENT REVIEW – An increase in rents which is carried out during the term of a lease. Most leases allow for rents to be reviewed every three or five years.
RENT TO OWN – A means of acquiring ownership over time without taking on debt.
RENT – Compensation, either in money, provisions, chattels, or labor, received by the owner of real estate from the occupant.
RENT SCHEDULE – A statement of a property’s proposed rental rates. A landlord and property manager can work together or separately to determine the rental rates by considering the building’s estimated expenses, current market characteristics, and goals for the future use of the property.
RENTAL CONCESSION – A landlord’s agreement to forego part of the advertised rent in an effort to attract tenants.
RENTAL MARKET – A collection of economic factors that determine the relative supply of and demand for rental property in a given area. Rental markets can be calculated for neighborhoods, regions, states or countries.
REO – See REAL ESTATE OWNED.
REPLACEMENT COSTS – Cost of a building with equivalent utility but with modern materials and eliminating deficiencies of the building it replaces.
RESERVATION – A right reserved by an owner in the grant (sale or lease) of a property.
RESIDENT MANAGER – A resident manager resides at the same address as the property he or she manages, allowing the manager to supervise security and address maintenance concerns at all times. A resident manager may be an employee of a property management firm and is sometimes referred to as a building superintendent.
RESIDENTIAL MORTGAGE LOAN ORIGINATOR (RMLO): A company or licensed induvial who will dray up the mortgage documents when you are selling a property with owner finance
RESTRICTION – A limitation upon the use or occupancy of real estate, placed by covenant in deeds or by public legislative action.
RESTRICTIVE COVENANT – A clause in a deed limiting use of the property conveyed for a certain period of time.
RETURN ON EQUITY – Measures the rate of return on the ownership interest (shareholders’ equity) of the common stock owners. It measures a firm’s efficiency at generating profits from every unit of shareholders’ equity (also known as net assets or assets minus liabilities).
RETURN ON INVESTMENT(ROI) – is used to measure and evaluate the efficiency of investment. Return on investment is a ratio between net profit and cost of investment. A high ROI means the investment’s gains compare favorably to its cost. As a performance measure, ROI is used to evaluate the efficiency of an investment or to compare the efficiencies of several different investments.
REVERSE LEVERAGE – A situation that arises when financing is too costly. It results when total yield on cash investment is less than the financing constant on borrowed funds (see NEGATIVE CASH FLOW).
REVERSE MORTGAGE – A form of mortgage in which the lender makes periodic payments to the borrower using the borrower’s equity in the home as collateral for and repayment of the loan.
REVERSION – The residue of an estate left in the grantor to commence in possession after the determination of some particular estate granted out by him. The return of land to the grantor and his heirs after the grant is over.
RIGHT OF SURVIVORSHIP – The distinctive characteristic of a joint tenancy (also tenancy by the entirety) by which the surviving joint tenants) succeeds to all right, title, and interest of the deceased joint tenant without the need for probate proceedings.
RIGHT-OF-ENTRY – A written instrument, binding on all parties, which provides authority to enter on certain premises to perform specified acts, without acquiring any estate or interest in the property.
RIGHT-OF-WAY – The right or privilege, acquired through accepted usage or by contract, to pass over a designated portion of the property of another. A right-of-way may be private, as in an access easement given a neighbor, or public, as in the right-of-way to use the highways and streets.
RULE OF 2% – he 2% rule-For a rental property investment to be “good”, the monthly rent should be equal to or higher than 2% of the purchase price. Example–For a $100,000 property, the monthly rent collected needs to be $2,000/month or higher to meet this guideline.
RULE OF 72 – These rules apply to exponential growth and are therefore used for compound interest as opposed to simple interest calculations. They can also be used for decay to obtain a halving time. The choice of number is mostly a matter of preference, 69 is more accurate for continuous compounding, while 72 works well in common interest situations and is more easily divisible. There are a number of variations to the rules that improve accuracy. For periodic compounding, the exact doubling time for an interest rate of r per period is
where T is the number of periods required. The formula above can be used for more than calculating the doubling time. If you want to know the tripling time, for example, simply replace the constant 2 in the numerator with 3. As another example, if you want to know the number of periods it takes for the initial value to rise by 50%, replace the constant 2 with 1.5.
RULE OF 78 – A formula used to determine rebates on interestfor installment loans. For a 12 monthloan: 1 + 2 + … + 12 = 78. After the first month, 12/78th of the interest is owed, 11/78ths after the second month, etc.
RUN SHEET – An uncertified title search.
SALE-LEASEBACK – A situation where the owner of a piece of property wishes to sell the property and retain occupancy by leasing it from the buyer.
SALES AGRREMENT – See AGREEMENT OF SALE.
SALES CONTRACT – A contract by which buyer and seller agree to the terms of the sale.
SANDWICH LEASE – A lease in which the “sandwich party” is a lessee, paying rent on a leasehold interest to one party, and also is a lessor, collecting rents from another party or parties. Usually the owner of the sandwich lease is neither the fee owner nor the user of the property.
SATISFACTION OF MORTGAGE – An instrument for recording and acknowledging payment for an indebtedness secured by a mortgage.
SCOPE OF WORK – Chronological division of work to be performed under a contract or subcontract in the completion of a project. Also called work scope.
SCREENING – Circulation of notice within the Army of real property which is no longer required by one Army organization but may be required and useful to another.
SEASONING A NOTE – Describes the amount of time a payer has been making payments. As a general rule the longer the better.
SECOND MORTGAGE – A real estate mortgage junior to another mortgage.
SECOND MORTGAGE – A mortgage that has a lien position subordinate to the first mortgage.
SECONDARY FINANCING – A loan secured by a second mortgage or trust deed on real property.
SECONDARY MORTGAGE PAYMENT – An unorganized market where existing mortgages are bought and sold. It contrasts with the primary mortgage market where mortgages are originated.
SECTION – Under the government survey section, a division or parcel of land on the government survey comprising one square mile, or 640 acres.
SECURED PARTY – The party holding a security interest or line; may be referred to as the mortgagee, the conditional seller, or the pledge.
SECURITY – The collateral given, deposited, or pledged to secure the fulfillment of an obligation or the payment of a debt.
SECURITY AGREEMENT – An agreement between a secured party and a debtor creating a Security interest.
SECURITY DEPOSIT – A payment that a tenant makes to a landlord, which is held in escrow during the lease term, as a kind of insurance that the tenant will fulfill the terms and conditions of his or her lease. The landlord may keep part or all of this deposit if the tenant defaults on his or her lease or causes damage to the leased Property Management 5 premises. Specific arrangements for the management and disbursement of security deposit funds are generally established by a lease contract. Property managers should be aware that state laws often specify a proper way to handle this money and establish time periods within which these funds must be returned to tenants who are entitled to refunds.
SECURITY INSTRUMENT – The mortgage or trust deed evidencing the pledge of real estate security as distinguished from the note or other credit instrument.
SECURITY INTEREST – An interest in personal property or fixtures, obtained to ensure payment owed as performance of an obligation.
SEED MONEY – See FRONT-END MONEY.
SELLER CARRY-BACK – An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage. See Owner Financing.
SELLER’S (UP) MARKET – A real estate cycle in which there are more buyers looking to purchase properties that there are sellers. In this situation, sellers can command higher prices or terms.
SERVICING – The duties of the mortgage banker as a loan correspondent as specified in the servicing agreement for which a fee is received. The collection for an investor of payments, interest, principle, and trust items such as hazard insurance and taxes, on a note by the borrower in accordance with the terms of the note. Servicing also consists of operational procedures covering accounting, bookkeeping, insurance, tax records, loan payment follow-up, delinquency loan follow-up, and loan analysis.
SHERIFF’S DEED – A deed given by court order in connection with the sale of property to satisfy a judgment or tax sale.
SIMPLE INTEREST – The interest which is computed only on the principle balance.
SITE – A parcel of land, sufficiently improved to be used as a building lot or for other purposes requiring an improved site.
SOFT COSTS – Architectural, engineering, and legal fees as distinguished from land and construction costs.
SOFT PAPER – NOTES WITH PRIVATE LENDERS
SORTING – Sorting selected text by alphabetizing or by numerical order.
SPECIAL WARRANTY DEED – A deed in which the grantor warrants or guarantees the title only against defects arising during his ownership of the property and not against defects existing before the time of his ownership.
SPECIFICATIONS – See PLANS AND SPECITICATIONS.
START-UP COSTS – See FRONT-END MONEY.
STATUTE OF LIMITATIONS – A law that limits the length of time within which a lawsuit must commence or the right to sue is lost. It varies from state to state.
SUBCONTRACTOR – The person or company under contract to perform work for a developer or general contractor.
SUBDIVISION – Any land which is divided or is proposed to be divided for the purpose of disposition into two or more lots, parcels, units, or interests.
SUBJECT TO MORTGAGE – When the purchaser buys subject to a mortgage but does not endorse the same or assume to pay the mortgage, the purchaser cannot be held for any deficiency if the mortgage is foreclosed and the property sold for an amount not sufficient to cover the note (See ASSUMPTION OF MORTGAGE).
SUBJECT TO – The taking of title to Property by a grantee, wherein he is not responsible to the holder of the promissory note for the payment of any portion of the amount due. In the event of foreclosure, the most that he can lose is his equity in the property. The original maker of the note is not released from his responsibility.
SUBLEASE – An agreement in which a lessee (tenant) transfers some of his or her rental interest in a leased property to a third party (sublessee). Sometimes, the lessee retains some reversionary interest – for example, he or she could sublet the property for a month, planning to return to the property at the end of that month to finish out his or her lease term. Note that subletting does not generally mean that the responsibility for fulfilling the lease terms has been transferred to the third party. Unless a landlord specifically agrees otherwise, the person who transfers his or her lease can still be held responsible for rent and damages if the third party fails to fulfill the terms and conditions of the lease.
SUBLETTING – A leasing by one tenant to another, who holds the right of use and occupancy subject to the original lease; the sub lessee.
SUBORDINATE – To make subject to, or junior to.
SUBORDINATION – The act of a party acknowledging, by written recorded instrument, that a debt due is inferior to the interest of another in the same property. Subordination may apply not only to mortgages, but to leases, real estate lights, and any other types of debt instruments.
SUBORDINATION CLAUSE – Clause in some mortgages which allows subsequent mortgages on the same property to have higher claim than the current mortgage.
SURFACE RIGHTS – Ownership rights in a parcel of real estate that are limited to the surface and do not include air above the property (air rights) or minerals below the surface (subsurface rights).
SURRENDER – The cancellation of a lease by mutual consent of lessor and lessee.
SURVEY – The act by which the quantity and boundaries of a piece of land are ascertained; the paper containing a statement of the courses, distance, and quantity of land is also called a survey.
SURVEYOR’S CERTIFICATE – A formal statement signed, certified, and dated by a surveyor giving the pertinent facts about a particular property and any easements for encroachments affecting it.
SWEAT EQUITY – Equity created in a property by the performance of work or labor by the purchaser or borrower. It directly increases the value of the property.
SYNDICATION – See REAL ESTATE a SYNDICATE
TACTICS – Ways to find deals in real estate.
TAPE-A – Spreadsheet of discounted properties or notes for sale.
TAX APPRAISAL – You can get this off any government website. It gives the Tax Appraisal Value, owner’s name and address, deed date and number of prior owners.
TAX DEED – A deed given where property has been purchased at a sale to the public of property for nonpayment of taxes.
TAX LIEN – A government claim for unpaid real estate tax.
TAX RATE – The rate of tax per $100 of assessed value of real property.
TAX SALE – A sale of property, usually at auction, for nonpayment of taxes assessed against it.
TAXING AUTHORITY – A statutory authority given to a governmental body to levy and collect taxes for public purposes.
TENANCY – A holding (either ownership or possession) of real estate.
TENANCY IN COMMON – A type of joint tenancy of property without right of survivorship; each tenant’s portion of ownership is distributable under will.
TENANCY IN COMMON – Co-ownership of real property by two or more persons, each entitled to possession according to his proportionate share. Unlike joint tenancy, there is no right of survivorship. See also JOINT TENANCY, TENANCY BY ENTIRETY, RIGHT OF SURVIVORSHIP.
TENANT ALSO KNOW AS ‘LESSEE’ – One who holds or possesses land or tenements by any kind of title, either in fee, for ‘life, for years, or at will. In a popular sense, the one who has temporary use and occupation of lands or tenements which belong to another, the duration and other terms of whose occupations are usually defined by a lease, while the parties thereto are placed in the relationship of landlord and tenant.
TERM – The extent of time for which an estate is granted. For example, the period which is granted for the lessee to occupy the premises; it does not include the time between making the lease and the tenant’s entry.
TERMINATION – End of a lease or contract, usually before the anticipated time; termination may be by mutual agreement or by exercise of one party of a legal remedy due to default of the other party.
TESTATE – The estate or conditions a legally valid will at death.
TIME IS OF THE ESSENCE – One of the essential requirements to the forming of binding contract; it contemplates a punctual performance.
TIME VALUE OF MONEY – A dollar tomorrow is worth less than a dollar today.
TITLE COMPANY – A company that specializes in examining and insuring titles to real estate.
TITLE DEFECT – An objectionable legal right held by others to claim property or to make demands upon an owner.
TITLE EXCPETION – An exception appearing in a title policy against which the company does not insure.
TITLE INSURANCE POLICY -A written promise from the title insurance company to insure the title to the property, based on the conditions and exclusions shown in the policy.
TITLE INSURANCE – Indemnity against loss or damage resulting from defects in or liens on a title at the date of the insurance.
TITLE SEARCH – The process of examining all relevant records to confirm that the seller is the legal owner of a property and that there are no liens or other claims outstanding.
TITLE – The right to or ownership of lands. Also, the evidence of ownership. Title to property encompasses all the bundle of rights an owner possesses.
TOWNHOUSE – An attached home that is not considered to be a condominium.
TRACT – An area of land contained in one description.
TRANSFER FEES – Fees collected from the buyer or seller of a property to defray county or city charges for changing the records.
TRANSFER – Change of jurisdiction over real property from one Federal agency or department to another, including military departments and defense agencies.
TRIPLEX – a dwelling composed of three units.
TRUST DEED OR DEED OF TRUST – A deed conveying land to a trustee as collateral security for the payment of a debt; upon payment of a debt secured thereby, the deed of trust is released; upon default, the trustee has the power to sell the land and pay the debt.
TRUSTEE – A fiduciary who holds or controls property for the benefit of another.
TRUTH-IN-LENDING – A federal law requiring disclosure of the Annual Percentage Rate to home buyers shortly after they apply for the loan. Also known as Reg Z.
UNDIVIDED INTEREST – A form of communal ownership in which all owners share possession jointly and severally. That is, owners with undivided interest collectively own a single piece of property rather than each owning a portion of it. Decisions regarding the property must be made as a group.
– One why holds property in trust for another to secure the performance of an obligation.
UNENCUMBERED PROPERTY – A property that is free and clear.
UNIFORM COMMERICAL CODE (UCC) – A commercial comprehensive law regulating commercial transactions. It has been adopted, with modifications, by most states.
UNIMPROVED LAND – See RAW LAND.
USURY – Charging more than the legal rate of interest for the use of money.
USURY CEILING – A maximum legal rate, established by state law, of interest that may be charged for the use of money. The ceiling may vary depending on the nature or type of loan.
VA – See VETERANS ADMINISTRATION.
VACANCY FACTOR – A percentage rate expressing the loss from gross rental income due to vacancy and collection losses.
VALUE – Ability to command goods, including money, in exchange; the quantity of goods, including money, which should be commanded or received in exchange for the thing valued; utility; desirability. As applied to a property value may be broadly defined as “the present worth of all the rights to future benefits arising from ownership”.
VARIABLE RATE MORTGAGE – A mortgage agreement that allows for adjustment of the interest rate in keeping with a fluctuating market and terms agreed upon in the note.
VARIANCE – An approved special charge in construction codes, zoning requirements, or other property use restrictions.
VENDEE – The party to whom personal or real property is sold.
VENDOR – The person who transfers Property by sale.
VENDOR’S LIEN – An unpaid seller’s right to a prior lien on property until the purchase price has been recovered.
VERIFICATION OF DEPOSIT (VOD) – A document signed by the borrower’s financial institution verifying the status and balance of his or her financial accounts.
VERIFICATION OF EMPLOYMENT (VOE) – A document signed by the borrower’s employer verifying his/her position and salary.
VOID – That which is unenforceable; having no force or effect.
VOLUNTARY LIEN – Any lien placed upon property with consent of, or as a result of, the voluntary act of the owner.
VOUCHER SYSTEM – In construction lending, a system giving subcontractors a voucher in lieu of cash that they may redeem with the construction lender. The opposite a fixed disbursement schedule.
W9 – A W9 form is one of the tax forms required by the Internal Revenue Service (IRS) for income reporting. Individuals and companies who are providing contract services for a company usually receive blank W9 forms to fill out. These forms are rather simple to complete, but must be filled out accurately to avoid unnecessary payment errors and even incorrect calculation of tax liability.
WAIVER OF LIEN – The written evidence from the contractor (or supplier of material) surrendering the right of lien to enforce collection of debt against property.
WAIVER – The renunciation, abandonment, or surrender of a right, claim, or privilege.
WARRANTY DEED – A deed that contains a covenant that the grantor will protect the grantee against any claimant.
WATER TABLE – Distance from the ground surface to a depth at which natural ground water is found.
WILL – A written document providing for the distribution of property at death.
WITHOUT RECOURSE – A qualified endorsement of a negotiable instrument that protects the endorser from liability.
WORKING CAPITAL – Liquid assets available for the conduct of daily business
WRAPAROUND MORTGAGE –(aka–All Inclusive Trust Deed) A mortgage that includes the remaining balance on an existing first mortgage plus an additional amount requested by the mortgagor. Full payments on both mortgages are made to the wraparound mortgagee, who then forwards the payments on the first mortgage to the first mortgagee.
YIELD – The ratio of the annual income generated by an investment divided by the annual income of that investment.
YIELD(2) – The annual rate of return on and investment, expressed as a percentage.
ZILLOW – An online real estate service company. It allows users to see the value of millions of homes across the United States. It offers several features including giving value estimates of homes.
ZONING – The public regulation, through police power, of the character and extent of real estate use. Uniform restrictions on improvements, building height, density of population, and other factors regulate the use and development of private property.