Terms Beginning With - P
Property Development & Investment Glossary, Terms & Definitions
Personal items such as washers, dryers, refrigerators, air conditioners, and other appliances can be used as collateral to secure a loan for the purchase of a home. An itemized list of home accessories is included in a mortgage document that describes the real property and declares them to be fixtures. A budget mortgage's monthly payments include principal, interest, and pro rata appliance payments.
If a buyer can pay for essential furnishings over an extended period of time without an additional down payment rather than exhausting resources by purchasing them outright, some lenders believe that a package mortgage reduces default rates. New subdivision homes and condominiums, particularly in resort areas, are popularly sold using package mortgages. A financing statement in accordance with the Uniform Commercial Code is usually required as part of a package mortgage. Like a typical consumer installment loan, interest is only paid on the remaining balance in a package mortgage.
1. The space in a land lease park where a manufactured home can be placed.
2. A foundation or site that is especially good for a certain kind of improvement, like a pad for a convenience store.
Paired sales analysis
The direct-sales comparison approach employs a technique in which properties are paired based on similar features. An adjustment to reflect a specific change in one characteristic is made to the sales price, for example, an adjustment for the date of sale (market conditions).
Wetlands connected with inland locations that do not rely on stream, lake, or sea water.
A word used to describe films that are susceptible to broadband signals (that is, the entire visible part of the electromagnetic spectrum).
Buildings built on-site using prefabricated factory products such as finished sections of walls, floors, beams, trusses, roofs, and other housing parts delivered to a construction site and assembled into a single housing unit.
The illegal practice of trying to get people to buy or rent a home by making written or spoken statements that cause fear or alarm, sending written or spoken warnings or threats, contacting potential renters or buyers who belong to a protected class, or acting in any other way to try to get someone to buy or rent a home, either with the intent to do so or with the intent to try to do so.
- by making statements about the presence of or plans for one or more minorities to move into an area; or
- by making statements that a reasonable person would understand to mean that one or more people from a minority group are or may be moving into the area, even if they don't say so directly.
Panic peddling is the act of aggressively trying to find sellers in a neighborhood where things are changing quickly.
Mortgage, note, or contract for deed is a business term that refers to a mortgage, note, or contract for deed that a seller typically takes back from the buyer when real estate is sold. A 5 percent down payment on a 10-year contract for deed is common practice among land developers when selling subdivided lots. They then sell these contracts, or "paper," to a lender at a discount, or pledge them as collateral for a loan.
Average; comparable; face value The accepted comparison method, such as "this loan is two points above par."
A debt's residual balance or outstanding principal amount.
Paragraph 17 of the Fannie Mae/Freddie Mac Uniform Instrument is the most common mortgage clause that has a "due-on-sale" clause. If the mortgage loan has a "due-on-sale" clause, it is hard to sell a single-family home when money is tight.
The part of a house's wall that goes up above the roof.
A parcel of land that is owned by only one person.
Much of a larger area; a substantial amount.
The particulate substance from which soil is formed; there are two types of parent material: "residual" and "transported."
Multiple-note mortgage or trust deed provision that stipulates that a single mortgage or trust deed can serve as security for multiple debt obligations. Two investments with the same value are said to be in "parity."
The ratio of parking spaces to office space or the number of apartments is a critical factor these days.
Off-street parking ratio to the total number of dwelling units in a particular development. There are often minimum ratios specified in local zoning codes.
A major collector road that usually has a median strip and landscaped, set-back, park-like areas on both sides of the right-of-way. Trees are usually planted heavily along the entire length of this type of road.
Parol evidence rule
A rule of evidence that is meant to give a certain amount of certainty in a transaction and stop fraudulent and false claims. Even though the word "parol" means "spoken," it is used here to mean "evidence that is outside of and separate from the writing." When parties to a real estate contract put their agreement in writing, the parol evidence rule says that any oral or written negotiations or agreements made before or at the same time that change or contradict the terms of the written contract cannot be used in court as proof.
So, if the buyer and seller agree orally that the buyer will pay the broker's commission, but the final contract of sale says that the seller will pay, the written contract wins, and evidence of the oral agreement is not allowed. Note that the rule does not prevent proof of oral contracts made after the formal written contract.
There are many ways that the "parol evidence rule" can be broken. For example, parol evidence is always allowed to show that the parties did not intend to make a contract, that the contract was illegal when it was made, that there were certain circumstances that led to the creation of a contract, or to clear up any ambiguities in the contract. In other words, a party can still question whether or not a contract is valid instead of trying to change, add, or change the terms of the contract.
Not a strip floor, but one made of short pieces of hardwood laid in various patterns.
A situation in which the landlord's carelessness makes it impossible for the tenant to use part of the property for the reasons stated in the lease.
A document that is filed when a mortgage or trust deed lien is removed from part of a piece of real property.
A mortgage condition that allows for the release of portions of a property following defined lump-sum loan installments. Typically used in subdivision and development finance.
The act of removing a general mortgage lien from a piece of the pledged property.
Partial release clause
A clause in a mortgage that says the mortgagee will free certain parcels from the blanket mortgage lien if the borrower pays a certain amount of money. The clause is often included in loans for building on land tracts. A mortgagee can't be forced to release a part of the property from the mortgage lien unless that's what the mortgage says to do. So, if there isn't a partial-release clause, people who buy a lot from a developer who also has a mortgage can't force the mortgagee to release their lot from the lien of the developer's mortgage just because they paid a portion of the debt. Also, if the terms of a purchase-money note limit the buyer's ability to pay all or part of the amount due early, the buyer will want to be able to get parts of the mortgaged property released or other collateral put in place of the released property. At the time of the release, the mortgagee should make sure that the mortgagor hasn't broken any of the terms of the loan.
Many states require that a blanket lien on a condo unit or lot in a subdivision be partially released before the unit can be sold.
Taking a portion of a private property for public use is known as condemnation. There must be consideration given to any special benefits or losses that may have been gained or lost as a result.
The seizing of merely a portion of the property or property rights in a condemnation.
A plan for paying back a loan in which the payments on the principal are not enough to pay off the loan over its term. The remaining principal balance is due in full at the end of the loan's term.
A loan option in which the outstanding principal is paid in installments during the term of the loan, then entirely retired with a greater lump sum "balloon" payment at maturity.
Partially disclosed principal
A situation in which a party to a transaction, like a seller, knows or has reason to know that an agent in the transaction is working for a principal, but the seller can't figure out who the principal is. A buyer's broker does not have to tell the seller who the buyer is.
1. A brokerage firm or its sales agent that finds a buyer for a property that is listed with another brokerage firm. Most of the time, the participating broker and the seller's broker agree on how much of the commission will go to each of them.
2. A broker who helps the listing broker on behalf of the seller, whether the broker works for the seller, the listing broker, or the buyer. Condominium developers sometimes list their condos for sale with more than one brokerage company. These companies are called "participating brokers" in the project.
Participation certificate (PC)
A mortgage-backed security is a type of security that Freddie Mac sells to pay for the mortgages it buys. It represents an ownership interest in pools of mortgages that Freddie Mac buys and the sellers take care of. PCs can be given to anyone, so they can be sold between investors like bonds.
A loan in which the lender shares in the property's future cash flow and resale profits.
1. A mortgage in which the lender gets a share of the income from the property being mortgaged, in addition to the interest rate, or gets a yield on the loan. The lender can either take an equity position in the project or get a share of the income from the property and the borrower's income. It's also called a "equity kicker" or a "hybrid mortgage" sometimes. Lenders need to be careful about environmental hazards on the property, because the Environmental Protection Agency (EPA) might think that the lender's participation is enough of an ownership interest to make the lender liable under Superfund regulations.
Lenders usually use participation mortgages with commercial loans as a way to protect themselves from inflation and increase their total return on the loan. A lender's share of gross rents over a fixed base of 90 percent is an example of this. Most of the time, these participations happen when a large lender, like a life insurance company, gives loans on commercial properties or multifamily units when interest rates are high and money is tight. Some people don't agree on whether or not a lender's share of a project's income or equity counts as extra interest under the state's usury law.
2. A loan that is paid for by more than one lender.
Wood fibres and a glue are mixed together to make this building material, which is less expensive than solid wood or plywood.
The parties involved in a transaction or legal proceeding. A sales contract, for example, has the buyer and seller (not the broker) as parties; a lawsuit has the plaintiff and defendant as parties.
The partition of property among individuals who have an undivided stake in it.
1. A wall inside the house.
2. The division of cotenants' rights in a piece of real estate. In co-ownership, one of the people who owns the property may want to sell it, but the other people may not. When people can't agree on anything, an action in partition is often the best way to solve the problem. Partition is a way for people who own things in common but don't want to be related to each other to get rid of that relationship.
Any one or more of the owners who hold title as tenants in common or joint tenants and want the property to be split up can file a suit in equity. If it looks like a "partition in kind" can't be done without hurting the owners too much, the court orders that all or part of the property be sold. The verified petition for partition gives a full description of the property and lists the rights of everyone who is interested. The petitioner should file a "lis pendens" against the property right away to let people know that a court case is pending.
The court can choose a commissioner to look into the situation and give advice on the best way to divide the land. If the court tells the commissioner to, he or she can make deeds of partition or sell the land. In equity, the court can clear up any problems with the title, such as an unreleased lien or encumbrance, transfer titles by decree, divide the property between the parties as they agree or by drawing lots, give some or all of the parties a piece of the property and sell the rest, or sell the whole thing and use the money to make everyone's share of the property equal.
An action for partition can end a joint tenancy, but a tenancy by the entirety can't be ended by partition. Most state laws say that a condo's common areas can't be split up.
By all parties agreeing in writing, the right to divide can be limited or changed. Reasonable limits on the right to divide are legal, but under the statute of frauds, they must be in writing. For example, it's not unusual for people who own something together to agree that each of them has the right of first refusal if one of them wants to sell his share.
When a partition is ordered, a mortgagee's lien is put on the part of the land that was given to the person who took out the loan. In some cases, the fact that the house is being split up could cause a clause in the mortgage to go into effect.
Because legal procedures can take a long time and cost a lot of money, tenants may choose to divide the property among themselves or sell it at auction. This can be done even if the only bidders are the tenants and a third party is in charge of the auction.
A group of two or more people who work together to run a profitable business.
A group of two or more people who work together to run a business for profit, as defined by the Uniform Partnership Act, which is in effect in most states. Under this act, a partnership can hold title to real property in the name of the partnership. This is called "holding by tenancy in partnership." One benefit of this type of ownership is that the partnership does not have to pay taxes on its own. It has to fill out Form 1065, which is a partnership information return, to show how much of its income it gave to each partner. The partners, on the other hand, are responsible for their own taxes.
State license laws may let a partnership get a real estate broker's license under certain circumstances.
An organization of two or more persons acting as co-owners for the purpose of operating a profit-making enterprise.
Document outlining the rights and duties of persons who get together to run a for-profit corporation. It can be done orally, but it is commonly done in writing.
An agreement between partners that spells out each party's responsibilities and rights.
A driveway that goes on both sides of a property line and is used by both property owners. Instead of relying on the general law of easements, it is best for the owners to have a written agreement that spells out their rights and responsibilities.
Party to be charged
In the statute of frauds, this is the person against whom the contract is being tried to be enforced. This is the person who is being sued (the defendant) and is being held responsible for the terms of the contract that person signed. This is the person who is to be bound by the contract.
An outside wall shared by two contiguous structures, each owned by a separate person.
A wall that is on or near the boundary line between two lots that are next to each other and is used or planned to be used by the owners of both lots to build or maintain improvements on their own lots. This wall is often made to be the outside wall of two buildings that are next to each other. It is built and kept up according to a written agreement. Both neighbors need to agree on what is theirs and what isn't, so that both properties will be easier to sell.
You can make a party wall through an agreement, a deed, or an implied grant. Even though it is usually in the middle, the party wall can be all on one lot. A party wall is usually a perimeter wall that connects two attached houses and gives structural support to both. It is most common in row or tract houses in highly developed urban areas where property owners want to make the most of the width of their lots and share the costs of building and maintaining the houses. Both owners are responsible for fixing a party wall, and they can't use their rights to the wall in a way that hurts their neighbor.
Each owner owns a cross-section of the wall on his own piece of land. The other owner has an easement, called a cross-easement, to use the wall as the perimeter wall of his or her own building and to support it. The statute of frauds says that because a party wall is an easement, the agreement should be in writing. The right to a party wall can also arise by prescription, such as when a surveyor's mistake causes a wall to encroach on neighboring land and the encroachment continues for the prescriptive period.
When a property owner wants to build, he or she may make a "party-wall agreement" with nearby property owners. For example, in a typical agreement, owner A will build first, and when neighbor B decides to build on his lot and use the wall, B will pay A one-half of the cost of the wall. A party wall is also used if A owns two lots and builds a house on each, with one wall dividing the two houses and serving as the perimeter wall for each.
Lease provision in which certain costs are passed on directly to the tenant rather than the owner (for example, property tax increases on a long-term lease).
Tax benefit of a partnership, limited liability company, or S corporation that lets income, profits, losses, and deductions, especially depreciation, "pass through" the legal structure of the partnership directly to the individual investors. Called flow-through as well. Real estate investment trusts also use the pass-through.
Expenditures or a portion of tenancy expenses that are "passed through" from the landlord to the tenant and paid by the renter.
Certificates guaranteed by a pool of mortgages that have been insured. The collected interest and principal are used to pay interest on the certificates as well as to retire them.
A security that Ginnie Mae gives to investors in mortgages. Cash flows from the block of individual mortgage loans that the securities are backed by are "passed through" to the holders of the securities in proportion to how much they own of the block. This includes loan prepayments. Ginnie Mae makes sure that the principal and interest on a mortgage-backed security are paid on time.
When a property does not sell for the vendor's reserve price at auction, it is referred to as a "failure to sell." (The highest bidder has the option of meeting the reserve price or attempting to negotiate a price that is acceptable.)
This happens at an auction when a person bids too high and doesn't get close enough to the seller's "reserve price."
For a taxpayer who is not actively participating in operations on a "regular, continuous, and significant (year-round) basis," any trade or business is a passive activity.
Passive activity income
The IRS income categorization that encompasses all revenue derived from trade and commercial operations such as rental real estate.
Passive activity income
Profits from a passive trade or business. Passive income can be used to cover losses from other passive activities. Any passive activity income that is not offset by losses is combined with other taxable income.
Passive activity loss restrictions
Losses from passive operations, which include all rental properties, are generally allowed to be used exclusively to offset income from other passive assets, according to IRS guidelines.
Passive activity losses
Losses incurred as a result of inactive trade or company operations. In most cases, passive activity losses can be countered solely by passive activity revenue. With some key exceptions, all leftover passive activity losses must be carried forward and used against future years' passive activity revenue, even if a taxpayer has significant taxable income from non-passive sources during the year of the loss.
Rents, royalties, dividends, interest, and capital gains from the selling of securities are all sources of income.
An investor who only puts money into a project and doesn't do anything else to help plan, build, or run it. This is the opposite of an active investor.
A person who makes a financial investment but does not participate in its management.
A loss from doing nothing. The Tax Reform Act of 1986 stopped letting losses and credits from passive investments be used to offset income from other sources (also called tax shelter). Passive activity losses and credits can no longer be deducted from other active sources of income. However, they can still be deducted from passive activity gains. Any losses or credits that aren't allowed in one year can be moved to the next year and used as a deduction or credit for only passive activities. There are no carry-backs allowed. Any unrealized losses from an activity are fully allowed when the activity is sold in a way that is taxed. For real estate rental activities in which an individual taxpayer actively takes part, there is a small exception (up to a $25,000 offset).
A passive activity is any activity that has to do with running a business or trade in which the taxpayer doesn't play a big role, or any activity that has to do with renting. A taxpayer is only considered to be materially involved in an activity if they do it on a regular, continuous, and significant basis. Most of the time, a limited partner's interest is considered passive because they don't take part in running the business. Interest, dividends that aren't made in the normal course of business, and any gain or loss from selling a property that makes interest or dividends don't count as passive income.
A sort of deed in which the government transfers title to a private party to real property controlled by the government.
The instrument by which the state or federal government transfers real property to an individual.
Any continuous succession of related activities in a project network diagram from the beginning to the end of the project.
A small-lot home design that saves land by building part of the house close to or on the lot line. On the side of each house, a patio is built. To keep things private, the next house has a wall with no windows that faces that patio.
A part of a building that sticks out or is only partly connected to the rest of it.
Multipliers for real estate investing criterion based on rules of thumb.
The period of time it takes for an investor to recoup their investment in an enterprise.
For the advantages of an investment, generally income or cash flow, to repay the whole cost or equity costs of the investment, there are rules of thumb that result in years.
Individual who has agreed to return a certain sum at a future period under the terms of a promissory note.
The person to whom a debt instrument, like a check or promissory note, is made payable; the obligee; the receiver.
A surety bond is a way for a contractor to guarantee to a building owner that all the money for materials and labor used to build a building will be paid in full and that no mechanics' liens will be filed. The payment bond protects subcontractors and suppliers from the prime contractor not paying them. A labor and material payment bond is another name for it.
Protects the borrower from the shock of substantial payment fluctuations; the interest rate may rise to the point that the consequent payment increase is insufficient to meet the extra interest expense.
Refinancing or the sale or transfer of a secured property usually results in the complete repayment of an existing loan. For the purpose of getting "payoff statistics," Escrow will reach out to the mortgagee.
The person or group that pays someone else.
Maximum flow of a stream or river in reaction to an event, such as a downpour, or throughout a time period, such as a year.
Pedestrian traffic count
A study and analysis of the number and types of people who pass by a certain place. This helps to figure out the buying power of a certain area. When planning, building, and renting shopping centres, it is especially important to know how many people walk through them.
A penalty is what happens when someone breaks a law or an agreement. Sometimes, a court will not enforce a liquidated damages clause as a penalty for breaking a contract if the amount of damages is so high that it has nothing to do with the real damages caused by the breach. In this case, the court looks at the damages clause as a punishment, which means it can't be enforced. The court then gives the person who was hurt the right amount of money.
A price levied for breaking the law or breaching a contract's conditions.
A project's and its competitors' ability to attract a percentage of total demand within a particular market sector. Also known as capture rate.
1. A financial institution that invests in long-term mortgages and high-quality stocks and bonds in order to accumulate funds to provide individuals with retirement income in accordance with a predetermined plan. Pension funds are a rich source of funding for real estate. Pension funds can accept a lower yield on an investment because they are not taxed on earnings.
2. A pension or profit-sharing arrangement. Because qualified plans receive favorable tax treatment, it is common for attorneys, real estate brokers, and other professional businesspeople to incorporate individually and set up their own pension and profit-sharing plans.
In commercial real estate markets, retirement savings accounts are increasingly a substantial source of equity capital.
A structure on the roof of a building that stores mechanical equipment or, more commonly, an apartment on the top floor of a building. Most of the time, a penthouse is considered another story when it is used to store mechanical equipment that takes up more than 20% of the roof area or when people will be living there. Most of the time, a penthouse apartment costs more than most of the other apartments in the building.
A one-peppercorn-a-year rent; in actuality, a way by which a landlord can rent a property for almost nothing while keeping all ownership rights.
Per cent complete
An estimate of the quantity of work accomplished on an activity or series of activities represented as a percentage.
To get a share through the law of descent by right of representation instead of per capita or in one's own right. Let's say Samir dies without a will and leaves $60,000 behind. He doesn't leave behind a wife, but he does have two children who are still alive, Aida and Nina, and two grandchildren from a third child who died. Aida and Nina each get one-third of the money as their share. The two children of the child who died would each get one-third of the child's share per stirpes, which means by right of representation. Then, each grandchild gets $10,000, which is a one-sixth share.
Per-unit cost method
A way to figure out how much a property manager should charge based on how much it costs directly to run a certain number of rental units.
Lease clause that stipulates rental based on a base rate plus a percentage of the tenant's total sales.
Rent payments that comprise both the minimum of base rent and overage as a percentage of gross income that surpasses a particular threshold. It's a regular occurrence with huge rental stores.
Lease in which rental payments are dependent on the tenant's gross sales.
A lease where the rent is based on a percentage of the monthly or annual gross sales on the property. Large stores, especially those in shopping centres, often have percentage leases. The percentage lease is based on the idea that both the landlord and the tenant should benefit from the good location of the rented space. There are many different kinds of percentage leases: the straight percentage of gross income, with no minimum (this is rare), the fixed minimum rent plus a percentage of the gross, the fixed minimum rent against a percentage of the gross, whichever is greater, and the fixed minimum rent plus a percentage of the gross, with a cap on the percentage rental (among others).
The Institute of Real Estate Management, the International Council of Shopping Centers, the Urban Land Institute, and other real estate management groups publish percentage lease tables (see an example table below), which can be used as general guides when negotiating lease terms. For instance, the percentage ranges for bowling alleys could be 8 to 10 percent, 7 to 10 percent for cocktail lounges, and 10 to 12 percent for movie theatres.
Because it's hard to figure out what a "profit" is, most percentage leases are based on a percentage of gross sales, not gross profits. Gross sales must be fully and correctly defined with the utmost care. It is especially important to be clear about how the percentage applies to sales on credit, sales at other stores, credit card discounts, mail orders, trade-ins, gift certificates, and transactions between stores. Most of the time, sales and excise taxes are not included in the definition of "gross income." Gross sales is usually defined as "the gross amount of all sales made in, from, or at the leased premises, whether for cash or on credit, after deducting the sales price of any returned merchandise where a cash refund is given."
The landlord should think about protective clauses that cover: the tenant's duty to act in good faith; the tenant's duty not to open a competing store nearby; regular reports of sales volume; the landlord's right to look at the tenant's books and records; a tax participation clause; the landlord's right to stop the tenant from assigning or subletting the space without permission; and the landlord's right to reclaim the space.
The percentage rent requires detailed auditing procedures that are hard to use for small businesses, hard to enforce, and don't apply to businesses that provide personal services, like real estate brokers or lawyers.
A lease in which the rent is calculated as a proportion of the lessee's gross revenue.
Amount paid by a retail tenant above and beyond the standard rent. It's usually expressed as a percentage of tenant retail sales above a predetermined threshold.
In land surveying, a rod is a unit of length that is equal to 16.5 feet.
The pace at which water travels into soil through the walls of a test pit; used to assess the appropriateness of soil for wastewater disposal and treatment.
A field soil permeability test used to verify a material's suitability for wastewater disposal and treatment.
A perk test is a way for a hydraulic engineer to find out how well the soil can absorb and drain water. This information helps figure out if a site is good for certain kinds of development and for putting in septic tanks or injection wells for sewage treatment plants. A percolation report must be part of the application for registering a subdivision with HUD.
Percolating water is water below the surface that doesn't stay in a well-defined channel or bed. If the water stays in a channel or bed, it's called a lake or stream. An escrow in which the escrow agent has all the documents, funds, and instructions needed to close the deal.
A test for determining the drainage properties of soil.
An escrow in which the escrow agent has all the documents, funds, and instructions needed to close the deal.
The process of getting rid of all claims against a title. For example, a wife could sign a quitclaim deed to give up any possible dower claim. To "perfect" something means to make it official, like when you file a UCC financing statement or an affidavit of a surviving joint tenant.
A bond is usually put up by someone who is going to do work for someone else. It guarantees that a project or task will be done the way it was agreed upon. A performance bond is often asked of a contractor to make sure that a project will be finished. Usually, the bond says that if the contractor doesn't finish the job, the surety company will either finish the job or pay damages up to the amount of the bond. Usually, a performance bond is combined with a labor and materials bond. This guarantees the owner that the surety company will pay all bills for labor and materials contracted for and used by the contractor if the contractor doesn't do their job. So, the performance bond is the best way to protect the owner from subcontractors who file mechanics' liens.
Most of the time, a performance bond costs about 1% of the total cost of building something. To get one of these bonds, a contractor must have a good track record.
A bond offered by an insurance company to ensure that a building contract is completed.
Collecting and sharing project performance data to assist assure project success.
Limiting harmful activities is a method of land use regulation that addresses concerns about urban systems such as traffic, watershed, green space, air quality, and other aspects of the environment.
A loan or other receivable for which the borrower has made all of the loan's scheduled interest and principal installments.
A defined region around the outside of a structure.
Adjustable rate mortgages have provisions that limit the amount of change in the contract interest rate from one change date to the next.
Taxes and insurance are examples of fixed property costs that happen regularly but not very often.
Any leasing arrangement that renews automatically each period unless one of the parties gives notice of cancellation.
A lease that lasts from one period to the next, such as from one month to the next or from one year to the next. All of the tenancy's rules and conditions carry over from one period to the next and stay in place until the right notice is given to end the lease. This element of continuity is what makes the periodic tenancy what it is. If a yearly rent is set, the lease is for a whole year, whether the rent is paid monthly or three times a year. This rent deposit is what makes a periodic tenancy different from a tenancy at will.
A periodic tenancy can happen if both parties agree to it, but it usually happens by default when the rent is set at a certain amount per week, month, or year but there is no agreement on how long the tenant will be able to stay.
The preference for leasing residential units to households with a track record of long-term occupancy.
In contrast to an interim short-term loan, a long-term loan. Certain lenders specialize in providing short-term financing for the construction of condominiums, shopping malls, and other large projects. Other lenders specialize in long-term financing to "take out" the interim or construction lender. Permanent loans used to be 20 to 30 years long with fixed interest rates. Nowadays, a variable interest rate can be used, or a rate can be set for a set period of time and then renegotiated.
With construction loans, there is frequently a tri-party agreement covering the permanent lender, interim lender, and borrower to ensure joint use of documents; the interim lender agrees not to assign the loan to another lender; and the interim loan is assigned to the permanent lender within a specified time upon completion of construction and satisfaction of specified conditions.
A mortgage on a piece of real estate that is for a lengthy period of time.
Mortgage finance with a long term horizon.
A long-term real estate loan used to fund a completed development ( as opposed to a construction loan).
The pace at which groundwater is transmitted through soil or rock ( or gravity water in the area above the water table).
The failure of renters or life tenants to take care of and fix up the real estate they are responsible for. Also known as careless waste or passive waste. For example, a tenant's failure to keep the property well-protected during the winter can lead to damage to the plumbing and improvements. This is called "permissive waste." In this case, the landlord could sue for damages or, in some cases, try to get a court order to stop the waste from happening again.
A never-ending flow of money or revenues.
Person is defined differently by different laws because a legal person doesn't have to be a single person. It can also be a corporation, a government or government agency, a business trust, an estate, a trust, an association, a partnership, a joint venture, two or more people with a common interest, or any other legal or business entity.
A person who works for a licensed real estate agent and does things like handle paperwork, set up appointments, coordinate marketing efforts, and take care of the top producer's personal business. If the personal assistant isn't licensed, the person who hires them must set clear rules about what the assistant can and can't do, based on state license laws. Most of the time, these assistants must be treated as employees because they don't meet the safe harbor rules for independent contractors.
Personal consumption expenditures
Individual spending on commodities such as food, shelter, and clothes is described as an economic phrase.
An individual's pledge to endorse a note or obligation.
Personal income tax rates
The federal tax rates that are applied to individual income in order to calculate the government's tax burden.
Borrowers incur liability, allowing lenders to sue them personally for contract compliance.
The duty to pay off a debt with all of one's own money and property. Most of the time, shareholders in a corporation and limited partners in a limited partnership syndication are not personally responsible for the debts of the corporation or syndication. With a nonrecourse loan, the borrower doesn't have to pay back the loan (the lender must look solely to the sale of secured property for recovery of amounts owed). A guarantor is personally responsible if the borrower doesn't pay back the loan.
Personal performance (contract)
A contract that mandates one party to provide a service or take action. This includes, for example, leases and mortgage loans that demand monthly payments. In most cases, these contracts aren't entirely assignable because the lessee or mortgagor is still responsible for the obligation.
Other than real estate, ownership rights in all other types of property. Securities, a partnership stake in a corporation, and ownership of a car are all examples. Also known as personality.
Furniture and tenant fixtures are frequently acquired in connection with real estate acquisitions since they are transportable and not permanently fastened to the land or structure.
Tangibles and movables, such as chattels, that are not considered real property (also called personality). In contrast to a deed for real estate, a bill of sale is used to transfer ownership of personal property.
Items of personal property are frequently the subject of disagreements between buyers and sellers, most often because the seller attempts to substitute a similar item or because an item is considered a fixture. When purchasing a home, some buyers include a condition in their contracts stating that they will receive the appliances "as currently installed and used in the premises."
When a tree is cut down, it is no longer actual property, but rather personal property. However, when lumber is combined and utilized to build a house, it once again becomes a fixture or real property of the owner.
Personality is a possession or object that is not actual property.
The name for the person named in a will or chosen by a court to settle the estate of a person who has died. Before there were uniform probate court rules, this person was called an executor or administrator.
A home that is currently occupied by the owner.
Personal liberties are essentially drawn from the United States Constitution's Bill of Rights and other amendments and sections.
Everything that isn't firmly tied to the land.
A formal request or application to a governing body, like a court, for help or to right a wrong. A petition to a court of equity for the division of real estate, a petition filed in circuit court by a respondent in a state discrimination hearing, or a petition to the local zoning board for a change in zoning are all common petitions in real estate.
Property Funds Analysis.
Taxable income that may or may not have been received.
Phase I audit
A preliminary assessment of a property site to determine potential contamination or noncompliance with environmental laws and regulations, which is frequently required by lenders for commercial and industrial properties.
Formal standards have yet to be established. The American Society of Testing and Materials recommends that the Phase I environmental site assessment be performed by or under the supervision of an environmental consultant and include a review of public records, site reconnaissance (for evidence of hazardous waste, underground storage tanks, leaks, and suspicious features), interviews with current owners and operators, evaluation, and report preparation. To determine the extent of contamination, approximately 20% of the properties require a more detailed Phase II assessment. Corrective actions, including removal, are part of the Phase III assessment.
The art or science of acquiring accurate measurements using photography.
The process by which green plants synthesize water and carbon dioxide and turn them into plant components in the form of sugar and carbs using the energy from absorbed light.
The depreciation of property as a result of the passage of time and the activity of the elements.
Appraisers use this term to denote any decrease in value caused by physical wear.
The loss of a building's worth due to wear and tear over time, as measured by its reproduction cost.
A kind of financing in which private mortgage insurance is not included (PMI). One loan is "piggybacked" on top of another, with a first mortgage covering 80% of the value. Loans are frequently issued by the same company. There are lower closing costs because the loans are being made at the same time. Additionally, the interest paid on the second loan reduces taxable income, while the PMI payments do not.
The ability of a structure to tolerate physical wear and tear.
The length of time that a building remains structurally sound, which is determined by the quality of its upkeep.
When a building is considered habitable, it is older than it is economically.
A physical geography word that has traditionally been used to define the composite aspect of the terrain over wide areas.
1. A column is a piece of support that goes under a building and is usually made of steel-reinforced concrete. Foundation piers are made by digging holes in the ground to a certain depth and filling them with concrete. Some foundation piers, like those that hold up bridges, can be above the ground.
2. The part of a wall that supports the weight of the wall between windows or other openings.
When it comes to industrial properties, a system in which goods are moved from one place to another by loading truck trailers with goods onto rail flatcars.
A second mortgage loan is formed at the same time as a first mortgage loan, with the latter having a maximum loan-to-value ratio of 80%. The "piggyback" second mortgage allows a buyer to get a loan amount more than 80% without having to pay mortgage insurance on the first loan.
A type of loan that tries to stay away from private mortgage insurance (PMI). The first loan, for 80% of the home's value, is "piggybacked" with a second (or third) loan for the same amount. Most loans come from the same company. Since the loans are made at the same time, there are fewer closing costs. Another benefit is that interest paid on the second loan lowers taxable income while PMI payments do not.
A loan that can be used for both construction and permanent purposes.
A vertical architectural member or projection from one or both sides of a wall that is used to make the wall stronger by adding support or stopping it from buckling.
The period of time between committing to a loan and selling the debt. During this time, the mortgage banker faces significant risk.
Roof slope is calculated by dividing the vertical distance in inches (rise) by the horizontal distance in feet (span).
The monthly principle and interest payment on a house mortgage loan, as well as monthly escrow payments for annual property taxes and hazard insurance.
This is an abbreviation for principal, interest, taxes, and insurance. It was originally used in a mortgage payment that included everything. Private mortgage insurance (PMI), mortgage insurance premiums (MIP), flood insurance, and dues to a homeowners' association can also be part of the monthly payment.
A dead-end street that is longer than 125 feet and serves more than three lots.
A fee that a mortgage broker charges for helping a borrower and a lender work out a loan.
Plain language law
A federal or state law that says that certain consumer contracts have to be written in a clear and logical way, using words that people understand, and divided into sections with clear titles. Some states, like Hawaii and New York, require that real estate rental contracts and consumer loan contracts be written in easy-to-understand language.
The person who files a lawsuit; the person who is being sued.
Planned Unit Development (PUD)
A planned, created, operated, and maintained area with one or more structures and common areas; may incorporate several land uses (for example, commercial, residential).
A development project that generally involves a combination of land uses and densities that are not authorized by standard zoning. It is permitted since the entire development is seen as a whole.
A fairly new idea in housing that aims for a high density of homes, the best use of open spaces, and more flexibility for residential land and development. This usually leads to cheaper homes with less upkeep costs. PUDs are often written into zoning laws or listed as a conditionally permitted use. They are also sometimes called "planned development housing."
The proposed PUD zone needs to be approved by the local government. The common areas are taken care of by a community association that isn't for profit. The developer files a declaration of covenants and restrictions and a subdivision plat, which says that common areas are only for association members and not for the general public.
The PUD idea is actually a "overlay" zoning that lets a developer get a higher density (and sometimes a mix of commercial and industrial uses) than the underlying zoning allows. Because most buildings are close to each other, there is more green space for parks and other activities.
Compare, for example, the two pictures on page 329. The first is a version of a subdivision with a typical layout and 368 housing units. Note that it uses 23,200 linear feet of street and only leaves 1.6 acres for parks. Compare this to the PUD, the second figure. The size and shape of both subdivisions are the same. But by slightly shrinking lot sizes and grouping them around cul-de-sac streets with limited access, the number of housing units stays almost the same at 366. The street areas shrink by 17,000 linear feet, and open space grows by 23.5 acres. Also, this clustered plan could be changed to make room for 550 patio homes or 1,100 townhouses using modern building designs.
A PUD is very different from a condo. In a PUD, each unit is a lot. This means that the people who live in PUDs own the land under their homes. In a PUD, there is also no direct interest in the common areas, the community association is a corporation, and the PUD is created by covenants in the deed or master lease. In a condo, the unit is an air space, and there is a share of ownership in the common areas. This means that owners do not own the land directly under their units. Most of the time, the owners' association is not a separate legal entity, and the condominium is made by recording a declaration. This is how state condominium laws work. PUDs are also used to build housing at resorts and even shopping centres.
Most underwriters say that a de minimis PUD is one where the community association has little or no effect on the value of the property. This term is also used by Fannie Mae and Freddie Mac. Fannie Mae's definition of a PUD is: "A planned unit development with a small amount of common property and improvements, which have little effect on the value of individual units in the development, so that the owner's association has a small amount of financial responsibility for maintaining the common property and improvements." Fannie Mae and Freddie Mac both let appraisers use the Uniform Residential Appraisal Report (URAR) to value a unit instead of their special condo/PUD appraisal forms because the PUD part doesn't change the value of the unit much. As a rule of thumb, when underwriters try to figure out what "little effect on value" means, they use 2% or less.
A zoning designation that permits a subdivision's design to be more flexible.
A government group that is usually set up at the city, county, or regional level to make a master plan and control how land is used, designed, and built.
Plans and specifications
Plans include all the drawings for a proposed development, like the building, the mechanical and electrical drawings, and so on. Specifications are the written instructions to the builder that tell him or her everything about the size, materials, workmanship, style, fabrication, colours, and finishes. They add to the information on the working drawings.
The place where a title insurance company keeps all of the full title records for the properties in its area. The plants also keep copies of the original title reports (called "starters") that the company and sometimes other companies have made. Many of the bigger title insurance companies have their own "title plants," or record rooms, where they keep copies of all instruments that have been recorded. Most of the time, these title plants record hundreds of new documents every day, and many of them have made good computer systems for indexing by parcel of land. This makes it easier to look up titles in the grantor-grantee indexes, especially when the parties have the same last name. Some plants have computers that are linked to the computer at the government recording office. This way, as soon as a new document is put on record, the title plant knows about it.
The last thin layer of fine-grain plaster used as a decorative finish over several coats of coarse plaster on the lath base. Most finishing plaster has more lime than sand, while coarser plaster has more sand. Plaster is soft when you put it on the wall, but as it dries, it gets hard. Plasterboard or gypsum board are often used instead of plaster in newer buildings because they don't have to harden.
A planned subdivision diagram showing the placement of all roadways, sites, and easements.
A subdivision or site plan map or maps.
A map or plan of a certain land region.
A public record of maps of divided land that show how the land is divided into blocks, lots, and parcels and how big each parcel is.
A public record that includes maps of land and street divisions.
A city or county maintains a register of documented plat maps that depict the borders, forms, and sizes of property lots.
Plat lot and block number
Unambiguous way of providing a property description that identifies each parcel on a surveyed map of a subdivision.
A town, section, or subdivision map that shows the location and boundaries of individual properties. A plat typically depicts details such as lots, blocks, sections, streets, public easements, and monuments. A plat may also include dates and scales, engineering data such as floodplain location, restrictive covenants, elevation, and adjoining owner names. Plats and platting are commonly used in subdivision procedures, which often require the sub-divider to submit a preliminary plat for review. After the improvements have been completed and approved by the appropriate officials, the sub-divider files a final plat.
A flat piece that forms the bottom of a support. The sole plate or sill rests on the foundation and is where the studs start. The wall plate goes on top of the wall studs and gives the rafters a place to rest.
A public square or gathering place that is usually in the middle of an area and is often a shopping complex.
Transfer of property to a lender in order to secure repayment of a debt. Hypothecations, such as a mortgage, are distinct from pledges in that the property subject to the hypothecation is pledged as security rather than ceded.
When the borrower, the seller, or another party promises sufficient funds to cover the excess amount, certain savings and loan associations will lend more than their legal maximum. However, the pledgor is unable to withdraw monies from the pledge account unless the pledge agreement permits it. As a result, the lender is able to better manage its assets.
Stock certificates issued to a lender are a popular kind of pledge.
Pledged Account Mortgage (PAM)
The mortgagor must commit a quantity of money at loan closing to be set aside to support periodic mortgage payments.
A plot is a plan that shows how the improvements on a property site are set up. Usually, the plot plan shows the location, size, parking spots, landscaping, and other details.
A graphic depicting the projected or current usage of a particular piece of land.
the building area to site area ratio
Land value is increased by combining small lots into bigger ones.
When two or more adjacent lots are combined or consolidated into one larger lot, their usability and value go up. Plottage is also called assemblage, but the word assemblage is usually used to talk about the process of consolidation. This term is often used in eminent domain cases to talk about how lots that are close to each other have more value.
The walls that are given along sections where there are no preparations for pipe shafts, such as in the kitchen and bathrooms.
Pocket license card
The state real estate licensing agency gives out what is sometimes called a "wallet card" as proof of a real estate license. A licensee should always have this card with them and show it to anyone who asks for it when they are doing business with them about real estate.
A listing that the listing broker or salesperson keeps for themselves and doesn't share with other brokers in the office or with other members of a multiple listing service. This is a bad idea in the business world, and many brokers' offices won't let you do it. Under MLS rules, a member must report any new listing within a short amount of time, usually two or three days, unless the seller says otherwise in the listing agreement.
Point of beginning (POB)
A street intersection or a specific monument that serves as the starting point for a metes-and-bounds description of property. To be complete, a legal description of a property must always return to the beginning to accurately describe the area.
Point of switch
When one rail track separates from another and diverges (for example, a spur track leaving a drill track), this is the initial point of separation.
Water contamination caused by a single source, such as a sewage treatment facility or a stormwater outfall.
A one-percentage-point fee applied by a lender to the principle loan amount.
A general term for a percentage of the principal amount of a conventional loan; a rate adjustment factor. For making a loan, a lender will often charge the borrower some service charge points. One percent of the loan amount is equal to one point. In the beginning of a loan application, when the lender doesn't know how much of a loan will be approved, it's easier to say that the fee is a set percentage of the loan amount. Points are sometimes necessary to cover the costs the lender has to pay to get the loan started and to make up for any losses when the mortgage is sold on the secondary mortgage market. Points can be used to "buy down" the rate or raise the lender's yield. In traditional financing, the buyer or the seller can pay the points.
In everyday use, the word "points" can mean many different things, which can lead to confusion. Points and discount charges are often used interchangeably, but they are not the same thing. Technically, a point is a unit of measurement. It measures not only the amount of "discount," but also other costs like mortgage insurance premiums and origination fees. The borrower should make sure that each cost item is clearly labeled.
In the sales agreement, it should be clear who pays the points. Sellers who pay points should know that they may have to pay more than they thought because of things like an appraisal that shows the home is worth less than the sellers thought, repairs that are required by the FHA and require building permit fees and other costs, and changes in the market that may cause the point structure to go up.
Points are like a one-time fee for using money. Different things can be deducted under federal tax law. When it comes to taxes, points paid as payment for using borrowed money are treated as interest, not as payment for the lender's services. The prepaid interest rule says that these points should be treated as if they were paid over the life of the loan. This is because they are similar to paying interest ahead of time. This also applies to charges that are similar to points, like a loan processing fee or a premium charge. Note, though, that discount charges paid by the seller for an FHA loan are not interest, so they are not tax-deductible.
Homeowners who refinanced their loans only to get a lower interest rate can't deduct all of the points they paid when paying off their loans. Over the life of the loan, the points must be paid off.
Under federal "truth-in-lending" laws, the borrower's payment of points must be included in the APR and given to the consumer in full.
The authority of a municipality to enact laws that promote health, safety, morals, and general well-being. Building rules, planning goals, and zoning ordinances are all enforced by the use of police force.
The right of the government to control personal conduct and the use of property in order to safeguard the population's health, welfare, and safety.
A state's constitutional authority and inherent power to enact and enforce laws and regulations that promote and support public health, safety, morals, and general welfare. Such laws must be applied consistently and without discrimination, and they cannot benefit any one person or group in particular. It is, in essence, a power derived from individual state constitutions, which also grant counties, cities, and municipalities the authority to adopt and enforce appropriate local ordinances and regulations that do not conflict with general laws. The right to tax, the right to regulate land use through a general plan and zoning, the right to require persons selling real estate to be licensed, the right to regulate pollution, environmental control, and rent control are all examples of police power.
Traditional notions of police power have recently been expanded to include the enhancement of the community's aesthetic beauty. Courts, for example, have upheld an ordinance restricting advertising in state parks, as well as the regulation of a community's appearance through design review boards.
Police power also includes the authority to damage or destroy private property (without compensation to the owner) when doing so is necessary to protect the public interest. This may occur, for example, if a condominium unit catches fire and the fire department is forced to destroy an adjacent unit in order to extinguish the fire and save the rest of the building. Although the government is not required to compensate an owner for such destruction, a valid claim against the insurance policy covering the burning unit or the owner's own policy may be filed. Although the state has the authority to regulate the use of an individual's property in order to protect public health, safety, and welfare, such regulation has its limitations. If it goes too far, it is considered a "taking," which requires the state to compensate the individual affected.
Polychlorinated biphenyls (PCBs)
Previously employed in the construction of electrical connections and equipment were cancer-causing substances.
The complete universe of data from which samples are drawn in statistics.
Portable loans let you sell your home and move to a new one without having to change your loan. When you can move, you can use stamp duty and avoid paying break costs if you're on a fixed rate. You don't need to refinance, and you don't have to pay break costs.
A roofed structure that extends from a building's entrance over an adjacent driveway to provide shelter for people getting into or out of vehicles.
Income from interest, dividends, rents, and royalties, gain from disposition of investment property, passive activity income regarded as portfolio income under the Tax Reform Act of 1986 phase-in provisions, and income from a trade or company in which the taxpayer does not engage meaningfully (unless the activity is a "passive activity" under the passive loss rules).
Income derived from securities such as stocks and bonds is classified as such by the IRS. Income derived directly from rental real estate operations does not qualify as portfolio income.
Banks and other financial entities that fund mortgage loans and then keep the loans as investments.
A loan that was made by the lending institution and is still being managed by it. It is not sold on the secondary mortgage market. The qualifications set by the secondary mortgage market do not limit the lender. After the loans have "aged," they are eventually sold.
A person or organization in charge of a portfolio of investments.
A manager in charge of several key initiatives.
Considering real estate investments in light of an owner's other assets and overall status.
The overall risk of owning a collection of assets. When one investment is coupled with another that has balancing risk patterns, the risks associated with the first investment may be reduced.
Positive cash flow
The amount of money left over after deducting rental income and paying operating expenses and mortgage payments. Negative cash flow, also known as an alligator, occurs when more money is owed than is earned.
When a property's income (typically rent) is adequate to cover the costs of ownership - such as loan repayments, upkeep, rates, and management fees - the owner receives a net return.
Possession or occupation of property, whether actual or constructive. Possession serves as constructive notice that the party in possession may be entitled to certain rights. As a result, when someone is in possession of property under a claim of ownership and a buyer purchases the property from the owner of record for value, the purchaser is not protected under the recording laws, because possession imparts constructive notice in the same way that recording a deed does. According to legend, the purchaser should have investigated the claims of the person in possession (sometimes called inquiry notice). Furthermore, possession of a property frequently cures an indefinite description in deeds, leases, sales contracts, and the like. When a sales transaction is completed, the buyer typically gains the right to possess real property.
The right of a property owner to inhabit it. By right of title, the owner enjoys constructive possession of the property when it is inhabited by a renter.
Possibility of a reverter
When a life estate expires, a residual interest in the property becomes effective.
Property granted under a deed may revert to the grantor if the grantee breaches a condition under which the property was granted. For example, Napoleon Baker transfers his farm to Steve Stowe and his heirs on the condition that Stowe prohibits the consumption of alcohol on the property. If Stowe violated the condition by allowing alcoholic beverages on the property, the property would revert to Baker. According to current thinking, a reverter possibility is a land estate that can be sold and devised.
A check that appears to be dated later than the date of signing and is thus not negotiable until the later date arrives, because a bank cannot make payment before the stated date. Such a check is legal as long as it was not postdated for illegal purposes. The person who receives a postdated check is deemed to acquire title as of the date of delivery, not the date of the check. Accepting a postdated check as a deposit is bad form for a broker. It is preferable to draught a promissory note that provides for the prevailing party to recover costs and attorney fees if the deposit is not paid on time. When a broker accepts a check or promissory note, he or she must inform the principal of this fact. An escrow company will usually not accept a postdated check, but it may hold a properly dated check for one day before cashing it.
Water that can be consumed safely and comfortably. The availability of potable water must be disclosed in a public offering statement used in the sale of subdivided land.
Potential gross income
The greatest amount of money that a property might generate if it were completely rented at market rates.
The property's entire yearly income if it were fully rented and there were no collection losses.
Potential gross rent
The amount of rental income a property would earn if there were no vacancies.
Power of attorney
An instrument that authorizes another person to serve as the grantor's agent.
A written instrument authorizing a person, the attorney in-fact, to act as agent for another to the extent specified in the instrument." A warrant of attorney is also known as a letter of attorney. The following are some highlights of relevant general practise regarding the use of powers of attorney for the sale or purchase of real estate:
- A real estate license may not be required for an attorney-in-fact to sell the owner's property. An exception to this rule would be if the attorney-in-fact is engaged in real estate development or brokerage and is purposefully avoiding licensing requirements.
- Good title practice necessitates the recording of the power of attorney; otherwise, the document signed by the attorney-in-fact, such as a deed, is ineffective against third parties. To be recorded, the power of attorney must be acknowledged. To revoke a recorded power of attorney, a notice of revocation is required.
- Good title practice requires that the parties use a "special" or limited power of attorney to convey real estate rather than an all-inclusive general power of attorney. Because the power of attorney is strictly construed, it must expressly authorize the attorney-in-fact to carry out the entire transaction. The time limit must also not have expired. A power to sell does not imply a power to convey.
- Any power of attorney instrument should be executed as follows: "John Frank by John Neil, his attorney-in-fact." The agent's name should never be the first to be signed. The principal's name can be typed in by the agent.
- One spouse may act as the other spouse's attorney-in-fact for the purchase of property, but this may conflict with homestead, dower, or courtesy rights in the sale of property. If the agent has a vested interest in the transaction, the agent cannot act legally.
- Normally, the power of attorney is automatically revoked upon the death of either the principal or the attorney-in-fact. Because of the revocation-by-death rule, most title companies are extremely cautious with power of attorney documents. A durable power of attorney continues to be valid even if the principal becomes incompetent or disabled.
- The power of attorney must be in writing under the equal dignities rule, because the real estate documents to be signed under the power of attorney must be in writing.
- When the transaction is to be closed in escrow, the power of attorney should be forwarded to escrow along with an original and three copies.
Power of sale
A mortgage clause that gives the lender or a trustee the ability to carry out a foreclosure. Allows for nonjudicial foreclosing.
In the event of a borrower's default, a clause in a mortgage authorizing the mortgage holder to sell the property at public auction without resorting to legal action. The proceeds of the public sale are used first to pay off the mortgage debt, with any surplus going to the mortgagor. Trust deeds also include a power-of-sale clause, which gives the trustee the authority to sell trust property under certain conditions. In some states, powers of sale are not used.
The power of sale is a contractual right that cannot be exercised unless all of the terms of the mortgage are met.
In general, when dealing with Torrens-registered land, the certificate of title must state that the mortgage contains a power of sale. Otherwise, no subsequent document, such as a power of sale deed or lease assignment, will be accepted for registration.
A mortgage clause that allows the lender to sell the property if the borrower defaults.
Power shopping center
Three or more hard goods retailing behemoths are usually found in these shopping malls (for example, Walmart and Home Depot). The high ratio of anchor tenants to lesser tenants is a power center's defining trait.
Practice of law
Providing services unique to the legal profession, such as preparing legal documents, providing legal advice and counsel, or drafting contracts that secure legal rights. Whether or not fees are charged, a broker's license can be suspended or revoked for the unlawful practice of law. The broker also has an ethical obligation to recommend that legal counsel be obtained when either the buyer or seller's interests require it.
There is widespread uncertainty about whether the broker's use of certain forms constitutes legal practice. While it is permissible for the broker to assist in the completion of certain standard forms, such as a sales contract, the broker is required to do so with accuracy and certainty. Form completion is permitted only when it is incidental to the broker earning a commission and not when the broker charges a separate fee for filling out the form. The broker may not prepare documents such as contracts for deed, deeds, options, mortgages, and certain leases in most states, but may assist with the completion of an attorney-approved document.
You get a written offer from a lender that says how much money they will give you, if you meet certain conditions.
A loan that is almost ready to close because all the paperwork is in order and there is a good chance that credit or income problems won't stop it. It doesn't always mean that the file has been approved by the lender, who has promised to pay for the closing.
A pre-closing meeting where documents are prepared, reviewed, and signed, and estimated prorations are made well in advance of the closing date. Because there may be hundreds of separate units to close finally within one day, pre closings are common in the conversion of entire apartment buildings to condominiums.
A run-through of the ending.
Building parts are sent to the construction site unassembled and marked with codes that show how to put them together step by step. Precuts require skilled work on-site, and building them can cost more than building a home in a factory.
There are many unethical ways for a lender to make loans that are secured by a home or car. The lender does this so that if the borrower can't pay back the loan, the lender can take back the home or car and sell it for a profit. The practices, which are somewhere between fair risk-based pricing and outright fraud, are meant to take advantage of borrowers who don't know what they're doing—often people with low incomes, little education, or who are older. These schemes shouldn't involve people who have real estate licenses.
1. A provision sometimes inserted in a deed of subdivided land retaining the developer's right of first refusal or granting that right to the owner of an adjacent lot, who may exercise it when the property is offered for sale. Some condominium documents also state that any condo owner has the right of first refusal upon the resale of another unit in the building.
2. A legal doctrine that states that one law is superior to another. Federal lenders, for example, argue that, under the Supremacy Clause of the United States Constitution, federal laws governing the validity of due-on-sale clauses preempt any state laws or court cases to the contrary. Under certain conditions, the OCC and the FHLBB have adopted regulations that preempt state usury laws.
A senior equity position that is structured similarly to a mezzanine loan but is structured as a senior equity position rather than a loan. A stated preferred return and control powers equivalent to, or higher than, those of a mezzanine lender are characteristic of a preferred equity position.
After the initial capital investment has been refunded, the second kind of cash flow distribution in a fund is payable. A preferred return is similar to a preferred stock dividend, and it is paid before any other claims on the underlying property cash flows.
Prior to receiving a certificate of occupancy, secure a lease commitment.
Preliminary cost estimates
The first cost estimates, which are sometimes referred to as "ballpark" values. Prior to a more in-depth investigation, these data were calculated.
Those costs that were incurred along with the main project, but before it started. For example, there are costs for feasibility studies, soil tests, financial commitments, and preliminary legal matters.
Memorandum containing complete disclosure of all things relevant to a public security offering. Prior to advertising the offering, a preliminary prospectus must be filed to and authorized by the Securities and Exchange Commission.
A report on the title that is done before a title insurance policy or escrow is opened. A preliminary report or title insurance policy only tells you about the documents that affect the title. You shouldn't use them as if they were an abstract. On the other hand, an abstract of title lists all documents that have changed the title since the original grant and gives a brief description of each one. It doesn't try to figure out which documents currently affect record title. The "preliminary" is not a contract or promise that the title company will then insure the property's title, though this can be done for an extra fee.
1. The part of a deed that lists the names of the parties, the amount of money being exchanged, and the legal name of the property.
2. The property in question, such as the one you own or the one you rent. This usually includes the house, all of its parts, the land, any facilities that are set aside for the use of the tenant, and any other area or facility that the tenant is promised to be able to use. Land and premises are sometimes the same thing.
Amount paid for an asset (or the par value of a security) in excess of the ordinary price, frequently as an enticement or incentive.
The price of a policy of insurance.
1. The thing that is given in exchange for a loan or a deal, like the money that the new owner of a lease or contract, like an option, pays to the person who gave them the lease or contract. Part of the rent is sometimes paid as a lump sum when the lease is signed. This is called "capitalizing" the rent.
2. The amount of money paid for insurance. The part of the premium that must be given back to the insured when the policy is canceled is the unearned premium.
Prepaid expenses are expenses that are paid before they are due. The majority of fire insurance premiums are paid a year in advance. Normally, rent is paid one month in advance. Normally, the seller is credited for prepaid expenses and charged for prepaid income, such as rent received, at closing.
Expenses that have been paid in advance of the period they are supposed to cover.
Interest paid before the due date. When money is provided on a real estate loan, prepayment interest is frequently subtracted from the loan amount.
The payment of interest before the due date. Prior to 1975, prepayment of interest was a tax-saving strategy because the IRS allowed a taxpayer to deduct interest prepayment under certain conditions. However, the Internal Revenue Code now states that interest cannot be deducted as prepaid but must be deducted when and as earned over the life of the loan. Prepayment rules apply to mortgage service points as well. Mortgage service points paid in connection with the financing of a primary residence, on the other hand, may be deducted in the year paid if the payment of points is an established business practices in the area and the amount paid does not exceed the amount generally charged in the area.
A one-time payment that is used to set up a reserve or impound account. This payment includes the first year's mortgage insurance, the first year's hazard insurance, and taxes and insurance that are spread out over the year.
A payment made by the borrower that is larger than and/or sooner than the repayment plan.
Debt repayment in advance.
A condition in a mortgage that specifies penalties to be paid by the borrower if a loan is prepaid.
A mortgage clause that specifies the parameters of a mortgage loan's early repayment.
Charges incurred when a mortgage is repaid before its maturity date in order to discourage prepayment.
The amount set by the creditor as a penalty to the debtor for repaying the debt before it matures; also known as an early-withdrawal charge. The lender charges a prepayment penalty to recoup a portion of the interest that the lender expected to earn when the loan was made. It reimburses the lender for the initial costs of establishing the loan, servicing it, and carrying it during the early years of high risk. This punitive device may also represent the lender's loss of income during the time the mortgage is paid off and the funds remain uncommitted. Most lenders are willing to allow prepayment without penalty after five years because much of the total interest on the note has been paid in by that time.
"Additional principal payments may be made with any monthly installment, but prepayments made in any calendar year in excess of 20% of the original amount of this note shall be subject to a charge of 1% of such prepayments," is typical prepayment language. Some states limit the amount of prepayment penalties that a lender can charge, while others outright prohibit them. Some loans include a prepayment and coasting clause, which allows the buyer to pay before the money is due and then "coast" for as long as there is a surplus. The penalty amount varies, but it is frequently equal to the interest that would have been paid on the balance for a specified period of time, such as 90 days.
Real estate loans with savings and loan institutions can be prepaid at any time, and the penalty is limited by state law to a certain percentage of the prepayment amount. Prepayment penalties are typically specified in the promissory note. The current trend is to consider excessive prepayment penalties usurious and thus unenforceable. A reasonable prepayment charge, on the other hand, is not considered interest because it is paid only in connection with the borrower's exercise of a lender-provided option. On FHA, VA, or conforming loans, prepayment penalties are not permitted.
If the borrower refinances with the same lender, some lending institutions will waive the penalty. Others may waive it if the funds to pay off the loan come from personal sources rather than refinancing with another lender. Some lenders, on the other hand, do enforce their penalty provisions even in the event of an involuntary payment, such as the receipt of condemnation or insurance proceeds.
Prepayment penalties are not permitted on conforming loans purchased by Fannie Mae and Freddie Mac. The trend is to eliminate the prepayment penalty, as is the case with certain federal credit union rules.
A penalty imposed by a lender when a loan is repaid early.
Prepayment Penalty or Prepayment Premium
To discourage prepayment on a mortgaged loan, a charge is applied on prepayments.
Having the ability to pay off a debt before it is due, without penalty or additional fees, such as in a mortgage or sale agreement. Lenders are legally allowed to use the prepayment in a variety of ways, some of which are more advantageous to the borrower than others. For example, if a debtor prepays a portion of the loan, the payment may be applied to the remaining payments. Thus, if the debtor prepays for six months in January, she must still make the February payment, and the large payment is applied to the loan's final six monthly installments.
There is no right to prepay unless agreed to, such as when monthly payments are stated as "or more" or "not less than," such as "$200 or more per month." A closed mortgage is one that does not have a statement granting the right to prepay. An open mongage is a statement that grants the right to prepay. If there is no right to prepay stated in the contract and the seller refuses to consent to a prepayment, the buyer cannot force a prepayment by purposefully defaulting on several installments, tendering the balance due with interest to the date of payment, and claiming that the mortgage default automatically triggered the acceleration clause. Courts have ruled that an acceleration clause is for the creditor's benefit, and the creditor has the option of enforcing it or not.
An increasingly common practice is to specify a time period in the first part of the mortgage during which no prepayment is permitted. This is commonly referred to as a "lock-in." Prepayment penalties are not permitted on any FHA-insured or VA-guaranteed loan.
The possibility that an investment's return may be harmed if some or all of the money invested is returned ahead of schedule. Lock-out periods, prepayment charges, and/or yield maintenance are common features of commercial mortgages that help to mitigate this risk. Prepayment risk also includes extension risk, which refers to the repayment of debt at a slower rate than anticipated.
It's possible that the borrower's pre-interview and credit report indicate that, if they are telling the truth about their financial situation and income status, they will meet the loan requirements.
A developer's pre-construction sales programme. Before a lender will commit to financing the construction of a condo project, a developer is frequently required to presell a certain percentage of units. Pre-sales in a condominium project are permitted in some states only after the developer obtains a preliminary public report. Such presales are not binding on the purchaser until the final public report is received. The more recent marketing trend is away from the presale programme and toward selling under a final public report during the construction period, particularly if the lender is a joint venturer in the project's profits.
The selling of a property before it is finished.
Adverse possession is the process of acquiring property rights.
Acquiring a property right, usually in the form of an intangible property right such as an easement or right-of-way, through continuous and uninterrupted adverse use of property for the prescriptive period established by state statute. Land use is harmful when it is made under a claim of right. As a result, if the owner has granted permission, the user has paid for the use, or the user has admitted that the owner has a superior right in the property, there is no adverse use.
Prescription is frequently used interchangeably with the term adverse possession, which refers to the acquisition of title to land. The essential elements in adverse possession are that the prescriptive right be adverse; under claim of right; continuous and uninterrupted; open, notorious, and exclusive; with the knowledge and acquiescence of the servient owner; and continuing for the entire prescriptive period. The term "constant" denotes that the property is used on a regular basis. Generally, there is no prescription against the state or Torrens-registered property.
The present worth of expected future income or payments.
At time zero, the worth of future cash flows.
The current worth of an income-generating asset as determined by discounting all expected future cash flows over the holding period.
A sum of money that would be equivalent to a certain amount of money in the future if invested today at a set interest rate.
Present value approach
Adjusting for the opportunity cost of capital, this technique is used to depict predicted future cash flows in terms of their current worth.
Present value of an annuity
The present value of a sequence of even-numbered level payments. The cumulative opportunity cost of capital is reflected in current value.
Present value of future selling price
The current value of the $1.00 component multiplied by the estimated future selling price.
Present value of one dollar
A doctrine founded on the idea that money has a time value. The present value of a payment to be received at some point in the future is the amount that grows to the payment amount over the projected term at a given fixed interest rate. The present value of one dollar receivable one year from now is one dollar less the one-year interest loss. For example, if annual interest is 6%, the value of a dollar to be received next year is 94 cents today.
Tables (such as the Inwood tables) have been devised to set forth a list of mathematical factors to be used to discount money to be received in the future at different interest rates over different time periods. These tables are most commonly used in long-term lease valuations to compute the value of a lessor's reversionary interest. They are also used to calculate the appropriate conveyance tax on the first ground lease issued. The present value of one dollar is also used in building valuation calculations to determine the present value of assigned leases.
A zoning district created to protect and preserve parkland, wilderness areas, open spaces, beach reserves, scenic areas, historic sites, open ranges, watersheds, water supplies, and fish and wildlife, as well as to encourage forestry and grazing.
A legal principle that states that a court will draw a specific inference from a given fact or piece of evidence unless and until the truth of that inference is disproved or rebutted. The date on a deed, for example, is presumed to be the date of delivery, and a transfer to two or more people with no stated tenancy is presumed to be a tenancy in common with equal interests.
The person who prevails in a lawsuit. Some contracts state that the prevailing party is entitled to reimbursement for reasonable attorney fees incurred if a lawsuit arises from the contract.
A general term for the average interest rate that banks and other lenders charge on mortgage loans right now.
To avoid possible difficulties, a programme of frequent inspections and care is implemented.
A programme that inspects the many physical components of a property on a regular basis.
The amount of one thing exchanged for another. The sum of money paid for a product; the consideration; the purchase price Market price and market value are distinct concepts.
A measure of how sensitive supply (price elasticity of supply) or demand (price elasticity of demand) is to price changes for a product or service.
A market circumstance in which price decreases result in a decrease in total revenue while price rises result in a gain in total revenue.
Economic units that operate on a large enough scale to have some price control over their goods or services in the marketplace.
Economic units that realize that they cannot entirely control the price at which things are exchanged, but also recognize that they do influence market pricing. Price hunters must be continually mindful of the influence their price selections will have on the decisions of competitors.
Economic entities that operate on such a tiny scale that they have little control on the market price of their goods or services.
The illegal practice of conspiring to set fixed fees or prices for goods or services rendered; a violation of antitrust laws. In recent years, local bar associations' setting of attorney fees and commission percentages and management fees has been successfully challenged as price-fixing and thus a violation of the Sherman Antitrust Act.
Prima facie evidence
A legal term for evidence that, at first glance, seems to be good enough to prove a certain fact or prove a case. Prima facie evidence proves a case unless it is rebutted or contradicted. This is also known as presumptive evidence.
For example, if a homeowner puts their home up for sale but never moves in, even though they got an owner-occupant loan, this is a clear sign that they don't plan to live there. Then it's up to the homeowner to prove his or her case.
Data obtained by researchers precisely for the subject they are currently working on.
A lease between a landlord and a tenant whose interest has been leased in whole or in part.
Primary mortgage market
Borrowers and lenders negotiate mortgage conditions in the loan origination market.
The market where lenders start loans and give money directly to borrowers, take on the risk of long-term financing, and usually keep paying back the loan until the debt is paid off.
Markets where real estate loans originated.
Referring to house mortgages that are "qualified." The phrase is used in a variety of ways. Some people use the term prime to refer to loans with a FICO score of 660 or better. FHA and VA mortgage loans are two more options. Others differentiate prime based on the type of lender.
A commercial bank's minimum interest rate on short-term loans to its largest and strongest clients (those with the highest credit standings). The prime rate is frequently used as a base rate for other commercial and personal loans. The rates at which banks must pay for the money they lend to prime rate borrowers influence prime rates in part. The interest rates available on other types of loans, as well as the return on investments such as federal government securities, have a significant impact on the setting of prime rates. The prime rate fluctuates due to the supply of money and the demand for loans, sometimes on a daily basis. The Federal Reserve Bank's decisions to increase or decrease the supply of money cause prime rates to rise or fall, as does the Federal Reserve Bank's discount rate. The interest rate on many large loans floats with the prime rate. For example, the interest rate could be stated as 3% (or three "points") above the prime rate on the first banking day of the month. In a highly volatile money market, such as one in which the prime rate changes six or seven times per month, some lenders structure their loans using the monthly daily prime rate average. Because the interest rate on many interim construction loans is tied to the prime rate, large increases in the prime rate during construction can be detrimental to a real estate development's profits.
The interest rate that a lender charges its most credit-worthy borrowers.
A tenant (or group of tenants) who lives in a building and takes up the most space. Usually, this is for 25 percent or more of the rentable space in the building. By name and reputation, the prime tenant may be the most important tenant in a building. A prime tenant is also someone who rents the most space or maybe even owns the building they rent. When there is a sublease, the original renter is sometimes called the prime tenant.
A business property's anchor tenant.
The amount on which interest liability is calculated in finance.
The person who delegated power to an agent in brokerage; the amount borrowed and owing on a loan in finance.
You owe money on your loan.
1. One of the main people or groups involved in a deal. For example, the buyer and the seller of a piece of real estate are both principals in the deal.
2. The person who hires a real estate broker to help her sell property is in a fiduciary relationship with the broker. When real estate ads say "principals only," it means that real estate agents are not allowed to contact the owners of the property.
3. The biggest amount. On the main amount, interest is paid. Interest and principal are both part of an amortized payment.
(Note: Do not confuse principal and principle. Principles are rules, like ethics or codes of conduct.)
The most important participant in a transaction.
The mortgage loan's total amount.
Principal and interest loans
A loan in which the principle and interest are both paid over the course of the loan's duration.
Principal and interest payment (P & I)
The periodic payment of both the principle reduction and the interest required on a loan, generally made monthly.
Principal broker (PB)
Under the laws of some states, a licensed broker is directly in charge of and responsible for the real estate business that a brokerage company does. The designated broker is also called the broker-in-charge or the broker in charge.
In a government rectangular survey, a line of geographic reference running north and south.
The point where the prime meridian crosses the survey's reference marker is used as a reference line for numbering ranges.
Lines stretching north and south between the Earth's poles that are used as reference lines in property surveys.
A structure that the taxpayer has actually and physically occupied. Taxpayers who sell their primary residence receive preferential tax treatment, including an exclusion (i.e., no tax) of up to $250,000 for an individual return and up to $500,000 for married filing jointly if they own and have occupied the residence for two of the previous five years. If the buyer uses the home as his or her primary residence, foreign sellers may be exempt from the FIRPTA withholding rules.
Principle of substitution
The valuation principle states that a person is not justified in paying more for a property than it would cost to build or buy a substitute property.
Principles of appraisal
The economic theories and ideas that explain how and why market behavior affects value. The theories of anticipation, change, competition, balance, substitution, supply, and demand are all part of the principles of appraisal.
A theory of water law that is based on the idea that the first person to take water from a source of water has the right to do so. The idea is that if all possible users got the same amount of water, there wouldn't be enough to make anything. However, if the water was concentrated in a few places, at least something could be made.
The order of where things are or when they happen. Most of the time, the order in which liens are recorded shows how important they are. However, real property tax liens have priority even over recorded liens. So, the old saying, "First in time, first in right."
Economic products in which one person's consumption decreases the amount accessible for consumption by others.
Transfer of title to real estate on one's own volition. Transfers for consideration, donations, and bequests are examples of these.
Property is transferred from one private owner to another by conveyance.
Private limited partnership
A limited partnership with a small number of investors and shares that are not available to the general public.
Private mortgage insurance (PMI)
Insurance provided by private firms that reimburses the lender for capital losses incurred by the borrower in the case of failure.
A mortgage insurance policy that pays off if the borrower defaults.
A type of insurance that lets lenders increase their loan-to-market-value ratio, usually up to 97 percent of the property's market value. Government rules, special loss reserve requirements, or internal management policies related to the mix of mortgage portfolios limit many lenders to 80 percent loans. A lender can lend up to 95% of the property's value, though, if the extra loan amount over 80% of the property's value is covered by a private mortgage guaranty insurer. Conventional guaranteed mortgages are sometimes used to describe mortgages that are insured by private companies.
The mortgage insurance company gives the lender a promise to cover the loan with a policy worth 20% of the loan amount. When the lender gets the insurance certificate, he or she may raise the loan amount to a higher percentage of the property's value. The borrower pays the insurance premiums, which are usually a percentage at the beginning and a set amount each month after that.
For loans that started on or after July 1, 1999, the private mortgage insurance must end when the borrower has 22 percent of the property's value based on the property's value at the time the loan started, with no allowance for the property's value going up or down.
Most policies cover the top 20 to 25 percent of the loan, which is seen as the risky part of a higher-ratio loan. Unlike the FHA, which requires the insurance to be kept throughout the life of the loan, policies on privately insured loans allow the lender to stop insurance coverage when the lender is sure that the risk level has been reduced enough. Each situation is looked at on its own to decide this. State and federal laws affect whether or not the lender has to keep paying for the insurance after the borrower has reached the amount of equity that was agreed upon.
In the event of a default on an insured mortgage loan, the insurer can either buy the property from the lender for the amount still owed or let the lender foreclose and pay the lender's losses up to the amount of the insurance. Many insurers choose the first option, especially since lenders like it better. If the loan has been late for more than four months, the lender must tell the insurance company.
FHA and VA loans are not as popular as they used to be because private mortgage insurance has lower administration costs and fees and is faster to process. The Mortgage Insurance Companies of America is a trade group that is made up of about seven private mortgage insurance companies.
A real estate security offering that is exempt from registration with state and/or federal regulatory agencies because it is not a public offering. The Securities and Exchange Commission issued guidelines (known as Rule 146) in 1974 in the hopes of bringing more clarity to what constitutes a private offering and thus does not require registration. However, even though the private offering security is exempt from the SEC's costly and burdensome registration requirements, it is still subject to the securities laws' full disclosure and antifraud provisions.
The selling of securities to sophisticated investors (insurance firms, pension funds, etc.) who fulfill particular conditions.
The selling of securities to a limited group as opposed to a public offering, in which the transaction is announced to the broader public. A private offering is another term for a public offering.
Private placement memorandum
A private placement prospectus. It is not required to seek SEC permission, but it must offer complete information.
Private Real Estate Investments
Direct property investments and indirect real estate investments, such as open-ended and closed-ended funds that invest directly in real estate but are not traded on exchanges, are both available.
A way to sell that doesn't have a set closing date and is usually done with the help of an agent (as distinct from a sale at auction).
The vendor and buyer perform a private property sale.
The relationship between two people who have the same property rights, such as a mortgager and a mortgagee or an assignee and an assignor (landlord-sublessee or heir-ancestor). A change in the rights.
A cash flow prediction that has been developed to aid in discounted cash flow analysis.
A financial statement that forecasts gross income, operating expenses, and net operating income for a future period using a specified set of assumptions.
Only for show; not always official.
Pro forma statement
A prediction of what will happen in the future with money or other things. A projected annual operating statement that shows expected income, operating costs, net operating income, and taxable income and loss. A prospectus for an offering of a real estate security, like a limited partnership to own income property, will often have a pro forma statement. A pro forma statement should be clearly marked as a prediction, and it should be set apart from operating figures, which are based on how well the business has done in the past.
Pro rata share
An amount proportional to an investor's ownership interest.
A measure of the likelihood of every potential result occurring.
A collection of all conceivable outcomes and their corresponding probability of occurrence.
The probability distribution of all possible outcomes and their corresponding likelihood.
Probability of acceptance error
The likelihood that accepting a suggested investment would turn out to be a mistake.
State legislation that controls the disposal procedure of real estate conveyances upon the death of a property owner.
The formal court process to prove or confirm that a will is valid, collect the assets of the deceased person's estate, pay their debts and taxes, and figure out who gets the rest of their estate. The will is taken to the probate court, where creditors and other interested parties are told to present their claims or explain why the court shouldn't enforce the will's terms. This court is sometimes called the surrogate's court. Even if there is a will, it still has to go through probate. The will does, however, say what to do with the testator's property instead of leaving it up to the laws of the state where the testator lived if there was no will.
Any interest in land goes straight to the heirs or people named in the will. This transfer is not a final sale, though, because it has some restrictions:
- The title is based on whether or not the personal representative has the right to own the property.
- The title is subject to claims that can be made against the estate of the person who died. If the claims are true, the property could be sold and the money from that could be split.
- The title depends on whether or not the surviving spouse goes against the will.
- The title is subject to all liens and claims that were in place at the time of death.
- The will could be called into question.
- The estate and inheritance taxes that apply to all of the deceased person's property also apply to the title.
Even if the person who died didn't have a will (died "intestate"), the estate still has to go through the probate process. The court decides who the rightful heirs are, pays the legal claims of creditors, and chooses an administrator to distribute the real and personal property according to the court's decree.
A creditor has a certain amount of time to make a claim on the estate of a person who has died, or the claim will be lost forever. One exception is that a secured creditor, like a mortgagee, can foreclose on the decedent's property even if she hasn't already filed a claim.
The executor or administrator of an estate, also called the personal representative, must file a final accounting with the court that lists all income, expenses, and remaining assets. When the court approves the final accounting, this person is let out of jail. When this is done, the real property can be sold or given away without any debts, claims, or taxes from the person who died.
A broker who signs a listing agreement with the executor or administrator of an estate in probate should know that the court sets the amount of commission and that commissions are only paid out of the sale proceeds. So, a broker can't get a commission unless the sale is okayed by the court. Even if the broker finds a buyer who is ready, willing, and able to buy, this is still the case. Both the sale and the commissions to be paid are subject to court approval.
Any modification in contract criteria must be approved in writing before any work may begin, and the price and/or completion time must be recalculated accordingly.
A place where the lender puts the money from the loan until the closing of a real estate deal. This step is especially important if the loan commitment is set to end before the closing date.
The cost of transforming raw materials into final items.
That work that leads to the result you want. Also known as the leading cause or the contributing cause.
In an open listing, the commission goes to the broker who made the sale happen or did the most to make it happen. A broker can be the procuring cause, even if the property is only sold indirectly because of the broker's work. For example, if the broker sent a potential buyer to the owner's house and the property was then sold, the broker is seen as the cause of the sale.
With the exclusive-right-to-sell contract, the broker is entitled to a commission if the property is sold "by you, by me, or by anyone else," which gets rid of most procuring cause disputes. But disputes between the cooperating broker acting as a subagent and the listing broker can happen when both of them give advice to the buyer without knowing about the other's role. There are also problems when the buyer works with more than one buyer's agent. Purchasing cause disputes should be solved between the offices involved if at all possible.
Several state REALTOR® boards have made rules for how to settle disputes over procuring cause. Procuring cause panels look at all the facts and try to figure out who started and continued the chain of events that led to a successful transaction.
A broker will be considered the transaction's procuring cause. If his efforts form the foundation on which the talks culminated in a closure, he is entitled to the real estate commission.
The ultimate output of the manufacturing process.
A property's ability to provide utility or want-satisfying power. The ability of a property to command rent is a measure of its productivity.
A non possessive right to take the soil, minerals, or products from someone else's land. Includes an implied right of access.
Profit a prendre
A legal right to remove a portion of the land's soil or produce, such as coal, fruit, or wood. The only way a profit may be generated is by a formal gift or prescription, as a profit is a land interest. In contrast to a profit, an easement merely gives you permission to utilize someone else's land, whereas a profit allows you to take their soil or products with you. It is considered an ancillary easement if it is essential for a profit a prendre to be enjoyed to its full extent.
Ownership of a natural resource is different from leasing it to a developer and receiving a royalty payment, such as in an oil or gas lease contract in which the owner retains the right to a one-sixth net sales price royalty.
Profit and loss statement
A declaration that shows a property's operational results.
A detailed list of how much money a business makes and how much it spends. It shows how the business is doing over a certain time period. Often called a profit and loss statement, operating statement, or income statement.
P&L statements are something that a property manager has to do on a regular basis. Most of the time, these statements only show the total gross income, not the sources of that income, and the total of all operating expenses, not each expense.
The present value of predicted future cash flows divided by the original cash outlay yields the present value per dollar of cash outlay.
A forecast of future earnings and costs.
Program evaluation and review technique (PERT)
A network analysis approach that is often used to depict the project sequence, identify the critical path, and assess project progress.
A project manager in charge of a number of interconnected initiatives.
1. Payments that are planned to be made when certain parts of a construction project are finished. In many new condo projects, buyers have to make progress payments. This means that they pay the down payment into escrow in small amounts, with a certain amount due at the time of purchase, loan approval, building completion, and closing.
2. Construction loan funds are usually given out as the building is built, not all at once at the beginning. On behalf of the owner, the lender usually keeps a small portion of each progress payment to the contractor until the lender is sure that the work is done as planned.
A valuation principle that says that putting a less valuable object near better ones makes it more valuable. Change in the opposite direction.
A transitory and one-of-a-kind set of goal-oriented actions carried out to achieve a predetermined end.
A property's intended development plan.
1. One or more homes that are usually made up of five or more single-family units.
2. A project is a planned development, like a condominium complex or a shopping centre.
Project life cycle
A set of typically consecutive project stages, the names and numbers of which are established by the control requirements of the project's associated organization(s). The application of knowledge, skills, tools, and procedures to project activities in order to meet or exceed stakeholder demands and expectations.
Project management office (PMO)
A centralized office (strategic or administrative) for project coordination.
The person in charge of overseeing a project.
The parent organization in charge of project management.
The formal document that contains all of the precise plans for how the project will be carried out.
A prediction of a property's future performance.
A contract that includes a commitment to pay a certain sum at a future date.
A letter outlining the details of a financial deal.
A written promise from one person to pay a certain amount of money to another person, an order, or the bearer at a future date. The words "or order" or "bearer" are important to make the instrument negotiable because they let the instrument be signed over and given to someone else. If it can be changed, the person who made it should make and sign only one note and not any copies. Most copies have the maker's initials on them. The Uniform Commercial Code says how to write a promissory note that can be enforced and traded.
When a prospective buyer gives a broker a promissory note as a deposit, the broker must usually tell the seller that the deposit is in the form of a promissory note. If the broker doesn't tell the seller, his or her license could be suspended or taken away. The agent is required by common law to tell the principal about all facts about the subject of the agency that could hurt the principal's interests. A promissory note is better than a "hold check" or a check with a future date. It's a good idea to put a clause in the note that says the person who wins a dispute over the note is entitled to the costs of collecting it, including attorney fees.
In financing real estate, the promissory note, which is sometimes called the mortgage note, is proof of the debt, which is secured by the mortgage on the property. If the security isn't enough to cover the debt, the holder of the note can get a deficiency judgment against the debtor for the difference, unless the note is marked "nonrecourse."
A placement agency or fund-raising consultant employed by the concept's creator or general partner to find investors.
A syndicator is a person who organizes a group of people
To put out in print. The state real estate commission may put out rules and regulations or approved forms for brokers to use.
Anything that has the potential to be owned or possessed. It may be both a tangible and intangible asset.
To the exclusion of all others, an individual's rights in lands or assets.
A person's ownership stake in a thing, but not the thing itself. The right to acquire, use, encumber, transfer, and exclude are all included in what is known as the "bundle of rights." The modern concept of property, on the other hand, refers to a specific object that is owned by a certain person or group of people. There are two types of property: real and personal
Location, physical qualities, economic attributes, usage, and non reality components are the five selling price adjustments made to comparable property transaction prices.
Property life cycle
Development, stabilization, and decline are the three stages that a building goes through in its life, and they all happen at different times.
A piece of land's recorded boundaries.
Supervising the functioning of real estate for others. Renting space, collecting rentals, managing upkeep, budgeting, and so on are all part of the job.
Property activities are directed on a daily basis.
A real estate agent administers properties for landlords, ensuring that they always comply with legislation and regulations. They are also in charge of selecting tenants, collecting rentals, and coordinating upkeep, among other things.
The management of real estate as a company.
That part of the real estate business that deals with renting, managing, selling, and taking care of other people's property. The property manager works hard to protect the investment and income from the property and to keep the building in good shape. In some states, people who do these things for other people and get paid for it must either have a real estate license or a special license to be a property manager. This usually doesn't include janitors or security guards who only work for one property.
A property manager may work for a real estate office or a company that manages properties for many different owners. The main jobs of a property manager are to find and keep tenants, keep financial records and accounts, and take care of and maintain the property. The property manager's main job is to rent out space. The property manager is in charge of three main tasks:
1. Budgeting and financial matters
2. Structures and grounds for physical management
3. Managing files and records for administrative tasks
The individual building manager is usually paid a straight salary and works for a property manager or the building's owner. He or she is in charge of the building's daily operations. Most of the time, resident managers live in one of the apartments on the property.
The property manager has a fiduciary duty to the owner, but he or she also has a duty to be honest, fair, and responsible to the people who live in the building. The owner wants the best net return on investment, while the tenants want the building to work as well as possible. To do all of these things, the property manager needs to know about property maintenance, renting, accounting, income tax, insurance, real estate law (especially contracts and agency principles), and dealing with people.
Most of the time, a property manager's fees are based on a percentage of gross income (after taking into account vacancies and other rent losses) and not on operating costs.
Some of the most important parts of a well-written management agreement are the management agency's responsibilities, the manager's authority to rent and run the property, the length of the agreement, the fee, and the names of the parties and the property (usually not a legal description).
Property management fee
A charge paid to a management business in exchange for services given, generally based on a portion of the revenue earned.
An individual or company that runs better real estate. Lease and maintenance supervision are two of the things that managers do.
Those in charge of a property's daily operations.
A document that is required by the federal Interstate Land Sales Full Disclosure Act when subdivided lots are sold across state lines. The property report is in the form of questions and answers, and it talks about things like the land's topography, how easy it is to get to public transportation and schools, the state of the soil, the existence of liens and encumbrances, recreational facilities, whether or not there will be special assessments, and other similar things. A potential buyer must get a copy of the property report at least 48 hours before making a decision to buy, unless the buyer acknowledges in writing that they have received the report and inspected the property. If the buyer doesn't get a property report at least 48 hours before the purchase, they have seven calendar days to change their mind and back out. If the buyer isn't given a copy of the property report, the buyer has the right to back out of the deal at any time and get his or her money back with interest.
Property residual technique
A method for determining the worth of a property based on expected future income and the reversionary value of improvements and land in assessment.
A way to figure out how much a property is worth is similar to the building residual technique and the land residual technique of capitalization, except that the net income is thought to come from the whole property. The income is turned into a total value based on the idea that the land and the improvements on the land are a balanced economic unit that generates income as a whole.
Possession, use (enjoyment), and disposition of property are all rights in property.
The "bundle of rights" refers to the legal rights and duties that come with ownership.
Property securities fund
A managed fund that invests in a range of listed property trusts and, on occasion, other property assets.
A legal entity that is formed to invest in a real asset for a specified period of time. Property management businesses manage large public syndicates.
The government puts a tax on either real property or personal property. Real estate has always been a popular thing to tax because it doesn't move and is therefore easy to find, value, and tax. State and local governments are the only ones with the power to tax real estate in the United States. The Constitution of the United States says that the federal government can't sell land.
The general real estate tax is made up of the taxes that different government agencies and cities charge on real estate. There's the city, the town, the village, and the county. School districts or boards are also taxing bodies. These include elementary and high schools, junior colleges, and community colleges in the area. A taxing body can also be a drainage district, a water district, or a sanitary district. The legislatures of the different states have also given municipal authorities that run parks and forest preserves the power to charge real estate taxes.
General real estate taxes are collected by the government agency that has the right to do so. The money from these taxes is used to run or support the agency. These taxes are called "ad valorem taxes" because the amount of the tax depends on how much the property being taxed is worth. About 45 percent of real estate taxes go to education. The rest goes to welfare, roads, and public services (police, fire, hospitals).
Most state laws say that you don't have to pay taxes on some kinds of property. Property owned by the government, religious groups, schools, and hospitals are common examples, as long as the property is used for tax-exempt purposes. Other state laws give homeowners, veterans, and the elderly special exemptions that lower their real estate taxes. Some states give tax breaks to businesses or to encourage farmers to use their land.
The tax makes things worse for the poor. That is, the tax rate has nothing to do with how much the owner makes or how much money they can pay. So, low-income families usually spend a bigger portion of their money on property taxes.
The general tax rate can be given in either dollars per $1,000 of assessed value or mills ($0.001) per dollar of assessed value. For example, if a property is worth $20,000 and the tax rate is $2.10 per $100 of assessed value, then the tax will be $420.
$20,000 + $100 = 200
Rx $2.10 = $420
At a millage rate of 21 mills per dollar, the same tax is $21 for every $1,000 of assessed value.
Taxes are based on how much a property is worth, which is what county and township assessors do. Most of the time, the land is valued separately from the building. Most of the time, the value of a building is found in a guide or set of rules that covers unit cost prices and rates of depreciation. Some states require that the assessed value of a property be a certain percentage of its true or market value and that it be reassessed every so often. If a property owner thinks that mistakes were made when figuring out how much their property is worth, they can usually appeal to the local board of appeal or board of review.
In some places, an equalization factor can be used to make sure that everyone pays the same amount of taxes when it is necessary to fix general differences in tax assessments across the whole state. In counties or districts where taxes need to be raised or lowered, this kind of factor could be used. The tax rate is applied to the equalized assessment when the equalization factor is used. For example, to raise the assessed value of a property that has been valued by the assessor at $10,000, the original assessment is multiplied by the equalization factor for the county where the property is located, which is 1.4 in this case. If the tax rate was $3.10 per $100 of equalized value, the tax would be $434.
$1 0,000 X $1.40 = $14,000
$14,000 + $100 = 140
140 X $3. 10 = $434
On January 1 of each tax year, the general real estate tax becomes a lien in most states. In some states, once the tax becomes a lien, it must be paid within a month or two. In a lot of states, you can pay the tax in two parts.
The taxes for a condo unit are added up for each unit separately. It is not necessary to assess and tax the common areas separately because the market value of each unit reflects not only the value of the unit itself but also the proportional value of ownership in the common areas.
When figuring out your income tax, you can deduct your real estate taxes. But special assessment taxes for improvement districts are not covered by the deduction. Before taking any deductions, you should talk to a tax authority because tax laws change and some situations are unique.
Property tax lien
Local governments use an automatic lien to ensure that property taxes are paid.
A local government tax based on the assessed value of a piece of property.
Buying properties for less than market value and reselling for a profit is a profitable strategy.
a property investment that is well-managed. The Australian Stock Exchange lists the majority of trusts.
Property Unit Trusts (PUTs)
With a trustee and beneficiaries, collective investment plans in a vehicle or wrapper type based on UK trust law (investors).
the discrepancy between the market value of your property and the amount owed on it
The document used to make an offer; in some states, this is called a "proposed offer to purchase."
Associated with a cooperative, an indefinite lease in which the lessee pays expenses but not rent.
A written lease between the owner/corporation and the tenant/stockholder of a cooperative apartment building that gives the tenant the right to live in a certain unit. It's different from a typical lease between a landlord and a tenant because the tenant also owns stock in the company that owns the building.
In contrast to a typical rental agreement, there is no set amount for rent. The renter pays a fair share of the costs of running the corporation. When a unit is sold, the proprietary lease and the seller's stock certificate are given to the new owner.
A document that grants a cooperative shareholder the right to occupy a unit under specified circumstances.
Own a business or property that brings in money.
To divide or distribute proportionately. With the exception of principal payments on a mortgage, most real estate costs are paid in advance. This includes rent, insurance (which is often paid for several years in advance), and other costs. But some bills, like real estate taxes and mortgage interest, are paid after they are due. At the end of a real estate deal, all of these costs are split between the buyer and the seller so that each person is responsible for the costs of running the property while they own it. For example, if a seller pays for fire insurance for three years and then sells the property after the second year, they would get a credit for the cost of the remaining year. The buyer then has to pay for the property's insurance and gets the benefits of the policy for that last year. Most of the time, expenses are divided up based on the date of closing or the date of possession.
In some cases, a seller may be able to negotiate a clause into the sales contract that says any credits from the buyer will be used to pay off the balance of a purchase-money mortgage that the seller is taking back.
Some of the most common things that need to be prorated are sewer fees, loan interest, insurance premiums, rent, mortgage impounds, utilities, and real estate taxes.
At closing, costs and income are split between the buyer and seller of real estate, based on how long each party has owned the property.
The buyer and seller divide the prepaid or accumulated expenditures that are payable at the time of sale.
A potential buyer or seller of real estate; a potential client or consumer.
The document contains all of a security's material information.
A document that discloses the entire nature of a securities offering.
A piece of paper that describes a business, venture, project, or stock issue and gives information about it ahead of time. If a real estate project is being sold as a security, the prospectus must include all important details and investment aspects that could affect an investor's decision about whether or not to buy. Usually, the term only applies to a security that is available to the public (registered). A private placement memorandum is the disclosure statement for a private offering.
A document that outlines the specifics of a particular investment opportunity.
Any group of people that federal, state, or local laws protect from discrimination. Some of these laws are about equal housing, employment, and credit. Protections in federal laws can be added to by state and local laws, but they can never be taken away.
In agreements such as credit default swaps, one party transfers the credit risk associated with particular assets to another in exchange for payment. A premium is usually paid up ahead.
The person who agrees to take up the credit risk of particular assets (often seen in transactions such as credit default swaps, as mentioned above). The protection seller offers credit protection payments to the protection buyer if the asset losses surpass a certain threshold.
A person who is temporarily allowed to act or do business for someone else. A power of attorney is a document that gives someone the right to act on behalf of someone else.
Condo association meetings often use proxies to vote or make sure there is a quorum. The proxy is not a binding agreement, and all it does is make sure that the owner's vote will be cast at the meeting if the owner can't be there.
For advanced market segmentation, a data-intensive, multivariate statistical technique is used.
Information about the lives, interests, hobbies, consumer preferences, and purchasing behaviors of a market area's households; utilized in retail tenanting and housing design.
Consumption of economic commodities or services by one person does not affect the amount available for consumption by others. Also known as communal commodities.
The mechanisms used to supply public services to a place in real estate. Streets, sidewalks, sewer lines, water pipes, and so forth are all included.
Securities are being offered for sale to the general public. Such an issuance necessitates the filing of a prospectus with the Securities and Exchange Commission. A public offering is another term for this.
The federal government owns land that a private citizen can buy when it is no longer needed for government purposes. The Bureau of Land Management in the U.S. Department of the Interior is in charge of taking care of public land. The General Services Administration helps sell public land that has been fully built on.
Insurance purchased by businesses and individuals to protect themselves from claims made by members of the public who may have been hurt in some manner while on the premises.
Public limited partnership
A limited partnership with shares available to the general public, allowing for a large number of investors.
Public offering statement
The document made by a sub-divider in accordance with state subdivision laws that say all important information about a subdivision must be made public before it can be sold to the public. No sale is legal unless the buyer gets a copy of the most recent public offering statement, has enough time to read it, and signs a receipt for it.
A public offering statement isn't up-to-date until all changes have been added. So, if the project changes in a way that is important, the sub-divider must stop all sales until the right regulatory agency accepts the change and adds it to a new public offering statement.
The broadening of the public use notion by courts in eminent domain cases, no longer required actual physical use by the condemning agency to sustain condemnation.
Public Real Estate Investments
Indirect property investments in real estate exchange-traded firms or exchange-traded bonds backed by real estate assets.
A public auction sale is one where people who have been invited or told about the auction have the chance to bid against each other at a place where the public can go.
A public notice auction sale of a property.
The need for actual physical usage by the condemning agency to warrant condemnation in eminent domain.
Exaggerated or overly positive comments or opinions, like "This property is a really good buy," are not made as statements of fact, so they are not grounds for misrepresentation. One test is whether or not a reasonable person would have believed what was said. Saying something like, "The apartment has a great view," is bragging because the potential buyer can see the view for themselves. On the other hand, saying something like, "The apartment has a great view of the lake," when all of its windows face the street, would be lying.
A list of construction flaws that need to be addressed to bring the building in line with the specifications and designs. During a final examination of the structure, the property owner or the original architect can make a punch list to document any discrepancies in the construction plans or other issues. The building contractor can next begin correcting the flaws with the help of a punch list.
Prior to a sale, a list of items that need to be finalized or fixed.
The court gives punitive or exemplary damages to a person who has been hurt, as opposed to compensatory damages, which are given to make up for real losses. Punitive damages are meant to punish the person who did wrong, not to compensate the person who was hurt. As a general rule, you can't get money damages for just mental pain caused by a breach of contract. Also, punitive damages aren't covered by errors and omissions insurance, and you can't get them unless you've actually been hurt.
A broker may have to pay punitive damages to a client who was scammed if the broker hired a salesperson who was known to scam real estate consumers.
Pur autre vie
For someone else's life. A life estate pur autre vie is a life estate that is measured by the life of someone other than the grantee. George gives Harry the right to live in his mansion as long as Sally lives. Even though an estate pur autre vie is not a true estate of inheritance, it is usually thought of as a freehold estate that can be passed on to heirs, at least until the measuring life dies.
A prediction of a property's future performance.
The right to acquire a property within a set time frame and at a set price.
Purchase-money mortgage (PMM)
A mortgage given to the seller at the same time as the purchase of real estate to protect the remainder of the purchase price that has not been paid.
A mortgage offered to a seller by a buyer to secure a portion of the purchase price. When a deed is granted, a purchase-money mortgage is often registered, confirming its priority over all other claims.
A mortgage that is formed at the same time as the transfer of ownership. Typically, when a seller lends a portion of a property's selling price to the buyer, but it may also apply to any mortgage used to fund a purchase.
A mortgage that is given to the buyer as part of the price for a piece of real estate and is given to the buyer at the same time that the property is transferred. It is often a mortgage that a seller takes back from a buyer in place of the buyer's cash. The purchase-money mortgage can be used to buy the property, but it is usually used to bridge the gap between the buyer's down payment and a new first mortgage or a mortgage that the buyer is taking over. For example, if the buyer pays 10% in cash and gets an 80% first mortgage from a bank, the seller will usually take back a 10% purchase-money mortgage to cover the remaining 10%.
When a seller agrees in a contract of sale to take back a purchase-money mortgage for part of the purchase price, the terms and conditions of the mortgage, such as the interest rate and length, must be set out in detail. If they are not, the contract might not be enforceable because it is not clear or complete.
Depending on state law, if you don't pay your purchase-money mortgage, you may or may not be able to get a deficiency judgment. In some states, a purchase-money mortgage doesn't count toward the state's maximum rate of interest on loans.
Technically, a purchase-money mortgage is any mortgage on real property that is signed by the buyer to secure the purchase money at the same time that the buyer gets the legal title to the property. Even if a mortgage is given to someone other than the seller, it can still be a purchase-money mortgage.
A title insurance policy, also called an owner's policy, is usually given by a seller to a buyer as part of a real estate sales contract or contract for deed. It protects the property against problems with the title to the property on record.
People's financial ability to purchase both durable and nondurable products.
A zoning law that lets a more restricted zone type (light industrial) be built in a less restricted zone (heavy industrial).
A way to buy more properties by refinancing the ones you already own and then putting the money from the loan into more properties.