GLOSSARY VOCAB Flashcards
100-year flood plain
An area where a flood has a 1%
chance of being equaled or exceeded each year. Thus, a
100-year flood could occur more than once in a relatively
short period of time or even within the same month.
ad valorem tax
A tax levied according to value,
generally used to refer to real estate tax.
(Ad valorem means “according to value”)
(Assed Value / 100) x Tax Rate = Annual Taxes
abstract of title
The condensed history of a title to
a particular parcel of real estate, consisting of a summary
of the original grant and all subsequent conveyances and
encumbrances affecting the property and a certification by
the “abstractor” that the history is complete and accurate. If the title is clean an “certificate of title” is issued validifying that this is the sellers property to sell
adverse possession
The open, continuous, exclusive,
adverse, notorious (OCEAN) possession of another’s land
under a claim of title. Possession for a statutory period of
20 years in North Carolina may be a means of acquiring
title.
*Open
- Must be operating their use out in the open not surreptitiously or in stealth
*Continuous
- Without interruption for up to 20 years
*Exclusive
- Must use the land exclusively meaning by themselves not open to the public; making an ordinary use of is the type of possession
*Adverse
- I couldn’t really find a good definition for it yet but it almost means that it has to be a kind of hostile situation between owner and squatter; or against the owners rights or desires
*Notorious
- the lengths someone would go to to accomplish all of this could be described as hostile and notorious
acceleration clause
The clause in a mortgage or deed
of trust that can be enforced to make the entire debt due
immediately if the borrower defaults on an installment
payment or another covenant.
aesthetic zoning
Zoning ordinances that regulate the
appearance of real property, such as exterior color, exterior
construction material, required screening and fencing.
acceptance
Expression of intent by the offeree to be
bound by the terms of the offer; must be in writing if the
contract pertains to real property. Acceptance must be
communicated to the opposite party to create a contract.
after-tax cash flow
The amount of cash remaining
after the owner has reported all income from the property,
less appropriate tax deductions and any taxes due.
age-life method
A method of depreciation computed
by dividing the replacement cost of a property by the
number of years of remaining useful life; also called the
straight-line method.
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.
agency
The relationship between a principal and an
agent wherein the agent is authorized to represent the
principal in certain transactions.
accretion
The increase or addition of land by the
deposit of sand or soil washed up naturally from a river,
lake, or sea.
agent
One who acts or has the power to act for
another. A fiduciary relationship is created under the
law of agency when a property owner, as the principal,
executes a listing agreement or management contract
authorizing a licensed real estate broker to be the property
owner’s agent. See OLD CAR.
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 hectare.
agricultural fixture
In North Carolina, a fixture
attached to leased property by a tenant farmer is
considered the landowner’s real property rather than the
tenant’s personal property.
action to quiet title
A lawsuit brought in a court in
order to establish a party’s title to real property and to
“quiet” any challenges or claims to the title.
air rights
The right to use the open space above a
property, usually allowing the surface to be used for
another purpose.
actual eviction
The legal process that results in
the tenant’s being physically removed from the leased
premises; summary ejectment.
alienation
The act of transferring property to another.
Alienation may be voluntary, such as by gift or sale,
or involuntary, as through eminent domain or adverse
possession.
addendum
A rider to a contract with additional terms
or conditions.
alienation clause
This clause prevents the borrower
from letting someone else assume the debt without the
lender’s approval. See due-on-sale clause.
adjustable rate mortgage (ARM)
A loan
characterized by a fluctuating interest rate, usually one
tied to a published index. Caps for adjustments on
periodic interest, lifetime interest, and payment amounts
are normal.
amendment
A change to contractual terms or
conditions.
Americans with Disabilities Act (ADA)
Federal act
implementing regulations that protect citizens with mental
or physical disabilities. Does not apply to residential
housing but to commercial facilities and places of public
accommodation.
American Land Title Association (ALTA) policy
A title insurance policy that protects the interest in a
collateral property of a mortgage lender that originates a
new real estate loan.
amortized loan
A loan in which principal as well as
interest is payable in periodic installments over the term of
the loan.
amount realized
A calculation performed to determine
capital gain; the difference between the actual sales price
and expenses of the sale.
annexation
The process of converting personal property
into real property.
annual percentage rate (APR)
The relationship of
the total finance charges associated with a loan. This must
be disclosed to borrowers by lenders under the Truth in
Lending Act.
anticipated revenue
A synonym for potential or
projected or scheduled gross income used when developing
an operating statement.
anticipation
The appraisal principle that value can
increase or decrease based on the expectation of some future
benefit or detriment affecting the property.
antitrust laws
Laws designed to preserve the free
enterprise of the open marketplace by making illegal
certain private conspiracies and combinations formed to
minimize competition. Most violations of antitrust laws in
the real estate business involve either price fixing (brokers
conspiring to set fixed compensation rates) or allocation of
customers or markets (brokers agreeing to limit their areas
of trade or dealing to certain areas or properties).
apparent authority
When someone claims to be an
agent but there is no express agreement, the principal can
establish an agency relationship by performing any act
that accepts (ratifies) the conduct of the agent as that of an
agent.
appraisal
An estimate of the quantity, quality, or value
of something. The process through which conclusions of
property value are obtained; also refers to the report that
sets forth the process of estimation and conclusion of value.
appreciation
An increase in the worth or value of a
property due to economic or related causes, which may
prove to be either temporary or permanent; opposite of
depreciation.
appurtenance
A right, a privilege, or an improvement
belonging to, and passing with, the land.
arm’s-length transaction
A transaction where the
parties are dealing from equal bargaining positions.
asbestos
A fire-resistant mineral fiber used in a wide
variety of building supplies prior to 1978; environmental
health hazard, when friable, that can cause respiratory
diseases and cancer.
assessment
(1) The imposition of a tax, charge, or levy,
usually according to established rates. (2) Official valuation
of property for the purpose of establishing assessed value for
tax purposes.
as is
A description of the physical condition of the
property where no promises are made regarding its quality
or condition.
assignment
The transfer to another party in writing of
rights or interest in a bond, a mortgage, a lease, or another
instrument.
assumption of mortgage
Acquiring title to property
on which there is an existing mortgage and agreeing to
be personally liable for the terms and conditions of the
mortgage, including payments.
auction
A form of selling property where oral bids are
taken and the property is sold to the highest bidder.
avulsion
The sudden tearing away of land, as by
earthquake, flood, volcanic action, or the sudden change in
the course of a stream. The loss of land may not result in
loss of title to the property.
backup offer
An offer submitted to the property owner
with knowledge that the owner is already under contract; a
secondary offer.
balloon payment
A final payment of a mortgage loan
that is larger than the required periodic payments because
the loan amount was not fully amortized.
bargain and sale deed
A deed that carries with it
no warranties against liens or other encumbrances but
that does imply that the grantor has the right to convey
title. The grantor may add warranties to the deed at his
discretion.
baseboard
A board around the bottom of a wall
perpendicular to the floor. Sometimes called wains,
baseboards cover the gap between the floor and the wall,
protecting the wall from scuffs and providing a decorative
accent.
Base Flood Elevation
The location of the lowest floor
in relation to the computed elevation to which floodwater
is anticipated to rise during a flood on the flood map.
base line
The main imaginary line running east and
west and crossing a principal meridian at a definite point;
used by surveyors for reference in locating and describing
land under the rectangular (government) survey system of
legal description.
basement
Story-high space below the first floor that is
totally or partially below the exterior grade; floor is usually
concrete slab.
basis
The financial interest that the IRS attributes to
an owner of an investment property for the purpose of
determining annual depreciation and gain or loss on the
sale of the asset. If a property was acquired by purchase,
the owner’s basis is the cost of the property plus allowable
closing costs plus the value of any capital expenditures for
improvements to the property, minus any depreciation
allowable or actually taken. This new basis is called the
adjusted basis.
before-tax cash flow
The money left after debt service
has been subtracted from the net operating income and
before income tax is paid; also called cash throw-off or cash
flow after debt service.
benchmarks
Permanent reference marks or points
established for use by surveyors in measuring differences in
elevation.
beneficiary
(1) The person for whom a trust operates
or in whose behalf the income from a trust estate is drawn.
(2) A lender in a deed of trust loan transaction. (3) The
recipient of personal property (a bequest or legacy) in a will.
blanket loan
A mortgage covering more than one parcel
of real estate, providing for each parcel’s partial release from
the mortgage lien upon repayment of a definite portion of
the debt.
blockbusting
The illegal practice of inducing
homeowners to sell their properties by making
representations regarding the entry or prospective
entry of persons of a particular protected class into the
neighborhood.
blue-sky laws
Common name for state and federal
laws that regulate the registration and sale of investment
securities.
boot
Money or property given to make up any difference
in value or equity between two properties in a 1031
exchange.
branch office
A secondary place of business apart from
the principal or main office from which real estate business
is conducted. A branch office usually must be run by a
broker-in-charge working on behalf of the broker.
breach of contract
The violation of any terms or
conditions in a contract without legal excuse; for example,
failure to make a payment when it is due.
bridge loan
A short-term loan to cover period between
termination of one loan and the beginning of another
loan; between interim construction loan and a permanent
takeout loan; residential financing arrangement where
homeowner borrows money under a second mortgage on
buyer’s unsold current home to fund acquisition of a new
home.
British Thermal Unit (BTU)
A measure of heat used in
rating the capacity of heating and cooling systems.
broad form (HO-2)
An insurance policy covering
buildings and personal property against loss or damage
from fire, lightning, removal, windstorm, hail, explosion,
riot, smoke, vandalism, and theft. This form also covers
falling objects; weight of snow, ice, or sleet; collapse of
buildings; malfunctioning heating systems; accidental
discharge of water or steam; and electrical currents that are
artificially generated.
broker
(1) One who acts as an intermediary on behalf of
others for a fee or commission. (2) One who is licensed to
list, lease, buy, exchange, auction, negotiate or sell interest
in real estate for others for a fee.
brokerage
The bringing together of buyers and sellers in
the marketplace.
broker-in-charge (BIC)
Required for each brokerage
firm and each branch office, the full broker responsible
for displaying all licenses properly, notifying the North
Carolina Real Estate Commission of any change of business
address or trade name, ensuring that all advertising and
agency compliance is done properly, maintaining the trust
account and trust account records properly, retaining and
maintaining all real estate transaction records properly, and
supervising all provisional brokers associated with the firm
or office.
budget comparison statement
Compares actual
results with the original budget, often giving either
percentages or a numerical variance of actual versus
projected income and expenses.
buffer zone
A strip of land, usually used as a park or
designated for a similar use, separating and screening land
dedicated to one use from land dedicated to another use
(e.g., residential from commercial).
building code
An ordinance that specifies minimum
standards of construction for buildings to protect public
safety and health.
building permit
Written governmental permission
for the construction, alteration, or demolition of an
improvement, showing compliance with building codes and
zoning ordinances. See certificate of occupancy
bundle of legal rights
The concept of land ownership
that includes ownership of all legal rights to the land (i.e.
disposition, exclusion, enjoyment, possession and control).
business cycle
The upward and downward fluctuations
in business activities generally characterized by four stages:
expansion, recession, depression, and revival.
buydown
A financing technique used to reduce the
monthly payments for the first few years of a loan. Funds in
the form of discount points are given to the lender to buy
down or lower the effective interest rate paid by the buyer,
thus reducing the monthly payments for a set time.
buyer agency agreement
A principal-agent
relationship in which the broker is the agent for the buyer,
with fiduciary responsibilities to the buyer. The broker
represents the buyer under the law of agency.
Buyer Closing Disclosure (BCD)
A form required (as
of 2015) in most residential mortgage transactions provided
to a buyer prior to closing that includes details about
settlement costs, such as loan and closing costs.
call
In surveying, a reference to a course, distance, or
monument when a describing a boundary.
capital gain
The taxable profit earned from the sale of a
capital asset such as real property. Profits from assets owned
for 12 months or less are treated as short-term capital gain,
which is taxable as ordinary income. Profits from assets
owned longer than 12 months are treated as long-term
capital gain that is usually taxed at a much lower rate than
ordinary income.
capital improvement
The addition of a permanent
structural improvement or the restoration of some aspect
of a property that will either enhance the property’s
overall value or increases its useful life; often used in the
calculation of capital gain.
capital loss
A loss derived from the sale of a capital asset
such as real property that may be deductible from ordinary
taxable income.
capitalization
A mathematical process for estimating
the value of a property using a proper rate of return on the
investment and the annual net operating income expected
to be produced by the property. The formula is Income ÷
Rate = Value.
capitalization rate
The rate of return a property will
produce on the owner’s investment.
carbon monoxide
A colorless, odorless gas produced as
a byproduct of inefficient burning of fuel such as gas, oil or
wood; poor ventilation can lead to deadly concentration of
gas.
cash flow
The net spendable income from an
investment, determined by deducting all operating and
fixed expenses from the gross income. When expenses
exceed income, a negative cash flow results.
cash-on-cash rate of return
Derived by dividing the
before-tax cash flow by the owner’s cash investment; equity
dividend rate.
caveat emptor
A Latin phrase meaning “Let the buyer
beware.” In a caveat emptor state, sellers do not have to
disclose any facts about their property when selling.
ceiling joist
Attached to the top plate of a wall, these
joists carry the weight of the roof.
certificate of occupancy (CO)
A certificate issued by
a government authority stating that a building is fit for
occupancy and there are no building code violations; the
end result of a successful building permit.
certificate of reasonable value (CRV)
A form
indicating the appraised value of a property being financed
with a VA loan.
certificate of title
A statement of attorney’s opinion on
the status of the title to a parcel of real property based on a
title search of specified public records.
chain of title
The succession of title conveyances, from
some accepted starting point, whereby the present holder of
real property derives title.
change
The appraisal principle that no physical or
economic condition remains constant.
Civil Rights Act of 1866
A federal act that prohibits
racial discrimination in the sale and rental of all real and
personal property.
closing
The consummation of a real estate transaction;
seller delivers clear title and buyer delivers payment of the
purchase price; occurs at the recordation of the deed per the
standard residential sales contract.
closing agent
A third party that conducts the closing of
the transaction, usually an attorney in North Carolina.
Closing Disclosure (CD)
A settlement form required in
most residential mortgage loans required by the TRID rules
since October 2015.
closing statement
A detailed cash accounting of a real
estate transaction showing all cash received, all charges and
credits made, and all cash paid out in the transaction.
cloud on the title
Any document, claim, unreleased
lien, or encumbrance that may impair the title to real
property or make the title doubtful; usually revealed by a
title search and removed by either a quitclaim deed or suit
to quiet title.
clustering
The grouping of homesites within a
subdivision on smaller lots than normal, with the remaining
land used as common area.
cluster zoning
The practice of slightly reducing the sizes
of the individual lots and clustering the lots around varying
street plans such as cul-de-sacs to create more open space in
a development.
co-brokered sale
A real estate transaction involving
two or more brokerage firms, one firm representing the
seller and the other representing the buyer.
code of ethics
A written system of standards for ethical
conduct.
codicil
A supplement or an addition to a will, executed
with the same formalities as a will, that normally does not
revoke the entire will.
coinsurance clause
A clause in insurance policies
covering real property that requires that the policyholder
maintain fire insurance coverage generally equal to at least
80% of the property’s actual replacement cost.
co-listing
Two brokerage firms team up to sell a
property, usually to create more effective marketing for the
listing client.
commingling
The illegal act by a real estate broker
of placing consumer funds with personal funds. By law,
brokers are required to maintain a separate trust or escrow
account for other parties’ funds held temporarily by the
broker.
commission
Payment to a broker for services rendered,
as in the sale or purchase of real property; traditionally, a
percentage of the gross sales price of the property but can
be a flat fee or some other calculation.
common elements
Parts of a prop common use by
all of the condominium residents. Each condominium
owner has an undivided ownership interest in the common
elements.
common interest community ownership (or hybrid)
ownership
Ownership that contains elements of both
ownership in severalty and concurrent ownership.
common law
The body of law based on custom, usage,
and court decisions.
common law of agency
The basic framework of law
that governs the legal responsibilities of the broker to the
people the broker represents.
comparable
Property used in an appraisal report that is
substantially equivalent to the subject property.
comparative market analysis (CMA)
A comparison of
the prices of recently sold homes that are similar to a listing
seller’s home in terms of location, style, and amenities; an
estimate of market value; also called a broker price opinion.
compensatory damages
Money damages awarded
to the injured party to compensate them for the breach of
contract but not to punish the breaching party.
competition
The appraisal principle that states that
excess profits generate competition.
Comprehensive Loss Underwriting Exchange
(C.L.U.E.)
A report which generally contains up to seven
years of personal auto and property data, used by insurance
companies to determine the insurability of a property and/
or auto owner.
concurrent ownership
Ownership involving two or
more owners.
condemnation
A judicial or an administrative
proceeding to exercise the power of eminent domain,
through which a government agency takes private property
for public use and justly compensates the owner.
condition
It limits coverage of a specified property in an
insurance policy.
conditional-use permit
Written governmental
permission allowing a use inconsistent with zoning but in
the public interest, such as locating an emergency medical
facility in a predominantly residential area: special-use
permit.
condition subsequent
A defeasible fee simple estate
that dictates some action or activity that the new owner
must not perform. The former owner retains a right of
reentry, so if the condition is broken, the former owner can
take repossession of the property.
condominium ownership
The absolute ownership of
a unit in a multiunit building based on a legal description
of the airspace the unit actually occupies, plus an undivided
interest in the ownership of the common elements, which
are owned jointly with the other condominium unit
owners.
conforming loan
A standardized conventional loan
that meets Fannie Mae’s or Freddie Mac’s purchase
requirements.
conformity
The appraisal principle that holds that the
greater the similarity among properties in an area, the better
they will hold their value.
Connor Act
A North Carolina law that requires many
types of real estate documents to be recorded for protection
against claims from third parties. These documents include
deeds, mortgages, purchase contracts, installment land
contracts, assignments, options, leases exceeding three years,
easements, and restrictive covenants; a pure race statute.
consequential damages
Award of special damages
if the breaching party entered the contract with plans to
breach; injured party may sue for lost profits.
consideration
(1) That received by the grantor in
exchange for a deed. (2) Something of value that induces a
person to enter into a legally enforceable contract.
constructive eviction
The actions of a landlord that
so materially disturb or impair a tenant’s enjoyment of the
leased premises that the tenant is effectively forced to move
out and terminate the lease without liability for any further
rent.
constructive notice
The notice given to the world
by recorded documents. All people are charged with
knowledge of such documents and their contents, whether
or not they have actually examined them. Possession of
property is also considered constructive notice that the
person in possession has an interest in the property
Consumer Financial Protection Bureau (CFPB)
A federal agency created by the Dodd-Frank Act in 2010 to
oversee consumer protection via financial regulations within
seven federal agencies.
contingency
A provision in a contract that requires a
certain act to be done or a certain event to occur before the
contract becomes binding; a condition of the contract.
contract
A legally enforceable promise or set of promises
between legally competent parties that must be performed
for consideration. If a breach of the promise occurs, the
law provides a remedy. A contract may be either unilateral,
by which only one party is bound to act, or bilateral, by
which all parties to the instrument are legally bound to act
as prescribed.
conventional loan
A loan from private investors that
requires no government insurance or guarantee.
conveyance
A term used to refer to any document
that transfers title to real property. The term is also used in
describing the act of transferring.
cooperative listing service (CLS)
Another term for
MLS. See Multiple Listing Service.
cooperative ownership
A residential multiunit
building whose title is held by a trust or corporation that
is owned by and operated for the benefit of persons living
within the building, who are the beneficial owners of the
trust or stockholders of the corporation, each possessing a
proprietary lease to a specific apartment in the building.
co-ownership
Title ownership held by two or more
persons or entities.
corporation
An entity or organization, created by
operation of law, whose rights of doing business are
essentially the same as those of an individual. The entity has
continuous existence until it is dissolved according to legal
procedures.
cost approach
The process of estimating the value
of a property by adding the appraiser’s estimate of the
reproduction or replacement cost of the building, less
depreciation to the estimated land value.
cost recovery
An Internal Revenue Service term for
depreciation.
counteroffer
A new offer made in response to an offer
received. It has the effect of rejecting the original offer.
covenant
A written agreement between two or more
parties in which a party or parties pledge to perform or
not perform specified acts with regard to property; usually
found in such real estate documents as deeds, mortgages,
leases, and contracts for deed.
covenant of quiet enjoyment
The covenant implied
by law by which a landlord guarantees that a tenant may
take possession of leased premises and that the landlord
will not interfere in the tenant’s possession or use of the
property.
crawl space
The space between the ground surface
and the first floor; frequently found in houses without
basements that are not built on a slab foundation.
credit
On a closing statement, an amount entered in a
person’s favor—an amount the party has paid or an amount
received from another party.
customer
A third party to whom is owed honesty and
fairness; not a fiduciary relationship.
datum
A horizontal plane from which heights and
depths are measured.
debit
On a closing statement, an amount charged; an
amount the party must pay at settlement.
debt service
The principle and interest payment on a
loan.
decedent
A person who has died
declaration of restrictive covenants
A statement of
all covenant, conditions and restrictions (CC&Rs) affecting
a parcel of land; sometimes noted on the plat map or in a
separate document. Restrictions are appurtenant and aim to
protect property values.
dedication
The voluntary transfer of private property
by its owner to the public for some public use, such as for
streets or schools.
deductible
Loss not covered by the insurer
deed
A written instrument that, when executed and
delivered, conveys title to or interest in real estate; evidence
of title.
deed in lieu of foreclosure
A deed given by the
mortgagor to the mortgagee when the mortgagor is in
default under the terms of the mortgage. This avoids
foreclosure but does not remove liens from the property;
“friendly foreclosure.”
deed of trust
An instrument used to create a mortgage
lien by which the borrower conveys title to a trustee, who
holds it as security for the benefit of the note holder (the
lender); also called a trust deed.
deed restriction
Clause placed in a deed by the owner
to control the future uses of the property. See restrictive
covenants.
default
The nonperformance of a duty, whether arising
under a contract or otherwise; failure to meet an obligation
when due.
defeasance clause
A clause used in leases and
mortgages that cancels a specified right upon the occurrence
of a certain condition, such as cancellation of a mortgage
upon repayment of the mortgage loan.
defeasible fee estate
An estate in which the holder
has a fee simple title that may be terminated upon
the occurrence or nonoccurrence of a specified event.
Two categories of defeasible fee estates exist: fee simple
determinable and fee simple on condition subsequent.
deferred maintenance
The act of postponing
necessary maintenance and repairs on rental properties
deficiency judgment
A personal judgment levied
against the borrower when a foreclosure sale does not
produce sufficient funds to pay the mortgage debt in full; a
general lien.
delivery and acceptance
The actual delivery of a deed
by a grantor and the actual or implied acceptance of the
deed by the grantee; recordation of the deed is viewed as
acceptance.
demand
The amount of goods people are willing and
able to buy at a given price; often coupled with supply.
Department of Housing and Urban Development
(HUD)
A federal cabinet department active in national
housing programs. Among its many programs are urban
renewal, public housing, model cities, rehabilitation loans,
FHA subsidies, fair housing enforcement, and water and
sewer grants.
depreciation
(1) In appraisal, a loss of value in
property due to any cause, including physical deterioration,
functional obsolescence, and external obsolescence. (2) In
real estate investment, an expense deduction for tax
purposes taken over the period of ownership of income
property
descent
The acquisition of an estate by inheritance
in which an heir succeeds to the property by intestate
succession.
designated dual agency
An agency option under dual
agency that allows the firm, with both clients’ permission,
to appoint one or more licensees to exclusively represent
the seller-client and one or more licensees to exclusively
represent the buyer-client; also called designated agency.
developer
A person or company that attempts to
put land to its most profitable use through the construction
of improvements.
devise
A gift of real property by will. The donor is the
devisor, and the recipient is the devisee.
direct reduction loan
A mortgage loan that requires
a fixed amount of principal payment in each period; the
total debt service payment starts higher than with a level
payment loan since interest portion will reduce with each
payment.
discount point
Interest paid in advance; one point
equals 1% of the loan amount for the borrower and
increases the yield for the investor approximately 1
⁄8%.
Doctrine of Prior Appropriation
Followed primarily
by Western states, this doctrine contends that water rights
are determined by priority of beneficial use. The first person
to use water or divert water for a beneficial use or purpose
can acquire individual rights to the water. In these states,
property owners may have land that borders water but no
rights to use that water.
Dodd-Frank Wall Street Reform and Consumer
Protection Act (Dodd-Frank)
Legislation passed in
2010, primarily affecting financial institutions and their
consumers in an effort to prevent a recurrence of events that
caused the economic recession and the mortgage market
meltdown during the mid-2000s.
dominant tenement
A property that includes in its
ownership the appurtenant right to use an easement over
another person’s adjacent property (called the servient
tenement) for a specific purpose; ownership of the easement
runs with the land.
dormer
A projection built out from the slope of a roof,
used to house windows on the upper floor and to provide
additional headroom. Common types of dormers are the
gable dormer and the shed dormer.
dual agency
Representing both parties to a transaction;
must be consensual and reduced to writing prior to
presentation of first offer.
due diligence
(1) a buyer’s investigative process of
having experts inspect the property, examine title, and
review any leases to determine if the property meets the
buyer’s needs and if buyer wishes to proceed with the
purchase. During the “due diligence period,” the buyer
can terminate the purchase contract for any reason or no
reason; (2) a licensee’s affirmative duty to discover and
disclose any material facts about the property in question.
due-on-sale clause
A provision in a mortgage that
states that the entire balance of the note is immediately due
and payable if the mortgagor transfers (sells) the property.
See alienation clause.
duress
The unlawful constraint or action exercised on
a person whereby the person is forced to perform an act
against that person’s will. A contract entered into under
duress is voidable.
earnest money
Money deposited by a buyer under the
terms of a contract, to be forfeited if the buyer defaults but
applied to the purchase price if the sale is closed.
easement
A right to limited use and enjoyment of the
land of another for a specific purpose without ownership; a
nonpossessory interest in real estate. Two types of easements
are easement appurtenant and easement in gross.
easement appurtenant
An easement that runs with
the land; the easement is part of both the dominant and the
servient tracts and conveys with the title to either tenement.
easement by necessity
An easement allowed by law
as necessary for the full enjoyment of a parcel of real estate;
i.e., to allow a landlocked owner a right of ingress and
egress over a grantor’s land.
easement by prescription
An easement acquired
through adverse use of another’s property for a period of 20
or more years in North Carolina.
easement in gross
An easement that is not created for
the benefit of any land owned by the owner of the easement
but that attaches personally to the easement owner. There
is no dominant tract; the easement attaches to the servient
tract. Personal easement in gross is not assignable; a
commercial easement in gross is assignable.
eave
The overhang of a sloping roof that extends beyond
the walls of the house.
economic life
The number of years during which an
improvement will add value to the land.
effective age
The apparent age of a building based on
observed condition rather than chronological age.
effective gross income (EGI)
The anticipated income
from a rental property resulting from potential gross
income minus an allowance for vacancy and bad debts.
electromagnetic fields (EMFs)
Naturally occurring
energy fields near power lines and electrical appliance
thought to be linked with adverse health effect but research
is inconclusive.
emblements
Growing crops, such as grapes and corn,
that are produced annually through labor and industry; also
called fructus industriales. Usually considered to be personal
property.
eminent domain
The right of a government or
municipal quasi-public body to acquire property for public
use through a court action called condemnation, in which
the court decides that the use is a public use and determines
fair compensation to be paid to the owner.
employee
Someone who works as a direct employee
of an employer and has employee status. The employer is
obligated to withhold income taxes and Social Security
taxes from the compensation of the employee.
employment contract
A document evidencing formal
employment between employer and employee or between
principal and agent. In real estate, this is generally a listing
agreement, a buyer agency agreement or a management
agreement.
enabling act
State legislation that confers zoning
powers on municipal governments.
encapsulation
Sealing off environmental hazards
instead of removal.
encroachment
An unauthorized intrusion of an
improvement, or any part of an improvement, on the real
property of another party; can make title to both parcels
unmarketable. Best discovered by survey.
encumbrance
Any charge, claim, lien, or liability held
by someone other than the owner of property that may
diminish the value or use and enjoyment of a property. May
not prevent the transfer of title.
endorsement
In an insurance policy, coverage added to
the general policy; a rider
Equal Credit Opportunity Act (ECOA)
The federal
law that prohibits discrimination in the extension of credit
because of race, color, religion, national origin, sex, age, or
marital status.
equitable title
(1) The interest held by the grantor in a
deed of trust that allows possession and use of the pledged
property. (2) The interest held by a vendee under a contract
for deed or an installment contract; the equitable right to
obtain absolute ownership to property when legal title is
held in another’s name.
equity
The interest or value that an owner has in
property over and above any indebtedness.
equity buildup
That portion of the loan payment
directed toward the principal rather than the interest, plus
any gain in the property value due to appreciation.
equity of redemption
The right of a borrower in
default on a mortgage loan to reclaim the forfeited property
prior to the foreclosure sale through payment in full of all
debt and associated costs.
erosion
The gradual wearing away of land by water,
wind, or other natural forces; the diminishing of property
by the elements may cause loss of ownership.
escheat
The reversion of property to the state, as
provided by state law, in cases where a decedent dies
intestate without heirs capable of inheriting or when the
property is abandoned.
escrow
The closing of a transaction through a third
party called an escrow agent who receives certain funds and
documents to be delivered upon the performance of certain
conditions outlined in the escrow instructions.
escrow account
The trust account established by
a broker under the provisions of the license law for
the purpose of holding funds on behalf of the broker’s
principal or some other person until the consummation or
termination of a transaction.
estate taxes
Federal taxes on a decedent’s real and
personal property
estate (tenancy) at sufferance
The tenancy of a lessee
who lawfully comes into possession of a landlord’s real
estate but who continues to occupy the premises after the
lease has expired against the landlord’s wishes.
estate (tenancy) at will
An estate that gives the lessee
the right to possession until the estate is terminated by
either party; the term of this estate is indefinite and no
prior notice to terminate is needed.
estate (tenancy) for years
A possessory interest in
property for a definite period of time leased for a specified
consideration.
estate (tenancy) from period to period
A possessory
interest in leased property that automatically renews from
period to period—week to week, month to month, or year
to year; notice is necessary to terminate. Also called periodic
tenancy.
estoppel
A method of creating an agency relationship
in which a person states incorrectly that a second person
is the first person’s agent and a third person relies on that
representation.
ethics
The system of moral principles and rules that
becomes the standard for conduct.
eviction
A legal process to oust a person from possession
of real estate.
evidence of title
Proof of ownership of property;
commonly a certificate of title, an abstract of title with
lawyer’s opinion, or a Torrens registration certificate
excise tax
Deed transfer tax paid by the seller and
required to be noted on a deed by state law; the rate is $1
per $500 of sales price.
exchange
A transaction in which all or part of the
consideration is the transfer of like-kind property (such as
investment real estate for investment real estate).
exclusion
Something that is not covered for loss in an
insurance policy
exclusive-agency listing
A listing contract under
which the owner appoints a real estate broker as the
exclusive agent for a designated period of time to sell the
property, on the owner’s stated terms, for a commission.
The owner reserves the right to sell without paying anyone
a commission if the owner sells to a prospect who has not
been introduced or claimed by the broker.
exclusive right-to-sell listing
A listing contract
under which the owner appoints a real estate broker as the
exclusive agent for a designated period of time to sell the
property, on the owner’s stated terms, and agrees to pay the
broker a commission when the property is sold, regardless
of who sells the property.
executed contract
A contract in which all parties have
fulfilled their promises in the contract.
execution
The signing and delivery of an instrument.
Also, a legal order directing an official to enforce a
judgment against the property of a debtor.
executory contract
A contract under which something
remains to be done by one or more of the parties.
express agreement/contract
An oral or written
contract in which the parties state the contract’s terms and
express their intentions in words.
express authority
An agent’s power to act on behalf of
a principal, explicitly granted by an agreement between the
agent and principal.
extender clause
A carry-over or protection clause in
a listing contract that says the listing broker is entitled to
commission for a time period after expiration of the listing
term if the property is transferred to a prospect that the
broker introduced to the property during the listing term;
override clause. This clause is void if the property is listed
with another broker.
external depreciation
The reduction in a property’s
value caused by outside factors (those that are off the
property).
extra-territorial jurisdictions (ETJs)
A municipality’s
right to regulate development in areas adjacent to but not
part of the city’s corporate limits. Population determines
if the power extends for 1 to 3 miles from the corporate
limits.
facilitator
The real estate licensee who assists buyers and
sellers in reaching an agreement in a real estate transaction
without representing interests of either party. The licensee
treats both parties equally as customers.
Fannie Mae (FNMA)
A quasi-government agency
established to purchase any kind of mortgage loans in the
secondary mortgage market from the primary lenders
fascia board
A flat strip of wood or metal that encloses
the ends of the rafters; gutters are usually attached to the
fascia board.
Federal Emergency Management Agency (FEMA)
A federal agency responsible for disaster preparedness,
response and recovery. Now under Department of
Homeland Security.
Federal Fair Housing Act
The federal law that prohibits
discrimination in housing based on race, color, religion, sex,
handicap, familial status, or national origin.
Federal Reserve System
The country’s central banking
system, which controls the nation’s monetary policy by
regulating the supply of money and interest rates.
fee-for-service agreement
Arrangement where
consumer asks licensee to perform specific real estate
services for a set fee; unbundling of services; limited service
firms.
fee simple absolute
The maximum possible estate
in real property; most complete and absolute ownership;
indefinite in duration, freely transferable and inheritable.
fee simple determinable
An estate in real estate that
continues “so long as” a prescribed land use continues.
Estate ends automatically upon the termination of the
prescribed use; no lawsuit is necessary for reversion.
fee simple subject to a condition subsequent
An
estate in real estate that prohibits a specific condition on the
property. Grantor has the right to re-enter the property and
reclaim ownership through legal proceedings.
FHA loan
A loan insured by the Federal Housing
Administration and made by an approved private lender in
accordance with the FHA’s regulations.
fiduciary
One in whom trust and confidence are placed;
a reference to a principal-agent relationship
first substantial contact
A flexible moment in time
when conversation between a licensee and a consumer
begins to address confidential needs, desires and abilities;
latest moment to legally disclose agency choices to a
consumer.
fixture
An item of personal property that has been
converted to real property by being permanently affixed to
the realty
flood hazard area
Property identified by flood
certification to be in a flood-prone area with a likelihood
that a flood may occur once every 100 years and therefore
usually requiring flood insurance if federally related
financing is involved.
floor joist
A horizontal board laid on edge, resting on
the beams that provide the main support for the floor. The
subflooring is nailed directly to the joists.
footing
A concrete support under a foundation,
chimney, or column that usually rests on solid ground and
is wider than the structure being supported. Footings are
designed to distribute the weight of the structure over the
ground.
foreclosure
A legal procedure whereby property used
as security for a debt is sold to satisfy the debt in the event
of default in payment of the mortgage note or default of
other terms in the mortgage document. The foreclosure
procedure brings the rights of all parties to a conclusion
and passes the title in the mortgaged property to either the
holder of the mortgage or a third party who may purchase
the realty at the foreclosure sale, free of all liens affecting
the property subsequent to the mortgage.
foreshore
Land at the coast between average high tide
and average low tide this is owned by the state of North
Carolina.
foundation wall
The masonry or concrete wall below
ground level that serves as the main support for the frame
structure. Foundation walls form the side walls of the
basement or crawlspace.
frame
The wooden skeleton of the house consisting of
the floors, walls, ceilings, and roof.
fraud
An intentional misrepresentation of material fact
so as to harm or take advantage of another person.
Freddie Mac
A corporation established to purchase
primarily conventional mortgage loans in the secondary
mortgage market.
freehold estate
An estate in land in which ownership
is for an indeterminate length of time, in contrast to a
leasehold estate.
friable
A dry, crumbly condition often used to describe
old asbestos.
frieze board
A wooden board fastened at the top of the
exterior wall under the eave soffit to prevent penetration of
weather elements; frequently the base for additional exterior
decorative trim.
front footage
The measurement of a parcel of land
by the number of feet of street or road frontage, or water
frontage.
frontage
The length of property along the street or
waterfront.
fructus naturales
Plants that do not require annual
cultivation and are considered real property.
functional obsolescence
A loss of value to an
improvement to real estate arising from functional
problems, often caused by age or poor design.
future interest
A person’s present right to an interest
in real property that will not result in possession or
enjoyment until sometime in the future, such as a reversion
or right of reentry
gable
The triangular portion of an end wall rising
from the level top wall under the inverted V of a sloping
roof that aids water drainage. A gable can be made of
weatherboard, tile, or masonry and can extend above the
rafters.
gambrel
A curb roof, having a steep slope and a flatter
one above, as seen in Dutch colonial architecture.
gap
A defect in the chain of title of a particular parcel
of real estate; a missing document or conveyance that raises
doubt as to the present ownership of the land.
general agent
One who is authorized to represent the
principal in a broad range of matters related to a specific
business or activity; a property manager might have this
power.
general lien
The right of a creditor to have all of a
debtor’s current and future property for the next 10 years—
both real and personal—sold to satisfy a debt; i.e. judgment
lien.
general warranty deed
A deed in which the grantor
fully warrants good clear title to the premises through
four covenants in the deed. Used in most real estate
deed transfers, a general warranty deed offers the greatest
protection to the grantee of any deed.
Ginnie Mae
A government agency under HUD that
plays an important role in the secondary mortgage market.
It sells mortgage-backed securities that are backed by pools
of FHA and VA loans.
girder
A heavy wooden or steel beam supporting the
floor joists and providing the main horizontal support for
the floor.
