A

B

Backup offer:

C

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

California Housing Financial Discrimination Act of 1977: Also known as the Holden Act. A California act prohibiting discrimination by a lender for any reason unrelated to the creditworthiness of the loan applicant.

California Residential Mortgage Lending Act: An act administered by the Commissioner of Corporations which provides licensing authorizing mortgage lending and brokering.
CRMLA pages at the Department of Corporations

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

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

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

Capacity of parties: The legal ability of people or organizations to enter into a valid contract. A person entering into a contract will have full, limited or no capacity to contract.

No capacity to contract: The inability of a person to enter into a valid contract under any circumstances. Such inability can arise when a person has been adjudicated insane or is an officer of a corporation who is not authorized to execute a contract in behalf of a corporation.

Capital gain: Profit earned from the sale of an asset, where the sales price was greater than the adjusted basis. (See adjusted basis, deferred capital gain, excluded capital gain, realized capital gain (loss), recognized capital gain)

Capital loss: Loss sustained from the sale of an asset, where the sales price is less than the adjusted book basis. (See adjusted basis)

Capitalization: A mathematical process for converting net income into an indication of value, commonly used in the income approach to value. The net income of the property is divided by an appropriate (capitalization) rate of return to give the indicated value. (Income ÷ Rate = Value)

Capitalization rate: The rate of return a property will produce on the owners investment.

Capping: The process at of laying two to four feet of soil over the top of a landfill site and then planting vegetation to prevent erosion and enhance the landfill's aesthetic value. (See landfill)

Caps: Yearly and/or life-of-loan limitations on the amount of variation allowed when adjusting interest on variable-rate loans. (See adjustable rate mortgage (ARM), rate cap)

Caravan: A group tour by a real estate office's sales agents to view listed properties. (See agent property evaluation)

Carbon monoxide (CO): A colorless, odorless gas that occurs as a byproduct of burning such fuels as wood, oil and natural gas due to incomplete co

D

Damages: The indemnity recoverable by a person who has sustained an injury, either in his/her person, property, or relative rights, through the act or default of another. (See liquidated damages)

Datum: A horizontal plane from which heights and depths are measured.

Debenture: A type of long-term bond or note given as evidence of debt. Unlike a mortgage note, a debenture is not secured by a specific property. Fannie Mae issues debentures to finance the acquisition of mortgages in the secondary mortgage market. If a borrower defaults on an FHA loan, the government gives interest-bearing debentures to the mortgagee after the title is transferred to FHA. (See Fannie Mae, FHA)

Debit: A charge on an accounting statement or balance sheet (appearing on the left-hand column); the opposite of a credit. Used in bookkeeping and in preparing the closing statement in a real estate transaction.

Debtor: One who owes money; a borrower, a maker of a note; a mortgagor.

Debt ratio: The relationship between a person's long term debt payments and their monthly income.

Debt-to-income ratio: A borrower's monthly long term debt payments divided by the borrower's gross monthly income and expressed as a percentage. This ratio is used by lenders to determine if a loan applicant is qualified for the amount of the loan.

Decedent: A deceased person, especially one who has died recently.

Declaration of condominium: The declaration includes:
1. A legal description of the condominium units and the common elements (including limited common     elements-those that serve only one particular unit);
2. A copy of the condominium's bylaws, drafted to govern the operation of the owners' association; 3. A survey of the property;
4. An architect's drawings, illustrating both the vertical and horizontal boundaries of each unit; and 5. Any restrictive covenants controlling the rights of ownership.

Declaration of restrictions: A statement of all the covenants, conditions and restrictions (CC&Rs) that affect a parcel of land. A subdivider may note the restrictions on the map or plan when recording the subdivision plat. If the restrictions are numerous, the subdivider may also prepare a separate document called a declaration, listing all the restrictions, and then record this declaration. (See CC&Rs)

Declaratory relief action: An action to have a court determine the rights of parties before a violation of rights has occurred.

Dedication: The voluntary transfer of private property by its owner to the public for some public use, such as for streets or schools. deed A written instrument that, when executed and delivered, conveys title to or an interest in real estate.

Declining-balance method: An accounting method of depreciation for income-tax purposes designed to provide larger-than-straight-line deductions in the early years of a property's life, and applicable to property placed in service before 1981. The declining-balance method of calculation is applied in the IRS percentage tables for determining ACRS depreciation deductions applicable to personal property. The 3-, 5-, 7- and 10-year classes use the 200 percent declining-balance method, switching to straight-line at the appropriate time, and the 15- and 20-year classes use the 150 percent declining-balance method, also switching to straight-line. (See depreciation,

E

earnest money: Money deposited by a buyer under the terms of a contract, to be forfeited if the buyer defaults but applied to the purchase price if the sale is closed. The cash deposit (including initial and additional deposits) paid by the prospective buyer of real property as evidence of good-faith intention to complete the transaction; called bargain money, caution money, hand money, or a binder in some states. (See trust funds)

Earthquake safety disclosure: By California law, real estate agents or owners are required to prepare a "Residential Earthquake Hazards Report" disclosing the earthquake safety preparedness of all houses sold in the state.
California Seismic Safety Commission

Easement:The right to a specific use of or right to travel over land owned by another. The land being used or traveled over is the servient tenement; the land that is benefited by the use is the dominant tenement. An easement appurtenant is a property interest belonging to the owner of dominant tenement and is transferred with the land; an easement in gross is a personal right that usually is not transferable by its owner. (See affirmative easement, dominant tenement, easement appurtenant, easement in gross, implied easement, negative easement, servient tenement)

Easement by condemnation: An easement created by the government or government agency that has exercised its right under eminent domain. (See eminent domain)

Easement by estoppel: An easement created when a person's words or actions lead another to believe that an easement exists. If, in relying on those words or actions, the easement user acts to his or her detriment, they may not deny the existence of the easement. (See estoppel)

Easement by necessity: An easement allowed by law as necessary for the full enjoyment of a parcel of real estate; for example, a right of ingress and egress over a grantor's land.

Easement in gross: An easement that is not created for the benefit of any land owned by the owner of the easement but that attaches personally to the easement owner. For exam ple, a right granted by Eleanor Franks to Joe Fish to use a portion of her property for the rest of his life would be an easement in gross.

Easement by prescription: An easement acquired by continuous, open and hostile use of property for the period of time prescribed by state law.

Easton v. Strassburger: The duty of the licensee to make a reasonable investigation of the property evolved from the case of Easton v. Strassburger (1984). As the leading case on this issue, the courts decision sent the message "loud and clear" to all real estate licensees that their responsibility does not stop at a mere disclosure of material facts known to the licensee. Easton filed suit against Strassburger, the real estate agency and others for fraudulent concealment and intentional misrepresentation regarding potential soil problems and a resulting slide on the property.

Economic life: 1. The estimated period over which an improved property may be profitably used so that it will yield a return over and above the economic rent attributable to the land itself; the period during which an improvement has value in excess of its salvage value. In the case of an older structure or improvement, economic life refers to the remaining period during which the improvements to the real property (not land) are depreciated for tax purposes. The economic lives of such improvements are normally shorter than their actual physical lives. Also called

F

Four Zero One 401(k) retirement plan:

401(k) retirement plans allow an individual to contribute part of their "pre-tax" income to an investment account. Pre-tax contributions are not tax-free, they are tax-deferred, meaning the person does not pay income tax on this money until they withdraw it from the plan (which should be at retirement). Some companies offer to "match" the individual's contribution as an incentive to join the company's retirement plan. Depending on the provisions of a company's retirement plan, a person may take a loan from their 401(k) account, however, not all plans allow for loans. The loan is paid back, plus interest (a fixed rate determined at the time of the loan), through after-tax payroll deductions. As long as the individual repays the loan on time, they are not subject to withholding taxes or penalties.

Fair Credit Reporting Act:

The Fair Credit Reporting Act gave consumers the right of access to, and correction of, credit reports. (See credit report

)

Fair Employment and Housing Act:

California's Fair Employment and Housing Act (FEHA) (Sections 13100-13196 of the Government Code) prohibits housing discrimination based on marital status as well as race, color, religion, sex, national origin or ancestry. The Department of Fair Employment and Housing enforces the law, which is based on the former Rumford Fair Housing Act.
Fair Employment and Housing Act—Full Text

Example:

Some years ago Len Lessor tried to evict Alice Tenant because Alice, an unmarried woman, was living with an unrelated adult male. Len was unsuccessful because his intended action violated what was then the Rumford Act. Len recently decided to require that each member of an unrelated couple living together in one of his apartments meet his rental financial requirements, even though married couples can aggregate their income to meet the financial requirements. Can Len do that? No.

The Fair Employment and Housing Act bans discrimination based on marital status. Note:

Discrimination under FEHA does not include refusal to rent part of a single-family, owner-occupied dwelling to only one individual. All notices and advertisements must comply with FEHA, except for those expressing a preference for applicants of one sex for the sharing of living in a single dwelling unit.

Fair Housing Act:

Pursuant to the federal Fair Housing Act, any offer to sell, rent, buy, or exchange property shall not contain any preference, limitation, or discrimination based on race, color, religion, sex, national origin, handicap, familial status, or an intention to make such preference, limitation or discrimination. (See Civil Rights Act of 1968, federal fair housing law)
HUD—Fair Housing Reading Room

Fair Housing Amendment Act of 1988:

Extends the Civil Rights Act of 1968 to cover handicapped persons and families with children. (See Fair Housing Act, federal fair housing law, Civil Rights Act of 1968) HUD—Fair Housing Reading Room

familial status:

Familial status is defined as one or more individuals who have not obtai

G

Gap:A defect in the chain of title of a particular parcel of real estate; a missing document or conveyance that raises doubt as to the present ownership of the land.

Garn-St. Germain Bill:Or the Depository Institutions Deregulation and Monetary Control Act of 1980 which authorized the deregulation of banks and savings institutions. Allowed savings and loan associations to offer checking-type accounts; to issue credit cards. Established loan loss reserve requirements. A follow-on bill, The Depository Institutions Act of 1982 (also sponsored by Senators Garn and St. Germain), allowed savings and loan associations to have up to 50% of assets in real estate development; 30% of assets in consumer loans and corporate debt; own real estate development companies; and offer money market deposit accounts.
Garn-St. Germain—Full Text

General agent:One authorized by a principal to perform any and all acts associated with the continued operation of a particular job or a certain business of the principal. The essential feature of a general agency is the continuity of service, such as that provided by a property manager of a large condominium project. Most real estate brokers are treated as special agents. (See agent, special agent)

General contractor:A licensed construction specialist who enters into a construction contract with a developer or property owner to construct a building or real estate project. The general contractor often negotiates individual contracts with sub-contractors who specialize in various aspects of the building process, such as electricity, drywall and plumbing.

General index:A county recorder's office index used by title company examiners when searching the chain of title of a property. The examiner uses the index to research all the grantors and grantees in the chain of title. The index lists all the things that apply to a person by name, including liens, judgments and power of attorneys. (See chain of title)

General lien:The right of a creditor to have all of a debtor's property—both real and personal—sold to satisfy a debt. (See lien)

General partner:In a limited partnership, the individual or company aquiring, organizing and managing the investment. (See limited partnership)

General partnership:In a general partnership, all the partners participate in the operation and management of the business and share full liability for business losses and obligations. (See partnership)
Uniform Partnership Act—Full Text

General plan:Every city and county is required to develop a general plan of comprehensive zoning. (See comprehensive zoning)

General real estate tax:General real estate taxes are levied to fund the operation of the governmental agency that imposes the taxes.

General warranty deed:A deed in which the grantor fully warrants good clear title to the premises. Used in most real estate deed transfers, a general warranty deed offers the greatest protection of any deed.

Geographic farming:Farming/prospecting an area defined by specific "geographic" boundaries. The best geographic farms are particular subdivisions with similar demographics, such as: the price of homes, the ages of residents, family composition, etc. (See farming, nongeographic farming)

Gift deed:A deed in which the consideration is "love and affection.&qu

H

habendum clause
That part of a eed beginning with the words "to have and to hold," following the grantor is conveying.
habitability
Fit for human habitation. (See implied warranty)


Handicap: As defined in the fair housing act, a physical or mental impairment that substantially limits one or more major life activities (walking, seeing, learning, working) or a record of having such an impairment or being regarded as having such impairment. Handicap does not include current, illegal use or addiction to a controlled substance. (See disability)

Hard money loan: A loan made in cash by a non-institutional lender.

Hazardous waste: A subset of solid wastes that pose substantial or potential threats to public health or the environment and meet any of the following criteria:

• Is specifically listed as a hazardous waste by EPA;
• Exhibits one or more of the characteristics of hazardous waster (ignitability, corrosiveness, reactivity, and/or toxicity;
• Is generated by the treatment of hazardous waste or is contained in a hazardous waste.

Toxic waste materials jeopardizing the value of real estate. (See asbestos, Environmental Protection Agency, undergound storage tanks, urea-formaldehyde)

Hazardous waste disclosure: California Health and Safety Code (§ 25359.7(a)) requires owners of nonresidential properties to disclose to prospective buyers or lessees the existence of hazardous substances on or beneath a property. Both residential and nonresidential tenants are required to notify landlords if hazardous substances have been released on a property.

Heat absorbing glazings: A technology that uses heat-absorbing glazing with tinted coatings to absorb solar heat gain through windows. This approach does allow some light to pass through the tinted windows.

Heat exchanger: Heat exchange is the method by which the unwanted heat is removed from a system. A heat exchanger is a device by which energy (in the form of heat) is transferred from one fluid or gas to another across a solid surface.

Heir: A person who inherits under a will or a person who succeeds to property by the state laws of descent if the decedent dies intestate. (See intestate)

Hereditaments: Property capable of being inherited.

HERS score: A number between 0-100 that is used to designate the energy efficiency of a home compared to guidelines established by the Home Energy Rating System Council. The higher the score (number), the greater the energy efficiency of the residence. (See Home Energy Rating System (HERS))

Heterogeneity: The quality or state of being heterogeneous; different in kind; unlike; incongruous.

Highest and best use: The possible use of a property that would produce the greatest net income and thereby develop the highest value.

Highrise developments:Sometimes called mixed-use developments (MUDs), these combine office space, stores, theaters and apartment units in a single vertical community. MUDs usually are self-contained and offer laundry facilities, restaurants, food stores, valet shops, beauty parlors, barbershops, swimming pools and other attractive and convenient features.

Hold-harmless clause: A contract provision whereby one party agrees to indemnify and protect the other party from any injuries or lawsuits arising out of the particular transaction. Such clauses are usually found in leases in which the lessee agrees to "indemnify, defend and ho

I

Identification period:The period during which the exchanger must identify replacement property in a 1031 tax deferred exchange. The identification period starts on the day the exchanger transfers the first relinquished property and ends at midnight on the 45th day thereafter.

Illusory contract:An apparent contract that is not a contract because the parties have not agreed to be bound.

Implied agency:An agency agreement created by the actions of the parties, and not a stated (written or verbal) agreement. (See express agency)

Implied agreement/contract:A contract under which the agreement of the parties is demonstrated by their acts and conduct.

Implied easement:When the owner of two or more adjacent properties sells a part thereof, he or she grants by implication all those apparent and visible easements which are necessary for the reasonable use of the property granted. (See easement)

Implied authority:The authority of an agent to perform acts which are reasonably necessary to accomplish the purpose of the agency.

Implied warranty:A theory in landlord/tenant law in which the landlord renting residential property implies quiet enjoyment of the property or that the property is habitable. (See habitability, quiet enjoyment)

Impound account:A trust account established to set aside funds for future needs relating to a parcel of real property. Many mortgage lenders require an impound account to cover future payments for taxes, assessments, private mortgage insurance and insurance in order to protect their security from defaults and tax liens. In the case of FHA loans, many lenders require a tax reserve of six months and an insurance reserve of one year. When the property is sold and the buyer assumes the seller's mortgage, the lender does not usually return the escrow account balance to the owner. The sum remains with the lender, and it is the responsibility of the buyer and seller to prorate the balance between them. Impound accounts are required for FHA loans, and although VA regulations do not require an impound account for taxes and insurance premiums on GI loans, many lenders customarily require that such accounts be established and maintained. Under RESPA, the amount of reserves in the impound account is limited to one-sixth of the estimated amount of taxes and insurance that will become due in the 12-month period beginning at settlement. Sometimes, part of the purchase price due the seller may be impounded or put aside by escrow to meet the postclosing expense of clearing title or repairing the structure. The issue of use of interest earned on reserve funds is frequently debated. Typically, lenders do not pay interest to borrowers on money held as reserves.

Improvement:1 Any structure, usually privately owned, erected on a site to enhance the value of the property--for example, building a fence or a driveway. 2) A publicly owned structure added to or benefiting land, such as a curb, sidewalk, street or sewer.

Incentive zoning:Zoning that offers incentives to developers, such as retail shops on the first floor of multistory office buildings if a plaza for public use is included. (See zoning)

Income and expense report:A financial report generated by a property manager that details the income and expenses from a property and the amount remitted to the owner.

income approach:The process of estimating the value of an income-producing property through

J
Joint and several liability:A situation when more than one party is liable for repayment of a debt or obligation. A creditor can obtain compensation from one or more parties, either individually or jointly. (See liability

A title insurance policy insuring the interest of both owner and lender. four unities)

Joint venture:The joining of two or more people to conduct a specific business enterprise. A joint venture is similar to a partnership in that it must be created by agreement between the parties to share in the losses and profits of the venture. It is unlike a partnership in that the joint venture is for one specific project only, rather than for a continuing business relationship. (See partnership

)

Judgment:

The formal decision of a court on the respective rights and claims of the parties to an action or suit. A judgement that has been entered and recorded with the county recorder usually becomes a general lien on the property of the defendant.

Judgment decree:

Specifiies the award made by the court in a civil case.

Judgment lien:A general lien on the property of a judgment debtor, giving the holder of the judgment a right to levy the property to satisfy the debt. (See general lien

)

Judicial foreclosure:A method of foreclosing on real property by means of a court-supervised sale. In a judicial foreclosure, there is an appraisal, after which the court determines an upset price below which no bids to purchase will be accepted. (See nonjudicial foreclosure, strict foreclosure

)

Judicial precedent:

In law, the requirements established by prior court decisions.

Jumbo loan:A "jumbo" loan is any loan that exceeds the underwriting guidelines for Fannie Mae/Freddie Mac maximum loan limits ($240,000 as of January 1999). (See Non-conforming loan, Fannie Mae, Freddie Mac

)

Junior lien/mortgage:An obligation, such as a second mortgage, that is subordinate in right or lien priority to an existing lien (senior loan) on the same real estate. (See senior lien/loan

)

Junction box:A rectangular metal or plastic box that provides a nexis (junction) for a home's electrical wiring system. Protects the wiring from the elements.

K

Kickback:Payment made to someone for referral of a customer or business. Unlike a commission, a kickback is made without the customer's knowledge; thus, the referral could have been made without the customer's best interest at heart.

Kiosk:A kiosk is a freestanding structure (open sides, usually multi ided) located in a shopping center or mall from which merchandise is sold. A multi-sided structure found in a shopping mall or center.

l
Laches:

An equitable doctrine used by courts to bar a legal claim or prevent the assertion of a right because of undue delay or failure to assert the claim or right.

Land:

The earth's surface, extending downward to the center of the earth and upward infinitely into space, including things permanently attached by nature, such as trees and water.

Land contract:A land contract is a real property sales contract. (See contract for deed

)

Landfill:

A landfill is an enormous hole, either excavated for the purpose of waste disposal or left over from a surface mining operation. The hole is lined with clay or a synthetic lining to prevent leakage of waste into the surrounding water supply. Waste is laid on the liner at the bottom of the landfill and a layer of topsoil is then compacted into the waste. The layering is repeated again and again until the landfill reaches its full capacity.

Landlord:The lessor or the owner of leased premises. The landlord retains a reversionary interest in the property, so that when the lease ends the property will revert to the landlord. (See lease, lessor, lessee)
Landlord-Tenant Law Overview

Land trusts:

A few states permit the creation of land trusts, in which real estate is the only asset. As in all trusts, the title to the property is conveyed to a trustee, and the beneficial interest belongs to the beneficiary. In the case of land trusts, however, the beneficiary is usually also the trustor. While the beneficial interest is personal property, the beneficiary retains management and control of the real property and has the right of possession and the right to any income or proceeds from its sale.

One of the distinguishing characteristics of a land trust is that the public records usually do not name the beneficiary. A land trust may be used for secrecy when assembling separate parcels. There are other benefits as well. A beneficial interest can be transferred by assignment, making the formalities of a deed unnecessary. The beneficial interest in property can be pledged as security for a loan without having a mortgage recorded. Because the beneficiary's interest is personal, it passes at the beneficiary's death under the laws of the state in which the beneficiary lived. If the deceased owned property in several states, additional probate costs and inheritance taxes can be avoided.

Latent defect:

A hidden structural defect that would not be discovered by ordinary inspection and that threatens the property's soundness or the safety of its inhabitants. Some states impose on sellers and licensees a duty to inspect for and disclose latent defects. Buyers have been able to either rescind the sales contract or receive damages when a seller fails to reveal known latent defects. The courts have also decided in favor of the buyer when the seller neglected to reveal violations of zoning or building codes.

Lateral support:The right to have land supported by the adjoining land or soil beneath. (See subjacent support

)

Latitude:Distance on the earth's surface, measured northward or southward from the equator measured in degrees of the meridian; angular distance reckoned on a meridian. (See longitude, meridian

)

L

M
M1, M2, M3:Three measurements of the United States money supply. M1, or the basic money supply, consists of cash in public hands, private checking accounts, credit union share accounts and demand deposits at thrifts. M2 includes all of M1 plus money market mutual fund shares, and savings deposits of less than $100,000 at all depository institutions. M3

includes M2 plus large time deposits at all depository institutions.

Maker:The maker of a check is known as the drawer. (See payee

)

Manifest system:Tracking of hazardous waste from "cradle to grave" (generation through disposal), with accompanying documents known as "manifests." (See hazardous waste

)

Maintenance charges:

Monthly or annual charges assessed in a condominium, planned united development, or cooperative development to cover operational costs.

Management:

Refers to the amount of personal or hired time, it takes to run the investment.

Management agreement:

A contract between the owner of income property and a management firm or individual property manager that outlines the scope of the manager's authority.

Management plan:The financial and operational strategy for the ongoing management of a property. It is based on market analysis, a property analysis and the owner's goals. (See market analysis, property analysis

)

Manufactured home:A structure (transportable in one or more sections) when in the traveling mode, is eight body feet or more in width, or 40 body feet or more in length, or, when erected on site, is 320 or more square feet. It is built on a permanent chassis and designed to be used as a dwelling with or without a permanent foundation when connected to the required utilities, and includes the plumbing, heating, air conditioning, and electrical systems contained therein. (H & S Code § 18007)
Manufactured Housing Institute

Margin:In an adjustable-rate loan, the amount added to the index rate that represents the lender's cost of doing business (including costs, profits and risk of loss of the loan). Generally the margin stays constant during the life of the loan. (See adjustable-rate loan, index rate

)

Market:

A place where goods can be bought and sold and a price established.

Market analysis:

A regional and neighborhood study of economic, demographic and other factors made to determine supply and demand, market trends, and other factors important to leasing and operating a specific property.

Market approach:A method of pricing single-family rental homes and condos using comparable market data. When pricing multiple unit rental properties, the income approach is probably better. (See comparative market analysis, net income approach

)

Market-data approach:Estimating a property's value based on a comparison of the property with similar properties in the same locale that have sold recently. Also known as the di

N
Naked title:Bare title to the property, lacking the usual rights and privileges of ownership. A trustee in a deed of trust securing instrument may hold the title to a secured property, but only such title as is needed to carry out the terms of the lien document. (See deed of trust

)

National Association of Independent Fee Appraisers (NAIFA):A professional association of appraisers with more than 2,000 members nationally. NAIFA offers the specialty designations IFA (member), IFAS (senior member) and IFAC (appraiser-counselor).
NAIFA Website

National Association of REALTORS® (NAR):Formerly known as the National Association of Real Estate Boards (NAREB), NAR is the largest and most prestigious real estate organization in the world. Its members include REALTORS® and REALTOR-ASSOCIATES® representing all branches of the real estate industry. The national organization functions through local boards and state associations. Active brokers who have been admitted to membership in state and local NAR boards are allowed to use the trademark REALTOR®. Salespeople are admitted on a REALTOR-ASSOCIATE® active status. NAR members subscribe to a strict Code of Ethics.
NAR Website

National Bank Act of 1863:

In 1863, President Abraham Lincoln, at the urging of Salmon Chase, the Secretary of the Treasury, signed the National Bank Act. The Act established a national banking system and a uniform national currency to be issued by new "national" banks. The banks were required to purchase U.S. government securities as backing for their National Bank notes. In 1865, a 10-percent tax levied against State Bank notes essentially taxed those notes out of existence. From 1863 to 1877, National Bank notes were printed privately by the issuing banks. After 1877, the Bureau of Engraving and Printing, a division of the U.S. Department of the Treasury, assumed responsibility for printing all notes.

National Environmental Policy Act:The Act requires an environmental impact statement for federal actions that significantly affect the quality of the environment. (See environmental impact statement)
NEPAnet Website

Negative amortization:

A financing arrangement in which the monthly payments are less than the true amortized amounts and the loan balance increases over the term of the loan rather than decreases; an interest shortage that is added to unpaid principal.

Negative declaration:

A declaration by a developer that a project will not have a negative impact on the environment.

Negative easement:An easement where the owner of a servient estate is prohibited from doing something on his or her estate that is otherwise lawful, because it will affect the dominant estate. (See easement

)

Negligence:

The failure to use ordinary or reasonable care under the circumstances.

Negligent misrepresentation:

A negligent misrepresentation occurs when the broker should have known that a statement about a material fact was false. The fact that the broker may actually be ignorant about the issue is no excuse.

Negotiable instrument:

A written promise or order to pay a specific sum of money that may be transferre

O
Obedience:The fiduciary relationship obligates the agent to act in good faith at all times, obeying the principal's instructions in accordance with the contract. However, that obedience is not absolute. The agent may not obey instructions that are unlawful or unethical. Because illegal acts do not serve the principal's best interests, obeying such instructions violates the broker's duty of loyalty. On the other hand, an agent who exceeds the authority assigned in the contract will be liable for any losses that the principal suffers as a result.

Obligor:A promisor; one who incurs a lawful obligation to another (the obligee). The maker of a promissory note is an obligor. In a performance bond, the contractor is the obligor. One who guarantees the performance of the obligation is a surety; also called a guarantor. (See payor

)

Obligatory advance:

Any advance which, under the terms of the credit line deed of trust or other agreement, the secured party has legally obligated itself to make in the absence of a default, breach, or other such event. Obligatory advances include, but are not limited to, advances which the secured party has agreed to make as a term or condition of the credit line deed of trust or other related agreement; obligations arising out of the occurrence of a condition, event or circumstance contemplated by the agreement; obligations arising on a specified date or time; or advances made upon application therefor by the grantor under the credit line deed of trust or by another obligor whose indebtedness is secured by the deed of trust.

Obsolescence:

The loss of value due to factors that are outmoded or less useful. Obsolescence may be functional or economic.

Occupancy permit:

A permit issued by the appropriate local governing body to establish that the property is suitable for habitation by meeting certain safety and health standards.

Occupational Safety and Health Act (OSHA):Congress created OSHA under the Occupational Safety and Health Act, which was signed by President Richard M. Nixon on December 29, 1970. OSHA's mission is to prevent work-related injuries, illnesses and deaths.
OSHA Website

Offer:

An offer is a promise made by one party, requesting something in exchange for that promise. The offer is made with the intention that the offeror will be bound to the terms if the offer is accepted. The terms of the offer must be definite and specific and must be communicated to the offeree.

Offer and acceptance:Two essential components of a valid contract; a "meeting of the minds." (See acceptance, offer

)

Offeree:

The person to whom an offer is made - usually the owner.

Office of Thrift Supervision (OTS):Monitors and regulates the savings and loan industry. OTS was created by FIRREA.
OTS Website

Office property:

Income-producing commercial property from which a particular service is rendered.

Offeror:

The party who makes an offer - usually the buyer.

Offsite improvements:

Improvements made o

P
Package loan:

A real estate loan used to finance the purchase of both real property and personal property, such as in the purchase of a new home that includes carpeting, window coverings and major appliances.

par:The face value of a bond or security. (See security

)

parol evidence rule:

A rule of evidence providing that a written agreement is the final expression of the agreement of the parties, not to be modified by oral or written negotiations.

partial release clause:

A mortgage provision under which the mortgagee agrees to release certain parcels from the lien of the blanket mortgage upon payment of a certain sum of money by the mortgagor. The clause is frequently found in tract development construction loans.

partial zoning:Zoning that does not consider its effect on other areas. (See zoning

)

participation financing:

Where a lender becomes a partner in a development.

participation certificates:

Certificates issued by Freddie Mac backed by pools of mortgages.

participation mortgage:

A mortgage loan wherein the lender has a partial equity interest in the property or receives a portion of the income from the property.

partition:Co-tenants who wish to terminate their co-ownership may file an action in court to partition the property. Partition is a legal way to dissolve the relationship when the parties do not voluntarily agree to its termination. If the court determines that the land cannot be divided physically into separate parcels without destroying its value, the court will order the real estate to be sold. The proceeds of the sale will then be divided among the co-owners according to their fractional interests. (See co-ownership

)

partnership:An association of two or more individuals who carry on a continuing business for profit as co-owners. Under the law a partnership is regarded as a group of individuals rather than as a single entity. (See general partnership, limited partnership, joint venture)
Uniform Partnership Act

—Full Text

parts per billion (ppb):

Units commonly used to express contamination ratios, as in establishing the maximum permissible amount of a contaminant in water, land, or air. These ratios can also be expressed in "parts per million (ppm)."

parts per million (ppm):

Units commonly used to express contamination ratios, as in establishing the maximum permissible amount of a contaminant in water, land, or air. These ratios can also be expressed in "parts per billion (ppb)."

party wall:

A wall that is located on or at a boundary line between two adjoining parcels of land and is used or is intended to be used by the owners of both properties.

party wall easement:A party wall can be an exterior wall on a building that straddles the boundary line between two lots, or it can be a commonly shared partition wall between two connected properties. Each lot owner owns the half of the wall on his or her lot

Q
Qualified intermediary:

Corporation or entity who facilitates a 1031 tax deferred exchange (also known as an "accommodator"). To be a qualified intermediary, the intermediary must not be a related party.

Quantity-survey method:The appraisal method of estimating building costs by calculating the cost of all of the physical components in the improvements, adding the cost to assemble them and then including the indirect costs associated with such construction. (See appraisal

)

Quasi contract:

A contract implied by law, as a matter of equity, when no actual contract exists.

Quiet enjoyment:An implied warranty that the landlord will not interfere with the tenant's reasonable use and enjoyment of a leased property. (See implied warranty

)
quiet title:

A court action to remove a cloud on the title.

Quitclaim deed:A conveyance by which the grantor transfers whatever interest he or she has in the real estate, without warranties or obligations.

R
Radon:A naturally occurring gas that is suspected of causing lung cancer.
National Safety Council on Radon

Rafter:A roof structural support system using "2 by" wood components that are nailed together (as opposed to trusses that are connected using press-on metal plates). (See truss

)

Range:1. A measure of the difference between the highest and lowest variates. (See variates) 2.

A strip of land six miles wide, extending north and south and numbered east and west according to its distance from the principal meridian in the rectangular (government) survey system of legal description. For example, Range 3 East would be a strip of land between 12 and 18 miles east of its principal meridian.

Rate cap:The limit on the amount the interest rate can be increased at each adjustment period in an adjustable rate loan. The cap may also set the maximum interest rate that can be charged during the life of the loan. (See adjustable rate mortgages (ARMs)

)

Rate factor:

The number of dollars required to pay off each $1,000 of a mortgage loan.

Ratification:Method of creating an agency relationship in which the principal accepts the conduct of someone who acted without prior authorization as the principal's agent.

Ready, willing and able buyer:

One who is prepared to buy property on the seller's terms and is ready to take positive steps to consummate the transaction.

Real estate:

The physical land at, above and below the earth's surface with all appurtenances, including any structures; any and every interest in land whether corporeal or incorporeal, freehold or nonfreehold; for all practical purposes, the term real estate is synonymous with real property.

Real Estate Advisory Commission:A ten member panel appointed by the Real Estate Commissioner

, who preside over meetings. Six commission members must be licensed California real estate brokers, and four must be non licensed members of the public. Unlike the commissioner, commission members serve without compensation. They make recommendations to the Real Estate Commissioner on relevant matters.

real estate assistant:

A real estate assistant (also known as a personal assistant or professional assistant) is a combination of office manager, marketer, organizer and facilitator with a fundamental understanding of the real estate industry.

Real estate brokerage:

A Real Estate Brokerage is a business in which real estate license-related activities are performed under the authority of a real estate broker.

Real estate commissioner:

The Real Estate Commissioner is appointed by the governor and serves at the governor's discretion. The commissioner determines administrative policy and enforces that policy in the best interests of those dealing with real estate licensees. The person selected as commissioner must have been a practising real estate broker in California for five years or otherwise engaged in real estate activity for five of the past ten years.

Real estate dealer:

A real estate dealer holds property primarily for resale to customers in the course of business, in contrast to a real estate investor who holds property for personal<

S
Safe Drinking Water Act:Enacted by Congress in 1974, this federal law administered by the EPA and equivalent state regulators to establish and enforce drinking water standards.
Safe Drinking Water Act

safety clause:

A safety clause may be contained in a listing. It provides that a broker is still entitled to a commission for a set period of time after the listing has expired if the property is sold to a prospect, who was introduced to the property by the broker, during the period of the listing.

Sale-leaseback:

A transaction in which an owner sells his or her improved property and, as part of the same transaction, signs a long term lease to remain in possession of the premises.

Sales comparison approach:The process of estimating the value of a property by examining and comparing actual sales of comparable properties. (See appraisal

)

Sales contract:

A real estate sales contract contains the complete agreement between a buyer of a parcel of real estate and the seller. Depending on the area, this agreement may be known as an offer to purchase, a contract of purchase and sale, a purchase agreement, an earnest money agreement or a deposit receipt.

Salesperson:

A person employed directly or indirectly by a licensed real estate broker to perform various tasks and responsibilities. These may include selling and/or buying real estate; negotiating purchase, sale or exchange of real estate; negotiating leases, rents and/or improvements.

Sandwich lease:

Another term used is "sublease." This is when a tenant has a current lease with the owner of a property and then "sublets" the property to a third party. The tenant is then "sandwiched" between the owner and the end user, acting as lessee and lessor at the same time.

Satisfaction of mortgage:

When all mortgage loan payments have been made and the note has been paid in full, a satisfaction of mortgage (also known as a release of mortgage or mortgage discharge) returns to the mortgagor all interest in the real estate, which was conveyed to the mortgagee by the original recorded mortgage document.

Savings and loan association (S&L):A financial institution whose principal function is to promote thrift and home ownership. Depositors earn interest on their deposits, often at a higher rate than is offered at commercial banks. The S&L invests some of these deposits in residential mortgage loans, enabling more people to purchase and/or repair their homes. Savings and loan associations are active participants in the home loan mortgage market. (See thrift

)

Second mortgage:A mortgage (or trust deed) that is junior or subordinate to a first mortgage; typically, an additional loan imposed on top of the first mortgage, taken out when the borrower needs more money. Because the risk involved to the lender is greater with the second mortgage, the lender's conditions are usually more stringent, the term is shorter and the interest rate is higher than for the first mortgage. (See mortgage

)

Secondary financing:

A loan taken out in addition to a first loan, usually obtained from an individual lender.

Secondary mortgage market:A market for the purchase and sale of existing mortgages, designed to provide

T
Table funding:Simultaneous conveyance of purchase price and title as well as all loan papers at a closing.

Tacking:

Adding or combining successive periods of continuous occupation of real property by adverse possessors. This concept enables someone who has not been in possession for the entire statutory period to establish a claim of adverse possession.

Take-out financing:Long-term permanent financing. In the usual large construction project, the developer obtains two types of financing. The first is the interim loan, a short-term loan to cover construction costs. Before lending any money, however, the interim lender normally requires a commitment by a permanent lender to agree to "take out" the interim lender in which the lender pays off the construction loan

and leaves the developer with a permanent long-term loan when the building has been completed.

Taking:The concept of taking comes from the Takings clause of the fifth amendment of the United States Constitution. The clause reads, "nor shall private property be taken for public use, without just compensation." This means that when land is taken for public use through the government's power of eminent domain or condemnation, the owner must be compensated. (See eminent domain)

Talking sign:

A radio transmitter with a range of up to 250 feet that broadcasts a description of a property to prospects listening to a radio tuned to the transmitter's frequency.

Tandem plan:A mortgage subsidy program offered from time to time by the United States Congress. The Government National Mortgage Association (GNMA) purchases certain mortgages at below market interest rates, granting borrowers low-interest loans. GMNA sells the loans on the secondary market at a discount, the discount being the amount of the subsidy. These programs are offered "in tandem" with local mortgage lenders. (See GNMA, secondary mortgage market

)

Taxation:1. The process by which a government or municipal quasi-public body raises monies to fund its operation. 2.

The impact an investment has on the investor's liability for the payment of federal, state, and local taxes.

Tax bill:

A property owner's tax bill is computed by applying the tax rate to the assessed valuation of the property.

Tax credit:

An amount by which tax owed is reduced directly.

Tax deed:An instrument, similar to a certificate of sale, given to a purchaser at a tax sale. (See certificate of sale

)

Tax deferred exchange (1031 exchange):Under Section 1031 of the Internal Revenue Code, some or all of the realized gain from the exchange of property may not need to be immediately recognized for tax purposes. Both properties in an exchange must be held for productive use in trade or business or for investment and must be of a like-kind. (See like-kind, realized capital gain

)

Tax-free gifts:

Gifts that are free from federal gift taxes.

Tax levy

U
uncollected rent:Uncollected rent or vacancy is subtracted from gross scheduled income. Uncollected rent is an estimate expressed as a percentage then converted to dollars. (See gross scheduled income

)

unconscionable contracts:

An agreement that is so unfair and one-sided that the courts will refuse to honor it.

underground storage tanks (USTs):USTs are commonly used for storing petroleum products, chemicals or process wastes. Sites which use USTs include airports, gas stations, industrial locations and military bases. Over time neglected tanks may leak hazardous substances into the environment, contaminating groundwater. State and federal laws impose strict requirements on landowners where USTs are located to detect and correct leaks to protect groundwater.
EPA—Office of Undergound Storage Tanks

underwriter:

A person who evaluates the risk of default by a mortgage loan applicant, and grants approval or denial of the loan.

underwriting:

The process of evaluating a mortgage loan applicant's credit, collateral value and the risks in making a loan.

undisclosed dual agency:A broker may not intend to create a dual agency

. However, like any other agency, it may occur unintentionally or inadvertently. Sometimes the cause is carelessness, and other times a salesperson does not fully understand his or her fiduciary responsibilities. Some salespersons lose sight of other responsibilities when they focus intensely on bringing buyers and sellers together. For instance, a salesperson representing the seller might suggest to a buyer that the seller will accept less than the listing price, or that same salesperson might promise to persuade the seller to accept an offer that is in the buyer's best interests. Giving a buyer any specific advice on how much to offer can lead him or her to believe that the salesperson represents the buyer's interests and is acting as the buyer's advocate.

undue influence:

Strong enough persuasion to completely overpower the free will of another and prevent him or her from acting intelligently and voluntarily, as in a case where a broker guilty of blockbusting has induced someone to sell in fear of a change in the racial character of the community. Undue influence usually requires a close or confidential relationship like parent-child, broker-seller, attorney-client, or trustee-beneficiary. When a person has been unduly influenced to sign a contract, that person can void the contract.

unenforceable contract:

A contract which is considered unenforceable either because it cannot be proven or will not be enforced by a court. In addition to being considered void or illegal, other reasons for unenforceable contracts may be because they were not presented in writing which may have been a requirement under state statutes of frauds or the statutes of limitations period has elapsed.

unequivocal:

Unambiguous; clear; having only one possible meaning or interpretation.

Uniform Building Code:A national building code published by the International Conference of Building Officials. It has been adopted in part by municipalities throughout the United States, but used mostly in the western states. (See building co.

V
Valid contract:A contract that complies with all the essentials of a contract and is binding and enforceable with all associated parties. (See contract

) -->

VA loan:A government-sponsored mortgage assistance program administered by the Department of Veterans Affairs. Under the Servicemen's Readjustment Act of 1944, eligible veterans and widows or widowers (who have not re-married) of veterans who died in service or from service-connected causes may obtain partially guaranteed loans for the purchase or construction of a house or to refinance existing mortgage debt.
Quick Guide to VA Home Loans

-->

Value:The measure of the monetary equivalent of a property. The four essential elements of value are utility, scarcity, demand and transferability. Cost does not equal value nor does equity.

There are various types of value, such as market value, tax assessed value, book value, insurance value, use value, par value, rental value and replacement value. By far, the type of value used for the largest number of real estate transactions is market value. -->

Value in exchange:

The market value of a property. -->

Value in use:

The value of a property as used for a specific purpose. -->

Vapor retarders:

Special materials used in the installation of thermal insulation to reduce the passage of water vapor. These materials include treated papers, plastic sheets, and metallic foils. -->

Variable costs:

Operating expenses that fluctuate with occupancy, such as utilities and maintenance costs. -->

Variable lease:

Allows for increases in the rental charges during the lease period. One of the more common is the graduated lease which provides for specified rent increases at set future dates. Another is the index lease, which allows rent to be increased or decreased periodically based on changes in the consumer price index or some other indicator. -->

Variance:

Permission obtained from governmental zoning authorities to build a structure or conduct a use that is expressly prohibited by the current zoning lows; an exception from the zoning laws. A variance gives some measure of elasticity to the zoning game. -->

Variate:

A single item in a group. -->

Vendee:

The purchaser of realty; the buyer. The buyer under a land contract. -->

Vendor:

The seller of realty. The seller under a land contract. In some cases, the vendor may not be the owner--he or she might be the holder of an option. -->

Verification:

Confirmation under oath of the truthfulness of a statement. -->

Veteran's Administration (VA):Federal agency providing assistance to veterans, including the guarantee of VA mortgage loans.
Department of Veterans Affairs Website

-->

Veteran's exemption:

California war veterans may receive a $4,000 exemption on the full cash value of their homes. -->

Voi

W
Waiver: To give up a right voluntarily. (See workout

)

Walk-through:

A final inspection of a property just before closing. This assures the buyer that the property has been vacated, that no damage has occurred and that the seller has not taken or substituted any property contrary to the terms of the sales agreement. If damage has occurred, the buyer might ask that funds be withheld at the closing to pay for the repairs.

Warehousing:Warehousing is the assembly of mortgage loans into "pools." Securities that represent shares in these pools are then sold to investors. Examples of warehousing "agencies" include Fannie Mae/Federal National Mortgage Association and Ginnie Mae/Government National Mortgage Association

.

Warranty:

--> A promise that certain stated facts are true. A guaranty by the seller, covering the title as well as the physical condition of the property. A warranty is different from a representation in that a representation is a statement made in the course of negotiations leading up to the sale, but not incorporated into the contract. A warranty, on the other hand, is a statement in the contract asserting the truth of certain things about the property.

Warranty deed:

A deed in which the grantor fully warrants good clear title to the premises; also called a general warranty deed. The usual covenants of title are covenant of seisin (possession), covenant of quiet enjoyment, covenant against encumbrances, covenant of warranty forever and covenant of further assurance. A warranty deed warrants the title, not the quality of construction of the real property. A warranty deed is used in most real estate deed transfers and offers the greatest protection of any deed.

Waste:

An improper use or an abuse of a property by a possessor who holds less than fee ownership, such as a tenant, life tenant, mortgagor or vendee. Such waste ordinarily impairs the value of the land or the interest of the person holding the title or the reversionary rights.

Water rights: See appropriative water rights, correlative water rights, littoral rights, right of correlative user, right of prior appropriation, riparian rights
  State of CA—State Water Resources Control Board Department of Water Rights

water table:

The natural level at which water is located in a particular area, be it above or below the surface of the earth.

Water well:

An excavation where the intended use is for location, acquisition, development, or artificial recharge of ground water.

Weekly activity report:

A weekly written report given to an owner by a listing broker reviewing the sales activities conducted by the broker to sell the listed property.

Weighted average technique: When reconciling appraisal approaches, the application of a weight to each approach for averaging. (See appraisal

)

Wetlands:

Areas that are inundated or saturated by su

Y

Yield: The return on an investment or the amount of profit, stated as a percentage of the amount invested; the rate of return. In real estate, yield refers to the effective annual amount of income that is being accrued on an investment. The yield on income property is the ratio of the annual net income from the property to the cost or market value of the roperty. The yield, or profit, to a lender is the spread or differential between the cost of acquiring the funds lent and the interest rate charged.

Z
Zero coupon bonds:A single-payment bond that grows to its face value over a prescribed time period at a specific interest rate. All compound interest is tax-deferred until the bond is cashed.

Zoning: The regulation of structures and uses of property within designated districts or zones. Zoning regulates and affects such things as use of the land, lot sizes, types of structure permitted, building heights, setbacks and density (the ratio of land area to improvement area). (See aesthetic zoning, bulk zoning, comprehensive zoning, cumulative zoning, downzoning, exclusionary zoning, incentive zoning, noncumulative zoning, partial zoning, spot zoning)

Zoning ordinance: An exercise of police power by a municipality to regulate and control the character and use of property.

Zoning variance: A zoning variance permits a change in the specifications required by the zoning ordinance.