Key Terms Flashcards
Abandonment
Voluntarily relinquishing or surrendering possession of real property, without the transfer of title to someone else.
Abatement
A decrease or reduction in worth or amount (usually applies to taxes or rent).
Able
Refers to financial ability; as in ready, willing, and able buyer.
Abrogation
The rescission, revocation, or annulling of a contract by mutual consent of the parties to the contract, or for cause by either party to the contract.
Absolute Ownership
The greatest interest that one can have in real property. An estate that is unqualified, of indefinite duration, freely transferable and inheritable.
Also known as Fee Simple Estate.
Abstract of Judgment
The summary of a court judgment that creates a lien against a property when filed with the county recorder.
Abstract of Title
A summary or digest of all transfers, conveyances, legal proceedings and any other facts relied on as evidence of title, showing continuity of ownership, together with any other elements of record which may impair title.
Abutting Property
Property that touches or is contiguous to another property; as opposed to being near to another property.
Acceleration Clause
A condition in a real estate financing instrument giving the lender the power to declare all sums owing lender immediately due and payable upon the happening of an event, such as sale of the property, or a delinquency in the repayment of the note.
Acceptance
The act of agreeing or consenting to the terms of an offer thereby establishing the “meeting of the minds” that is an essential element of a contract.
Access
Any means by which a person can enter property
Accession
An addition to property through the efforts of man or by natural forces.
Accretion
Accession by natural forces, e.g., alluvium.
Accrual Method
An accounting method that reports revenue when earned and expenses when incurred.
Acknowledgment
A formal declaration made before an authorized person, e.g., a notary public, by a person who has executed an instrument stating that the execution was his or her free act. In this state an acknowledgment is the statement by an officer such as a notary that the signatory to the instrument is the person represented to be.
Acquisition
The act or process by which a person procures property.
Acre
A measure of land equaling 160 square rods, or 4,840 square yards, or 43,560 square feet, or a tract about 208.71 feet square.
Acre Foot
The volume of material needed to cover an acre of land one foot deep.
Action
A lawsuit brought to court.
Actual Age
The number of years a structure has been standing.
Actual Fraud
An act intended to deceive another, e.g., making a false statement, making a promise without intending to perform it, suppressing the truth.
Actual Notice
Notice in fact or in reality to or by a party directly and personally based on things actually seen, heard, read, or observed.
Adam E. Lee
The eight ways to terminate an easement:
Abandonment, Destruction, Adverse possession, Merger, Express agreement, Lawsuit, Estoppel, and Excessive use.
8 Ways to Terminate an Easement:
- Abandonment
- Adverse Possession
- Destruction
- Lawsuit
- Merger
- Estoppel
- Excessive Use
- Express Agreement
Addendum
An addition or change to a contract.
Adequate Description
The legal description is not necessary, but the description used must be adequate to positively identify the subject property.
Adjustable-Rate Loan
A type of loan whose interest rate is tied to a movable economic index. The amount and timing of interest rate adjustments are agreed upon in the note.
Adjustable Cost Basis
The cost of any improvements the seller makes to the property. Deducting the cost from the original sales price provides the profit or loss of a home when it is sold.
Adjustable-Rate Mortgage
A mortgage loan which bears interest at a rate subject to change during the term of the loan, predetermined or otherwise.
Adjusted Sales Price
(a) The estimated sales price of a comparable property after adjustments have been made to compensate for differences between the subject property and the comparable.
(b) The price the comparable property would sell for if it possessed all the characteristics of the subject property.
Administrator / Administratrix
A male/female person appointed by the probate court to administer the estate of a deceased person who died intestate.
Ad Valorem
A Latin phrase meaning “according to value”.
Usually used in connection with real estate taxation
Advance Fees
A fee paid in advance of any services rendered. Sometimes unlawfully charged in connection with that illegal practice of obtaining a fee in advance for the advertising of property or businesses for sale, with no intent to obtain a buyer, by persons representing themselves as real estate licensees, or representatives of licensed real estate firms.
Adverse Possession
A method of acquiring title to real property through possession of the property for a statutory
Aesthetic Value
Relating to beauty, rather than to functional considerations.
Affiant
One who makes an affidavit or gives evidence
Affidavit
A statement or declaration reduced to writing sworn to or affirmed before some officer who has authority to administer an oath or affirmation.
Affirm
To confirm, to aver, to ratify, to verify. To make a declaration.
Affirmation
A substitution for an oath granted to people based on religious reasons.
Affirmative Easement
One that requires the owner of the servient estate to do something to benefit the dominant estate.
Affordable Housing
Housing for individuals or families considered low-income by HUD (U.S. Department of Housing and Urban Development).
After-Acquired Title
Title accepted by a grantor after his or her previous conveyance.
After-Tax Cash Flow (ATCF)
The cash flow remaining from the net operating income after paying income taxes, debt service, and loan repayments .
After-The-Fact Referral Fee (ATF)
Fee requested after a real estate agent has established a relationship with a buyer or seller.
Age
The chronological lifespan of a person or object. A consideration when determining legal capacity to enter into contracts, also a feature of anti-discrimination housing laws.
Age-Life-Depreciation
An appraisal method of computing accrued depreciation. It assumes a building depreciates at a fixed rate over the course of its life. The depreciation is calculated by dividing the total economic life by its current effective age. Also called the straight-line method.
Age-Life Method
A method of computing accrued depreciation. The cost of a building is depreciated at a fixed annual percentage rate. This is the method most frequently used by residential appraisers; also known as the straight-line method.
Agency
The relationship between principal and the principal’s agent which arises out of a contract, either expressed or implied, written or oral, wherein the agent is employed by the principal to do certain acts dealing with a third party.
Agency by Estoppel
An agency relationship between a broker and a principal created when a principal causes a third party to believe the agency exists by words or actions. If the third party then deals with the supposed agent, the principal is estopped, or prevented, from denying the agency relationship, because of his or her earlier words or deeds.
Agency by Ratification
An agency relationship created then the agent acts as if an agency relationship exists, before an official agreement or contract is expressed. The principal agrees to the relationship after the act is performed, thereby ratifying the act and the agency relationship.
Agent
One who acts for and with authority from another called the principal; a person licensed by the state to conduct real estate transactions.
Agrarian
Relating to land.
Agreement
An exchange of promises, a mutual understanding or arrangement; a contract.
Air Rights
The rights in real property to the reasonable use of the air space above the surface of the land.
Air Space
(1) Above the earth’s surface for an indefinite distance as allowed by government controls and is also included in the definition of Real Estate.
(2) The interior space in an apartment, office, or condominium.
Alienation
The transferring of property to another; the transfer of property and possession of lands, or other things, from one person to another.
Alienation Clause
A clause in a contract giving the lender certain rights in the event of a sale or other transfer of mortgaged property; a provision that requires the borrower to pay the balance of the loan in a lump sum after the property is sold or transferred.
All-Inclusive Trust Deed (AITD)
A deed of trust securing payment of an obligation owing under a prior deed of trust. See Wrap-Around Mortgage.
AITD
A deed of trust securing payment of an obligation owing under a prior deed of trust. See Wrap-Around Mortgage.
Allocation Method
The allocation of the appraised total value between land and improvements. Allocation made by using a ratio comparing building value to the total price (or value).
Alluvium
The gradual increase of the earth on a shore of an ocean or bank of a stream resulting from the action of the water.
Alta Owner’s Policy
An owner’s extended coverage policy that provides buyers and owners the same protection the ALTA policy gives to lenders.
ALTA (American Land Title Association) Title Policy
A type of title insurance policy issued by title insurance companies which expands the risks normally insured against under the standard type policy to include unrecorded mechanic’s liens; unrecorded physical easements; facts a physical survey would show; water and mineral rights; and rights of parties in possession, such as tenants and buyers under unrecorded instruments.
Amendment
A change to a contract that is not a part of the original contract. An Amendment occurs after the fact.
Amenities
Satisfaction of enjoyable living to be derived from a home; conditions of agreeable living or a beneficial influence from the location of improvements, not measured in monetary considerations but rather as tangible and intangible benefits attributable to the property, often causing greater pride in ownership; parks, swimming pools, health-club facilities, party rooms, bike paths, community centers and other enticements offered by builders of planned developments.
American Land Title Association (ALTA)
An association of land title companies that promotes the safe and efficient transfer of ownership and interest in real property and provides information to consumers, while maintaining
American Society of Appraisers (ASA)
The oldest professional organization of appraisers. It promotes professional excellence through education, accreditation, publication, and other services. Members include personal property appraisers, business appraisers, and machine and jewelry appraisers in addition to real property appraisers.
ASA
American Society of Appraisers
Americans with Disabilities Act
A law passed in 1990 that outlaws discrimination against a person with a disability in housing, public accommodations, employment, government services, transportation and telecommunications.
Amortization
The liquidation of a financial obligation on an installment basis; also, recovery over a period of cost or value.
Amortized Loan
A loan to be repaid, interest and principal, by a series of regular payments that are equal or nearly equal, without any special balloon payment prior to maturity. Also called a Level Payments Loan.
Anchor Bolt
A large steel bolt anchored in concrete and attached to a building to prevent the structure from moving.
Annexation
Addition to property or to territory.
Annual Debt Service
The total amount of all mortgage payments required in one year on a loan.
Annual Net Income
The amount of income left from an income-producing property after all expenses have been deducted; also called net operating income.
Annual Percentage Rate (APR)
The relative cost of credit as determined in accordance with Regulation Z of the Board of Governors of the Federal Reserve System for implementing the Federal Truth in Lending Act.
Annuity
A sum of money received at fixed intervals, such as a series of assured equal or nearly equal payments to be made over a period of time, or it may be a lump sum payment to be made in the future. The installment payment due to the landlord under a lease is an annuity. So are the installment payments due to a lender.
Appliance
Non-industrial equipment such as dishwasher, electric range, air-conditioning, etc.
Appraisal
An estimate of the value of property resulting from an analysis of facts about the property; an opinion of value.
Appraisal Approaches to Value
Any of the following three methods used to estimate the value of real estate: sales comparison approach, cost approach, and income capitalization approach.
Appraised Value
An opinion of the current market value of a property.
Appraiser
One qualified by education, training and experience who is hired to estimate the value of real and personal property based on experience, judgment, facts, and use of formal appraisal processes.
Appreciation
An increase in the value of a home or other property.
Appurtenance
That which belongs to something, but not immemorially; all those rights, privileges, and improvements which belong to and pass with the transfer of the property, but which are not necessarily a part of the actual property. Appurtenances to real property pass with the real property to which they are appurtenant, unless a contrary intention is manifested. Typical appurtenances are rights-of-way, easements, water rights, and any property improvements.
Appurtenant
Belonging to; adjunct; appended or annexed to. For example, the garage is appurtenant to the house, and the common interest in the common elements of a condominium is appurtenant to each apartment. Appurtenant items pass with the land when the property is transferred.
Annual Percentage Rate (APR)
The relative cost of credit as determined in accordance with Regulation Z of the Board of Governors of the Federal Reserve System for implementing the Federal Truth in Lending Act.
APR
Annual Percentage Rate
Aquifer
A subsurface layer or layers of rock or other geological strata of sufficient porosity and permeability to allow either a significant flow of groundwater or the abstraction of significant quantities of groundwater.
Arbitration
A method of resolving a dispute in which a third party renders a decision.
Area
The space or size of a surface defined by a set of boundaries
Arm’s-Length Transaction
A transaction, such as a sale of property, in which all parties involved are acting in their own self-interest and are under no undue influence or pressure from other parties .
Arrears
(a) A payment made at the end of a time period.
(b) A delinquent payment of a debt.
Artesian Well
A well in which the water rises under hydrostatic pressure above the level of the aquifer in which it has been confined by overlying impervious strata.
As-Is Condition
The purchase or sale of a property in its existing condition
Asking Price
A seller’s initial price for a property.
Assemblage
The process of putting several smaller less valuable lots together under one ownership to increase total value.
Assess
The act of determining a property’s value for tax purposes.
Assessed Valuation
A valuation placed upon a piece of property by a public authority as a basis for levying taxes on the property.
Assessor
The official who has the responsibility of determining assessed values
APN
Assessor’s Parcel Number
Assessor’s Parcel Number (APN)
An identifying number assigned to each parcel by the County Tax Assessor’s Office.
Assets
Items of value which include cash, real estate, securities and investments.
Assigns, Assignees
Those to whom property or interests therein shall have been transferred.
Assignment
A transfer to another of any property in possession or in action, or of any estate or right therein. A transfer by a person of that person’s rights under a contract.
Assignor
One who assigns or transfers property
Assumable Mortgage
A mortgage that can be transferred to another borrower.
Assume
A term used in real estate transactions where the buyer may take over, or assume, responsibility for a pre-existing mortgage.
Attachment
The process by which real or personal property of a party to a lawsuit is seized and retained in the custody of the court for the purpose of acquiring jurisdiction over the property, to compel an appearance before the court, or to furnish security for a debt or costs arising out of the litigation.
Attest
To affirm to be true or genuine; an official act establishing authenticity.
Attorney in Fact
One who is authorized by another to perform certain acts for another under a power of attorney; power of attorney may be limited to a specific act or acts or be general.
Attractive Nuisance
Any inherently dangerous object or condition that is likely to attract and harm children. A property owner is liable for injuries to a child due to such a hazard. For example, an unfenced swimming pool is an attractive nuisance.
Average Price
The price of a home determined by totaling the sales prices of all houses sold in an area and dividing that number by the number of homes.
Avulsion
A sudden and perceptible loss of land by the action of water as by a sudden change in the course of a river.
Back-End Ratio
The ratio of all fixed debt, including housing expenses, to gross income.
Back Fill
The replacement of excavated earth into a hole or against a structure.
Backup Offer
A secondary bid for a property that the seller will accept if the first offer fails
Balance Sheet
A statement of the financial condition of a business at a certain time showing assets, liabilities, and capital; a statement that shows the assets, liabilities and net worth of an individual.
Balloon Loan
A mortgage in which monthly installments are not large enough to repay the loan by the end of the term. As a result, the final payment due is the lump sum of the remaining principal.
Balloon Payment
An installment payment on a promissory note - usually the final one for discharging the debt - which is significantly larger than the other installment payments provided under the terms of the promissory note.
Band of Investment Apprach
Method of estimating interest and capitalization rates, based on a weighted average of the mortgage interest rate (or other cost of borrowed funds) and the rate of return on equity required.
Banker’s Rule
A calendar standard by which proration is calculated. When closing a real estate transaction, most escrow agents use a 360-day year (30 days in each month) to calculate proration.
Bankruptcy
A proceeding in which an insolvent debtor can obtain relief from payment of certain obligations. Bankruptcies remain on a credit record for seven years and can severely limit a person’s ability to borrow.
Bare Title
Title conveyed using a deed of trust, in which the trustee holds title to property without the usual rights of ownership.
Bargain Sale
The sale of a piece of property for less than market value.
Base and Meridian
Imaginary lines used by surveyors to find and describe the location of private or public lands. In government surveys, a base line runs due east and west, meridians run due north and south, and are used to establish township boundaries.
Baseboard
Any board or molding found at the bottom of an interior wall.
Baseline
In the Public Land Survey System, the imaginary east-west lines that intersect meridians to form a starting point for measurement of land.
Base Rent
The minimum rent due in a percentage lease agreement. See minimum rent.
Basis
(1) Cost Basis. The dollar amount assigned to property at the time of acquisition under provisions of the Internal Revenue Code for the purpose of determining gain, loss and depreciation in calculating the income tax to be paid upon the sale or exchange of the property.
(2) Adjusted Cost Basis. The cost basis after the application of certain additions for improvements, etc., and deductions for depreciation, etc.
Beam
A long thick piece of wood, metal or concrete, used to support weight in a building or other structure.
Bearing Wall
A wall or partition which supports a part of a building, usually a roof or floor above.
BTCF
Before-Tax Cash Flow
Before-Tax Cash Flow (BTCF)
The portion of net operating income after debt service is paid, but before income tax is deducted. Also called equity dividend or pre-tax cash flow.
Before-Tax Income
Total income before taxes is deducted.
Belly-Up
A slang term used to describe a failed business or real estate project, as in the sentence, “The clothing store went belly-up.”
Bench Mark
A monument used to establish the elevation of the point, usually relative to Mean Sea Level, but often to some local datum.
Beneficiary
(1) One entitled to the benefit of a trust
(2) One who receives profit from an estate, the title of which is vested in a trustee
(3) The lender on the security of a note and deed of trust
(4) The lender who makes a loan, also called a mortgagee. The person borrowing money is the mortgagor.
Beneficiary Statement
Statement of a beneficiary under a deed of trust as to principal balance due on a promissory note and other information concerning the loan.
Bequeath
To give or hand down by will; to leave by will.
Bequest
Personal property given by the terms of a will.
Bid
An offer to purchase property for a certain amount, or the act of submitting an offer to purchase something.
Bidding War
Offers from multiple buyers for a piece of property. Agents also sometimes compete to list a house for sale.
Bilateral Contract
A contract in which the parties involved give mutual promises. Also called “reciprocal” contracts
Bill of Sale
A written instrument given to pass title of personal property from vendor to the vendee.
Binder
An agreement to consider a down payment for the purchase of real estate as evidence of good faith on the part of the purchaser. Also, a notation of coverage on an insurance policy, issued by an agent, and given to the insured prior to issuing of the policy.
BiWeekly Mortgage
A mortgage that requires payments every two weeks and helps repay the loan over a shorter term.
Blacktop
Asphalt paving used in streets and driveways.
Blackwater
Water from toilets, kitchen sink, or other dirty sources (e.g. washing machines used for diapers), which may be contaminated with microorganisms or harmful bacteria.
Blanket Mortgage
A single mortgage which covers more than one piece of real property.
Blind Advertising
Advertising that fails to disclose that the party is a licensee acting as an agent.
Blind Pool
A type of syndication where money is raised for unspecified properties meeting specific investment criteria.
Blockbusting
The practice on the part of unscrupulous speculators or real estate agents of inducing panic selling of homes at prices below market value, especially by exploiting the prejudices of property owners in neighborhoods in which the racial make-up is changing or appears to be on the verge of changing.
Blue Sky Laws
Regulations on the sale of securities to prevent consumers from investing in fraudulent or high-risk companies without being informed of the risks.
Board Foot
Measurement of lumber that is the equivalent of 144 cubic inches.
Board of Governors (BOG)
Created by the Federal Reserve Board, the BOG regulates the banking system and supervises certain types of financial institutions, overseeing a network of 12 Federal Reserve Banks and 25 branches that make up the Federal Reserve System.
B.O.G.
Board of Governors
Boilerplate
Form language used in deeds, mortgages, and other documents. Details can be added by individual parties.
Bona Fide
In good faith; without fraud or deceit; authentic; a legal term that refers to actions or persons that are honest and in good faith.
Bond
Written evidence of an obligation given by a corporation or government entity; a surety instrument; an agreement that insures one party against loss by acts or defaults of another party.
Book Depreciation
An accounting concept which refers to an allowance taken to provide for recovery of invested capital.
Book Value
The current value for accounting purposes of an asset expressed as original cost plus capital additions minus accumulated depreciation.
Boot
Money or other property used to equalize the trade in a 1031 tax deferred exchange transaction, if the value of one property is greater than the other.
Borrower
A debtor or one who borrows money in the form of a loan, and who is obligated to repay the debt in full, with interest.
Boundary
The dividing line between two adjacent properties.
Bounds
A directional reference, as in metes-and-bounds. Metes measure the length, and bounds limit the lengths to a certain area designated by monuments or landmarks.
Breach
The breaking of a law, or failure of duty, either by omission or commission.
Breach of Contract
The failure to perform provisions of a contract without a legal excuse
Breakdown Method
A method of calculating accrued depreciation by analyzing and measuring each cause of depreciation separately. The different types of depreciation are then added together to find the total depreciation. Also known as observed condition method.
Break-Even Point
The point in which the owner’s rental income matches expenses and debt.
Bricks and Mortar Office
An office with a physical presence. Also called a traditional office.
Bridge Loan
A short-term loan for borrowers who need more time to find permanent financing.
BTU
British Thermal Unit
British Thermal Unit (BTU)
The quantity of heat required to raise the temperature of one pound of water one degree Fahrenheit.
Broker
A person employed for a fee by another to carry on any of the activities listed in the license law definition of a broker
Brokerage
The act of bringing together two or more parties in exchange for a fee or commission.
Budget
A balance sheet that identifies estimated or future receipts and expenditures.
Building and Loan Association
An organization that raises money to help its members purchase real estate or construct a building
Building Capitalization Rate
The sum of the discount and capital recapture rates for a building.
Building Code
A systematic regulation of construction of buildings within a municipality established by ordinance or law.
Building Line
A line set by law a certain distance from a street line in front of which an owner cannot build on owner’s lot. A setback line.
Building Permit
A permit issued by a local government agency that allows the construction of home or renovation of a house.
Building Residual Technique
An appraisal method used to determine the total property value. The income from the land is subtracted from the net operating income. The remainder is divided by the building capitalization rate and the result is the building value. The building value is then added to the land value to arrive at the total property value.
Built-Ins
Appliances or other items that are framed into a home or permanently attached.
Built-Up Rate
A method of calculating a capitalization rate. It takes into consideration the yield amount each investor requires. Also called weighted rate.
Bulk Goods
The personal property that is included in the sale of the business; such as, articles of clothing in sale of a clothing store.
Bulk Transfers
A transfer in bulk of a major part of the materials, inventory, or supplies of a business. The uniform commercial code regulates bulk sales transfers. Refer to Article 6 of the Uniform Commercial Code (UCC).
Bullet Loan
A short-term, interest-only loan without periodic payments, with the entire loan due upon maturity. Generally, prepayment is not allowed, or not without large penalties.
Bundle of Rights
All of the legal rights incident to ownership of property including rights of use, possession, encumbering, and disposition
Business Cycle
The constant fluctuation of levels of income, employment, and the amount of goods and services produced in one year. Stages of the cycle include prosperity, recession, depression, and recovery.
Business Opportunity
The assets for an existing business enterprise including its goodwill. As used in the Real Estate Law, the term includes the sale or lease of the business and goodwill of an existing business enterprise or opportunity.
Business Risk
The uncertainty of future income of a business. In real estate, business risk includes variability in rents, vacancies, and operating expenses.
Buttress
A support for a wall. If the buttress projects from the wall and supports it by lateral pressure, it is called a flying buttress
Buydown
A loan with an initially discounted interest rate, gradually increasing to an agreed-upon fixed rate, usually within one to three years. An initial lump sum is paid to the lender for the buydown of the rate. This allows a buyer to qualify for more property with the same income.
Buyer’s Agent
A broker or agent of a broker who represents only the buyer and has a fiduciary duty to find the best house for the least money at the terms most favorable to his or her principal (the buyer).
Buyer’s Market
The condition which exists when a buyer is in a more commanding position as to price and terms because real property offered for sale is in plentiful supply in relation to demand.
Buyer’s Remorse
An emotion felt by first-time homebuyers after signing a sales contract or closing the purchase of a house.
Bylaws
Rules for the conduct of the internal affairs of corporations and other organizations.
C.A.R.
California Association of Realtors
California Association of Realtors (CAR)
The California Association of Realtors® is a trade association representing more than 185,000 REALTORS® statewide. As members of organized real estate, REALTORS® subscribe to a strict code of ethics and have access to numerous services and programs to enhance their professionalism. Preventative legal programs provide members with the latest in legal information to give them the competitive edge. CAR’s extensive legislative advocacy program means members are well-represented on local, state, and federal issues. Educational programs and year-round seminars help members gain new skills and professional designations like the prestigious Graduate REALTOR® Institute.
California Civil Code 54-55.1
The handicapped and physically disabled persons may not be discriminated against for housing accommodations. Property owners must be in compliance with this law.
California Bureau of Real Estate (CalBRE)
A division of the Department of Consumer Affairs, it is responsible for the licensing and regulation of persons engaged in the real estate business. The person heading the bureau is usually called the Real Estate Commissioner.
California Department of Veteran Affairs (CDVA)
Its mission is to provide California veterans and their families with aid and assistance in presenting their claims for veterans’ benefits under the laws of the United States; to provide them with beneficial opportunities through direct low-cost loans to acquire farms and homes; and to provide the state’s aged or disabled veterans with rehabilitative, residential, and medical care and
CDVA
California Department of Veteran Affairs
California Fair Employment and Housing Act (Rumford Act)
California Government Code 12900 et seq: Prohibits discrimination based on age, sex, race, color, religion, ancestry, or national origin in the areas of employment and housing. With respect to housing, the law prohibits discrimination in the sale, rental, lease, or financing of virtually all types of housing. Individuals may file a complaint with the Department of Fair Employment and Housing.
California Land Title Association (CLTA)
A statewide association of title insurers and underwritten title companies. The association adopts standard title policy forms.
CLTA
California Land Title Association
Call
In a metes and bounds description, the angle and distance of a given line or arc. Each call is preceded by the word then or thence. For example, N 220 E 100’ (1st call), thence N 800 E 100’ (2nd call).
Cal-Vet Loan
Home or farm loan procured through the California Veterans Farm and Home Purchase Program.
Cal-Vet Program
A program administered by the State Department of Veterans Affairs for the direct financing of farm and home purchases by eligible California veterans of the armed forces.
Cancellation Clause
A clause that details the conditions under which each party may terminate the agreement.
Cap
A limit on the amount the interest rate or monthly payment can increase in an adjustable-rate mortgage.
Capacity
One of the legal essentials of a valid contract. Legitimate legal status to enter into a contract (mentally competent and of legal age).
Capital Assets
Assets of a permanent nature used in the production of an income, such as land, buildings, machinery and equipment, etc. Under income tax law, it is usually distinguishable from inventory, which comprises assets held for sale to customers in ordinary course of the taxpayer’s trade or business.
Capital Expenditure
The cost of making improvements on a property.
Capital Gain
At resale of a capital item, the amount by which the net sale proceeds exceeds the adjusted cost basis (book value). Used for income tax computations; gains are called short or long term based upon length of holding period after acquisition; usually taxed at lower rates than ordinary income.
Capital Gains Tax
A tax placed on the profits from the sale of real estate or investments.
Capital Improvement
Any improvement that extends the life or increases the value of a piece of property.
Capital Loss
The decrease in value between the times an asset is bought and when it is sold.
Capitalization
In appraising, determining value of property by considering net income and percentage of reasonable return on the investment. The value of an income property is determined by dividing annual net income by the Capitalization Rate.
Capitalization Rate
The rate of interest which is considered a reasonable return on the investment, and used in the process of determining value based upon net income. It may also be described as the yield rate that is necessary to attract the money of the average investor to a particular kind of investment. In the case of land improvements which depreciate, to this yield rate is added a factor to take into consideration the annual amortization factor necessary to recapture the initial investment in improvements. This amortization factor can be determined in various ways. (1) straight-line depreciation method, (2) Inwood Tables and (3) Hoskold Tables. (To explore this subject in greater depth, the student should refer to current real estate appraisal texts.)
Cap Rate (Life of Loan Rap)
With regard to an adjustable rate mortgage, a ceiling the note rate cannot exceed over the life of the loan.
Carryback Financing
Financing by a seller, who takes back a. note for part of the purchase price.
Cash Equivalency
The price for which real estate would sell if paid for in cash, without financing.
Cash Equivalency Technique
Method of adjusting a sales price downward to reflect the increase in price due to assumption or procurement by buyers of a loan at an interest rate lower than the prevailing market rate.
Cash Flow
The net income generated by a property before depreciation and other noncash expenses.
Cash Method
An accounting method that reports income when received and expenses when paid
Cashier’s Check
A check the bank draws on itself rather than on a depositor’s account.
Cash-Out Refinance
The refinancing of a mortgage in which the money received from the new loan is greater than the amount due on the old loan. The borrower can use the extra funds in any manner.
Casing
The decorative wood finish trim surrounding doors and windows.
Cathedral Ceiling
A high open ceiling formed by finishing exposed roof rafters.
Caveat
A formal notice, that asks a court to suspend action until the party which filed the challenge can be heard.
Caveat Emptor
A legal principle derived from Latin that means “let the buyer beware.”
The buyer must examine the goods or property and buy at his or her own risk, absent misrepresentation.
CC&Rs
Covenants, Conditions, and Restrictions
CC&Rs (Covenants, Conditions, and Restrictions)
The basic rules establishing the rights and obligations of owners (and their successors in interest) of real property within a subdivision or other tract of land in relation to other owners within the same subdivision or tract and in relation to an association of owners organized for the purpose of operating and maintaining property commonly owned by the individual owners.
Ceiling Height
The standard height of a ceiling is eight feet.
Certificate of Eligibility
Issued by Department of Veterans Affairs - evidence of individual’s eligibility to obtain VA loan.
Certficate of Reasonable Value (CRV)
The Federal VA appraisal commitment of property value.
CRV
Certficate of Reasonable Value
Certificate of Sale
A document issued at a judicial sale, which entitles the buyer to receive a deed after court confirmation of the purchase of the property.
Certified Check
A check bearing the issuing bank’s guarantee that sufficient money is on deposit to cover the check.
Certified General Appraiser
An individual who has met specific education, experience, and examination requirements. May appraise any property. See appraiser.
CPM
Certified Property Manager
Certified Property Manager (CPM)
The most advanced property management designation offered by the Institute of Real Estate Management (IREM).
Certified Residential Appraiser
An individual who has met specific education, experience, and examination requirements. May appraise any 1-4 unit residential properties.
Cesspool
An excavation in the earth which receives and retains drainage and sewage from a building.
Chain
A unit of measurement used by surveyors. A chain consists of 100 links equal to 66 feet.
Chain of Title
A history of conveyances and encumbrances affecting the title from the time the original patent was granted, or as far back as records are available, used to determine how title came to be vested in current owner.
Chattel
Goods or every species of property movable or immovable which are not real property; personal property.
Chattel Mortgage
A claim on personal property (instead of real property) used to secure or guarantee a promissory note. See definition of Security Agreement and Security Interest.
Chattel Real
An estate related to real estate, such as a lease on real property.
Chose in Action
A personal right to something not presently in the owner’s possession, but recoverable by a legal action for possession.
Churning
The excessive sale and purchase of properties for financial gain.
Civil Law
Body of law imposed by the state or government for its citizens.
Civil Rights Acts of 1966, 1977, 1981, 1982
Laws providing protection to individuals who are denied property.
Clear Title
A property that does not have liens, defects or other legal encumbrances.
Client
The person who employs an agent to perform a service for a fee.
Closed Bid
A real estate transaction not open for usual negotiations. The bids from potential buyers are sealed until a specified time when they are opened and the seller picks the best offer. The seller benefits from this method, because bidders often overbid to ensure their bid is chosen. Closed bidding is not a common practice.
Closed-End Mortgage
A mortgage that cannot be used as security for additional loans.
Closed Listing
A contract between a principal and an agent, giving the agent the exclusive right to market the principal’s property for a fixed period of time. Also called an exclusive listing.
Closed Mortgage
A mortgage that cannot be prepaid until a certain time or until maturity.
Closing
(1) Process by which all the parties to a real estate transaction conclude the details of a sale or mortgage. The process includes the signing and transfer of documents and distribution of funds.
(2) Condition in description of real property by courses and distances at the boundary lines where the lines meet to include all the tract of land.
Closing Costs
The miscellaneous expenses buyers and sellers normally incur in the transfer of ownership of real property over and above the cost of the property.
Closing Statement
An accounting of funds made to the buyer and seller separately. Required by law to be made at the completion of every real estate transaction.
Cloud
Liens or encumbrances against a property which make the Title defective. A claim against the Title that must be paid in full or satisfied in order for the Title or ownership to be transferable.
Cloud on Title
A claim, encumbrance or condition which impairs the title to real property until disproved or eliminated as for example through a quitclaim deed or a quiet title legal action.
CLTA (California Land Title Association)
A statewide association of title insurers and underwritten title companies. The association adopts standard title policy forms.
CLTA
California Land Title Association
CMA (Competitive Market Analysis)
Also Comparable Market Analysis; A realistic estimate of a home’s current market value based on recent comparable listings and sales. This is not an appraisal, it is an opinion of value.
CMA
Competitive Market Analysis
Code
A collection of laws
Code of Ethics
A set of rules and principles expressing a standard of accepted conduct for a professional group and governing the relationship of members to each other and to the organization.
Code of Ethics
A set of rules and principles expressing a standard of accepted conduct for a professional group and governing the relationship of members to each other and to the organization.
Codicil
A change to a will that adds or subtracts provisions or clarifies portions of the document.
Codify
Compile, arrange, systemize, and write the laws of a given region into a code.
Cold Calling
The practice of making unsolicited calls to people you do not know in order to get new business.
Collateral
Marketable real or personal property which a borrower pledges as security for a loan. In mortgage transactions, specific land is the collateral. See definition of Security Interest.
Collection
The series of steps a lender takes to bring a delinquent mortgage up to date.
Collusion
An agreement between two or more persons to defraud another of rights by the forms of law, or to obtain an object forbidden by law.
Color of Title
That which appears to be good title but which is not title in fact.
Co-Maker
A person who signs a promissory note with the borrower and assumes responsibility for the loan.
Commercial Acre
A term applied to the remainder of an acre of newly subdivided land after the area devoted to streets, sidewalks and curbs, etc., has been deducted from the acre.
Commercial Bank
A financial institution that provides a broad range of services, from checking and savings accounts to business loans and credit cards.
Commercial Loan
A personal loan from a commercial bank, usually unsecured and short term, for other than mortgage purposes.
Commingling
The mixing of money held in trust with other funds.
Commission
An agent’s compensation for performing the duties of the agency; in real estate practice, a percentage of the selling price of property, percentage of rentals, etc. A fee for services.
Commisioner
A member of a state real estate commission.
Commitment
A pledge or a promise or firm agreement to do something in the future, such as a loan company giving a written commitment with specific terms of mortgage loan it will make.
Common Area
An entire common interest subdivision except the separate interests therein.
Common-Area Assessments
Fees paid by the owners of a condominium project or planned-unit development to maintain, repair, improve or operate common areas.
Common Interest Development
A project composed of individually owned units that share usage and financial responsibility for common areas.
Common Interest Subdivision
Subdivided lands which include a separate interest in real property combined with an interest in common with other owners. The interest in common may be through membership in an association. Examples are condominiums and stock cooperatives.
Common Law
A body of laws based on custom, usage and rulings by courts in various jurisdictions.
Common Wall
A wall shared by two or more buildings or by two or more units in the same building.
Community Property
Property acquired by husband and/or wife during a marriage when not acquired as the separate property of either spouse. Each spouse has equal rights of management, alienation and testamentary disposition of community property.
Community Property with the Right of Survivorship
A type of vesting used in some states by spouses to hold title in property. This type of title combines the benefits of community property and joint tenancy. Upon the death of a spouse, community property with right of survivorship gives the surviving spouse title to the property and excludes the property from probate proceedings.
Community Reinvestment Act
A federal law that encourages financial institutions to loan money in the neighborhoods where minority depositors live.
Compaction
Whenever extra soil is added to a lot to fill in low places or to raise the level of the lot, the added soil is often too loose and soft to sustain the weight of the buildings. Therefore, it is necessary to compact the added soil so that it will carry the weight of buildings without the danger of their tilting, settling or cracking.
Comparable Sales
Sales which have similar characteristics as the subject property and are used for analysis in the appraisal process. Commonly called “comparables,” they are recent selling prices of properties similarly situated in a similar market.
Comparative Market Analysis (CMA)
A comparison analysis of recent sales used, by real estate brokers when working with a seller, to determine an appropriate listing price for the seller’s house.Com
Comparative-Unit Method
An appraisal method used to determine the value of a building by multiplying the cost per square foot of a recently built comparable building by the number of square feet in the subject building. See square-foot method.
Comparison
An appraisal method of determining the capitalization rate of a property by looking at the operational capitalization rate of similar properties in the area.
Comparison Approach
A real estate comparison method which compares a given property with similar or comparable surrounding properties; also called market comparison.
Competency Rule
Per USPAP, the COMPETENCY RULE “identifies requirements for experience and knowledge, when completing an appraisal and prior to accepting an appraisal assignment.”
Competent
A term for a buyer who is legally fit to enter into a sales contract; legally qualified.
Competent Party
A person entering into a contract who is legally capable to enter into a binding contract. Criteria for competency include age of majority and mental capacity.
Principle of Competition
Holds that profits tend to breed competition and excess profits tend to breed ruinous completion.
Complaint
The first document (pleading) that starts a civil action summarizing the plaintiff’s case against the defendant including a demand for relief.
Compost
A mixture of decaying organic matter, such as plants, leaves, and food scraps that is used for fertilizer.
Compound Interest
Interest paid on original principal and also on the accrued and unpaid interest which has accumulated as the debt matures.
Concessions
Discounts or enticements given by a landlord or seller to attract prospective tenants or buyers into signing a lease or purchasing property
Concurrent Ownership
Ownership of a piece of property by two or more persons at the same time. Examples of concurrent ownership include joint tenants, tenants by entirety, tenants in common, and community property owners. Also known as co-ownership.
Concurrent Recording
When the closing of an escrow is contingent upon the simultaneous closing of another escrow.
Condemnation
The act of taking private property for public use by a political subdivision upon payment to owner of just compensation. Declaration that a structure is unfit for use.
Condition
In contracts, a future and uncertain event which must happen to create an obligation or which extinguishes an existent obligation. In conveyances of real property conditions in the conveyance may cause an interest to be vested or defeated.
Condition Precedent
A qualification of a contract or transfer of property, providing that unless and until a given event occurs, the full effect of a contract or transfer will not take place.
Condition Subsequent
A condition attached to an already-vested estate or to a contract whereby the estate is defeated or the contract extinguished through the failure or non-performance of the condition.
Conditional Estate
Usually called, in California, “Fee Simple Defeasible.” An estate that is granted subject to a condition subsequent. The estate is terminable on happening of the condition.
Conditional Sale Contract
A contract for the sale of property stating that delivery is to be made to the buyer, title to remain vested in the seller until the conditions of the contract have been fulfilled. See definition of Security Interest.
Conditional Use
A use that does not meet the current use requirements, but may be allowed by obtaining a special permit.
Conditional Use Permit
Allows a land use that may be incompatible with other uses existing in the zone. Also called special use permit.
Condominium
An estate in real property wherein there is an undivided interest in common in a portion of real property coupled with a separate interest in space called a unit, the boundaries of which are described on a recorded final map, parcel map or condominium plan. The areas within the boundaries may be filled with air, earth, or water or any combination and need not be attached to land except by easements for access and support.
Confirmation of Sale
A court approval of the sale of property by an executor, administrator, guardian or conservator.
Confiscation
The seizing of property without compensation
Conforming Loans
Loans which conform to Fannie Mae guidelines, which sets loan limits to a certain amount.
Principle of Conformity
Holds that the maximum of value is realized when a reasonable degree of homogeneity of improvements is present. Use conformity is desirable, creating and maintaining higher values; the idea that a house will more likely appreciate in value if its size, age, condition and style are similar to, or conform to, other houses in the neighborhood.
Consideration
Anything given or promised by a party to induce another to enter into a contract, e.g., personal services or even love and affection. It may be a benefit conferred upon one party or a detriment suffered by the other.
Constant Payment Mortgage
A mortgage with fixed payments of principal and interest for the life of the loan.
Construction Cost
The cost of building a structure, including labor, materials, contractor’s overhead and profit, taxes, and construction loan interest. Construction cost is different from original costs (the price the owner paid). The original costs may be more or less than the construction cost.
Construction Loan
A loan made to finance the actual construction or improvement on land. Funds are usually dispersed in increments as the construction progresses.
Construction Eviction
Breach of a covenant of warranty or quiet enjoyment, e.g., the inability of a lessee to obtain possession because of a paramount defect in title or a condition making occupancy hazardous.
Construction Fraud
A breach of duty, as by a person in a fiduciary capacity, without an actual fraudulent intent, which gains an advantage to the person at fault by misleading another to the other’s prejudice. Any act of omission declared by law to be fraudulent, without respect to actual fraud.
Constructive Notice
Notice of the condition of title to real property given by the official records of a government entity which does not require actual knowledge of the information.
CPI
Consumer Price Index
Consumer Price Index (CPI)
The CPI or Consumer Price Index is a measure of the cost of goods purchased by average U.S. household. It is calculated by the U.S. government’s Bureau of Labor Statistics. It is an inflationary indicator that measures the change in the cost of a fixed basket of products and services, including housing, electricity, food, gasoline, and transportation. The CPI is also called cost-of-living index and sometimes referred to as “headline inflation.”
Contiguous
In close proximity.
Contiguous Lots
Pieces of property that are adjoined.
Contingency
A condition specified in a purchase contract, such as a satisfactory home inspection.
Contingent
Dependent upon an uncertain future event.
Contract
An agreement to do or not to do a certain thing. It must have four essential elements: parties capable of contracting, consent of the parties, a lawful object, and consideration. A contract for sale of real property must also be in writing and signed by the party or parties to be charged with performance.
Contract of Sale
A contract for the sale of real property, where the seller gives up possession, but retains title until the total of the purchase price is paid of£ Also called an installment sales ·contract, a contract for deed, an agreement of sale, a conditional sales contract, or a land sales contract.
Contract to Purchase
A contract the buyer initiates which details the purchase price and conditions of the transaction and is accepted by the seller. Also known as an agreement of sale.
Contract Rate
The agreed-upon interest rate of a loan, adjusted for inflation. Also called the nominal rate.
Contract Rent
The rent established by agreement or contract
Contractual Lien
A voluntary obligation such as a mortgage or trust deed.
Principle of Contribution
A component part of a property is valued in proportion to its contribution to the value of the whole. Holds that maximum values are achieved when the improvements on a site produce the highest (net) return, commensurate with the investment.
Convection
(1) Gravity-caused heat transmission by the movement of air, due to the density differences between air currents of differing temperatures.
(2) The transfer of heat in water, air, or another fluid, as the substance descends when it is cooler, and rises when it is warmer.
Conventional Loan
A long-term loan a lender makes for the purchase of a home.
Conventional Mortgage
A mortgage securing a loan made by investors without governmental underwriting, i.e., which is not FHA insured or VA guaranteed. The type customarily made by a bank or savings and loan association.
Conversion
(1) Change from one legal form or use to another, as converting an apartment building to condominium use.
(2) The unlawful appropriation of another’s property, as in the conversion of trust funds.
Convertible Adjustable-Rate Mortgage
A mortgage which starts as an adjustable-rate loan, but allows the borrower to convert the loan to a fixed-rate mortgage during a specified period of time.
Convertible Loan
An adjustable-rate loan allowing the borrower to change to a fixed rate at any time during the life of the loan.
Convey
To transfer ownership or title to property from one person to another.
Conveyance
An instrument in writing used to transfer (convey) title to property from one person to another, such as a deed or a trust deed.
Cooperation
Form of common interest development in which a corporation holds title to all of the real property and owners purchase shares of stock in that corporation. Each resident possesses a proprietary lease.
Corner Lot
A lot found at the intersection of two streets. It may be desirable because of its accessibility, but may also be noisy and expensive to maintain because of the increased frontage.
Correlation
A step in the appraisal process involving the interpretation of data derived from the three approaches to value (cost, market and income) leading to a single determination of value. Also frequently referred to as “reconciliation.”
Corrosion
The gradual wearing a way of a metal by rusting or chemical usage.
Co-Signer
A second party who signs a promissory note together with the primary borrower.
Cost
The amount paid (in labor, material, or sacrifices) for goods or services.
Cost Approach
One of three methods in the appraisal process. An analysis in which a value estimate of a property is derived by estimating the replacement cost of the improvements, deducting therefrom the estimated accrued depreciation, and then adding the market value of the land.
Cost Basis
Original price paid for a property ‘ (real or personal).
Cost-Benefit Ratio
The ratio of the benefits of an improvement to the cost of that improvement. In order for the improvement to be considered desirable, the ratio must exceed 1.00
Cost-of-Living Index
A government indicator of the fluctuating cost of living for an average person on a monthly basis.
Cost-to-Cure
The dollar amount necessary to restore a deteriorated item to new or reasonably new condition.
Cost-to-Cure Method of Depreciation
Method of estimating accrued depreciation based on the cost-to-cure or repair observed building defects
Co-Tenancy
Ownership of an interest in a particular parcel of land by more than one person; e.g., tenancy in common, joint tenancy.
Counter-Offer
A response to an offer
Court Confirmation
The approval by a court of the sale of property by an executor, administrator, guardian, conservator, or commissioner in a foreclosure sale.
Covenant
An agreement or promise to do or not to do a particular act such as a promise to build a house of a particular architectural style or to use or not use property in a certain way; a legal assurance or promise in a deed or other document, or implied by the law.
Creative Financing
Innovative home-financing arrangements that help sell a property.
Credit
A bookkeeping entry on the right side of an account, recording the reduction or elimination of an asset or an expense, or the creation of or addition to a liability or item of equity or revenue; the money a lender extends to a buyer for a commitment to repay the loan within a certain time frame.
Creditor
An individual or institution to which a debt is owed
Cripple
Stud above or below a window opening or above a doorway
Cross-Collateralization
When collateral for one loan also serves as collateral for one more additional loans.
