GLOSSARY OF REAL ‘ESTATE INVESTING TERMS A
Acceleration A mortgage clause that calls for the total balance on the loan to be Clause Acquisition Costs paid in fill, immediately upon default of the borrower Costs of acquiring property other than purchase price: escrow fees, title insurance, etc. Acre Is an area of land containing 43,560 square feet, or 4,840 square yards or 160 square rods. Actual Notice
‘
Actually notifying a person of an existing instrument or other claim to property by means of showing documents, or other
physical evidence
Administrator
Is a person appointed by court to settle the estate of a person who died interstate. In Michigan this person is known as “personal representative”.
Adverse Possession Is gaining interest in real estate, though a notorious possession of such property for the statuary period of time (15 years in Michigan). Agency Agent A relationship created when a principal appoints another, called an agent, to act for him in a certain capacity; Is a person authorized to represent another person to conduct certain acts. In selling real estate, the broker is the agent of the owner of the property. A purchase agreement the seller and the buyer agree~ to buy and sell according to certain price and terms. .It may be also called the “contract of the sale”. The right, of the owner of real estate, to the space of air above his/her land. Also known as “Due on Sale Clause” A mortgage clause that
Agreement of Sale
Air Rights Alienation Clause
gives the lender the right to call the whole balance of the loan due when ownership of property transfers. Amortization Appreciation Assemblage Assessed Value The process of reducing the principal amount of a loan by making periodic payments. Is the increase in the value of property. This may result from economic conditions or supply and demand. The merging of adjacent properties, into one common ownership use. Represents 50% of the appraised value of a property for the
purpose of taxation. Assessment Assessor Assignee Assignor Evaluating property for tax purposes. The person who evaluated the property for tax purposes. The person to whom an assignment is made. A person who assigns his/her interest in property or a contract to
another. Assignment Assignment Attorney-in-Fact The transfer of a person‟s right or interest in real or personal property to another. The transfer of a person‟s interest in a contract to another of Contract A person authorized under power of attorney or conducts certain acts like selling property or receiving money, etc...
B
Balloon Payment Is a lump sum payment required to pay off the loan. It is larger than the normal installment payments made on the loan. Bargain and Sale A deed that implies that the grantor owns the property being. Deed Conveyed but the deed contains no Covenants or warranties of title. Base Line (Latitude), imaginary line that runs in the east west direction and intersects with the meridian line.
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Base Rent
The minimum amount of rent charged in a percentage lease situation, usually, a percentage of the sales are added to base rent.
Basis Point Bill of Sale Bank Mortgage Blitzing Bridge Loan Building Line Bundle of Rights
Equal to one of 1% (.01%) of a point. An instrument used to transfer interest in personal property from one person to another. A mortgage that secures more than one property. Locating prospective properties by driving by, classified ads or through a realtor. Loan that allows borrower to start a project, while waiting for a committed loan to be disbursed. (Set back ordinance) A line located at a certain distance from the lot line where a building can be erected. Legal rights included in ownership of real estate like buying, leasing, mortgage, improving, etc.
C
Capital Gains Gains resulting from one sale of a capital asset. Capital Loss Losses resulting from one sale of a capital asset Improvements to property that add value and extend it~ useful Determining the value of property by calculating net income and using a rate of return.
Capital life. Improvement Capitalization
Capitalization Rate The rate of return on a free and clear basis expected from a particular piece of property. Cash Flow The income from an investment which is equal to the gross income minus the expenses and debt service.
Certificate of A c”rtificate issued to a veteran who is eligible for a VA „loan by Eligibility the veterans administration. Certificate of No An instrument signed by the mortgager showing the full amount of Defense the balance and interest rate of the loan that is owed.
Certificate of Issued for property considered for VA financing to‟ show fair Reasonable value Market Value. Chain of Title A history of conveyances and encumbrances affecting the title. Chattel Mortgage Personal Property
Check An area of land, equal to 24 x 24 miles used in the rectangular survey system.
City of Detroit of the Assessor Closing Statement
One who estimates value of property for tax purposes. Office A statement showing buyers and sellers charges and credits. If a broker is involved, the broker must sign the closing statement. A claim or encumbrance that is still outstanding. If prove to be valid than it will affect the marketability of the title. The property that is given as security for a loan. Property which is zoned “commercial” (for business use)
Cloud on the title Collateral Commercial
Commingling funds Mixing the broker‟s personal funds with trust account funds belonging to the public. Commitment Fee Common elements Fee charged to insure a promise of a certain loan, interest rate, and terms for a certain period of time. Elements in a condominium project owned jointly b the condominium owners as tenants in common. Community Property Property owned by the husband and wife jointly which is acquired while married to each other. Competent Legally qualified act
Compound Interest Interest Paid on the original principal and on the interest generates previously.
Compliant Concurrent Estate
A person making the complaint against another person. Ownership of a property by two or more persons at the same time. The process of exercising the government‟s right of eminent domain. Requirements that must be satisfied to affect the results of a certain transaction. Not satisfying these requirements may release a party from obligation to act. Agreement by a lender to grant a loan provided that the Commitment borrower meets certain requirements before the loan is made
A contract whereby the seller retains title to the ,sold property until Sale Contract the purchaser meets certain conditions and requirements that are stated in the contract.
Condemnation Conditions
Conditional
Conditional
Condominium
The ownership of a‟ unit in a multi-unit structure. In addition to ownership of the unit the owner shares a common element. Ownership may be of a residential or commercial dwelling. The act of converting units in a rental complex into
individually owned units that may be bought or sold without affecting the status of the other units
Condominium
Conversion
Consideration
An amount of money or something of value promised in a contract for the exchange of another in promise. Consideration must be included in a contract to make it valid. An illegal act made by the landlord which makes it impossible for the tenant to stay in the leased premises any longer which results illegally evicting the tenant
Constructive Eviction
Constructive Notice Notice given to the public when a legal document is recorded” at the register of deed office. The recorded documents are available to the public and when title search is conducted on a property it is the duty of the title insurance company to check all recorded instruments relating to the title. Contingency Contract A requirement or condition in a contract that must be met before a party is obligated to act. A written agreement that may involve one or more parties to act in a certain capacity.
Contract of Sale
Also known as the “purchase agreement” whereby the buyer and the seller agree to conduct a transaction and set the price, terms and conditions of the sale. The transfer of interest in real property from one person to the other. A group of units owned by a corporation that leases units to the shareholders of the corporation.
A non-living entity that is treated as a person with rights and liabilities. The entity pays taxes the same as any person would pay,
Conveyance Cooperatives
Corporation
however any liability that the cooperation may be subject to would not pass on to the shareholders, which provides protection to their personal assets.
Correction Deed Covenant Creditor Curtesy
A deed issued to correct an error in another deed.
A provision entered into an instrument promising certain in action or inaction or limiting or allowing the use of property. A person to whom money is owed by debtor. A lifetime interest granted to the husband in his wife‟s real estate upon her death.
D
DBA Debt Constant
Initials for “Doing Business As” which is a certificate filled with the county clerk for a person who wants to do business under
an assumed name. The yearly percentage of interest which remains the same over he life of an amortized loan, based on the monthly payment in relation to the principal originally loaned. For example: A $1000 loan at 9% interest for 20 years can be amortized at $9.00 per month. A
constant interest rate is figured by finding one year‟s payments ($.00 x 12 months = $18.00), and expressing this amount as a percentage of the principal originally borrowed (10.8% of 1000). Debt Coverage Ratio (DCR) A ratio used in underwriting loans for income producing property which is created by dividing net operating income by total debt service. Ratios of a least 1.10 are generally required with ratios of 1.20 and higher considered the norm. Periodic payment of mortgages or trust deeds on a specific
Debt Service
property.
Debtor Declaration
Dedication
A person who owes money to another person. The other person is usually called the creditor. Is an instrument that is recorded with the government to establish a condominium development.
The donation of privately owned property to public use.
Deed, an instrument that conveys title in real property from one person to N another. The person giving up the title is called the grantor and the person receiving the title is called the grantee. Deed of Trust When a person is buying on installments, property is deeded to a third property known as the “trustee” who will deed him property to the buyer upon full payment of debt.
Deed Restrictions A requirement in a deed that limits the property being conveyed. Default Non performance of an obligation. Defeasable Fee also called a “qualified fee” interest in real estate, which may be tenninated upon the happening of a certain event.
Deferred Repairs due but put off which is the cause of physical. Maintenance deterioration. Deficiency Judgment Depreciation A court judgment obtained by the creditor against a mortgage Or when a sheriff‟s sale that not generate enough cash to satisf~r the debt under the mortgage. The loss of property value.
Deterioration The physical wear and tear that leads to depreciation.
Devise Devisee Devisor
Is a gift of real estate by will. The donor is the devisor and the recipient is the revisee. A person receiving title in real estate through a will. A person transferring title in real estate to another person by means of a will.
Discharge of A mortgage release. A document issued by the lender that Mortgage evidence the satisfaction of a mortgage. Discount Point Equal to 1% of the loan amount, charged by the lender in advance at closing which helps to raise the lending yield. Documentary Stamps See revenue stamps. Dower Right Escalation clause The right of a wife, in her husband’s real granted upon his death. A provision in a contract that allows for the adjustment of interest rate, payments, lease payments, etc. to satisfy certain contingencies. Lease which provides for increases based on the lessor‟s future expenses. When a person dies without a will and without heirs, his/her property reverts back to the state. (1) In the case of a budget mortgage, the bank holds money for taxes and insurance on the property in a special account. This account is adjusted as payments come in, and as bills are paid. (2) An account held by the real estate broker, top deposit earnest money paid by the public. (1) Property held by a deceased person (2) The degree and nature of interest a person has in real property.
Escalator Lease Escheat
„Escrow Account
Estate
Estoppel Certificate See certificate of no defense Exclusive agency Also referred to as the exclusive listing. A listing by which the Listing broker is specified as an exclusive agent, but the seeker can sell the property to a buyer procured due to the seeker‟s efforts without paying a commission. Exclusive Right A listing hat employs one exclusive agent and promises a fee in the To sell event anyone procures a buyer including other competing agents or even the seller Executory Contract A contract that has no been performed in full yet. Executed Contract A contract in which all parties have fulfilled their promises/
Executor A person named in will to handle the deceased‟s estate
F
Fannie Mae F.D.LC. The Federal National Mortgage Association. A private corporation that provides funding as a secondary market. Federal Deposit Insurance Corporation. A federal agency that insured deposits at commercial banks and savings and loan associations. A person appointed by court or by another person to handle the property and affairs of a person that is a minor or mentally incapable.
Guardian
H
Habendum Clause Heirs Homestead „Horizontal Property Act BUD Hypothecate Part of the deed, “To have and to hold” defining the extent of ownership the granter is conveying. Persons who inherit property from the deceased. The right given to a homeowner to exempt his/her home from judgments and bankruptcies. The act that allows for the creation if a condominium project. The Department of Housing and Urban Development. The act of giving up property as security for a loan without giving up possession. I Income Approach A method of appraising property using a relation between the
amount of money invested and the net return from income. Income Property Real Estate that procedures income to owner. Indefeasible May not be terminated against the will of the owner or the titleholder. The opposite of defeasable.
Independent One who is retained to perform a certain act but who is subject to Contractor the control and direction of another only as the end result and not as a way in which he performs the act. This person normally sets his/her own working hour, pays his/~ ~r own expenses, and receives no employment benefits, and pays for his/her own
social security and income tax to the government, but not as a withholding from his/her paycheck. The majority of real estate salespeople and brokers work as independent contractors. Index Lease A lease that is adjusted according to some specified index such as the consumer price index, cost of living index, etc... Ingress The way to enter property.
Installment Sale Paying the purchase price for property in installments usually in Licensed (1) A persona; privilege or right granted by legal authority to perform a certain occupation. (2) Permission of a personal and temporary nature granted o use another person‟s property such as for the purpose of fishing or hunting. A charge or claim against the real estate of another. Interest in real property, given to a person for the duration of a lifetime A person who has life estate Notice of a pending suit filed against property that may affect the marketability of title. ‘Loan to value Ratio A percentage used by a lender to determine the amount of loan granted based on value.
Lien Life Estate Life Tenant Lis Pendens
M
Market Comparison Appraisal method that employs information available Approach on comparable sold properties
Market Data Approach Appraising the value of a property by comparing the price of similar properties comparables) recently sold. Market Value An estimated sum, as to what the property value is, providing proper exposure and no pressure due on the buyer or seller.
Marketable Title Master Deed
Title that has no clouds and may be freely transferred. A deed that converts land and improvements into a condo project
Mechanics‟ Lien A lien placed on real property for unpaid construction bills. Metes and Bounds A method used to legally prescribe property using apoint of beginning. Distances, boundaries, monuments and benchmarks. Intermediate, temporary, GAP financing
Equal to one tenth of one cent or .001 of a dollar/
Mezzanine
Financing Mill
Open End Mortgage A mortgage that allows the borrower to borrow up a predetermined line of credit, similar to a credit card loan. Open Listing The owner reserves the right to hire more than one broker to list the property as s/he sees fit Optionee Optionor Owner‟s Association A person who receives an option The person giving the option
A committee that is formed to establish regulations in condo projects and subdivisions.
P
„Package Mortgage A mortgage that secures a loan made to purchase both real and personal property. Partial Release A clause contained in a blanket mortgage that allows for the Clause release of one or more properties secured by the mortgage in return for partial payment on a loan. Percentage Lease A lease by which the amount of rent is related up to the retail sales generated by the tenant.
Personal Property
Also referred to as (personality, chattel). Property of a temporary or moveable nature. The opposite of real property. The complainant or the person making the complaint in court.
Plaintiff
Pint A plan or map showing locations and dimensions of property.
Pocket Card
An identification card supplied by the department to licensee, which must be carried while doing business.
Point of Beginning A starting point located at the corner of a property used in the metes and bounds legal description. Police Power Polk Directories The right of a government, to enforce certain rules and legislation to enhance the public‟s health, safety, and welfare. Hard bound directory that includes business and consumers in your community. Items such as: names, telephone numbers, Street guide, map section and demographic. Discharge of Lien. The interest of a remainder man. A third party (person or entity) named in a deed (other than the grantor or his/her heirs) to whom the property reverts after the termination of a life estate. Land designated by zoning ordinances as “residential”, maybe vacant or improved. A restriction or clause in the deed that limits the use of property being granted.
See documentary stamps, paid by the seller of the property uponrecording a deed. The amount is 55 cents per $500 of the purchase price
Release of Lien Remainder Estate Remainder Man
Residential Property
Restrictive Covenant
Revenue Stamps
Reverse Mortgage
The borrower arranges to receive regular monthly payments from the lender for a set period of time allowing the balance to accumulate and promising to pay the entire‟ sum owed at the end of that period. „Usually suitable for retirement income. (1) The right that a grantor has in a life estate after it‟s termination.
Reversionary Interest
(2) The right of a landlord to the property after the lease has been terminated Right of First
Refusal
•
A right given to a tenant or other individual to match a price offered by a third party for the purpose of leasing or purchasing property. The right of a join tenant or a tenant by the entireties to he. deceased partner‟s share, conveyed to him/her automatically without the process of probate A form of easement that allows a person to pass over the property of the other person An owner‟s right in land that borders or includes a stream~
river, or lake. These rights include access to and use of the water.
Right of Survivorship Right of Way
Riparian Rights
S
Sale Contract See Contract of sale also known as Purchase agreement.
Statue of Limitations A law that sets a limited time for legal action to be brought in court to enforce a valid contract. Steering Step-Up-Lease
„Straight Line
Directing minority persons into or away from neighborhoods Because of their minority status. “Graduated Lese” a lease that allows for increases in the amount of rent at certain periods of time.
A paper loss allowed by government for improvements of income Depreciation and business properties as well as business equipment, such loss is calculated as an equal amount every year for the length the economic life for that depreciable asset.
Subleasing Subordination Clause
The tenant who leases property acts as a landlord and lease a portion or all of the property to yet another tenant. A clause in a lien instrument which causes such an instrument to take less priority in relation to a subsequent instrument.
Surrender of Lease To cancel a lease by mutual consent of the parties Sylidication A group of people or firms that are formed to accomplish an
investment venture by pooling their resources.
T
Tax Deed Tax Sale A deed given to a person who purchased property sold for default on taxes. A sale of property because of non payment of taxes
Tax Shelter
A legal means by which an investor may reduce or defer the payment of tax.
Tenancy at The tenancy created when the tenant has gained possession to the Sufferance property legally but now has lost the landlord‟s approval to stay. Tenancy at Will A rental arrangement that does not obligate any of the parties to a set period of time.
Tenancy by the Interest in real estate held by a husband and „wife with the right if Entireties survivorship. Tenancy for years
Code
Tenancy of a known and set duration.
regulations relating to commercial transactions and bulk
transfers.
Unilateral Contract A contract that contains a promise on the side of one party in exchange for the other parties action.
V
VA Mortgages Valid Valuation Guarantees mortgages issues to veteran‟s administration requiring no down payment. Binding and enforceable. The act of estimating the value of property.
Variance
Vendee Vendor
Zoning permission allowing the introduction of non conforming use.
The person making payments on a land contract. The person receiving payments on a land contract.
Void
Not binding or enforceable.
Voidable Contract Is a contract, which may be enforced or voided by one party.
Voluntary Alienation The voluntary transfer of title.
w
Warranty Deed Is a deed whereby, the grantor promises the grantee protection against any future claims of title by a third party.
Wrap around Is a mortgage that secures a loan which includes and existing loan Mortgage previously made on the property.
z
Zoning Is regulating the use of property by the local governments to insure
proper development of the community.