BALANCE SHEET – A statement of financial condition of a business organization showing assets, liabilities, capital, and including net worth as of a given date.

 

BALLOON PAYMENT – A final payment on a note. It is usually substantially larger than any of the preceding installments.

 

BANKRUPT – A person, firm, or corporation who, through a court proceeding is relieved from the payment of all debts after the surrender of all assets to a court appointed trustee, for the protection of creditors.

 

BANKRUPTCY – The state of being bankrupt.

 

BASERENT – The minimum fixed guaranteed rent in a commercial property lease.

 

BASICRENT – The rent charged in a subsidized housing project and computed on the basis of a maximum subsidy.

 

BASISPOINT – One one-hundredth of one percent. Used to describe the amount of change in yield in many debt instruments, including mortgages.

 

BENCH MARKS – A mark on permanent object indicating elevation and serving as a reference in land surveys.

 

BENEFICIARY – A person who receives and benefits from the gifts or acts of another, such as one who is designated to receive the proceeds from a will or trust.

 

BENEFICIARY STATEMENT – The statement of a lender that shows the remaining principal balance and other information about the loan. It is usually obtained when an owner wishes to sell or refinance. Often referred to as a “bene” statement, offset statement, ore estoppel certificate, and requested by escrow or title companies.

 

BEQUEATH – To leave personal property to another by will. To leave real property by will is to devise.

 

BETTERMENT – An improvement that increases property values as distinguished from repair or replacements that simply maintain value.

 

BID – An offering of money in exchange for property placed for sale. At an ordinary auction sale, a bid is an offer to purchase.

 

BILL OF SALE – A written instrument transferring title, right, and interest in personal property to another.

 

BINDER – An agreement to cover an earnest money deposit for the purchase of real property as evidence of the purchaser’s good faith and intention to complete the transaction.

 

BIWEEKLY PAYMENT MORTGAGE – A plan to reduce the debt every two weeks (instead of the standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half of the monthly payment required if the loan were a standard 30-year fixed rate mortgage. The result for the borrower is a substantial savings in interest.

 

BLANKET MORTGAGE – A single mortgage which covets more than one piece of real estate.

 

BLIGHTED AREA – A declining area in which property values are adversely affected by destructive natural or economic forces, such as encroachments, inharmonious property usages, changing social and economic neighborhoods, or rapidly depreciating buildings.

 

BLOCK – A rectangular portion of a city or town enclosed by streets, whether partially or wholly occupied buildings or containing only vacant lots as defined in the  plot. Frequently used in legal descriptions.

 

BOMA International – BOMA is an acronym designating the Building Owners and Managers Association International, which is the oldest and largest professional organization of property managers and owners. It was founded in 1907 under the name “National Association of Building Owners and Managers,” and assumed its present name in 1968 when it expanded to include chapters outside of the United States.

 

BONA FIDE – in good faith; without fraud.

 

BOND – Any obligation under seal. A real estate bond is a written obligation, usually issued on security of a mortgage or a trust deed.

 

BOOK COST – The actual costs of assets purchase or acquired.

 

BOOK VALUE – The capitalized cost of an asset less depreciation taken for accounting purposes based upon the method used for the computation of depreciation over the useful life of the asset. Also, the actual value of an asset after the deduction of depreciation and all liabilities is the net book value.

 

BORROWER (Mortgagor) – One who applies for and receives a loan in the form of a mortgage with the intention of repaying the loan in full.

 

BREACH – A violation of any legal obligation.

 

Breach of Lease: A lessor or lessee breaches a lease contract when he or she violates the terms of that contract.

 

BREACH OF CONTRACT – Violation of any of the terms or conditions of a contract without legal excuse.

 

BREAK EVEN RATIO – Represents the sales amount—in either unit or revenue terms—that is required to cover total costs (both fixed and variable). Profit at break-even is zero. Break-even is only possible if a firm’s prices are higher than its variable costs per unit. If so, then each unit of the product sold, will generate some “contribution” toward covering fixed costs.

 

BREAK-EVEN POINT – In residential or commercial property, the figure at which occupancy income is equal to all required expenses and debt service.

 

BRIDGE LOAN – A second trust that is collateralized by the borrower’s present home, allowing the proceeds to be used to close on a new house before the present home is sold. Also known as “swing loan.”

 

BROKER – A person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them. See mortgage broker.

 

BUILDER’S RISK INSURANCE – Fire and extended coverage insurance for a building under construction. Coverage increases automatically as the building progresses and terminates at completion. Such a policy should be replaced by permanent insurance when the building is ready for occupancy.

 

BUILDING CODE – The local regulations that control design, construction, and materials used in construction. Building codes are based on safety and health standards.

 

BUILDING EFFICIENCY – A percentage ratio of net rentable area to gross building area.

 

BUILDING SITE – a lot on which there are no permanent buildings.

 

BUILT-INS – Cabinets, ranges, and ovens, or similar features that are part of the structure.

 

BUNDLE OF RIGHTS – The rights or interests that a person has in property. It is the exclusive right of an individual to own, possess, use, enjoy, and dispose of real property.

 

BUREAU RATE (STANDARD RATE) –  For hazard insurance, and for title insurance in some states, a standard rate established by a rating bureau for all companies writing policies in a specific area.

 

BURNOUT –  A home that has been damaged or destroyed by a fire.

 

BUY-DOWN – When the lender and/or the home builder subsidized the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires.

 

BUY-SELL AGREEMENT – An agreement entered into by an interim and a permanent lender for the sale and assignment of the mortgage to the permanent lender when a building has been completed. Often the mortgagor is a party to this agreement on theory that mortgagor should have a contractual right to insist the permanent lender buy the mortgage.

 

BUYER’S BROKER –  A broker or agent who represents the buyer in a real estate transaction.

 

BUYER’S DOWN MARKET – A real estate cycle where there are more sellers of properties than there are buyers. This situation can occasionally give buyers more opportunities to buy choice properties at lower prices.

 

CALL PROVISION – In the mortgage or deed of trust, a clause giving the mortgagee or beneficiary the right to accelerate payment of the mortgage debt in full on a certain date or on the happening of specified conditions.

 

CAPITAL – The money and/or property comprising the wealth owned or used by a person or business enterprise. The accumulated wealth of a person or business. The net worth of a business represented by the amount that its assets exceed liabilities.

 

CAPITALIZATION RATE (CAP RATE)  – This is used in commercial real estate to indicate the rate od return that is generated on real estate investment rental property. The Cap Rate is calculated based on net income. This is calculated by dividing net operating by the property asset value and is calculated as a percentage. Investors use this to estimate the potential return on their investment (ROI).

 

CAPITALIZATION – In appraising, determining value of property by considering net income and percentage of reasonable return on the investment.

 

CAPS (INTEREST) – Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage, which may charge per year and/or the life of the loan.

 

CAPS (PAYMENT) – Consumer safeguards which limit the amount monthly payments on an adjustable rate mortgage may change.

 

CARRYING CHARGES – Costs incurred by a developer or builder. Principally interest on land and construction loans and property taxes to cover expenses until the point of sale.

 

CARTOGRAPHY – The science or act of making maps.

 

CASH AFTER DEBT SERVICE – A ratio that measures the amount of cash a company has on hand as compared to its debt service obligations. Debt service obligations include all current interest payments due, as well as all current principal repayments due.

 

CASH FLOW – The amount of cash derived over a certain period of time from an income-producing property. The cash flow should be large enough to pay the expenses of the income producing property (mortgage payment, maintenance, utilities, etc.).

 

CASH VALUE – The actual money that an Asset will bring on the open market without any lengthy delay.

 

CASH-ON-CASH RETURN – Is the ratio of annual before-tax cash flow to the total amount of cash invested, expressed as a percentage.

 

CAVEAT EMPTOR – “Let the buyer beware” is Latin. Summarizes the rule that the buyer must examine, judge and test merchandise/property for himself.

 

CD – (see HUD-1 Statement)

 

CERTIFICATE OF CLAIM – A contingent promise to reimburse an insured mortgagee for certain costs incurred during foreclosure of an insured mortgage, provided the proceeds from the sale of the property acquired are sufficient to cover these costs.

 

CERTIFICATE OF DEPOSIT – A written document issued by a bank or other financial institution that is evidence of a deposit with the issuer’s promise to return the deposit plus earnings at a specified rate of interest (see NEGOTIABLE CERTIFICATE OF DEPOSIT).

 

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 form DD-214 (Separation Paper) to the local VA office with VA form1880 (request for Certificate of Eligibility).

 

CERTIFICATE OF OCCUPANCY – Written authorization given by a local municipality that allows a newly completed or substantially completed, structure to be inhabited.

 

CERTIFICATE OF SALE – A certificate issued to the buyer of real property at a judicial sale.

 

CERTIFICATE OF TITLE – A document stating that title to a particular property is clear. It is prepared by an attorney or qualified person who has examined the abstract of title, but is not to be confused with title insurance. It is only an opinion that title is good. Usually given to a homeowner with the deed.

 

CHANGE OF FREQUENCY – The frequency (in months) of payment and/or interest rate changes in an adjustable –rate mortgage (ARM).

 

CHANGE ORDER – A change in the original plan of construction by a building owner or the general contractor.

 

CHATTEL – Personal property which is tangible and movable. (The word “chattel” evolved from the word “cattle”, one of man’s early important possessions.)

 

CLEAR TITLE – A title free and clear of all encumbrances.

 

CLEARING ACCOUNT – A bank account used by a mortgage servicer for temporary, short-term deposit of mortgage payments collected for transmittal to investors or for deposit in escrow accounts.

 

CLOSED PERIOD – That portion of the term of a mortgage loan during which the loan cannot be prepaid.

 

CLOSING COSTS – Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include an origination fee, an attorney’s fee, taxes, an amount placed in escrow, and charges for obtaining title insurance and a survey. Closing costs percentage will vary according to the area of the country; lenders or realtors often provide estimates of closing costs to prospective homebuyers.

 

CLOSING STATEMENT – An accounting by a broker of funds in a real estate sale, made to the seller and to the buyer.

 

CLOSING – A meeting at which a sale of a property is finalized by the buyer signing the mortgage documents and paying closing costs.

 

CLOUD ON TITLE – An outstanding claim or encumbrance which would affect or impair the owner’s title, if valid. A judgment or dower interest.

 

COINSURANCE – A relative division of risk between the insurer and insured, depending on relative amount of the policy and the actual value of the property insured. Takes effect only with partial loss, less than the amount of the policy coinsurance clauses induce the owner to carry full or nearly full coverage.

 

COLLATERAL – Property pledged as security for a debt, such as the real estate securing a mortgage.

 

COLLATERAL SECURITY – A separate obligation attached to a contract to guarantee its performance; the transfer of property or of other contracts or valuables, to ensure the performance of a principal agreement.

 

COLLECTION – The procedure followed to bring a delinquent mortgage account current.

 

COLLECTION REPORT – The form used by the correspondent (servicer) in reporting collection from mortgagors, including payments in full, repayment of advances, tax and insurance funds for foreclosed mortgages, and any other items not remitted as regular installment payments.

 

COLLOCATE – Sharing of one property by more than one user; especially armed forces recruiting facilities.

 

COMMERCIAL LOAN– A mortgage loan on a property that produces income.

 

COMMERCIAL PAPER – Short-term unsecured notes that are sold to meet short term capital needs.

 

COMMISSION – An agent’s compensation (fee) for negotiating a real estate or loan transaction, often expressed as a percentage of the sales price or mortgage amount.

 

COMMITMENT – An agreement between a lender and a borrower to loan money at a future date subject to compliance with stated conditions (see CONDITIONAL, FIRM, STANDBY, & TAKEOUT COMMITMENT).

 

COMMON ELEMENT – In a condominium, land and parts of buildings used by all owners for mutual convenience and safety.

 

COMMUNITY PROPERTY – Property accumulated through joint efforts of husband and wife, or by either one, during their marriage and owned in common.

 

COMPARABLE – Properties listed in an appraisal report which are substantially equivalent to the subject property, comparable in selling price, rental, income or similar measure.

 

COMPARATIVE MARKET ANALYSIS (CMA) – A demographic and economic analysis of the real estate market in which a property is situated. The analysis assesses a specific property and compares it to other properties with similar features to determine an informal value range and market standing for that particular property. The similar properties that are compared to the subject property are sometimes referred to as “Comparable’s.”

 

COMPENSABLE INTEREST – Interest of parties that is to be compensated.

 

COMPENSATING BALANCE – A deposit usually required by a commercial bank as a condition for extending a line of credit or a bank loan, whereby the deposit is not collateral for the loan.

 

COMPLETION BOND – A bond furnished by a contractor to guarantee completion of construction.

 

COMPLIANCE INSPECTION – Inspection of outgrants, military and civil, for compliance with terms of the outgrant and to review management/development of the property, particularly of outgrants which provide services to the general public.

 

COMPOUND INTEREST – Interest paid both on the original principal and on interest accrued from the time it fell due.

 

CONDEMNATION – In real property law, the process by which property of a private owner is taken for public use, with just compensation to the owner. Condemnation occurs under the right of eminent domain.

 

CONDITIONAL COMMITMENT – A commitment for a loan subject to one or more conditions.

 

CONDITIONAL SALE CONTRACT – A contract whereby the owner retains title to the property until the purchaser has met all of the terms and conditions of the contract.

 

CONDOMINIUM COMMON EXPENSE – In a condominium, expenses of operation and sums declared by the bylaws to be common expense.

 

CONDOMINIUM – Fee ownership of a unit in multi-unit building with joint ownership of common areas.

 

CONSIDERATION – An act or forbearance, 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. Consideration is usually something of value, such as the purchase price in money, though it may be personal services or exchanged property. It is the price bargained for and paid for a promise.

 

CONSTRUCTION LOAN – A short-term interim loan to pay for the construction of buildings or homes. These are usually designed to provide periodic disbursements to the builder as they progress.

 

CONSUMER REPORTING AGENCY (or Bureau) – An organization that handles the preparation or reports used by lenders to determine a potential borrower’s credit history. The agency gets data for these reports from a credit repository and from other sources.

 

CONTAMINATION – Presence of unexploded conventional ordiance, or of biological, radioactive, toxic chemical, or hazardous substances (defined in comprehensive Environmental Response Compensation and Liability Act of 1980) at levels that present a public hazard or exceed applicable standards.

 

CONTINGENCIES –Any one of a number of common clauses added to real estate agreements that provide buyer or seller rights during various stages of a transaction.

 

CONTINGENCY – A condition that must be met before a contract is legally binding.

 

CONTRACT FOR DEED – A ‘land contract’ (sometimes known as a “contract for deed,” “agreement for deed,” “land installment contract” or an “installment sale agreement”) is a contract between a seller and buyer of real property in which the seller provides financing to buyer to purchase the property for an agreed-upon purchase price and the buyer repays the loan ininstallments. Under a land contract, the seller retains the legal title to the property, while permitting the buyer to take possession of it for most purposes other than legal ownership. The sale price is typically paid in periodic installments, often with a balloon payment at the end to make the timelength of payments shorter than a corresponding fully amortized loan without a final balloon payment. When the full purchase price has been paid including any interest, the seller is obligated to convey legal title to the property to the buyer. An initial down payment from the buyer to the seller is usually also required by a land contract. The legal status of land contracts varies from region to region.

 

CONTRACT RENT – Payment for use of property, as specified in a lease.

 

CONTRACT – An agreement, either oral or written to do or not to do certain things. In real estate, there are many different types of contracts, including listings, contracts of sale, options, mortgages, assignments, leases, deeds, escrow agreements, and loan commitments, among others.

 

CONVENTIONAL MORTGAGE – A mortgage on real estate securing a loan made by a private investor, not guaranteed by a Government agency such as FHA or VA.

 

CONVERSION CLAUSE – A provision in an ARM allowing the loan to be converted to a fixed-rate at some point during the term. Usually conversion is allowed at the end of the first adjustment period. The conversion feature may cost extra.

 

CONVEYANCE – The transfer of title to real property by means of a written instrument, such as a deed.

 

COST CERTIFICATION – A condition often placed, in the contract requiring a certification of cost by the architect, contractor, or owners; must sometimes be audited by a third party.

 

COST OF REPRODUCTION – The normal cost of exact duplication of a property with the same or closely similar materials as of a certain date or period.

 

COST, OVERRUN – The amount of money required or expended over and above budgeted costs, including such items as labor, interest, materials and land.

 

COST-PLUS CONTRACT – A construction contract in which the contract price is equal to the cost of construction plus a profit allowance to the builder; as opposed to a fixed price contract.

 

COUNTER OFFER –  A response to an offer that effectively rejects the original offer and introduces a new offer with different terms and conditions.

 

COVENANT – A written agreement in a deed which pledges that either party will perform or abstain from specified acts on a certain property, or which specifies or forbids certain uses of the property.

 

CREDIT HISTORY – A record of an individual’s open and fully repaid debts. A credit history helps a lender determine whether a potential borrower has a history of repaying debts in a timely manner.

 

CREDIT RATING – A rating given to a person or company to establish credit worthiness based upon present financial condition, experience and past credit history.

 

CREDIT REPORT – A report of an individual’s credit history prepared by a credit bureau and used by a lender in determining a loan applicant’s creditworthiness.

 

CREDIT RISK SCORE – A credit risk score is a statistical summary of the information contained in a consumer’s credit report. The most well known type of credit risk score is the Fair Isaac or FICO score. This form of credit scoring is a mathematical summary calculation that assigns numerical values to various pieces of information in the credit report. The overall credit risk score is highly relative in the credit underwriting process for a mortgage loan.

 

CREDIT – An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.

 

CRITERIA – The standards you set for the real estate you choose to invest in.

 

CRITICAL MASS – The amount you need to live-on from the interest on your investments.

 

CROWDFUNDING –  The practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the Internet.  Or raising funds from two or more people over the internet towards a common Service, Project, Product, Investment, or Cause.

 

CUL DE SAC –  A street with a dead end usually with adequate space at the end for vehicles to turn around.

 

CURTILAGE – Area of land occupied by a building and its yard and outbuildings, actually enclosed or considered enclosed.

 

CUSTODIAL ACCOUNTS – Bank accounts deposit of funds belongings to others (see ESCROW ACCOUNT).

 

CUSTODY – Responsibility for a property, as when the mortgagee turns a foreclosed property over to VA. This is a specialized VA term that may, but does not necessarily, include the legal right to physical possession of the property.

DAMAGES – Compensation or indemnity recovered through the courts by any person who has suffered loss, detriment or injury to person, property or rights. A sum of money awarded to a person injured by an act of another. May be compensatory or punitive.

 

DEBT COVERAGE RATIO – Also known as “debt coverage ratio,” (DCR) is the ratio of cash available for debt servicing to interest, principal and lease payments. It is a popular benchmark used in the measurement of an entity’s (person or corporation) ability to produce enough cash to cover its debt (including lease) payments. The higher this ratio is, the easier it is to obtain a loan.

 

DEBT SERVICE – Periodic payment on a debt, for interest on and retirement of the principal.

 

DEBT TO INCOME RATIO – Is the percentage of a consumer’s monthly gross income that goes toward paying debts. (Speaking precisely, DTIs often cover more than just debts; they can include principal, taxes, fees, and insurance premiums as well. Nevertheless, the term is a set phrase that serves as a convenient, well-understood shorthand.) There are two main kinds of DTI, as discussed below.

 

DEED OF RECONVEYANCE – The transfer of legal title from the trustee to the trustor (also called the borrower) after the trust deed debt is paid in full.

 

DEED OF TRUST – A document that embodies the agreement between a lender and a borrower to transfer an interest in the borrower’s land to a neutral third party, a trustee, to secure the payment of a debt by the borrower.

 

DEED RESTRICTION – A provision in a deed controlling or limiting the use of the land.

 

DEED – A legal instrument in writing, duly executed, sealed, and delivered, whereby the owner of real property (grantor) conveys to another (grantee) some right, title, or interest in real estate

 

DEED IN LIEU OF FORECLOSURE – is a deed instrument in which a mortgagor (i.e. the borrower) conveys all interest in a real property to the mortgagee (i.e. the lender) to satisfy a loan that is indefault and avoid foreclosure proceedings.

 

DEFAULT – Failure to perform a specific, required legal duty.

 

DEFERRED INTEREST – When a mortgage is written with a monthly payment that is less that required to satisfy the note rate, the unpaid interest is deferred by adding it to the loan balance. See negative amortization.

 

DEFERRED MAINTENANCE – Existing but unfulfilled requirements for repairs and rehabilitation, deferred until a later date.

 

DEFICIENCY JUDGMENT – At a foreclosure sale, the difference between the indebtedness sued upon and the sale price or market value of the real estate.

 

DEFICIENCY PAYMENT – Additional compensation required in a final judgment in condemnation proceedings. See also DEFICIENCY JUDGMENT.

 

DELINQUENCY – The failure to make payments on time. This can lead to foreclosure.

 

DELIVERY – The legal, final and absolute transfer of a deed from seller to buyer in such a manner that it cannot be recalled by the seller. A necessary requisite to the transfer of title. In mortgage banking, the physical delivery of loan documents to an investor or agent in conformance with the commitment.

 

DEMAND NOTE – A note that is due whenever the holder demands payment.

 

DEPOSIT RECEIPT – A form used to accept earnest money that binds an offer to purchase real property.

 

DEPOSIT – A sum of money given to bind the sale of real estate, or a sum of money given to insure payment or an advance of funds in the processing of a loan.

 

DEPRECIATION ALLOWANCE – The accounting charge made to allow for the fact that the asset may become economically obsolete before its physical deterioration. The purpose is to write off the original cost by distributing it over the estimated useful life of the asset. It appears in both the profit and loss statement and the balance sheet.

 

DEPRECIATION – (1) A lowering of value. A reduction; lessening. The decline in value of property. Loss in market value. Deterioration over a period of time. The opposite of appreciation. (2) In appraising, depreciation is the reduction on value of a property as measured from the cost to replace it. It is the difference between the replacement cost and the market value. (3) In accounting, it is a write-off (usually annually) of a portion of an asset on the records.

 

DETERIORATION – Impairment of condition. One of the causes of depreciation and reflecting the loss in value brought about by wear and tear, disintegration, use in service, and the action of the elements. To diminish or impair in quality.

 

DEVELOPER – A person or entity who prepares raw land for building sites, and sometimes builds on the sites.

 

DEVISE – A transfer of real property under a will. The donor is the devisor and the recipient is the devisee. Where there is no will, the real property “descends” to the heirs.

 

DISBURESEMENTS – The payment of monies on a previously agreed basis. Used to describe construction loan draws.

 

DISCLOSURE DOCUMET – A notice regarding problems with or defects in a property to acquaint tenants and other people who use a leased property with the hazards or expenses they may face. Disclosure documents may include information about environmental hazards or other property conditions. Some disclosures are mandated by federal law (such as the lead-based paint warnings required by the Environmental Protection Agency) and that others may be required by the laws of their state.

 

DISCOUNT  POINT – A type of prepaid interest mortgage borrowers can purchase that lowers the amount of interest they will have to pay on subsequent payments. Each discount point generally costs 1% of the total loan amount and depending on the borrower, each point lowers your interest rate by one-eighth to one one-quarter of your interest rate. Discount points are tax deductible only for the year in which they were paid.

 

DISCOUNT – That which can be taken off the established amount. Mortgages, for example, are frequently discounted when paid in advance of maturity. (2) A sum paid to obtain certain preferred mortgages, as the payment of points to a lending institution for FHA and VA mortgages.

 

DISPOSSESS – To deprive a person of possession and/or use of real property.

 

DISSTRESSED PROPERTY – Property in poor physical condition that is often priced.

 

DOWER – The rights that a widow has in the property of her husband at this death.

 

DOWN PAYMENT – The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.

 

DUAL AGENT – An agent who represents both the buyer and the seller.

 

DUE DILIGENCE – Due diligence means taking caution, performing calculations, reviewing documents, procuring insurance, walking the property, etc. — essentially doing your homework for the property BEFORE you actually make the purchase. If there are too many issues with the property — and that means too much potential risk and cost — then you can cancel your purchase agreement and look for a better property.

 

DUE-ON-SALE PROVISION – A provision in a mortgage that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the mortgage.

 

DUPLEX – A single structure designed with two separate housing units.

 

DURESS – in contract law relates to where a person enters an agreement as a result of threats. Where a party enters a contract because of duress they may have the contract set aside. Originally, the common law only recognized threats of unlawful physical violence, however, in more recent times the courts have recognized economic duress as giving rise to a valid claim. Where the threat is to goods, the courts have been less willing to intervene, although analogous claims in restitution suggest that this position of the law may change. The basis of the duress as a vitiating factor in contract law is that there is an absence of free consent. Duress operates at common law. Pressure not amounting to duress may give rise to an action for undue influence in equity. The effect of a finding of duress and undue influence is that the contract is voidable. The innocent party may rescind the contract and claim damages. The normal bars to rescission operate

 

DWELLING UNIT – The living quarters occupied, or intended for occupancy, by a household.

 

EX PARTE – A decision by a judge without all parties present. Used by Real Estate Investors to challenge and remove false liens.

FAIR MARKET VALUE – Legal term synonymous with MARKET VALUE.

 

FANNIE MAE – see Federal National Mortgage Association.

 

FARMERS HOME ADMINISTRATION (FmHA) – Provides financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere.

 

FEDERAL HOUSING ADMINISTRATION (FHA) – A division of the Department of Housing and Urban Development. Its main activity is the insuring of residential mortgage loans made by private lenders. FHA also sets standards for underwriting mortgages.

 

FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) – also known as “Fannie Mae”: A tax-paying corporation created by Congress that purchases and sells conventional residential mortgages as well as those insured by FHA or guaranteed by VA. This institution, which provides funds for on in seven mortgages, makes mortgage money more available and more affordable.

 

FHA LOAN – A loan insured by the Federal Housing Administration open to all qualified home purchasers. While there are limits to the size of the FHA loans, they are generous enough to handle moderately-priced homes almost anywhere in the country.

 

FHA MORTGAGE INSURANCE – A required fee paid at closing to insure the loan with FHA. In addition, FHA mortgage insurance requires an annual feed paid in monthly installments. The lower the down payment, the more years the fee must be paid.

 

FIDUCIARY RELATIONSHIP – A relationship of trust and confidence that generally imposes special obligations and is usually created by a legal agreement. For example, the relationship between a trustee and a beneficiary is a fiduciary relationship, as is the relationship between an attorney and his or her client. Property managers have this kind of relationship with the people who have hired them to oversee property.

 

FINANCING – The use of another party’s funding (such as a loan from a financial institution) to purchase property.

 

FINANCING PACKAGE – The total of all financial interest in a project. It may include mortgages, partnerships, joint venture capital interests, stock ownership, or any financial arrangement used to carry a project to completion.

 

FINANCING STATEMENT – Under the Uniform Commercial Code, a prescribed form filed by a lender with the registrar of deeds, or secretary of state. It gives the name and address of the debtor and the secured party (lender), along with a description of the personal property securing the loan. It may show the amount of indebtedness.

 

FINDERS FEE – A fee or commission paid to a broker for obtaining a mortgage for a client or for referring a mortgage loan to a broker. It may also refer to a commission paid to a broker for locating property.

 

FIRM COMMITMENT – A promise by FHA to insure a mortgage loan for a specified property and borrower. A promise from a lender to make a mortgage loan.

 

FIRST MORTGAGE – The mortgage on property that is superior in right to any other mortgage.

 

FIX AND FLIP –  A money-making strategy in which you buy a house, fix it up, and then sell it a short time later for a profit.

 

FIXED INSTALLMENT – The monthly payment due on a mortgage including payment of both principle and interest.

 

FIXED RATE  –An interest rate that remains constant over the term of the loan, such as fifteen or thirty years.

 

FIXED RATE MORTGAGE – The mortgage interest rate will remain the same on these mortgages throughout the term of the mortgage for the original borrower.

 

FIXTURE – A chattel which is affixed to and becomes a part of realproperty.

 

FLAT FEE LISTING – When a seller lists a property with a real estate broker who accepts a flat fee rather than a percentage of the sale price for the listing side of the transaction. When the home is sold the buyer’s broker is still usually offered a percentage of the sale price but that could also be a flat fee rather than a percentage.

 

FLOOR PLAN – Scale architectural drawing(s) showing details of a floor design and layout.

 

FOURPLEX –  Having four apartments, divisions, or floors: a fourplex apartment building.

 

FORBEARANCE – The act of refraining from taking legal action despite the fact that a mortgage is in arrears. It is usually granted only when a mortgagor makes a satisfactory arrangement by which the arrears will be paid at a future date.

 

FORECLOSURE – Procedure whereby property pledged as security for a debt is sold to pay the debt in event of default in payments or terms.

 

FORFEITURE – The loss of money or anything of value due to a failure to perform.

 

FRANCHISE – The authorization to do business using the name and operating methods of another. In income property lending, a franchise may have a value as an additional security. It may also be assigned to the lender.

 

FRONTAGE – The property line abutting the most important adjacent property, usually a street, a lake, river or ocean.

 

FRONT-FOOT – A measurement (one foot in length) of the frontage of real property.

 

FULLY AMORTIZED ARM – An adjustable-rate mortgage (ARM) with a monthly payment that is sufficient to amortize the remaining balance, at the interest accrual rate, over the amortization term.

G. I. LOAN – Colloquial term given to a mortgage loan guaranteed by the Veterans Administration.

 

GAP FINANCING – A interim loan given to finance the difference between the floor plan and the maximum permanent loan as committed (see FLOOR PLAN).

 

GARNISHMENT – A proceeding that applies specified monies, wages, or property to a debt or creditor by proper statutory process against a debtor.

 

GENERAL CONTRACTOR – A party that performs or supervises the construction or development of a property pursuant to the terms of a primary contract with the owner. The general contractor may use its own employees for this work and/or the services of other contractors (sub-contractors).

 

GENERAL LIEN – A lien which attaches to all property owned by the debtor.

 

GENERAL WARRANTY – A covenant in the deed whereby the grantor agrees to protect the grantee against the world.

 

GINNIE MAE – See Government National Mortgage Association.

 

GOOD OFFER – A good offer is one that—when accepted, is low enough to guarantee an excellent return on the investment of time and money.

 

GOVERNMENT NATIONAL MORTGAGE ASSOCTIATION (GNMA) – A organization that provides sources of funds for residential mortgages, insured or guaranteed by FHA or VA. Also known as “Ginnie Mae.”

 

GRADUATED PAYMENT MORTGAGE (GPM) – A type of flexible-payment mortgage where the payments increase for a specified period of time and then level off. This type of mortgage has negative amortization built in to it.

 

GRANT – The act of conveying or transferring real property, the operative words in a conveyance of real estate are to “grant, bargain, and sell”. The grantor (the person who conveys the real estate) delivers the grant, in the form of a deed, to the grantee.

 

GRANTEE – Entity to whom a grant is made, or to whom real estate is conveyed. The buyer.

 

GRANTOR – Entity who makes a grant, conveys real estate by deed. The seller.

 

GREEN BELT – Forests, woods, parks or fields surrounding or enclosing urban areas (see COMMON AREAS).

 

GROSS AREA – The total floor area of a building, except that of un-enclosed areas, measured from the outside of the exterior walls.

 

GROSS INCOME – The projected annual income from operation of a business or from management of a property.

 

GROSS RENT MULTIPLIER – Ratio of sales price to monthly rental income for single family residential properties.

 

GROUND LEASE – A lease to use land for a stated period; may be secured by improvements which the tenant will provide.

 

GROWING-EQUITY MORTGAGE (GEM) – A fixed-rate mortgage that provides scheduled payment increases over an established period of time. The increased amount of the monthly payment is applied directly toward reducing the remaining balance of the mortgage.

 

GUARANTY – A promise by one party to pay a debt or perform an Obligation contracted by another in the event that the original obligor fails to pay or perform as contracted.

 

GUARDIAN – One appointed by the court to administer the affairs of an individual not capable of doing so by reason of age, understanding or self-control.

HARD PAPER – NOTES WITH BANKS OR MORTGAGE CO’S

 

INSURABLE WITH REPAIR ESCROW:  A property that requires no more than $5,000 for repairs to meet FHA’s MPR or MPS as estimated by the PCR and as reviewed and determined to be reasonable by the appraiser, is eligible to be marketed for sale in its as-is condition with FHA mortgage insuranceaavailable, provided the purchaser(s) establishes a cash escrow to ensure the completion of the required repairs.  Purchaser(s) are permitted to include in the mortgage an amount equal to 110% of the estimated cost of the repairs.

JOINT AND SEVERAL – An obligation which binds two or more persons individually and jointly. This type of obligation can be enforced by joint action against all or separate actions against one or more.

 

JOINT TENANCY – Co-ownership of real property by two or more persons, whereby the joint tenancy have equal interest, accruing by the same conveyance, commencing at the same time, and held by equal and undivided possession. Joint tenancy includes the right of survivorship, by which interest of a deceased tenant passes to survivors.

 

JOINT VENTURE – A contractual agreement joining together two or more parties for the purpose of executing a particular business undertaking. All parties agree to share in the profits and losses of the enterprise.

 

JUDGMENT – The final determination of the rights and liabilities of the parties in an action, as decreed by a court.

 

JUMBO LOAN – A loan of $417,000 or more, or a loan which exceeds the size limit set for purchase or securitization by the appropriate agency, such as Fannie Mae or Freddie Mac.

 

JUNIOR LIEN – A lien placed upon property after a previous lien has been made and recorded.

 

JUST COMPENSATION – Market value paid for real estate taken in a condemnation action.

LAND ACQUISITION LOAN – A loan that provides the mortgagor funds to acquire land.

 

LAND BANK – Land purchased and held for future development.

 

LAND SPECULATION – The purchase of unimproved land for investment purposes with expectations for rapid value increases.

 

LAND TRUST – These simple title holding trusts were originally started in Illinois, so they are often called Illinois Land Trusts. The purpose of a land trust is to allow one to have the legal title to his property held by another person, or trusteewhile retaining all of the rights and privileges of property ownership (the beneficial interest). The trustee acts only upon the beneficiaries direction. The property owner still retains all rights, such as the right to possession, to collect rent, mortgage the property, homestead exemption, and any other benefit he now has.

 

LANDLORD – One who rents property to others.

 

LANDMARK – In land surveys, any conspicuous object that helps establish land boundaries.

 

LATE CHARGE – An additional charge a borrower is required to pay as a penalty for failure to pay a regular installment when due.

 

LAW OF 72 – Take the constant (72) and divide it by the (rate of return) to find out how many years it will take your money to double.

 

LEASE – A written document by which the owner transfers the rights of use and occupancy of land and/or structures to another person or entity for a specified period of time in return for a specified rental.

 

LEASEHOLD – An estate or interest in an estate in real property held by virtue of a lease.

 

LEASEHOLD ESTATE – as opposed to property conveyed in a manner that transfers full ownership rights to the property.

 

LEASEHOLD MORTGAGE – A loan to a lessee secured by a leasehold interest in a property.

 

LEASE OPTION – An agreement between two parties in which the party who owns the property sells to the second party the right to purchase the property at a future date.

 

LEASE PENDENSE – Latin for “a suit pending,” a written notice that a lawsuit has been filed which concerns the title to real property or some interest in that real property.

 

LEASE PURCHASE CONTRACT –is a shortened name for lease with option to purchase contract. It is a form of real estate purchase which combines elements of a traditional rental agreement with an exclusive option of right of first refusal to later purchase the home.

These contracts are commonly used where a buyer wants to purchase a home, but due to credit issues would not qualify for a conventional mortgage and does not wish to, or would not qualify, for FHA or VA financing.

 

LEASE-PURCHASE MORTGAGE LOAN – An alternative financing option that allows low-and moderate-income home buyers to lease a home with an option to buy. Each month’s rent payment consists of principal, interest, taxes, and insurance (PITP) payments on the first mortgage plus an extra amount that accumulates in a savings account for a down payment.

 

LEGAL DESCRIPTION – A statement containing a designation by which land is identified according to a system set up by law or approved by law.

 

LESSEE ALSO CALLED ‘TENANT’ – A person/entity to whom property is rented under terms of a lease.

 

LESSOR – A person who rents property under a lease; the landlord.

 

LETTER OF CREDIT – A letter authorizing a person or company to draw on a bank, or stating that the bank will honor their credit up to the stated amount.

 

LEVERAGE – The use of debt financing of an investment to maximize the return per dollar of equity invested.

 

LIABILITY – Any drawback, debt, or obligation. Something that acts as a disadvantage. An obligation or duty that must be performed. The opposite of asset.

 

LICENSE – Authority to enter or use another person’s land or property, without possessing estate in it; revocable. Would otherwise constitute a trespass.

 

LIEN – A hold or claim which one person has upon the property of another as a security for some debt or charge.

 

LIMITED PARTNERSHIP – A business organization with one or more general partners, who manage the business and assume legal debts and obligations, and one or more limited partners, who are liable only to the extent of their investments. Limited partners also enjoy rights to the partnership’s cash flow, but are not liable for company obligations.

LINE OF CREDIT – An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain time to a specific borrower.

 

LIQUIDITY – The ability of an individual or business to quickly convert assets into cash without incurring a considerable loss.

 

LIS PENDENS- Latin for “a suit pending.” The term may refer to any pending lawsuit. (2) A written notice that a lawsuit has been filed concerning real estate, involving either the title to the property or a claimed ownership interest in it. The notice is usually filed in the county land records office. Recording a lis pendens alerts a potential purchaser or lender that the propertys title is in question, which makes the property less attractive to a buyer or lender. After the notice is filed, anyone who nevertheless purchases the land or property described in the notice takes it subject to the ultimate decision of the lawsuit.

 

LIST OF REPAIRS – A summary of repairs that need to be made on a house before renting or selling it.

 

LISTING – A written authorization to or lease real estate.

 

LISTING BROKER – A broker who has contracted with a seller to offer the property for sale at a specified price in exchange for a commission or some other consideration.

 

LOAN PACKAGE – A package of pertinent papers and documents regarding specific property or properties. It is delivered to a prospective lender for review and consideration for the purpose of making a mortgage loan.

 

LOAN TO VALUE RATIO – Is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased.

 

LOAN SERVICER – Loan servicing is the process performed by a company who will collect payments, calculate interest, principle and escrow payments from a borrower. The servicer will hold the escrows for property taxes and insurance, it is their obligation to pay the property tax and insurance when due.

 

LOCAL HOUSING AUTHORITY – A city agency that monitors and implements community housing development needs. Local agencies do not necessarily possess renewal or redevelopment authority.

MANAGEMENT AGREEMENT – An employment contract between an individual who owns real estate (generally called the owner or landlord) and the property manager or property management firm hired to manage property.

 

MANAGEMENT PLAN – A written description of what the person or firm managing the property will accomplish for the property and a plan for how these goals will be achieved.

 

MARGIN – The amount the lender adds to the index on an adjustable rate mortgage to establish the adjusted interest rate.

 

MARKET PRICE – The price paid regardless of pressures, motives, or intelligence.

 

MARKET RENT – The price a tenant pays a landlord for the use and occupancy of real property, based upon current prices for comparable property.

 

MARKET VALUE – The price at which a willing seller would sell and a willing buyer would buy, neither being under abnormal pressure.

 

MARKETABLE TITLE – A title that may not be completely clear, but has only minor objections that a well-informed and prudent buyer of real estate would accept.

 

MATURITY – The terminating or due date on a note, time draft, acceptance, bill of exchange, or bond. The date a time instrument of indebtedness becomes due and payable.

 

MAVEN – (also mavin) is a trusted expert in a particular field, who seeks to pass knowledge on to others. The word maven comes from the Hebrew, via Yiddish, and means one who understands, based on an accumulation of knowledge.

 

MAXIUM ALLOWABLE OFFER (MAO Formula) – Concept provides beginner investors a framework for making offers and buying distressed properties

 

MECHANICS LIEN – A statutory lien to secure payment to material men and mechanics for materials and services used to repair, improve, or maintain real property.

 

MILL – One-tenth of one percent, the measure used to state the property tax rate.

 

MIMIMUM PROPERTY STANDARDS – FHA regulations that set forth minimum acceptable technical standards for insurable loans.

 

MINERAL RIGHTS – The right to extract minerals from land. Does not include right to use the surface of the land to conduct mineral extraction. This must be obtained from the surface owner.

 

MLS (Multiple Listing Service) – An association of real estate agents providing for a pooling of listings and the sharing of commissions of a specified basis.

 

MOBILE HOME PARK – A tract of land providing roads, utility connections; and concrete slabs for mobile homes.

 

MODULAR HOUSE – A factory assembled residence built in units or sections, transported to a permanent site an erected on a foundation. The term excludes mobile homes.

 

MORATORIUM – A period in which a borrower is granted the right to delay fulfillment of an obligation.

 

MORTGAGE – A legal instrument pledging a described property for repayment of a loan under certain terms.

 

MORTGAGEE – one to whom a mortgage is made; the lender.

 

MORTGAGE BACKED SECURITIES – Bond-type investment securities representing an undivided interest in a pool of mortgages or trust deeds. Income from the underlying mortgage is used to payoff the securities.

 

MORTGAGE BANKER – A firm or individual active in the field of mortgage banking. Mortgage bankers, as local representatives of regional or national institutional lenders act as correspondent system is the foundation of the mortgage banking industry.

 

MORTGAGE BANKING – The packaging of mortgage loans secured by real property to be sold to a permanent investor with servicing retained for the life of the loan for a fee. The origination, sale, and servicing of mortgage loans by a firm or individual. The investor-correspondent system is the foundation of the mortgage banking industry.

 

MORTGAGE BROKER – An individual or firm that makes mortgage loans on its own behalf, with its own funds, usually expecting to re-sell the loans to lenders at a profit.

 

MORTGAGE DISCOUNT – The difference between the principal amount of a mortgage and the amount it actually sells for. Sometimes called points, loan brokerage fee, or new loan fee, the discount is computed on the amount of the loan, not the sales price.

 

MORTGAGE INSURANCE PREMIUM (MIP) – The amount charged for mortgage insurance, either to a government agency or to a private MI company. On an FHA loan, the payment is one half of one percent annually on the declining balance of the mortgage. It is a part of the regular monthly payment and used by FHA to meet operating expenses and provide loss reserves.

 

MORTGAGE NOTE – A written promise to pay a sum of money at a stated interest rate during a specified term. It is secured by a mortgage.

 

MORTGAGE LOAN – is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan. However, the word mortgage alone, in everyday usage, is most often used to mean mortgage loan.

 

MORTGAGE PORTFOLIO – The aggregate of mortgage loans held by an investor, or serviced by a mortgage banker.

 

MORTGAGOR – One who makes a mortgage, the borrower.

OBLIGATION – Legal reservation of funds based on known requirements (a contract, for example), or a realistic estimate of costs.

 

OBSOLESCENCE – The loss of value of a property occasioned by going out of style, by becoming less suitable for use, or by other economic influences.

 

OCCUPANCY RATE – The percentage of space or units which are leased or occupied.

 

OFFER – A promise by one party to act in a certain manner provided the other party will act in the manner requested. The offeror is the one who makes the offer to the offeree.

 

OFFERING SHEET – A one-page loan summary that points out its important features. This summary assists the investor in evaluating the mortgage loan being submitted by the loan correspondent.

 

OFFISTE IMPROVMENTS – Improvements outside the boundaries of a property, such as sidewalks, streets, curbs, and gutters that enhance its value.

 

ONSITE IMPROVEMENTS – Any construction of buildings or other improvements within boundaries of a property that would increase its value.

 

OPEN-END MORTGAGE – A mortgage containing a clause that permits the mortgagor to borrow money after the loan has been reduced without rewriting the mortgage.

 

OPERATING BUDGET – A detailed projection of all income and expensed for a given period.

 

OPERATING EXPENSES – Generally regarded as all expenses of a property with the exception of real estate taxes, depreciation, interest, and amortization.

 

OPERATING RATIO – The percentage relationship between budgeted or actual operating expenses, plus taxes, and effective gross income.

 

OPTION – A privilege, acquired for a consideration, of demanding within a specified time the carrying out of a transaction upon stipulated terms. The optionor grants an option to an optionee.

 

ORIGINATION FEE – A fee or charge for the work involved in the evaluation, preparation, and submission of a proposed mortgage loan.

 

ORIGNIATOR – A person who solicits builders, brokers, and others to obtain applications for mortgage loans. Origination is the process by which the mortgage banker brings into being a mortgage secured by real property.

 

OWNER FINANCING – A property purchase that is partly or wholly financed by the seller.

PARTIAL PAYMENT – In loan collection less than full payment due, usually not credited until the balance is received.

 

PARTICIPATION LOAN – (1) A mortgage made by one lender in which one or more lenders own a part interest; (2) a mortgage originated by two or more lenders.

 

PARTY WALL – A wall built on a line between two adjoining properties and used by both owners.

 

PAST DUE LOAN – A mortgage loan that is delinquent or has matured and not been paid in full.

 

PAY OFF – To satisfy in full an existing indebtedness.

 

PAYMENT SCHEDULE/WITH MILE STONES AND BENCHMARKS – The payment schedule of financial instruments defines the dates at which payments are made by one party to another on for example a bond or derivative. It can be either customised or parameterised.

 

PERFORMANCE BOND – A bond to guarantee performance of specified acts, such as the completion of property or off-site improvements.

 

PERFORMANCE CLAUSE – A clause requiring the Specific Performance, Equitable Relief, or Injunctive Relief. The clause requires a defaulting party to perform the contractual obligations in accordance with the terms of the bargain.

 

PERSONAL PROPERTY – All physical objects of a personal or movable nature subject to ownership, except real estate (real property). See also PROPERTY and REAL PROPERTY. PLAT – Map of town, section, or subdivision, showing location and boundaries of individual properties.

 

PERPETUITY – An annuity in which the periodic payments begin on a fixed date and continue indefinitely.

 

PITI (PRINCIPLE, INTEREST, TAXES AND INSURANCE) – The Principle and Interest payment on most loans is fixed for the term of the loan; the Tax and Insurance portion may be adjusted to reflect changes in taxes or insurance costs.

 

PLANNING COMMISSION – A local or regional organization, normally a government agency responsible for the preparation and adoption of comprehensive long-term general plans for the physical development of property within its jurisdiction.

 

PLAT BOOK – A book showing the lots and legal descriptions of the subdivisions of an area, usually recorded and kept in the office of the city or county.

 

PLOT PLAN –   A diagram showing the proposed or existing use of a specific parcel of land. Typically shows the location, dimensions, parking areas, and landscaping.

 

PLOT – A piece of land.

POINT – An amount equal to one percent of the principle amount of an investment or note. Loan discounts are a one-time charge assessed at closing by the lender to increase the yield on the mortgage loan to a comprehensive position.

 

POSITIVE CASH FLOW – When rental and other income more than covers the operating expenses and debt service of the property.

 

POWER OF ATTORNEY – An instrument authorizing someone to act as another person’s agent or attorney. The agent is attorney in fact, and his power is revoked at the death of the principal by operation of law. Power of attorney may be general or special.

 

PRE-APPROVAL – The process of determining how much money the buyer will be eligible to borrow before they apply.

 

PRELIMINARY TITLE REPORT – A title search by a title company prior to issuance of a title binder or commitment to insure.

 

PREMISES – A defined portion of land and the improvements thereon as usually described in a deed, deed of trust, or a mortgage.

 

PREMIUM – The amount, often stated as a percentage, paid in addition to the face vale of a note or bond. Also, the charge for insurance coverage.

 

PREPAYMENT PENALTY – Penalty for the payment of a mortgage or deed of trust note before it actually becomes due. PRICE – The amount paid in legal tender, goods, or services; the consideration; purchase price. The terms for which a thing is done.

 

PRIME RATE – The interest rate that the banks charge their best corporate customers.

 

PRINCIPAL – Amount of a loan balance. In a mortgage payment of principal and interest, the principal repays the loan.

 

PRINCIPAL AMORTIZATION – The reduction of the amount of the loan through periodic installment payments.

 

PRINCIPLE BALANCE – The outstanding balance of principle on a mortgage not including interest or any other charges.

 

PRINCIPLE, INTREST, TAXES AND INSURANCE (PITI) – The four components of a monthly mortgage payment. Principle refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the monthly cost of property taxes and homeowners insurance, whether these amounts that are paid into an escrow account each month or not. Also called monthly housing expense.

 

PRIVATE MORTGAGE INSURANCE (PMI) – Insurance written by a private company protecting the mortgage lender against loss occasioned by a mortgage default.

 

PROBATE – a court-supervised process by which the deceased person’s property is distributed to pay off the deceased person’s debts and then to give the remaining money and property to the rightful heirs.

 

PROCESSING – The preparation of a mortgage loan application and supporting documents for consideration by a lender or insurer.

 

PROFORMA STATEMENT– A financial or accounting statement projecting income and performance of real estate within a period of time (usually one year) based upon estimates and assumptions.

 

PROMISSORY NOTE – See MORTGAGE NOTE.

 

PROOF OF LOSS – A statement taken from the insured by the insurer, regarding the details of their loss. The insurer uses the information gained to determine their liability for the loss.

 

PROPERTY – The rights or interests a person has in the thing he owns; not, in the technical sense, the thing itself. These rights include the right to possess, to use, to encumber, to transfer and to exclude, commonly called the bundle of rights. In modern understanding, however, property has come to mean the thing itself to which certain ownership rights are attached. Property is either real or personal.

 

PROPERTY ANALYSIS – A description of the current fiscal and physical condition of a particular property

 

PROPERTY MANAGER – The individual overseeing the physical and financial maintenance of an owner’s property, often employed by a real estate brokerage firm or a property management firm.

 

PROPERTY MANAGMENT – The operation and oversight of an owner’s property carried out by a professional property manager for compensation. Property management operations generally include marketing the property; advertising and rental activities; collecting, recording, and remitting rents; maintaining the property; tenant relations; hiring employees; keeping proper accounts; and providing periodic reports to the owner. Other obligations can be imposed by specific clauses in a management agreement.

PROPERTY MANAGMENT COMPANY – A company that finds and screens tenants, pays for routine maintenance, and collects rent from tenants for a percentage of the monthly rental income.

 

PROSPECTUS – A legal document offering securities or mutual fund shares for sale, required by the Securities Act of 1933. It must explain the offer, including the terms, issuer, objectives (if mutual fund) or planned use of the money (if securities), historical financial statements, and other information that could help an individual decide whether the investment is appropriate for him/her.

 

PUNCH LIST – A list of discrepancies in building plans or other construction flaws written by the original architect during his final inspection of the structure.

 

PULLING A PERMIT– Getting permission form the city or county goverment to do work or install plumbing or electricity.

 

PURCHASE AGREEMENT– See AGREEMENT FOR SALE.

 

PURCHASE MONEY MORTGAGE – A mortgage given by the grantee to the grantor, on the same land and concurrently with the conveyance, to secure the unpaid balance of the purchase price.

The “estate” is composed of everything the decedent owned including real estate, cars, bank accounts, furniture, etc.

QUITCLAIM DEED – A deed of conveyance with conveys to the grantee without warranty of title whatever interest, title, or claim the grantor possesses.

 

QUALIFIED  INVESTOR – A qualified investor (or an accredited investor), must either have a net worth of a million dollars or an annual income of $200,000 or more.  Companies wishing to raise capital form individuals without issuing registered securities are forced to limit their search to people who meet these thresholds. Although there are rules that affect Private Money lenders being at qualified investor is not one of those rules.

Note always check with an attorney before doing any real estate transaction.

 

RULE OF 2% – he 2% rule-For a rental property investment to be “good”, the monthly rent should be equal to or higher than 2% of the purchase price. Example–For a $100,000 property, the monthly rent collected needs to be $2,000/month or higher to meet this guideline.

 

 

 

 

SOFT PAPER – NOTES WITH PRIVATE LENDERS

TACTICS – Ways to find deals in real estate.

 

TAPE-A – Spreadsheet of discounted properties or notes for sale.

 

TAX APPRAISAL – You can get this off any government website. It gives the Tax Appraisal Value, owner’s name and address, deed date and number of prior owners.

 

TAX DEED – A deed given where property has been purchased at a sale to the public of property for nonpayment of taxes.

 

TAX LIEN – A government claim for unpaid real estate tax.

 

TAX RATE – The rate of tax per $100 of assessed value of real property.

 

TAX SALE – A sale of property, usually at auction, for nonpayment of taxes assessed against it.

 

TAXING AUTHORITY – A statutory authority given to a governmental body to levy and collect taxes for public purposes.

 

TENANCY – A holding (either ownership or possession) of real estate.

 

TENANCY IN COMMON –  A type of joint tenancy of property without right of survivorship; each tenant’s portion of ownership is distributable under will.

 

TENANCY IN COMMON – Co-ownership of real property by two or more persons, each entitled to possession according to his proportionate share. Unlike joint tenancy, there is no right of survivorship. See also JOINT TENANCY, TENANCY BY ENTIRETY, RIGHT OF SURVIVORSHIP.

 

TENANT ALSO KNOW AS ‘LESSEE’ – One who holds or possesses land or tenements by any kind of title, either in fee, for ‘life, for years, or at will. In a popular sense, the one who has temporary use and occupation of lands or tenements which belong to another, the duration and other terms of whose occupations are usually defined by a lease, while the parties thereto are placed in the relationship of landlord and tenant.

 

TERM – The extent of time for which an estate is granted. For example, the period which is granted for the lessee to occupy the premises; it does not include the time between making the lease and the tenant’s entry.

 

TERMINATION – End of a lease or contract, usually before the anticipated time; termination may be by mutual agreement or by exercise of one party of a legal remedy due to default of the other party.

 

TESTATE – The estate or conditions a legally valid will at death.

 

TIME IS OF THE ESSENCE – One of the essential requirements to the forming of binding contract; it contemplates a punctual performance.

 

TIME VALUE OF MONEY – A dollar tomorrow is worth less than a dollar today.

 

TITLE COMPANY – A company that specializes in examining and insuring titles to real estate.

 

TITLE DEFECT – An objectionable legal right held by others to claim property or to make demands upon an owner.

 

TITLE EXCPETION – An exception appearing in a title policy against which the company does not insure.

 

TITLE INSURANCE POLICY -A written promise from the title insurance company to insure the title to the property, based on the conditions and exclusions shown in the policy.

 

TITLE INSURANCE – Indemnity against loss or damage resulting from defects in or liens on a title at the date of the insurance.

 

TITLE SEARCH – The process of examining all relevant records to confirm that the seller is the legal owner of a property and that there are no liens or other claims outstanding.

 

TITLE – The right to or ownership of lands. Also, the evidence of ownership. Title to property encompasses all the bundle of rights an owner possesses.

 

TOWNHOUSE – An attached home that is not considered to be a condominium.

 

TRACT – An area of land contained in one description.

 

TRANSFER FEES – Fees collected from the buyer or seller of a property to defray county or city charges for changing the records.

 

TRANSFER – Change of jurisdiction over real property from one Federal agency or department to another, including military departments and defense agencies.

 

TRIPLEX – a dwelling composed of three units.

 

TRUST DEED OR DEED OF TRUST – A deed conveying land to a trustee as collateral security for the payment of a debt; upon payment of a debt secured thereby, the deed of trust is released; upon default, the trustee has the power to sell the land and pay the debt.

 

TRUSTEE – A fiduciary who holds or controls property for the benefit of another.

 

TRUTH-IN-LENDING – A federal law requiring disclosure of the Annual Percentage Rate to home buyers shortly after they apply for the loan. Also known as Reg Z.

UNDIVIDED INTEREST – A form of communal ownership in which all owners share possession jointly and severally. That is, owners with undivided interest collectively own a single piece of property rather than each owning a portion of it. Decisions regarding the property must be made as a group.
– One why holds property in trust for another to secure the performance of an obligation.

 

UNENCUMBERED PROPERTY – A property that is free and clear.

 

UNIFORM COMMERICAL CODE (UCC) – A commercial comprehensive law regulating commercial transactions. It has been adopted, with modifications, by most states.

 

UNIMPROVED LAND – See RAW LAND.

 

USURY – Charging more than the legal rate of interest for the use of money.

 

USURY CEILING – A maximum legal rate, established by state law, of interest that may be charged for the use of money. The ceiling may vary depending on the nature or type of loan.

VA – See VETERANS ADMINISTRATION.

 

VACANCY FACTOR –  A percentage rate expressing the loss from gross rental income due to vacancy and collection losses.

 

VALUE – Ability to command goods, including money, in exchange; the quantity of goods, including money, which should be commanded or received in exchange for the thing valued; utility; desirability. As applied to a property value may be broadly defined as “the present worth of all the rights to future benefits arising from ownership”.

 

VARIABLE RATE MORTGAGE – A mortgage agreement that allows for adjustment of the interest rate in keeping with a fluctuating market and terms agreed upon in the note.

 

VARIANCE – An approved special charge in construction codes, zoning requirements, or other property use restrictions.

 

VENDEE – The party to whom personal or real property is sold.

 

VENDOR – The person who transfers Property by sale.

 

VENDOR’S LIEN – An unpaid seller’s right to a prior lien on property until the purchase price has been recovered.

 

VERIFICATION OF DEPOSIT (VOD) – A document signed by the borrower’s financial institution verifying the status and balance of his or her financial accounts.

 

VERIFICATION OF EMPLOYMENT (VOE) – A document signed by the borrower’s employer verifying his/her position and salary.

 

VOID – That which is unenforceable; having no force or effect.

 

VOLUNTARY LIEN – Any lien placed upon property with consent of, or as a result of, the voluntary act of the owner.

 

VOUCHER SYSTEM – In construction lending, a system giving subcontractors a voucher in lieu of cash that they may redeem with the construction lender. The opposite a fixed disbursement schedule.

W9 – A W9 form is one of the tax forms required by the Internal Revenue Service (IRS) for income reporting. Individuals and companies who are providing contract services for a company usually receive blank W9 forms to fill out. These forms are rather simple to complete, but must be filled out accurately to avoid unnecessary payment errors and even incorrect calculation of tax liability.

 

WAIVER OF LIEN – The written evidence from the contractor (or supplier of material) surrendering the right of lien to enforce collection of debt against property.

 

WAIVER – The renunciation, abandonment, or surrender of a right, claim, or privilege.

 

WARRANTY DEED – A deed that contains a covenant that the grantor will protect the grantee against any claimant.

 

WATER TABLE – Distance from the ground surface to a depth at which natural ground water is found.

 

WILL – A written document providing for the distribution of property at death.

 

WITHOUT RECOURSE – A qualified endorsement of a negotiable instrument that protects the endorser from liability.

 

WORKING CAPITAL – Liquid assets available for the conduct of daily business

 

WRAPAROUND MORTGAGE –(aka–All Inclusive Trust Deed) A mortgage that includes the remaining balance on an existing first mortgage plus an additional amount requested by the mortgagor. Full payments on both mortgages are made to the wraparound mortgagee, who then forwards the payments on the first mortgage to the first mortgagee.

YIELD – The ratio of the annual income generated by an investment divided by the annual income of that investment.

 

YIELD(2) – The annual rate of return on and investment, expressed as a percentage.

ZILLOW – An online real estate service company. It allows users to see the value of millions of homes across the United States. It offers several features including giving value estimates of homes.

 

ZONING – The public regulation, through police power, of the character and extent of real estate use. Uniform restrictions on improvements, building height, density of population, and other factors regulate the use and development of private property.