CANCELLATION
CLAUSE A contract provision that gives the right to
terminate obligations upon the occurrence of specified conditions
or events.
CAI Community
Associations Institute.
CALIFORNIA BUNGALOW
A 1-story, small, compact early twentieth-century house.
CAP In adjustable
rate mortgages, a limit placed on adjustments to protect the
borrower from large increases in the interest rate or the
payment level.
CAPACITY OF PARTIES
One of the requirements for a valid contract. Parties with
less than full capacity include minors, the mentally insane,
and those who are intoxicated.
CAPE COD COLONIAL
An early-American-style 1-story compact house that is small
and symmetrical with a central entrance. The roof is the steep
gable type covered with shingles. The authentic types have
low central chimneys, but end chimneys are very common in
the new versions. Bedrooms on the first floor. The attic may
be finished into additional bed- rooms and a bath. A vine-covered
picket fence is traditional.
CALIFORNIA RANCH
A post-World War II style, 1-story ground-hugging house with
a low, pitched roof.
CALL PROVISIONS
Clauses in a loan that give the lender their right to accelerate
the debt upon the occurrence of a specific event or date.
CAPITAL ASSET
An asset defined in Section 1221 of the Internal Revenue Code
that once received favorable tax treatment upon sale. Excludes
inventory, property held for resale, property used in a trade
or business, copyrights in certain instances, and certain
U.S. government obligations.
CAPITAL CALLS
Additional money to be invested by equity owners to fund deficits
in construction costs or operating costs.
CAPITAL EXPENDITURE
An improvement (as distinguished from a repair) that will
have a life of more than one year. Capital expenditures are
generally depreciated over their useful life, as distinguished
from repairs, which are subtracted from income of the current
year.
CAPITAL GAIN Gain
on the sale of a capital asset In 1991 and thereafter, the
maximum individual tax rate on capital gains is 28%. There
are limits on the deduction of capital losses against ordinary
income.
CAPITAL IMPROVEMENT
Same as capital expenditure.
CAPITAL LOSS Loss
from the sale of a capital asset.
CAPITALIZATION In
finance, a process whereby anticipated future income is converted
to one lump sum capital value. A capitalization rate is divided
into the expected periodic income to derive a capital value
for the expected income. Sum of interest rate and recapture
rate.
CAPITALIZATION RATE
A rate of return used to derive the capital value of an income
stream. The formula is Value = annual income capitalization
rate
CAPITALIZE To
estimate the present lump sum value of an income stream. 2.
to set up the cost of an asset on financial records.
CAPITALIZED VALUE
The value estimated by converting an income stream into a
lump sum amount.
CAP RATE Same
as capitalization rate.
CAPTURE RATE The
sales or leasing rate of a real estate development compared
to the sales or leasing rate of all developments in the market
area.
CARRYING CHARGES
Expenses necessary for holding property, such as taxes and
interest on idle property or property under construction.
CARRYOVER BASIS
In a tax-deferred exchange, the adjusted tax basis of the
property surrendered that is used to determine the tax basis
of the property acquired. See basis (tax).
CASH EQUIVALENT
The conversion of the price of property that sold with either
favorable or unfavorable financing into the price the property
would have sold for had the seller accepted all cash in the
transaction.
CASH FLOW Periodic
amounts available to an equity investor after deducting all
periodic cash payments from rental income.
CASH METHOD A
method of accounting based on cash receipts and disbursements.
Contrast accrual method.
CASH-ON-CASH Same
as equity dividend rate.
CASH THROW-OFF
Same as cash flow.
CAVEAT EMPTOR
"Let the buyer beware." The buyer must examine the
goods or property and buy at his own risk, except for latent
defects.
CBD Central business
district.
CCIM Certified Commercial
Investment Member, A professional designation of
the Realtors National Market Institute (RNMI).
CD Certificate
of deposit.
CENTRAL BUSINESS DISTRICT
(CBD) The downtown section of a city, generally consisting
of retail, office, hotel, entertainment, and governmental
land uses with some high density housing.
CERTIFICATE OF DEPOSIT
(CD) A type of savings account and that carries a
specified minimum deposit and term and generally provides
a higher yield than passbook-type savings accounts.
CERTIFICATE OF ELIGIBILITY
Issued by the Veterans Administration to those who qualify
for a VA loan.
CERTIFICATE OF INSURANCE
A document issued by an insurance company to verify the coverage.
CERTIFICATE OF NO DEFENSE
Same as estoppel certificate.
CERTIFICATE OF OCCUPANCY
A document issued by a local government to a developer permitting
the structure to be occupied by members of the public. Issuance
of the certificate generally indicates that the building is
in compliance with public health and building codes.
CERTIFICATE OF REASONABLE
VALUE A document issued by the Veteran's Administration,
based on an approved appraisal. Establishes a ceiling on the
maximum VA mortgage loan principal.
CERTIFICATE OF TITLE
An opinion rendered by an attorney as to the status of title
to a property, according to the public records.
CERTIFIED COMMERCIAL INVESTMENT
MEMBER (CCIM) A designation awarded by the Realtors
National Marketing Institute, which is affiliated with the
National Association of Realtors Address: Realtors National
Marketing institute 430 North Michigan Avenue Chicago, IL
6061 1
CERTIFIED GENERAL APPRAISER
One qualified to appraise any property, under the appraiser
certification law recently adopted by most states. Usually
requires at least two years of general appraisal experience,
150 hours of education, and passing a state examination.
CERTIFIED PROPERTY MANAGER
(CPM) A professional awarded to real estate managers
by the Institute of designation Real- Estate Management, an
affiliate of the National Association of Realtors. Address:
Institute of Real Estate Management 430 North Michigan Avenue
Chicago, IL 6061 1
CERTIFIED RESIDENTAL APPRAISER
One qualified to appraise residences and up to 4
units of housing, under appraiser certification law. Standards
call for less education, less experience, and less comprehensive
exam than for General Certification.
CERTIFIED RESIDENTIAL BROKER
(CRB) A designation awarded by the Realtors National
Marketing Institute, which is affiliated with the National
Association of Realtors.
CERTIFIED RESIDENTIAL SPECIALIST
(CRS) A professional designation awarded by the Realtors
National Marketing Institute, based on education and experience
in residential sales. Candidates must hold the GRI designation.
CHAIN A linear
unit of land measurement used in surveying: 66 feet in length.
Each chain consists of 100 links.
CHAIN OF TITLE
A history of conveyances and encumbrances affecting a title
from the time that the original patent was granted, or as
far back as records are available. See abstract of title,
certificate of title.
CHATTEL Personal
property. Anything owned and tangible, other than real estate.
CHATTEL MORTGAGE
A pledge of personal property as security for a debt.
CLEAR TITLE A marketable title; one free
of clouds and disputed interests.
CLIENT The one
who engages a broker, lawyer, accountant, appraiser, etc.
CLOSED-END MORTGAGE
A mortgage loan whose principal amount cannot be increased
during the pay-out period; contrast with open-end mortgage.
CLOSING 1. The
act of transferring ownership of a property from seller to
buyer in accordance with a sales contract. 2. The time when
a closing takes place.
CLOSING COSTS
Various fees and expenses payable by the seller and buyer
at the time of a real estate closing (also termed transaction
costs).
CLOSING DATE The
date on which the seller delivers the deed and the buyer pays
for the property.
CLOSING STATEMENT
An accounting of funds from a real estate sale, made to both
the seller and the buyer separately. Most states require the
broker to furnish accurate closing statements to all parties
to the transaction.
CLOUD ON THE TITLE
An outstanding claim or encumbrance that, if valid, would
affect or impair the owner's title. Compare clear title.
CLUSTER HOUSING
A subdivision technique in which detached dwelling units are
grouped relatively close together, leaving open spaces as
common areas.
CODE OF ETHICS
A statement of principles concerning the behavior of those
who subscribe to the code.
COINSURANCE A
clause in an insurance policy stating the minimum percentage
of value to be insured in order to collect the full amount
of loss.
COLD CANVASS The
process of contacting homeowners in an area in order to solicit
listings.
COLLAPSIBLE CORPORATION
A term that applies to some corporations that are dissolved
within 3 years. The IRS treats gain on the sale or liquidation
of the corporation as ordinary income to the stockholder.
COLLATERAL Property
pledged as security for a debt.
COLLATERALIZED MORTGAGE
OBLIGATION (CMO) A security backed by a pool of mortgage
loans that may be separated into various classes with varying
maturities. Note that REMICS, introduced by the Tax Reform
Act of 1986, are the standard vehicle for investing in mortgage
instruments.
COLOR OF TITLE
That which appears to be good title but is not.
COMMERCIAL BANK
A financial institution authorized to provide a variety of
financial services, including consumer and business loans
(generally short-term), checking services, credit cards and
savings accounts. Certain deposits at most commercial banks
are insured by the Federal Deposit Insurance Corporation.
Commercial banks may be members of the Federal Reserve System.
COMMERCIAL BROKER
One who lists and sells commercial property, which may include
shopping, office, industrial, and apartment projects. Contrast
residential broker.
COMMERCIAL PROPERTY
Property designed for use by retail, wholesale, office, hotel,
or service users.
COMMINGLE To mingle
or mix, such as the deposit of another's money in a broker's
personal account.
COMMISSION 1.
An amount earned by a real estate broker for his services.
2. The official body that enforces real estate license laws.
COMMISSIONER The
head administrator of the State Real Estate Commission.
COMMISSION SPLIT
The arrangement of sharing commissions earned between a sales
agent and sponsoring broker, or between the selling broker
and listing broker.
COMMITMENT A pledge
or promise; a firm agreement. Example: Collins obtains a commitment
from a savings and loan association for a $ 1 00,000 loan
on a house she wants to buy. She is then assured of the loan
so business will proceed to closing.
COMMITMENT FEE
A charge required by a lender to lock in specific terms on
a loan at the time of application.
COMMITMENT LETTER An
official notification to a borrower from a lender indicating
that the borrower's loan application has been approved and
stating the terms of the prospective loan.
COMMON AREAS Areas
of a property that are used by all owners or tenants.
COMMON ELEMENTS
In a condominium, those portions of the property not owned
individually by unit owners but in which an indivisible interest
is held by all unit owners. Generally includes the grounds,
parking areas, recreational facilities, and external structure
of the building.
COMMON LAW The
body of law that has grown out of legal customs and practices
that developed in England. Common law prevails unless superseded
by other law.
COMMUNITY ASSOCIATION
General name for any organization of property owners to oversee
some common interest. In a condominium or planned unit development,
the association has the responsibility of managing the common
elements in the project. A homeowners' association may be
established in a subdivision to enforce deed covenants.
COMMUNITY ASSOCIATIONS
INSTITUTE (CAI) A nonprofit educational and research
organization concerned with the problems of managing homeowners'
associations and other community associations (such as condominium
owners associations). CAI sponsors educational seminars and
publishes various handbooks and brochures. Address: Community
Associations Institute 1630 Duke Street Alexandria, VA 22314
COMMUNITY PROPERTY
Property accumulated through joint efforts of husband and
wife and owned by them in equal shares. This doctrine of ownership
now exists in Arizona, California, Idaho, Louisiana, Nevada,
New Mexico, Texas, and Washington State.
COMMUNITY REINVESTMENT
ACT A federal law that requires federal regulators
of lending institutions to encourage lending within the local
area of the institution, particularly to low- and moderate-income
residents and those residing in inner-city neighborhoods.
CO-MORTGAGOR One
who signs a mortgage contract with another party or parties
and is thereby jointly obligated to repay the loan. Generally
a co-mortgagor provides some assistance in meeting the requirements
of the loan and receives a share of ownership in the encumbered
property.
COMPARABLES Properties
that are similar to the one being sold or appraised. See market
approach.
COMPARATIVE SALES APPROACH
Same as market comparison approach.
COMPARATIVE UNIT METHOD
An appraisal technique to establish relevant units as a guide
to appraising the subject property.
COMPARISON METHOD
Same as market comparison approach.
COMPETENT PARTIES
Persons legally capable of entering a contract must be of
legal age, not be insane or a drunkard.
COMPLETION BOND
A legal instrument used to guarantee the completion of a development
according to specifications.
COMPOUND INTEREST
Interest paid on the original principal and also on the unpaid
interest that has accumulated.
COMPRESSED BUY-DOWN
A buy-down loan for which the
COMPONENT DEPRECIATION
Dividing real estate improvements into various parts such
as the roof, plumbing, electrical system, and shell, then
depreciating each component separately for tax purposes.
COMPOUND AMOUNT OF ONE
PER PERIOD The amount that a series of deposits of
$1.00 per period would grow to if left on deposit with interest
allowed to compound.
COMPS Appraisal
term, short for comparables.
CONCESSIONS Benefits
granted by a seller/lessor to induce a sale/lease.
CONDEMNATION 1.
Taking private property for public use with compensation to
the owner under eminent domain. Used by governments to acquire
land for streets, parks, schools, etc., and by utilities to
acquire necessary property. 2. Declaring a structure unfit
for use. Example: The state health department, acting through
its condemnation powers, prevented use of an old, dilapidated
shack because of violations of the housing code.
CONDITION(S) Provision(s)
in a contract that some or all terms of the contract will
be altered or cease to exist upon a certain event.
CONDITIONAL COMMITMENT
An agreement by a lender to provide a loan to a qualified
borrower, within a specified time period, but without stating
who the borrower will be.
CONDITIONAL OFFER
Purchase contract tendered to the seller that stipulates one
or more requirements to be satisfied before the purchaser
is obligated to buy.
CONDITIONAL SALES CONTRACT
A contract for the sale of property stating that the seller
retains title until the conditions of the contract have been
fulfilled.
CONDOMINIUM A
system of ownership of individual units in a multiunit structure,
combined with joint ownership of commonly used property (sidewalks,
hallways, stairs, etc.).
CONDOMINIUM OWNERS ASSOCIATION
An organization of all unit owners in a condominium to oversee
the common elements and enforce the bylaws.
CONFORMING LOAN
A mortgage loan that is eligible for purchase by FNMA or FHLMC.
CONFORMITY PRINCIPLE
An appraisal principle that holds that property tends to reach
maximum value when the neighborhood is reasonably homogeneous
in social and economic activity.
CONSIDERATION
Anything of value given to induce entering into a contract;
it may be money, personal services, a product etc.
CONSIGNMENT In
real estate finance, the process in which the FSLIC replaces
the management of an insolvent savings and loan association,
but allows the association to continue operating. Example:
Under the Southwest Plan, many savings and loan associations
in Texas were placed under a consignment program, in which
experienced managers from other S&Ls were recruited to
run the associations under federal supervision.
CONSTANT Same
as mortgage constant.
CONSTANT ANNUAL PERCENT
Same as mortgage constant.
CONSTANT PAYMENT LOAN
A loan on which equal payments are made periodically so as
to pay off the debt when the last payment is made. See Level
Payment Mortgage, variable payment plan.
CONSTRUCTION LOAN
One that finances subdivision costs and/or improvements to
real estate.
CONSTRUCTIVE EVICTION
The legal term describing a situation in which a lessor's
breach of a lease contract causes the lessee (tenant) to cancel
the contract and vacate.
CONSTRUCTIVE NOTICE
The law presumes that everyone has knowledge of a fact when
the fact is a matter of public record.
CONSTRUCTIVE RECEIPT
1. For tax purposes, the right to receive money that would
be taxable and is taxable, even if receipt is postponed. 2.In
real estate exchanges, the receipt of cash or other non-like-kind
property or the acquisition of the right to use or benefit
from such cash or property during an exchange transaction.
CONSUMER PRICE INDEX
The most widely known of many such measures of price levels
and inflation that are reported to the U.S. government. It
measures and compares, from month to month, the total cost
of a statistically determined "typical market basket"
of goods and services consumed by U.S. households.
CONTIGUOUS Actually
touching; contiguous proper-ties have a common boundary.
CONTRACT An agreement
between competent parties to do or not to do certain things
for a consideration.
CONTRACT FOR DEED
Same as land contract.
CONTRACT OF SALE
Same as agreement of sale.
CONTRACTOR One
who contracts to supply specific goods or services, generally
in connection with development of a property.
CONTRACT PRICE (TAX)
In an installment sale, for tax purposes, generally the selling
price less existing mortgages assumed by the buyer.
CONTRACT RATE
Same as face interest rate.
CONTRACT RENT
The amount of rent that has been set forth in a contract.
Contrast with economic rent
CONTRIBUTION A
principle of valuation that states that the value of any portion
of a property is determined by how it affects the performance
of the total property. Therefore, a property is considered
a combination of features, each of which adds something to
the total value based on its contribution to the property's
usefulness.
CONVENTIONAL LOAN
1. A mortgage loan other than one guaranteed by the Veterans
Administration or insured by the Federal Housing Administration.
2. A fixed-rate, fixed-term mortgage loan.
CONVERSION 1.
Changing property to a different use or form of ownership,
such as when apartments are transformed to condominiums. 2.
The taking away of property that belongs to another person.
See also involuntary conversion. 3. A change in the ownership
form of a savings and loan association.
CONVERTIBLE ARM
An adjustable rate mortgage that offers the borrower the option
to convert payments to a fixed-rate schedule at a specified
period within the term of the loan. Conversion is made for
a nominal fee, and the interest rate on the fixed-rate loan
is determined by a rule specified in the ARM loan agreement.
CONVEY To deed
or transfer title to another.
CONVEYANCE The
transfer of the title of real estate from one to another;
the means or medium by which title of real estate is transferred.
CO-OP 1. An arrangement
between 2 real estate agents that generally results in splitting
the commission between them. 2. A type of housing in which
each tenant is a shareholder in a omission.
COOPERATING BROKER
One who agrees to share the commission with another broker.
COOPERATIVE A
type of corporate ownership of real property whereby stockholders
of the corporation are entitled to use a certain dwelling
unit or other units of space. Special income tax laws allow
the tenant stockholders to deduct interest and property taxes
paid by the corporation.
CORPORATION A
legal entity properly registered with the secretary of state.
Can have limited liability, perpetual life, freely transferable
shares, and centralized management.
CORPOREAL Visible
or tangible real or personal property. Example: Buildings,
pavement, fences, and the like are corporeal Easements are
incorporeal.
COSIGNER Same
as accommodation party.
COST APPROACH
A method of appraising property based on the depreciated reproduction
or replacement cost (new) of improvements, plus the market
value of the site.
COST ESTIMATNG
In construction, the act of predicting the total costs of
labor, materials, capital, and professional fees required
to construct a proposed project.
COST OF LIVING INDEX
An indicator of the current price level for goods and services
related to some base year.
COST-PLUS-PERCENTAGE CONTRACT
An agreement on a construction project in which the contractor
is provided a specified percentage profit over and above the
actual costs of construction. These contracts are considered
poor business practice because the contractor has little incentive
to hold down costs. A cost-plus-fixed-fee contract is a better
approach.
COTENANCY Any
of a number of forms of multiple ownership such as tenancy
in common and joint tenancy.
COUNSELING The
act of advising clients on a variety of real estate investment
or development matters.
COUNSELOR OF REAL ESTATE
(CRE) A member of the American Society of Real Estate
Counselors (ASREC). Membership is based on experience and
professional conduct as a real estate counselor.
COUNTEROFFER Rejection
of an offer to buy or sell, with a simultaneous substitute
offer.
COVENANT NOT TO COMPETE
A clause in an agreement where one party promises not to offer
to sell or produce the same goods and services in proximity
to the other party.
COVENANT RUNNING WITH THE
LAND A covenant restricting or limiting property
rights to land, or a deed restriction, in which it is specified
that ownership of the land cannot be transferred unless the
new owner agrees to continue to abide by the covenant.
COVENANTS Promises
written into deeds and other instruments agreeing to performance
or nonperformance of certain acts, or requiring or preventing
certain uses of the property.
CPM Certified Property
Manager A professional designation of the Institute
of Real Estate Management (IREM).
CRAM DOWN In bankruptcy,
the reduction of various classes of debt to a lower amount,
with acceptance by the bankruptcy court.
CRB Certified Real Estate
Brokerage Manager A professional designation of
the Realtors National Marketing Institute (RNMI).
CRE Counselor of Real Estate
Member of the American Society of Real Estate Counselors (ASREC).
CREATIVE FINANCING
Any financing arrangement other than a traditional mortgage
from a third-party lending institution.
CREDIT 1. In finance,
the availability of money. 2. In accounting, a liability or
equity entered on the right side of the ledger.
CREDITOR One who
is owed money.
CREDIT RATING (REPORT)
An evaluation of a person's capacity (or history) of debt
repayment. Generally available for individuals from a local
retail credit association; for businesses publicly held by
companies such as Dunn & Bradstreet; and for - bonds by
Moody's, Standard & Poors, and Fitch's. individuals have
access to their own files.
CRS Certified Residential
Specialist A professional designation of the Realtors
National Marketing Institute (RNMI).
CUL-DE-SAC A street
with an intersection on one end and a closed turning area
on the other. often valued in the design of residential subdivisions
for the privacy provided to homes on the street.
CURABLE DEPRECIATION
Depreciation or deterioration that can be corrected at a cost
less than the value that will be added.
CURRENT YIELD
A measurement of investment returns based on the percentage
relationship of annual cash income to the investment cost.
CURTESY The right
of a husband to all or part of his deceased wife's realty
regardless of the provisions of her will. Exists in only a
few states.
CUSTOM BUILDER
One who builds unique houses; contrast with tract house.
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