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Abandonment

The voluntary relinquishment of rights of ownership or other interest (such as an easement) by failure to use the property, coupled with an intent to abandon (give up the interest).

Abatement

A reduction or decrease. Usually applies to a decrease of assessed valuation of ad valorem taxes after the assessment and levy.

Abstract

A summary, an abridgement. Before the use of photostatic copying, public records were kept by abstracts of recorded documents.

Abstracter's Certificate

A certificate contained in an abstract which shows the time period and scope of the search of public records done by the abstracter.

Abstract Of Judgment

A summary of the essential provisions of a court judgment, which when recorded in the county recorder's office, creates a lien upon the property of the defendant in that county, both presently owned or after acquired.

Abstract Of Title

A compilation of the recorded documents relating to a parcel of land, from which an 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 lender's consent, destruction of the property, or other event which endangers the security of the loan.

Accessibility

The location of a site in terms of how easily it may be reached by customers. employees, carriers, and others necessary to the intended use of the property

Accord

An agreement by which one accepts something different (usually less) from what is owed as full satisfaction The amount owed may be in dispute or simply accepted as full satisfaction by the creditor or claimant. The agreement and acceptance is called "Accord and Satisfaction."

Accretion

The gradual addition to the shore or bank of a waterway. The land generally becomes the property of the owner of the shore or bank, except where statutes specify otherwise.

Acknowledgement

A written declaration by a person executing an instrument, given before an officer authorized to give an oath (usually a notary public), stating that the execution is of his own volition.

Acquisition Costs

Costs of acquiring property other than purchase price: escrow fees, title insurance, lenders fees, etc.

Act Of God

Damage caused by nature (floods, winds, etc.) rather than destruction by man.

Adjustable Rate Mortgages (ARM'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 Mortgage Loans (AML'S), Flexible Rate Loans, Variable Rate Loans.

Ad Valorem

"According to value." A method of taxation using the value of the object taxed to determine the amount of tax. Taxes can be either "Ad Valorem" or "Specific." Example: A tax of $5.00 per $1000.00 of value per house is "Ad Valorem," A tax of $5.00 per house (irrespective of value) is "Specific."

Advance Fee

A fee charged by a broker to a seller to cover all or a portion of the broker's 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.

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.

American Land Title Association (ALTA)

A national association of title insurance companies, abstractors, and agents. The association adopts standard title policy forms.

Amortization

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

Annual Percentage Rate (A.P.R.)

The Annual Percentage Rate is the cost of your credit as a yearly rate. The A.P.R. considers the interest rate, points, and certain other fees called finance charges associated with obtaining credit.

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, Market Value (comparables) Approach.

Arrears

(1) Payment made after it is due is in arrears. (2) Interest is said to be paid in arrears since it is paid to the date of payment rather than in advance, as is rent. Example: A rental payment made July 1 pays the rent to August 1. An interest payment made July 1 pays the interest to July 1.

Assumable

A mortgage loan which can be transferred to another person without a change in the terms of the loan. VA and FHA loans are assumable, FHLMC and FNMA are not.

Assumption of Note

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 (usually the seller) from liability.

Avigation Easement

An easement over private property abutting an airport runway, which limits the height of crops, trees, structures, etc., in the aircraft's take off and landing path.

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- B -

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 "balloon" is due at maturity.

Balloon Payment

The unpaid principal amount of a loan due on a specific date in the future. Usually the amount that must be paid in a lump sum at the end of the term.

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 (bankrupt) from insurmountable debt. The bankrupt's property is distributed by the court to the creditors as full satisfactions of the debts, in accordance with certain priorities and exemptions. Voluntary bankruptcy is petitioned by the debtor for, involuntary by the creditors.

Beneficiary

The Person who is entitled to receive funds of property under the terms and provisions of a will, trust, insurance policy or security instrument. In connection with a mortgage loan the beneficiary is the lender.

Bill Of Sale

An instrument by which title to personal property is transferred or conveyed.

Biweekly

Also known as accelerated mortgages. Biweeklies reduce interest expense and build home equity faster than monthly payments.

Bona Fide Purchaser

A purchaser in good faith. for valuable consideration, without notice or knowledge of adverse claims of others. Sometimes abbreviated B.F.P.

Breach Of Warranty

In real property, the failure of the seller to pass title as either expressed or implied (by law) in the conveyancing document.

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 And Loan Association

An organization for the purpose of accumulating a fund by subscription and savings of its members, to assist them with loans for building or purchasing real estate.

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.

Buy-Sell Offer

An offer by one owner of a business or real estate to buy out the interest of another owner of the same business or real estate (a partner or other shareholder), or to sell the offeror's interest at the same price or proportionate price if unequal ownership. Example: A and B each own a 112 interest in Lot 1. A offers to buy B's interest for $10,000 or to sell A's interest to B for $10,000. Theoretically very fair, since B has the option to buy or sell. However, B's interest may be worth $12,000, but B is financially unable to buy A's interest (also worth $12,000).

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California Land Title Association (CLTA)

A statewide association of title insurers and underwritten title companies. The association adopts standard title policy forms.

Call

In a metes and bounds description, the angle and distance of a given line or arc. Each call is usually preceded by the word then or thence. Example: N 220 E 100' (lst. call), thence N 800 E 1W (2nd. call).

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.

Cap

The maximum which an adjustable rate mortgage may increase, regardless of index changes.

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.

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.

CC and Rs (Covenants, Conditions and Restrictions)

Limitations placed on the use and enjoyment of real property. These are found most often in condominiums and planned unit developments.

Certificate Of Title

In areas where attorneys examine abstractor chains of title, a written opinion, executed by the examining attorney, stating that title is vested as stated in the abstract.

Chain of Title

A chronological list of recorded instruments tracing title to land, from the original owner to the present owner.

Chains And Links

Measurements. In real estate measurements(surveying) a chain is 66' long or 100 links, each link being 7.92". The measurement may change when used in fields other than surveying.

Classified Property Tax

Property tax which varies in rate depending on the use (zoning classification) of the property.

Clear Title

Title to property which is free from liens, defects or other encumbrances.

Closing

(1) In real estate sales, the final procedure in which documents are executed and/or recorded, and the sale (or loan) is completed. (2) A selling term meaning the point at which the client or customer is asked to agree to the sale or purchase and sign the contract. (3) The final call in a metes and bounds legal description which "closes" the boundaries of the property.

Closing Costs

Expenses, beyond the selling price, such as loan fees, title fees, etc. Paid when documents are executed and/or recorded and the sale is complete.

Closing Statement

A summary, in the form of a balance sheet, showing the amounts of debits and credits to which each party to a real estate transaction is entitled upon closing.

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 by the recording of the erroneous deed. The cloud may be removed by quit claim deed, or, if necessary, by court action.

Commercial Property

Property which is zoned "commercial" (for business use). Property such as stores, restaurants, etc., falling between residential and industrial.

Commingling

To mix funds held in trust with other funds. For example: A broker or builder mixes deposits (should be in a trust account) with his funds by putting the deposits in his general account. Although commingling is in itself a violation for which a broker may lose his license, it does not mean that, by commingling, the broker or builder intended to misappropriate the funds.

Commission

Compensation due a real estate lender for acting on behalf of the principal.

Community Property

Property acquired during a marriage by either a husband or wife, or both, which is not separate property.

Comparables (Comps)

An abbreviation for comparable properties used for comparative purposes in the appraisal process.

Conditional Sales Contract

A sale in which the title to property or goods remains with the seller until the purchaser has fulfilled the terms of the contract, usually payment in full.

Condominium

A structure of two or more units, the interior space of which are individually owned: the balance of the property (both land and building) is owned in common by the owners of the individual units. The size of each unit is measured from the interior surfaces (exclusive of paint or other finishes) of the exterior walls, floors, and ceiling. The balance of the property is called the common area.

Conforming

A loan that meets the guidelines set forth by Fannie Mae and Freddie Mac in maximum loan amount, credit standards, employment and income standards, and acceptable collateral as well as product type and definition.

Consideration

A required element in all contracts by which something of value, including a promise, is exchanged for the act or promise of another.

Contingency

Action conditioned upon a certain event. Acceptance of the terms of a contract based on something else happening or certain conditions being met.

Conveyance

The transfer of title or an interest in real property by means of a written instrument such as a deed of trust.

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- D -

Declaration Of Trust

A written acknowledgement by one holding legal title to property that the property is held in trust for the benefit of another.

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 (trustor) in favor of the lender (beneficiary), and reconveyed upon payment in full.

Defeasible Title

Title which is not absolute but possibly may be annulled or voided at a later date. For example: Title conveyed to A with condition that if A marries before age 30, title will go to B. A's title may be good (doesn't marry) or may be defeated (marries before 30).

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 deficiency, the recovery from the foreclosure sale being deducted from this amount.

Delivery

In conveyancing, the placing of the property in the actual or constructive possession of the grantee. Usually accomplished by delivery of a deed to the buyer, or by recording said deed.

Demand

The lender's statement of the amount due to pay off a loan.

Demand Note

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

Deposit

(1) 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

(1) 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.

Discount Points

The fee associated with the note rate for your loan. The more discount points you pay, the lower the rate you can buy. The fewer you pay, the higher your rate.

Disposition of Real Estate Statement

A statement that the buyer will occupy the property being purchased even though the buyer owns other property. The buyer states that the other property will be sold or rented. Particulars must be given as to any loan on the property and the equity or rent to payment amounts.

Documentary Transfer Tax

The tax, based on sales price, less loans which are being assumed, which is charged by the city and/or county on the transfer of real property.

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.

Due on-Sale-Clause

A clause in a mortgage loan which gives the lender the right to demand payment in full when the property changes ownership. Not applicable to FHA or VA loans.

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