Terminology Flashcards
Acceptance
Words or an act indicating a proposed offer is accepted, thereby creating a binding contract
Access Right
Landowner’s right of ingress to and egress from his property to a public highway over another’s land
Accessibility
The manner in which a site can be reached
Accession
Additions to property by natural increase or growth, or improvements to real property
Accommodation Lender
see Lender
Accreation
Gradual deposit of soil by wind or water onto adjoining property
Accrued Depreciation
Total depreciation that has accumulated over a period of time
Acknowledgement
Admitting in writing before an authorized official (usually a notary public) by a person who has executed a document, that he or she in fact did execute (sign) the document
Acquisition
The process of acquiring property
Acquisition Expenses
Relate to the cost of acquiring the property such as surgery’s, travel expenses, escrow charges, and legal expenses related to acquisitions
Acre
43,560 sqft of land area (approx. 209’ x 209’); or 160 sq rods (4840 sq yards)
Acre-Foot
A volume of water equivalent to one acre in area with a depth of one foot (43,560 cubic feet of water)
Action
Court Proceeding
Abandon
Voluntary termination of interest in property
Acceleration
Unless otherwise specified, the maturing of a loan upon the happening of an event. The “accelerating” of the maturity date of the loan. An event that causes an obligation to be due. Some causes of acceleration: (a) TRANSFER, caused by the transfer of an interest in the property (property transfer) or in the title holding entity (equity transfer) including a sale by contract. This can be BROAD TRANSFER, covering a transfer of any type of interest in the property, such as a lease, or a NARROW TRANSFER, which would apply only to a sale or transfer of a specific interest, such as the entire property or a defined portion thereof; (b) DEFAULT, by reason of any default in payment; (c) INSOLVENCY, by reason of an act of insolvency affecting borrower; (d) JUNIOR FINANCING, by reason of the placement of a junior lien; and (e) BREACH OF CONTRACT OR COVENANT, by reason of some contractual breach other than by the above.
Abstract
A summary or review of a detailed document or record.
Abstract of Judgment
Summary or a court’s order regarding a money judgment. When recorded, it creates a general lien upon all real estate and personal property of a judgment debtor in the county where recorded.
A & B Partnership
Indicates a partnership with at least two classes of partners. See Limited Partnership Interest. “A&B Entity “an entity with two or more classes of equity
Absorption
A swallowing up or engulfment. Note: land may absorb the building values, e.g., in cases where encroaching higher land uses increased he degree of obsolescence in the building, thus engulfing the building value leaving no value or a negative value to the building.
Abstract of Title
A history of the title, summarizing the various links in the chain of title, together with a statement of all liens, charges, or encumbrances affecting a particular property, as maintained in public records.
Abutting
Land touching another parcel, such as a highway or adjoining parcel. Also referred to as “adjacent”
Acceleration Clause
A provision in a trust deed or mortgage that makes the balance owed immediately due and payable upon the happening of a certain. See ALIENATION CLAUSE, DUE ON SALE CLAUSE. In Wellenkamp v. Bank of America, 22C3d (1978) the Court declared that an acceleration clause upon an outright sale of property is unenforceable by an institutional lender unless there is an impairment of lender’s security interest or an increased likelihood of default. This holding do not presently apply to private lenders (according to the court) nor to federally chartered institutional lenders (according the The Federal Home Loan Bank Board)
Action in Personam
Court action seeking a judgement against the person rather than against property, e.g., for money against the maker of an unsecured note.
Action in REM
Court action seeking judgement again ask property, e.g., for quiet title to property
Actual Notice
A notice that a party has in fact received as compared with constructive notice that is implied or inferred
Additional Advance
A provision that under certain circumstances the lender will advance additional funds for stated purposes. These funds are to be secured by the security pledged for the original loan. Such advances may be obligatory (required by the loan documents) or optional (authorized in the lender elects to make).
Additional Commitment
The amount that each investor is obligated to pay in addition to his initial subscription. Generally, this phrase will be applicable only in the case of transactions where, in addition to the down payment, continuing payments will be required because income from the property will not be sufficient to service encumbrances and expenses or further payments are required to the seller. In the event of failure to make such payments an investor’s interest may include one or more of the following: be (a) proportionately reduced and the interest of those who make their payments be increased; (b) sold at public or private sale with the defaulting investor responsible for the deficiency; (c) sold at public or private sale with the defaulting investor to responsible for deficiency; (d) subordinated to the interest of those who are non-defaulting investors; or (e) a combination of the above and/or subject to further restrictions and disabilities as may be provided in the entity agreement.
Adjudication
Judicial determination of a matter
Adjusted Basis
Cost basis of property for tax purposes with certain additions such as improvement costs and certain subtractions such as depreciation
Adjusted Cash Flow
All cash receipts from project during the ordinary course of business for the fiscal period, without allowing deductions for depreciation, after payment of operating cash expenses, capital expenditures and any sums set aside for restoration or creation of reserves.
Adjusted Capital Contributions
Each investor’s capital contribution for the fiscal period, less distributions of sale or refinancing proceeds. Also called Remaining Cash Investment.
Administrator
A person appointed by the court to administer the estate of a deceased person who left no will, i.e., who died intestate.
ADR System - Asset Depreciation Range System
Internal Revenue Code Section. Method of property depreciation allowance, “useful life” determined by guideline life ranges published by the IRS
Ad Valorem
According to the value
Ad Valorem Tax
A tax varying with the value of goods or commodity
Advances - Obligatory
Money advanced by beneficiary under deed of trust to protect his interests , e.g., real property taxes, hazard insurance premiums.
Advances- Optional
Advances made which are not required to protect the security but which hte lender has the right to make under the loan agreement.
Adverse Land Use
Incompatible land use with detrimental effect of adjacent properties
Adverse Possession
The right of an occupant of land to acquire title against the real owner, where all of the following circumstances are present for the statutory period: possession as been (1) actual, (2) open and notorious, (3) exclusive, (4) hostile (without consent), (5) continuous, and (6) in some jurisdictions, the taxes may have been paid by the claimant for the period required. The foregoing applies to securing title by adverse possession. A non-exclusive easement by adverse possession would not require payment of taxes or exclusive use, but might result from all of the other elements being present for the required period.
Affiant
One who affirms the statement in an affidavit
Affidavit
A statement of declaration reduced to writing, and sworn or affirmed to before some officer who has authority to administrator an oath or affirmation
Affirmative Coverage
Insurance policy provisions whereby the insurer affirmatively insures against specific risks not ordinarily covered by the policy
After Acquired Title Estoppel by Deed
Title acquired by grantee from grantor who conveyed land before he owned it, and then acquired it. Grantee automatically retains title to such land without having to obtain another deed from his grantor
After Completion Costs
Costs incurred for the development of real property after the regular construction has been completed
After tax investment
The out-of-pocket cost to make an investment after all tax considerations. Also referred to as “hard Dollar investment”
After Tax Net Cash Proceeds of Resale
Resale price of property, less commissions, outstanding debts, and taxes on the ownership interest
Age, Actual
The number of years elapsed since the original structure was built
Age, Effective
The number of years that is indicated by the condition of the building
Age Life Method
Method of estimating accrued depreciation as percentage of current reproduction costs of new improvements
Agency
A relationship of trust. The agent represents the principal who appoints him. SEE FIDUCIARY
Agreement of Sale
A written agreement whereby the purchaser agrees to buy certain real estate and the seller agrees to sell upon terms and conditions set forth therein (also called Land Contract, Contract of Sale, Conditional Sales Contract)
A.I.C.P.A.
American Institute of Certificate Public Accountants (See also A.P.B.)
Air Rights
Right to Ownership of Everything above physical surface of the land
Alienation
In real estate, to convey the ownership to another
Alienation Clause
A special kind of acceleration that demands payment of a balance due upon the alienation of title.
All-Inclusive Loan
Also called in some cases an “overriding” or Overlapping” or “AITD” or “hold harmless” or “wrap around”. A junior loan where the beneficiary (lender or seller) covenants to pay one or more senior encumbrances and the trust or (borrower or buyer) is responsible for making only one payment on the all inclusive loan to the beneficiary, rather than the junior and senior encumbrances separately. Normally the senior encumbrances are referred to as “underlying.” The face amount of the all inclusive loan includes the equity of the beneficiary as well as the balance of the senior encumbrances at the time of its creation.
Allowance for Vacancy and Income Loss
Deduction from potential annual gross income to reflect possible vacancy, turnover, and non-payment of rent by tenants.
Alluvion (Alluvium)
Accretion by gradual action of water on a shore or bank.
A.L.T.A (American Land Title Association)
Extended coverage form of title insurance usually requiring physical inspection of property and survey, as compared to Standard Coverage Policy, which only covers matters of record.
Amenities
State of being pleasant or agreeable, as in respect to a situation, location, or climate. In residential appraising it means those peculiar and intangible benefits arising from ownership. Often refers to special features such as pool, tennis courts, club house, water frontage, etc..
Amenity Package
Special features such as swimming pool, tennis courts, etc.
Amenity Value
The value of the pleasure of the property such as good neighborhood, schools, parks, playgrounds, etc.
Amortization
The liquidation of a financial obligation on an installment basis.
Amortized Loan
Principal and Interest of loan reduced by a series of regular payments that are often equal or almost equal. As equal payments are made principal reduction increases and interest portion of the loan reduces.
Anchor Tenant
One who draws enough customers to encourage smaller tenants to lease in a shopping center
Annexation
(A) Addition of a county’s unincorporated territory to a city or town
(B) Increasing a property by adding, attaching other property to it, e.g., fixtures, improvements
Annuity
Series of assured payments made over a period of time.
Anticipation
Economic principle that value is created by anticipated benefits to be gained in the future. When property value appreciates because of an improved neighborhood.
Antideficiency Legislation
Where the buyer is unwilling or unable to pay the balance of a loan, the holder only has recourse against the property and may not obtain a money judgment against the borrower.
Apartment House
A Building with separate residential units, generally at least 3 units. Two units would be referred to as a duplex. Three units a Triplex and 4 units a four-plea.
A.P.B. (Accounting Principles Board)
An affiliate of the American Institute of Certified Public Accountants, which sets forth standards to be used in the preparation of audits and financial reports.
Application for Qualification
A written form filed with the respective securities commissioner requesting a permit to offer and sell interests in a limited partnership
Appraisal
A written opinion of value prepared by an individual whose background and experience would qualify him to give such an opinion. Compensation for the preparation and rendering of such an opinion shall not be in any way contingent upon the determination fo any particular value.It shall constitute the opinion of the appraiser only, and the appraiser shall not in any way be interested in the offering.
Appraisal by Capitalization
An estimate of value based upon the capitalization (i.e. obtaining the “present worth”) of income, usually future or anticipated net income
Appraisal by Comparison
An estimate of value based upon an analysis of current market sales, listings, and rentals adjusted to reflect major points of difference.
Appraisal By Summation
The process of adding together parts of a property separately appraised to form an opinion to the worth of the whole
Appreciation Build-Up
An assumed increase in value due to inflation and supply and demand factors. Should be clearly designated as speculative estimate
Appurtenance
Belonging to something else; something that passes as an incident to land, such as right of way
Architect’s Punch List
Discrepancies in building plans or other construction flaws noted by architect during final inspection
Assessability
Indicates that interests in a syndicate are assessable by action of the GENERAL PARTNER under certain limited conditions and that such assessments will generally result in personal liability for the assessment on the part of the INVESTOR. Where the assessment does not result in personal liability, but merely a penalty affecting the investor’s ownership interest, the assessment may be referred o as “Non-Personal Assessability”
Assessed Valuation
Value of real estate as set by a unit of government for taxation purposes. Not necessarily corresponding to market valuation.
Assessment
There are basically two types of assessments: (a) Property assessments are impositions by government agencies or districts as charges for improvements; (b) Entity assessments are impositions by the Entity manager on the interests of the investors for entity purposes. Such assessments may be personal indicating that the assessed investor has personal liability therefore, or non-personal, indicating that only the entity interest itself may be made to pay the assessment if the respective investor does not. Most interests are non-assessable unless so stated in the Offering Circulars. Assessments may be optional or Mandatory.
Asset Base
Value of Assets can be (a) book value, (b) market value or (c) cost.
Assessor
Public Official who determines assessed value of property for tax purposes
Assignee
Person who receives property or a right in an assignment
Assignment
The method or manner by which a right, a specialty, or contract is transferred from one person to another
Assignor
Person who transfers property or a right to another in an assignment
Assisted Housing
Construction, finance or purchase of housing with governmental assistance, e.g., FHA, VA, HUD etc..
Assumption Agreement
Agreement to take over a debt or obligation of another. Original debtor may remain secondarily liable.
Assumption Fee
Lender’s fee for changing and processing new records for a buyer who assumes an existing loan.
Assumption of Mortgage (or trust deed)
Taking over the primary liability to pay an existing mortgage or trust deed debt
Attachment
Seizure of property by court order to keep it available for payment of a debt to be collected in a pending lawsuit
Attorn
A tenant accepting and acknowledging a new property owner.
Attorney-in-fact
A person appointed under a “power of Attorney to act on another’s behalf as an agent
Audited Financial Statements
Financial statements including the profit and loss statement, cash flow and source of application statement, and balance sheet, which have been attested to by a CPA because of an independent audit
Available Cash Flow-Return to the Investor
See NET SPENDABLE. Proceeds from operation of project not required to meet its obligations or operations and available for distributions to investors and sponsor.
Balance Sheet
A financial statement showing assets, liabilities, and net worth.
Balloon Payment
A payment on maturity of a debt that is greater than the normal payment and is the balance due on maturity date.
Bankrupt
A person relieved by a court proceeding from payment of certain debts, after surrender of certain assets to a court appointed trustee
Base Line
Survey line running east and west that is used in establishing township boundaries
Basis
Dollar cost assigned to property at acquisition (less losses and depreciation for tax purposes. I.R.C. Sections 167(g), 1011.) in order to compute gains.
Basis-Allocation of
Allocation of basis among land, improvements, personal property.
Basis-New Adjusted
New owners basis in property acquired in an exchange
Basis-Old Adjusted
Old owner’s adjusted basis in property being disposed of
Basis Point
Used to describe the amount of change in yield in debt instruments such as mortgages- one one-hundredths of one percent
Bearer Instrument
Note or other document payable to “bearer” rather than named party
Before-Tax Cash Flow
Cash available before payment of income taxes after payment of operating expenses and contractual debt service
Bench Mark
Location indicated by a land surveyor on a durable marker
Beneficiary
(1) The lender in a trust deed, or
(2) one who receives the income (benefit) from a trust
Beneficiary’s Statement
Statement of a creditor giving the remaining principal balance and other information concerning the debt. Usually obtained when owner wishes to sell or refinance. See OFFSET STATEMENT
Best-Efforts Basis
Security broker’s undertaking to use his best efforts to sell the issue. Opposite of FIRM UNDERWRITING
Betterment
Improvement to property that increases its value as opposed to maintenance, or replacement
Bilateral Contract
Contract in which a promise is given for a promise. See UNILATERAL
Bill of Sale
Document used to transfer title (ownership) of personal property
Blanket Encumbrance
A lien covering more than one item of security of the same class. If the security were real estate, it would be one or more parcels of real estate. (If the security were personal property, it would be more than one item of personal property of the same class). As individual lots are sold, a partial reconveyance from the blanket encumbrance is ordinary
Blighted Area
A declining area that is seriously affected by destructive economic forces, such as encroaching inharmonious property usages, infiltration of disadvantaged social and economic classes of inhabitants, and/or rapidly depreciating buildings.
Blind Pool
See NON-SPECIFIED FUND
Blue Sky
The process of qualifying a securities issue under state securities act
Blue Sky Law
A state law regulating solicitation and sale of securities
Bona Fide
In good faith, without fraud
Bona Fide Purchaser
Good faith property purchaser, for fair value, with out notice of any adverse claim, or rights of third parties.
Bond
(a) Insurance agreement whereby one party becomes surety to pay, within stated limits, financial losses caused by specified acts, or defaults of a third party.
(B) interest baring security evidencing a long term debt may be secured by lien on property, issued by government or corporation
Book Cost
Cost shown in general ledger of individual or entity, usually including direct and indirect financing and all development costs
Book Value
“Value” as reflected on the “books” after subtracting depreciation from original cost of property. For income tax purposes only
Boot
Non-qualified property received as part of an exchange of realty and/or relief of liability in exchange
Borrower(s)
The primary obligor(s) in a debt to a lender
Breach
Failure to perform a duty or promise
Break-even Point
Amount required to cover all operating expenses and debt service, if any, on the property. Normally expressed in two formulas:
(A) Break-even on operations absent debt service, and
(B) Break-even operations after debt service. Break-even point can be stated as a dollar amount or as a percentage of occupancy.
Broker
One who negotiates a transaction on behalf of others
Broker-Dealer
One who is licensed to sell securities and may employ licensed agents for that purpose.
B.S.P.R.A. - Builder/Sponsor Profit and Risk Allowancel
Developer’s return for assuming risks involved when building low-income housing. Amount subject to government regulations.
Built-Ins
Cupboards, appliances, etc. attached as part of structure
Building Line
A line established by ordinance, or statute, between which a street, or adjoining lot, a structure is not permitted. Also called a setback
Building Residual Technique
Method of appraising a building and one of three methods of determining accrued depreciation
Building to Land Ratio
Ratio of Value of building to value of land
Bulk Sale
Large transfer out of ordinary course of transfer or’ s business of a substantial part of the personal property of the business
Bundle of Rights
Beneficial Interests
Burn Off
Amortization of front end prepayments of interest by adjusting payments in a tax-structured transaction
Business Purpose
When an ENTITY is primarily involved in non-trade or non-business activities, such as a hobby, sport, or recreational activity and there is no bona Fide intent to operate at a profit, the IRS will disallow all expenses other than those that are deductible without regard to profit motivation. Expenses deductible without regard to profit include interest, state and local taxes, capital losses, bad debts, and casualty and theft loss
Buyers Closing Costs
Escrow costs to the buyer, including his share of prorated expenses
Buyer’s Commitment
Valuable consideration or promise given by buyer as initial investment or continuing commitment
Buyer’s Market
Supply exceeding demand so that market prices are relatively low, giving buyers an advantage
Buy-out estimate
Projected cost of construction based on price of jobs for which contracts have been completely let.
Buy-Sell Agreement
Under a buy-sell agreement, if one party desires to sell, he must sell to the other and the other must buy
C.A.E.
Certified Assessment Evaluator
Calendar Year
Jan 1 through Dec 31
Call
Option to purchase at a set price for a given period
Capacity
Legal right to do something (enter a contract, etc.)
Capital Account
Account established for each participant, initially equal to original investment, increased by taxable income allocated to that person and reduced by allocated tax losses, cash, and sale or refinancing proceeds distributed to that person
Capital Investment (Capital Contribution)
The amount invested by a particular INVESTOR that may be his (a) initial or original capital investment at the time of the organization of the partnership; (b) his continuing investment consisting of his additional assessments after initial or original capital investment; or (c) his total investment including his initial and continuing payments.
Capital Investment Return
Ratio of capital investment to net spendable income the investor earns. Capital investment. Remaining the amount invested less returns from sale, refinance, or otherwise designated in the entity agreement for purposes of determining share of distributable cash.
Capitalized Costs
Costs, for tax purposes, removed by depreciation of a term of years, rather that being recovered by an immediate tax deduction.
Capitalization Rate
A formula applied to the net income generated from property to determine its value. If the net income were to be capitalized at 10%, the value of the property would be ten times its income
Carrying Charges
Non-capital costs incurred by developers in carrying the project prior to occupancy, e.g., interest on loans for land and construction, property taxes, etc.
Cash-on-Cash Return
Rate of return on investment without regard to tax savings
Cash Income or Gross Income
Total income of the property prior to expenses and debt service.
Cash Liquidating Value
The sum that a participant in an investment program is entitled to receive upon request where a program offers liquidity
Caveat Emptor
“Let the buyer beware”. Places obligation on buyer to examine property before purchasing. Less applicable than in the past.
C.C&r.’s
Covenants, conditions and restrictions
Ceiling
In a floating or variable rate loan, the maximum rate of interest to be charged. The opposite is referred to as a “floor” the minimum rate to be charged
Certificate of Limited Partnership
A summary of the major provisions of a limited partnership agreement which is requested to be filed in the office of the county recorder in which the particular partnership is going to do business
Certificate of Occupancy
Written authorization by local authority allowing newly completed building to be occupied.
Certificate of Reasonable Value
Documentation required by federally insured or guaranteed loans evidencing physical inspection of property by federal employee to determine loan to value ratio
Certificate of sale
Certificate issued to purchaser at an execution sale. Evidences ownership. Given in exchange for deed if there is no redemption from the sale
Certificate of Title
A title company’s opinion of the condition of the title to a parcel of real estate without guarantee
Certification
A written statement under penalty of perjury, executed by an officer of principal of borrower that the material contained in a document to which it is affixed is true and correct to the best knowledge of the person subscribing there to. This is to be distinguished from a full disclosure notice, which is a statement executed under penalty of perjury that all material facts have, to the best of the knowledge of the person executing said notice, been disclosed in the document to which it is attached.
Cestu Que Trust
One for whose benefit property is held in trust
Chain
Measurement of land equal to 66 feet in length
Chain of Title
All documents transferring title to a parcel of real estate, beginning with the document originally transferring title from public to private ownership and ending with the latest document transferring title.
Change Order
Change to the original plan of construction by owner or contractor
Chattel Real
Interest in land that is less than freehold, e.g., leasehold
Check-O-Magic (Automatic check off)
A contract between the borrower and the lender which provide that the borrower sign an agreement allowing lender to arrange with the borrowers bank for the bank automatically to, each period, debit the borrower’s account and send to the lender the periodic payment called for in the loan.
Chose in Action
Personal right recoverable by an action at law
Class
(A) of securities indicates the securities being offered have different rights and privileges. All those having the same rights and privileges being of the same class when one class could have (1) a priority over another or (2) have greater participation or Tax Benefits (B) of Investor, referring to the holder of a particular class of securities.
Class Action
Plaintiff brings suit on his own behalf and as representative for all others similarly harmed
Clear Title
Free from encumbrances or defects
Close
Date on which a transaction is closed and the net proceeds generally are available to the borrower
Closed End
Indicating an offering or fund that after the sale of a maximum number of units is “closed”, with no additional units to be offered to issue without further amendment of the agreement of partnership. An Open End offering would indicate that further securities could be issued without amending or changing the partnership agreement.
Cloud on the Title
Claim or encumbrance that, if valid, would affect or impair the owner’s title. Removed by quitclaim deed or court action.
Coinsurance
More than one insurer sharing a single risk, each undertaking part of the whole risk often the insured retains a portion of the risk itself. The coinsurer may be the insured
Collateral
Security for a loan
Collateral Assignment
Assignment of property interest for security purposes, not an absolute assignment
Collateral Security
Transfer to a creditor of an interest in property providing additional security for the creditor
Color of Title
Giving the appearance of title, but not in fact title
Comfort Letter
A letter prepared by the independent certified public accountant indicating that immediately prior to the public issuance of program interests a preliminary review of the company’s books and records indicates no material change from the last certified audit. A comfort letter is not an audit. It refers to a cursory review.
Commercial acre
The remainder of an acre of subdivided land after the deduction of areas for streets, sidewalks, curbs, etc.
Commercial Property
Real property, excluding residential property, acquired for investment or commercial use
Commission
Sum due for services in selling an item of property; an administrative and enforcement tribunal of laws
Commitment
An agreement to make or buy a loan in the future, not intended for immediate funding, often called a FORWARD COMMITMENT
Commitment to Insure
Title insurance company report, showing condition of title and obligating insurance company to issue form of policy described upon compliance with and satisfaction of requirements stated
Common Areas
Land or improvements existing for the benefit of more than one tenant, or property owner
Common Law
Body of law that grew up from custom and decided cases (often English law) rather than from codified law (Roman law, Spanish law, French law, etc.)
Community Apartment Project
Subdivision where operation, maintenance and control are exercised by governing board selected by owner’s of fractional interests. Undivided interest in the property is conveyed complete with right to occupy a certain unit or apartment
Community property
Form of ownership of property in certain states. Real property within the state and personal property wherever located, acquired during marriage, is presumed to be community property when not acquired as the separate property of either spouse. It is owned in common by both spouses
Comparable
Recently sold properties with similar characteristics to a particular property, which are indicative of fair market value of particular property being compares
Comparison Figures
In projections, comparing a particular period, normally the latest current period, with some prior period of historical operation
Completed Contract Method
Method of recording income from construction contracts where income is recorded at completion rather that during progress of hte work.
Component Financing
Borrowing from separate lenders on separate loans (referred to as “sandwich financing”) on various parts of the property such as (a) the fee, normally by means of a ground lease; (b) the improvements; and (c) the personal property
Conclusive presumption
Unequivocal inference made by the law
Condemnation
Taking of private proeprty for public use, with compensation to the owner under the right of eminent domain
Condition
Provision in agreement, contract providing that a right or interest in property depends on a future event that may or may not happen
Condition precedent
Condition must be fulfilled before estate can vest
Condition Subsequent
Failure or non-performance of condition may defeat an estate that has already vested
Conditional sale contract
Title remains in seller until condition of contract met. Sometimes referred to as a “land contract”
Condominium
Individual fee ownership of units combined with joint ownership of common areas of the building and the land
Confirmation of sale
Sale of property by executor, administrator, guardian, or conservator, approved by the court
Conflict of interest
Anything in the nature of a program that would cause a conflict with the motivation of the general partner, promoter, Spenser, or syndicator to use his best efforts exclusively in the field of real estate investment for the benefit of the respective program. Conflicts of interest are not necessarily prohibited but must be fully disclosed
Conservator
One appointed by probate court to take care of person and/or property of one unable to do so himself
Consideration
Anything of value used to induce another to enter into a contract. Either a benefit to pro is or or detriment to promise
Constant
The amount of annual debt service (expressed as a percentage of the original loan balance required to fully amortize the loan in equal payments of principal and interest monthly, quarterly, or annually) over a given period of time
Construction Costs
Direct costs to improve raw land or building
Contiguity Insurance
The endorsement on title insurance policy indicating that the perimeter surgery of the property is insured
Contiguous
(A) actual contact, (b) adjoining
Contingent
Dependent on uncertain future events
Continuing commitment
Consideration to be given by buyer after his initial investment
Contour
A line connecting the points on a land surface that have the same elevation
Contract of sale (also referred to as a “land contract” or “conditional sale contract”)
An agreeement whereby one party has bound himself to purchase and receives possession from the other, but no legal title, as opposed to a CONTRACT TO PURCHASE whereby one party has agreed to buy and the other has agreed to sell, but both title and possession remain with the seller until further conditions take place prior to transfer of possession.
Contract Rent
Rent due pursuant to rental or lease agreement
Contractor’s Fee
A payment to a licensed contractor for overhead and profit for supervising construction
Constructive Notice
Notice given by the public records
Constructive Trust
Trust imposed by law to prevent unjust enrichment
Conventional Mortgage
One not guaranteed or insured by a federal agency
Convertible Debt
Debt that can be converted into equity shares usually a stated amount of issuers equity
Conveyance
The means or medium by which title to real estate in transferred
Co-op sale or loan
Indicates that more than one BROKER is involved in the sale and that there is a sharing of COMMISSION
Corporation
An artificial “person” created by law
Cost Basis
Value of property determined at time fo purchase by amount of purchase
Cost Certification
Independent audit statement of FHA insured housing projects as required by Section 227 National housing act and FHA regulations
Cost, Historical
The total cost of a project based on prices at the time of construction
Cost Plus Contract
Construction contract wherein contract price is equal to cost of construction plus profit allowance to builder
Cost, Replacement
The cost that would be incurred in acquiring a substitute property of equivalent desirability and utility
Cost, Reproduction
The cost of reproducing a new replica property on the basis of current prices with the same or closely similar material, labor, plus contractor’s overhead, profits and fees
Cost of Reproduction (or Replacement) New Less Depreciation
The possible combinations are too numerous to list; the appraiser must study each engagement’s requirements to decide which category, or categories of depression all are applicable.
Cost, Trended
Original cost new adjusted by application of an index to develop normal cost at another date, under similar conditions of acquisition, construction and installation. Care must be exercised to insure that proper indexes are applied to historical cost involving units or structures acquired used, or to purchased assets for a lump sum wherein an allocation of the price paid may have been distributed among the various assets.
Costs
Costs are often broken down into DIRECT COSTS that are the physical items tat go into the project itself, and INDIRECT COSTS that might be financing, carrying charges, architect’s fees, engineering fees, developer’s profit and overhead, etc. Cost can also be ACTUAL COST (often termed “historical cost” or “replacement costs”) based on present market prices of the components of the property.
Covenant
An agreement in a deed or other instrument governing activities or uses permitted or prohibited upon real estate.
Coverage
Percentage by which the net spendable income prior to debt service equals the constant required to service the loan. If the constant is $10,000 per year, and the net spendable income is 15,000 the coverage is 150%
CPI
Consumer Price Index of the Bureau of Labor Statistics
Credit Report
Report obtained by potential lender regarding credit standing of potential borrower.
C.R.V.
Certificate of Reasonable Value issued by Federal Housing Administration
Co-Tenancy
Ownership of property by 2 or more persons
Curtail Schedule
Listing of amounts by which principal sums of a debt are to be reduced by partial payments and the due date for such payments (AKA Mortgage Am Schedule)
Curtesy
Interest in wife’s property allowed to a husband
Custodial Accounts
Bank Accounts used for funds belonging to others.
Dealer of Property
One whose occupation is the sale of real property from inventory and whose profits on such sales because of his dealer status are ordinary income rather than capital gain. One can be a dealer with respect to some property and an investor with respect to other property
Debt
In reference to a given loan, all the elements of the loan including the instruments, the security, and the obligation of the borrower. When talking about a financial statement, the total amount owed by a borrower to all creditors
Debt Service
The amount of money (both principal and interest) required to meet encumbrances on a parcel of property. Expressed in terms of TOTAL (meaning the entire amount required to service the loan during the period it is outstanding; ANNUAL (being the amount required to service encumbrances during a calendar year); or MONTHLY (being the amount required to service encumbrances monthly). Specify whether the discussion concerns TOTAL, ANNUAL, or MONTHLY
Declaration of Abandonment
Document recorded to terminate a homestead
Declaration of CC&R’s (Covenants, Conditions and Restrictions)
Restrictions placed on owner’s use of property in subdivisions and condominium developments. Binding on all owners of interest in the subdivision and enforceable as equitable servitude’s.
Declaration of Homestead
Document recorded to create a homestead
Decree
A type of court order
Dedication
A grant of land or easement by an owner to some public use together with acceptance for such use by or on behalf of the public
Deductions
Specified allowable items subtracted from income before calculating taxes to be paid. A method of tax shelter deductions are subject to “investment at-risk rule” and “limit on investment interest rule” of the IRS
Deed
A written instrument which, when properly executed and delivered, transfers title to real estate.
Deed in Lieu of Foreclosure
Deed given by investor/owner/debtor to the trustee of a deed of trust for the benefit of the beneficiary/lender/mortgagee to prevent foreclosure of the property
Deed of Revonveyance
The transfer of legal title from the trustee tot he trust or (borrower) after a trust deed debt has been paid
Deed of Trust
Written instrument transferring title to land to a trustee as security for a debt or other obligation. Also called a TRUST DEED
Deep Shelter
Indicated a project wherein there are losses available to shelter other income of the investor. See TAX SHELTER
Default
The non-performance of a duty, whether arising under a contract, or otherwise; failure to meet an obligation
Default Judgement
A court order after the defendant has failed to answer the complaint in a lawsuit
Defeasable
Ownership with conditional restrictions that, if broken, can cause forfeiture of title to grantor or his heirs
Defeasance Clause
A Clause in a deed that contains conditional restrictions, which if broken, can cause forfeiture of title back to grantor or his heirs
Deferral
Tax incentive structure setting up investments with deductions occurring during years of high earnings, and income and capital gains occurring during reduced earning periods or on retirement. Postponement techniques resulting in taxes being paid in the future
Deferred Maintenance
Negligent or “putting off” care of a proeprty. An excessive form of deterioration
Deferred Purchase (Deferred Payment Sale)
A condition of payment of property whereby the property may be paid for in certain designated periods spaced over a specified length of time
Deficiency
The difference between the indebtedness sued upon and hte sale price, or market value of the real estate at the foreclosure sale.
Deficiency Judgement
A court order to pay the balance (deficiency) owed on a loan after the proceeds from sale of the security are not sufficient to pay off the loan
Delivery
Unequivocal transfer of a deed from donor/seller to donee/buyer in such a manner that it cannot be revoked
Demise
Transfer of an estate for years, for life or at will
Depletion
Tax allowance on a wasting asset, e.g., such as mineral deposits. Percentage depletion deduction allowance throughout the production period. Effectively enables investor to recover more than his investment tax free
Deposit Receipt
Form acknowledging deposit. May also form contract for sale and purchase of land when executed by both buyer and seller.
Depreciation
That sum which a qualified individual (generally a certified CPA) has determined to be the reasonable allowance (for tax purposes) charge against profit and loss for tax purposes for the depreciating value of the building due to its increasing age. There are 5 principle methods of computing tax deprecation: (a) Straight line; (b) 200% declining balance; (c) 150% declining balance; (d) 125% declining balance; (e) Sum of the years digits. Of the above, (b) through (e) are termed accelerated methods of depreciation. Depreciation taken on a UNIT basis is where one estimated life is applied to all parts of the building.
Component Basis
Where the assets are broken up and different lives are applied to the respective parts of the building. Reference should be made to the regulations of the IRS as to the applicability and definition of the various methods. It is also deemed a loss in value from any cause. An effect caused by deterioration or obsolescence or both is (a) PHYSICAL, while for tax purposes is (b) tax.
Depreciation, Normal
The amount anticipated under average use and ordinary conditions
Depth Table
A chart used by appraisers
Deraign
To prove
Deterioration
An impairment of physical condition, due to wear and tear, decay:
(A) physical loss of value resulting from disintegration, wear, tear, and action of the elements, (b) functional obsolescence, value loss resulting from decreased utility, due to deficiencies inherent in the structure, or (c) Economic obsolescence, value loss resulting from decreased utility, due to adverse external economic influences
