GLOSSARY OF CONSTRUCTION TERMS (A - M)

ABSTRACT OF TITLE:
A summary of all deeds, wills, and legal actions to show ownership.
ABUT:
Joining the ends of construction members.
ACOUSTICS:
The science of sound. In housing, acoustical materials used to keep down noise within a room or to prevent it
from passing through walls.
ADOBE:
Construction using sun-dried units of adobe soil for walls; usually found in southwestern United States.
A-FRAME:
A structural system utilizing members which when fastened together resemble the letter A.
AGGREGATE:
Gravel (course) or sand (fine) used in concrete mixes.
AIR CONDITIONER:
An apparatus that can heat, cool, clean, and circulate air.
AIR-DRIED LUMBER:
Lumber that is left in the open to dry rather than being dried by a kiln.
AIR DUCT:
A pipe, usually made of sheet metal, that conducts air to rooms from a central source.
AIR TRAP:
A U-shaped pipe filled with water and located beneath plumbing fixtures to form a seal against the passage of
gases and odors.
ALCOVE:
A recessed space connected at the side of a larger room.
ALTERATION:
A change in, or addition to, an existing building.
AMORTIZATION:
An installment payment of a loan, usually monthly for a home loan.
AMPERE:
The unit used in the measure of the rate of flow of electricity.
ANCHOR BOLT:
A threaded rod inserted in masonry construction for anchoring the sill plate to the foundation.
ANGLE IRON:
A structural piece of rolled steel shaped to form a 90-degree angle.
APRON:
Inside window trim placed under the stool and against the wall.
ARCADE:
A series of arches supported by a row of columns.
ARCH:
A curved structure that will support itself by mutual pressure and the weight above its curved opening.
AREA WALL:
A wall surrounding an areaway.
AREAWAY:
A recessed area below grade around the foundation to allow light and ventilation into a basement window or
doorway.
ASHLAR:
A facing of squared stones.
ASHPIT:
The area below the hearth of a fireplace which collects the ashes.
ASPHALT:
Bituminous sandstones used for paving streets and waterproofing flat roofs.
ASPHALT SHINGLES:
Composition roof shingles made from asphalt-impregnated felt covered with mineral granules.
ASTRAGAL MOLD:
T-profiled molding usually used between meeting doors or casement windows.
ATRIUM:
An open court within a building.
ATTIC:
The space between the roof and the ceiling.
AWNING WINDOW:
An out-swinging window hinged at the top.
AXIS:
 Line around which something rotates or is symmetrically arranged.
BACKFILL:
Earth used to fill in areas around foundation walls.
BACKHEARTH:
The part of the hearth inside the fireplace.
BAFFLE:
A partial blocking against a flow of wind or sound.
BALCONY:
A deck projecting from the wall of a building above the ground.
BALLOON FRAMING:
The building-frame construction in which each of the studs is one piece from the foundation to the roof of a
two-story house.
BALUSTRADE:
A series of balusters or post connected by a rail, generally used adjacent to stairs.
BANISTER:
A handrailing.
BARGEBOARD:
Finish board covering the projecting and sloping portion (end rafter) of a gable roof.
BASE:
The finish or a room at the junction of the walls and floors.
BASEBOARD:
Finish board covering the interior wall where the wall and floor meet.
BASE COURSE:
The lowest part of masonry construction.
BASE LINE:
A located line for reference control purposes.
BASEMENT:
The lowest story of a building, partially or entirely below ground.
BASE PLATE:
A plate, usually of steel, upon which a column rests.
BASE SHOE:
A molding used next to the floor in interior baseboards.
BATT:
A type of fiberglass insulation designed to be installed between framing members.
BATTEN:
Narrow strip of wood nailed over the vertical joints of boards to form board-and-batten siding.
BATTER:
A masonry or concrete wall which slopes backward from the perpendicular.
BATTER BOARDS:
Horizontal boards at exact elevations nailed to posts just outside the corners of a proposed building. Strings
are stretched across the boards to locate the outline of the foundation for workers.
BAY WINDOW:
A projection formed by three windows that are joined at obtuse angels.
BEAM:
A horizontal structural member that carries a load.
BEAM CEILING:
A ceiling in which the ceiling beams are exposed to view.
BEARING PLATE:
Metal plate that provides support for a structural member.
BEARING WALL OR PARTITION:
A wall supporting any vertical load other than its own weight.
BENCH MARK:
Mark on some permanent object fixed to the ground from which land measurements and elevations are taken.
BENDING MOMENT:
A measure of the forces that break a beam by bending.
BENT:
A frame consisting of two supporting columns and a girder or truss used in vertical position in framing a
structure.
BEVEL SIDING:
Shingles or other siding board thicker on one edge than the other. The thick edge overlaps the thin edge of
the next board.
BILL OF MATERIAL:
A parts list of material accompanying a structural drawing.
BLANKET INSULATION:
 Insulation in rolled-sheet form, often backed by treated paper that forms a vapor barrier.
BLIND NAILING:
Method of nailing which will conceal nails, usually used on strip flooring and wood paneling.
BLOCKING:
Small wood framing members that fill in the open space between the floor and ceiling joists to add stiffness to
the floors and ceiling.
BLUEPRINT:
An architectural type drawing used by workers to build from. The original drawing is transferred to a
sensitized paper that turns blue with white lines when printed. Also, prints of blue lines on white paper.
BOARD MEASURE:
System of lumber measurement. The unit is 1 bd. ft, which is 1 ft square by approximately 1 in. thick.
BOND BEAM:
Continuous, reinforced concrete block course around the top of masonry walls.
BOW WINDOW:
A curved projection formed by five or more windows that are joined at obtuse angles.
BRACE:
Any stiffening member of a framework.
BRACED FRAMING:
Frame construction with posts and braces used for stiffening.
BREEZEWAY:
A roofed walkway with open sides. It connects the house and garage.
BRIDGING:
Cross bracing or solid blocking between joist to stiffen floor framing.
BUCK:
Frame for a door, usually made of metal, into which the finished door fits.
BUILDING CODE:
A collection of legal requirements for buildings designed to protect the safety, health, and general welfare of
people who work and live them.
BUILDING LINE:
Setback restrictions on property, established by zoning ordinances, beyond which a building must be placed.
BUILDING PAPER:
A heavy, waterproof paper used over sheathing and subfloors to prevent passage of air and water.
BUILDING PERMIT:
A permit issued by a municipal government authorizing the construction of a building or structure.
BUILT-UP ROOF:
Roofing for low-slope roofs composed of several layers of felt and hot asphalt or coal tar, usually covered with
small aggregate.
BUTT:
Type of hinge allowing edge of door to butt into the jamb; a joint which fastens members end to end.
BUTTERFLY ROOF:
A roof with two sides sloping down toward the interior of the house.
BUTTRESS:
Vertical masonry or concrete support, usually larger at the base, which projects from a wall.
BTU:
Abbreviation for british thermal unit; a standard unit for measuring heat gain or loss.
BX CABLE:
Armored electric cable wrapped in plastic and protected by a flexible steel covering.
CANOPY:
A projection over windows and doors to protect them from the weather.
CANTILEVER:
A projecting beam or structural member anchored at only one end.
CANT STRIP:
Angular shaped member used to eliminate a sharp, right angle, often used on flat roofs.
CARPORT:
An automobile shelter not fully enclosed.
CARRIAGE:
The horizontal part of the stringers of a stair that supports the treads.
CASEMENT WINDOW:
A hinged window that opens out, usually made of metal.
CASING:
Trim around window and door openings.
CATCH BASIN:
An underground structure for drainage into which the water from a roof or floor will drain. It is connected
with a sewer drain or sump pump.
CAULKING:
Soft, elastic material used to seal small openings around doors, windows, etc.
CAVITY WALL:
Double masonry wall having an air space between the wyths.
CEDAR SHINGLES:
Roofing and siding shingles made from western red cedar.
CEMENT:
A masonry adhesive material purchased in the form of pulverized powder.
CENTRAL HEATING:
A single source of heat that is distributed by pipes or ducts.
CESSPOOL:
A pit or cistern to hold sewage.
CHALK LINE:
A string that is heavily chalked, held tight, then plucked to make a straight guideline against boards or other
surfaces.
CHAMFER:
Beveled edge formed by removing the sharp corner of a material.
CHASE:
Vertical space within a building for ducts, pipes, or wires.
CHECKS:
Splits or cracks in a board, ordinarily caused by seasoning.
CHECK VALVE:
A valve that permits passage through a pipe in only one direction.
CHIMNEY:
A vertical flue for passing smoke and gases outside a building.
CHIMNEY STACK:
A group of flues in the same chimney.
CHORD:
Top or bottom member of a truss.
CINDER BLOCK:
A building block made of cement and cinder.
CIRCUIT:
Closed wiring or conductor through which an electric current can pass.
CIRCUIT BREAKER:
A safety device used to open and close an electrical circuit.
CISTERN:
A tank or other reservoir to store rainwater run off.
CLAPBOARD:
A board, thicker on one side than the other, used to overlap an adjacent board.
CLEARANCE:
A clear space to allow passage.
CLERESTORY:
An outside wall of a room or building that rises above an adjoining roof and contains windows.
CLINCH:
To bend over the protruding end of a nail.
CLIP:
A small connecting angle used for fastening various members of a structure.
COLLAR BEAM:
Horizontal member tying opposing rafters below the roof ridge.
COLUMN:
Vertical supporting member.
COMMON WALL:
A single wall that serves two dwelling units.
COMPRESSION:
A force that tends to make a member fail because of crushing.
CONCRETE:
A mixture of cement, sand, gravel, and water.
CONCRETE BLOCK:
Precast hollow or solid blocks of concrete.
CONDEMN:
To legally declare unfit for use.
CONDENSATION:
The formation of frost or drops of water on inside walls when warm vapor inside a room meets a cold wall or
window.
CONDUCTOR:
In architecture, a drain pipe leading from the roof; in electricity, anything that permits the passage of an
electric current.
CONDUCTOR PIPE:
A pipe used to lead water from the roof to the sewer.
CONDUIT:
A channel built to convey water or other fluids; a drain or sewer. In electrical work, a channel that carries
wires for protection and for safety.
CONSTRUCTION LOAN:
A mortgage loan to be used to pay for labor and materials going into the house. Money is usually advanced to
the builder as construction progresses and is repaid when the house is completed and sold.
CONTINUOUS BEAM:
A beam that has no intermediate supports.
CONTRACTOR:
The manager of a construction project.
CONTROL JOINT:
Continuous, vertical joint in masonry walls to control cracking.
CONVECTOR:
A heat-transfer surface that uses convection currents to transfer heat.
COPING:
Metal cap or masonry top course of a wall.
CORBEL:
Projection of masonry from the face of a wall; a stepped coursing bracket to support weight above.
CORNER BEAD:
A metal molding built into plaster corners to prevent the accidental breaking off of the plaster.
CORNICE:
Molded projection of the roof overhang at the top of a wall.
COUNTERFLASHING:
A flashing used under the regular flashing.
COURSE:
A continuous row of stone or brick of uniform height.
COURT:
An open space surrounded partly or entirely by a building.
COVE:
Concave molding usually used on horizontal inside corners.
CRAWL SPACE:
Shallow space below the floor of a building built above ground, generally surrounded with a foundation wall.
CRICKET:
Small gable-like roof structure used to divert water and debris from intersection of sloping roof and chimney;
also called a saddle.
CRIPPLE:
Structural member that is cut less than full length, such as a studding piece above a window or door.
CROSS BRACING:
Boards nailed diagonally across studs or other boards to make framework rigid.
CROSS BRIDGING:
Bracing between floor joist to add stiffness to the floors.
CROSSHATCH:
Lines drawn closely together at an angle to show a section cut.
CROWN MOLDING:
Molding used above eye level; usually the upper trim on interior walls.
CULL:
Building material rejected as below standard grade.
CULVERT:
A passage for water below ground level.
CUPOLA:
A small structure built on top of a roof to provide ventilation.
CURB:
A very low wall.
CURE:
To allow concrete to dry slowly by keeping it moist to allow maximum strength.
CURTAIN WALL:
An exterior wall that provides no structural support.
DADO JOINT:
Recessed joint on the face of a board to receive the end of a perpendicular board.
DAMP COURSE:
A layer of waterproof material.
DAMPER:
A movable plate that regulates the draft of a stove, fireplace, or furnace.
DATUM:
A reference point of starting elevations used in mapping and surveying.
DEADENING:
Construction intended to prevent the passage of sound.
DEAD LOAD:
All the weight in a structure made up of unmovable materials.
DECAY:
The disintegration of wood through the action of fungi.
DEHUMIDIFY:
To reduce the moisture content in the air.
DENSITY:
The number of people living in a calculated area of land such as s square mile or square kilometer.
DENTIL:
One of a series of small projecting rectangular blocks forming a molding under an overhang, most common in
Colonial-style homes.
DETAIL:
Information added to a drawing to provide specific instruction with a drawing, dimensions, notes, or
specifications.
DIMENSION LINE:
A line with arrowheads at each end to show the distance between two points.
DIMENSION LUMBER:
Framing lumber that is nominal thickness.
DOME:
A hemispherical roof form.
DOORSTOP:
Projecting strip around the inside of door frame against which the door closes.
DORMER:
Top-floor projection of a room built out from a sloping roof to allow light and ventilation.
DOUBLE GLAZING:
A pane made of two pieces of glass with air space between and sealed to provide insulation.
DOUBLE HEADER:
Two or more timbers joined for strength.
DOUBLE HUNG:
A window having top and bottom sashes each capable of movement up and down.
DOWNSPOUT:
Pipe for carrying rainwater from the roof to the ground or storm drainage system; also called a leader.
DRAIN:
A pipe for carrying waste water.
DRESSED LUMBER:
Lumber machined and smoothed at the mill. Usually 1/2 inch less than nominal (rough) size.
DRIP:
Projecting construction or groove below an exterior member to throw off rainwater.
DRY ROT:
A term applied to many types of decay, especially and advanced stage when the wood can be easily crushed to a
dry powder.
DRY-WALL CONSTRUCTION:
Interior wall covering other than plaster, usually referred to as "gypsum board" or "wallboard."
DRY WELL:
A pit located in porous ground and lined with rock that allows water to seep through the pit. Used for the
disposal of rain water of the effluent from a septic tank.
DUCTS:
Sheet metal conductors for warm and cold air distribution.
DUPLEX OUTLET:
Electrical wall outlet having two plug receptacles.
EASEMENT:
The right to use land owned by another, such as a utility company's right-of-way.
EAVE:
Lower portion of the roof that overhangs the exterior walls.
EFFLORESCENCE:
 Whitish powder that forms on the surface of bricks or stone walls due to evaporation of moisture containing
slots.
EFFLUENT:
The liquid discharge from a septic tank after bacterial treatment.
ELASTIC LIMIT:
The limit to which a material can be bent or pulled out of shape and still return to its former shape and
dimensions.
ELBOW:
An L-shaped pipe fitting.
ELEVATION:
The drawings of the front, sides, or rear face of a building.
ELL:
Extension or wing of a building at right angles to the main section.
EMBELLISH:
To add decoration.
EMINENT DOMAIN:
The right of the local government to condemn for public use.
ENAMEL:
Paint with a considerable amount of varnish. It produces a hard, glossy surface.
ENTABLATURE:
In architecture, the entablature is that part of a structure which is immediately above the column; also the
distinguishing feature of the Greek styles. There are five distinct orders of entablature - Tuscan, Doric, Ionic,
Corinthian and Composite. The entablature is composed of three parts - the architrave, a stone or marble slab,
the prototype of which was the square timber beam of the primitive structure; the frieze or middle member,
subdivided into its minor parts; and the cornice, which, with its mouldings and ornaments, is the superior
projection of the structure.
ERGONOMICS:
The study of human space and movement needs.
ESCUTCHEON:
The hardware on a door to accommodate the knob and keyhole.
EXCAVATION:
Cavity or pit produced by digging the earth in preparation for construction.
EXPANSION JOINT:
Flexible joint used to prevent cracking or breaking due to thermal expansion and contraction.
FABRICATION:
Work done on parts of a structure at the factory before delivery to the building site.
FACADE:
Face or front elevation of a building.
FACE BRICK:
Brick of better quality used on the face of a wall.
FACING:
A surface finish material used to cover another surface.
FASCIA:
Outside horizontal face of member on the edge of a roof or cornice.
FATIGUE:
A weakening of structural members.
FEDERAL HOUSING ADMINISTRATION (FHA):
A government agency that insures loans made by regular lending institutions.
FELT PAPER:
Papers, sometimes tar-impregnated, used on roofs and sidewalls to give protection against dampness and leaks.
FENESTRATION:
Arrangement and sizing of doors and windows in a building.
FIBERBOARD:
A building board made with fibrous material used as an insulating board.
FILLED INSULATION:
A loose insulating material poured from bags or blown by machines into walls.
FINISH LUMBER:
Dressed wood used for building trim and cabinet work.
FIREBRICK:
A brick that is especially hard and heat-resistant. Used in fireplaces.
FIRECLAY:
A grade of clay that can withstand large quantity of heat. Used for firebrick.
FIRE CUT:
Angular cut at the ends of joists framing into a masonry wall.
FIRE DOOR:
A door that will resist fire.
FIRE PARTITION:
A partition designed to restrict the spread of fire.
FIRE-STOP:
Tight closure material or blocking to prevent the spread of flame or hot gases within framing.
FISHED:
A splice strengthened by metal pieces on the sides.
FIXTURE:
A piece of electric or plumbing equipment that is part of the structure.
FLAGGING:
Cut stone, slate, or marble used on floors.
FLAGSTONE:
Flat stone used for floors, terraces, steps, and walks.
FLASHING:
Sheet-metal work used in roof or wall construction to prevent water from seeping into the building.
FLAT ROOF:
A roof with minimum pitch for drainage.
FLITCH BEAM:
Built-up beam formed by a steel plate sandwiched between two wood members and bolted together for
additional strength.
FLOATING:
Spreading plaster, stucco, or cement on walls or floors with use of a tool called a float.
FLOOR PLAN:
The top view of a building at a specified floor level. A floor plan includes all vertical details at or above
windowsill levels.
FLOOR PLUG:
An electrical outlet flush with the floor.
FLUE:
The opening in a chimney through which smoke passes.
FLUE LINING:
Terra-cotta pipe used for the inner lining of chimneys.
FLUSH SURFACE:
A continuous surface without an angle.
FOOTING:
Poured concrete base upon which foundation walls, columns, or chimneys rest; usually has steel reinforcing bars.
FOOTING FORM:
A wooden or steel form used to hold concrete to the desired shape and size until it hardens.
FOOTPRINT:
The outline of a home's foundation; this means the home's outermost points and is used for site planning.
FRAMING:
Wood skeleton of a building constructed one level on top of another.
FRIEZE BOARD:
Trim member below the cornice that is fastened against the wall.
FROST LINE:
Depth of frost penetration in the ground; bottom of footings should always be below this line.
FURRING STRIPS:
Thin strips fastened to walls or ceilings for leveling and for attaching finish surface material.
FUSE:
A strip of soft metal inserted in an electric circuit and designed to melt and open the circuit should the
current exceed a predetermined value.
GABLE:
The vertical triangular end of a building or part of a building, from the eaves to the ridge.
GALVANIZE:
A lead and zinc bath treatment to prevent rusting.
GAMBREL ROOF:
A roof with 2 slopes on each side, the lower slope steeper than the upper.
GARRET:
An attic.
GIRDER:
A horizontal beam supporting the floor joists.
GLAZING:
Installation of glass in windows and doors.
GRADE:
 (1) Finished surface of ground around a building. (2) Refers to classification of the quality of lumber or
plywood.
GRADIENT:
Inclination of a road, piping, or the ground, expressed in percent.
GRAVEL STOP:
Strip of metal with a vertical lip used to retain the gravel around a built-up roof.
GREEN LUMBER:
Lumber that still contains moisture or sap.
GROUND-FAULT CIRCUIT INTERRUPTER (GFCI):
An electrical device that breaks an electric circuit when an excessive leakage current is detected. Intended to
eliminate shock hazards to people.
GROUNDS:
Wood strips fastened to walls before plastering which serve as edges for the plaster and nailing base for wood
trim.
GROUT:
Thin cement mortar used for leveling and filling masonry cavities.
GUSSET:
Plywood or metal plate used to strengthen joints of a truss.
GUTTER:
Metal or wood trough for carrying rainwater to downspouts.
GYP BOARD:
Gypsum sheets covered with paper which are fastened to walls and ceilings with nails or screws.
HALF TIMBER:
Exterior wall construction having wood frame members exposed and the spaces between filled with stucco or
masonry.
HANGER:
Metal strap used to support the ends of joists or piping.
HARDPAN:
A compacted layer of soils.
HEAD:
The upper frame on a door or window.
HEADER:
In framing, the continuous joist placed across the ends of floor joists, the double joists at each end of floor or
ceiling openings attached to the trimmers, and the structural member above window or door openings. In
masonry, exposed ends of masonry units laid horizontally.
HEADROOM:
Vertical clearance in a passageway or above a stairway, measured from the edge of the nosing.
HEARTH:
That part of the foor directly in front of the fireplace, and the floor inside the fireplace on which the fire is
built. It is made of fire-resistant masonry.
HEARTWOOD:
Central portion of a tree, which is stronger and more decay-resistant than the surrounding sapwood.
HEEL PLATE:
A plate at the ends of truss.
HIP RAFTER:
Diagonal rafter that extends from the plate to the ridge to form the hip.
HIP ROOF:
A roof with sloping ends and sloping sides that meet at a ridge.
HOSE BIBB:
Water faucet made for the threaded attachment of a hose; also called a sill-cock.
HOUSE DRAIN:
Horizontal sewer piping within a building that receives wastes from the soil stacks.
HOUSE SEWER:
Watertight soil pipe extending from the exterior of the foundation wall to the sewer main.
HUMIDIFIER:
A mechanical device that controls the amount of water vapor to be added to the atmosphere.
HUMIDISTAT:
An instrument used for r measuring and controlling moisture in the air.
I BEAM:
A steel beam with an I-shaped cross section.
INCANDESCENT LAMP:
Lamp in which a filament gives off light.
INDIRECT LIGHTING:
Artificial light that is reflected from a surface before reaching source.
INSULATING BOARD:
Any board suitable for insulating purposes, usually manufactured board made from vegetable fibers, such as
fiberboard.
INSULATION:
Materials for obstructing the passage of sound, heat, or cold from one surface to another.
INTERIOR TRIM:
General term for all the finish molding, casing, baseboard, etc., applied within the building by finish carpenters.
JACK RAFTER:
Rafter shorter than a common rafter; especially used in hip-roof framing.
JALOUSIE:
A type of window consisting of a number of long, thin, hinged panels.
JAMB:
Vertical members of a finished door or window opening.
JOINTURE:
General woodworking term used for better-quality wood-joint construction.
JOIST:
Structural member which directly supports floors or ceilings and is supported by bearing walls, beams, or
girders.
KEYSTONE:
A wedge-shaped detail at the crown of an arch.
KILN:
A heating chamber for drying lumber.
KILN-DRIED LUMBER:
Lumber that has been properly dried and cured (to 15 percent moisture content) resulting in a higher grade
lumber than air dried.
KING POST:
In a roof truss, the central upright piece.
KNEE BRACE:
A corner brace, fastened at an angle from wall stud to rafter, stiffening a wood or steel frame to prevent
angular movement.
KNEE WALL:
Low wall in upper story resulting from 1 1/2 story construction.
KNOB AND TUBE:
Electric wiring through walls where insulated wires are supported with porcelain knobs and tubes when passing
through wood construction members.
KNOCKED DOWN:
Unassembled; refers to construction units requiring assembly after being delivered to the job.
LALLY COLUMN:
A steel column used as a support for girders and beams.
LAMINATED BEAM:
Beam made of superimposed layers of similar materiel (usually wood) by uniting them with glue under pressure.
LANAI:
A verandah or porch.
LANDING:
A platform in a flight of stairs.
LAP JOINT:
Joint produced by lapping and joining two similar members.
LATH:
Metal or gypsum sheeting used under plaster, stucco, and ceramic tile.
LATTICE:
Grillwork made by crossing small wooden strips.
LAVATORY:
A washbasin or room equipped with a washbasin.
LEACHING BED:
A system of trenches that carries wastes from sewers. It is constructed in sandy soils or in earth filled with
stones. or gravel.
LEADER:
Vertical pipe or downspout that carries rainwater to the ground or storm sewer.
LEAN-TO:
A shed whose rafters lean against another building or other part of the same building.
LEDGER:
Strip of lumber fastened to the lower part of a beam or girder on which notched joist are attached.
LINEAL FOOT:
One-foot measurement along a straight line.
LINTEL:
Horizontal support over a window or door opening.
LOADS:
Live load; the total of all moving and variable loads that may be placed upon a building. Dead load; the weight of
all permanent, stationary construction included in a building.
LOAD-BEARING WALL:
Wall designed to support the weight imposed upon it from above.
LOGGIA:
A roofed open gallery, often on an upper level.
LOOKOUT:
Short, wooden framing member used to support an overhanging portion of a roof. It extends from the wall to
support the soffit.
LOT LINE:
Line forming the legal boundary of a piece of property; also called property line.
LOUVER:
Opening or slatted grillwork that allows ventilation while providing protection from rain, sight, or light.
MANSARD ROOF:
A roof with two slopes on each side, with the lower slope being nearly vertical and the upper nearly horizontal.
MANTEL:
A shelf over a fireplace.
MASONRY:
General term for brickwork, stonework, concrete blockwork, or similar materials.
MASTIC:
Flexible adhesive for adhering building materials.
MATTE FINISH:
Finish free of gloss or highlights.
MEETING RAIL:
The horizontal rail of a double hung sash that fit together when the window is closed.
MEMBER:
A single piece of material used in a structure.
METAL TIE:
A strip of metal used to fasten construction members together.
METAL WALL TIES:
Strips of corrugated metal used to tie a brick veneer wall to framework.
MILLWORK:
Finish carpentry work or that woodwork done in a mill and delivered to the site; relates to interior trim.
MINERAL WOOL:
An insulating material made into a fibrous form from mineral slag.
MITER JOINT:
Joint made with ends or edges of two pieces cut at 45-degree angles and fastened together.
MODULAR CONSTRUCTION:
Construction in which the size of the building and the building materials are based on a common unit of
measure.
MODULE:
Standardized unit of measure (e.g., 4", 12", or 4'-0", etc.) to unify construction.
MOISTURE BARRIER:
A material such as specially treated paper that retards the passage of vapor or moisture into walls and
prevents condensation within the walls.
MONOLITHIC:
Term used for concrete work poured and cast in one piece without joints.
MONUMENT:
A boundary marker set by surveyors to locate property lines.
MORTAR:
A mixture of cement, sand, and water, used as a bonding agent by the mason for binding bricks and stones.
MOSAIC:
Small colored tile, glass, stone, or similar material arranged to produce a decorative surface.
MUD ROOM:
A small room or entranceway where muddy overshoes and wt garments can be removed before entering other
rooms.
MULLION:
Structural support member between a series of windows.
MUTIN:
Small bar separating the glass lights in a window sash.
NEWEL:
 A post supporting the handrail at the top or bottom of a stairway.
NORMAL SIZE:
Size of lumber before dressing, rather than its actual or finished size.
NONBEARING WALL:
A dividing wall that does not support a vertical load.
NONFERROUS METAL:
Metal containing no iron, such as copper, brass, or aluminum.
NOSING:
The rounded edge of a stair tread.
OBSCURE GLASS:
Sheet glass that is made translucent instead of transparent.
ON CENTER:
Method of indicating spacing of framing members by stating the distance from center of one to center of the
next.
OUTLET:
Any type of electrical box allowing current to be drawn from the electrical system for lighting or appliances.
ORIENTATION:
The positioning of a house on a lot in relation to the sun, wind, view, and noise.
OVERHANG:
Projecting area of a roof or upper story beyond the wall of the lower part.
PALLADIAN WINDOW:
A window arrangement with a half-round window on top of a wider rectangular window.
PANELBOARD:
The center for controlling electrical circuits.
PARAPET:
Low wall or railing at the edge of a roof; it extends above the roof level.
PARGE COAT:
Thin coat of cement mortar applied to a masonry wall for refinement or dampproofing.
PARQUET FLOORING:
Flooring, usually wood, laid in an alternating or inlaid pattern to form various designs.
PARTICLE BOARD:
Sheets made from compressed wood fiber.
PARTITION:
An interior wall that separates two rooms.
PARTY WALL:
Wall common to adjoining buildings in which both owners share, such as a wall between row houses or
condominiums.
PATIO:
An open court.
PEDIMENT:
A triangular space formed in the middle of a gable; also used as a decoration above a door.
PENNY:
Term used to identify nail size.
PERGOLA:
Open, structural framework over an outdoor area, usually covered with climbing vines to form an arbor.
PERIPHERY:
Entire outside edge of an object or surface.
PERSPECTIVE:
A drawing of an object in a three dimensional form on a plane surface. An object drawn as it would appear to
the eye.
PIER:
Support, usually in the crawl space, to support the floor framing.
PILASTER:
Rectangular pier attached to a wall for the purpose of strengthening the wall; also a decorative column
attached to a wall.
PILES:
Long posts driven into the soil in swampy locations, or whenever it is difficult to secure a firm foundation, upon
which the foundation footing is laid.
PILLAR:
A column used for supporting parts of a structure.
PINNACLE:
Projecting or ornamental cap on the high point of a roof.
PLAN:
A horizontal, graphic representational section of a building.
PITCH:
Slope of a roof usually expressed as a ratio.
PLANK:
Lumber 2" thick or more and more than 4" wide, such as joists, flooring, and the like.
PLASTER:
A mortarlike composition used for covering walls and ceilings. Usually made of portland cement mixed with sand
and water.
PLASTERBOARD:
A board made of plastering material covered on both sides with heavy paper.
PLASTER GROUND:
A nailer strip included in plaster walls to act as a gage for thickness of plaster and to give a nailing support for
finish trim around openings and near the base of the wall.
PLAT:
A map or chart of an area showing boundaries of lots and other parcels of property.
PLATE:
Top or bottom horizontal members of a row of studs in a frame wall; also, the sill member over a foundation
wall.
PLATE CUT:
The cut in the rafter that rests upon the plate. It is also called the seat cut or birdmounth.
PLATE GLASS:
A high-quality sheet of glass used in large windows.
PLATFORM:
Framing in which each story is built upon the other.
PLENUM SYSTEM:
A system of heating or air-conditioning in which the air is forced through a chamber connected to distributing
ducts.
PLOT:
The land on which a building stands.
PLOW:
To cut a groove running the same direction as the grain of the wood.
PLUMB:
Said of a member when it is in true vertical position as determined by a plumb bob or vertical level.
PLYWOOD:
A piece of wood made of three or more layers of veneer joined with glue and usually laid with the grain of
adjoining piles at right angles.
PORCH:
A covered area attached to a house at an entrance.
PORTE COCHERE:
A covered, drive-through structure that extends from the side of a home, providing shelter for people getting
in and out of vehicles.
PORTICO:
A roof supported by columns; often used at an entry.
PORTLAND CEMENT:
A hydraulic cement, extremely hard, formed by burning silica, lime, and alumina together and then grinding up
the mixture.
POST:
A perpendicular supporting member.
POST & BEAM CONSTRUCTION:
Wall construction consisting of large, widely spaced posts to support horizontal beams.
PRECAST:
Concrete shapes made separately before being used in a structure.
PREFABRICATED BUILDINGS:
Buildings that are built in sections or component parts in a factory, and then assembled at the site.
PRIME COAT:
First coat of paint applied to wood or metal to prime the surface for succeeding coats.
PURLIN:
Horizontal roof members laid over trusses to support roof decking.
QUAD:
An enclosed court.
QUARRY TILE:
Unglazed, machine-made tile used for floors.
QUARTER ROUND:
Small molding with a quarter-circle profile.
QUARTER SAWED:
 Lumber, usually flooring, that has been sawed so that the medulary rays showing on end grain are nearly
perpendicular to the face of the lumber.
QUOIN:
A large, square stone or brick veneer set into the corners of masonry buildings for architectural style.
RABBET:
Groove cut along the edge or end of a board to receive another board.
RADIANT HEATING:
A system using heating elements in the floors, ceilings, or walls to radiate heat into the room.
RAFTER:
Inclined structural members used to frame a roof.
RAGLIN:
The open joint in masonry to receive flashing.
RAKE:
Inclined edge of a roof that overhangs the gable end.
RANDOM RUBBLE:
Stonework having irregular shaped units and no indication of systematic course work.
REBAR:
Steel reinforcing bar.
REGISTER:
The open end of a duct in a room for warm or cool air.
REINFORCED CONCRETE:
Concrete in which steel bars or webbing has been embedded for strength.
RENDERING:
The art of shading or coloring a drawing.
RESTORATION:
Rebuilding s structure so it will appear in its original form.
RESTRICTIONS:
Limitations on the use of real estate building materials, size, or design styles.
RETAINING WALL:
A wall to hold back an earth embankment.
REVEAL:
Side of an opening of a window or door.
RHEOSTAT:
An instrument for regulating electric current.
RIBBON:
Wood strip let into the studs to provide a bearing for joists.
RIDGEBOARD:
Horizontal wood framing member to which the top of rafters are attached.
RIDGE CAP:
A wood or metal cap used over roofing at the ridge.
RIPRAP:
Stones placed on a slope to prevent erosion. Also broken stone used for foundation fill.
RISE:
The vertical height of a roof.
RISER:
The vertical board in a stairway between two treads.
ROCK WOOL:
An insulating material that looks like wool but is composed of such substances as granite or silica.
RODDING:
Stirring freshly poured concrete with a vibrator to remove air pockets.
ROLL ROOFING:
Roofing material of fiber and asphalt manufactured in rolls.
ROUGH FLOOR:
The subfloor on which the finished floor is laid.
ROUGH HARDWARE:
All the concealed fasteners in a building, such as nails, bolts, and hangers.
ROUGH-IN:
Putting up the skeleton of the building.
ROUGH LUMBER:
Lumber as it comes from the saw.
ROUGH OPENING:
Any unfinished opening in the framing of a building.
ROWLOCK:
Brickwork with exposed ends setting vertically.
RUN:
Horizontal distance of a flight of stairs, or the horizontal distance from the outside wall to the ridge of a roof.
SADDLE:
Small gable-like roof structure used to divert water and debris from intersection of sloping roof and chimney;
also called a cricket.
SAFETY FACTOR:
The ultimate strength of the material divided by the allowable working load. the element of safety needed to
make certain that there will be no structural failures.
SAND FINISH:
A final plaster coat; a skim coat.
SAP:
All the fluids in a tree.
SASH:
Individual frame into which glass is set; the movable part of a double-hung window.
SCAB:
A small wood member, used to join other members, which is fastened on the outside face.
SCARF JOINT:
Joint made with diagonal ends.
SCHEDULE:
Listing of finishes, doors, windows, etc.
SCRATCH COAT:
The first coat of plaster. It is scratched to provide a good bond for the next coat.
SCREED:
A guide for the correct thickness of plaster or concrete being placed on surfaces.
SCUTTLE:
Small opening in a ceiling to provide access to an attic or roof.
SEASONING:
Drying out of green lumber, either in an over or kiln or by exposing it to air.
SECTION:
The drawing of an object that is cut to show the interior. Also, a panel construction used in walls, floors,
ceilings, or roofs.
SEEPAGE PIT:
A pit in which sewage drains from a septic tank, and which is so constructed that the liquid waste seeps
through the sides of the pit into the ground.
SEPTIC TANK:
A concrete or steel tank where sewage is reduced to liquid and gases by bacterial action. About half the
sewage solids become gases that escape back through the vent stack in the house. The liquids flow from the
tank into the ground through a leaching field tile bed.
SERVICE CONNECTION:
The electric wires to the building from the outside power lines.
SET:
The hardening of cement or plaster.
SETBACK:
Distance from the property lines, front, side, and rear, to the face of building; established by zoning
ordinances.
SETTLEMENT:
Compression of the soil or the members in a structure.
SHAKES:
Thick hand-cut wood shingles.
SHEATHING:
Rough covering over the framing of a building, either roof or wall, which is not exposed when finish material is
applied.
SHED ROOF:
A roof slanting in one direction.
SHIM:
A piece of material used to fill in the space between two surfaces.
SHINGLES:
Thin pieces of wood or materials that overlap each other in covering a roof. The number and kind needed
depend on the steepness of the roof and slope.
SHIPLAP:
Boards with lapped joints along their edges.
SHOE MOLD:
Small rounded molding covering the joint between the flooring and the baseboard.
SHORING:
 Lumber placed in a slanted position to support the structure of a building temporarily.
SIDING:
The outside boards of an exterior wall.
SIDELIGHT:
A vertical window beside a door or another window.
SILL:
Horizontal exterior member below a window or door opening. In frame construction, the lowest structural
member that rests on the foundation.
SILL-COCK:
Water faucet made for the threaded attachment of a hose; also called a hose bibb.
SKYLIGHT:
An opening in the roof for admitting light.
SLAB CONSTRUCTION:
A reinforced concrete floor and foundation system.
SLEEPERS:
Wood strips placed over or in a concrete slab to receive a finished wood floor.
SMOKE CHAMBER:
The portion of a chimney flue located directly over the fireplace.
SOFFIT:
Underside of an overhang such as the eave, a second floor, or stairs.
SOFTWOOD:
Wood from trees having needles rather than broad leaves. The term does not necessarily refer to the softness
of the wood.
SOIL STACK:
Vertical plumbing pipe that carries sewage.
SOLAR HEAT:
Heat from the sun.
SOLE PLATE:
The horizontal framing member directly under the studs.
SPACING:
The distance between two structural members.
SPACKLE:
To cover wallboard joints with plaster.
SPAN:
Horizontal distance between supports for joists, beams, or trusses.
SPECIFICATIONS:
The written or printed direction regarding the details of a building or other construction not included in the
set of working drawings.
SPIKE:
A large, heavy nail.
SPLICE:
Joining of two similar members in a straight line.
SQUARE:
In roofing, 100 sq ft of roofing.
STACK:
A vertical pipe.
STAKEOUT:
Marking the foundation layout with stakes.
STEEL FRAMING:
Skeleton framing with structural steel members.
STEENING:
Brickwork without mortar.
STILE:
Vertical framing member of a panel door.
STIRRUP:
A metal U-shaped strap used to support framing members and pipes.
STOOL:
Horizontal interior member of the frame below a window.
STOP:
A small strip to hold a door or window sash in place.
STORM SEWER:
A sewer that is designed to carry away water from storms, but not sewage.
STORY:
Space between two floors of a building.
STRESS:
Any force acting upon a part or member.
STRESS COVER CONSTRUCTION:
Construction consisting of panels or sections with wood frameworks to which plywood or other sheet material is
bonded with glue so that the covering carries a large part of the loads.
STRETCHER COURSE:
A row of masonry in a wall with the long side of the units exposed to the exterior.
STRINGER:
One of the sides of a flight of stairs. The supporting member cut to receive the treads and risers.
STRIPPING:
Removal of concrete forms from the hardened concrete.
STUCCO:
Any of various plasters used for covering walls, especially an exterior wall covering in which cement is used.
STUDS:
Vertical framing members in a wall spaced at 16" or 24" o.c.
SUBFLOOR:
Material fastened directly to floor joist below the finish floor.
SUMP:
A pit in a basement floor to collect water, into which a sump pump is placed to remove water.
SURFACE LUMBER:
Lumber that is dressed by running it through a planer.
SURVEYOR:
A person skilled in land measurement.
SUSPENDED CEILING:
Finish ceiling hung below the underside of the building structure, either floor or roof.
SWALE:
A drainage channel formed where two slopes meet.
TAIL JOISTS:
Relatively shorter joists that join against a header or trimmer in floor framing.
TAMP:
To ram or compact the soil.
TAR:
A dark heavy oil used in roofing and roof surfacing.
TEMPERED:
Thoroughly mixed cement or mortar.
TENSILE STRENGTH:
The greatest longitudinal stress a structural member can resist without adverse affects (breaking or cracking).
TERMITE SHIELD:
Sheet metal used to block the passage of termites.
TERRAZZO:
Wear-resistant flooring made of marble chips or small stones embedded in cement matrix that has been
polished smooth.
THERMAL CONDUCTOR:
Material capable of transmitting heat.
THERMOSTAT:
A device for automatically controlling the supply of heat and air.
THRESHOLD:
Wood, metal, or stone member placed directly below a door.
THROAT:
A passage located directly above the fireplace opening where a damper is set.
TIE:
A structural member used to bind others together.
TIMBER:
Lumber with a cross section larger than 4"x6", for posts, sills, and girders.
TOENAIL:
Nailing diagonally through a member.
TOLERANCE:
The acceptable variance of dimensions from s standard size.
TONGUE:
A projection on the edge of wood that joins with a similarly shaped groove.
T-POST:
Post built up of studs and blocking to form the intersection framing for perpendicular walls.
TRANSOM WINDOW:
A narrow horizontal window above a window or door, named for the cross bar on which it rests.
 TRAP:
U-shaped pipe below plumbing fixtures which provides a water seal to prevent sewer odors and gases from
entering habitable areas.
TRAY CEILING:
A recessed ceiling resembling an upside-down tray; also referred to as a stepped ceiling.
TREAD:
The step or horizontal member of a stair.
TRIMMER:
The longer floor or ceiling-framing member around a rectangular opening into which headers are joined; both
headers and trimmers are doubled.
TRUSS:
Structural unit of members fastened in triangular arrangements to form a rigid framework for support over
long spans.
TRUSS RAFTER:
Truss spaced close enough (usually 24" o.c.) to eliminate the need for purlins.
TURRET:
A small tower usually on the corner of a building, most common in Victorian-style homes.
UNDERPINNING:
A foundation replacement or reinforcement for temporary braced supports.
UNDRESSED LUMBER:
Lumber that is not squared or finished smooth.
VALLEY:
The internal angle formed by two slopes of a roof.
VALLEY JACKS:
Rafters that run from a ridgeboard to a valley rafter.
VALLEY RAFTER:
Diagonal rafter at the intersection of two intersecting sloping roofs.
VALVE:
A device that regulates the flow of material in a pipe.
VAPOR BARRIER:
Watertight material used to prevent the passage of moisture or water vapor into and through walls and under
concrete slabs.
VAULTED CEILING:
A ceiling that slopes up to a peak.
VENEER CONSTRUCTION:
Type of wall construction in which frame or masonry walls are faced with other exterior surfacing materials.
VENT:
A screened opening for ventilation.
VENTILATION:
The process of supplying and removing air by natural or mechanical means to or from any space.
VENT PIPES:
Small ventilating pipes extending from each fixture of a plumbing system to the vent stack.
VENT STACK:
Vertical soil pipe connected to the drainage system to allow ventilation and pressure equalization.
VERGEBOARD:
The board that serves as the eaves finish on the gable end of a building.
VESTIBULE:
A small lobby or entrance room.
VITREOUS:
Pertaining to a composition of materials that resemble glass.
VOLUME CEILING:
Any ceiling higher than the standard 8 feet.
WAINSCOT:
Surfacing on the lower part of an interior wall when finished differently from the remainder of the wall.
WALLBOARD:
Wood pulp, gypsum, or similar materials made into large rigid sheets that may be fastened to the frame of a
building to provide a surface finish.
WALL TIE:
Small metal strip or steel wire used to bind courses of masonry to wood frame in veneer construction.
WARP:
Any change from a true or plane surface. Warping includes bow, crook, cup, and twist.
WASH:
The slant upon a sill, capping, etc., to allow the water to run off.
WASTE STACK:
 A vertical pipe in a plumbing system that carries the discharge from any fixture.
WATERPROOFING:
Material or construction that prevents the passage of water.
WATER TABLE:
Horizontal member extending from the surface of an exterior wall to throw rainwater away from the wall; also,
the level of subsurface water.
WEATHER STRIPPING:
Strips of fabric or metal fastened around the edges of windows and doors to prevent air infiltration.
WEEP HOLE:
Small holes in masonry cavity walls to release moisture accumulation to the exterior.
WELL OPENING:
A floor opening for a stairway.
WINDER:
Stair tread that is wider at one end than the other, allowing the stairs to change direction.
WYTHE:
Pertaining to s single-width masonry wall.
ZONING:
Building restrictions as to size, location, and type of structures to be built in specific areas.

acceleration clause

A term in the contract which brings the maturity date of the loan forward if the borrower defaults, so that
the Outstanding Balance is immediately due and payable.

accrual basis

Accounting procedure which recognizes revenue at the time it is earned, as opposed to when it is actually
received. This method ties in with the Revenue Principle. Contrast with Cash Basis.

actual value

Actual value as determined by the assessor. This value, in thousands of dollars, when multiplied by the tax
rate equals the amount of real property taxes payable.

adjacent

In law, implies that two or more properties are not widely separated, though they may not physically touch.

adjoining

In law, implies that two properties are contiguous or touching each other as opposed to adjacent to one
another.

adjustment date

Date agreed to by both parties to a real property transaction for the adjustment of property taxes, rent,
interest, and other items.

affidavit

A written statement of facts, the contents of which are sworn under oath to be true by the person making
the statement. An affidavit is sometimes used in court proceedings as evidence in place of oral testimony.

agent

At common law, an agent is any person who contracts to act for or on behalf of another, who in turn, is
known as the principal. The common law principles of agency apply to all levels of licensee, including
brokerages, managing brokers, associate brokers and representatives, as defined by the Real Estate
Services Act, when they are acting on behalf of a vendor or purchaser.
 agreement for sale

A contract by which the owner of land (vendor) agrees to sell land to another (purchaser) who agrees to
purchase it. The purchaser's interest is registered in the Land Title Office as a charge against the vendor's
certificate of title. The contract provides that the purchase price will be paid by instalments.

airspace

Historically, one owned the airspace above a parcel of 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 the land as he or she
can effectively use.

amortization

The process of paying off a loan by periodic payments of blended principal and interest.

appraisal

The estimation of the value of a legal interest in land.

appreciation

The amount by which real property (or any other Asset) has increased in value.

arm's length
transaction

Transaction in which the parties involved are not inclined toward making voluntary concessions to each
other.

assessment

Appraisal, usually for real property taxation purposes.

a
s
s
e
t

Item of value owned by a business. Contrast to Liability.

a
s
s
i
g
n

To transfer over to another. (e.g., "I assign all right, title and interest in Blackacre to my wife, Elaine.")

a
s
s
o
c
 i
a
t
e

b
r
o
k
e
r

A licensee who meets the educational and experience requirements to be a managing broker, but who is
providing real estate services under the supervision of a managing broker (formerly known as an "Agent
9.15" under the now repealed Real Estate Act).

A Mortgage that allows a purchaser to assume or take over the responsibilities and liabilities under the
mortgage from the vendor.
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.

An estimate of the amount of rent that may become uncollectible from the tenants of occupied units (also
known as collection loss allowance).

The amount of money the purchaser will be required to pay to the vendor to complete the purchase, after
all adjustments have been made.
A financial statement listing Assets, Liabilities, and Owner's Equity at a specific point in time. Also known
as a Statement of Financial Position or Statement of Assets and Liabilities.

Any payment of principal over and above the regular payment.

A single mortgage registered against two or more individual parcels of real property.
See constant payment loan or payment.

The portion of the face value of a mortgage loan which exceeds the funds actually received by the
borrower and which is intended as additional compensation for the lender.

The original cost of a noncurrent asset less all depreciation claimed to date.
The original face value of the mortgage less the amount of principal repayment, or the mortgage amount
outstanding at a particular point in time. At origination, the book value and face value are the same.

The process of determining the maximum amount that can be lent to a potential borrower, given his or her
income and the Lending Value of the property to be purchased.

Incurring an obligation to repay a debt in order to invest or consume more than one currently owns.
Failure, without legal excuse, to perform any promise which forms the whole or part of a contract.

The square footage of floor space (or number of units) which must be rented in order for revenues to
exactly equal expenses.

A licensee (often corporate) on behalf of which other licensees must provide real estate services.
A fee charged by a mortgage broker for arranging a loan.

A claim registered against the title to land by a contractor, supplier of materials or workman with respect
to work done or materials supplied to improve that land.

Refers to a scheme of development which comes into existence where defined land is laid out in parcels
and intended to be sold to different purchasers or leased or subleased to different tenants each of whom
enters into a restrictive covenant with the common vendor or landlord agreeing that his particular parcel
should be subject to certain restrictions as to use.
The amount that an owner of an income producing asset is allowed to deduct as an expense for Income
Tax purposes as a result of ownership of that depreciable asset. Only one-half of the ordinary CCA may be
claimed in the first year of the holding period; no CCA may be claimed in the year of sale.

The risk of losing all or part of an Investment. (Capital at risk is the estimate).
Changing a stream of income to a capital market value (current market value) using a required rate of
return.

The return an investor requires for investing in a property to receive the annual net operating income
flows. It can be estimated from similar properties by dividing their estimated net operating incomes by the
prices at which the properties sell.

Accounting procedure which recognizes revenue at the time it is actually received in cash form. Contrast to
Accrual Basis.
A calculation of the cash available at any point in time. The old cash balance plus all receipts less all
disbursements will compute the current cash at hand.
See Market Value (of an offer).

A notice registered against the title to land warning those looking at the title that a claim has been made.

Abbreviation of Capital Cost Allowance.

The maximum price that a purchaser is willing to pay for a property. Compare to Floor Price.
A notice of a pending court action registered against the title to property for the purpose of warning all
persons that the title to the property is in litigation and preventing dealings with respect to the property.

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.

Articles of personal property (i.e., a car, stereo, television, etc.) as opposed to real property.
A system whereby the law of a nation is set out in a comprehensive set of writings. An example of these
writings or codes would be a Criminal Code for a country.

A mortgage which cannot be fully paid out before expiry of its term.

A statement prepared for a purchaser or vendor, showing the amounts to be received and paid out. The
difference between these amounts represents either the balance payable (by the purchaser) or the cash
proceeds from sale (to the vendor) upon completion of the transaction. See also Purchaser's Statement of
Adjustment and Vendor's Statement of Adjustment.
A real estate syndicate organization in which two or more investors are owners of an undivided interest in
real property.

A system of law made up of principles and rules of action based upon the ancient customs and usages of
the people of a nation which have been recognized, affirmed or enforced by the courts.

An appraisal method which bases the value of the subject property on the price of similar properties which
have sold recently. Also named the Market Method.

Date on which the purchaser's solicitor undertakes to the vendor (or his solicitor) that he will pay the
balance owing to the vendor upon the Transfer of Title being accepted for registration.

Interest which, during the life of the loan, is charged or calculated at regular intervals and if not
immediately paid (as in an interest only loan) will, in subsequent periods, earn interest itself (as in an
interest accruing loan).
Indicates the number of times compound interest is charged or calculated per year (for example, semi-
annually or monthly).

A fundamental term of a contract, a breach of which allows the injured party to terminate the contract
and/or sue for damages or Specific Performance.

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 contract for the sale of goods by which the seller reserves ownership (but not possession) of the goods
until the price has been paid (usually by instalments). Such contracts are regulated by the Personal
Property Security Act.

The legal term for the reason which induces a party to enter into a contract. Consideration may be in the
form of a right, interest, profit or benefit accruing to one party. It may also be in the form of an agreement
not to do something, or loss suffered by the other.

The accounting rule which states that once a firm has selected a method of recording financial transactions
from a number of alternative options, all of which are acceptable under generally accepted accounting
principles, it will apply those principles over subsequent accounting periods.

A loan which is repaid by equal and consecutive instalments that include principal and interest.

The act of spending money on goods which decrease in value after the time of purchase (for example, the
purchase of bread or a refrigerator). Contrast to Investment.

An agreement between two or more persons which creates an obligation to do or not to do a particular
thing.

A contract of purchase or sale of land which contains the obligations of the vendor and purchaser with
respect to the purchase and sale.

The process of changing an interest rate with one compounding frequency to an equivalent rate with a
different compounding frequency.
The process of transferring an interest in land from one person to another by way of a transfer document.
Conveyancing usually refers to the transfer of title to land but also includes dealings such as assignments,
leases, and mortgages.

In law, this refers to the distinct status of a corporation as a separate entity from its shareholders and
corporate officers. Because a corporation is a separate entity, a person dealing with the corporation may
not know the identities of the shareholders or officers. For example, the names of the owners of an
incorporated business are not shown on its financial statements.

A business entity which is owned by shareholders who decide on the general policies of the company
through their elected Board of Directors. A corporation is a separate legal entity and therefore has the
rights and liabilities of an individual.

A method of appraisal which determines the value of a property by adding the market value of the site to
the cost of replacing the existing building.

The cost to the business of manufacturing or purchasing the items actually sold.

A generally accepted accounting principle which states that the historical cost of an asset must be
reflected in a company's Financial Statements.

A statement by the recipient of the offer which has the legal effect of rejecting the offer and of proposing a
new offer to the offeror (who then becomes the recipient of the "new" offer).

An Act which, amongst other things, provides for the rights and remedies of individuals attempting to
collect on judgments awarded by the Court.

For the purposes of this course a covenant is a promise contained within an agreement. The person
making the covenant is called the covenantor and the person in whose favour it is made is called the
covenantee.

An investigation of a loan applicant's ability to repay.

A person to whom a debt is owed. Contrast to Debtor.

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.

In appraisal, the date for which the value of the subject property is established, not to be confused with
the date at which the appraisal takes place.

The number of times net operating income must cover the annual mortgage payments (principal and
interest). For example, if the lender requires the borrower to earn $1,100 in net income to allow him
$1,000 in annual mortgage payments, the ratio is 1.1:1. The lender usually states the ratio as a number
exceeding one (i.e., 1.1) and the maximum allowable loan payment can then be calculated by dividing
N.O.I. by the number supplied (i.e., $1,100 ÷ 1.1 = $1,000.) See also Ratio.

Incurring an obligation to repay a debt in order to invest or consume more than one currently owns.

The making of mortgage payments by the borrower, as arranged with the lender.

One who owes a debt. Contrast to Creditor.

A fraudulent or deceptive misrepresentation used by one person to deceive or trick another person
ignorant of the true facts.

A document used to transfer an interest in land from one party to another.

The legal term for the granting of a Lease.

An amount deposited with the brokerage by the purchaser when an offer to purchase is made.

The amount by which the value of improvements has decreased over time as a result of wear and tear or
changes in taste. Depreciation can be classified as physical or functional and curable or incurable. See also
Depreciation Expense and compare to Capital Cost Allowance.

The periodic cost of owning depreciable assets which are subject to wear and tear, such as buildings and
equipment. No depreciation expense can be taken on land. Depreciation expense is a method of
accounting for the initial cost of an asset in its subsequent periods of use.

A document prepared by the developer of a subdivision to ensure that investors or purchasers have
adequate information upon which to base a purchasing decision.

A schedule showing the face value of the loan, all costs associated with issuing the loan to the borrower,
and the effective annual rate as required by the B.C. Mortgage Brokers Act.

The process of expressing expected future income in terms of a present value.

A legal term for a landlord's right to seize and sell a tenant's personal property in order to recover arrears
of rent.

The process of investing funds in more than one project or industry in order to reduce the risk of incurring
unexpected losses. The opposite of "putting all your eggs in one basket."

A real estate syndicate organization in which the investors are the individual owners of the (condominium)
units.

That part of a corporation's after-tax income that is distributed to the shareholders.

Land to which the benefit of a right (i.e., an easement or restrictive covenant) is attached.
 A situation where a person is forced to enter into a contractual relationship against his will by the threat of
imprisonment either to himself or his family, or the threat of actual physical force.

A limited right of use of another's land by a landowner for the benefit of his land. The land receiving the
benefit is called the dominant tenement and the land granting the benefit is called the servient tenement.

The time span over which a property is employed in its Highest and Best Use.

ve annual rate

An annual interest rate which is compounded once a year. This rate is used for disclosure purposes under
the B.C. Mortgage Brokers Act.

encroachment

A fixture, such as a wall or fence, which illegally intrudes into or invades on public or private property,
diminishing the size and value of the invaded property.

encumbrance

A judgment, mortgage or lien or any other claim which is registered against the title to land.

equitable mortgage

The transfer of equity in property as security for a debt. Technically, any mortgage registered on title
subsequent to the first mortgage (i.e., second or third mortgage).

equity (in common law)

The concept of justice being administered by the Courts according to fairness as contrasted with the
strictly formulated rules of common law. In law the term "equity" denotes the spirit and habit of fairness,
justness, and right dealing which would regulate interaction of men with men.

equity (in mortgage finance)

The difference between a property's market value or purchase price and the debt incurred to purchase the
property.

equity of redemption

The mortgagor's right to repay the mortgage.

equivalent rate

Two interest rates are equivalent if, for the same amount borrowed, over the same period of time, the
same amount is owed at the end of that period of time.

escalator clause

A term in a commercial lease which allows the landlord to charge the tenant for any increases in specified
operating expenses.
 execution

The process of commencing proceedings to collect an amount owing by reason of a judgment.

face value of a loan

The loan amount which must be repaid at a stated rate of interest according to the contract terms.

fee simple

The legal term for the maximum interest in land available to a person, or the maximum of legal ownership.
Equivalent in many ways, for practical purposes, to absolute ownership.

fiduciary

A person who holds a position of trust with respect to someone else and is obliged, by virtue of the
relationship of trust, to act solely in the other person's benefit.

final payment

The last instalment that is made on a fully amortized loan. It is usually smaller than the preceding periodic
payments.

financial statement

A numerical presentation of particular aspects of a business. Common financial statements include the
Balance Sheet and the Income Statement.

first-year half-rate rule

In the year an asset is purchased, only one-half the maximum allowable CCA may be claimed.

fiscal year

Any period of twelve consecutive months chosen by a business as its accounting period.

fixed
expenses

Those costs which will be incurred irrespective of the extent to which a property is occupied.

fi
xt
ur
e

A chattel attached to real property; anything which has become so attached to the land as to form, in law,
part of the land.

f
l
o
o
r
 p
r
i
c
e

The minimum price that a vendor is willing to accept for a property. Compare to Ceiling Price.

f
o
r
e
c
l
o
s
u
r
e

A legal action taken by a mortgagee to obtain possession of a property, by reason of the mortgagor's
default in payment of the principal and/or interest of the mortgage debt.

A legal doctrine that provides that where the existence of a specific thing is necessary for performance of
the contract, the duty to perform is discharged if the thing, for reasons beyond anyone's control, is no
longer in existence at the time for performance.
Loan which is repaid completely by a series of payments over the full duration of the amortization period.

The loss in value caused by outmoded or inadequate design (e.g., small closets in a residential property)
which may be curable or incurable. See Curable Depreciation and Incurable Depreciation. Compare to
Physical Depreciation.

Any lump sum which is payable or will have been accumulated some time from now.
A form of organization in which two or more persons carry on a business with a view to profit. Each
general partner assumes unlimited liability. The partnership is not a taxable entity; net income is
distributed to the partners who, in turn, must report this income on their personal income tax return.
Compare to Limited Partnership.
The rules and guidelines followed in the preparation of Financial Statements. They include the Cost
Principle, the Revenue Principle, the Matching Principle, the Objectivity Principle, the Consistency Principle
and the Fiscal Year.

The amount by which the purchase price of a business exceeds the fair market value of its net assets. This
extra amount could be attributed to factors such as the value of good customer relations, high employee
morale, a well-respected business name, or other intangible attributes of the business which are not
quantifiable, but contribute to purchasers' expectations for the income potential of the business.
An innovative loan arrangement in which the periodic payments made by the borrower increase in size
over all, or a portion of, the term of the mortgage contract.

The percentage of gross income which is the maximum amount a mortgagor is allowed to pay annually in
principal, interest, and property taxes. For example, a mortgagor may pay $270 out of $1000 gross
income as P.I.T. payments. This ratio is usually expressed as a percentage i.e., P.I.T. payments can be 27%
of gross income. Compare to Loan-to-Value Ratio. See also Ratio and Total Debt Service Ratio.

The amount earned through employment or investment before taking taxes or other deductions into
consideration. This amount may or may not be the same as gross income for purposes of mortgage
lending.
A lease in which the landlord pays for all the operating expenses. Contrast to Net Lease.

The rent which would be collected if all units were leased at market rents.
Similar to Gross Potential Rent, except it also includes income from other sources such as parking income
or laundry income (in the case of an apartment building, for example).

Gross Potential Rent less Vacancy Allowance and Bad Debt Allowance.

Gross Potential Revenue less an allowance for Vacancy and Bad Debt. Note that different rates may be used
for the different income sources (i.e., 5% vacancy rate for units, 2% vacancy rate for parking spaces).
One who becomes contingently or secondarily liable for another's debt or performance.

That use of land which, within all constraints (for example, zoning bylaws), will provide the maximum net
return during the foreseeable future.

The actual amount of money spent at the time the asset was purchased or the improvements were built.
See also Current Cost.
One of two tests which determines whether an investment unit is a security. The other test is called the
Risk Capital Test.

A market in which (similar) properties are traded for either more or less than actual Market Value.

A structural addition to the land which can be considered to be a fixture.

An appraisal method, also called the Investment Method, which is typically used for income producing
properties. It converts the income stream produced by the property into a market value for the property by
using a Capitalization Rate.

A financial statement which lists the revenues and expenses of a business organization for a stated period
of time. Also called a profit and loss statement.

That part of taxable income which a person or corporation is required to forward to Revenue Canada
periodically.
Wear and tear or outmoded design which can only be corrected at considerable expense and, in fact,
correction may be cost-prohibitive (e.g., narrow hallways). Contrast with Curable Depreciation.

A legal principle. In B.C., subject to certain statutory exceptions, the Title Register is conclusive evidence
that the person named as holding an estate in land is in fact entitled to that interest, and his holding is not
subject to any condition or encumbrance other than those shown on the Title Register.

A document or deed, expressing certain objects between two or more parties.

In B.C., a person under 19 years of age which, generally speaking, is the age of legal competence.
A rise in the average price level.

A court order which either restrains a party from doing something or requires a party to do something.

The estimated value of a property for insurance purposes.

The dollar value which represents the cost of borrowing or the benefit of lending money.
Debt which is paid off as one lump sum, including principal plus accumulated compound interest.

The process of calculating compound interest payable on the amount borrowed between the day the
monies are advanced and the day the amortization period starts.
The percentage rate that represents the cost of borrowing or the benefit of lending money.

A loan which is serviced by interest-only payments. At the end of the term the full principal plus interest
for the last payment period of the loan is still owing.

The spending of capital today in order to receive benefits in the future (e.g., the purchase of a Canada
Savings Bond which pays interest periodically). Contrast to Consumption.

A type of advertisement used by one to induce the public or some individual to submit their own offers. An
invitation to treat is not an offer capable of acceptance to form a contract.
Where two or more persons acquire an equal undivided interest in a property. When one person dies, that
person's share automatically goes to the survivor or survivors.

A type of business where two or more business organizations cooperate in a particular undertaking. Profits
or losses are shared by the participants and taxed in their hands.

An award granted to a successful party to litigation by the court. The award may include a specific amount
of money to be paid to the successful party by the unsuccessful party to the litigation.

The collection of legal decisions out of which legal principles or rules emerge.

A hidden or concealed defect that would not be discovered during the course of a reasonable inspection.

The value possessed by a property which has potential for redevelopment because it is currently not
employed at its Highest and Best Use.

The support provided to one piece of land by the land which lies next to it.

An instrument granting exclusive possession of land to another for a specified term, usually at a rent. The
one who grants the lease is called the Landlord (or Lessor) and the one to whom it is granted is called the
Tenant (or Lessee ).

The estimated value of a property for lending purposes. It is a long-term, conservative estimate of the
value of the security as determined by the lender and, therefore, does not necessarily equal Market Value
or Sales Price.

The partial use of debt to finance investments. The use of debt can magnify the potential variations of
yields on the equity portion of the investment.

Monies owed by a business. Contrast to Asset.

With respect to real property, a privilege to enter onto premises for a certain purpose. However, this
privilege does not confer upon the licensee any title, interest or estate in such property (e.g., exclusive
right to possession of the property). Examples of a licence include a hotel suite where monthly rates may
be available but the innkeeper has the right to enter the suite at his pleasure.

A claim or charge on real or personal property for payment of some debt, lien obligation or duty.

An interest in land to be enjoyed during a person's life, and which ends on that person's death.

The form of Life Estate where the measuring life is that of some other person. (e.g., A man may grant a life
estate pur autre vie to his deceased son's wife [his daughter-in-law] for the life of his grandchild. If the
grandchild dies, the daughter-in-law loses her interest.)

The principle that a shareholder or limited partner cannot be held liable for more than he has paid into (or
agreed to pay into) the firm. Contrast to Unlimited Liability.

A form of organization in which two or more persons conduct a business. It consists of one or more
limited partners and one or more general partners. A general partner assumes unlimited liability but a
limited partner has limited liability. Compare to General Partnership.

A specific sum of money expressly stipulated by the parties to a contract as a pre-estimate of the amount
of damages to be recovered by either party for a breach of the contract by the other.

The degree of ease and certainty with which an asset can be converted into cash.

A contract between an owner (vendor) and a real estate licensee whereby the licensee agrees to try to find
a purchaser for the listed property in return for the vendor paying a stipulated amount of commission
should the licensee be successful.

The value at which a property is advertised for sale.

The percentage of lending value which determines the maximum loan available. See Ratio. Compare to
Gross Debt Service Ratio or Total Debt Service Ratio (for residential underwriting) and Debt Coverage Ratio
(for commercial underwriting).
A study of a property and the factors which affect it. The survey includes an analysis of the region, the
market, the neighbourhood, and the property and also presents a study of the economics of alternatives, a
financial analysis, and a management plan.

The licensee responsible for a brokerage, and who is responsible for exercising the rights conferred on the
brokerage as well as for the performance of the duties imposed on the brokerage by its licence. In
addition, the managing broker is responsible for the control and conduct of the brokerage's real estate
business, including the supervision of its related licensees. Sometimes also meaning the human
representative of a corporate real estate brokerage. See the Real Estate Services Act, sections 5 and 6.

See Comparative Method.

The prevailing interest rate, at any given point in time, at which financing or refinancing can be expected.

In appraisal, the expected or forecasted sales price.

The amount of cash which would have to be received today that equals the downpayment plus the present
value of the mortgage loan discounted at the market rate.

A generally accepted accounting principle which states that expenses should be recognized in the same
period as the revenues with which they are associated.

The date on which the balance owing on a mortgage becomes due; the final day of the term of a mortgage.

A system of land description whereby all boundary lines are set forth by use of terminal points, directors,
and angles - mete referring to a limit or limiting mark, the bounds referring to boundary lines.

A false assertion of fact which, if accepted, leads one to an incorrect belief about a given situation.

A legal term which describes the situation where a person, under some erroneous conviction of law or fact,
does, or omits to do, some act which but for the erroneous conviction, he would not have done or omitted
doing.

The legal doctrine of "mitigation" imposes upon an injured party a duty to exercise reasonable diligence
and ordinary care in attempting to minimize his damages after injury has been inflicted.
A document evidencing a debt owed by the borrower (mortgagor) to the lender (mortgagee). Registration
of the mortgage in the Land Title Office transfers the mortgagor's interest in land to the mortgagee as
security for the repayment of the debt.

The lender.

The borrower.

Generally, a necessary is an article indispensable or proper and useful, for the sustenance of human life
(i.e., food, drink, clothing, medical attention).

A legal term for the failure to use such care as a reasonably prudent and careful person would use under
similar circumstances; it is the doing of some act which a person of ordinary prudence would not have
done under similar circumstances or failure to do what a person of ordinary prudence would have done
under similar circumstances.

A legal principle which provides that if, in the ordinary course of business, a person seeks information or
advice from another who possesses special skills in circumstances in which a reasonable man would know
that his special skills were being relied upon, and the person asked chooses to give the advice without
clearly qualifying his answer so as to show that he does not accept responsibility if it is incorrect then he
accepts a legal duty to exercise such care as the circumstances require. If he is incorrect he may be liable
for his negligent misrepresentation.

The amount by which revenues exceed expenses in any given time period. Contrast to Net Loss.

A Lease in which the tenant pays some or all of the operating expenses. See also Triple Net Lease. Contrast
to Gross Lease.

The amount by which expenses exceed revenues in any given time period. Contrast to Net Income.

Gross Potential Revenue less Vacancy Allowance, Bad Debt Allowance, and total Operating Expenses. This
amount is calculated excluding Income Tax, Mortgage Payments, and Depreciation Expense or Capital Cost
Allowance.
 The face value of a loan less all brokerage fees, legal fees, appraisal costs and other charges.

An interest rate quoted as a rate per annum; it is equal to the interest rate per compounding period
multiplied by the number of compounding periods. (For example, j2 = 10%; j4 = 12%; j12 = 11.5%).

Under the now-repealed Real Estate Act, the nominee was the equivalent of the managing broker.

Those assets that will not be sold within one year or the normal operation cycle of a business. Noncurrent
Assets may include property, plant, and equipment. Compare to Current Assets.

Those liabilities which are not expected to be paid within one year.

A novation refers to a creditor's acceptance of a 3rd party in place of the debtor so that the 3rd party
becomes the debtor and the original debtor is released by the creditor from having to pay off the debt.

ity principle

A generally accepted accounting principle which states that all recorded financial information is based
upon objective and verifiable data.

offer

A proposal to do or refrain from doing some specified thing usually followed by an expected acceptance,
counter-offer, return promise or act. The person who makes the offer is called the offeror. The recipient of
the offer is called the offeree.

offering memorandum

A condensed version of a prospectus.

open listing

A listing given to any number of licensees without liability to compensate any except the licensee who first
acquires a buyer ready, willing and able to meet the terms of the listing; the sale of the property
automatically terminates the listing.

operating expenses

Those costs which have to be incurred to keep any business going, including the business of renting real
property. See also Fixed Expenses and Variable Expenses.

option to purchase

A right conferred by a contract to accept or reject an offer to buy property within a certain time.
 outstanding balance

The amount owing to the lender at any specified time, whether it is to be repaid over an amortization
period or in a lump sum at the end of the term.

owners' equity

A classification on the balance sheet. Equal to Total Assets less Total Liabilities.

partial amortization

A loan repayment scheme in which the term is shorter than the amortization period. Whereas the loan
payments will be calculated as if the loan will be paid back over the full amortization period, at the end of
a specified term the outstanding balance is due and payable.

partnership

See General Partnership and Limited Partnership.

patent defect

A defect which is plainly visible or which can be discovered during the course of a reasonable inspection.

payment

A periodic instalment that is made to service a debt. For an interest-only loan, the payment consists of
interest; for a constant payment loan, the payment consists of interest and principal.

percentage lease

A lease agreement which specifies that the tenant will pay the Landlord:

periodic rate

The interest rate which is charged per compounding period (for example, per month or per day).

periodic tenancy

A tenancy which automatically renews itself on the last day of the term for a further term of the same
duration until terminated by either party.

physical depreciation

The loss in value due to wear and tear (e.g., peeling paint) which may be curable or incurable. See Curable
Depreciation and Incurable Depreciation. Compare to Functional Depreciation.

pooling agreement

An agreement between investors who have a direct ownership in real property to share revenues and
expenses generated by individual rental units.

portable
mortgage
A borrower can transfer the terms, conditions and interest rate of his or her current mortgage to the home
the borrower would like to purchase.

pos
sess
ion
date

Date on which the purchaser is entitled to possession of the property.

p
o
w
e
r

o
f

a
t
t
o
r
n
e
y

A document conferring authority to one person to act as another's agent on his or her behalf.

p
o
w
e
r

o
f

s
a
l
e

A clause inserted into a mortgage giving the mortgagee the right and power, on default in the payment of
the debt secured, to advertise and sell the mortgaged property at public auction to satisfy the mortgage
debt, without the necessity of foreclosure proceedings.
The act of fully or partially paying off the outstanding balance of a loan at any point during the term of the
loan at a time earlier than set out in the contract.

The current equivalent of a future dollar amount.

That portion of the original amount borrowed which still has to be paid back to the lender.

The law that deals with disputes between two or more individuals.
A legal term for wrongfully allowing the escape of injurious things onto another person's land or the
wrongful disturbance of an easement or other interest granted over land.

A financial statement which shows expected future revenues and expenses.

The part of law which sets out the methods of determining and enforcing rights as between parties.
A right to take the produce or part of the soil from the lands of another. For example: minerals, oil, stones,
gravel, etc.

See Income Statement.

A guarantee to the registered owner or mortgagee of an interest in land that after a specified hazard (for
example, a fire) the value of the interest in land can be restored.

A business enterprise that is owned by a single owner who assumed unlimited liability. The proprietorship
is not a taxable entity; the profits or losses of the business are reported on the owner's personal income
tax return.

The law that regulates disputes between individuals and the public as a whole (i.e., the state). The term
"public" may be: (i) general (applying to all persons within the jurisdiction); (ii) local (applying to a
geographical area); (iii) special (relating to an organization or authority charged with a public interest).
A legal term for some unlawful act or omission which endangers the safety or comfort of the public or
some section of the public.

A closing statement in a real property transaction which indicates the balance of cash required from the
purchaser to complete the transaction. See also: Closing Statement.
Literally, "as much as he deserves". A doctrine that no one who benefits by the labour and materials of
another should be unjustly enriched thereby; under those circumstances, the law implies a promise to pay
a reasonable amount for the labour and materials furnished, even though a specific contract price may not
have been agreed to.

A matrix which is used to make adjustments to comparable properties in order to derive the value of the
subject property when using the market comparison method of appraisal.

A ratio expresses one value in terms of another value; e.g., one out of every four houses is painted white.
It can be stated as a fraction, one-quarter (1/4) of the houses are white; as a percentage, twenty-five
percent (25%) of the houses are white; or as a ratio, one out of four (1:4) houses is white.
Any security whose principal or major assets consist of real property and/or buildings attached to land.

Any form of organization in which two or more investors share in the ownership of an interest in real
estate.

In appraisal, that time period just prior to the date of valuation over which demand and supply conditions
have remained relatively stable.
As a noun, the term refers to the books in which certificates of indefeasible title are entered or kept and,
as a verb, the term refers to registering documentation pursuant to the provisions of the Land Title Act.

The act of investing the funds generated by one investment into another investment.

The expense that has to be incurred to build a modern equivalent of the subject property. Contrast to
Reproduction Cost.
The amount of funds set aside for periodic replacement of building components that wear out more
rapidly than the building itself and must be replaced during the buildinga s economic life (also referred to
as replacement allowance).

A licensee providing real estate services under the supervision of a managing broker.

The expense that has to be incurred to build an exact replica of the subject property. Contrast to
Replacement Cost.
In the law of contracts, a rescission amounts to the unmaking, or an undoing of it from the beginning, as
opposed to a termination.

This appraisal method is used for properties with redevelopment potential. To employ this method,
another appraisal method is used to derive the property's value assuming it were employed in its highest
and best use. Then, depending on whether the residual value of the land or the building is to be found, the
cost of the building or the market value of the land is subtracted.

A covenant restricting the use of the land of the covenantor (the Servient Tenement) for the benefit of land
belonging to the covenantee (the Dominant Tenement). An example would be a restriction on the height of
a building on one piece of land so that adjacent or adjoining lands are not put in shadow.
The net income of current and prior periods less dividends paid, belonging to the shareholders of a
corporation.

See Yield.

A generally accepted accounting principle which states that revenue is the value received from the sale of
goods and services, interest, rent, and the gain or loss on the sale of assets. According to this principle,
revenue is recognized on an accrual basis.
An innovative loan arrangement in which the lender makes periodic payments to the borrower during the
loan term. At the end of the term, the borrower will have to repay the balance owing by refinancing or
selling the property.

The term for the cancellation of an offer communicated by the offeror to the offeree prior to acceptance.

A right conferred by an Agreement for Sale of land.

See Capital Risk.

Situation in which the vendor will lease the subject property from the purchaser.

Value in exchange; the price obtained in an actual transaction.

The term used in the now repealed Real Estate Act, to refer to the licencee level equivalent of a
representative.

The process of consuming less than what can be afforded in order to increase consumption in the future.

Land bearing the burden of an easement or other right (i.e., restrictive covenant).
Individual who has purchased the rights and obligations associated with (part of) the equity of a
corporation.

In appraisal, two properties are similar if the actual differences between the properties will not have a
material effect on their selling price.

Interest which is charged only once on the sum originally borrowed, and paid at the end of the term along
with the full amount of the principal. Contrast to Compound Interest.

Large outlays beyond the basic costs of land acquisition and construction of buildings.

The court, rather than granting damages in lieu of performance, orders that the terms of the contract be
carried out by the party in default.

Generally, a stakeholder is a third party chosen by two or more persons to keep money on deposit, the
right to the money which may be contested between them.

Literally, "let the former decision stand" - to abide by prior decisions and not to disturb the doctrine of the
courts that, when the court has once laid down a principle of law applicable to a certain state of facts, it
will adhere to that principle, and apply it to all future cases, where the facts are substantially the same;
regardless of whether the parties and property are the same.

A closing statement in a real property transaction whose format is structured by Debits and Credits. See
also Closing Statements.

A written statement of facts signed by the maker and sworn to be true, usually before a lawyer or notary. A
statutory declaration is similar to an affidavit.

One possible method used to calculate depreciation expense for accounting purposes. The expected
salvage value is subtracted from the purchase price of the depreciable item and the result is divided by the
expected economic life to find the periodic depreciation expense.

A mortgage which is paid off with periodic payments which always include the same amount of principal
and an amount of interest based on the balance still owing.
A defined term in the Mortgage Brokers Act. Basically, an individual employed by a mortgage broker who
satisfies any one of the following requirements:

 carries on a business of lending money secured in whole or in part by mortgages, whether the
money is his own or that of another person;
 holds himself out as, or by an advertisement, notice or sign indicates that he is, a mortgage
broker;
 carries on a business of buying and selling mortgages or agreements for sale;
 in any one year, receives an amount of $1,000 or more in fees or other consideration, excluding
legal fees for arranging mortgages for other persons; or
 during any one year, lends money on the security of 10 or more mortgages.
 carries on a business of collecting money secured by mortgages.

This is a defined term in various statutes. Basically, a subdivision is the division of land into two or more
parcels.

The property to be appraised.

The part of law which creates, defines, and regulates legal rights and obligations.

The term for the right to have one's ground supported so that it will not cave in when an adjoining owner
makes an excavation. Support is of two kinds, lateral and vertical.

A membership program that provides access to exclusive discounted products and services including the
best mortgage rate available. Go to www.suttonmember.com to find out more.

The promoter who sets up a syndicate investment package.

The number of dollars per $1,000 worth of actual value which is payable in property taxes.

The process of creating a taxable loss on an investment property, and applying such a loss to offset
taxable income generated by another source.

Income (loss) reported for tax purposes. It is not to be confused with net income (loss). Net income (loss)
is arrived at by the deduction of Depreciation Expense, whereas taxable income (loss) is calculated after
the deduction of Capital Cost Allowance.
Actual value as determined by the Assessor. This value, in thousands of dollars, when multiplied by the
Tax Rate equals the amount of real property taxes payable.

Contract between the landlord and the tenant, pertaining to the letting of residential premises.

A tenancy where the tenant, with the consent of the landlord, occupies land as a tenant for a term which
can be terminated by either party at any time.

Where two or more persons acquire interests in a single property. Each may sell or bequeath their interest
and in the event of death, their interest becomes a part of their estate.

With respect to mortgages, a time period at the end of which the outstanding balance of a mortgage is due
and payable; it represents the duration of the mortgage contract.

The value upon destruction of an asset.

A clause contained in a contract for purchase or resale of land which allows a party to invoke a time period
in which a condition precedent must be removed. A failure to remove the condition precedent within the
time period would result in the termination of the contract.

A plan providing for the recurring use, occupation, or possession of real property to circulate on a periodic
basis among persons in the plan.

A system for registration of the actual title to land in order to provide security to those holding interests in
land and to remove the need for retrospective investigation of titles to land.

A private wrong or injury, other than breach of contract, for which the court will provide a remedy in the
form of an action for damages.

The percentage of gross income which is the maximum amount that a mortgagor is allowed to pay
annually in principal, interest and property taxes on all debts. Compare to Loan-to-Value Ratio. See also
Ratio and Gross Debt Service Ratio.
A form required and approved by the Real Estate Council, which contains certain required information in
respect to trades in real estate in relation to which a brokerage provides trading services.

A legal term for wrongfully entering, remaining on, or placing something on another's land.

A lease in which the tenant pays all operating expenses. See Net Lease.

An account where money is deposited by one for the benefit of another. The money is devoted to a
particular purpose and cannot or should not be diverted for other purposes.

Syndicate organization in which the investors hold real estate indirectly as beneficiaries under a trust
agreement. Such a trust may be referred to as a Real Estate Investment Trust (REIT).

Individual or business entity in whose name a trust is held.

An account which includes the purchase price of all assets belonging to the same class less all CCA
accrued over time for that class.

A promise given in the course of legal proceedings by a party or his lawyer, generally as a condition to
obtaining some concession from the opposite party.

Any improper or wrongful constraint, manipulation, or persuasion whereby the will of a person is
overpowered and he is induced to do or refrains from doing an act which he would not do or would do if
left to act freely.

The obligation of an owner to pay his creditors from his personal assets if his company cannot pay its
debts. Contrast to Limited Liability.

In law, referring to regulating the charging of interest rates. Historically, charging interest on money lent
or the taking of any compensation whatever for the use of money offended the usury laws which
disallowed this practice.
 An estimate of the amount of rent that may be foregone because of unoccupied units.

See Appraisal.

See Sale Price.

Those costs which vary according to the extent to which a property is occupied (e.g., janitorial services in
an office building).

ate mortgage

A loan being repaid by payments which change as the market interest rate changes.

ndor take-back mortgage

A mortgage taken back by the vendor from the purchaser to facilitate a sale, whereby the vendor becomes
the mortgagee and the purchaser becomes the mortgagor.

vendor's statement of adjustment

Closing Statement which shows the net amount of proceeds to be received by the vendor upon completion
of the transaction. See also Statement of Adjustment.

vertical support

The right of land to be supported by the land which lies under it.

void contract

A contract which never had any legal existence or effect and which is not capable of being enforced.

voidable contract

One which exists until repudiated by a party entitled to do so at which time it becomes void.

warranty of authority

An agent's promise or guarantee to third parties that his or her actions fall within the scope of authority
given by the principal. An agent acting outside of the scope of authority breaches the warranty of
authority.

waste

An abusive or destructive use of property by a person in rightful possession is one form of waste. There
are other forms of waste described in the text.

wrap-around mortgage
 A second mortgage, registered on title, which includes a prior existing mortgage. It
may be written for an amount equal to the outstanding balance of the first mortgage or
may also add additional funds for a larger loan balance than currently exists. Payments
under the new mortgage include the payments under the original mortgage and the
new mortgagee undertakes the responsibilities as mortgagor under the original
mortgage.

yield

The income and/or value appreciation of an investment expressed in terms of the purchase price of that
investment. For example, if a property that has sold for $100,000 is worth $2,000 more one year later and
has generated an income of $5,000 during the year, the yield to the investor is ($2,000 + $5,000) ÷
$100,000 = .07 or 7%. See Return.

abstract of title
A condensed version of the history of title to a piece of land that lists any transfers in ownership, as well as any
liabilities attached to it, such as mortgages.
abutting
The joining, reaching, or touching of adjoining land. Abutting pieces of land have a common boundary.
acceleration clause
A provision in a written mortgage, note, bond or conditional sales contract that, in the event of default, the whole
amount of principal and interest may be declared to be due and payable at once.

acceptance
An offeree’s consent to enter into a contract and be bound by the terms of the offer.
accretion
An addition to land through natural causes.
acknowledgment
A declaration made by a person to a notary public, or other public official authorized to take acknowledgments, that
the instrument was executed by him and that it was his free and voluntary act.
acre
A measure of land equal to 43,560 square feet.

ad valorem
Designates an assessment of taxes against property. Literally, according to value.

additional principal payment

A payment by a borrower of more than the scheduled principal amount due in order to reduce the remaining balance
on the loan.
adjustable rate mortgage (ARM)
A mortgage loan whose interest rate fluctuates according to the movements of an assigned index or a designated
market indicator--such as the weekly average of one-year U.S. Treasury Bills--over the life of the loan. To avoid
constant and drastic fluctuations, ARMs typically limit how often and by how much the interest rate can vary.

adjusted basis
The original cost of a property plus the value of any capital expenditures for improvements to the property minus any
depreciation taken.

adjustment date
The date on which the interest rate changes for an adjustable-rate mortgage (ARM).

adjustment period
The period that elapses between the adjustment dates for an adjustable-rate mortgage (ARM).

adjustments
Money that the buyer and sellers credit each other at the time of closing. Often includes taxes and down payment.
administrator/administratrix
A man/woman appointed by a court to settle the estate of a deceased person when there is no will. Contrast with
executor/executrix.
adverse possession
The right of an occupant of land to acquire title against the real owner, where possession has been actual,
continuous, hostile, visible, and distinct for the statutory period. The requirements for adversely possessing property
vary between states, but usually include continuous and open use for a period of five or more years and paying taxes
on the property in question.
affidavit
Written statement signed and sworn to before some person authorized to take an oath.
agency
The legal relationship between a principal and an agent. In real estate transactions, usually the seller is the principal,
and the broker is the agent: however, a buyer represented by a broker (i.e., buyer as principal is a growing trend. In
an agency relationship, the principal delegates to the agent the right to act on his or her behalf in business
transactions and to exercise some discretion while so acting. The agent has a fiduciary relationship with the principal
and owes to that principal the duties of accounting, care, loyalty, and obedience. Also see buyer's broker.
agent
A person authorized to act for and under the direction of another person when dealing with third parties. The person
who appoints an agent is called the principal. An agent can enter into binding agreements on the principal's behalf
and may even create liability for the principal if the agent causes harm while carrying out his or her duties. See also
attorney-in-fact.
alienation Clause
A clause in a mortgage, which gives the lender the right to call the entire loan balance due if the property is sold; due-
on-sale clause.
amenities
Non monetary benefits and satisfactions derived from property ownership, such as a pleasant view, pride in home
ownership, etc.

ammendment
A modification to an existing contract, mutually agreed to by all parties. Examples might include a change in the
pruchase price due to a low appraisal, or a change in the closing date.
amortization
The operation of paying off indebtedness, such as a mortgage, by installments. The conventional amortization periods
are15 or 30 years. (See term)
amortized mortgage
A mortgage requiring periodic payments that include both interest and principal. Also see self amortized loan.
annual membership
The amount that is charged annually for having a line of credit available. Often charged regardless of whether or not
you use the line.
antitrust laws
Federal and state laws prohibiting, among other things, monopolies, monopolistic practices, restraint of trade, and
price fixing.
application
An initial statement of personal and financial information, which is required to approve your loan.
application fee
Fees that are paid upon application. Charges for property appraisal and a credit report are usually included in the
application fee.
appraisal
A determination of the value of something, such as a house, jewelry or stock. A professional appraiser--a qualified,
disinterested expert--makes an estimate by examining the property, and looking at the initial purchase price and
comparing it with recent sales of similar property. Courts commonly order appraisals in probate, condemnation,
bankruptcy or foreclosure proceedings in order to determine the fair market value of property. Banks and real estate
companies use appraisals to ascertain the worth of real estate for lending purposes. And insurance companies
require appraisals to determine the amount of damage done to covered property before settling insurance claims.
appraised value
An estimate of the present worth.
appreciation
An increase in value or worth of property. Opposite of depreciation.
asking (list) price
The price placed on property for sale.
assessor
A local government official who determines the value of the property for taxation purposes.
assignee
A person to whom a property right is transferred. For example, an assignee may take over a lease from a tenant who
wants to permanently move out before the lease expires. The assignee takes control of the property and assumes all
the legal rights and responsibilities of the tenant, including payment of rent. However, the original tenant remains
legally responsible if the assignee fails to pay the rent.

assignment
A transfer of property rights from one person to another, called the assignee.
assumable mortgage
An existing mortgage that can be taken over by the buyer on the same terms given to the original borrower.
assumption of mortgage
The transfer of title to property to a grantee wherein he assumes liability for payment of an existing note secured by a
mortgage against the property; should the mortgage be foreclosed and the property sold for a lesser amount than that
due, the grantee-purchaser who has assumed and agreed to pay the debt secured by the mortgage is personally
liable for the deficiency. Before a seller may be relieved of liability under the existing mortgage, the lender must
accept the transfer of liability for payment of the note. Also known as simple assumption. Contrast withsubject to
mortgage.
attachment
Method by which a debtor's property is placed in the custody of the law and held as security pending outcome of a
creditor's suit.
attorney's opinion of title
An instrument written and signed by the attorney who examines the abstracts of title, stating his opinion as to whether
a seller may convey good title.

attractive nuisance
Something on a piece of property that attracts children but also endangers their safety. For example, unfenced
swimming pools, open pits, farm equipment and abandoned refrigerators have all qualified as attractive nuisances.
auction
A public sale of property to the highest bidder.

balloon mortgage
 A mortgage where the final payment is considerably larger than the preceding payments. Contrast with amortized
mortgage.
balloon payment
A large final payment due at the end of a loan, typically a home or car loan, to pay off the amount your monthly
payments didn't cover. Many states prohibit balloon payments in loans for goods or services that are primarily for
personal, family or household use, or require the lender to let you refinance the balloon payment before forcing
collection.
bill of sale
A written instrument given to pass title to personal property.
blanket mortgage
One mortgage on a number of parcels of real property.
blockbusting
The illegal practice of inducing panic selling in a neighborhood by making representations of the entry, or prospective
entry, of members of a minority group; panic peddling. See Fair Housing.

bond
(1) A written agreement purchased from a bonding company that guarantees a person will properly carry out a
specific act, such as managing funds, showing up in court, providing good title to a piece of real estate or completing
a construction project. If the person who purchased the bond fails at his or her task, the bonding company will pay the
aggrieved party an amount up to the value of the bond.

(2) An interest-bearing document issued by a government or company as evidence of a debt. A bond provides pre-
determined payments at a set date to the bond holder. Bonds may be "registered" bonds, which provide payment to
the bond holder whose name is recorded with the issuer and appears on the bond certificate, or "bearer" bonds, which
provide payments to whomever holds the bond in-hand. Mortgage interest rates are closely related to long term bond
interest rates.

bonus to selling agent (BTSA)

Compensation, above and beyond the sales commission, offered to the real estate agent who brings the buyer to the
transaction. A BTSA is used to provide an extra incentive for real estate agents to show a particular listing. Often the
bonus is tied to closing within a certain time period or the property selling for a certain price. A buyer's agent should
not consider the BTSA a factor in any negotiations between buyer and seller. Realistically, most BTSA's tend to
disappear during initial negotiations, eventhough they should never be considered as negotiable after they have been
offered. Any bonus to selling agent should be contained in a written agreement between the seller and listing broker.
The BTSA is technically offered by the listing broker, not the seller, and thus should not be a subject of negotiation.
breach of contract
Failure, without legal excuse, of one of the parties to a contract to perform according to the contract.
brokerage
For a commission or fee, bringing together parties interested in buying, selling, exchanging, or leasing real property.

BTSA
Acronym - bonus to selling agent.
building line
A line fixed at a certain distance from the front and/or sides of a lot beyond which no structure can project. See set
back.
bundle of rights
Ownership in real property implies a group of rights, such as the right of occupancy, use and enjoyment, the right to
sell in whole or in part, the right to control the use, the right to bequeath, the right to lease any or all of the rights, the
right to the benefits derived by occupancy and use of the property, etc.
buy down
A cash payment, usually measured in points, to a lender in order to reduce the interest rate a borrower must pay.
buyer's broker
A licensee who has declared to represent only the buyer in a transaction, regardless of whether compensation is paid
by the buyer or the listing broker through a commission split. Some brokers conduct their business by representing
buyers only.

calendar Year
A year using the actual number of days in each month for a total of 365 days in a year (366 days in a leap year).
cap
The maximum allowable increase, for either payment or interest rate, for a specified amount of time on an adjustable
rate mortgage.

capital gains
The profit on the sale of a capital asset, such as stock or real estate. If you sell your primary residence, you can
exclude $250,000 in profit from capital gains tax. A couple can exclude $500,000.
capitalization
The estimation of the value of income producing property by dividing the annual net income by the capitalization
rate.
capitalization rate
The rate of expected return on investment property. A ratio of income to value.
cash Out
Receiving money back when refinancing your present mortgage. Not available on homestead property in Texas (See
homestead).

CC&R
See covenants, conditions & restrictions.

CCCS
 See Consumer Credit Counseling Service.
ceiling
The maximum allowable interest rate over the life of the loan of an adjustable rate mortgage.
census
An official count of the number of people living in a certain area, such as a district, city, county, state, or nation. The
United States Constitution requires the federal government to perform a national census every ten years. The census
includes information about the respondents' sex, age, family, and social and economic status.

Certificate of Eligibility
The document given to qualified veterans which entitles them to VA guaranteed loans for homes, business, and
mobile homes. Certificates of eligibility may be obtained by sending DD-214 (Separation Paper) to the local VA office
with VA form 1880 (request for Certificate of Eligibility).
chain of title
A history of conveyances and encumbrances of a property from some starting point, whereby the present owner
derives title.
channeling
The illegal practice of directing people to, or away from, certain areas or neighborhoods because of minority status;
Steering. See Fair Housing.
chattel
See personal property.

cleaning fee
A nonrefundable fee charged by a landlord when a tenant moves in. The fee covers the cost of cleaning the rented
premises after you move out, even if you leave the place spotless. Cleaning fees are illegal in some states and
specifically allowed in others, but most state laws are silent on the issue. Landlords in every state are allowed to use
the security deposit to clean a unit that is truly dirty.
clear title
A land title that doesn't have any liens (including a mortgage) against it.
closing
The conclusion of the sales transaction when the seller transfers title to the buyer in exchange for consideration. In
Texas, these proceedings are usually held at a title company.
closing costs
Costs the buyer must pay at the time of the closing in addition to the down payment which may include points, title
charges, credit report fee, document preparation fee, mortgage insurance premium, inspections, appraisals,
prepayments for property taxes, deed recording fee, and homeowners insurance. Closing costs can vary considerably
from one financial institution to another.
closing statement
A detailed written summary of the financial settlement of a real estate transaction, showing all charges and credits
made, and all cash received and paid out.
cloud on title
A claim or encumbrance that may effect title to land.
co-op
See cooperative housing or cooperative sale.
co-tenants
Two or more tenants who rent the same property under the same lease or rental agreement. Each co-tenant is 100%
responsible for carrying out the rental agreement, which includes paying the entire rent if the other tenant skips town
and paying for damage caused by the other tenant.
collateral
Something of value deposited with a lender as a pledge to secure repayment of a loan.
commingling
The illegal practice of combining or mixing clients' funds with the agent's own funds.
commission
The compensation paid to a licensed real estate broker or by the broker to the salesman for services rendered.
Usually a percentage of the selling price of the property.
Community Reinvestment Act
The federal law which requires federally regulated lenders to describe the geographical market area they serve.
Deposits from that area are to be reinvested in that area whenever practical.
comparables
Properties which are similar to a particular property and are used to compare and establish a value for that property.
compound interest
Interest which is computed on the principal and any unpaid accumulated interest. Contrast with simple interest.
condemnation
The act of taking private property for public use, through due process under the right of eminent domain, with
compensation to the owner.
condominium
A form of real estate, usually a dwelling with individual ownership of separate portions of the building plus shared
ownership of the common areas.
consideration
The price or subject matter, which induces a contract; may be in money, commodity, exchange, or a transfer of
personal effort.
constructive eviction
The provision of housing that is so substandard that, for all intents and purposes, a landlord has evicted the tenant.
For example, the landlord may refuse to provide light, heat, water or other essential services, destroy part of the
premises or refuse to clean up an environmental health hazard, such as lead paint dust. Because the premises are
unlivable, the tenant has the right to move out and stop paying rent without incurring legal liability for breaking the
lease. Usually, the tenant must first bring the problem to the landlord's attention and allow a reasonable amount of
time for the landlord to make repairs.
Consumer Credit Counseling Service (CCCS)
A national non-profit agency that, at no cost, helps debtors plan budgets and repay their debts. One major criticism of
CCCS is that each office is primarily funded by voluntary donations from the creditors that receive payments from
debtors repaying their debts through that office. The goal of CCCS is to insure that consumers repay the debts that
they owe. CCCS may arrange easy payment plans that increase the chances for repayment, but harm a consumer's
credit in the process. Agreeing to a payment plan and following it to the letter may not stop creditors from reporting
delinquent repayment information to credit bureaus for each month the payment falls short of the previous minimum
amount.

contingency
A provision in a contract stating that some or all of the terms of the contract will be altered or voided by the occurrence
of a specific event. A common example is a Buyer who enters into the purchase of another home before his current
home is sold. The Buyer will usually ask for the Seller to make the sale contingent upon the sale of the Buyer's
current home. If the Seller receives another offer for the property, the first Buyer must either agree to buy the home
without any contingency, or step aside and let someone else purchase the home.
contract
A legally enforceable agreement to do, or not to do, a particular thing for a consideration.
contract for deed
A contract for the sale of real estate where the deed (title) of the property is transferred only after all the payments
have been made. Also known as a land contract, agreement of sale, conditional sales contract, or installment
contract. Buyers should be wary of this type of contract, since they can lose their entire investment if the owner
declares brankruptcy, before the deed has been transferred.
contract for exchange of real estate
A contract for the sale of real estate in which the consideration is paid wholly or partly in real property instead of cash.
contract of sale
The agreement between the buyer and seller on the purchase price, terms, and conditions necessary to both parties
to convey the title to the buyer.
conventional loan
A real estate loan, which is not insured by the FHA or guaranteed by the VA.
conveyance
Written instrument, such as a deed or lease, that evidences transfer of some ownership interest in real property from
one person to another.

cooperative housing
(1) A form of real estate, usually a dwelling in which residents own shares, but do not directly own the space they
inhabit. Rather, owning a share of the building entitles the shareholder with the right to inhabit a certain space within
the dwelling, such as an apartment. Shares are usually proportional to the amount of space in each apartment.
(2) A living arrangement in which residents must perform certain duties or chores to benefit the entire residence, in
addition to paying room and board. A common form of dormitory living.

cooperative sale
A sale of property in which the buyer is brought to the transaction by a real estate agent who works for a different real
estate broker than the listing agent. Both brokers/companies have agreed to cooperate in closing the property, and
typically, splitting the commission. Offers of cooperation and compensation are commonly found in the MLS property
listings.
cost approach to value
An estimate of value based on current construction costs, less depreciation, plus land value. Contrast with the
income approach to value and the market data approach to value.
counter offer
The rejection of an offer to buy or sell that simultaneously makes a different offer, changing the terms in some way.
For example, if a Buyer offers $160,000 for a home, and the Seller replies that he wants $175,000, the Seller has
rejected the Buyer's offer of $160,000 and made a counteroffer to sell at $175,000. The legal significance of a
counteroffer is that it completely voids the original offer, so that if the Seller decided to sell for $160,000 the next day,
the Buyer would be under no legal obligation to pay that amount for the property.

covenant
A restriction on the use of real estate that governs its use, such as a requirement that the property will be used only
for residential purposes. Covenants are found in deeds or in documents that bind everyone who owns land in a
particular development. See Covenants, Conditions & Restrictions.

covenants, conditions & restrictions (CC&Rs)

The restrictions governing the use of real estate, usually enforced by a homeowners' association and passed on to
the new owners of property. For example, CC&Rs may tell you how big your house can be, how you must landscape
your yard or whether you can have pets. If property is subject to CC&Rs, buyers must be notified before the sale
takes place.

credit bureau
A private, profit-making company that collects and sells information about a person's credit history. Typical clients
include banks, mortgage lenders and credit card companies that use the information to screen applicants for loans
and credit cards. There are three major credit bureaus, Equifax, Experian and Trans Union, and they are regulated
by the federal Fair Credit Reporting Act.

credit file
See credit report.

credit insurance
Insurance a lender offers or requires a borrower to purchase to cover the loan. If the borrower dies or becomes
disabled before paying off the loan, the policy will pay off the remaining balance. Federal and state consumer
 protection laws require the lender to disclose to existing and potential borrowers the terms and costs of obtaining
credit insurance because it can affect the terms of the loan.
credit limit
The maximum amount that you can borrow under a home equity plan.

credit report
An account of your credit history, prepared by a credit bureau. A credit report will contain both credit history, such as
what you owe to whom and whether you make the payments on time, as well as personal history, such as your former
addresses, employment record and lawsuits in which you have been involved. An estimated 50% of all credit reports
contain errors, such as accounts that don't belong to you, an incorrect account status or information reported that is
older than seven years (ten years in the case of a bankruptcy).

credit score
In the mortgage lending world, credit scores either make or break you when it comes to obtaining a home mortgage or
getting the best rate you can. There are three different scores available to a mortgage lender each being generated
by the three different credit agencies. The most popular, known as a Fico score is from Experian (formally TRW), then
there is a Beacon score from Equifax, and finally a Emperica score from Trans Union. This is the "mortgage scoring"
system used to get a conventional mortgage.

Simply, credit scores are numbers calculated based upon your credit history. The better your credit, the higher your
number or score will be - the worse your credit, the lower the score. The number of inquiries or times your credit has
been pulled in the past 90 days will also lower your "score". In some instances, lack of credit results in "no score" on
your report requiring you to provide "alternative credit" via your rental, utility or telephone payment histories. There's
plenty you can do to improve your score if you know how the system works. Just don't expect much help from your
lender--most consider the actual formulas a trade secret and don't want people angling for an advantage. Congress
is currently working on legislation to provide consumers with access to their credit scores and the formulas used to
calculate these scores.

There are some lenders that do not rely on credit scores to the degree that most do. Some times, credit reports
contain inaccuracies that lower your score, this is when a lender has to use a common sense approach to approving
your loan. In some instances you may have to correct your credit report, wait for your score to improve, then reapply
for the loan. Talk with your mortgage broker or lender to understand what your options are.

creditor
A person or entity (such as a bank) to whom a debt is owed.
cul-de-sac
A dead end street which widens sufficiently at the end to permit an automobile to make a "U" turn.

DBA
Doing Business As. Business names or aliases filed with the county.
debenture
Bonds issued without security.
debt service
The total amount of credit card, auto, mortgage or other debt upon which you must pay.
debt-service ratio
The measurement of debt payments to gross household income which may include, in addition to the main wage
earner's salary, salaries of other wage earners, commissions, bonuses, overtime, etc.
Deceptive Trade Practices Act
Part of the federal Consumer Protection Act originally passed in 1973 and made specifically applicable to real estate
in 1975, specifically prohibiting a lengthy number of false, misleading and deceptive acts or practices. The Texas
Supreme Court has defined a deceptive trade practice as one "which has the capacity to deceive an average,
ordinary person, even though that person may have been ignorant, unthinking, or credulous." Also see Texas
Deceptive Trade Practices - Consumer Protection Act.
deduction
In tax law, an amount that you can subtract from the total amount on which you owe tax. Examples of federal income
tax deductions include mortgage interest, charitable contributions and certain state taxes. For example, if Aimee
receives an income of $60,000 in 1998 and pays $12,000 in mortgage interest during that same year, she can deduct
$12,000 when she fills out her federal tax return, leaving an amount of $48,000 upon which she must pay tax.

deed
A written instrument by which title to land is conveyed.

deed in lieu (of foreclosure)

A means of escaping an overly burdenome mortgage. If a homeowner can't make the mortgage payments and can't
find a buyer for the house, many lenders will accept ownership of the property in place of the money owed on the
mortgage. Even if the lender won't agree to accept the property, the homeowner can prepare a quitclaim deed that
unilaterally transfers the homeowner's property rights to the lender.
deed of trust
The legal instrument used in Texas in lieu of a mortgage, in which the property is conveyed in trust to a trustee to be
held as security for a loan.

deed restrictions
Common name used in the Houston area to denote covenants, conditions & restrictions (CC&Rs). Deed
restrictions cover allowable land uses and home types and sizes within a neighborhood. They are especially
important within Houston, and unincorporated parts of Harris County, since zoning does not exist in these areas.
default
Non-performance of a duty arising under a contract or otherwise.
defeasanse
A clause in a deed, lease, will or other legal document that completely or partially negates the document if a certain
condition occurs or fails to occur. Defeasance also means the act of rendering something null and void. For example,
a will may provide that a gift of property is defeasable--that is, it will be void--if the beneficiary fails to marry before the
willmaker's death.
delivery
The actual transfer of the deed, or an act of a seller showing intent to make a deed effective, without which, there is
no transfer of title to the property.
depreciation
A loss in value.
descent
Acquisition of property through inheritance laws when there is no will (when a person dies intestate).
devise
A transfer of real estate by will or last testament.
disclosure
The making known of a fact that had previously been hidden; a revelation. For example, in many states you must
disclose major physical defects in a house you are selling, such as a leaky roof or potential flooding problem.
discount points (or points)
The amount paid either to maintain or lower the interest rate charged. Each point is equal to one percent (1%) of the
loan amount (i.e., two points on a $100,000 mortgage would equal $2,000).
discount rate
(1) The rate charged member banks who borrow from the Federal Reserve System.
(2) The rate used to convert future income into present value.
dispossess
To oust from land by legal process.
dominant tenement
Property that carries a right to use a portion of a neighboring property. For example, property that benefits from a
beach access trail across another property is the dominant tenement.
down payment
An amount of money the buyer pays which is the difference between the purchase price and the mortgage amount.
dual agency
Representing the buyer and the seller in the same transaction by the same agent. Since there is an inherent conflict in
fiduciary obligations to two different principals, dual agency, at best, is a risky undertaking. TRELA requires that all
parties to a dual agency have full knowledge and consent (Disclosed Dual Agency). Contrast with intermediary.
due on sale
A clause in a mortgage agreement providing that, if the mortgagor (the borrower) sells, transfers, or, in some
instances, encumbers the property, the mortgagee (the lender) has the right to demand the outstanding balance in
full.
duress
Forcing action or inaction against a person's will.

earnest money
A deposit made by the buyer as evidence of good faith in offering to purchase real estate and to secure performance
of the contract. Earnest money is typically held by a title company, in an escrow account, during the period between
acceptance of the contract and the closing.
earnest money contract (EMC)
A contract for the sale or purchase of real estate in which the purchaser is required to tender earnest money to
evidence good faith in completing the contractual obligations. Almost every sales contract for real estate in Texas will
be an earnest money contract. Also see sales contract and promulgated contracts.
easement
A right to use another person's real estate for a specific purpose. The most common type of easement is the right to
travel over another person's land, known as a right of way. In addition, property owners commonly grant easements
for the placement of utility poles, utility trenches, water lines or sewer lines. The owner of property that is subject to an
easement is said to be "burdened" with the easement, because he or she is not allowed to interfere with its use. For
example, if the deed to John's property permits Sue to travel across John's main road to reach her own home, John
cannot do anything to block the road. On the other hand, Sue cannot do anything that exceeds the scope of her
easement, such as widening the roadway.
easement by prescription
A right to use property, acquired by a long tradition of open and obvious use. For example, if hikers have been using a
trail through your backyard for ten years and you've never complained, they probably have an easement by
prescription through your yard to the trail.
economic obsolescence
Loss of value of real property due to external forces or events; eg., a sewer plant is built next door to the subject
property. Contrast with Functional Obsolescence.
effective interest rate
The cost of credit on a yearly basis expressed as a percentage. Includes up-front costs paid to obtain the loan, and is,
therefore, usually a higher amount than the interest rate stipulated in the mortgage note. Useful in comparing loan
programs with different rates and points.

effluxion of time
The normal expiration of a lease due to the passage of time, rather than due to a specific event that might cause the
lease to end, such as destruction of the building.

egress
An exit, or the act of exiting. The most famous use of this word was by P.T. Barnum, who put up a large sign in his
circus tent saying "This Way to the Egress." Thinking an egress was some type of exotic bird, people eagerly went
though the passage and found themselves outside the circus tent. Compare ingress.
emblements
Annual crops produced by cultivation. They are deemed to be personal property.
eminent domain
The right of government to take private property for public use, through court action known as condemnation. The
Fifth Amendment to the United States Constitution allows the government to take private property if the taking is for a
public use and the owner is "justly compensated" (usually, paid fair market value) for his or her loss. A public use is
virtually anything that is sanctioned by a federal or state legislative body, but such uses may include roads, parks,
reservoirs, schools, hospitals or other public buildings. Sometimes called expropriation.

enclave community
Smaller in scope than master-planned communities, enclave communities typically blend different price ranges of
residential neighborhoods with amenities such as public recreation areas and parks, neighborhood schools and
extensive landscaping. Recreation areas may include public swimming pools, tennis courts, and children's play
grounds. Many offer large water features and gated access.
encroachment
A fixture, or structure, such as a wall or fence, which invades a portion of a property belonging to another. Solutions
range from paying the rightful property owner for the use of the property to the court-ordered removal of the structure.
encumbrance
A cloud against clear, free title to the property which does not prevent conveyance, such as unpaid taxes, easements,
deed restrictions, mortgage loans, etc.
endorsement
Writing one's name, either with or without additional words, on a negotiable instrument, or on a paper attached to it.
Equal Credit Opportunity Act
The 1974 federal law (Title VII of the Consumer Credit Protection Act) which requires fairness and impartiality without
discrimination on the basis of race, color, religion, national origin, sex or marital status, or receipt of income from
public assistance programs in the extension of credit, and good faith exercises of any right under the Consumer Credit
Protection Act (eg. the creditor must state reasons for denial of credit).
Equal Treatment/Different Impact
It is possible to be guilty of discrimination even by treating two individuals the same. If the results of the treatment are
discriminatory, or tend to exclude or otherwise harm members of a minority group, or have discriminatory impact, they
are against the law. For example, an apartment house which rents only to doctors and lawyers, where there are few, if
any, minority doctors or lawyers in the area, may be a violation of the Fair Housing Laws.
equity
The difference in dollars between a house's value and the mortgage amount.
escalator clause
The clause in a contract permitting adjustments of the payments.
escheat
The reversion of property to the state in the event the owner thereof dies without leaving a will (intestate) and has no
heirs to whom the property may pass by lawful descent.
escrow
A trust arrangement by which none or more parties deposit things of value with an authorized escrow agent in
accordance with the terms of a real estate agreement.
escrow account
(1) A third party account that holds money safely while a sale is in progress.
(2) An account used to save monies required for the payment of an eventual debt. Often used by lenders to save for
property taxes, hazard insurance, homeowner's dues, etc.
Escrow accounts are typically non-interest bearing for the contributors, but may pay interest to the entity holding the
account (lenders, title companies, lawyers, etc.).
estimate of value
An appraisal; the appraised value.
et ux
Abbreviation for "et uxor", meaning "and wife".

eviction
Removal of a tenant from rental property by a law enforcement officer. First, the landlord must file and win an eviction
lawsuit, also known as an "unlawful detainer."
exception
As used in the conveyance of real estate, an exception is the exclusion of some part of the property conveyed, with
title of that excepted part remaining with the grantor. For example, in most subdivision developments, mineral rights
are not conveyed to the purchaser of a lot, but remain the property of the developer. Contrast with Reservation.
exclusive agency (EA)
A listing agreement which gives the listing agent the right to sell the property for a specified time. The owner reserves
the right to sell the property himself without paying a commission to the agent. Brokers run the risk of investing their
time, effort, and money in a listing that, even if sold through their marketing efforts, does not produce a commission.
Contrast with Exclusive Right to Sell.
exclusive right to sell (ERS)
A listing agreement which gives the listing agent the right to sell the property for a specified time, with the right to
collect a commission if the property is sold by anyone, including the owner, during the listing period. Contrast with
Exclusive Agency.

exculpatory clause
A provision in a lease that absolves the landlord from responsibility for all damages, injuries or losses occurring on the
property, including those caused by the landlord's actions. Most states have laws that void exculpatory clauses in
rental agreements, which means that a court will not enforce them.

executor/executrix
The man/woman appointed in a will to carry out the requests of the will. Contrast with Administrator/Administratrix.
expropriation
See eminent domain.
Fair Housing Act & Fair Housing Amendments Act
Federal laws that prohibit housing discrimination on the basis of race or color, national origin, religion, sex, familial
status or disability. The federal Acts apply to all aspects of the landlord/tenant relationship, from refusing to rent to
members of certain groups to providing different services during tenancy.
Fair Housing Laws
Federal, state, and local laws, particularly Title VIII of the 1968 Civil Rights Act, Title VI of the Civil Rights Act of 1964,
and the Civil Rights Act of 1866, which forbid discrimination because of race, sex, color, religion, or national origin, in
the selling or renting of homes or apartments, and in other specified transactions. These laws have been recently
been expanded to include familial status (having children) and disabilities (Americans with Disabilities Act).

Fannie Mae
Created by Congress in 1938 to bolster the housing industry during the Depression, Fannie Mae was originally part of
the Federal Housing Administration (FHA) and authorized to buy only FHA-insured loans to replenish lenders'
supply of money. In 1968, Fannie Mae became a private company operating with private capital on a self-sustaining
basis. Its role was expanded to buy mortgages beyond traditional government loan limits, reaching out to a broader
cross-section of Americans.

Today, Fannie Mae operates under a congressional charter that directs it to channel its efforts into increasing the
availability and affordability of homeownership for low-, moderate-, and middle-income Americans. Fannie Mae
receives no government funding or backing, and is one of the nation's largest taxpayers as well as one of the most
consistently profitable corporations in America. Fannie Mae establishes strict guidelines for mortgage loans it is
willing to purchase. As the largest buyer of mortgage loans in the US, these guidelines have become the industry
standard for the majority of home loans. Any loan that meets these Fannie Mae guidelines is called a "conforming
loan".

FDIC
Acronym - The Federal Deposit Insurance Corporation.

Federal Deposit Insurance Corporation (FDIC)

The Federal Deposit Insurance Corporation's mission is to maintain the stability of and public confidence in the
nation's financial system. To achieve this goal, the FDIC has insured deposits and promoted safe and sound banking
practices since 1933. FDIC insurance is offered at almost every US bank and savings and loan. In general, the FDIC
insures individual accounts in each financial institution for a maximum of $100,000.00 per account. An individual or
entity may only be insured for a total of $100,000.00 for all the accounts held in any one institution, or any of its
branches.

Federal Emergency Management Agency (FEMA)

FEMA is the governmental unit that has leadership responsibilities for the Nation's emergency management system.
Once the President has declared a major disaster, FEMA coordinates not only its own response activities but also
those of as many as 28 other Federal agencies that may participate. FEMA also works with States, territories, and
communities during non-disaster periods to help plan for disasters, develop mitigation programs, and anticipate what
will be needed when major disasters occur. Among its many responsibilities the agency operates the Federal
Insurance Administration, which makes flood insurance available to residents of communities that agree to adopt and
enforce sound floodplain management practices.

Federal Home Loan Mortgage Corporation (FHLMC)

See Freddie Mac.

Federal Housing Administration

The Federal Housing Administration (FHA), a wholly owned government corporation, was established under the
National Housing Act of 1934 to improve housing standards and conditions; to provide an adequate home financing
system through insurance of mortgages; and to stabilize the mortgage market. FHA was consolidated into the newly
established Department of Housing and Urban Development (HUD) in 1965. Since 1934, FHA has been extremely
successful in achieving these goals. FHA loans require special a appraisal/inspection that determine if a property
meet the agency's minimum property standards. While somewhat more expensive that a conventional loan in terms
of interest rates and insurance fees, FHA loans offer slightly more liberal qualifying criteria. The current maximum
FHA loan amount in the Houston area, for a single-family home, is $139,650.00
fee simple estate
The most complete form of ownership of real property; absolute ownership. Commonly used to to denote a property
where the owner has undivided title to the land on which the property is situated.
FHA
The Federal Housing Administration which insures mortgage loans made by approved lenders, in accordance with
FHA regulations.

FHLMC
Acronym - Federal Home Loan Mortgage Corporation. See Freddie Mac.
fiduciary
The relationship of trust, honesty and confidence between agent and principal; the faithful relationship owed by an
agent to the principal.

finder's fee
A fee charged by real estate brokers and apartment-finding services in exchange for locating a rental property. These
fees are permitted by law. Some landlords, however, charge finder's fees merely for renting a place. This type of
charge is not legitimate and, in some areas, is specifically declared illegal.
first mortgage
A mortgage which is in first lien position, taking priority over all other liens (which are financial encumbrances).
fixed rate mortgage
A mortgage with an interest rate and monthly payment that doesn't vary for the term of the loan.
fixture
Personal property which has been attached to real estate so as to become part of the real property. The article must
meet at least one of three conditions:
1. Attached in a permanent manner.
2. Specially adapted to the property. or
3. Intentionally made part of the real property.
Flood Control District
A special taxing district created to provide flood control in specific areas of a county.

flood insurance
A special and separate type of homeowner's insurance the provides coverage for damages resulting from flooding.
Flood insurance is required by most lenders only if the property is located within a designated flood plain. The cost of
the policy is related to the associated flooding risk. If a property has a small section of land located within a flood
plain, but away from the residential improvements (house), the lender will still require a policy, but its cost will be
much lower. Likewise, flood insurance policies for properties not located within any floodplain, are fairly inexpensive.

Most flood insurance is underwritten by the federal government through FEMA and the National Flood Insurance
Program in cooperation with private insurance agencies. More than 18,000 communities participate in the Federal
flood insurance program. More than 3.8 million National Flood Insurance Program (NFIP) home and business policies
are in effect. The United States experiences flooding threats throughout all four seasons of the year and, in fact,
flooding is the most common natural disaster. There are, on average, 1000 floods per year in the U.S. Nearly
everyone is at some risk of experiencing the effects of flooding. In the Houston area, 25 percent of flood-insurance
claims come from areas outside a designated flood plain.

flood plain
Flood plains are by definition subject to periodic flooding. They are generally characterized by relatively flat
topography and soil types that were laid down during past inundations by flood waters. If your property is in the 100-
year flood plain, there is a 1-in-100 chance in any given year that your property will flood. If it is in the 25-year flood
plain, there is a 1-in-25 chance in any given year that your property will flood. The statistical chance of flooding is not
changed by any one flooding event; but repeated flooding may result in the flood plain being recalculated.

A 100-year flood plain is always wider than a 25-year flood plain, and the 25-year flood plain is contained within the
100-year flood plain. The flood prone areas of the United States cover approximately 150,000 square miles or 94
million acres of land, an area roughly the size of the State of Montana. People living in flood plains are 26 times more
likely to experience a flooding disaster than they are a fire disaster during the life of the 30-year mortgage on their
homes.

The changes in flood plain maps reflect changes in land use (such as increased building activity), changes in the
waterways, and flood control improvements (such as detention ponds or other flood control measures). As more lots
are covered with more buildings and parking lots, the amount of water that flows into creeks and lakes increases
because there is less vegetation to absorb the water when it rains. This is one reason why buildings that were not
originally built in a flood plain are now in the 25-year or 100-year flood plain.
FNMA
Usually referred to as "Fannie Mae", the acronym stands for the Federal National Mortgage Association.

For Sale By Owner (FSBO)

An individual homeowner who is attempting to sell his property without a real estate broker. The acronym, FSBO is
pronounced "fizzbo."
foreclosure
A legal process instituted by a mortgagee or lien creditor after the debtor's default.

forfeiture
The loss of property or a privilege due to breaking a law. For example, a landlord may forfeit his or her property to the
federal or state government if the landlord knows it is a drug-dealing site but fails to stop the illegal activity. Likewise,
a homeowner may lose his house to satisfy IRS debts or if the government suspects the home was bought with
money derived from criminal acts. The government may seize and sell the property at auction, often far below its fair
market value, before the homeowner has been allowed the due process of a trial. If the homeowner is found not
guilty, the government is only required to pay back the amount received at auction, and not the market value.
fraud
A misstatement of a material fact made with intent to deceive or made with reckless disregard of the truth, and which
actually does deceive.

Freddie Mac
Chartered by Congress in 1970, Freddie Mac is a publicly held corporation that purchases mortgages in the
secondary mortgage market. Freddie Mac came into being as the Federal Home Loan Mortgage Corporation
(FHLMC) with the mission to create a continuous flow of funds to mortgage lenders. By supplying lenders with the
money to make mortgages and packaging the mortgages into marketable securities which are sold to investors,
Freddie Mac also helps to sustain a stable mortgage credit system which in turn, reduces the mortgage rates paid by
homebuyers. Over the years, Freddie Mac has been responsible for opening the door to homeownership for one out
of six home buyers in America who would not have qualified otherwise.
front foot
One linear foot (12 inches) along the street side of a lot.

FSBO
Acronym - For Sale By Owner
functional obsolescence
Loss of value of real property caused by modernization or changing tastes or standards; e.g.. single bath, inadequate
closet space, etc. Contrast with economic obsolescence.

garden home
See patio home
gated community
A neighborhood or group of neighborhoods, usually surrounded by masonary walls, restricting access through the use
of a manned guard station or electronically operated gates. The electronic gates may be opened through the use of
individual remote controls and/or a numeric keypad and code. Some gated communities restrict entry at all times,
while others only limit access during the evening hours. The City of Houston does not allow public city streets to be
gated off, so only neighborhoods with private streets, may have restricted access. The costs associated with
maintaining a manned guard gate can significantly impact monthly maintenance fees, depending on the size of the
community.
general lien
A lien that includes all the property owned by a debtor, rather than a specific property. Contrast with Specific Lien.
general warranty deed
A deed in which the grantor fully warrants good and clear title to the property. A general warranty deed offers the most
protection of any deed.

Ginnie Mae
The common nickname for the Government National Mortgage Association. Ginnie Mae was created in 1968 as a
wholly owned corporation within the Department of Housing and Urban Development (HUD), having been separated
from Fannie Mae. Ginnie Mae does not loan money for mortgages. Instead, it operate in the secondary mortgage
market, buying loans and selling mortgage-backed securities investors, which in turn, increases the availability of
mortgage credit.

Government National Mortgage Association

See Ginnie Mae.

GNMA
Acronym - Government National Mortgage Association, also known as "Ginnie Mae"
good faith estimate
A written estimate of closing costs which a lender must provide you within three days of submitting an application.
government survey method
A system of land description (not used in Texas) which uses meridians (north and south lines) and base lines (east
and west lines). Areas include quadrangles (24 miles on each side), townships (6 miles on each side), and sections (1
mile on each side). Also known as the Rectangular Survey Method. Contrast with metes and bounds, and recorded
plat (Lot and Block Number) method.
grace period
A period of time during which a loan payment may be paid after its due date but not incur a late penalty. Such late
payments may be reported on your credit report.

grant deed
A deed containing an implied promise that the person transfering the property actually owns the title and that it is not
encumbered in any way, except as described in the deed. This is the most commonly used type of deed. Compare
quitclaim deed.
grantee
A person to whom real estate is conveyed; the buyer.
grantor
A person conveying real estate by deed; the seller.
gross debt service
The amount of money needed to pay principal, interest and taxes, and sometimes energy costs. If the dwelling unit is
a condominium, all or a portion of common fees are excluded, depending on what expenses are covered.
gross income
For qualifying purposes, the income of the borrower before taxes or expenses are deducted.
gross lease
A commercial real estate lease in which the tenant pays a fixed amount of rent per month or year, regardless of the
landlord's operating costs, such as maintenance, taxes and insurance. A gross lease closely resembles the typical
residential lease. The tenant may agree to a "gross lease with stops," meaning that the tenant will pitch in if the
landlord's operating costs rise above a certain level. In real estate lingo, the point when the tenant starts to contribute
is called the "stop level," because that’s where the landlord’s share of the costs stops. Contrast with Net Lease.

habendum clause
The "to have and hold" clause which defines or limits the quantity of the estate granted in the premises of the deed.
hazard insurance
A contract between purchaser and an insurer, to compensate the insured for loss of property due to hazards (fire, hail
damage, etc.), for a premium. Most common, lender required feature of homeowners insurance.
hereditaments
Property, personal and real, capable of being inherited.

high-rise
A nine-story or taller building containing residential apartments or condominium units. In addition to spectacular
views, most high-rises offer their residents a full range of amenities. Building features may include 24-hour concierge
service, swimming pools, spas, saunas, tennis courts, exercise areas, party rooms and guest suites. Security is
enhanced at these buildings by the manned entry desks and limited access, covered parking garages. Compare with
mid-rise.
highest and best use
The particular use of a real property which will produce the greatest financial return. The optimum use of a site as
used in appraisal. This is often determined by location, neighboring properties, deed restrictions and local zoning
regulations. A home built on a busy street, surrounded by commercial property, and not restricted from other
development, is not fulfilling its highest and best use. Once the property is redeveloped into commercial property, it
can meet it economic potential.

HOA
Acronym - homeowner's association

hold harmless
In a contract, a promise by one party not to hold the other party responsible if the other party carries out the contract
in a way that causes damage to the first party. For example, many leases include a hold harmless clause in which the
tenant agrees not to sue the landlord if the tenant is injured due to the landlord’s failure to maintain the premises. In
most states, these clauses are illegal in residential tenancies, but may be upheld in commercial settings.
home equity loan
A fixed or adjustable rate loan obtained for a variety of purposes, secured by the equity in your home. Interest paid is
usually tax-deductible. Often used for home improvement or freeing of equity for investment in other real estate or
investment. Recommended by many to replace or substitute for consumer loans whose interest is not tax-deductible,
such as auto or boat loans, credit card debt, medical debt, and education loans. Home equity loans were recently
made available in Texas due to changes the homestead laws as of January 1, 1999.

home warranty
A service contract that covers a major housing system--for example, plumbing or electrical wiring--for a set period of
time from the date a house is sold. The warranty guarantees repairs to the covered system and is renewable. A
basic, one year Buyer's warranty costs $295 to $350 with additional coverage available for garage door openers,
spas, swimming pools, sprinkler system and other appliances.

homeowners' association (HOA)

An organization comprising neighbors concerned with managing the common areas of a subdivision or condominium
complex. These associations take on issues such as maintaining common land and recreation areas, and collecting
dues from residents. The homeowners' association is also responsible for enforcing any covenants, conditions &
restrictions that apply to the property. Payment of dues and participation in the homeowner's association may be
either voluntary or mandatory, depending on the neighborhood.

homeowners' insurance
A type of insurance policy designed to protect homeowners from financial losses related the ownership of real
property. In addition to covering losses due to vandalism, fire, hail, etc.(hazard insurance), most policies also
provide theft and liability coverage. Flood related damage requires a separate flood insurance policy or rider.
homestead
(1) The house in which a family lives, plus any adjoining land and other buildings on that land.
(2) Land, and the improvements thereon, designated by the owner as his homestead and, therefore, protected by
state law from forced sale by certain creditors of the owner. Texas offers homestead protection for a single residential
property. In addition, Texas mandates a minimum $15,000 school district property tax exemption on the appraised
value of a homestead property. Other taxing authorities, such as cities and counties, may offer additional property tax
exemptions on homesteads. Homestead protection will not stop foreclosures for deliquent mortgages, taxes or
mandatory homeowner's association dues.
(3) Land acquired out of the public lands of the United States. The term "homesteaders" refers to people who got their
land by settling it and making it productive, rather than purchasing it outright.

house closing
The final transfer of the ownership of a house from the seller to the buyer, which occurs after both have met all the
terms of their contract and the deed has been recorded. Also known as just "closing".

Housing and Urban Development, Deparment of (HUD)

The U.S. Department of Housing and Urban Development. This is the agency responsible for enforcing the federal
Fair Housing Act.

HUD
Acronym - Housing and Urban Development.

implied warranty of habitability

A legal doctrine that requires landlords to offer and maintain livable premises for their tenants. If a landlord fails to
provide habitable housing, tenants in most states may legally withhold rent or take other measures, including hiring
someone to fix the problem or moving out. See constructive eviction.
improvements
Valuable additions to the land, such as buildings, fences, roads, etc., which increase the value of the property.
incidents of ownership
Any control over property. If you give away property but keep an incident of ownership--for example, you give away an
apartment building but retain the right to receive rent--then legally, no gift has been made. This distinction can be
important if you're making large gifts to reduce your eventual estate tax.
income approach to value
An estimate of value based on the monetary returns that a property can be expected to generate; capitalization.
Contrast with the cost approach to value and the market data approach to value.
Independent School District
In Texas, all but one of the state's school districts are considered "Independent" since they do not fall under the direct
control of any other local government, and their boundaries are not constrained by any city or county border lines.
Each district is run by an elected school board, which appoints a superintendent and sets budgets and tax rates. Only
the State of Texas has the authority to regulate and oversee the actions of an Independent School District.
The one exception is the Stafford Municipal School District, which de-annexed itself from the Fort Bend Independent
School District. Stafford MSD lies entirely within the city limits of the City of Stafford, and shares its recreational and
auditorium facilities.
index
A number, usually a percentage, upon which future interest rates for adjustable rate mortgages are based.
ingress
An entrance, or the act of entering. Compare egress.
inspection clause
A stipulation in an offer to purchase that makes the sale contingent on the findings of a home inspector.
insurable title
A title which a title company will insure.
interest
(1) The sum paid in return for the use of money; could be considered rent for the use of money.
(2) The type and extent of ownership in property.
interest rate
The periodic charge, expressed as a percentage, for use of credit.
intermediary
As of January 1, 1996, a broker may act as an intermediary between the parties if the broker complies with the The
Texas Real Estate License Act. The broker must obtain the written consent of each party to the transaction to act as
an intermediary. The written consent must state who will pay the broker and, in conspicuous bold or underlined print,
set forth the broker's obligations as an intermediary. The broker is required to treat each party honestly and fairly and
to comply with The Texas Real Estate License Act. A broker who acts as an intermediary in a transaction:
(1) shall treat all parties honestly;
(2) may not disclose that the owner will accept a price less than than the asking price unless authorized in writing to
do so by the owner;
(3) may not disclose that the buyer will pay a price greater than the price submitted in a written offer unless authorized
in writing to do so by the buyer; and
(4) may not disclose any confidential information or any information that a party specifically instructs the broker in
writing not to disclose unless authorized in writing to disclose the information or required to do so by The Texas Real
Estate License act or a court order or if the information materially relates to the condition of the property.
With the parties' consent, a broker acting as an intermediary between the parties may appoint a person who is
licensed under The Texas Real Estate License Act and associated with the broker to communicate with and carry out
instructions of one party and another person who is licensed under the Act and associated with the broker to
communicate with and carry out instructions of the other party.
intestate
Legal designation of a person who has died without leaving a valid will.
intimidation
As defined in the fair housing laws, it is the illegal act of coercing, intimidating, threatening, or interfering with a person
in exercising or enjoying any right granted or protected by federal, state or local fair housing laws.
invitee
A business guest, or someone who enters property held open to members of the public, such as a visitor to a
museum. Property owners must protect invitees from dangers on the property. In an example of the perversion of
legalese, social guests that you invite into your home are called "licensees."

joint tenancy
A way for two or more people to share ownership of real estate or other property. When two or more people own
property as joint tenants and one owner dies, the other owners automatically own the deceased owner's share. For
example, if a parent and child own a house as joint tenants and the parent dies, the child automatically becomes full
owner. Because of this right of survivorship, no will is required to transfer the property; it goes directly to the surviving
joint tenants without the delay and costs of probate. Contrast with tenancy in common.
judgment
The official and authentic decision of a court of justice concerning the respective rights and claims of the parties to an
action or suit.

laches
Delay or negligence in asserting one's rights.
landlord
The owner of any real estate, such as a house, apartment building or land, that is leased or rented to another person,
called the tenant.
latent defect
Hidden structural defects and flaws.
lease
An oral or written agreement (a contract) between two people concerning the use by one of the property of the other.
A person can lease real estate (such as an apartment or business property) or personal property (such as a car or
a boat). A lease should cover basic issues such as when the lease will begin and end, the rent or other costs, how
payments should be made, and any restrictions on the use of the property. The property owner is often called the
"lessor," and the person using the property is called the "lessee." In Texas, any lease over one year in length, must
be in writing.
lease option
A contract in which an owner leases his house (usually for one to five years) to a tenant for a specific monthly rent,
and which gives the tenant the right to buy the house at the end of the lease period for a price established in advance.
This allows a potential home buyer move into a house he may wish to eventually buy without having to come up with
a down payment or financing at that time.
lease purchase
A contract in which an owner leases his house (usually for one to five years) to a tenant for an increased monthly rent,
and which gives the tenant the right to buy the house at the end of the lease period for a price established in advance,
with the incremental rent increase being used to form a down payment. Buyers should be wary of this type of contract
since they may lose their extra rent/down payment money should the owner suffer financial setbacks before the
purchase has been completed.

leasehold estate
A form of real estate in which a tenant is allowed to construct permanent structures upon a parcel of leased land, and
derive some use or income from said structures during the period of the lease. Leasehold estates usually involve
long-term leases, ranging from 20 to 99 years. Land owners are able to have their property developed, with no out of
pocket expenses. Instead of having to sell their land too soon, they retain their family's rights to the land, while
receiving a steady income stream. The tenant saves the initial land acquisation costs and may gain access to
property that would be otherwise unavailable. The downside is, as the lease nears the end or its term, the tenant's
investment becomes uncertain, and the landlord is in a position to make demands for compensation, above the fair
market price. Leaseholds are much more common in commercial real estate, but can apply to some residential
properties as well. Hawaii has many leasehold condominium projects, and even Houston has at least one mid-rise
condominium building that lacks ownership of the land it occupies.
legal description
A description of a specific parcel of real estate which is acceptable to the courts in that state, and which will allows an
independent surveyor to locate and identify it. Usually it uses one of the following methods; government survey (Not
Used in Texas), metes and bounds, or recorded plat (lot and block number).
less favorable treatment
Any time a person is treated differently on the basis of race, sex, religion, color, familial status, disability, or national
origin, either by action or inaction, in the selling or leasing of real property, it is a violation of the Fair Housing Laws.
Also known as unequal treatment or different treatment.
lessee
Tenant leasing property.
lessor
One who leases property to a tenant.
leverage
The use of borrowed funds to finance an investment and to magnify the rate of return.

Levy Improvement District (LID)

A type of Water Control and Improvement District, used to build and maintain levies. Levies are used to contain
flooding creeks and rivers.
licensee
A person licensed by the Texas Real Estate Commission to engage in real estate brokerage, either as a broker or as
a salesman.
LID
Acronym - Levy Improvement District.
lien
A monetary claim against a property. These should be settled before the sale is finalized.
lien theory state
Texas is a Lien Theory State, where legal title of mortgaged property resides with the mortgagor (borrower), with the
mortgage as a lien against the property. Contrast with title theory state.
life estate
An interest in property only for the duration of someone's life.
life tenant
One who has a life estate in real property.
limited equity housing
An arrangement designed to encourage low-and moderate-income families to purchase housing, in which the housing
is offered at an extremely favorable price with a low down payment. The catch is that when the owner sells, she gets
none of the profit if the market value of the unit has gone up. Any profit returns to the organization that built the home,
which then resells the unit at an affordable price.
lis pendens
A notice indicating that legal action is pending on a property.
listing agreement
The legal agreement between the listing agent/broker and the vendor, setting out the services to be rendered,
describing the property for sale, and stating the terms of payment.

loan-to-value ratio (LTV)

The ratio of the amount being loaned in respect to the appraised value of the property, usually expressed as a
percentage. If a buyer was putting down $20,000, and borrowing a first lien of $180,000, on a $200,000 property,
then the loan would have a 90% LTV. Loan-to-value ratios can effect interest rates, loan qualifying criteria, and lender
requirements for PMI and escrow accounts.
lock or lock In
A commitment you obtain from a lender assuring you a particular interest rate or feature or a definite time period.
Provides protection should interest rates rise between the time you apply for a loan, acquire loan approval, and,
subsequently, close the loan and receive the funds you have borrowed.

loft
(1) A style of residential construction. In Houston the term "loft" is used quite liberally. It may refer to an older building
that has been converted into residential condominiums, or it may mean a new mid-rise project with a "loft-style" finish
to the units. There are also new construction townhomes that are promoted as being "lofts". A builder creates new
loft space by leaving exposed brick walls, bare polished concrete floors and having unhidden heating ducts, trusses,
etc.
(2) An upstairs room or area that has an open wall, overlooking a room or area below.

LTV
See loan-to-value ratio.
mandatory continuing education (MCE)
The State of Texas requires that its licensed real estate brokers, and salesmen (who have met their SAE
requirement), attend at least 15 hours of certified real estate education courses before each license renewal (every
two years). At least six of the 15 hours must be in legal topics.
manufactured home
A structure built in a factory, that is later shipped to, and placed on, the homesite. The term can apply to both mobile
homes and pre-fab homes.
margin
An amount, usually a percentage, which is added to the index to determine the interest rate for adjustable rate
mortgages.
marginal land
Property which is barely profitable to use.
market approach to value
An estimate of value based on the actual sales prices of comparable properties. Contrast with cost approach to
value and income approach to value.
market value
The price that a willing buyer and a willing seller, both given full information, and neither under pressure to act, would
agree upon. Also known as Fair Market Value.

master-planned community
A large scale, mixed use, real estate development that follows a long term, comprehensive plan. Master-planned
communities typically blend different price ranges of residential neighborhoods with some commercial properties
designed to serve the residents' needs. Residential properties may include patio homes, townhouses, condominiums
and apartment complexes in addition to neighborhoods of single-family homes. Likewise, multiple home builders are
included in the construction of the various neighborhoods. Commercial development can consist of retail strip centers
ans shopping malls, restaurants, entertainment venues and office buildings.

In addition, master-planned communities usually offer amenities such as public recreation areas and parks,
neighborhood schools and extensive landscaping. Recreation areas may include public swimming pools, tennis
courts, children's play grounds and sports fields. Many offer large water features and public or private golf courses.
The term "master-planned" has become somewhat of an overused buzzword in the current market place. True
master-planned communities require a a multi-year commitment from the developer and contain thousands of homes.
MCE
See mandatory continuing education.
mechanic's lien
A legal claim placed on real estate by someone who is owed money for labor, services or supplies contributed to the
property for the purpose of improving it. Typical lien claimants are general contractors, subcontractors and suppliers
of building materials. A mechanics' lien claimant can sue to have the real estate sold at auction and recover the debt
from the proceeds. Because property with a lien on it cannot be easily sold until the lien is satisfied (paid off), owners
have a great incentive to pay their bills.
mediation
A dispute resolution method designed to help warring parties resolve their own dispute without going to court. In
mediation, a neutral third party (the mediator) meets with the opposing sides to help them find a mutually satisfactory
solution. Unlike a judge in her courtroom or an arbitrator conducting a binding arbitration, the mediator has no power
to impose a solution. No formal rules of evidence or procedure control mediation; the mediator and the parties usually
agree on their own informal ways to proceed.
metes and bounds
A system of land description using distance (metes) and angles/compass directions (bounds), beginning and ending
at the same point. Contrast with government survey and recorded plat method.
mid-rise
A 4-story to 8-story tall building that contains residential apartment or condominium units. While not offering the
panoramic views of a high-rise, mid-rise buildings can offer comparable levels of amenities and services. Building
features may include 24-hour concierge service, swimming pools, spas, saunas, tennis courts, exercise areas, and
party rooms. Security is enhanced at these buildings by the manned entry desks and limited access, covered parking
garages.
mineral rights
An ownership interest in the minerals contained in a particular parcel of land, with or without ownership of the surface
of the land. The owner of mineral rights is usually entitled to either take the minerals from the land himself or receive a
royalty from the party that actually extracts the minerals.
minimum payment
The minimum amount that you must pay, usually monthly, on a home equity loan or line of credit. In some plans, the
minimum payment may be "interest only," (simple interest). In other plans, the minimum payment may include
principal and interest (amortized).
minority
As defined in the Civil Rights Act of 1968 as part of the Fair Housing Laws "'minority' means any group, or any
member of a group, that can be identified either: (1) by race, color, religion, sex, disability, or national origin; or (2) by
any other characteristic (such as familial status) on the basis of which discrimination is prohibited by a federal, state,
or local fair housing law.
misrepresentation
A false statement, or concealment, of material fact with the intention of inducing action of another.
mobile home
A type of manufactured home, that is transported to the home site using wheels attached to the structure. Mobile
homes come in various widths and lengths, and maybe composed of one to three pieces. A one piece home is called
a "single-wide", while a house that is joined together from two halves is called a "double-wide". Recently, "triple-
wides" have appeared, and become as the largest mobile homes available. Most sections are between 14 and 16
feet wide, and 54 to 80 feet in length. Mobile homes do not require any foundation or substructure. They sit up off the
ground, with skirting used around the base to hide the wheel and jacks. While it is possible to tie down a mobile home
to a piece of land, using straps and screw-in anchors, the structures are very susceptible to high winds and tornados.
month-to-month tenancy
A rental agreement that provides for a one-month tenancy that is automatically renewed each month unless either
tenant or landlord gives the other the proper amount of written notice (usually 30 days) to terminate the agreement.
Some landlords prefer to use month-to-month tenancies because it gives them the right to raise the rent after giving
proper notice. This type of rental also provides a landlord with an easy way to get rid of troublesome tenants, because
in most states month-to-month tenancies can be terminated for any reason. It is also common for leases to revert to
month-to-month tenancies at the end of the original lease period, if another lease has not been signed.
monument
A fixed object or point, either natural or man-made, used in making a survey.
mortgage
A contract providing security for the repayment of a loan, registered against property, with stated rights and remedies
in the event of default. Lenders consider both the property (security) and financial worth of the borrower (covenant) in
deciding on a mortgage loan.
mortgage banker
Originates mortgage loans, loaning you their funds and closing the loan in their name.
mortgage broker
A person or company having contacts with financial institutions or individuals wishing to invest in mortgages.
mortgage loan
A loan which utilizes real estate as security or collateral to provide for repayment should you default on the terms of
your loan. The mortgage or deed of trust is your agreement to pledge your home or other real estate as security.
mortgagee
The lender in a mortgage loan transaction.
mortgagor
The borrower in a mortgage loan transaction.
MUD
See Municipal Utility District.
Multiple Listing Service (MLS)
A system by which a number of real estate firms share information about homes that are for sale. Membership
usually provides a monthly book and/or computer service that provides Realtors® with detailed listings of most homes
currently on the market.
Municipal Utility District (MUD)
Municipal Utility Districts are authorized under the Texas Constitution, Article III, Section 52, or Article XVI, Section
59. They are local political subdivisions of the State, governed by a board of directors. After the terrible floods in
Texas during 1912-14, people across the state realized there was a real need to confirm the State's duty to not only
prevent floods but, also through the storage of flood waters, to conserve the water for beneficial usages. This was the
genesis for the passage of Section 59 of Article XVI in 1917, which allowed water districts to operate with unlimited
bonded indebtedness. In 1925, legislation was passed which authorized the creation of Water Control and
Improvement Districts -- WCIDs -- with the same bonded indebtedness and taxing authority.

To create a new water district, a developer files an application through the Office of the State Attorney General to the
TNRCC. The application outlines the developer's plans for providing various services such as water, sewer and
drainage to areas where municipal services are not already in place. A Board of Directors is established, which is
assisted by qualified professionals who provide services on a fee basis. Not all water districts are created equal.
Some are established under General Law by theTexas Natural Resource Conservation Commission (TNRCC);
some by Commissioners Court; and others are created by the governing board of a city. Special law districts are
created by an act of the State Legislature. All water districts, however, must comply with the laws contained in the
Texas Water Code.

Water districts are generally empowered to incur debt and levy taxes. If voters approve unlimited tax bonds, a debt
service tax to pay the bonds is also approved. Each year, the water district board is obligated to levy a property tax
adequate to cover the debt. This tax is levied on all property in the district based on appraised value, regardless of
services received, and must comply with the Property Tax Code. The tax rate must be published each year and public
hearings held if the effective tax rate increases more than three percent over the previous year. District voters may
also approve a maintenance tax. Water districts must comply with the Texas Open Meetings Act and the Texas Open
Records Act and have an annual audit performed by an independent auditing firm. Water districts are generally
empowered to:

negative amortization
Amortization in which the payment made is insufficient to fund complete repayment of the loan at its termination.
Usually occurs when the increase in the monthly payment is limited by a ceiling. The portion of the payment which
should be paid is added to the remaining balance owed. The balance owed may increase, rather than decrease over
the life of the loan.
net lease
A commercial real estate lease in which the tenant regularly pays not only for the space (as he does with a gross
lease) but for a portion of the landlord’s operating costs as well. When all three of the usual costs--taxes, maintenance
and insurance--are passed on, the arrangement is known as a "triple net lease." Because these costs are variable
and almost never decrease, a net lease favors the landlord. Accordingly, it may be possible for a tenant to bargain for
a net lease with caps or ceilings, which limits the amount of rent the tenant must pay. For example, a net lease with
caps may specify that an increase in taxes beyond a certain point (or any new taxes) will be paid by the landlord. The
same kind of protection can be designed to cover increased insurance premiums and maintenance expenses.
Contrast with gross lease.
net listing
A price, which must be expressly agreed upon, below which the owner will not sell the property and at which the
broker will not receive a commission; the broker receives the excess over and above the net listing price as
commission. The broker in this type of listing will have a very hard time maintaining his fiduciary responsibilities to his
seller since his interests are potentially at odds with the interests of the seller.
non-escrowing loan
Typically, mortgage lenders require escrow accounts for property taxes, hazard insurance, and sometimes,
homeowner's association dues. Monthly contributions to these accounts are rolled into a lender's mortgage payment.
In Texas, escrow accounts are non-interest bearing, so many borrowers prefer the option of keeping the monies for
their hazard insurance and property taxes in their own interest bearing accounts, until they become due. Most lenders
only allow non-escrowing loans on mortgages with an 80% or lower, loan-to-value ratio.
Property taxes can be paid as late as January 31st of the following year before interest and penalties begin to accrue.
If the borrower has the discipline to save the monies for taxes and insurance independently, a non-escrowing loan
would be the smart choice. Most lenders charge a one-time fee at closing for selecting the non-escrow option. Non-
escrowing loans also have lower closing costs since the lender does not collect reserves, which place a 2-3 month
cushion of pro-rated payments in the escrow account. Additionally, the seller's pro-rated share of the year's property
taxes is applied directly to the buyer's closing costs, instead of being placed into the escrow account.
note
A written instrument of credit attesting to a debt and promise to pay.

nuisance
Something that interferes with the use of property by being irritating, offensive, obstructive or dangerous. Nuisances
include a wide range of conditions, everything from a chemical plant's noxious odors to a neighbor's dog barking. The
former would be a "public nuisance," one affecting many people, while the other would be a "private nuisance," limited
to making your life difficult, unless the dog was bothering others. Lawsuits may be brought to abate (remove or
reduce) a nuisance. See quiet enjoyment, attractive nuisance.

obsolescence
A loss in value of real property caused by changes either internal or external to the property. See economic
obsolescence, functional obsolescence, and physical deterioration.
offer
A proposal to enter into an agreement with another person. An offer must express the intent of the person making the
offer to form a contract, must contain some essential terms--including the price and subject matter of the contract--and
must be communicated by the person making the offer. A legally valid acceptance of the offer will create a binding
contract.
open house
An opportunity for prospective buyers to view a house in a low pressure environment.
open listing
A listing under which the principal (owner) reserves the right to list his property with other brokers.
option
The right to purchase property within a definite time at a specified price. There is no obligation to purchase, but the
seller is obligated to sell if the option holder exercise the right to purchase. For the option to be valid, it must include
consideration.
option fee
An amount of money payed by a prospective Buyer, to a Seller, in order to obtain an option period, as specified in
Paragraph 7 of a TREC promulagated earnest money contract. If a Buyer decides to close on the property, the option
fee may be credited to his funds at closing.
option period
Current residential earnest money contracts, promulagated by the Texas Real Estate Commission offer the choice of
an option period, under Paragraph 7. During this period, the length of which is negotiable, the Buyer has a right to
inspect the property and has an absolute right to terminate the offer/contract for any reason, without penalty. In
exchange for this option period, the Buyer pays an option fee to the Seller. If the Buyer decides to continue with the
sale of the property, this option fee may be credited to him at closing. Typical option periods run from 7 to 14 days
long.
ordinance
A law adopted by a town or city council, county board of supervisors or other municipal governing board. Typically,
local governments issue ordinances establishing zoning and parking rules and regulating noise, garbage removal, and
the operation of parks and other areas that affect people who live or do business within the locality's borders.
origination fee
A fee charged by lenders, in addition to interest, for services in connection with granting of a loan. Usually a
percentage of the loan amount.

panic peddling
The illegal practice of inducing panic selling in a neighborhood by making representations of the entry, or prospective
entry, of members of a minority group; blockbusting. See Fair Housing.
party wall
Wall erected on line between adjoining properties for the use of both properties.

patio home
A single-family home that sits on a small lot, often with one outside wall of the structure sitting on the property line.
Patio homes have no common structural walls with adjoining propeties, but their zero lot line wall may form part of
their neighbors backyard fence/wall. These properties often have a small back or side yard large enough for a patio
or garden area. Also known as a garden home.
percentage lease
Lease in which all or part of rental is a specified percentage of gross income from total sales made upon the
premises.
person
An individual, a partnership, or a corporation, foreign or domestic.
personal property
Property which is tangible, movable, and not fixed to the land. Also called chattel and personalty. Contrast with real
property.
personalty
Personal property; chattel. Contrast with Realty.
physical deterioration
The loss of value to real property from all causes due to the action of the elements and old age. Physical deterioration
can be either curable or incurable.
PITI
Principal, Interest, Taxes and Insurance.
planned unit development (PUD)
In a PUD, the planned unit development association owns and maintains property in a real property development
project for the benefit of its members, who are owners of individual parcels of real property in the development and
are members of the association because of that ownership. The level of services and fees are similar to a
condominium complex, but since each owner has title to a specific parcel of land, lenders may treat units as non-
condominiums. This allows higher LTV loans and eliminates owner occupancy percentage requirements.
plat book
A record of recorded subdivisions of land.
PMI
Acronym - private mortgage insurance.
points
Fees paid to induce lenders to make mortgage loans at a particular interest rate. Each point is equal to one percent
(1%) of the loan principal. Same as discount points.
police power
The authority of a government to adopt and enforce law governing the use of real estate based on the need to
promote public safety, health, and general welfare.
power of attorney (POA)
A written authorization by a person to another person to act for him on his behalf.
prepayment
Paying off all or part of the mortgage before the scheduled date.
prepayment clause in a mortgage
Statement of the terms upon which the mortgagor (borrower) may pay the entire or stated amount on the mortgage
principal at some time prior to the due date.
prepayment penalty
A fee paid to the lending institution for paying a loan prior to the scheduled maturity date.
primary mortgage market
Lenders who originate loans and makes funds available directly to the borrowers. Contrast with secondary mortgage
market.
prime rate
The interest, or discount rate charged by a commercial bank to its largest and strongest customers.
principal
The amount of money owed to the lender not including interest.
principle of conformity
An appraisal principle which holds that the maximum value is realized when a reasonable degree of homogeneity
(sameness) exists in a neighborhood.
private mortgage insurance (PMI)
Default insurance on conventional loans, normally insuring the top 20%-25% of the loan and not the whole loan.
promulgated contracts
The Texas Real Estate Commission has prepared and authorized various standard contracts which must be used by
all licensees when acting as agents in real estate transactions with limited exceptions.

property taxes
Taxes that are paid yearly on real property. Property taxes are ad valorem, based on the assessed value of the real
property. In Texas the assessed value is determined by the County Appraisal District. Each taxing authority
multiplies this appraised value by its annual tax rate. Taxing authorities include local school districts, counties, cities,
water districts(MUD's, PUD's, LID's, etc.), and other special tax districts.

pro-rate
To divide or distribute proportionally. At closing, various expenses such as taxes, insurance, interest, rents, etc. are
prorated between the seller and buyer.
Public Utility District (PUD)
A water district, created by a city or county, promoting development of a designated area by providing water and
sewer services. The PUD operates in the same manner as a Municipal Utility District, but is created by a local
government, not a private developer.
PUD
Acronym - planned unit development.
Acronym - Public Utility District.
puffing
Non-factual or extravagant statements and opinions made to enhance the perceived desirability of a property. The is a
fine line between legal puffing and illegal misrepresentation, and puffing is best avoided. An example of puffing would
be, "This home has the best view in the city". Also known as puffery.
purchase offer
A document that lists the price, terms and conditions under which a buyer is willing to purchase a property.

qualify
To meet a mortgage lender's approval requirements.
qualifying ratios
Comparisons of a borrower's debts and gross monthly income.
quiet enjoyment
The right of a property owner or tenant to enjoy his or her property without interference. Disruption of quiet enjoyment
may constitute a nuisance. Leases and rental agreements often contain a "covenant of quiet enjoyment," expressly
obligating the landlord to see that tenants have the opportunity to live undisturbed.

quitclaim deed
A deed that transfers whatever ownership interest the transferor has in a particular property. The deed does not
guarantee anything about what is being transferred, including an actual ownership interest. For example, a divorcing
husband may quitclaim his interest in certain real estate to his ex-wife, officially giving up any legal interest in the
property. A quit claim deed may also be used to clear up a cloud on the title to the property in cases where there is a
question of a possible ownership claim. Compare with grant deed.

ready, willing and able

A buyer who is prepared to buy on the seller's terms and has the financial capacity to do so.
real estate
Refers to land and improvements and the rights to own or use them. "A leasehold, as well as any other interest or
estate in land, whether corporeal, incorporeal, freehold, or non-freehold, and whether the real estate is situated in this
state or elsewhere." {TRELA, Section 2(1)} In popular usage, Real Estate is used interchangeably with real property
and realty.
real estate board
A non profit organization representing local real estate agents/brokers and salespeople, which provides services to its
members and maintains and operates the Multiple Listing Service in the community.
real estate agent
A person licensed to negotiate and transact the sale of real estate on behalf of the property owner.
Real Estate Appraiser, licensed
A person licensed to legally appraise real estate property for a fee. Texas has required its appraiser be licensed since
1939. In 1991 the responsibility for licensing real estate appraisers was transfered from the Texas Real Estate
Commission to a newly formed Texas Appraiser Licensing and Certification Board (TALCB). There are several
classes of licensed real estate appraisers, with the highest classification - Certified General RE Appraiser, requiring a
minimum of 180 classroom hours, and 3,000 hours appraisal work over at least 2½ years.
Real Estate Broker, licensed
To be eligible to apply for a real estate Broker License, an individual must have not less than two (2) years active
experience in Texas as a licensed real estate salesperson and 180 classroom hours of core real estate coursesplus
an additional 720 classroom hours in related courses acceptable to the Commission. The applicant must also pass
the TREC Real Estate Broker's exam, and then continue to maintain his license with mandatory continuing education
(MCE) courses .
Real Estate Center
In 1971, the Texas Real Estate Research Center was created by the state legislature. It is located on the campus of
Texas A&M University, and is part of the Lowry Mays College and Graduate School of Business. Today, the
shortened "Real Estate Center" name is used. The mission of the Real Estate Center is to conduct real estate related
research based on needs of the Texas citizenry and disseminate the results and findings.
Real Estate Inspector, licensed
A Licensed Real Estate Inspector is someone who is licensed by TREC who holds himself out to the public as being
trained and qualified to inspect property. Formerly known as Registered Real Estate Inspector before January 1,
1996.
Real Estate Salesperson, licensed
To be eligible to apply for a real estate Salesperson License, an individual must complete core education courses in
Principles of Real Estate , Law of Agency and Law of Contracts. An additional six (6) semester (90 classroom) hours
must be completed in core courses or in related courses acceptable to the Commission. The applicant must also pass
the TREC Real Estate Salesperson's exam, and then continue to maintain his license with mandatory continuing
education (MCE) courses. Recently licensed real estate salespersons are required to complete a total of 18 semester
(270 classroom) hours of education by the end of their third year of licensure, taking at least 30 hours per year.
real property
Refers to the right to own land and improvements. Commonly used interchangeably with Real Estate and Realty.
Contrast with personal property.
REALTOR®
A real estate broker or an associate who holds active membership in a local real estate board that is affiliated with the
NATIONAL ASSOCIATION OF REALTORS®.
realty
Refers to land and buildings and other improvements from a physical standpoint. Real Estate and Real Property tend
to be used interchangeably with Realty in everyday usage. Contrast with personalty.
receiver
Court-appointed custodian who holds property for the court, pending final disposition of the matter before the court.
recorded plat
A subdivision map filed with the county recorder's office that shows the location and boundaries (lot and block
number) of individual parcels of land. Contrast with government survey method and metes and bounds.
recording
The act of entering in the public records, the written record of title to real property, thereby giving constructive notice
to the public.
recovery fund
A fund maintained by the Texas Real Estate Commission which upon court order is used to reimburse the public for
monetary loss due to illegal acts of licensees.
redlining
The illegal practice of refusing to originate mortgage loans, or limiting their number, in certain neighborhoods on the
basis of racial or ethnic composition. See Fair Housing.
refinancing
To apply for a new mortgage in order to gain better terms, usually either a lower interest rate or a different principal
amount.
Regulation 'Z'
Truth in lending law developed by the Federal Reserve System which requires lenders to provide full disclosure of the
terms of the loan, including interest rates expressed as an annual percentage rate (APR).
RELA
Real Estate License Act.
release
To relinquish an interest or claim to a piece of property.
remainder
The future interest in an estate which takes effect after the termination of another estate, such as a life estate; what is
left at the termination of a life estate.
rent control
Laws that limit the amount of rent landlords may charge, and that state when and by how much the rent can be raised.
Most rent control laws also require a landlord to provide a good reason, such as repeatedly late rent, for evicting a
tenant. Rent control exists in some cities and counties in California, Maryland, New Jersey, New York and
Washington, D.C.
reserves
Amounts of money set aside by a mortgage company to assure payment of property taxes, homeowners' association
dues, and insurance premiums. The money is kept in an escrow account
reservation
A right reserved by a grantor in the sale or lease of a property. In a sale, the title of all property passes to the grantee,
but the use may be reserved for the grantor. Contrast with exception.
RESPA
Real Estate Settlement Procedures Act is a federal law which deals with the procedures to be followed in a real estate
closing, and is intended to make borrowers more knowledgeable about possible costs and charges.
restrictions
Limitations on the use or occupancy of real estate contained in a deed or in local ordinances pertaining to land use.
right of survivorship
The right of a surviving joint tenant to take ownership of a deceased joint tenant's share of the property. See joint
tenancy.
riparian owner
One who owns land bounding upon a river or water course (stream, creek, bayou, etc.).

Road Utility District (RUD)

Pursuant to Article III, Section 52 of the Texas Constitution, a Road Utility District may be created to construct,
acquire, improve and provide financing for a road facility. The term "road facility" is defined as a road constructed,
acquired or improved by a district; or property, an easement, or work constructed, acquired, or improved by a district
and necessary or appropriate for, or in aid of the improvement of, a river, creek, or stream to prevent overflow; or the
construction and maintenance of a pool, lake, reservoir, dam, canal or waterway for the purpose of drainage, if the
property, easement, or works is related to, or in furtherance of, the construction, acquisition, or improvement of a
road.
running with the land
A phrase used in property law to describe a right or duty that remains with a piece of property no matter who owns it.
For example, the duty to allow a public beach access path across waterfront property would most likely pass from one
owner of the property to the next.

Rural Fire Prevention District (RFPD)

A special taxing district created to provide rural residents with fire-fighting, fire prevention and other emergency
services.

sales contract
A written agreement stating the terms of the sale agreed to by both buyer and seller. TREC promulgated standard
contracts must be used by all licensees, with certain limited exceptions. See earnest money contract.
Salesperson Annual Education (SAE)
A real estate salesperson is required to complete a total of 18 semester (270 classroom) hours of education by the
end of their third year of licensure. All active and inactive salespersons, who are under the SAE requirement, must
show evidence of having completed a minimum of 30 hours in core or related real estate education each year or until
a total of 270 classroom hours have been completed. At least 180 hours of the 270 must be in core real estate.
Therefore the other 90 hours may be in related. Evidence of successful completion must be received on or before the
renewal filing deadline. If this documentation is not received on time, the license will expire.
SAE
Acronym - Salesperson Annual Education
secondary mortgage market
Buying and selling of existing mortgage loans, designed to provide additional liquidity for lenders. Contrast with
primary mortgage market. Also see Fannie Mae, Freddie Mac and Ginnie Mae.
security deposit
A payment required by a landlord to ensure that a tenant pays rent on time and keeps the rental unit in good
condition. If the tenant damages the property or leaves owing rent, the landlord can use the security deposit to cover
what the tenant owes.
security interest
An interest that a lender takes in the borrower's property to assure repayment of a debt.
self amortized loan
A loan which will retire the debt by systematic payments of principal and interest, so that at the end of the loan period,
the balance will be zero.
servicing a loan
The ongoing process of collecting your monthly mortgage payment, including accounting for and payment of your
yearly tax and/or homeowners insurance bills.
servient tenement
Property that is subject to use by another for a specific purpose. For example, a beachfront house that has a public
walkway to the beach on its premises would be a servient tenement.
setback
The distance a building must be set back from the property lines in accordance with local zoning ordinances or deed
restrictions.
shared equity mortgage
A home loan in which the lender gets a share of the equity of the home in exchange for providing a portion of the
down payment. When the home is later sold, the lender is entitled to a portion of the proceeds.
short sale (of house)
A sale of a house in which the proceeds fall short of what the owner still owes on the mortgage. Many lenders will
agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner
cannot make the mortgage payments. By accepting a short sale, the lender can avoid a lengthy and costly
foreclosure, and the owner is able to pay off the loan for less than what he owes. See also deed in lieu (or
foreclosure).
simple interest
Interest computed only on the principal balance. Contrast with compound interest.
single-family home
A free-standing, residential structure, designed to accomodate one family. Single-family homes include traditional
houses, as well as patio homes.
special warranty deed
A warranty deed which, instead of warranting the title from sovereignty of the soil to the last grantee, merely warrants
the title against every person whomsoever lawfully claiming or to claim the same, or any part thereof, by, through or
under the grantor.
specific lien
A claim that only applies to or affects a certain property or group of properties. Contrast with general lien.
specific performance
Carrying out of the precise terms agreed upon in a contract. Also see suit for specific performance.
spite fence
An unsightly fence erected for no other purpose than to irritate a neighbor. Such a fence may be illegal under local
fence height and appearance regulations or state laws that specifically bar spite fences. Even if it doesn't violate
regulation or laws, the fence may still be illegal if it was built with malicious intent.
Statute of Frauds
The law which requires among other things, that all contracts transferring real estate, or for the leasing of property for
over one year, must be in writing to be enforceable.
statutory year
A year composed of twelve months, each with thirty (30) days, for a total of 360 days in a statutory year. Also known
as a banker's year. Contrast with calendar year.
steering
The illegal practice of directing members of minority groups to, or away from, certain areas or neighborhoods;
channeling. See Fair Housing.
subject to mortgage
The buyer of an already mortgaged property makes the payments, but does not take personal responsibility for the
loan. Should the mortgage be foreclosed and the property sold for a lesser amount than is owed, the grantee-buyer is
not personally liable for the deficiency, but the grantor-seller is. Contrast with assumption of mortgage.
sublease
A rental agreement or lease between a tenant and a new tenant (called a sublessee) who will either share the rental
or take over from the first tenant. The sublessee pays rent directly to the tenant. The tenant is still completely
responsible to the landlord for the rent and for any damage, including that caused by the sublessee. Most landlords
prohibit subleases unless they have given prior written consent. Compare with assignment.
subpoena
A legal process ordering a witness to appear and give testimony or to present documents under penalty of law. TREC
has subpoena powers.
substitution, principle of
The principle which states that a buyer will pay no more for a property than the cost of an equally desirable alternative
property.
succession
The passing of property or legal rights after death. The word commonly refers to the distribution of property under a
state’s intestate succession laws, which determine who inherits property when someone dies without a valid will.
When used in connection with real estate, the word refers to the passing of property by will or inheritance, as opposed
to gift, grant, or purchase.
suit for specific performance
A legal action brought by either a buyer or a seller to enforce performance of the terms of a contract.

TALCB
Acronym - Texas Appraiser Licensing and Certification Board
taking
See eminent domain.
tenancy by the entirety
A special kind of property ownership that's only for married couples. Both spouses have the right to enjoy the entire
property, and when one spouse dies, the surviving spouse gets title to the property (called a right of survivorship). It
is similar to joint tenancy, but it is available in only about half the states.
tenancy in common
A type of ownership in which two or more people have an undivided interest in property, without the right of
survivorship. Upon death of one of the owners, his/her interest passes to his/her heirs or devises. Contrast with joint
tenancy.
tenant
Anyone, including a corporation, who rents real property, with or without a house or structure, from the owner (called
the landlord). The tenant may also be called the "lessee."
tenants in common
See tenancy in common.
tenement
Everything that may be occupied under a lease by a tenant.
term
The actual life of a mortgage, at the end of which the mortgage becomes due and payable unless the lender renews
the mortgage.
Texas Appraiser Licensing and Certification Board (TALCB)
A regulatory agency of the State of Texas, the TALCB was created in 1991 to license, certify and regulate real estate
appraisers in Texas under state and federal laws. It superseded the Texas Real Estate Appraiser Certification
Committee of the Texas Real Estate Commission.
Texas Deceptive Trade Practices - Consumer Protection Act
Makes it illegal for false, misleading, or deceptive acts or practices in the advertising, offering for sale, selling, or
leasing of any real or personal property. The Act provides for civil penalties and in some cases, for mandatory triple
damages and attorney fees for the aggrieved party. Also see Deceptive Trade Practices Act.
Texas Housing Agency (THA)
Created in 1979, the THA issues tax exempt mortgage revenue bonds. The funds may be used to purchase existing
mortgages from lending institutions, to purchase new mortgage loans, or to make direct loans to qualified housing
sponsors who are recommended by a lending institution. The agency does not actually originate mortgages, but
issues commitments to lenders to purchase mortgages that meet all the agency's requirements. This is known as a
forward commitment program.

Texas Natural Resource Conservation Commission (TNRCC)

The TNRCC is the lead environmental agency for The State of Texas. Its mission is to protect the state's human and
natural resources consistent with sustainable economic development. Goals include clean air, clean water, and the
safe management of waste. The TNRCC is responsible for the general supervision and oversight of water districts
and utilities, including the processing of petitions to create a district and applications to approve a utility service area.
In addition, the agency maintains approval authority over many utility matters including the review of most district
bond issues to assure the engineering and economic feasibility of projects, as well as standby fees, impact fees, fire
plans, and other district matters plus the rates charged by privately-owned and member-owned utilities.
Texas Real Estate License Act (TRELA)
The law which established the Texas Real Estate Commission and governs the licensure and lawful behavior of Real
Estate Brokers and Salespersons. The Texas Real Estate License Act may be amended by the State Legislature, as
it deems necessary.
Texas Real Estate Commission (TREC)
The state regulatory agency responsible for the education and licensing of Real Estate Brokers, Inspectors and
Salespersons. TREC also provides enforcement of the Texas Real Estate License Act, the Rules of the of the Real
Estate Commission, the Texas Timeshare Act and the Residential Service Company Act. The mission of the Texas
Real Estate Commission is to assist and protect consumers of real estate services, and foster economic growth in
Texas. Through its programs of education, licensing and industry regulation, the Commission ensures the availability
of capable and honest real estate service providers.
Texas Veterans Home Improvement Program
This program assists Texas veterans in the repair and improvement of their principle residence by providing low
interest home improvement loans up to $15,000.
Texas Veterans Housing Assistance Program (VHAP)
Established by a constitutional amendment in 1984, the VHAP assists Texas veterans in the purchase of a principal
residence.
Texas Veterans Land Program
Established by state in 1949 to assist Texas veterans to buy land with a small down payment and with long term
mortgages with low interest rates.
time is of the essence
A clause, which if included in a contract, makes failure to perform by a specified date a material breach or violation of
the contract.
timeshare
An arrangement under which a purchaser receives an interest in real property and the right to use an accommodation
or amenities, or both, for a specified period and on a recurring basis. Used primarily for selling vacation properties.
title
The right of ownership of a property.
title company
A company that provides title insurance policies. In Texas title companies also act as escrow agents, conduct title
searches and hold closings.
title insurance
Protection for lenders or homeowners against financial loss resulting from legal defects in the title.
title search
Checks all the records relating to the property to determine whether the seller can sell the property, and can do so
free of liens.
title theory state
The system in which the lender has legal title to the mortgaged property and the borrower has equitable title. Texas is
not a title theory state. Contrast with lien theory state.

TNRCC
See Texas Natural Resource Conservation Commission.
torrens system
A system of land registration (not used in Texas) in which clear title is established with a governmental authority,
which issues title certificates to owners.
townhouse
A dwelling unit usually with two,three or four floors, and shared structural walls. It can be individually owned, a
condominium, a cooperative, a planned unit development or a rental property.
transaction fee
A fee which may be charged each time you draw on a home equity credit line.
TREC
Acronym - Texas Real Estate Commission.
TRELA
Acronym - Texas Real Estate License Act.
TRERC
Acronym - Texas Real Estate Research Center, now renamed Real Estate Center.
triple net lease
See net lease.
trust deed
The most common method of financing real estate purchases in California (most other states use mortgages). The
trust deed transfers the title to the property to a trustee--often a title company--who holds it as security for a loan.
When the loan is paid off, the title is transferred to the borrower. The trustee will not become involved in the
arrangement unless the borrower defaults on the loan. At that point, the trustee can sell the property and pay the
lender from the proceeds. In Texas it is more commonly refered to as a deed of trust.
trustee
One who as agent for others handles money or holds title to their land.

underwriting
The process of verifying data and approving a loan.
unlawful detainer
An eviction lawsuit.
usufruct
The right to use property--or income from property--that is owned by another.
usury
Charging more than the rate of interest allowed by law.

VA
The Veterans Administration, a federal agency which guarantees loans made to qualified veterans on approved
property.
vara
A measurement of length of 33 1/3 inches in Texas.
variable rate
An interest rate that changes periodically in relation to an index. Payments may increase or decrease accordingly.
variance
An exception to a zoning ordinance, usually granted by a local government. For example, if you own an oddly shaped
lot that could not accommodate a home in accordance with your city's setback requirement, you could apply at the
appropriate office for a variance allowing you to build closer to a boundary line.
vendee
Purchaser.
vendor
Seller.
view ordinance
A law adopted by some cities or towns with desirable vistas--such as those in the mountains or overlooking the
ocean--that protects a property owner from having his or her view obstructed by growing trees. View ordinances don't
cover buildings or other structures that may block views.

village acre
A lot size used in the Houston area to denote a 40,000 square foot parcel. In the Memorial Villages of Bunker Hill,
Hedwig, Hillshire, Hunter's Creek, Piney Point and Spring Valley, lot sizes are often expressed in village acres or a
fractions of village acres. The term was coined by developers who successfully lobbied for slighty smaller, minimum
lot size requirements, in the cities' zoning regulations.

virtual home tour

Any method used to provide internet users with a graphical presentation of a home, or homes. Presentations may
include web pages, java applets, streaming video, panoramic images and bubble views.
void
Having no legal force or effect; legally invalid.
voidable
A contract which appears valid and enforceable on the surface, but may be declared invalid by one of the parties,
such as a contract entered into by a minor.

waiver
The intentional or voluntary relinquishment of a known claim or right.

walk through
(1) A Buyer's on-site inspection of the property being purchased, just prior to closing.
(2) A detailed inspection of a new construction home, in which punch list and cosmetic items are addressed, prior to
final acceptance.
warranty deed
A type of deed that contains express assurances about the legal validity of the title being transferred. See general
warranty deed andspecial warranty deed.
writ of execution
A court order which authorizes and directs the proper officer of the court (usually the sheriff) to carry into effect the
judgment or decree of the court.

zero lot line

A term generally used to describe the positioning of a structure on a lot so that one side rests directly on the lot's
boundary line (no set back). Where allowed by zoning and/or deed restrictions, it is used for "patio homes".
zoning
Exercise of police power of city in regulating and controlling the character or use of property. Zoning laws divide cities
into different areas according to use, from single-family residences to industrial plants. Zoning ordinances control the
 size, location, and use of buildings within these different areas. Houston is the largest city in the U.S. without zoning.
Most of the other cities and villages within the Houston Metropolitan Area do have zoning regulations.
A
abatement:
1. A reduction or decrease. 2. The removal of a nuisance.

A, B, C, D paper:
Mortage 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.

absorption rate:
The total number of vacant square feet of office space divided by the square footage leased per year historically.
Used to analyze demand of office space in a given market area.

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)

abstract of judgment:
A full summary by the court of a judgment. It becomes a general lien on all of a debtor's property in the county where
it is recorded. (See general lien, judgment)

abstracter:
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.

acceleration clause:
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)

acceptance:
An acceptance is a promise by the offeree to be bound by the exact terms proposed by the offeror. The acceptance
must be communicated to the offeror. (See offeree, offeror)

accession:
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.

accounting:
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.

accretion:
The increase or addition of land by the deposit of sand or soil washed up naturally from a river, lake or sea. 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.

accrued depreciation:
1. In accounting, a bookkeeping account that shows the total amount of depreciation taken on an asset since it was
acquired; also called accumulated depreciation. (See depreciation) 2. 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.

accrued items:
In 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.

accusation:
The first step in a disciplinary action against a licensee.
acknowledgment:
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.

acquisition cost:
The amount of money or other valuable consideration expended to obtain title to a property. It includes the purchase
cost, plus such items as appraisal fees, closing costs, finance charges, mortgage loan origination fees and title
insurance. (See title)

acre:
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.

actual damages:
Real, substantial and just damages, or the amount awarded to a complainant in compensation for his actual and real
loss or injury.

actual eviction:
The legal process that results in the tenant's being physically removed from the leased premises. (See eviction,
constructive eviction, lease)

actual notice:
Express information or fact; that which is known; direct knowledge.

addendum:
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.

add-on rate:
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.

ademption:
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)

adjusted basis:
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)

adjustment:
Decrease or increase in the sales price of a comparable property to account for a feature that the property has or
does not have in comparison with the subject property.

adjustment period:
In an adjustable rate mortgage (ARM), the "adjustment period," is the period of time (i.e., one month, three months,
six months, one year, etc.) between changes in one interest rate charged and the next interest rate to be charged.
(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)

administrative agency:
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.

administrative order:
 A legal document signed by the EPA directing an individual, business, or other entity to take corrective action or
refrain from an activity. The order describes the violations and action to be taken and can be enforced in court.

administrator:
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)

administratrix:
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)

advance fee:
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)

ad valorem:
The Latin word for "according to value."

ad valorem tax:
A tax levied according to value, generally used to refer to real estate tax. Also called the general tax.
IRS on Real Estate Taxes

adverse action:
A denial or revocation of credit, a change in the terms of an existing credit arrangement, or a refusal to grant credit
either on the amount requested or on the terms requested.

adverse possession:
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: 1. He or she has been in possession under a claim of right. 2. He or she was in actual, open and
notorious possession of the premises so as to constitute reasonable notice to the record owner. 3. 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). 4. Possession was uninterrupted and continuous
for at least the prescriptive period stipulated by state law.

aesthetic zoning:
Zoning for beauty. May regulate architectural styles, colors or signage. (See zoning)

affirmation:
A formal declaration that an affidavit is true.

affirmative easement:
Gives the owner of the dominant tenement the right to use the servient tenement. (See dominant tenement, servient
tenement)

affidavit:
A sworn written statement 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 1. identifies himself or herself and indicates marital status, 2. certifies that since the examination of
the title on the date of the contracts no defects have occurred in the title and 3. certifies that he or she is in possession
of the property (if applicable).

after-acquired title:
Title or interest acquired by the grantor after a property has been conveyed. (See grantor)

agency:
A relationship created when one person, the principal, delegates to another, the agent, the right to act on his or her
behalf in business transactions and to exercise some degree of discretion while so acting. An agency gives rise to a
fiduciary relationship and imposes on the agent, as the fiduciary of the principal, certain duties, obligations, and high
standards of good faith and loyalty. (See agent, fiduciary, dual agency, buyer's broker)

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).
agent:
One authorized to represent and to act on behalf of another person (called the principal). Unlike an employee, who
merely works for a principal, an agent works in the place of a principal. The main difference between an agent and an
employee is that the agent may bind his or her principal by contract, if within the scope of authority, whereas an
employee may not unless given express authorization. (See law of agency, principal)

agent property evaluation:

A questionnaire filled out by real estate agents while reviewing a listed property. Often completed during the course of
a caravan. (See caravan)

aggrieved party:
One whose 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.

agricultural lease:
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: an agreed cash in advance rental amount (cash rents) or
as a percentage of the profits from the sale of the crop when it is sold (sharecropping). (See cash rents,
sharecropping)

AIDA:
Attention, Interest, Desire, Action. In real estate advertising, creating ads that get the Attention of prospects,
stimulating their Interest in a property, generating a Desire to purchase, and motivating the prospect to take Action.

AIDS:
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 include that someone who 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).

air lot:
A designated airspace over a piece of land. An air lot, like surface property, may be transferred.

air rights:
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 avigation
easement, to provide glide patterns for air traffic.

The air itself is not real property; however, air space 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, subsurface rights)

air quality standards:

The level of selected pollutants set by law that may not be exceeded in outside air. Used to determine the amount of
pollutants that may be emitted by industry

alienation:
The act of transferring ownership, title, 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)

alienation clause:
A provision sometimes found in a promissory note or mortgage that provides that the balance of the secured debt
becomes immediately due and payable at the option of the mortgagee upon the alienation of the property by the
mortgagor. Alienation is usually broadly defined to include any transfer of ownership, title, interest, or estate in real
property, including a sale by way of a contract for deed. Also called a due-on-sale clause. (See acceleration clause)

all-inclusive encumbrance:
See wraparound mortgage

allodial system:
 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.

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
residentally 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.

ambient:
Any unconfined portion of the atmosphere; open air; outside surrounding air.

amendment to the escrow instructions:

A change to escrow instructions requiring the agreement of both buyer and seller. (See escrow instructions)

amendments:
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:
The qualities and state of being pleasant and agreeable. In residential appraising, those peculiar and intangible
benefits of home ownership such as satisfaction of possession and use arising from architectural excellence, scenic
beauty, and desirable social environment.

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)
Appraisal Institute Homepage

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)
ALTA Homepage

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):

On July 26, 1990, President Bush signed into law the Americans with Disabilities Act of 1990 ("ADA"), a federal law
which prohibits discrimination against individuals with disabilities. The ADA addresses discrimination in four general
areas:

1. Employment (Title I);

2. Public services (Title II);
3. Public accommodations and commercial facilities (Title III); and,
4. Telecommunications (Title lV).

The purpose of the ADA is to give individuals with disabilities civil rights protection against discrimination similar to
hose afforded to individuals on the basis of race, color, national origin, sex, and religion.
Americans with Disabilities Homepage—Department of Justice

amortization:
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)

annexation:
An addition to property by the act of joining or uniting one thing to another, as in attaching personal property to real
property, 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)

annuity:
A sum of money recieved by an annuitant in a series of fixed periodic payments.

anticipation
The appraisal principle which holds that value can increase or decrease based on the expectation of some future
benefit or detriment produced by the property. (See appraisal)

antimerger clause
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)

antitrust laws:
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.
Antitrust Division—Department of Justice
Federal Trade Commission

apartment building:
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.

appraisal:
An estimate of the monetary value of a property on the open market; an estimate of a property's type and condition,
its utility for a given purpose or its highest and best use. (See cost approach, income approach, index method,
market-data approach, quantity survey method, sales comparison approach, square-foot method, unit-in-place
method)
Appraisal Foundation

appraiser:
An independent person trained to provide an unbiased estimate of value, such as a professional service performed for
a fee.

appreciation:
An increase in the worth or value of a property due to economic or related causes, which may prove to be either
temporary or permanent; opposite of depreciation. (See depreciation)

appropriation:
Appropriation is the way a taxing body authorizes the expenditure of funds and provides for the sources of 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:

A water right favored in some states where an owner has the exclusive rights to take all the water for specific
beneficial uses. (See correlative water rights, riparian rights)

appurtenant:
Belonging to; adjunctive; appended 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.
appurtenant easement:
An easement that is annexed to the ownership of one parcel and allows the owner the use of the neighbor's land.

aquifer:
An underground water-bearing layer of rock, including gravel and sand, that will yield water in usable quantity.
Aquifers are sources of water for wells and springs.

arbitrage:
Borrowing at one interest rate and investing at a higher rate.

arbitration:
A nonjudicial method of resolving disputes by selecting a neutral party to make a final determination. This method was
either previously agreed to by the disputing parties or stipulated by law.

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)

arrears:
1. The state of being delinquent in paying a debt. 2. 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.

Article 5:
The part of the Business and Professions Code governing transactions in real property sale contracts and trust deeds.

Article 6:
The part of the Business and Professions Code governing real property securities dealers.

Article 7:
The part of the Business and Professions Code governing commissions, loan costs, and payment requirements in
loan brokerage activities.

asbestos:
A mineral once used in insulation and other materials that can cause respiratory diseases. Asbestos has been
classified as carcinogenic. (See carcinogen)
National Safety Council on Asbestos

asbestos containing material (ACM):

The EPA defines asbestos containing material as any material or product that contains more than one percent
asbestos. Some states regulate smaller percentages of asbestos containing material.

Asbestosis:
A disease associated with inhalation of asbestos fibers. The disease makes breathing progressively more difficult and
can be fatal. (See asbestos)

"as-is":
Words in a contract intended to signify that no guarantees, whatsoever, are given regarding the subject property and
that it is being purchased exactly as it is found. An "as-is" indicator is intended to be a disclaimer of warranties or
representations. The recent trend in the courts to favor consumers tends to prevent sellers from using "as-is" wording
in a contract to shield themselves from possible fraud charges brought on by neglecting to disclose material defects in
the property.

assemblage:
The combining of two or more adjoining lots into one larger tract to increase their total value.

assessment:
The imposition of a tax, charge or lein, usually according to established rates.

asset:
An asset is something of value, encumbered or not, owned by a person, corporation or other entity. Assets are
financial (cash or bonds), tangible or intangible, or physical (real or personal property).

asset management:
The assembly, management and disposition of a portfolio of investment properties.

assignment:
The transfer of the right, title and interest in the property of one person (the assignor) to another (the assignee). There
are assignments of, among other things, mortgages, sales contracts, contracts for deeds, leases and options.

associate broker:
 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.

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. (See acceleration clause, due-on-sale clause, novation,
subrogation)

assumption "subject to":

When a loan is taken "subject to," the seller agrees to remain liable and the buyer accepts no liability in the event of a
deficiency on a foreclosure. (See assumption of mortgage, foreclosure)

attachment:
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.

Attorney General:
The chief law officer of the federal or state government, who appears for the people in criminal court.

attorney-in-fact:
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)

attractive nuisance doctrine:

An owner has a duty to reasonably protect children from injury when his or her property is likely to attract children.

auction:
Selling property to the highest bidder.

automated underwriting:
Computer systems that permit lenders to expedite the loan approval process and reduce lending costs.

automatic extension:
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.

avulsion:
The sudden tearing away of land, as by earthquake, flood, volcanic action or the sudden change in the course of a
stream.
B
backup offer:
An offer to buy, submitted to a seller, with the understanding that the seller has already accepted a prior offer; a
secondary offer. Sometimes the seller accepts the backup offer contingent on the failure of the sales transaction on
the part of the first purchaser within a specified period of time. The seller must be careful how he or she proceeds,
however, when the time for the buyer's performance, under the first contract, has expired.

back-end qualification:
When qualifying a prospective buyer for financing, the ratio of the borrower's income to monthly debt obligation is a
primary consideration. Based on "back-end qualification," the ratio of a prospect's income to their total housing
expense plus their long-term debt obligation should not exceed 36%. (See front-end qualification, prequalify)

back-end ratio:
The ratio of monthly housing costs (PITI) plus long-term debt service to total monthly income. (See front-end ratio,
PITI)

bail bond lien:

A real estate owner who is charged with a crime for which he or she must face trial, and may post bail in the form of
real estate rather than cash. The execution and recording of such a bail bond creates a specific, statutory, voluntary
lien against the owner's real estate. If the accused fails to appear in court, the lien may be enforced by the sheriff or
another court officer.

balance:
The appraisal principle that states that the greatest value in a property will occur when the type and size of the
improvements are proportional to each other as well as the land.
balanced trust:
A "combination trust" is referred to as a "balanced trust" in California. (See combination trust)

balloon payment:
Under an installment loan agreement, a final payment that is substantially larger than the previous installment
payments and repays the debt in full; the remaining balance that is due at maturity (stop date) of a note or obligation.
(See amortization, fully amortized, stop date)

baluster:
Any of the vertical supports for a stair, balcony or railing.

banker's rule:
Using a 360-day year for prorations.

bankruptcy:
A condition of financial insolvency in which a person's liabilities exceed assets and the person is unable to pay current
debts.

bankruptcy score:
A scoring system to indicate risk of borrower default. (See bankruptcy)

bargain and sale deed:

A deed that carries with it no warranties against liens or other encumbrances but that does imply that the grantor has
the right to convey title. The grantor may add warranties to the deed at his or her discretion.

base line:
One of a set of imaginary lines running east and west used by surveyors for reference in locating and describing land
under the government survey method of property description.

basic form homeowner's policy:

The most common homeowner's policy is called a basic form. It provides property coverage against fire and lightning;
glass breakage; windstorm and hail; explosion; riot and civil commotion; damage by aircraft; damage from vehicles;
damage from smoke; vandalism and malicious mischief; theft; and loss of property removed from the premises when
it is endangered by fire or other perils. (See homeowner's insurance policy)

basis:
The dollar amount that the Internal Revenue Service attributes to an asset for purposes of determining annual
depreciation or cost recovery, and gain or loss in the sale of the asset. The determination of basis is of fundamental
importance in tax aspects of real estate investment. All property has a basis. If property was acquired by purchase,
the owner's basis is the cost of the property plus the value of any capital expenditures for improvements to the
property, reduced by any cost recovery depreciation actually taken or allowable. The basis is also reduced by any
untaxed gain "carried over" to the new property in cases where the new property is a replacement of a former
residence or is acquired through a like-kind exchange or through an involuntary conversion. This new basis is called
the property's adjusted basis. (See adjusted basis, depreciable basis, original basis)

before-tax cash flow:

The result when the annual debt service is subtracted from the net operating income. (See annual debt service, net
operating income)

benchmark:
A permanent reference mark or point established for use by surveyors in measuring differences in elevation.

beneficiary:
A person who receives benefits from the gifts or acts of another, as in the case of one designated to receive the
proceeds from a will, insurance policy, or trust; the real owner, as opposed to the trustee who holds only legal title.
With a trust, the trustee holds the legal title, but the beneficiary enjoys the benefits of ownership.

beneficiary statement:
When an existing loan is to be paid or assumed by a buyer, the escrow agent will obtain a statement of the balance
due on the loan so the buyer receives the proper amount of credit.

best-faith estimate:
The acquisition cost is the purchase price plus a "best-faith estimate" of all settlement costs. (See acquisition cost)

blended rate:
An interest rate for a newly financed loan that is higher than the existing rate but lower than the current market rate.

bilateral contract/agreement:
A contract in which each party promises to perform an act in exchange for the other party's promise to perform. The
usual real estate contract is an example of a bilateral contract in which the buyer and seller exchange reciprocal
promises respectively to buy and sell the property. If one party refuses to honor his or her promise and the other party
is ready to perform, the nonperforming party is said to be in default.
bill of sale:
A written agreement by which one person sells, assigns or transfers to another his or her right to, or interest in,
personal property. A bill of sale is sometimes used by a seller of real estate to evidence the transfer of personal
property, such as when the owner of a store sells the building and includes the store equipment and trade fixtures.

BIF:
Bank Insurance Fund

binder:
An agreement that may accompany an earnest money deposit for the purchase of real property as evidence of the
purchaser's good faith and intent to complete the transaction.

binder policy:
A type of title insurance policy offered by some title companies which allows for a refund of the basic title insurance
rate if the property is sold within a specified period of time.

biweekly loan:
A loan with twice-monthly payments to match a borrower's payroll schedule.

bird dogs:
See centers of influence.

blanket loan:
A mortgage covering more than one parcel of real estate, providing for each parcel's partial release from the
mortgage lien upon repayment of a definite portion of the debt.

blanket trust deed:

A trust deed secured by several properties or a number of lots. A blanket mortgage is often used to secure
construction financing for proposed subdivisions or condominium development projects. The developer normally
seeks to have a "partial release" clause inserted in the mortgage so that he or she can obtain a release from the
blanket loan for each lot as it is sold, according to a specified release schedule.

blind ad:
An advertisement that does not include the name and address of the person placing the ad, only a phone number or
post office box address. Licensed brokers are generally prohibited by state license laws from using blind ads.

blockbusting:
An illegal and discriminatory practice whereby one person induces another to enter into a real estate transaction from
which the first person may benefit financially by representing that a change may occur in the neighborhood with
respect to race, sex, religion, color, handicap famial status or ancestry of the occupants. A change possibly resulting
in the lowering of the property values, a decline in the quality of schools or an increase in the crime rate. Also called
panic selling or panic peddling.

blue-sky provision:
Requiring full disclosure of all risks in a limited partnership solicitation under the Uniform Partnership Act. (See
Uniform Partnership Act)

bona fide:
In good faith, honestly, openly, and sincerely and without deceit or fraud. In an attitude of trust and confidence,
without notice of fraud.

bond:
1. A debt instrument; an obligation to pay; a security issued by a corporation. 2. A written promise that accopmpanies
a mortgage and is evidence of the debt secured by the mortgage. 3. An interest-bearing certificate issued by a
government to finance public projects. (See security)

boot:
Money or other property that is not like-kind, which is given to make up any difference in value or equity between
exchanged properties. Boot may be in the form of cash, notes, gems, the market value of an asset such as a
mortgage, land contract, personal property, goodwill, a service or a patent offered in an exchange. The taxable gain in
the like-kind exchange is recognized immediately to the extent of boot, whereas, other gain from the exchange may
be deferred until subsequent transfer. (See exchange, like-kind)

branch office
A secondary place of business apart from the principal or main office from which real estate business is conducted. A
branch office usually must be run by a licensed real estate broker working on behalf of the broker.

breach of contract:
Violation of any of the terms or conditions of a contract without legal excuse; default; nonperformance. The
nonbreaching party can usually seek one of three alternative remedies upon a material breach of the contract:
rescission of the contract, action for money damages or an action for specific performance.

breaker:
 A switch-like device in electrical panel boxes used to keep the electrical current from exceeding the recommended
load for the wire size connected to the breaker.

breaker panel:
A large rectangular shaped electrical box used to distribute electricity throughout a house after passing through
protective breakers located within the box. (See breaker)

break-even point:
In income property, the figure at which rental income is equal to expenses and debt service.

bridge loan:
A short-term loan made to cover the period between the termination of one loan, such as an interim construction loan,
and the beginning of another loan, such as a perminent takeout loan. (See interim financing, swing loan, takeout)

broad-form homeowner's policy:

Covers falling objects; damage due to the weight of ice, snow or sleet; collapse of all or part of the building; bursting,
cracking, burning or bulging of a steam or hot water heating system or of appliances used to heat water; accidental
discharge, leakage or overflow of water or steam from within a plumbing, a heating or an air-conditioning system;
freezing of plumbing, heating and air-conditioning systems and domestic appliances; and injury to electrical
appliances, devices, fixtures and wiring from short circuits or other accidentally generated currents.

broker:
One who acts as an intermediary on behalf of others for a fee or commission.

broker cooperation:
Working with outside licensed real estate brokers who have prospective tenants in exchange for a finder's fee or
commission split.

brokerage:
The bringing together of parties interested in making a real estate transaction. The business of a broker in acting as a
third party agent to a transaction.

brownfields:
Economically depressed urban areas suffering from real or perceived hazardous material contamination.

budget loan:
A loan with payments set up to cover taxes and insurance in addition to interest and principal reductions.

building code:
An ordinance that specifies minimum standards of construction for buildings to protect public safety and health. (See
Uniform Building Code)

building inspection:
An overall inspection of a home or building performed by a qualified contractor or inspector. The inspection usually
covers all major systems including foundation, plumbing, electrical, roof, heating and air conditioning.

Building Owners and Managers Association (BOMA):

A national organization of more than 4,000 professionals in the highrise/office building industry, with 80 local BOMA
associations. The Building Owners and Managers Institute (BOMI) is the related educational institute that provides
professional training in all aspects of building management and operations via courses in individual study leading to
professional certification as a Real Property Administrator (RPA). The seven required courses are Engineering and
Building Structures, Real Property Maintenance, Risk Management and Insurance, Accounting and Financial
Concepts, Law, Finance and Management Concepts.
Building Owners and Managers Association Website

building permit:
Written governmental permission for the construction, alteration or demolition of an improvement, showing compliance
with building codes and zoning ordinances.

build-up rate:
The discount or interest rate used in the selection of the capitalization rate for an investment property. (See
capitalization rate)

Bulk Sales Act:

An act that requires the recording and publication of a sale that is not in the normal course of business. The act is
intended to give notice to the creditors of the seller so they can protect their interests.

bulk sales transfer:

Any transfer in bulk (and not a transfer in the ordinary course of the seller's business) of a major part of the materials,
inventory or supplies of an enterprise. The Uniform Commercial Code (UCC) regulates bulk transfers to deal with
such commercial frauds as a merchant selling out stock, pocketing the proceeds and leaving creditors unpaid. The
UCC requires the buyer of the goods to demand that the seller provide a schedule of all the property and a list of all
creditors and that the buyer give notice to creditors of the pending sale. Failure to comply with UCC means that the
 transfer or sale is ineffective in respect to the claims of any creditor of the seller. Bulk transfers usually become
relevant upon the liquidation or sale of a business.

Under state law, a bulk sale must be reported by the seller to the state tax authorities, and the purchaser must withhold payment
until the seller's tax clearance is received. If the tax clearance is not made, the purchaser may become liable for any unpaid taxes
that are a lien against the items sold. (See Uniform Commercial Code)

bulk transfer of goods:

Any transfer in bulk of a substantial part of the materials, supplies, merchandise, equipment or other inventory of an
applicable enterprise that is not in the ordinary course of the transferor's business.

bulk zoning:
Zoning for density. Regulates height restrictions, open-space requirements, parking and setback. (See zoning)

bullet loan:
A loan that includes a call date earlier than its normal amortization period; also called a renegotiable rate loan or a
rollover loan.

burden of proof:
The obligation to prove the truth or falsity of a fact.

bundle of legal rights:

The concept of land ownership that includes ownership of all legal rights to the land. For example, possession, control
within the law and enjoyment.

business cycle:
The wavelike movement of increasing and decreasing economic prosperity consisting of four phases: expansion,
recession, contraction and revival.

business opportunity:
Any type of business that is for sale (also called business brokerage). The sale or lease of the business and goodwill
of an existing business, enterprise or opportunity, including a sale of all or substantially all of the assets or stock of a
corporation, or assets of partnership or sole proprietorship.

buydown:
A financing technique used to reduce the monthly payments for the first few years ofa loan. Funds in the form of
discount points are given to the lender by the builder or seller to buy down or lower the effective interest rate paid by
the buyer, thus reducing the monthly payments for a set time.

buyer listing:
An agreement where a buyer agrees to pay a commission if a broker locates a property that the buyer purchases.

buyer's agent:
A residential real estate broker or salesperson who represents the prospective purchaser in a transaction. The buyer's
agent owes the buyer/principal the common-law or statutory agency duties. (See seller's agent)
Real Estate Buyer's Agent Council Online
National Association of Exclusive Buyer Agents

buyer-agency agreement:
A principal-agent relationship in which the broker is the agent for the buyer, with fiduciary responsibilities to the buyer.
The broker represents the buyer under the law of agency.

buyer's broker:
A broker who represents the buyer in a fiduciary capacity. Some buyer's brokers practice single agency, in which they
represent either buyers or sellers, but never both in the same transaction. Some buyer's brokers represent only
buyers and refer prospective sellers to other brokers. The broker is paid by the buyer, or through the seller or listing
broker at closing, provided all parties consent.

buying motives:
Ownership of real estate satisfies certain basic human needs. These needs are what motivate a person to purchase
real property. They include: comfort and convenience, desire for profit, pride of ownership, and security.

buying on contract:
A type of contract used in connection with the sale of real property where the seller retains legal title to the property
until some future date, usually when the full purchase price has been paid. Referred to as one of four terms, all
meaning much the same thing: agreement to convey, contract for deed, contract of sale, or installment sales contract.

buying signals:
Words, actions or facial expressions that signal a prospect's readiness to buy.

buyer's remorse:
 Buyers of expensive items, like a home or automobile, sometimes regret their decision. They wonder if they paid too
much or made the wrong selection. This fear of having made a serious mistake is referred to as "buyer's remorse."

Real Estate Glossary

A B C D E F G
H I J K L M N
O P Q R S T U
V W X Y Z

Related Web Links

C
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.

California Residential Mortgage Lending Act:

An act administered by the Commissioner of Corporations which provides licensing authorizing mortgage lending and
brokering.
CRMLA pages at the Department of Corporations

CAL-FIRPTA:
California's version of the federal FIRPTA. It is a tax act which became effective in 1988 and was subsequently
amended in September, 2002 to become a withholding tax for residents and non-residents who sell California real
estate. Assembly Bill 2065 requires that all sales closing after December 31, 2002 in California withhold 3 1/3% of the
sales price for certain California real property transactions. (See FIRPTA)

Cal-Vet:
A program to help eligible California Veterans finance the purchase of farms and ranches within the state.
Cal-Vet Loan Programs

canceling escrow:
Providing written notification that an escrow is to be terminated; must be done by mutual consent of all parties to the
escrow and in accordance with governing agreements.

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.

No capacity to contract: The inability of a person to enter into a valid contract under any circumstances. Such inability
can arise when a person has been adjudicated insane or is an officer of a corporation who is not authorized to
execute a contract in behalf of a corporation.

capital gain:
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)

capital loss:
Loss sustained from the sale of an asset, where the sales price is less than the adjusted book basis. (See adjusted
basis)

capitalization:
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)

capitalization rate:
The rate of return a property will produce on the owners investment.

capping:
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)
caps:
Yearly and/or life-of-loan limitations on the amount of variation allowed when adjusting interest on variable-rate loans.
(See adjustable rate mortgage (ARM), rate cap)

caravan:
A group tour by a real estate office's sales agents to view listed properties. (See agent property evaluation)

carbon monoxide (CO):

A colorless, odorless gas that occurs as a byproduct of burning such fuels as wood, oil and natural gas due to
incomplete combustion.
National Safety Council on Carbon Monoxide

care:
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 on
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)

carcinogen:
A cancer producing substance. (See asbestos, radon)

carry-back:
Financing where the seller takes back a note for part of the purchase price secured by a junior mortgage, wraparound
mortgage or contract for deed. (See wraparound, junior mortgage)

cash flow analysis:

A cash flow analysis shows the effect an investment property has on an owner's income in terms of tax benefits.
Analyzes the return on investment after taxes on an income producing property. Measures the property manager's
performance from period to period by comparing income and expenses for a given property.

cash now:
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.

cash-out:
When a seller of a property wants to receive the entire sales price in cash with no carry-back financing. (See carry-
back)

"cash-out" scheme:
Where a buyer offers a large cash downpayment and asks the seller to carry-back the balance as a subordinate trust
deed. (See carry-back, subordination clause)

cash rent:
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.

casualty:
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.

caveat emptor:
Latin for "let the buyer beware." A buyer should inspect the goods or realty before purchase.

CC&Rs:
Covenants, conditions and restrictions are limitations on land use, which are imposed by deeds, 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)

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.

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 (CO):

A certificate issued by a governmental authority indicating that a building is ready and fit for occupancy and that there
are no building code violations. Some condominium developers insert language into the sales contract to the effect
that upon notification that the units are ready for occupancy, the buyer must accept the unit despite any construction
defects that may exist, although acceptance will not bar the buyer from obtaining redress for such defects. Once the
building has been certified for occupancy the developer can then close the individual sales, transfer title to the buyers
and, most important, begin to pay off the construction loan and eliminate the interest payments.

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)

change:
The appraisal principle that holds that no physical or economic condition remains constant. (See appraisal)

chattel:
See personal property.

civil action:
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 law:
A system of law codified by statutes. (See common law, constitutional law, Roman Civil Law, statutory law)

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)

classified ads:
Advertisements purchased by the line and placed in the classified ad section of newspapers or real estate magazines.
Used primarily for advertising residential properties and rentals. (See display ads)

client:
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.

close-of-escrow/closing:
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.

closing costs:
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; others are a matter of local custom and practice.

closing statement:
A detailed cash accounting of a real estate transaction showing all cash received, all charges and credits made and
all cash paid out in the transaction.

cloud on title:
Any document, claim, unreleased lien or encumbrance that may impair the title to real property or make the title
doubtful: usually revealed by a title search and removed by either a quitclaim deed or suit to quiet title.

CLTA policy:
A standard coverage title insurance policy protects real estate buyers in matters of record and specific risk. (See
standard coverage policy, title insurance)

clustering:
The grouping of homesites within a subdivision on smaller lots than normal, with the remaining land used as common
areas.

CMO:
Securities (a series of bonds) issued backed by mortgages.

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.

codicil:
A supplement or an addition to a will, executed with the same formalities as a will, that normally does not revoke the
entire will.

coinsurance clause:
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.

collateral:
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.

combination trust:
A trust that participates in real estate investments as both financier and investor.

combustion gases
The gasses that are emitted from a flame upon the combustion of a flammable material.

commercial acre:
 A commercial acre is that portion of an acre of newly subdivided land remaining after dedication for streets, sidewalks,
parks and so on.

commercial bank:
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®, confers the designation CCIM (Certified Commercial Investment Member).
CCIM Commercial Real Estate Network

commercial leasehold insurance:

Insurance that covers payment of rent in the event the insured (tenant) cannot pay it.

commercial real estate/property:

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. Public accommodations.

commercial waste:
All solid waste from businesses. This category includes but is not limited to, solid waste originating in stores, markets.
office buildings, restaurants, shopping centers, and theaters.

commingling:
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)

commission:
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.

commitment:
1. 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. 2. 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.

common areas:
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, elevators, parks,
playgrounds and barbecue areas, which are sometimes called green belts. In shopping centers, the common areas
are parking lots, malls and traffic lanes.

common elements:
Parts of a property that are necessary or convenient to the existence, maintenance and safety of a condominium or
are normally in common use by all of the condominium residents. Each condominium owner has an undivided
ownership interest in the common elements. (See condominium ownsership)

common interest:
The percentage of undivided ownership in the common elements belonging to each condominium apartment, as
established in the condominium declaration.

common interest subdivision:

A subdivision in which the owners own or lease a separate lot or unit together with an undivided interest in the
common areas of the subdivision. (See common areas, subdivision)

common law:
The body of law based on custom, usage and court decisions. (See civil law, constitutional law, stare decisis,
statutory law)

community property:
A system of property ownership based on the theory that each spouse has an equal interest in the property acquired
by the efforts of either spouse during marriage. 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. Separate
property is considered all community property and is automatically owned equally by each spouse regardless of whose name the
record title is held under.
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.
Community Reinvestment Act of 1977—Full Text

company dollar:
The term "company dollar" is the amount left over after all commissions have been paid out.

comparables:
Properties that are substantially equivalent to the subject property.

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.

compensating factors:
Positive factors in an individual's credit history which offset negative factors. "Compensating factors" increase the
possiblity that a borrower's loan application will be approved. (See credit score)

compensation:
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, whichever way 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.

compensatory damages:
Monetary damages paid to compensate an injured party for a loss. (See exemplary damages, nominal damages)

competition:
The appraisal principle that states that excess profits generate competition. (See appraisal)

completion bond:
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.

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)
EPA—CERCLA Overview

comprehensive zoning:
A broad zoning plan over a large area. (See general plan, zoning)

compound interest:
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.

computerized loan origination (CLO) system:

An electronic network for handling loan applications through remote computer terminals linked to various lenders'
computers.

concession:
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.

concurrent ownership:
 Ownership by two or more persons at the same time, such as joint tenants, tenants by the entirety, tenants in
common or community property owners. (See joint tenancy, tenants in common)

concurrent performance:
Occurring simultaneously; real estate exchanges often must be recorded concurrently.

condemnation:
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).

condition precedent:
A condition that requires a certain action or a specified event to take place before an estate granted can take effect.
For example, most installment real estate sales contracts require all payments to be made by the time specified
before the buyer can demand transfer of title.

condition subsequent:
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).

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-use permit:
Written governmental permission allowing a use inconsistent with zoning but necessary for the common good, such
as locating an emergency medical facility in a predominantly residential area. (See zoning)

condominium:
A subdivision providing an exclusive ownership interest in the airspace of a particular portion of real property, as well
as an interest in common in a portion of that property.

condominium ownership:
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 lienable 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.

conduits:
A party that purchases loans from one lender and resells the loans to investors.

confession of judgment clause:

Permits judgment to be entered against a debtor without the creditors needing to institute legal proceedings.

conforming loan:
A mortgage loan that meets all Fannie Mae and Freddie Mac underwriting guidelines. (See Fannie Mae, Freddie
Mac)

conformity:
The appraisal principle that holds that the greater the similarity among properties in an area, the better they will hold
their value. (See appraisal)

conservator:
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.

consideration:
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.
constitutional law:
Law set forth in federal or state constitutions. (See civil law, common law, statutory law)

construction loan:
See interim financing.

constructive eviction:
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)

constructive fraud:
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)

constructive notice:
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.

constructive receipt:
Control of the cash proceeds in a delayed exchange without actual physical possession by the exchanger or his or her
agent.

contingency:
A provision in a contract that requires a certain act to be done or a certain event to occur before the contract becomes
binding.

continuing education:
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.

contract:
A legally enforceable promise or set of promises that must be performed and for which, if a breach of the promise
occurs, the law provides a remedy. A contract may be either unilateral, by which only one party is bound to act, or
bilateral, by which all parties to the instrument are legally bound to act as prescribed. (See valid contract)
FindLaw Contract Law Web Guide

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.

The contract for deed document usually contains the names of the buyer and seller, the sales price, the terms of
payment, a full legal description and a lengthy statement of the rights and obligations of the parties, similar to those
under a mortgage, including use of premises, risk of loss, maintenance of premises, payment of taxes and insurance
and remedies in case of default. Specific rights, such as acceleration or the right to prepay without penalty, must be
expressly written into the agreement. The contract is usually signed by both parties, acknowledged and recorded.

In a dynamic and rapidly appreciating real estate market, the contract for deed enables buyers to purchase property
on reasonable financial terms and thereby benefit from the appreciation of the property values. Many buyers then sell
the property at a profit before their final payment becomes due. In a tight money market where it is difficult to qualify
prospective buyers for conventional financing, the contract for deed is frequently the best method to sell or purchase a
property. Especially benefited by the contract for deed are young couples, who would have difficulty qualifying for a
bank loan at the time of entering into the contract for deed, but whose incomes will increase before maturity of the
agreement, enabling them to refinance and pay off the contract for deed.

Some sellers prefer to sell on a contract for deed because it can create an installment sale, which will enable them to defer
payment of a portion of tax. In addition, if the buyer defaults the seller can sue for strict foreclosure, something he or she cannot
do with a mortgage. However, a seller who chooses this remedy is rescinding the contract and cannot seek a deficiency judgment
for the unpaid balance.

Some contracts for deed provide that seller and/or buyer can convert the contract into a conventional security transaction. For
example, upon payment of 40 percent of the purchase price, the seller may be required to deliver a deed and take back a purchase-
 money mortgage from the buyer for the balance of the purchase price.

Use of a contract for deed is not without some disadvantages.

From the buyer's viewpoint:

1. Because the seller need not deliver good marketable title until the final payment, the buyer must, at the risk
of default, continue to make payments even when there may be a doubt whether the seller will be able to
perform when all payments are made. This can be especially serious when the seller is a corporation,
because its directors and shareholders have only limited liability. Some attorneys try to minimize this
problem by inserting a clause to the effect that "the property is to be conveyed free and clear of all
encumbrances except (those specified herein) and to remain free and clear except for the above-stated
encumbrances." The seller is then discouraged from placing further mortgages and encumbrances on the
property during the period of the contract for deed.

2. The buyer may have difficulty getting the seller to deed the property upon satisfaction. By withholding a
large enough final payment, the buyer often can persuade a seller to pay the costs of drafting the deed. In
addition, at the time of final payment, the seller might be suffering a legal disability or may be missing, or
may be bankrupt or dead. The property might then be tied up in probate.

3. The buyer might be restricted from assigning his or her interest in the contract for deed by covenants
against assignment.

4. Liens that arise against the seller could cloud the title.

5. Unless a collection account is used, problems could arise if the seller does not apply the buyer's payments
to the underlying mortgage.

From the seller's viewpoint:

1. If the buyer defaults, the process of clearing record title may be time consuming and costly, especially if the
buyer is under a legal disability or is bankrupt, is a nonresident or has created encumbrances in favor of
persons who might have to be joined in any quiet title action.

2. The seller's interest in the contract for deed is less salable than a mortgagee's interest would have been had
the seller sold under a purchase-money mortgage.

3. By its very nature, the contract for deed is a contract, and all contracts are subject to differing interpretations
with the possibility of disputes and litigation.

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.

contract rent:
The rental income as stipulated by the parties in a lease.

contribution:
The appraisal principle that states that the value of any component of a property is what it gives to the value of the
whole or what its absence detracts from that value. (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)

conventional loan:
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 the lender looks solely to the credit of the borrower and the
security of the property to ensure payment of the debt. Conventional loans include those loans insured by private
mortgage insurance companies.

Because the lender is not subject to the more stringent government regulations of the FHA and VA, conventional
loans are frequently more flexible with respect to terms and interest rates, although they do reflect a higher interest
rate and larger down payment requirements due to the higher risk involved. Nonconventional loan interest rates (VA
loans) are fixed by federal regulation. Conventional loans are subject to institutional regulation, which may be
statutory (federal, state) or self-created. (See FHA, VA loan)

conversion:
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)

convertible loan:
An adjustable-rate loan that the borrower can convert to fixed-rate at any time during the life of the loan. (See
adjustable-rate mortgage, hybrid financing)

converted-use properties:
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.

conveyance:
A term used to refer to any document that transfers title to real property. The term is also used in describing the act of
transferring. (See title)

cooperating broker:
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

An agreement between brokers specifying the commission split should the cooperating broker sell a property listed by
the listing broker. (See cooperating broker, listing broker)

cooperative:
A residential multiunit building whose title is held by a trust or corporation that is owned by and operated for the
benefit of persons living within the building, who are the beneficial owners of the trust or stockholders of the
corporation, each possessing a proprietary lease.

co-ownership:
Title ownership held by two or more persons.

coping:
1. The tile around the outer edge of a swimming pool at the water line. 2. The flat portion at the top of a parapet wall
rising above the roof line of a building.

corporation:
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.

correction lines:
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 irragation). (See
appropriative water rights, riparian rights)

correspondent:
A mortgage banker. (See mortgage banker)

corrosion:
The dissolving and wearing away of metal caused by a chemical reaction such as between water and the lead pipes
or solder in a home's plumbing.

corrosive:
A substance that eats or wears away materials gradually by chemical action.

cosigners:
Additional signers of a financial agreement that add their personal guarantees to that of the borrower.

cost approach:
The process of estimating the value of a property by adding to the estimated land value. The appraiser's estimate of
the reproduction or replacement cost of the building, less depreciation. (See appraisal)

cost basis:
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 recovery:
An Internal Revenue Service term for depreciation.

cost-plus:
A method of paying construction contractors when the contractor is paid the actual costs of the job plus a percentage
for profit. (See fixed-fee)

counteroffer:
A new offer made in response to an offer received. It has the effect of rejecting the original offer, which cannot be
accepted thereafter, unless revived by the offeror.

covenant:
A written agreement between two or more parties in which a party or parties pledge to perform or not perform
specified acts with regard to property; usually found in such real estate documents as deeds, mortgages, leases and
contracts for deed.

covenant 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 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 ("seisen" simply means
"possession").

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 even against himself/herself and all those who
previously held title.

covenants that run with the land:

Convenants that become part of the property rights and benefit or bind successive owners of the property.

crawl space:
1. The space between the ground and the first floor, often found in homes with no basement. 2. The space found
between the top floor and the roof, often found in the place of an attic.
creative financing:
Structuring the financing of a real estate transaction based on the cash positions of the buyer and seller. It involves
working in conjunction with the existing financing to create a financing package that enables the buyer to purchase the
property at better interest rates or terms than a conventional loan.

credit:
1. Obligations that are due or are to become due to a person. 2. 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.

credit loan:
A mortgage issued upon the financial strength of a borrower, without regard for collateral.

credit rating:
The Dun & Bradstreet credit rating system. Rating the financial strength of commercial and industrial companies.
Dun & Bradstreet Website

credit report:
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)

credit repository:
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)
Equifax
Experian

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)
Fair, Isaac and Company on Credit Scoring

credit unions:
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 mortgages and deed of trust loans. (See noninstitutional lenders)

creditor:
The person to whom a debtor owes a debt or obligation; a lender.

creosote:
A potentially flammable oily byproduct of wood burning. Often builds up in the chimney of wood burning fireplaces.

cross-default:
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)

crunch down:
A form of recasting where the lender rewrites an existing mortgage loan to a lower balance to avoid a foreclosure.
(See foreclosure, recasting)

curtesy:
A life estate, usually a fractional interest, given by some states to the surviving husband in real estate owned by his
deceased wife. Most states have abolished curtesy.

cumulative zoning:
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)

customer:
A prospective buyer of real estate. Not to be confused with a property seller, who is the listing broker's client.