Chamberlin RE Principles

scarcity

1. One of the four basic elements of market value. Demand, Utility, Scarcity and Transferability (DUST) 2. Insufficiency of amount or supply; shortage: a scarcity of food that was caused by drought. 3. Rarity of appearance or occurrence: antiques that are valued for their scarcity.

rafters

1. Rafters are beams that extend from the ridge line of a roof to the eave. 2. A roof structural support system using "2 by" wood components that are nailed together (as opposed to trusses that are connected using press-on metal plates). (See truss)

reconciliation

1. The final step in an appraisal process, in which the appraiser reconciles the estimates of value received from the direct sales comparison, cost, and income approaches to arrive at a final estimate of market value for the subject property. 2. The balancing of entries in a double-entry accounting system. (See appraisal)

crawl space

1. The space between the ground and the first floor, often found in homes with no basement. 2. The space found between the top floor and the roof, often found in the place of an attic. (See construction terms)

Morgan Property Taxpayers' Bill of Rights

A California law effective January 1, 1994, that ensures that taxpayers are provided fair and understandable explanations of their rights and duties with respect to property taxation, prompt resolution of legitimate questions and appeals regarding their property taxes, and prompt corrections when errors have occurred in property tax assessments.

Homeowner Assistance Program

A California program for senior citizens and blind or disabled citizens of any age, providing a property tax rebate for low-income taxpayers.

cooperating broker

A broker who assists another broker in the sale of real property. Usually the cooperating broker is the selling broker who found a buyer for the listing broker. (See listing broker)

Broker's Price Opinion (BPO)

A broker's price opinion (BPO) is an estimate of property value that is not an appraisal but is developed by a real estate broker based on comparable sales in the area.

Certificate of Reasonable Value (CRV)

A certificate insured by the Veterans Administration setting forth a property's current market value estimate, based on a VA-approved appraisal. The CRV places a ceiling on the amount of a VA-guaranteed loan allowed for a particular property. (See VA loan)

Certificate of Eligibility

A certificate issued by a Veterans Administration regional office to veterans who qualify for a VA loan. The Veteran Housing Act permits regional administrators to restore a veteran's entitlement to loan-guarantee benefits after his or her property purchased with an existing VA-guaranteed loan has been disposed of and 1. this loan has been paid in full; 2. the administrator is released from liability under the guarantee or 3. any loss suffered by the administrator has been repaid in full. It is no longer required that property ownership was transferred for a compelling reason.

certificate of occupancy (CO)

A certificate issued by a governmental authority indicating that a building is ready and fit for occupancy and that there are no building code violations. Some condominium developers insert language into the sales contract to the effect that upon notification that the units are ready for occupancy, the buyer must accept the unit despite any construction defects that may exist, although acceptance will not bar the buyer from obtaining redress for such defects. Once the building has been certified for occupancy the developer can then close the individual sales, transfer title to the buyers and, most important, begin to pay off the construction loan and eliminate the interest payments.

Use Tax

A charge imposed on the use or possession of personal property. Governments employ use taxes to accomplish two purposes. A use tax may be imposed to prevent someone from evading a sales tax by buying goods in a nontaxing state and shipping them into the state that imposes the sales tax. Use taxes are also used to help defray the cost of public services associated with particular types of personal property.

commercial acre

A commercial acre is that portion of an acre of newly subdivided land remaining after dedication for streets, sidewalks, parks and so on. (See acre)

Attorney-in-fact

A competent and disinterested person who is authorized by another person to act in his or her place. In real estate conveyance transactions, an attorney-in-fact, who has a fiduciary relationship with his or her principal, is authorized by way of a written, notarized and recordable instrument called a power of attorney. (See power-of-attorney)

Title Insurance

A comprehensive indemnity contract under which a title insurance company warrants to make good a loss arising through defects in title to real estate or any liens or encumbrances thereon. Unlike other types of insurance, which protect a policyholder against loss from some future occurrence (such as a fire or auto accident), title insurance in effect protects a policyholder against loss from some occurrence that has already happened, such as a forged deed somewhere in the chain of title. Needless to say, a title company will not insure a bad title any more than a fire insurance company would insure a burning building. However, if upon investigation of the public records and all other material facts, the title company feels that it has an insurable title, it will issue a policy. Title insurance protects the lender against any claims that arise from arguments about ownership of the property; also available for home buyers. An insurance policy guaranteeing the accuracy of a title search protecting against errors. Most lenders require the buyer to purchase title insurance protecting the lender against loss in the event of a title defect. This charge is included in the closing costs. A policy that protects the buyer from title defects is known as an owner's policy and requires an additional charge. (See extended coverage policy, mortgagee's title insurance, standard coverage policy)

master plan

A comprehensive plan to guide the long-term physical development of a particular area. (See comprehensive zoning, general plan, regional planning, urban planning)

drywall

A construction material used as a basis for interior walls in a home. Drywall is composed of an inner core of chalk with a paper facing on each side. (See construction terms)

Installment Contract

A contract for the sale of real estate whereby the purchase price is paid in periodic installments by the purchaser, who is in possession of the property even though title is retained by the seller until a future date, which may not be until final payment. Also called a contract for deed or articles of agreement for warranty deed. (See contract for deed, warranty deed)

Discharged Contract

A contract is discharged when the agreement is terminated. Obviously, the most desirable case is when a contract terminates because it has been completely performed, with all its terms carried out. However, a contract may be terminated for other reasons, such as a party's breach or default.

Valid Contract

A contract that complies with all the essentials of a contract and is binding and enforceable with all associated parties. (See contract)

Voidable Contract

A contract that seems to be valid on the surface but may be rejected or disaffirmed by one or both of the parties.

Executory Contract

A contract under which some future contract obligation remains to be done by one or more of the parties.

Unenforceable Contract

A contract which is considered unenforceable either because it cannot be proven or will not be enforced by a court.

General Index

A county recorder's office index used by title company examiners when searching the chain of title of a property. The examiner uses the index to research all the grantors and grantees in the chain of title. The index lists all the things that apply to a person by name, including liens, judgments and power of attorneys. (See chain of title)

negative declaration

A declaration by a developer that a project will not have a negative impact on the environment.

Actual Fraud

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

subdivided land law

A disclosure law enacted to protect buyers of subdivided parcels. A public report is required for subdivisions of five or more parcels. (See public report, subdivision) Information on zoning and planning laws can be found at www.ceres.ca.gov/planning/planning_guide/plan_index.html.

public report

A disclosure statement required by the Subdivided Land Law stating that a buyer is not obligated until he or she has read the report and signed a receipt. (See Subdivided Land Law)

Settlement Statement

A document prepared for and presented to the borrower at the loan closing showing all disbursements to be made, such as payment to the seller.

downspout

A downspout is a drain pipe or similar conduit to allow water to flow from the rain gutter at the edge of the roof to the ground. (See construction terms)

Misrepresentation

A false statement or concealment of a material fact made with the intention of inducing some action by another party.

Government National Mortgage Association (GNMA)

A federal agency created in 1968 when the Federal National Mortgage association (FNMA) was partitioned into two separate corporations. "Ginnie Mae," as it is commonly called, is a corporation without capital stock and is a division of HUD. The GNMA operates the special assistance aspects of federally aided housing programs and has the management and liquidating functions of the old FNMA. The FNMA is authorized to issue and sell securities backed by a portion of its mortgage portfolio, with the GNMA guaranteeing payment on such securities.

Environmental Protection Agency (EPA)

A federal agency created in 1970 by bringing together various federal pollution control activities that had been scattered among a number of federal departments and agencies. The EPA is involved with environmental problems of air and water pollution, solid-waste management, pesticides, radiation and noise. The EPA sets standards, determines how much pollution is tolerable, establishes timetables to bring polluters into line with its standards and enforces environmental laws. The EPA conducts an extensive environmental research program; provides technical, financial, and managerial help to state, regional and municipal pollution control agencies; and allocates funds for sewage-treatment facilities. The original authority of the EPA was broadened by passage of the Clean Air Amendments and the Resource Recovery Act in 1970; the Federal Water Pollution Control Act Amendments, the Federal Environmental Pesticide Control Act, the Noise Control Act and the Marine Protection Research and Sanctuaries Act in 1972; the Safe Drinking Water Act in 1974; and the Comprehensive Environmental Response Compensation and Liability Act (CERCLA) in 1980. (See CERCLA, hazardous waste) Environmental Protection Agency Website

Federal Housing Administration (FHA)

A federal agency established in 1934 under the National Housing Act to encourage improvement in housing standards and conditions, to provide an adequate home-financing system through the insurance of housing mortgages and credit and to exert a stabilizing influence on the mortgage market. FHA was the government's response to a lack of quality housing, excessive foreclosures and a building industry that collapsed during the depression. (See National Housing Act)

Gift Tax

A federal tax applied to an individual giving anything of value to another person. For something to be considered a gift, the receiving party cannot pay the giver full value for the gift, but may pay an amount less than its full value. It is the giver of the gift who is required to pay the gift tax. The receiver of the gift may pay the gift tax, or a percentage of it, on the giver's behalf in the event that the giver has exceeded his/her annual personal gift tax deduction limit. California's gift tax was repealed by voters on June 8, 1982. (See gift)

federally related transaction

A federally related transaction is any real estate—related financial transaction involving or identified as such by a federal institution's regulatory agency. This includes all loans made by federally chartered banks and savings and loans.

gross income multiplier

A figure used as a multiplier of the gross annual income of a property to produce an estimate of the property's value.

Adjusted Cost Basis

A figure, used for taxes, that shows if you make a profit when you sell your house. You can calculate the adjusted cost basis by adding the amount you paid for the house to how much you spent on capital improvements and subtracting any losses or depreciation. Capital improvements are any major renovation that increases a home's value, like enlarging a kitchen, installing a pool, or adding an extra bedroom.

Ostensible Agency

A form of implied agency relationship created by the actions of the parties involved rather than by written agreement or document. (See implied agency)

community apartment project

A form of subdivision in which the owner has an individual interest in the land and exclusive right of occupancy of an apartment on the land.

time share project

A form of subdivision of real property into rights to the recurrent, exclusive use or occupancy of a lot or unit of the property on an annual or other periodic basis, for a specified period of time. (See subdivision)

Tender

A formal offer of money or service in payment of an obligation. A written offer to contract goods or services at a specified cost or rate; a bid. Something, especially money, offered in payment.

Abstract of Title

A full summary of all consecutive grants, conveyances, wills, records and judicial proceedings affecting title to a specific parcel of real estate, together with a statement of all recorded liens and encumbrances affecting the property and their present status. The abstract of title does not guarantee or ensure the validity of the title of the property. Rather, it is a condensed history that merely discloses those items about the property that are of public record; thus, it does not reveal such things as encroachments and forgeries. (See abstracter, title insurance policy, certificate of title)

VA Loan

A government-sponsored mortgage assistance program administered by the Department of Veterans Affairs. Under the Servicemen's Readjustment Act of 1944, eligible veterans and widows or widowers (who have not re-married) of veterans who died in service or from service-connected causes may obtain partially guaranteed loans for the purchase or construction of a house or to refinance existing mortgage debt.

gutter

A gutter is the trough along the roof line of a structure that collects rainfall, which is diverted to a drainage pipe that carries the water to the ground and away from the structure.

joist

A joist is a heavy piece of horizontal timber to which the boards of a floor or the lath of a ceiling are nailed. Joists are laid edgewise to form the floor support. (See construction terms)

condemnation

A judicial or administrative proceeding to exercise the power of eminent domain, through which a government agency takes private property for public use and compensates the owner. (See eminent domain).

Interpleader

A judicial proceeding where an innocent third party, such as an escrow agent or broker, can deposit with the court property or money that he or she holds and that is subject to adverse claims. The court can then distribute it to the rightful claimant.

land contract

A land contract is a real property sales contract. (See contract for deed, installment sales contract)

homeowner's bill of rights 0f 2004

A law enacted after the 2003 Southern California wildfires to clarify the rights of homeowners under homeowner insurance policies.

Contract

A legally enforceable promise or set of promises that must be performed and for which, if a breach of the promise occurs, the law provides a remedy. A contract may be either unilateral, by which only one party is bound to act, or bilateral, by which all parties to the instrument are legally bound to act as prescribed. (See valid contract)

Open Listing

A listing given to any number of brokers who can work simultaneously to sell the owner's property. The first broker to secure a buyer who is ready, willing and able to purchase at the terms of the listing earns the commission. In the case of a sale, the seller is not obligated to notify any of the brokers that the property has been sold.

Option Listing

A listing in which the broker also retains an option to purchase the property for the broker's own account. In view of the body of litigation involving breach of fiduciary duties by brokers who conceal offers from buyers until after the broker has exercised the option, full and fair disclosure must be given to the seller. (See listing agreement)

Loan Commitment

A loan commitment or commitment is a statement by the lender setting forth the terms and conditions upon which the lender is willing to make a particular mortgage loan to a particular borrower.

Conventional Loan

A loan made with real estate as security and not involving government participation in the form of insuring (FHA) or guaranteeing (VA) the loan. The mortgagee can be an institutional lender or a private party. The loan is conventional in the sense that it conforms to accepted standards and the lender looks solely to the credit of the borrower and the security of the property to ensure payment of the debt. Conventional loans include those loans insured by private mortgage insurance companies.

Capital Asset

A long-term asset that is not bought or sold in the regular course of business.

functional obsolescence

A loss of value to an improvement to real estate arising from functional problems, often caused by age or poor design. (See depreciation, economic obsolescense, physical obsolescence)

Secondary Mortgage Market

A market for the purchase and sale of existing mortgages, designed to provide greater liquidity for selling mortgages; also called secondary money market, not to be confused with secondary financing. (See primary mortgage market)

MLS (Multiple Listing Service)

A marketing organization composed of member brokers who agree to share their listing agreements with one another in the hope of procuring ready, willing and able buyers for their properties more quickly than they could on their own.

energy-efficiency ration (EER)

A measure of an electrical appliance's energy consumption found by dividing its capacity measured in British Thermal Units (BTUs) by the number of watts of electricity needed to run it. Information on the EER in a variety of applications can be found at www.eere.energy.gov/consumer

Straight-line Method

A method of depreciation, also called the age-life method, that is computed by dividing the adjusted basis of a property by the number of years of estimated remaining useful life. The cost of the property is thus deducted in equal annual installments. For example, if the depreciable basis is $ 100,000 and the estimated useful life is 25 years, the annual depreciation deduction is $4,000 for each year during the useful life of the asset. Prior to 1986, taxpayers sometimes used a form of accelerated depreciation such as 175 percent of straight line. The IRS had rules to recapture the amount of depreciation that was in excess of the straight-line rate. (See adjusted basis, depreciation)

straight-line method

A method of depreciation, also called the age-life method, that is computed by dividing the adjusted basis of a property by the number of years of estimated remaining useful life. The cost of the property is thus deducted in equal annual installments. For example, if the depreciable basis is $ 100,000 and the estimated useful life is 25 years, the annual depreciation deduction is $4,000 for each year during the useful life of the asset. Prior to 1986, taxpayers sometimes used a form of accelerated depreciation such as 175 percent of straight line. The IRS had rules to recapture the amount of depreciation that was in excess of the straight-line rate. (See adjusted basis, depreciation)

square-foot method

A method of estimating a building's construction, reproduction or replacement costs; whereby the structure's square-foot floor area is multiplied by an appropriate construction cost per square foot. (See appraisal)

Overriding Trust Deed

A method of financing in which the new mortgage is placed in a secondary or subordinate position; the new mortgage includes both the unpaid principal balance of the first mortgage and whatever additional sums are advanced by the lender. Sometimes called an all-inclusive loan, an overlapping loan or a wraparound mortgage.

Wraparound Mortgage

A method of financing in which the new mortgage is placed in a secondary or subordinate position; the new mortgage includes both the unpaid principal balance of the first mortgage and whatever additional sums are advanced by the lender. Sometimes called an all-inclusive loan, an overriding loan or an overlapping loan. In essence, it is an additional mortgage in which another lender refinances a borrower by lending an amount over the existing first mortgage amount, without cashing out or disturbing the existence of the first mortgage. The entire loan combines two or more debts and is treated as a single obligation, and the wrap, or secondary, mortgagee pays the obligations of the first mortgage from the total payments received. While the wraparound lender makes the debt service payments on the first mortgage, the lender does not assume liability for this first lien. A default on the wraparound mortgage would usually result in a default on the underlying mortgage.

asbestos

A mineral once used in insulation and other materials that can cause respiratory diseases. Asbestos has been classified as carcinogenic, meaning cancer causing. (See carcinogen and the Fact Sheet published by the National Safety Council on Asbestos

Purchase-Money Mortgage

A mortgage given as part of the buyer's consideration for the purchase of real property, and delivered at the same time that the real property is transferred as a part of the transaction. It is commonly a mortgage taken back by a seller from a purchaser in lieu of purchase money. A purchase-money mortgage is usually used to fill a gap between the buyer's down payment and a new first mortgage or mortgage assumed, as when the buyer pays 10 percent in cash, gets an 80 percent first mortgage from a bank, and then the seller takes back a purchase-money second mortgage for the remaining 10 percent.

Conforming Loan

A mortgage loan that meets all Fannie Mae and Freddie Mac underwriting guidelines. (See Fannie Mae, Freddie Mac)

uniform building code

A national building code published by the International Conference of Building Officials. It has been adopted in part by municipalities throughout the United States, but used mostly in the western states. (See building code)

radon

A naturally occurring gas that is suspected of causing lung cancer. (See carcinogen) National Safety Council on Radon

Unilateral Contract

A one-sided contract wherein one party makes a promise so as to induce a second party to do something. The second party is not legally bound to perform; however, if the second party does comply, the first party is obligated to keep the promise.

growth

A period of the life cycle of a neighborhood in which property development is ongoing.

redlining

A practice by some lending institutions that restricts the number of loans or the loan-to-value ratio in certain areas of a community. A redlining policy may be so severe that in effect the lending institution prohibits lending any money in certain areas of the city. The usual justification for redlining is that the lender wants to limit the risks in an area that is deteriorating. The lender discriminates against a whole class of risks rather than distinguishing among individual risks.

Cal-Vet

A program to help eligible California Veterans finance the purchase of farms and ranches within the state.

inverse condemnation

A property owner forcing a government to take a property by eminent domain when that government's actions resulted in the owner's inability to use the property. (See condemnation, eminent domain)

Interest Rate

A rate which is charged or paid for the use of money. An interest rate is often expressed as an annual percentage of the principal. Interest rates often change as a result of inflation and Federal Reserve policies.

physical deterioration

A reduction in a property's value resulting from a decline in physical condition; can be caused by action of the elements or by ordinary wear and tear.

minimum property requirements

A regulation imposed by the US Federal Housing Authority (FHA) that requires a minimally acceptable property condition for FHA-insured or VA-guaranteed loans; usually determined by compliance with loan building codes.

Fiduciary

A relationship that implies a position of trust or confidence wherein one person is usually entrusted to hold or manage property or money for another. The term fiduciary describes the faithful relationship owed by an attorney to a client or by a broker (and salesperson) to a principal.

planned unit development (PUD)

A relatively modern concept in housing designed to produce a high density of dwellings and maximum use of open spaces. This efficient use of land allows greater flexibility for residential land and development. It also usually results in lower-priced homes and minimum maintenance cost. Often, PUDs are specifically provided for in zoning ordinances or are listed as a conditional permitted use, sometimes called planned development housing.

environmental impact report

A report required by the California Environmental Quality Act that projects the impact a project may have on the environment. The report includes relevant data and an analysis of its effects on the environment.

restricted use report

A restricted use report is a property appraisal that will be limited in either the method of valuation used or the property interests valued.

mortgage-backed security (MBS)

A security guaranteed by pools of mortgages and used to channel funds from securities markets to housing markets. Ginnie Mae has a popular MBS program recognized for its low risk and high yield. The Ginnie Mae MBS security is a pool of VA and FHA mortgages put together as a bond. Freddie Mac and Fannie Mae also have MBS programs. (See FHA, Fannie Mae, Freddie Mac, Ginnie Mae, VA loan)

self contained report

A self-contained report is a narrative report and the most comprehensive type of appraisal report, including a thorough statement of the background data supporting the opinion of value.

sill

A sill is the wood member placed directly on a foundation; in California, state law requires anchor bolts to fasten a sill to the foundation for earthquake safety. (See anchor bolts, foundation)

Standard Coverage Policy

A standard coverage policy normally insures the title as it is known from the public records. In addition, the standard policy insures against such hidden defects as forged documents, conveyances by incompetent grantors, incorrect marital statements and improperly delivered deeds. (See extended coverage policy, title insurance)

Home Energy Rating System (HERS)

A standardized system for rating the energy efficiency of residential buildings. (See HERS score)

Certificate of Title

A statement of opinion prepared by a title company, licensed abstracter or an attorney on the status of a title to a parcel of real property, based on an examination of specified public records. This certificate of title should not be confused with the certificate of title that is issued to a titleholder of land registered under the Toreens system, or with a title insurance policy. A certificate of title does not guarantee title, but it does certify the condition of title as of the date the certificate is issued, on the basis of an examination of the public records maintained by the recorder of deeds, the county clerk, the county treasurer, the city clerk and collector and clerks of various courts of record. The certificate also may include records involving taxes, special assessments, ordinances, zoning and building codes. Note that a certificate of title does not offer protection against "off -the-record" matters such as undisclosed liens, rights of parties in possession and matters of survey and location. Nor does it protect against "hidden defects" in the records themselves, such as fraud, forgery, lack of competency or lack of delivery. A title insurance policy, not a certificate of title, protects against certain off-the-record and hidden defects risks.

limited equity housing cooperative

A stock cooperative financed by the California Housing Finance Agency.

manufactured home

A structure (transportable in one or more sections) when in the traveling mode, is eight body feet or more in width, or 40 body feet or more in length, or, when erected on site, is 320 or more square feet. It is built on a permanent chassis and designed to be used as a dwelling, with or without a permanent foundation, when connected to the required utilities, and includes the plumbing, heating, air conditioning, and electrical systems contained therein. (H & S Code SS 18007) Manufactured Housing Institute

common interest subdivision

A subdivision in which the owners own or lease a separate lot or unit together with an undivided interest in the common areas of the subdivision. (See common areas, subdivision)

subdivision map

A subdivision map is a document showing a division of land into two or more parcels, required before a subdivision can be approved. (See subdivision)

condominium

A subdivision providing an exclusive ownership interest in the airspace of a particular portion of real property, as well as an interest in common in a portion of that property.

summary report

A summary report is an appraisal report using a standardized form, such as the Uniform Residential Appraisal Report (URAR) developed by Fannie Mae and Freddie Mac.

Sales Tax

A tax imposed by the government at the point of sale on retail goods and services. It is collected by the retailer and passed on to the state.

Special Assessment

A tax or levy customarily imposed against only those specific parcels of realty that will benefit from a proposed public improvement, as opposed to a general tax on the entire community. Because the proposed improvement will enhance the value of the affected homes, only those affected owners must pay this special lien. Common examples of special assessments are water, sidewalk and sewer assessments, or other special improvements such as parks and recreational facilities.

R-value

A term used to describe the effectiveness of various kinds of insulation to indicate their resistance to heat flow. If more than one layer of insulation is used, the R-value of the individual layers are added together to indicate a total R-value.

percolation test

A test of soil to determine if it will absorb and drain water adequately to use a septic system for sewage disposal.

Extended Coverage Policy

A title insurance policy that covers risks normally excluded by most standard coverage policies. The standard policy normally insures the title only as shown by the public records. It does not cover unrecorded matters that might be discovered during an inspection of the premises. Most lenders require extended coverage mortgage title insurance policies. Extended coverage indemnifies the insured against such things as mechanic's liens, tax liens, miscellaneous liens, encumbrances, easements, rights of parties in possession and encroachments, which may not be disclosed by the public records. (See standard coverage, title insurance)

Title Plant

A title plant is the storage facility of a title insurance company in which it has accumulated complete title records of properties in its area. Many of the larger title insurance companies maintain their own title plants containing copies of all recorded instruments.

Preliminary Report

A title report that is made before a title insurance policy is issued or when escrow is opened. A preliminary report or policy of title insurance reports only on those documents having an affect on the title and should not be relied on as being an abstract. An abstract of title, on the other hand, reflects all instruments affecting title from the time of the original grant and also includes a memorandum of each instrument, and makes no attempt to determine which of the documents currently affects record title. The "preliminary" is not a binder or commitment that the title company will insure the title to the property, although this commitment may be obtained at an added cost. (See abstract of title)

Arms-length transaction

A transaction between two related or affiliated parties that is conducted as if they were unrelated, so that there is no question of a conflict of interest. Or sometimes, a transaction between two otherwise unrelated or affiliated parties.

Exchange

A transaction in which all or part of the consideration for the purchase of real property is the transfer of property of "like kind" (i.e., real estate for real estate). (See like kind, realized capital gains)

Leaseback

A transaction in which an owner sells his or her improved property and, as part of the same transaction, signs a long term lease to remain in possession of the premises.

Sale Leaseback

A transaction in which an owner sells his or her improved property and, as part of the same transaction, signs a long term lease to remain in possession of the premises.

interest rate reduction refinancing loan (IRRRL)

A type of VA-guaranteed loan that can be used for loan refinancing.

external obsolescence

A type of incurable depreciation caused by negative factors not on the subject property, such as environmental, social or ecomomic forces. The loss in value can not be reversed by spending money on the property. (See depreciation)

mortgage revenue bonds

A type of tax-exempt industrial development bond offered by state and local governments through their housing financing agencies. (See industrial development bonds)

nonconforming use

A use of property, legally permitted to continue as such, in spite of the original zoning ordinance which prohibited such use for the area.

Proposition 13

A voter initiative that added Article XIII A to the California Constitution. It limits property tax rates to no more than 1% of full cash value. Increases in assessed value per year are capped at 2% or the percentage growth in the Consumer Price Index (CPI), whichever is less. In 2002-03, the increase was 1.87%. It has been less than the 2% cap only five times since 1977. New construction and the sale of property, with some exceptions, also increase assessed values.

Security Instrument

A written document executed by a debtor by which the described property is made security for the underlying debt.

exclusive-authorization-and-right-to-sell listing

A written listing agreement appointing a broker as the exclusive agent for the sale of property for a specified period of time. The listing broker is entitled to a commission if the property is sold by the owner, by the broker or by anyone else.

Exclusive Agency Listing

A written listing agreement giving a sole agent the right to sell a property for a specified time, but reserving to the owner the right to sell the property himself without owing a commission. The exclusive agent is entitled to a commission if he or she personally sells the property or if it is sold by anyone other than the seller.

zoning variance

A zoning variance permits a change in the specifications required by the zoning ordinance. (See zoning)

Supplemental Assessment

Additional "catch-up" property tax assessment following a sale or other reassessment event. (See assessment)

Benefit Assessment

Amount owed by owners of property that is enhanced by the construction or renovation of improvements.

Deductions

Amounts on which income tax need not be paid; the home mortgage interest deduction from taxable income benefits homeowners.

Inheritance Taxes

An "estate" tax imposed by the state on heirs for their right to inherit property. The tax is not levied on the property itself, but rather on the heirs for their right to acquire the property by succession or devise. Therefore, the rates or the deductions may vary depending on the degree of the relationship. At the time of a person's death, a statutory lien usually attaches to all real property interests owned by the decedent, which lien remains in effect until the inheritance taxes have been paid and a "tax clearance" is issued. This applies even if property was held in joint tenancy with right of survivorship. (See estate taxes, statutory lien)

subdivision map act

An act providing for local control of subdivisions. Cities and counties are required by state law to adopt an ordinance to regulate subdivisions. (See subdivision) Information on subdivisions can be found at www.ceres.ca.gov/planning/planning_guide/plan_index.html.

Specific Performance

An action brought in a court of equity in special cases to compel a party to carry out the terms of a contract. The basis for an equity court's jurisdiction in breach of a real estate contract is the fact that land is unique and mere legal damages would not adequately compensate the buyer for the seller's breach.

Discount Points

An added loan fee charged by a lender to make the yield on a lower-than-market-interest VA or FHA loan competitive with higher-interest conventional loans. The price of one discount point is equal to 1 percent of the loan amount, or 100 basis points.

community redevelopment agency (CRA)

An agency authorized by state law but formed by a local governing body to provide low- and moderate-income housing and employ low-income persons by rehabilitating existing structures and/or bringing new development. All CRAs have been dissolved as of February 1, 2012.

Dual Agency

An agency relationship in which the agent acts concurrently for both principals (the buyer and the seller) in a real estate transaction. (See agency, agent, fiduciary)

Subagent

An agent of a person who is already acting as an agent for a principal. The original agent can delegate authority to a subagent where such delegation is either expressly authorized or customary in the trade.

Option

An agreement to keep open, for a set period, an offer to sell or lease real property.

Tax Credit

An amount by which tax owed is reduced directly.

Homeowner's Exemption

An amount of property value of owner-occupied residence excluded from property taxation.

regression

An appraisal principle that states that between dissimilar properties the value of the better-quality property is affected adversely by the presence of the lesser-quality property. (See appraisal)

substitution

An appraisal principle that states that the maximum value of a property tends to be set by the cost of purchasing an equally desirable and valuable substitute property, assuming that no costly delay is encountered in making the substitution. (See appraisal)

progression

An appraisal principle that states that, between dissimilar properties, the value of the lesser-quality property is favorably affected by the presence of the better-quality property. (See appraisal)

physical obsolescence

An appraisal term that describes the ordinary deteriorization of a property due to aging. (See economic obsolescence, functional obsolescence)

coastal zone

An area of about 1,800 square miles that runs the length of the state from the sea inland about 1,000 yards, with wider spots in coastal estuarine, habitat, and recreational areas; any development or improvement of land within the coastal zone must meet local requirements for coastal conservation and preservation of resources, as authorized by the California Coastal Act and subsequent legislation.

undivided interest subdivision

An area of land divided into parcels where each owner is a tenant in common with all other owners; for example, a campground with shared facilities.

Net Listing

An employment contract in which the broker receives as commission all excess monies over and above the minimum sales price agreed on by broker and seller. Because of the danger of unethical practices in such a listing, its use is discouraged in most states. (See listing agreement)

Appraisal

An estimate of the monetary value of a property on the open market; an estimate of a property's type and condition, its utility for a given purpose or its highest and best use. (See cost approach, income approach, index method, market-data approach, quantity survey method, sales comparison approach, square-foot method, unit-in-place method)

zoning ordinance

An exercise of police power by a municipality to regulate and control the character and use of property. (See zoning)

Installment Sale

An income tax method of reporting gain received from the sale of real estate when the sales price is paid in installments, i.e., where at least one payment is to be received after the close of the taxable year in which the sale occurs. No down payment is required in an installment sale. If certain conditions are met the taxpayer can save on taxes by postponing the receipt of an installment and the reporting of such income to future years when his or her other income may be lower. Thus, a taxpayer can avoid paying the entire tax on the gain in the year of sale. (See realized capital gains)

Franchise Tax

An income tax, California corporations pay.

Escrow Agent/Officer

An individual qualified to perform all the steps necessary to prepare and carry out escrow instructions. Tasks include obtaining title insurance; securing payoff demands; prorating taxes, interest, rents, etc.; and distributing the funds held in escrow. (See escrow instructions, prorations, title insurance)

Escrow Officer

An individual qualified to perform all the steps necessary to prepare and carry out escrow instructions. Tasks include obtaining title insurance; securing payoff demands; prorating taxes, interest, rents, etc.; and distributing the funds held in escrow. Also known as an escrow agent. (See escrow instructions, prorations, title insurance)

Tax Deed

An instrument, similar to a certificate of sale, given to a purchaser at a tax sale. (See certificate of sale)

Revocation

An offeree may fail to accept the offer before it expires. The offeror may revoke the offer at any time before receiving the acceptance. This revocation must be communicated to the offeree by the offeror, either directly or through the parties' agents.

Express Agreement/Contract

An oral or written contract in which the parties state the contract's terms and express their intentions in words.

building code

An ordinance that specifies minimum standards of construction for buildings to protect public health and safety. (See construction terms, Uniform Building Code)

Promissory Note

An unconditional written promise of one person to pay a certain sum of money to another person, order or bearer at a future specified time. A broker who accepts a promissory note as a deposit from a prospective purchaser must generally disclose to the seller that the buyer's deposit is in the form of a promissory note.

Oral Contract

An unwritten agreement. With few exceptions, unwritten agreements for the sale or use of Real Estate are unenforceable. In most states, contracts for the sale or rental of real estate are, unless they are in writing, unenforceable under the Statute of Frauds. Verbal leases for up to a year are often acceptable.

masonry

Any construction material or methods involving bricks and mortar or related materials. (See construction terms)

Material Fact

Any fact that pertains to the physical condition of the property Any fact that pertains to a party's ability to perform.

Fraud

Any form of deceit, trickery, breach of confidence or misrepresentation by which one party attempts to gain some unfair or dishonest advantage over another.

Bulk Sale

Any sale of a large quantity of materials, merchandise, supplies, or other inventory that is not in the seller's ordinary course of business. Also called bulk transfer. Regulated by the Uniform Commercial Code that is designed to prevent a seller from making such a sale, and then spending or disappearing with the proceeds without first paying his creditors.

income capitalization approach

Appraisal method in which the actual or likely net operating income of property is divided by its expected rate of return (capitalization rate) to arrive at an estimate of market value. (See capitalization rate)

standard subdivision

Area of land divided into parcels intended for separate ownership, with no common (shared) ownership by all of the owners of any of the land.

seismic hazards zone

Area specified by the California Department of Conservation as being at high risk of severe earth movement.

earthquake fault zone

As defined by the state geologist, the area in such close proximity to an earthquake fault that movement of the fault presents a property hazard; location within an earthquake fault zone must be disclosed to a prospective purchaser by the seller (or seller's agent, if there is one).

Real Estate Transfer Disclosure Statement

As required by California Civil Code, a buyer of residential real estate is entitled to a Real Estate Transfer Disclosure Statement from the seller which provides information regarding the physical condition of the property.

General Power of Attorney

Authority to act on behalf of someone else for financial purposes. (See power of attorney

backfill

Backfill is the dirt placed against the foundation of a structure after the concrete used to create the foundation wall has cured and the wood forms in which the concrete was poured have been removed. (See foundation)

foundation

Base of building, typically of poured concrete consisting of walls or footings. (See anchor bolts, sill)

anchor bolts

Bolts that fasten the sill plate of a wood-frame house to the house's foundation, required in California since 1931 for all new construction as an earthquake safety measure. (See foundation, sill)

Constructive Fraud

Breach of a legal or equitable duty that the law declares fraudulent because of its tendency to deceive others, despite no showing of dishonesty or intent to deceive. For example, if a listing broker failed to disclose a known major foundation problem not readily observable upon an ordinary inspection. (See material fact)

observed condition method

Breakdown method; depreciation computed by estimating the loss in value caused by every item of depreciation, whether curable or incurable. (See depreciation)

Title Insurance Company

Business licensed by the state to insure buyers and lenders against losses due to defects in title to real estate. (See title insurance)

California Department of Fair Employment and Housing

California agency that enforces anti-discrimination laws.

California Department of Public Health

California agency that regulates construction activities affecting the water supply and other public health issues; formerly part of the California Department of Health Services. www.cdph.ca.gov

California Dept of Business Oversight (DBO)

California agency that regulates licensees and industries formerly under the control of the Department of Corporations and Department of Financial Institutions. More information is available at

California Franchise Tax Board

California department that collects state personal income taxes and bank and corporation taxes. (See franchise tax)

Mello-Roos Community Facilities Act

California law that requires property owners benefiting from public improvements financed by bond issues to repay the bonds; requires notification to a prospective purchaser of lien assessments on the property. (See Mello-Roos Bonds)

California Bureau of Real Estate Appraisers (BREA)

California office, part of the California State Transportation Agency, that licenses and regulates Real Estate Appraisers. Information can be found at www.brea.ca.gov.

Taxpayer Advocate's Office

California state office that assists taxpayers in explaining and resolving tax issues.

Veteran's Exemption

California war veterans may receive a $4,000 exemption on the full cash value of their homes.

civil rights housing act of 2006

California's Civil Rights Housing Act of 2006 provides that, as of January 1, 2007, all of the protected classifications of FEHA are extended automatically to all other nondiscrimination laws; this includes the Unruh Civil Rights Act.

fair employment and housing act

California's Fair Employment and Housing Act (FEHA) (Sections 13100-13196 of the Government Code) prohibits housing discrimination based on marital status as well as race, color, religion, sex, national origin or ancestry. The Department of Fair Employment and Housing enforces the law, which is based on the former Rumford Fair Housing Act.

Lot Books

Catalogs maintained by title and abstract companies listing properties by location and showing deeds and other documents affecting title.

rezoning

Change in the land use designation of an area.

Usury

Charging interest at a higher rate than the maximum rate established by state law.

Federal Home Loan Mortgage Corporation (FHLMC)

Commonly known as "Freddie Mac," a federally chartered corporation established in 1970 for the purpose of purchasing mortgages in the secondary market. Freddie Mac was created as a part of the savings association system and, while it is not so limited, its loan purchase policies are designed to accommodate savings association needs. It functions with an independent board of directors but is subject to oversight by HUD.

comps

Comparable properties that are used in an appraisal to determine the value of the property that is the subject of the appraisal. It refers to properties with characteristics that are similar to a subject property whose value is being sought.

Electronic Signatures in Global and National Commerce Act

Congress enacted the Electronic Signatures in Global and National Commerce Act (P.L. 106-229; also known as E-SIGN) on June 30, 2000, and the law became effective on October 1, 2000. The main purpose of this statute is to create an equivalent legal status for electronic signatures and documents with the legal status of handwritten documents. This act enhances possibilities of e-commerce especially in legal transactions and the financial services industry. The act's purpose is "to facilitate the use of electronic records and signatures in interstate and foreign commerce by ensuring the validity and legal effect of contracts entered into electronically."

decline

Decline is a period in which property loses value due to lack of maintenance.

zones

Defined land areas with designated land uses and building specifications. (See zoning)

plasterboard

Drywall; interior wall finishing material.

brownfields

Economically depressed urban areas suffering from real or perceived hazardous material contamination.

effective gross income

Effective gross income is a property's income from all sources, less allowance for vacancy and collection losses.

general plan

Every city and county is required by state law to develop a general plan of comprehensive zoning. (See comprehensive zoning, master plan, regional planning)

Binding Contract

Executed with proper legal authority, and contains the elements of a valid legal agreement; "a binding contract."

Prorations

Expenses, either prepaid or paid in arrears, that are divided between the buyer and seller at closing.

Farmer Mac

Farmers Home Administration; provides financing of agricultural real estate and rural housing loans and liquidity to agricultural and rural housing lenders.

Freddie Mac

Federal Home Loan Mortgage Corporation, commonly known as "Freddie Mac," is a federally chartered corporation established in 1970 for the purpose of purchasing mortgages in the secondary market. Freddie Mac functions with an independent board of directors but is subject to oversight by HUD.

Department of Veterans Affairs

Federal agency providing assistance to veterans, including the guarantee of VA mortgage loans.

Estate Taxes

Federal estate taxes and state inheritance taxes (as well as the debts of decedents) are general, statutory, involuntary liens that encumber a deceased person's real and personal property. These are normally paid or cleared in probate court proceedings. (See inheritance taxes, lien)

fire stops

Fire stops are wood blocks placed at intervals between wall studs to slow the spread of fire.

urea-formaldehyde

First used in building materials, particularly insulation, in the 1970s. Gases leak out of the urea-formaldehyde foam insulation (UFFI) as it hardens and become trapped in the interior of a building. It is no longer used because emissions were found to be a health hazard. (See formaldehyde)

Property Tax Year

Fiscal year for California property tax purposes runs from July 1 to June 30. Taxes charged for that period become a lien on the property on the preceding January 1. (See property taxes)

Base Value

For property tax assessment purposes, the full cash value of a parcel of real estate as of February 28, 1975, or the date of a subsequent sale or other reassessment event.

Change in Ownership

For property tax purposes, a change in ownership in real property is the transfer of a present interest in real property, including the transfer of the rights to the beneficial use thereof, the value of which is substantially equal to the value of the fee interest. All three factors must be present in order for a change in ownership to occur. Often a change in, or transfer of, title may indicate a change in ownership, which generally occurs upon the purchase, sale, gift, or inheritance of real property.

Unruh Civil Rights Act

Forbids discrimination as to sex, race, color, religion, ancestry or national origin in accommodations and business establishments. Under this law there can be no arbitrary eviction, rent increase or withholding of services by virtually any landlord, including the owner of a nonowner-occupied single-family dwelling that is sold or leased for income or gain. Len Lessor brings an action to evict Adam Lessee from one of his rental properties because Adam has long hair, associates with black people and homosexuals, receives public assistance and is a student. Len will not be successful because all of those "reasons" are arbitrary and fail to establish good cause for an eviction.

gentrification

Gentrification or urban gentrification, is the physical renovation of low-cost, physically deteriorated neighborhoods, leading to an increase in property values, along with an influx of wealthier residents who may displace the prior residents.

girders

Girders are the beams that span foundation walls and footings to provide support for the floor of a structure.

Ginnie Mae

Government National Mortgage Association is a federal agency created in 1968 when the Federal National Mortgage Association (FNMA) was partitioned into two separate corporations. "Ginnie Mae," as it is commonly called, is a corporation without capital stock and is a division of HUD. The GNMA operates the special assistance aspects of federally aided housing programs and has the management and liquidating functions of the old FNMA. The FNMA is authorized to issue and sell securities backed by a portion of its mortgage portfolio, with the GNMA guaranteeing payment on such securities.

Guarantee of Title

Guarantee of title as determined from examination of the public records and described in the guarantee document.

transferability

High transferability is linked with high value.

federal fair housing act

In 1968, Congress enacted Title VIII of the Civil Rights Act, called the Federal Fair Housing Act, which declared a national policy of providing fair housing throughout the United States (reference Sections 3601-3631 of Title 42, United States Code). This law makes discrimination based on race, color, sex, familial status, handicap, religion or national origin illegal in connection with the sale or rental of most dwellings and any vacant land offered for residential construction or use. The law does not prohibit discrimination in other types of real estate transactions, such as those involving commercial or industrial properties. The law is administered by the Office of Equal Opportunity (OEO) under the direction of the Secretary of the Department of Housing and Urban Development (HUD).

Escrow Instructions

In a sales transaction, a writing signed by buyer and seller that details the procedures necessary to close a transaction and directs the escrow agent how to proceed. Sometimes the buyer and seller execute separate instructions and sometimes the contract of sale itself serves as the escrow instructions. (See bilateral instructions, final escrow instructions, joint escrow instructions, lender's escrow instructions, escrow, supplemental instructions)

highest and best use

In appraising real estate, the most profitable, physically possible, and legally permissible use for the property under consideration.

Adjusted Gross Income

Income from all sources less deductions for taxes, depreciation, and other allowable deductions.

Ordinary Income

Income that does not qualify for capital gains treatment.

Taxable Income

Income that remains after allowed deductions from adjusted gross income. (See adjusted gross income

wallboard

Interior wall finishing material.

Certificate of Redemption

Issued by the county tax collector when all past due amounts have been paid.

Installment Sales Contract

Land contract; sales contract; a contract used in a sale of real property whereby the seller retains title to the property until all or a prescribed part of the purchase price has been paid, but no earlier than one year from the date of possession.

city planning

Land-use recommendations adopted by local jurisdiction, determined by use of demographic, geographic, economic, and other data.

laths and plaster

Lath and plaster is a method of interior wall finishing used in older homes in which wet plaster is applied to a framework of wood slats, called laths, and wire.

prospective economic advantage

Legal term for one's expectations in doing business.

Economic Stimulus Act of 2008

Legislation passed by Congress in 2008 to bolster the economy by making payments of up to $1,200 to over 130 million households.

Demand for Payoff

Lender's statement of remaining indebtedness that will be paid at closing on transfer of the property securing the debt.

parcel map

Map that shows all property boundaries within a subdivision.

Ratification

Method of creating an agency relationship in which the principal accepts the conduct of someone who acted without prior authorization as the principal's agent.

Estoppel

Method of enforcing an agency relationship in which someone stated incorrectly that another person is his or her agent, and a third person relied on that representation.

mold

Molds are simple, microscopic organisms that are present virtually everywhere both indoors and outdoors. Molds are fungi and are needed to break down dead material and recycle nutrients in the environment. For molds to grow and reproduce they need only a food source such as leaves, wood, paper, or dirt - and moisture.

Boot

Money or other property that is not like-kind, which is given to make up any difference in value or equity between exchanged properties. Boot may be in the form of cash, notes, gems, the market value of an asset such as a mortgage, land contract, personal property, goodwill, a service or a patent offered in an exchange. The taxable gain in the like-kind exchange is recognized immediately to the extent of boot, whereas, other gain from the exchange may be deferred until subsequent transfer. (See exchange, like-kind)

Negligent Misrepresentation

Negligent misrepresentation occurs when the broker should have known that a statement about a material fact was false. The fact that the broker may actually be ignorant about the issue is no excuse. (See material fact, misrepresentation)

Full Disclosure of Material Facts

Obligation of real estate licensee to make known to the licensee's client as well as prospective purchasers all facts concerning the property and likely to affect its value that are known to the licensee and that the licensee is not otherwise prohibited by law from disclosing.

Special Agent

One authorized by a principal to perform a particular act or transaction without contemplation of continuity of service as with a general agent. The real estate broker is ordinarily a special agent appointed by the seller to find a ready, willing and able buyer for a particular property.

Agent

One authorized to represent and to act on behalf of another person (called the principal). Unlike an employee, who merely works for a principal, an agent works in the place of a principal.

Basis Point

One hundredth of a percentage point (0.01%). Basis points are often used to measure changes in or differences between yields on fixed income securities, since these often change by very small amounts.

Independent Contractor

One who is retained to perform a certain act, but who is subject to the control and direction of another only as to the end result and not as to how he or she performs the act.

Donor

One who makes a gift

Donee

One who receives a gift.

orientation

Orientation is the placement of a structure on a site, ideally to take maximum advantage of street frontage, view, and access to light and air.

stock cooperative

Ownership of real property by a corporation where each stockholder is entitled to occupancy of a unit under a lease. (See cooperative)

lead based paint

Paint, no longer allowed for use in buildings or products, that contains lead. Information on lead found in paint, dust, and soil is available at www.epa.gov/lead.

Assignee

Party to whom an assignment of rights is made. (See assignment, assignor)

National Housing Act

Passed by Congress in 1934, the National Housing Act set up the Federal Housing Authority (FHA) to encouraged banks, building and loan associations, etc. to make loans for building homes, small business establishments, and farm buildings. If the FHA approved the plans, it would insure the loans. In 1937 Congress passed another National Housing Act that enabled the FHA to take control of slum clearance. It made 60 year loans at low interest to local governments to help them build apartment blocks. Rents in these homes were fixed and were only available to low income families. By 1941 the agency had assisted in the construction of more than 120,000 family unit

tax increment funding

Payments on bonds through collection of increased taxes on improvements financed by the bonds.

equilibrium

Period of stability in the life cycle of a building or neighborhood in which little change is evident.

Employee

Person who is hired by someone else to perform work; for purposes of the Real Estate Law, a real estate salesperson is always considered an employee under the supervision of the employing broker. (See employer, independent contractor)

platform frame

Platform frame is a construction technique in which each floor of a building provides support for the floor above it.

Federal National Mortgage Association (FNMA)

Popularly known as "Fannie Mae," an active participant in the secondary mortgage market. Fannie Mae was established as a federal agency in 1938 for the purpose of purchasing FHA loans from loan originators to provide some liquidity for government-insured loans in a depression-wracked economy when few lending institutions would undertake this type of loan.

post-and-beam frame

Post-and-beam frame is a construction technique in which interior posts support ceiling boards, allowing for more open space within a structure than is possible with other forms of construction.

Capital Gain

Profit earned from the sale of an asset, where the sales price was greater than the adjusted basis. (See adjusted basis, deferred capital gain, excluded capital gain, realized capital gain (loss), recognized capital gain)

Recovery Property

Property that can be depreciated for income tax purposes, with the cost of the property deducted from income over a stated period.

California Department of Veterans Affairs

Provides California veterans and their families with aid and assistance in presenting their claims for veterans' benefits under the laws of the United States; to provide them with beneficial opportunities through direct low-cost loans to acquire farms and homes; and to provide the state's aged or disabled veterans with rehabilitative, residential, and medical care and services in a home-like environment at the California Veterans Homes.

Ready, Willing and Able Buyer

Real estate term describing a buyer who is prepared to comply with the terms and conditions of a purchase contract, and has the financial ability to complete the transaction. If the real estate broker secures a client who is a ready, willing, and able buyer, then he or she is entitled to a commission.

Secret Profit

Refers to a broker making an undisclosed profit at the seller's expense; for example, when the broker has an undisclosed relative buy the listed property and then resell it to a buyer whose earlier offer was never presented to the seller.

Conflict of Interest

Refers to a situation when someone, such as a lawyer, public official or REALTOR®, has competing professional or personal obligations or personal or financial interests that would make it difficult to fulfill his or her duties fairly.

replacement cost

Replacement cost is the construction cost at current prices of a property that is not necessarily an exact duplicate of the subject property but serves the same purpose or function as the original. (See appraisal)

reproduction cost

Reproduction cost is the cost of a new building of exactly the same design and materials as the subject property.

revitalization

Revitalization is a period of property renovation and rebuilding in which a neighborhood begins a new life cycle.

ridge board

Ridge boards are beams that run along top of roof.

Reassessment Event

Sale or other transaction, such as addition of improvements, that triggers a revaluation of property for tax purposes.

Escrow Holder

See escrow agent

sheathing

Sheathing is insulating and bracing material, such as plywood, applied to exterior walls of wood-frame structures, to which exterior finishing material, such as siding or masonry, is applied.

flashing

Sheet metal or other impervious material used in roof and wall construction as a barrier to water seepage. (See construction terms)

siding

Siding is an exterior wall finishing, applied in horizontal boards that can be made of wood, aluminum, vinyl, or a composite material.

site value

Site value is the value of land exclusive of improvements.

solar heating

Solar heating is a system that uses the warmth of sun; passive when sunlight is allowed to warm tiles or other materials; active when water is passed through a solar collector, then recirculated.

Title Insurance Fund

Specified amount of premiums collected by a licensed California title insurance company that must be set aside each year. (See title insurance)

Department of Housing and Community Development

State agency that carries out California's State Housing Law by adopting building standards and administrative regulations that ensure safe and durable housing while safeguarding affordability. www.hcd.ca.gov

Undue Influence

Strong enough persuasion to completely overpower the free will of another and prevent him or her from acting intelligently and voluntarily, as in a case where a broker guilty of blockbusting has induced someone to sell in fear of a change in the racial character of the community.

Creative Financing

Structuring the financing of a real estate transaction based on the cash positions of the buyer and seller. It involves working in conjunction with the existing financing to create a financing package that enables the buyer to purchase the property at better interest rates or terms than a conventional loan. (See conventional loan)

stucco

Stucco is a type of plaster used for exterior wall finishing.

studs

Studs are vertical wall supports; wood studs are used in a wood-frame structure and steel studs are used in a steel-frame structure.

Novation

Substituting a new obligation for an old one or substituting new parties to an existing obligation.

frame

Support posts, beams, and roof members, typically wood in residential construction; steel-frame construction is common for commercial structures and is also used for homes.

Documentary Transfer Tax

Tax applicable to property transfers and affixed to the grant deed; varies from county to county, city to city.

Tax Bracket

Tax rate applicable to a taxpayer's taxable income.

Jones v. Mayer

The 1968 decision of the U.S. Supreme Court that upheld the Civil Rights Act of 1866; As a result of this case, there are NO EXCEPTIONS to the prohibition of discrimination based on race. Jones v. Mayer

Housing Financial Discrimination Act of 1977 (Holden Act)

The Act prohibits financial institutions (banks, savings & loans, or other financial institutions, including mortgage loan brokers, mortgage bankers and public agencies) from engaging in discriminatory loan practices.

Title Insurance Surplus Fund

The California Insurance Code requires every title insurer to annually set apart a sum equal to 10 percent of its premiums collected during the year. The resulting "title insurance surplus fund" shall be maintained as a further security to holders and beneficiaries of the title policies issued by the insurer.

California Solar Initiative

The California Solar Initiative is a state law, effective January 1, 2008, that requires municipal utilities to offer a solar incentive program to customers. www.gosolarcalifornia.org

California Department of Insurance

The California agency that regulates insurers. www.insurance.ca.gov

civil rights act of 1866

The Civil Rights Act of 1866 prohibits racial discrimination in the sale and rental of housing.

Department of Fair Employment and Housing

The Department of Fair Employment and Housing is the California agency that enforces anti-discrimination laws; found at www.dfeh.ca.gov.

Fair Credit Reporting Act

The Fair Credit Reporting Act gave consumers the rights of access to, and correction of, credit reports. FCRA can be found in 15 U.S. Code section 1681, et seq. (See credit report, FACTA)

Fannie Mae

The Federal National Mortgage Association, popularly known as "Fannie Mae," an active participant in the secondary mortgage market. Fannie Mae was established as a federal agency in 1938 for the purpose of purchasing FHA loans from loan originators to provide some liquidity for government-insured loans in a depression-wracked economy when few lending institutions would undertake this type of loan.

Ad Valorem

The Latin phrase for "according to value."

Property Tax Postponement Law

The Property Tax Postponement Law gives qualified persons who are 62 or older, blind or disabled with a minimum household income the option of having the state pay all or part of the taxes on their homes. The amount of taxes postponed must be repaid to the State of California. The postponed amount becomes due and payable when the Individual moves, sells the property or dies.

Direct Endorsement

The ability of an FHA-approved lender to secure FHA single- and multifamily mortgage insurance by following FHA guidelines. Under a direct endorsement program, applications for many of FHA's mortgage insurance programs can be underwritten by approved lenders who certify that the mortgage complies with applicable FHA requirements. (See mortgage insurance)

Obligation

The act of binding oneself by a social, legal, or moral tie. A social, legal, or moral requirement, such as a duty, contract, or promise that compels one to follow or avoid a particular course of action.

Execute

The act of making a document legally valid, such as formalizing a contract by signing or acknowledging and delivering a deed. In some cases, execution of a document may refer solely to the act of signing, in other cases it may refer to complete performance of the document's terms.

demand

The amount of goods people are willing and able to buy at a given price; often coupled with supply. (See supply)

Veteran's Entitlement

The amount of loan guarantee available to eligible veterans.

unit-in-place method

The appraisal method of estimating building costs by calculating the costs of all of the physical components in the structure with the cost of each item including its proper installation, connection, etc. Also called the segregated cost method. (See appraisal)

index method

The appraisal method of estimating building costs by multiplying the original cost of the property by a percentage factor to adjust for current construction costs. (See appraisal)

change

The appraisal principle that holds that no physical, economic, social, or political condition remains constant. (See appraisal)

conformity

The appraisal principle that holds that the greater the similarity among properties in an area, the better they will hold their value. (See appraisal)

competition

The appraisal principle that states that excess profits generate competition. (See appraisal)

balance

The appraisal principle that states that the greatest value in a property will occur when the type and size of the improvements are proportional to each other as well as the land. (See appraisal)

contribution

The appraisal principle that states that the value of any component of a property is what it contributes to the value of the whole or what its absence detracts from that value. (See appraisal)

Anticipation

The appraisal principle which holds that value can increase or decrease based on the expectation of some future benefit or detriment produced by the property. (See appraisal)

Procuring Cause

The cause originating a series of events that lead directly to the intended objective; in a real estate transaction the procuring cause is the real estate agent who first procures a ready, willing, and able buyer.

Close of Escrow/Closing

The consummation of a real estate transaction, when the seller delivers title to the buyer in exchange for payment by the buyer of the purchase price. Closing in some areas may not occur until the documents are recorded; however, under general rules of real estate law, transfer of title takes place upon delivery of the deed to the grantee. (See escrow)

Depreciation

The decrease in the value of an asset allowed when computing property value for tax purposes. It can also be a loss in the appraised value of a property due to physical deterioration. This latter type of depreciation is curable when it can be remedied by repair or an addition to the property, and incurable when there is no easy or economical remedy. (See appreciation)

depreciation

The decrease in the value of an asset allowed when computing property value for tax purposes. It can also be a loss in the appraised value of a property due to physical deterioration. This latter type of depreciation is curable when it can be remedied by repair or an addition to the property, and incurable when there is no easy or economical remedy. (See appreciation)

Basis

The dollar amount that the Internal Revenue Service attributes to an asset for purposes of determining annual depreciation or cost recovery, and gain or loss in the sale of the asset. The determination of basis is of fundamental importance in tax aspects of real estate investment. All property has a basis. If property was acquired by purchase, the owner's basis is the cost of the property plus the value of any capital expenditures for improvements to the property, reduced by any cost recovery depreciation actually taken or allowable. The basis is also reduced by any untaxed gain "carried over" to the new property in cases where the new property is a replacement of a former residence or is acquired through a like-kind exchange or through an involuntary conversion. This new basis is called the property's adjusted basis. (See adjusted basis, depreciable basis, original basis)

Assessed Value

The dollar value of an asset assigned by a public tax assessor for the purposes of taxation.

eave

The eave is the portion of a roof that extends over the exterior wall. (See construction terms)

Beneficiary Statement

The escrow agent obtains a beneficiary statement when an existing loan is to be paid or assumed by a buyer. The statement includes the balance due on the loan so the buyer receives the proper amount of credit.

Performance

The execution of an action; the fulfillment of a promise or request; implementation.

Mortgage Insurance Premium

The fee paid by a mortgagor to obtain Mortgage Insurance on a mortgage loan. The fee may be collected as a lump sum at loan closing or as a periodic amount included in the monthly payment, or both. (See mortgage insurance)

soffit

The finished underside of the eaves. A small ceiling like space, often out of doors, such as the underside of a roof overhang.

Commingling

The illegal act of mixing deposits or monies belonging to a client (trust funds) with one's personal money. By law brokers are required to maintain a separate trust or escrow account for other parties' funds held temporarily by the broker. (See trust funds)

net operating income (NOI)

The income projected for an income-producing property after deducting losses for vacancy, collection and operating expenses.

police power

The inherent right of the state to regulate for the purpose of promoting health, safety, welfare, and morality. Police power gives the state the right to impose certain restraints on human conduct which are reasonably necessary in order to safeguard the public interest. This right is the basis of zoning, the official map, building codes, and subdivision regulations.

Authority

The legal power or right given by a principal and accepted by the agent to act on the principal's behalf in performing specific acts or negotiations.

value in exchange

The market value of a property.

potential gross income

The maximum income that property is capable of producing.

market value

The most probable price a property should bring in a competitive and open market under all conditions requisite to a fair sale. Such such conditions include the assumption that the buyer and seller acted prudently and knowledgeably and that the price is not affected by undue stimulus. (See value)

Federal Reserve Bank System

The nation's central bank created by the Federal Reserve Act of 1913. Its purpose is to help stabilize the economy through the judicious handling of the money supply and credit available in this country. The system functions through a seven-member Board of Governors and 12 Federal Reserve District Banks, each with its own president.

Default

The nonperformance of a duty or obligation that is part of a contract. A default is normally a breach of contract, and the nondefaulting party can seek legal remedies to recover any loss.

Duty of Care

The obligation of principal to agent that the principal will not interfere with the agent's prospective economic advantage the agent's business activities.

County Assessor

The official responsible for determining property values for ad valorem taxation purposes.

Assignor

The party making an assignment of rights to someone else (the assignee). (See assignment, assignee)

supply and demand

The principle of supply and demand takes into account the effect on market value of the relationship between the number of properties on the market at a given time and the number of potential buyers.

Escrow

The process by which money and/or documents are held by a disinterested third person (a stakeholder) until satisfaction of the terms and conditions of the escrow instructions (as prepared by the parties to the escrow) have been achieved. Once these terms have been satisfied, delivery and transfer of the escrowed funds and documents takes place. Although in some states a real estate broker is authorized to handle escrow functions, the common practice is to employ the services of a licensed escrow company, title company or lending institution. (See bilateral instructions, final escrow instructions, joint escrow instructions, lender's escrow instructions, supplemental instructions)

cost approach

The process of estimating the value of a property by adding to the estimated land value, the appraiser's estimate of the reproduction or replacement cost of the building, less depreciation. (See appraisal)

sales comparison approach

The process of estimating the value of a property by examining and comparing actual sales of comparable properties. (See appraisal)

income approach

The process of estimating the value of an income-producing property through capitalization of the annual net income expected to be produced by the property during its remaining useful life. (See appraisal)

utility

The quality or condition of being useful; usefulness.

capitalization rate

The rate of return a property will produce on the owner's investment.

zoning

The regulation of structures and uses of property within designated districts or zones. Zoning regulates and affects such things as use of the land, lot sizes, types of structure permitted, building heights, setbacks and density (the ratio of land area to improvement area). (See aesthetic zoning, bulk zoning, comprehensive zoning, cumulative zoning, downzoning, exclusionary zoning, incentive zoning, noncumulative zoning, partial zoning, spot zoning)

market rent

The rent that could be charged for property at the present time, based on demand and the supply of comparable properties. (See contract rent)

contract rent

The rental income as stipulated by the parties in a lease. (See market rent)

eminent domain

The right of the government to acquire title to property for public use by condemnation; the property owner receives compensation which is generally fair market value. (See taking) FindLaw® eminent domain

Contractors State License Board

The state agency that licenses and regulates building contractors. www.cslb.ca.gov

Tax Rate

The tax rate for each taxing body is computed separately. To arrive at a tax rate, the total monies needed for the coming fiscal year are divided by the total assessments of all real estate located within the taxing body's jurisdiction.

Assignment

The transfer of the right, title and interest in the property of one person (the assignor) to another (the assignee). There are assignments of, among other things, mortgages, sales contracts, contracts for deeds, leases and options. (See assignor, assignee)

Competitive Market Analysis (CMA)

This is a term often used by real estate brokers in preparing a report for prospective sellers and buyers, indicating market trends in various neighborhoods, based on computer statistics generated from multiple-listing service data. Generally, these analyses are used for clients to determine a listing price for the sale of a home or for buyers to determine if a list price is reasonable for a given location.

Hypothecation

To pledge real or personal property as security for a loan or other obligation without surrendering possession of the property. The borrower retains the rights of control and possession, and the lender secures an underlying equitable right in the pledged property.

Conditional Delivery

Transfer of documents and funds to escrow agent or settlement officer to be held until the transaction is closed, at which time they are transferred to the designated party.

Offer and Acceptance

Two essential components of a valid contract; a "meeting of the minds." (See acceptance, offer)

form-based planning

Type of land use planning permitted in California that provides for a mix of land uses while taking into account the relationship of buildings and public areas.

tax deferred exchange (1031 exchange)

Under Section 1031 of the Internal Revenue Code, some or all of the realized gain from the exchange of property may not need to be immediately recognized for tax purposes. Both properties in an exchange must be held for productive use in trade or business or for investment and must be of a like-kind. (See like-kind, realized capital gain)

bracing

Use of one or more construction methods, such as plywood wall sheathing, to enable a structure to withstand the pressures caused by high winds and earth movement. Information on bracing systems can be found at the Web site of the Engineered Wood Association. www.wallbracing.org

insulation

Use of wrapping and filling materials to reduce heat conductivity and improve energy efficiency of buildings and building components; measured in R-value. (See R-value)

value in use

Value in use is the subjective value of property to its present owner, as opposed to market value, which should be objective.

Breach of Contract

Violation of any of the terms or conditions of a contract without legal excuse; default; nonperformance. The nonbreaching party can usually seek one of three alternative remedies upon a material breach of the contract: rescission of the contract, action for money damages or an action for specific performance.

Gift

Voluntary transfer by an individual of any type of property for less than full consideration. (See gift tax)

quantity-survey method

Way of estimating building reproduction cost by making a thorough itemization of all construction costs, both direct (material and labor) and indirect (permits, overhead, profit), then totaling those costs. (See appraisal)

conditional-use permit

Written governmental permission allowing a use inconsistent with zoning but necessary for the common good, such as locating an emergency medical facility in a predominantly residential area. (See zoning)

building permit

Written governmental permission for the construction, alteration or demolition of an improvement, showing compliance with building codes and zoning ordinances. (See construction terms)

Uniform Residential Appraisal Report

a summary form of appraisal report developed and required by Fannie Mae and Freddie Mac.

Void Contract

one that has no legal effect from its inception. An agreement to do something that is illegal