Real Estate Terms

Beneficiary

(1) The person for whom a trust operates or in whose behalf the income from a trust estate is drawn. (2) A lender in a deed of trust loan transaction.

Chlorofluorocarbons

(CFCs) found in gases used in aerosols, freon used in refrigerators, and air conditioners that destroy part of the ozone layer

Automatic extension

A listing agreement clause stating that the agreement will continue automatically for a certain period of time after its expiration date. In many state this clause is discouraged or prohibited

Allodial system

A system of land ownership in which land is held free and clear or any rent or service due to the government; commonly contrasted to the feudal system is held under the allodial system in the United States

Accesion

Acquiring title to additions or improvements to real property as a result of the annexation of fixtures or the accretion of alluvial deposits along the banks of streams.

Assumption of mortgage

Acquiring title to property on which there is an existing mortgage and agreeing to be personally liable for the terms and condition of the mortgage, including payments

Americans with Disabilities Act

Act that addresses the rights of the disabled, to include public accommodations and equal access.

Binder

An agreement to consider a down payment for the purchase of real estate as evidence of good faith on the part of the purchaser. Also, a notation of coverage on an insurance policy, issued by an agent, and given to the insured prior to issuing of the policy.

Anticipation

Appraisal principle that holds that value can increase or decrease based on the expectation that some future event may or may not occur

Annexation

Change personal property to real property, such as mixing sand, stone and cement, and making a sidewalk

Blue-sky laws

Common name for those state and federal laws that regulate the ‎registration and sale of investment securities. 23:437‎

Automated underwriting

Computer system that permits lender to expedite the loan approval process and reduce lending costs

Brownfields

Defunct, derelict, or abandoned commercial or industrial sites; many have toxic wastes

Building-related illness (BRI)

Describes a condition in which the health-related symptom or symptoms of a building's occupants are identified and can be directly attributed to certain building containments.

Actual notice

Express information or fact; that which is known; direct knowledge.

Asbestos

Mineral used extensively in insulation; inhaling fibers can cause sever respiratory diseases or cancer

Benchmarks

Permanent reference marks or points established for use by surveyors ‎in measuring differences in elevation. 9:154‎

Certificate of occupancy

Permission by the municipal inspector to occupy a completed building structure after being inspected and having complied with building codes.

Certificate of reasonable value (CRV)

Prepared by an appraiser on VA loans; it states the market value of a property.

Capping

Process of laying two to four feet of soil over the top of a landfill site and planting grass to enhance aesthetic value and to prevent erosion

Capital gain

Profit from the sale of an asset.(Capital gain can result when stock is sold for a higher price than was paid for it).

adverse possession

The acquisition of title to real property by occupying it openly, without the consent of the owner, for a period of time specified by a state statute. The occupation must be actual, open, notorious, exclusive, and in opposition to all others, including the owner.

Assemblage

The act of combining the two adjacent lots to result in a higher value

Certificate of sale

The document generally given to the purchaser at a tax foreclosure sale. A Certificate of Sale does not convey title; normally it is an instrument certifying that the holder received title to the property after the redemption period passed and that the holder paid the property taxes for that interim period.

Breach of contract

The failure, without legal excuse, of a promisor to perform the obligations of a contract.

Cash flow

The net spendable income from an investment, determined by ‎deducting all operating and fixed expenses from the gross income. ‎When expenses exceed income, a negative cash flow results. 23:431‎

Client

The principal

Air rights

The right to use open space above a property, usually allowing the surface to be used for another purpose

Bulk transfer

a business transfers all merchandise and supplies at once

Amortized loan

a loan in which the principle as well as the interest is payable in monthly or other periodic installments over the term of the loan

Cash flow report

a monthly statement that details the financial status of the property. 297

Attachment

a writ authorizing the seizure of property that may be needed for the payment of a judgment in a judicial proceeding

Assessment

appraisal; determining the value, especially for taxing

CC&Rs

covenants, conditions, and restrictions; private restrictions imposed by subdivision developers

Acknowledgment

formal declaration made before an authorized official, notary, or clerk, has signed a document, states that a signature is genuine and voluntary

Caveat emptor

let the buyer beware

Agent

means or instrument; personal representative; person acting in an official capacity

Accrued items

on a closing statement, items of expense that are incurred but not yet payable, such as interest on a mortgage loan or taxes on real property.

Appraiser

one who estimates officially the worth or value or quality of things

Chattel

personal as opposed to real property

Building code

set of standards established and enforced by local government for the structural safety of buildings

Area

the amount of space that a flat surface or shape covers

Administrator

the party appointed by a probate court to distribute the estate of someone who dies without a will or without naming an executor

Annual percentage rate (APR)

the relationship of all finance charges to the loan amount; must be disclosed to borrowers the Truth-in Lending Act.

Adjusted basis

• taxpayer's initial basis as adjusted by certain increases and decreases. The initial basis is cost. Adjustments to basis include items that reduce basis, such as allowance for depreciation, depletion, and obsolescence that reduce the taxpayer's taxes. [the basis in stock may be decreased by non-taxable distributions. • Capital expenditures that improve property will increase the basis of property.

Amendment

A change to the existing content of a contract. Must be initialed by all parties.

Bilateral contract

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

Bargain and sale deed

A deed that carries with it no warranties against liens or other encumbrances but that does imply that the grantor has the right to convey title. The grantor may add warranties to the deed at his or her discretion

Buydown

A financing technique used to reduce the monthly payments for the first few years of a loan. Funds in the form of discount points are given to the lender by the builder or seller to buy down or lower the effective interest rate paid by the buyer, thus reducing the monthly payments for a set time.

Adjustable-rate mortgage (ARM)

A loan characterized by a fluctuating interest rate, usually one tied to a bank or savings and loan association cost-of-funds index.

Capitalization

A mathematical process for estimating the value of a property using a proper rate of return on the investment and the annual net operating incomes expected to be produced by the property. The formula is expressed as: Income ÷ Rate = Value.

Acre

A measure of land equal to 43,560 square feet.

Blanket loan

A mortgage covering more than one parcel of real estate, providing for each parcel's partial release from the mortgage lien upon repayment of a definite portion of the debt.

Agency

A relationship in which one party (the principal) authorizes another party (the agent) to act as the principal's representative in dealing with third parties.

Buyer's agent

A residential real estate broker or salesperson who represents the prospective purchaser in a transaction. The buyer's agent owes the buyer-principal the common law or statutory agency duties.

Buyer's broker

A residential real estate broker who represents prospective buyers exclusively. As the buyer's agent, the broker owes the the buyer-principal the common law or statutory agency duties.

Branch office

A secondary place of business apart from the principal or main office from which real estate business is conducted. A branch office usually must be run by a licensed real estate broker working on behalf of the broker

Certificate of title

A statement of opinion on the status of the title to a parcel of real property based on an examination of specified public records

affidavit of title

A statement, in writing, made under oath by seller or grantor, acknowledged before a Notary Public in which the affiant identifies himself or herself and affiant's marital status certifying that since the examination of title on the contract date there are no judgments, bankruptcies or divorces, no unrecorded deeds, contracts, unpaid repairs or improvements or defects of title known to affiant and that affiant is in possession of the property.

Buffer zone

A strip of land, usually used as a park or designated for a similar use, separating land dedicated to one use from land dedicated to another use (e.g., residential from commercial).

American Land Title Association (ALTA) policy

A title insurance policy that protects the interest in a collateral property of a mortgage lender who originates a new real estate loan

Civil Rights Act of 1866

Act that prohibits any racial discrimination in the sale or rental of housing

Agency by ratification

Agency relationship in which an unauthorized agent commits the principal to an agreement and the principal later accepts the unauthorized agreement, thus ratifying the agency relationship.

Alienation clause

Also know as "due on sale" clause permits lender to declare balance of loan immediately due if property is sold; prevents loan assumption without lender approval

Attorney's opinion of title

An abstract of title that an attorney has examined and has certified to be, in his or her opinion, an accurate statement of the facts concerning the property ownership.

Assume

An agreement to continue performing duties under a contract or lease.

Appurtenant easement

An easement that is annexed to the ownership of one parcel and allows the owner the use of the neighbor's land.

Appraisal

An estimate of the value of property resulting from an analysis of facts about the property. An opinion of value.

Accretion

An increase in land resulting from the deposit of soil by the water.

Broker's price opinion (BPO)

An opinion of real estate value commissioned by a bank or attorney and provided by a broker

Addendum

Any provision added to an existing contract without altering the content of the original. Must be signed by all parties.

Brokerage

Bringing together parties interested in a real estate transaction

Carbon monoxide

Colorless, odorless poisonous gas produced as a by-product of incomplete combustion; can be dangerous if not properly ventilated

Air lots

Designated airspace over a piece of land. An air lot, like surface ‎property, may be transferred. 9:153‎

Buyer-agency agreement

Employment contract in which the buyer hires the broker to find a property to buy. Broker owes fiduciary responsibilities to buyer/client

Balloon payment

Final payment of mortgage loan that is considerably larger than the required periodic payments because the loan amount was not fully amortized

Blockbusting

Illegal practice of inducing homeowners to sell their properties by telling them that a certain people of a certain race, national origin or religion are moving into the area

Base line

Imaginary line running east and west used by surveyors as a reference in describing land under the rectangular survey system

Antitrust laws

Laws to minimize unfair competition. Illegal to conspire to fix prices, allocate customers or markets

Accrued depreciation

Loss in value resulting from the property's physical deterioration, ‎external depreciation (decrease in price), and functional obsolescence. ‎‎18:328‎

Boot

Money or property given to make up any difference in value or equity between two properties in an exchange

Broker

One who acts as an intermediary on behalf of others for a fee or commission

Area preference

People's desire for one area over another, based on a number of ‎factors such as history, reputation, convenience, scenic beauty, and ‎location. 2:23‎

Appurtenance

Right, privilege or improvement belong to, and passing with the land

Chain of title

Succession of conveyances from some accepted starting point, whereby the present hold of title derives the title, there should be no "breaks" in the succession

Ad valorem tax

Tax levied according to value, used to refer to real estate taxes

Change

The appraisal principle that holds that no physical or economic condition remains constant.

Balance

The appraisal principle that states that the greastest value in a property will occur when the type & size of the improvements are proportional to each other as well as the land.

Acceleration clause

The clause in a mortgage or deed of trust that can be enforced to make the entire debt due immediately if the borrower defaults on an installment payment or other covenant

Bundle of legal rights

The concept of land ownership that includes ownership of all ‎legal rights to the land — possession, control within the law, ‎enjoyment, exclusion, and disposition. 2:17‎

Abstract of title

The condensed history of a title to a particular parcel of real estate, consisting of a summary of the original grant and all subsequent conveyances and encumbrances affecting the property and a certification by the abstractor that the history is complete and accurate.

Basis

The financial interest that the Internal Revenue Service attributes to an owner of an investment property for the purpose of determining annual depreciation and gain or loss on the sale of the asset. If a 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, minus any depreciation allowable or actually taken. This new basis is called the adjusted basis.

Appreciation

The increase in the value of a property due to changes in market conditions, inflation, or other causes.

Actual eviction

The legal process that results in the tenant's being physically removed from the leased premises

Avulsion

The sudden tearing away of land, as by earthquake, flood, volcanic action, or the sudden change in the course of a stream

Alienation

The transferring of property to another; the transfer of property and possession of lands, or other things, from one person to another.

Assessed value

The value of an asset determined by tax authorities for the purpose of calculating taxes

Assignment

Transfer in writing of interest in a bond, mortgage, lease

Building permit

Written governmental permission for the contruction, alteration, or demolition of an improvement, showing compliance with building codes and zoning ordinances.

Budget comparison statement

compares actual results with the original budget, often giving either percentages or a numerical variance of actual versus projected income and expenses. 298