Real Estate Defined

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acknowledgment

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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.

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addendum

Back 2

An attachment to a contract, rental or lease agreement for incorporating any provision agreed to but not included in the boilerplate provisions of the agreement. [See RPI Form 250]

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advance costs

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Deposits handed to a broker to cover out-of-pocket costs incurred on behalf of the depositor while performing brokerage services.

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affiliated business arrangement

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Referral of a client to a financially controlled business whose earnings are shared with the broker.

[RPI Form 205 and 519]

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agency

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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.

[RPI Form 305]

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attorney fee provision

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A provision in an agreement specifying the prevailing party to a dispute is to receive attorney fees if litigation results. [See RPI Form 552 §23.2]

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attorney in fact

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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.

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bi-lateral contract

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A promise for a promise, such as a purchase agreement or a listing agreement

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boot

Back 9

Receipt of an item not of like-kind property, such as cash or mortgage relief, in a tax deferred exchange.

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capable parties

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Parties who can be held responsible for the performance of their obligations under a contract. One of the essential elements needed to form a contract

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choice-of-law provision

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A provision specifying California law applies if a dispute arises with a tenant regarding the lease.

[RPI Form 552 §23.4]

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consideration

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Anything given or promised by a party to induce another to enter into a contract. It may be a benefit conferred upon one party or a detriment suffered by the other.

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credit application

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A document prepared by a prospective tenant which includes a provision authorizing the landlord to investigate and receive information on the tenant's creditworthiness. [See RPI Form 302]

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contract

Back 14

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

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counteroffer

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An alternative response to an offer received consisting of terms different from those of the offer rejected. [See RPI Form 180]

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deed

Back 16

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

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enforceable contract

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An agreement which meets minimum elemts needed to be enforceable in court.

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essential elements of a contract

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Four conditions required to form a legal contract: capable parties, acceptance, legal object and consideration.

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exclusive right-to-sell listing

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A listing agreement employing a broker to act as agent for the seller of real property under the terms of which the broker is entitled to a commission if the property is sold during the duration of the listing through another broker or by the owner without the services of an agent.

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exchange

Back 20

A trading between two or more owners of their equities in different properties.

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exclusive agency listing

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A listing agreement employing a broker as the sole agent for the seller of real property under the terms of which the broker is entitled to a commission if the property is sold through any other broker, but not if a sale is negotiated by the owner without the services of an agent. [See RPI Form 102]

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execution

Back 22

The signing and delivery of a document, as occurs on a seller's acceptance of an offer to buy real estate by signing and delivering the signed document to the buyer.

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forbearance agreement

Back 23

An agreement that the lender will temporarily reduce monthly mortgage payments for the homeowner at risk of default, without altering the original loan terms.

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escrow instructions

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Directives an escrow officer undertakes as given by an investor and a seller-in-foreclosure to coordinate a closing on a purchase agreement.

[RPI Form 401]

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fraud

Back 25

The intentional use of deception to induce another person to act against their best interests resulting in the loss of property or money.

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hold harmless clause

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A provision in an agreement that shifts liability between parties.

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habendum clause

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The "to have and to hold" clause in a deed.

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graduated rent provision

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A rent provision in a nonresidential lease agreement which increases the initial monthly rent in pre-set increments over the term of the lease. [See RPI Form 552 §4.4]

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guarantee agreement

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An agreement to be obligated to pay the debt or perform on a contract of another person if that person defaults or does not perform.

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grant deed

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A document used to pass a fee simple interest in real estate from the grantor to another individual, unless a lesser interest is stated.

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installment note

Back 31

A note calling for periodic payments of principal and interest, or interest only, until the principal is paid in full by amortization or a final balloon payment.

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gross lease

Back 32

A nonresidential lease specifying that the tenant pays for their utilities and janitorial fees, but unless modified is not responsible for any other care, maintenance or carrying costs of the property. [See RPI Form 552 and 552-1]

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instrument

Back 33

A written legal document; created to effect the rights of the parties, giving formal expression to a legal act or agreement for the purpose of creating, modifying or terminating a right. Real estate lenders basic instruments are promissory notes, deeds of trust, mortgages, installment sales contracts, leases, assignments.

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letter of intent

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A non-binding proposal signed and submitted to a property owner to start negotiations. [See RPI Form 185]

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liquidated damages

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A provision in a contract specifying the amount of damages one party will receive from the opposing party if the opposing party breaches the agreement.

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listing

Back 36

An employment contract between principal and agent authorizing the agent to perform services for the principal involving the latter's property; listing contracts are entered into for the purpose of securing persons to buy, lease, or rent property. Employment of an agent by a prospective purchaser or lessee to locate property for purchase or lease may be considered a listing.

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loan assumption

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When a buyer takes over an existing mortgage and becomes primarily responsible for payment on the debt.

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mutual consent

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A meeting of the minds between the parties to a transaction. One of the four essential elements of a contract.

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loan application

Back 39

The loan application is a source of information on which the lender bases a decision to make the loan; defines the terms of the loan contract, gives the name of the borrower, place of employment, salary, bank accounts, and credit references, and describes the real estate that is to be mortgaged. It also stipulates the amount of loan being applied for and repayment terms. [See RPI Form 202]

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lease agreement

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The written document which sets the terms of a fixed-term tenancy.

[RPI Form 550 and 552 - 552-4]

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net lease

Back 41

A nonresidential lease which transfers to the tenant the obligation, unless modified, to pay all of the costs of ownership in addition to utilities and janitorial services. [See RPI Form 552-2 and 552-3]

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note

Back 42

A document evidencing an obligation to pay money to a creditor — usually a lender or carryback seller.

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open listing

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An employment entered into by a broker to render real estate services on a best-efforts basis under which a fee is due to the broker if they achieve the client's objective of the employment before the client or another broker separately first meet the objective, such as the sale or locating of a property

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offer to lease

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A document which sets forth all crucial elements typically negotiated to bring the landlord and tenant together in final leasing arrangements. [See RPI Form 556]

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option to buy

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An agreement granting an irrevocable right to buy property within a specific time period. [See RPI Form 161]

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option to extend

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An agreement granting a tenant the right to extend possession under the original lease agreement on terms set out in the option to extend. [See RPI Form 565]

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option listing

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A variation of the exclusive right-to-sell listing in which the seller grants the broker an option to buy the property at a predetermined price, if the property does not sell during the listing period.

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net listing

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A type of listing in which the agent's fee is set as all sums received exceeding a net price established by the owner.

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option to renew

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An agreement granting a tenant the right to continue in possession upon expiration of the existing lease under a new lease agreement on the same conditions as the expiring lease agreement on terms for payment of rent set out in the option to renew. [See RPI Form 565]

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purchase agreement

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The primary document used to negotiate a real estate sales transaction between a buyer and seller. [See RPI Form 150 -- 159]

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qualified endorsement

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The payee's signature on the back of a check with the words for deposit only.

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quitclaim deed

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A document used to convey whatever interest, if any, the grantor may hold in the real estate.

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rescission

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The cancellation of a contract and restoration of the parties to the same position they held before the contract was entered into.

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revocation

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When the person making an offer withdraws their offer prior to delivery of the signed acceptance.

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rejection

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When a person chooses not to accept the terms of an offer.

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promissory note

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A document given as evidence of an underlying debt owed by one person to another.

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Structural Pest Control report

Back 57

A report disclosing any active infestations, damage from infestations or conditions which may lead to infestations.

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tender

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To make an offer.

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triple net lease

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A nonresidential lease which passes the responsibility for all costs and maintenance of the property to the tenant. [See RPI Form 552-2 and 552-3]

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unenforceable

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A contract that cannot be enforced in court of law.

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Uniform Residential Loan Application

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A standardized mortgage application completed by the buyer with the assistance of the transaction agent and the mortgage lender's representative. [See RPI Form 202]

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use-maintenance provision

Back 62

A provision in a nonresidential lease agreement which establishes the landlord’s and tenant’s responsibility for the care and maintenance of the premises during the lease term.

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title report

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A report which discloses condition of the title, made by a title company preliminary to issuance of title insurance policy.

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time-essence provision

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A purchase agreement provision establishing that dates for performance of any activity or occurrence of an event are to be strictly enforced as essential to the continuation of the transaction.

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voidable contract

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That which is capable of being adjudged void, but is not void unless action is taken to make it so.

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California Bureau of Real Estate (CalBRE)

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A government entity which oversees, regulates, administers and enforces California real estate law as practiced by licensees.

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Civil Rights Act

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A federal law which provides broad protections to all persons in the United States against discriminatory activities.

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commingling

Back 68

The mixing of personal funds with client or other third-party funds required to be held in trust.

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conflict of interest

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When a broker or agent has a positive or negative bias toward a party in a transaction which is incompatible with the duties owed to their client. [See RPI Form 527]

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contingency

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A condition that needs to be met before escrow can proceed to closing.

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contingency fee

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An incentive bonus paid upon successfully completing or hitting certain benchmarks, or received as compensation on the occurrence of an event.

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conversion

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The unlawful appropriation of another's property, as in the conversion of trust funds.

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disclosure

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A fact that is made known, such as informing a buyer or tenant about a property's condition.

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discriminatory practices

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Unequal treatment given to members of a protected group.

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double-end

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When the seller's agent receives the entire fee in the transaction as there is no buyer's agent to split the fee with.

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dual agency

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The agency relationship that arises when a broker represents both parties in a real estate transaction. [See RPI Form 117]

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Equal Credit Opportunity Act

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A federal law enacted in 1974 prohibiting lenders from discriminating against borrowers from a protected class.

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ethics

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The branch of fiduciary science concerning the duties which a member of a profession or craft owes to the public, client or partner, and to professional brethren or members. Accepted standards of right and wrong.