Glossary

Question 1

The consumption of available vacant property in a building or market

Answer 1

absorption

Question 2

A written, chronological record of the title records affecting rights and interests in a parcel of real property.

Answer 2

abstract of title

Question 3

A right granted through a loan clause enabling the lender to call all sums immediately due and payable on a loan should the borrower violate certain provisions of the loan agreement.

Answer 3

acceleration

Question 4

An increase in land caused by natural phenomena, for example a deposit of sand on a beachfront property due to a tropical storm.

Answer 4

accretion

Question 5

Knowledge given or received directly through demonstrable evidence. Actual notice of ownership: reading a bill of sale, inspecting a deed, searching title records. See also constructive notice.

Answer 5

actual notice

Question 6

A mortgage loan having an interest rate that can be periodically raised or lowered in accordance with the movement of a financial index.

Answer 6

adjustable rate mortgage

Question 7

The beginning basis, or cost, of a property plus the costs of capital improvements, minus all depreciation expense.

Answer 7

adjusted basis

Question 8

A real property’s annual tax levied by taxing entities according to the property’s assessed value.

Answer 8

ad valorem tax

Question 9

The entry, occupation, and use of another’s property without the consent of the owner or where the owner took no action to evict the adverse possessor. May lead to loss of legal title if the adverse possessor fulfills certain requirements.

Answer 9

adverse possession

Question 10

A fiduciary relationship between an agent and a principal where respective rights and duties are prescribed by laws of agency and by the agency agreement executed by the two parties. See universal agency, limited agency, and fiduciary.

Answer 10

agency

Question 11

The party in an agency relationship who is hired by the principal to perform certain duties. In so doing, the agent must also uphold fiduciary duties owed the principal.

Answer 11

agent

Question 12

Rights in real property as they apply to the property’s airspace, or all space above the surface within the parcel’s legal boundaries

Answer 12

air rights

Question 13

The air portion of real property. In a condominium unit, the freehold space enclosed by the unit’s outer walls, floor, and ceiling.

Answer 13

air space

Question 14

A transfer of title to real property by voluntary or involuntary means.

Answer 14

alienation

Question 15

An act of collusion where two or more competitors agree to limit competitive activity in portions of the market in exchange for reciprocal restrictions from the others.

Answer 15

allocation of markets

Question 16

A partial or complete reduction of a loan’s principal balance over the loan term, achieved by periodic payments which include principal as well as interest. See negative amortization.

Answer 16

amortization

Question 17

The total cost of credit to a borrower inclusive of finance charges and the stated interest rate, expressed as an annual rate of interest.

Answer 17

annual percentage rate (APR)

Question 18

Legislation aimed at preventing unfair trade practices and monopoly, including collusion, price fixing, and allocation of markets.

Answer 18

antitrust laws

Question 19

An opinion of value of a property developed by a professional and disinterested third party and supported by data and evidence.

Answer 19

appraisal

Question 20

A duly trained and licensed professional authorized to perform appraisals for other parties.

Answer 20

appraiser

Question 21

An increase in the value of a property generally owing to economic forces beyond the control of the owner

Answer 21

appreciation

Question 22

A right, interest, or improvement that attaches to and transfers with a parcel of real property, such as an easement or a riparian right.

Answer 22

appurtenance

Question 23

Payment that occurs at the end of a payment term rather than at the beginning. Examples of items paid in arrears include taxes and interest.

Answer 23

arrears

Question 24

A combining of contiguous parcels of real estate into a single tract, performed with the expectation that increased value will result.

Answer 24

assemblage

Question 25

The value of a property as established by assessors for the purpose of ad valorem taxation.

Answer 25

assessed value

Question 26

A periodic charge payable by condominium owners for the maintenance of the property’s common elements.

Answer 26

assessment

Question 27

A tangible or intangible item of value.

Answer 27

asset

Question 28

A sale of a business involving the transfer of assets as opposed to the liabilities or stock.

Answer 28

asset sale

Question 29

A transfer of one’s entire interest in an item of real or personal property. The assignor transfers the interest to the assignee.

Answer 29

assignment

Question 30

In a sale of real property, the transfer of the seller’s mortgage loan obligations to the buyer. Requires, in most cases, the approval of the lender.

Answer 30

assumption

Question 31

A lump sum payment on any loan which retires the remaining loan balance in full.

Answer 31

balloon payment

Question 32

An imaginary latitude line within the rectangular survey system that is designated in relation to a principal meridian for purposes of identifying townships.

Answer 32

base line

Question 33

The original cost or market value of an acquired asset.

Answer 33

beginning basis

Question 34

A registered marker denoting an official elevation above sea level; used by surveyors to identify other elevations in the area.

Answer 34

benchmark

Question 35

A party named to benefit from the yield or disposition of an asset identified in a trust, insurance policy, or will.

Answer 35

beneficiary

Question 36

A contract where both parties promise to perform in exchange for performance by the other party. See unilateral contract.

Answer 36

bilateral contract

Question 37

A temporary agreement to buy a property evidenced by a valuable deposit. Receipt of the deposit binds a seller to a good-faith agreement to sell a property, provided a complete sale contract is executed within a certain period.

Answer 37

binder

Question 38

An advertisement that does not contain the identity of the advertiser.

Answer 38

blind ad

Question 39

Inducing property owners to sell or rent their holdings due to an impending downturn in their property values, often owing to a change in the area’s ethnic or social composition.

Answer 39

blockbusting

Question 40

A direct agent of the principal who is hired for compensation to perform a stated service such as procuring a customer.

Answer 40

broker

Question 41

An estimate of a property’s value rendered by a party who is not necessarily licensed, objective, or qualified. The estimate may not be a complete appraisal.

Answer 41

broker’s opinion of value

Question 42

The business of procuring customers on behalf of clients for the purpose of completing a real estate transaction.

Answer 42

brokerage

Question 43

The brokerage of a business enterprise in addition to any real property it may own or lease.

Answer 43

business brokerage

Question 44

A specific standard of construction or maintenance of any aspect of an improved property established by local government officials.

Answer 44

building code

Question 45

A set of rights associated with ownership of property, including the rights to possess, use, transfer, encumber and exclude.

Answer 45

bundle of rights

Question 46

See syndication *

Answer 46

business trust

Question 47

A loan arrangement where the borrower pays extra interest in advance for the future benefit of a lower interest rate over the loan term.

Answer 47

buydown

Question 48

A broker’s listing with a buyer to locate a suitable property for purchase or lease.

Answer 48

buyer representation agreement

Question 49

A market characterized by an excess of sellers over buyers.

Answer 49

buyer’s market

Question 50

The difference between the net sales proceeds of an asset and its adjusted basis.

Answer 50

capital gain (or loss)

Question 51

An upgrading of improved property having sufficient magnitude to constitute an addition to the property’s basis. Contrasts with repair and maintenance.

Answer 51

capital improvement

Question 52

The rate of return on capital an investor will demand from the investment property, or the rate of return that the property will actually produce.

Answer 52

capitalization rate

Question 53

The remaining positive or negative amount of income an investment produces after subtracting all operating expenses and debt service from gross income

Answer 53

cash flow

Question 54

A document confirming that a newly constructed or renovated property has fully complied with all building codes and is ready for occupancy and use.

Answer 54

certificate of occupancy

Question 55

A document expressing the opinion of a title officer or attorney that a property seller is in fact the owner of good title based on a review of title records.

Answer 55

certificate of title

Question 56

An item of personal property.

Answer 56

chattel

Question 57

A meeting of principal parties where a seller transfers title and a buyer pays monies owed the seller and lender.

Answer 57

closing

Question 58

A financial summary and settlement of a property transaction indicating sums due and payable by the buyer and seller.

Answer 58

closing statement

Question 59

An encumbrance or claim on title to property impeding or diminishing its marketability.

Answer 59

cloud

Question 60

A brokerage practice where agents and brokers outside of the listing broker’s agency assist as subagents in procuring a customer in exchange for portions of the commission.

Answer 60

co-brokerage

Question 61

Property liened by a lender as security for a loan.

Answer 61

collateral

Question 62

An unlawful agreement between competitors to monopolize a market, disadvantage other competitors, or otherwise undertake activities in violation of fair trade laws.

Answer 62

collusion

Question 63

A defective title transfer or the transfer of a defective title where the new owner is originally unaware of the defect. Color of title may be used as a grounds for adverse possession, which, if successful, would nullify the original defect.

Answer 63

color of title

Question 64

An unlawful practice of mixing escrow funds with the agency’s operating funds

Answer 64

commingling

Question 65

1. Portions of a condominium property that are owned by all unit owners, for example the grounds, parking facilities, lobby, and elevators. 2. Portions of a commercial property used by all occupants as well as the public, for which the tenants may have to share in the repair and maintenance costs.

Answer 65

common elements

Question 66

A body of law developed by court judgments, decrees, and case decisions.

Answer 66

common law

Question 67

A system of property ownership established by law which generally defines rights of property ownership of spouses; community property is co-owned by spouses, and separate property is owned by a single spouse. Generally, property acquired during the marriage with jointly held funds is community property.

Answer 67

community property

Question 68

A property having similar characteristics to a subject property in an appraisal. The value or sale price of the comparable is used to estimate the value of the subject.

Answer 68

comparable

Question 69

A method of appraising property that relies on the principle that a property is generally worth what other, similar properties are worth.

Answer 69

comparable sales approach

Question 70

A method used by brokers and salespeople for estimating the current value of a property using sale price data from similar properties. Not to be confused with a bona fide appraisal performed by a licensed appraiser.

Answer 70

comparative market analysis (CMA)

Question 71

A local, county, or regional planning policy that requires developers to correct foreseen negative impacts of a development during the construction period of the project itself rather than afterwards; for example, widening a road during construction to accommodate a future increase in traffic.

Answer 71

concurrency

Question 72

1. A decree by a court or municipal authority that a parcel of private property is to be taken for public use under the power of eminent domain. 2. A government order that a particular property is no longer fit for use and must be demolished.

Answer 72

condemnation

Question 73

An estate distinguished by fee simple ownership of the airspace of a unit plus an undivided interest with the other unit owners in the overall property’s common elements.

Answer 73

condominium estate

Question 74

An item of tangible or intangible value, or one’s promise to do or not do some act which is used as an inducement to another party to enter into a contract.

Answer 74

consideration

Question 75

Knowledge one could or should have, according to the presumption of law; a demonstration to the public of property ownership through title recordation, “for all to see.” See actual notice.

Answer 75

constructive notice

Question 76

A condition that must be satisfied for a contract to be binding and enforceable.

Answer 76

contingency

Question 77

A potentially enforceable agreement between two or more parties who agree to perform or not perform some act. If valid, the contract is enforceable, with limited exceptions.

Answer 77

contract

Question 78

A financial contract where a seller retains legal title to a property and gives the buyer equitable title and possession over a period of time. During the contract period, the seller finances all or part of the purchase price. If the buyer makes timely payments and abides by all contract provisions, the seller conveys legal title at the end of the contract period.

Answer 78

contract for deed

Question 79

The increment of market value added to a property through the addition of a component or improvement to the property. Not to be confused with the cost of the component.

Answer 79

contribution

Question 80

A permanent long-term loan that is not FHA-insured or VA-guaranteed.

Answer 80

conventional loan

Question 81

1. Changing real property to personal property, and vice versa. 2. An illegal act of appropriating escrow funds for payment of an agency’s operating expenses.

Answer 81

conversion

Question 82

A voluntary transfer of real property interests.

Answer 82

conveyance

Question 83

Ownership of shares in a cooperative association which acquires a multi-unit dwelling as its primary asset. Shareholders also receive a proprietary lease on a unit for the duration of their share ownership.

Answer 83

cooperative estate

Question 84

A method for determining value that takes into account the cost of the land and the replacement or reproduction cost of the improvements net of estimated depreciation.

Answer 84

cost approach

Question 85

see depreciation 1. A non-cash expense taken against the income of investment property that allows the owner to recover the cost of the investment through tax savings. 2. A loss of value to improved property.

Answer 85

cost recovery

Question 86

Any new offer or amended offer made in response to an offer. See offer.

Answer 86

counter offer

Question 87

A written warrant or promise set forth in a contract or other legal document by one or both of the parties to the contract.

Answer 87

covenant

Question 88

1. An accounting entry on a closing statement indicating an amount a party has paid or is to receive. 2. Loan funds advanced to a borrower.

Answer 88

credit

Question 89

A lender’s opinion of a borrower’s ability to repay a loan in view of financial capabilities and past repayment patterns.

Answer 89

credit evaluation

Question 90

A widower’s life estate claim to portions of his deceased spouse’s real property. See also dower

Answer 90

curtesy

Question 91

In agency law, a party outside of the fiduciary relationship of client and agent. If an agent treats a customer as a client, an implied agency may result.

Answer 91

customer

Question 92

A standard elevation reference point used by surveyors to measure elevations of property in an area.

Answer 92

datum

Question 93

An accounting entry on a closing statement

Answer 93

debit

Question 94

An underwriting equation reflecting how much debt service an investment property can reasonably afford to pay out of its net operating income; used to identify how large a loan the property can afford given an interest rate and loan term.

Answer 94

debt coverage ratio

Question 95

An underwriting equation that is used to determine how much debt an individual can reasonably afford in view of the party’s or household’s income.

Answer 95

debt ratio

Question 96

Periodic payments of interest and/or principal on a mortgage loan.

Answer 96

debt service

Question 97

An instrument used to convey mortgaged property back to the lender rather than have the lender foreclose on the property.

Answer 97

deed in lieu of foreclosure

Question 98

An instrument used to convey real property to the trustee of a land trust. The trustor is also the beneficiary. See land trust.

Answer 98

deed in trust

Question 99

An instrument used by a borrower to convey title to mortgaged property to a trustee to be held as security for the lender, who is the beneficiary of the trust.

Answer 99

deed of trust

Question 100

A provision in a deed that limits or places rules on how the deeded property may be used or improved.

Answer 100

deed restriction

Question 101

A fee estate where ownership is perpetual, provided that usage restrictions or other conditions stated in the deed are upheld. If not, the fee reverts to the grantor either automatically (determinable fee) or by the grantor’s actions (condition subsequent).

Answer 101

defeasible fee

Question 102

A court order enabling a damaged lender to attach a lien on the defaulted borrower’s property for an amount equal to the difference between the debt and the proceeds of a foreclosure sale.

Answer 102

deficiency judgment

Question 103

A quantity of a product or service that is desired for purchase, lease, or trade at any given time.

Answer 103

demand

Question 104

A measure of the degree of residential land use within a given area for purposes of residential zoning and land use control.

Answer 104

density

Question 105

Valuable consideration accompanying an offer to purchase real estate that signifies the offeror’s good faith intention to complete a sale or lease contract.

Answer 105

deposit

Question 106

The portion of a property’s total basis that may be depreciated, generally the basis of the improvements, since land cannot be depreciated.

Answer 106

depreciable basis

Question 107

1. A non-cash expense taken against the income of investment property that allows the owner to recover the cost of the investment through tax savings. 2. A loss of value to improved property.

Answer 107

depreciation

Question 108

A body of state-level laws that stipulates how an estate will be passed on to heirs in the absence of a valid will.

Answer 108

descent and distribution, laws of

Question 109

A defeasible fee estate where title automatically reverts to the grantor if usage conditions stated in the deed are violated

Answer 109

determinable fee

Question 110

A transfer of real or personal property from the devisor to the devisee(s) by means of a will.

Answer 110

devise

Question 111

A financial practice of reducing the value of dollars received in the future by an amount that reflects the interest that would have been earned if the dollars had been received today. Performed to measure the present value of an investment’s future income.

Answer 111

discounting

Question 112

A financial analysis to identify the discounted value of the cash flow of an investment over a given number of years. See discounting and cash flow.

Answer 112

discounted cash flow analysis

Question 113

A failure to provide equal opportunity for persons to acquire or finance housing based on race, color, religion, national origin, sex, handicapped status, marital status, or family status.

Answer 113

discrimination in housing

Question 114

Direct investment without the intermediation of a bank or other depository institution to make loans and other investments.

Answer 114

disintermediation

Question 115

A tax stamp affixed to a property document or record as evidence that the owner has paid taxes related to the financing or transfer of real property.

Answer 115

documentary stamp

Question 116

The property that benefits from the existence of an easement appurtenant. The holder of the easement is the dominant tenant. See servient tenement.

Answer 116

dominant tenement

Question 117

A widow’s life estate interest in portions of her deceased spouse’s real property.

Answer 117

dower

Question 118

Representing both principal parties to a transaction

Answer 118

dual agency

Question 119

A loan provision defining the lender’s right to accelerate a note upon the transfer of collateralized property.

Answer 119

due on sale

Question 120

An impound account used for the safekeeping of a buyer’s earnest money deposit; accompanied by specific instructions to the escrow agent for holding and disbursing the funds.

Answer 120

earnest money escrow

Question 121

An interest in real property giving the interest holder the right to use defined portions of another’s property. May or may not attach to the estate.

Answer 121

easement

Question 122

The period during which an improvement is expected to remain useful in its original use. Establishes the improvement’s annual depreciation amounts in appraisal. Depreciation in tax accounting is determined by a property’s cost recovery class, which is related to economic life.

Answer 122

economic life

Question 123

A loss of value in a property because of external factors generally beyond the control of the owner, for example, a municipality’s lack of funds to improve deteriorated roadways. Also called external obsolescence.

Answer 123

economic obsolescence

Question 124

The actual income of an investment property before expenses, expressed as total potential income minus vacancy and collection losses.

Answer 124

effective gross income

Question 125

A right of a surviving spouse to claim a prescribed portion of the decedent’s real and personal property in place of the provisions of the decedent’s will.

Answer 125

elective share

Question 126

Plants and crops considered personal property, since human labor is required for planting, growing and harvesting.

Answer 126

emblements

Question 127

A power of a government entity to force the sale of private property for subsequent public use.

Answer 127

eminent domain

Question 128

An unauthorized physical intrusion of one’s real property into the real property of another.

Answer 128

encroachment

Question 129

An interest, right or intrusion that limits the freehold interest of an owner of real property or otherwise adversely effects the marketability of title.

Answer 129

encumbrance

Question 130

Legal status of a valid contract or otherdocument that a court of law will force to be performed.

Answer 130

enforceability

Question 131

An averaging of assessed valuations in an area to compensate for ad valorem tax inequities.

Answer 131

equalization

Question 132

A theoretical market state in which the forces of supply and demand are in balance.

Answer 132

equilibrium

Question 133

An interest that gives a lienholder or buyer the right to acquire legal title to a property if certain contractual conditions occur.

Answer 133

equitable title

Question 134

That portion of a property’s value owned by the legal owner, expressed as the difference between the property’s market value and all loan balances outstanding on the property.

Answer 134

equity

Question 135

A mortgagor’s right to pay off a defaulted mortgage and reclaim the property, provided the redemption occurs before the completion of the foreclosure sale.

Answer 135

equity of redemption

Question 136

A lease clause providing for an increase in rent.

Answer 136

escalator clause

Question 137

A reversionary transfer of real property to the state or county when the legal owner dies without a will and without heirs.

Answer 137

escheat

Question 138

1. A trust or impound account used for the proper handling of funds and documents in the closing of a real property transaction. 2. An account that a lender requires a borrower to establish to ensure that adequate funds will be available for payment of taxes and insurance on a mortgaged property.

Answer 138

escrow

Question 139

1. A set of rights to real property that includes the right of possession. 2. The totality of one’s personal and real property ownership.

Answer 139

estate

Question 140

A legal restraint to prevent a person from claiming a right or interest that is inconsistent with the person’s previous statements or acts. An estoppel certificate documents the party’s initial position or act, which cannot be contradicted later.

Answer 140

estoppel

Question 141

Standards governing proper and professional business practices.

Answer 141

ethics

Question 142

Removal of a tenant from a property because of a lease default.

Answer 142

eviction

Question 143

Actual or constructive notice of real property ownership, including opinion of title, certificate of title, and title insurance.

Answer 143

evidence of title

Question 144

One of the bundle of legal rights to real property enabling the owner to prevent others from entry or use.

Answer 144

exclusion

Question 145

A listing agreement which pays the listing broker a commission if anyone other than the property owner procures a customer..

Answer 145

exclusive agency

Question 146

A listing agreement which pays the listing broker a commission if anyone at all procures a customer.

Answer 146

exclusive right to sell

Question 147

A completed agreement which enjoins one or both principal parties to perform certain actions in order for the contract to become fully executed.

Answer 147

executory contract

Question 148

A transaction broker who assists principal parties in completing a transaction without acting as a fiduciary agent of either party.

Answer 148

facilitator

Question 149

Anti-discrimination legislation designed to ensure that all parties have equal access to mortgage financing.

Answer 149

fair financing laws

Question 150

Anti-discrimination legislation designed to ensure equal opportunity in housing to all home buyers.

Answer 150

fair housing laws

Question 151

A quasigovernmental agency that insures deposits of depository institutions and otherwise develops regulations for the banking industry.

Answer 151

Federal Deposit Insurance Corporation

Question 152

A major secondary mortgage market organization which buys conventional, FHA, and VA loans and sells mortgage-backed securities.

Answer 152

Federal Home Loan Mortgage Corporation (Freddie Mac)

Question 153

An agency of the Department of Housing and Urban Development which insures permanent long-term loans that meet certain qualifications.

Answer 153

Federal Housing Administration

Question 154

A government-sponsored agency in the secondary mortgage market which buys conventional, FHA, and VA loans, sells mortgage-backed securities, and guarantees payment of principal and interest on the securities.

Answer 154

Federal National Mortgage Association (Fannie Mae)

Question 155

The principal regulator of the money supply as well as of the American banking system.

Answer 155

Federal Reserve System

Question 156

An estate representing the highest form of legal ownership of real property, particularly the fee simple absolute estate.

Answer 156

fee simple

Question 157

The agent in an agency relationship; receives the trust and confidence of the principal and owes fiduciary duties to the principal.

Answer 157

fiduciary

Question 158

Duties of an agent to the principal in an agency relationship, including skill, care, diligence, loyalty, obedience, confidentiality, disclosure, and accounting.

Answer 158

fiduciary duties

Question 159

An item permanently attached to land so as to be defined as real property.

Answer 159

fixture

Question 160

A procedure for forcing sale of a secured property to satisfy a lienholder’s claim.

Answer 160

foreclosure

Question 161

An ownership estate of indeterminable duration; contrasts with a leasehold estate.

Answer 161

freehold estate

Question 162

A lease requiring the landlord to pay all of a property’s operating expenses, including those that pertain to an individual tenant.

Answer 162

full-service lease

Question 163

A loss of value in an improved property because of design flaws or failure of the property to meet current standards. May be curable or incurable.

Answer 163

functional obsolescence

Question 164

A fiduciary relationship which authorizes the agent to conduct a broad range of activities for the principal in a particular business enterprise. May or may not include authority to enter into contracts.

Answer 164

general agency

Question 165

A lien against any and all property owned by a lienee.

Answer 165

general lien

Question 166

A for-profit business where two or more co-owners agree to share management responsibilities and profits. Does not involve silent partners, as in a limited partnership.

Answer 166

general partnership

Question 167

A bargain and sale deed containing the assurance that the grantor will defend against any and all claims to the title.

Answer 167

general warranty deed

Question 168

An intangible business asset valued at the difference between the sale price and the value of all other assets of the business.

Answer 168

goodwill

Question 169

A division of HUD which guarantees FNMA mortgages and securities backed by pools of VAguaranteed and FHA-insured mortgages.

Answer 169

Government National Mortgage Association (Ginnie Mae)

Question 170

A method of legally describing real property which uses longitude and latitude lines to identify ranges, tiers, and townships.

Answer 170

government survey system See rectangular survey system.

Question 171

A party who receives a right, interest, or title to real property from another.

Answer 171

grantee

Question 172

A party who transfers a right, interest, or title to real property to another.

Answer 172

grantor

Question 173

A personal right to use another’s property, granted by the owner; does not attach to the estate, and there are no dominant or servient tenements.

Answer 173

gross easement

Question 174

A shortcut method for estimating the value of an income property. The procedure involves multiplying the property’s gross annual income times a multiplier that reflects the ratio between gross annual income and sale price that is typical for similar properties in the area.

Answer 174

gross income multiplier

Question 175

A shortcut method for estimating the value of an income property. The procedure involves multiplying the property’s gross monthly rent times a multiplier that reflects the ratio between gross monthly rent and sale price that is typical for similar properties in the area.

Answer 175

gross rent multiplier

Question 176

A lease requiring the landlord to pay all of a property’s operating expenses, including those that pertain to an individual tenant.

Answer 176

gross lease See full service lease.

Question 177

A lease of the land-only portion of a parcel of real property

Answer 177

ground lease

Question 178

Insurance against loss or damage to real property improvements; required by most mortgage lenders to protect the collateral.

Answer 178

hazard insurance

Question 179

A theoretical use of a property that is legally permissible, physically possible, financially feasible, and maximally productive, usually in terms of net income generation.

Answer 179

highest and best use

Question 180

A will prepared entirely in the testator’s handwriting, complete with date and signature.

Answer 180

holographic will

Question 181

A junior mortgage loan on a residence, secured by portions of the owner’s equity in the home.

Answer 181

home equity loan

Question 182

Laws that protect a homeowner against loss of the homeowner’s principle residence to a sale forced by creditors to collect debts. Homestead laws also protect the interests of individual spouses by requiring both spouses to sign any conveyance of the homestead property.

Answer 182

homestead laws

Question 183

An exemption of a portion of the assessed value of a homeowner’s principal residence from ad valorem taxation.

Answer 183

homestead tax exemption

Question 184

Use of real property as collateral for a mortgage loan.

Answer 184

hypothecation

Question 185

An agency relationship that arises by implication from the actions and representations of either agent or principal.

Answer 185

implied agency

Question 186

An unstated or unintentional agreement that may be deemed to exist by implication because of acts or statements by any of the parties to the agreement.

Answer 186

implied contract

Question 187

An agency relationship that arises by implication from the actions and representations of either agent or principal.

Answer 187

implied listing See implied agency.

Question 188

Any man made structure or item affixed to land.

Answer 188

improvement

Question 189

A method of appraising the value of a property by applying a rate of return to the property’s net income.

Answer 189

income capitalization

Question 190

An underwriting ratio that relates a borrower’s gross or net income and the debt service of a loan; used to determine how large a loan a borrower can reasonably afford.

Answer 190

income ratio

Question 191

A sales agent who works for a broker but is not legally an employee. The employer exerts only limited control over the contractor’s actions, does not provide employee benefits, and does not withhold taxes from the contractors’s pay.

Answer 191

independent contractor

Question 192

A lien whose priority is subordinate to that of a superior (tax) lien. Priority among inferior liens is established according to the time of recordation, with the exception of the mechanic’s lien. Also called junior lien.

Answer 192

inferior lien

Question 193

See contract for deed. interest 1. A right to real property. 2. A lender’s charge for the use of the principal amount of a loan.

Answer 193

installment contract

Question 194

The percentage of a loan amount that a borrower must pay a lender annually as interest on a loan amount.

Answer 194

interest rate

Question 195

Investment by a depository institution on behalf of depositors

Answer 195

intermediation

Question 196

The rate at which inflows from an income property investment must be discounted in order for the total inflows over time to equal the initial outlay, expressed as a percent; may include projected proceeds from the future sale of the property as an inflow.

Answer 196

internal rate of return

Question 197

Legal condition of a person who dies without leaving a will.

Answer 197

interstate

Question 198

Expenditure to purchase an asset with the expectation of deriving a future profit or benefit from the asset.

Answer 198

investment

Question 199

A transfer of title to real property without the consent or against the will of the owner, for example, eminent domain, foreclosure, and adverse possession.

Answer 199

involuntary alienation

Question 200

A lien imposed by legal process irrespective of the owner’s wishes or consent.

Answer 200

involuntary lien

Question 201

A form of real property ownership in which co-owners share all rights and interests equally and indivisibly; entails right of survivorship. Parties must establish tenancy at the same time and with a single deed.

Answer 201

joint tenancy

Question 202

A partnership created for a specific, predetermined business endeavor, after which the joint venture is usually dissolved

Answer 202

joint venture

Question 203

A court decision resulting from a lawsuit. If a creditor sues to collect a debt, a favorable ruling is followed by a judgment lien against the defaulting borrower’s property.

Answer 203

judgment

Question 204

A court proceeding triggered by a foreclosure suit. Involves notice, debt acceleration, the termination of the owner’s interests in the property, and a public sale where proceeds are applied to the debt.

Answer 204

judicial foreclosure

Question 205

The surface area of the earth, all natural things permanently attached to the earth, and everything beneath the surface to the earth’s center and above the surface extending upward to infinity.

Answer 205

land

Question 206

A trust in which a trustor conveys a fee estate to a trustee and names himself or herself as beneficiary. The beneficiary in turn controls the property and the actions of the trustee.

Answer 206

land trust

Question 207

Regulation of how individual owners use property in a municipality or planning district. Control patterns are generally in accordance with a master plan.

Answer 207

land use control

Question 208

A parcel of property lacking legal access to a public thoroughfare; requires a court-ordered easement by necessity to relieve the condition.

Answer 208

landlocked

Question 209

A body of law defining roles, duties and responsibilities of an agent and a principal. Laws also set forth standards of conduct agent and principal owe to a customer.

Answer 209

law of agency

Question 210

A legal contract and instrument of conveyance which transfers to the tenant, or lessee, a leasehold fee for a certain duration. The lease contract sets forth all tenant and landlord covenants, financial terms, and grounds for default. The landlord is referred to as the lessor.

Answer 210

lease

Question 211

A life estate established by operation of law rather than by the actions or wishes of the property owners. Examples are homestead law, dower, curtesy, and elective share.

Answer 211

legal life estate

Question 212

Full legal ownership of property and the bundle of rights as they apply to it. Contrasts with equitable title.

Answer 212

legal title

Question 213

An estate that entails temporary rights of use, possession, and to an extent, exclusion, but not legal ownership. Compare freehold estate.

Answer 213

leasehold estate

Question 214

A description of a parcel of property which accurately locates and identifies the boundaries of the subject parcel to a degree acceptable by local courts of law.

Answer 214

legal description

Question 215

The relationship between the yield rate of an investment and the interest rate of funds borrowed to finance the investment. If the yield rate is greater than the loan rate, positive leverage results. If the yield rate is less than the loan rate, negative leverage results.

Answer 215

leverage

Question 216

1. An accounting entry representing a claim against the assets of a business by a creditor. 2. A condition of vulnerability to lawsuits seeking redress for potentially wrongful acts or statements.

Answer 216

liability

Question 217

1. Legal authorization to conduct business. 2. An individual’s personal right to use the property of another for a specific purpose. Revocable at any time at the owner’s discretion. Does not attach to the property and terminates upon the death of either party.

Answer 217

license

Question 218

A creditor’s claim against real or personal property as security for a property owner’s debt. A lien enables a creditor to force the sale of the property and collect proceeds as payment toward the debt.

Answer 218

lien

Question 219

The order in which liens against a property are satisfied; the highest priority lien receives sale proceeds from a foreclosure before any other lien.

Answer 219

lien priority

Question 220

A state whose laws give a lender on a mortgaged property equitable title rather than legal title. The mortgagor in a lien theory state retains legal title. See title theory state.

Answer 220

lien theory state

Question 221

A freehold estate that is limited in duration to the life of the owner or other named person. On the death of this person, legal title passes to the grantor or other named party.

Answer 221

life estate

Question 222

An agency relationship which restricts the agent’s authorizations to a specific set of duties. The relationship usually terminates on performance of these duties, as in a real estate broker’s listing agreement. Also called special agency.

Answer 222

limited agency

Question 223

A business enterprise consisting of general and limited partners: general partners manage the affairs of the business while limited partners are silent investors.

Answer 223

limited partnership

Question 224

In a contract, a clause that expressly provides for compensation a defaulting party owes the damaged party. In the absence of such a clause, a damaged party may sue for unliquidated damages.

Answer 224

liquidated damages

Question 225

The degree to which an investment is readily marketable, or convertible to another form of asset. If immediately salable, an investment is liquid; the longer it takes to sell, the more illiquid the investment. Real property is relatively illiquid in comparison with other types of investment.

Answer 225

liquidity