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Real Estate Terms and Definitions

ABATEMENT: A reduction or reprieve from a tax debt or other payment obligation. Sometimes rental contracts will include an abatement clause to protect the lessee (renter) from having to pay full rent if the building is destroyed by fire, flood or is damaged in some other way to the point it cannot be occupied until renovated.
ABSORPTION: The rate, expressed as a percentage, at which properties can be leased or sold in a given area. This is especially important to know if you are buying rental properties as this will help you better know the real value of the property.
ABSTRACT OF TITLE: A synopsis of the legal history of ownership of real property as well as any liabilities attached to it, such as mortgage liens. A summary of recorded instruments, which affect title, arranged in the order of recordings. This abstract will sow a “chain of title” recording ownership from person to person over time.
ABUTTING: When two pieces of property share the same border. Abutting pieces of property have a common boundary.
ACCELERATION CLAUSE: A clause written into a mortgage, note, bond or other contract giving the lender the option, in the event of default, to require the whole amount of principal and interest to be declared to be due and payable at once.
ACCEPTANCE: The acceptance of a contract’s terms and the willingness to be bound by the terms of said contract. Shown in the form of a signature on the bottom line.
ACCRETION: The gradual buildup of land through deposits of sediment. Can also apply towards a general increase or growth in size by gradual external addition, fusion or inclusion such as the accretion of laws governing real estate investing.
ACCURED INTEREST: Accumulated (collected) interest that has been earned but not yet paid.
ACQUISITION AND IMPROVEMENT LOAN: Also known as a “rehab” loan it means a loan to purchase an existing property which includes additional funds for the purpose of installing energy conservation improvements or making other alterations, improvements, or repairs.
ACRE: A measure of land totaling 43,560 square feet. Lots are often divided into sub- acre sizes.
AD VALORUM: “According to the value,” and used in connection with taxation.
ADDITIONAL PRINCIPAL PAYMENT: A payment by a borrower of more than the scheduled principal amount due in order to reduce the remaining balance of the loan.
ADJUSTABLE RATE MORTGAGE (ARM): A mortgage whose cost (interest rate) is variable based on criteria established in the Note. Usually loans allow a lender to adjust the interest rate annually based on changes to an underlying, specified index. This type of loan does not have a fixed interest rate but allows the rate to fluctuate up or down as market conditions change. To avoid constant and drastic fluctuations, ARMs typically limit how often and by how much the interest rate can vary.




Real Estate Terms and Definitions

ADJUSTED COST BASIS: Used in accounting terms. Means the original cost of the property plus any improvements made minus the depreciation or cost recovery taken. In essence the adjusted cost basis is used to figure any capital gains on the sale of a property.
ADJUSTED GROSS INCOME (AGI): A borrower’s gross income reduced by certain adjustments allowed by law. For example, an IRA contribution may be deducted from gross income in some cases.
ADJUSTMENT DATE: The date on which the interest rate changes for an adjustable rate mortgage (ARM).













ADJUMENT PERIOD: The period of time measured between adjustment dates for an ARM loan. This is usually done on a yearly basis.
ADMINISTRATOR: A person appointed by a probate court to administer the estate of a person who died intestate (without a will).
ADVANCE: In real estate, a partial disbursement of funds under a note. Most often used in connection with construction lending.
AFFORDABILITY ANALYSIS: A detailed analysis of your ability to afford the purchased home. An affordability analysis looks at your debt-to-income ratio and includes such things as income, liabilities (debts), other payments, cash on hand, type of mortgage including how much LTV (Loan To Value) ratio in the loan, the home’s neighborhood and the closing costs of the loan.
AFTER TAX CASH FLOW: Effective gross income minus operating expenses and debt service plus or minus any tax savings or tax liability. Cash flow is king and every transaction you do should be based on a positive cash flow.
AGENCY: Describes a relationship of trust whereby one party (the principal or decision maker) contracts with another party (like a real estate agent) to act in their best interest when doing business with other parties. Describes a legal relationship which should be clearly stated or explained in a contract.
AGREEMENT OF SALE: Known by various names such as contract of purchase, purchase agreement, or sales agreement depending on where you happen to be. An agreement of sale is a contract in which a seller agrees to sell and a buyer agrees to buy something according to the specific terms written into and signed by both parties.
ALIENATION: Transference of real property from one person to another.
ALIENATION CLAUSE: A clause in a mortgage, which gives the lender the right to call the entire loan balance due if the property is sold, also know as due-on-sale clause.
ALLIGATOR: A property that has a negative cash flow once all the carrying costs are factored into the equation.


Real Estate Terms and Definitions

ALL-INCLUSIVE TRUST DEED (AITD): Can be called a “Wrap Around Trust Deed” and is often used by sellers in combination with a Note when doing seller financing. If done properly, these notes can then be sold by the seller at closing to a note buyer to cash the seller out totally.
AMENITY: A feature of real property that enhances its value, salability or attractiveness and contributes to the owner’s satisfaction although the feature is not essential to the property’s use. Natural amenities include a pleasant or desirable location, view, closeness to water, privacy and the like. Man made amenities include swimming pools, community infrastructure, road access, cable or high speed internet access and so on. Amenities are great things to feature in your advertising – almost anything can be marketed as an amenity with creativity.
AMORTIZATION: A method of paying off the principal amount of a debt over time. Each payment made reduces the amount owed.
AMORTIZATION SCHEDULE: A timetable for payment of mortgage loan. An amortization schedule sows the amount of each payment applied to interest and principal and shows the remaining balance after each payment is made.
AMORTIZED LOAN: A loan in which the principal as well as the interest is payable in monthly of other periodic installments over the term of the loan.
ANCHOR TENANT: Usually the biggest tenant in a commercial property such as a shopping center. Investors in large commercial properties seek these anchor tenants to attract smaller tenants hoping to gain more business through exposure developed by these larger more well-known tenants.
ANNUAL MORTGAGE STATEMENT: A report sent to the mortgagor (the borrower) each year. The report shows how much was paid in taxes and interest during the year as well as the remaining mortgage loan balance at the end of the year.
ANNUAL PERCENTAGE RATE (APR): The cost of a mortgage stated as a yearly rate which factors into the quoted interest rate other costs of the loan such as mortgage insurance and the loan origination fees.
ANNUAL STATEMENT: An annual statement sent to mortgagors (homeowners) detailing all activity in their mortgage loan account, including all escrow activity.
ANNUITY: A payment of equal installments paid periodically for a given number of periods. Can be something you pay (such as an insurance premium) or something in which you are paid (such as rent).
APPLICATION: A form used to apply for a mortgage loan and to record pertinent information concerning a prospective mortgagor (buyer) and the proposed security (real property). Lenders use this information on the loan application to evaluate whether or not they will loan money and how much and at rate this money will be loaned.
APPRAISAL: An estimation of the value of real property at the present point in time. Any of three different methods are used to
1.A cost approach: Use current building costs to determine value.
2.Income approach: used in rentals or commercial buildings. Use the monthly cash 
flow in a formula to determine value of the property. 
3.Market data approach: use comparable home sales to determine value. This is 
by far the most often used method of valuing residential property. 

APPRAISER: A non-biased, accredited and licensed person who evaluates a property and determines its value. Many appraisers will arrive at many different values for the same property.
APPRECIATION: A property’s growth in value over time due to higher selling prices in the local neighborhood. A rise in appreciation leads to an increase of equity in the house and will increase the investors return on their investment significantly. The opposite of depreciations.
APPURTENANCE: Anything attached to the land which becomes part of the property.
ARREARS: The payment of money after the fact. Interest and taxes are paid in arrears would represent money paid for a period of time which has now passed. Can also be used to describe the amount of payment past due as in, “Your payment is 3 months past due and you are $2,,000 in arrears.”
ASKING (LIST) PRICE: The price for which a home is listed on the market. The asking price often sets value for the home. As a real estate investor, you must be aware of this asking price and how it reflects on the market value. A home priced too low will affect how much the appraisers find it to be worth. When buying homes below market value it is easier to hide what you paid when you buy a FSBO (for sale by owner) home. When buying an undervalued home that has been listed by an agent, be sure to emphasize with the appraiser the specific distressed situation the seller was in when you bought the house.
ASSESSD VALUE: The value as determined by the local tax assessor’s office for the purpose of levying local taxes. Each community has its own method for when these taxes are assessed which you should know as a real estate investor. California assesses value on the sale of a property and while Florida assess based on an annual evaluation of selling prices within a given area.
ASSESMENT: The word used to describe the amount of taxes paid according to the assessed value of the property. May also refer to a levy against the property for a special purpose such as a sewer assessment.
ASSESSOR: The public official who establishes the value of a property for taxation purposes.
ASSET: Any possession of value that an individual owns which may be used for payment of debt or to establish a value for that person’s net worth.
ASSIGN: To transfer one’s rights in a bond, mortgage, lease or other legal instrument to another person.

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Real Estate Terms and Definitions

ASSIGNEE: A person to whom a property right is transferred.
ASIGNMENT OF MORTGAGE: A document that evidences a transfer of ownership of a mortgage from one party to another. If one lender sells the loan (note) to another lender, the property owner will be sent an assignment of mortgage notice.
ASSIGNMENT OF RENTS: An agreement between a property owner and mortgagee specifically fixing the rights and obligations of each regarding rent transferred to a mortgage if a mortgagor defaults.
ASSIGNOR: A person who transfers or assigns a right or property.
ASSUMABLE MORTGAGE: An existing mortgage that can be take over by the buyer on the same terms given to the original borrower. FHA and VA loans have not been assumable since the late 1980s. Other mortgages may be assumable including seller financed deals.
ASSUMING A MORTGAGE: Taking responsibility for both the title of the property and the mortgage payments due to a note holder whose loan is secured by the property. This is just another form of a sale especially desirable for investors because it usually reduces the upfront cash-out-of pocket amount an investor must spend to secure the property.
ASSUMPTION CLAUSE: A provision in an assumable mortgage that allows a buyer to assume responsibility for the mortgage from the seller. FHA loans have not had this since 1989 and VA loans have not had this since 1988. The vast majority of loans made by banks today have a “Due On Sale” clause written into the note meaning they want to be paid on the sale of the property.
ATTACHED HOME: A home that has one or more common walls adjoining another home. Condominiums and townhomes and row houses are attached homes.
ATTACHMENT: A seizure of defendant’s property by court order as a security for any judgment a plaintiff may recover in a legal action.
ATTORN: To turn over or transfer to another money or goods or, in the case of a renter, to agree to recognize and pay rent to a new owner or a property. Also, in a lease, when the tenant agrees to attorn to the new buyer, the current owner is given the power to subordinate tenant’s interest to another first mortgage or deed of trust lien subsequently placed on the property.
ATTORNEY-AT-LAW: A person who is licensed to practice law. There are several types of legal specialties. As a real estate investor, you would be wise to develop a relationship with an attorney who specializes in real estate law within your local area.
BALANCE SHEET: A financial statement showing the assets, liabilities and net worth of a company at a single point in time.
BALLOON MORTGAGE: A mortgage where the final payment is considerably higher that the preceding payments.

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Real Estate Terms and Definitions

BALLOON PAYMENT: A large financial payment made on a note, usually after partial amortization of the debt through installment (monthly)payment.
BANKRUPTCY: Proceedings against a debtor who has been declared legally insolvent. The assets and property of the debtor is distributed among the creditors (the lenders) to pay off as much debt as possible.
BASE RENT: The initial rental amount set as a minimum monthly rent in a lease containing provisions for increasing the monthly rent during the term of the lease.
BASE YEAR: The year of a lease term which is used to compare subsequent years.
BASIS: Generally, the cost of an asset. The baseline number used to compare profitability upon the eventually sale of the property.
BASIS PONTS: A basis point is 1/100 of 1% interest,; thus, 50 basis points equal .50%.
BENEFICIARY: The person designated to receive the income from a trust estate, or trust deed.
BILL OF SALE: A document used to transfer title of personal property to the buyer.
BINDER: Small deposit money paid with a temporary agreement to purchase property under specific terms. Can also be called an “Earnest Money Deposit’ (EMD).
BIRD DOG: investigators used by real estate investors to find property.
BLANKET MORTGAGE: One mortgage that covers several different parcels of real property.
BLENDED INTEREST RATE: Averaging the interest rate and loaned amount of all mortgages of all encumbrances upon the property to determine the weighted average of the actual costs of the loan(s).
BOILER PLATE: Used to describe the standardized, preprinted sections of a contract.
BOMA STANDARD: A nationally published and recognized standard for measuring office space.
BOMA: Building Owners and Managers Association

BOND: The evidence of a personal debt which is secured by a mortgage on real estate.
BOOK VALUE: The value of a property carried on a company’s books. It is either determined by the cost of the property less the de Wealth Building through Real Estate Investing in America 

Real Estate Terms and Definitions

BOUNDS: Natural manmade boundaries (such as roads, trees, rocks, railroad tracks, etc.) used to demark property lines. Especially used in the eastern states which used a method called Metes and Bounds in the legal description of property.
BREAK EVEN POINT: In residential or commercial property, the figure at which occupancy income is equal to all required expenses and debt service.
BROKER: State licensed agent who represents buyers and/or sellers in real estate proceedings. Brokers earn a commission or fee for bringing two parties (a buyer and a seller) together. In other words, the person who, for a commission or a fee, brings parties together and assists in the negotiating contracts between them.
BROKERAGE: The term used to describe the place or company that agents or brokers work for.
BORKERS OPINION: The opinion of a Real Estate Broker as to the value of a property.
BUILDING CLASSFICATIONS: Building classifications used in commercial real estate to rate the desirability of a particular property to potential tenants.
BUILDING CODE: Local regulations that control design, construction and materials used in construction or in remodeling.
BUILDING CORE: The section of the commercial building where the restrooms, ventilation shafts, electrical distribution, elevator shafts and stairwells are located. Buildings are built this way to reduce the cost of construction.
BUILDING STANDARD: The project specifications set out by the owner, usually in conjunction with the project to insure builder builds the designed building.
BUILD-OUT: Used to describe the need by a commercial building owner to adapt the space for a potential tenant. Usually the tenant is responsible for these costs, especially after the tenant is in the building.
BUILD TO SUIIT: Usually used in commercial real estate in which the building owner finds a tenant and builds the property specific to that tenant’s requirement.
BUYER’S BROKER: An agent who has declared to represent only the buyer in a transaction, regardless of whether compensation is paid by the buyer or the listing broker through a commission split.
BUY DOWN MORTGAGE: A mortgage made by a lender with a below-market interest rate in return for an interest rate in the form of money received from a building, seller, or in some situations, a homebuyer. Cash is given at closing to reduce the interest rate during the term of the loan.
BUY SELL AGREEMENT: An agreement entered into by an interim lender and a permanent lender for the sale and assignment of the mortgage to the permanent lender when a building has been completed under the terms of the contract between the two parties.

CALENDAR YEAR: A year beginning January 1 and ending December 31 and which therefore contains the actual number of days in each month for a total of 365 days in a year (366 days in a leap year). Companies and governments may keep their books on a schedule different from a calendar year. The year as kept for a company’s may or may not fall on January 1 and end as of December 31 of a given year. It could begin on any day of the year and end the following year on the day before the start date. This is know as a “fiscal year”
CALL PROVISION: A clause in the mortgage or deed of trust 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 such as a refinance, assumption or sale.
CAP: The maximum allowable increase, for ether payment or interest rate, for a specified amount of time on an adjustable rate mortgage. All increases and decreased of an ARM loan are “capped” to protect the buyer if rates are going up and to protect the seller if rates are going down.
CAPITAL: Money used to create income, ether as investment in a business or income producing property. Also known as the money an investor will need to bring into the deal to get it done.
CAPITAL ASSET: In general, property held for personal purposes or investment such as homes or rental property.
CAPITAL EXPENSES: This type of expense is most often defined by reference to generally accepted accounting principals (GAAP), but GAAP does not provide definitive guidance on all possible expenditures.
CAPITAL GAINS AND LOSS: A gain or loss arising from the sale or exchange of capital assets such as a house or apartment complex. Capital gain or loss is computed by comparing the amount realized on the sale or exchange of an asset with the adjusted cost basis of the asset.
CAPITAIZATION: The process of converting into present value a series of anticipated future installments of net income by discounting them into a present value using a specific desired rate earnings.
CAPITALIZATION RATE: The rate which is believed to represent the proper relationship between real property and the net income it produces. This rate is multiplied with the current rental income to ascertain a sales value of the property.
CAPATILIZE: To treat expenditure as a cost or additional cost of property that increases the property’s basis as opposed to treating the expenditure as an immediate deduction. An expense may be deducted in the year it is incurred or it may be capitalized.
CARRYING CHARGES: Costs incidental to property ownership, other than interest such as taxes, insurance costs, maintenance expenses and marketing costs that must be absorbed by the landlord during the initial lease up of a building and thereafter during periods of vacancy.

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Real Estate Terms and Definitions

CASH COW: This term is often used to describe a rental property generating high positive cash flow.
CASH FLOW: Effective gross income minus operating expenses, taxes and debt services. In simple terms this is basically the amount of cash you have coming in every month less the amount of money you have going out each month.
CASH METHOD OF ACCOUNTING: A method of accounting in which income is reported when actually or constructively received and expenses are reported when paid.
CASH-ON-CASH RETURN: The rate of return on an investment measured by the cash returned to the investor based on the investor’s own cash investment without regard to income tax savings or the use of borrowed funds.
CASH-OUT REFINANCING: A loan made to an owner to be used for any purpose whatsoever.
CAVEAT EMPTOR: Latin for “Let the Buyer Beware.” Buyers must inspect the goods or property and purchase at their own risk. In other words the buyer takes responsibility for the property’s condition upon the purchase price.
CEILING: The maximum allowable interest rate over the life of the loan of an adjustable rate mortgage.
CERTIFICATE OF OCCUPANCY: A document presented by local government agency or building department certifying that a building and/r the leased premises (tenant space) has been satisfactorily inspected and is/are in a condition suitable for occupancy.
CHAIN OF TITLE: The analysis of applicable records (usually title) sowing history of ownership to a piece of property over time.
CHATTEL MORTGAGE: A mortgage on personal property.
CHATTEL: Term used to describe the personal property on possesses such as TV’s, couches, stereo system and the like. In real estate, chattel describes personal property that is not fixed or attached to the real property in some way. As such blinds, dishwashers, and the like are not chattel but now a part of the real property because they have become permanently attached to the property.
CLEAR TITLE: A title that does not have any liens (including a mortgage) against it.
CLOSING: The conclusion or consummation of a transaction. In real estate closing includes the delivery of a deed, financial adjustments, the signing of notes and the disbursement of funds necessary to the sale or loan transaction. The process by which the property title is conveyed from seller to buyer in exchange for consideration such as money, promise to pay a seller finance note and so on.
CLOSING COSTS: Costs the buyer must pay at the time of closing, in addition to the down payment which may include pints, title charges, credit report fee, document preparation

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Real Estate Terms and Definitions

fee, mortgage insurance premiums, property taxes etc.. Closing costs can vary from one closing to another.
CLOSING STATEMENT: A detailed written summary of the financial settlement of a real estate transaction sowing all charges and credits made, and all cash received and paid out.
CLOUD ON TITLE: Any conditions revealed by a title search that adversely affects the title and interferes with the sale of real estate. Usually these clouds on title cannot be removed expect by a quitclaim deed, release or court action.
COLLATERAL: Real or personal property pledged as security for repayment of a loan or debt. This can mean money or it can mean other types of property such as cars, trucks, cameras, other real property or anything else the lenders might recognize as valuable.
COMMISSION: Usually a percentage of the purchase price paid to the broker or real estate agent for the services of they render.
COMMON AREA MAINTENANCE (CAM): This is the amount of additional rent charged to the tenant in addition to the base rent to maintain the common areas of the property shared by the tenants and from which all tenants derive some benefit.
COMMON AREA: There are two types of common areas. The first, used in apartment complexes describes common areas such as lawns, parking spaces, laundry rooms and so on. The second is used in commercial office space for business. In this version of the word, there are two ways to define it: (1) Referring to the load factor calculation, the common area are those areas within a building that are available for common use by all tenant groups of tenants and their invitees. (2) On the other hand, the cost of maintaining parking facilities, malls, sidewalks, public toilets, service facilities and the like are included in the term “common area” when calculating the tenants pro-rata share of building operating expenses.
COMMON LAW: Common law is used to help the courts make just decision in the gaps between the constitution and statutory laws.
COMPARABLES: Often called “comps” these are properties which are similar to a particular property and are used to compare and establish a value for that property.
COMPETENT PARTY: A person legally able to enter into contracts because they are both of legal age and because they are of sound mind and body.
COMPLIANCE INSPECTIONS: Inspection of dwellings under construction and, in appropriate cases, existing dwellings being altered, improved, or repaired to determine whether onsite and offsite improvements are in accordance with local building ordinances and codes.
COMPOUND INTEREST: Interest paid on original principal and on the accrued and unpaid interest which has accumulated.

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Real Estate Terms and Definitions

CONCESSIONS: Cash or cash equivalents expended by the landlord in the form of rental abatement, additional tenant finish allowance, moving expenses, or other monies or services used to attract tenants to sign a lease.
CONDEMNATION: The process by which property of a private owner is taken, with or without valid consent, for the public use. Fair compensation must be paid. The power of the government to condemn property is given through a doctrine called, “Imminent domain” which says that the rights of many can impact the rights of the one.
CONDOMINIUM: Individual ownership of an apartment or other multiple attached building offering the owner an undivided interest in the common areas and facilities which serve the multi-unit property.
CONSIDERATION: Something of value exchanged by a party to influence another party to enter into a contract. Consideration can be cash, financial terms, personal property, time or anything somebody might want in exchange for something they have.
CONSTRUCTION CONTRACT: An agreement between a general contractor and an owner-developer stating the specific duties the general contractor will perform according to blueprints and specifications at a stipulated price and terms of payment.
CONSTRUCTION LOAN: A short-term, interim loan for financing the cost of construction. The lender makes payments (called draws) to the builder at periodic intervals as the work progresses. These loans can be single close loans if financed this way from the beginning.
CONSTRUCTION LOAN AGREEMENT: A written agreement between a lender and a builder or borrower in which the specific terms and conditions of a construction loan, including the schedule of payments, are spelled out.
CONSTRUCTION LOAN DRAW: The partial disbursement of the construction loan, based on the schedule of payments in the loan agreement. Also called takedown.
CONTIGUOUS SPACE: used to describe the amount of rental space available in a commercial building. This can be either (1) Multiple suites/spaces within the same building and on the same floor which can be combined and rented as a single unit, or (2) A block of space located on multiple adjoining floors in a building.
CONTIGENCY: A possible event based on the happening of an uncertain future event. Often called plan A, B, C and so on. As an investor you should always develop contingency plans for various possible scenarios so you are never paralyzed into an action through fear. This is especially important with your exit strategy of every property you purchase.
CONTRACT FOR DEED: A contract for the sale of real property wherein the seller is obligated to provide a merchantable title after the buyer has paid for the property, usually in installments. Abbreviated as CFD. Also called a Land Contract (LC) or Agreement for Deed (AD). 

CONTRACT FOR PURCHASE AND SALE: An agreement between buyer and seller of real property to transfer title to that property at a future time for a specific sum of money. Similar to a lease option contract.
CONTRACT: A legal agreement between competent parties in the performance of a legal consideration whereby each party obtains a right to what the other owns. Contracts can be verbal or written (more defensible when written) and should spell out in terms the agreement between the two parties. For the purchase of real estate, the contract is a state sanctioned document specific to your state.
CONVENTIONAL LOAN: A mortgage neither insured by FHA nor guaranteed by VA.
CONVERTIBLE MORTGAGE: An adjustable rate mortgage whereby the mortgagor can convert the mortgage to a fixed –rate mortgage during a predetermined time period.
CONVEYANCE: Most commonly refers to the transfer of title to property between parties by deed. The term may also include most of the instruments by which an interest in real estate is created, mortgaged or assigned.
COOPORATIVE: An apartment house or similar property owned, usually in corporate form, by all the tenants. Each has stock in the corporation which owns the building. As such each has a say in the management and disposition of the real property owned by the corporation.
COSIGNER: A person who signs a legal instrument and therefore becomes individually and jointly liable for repayment or performance of an obligation.
COST APPROACH: An appraisal technique used to establish value by estimating the cost to reproduce the improvement, allowing for depreciation, them adding in the fair market value.
COTERMINOUS: Two or more leases that end at the same time.
COUNTER OFFER: A change in price or terms of an unacceptable and rejected offer. If you are investing correctly you should expect a counter offer from the seller because your original offer will not offer enough value.
COVENANT: Insertion of a written agreement into deeds and other documents promising performance of certain acts or stating certain uses of real estate. Subdivision, especially PUD (Planned Unit Development) subdivisions, often codify these covenants as part of their CC&R’s (Covenant, Conditions and Restrictions) which specify in clear language the standards established for yard maintenance, external home maintenance and other standards made to for the neighborhood.
CPI: Consumer Price Index, Sometimes used to index rental rate escalations.
CPM: Certified Property Manager. Professional designation conferred by Institute of Real Estate Management; requires extensive specialized education and experience. 

CREDIT BUREAU REPORT: the compilation of an individuals credit history. Also know as the credit report.
CREDIT BUREAU: An agency that compiles data on an individuals credit history.
CREDIT DEAL: A mortgage made based primarily on the credit of a borrower or tenant with a net lease.
CREDIT LIMIT: Generally found when dealing with credit cards, this is the maximum amount the cardholder may charge to that account.
CREDITOR: The lender. This is the entity to whom the debt is owed and the payments are made. Mortgage holders (creditors) may sell their note to another bank which changes the creditor name not the payment amount.
CURE DATE: The last day the homeowner has to make up the late payments and bring the mortgage current before the bank begins to foreclose and sell the property.
DBA: Stands for “Doing Business As...” Business names or aliases filed with the county.
DEAD ASSET: An asset that an investor does not want. An investment that has no value or no worth.
DEBENTURE: An unsecured debt instrument backed only by the general credit standing and earning capacity of the issuer. Real Estate is always secured by the underlying real property.
DEBT COVERAGE RATIO: The ratio of effective annual net income to annual debt service.
DEBT SERVICE: The sum of the annual principal and interest payments expressed as a percentage of the amount owed. Is also used to describe the amount of debt payments (negative cash flow ) a particular investment has on a monthly basis.
DEED: A legal document which conveys real estate from seller to buyer when properly executed. Must be recorded at the county recorders office to protect both parties.
DEED IN LIEU OF FORECLOSURE: used when a homeowner is about to loose the property. The bank does not own the deed (title to the property) they only own the mortgage note.
DEED OF RECONVEYANCE: The transfer of legal title from the trustee to the trustor (the borrower) after the trust deed is paid in full.
DEED OF TRUST: In some states it is the document used in place of a mortgage; a type of security instrument conveying title in trust to a third party covering a particular piece of property; used to secure the payment of a note; a conveyance of the title land to a trustee as collateral security for the payment of a debt with the condition that the trustee shall reconvey the title upon the payment of the debt, and with the power of the trustee to sell the land and pay the debt in the event of a default on the part of the debtor.

DEED OF TRUST THEORY: Another type of mortgage custom wherein the seller of a property gives title to the buyer of that property upon which the buyer signs over the Deed of Trust making the lender the beneficiary of the property. This makes the foreclosure process a quicker one for the lender.
DEFAULT: Failure to discharge a duty or obligation often used to describe a late payment situation when a seller is late on their payments to the bank they are described as being in default.
DEFESANCE CLASE: The clause in a mortgage that gives the mortgager (owner) the right to redeem property upon the payment to the mortgagee (lender) of the obligation due.
DEFICIENCY JUDGEMENT: A judgment rendered in court for the difference in the amount realized at a foreclosure sale and the amount owed by the homeowner (mortgagor) if the foreclosure sale fails to complexly liquidate or satisfy the debt. The homeowner is liable for this amount personally if there is a recourse provision in the note.
DELIQUENT: The status of a mortgage with a payment past due.
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 demand payment.
DEMISING WALLS: The partition wall that separates one tenant’s space from another or from the building’s common area such as a public corridor.
DEPRICIABLE ASSET: Property used in a trade or business or help for the production of income with a useful life of one year or more.
DEPRECIATION: A deductible expense that reflects a reasonable allowance for wear and tear of property. Only property that has a useful life of more than one year and is used for business or income-producing purposes may be depreciated.
DEPRECIATON 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. If appears in both the profit and loss statement of the balance sheet.
DESIGNATED APPRAISER: Some mortgage lenders have a list of designated appraisers from whom (and only whom) they will accept an appraisal.
DEVISE: Disposition of land or real property by will.
DISBURSEMENTS: The payment of monies on a previously agreed-to basis. Used to describe construction loan draws.

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DISCOUNTING A NOTE: The process of offering a promissory note for less than its face value to enhance it marketability. In other words, the process of selling a note for less than the amount of the note to get it sold and shift the obligation to service the note from the seller to the new note buyer. If the note is sold, the buyer should be informed of the new address and where to send the payments.
DISCLOSURE: The making known of a fact that had previously been hidden.
DISCOUNT: The percentage of the original balance o the loan that is charged the borrow as the cost of doing the loan. Sometimes referred to as points. The payment of points can reduce the amount of interest owed on the loan. Can also be used to describe the difference between what a note holder is owed on a loan and what thy will sell that loan to someone else for. If a seller creates a note with a buyer, the seller has the right to sell that note to another note buyer for a price less than the amount of the note. The actual discount is factored b many things including the credit worthiness of the borrow, the interest rate and the prevailing market conditions at the time.
DISTRESSED PROPERTY: A bargain property that is substantially below its present or projected renovated value. A distressed property usually describes a property in serous need of repair.
DOWER: The legal rights of a widow to 1/3 or her husbands land. These rights have been abolished in many states and widows have been provided for in other provisions such as the rights of inheritance.
DOWN PAYMENT: An amount of money the buyer pays our of personal cash which is the difference between the purchase price and the mortgage amount.
DUE-ON-SALE CLAUSE: A type of acceleration clause as part of the note which calls for the entire remaining balance of the note debt to be paid upon the transfer of ownership of he secured property.
DUPLEX: A two family hoe where the units share a common divider and are situated either side by side or up and down.
DWELLING: Any building deigned primarily for use as a home consisting or note more than a four family units, except that in the case of a condominium housing development or project within the purview of 38 U.S.C. 3710(a)(6) and 36.4356 through 36.460(a) of this part the term is limited to a one single-family residential unit. Also, a manufactured home, permanently affixed to a lot owned by an individual and classified as real property under the laws of the state where it is located.
EARNEST MONEY: A deposit of money given by a party to bind the contract usually credited towards the sales price.
EASEMENT: A right to use another person’s real estate for a specific purpose. The most common type of easement is the right to travel over another person’s land, know as a right of way. In addition, property owners commonly grant easements for the placement of utility poles, utility trenches, water lines or sewer lines. The owner of property that is subject to easement is said to be “burdened” with the easement because he or she is
not allowed to interfere with its use. Easements can sometimes reduce the value of a property by preventing some higher or best use of that property due to the easement.
ECONOMIC RENT: the rent that a property would bring if offered in the open market at the fair rental value. Not necessarily the contract rent.
ECONOMIC VALUE: The valuation of real property based on its earning capabilities.
EFFECTIVE GROSS INCOME: The difference between the total gross income generated by a property and the amount accrual received through rental income. All rental properties have a maximum level of rental income (say a 10 unit which rents for $700 a month which gives the gross income of $7,000) but the effective gross income is the amount actually taken in if one or more of the units is vacant.
EFFECTIVE INTEREST: The interest rate between the borrower actually pays as opposed to the nominal interest rate often quoted as the interest rate when getting a loan. The effective interest rate is made higher than the nominal rate by the addition of points or discounting of a loan.
EFFECTIVE RATE; The actual rate of return to the investor. It may vary from the contract rate for a variety of reasons. Also called yield.
EFFECTIVE RENT: The actual rental rate to be achieved by the landlord after deducting the value of concessions from the base rental rate paid by the tenant, usually expressed as an average rate over return over the term of the lease.
EMINENT DOMAIN: the power of the government to take private property for public use in return for fair compensation. This power is exercised through a court action called condemnation. The owner is to be given “just compensation: which is usually determined to be full market value.
ENCROACHMENT: An obstruction or building which intrudes upon or trespasses upon the property line, easement boundary or building setback line of another without permission.
ENCUMBRANCE: Anything that mars title to a property such as a mechanic’s lien, a lien for unpaid taxes, a lien for an unpaid mortgage, a judgment or the like. Normally encumbrances take precedence in order of recordings date but in the case of tax liens, the tax lien automatically puts itself in the first position. Encumbrances to not prevent conveyance to another person.
ENVIRONMENTAL IMPACT STUDY: Documents which are required by federal and state laws o accompany proposals for major projects and programs that will likely have an impact on the surrounding area such as large office buildings.
EQUITY: Value of a property minus he debts or liens against it. Equity is increased in one of two ways. The first way is to pay off the mortgage which decreases the amount of debt owed and increases the difference between the amount owed and the value of the property. The second way is to see the equity of the home appreciate is through market action (appreciation) which also increases the spread between the market value of the property and the amount owed.

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EQUITY OF REDEMPTION: The right of a mortgagor (or in other words the borrower) to buy back a property after foreclosure sale (in some states) and during the redemption period. While equity redemption after a foreclosure sale does not exist in some states, in others I extends up to two years.
EQUITY PARTICIPATION: Partial ownership of income property, given by the owner to the lender as part of the consideration of making the loan.
ESCALATION CLAUSE: A clause in a lease which provides for the rent to be increased or decreased to reflect changes in expenses paid by the landlord such as real estate taxes, operating costs, etc. Usually these clauses specify some underlying number by which he new rental rates will be calculated.
ESCAPE CLAUSE: Also known as a “Weasel Clause” they are clauses added to a contract such that both parties have the option of exiting the contract meaning both parties would no longer be bound by any contractual obligation.
ESCHEAT: The reversion of property to the state when an owner dies with no will and no known heirs.
ESCROW ACCOUNT: An account set up at for a third party to accumulate funds between the buyer and the seller. This disinterested third party keeps the money in a neutral place, making it safer for both parties.
ESCROW: Funds help by a third party (usually a title company or attorney’s office) to be released when certain conditions in a contract are fulfilled. Escrow protects your money because it is easier for you to get your money back should you decide to exercise an exit clause in the contract prior to earnest money going hard.
ESTATE BY THE ENTIRETIES: Ownership by husband and wife with the rights of survivorship. This means the ownership of the property is not held by either the husband or he wife but by both spouses as an indivisible entity so when one dies, the other automatically has 100% ownership of the property.
ESTATE: The word used to describe ownership interest in real property.
ESTIMATE ANNUAL INCOME: The estimated total gross amount of income one will receive in a year’s time. This number just means all the money coming in without subtracting any money used to pay for things.
ESTOPPEL CERTIFICATE: A signed statement certifying that certain statements of fact are correct as of the date of the statement and can be relied upon by a third party, including a prospective lender or purchaser.
ESTOPPEL LETTER: A statement that in itself prevents its issuer from later asserting different facts.
ET AL: Often used in legal documents and contracts to describe, “and others.
ET UX: Also used on legal documents and contracts to describe, “and wife.”
EXCHANGE: The exchange or trade of a business property you own for another trade or business property that is like it. No taxes are due in such an exchange under a specific set of circumstances. Contact an attorney in your area who specializes in real estate if you seek to do a deal like this.
EXCLUSIVE LISTING: A written contract giving a licensed real estate agent the exclusive right to sell a property for a specified time but reserving the owner’s right to sell the property alone with out the payment of a commission.
EXCLUSIVE RIGHT TO SELL: The same as exclusive listing, but the owner agrees to pay a full commission to the broker ever though the owner may sell the property.
EXCULPATORY CLAUSE: A clause in a contract relieving one of the parties of personal responsibility or liability. These can be very powerful clauses protecting you by clearly delineating your responsibilities in the term of the contract.
EXECUTOR: The administrator of an estate who is specified in the will.
EXPENSES: The costs of maintenance, repairs and marketing (and management if you contract this out) that is deducted from a property’s gross income.
EXTENSION CLAUSE: A clause contained within some lease options that provides the terms under which the contact may be extended. State approved Real Estate Contracts may also have extension clauses allowing both parties to agree to an extension of the contract if necessary to closing the deal,
FACE VALUE: In reference to a note (mortgage), the face value of the note is the full amount for which the note has been written. The face value of the note does not change over time as the note is paid down. The balance remaining is reduced but the face value is always the same.
FAIR HOUSING AMENDMENTS: The Fair Housing Amendments make it unlawful to discriminate in residential housing transactions against any person because of family status or handicap. However, the law provides exception for certain age-restricted communities which meet the definition provided in the law for “housing for older persons”
FAIR MARKET VALUE: The appraised value of a property as compared with other properties in the same neighborhood. The fair market value is a relative number each appraiser will likely arrive at a different value number.
FEE SIMPLE: Ownership of property without conditions or without being subject to conditions save for the laws of escheat. Often described by using the words, “fee simple title” indicating ownership of title with no other mortgages or debts on the property.
FICO SCORE: FICO stands for Fair, Isaac, and Co. – the name of the California company who developed the system upon which the modern credit scoring system is based. This
number is the single biggest number used to determine the borrower’s loan risk and to set the terms and conditions for the loan. Higher scores (over 740) make it easier to loan 100% of the asking price,
FIDUCIARY: Someone who acts as an agent on behalf of someone else. Often applied to real estate agents the term also describes a relationship of trust and confidence imposed by law. A fiduciary has certain obligations to the client especially on financial matters.
FNANCE CHARGES: Interest paid on purchases made on a deferred-payment basis such as a home mortgage.
FINANCE COMPANY: A limited-purpose financing entity organized and controlled by a builder for the purpose of facilitating the issuance of bonds. Also known as the lender.
FINANCIAL ANALYSIS: he process by which an investor determines the value of a property according to the investor’s specific needs. Investors will go through this process prior to making an offer to both know the value of the property and to determine the highest price to be paid to stay with the bounds of the investors plan.
FINANCIAL LEVERAGE: The use of other people’s money (OPM) for investment purposes. You can also gain financial leverage when you use equity in the various properties you own to buy other investment properties.
FINANCIAL STATEMENTS: Accounting statements that provide specific information about a company’s financial position and determined according GAAP (General Accepted Accounting Principals_. They include the Profit and Loss Statement, also known as the Income Statement, the Balance Sheet, and the Statement of Cash flows. Financial statements can generally be audited by an outside CPA firm or unedited and, thus, prepared by the company,
FINANCING: The way in which an investor obtains the capital with which to purchase a property. Financing can be creatively done with a combination cash down hard money, bank money, seller carrybacks and more.
FINDER’S FEE: A fee or commission paid to a broker for obtaining a mortgage loan 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 a property.
FIRST DEED OF TRUST: In the hierarchy of recording, this is the deed that was recorded first and is usually the lender hold the note to the 1st mortgage on the property. This first position gives the lender certain rights including the right of foreclosing on the property to recoup its investment. A lender in first position is able to take the property into foreclosure and wipeout the debts to subsequent lien holders. A note holder in a 2nd position or later has less security in the property itself.
FIRST GENERATION SPACE: Generally refers to new space that is currently available for lease and has never been occupied by a tenant.

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FIRST MORTGAGE: A mortgage having priority over all other voluntary liens against certain property This lender holding the first mortgage has the right to foreclose on the property to recoup its interest before any other lien holder is satisfied.
FIXTURE: Personal property which has been attached to the real estate so as to become a part of the real property. The article must meet one of three conditions: (1) attached in a permanent manner, (2) specially adapted to the property, (3) intentionally made part of the real property.
FLEX SPACE: Space to describe a building or an area within a building which can be used as necessary in a variety of ways.
FLEIBILITY SELLER: A seller who is willing to sell property in a nontraditional manner. This person may be flexible in terms, price or both. Investors looks for sellers willing to be creative because these types of sellers often give the investor many more ways to profit on the deal. Flexible areas are also often distressed sellers interested in selling quickly.
FLIPPING: Term used to describe the action of buying a home and quickly reselling it with little or no investment in the property.
FOREBERANCE: The act of refraining from taking legal action despite the fact that a mortgage is in arrears. It is usually granted when a mortgagor makes a satisfactory arrangement by which the arrears will be paid at a future date.
FORCE MAJEURE: A force that cannot be controlled by the parties to a contract and prevents said parties from complying with the provision of the contract, for example a hurricane.
FORCED SALE: The sale of a property used as a security for a loan to repay the creditor or others in the event of a default on the loan. A foreclosure sales is a forced sale.
FORECLOSURE: The legal procedure whereby the note holder is able to force the sale of a property to recoup its debt. This is a legislative process and the various steps of this process have been very clearly specified by statue.
FRONTAGE: The width of a lot at the front which is also usually given as the first measurement. This is also called “frontage”
FULL SERVICE RENT: An all-inclusive rental rate that include operating expenses and real estate taxes for the first year. The tenant is generally still responsible for any increase in operating expenses over the base year amount.
GARNISHMENT: A proceeding that apples specified monies, wages, or property to a debt or creditor by proper statutory process against a debtor.
GENERAL PARTNERSHIP: A form of business entity where two or more persons enter into an agreement to conduct business. Profits and losses are shared in a predetermined fashion and all partners are jointly and severally liable for debts of the general partnership.
Jointly and severally liable means the liability of the debts can be applied to each of the partners equally or given all to one partner in the even one of the partners is insolvent.
As real estate investor it will be critical for you to investigate the best business entity or combination of entities to protect yourself from potential liabilities.
GOVERNMENT SURVEY METHOD: Also called he PLSS or PLS system. A way to describe land which uses meridians (north and south lines) and base lines (east and west lines). Aras include quadrangles (24 miles on each side), townships (6 miles on each side) and sections (1 mile on each side).
GRACE PERIOD: Additional time granted to perform an act or make a payment before default. In the case of a mortgage, it is due on the first of the month but late fees will not be applied unless the payment is received after the 15th of the month. This means the owner is given a grace period from the 1st to the 15th of every month.
GRADUATED PAYMENT MORTGAGE: This repayment plan provides for smaller-than-normal monthly payments for the first few years (usually 5 years), which gradually increases each year, and then level off after the end of the “graduation period” to larger-than-normal payments for the remaining term of the loan.
GRADUATED PAYMENT MORTGAGE LOAN: A loan for the purpose of acquiring a single- family dwelling unit involving a plan for repayment in which a portion of the interest due is deferred for a period of time. The interest so deferred is added to the principal balance thus resulting in a principal amount greater than a loan origination (negative amortization). The monthly payments increase on an annual basis (graduate) for a predetermined period of time until the payments reach a level which will fully amortize the loan during the remaining loan term.
GRANTEE: The person to whom an interest in real property is conveyed. Also known as the buyer.
GRANTOR: The person conveying an interest in real property. Also know as the seller.
GROSS RENT MULTIPLIER: A figure used to compare rental properties to determine value. It gives the relationship between the gross rental income and the sales price. Synonyms are gross multiplier and gross income multiplier.
GRANDFATHER CLAUSE: Properties that do not conform to current ordinances, codes or regulations but are allowed to continue to be occupied because the properties predate the institution of the ordinances, code or regulations.
GROSS INCOME: The total income from a property before the deduction of expenses.
GROSS INCOME MULTIPLIER (GIM): Also known as Gross Rent Multiplier (GRM). The GIM is calculated by taking the sales price and dividing the gross rental income into the sales price to get a number. Calculating the GIM for a number of other rental properties that have recently sold in the area will help you get a better feel for the actual value of the rental property. You can also use the amount of monthly income earned multiplied with the GIM to produce a selling value.
GROSS LEASE: A lease in which the tenant pays a flat sum for rent from which the owner (landlord) must pay all expenses.

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GROSS SQUARE FOOTAGE: Usually the building’s total inner square footage, including elevator shafts, vertical penetrations, equipment areas, ductwork shafts and stairwells.
GROUND RENT: Rent paid to the owners for use of land, normally on which to build a building.
HARD MONEY: Also known as private money, this type of money is very expensive.
HAZARD INSURANCE: A contract whereby an insurer, for a premium, undertakes to compensate the insured for loss on a specific property due to certain hazards.
HIGHEST AND BEST USE: The use of land or buildings which will bring the greatest economic return over a given time which is physically possible, appropriately supported and financially feasible.
HOLD HARMLESS: In a contract, a promise by one party not to hold the other party responsible if the other party carries out the contract in a way that causes damage to the first party.
HOLD OVER TENANT: A tenant retaining possession of the leased premises after the expiration of a lease.
HOMESTEAD ESTATE: In some states, the home and property occupied by an owner are protected by a law up to a certain amount from attachment and sale for the claims of the creditors.
HOMESTEAD EXEMPTION: Described in various ways by individual states, it allows for protection of the homeowner from loosing their house to certain types of consumer debt creditors. In some states the owner must declare their house a homestead with the government.
HOMESTEAD TAX EXEMPTION: The credit against taxes given in some states to a person who owns and occupies a dwelling and to certain other individuals including disabled veterans, widows, handicapped and those over age 65.
HVAC: Heating Ventilation and Air Conditioning. Is used almost exclusively in commercial buildings.
IMPROVEMENTS: Buildings or other structures which become part of the land. Raw land is often called a lot while the home that is built upon that lot is called an improvement.
IMCOME APPROACH TO VALUE: The appraisal technique used to estimate real property value by capitalizing net income received as rents from the property.
INCOME AVERAGING: A method allowed by law that taxes some of the income in a high income year as if it were spread over a 4-year period.
INCOME PROPERTY: Real estate developed or improved to produce income such as apartments, duplexes, triplexes, or commercial property.

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INDENTEDNESS: The unpaid principal and interest plus any other amounts allowable under the terms of a loan including those authorized by statue which have been paid and debited to the loan account as of the applicable date established.
INDENTURE: A contract, the terms of which the parties agree to be bound by.
INSTALLMENT: The regular periodic payment that a borrower agrees to make to the mortgagee.
INSTALLMENT LOAN: In this type of loan, the loan amount is made once and payments are made until the balance is paid in full. A loan that must be paid in no less than two payments.
INSTALLMENT NOTE: A note which specifies how mortgage payments will be made, whey they will be due and for what amount. Is also specifies where payments are to be made and for what terms.
INSTALLMENT SALE: A sale in which the proceeds are received over a period of time. Any gain on installment sales is recognized when the proceeds arrive and not when the contract is executed.
INSTANT EQUITY: The difference between the property’s appraised value and what the investor paid for it.
INSTRUMENT: A written legal document delineating the rights of the parties. A contract is an instrument of sale.
INTEREST: Consideration in the form of money paid for the use of money, usually expressed as an annual percentage. Also, a right, share, or title in property.
INTEREST RATE: The amount a borrower must pay in addition to the full price of the principal of the loan.
INTERSTATE: The state of affairs for a person who has died without leaving a valid will. In such cases the distribution of the estate is done by a probate court.
INVESTOR: The holder of a mortgage or the permanent lender for whom a mortgage lender services the loan. Any person or institution investing in mortgages.
INVOLUNTARY CONVERSION The disposition of property as a result of casualty, theft, or condemnation. Upon conversion, cash is usually received from insurance proceeds or condemnation awards.
INVOLUNTARY LIEN: A lien imposed against property without consent of an owner. Examples include taxes, special assessments, federal income tax liens, mechanics liens, and materials liens.
JOINT TENANCY: Ownership of real estate by two or more persons, each with a specified ownership in the property. Either partner is free to sell or put a lien against their portion of
the ownership without the consent of the other but in the case of the death of one of the partners, ownership will automatically pass to the surviving partner.
JOINT VENTURE: An association between two or more parties to own or develop real estate. It may take a variety of legal forms including partnership, tenancy in common, or a corporation. It is formed for a specific purpose and duration and to spread the risk of the investment among more than one party.
JOINTLY AND SEVERALLY: A legal term indicating that a contract has been entered into by two parties and that the two parties are not only liable together by individually as well. If an investor were to partner with another investor in the purchase of the property, the two investors would both be responsible for the whole debt (jointly) but in the event on of the partners did not nor could not make payment, the full debt would pass to the other, solvent partner (severally).
JUDGMENT: The verdict of a court on a matter presented to it. A money judgment dictates that a party must make payments to another to settle a claim. Judgments can allow a creditor (to whom money is owed) force payment of judgment through wage garnishing and other methods.
JUDGMENT LIEN: A lien upon the property of a debtor resulting from the decree of a court as a result of a judgment awarded against the homeowner.
JUDICIAL FORECLOSURE: A type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under auspices of a court.
JUNIOR LIEN: A mortgage or other encumbrance or lien made against the property after the recorded date of another mortgage or encumbrance. This a 1st mortgage is the primary lien holder with the most secure debt. A junior lien holder has a position behind this primary lien holder and would be paid only after liens more senior were paid in full.
KICKER: A term describing any benefit to a lender above ordinary interest payments. It may be an equity in a property or a participation in the income stream. Usually seen as a benefit to encourage the other party to do the deal.
LAND TRUST: A form of ownership whereby property is conveyed to a person or an institution called a trustee, to be held and administered on behalf of another person called the beneficiary. Land trusts are especially beneficial to the real estate investor because they can be used to hid ownership while still allowing the investor to retain such rights as use of the property and any income that might come from it.
LANDLORD: Owner or lessor of real property.
LEASEBACK: An arrangement by which the owner occupant of a property agrees to sell all or part of the property to an investor and then lease it back and continue to occupy space as a tenant.
LEASEHOLD: An investment in real property help by virtue of a lease. There is no transfer of ownership involved. A renter has a hold on the property granting them certain rights subject to the terms of the lease.

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LEASEHOLD MORTGAGE: A loan to a lessee secured by a leasehold interest in a property.
LEASE OPTION: An agreement between two parties where the party who owns the property extends the buyer the right to purchase the property at a future date. The buying party lives in the property until the lease option expires.
LEASE TERM: The fixed term of the lease. This term may be extended if both parties agree.
LEASE: A contractual agreement between the owner (lessor) and the tenant (lessee) which allows the tenant the use and occupancy of the property for a specified period of time for the purpose of occupancy.
LEASEHOLD IMPROVEMENT: Improvements made to the leased premises by of for a tenant.
LEGAL DESCRIPTION: The means used to identify the exact boundaries of a property in a way acceptable to a court and to allow an independent surveyor to locate and identify it.
LENDER: The payee or assignee or transferee of an obligation at the time it is guaranteed or insured. This term also includes any sole proprietorship, partnership, or corporation and the owners, officers and employees of a sole proprietorship, partnership, or corporation engaged in the origination, procurement, transfer, servicing, or funding of a loan which guaranteed or insured by VA.
LESSEE: The person who rents property from the owner subject to the terms specified in the contract between the two parties.
LESSOR: The person who owns the property and decides to rent it out to a tenant.
LETTER OF CREDIT (LOC OR LC): A Letter from a lending source guaranteeing payment to a third party beneficiary. Often used like a security deposit in real estate security for the seller or another lender when entering into a transaction.
LETTER OF INTENT: A preliminary agreement stating the proposed terms for a final contract. They can be binding or non-binding. Investors can use a letter of intent as the first step in a negotiation or a complicated deal to signal to the seller real interest in the property without have to commit to exact terms until after all negotiations.
LEVERAGE: The use of borrowed money to increase the return on a cash investment. For leverage to be profitable, the rate of return on the investment must be higher than the cost of the money borrowed (interest plus amortization). In real estate it means using a greater percentage of Other People’s Money (OPM) so your cash can be spread into more deals more quickly.
LIEN: A monetary claim against a property. Liens are used by creditors as a way to secure payment of the debt. Liens will be paid in full before a new buyer can buy the property.

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LIEN THEORY STATES: A mortgage theory of some states which tells the state how to interpret mortgage law. In lien theory states, the buyer holds the deed to the property and the lender places a mortgage lien on the property. Lien theory makes it more difficult and time consuming to foreclose on a property meaning the buyer is more protected. As an investor you will be both buyer and potentially a financer of property So know what type of mortgage theory is followed in your state and know what your rights are.
LIMITED PARTNERSHIP: A partnership composed of a limited partner(s) and a general partner(s). The limited partners(s) contribute capital but are not labile for any of the debts of the partnership. Limited partners also cannot manage or control the partnership. There are many different ways to establish a business and various pros and cons between them. Before you register you business, it would be wide to know a little more about the types of corporations available to you and how your specific situation would be beneficial by a particular type.
LIQUID DAMAGES: A clause or provision inserted into some contracts to protect parties from a breach of contract by the other party.
LIS PENDENS: A legal instrument recorded in the county clerk’s office giving notice that a legal action is pending in the courts affecting title to a property. This notice clouds the title and could impact the salability of the property for as long as the legal action is pursued or until it is voluntarily withdrawn or wiped out (expunged).
LISTING: The home for sale. Real estate agents work to get listings to increase their profits.
LISTING AGREEMENT: The legal agreement between the listing agent/broker and the seller of the property, setting out the services to be rendered, describing the property for sale, and stating the terms of payment. The terms of a listing agreement can be changed.
LOAD FACTOR: The common area calculation used to convert usable square foot measurements (usually, the physical space actual occupied by the tenant) to rentable square foot calculations. Usually includes a pro rata share of restrooms, lobby and common hallways.
LOAN: A sum of money loaned at interest to be repaid. The amount of OPM used to purchase a property.
LOAN CONSTANT: The yearly percentage of interest which remains the same over the life of an amortized loan, based on the monthly payment in relation to the principal originally loaned.
LOAN PROCESSING: The function that is responsible for underwriting prior approval loans or reviewing automatic loans processed by lenders. Loan processors are the people who do this work inside the lending institution.

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LOAN SALE: The sale of portfolio loans by a lender to an investor (usually a bigger lender) who repackages and sells these loans on Wall Street.
LOAN SUBMISSION: A package of pertinent papers and documents regarding a 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 (LTV): The relationship between the amount of the mortgage loan and the appraised value of the security expressed as a percentage of the appraised value.
LOSS PAYABLE CLAUSE: A clause in a fire insurance policy, listing the priority of claims in the event of destruction of the property insured.
MANUFACTURED HOME A moveable dwelling unit designed and constructed for year round occupancy by a single family, on land, containing permanent eating, cooking, sleeping and sanitary facilities.
MARGIN: The number of basis points a lender adds to an index to determine the interest rate of an adjustable rate mortgage.
MARKET APPROACH TO VALUE: This approach to finding values uses comparable market sales (comps). In appraising, the market value estimate is predicated upon actual prices paid in market transactions.
MARKET RENT: The going rate for rent. This number is indicated by the rents that landlords are willing to accept and tenants are willing to pay in recent lease transactions for comparable space in comparable areas.
MARKET VALUE: this highest price for a property which a buyer is willing to pay and the lowest price a seller is willing to accept. Before the sale, the market price is determined by an appraisal which gives the lender an idea of the value of the potential investment.
MARKETABLE TITILE: A title free and clear of liens and encumbrances. As a buyer of property, you should always get marketable title. Title insurance provides this guarantee.
MECHANICS LIEN: A legal claim placed on real estate by someone who is owed money for labor, services or supplies contributed to the property for the purpose of improving it.
MEETING OF THE MINDS: A term used to describe an agreement among all parties involved on a real estate transaction.
METES: Measures such as inches, feet, yards or miles.
METES AND BOUNDS: A system of land description using distance (metes), angles/compass directions (bounds) and/or natural or manmade objects such as rivers, roads or railroad tracks all beginning at the same point.
MIXED USE: Space within a building or project for more than one use like a condo building with retail stores inside.

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MONTH-TO-MONTH TENANCY: A rental agreement that provides for a one month tenancy that is automatically renewed each month unless either tenant or landlord gives the other proper amount of notice (usually 30 days) to terminate the agreement.
MORATORIUM OF INTEREST: A time during the term of a loan wherein no payment of interest is due made.
MORTGAGE: A legal instrument or document that conveys title to the buyer and is registered against a property with stated rights and remedies in the event of default.
MORTGAGE-BACKED BONDS: A “bond” or debt instrument which is backed by a pool of mortgages and for which a cash flow of the mortgages serves as the source of repayment.
MORTGAGE BROKER: A firm or individual bringing the borrower and lender together and receiving a commission. A mortgage broker does not retain servicing.
MORTGAGE COMPANY: A private corporation (sometimes called a mortgage banker) whose principal activity is the origination and servicing of mortgage loans which are sold to other financial institutions.
MORTGAGE COMMITMENT: This is also called a “pre-approval.” The offers from buyers who are pre-approved for a certain size loan carry more weight with the seller because it removes a potential weasel clause from the offer.
MORTGAGE INSURANCE: The function of mortgage insurance (whether government or private) is to insure a mortgage lender against loss caused by a mortgagors default. This insurance may cover a percentage of or virtually 80% LTV will usually require a mortgage insurance premium to be paid by the borrow as part of their monthly payment.
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.
MORTGAGOR: This is the borrower of money who (in some states) hold title to the property buy has used it as collateral for the loan (mortgage).
MULTIPLE LISTING SERVICE: A multi-realty service whereby members of the local board of Realtors exchange their listings.
MULTI-UNIT PROPERTY: A structure with more than a one-family dwelling unit. Under four units is considered residential. Anything over four units is considered commercial property.
NEGATIVE CASH FLOW: The amount of money coming in on an income producing property is less than the amount of money going out.
NET INCOME APPROACH: A technique used to evaluate larger, commercial or rental properties and determining their value by calculating the net income they produce. 

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Of the three types of ways an appraiser ascertains value, this is most commonly used on income producing properties such as commercial buildings, apartments, office complexes and so on.
NET LEASE: Type of lease whereby the Tenant pays for part or all of the operating expenses which may include utilities, janitorial, property insurance, property management, sewer, water and garbage.
NET LISTING: A price under which an owner will not sell the property. This broker is entitled to the excess over the net listing as his commission.
NET LOSS (insured loans): The indebtedness, plus any charges authorized under 36.4313, remaining unsatisfied after the liquidation of all available security and recourse to all intangible rights of the holder against those obligated on the debt.
NET OPERATING INCOME: Gross income minus any operating expenses. Debt service is not deducted as an expense. Used as a line item in the company’s financial statement.
NET SPENDABLE INCOME: Also known as the bottom line. This is the amount remaining after expenses, debt service and any taxes have been paid or deducted from gross income.
NET VALUE: The fair market value of real property, minus the total of the costs estimates for the acquisition and disposition of the property for property taxes, assessments, liens, property maintenance, property improvement, and administration, and resale. This represents the profit an investor expects going into a deal.
NET WORTH: The value of all assets, including cash, less total liabilities (obligations or debts). It is often used as an underwriting guideline to indicate an individuals credit worthiness and financial strength.
NET YIELD: That part of gross yield that remains after the deductions of all costs, such as servicing, and any reserves for losses.
“NO DOC” LOAN: A popular type of loan with inventors because it does no require any form of documentation of income to secure a loan. Theses loans do cost more in terms of higher interest rates.
NOMINAL INTEREST RATES: The rate of interest which doe not include the effects of inflation. Thus if you were to lend money to earn 7% interest rate on a seller financed note, you would earn a real interest rate (the actual rate of return on our cash) of 7% minus the amount of inflation.
NON-COMPEE CLAUSE: A clause that can be inserted into a lease specifying that the business of the tenant is exclusive in the property and the no other tenant operating the same or similar type of business can occupy space in the building.
NON OWNER OCCUPANT: A property were the owner does not live. Generally refers to rental property.

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NON-DISTURBANCE AGREEMENT: An agreement that permits a tenant under a lease to remain in possession despite any foreclosure.
NON-RECOURSE FINANCING: A type of debt for which, in the event of forfeiture, the lender may not seek recovery from the borrower personally but mist look to the property that was being financed.
NON RECOURSE LOAN: A loan not allowing for a deficiency. The lender’s only recourse in the event of default is the security (property), and the borrower is not personally liable.
NOTARIZE: To have a document signed by a notary public.
NOTE: The legal evidence of debt. Lenders are note holders while buyers are note signers.
NOTICE OF DEFAULT(NOD): The first notice filed showing a borrower has defaulted on their loan. Usually this NOD is filed when payments are 90 days late.
OPERATING EXPENSES: The actual costs associated with operating a property including maintenance, repairs, management, utilities, taxes and insurance.
OPTION: An instrument giving the right, nut not the obligation, to the potential buyer to lease or purchase a property for a specified period of time and for a specified price. The buyer option of the option has the right but not the obligation to follow through with the deal, but the seller of an option obligates themselves to the terms of the deal; meaning they must follow through if the option buyer decides to pull the trigger. A lease option purchase is a form of option.
OPTIONEE: The buyer of the option or the person who has the legal right but not the obligation to purchase or not purchase a specific property at a specific price by a specified date. Lease option buyers are considered optionees.
OPTIONOR: The seller of the option who has the legal obligation to perform to the terms of the option if the optionee decides to exercise their right. If the optionee decides not to exercise their right and purchase the property, the optionor (seller) is no longer obligated and can dispose of the property in any way deemed profitable or necessary.
ORIGINATION: The process of originating mortgages. Solicitation may be from individual borrowers, builders, or brokers.
ORIGINATION FEE: A fee or charge for the work involved in the evaluation, preparation, and submission of a proposed mortgage loan.
OWNERS OF RECORD: All owners listed on a deed recorded in the county recorders office.
OVERDRAFT PROTECTION: A type of insurance policy on a checking account in which if the account’s owner writes a check amount for greater than the amount in the account, the bank will automatically write a loan to the client to cover the difference.

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P&L STATEMENT: A statement showing the profit and loss. Investors in real estate should create a separate P&L statement for each deal they do.
PACKAGE MORTGGE: A mortgage or deed of trust that includes items which are technically chattels, such as appliances, carpeting and drapery.
PARKING RATIO INDEX: the number of parking spaces available given commercial property expressed in relationship to the rentable square footage. Expressed as X spaces per 1000 square feet, a building that offered 2 spaces for every 1000 square feet would show a parking ratio of 2:1000.
PARTNERSHIP: Two or more people associated for the purposes of conducting business activities. The creation of a partnership can be done with various legal entities and should be given due consideration to the circumstances, liabilities and type of business to be conducted by the partnership. Partnerships can be between individual or between business entities.
PAY DOWN: The amount of principal on a loan retired through payments at a given time. This is the amount of principal paid with each monthly payment.
PERCENTAGE LEASE: A type of lease which can beneficial to both parties of the lease (the owner and the tenant). The owner could get a higher upside if sales for the space is more that expected while the tenant is able to get into the space with a lower overhead expenditure for rent. The risk is lessened for the tenant but increased for the owner of the property. Because of this, a straight percentage lease is rare.
PERSONAL GUARANTEE: The guarantee of someone to be individually responsible for the obligation of the lease. Generally for smaller or closely held companies with little business background or credit history a lessor (landlord) may ask for a personal guarantee as a way to insure that the lease payments will be made. A personal guarantee will hold the signor personally responsible for any default giving the landlord to attach the obligation to the personal property of the signor.
PLAT BOOK: A record or recorded subdivision of land found at the local county recorders office. The plat book contains plat maps showing the dimensions and location of the property.
POINTS: A term used to describe certain charges paid by a borrower in a real estate transaction. Points can also be extra money paid by the borrower to reduce the interest rate of the loan.
POSITIVE CASH FLOW: A situation where the loan carrying costs and other costs for a particular property are covered by the rental income. Money coming in is greater than the money going out.
POWER OF ATTORNEY: A written authorization to an agent to perform specified acts on behalf of their principal. Beyond the items specified in this power of attorney document the agent has not power.

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PRELEASED: Refers to space in a proposed building that has been leased before the start of construction or in advance of the issuance of a Certificate of Occupancy.
PRELIMINARY TITLE SEARCH: The first review of all previously recorded documents regarding a specific property to make sure the property can be sold free and clear of any encumbrances.
PREMIUM: An additional sum of money paid as an incentive for someone to do something. Premiums can include such things as free rent, free internet, or anything else.
PREPAYMENT CLAUSE: A clause in a mortgage giving the mortgagor the privilege of paying off the mortgage before its due date.
PREPAYMENT FEE: A consideration paid to the mortgagor (lender) for the prepayment privilege. Also known as the prepayment penalty or reinvestment fee.
PREPAYMENT PENALTY: A fee charged a mortgagor (borrower) who prepays a loan before it is due. Prepayment penalties can be very expensive and should be avoided by the investor who may have to make adjustments to the financing of a particular property when adjusting either to new market conditions or to a buyer request.
PREPAYMENT PRIVILIGE: The right given a borrower to pay all or part of a debt prior to it maturity date. The mortgagor cannot be compelled to accept any payment other than those originally agreed to.
PRIME RATE: The interest rate o discount rate charged by a commercial bank to it largest and strongest customers meaning this is the cheapest form of credit.
PRINCIPAL: The amount of dent not including interest. The face value of a note or mortgage.
PRO FORMA STATEMENT: A financial statement based on the anticipated future income and expenses expected for a given time frame.
PROMISSORY NOTE: Usually a note given to the seller by the borrower which promises to pay back the principal plus interest to the seller. It states the interest rate and time frame to pay back the note.
PROMULGATED RATE: A formally and publicly stated rate.
PROPERTY OPERATING EXPENSES: All disbursements made for payment of taxes, assessments, liens, property maintenance and related repairs, management broker’s fees and commissions, and any other charges to the property account excluding property improvements and selling expenses.
PROPERTY TAXES: Taxes that are paid yearly on real property. The amount of property taxes due Is based on the county assessor’s assessed value of the property. A sale of the property will dictate this assessed value in states like California.
PROPRIETOR: An individual who is the sole owner of his trade or business.

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PRO-RATA: Proportionately; according to measure, interest or liability. Used to describe the buyers or sellers unpaid or prepaid expenses such as taxes and insurance on the closing documents.
PRO-RATE: To divide and distribute proportionally. At closing, various expenses such as taxes, insurance, interest and rents, etc. are prorated for both the seller and the buyer.
PUNCH LIST: An itemized list, typically by the architect or construction manager in commercial buildings or prepared by the builder and buyer together for residential homes documenting incomplete or unsatisfactory items after the contractor has notified the owner that the tenant space is substantially complete.
PURCHASE MONEY MORTGAGE: The initial funds used to purchase a property. The lender in the first position is often called the purchase money mortgage because it was their money that secured the property purchase. A lender for a second mortgage is known as a no-purchase money mortgage.
PURCHASE PRICE: The price of the home excluding any acquisition costs or labor and materials costs applied to the property. Investors must know the purchase price of the home and they must also know the other costs associated to both to obtain, fix-up and resell that property to accurately determine their potential profit on any deal and to decide if a deal is even worth doing.
PURCHASE OPTION: Option to purchase leased property either at the end of the lease term or if some other specific criteria are met by the lessee. In some states a purchase option gives many more rights to the tenant and makes it much more difficult and time consuming for the owner to remove the tenant. Understand your rights and obligations and the eviction process as outlined by the laws of your state before you ever enter into a purchase option with a potential buyer.
QUIET ENJOYMENT: he right of a property owner or tenant to enjoy his or her property without interference.
QUIT CLAIM DEED: A deed transferring whatever interest in the property that the grantor may have with no warranties implied. This document releases a person from any ownership interests in a piece of property and must be recorded at the county recorders office.
RAW SPACE: Unimproved shell space in a building.
REAL PROPERTY: Land, and generally whatever is erected or affixed to the land, such as buildings, fences and including light fixtures, plumbing and heating fixtures or other items which would be personal property if not attached.
R.E.O. (REAL ESTATE OWNED): Properties that a financial institution has repossessed as a result of default on a mortgage by an owner. Banks are in the business of loans, not in the business of holding real estate and are interested in selling these properties, sometimes for as little as the amount they are owed for the loan also known as “bank – owned”

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REAL ESTATE INVESTMENT TRUST: A trust that invests principally in real estate and mortgages. It is taxed only on the income that it does not distribute to its beneficiaries or shareholders.
REAL ESTATE INVESTMENT TRUST (REIT): A financial institution which can own and hold mortgages on real estate and pass earnings from these assets on, income tax free, to the corporation but which income is taxable to shareholders.
REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974 (RESPA): Regulates certain lending practices and closing and settlement procedures in federally related mortgage transactions to the end that unnecessary costs and difficulties of purchasing housing are minimized.
REAL PROPERTY (REAL ESTATE): Physical property that is permanent and non-removable in nature. Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals, and the interest benefits, and inherent rights thereof.
REAL-ESTATE LOAN: Any obligation incurred for the purchase or refinancing or real property or a leasehold estate.
REALTOR: A real estate broker or associate who holds active membership in a local and/or state real estate board that is affiliated with the National Association of Realtors® and is licensed to practice real estate in their state.
REASONABLE VALUE (RV): That figure which represents the amount a reputable and qualified appraiser, unaffected by personal interest, bias, or prejudice, would recommend to a prospective purchaser as the market value of that property determined from current market conditions – namely other homes of similar size and age selling in close proximity to the one the buyer is interested in.
RECAPTURE: An owner’s recovery of money invested in real estate, usually referring to a depreciation allowance.
RECEIVER: Court-appointed custodian who holds property for the court, pending final disposition of the matter before the court.
RECISION: The cancellation or annulment of a transaction or contract by the operation or by mutual consent. In a contract they are often titled, “Rights of Recision.”
RECONVEYANCE: The transfer of the title of land from one person to the immediately preceding owner. It is used when the performance of debt is satisfied under the terms of a deed or trust. If a property is refinanced, the old mortgage lender will reconvey the deed of trust to the new lender.
RECORD DATE: The date which determines the order for repayment of liens in the event of a default. The first lien on record is in first position and is entitled to any proceeds from the sale of a property up to the lien amount, Any extra is then sent to the lien recorded next also know as the lender is 2nd position A tax lien by mandate is put n 0 priority whether or not is was recorded first.

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RECORDED PLAT: A subdivision map filed with the county recorder’s office that shows the location and boundaries (lot and block number) of individual parcels of land including the dimensions of each lot and the relationship of the lot to other features such as roads.
RECORDER: The noting in the registar’s office of the details of a properly executed legal document, such as a deed, mortgage, a satisfaction of mortgage, or an extension of mortgage, thereby making it part of the public record.
RECOURSE: the right of the holder of a note secured by a mortgage or deed of trust to look personally to the borrower or endorser for payment. Allows the lender to look beyond the property if the property is sold for a deficient amount.
REDEMPTION, RIGHT OF: The right allowed by law in some states whereby a mortgagor (homeowner) may buy back property by paying the amount owed on a foreclosed mortgage, including interest and fees. If you live in a state allowing a redemption and you buy property from a foreclosure sale you must adjust your business model to account for this potential eventuality.
REFINANCE: Investors or other who get another mortgage on a property to either replace the current mortgage with better terms or to simply renew the same mortgage with the same borrow/lender. It can also be used to define the process of the lender selling the mortgage to another lender.
REHAB: The process renovating a property needing some attention. Could extend from minor work such as carpet replacement to such major repairs as a new addition, new roof or entire gutting of the house.
REHAB APPRAISAL: An appraisal done for a property not for its “as-is” condition but for the proposed condition based upon the proposed work list of repairs to be done. This appraisal of future value can be used by a lender to get a “rehab loan” which allows the investor to by the property and do the repairs with less money coming our of pocket.
REHABBER: An investor who specializes in rehab properties, who understands the market and who can control the costs of repairs to earn a profit. Many homes are sold far below market value because they need repairs to be marketable or quickly resalable.
REHAB LOAN: A type of loan many lenders will provide to investors or home buyers interested in buying a property in need of work. The lender will use the rehab appraisal to determine market value after the repairs have been made to establish a loan amount.
RELEASE CLAUSE: A statement in a blanket mortgage that allows a specific described parcel to be released from under the blanket lien after a sum of money is paid or a period of time is up. Release clauses can be sought releasing the signor from some of the terms of the contract.
RELEASE OF LIEN: An instrument discharging secured property from a lien. The process of removing a lien on a property either through payment or judgment.

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RENEWAL OPTION: A clause giving a tenant the right to extend the term of a lease, usually for a stated period of time and at a rent amount provided for the option language.
RENT: Consideration paid for use or occupancy of property, buildings, or dwelling units.
RENT CONTROL: The regulation or restrictions set by government agencies on the amount of rent that landlords may charge.
RENTABLE SQUARE FEET: Usually the space measurement which incorporates both the “useable square foot” measurement as well as the common area. The difference in the rental amount between usable and rentable is generally between 10% - 15%.
REPOSSESSION/REPOSSESSED: Recovery or acquisition of such physical control of property (pursuant to the provisions of the security instrument or as otherwise provided by law) as to make further legal or other action unnecessary in order to obtain actual possession of the property or to dispose of the same by sale or otherwise.
REPRESENTATIVE: A person who is selected and designated to accompany, represent, and/or advise someone else. Thus in real estate a representative could be a real estate agent or a mortgage broker acting on your behalf to others.
REPRODUCTION COST ANALYSIS: A technique used to evaluate a property by estimating the costs of building the same or similar structure then adding the cost of the land and subtracting an allowance for wear and tear. This is another way an appraiser is able to determine the market value of a residential property.
RESIDENCE: A place where someone lives. Also known as a domicile. Could be a rented or owned house, apartment, townhome, condo, etc.
RESIDENTIAL MORTGAGE CREDIT REPORT: A detailed account of the credit, employment, and residence history, and public records information concerning an individual which is used to determine credit worthiness. Also known simply as a credit report.
RESIDUAL INCOME: there are two uses for this term: (1) The amount a borrower will have left over to live on after taking into consideration expenditures for shelter expense, consumer debt, and child and/or alimony support. The residual income is the money left for such standard items such as food, healthcare, apparel, and gasoline. The residual income figure is a significant factor in determining whether or not the loan can be approved, and (2) Income generated in the future for effort made today. Apartments or other rental properties have a residual income component because for work you make toady (buying the property) they generate income year after year after year.
RESTRICTIVE CONVEANT: A clause in a deed in which there is an agreement between buyer and seller stating certain restraints as to the use of the property.
RETURN ON EQUITY: The ratio of cash flow after debt service to the difference between the value of property and the total financing.

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REVERSE LEVERAGE: A situation that arises when financing is too costly. It results when total yield on cash investment is less than the financing constant on borrowed funds (see negative cash flow).
REVERSION: A right to future possession retained by an owner at the time of a transfer of an owner’s interest in real property.
REVERSIONARY CLAUSE: A clause providing that any violations of restrictions will cause title to the property to revert to the seller or the party who imposed the restriction.
RIGHT OF FIRST RIGHT OF REFUSAL: (1) A lease clause giving the tenant the first opportunity to buy the property at the same price and on the same terms and conditions as those contained in a third party offer that the owner has expressed w willingness to accept; (2) A lease clause giving a tenant the first opportunity to lease additional space that may become available in a property at the same price and under the same terms and condition as those contained in a third party offer that the owner has expressed and willingness to accept.
RIGHT OF SURVIVORSHIP: In joint tenancy, the right of survivors to acquire that interest of a deceased joint tenant.
RIGHT OF WAY: An easement on land whereby an owner grants or gives to another the right of passage over their land.
RIPARIAN RIGHTS: the landowner’s right to water on, under or next to his land.
S CORPORATION: A corporation that meets the requirements of and elects to be taxed under Subchapter S of the Internal Revenue Code. Generally this type of corporation acts as a conduit passing through to the shareholders its taxable income or loss.
SALE-LEASEBACK: An arrangement by which the owner occupant of a property agrees to sell all or part of the property to an investor and then lease it back and continue to occupy space as a tenant.
SALES CONTRACT: Another name for a sales agreement, purchase agreement, etc. Not to be confused with a land contact, and also is a lessor, collecting rent from another party.
SANDWICH LEASE: A lease in which the “sandwiched party” is a lessee, paying rent on a leasehold interest to one party, and also is a lessor, collecting rent from another party or parties.
SATISFACTION OF MORTGAGE: The recordable instrument given by the lender to evidence payment in full of the mortgage debt. Sometimes known as a release deed.
SECOND GENERATION SPACE: Refers to previously occupied space that becomes available for lease, either directly from the landlord or as sublease space.
SECONDARY FINANCING: Financing real estate with a loan, or loans, subordinate to a first mortgage or first trust deed. In the event of default, these loans would be paid on any


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remaining balance after the debt of the lender in first position (1st lien) had been paid satisfied. Usually the interest rate on these loans is significantly higher because of the increased risk to the lender.
SECONDARY MORTGAGE: An unorganized market where existing mortgages are bought and sold. It contrasts with the primary mortgage market, where mortgages are originated.
SECURITY: The collateral given, deposited, or pledged to secure the fulfillment of an obligation or payment of a debt.
SECURITY DEPOSIT: A payment required by a landlord to ensure that a tenant pays rent on time and keeps the rental unit in good condition. If the tenant damages the property or leaves owing rent, the landlord can use the security deposit to cover what the tenant owes.
SECURITY INSTRUMENT: The mortgage or trust deed evidencing the pledge of real estate security as distinguished from the note or other credit instrument.
SECURITY INTEREST: According to the Uniform Commercial Code, security interest is a term designating the interest of the creditor in the property of the debtor in all types of credit transactions. It thus replaces such terms as chattel mortgage, pledge trust receipt, chattel trust, equipment trust, conditional sale, and inventory lien.
SELLER CONCESSIONS: In some localities, concessions are offered by builders/sellers as a competitive tool. A seller concession is defined as anything of value added to the transaction by the builder/seller for which the buyer pays nothing additional and which the seller is not customarily expected or required to pay or provide. Such concessions include payment by the seller of the buyers VA funding fee, prepaid taxes and insurance, gifts such as a television set or microwave oven.
SERVICING A DEBT: The act of paying the periodic principal and interest payments on an outstanding debt or obligation.
SETBACK: The distance a building must be set back from the property lines in accordance with local zoning ordinances or deed restrictions.
SHADOW MARKET: The “Unofficial” vacancy portion of the office market caused by available sublease space and/or excess space leased but not occupied by office users.
SITE DEVELOPMENT: The installation of all necessary improvements (installment of utilities, grading, etc.) made to a site before a building or project can be constructed on such a site.
SITE PLAN: A detailed plan which depicts the location of improvements on a parcel of land which also contains all the information required by zoning ordnances.
SLAB: The exposed wearing surface laid over the structural support beams of a building to form one of the floor(s) of the building or laid slab on grade in the case of non- structural ground level concrete slab.

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SOCIETY OF INDUSTRIAL AND OFFICE REALTOR (SIOR): One of the oldest professional commercial designations in the United States. Approximately 1,500 members worldwide. Emphasis on corporate office and industrial real estate.
SPACE PLAN: A graphic representation of a tenant’s space requirements, showing all wall and door locations, room sizes, and sometimes furniture layout.
SPECIAL ASSESMENT: Any special charge levied against real property for public improvements that benefit the assessed property.
SPECIAL WARRANTY DEED: A deed containing a covenant whereby the grantor agrees to protect the grantee against any claims arising during the grantors period of ownership.
SPECIFIC PERFORMANCE: A court order requiring a person to carry out the precise terms agreed upon in a contract.
STACKING PLAN: Schematic illustrating tenancies on a floor-by-floor basis. Useful in forecasting how to accommodate growth tenants and identifying larger blocks of space.
STATUTE OF FRAUDS: A state law requiring that certain contracts be in writing. In real estate, a contract for the sale of land must be in writing to be enforceable.
STATUTE OF LIMITATIONS: A law that limits the length of time in which a lawsuit must be commenced, or the right to sure is lot. It varies from state to state.
STEP-DOWN LEASE: A lease calling for one initial rent followed by a decrease in rent over stated periods.
STEP-UP LEASE: A lease calling for one initial rent followed by and increase in rent over stated periods.
SUBLEASE: A rental agreement or lease between a tenant and new tenant (called a sublessee) who will either share the rental or take over from the first tenant. The sublessee pays directly to the tenant. The tenant is still completely responsible to the landlord for the rent and for any damages, including those caused by the sublessee. Most landlords prohibit subleases unless they have given prior written consent.
SUBJECT TO: A term used in a contract to describe the various “weasel” clauses a buyer will include to allow them to get our of the contract for the stated subject to reasons.
SUBORDINATION AGREEMENT: As used in a lease, the tenant generally accepts the leased premises subject to any recorded mortgage or deed of trust lien and all existing recorded restrictions and the landlord is often given the power to subordinate the tenant’s interest to any first mortgage or deed of trust lien subsequently placed on the leased premises.
SUBROGATION: The substitution of one person for another in reference to a debt, claim, or right.

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Real Estate Terms & Definitions
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Real Estate Terms and Definitions



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