Glossary / Dictionary

ABSTRACT OF TITLE- A compilation of the recorded documents relating to a parcel of land, from which and attorney may give an opinion as to the condition of title. Still in use in some states, but giving way to the use of title insurance.

ACCELERATION CLAUSE- Clause used in an installment note and mortgage (or deed of trust), which gives the lender the right to demand payment in full upon the happening of a certain event, such as failure to pay an installment by a certain date, change of ownership without the lenderÍs consent, destruction of the property (see Waste), or other event which endangers the security of the loan. (See also: Alienation Clause).

ACREAGE- Any parcel of land which may be measured in terms of acres. Usually qualified by its zoning or usage, such as residential acreage, industrial acreage, etc.

ADDITIONAL DEPOSIT- A buyer of real property will generally give a small deposit with an offer, and a more substantial deposit after the offer has been accepted. The second deposit is the ñadditional depositî.

ADJUSTABLE MORTGAGE LOANS(AML'S)- Mortgage loans under which the interest rate is periodically adjusted to more closely coincide with current rates. The amounts and times of adjustment are agreed to at the inception of the loan. Also called: Adjustable Rate Loans, Adjustable Rate Mortgages (ARMÍs), Flexable Rate Loans, Variable Rate Loans. (See also: Indexing, Rate Index).

ADVANCE FEE- A fee charged by a broker to a seller to cover all or a portion of the brokerÍs costs of promoting the property. The fee is generally credited against commissions but is not refunded if no commissions are received. Most frequently used in connection with large offerings which require a substantial outlay of funds for promotion.

ADVERTISING- In real estate, mainly confined to newspaper ads and signs on the property, although advertising of the real estate brokerage may extend to radio and television. Recently, newspaper ads have become more binding on the advertiser, especially with regard to the financing advertised.

AFFIDAVIT- A written statement or declaration, sworn to before and officer who has authority to administer an oath. AGENCY- Any relationship in which one party (agent) acts for or represents another (pricipal) under the authority of the latter. Agency involving real property should be in writing, such as listings, trusts, powers of attorney, etc.

AGENCY AGREEMENT (AGENCY LISTING)- In some states, the term describing a listing under which the brokerÍs commission is protected against a sale by other agents but not by a sale by the principal. Called a ñnon-exclusiveî listing in some states.

AGENT- One who is authorized to act for or represent another (principal), usually in business matters. Authority may be express or implied.

AGREEMENT- A general term usually describing a common view of two or more people regarding the rights and obligations of each with regard to a given subject. Not necessarily a contract, although all contracts are agreements.

AGREEMENT OF SALE- Has two seperate meanings, depending on area of the country. In some states it is synonomous with a purchase agreement (See: Purchase Agreement). In other states, it is synonomous with a land contract (See: Land Contract).

AIR RIGHTS- The right to the use of the air space above property without the right to use the surface of the property. However, air rights may restrict surface rights, especially height of improvements.

AMENDMENT- A change, either to correct an error or to alter a part of an agreement without changing the principal idea or essence.

AMORTIZATION- Payment of a debt in equal installments of principal and interest, rather than interest only payments.

AMORTIZE- To reduce a debt by regular payments of both principal and interest, as opposed to interest only payments.

ANNUAL PERCENTAGE RATE (A.P.R.)- The yearly interest percentage of a loan, as expressed by the actual rate of interest paid. For example: 6% add-on interest would be much more than 6%. The A.P.R. is disclosed as a requirement of federal truth in lending statutes.

APPRAISAL- An opinion of value based upon a factual analysis. Legally, an estimation of value by two disinterested persons of suitable qualifications.

APPRAISAL METHODS- Generally, three major methods of appraisal: Cost Approach, Income Approach, Income Approach, Market Value (comparables) Approach.

APPRAISAL REPORT- A written report by an appraiser containing his opinion as to the value of a property and the reasoning leading to this opinion. The factual data supporting the opinion, such as comparables, appraisal formulas, and qualifications of the appraiser, will also be set forth.

APPRAISED VALUE- An opinion of the value of a property at a given time, based in facts regarding the location, improvements, etc., of the property and surroundings.

APPRAISER- One who is trained and educated in the methods of determining the value of property through analysis of various factors which determine said value.

APPRECIATION- An increased value of property due to either a positive improvement of the area or the elimaination of negative factors. Commonly, and incorrectly, used to describe an increase in value through inflation.

APPROPRIATION- The private taking and use of public property, such as water from a river or lake. Not to be confused with condemnation or expropiation.

APPROVED ATTORNEY- In states where attorneys examine the chain of title before title insurance is issued, the title company will approve certain attorneys as those whose opinion it will accept for the issuance of a title policy.

AQUATIC RIGHTS- Individual rights to the use of the sea and rivers, for the purpose of fishing or navigation, and to the soil in the sea and rivers.

ARBITRATION CLAUSE- A clause in a lease calling for the decision of a third party (arbiter) regarding disputes over future rents based on negotiation. Also used in construction contracts, disputes between brokers, etc.

ARCHITECTURE- The design and construction plans for a structure. Recently the design for landscaping has become known as landscape architecture.

ARREARS- Payment made after it is due is in arrears.

AS IS CONDITION- Premises accepted by a buyer or tenant in the condition existing at the time of the sale or lease, including all physical defects.

ASKING PRICE- The price at which the seller is offering property for sale. The eventual selling price may be less after negotiation with a buyer.

ASSEMBLAGE- The acquisition of contiguous properties into one ownership for a specific use.

ASSEMBLAGE COST- The cost above the value of individual properties because of assemblage, rather than periodic individual sales.

ASSESS- To fix a value; to appraise. Most commonly used in connection with taxes.

ASSESSED VALUE- Value placed upon property for property tax purposes by the tax assessor.

ASSESSMENT- The estimating of value of property for tax purposes.

ASSESSMENT BASE- The total assessed value of all property in a given assessment district.

ASSESSMENT PERIOD- Taxable period. The period during which the tax assessment must be completed. ASSETS- Everything owned by a person or corporation which can be used for the payment of debts.

ASSIGN- To transfer property, or an interest in property.

ASSIGNEE- One who receives an assignment.

ASSIGNMENT- A transfer to another of any property, real or personal, or of any rights or estates in said property. Common assignments are of leases, mortgages, deeds of trust, but the general term encompasses all transfers of title.

ASSIGNOR- One who makes an assignment.

ASSUMPTION FEE- LenderÍs charge for paperwork involved in processing records for a new buyer assuming an existing loan.

ASSUMPTION OF DEED OF TRUST- (See: Assumption of Mortgage).

ASSUMPTION OF MORTGAGE- Agreement by a buyer to assume the liability under an existing note secured by a mortgage or deed of trust. The lender usually must approve the new debtor in order to release the existing debtor from liability.

ATTACHMENT- An act of seizing persons or property by judicial order to bring them within the custody of the court. Most commonly the seizure of property to furnish security for a debt in connection with a pending action.

ATTORNEY AT LAW- An advocate, counsel, or official agent employed in preparing, managing, and trying cases in court. Must be licensed by the state.

ATTORNEY-IN-FACT- One who is appointed to act (as agent) for another (principal) under a power of attorney. The scope of the agentÍs authority is limited to that given by the power of attorney, which may be limited to one specific act or may be broader.

AUCTION- A public sale of land or goods to the highest bidder.

BALLOON NOTE- A note calling for periodic payments which are insufficient to fully amortize the face amount of the note prior to maturity, so that a principal sum known as a ñballoonî is due at maturity.

BANKRUPT- One who is adjudicated a bankrupt by a court having proper jurisdiction. The bankruptcy may be voluntary (petitioned by the bankrupt) or involuntary (petitioned by the creditors of the bankrupt).

BANKRUPTCY- Proceedings under federal bankruptcy statutes to relieve a debtor from insurmountable debt. The bankruptÍs property is distributed by the court to the creditors as full satisfaction of the debts, in accordance with certain priorities and exemptions. Voluntary bankruptcy is petitioned by the debtor; involuntary by the criditors.

BENEFICIARY- One for whose benefit a trust is created.

BILATERAL (RECIPROCAL) CONTRACT- Contract under which the parties expressly enter into mutual promises, such as sales contracts.

BILL OF SALE- An instrument by which one transfers personal property.

BINDER- A report issued by a title insurance company setting forth the condition of title to certain property as of a certain date, and also setting forth conditions which, if satisfied, will cause a policy of title insurance to be issued. Also called a commitment.

BLANKET MORTGAGE- A mortgage covering more than one property of the mortgagor, such as a mortgage covering all the lots of a builder in a subdivision.

BLIND AD- An ad (usually in a newspaper or magazine) which does not identify the party placing the ad. Often used in an ad for a job, asking that a resume be sent to a post office box.

BLOCK BUSTING- An illegal method of obtaining houses at below fair market value by telling the inhabitants that people of a different race or religion, moving into the area, will cause property values to fall.

BOOK VALUE- The value of a property as a capital asset (cost plus additions to value, less depreciation).

BREACH OF CONTRACT- Failure to perform a contract, in whole or part, without legal excuse.

BREAK EVEN POINT- In income property, when there is neither a positive nor a negative cash flow.

BRIDGE FINANCING- A form of interim loan, generally made between a short term loan and a permanent (long term) loan, when the borrower needs to have more time before taking the long term financing.

BROKERAGE- The act of bringing together principals for a fee or commission, rather than acting as a principal.

BROKER, REAL ESTATE- One who is licensed by the state to carry on the business of dealing in real estate. A broker may receive a commission for his or her part in bringing together a buyer and seller, landlord and tenant, or parties to an exchange.

BUILDING CODE- A comprehensivse set of laws which control the construction of buildings, including design, materials used, construction, use, repair, remodeling, and other similar factors.

BULK SALE- A transfer in bulk, not in the ordinary course of business, of all or substantially all of he inventory and fixtures of a business.

BULK SALES ACT- Laws to protect creditors against secret sale of all or substantially all of a merchantÍs goods. Requires certain notice before sale, and sets forth methods of voiding improper sales. (See also: Uniform Commercial Code.)

BUYDOWN- A payment to the lender from the seller, buyer, third party, or some combination of these, causing the lender to reduce the interest rate during the early years of a loan. The buydown is usually for the first 1 to 5 years of the loan.

BUYERÍS MARKET- A market condition favoring the buyer. In real estate, when more homes are than there are interested buyers.

BY-LAWS- Rules and regulations, adopted by an association or corporation, which govern its activities.

CANCELLATION CLAUSE- A clause in a lease or other contract, setting forth the conditions under which each party may cancel or terminate the agreement. The conditions may be as simple as giving notice or complex and require payment by the party desiring to cancel.

CAPITAL- Money used to create income, either as investment in a business or income property.

CAPITAL ASSETS- Assets of a permanent nature used to produce income, such as machinery, buildings, equipment, land, etc. Must be distinguished from inventory. A machine which makes pencils, for example, would be a capital asset to a pencil manufacturer, but inventory to the company whose business is to sell such machines.

CAPITAL GAINS- Gains realized from the sale of capital assets. Generally, the difference between cost and selling price, less certain deductible expenses. Used mainly for income tax purposes.

CARAVAN- An inspection of newly listed properties, either by the entire sales staff of an office or by sales personnel from more than one office in conjunction with a multiple listing group. Generally conducted on a regular basis.

CARRYING CHARGES- The costs involved in keeping a property which is intended to produce income (either by sale or rent) but has not yet done so.

CASHIERÍS CHECK- A check drawn by a bank on itself rather than on an account of a depositor. A cashierÍs check is generally acceptable to close a sale without waiting for the check to clear.

CAVEAT EMPTOR- ñLet the buyer bewareî. Legal maxim stating that the buyer takes the risk regarding quality or condition of the item purchased, unless protected by warranty or there is misrepresentation. Modernly, consumer protection laws have placed more responsibility for disclosure on the seller and broker.

CERTIFICATE OF DEPOSIT (C.D.)- A specific sum of money deposited into a savings institution for a specified time period, and bearing a higher rate of interest than a passbook account if left to maturity. Does not have withdrawal privileges as does a passbook account. Also called a time certificate of deposit.

CERTIFICATE OF ELIGIBILITY- A certificate obtained by a veteran from a VeteranÍs Administration office which states that the veteran is eligible for a V.A. insured loan. There is a list of requirements which also may be obtained from the V.A. office.

CERTIFICATE OF REDEMPTION- Evidence of redeeming a property by the owner after losing it through a judicial sale. The time limit for redemption is set by statute.

CERTIFICATE OF SALE- Certificate issued to the buyer at a judicial sale which will entitle the buyer to a deed upon confirmation of the sale by the court or if the land is not redeemed within a specified time.

CERTIFICATE OF TITLE- In areas where attorneys examine abstracts or chains or title, a written opinion, executed by the examining attorney, stating that title is vested as stated in the abstract.

CERTIFIED CHECK- A personal check drawn by an individual which is certified to be good. The bank holds the funds to pay the certified check and will not pay any other checks drawn on the account if such payment would impede payment of the certified check. The bank also will not honor a stop payment of a certified check.

CERTIFIED COPY- A true copy, attested to be true by the officer holding the original.

CHAIN OF TITLE- The chronological order of conveyancing of a parcel of land, from the original owner to the present owner.

CLOSING- In real estate sales, the final procedure in which documents are executed and/or recorded, and the sale is completed.

CLOSING COSTS- Expenses incidental to a sale of real estate, such as loan fees, title fees, appraisal fees, etc.

CLOSING STATEMENT- The statement which lists the financial settlement between buyer and seller, and also the costs each must pay. A seperate statement for buyer and seller is sometimes prepared.

CLOUD ON TITLE- An invalid encumbrance on real property, which, if valid, would affect the rights of the owner. For example: A sells lot 1, tract 1, to B. The deed is mistakenly drawn to read lot 2, tract 1. A cloud is created on lot 2 by the recording of the erroneous deed. The cloud may be removed by quitclaim deed, or, if necessary,by court action.

COMMINGLING- To mix funds held in trust with other funds.

COMMISSION- An amount, usually as a percentage, paid to an agent as compensation for his services. The amount to a real estate broker is generally a percentage of the sale price or total rental.

COMMUNITY PROPERTY- Property owned in common by a husband and wife, which was not acquired as seperate property. A classification of property peculiar to certain states.

CONDEMNATION- The taking of private property for public use without the consent of the owner, but only upon payment of just compensation.

CONTINGENCY- Commonly, the dependence upon a stated event which must occur before a contract is binding. For example: The sale of a house, contingent upon the buyer obtaining financing.

CONTRACT- An agreement between two or more persons or entities which creates or modifies a legal relationship. Generally based upon offer and acceptance.

CONTRACT OF SALE- In some areas of the country, synonymous with land contract. In other areas synonymous with purchase agreement.

CONVENTIONAL LOAN- A mortgage or deed of trust not obtained under a government insured program, (such as F.H.A. or V.A.).

CONVEYANCE- Transfer or title to land, includes most instruments by which an interest in real estate is created, mortgaged, or assigned.

COOPERATING BROKER- The broker who finds the buyer and so shares in the commission with the lasting broker.

COST- Technically, the original amount paid for anything. The term is generally used as a synonym for value or the total amount invested, including expenses after the original purchase

COST APPROACH- An appraisal method, estimating the replacement cost of a structure, less depreciation, plus land value.

COUNTER OFFER- An offer (instead of acceptance) in response to an offer. For example: A offers to buy BÍs house for X dollars. B, in response, offers to sell to A at a higher price. BÍs offer to A is a counter offer.

COVENANT OF QUIET ENJOYMENT- Usually inserted in leases or conveyances whereby lessor or grantor promises that the tenant or grantee shall enjoy possession of the premises in peace without disturbance caused by defective title.

CREATIVE FINANCING- A general term which encompasses any method of financing property going beyond traditional real estate lending.

CREDIT- The financial worthiness of a borrower. The history of whether this borrower has met financial obligations on time in the past. (2) An accounting term designating money received or receivable, as opposed to debit which is money payed or payable.

CREDIT REPORT- A report on the past ability of a loan applicant to pay installment payments. Several national and local companies make such reports.

DEALER- One who buys and sells real estate as a business, as opposed to an investor. The importance of the term is for tax purposes. If IRS determines that a taxpayer is a dealer, said taxpayer will not be allowed the capital gains benefits of an investor, but will be taxed at ordinary income rates. The term applies to the transactions more than the person. One may be a dealer in certain transactions and an investor in others.

DEBIT- An accounting term used to designate a payment or owing, as opposed to a credit which is a receiving or being owed. DEBT- Money owing from one person to another.

DEBT SERVICE- The amount of financing on a property.

DEED- Actually, any one of many conveyancing or financing instruments, but generally a conveyancing instrument, given to pass fee title to property upon sale.

DEED OF TRUST- An instrument used in many states in place of a mortgage. Property is transferred to a trustee by the borrower in favor of the lender, and reconveyed upon payment in full.

DEED RESTRICTIONS- Limitations on the use of property placed in the conveyancing deed by the grantor, which bind all future owners.

DEFECTIVE TITLE- Title to a negotiable instrument obtained by fraud. (2) Title to real property which lacks some of the elements necessary to transfer good title.

DEFERRED MAINTENANCE- Repairs necessary to put a property in good condition. A concern of a purchaser. An owner may have an account for such maintenance.

DEFERRED PAYMENTS- Payments to begin at a future time. (2) Installment payments.

DEFICIENCY JUDGMENT- Commonly, the amount for which the borrower is personally liable on a note and mortgage if the foreclosure sale does not bring enough to cover the debt. Actually the judgment is for the total amount and not for the defiency, the recovery from the foreclosure sale being deducted from this amount.

DEMAND NOTE- A note having no date for repayment, but due on demand of the lender.

DEPOSIT- Money given by the buyer with an offer to purchase. Shows good faith. Also called earnest money. (2) A natural accumulation of resources (oil, gold, etc.) which may be commercially recovered and marketed.

DEPRECIATION- Decrease in value to real property improvements caused by deterioration or obsolescence. (2) A loss in value as an accounting procedure to use as a deduction for income tax purposes. (See specific types of depreciation.)

DISCOUNT- The difference between face value of an installment note and mortgage or deed of trust, and the present cash value.

DISBURSEMENTS- Payments made during the course of an escrow or at closing.

DISTRESS SALE- A sale of property when the seller is under extreme pressure to sell. Generally the property is sold for less than market value.

DOCUMENTARY TAX STAMPS- Stamps, similar to postage stamps, affixed to a deed, showing the amount of transfer tax paid. Most states now ñstampî the deed rather than actually affixing a stamp.

DOMICILE- A legal term signifying a place where a person has his permanent home. The most accurate meaning is the laymanÍs understanding of the place where a person ñlivesî, since this takes into consideration the intent of the person to make a particular property his ñhomeî. (2) The state or country in which a corporation is chartered (organized), such as a corporation ñdomiciledî in the U.S.

DOWN PAYMENT- Cash portion paid by a buyer from his own funds, as opposed to that portion of the purchase price which is financed.

DUAL AGENCY- The representation of opposing principals (buyer and seller) at the same time. In brokerage many states get around this by saying that the agent aids the buyer but is the agent of the seller only. A problem arises if both buyer and seller pay the broker. Then full disclosure must be made. An escrow agent is the agent of buyer and seller and usually paid by both. This is why an escrow agent must be neutral.

EMINENT DOMAIN- A governmental right to acquire private property for public use by condemnation, and the payment of just compensation.

ENCUMBRANCE, INCUMBRANCE- A claim, lien, charge, or liability attached to and binding real property. Any right to, or interest in, land which may exist in one other than the owner, but which will not prevent the transfer of fee title.

EQUITY- A legal doctrine based on fairness, rather than strict interpretation of the letter of the law. (2) The market value of real property, less the amount of existing liens.

EQUITY LINE OF CREDIT- A combination of a line of credit and equity loan. A maximum loan amount is established based on credit and equity. A mortgage (deed or trust) is recorded against the potential borrowerÍs property for said maximum loan amount. The potential borrower has the right to borrow, as needed, up to the amount of the mortgage.

EQUITY LOAN- A loan based upon the equity in a property. The credit of the borrower is not a major factor. (See also: Personal Property Loan.)

ESCALATION CLAUSE- A clause in a lease providing for an increased rental at a future time. May be accomplished by several types of clauses, such as (1) Fixed increase- A clause which calls for a definite, periodic rental increase. (2) Cost of living- A clause which ties the rent to a government cost of living index, with periodic adjustments as the index changes. (3) Direct expense- The rent is adjusted according to changes in the expenses of the property paid by the lessor, such as tax increases, increased maintenance costs, etc.

ESCROW- Delivery of a deed by a grantor to a third party for delivery to the grantee upon the happening of a contingent event. Modernly, in some states, all instruments necessary to the sale (including funds) are delivered to a third (neutral) party, with instructions as to their use.

ESCROW OFFICER- An escrow agent. In some states, one who has, through experience and education, gained a certain degree of expertise in escrow matters.

ESTATE- The interest or nature of the interest which one has in property, such as a life estate, the estate of a deceased, real estate, etc. (2) A large house with substantial grounds surrounding it, giving the connotation of belonging to a wealthy person.

ESTATE TAX- A tax against the property of a deceased, based on the value of the estate.

ESTOPPEL- The prevention of one from asserting a legal right because of prior actions inconsistent with the assertion.

EVICTION- A court action to remove one from possession of real property. Most commonly, the removal of a tenant.

EXCLUSIVE LISTING- A written contract between a property owner and a real estate broker, whereby the owner promises to pay a fee or commission to the broker if certain real property of the owner is sold during a stated period, regardless of whether the broker is or is not the cause of the sale. The broker promises to put forth his or her best efforts to sell the property, and may make specific promises as to advertising or other promotion in certain instances.

FAIR MARKET VALUE- Price that probably would be negotiated between a willing seller and willing buyer in a reasonable time. Usually arrived at by comparable sales in the area.

FEE SIMPLE- An estate under which the owner is entitled to unrestricted powers to dispose of the property, and which can be left by will or inherited. Commonly, a synonym for ownership.

FIXED RATE MORTGAGE- A mortgage having a rate of interest which remains the same for the life of the mortgage.

GIFT LETTER- A letter to HUD from the donor (giver) stating that a gift of money has been made to the buyer in order to purchase specific property. The relationship of the donor and donee is stated, as well as the amount of the gift.

GUARANTY- Agreement to pay the debt or perform the obligation of another in the event the debt is not paid or obligation not performed. Differs from a surety agreement in that there must be a failure to pay or perform before the guaranty can be in effect.

HOME OWNERSÍ ASSOCIATION- An association of people who own homes in a given area, formed for the purpose of improving or maintaining the quality of the area. (2) An association formed by the builder of condominiums or planned developments, and required by statute in some states. The builderÍs participation as well as the duties of the association are controlled by statute.

HOMESTEAD- The dwelling (house and contiguous land) of the head of a family. Some states grant statutory exemptions, protecting homestead property (usually to set maximum amount) against the right of creditors. Property tax exemptions (for all or part of the tax) are also available in some states. Statutory requirements to establish a homstead may include a formal declaration to be recorded.

ENCUMBRANCE (ENCUMBRANCE)- A claim, lien, charge, or liability attached to and binding real property. Any right to, or interest in, land which may exist in one other than the owner, but which will not prevent the transfer of fee title.

LATE CHARGE- A penalty for failure to pay an installment payment on time. Usually not allowed as interest for tax deductions. May or may not be included as usury. If not, the amount of late charge is either set by statute or must be ñreasonableî.

LEASE WITH OPTION TO PURCHASE- A lease under which the lessee has the right to purchase the property. The price and terms of the purchase must be set forth for the option to be valid. The option may run for the length of the lease or only for a portion of the lease period.

LIEN- An encumbrance against property for money, either voluntary or involuntary. All liens are encumbrances but all encumbrances are not liens.

LIFE ESTATE- An estate in real property for the life of a living person. The estate then reverts back to the grantor or on to a third party (remainderman).

LISTING- An agreement between an owner of real property and a real estate agent, whereby the agent agrees to secure a buyer or tenant for specific property at a certain price and terms in return for a fee or commission.

LISTING AGENT- A real estate agent obtaining a listing (see which), as opposed to the selling agent.

LITTORAL RIGHTS- Rights concerning properties abutting an ocean or lake rather than a river or stream (riparian). Littoral rights are usually concerned with the use or enjoyment of the shore.

LIVING TRUST- A trust which is in effect during the life of the settlor, rather than upon his death (testamentary trust).

LOAN ORIGINATION FEE- A one time set up fee charged by the lender.

LONG TERM CAPITAL GAIN- Gain on the sale of a capital asset which has been held for a specified time or longer. Long term capital gain is taxed at a special rate and not as ordinary income.

MARKETABLE TITLE- Title which can be readily marketed (sold) to a reasonably prudent purchaser aware of the facts and their legal meaning concerning liens and encumbrances.

MARKET PRICE- The price a property brings in a given market. Commonly used interchangeably with market value, although not truly the same. (See also: Market Value). Pg 15

MARKET VALUE- The highest price a willing buyer would pay and a willing seller accept, both being fully informed, and the property exposed for a reasonable period of time. The market value may be different from the price a property can actually be sold for at a given time (market price).

MARKET VALUE APPROACH- Appraising the value of a property by comparing the price of similar properties (comparables) recently sold. The degree of similarity of the properties and circumstances of the sale are the important characteristics to consider.

MINERAL RIGHTS- The ownership of the minerals (coal, gold, iron, etc.) under the ground, with or without ownership of the surface of the land. (See also: Subsurface Rights).

MORTGAGE- To hyopthecate as security, real property for the payment of a debt. The borrower (mortgagor) retains possession and use of the property. (2) The instrument by which real estate is hypothecated as security for the repayment of a loan.

MORTGAGE BROKER- One who, for a fee, brings together a borrower and lender, and handles the necessary applications for the borrower to obtain a loan against real property by giving a mortgage or deed of trust as security. Also called a loan broker.

MORTGAGE COMPANY- A company authorized to service real estate loans, charging a fee for this service.

MORTGAGE- The party lending the money and receiving the mortgage. Some states treat the mortgagee as the ñlegalî owner, entitled to rents from the property. Other states treat the mortgagee as a secured creditor, the mortgagor being the owner. The latter is the more modern and accepted view.

MORTGAGE INSURANCE- Insurance written by an independent mortgage insurance company (referred to as an ïMICÍ) protecting the mortgage lender against loss incurred by a mortgage default, thus enabling the lender to lend a higher percentage of the sale price. The Federal Government writes this form of insurance through the FHA and the VA.

MORTGAGOR- The party who borrows the money and gives the mortgage.

MULTIPLE LISTING- An exclusive listing, submitted to all members of an association, so that each may have and opportunity to sell the property.

NAR (NATIONAL ASSOCIATION OF REALTORS)- An association of people engaged in the real estate business. Organized in 1908, it currently lists over half a million members. With headquarters in Chicago, it is dedicated to the betterment of the real estate industry through education, legislation, and high ethical standards for its members.

NEGATIVE CASH FLOW- When the income from an investment property does not equal the usual expenses. The owner must come up with cash each month to meet these expenses.

NEGOTIABLE- Capable of being negotiated. Commonly used to mean assignable or transferable in the ordinary course of business, such as negotiable bonds, securities, notes, etc.

NOTE- A unilateral agreement containing an express and absolute promise of the signer to pay to a named person, or order, or bearer, a definate sum of money at a specified date or on demand. Usually provides for interest and, concerning real property, is secured by a mortgage or mortgage or trust deed.

OCCUPANCY- With reference to land, the word has become synonymous with possission.

OFFER AND ACCEPTANCE- Necessary elements of a contract to sell real estate. (See also: Offer; Acceptance).

ORIGINAL COST- The purchase price of property, paid by the present owner. The present owner may or may not be the first owner.

PACKAGE MORTGAGE- Mortgage covering both real and personal property.

PREPAID INTEREST- Interest paid before becoming due.

PREPAYMENT PENALTY- A penalty under a note, mortgage, or deed of trust, imposed when the loan is paid before it is due.

PREPAYMENT PRIVILEGE- The right to prepay a loan without penalty, either in full or in part. (See also:Lock-in; Or More Clause; Prepayment Penalty).

PRICE- Modernly, the amount of money paid for property which is purchased, although the word is general enough to include anything given (not necessarily money) in exchange for something else.

PRIME LENDING RATE- The most favorable interest rates charged by a commercial bank on short term loans, (not mortgages).

PRIVATE MORTGAGE INSURANCE- Insurance against a loss by a lender in the event of default by a borrower (mortgagor). The insurance is similar to insurance by a governmental agency such as FHA, except that it is issued by a private insurance company. The premium is paid by the borrower and is included in the mortgage payment.

PROCURING CAUSE- A direct cause of an event, or the direct cause of a series of causes leading to an event. A broker is entitled to a commission under an open listing if proven to be the procuring cause of a sale.

PROMISSORY NOTE- A promise in writing, and executed by the maker, to pay a specified amount during a limited time, or on demand, or at sight, to a named person, or on order, or to bearer.

PURCHASE MONEY MORTGAGE- A mortgage given from buyer to seller to secure all or a portion of the purchase price. (2) Any mortgage from which the funds are used to purchase the property.

READY, WILLING, AND ABLE- Capable of present performance. A broker supplying an offer from a ready, willing and able buyer, which meets the price and terms of the listing, is entitled to a commission, even though the seller is not bound to accept the offer. A standard listing agreement would state this.

REFINANCE- The renewing of an existing loan with the same borrower and lender. (2) A loan on the same property by either the same lender or borrower. (3) The selling of loans by the original lender.

RELEASE CLAUSE- A clause in a blanket encumbrance allowing for the ñreleaseî of certain parcels upon payment of a specified amount. Example: A builder mortgages an entire subdivision under one loan. As the builder sells each house, the lender releases the lien upon that house upon a specified payment by the builder.

SELLING AGENT- The real estate agent obtaining the buyer rather than listing the property. The listing and selling agent may be the same person or company.

SHORT TERM CAPITAL GAIN- Profit from the sale of a capital asset not held long enough to qualify as a long term capital gain. Taxed as ordinary income.

SUBORDINATION AGREEMENT- An agreement by which an encumbrance is made subject (junior) to a junior encumbrance. For example: A loan on vacant land is made subject to a subsequent construction loan.

TAX DEED- Deed from tax collector to governmental body after a period of non-payment of taxes according to statute. (2) Deed to a purchaser at a public sale of land taken for delinquent taxes. The purchaser receives only such title as the former owners had, and strict procedures must be followed to prevent attachment of prior liens.

TAX LIEN- A lien for nonpayment of property taxes. Attaches only to the property upon which the taxes are unpaid. (2) A federal income tax lien. May attach to all property of one owing the taxes.

TENANCY BY THE ENTIRETY- A form of ownership by husband and wife whereby each owns the entire property. In the event of the death of one, the survivor owns the property without probate.

TENANCY IN COMMON- An undivided ownership in real estate by two or more persons. The interests need not be equal, and, in the event of the death of one of the owners, no right of survivorship in the other owners exists.

TENANT AT SUFFERANCE- One who comes into possession lawfully, but holds over after the termination of his interest.

TENANT AT WILL- One who holds possession of premises by permission of the owner or landlord, but without agreement for a fixed term of possession.

TENANT IN SEVERALTY- One who owns property alone, without any other person being joined in said ownership.

TITLE INSURANCE- Insurance against loss resulting from defects of title to a specifically described parcel of real property. Defects may run to the fee (chain of title) or to encumbrances.

TRUSTEEÍS DEED- A deed by a trustee under a deed of trust, issued to a purchaser at auction, pursuant to foreclosure.

UNDERWRITER- One who insures another. A small title company may buy insurance from a larger one (the underwriter) for all or part of the liability of its policies. A larger title company may buy part of the insurance from another company on high liability policies.

UNILATERAL CONTRACT- A contract under which one party expressly makes a promise; the other party, although making no reciprocal promise, may be obligated by law or may have already given consideration.

VALUE- The usefulness of an object. (2) The monetary worth of an object. (3) A shortening of the term value consideration, as in a purchaser ñfor valueî.

VARIABLE INTEREST RATE- An interest rate which fluctuates as the prevailing rate moves up or down. In mortgages there are usually maximums as to the frequency and amount of fluctuation. Also called ñflexible interest rateî.

VARIANCE- Change of a portion of zoning requirements without changing the zoning.

VETERANÍS ADMINISTRATION (V.A.) LOANS- Housing loans to veterans by banks, savings and loans, or other lenders which are insured by the VeteranÍs Administration, enabling veterans to buy a residence with little or no down payment.

WARRANTY DEED- A deed used in many states to convey fee title to real property. Until the widespread use of title insurance, the warranties by the grantor were very important to the grantee. When title insurance is purchased, the warranties become less important as a practical means of recovery by the grantee for defective title.

WRAP-AROUND MORTGAGE- A second or junior mortgage with a face value of both the amount it secures and the balance due under the first mortgage. The mortgagee under the wrap-around collects a payment based on its face value and then pays the first mortgagee. It is most effective when the first has a lower interest rate than the second, since the mortgagee under the wrap-around gains the difference between the interest rates, or the mortgagor under the wrap-around may obtain a lower rate than if refinancing.

ZONING- The division of a city or county by legislative regulations into areas (zones), specifying the uses allowable for the real property in these areas.

ZONING ORDINANCE- A law (generally at the city or county level) controlling the use of land and construction of improvements in a given area (zone).