Mortgage loans are rated as A, B, C, or D paper. "A" paper loans are the highest quality, lowest risk loans; "B" quality are loans where the borrower has minor credit problems; "C" quality are borrowers with marginal or poor credit; "D" quality indicates very high risk loans.
In commercial property leasing, this refers to the temporary or partial forgiveness of rent.
A reduction or elimination of rent payments for a specified period of time, usually granted by the landlord as an inducement to the tenant to enter into or renew a lease.
A reduction in real property tax granted by a taxing authority as the result of an appeal. In some jurisdictions, tax abatements may also be granted as an inducement for development or to attract or retain job-providing industries.
above building standard
Materials not included in the work letter, and usually of greater quality or amount, which are subject to negotiation between the landlord and tenant as to quality, quantity and payment.
A measure of the amount of office, industrial, or retail space leased in a market or submarket area over a period of time.
abstract of judgment
abstract of title
A full summary of all consecutive grants, conveyances, wills, records and judicial proceedings affecting title to a specific parcel of real estate, together with a statement of all recorded liens and encumbrances affecting the property and their present status. The abstract of title does not guarantee or ensure the validity of the title of the property. Rather, it is a condensed history that merely discloses those items about the property that are of public record; thus, it does not reveal such things as encroachments and forgeries. (See abstracter, title insurance policy, certificate of title)
The person preparing the abstract of title. The abstracter searches the title as recorded or registered with the county recorder, county registrar, circuit court and/or other official sources. He or she then summarizes the various instruments affecting the property and arranges them in the chronological order of recording, starting with the original grant of title.
Depreciation methods, chosen for income tax or accounting purposes, that offer greater deductions in early years.
A provision in a mortgage, trust deed, promissory note or contract for deed (agreement of sale) that, upon the occurrence of a specified event, gives the lender (payee, obligee or mortgagee) the right to call all sums due and payable in advance of the fixed payment date. (See alienation clause)
The right of owners to get to and from their property.
Acquiring title to additions or improvements to real property as a result of the annexation of fixtures or the accretion of alluvial deposits along the banks of streams.
accord and satisfaction
The settlement of an obligation. An accord is an agreement by a creditor to accept less than bargained for from a debtor. The creditor's acceptance of the accord constitutes satisfaction of the debt.
The agent must be able to report the status of all funds received from or on behalf of the principal. Most state real estate license laws require a broker to give accurate copies of all documents to all parties affected by them and to keep copies on file for a specified period of time. Most license laws also require the broker to deposit immediately, or within 24 to 48 hours, all funds entrusted to the broker (such as earnest money deposits) in a special trust, or escrow, account. Commingling such monies with the broker's personal or general business funds is strictly illegal.
The gradual and imperceptible addition of land by alluvial deposits of soil through natural causes, such as shoreline movement caused by streams or rivers. This added land upon a bank or stream, navigable or not, becomes the property of the riparian or littoral owner, and it also becomes subject to any existing mortgages.
Accounting method in which income and expenses are charged to the periods for which they are applicable, rather than when actual payment is received or made.
accrual interest rate
The unpaid interest resulting from the difference between the Stated Rate and Pay Rate. The Accrual Rate interest is typically added to the Base Principal Balance; interest is then calculated on both the Base Principal Balance and the Accrual Rate interest.
A method of accounting that requires income or expense to be entered when the amount is earned or the obligation is payable. Distinguished from "cash method", in which amounts are posted when paid or received.
- In accounting, an account that shows the total amount of depreciation taken on an asset since it was acquired; also called accumulated depreciation. (See depreciation)
- For appraisal purposes, the difference between the cost to reproduce the property (as of the appraisal date) and the property's current value as judged by its "competitive condition." In this context, accrued depreciation is often called diminished utility.
Interest that has been earned by not paid.
On a closing statement, items of expense that are incurred but not yet payable, such as interest on a mortgage loan or taxes on real property.
A formal declaration made before a duly authorized officer, usually a notary public, by a person who has signed a document; also, the document itself. An acknowledgment is designed to prevent forged and fraudulently induced documents from taking effect.
The total cost of acquiring an investment property, consisting of the purchase price plus other costs, such as closing costs, legal fees, title insurance, acquisition fees, and due diligence costs. Acquisition cost includes only direct costs related to a specific property acquisition, and does not include costs of running an acquisition program, such as general and administrative costs incurred in analyzing proposals that are rejected, joint-venture organization costs, etc.
A measure of land equal to 43,560 square feet, 4,840 square yards, 4,047 square meters, 160 square rods or 0.4047 hectares.
Real, substantial and just damages or the amount awarded to a complainant in compensation for his actual and real loss or injury.
Real, substantial and just damages or the amount awarded to a complainant in compensation for his actual and real loss or injury.
Express information or fact; that which is known; direct knowledge.
The Latin word for "according to value."
ad valorem tax
A tax based on the value of the thing being taxed.
Interest charged on a principal amount for specified term, regardless of any repayments of principal. The borrower is paying interest on the full principal sum for the entire loan period, even though the principal is being reduced each month.
Additional material attached to and made part of a document. If there is space insufficient to write all the details of a transaction on the sales contract form, the parties will attach an addendum or supplement to the document. The sales contract should incorporate the addendum by referring to it as part of the agreement. The addendum should refer to the sales contract and be dated and signed or initialed by all the parties.
Disposal by a testator in his or her lifetime of a specific property bequeathed in his or her will so the bequest is revoked. (See testator)
adjustable rate mortgage (ARM)
A broad term for a loan (mortgage or deed of trust) with rates and terms that can change. The adjustable rate loan has become commonplace, with allowable ranges as to time intervals, percentage of increase or decrease and total increases or decreases likely to change as market conditions change. (See caps, index rate, initial rate, rate cap, rate factor)
The original cost basis of a property reduced by certain deductions and increased by certain improvement costs. The original basis determined at the time of acquisition is reduced by the amount of allowable depreciation or depletion allowances taken by the taxpayer, and by the amount of any uncompensated property losses suffered by the taxpayer. It then increases by the cost of capital improvements plus certain carrying costs and assessments. The amount of gain or loss recognized by the taxpayer upon sale of the property is determined by subtracting the adjusted basis on the date of sale from the adjusted sales price. (See basis, capital gain)
adjusted sales price
- In appraisal, the indicated price of a comparable property after adjustments have been made to account for differences between comparable and subject properties.
- In income taxation, the selling price of a home less expenses of sale, less fixing-up expenses. When the purchase price of a new principal residence equals or exceeds the "adjusted sales price" of a former residence, any gain on the sale of the former residence will be deferred.
adjusted tax basis
The original cost or other basis of property, reduced by "depreciation" deductions and increased by "capital expenditures".
In an adjustable rate mortgage (ARM) the "adjustment period" is period (one month, three months, six months, one year or three years) between one interest rate and monthly payment change and the next. (See adjustable rate mortgage (ARM))
administered price system
Federal National Mortgage Association securities purchasing procedure where required yields are adjusted daily to reflect financial market factors. (See Federal National Mortgage Association)
A government agency that makes rules and regulations to carry out the law. A state's real estate commission develops regulations to complement license law.
A male person appointed by the court to settle the estate of a person who has died intestate (leaving no will). Sometimes referred to as the personal representative. (See executor)
A female person appointed by the court to settle the estate of a person who has died intestate (leaving no will). Sometimes referred to as the personal representative. (See executrix)
A fee paid before any services are rendered. Specifically, it is a practice of some brokers to obtain a nonrefundable fee from the seller in advance to cover the advertising of properties or businesses for sale while giving no guarantee that a buyer will be found, which is often held to be improper conduct. Brokers must keep accurate records of expenditures.
advance fee addendum
An agreement specifying services for which an agent or broker will be compensated including a provision for payment of an advance fee. (See advance fee)
A denial or revocation of credit, a change in the terms of an existing credit arrangement, or a refusal to grant credit in substantially the amount or on substantially the terms requested.
The acquiring of title to real property owned by someone else by means of open, notorious, hostile and continuous possession for a statutory period of time. The burden to prove title is on the possessor, who must show that four conditions were met:
- He or she has been in possession under a claim of right.
- He or she was in actual, open and notorious possession of the premises so as to constitute reasonable notice to the record owner.
- Possession was both exclusive and hostile to the title of the owner (that is, without the owner's permission and evidencing an intention to maintain the claim of ownership against all who may contest it).
- Possession was uninterrupted and continuous for at least the prescriptive period stipulated by state law.
Zoning for beauty. May regulate architectural styles, colors or signage. (See zoning)
A sworn statement written down and made under oath before a notary public or other official authorized by law to administer an oath. The term literally means "has pledged one's faith." The affiant (person making the oath, sometimes called the deponent") must swear before the notary that the facts contained in the affidavit are true and correct.
affidavit of title
A written statement, made under oath by a seller or grantor of real property and acknowledged by a notary public, in which the grantor
- identifies him or herself and indicates marital status
- certifies that since the examination of the title on the date of the contracts no defects have occurred in the title and
- certifies that he or she is in possession of the property (if applicable).
A formal declaration that an affidavit is true.
Title or interest acquired by the grantor after a property has been conveyed. (See grantor)
after-tax cash flow
"Cash flow" from income-producing property, less income taxes, if any, attributable to the property's income. If there is a tax loss which can provide a tax saving from the shelter of income earned outside the property, that savings is added to the "cash flow" that is earned by the property.
after-tax equity yield
The "rate of return" on an equity interest in "real estate", taking into account financing costs and income tax implications of the investor.
The legal relationship arising out of a contract under which a principal is represented by an agent in dealings with third parties.
agency coupled with an interest
An agency relationship in which the agent is given an estate or interest in the subject of the agency (the property).
One who acts on behalf of another. In commercial real estate leasing, an agent is a real estate licensee (either a salesperson or broker) who represents a tenant and/or a landlord in a leasing transaction.
One who's legal right is invaded by an act(s) of another. The word "aggrieved" refers to a substantial grievance, a denial of some personal or property right, or the imposition upon a party of a burden or obligation.
agreement of sale
A written agreement between seller and purchaser in which the purchaser agrees to buy certain real estate and the seller agrees to sell upon terms of the agreement. Also called "offer and acceptance", "contract of sale", "earnest money" contract.
Agricultural landowners often lease their land to tenant farmers, who provide the labor to produce and bring in the crop. An owner can be paid by a tenant in one of two ways as an agreed on rental amount in cash in advance (cash rents) or as a percentage of the profits from the sale of the crop when it is sold (sharecropping). (See cash rents, sharecropping)
Attention, Interest, Desire, Action. In real estate advertising, creating ads that get the Attention of prospects, stimulating their Interest in a property, generate a Desire to purchase, and motivating the prospect to take Action.
Persons with acquired immunodeficiency syndrome are protected under most federal and state discrimination laws. If buyers ask the real estate agent whether a prior occupant had AIDS, most agents point out that the law prevents responding one way or the other. Many states have emended their licensing laws to provide that the fact that someone has AIDS is not deemed a material fact and therefore does not form the basis for a claim that a broker concealed a material fact. Also protected are persons with AIDS-related complex (ARC) or human immunodeficiency virus infection (HIV).
A designated airspace over a piece of land. An air lot, like surface property, may be transferred.
Rights to the use of the open space or vertical plane above a property. Ownership of land includes the right to all air above the property. Until the advent of the airplane, this right was unlimited, but now the courts permit reasonable interference with one's air rights, such as is necessary for aircraft, so long as the owner's right to use and occupy the land is not lessened. Thus, low-flying aircraft might be unreasonably trespassing, and their owners would be liable for any damages. Governments and airport authorities often purchase air rights adjacent to an airport, called an aviation easement, to provide glide patterns for air traffic. The air itself is not real property; airspace, however, is real property when described in three dimensions with reference to a specific parcel of land, as in a condominium unit. A Maryland case has decided that separate owners of the land and the air rights may be separately assessed for tax purposes. Air rights may be sold or leased and buildings constructed thereon, such as was done with the Pam Am Building constructed above Grand Central Station in New York City. Air rights may also be transferred by way of easements, such as those used in constructing elevated highways or in acquiring scenic easements or easements of light and air. Because of the scarcity of land, many developers are examining the possibilities for developing properties in the airspace above prime properties owned by schools, churches, railways and cemeteries. (See surface rights, sub surface rights)
Historically, one owned the airspace above his land "to the heavens". Today, airspace refers to the legal concept that a person who owns land also owns as much of the airspace above his land as he can effectively use.
The act of transferring ownership, title or an interest or estate in real property from one person to another. Property is usually sold or conveyed by voluntary alienation, as with a deed or assignment of lease. Involuntary alienation takes place when property is sold against the owner's will, as in a foreclosure sale or a tax sale. (See alienation clause)
A system of land ownership in which land is held free and clear of any rent or service due to the government; commonly contrasted to the feudal system. Land is held under the allodial system in the United States.
Indicates the amount the landlord is prepared to offer by way of contribution to the tenant's cost of leasehold improvements, but can also include other inducements, such as free rent or its equivalent, or lease takeover. It is generally expressed as a dollar amount times the number of square feet occupied (usable).
Alquist-Priolo Special Study Zone
A California law requiring a real estate agent or owner to disclose to prospective buyers that a property is located within a special studies zone (geological hazard zone) and if the property contains or will contain a dwelling (a residentially zoned lot). "Special study zones" cover an area 660 feet on each side of fault lines and are indicated on maps prepared by the California Department of Mines and Geology.
amendment to the escrow instructions
A change to escrow instructions requiring the agreement of both buyer and seller. (See escrow instructions)
An amendment is a change to the existing content of a contract. Any time words or provisions are added to or deleted from the body of the contract, the contract has been amended.
amenity or amenities
A feature of commercial space that enhances its usefulness and value. Amenities can be onsite, such as a restaurant, exercise club, or concierge within an office building, or offsite, such as proximity to shopping, dining, and specific businesses.
American Institute of Real Estate Appraisers (AIREA)
A professional organization formerly affiliated with the National Association of REALTORS. AIREA promoted professional practice and ethics in the real estate appraisal industry and identified experienced, competent, ethical appraisers by awarding the MAI (Member, Appraisal Institute) and RM (Residential Member) designations. In 1991, AIREA was merged with the Society of Real Estate Appraisers into the Appraisal Institute. The only designations awarded now are the MAI and SRA (Senior Residential Appraiser)
American Land Title Association (ALTA) policy
A title insurance policy that protects the interest in a collateral property of a mortgage lender who originates a new real estate loan. (See title insurance)
American Society of Appraisers (ASA)
A professional organization of appraisers engaged in the appraisal of both real and personal property. It confers the designations ASA and FASA (Fellow).
American Society of Real Estate Counselors (ASREC)
A professional organization, affiliated with the National Association of REALTORS, composed of individuals with proven success in real estate counseling who serve clients on a fee basis. The society offers its members exclusive use of the professional designation CRE (Counselor of Real Estate).
Americans with Disabilities Act (ADA)
The Americans with Disabilities Act. The ADA requires employers with 15 or more employees to ensure their workplace has full access for physically handicapped persons.
The gradual repayment of a debt by means of systematic payments of principal and/or interest over a set period, so that at the end of the period there is a zero balance. The principal is thus directly reduced or amortized over the life of the loan. Some loans are not fully amortized, and require a balloon payment at the end of the term of the loan. (See balloon payment, fully amortized)
amortization of additional tenant improvements
An agreement on the part of the landlord to pay for “above-building standard” improvements and amortize those improvements at a defined interest rate over a fixed term as additional rent.
The time it takes to retire a debt through periodic payments. Also known as the "full amortization term".
Any loan with at least some payments to the "principal" amount.
A major or prime tenant in a shopping center, building, etc.
An addition to property by the act of joining or uniting one thing to another, as in attaching personal property to real property and thereby creating a fixture. For example, a sink becomes a fixture when it is annexed to the plumbing outlet.
annual debt service
Monthly loan payments (principal and interest), if any, times 12 months.
annual operating expenses
The actual costs it takes to run the property, such as property tax, insurance, maintenance, repairs, management fees, utilities and supplies.
annual percentage rate (APR)
An expression of the relationship of the total finance charge to the total amount to be financed as required under the federal Truth-in-Lending Act. Tables available from any Federal Reserve bank may be used to compute the rate, which must be calculated to the nearest one-eighth of 1 percent. Use of the APR permits a standard expression of credit costs, which facilitates easy comparison of lenders. (See interest, Truth-in-Lending Act)
A sum of money received by an annuitant in a series of fixed periodic payments.
A clause in a mortgage or deed of trust specifying that the senior lienholder will retain lien priority in the event of a merger. (See merger)
An estimate (usually the agent's) on how much space will be leased within a building, submarket, or market based on objective and subjective assessments. Such an estimate requires knowledge of the local market and the area's economy. (See absorption)
The appraisal principle that holds that value can increase or decrease based on the expectation of some future benefit or detriment produced by the property. (See appraisal)
State and federal laws designed to maintain and preserve business competition. The Sherman Antitrust Act (1890) is the principal federal statute covering competition, which is defined by most courts as "that economic condition in which prices are determined by market forces without interference from private concerns and there is reasonable freedom of entry into most businesses." Certain real estate brokerage activities have come under public scrutiny by the Federal Trade Commission. These activities include the fixing of general commission rates by local boards or groups of brokers and the exclusion of brokers from membership in local boards or in multiple-listing arrangements due to unreasonable membership requirements. As a result of court cases, local real estate boards no longer directly or indirectly influence fixed commission rates or commission splits between cooperating brokers. Moreover, in some states clients must be specifically informed that the commission rates are negotiable between client and broker.
A building having separate units for permanent tenants who rent or lease them. The owner of the building provides common facilities, such as lights, heat, elevator and garbage disposal services, and maintains common entrances and hallways.
- The "prorating" of property expenses, such as taxes and insurance, between buyer and seller.
- The partitioning of property into individual parcels by tenants in common.
A qualified party’s opinion or estimate of the market value of a property.
Customarily refers to a qualified appraiser’s valuation.
A qualified individual who provides a professional opinion of the market value of a property. (See licensed appraiser)
An increase in the worth or value of a property due to economic or related causes, which may prove to be either tempo rary or permanent; opposite of depreciation. (See depreciation)
approaches to value
The accepted methods used by appraisers to prepare an estimate of value. The three traditional methods to value property include: the sales comparison approach, the income capitalization approach, and the cost approach.
Appropriation is the way a taxing body authorizes the expenditure of funds and provides for the sources of the funding. Appropriation generally involves the adoption of an ordinance or the passage of a law that states the specific terms of the proposed taxation.
appropriative water rights
Something that is outside the property itself but is considered a part of the property and adds to its greater enjoyment, such as the right to cross another's land (i.e., "easement" or "right-of-way").
Belonging to; adjunctive; appended to or annexed to. For example, the garage is appurtenant to the house, and the common interest in the common elements of a condominium is appurtenant to each apartment. Appurtenant items run with the land when the property is transferred.
An easement that is annexed to the ownership of one parcel and allows the owner the use of the neighbor's land.
The nonjudicial submission of a controversy to selected third parties for their determination in a manner provided for by an agreement or under the law.
arm's length transaction
A transaction among parties, each of whom acts in his or her own best interest. Examples of transactions that would NOT be considered "arm's length" would be:
- between husband and wife;
- between a corporation and one of its subsidiaries.
arranger of credit
As defined under the federal Truth-in-Lending Law, a person who regularly arranges for the extension of consumer credit by another person if a finance charge will be imposed, if there are to be more than four installments, and if the person extending the credit is not a creditor. At present, the term does not include a real estate broker who arranges seller financing of a dwelling or real property. (See Truth-in-Lending Law)
- The state of being delinquent in paying a debt.
- At or after the end of the period for which expenses are due or levied; the opposite of in advance. Mortgage interest and real estate taxes are often paid in arrears.
The part of the Business and Professions Code governing transactions in real property sale contracts and trust deeds.
The part of the Business and Professions Code governing commissions, loan costs, and payment requirements in loan brokerage activities.
A hazardous fire retardant material sometimes found in U.S. buildings constructed before the mid 1970s.
"as is" condition
Premises accepted by a buyer or tenant in the condition existing at the time of the sale or lease, including all physical defects. A landlord may be liable for latent defects known to them but not disclosed to the tenant.
asking rental rates
The base rental rate quoted by a landlord for commercial space available for lease.
The combining of two or more adjoining lots into one larger tract to increase their total value.
The value established for property tax purposes.
- The imposition of a tax, charge or lien, usually according to established rates.
- The amount of tax or special payment due to a municipality or association.
- An owner's or lessee's proportionate share of a common expense.
An asset is something of value, encumbered or not, owned by any person, corporation or other entity. Assets are financial (cash or bonds), tangible or intangible, or physical (real or personal property).
To transfer one's property rights or contract rights to another.
A transfer between parties of the title to any property, real or personal, or of any rights or estates in the property. Common assignments include leases as well as mortgages and deeds of trust.
assignment of lease
The replacement of one tenant (the assignor) by another (the assignee) under a lease. The assignee assumes all the responsibilities and obligations of the original tenant; the assignor may or may not be relieved of those responsibilities.
A real estate license classification used in some states to describe a person who has qualified as a real estate broker but still works for and is supervised by another broker; also called a broker-salesperson, broker-associate or affiliate broker.
A property loan that includes a provision for a qualified subsequent buyer to take over the position of the original borrower.
A mortgage that allows a purchaser to assume or take over the responsibilities and liabilities under the mortgage from the vendor.
assumption "subject to"
assumption of mortgage
The acts of acquiring title to property that has an existing mortgage and agreeing to be personally liable for the terms and conditions of the mortgage, including payments. The seller remains liable to the lender unless the lender agrees to release him. (See acceleration clause, due-on-sale clause, novation, subrogation)
A fund established by the B.C. provincial government to compensate any person who is deprived of land because of the operation of the Land Title Act in certain cases where there has been a fraud committed, a mistake made, or an improper act of the Registrar of Titles or his employees.
The legal process of seizing the real or personal property of a defendant in a lawsuit by levy or judicial order, and holding it in court custody as security for satisfaction of a judgment. The lien is thus created by operation of law, not by private agreement. The plaintiff may recover such property in any action upon a contract, express or implied.
To turn over or transfer money or goods to another party. To agree to recognize a new owner of a property and to pay them rent as the new landlord. (See letter of attornment)
The chief law officer of the federal or state government, who appears for the people in criminal court.
A competent and disinterested person who is authorized by another person to act in his or her place. In real estate conveyance transactions, an attorney-in-fact, who has a fiduciary relationship with his or her principal, should be so authorized by way of a written, notarized and recordable instrument called a power of attorney. (See power-of-attorney)
attorney's opinion of title
An abstract of title that an attorney has examined and has certified to be, in his or her opinion, an accurate statement of the facts concerning the property ownership. (See abstract of title)
A tenant's formal agreement to be a tenant of a new landlord. Example: Abel defaulted on the mortgage against his shopping centre, so the Happy Life Insurance company foreclosed and became the landlord. Happy Life asked all tenants to sign an attornment recognizing the new landlord.
attractive nuisance doctrine
An owner has a duty to reasonably protect children from injury when his or her property is likely to attract children.
Selling property to the highest bidder.
Computer systems that permit lenders to expedite the loan approval process and reduce lending costs.
A clause in a listing agreement that states that the agreement will continue automatically for a certain period of time after its expiration date. In many states, use of this clause is discouraged or prohibited.
automobile traffic counts
The volume of auto traffic over an average 24-hour period. One of the main criteria used by retail tenants to qualify potential locations. This will be of importance to most retailers considering a space for lease.
The percentage rate derived by dividing the total space being marketed to users as of the survey date including both occupied and physically empty space by the total inventory.
The amount of space being marketed for sale or lease to a user. It includes both occupied and physically empty spaced.
The sudden tearing away of land, as by earthquake, flood, volcanic action or the sudden change in the course of a stream.