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| Term | Definition |
| 0% financing | A loan with no interest in the contract. The IRS imputes 10 percent for both borrower and lender. |
| 100% commission plan | Some firms have adopted a 100 percent commission plan. Salespersons in these offices pay a monthly service charge to their brokers to cover the costs of office space, telephones and supervision in return for keeping 100 percent of the commissions from the sales they negotiate. The 100 percent commission salesperson pays all of his or her own expenses. |
| 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. |
| 11th District Cost-of-Funds Index | This index is the monthly weighted average cost of what banks on the West Coast pay for their various deposits and for the advances they get through the Federal Home Loan Bank Board of San Francisco. It moves at a tortoise's pace compared to the other indices. |
| 13th Amendment to the US Constitution (1 | Section 1. Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction. |
| 2 step mortgage | A hybrid loan between a fixed-rate and adjustable-rate mortgage (ARM) loan where a lower rate remains in effect for 5, 7, or 10 years and is then adjusted to a new fixed rate for the remainder of the balance and amortization term. |
| 2 to 4 family property | A property that consists of a structure that provides living space (dwelling units) for two to four families, although ownership of the structure is evidenced by a single deed. |
| 3-day notice | Notice to quit, quit or cure, or quit or pay rent. Three-day notice must be given before an unlawful detainer action. |
| 3-way switch | A light switch that allows a person to turn the light on or off from either end of a hallway or stairway. |
| 30-day notice | Notice to vacate a premises under a periodic tenancy. Notice must be for the rent period, but not more than 30 days. (See periodic tenancy) |
| 401(k) | Retirement plans which allow an individual to contribute part of their "pre-tax" income to an investment account. These pre-tax contributions are not tax-free, they are tax-deferred, meaning the person does not pay income tax on this money until they withdraw it from the plan (which should be at retirement). 401(k) plans are provided by employers that are private corporations. Some companies offer to "match" the individual's contribution as an incentive to join the company's retirement plan. Loans against 401K plans are an acceptable source of down payment for most types of loans. |
| 403(b) | An employer-sponsored investment plan that allows individuals to set aside tax-deferred income for retirement or emergency purposes. 403(b) plans are provided by employers that are not for profit organizations. Some administrators allow for loans against the monies accumulated in the plan. |
| A, B, C, D paper | Mortgage loans are rated as A, B, C, or D paper. "A" paper loans are the highest quality, lowest risk loans; "B" quality are loans where the borrower has minor credit problems; "C" quality are borrowers with marginal or poor credit; "D" quality indicates very high risk loans. |
| abatement | 1. A reduction or decrease. 2. The removal of a nuisance. |
| absorption rate | The total number of vacant square feet of office space divided by the square footage leased per year historically. Used to analyze demand of office space in a given market area. |
| abstract of judgment | A full summary by the court of a judgment. It becomes a general lien on all of a debtor's property in the county where it is recorded. (See general lien, judgment) |
| abstract of title | A summary of recorded transactions concerning a property. An attorney or title insurance company examines an abstract of title for any title defects which must be cleared before a buyer can purchase clear, marketable, and insurable title. The abstract of title does not guarantee or ensure the validity of the title of the property. Rather, it is a condensed history that 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) |
| abstracter | The person preparing the abstract of title. The abstracter searches the title as recorded or registered with the county recorder, county registrar, circuit court and/or other official sources. He or she then summarizes the various instruments affecting the property and arranges them in the chronological order of recording, starting with the original grant of title. |
| acceleration clause | A clause in your mortgage which allows the lender to demand payment of the outstanding loan balance for various reasons. The most common reasons for accelerating a loan are if the borrower defaults on the loan or transfers title to another individual without informing the lender. A provision in a mortgage, trust deed, promissory note or contract for deed (agreement of sale) that, upon the occurrence of a specified event, gives the lender (payee, obligee or mortgagee) the right to call all sums due and payable in advance of the fixed payment date. (See alienation clause) |
| acceptance | A promise by the offeree to be bound by the exact terms proposed by the offeror. The acceptance must be communicated to the offeror. (See offeree, offeror) |
| accessed value | The valuation placed on property by a public tax assessor for purposes of taxation. |
| accession | 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. |
| accord and satisfaction | The settlement of an obligation. An accord is an agreement by a creditor to accept less than bargained for from a debtor. The creditor's acceptance of the accord constitutes satisfaction of the debt. |
| accounting | The agent must be able to report the status of all funds received from or on behalf of the principal. Most state real estate license laws require a broker to give accurate copies of all documents to all parties affected by them and to keep copies on file for a specified period of time. Most license laws also require the broker to deposit immediately, or within 24 to 48 hours, all funds entrusted to the broker (such as earnest money deposits) in a special trust or escrow account. Commingling such monies with the broker's personal or general business funds is strictly illegal. |
| accretion | The increase or addition of land by the deposit of sand or soil washed up naturally from a river, lake or sea. The gradual and imperceptible addition of land by alluvial deposits of soil through natural causes, such as shoreline movement caused by streams or rivers. This added land upon a bank or stream, navigable or not, becomes the property of the riparian or littoral owner, and it also becomes subject to any existing mortgages. |
| accrued depreciation | 1. In accounting, a bookkeeping account that shows the total amount of depreciation taken on an asset since it was acquired; also called accumulated depreciation. 2. For appraisal purposes, the difference between the cost to reproduce the property and the property's current value as judged by its "competitive condition." In this context, accrued depreciation is often called diminished utility. |
| accrued interest | Interest earned but not yet paid. |
| accrued items | In 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. |
| accusation | The first step in a disciplinary action against a licensee. |
| acknowledgment | A formal declaration made before a duly authorized officer, usually a notary public, by a person who has signed a document; also, the document itself. An acknowledgment is designed to prevent forged and fraudulently induced documents from taking effect. |
| acquisition cost | The amount of money or other valuable consideration expended to obtain title to a property. It includes the purchase cost, plus such items as appraisal fees, closing costs, finance charges, mortgage loan origination fees and title insurance. |
| acre | A measure of land equal to 43.560 square feet, 4,840 square yards, 4,047 square meters, 160 square rods or 0.4047 hectares. |
| actual damages | Real, substantial and just damages, or the amount awarded to a complainant in compensation for his actual and real loss or injury. |
| actual eviction | The legal process that results in the tenant's being physically removed from the leased premises. |
| actual notice | Express information or fact - that which is known; direct knowledge. |
| ad valorem | The Latin word for "according to value." |
| ad valorem tax | A tax levied according to value, generally used to refer to real estate tax. Also called the general tax. |
| add-on rate | Interest charged on a principal amount for specified term, regardless of any repayments of principal. The borrower is paying interest on the full principal sum for the entire loan period, even though the principal is being reduced each month. |
| addendum | Additional material attached to and made part of a document. If there is space insufficient to write all the details of a transaction on the sales contract form, the parties will attach an addendum or supplement to the document. The sales contract should incorporate the addendum by referring to it as part of the agreement. The addendum should refer to the sales contract and be dated and signed or initialed by all the parties. |
| ademption | Disposal by a testator in his or her lifetime of a specific property bequeathed in his or her will so the bequest is revoked. |
| adjustable rate | An interest rate that changes periodically according to an index. |
| adjustable rate mortgage (ARM) | A broad term for a loan (mortgage or deed of trust) with rates and payments that can adjust periodically according to fluctuations in the market conditions. All ARMs are tied to preselected indexes. The adjustable rate loan has become commonplace. |
| adjusted basis | The original cost basis of a property reduced by certain deductions and increased by certain improvement costs. The original basis determined at the time of acquisition is reduced by the amount of allowable depreciation or depletion allowances taken by the taxpayer, and by the amount of any uncompensated property losses suffered by the taxpayer. It then increases by the cost of capital improvements plus certain carrying costs and assessments. The amount of gain or loss recognized by the taxpayer upon sale of the property is determined by subtracting the adjusted basis on the date of sale from the adjusted sales price. |
| adjustment | Decrease or increase in the sales price of a comparable property to account for a feature that the property has or does not have in comparison with the subject property. |
| adjustment date | The date the interest rate changes on an adjustable-rate mortgage (ARM). |
| adjustment interval | On an adjustable rate mortgage, the time between changes in the interest rate and/or monthly payment, usually one, three or five years. The time between changes in the interest rate and monthly payments on an ARM |
| adjustment period | In an adjustable rate mortgage (ARM), the "adjustment period," is the period of time between changes in one interest rate charged and the next interest rate to be charged. |
| administered price system | Federal National Mortgage Association securities purchasing procedure where required yields are adjusted daily to reflect financial market factors. |
| administrative agency | A government agency that makes rules and regulations to carry out the law. A state's real estate commission develops regulations to complement license law. |
| administrative order | A legal document signed by the EPA directing an individual, business, or other entity to take corrective action or refrain from an activity. The order describes the violations and action to be taken and can be enforced in court. |
| administrator | A male person appointed by the court to settle the estate of a person who has died intestate (leaving no will). Sometimes referred to as the personal representative. Also called executor. |
| administratrix | A female person appointed by the court to settle the estate of a person who has died intestate (leaving no will). Sometimes referred to as the personal representative. Also called executrix. |
| advance fee | A fee paid before any services are rendered. Specifically, it is a practice of some brokers to obtain a nonrefundable fee from the seller in advance to cover the advertising of properties or businesses for sale while giving no guarantee that a buyer will be found, which is often held to be improper conduct. Brokers must keep accurate records of expenditures. |
| advance fee addendum | An agreement specifying services for which an agent or broker will be compensated including a provision for payment of an advance fee. |
| adverse action | A denial or revocation of credit, a change in the terms of an existing credit arrangement, or a refusal to grant credit either on the amount requested or on the terms requested. |
| adverse possession | The acquiring of title to real property owned by someone else by means of open, notorious, hostile and continuous possession for a statutory period of time. The burden to prove title is on the possessor, who must show that four conditions were met - 1. He or she has been in possession under a claim of right. 2. He or she was in actual, open and notorious possession of the premises so as to constitute reasonable notice to the record owner. 3. Possession was both exclusive and hostile to the title of the owner (that is, without the owner's permission and evidencing an intention to maintain the claim of ownership against all who may contest it). 4. Possession was uninterrupted and continuous for at least the prescriptive period stipulated by state law. |
| aesthetic zoning | Zoning for beauty. May regulate architectural styles, colors or signage. |
| affidavit | A sworn written statement made under oath before a notary public or other official authorized by law to administer an oath. The term literally means "has pledged one's faith." The affiant (person making the oath, sometimes called the deponent") must swear before the notary that the facts contained in the affidavit are true and correct. |
| affidavit of title | A written statement, made under oath by a seller or grantor of real property and acknowledged by a notary public, in which the grantor 1. identifies himself or herself and indicates marital status, 2. certifies that since the examination of the title on the date of the contracts no defects have occurred in the title and 3. certifies that he or she is in possession of the property (if applicable). |
| affiliate | An entity related to a seller that is subject to common operating control and that is operated as part of the same system or enterprise. The seller typically owns less than a majority of the voting stock or the seller and the entity are subsidiaries of a third party. |
| affirmation | A formal declaration that an affidavit is true. |
| affirmative easement | Gives the owner of the dominant tenement the right to use the servient tenement. |
| affordable seconds | Subsidized secondary financing or other financial assistance provided under an established, documented secondary financing or financial assistance program that has formal procedures in place to provide applicant qualification, loan processing, and loan program administration on an ongoing basis. |
| after-acquired title | Title or interest acquired by the grantor after a property has been conveyed. |
| agency | A relationship created when one person, the principal, delegates to another, the agent, the right to act on his or her behalf in business transactions and to exercise some degree of discretion while so acting. An agency gives rise to a fiduciary relationship and imposes on the agent, as the fiduciary of the principal, certain duties, obligations, and high standards of good faith and loyalty. |
| agency coupled with an interest | An agency relationship in which the agent is given an estate or interest in the subject of the agency (the 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. |
| agent property evaluation | A questionnaire filled out by real estate agents while reviewing a listed property. |
| aggrieved party | One whose legal right is invaded by an act(s) of another. The word "aggrieved" refers to a substantial grievance, a denial of some personal or property right, or the imposition upon a party of a burden or obligation. |
| agreement of sale | A written contract in which a seller agrees to sell and a buyer agrees to buy, with specific terms and conditions under which a property will be sold and signed by both parties. Agreement of sale is also called contract of purchase, purchase agreement, or sales agreement. |
| agricultural lease | Agricultural landowners often lease their land to tenant farmers, who provide the labor to produce and bring in the crop. An owner can be paid by a tenant in one of two ways - an agreed cash in advance rental amount (cash rents) or as a percentage of the profits from the sale of the crop when it is sold (sharecropping). |
| AIDA | Attention, Interest, Desire, Action. In real estate advertising, creating ads that get the Attention of prospects, stimulating their Interest in a property, generating a Desire to purchase, and motivating the prospect to take Action. |
| air lot | A designated airspace over a piece of land. An air lot, like surface property, may be transferred. |
| air quality standards | The level of selected pollutants set by law that may not be exceeded in outside air. Used to determine the amount of pollutants that may be emitted by industry |
| air rights | Rights to the use of the open space or vertical plane above a property. Air rights may also be transferred by way of easements, such as those used in constructing elevated highways or in acquiring scenic easements or easements of light and air. |
| alienation | The act of transferring ownership, title, interest, or estate in real property from one person to another. Property is usually sold or conveyed by voluntary alienation, as with a deed or assignment of lease. Involuntary alienation takes place when property is sold against the owner's will, as in a foreclosure sale or a tax sale. |
| alienation clause | A provision sometimes found in a promissory note or mortgage that provides that the balance of the secured debt becomes immediately due and payable at the option of the mortgagee upon the alienation of the property by the mortgagor. Alienation is usually broadly defined to include any transfer of ownership, title, interest, or estate in real property, including a sale by way of a contract for deed. Also called a due-on-sale clause. (See acceleration clause) |
| all-inclusive encumbrance | A wraparound mortgage. |
| allodial system | A system of land ownership in which land is held free and clear of any rent or service due to the government; commonly contrasted to the feudal system. Land is held under the allodial system in the United States. |
| Alquist-Priolo Special Study Zone | A California law requiring a real estate agent or owner to disclose to prospective buyers that a property is located within a special studies zone (geological hazard zone) and if the property contains or will contain a dwelling (a residentially zoned lot). "Special study zones" cover an area 660 feet on each side of fault lines and are indicated on maps prepared by the California Department of Mines and Geology. |
| alternative documentation | A method of documenting a loan file that relies on information the borrower is likely to be able to provide instead of waiting on verification sent to third parties for confirmation of statements made in the application. |
| ambient | Any unconfined portion of the atmosphere; open air; outside surrounding air. |
| amendment to the escrow instructions | A change to escrow instructions requiring the agreement of both buyer and seller. |
| amendments | An amendment is a change to the existing content of a contract. Any time words or provisions are added to or deleted from the body of the contract, the contract has been amended. |
| amenity | The qualities and state of being pleasant and agreeable. In residential appraising, those peculiar and intangible benefits of home ownership such as satisfaction of possession and use arising from architectural excellence, scenic beauty, and desirable social environment. |
| American Institute of Real Estate Apprai | A professional organization formerly affiliated with the National Association of REALTORS. AIREA promoted professional practice and ethics in the real estate appraisal industry and identified experienced, competent, ethical appraisers by awarding the MAI (Member Appraisal Institute) and RM (Residential Member) designations. In 1991, AIREA was merged with the Society of Real Estate Appraisers into the Appraisal Institute. The only designations awarded now are the MAI and SRA (Senior Residential Appraiser) |
| American Land Title Association (ALTA) p | A title insurance policy that protects the interest in a collateral property of a mortgage lender who originates a new real estate loan. |
| American Society of Appraisers (ASA) | American Society of Appraisers (ASA) - A professional organization of appraisers engaged in the appraisal of both real and personal property. It confers the designations ASA and FASA (Fellow). |
| American Society of Real Estate Counselo | A professional organization, affiliated with the National Association of REALTORS, composed of individuals with proven success in real estate counseling who serve clients on a fee basis. The society offers its members exclusive use of the professional designation CRE (Counselor of Real Estate). |
| Americans with Disabilities Act (ADA) | A federal law which prohibits discrimination against individuals with disabilities. |
| amortization | The gradual repayment of principal and/or interest over a set period, so that at the end of the period there is a zero balance. The principal is thus directly reduced or amortized over the life of the loan. For the first few years, most of each payment is applied toward interest. During the final years of the loan, payment amounts are applied almost exclusively to the remaining principal. Some loans are not fully amortized, and require a balloon payment at the end of the term of the loan. |
| amortization schedule | A table which shows how much of each payment will be applied toward principal and how much toward interest over the life of the loan. It also shows the gradual decrease of the loan balance until it reaches zero. |
| annexation | An addition to property by the act of joining or uniting one thing to another, as in attaching personal property to real property, thereby creating a fixture. |
| annual debt service | Monthly loan payments (principal and interest, if any) times 12 months. |
| annual operating expenses | The actual costs it takes to run the property, such as property tax, insurance, maintenance, repairs, management fees, utilities, and supplies. |
| annual percentage rate (APR) | The cost of a mortgage expressed as a yearly rate, expressed as a percentage. This percentage takes into account interest, points, origination fees, and mortgage insurance, so will be slightly higher than the interest rate on the loan. It is a value created according to a government formula intended to reflect the true annual cost of borrowing. This is not the note rate on your loan. |
| annuity | A sum of money received by an annuitant in a series of fixed periodic payments. |
| 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. |
| antimerger clause | A clause in a mortgage or deed of trust specifying that the senior lienholder will retain lien priority in the event of a merger. |
| antitrust laws | State and federal laws designed to maintain and preserve business competition. The Sherman Antitrust Act (1890) is the principal federal statute covering competition, which is defined by most courts as "that economic condition in which prices are determined by market forces without interference from private concerns and there is reasonable freedom of entry into most businesses." |
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