Mel feller mpa, mhr, discusses texas real estate

Mel Feller MPA, MHR, Discusses Texas Real Estate and Terms to Know
Mel is the President/Founder of Mel Feller Seminars with Coaching for Success 360, Inc. and
Mel Feller Coaching. Mel Feller is an Innovator and Business Leader. Mel Feller currently
maintains an office in Texas. Mel is currently an MBA Candidate.
Why should I buy, instead of rent?
You will love the feeling of having something that is all yours - a home where your own personal
style will tell the world who you are. A thriving vegetable garden in the backyard, a tiled
entryway, a yellow kitchen... when you own, you can do it all your way! However, there is more
to owning a home than personal satisfaction. You can deduct the cost of your mortgage loan
interest from your federal income taxes, and usually from your state taxes, too. And interest will
compose nearly all of your monthly payment, for
over half the number of years you'll be paying
your mortgage. This adds up to hefty savings at
the end of each year. Moreover, you are allowed
to deduct the property taxes you pay as a
homeowner. If you rent, you write your monthly
check and it is gone forever. Another financial
plus in owning a home is the possibility its value
will go up through the years.
Should I use a Buyer's Agent? How do I find one?
Using a Buyer's Agent is a very good idea. All the details involved in home buying, particularly the
financial ones, can be overwhelming. A good real estate professional can guide you through the
entire process and make the experience much easier. A Buyer's Agent will be well acquainted
with all the important things you will want to know about a neighborhood you may be
considering...the quality of schools, the number of children in the area, the safety of the
neighborhood, traffic volume, and more. He or she will help you figure the price range you can
afford and search the classified ads and multiple listing services for homes you will want to see.
With immediate access to homes as soon as they are put on the market, the broker can save you
hours of wasted driving-around time. When it is time to make an offer on a home, the Buyer's
Agent can point out ways to structure your deal to save you money. He or she will explain the
advantages and disadvantages of different types of mortgages, guide you through the paperwork,
and be there to hold your hand and answer last-minute questions when you sign the final papers
at closing. In addition, you do not have to pay the Buyer's Agent anything! The payment comes
from the home seller - not from the buyer.
Real Estate 101 Financing
Most all of us will need to finance our home purchase. A very important part of purchasing a
home is finding the right lender for you. Here we present some characteristics, which you should
Texas Real Estate and Terms to Know by Mel Feller

look for when choosing and evaluating a lender.
Remember that not only is the lender going to require a pre-qualification process from you
before authorizing a mortgage loan - but also that this is a two-way street, and that you will be
evaluating the lender to determine if they are the best source for your business. There are also a
few things you should be aware of concerning lenders, and we tell you what to look out for.
Questions you should ask or consider when shopping for a lender:
What is his/her reputation within the community?
Approximately how many loans do they close each year?
Is the company well known in the area and in the real estate community?
How long has the company been in business?
Does the lender have access to a wide variety of loan packages?
Can the interest rates be locked in, and for how long?
A few things to be aware of when shopping for a lender:
Quoted rates over the phone are rarely locked-in prices. This is one way the lender gets you to
come to his office. Rates can be subject to changes unless they are predetermined for a specific
period of time.
Interest rates can (and often will) change daily. A quote you get today may not be available to
you at the same price tomorrow.
Is the company well known in the area and in the
real estate community?
The interest rate you are quoted over the phone
may not be a program that will fit your needs or
situation.
Many lenders will discount their posted rates for
well qualified customers.
Moving Tips
One Month Before the Move
• Hire a moving company.
• Inventory and evaluate your possessions. This is an excellent time to get rid of clutter.
• Contact doctors, dentists, lawyers and accountants and obtain copies of your personal
records. Also, ask for referrals to replace these people in your new city.
• Get a change-of-address kit from the post office and send notices to everyone. Do not
forget to fill out a card for everyone in the household who receives mail.
• Pets and plants need special care. Arrange transportation. Bring pets to the vet for rabies
shots and health certificates if needed.
• Notify the principal of your children's schools and arrange for transfer of school records.

• Contact the gas, electric, oil, water, telephone, cable TV, newspaper and trash companies
for service disconnect/connect at your old and new addresses. Remember to keep phone
and utilities connected at your current home throughout moving day.
• Arrange for insurance coverage in your new location: auto, homeowner's, medical and
life.
• Plan a garage sale to sell unneeded stuff or arrange to donate them to charity. Get
receipts for possible tax deductions.
Three Weeks and Counting
• Make travel arrangements.
• Collect important papers (insurance, will, deeds, passport, stock certificates, birth records,
etc.
• Open bank accounts in your new city.
• Arrange to transfer your insurance on household goods and personal possessions so they
will be covered at your new home and enroute.
One Week Left
• Have your cars serviced.
• Arrange for sufficient cash or travelers checks to cover cost of moving and expenses. Cash
or certified check is required by the moving company. They will not unpack the van
without it.
• Check your safe deposit box, pick up any dry-cleaning, return library books and rented
video tapes, etc.
Two Days to Go
• Defrost freezer and refrigerator. Block doors open so they cannot accidentally close on
pets or children.
• Disconnect your major appliances and prepare them for the move.
• Pack a box of personal items needed immediately at your new home. Bring this with you if
possible.
• Organize and set aside those things you are bringing with you so they don't get loaded on
the van by accident.
Moving Day
• Supervise the loading. Read your bill of lading and inventory carefully before you sign
them. Keep these and all related papers in a safe place until all charges have been paid
and all claims, if any, have been settled.
• Leave house keys with your real estate agent.

Real Estate Terms To Be Familiar With
AAA TENANT A tenant with a top credit rating. To a real estate developer, attracting such a
tenant is important since the ability to arrange both construction and permanent financing for a
major commercial project, such as a shopping center or office building, is often dependent upon
pre- leasing a certain amount of the space to an AAA tenant(s).
AAE Accredited Assessment Evaluator. A professional designation awarded by the International
Association of Assessing Officers.
ABANDONMENT The voluntary release of a claim or right one has in a piece of property with the
clear intention of terminating possession or interest and without giving this interest to anyone
else. Abandonment includes both the intention to release any claim one has against the property
as well as the actual act of "abandoning" the property.
ABATEMENT A decrease or reduction in the amount of a charge such as rent. For example, a
tenant receives an abatement of rent during the time the leased space cannot be inhabited due
to fire or flood damage.
ABLE A term referring to the financial capability of a purchaser. The word is often used in a
phrase appearing in real estate listing agreements and sales contracts as "ready, willing and
able."
ABNORMAL SALE A sale that is not typical within the context of what is happening in the
marketplace.
Listings
ABODE A home or place of residence.
ABROGATE To repeal or cancel. For example, a law could be repealed (abrogated) by legislative
action.

ABSENTEE OWNER The owner(s) of property who does not physically reside on the property.
When this occurs someone other than the actual owner, such as a property manager, normally
does both the rental as well as the upkeep of the property.
ABSORPTION RATE The percentage of a particular type of real estate that can be sold or leased in
a particular location during a certain period.
ABSTRACT OF TITLE A condensed chronological history of all recorded instruments in the chain of
title, which affect the title.
ABSTRACTION (EXTRACTION) METHOD A method of estimating the value of land by establishing
a ratio of site value to total property value based on data from comparable improved properties.
The ratio derived from comparable properties is then applied to the total value of the property
being appraised to estimate the value of the land.
ABUT To border on or to share a common boundary. For example, a property owner could have
land that "abuts" a highway, which means the two properties border each other.
ACCELERATED DEPRECIATION The method(s) of depreciation for income tax purposes which
increases the write-off at a rate higher than under the straight-line method of depreciation.
ACCELERATION CLAUSE A clause in a promissory note, mortgage or deed of trust giving the
creditor (mortgagee) the legal right to demand immediate payment of all future payments due to
the occurrence of some event such as the default on an installment payment or the failure to
keep the property adequately insured.
ACCEPTANCE A voluntary expression by the person receiving the offer (the offeree, and quite
often the seller of the property) to be bound by the exact terms of the offer in the manner
requested or authorized by the person making the offer (the offeror, and quite often the
potential buyer of the property). An acceptance must be unequivocal and unconditional.
ACCESS The right to enter upon and leave property. The owner of land which abuts or adjoins a
road or highway normally has a vested right to come and go from his or her land to the highway
without obstruction, subject to limitations imposed by the governing body.

ACCESSIBILITY The ease with which a person can either enter or exit a particular parcel of land.
The accessibility of a particular parcel is a function of many things such as frontage to a road,
traffic flow, and topography. Good accessibility will usually result in higher value; likewise, a
parcel of land with poor accessibility will normally sell for less in the marketplace.
ACCESSION The legal right that entitles the owner of land to all that the soil produces or all that is
added to the land either intentionally or by mistake.
ACCESSORY BUILDING A second building on a lot and one that is not considered to be the
primary building. A storage shed or a detached garage would be an accessory building.
ACCORD AND SATISFACTION An agreed-to substitution of a different performance for the
original obligation, the accord being the agreement and the satisfaction the execution or
performance.
ACCREDITED RESIDENTIAL MANAGER (ARM) A professional designation awarded by the Institute
of Real Estate Management (IREM), an affiliate of the National Association of Realtors. The
designation is intended for those persons specializing in the management of residential property.
ACCRETION The accumulation of land (soil) as a result of the gradual washing or motion of water
(alluvion).
ACCRUED An accumulation over a certain period of time, such as accrued depreciation or accrued
interest.
ACCRUED DEPRECIATION Any diminishment or loss of utility or value of a building from the time
of initial construction to the present. Accrued depreciation is calculated as the difference
between what it would cost to replace the building new and the current appraised value of the
building.
ACCRUED INTEREST Unpaid interest that has already been earned.
ACKNOWLEDGMENT A formal declaration to a public official by a person who has signed
(executed) an instrument which states that the signing was voluntary.

ACQUISITION The act or process by which property ownership is achieved. The ways in which
title to real property is transferred may be classified as (1) voluntary conveyance (deed), (2)
transfer by devise (dying with a will) or descent (dying without a will), (3) transfer by adverse
possession, (4) transfer by accession and (5) transfer by public action or by operation of law.
ACQUISITION COST The total cost of purchasing or acquiring title to real property. In addition to
the sales price, additional costs could also include loan origination fees, appraisal fee, credit
report fee, title charges, attorney fees and other normal closing costs.
ACRE A measure of land in whatever shape equal to 43,560 square feet, 4,840 square yards or
160 square rods. A square parcel of land measuring 208.71 feet on each side contains one acre.
There are 640 acres in a section of land.
ACREAGE PROPERTY A large tract of land that has had few, if any, improvements made either
"to" the land, such as roads or the platting of individual lots, or "on" the land, such as buildings.
ACTION TO QUIET TITLE A lawsuit filed by a person to remove a cloud on title or clear the claims
of others filed against a parcel of property. The objective of such action is to have a court rule
that the claims filed against the property are invalid.
ACT OF GOD Any act of nature such as rain, lightning, floods or earthquakes. Many casualty
insurance policies do not cover losses resulting from an "Act of God."
ACTUAL AGE The historical (chronological) age of a building, as for example a building
constructed ten years ago is ten years old in actual age. Actual age should not be confused with
effective age which is the age of a building that is indicated by the condition and utility of the
improvement. It should be clear that the amount of maintenance and care given to a building
helps determine its effective age. For example, a ten-year-old building might have an effective
age of twenty-five years because of poor or deferred maintenance.
ACTUAL AUTHORITY The power that a principal has expressly conferred upon an agent or any
power that is incidental or necessary to carry out the express power of the agency. This power
may be broad, general power or it may be limited, special power.

ACTUAL CASH VALUE The monetary worth of a structure for insurance purposes. Actual cash
value is calculated by taking the replacement cost of the property and then subtracting the value
of the physical wear and tear of the property.
ACTUAL DAMAGES The compensation received by an injured party for the actual injuries or loss
suffered by the party.
ACTUAL EVICTION The violation of any material breach of covenants by the landlord or any other
act which wrongfully deprives the tenant of the possession of the premises.
ACTUAL POSSESSION The physical occupancy and control by someone of a parcel of real estate.
For example, if John has clear title to his house and is living in the house then he is in actual
possession of the house. A distinction should be made between actual possession and
constructive possession which occurs when a person has the legal right to assume occupancy but
does not actually occupy the space.
ADC LOAN A type of loan intended to cover the three phases of a project: (1) acquisition, (2)
development, and (3) construction. Such loans, while considered more risky than some other
types of real estate loans, are normally made with a variable interest rate and are expected to be
repaid over a reasonably short period of time.
ADDENDUM Something that is added and thus made part of a document. Quite often a real
estate listing agreement or sales contract is a pre-printed form and thus may not have the space
within the document to include specific and detailed information that the parties to the contract
wish to include.
ADD-ON-INTEREST A method of calculating the amount of interest due by taking the simple
interest that would be charged if the loan principal amount was not amortized over the term of
the loan. Periodic installments are thus calculated by dividing the sum of the add-on interest and
original principal by the number of periods in the term.
ADEQUATE PUBLIC FACILITIES ORDINANCE A local government ordinance that requires that
certain public facilities such as road and utilities be completed or soon to be completed before
any new real estate development can be permitted. This technique is used by municipalities to
control growth and direct new development toward areas where adequate public facilities exist.

ADJACENT LAND Land lying close to or near another parcel, though the two parcels may not
actually touch. The term should not be confused with adjoining land which exists when two
parcels are actually jointed to each other.
ADJUNCTION The process of adding or annexing a parcel of land to a larger parcel.
ADJUSTABLE RATE MORTGAGE (ARM) A type of real estate loan in which either the interest rate
charged or the length of the loan, or both, can change. Adjustable rate mortgages became very
popular during the 1980s due primarily to the reluctance of lenders to quote a fixed interest rate
loan to potential borrowers. By using an ARM, a lender is able to pass on the uncertainty of
changes in interest rates to the borrower if rates change during the life of the loan. ARMs are
normally tied to some index such as government securities.
ADJUSTED COST BASIS The value of property for accounting purposes used to determine the
amount of gain or loss realized by the owner upon the sale of the property.
ADJUSTED SALES PRICE The estimated sales price of a comparable property after additions
and/or subtractions have been made to the actual sales price for improvements and deficiencies
when compared to the subject property being appraised.
ADJUSTMENTS The additions and subtractions made in the market data or comparable sales
approach to value to account for differences in location, design, age, etc. between the properties
being used as comparables and the subject property being appraised.
ADMINISTRATOR A person appointed by a court to administer or settle the estate of a deceased
person who has died intestate (dying without a will).
ADMINISTRATRIX Feminine form of administrator.
ADMINISTRATOR'S DEED A conveyance of property which is issued to a grantee (purchaser) who
purchases property from an estate.
ADULT A person who has attained the age of majority and thus has the legal capacity to be bound
under a contract. The age of majority varies from state to state.

AD VALOREM A Latin prefix meaning "according to value." Local and state governments levy
taxes on real property based on the assessed value of the property. Two different pieces of
property with the same assessed value have the same ad valorem tax.
ADVANCE The word has two common meanings in real estate finance: (1) to pay or advance
money before it is due, and (2) to disburse working capital to a builder/developer through a
construction loan. Under the first meaning, an owner might have both a first mortgage and a
second mortgage on a parcel of real estate.
ADVERSE POSSESSION A method of acquiring title to real property by possession for a statutory
period of time.
AESTHETIC VALUE The intangible value of property created when the property possesses unique
characteristics or features that make it attractive.
AFFIANT The person who makes an affidavit.
AFFIDAVIT Latin meaning "has pledged his faith." A written statement of facts made voluntarily
and sworn to under oath before a public official or other persons authorized to administer such
an oath.
AFFIDAVIT OF TITLE A sworn statement by the seller of real estate that no defects of title other
than those stated in the sales contract or deed exist in the title being conveyed.
AFFIRM Ratification of a voidable contract by the party who is to be bound under the contract.
AFFIRMATION A solemn and formal declaration attesting to the truth of some matter. In certain
instances, an affirmation is substituted for an oath, as for example, when a person for religious or
personal reasons does not wish to take an oath.
AFFIRMATIVE FAIR HOUSING MARKETING PLAN Action taken with the intent of encouraging
minority integration in housing. The Department of Housing and Urban Development (HUD) has
required an affirmative fair housing marketing plan from all subdivisions, multi-family projects
and mobile home parks of five or more units before these projects are eligible for participation in

various federal programs, including home mortgage programs.
AFTER ACQUIRED TITLE Legal ownership in real property acquired by someone who had
previously transferred his or her legal interest in the property.
AFTER-TAX CASH FLOW The spendable cash from an income- producing asset, such as an office
building or apartment complex, calculated by taking gross income and subtracting fixed and
variable costs, replacement for reserves, debt service plus tax savings or minus tax liability.
AFTER-TAX EQUITY YIELD RATE The internal rate of return on the equity investment after
considering federal income taxes.
AFTER-TAX PROCEEDS FROM RESALE The amount of money a property seller would receive from
a property sale after subtracting transaction costs, capital gains taxes and other expenses.
Generally, this figure is calculated by taking the selling price less the sum of the existing debt, the
income or capital gains taxes, and the expenses of sale.
AGE-LIFE METHOD A method of estimating accrued depreciation by applying to the reproduction
cost new of the property the ratio of the property's effective age to its economic useful life.
AGENCY A relationship in which one party (known as the principal) authorizes another party (the
agent) to act as the principal's representative in dealing with third parties. Agency law generally
involves rights and liabilities among these three parties.
AGENCY BY ESTOPPEL (Ostensible Agency) A type of agency relationship that occurs when the
principal in a principal-agent relationship leads a third person to believe that someone is an
agent. The principal may create the impression of agency either intentionally or negligently.
AGENCY BY NECESSITY An agency relationship in which authority to act is created by operation of
law in an emergency. During such an emergency, it is generally unnecessary to gain consent from
a principal in order for a person to act to protect property or person.
AGENCY BY RATIFICATION A type of agency relationship that occurs when a principal agrees to
be bound by the acts of a person purporting to act as an agent, even though the person was not

in fact an agent. The principal may also be bound if there are acts of an agent who acted beyond
the scope of authority.
AGENT One who acts for and in the place of a principal for the purpose of affecting the principal's
legal relationship with third persons. The power of an agent to affect the principal's legal
relations for lawful purposes is called authority.
AG LAND Land zoned for agricultural use such as farmland or land used to raise livestock.
AGGRAVATION COSTS The annoyance and irritation to a driver or passenger during a linkage trip
caused by congestion, bad weather, delay or other inconveniences.
AGREEMENT An expression of mutual assent, or a meeting of the minds, by two or more parties
on a given proposition.
AGRICULTURAL PROPERTY Land zoned for agricultural or farming activities.
AIR RIGHTS The right to use, control and occupy the space above a particular parcel of real
estate.
ALC Accredited Land Consultant. A professional designation awarded by the Realtors Land
Institute to people involved in the marketing and brokerage of land.
ALIENATION The voluntary transfer of property and possession of the land or tenements from
one party to another.
ALIENATION CLAUSE A provision often included in a mortgage or deed of trust that legally
permits the lender (mortgagee) to demand payment of all the outstanding principal if the
property is sold or transferred by the borrower (mortgagor). Such a provision is also commonly
known as a due-on-sale clause.
ALLOCATION (ABSTRACTION) METHOD An appraisal technique used to estimate the value of the

site (land) by deducting the value of the improvements from the total sales price of the property.
ALLODIAL SYSTEM The free and complete ownership of land by individuals. The allodial system is
the system of property ownership in America today. The term allodial means free from the
tenurial or vested rights in the king or feudal overlord.
ALLUVION The increase of soil, gravel or sand upon the bank of a stream or river or the shore of a
sea due to the flow or current of the water. The actual act of the soil being added is known as
accretion.
ALONSO, WILLIAM An urban economist who believed that urban sites are composed of both land
and location. In his book, Location and Land Use, Alonso explained the trade-off that exists
between land rent and the transportation cost incurred by individuals in determining where to
locate within an urban area.
ALTERATION An unauthorized modification of a contract by one of the parties to the contract.
The alteration is considered material when it affects the rights of the parties to the contract. If
the alteration is intentional and material, it will be treated as fraud and the innocent party may
void the contract at his or her option.
AMENITY A feature or benefit received from a particular parcel of property, which increases the
satisfaction received by the owner or user of that property. Amenities may be both natural, for
example, location or scenic view, and manmade, such as a swimming pool or tennis courts. Both
material and manmade amenities increase the desirability of a certain location or parcel of land
and thus that particular land will normally have a higher value than a parcel of land without the
amenities.
AMERICAN BANKERS ASSOCIATION (ABA) Membership in the American Bankers Association is
comprised of persons employed in the commercial banking business. The organization serves as a
spokesman for the banking community. The Association is headquartered at Connecticut Avenue,
N.W., Washington, D.C. 20036; (202) 663-5000.
AMERICAN ECONOMIC DEVELOPMENT COUNCIL (AEDC) The American Economic Development
Council is an international organization whose mission is to advance the art and science of
economic development. AEDC publishes a journal, Economic Development Review, and awards
the professional designation CIDICED (Certified Industrial or Economic Developer). The council's
address is Suite 22, 4849 North Scott Street, Schiller Park, Illinois 60176.

AMERICAN INSTITUTE FOR PROPERTY AND LIABILITY UNDERWRITER The American Institute for
Property and Liability Underwriters is the main professional organization of property insurance
agents. In addition to numerous educational programs and seminars, a professional designation,
CPCU (Chartered Property Casualty Underwriter), is sponsored by the institute. The mailing
address is Providence and Sugartown Roads, Malvern, Pennsylvania 19355; (215) 64-2100.
AMERICAN INSTITUTE OF ARCHITECTS This institute awards the designation AL4 and is the
primary group for promoting architecture as a profession. Among the group's activities is its
national committee on housing which provides numerous services in an effort to improve the
quality of the living environment. The institute is located at 1735 New York Avenue, N.W.,
Washington, D.C 20006; (202) 626-7300.
AMERICAN INSTITUTE OF HOUSING CONSULTANTS This organization works with nonprofit
sponsors in developing low-income housing. The institute also serves as a spokesman for low-
income housing.
AMERICAN LAND DEVELOPMENT ASSOCIATION (ALDA) The American Land Development
Association is a trade organization comprised primarily of land developers. The association's
primary function is to represent the interstate land development industry in matters related to
land development. The mailing address is 1200 L Street, N.W., Washington, D.C. 20005; (202)
371-6700.
AMERICAN LAND TITLE ASSOCIATION (ALTA) An association, founded in 1907, representing
more than 2,100 title abstractors, title insurance companies, title insurance agents, and associate
members. Since the role and responsibility of the title industry, and of its ALTA members, is to
guarantee the safe, efficient transfer of real property, the ALTA membership functions
cooperatively and effectively to provide protection for consumers and lenders alike. Members of
the association use standardized title insurance forms developed by ALTA to provide uniformity
within the industry. The ALTA staff represents specialists in the fields of government relations,
public affairs, research and state governmental affairs. ALTA’s national headquarters is located at
1828 L Street, N.W., Suite 303, Washington, D.C. 20036; (202) 296-3671.
AMERICAN PLANNING ASSOCIATION (APA) A professional trade association comprised of both
publicly and privately employed planners. APA was formed by the merger of the American
Institute of Planners and the American Society of Planning Officials. The association is located at
1313 East 60th Street, Chicago, Illinois 60637; (312) 947-2560.

AMERICAN REAL ESTATE AND URBAN ECONOMICS ASSOCIATION (AREUEA) The principal
professional organization of real estate education, AREUEA consist of both educators and
professional practitioners. The association publishes a journal of articles dealing with land use,
urban economics and related topics.
AMERICAN SOCIETY OF APPRAISERS An appraisal organization consisting of persons involved in
the appraisal of both real and personal property. The society sponsors the designation ASA. The
society's mailing address is Dulles International Airport, P.O. Box 17265, Washington, D.C. 20041;
(703) 478-2228.
AMERICAN SOCIETY OF CONSULTING PLANNERS A professional society whose membership is
limited to private planning firms. The society offers various services to its members and serves as
a spokesman for consulting planners. The address is Suite 647, 210 7th Street, S.E., Washington,
D.C. 20003; (202) 544-0035.
AMERICAN SOCIETY OF HOME INSPECTORS, INC. (ASHI) A professional trade organization whose
membership specializes in the physical inspection of homes. ASHI publishes numerous pamphlets
and proceedings, conducts seminars and provides a Standards of Practice. The society's address is
7th Floor, 3299 K Street, N.W., Washington, D.C. 20007; (202) 842- 3096.
AMERICAN SOCIETY OF REAL ESTATE COUNSELORS (ASREC) As an affiliate with the National
Association of Realtors, this society consists of real estate brokers, appraisers, and consultants
involved in assisting people in the buying and selling of real estate. The professional designation
CPE (Counselor, Real Estate) is awarded by the society. The mailing address is 430 North Michigan
Avenue, Chicago, Illinois 60611; (312) 440-8091.
AMO Accredited Management organization. A professional designation awarded by the Institute
of Real Estate Management to companies involved in the management of property.
AMORTIZATION The repayment of a financial obligation over a period of time in a series of
periodic installments. Specifically, this is the payback of the principal owed to the lender. The
effect of amortization is to build up the paper value of the investor's (owner's) equity and to
reduce the debt obligation. It should be noted that a portion of each payment consists of a blend
of interest and amortization of principal. The interest portion is tax deductible, whereas the
amortization is not.

AMORTIZATION RATE The percentage of a periodic payment that is applied to the reduction of
the principal; in a level- payment mortgage this corresponds to the sinking fund factor.
AMORTIZATION TERM The time period over which the principal amount would be retired on the
basis of the periodic installments paid.
AMORTIZED LOAN A financial obligation that is repaid over a period of time by a series of
periodic payments.
ANACONDA MORTGAGE A type of mortgage in which a clause is included which states that the
mortgage secures all debts of the mortgagor (borrower) that may be due and payable to the
mortgagee (lender). Such a provision is also referred to as a Mother Hubbard clause.
ANALYST An individual who performs various studies and calculations to help make decisions or
solve problems concerning real estate investments.
ANCHOR TENANT A well-known commercial retail business such as a national chain store or
regional department store strategically placed in a shopping center so as to generate the most
amount of customers for all of the stores located in the shopping center.
ANNEXATION The act of adding, joining and attaching one thing to another. With respect to the
annexing of land, from time to time municipalities legally incorporate into the existing town or
city limits a certain amount of land or territory outside their legal boundary. This may be done to
consolidate two governments into one or perhaps to increase property tax revenue for the
municipality.
ANNUAL Occurring once a year.
ANNUAL DEBT SERVICE Total payments required in one year in regard to a loan. The amount of
payment is affected by either a change in the interest rate or a change in the payback period.
ANNUAL LOAN CONSTANT A ratio of the annual debt payment on a loan to the original amount
borrowed. The loan constant is also referred to as a mortgage constant.

ANNUAL PERCENTAGE RATE (APR) The actual yearly cost of credit stated to the nearest one-
fourth of one percent. Any lender subject to the federal Truth-in-Lending Act must fully disclose
the APR to the borrower.
ANNUITY A series of payments made or received at even intervals either for life or for a fixed
number of years.
ANNUITY IN ADVANCE An annuity in which payments are made at the beginning of each period
as contrasted with an ordinary annuity in which payments are made at the end of each period.
ANNUITY METHOD A means of capitalizing future income streams from an investment. The
procedure uses compound interest formulas that treat the income stream as an annuity
providing for both a return "on" the investment and a return "of" the investment.
ANTICIPATION, PRINCIPAL OF A basic value principle which states that value changes in
expectation of some future benefit or detriment affecting the property. For example, the value of
a vacant parcel of land may increase if an office building is constructed next to it; likewise, use of
land as an open dump may result in decreased values of surrounding residential properties.
ANTITRUST LAWS State and federal laws enacted to protect individuals and business entities
from monopolies and unfair restrictions. For example, local real estate boards cannot require its
members to charge a certain brokerage commission rate since to do so would be in violation of
federal antitrust laws.
APARTMENT BUILDING A type of property intended for permanent residents who lease a specific
space or unit. Payment for use of the space is referred to as rent.
APPARENT AUTHORITY In agency law such authority which a third person can reasonably assume
that an agent has on the basis of actions or inactions of the principal. This is so despite the fact
that the agent may not have actual authority.
APPEALS BOARD A means by which a property owner can formally protest a tax bill and seek a
change in the assessed value of his or her property. Jurisdictions that have such a board normally
require the property owner to have first met with the tax assessor prior to appealing the property

tax.
APPOINTMENTS Items such as furniture or equipment found in a building that may increase or
decrease the intrinsic value of the property.
APPORTIONMENT A division or allocation of responsibility among two or more persons. In regard
to the sale of real estate, the allocation is typically of a cost or expense such as property taxes
between the purchaser and the seller, or, in the case of income producing property, the
allocation of rental income between the purchaser and seller. Normally the seller is responsible
for expenses up to and including the day of settlement or closing.
APPORTIONMENT CLAUSE A clause normally included in standard insurance policies to prevent
financial gain by the insured as a result of insuring the same property with two or more
companies and hoping to collect more than the loss.
APPRAISAL An estimate or opinion of value supported by factual information as of a certain date.
APPRAISAL FOUNDATION An educational self-regulatory organization which functions for the
purpose of developing appraisal standards and appraiser qualifications. The Appraisal Foundation
is comprised of member organizations representing various appraisal groups, users of appraisal
services and the public at large. The address is 1029 Vermont Avenue, N.W., Suite 900,
Washington, D.C, 20005; (202) 347-7722.
APPRAISAL INSTITUTE A professional real estate appraisal organization whose members
specialize in valuation and market analysis. The mailing address is 225 North Michigan Avenue,
Chicago, Illinois 60611; (8ffl) 732-7732.
APPRAISAL INSTITUTE OF CANADA An appraisal organization comprised of persons doing
appraisal work in Canada. The institute offers membership to those appraisers in the United
States who do appraisal work in Canada. The address is 177 Lombard Avenue, Winnipeg,
Manitoba, Canada; (204) 942-0751.
APPRAISAL PRINCIPLES Economic concepts used to explain the rationale and process of market
behavior. Appraisal principles include anticipation, change, competition, substitution, and supply
and demand.

APPRAISAL PROCESS A systematic step-by-step analysis used by the appraiser to accurately reach
an opinion of value. While each appraisal assignment varies according to the purpose of the
appraisal and the approach(es) used, a well-done estimate of value will follow some standardized
procedure.
APPRAISAL REPORT A written report submitted by the appraiser to support and document the
opinion of value rendered by the appraiser. The form of the appraisal report can be a letter of
valuation, a single page standard form or a more elaborate report.
APPRAISED VALUE An estimate of value based on the appraiser's analysis of data within the
context of the appraisal problem that the appraiser was employed to solve.
APPRAISER An individual who has the experience, training, and legal qualifications to appraise
real or personal property. Effective July 1, 1991, appraisers must be state certified or licensed in
order to appraise property involving a federally insured or regulated agency.
APPRECIATION An increase in an asset's market value over its value at some previous point in
time. The increase can be a result of inflation, increased demand or some other related cause.
The term denotes the opposite of depreciation.
APPROACHES TO VALUE The various acceptable methods used by appraisers in deriving an
estimate of value. There are three traditional approaches to value: (1) cost approach, (2) sales
comparison approach, and (3) income approach.
APPURTENANCE That which belongs to something else and thus passes with the property.
Examples would include riparian rights, easements, barns and other outbuildings, gardens and
orchards.
ARA An appraisal designation for Accredited Rural Appraiser awarded by the American Society of
Farm Managers and Rural Appraisers.
ARM Accredited Resident Manager. A professional designation awarded by the Institute of Real
Estate Management to individuals involved in the management of property.

ARBITRATION A procedure for resolving disputes out of court by an impartial third party chosen
by the disputing parties who agree to abide by the decision of the arbitrator. While
disagreements and disputes involving real estate often result in court action, disputing parties
sometimes agree to settlement through arbitration.
"ARM'S LENGTH" TRANSACTION A transaction such as a sale of property or the lending of money
in which all parties involved are acting in their own self-interest and are under no undue
influence or pressure from the other parties. Such a situation is the basis for deriving fair market
value, and if the transaction is not at arm's length then the actual selling price will likely be less
than or greater than the market value.
ARPEN(ARPENT) A French measurement term used to denote an area equal to seven-eighths of
one acre. (See Acre)
ARREARS Money which is not paid on time, as for example, if a borrower has not made the last
two mortgage payments, he or she is said to be in arrears. In many political jurisdictions, property
taxes are paid at the end of the year rather than at the beginning and are thus referred to as due
in arrears rather than in advance.
ARTERIAL STREET A major road designed to be a through street and to handle a large volume of
traffic.
ARTIFICIAL PERSON A person created and recognized by law as having legal rights, an example
being corporation. Within a legal context, such a person should be distinguished from natural
person.
ASA Senior Member, American Society of Appraisers. A professional designation awarded to
individuals involved in the appraisal of both real and personal property.
AS IS A phrase included in a contract of sale disclaiming any warranty or guarantee on the part of
the seller. A person purchasing real estate "as is" takes it in exactly the condition in which it is
found and must trust his or her own inspection of the property.
ASKING PRICE The listed price of the property. Often such a price denotes a willingness on the
part of the owner to sell the property for a lower price.

ASSEMBLAGE The combining of two or more adjoining lots into a single large lot. Often the
purpose of bringing a number of lots together under one ownership is to allow a
developer/investor to construct a large building or buildings on a single lot. By assembling the
lots, the single value of the one large lot is often greater than the total single values of each of
the smaller lots.
ASSESSED VALUE The worth or value of a piece of property as determined by the taxing authority
for the purpose of levying an ad valorem (property) tax. The assessed value of property is
normally based on some percentage of market value. Property may be assessed at full market
value or, as is more commonly the case, assessed at something less.
ASSESSMENT (1) A determination of the value of a parcel for the purpose of levying a property
tax on that parcel. (2) The term also is used to denote the means by which local governments
raise the money to pay for certain improvements which directly benefit property owners
adjoining or adjacent to the improvements. For example, the cost of paving a previously unpaved
road could be assessed to the land on each side of the road. The actual cost to a particular
landowner would be based on his or her front footage as a percentage of the total footage being
improved. (3) Joint forms of ownership such as condominiums and cooperatives allocate the
expenses incurred for the maintenance and upkeep of the common areas and limited common
areas and assess each unit owner for his or her proportionate share.
ASSESSMENT RATIO The ratio of assessed value to full market value as set by a taxing authority.
ASSESSMENT ROLL A list of all taxable property showing the assessed value of each parcel. Such
information is public and is normally available in the tax assessor's office or in the local land
records.
ASSESSOR A public official either appointed or elected to appraise property and place an
assessed value on that property for the purpose of levying a property (ad valorem) tax.
ASSETS An accounting term used to denote the real and personal property one possesses, as
distinguished from debts and obligations which are known as liabilities. Assets minus liabilities
equals net worth.
ASSIGN To transfer to another.

ASSIGNEE The person to whom a claim, benefit, or right in property is made.
ASSIGNMENT The transfer of a claim, benefit or right in property belonging to one person (the
assignor) to another person (the assignee). Real estate instruments in which assignments occur
include sales contracts, mortgages, options, and leases. Rights under contracts are valuable
property rights which can ordinarily be assigned to third persons. The legal effect of an
assignment is to substitute the assignee for the assignor in the contractual relationship with the
other original contracting party.
ASSIGNMENT OF LEASE A transfer by the tenant (lessee) of his or her interest in the lease to a
third person. Both the lessor and lessee may transfer their respective interests in a lease to a
third person, unless prohibited by the terms of the lease.
ASSOCIATE BROKER A person who has met the qualifications necessary for a real estate broker's
license but who works jointly with and is employed by another broker.
ASSOCIATED GENERAL CONTRACTORS OF AMERICA (AGCA) AGCA serves as a leading spokesman
for the construction industry. Four classifications of construction contractors are represented:
buildings, heavy industrial, municipal utility construction, and highway. The association's address
is 1957 E Street, N.W., Washington, D.C. 20006; (202) 393-2040.
ASSUMPTION FEE A charge levied by a lender to a purchaser who takes title to property by
assuming an existing mortgage. The charge can be a fixed amount; for example, $100, or perhaps
a percentage of the outstanding balance, for example, one percent. The assumption fee is paid to
the lender at the time of settlement or closing.
ASSUMPTION OF MORTGAGE Taking title to property which has an existing mortgage and
agreeing to be personally liable for the payment of the existing mortgage debt. A distinction
exists between "assuming" a mortgage and taking title 'subject to' a mortgage. If the purchaser
agrees to assume the mortgage, he or she becomes personally liable on any deficiencies, such as
not making payments, occurring in a foreclosure sale. When a purchaser takes title subject to the
mortgage, no personal liability is undertaken to the lender; thus, the purchaser could walk away
from the mortgage and lose nothing but the equity already invested. In both situations the
original borrower is liable to the lender unless specifically released in a novation. A mortgage may
obtain a non-assumption clause or due on sale clause which prohibits an assumption without
consent of the lender. Such consent is normally given for a fee and a possible jump in the interest
rate if the contract rate is below the prevailing market rate.

AT-RISK RULE A part of the Tax Reform Act of 1986 which limits the amount that an investor can
claim as a loss suffered from a real estate investment.
ATTACHED HOUSING Two or more units that are physically attached but intended and designed
for occupancy as individual housing units. Such units may be in the form of a duplex, triplex or
fourplex as well as row houses which may extend for a complete city block. In contrast, most
residential units are in the form of detached units.
ATTACHMENT The act of taking a person's property into the legal custody of a court for the
purpose of serving as security for satisfaction of a judgment which has been filed. The action
itself is often called a writ of attachment and serves to create a lien against the property. As a
result the property may not be sold free of the attachment unless the attachment has either
been satisfied or released.
ATTESTATION The act of witnessing a person's signing of a written instrument. Some states
require that a deed be witnessed by at least two witnesses one of whom may need to be an
official witness such as a notary. Without the attestation the deed is void in those states that
have this requirement. Some deeds may require a witnessing in cases involving grantors who
have not learned to write or are paralyzed. Such a grantor would be required to make a mark or
at least a thumbprint which manifests intent to sign. Both the marking and the statement or
declaration of intent by the grantor would need to be witnessed.
ATTORNEY AT LAW A person authorized to practice law in his or her respective state and thus
permitted to give legal advice, draft legal instruments, and represent clients in courts of law.
ATTORNEY IN FACT A person authorized to act on behalf of another by virtue of a power of
attorneys. Anyone of legal capacity may be an attorney in fact, and depending on the desire of
the person creating the relationship, the attorney in fact's authority could be that of a universal,
general, or specific agent.
ATTORNEY'S OPINION OF TITLE A statement issued by an attorney as to the quality of title after
examining an abstract of title. Commonly referred to as "opinion of title."
ATTRACTIVE NUISANCE A potentially hazardous object, such as a swimming pool, or a condition,
such as an open pit on a parcel of land, that is inviting and potentially dangerous to young
children.

AUCTION The selling of real or personal property to the highest bidder by a person licensed and
authorized to sell the property. The auctioneer is employed by the owner or seller of the property
as an agent and normally receives a percentage of the sales price as his or her commission.
AUCTIONEER A person licensed or authorized to sell real or personal property belonging to
someone else at public auction. In some states an auctioneer selling real property must be
licensed as a real estate broker, whereas in others he or she is licensed as an auctioneer.
AUTHORITY The power of an agent to affect the principal in legal relations with third persons for
lawful purposes. Authority may be classified into: (1) actual authority, (2) implied authority, (3)
apparent or ostensible authority, (4) inherent authority, and (5) other authority which may be
implied from particular circumstances. Generally, the authority of an agent is strictly construed
by the courts.
AUTHORIZATION TO SELL A listing agreement entered into by the owner of property and a
broker determining the rights and responsibilities of both parties in the selling of the property.
AVERAGE RATE OF RETURN A technique used to estimate a rate of return. To compute this rate,
investment outflows are subtracted from total investment inflows. The result is divided by the
number of years the investment was held, and that result is divided by the total investment to
arrive at the average annual rate of return.
AVULSION A sudden loss or gain of land as the result of action of water or a shift in a bed of a
river which has been used as a boundary by property owners. If land is lost as a result of avulsion
the riparian owner does not lose title to the land that has been lost; the boundary lines remain
the same. This is not true when land is lost by erosion.
AXIAL THEORY OF GROWTH A pattern of land growth and development which takes the form of
a star and occurs along the main transportation routes outward from a city. The city or central
business district remains the center of the "star."
BACKFILL the replacement of excavated earth into a hole or against a structure.

BACKUP CONTRACT a contract to Buy real estate that becomes effective if a prior contract fails to
be consummated.
BALANCE, PRINCIPLE OF in real estate appraisal, there is an optimal mix of inputs that, when
combined with land, will result in the greatest land value. Inputs, or factors of production, include
labor, capital, and entrepreneurship.
BALANCE SHEET a financial statement in table form showing assets, liabilities, and equity, in
which assets equal the sum of liabilities plus equity.
BALLOON MORTGAGE a mortgage with a balloon payment.
BALLOON PAYMENT the final payment on a loan, when that payment is greater than the
preceding installment payments and pays the loan in full
BAND OF INVESTMENT an income property appraisal technique where the overall interest rate is
derived from weighting mortgage and equity rates.
BASELINE part of the Rectangular Survey or Government Rectangular Survey method of land
description.
BASE PERIOD a point of time that serves as a benchmark for reflecting the change in an index.
BASE RENT the minimum rent due under a lease that has a percentage or participation
requirement.
BASIC INDUSTRY MULTIPLIER in economic base analysis, the ratio of total population in a local
area to employment in basic industry. Basic industry is considered to be any concern which
attracts income from outside the local area.
BASIS(TAX) the point from which gains, losses, and depreciation deductions are computed.

BASIS POINT one 100th of 1%.
BEARER INSTRUMENT a security that does not indicate the owner; payable to whoever presents
it.
BEDROOM COMMUNITY a residential community in the suburbs, often near an employment
center, but itself providing few employment opportunities.
BEFORE-AND-AFTER-RULE in an eminent domain award, many jurisdictions appraise the property
value before the taking, then the property value after the taking, considering enhancement or
injury to the property that was the result of condemnation.
BEFORE-TAX CASH FLOW cash flow prior to deducting income tax payments or adding income tax
benefits.
BEFORE-TAX EQUITY REVERSION same as after-tax proceeds from resale, except it does not
consider income taxes.
BELOW-MARKET INTEREST RATE (BMIR) in some government-subsidized housing, the owner is
charged a low interest rate with the requirement that savings be passed on to tenants in the form
of reduced rent.
BENCHMARK a permanently affixed mark that establishes the exact elevation of a place; used by
surveyors in measuring site elevations, or as a starting point for surveys.
BENEFICIARY the person who receives or is to receive the benefits resulting from certain acts.
BEQUEATH to specify by will the recipient of personal property. Compare devise.
BEQUEST that personal property given by the terms of a will.
BETTERMENT an improvement to real estate.

BIANNUAL occurring twice a year. Same as semiannual. Contrast with biennial.
BIENNIAL occurring every 2 years.
BILATERAL CONTRACT a contract under which each party promises performance.
BI-LEVEL a house built on 2 levels in which the main entrance is situated above the lower level
but below the upper level.
BILL OF ASSURANCE the name given, in some states, to the total collection of restrictive
covenants that apply to a group of contiguous lots.
BILL OF SALE a written instrument given to pass title of personal property from a seller to a
buyer. Used when furniture and portable appliances are sold.
BINDER an agreement, accompanied by a deposit, for the purchase of real estate, to evidence
good faith on the part of the purchaser.
BIWEEKLY LOAN a mortgage which requires principal and interest payments at two-week
intervals. The payment is exactly half of what a monthly payment would be. Over a year's time,
the 26 payments are equivalent to 13 monthly payments on a comparable mortgage loan. As a
result, the loan will amortize much faster than loans with monthly payments.
BLANKET MORTGAGE a single mortgage that covers more than one parcel of real estate.
BLEEDING A PROJECT 1. in new construction, overstating expenses and fees so as to divert a
larger than normal amount of the project costs to the developer's profit. 2. managing an existing
piece of real estate so as to obtain the highest possible current income from it, to the extent that
many normal operating expenses are forgone.

BLENDED RATE an interest rate, applied to a refinanced loan, that is higher than the rate on the
old loan but lower than the rate offered on new loans.
BLIGHTED AREA a section of a city in which a majority of the structures are dilapidated.
BLIND POOL an investment program in which monies are invested into an association without
investors knowing which properties will be purchased.
BLOCKBUSTING a racially discriminatory and illegal practice of coercing a party to sell a home to
someone of a minority race or ethnic background, then using scare tactics to cause others in the
neighborhood to sell at depressed prices.
BLUEPRINT a detailed set of plans used as the guide for construction of a building.
BLUE-SKY LAWS state laws requiring the offeror of securities to give full disclosure, and register
the offering as required by federal and state law.
BOARD OF EQUALIZATION a government entity whose purpose is to assure uniform property tax
assessments.
BOARD OF REALTORS a local group of real estate licensees who are members of the State and
National Association of Realtors.
BOECKH BUILDING VALUATION MANUAL a book, frequently updated, that offers estimates of
the replacement cost or reproduction cost for different types of buildings. Address: Boeckh 525
East Michigan P.O. Box 664 Milwaukee, WI 53201-0664
BOILER PLATE standard language found in contracts. Preprinted material.
BOMA Building Owners and Managers Association.

BONA FIDE in good faith, without fraud.
BOND a certificate that serves as evidence of a debt and of the terms under which it is
undertaken.
BOOK VALUE the carrying amount of an asset, as shown on the books of a company.
BOOT unlike property included to balance the value of like properties exchanged.
BOTTTOMLAND 1. low land near a river, lake, stream, which is often flooded 2. land in a valley or
dale.
BOUNDARY same as property line.
BOY beginning of year.
BREACH OF CONTRACT a violation of the terms of a legal agreement; default. Breach of contract
allows the non-breaching party to rescind the contract, sue for damages, or sue for performance
of the contract.
BREAK-EVEN POINT the amount of rent or the occupancy level needed to pay operating expenses
and debt service. Also called default point.
BRIDGE LOAN mortgagee financing between the termination of one loan and the beginning of
another loan.
BROKER a state-licensed agent who, for a fee, acts for property owners in real estate
transactions, within the scope of state law.
BROKERAGE 1. the business of being a broker. 2. the commission received by a broker for his
services.

BROWNSTONE, BRICK ROW HOUSE, OR EASTERN TOWNHOUSE a nineteenth-century-style
house, usually having 4 or 5 stories with a stoop leading up to the first floor. There are common
side walls with a house on either side.
BUDGET MORTGAGE a mortgage that requires monthly payments for taxes and insurance in
addition to interest and principal.
BUFFER ZONE a transitional area between 2 areas of different predominant land uses.
BUILDERS AND SPONSORS PROFIT AND RISK ALLOWANCE (BSPRA) an amount above the cost of
apartments that is allowed to be included in the project cost for purpose of determining the loan
amount in certain government-sponsored programs.
BUILDER WARRANTY a guarantee on the quality of construction offered by the developer or
building contractor.
BUILDING CAPITALIZATION RATE in appraisal, the capitalization rate is used to convert an
income stream into one lump sum value. The rate for the building may differ from that for the
land because the building is a wasting asset.
BUILDING CODES regulations established by local governments describing the minimum
structural requirements for buildings; includes foundation, roofing, plumbing, electrical, and
other specifications for safety and sanitation.
BUILDING LINE a line fixed at a certain distance from the front and/or sides of a lot, beyond
which the building may not project.
BUILDING LOAN AGREEMENT an agreement whereby the lender advances money to an owner at
specified stages of construction.
BUILDING OWNERS AND MANAGERS ASSOCIATION (BOMA) an organization of practitioners

who own and manage buildings, notably office space. Address: Building Owners and Managers
Association 1221 Massachusetts Avenue NW Washington, DC 20005
BUILDING PERMIT permission granted by a local government to build a specific structure at a
particular site.
BUILDING RESIDUAL TECHNIQUE an appraisal technique whereby income to land is subtracted
from net operating income to result in the building income. Building income is capitalized into
building value.
BUILDING RESTRICTIONS provisions in building codes that affect the orientation, size, and
appearance of a building.
BUILD TO SUIT an arrangement whereby a landowner offers to pay to construct on his or her
land a building specified by a potential tenant, and then to lease land and building to the tenant.
BUILT-INS appliances, machinery, and other equipment that are constructed as part of a building
rather than left freestanding and moveable.
BULLET LOAN typically a loan with a 5- to 10-year term and no amortization. At the end of the
term the full amount is due.
BUNDLE OF RIGHTS THEORY the theory that ownership of realty implies a group of rights such as
occupancy, use and enjoyment, and the right to sell, bequeath, give, or lease all or part of these
rights.
BUNGALOW a small, early-twentieth-century-style, I-story house that usually has an open or
enclosed front porch.
BUREAU OF LAND MANAGEMENT an agency of the U.S. Department of the Interior that oversees
the management of much of the land owned by the U.S. government, particularly national forests
and other relatively undeveloped land.

BUSINESS DAY a standard day for conducting business. Excludes weekends and holidays.
BUY-BACK AGREEMENT a provision in a contract under which the seller agrees to repurchase the
property at a stated price upon the occurrence of a specified event within a certain period of
time.
BUY DOWN 1. the action to pay additional discount points to a lender in exchange for a reduced
rate of interest on a loan. The reduced rate may apply for all or a portion of the loan term. 2. a
loan that has been bought down by the seller of the property for the benefit of the buyer.
BUYER'S BROKER an agent hired by a prospective purchaser to find an acceptable property for
purchase. The broker then represents the buyer and negotiates with the seller in the purchaser's
best interest.
BUYER'S MARKET a situation where buyers have a wide choice of properties and may negotiate
lower prices. Often caused by overbuilding, local population decreases, or economic slump.
BUY-SELL AGREEMENT a pact among partners or stockholders under which some agree to buy
the interests of others upon some event.
BYLAWS a set of regulations by which an organization conducts its activities.
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 bedrooms 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 1. 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 1. 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, or 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.
EARNEST MONEY a deposit made by a purchaser of real estate to evidence good faith.
EASEMENT the right, privilege, or interest that one party has in the land of another.
EASEMENT BY NECESSITY the right of an owner to cross over another's property for a special
necessary purpose.
EASEMENT BY PRESCRIPTION continued use of another's property for a special purpose can ripen
into a permanent use if conditions are met.
EASTLAKE HOUSE a nineteenth-century-style house with three-dimensional ornamentation made
with a chisel, gouge, and lathe rather than the scroll saw. Many of the parts of the ornamentation
resemble furniture legs and knobs. This distinctive type of ornamentation is the major
characteristic of this style and separates the Eastlake-style house from the Queen
ECONOMIC BASE industry within a geographic market area that provides employment
opportunities that are essential to support the community.
ECONOMIC DEPRECIATION loss of value from all causes outside the property itself.
ECONOMIC LIFE that remaining period for which real estate improvements are expected to
generate more income than operating expenses cost.
ECONOMIC OBSOLESCENCE same as economic depreciation.
ECONOMIC RENT 1. in economics, the cost commanded by a factor that is unique or inelastic in
supply. 2. in appraisal, the market rent. Contrast with contract rent
EFFECTIVE AGE the age of a property based on the amount of wear and tear it has sustained.

Contrast with actual age.
EFFECTIVE GROSS INCOME for income-producing property, potential gross income, less a vacancy
and collection
EFFECTIVE RATE the true rate of return considering all relevant financing expenses.
EFFICIENCY RATIO the proportion of a building's area that is leasable space.
EFFICIENCY UNIT OR APARTMENT a small dwelling unit, often consisting of a single room, within
a multifamily structure. In most cases, kitchen and bath facilities are not complete.
EGRESS access from a land parcel to a public road or other means of exit.
EJECTMENT action to regain possession of real property, when there is no lease.
ELIZABETHAN OR HALF TIMBER STYLE an English-style 2- or 21/2 story house, often with part of
the second story overhanging the first. It has less tone work and is less fortlike than the Tudor.
Stone and stucco walls with half timbers are most common.
ELLWOOD TECHNIQUE in the appraisal of mortgaged income property, a technique used to
estimate the present value of the property. The appraiser determines and discounts to a present
value the annual cash flow to the equity owner and the expected resale proceeds. Those
amounts are added together to derive the equity value, then added to the mortgage balance to
offer a property value estimate. The late L. W. Ellwood provided capitalization rate tables that
accelerate the process.
EMBLEMENT a growing crop. Annual crops are generally considered personal property
EMINENT DOMAIN the right of the government or a public utility to acquire property for
necessary public use by condemnation; the owner must be fairly compensated.

EMPTY NESTERS a couple whose children have established separate households; important
segment of the housing market, since empty nesters often seek to reduce the amount of housing
space they occupy. Thus empty nesters are one source of demand for smaller housing units.
ENCROACHMENT a building, a part of a building, or an obstruction that physically intrudes upon,
overlaps, or trespasses upon the property of another.
ENCUMBRANCE any right to or interest in land that affects its value. Includes outstanding
mortgage loans, unpaid taxes, easements, deed restrictions.
END LOAN same as permanent mortgage.
ENDORSEMENT 1. the act of signing one's name, as the payee, on the back of a check or note,
with or without further qualification; the signature itself 2. offering support or credibility to a
statement.
ENERGY EFFICIENT as applied to buildings, generally indicating the existence of extra insulation,
weatherproofing, and/or special features and equipment designed to reduce the cost of energy
for heating, co671ing and hot water.
ENERGY TAX CREDITS a reduction in income tax, generally based on the cost of installing
insulation and other energy-saving devices. Note: At the federal level, energy tax credits generally
expired before 1987 and were not renewed by the 1986 Tax Act.
ENTITY the legal form under which property is owned.
ENTREPRENEUR an individual who generates business activity. A businessman or
businesswoman. Often associated with one who takes business risks.
ENVIRONMENTAL IMPACT STATEMENT (EIS) an analysis of the expected effects of a
development or action on the surrounding natural and fabricated environment. Such statements
are required for many federally supported developments under the National Environmental
Policy Act of 1969.

ENVIRONMENTAL PROTECTION AGENCY (EPA) an agency of the U.S. government established to
enforce federal pollution abatement laws and to implement various pollution prevention
programs.
EQUAL CREDIT OPPORTUNITY ACT a federal law, enacted in 1974, to discourage discrimination
by lenders on the basis of sex or marital status. Amended in 1976 to prohibit discrimination on
the basis of age, race, color, religion, national origin, or receipt of public assistance.
EQUALIZATION BOARD a government agency that determines the fairness of taxes levied against
properties.
EQUITABLE CONVERSION a legal doctrine in some states in which, under a contract of sale,
buyers and sellers are treated as though the closing had taken place in that the seller in
possession has an obligation to take care of the property.
EQUITABLE TITLE the interest held by one who has agreed to purchase but has not yet closed the
transaction.
EQUITY the interest or value that the owner has in real estate over and above the liens against it.
EQUITY BUILDUP the gradual increase in a mortgagor's equity in a property caused by
amortization of loan principal.
EQUITY DIVIDEND the annual cash flow that an equity investor receives.
EQUITY OF REDEMPTION the right of an owner to redeem property securing a loan that has been
accelerated prior to foreclosure.
EQUITY PARTICIPATION same as participation mortgage.

EQUITY YIELD RATE the rate of return on the equity portion of an investment, taking into account
periodic cash flow and the proceeds from resale. Considers the timing and amounts of cash flow
after annual debt service, but not income taxes.
EROSION the gradual wearing away of land through processes of nature, as by streams and
winds.
ERRORS AND OMISSIONS INSURANCE liability protection against professional malpractice,
mistakes in business dealings by insured, etc.
ESCALATOR CLAUSE a provision in a lease that requires the tenant to pay more rent based on an
increase in costs. Same as stop clause.
ESCAPE CLAUSE a provision in a contract that allows one or more of the parties to cancel all or
part of the contract if certain events or situations do or do not happen.
ESCHEAT the reversion of property to the state in the event that the owner dies without leaving a
will and has no legal heirs.
ESCROW an agreement between 2 or more parties providing that certain instruments or property
be placed with a third party for safekeeping, pending the fulfillment or performance of a specified
act or condition.
ESCROW ACCOUNT same as trust account
ESCROW AGENT any person engaged in the business of receiving escrows for deposit or delivery.
ESCROW CLOSING ten-n meaning the same as closing, especially in states where deeds of trust
are used instead of mortgages.
ESTATE the degree, nature, and extent of interest that a person has in real property.

ESTATE AT SUFFERANCE the wrongful occupancy of property by a tenant after the lease has
expired.
ESTATE AT WILL the occupation of real estate by a tenant for an indefinite Period, terminable by
one or both parties at will.
ESTATE FOR LIFE an interest in Property that terminates upon the death of a specified person.
ESTATE FOR YEARS an interest in land allowing Possession for a specified and limited time.
ESTATE IN REVERSION an estate left by the grantor for himself or herself, to begin after the
termination of some particular estate granted by him or her.
ESTATE TAX a tax based on the value of property left by the deceased. Since 1987, the estate and
gift tax laws exempt approximately $600,000 of property.
ESTOPPEL a doctrine of law that stops one from later denying facts which that person once
acknowledged were true and others accepted on good faith.
ESTOPPEL CERTIFICATE a document by which the mortgagor (borrower) certifies that the
mortgage debt is a lien for the amount stated. The debtor is thereafter prevented from claiming
that the balance due differs from the amount stated.
ESTOVERS the legally supported right to take necessities from property. Contrast with waste.
ET AL abbreviation of the Latin et alii "and others.'
ET CON abbreviation of the Latin et conjunx. Legal term signifying "and husband."

ET UX abbreviation of the Latin et axor, which means "and wife."
EVALUATION a study of potential property uses, but not to determine its present value.
EVICTION a legal proceeding by a lessor (landlord) to recover possession of property.
EVICTION, ACTUAL exists where one is removed from the property, either by force or by process
of law.
EVICTION, CONSTRUCTIVE exists when, through the fault of the landlord, physical conditions of
the property render it unfit for the purpose for which it was leased.
EVICTION, PARTIAL exists where the possessor of the property, such as a tenant, is deprived of a
portion thereof.
EVIDENCE OF TITLE documents, such as deeds, that demonstrate ownership.
EXAMINATION OF TITLE research of the title to a piece of real estate; less thorough than a title
search, usually concentrates on recent records.
EXCESS ACCELERATED DEPRECIATION the accumulated difference between accelerated
depreciation claimed for tax purposes and what straight-line depreciation would have been.
Generally, excess accelerated depreciation is recaptured (taxed) as ordinary income upon a sale,
instead of receiving more favorable capital gains treatment.
EXCESS RENT when the rent of an existing lease exceeds the rental rate on comparable existing
space. Should the lease expire or the tenant break the lease, the new rate will probably be at
market rates.
EXCHANGE under Section 1031 of the Internal Revenue Code, likekind property used in a trade or
business or held as an investment can be exchanged tax-free.

EXCLUSIVE AGENCY LISTING employment contract giving only one broker for a specified time,
the right to sell the property and also allowing the owner alone to sell the property without
paying a commission.
EXCLUSIVE RIGHT TO SELL LISTING employment contract giving the broker the right to collect
commission if the property is sold by anyone, including the owner, during the term of the
agreement.
EXCULPATORY CLAUSE a provision in a mortgage allowing the borrower to surrender the
property to the lender without personal liability for the loan.
EXECUTE to sign a contract; sometimes, to Perform a cOlItIO4 fully.
EXCUTED CONTRACT a contract whose terms have been completely fulfilled.
EXECUTOR a person named in a will to carry out its provisions for the disposition of the estate.
EXECUTORY CONTRACT a contract under which one or more parties has not yet performed.
EXECUTRIX a woman who Performs the duties of an executor.
EXEMPTION an amount provided by law that reduces taxable . income or taxable value.
EXPENSE RATIO a comparison of the operating expenses to potential gross income. This ratio can
be compared over time and with that of other properties to determine the relative operating
efficiency of the property considered.
EXPOSURE (MARKET) the advertising, whether free or paid, of property that is for sale.

Mel feller mpa, mhr, discusses texas real estate

Mel feller mpa, mhr, discusses texas real estate

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Mel feller mpa, mhr, discusses texas real estate