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Hogan School Of Real Estate Vocab

Terms in this set (521)

Personal Property (Chattel)
includes moveable items: chair or sofa
emblements (fructus industriales) annual plantings, vegetables and fruits; grains. Things that can be picked up. (even by a forklift I.E. Car)
Bill of Sale
A document used to transfer ownership of personal property.
Real Property (REAL estate)
Land and everything attached to it and the rights that accompany it. Property that is immovable.
State Trust Land
Land that was given to the state from the federal government.
Article X (10) - Arizona Constitution
The land that was given by federal government to the state.Land that is held in a trust and managed by Arizona State Land Department. Most of the proceeds go to benefiting state owned schools.
Deed
The written instrument (or document) by which a property owner conveys (transfers) an ownership of land.
Grantor
the individual who conveys the ownership rights of real property. One who gives the Deed away. -OR means to give
Grantee
A person who receives a conveyance of real property from a grantor. Receives a Deed. -EE means to receive
Erosion (Avulsion)
The tearing away of land due to natural causes. For example wind and rain.
Accretion
The Increase of land due to natural causes. For example where the rain deposits the dirt. Or where the wind lets the dirt rest.
Heterogeneity
Differences. No two parcels of land are the same. A good way to think of it is no land has the same grid coordinates.
Appurtenance
rights, privileges or improvements that belong to and pass with the land, unless reserved or expected. (improvements such as buildings, fences, trees, or sidewalks)
Emblements
are considered personal property. Annual crops are considered emblements. This also includes the right of a tenate farmer to harvest crops after the lease has expired.
Bundle of Rights
Intangible rights and privileges. The group of rights that get transferred with the deed. The rights of an owner to possess, control, enjoy, sell, lease, mortgage, and dispose of the property.
Riparian Rights
Water rights next to rivers or streams
Littoral Rights
Water rights of landowners whose land touches a commercial lake, sea or ocean.
Fixture
An item of personal property that has been converted to real property by being permanently affixed to the realty. An item that was once personal property but has been permanently attached to and has become real property.
Conversion
The process of changing from personal property to real property; or from real property to personal property.
Affidavit of Affixture
A document for owners of mobile homes certifying that the home is immobilized, I.e. anchored to real property and can therefore be taxed as real property.
Police Power
the authority of each State to act to protect and promote the public health, safety, morals, and general welfare of its people
Eminent Domain
the right of a government or its agent to take private property for public use, with payment of compensation.
Condemnation
is the process of taking private property for public use.
Taxation
Charges against property to bare the cost of municipal functions.
Escheat
Reversion of property to the state due to the owner dying without a will or any heirs.
Dedication
Transfer of private property to state property assuming that the state will take the responsibility for it.
Front Footage
The measurement of a parcel of land by the number of feet of street or road frontage. Where the address is.
General Plan
Long-term, comprehensive plan for development of a community implemented through zoning and other laws set up by the government
Master Planned Community
Large-scale residential plan with a large number of recreational amenities such as parks, golf courses, lakes, or bike paths.
Natural area open space (NAOS)
An area or wide easement restriction and preserving the use as a natural environment.
Arizona 811 (blue Stake)
Company you can call and have them trace where pipes and electrical wires are buried underground.
Buffer Zone
An area or zone that separates two incompatible zoned areas.
Zone
Area of a city with a relatively uniform land use (e.g. an industrial zone or residential zone). An area set up by authorities for specific use.
Setback
The minimal distance from the street and/or street lines beyond which a structure can be built. This was to help prevent fires and the spread of disease.
Variance
A use or exception granted by authority to violate the zoning ordinance.
Nonconforming use
A pre-existing use of land which does not conform to the zoning ordinance but which may legally remain.
Encumbrance
Any claim right or interest held by one who is not the legal owner. Sch as deed restrictions or liens.
Deed Restrictions
Clauses in a deed limiting the future uses of the property. Deed restrictions may impose a vast variety of limitations and conditions—for example, they may limit the density of buildings, dictate the types of structures that can be erected, or prevent buildings from being used for specific purposes or even from being used at all.
covenants
a written promise, to refrain from a specific action.
Easement
the right to use another's property for a specific use or purpose.
Easement Appurtenant
An easement created to benefit adjacent land. Or a right across ones property for the benefit of the adjacent property.
Dominant parcel
Benefits from the easement.
Servient parcel
Has an easement across it.
Easement in gross
A right across one's property for the benefit of a 3rd party.
Easement Personal
One person has permission or a license.
Easement by necessity
Created if a land is land locked, the land locked land has the right to a public road
Conservation Easement
An agreement that limits certain types of uses or prevents development from taking place on the property while the property remains private.
View Easement
A right a property owner has in adjacent property by which that property owner my not interfere with the view of the easement holder.
Prescriptive Easement
An easement created by adverse possession.
Ingress
Coming
Egress
Going
Adverse Possession
Is when a person who does not own the property claims rights though N.O.C.H. Notorious, Open, Continuous, Hostile.
N.O.C.H
Notorious, Open, Continuous, Hostile.
Merger
Holder of easements buys property and then is able to remove the easement.
Quit claim deed
A Court action that a person will use to give up any rights that they might have.
Quiet Title Action
A court action to remove a cloud or any question on a title.
Encroachment
A physical thing in nature. When someone's physical property is on someone else's property.
Liens
A charge or claim which one person has upon the property of another as security for a debt or obligation. Think of it as an unpaid bill. or Collateral for a debt.
Involuntary lien
Liens that are placed against property without consent.
Specific Lien
A lien that is placed against specific property. For example real estate tax, government assessments, or a mechanics lien.
General liens
Are liens that are placed against an individual person and everything that he or she owns.
Judgement Lien
A lien ordered by the court
Income Tax Lien
Liens placed by the government for the non payment of income tax
Voluntary liens
Are liens that a person volunteers for like a mortgage, trust or land contacts.
Contract
An agreement between two or more parties that is enforceable in court
Statue of Frauds
A state statute under which certain types of contracts must be in writing to be enforceable. It is also something that both parties or authorized agents MUST sign
Competent Parties
Those who are legally capable of entering into contracts. Those entering into the contract must be of legal age and must be mentally competent.
Valid Consideration
Has to be something exchanged, money or other valuables such as labor, love or affection.
Offer and Acceptance
All parties must agree to all terms. Also called "meeting of the minds".
Legal object (legal purpose)
Contract must be over legal situations.
Expressed contract
All the terms have been specifically stated between the parties either written or verbally.
Implied contract
A contract created from the actions or conduct of the parties. I.e. Fast food. we don't sign a contract but it is IMPLIED that if we give them money they will give us food.
Executed contract
All the terms have been performed by the parties.
Executory contract
A contract that has not yet been fully performed. they story is still going on "-tory" is close to "story"
Bilateral contract
A promise is made by one party in return for a promise of another.
Unilateral Contract
One party makes a promise to induce other party into action. I.e. A lost dog ad with a cash reward.
Option
The right to buy or lease a property within a specified period for a specified price and terms. Binding only to the owner, not the buyer. the buyer has the OPTION to walk away.
Right of first refusal
Allows the holder to match any offer the owner may receive to buy or lease the property.
Valid Contract
A contract that contains all the essential elements of a contract and therefore is binding on all parties.
Void contract
No contract at all not enforceable by law.
Voidable contract
Appears to be valid but because of a defect could be overturned by one of the parties
Real Estate Employment Agreement
Written agreement authorizing or employing an agent or broker to purchase or sell real property for commission.
Open Listing
The listing broker will be paid a commission ONLY if he or she finds a buyer.
Exclusive agency listing
The listing broker will be paid a commission if he or she finds a buyer or if another broker finds a buyer, but if the seller sells the property the broker does not get a commission.
Exclusive right to sell listing
The listing broker will be paid if he finds a buyer or if another broker finds a buyer, or if the seller finds a buyer.
Net Listing
Seller agrees to take a specified amount as net proceeds and broker may retain any amount of sales above sales price.
Pocket Listing
A listing that is not shared with anyone else inside the brokerage or anywhere else.
"Coming Soon" Listing
Refers to a property that is not yet available for sale but might be soon.
"Exclusive" Listing
Cooperation and compensation is not offered to other companies therefore the buyers broker may require separate compensation.
Buyer Brokerage Agreement
A written employment contract in which the buyer hires a broker to find a seller.
Sherman Anti-Trust Act
Prevents anti-competitive Practices such as telling someone that all commissions are the same.
Covenant Not To Compete
a promise not to compete within a given geographical area for a specific time period. usually set up by a business.
Agency
A relationship created when one person hires another to act on his or her behalf.
Principal
Employs the agent. Also known as the client
Agent
Represents the principal and must follow the principal's instructions unless it is against the law.
Clients
Are people who are represented by your broker
Customers
Are people who are not represented by your broker but maybe by another broker.
Fiduciary Duties
The duties of obedience, care, and loyalty owed by directors and officers to their clients
C.A.R.L.O.D
Confidentiality, Accounting, Reasonable Skill and Care, Loyalty, Obedience, Disclosure
Confidentiality
The agent must keep some info confidential.
Accounting
The agent must account to all parties for all monies the agent accepts during the transaction.
Reasonable Skill and care
The agent must perform to the high standards by his profession as promised and must be knowledgeable in: Contract preparation, Marketing efforts, advising on prices and market conditions, meeting deadlines, disclosure of material facts and defects
Loyalty
The agent must place the clients interests above their own interests.
Obedience
An agent must follow the clients instructions unless they violate the law
Disclosure
The agent must make full disclosure the client of matters that affect the client.
Expressed agency
is created by specific authorization from the principal (client) to perform functions on the clients behalf.
Implied agency
is created by the actions and/or statements of the parties.
Subagent
is a person appointed by a broker under authority granted by a client to perform functions on the clients behalf.
Broker
is the agent of the client and the salesperson is an agent of the broker
Single Agency
the agent only represents a single party
Dual Agency
When the broker represents both the buyer and the seller
Attorney-in-Fact
A person authorized to represent another through a power of attorney.
power of attorney
A document through which the client authorizes the agent to act on his or her behalf
Universal Agency
agent has authority to represent the principal (client) in all matters
Special agent
a special agent has power in a specific situation or limited authority. I.e. An agent has authority over 1 listing.
General agent
A broker has broader authority. has authority of more than one listing
Imputed notice
The legal concept that information communicated to the agent has been communicated to the principle. Give any information that you receive to the client ASAP.
Vicarious liability (respondeat superior)
concept that a principal is responsible for the acts of the agent.
Errors & Omissions Insurance (E&O)
Insures licensees against misrepresentations or material facts the licensee failed to disclose.
General Liability Insurance
Insures the brokerage or licensee against claims when a third party is injured or has other losses
Umbrella Insurance
Extra liability insurance designed to protect the insured from major claims on lawsuits
Independent Contractor
One who contracts his or her services to the broker
Employee
One who is employed by the broker who can control the hour-by-hour work of the employee.
Letter of Intent
Expresses the parties intention to invest in, buy or develop a property without creating a binding legal obligation.
Offer
An invitation to enter into a contract.
Offeror
A person who makes an offer.
Offeree
person who receives an offer
Counter Offer
An offer made by the offeree to the offeror, which modifies the offeror's original offer. (this voids the original offer)
Assignment of contract
Transfer of rights in a contract from one party (assignor) to another (assignee)
"or Nominee"
A term used in a purchase contract or lease to indicate that the buyer or lessee may name another person or entity who will complete the transaction.
Earnest Money
Money given by the buyer to show the seller the buyer's good faith intention to complete the transaction.
Trust account
a place where the broker is required to put earnest money unless otherwise agreed upon in writing.
Escrow Account
An account where the broker is required to put earnest money unless otherwise agreed upon in writing. Usually goes here.
Escrow Agent
Is a disinterested neutral third party hired to close the transaction.
Commingling
Illegally mixing client's funds with the broker's business or personal account.
Conversion of funds
is when the agent uses the earnest money for personal use
Contingency clause
Makes the sale contingent upon certain events. Failure to fulfill contingency voids the contract.
Mortgage Contingency Clause
makes the sale contingent upon the buyer obtaining financing. Usually specifies the loan amount, and interest rate.
Escrow
is a company that is hired, and acts as the agent of both the buyer and the seller. They ensure that all terms and conditions lined in the contract are met.
Boilerplate
the pre-printed words in a contract
close of escrow
Typically occurs at the time the deed and other documents are recorded.
DOUBLE ESCROW
The use of one escrow to purchase and resell a property. or simultaneous escrows on the same property where in the buyer has sold the property prior to close.
Prorations
Expenses, either prepaid or paid in arrears, that are divided or distributed between buyer and seller at the closing. Specifies what items will be prorated and the dates of such Prorations.
Loss payee
Person designated in an insurance policy to be paid if the insured property is damaged or destroyed.
Additional party insured
A person or entity other than the policy holder who is covered by the policy.
Claims History (CLUE report or loss history report)
A record of insurance losses on a property or related to a specific consumer.
Home warranty
A service contract covering the repairs or replacement of appliances or systems. Such as furnaces, air-conditioners, plumbing or a roof.
Liquidated damages
The amount pre-determined by the parties as the total amount of compensation an injured party should receive if the other party breaches the contract. Buyers can sue for all the inspection costs.
Specific performance
Is a court order to enforce the terms of a contract.
Puffing
Making overstatements of personal opinion, this is not considered misrepresentation. Making statements such as "superb quality," or "best on the market," is exaggerated sales talk
Misrepresentation
Saying things that you don't know about. False statements of material facts which a party relies upon to his or her damage.
Fraudulent Misrepresentation
Any misrepresentation, either by misstatement or omission of a material fact, knowingly made with the intention of deceiving another and on which a client or customer would and does rely upon to make a decision.
Indemnification clause (Hold harmless clause)
Provision where by one party agrees to protect another party from damages or lawsuits.
Rescission
the legal remedy of canceling a contract and restoring the parties to their original positions prior to entering into the contract.
Mediation
A dispute resolution process conducted by an independent 3rd party mediator who works with the parties to help resolve their differences.
Arbtration
the non-judicial submission of a dispute to a third party arbitrator which both parties agreeing, in advance, to comply with the final decision of the arbitrator.
Identity theft
the fraudulent acquisition and use of a person's private identifying information, usually for financial gain.
Wire fraud
Occurs when a hacker intercepts an email and sends fraudulent wiring instructions directing a clients money to the hackers account.
Indemnify
to compensate for damage or loss.
Leverage
Increase in rate of return through using borrowed money.
Promissory note
A personal promise to pay a debt. this serves as evidence of debt. it contains the lender and borrower's names, Amount of the debt, the interest rate, and pattern of the payments
Mortgage or Trust Deed
Pledges (hypothecates) the property as collateral for the debt.
Amortized (Amortization)
Level or constant payments including principal and interest payments spread out over time. Such as 10, 15, or 30 years.
Principal
The original loan amount or current balance. The actually money borrowed not including interest.
Interest
the charge to borrow the money. In real estate it is usually simple interest. Think of the interest payments as rent.
Balloon payment
one payment that is larger than normal monthly payments. 10 year loan that sets a low rate upfront then at the end you pay the rest of the balance in full.
Budget loan
payments made PITI (principal, interest, taxes, insurance)Taxes and insurance go into escrow then the lender pays the taxes and insurance out of that account.
Straight loan
Interest only charges during the term of the load with the principal due at maturity or the end of the loan.
Negative amortization
The monthly payments are less than the interest. The interest shortage is added to the unpaid principal and the loan balance increases over the term of the loan.
FHA Loan
Insured by the Federal Housing Administration, HUD
VA loan
A mortgage loan on approved property made to a qualified veteran by an authorized lender and guaranteed by the Department of Veterans Affairs in order to limit the lender's possible loss.
Conventional loan
Made by lending institutions but without government guarantee or insurance like an FHA or VA loans.
Purchase money loan (Seller carry-back financing)
Is when the seller becomes the lender and the buyer becomes the borrower.
Wraparound loan
the seller remains liable for the first loan while also agrees to create a new loan for the buyer for a greater amount.
Adjustable rate loan (ARM)
Interest loans that change throughout the loan
Basis points
are one one-hundredth of a single percent (1% .001) and is used to indicate increases or decreases in interest rates.
Blanket loan
Loan secured with one or more properties.
Package loan
A loan secured by real property plus personal property
Open end loan
Allows borrower to borrow more funds within the same loan (Home equity line of credit HELOC is an example)
Construction loan (Interim Loan)
Funds are advanced in installments as construction continues. it is a short term loan with interest payments only.
Take out loan
Normal long term financing replacing and paying off construction loan
Gap loan (Bridge loan, Swing loan)
Short term loan on existing property that is for sale to allow the owner to borrow funds for a down payment for a new property.
Reverse annuity loan (RAM)
the lender makes monthly payments to the borrower.
Superior loan
A loan that has the highest priority (if the property goes into foreclosure)
Junior loan
Loan which is lower in priority to another loan. (different lien position)
non-recourse loan
Loan in which the borrower is not held personally liable for the debt
Acceleration clause
Allows lender to declare the loan balance immediately due and payable if the borrower defaults or misses any payments.
Alienation clause (due on sale clause)
Allows lender to declare debt due and payable if the property is sold.
Prepayment clause
Allows lender to charge prepayment penalty if loan is paid off early.
Defeasance clause
States that the note and mortgage are null and void when the borrower pays off the debt. You have defeated the loan.
Release clause
Allows individual parcels to be released from a blanket mortgage.
Subordination clause
Calls for existing loan to be placed in lower priority position to another lien.
Nondisturbance clause
Lender agrees not to terminate leases with tenants in the even of a foreclosure.
Personal guarantee clause
indicates which person or persons are held personally liable if the default occurs.
Usury
Charging more than the rate set by law
Contract Rate/Note Rate
Rate specified in the note or contract.
Legal rate
In Arizona this is the rate that would apply when no specific rate appears in an agreement.
Loan-to-Value Ratio
IS an assessment of lending risk, the lender will look at this before approving a mortgage.
HUD (Department of Housing and Urban Development)
Regulates the FHA loan
MIP (Mortgage Insurance Premium)
Protects the lender in the case of foreclosure.
Conditional commitment
also known as an appraisal, this is required to qualify for a FHA loan
FHA escape clause/amendatory clause
A way to get out of a contract, the appraisal caluse must be equal or greater than the purchase price. and the buyer must see the appraisal.
Certificate of eligibility
is required to qualify for a VA loan. States that the veteran is eligible for a certain amount.
VA funding fee
a fee charged to the buyer instead of paying a monthly mortgage insurance premium (MIP)
Certificate of Reasonable Value (CRV)
Also known as an appraisal and is required to qualify for a VA loan.
USDA Guaranteed Loans (US department of Agriculture)
Loans that assists the lenders in providing low and moderate income households the opportunity to own a home in eligible rural areas.
SBA loans
Loans made to purchase or expand small businesses.
insured conventional loan
Is a loan in which a lender is insured against loss.
Mortgage Insurance (MI)
Insures the lender against loss
Conforming loan
Are loans that meet all Fannie Mae and Freddie Mac guidelines.
Non-conforming loan
Are loans that DO NOT meet all Fannie Mae and Freddie Mac guidelines.
Jumbo loan
Non-conforming loans that exceed the maximum dollar limits set by Fannie Mae or Freddie Mac, these usually have un-favored terms.
subprime loans
A loan offered at higher interest rates to borrowers who are less qualified than prime borrowers.
Private Investor loan (Hard Money Loan)
Typically placed at high interest rates for hard to finance borrowers or properties.
Discount points
Fee charged by lender to increase the lender's yield; or to reduce the borrowers interest rate and payment. ! discount point = 1% of loan amount
Origination Fee
Fee charged by the lender to cover the initial cost to originate the loan or to start the loan.
Tax Service Fee
Charge to hire a tax service company to inform a lender when property taxes are due or payable.
Underwriting fee
Charges made to offset the cost of determining the borrowers ability to repay the loan. and if the property meets the basic loan criteria.
Pre-qualification
is the initial step in the mortgage process. this provides an estimate of how much a buyer can afford to borrow.
Pre-approval
is when a borrower has completed a uniform residential loan application (URLA) and the lender has performed a through review of borrowers credit and income. and indicates a strong probability that the loan will close.
Rate lock
the lender guarantees the interest rate will not change prior to close
Floating rate
The interest rate could change prior to close
Tri-Merged Credit Report
A single credit report that brings together data from all three major credit reporting agencies.
Credit score
A measure of an individual's credit risk; calculated from a credit report using a standardized formula
Consumer credit transaction
When the buyer is acquiring the property for personal, family, or investment purposes.
Non-consumer credit transaction
is when a buyer is acquiring the property for business purposes.
Loan Assumption
buyer does not originate a new loan, but takes over payments and assumes personal liability on an existing loan
Novation
The process of the lender rewriting the terms of an existing loan substituting the buyer as the debtor and releasing the seller from liability.
Reduction Certificate
Is given to the buyer to verify loan balance and terms when the buyer takes over payments on an existing loan.
Primary Mortgage Market
Is the market where borrowers and mortgage originators come together to negotiate terms and effectuate mortgage transactions.
Financial Intermediary
is an institution or individual that serves as a middle man among diverse parties in order to facilitate financial transactions
Portfolio Lender
A lender who does not sell loans to the secondary market.
Secondary Market
Market place where loans that originated in the primary market are sold to other lenders or investors
Warehousing
The gathering together of many loans for sale in secondary market.
Assignment
The process of selling a loan to another lender
Estoppel Certificate
A certificate executed by a borrower setting forth the exact unpaid balance and rate of interest. Used when the lender sells the loan
Loan Servicing
A loan servicer is a company to whom a borrower makes payments to
Government National Mortgage Association (GNMA)
Commonly known as "Ginnie Mae," this agency of HUD operates in the secondary mortgage market. It is involved with special government financing programs. This also operates the special assistance aspect of low income housing.
Federal National Mortgage Association (FNMA)
Commonly known as "Fannie Mae", it is the largest buyer of existing mortgages in the secondary mortgage market. it is also controlled by the Gov.
Federal Home Loan Mortgage Corporation (FHLMC)
"Freddie Mac" is a wholly owned subsidiary of the Federal Home Loan Bank System, which serves as a secondary mortgage market for savings and loan associations, who are members of the FHLBB; also referred to as The Mortgage Corporation.
Uniform Residential Loan Application (URLA)
Form Used all residential loan Types. FNMA form 1003
Consumer Financial Protection Bureau (CFPB)
Federal agency that administers and enforces many federal laws and rules relating to financing
Truth in Lending Act (Regulation Z)
Federal law requires lenders to disclose all the terms and costs in obtaining a consumer loan.
Annual Percentage rate (APR)
Interest, discount points and loan cost expressed as an APR and all finance charges in dollars and cents
Loan Estimate
An estimate of the amount the lender will give to the borrower; Must be given with in 3 business days of application.
TRID Closing Disclosure
Detailing all loan terms upon closing. Customer must RECEIVE AT LEAST 3 BUSINESS DAYS before LOAN CONSUMMATION (Always Counting Saturday)
Fair Credit Reporting Act (FCRA)
U.S act that protects privacy of background information and ensures that information supplied is accurate.
Equal Credit Opportunity Act (ECOA)
The federal law that prohibits discrimination in the extension of credit because of race, color, religion, national origin, sex, age, or marital status.
Americans with Disabilities Act (ADA)
Prohibits discrimination against people with disabilities and requiring equal access to public accommodations.
Interstate Land Sales Full Disclosure Act
Regulates interstate land sales. Requires full disclosure of material information to buyers through a property report.
Consumer Privacy Act of 1974
Established a code of fair practices governing collection, use, maintenance, and dissemination of information about individuals that is maintained by the federal government
Fair Housing Laws
prohibit housing discrimination based on sex, race, color, religion, national origin, disabilities, or familial status
Civil Rights Act of 1866
Prohibits discrimination based on race or color
Fair Housing Act of 1968
prohibits discrimination on the basis of race, color, religion, or national origin in the sale or rental of most housing
Steering
Channeling prospective buyers or tenants to particular neighborhoods based upon their race, religion, national origin, or ancestry.
Blockbusting
A process by which real estate agents convince white property owners to sell their houses at low prices because of fear that persons of color will soon move into the neighborhood
Redlining
A process by which banks draw lines on a map and refuse to lend money to purchase or improve property within the boundaries.
Fair Housing Amendments Act of 1988
Expansion of the Fair Housing Act to include families with children and those with physical or mental disabilities.
Handicap
A physical or mental impairment that substantially limits an individual's activities.
Group Home
A home where a small number of unrelated people in need of care, support, or supervision can live together, such as those who are elderly or mentally ill.
Familial Status
One of the protected classes under Fair Housing referring to families with children under 18.
Appraisal
Estimate or opinion of Value
Value
a WORTH that can be expressed in dollars and cents
Market Value
The amount a willing buyer would pay, and a willing seller would accept
Market price
The actual amount of money paid for the property.
Cost
The amount of money required to produce an item at today's prices.
Mortgage Value
the amount a lender will lend using a property as collateral.
Insurance Value
Value of physical items that are subject to loss due to hazards.
Full Cash Value and Assessed Value
Value for property tax purposes
Salvage or residual value
value of an asset at the end of its physical life
Principle of supply and Demand
Value is affected by scarcity of a product and the desire for that item.
Principle of Highest and Best Use
The use of the property will produce the highest net return.
Excess Land
Land that is not needed to support the highest and best use
Principle of Substitution
The maximum value of a property tends to be set by the cost of purchasing an equally desirable substitute property.
Principle of Conformity
Value will tend to be more stable in an area where there is a reasonable degree of conformity.
Principle of Regression
The value of lesser properties adversely affects the value of greater properties
Principle of Progression
the value of a lesser property is enhanced in the presence of greater properties
Principle of Contribution
The value of a component part is determined by how much it adds to or detracts from the value as a whole.
Principle of Change
Real estate values do not remain constant.
Principle of Development, Equilibrium and Disintegration
Properties go through phases of growth, Stability, and decline.
Principle of Competition
Profits tend to breed competition which can reduce profits.
Principle of Anticipation
Value is affected by the expectation of future events.
Principle of Externalities
Factors outside of a property can have a positive or negative effect on its value.
Directional Growth
The directions in which a city or community appears to be growing.
Orientation
The placement of a building on its site in relation to the sun and prevailing winds along with consideration for privacy and views.
Appreciation
is the increase in value for any reason.
Earned increment
A value increase due to the effort of the owner.
Unearned increment
increase in value due to no effort of the owner, such as positive zoning changes, inflation, population increase, or increases in demand.
Plottage (assemblage)
Increase in value by bringing small parcels under one ownership
Depreciation
is the loss in value for any reason.
Deterioration
Loss in bale due to physical wear and tear: Such as termites, weather damage leaky roof, or cracked paint. This is USUALLY CURABLE.
Deferred Maintenance
Postponed maintenance on property that results in increased physical depreciation (wear and tear)
Functional Obsolescence
Loss due to outdated features, technological advances or poor design.
Economic Obsolescence
Loss due to factors outside of property and USUALLY INCURABLE. neighborhood conditions, air and noise pollution are examples.
Comparison Approach (Market Data or Direct Sales Approach)
Estimating the value of subject property by comparing it to similar properties that have recently sold.
Drive-by Appraisal
Appraiser only observes exterior of the property, with no interior inspection.
Desktop Appraisal
An appraisal performed without physical inspection of the property. it uses data readily available from tax data and MLS data.
Automated Valuation Model (AVM)
A service that provides a valuation based on a mathematical model combined with a database.
Cost Approach (Summation)
An appraisal approach in which the cost of building the structure is calculated depreciation is subtracted, and the land value is added.
Replacement Cost
Cost to produce a reasonable duplicate at today's prices.
Reproduction Cost
Cost to produce an exact duplicate at today's prices.
Square Footage of Living Area
Determined by measuring the exterior dimensions of the building and calculating the area. The heated and cooled parts.
Square Footage Under Roof
The area of a building under the roof which includes garages, patios, and eves.
Uniform Residential Appraisal Report (URAR)
Is the form used in residential appraisals that allows for standard reporting and analysis of single-family dwellings.
Estate
The degree or extent of interest a person has in real property.
Fee Simple Absolute
Is the highest form of ownership, and the most common form of ownership. The holder has all rights of the bundle of rights forever.
Defeasible fee simple
Ownership lasts as long as certain conditions or uses are met. If conditions are not met ownership reverts back to the grantor.
Reverter
is who the deed goes back to if ownership is defeated.
Life estates
ownership interest created for the life of a certain person.
Life tenant
Tis the holder of a life estate.
Conventional life estate
A life estate created by one person for another person, where the life tenant cannot, will their interest (or life estate) or commit waste.
Waste
Deliberate damage to the property or its value by the life tenant.
Estate in reversion
is an estate that will revert back to the grantor after the life estate expires.
Estate in remainder
an estate that will go to a specific party after the life estate expires.
Remainderman
An interest held by a person other than the grantor by which they will acquire a greater interest in the future. OR a person who holds a remainder interest.
Demise
the lease which holds the rights to possess the property of another.
Lessor
The landlord in a lease.
Lessee
The tenant in a lease.
Estate (tenancy) for years
Rent is paid for a specified and definite period of time.
Estate from period to period
Tenancy is of indefinite duration, from month to month, or year to year.
Estate at will
a less formal type of tenancy where the lessor gives permission to the lessee to use the property. A form of license or privilege.
Estate at sufferance
Existing lease has terminated but the tenant is holding over wrongfully.
Holdover tenancy
is when a tenant remains on the property after the lease has expired.
Gross lease
rent is a fixed payment amount for tenant.
Sale leaseback
is when an owner sells property to an investor and at the same time leases the property back from the investor.
Graduated lease
Lease that has an escalator clause which calls for an increase or decrease in rent at a specified intervals.
Escalator clause
calls for an increase or decrease in rent at specified intervals. Basically defines the increase of payments.
Index lease
Rent is tied to an index, such as the Consumer Price Index. Can go up or down.
Lease-option
Lease with an option to buy or release.
Anchor lease
lease with a major tenant such as a department store or supermarket, that attracts small businesses.
Proprietary lease
lease in a co-op in which the tenant has the right to rent a particular unit.
Section 8 lease
federal rent subsidy program for low-to-moderate income families that pay a portion of the tenant's rent to the landlord.
Sublease (sandwich lease)
A lease in which the lessee (becomes sub-lessor) enters a into a separate lease with another lessee (the new sub-lessee)
Contract rent
rent stated in the lease.
Economic Rent
the rent that could be obtained in the current market.
Excess rent
the difference between the contract rent and economic rent.
Positive leasehold
a lease in which the economic rent is higher than the contract tent.
Negative leasehold
A lease where the contract rent is higher than the economic rent
Tenant improvements (TI's)
Alterations or improvements to a lease d space to configure the space for the tenants needs.
Building shell
Made up of roof, walls, floor, windows, and doors. everything that separates the inside from the outside.
Certificate of Occupancy (CO)
A document issued by a governmental authority that a building is ready and fit for occupancy.
Common area maintenance charges (CAMs)
fees charged to commercial tenants to maintain parking lots, walkways, area lighting, etc.
Expense stop
A lease provision that limits the land lords operating expenses by requiring the tenant to pay for increases in taxes or heating or cooling costs etc.
Turnkey project
a development project by which the developer completes the building, so the buyer or tenant only has to turn the key in the door to start a business.
Surrender and acceptance
mutual agreement to end a lease
condemnation clause
cancels lease if eminent domain is exercised.
Actual eviction
if tenant fails to perform obligations lessor sues for possession.
Ejectment (Forcible Entry & Detainer Action)
Legal proceeding to regain possession of the property.
Constructive eviction
if landlord fails to perform obligations tenant can terminate lease and sue for damages.
Protecting Tenants at Foreclosure Act
requires landlords who acquire residential property through foreclosure to give tenants a minimum of 90 days to vacate. or if more than 90 days is left to honor the terms of the lease.
Quiet Enjoyment
Use of property without interference by lessor or others claiming a superior title.
Trade fixtures
are a tenants personal property used in the operation of tenants business.
Inheritance
At death the decedents estate is probated.
Probate
Court proceeding that validates the will, totals the assets of the deceased and distributes them to the heirs.
Tastate
Decedent dies with a will.
Testator
a person who makes a will.
Intestate
Decedent dies without a will property passes to heirs according to law.
Administrator / Administratrix
Person appointed by court when no executor is named in will.
Executor / Executrix
Person named in a will to carry out its provisions, including disbursement of land.
Involuntary alienation
Forced transfer through any of the following, Eminent Domain, Adverse Possession, Foreclosure Proceedings
Voluntary alienation
an un-coerced transfer by gift or deed.
Severalty ownership
ownership by one person.
Joint tenancy
Shared ownership by two or more people having the right of survivor-ship.
Automatic right of survivorship
At death of one joint tenant, that joint tenant's interest passes to the surviving tenant(s) automatically and immediately without probate.
Community property
Property acquired by spouse during marriage.
Community property with the rights of survivorship
allows spouses to hold community property and when one dies their interest automatically transfers to the surviving spouse.
Tenancy in Common
Co-ownership of property in which each party owns an undivided interest that passes to his or her heirs at death. (no automatic right of survivor-ship)
Suit for partition
legal action used to terminate a tenancy in a common or joint tenancy.
General Partnership
each partner has full liability for debits of partnership.
Limited Partnership
composed of general and limited partners.
Corporation
a business entity made up of one or more persons that is treated as a separate entity.
Limited Liability Companies (LLC)
A business entity with combined characteristics of limited partnerships and certain types of corporations.
Trust
an arrangement under which legal title property is transferred to and managed by a trustee for benefit of beneficiary.
REIT (Real Estate Investment Trust)
A company with at lease 100 investors that owns income producing real estate and provides favored tax treatment to the investors.
Blue Sky Laws
Regulates the sale of interest that might be considered security.
Condominium
individual fee simple ownership of a unit plus shared ownership of common areas.
Common area
A shared amenities such as a building, land, parking, stairways, pools, ect.
Cooperative
A corporation holds title to the building and the unit buyer purchases shares or stocks in the corporation.
Deed
IS a written instrument that transfers ownership of real property.
Grantor
Person who gives the deed.
Grantee
Person who receives the deed.
Warranty Deed
Conveys the grantors interest and warrants title against all claims.
Special Warranty Deed
Conveys the grantors interest and warrants title against claims arising only from the grantors actions.
Bargain and Sale Deed
Conveys the grantors interest but has no expressed warranty.
Quit claim deed
Releases all the grantors interest if any.
Patent
an instrument that conveys real property from the state of federal government to an individual.
Beneficiary Deed
A deed that specifies who will receive real estate when the grantor dies.
Disclaimer Deed
Documents signed by one spouse prior to the other spouse acquiring property and preventing it from becoming community property.
Acknowledgement/notarization
a formal declaration that the person who signs a written document does so voluntarily and that her signature is genuine. Technically in Illinois you don't have to have it notarized, but it actually is necessary
Delivery and Acceptance
Final stem to transfer title. when the deed is delievered and accepted by the buyer.
Recording
Gives constructive notice to the general public.
Constructive Notice
Notice given when a document is recorded in the county which the property exists.
Actual Notice
Notice obtained by an inspection of property other records or by actual knowledge of a fact.
Affidavit of value
A sworn document that identifies the Grantor and Grantee and states the value paid for real property; signed by both parties and notarized.
Consideration
States the sales price.
Merchantable (Marketable) Title
title that is without cloud or defect.
Abstract of Title
A summary of the chain of title.
Chain of Title
is a complete history of the property.
Owner's Title Policy
Protects the buyer against certain defects.
Page of Exceptions
a list of items not covered by the insurance policy.
ALTA Title Policy (Lender's Policy)
An insurance policy that protects the lender against defects which could be determined by an inspection of the public records (constructive notice) or an inspection of the property itself (actual notice)
Title Plant
A duplicate set of public records maintained by a title company.
Preliminary Title Report
Issued prior to closing of the sale.
Subrogation
The substitution of a third person in place of another in relation to a claim or debt.
Bulk Sales Affidavit
Provides buyer of a business with a list of seller's creditors.
Uniform Commercial Code (UCC)
Governs commercial & business transactions, sale and financing of personal property.
Security Agreement
An agreement that creates or provides for a security interest between the debtor and a secured party.
Closing Statement
is a detailed accounting usually prepared by the escrow agent. Company of a real estate transaction showing all cash received all charges and credits to the parties and the money paid out in the transaction.
TRID Closing Disclosure
Details the term of the loan mad eto the buyer.
Proration
A proportional division or distribution.
Gross scheduled income
Projected rent if property is 100% occupied.
Vacancies
Units which were not rented.
Credit losses
Rent which was owed by a tenant but unable to be collected.
Effective Gross Income
The actual income recieved after deducting vacancy and credit losses from scheduled income.
Operation expenses
Include cost necessary to operate and maintain the property such as management fees, repairs, maintenance, utilities, taxes, insurance.
Net Operating Income
Income remaining after deductions for property expenses, used in the income approach IRV formula to estimate value
Debt service
the principal and interest payments on the loan.
Cash Flow Before Income Taxes
The amount remaining after paying all operating expenses and debt service but before taking into account any tax benefits or cost of ownership.
Ordinary income
Income from salaries, wages, commissions, and interest.
Capital gain income
Income realized from the sales of an asset at a profit.
Pass-though income
Income from an entity such as an LLC that is not taxed at the level of entity buy "Passes through" to be taxed at the level of individuals in the entity.
FIRPTA (Foreign Investment in Real Property Tax Act)
Federal law which subjects nonresident aliens to use income tax upon gain from the sale of real U.S. Property.
Cost Recovery (Depreciation)
Land or personal residence is not depreciated.
Recovery Period
Period over which the owner may take deductions to recover investment.
Straight Line Depreciation
Same amount of depreciation per year.
Delayed Exchange
New property must be acquired within specific time frame.
BOOT
Unlike kind property received in an exchange.
Article XXVI (26) of Arizona Constitution
Gives licenses the authority to prepare all types of real estate contracts but only when preparation is incidental to their function as an agent and if the agent does not charge for preparation.
Statute of Frauds
requires real estate contracts to be in writing to be enforceable
Commissioner's Rules
Not law but have the force and effect of law on licensees
Substantive Policy Statements (SPS)
Establish and clarify ADRE policies on statute or rules.
Real Estate Commissioner
Appointed by governor, Promulgate the commissioner's rules through public process, Audit the books and records of licensees, manage the daily operation of the ADRE, And investigate written complaints against licensees
Real Estate advisory board
Will advise and evaluate the commissioner. it consists of ten members. Two brokers, two sub dividers, three people engaged in real estate for the last five years, and three public members.
Police Power (Licence)
Gives the state the right to licence brokers and salespeople
Real Estate broker
someone who for another and for compensation performs real estate services.
Real estate salesperson
A person engaged to represent a real estate broker.
Attorney in fact
Doesn't need a licence if acting in a SINGLE transaction.
Cease and Desist Order
denoting a legally enforceable order from a court or government agency directing someone to stop engaging in a particular activity.
Real Estate Team
A group of licensees headed by a lead agent that works within a brokerage company.
Real Estate Recovery fund
Established to protect parties harmed due to reliance on a licencee.
Subdivision
Is a land which is divided into 6 or more lots or parcels created for sale or lease.
Public Report
A statement of important facts relating to a subdivision which allows the purchaser to make an informed decision.
Amended Public Report
Is required if there are material changes from the original.
Subsequent owner exemption
allows a buyer/owner of an existing subdivision on which there is a current and accurate public report issued within the past five years to use the existing public report
Lot reservation
Is a reservation in a subdivision. maximum $5000 deposit. seller must deliver public report within 15 Days.
Affidavit of Disclosure
Document required to be given to the buyer of property not located in a municipality or a recorded subdivision.
Unsubdivided land
Property divided for the purpose of sale or lease into 6 or more lots which are 36 acres or more but less than 160 acres each.
Real estate timeshare
is a share or interest in real property (usually in a resort condominium or hotel) With a right to use the facility for a certain period of time.
Hypothecation
is a pledge of real property as security without giving possession of the property to the lender/
Satisfaction of Mortgage
Proof that a borrower has repaid their debt.
Default
Failure to comply with any terms of the note or mortgage. not paying the bills
Lis Pendens
That litigation is pending against property owner, this also activates the acceleration clause.
Sheriff's sale
where the property is auctioned off in a mortgage.
Sheriff's certificate of sale
Highest bidder receives this as proof of winning the auction
Sheriff's deed
conveys full title to the purchaser.
Equity of redemption
right to pay back all that is owed to cancel the foreclosure.
Statutory right of redemption
six month period that the owner of the property has to pay back the property in full this includes taxes and interest.
Promissory Note
A promise to repay a debt, proof of debt.
Trust Deed
Secures the promissory note with the property as collateral.
Trustor
is the borrower.
Trustee
Third party who holds the right to sell the property at foreclosure, when trustor is in default.
Beneficiary
is the lender that has control over the trustee (person who holds right to sell in foreclosure).
Deed of Reconveyance
Document that evidences the release of a deed of trust.
Deficiency judgement
A judgement obtained by a lender when a foreclosure sale brings less that the owed amount.
Notice of default & Trustee's sale
informs anyone who has recorded a request for notice of default usually is the seller or second lien holder. They also tell the Trustor that they are being foreclosed on.
Right of reinstatement
trustor (borrower) can cure default by paying back payments (plus costs and penalties) at any time before the forced sale.
Trustee's sale
where the foreclosed property is sold.
Trustees's deed
Proof that the highest bidder holds title and tights of ownership.
Forfeiture action
is when the seller gives the buyer a grace period to reinstate the payments. and if the buyer does not reinstate the payments the seller can get the property back.
Lien theory
the mortgage or trust deed does not convey any ownership to the lender.
Title theory
legal title is conveyed to the lender.
Short sale
Sale in which the balance is higher than the properties value and the lender agrees to accept a reduced payoff.
Bank Owned Property (REO)
A sale in which the lender has acquired the property through a foreclosure auction.
Forbearance
an arrangement between a borrower and a lender in which the lender agrees to delay foreclosure.
Loan Modification
an agreement between a borrower and a lender that changes the loan terms.
Lien
a lien is a claim against property to secure a debt. a money encumbrance
Real estate taxes
have number one priority over all liens.
Ad Valorem
According to the value; in proportion to worth.
Affidavit of Value
shows the sales price and is required to record the deed upon property transfer. this is all public.
Full Cash Value (FCV)
Is determined at the beginning of each calendar year for the next tax year. it is the way real estate taxa is determined. assessors reflection of the ups and downs of the market.
Limited Property Value (LPV)
All real property taxes are calculated using the LPV
Assessed value ratio
it is set by state law. 10% is owner occupied residential property(class 3). 10% residential income property (class 4). 15% vacant land (class 2). 18% commercial property (class 1)
Treasurer's sale
treasurer sells tax liens at auction.
Certificate of purchase
The document the low bidder receives at a property tax lien sale.
Community Facilities District (CFD)
A special purpose public improvement district in AZ that has the ability to levy long term bonds to finance and provide public infrastructure, such as water, sewer, schools, and streets. for a planned community.
Assessment (special assessments)
Lien against property for public improvements (Paving, sewer, sidewalks, speed bumps etc)
Mechanic's Lien
lien for labor or material supplied to a property.
Judgements
court order general liens is on everything to do with a specific person.
Income tax lien
Claims placed by the IRS or Arizona government for nonpayment of income taxes
Homestead Exemptions
Exemptions exempts a portion of a homeowners equity from attachment and execution of a forced sale due to non payment of a judgement.
Arizona Residential Landlord and Tenant Act
Applies to the rental of dwelling units
Distraint
Holding a tenant's personal property for back rent is illegal in Arizona.
Property Management
Aspect o real estate that deals with leasing,
managing, marketing, and maintenance of property for others for a fee.
Property Manager
Someone who manages real estate for another person for compensation. Is also concerned with getting the highest net return on the owners investment and protecting the owner from foreseeable risk.
Property Management Agreement
An employment contract between an income producing property owner and a real estate broker, appointing the broker as the owner's general agent for the purpose of leasing and managing the property.
Planned community
a real estate development which includes real estate owned by an association created for the purpose of managing, maintaining, or improving the property, and in which the owners of separately owned parcels are mandatory members and required to pay association assessments.
Self Help for Minor Defects
If the landlord does not promptly repair minor defects the tenant may hire a licensed contractor to perform the required work so long as the reasonable cost of the repair does not exceed $300 or one half of the monthly rent, whichever is greater.
Doctrine of Prior Appropriation
The theory that whoever begins using the water first, has the right to continue using the water.
Central Arizona Project (CAP)
Brings Colorado river water to urban areas in Arizona by way of a 336 mile canal.
Central Arizona Groundwater Replenishment District (CAGRD)
Is responsible for replenishing ground water in Maricopa, Pima and Pinal counties.
Effluent
Waste water that has been treated for re use. (not drinking water)
Arizona Groundwater Management Code
Controls overdrafts, increases Arizona water supplies through supplemental sources such as CAP water. was adopted in 1980.
Overdraft
Over pumping of ground water faster than nature can replenish it.
Irrigation Non-Expansion Area (INA)
Area where irrigation use threatens to exceed limited water supplies.
Active Management Area (AMA)
Areas where excessive overdraft is occurring.
Assured water Supply Program
Regulates limited ground water supplies in AMA.
Adequate Water supply program
subdividers must provide a water adequacy report. If water supplies are Inadequate must be disclosed.
Exempt wells
wells used for domestic purpose not for irrigation.
Irrigation Grandfathered right
the right to use ground water that was being used between 1975 and 1980 to still be used today. this right cannot be sold separately.
Type 1 non-irrigation right
water use has been retired from irrigation can be used for industry or a subdivision.
Type 2 non-irrigation right
Based on historical ground water pumping for a non irrigation use such as live stock watering, industry, or golf courses.
Metes and bounds
A method of describing property boundaries using distances and compass directions from point to point.
Recorded plat (lot and block)
A subdivision map that shows the location and boundaries of individual parcels and is recorded.
Public Land Survey System / Government Survey (Rectangular Survey)
A method of land description based on survey lines that run north to south and east to west.
Range Lines
Lines that run north and south every 6 miles.
Township Lines
Lines that run East and West every 6 miles.
Township
6 mile by 6 mile square parcel of land formed by the intersection of range and township lines.
Tier
Are rows created between the township lines.
Section
a parcel of land 1 mile by 1 mile. there are 36 sections to a township.
Acre
A measure of land equal to 43,560 square feet.
Check
is a parcel which is 24 miles square (24x24) contains 16 Townships.
Correction Township
Townships that are distorted to correct for the curvature of earth. these sections are 1, 2, 3, 4, 5, 6, 7, 18, 19, 30, 31.
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