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Glossary of Glossary of Real Estate Terms

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abstract of title
The condensed history of a title to a particular parcel of real estate, consisting of a summary of the original grant and all subsequent conveyances and encumbrances affecting the property and a certification by the abstractor that the history is complete and accurate.
acceleration clause
The clause in a mortgage or deed of trust that can be enforced to make the entire debt due immediately if the borrower defaults on an installment payment or another covenant.
acknowledgment
A formal declaration made before a duly authorized officer, usually a notary public, by a person who has signed a document.
acre
A measure of land equal to 43,560 square feet,
actual notice
Express information or fact; that which is known; direct knowledge.
adjustable-rate mortgage (ARM)
A loan characterized by a fluctuating interest rate, usually one tied to a bank or savings and loan association cost-of-funds index.
ad valorem tax
A tax levied according to value, generally used to refer to real estate tax. Also called the general tax.
adverse possession
The actual, open, notorious, hostile and continuous possession of another's land under a claim of title. Possession for a statutory period may be a means of acquiring title.
agency
The relationship between a principal and an agent wherein the agent is authorized to represent the principal in certain transactions.
agent
One who acts or has the power to act for another. A fiduciary relationship is created under the law of agency when a property owner, as the principal, executes a listing agreement or management contract authorizing a licensed real estate broker to be his or her agent.
agricultural fixture
In North Carolina, a fixture used in farming operations that is considered real property rather than personal property.
air rights
The right to use the open space above a property, usually allowing the surface to be used for another purpose.
alienation
The act of transferring property to another. Alienation may be voluntary, such as by gift or sale, or involuntary, as through eminent domain or adverse possession.
alienation clause
The clause in a mortgage or deed of trust that states that the balance of the secured debt becomes immediately due and payable at the lender's option if the property is sold by the borrower. In effect, this clause prevents the borrower from assigning the debt without the lender's approval.
amortized loan
A loan in which the principal as well as the interest is payable in monthly or other periodic installments over the term of the loan.
annual percentage rate (APR)
The relationship of the total finance charges associated with a loan. This must be disclosed to borrowers by lenders under the Truth-in-Lending Act.
anticipation
The appraisal principle that holds that value can increase or decrease based on the expectation of some future benefit or detriment affecting the property.
antitrust laws
Laws designed to preserve the free enterprise of the open marketplace by making illegal certain private conspiracies and combinations formed to minimize competition. Most violations of antitrust laws in the real estate business involve either price fixing (brokers conspiring to set fixed compensation rates) or allocation of customers or markets (brokers agreeing to limit their areas of trade or dealing to certain areas or properties).
appraisal
An estimate of the quantity, quality or value of something. The process through which conclusions of property value are obtained; also refers to the report that sets forth the process of estimation and conclusion of value.
appreciation
An increase in the worth or value of a property due to economic or related causes, which may prove to be either temporary or permanent; opposite of depreciation.
appurtenance
A right, a privilege or an improvement belonging to, and passing with, the land.
appurtenant easement
An easement that is annexed to the ownership of one parcel and allows the owner the use of the neighbor's land.
assessment
The imposition of a tax, charge or levy, usually according to established rates.
assignment
The transfer in writing of interest in a bond, a mortgage, a lease or another instrument.
assumption of mortgage
Acquiring title to property on which there is an existing mortgage and agreeing to be personally liable for the terms and conditions of the mortgage, including payments.
attachment
The act of taking a person's property into legal custody by writ or another judicial order to hold it available for application to that person's debt to a creditor.
attorney's opinion of title
An abstract of title that a lawyer has examined and has certified to be, in his or her opinion, an accurate statement of the facts concerning the property ownership.
balloon payment
A final payment of a mortgage loan that is considerably larger than the required periodic payments because the loan amount was not fully amortized.
baseboard
A board around the bottom of a wall perpendicular to the floor. Sometimes called wains, baseboards cover the gap between the floor and the wall, protecting the wall from scuffs and providing a decorative accent.
basic form (HO-1)
An insurance policy covering buildings and personal property against loss or damage from fire, lightning, removal, windstorm, hail, explosion, riot, smoke, vandalism and theft.
basis
The financial interest that the Internal Revenue Service attributes to an owner of an investment property for the purpose of determining annual depreciation and gain or loss on the sale of the asset. If a property was acquired by purchase, the owner's basis is the cost of the property plus the value of any capital expenditures for improvements to the property, minus any depreciation allowable or actually taken. This new basis is called the adjusted basis.
bench mark
A permanent reference mark or point established for use by surveyors in measuring differences in elevation.
beneficiary
(1) The person for whom a trust operates or in whose behalf the income from a trust estate is drawn (2) A lender in a deed of trust loan transaction.
binder
An agreement that may accompany an earnest money deposit for the purchase of real property as evidence of the purchaser's good faith and intent to complete the transaction.
blanket loan
A mortgage covering more than one parcel of real estate, providing for each parcel's partial release from the mortgage lien upon repayment of a definite portion of the debt.
blockbusting
The illegal practice of inducing homeowners to sell their properties by making representations regarding the entry or prospective entry of persons of a particular race or national origin into the neighborhood.
branch office
A secondary place of business apart from the principal or main office from which real estate business is conducted. A branch office usually must be run by a licensed real estate broker working on behalf of the broker.
breach of contract
The violation of any terms or conditions in a contract without legal excuse; for example, failure to make a payment when it is due.
broad form (HO-2)
An insurance policy covering more perils than the basic form. This form also covers falling objects; weight of snow, ice or sleet; collapse of buildings; malfunctioning heating systems; accidental discharge of water or steam; and electrical currents that are artificially generated.
broker
One who acts as an intermediary on behalf of others for a fee or commission.
brokerage
The bringing together of parties interested in making a real estate transaction.
broker-in-charge
Required for each brokerage firm and each branch office, the person responsible for displaying all licenses properly, notifying the Real Estate Commission of any change of business address or trade name, ensuring that all advertising is done properly, maintaining the trust account and trust account records properly, retaining and maintaining all real estate transaction records properly and supervising all salespeople associated with the firm or office.
building code
An ordinance that specifies minimum standards of construction for buildings to protect public safety and health.
building permit
Written governmental permission for the construction, alteration or demolition of an improvement, showing compliance with building codes and zoning ordinances.
bundle of legal rights
The concept of land ownership that includes ownership of all legal rights to the land-for example, possession, control within the law and enjoyment.
business cycle
The upward and downward fluctuations in business activities generally characterized by four stages: expansion, recession, depression and revival.
buydown
A financing technique used to reduce the monthly payments for the first few years of a loan. Funds in the form of discount points are given to the lender by the builder or seller to buy down or lower the effective interest rate paid by the buyer, thus reducing the monthly payments for a set time.
buyer-agency agreement
A principal-agent relationship in which the broker is the agent for the buyer, with fiduciary responsibilities to the buyer. The broker represents the buyer under the law of agency.
capital gain
The profit earned from the sale of an asset.
capitalization
A mathematical process for estimating the value of a property using a proper rate of return on the investment and the annual net operating income expected to be produced by the property. The formula is expressed as capitalization rate The rate of return a property will produce on the owner's investment.
caveat emptor
A Latin phrase meaning "Let the buyer beware."
ceiling joist
Attached to the top plate of a wall, these joists carry the weight of the roof.
certificate of reasonable value (CRV)
A form indicating the appraised value of a property being financed with a VA loan.
certificate of title
A statement of opinion on the status of the title to a parcel of real property based on an examination of specified public records.
chain of title
The succession of conveyances, from some accepted starting point, whereby the present holder of real property derives title.
change
The appraisal principle that holds that no physical or economic condition remains constant.
chattel
See personal property.
Civil Rights Act of 1866
An act that prohibits racial discrimination in the sale and rental of housing.
closing statement
A detailed cash accounting of a real estate transaction showing all cash received, all charges and credits made and all cash paid out in the transaction.
cloud on title
Any document, claim, unreleased lien or encumbrance that may impair the title to real property or make the title doubtful; usually revealed by a title search and removed by either a quitclaim deed or suit to quiet title.
LOADS
An acronym for the agent's specific duties in an agency relationship: care, obedience, accounting, loyalty and disclosure.
code of ethics
A written system of standards for ethical conduct.
coinsurance clause
A clause in insurance policies covering real property that requires that the policyholder maintain fire insurance coverage generally equal to at least 80 percent of the property's actual replacement cost.
commingling
The illegal act by a real estate broker of placing client or customer funds with personal funds. By law, brokers are required to maintain a separate trust or escrow account for other parties' funds held temporarily by the broker.
commission
Payment to a broker for services rendered, as in the sale or purchase of real property; usually a percentage of the selling price of the property.
common elements
Parts of a property that are necessary or convenient to the existence, maintenance and safety of a condominium or are normally in common use by all of the condominium residents. Each condominium owner has an undivided ownership interest in the common elements.
common law
The body of law based on custom, usage and court decisions.
community property
A system of property ownership based on the theory that each spouse has an equal interest in the property acquired by the efforts of either spouse during marriage. A holdover of Spanish law found predominantly in western states; the system was unknown under English common law.
comparable
Property used in an appraisal report that is substantially equivalent to the subject property.
competition
The appraisal principle that states that excess profits generate competition.
competitive market analysis (CMA)
A comparison of the prices of recently sold homes that are similar to a listing seller's home in terms of location, style and amenities.
condemnation
A judicial or an administrative proceeding to exercise the power of eminent domain, through which a government agency takes private property for public use and compensates the owner.
conditional-use permit
Written governmental permission allowing a use inconsistent with zoning but necessary for the common good, such as locating an emergency medical facility in a predominantly residential area.
condominium
The absolute ownership of a unit in a multiunit building based on a legal description of the airspace the unit actually occupies, plus an undivided interest in the ownership of the common elements, which are owned jointly with the other condominium unit owners.
confession of judgment clause
Permits judgment to be entered against a debtor without the creditor's having to institute legal proceedings.
conformity
The appraisal principle that holds that the greater the similarity among properties in an area, the better they will hold their value.
Conner Act
A North Carolina law that states that many types of real estate documents are not valid as to third parties unless the documents are recorded. These documents include deeds, mortgages, purchase contracts, installment land contracts, assignments, options, leases of three years or more, easements and restrictive covenants.
consideration
(1) That received by the grantor in exchange for his or her deed. (2) Something of value that induces a person to enter into a contract.
construction loan
See interim financing.
constructive eviction
The actions of a landlord that so materially disturb or impair a tenant's enjoyment of the leased premises that the tenant is effectively forced to move out and terminate the lease without liability for any further rent.
constructive notice
The notice given to the world by recorded documents. All people are charged with knowledge of such documents and their contents, whether or not they have actually examined them. Possession of property is also considered constructive notice that the person in possession has an interest in the property.
contingency
A provision in a contract that requires a certain act to be done or a certain event to occur before the contract becomes binding.
contract
A legally enforceable promise or set of promises that must be performed and for which, if a breach of the promise occurs, the law provides a remedy. A contract may be either unilateral, by which only one party is bound to act, or bilateral, by which all parties to the instrument are legally bound to act as prescribed.
contribution
The appraisal principle that states that the value of any component of a property is what it gives to the value of the whole or what its absence detracts from that value.
conventional loan
A loan that requires no insurance or guarantee.
conveyance
A term used to refer to any document that transfers title to real property. The term is also used in describing the act of transferring.
cooperating broker
See listing broker.
cooperative
A residential multiunit building whose title is held by a trust or corporation that is owned by and operated for the benefit of persons living within the building, who are the beneficial owners of the trust or stockholders of the corporation, each possessing a proprietary lease.
co-ownership
Title ownership held by two or more persons.
cost approach
The process of estimating the value of a property by adding to the estimated land value the appraiser's estimate of the reproduction or replacement cost of the building, less depreciation.
counteroffer
A new offer made in response to an offer received. It has the effect of rejecting the original offer, which cannot be accepted thereafter unless revived by the offeror.
covenant
A written agreement between two or more parties in which a party or parties pledge to perform or not perform specified acts with regard to property; usually found in such real estate documents as deeds, mortgages, leases and contracts for deed.
covenant of quiet enjoyment
The covenant implied by law by which a landlord guarantees that a tenant may take possession of leased premises and that the landlord will not interfere in the tenant's possession or use of the property.
credit
On a closing statement, an amount entered in a person's favor-either an amount the party has paid or an amount for which the party must be reimbursed.
curtesy
A life estate, usually a fractional interest, given by some states to the surviving husband in real estate owned by his deceased wife. Most states have abolished curtesy.
debit
On a closing statement, an amount charged; that is, an amount that the debited party must pay.
decedent
A person who has died.
dedication
The voluntary transfer of private property by its owner to the public for some public use, such as for streets or schools.
deed
A written instrument that, when executed and delivered, conveys title to or an interest in real estate.
deed in lieu of foreclosure
A deed given by the mortgagor to the mortgagee when the mortgagor is in default under the terms of the mortgage. This is a way for the mortgagor to avoid foreclosure.
deed in trust
An instrument that grants a trustee under a land trust full power to sell, mortgage and subdivide a parcel of real estate. The beneficiary controls the trustee's use of these powers under the provisions of the trust agreement.
deed restriction
Clause in a deed limiting the future uses of the property. Deed restrictions may impose a vast variety of limitations and conditions-for example, they may limit the density of buildings, dictate the types of structures that can be erected or prevent buildings from being used for specific purposes or even from being used at all.
default
The nonperformance of a duty, whether arising under a contract or otherwise; failure to meet an obligation when due.
defeasance clause
A clause used in leases and mortgages that cancels a specified right upon the occurrence of a certain condition, such as cancellation of a mortgage upon repayment of the mortgage loan.
defeasible fee estate
An estate in which the holder has a fee simple title that may be divested upon the occurrence or nonoccurrence of a specified event. Two categories of defeasible fee estates exist: fee simple on condition precedent (fee simple determinable) and fee simple on condition subsequent.
deficiency judgment
A personal judgment levied against the borrower when a foreclosure sale does not produce sufficient funds to pay the mortgage debt in full.
delivery and acceptance
The actual delivery of a deed by a grantor and the actual or implied acceptance of the deed by the grantee.
demand
The amount of goods people are willing and able to buy at a given price; often coupled with supply.
density zoning
Zoning ordinances that restrict the maximum average number of houses per acre that may be built within a particular area, generally a subdivision.
Department of Housing and Urban Development (HUD)
A federal cabinet department officially known as the U.S. Department of Housing and Urban Development; active in national housing programs. Among its many programs are urban renewal, public housing, model cities, rehabilitation loans, FHA subsidies and water and sewer grants.
depreciation
(1) In appraisal, a loss of value in property due to any cause, including physical deterioration, functional obsolescence and external obsolescence. (2) In real estate investment, an expense deduction for tax purposes taken over the period of ownership of income property.
descent
The acquisition of an estate by inheritance in which an heir succeeds to the property by operation of law.
developer
A person or company that attempts to put land to its most profitable use through the construction of improvements.
devise
A gift of real property by will. The donor is the devisor, and the recipient is the devisee.
discount point
A unit of measurement used for various loan charges; one point equals 1 percent of the amount of the loan.
dominant tenement
A property that includes in its ownership the appurtenant right to use an easement over another person's property for a specific purpose.
dower
The legal right or interest, recognized in some states, that a wife acquires in the property her husband held or acquired during their marriage. During the husband's lifetime, the right is only a possibility of an interest; upon his death, it can become an interest in land.
dual agency
Representing both parties to a transaction. This is unethical unless both parties agree to it, and it is illegal in many states.
due-on-sale clause
A provision in a mortgage that states that the entire balance of the note is immediately due and payable if the mortgagor transfers (sells) the property.
duress
The unlawful constraint or action exercised on a person whereby the person is forced to perform an act against his or her will. A contract entered into under duress is voidable.
earnest money
Money deposited by a buyer under the terms of a contract, to be forfeited if the buyer defaults but applied to the purchase price if the sale is closed.
easement
A right to use the land of another for a specific purpose, such as for a right-of-way or utilities; an incorporeal interest in land.
easement by condemnation
An easement created by the government or a government agency that has exercised its right under eminent domain.
easement by necessity
An easement allowed by law as necessary for the full enjoyment of a parcel of real estate; for example, a right of ingress and egress over a grantor's land.
easement by prescription
An easement acquired by continuous, open and hostile use of property for the period of time prescribed by state law.
easement in gross
An easement that is not created for the benefit of any land owned by the owner of the easement but that attaches personally to the easement owner. For example, a utility easement.
economic life
The number of years during which an improvement will add value to the land.
emblements
Growing crops, such as grapes and corn, that are produced annually through labor and industry; also called fructus industriales.
eminent domain
The right of a government or municipal quasi-public body to acquire property for public use through a court action called condemnation, in which the court decides that the use is a public use and determines the compensation to be paid to the owner.
employee
Someone who works as a direct employee of an employer and has employee status. The employer is obligated to withhold income taxes and Social Security taxes from the compensation of the employee. See also independent contractor.
enabling acts
State legislation that confers zoning powers on municipal governments.
encroachment
A building or some portion of it-a wall or fence, for instance-that extends beyond the land of the owner and illegally intrudes on the land of an adjoining owner or on a street or an alley.
encumbrance
Anything-such as a mortgage, tax or judgment lien; an easement; a restriction on the use of the land; or an outstanding dower right-that may diminish the value or use and enjoyment of a property.
Equal Credit Opportunity Act (ECOA)
The federal law that prohibits discrimination in the extension of credit because of race, color, religion, national origin, sex, age or marital status.
equitable right of redemption
The right of a defaulted property owner to recover the property prior to its sale by paying the appropriate fees and charges.
equitable title
The interest held by a vendee under a contract for deed or an installment contract; the equitable right to obtain absolute ownership to property when legal title is held in another's name.
equity
The interest or value that an owner has in property over and above any indebtedness
escheat
The reversion of property to the state or county, as provided by state law, in cases where a decedent dies intestate without heirs capable of inheriting or when the property is abandoned.
escrow
The closing of a transaction through a third party called an escrow agent, or escrowee, who receives certain funds and documents to be delivered upon the performance of certain conditions outlined in the escrow instructions.
escrow account
The trust account established by a broker under the provisions of the license law for the purpose of holding funds on behalf of the broker's principal or some other person until the consummation or termination of a transaction.
escrow instructions
A document that sets forth the duties of the escrow agent as well as the requirements and obligations of the parties when a transaction is closed through an escrow.
estate in land
The degree, quantity, nature and extent of interest a person has in real property.
estate (tenancy) at sufferance
The tenancy of a lessee who lawfully comes into possession of a landlord's real estate but who continues to occupy the premises improperly after his or her lease rights have expired.
estate (tenancy) at will
An estate that gives the lessee the right to possession until the estate is terminated by either party; the term of this estate is indefinite.
estate (tenancy) for years
An interest for a certain, exact period of time in property leased for a specified consideration.
estate (tenancy) period to period
An interest in leased property that continues from period to period-week to week, month to month or year to year.
eviction
A legal process to oust a person from possession of real estate.
evidence of title
Proof of ownership of property; commonly a certificate of title, an abstract of title with lawyer's opinion, or a Torrens registration certificate.
exchange
A transaction in which all or part of the consideration is the transfer of like-kind property (such as real estate for real estate).
exclusive-agency listing
A listing contract under which the owner appoints a real estate broker as his or her exclusive agent for a designated period of time to sell the property, on the owner's stated terms, for a commission. The owner reserves the right to sell without paying anyone a commission if he or she sells to a prospect who has not been introduced or claimed by the broker.
exclusive-right-to-sell listing
A listing contract under which the owner appoints a real estate broker as his or her exclusive agent for a designated period of time to sell the property, on the owner's stated terms, and agrees to pay the broker a commission when the property is sold, whether by the broker, the owner or another broker.
executed contract
A contract in which all parties have fulfilled their promises and thus performed the contract.
execution
The signing and delivery of an instrument. Also, a legal order directing an official to enforce a judgment against the property of a debtor.
executory contract
A contract under which something remains to be done by one or more of the parties.
express agreement
An oral or a written contract in which the parties state the contract's terms and express their intentions in words.
express contract
See express agreement.
external depreciation
The reduction in a property's value caused by outside factors (those that are off the property).
external obsolescence
See obsolescence.
Fair Housing Act
The federal law that prohibits discrimination in housing based on race, color, religion, sex, handicap, familial status or national origin.
Fannie Mae
A quasi-government agency established to purchase any kind of mortgage loans in the secondary mortgage market from the primary lenders.
Federal Deposit Insurance Corporation (FDIC)
An independent federal agency that manages the insurance funds for deposits in commercial banks and savings and loan associations.
Federal Reserve System
The country's central banking system, which controls the nation's monetary policy by regulating the supply of money and interest rates.
fee simple absolute
The maximum possible estate or right of ownership of real property, continuing forever.
FHA loan
A loan insured by the Federal Housing Administration and made by an approved lender in accordance with the FHA's regulations.
fiduciary
One in whom trust and confidence are placed; a reference to a broker employed under the terms of a listing contract or buyer agency agreement.
fiduciary relationship
A relationship of trust and confidence, as between trustee and beneficiary, lawyer and client or principal and agent.
fixture
An item of personal property that has been converted to real property by being permanently affixed to the realty.
floor joist
A horizontal board laid on edge, resting on the beams that provide the main support for the floor. The subflooring is nailed directly to the joists.
footing
A concrete support under a foundation, chimney or column that usually rests on solid ground and is wider than the structure being supported. Footings are designed to distribute the weight of the structure over the ground.
foreclosure
A legal procedure whereby property used as security for a debt is sold to satisfy the debt in the event of default in payment of the mortgage note or default of other terms in the mortgage document. The foreclosure procedure brings the rights of all parties to a conclusion and passes the title in the mortgaged property to either the holder of the mortgage or a third party who may purchase the realty at the foreclosure sale, free of all encumbrances affecting the property subsequent to the mortgage.
foundation wall
The masonry or concrete wall below ground level that serves as the main support for the frame structure. Foundation walls form the side walls of the basement.
fraud
A deception intended to cause a person to give up property or a lawful right.
Freddie Mac
A corporation established to purchase primarily conventional mortgage loans in the secondary mortgage market.
freehold estate
An estate in land in which ownership is for an indeterminate length of time, in contrast to a leasehold estate.
front footage
The measurement of a parcel of land by the number of feet of street or road frontage.
functional obsolescence
A loss of value to an improvement to real estate arising from functional problems, often caused by age or poor design.
future interest
A person's present right to an interest in real property that will not result in possession or enjoyment until some time in the future, such as a reversion or right of reentry.
gable
The triangular portion of an end wall rising from the level top wall under the inverted V of a sloping roof that aids water drainage. A gable can be made of weatherboard, tile or masonry and can extend above the rafters.
gap
A defect in the chain of title of a particular parcel of real estate; a missing document or conveyance that raises doubt as to the present ownership of the land.
general agent
One who is authorized by a principal to represent the principal in a specific range of matters.
general lien
The right of a creditor to have all of a debtor's property-both real and personal-sold to satisfy a debt.
general warranty deed
A deed in which the grantor fully warrants good clear title to the premises. Used in most real estate deed transfers, a general warranty deed offers the greatest protection of any deed.
Ginnie Mae
A government agency that plays an important role in the secondary mortgage market. It sells mortgage-backed securities that are backed by pools of FHA and VA loans.
girder
A heavy wooden or steel beam supporting the floor joists and providing the main horizontal support for the floor.
graduated-payment mortgage (GPM)
A loan in which the monthly principal and interest payments increase by a certain percentage each year for a certain number of years and then level off for the remaining loan term.
grantee
A person who receives a conveyance of real property from a grantor.
granting clause
Words in a deed of conveyance that state the grantor's intention to convey the property at the present time. This clause is generally worded as "convey and warrant," "grant," "grant, bargain and sell" or the like.
grantor
The person transferring title to or an interest in real property to a grantee.
gross income multiplier (GIM)
A figure used as a multiplier of the gross annual income of a property to produce an estimate of the property's value.
gross lease
A lease of property according to which a landlord pays all property charges regularly incurred through ownership, such as repairs, taxes, insurance and operating expenses. Most residential leases are gross leases.
gross rent multiplier (GRM)
The figure used as a multiplier of the gross monthly income of a property to produce an estimate of the property's value.
ground lease
A lease of land only, on which the tenant usually owns a building or is required to build as specified in the lease. Such leases are usually long-term net leases; the tenant's rights and obligations continue until the lease expires or is terminated through default.
growing-equity mortgage (GEM)
A loan in which the monthly payments increase annually, with the increased amount being used to reduce directly the principal balance outstanding and thus shorten the overall term of the loan.
highest and best use
The possible use of a property that would produce the greatest net income and thereby develop the highest value.
hip
A pitched roof with sloping sides and ends.
holdover tenancy
A tenancy whereby a lessee retains possession of leased property after the lease has expired and the landlord, by continuing to accept rent, agrees to the tenant's continued occupancy.
home equity loan
A loan (sometimes called a line of credit ) under which a property owner uses his or her residence as collateral and can then draw funds up to a prearranged amount against the property.
homeowner's insurance policy
A standardized package insurance policy that covers a residential real estate owner against financial loss from fire, theft, public liability and other common risks.
implied agreement
A contract under which the agreement of the parties is demonstrated by their acts and conduct.
implied warranty of habitability
A theory in landlord/tenant law in which the landlord renting residential property implies that the property is habitable and fit for its intended use.
improvement
(1) Any structure, usually privately owned, erected on a site to enhance the value of the property-for example, a fence or a driveway. (2) A publicly owned structure added to or benefiting land, such as a curb, sidewalk, street or sewer.
income capitalization approach
The process of estimating the value of an income-producing property through capitalization of the annual net income expected to be produced by the property during its remaining useful life.
independent contractor
Someone who is retained to perform a certain act but who is subject to the control and direction of another only as to the end result and not as to the way in which the act is performed. Unlike an employee, an independent contractor pays all expenses and Social Security and income taxes and receives no employee benefits. Most real estate salespeople are independent contractors.
index method
The appraisal method of estimating building costs by multiplying the original cost of the property by a percentage factor to adjust for current construction costs.
installment contract
A contract for the sale of real estate whereby the purchase price is paid in periodic installments by the purchaser, who is in possession of the property even though title is retained by the seller until a future date, which may not be until final payment. Also called a contract for deed or articles of agreement for warranty deed.
installment sale
A transaction in which the sales price is paid in two or more installments over two or more years. If the sale meets certain requirements, a taxpayer can postpone reporting such income until future years by paying tax each year only on the proceeds received that year.
insulation
Pieces of plasterboard, asbestos sheeting, compressed wood-wool, fiberboard or other material placed between inner and outer surfaces, such as walls and ceilings, to protect the interior from heat loss. Insulation works by breaking up and dissipating air currents.
interest
A charge made by a lender for the use of money.
intestate
The condition of a property owner who dies without leaving a valid will. Title to the property will pass to the decedent's heirs as provided in the state law of descent.
intrinsic value
An appraisal term referring to the value created by a person's personal preferences for a particular type of property.
investment
Money directed toward the purchase, improvement and development of an asset in expectation of income or profits.
involuntary lien
A lien placed on property without the consent of the property owner.
joint tenancy
Ownership of real estate between two or more parties who have been named in one conveyance as joint tenants. On the death of a joint tenant, the decedent's interest passes to the surviving joint tenant or tenants by the right of survivorship.
judgment
The formal decision of a court upon the respective rights and claims of the parties to an action or a suit. After a judgment has been entered and recorded with the county recorder, it usually becomes a general lien on the property of the defendant.
junior lien
An obligation, such as a second mortgage, that is subordinate in right or lien priority to an existing lien on the same realty.
land
The earth's surface, extending downward to the center of the earth and upward infinitely into space, including things permanently attached by nature, such as trees and water.
lease
A written or an oral contract between a landlord (the lessor) and a tenant (the lessee) that transfers the right to exclusive possession and use of the landlord's real property to the lessee for a specified period of time and for a stated consideration (rent). By state law, leases for longer than a certain period of time (generally one year) must be in writing to be enforceable.
leasehold estate
A tenant's right to occupy real estate during the term of a lease, generally considered to be a personal property interest.
lease option
A lease under which the tenant has the right to purchase the property either during the lease term or at its end.
lease purchase
The purchase of real property, the consummation of which is preceded by a lease, usually long-term; typically done for tax or financing purposes.
legal description
A description of a specific parcel of real estate complete enough for an independent surveyor to locate and identify it.
legally competent parties
People who are recognized by law as being able to contract with others; those of legal age and sound mind.
leverage
The use of borrowed money to finance an investment.
levy
To assess; to seize or collect. To levy a tax is to assess a property and set the rate of taxation. To levy an execution is to officially seize the property of a person to satisfy an obligation.
liability coverage
Insurance providing protection of the property owner against financial claims of others.
license
(1) A privilege or right granted to a person by a state to operate as a real estate broker or salesperson. (2) The revocable permission for a temporary use of land-a personal right that cannot be sold.
lien
A right given by law to certain creditors to have their debts paid out of the property of a defaulting debtor, usually by means of a court sale.
lien theory
Some states interpret a mortgage as being purely a lien on real property. The mortgagee thus has no right of possession but must foreclose the lien and sell the property if the mortgagor defaults.
life cycle costing
In property management, comparing one type of equipment with another based on both purchase cost and operating cost over its expected useful lifetime.
life estate
An interest in real or personal property that is limited in duration to the lifetime of its owner or some other designated person or persons.
life tenant
A person in possession of a life estate.
liquidated damages
An amount predetermined by the parties to a contract as the total compensation to an injured party should the other party breach the contract.
liquidity
The ability to sell an asset and convert it into cash, at a price close to its true value, in a short period of time.
lis pendens
A recorded legal document giving constructive notice that an action affecting a particular property has been filed in either a state or a federal court.
listing agreement
A contract between an owner (as principal) and a real estate broker (as agent) by which the broker is employed as agent to find a buyer for the owner's real estate on the owner's terms, for which service the owner agrees to pay a commission.
listing broker
The broker in a multiple-listing situation from whose office a listing agreement is initiated, as opposed to the cooperating broker, from whose office negotiations leading up to a sale are initiated. The listing broker and the cooperating broker may be the same person.
littoral rights
(1) A landowner's claim to use water in large navigable lakes and oceans adjacent to his or her property. (2) The ownership rights to land bordering these bodies of water up to the high-water mark.
loan origination fee
A fee charged to the borrower by the lender for making a mortgage loan. The fee is usually computed as a percentage of the loan amount.
loan-to-value ratio
The relationship between the amount of the mortgage loan and the value of the real estate being pledged as collateral.
lot-and-block (recorded plat) system
A method of describing real property that identifies a parcel of land by reference to lot and block numbers within a subdivision, as specified on a recorded subdivision plat.
management agreement
A contract between the owner of income property and a management firm or an individual property manager that outlines the scope of the manager's authority.
mansard
An architectural style in which the top floor or floors of a structure are designed to appear to be the roof. Such a roof has two slopes on each of the four sides of the building, with the upper slope less steeply inclined.
market
A place where goods can be bought and sold and a price established.
marketable title
A good or clear title, reasonably free from the risk of litigation over possible defects.
Marketable Title Act
Provides that if a chain of title can be traced back for 30 years without a problem, it becomes a marketable title. The act is designed to eliminate obsolete defects in a chain of title.
market value
The most probable price property will bring in an arm's-length transaction under normal conditions on the open market.
mechanic's lien
A statutory lien created in favor of contractors, laborers and materialmen who have performed work or furnished materials in the erection or repair of a building.
metes-and-bounds description
A legal description of a parcel of land that begins at a well-marked point and follows the boundaries, using directions and distances around the tract, back to the place of beginning.
minor
Someone who has not reached the age of majority and therefore does not have legal capacity to transfer title to real property.
monetary policy
Governmental regulation of the amount of money in circulation through such institutions as the Federal Reserve Board.

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