Word Book

Learn and master these words to succeed in Real Estate

A

Abstract of Judgment: Abstract of Judgment is a summary of a court’s decision. When recorded it creates a lien upon real and personal property of the judgment debtor.

Abstract of Title: Abstract of Title is a summary or digest of documents affecting title to real estate.

Acceleration Clause: Acceleration Clause is a provision in a trust deed or mortgage that makes the loan balance immediately due and payable upon occurrence of a certain event, such as sale of the property.

Acceptance: Acceptance is consent to an offer to enter into a contract. Offer and acceptance create a contract when the acceptance is communicated to the offeror.

Accession: Accession is acquisition of property by its union with other property, either through human effort or by natural forces.

Accounts Receivable: Accounts Receivable is an accounting term for money earned but not yet received.

Accretion: Accretion is the growth of land by the gradual deposit of soil by natural causes.

Accrual for Depreciation: Accrual for Depreciation, in the income approach to appraisal, is a provision included in the capitalization rate to provide a return of investment out of income.

Accrued Depreciation: Accrued Depreciation is depreciation that has accumulated over a period of time.

Acknowledgment: Acknowledgment is a formal declaration before an authorized official, usually a notary public, by a person who has executed a document, that he or she in fact did execute or sign the document.

Acre: Acre is a measure of land equaling 43,560 square feet. A square acre is approximately 209 feet by 209 feet. There are 640 acres in a square mile.

Actual Notice: Actual Notice is information of a fact actually, expressly, or directly given to a person.

Ad Valorem: Ad Valorem is a Latin term meaning “according to value” or “in proportion to the value.” Property taxes are normally assessed ad valorem.

Adjusted Cost Basis: Adjusted Cost Basis is the value of a property as shown on the books of a taxpayer, calculated as original cost, plus capital improvements, less depreciation.

Administrative Procedure Act: Administrative Procedure Act is the state law establishing the procedure the Real Estate Commissioner must follow in order to discipline a licensee.

Administrator: Administrator is a person appointed by the probate court to administer the estate of a deceased person.

Advance Fee: Advance Fee is money demanded or collected from an owner in advance, for example to pay for advertising. Mishandling of advance fees by a licensee may result in disciplinary action.

Adverse Possession: Adverse Possession is open and notorious possession and occupancy of property under an evident claim of right, in opposition to the title of some other claimant.

Affidavit: An Affidavit is a written statement of facts sworn to or affirmed before an authorized official, usually a notary public.

Affirmation: An Affirmation is a solemn declaration by a person whose religious beliefs forbid the taking of an oath.

After Acquired Title: After Acquired Title is defined in Civil Code Section 1106: “When a person purports by proper instrument to grant real property in fee simple and subsequently acquires any title, or claim of title thereto, the same passes by operation of law to the grantee or his successors.”

Agency: Agency is the fiduciary relationship in which one person (the agent) represents another (the principal) in dealing with third parties, as authorized by the principal.

Agent: Agent is one who represents another, called the principal, in dealing with third persons.

Alcoholic Beverage Control Act: Alcoholic Beverage Control Act is a California law regulating the sale of alcoholic beverages. It is administered by the State Department of Alcoholic Beverage Control. Both are abbreviated ABC.

Alienate: Alienate is to transfer the title to real property from one person to another.

Alienation Clause: Alienation Clause is a type of acceleration clause that demands payment of the entire loan balance upon sale or other transfer of the title. It is also called a due-on-sale clause.

All Inclusive Trust Deed: All Inclusive Trust Deed is a financing device whereby a lender assumes payments on existing trust deeds of a borrower and takes a junior trust deed for the total existing debts plus the additional amount borrowed. This is also called A.I.T.D., wrap-around, or wrap.

Alluvion: Alluvion is soil deposited by accretion. It is also called Alluvium.

Alternative Minimum Tax: Alternative Minimum Tax is an aspect of federal income tax, a flat tax applied on “alternative minimum taxable income” to ensure that everyone with income above a certain level pays some income tax.

Amenities: Amenities are attractive or desirable features of a property, beyond the purely monetary and utilitarian.

A.L.T.A. Title Policy: A.L.T.A. Title Policy is an extended coverage title insurance policy issued to owners and lenders. It expands the coverage normally given in a standard policy to include facts a physical survey would show, and rights of parties in possession. A.L.T.A. stands for American Land Title Association.

Amortization: Amortization is the liquidation of a financial obligation on an installment basis, or the recovery of cost or value over a period of time.

Amortization Table: Amortization Table is a table showing payments required to amortize loans at various interest rates over various periods of time.

Amortized Loan: Amortized Loan is a loan that is completely paid off, interest and principal, by a series of regular payments that are equal or nearly equal.

Annexation: Annexation is an addition to property by the act of attaching a smaller thing to the larger property, usually attaching personal property to real property.

Annual Percentage Rate: Annual Percentage Rate is a term used in the Truth in Lending Act. It is abbreviated APR. It represents the total cost of credit, including interest, discount points, origination fees, and loan broker commission, as a percentage of the amount financed.

Anticipation: Anticipation is an appraisal principle that affirms that value is created by anticipated benefits to be derived in the future.

Appraisal: Appraisal is an estimate or opinion of value as of a specific date.

Appreciation: Appreciation is increase in value due to any cause.

Appurtenance: Appurtenance is anything incident to or attached to the land that is a part of the property. It “runs with the land,” meaning it is transferred with a transfer of the land.

Appurtenant: Appurtenant means belonging to.

Arranger of Credit: Arranger of Credit is defined by California Civil Code as “a party to the transaction” who is a real estate licensee or attorney, or a nonattorney who arranges credit extended by a seller. This person is responsible for the disclosure statements required when credit is extended by a seller of residential property.

Article 5: Article 5 is the part of the California Real Estate Law that regulates transactions in notes and land contracts.

Article 6: Article 6 is the Real Property Securities Dealer’s Law, a part of the California Real Estate Law.

Article 7: Article 7 is the Broker’s Loan Law, a part of the California Real Estate Law.

Assemblage: Assemblage is combining two or more parcels to result in some value greater than the sum of the individual parcels. The increase in value is called plottage or plottage increment.

Assessed Value: Assessed Value is value placed on property for the purpose of computing real property taxes.

Assets: Assets refers to anything of value owned.

Assign: Assign is to transfer over to another a claim, right, or title to property, or to transfer a contractual claim or right.

Assignee: Assignee is the person receiving a right or property being assigned or transferred.

Assignment: Assignment is a transfer to another of any property, real or personal, or of any estate or right therein.

Assignment of Rents Clause: Assignment of Rents Clause is a clause in a trust deed that gives the beneficiary the right to collect rents of the secured property in the event of a default.

Assignor: Assignor is the owner of a right or property being assigned or transferred.

Associate Licensee: Associate Licensee is a broker or salesperson employed by a real estate broker.

Assumption: Assumption is taking over the primary liability for the payment of an existing mortgage or trust deed.

Attorney-in-Fact: Attorney-in-Fact is a person holding power of attorney for another. The power may be special (for a limited purpose) or general (to transact all business).

Authorization to Sell: Authorization to Sell is a shorter name for the exclusive authorization and right to sell, commonly called a listing.

Avulsion: Avulsion is sudden tearing away of land by a river or other watercourse.

B

Balance: Balance is an appraisal principle that holds that value is created and maintained when contrasting, opposing, or interacting elements are in a state of equilibrium. Value is sustained when the four “agents in the production of income” are in proper balance.

Balance Sheet: Balance Sheet is a financial statement showing assets, liabilities, and net worth as of a specific date.

Balloon Payment: Balloon Payment is the outstanding balance due at the maturity of a balloon mortgage. The Real Estate Law defines any payment that is twice as great as the smallest installment payment as a balloon payment.

Band of Investment: Band of Investment is a method of developing a capitalization rate by combining the weighted average rates attributable to the different components of invested capital.

Banker’s Rule: Banker’s Rule is the convention that a month consists of 30 days, and a year of 360 days, for proration and some other calculations.

Base Line: Base Line is a survey line running east and west, used in establishing township boundaries.

Basis: Basis is a property owner’s “book value” for income tax purposes, calculated as original cost plus capital improvements less depreciation.

Benchmark: Benchmark is a surveyor’s mark made on a permanent landmark.

Benchmark Property: Benchmark Property is a property used as a standard or base against which comparisons are made.

Beneficiary: Beneficiary is the one for whose benefit a trust is created. On a note and trust deed transaction, this is the lender.

Beneficiary Statement: Beneficiary Statement is the statement of a lender, giving the remaining principal balance and other information concerning a loan. It is usually obtained when a borrower wishes to sell, pay off a loan, or refinance.

Bequeath: Bequeath is to transfer personal property by will. Real property is technically “devised,” not “bequeathed.”

Bequest: Bequest is personal property that is transferred by will.

Bilateral: Bilateral means two-sided. A bilateral contract is a contract in which a promise is given in exchange for a promise. It obligates both sides.

Bill of Sale: Bill of Sale is the document used to transfer title or ownership of personal property.

Blanket Mortgage or Trust Deed: Blanket Mortgage or Trust Deed is a mortgage or trust deed that encumbers more than one parcel of real estate.

Blind Advertising: Blind Advertising is failure by a licensee to indicate license status in any advertising of services for which a real estate license is required.

Blockbusting: Blockbusting is the illegal act of inducing the sale, lease, or listing of residential property on the grounds of loss in value due to entry into the neighborhood of persons of another race, religion, ancestry, or national origin. It is also called panic selling.

Book Value: Book Value is original acquisition cost of an asset, plus the cost of any subsequent capital improvements, less charges for depreciation on both. It is also called basis, and adjusted cost basis. An accounting term.

Boot: Boot is something not of like kind received in a tax-deferred exchange, such as cash or net mortgage relief.

Bracketing: Bracketing is the selecting of a value that falls within the highs and lows of recent selling prices of comparable homes. It is used in the market data approach.

Breach: Breach is failure, without legal excuse, to perform a duty or promise.

British Thermal Unit: British Thermal Unit is a unit of heat measurement, abbreviated B.T.U. The quantity of heat required to raise the temperature of one pound of water one degree Fahrenheit.

Broker: A Broker is a natural or legal person, who for compensation or in expectation of compensation, acts for another in a real estate or related transaction.

Broker’s Loan Statement: Broker’s Loan Statement is a statement given to the borrower at the time of a loan transaction negotiated by a licensee, indicating the costs, expenses, and deductions of the loan. Also called a mortgage loan disclosure statement.

Building Code: Building Code is a state, city, or county law that sets forth minimum construction standards.

Building Residual Technique: Building Residual Technique is a method of appraising an income producing building separate from the land.

Bulk Sales Law: Bulk Sales Law is Division 6 of the Uniform Commercial Code, that regulates the sale of inventory of a business for the protection of the buyer and the seller’s creditors.

Bundle of Rights: Bundle of Rights is the group or bundle of interests that a person has in any real or personal property owned, such as a distinct right to possess, use, enjoy, or dispose of property—in other words, an ownership interest.

Business and Professions Code: Business and Professions Code is the body of laws containing the California Real Estate Law and other state licensing laws.

Business Opportunity: Business Opportunity is defined by the Real Estate Law as the sale or lease of the business and goodwill of an existing business enterprise.

Buyer’s Market: Buyer’s Market is a situation where many properties are for sale with few buyers. Supply is up, demand is down.

C

Cal-Vet: Cal-Vet is the home loan program of the California Department of Veterans Affairs, funded by bonds under the California Farm and Home Purchase Act. The Cal-Vet financing device is the land contract.

California Department of Veterans Affairs: California Department of Veterans Affairs is the state agency that, among other things, makes Cal-Vet loans to qualified California veterans.

Called Loan: Called Loan is a loan that is due and payable at the demand of the lender, usually as a result of an acceleration or alienation clause becoming effective.

Capacity: Capacity is the legal ability of a person to perform certain civil acts, such as making a will or a contract.

Capital Expenditures: Capital Expenditures are investments for land, buildings, machinery, and equipment.

Capital Gain: Capital Gain is the gain or profit received on the sale of real or personal property, other than property sold as stock-in-trade. Capital gain is distinguished from ordinary income.

Capitalization: Capitalization is an appraisal method of determining value of property by considering net income and a percentage of reasonable return on the investment. It is the conversion of income into value, by discounting a future stream of income to a present rate that is attracting funds in today’s market.

Capitalization Rate: Capitalization Rate is any rate used to capitalize income. It is a percentage relationship between capital and net income, that can be applied to any income stream with a finite term over which the invested principal is returned to the investor or lender.

Cash Flow: Cash Flow is the pre-tax income from an investment after deducting from gross income all operating expenses and loan payments. The after-tax income is referred to as “net spendable cash flow.”

Caveat Emptor: Caveat Emptor is Latin for “Let the buyer beware,” meaning the buyer must examine the purchase and buy at his or her own risk. This principle is no longer applicable to real estate transactions in California.

Certificate of Clearance: Certificate of Clearance is a certificate obtained from the State Board of Equalization showing that no sales tax is due from the seller of the business. It protects the buyer from successor’s liability. It is also called a clearance receipt.

Certificate of Reasonable Value: Certificate of Reasonable Value is an estimate of value issued by the U.S. Department of Veterans Affairs for a VA loan, based on an approved appraisal. The abbreviation is CRV.

Certificate of Title: Certificate of Title is a statement furnished by an abstract company stating that the company found title properly vested in the present owner, based upon its records.

Chain of Title: Chain of Title is a history of all documents transferring title to a parcel of real estate, beginning with the original transfer from government to private ownership and ending with the latest document

transferring title.

Change: Change is an appraisal principle that holds that the future, not the past, is of prime importance in estimating value.

Chattel: Chattel is any item of personal property.

Chattel Mortgage: Chattel Mortgage is a personal property mortgage. In California the document used is the security agreement.

Chattel Real: Chattel Real is a personal property right in real estate, such as a lease.

Chose: Chose is a legal term for an article of personal property. “Chose in possession” is tangible personal property, and “Chose in action” is intangible personal property.

Chronological Age: Chronological Age is the age of a property measured by the actual number of years since the structure was built.

Claim of Right: Claim of Right is an aspect of adverse possession or easement by prescription. A claim of right is present when the adverse user or possessor treats the land as his or her own.

Client: Client is the party represented by a broker or an attorney.

Closing Statement: Closing Statement is a financial statement rendered to the buyer and seller at the close of escrow, giving an account of all funds received or expended by the escrow holder.

Cloud on Title: Cloud on Title is any condition that may affect the clear title and marketability of real property.

Co-venture Loan: Co-venture Loan is another name for Equity Participation Loan. The lender gets a share of ownership or income from the property.

Code of Ethics: Code of Ethics is the set of standards that a professional is bound to observe. Professional associations such as the National Association of REALTORS® have codes for their members.

Codicil: Codicil is an addition or change to a will.

Collateral: Collateral is property held by a lender as security for a loan.

Collusion: Collusion is a secret agreement between two or more persons to defraud another.

Color of Title: Color of Title is that which appears to be good title but is not title in fact, such as a forged deed or invalid will.

Commercial Acre: Commercial Acre is the remainder of an acre of newly subdivided land after deduction for streets, sidewalks, curbs, and the like.

Commingling: Commingling is unauthorized mixing of personal funds with funds of a customer or client.

Commission: Commission is an agent’s compensation or fee for negotiating a real estate or loan transaction, usually a percentage of the transaction amount.

Commissioner’s Regulations: Commissioner’s Regulations are regulations adopted by the Real Estate Commissioner to implement the California Real Estate Law. They have the force and effect of the law itself, and are contained in the Code of Regulations, formerly the Administrative Code.

Commitment: Commitment is an agreement to lend money or insure a loan. For example, FHA offers two kinds of commitment: FHA-Firm is an agreement to insure a loan on a specified property with a specified borrower. FHA- Conditional is a tentative commitment subject to the approval of an unknown borrower.

Community Apartment Project: Community Apartment Project is multiple ownership of an apartment building in which each owner is a tenant in common with the right to occupy one of the apartments.

Community Property: Community Property is property acquired by husband and wife during marriage, unless explicitly acquired as separate property.

Comparative Analysis: Comparative Analysis is a method of appraisal in which selling prices of similar properties are used as the basis for arriving at the value estimate. It is also known as the market data approach.

Compensation: Compensation is money or equivalent of money received for services rendered.

Compound Interest: Compound Interest is interest paid on original principal and also on the accrued interest.

Condition: Condition is a requirement or prohibition in a deed that can place the title back in the hands of the original grantor if it is violated. It is a form of private restriction.

Conditional Sales Contract: Conditional Sales Contract is a contract for the sale of real or personal property by which possession is delivered to the buyer, but legal title remains vested in the seller until all the conditions of the contract have been fulfilled. When used for real property, it is also called land contract and real property

sales contract.

Condominium: Condominium is an estate in real property consisting of an undivided interest in common in a portion of the property, together with a separate interest in space in a residential, industrial, or commercial unit.

Consent: Consent is agreement to do something. Mutual consent of all parties is one of the essential elements of a valid contract.

Conservator: Conservator is a person appointed by the court to administer the person and property of another.

Consideration: Consideration is anything of value given to induce another to enter into a contract, whether money, services, or a promise. Consideration is one of the essential elements of a valid contract.

Constructive Eviction: Constructive Eviction is any action by a landlord whereby the premises are rendered unfit or the tenant is deprived of the benefit of the premises.

Constructive Fraud: Constructive Fraud is any breach of duty that, even without an actually fraudulent intent, gains an advantage by misleading another.

Constructive Notice: Constructive Notice is notice given by the public records or by possession. Parties involved are not directly informed, but are assumed to be informed. This type of notice is also called notice to the world.

Constructive Severance: Constructive Severance is a way of separating fixtures or appurtenances from land. Sale or mortgaging of crops before harvesting (before severance) is a constructive severance, converting the crops into personal property. Parties may create a constructive severance of fixtures by contract.

Contiguous: Contiguous means adjoining or touching at any point, such as parcels of land next to each other.

Contingency: Contingency is a future event or condition upon which a valid contract is dependent.

Continuation Statement: Continuation Statement is the statement filed with the California Secretary of State to extend the time limit on a previously filed financing statement.

Contract: Contract is a deliberate agreement, based upon legal consideration, between two or more parties who have legal capacity, to perform or abstain from doing a legal act. A contract is a binding promise.

Contract Rent: Contract Rent is the rent set forth in a lease.

Contribution: Contribution is an appraisal principle that states that the value of a particular component is measured in terms of what it adds to the value of the whole property, or what its absence would detract from the value of the whole.

Conventional Loan: Conventional Loan is a loan that is not underwritten by a government agency.

Conversion: Conversion is a change from one character or use to another. As applied to trust funds, conversion is the unlawful appropriation of another’s property.

Convey: Convey is to transfer title to property from one person to another.

Conveyance: Conveyance is a document, such as a deed, used to transfer title to property.

Corner Influence: Corner Influence is the added value of a corner lot due to its location.

Corporation: Corporation means an artificial “person” recognized in law, ordinarily an association of numerous individuals. It has many of the rights and duties of a natural person.

Correlation: Correlation is the final step in the appraisal process, also called reconciliation. The appraiser considers the three estimates of value derived from the cost, income, and market data approaches, and weighs the influence of each to arrive at a final estimate of value.

Cost Approach: Cost Approach is an appraisal technique used to establish value by estimating the cost to reproduce the improvements, allowing for depreciation.

Cost Basis: Cost Basis is original acquisition price plus acquisition expense, or original book value, used for income tax purposes.

Covenant: Covenant is a promise or agreement. Covenants in a deed may require the performance or nonperformance of certain acts, or affect the use of the property. It is a form of private restriction.

Curable Depreciation: Curable Depreciation is physical deterioration and functional obsolescence that can reasonably be repaired or corrected by a prudent property owner at a given time.

Customer: Customer is a prospective buyer, not yet a client.

D

Damages: Damages means the money value of an injury recognized by law, and the sum awarded by a court as indemnity or reparation for the injury suffered.

DBA: DBA is an abbreviation for “doing business as,” a fictitious business name.

Declaration of Abandonment: Declaration of Abandonment is the document recorded to terminate a homestead.

Declaration of Homestead: Declaration of Homestead is the document recorded to create a homestead.

Declining Balance: Declining Balance is one of the accelerated methods for computing depreciation for income tax purposes. The depreciable balance declines by the amount depreciated each year.

Deed: The written instrument or document that transfers title to real property, when properly executed and delivered.

Deed of Trust: Deed of Trust is a security device that conveys bare legal title to a trustee, to be held as security for a loan on real property.

Default: Failure to perform a duty or discharge an obligation.

Defeasible: Defeasible means capable of being annulled, or defeated. A defeasible estate is ownership with restrictions that can cause forfeiture of title if broken.

Deferred Gain: Deferred Gain is gain that does not have to be recognized in a given tax year, so the tax on that gain can be deferred to a later year.

Deficiency Judgment: Deficiency Judgment is a court order to pay the balance or deficiency owed on a loan, after the proceeds from sale of the security property are not sufficient to pay off the loan.

Demand: Demand is one of the four essential elements of value: the willingness of consumers to buy goods or services at a given price.

Demise: Demise is the transfer to another of an estate for years, an estate for life, or an estate at will. It means “to lease.”

Department of Real Estate: Department of Real Estate is the state agency that administers the provisions of the Real Estate Law.

Department of Veterans Affairs: Department of Veterans Affairs is the federal government agency that administers GI or VA loans. Previously known as the Veterans Administration or VA.

Deposit Receipt: Deposit Receipt is the form used for receipt of “earnest money” accompanying an offer to purchase real property. When the offer is accepted and the acceptance communicated, the form becomes a purchase contract.

Depreciation: Depreciation, as an appraisal term, is loss in value due to any cause. As used in taxation and accounting, it is a capital cost recovery out of income.

Deterioration: Deterioration is loss of value due to wear and tear.

Determinable Fee: Determinable Fee is an estate that may end or terminate, without court action, on the happening of a specified event.

Development Method: Development Method is an appraisal method used to value raw land. The appraiser locates improved comparable property with a known value, deducts the cost of the improvements, and arrives at the value of the raw land.

Devise: Devise is to transfer real property by will. The recipient is called the devisee.

Directional Growth: Directional Growth is the direction in which the residential, commercial, or industrial sections of a city are growing.

Disciplinary Action: Disciplinary Action is administrative action taken by the Real Estate Commissioner in the form of revocation or suspension of a real estate license.

Discount: Discount is to sell a note for less than its face value.

Discount Points: Discount Points describes a loan fee charged by a lender to increase effective loan interest rates.

Disintegration: Disintegration is the last stage of the life cycle of property value; the decline or decay stage.

Doctrine of Relation Back: Doctrine of Relation Back states that the title received by the successful bidder at a foreclosure sale relates back to the time when the borrower first signed the security. This causes certain intervening liens, except for some tax liens, to be cut off by the foreclosure sale.

Documentary Transfer Tax: Documentary Transfer Tax is a tax on real property transfers, collected by California counties prior to recording the deed.

Dominant Tenement: Dominant Tenement is the property benefiting by an easement appurtenant.

Dual Agency: Dual Agency is a situation wherein one agent represents both sides of a transaction with consent of all parties. The most common dual agency in real estate is escrow.

Dual Agent: Dual Agent is an agent who, with mutual consent of all parties, represents both sides in a transaction.

Due-on-Sale Clause: Due-on-Sale Clause is an acceleration clause granting the lender the right to demand full payment of the mortgage (or call the loan) upon sale of the property.

Duress: Duress is unlawful force used to compel a person to do something against his or her will.

E

Easement: Easement is a right to use the land of another for a specific purpose.

Easement in Gross: Easement in Gross is an easement held by a person or an entity such as a public utility company, not for the benefit of any specific land.

Economic Life: Economic Life is the period during which an improvement earns enough to justify maintaining in the period during which an improvement adds value to the land.

Economic Obsolescence: Economic Obsolescence is loss in value due to external causes, such as zoning regulations or a deteriorating neighborhood. It is also called “social obsolescence.”

Economic Rent: Economic Rent is the amount of rent that a property would bring in the open market at the time of the appraisal.

Effective Age: Effective Age is the age the appraiser believes reflects the condition of the improvement, not necessarily its chronological age.

Effective Gross Income: Effective Gross Income is gross income less vacancy and bad debt allowance.

Effective Interest Rate: Effective Interest Rate is an interest rate calculated to reflect nonrecurring payments and discounts.

Ejectment: Ejectment is an action to recover possession of land that was wrongfully obtained.

Emancipated Minor: Emancipated Minor is a person under the age of 18 who is married, divorced, serving in the armed forces, or has received a declaration of emancipation by court order. Such a person has certain legal rights of an adult.

Eminent Domain: Eminent Domain is the power of the government to take or condemn private property for public use upon payment of fair compensation.

Employee: Employee is a person under control and supervision of the employer, as distinguished from an independent contractor.

Encroachment: Encroachment is the building of a structure partly or wholly upon the land of another. It is a form of trespass.

Encumber: Encumber is to place a lien or charge on land, or a limitation on the use of property.

Encumbrance: Encumbrance is anything that burdens or limits the title to property, such as a lien, easement, or restriction of any kind.

Endorsement: Endorsement is a signature on the back of a promissory note or check for the purpose of transferring ownership. Endorsement In Blank guarantees payment to subsequent holders. Endorsement Without Recourse does not guarantee payment to subsequent holders.

Enforceable: Enforceable describes a contract or agreement which the parties can be compelled to perform by a court of law or equity.

Equilibrium: Equilibrium is the middle stage of the life cycle of property value. The equilibrium point is the static point at the peak of its value.

Equity: Equity is the value of real estate over and above the liens against it, obtained by subtracting the total liens from the value.

Equity of Redemption: Equity of Redemption is the right that an owner has under certain circumstances to redeem property after a judicial foreclosure sale.

Equity Participation Loan: Equity Participation Loan is a loan that requires the borrower not only to repay the loan with interest but also to pay the lender a certain percentage of income or convey a certain ownership interest in the property to the lender. This is also called a co-venture loan.

Erosion: Erosion is gradual wearing away of the soil by current, tide, or wind.

Escalator Clause: Escalator Clause is a clause in a lease providing for an increase or decrease in rent based on specific contingencies. If it is based on a cost of living index, the lease is called an “index lease.”

Escheat: Escheat is reversion of property to the state if an owner dies without a will, and without heirs.

Escrow: Escrow is an arrangement wherein parties to a transaction deliver documents, money, or other things of value to a third party to be held until the performance of prescribed conditions, when the things held are delivered as required to complete the transaction.

Escrow Holder: Escrow Holder is a third party that acts as the stakes holder for a buyer and seller. The escrow holder is an agent for both buyer and seller. Title companies often act as escrow holders.

Estate: Estate is the ownership interest a person has in real property, including partial interests such as leasehold. Estate also means the property left by a deceased person.

Estate at Sufferance: Estate at Sufferance is the estate resulting when a tenant holds over without consent of the landlord after expiration of a lease.

Estate at Will: Estate at Will is a leasehold interest that may be terminated at will by either party, without advance notice. It is generally prohibited in California.

Estate for Years: Estate for Years is a leasehold interest for a definite period of time. The period is not necessarily a year—it may be by the week, month, or year.

Estate in Fee: Estate in Fee is the most inclusive type of ownership of real property, in perpetuity and inheritable. This type of ownership is also called fee simple absolute estate, fee simple estate, fee, or estate of inheritance.

Estate in Remainder: Estate in Remainder is a future interest given by the grantor to a third person, to take effect after termination of a life estate.

Estate in Reversion: Estate in Reversion is the future interest retained by the grantor, for example, to regain possession after termination of a leasehold or life estate.

Estoppel: Estoppel is a legal doctrine preventing a person from making an affirmation or denial because it is contrary to a previous affirmation or denial that the person has made.

Ethics: Ethics refers to the set of duties a member of a profession owes to the public, to clients, and to professional colleagues.

Exchange: Exchange is the act of giving one thing in return for another of like kind, such as two pieces of real property in a tax deferred exchange.

Exclusive Agency Listing: Exclusive Agency Listing is a written instrument giving one agent the authorization to sell property for a specified time, but reserving the right of the owner to sell the property himself without payment of a commission.

Exclusive Right to Sell Listing: Exclusive Right to Sell Listing is a written agreement between owner and agent giving the agent the right to collect a commission if the property is sold by anyone, even the owner, during the term of the listing.

Execute: Execute is to complete, make, perform, do, or follow out. To execute a deed is to make a deed, including signing. To execute a contract is to perform the contract.

Executed: Executed describes a contract that has been fully performed, or a document that has been signed.

Executor: Executor is a person named in a will to carry out its provisions.

Executory: Executory describes a contract that has not yet been fully performed.

Express: Express is to state; to put into words or writing. “Express” is the opposite of “implied.”

Extended Coverage: Extended Coverage is a broad form of title insurance that is available to homeowners. It covers unrecorded liens and other matters not in the standard policy.

F

Federal Home Loan Bank: Federal Home Loan Bank is a federal organization formed in 1932 to provide a credit reserve system for savings and loan associations through which they are able to borrow for a short or long term.

Federal Reserve Bank: Federal Reserve Bank is the nation’s monetary agent, charged with regulating the nation’s money supply.

FHA: FHA is the Federal Housing Administration, the federal government agency that insures private mortgages. Such loans are called FHA insured loans.

Fictitious Deed of Trust: Fictitious Deed of Trust is a recorded generic deed of trust that does not relate to a specific transaction, and is used for reference in short-form deeds of trust.

Fictitious Name: Fictitious Name is a name used for business purposes that is not the true name of the owner. Also called “DBA,” for “doing business as.”

Fiduciary: Fiduciary is a person holding a position of trust, such as an agent, trustee, executor, administrator, or attorney-in-fact. Special high standards of good faith apply.

Financial Statement: Financial Statement is a written statement often required of a borrower by a bank, stating all of the borrower’s assets, liabilities, and net worth.

Financing Statement: Financing Statement is a public notice of a lien on personal property. The form is usually filed with the California Secretary of State, identifying the parties and the property.

Fixed Expenses: Fixed Expenses are the regular recurring costs required in holding a property, such as taxes and fire insurance.

Fixture: Fixture is personal property permanently attached to land or improvements, which becomes part of the real property.

Flat Lease: Flat Lease is a lease in which the rent is a fixed sum paid periodically throughout the entire lease term.

FNMA: Federal National Mortgage Association, nicknamed Fannie Mae. It is a private corporation, formerly a federally-related agency, that buys and sells mortgages in the secondary market.

Foreclosure: Foreclosure is a legal procedure whereby property pledged as security for a debt is sold to pay the debt in the event of default.

Forfeiture: Forfeiture is loss of anything of value due to failure to perform.

Fraud: Fraud is an intentional false representation or concealment of a material fact in order to induce another person to act to the detriment of his or her property or legal rights.

Freehold Estate: Freehold Estate is an estate of indefinite duration. It can be either an estate of inheritance (a fee simple estate) or an estate for life.

Front Foot: Front Foot is a property measurement for sale or valuation purposes. The property is measured by the linear foot on its street line, and each front foot extends the entire depth of the lot.

Frontage: Frontage is that part of a parcel of land or an improvement that faces a street, or the length of the part parallel to and facing the street, such as a lot with a 75-foot frontage.

Functional Obsolescence: Functional Obsolescence is loss in value due to out-of-date, old-fashioned, or poorly designed equipment.

G

General Liquor License: General Liquor License is a license issued by the Department of Alcoholic Beverage Control that authorizes the holder to engage in the sale of distilled spirits, wine, and beer.

GI Loan: GI Loan is a guaranteed loan available to veterans under a federal government program administered by the Department of Veterans Affairs. It is also called a VA loan.

Gift Deed: Gift Deed is a deed used to make a gift of real estate.

Goodwill: Goodwill is a business’s expectation of continued public patronage.

Graduated Lease: Graduated Lease is a lease that provides for a varying rental, often based on some future determination such as a periodic appraisal of the property.

Grant Deed: Grant Deed is the customary document used in California to transfer title to real property. It uses the word “grant” to convey a fee estate, and contains two implied warranties.

Grantee: Grantee is the receiver of the title being granted; the buyer.

Grantor: Grantor is the owner of the title being granted; the seller, the person who makes a grant.

Gross Annual Multiplier: Gross Annual Multiplier is a factor used to derive an estimate of value as a multiple of the gross annual income.

Gross Income: Gross Income is total income before deduction of expenses or vacancy factor.

Gross Lease: Gross Lease is a lease in which the lessee pays an agreed rent and the lessor pays other expenses.

Gross Multiplier: Gross Multiplier is a factor used for appraising income producing property. The multiplier times the gross income gives an approximate property value. Gross Annual Multiplier is used with annual income; for duplexes and rental houses a Gross Monthly Multiplier is used.

Gross National Product: Gross National Product is the total value of all goods and services sold in an economy during a given period of time. It is abbreviated GNP, and also called Gross Domestic Product.

Gross Profit: Gross Profit is profit expressed as a percentage of selling price.

Ground Lease: Ground Lease is a lease of land only, sometimes secured by the improvements placed on the land by the user.

Guarantee of Title: Guarantee of Title is a guarantee by a title company or abstract company that title is vested as shown on the guarantee. The guarantee is backed only by the assets or reserves of the guarantor.

Guaranteed Inventory: Guaranteed Inventory is a guarantee given by the seller of a business opportunity that the actual amount of inventory on hand at the close of escrow will equal the value placed upon the inventory at the time the sales agreement was entered into.

Guardian: Guardian is one lawfully vested with the power and duty to care for and manage the affairs of a person who is unable to do so for himself.

H–I–J

Hard Money: Hard Money is cash, including the cash proceeds from a loan, as distinguished from credit extended by a seller.

HB & M: HB & M is the abbreviation for Humboldt Base and Meridian.

Highest and Best Use: Highest and Best Use is that use which is most likely to produce the greatest net return to the land or building over a given period of time.

Holder in Due Course: Holder in Due Course is a person who in good faith and for value obtains a promissory note or check before it is overdue, does not have notice that it has been previously dishonored, and does not have knowledge of any defects.

Holographic Will: Holographic Will is a will that is written, dated, and signed entirely in the handwriting of the testator.

Homestead: Homestead is a home upon which the owner has recorded a declaration of homestead. This declaration offers limited protection against certain money judgments.

Hypothecate: Hypothecate is to make property security for a debt without giving up possession of it.

Illusory: Illusory means deceptive; deceiving by false appearances.

Implied: Implied means suggested or presumed, rather than expressly stated in words.

Implied Warranties: Implied Warranties are the warranties, implied by law but not expressed, in a grant deed, namely that the grantor has not previously conveyed the title, and title is free of undisclosed encumbrances.

Impound Account: Impound Account is a trust account in which funds are held, usually by a lender, for the payment of property taxes and insurance premiums required to protect the lender’s security. These amounts are usually collected with the note payment.

Improved Value: Improved Value is the combined value of land and building, as distinguished from their separate values.

In the Business: In the Business is a term used in connection with transactions in notes and sales contracts. Anyone who acquires for resale to the public, and not as an investment, eight or more trust deeds or land contracts during one calendar year, is “in the business,” and is required to have a real estate broker’s license.

Including Interest: Including Interest is a term for mortgage payments that include both principal and interest: a level-payment plan or amortized loan.

Income Approach: Income Approach is one of the three fundamental appraisal approaches. Net income is capitalized to convert anticipated future benefits from the property into a present value estimate.

Increasing and Diminishing Returns: Increasing and Diminishing Returns is an appraisal principle that holds that as successively greater increments of land, labor, or capital are applied to a property, a greater or lesser yield

is produced.

Incurable Depreciation: Incurable Depreciation is physical deterioration, functional obsolescence, or economic obsolescence that is physically impossible or not economically feasible to correct at a given time.

Indemnify: Indemnify is to secure against hurt, loss, or damage, or to make compensation to someone for hurt, loss, or damage.

Independent Contractor: Independent Contractor is a person responsible only as to the results of work, and whose time and efforts are not supervised by others, in contrast to an employee.

Inherit: Inherit is to receive property by the laws of inheritance, not by will.

Installment Loan: Installment Loan is a loan providing for payment of the principal in two or more payments at different stated times.

Installment Sale: Installment Sale is a sale that permits the taxpayer to prorate the tax on the capital gain over the term of the installment contract, provided at least one payment is received after the tax year in which the sale occurs.

Installment Sales Contract: Installment Sales Contract is another name for conditional sales contract or land contract.

Institutional Lender: Institutional Lender is a bank, insurance company, mutual savings bank, or savings and loan association.

Instrument: Instrument is a written legal document.

Intangible: Intangible describes property that cannot be touched, such as goodwill.

Integration: Integration is the initial stage of the life cycle of property value, the development stage.

Interest Rate: Interest Rate is a rate of return on capital, usually expressed as an annual percentage of the amount loaned or invested.

Interim Financing: Interim Financing is a loan used to finance construction, due at the completion of the construction and usually paid off with the proceeds of a “take out” loan.

Intestate: Intestate is a term describing a person who dies without leaving a valid will.

Inventory: Inventory is a detailed list of the stock-in-trade of a business.

Inverse Condemnation: Inverse Condemnation is a lawsuit by an owner to obtain just compensation from a government authority when the owner’s property has been substantially impaired or effectively taken

by the authority.

Involuntary Lien: Involuntary Lien is a lien imposed against property by operation of law without consent of the owner, such as a tax lien, judgment lien, or mechanic’s lien.

Irrevocable: Irrevocable describes that which cannot be revoked or changed.

Joint Tenancy: Joint Tenancy is ownership of property by two or more people with the right of survivorship. It requires unity of time, title, interest, and possession.

Jointly and Severally Liable: Jointly and Severally Liable means that each party may be sued individually for the entire amount on a note, or all parties may be sued together.

Judicial Foreclosure: Judicial Foreclosure is a sale of property by a court to satisfy a debt.

L

Laches: Laches is delay or negligence in asserting a legal right.

Land Contract: Land Contract is another name for conditional sales contract. Buyer takes possession, seller retains title until all conditions are met.

Land Project: Land Project is defined by the Subdivided Lands Act as a subdivision containing 50 or more unimproved parcels for residential use, located in a sparsely populated area.

Land Residual Technique: Land Residual Technique is a method of estimating the value of land separate from the building in the income approach.

Landlord: Landlord is the owner and lessor of rented real property.

Lawful Object: Lawful Object is an object of a contract that is permitted by law and possible of performance.

Lease: Lease is a contractual agreement whereby possession and use of land is transferred for a limited period under specified conditions.

Legacy: Legacy is a gift of personal property by will, usually money.

Legal Description: Legal Description is a formal method of identifying a parcel of real estate, using government surveys, metes and bounds, or recorded maps.

Legal Person: Legal Person is a legal entity, usually a corporation, having certain powers and duties of a natural person.

Less Than Freehold: Less Than Freehold describes an estate that is limited in time or by desire of the parties, such as a leasehold.

Lessee: Lessee is a person who receives the right to occupy and use real property under the terms of a lease: a tenant.

Lessor: Lessor is the owner of real property who transfers the right to occupy and use real property to another by a lease: a landlord.

Leverage: Leverage is the use of borrowed money to purchase an investment that realizes enough income to cover the expense of the financing, with the excess accruing to the purchaser.

Liabilities: Liabilities are claims of creditors, or debts.

License: License is an authorization by law to do some specific thing, such as to enter upon the land of another for a particular purpose, or to practice a profession.

Lien: Lien is an encumbrance upon property for the payment of a debt or obligation.

Life Estate: Life Estate is an estate in real property that ends with the life of a person—either the grantee or another person.

Liquidated Damages: Liquidated Damages refers to a definite sum of money to be paid under a contract in the event of a breach of the contract.

Lis Pendens: Lis Pendens is a recorded notice that litigation is pending that may affect the title of the real estate involved.

Listing: Listing is a contract authorizing a broker to sell, buy, or lease real property on behalf of another or to perform other services such as negotiating a loan or a lease. A sales listing is also known as an “authorization to sell.”

Listing Agent: Listing Agent is a real estate broker who has obtained a listing.

Littoral: Littoral describes land bordering the sea, a lake, or other body of water except a watercourse.

Loan Correspondent: Loan Correspondent is a representative who negotiates or services loans for a lender.

Loan Origination Fee: Loan Origination Fee is a fee charged by a lender for setting up the loan records and file. It is a fee for services, not interest, and therefore not deductible for income tax purposes, but is considered part of the finance charge under Regulation Z and included in the Annual Percentage Rate.

Loan Value: Loan Value is the value established by a lender for determining the amount of a new mortgage or trust deed. It is usually a percentage of market value.

Lock-in: Lock-in is a clause that may appear in a note prohibiting the buyer from paying off the indebtedness early.

Long-term Capital Gain: Long-term Capital Gain is gain or profit on the sale of property owned for more than one year. The maximum tax rate on long-term capital gain is lower than the maximum rate on ordinary income.

Lot Split: Lot Split is the division of an existing small parcel into two separate parcels.

M

Market Data Approach: Market Data Approach is an appraisal approach in which recent selling prices of similar properties are the basis for the value estimate.

Market Price: Market Price is the price actually paid for a property.

Market Value: Market Value is the price for which a property can be sold on the open market given a willing seller, a willing buyer, and a reasonable time to make the sale.

Marketable Title: Marketable Title is title to property that is free of objectionable encumbrances and liens.

Material Change of Ownership: Material Change of Ownership is sale of five or more parcels to one buyer by a subdivider.

MDB & M: MDB & M is the abbreviation for Mount Diablo Base and Meridian.

Mechanic’s Lien: Mechanic’s Lien is a statutory lien on a specific property for labor or materials contributed to a work of improvement.

Meridian: Meridian is a U.S. government survey line running north and south, used in establishing township boundaries.

Metes and Bounds: Metes and Bounds is a complex method of describing parcels of land, setting forth all the boundary lines and their terminal points and angles.

Minimum Property Requirements: Minimum Property Requirements are minimum standards of planning, construction, and general acceptability required on FHA loans for the purchase or construction of residential property. The abbreviation is MPR.

Minor: Minor is a person under 18 years of age. Unless “emancipated,” minors cannot convey real property, enter into contracts, or exercise certain other legal rights of adults.

Misrepresentation: Misrepresentation is a false, incorrect, or misleading statement, account, or explanation, or a failure to disclose a material fact, whether asked or not.

Mobilehome: Mobilehome is defined in the Business and Professions Code as a structure transportable in one or more sections, designed and equipped to contain not more than two dwelling units, to be used with or without a foundation system. This definition does not include a recreational vehicle or factory-built housing.

Mortgage: Mortgage is a contract that makes a specific property the security for the payment of a debt.

Mortgage Banker: Mortgage Banker is a person whose principal business is the originating, financing, closing, selling, and servicing of loans secured by real property for institutional lenders on a contractual basis.

Mortgage Company: Mortgage Company is a mortgage banker or mortgage broker.

Mortgagee: Mortgagee is the lender of the money secured by a mortgage.

Mortgagor: Mortgagor is the property owner who is the borrower in a mortgage.

Multiple Listing Service: Multiple Listing Service is an association of real estate agents and appraisers for the pooling of listings, sharing of commissions on a specified basis, and providing data for agents and appraisers in preparing market evaluations and appraisals of real property.

Mutual Consent: Mutual Consent is approval or assent by both parties to the terms of a contract. Consent is essential for a valid contract, and is achieved by offer and acceptance.

Mutual Mortgage Insurance: Mutual Mortgage Insurance is a type of FHA insurance, abbreviated MMI. The premium is collected by the lender, often by adding to the loan, and paid to the FHA. This fund insures lenders against loss and provides funds for the full operation of the FHA.

Mutual Savings Bank: Mutual Savings Bank is a type of savings bank originated in the New England states in which the depositors invest their savings with the right to borrow money for home loans.

N

Narrative Report: Narrative Report is the most comprehensive type of report used by appraisers.

Natural Person: A Natural Person is a living person, as distinguished from a legal person or corporation.

Negative Fraud: Negative Fraud is the withholding of a material fact from another party, inducing the party to enter into a contract that causes damage or loss.

Negotiable Instrument: Negotiable Instrument is a promissory note or check that meets certain legal requirements, allowing it to be traded freely in commerce.

Net Lease: Net Lease is a lease in which the tenant pays some or all of the operating expenses, such as taxes and insurance, giving the owner a net amount of income.

Net Listing: Net Listing is a listing which provides that the broker may retain as commission that part of the sales price above a specified amount.

Net Operating Income: Net Operating Income is the anticipated net income after deducting all operating expenses from effective gross income, but before deducting mortgage debt service or income taxes. Effective gross income less operating expense equals NOI.

Net Profit: Net Profit is profit expressed as a percentage of cost.

Net Spendable: Net Spendable is the cash remaining from gross income after deducting operating expenses, principal and interest payments, and income taxes. It is also called spendable income.

Net Worth: Net Worth is the difference between assets and liabilities, or an owner’s equity in a business.

Noninstitutional Lender: Noninstitutional Lender is a source of real estate loan funds other than a bank or similar institution, such as mortgage companies, pension funds, individuals, and finance companies.

Notice of Completion: Notice of Completion is a notice recorded by the party who ordered work or improvements, placing time limits for recording mechanic’s liens.

Notice of Intention to Sell: Notice of Intention to Sell is a document that is recorded and published prior to the sale of a business opportunity in order to give notice to the seller’s creditors. It is also called

Notice to Creditors of Bulk Transfer.

Notice of Intention to Transfer: Notice of Intention to Transfer is a document that must be recorded and filed with the Department of Alcoholic Beverage Control prior to transfer of a liquor license.

Notice of Nonresponsibility: Notice of Nonresponsibility is a notice recorded to relieve the owner of mechanic’s liens for work that was not ordered by the owner.

Notice to Pay Rent or Quit: Notice to Pay Rent or Quit is a three-day notice required by law before a tenant who is delinquent in rent payments may be evicted by an unlawful detainer action.

Novation: Novation is the substitution of a new obligation for an old one.

O

Obsolescence: Obsolescence is loss in value due to reduced desirability and usefulness. Obsolescence is classified as functional or economic.

Offer: Offer is a proposal made by one person to another to enter into a contract, such as an offer to purchase real property.

Off-sale License: Off-sale License is a liquor license issued by the ABC permitting the licensee to sell alcoholic beverages that are to be consumed off the premises.

Offsite Improvements: Offsite Improvements are improvements that add to the usefulness of the site but are not located directly on it, such as streets, sidewalks, sewers, and lighting.

On-sale License: On-sale License is a liquor license issued by the ABC to establishments that sell alcoholic beverages for consumption on the premises.

Open-end Mortgage or Trust Deed: Open-end Mortgage or Trust Deed is a mortgage or trust deed that allows for additional loan amounts in the future, using the same document.

Open Housing Law: Open Housing Law is the federal law banning discrimination in the sale, use, or rental of housing based upon race, color, religion, sex, or national origin of the buyer or tenant. The two formal names are the Civil Rights Act, Title 8 and Public Law No. 90-284.

Open Listing: Open Listing is a nonexclusive listing providing that the broker is to receive a commission if he or she is the first person to obtain a buyer, ready, willing, and able to purchase the property on the terms of the listing, or on other terms acceptable to the owner.

Operating Expenses: Operating Expenses are periodic expenditures necessary to maintain the property and continue the production of effective gross income.

Option: Option is a right given a person to buy, sell, or lease property within a stated period and under specified terms. It is a contract to keep an offer open.

Optionee: Optionee is the person who receives an option on property.

Optionor: Optionor is the owner of the title who gives an option.

Or More Clause: Or More Clause is a clause in a trust deed or note that permits an early payoff of the loan.

Oral Contract: Oral Contract is a spoken contract, not reduced to writing. It is also called a parol contract.

Original License: Original License is a liquor license initially issued by the ABC—not a transfer of an existing license.

Ostensible Agency: Ostensible Agency is an agency created when a principal allows others to believe someone is his or her agent. Ostensible refers to that which is apparent or seems to be.

Overall Rate: Overall Rate is a capitalization rate used in appraising income producing properties, expressed as a percentage, that provides for a return on as well as a return of the capital invested.

Ownership: Ownership is the right to the use and enjoyment of property to the exclusion of others.

P

Package Trust Deed or Mortgage: Package Trust Deed or Mortgage is a trust deed or mortgage secured by both real property and personal property, such as appliances, carpeting, etc.

Panic Selling: Panic Selling is the illegal act of inducing the sale, lease, or listing of residential property on the grounds of loss in value due to entry into the neighborhood of persons of another race, religion, ancestry, or national origin. Also called blockbusting.

Parcel: Parcel is any area of land contained within one legal description.

Parol Contract: Parol Contract is a spoken or oral contract, not reduced to writing.

Partial Release Clause: Partial Release Clause is a clause in a mortgage or trust deed that releases part of the property from the mortgage or trust deed upon part payment of the debt.

Participation Loan: Participation Loan is a loan in which the lender receives some portion of the ownership and profits.

Passive Activity Income: Passive Activity Income is income from real estate or other business in which an owner does not actively participate.

Patent: Patent is an original conveyance of real estate from the government to a private owner.

Percentage: Percentage is a given part or amount in every hundred.

Percentage Lease: Percentage Lease is a lease in which the rent is computed as a percentage of the gross business of the tenant.

Periodic Tenancy: Periodic Tenancy is tenancy for successive periods of the same length unless terminated by proper notice of either party, for example, month-to-month tenancy.

Personal Property: Personal Property is any property that is not real property. It may be movable property, or intangible. Personal property is also called personalty.

Personal Residence: Personal Residence is a home in which the owner resides. For tax purposes a person may have multiple personal residences, but only one primary residence.

Physical Deterioration: Physical Deterioration is loss in value resulting from ordinary wear and tear or deferred maintenance.

Physical Life: Physical Life is the estimated period during which a building stands, as distinguished from its “economic life.”

Plaintiff: Plaintiff is the party who commences a lawsuit.

Planned Development: Planned Development is a subdivision of five or more lots, which in addition includes areas owned in common for the use of the owners of the separately owned lots. This is sometimes called a planned unit development when zoning variations are required.

Pledge: Pledge is to deposit personal property with a lender as security for payment of a debt.

Plottage: Plottage is the increase in value of several parcels of land when brought under one ownership, making possible a higher utility as a whole. It is also known as plottage increment. Plottage results from assemblage.

Plus Interest: Plus Interest describes a loan payment plan that calls for straight principal reduction payments plus accrued interest.

Points: Points is a name for charges paid to the lender at the time the loan is made, to pay for services rendered by the lender or as prepaid interest to increase the lender’s yield. A point is 1 percent of the amount of the loan.

Police Power: Police Power is the right of the state to regulate the use of private property for the protection of the health, safety, morals, or general welfare of the public.

Power of Attorney: Power of Attorney is the instrument used to appoint an attorney-in-fact.

Power of Sale Clause: Power of Sale Clause is a standard clause in a trust deed that gives the trustee the right to sell the property at public auction, without court proceedings, if the borrower defaults. This clause may be put into a mortgage by agreement.

Prepaid Interest: Prepaid Interest is interest paid before it has accrued, or paid before the funds are available to the borrower.

Prepayment Penalty: Prepayment Penalty is a clause in a note that provides for a monetary penalty in the event of early payoff of the note.

Prescription: Prescription is a method of creating an easement by at least five years of open use, hostile to the owner.

Presumption: Presumption is an apparent fact that will stand and be assumed true until overcome by some evidence to the contrary.

Primary Financing: Primary Financing refers to the trust deed and note that has first priority.

Primary Mortgage Market: Primary Mortgage Market is the market in which loans are made directly to borrowers.

Principal: Principal is the employer of an agent, or one of the parties to a transaction.

Priority: Priority is preferred rank or position, specifically the order in which liens have precedence for payment.

Private Restriction: Private Restriction is a restriction placed on real property by the grantor.

Privity: Privity is closeness or mutuality of relationship. Privity of Contract is the relationship between two or more contracting parties: they are involved in the same contract. Privity of Estate is the relationship between lessor and lessee: they are involved with the same property or estate.

Probate: Probate is a minimum four-month period during which the Superior Court has jurisdiction over the administration of the estate of a deceased person.

Probate Court: Probate Court is the Superior Court that has authority over property of deceased persons, minors, and insane persons.

Profit and Loss Statement: A financial report listing income and expenses, including depreciation and income tax deductions, showing profit or loss from operations over a given period of time—month, quarter, or year.

Progression: Progression is an appraisal principle that holds that the worth of a lesser valued home is enhanced in an area with homes of higher value. The opposite is the principle of regression.

Progressive Tax: Progressive Tax is a tax in which the tax rate increases as the taxable quantity increases, as in the federal income tax.

Promissory Note: Promissory Note is a written contract containing a promise to pay a specified amount of money at a specified time. The note is the evidence of a debt.

Promotional Note: Promotional Note is a type of real property security. It is typified by the purchase-money second mortgages on a new subdivision before they become seasoned.

Property: Property is anything that is owned—real or personal, tangible or intangible.

Property Manager: Property Manager is one who leases, maintains, and manages the property of others.

Property Residual Technique: Property Residual Technique is an appraisal technique used in the income approach to estimate the total value of a property, including both land and improvements.

Prorate: Prorate is to divide proportionately to time or use.

Public Report: Public Report is the report of the Real Estate Commissioner under the Subdivided Lands Act, containing information about subdivided property.

Public Restriction: Public Restriction is a government regulation limiting the use of real property.

Puffing: Puffing is the unethical practice of making inflated or exaggerated statements that do not clearly represent the truth.

Purchase Contract and Receipt for Deposit: Purchase Contract and Receipt for Deposit is the formal name for the “deposit receipt” used when accepting “earnest money” from a prospective purchaser with an offer

to buy property.

Purchase Money: Purchase Money is money paid to acquire a property. A purchase money loan is a loan to buy the property that secures the loan.

Q–R

Quantity Survey: Quantity Survey is a detailed method of estimating construction cost or reproduction cost.

Quiet Title Action: Quiet Title Action is a suit brought for the purpose of establishing clear title to real property or to remove a cloud on the title.

Quitclaim Deed: Quitclaim Deed is a deed used to transfer any interest in real property that the grantor may have. It contains no warranties or any kind.

Range Line: Range Line is a north and south line used in the location and description of townships.

Ratification: Ratification is the confirmation of a previous act, such as the confirmation by a principal of the acts of an agent who has acted without authority or in excess of authority.

Real Estate Commissioner: Real Estate Commissioner is the head of the Department of Real Estate.

Real Estate Fund: Real Estate Fund is a fund for the operation of the Department of Real Estate, funded by license fees. It includes the Education, Research, and Recovery Accounts.

Real Estate Investment Trust: Real Estate Investment Trust is an unincorporated association of at least 100 investors. Because of a special exemption it is not taxed as a corporation. The abbreviation is REIT.

Real Property: Real Property is land, that which is affixed to the land, that which is incidental or appurtenant to land, and that which is immovable by law.

Real Property Sales Contract: Real Property Sales Contract is a financing device in which the buyer takes possession, but legal title remains vested in the seller until all conditions of the sale have been met. It is also called a land contract or conditional sales contract. The parties are called vendor and vendee.

Real Property Securities Dealer: Real Property Securities Dealer is a real estate broker whose license has been endorsed to permit selling guaranteed real property securities.

Realized Gain: Realized Gain is actual gain from sale of a capital asset. This is the total gain, including both recognized and deferred gain.

REALTOR®: REALTOR® is registered trademark of the National Association of REALTORS®, its state associations and local boards. Some jurisdictions make a distinction between REALTORS® (who must be licensed as real estate brokers) and REALTOR®-Associates (who hold sales licenses). Others designate all their members REALTORS®.

Recognized Gain: Recognized Gain is gain that is taxable in the year of the transaction.

Reconciliation: Reconciliation is the same as correlation: bringing together estimates from the market, cost, and income approaches to produce a final estimate of value.

Reconveyance: Reconveyance is the transfer of legal title from the trustee to the trustor or borrower after a trust deed debt has been paid in full.

Recordation: Recordation is a system by which documents concerning title and other legal matters are collected in one convenient, public place, commonly the county recorder’s office. Documents properly recorded constitute constructive notice of the contents of the documents.

Recovery Account: Recovery Account is part of the Real Estate Fund held by the Department of Real Estate to underwrite uncollectable court judgments against licensees for fraud, misrepresentation, and similar acts.

Recurring Costs: Recurring Costs are expenses that the buyer can expect year after year, such as property taxes, fire insurance, and interest.

Regression: Regression is an appraisal principle that holds that a higher valued property in a neighborhood of lower valued properties seeks the level of the lower valued properties. It is the opposite of progression.

Regulation Z: Regulation Z is the Federal Reserve regulation that implements the Federal Consumer Credit Protection Act of 1969 or Truth in Lending law.

Rehabilitation: Rehabilitation is bringing a property back to satisfactory condition and function without changing its plan, form, or style.

Reinstatement: Reinstatement is the statutory right of a borrower to pay up a loan that has gone into default and return it to good standing, prior to scheduled public auction of the property.

Release Clause: Release Clause is a provision in a trust deed or mortgage that a specific lot or area will be removed from a blanket lien upon the payment of a specific sum of money.

Reliction: Reliction is an increase of land by the permanent withdrawal of a sea or river.

Remaining Economic Life: Remaining Economic Life is the period of time from the date of the appraisal to the date when the improvements no longer add value to the land.

Remodeling: Remodeling is changing the plan, form, or style of a structure.

Rent: Rent is consideration paid for the use and possession of a property for a certain length of time.

Replacement Cost: Replacement Cost is the cost of producing, at current prices, a property having a utility equivalent to the one being appraised.

Reproduction Cost: Reproduction Cost is the cost of reproducing a new replica of a property on the basis of current prices with the same or closely similar materials.

Request for Notice of Default: Request for Notice of Default is a notice recorded by the beneficiary of a trust deed or other interested party, requesting notification if foreclosure proceedings are commenced.

Rescind: Rescind is to annual or cancel a contract from the beginning, restoring the parties to their original positions.

Resident Manager: Resident Manager is an agent of the owner of a building, who is employed on a salary to manage the property in which the manager resides.

RESPA: RESPA is the Real Estate Settlement Procedures Act, a federal law that ensures that buyers and sellers in certain federally related residential real estate transactions receive full disclosure of all settlement costs, so they can shop around for settlement services.

Restoration: Restoration is returning a building to its original form.

Restricted License: Restricted License is a probationary real estate license that contains specific restrictions.

Restriction: Restriction is an encumbrance that limits the use of real estate in some way. Restrictions are classified as public, such as zoning ordinances, or private, such as covenants or conditions in a deed.

Return of Investment: Return of Investment is a recapture of investment, either from sale or from income. In appraisal an allowance for return of investment in capitalization is termed an accrual for future depreciation.

Return on Investment: Return on Investment is interest or profit.

Revocation: Revocation is nullification of an offer to contract, or an annulment of a license.

Rider: Rider is an addition, amendment, or endorsement to a document.

Right of Survivorship: Right of Survivorship is the automatic right of a joint tenant to acquire the interest of a deceased joint tenant.

Right to Rescind: Right to Rescind is a right to terminate a contract unilaterally.

Riparian Rights: Riparian Rights describes the rights of an owner whose land borders on a stream or river to reasonable use of the flowing water, provided such use does not injure other riparian owners.

Rollover of Gain: Rollover of Gain is a deferral of gain from sale of one personal residence to another.

S

Sale-Leaseback: Sale-Leaseback is a transaction in which the seller retains occupancy by agreeing to lease the property from the purchaser. The seller receives cash while the buyer is assured a tenant and an income.

Sales and Use Tax: Sales and Use Tax is tax on the sale or use of certain tangible personal property.

Salesperson: Salesperson is a natural person, who for compensation or in expectation of compensation, is employed by a licensed real estate broker to do one or more acts specified in the Real Estate Law. The Real Estate Law recognizes the terms salesman, saleswoman, and sales person.

Salvage Value: Salvage Value is the price expected for a property after its economic life is over.

Sandwich Lease: Sandwich Lease is a leasehold interest between the primary lease and the operating lease.

Satisfaction of Mortgage: Satisfaction of Mortgage is a release or receipt for having paid off a mortgage note.

SBB & M: SBB & M is the abbreviation for San Bernardino Base and Meridian.

Scarcity: Scarcity is an inadequate supply. Scarcity combined with demand creates value.

Seasoned Loan: Seasoned Loan is a loan with a good payment record.
Secondary Financing: Secondary Financing refers to any loan secured by a junior trust deed or mortgage—second, third, and so on.

Secondary Mortgage Market: Secondary Mortgage Market is the market for the sale and purchase of existing trust deeds and mortgages.

Section: Section is a unit of land in government surveys, equal to one square mile or 640 acres.

Secured: Secured describes a lien for which a specific property is available to satisfy the debt if the borrower does not pay.

Security Agreement: Security Agreement is a security device by which personal property is made security for a debt.

Security Device: An instrument used to secure the payment of a loan. It may be a mortgage, trust deed, real property sales contract, or security agreement.

Seller’s Permit: Seller’s Permit is a resale certificate obtained from the State Board of Equalization, required of all sellers of taxable goods in the state of California. The seller may be required to give a security deposit to the state to insure payment of collected sales taxes.

Selling Agent: Selling Agent is the agent who sells a property or obtains a buyer.

Send-out Slip: Send-out Slip is a form enumerating listed properties or business opportunities, signed by the buyer, promising to buy through the issuing broker’s office if the buyer purchases or leases one of the enumerated properties.

Separate Property: Separate Property is property owned by either spouse other than community property.

Servient Tenement: Servient Tenement is land burdened by an easement.

Severalty: Severalty is ownership or obligation by one person only; sole ownership or obligation.

Sheriff’s Deed: Sheriff’s Deed is a deed given when property is sold by court order for payment of a debt.

Short Rate: Short Rate is the amount of premium that is returned when an insured cancels a policy. The insurance company retains a portion as a cancellation fee.

Short-term Capital Gain: Short-term Capital Gain is gain on sale of property owned for less than one year. Gain is fully taxed, and loss is fully deductible.

Sinking Fund: Sinking Fund is a fund set aside from the income of property which, with accrued interest, will pay for replacement of improvements.

Site: Site is the area or the place on which anything is, has been, or is to be located.

Social Obsolescence: Social Obsolescence is a loss in value of property due to factors outside the property—the same as economic obsolescence.

Special Assessment: Special Assessment is a tax on real estate to pay the cost of public improvements benefiting the property, such as sewers or street lights.

Specific Performance: Specific Performance is a doctrine of contract law by which a party can be compelled by the court to perform as agreed.

Standard Form: Standard Form is the basic title insurance policy usually issued to a purchaser of real property. It provides coverage against fraud, forgery, and matters of record. This is a California Land Title Association (CLTA) policy.

Statute of Frauds: Statute of Frauds is the law that requires certain contracts to be in writing.

Statute of Limitations: Statute of Limitations is the law that specifies the time limits within which any legal action must be taken.

Statutory Dedication: Statutory Dedication is the giving of private land for public use, under a procedure established by statute.

Stock Cooperative: Stock Cooperative is a multiple unit property owned by a corporation, in which each stockholder has exclusive occupancy of a portion of the property.

Stock-in-Trade: Stock-in-Trade is merchandise held by a business for sale.

Straight Line Depreciation: Straight Line Depreciation is a method of calculating depreciation whereby an equal sum is set aside annually from income to recapture investment in a building.

Straight Line Equation: Straight Line Equation is a three-quantity equation in which the three quantities have a fixed mathematical relation, so that given any two, the third can be found. The simplest example of a straight line equation is “two times three equals six.”

Straight Note: Straight Note is a note in which the principal is paid in one sum at maturity.

Subagent: Subagent is a person to whom an agent delegates agency powers. An associate licensee is not considered a subagent.

Subdivided Lands Act: The Subdivided Lands Act is a California law regulating the division of land into five or more parcels of less than 160 acres or five or more undivided interests of any size. It is administered by the Real Estate Commissioner.

Subdivision: Subdivision is division of any improved or unimproved land for the purpose of sale, lease, or financing, whether immediate or future.

Subdivision Map Act: The Subdivision Map Act is a California law authorizing local governments to regulate the physical aspects of subdivisions.

Subject To: Subject To is a method of taking title to a property subject to an existing loan without taking on personal liability for the debt or a possible deficiency judgment. The most the grantee can lose is the grantee’s equity.

Sublease: Sublease is a lease given by a lessee for part of the premises or less than the remaining term.

Subordination Clause: Subordination Clause is a clause in a junior lien permitting retention of priority for prior liens, or in a first deed of trust permitting it to be subordinated to subsequent liens such as construction loans.

Substitution: Substitution is an appraisal principle that holds that when two or more properties with substantially the same utility are available, the one with the lower price receives the greatest demand.

Succession: Succession is transfer of property under the laws of inheritance when a person dies without a will.

Successor’s Liability: Successor’s Liability is the liability of a purchaser of a business that may arise for nonpayment of sales taxes by the prior owner.

Sufferance: Sufferance is the interest that exists when a tenant holds over without consent of the landlord after expiration of a lease. It is also called estate at sufferance.

Sum-of-the-Years’-Digits: Sum-of-the-Years’-Digits is an accelerated method of calculating depreciation under former tax laws, by which an asset was assumed to lose its value rapidly in its early years and more gradually in late years.

Summary Proceeding: Summary Proceeding is a short, concise, and immediate legal proceeding without a jury. An unlawful detainer action is an example of a summary proceeding.

Surrender: Surrender is giving up a lease before its expiration.

Suspension: Suspension is a temporary cancellation of a license.

Syndicate: Syndicate is a combination of individuals formed to carry out some project requiring large amounts of capital.

T

Take-Out Loan: Take-Out Loan is a long-term loan that replaces an interim construction loan.

Tangible: Tangible describes property that can be handled physically, such as stock-in-trade.

Tax Deed: Tax Deed is the deed given when property is sold due to tax delinquency. It is also called a controller’s deed.

Tax Deferred Exchange: Tax Deferred Exchange is a method of deferring capital gains by exchanging real property for other like-kind property.

Tax Rate: Tax Rate is a percentage of the taxable value, used to calculate the amount of tax.

Tax Reform Act of 1986: Tax Reform Act of 1986 is the Internal Revenue Code of 1986, replacing the previous code of 1954.

Tenancy: Tenancy is the mode of holding property, such as a joint tenancy, tenancy in common, or tenancy for years.

Tenancy in Common: Tenancy in Common is co-ownership by two or more persons who hold undivided interests, without right of survivorship. The co-owners’ interests need not be equal.

Tenant: Tenant is one who holds or possesses real estate by any kind of right. The term is commonly used for a lessee.

Tender: Tender is an offer of money or performance. When unjustifiably refused, it may permit the party making tender to exercise remedies for breach of contract.

Termination Statement: Termination Statement is the form prescribed by the Uniform Commercial Code to remove a previously filed financing statement or security agreement.

Testament: Testament is the written declaration of one’s last will.

Testate: Testate means leaving a will upon death: the opposite of intestate.

Testator: Testator is a person who makes a will.

Tier: Tier is a row of townships, running east and west, lying between any two consecutive township lines, comprising an area six miles wide.

Tight Money Market: Tight Money Market is a situation in which loan funds are scarce and interest rates and discount points are high.

Time is of the Essence: Time is of the Essence is a term meaning performance within a specific period is a prerequisite to performance by another party to the contract.

Timeshare: Timeshare is a form of ownership that allows several buyers to purchase undivided interests in real property with a right to use the property for a fixed or variable time period.

Title Insurance: Title Insurance is insurance to protect the property owner against loss if title is imperfect.

Title Plant: Title Plant is a set of copies of pertinent public records maintained at a title company.

Title: Title is the right to or ownership in land, and also the evidence of a person’s ownership in property.

Tort: Tort is a civil wrong or a violation of a legal right. It is a breach of duty derived from law rather than contract.

Township: Township is a unit of land six miles on each side, containing 36 square miles.

Trade Fixtures: Trade Fixtures are articles of personal property annexed to real property but necessary to carry on a business. They are removable by the owner of the fixtures.

Trade Name: Trade Name is the name under which a company carries on business.

Transferability: Transferability is potential for being conveyed from one ownership to another. Transferability is one of the four essential elements of value.

Trust Account: Trust Account is a special account into which money is deposited by an agent for the account of a principal, to be kept intact and not commingled.

Trust Deed: Trust Deed is also called Deed of Trust. It is a deed by which a trustor or borrower conveys legal title to a trustee as security for the payment of a debt.

Trust Funds: Trust Funds is a collective term for money or things of value received by a broker or salesperson on behalf of a principal. The funds are held for the benefit of others.

Trust Ledger: Trust Ledger is a record of all trust funds received, such as cash or checks, whether placed in the broker’s trust account, given to the seller, or placed in escrow.

Trustee: Trustee is one who holds legal title to property for a special purpose without being the actual (or beneficial) owner. A trustee is one of the parties to every trust deed.

Trustee’s Deed: Trustee’s Deed is the deed given when property is sold under the power of sale in a trust deed.

Trustor: Trustor is the owner or buyer who is the borrower in a trust deed.

Truth in Lending: Truth in Lending is the Federal Consumer Credit Protection Act of 1969, implemented by Federal Reserve Board Regulation Z, which requires disclosure of certain loan terms to the borrower. Required disclosures include the total cost of credit as a dollar amount and as an Annual Percentage Rate or APR.

Turnover: Turnover is the number of times a given amount of inventory sells over a given period of time.

U–V

U.S. Department of Veterans Affairs: Department of Veterans Affairs is the federal government agency that administers GI or VA loans. Previously known as the Veterans Administration or VA.

Undivided Interest: Undivided Interest is the separate interest of each co-owner in an entire property. Each interest is indistinguishable, meaning a co-owner does not own a specified separate part of the property, but owns a specified interest in the whole.

Undue Influence: Undue Influence is taking unfair advantage of another person’s distress or weakness of mind to induce him or her to enter into a contract.

Unearned Increment: Unearned Increment describes an increase in the value of property, not brought about by the owner, due primarily the operation of social forces, such as an increase in population.

Unenforceable: Unenforceable describes a law or contract that a person cannot be compelled to observe.

Uniform Commercial Code: Uniform Commercial Code is the law that establishes unified and comprehensive regulations for bulk sales transfers and security transactions in personal property.

Uniform Vendor and Purchaser Risk Act: The Uniform Vendor and Purchaser Risk Act is a California law providing that transfer of title or possession is the determining fact in the question of risk of loss by flood, earthquake, fire, etc.

Unilateral: Unilateral means done by, undertaken by, or obligating only one side. A unilateral contract is binding on one side only, such as a promise in exchange for an act.

Unlawful Detainer: Unlawful Detainer is a legal action to evict a tenant who unlawfully remains in possession of real property originally rightfully obtained.

Unruh Civil Rights Act: Unruh Civil Rights Act is the California law prohibiting discrimination by business establishments because of race, creed, color, or national origin.

Usury: Usury is interest in excess of the maximum rate set by state law.

Utility: Utility is the ability of a product to create desire in consumers. Utility is one of the four essential elements of value.

VA Loan: VA Loan is a loan guaranteed by the U.S. Department of Veterans Affairs.

Vacancy Factor: Vacancy Factor is an allowance for vacancies and bad debts, usually a percentage, deducted from annual gross income of a property to arrive at an estimate of effective gross income.

Valid: Valid means legally sufficient and authorized by law.

Value: Value is the worth of a thing in money or goods at a certain time. Value requires four elements: utility, scarcity, demand, and transferability.

Variance: A variance is legal permission for a use that does not conform to the zoning for the property. It is not a change in the zoning.

Vendee: Vendee is the receiver of a thing being vended or sold, especially in a land contract.

Vendor: Vendor is the owner of thing being sold; the seller, especially in a land contract.

Void: Void means having no force or effect: unenforceable.

Voidable: Voidable means capable of being made void, but not void unless action is taken to make it so.

W–Y–Z

Waiver: Waiver is the intentional or voluntary relinquishment of a known right, essentially a unilateral act.

Warehousing: Warehousing is the holding of loan portfolios by a primary lender, pending sale in the secondary mortgage market.

Warranty Deed: Warranty Deed is a deed that contains written warranties or guarantees of title.

Waste: Waste is destruction, material alteration, or injury to premises.

Wild Document: Wild Document is a document either created by a “stranger to the title,” such as a forger, or made “outside the chain of title,” such as a conveyance granted by someone who previously failed to record and thereby left a link missing in the chain of title.

Will: Will is the legal declaration of a person’s mind or wishes as to the disposition of the maker’s property to take effect after the maker’s death.

Writ of Execution: Writ of Execution is a writ or writing to carry out the judgment or decree of a court, for example that a property be sold to satisfy a debt.

Yield: Yield is the ratio of the annual net income from a property or other investment to its cost.

Zoning: Zoning is local legislation regulating the use of land by specifying types of uses permitted in particular areas or zones.