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Glossary
of Regentrification Terms
A
AAA
tenant: A rating given to a prime tenant
with the highest credit rating. The term
is often used to describe the credit rating
of a retail store. For example, a developer
who plans to build a shopping center will
seek a "triple A" tenant to help secure
financing.
Absorption
rate: A rate that is a forecast of how
quickly properties can be sold or leased
in a given area. For example, if a developer
can lease 20% of the units available to
the market in a given area for a given time,
the absorption rate is 20 percent.
Abstract
of title: A condensed history of the
title of a property. An abstract of title
should be a chronological history of recorded
instruments that affect the title of the
subject property. In some states, an attorney
does a title search using an abstract. After
a title search, the attorney issues an opinion
that can be used to obtain title insurance.
Abstract
of title: A summary of the public records
relating to the title to a particular piece
of land. An attorney or title insurance
company reviews an abstract of title to
determine whether there are any title defects
which must be cleared before a buyer can
purchase clear, marketable, and insurable
title.
Abut:
Connect or join. If two pieces of property
touch each other, they abut each other.
Abutment:
A load-bearing vertical member of a structure.
A wall or a column are examples of abutments.
Acceleration
clause: A clause in a note, bond, mortgage
or deed of trust giving the lender the right
to demand the remaining balance due and
payable before its original date because
regular mortgage payments are not made or
for breach of other conditions of the mortgage.
Accessory
building: A building or structure detached
from but on the same property as a main
building. Examples of accessory buildings
are garages, storage buildings and guest
houses.
Accident
and health premium: A premium paid by
a mortgagor for an insurance policy to ensure
the continuance of mortgage payments if
the borrower is disabled or ill.
Accommodation
party: One who accommodates another
by signing a note or a bill without receiving
compensation (a note being a negotiable
instrument such as a promissory note).
Accrued
interest: Interest earned but not paid
since the last due date.
Acoustical
tile: Tile that absorbs sound. Acoustical
tile is often used in the ceilings of apartment
units and offices.
Acre
(AC): Land that measures 43,560 square
feet. A lot 208.71' x 208.71' is 4,840 square
yards, 4,047 square meters, 160 square rods,
0.4047 hectare or 43,560 square feet.
Act
of God: An event that causes damage
by nature such as a flood, earthquake or
winds; an occurrence not caused by man.
Action
to quiet title: A court action to establish
ownership of real property. This court action
usually removes any interest or claim to
title of real estate. The action results
in removing any cloud on the title. Normally
a lender will not commit to a mortgage with
a cloud on the title. If the complainant
is successful in the court action, the title
is made quiet, or is clean.
Ad
valorem: A method of taxation using
a fixed proportion of property value; for
example, real estate taxes collected at
the rate of a specific dollar amount of
appraised value or assessment. People use
the ad valorem method as a formula to decide
how much tax to pay the government. A commonly
used formula for computing taxes is as follows
(assumptions: properties are assessed at
25% of valuation, appraisal is $100,000
and the tax rate is $7.50 per $100): $100,000
x 25% = $25,000 1Ú2 $100 = 250 ($100 units),
250 x $7.50 = $1,875 1Ú2 12 (12 months)
= $156.25 per month
Adaptive
reuse: Providing a new use for an older,
but sound, structure. An example would be
an abandoned warehouse converted into business
or residential condominiums.
Add-on
interest: Interest added to the amount
of the loan on the front end, or beginning
of the loan repayment period. The balance
is then paid by installments. This form
of interest is much more expensive than
simple interest paid on the entire amount
for the entire term of the loan.
Adjoin:
Connect or join. If two pieces of property
touch each other, they adjoin or abut each
other.
Adjustable
living expenses: Expenses you can change,
such as costs of groceries, utilities, telephone.
Adjustable
Mortgage Loans (AML): See Adjustable
Rate Mortgage
Adjustable-Rate
Mortgage (ARM): A mortgage where the
interest rate is not fixed, but changes
during the life of the loan in line with
movements in an index rate. The rate is
usually based on indexes tied to the nation's
economy. You may also see ARMs referred
to as AMLs (adjustable mortgage loans) or
VRMs (variable-rate mortgages)
Adjusted
basis: The original cost of the property
plus improvements (including what it cost
to sell the property), less depreciation.
Calculate the gain on the sale by subtracting
the adjusted basis from the sale price.
Advance:
To give someone a draw or payment by making
them a loan.
Affordable
Housing Program (AHP): A program of
the Federal Home Loan Bank system which
allows the Regional Banks of the System
to make subsidized funds available through
member institutions for the production of
affordable housing to serve families below
80 % of their area median income (AMI).
Agrarian:
Something that relates to land or to a distribution
or division of land.
Agreement
of sale: Known by various names, such
as contract of purchase, purchase agreement,
or sales agreement according to location
or jurisdiction. A contract in which a seller
agrees to sell and a buyer agrees to buy,
under certain specific terms and conditions
spelled out in writing and signed by both
parties.
Air
rights: The right to use the space or
air above the ground but not the ground
itself. Air rights can be sold or leased.
Ownership of land includes air rights above
the property. Some use of air rights, such
as traveling through airspace by airplane
no longer require the approval of the property
owner.
Alcove:
A recessed room connected to a main or larger
room.
Alienation
clause: A clause closely associated
in meaning with Due-On-Sale Clause and Acceleration
Clause. An alienation clause in a mortgage
can give the lender the option to call the
loan (declare the entire balance due) when
the property owner transfers ownership,
title or interest without the lender' s
consent.
Alienation:
A transfer or conveyance of property. Alienation
is voluntary when it is with the consent
of the owner. Involuntary alienation is
a transfer of property without the consent
of the owner, as in a foreclosure, adverse
possession and eminent domain.
All
Inclusive Trust Deed (AITD): Also known
as a Wraparound Mortgage. A junior lien
on a property which encompasses the senior
financing. Enables the borrower to increase
the amount of borrowing without paying off
the original loan or paying the higher interest
rates associated with other types of secondary
financing. The borrower makes one payment
(usually to the seller) from which the senior
financing is paid with the balance going
to ward the holder of the Note. May be advantageous
to the seller in that he can experience
an additional return on money (the senior
financing) which he never loaned.
All-Inclusive
Trust Deed (AITD): A new deed of trust
securing a balance due on an existing note
plus new funds advanced. This technique
is similar to a wraparound mortgage.
Allodial
system: Ownership of land with the owner
having full and absolute dominion over the
property. This system is the basis for our
property rights in the United States. A
contrasting system is the feudal system,
which gives ownership to a king or sovereign
who gives rights to the citizenry to occupy
the land for a period of time.
Allowance
for vacancy and income loss: An allowance
used on pro-forma or profit-and-loss projections
for income properties. You subtract an allowance
for vacancy from gross income to decide
net effective income (income before expenses).
An investor cannot use rental property that
is 100% occupied. Depending on the market
area, the vacancy allowance for income properties
such as apartments is usually from 5% to
10% of the gross rental.
Alluvion:
The gradual building up of soil deposited
by water against a shore.
Alluvium:
Soil deposited by accretion along the shore
or bank of a river.
Amenity:
A natural or man-made feature that increases
the value of property. Examples would be
a view of a golf course or the ocean, or
a beautifully landscaped yard.
American
Bankers Association (ABA): A professional
organization of banks based in Washington,
D.C., that lobbies the federal government
and monitors federal and state laws and
regulations on issues pertinent to the banking
industry.
American
Institute Of Architects (AIA): A professional
organization of architects. All registered
architects subscribe to AIA' s standards
of ethical practice.
American
Institute Of Certified Public Accountants
(AICPA): A professional organization
of certified public accountants. AICPA is
responsible for developing "GAAP" accounting
-- generally accepted accounting principles.
AICPA awards the CPA designation.
American
Institute Of Real Estate Appraisers (AIREA):
Formerly,.a member organization of the National
Association of REALTORS (NAR). AIREA severed
its affiliation with NAR in 1990 and merged
with the Society of Real Estate Appraisers
to form The Appraisal Institute. The Appraisal
Institute officially began operation on
January 1, 1991.
American
Land Title Association (ALTA): An organization
comprising title insurance companies, abstractors
and attorneys specializing in real property
law. ALTA has adopted many title insurance
policy forms that standardize coverage nationally
for property owners and lenders. Many states
require ALTA standardized title insurance
policies.
Amortization
schedule: A list showing the payment
number, interest payment, principal payment,
total payment and unpaid principal balance.
People sometimes call an amortization schedule
a curtail schedule.
Amortization
schedule: A timetable for payment of
a mortgage showing the amount of each payment
applied to interest and principal and the
remaining balance.
Amortization:
A payment plan which enables the borrower
to reduce his debt gradually through monthly
payments of principal. Fully amortized loans
are paid in full at the end of the loan
term.
Amortization:
Loan amortization is paying off a debt or
mortgage, usually by monthly payments. Regardless
of whether a loan is a level payment mortgage,
graduated payment mortgage, adjustable graduated
mortgage or variable-rate mortgage, if it
is an amortized loan there will be a portion
for interest and a portion for principal
reduction in every payment of the loan.
Amortization:
The repayment of loan principal through
equal payments over a designated period
of time.
Amount
financed: The base loan amount without
regard to closing costs, discount points
or mortgage insurance premiums. This dollar
amount is associated with a disclosure statement
used in compliance with the Truth-in-Lending
Act.
Ampere:
Measure of electrical current equal to the
current produced by the force of one volt
through the resistance of one ohm.
Anaconda
mortgage: A mortgage that uses the subject
property as collateral for all debts from
various loans owed to the lender. Courts
may disagree with what an anaconda mortgage
intends since they may require a direct
relationship between each loan and the collateral
acquired by the loan proceeds.
Anchor
bolt: A bolt that attaches the sill
of a house to the foundation wall.
Anchor
tenant: A retail store in a shopping
center used as a major draw to the center.
The presence of an anchor tenant helps secure
financing for the center and enhances the
chance of success for other tenants as it
draws the public to its store. The store
is normally part of a major chain and is
a name easily recognized by the public.
Depending on the size of the shopping center,
there can be several anchor tenants.
Ancillary
income: Income that is secondary in
nature and not the main reason for being
in the business; income that an investor
would not receive if they were not in a
particular business.
Annex:
To attach or add; to add to something else.
Annual
Debt Service (ADS): The total amount
of principal and interest to be paid each
year to satisfy the obligations of a loan
contract.
Annual
Percentage Rate (APR): A measure of
the cost of credit, expressed as a yearly
rate. It includes interest and points as
well as other charges. It provides consumers
with a good basis for comparing the cost
of any loan, including a proposed mortgage
loan.
Annual
Percentage Rate (APR): A method for
calculating an interest rate to the interest
collected, discount points charged to either
purchaser or seller or both, certain costs
related to closing and mortgage insurance
premiums.
Annual
percentage rate or APR: The cost of
a borrower's credit as a yearly rate. Defined
by the federal Truth in Lending Act, it
includes finance charges as well as the
contractual interest rate.
Annuity:
An assured income for life or for a given
time. This term normally relates to the
insurance industry, but is sometimes used
in comparison with certain kinds of high-quality
income from real estate investments.
Appointments:
Decorative items such as furnishings and
equipment in a building.
Apportionment:
A division of expenses, liabilities, responsibilities
or property among individuals.
Appraisal
institute: An organization that officially
began operation on January 1, 1991. The
Appraisal Institute is the result of a merger
of the former American Institute of Real
Estate Appraisers (AIREA) and the Society
of Real Estate Appraisers. The surviving
designations are the MAI (Member of the
Appraisal Institute) and SRA (Senior Residential
Appraiser).
Appraisal
report: A written opinion of value.
The report contains the estimate of value;
date of valuation; certification and signature
of the appraiser; the purpose, qualifying
conditions and description of the subject
property and its ownership; a neighborhood
description; the approaches to value; and
the final determination of value. An appraiser
shall report the present market value for
existing properties and proposed developments.
The appraiser may report a value as of the
conclusion of construction and as of the
projected date when stabilized occupancy
is achieved.
Appraisal:
An estimate of a property's fair market
value by a licensed professional. Lenders
take the appraisal into account when deciding
whether or not to make loans.
Appraisal:
An expert judgment or estimate of the quality
or value of real estate as of a given date.
Relies upon one or more of three different
types of valuation approach depending upon
the property type and current or anticipated
usage: The Market Approach, Cost Approach
or Income Approach.
Appraisal:
An opinion of estimated value for a specific
purpose of a described property on a given
date. An appraisal can be either written
or verbal.
Appraised
value: The dollar amount of value given
to the property appraised. There are three
major approaches to estimating value of
real estate. The market approach bases value
on the sales of other comparable properties.
The cost approach bases value on what it
will cost to replace the property. The income
approach bases value on the income produced
by owning the property. In most appraisals
all three approaches will be used, with
the appraiser stating what approach was
most influential in making the final determination
of value.
Appraiser:
One who estimates value on a professional
level. Many appraisers have designations
such as MAI (Member of the Appraisal Institute),
SRA (Senior Residential Appraiser), SREA
(Senior Real Estate Analyst) and SRPA (Senior
Real Property Appraiser).
Appreciation:
An increase in the value of a house due
to changes in market conditions or other
causes.
Appreciation:
An increase in the value of property. The
opposite of depreciation.
Appropriation:
The private taking of property and dedicating
it to public use. It is also the dedication
of public land for a private use.
Appurtenance:
An item attributable to the land, such as
improvements or an easement. Something that
comes from outside the property but is considered
part of the property and transfers with
the property upon sale or other transfer.
A utility easement is an example of an appurtenance.
Apron:
An area such as the entrance to a driveway
or the concrete portion around a swimming
pool.
Arm's-length
transaction: A transaction between individuals
who do not have a conflict of interest or
reason for collusion. The parties are as
strangers to each other. The value of property
should be questioned for fairness or accuracy
if there is not an arm's-length transaction
between the seller and buyer. An appraiser
should not use comparable sales not closed
by an arm's-length transaction in the market
approach to value.
Arrears:
At the end of a period. You pay interest
on home mortgages in arrears. You pay rent
in advance. For example, a mortgage payment
due May 1 is for the interest for April;
rent due May 1 is for the month of May.
The term can pertain to delinquent mortgage
payments. A mortgage loan that is three
months delinquent can be said to be three
months in arrears.
Artesian
well: A deep well where water rises
to the surface by natural pressure.
As
is: Property sold in its present condition
with no warranties made about the plumbing,
heating, electrical system or infestation
of termites is said to be sold "as is."
Assemblage:
Combining pieces of property to make one
large, attractive property. The added value
is plottage. People often use option contracts
with the practice of assemblage.
Assessed
valuation: The dollar amount or value
on what real estate tax is levied. If a
property worth $100,000 is assessed for
tax purposes at 50% of value, the assessed
valuation is $50,000. County or township
tax assessors normally make appraisals for
tax reasons. Many state laws require properties
to be reappraised periodically. If the taxpayer
disagrees with the appraisal, he or she
can appeal to a board of appeal or board
of equalization.
Assessed
value: Dollar amount assigned to taxable
property for tax purposes by the county
tax assessor. It is usually a statutory
percentage of market value. (Not to be confused
with appraised value.)
Assessed
value: The valuation placed upon property
by a public tax assessor for purposes of
taxation.
Assessed
value: The value of real property established
by the tax assessor for the purpose of levying
real estate taxes.
Assessment:
(1) The fair market value of property for
tax purposes. (2) An expense appropriated
to a unit of a whole such as a condominium
assessment for common grounds, maintenance
or an additional charge for improvement.
(3) A levy for adding a product or service
to a neighborhood, such as curbs or sewers.
(4) A value given to a property owner for
the taking of the property by the process
of condemnation.
Assessor:
Commonly called a tax assessor, an assessor
is the individual charged with determining
the fair market value for tax purposes.
Tax assessors do not set the tax rate; they
merely set the value for tax purposes.
Asset:
Something of value that you own. An asset
could be a car, a retirement fund, stocks
or bonds, or even a valuable piece of furniture.
Assign:
The act of transferring rights or property
to another.
Assignee:
One who receives rights or property. An
assignee stands in the place of the assignor
for rights, liabilities and interest in
the property.
Assignment
of Mortgage (A/M): A transfer of a mortgage
from one mortgagee to another. Sometimes,
FHA will accept an assignment of a mortgage
to help a qualified, distressed mortgagor.
Assignment
of servicing: A process of assigning
the servicing rights from one lender to
another.
Assignment:
Transfer of one person's rights under a
contract to another.
Assignor:
One who assigns rights or property.
Assumability:
When a home is sold, the seller may be able
to transfer the mortgage to the new buyer.
This means the mortgage is assumable. Lenders
generally require a credit review of the
new borrower and usually charge a fee for
the assumption. Most mortgages now contain
a due-on-sale clause, which means that the
mortgage may not be transferable to a new
buyer. Instead, the lender may insist that
the entire balance is paid in full when
the home is sold. Assumability may benefit
the seller especially during periods of
higher interest rates or after periods of
property depreciation.
Assumable
mortgage: A mortgage that can be taken
over ("assumed") by the buyer when a home
is sold.
Assumption
of mortgage: An obligation undertaken
by the purchaser of property to be personally
liable for payment of an existing mortgage.
In a full assumption, the purchaser is substituted
for the original mortgagor in the mortgage
instrument and the original mortgagor is
to be released from further liability in
the assumption, the mortgagee's consent
is usually required. The original mortgagor
should always obtain a written release from
further liability if he desires to be fully
released under the assumption. Failure to
obtain such a release renders the original
mortgagor liable if the person assuming
the mortgage fails to make the monthly payments.
(Not to be confused with a subject-to purchase.)
Assumption:
The transfer of the seller's existing mortgage
to the buyer.
Atrium:
Usually a space in the center of a building
with a translucent ceiling and sometimes
decorated with such amenities as a water
fountain and tropical plants.
Attachment:
The actual taking of property into the custody
of a court to serve as collateral for a
judgment sought in an impending suit. Law,
not private consent, creates the lien. This
form of legal action is not available for
obligations secured by collateral, as in
the case of a mortgage.
Attestation:
The act of witnessing a signature on an
instrument.
Attic:
The portion of a house between the ceiling
of the top floor and the underside of the
roof. There must be access to an attic.
By inspecting an attic you can check for
signs of structural problems in the rafters
and joists and assure that there is adequate
ventilation.
Attornment:
A tenant's formal recognition of a new landlord.
A mortgagee, who becomes an owner by foreclosure,
with the tenant recognizing the mortgagee
as the new landlord, has a defense against
claims for rent by the defaulting mortgagor.
Attornment starts a new tenancy between
the new owner and the tenant.
Attractive
nuisance doctrine: A legal doctrine
holding that a property owner must protect
children from injuring themselves by an
attractive danger such as a swimming pool.
As an example of adhering to this doctrine,
a property owner should build a fence around
a swimming pool.
Average
life of a mortgage: The average number
of years one dollar of principal investment
remains outstanding in a mortgage loan.
The average life is used in deciding the
true yield of a mortgage. A 30-year mortgage
is said to have an average life of 12 years;
a 10- to 15-year mortgage has an average
life of 7 years. Investors base the yield
of a mortgage on the average life as opposed
to the original term.
Avulsion:
The sudden removal of land by action of
a body of water, such as a river.
Back to Top
B
Backfilling:
The act of putting back dirt removed for
construction. You backfill by filling the
gap between the foundation wall and the
yard so that water will drain away from
the building.
Backup
contract: A term often used with contracts
to buy real estate. A backup contract is
a contract that will replace a prior contract
in the event of failure to perform or close
by the parties of the prior contract. The
seller should get a release from the buyer
on the first contract before canceling the
contract and proceeding with the second,
or backup, contract.
Balloon
mortgage: A mortgage loan with periodic
payments of principal and interest that
do not completely amortize the loan. The
balance of this type of mortgage loan is
due and payable in a lump sum at a specified
time in the future. The borrower pays interest
regularly, but may or may not make small
principal repayments during the loan period.
The unpaid balance is due at a specific
time in the future as stated in the mortgage
or deed of trust. For example, if you borrow
$30,000 for 5 years, or 60 months, and the
interest rate is 15%, your monthly payments
will be only $375. But the payments cover
interest only, with the entire principal
due at maturity in five years. Thus, the
borrower must make 59 equal monthly payments
of $375 and a final balloon payment of $30,375
(the principal plus the last interest payment).
If the borrower cannot make the final payment,
the borrower must refinance (if refinancing
is available) or sell the property. Some
lenders guarantee refinancing when the balloon
payment is due, although they do not commit
to a specified interest rate. The rate at
refinancing could be much higher than the
borrower's current rate. Other lenders do
not offer automatic refinancing. Without
such a guarantee, the borrower could be
forced to start the whole business of shopping
for mortgage funds again, besides paying
closing costs and front-end charges a second
time. A balloon mortgage can be a senior
or junior mortgage; i.e., a first or second
mortgage.
Balloon
note: A Promissory Note which requires
only partial or no amortization (principal
reduction.) Balloon Notes result in an eventual
Balloon Payment. A Balloon Note may be coupled
with an Extendible Rider which allows for
the extension of the loan term as long as
certain conditions are met. (Such as on
5/25 and 7/23 loans.)
Balloon
payment: Amount of loan principal remaining
unamortized and outstanding at the end of
the mortgage term.
Balloon
payment: The final payment in a balloon
mortgage. The balloon payment ends the mortgage;
the mortgage is paid in full. This final
payment is called the balloon or bullet.
Balloon
payment: The final payment of the balance
due on a partially amortized loan.
Baluster:
The support for the rail in a staircase;
one of a series of upright posts.
Bank
Holding Company (BHC): A corporation
that owns interests in one or more banks.
Bankrupt:
A corporation, firm or person who files
for relief from the courts and surrenders
all assets. Bankruptcy is a condition in
which liabilities exceed assets and the
person or business is unable to pay the
creditors. Bankruptcy may be voluntary or
involuntary. Involuntary bankruptcy is when
a creditor forces payment of a debt of $1,000
or more and the debtor cannot pay. There
are several chapters of bankruptcy. A lender
will most likely encounter the following
chapters:
- Chapter
7 covers liquidation of the debtor's assets.
- Chapter
11 covers reorganization of a bankrupt
business.
- Chapter
13 covers repayment of debts by individuals
(commonly called wage-earner). Som e plans
may provide for full payment of debts,
while others arrange for payment of reduced
debts.
Under
Chapters 7 and 11, dismissal of bankruptcy
means that the debts, but not the liens,
are dismissed. The courts must close the
bankruptcy to release the liens. Under Chapter
13, dismissal means that the court has thrown
a person or business out of bankruptcy.
That person or business is no longer under
the court's protection and is subject to
the action of creditors. In reviewing a
loan application from a person who has taken
bankruptcy, lenders look at three important
points: (1) the reason for bankruptcy, e.g.,
an inability to work due to bad health,
an accident, etc., (2) the type of bankruptcy
taken (the chapter) and (3) compensating
factors.
Bankruptcy:
When a person is declared by a court to
be unable to pay her or his debts, that
person is in bankruptcy. That person must
then turn over any money or properties to
a trustee, a person whom the court appoints,
for management.
Base
line: A surveyor' s term used to show
an east-west line.
Base
rent: The minimum monthly rent due to
the landlord. Typically, it is a fixed amount.
Baseboard:
A board that runs along the base of the
wall where it meets the floor.
Basement:
The space that is below the first floor.
Basements are usually wholly or partly below
the exterior grade. Basements should be
checked for signs of water leakage. Dampness
in comers is a sign of moisture problems,
and water marks along the base of walls
or any cabinets suggest that there is or
has been some serious water leakage.
Basis
points: A term used in relationship
to interest rates. One basis point is equal
to 1/100 of 1 percent. Basis points are
used to describe the yield of a debt instrument,
including mortgages. The difference between
9% and 9.5% is 50 basis points.
Basis:
An unadjusted basis is the cost of the property
minus the land value. Cost plus capital
spent to modify the improvements minus the
land value is the adjusted basis. For the
purposes of determining capital gain or
loss, it is the total cost of the property
compared to the sales price minus the costs
of the sale.
Basis:
The total amount paid for a property, including
equity capital and the amount of debt incurred.
For a LIHTC project, the initial value that
is eligible for tax credits.
Batten:
A narrow board normally used to cover a
joint or space between boards, often called
a batten board.
Baty:
The strip of insulation placed between the
studs of a wall or joists of a ceiling or
floor.
Beam:
A load-bearing support that can be made
of wood, iron, stone or other strong material.
Bearer
bond: A coupon bond payable to the individual
who has possession of the bond.
Bedrock:
Solid rock for a foundation of a large building.
Bedroom
community or suburb: Residential area
for commuters who work at a nearby large
city or employment center.
Before-tax
income: Income used to decide yield
from an investment before it becomes taxable
to the investor. It is income used in an
offering of an investment without regard
to the investor's taxable income bracket
used in filing income tax returns.
Belly-up:
A project, business or venture that has
failed is said to have gone belly-up.
Beneficiary:
See Deed of Trust.
Billing
cycle: The date a bill is sent out and
the payment due. Some bills are sent out
on the first of the month, some on the fifteenth,
some on other dates.
Binder:
A preliminary agreement, secured by the
payment of earnest money, under which a
buyer offers to purchase real estate.
Biweekly
mortgages: Mortgage where payments are
made every two weeks as opposed to more
conventional monthly payments. Biweekly
mortgages can be offered in any mortgage
amount and term, at a given interest rate.
Shorter payment intervals accelerate equity
through faster amortization that will shorten
the loan maturity.
Blacktop:
A paving surface usually made of asphalt.
Blanket
mortgage: A single mortgage used to
secure a debt for money loaned on several
properties such as the lots a builder owns
in a subdivision. It is important for the
borrower (mortgagor) to ask for a partial
release clause in the blanket mortgage.
A partial release clause will release each
lot that is sold for a stated amount that
is a portion of the entire debt. Without
a partial release clause, the entire debt
l have to be paid before the mortgage is
released.
Blanket
mortgage: Mortgage lien secured by two
or more property parcels.
Blended
rate: (1) A first-mortgage lender can
use a blended rate in an advertisement to
induce mortgagors to refinance and pay off
their old low-interest-rate first mortgage.
The first-mortgage lender could offer a
10% interest loan as compared to the going
rate of 12% if the mortgagor will refinance
the existing mortgage that is at 8 percent.
(2) A second-mortgage lender or a wraparound
lender will advertise not to pay off the
old mortgage with the low rate and short
term remaining, but instead, to place a
second mortgage or wraparound loan behind
the first and have a blended rate below
market interest rates for first-mortgage
loans.
Blighted
area: Usually an inner city area where
property values are falling and buildings
are deteriorating.
Blockbusting:
An illegal practice of promoting panic-selling
in an all-white neighborhood because someone
of a minority or ethnic background has moved
into or is said to be moving into the neighborhood.
The blockbuster will try to gain illegally
from depressed prices either by buying or
listing the properties at far below market
values.
Blueprint:
An architect's or designer's detailed plan
for a building. If you remodel your house,
you will probably need a blueprint.
Board
and batten: Siding with batten boards
nailed over cracks between wider boards.
Board
foot: A piece of wood that is one foot
square by one inch thick; 144 cubic inches
= l'x l'x 1".
Board
of adjustment: A government body that
hears appeals concerning zoning matters.
A Board of Adjustment can grant zoning variances.
Board
of equalization: A government body that
hears appeals concerning real estate tax
assessments. If a property owner thinks
the assessment is too high, they can appeal
to the Board of Equalization. This board
can lower assessments, causing a lower real
estate tax.
Board
of realtors®: The local association
of REALTORS® who belong to the State and
National Association of Realtors.®
Board
of review: See Board Of Equalization.
Boilerplating:
Standard language found in contracts, deeds
or deeds of trust, and in covenants, conditions
and restrictions (CC&Rs).
Bona
fide: Genuine; sincere; in good faith.
The term can be used in a sentence such
as, "this is a bona fide offer to purchase
your real estate."
Bond
value: The mortgage bond's cash flow
(or underlying collateral) that upholds
the value of the bond. The mortgage bond's
value is restricted to the mortgage loan's
unpaid balance.
Bond:
A formal certificate that evidences a debt
and outlines the terms. It is a formal promise
to pay a lender a specified sum of money
at a future date -- with or without collateral.
The promise must be in writing and signed
and sealed by the maker (borrower). The
balance owed is paid on a future date with
a series of interest payments in the interval.
Bond-type
security: An investment security, especially
a mortgage-based one, that has the characteristics
of a typical corporate bond, including a
long-term, fixed rate of return and repayment
of principal at maturity.
Book
value: An accounting term used to show
the value of a business as a whole or particular
asset, such as real estate. You show the
value by accounting records that give the
cost of the assets plus any improvement
minus depreciation. It is the value of an
asset. Depending on the reason for valuation,
book value may be marked down for a distress
sale, but it is normally never marked up
to reflect an increase in value.
Boot:
Cash or other non-real-estate assets exchanged
for real property.
Boot:
Something of value given to even the exchange
of like properties. For example, if parcel
A is worth $100,000 and is exchanged for
parcel B (worth $80,000) and $20,000 in
cash, the boot is the $20,000 in cash.
Boring
test: Using samples obtained by boring
deep holes in the ground to decide the strength
of the subsoil for construction purposes.
Borough:
A section of a city, similar to an incorporated
village, that has control over local matters.
New York City has five boroughs.
Boti'om
land: Low land situated near a body
of water.
Bottom
line: A phrase that means the net result,
such as after-tax cash flow, or the final
consequence.
Bracing:
Placing boards between floor or ceiling
joists to prevent them from twisting.
Breach
of contract: Failure to perform according
to the terms of a contract. The party who
has not breached the contract can rescind
the agreement and sue for damages or for
performance.
Breach
of trust: Abuse of the responsibilities
or authority as set forth in a trust agreement.
Break-even
cash ratio: Equalization of the ratio
of operating expense plus debt service to
gross income (1:1.) Interpreted as the occupancy
level that must be achieved to break even.
Break-even
point: A point when gross income will
cover operating expenses and the debt service.
Breakpoint:
The Sales threshold over which percentage
rent is due.
Bridge
financing or bridge loan: Short-term
mortgage financing between the end of one
loan or financing instrument and the beginning
of another.
British
Thermal Unit (BTU): A unit used to measure
the efficiency or capacity of heating or
cooling systems. A unit of heat required
to raise one pound of water One degree Fahrenheit
at sea level.
BTU:
See British Thermal Unit.
Buffer
strip or zone: Land between two areas
of different use, such as commercial and
residential.
Builder's
risk insurance: Insurance used to protect
builders against fire and special risks
while they have buildings under construction.
Building
code: Local and State Laws that set
minimum construction standards.
Building
line or setback: Distances from the
ends and/or sides of the lot beyond which
construction may not extend. The building
line may be established by a filed plat
of subdivision, by restrictive covenants
in deeds or leases, by building codes, or
by zoning ordinances.
Building
permit: A written permit that must be
purchased from the local government by anyone
doing remodeling or rehabbing work on a
property.
Buydown:
With a buydown, the seller or borrower pays
an amount to the lender so that the lender
can offer a lower rate and lower payments,
during the earlier portion of the loan term.
If the seller pays, he may increase the
sales price to cover the cost of the buydown.
Buydowns can occur in all types of mortgages;
fixed rate, interim fixed and adjustables.
Buyer's
agent: A real estate agent who works
for the buyer of a house, not the seller.
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C
Cadastral
map: A map with legal boundaries and
ownership of real property used for title
recording.
Candle
power: Luminous intensity of a light
expressed in candles.
Candle:
A measure of light intensity that is approximately
equal; to the intensity of light for a 7/8"
sperm candle burning at the rate of 120
grains per hour.
Cap:
A limit on how much the interest rate or
the monthly payment can change, either at
each adjustment or during the life of the
mortgage. Payment caps don't limit the amount
of interest the lender is earning, so they
may cause negative amortization.
Cap:
A provision of an ARM limiting how much
the interest rate or mortgage payments may
increase.
CAP:
The limit on how much an interest rate or
the monthly payment of an adjustable rate
mortgage can change, at each adjustment
or during the life of the mortgage.
Cape
cod: A Colonial-style house, usually
1 _ stories in height. The house is small
with a single centered front entrance. The
entrance usually has one or windows on each
side of the front door and is symmetrical.
The chimney is often in center of the house,
and the roof is a steep gable made of shingles.
Capital
asset: As defined by the IRS, an asset
that can receive favorable treatment upon
sale. Assets excluded would be inventory,
property held for resale property used in
a trade or business.
Capital
gain: The taxable profit from the sale
of a capital asset. The gain is the difference
from the basis for the capital asset and
the value received less adjustments the
cost of the sale, e.g., sales commissions,
discount points, and closing costs.
Capital
gains tax: A tax owed for selling something
at a price that is more than the price the
owner bought it for.
Capital
improvement: A permanent improvement
that increases the value of real property
and extends the useful life of the property.
It is expenditure different from a necessary
repair expense. Painting a house is a maintenance
repair expense, whereas the installation
of vinyl or aluminum siding is a improvement.
Capital
loss: What a homeowner has if he sells
his home for less money than he paid for
it.
Capital:
The net worth of a business or an individual;
accumulated wealth used produce goods or
more wealth.
Capitalization
rate: Commonly called the cap rate,
the capitalization rate can be used as a
division factor to decide the capital value.
The net income from an investment divided
by the cap rate will equal the capital value,
or value. The cap rate is a combination
of a return or recapture of the investment
and a return on the investment.
Capitalization:
Process of estimating value by discounting
stabilized net operating income by an appropriate
rate.
Capitalization:
Rate a percentage that relates the value
of an income-producing property to its future
income, expressed as net operating income
divided by price.
Capitalization:
The process of converting the future net
operating income of an income-producing
property into a single present vaue, given
a capitalization rate.
Carryback
financing: When the seller helps to
finances the sale of property.
Cash
basis: The method of reporting income
and expenditures as they are received. A
way of deciding the net profit or loss of
a business based solely on income received
minus expenses paid.
Cash
flow model: The framework used to determine
the cash flow from operations and the cash
proceeds from sale.
Cash
flow: Income from an investment after
deducting expenses and debt service from
gross income and before depreciation and
income taxes. Net income minus debt service
equals cash flow.
Cash
flow: Investment returns generated by
one of two methods: current income (rents,
dividends, etc.) minus expenses and debt
service or cash proceeds received upon the
sale of an investment (reversion).
Cash
reserve: A requirement of some lenders
that buyers have sufficient cash remaining
after closing to make the first two mortgage
payments.
Cash-on-cash
return: Rate of return based on cash
returned to the investor on his or her cash
investment. The cash-on-cash return is the
relationship of the cash returned to the
cash invested.
Certificate
Of Occupancy (CO): An official document
by a governing authority stating that a
structure complies with the building code
and may be occupied legally.
Certificate
of occupancy: Official document issued
by a local government body stating that
a structure meets local zoning and building
codes and is ready for use.
Certificate
of title: A certificate issued by a
title company or a written opinion rendered
by an attorney that the seller has good
marketable and insurable title to the property
which he is offering for sale. A certificate
of title offers no protection against any
hidden defects in the title which an examination
of the records could not reveal. The issuer
of a certificate of title is liable only
for damages due to negligence. The protection
offered a homeowner under a certificate
of title is not as great as that offered
in a title insurance policy.
Cession
deed: A deed used to transfer rights
to a government authority. Developers may
use a Cession Deed to transfer control of
streets in a subdivision.
Change
order: A form used by a builder to specify
changes from the approved original plans
or blueprints used to construct a building.
Chattel
mortgage: A lien on personal property
that is not permanently attached; something
other than real estate.
Clear
title: A title that is free of liens
and legal questions as to ownership of the
property.
Closing
costs: Money paid by borrowers and sellers
to close a mortgage loan. This normally
includes origination fees, points, title
insurance, survey and attorneys' fees, and
prepaid items such as insurance and taxes.
Also called settlement costs.
Closing
costs: The numerous expenses which buyers
and sellers normally incur to complete a
transaction in the transfer of ownership
of real estate. These costs are in addition
to price of the property and are items prepaid
at or before the closing day. Non-Recurring
Closing Costs are items such as appraisal,
credit report, processing fees, origination
fees, transfer taxes, points, etc., which
are paid on a one-time basis. Recurring
Closing Costs (also known as pre-paids)
include such items as property taxes, hazard
insurance and may include pre-paid interest
or Private Mortgage Insurance premiums.
Total costs and the method by which they
are split between the buyer and seller depend
upon local custom, jurisdiction and agreements
stipulated in the purchase contract.
Closing
day: The day on which the formalities
of a real estate sale are concluded and
at which time title passes from seller to
buyer. The final closing merely confirms
the original agreement reached in the agreement
of sale.
Closing:
The meeting during which all the papers
are signed (the loan is "closed") and the
house keys are turned over to the new homebuyer.
Also called settlement.
Cloud
(On Title): An outstanding claim or
encumbrance which adversely affects the
marketability of title.
Codes:
Standards for constructing buildings that
are established by city, state or municipal
governments. In most areas these codes are
modeled after national codes establish many
minimum requirements for construction buildings.
Points covered by the codes are design,
quality of construction, use and occupancy
of the building on the site, safety and
health.
Collateral
or security: Property that backs up
a loan. If the borrower does not pay back
the loan as agreed, the lender can take
the collateral. A house is collateral for
a mortgage loan. A house gives security
to a mortgage loan.
Collateral:
Assets that are pledged to secure the discharge
of an obligation.
Collateral:
Property that serves as security for a loan.
Collection
agencies: Private businesses, hired
by creditors, that try to get borrowers
to make payments that are overdue.
Collusion:
Two or more parties agree to perform an
illegal act.
Commission:
Money paid to a real estate agent or broker
by the seller (or infrequently the buyer)
as compensation for finding a buyer and
completing the sale. Usually it is a percentage
of the sale price -- Commonly, 6 to 7 percent
on houses, 10 percent on land and mobile
homes. The commission rate is negotiable.
Commission:
The compensation for the sale of an asset.
Leasing Commission is compensation for the
lease of an asset.
Commission:
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