Glossary of Real Estate Terms

ABATEMENT OF NUISANCE - Extinction or termination of a nuisance.

ABSOLUTE OWNERSHIP- See FEE SIMPLE ESTATE.

ABSTRACT OF JUDGMENT - A condensation of the essential provisions of a court judgment.

ABSTRACT OF TITLE - A summary or digest of all transfers, conveyances, legal proceedings, and any other facts relied on as evidence of title, showing continuity of ownership, together with any other elements of record which may impair title.

ABSTRACTION - A method of valuing land. The indicated value of the improvement is deducted from the sale price.

ACCELERATED COST RECOVERY SYSTEM - The system for figuring depreciation (cost recovery) for depreciable real property acquired and placed into service after January 1, 1981. (ACRS)

ACCELERATED DEPRECIATION - A method of cost write-off in which depreciation allowances are greater in the first few years of ownership than in subsequent years. This permits an earlier recovery of capital and a faster tax write-off of an asset.

ACCELERATION CLAUSE - A condition in a real estate financing instrument giving the lender the power to declare all sums owing lender immediately due and payable upon the happening of an event, such as sale of the property, or a delinquency in the repayment of the note.

ACCEPTANCE - The act of agreeing or consenting to the terms of an offer thereby establishing the “meeting of the minds” that is an essential element of a contract.

ACCESS RIGHT - The right of an owner to have ingress and egress to and from owner’s property over adjoining property.

ACCESSION - An addition to property through the efforts of man or by natural forces.

ACCRETION - Accession by natural forces, e.g., alluvium.

ACCRUED DEPRECIATION - The difference between the cost of replacement new as of the date of the appraisal and the present appraised value.

ACCRUED ITEMS OF EXPENSE - Those incurred expenses which are not yet payable. The seller’s accrued expenses are credited to the purchaser in a closing statement.

ACKNOWLEDGMENT - A formal declaration made before an authorized person, e.g., a notary public, by a person who has executed an instrument stating that the execution was his or her free act.. In this state an acknowledgment is the statement by an officer such as a notary that the signatory to the instrument is the person represented to be.

ACOUSTICAL TILE - Blocks of fiber, mineral or metal, with small holes or rough textured surface to absorb sound, used as covering for interior walls and ceilings.

ACQUISITION - The act or process by which a person procures property.

ACRE - A measure of land equaling 160 square rods, or 4,840 square yards, or 43,560 square feet, or a tract about 208.71 feet square.

ACTUAL AUTHORITY - Authority expressly given by the principal or given by the law and not denied by the principal.

ACTUAL FRAUD - An act intended to deceive another, e.g., making a false statement, making a promise without intending to perform it, suppressing the truth.

ADJUSTABLE RATE MORTGAGE (ARM) - A mortgage loan which bears interest at a rate subject to change during the term of the loan, predetermined or

otherwise.

ADJUSTMENTS - In appraising, a means by which characteristics of a residential property are regulated by dollar amount or percentage to conform to similar

characteristics of another residential property.

ADMINISTRATOR - A person appointed by the probate court to administer the estate of a deceased person who died intestate. (Administratrix, the feminine form.)

AD VALOREM - A Latin phrase meaning “according to value.” Usually used in connection with real estate taxation.

ADVANCE - Transfer of funds from a lender to a borrower in advance on a loan.

ADVANCE COMMITMENT - The institutional investor’s prior agreement to provide long-term financing upon completion of construction; also known as a “takeout” loan commitment.

ADVANCE FEES - A fee paid in advance of any services rendered. Sometimes unlawfully charged in connection with that illegal practice of obtaining a fee in advance for the advertising of property or businesses for sale, with no intent to obtain a buyer, by persons representing themselves as real estate licensees, or representatives of licensed real estate firms.

ADVERSE POSSESSION - A method of acquiring title to real property through possession of the property for a statutory period under certain conditions by a person other than the owner of record.

AFFIANT - One who makes an affidavit or gives evidence.

AFFIDAVIT - A statement or declaration reduced to writing sworn to or affirmed before some officer who has authority to administer an oath or affirmation.

AFFIDAVIT OF TITLE - A statement, in writing, made under oath by seller or grantor, acknowledged before a Notary Public in which the affiant identifies himself or herself and affiant’s marital status certifying that since the examination of title on the contract date there are no judgments, bankruptcies or divorces, no unrecorded deeds, contracts, unpaid repairs or improvements or defects of title known to affiant and that affiant is in possession of the property.

AFFIRM - To confirm, to aver, to ratify, to verify. To make a declaration.

AGENCY - The relationship between principal and the principal’s agent which arises out of a contract, either expressed or implied, written or oral, wherein the agent is employed by the principal to do certain acts dealing with a third party.

AGENT - One who acts for and with authority from another called the principal.

AGREEMENT - An exchange of promises, a mutual understanding or arrangement; a contract.

AGREEMENT OF SALE - A written agreement or contract between seller and purchaser in which they reach a “meeting of minds” on the terms and conditions of the sale. The parties concur; are in harmonious opinion.

AIR RIGHTS - The rights in real property to the reasonable use of the air space above the surface of the land.

ALIENATION - The transferring of property to another; the transfer of property and possession of lands, or other things, from one person to another.

ALIENATION CLAUSE - A clause in a contract giving the lender certain rights in the event of a sale or other transfer of mortgaged property.

ALLODIAL TENURE - A real property ownership system where ownership may be complete except for those rights held by government. Allodial is in contrast to feudal tenure.

ALLUVIUM - The gradual increase of the earth on a shore of an ocean or bank of a stream resulting from the action of the water.

ALTA OWNER’S POLICY - An owner’s extended coverage policy that provides buyers and owners the same protection the ALTA policy gives to lenders.

ALTA TITLE POLICY - (American Land Title Association) A type of title insurance policy issued by title insurance companies which expands the risks normally insured against under the standard type policy to include unrecorded mechanic’s liens; unrecorded physical easements; facts a physical survey would show; water and mineral rights; and rights of parties in possession, such as tenants and buyers under unrecorded instruments.

AMENITIES - Satisfaction of enjoyable living to be derived from a home; conditions of agreeable living or a beneficial influence from the location of improvements, not measured in monetary considerations but rather as tangible and intangible benefits attributable to the property, often causing greater pride in ownership.

AMORTIZATION - The liquidation of a financial obligation on an installment basis; also, recovery over a period of cost or value.

AMORTIZED LOAN - A loan to be repaid, interest and principal, by a series of regular payments that are equal or nearly equal, without any special balloon payment prior to maturity. Also called a Level Payments Loan.

ANNUAL PERCENTAGE RATE - The relative cost of credit as determined in accordance with Regulation Z of the Board of Governors of the Federal Reserve System for implementing the Federal Truth in Lending Act.

ANNUITY - A sum of money received at fixed intervals, such as a series of assured equal or nearly equal payments to be made over a period of time, or it may be a lump sum payment to be made in the future. The installment payments due to the landlord under a lease is an annuity. So are the installment payments due to a lender.

ANTICIPATION, PRINCIPLE OF - Affirms that value is created by anticipated benefits to be derived in the future.

APPELLANT - A party appealing a court decision or ruling.

APPRAISAL - An estimate of the value of property resulting from an analysis of facts about the property. An opinion of value.

APPRAISER - One qualified by education, training and experience who is hired to estimate the value of real and personal property based on experience, judgment, facts, and use of formal appraisal processes.

APPR0PRIATION OF WATER - The taking, impounding or diversion of water flowing on the public domain from its natural course and the application of the water to some beneficial use personal and exclusive to the appropriator.

APPURTENANCE: That which belongs to something, but not immemorially; all those rights, privileges, and improvements which belong to and pass with the transfer of the property, but which are not necessarily a part of the actual property. Appurtenances to real property pass with the real property to which they are appurtenant, unless a contrary intention is manifested. Typical appurtenances are rights-of-way, easements, water rights, and any property improvements.

APPURTENANT - Belonging to; adjunct; appended or annexed to. For example, the garage is appurtenant to the house, and the common interest in the common elements of a condominium is appurtenant to each apartment. Appurtenant items pass with the land when the property is transferred.

APR - See ANNUAL PERCENTAGE RATE.

ARCHITECTURAL STYLE - Generally the appearance and character of a building’s design and construction.

ARTICLES OF INCORPORATION - An instrument setting forth the basic rules and purposes under which a private corporation is formed.

ASSESSED VALUATION - A valuation placed upon a piece of property by a public authority as a basis for levying taxes on the property.

ASSESSMENT - The valuation of property for the purpose of levying a tax or the amount of the tax levied. Also, payments made to a common interest subdivision homeowners- association for maintenance and reserves.

ASSESSOR - The official who has the responsibility of determining assessed values.

ASSIGNMENT - A transfer to another of any property in possession or in action, or of any estate or right therein. A transfer by a person of that person’s rights under a contract.

ASSIGNMENT OF RENTS - A provision in a deed of trust (or mortgage) under which the beneficiary may, upon default by the trustor, take possession of the property, collect income from the property and apply it to the loan balance and the costs incurred by the beneficiary.

ASSIGNOR - One who assigns or transfers property.

ASSIGNS, ASSIGNEES - Those to whom property or interests therein shall have been transferred.

ASSUMPTION AGREEMENT - An undertaking or adoption of a debt or obligation primarily resting upon another person.

ASSUMPTION FEE - A lender’s charge for changing over and processing new records for a new owner who is assuming an existing loan.

ASSUMPTION OF MORTGAGE - The taking of a title to property by a grantee wherein grantee assumes liability for payment of an existing note secured by a mortgage or deed of trust against the property, becoming a co-guarantor for the payment of a mortgage or deed of trust note.

ATTACHMENT - The process by which real or personal property of a party to a lawsuit is seized and retained in the custody of the court for the purpose of acquiring jurisdiction over the property, to compel an appearance before the court, or to furnish security for a debt or costs arising out of the litigation.

ATTEST - To affirm to be true or genuine; an official act establishing authenticity.

ATTORNEY IN FACT - One who is authorized by another to perform certain acts for another under a power of attorney; power of attorney may be limited to a specific act or acts or be general.

AVULSION - A sudden and perceptible loss of land by the action of water as by a sudden change in the course of a river.

BACKFILL - The replacement of excavated earth into a hole or against a structure.

BALANCE SHEET - A statement of the financial condition of a business at a certain time showing assets, liabilities, and capital.

BALLOON PAYMENT - An installment payment on a promissory note - usually the final one for discharging the debt - which is significantly larger than the other installment payments provided under the terms of the promissory note.

BARGAIN AND SALE DEED - Any deed that recites a consideration and purports to convey the real estate; a bargain and sale deed with a covenant against the grantor’s act is one in which the grantor warrants that grantor has done nothing to harm or cloud the title.

BASE AND MERIDIAN - Imaginary lines used by surveyors to find and describe the location of private or public lands. In government surveys, a base line runs due east and west, meridians run due north and south, and are used to establish township boundaries.

BASIS - (1) Cost Basis-The dollar amount assigned to property at the time of acquisition under provisions of the Internal Revenue Code for the purpose of determining gain, loss and depreciation in calculating the income tax to be paid upon the sale or exchange of the property. (2) Adjusted Cost Basis-The cost basis after the application of certain additions for improvements, etc., and deductions for depreciation, etc.

BEARING WALL - A wall or partition which supports a part of a building, usually a roof or floor above.

BENCH MARK - A monument used to establish the elevation of the point, usually relative to Mean Sea Level, but often to some local datum.

BENEFICIARY - (1) One entitled to the benefit of a trust; (2) One who receives profit from an estate, the title of which is vested in a trustee; (3) The lender on the security of a note and deed of trust.

BEQUEATH - To give or hand down by will; to leave by will.

BEQUEST - Personal property given by the terms of a will.

BETTERMENT - An improvement upon property which increases the property value and is considered as a capital asset as distinguished from repairs or replacements where the original character or cost is unchanged.

BILL OF SALE - A written instrument given to pass title of personal property from vendor to the vendee.

BINDER - An agreement to consider a down payment for the purchase of real estate as evidence of good faith on the part of the purchaser. Also, a notation of coverage on an insurance policy, issued by an agent, and given to the insured prior to issuing of the policy.

BLANKET MORTGAGE - A single mortgage which covers more than one piece of real property.

BLIGHTED AREA - A district affected by detrimental influences of such extent or quantity that real property values have seriously declined as a result of adverse land use and/or destructive economic forces; characterized by rapidly depreciating buildings, retrogression and no recognizable prospects for improvement. However, renewal programs and changes in use may lead to resurgence of such areas.

BLOCKBUSTING - The practice on the part of unscrupulous speculators or real estate agents of inducing panic selling of homes at prices below market value, especially by exploiting the prejudices of property owners in neighborhoods in which the racial make-up is changing or appears to be on the verge of changing.

BONA FIDE - In good faith; without fraud or deceit; authentic.

BOND - Written evidence of an obligation given by a corporation or government entity. A surety instrument.

BOOK VALUE - The current value for accounting purposes of an asset expressed as original cost plus capital additions minus accumulated depreciation.

BREACH - The breaking of a law, or failure of duty, either by omission or commission.

BROKER - A person employed for a fee by another to carry on any of the activities listed in the license law definition of a broker.

BROKER-SALESPERSON RELATIONSHIP AGREEMENT - A written agreement required by the regulations of the Real Estate Commissioner setting forth the material aspects of the relationship between a real estate broker and each salesperson and broker performing licensed activities in the name of the supervising broker.

B.T.U. - British thermal unit. The quantity of heat required to raise the temperature of one pound of water one degree Fahrenheit.

BUILDING CODE - A systematic regulation of construction of buildings within a municipality established by ordinance or law.

BUILDING LINE - A line set by law a certain distance from a street line in front of which an owner cannot build on owner’s lot. A setback line.

BUILDING, MARKET VALUE OF - The sum of money which the presence of that structure adds to or subtracts from the value of the land it occupies. Land valued on the basis of highest and best use.

BUILDING RESTRICTIONS - Zoning, regulatory requirements or provisions in a deed limiting the type, size and use of a building.

BUNDLE OF RIGHTS - All of the legal rights incident to ownership of property including rights of use, possession, encumbering and disposition.

BUREAU OF LAND MANAGEMENT - A federal bureau within the Department of the Interior which manages and controls certain lands owned by the United States.

BUSINESS OPPORTUNITY - The assets for an existing business enterprise including its goodwill. As used in the Real Estate Law, the term includes “the sale or lease of the business and goodwill of an existing business enterprise or opportunity.”

BUYDOWN- See SUBSlDY BUYDOWN.

BUYER’S MARKET - The condition which exists when a buyer is in a more commanding position as to price and terms because real property offered for sale is in plentiful supply in relation to demand.

BYLAWS - Rules for the conduct of the internal affairs of corporations and other organizations.

CAL-VET PROGRAM - A program administered by the State Department of Veterans Affairs for the direct financing of farm and home purchases by eligible California veterans of the armed forces.

CC&Rs - Covenants, conditions and restrictions. The basic rules establishing the rights and obligations of owners (and their successors in interest) of real property within a subdivision or other tract of land in relation to other owners within the same subdivision or tract and in relation to an association of owners organized for the purpose of operating and maintaining property commonly owned by the individual owners.

CCIM - Certified Commercial Investment Member.

CPM© - Certified Property Manager, a designation of the Institute of Real Estate Management.

CAPITAL ASSETS - Assets of a permanent nature used in the production of an income, such as land, buildings, machinery and equipment, etc. Under income tax law, it is usually distinguishable from “inventory” which comprises assets held for sale to customers in ordinary course of the taxpayer’s trade or business.

CAPITAL GAIN - At resale of a capital item, the amount by which the net sale proceeds exceed the adjusted cost basis (book value). Used for income tax computations. Gains are called short or long term based upon length of holding period after acquisition. Usually taxed at lower rates than ordinary income.

CAPITALIZATION - In appraising, determining value of property by considering net income and percentage of reasonable return on the investment. The value of an income property is determined by dividing annual net income by the Capitalization Rate.

CAPITALIZATION RATE - The rate of interest which is considered a reasonable return on the investment, and used in the process of determining value based upon net income. It may also be described as the yield rate that is necessary to attract the money of the average investor to a particular kind of investment. In the case of land improvements which depreciate, to this yield rate is added a factor to take into consideration the annual amortization factor necessary to recapture the initial investment in improvements. This amortization factor can be determined in various ways - (1) straight-line depreciation method, (2) Inwood Tables and (3) Hoskold Tables. (To explore this subject in greater depth, the student should refer to current real estate appraisal texts.)

CAP RATE - See LIFE OF LOAN CAP.

CASEMENT WINDOWS - Frames of wood or metal which swing outward.

CASH FLOW - The net income generated by a property before depreciation and other noncash expenses.

CAVEAT EMPTOR - Let the buyer beware. The buyer must examine the goods or property and buy at his or her own risk, absent misrepresentation.

CERTIFICATE OF ELIGIBILITY - Issued by Department of Veterans Affairs - evidence of individual’s eligibility to obtain VA loan.

CERTIFICATE OF REASONABLE VALUE (CRV) - The Federal VA appraisal commitment of property value.

CERTIFICATE OF TAXES DUE - A written statement or guaranty of the condition of the taxes on a certain property made by the County Treasurer of the county wherein the property is located. Any loss resulting to any person from an error in a tax certificate shall be paid by the county which such treasurer represents.

CERTIFICATE OF TITLE - A written opinion by an attorney that ownership of the particular parcel of land is as stated in the certificate.

CHAIN - A unit of measurement used by surveyors. A chain consists of 100 links equal to 66 feet.

CHAIN OF TITLE - A history of conveyances and encumbrances affecting the title from the time the original patent was granted, or as far back as records are available, used to determine how title came to be vested in current owner.

CHANGE, PRINCIPLE OF - Holds that it is the future, not the past, which is of prime importance in estimating value. Change is largely result of cause and effect.

CHARACTERISTICS - Distinguishing features of a (residential) property.

CHATTEL MORTGAGE - A claim on personal property (instead of real property) used to secure or guarantee a promissory note. (See definition of Security Agreement and Security Interest.)

CHATTEL REAL - An estate related to real estate, such as a lease on real property.

CHATTELS - Goods or every species of property movable or immovable which are not real property. Personal property.

CHOSE IN ACTION - A personal right to something not presently in the owner’s possession, but recoverable by a legal action for possession.

CIRCUIT BREAKER - (l) An electrical device which automatically interrupts an electric circuit when an overload occurs; may be used instead of a fuse to protect each circuit and can be reset. (2) In property taxation, a method for granting property tax relief to the elderly and disadvantaged qualified taxpayers by rebate, tax credits or cash payments. Usually limited to homeowners and renters.

CLOSING - (l) Process by which all the parties to a real estate transaction conclude the details of a sale or mortgage. The process includes the signing and transfer of documents and distribution of funds. (2) Condition in description of real property by courses and distances at the boundary lines where the lines meet to include all the tract of land.

CLOSING COSTS - The miscellaneous expenses buyers and sellers normally incur in the transfer of ownership of real property over and above the cost of the property.

CLOSING STATEMENT - An accounting of funds made to the buyer and seller separately. Required by law to be made at the completion of every real estate transaction.

CLOUD ON TITLE - A claim, encumbrance or condition which impairs the title to real property until disproved or eliminated as for example through a quitclaim deed or a quiet title legal action.

CODE OF ETHICS - A set of rules and principles expressing a standard of accepted conduct for a professional group and governing the relationship of members to each other and to the organization.

COLLATERAL - Marketable real or personal property which a borrower pledges as security for a loan. In mortgage transactions, specific land is the collateral. (See definition of Security Interest. )

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

COLLUSION - An agreement between two or more persons to defraud another of rights by the forms of law, or to obtain an object forbidden by law.

COLOR OF TITLE - That which appears to be good title but which is not title in fact.

COMMERCIAL ACRE - A term applied to the remainder of an acre of newly subdivided land after the area devoted to streets, sidewalks and curbs, etc., has been deducted from the acre.

COMMERCIAL LOAN - A personal loan from a commercial bank, usually unsecured and short term, for other than mortgage purposes.

COMMERCIAL PAPER - Negotiable instruments such as promissory notes, letters of credit and bills of lading. Instruments developed under the law of merchant.

COMMISSION - An agent’s compensation for performing the duties of the agency; in real estate practice, a percentage of the selling price of property, percentage of rentals, etc. A fee for services.

COMMITMENT - A pledge or a promise or firm agreement to do something in the future, such as a loan company giving a written commitment with specific terms of mortgage loan it will make.

COMMON AREA - An entire common interest subdivision except the separate interests therein.

COMMON INTEREST SUBDIVISION - Subdivided lands which include a separate interest in real property combined with an interest in common with other owners. The interest in common may be through membership in an association. Examples are condominiums and stock cooperatives.

COMMON LAW - The body of law that grew from customs and practices developed and used in England “since the memory of man runneth not to the contrary.”

COMMON STOCK - That class of corporate stock to which there is ordinarily attached no preference with respect to the receipt of dividends or the distribution of assets on corporate dissolution.

COMMUNITY PROPERTY - Property acquired by husband and/or wife during a marriage when not acquired as the separate property of either spouse. Each spouse has equal rights of management, alienation and testamentary disposition of community property.

COMPACTION - Whenever extra soil is added to a lot to fill in low places or to raise the level of the lot, the added soil is often too loose and soft to sustain the weight of the buildings. Therefore, it is necessary to compact the added soil so that it will carry the weight of buildings without the danger of their tilting, settling or cracking.

COMPARABLE SALES - Sales which have similar characteristics as the subject property and are used for analysis in the appraisal process. Commonly called “comparables”, they are recent selling prices of properties similarly situated in a similar market.

COMPARISON APPROACH - A real estate comparison method which compares a given property with similar or comparable surrounding properties; also called market comparison.

COMPETENT - Legally qualified.

COMPETITION, PRINCIPLE OF- Holds that profits tend to breed competition and excess profits tend to breed ruinous completion.

COMPOUND INTEREST - Interest paid on original principal and also on the accrued and unpaid interest which has accumulated as the debt matures.

CONCLUSION - The final estimate of value, realized from facts, data, experience and judgment, set out in an appraisal. Appraiser’s certified conclusion.

CONDEMNATION - The act of taking private property for public use by a political subdivision upon payment to owner of just compensation. Declaration that a structure is unfit for use.

CONDITION - In contracts, a future and uncertain event which must happen to create an obligation or which extinguishes an existent obligation. In conveyances of real property conditions in the conveyance may cause an interest to be vested or defeated.

CONDITION PRECEDENT - A qualification of a contract or transfer of property, providing that unless and until a given event occurs, the full effect of a contract or transfer will not take place.

CONDITION SUBSEQUENT - A condition attached to an already-vested estate or to a contract whereby the estate is defeated or the contract extinguished through the failure or non-performance of the condition.

CONDITIONAL COMMITMENT - A commitment of a definite loan amount for some future unknown purchaser of satisfactory credit standing.

CONDITIONAL ESTATE - Usually called, in California, Fee Simple Defeasible. An estate that is granted subject to a condition subsequent. The estate is terminable on happening of the condition.

CONDITIONAL SALE CONTRACT - A contract for the sale of property staffing that delivery is to be made to the buyer, title to remain vested in the seller until the conditions of the contract have been fulfilled. (See definition of Security Interest.)

CONDOMINIUM - An estate in real property wherein there is an undivided interest in common in a portion of real property coupled with a separate interest in space called a unit, the boundaries of which are described on a recorded final map, parcel map or condominium plan. The areas within the boundaries may be filled with air, earth, or water or any combination and need not be attached to land except by easements for access and support.

CONDOMINIUM DECLARATION - The document which establishes a condominium and describes the property rights of the unit owners.

CONFESSION OF JUDGMENT - An entry of judgment upon the debtor’s voluntary admission or confession.

CONFIRMATION OF SALE - A court approval of the sale of property by an executor, administrator, guardian or conservator.

CONFISCATION - The seizing of property without compensation.

CONFORMITY, PRINCIPLE OF - Holds that the maximum of value is realized when a reasonable degree of homogeneity of improvements is present. Use conformity is desirable, creating and maintaining higher values.

CONSERVATION - The process of utilizing resources in such a manner which minimizes their depletion.

CONSIDERATION - Anything given or promised by a party to induce another to enter into a contract, e.g., personal services or even love and affection. It may be a benefit conferred upon one party or a detriment suffered by the other.

CONSTANT - The percentage which, when applied directly to the face value of a debt, develops the annual amount of money necessary to pay a specified net rate of interest on the reducing balance and to liquidate the debt in a specified time period. For example, a 6% loan with a 20 year amortization has a constant of approximately 8 1/2%. Thus, a $10,000 loan amortized over 20 years requires an annual payment of approximately $850.00.

CONSTRUCTION LOAN - A loan made to finance the actual construction or improvement on land. Funds are usually dispersed in increments as the construction

progresses.

CONSTRUCTIVE EVICTION - Breach of a covenant of warranty or quiet enjoyment, e.g., the inability of a lessee to obtain possession because of a paramount

defect in title or a condition making occupancy hazardous.

CONSTRUCTIVE FRAUD - A breach of duty, as by a person in a fiduciary capacity, without an actual fraudulent intent, which gains an advantage to the person at fault by misleading another to the other’s prejudice. Any act of omission declared by law to be fraudulent, without respect to actual fraud.

CONSTRUCTIVE NOTICE - Notice of the condition of title to real property given by the official records of a government entity which does not require actual knowledge of the information.

CONTIGUOUS - In close proximity.

CONTOUR - The surface configuration of land. Shown on maps as a line through points of equal elevation.

CONTRACT - An agreement to do or not to do a certain thing. It must have four essential elements - parties capable of contracting, consent of the parties, a lawful object, and consideration. A contract for sale of real property must also be in writing and signed by the party or parties to be charged with performance.

CONTRIBUTION, PRINCIPLE OF - A component part of a property is valued in proportion to its contribution to the value of the whole. Holds that maximum values are achieved when the improvements on a site produce the highest (net) return, commensurate with the investment.

CONVENTIONAL MORTGAGE - A mortgage securing a loan made by investors without governmental underwriting, i.e., which is not FHA insured or VA guaranteed. The type customarily made by a bank or savings and loan association.

CONVERSION - (1) Change from one legal form or use to another, as converting an apartment building to condominium use. (2) The unlawful appropriation of another’s property, as in the conversion of trust funds.

CONVEYANCE - An instrument in writing used to transfer (convey) title to property from one person to another, such as a deed or a trust deed.

COOPERATIVE (apartment) - An apartment building, owned by a corporation and in which tenancy in an apartment unit is obtained by purchase of shares of the stock of the corporation and where the owner of such shares is entitled to occupy a specific apartment in the building. In California, this type of ownership is called a “stock cooperative.”

CORNER INFLUENCE TABLE - A statistical table that may be used to estimate the added value of a corner lot.

CORPORATION - An entity established and treated by law as an individual or unit with rights and liabilities, or both, distinct and apart from those of the persons composing it. A corporation is a creature of law having certain powers and duties of a natural person. Being created by law it may continue for any length of time the law prescribes.

CORPOREAL RIGHTS - Possessory rights in real property.

CORRECTION LINES - A system for compensating inaccuracies in the Government Rectangular Survey System due to the curvature of the earth. Every fourth township line, 24 mile intervals, is used as a correction line on which the intervals between the north and south range lines are remeasured and corrected to a full 6 miles.

CORRELATION - A step in the appraisal process involving the interpretation of data derived from the three approaches to value (cost, market and income) leading to a single determination of value. Also frequently referred to as “reconciliation.”

CO-SIGNER - A second party who signs a promissory note together with the primary borrower.

COST APPROACH - One of three methods in the appraisal process. An analysis in which a value estimate of a property is derived by estimating the replacement cost of the improvements, deducting therefrom the estimated accrued depreciation, then adding the market value of the land.

COTENANCY - Ownership of an interest in a particular parcel of land by more than one person; e.g. tenancy in common, joint tenancy.

COVENANT - An agreement or promise to do or not to do a particular act such as a promise to build a house of a particular architectural style or to use or not use property in a certain way.

CRAWL HOLE - Exterior or interior opening permitting access underneath building, as required by building codes.

CRE - Counselor of Real Estate, Member of American Society of Real Estate Counselors.

CREDIT - A bookkeeping entry on the right side of an account, recording the reduction or elimination of an asset or an expense, or the creation of or addition to a liability or item of equity or revenue.

CURABLE DEPRECIATION - Items of physical deterioration and functional obsolescence which are customarily repaired or replaced by a prudent property owner.

CURRENT INDEX - With regard to an adjustable rate mortgage, the current value of a recognized index as calculated and published nationally or regionally. The current index value changes periodically and is used in calculating the new note rate as of each rate adjustment date.

CURTAIL SCHEDULE - A listing of the amounts by which the principal sum of an obligation is to be reduced by partial payments and of the dates when each payment will become payable.

DAMAGES - The indemnity recoverable by a person who has sustained an injury, either in his or her person, property, or relative rights, through the act or default of another. Loss sustained or harm done to a person or property.

DATA PLANT - An appraiser’s file of information on real estate.

DEBENTURE - Bonds issued without security, an obligation not secured by a specific lien on property.

DEBIT - A bookkeeping entry on the left side of an account, recording the creation of or addition to an asset or an expense, or the reduction or elimination of a liability or item of equity or revenue.

DEBT - That which is due from one person or another; obligation, liability.

DEBTOR - A person who is in debt; the one owing money to another.

DECLINING BALANCE DEPRECIATION - A method of accelerated depreciation allowed by the IRS in certain circumstances. Double Declining Balance Depreciation is its most common form and is computed by using double the rate used for straight line depreciation.

DECREE OF FORECLOSURE - Decree by a court ordering the sale of mortgaged property and the payment of the debt owing to the lender out of the proceeds.

DEDICATION - The giving of land by its owner to a public use and the acceptance for such use by authorized officials on behalf of the public.

DEED - Written instrument which when properly executed and delivered conveys title to real property from one person (grantor) to another (grantee).

DEED IN LIEU OF FORECLOSURE - A deed to real property accepted by a lender from a defaulting borrower to avoid the necessity of foreclosure proceedings by the lender.

DEED OF TRUST - (See Trust Deed.)

DEED RESTRICTIONS - Limitations in the deed to a property that dictate certain uses that may or may not be made of the property.

DEFAULT - Failure to fulfill a duty or promise or to discharge an obligation; omission or failure to perform any act.

DEFEASANCE CLAUSE - The clause in a mortgage that gives the mortgagor the right to redeem mortgagor’s property upon the payment of mortgagor’s obligations to the mortgagee.

DEFEASIBLE FEE - Sometimes called a base fee or qualified fee; a fee simple absolute interest in land that is capable of being defeated or terminated upon the happening of a specified event.

DEFENDANT - A person against whom legal action is initiated for the purpose of obtaining criminal sanctions (criminal defendant) or damages or other appropriate judicial relief (civil defendant) .

DEFERRED MAINTENANCE - Existing but unfulfilled requirements for repairs and rehabilitation. Postponed or delayed maintenance causing decline in a building’s physical condition.

DEFERRED PAYMENT OPTIONS - The privilege of deferring income payments to take advantage of statutes affording tax benefits.

DEFICIENCY JUDGMENT - A judgment given by a court when the value of security pledged for a loan is insufficient to pay off the debt of the defaulting

borrower.

DELEGATION OF POWERS - The conferring by an agent upon another of all or certain of the powers that have been conferred upon the agent by the principal.

DEPOSIT RECEIPT - A term used by the real estate industry to describe the written

offer to purchase real property upon stated term and conditions, accompanied by a deposit toward the purchase price, which becomes the contract for the sale of the property upon acceptance by the owner.

DEPRECIATION - Loss of value of property brought about by age, physical deterioration or functional or economic obsolescence. The term is also used in accounting to identify the amount of the decrease in value of an asset that is allowed in computing the value of the property for tax purposes.

DEPTH TABLE - A statistical table that may be used to estimate the value of the added depth of a lot.

DESIST AND REFRAIN ORDER - An order directing a person to stop from committing an act in violation of the Real Estate Law.

DETERMINABLE FEE - An estate which may end on the happening of an event that may or may not occur.

DEVISE - A gift or disposal of real property by last will and testament.

DEVISEE - One who receives a gift of real property by will.

DEVISOR - One who disposes of real property by will.

DIRECTIONAL GROWTH - The location or direction toward which the residential sections of a city are destined or determined to grow.

DISCOUNT - To sell a promissory note before maturity at a price less than the outstanding principal balance of the note at the time of sale. Also an amount deducted in advance by the lender from the nominal principal of a loan as part of the cost to the borrower of obtaining the loan.

DISCOUNT POINTS - The amount of money the borrower or seller must pay the lender to get a mortgage at a stated interest rate. This amount is equal to the difference between the principal balance on the note and the lesser amount which a purchaser of the note would pay the original lender for it under market conditions. A point equals one percent of the loan.

DISCRETIONARY POWERS OF AGENCY - Those powers conferred upon an agent by the principal which empower the agent in certain circumstances to make decisions based on the agent’s own judgment.

DISINTERMEDIATION - The relatively sudden withdrawal of substantial sums of money savers have deposited with savings and loan associations, commercial banks, and mutual savings banks. This term can also be considered to include life insurance policy purchasers borrowing against the value of their policies. The essence of this phenomenon is financial intermediaries losing within a short period of time billions of dollars as owners of funds held by those institutional lenders exercise their prerogative of taking them out of the hands of these financial institutions.

DISPOSABLE INCOME - The after-tax income a household receives to spend on personal consumption.

DISPOSSESS - To deprive one of the use of real estate.

DOCUMENTARY TRANSFER TAX - A state enabling act allows a county to adopt a documentary transfer tax to apply on all transfers of real property located in the county. Notice of payment is entered on face of the deed or on a separate paper filed with the deed.

DOCUMENTS - Legal instruments such as mortgages, contracts, deeds, options, wills, bills of sale, etc.

DONEE - A person who receives a gift.

DONOR - A person who makes a gift.

DOUBLE DECLINING BALANCE DEPRECIATION - (See DECLINING BALANCE DEPRECIATION.)

DRAW - Usually applies to construction loans when disbursement of a portion of the mortgage is made in advance, as improvements to the property are made.

DUAL AGENCY - An agency relationship in which the agent acts concurrently for both of the principals in a transaction.

DUE ON SALE CLAUSE - An acceleration clause granting the lender the right to demand full payment of the mortgage upon a sale of the property.

DURESS - Unlawful constraint exercised upon a person whereby he or she is forced to do some act against his or her will.

EARNEST MONEY - Down payment made by a purchaser of real estate as evidence of good faith. A deposit or partial payment.

EASEMENT - A right, privilege or interest limited to a specific purpose which one party has in the land of another.

ECONOMIC LIFE - The period over which a property will yield a return on the investment over and above the economic or ground rent due to land.

ECONOMIC OBSOLESCENCE - A loss in value due to factors away from the subject property but adversely affecting the value of the subject property.

ECONOMIC RENT - The reasonable rental expectancy if the property were available for renting at the time of its valuation.

EFFECTIVE AGE OF IMPROVEMENT - The number of years of age that is indicated by the condition of the structure, distinct from chronological age.

EFFECTIVE DATE OF VALUE - The specific day the conclusion of value applies.

EFFECTIVE INTEREST RATE - The percentage of interest that is actually being paid by the borrower for the use of the money, distinct from nominal interest.

EMINENT DOMAIN - The right of the government to acquire property for necessary public or quasi-public use by condition; the owner must be fairly compensated and the right of the private citizen to get paid is spelled out in the 5th Amendment to the United States Constitution.

ENCROACHMENT - An unlawful intrusion onto another’s adjacent property by improvements to real property, e.g. a swimming pool built across a property line.

ENCUMBRANCE - Anything which affects or limits the fee simple title to or value of property, e.g., mortgages or easements.

EQUITY - The interest or value which an owner has in real estate over and above the liens against it. Branch of remedial justice by and through which relief is afforded to suitors in courts of equity.

EQUITY BUILD-UP - The increase of owner’s equity in property due to mortgage principal reduction and value appreciation.

EQUITY PARTICIPATION - A mortgage transaction in which the lender, in addition to receiving a fixed rate of interest on the loan acquires an interest in the borrower’s real property, and shares in the profits derived from the real property.

EQUITY OF REDEMPTION - The right to redeem property during the foreclosure period, such as a mortgagor’s right to redeem within either 3 months or 1 year as may be permitted after foreclosure sale.

EROSION - The wearing away of land by the act of water, wind or glacial ice.

ESCALATION - The right reserved by the lender to increase the amount of the payments and/or interest upon the happening of a certain event.

ESCALATOR CLAUSE - A clause in a contract providing for the upward or downward adjustment of certain items to cover specified contingencies, usually tied to some index or event. Often used in long term leases to provide for rent adjustments, to cover tax and maintenance increases.

ESCHEAT - The reverting of property to the State when heirs capable of inheriting are lacking.

ESCROW - The deposit of instruments and/or funds with instructions with a third neutral party to carry out the provisions of an agreement or contract.

ESCROW AGENT - The neutral third party holding funds or something of value in trust for another or others.

ESTATE - As applied to real estate, the term signifies the quantity of interest, share, right, equity, of which riches or fortune may consist in real property. The degree, quantity, nature and extent of interest which a person has in real property.

ESTATE OF INHERITANCE - An estate which may descend to heirs. All freehold estates are estates of inheritance, except estates for life.

ESTATE FOR LIFE - A possessory, freehold estate in land held by a person only for the duration of his or her life or the life or lives of another.

ESTATE FROM PERIOD TO PERIOD - An interest in land where there is no definite termination date but the rental period is fixed at a certain sum per week, month, or year. Also called a periodic tenancy.

ESTATE AT SUFFERANCE - An estate arising when the tenant wrongfully holds over after the expiration of the term. The landlord has the choice of evicting the tenant as a trespasser or accepting such tenant for a similar term and under the conditions of the tenant’s previous holding. Also called a tenancy at sufferance.

ESTATE AT WILL - The occupation of lands and tenements by a tenant for an indefinite period, terminable by one or both parties.

ESTATE FOR YEARS - An interest in lands by virtue of a contract for the possession of them for a definite and