Real Estate U - Glossary

Credit -

A bookkeeping entry on the right side of an account, recording the reduction or elimination of an asset or an expense, or the creation of or addition to a liability or item of equity or revenue.

Assessments -

A charge against real estate made by a unit of government to cover a proportionate cost of an improvement such as a street or sewer.

Asbestosis -

A chronic lung disease caused by inhaling asbestos fibers.

Assessing Unit -

A city, county, town or village with the authority to value real property for purposes of taxation.

Cloud on Title -

A claim, encumbrance or condition which impairs the title to real property until disproved or eliminated as for example through a quitclaim deed or quiet title legal action.

Adverse Possession -

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

Accession -

An addition to property through the efforts of man or by natural forces.

Encroachment -

An unlawful intrusion onto another's adjacent property by improvements to real property, e.g., a swimming pool built across a property line.

Constructive Eviction -

Any disturbance of the tenant's possession of the lease premises by the landlord whereby the premises are rendered unfit or unsuitable for the purpose for which they were leased.

Consideration -

Anything given or promised by a party to induce another to enter into a contract, e.g., money or personal services.

Encumbrance -

Anything which affects or limits the fee simple title to or value of property, e.g., mortgages or easements.

Capital Gains -

At resale of a capital item, the amount by which the net sale proceeds exceed the adjusted cost basis (book value). Used for income tax computations. Gains are called short or long based upon the length of the holding period after acquisition. Usually taxed at lower rates than ordinary income.

Capital Expense -

Expenditures creating future value. Incurred when a property owner spends money to upgrade a building in an effort to add value and/or extend the useful life of the building.

Actual Notice -

Express or implied knowledge of a fact.

Default -

Failure to fulfill a duty or promise or to discharge an obligation.

Chattel -

Goods or every species of property movable or immovable which are not real property. Personal property.

Deed Restrictions -

Limitations in the deed to a property that dictate certain uses that may or may not be made of the property.

Constructive Notice -

Notice of the condition of title to real property given by the official records of a government entity which does not require actual knowledge of the information.

Devisor -

One who disposes of real property by will.

Devisee -

One who receives a gift of real property by will.

Debit -

That which is due from one person to another.

Assignment -

The transfer to another of any property in possession or in action, or of any estate or right therein. A transfer by a person of that person's rights under a contract.

Conversion -

The unlawful appropriation of another's property, as in the conversion of trust funds.

Erosion -

The wearing away of land by the act of water, wind, or glacial ice.

Building Envelope -

A building envelope is the maximum three-dimensional space on a zoning lot within which a structure can be built, as permitted by applicable height, setback and yard controls. One of the main goals of a zoning analysis is to determine the building envelope. A building envelope is also referred to as the "bulk" of a building.

Acceleration Clause -

A condition in a real estate finance instrument giving the lender the power to declare all sums owing the lender immediately due and payable upon the happening of an event, such as sale of the property, or a delinquency in the repayment of the note.

Bilateral Contract -

A contract in which each party promises to do something.

Deed in Lieu of Foreclosure -

A deed to real property accepted by a lender from a defaulting borrower to avoid the necessity of foreclosure proceedings by the lender.

Certificate of Occupancy -

A document issued by a local government agency after satisfactory inspection of a structure authorizing that the structure can be occupied.

Chloro-flouro Carbons (CFCs) -

A fluid, containing hydrocarbons, that absorbs heat from a reservoir at low temperatures and rejects heat at higher temperatures. When emitted into the atmosphere, CFCs cause depletion of the stratospheric ozone layer.

Acknowledgment -

A formal declaration made before an authorized person, e.g., a notary public, by a person who has executed an instrument stating that the execution was his or her free act.

Devise -

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

Chain of Title -

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

Deficiency Judgment -

A judgment given by a court when the value of security pledged for a loan is insufficient to pay off the debt of the defaulting borrower.

Equitable Lien -

A lien on property imposed by a court in order to achieve fairness, particularly when someone has possession of property which he/she holds for another.

Construction Loan -

A loan secured by real estate which is for the purpose of funding the construction of improvements or building(s) upon the property.

Amortized Loan -

A loan to be repaid, interest and principal, by a series of regular payments that are equal or nearly equal, without any special balloon payment prior to maturity.

Corrective Maintenance -

A maintenance task performed to identify, isolate, and rectify a problem with a property so that the property can be restored to an acceptable condition.

Conventional Loan -

A mortgage securing a loan made by investors without governmental underwriting, i.e., which is not FHA insured or VA guaranteed. This type of loan is customarily made by a bank or savings and loan association.

Asbestos -

A naturally occurring mineral fiber sometimes found in older homes. It is hazardous to health when a possibility exists of exposure to inhalable fibers. Homeowners should be alert for friable asbestos and always seek professional advice in dealing with it.

Dominant Tenement -

A parcel of real property that has an easement over another piece of property (the servient estate).

Assignment of Rents -

A provision in a mortgage or deed of trust under which the lender may, upon default by the trustor, take possession of the property, collect income from the property and apply it to the loan balance and the costs incurred by the lender.

Counter Offer -

A response to an offer to enter into a contract, changing some of the terms of the original offer. A counter offer is a rejection of the offer (not a form of acceptance), and does not create a binding contract unless accepted by the original offeror.

Easement -

A right, privilege or interest limited to a specific purpose which one party has in the land of another.

Avulsion -

A sudden and perceptible loss of land by the action of water as by a sudden change in the course of a river.

Abstract of Title -

A summary or digest of all transfers, conveyances, legal proceedings, and any other facts relied on as evidence of title, showing continuity of ownership, together with any other elements of record which may impair title.

Building Code -

A systematic regulation of construction of buildings within a municipality established by ordinance or law.

Blanket Mortgage -

A type of loan used to fund the purchase of more than one piece of real property. A blanket mortgage is often used for subdivision financing.

Assessed Value -

A valuation placed upon a piece of property by a public authority as a basis for levying taxes on the property.

Deed -

A written instrument which when properly executed and delivered conveys title to real property from one person (grantor) to another (grantee).

Certificate of Title -

A written opinion by an attorney that ownership of a particular parcel of land is as stated in the certificate.

Accretion -

Accession by natural forces, e.g., alluvium.

Addendum -

Additional pages of material that are added to and become part of a contract.

Bundle of Rights -

All of the legal rights incident to ownership of property including rights of use, possession, encumbering and disposition.

Dual Agency -

An agency relationship in which the agent acts concurrently for both of the principals in a transaction.

Confidentiality -

An agent is obligated to safeguard his/her principal's lawful confidences and secrets. Therefore, a real estate broker must keep confidential any information that may weaken a principal's bargaining position. The duty of confidentiality precludes a broker who represents a seller from disclosing to a buyer that the seller can, or must, sell a property below the listed price. Conversely, a broker who represents a buyer is prohibited from disclosing to a seller that the buyer can, or will, pay more than what has been offered for a property. The duty of confidentiality does not include an obligation by a broker who represents a seller to withhold known material facts about the condition of the seller's property from the buyer, or to misrepresent the property's condition. To do so constitutes misrepresentation and may impose liability on both the broker and/or the seller.

Buyer Agent -

An agent who represents the buyer in a real estate transaction.

Commission -

An agent's compensation for performing the duties of agency; in real estate practice, a percentage of the selling price of property, percentage of rentals, etc.

Contract -

An agreement to do or not to do a certain thing.

Cost Approach -

An analysis in which a value estimate of a property is derived by estimating the replacement cost of the improvements, deducting therefrom the estimated accrued depreciation, then adding the market value of the land.

Comparative Market Analysis -

An analysis of the competition in the marketplace that a property will face upon sale attempts.

Cooperative -

An apartment building, owned by a corporation and in which tenancy in an apartment unit is obtained by purchase of shares of stock of the corporation and where the owner of such shares is entitled to occupy a specific apartment in the building.

Easement by Condemnation -

An easement created by the government or government agency that has exercised its right under eminent domain.

Easement in Gross -

An easement that benefits an individual or legal entity, rather than a dominant estate.

Easement Appurtenant -

An easement that benefits the dominant estate and "runs with the land". In other words, an easement appurtenant generally transfers automatically when the dominant estate is transferred.

Easement by Implication -

An easement that is not created by express statements between the parties; but as a result of surrounding circumstances that dictate that an easement must have been intended by the parties.

Corporation -

An entity established and treated by law as an individual or unit with rights and liabilities, or both, distinct and apart from those of the persons composing it. A corporation is a creature of having certain powers and duties of a natural person. Being created by law, it may continue for any length of time the law prescribes.

Condominium -

An estate in real property wherein there is an undivided interest in common in a portion of real property coupled with a separate interest in space called a unit, the boundaries of which are described on a recorded final map, parcel map or condominium plan.

Bargain and Sale Deed -

Any deed that recites a consideration and purports to convey the real estate; a bargain and sale deed with a covenant against the grantor's act is one in which the grantor warrants that grantor has done nothing to harm or cloud the title.

Base and Meridian -

Imaginary lines used by surveyors to find and describe the location of private or public lands. In government surveys, a base line runs due east and west, meridians run due north and south, and are used to establish township boundaries.

Easement by Prescription -

Implied easements granted after the dominant estate has used the property in a hostile, continuous, and open manner for a statutorily prescribed number of years.

Appreciation -

Monetary gain resulting from the increase in the market value of an investment, excluding additions of capital. For example, a house which is sold five years after it was purchased for 20% more than the purchase price.

Capital Reserve Budget -

Money set aside by a property owner for long-term capital expenditures to a property.

Buydown -

Obtaining a lower interest rate by paying additional points to the lender.

Appraiser -

One qualified by education, training and experience who is hired to estimate the value of real and personal property based on experience, judgment, facts, and use of formal appraisal process.

Agent -

One who acts for and with authority from another called the principal. Agreement of Sale - A written agreement or contract between seller and purchaser in which they reach a "meeting of minds" on the terms and conditions of the sale. The parties concur; are in harmonious opinion.

Easement by Necessity -

Parcels without access to a public way may have an easement of access over adjacent land if crossing that land is absolutely necessary to reach the landlocked parcel and there has been some original intent to provide the lot with access.

Closing -

Process by which all the parties to a real estate transaction conclude the details of a sale or mortgage. The process includes the signing and transfer of documents and distribution of funds.

Community Property -

Property acquired by husband and/or wife during a marriage when not acquired as the separate property of either spouse. Each spouse has equal rights of management, alienation and testamentary disposition of community property.

Common Elements -

Refers to the spaces in a building shared by residents of the building. These include lobbies, corridors, stairs, elevators, etc.

Acceptance -

The act of agreeing or consenting to the terms of an offer thereby establishing the "meeting of the minds" that is an essential element of a contract.

Condemnation -

The act of taking private property for public use by a political subdivision upon payment to owner of just compensation.

Discount Points -

The amount of money the borrower or seller must pay the lender to get a mortgage at a stated interest rate.

Covenants, Conditions, and Restrictions (CC&Rs) -

The basic rules establishing the rights and obligations of owners of real property within a subdivision or other tract of land in relation to other owners within the same subdivision or tract and in relation to an association of owners organized for the purpose of operating and maintaining property commonly owned by the individual owners.

Defeasance Clause -

The clause in a mortgage that gives the mortgagor the right to redeem the mortgagor's property upon the payment of the mortgagor's obligations to the mortgagee.

Easement by Grant -

The creation of an easement by one party expressly transferring the easement to another party.

Emblements -

The crops and other annual plantings considered to be personal property of the cultivator.

Alluvium -

The gradual increase of the earth on a shore of an ocean or bank of a stream resulting from the action of the water.

Commingling -

The illegal mixing of personal funds with money held in trust on behalf of a client.

Beneficiary -

The lender on the security of a note and deed of trust.

Amortization -

The liquidation of a financial obligation on an installment basis.

Blockbusting -

The practice on the part of unscrupulous speculators or real estate agents of including panic selling of homes at prices below market value, especially by exploiting the prejudices of property owners in neighborhoods in which the racial make-up is changing or appears to be on the verge of changing.

Capitalization Rate -

The rate of interest which is considered a reasonable return on the investment, and used in the process of determining value based upon net income. Capitalization Rate = Net Operating Income (NOI) / Purchase Price

Agency -

The relationship between principal and the principal's agent, which arises out of a contract, either expressed or implied, written or oral, wherein the agent is employed by the principal to do certain acts dealing with a third party.

Actual Eviction -

The removal of a tenant by the landlord because the tenant breached a condition of a lease or another rental contract.

Eminent Domain -

The right of the government to acquire property for necessary public or quasi-public use by condition; the owner must be fairly compensated.

Escalation -

The right reserved by the lender to increase the amount of the payments and/or interest upon the happening of a certain event.

Air Rights -

The rights in real property to the reasonable use of the air space above the surface of the land.

Demand -

The supply of willing and able buyers in the marketplace or lack thereof.

Assumption of Mortgage -

The taking of a title to property by a grantee wherein the grantee assumes liability for payment of an existing note secured by a mortgage or deed of trust against a property, becoming a co-guarantor for the payment of a mortgage or deed of trust note.