FAIR MARKET VALUE - The highest monetary price which a property would bring, if offered for sale for a reasonable period of time in a competitive market, to a seller who is willing but not compelled to sell, from a buyer, willing but not compelled to buy, both parties being fully informed of all the purposes to which the property is best adapted and is capable of being used.
FARM AREA - A selected geographical area or one specific building to which a real estate salesperson devotes special attention and study.
FEASIBILITY STUDY - An analysis of a proposed project with emphasis on the attainable income, probable expenses, and most advantageous use and design.
FEDERAL HOUSING ADMINISTRATION (FHA) - The FHA was set up in1934 under the National Housing Act to encourage improvement in housing standards and conditions, to provide an adequate home financing system by insurance of housing mortgages and credit, and to exert a stabilizing influence on the mortgage market.
FEDERAL TAX LIEN - A federal lien which attaches to real property, either if the federal estate tax is not paid, or if the taxpayer has violated the federal income tax or payroll tax laws.
FEDERAL TRADE COMMISSION (FTC) - A federal agency created to investigate and eliminate unfair and deceptive trade practices in business.
FEE SIMPLE - The largest estate one can possess in real property. A fee simple estate is the least limited interest and the most complete and absolute ownership in land: it is of indefinite duration, freely transferable and inheritable. Fee simple title is sometimes referred to as "the fee.
FIDUCIARY - A relationship which implies a position of trust or confidence wherein one is usually entrusted to hold or manage property or money for another. Among the obligations a fiduciary owes to the principal are duties of loyalty; obedience; full disclosure; the duty to use skill, care and diligence; and the duty to account for all monies.
FILLED LAND - An area where the grade has been raised by depositing or dumping dirt, gravel or lava rock.
FINANCE CHARGE - The total of all costs imposed directly or indirectly by the creditor and payable either directly or indirectly by the customer, as defined under the federal Truth-in-Lending Law.
FINANCE FEE - A mortgage brokerage fee to cover the expenses incurred in placing the mortgage with a lending institution; a mortgage service charge or origination fee.
FINANCIAL STATEMENT - A formal statement of the financial status and net worth of a person or company, setting forth and classifying assets and liabilities as of a specified date.
FINDER'S FEE - A fee paid to someone for producing a buyer to purchase or a seller to list property; also called a referral fee.
FIRM COMMITMENT - A definite undertaking by a lender to loan a set amount of money at a specified interest rate for a certain term.
FIRST REFUSAL, RIGHT OF - The right of a person to have the first opportunity either to purchase or lease real property.
FISCAL YEAR - A business year used for tax, corporate or accounting purposes, as opposed to a calendar year.
FIXTURE - An article which was once personal property but has been so affixed to the real estate that it has become real property (e.g. stoves, bookcases, plumbing, etc.). If determined to be a fixture, then the article passes with the property even though it is not mentioned in the deed.
FLAG LOT - A land parcel having the configuration of an extended flag and pole. The pole represents access to the site which is usually located to the rear of another lot fronting a main street.
FLOOR AREA RATIO - The ratio of floor area to land area expressed as a percent or decimal, which is determined by dividing the total floor area on a zoning lot by the lot area.
FLOOR DUTY - A frequent practice in real estate brokerage offices of assigning one sales agent the responsibility for handling all telephone calls and office visitors for a specified period of time.
FORECLOSURE - A legal procedure whereby property used as security for debt is sold to satisfy the debt in the event of default in payment of the mortgage note or default of other terms in the mortgage document.
FRAUD - Any form of deceit, trickery, breach of confidence or misrepresentation by which one party attempts to gain some unfair or dishonest advantage over another.
FREE AND CLEAR TITLE - Title to real property which is absolute and unencumbered by any liens, mortgages, clouds or other encumbrances.
FRONTAGE - The length of a property abutting a street or body of water; that is, the number of feet that "front" the street or water.
FUNCTIONAL OBSOLESCENCE - A loss in value of an improvement due to functional inadequacies, often caused by age or poor design.
GARNISHMENT - A legal process designed to provide a means for creditors to safeguard for themselves the personal property of a debtor which is in the hands of a third party ("garnishee").
GENERAL AGENT - One who is authorized to perform any and all acts associated with the continued operation of a particular job or a certain business.
GENERAL CONTRACTOR - A construction specialist who enters into a formal construction contract with a land owner or master lessee to construct a real estate building or project.
GENERAL PARTNER - A co-owner of a partnership who is empowered to enter into contracts on behalf of the partnership and who is fully liable for all partnership debts.
GIFT TAX - A graduated federal tax paid by a donor upon making a gift.
GOOD FAITH - Bona fide. An act is done in good faith if it is in fact done honestly, whether it be done negligently or not.
GOOD WILL - An intangible, salable asset arising from the reputation of a business.
GOVERNMENT SURVEY - A system of land description in which large blocks of land are divided into tracts bounded by imaginary lines conforming to the true meridian.
GRADUATED RENTAL LEASE - A lease in which the rent payments commence at a fixed, often low rate, but "step up" or increase at set intervals as the lease term matures.
GRANDFATHER CLAUSE - Common expression used to convey the idea that something which was once permissible continues to be permissible despite changes in the controlling law.
GRANTEE - The person who receives from the grantor a grant of real property.
GRANTOR - The person transferring title to, or an interest in, real property. A grantor must be competent to convey; thus, for example, an insane person cannot convey title to real property.
GROSS AREA - The total floor area of a building measured from the exterior of the walls (excluding those unenclosed).
GROSS INCOME MULTIPLIER - A useful rule of thumb to estimate market value of income producing residential property. The multiplier is derived by using comparable sales divided by the actual or estimated monthly rentals and arriving at an acceptable average.
GROSS LEASE - A lease of property under which the lessee pays a fixed rent, and the lessor pays the taxes, insurance, and other charges regularly incurred through ownership.
GUARDIAN - One who is given the lawful custody and care of another(called a ward).
HABENDUM CLAUSE - That part of the deed beginning with the words "to have and to hold," following the granting clause and reaffirming the extent of ownership that the grantor is transferring.
HABITABLE - Being fit to live in. The residential landlord has an obligation to keep the leased premises in a habitable condition.
HEIR - A person who inherits under a will or a person who succeeds to property by the laws of descent if the decedent dies without a will (intestate).
HIGHEST AND BEST USE - That use which, at the time of appraising the property, is most likely to produce the greatest net return to the land and/or the building over a given period of time.
HIGH RISE - A popular expression for a condominium or apartment building generally higher than six stories.
HOLD HARMLESS CLAUSE - A clause inserted in a contract whereby one party agrees to indemnify and protect the other party from any injuries or lawsuits arising out of the particular transaction.
HOLDOVER TENANT - One who stays on the leased premises after his lease has expired. The landlord normally has the choice of evicting the holdover tenant or permitting him to remain and continue to pay rent.
HOMEOWNER'S ASSOCIATION - A non-profit association of homeowners organized pursuant to a declaration of restrictions or protective covenants for a subdivision, a PUD, or a condominium.
HOMESTEAD - A home which is used as a personal residence.
HOTEL - A building or group of attached or detached buildings containing dwelling or lodging units in which 50 percent or more of the units are lodging units, usually distinguished by a front desk, dining and other common facilities.
HOUSE RULES - Rules of conduct adopted by a board of directors of a condominium and designed to promote harmonious living among the owners and occupants.
HUD - A federal cabinet department officially known as the Department of Housing and Urban Development.
HYPOTHECATE - To pledge specific real or personal property as security for an obligation, without surrendering possession of it.
IMPLIED WARRANTY OF HABITABILITY - A legal doctrine imposing on the landlord a duty to make the leased premises acceptable to live in and ready for occupancy and to continue to maintain them in a state of repair throughout the entire term of the lease.
IMPOUND ACCOUNT - A trust account established to set aside funds for future needs.
IMPROVED LAND - Real property whose value has been enhanced by the addition of on-site and off-site improvements such as roads, sewers, utilities, buildings, etc.; as distinguished from raw land.
IMPROVEMENTS - Valuable additions made to property, amounting to more than repairs, costing labor and capital and intended to enhance the value of the property. Improvements of land would include grading, sidewalks, sewers, streets, utilities, etc. Improvements on land would include buildings, fences, and the like.
IMPUTED INTEREST - Interest implied by the federal tax law.
INCOME APPROACH - An approach to the valuation or appraisal of real property as determined by the amount of net income the property will produce over its remaining economic life.
INCOME PROPERTY - Property purchased primarily for the income to be derived plus certain tax benefits, such as accelerated depreciation. Income property can be commercial, industrial or residential.
INCORPOREAL RIGHTS - Intangible or non-possessory rights in real property such as easements, licenses, profits and the like.
INDEPENDENT CONTRACTOR - One who is retained to perform a certain act, but who is subject to the control and direction of another only as to the end result and not as how he performs the act. The critical feature, and what distinguishes an independent contractor and an employee or agent, is the right to control.
INDUSTRIAL PARK - An area zoned industrial and containing sites for many separate industries and developed and managed as a unit, usually with provisions for common services for the users.
INJUNCTION - A legal action which forbids a party defendant from doing some act; it requires a person to whom it is directed to refrain from doing a particular thing.
INNOCENT PURCHASER FOR VALUE - One who purchases real property without notice, actual or constructive, of any superior rights or interests in the real property.
INSPECTION - A visit to and review of the premises. A prudent purchaser of property always inspects the premises before closing.
INSTITUTIONAL LENDER - Financial institutions such as banks, insurance companies, savings and loans or any lending institution whose loans are regulated by law.
INTEREST - The sum paid or accrued in return for the use of money.
INTERIM FINANCING - A short-term loan usually made during the construction phase of a building project; often referred to as the "construction loan."
INTESTATE - To die without a valid will.
INVENTORY - An itemized list of property. Many brokers recommend that their clients attach to the sales contract an inventory of property to be included in the sale of a residential property, including a condominium dwelling.
INVERSE CONDEMNATION - An action for "just compensation "brought by one whose property has been effectively "taken" or substantially interfered with or taken without just compensation
JOINT AND SEVERAL LIABILITY - A situation in which more than one party is liable to repay a debt or obligation and a creditor can obtain compensation from one or more parties, either individually or jointly, whichever he chooses.
JOINT TENANCY - A form of property ownership by two or more persons in which the joint tenants have one and the same interest, arising by one and the same conveyance, commencing atone and the same time and held by one and the same possession(the concept of "four unities").
JOINT VENTURE - The joining of two or more people in a specific business enterprise such as the development of a condominium project or a shopping center.
JUDGMENT LIEN - A lien binding on all the real estate of a judgment-debtor and giving the holder of the judgment a right to levy (i.e. to seize) the land for satisfaction of the judgment.
JUDICIAL FORECLOSURE - A method of foreclosing upon real property by means of a court supervised sale. After an appraisal, the court determines an upset price below which no bids to purchase will be accepted.
JUNIOR MORTGAGE - A mortgage which is subordinate in right or lien priority to an existing mortgage on the same realty, such as a second mortgage.
JURISDICTION - The authority or power to act, such as the authority of a court to hear and render a decision that binds both parties.
JUST COMPENSATION - An amount of compensation to be received by a party for the taking of property under the power of eminent domain.
LAND - The surface of the earth extending down to the center and upward to the sky, including all natural things thereon such as trees, crops, or water; plus the minerals below the surface and the air rights above.
LAND CONTRACT - Another name for an installment purchase contract, by which the buyer obtains equitable title (the right to use the property) while the seller retains legal title (recorded title)as security for payment of the balance of the purchase price.
LAND DESCRIPTION - A description of a particular piece of real property.
LAND LEASEBACK - A creative financing device often used with raw land which a developer wants to improve, in which the developer sells the land to an investor who leases the land back to the developer under a long-term net lease and subordinates his fee ownership to the lender providing development financing.
LAND, TENEMENTS AND HEREDITAMENTS - A feudal phrase used to describe all types of immovable realty including the land, buildings and all appurtenant rights thereto.
LAND TRUST - An association organized by common owners of real property, which holds title to the real property in the name of one or more trustees for the benefit of the owners, whose beneficial interests may be represented by trust certificates.
LANDLOCKED - Real property having no access to a public road or way.
LANDLORD - The lessor or the owner of leased premises. The landlord retains a reversion interest in the property so that when the lease ends the property will revert to the landlord.
LANDMARK - A stake, stream, cliff, monument or other object or feature which is used to fix or define land boundaries; also a prominent feature of a landscape or property that is the symbol for the place.
LANDSCAPING - Shrubs, bushes, trees and the like, on the grounds surrounding a structure.
LATERAL AND SUBJACENT SUPPORT - The support received by a parcel of real property from the land adjoining it is called lateral support. Subjacent support is that support which the surface of the earth receives from its underlying strata.
LAW DAY - The date an obligation becomes due; sometimes refers to the closing date.
LEASE - A lease is both a contract between lessor (landlord)and lessee (tenant) and a conveyance or demise of the premises by the lessor to the lessee. A lease is a contract in that item bodies the agreement between the parties.
LEASEHOLD - A less-than-freehold estate which a tenant possesses in real property.
LEGAL DESCRIPTION - A description which is complete enough that an independent surveyor could locate and identify a specific piece of real property.
LEGAL NOTICE - That notice which is either implied or required by law. Constructive notice under the recording laws is also referred to as legal notice.
LEGAL RATE OF INTEREST - The maximum interest rate permitted bylaw, with anything above that rate being usury.
LESSEE - The person to whom property is rented or leased; called a "tenant" in most residential leases.
LESSOR - The person who rents or leases property to another. In residential leasing, the lessor is often referred to as a landlord.
LESS-THAN-FREEHOLD ESTATE - An estate held by one who rents or leases property. This classification includes an estate for years, periodic tenancy, estate at will, and estate at sufferance.
LETTER OF CREDIT - An agreement or commitment by a bank("issuer") made at the request of a customer ("account party")that the bank will honor drafts or other demands of payment from third parties ("beneficiaries") upon compliance with the conditions specified in the letter of credit.
LETTER OF INTENT - An expression of intent to invest, develop or purchase without creating any firm legal obligation to do so.
LEVEL PAYMENT MORTGAGE - A mortgage which is scheduled to be repaid in equal periodic payments which include both principal and interest.
LEVERAGE - The use of borrowed funds to purchase investment property with the anticipation that the property acquired will increase in return so that the investor will realize a profit not only on his own investment, but also on the borrowed funds; the employment of a smaller investment to generate a larger rate of return through borrowing.
LICENSEE - A person who has a valid license. A real estate licensee can be a salesperson or a broker, active or inactive, an individual, a corporation, or a partnership.
LIEN - A charge or claim which one person (lienor) has upon the property of another (lienee) as security for a debt or obligation. Liens can be created by agreement of the parties(mortgage) or by operation of law (tax liens).
LIFE ESTATE - Any estate in real or personal property which is limited in duration to the life of its owner or the life of some other designated person.
LIMITED COMMON ELEMENTS - That special class of common elements in a condominium reserved for the use of a certain apartment(s) to the exclusion of other apartments.
LIMITED PARTNERSHIP - A partnership formed by two or more persons having as members one or more general partners and one or more limited partners.
LINE OF CREDIT - A maximum amount of money a bank will lend one of its more reliable and credit worthy customers without need for any formal loan submission.
LIQUIDATED DAMAGES - An amount predetermined by the parties to an agreement as the total amount of compensation an injured party should receive in the event the other party breaches a specified part of the contract.
LIQUIDITY - The ability to sell an asset and convert it into cash at a price close to its true value.
LIS PENDENS - A legal document recorded in the Bureau of Conveyances, which gives constructive notice that an action has been filed in either a state or federal court affecting a particular piece of property. "Lis Pendens" is a Latin term which means "action pending" and is in the nature of a quasi-lien.
LISTING - A written employment agreement between a property owner and a broker authorizing the broker to find a buyer or a tenant for a certain real property.
LITTORAL LAND - Land bordering on the shore of a sea or ocean and thus affected by the tide currents.
LOAN COMMITMENT - A commitment by a lender of the amount he will loan to a qualified borrower on a particular piece of real estate for a specified amount of time under specific terms.
LOAN-TO-VALUE RATIO - The ratio that the amount of the loan bears to the appraised value of the property or the sales price, whichever is lower.
LOCUS SIGILLI - Latin for "under seal", used in the abbreviated form, "L.S.," at the end of signature line in some formal legal documents; used instead of the actual seal.
LOSS PAYEE - The person designated on an insurance policy to be paid in case the insured property is damaged or destroyed.
MAINTENANCE - The care and work put into a building to keep it in operation and productive use; the general repair and upkeep of a building. If maintenance is deferred, the building will suffer a loss in value.
MALL - A landscaped public area set aside for pedestrian traffic.
MARGINAL LAND - Land which is of little value because of some deficiency, such as poor access, lack of adequate rainfall, or steep terrain.
MARKETABLE TITLE - Good or clear title reasonably free from risk of litigation over possible defects; also referred to as merchantable title. Marketable title need not, however, be perfect title.
MARKET VALUE - The highest price, estimated in terms of money, which a property will bring if exposed for sale in the open market, allowing a reasonable time to find a purchaser who buys with knowledge of all the uses to which the property is adapted and for which it is capable of being used.
MASTER PLAN - A comprehensive plan to guide the long-term physical development of a particular area.
MEANDER LINE - An artificial line used by the surveyors to measure the natural, uneven, winding property line formed by rivers, streams and other watercourses bordering a property.
MECHANIC'S LIEN - A statutory lien created in favor of materialmen and mechanics to secure payment for materials supplied and services rendered in the improvement, repair or maintenance of real property.
METES AND BOUNDS - A common method of land description that identifies a property by specifying the shape and boundary dimensions of the parcel, using terminal points and angles.
MILITARY CLAUSE - A clause inserted in some residential leases to allow the military tenant to terminate the lease in case of transfer, discharge or other circumstances making termination appropriate.
MINERAL RIGHTS - Rights to subsurface land and profits. Normally, when real property is conveyed, the grantee receives all right and title to the land including everything above and below the surface, unless excepted by the grantor.
MISREPRESENTATION - A false statement or concealment of a material fact made with the intent to induce some action by another party.
MONEY - The cash deposit (including initial and additional deposits) paid by the prospective buyer of real property as evidence of his good faith intention to complete the transaction; called hand money or a binder in some states.
MONTH-TO-MONTH TENANCY - A periodic tenancy where the tenant rents for one month at a time. In the absence of rental agreement (oral or written), a tenancy is deemed to be month-to-month, or in the case of boarders, week-to-week.
MONUMENTS - Visible markers, both natural and artificial objects, which are used to establish the lines and boundaries of a survey.
MORTGAGE - A legal document used to secure the performance of an obligation. In effect, the mortgage states that the lender can look to the property in the event the borrower defaults in payment of the note.
MORTGAGE BANKER - A corporation or firm which normally provides its own funds for mortgage financing.
MORTGAGE BROKER - A person or firm which acts as an intermediary between borrower and lender; one who, for compensation or gain, negotiates, sells or arranges loans and sometimes continues to service the loans.
MORTGAGEE - The one who receives and holds a mortgage as security for a debt; the lender; a lender or creditor who holds a mortgage as security for payment of an obligation.
MORTGAGOR - The one who gives a mortgage as security for a debt; the borrower; usually the landowner; the borrower or debtor who hypothecates or puts up his property as security for an obligation.
MULTIPLE LISTING SERVICE (MLS) - An organization created by Realtors to facilitate the sharing of listings among member brokers.
NATIONAL ASSOCIATION OF REALTORS - Formerly known as the National Association of Real Estate Boards (NAREB), it is the largest and most prestigious real estate organization in the world.
NEGATIVE CASH FLOW - The investment situation where cash expenditures to maintain an investment (taxes, mortgage payments, maintenance, etc.) exceed the cash income received from the investment.
NEGOTIABLE INSTRUMENT - Any written instrument which may be transferred by endorsement or delivery so as to vest legal title in the transferee.
NEGOTIATION - The transaction of business aimed at reaching a meeting of minds among the parties; bargaining.
NET INCOME - The sum arrived at after deducting from gross income the expenses of a business or investment, including taxes and insurance, and allowances for vacancy and bad debts; what the property will earn in a given year's operation.
NET LEASE - A lease, usually commercial, whereby the lessee pays not only the rent for occupancy, but also pays maintenance and operating expenses such as tax, insurance, utilities and repairs. Thus the rent paid is "net" to the lessor.
NET WORTH - The value remaining after deducting liabilities from assets.
NOMINAL CONSIDERATION - A consideration bearing no relation to the real value of the contract. A deed often recites a nominal consideration, such as "ten dollars and other valuable consideration."
NON-COMPETITION CLAUSE - A provision in a contract or lease prohibiting a person from operating or controlling a nearby business which would compete with one of the parties to the contract.
NONCONFORMING USE - A permitted use which was lawfully established and maintained but which no longer conforms to the current use regulations because of a change in the zoning.
NONDISTURBANCE CLAUSE - A clause inserted in a mortgage whereby the mortgagee agrees not to terminate the tenancies of lessees who pay their rent if the mortgagee forecloses on the mortgagor-lessor's building.
NORMAL WEAR AND TEAR - That physical deterioration which occurs in the normal course of the use for which a property is intended, without negligence, carelessness, accident or abuse of the premises (or equipment or chattels) by the occupant, members of household, or their invitees or guests.
NOTE - A document signed by the borrower of a loan, stating the loan amount, the interest rate, the time and method of repayment and the obligation to repay. The note is the evidence of the debt. When secured by a mortgage, it is called a mortgage note.
NOTICE - (1) Legal notice is notice which is required to be made by law, or notice which is imparted by operation of law as a result of the possession of property or the recording of documents. (2) Notice which is required by contract, for example, when the parties agree to terminate a contract by the written notice of either party 30 days prior to termination.
NOTICE OF COMPLETION - Document filed to give public notice that a construction job has been completed and that mechanics' liens must be filed within ,say, 45 days to be valid.
NOTICE OF DEFAULT - A notice to a defaulting party that there has been a default, usually providing a grace period in which to cure the default.
NOTICE OF NONRESPONSIBILITY - A legal notice designed to relieve a property owner from responsibility for the cost of improvements ordered by another person.
NOTICE TO QUIT - A written notice given by a landlord to his tenant, stating that the landlord intends to regain possession of the leased premises and that the tenant is required to quit and remove himself from the premises either at the end of the lease term or immediately if there is a breach of lease or if the tenancy is at will or by sufferance; sometimes refers to the notice given by the tenant to the landlord that he intends to give up possession on a stated day.
NOVATION - The substitution of a new obligation for an old one; substitution of new parties to an existing obligation, as where the parties to an agreement accept a new debtor in place of an old one.
NUISANCE - Conduct or activity which results in an actual physical interference with another person's reasonable use or enjoyment of his property for any lawful purpose.
NULL & VOID - Having no legal force or effect; of no worth; unenforceable; not binding.
OBSOLESCENCE - A type of depreciation of property.
OFFER - A promise by one party to act or perform in a specified manner provided the other party will act or perform in the manner requested.
OFFER AND ACCEPTANCE - The two components of a valid contract; a "meeting of the minds."
OFFICE EXCLUSIVE - A listing in which the seller refuses to submit the listing to Multiple Listing Service, even after being informed of the advantages of MLS, and signs a certification to that effect.
OFFSITE COSTS - Costs such as for sewers, streets, utilities, etc., which are incurred in the development of raw land, but are not connected with the actual construction of the buildings(onsite costs).
OPEN-END MORTGAGE - A mortgage in which the borrower is given a limit up to which he may borrow, with any incremental advances of money up to but not exceeding the original borrowing limit to be secured by the same mortgage.
OPEN HOUSE - The common real estate practice of showing a listed home to the public during established hours, frequently on Sunday afternoons.
OPEN LISTING - A listing given to any number of brokers. The first broker who secures a buyer ready, willing and able to purchase at the terms of the listing is the one who earns the commission.
OPEN SPACE - Certain portion of the landscape which has not been built upon and which is sought either to be reserved in its natural state or used for agricultural or recreational purposes(such as parks, squares, and the like).
OPERATING EXPENSES - Those periodic and necessary expenses which are essential to the continuous operation and maintenance of a property.
OPINION OF TITLE - An opinion by a person competent in examining titles, usually a title attorney, as to the status of the title of a property.
OPTION - An agreement to keep open, over a set period, an offer to sell or purchase property.
ORIGINATION FEE - The finance fee charged by a lender for placing a mortgage, which covers initial costs such as preparation of documents and credit, inspection and appraisal fees.
OVERIMPROVEMENT - An improvement which by reason of excess size or cost is not the highest and best use for the site on which it is placed.
OVERRIDE - A commission paid to managerial personnel (e.g. principal broker) on sales made by their subordinates, usually calculated as a percentage of the gross sales commissions earned by the salesperson.