Balloon
1) The final payment of a ballon note (see which).
2) A landlocked parcel of land.

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

Balloon Payment
The final payment (balance due) of a balloon note.

Basis for Depreciation
The value of property for purposes of depreciation. For example: A purchased asset-The basis is cost, whether fully paid for or not. The method for determining the basis is different for gift, inheritance, etc.

Basis Point
A finance term meaning a yield of 1/100th of 1%.

Bearer Instruments
Checks, Notes, drafts, bonds, etc., payable to whomever has possession of the instruments: i.e. the bearer.

Beneficial Interest
The equitable, rather than legal ownership of property, such as under a land contract.

Beneficiary
1) One for whose benefit a trust is created.
2) In states in which deeds of trust are commonly used instead of mortgages, the lender (mortgagee) is called the beneficiary.

Beneficiary's Demand
Written instructions by a beneficiary under a deed of trust stating and demanding the amount necessary for issuance of a reconveyance, whether a full or partial amount.

Beneficiary's Statement
A statement by a lender under a deed of trust, setting forth the pertinent information necessary to assume said deed of trust, such as the unpaid balance, monthly payment, and interest rate.

Biannual
Twice per year. Semiannual.

Blanket Deed of Trust
See: Blanket Mortgage

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

Boiler Plate
Te form language (Generally Printed) which is constrained in deeds, deeds of trust, CC&R's, and other documents and contracts. The specifics for each instance are then filled in.

Bona Fide
A legal term which refers to any actions, situations, or persons that are honest, in good faith, and without fraud.

Break Even Point
In income property, where there is neither a positive nor a negative cash flow.

Bridge Financing
A form of interim loan, generally made between a short term loan and a permanent (long term) loan. When the borrower needs to have time before taking the long term financing.

Broker, Real Estate
One who is licensed by the state to carry on the business of dealing in real estate. A broker may receive a commission for his or her part in bringing together a buyer and seller, landlord and tenant, or parties to an exchange.

Building Code
A comprehensive set of laws which control the construction of buildings, including design, materials used, construction, use, repair, remodeling, and other similar factors.

Building Permit
A permit given by a local government to construct a building, or make improvements.

Business Cycle
The economic cycle of prosperity, followed by a decline, and then a return to prosperity.

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

Call Date
Originally a term used when a bond is redeemed prior to maturity, it is now also used in describing mortgages.

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

CAP
A maximum amount of charge. Example: An adjustable rate mortgage with a 5% rate cap could not adjust the interest rate by more than 5%.

Capital Expenditures
Money spend on improvements such as land, buildings, machinery, and similar major expenditures which are not inventory.

Capitalization
Determining a present value of income property by taking the annual net income (either know or estimated) and discounting by using a rate of return commonly acceptable to buyers of similar properties. For example: Net income of a property is $10,000 per year. Capitalizing at a rate of 10%, the property would be worth $100,000.

Capitalization Rate
The percentage (acceptable to an average buyer) used to determine the value of income property through capitalization.

Carry-back Loan
See. Purchase Money Mortgage

Cash Equivalency analysis
An appraisal technique by which the price of comparable properties selling at different financing terms are adjusted to find market value. The theory is that terms less advantageous to the seller will cause a higher sale price; cash being most advantageous to the seller.

Cash Flow
In investment property, the actual cash the investor will receive after deduction of
operation expenses and debt service (Loan payment) from his gross income.

Cash Out
To take the entire amount of a seller's equity in cash rather than to retain some interest in the property, such as a purchase money mortgage or deed of trust. Also loosely used when paying off anyone having an interest in property, thereby ending the interest.

Cashiers Check
A check drawn by a bank on itself rather than on an account of a depositor. A cashier's check is generally acceptable to close a sale without waiting for the check to clear.

CC&R's (Covenants, conditions, and restrictions)
A term used in some areas to describe the restrictive limitations which may be placed on property, in other areas, simply called restrictions.

Certificate of deposit (C.D.)
A specific sum of money deposited into a savings institution for a specified time period, and bearing a higher rate of interest than a passbook account if let to maturity. Does not have withdrawal privileges as does a passbook account. Also called a time certificate of deposit (T.C.D.)

Certificate of Occupancy
A certificate issued by a local building department to a builder or renovator, stating that the building is in proper condition to be occupied.

Certified Copy
A true copy, attested to be true by the office holding the original.

Certified Property Manger (CPM)
A professional awarded to real estate managers by the institute of designation Real-Estate Management, an affiliate of the National Association of Realtors. Address: Institute of Real Estate management 430 North Michigan Avenue Chicago, IL 60611

Certified Public Accountant (CPA)
A designation awarded to accountants by the American Institute of Certified Public Accountants (AICPA) after completing the required education required and passing a national exam. Only CPA's may audit HUD programs unless registered before 1970.

Chain of Title
The chronological Order of conveyancing of a parcel of land, from the original owner (usually the government) to the present owner.

Chattel Mortgage
A lien on personal property. Also called a security interest of financing statement.

Civil Law
1) Roman Law. The legal system derived from the Romans which is prevalent in most of the non-English speaking countries, and, to some degree, in Louisiana. Differs from Common Law of England, from which United States Law is derived.
2) Any laws which are not criminal laws.

Claim
An assertion of some right or demand.

Clear Title
See: Free and Clear

Closed End Mortgage
A mortgage that does not allow the borrower to increase the amount borrowed over the term of the mortgage. See also: Open End Mortgage.

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

Closing Costs
Expenses incidental to a sale of real estate, such as loan fees, title fees, appraisal fees, etc.

Closing Statement
The statement which lists the financial settlement between buyer and seller, and also the costs each must pay. A separate statement for buyer and seller is sometimes prepared.

Cloud on Title
An Invalid encumbrance on real property, which, if valid, would affect the rights of the owner. For example: A sells lot 1, tract 1, to B. The deed is mistakenly drawn to read lot 2, tract 1. A cloud is created on lot 2 by the recording of the erroneous deed. The cloud may be removed by quitclaim deed, or , if necessary, by court action.

Co-Maker
A surety (See which) under a loan. The co-maker is equally responsible for repayment as the borrower (maker).

Co-ownership
Ownership by two or more persons or entities. See also Equitable Ownership; Legal Owner.

Code of Ethics
See: Ethics.

Collateral Security
Most commonly used to mean some security in addition to the personal obligation of the borrower.

Commercial Paper
Negotiable instruments used in the course of business, such as promissory notes, which are bought and sold (Usually at a discount).

Commercial Property
Property which is zoned "commercial" (for business use). Property such as stores, restaurants, etc., falling between residential and industrial.

Commission
An amount, usually a percentage, paid to an agent (real estate broker) as compensation for his service. The amount to a real estate broker is generally a percentage of the sale price or total rental.

Commitment
1) Title insurance term for the preliminary report issued before the actual policy. Said report shows the condition of title and the steps necessary to complete the transfer of title as contemplated by the buyer and seller.
2) A written promise to make or insure a loan for a specified amount and on specified terms.

Common Interest Development
A general term used to describe any type of clustered buildings with shared land ownership, such as condominiums and planned developments. CID's as they are called, must have individual ownership or exclusive rigth to occupy, combined with shared ownership.

Comparison method
See: Market Data Approach.

Competitive Market Analysis (CMA)
See: Market data approach.

Competitive Market Analysis
See: Market data approach

COMPS
See: Comparables

Conditional Commitment
A loan commitment given before a borrower (buyer) is obtained, and subject to approval of the buyer by the lender.

Conditional Offer
An offer conditioned upon some event, such as the buyer being approved for a loan, an appraisal above a certain amount or a favorable termite report.

Condominium
A structure of two or more units, the interior space of which are individually owned; the balance of the property (both land and building) is owned in common by the owners of the individual units. The size of each unit is measured from the interior surface (exclusive of paint and other finishes) of the exterior walls, floors, ceiling. The balance of the property is called the common area.

Construction Cost
The total cost of building, including overhead and profits as well as land, labor, and materials.

Construction Loan
Short term financing of real estate construction, generally followed by long term financing called a "take out" loan, issued upon completion of improvements.

Contiguous
Near or close to, whether actually touching or not. Generally refers to actual touching or bordering on.

Contingency
Commonly, the dependence upon a stated event which must occur before a contract is binding. For example: The sale of a house contingent upon the buyer obtaining financing.

Contingent Fees
Fees to be paid only in the event of a future occurrence. A broker's commission is paid only if the property is sold or leased (unless otherwise agreed upon). Attorneys (especially in negligence cases) may be paid based on winning the suit and collecting damages.

Contract of Sale
In some areas of the country, synonymous with land contract. In other areas synonymous with purchase agreement.

Contractor
See: General Contractor; Subcontractor

Contractor's Overhead
Expenses over and above labor and materials, such as return on money invested, carrying costs of land, office expense, interest on loans, etc.

Contractor's Profit
The price at which property is sold, less costs of land, labor, materials, and overhead.

Conventional Loan
A mortgage or deed of trust not obtained under a government insured program, (such as F.H.A. or V.A.).

Conversion
1) A legal term referring to the "legal" changing from real to personal property (or vice versa), although there is no actual change in the property.
2) A taking of something for one's own use which was originally in his possession only to hold for the owner.
3) The changing of an apartment to a condominium.

Cooperating Broker
The broker who finds the buyer and so shares in the commission with the listing broker.

Co-Ownership
Ownership by two or more persons or entities. See also: Equitable ownership; Legal owner.

Corporate Resolution
An action taken by vote of the directors of a corporation. A title insurance company may require a corporate resolution before insuring a sale or loan made by a corporation.

Corporation
A general term encompassing any group of people "incorporating" by following certain statutory procedures. Most common type of corporation is a private one formed to carry on a business.

Correlation
The use of different appraisal methods to reach an estimate of value of a property. The methods must be weighed as to relative value in each specific appraisal.

Cost Estimating
1) In construction, the expenditure of building based on a detailed cost of materials to be used.
2) In appraisal the term is general, referring to replacement cost, but not limited to a specific method or arriving at said cost.

Cost-Plus Contract
A building contract setting the builders profit as a set percentage of actual cost of labor and materials.

Counter Offer
An offer (instead of acceptance) in response to an offer. A offers to buy B's house for X dollars. B, in response, offers to sell to A at a higher price. B's offer to A is a counter offer.

County Records
Public recorded documents by which notice is given of changes of title, liens, and other matters affecting real estate.

Cramdown
A term used in chapter 13 (wage earner restructuring debt) bankruptcy. A secured loan is reduced when the loan balance exceeds the reasonable value of the collateral security. The amount above the value becomes unsecured. Used mainly for personal property loans but now starting to be used for mortgage loan. A portion of mortgage, if it exceeds the value of the property, can become an unsecured loan.

Creative Financing
A general term which encompasses any method of financing property going beyond traditional real estate lending.

Credit
1) The financial worthiness of a borrower. The history of whether this borrower has met financial obligations on time in the past.
2) An accounting term designating money received or receivable, as opposed to debit which is money payed or payable.

Credit Report
A report on the past ability of a loan applicant to pay installment payments. Several national and local companies make such reports.

Creditor's Position
1) The portion of the value of property which is mortgaged, rather than the equity.
2) The portion of the value of property upon which is a first mortgage could be obtained.

Cubic Foot
See: Cubic Measure

Cubic Foot Cost
The cost of construction of a structure, divided by the number of cubic feet of the structure.

Cubic Measure
A system of measuring volume or space by using cubic units. Once cubic inch is 1 inch long by 1 inch wide by 1inch high; 1728 cubic inches equals 1 cubic foot; 27 cubic feet equals 1 cubic yard.

Cubic Content
The number of cubic feet in a building, measured from the exterior surfaces of the exterior walls and roof, and the interior surface of an unfinished floor to six inches below the finished surface of the floor.

Currents Assets
An accounting term meaning cash or those things which can be readily converted to cash, such as short term accounts receivable.

Current liabilities
Short term debts.

Custodian
One who is entrusted with the care and keeping of real or personal property.

Custom Builder
One who builds for a specific owner, designing the building to suit said owner's need, rather than building and then looking for a buyer.

Debt
Money owing from one person to another.

Debt Equity Ration
The ratio of the mortgage balance to the owner's equity.

Debt service
1) The periodic payment of mortgages or trust deeds on a specific property.
2) The interest payments of said mortgages or trust deeds.
3) Sometimes loosely used for the total amount owing on said mortgages or trust deeds.

Debt Ratio
The ratio, expressed as a percentage, of a borrower's monthly expenses to gross monthly income. There are two ratios. The first is the expense of the property to income. This includes the mortgage payment, taxes and insurance. The second is the total expense to income. This includes car payments, credit card payments, etc. Acceptable numbers for almost any loan would be 25% property expense to income and 35% total expense to income. The percentages may be much higher especially for a hard money mortgage.

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

Deed in Lieu
See: Deed in Lieu of Foreclosure

Deed in Lie of Foreclosure
A deed given by an owner/borrower to a lender to prevent the lender from bringing foreclosure proceedings. The validity of the deed depends to some degree on "fairness" under the circumstances, and adequacy of consideration will be considered.

Deed of Reconveyance
See Reconveyance

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

Deed Restrictions
Limitations on the use of property placed in the conveyancing deed by the grantor, which bind all future owners.

Default
An omission or failure to perform a legal duty.

Default Judgment
A judgment entered against a party who fails to appear in court at the scheduled time.

Defective Title
1) Title to a negotiable instrument obtained by fraud.
2) Title to real property which lacks some of the elements necessary to transfer good title.

Deferred Maintenance
Repairs necessary to put a property in good condition. A concern of a purchaser. An owner may have an account for such maintenance.

Deferred Payments
1) Payments to begin at a future time.
2) Installment Payments.

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

Delayed Reconceyance
A reconveyance of a deed of trust which is issued and recorded after transfer of title and issuance of title insurance. (Not showing the deed of trust). Usually occurs when the lender is in another state and will not issue the reconveyance until paid in full.

Demand
1) The quantity of goods which can be sold at a specified price, in a given market, at a particular time.
2) A letter from a lender showing the amount due in order to pay off a mortgage or trust deed.

Department of Real Estate
That department of the state government responsible for the licensing and regulation of persons engaged in the real estate business. The person heading the department is usually called The Real Estate Commissioner. Other names for the department are the Division of Real Estate and The Real Estate Commission.

Deposit
1) Money given by the buyer with an offer to purchase. Shows good faith. Also called earnest money.
2) All natural accumulation of resources (oil, gold, etc.) which may be commercially recovered and marketed.

Developer
1) Builder.
2) One who prepares the raw land for construction and then sells lots to a builder.

Development
A planned construction project, rather than simply the building of unrelated buildings.

Development Cost
See: Off-site improvements

Development Loan
A loan for the purchase of land or off-site improvements, rather than building costs. The land involved is used to secure the loan.

Discount
The difference between face value of an installment note and mortgage or deed of trust, and the present cash value.

Discount Point
See: Point (1)

Discount Points
The amount paid to increase the yield. Example: A borrower receives a loan with an interest rate of seven percent but pays the lender three points in advance. The points raise the annual percentage rate of the loan. The lender may then sell the loan at less than face value and still make a profit. Each point equals one percent of the face value of the loan.

Distress Sale
A sale of property when the seller is under extreme pressure to sell. Generally the property is sold for less than the market value.

Documentary Tax Stamps
Stamps, similar to postage stamps, affixed to a deed, showing the amount of transfer tax paid. Most states now "stamp" the deed rather than actually affixing a stamp.

Documentary Transfer Tax
A state tax on the sale of real property. Based on the sale price of equity transferred, being $.55 for each $500 of the taxable amount in most states. Some states use $1.10 per $1000; $.50 per $500; $1.00 per $1000.

Domestic Corporation
1) Refers to a state rather than a country. For example: In Delaware, a corporation organized under Delaware law would be domestic corporation. In New York, a corporation organized under Delaware law would be foreign corporation (foreign to New York). (See also: Corporation).
2) In international terms, refers to the country in which the corporation is based. In the U.S., for example U.S. based corporations are domestic.

Double Escrow
Two concurrent escrows on the same property. Escrow 1-A buys from B, Escrow 2-A sells the same property to C. A is using C's money to buy B's property. The process if illegal in many states unless full disclosure is made.

Down Payment
Cash portion paid by the buyer from his own funds, as opposed to that portion of the purchase price which is financed.

Downstroke
Slang for down payment

Draw
Portions of a construction loan, given after certain stages of completion. 2) An advance against future income.

Dry Mortgage
A lien which places no personal liability on the mortgagor, looking to the property for security.

Due-On-Sale-Clause
See: Alienation Clause

Duplex
1) Any building containing exactly two dwelling units. Most commonly refers to the units which are side by side, with a common wall and roof.
2) An apartment on two floors or levels.

Dwelling Unit (Dwelling House)
The apartment, building, or group of buildings, occupied by a person as a residence.

Earnings
Money received for labor or personal services rather than a return on capital, although corporate income from all sources described as "earnings".

Easement
A right created by grant, reservation, agreement, prescription, or necessary implication, which one has in the land of another. It is either for the benefit of land (appurtenant), such as right to cross A to get to B, or "in gross", such as a public utility easement.

Egress
A term concerning a right to come and go across the land (public of private) of another. Usually part of the term ingress and egress.

Eminent Domain
A governmental right to acquire private property for public use by condemnation, and the payment of just compensation.

Encumbrance, Incumbrance
A claim, lien, charge, or liability attached to and binding real property. Any right to, or interest in, land which may exist in one other than the owner, but which will not prevent the transfer of fee title.

Endorsement (Indorsement)
The act of the holder of a note, bill, check, or other negotiable instrument, of transferring said instrument by signing the back of the instrument, with or without qualifications.

Entrepreneur
A businessman, taking the risk of loss and gaining profit, rather than a salaried employee.

Equity
A legal doctrine based on fairness, rather than strict interpretation of the letter of the law. 2) The market value of real property, less the amount of existing liens. 3) Any ownership investment (stocks, real estate, etc.) as opposed to investing as a lender (bonds, mortgages, etc.).

Equity Build-up
The reduction of principal on a mortgage or deed of trust by periodic payments, which increases (build-up) the difference (equity) between the property value and amount of the lien.

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

Equity Loan
A loan based upon the equity in a property. The credit of the borrower is not a major factor. See Also: Personal Property Loan.

Equity Purchaser
One who purchases the equity of another in real property, either assuming or taking subject to existing mortgages or deeds of trust.

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

Escrow Account
See; Impound Account.

Escrow Instructions
Instructions which are signed by the both buyer and seller, and which enable an escrow agent to carry out the procedures necessary to transfer real property, a business, or another assignable interest.

Escrow Officer
An escrow agent. In some states, one who has, through experience and education, gained a certain degree or expertise in escrow matters.

Estate
1) The interest or nature of the interest which one has in property, such as a life estate. The estate of a deceased, real estate, etc.
2) A large house with substantial grounds surrounding it, giving the connotation of belonging to a wealthy person.

Evidence of Title
A document establishing ownership to property. Most commonly, a deed.

Exclusive Listing
A written contract between a property owner and a real estate broker, whereby the owner promises to pay a fee or commission to the broker if certain real property of the owner is sold during a state period, regardless of whether the broker is or is not the cause of the sale. The broker promises to put forth his or her best efforts to sell the property, and may make specific promises as to advertising or another promotion in certain instances.

Executed Sales
One which is final and completed.

Executor's Deed
A deed issued by the executor of an estate. (See Executor)

Expense Ratios
Formulas to determine a potential borrower's ability to repay a mortgage loan. The ratios are:
1) the monthly amount to repay all mortgage loans on the property divided by the borrower's gross monthly income and
2) the borrower's total monthly expenses divided by the gross monthly income.

Expenses of Sale
The costs which are attributed to the sale of real estate. They would include commission, loan points, title and escrow fees, documentary transfer tax, etc.

Face Value
The value of notes, mortgages, etc., as stated on the face of the instrument, and not considering and discounting.

Factoring
Purchasing accounts receivable from a business at a discount.

Fair Market Value
Price that probably would be negotiated between a willing seller and willing buyer in a reasonable time. Usually arrived at by comparable sales in the area.

Feasibility Survey
A study of an area before construction of a project, to determine the probable financial success of the project.

Federal Tax Lien
A lien attaching to property for nonpayment of a federal tax (estate, income, etc.). A federal tax lien differs from other liens in that is its not automatically wiped out by foreclosing on a mortgage or trust deed recorded before the tax lien (except by judicial foreclosure).

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

Fee Appraiser
An independent contractor, not an employee of the company requesting the appraisal.

Fee Simple
An estate under which the owner is entitled to unrestricted powers to dispose of the property, and which can be left by will or inherited. Commonly, a synonym for ownership.

FICO (Fair, ISAAC, and Company, INC.) Score
A number which "scores" credit of a mortgage loan applicant or loan applicant for another purpose. The score is based on many factors, such as too much or too little credit, past delinquencies, bankruptcy, and frequency of inquiries. There are many other factors. Lenders use the score to determine whether to make a loan and the score may also influence the interest rate charged. FAIR, ISAAC, and Company, INC. also provides insurance scores and many other business services.

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

Financing Costs
The cost of interest and other charges involved in borrowing money to build or purchase real estate.

First Mortgage
A mortgage having priority over all the voluntary liens against certain property.

First Refusal Right
A right, usually given by an owner to a lessee, which gives the lessee a fist chance to buy the property if the owner decides to sell. The owner must have a legitimate offer which the lessee can match or defense. If the lessee refuses, the property can then be sold to the offeror.

Fixed Rate Mortgage
A mortgage having a rate of interest which remains the same for the life of the mortgage.

Flexible Interest Rate
See: Variable Interest Rate

Floor Plan
The layout of a building or portion of a building (apartment, office, etc.) showing the size of the rooms and the purpose of each (bath, bedroom, etc). A good floor plan should be very important to a builder, since it will be important to a buyer or tenant.

Forbearance
The waiting for payment of a debt by a creditor after the debt becomes due.

Foreclosure
A proceeding in our out of court, to extinguish all rights, title, and interest, of the owner(s) of property in order to sell the property to satisfy a lien against it.

Foreclosure Sale
A sale of property used as security for a debt, to satisfy said debt.

Foreign Corporation
A corporation incorporated in another state. In New York, for example, a Delaware corporation would be a foreign corporation.

Formal Contract
Any of three types of contracts.
1) Contacts under seal.
2) Contracts of record.
3) Negotiable instruments.

Fractional interest:
See Divided Interest.

Free and Clear
Real property against which there are no liens, especially voluntary liens (Mortgages).

Full Disclosure
In real estate:
1) revealing all the known facts which may affect the decision of the buyer or tenant. A broker must disclose known defects in the property for sale or lease. A builder must give to a potential buyer the facts of his new development (are these adequate school facilities?; sewer facilities?; an airport nearby?; etc.).
2) A broker cannot charge a commission to buyer and seller unless both know (disclosure) and agree.

Fully Amortizing Loan
A loan of equal, regular payments which cause the principal and interest to be completely paid by the due date.

Gap Financing
1) Interim financing
2) a loan between the floor amount and full amount of a take out loan.

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

General Contractor
One who contracts for the construction of an entire building or project, rather than for a portion of the work. The general contractor hires subcontractors, such as pluming contractors, electrical contractors, etc., coordinates all work, and is responsible for payment to the said subcontractors.

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

General Partner
A member of a partnership who has the authority to bind the partnership and shares in the profits and losses. A partnership must have at least one general partner an may have more, as well as limited partners.

General Partnership
A partnership made up of general partners, without special (limited) partners.

Good Faith
Something done with good intentions, without knowledge of fraudulent circumstances, or reason to inquire further.

Grace Period
A period of time past the due date for a payment (mortgage, insurance, etc.) during which time a payment may be made and not considered delinquent.

Grant
To transfer an interest in real property; either the fee or a lesser interest, such as an easement.

Grand Deed
One of the many types of deeds used to transfer real property. Contains warranties against prior conveyances or encumbrances. When title insurance is purchased , warranties in a deed are of little practical significance.

Grantee
One to who a grand is made. Generally, the buyer.

Grantor
One who grand property of property rights.

Gross Profit
The total profit before deductions. A general term which varies, depending upon accounting procedures.

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

Hard Money Mortgage
A hard money loan is a specific type of asset-based loan financing through which a borrower receives funds secured by the value of a parcel of real estate.

Heirs and Assigns
Words usually found in a deed, showing the interest and grantee is receiving. A deed to "A, his heirs and assigns", would grant the property to A, with the right to assign said property or have it decent to A's heirs upon A's death. This would be considered a fee interest (estate). This would differ from, for example, a life estate granted to A, which would terminate upon A's death and could not be inherited by A's heirs.

Highest and best use
The use of land which will result in its highest value. In appraisal this cannot be merely theoretical but must be realistic in that the use must be legal (proper zoning, etc.), physically achievable and financially feasible.

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

Home Owner's Association
An association of people who own homes in a given area, formed for the purpose of improving or maintaining the quality of the area. 2) An association formed by the builder of condominiums or planned developments, and required by statute in some states. The builder's participation as well as the duties of the association are controlled by the stature.

Hypothecate
To mortgage or pledge without delivery of the security to the lender.

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

Improved Land
Land having either on-site improvements, off-site improvements, or both.

Improved Value
An appraisal term encompassing the total value of land and improvements (buildings) rather than the separate values of each.

Improvements
Generally, buildings, but may include any permanent structure or other development, such as a street, utilities, etc.

In Perpetuity
Of endless duration; forever.

Income
Generally, any increase in the assets of a person or corporation caused by labor, sales, or return on invested funds. May be different for tax purposes.

Income Approach
See: Income Capitalization Approach.

Income Capitalization Approach
Estimating value (v) by dividing Net Operating Income (N.O.I.) by an overall capitalization rate R+N.O.I./R=v.

Independent Appraisal
An appraisal by one who has no interest in property or nothing to gain from a high or low appraisal.

Independent Contractor
The term is most important as used to describe the relationship or broker and salesperson. The salesperson is either an employee or independent contractor. If an employee, the broker must withhold income tax and pay social security, provide workman's compensation when applicable, and may be liable for some negligent acts of the salesperson while on the job, such as automobile accidents. The broker voids all of these responsibilities if the salesperson is an independent contractor. The greater the control over the salesperson, the more likely the salesperson will be considered an employee. Some example of this control would be required office hours or attendance at regularly scheduled meetings, as well as payment or reimbursements by the broker for license fees, auto expenses, etc.

Individual Retirement Account
See: IRA

Indorsement (Endorsement)
The act of the holder of a note, bill, check, or other negotiable instrument, of assigning said instrument by signing the back of the instrument, with or without qualifications.

Inquiry
An item on a consumer's credit report showing that there has been a request for a copy of that person's credit report. An excessive number of inquiries may lower the person's FICO SCORE.

Insolvent
Incapable of meeting one's current debt.

Inspection
An examination of property for various reasons, such as a termite inspection, inspection to see if required repairs were made before funds are released, etc.

Installment Contract
A method of purchasing by installment (usually monthly) payments. When referring to real property, it is usually called a land contract.

Installment Note
A note calling for payment on both principal and interest in specified amounts, or specified minimum amounts, at specific intervals.

Insurable Value
Value of property for insurance purposes. Bases on the value of the property, less indestructible parts (land) for fire insurance. For title insurance purposes, the sales price (market value) is used.

Insurance
A contract under which, for a consideration, one party (the insurer) agrees to indemnify another (the insured) for a possible loss under specific conditions. May be loss of life, health, property, or property rights.

Interest
1) A share or right in some property.
2) money charged for the use of money (principal).

Interest Only Mortgage
A mortgage under which the principal amount borrowed is repaid in one payment. Periodic interest payments are made.

Interest Only Note
See: Interest Only Mortgage.

Interest Rate CAP
The maximum interest rate increase of an adjustable mortgage loan. For example: A 12% loan with a 5% interest rate cap would have maximum interest for the life of the loan which would not exceed 17%.

Interim Financing
Temporary financing, usually for construction.

Interim Loan:
See: Interim Financing

Investment
The putting of money with the intent to make a profit or receive interest./

Investment Property
Generally, any property purchased for the primary purpose of profit. The profit may be from income or from resale.

Investment Yield
The gain from an investment in real property, including both income and resale. Expressed as a percentage of the amount invested.

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

Irrevocable
That which cannot be revoked or recalled, such as certain trusts, contracts, and other legal relationships.

Joint
Meaning two or more, such as joint tenants, joint adventures, etc. 2) The point of union or connection of two members, whether pipes, boards, or other members.

Joint Ownership
Property owned by more than one person or entity.

Joint Tenancy
An undivided interest in property, taken by two or more joint tenants. The interests must be equal, accruing under the same conveyance, and beginning at the same time. Upon the death of a joint tenant, the interest passes to the surviving joint tenants, rather than to the heirs of the deceased.

Judgment (Judgement)
The decision of a court of law. Money judgments, when recorded, become a lien on real property of the defendant.

Judicial Foreclosure
Foreclosure through court action rather than by a power of sale. Judicial foreclosure is sometimes necessary to remove certain tax liens.

Judicial Sale
A sale made under court order, by one court appointed, rather than a voluntary sale by the owner, or one appointed by the owner.

Junior Mortgage
Any mortgage of lesser priority then a first mortgage.

Land Bank
An accumulation of land held for future use.

Land Contract
An installment contract for the sale of land. The seller (vendor) has legal title until paid in full. The buyer (vendee) has equitable title during the contract term.

Land Loan
A loan with collateral security of unimproved land. Usually the loan to value ratio is less than on improved land.

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

Latent defect
A hidden or concealed defect. One which could not be discovered by inspection, using reasonable care. In legal descriptions, a latent defect may be corrected, and totally new description not necessary.

Lease
An agreement by which an owner of real property (lessor) gives the right of possession to another (lessee), for a specified period of time (term) and for specified consideration (rent).

Lease with option to purchase
A lease under which the lessee has the right to purchase the property. The price and terms of the purchase must be set forth for the option to be valid. The option may run for the length of the lease or only for a portion of the lease period.

Leasehold Improvements
Improvements made by the lessee. The term is used in condemnation proceedings to determine the portion of the award to which the lessee is entitled.

Legal Description
A method of geographically identifying a parcel of land, which is acceptable in a court of law.

Legal Name
First and last name. Middle name included, omitted or incorrect will not matter. Today full names (for identification purposes) are required in many instances, but only for identification purposes (to distinguish between two men named John Smith, for example).

Legal Notice
The notice required by law in a particular case. May be actual notice, constructive notice, etc.

Legal Owner
The term has come to be used as a technical difference from the equitable owner, and not opposed to an illegal owner. The legal owner has title to the property, although the title may actually carry no rights to the property other than a lien.

Legal Title
Usually title without ownership rights, such as the title placed in a trustee under a deed or trust, or the title in a vendor under a land contract.

Lender
Any person or entity advancing funds which are to be repaid. A general term encompassing all mortgages, and beneficiaries under deeds of trust.

Letter of Credit
A letter, usually from a bank, requesting a person or company to extend credit to a certain person or company, and guarantying payment. Most commonly used in the purchase of good from another country. The letter may revocable or irrevocable, but most parties insist on irrevocable.

Letter of Intent
A formal method of stating that a prospective developer, buyer, or lessee, is interested in property. Not an offer and creates no obligation. However, a builder who wants to build an office building, for example, may influence a lender by showing letters of intent from major prospective tenants.

Liability
A general term encompassing all types of debts and obligations.

Lien
An encumbrance against property for money, either voluntary or involuntary. All liens are encumbrances but all circumstances are not liens.

Limited Partnership
Used in many real estate syndications; a partnership consisting of one or more general partners who conduct the business and are responsible (liable) for losses, and one or more special (limited) partners, contributing capital and liable only up to the amount contributed.

Line of Credit
An amount of money a borrower may obtain from a bank without a special credit check. The money is generally for business purposes and the amount would not include the borrower's own home loan and other personal secured loans.

LIS Pendens
A legal notice recorded to show pending litigation relating to real property, and giving notice that anyone acquiring an interest in said property subsequent to the date of the notice may be bound by the outcome of the litigation.

Listing
An agreement between an owner of real property and a real estate agent, whereby the agent agrees to secure a buyer or tenant for specific property at a certain price and terms in return for a fee or commission.

Living Trust
A trust which is in effect during the life of the settler, rather than upon his death (testamentary trust).

Loan Origination Fee
A one time set up fee charged by the lender.

Loan Package
The file of items necessary for the lender to decide to give or not give a loan. These items would include the information on the prospective borrower (loan application, credit report, financial statement, employment letters, etc.), and information on the property (appraisal, survey, etc.). There may be a charge for "packaging" the loan.

Loan Servicing
The bookkeeping and collection of a loan. It may be done by the lender or by another for the lender.

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

Long Term Financing
A mortgage or deed of trust for a term of ten years or more, as distinguished from constructions loans or interim loans.

Maker
One who executes (signs) as the maker (borrower) of a note.

Market Data Approach
Appraising the value of a property by comparing the price of similar properties (comparables) recently sold. The degree of similarity (Physical characteristics and locations) of the properties and the circumstances of the sale (time and terms) are the important considerations.

Market Price
The price a property brings in a given market. Commonly used interchangeably with market value, although not truly the same.

Market Rent
See: Economic Rent.

Master Plan
A zoning plan for an entire governmental subdivision, such as a city. A comprehensive plan to allow a city to grow in an orderly and sound manner, both economically an ecologically.

Material Fact
A fact upon which an agreement is based, and without which, said agreement would not be made.

Mechanic's Lien
A lien created by statue for the purpose of securing priority of payment for the price or value of work performed and materials furnished in construction or repair of improvements to land, and which attaches to the land as well as improvements.

Mortgage
To hypothecate as security, real property for the payment of debt. The borrower (mortgagor) retains possession and use of the property. 2) the instrument by which real estate is hypothecated as security for the repayment of a loan.

Mortgage Broker
One who, for a fee brings together a borrower and lender, and handles the necessary applications for the borrower to obtain a loan against real property by giving a mortgage or deed of trust as security. Also called a loan broker.

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

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

Negative Cash Flow
When the income from an investment property does not equal expenses. The owner must come up with cash each month to meet expenses.

Net Operating Income (N.O.I.)
The difference between the effective (also called adjusted) gross income of a property, and the operating expenses (not including debt service and book depreciation).

Net Profit
Remainder after deduction of all expenses from income for a given period. Generally classified as either net before taxes, or net after taxes.

Net Worth
The difference between total assets and liabilities of an individual, corporation, etc.

Nonconforming Use
A property which does not conform to the zoning of the area. Usually, the property was built in conformity and then the zoning was changed.

Nonjudicial Foreclosure Sale
Sale by a trustee under a deed of trust, or mortgage under a power of sale of a mortgage. There is no court (judicial) proceeding.

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

Notary Public
One who is authorized by the state or federal government, to administer oaths, and to attest to the authenticity of signatures. A federal authorization may extend the authority to attest to the authenticity of certain documents, and to act as a notary in foreign countries.

Note
A unilateral agreement containing an express and absolute promise of the signer to pay a named person, or order, or bearer, a definite sum of money at a specified date or on demand. Usually provides for interest and, concerning real property, is secured by a mortgage or trust deed.

Notice of Default
A notice filed to show that the borrower under a mortgage deed of trust is in default (behind on payments).

Occupancy
With reference to land, the word has become synonymous with possession.

On-Site Improvements
Structures erected permanently for use on a site, such as buildings, fences, etc.

On-Site Manager
A property manager who lives on the property being managed. The law in most areas requires an on-site manager for apartments over a specified number of units.

Origination Fee
A fee made by a lender for making a real estate loan. Usually a percentage of the amount loaned, such as one percent.

Owner Occupied
Property physically occupied by the owner.

Owner of Record
The owner of property according to the records of the county recorder.

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

Partial Release
A release of a portion of property covered by a mortgage. A sub divider will obtain a partial release as each lot is sold, upon payment of an agreed amount. In areas where the sub divider is not usually the builder, it may be necessary to sell groups of lots to obtain a partial release. In areas where deeds of trust are used instead of mortgages, a "partial reconveyance" is the document used.

Per Annum
Yearly, annually.

Personal Property
Any property which is not designated by law as real property.

P (Principal and Interest)
Used to indicate what is included in a monthly payment on real property. If the payment includes only principal and interest, property taxes and hazard insurance would make the total payment higher.

PITI (Principle, Interest, Taxes and insurance)
Used to indicate what is included in a monthly payment on real property. Principal, interest, taxes and insurance are the four major portions of a usual monthly payment.

Plans
All drawings necessary to a construction project, including the subcontractors' drawings.

Point
1) One Percent of the amount of the loan.
2) A commission paid for arranging a loan.

Policy
A general term used to describe all contracts of insurance.

Positive Cash Flow
See: Cash Flow, Negative Cash flow.

Power of Attorney
An authority by which one person (principal) enables another (attorney in fact) to act for him.
1) General power-authorizes sale, mortgaging, etc. of all property of the principal. Invalid in some jurisdictions.
2) Special Power- Specifies property, buyers, price and terms. How specific it must be varies in each state.

Preliminary Title Report
A report showing the condition of title before a sale or loan transaction. After completion of the transaction, a title insurance policy is issued.

Prepaid Interest
Interest paid before becoming due.

Prepaid Items
Those expenses of property which are paid in advance and will usually be prorated upon sale, such as taxes, insurance, rent, etc.

Prepayment Clause
A clause in mortgage that determines whether the borrower may make additional principal payments without penalty and the limit, if any, of the additional payments.

Repayment Penalty
A penalty under a note, mortgage, or deed of trust, imposed when the loan is paid before it is due.

Present Value
1) The current appraised value of property.
2) The current value of money that will be received at a future date.

Principal
1) The person who gives authority to an agent or attorney.
2) Amount of debt, not including interest. The face value of a note, mortgage, etc.

Principal Residence
The prime or main living quarters. It may be based on time spent at the location or declared by the resident to be his/her principal residence. It is important, for example, for tax purposes and declarations of homestead.

Priority
That which comes first in time or importance. Regarding liens, the time of recording usually establishes priority.

Private Property
Property owned by a person, group, or corporation, or other entity, not a governmental body.

Pro Rate
To divide in proportionate shares, such as taxes, insurance, rent, or other items which buyer and seller share as of the time of closing, or other agreed upon time.

Proceeds
A term commonly used to describe the money that goes to the seller of property after costs of the sale and payoffs. The net cash to the seller.

Profit
The difference of income less expenses. Further broken down into net profit and gross profit.

Profit and Loss Statement
A statement showing the income and expenses of a business over a stated time, the difference being the profit or loss for a period.

Promissory Note
A promise in writing, and executed by the maker, to pay a specified amount during a limited time, or on demand, or at sight, to a named person, or on order, or to bearer.

Property Management
The branch of the real estate business dealing with the management of property. The property may be a rented house or a large office or industrial complex. The duties may range from merely collecting rents to complete management of all maintenance and may also include being leasing agents or sales agent.

Property Tax
Generally, a tax levied on both real and personal property; the amount of the tax is dependent on the value of the property.

Purchase Money Mortgage
A mortgage given from buyer to seller to secure all or a portion of the purchase price. 2) Any mortgage from which the funds are used to purchase the property.

Purchase Money Trust Deed
See: Purchase Money Mortgage.

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

Rate of Return
The annual percentage of return, both of and on invested capital.

Raw Land
Land in its natural state. Land which has not been subdivided into lots, does not have water, sewers, streets, utilities, or other improvements necessary before a structure can be constructed.

Real Estate Owned (R.E.O.)
Most commonly refers to property owned by a lender from foreclosure of mortgages or trust deeds. This property is usually for sale.

Receipt
A written acknowledgement or admission that something has been received. Has no other legal effect, and does not in itself affirm any contractual obligation.

Reciprocity
A mutual exchange of privileges by states, allowing attorney, real estate brokers, and others to practice in one state while being licensed in another.

Reconveyance
An instrument used to transfer title from a trustee to the equitable owner of real estate, when title is held as collateral security for a debt. Most commonly used upon payment in full of a trust deed. Also called a deed of reconveyance or release.

Recorder's Office
The county office where instruments are recorded, giving public notice.

Recording
Filing documents affecting real estate property as a matter of public record, giving notice to future purchasers, creditors, or other interest parties. Recording is controlled by statue and usually requires the witnessing and notarizing of an instrument to be recorded.

Recording Fee
The amount paid to the recorder's office in order to make a document a matter of public record.

Referral
In the real estate business, generally the act of a past client recommending a real estate broker or agent to one currently a buyer or seller. Also, any recommendation by one real estate agent of another for a referral fee.

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

Reinstatement
1) Payment of a note, mortgage, deed of trust, etc., to bring it from default to good standing.
2) Restoring the previously used entitlement of a veteran to enable the veteran to purchase property under a VA program. (Also called restoration eligibility.)

Release
An instrument releasing property from the lien of the mortgage, judgment, etc. When a trust deed is used, the instrument is called a reconveyance. In some areas, a "discharge" is used instead of a release.

Renegotiation
An attempt to agree on new terms to an existing contract (in real estate, usually a lease). A lease, for example, may call for renegotiation of rent after 5 years. Since renegotiation needs argument of the parties, a set formula to determine the rent, such as an escalation clause, would not be renegotiation. Arbitration may be provided for in the event renegotiation fails.

Replacement Cost
The current cost to construct a building having the same utility as the subject building but using modern techniques and material.

Request for Reconveyance
A request by a beneficiary under a deed of trust to the trustee, requesting the trustee to reconvey the property (release the lien) to the trustor, usually upon payment in full.

Rerecording
The recording of a deed for a second time to correct an error contained in the deed when originally recorded. Also called a correction deed, confirmation deed, or reformation deed.

Residual
Amount remaining. Example: The income remaining after deducting for vacancies and operating expenses of apartment units. The amount can then be divided by the market capitalization rate to estimate the present value of the property.

Risk
In lending, the chance of being repaid. High risk may result from poor credit, a high loan to value ratio, poor general economic conditions etc. Generally, the greater the risk, the greater the required return (higher interest rate and points).

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

Seed Money
A general term describing any initial funds used to begin a project. Usually not the major source or amount of the funds necessary to complete the project.

Senior Mortgage
The mortgage with higher priority than the mortgage to which it is compared. Example: A first (in time) mortgage would be senior to a second (in time) mortgage. A second mortgage senior to a third. The priority can change by subordination, making a second mortgage senior to a first, a third senior to a first or second, etc.

Servicing Agent
The person or entity that collects payments and performs other functions for the holder of a loan.

Short Sale
A sale of a property which includes some forgiveness of debt by the lender under a mortgage or trust deed. The amount of debt forgiven may be considered income to the seller and taxable.

Simple Interest
Interest computed on principal alone, as opposed to compound interest.

Single Family House
A general term originally used to distinguish a house designed for use by one family from an apartment house. More recently, used to distinguish a house with no common area from a planned development or condominium.

Site Analysis
The study of a specific parcel of land (and the surrounding area) to determine its suitability for a specific use.

Soft Costs
See: Indirect Construction Costs.

Sole Proprietorship
Individual ownership of a business as opposed to a partnership or corporation.

Solvent
1) Financially able to meet one's current debts.
2) A liquid used to dissolve a substance, usually to remove it.

Special Assessment
Lien assessed against real property by a public authority to pay costs of public improvements (sidewalks, sewers, street lights, etc.), which directly benefits the assessed property.

Special Purpose Property
A building which, by it's design, cannot be used for other than the original purpose intended, without extensive remodeling, such as a hospital or church. Also called a single purpose property.

Square Foot
The area contained by boundaries of 1 foot long and 1 foot wide. There are 9 square feet in 1 yard.

Standard Coverage Policy
A title insurance policy used in several states, not having as broad a coverage as the nationally recognized American Land Title Association (A.L.T.A.) policies.

Statement of Information
A confidential form filled out by buyer and seller to help a title company determine if any liens are recorded against either. Very helpful when people with common names are involved. Also called a statement of identity.

Straight Note
A promise to repay a loan, signed by the debtor and containing the date executed, amount owing and to whom, date due (or on demand), rate of interest and how it is payable. A straight note is not amortized.

Straight-Term Mortgage
A mortgage calling for principal to be paid in lump sum at maturity.

SubContractor
One who works under a general contractor (builder), such as an electrical contractor, cement contractor, etc.

Subdivision
Commonly, a division of a single parcel of land into smaller parcels (lots) by filing a map describing the division, and obtaining approval by a government commission (city of country). The exception is a condominium, which is sometimes called a "one lot subdivision".

Subordination Agreement
An agreement by which an ecumbrance is made subject (junior) to a junior encumbrance. For example: A loan on vacant land is made subject to a subsequent construction loan.

Substitution of Trustee
A document which is recorded to change the trustee under a deed of trust. A simple procedure in some states, more regulated in others.

Succession
The passing of real estate property by will or inheritance, rather than by grant deed or any other form of purchase.

Supply and Demand
The economic theory that when supply exceeds demand, prices fall, and when demand exceeds supply, prices rise.

Syndicate
An association of individuals, formed for the purpose of carrying on some particular business venture in which the members are mutually interested.

Take Out Loan
The "permanent" (long term) financing of real estate after completion of construction.

Tax lien
1) A lien for nonpayment of property taxes. Attaches only to the property upon which the taxes are unpaid.
2) A federal income tax lien. May attach to all property of the one owning the taxes.

Tax Rate
Traditionally the ratio of dollars of tax per hundred or per thousand dollars of valuation. Modernly, has become to be expressed as a percentage of valuation.

Tax Sale
Public sale of property at auction by governmental authority, after a period of nonpayment of property tax.

Tenancy In Common
An undivided ownership in real estate by two or more persons. The interest need not be equal, and, in the event of the death or one or the owners, no right of survivorship in the other owners exist.

Tenant
1) A holder of property under a lease or other rental agreement.
2) Originally, one who had the right to possession, irrespective of the title interest.

Tenant Improvements
Improvements to land or building to meet the needs of tenants. May be new improvements or remodeling, and be paid for by the landlord, tenant, or party by each.

Term
A period of time, such as the term of a lease.

Terminate
To end- to cause to stop or end.

Terms
The consideration, other than price, in a sale, lease, mortgage, etc. For example: the way the money will be paid, time to take possession, conditions, etc.

Third Party
A general term which includes anyone not a party to a contract, agreement, instrument, etc. However, statues or court decisions may limit the definition in certain cases to, for instance, exclude representatives of the parties to a contract, etc.

Title Defect
See: Defective Title

Title Insurance
Insurance against loss resulting from defects of title to a specifically described parcel of real property. Defects may run to the fee (chain of title) or to encumbrance.

Title Insurance Company
A company which issues insurance regarding title to real property.

Title Order
An order for a search of the title to some parcel of property, eventually leading to the issuance of a policy of title insurance.

Title Plant
A filing of all recorded information to real property, paralleling the records of the county recorder's office, although the filing system may be different.

Title Report
See: Preliminary Title Repost

Title Search
A review of all recorded documents affecting a specific piece of property to determine the present condition of title.

Trust
A fiduciary relationship under which one holds property (real or personal) for the benefit of another. The party creating the trust is called the settlor, the party holding the property is the trustee, and the party for whose benefit the property is held is called the beneficiary.

Trust Account
An account used by brokers, escrow agents, or anyone holding money in trust for another.

Trust Deed
See: Deed of Trust

Trustee
1) One who is appointed, or required by law, to execute a trust.
2) One who holds title to real property under the terms of a deed of trust.

Trustee's Deed
A deed by a trustee under a deed of trust, issued to a purchaser at auction, pursuant to foreclosure.

Trustee's Sale
A sale at auction by a trustee under a deed of trust, pursuant to foreclosure proceedings.

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

Undivided Interest
A partial interest by two or more people in the same property, whether the interest of each is equal or unequal.

Uninsurable Title
Title to real estate that a title insurance company refuses to insure. The defect foes to the fee (ownership) or a claim or encumbrance that could lead to the loss of fee title in the party seeking insurance.

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

Vacancy
A place which is empty (vacant). The term is generally used to describe a property available for rent.

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

Vacancy Rate
See: Vacancy Factor

Vacant Land
Land without buildings. May or may not have improvements, such as grading, sewers, etc.

Verification
Confirmation of truth, correctness, or authenticity. Done by affidavit, oath, or deposition, all of which require sworn statements.

Verification of Deposit (VOD)
A written request (form) sent to an employer to check the accuracy of information supplied by a potential borrower on a loan application regarding the amount of the borrower's funds.

Verification of Employment (VOE)
A written request (form) send to an employer to check the accuracy of information supplies by a potential borrower on a loan application regarding the borrowers' employment history.

Voucher System
Payment of subcontractors by issuing vouchers that are redeemed by the construction lenders. The purpose is to make sure the payment reaches the subcontractors and avoids mechanics liens.

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

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

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

Working Capital
Cash, or assets which are readily convertible to cash, used to carry on a business.

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

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

Zero Interest Mortgage
A note and mortgage under which interest accrues but is not paid until the end of the term of the loan.