Terms

Article 5

The part of the Business and Professions Code governing transactions in real property sale contracts and trust deeds.

Article 6

The part of the Business and Professions Code governing real property securities dealers.

Article 7

The part of the Business and Professions Code governing commissions, loan costs, and payment requirements in loan brokerage activities.

asbestos

A mineral once used in insulation and other materials that can cause respiratory diseases. Asbestos has been classified as carcinogenic. (See carcinogen)
  National Safety Council on Asbestos

asbestos containing material (ACM)

The EPA defines asbestos containing material as any material or product that contains more than one percent asbestos. Some states regulate smaller percentages of asbestos containing material.

Asbestosis

A disease associated with inhalation of asbestos fibers. The disease makes breathing progressively more difficult and can be fatal. (See asbestos)

assemblage

The combining of two or more adjoining lots into one larger tract to increase their total value.

assessment

The imposition of a tax, charge or lein, usually according to established rates.

asset

An asset is something of value, encumbered or not, owned by a person, corporation or other entity. Assets are financial (cash or bonds), tangible or intangible, or physical (real or personal property).

asset management

The assembly, management and disposition of a portfolio of investment properties.

assignment

The transfer of the right, title and interest in the property of one person (the assignor) to another (the assignee). There are assignments of, among other things, mortgages, sales contracts, contracts for deeds, leases and options.

associate broker

A real estate license classification used in some states to describe a person who has qualified as a real estate broker but still works for and is supervised by another broker; also called a broker-salesperson, broker-associate or affiliate broker.

assumption "subject to"

When a loan is taken "subject to," the seller agrees to remain liable and the buyer accepts no liability in the event of a deficiency on a foreclosure. (See assumption of mortgage, foreclosure)

assumption of mortgage

The acts of acquiring title to property that has an existing mortgage and agreeing to be personally liable for the terms and conditions of the mortgage, including payments. (See acceleration clause, due-on-sale clause, novation, subrogation)

attachment

The legal process of seizing the real or personal property of a defendant in a lawsuit by levy or judicial order, and holding it in court custody as security for satisfaction of a judgment. The lien is thus created by operation of law, not by private agreement. The plaintiff may recover such property in any action upon a contract, express or implied.

Attorney General

The chief law officer of the federal or state government, who appears for the people in criminal court.

attorney's opinion of title

An abstract of title that an attorney has examined and has certified to be, in his or her opinion, an accurate statement of the facts concerning the property ownership. (See abstract of title)

attorney-in-fact

A competent and disinterested person who is authorized by another person to act in his or her place. In real estate conveyance transactions, an attorney-in-fact, who has a fiduciary relationship with his or her principal, should be so authorized by way of a written, notarized and recordable instrument called a power of attorney. (See power-of-attorney)

attractive nuisance doctrine

An owner has a duty to reasonably protect children from injury when his or her property is likely to attract children.

auction

Selling property to the highest bidder.

automated underwriting

Computer systems that permit lenders to expedite the loan approval process and reduce lending costs.

automatic extension

A clause in a listing agreement that states that the agreement will continue automatically for a certain period of time after its expiration date. In many states, use of this clause is discouraged or prohibited.

avulsion

The sudden tearing away of land, as by earthquake, flood, volcanic action or the sudden change in the course of a stream.

back-end qualification

When qualifying a prospective buyer for financing, the ratio of the borrower's income to monthly debt obligation is a primary consideration. Based on "back-end qualification," the ratio of a prospect's income to their total housing expense plus their long-term debt obligation should not exceed 36%. (See front-end qualification, prequalify)

back-end ratio

The ratio of monthly housing costs (PITI) plus long-term debt service to total monthly income. (See front-end ratio, PITI)

backup offer

An offer to buy, submitted to a seller, with the understanding that the seller has already accepted a prior offer; a secondary offer. Sometimes the seller accepts the backup offer contingent on the failure of the sales transaction on the part of the first purchaser within a specified period of time. The seller must be careful how he or she proceeds, however, when the time for the buyer's performance, under the first contract, has expired.

bail bond lien

A real estate owner who is charged with a crime for which he or she must face trial, and may post bail in the form of real estate rather than cash. The execution and recording of such a bail bond creates a specific, statutory, voluntary lien against the owner's real estate. If the accused fails to appear in court, the lien may be enforced by the sheriff or another court officer.

balance

The appraisal principle that states that the greatest value in a property will occur when the type and size of the improvements are proportional to each other as well as the land.

balanced trust

A "combination trust" is referred to as a "balanced trust" in California. (See combination trust)

balloon payment

Under an installment loan agreement, a final payment that is substantially larger than the previous installment payments and repays the debt in full; the remaining balance that is due at maturity (stop date) of a note or obligation. (See amortization, fully amortized, stop date)

baluster

Any of the vertical supports for a stair, balcony or railing.

banker's rule

Using a 360-day year for prorations.

bankruptcy

A condition of financial insolvency in which a person's liabilities exceed assets and the person is unable to pay current debts.

bankruptcy score

A scoring system to indicate risk of borrower default. (See bankruptcy)

bargain and sale deed

A deed that carries with it no warranties against liens or other encumbrances but that does imply that the grantor has the right to convey title. The grantor may add warranties to the deed at his or her discretion.

base line

One of a set of imaginary lines running east and west used by surveyors for reference in locating and describing land under the government survey method of property description.

basic form homeowner's policy

The most common homeowner's policy is called a basic form. It provides property coverage against fire and lightning; glass breakage; windstorm and hail; explosion; riot and civil commotion; damage by aircraft; damage from vehicles; damage from smoke; vandalism and malicious mischief; theft; and loss of property removed from the premises when it is endangered by fire or other perils. (See homeowner's insurance policy)

basis

The dollar amount that the Internal Revenue Service attributes to an asset for purposes of determining annual depreciation or cost recovery, and gain or loss in the sale of the asset. The determination of basis is of fundamental importance in tax aspects of real estate investment. All property has a basis. If property was acquired by purchase, the owner's basis is the cost of the property plus the value of any capital expenditures for improvements to the property, reduced by any cost recovery depreciation actually taken or allowable. The basis is also reduced by any untaxed gain "carried over" to the new property in cases where the new property is a replacement of a former residence or is acquired through a like-kind exchange or through an involuntary conversion. This new basis is called the property's adjusted basis. (See adjusted basis, depreciable basis, original basis)

before-tax cash flow

The result when the annual debt service is subtracted from the net operating income. (See annual debt service, net operating income)

benchmark

A permanent reference mark or point established for use by surveyors in measuring differences in elevation.

beneficiary

A person who receives benefits from the gifts or acts of another, as in the case of one designated to receive the proceeds from a will, insurance policy, or trust; the real owner, as opposed to the trustee who holds only legal title. With a trust, the trustee holds the legal title, but the beneficiary enjoys the benefits of ownership.

beneficiary statement

When an existing loan is to be paid or assumed by a buyer, the escrow agent will obtain a statement of the balance due on the loan so the buyer receives the proper amount of credit.

best-faith estimate

The acquisition cost is the purchase price plus a "best-faith estimate" of all settlement costs. (See acquisition cost)

BIF

Bank Insurance Fund

bilateral contract/agreement

A contract in which each party promises to perform an act in exchange for the other party's promise to perform. The usual real estate contract is an example of a bilateral contract in which the buyer and seller exchange reciprocal promises respectively to buy and sell the property. If one party refuses to honor his or her promise and the other party is ready to perform, the nonperforming party is said to be in default.

bill of sale

A written agreement by which one person sells, assigns or transfers to another his or her right to, or interest in, personal property. A bill of sale is sometimes used by a seller of real estate to evidence the transfer of personal property, such as when the owner of a store sells the building and includes the store equipment and trade fixtures.

binder

An agreement that may accompany an earnest money deposit for the purchase of real property as evidence of the purchaser's good faith and intent to complete the transaction.

binder policy

A type of title insurance policy offered by some title companies which allows for a refund of the basic title insurance rate if the property is sold within a specified period of time.

bird dogs

See centers of influence.

biweekly loan

A loan with twice-monthly payments to match a borrower's payroll schedule.

blanket trust deed

A trust deed secured by several properties or a number of lots. A blanket mortgage is often used to secure construction financing for proposed subdivisions or condominium development projects. The developer normally seeks to have a "partial release" clause inserted in the mortgage so that he or she can obtain a release from the blanket loan for each lot as it is sold, according to a specified release schedule.

blended rate

An interest rate for a newly financed loan that is higher than the existing rate but lower than the current market rate.

blind ad

An advertisement that does not include the name and address of the person placing the ad, only a phone number or post office box address. Licensed brokers are generally prohibited by state license laws from using blind ads.

blockbusting

An illegal and discriminatory practice whereby one person induces another to enter into a real estate transaction from which the first person may benefit financially by representing that a change may occur in the neighborhood with respect to race, sex, religion, color, handicap famial status or ancestry of the occupants. A change possibly resulting in the lowering of the property values, a decline in the quality of schools or an increase in the crime rate. Also called panic selling or panic peddling.

blue-sky provision

Requiring full disclosure of all risks in a limited partnership solicitation under the Uniform Partnership Act. (See Uniform Partnership Act)

bona fide

In good faith, honestly, openly, and sincerely and without deceit or fraud. In an attitude of trust and confidence, without notice of fraud.

bond

1. A debt instrument; an obligation to pay; a security issued by a corporation. 2. A written promise that accopmpanies a mortgage and is evidence of the debt secured by the mortgage. 3. An interest-bearing certificate issued by a government to finance public projects. (See security)

boot

Money or other property that is not like-kind, which is given to make up any difference in value or equity between exchanged properties. Boot may be in the form of cash, notes, gems, the market value of an asset such as a mortgage, land contract, personal property, goodwill, a service or a patent offered in an exchange. The taxable gain in the like-kind exchange is recognized immediately to the extent of boot, whereas, other gain from the exchange may be deferred until subsequent transfer. (See exchange, like-kind)

branch office

A secondary place of business apart from the principal or main office from which real estate business is conducted. A branch office usually must be run by a licensed real estate broker working on behalf of the broker.

breach of contract

Violation of any of the terms or conditions of a contract without legal excuse; default; nonperformance. The nonbreaching party can usually seek one of three alternative remedies upon a material breach of the contract: rescission of the contract, action for money damages or an action for specific performance.

break-even point

In income property, the figure at which rental income is equal to expenses and debt service.

breaker

A switch-like device in electrical panel boxes used to keep the electrical current from exceeding the recommended load for the wire size connected to the breaker.

breaker panel

A large rectangular shaped electrical box used to distribute electricity throughout a house after passing through protective breakers located within the box. (See breaker)

bridge loan

A short-term loan made to cover the period between the termination of one loan, such as an interim construction loan, and the beginning of another loan, such as a perminent takeout loan. (See interim financing, swing loan, takeout)

broad-form homeowner's policy

Covers falling objects; damage due to the weight of ice, snow or sleet; collapse of all or part of the building; bursting, cracking, burning or bulging of a steam or hot water heating system or of appliances used to heat water; accidental discharge, leakage or overflow of water or steam from within a plumbing, a heating or an air-conditioning system; freezing of plumbing, heating and air-conditioning systems and domestic appliances; and injury to electrical appliances, devices, fixtures and wiring from short circuits or other accidentally generated currents.

broker

One who acts as an intermediary on behalf of others for a fee or commission.

broker cooperation

Working with outside licensed real estate brokers who have prospective tenants in exchange for a finder's fee or commission split.

brokerage

The bringing together of parties interested in making a real estate transaction. The business of a broker in acting as a third party agent to a transaction.

brownfields

Economically depressed urban areas suffering from real or perceived hazardous material contamination.

budget loan

A loan with payments set up to cover taxes and insurance in addition to interest and principal reductions.

build-up rate

The discount or interest rate used in the selection of the capitalization rate for an investment property. (See capitalization rate)

building code

An ordinance that specifies minimum standards of construction for buildings to protect public safety and health. (See Uniform Building Code)

building inspection

An overall inspection of a home or building performed by a qualified contractor or inspector. The inspection usually covers all major systems including foundation, plumbing, electrical, roof, heating and air conditioning.

Building Owners and Managers Association (BOMA)

A national organization of more than 4,000 professionals in the highrise/office building industry, with 80 local BOMA associations. The Building Owners and Managers Institute (BOMI) is the related educational institute that provides professional training in all aspects of building management and operations via courses in individual study leading to professional certification as a Real Property Administrator (RPA). The seven required courses are Engineering and Building Structures, Real Property Maintenance, Risk Management and Insurance, Accounting and Financial Concepts, Law, Finance and Management Concepts.
  Building Owners and Managers Association Website

building permit

Written governmental permission for the construction, alteration or demolition of an improvement, showing compliance with building codes and zoning ordinances.

Bulk Sales Act

An act that requires the recording and publication of a sale that is not in the normal course of business. The act is intended to give notice to the creditors of the seller so they can protect their interests.

bulk sales transfer

Any transfer in bulk (and not a transfer in the ordinary course of the seller's business) of a major part of the materials, inventory or supplies of an enterprise. The Uniform Commercial Code (UCC) regulates bulk transfers to deal with such commercial frauds as a merchant selling out stock, pocketing the proceeds and leaving creditors unpaid. The UCC requires the buyer of the goods to demand that the seller provide a schedule of all the property and a list of all creditors and that the buyer give notice to creditors of the pending sale. Failure to comply with UCC means that the transfer or sale is ineffective in respect to the claims of any creditor of the seller. Bulk transfers usually become relevant upon the liquidation or sale of a business.Under state law, a bulk sale must be reported by the seller to the state tax authorities, and the purchaser must withhold payment until the seller's tax clearance is received. If the tax clearance is not made, the purchaser may become liable for any unpaid taxes that are a lien against the items sold. (See Uniform Commercial Code)

bulk transfer of goods

Any transfer in bulk of a substantial part of the materials, supplies, merchandise, equipment or other inventory of an applicable enterprise that is not in the ordinary course of the transferor's business.

bulk zoning

Zoning for density. Regulates height restrictions, open-space requirements, parking and setback. (See zoning)

bullet loan

A loan that includes a call date earlier than its normal amortization period; also called a renegotiable rate loan or a rollover loan.

bundle of legal rights

The concept of land ownership that includes ownership of all legal rights to the land. For example, possession, control within the law and enjoyment.

burden of proof

The obligation to prove the truth or falsity of a fact.

business cycle

The wavelike movement of increasing and decreasing economic prosperity consisting of four phases: expansion, recession, contraction and revival.

business opportunity

Any type of business that is for sale (also called business brokerage). The sale or lease of the business and goodwill of an existing business, enterprise or opportunity, including a sale of all or substantially all of the assets or stock of a corporation, or assets of partnership or sole proprietorship.

buydown

A financing technique used to reduce the monthly payments for the first few years ofa loan. Funds in the form of discount points are given to the lender by the builder or seller to buy down or lower the effective interest rate paid by the buyer, thus reducing the monthly payments for a set time.

buyer listing

An agreement where a buyer agrees to pay a commission if a broker locates a property that the buyer purchases.

buyer's agent

A residential real estate broker or salesperson who represents the prospective purchaser in a transaction. The buyer's agent owes the buyer/principal the common-law or statutory agency duties. (See seller's agent)
  Real Estate Buyer's Agent Council Online
  National Association of Exclusive Buyer Agents

buyer's broker

A broker who represents the buyer in a fiduciary capacity. Some buyer's brokers practice single agency, in which they represent either buyers or sellers, but never both in the same transaction. Some buyer's brokers represent only buyers and refer prospective sellers to other brokers. The broker is paid by the buyer, or through the seller or listing broker at closing, provided all parties consent.

buyer's remorse

Buyers of expensive items, like a home or automobile, sometimes regret their decision. They wonder if they paid too much or made the wrong selection. This fear of having made a serious mistake is referred to as "buyer's remorse."

buyer-agency agreement

A principal-agent relationship in which the broker is the agent for the buyer, with fiduciary responsibilities to the buyer. The broker represents the buyer under the law of agency.

buying motives

Ownership of real estate satisfies certain basic human needs. These needs are what motivate a person to purchase real property. They include: comfort and convenience, desire for profit, pride of ownership, and security.

buying on contract

A type of contract used in connection with the sale of real property where the seller retains legal title to the property until some future date, usually when the full purchase price has been paid. Referred to as one of four terms, all meaning much the same thing: agreement to convey, contract for deed, contract of sale, or installment sales contract.

buying signals

Words, actions or facial expressions that signal a prospect's readiness to buy.

CAL-FIRPTA

California's version of the federal FIRPTA. It is a tax act which became effective in 1988 and was subsequently amended in September, 2002 to become a withholding tax for residents and non-residents who sell California real estate. Assembly Bill 2065 requires that all sales closing after December 31, 2002 in California withhold 3 1/3% of the sales price for certain California real property transactions. (See FIRPTA)

Cal-Vet

A program to help eligible California Veterans finance the purchase of farms and ranches within the state.
  Cal-Vet Loan Programs

California Environmental Quality Act

The Act allows local governments to require environmental impact reports for private or government projects that may have a significant impact on the environment. (See environmental impact report, National Environmental Policy Act)

California Housing Financial Discrimination Act of 1977

Also known as the Holden Act. A California act prohibiting discrimination by a lender for any reason unrelated to the creditworthiness of the loan applicant.

California Residential Mortgage Lending Act

An act administered by the Commissioner of Corporations which provides licensing authorizing mortgage lending and brokering.
  CRMLA pages at the Department of Corporations

canceling escrow

Providing written notification that an escrow is to be terminated; must be done by mutual consent of all parties to the escrow and in accordance with governing agreements.

capacity of parties

The legal ability of people or organizations to enter into a valid contract. A person entering into a contract will have full, limited or no capacity to contract.No capacity to contract: The inability of a person to enter into a valid contract under any circumstances. Such inability can arise when a person has been adjudicated insane or is an officer of a corporation who is not authorized to execute a contract in behalf of a corporation.