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175 Cards in this Set

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yield
Investment return expressed as a dollar amount or
a percent of the original investment amount.
will
Last will and testament; a written or verbal
statement by a testator instructing how to distribute the testator's estate to heirs.
water rights
Rights of a property that abuts a body of water to own or use the water. See littoral rights,
riparian rights, and prior appropriation.
voidable contract
An agreement that is subject to being nullified because a party to the agreement acted under some legal disability. Only the disadvantaged party
can take action to void the contract.
void contract
An agreement that is null and cannot be enforced.
Void
Without legal force or effect; unenforceable and
null, such as an illegal contract
vvariance
A land use that conflicts with current zoning but is authorized for certain reasons, including undue hardship to comply and minimal negative impact to leave it alone.
value
In general, the worth of an item as determined by
its utility, desirability, scarcity, affordability, and othercomponents and quantified as price.
validity
Legal status of a contract that meets requirements of: competence of parties, mutual
consent, valuable consideration, legal purpose, and voluntary good faith. A prerequisite for enforceability.
usury
Excessive or illegal interest charged on a loan
universal agency
A fiduciary relationship which
empowers an agent to perform any and all actions for
a principal that may be legally delegated.
unilateral contract
An agreement in which only one
party promises to perform, contingent on the other
party's performance of an optional action.
unequal services
Services that differ in nature or
quality from those normally rendered, with the
alteration based on race, color, sex, national origin, or
religion.
trust
A fiduciary relationship between a trustor and
trustee. The trustor conveys legal title to property to
the trustee, who holds and manages the estate for the
benefit of another party, the beneficiary ( in a land
trust, trustor and beneficiary are the same person).
township
An area six miles square, bounded by two
consecutive parallels and two consecutive meridians in
the rectangular survey system. Contains 36 sections.
Torrens System
A title recording system that registers
title to property, as well as liens and encumbrances, on
a title certificate. The certificate is the title and
reflects everything there is to be known about the
condition of the title.
title theory state
A state whose laws give legal title of a
mortgaged property to the mortgagee until the
mortgagor satisfies the terms and obligations of the
loan. See lien theory state.
title records
Public records of real property
documenting the history of ownership, claims,
ownership, conveyances, legal descriptions, and
surveys.
title insurance
A policy that protects the holder against
loss arising from defects in title or documents
conveying title.
tier
An area between consecutive parallels, as defined in
the rectangular survey system.
testate
The legal condition of a person who dies leaving
a valid will
tenancy in severalty
An estate in real property owned by a single party
tenancy in common
An estate where each co-owner
owns an electable share of the property and can
transfer this share to any other party. Does not include
right of survivorship; interests of deceased owners pass
to heirs.
tenancy
A freehold or leasehold estate held by a tenant
taxable value
The assessed value of a property net of all
exemptions.
syndication
A real estate investment structure in which
investors provide capital and organizers provide
management expertise to develop or acquire and
manage investment real estate for profit.
survivorship, right of
A surviving joint tenant's right
to receive all rights and interests in the property
enjoyed by another joint tenant in the event of the
latter's death.
superior lien
1. One of a class of liens that by law have
a higher priority than any junior lien; all are tax liens.
2. A junior lien whose priority is higher than that of
another lien.
suit for possession
A landlord's formal legal avenue for
evicting a tenant.
substitution
An appraisal principle that holds that a
buyer will pay no more for a property than the buyer
would pay for an equally desirable and available
substitute property. Forms the foundation for the sales
comparison approach to value.
Subtative contract
Contact between an agent and
others that is deemed relevant to a transaction; used
as a benchmark to define when an agent should
disclose agency status to a prospective client or
customer . If a contact is substantive, the agent must
disclose agency status at the time of the contact.
subordination
A voluntary or involuntary placing of a
lien's priority below that of another. A mortgage lien,
for example automatically subordinates to a real estate
tax lien.
sublease
A transfer by a tenant of portions of the rights
and obligations of a lease to another party, the
sublessee. The original tenant, who is sublessor in the
sublease, is still lessee in the original lease and
remains primarily liable to the landlord for fulfilling
lease obligations.
subagency
An agency relationship between the client of
a listing broker and other brokers and salespeople who
have agreed to assist the broker in procuring a
customer for the client. The assisting brokers are
agents of the listing broker and subagents of the listing
broker's client.
strict foreclosure
A court proceeding which gives a
creditor legal title to a liened property rather than cash
proceeds from a court-ordered sale
straight-line cost recovery
An accounting method for
deducting depreciation expense from income. Periodic
Glossary 401
cost-recovery charges are made in equal amounts over
a depreciation period. For example, the straight-line
cost recovery of a $5,000 item over 5 years would be
$1,000 per year.
stock sale
A conveyance of an incorporated business
through the purchase of the stock. Entails the
purchase of all liabilities as well as assets. See also
asset sale.
Steering
The prohibited practice of channeling
prospective buyers and tenants toward or away from a
particular area..
Statute of frsuds
A law requiring certain contracts to be
in writing in order to be enforceable. Examples are
real property conveyances, listing agreements, and
long-term leases.
specific performance
Forced performance of one's
obligations in an agreement, to the letter of the
agreement. A legal remedy for a damaged party to
take against a defaulting party
specific lien
A lien placed against a specific item of
property rather than against all of an owner's property
special exception
A land use in conflict with current
zoning that is nevertheless authorized because of its
perceived benefit to the public welfare
specil assessment lien
A lien against property to
secure a tax levy for a specific public improvement,
such as a new road or sewer. Only properties
benefitting from the improvement are taxed and
liened.
severance
A conversion of real property to personal
property through detachment of the item from the
land.
severalty
same as tenancy in severalty An estate in real property owned by a single party.
servient tenement
A property containing an easement
that must "serve" the easement use belonging to a
dominant tenement.
seller's market
A market condition characterized by an
excess of buyers over sellers.
securities license
An authorization to broker securities.
The Series 39 and 22 securities licenses authorize
licensees to broker real estate securities
section
An area defined by the rectangular survey
system and consisting of 1/36th of a township, or one
square mile.
secondary mortage market
Lenders, investors, and
government agencies who buy, sell, insure, or
guarantee existing mortgages, mortgage pools, and
mortgage-backed securities.
second mortgage
A mortgage loan whose lien priority
is subordinate to a senior, or first, mortgage
scarcity
The degree of unavailability of a product or
service in relation to demand for the product or
service. A critical element of value.
sales comparison approach
A method of appraising
property that relies on the principle that a property is
generally worth what other, similar properties are
worth. See substitution.
sale leaseback
A sale of a property executed
simultaneously with a lease on the property from the
buyer back to the seller as tenant.
riparian rights
Water rights of a property that abuts a watercourse (stream, river).
right of redemption
same as equity of redemption A mortgagor's right to pay off a
defaulted mortgage and reclaim the property, provided
the redemption occurs before the completion of the
foreclosure sale.
revocation
1. Cancellation of a contract. 2.
Cancellation of a real estate license
reversion
1. A transfer of title from a life estate tenant
back to the grantor. 2. Proceeds from the sale of a
property at the end of a holding period in a cash flow
analysis
restriction
A limitation on the use of a property
imposed by deed, zoning, state statute, or public
regulation.
replecement cost
The cost of constructing a functional
equivalent of a property at current labor and materials
costs using current construction methods
remainder
A future freehold interest in a life estate
held by a third party remainderman named by the
grantor. When the life tenant dies, the estate passes to
the remainderman. See also reversion.
Regulation Z
A fair financing law applying to
residential loans; lenders must disclose financing costs
and relevant terms of the loan to the borrower.
redlining
The illegal lending practice of restricting
loans by geographical area.
redemption period
A statutory period after a
foreclosure sale during which the foreclosed owner
may buy back the property by paying all sums due the
lender. See also equity of redemption.
recording
An act of entering into public title records
any document or transaction affecting title to real
estate. Recording gives constructive notice of one's
rights and interests in a property and establishes the
priority of inferior liens.
reconcilliation
An appraiser's weighted blending of the
results of different approaches to value into a final
value estimate.
real property
Real estate and the bundle of rights
associated with ownership of real estate
real estate investment trust (REIT)
An investment in
which owners purchase shares in a trust which owns
or acquires real property. Investors receive income
and gain on a per-share basis.
quit claim deed
A deed which conveys one's possible
ownership interests to another party. The grantor does
not claim to own any interest and makes no warrants
quit title suit
A court proceeding to clear a property's
title of defects, claims, and encumbrances.
Pur autre vie
pur autre vie A life estate where the grantee's interest
endures over the lifetime of another party named by
the grantor.
prorartion
proration Apportionment of expense and income items
at closing. Examples of items prorated between buyer
and seller include interest, insurance, taxes, and rent.
proprietary lease
A cooperative owner's lease on a unit
in the cooperative building. The lease runs
concurrently with the owner's ownership interest in the
cooperative.
procuring cause
A party who was first to obtain a
ready, willing, and able customer, or a party who
expended the effort to induce the customer to complete
the transaction.
prior appropraition
A legal doctrine granting a state
the power to control and regulate the use of water
resources within state boundaries.
price fixing
An act of collusion where competitors agree to establish prices at certain levels to the
detriment of customers or other competitors.
power of attorney
An authorization granting a
fiduciary the power to perform specified acts on the
principal's behalf. Used to establish a universal
agency relationship.
police power
police power A state's or local government's legal
authority to create, regulate, tax, and condemn real
property in the interest of the public's health, safety,
and welfare.
point of beginning(POB)
point of beginning (POB) The origination and
termination point in a metes and bounds legal
description.
plat
A map of one or more properties indicating each
parcel's lot and block number, boundaries, and
dimensions.
physical deterioration
physical deterioration A loss of value to property
because of decay or natural wear and tear.
Exacerbated by deferred maintenance, or the failure to
repair or maintain property on a regular basis
periodic tenancy
periodic tenancy A leasehold interest for a lease term
where, in the absence of default, the term
automatically renews itself until proper notice of
termination is provided by either party.
option
option A unilateral contract in which an owner, or
optionor, grants a buyer or tenant, the optionee, a
future right to be exercised before a deadline, in
exchange for valuable consideration. The terms of the
right, such as a right to purchase or lease, must be
clearly stated and cannot be changed during the option
period.
offer and acceptance
offer and acceptance A process that creates a contract.
Acceptance is the offeree's unequivocal, manifest
agreement to the terms of an offer. The offer becomes
a contract when the acceptance has been
communicated to the offeror.
offer
A proposal to enter into a binding contract under
certain terms, submitted by an offeror to an offeree. If
accepted without amendment, an offer becomes a
contract.
obsolescence
obsolescence A loss of property value because of
functional or economic (external) factors. See
functional obsolescence and economic obsolescence
notice of title
notice of title Actual or recorded public evidence of real
property ownership. See actual notice and
constructive notice.
note
An agreement to repay a loan of an indicated amount under certain terms
non-prorated expense
non-prorated expense An expense incurred by buyer or
seller in closing a real estate transaction that is not
shared with the other party. Examples include
attorney fees, documentary tax stamps, and lender
fees.
non-confirming use
non-conforming use A land use that is not consistent
with the current zoning ordinance. May be legal or
illegal.
net operating income
net operating income The amount of pre-tax revenue
generated from an income property after accounting
for operating expenses and before accounting for any
debt service.
net listing
net listing A listing which states a minimum sale or
lease price the owner will accept, with any excess
going to the broker as a commission. Professionally
discouraged, if not illegal.
net lease
net lease A lease which requires a tenant to pay rent as
well as a share of the property's operating expenses to
the extent provided for in the lease contract
negotiable instrument
negotiable instrument A legal instrument that can be
sold, traded, assigned, or otherwise transferred to
another party, such as a promissory note.
negative amortization
negative amortization A situation in which the loan
balance of an amortizing loan increases because
398 Principles of Real Estate Practice
periodic payments are insufficient to pay all interest
owed for the period. Unpaid interest is added to the
principal balance.
millage rate
millage rate The ad valorem tax rate of a taxing
district, derived by dividing revenues required from
taxpayers by the district's tax base. If the millage rate
is 30, the tax rate is 3%, or $3.00 per $100 of assessed
valuation (net of exemptions)
metes and bounds
metes and bounds A method of legally describing
property which utilizes physical boundary markers and
compass directions for describing the perimeter
boundaries of a parcel.
mechanic's lien
mechanic's lien A junior lien enabling property
builders, suppliers, and contractors to secure debt
arising from labor and materials expended on a
property. Distinguished by its order or priority, which
is based on when the work was performed rather than
when the lien was recorded
master plan
master plan An amalgamated land use plan for a
municipality, county, or region which incorporates
community opinion, the results of intensive research,
and the various land use guidelines and regulations of
the state. Acts as a blueprint for subsequent zoning
ordinances and rulings.
lot and block system
lot and block system A method for legally describing
property in a subdivision where lots are identified by
block and number. A recorded metes and bounds or
rectangular survey description of the subdivision
underlies the lot and block system.
living trust
living trust A trust established during one's lifetime in
which the trustor conveys legal title to property to a
trustee and names another party as beneficiary. The
trustee discharges management duties and the
beneficiary receives all profit and gain net of the
trustee's fees.
littoral rights
littoral rights A set of water rights defined by state law
relating to properties abutting navigable bodies of
water such as lakes and bays. Generally, a property
owner enjoys usage rights but owns land only to the
high water mark. See riparian rights and prior
appropriation
listing
listing A legal contract that establishes and controls the
dynamics of the agency relationship between principal
and agent. The principal to the listing may be buyer,
seller, landlord, or tenant.
lis pendens
lis pendens A public notice in a foreclosure proceeding
that the mortgaged property may soon have a
judgment issued against it. Enables other investors to
join in the proceeding if they wish to collect their
debts.
liquidity
liquidity The degree to which an investment is readily
marketable, or convertible to another form of asset. If
immediately salable, an investment is liquid; the
longer it takes to sell, the more illiquid the investment.
Real property is relatively illiquid in comparison with
other types of investment.
limited partnership
limited partnership A business enterprise consisting of
general and limited partners: general partners manage
the affairs of the business while limited partners are
silent investors.
limited agency
limited agency An agency relationship which restricts
the agent's authorizations to a specific set of duties.
The relationship usually terminates on performance of
these duties, as in a real estate broker's listing
agreement. Also called special agency
life estate
life estate A freehold estate that is limited in duration to
the life of the owner or other named person. On the
death of this person, legal title passes to the grantor or
other named party
lien theory state
lien theory state A state whose laws give a lender on a
mortgaged property equitable title rather than legal
title. The mortgagor in a lien theory state retains legal
title. See title theory state
lien priority
lien priority The order in which liens against a
property are satisfied; the highest priority lien receives
sale proceeds from a foreclosure before any other lien.
legal description
legal description A description of a parcel of property
which accurately locates and identifies the boundaries
of the subject parcel to a degree acceptable by local
courts of law.
leasehold estate
leasehold estate An estate that entails temporary rights
of use, possession, and to an extent, exclusion, but not
legal ownership. Compare freehold estate.
legal life estate
legal life estate A life estate established by operation of
law rather than by the actions or wishes of the property
owners. Examples are homestead law, dower, curtesy, and elective share.
land use control
land use control Regulation of how individual owners
use property in a municipality or planning district.
Control patterns are generally in accordance with a
master plan.
land
land The surface area of the earth, all natural things
permanently attached to the earth, and everything
beneath the surface to the earth's center and above the
surface extending upward to infinity.
joint tenancy
joint tenancy A form of real property ownership in
which co-owners share all rights and interests equally
and indivisibly; entails right of survivorship. Parties
must establish tenancy at the same time and with a
single deed.
involuntary lien
involuntary lien A lien imposed by legal process
irrespective of the owner's wishes or consent.
involuntary alienanation
involuntary alienation A transfer of title to real
property without the consent or against the will of the
owner, for example, eminent domain, foreclosure, and
adverse possession
intestate
intestate Legal condition of a person who dies without
leaving a will.
inferior lien
inferior lien A lien whose priority is subordinate to that
of a superior (tax) lien. Priority among inferior liens
is established according to the time of recordation,
with the exception of the mechanic's lien. Also called
junior lien.
income capitalization
A method of appraising the value of a property by applying a rate of return to the
property's net income.
implied agency
An agency relationship that arises by
implication from the actions and representations of
either agent or principal.
hypothecation
Use of real property as collateral for a
mortgage loan.
homestead tax exemption
An exemption of a portion of
the assessed value of a homeowner's principal
residence from ad valorem taxation
homestead laws
Laws that protect a homeowner against
loss of the homeowner's principle residence to a sale
forced by creditors to collect debts. Homestead laws
also protect the interests of individual spouses by
requiring both spouses to sign any conveyance of the
homestead property.
gross rent multiplier
A shortcut method for estimating
the value of an income property. The procedure
involves multiplying the property's gross monthly rent
times a multiplier that reflects the ratio between gross
monthly rent and sale price that is typical for similar
properties in the area
gross income multiplier
A shortcut method for
estimating the value of an income property. The
procedure involves multiplying the property's gross
annual income times a multiplier that reflects the ratio
between gross annual income and sale price that is
typical for similar properties in the area.
grantee
A party who receives a right, interest, or title to
real property from another.
grantor
A party who transfers a right, interest, or title
to real property to another.
Government National Mortgage Association (Ginnie
Mae)
A division of HUD which guarantees FNMA
mortgages and securities backed by pools of VAguaranteed
and FHA-insured mortgages.
goodwill
An intangible business asset valued at the
difference between the sale price and the value of all
other assets of the business.
general warranty deed
A bargain and sale deed
containing the assurance that the grantor will defend
against any and all claims to the title.
functional obsolescence
A loss of value in an improved
property because of design flaws or failure of the
property to meet current standards. May be curable or
incurable
freehold estate
An ownership estate of indeterminable
duration; contrasts with a leasehold estate.
fixture
An item permanently attached to land so as to be
defined as real property.
fiduciary duties
fiduciary duties Duties of an agent to the principal in
an agency relationship, including skill, care, diligence,
loyalty, obedience, confidentiality, disclosure, and
accounting.
fiduciary
fiduciary The agent in an agency relationship; receives
the trust and confidence of the principal and owes
fiduciary duties to the principal.
fee simple
An estate representing the highest form of legal ownership of real property, particularly the fee
simple absolute estate.
Federal National Mortgage Association (Fannie Mae)
A government-sponsored agency in the secondary
mortgage market which buys conventional, FHA, and
VA loans, sells mortgage-backed securities, and
guarantees payment of principal and interest on the
securities
Federal Housing Administration
Federal Housing Administration An agency of the
Department of Housing and Urban Development
which insures permanent long-term loans that meet
certain qualifications.
Federal Home Loan Mortgage Corporation (Freddie
Mac)
A major secondary mortgage market
organization which buys conventional, FHA, and VA
loans and sells mortgage-backed securities
Federal Deposit Insurance Corporation
A quasigovernmental
agency that insures deposits of depository institutions and otherwise develops
regulations for the banking industry.
fair housing laws
Anti-discrimination legislation
designed to ensure equal opportunity in housing to all
home buyers.
fair financing laws
fair financing laws Anti-discrimination legislation
designed to ensure that all parties have equal access to
mortgage financing.
facilitator
A transaction broker who assists principal
parties in completing a transaction without acting as a
fiduciary agent of either party.
executory contract
A completed agreement which
enjoins one or both principal parties to perform certain actions in order for the contract to become fully
executed.
exclusive right to sell
A listing agreement which pays the listing broker a customer if anyone at all procures
a customer
exclusive agency
A listing agreement which pays the listing broker a commission if anyone other than the property owner procures a customer
estoppel
A legal restraint to prevent a person from claiming a right or interest that is inconsistent with
the person's previous statements or acts. An estoppel
certificate documents the party's initial position or act,
which cannot be contradicted later.
escheat
A reversionary transfer of real property to the state or county when the legal owner dies without a will and without heirs.
escalator clause
A lease clause providing for an
increase in rent.
equity of redemption
A mortgagor's right to pay off a
defaulted mortgage and reclaim the property, provided
the redemption occurs before the completion of the
foreclosure sale.
enforceability
Legal status of a valid contract or other
document that a court of law will force to be
performed.
encumbrance
An interest, right or intrusion that limits the freehold interest of an owner of real property or
otherwise adversely effects the marketability of title.
eminent domain
eminent domain A power of a government entity to
force the sale of private property for subsequent public
use.
emblements
emblements Plants and crops considered personal
property, since human labor is required for planting,
growing and harvesting.
elective share
A right of a surviving spouse to claim a
prescribed portion of the decedent's real and personal
property in place of the provisions of the decedent's
will.
economic obsolescence
economic obsolescence A loss of value in a property
because of external factors generally beyond the
control of the owner, for example, a municipality's
lack of funds to improve deteriorated roadways. Also
called external obsolescence.
easement
easement An interest in real property giving the interest
holder the right to use defined portions of another's
property. May or may not attach to the estate
dual agency
dual agency Representing both principal parties to a
transaction.
dower
A widow's life estate interest in portions of her
deceased spouse's real property
dominant tenement
dominant tenement The property that benefits from the
existence of an easement appurtenant. The holder of
the easement is the dominant tenant. See servient
tenement.
documentary stamp
A tax stamp affixed to a property document or record as evidence that the owner has
paid taxes related to the financing or transfer of real
property.
devise
A transfer of real or personal property from the
devisor to the devisee(s) by means of a will.
descent and distribution laws of
A body of state-level
laws that stipulates how an estate will be passed on to
heirs in the absence of a valid will.
depreciation
depreciation 1. A non-cash expense taken against the
income of investment property that allows the owner
to recover the cost of the investment through tax
savings. 2. A loss of value to improved property.
depreciable basis
depreciable basis The portion of a property's total basis
that may be depreciated, generally the basis of the
improvements, since land cannot be depreciated.
deficiency judgment
deficiency judgment A court order enabling a damaged
lender to attach a lien on the defaulted borrower's
property for an amount equal to the difference between
the debt and the proceeds of a foreclosure sale.
defeasible fee
A fee estate where ownership is perpetual, provided that usage restrictions or other
conditions stated in the deed are upheld. If not, the fee
reverts to the grantor either automatically
(determinable fee) or by the grantor's actions
(condition subsequent).
deed of trust
An instrument used by a borrower to convey title to mortgaged property to a trustee to be held as security for the lender, who is the beneficiary
of the trust.
deed in lieu of foreclosure
An instrument used to
convey mortgaged property back to the lender rather
than have the lender foreclose on the property.
datum
A standard elevation reference point used by
surveyors to measure elevations of property in an area.
covenant
A written warrant or promise set forth in a
contract or other legal document by one or both of the
parties to the contract.
counteroffer .
Any new offer or amended offer made in response to an offer. See offer.
cost approach
A method for determining value that
takes into account the cost of the land and the
replacement or reproduction cost of the improvements
net of estimated depreciation