A program to help eligible California Veterans finance the purchase of farms and ranches within the state. Cal-Vet Loan Programs
California Environmental Quality Act
The Act allows local governments to require environmental impact reports for private or government projects that may have a significant impact on the environment. (See environmental impact report, National Environmental Policy Act)
California Housing Financial Discrimination Act of 1977
Also known as the Holden Act. A California act prohibiting discrimination by a lender for any reason unrelated to the creditworthiness of the loan applicant.
A contract provision that gives the right to terminate obligations upon the occurrence of specified conditions or events. A cancellation clause in a lease may allow the landlord to break the lease upon the sale of the building.
capacity of parties
The legal ability of people or organizations to enter into a valid contract. A person entering into a contract will have full, limited or no capacity to contract.
Profit earned from the sale of an asset, where the sales price was greater than the adjusted basis. (See adjusted basis, deferred capital gain, excluded capital gain, realized capital gain (loss), recognized capital gain)
Loss sustained from the sale of an asset, where the sales price was less than the adjusted book basis. (See adjusted basis)
A mathematical process for converting net income into an indication of value, commonly used in the income approach to value. The net income of the property is divided by an appropriate (capitalization) rate of return to give the indicated value. (Income ÷ Rate = Value)
A rate of return used to derive the capital value of an income stream. The formula is: Value = (annual income divided by capitalization rate). Example: the estimated net operating income of an office building is $12,000 per year. An appraiser decides the appropriate capitalization rate is 12%, comprised of a 10% return on investment and 2% for depreciation. The estimated value of the building is $100,000.
The process at of laying two to four feet of soil over the top of a landfill site and then planting vegetation to prevent erosion and enhance the landfill's aesthetic value. (See landfill)
The sales or leasing rate of a real estate development compared to the sales or leasing rate of all developments in the market area. Example: 2,000 condominium units are built in a rapidly growing metropolitan area, including one project of 500 units built by Gibraltar Developments. Sales in the area during July are 200 units, of which half are sold by Gibraltar; therefore Gibraltar's capture rate is 50%.
A group tour by a real estate office's sales agents to view listed properties. (See agent property evaluation)
carbon monoxide (CO)
A colorless, ordorless gas that occurs as a byproduct of burning such fuels as wood, oil and natural gas due to incomplete combustion.
The agent must exercise a reasonable degree of care while transacting the business entrusted to him or her by the principal. The principal expects the agent's skill and expertise in real estate matters to be superior to that of the average person. The most fundamental way in which the agent exercises care is to use that skill and knowledge in the principal's behalf. The agent should know all facts pertinent to the principal's affairs, such as the physical characteristics of the property being transferred and the type of financing being used. (See agent, law of agency, principal)
Expenses necessary for holding property, such as taxes and interest on idle property or property under construction. Example: The annual carrying charges on a $100,000 tract of land are: $2,000 for taxes and $12,000 for interest.
The net spendable income from an investment, determined by deducting all operating and fixed expenses from the gross income. When expenses exceed income, a negative cash flow results.
In an agricultural lease, the amount of money given as rent to the landowner at the outset of the lease, as opposed to share cropping.
Same as equity dividend rate.
When a seller of a property wants to receive the entire sales price in cash, with no carry-back financing. (See carry-back)
Casualty insurance policies include coverage against theft, burglary, vandalism and machinery damage as well as health and accident insurance. Casualty policies are usually written on specific risks, such as theft, rather than being all-inclusive.
A notice registered against the title to land warning those looking at the title that a claim has been made.
Latin for "let the buyer beware." A buyer should inspect the goods or realty before purchase.
Covenants, conditions and restrictions are limitations on land use imposed by deed, usually when land is subdivided. CC&Rs are a means of regulating building construction, density and use. May be referred to simply as restrictions. (See deed restrictions, restrictive covenants)
Abbreviation of Capital Cost Allowance.
The maximum price that a purchaser is willing to pay for a property. Compare to floor price.
centers of influence
Influential people in a community. Real estate agents cultivate relationships with these "centers of influence" as a method of locating prospects in the community where the person has influence. Also known as "bird dogs," indicating that these people "point the way" to new prospects.
central business district (CBD)
The downtown section of a city, generally consisting of retail, office, hotel, entertainment, and governmental land uses with some high density housing. Example: Office markets of the CBD are distinguished from those in the suburbs by market analysts.
certificate of eligibility
A certificate issued by a Veterans Administration regional office to veterans who qualify for a VA loan. The Veteran Housing Act permits regional administrators to restore a veteran's entitlement to loan-guarantee benefits after his or her property purchased with an existing VA-guaranteed loan has been disposed of and 1. this loan has been paid in full; 2. the administrator is released from liability under the guarantee or 3. any loss suffered by the administrator has been repaid in full. It is no longer required that property ownership was transferred for a compelling reason. The act also authorizes regional administrators to restore a veteran/seller's entitlement to loan-guarantee benefits and release the veteran from liability to the VA when another veteran has agreed to assume the outstanding balance on the veteran/seller's existing VA-guaranteed loan and consented to the use of his or her entitlement to the same extent that the veteran/transferor had used the original entitlement. This is not a release from the lender, however. The veteran/transferee and the property must otherwise meet the requirements of the law. Reinstatement of eligibility is never automatic but must always be applied for, preferably at the time of the sale of property purchased with an existing VA-guaranteed loan. Many veteran/sellers presume that they are eligible for a new VA loan after selling their property by way of a loan assumption. In a loan assumption, the broker should point out that for the seller to have complete VA entitlement restored, the buyer must be a veteran and must agree in the sales contract to substitute his or her entitlement for the seller's. (See VA loan)
certificate of occupancy
A document issued by a local government to a developer permitting the structure to be occupied by members of the public. Issuance of the certificate generally indicates that the building is in compliance with public health codes and building codes. Example: Upon obtaining zoning and subdivision approvals and passing inspection by code enforcement officials, the developer is issued a certificate of occupancy.
certificate of reasonable value (CRV)
A certificate insured by the Veterans Administration setting forth a property's current market value estimate, based on a VA-approved appraisal. The CRV places a ceiling on the amount of a VA-guaranteed loan allowed for a particular property. (See VA loan)
certificate of sale
The document generally given to the purchaser at a tax foreclosure sale. A certificate of sale does not convey title normally it is an instrument certifying that the holder received title to the property after the redemption period passed and that the holder paid the property taxes for that interim period.
certificate of title
A statement of opinion prepared by a title company, licensed abstracter or an attorney on the status of a title to a parcel of real property, based on an examination of specified public records. This certificate of title should not be confused with the certificate of title that is issued to a titleholder of land registered under the Toreens system, or with a title insurance policy. A certificate of title does not guarantee title, but it does certify the condition of title as of the date the certificate is issued, on the basis of an examination of the public records maintained by the recorder of deeds, the county clerk, the county treasurer, the city clerk and collector and clerks of various courts of record. The certificate also may include records involving taxes, special assessments, ordinances, zoning and building codes. Note that a certificate of title does not offer protection against "off -the-record" matters such as undisclosed liens, rights of parties in possession and matters of survey and location. Nor does it protect against "hidden defects" in the records themselves, such as fraud, forgery, lack of competency or lack of delivery. A title insurance policy, not a certificate of title, protects against certain off-the-record and hidden defects risks.
cessation of work
A period of 60 days where no work is being conducted. (See notice of cessation)
chain of title
The succession of conveyances, from some accepted starting point, whereby the present holder of real property derives title. (See conveyance)
The appraisal principle that holds that no physical or economic condition remains constant. (See appraisal)
Personal property. Anything owned and tangible, other than real estate. Example: Furniture, automobiles, and jewelry are all chattels.)
A document evidencing a debt owed by the borrower (mortgagor) to the lender (mortgagee). The mortgage is secured by the lender against personal property owned by the borrower as collateral to ensure the repayment of the debt. These mortgages are governed by the Personal Property Security Act.
An action where an issue, formed by some kind of complaint, is presented for trial. Proceedings are for declaration, enforcement, protection of a right, redress, or prevention of a wrong.
Civil Rights Act of 1866
The Civil Rights Act of 1866 prohibits racial discrimination in the sale and rental of housing. (See Federal Fair Housing Law)
Civil Rights Act of 1870
The Voting Rights Act of 1870 (aka, Civil Rights Act of 1870) includes a clause reaffirming the remedies of the Civil Rights Act of 1866.
Civil Rights Act of 1964
The first modern civil rights act. Made into law by President John F. Kennedy's Executive Order 11063 prohibiting discrimination in housing where federal funds were involved. (See Federal Fair Housing Law)
Civil Rights Act of 1968
In 1968, Congress enacted Title VIII of the Civil Rights Act, called the federal Fair Housing Act, which declared a national policy of providing fair housing throughout the United States (Reference Sections 3601-3631 of Title 42, United States Code). This law makes discrimination based on race, color, sex, familial status, handicap, religion or national origin illegal in connection with the sale or rental of most dwellings and any vacant land offered for residential construction or use. (See Fair Housing Act, Federal Fair Housing Law)
Class A office buildings
The most prestigious buildings competing for premier office users with rents above average for the area. Buildings that have high quality standard finishes, state of the art systems, exceptional accessibility and a definite market presence. Characterized by: prime central location; 1st class tenant improvements; on site parking; state of the art elevators and HVAC systems; concrete and steel construction; contemporary design and architecture; high quality of upkeep and maintenance; ability to command a premium rent within the relevant market. Implicit in the Class A building definition is that the size of the building is "significant" in accordance with its market.
Class B office building
Buildings competing for a wide range of users with rents in the average range for the area. Building finishes are fair to good for the area and systems are adequate, but the building does not compete with Class A at the same prices. Characterized by: new buildings in non-prime locations and older buildings (including rehabilitated structures in prime locations); good quality tenant improvements; may have on site parking; elevators and HVAC served; built utilizing a variety of construction methods; upkeep and maintenance is generally good. Generally, all space has been previously occupied.
Class C office building
Buildings competing for tenants requiring functional space at rents below the average for the area. Characterized by: older structures, may or may not have been renovated; poor to average quality of tenant improvements; may not have elevators and air conditioning systems; generally no parking facilities; lower quality of upkeep and maintenance. All space has been previously occupied.
A marketable title; one free of "clouds" and disputed interests. (Example: It is necessary to obtain clear title in order to convey a general warranty deed in a transaction.)
The person who employs an agent to perform a service for a fee. In traditional real estate brokerage, the client is the seller, and the buyer is the prospect or customer. In modern practice, more and more buyers are seeking representation as a client. Dual agency occurs when a broker represents the seller and the buyer as clients.
The consummation of a real estate transaction, when the seller delivers title to the buyer in exchange for payment by the buyer of the purchase price. Closing in some areas may not occur until the documents are recorded; however, under general rules of real estate law, transfer of title takes place upon delivery of the deed to the grantee.
A mortgage which cannot be fully paid out before expiry of its term.
A commingled fund with a stated maturity (termination) date, with few or no additional investors after the initial formation of the fund. Closed-end funds typically purchase a portfolio of properties to hold for the duration of the fund and, as sales occur, typically do not reinvest the sales proceeds.
Expenses of the sale (or loan refinancing) that must be paid in addition to the purchase price (in the case of the buyer's expenses) or be deducted from the proceeds of the sale (in the case of the seller's expenses). Some closing costs result from legal requirements; other are a matter of local custom and practice.
The date on which the seller delivers the deed and the buyer pays for the property. (Example: The sales contract generally establishes a closing date, at which time the parties will meet and settle all accounts necessary to transfer title to the property.)
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.
The grouping of homesites within a subdivision on smaller than normal lots, with the remaining land used as common areas.
Title ownership held by two or more persons.
code of ethics
A written system of standards of ethical conduct. Because of the nature of the relationship between a broker and a client or other persons in a real estate transaction, a high standard of ethics is needed to ensure that the broker acts in the best interests of both his or her principal and any third parties.
A supplement or an addition to a will, executed with the same formalities as a will, that normally does not revoke the entire will.
A clause in insurance policies covering real property that requires the policyholder to maintain fire insurance coverage generally equal to at least 80 percent of the property's actual replacement cost.
Something of value given or pledged as security for a debt or obligation. The collateral for a real estate mortgage loan is the hypothecated mortgaged property itself.
A trust that participates in real estate investments as both financier and investor.
A financial institution designed to act as a safe depository and lender for many commercial activities (usually short-term loans or lines of credit). Commercial banks rely heavily on demand deposits—checking accounts—for their basic supply of loanable funds, although they also receive capital from savings accounts, loans from other banks, short-term loan interest and the equity invested by their owners. (See line of credit)
Commercial Investment Real Estate Institute (CIREI)
A professional organization of real estate practitioners specializing in commercial real estate. CIREI, affiliated with the National Association of REALTORS(r), confers the designation CCIM (Certified Commercial Investment Member).
commercial leasehold insurance
Insurance that covers payment of rent in the event the insured (tenant) cannot pay it.
commercial real estate
A classification of real estate that includes income-producing property such as office buildings, gasoline stations, restaurants, shopping centers, hotels and motels, parking lots and stores.
A term applied to all open-end and closed-end pooled investment vehicles designed for institutional tax-exempt investors. A commingled fund may be organized as a group trust, partnership, corporation, insurance company separate account or other multiple ownership entity.
The illegal act of mixing deposits or monies belonging to a client (trust funds) with one's personal money. By law brokers are required to maintain a separate trust or escrow account for other parties' funds held temporarily by the broker. (See trust funds)
Payment to a broker for services rendered, such as in the sale or purchase of real property; usually a percentage of the selling price of the property.
- A pledge to do a certain act, such as a promise by a lender to loan a certain amount of money at a specific rate of interest to a qualified borrower, provided the loan is made by a certain date.
- Also refers to an agreement by a title insurance company to issue a policy in favor of a proposed insured upon acquisition of a specific property.
For lease purposes, the areas of a building and its site that are available for the non-exclusive use of all its tenants, e.g., lobbies, corridors, parking lots, etc. For space measurement purposes, the square footage of lobbies, corridors, etc., contained within the building. For retail properties, the Total Floor Space less Total Retail Area.
Land or improvements in a condominium development designated for the use and benefit of all residents, property owners and tenants. Common areas frequently include such amenities as corridor or hall areas and elevators, and parks, playgrounds and barbecue areas, which are sometimes called green belts. In shopping centers, the common areas are parking lots, malls and traffic lanes.
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. (See condominium ownership)
The percentage of undivided ownership in the common elements belonging to each condominium apartment, as established in the condominium declaration.
common interest subdivision
A community center typically offers a wider range of apparel and other soft goods than the neighborhood center does. Among the more common anchors are supermarkets, super drugstores, and discount department stores. Community center tenants sometimes contain off-price retailers selling such items as apparel, home improvement/furnishings, toys, electronics or sporting goods. The center is usually configured as a strip, in a straight line, or "L" or "U" shape. Of the eight center types, community centers encompass the widest range of formats. For example, certain centers that are anchored by a large discount department store refer to themselves as discount centers. Others with a high percentage of square footage allocated to off-price retailers can be termed off-price centers.
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. This system stemmed from germanic tribes and, through Spain, came to the Spanish colonies of North and South America. In states that maintain a community property system, such as California and other states with laws of Spanish origin, there are two classifications of property - separate property and community property. Separate property is property that either the husband or wife owned at the time of marriage or that was acquired by one spouse during marriage by inheritance, will or gift.
Community Reinvestment Act of 1977 (CRA)
Community reinvestment refers to the responsibility of financial institutions to help meet their communities' needs for low- and moderate-income housing. In 1977, Congress passed the Community Reinvestment Act of 1977 (CRA). Under the CRA, financial institutions are expected to meet the deposit and credit needs of their communities, participate and invest in local community development and rehabilitation projects, and participate in loan programs for housing, small businesses and small farms.
The term "company dollar" is the amount left over after all commissions have been paid out.
comparative market analysis (CMA)
This is a term often used by real estate brokers in preparing a report for prospective sellers and buyers, indicating market trends in various neighborhoods, based on computer statistics generated from multiple-listing service data. Generally, these analyses are used for clients to determine a listing price for the sale of a home or for buyers to determine if a list price is reasonable for a given location.
An appraisal method which bases the value of the subject property on the price of similar properties which have sold recently. Also name the Market Method.
comparative unit method
An appraisal technique to establish relevant units as a guide to appraising the subject property. (Examples: Parking garages are compared per parking space; Bowling centres are compared per lane; Land may be sold per square foor or per front foot.)
Positive factors in an individual's credit history which offset negative factors. "Compensating factors" increase the possibility that a borrower's loan application will be approved. (See credit score)
The source of compensation does not determine agency. An agent does not necessarily represent the person who pays his or her commission. In fact, agency can exist even if no fee is involved (called a gratuitous agency). Buyers and sellers can agree however they choose to compensate the broker, regardless of which is the agent's principal. For instance, a seller could agree to pay a commission to the buyer's agent. The written agency agreement should state how the agent is being compensated and explain all the alternatives available.
The appraisal principle that states that excess profits generate competition. (See appraisal)
competitive market analysis (CMA)
A comparison of the prices of recently sold properties that are similar to a listing seller's property in terms of location, style and amenities.
The year the building was first ready for occupancy.
A surety bond posted by a landowner or developer that guarantees a proposed development will be completed according to specifications and free of mechanic's liens.
Interest computed on the principal sum plus accrued interest. At the beginning of the new interest period, all interest is added to the principal, forming a new principal figure on which interest is then calculated. This process repeats itself each interest period-interest may be compounded daily, monthly, semiannually or annually.
Indicates the number of times compound interest is charged or calculated per year (for example, semi-annually or monthly).
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA)
A federal law administered by the Environmental Protection Agency that establishes a process for identifying parties responsible for creating hazardous waste sites, forcing liable parties to cleanup toxic sites, bringing legal action against responsible parties and funding the abatement of toxic sites. (See Superfund)
computerized loan origination (CLO) system
An electronic network for handling loan applications through remote computer terminals linked to various lenders' computers.
Discount given to prospective tenants by landlords to induce them to sign a lease. Concessions are frequently encountered in commercial leases, where landlords may give the first two months' rent free or provide an allowance to the tenant for renovating or customizing the demised space. A purchaser of a commercial or income-producing property should check all existing leases to see if there are any lease concessions that would reduce the amount of rent receivable in the future (such as free cable TV or one month's free rent per year for the term of the lease). If so, the value of these concessions should be computed to reduce the amount of contract rent specified. An estoppel certificate should also be obtained from the tenant. Some state laws require concessions to be noted on a lease by special wording. Concessions are negotiable points in a lease that are resolved in favor of the prospective tenant. Another example in leasing a new office building is the owner's assumption of the lessee's remaining obligation under the lessee's existing lease in another building.
Occurring simultaneously; real estate exchanges often must be recorded concurrently.
A judicial or administrative proceeding to exercise the power of eminent domain, through which a government agency takes private property for public use and compensates the owner. (See eminent domain).
Legal term for a "subject to" clause. In contract law, a condition precedent calls for the happening of some event or the performance of some act before the contract shall be binding upon the parties.
A fee simple estate may be qualified by a condition subsequent. This means that the new owner must not perform some action or activity. The former owner retains a right of reentry so that if the condition is broken, the former owner can retake possession of the property through legal action. Conditions in a deed are different from restrictions or covenants because of the grantor's right to reclaim ownership, a right that does not exist under private restrictions. (See fee simple, restrictive covenant).
Provision(s) in a contract that some or all terms of the contract will be altered or cease to exist upon a certain event. See "cancellation clause." Example: 1) If a building is destroyed by fire before closing, the buyer is not obligated to complete the purchase. 2) If a loan that is described as a condition cannot be arranged, the buyer is not required to complete the transaction and may receive a refund of any earnest money.
Purchase contract tendered to the seller that stipulates one or more requirements to be satisfied before the purchase is obligated to buy. (Example: Bake offers to buy Collins' farm, conditioned on its rezoning for use as a shopping centre prior to purchase. If it is not rezoned, Baker can get the earnest money, tendered with the conditional offer, refunded.
conditional public report
An interim report that allows a subdivider to enter into a binding contract with a buyer prior to the issuance of the final public report.
conditional sales contract
A contract for the sale of property stating that the seller retains title until the conditions of the contract have been fulfilled. (Example: a contract for deed or a land contract is a conditional sales contract. Until the buyer makes full payment, the seller retains title to the property.)
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. (See zoning)
An estate in real property consisting of an individual interest in an apartment or commercial unit and an undivided common interest in the common areas in the condo project such as the land, parking areas, elevators, stairways, exterior structure and so on. Each condominium unit is a statutory entity that may be mortgaged, taxed, sold or otherwise transferred in ownership, separately and independently of all other units in the condo project. Units are separately assessed and taxed based on the combined value of the individual living unit and the proportionate ownership of the common areas. The unit also can be separately foreclosed upon in case of default on the mortgage note or other lien able payments. In effect, the condominium permits ownership of a specific horizontal layer of airspace as opposed to the traditional view of vertical property ownership from the center of the earth to the sky. Typically, the unit, the percentage of common interest and the limited common elements are appurtenant to each other and cannot be sold or transferred separately.
confession of judgment clause
Permits judgment to be entered against a debtor without the creditor's having to institute legal proceedings.
The appraisal principle that holds that the greater the similarity among properties in an area, the better they will hold their value. (See appraisal)
A guardian, protector, preserver or receiver appointed by a court to administer the person and property of another (usually an incapable adult) and to ensure that the property will be properly managed. A conservator may not need a real estate license to sell the protected real estate, although the sale does require court approval.
An act or the promise thereof, which is offered by one party to induce another to enter into a contract; that which is given in exchange for something from another; also the promise to refrain from doing a certain act, like filing a justifiable lawsuit (the forbearance of a right). Consideration, which distinguishes a contractual obligation from a gift, is usually something of value, such as the purchase price in and paid for a promise or it may be a return promise. Thus, the mere promise to pay money is sufficient consideration, so an earnest money deposit is not necessary for purposes of creating a binding contract.
The merging of a company's numerous smaller locations into a larger single facility.
constant payment loan
A loan on which equal payments are made periodically, so as to pay off the debt when the last payment is made. (Example: Baker obtains a constant payment loan to purchase a property. The loan requires a payment of $4,500 per month (principal and interest) for 30 years. At the end of 30 years, the principal balance will be zero.
One that finances subdivision costs and/or improvements to real estate. See building loan agreements. Example: Collins plans to develop an office building. She receives a commitment for permanent financing and approaches a commercial bank for a construction loan. The bank agrees to advance money as construction progresses.
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. (See eviction, actual eviction, lease)
Breach of a legal or equitable duty that the law declares fraudulent because of its tendency to deceive others, despite no showing of dishonesty or intent to deceive. A broker may be charged with constructive fraud for failing to disclose a known material fact when the broker had a duty to speak-for example, if a listing broker failed to disclose a known major foundation problem not readily observable upon an ordinary inspection. (See material fact)
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.
consumer price index
The most widely known of many such measures of price levels and inflation that are reported to the U.S. government. It measures and compares, from month to month, the total cost of a statistically determined "typical market basket" of goods and services consumed by U.S. households. (Example: The Consumer Price Index for May, 1992 stood at 139.7. Compared to the base period of 1982-1984, prices were almost 40% higher.)
Actually touching; contiguous properties have a common boundary. (As opposed to "adjacent" properties, which are near to each other, but not necessarily adjoining.)
A provision in a contract that requires a certain act to be done or a certain event to occur before the contract becomes binding.
A requirement in most states that real estate and appraiser licensees complete a specified number of educational offerings as a prerequisite to license renewal or reinstatement.
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.
contract for deed
The contract for deed is used extensively in many areas, where it may be called a land contract, agreement of sale, installment contract, articles of agreement, conditional sales contract, bond for deed or real estate contract. A contract for deed is an agreement between the seller (vendor) and buyer (vendee) for the purchase of real property in which the payment of all or a portion of the selling price is deferred. The purchase price may be paid in installments (of either principal and interest or interest only) over the period of the contract, with the balance due at maturity. When the buyer completes the required payments, the seller must deliver good legal title to the buyer by way of a deed or assignment of lease (if the property is leasehold property). Under the terms of the contract for deed, the buyer is given possession of the property and equitable title to the property, while the seller holds legal title and continues to be primarily liable for payment of any underlying mortgage. The features of the buyer's equitable title and obligation to purchase are what distinguishes a contract for deed from a lease-option.
contract of sale
A contract for the purchase and sale of real property in which the buyer agrees to purchase for a certain price and the seller agrees to convey title by way of a deed or an assignment of lease (for leasehold property). In addition to binding the parties to the purchase and sale of the property during the period of time required to close the transaction, the contract frequently serves as the initial directions to the closing agent or escrow company to process the mechanics of the transaction. In essence, the contract of sale is an executory contract to convey property, serving as the vehicle to get to the deed, which finally conveys title; it is the blueprint for the entire transaction. Some of the many names for this contract are sales contract, purchase agreement, deposit receipt, offer and acceptance, agreement of sale, offer to lease or purchase and sale agreement.
The rental obligation, expressed in dollars, as specified in a lease. The initial contract rent may change during the lease term because of specifically stated increases, or through adjustments based on changes in various published indices. Also known as "face rent."
The rental income as stipulated by the parties in a lease.
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. (See appraisal)
controlled business arrangements
As defined under the Real Estate Settlement Procedures Act (RESPA), an arrangement or combination in which an individual or a firm has more than a 1 percent interest in a company to which the individual or firm regularly refers business. Such arrangement is permitted provided that written disclosure of the affiliation is made; an estimated charge for the service is provided; consumers are free to obtain the services elsewhere; and referral fees are not exchanged among the affiliated companies. (See Real Estate Settlement Procedures Act (RESPA))
conventional life estate
A conventional life estate is created intentionally by the owner. It may be established either by deed at the time the ownership is transferred during the owner's life or by a provision of the owner's will after his or her death. The estate is conveyed to an individual who is called the life tenant. The life tenant has full enjoyment of the ownership for the duration of his or her life. When the life tenant dies, the estate ends and its ownership passes to another designated individual or returns to the previous owner. (See life estate)
A loan made with real estate as security and not involving government participation in the form of insuring (FHA) or guaranteeing (VA) the loan. The mortgagee can be an institutional lender or a private party. The loan is conventional in the sense that it conforms to accepted standards and that the lender looks solely to the credit of the borrower and the security of the property to ensure payment of the debt.
The appropriation of property belonging to another. The conversion may be illegal (as when a broker misappropriates client funds), or it may be legal (as when the government condemns property under the right of eminent domain). (See eminent domain)
An adjustable-rate loan that the borrower can convert to fixed-rate at any time during the life of the loan. (See hybrid financing)
Factories, warehouses, office buildings, hotels, schools, churches and other structures that have been converted to residential use. Developers often find renovation of such properties more aesthetically and economically appealing than demolishing a perfectly sound structure to build something new. An abandoned warehouse may be transformed into luxury loft condominium units, a closed hotel may reopen as an apartment building, and an old factory may be recycled into a profitable shopping mall.
convertible mortgage note
A loan secured by real property, typically written at a rate below current market interest rates, in exchange for the privilege of the lender to convert the loan to an equity interest at a specified future time.
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. (See title)
A broker who assists another broker in the sale of real property. Usually the cooperating broker is the selling broker who found a buyer for the listing broker. (See listing broker)
cooperating broker fee agreement
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 stock holders of the corporation, each possessing a proprietary lease.
An entity or organization, created by operation of law, whose rights of doing business are essentially the same as those of an individual. The entity has continuous existence until it is dissolved according to legal procedures.
corporation franchise tax lien
State governments generally levy a corporation franchise tax on corporations as a condition of allowing them to do business in the state. Such a tax is a general, statutory, involuntary lien on all real and personal property owned by the corporation.
Provisions in the rectangular survey (government survey) system made to compensate for the curvature of the earth's surface. Every fourth township line (at 24-mile intervals) is used as a correction line on which the intervals between the north and south range lines are measured and corrected to a full six miles. Range lines are only parallel in theory. Due to the curvature of the earth, range lines gradually approach each other. If they are extended northward, they eventually meet at the North Pole. The fact that the earth is not flat, combined with the crude instruments used in early days, means that few townships are exactly six-mile squares or contain exactly 36 square miles.
correlative water rights
A modern law in some states that holds that a riparian owner who has rights in a common water source is entitled to take only a reasonable amount of the total supply for the beneficial use of land (such as irrigation). (See appropriative water rights, riparian rights)
A mortgage banker. (See mortgage banker)
Additional signers of a financial agreement that add their personal guarantees to that of the borrower.
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. (See appraisal)
cost approach improvement value
The current cost to construct a reproduction of, or replacement for, the existing structure less an estimate for accrued depreciation.
cost approach land value
The estimated value of the fee simple interest in the land as if vacant and available for development to its highest and best use.
A cost basis of real property is usually based on the purchase price of the property plus the buyer's capitalized closing costs. (See closing costs)
cost of goods sold
The cost to the business of manufacturing or purchasing the items actually sold.
cost of living index
An indicator of the current price level for goods and services, related to some base year. (Example: The CPI, published by the Bureau of Labor Statistics, indicates that the price level for goods and services in April 1992 was 139.5. This means that, on average, prices were 39.5% higher in April 1992 than in Base Year 1982-84.)
cost of sale percentage
Expressed as a percentage of the Reversion Value, an estimate of the costs to sell an investment representing brokerage commissions, closing costs and fees, and other necessary disposition expenses.
A generally accepted accounting principle which states that the historical cost of an asset must be reflected in a company's financial statements.
An Internal Revenue Service term for depreciation.
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.
court order enforcement act
An Act which, among other things, provides for the rights and remedies of individuals attempting to collect on judgments awarded by the Court.
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 further assurance
The grantor promises to obtain and deliver any instrument needed to make the title good. For example, if the grantor's spouse has failed to sign away dower rights, the grantor must deliver a quitclaim deed (discussed later) to clear the title.
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. The grantor guarantees that the grantee's title will be good against third parties who might bring court actions to establish superior title to the property. If the grantee's title is found to be inferior, the grantor is liable for damages.
covenant of seisin
The grantor warrants that he or she owns the property and has the right to convey title to it ("seisin" simply means "possession").
covenant against encumbrances
The grantor warrants that the property is free from liens or encumbrances, except for any specifically stated in the deed. Encumbrances generally include mortgages, mechanics' liens and easements. If this covenant is breached, the grantee may sue for the cost of removing the encumbrances. (See encumbrances, liens)
covenant of warranty forever
The grantor promises to compensate the grantee for the loss sustained if the title fails at any time in the future. These covenants in a general warranty deed are not limited to matters that occurred during the time the grantor owned the property they extend back to its origins. The grantor defends the title against both himself or herself and all those who previously held title.
Promises written into deeds and other instruments agreeing to performance or nonperformance of certain acts, or requiring or preventing certain uses of the property. Examples: Deed covenants are often used to: (a) maintain a land parcel in a specified use; (b) enforce architectural and design standards; (c) control the density of future development; (d) prohibit certain practices, such as the sale of liquor.
covenants that run with the land
Covenants that become part of the property rights and benefit or bind successive owners of the property.
- The space between the ground and the first floor, often found in homes with no basement.
- The space found between the top floor and the roof, often found in the place of an attic.
Structuring the financing of a real estate transaction depending on the cash positions of the buyer and seller; involves working in conjunction with the existing financing to create a financing package that enables the buyer to purchase the property at a better interest rates or terms than a conventional loan.
- Obligations that are due or are to become due to a person.
- In closing statements, that which is due and payable to either the buyer or seller—the opposite of a charge or debit. The credit appears in the right-hand column of the accounting statement.
An investigation of a loan applicant's ability to repay.
A mortgage issued upon the financial strength of a borrower, without regard for collateral.
A document, obtained from a credit repository, indicating an individual's credit circumstances. Used to derive credit scores for borrowers seeking a real estate loan. (See credit repository, credit score)
Organizations that maintain and make available public credit history records; lenders use information from credit repositories to derive credit scores for potential borrowers. (See credit report, credit score)
A snapshot of a borrower's credit worthiness; a numerical score based on statistics showing the risk of default on a loan; takes into consideration available credit, management of existing credit and any detrimental credit information. (See FICO)
Credit unions are cooperative organizations whose members place money in savings accounts. In the past, credit unions made only short-term consumer and home improvement loans. Recently, however, they have branched out to originating longer-term first and second mortgage and deed of trust loans. (See noninstitutional lenders)
The person to whom a debtor owes a debt or obligation; a lender.
A provision of many junior mortgages stipulating that a default in one mortgage also triggers a default in the mortgage in which the clause appears. (See junior lien/mortgage)
Zoning that allows more restrictive uses. For example, a lot zoned for a multi-family dwelling would allow a single-family home if the zoning were cumulative. (See zoning)
Wear and tear or outmoded design which can be corrected at a cost that is economically feasible (e.g., worn carpeting). Contrast to Incurable Depreciation.
Those assets which will be converted into cash, sold, or consumed within one year or the normal operating cycle of a business, whichever is longer. Current Assets may include Cash, Marketable Securities, Accounts Receivable, Inventories, and Prepaid Expenses. Compare to Noncurrent Assets.
The amount of money it would be necessary to spend today to reconstruct existing improvements. See also Historic Cost.
Those liabilities which are expected to be paid within one year. Current Liabilities may include Accounts Payable, Property Taxes Payable, Wages Payable, and Income Taxes Payable.
The current leased portion of a building or property expressed as a percentage of its total area or units.
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.
A prospective buyer of real estate. Not to be confused with a property seller, who is the listing broker's client.