A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A

Abandonment

The voluntary relinquishment of rights of ownership or other interest (such as an easement) by failure to use the property, coupled with an intent to abandon (give up the interest).

Abatement

A reduction or decrease. Usually applies to a decrease of assessed valuation of ad valorem taxes after the assessment and levy.

Abstract Of Judgment

A summary of the essential provisions of a court judgment, which when recorded in the county recorder's office, creates a lien upon the property of the defendant in that county, both presently owned or after acquired.

Abstract Of Title

A compilation of the recorded documents relating to a parcel of land, from which an attorney may give an opinion as to the condition of title. Still in use in some states, but giving way to the use of title insurance.

Acceleration Clause

Clause used in an installment note and mortgage (or deed of trust), which gives the lender the right to demand payment in full upon the happening of a certain event, such as failure to pay an installment by a certain date, change of ownership without the lender's consent, destruction of the property, or other event which endangers the security of the loan.

Accessibility

The location of a site in terms of how easily it may be reached by customers. employees, carriers, and others necessary to the intended use of the property

Accord

An agreement by which one accepts something different (usually less) from what is owed as full satisfaction The amount owed may be in dispute or simply accepted as full satisfaction by the creditor or claimant. The agreement and acceptance is called "Accord and Satisfaction."

Accrued Depreciation

(1) The amount reserved each year in the accounting system for replacement of a building or other asset. (2) The useful life of a property at any given time.

Acknowledgement

A written declaration by a person executing an instrument, given before an officer authorized to give an oath (usually a notary public), stating that the execution is of his own volition.

Add on Interest

A method of charging interest usually used in the financing of automobiles, but not generally used in real estate financing. Interest is computed on the total amount borrowed and added on to the principal. Each payment is then deducted from this total amount. Interest on real estate loans is usually figured based on the balance owing after each payment is made (declining balance).

Adjusted Gross Income

Gross income of a building it fully rented, less an allowance for estimated vacancies.

Adjustable Rate Mortgages (arm's)

Mortgage loans under which the interest rate is periodically adjusted to more closely coincide with current rates. The amounts and times of adjustment are agreed to at the inception of the loan. Also called: Adjustable Rate Loans, Adjustable Mortgage Loans (AML'S), Flexible Rate Loans, Variable Rate Loans.

Amortization

Payment of a debt in equal installments of principal and interest, rather than interest only payments.

Annual Percentage Rate (a.p.r.)

The yearly interest percentage of a loan, as expressed by the actual rate of interest paid. For example: 6% add-on interest would be much more than 6% simple interest, even though both would say 6%. The A.P.R. is disclosed as a requirement of federal truth in lending statutes and should include all finance charges.

Appel Loan (Accelerating Payoff Progressive Equity Loan)

A residential property loan which calls for a payment increase over the first 6 years. Level payments are made for the remaining years and the loan paid off during the 15th year. There is no prepayment penalty and P.M.I. is required.

Arrears

(1) Payment made after it is due is in arrears. (2) Interest is said to be paid in arrears since it is paid to the date of payment rather than in advance, as is rent. Example: A rental payment made July 1 pays the rent to August 1. An interest payment made July 1 Pays the interest to July 1.

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B

Balloon Note

A note calling for periodic payments which are insufficient to fully amortize the face amount of the note prior to maturity, so that a principal sum known as a "balloon" is due at maturity.

Balloon Payment

The unpaid principal amount of a loan due on a specific date in the future. Usually the amount that must be paid in a lump sum at the end of the term.

Bankrupt

One who is adjudicated a bankrupt by a court having proper jurisdiction. The bankruptcy may be voluntary (petitioned by the bankrupt) or involuntary (petitioned by the creditors of the bankrupt).

Bankruptcy

Proceedings under federal bankruptcy statutes to relieve a debtor (bankrupt) from insurmountable debt. The bankrupt's property is distributed by the court to the creditors as full satisfactions of the debts, in accordance with certain priorities and exemptions. Voluntary bankruptcy is petitioned by the debtor for, involuntary by the creditors.

Before And After Method

An appraisal method used in both condemnation and modernization. In condemnation the method is used in a partial taking. The value of the total land owned by A, for example, is $1.00 per sq. ft. After a partial taking, the remaining land of A is worth $.75 per sq. ft. A should receive $1.00 per sq. ft. for the property taken plus $.25 per sq. ft. for the remaining parcel. In the event the remaining property is worth $1.25 after the taking (increased value), the payment to A could be less than the value of the property taken. In modernization, an appraiser may take the value of property before and after remodeling to determine if the value increased more than modernization costs.

Biweekly

Also known as accelerated mortgages. Biweeklies reduce interest expense and build home equity faster than monthly payments.

Blanket Mortgage

(1) A mortgage covering more than one property of the mortgagor, such as a mortgage covering all the lots of a builder in a subdivision. (2) A mortgage covering all real property of the mortgagor, both present and future. When used in this meaning it is also called a "general mortgage".

Bona Fide Purchaser

A purchaser in good faith. for valuable consideration, without notice or knowledge of adverse claims of others. Sometimes abbreviated B.F.P.

Book Depreciation

Depreciation reserved (on the books) by an owner for future replacement or retirement of an asset. 

Buydown

A payment to the lender from the seller, buyer, third party, or some combination of these, causing the lender to reduce the interest rate during the early years of a loan. The buydown is usually for the first 1 to 5 years of the loan.

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C

Cancellation Clause

A clause in a lease or other contract, setting forth the conditions under which each party may cancel or terminate the agreement. The conditions may be as simple as giving notice or complex and require payment by the party desiring to cancel.

Cap

The maximum which an adjustable rate mortgage may increase, regardless of index changes.

Capital Assets

Assets of a permanent nature used to produce income, such as machinery, buildings, equipment, land, etc. Must be distinguished from inventory. A machine which makes pencils, for example, would be a capital asset to a pencil manufacturer, but inventory to the company whose business is to sell such machines.

Capital Gains

Gains realized from the sale of capital assets. Generally, the difference between cost and selling price, less certain deductible expenses. Used mainly for income tax purposes.

Carrying Charges

The costs involved in keeping a property which is intended to produce income (either by sale or rent) but has not yet done so.

Closing

(1) In real estate sales, the final procedure in which documents are executed and/or recorded, and the sale (or loan) is completed. (2) A selling term meaning the point at which the client or customer is asked to agree to the sale or purchase and sign the contract. (3) The final call in a metes and bounds legal description which "closes" the boundaries of the property.

Closing Costs

Expenses, beyond the selling price, such as loan fees, title fees, etc. Paid when documents are executed and/or recorded and the sale is complete.

Closing Statement

A summary, in the form of a balance sheet, showing the amounts of debits and credits to which each party to a real estate transaction is entitled upon closing.

Coinsurance

A sharing of the risk of an insurance policy by more than one insurer. Usually one insurer is liable up to a certain amount, the other liable over that amount.

Consideration

A required element in all contracts by which some-thing of value, including a promise, is exchanged for the act or promise of another.

Contingency

Action conditioned upon a certain event. Acceptance of the terms of a contract based on something else happening or certain conditions being met.

Conveyance

The transfer of title or an interest in real property by means of a written instrument such as a deed of trust.

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D

Declaration Of Trust

A written acknowledgement by one holding legal title to property that the property is held in trust for the benefit of another.

Declining Balance Method Of Depreciation

Depreciation by a fixed annual percentage of the balance after deducting each yearly depreciation amount.

Deed

Actually, any one of many conveyancing or financing instruments, but generally a conveyancing instrument, given to pass fee title to property upon sale.

Deed Of Trust

An instrument used in many states in place of a mortgage. Property is transferred to a trustee by the borrower (trustor) in favor of the lender (beneficiary), and reconveyed upon payment in full.

Defeasible Title

Title which is not absolute but possibly may be annulled or voided at a later date. For example: Title conveyed to A with condition that if A marries before age 30, title will go to B. A's title may be good (doesn't marry) or may be defeated (marries before 30).

Deficiency Judgment

Commonly the amount for which the borrower is personally liable on a note and mortgage if the foreclosure sale does not bring enough to cover the debt. Actually the judgment is for the total amount and not for the deficiency, the recovery from the foreclosure sale being deducted from this amount.

Demand

The lender's statement of the amount due to pay of a loan.

Demand Note

A note having no date for repayment, but due on demand of the lender.

Depreciation

(1) Decrease in value to real property improve-ments caused by deterioration or obsolescence. (2) A loss in value as an accounting procedure to use as a deduction for income tax purposes.

Direct Reduction Mortgage

An amortized mortgage. One on which principal and interest payments are paid at the same time (usually monthly) with interest being computed on the remaining balance.

Discount Points

The fee associated with the note rate for your loan, the more discount points you pay the lower the rate you can buy, the fewer you pay, the higher your rate. If the rate is high enough, the loan is priced above par and these premium points are available to pay closing costs creating a no or low fee loan.

Double Declining Balance Method Of Depreciation

A use of the declining balance method, but with double the depreciation allowable by straight line. An accelerated method.

Double Escrow

Two concurrent escrows on the same property, having the same party as buyer and seller of the property. Example: Escrow 1 -A buys from B. Escrow 2 -A sells the same property to C. A is using C's money to buy B's property. The process is illegal in many states unless full disclosure is made.

Due on-Sale-Clause

A clause in a mortgage loan which gives the lender the right to demand payment in full when the property changes ownership. Not applicable to FHA or VA loans.

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E

Equitable Conversion

A legal fiction applied to a land contract which treats the vendee's (buyer's) interest as a real property interest even though the seller holds legal title, and the seller's interest as a security interest (personal property). This enables the buyer to act as the "owner" of the property without having "legal" title.

Equitable Mortgage

(1) A lien against real property (mortgage)which is enforceable in a court of equity, but does not legally constitute a mortgage. (2) A deed given as security for a debt will be held to be a mortgage rather than a transfer of title. Also called a constructive mortgage.

Equity

The value of a person's interest in real property after all liens and charges have been deducted.

Equity Line Of Credit

A combination of a line of credit and equity loan. A maximum loan amount is established based on credit and equity. A mortgage (deed of trust) is recorded against the potential borrower's property for said maximum loan amount. The potential borrower has the right to borrow, as needed, up to the amount of the mortgage.

Escrow

Delivery of a deed by a grantor to a third party for delivery to the grantee upon the happening of a contingent event, Modernly, in some states, all instruments necessary to the sale (including funds) are delivered to a third (neutral) party, with instructions as to their use.

Excess Condemnation

Taking by right of eminent domain, more property than actually necessary for the intended purpose. This happens frequently, the excess property being sold at auction after completion of the project.

Exception

A provision in a title insurance binder or policy excludes liability for a specified title defect or an outstanding encumbrance.

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F

Fair Market Value

An appraisal term for the price which a property would bring in a competitive market given a willing seller and willing buyer, each of whom has a reasonable knowledge of all pertinent facts, with neither being under any compulsion to buy or sell.

Fee Simple

An estate under which the owner owns a contract interest in the property and is entitled to the unrestricted enjoyment of the property, including the right to dispose property.

Fee

(1) Modernly, and not in strict legal terms, synonymous with fee simple or "ownership." (2) A charge made by a landlord to a tenant, which is not refundable. For example: A cleaning deposit would be refunded if the tenant left the rented property reasonably clean. A cleaning fee would be a charge by the landlord for cleaning the rented property and would not be refunded regardless of the condition of the property.

Finance Charge

A total of all costs imposed directly or indirectly by the creditor and payable either directly or indirectly by the customer, as defined by the federal Truth-In-Lending laws.

Financial Statement

An accounting statement showing assets and liabilities of a person or company. Used generally for large loans or other instances when the credit report (history of payment of debts) in itself is not sufficient.

First User

A tax term signifying the one who builds or buys property and is the first one to put the buildings to use. Certain tax (depreciation) advantages are given to a first user. The term concerns only depreciable property (improvements) and prior use of the land only (farming) would not be considered.

FNMA Buydown

FNMA (Federal National Mortgage Association) accepts loans containing a buy down provision on single family residential, owner occupied properties. A prepayment (points) will buy a lower rate of interest during the first one to five years of the loan. Restrictions apply as to the amount of the buydown and rise in payment amount as the loan progresses.

Forfiture

The taking of an individual's properly by a government, because the individual has committed a crime. In the United States, private property cannot be taken, except by eminent domain upon payment of just compensation, or for nonpayment of taxes.

Future Interest

A present interest, but only a future right to possession and enjoyment of the land, such as a remainder interest, reversionary interest, etc.

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G

Garnishment

A legal proceeding under which a person's money in control of another (such as salary) is taken for payment of a debt. The amount which may be taken is set by statute (usually as a percentage), and, in most states, a judgment is necessary before garnishment.

General Lien

(1) A lien such as a tax lien or judgment lien which attaches to all property of the debtor rather than the lien of, for example, a trust deed, which attaches only to specific property. (2) The right of a creditor to hold personal property of a debtor for payment of a debt not associated with the property being held. Must be done under an agreement since against general precepts of law.

Graduated Payment Mortgage

A mortgage or deed or trust calling for increasingly higher payments over the term of the loan. This allows the buyer low beginning payments. The payments then increase as (theoretically) the buyer's earnings increase.

Grantee

One to whom a grant is made. The purchaser of real property.

Grantor

One who has made a grant. The seller of real property.

Gross Income

The scheduled (total) income, either actual or estimated, derived from a business or property.

 

Growing Equity Mortgage (g.e.m.)

A fixed rate, graduated payment loan allowing low beginning payments and a shorter term because of higher payments as the loan progress. Based on the theory of increasing income by the buyer and, therefore. ability to make higher future payments. When state law applies, usury laws in some states may not presently allow such loans when less than interest only payments create interest on interest.

Guaranty

Agreement to pay the debt or perform the obligation of another in the event the debt is not paid or obligation not performed. Differs from a surety agreement in that there must be a failure to pay or perform before the guaranty can be in effect.

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H

Hard Money Mortgage

A mortgage given in return for cash, rather than to secure a portion of the purchase price, as with a purchase money mortgage.

Heir

One who by law, rather than by will, receives the estate of a deceased person.

Hereditaments

(1) Anything which could be considered real property. (2) Anything which may be inherited.

Holdback

Portion of a loan held back by the lender until a contingency is met. In the sale of a home insured by V.A. or F.H.A., funds may be held back to make necessary improvements to bring the property to V.A. or F.H.A. standards. The money to make "these" repairs may not be available until closing. One and one halt to double the estimated amount necessary is held back. If repairs are not made in the time allowed. these funds are used to make the repairs. In construction financing, funds are held back until, for example, a certain percentage of a subdivision has been sold, or a certain portion of a building has been constructed.

Holder In Due Course

A holder of a check or note who takes, for value and in good faith, the note before it is overdue or the check without knowledge that it has bounced, if, in fact it has.

Holding Period

The time period used by the IRS to determine along or short term capital gain. The period during which the taxpayer owns the capital asset.

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I

Impound Account

Account held by a lender for payment of taxes, insurance, or other periodic debts against real property. The mortgagor or trustor pays a portion of, for example, the yearly taxes, with each monthly payment. The lender pays the tax bill from the accumulated funds.

Income Averaging

A method of figuring income tax by paying tax on the average income per year for the past five years. For example: A, a real estate salesperson, earns $10,000 taxable income for 4 years. In the fifth year, A sells a shopping center and earns $100,000 taxable income. A-could take the total income for 5 years ($140,000), divide by 5 ($28,000), and pay tax on $28,000 for the past 5 years, less what A has already paid.

Inheritance Tax

A tax on the transfer of property from a deceased person: based on the right to acquire the property rather than the property itself.

Interest Cap

The maximum interest rate increase of an Adjustable Mortgage Loan. For example: a 120% loan with a 5% interest rate cap would have maximum interest for the life of the loan which would not exceed 17%.

IRA (individual Retirement Account)

Savings programs available to individuals. The plans allow for a certain amount to be deposited each year. This money is not subject to income tax for that year or following years as long as it is not withdrawn. The money is taxed as withdrawn upon retirement, usually when the depositor is in a lower tax bracket. During the life of the account, the money may be put into various interest bearing investments. Securities dealers as well as banking institutions now offer IRA'S.

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J

Judgment Lien

A lien against the property of a judgment debtor. An involuntary lien.

Judgment Proof

One against whom a judgment creditor cannot collect (no assets). If one can show he was defrauded by a "judgment proof" real estate licensee, he may recover from the state fund in states having such a fund,

Just Compensation

In condemnation the amount paid to the property owner. The theory is that in order to be "just," the property owner should be no richer or poorer than before the taking.

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K

Keogh Plan

A retirement plan whereby a self-employed person may set aside a certain portion of income (tax deferred) into a retirement account. The money is taxable upon withdrawal at retirement when the person's tax bracket is often lower.

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L

 

Late Charge

A penalty for failure to pay an installment payment on time. Usually not allowed as interest for tax deductions. May or may not be included as usury. If not, the amount of late charge is either set by statute or must be "reasonable."

Lease With Option To Purchase

A lease under which the lessee has the right to purchase the property. The price and terms of the purchase must be set forth for the option to be valid. The option may run for the length of the lease or only for a portion of the lease period. Legal Description: A description by which property can be definitely located by reference to surveys or recorded maps. Sometimes referred to simply as the legal.

Liquidated Damages

A definite amount of damages, set forth in a contract, to be paid by the party breaching the contract. A predetermined estimate of actual damages from a breach.

Lis Pendens

Legal notice that a lawsuit is pending. Also called a notice of action.

Loan Constant

The yearly percentage of interest which remains the same over the life of an amortized loan, based on the monthly payment in relation to the principal originally loaned. For example: A $1000 loan at 9% interest for 20 years can be amortized at $9.00 per month. The constant interest rate is figured by finding one year's payments ($9.00 x 12 months = $108,00), and expressing this amount as a percentage of the principal originally borrowed (10.8% of $1000).

Loan Ratio

The ratio, expressed as a percentage, of the amount of a loan to the value or selling price of real property. Usually, the higher the percentage, the greater the interest charged. Maximum percentages for banks, savings and loans, or government insured loans, is set by statute.

Loan toValue Ratio

The ratio of the mortgage loan's principal to the property's appraised value or its sales price, whichever is lower.

Long Term Capital Gain

Gain on the sale of a capital asset which has been held for a specified time or longer. Long term capital gain is taxed at a special rate and not as ordinary income.

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M

Marketable Title

Title which can be readily marketed (sold) to a reasonably prudent purchaser aware of the facts and their legal meaning concerning liens and encumbrances.

Market Value

The highest price a willing buyer would pay and a willing seller accept, both being fully informed, and the property exposed for a reasonable period of time. The market value may be different from the price a property can actually be sold for at a given time (market price),

Maturity

(1) Termination period of a note. For example: A 30 year mortgage has maturity of 30 years. (2) In sales law, the date a note becomes due.

Money Market Mutual

Funds which invest in the "Money Market," a variety of interest bearing securities such as treasury bills and bank certificates of deposit. None is invested directly into real property or real property securities.

Month To Month Tenancy

A tenancy where no written lease is involved, rent being paid monthly. Some obligations as to notice of moving or eviction may exist by statute.

Mortgage Insurance

Insurance written by a private mortgage insurance company (referred to as an 'PIC') protecting the mortgage lender against loss incurred by a mortgage default, thus enabling the lender to lend a higher percentage of the sale price. The Federal Government writes this form of insurance through the FHA and the VA.

Mortgage Life Insurance

A term life insurance policy for theamount of the declining balance of a loan secured by a mortgage or deed of trust. The beneficiary under the policy is the mortgagee. In the event of death (some policies also cover disability) of the insured (mortgagor), the mortgage is paid in full.

Mortgage Servicing

Controlling the necessary duties of a mortgagee, such as collecting payments, releasing the lien upon payment in full, foreclosing if in default, and making sure the taxes are paid, insurance is in force, etc. Servicing may be done by the lender or a company acting for the lender, for a servicing fee.

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N

Negative Amortization

A condition created when a loan payment is less than interest alone. Even though payments are made on time, the amount owing increases.

Net Lease

A lease requiring the tenant to pay, in addition to a fixed rental, the expenses of the property leased, such as taxes, insurance, maintenance, etc. In some states the terms net net, net net net, triple net, and other such repetitions are used.

Net Worth

The difference between total assets and liabilities of an individual, corporations, etc.

No Bonus Clause

A clause under the eminent domain section of a lease, giving the lessee the right to recover only the value of his physical improvements in the event of a taking, and not the value of the leasehold interest (the difference between the fixed rent of the lease and current market rental value). Not applicable in all states.

Nonrecourse Loan

A loan not allowing for a deficiency judgment. The lender's only recourse in the event of default is the security (property) and the borrower is not personally liable.

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O

 

"Once in a Lifetime" Tax Exclusion

A forgiveness of a portion of the tax due on the sale of a residence by a senior citizen. As the term denotes, the exclusion can be taken only once.

"One, Two, Three" Financing

A method of creative financing by which the buyer (1) assumes an existing loan, (2) secures a second loan from a third party lender, (3) takes a third loan from the seller.

Open End Mortgage

A mortgage permitting the mortgagor to borrow additional money under the same mortgage, with certain conditions, usually as to the assets of the mortgage. 

Override

A rental amount paid due to sales of the tenant. For example: A lease for a service station may contain a provision for a certain addition to the rent for every gallon of gasoline over a certain amount sold each month. The amount over is called the override, such as two cents per gallon for every gallon over fifty thousand sold each month.

Ownership

Rights to the use, enjoyment, and alienation of property, to the exclusion of others. Concerning real property, absolute rights are rare, being restricted by zoning laws, restrictions, liens, etc.

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P

Participation Certificates

Mortgage securities, rather than mortgages. The advantage of the certificate is that it is readily marketable or pledgeable.

Partition

(1) Any division of real or personal property between co-owners, resulting in individual ownership of the interests of each. (2) A wall, sometimes moveable, and not load-bearing, used to divide a room or building.

Payment Cap

A maximum amount for a payment under an Adjustable Mortgage Loan, regardless of the increase in the interest rate. If the payment is less than the interest alone, negative amortization is created.

Personal Property Loan

A loan which is secured by both real and personal property. The minimum ratio of personal to real property is set by law. The credit of the borrower is a major consideration in making the loan.

PITI

Refers to principal, interest, taxes and insurance, the four major components of a usual monthly mortgage payment.

PITI Ratio

The principal, interest, tax and insurance payment to income ratio. Used in mortgage lending decisions.

Point

One percent. When referring to mortgages or deeds of trust, the term is used to describe the percentage of discount rather than interest (for which the word "percent" is used). The points are paid by the seller in F.H.A. and V.A. insured loans, and by either buyer or seller (or both) in conventional loans.

Points

A fee charged by the lender to fund a loan, in addition to and separate from other fees charged. One Point equals one percent of the amount of the loan. Discount points are charged or are received based on the note rate the borrower selects. Additionally a one point origination fee is typically charged by a lender to underwrite a residential loan.

Proration

The method used in dividing charges into that portion which applies only to a party's ownership up to particular date.

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Q

Qualification

The process of reviewing a prospective borrower's credit and payment capacity prior to approving a loan.

Quarter Section

One quarter of a section. A quarter section (commonly called a quarter) contains 160 acres.

Quietus

Final disposition of a claim or debt.

Quitclaim Deed

A deed operating as a release, intended to pass any title, interest, or claim which the grantor may have in the property, but not containing any warranty of a valid interest or title in the grantor.

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R

Rate Index

An index used to adjust the interest rate of an adjustable mortgage loan. For example: the change in U.S. Treasury securities (T-Bills) with a 1 year maturity. The weekly average yield on said securities, adjusted to a constant maturity of one year, which is the result of weekly sales, may be obtained weekly from the Federal Reserve Statistical Release H.15 (519). This change in interest rates is the "index" for the change in the specific Adjustable Mortgage Loan.

Rate Of Return

The annual percentage of return on investment on income property.

Real Estate Settlement Procedures Act (RESPA)

A federal statute requiring disclosure of certain costs in the sale of residential, improved property which is to be financed by a federally insured lender.

Recapture Of Depreciation

Taxing as ordinary income, upon the sale of property, the amount of depreciation taken above straight line depreciation.

Redemption

The process of canceling a defeasable title to land, such as is created by a mortgage foreclosure or tax sale.

Refinance

(1) The renewing of an existing loan with the same borrower and lender. (2) A loan on the same property by either the same lender or borrower. (3) The selling of loans by the original lender.

Renegotiable Rate Mortgage

A real property loan calling for an adjustment in the interest rate at a given time. Example: A loan with a 15 year amortization is adjusted to current interest rates after 2 years. The lender agrees to make the adjusted loan at the new rate as long as the old loan is not in default. The Federal Reserve Board allows the original loan to be treated either as a balloon payment loan or a variable rate loan. However, points must be figured into the A.P.R. based on the time or renegotiation (2 years rather than 15).

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S

Safety Clause

A clause in a listing protecting the broker from having buyer and seller wait until the listing expires to make a deal, thereby avoiding the payment of commission. The clause states that if the property is sold during a specified period after the expiration of the listing (or any extension thereof) to a buyer provided during the listing period by the broker, the commission shall be paid. 

Secondary Financing

A loan secured by a mortgage or trust deed, which lien is junior (secondary) to another mortgage or trust deed.

Second Mortgage

A mortgage which ranks after a first mortgage in priority. Properties may have two, three, or more Mortgages, deeds of trust, or land contracts, as liens at the same time. Legal priority would determine whether they are called a first, second, third, etc. lien.

Sweat Equity

A program which allows a purchaser to do work on the property in place of all or part of the down payment and other costs of purchase.

 

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T

 

Tax Base

The assessed valuation of real property, which is multiplied by the tax rate to determine the amount of tax due.

Tax Lien

A statutory lien imposed against real property for nonpayment of taxes.

Transfer Tax

State tax on the transfer of real property. Based on purchase price or money changing hands. Check statutes for each state. Also called documentary transfer tax.

Trustee

A person who holds title in trust for the benefit of another. In a deed of trust, the trustee is the person named to hold title in trust for the benefit of the lender until the loan is paid off.

Trustee In Bankruptcy

One appointed by a bankruptcy court, and in whom the property of the bankrupt vests. The trustee holds the property in trust, not for the bankrupt, but for the creditors.

Trustor

The borrower under a deed of trust. One who deeds their property to a trustee as security for repayment of a loan.

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U

Unavoidable Cause

A cause which reasonable prudence and care could not have prevented, such as death, illness, papers lost in the mail, etc.

Underlying Financing

A mortgage, deed of trust, etc., prior to (underlying) a land contract, mortgage, etc , on the same property.

Undisclosed Principal

A principal whose identity is not revealed by an agent.

Uniform Laws

Laws approved by the National Conference of Commissioners on Uniform State Laws. Many have been adopted in one or more states. Among these are the Uniform Commercial Code, Uniform Negotiable Instruments Act, Uniform Partnership Act, Uniform Residential Landlord and Tenant Act, etc.

Uniform Settlement Statement

The Standard HUD Form 1 required to be given to the borrower, lender and seller at, or prior to, settlement.

Unilateral Contract

A contract under which one party expressly makes a promise, the other party, although making no reciprocal promise, may be obligated by law or may have already given consideration.

Unity Of Possession

In joint tenancy, the joint tenants must have equal rights to posesion.

Unmarketable Title

Title which contains defects that would allow a purchaser to be released from his obligation to purchase.

Unrecorded Instrument

A deed, mortgage, etc., which is not recorded in the county recorder's office and, therefore, not protected under recording statutes. Valid between the parties involved, but not against innocent third parties.

Useful Life

(1) In appraisal for sale purposes, the true economic value of a building in terms of years of use to the owner. (2) For tax purposes, the life set for depreciation. At any time during that period, a new life could begin for a new owner.

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V

Vacancy Factor

The estimated percentage of vacancies in a rental project. May be based on past records of the property, or a professional guess if a new project. Surrounding area buildings, it similar, may be used for comparison.

Variable Interest Rate

An interest rate which fluctuates as the prevailing rate moves up or down. In mortgages there are usually maximums as to the frequency and amount of fluctuation. Also called "flexible interest rate."

Veneered Construction

The placing of a facing material over the external surface of a structure.

Venue

(1) The county (or other geographical division) in which an action or prosecution is brought for trial and which is to furnish the panel of jurors. (2) The county in which an acknowledgement (notorization) is made.

Vesting

Denotes the manner in which title is held. Examples of common vestings are: Community Property, Joint Tenancy and Tenancy in Common.

Vital Statistics

Data regarding births, deaths, marriages, health records, etc., and usually kept by a governmental bureau. Federally, the Bureau of Vital Statistics.

Volt

A term in electronics, being the force necessary to cause one ampere to flow through a conductor with a resistance of one ohm. Common household current is 110 volts, with a 220 volt circuit used for some heavy appliances. Industrial uses may require higher voltage.

Voluntary Lein

A lien placed against real property by the voluntary act of the owner. Most commonly, a mortgage or deed of trust

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W

Waive

To knowingly abandon, relinquish, or surrender a right, benefit, or claim.

Wall Bearing Construction

Weight of roofs and floors supported entirely by the exterior walls, with no load-bearing partitions. Posts and pillars are used at points where the span is too wide for exterior wall support.

Warranty

A legal, binding, promise, given at the time of a sale, whereby the seller gives the buyer certain assurances as to the condition of the property being sold. Warranties as to real property have taken on a lessor role with the increase of the use of title insurance.

Warranty Deed

A deed used in many states to convey fee title to real property. Until the wide spread use of title insurance, the warranties by the grantor were very important to the grantee. When title insurance is purchased, the warranties become less important as a practical means of recovery by the grantee for defective title.

Wasting Assets

Assets which, by use or lapse of time, are consumed or reduced in book value, irrespective of market fluctuation. Includes oil, minerals, patent rights, franchises for a fixed term, etc. Also called "diminishing assets", "wasting property."

Watt Hour

The basis used to determine electric bills. Example: A 100 watt light bulb means if the bulb burns for one hour, it will use 100 watts of electricity.

Weep Holes

Small holes in a retaining wall or other wall where it may be necessary to drain off excess water to avoid pressure build-up.

Wild Interest

An interest of record which cannot be traced in the chain of title. Frequently occurs when an incorrect legal description appears on a document. An apparent wild interest may occur if a woman who changes her name through marriage after acquiring property, sells the property using her married name only.

Without Recourse

A finance term. A mortgage or deed of trust securing a note without recourse allows the lender to look only to the security (property) for repayment in the event of default, and not personally to the borrower.

Working Drawing

Drawing used by workman in construction.Shows all structural detail such as electric, plumbing, partitions, etc.

Wrap-Around Mortgage

A second or junior mortgage with a face value of both the amount it secures and the balance due under the first mortgage. The mortgagee under the wrap-around collects a payment based on its face value and then pays the first mortgagee. It is most effective when the first has a lower interest rate than the second, since the mortgagee under the wrap-around gains the difference between the interest rates, or the mortgagor under the wrap-around may obtain a lower rate then if refinancing.

Wrought Iron

An easily molded form of iron used for decorative railings, gates, furniture, etc. The term is loosely used to describe steel or aluminum used in the same manner.

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Y

Yacht Basin

A system of docks and channels used for the keeping of yachts and similar boats.

Yard

(1) A measure of 36". (2) The area between the building and property line of a residential property (back yard, side yard, front yard). (3) An enclosure, in or out of a building, used for a business purpose (lumber yard, etc.)

Yard Lumber

Lumber generally found in a lumber yard, that is, lumber graded for general building purposes.

Yield

Ratio of income from an investment to the total cost of the investment over a given period of time.

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Z

Zero Lot Line

The consruction of a building on any of the boundary lines of a lot. Usually built on the front line such as a store built to the sidewalk.

Zero Side Yard

The building of a subdivision with each house built on a side boundary line. This gives more usable yard space on narrow lots. An easement for maintenance is given over a portion of the lot adjoining each house.

Zone

(1) An area of a county or city in which the use of the land is restricted by law (zoning ordinance). (2) An area designated by a number for the delivery of mail. Zip codes incorporate the zones.