Real Estate Glossary Terms Beginning With – R

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Terms Beginning With - R

Property Development & Investment Glossary, Terms & Definitions

R-value

A special rating or way to figure out how well some types of insulation insulate. The Federal Trade Commission requires that sellers of new homes include certain insulation information in their sales contracts, such as the type, thickness, and R-value of the insulation.

R2 statistic

A measure of how well a regression model fits the data is the coefficient of multiple determination.

Rack rate

The publicized or highest room rate charged in a hotel.

Radiation

Wetlands are connected with inland locations that do not rely on stream, lake, or sea water.

Radial Axial development

Theoretical urban development is based on the assumption that companies concentrate along main arterial roadways, resulting in a radial or axial pattern of expansion outward from the central business area.

Radon

In most sections of the nation, a naturally occurring radioactive gas may be found in the soil. The gas may cause or contribute to cancer at high amounts.

A naturally occurring, odourless gas that is made when radioactive minerals in the ground break down. It can be found in buildings in every state and territory. Radon is a carcinogen that has been linked to deaths from lung cancer. The amount of radiation in the air indoors is measured in picocuries per litre (pCi/L). The EPA says that a level of 4 should be taken. In most states, brokers have to say if radon problems are known and if mitigation systems are present.

During a real estate deal, a 48-hour test may be used. For mitigation, cracks need to be sealed and a PVC pipe needs to be put into the ground and out of the building through the highest level. A small fan pulls air and radon from the ground through the pipe and into the air outside, where the radon breaks down.

Rafter

One of a series of sloped beams that go from the outside wall to the centre ridgeboard and hold up the roof.

Rainfall Intensity

The amount of rain that falls on the ground in inches or millimetres per hour or minute.

Range

1. An area of open land for cattle to graze.

2. A group of hills.

Range line

A characteristic of the government's rectangular survey that divides townships into east and west halves.

In the government survey system, a strip of land six miles wide running north-south is employed as a measurement.

Range of value

Most of the time, the market value of a property is given as a range between a low and a high number. As a first step in working with an owner to figure out an appropriate listing price, licensees often give an estimate of a range of values.

Rate lock agreement

A non-refundable deposit paid by a loan applicant to safeguard against an interest rate rise before the loan is concluded.

Rate of return

The relationship (expressed as a percentage) between a company's annual net income and its invested capital (or appraised value or gross income). The rate of return is the percentage yield to the investor based on the income generated by the property.

The return on an investment is expressed as a percentage.

Rateable value

the estimated worth of a property used to calculate rates

Rated Securities

Securities with an issuer credit rating assigned by a rating agency.

Ratification

Adoption or affirmation of an act already done on behalf of someone else without their permission. A principal's activities, according to agency law, can approve an agent's previously unauthorized actions. Anyone who has reached the legal age of majority may ratify a contract they entered into while still a juvenile.

Rating Agency

An organization that reviews investments and their underlying collateral and assigns a rating to the notes based on their standards. The ratings range from AAA (the highest) to CCC (the lowest).

Rational Method

A technique of calculating the discharge from a small drainage basin in response to a given rainfall total; the calculation is based on the coefficient of runoff, rainfall intensity, and basin area.

Raw land

Land that is devoid of any constructions or enhancements.

There is no infrastructure or other improvements on undeveloped property.

Unimproved land is land that has not been graded, built, divided, or changed in any way, such as by adding streets, lights, or sewers.

Land that has not been renovated.

Re-entry

The taking back of real property because of a legal right that was reserved when the property was first given away. The person who gives a fee simple with a condition has the right to get back in if that condition is broken. Reentry is basically a power of termination.

The right of reentry is different from the right of entry that a landlord has to go into a rented space and check it out.

Re-subdivision

The process of taking an existing subdivision and either replatting it (changing the lots from the old grid pattern to more modern irregular lots) or dividing it even more (that is, taking 20-acre lots and dividing them into 5-acre parcels). A re-subdivision is the same as a new subdivision when it comes to county subdivision approval and state and federal land sales registration.

Ready, willing, and able

A term used to describe a potential buyer of property who is both legally and financially capable of completing the sale. If a "ready, willing, and able" buyer is found on the listed terms, the broker is paid regardless of whether the seller completes the transaction. If the contract is subject to restrictions that were not anticipated in the listing agreement, the broker is not entitled to a fee until those conditions have been met or waived. Buyers aren't "ready and willing" when they enter into options with sellers, but they are when the options are actually exercised. In order for a corporation to be "ready, willing, and able," it must already exist.

In order to meet the requirements of the sale, the buyer must be able to pay both the initial cash payment and any required financing. When a seller accepts an offer from a buyer, the seller implicitly accepts the buyer's ability to pay off the mortgage because the broker is not required to verify that the buyer has actual cash or assets to do so. Case law does hold that the broker is responsible for verifying if the buyer is able to make a purchase. In most cases, the broker is not entitled to a commission if the buyer cannot afford to buy the property.

A person who is capable of purchasing or selling real estate.

Real asset

Tangible items have monetary worth due to their utility.

Land, buildings, machines, gold, antiques, and other tangibles of monetary worth. Real assets, as opposed to financial assets such as promissory notes, bonds, and commercial paper, tend to maintain their value during periods of price inflation.

Real estate

The "bundle" of rights connected with the ownership and use of physical assets; and the industry, or commercial activity, relating to the purchase, operation, and disposition of physical assets.

Land and improvements, as well as any minerals and resources found on the property.

The physical land on, above, and beneath the earth's surface, including all appurtenances, i.e., structures. Although for all practical purposes, the terms real estate and real property have become synonymous, technically speaking, the term real property is the most inclusive and includes the land, structures, and any and all interests in land, whether corporeal or incorporeal, freehold or non-freehold.

Real estate agent

A licensed salesperson who works for a licensed broker, even if the salesperson has already obtained an individual broker's license. 

Real estate broker

Any individual or business that has been granted a state license to sell or lease property on behalf of others.

Real estate commission

A commission that is appointed to monitor the implementation and administration of a state's real estate license statute. It typically has the authority to award, revoke, or suspend licenses, as well as penalize real estate agents practicing in the state.

When a transaction is completed, a fee is paid to a real estate broker or agent.

Broker and salesperson licenses are granted by this state agency, which also has the authority to revoke or suspend them if there is good cause. Its principal responsibility is to protect the general public involved in real estate transactions.

Real estate cycle

Predevelopment, maturity, decline, and eventually rehabilitation or demolition are all stages of real estate development.

Real estate education, research, and recovery fund

Some states have a special state fund that is paid for by a portion of the real estate licensing fees or a separate fee. This fund is used to promote real estate education and help people who have been hurt by a judgment-proof licensee's fraudulent actions.

Real Estate Fund

A legal entity that functions as a wrapper or vehicle for investors' money and subsequently invests in real estate.

Real estate investment

Acquiring ownership or a leasehold interest in real estate for a business motive.

Real estate investment strategy

A comprehensive investment strategy in which a real estate investor takes a series of decisions to assist them reach their objectives.

Real estate investment trusts (REITs)

A property investment vehicle that is tax-transparent, (typically) listed, and regulated, comparable to a property investment company.

A type of ownership entity that gives limited responsibility, no taxation, and liquidity. Shares of beneficial interest, which are comparable to shares of common stock, are used to demonstrate ownership.

A real estate investment trust. 95 percent of earnings must be allocated to investors by law.

When at least 100 investors pool their money to invest in a single business trust, the REITs that own at least 75% of their assets and distribute at least 95% of their annual real estate ordinary income to their investors are exempt from corporate tax. Office buildings, residential complexes, and shopping malls are the most common types of real estate investments, as are mortgages. For more information, check out a mortgage investment trust (REMT).

Investing in real estate through properties or mortgages, REITs trade like stocks on the major exchanges, much as mutual funds. As a stakeholder in a real estate trust, the shareholder is subject to regular income tax on the trust's ordinary income and capital gains distributions.

As a result, there is no double taxation, centralized management, transferability of interests, diversification of investments and access to expert real estate counsel, all of which contribute to the REIT's advantages. A few disadvantages include that investments are passive and usually limited to large real estate transactions; losses cannot be passed through to the investor, as is the case with syndications; and, in most cases, trusts must register with the Securities and Exchange Commission, which is a time-consuming and expensive procedure.

Untaxed corporate companies formed to aggregate the resources of private investors for real estate investing. Some REITs invest in mortgages, while others acquire stock.

A corporation or trust that purchases and manages income property (equity REIT) and/or mortgage loans using the combined capital of several investors (mortgage REIT).

Real Estate Mortgage Investment Conduit (REMIC)

A pass-through business that may hold real-estate-secured loans and benefit from tax advantages. These organizations aid in the secondary market selling of mortgage loan interests.

A special way to pay taxes for companies that sell different types of investor shares backed by a pool of mortgages. Most of the time, a REMIC is a conduit entity for tax purposes, which means that its investors get the income and report it on their own tax returns. There are a lot of complicated rules about how to become a REMIC and how to transfer money to or get rid of the entity. If the requirements are met, pass-through REMIC status is given to a partnership, trust, or other similar entity. The only way for something to be a REMIC is if it passes two tests: (1) Most of the assets must be qualified mortgages and allowed investments at the end of the fourth month after the "startup day" and at the end of each quarter after that. (2) There must be at least one class of regular interests and one class of residual interests for each REMIC interest.

Real estate mortgage trust (REMT)

A REIT that buys and sells real estate mortgages (typically short-term, junior instruments) rather than real estate. Mortgage interest, origination fees, and profits earned from buying and selling mortgages are major sources of income for REMTs.

The combination or hybrid trust is a related trust that combines real estate equity investing with mortgage lending, earning profits from rental income and capital gains, as well as mortgage interest and placement fees.

Real Estate Operating Company (REOC)

A publicly traded real estate development, investment, or management firm with assets but no REIT classification.

Real estate owned (REO)

Lenders use this term to describe real estate that they have acquired involuntarily through foreclosure. Brokers are frequently used by lenders to market their REO properties.

Real estate security

A type of personal property that is secured by real estate and serves as proof of ownership or indebtedness.

Real estate service

The advantages of using real estate. Real estate offers customers with a place to live and a place to work.

Real Estate Settlement and Procedures Act (RESPA)

A federal legislation that requires lenders to give information on all expenses connected with completing a residential loan within three business days of the loan application, to utilize the HUD-1 closing statement, to restrict needed escrow deposits, and to eliminate kickbacks on loan-related services.

It was established in 1974 and later changed by the federal government to ensure that the buyer and seller of a one-to-four-family residential property be informed of all settlement fees when the purchase is financed by a federally connected mortgage loan. To be considered a federally linked loan, a company must make loans that are insured by federal agencies, such as the Federal Housing Administration (FHA) or the Veteran's Administration (VA), or that are supervised by the Department of Housing and Urban Development (HUD). Most institutional loans are effectively covered under RESPA.

Consider the fact that RESPA laws only apply to first-time homebuyers, not second-time buyers. Loans that are covered by RESPA must meet the following criteria:.

Informational pamphlet: Shopping for Your Home Loan, a HUD-published brochure, must be given to every loan applicant to explain the various RES PA requirements and provide information on settlement (closing) expenses. The Uniform Settlement Statement is discussed in detail, line by line.

How much will it cost to settle the case? An estimate of the settlement expenses that the borrower is anticipated to incur must be provided by the lender upon application or within three business days of a completed application. Depending on comparable prior transactions in the area, this could be an exact dollar amount or a range of expenses. Anyone can hire and pay for an attorney or title business of their choice, and the borrower has no obligation to do so. Lenders, however, are required to disclose any business relationships they have with any attorney or title company that will be used to close the loan. A three-day waiting time may be imposed on charges that change before settlement. Taxes, insurance premiums, and other obligations may be escrowed by the lender for up to two months in advance (impounds).

Unified Statement of Agreement: On a conventional HUD form, loan closing information is required to disclose the financial details of the transaction. The statement must include a breakdown of all fees and costs incurred, including those imposed by the lender and those paid from the closing funds. There is a three-day waiting time before a transaction can close if certain charges alter from the original good faith estimate (GFE). Expenses incurred by the buyer and seller outside of the closing do not need to be disclosed to each other. Pre-paid items must be properly identified as such and deducted from your totals before you close out your bookkeeping for the year. There is a two-year time limit on lenders keeping these statements until they sell or otherwise dispose of the loan (and its servicing). The Uniform Settlement Statement may be modified to accommodate local practices, such as removing lines that don't apply. The settlement agent shall allow the borrower to examine the settlement statement, to the extent that the numbers are available, one business day prior to closing if requested by the borrower. For the purposes of the Truth in Lending Act, lenders are prohibited from charging a fee for the creation of the Uniform Settlement Statement or any other required statement.

Anti-kickback legislation: When an insurance company pays a lender a reward for sending one of the lender's recent customers to the agency, or when a lender pays a real estate licensee to connect purchasers to the lender, RESPA clearly bans the payment of kickbacks or unearned compensation. Real estate salespeople and brokers are exempt from this rule if payments are given in accordance with co-brokerage and referral arrangements.

The Consumer Financial Protection Bureau (CFPB) administers and enforces RESPA (CFPB). These types of loans are exempt from the provisions of the Real Estate Settlement Procedures Act (RESPA), which governs loans secured by mortgaged property that is more than 25 acres in size.

Real property

Any rights related with property ownership and all permanent attachments to land.

The possession of land and structures in the form of actual real estate.

The surface of the earth, the air above it, and the ground below it, as well as everything attached to the land, like buildings, structures, fixtures, fences, and improvements, except for crops. Real property refers to the interests, benefits, and rights that come with owning a piece of land (the bundle of rights).

Personal property is anything that is not real property. Real property and personal property are treated differently by the law, so it's important to tell them apart.

Instruments that affect real property must be written and should be recorded. Instruments that affect personal property, on the other hand, can be spoken or written, usually don't need to be recorded, and can be transferred by just delivering them.

There are many important differences between real and personal property when it comes to tax laws.

Land titles are bought and sold according to the laws of the state where the land is located. This includes important things like rules of inheritance and probate. On the other hand, personal property can be moved and is governed by the laws of the place where it is located.

Common-law rules treat leaseholds as personal property, which is also called "chattels real." However, for some purposes (like taxation and condos), certain long-term leaseholds are treated as real property by law.

Judgment liens can only be put on real property that has been ordered by a court. Most of the time, debts have to be paid off by selling personal property before real estate can be taken.

Real property administrator (RPA)

The Building Owners and Managers Association International bestows this professional accreditation to property managers. For individuals who have completed all of the necessary educational and experience criteria, designation is a mark of professional success.

Real property securities registration

The process of disclosing and notifying appropriate government agencies about an issuer's proposed real estate security offering. Unless exempt, all real estate securities must be registered with the federal Securities and Exchange Commission (SEC) and, in most cases, with the securities commissions in the states where the securities will be offered for sale.

The intrastate exemption and the private offering exemption are the two most frequently invoked exemptions. Under the intrastate exemption, an offering directed solely to residents of a single state where the issuer is also a resident and doing business is exempt from registration with the SEC, though it must register with the state unless it is also exempt from state registration requirements as a private offering. The private offering rules exempt an offering that is limited in scope and directed to a specific type of investor who does not require the protection provided by the SEC disclosure requirements (i.e., investors sophisticated and wealthy enough to withstand a loss of invested funds and knowledgeable enough to fully evaluate the risks of the investment). The limits of this private offering exemption are further defined in Securities and Exchange Commission Rule 146.

The SEC considers the offering of condominiums to be real property securities in certain circumstances, such as when the units are offered with an emphasis on the economic benefits derived from the rental of the units or where there is a rental pool or mandatory rental agreement. The developer of an unregistered (with the SEC) condominium must carefully train all salespeople to avoid making any representations about rental income that a purchaser may receive. Here are some examples of instructions:

Developer advises that no representations or references will be made to either purchasers or prospective purchasers concerning the rental of the apartment, income from the apartment, or any other economic benefit to be derived from the rental of the apartment, including but not limited to any reference or representation to the effect that the developer or the project's managing agent will provide, directly or indirectly, any services relating to the rental or sale of the apartment. The purchaser is solely responsible for the rental of the apartments and the provision of management services in connection with them.

If the condominium is offered for sale in other states, the securities laws (blue-sky laws) of those states must be reviewed to see if registration is required. For example, the California commissioner of corporations has ruled that offering Hawaii condominium units in conjunction with a voluntary rental pool constitutes the offering of a real property security under California law.

Realized gain

When you sell a capital asset, you make a profit. This profit is usually the difference between the net sales price (amount realized) and the property's adjusted tax basis. The part of the realized gain that is taxed is the part that is called the "recognized gain."

A gain that has happened monetarily but is not necessarily taxed in a transaction.

Realtor

A Realtor® who is a member of the National Association of Realtors®.

Active members of local boards of REALTORS connected with the National Association of REALTORS use this registered trademark phrase exclusively.

Realty

Land and everything that is fixed to it is the opposite of personal property.

It's all about real estate.

Reappraisal lease

A lease that says the property will be re-evaluated every so often and that sets the rent as a percentage of the new value.

Reasonable time

Allowable or required amount of time for an action to be done, taking into account the nature of the action and its surroundings If a contract specifies a specific deadline for execution, the courts will suggest a "reasonable time," which can vary greatly from case to case.

A court would not grant a reasonable amount of time after the defined time stated in the contract if the parties stated that "time is of the essence" in the contract.

When a due-on-sale clause is triggered, a lender must make a judgment about whether to activate the clause within a reasonable amount of time. Acceptance of an offer

Rebate

A decrease in an agreed-upon fee. In some states, it is legal for a broker to give a portion of his or her commission back to the person who hired the broker. The reason for this is that the payment is not for doing anything that needs a real estate license. It's just a refund or a cut in the commission. But if the seller's broker is going to give back some of the commission to the buyer, everyone needs to know about it.

Recapture

To charge taxes at the same rate as before (i.e., ordinary tax). All depreciation or cost recovery taken on depreciable real property that is more than the amount allowed by the straight-line method is subject to the recapture provisions of the Internal Revenue Code. This means that this excess is taxed at ordinary income rates in the year of sale. These rules are meant to stop the taxpayer from taking advantage of both accelerated depreciation and capital gain treatment.

Even though excess depreciation may be taxed at regular rates when the property is sold, a smart investor knows that the money saved on taxes in the first few years of investing can be used to make a lot of money before the same money is used to pay taxes on the excess depreciation. Also, if a tax-deferred exchange happens, the tax on the extra depreciation taken is put off until the next year.

Excess depreciation over straight line depreciation is the amount of gain assessed by the IRS on the sale of depreciable property.

Recapture clause

A provision that is common in percentage leases, particularly in those for shopping malls, providing the landlord the ability to terminate the lease and reclaim the premises if the tenant fails to meet a predetermined level of sales. In order to keep the lease in place, the tenant may try to negotiate a provision that increases the minimum rent to the amount the owner would have received had the predicted sales volume been attained.

It is also possible to use a recapture clause to give the ground lessee the right to purchase the fee after a set period of time has passed, or the landlord may have the option to regain the premises if the tenant gives notice of its intent to assign or sublet to another or surrender a portion of the lease space or term.

Office leases often include provisions that allow the lessor to reclaim any space the tenant is unable to use or sublet.

A contract clause that allows the party who transfers a right or interest to reclaim it under specified conditions.

Recapture rate

A term used in appraisal to describe the rate at which invested capital will be returned over the amount of time that smart investors would expect to get their money back from an asset that is losing value.

Recasting

Restructuring already existing debt, especially in cases when the borrower has fallen behind on payments. Depending on the borrower's needs, the loan term can be extended, and the interest rate can be altered on a regular basis. It's important to watch out for the possibility that other liens will take precedence over the recast debt. In some circumstances, the lender may prefer to wait until the building is sold before modifying or recasting a defaulted construction loan, as doing so could affect lien priorities.

Receipt

A written confirmation that you got something. Along with being an offer to buy and an acceptance form, many purchase contracts also serve as a receipt. So, brokers shouldn't sign the "receipt" part of a contract until they've actually gotten the deposit from the buyer.

Receivables

The principal-related and interest-related cash flows created by an asset that are payable to (or receivable by) the asset's owner are referred to as "principal-related and interest-related cash flows."

Receiver

A third party that a court chooses to receive, keep, and manage property that is involved in a lawsuit until the court makes a final decision on the case. This could be a bankruptcy case or a case where a subdivider is told they can't sell a subdivision that hasn't been registered. In some states, a receiver is put in charge during the time the law gives the owner to get back into the property after the foreclosure sale. Receivers wouldn't need a real estate license to sell the property they are in charge of, but the court would have to agree to the sale.

Recharge

The replenishing of groundwater with surface water.

Recharge Zone

A region with a high concentration of groundwater recharge.

Reciprocal easements

The practice of mutual exchanges of privileges. Some states have reciprocal arrangements for recognising and granting licenses to licensed brokers and salespeople from other states.

Reciprocity

The act of trading privileges with each other. Some states have agreements that allow licensed brokers and salespeople from other states to use their licenses in their own states.

Recital of consideration

A list of the things that make up the "consideration" for a certain transaction. Even though a deed doesn't technically need consideration to transfer ownership of real property, it is a good idea to list some consideration, especially to back up any promises or covenants in the deed. The "consideration" listed in the deed doesn't have to be the real "consideration." Often, it's just a number, like "for $10 and other good and valuable consideration."

Reclamation

The process of reclaiming arid land through irrigation or filling in swampland that would otherwise be a waste of natural resources.

Recognition

A specific tax term that means the transaction is taxable. If a gain or loss is "recognised," the gain is taxed and the loss is deducted. Most of the time, recognition takes place when the sale or exchange takes place. Some things that don't count as exceptions are forced conversions and sales between related parties.

Recognition clause

Some blanket mortgages and contracts for a conveyance used to purchase land for subdivision and development have this condition. In the event that the developer defaults on the blanket mortgage, the clause protects the interests of the buyers of individual lots. Essentially, it is a non-disturbance condition in a mortgage for an office complex.

Recognized gain

The taxable share of a gain in an exchange.

Reconciliation

The practice of combining two or more numbers to generate a single point estimate. It is commonly utilized in the assessment process. For example, in the sales comparison technique, a single indicated value is derived from numerous final adjusted selling prices of comparables, but in final reconciliation, a final estimate of value is derived from two or more indicated values.

1. The last step in the appraisal process, where the appraiser combines the estimates of value from the direct sales comparison, cost, and income approaches to come up with a final estimate of the property's value. Before, this was known as correlation.

2. Making sure that each entry in a double-entry accounting system adds up to zero.

Reconstructed operating statement

A property revenue and spending statement structured for appraisal and investment research. The treatment of some expenditures, including management fees, mortgage payments, and vacancy and collection losses, differs from that of a standard management operating statement.

Reconveyance

The act of giving ownership of a property back to the person who bought it. As security for a debt, the trustor (the borrower or mortgagee) gives title to a third-party trustee through a deed of trust. With a reconveyance deed, the trustee gives the property back to the trustor when the debt is paid off.

Record owner

If you look at the records, you can tell who owns a piece of property. This person has a record title.

Record title

From what the public records show, this is the title.

Recording

Formal notification of a sale or legal contract by filing a paperwork with a government agency or office.

The act of putting written documents that affect the title to real property, like deeds, mortgages, contracts for sale, options, and assignments, in the public record book. Other than the real estate recording system, there are a lot of public records that can affect the quality of a title. These include probate, marriage, tax, and judgment records. All documents must be written and signed in a way that follows the rules for recording in the state where the property is located.

Each state's recording laws say that all written documents that affect an estate, right, title, or interest in land must be recorded in the county where the land is. Recording gives everyone who has an interest in the title to a piece of land notice of the different interests of each party. Also, the recording acts give those interests that are recorded first legal priority.

The system of recording creates a hierarchy of claims against a piece of property. The order in which the claims are recorded determines the priority of the claims. Except for certain government tax liens, which automatically take first priority, the order of recorded priority will not change unless a subordination or release is recorded. Property tax liens, mechanics' liens, and special assessment liens don't get their priority based on when they were recorded because they are public records. Other tax liens, like those for income tax and payroll tax, must be recorded in order to take precedence over interests that have already been recorded.

The act of recording creates a (refutable) presumption that the instrument has been delivered properly and is real. Proper recording protects both the buyer who doesn't know about an unrecorded document and the person who gets the deed if it is changed or lost. Any transfer that isn't properly recorded is usually invalid against any subsequent buyer, lessee, mortgagee, donees, or beneficiaries under a will, as well as dower, courtesy, and homestead rights, prescriptive and implied easements, title by adverse possession, and interests that arise by operation of law rather than by a recordable document. (In the case of adverse possession, however, the adverse possessor's physical possession of the property would usually have given constructive notice to the subsequent buyer of the possessor's interest in the property, so the possessor would not be acting in "good faith.")

Even if a document is not recorded, it is still valid between the people who signed it and anyone else who knows about it. But if a contract that is written down is invalid for some reason, the fact that it is written down won't make it valid. Under the Torrens system, on the other hand, documents must be registered correctly for them to be valid.

There is a public recorder's office in every county. This office is sometimes called the county recorder's office, the county registrar's office, or the bureau of conveyances. People usually call the person in charge the recorder, registrar, or commissioner of deeds. When a copy of the deed is recorded, the recorder puts both the grantor and the grantee's names on it. Anyone can look at these files. Most of the time, the registrar charges a flat fee per document or page.

Filing a legal agreement in a county's public records.

Recording statutes

Statutory requirements for maintaining permanent records of all real estate transactions.

State regulations requiring papers conveying an interest in real estate must be recorded in public records in order for them to be binding on the public.

Recourse loan

In the case of a default on a loan, the borrower is personally accountable for the debt.

Personal liability loans in which the borrower is personally liable and the lender has legal recourse against the borrower in the event of failure.

Recourse note

A debt instrument that allows the lender to take legal action against the borrower or endorser as well as the property that covers the lender's mortgage.

Recovery fund

Funds set aside from real estate licensing fees to compensate clients who have suffered losses as a result of the actions of a licensed salesperson or broker. The availability of such funding varies by state.

A state-run fund that is generally defined and described in the state's real estate license law. This fund is used to pay buyers and sellers of real estate who have lost money because of a real estate licensee's misrepresentation or fraud (usually not negligent acts). The recovery fund pays for court judgments against real estate licensees that would be impossible to collect otherwise.

Most of the time, a person who has been hurt must first get a court judgment and then try to get money from the recovery fund by finding and seizing the licensee's assets. If the licensee can't be sued or doesn't have enough money to pay the judgment, the person who was wronged can file a verified claim in the court where he got the judgment and ask the court to pay out of the recovery fund. The court could then order the commission to pay from the recovery fund up to a certain amount per person or transaction that was wronged. When the wrongdoer gets paid from the fund, their license is usually taken away.

It has been decided that a real estate licensee is not a person who is owed money from the fund if the claim is based on an unpaid judgment against another licensee in a case of a fraudulent real estate transaction.

Recovery property

Property subject to the cost recovery allowance provisions, which were originally included in the tax system with the 1981 modification of the Internal Revenue Code.

Recreational lease

A contract in which a lessor (usually a developer) rents out recreational facilities like tennis courts, gyms, and swimming pools to a lessee for a certain amount of time and rent. Recreational leases are most common in residential condominium projects, but they can also be found in townhouse developments and subdivisions. Most of the time, these leases are long-term, triple-net leases where the rent goes up when the consumer price index goes up. Recreational leases in condos have led to a lot of lawsuits from unhappy renters, especially when rents went up sharply in a short amount of time. Many leases have been overturned because they were unfair, and both federal and state laws have been proposed to stop developers from being unfair in this area.

Recreational property

Homesites having recreational amenities, such as campsites and RV parks, or properties with fishing, boating, skiing, hunting, or other outdoor activities.

Rectangular survey system

Using a grid-like layout to identify land in a branch area by referencing a single geographic location.

Recycling

The process of recovering a historic structure for adaptive reuse.

Red flag

A condition that alerts a reasonably aware person to a possible problem, suggesting that they look into it further. If a broker sees uneven floors or water stains on the ceiling, that's a sign that the soil is shifting or the roof is leaking. 

Red herring

A preliminary securities prospectus is a document that must be filed to and authorized by the Securities and Exchange Commission before any advertising for a public offering can begin.

A preliminary prospectus is a document for selling a security that has been filed with the Securities and Exchange Commission but is not yet registered. The term comes from the red print on the left side of the prospectus that says a registration statement has been filed, but it could change, and that the securities in the prospectus can't be sold before the registration statement goes into effect.

The Securities and Exchange Regulator (SEC) or a state securities commission have not authorized a proposed prospectus.

Reddendum clause

A clause in a deed that gives the grantor something, like rent from a lessee or an interest in a life estate from a remainderman.

Redemption period

A period of time set by state law during which a property owner can buy back their property after a foreclosure or tax sale by paying the sales price, interest, and costs. This is a right that some states give to property owners. During the redemption period, which could be a year or longer, the court may appoint a receiver to take care of the property, collect rents, pay operating costs, and so on. If the owner who hasn't paid can get the money to redeem within the time limit, the redemption money is given to the court.

In history, the right of redemption comes from the ancient chancery proceedings in England, which ended the equitable right of redemption when the court sold the property. In many states, there is a statutory redemption period that starts after the sale and gives the person whose land was sold another chance to get it back.

A time during which a previous owner of a foreclosed property can regain it.

Redemption, equitable right of

By paying down the entire mortgage note before the foreclosure sale, mortgagors who have defaulted can redeem or reclaim their property. If a mortgage is signed but not paid, the equitable right of redemption begins immediately and continues until the mortgage is paid off and the right of redemption is no longer available due to the foreclosure sale. After a foreclosure auction, the mortgagor loses all rights to the property unless the state gives a statutory time of redemption.

Redevelopment

The process of demolishing existing structures in a region and replacing them with new ones.

the renovation of urban property, usually by demolition and reconstruction

Existing properties are redesigned, rehabilitated, or demolished and rebuilt.

Undeveloped or cleared land in an urban redevelopment area is often improved through this process.

Redevelopment agency

A non-government organization whose main goals are to develop property or improve housing in urban renewal areas and to find new homes for people who have to leave because of the changes. Most of the time, the redevelopment agency has the power of eminent domain. This means that it can take smaller parcels and combine them into one big project. The redevelopment agency could sign a development agreement with a professional developer and limit how much money the developer can make from the project.

Rediscount rate

The interest rate that the Federal Reserve Bank charges member banks for loans. This rate is also called the discount rate. The rediscount rate indirectly affects the interest rates charged to the public by member banks and the amount of money available for loans.

Redlining

Term used to characterize certain financial institutions' refusal to give real estate finance in specific locations; originated from the practice of defining areas with red lines on city maps.

When mortgage lenders ignore particular neighborhoods without consideration for the quality of individual loan applications.

Some lending institutions limit the number of loans they give out or the loan-to-value ratio in certain parts of a community. Most of the time, redlining is done because the lender wants to limit risks in an area that is getting worse. The lender doesn't choose between individual risks; instead, it picks against a whole group of risks.

A redlining policy that is based on the fact that a certain part of a community is becoming more mixed-race is illegal and goes against Title VIII of the federal Civil Rights Act and the Community Reinvestment Act. For example, it is against the law for a lending company to ask for a higher down payment because the home the borrower wants to buy is in a neighborhood with people of different races. The mix of races in the neighborhood where the loan will be given is never a good thing to look at when deciding whether or not to give a loan.

Under the Home Mortgage Disclosure Act, lenders are required to tell people how they decide how often to lend money in certain areas. Insurance redlining is a related problem that may be covered by the part of the federal fair housing law that says people can't do things that make housing hard to find.

The Office of Thrift Supervision has also put out a rule saying that redlining is not allowed. It says that refusing to lend in a certain area just because the homes are old or the income level is low may be discriminatory in practice, since minorities are more likely to buy used homes and live in low-income areas.

Redraw facility

To get the extra money you've paid on your loan, you can use this.

Reduction certificate

A piece of paper that shows the current amount owed on a mortgage, the interest rate, and the date it will be paid off. When a buyer wants to take over an existing mortgage or take title subject to an existing mortgage, they usually need a reduction certificate from the mortgagee. So, the mortgagee can't later say that the amount or terms of the loan were different than what was written in the certificate. A reduction certificate is like a certificate of no defense, except that the mortgagee signs it. The reduction certificate is useful because the public records only show the original amount of the loan. The parties are the only ones who know about any changes to the principal. The instrument is usually recognized, but it doesn't have to be written down. It can also be called a statement of condition from the lender or a beneficiary statement in the case of a deed of trust.

Referee

A neutral third party who is chosen by a court to settle a dispute, look into something, find the facts, or arbitrate. In bankruptcy, a referee acts as a temporary manager of the bankrupt's assets, which can be sold to pay off creditors' claims.

Referral

Referring something to someone else; a sales lead. A client who came to you because of what someone else did or what they said. Most of the time, a broker can only pay or share commissions with someone who sends them a client if that person is also licensed as a broker. If the person is a licensed salesperson, the referral fee must be paid through the person's supervising broker. A seller can pay a referral fee to anyone, but the person who gets the fee may be seen as acting as a real estate salesperson. If this is the case, that person must have a real estate license.

Referral agency

1. One in which licensed sales people undertake to obtain only leads on potential buyers and sellers as part of their brokerage services. A commission is paid to the referral agency when a sale is made via one of these leads.

2. A relocation service provider that is part of a national or regional relocation network.

Refinance

To get a new loan to pay off an old one; to use the money from one loan to pay off another. When interest rates go down and/or the value of a property goes up, it is common to refinance it. A buyer may buy a property through a contract for deed when he or she plans to sell the property before the contract for deed balance is due or refinance at better terms and interest rates than were available at the time the agreement of sale was made.

Investors who want more money to buy more investment properties often refinance properties that bring in money. This is called "pyramiding through refinancing," and it is a common way to get a lot of real estate.

Fannie Mae is a secondary buyer of home loans that is authorized by the federal government. It will refinance a loan it already owns for a new buyer, usually at a lower rate than the market rate. This new loan would replace a second mortgage, which is sometimes used to cover the difference between the purchase price and an assumable mortgage. This is a type of wraparound mortgage.

Refinancing

To move your money from one bank to another. This is called a loan switch.

The process of refinancing an existing debt with a new one.

Refinancing Risk

The possibility that a borrower may be unable to refinance the mortgage before it matures, so extending the life of a security that utilizes the mortgage as collateral.

Reformation

Contracts or deeds that have not adequately expressed the parties' intentions due to mechanical errors, such as a typographical error in the legal description, may necessitate a legal action. It is possible to get a court order to reform a deed termed a reformation deed in the event one of the parties refuses to perform a correction deed. When a grantor is bound by a warranty deed, he or she often promises to perform any reformation required to fulfill the covenant of additional assurance.

Regional planning

Developing guidelines for the general development of huge geographic regions. Standards pertain to land use, transportation systems, and infrastructure, among other things.

Regional shopping center

A retail mall that attracts the majority of its consumers from a trade region that is 15 to 30 minutes away by car. It typically has 200,000 to 400,000 square feet of retail space and one or two big department shops as anchor tenants.

These shopping malls are primarily centred on fashion and discretionary products, with at least two big department shops as anchor tenants.

A big shopping centre with more than 400,000 square feet of rentable space and 70 to 225 stores.

The most common style of shopping complex, with two to five anchor department stores and 100 to 150 smaller retail establishments. The enclosed centres are usually referred to as "malls." The size of these facilities varies from 400,000 to over 1,000,000 square feet.

Drive-in developments, which include department stores, supermarkets, and specialized stores, are displacing the ribbons of shops that used to run down both sides of busy roadways.

Registered historic district

Any location that is on the National Register of Historic Places. Includes any area so designated by appropriate local or state statute, provided that the Secretary of the Interior certifies that the statute will substantially achieve its purpose of preservation and rehabilitation and that the district meets substantially all of the requirements for inclusion in the National Registry.

Registered land

The Torrens system is used to keep track of land.

Registrar (recorder)

The person who is usually in charge of keeping accurate official records of all deeds, mortgages, contracts for deed, and other documents related to real estate titles that have been filed for recordation. Often associated with the Torrens system of title registration.

Regression

The idea that when two different kinds of properties are close to each other, the value of the better property goes down because of the presence of the worse property. So, in a neighborhood where most homes are worth around $100,000, a better-built house that would be worth at least $140,000 in another area would probably be worth closer to $100,000. The opposite is true for the principle of progression.

Regression analysis

A statistical approach for determining the relationship between two or more variables.

Regular system (REG)

The unregistered system is a way to keep track of documents that affect land that are not registered in the Torrens system. Even though the fees for recording are usually higher in the regular system than in the Torrens system, the requirements for recording are often less strict.

Regulation

A rule or order made for management or government, like the real estate commission's rules and regulations. In many states, once the governor approves the commission's rules after a public hearing, they have the same force as the law.

Regulation A

A special way to avoid having to register a security issue with the SEC when the total amount being sold is less than $1.5 million. Even if the issue meets the requirements of Regulation A, the developer must still file a short-form registration with the SEC regional office and give potential buyers an offering circular with much of the same information as a formal prospectus. So, Regulation A is not really a way to avoid registering, but rather a simpler way to do so.

Regulation B

The Federal Reserve is enforcing the rules of the Equal Credit Opportunity Act, which was passed in 1974.

A rule made by the Federal Reserve System about the Equal Credit Opportunity Act.

Regulation D

A rule from the SEC that says certain limited security offerings don't have to be registered.

The Securities and Exchange Commission's (SEC) regulation that lays out the requirements for a private placement exemption.

Regulation Q

A federal rule that was slowly phased out in 1986. It let some federal agencies set different interest rates on savings deposits for commercial banks and thrift institutions.

Regulation T

A federal rule that the Federal Reserve Board is in charge of enforcing. It says how securities brokers and dealers can get credit and how it can be used. The Federal Reserve Board makes a list of the securities on which dealers can lend money, and then it uses margin requirements to limit the amount of money that can be lent. The Federal Reserve Board has made it so that condo securities don't have to follow Regulation T.

Regulation Z

The Federal Reserve is enforcing the terms of the Truth-in-Lending Act, which was passed in 1969.

Regulatory taking

The degree of land regulation that is judged to be an effective seizure of the property under US Supreme Court decisions. If the government reaches this level of control, the property owner must be compensated for the loss of value.

Rehabilitate

To bring back to an old or better state, like when a building is renovated and updated. Rehabilitation can involve new construction, buildings, or additions, but it usually doesn't change the structure's basic plan, shape, or style. In urban renewal projects, neighborhood rehabilitation is the process of getting old buildings, neighborhoods, and public facilities back into good shape. It may also include making streets better and adding things like parks and playgrounds.

The Internal Revenue Code says that there are certain tax breaks for fixing up older real estate.

Rehabilitation

Renovating older or physically degraded structures for modern use.

The process of restoring a property to a suitable state without affecting the floor plan, shape, or style of the structure.

Renovating a home for personal use or sales.

Rehabilitation tax credit

A tax credit for non-residential buildings that were in service before 1939 and were rehabilitated. To qualify for this tax credit, the repaired property must be depreciated using the straight-line method.

Reinstatement

To put something back where it was before. For example, to reinstate a lapsed insurance policy or a loan that was not paid off. A borrower with a deed of trust who is behind on payments can avoid a foreclosure sale by reinstating the loan and bringing it up to date before the sale. After that, some states give the borrower a legal right to get out of the debt for a year, but the whole debt would have to be paid, not just the amount in default. 

Reinsurance

A contract in which the original insurer (the ceding company) gets insurance from another insurer (the reinsuring company) against losses on the ceding company's original policy. The ceding company's rights, duties, and liabilities under the original policy are taken on by the reinsurance company.

Reinvestment Risk

Debt instruments backed by a homogeneous pool of mortgage loans secured by residential real estate.

When borrowers prepay mortgages with above-market rates, lenders face the risk of having to reinvest the remaining loan balance at a lower rate.

Reissue rate

A title insurance company will charge less for a new policy if a policy on the same property was just issued a short time ago.

Related parties

Parties who have a clear relationship with each other. For example, two parties may be related by blood, a fiduciary relationship, or an ownership interest in a business. Under the Internal Revenue Code, you may not be able to deduct a loss from the sale of property between family members. Also, if two people who are related to each other sell or trade depreciable property, the gain may be treated as regular income. The only thing that matters is how close the people are to each other, not how fair the price or rent is. Under the tax law, related parties are all entities that the taxpayer owns more than 50% of, either directly or indirectly.

The tax law does allow installment sales between children, parents, and spouses, as long as the property is not sold or given to someone else within two years of the first sale. Installment treatment, on the other hand, is not allowed if depreciable property is sold to certain related people. For installment sales between related parties where the payments vary in amount but the fair market value can be determined, basis is recovered on a prorated basis, and the buyer can't increase basis in the property before the seller includes the amount in income.

Relation-back doctrine

An escrow transaction's ramifications on the grantor's death are determined by this doctrine. A valid escrow is one in which the executed deed, the purchase money, and the instructions are all placed in escrow and held there until the escrow conditions are met. The grantor's death does not terminate the escrow or invalidate the agent's ability to deliver a completed deed under the relation-back concept. There are no probate court approvals required when all escrow criteria are met. The grantor receives full ownership of property when all escrow terms are met. Deeds delivered to their recipients are considered to have been delivered to their recipients prior to the grantor's death, because the date they were delivered to the escrow agent reflects when they were originally lodged there. Otherwise, the grantor's heirs would have to be sued for particular performance. Deeds are delivered into escrow, which eliminates the rights of sellers' creditors, and so clears the title as of the date the escrow was established.

Release

The ending or giving up of a claim, right, or privilege. A formal release is a contract that frees a person from any further legal obligations. Because it is a contract, it must contain something of value. Real estate releases should be acknowledged and written down. The liber and page number of the document being released should also be written down.

Release clause

1. Mortgages that allow the borrower to seek partial release of particular parcels from the mortgage in exchange for a payment that is greater than the prorata portion of the loan are known as balloon mortgages. The majority of lenders include a provision stating that no partial release will be granted if the borrower defaults on the loan.

For example, a portion of the sales revenues from the developer's sale of the subdivided lots go toward paying down the mortgage. Upon the mortgagee's agreement to release the specific portion sold, purchasers of the property will be granted clear title. It's not uncommon for the release clause to include a formula for calculating release payments, such as paying a sum based on a percentage of the entire amount of land covered by the blanket mortgage. This means that the lender may demand payment of one-fourth of the total loan amount before releasing even one parcel, as an example.

2. A condition in a purchase agreement that permits the seller to continue marketing the property and accept alternative bids. First-time homebuyers have a 72-hour window in which they can waive any contingencies, such as their current house sale, or release the sellers from the agreement so they can sell to a second buyer.

A mortgage clause that allows the pledged property to be released when the obligation is paid in full.

Release of liability

Lenders can relieve a borrower from personal obligation on a note by issuing a release form.

Reliction

Recession of a lake or river's water line, leading to the exposing of more dry ground.

Water line that is receding and leaving dry ground to be added to the property of a nearby landowner.

The water level is slowly dropping below the usual water mark, which means the land is getting bigger. When land that was once under water becomes exposed, it is called alluvion, and the rules of accretion are used to figure out who owns it. Usually, the owner of the land along the river owns this new land.

Relief

The variation in topographic height within a given area.

Relinquished property

The up-leg property is the first property that changes hands in a delayed tax-deferred exchange. The property being traded for is called the replacement property.

Relocation clause

A clause in the lease that lets the landlord move a tenant. When an older building is being renovated or when smaller tenants move out, the landlord may want this right to be able to meet the needs of larger tenants who want to grow.

A provision in a contract that allows the landlord to evict a tenant.

Relocation company

A business that is hired by big companies to help their workers move from one place to another. One of the main purposes of this service is to buy the transferee's home so that the transferee has the money to find a new place to live and doesn't have to worry about selling the old home first. Most of the time, the employer corporation pays all of the costs that the relocation company has when it buys and sells the employee's current home.

Most of the time, the offer to buy from the relocation company is based on two or more independent fee appraisals. Once the relocation company has bought the property, it wants to make sure it is marketed well by combining the sales price, carrying costs, closing costs, and costs of repairs and improvements with the estimated cost of the company's services. They expect the listing broker to advertise the property in a number of ways, such as through the Internet and the multiple listing service (MLS).

Relocation option

According to most leasing agreements, the owner of an office or retail mall has the option of transferring an existing tenant to a new location as long as the new location is of comparable size or quality and that the owner pays for any reasonable relocation expenses.

Remainder estate

Following a life estate, the ownership interest becomes a fee of simple absolute interest at the death of the life estate owner.

A future interest in real estate that is created at the same time and by the same document as another estate and can only start when the first estate ends. A reversion is an estate that the grantor keeps when giving away a smaller estate. A remainder, on the other hand, is a future estate that the grantor makes for someone else.

A remainder can be guaranteed or not. It is vested if the only thing that isn't clear is when the previous estate will end. It is contingent if there are other things that aren't clear. For example, H gives his farm to his son as a life estate, and the rest goes to his son's living children. If there are no children, the estate goes to H's brother J. J., who has a contingent remainder that ends if H's son dies leaving a child.

Federal gift-tax rules apply to the giving of a "remainder interest" in real estate. The $10,000 annual exclusion does not apply to the remainder interest because it is not a "present interest." The IRS figures out how much the remainder interest is worth by using tables that are based on how long the donor is likely to live and a discount factor of 6%.

Remainderman

Individual who have a remaining interest in real estate. When a life estate expires, the remainder interest takes effect.

One who has the right to inherit an estate. For example, B owns a property outright and gives it to "C and, when C dies, to D and her heirs." When C dies, the estate automatically goes to D and her heirs. This is called a "vested remainder estate." Even though the remainderman only has an interest in the property in the future, he or she still has some rights in the present. For example, the remainderman has the right to sue the current owner for wasting the property.

Remainders

Residual interests that take effect when another person's life estate expires.

Remediation

1. The act of fixing a problem or making it better, like sealing or removing lead-based paint or putting in a radon mitigation system.

2. Implementing a plan to clean up a site that has been found to have dangerous substances on it. At the Phase III audit, a plan to fix the problem is made and put into action.

Remise

To stop; to give up. This is typical of a quitclaim deed.

Remodeling

Actions that result in alterations to a structure's floor plan, shape, or style in order to rectify functional or economic problems.

Rendering

Perspective drawing by an artist or architect of a finished building or area, usually in colour or ink.

Renegotiable rate mortgage (RRM)

A short-term loan that is backed by a long-term mortgage with an adjustable interest rate. The interest rate is renegotiated when the loan automatically renews. Even though the RRM is based on the Canadian Rollover Mortgage, there is a big difference: Under the Canadian plan, the mortgage itself is renewed instead of short-term interest adjustments to a long-term mortgage. Since the adjustable-rate loan came out, many of the rules that used to apply to RRM no longer do.

Mortgage having an interest rate that is subject to redetermination at set intervals, as indicated in the mortgage body or the accompanying promissory note.

Renegotiate

To change the terms of a contract legally.

Renegotiated rate mortgage (RRM)

A mortgage with a variable interest rate that changes over the life of the loan.

Renegotiation of lease

The process of renegotiating the terms of a lease after a certain amount of time has passed. The most common reason to renegotiate a lease is to set a new annual rent for an extra year because the economy has changed. Many leases say that renegotiating rent should be done by mutual agreement or, if that doesn't work, by an independent appraisal based on a rate of return to the fee owner equal to a certain rate set when the lease was first negotiated. A different method uses outside factors to decide when the rent should go up (e.g., U.S. Labor Department cost-of-living indicator). A broker should make sure to check the renegotiation period and terms, if there are any, before putting a leasehold on the market.

Renewal option

Lease provision in which the tenant has the option, but not the responsibility, to renew the lease.

A clause in a lease that lets the lessee extend the lease for a certain amount of time and on certain terms, as long as the tenant is not in default. Most of the time, though, a landlord can't use an automatic renewal clause against a tenant without also giving the tenant notice of the renewal. If the lease is sold, the covenant should say if the option to renew is also sold.

Renewal of a lease for a specific duration and rent.

Renovation, repair, and painting rule (RRP)

An EPA rule says that companies that renovate, repair, or paint homes built before 1978, child care centres, or schools and may disturb lead-based paint must be certified by the EPA. Such renovators must get training from an EPA-approved training provider on how to work in a way that is safe for lead, such as containing the work area, keeping dust to a minimum, and cleaning up well. The pamphlet Renovate Right: Important Lead Hazard Information for Families, Child Care Providers, and Schools must be given to the owners and people living in child care facilities, as well as to the parents and guardians of children under the age of six.

Rent

the expense of leasing a property that is paid to the owner by the renter.

The payment is received from a lessee in exchange for the use of an occupied area.

Rent is a set amount of money that a tenant or occupant of a property pays to the owner on a regular basis for the right to stay there and use it. This is usually agreed upon in advance by both parties. Most leases say that the rent is due before the lease starts. Unless the lease says otherwise, you have to pay the rent to the landlord at the place you're renting. If the landlord says or implies that the rent money can be mailed to her, delivering it to the post office is the same as paying it, and the landlord is responsible for any delay or loss that might happen after that.

Rent concessions

Agreements between a landlord and a tenant to lower real rental payments or revenues below those indicated in a contract. For example, a landlord may provide one month of free occupancy, lowering the effective rental rate throughout the whole tenancy time. Concessions are sometimes referred to simply as concessions.

Rent control

In some areas, state or local authorities put limits on the amount of rent a landlord can charge.

Regulation of the amount of rent or the rental increase by state or local governmental agencies; such regulation has been upheld as a valid exercise of the state's police power in jurisdictions that currently employ rent controls.

Two major themes in rent control have emerged across the country:

1. The use of rent control to regulate the quality of rental dwellings, with controls applied only to units that do not comply with applicable building codes, as in New York City.

2. The use of rent control across the board to alleviate high rents caused by a gross imbalance in housing supply and demand, as seen in Massachusetts and California.

In New Jersey, where the enabling statute is heavily weighted toward quality control, local jurisdictions have enacted rent control ordinances to deal with emergency housing shortages and inflated rents in Fort Lee and other towns near New York City.

The amount of rent a lessee can charge tenants is regulated by a local governing board.

Rent escalation

An increase or decrease in rent made by the landlord to account for increases in the cost of living or maintenance expenses.

Rent escalator clauses

Lease conditions that force tenants to pay all operational expenditures in excess of the amounts indicated in their leases.

Rent roll

A list of all renters, together with the rent they pay.

A list of tenants with the unit they live in and how much rent they pay. Certified rent rolls are checked by a third party, and lenders sometimes need them.

A balance statement for each tenant's account, including the tenant's name, unit number, lease period, and rent.

Rent schedule

The rent levels for the various sorts of units in a property are listed below.

Rent-up

1. The procedure of renting out a newly constructed building.

2. It is a condition of a permanent lender's "taking out" an interim construction lender that the borrower (developer/owner) successfully leases out a specified quantity of space in the building. The lender's servicing agent will verify the developer's certified rent rolls. Floor loans and gap financing must be sought if the developer fails to satisfy the rent attainment amount.

Rent-up period

The amount of time it takes for a property to become completely rented once it has been completed.

Rentable area

The useable space of the office tenant, plus his or her prorated part of the shared areas.

The number of square feet for which a commercial or industrial tenant will pay rent.

For an office on a multiple-tenancy floor, the area is computed by measuring to the inside finish of permanent outer building walls, or to the glass line if at least 50% of the outer building wall is glass, to the office side of corridors and/or permanent partitions, and to the centre of partitions that separate the premises from adjoining rentable areas, as standardized by the Building Owners and Managers Association International. There are no deductions for columns or projections required for the buildings.

Surface area that may be rented out. The three approaches listed below can be employed.

Rentable area -1

The International Association of Building Owners and Managers is a non-profit organization that brings together building owners and managers from (BOMA). On the partition walls, from the inside of the outside wall (or, in newer structures, the glass line) to the outside of the inner wall (or hall wall), and from centre to centre. There are columns included.

Rentable area -2

Administration of General Services (GSA). The only difference is that all columns, dividing walls, service closets, and other features are incorporated. Only the net useable space is available. This procedure must be utilized when leasing to the federal government.

Rentable area -3

The New York Method is a technique that was developed in New York City Only the elevator shafts and stairwells are taken into account when measuring space across the floor from the glass line. In the event of multiple occupancy on one level, the usable and non-use common space is divided among the tenants based on the size of their individual areas.

Rentable/usable (R/U) ratio

The proportion of total rentable space to total useable space. In office buildings, it will be larger than one.

Rental agent (leasing agent)

For remuneration or other valuable consideration, anybody who acts or attempts to act as an intermediary between a person looking to lease, sublease, or assign an accommodation and a person looking to acquire such accommodation. Rental agency or property management licenses may be required in several states.

Rental agreement

A written or verbal contract that sets or changes the terms, conditions, rules, regulations, or other provisions for the use and occupancy of a dwelling unit and premises; a lease on residential property. Some states have "plain language" laws that say rental agreements have to be written in clear, everyday language and have the right headings and paragraphs.

Rental concessions

Lessor concessions to the lessee in order to get the lessee to sign a lease.

Rental pool

A way to rent apartments in which the owners agree to have their units available for rent as decided by the rental agent and then share the profits and losses of all the apartments in the pool based on a formula that everyone agrees on. Some plans pay out profits based on how many days the rental unit was available. If a condo is for sale and the offer includes participation in a rental pool, the condo is considered a "investment contract" and is therefore a security. So, the person making the offer must register the condo as a security with the SEC. Once a project has been sold, the owners can put together a rental pool without having to register with the SEC.

Rental Yield

The annual return to the owner from an investment, also known as the rental rate or rental return, is represented as a percentage of the investment's original price.

Repairs

Current costs to bring the property back to its original state; small changes made to keep the property in good shape rather than to make it last longer. Most of the time, a homeowner can't deduct the cost of repairs from their taxes.

For properties that bring in money, the cost of repairs is often a business expense that can be deducted from your taxes. Repairs that change the building's shape or replace a large part of it and extend its useful life can be counted as capital expenditures that raise the property's value. One example would be adding on to the house or replacing the carpet or roof. 

There is no law that says the renter or owner has to make repairs. Unless the lease says otherwise, the landlord is usually not required to make any repairs at all to the rented property. But some states' landlord-tenant laws say that the landlord has to make sure the place is safe to live in, and the lessee has to return the property in the same condition it was in when they rented it, minus normal wear and tear. So that there are no disagreements, the lease should say who is responsible for each kind of repair. Tenants don't have to make major repairs, though, unless they caused the damage on purpose or by being careless.

When it's important, the parties should write in the sales contract what the seller needs to fix before the closing. Sellers of homes that will be bought with a VA or FHA loan should know that the cost of any repairs required by VA or FHA will cut into their net sales proceeds.

Work done to restore property to its previous state without extending its useful life.

Repeat sale analysis

Estimation of the rate of property appreciation based on a statistical evaluation of properties that sold twice during the sample period. Statistical regression is commonly used in analysis.

Repeat sales

Determining how much a property's price will change the next time it is sold.

Replacement cost

Appraisal word describing the cost of constructing a facility with utility identical to the one whose value is being appraised. The replacement cost is based on current building standards.

The expense of constructing a new structure that is of comparable usefulness to an existing building but is not a physical reproduction of the old one.

The cost of building a building with current materials and methods that serves the same purpose as the structure being appraised and is designed using current materials, styles, and standards. Most of the time, functional obsolescence is not taken into account because replacing a building means replacing its function according to current building standards.

Replacement cost approach

The expected cost to replace the improvements, less any depreciation, plus the evaluated worth of the land, is used in this assessment approach.

Replacement property

In a tax-deferred exchange, the property that was traded for. The replacement property must be found and bought within a very short amount of time after the sale of the property being given up.

Replacement reserve

A monetary reserve for the replacement of fixed assets in the future.

Replevin

Legal action is taken to get back personal property that was taken illegally, such as when a landlord takes a tenant's personal belongings because the tenant didn't pay the rent.

Reporting requirements

There are rules from the Internal Revenue Service that say the settlement agent has to report all sales or exchanges of real estate or a statement of exemption. The settlement agent, who makes the closing statement, is the one who has to file the IRS Form 1099S. If there isn't a settlement agent, the report must be sent by lawyers, title companies, mortgage lenders, and real estate brokers in that order.

Reproduction cost

The cost of constructing a structure comparable to the one whose worth is being determined in an appraisal.

The cost of constructing a new structure that is identical in every physical aspect to an existing building.

The cost of recreating a property as of a specific date.

How much it would cost to build a copy of the building at the moment, using the same materials and building standards. Most appraisers use the comparative cost method to figure out how much it would cost to make a copy. In this method, estimates are based on how much it costs now to build buildings of the same size, style, and quality. The quantity survey method and the unit-in-place method are two other ways. Most comparisons are made in terms of square feet or cubic feet.

Replacement cost is not the same as reproduction cost. Reproduction cost is the cost of making an exact copy, while replacement cost is the cost of making a building that does the same job but may be different in size, materials, or design. After figuring out how much it would cost to build a new building, subtract the amount of physical, functional, and economic wear and tear to finish the appraisal.

Resale proceeds

After subtracting all sales charges, the profit received by an individual after selling a property.

Rescind

To cancel a contract.

To annul, cancel a contract. One can back out of a deal and take back an offer.

Cancellation is a method of terminating a contract. The Truth in Lending Act gives a borrower the authority to cancel a non-purchase loan arrangement secured by his or her primary property within three days.

Rescission

Legal action that cancels, ends, or nullifies a contract and puts the parties back where they were before; a return to the status quo. Contracts can be broken if there was a mistake, fraud, or misrepresentation. You don't have to show that you lost money. In order to get out of a contract with a buyer who hasn't paid, the seller must return all of the money the buyer has paid, less a fair rent for the time the buyer has had the property. In a contract for deed, however, this is not true. Most contracts have a clause that lets the seller keep all payments if the buyer doesn't pay. Courts, on the other hand, don't like to enforce this kind of forfeiture clause, especially when it's in the form of a penalty, and they often order rescission instead.

Buyers are sometimes given a "cooling-off" period during which they can back out of the deal for any reason. For example, a buyer of subdivided land that is or should have been registered with HUD has seven calendar days from the time they get the property report to back out of the deal. Also, with VA and FHA financing, the buyer has the right to back out if the purchase price is higher than what an FHA- or VA-approved appraiser says it is worth. The federal Truth in Lending Act and most state time-sharing laws also give people the right to back out of a deal.

A contract that has been canceled.

Rescission clause

1. A clause in a contract for deed that says that if the buyer doesn't pay, the seller has to return all of the payments, less the cost and a fair rental value. Because this kind of clause might give the buyer too much of an advantage, it is not in many contracts for deed.

2. A clause in a contract that tells buyers of their right to back out of the deal according to state law. This is required by some state laws on the sale of land that has been split up.

Reservation

Clause in a deed that restricts some of the grantor's property rights.

The making of a new right for the grantor that comes from what was granted. So, a reservation is something that didn't exist before the conveyance as a separate right. For example, Smith gives Jones a ten-acre piece of land while keeping a life estate in it for himself. A right or interest cannot be set aside for someone else.

All of the property is given to the grantee, but the grantor can keep a use for himself. In an exception, the grantor keeps the title to a part.

Reservation money

Money put down as a "good faith" deposit to hold a house that is for sale. A potential buyer might ask a broker to hold reservation money until a certain property goes on the market. When the house goes on the market, the broker uses the deposit to make sure the sale goes through.

Reserve for repairs and replacements

Appraisal adjustment is used in the normalization of operating expenses to account for non-annual repairs or replacements.

Reserve for replacements

A cash flow projection allowance that reflects an annual provision for periodic replacements, releasing expenses, or tenant improvements.

A typical entry in an operating statement that sets aside money to replace things that don't last long, like air conditioners, carpeting, and appliances. This is an allowance that is needed to keep the projected level of income.

Reserve fund

Money that a lender often requires a borrower to set aside as a cushion of capital for things like taxes, insurance, and maintenance that won't be done right away. A reserve fund is sometimes called a customer's trust fund or an impound account. Reserves for replacement should be kept, especially if the owner is putting in things that won't last long, like appliances, furniture, or carpeting in a furnished apartment.

An account set up to cover anticipated capital expenses or cash flow shortfalls.

Reserve price

the lowest amount a vendor is willing to sell a property at auction for.

At auction, the lowest price that the seller is willing to accept for their home.

Residence

The place where someone lives. For tax, license, and education purposes, residence is defined in different ways. A person can have more than one place to live, but only one home. A trailer, a cooperative, a condominium, or even a household can be a residence.

Residence property

Raw land or property that has been built on and has buildings made for people to live in, like single-family homes or condos.

Residence, sale of

The Taxpayer Relief Act of 1997 significantly altered the tax treatment of gain from the sale of one's primary residence. The act provides a capital gains tax exclusion of up to $500,000 for married taxpayers filing jointly and $250,000 for single filers if the owner has resided in the principal residence for two of the last five years. There is no longer a requirement for taxpayers to purchase another property, and there is no minimum age requirement. Essentially, this provision can be used repeatedly. If the taxpayer occupied the property for a total of two years (need not be continuous), the fact that the taxpayer rented out the property for a portion of the five-year period would be irrelevant.

Once a taxpayer has claimed an exclusion, there is a two-year waiting period. If the taxpayer sells due to unforeseen circumstances such as illness or job relocation, the waiting period can be waived and the exclusion prorated. A taxpayer who sells his or her primary residence before occupying it for the required two years (out of the last five), or before two years have passed since claiming a previous exclusion, must pay tax on any gain. There is no allowable deduction if there is a loss.

Resident manager

A salaried agent hired by the owner to manage a single building. A resident manager is not required to be licensed under state real estate license laws if only acting as custodian or caretaker.

While dwelling in one of the apartment units, an individual monitors the upkeep of an apartment property.

Residential

Land zoning for residential purposes

Residential member (RM)

The American Institute of Real Estate Appraisers bestows this professional designation on individuals who specialize in residential valuation. The designation denotes completion of the necessary educational and experience prerequisites.

Residential Mortgage-Backed Securities (RMBS)

The phrase is used to describe any cash flow that remains after all security classes in a CMBS have been liquidated.

Residential property

Real estate that is designed to be used as the owner's primary residence.

Residential specialists

Brokers that specialize in the selling of single-family detached homes, townhouses, condos, or cooperatives.

Residual

The phrase used to describe any cash flow that remains following the liquidation of all security classes in a CMBS.

1. What's left over, like the property's residual value after its economic life is over.

2. Commissions that are earned but for which payment is put off for a certain amount of time.

Residual capitalization

Appraisal method that divides income between land and structure. If the value of the building is known, the remaining revenue is capitalized to estimate the value of the land, and if the value of the land is known, the remaining income is capitalized to estimate the value of the building.

Residual process

An appraisal method used in the income approach to figure out how much the land and/or building are worth based on how much the residual net income attributable to it is worth.

Resolution trust corporation (RTC)

As part of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), it was created in 1989 to take over the assets of failed savings associations and sell them. The Savings Association Insurance Fund took over its duties in 1995. One of those duties was to cover deposits in thrift institutions (SAIF).

Resort property

Land that is good for vacations, recreation, or other leisure activities because of its natural resources or beauty (mountains, lakes, or the sea) or because it has been improved (tennis courts, golf courses, man made ski hills).

Resource leveling

Any type of network analysis in which scheduling decisions (start and end dates) are influenced by resource management issues (e.g. limited resource availability or difficult-to-manage changes in resource levels).

Resource planning

Identifying what resources (people, equipment, and materials) are required and in what amounts to carry out project tasks.

Resources

Project operations are assigned to human and physical units.

Respondeat superior

A principle of agency law that says an employer (the principal) is responsible for the wrongdoings of an employee (the agent) that happen while the employee is on the job, as long as those wrongdoings happen within the agent's authority.

Restraint of trade

Contracts or groups that try to get rid of or slow down competition, create a monopoly, control prices, or do anything else to stop or slow down the free flow of business. Most of the time, federal and state antitrust laws make it illegal to stop people from doing business.

Restraint on alienation

A restriction or condition on the right to sell or give away property. Restrictions can be things like conditions and covenants in deeds or limits on how the property can be used. The rule against perpetuities says that contingent interests must be vested, if at all, within the period of lives-in-being plus 21 years. This means that an estate can't be fully vested until a long time from now.

The right to sell is one "stick" in the bundle of rights that come with owning real property. Because of this, the courts will not enforce any unreasonable restrictions put on this right by the grantor. For example, a clause in a deed that says the grantee can only sell to tall people is an unreasonable restriction on alienation. The clause, but not the deed, is therefore void. Antidiscrimination laws say that people can't be held back because of their race, religion, sex, disability, family status, or ancestry.

Some state courts have said that a mortgagee's automatic use of a "due-on-sale" clause when a property it owns is sold is an illegal restriction on alienation. Some courts have said that the due-on-sale clause can't be enforced because the lender must show that its security has been hurt in order to use the clause.

Restricted appraisal report

A brief description of the evaluation is provided, with numerous references to internal file material. A restricted report may be sufficient if the client only wants to know how much the property is worth and does not intend to give the assessment to anybody for use or reference.

Restriction

A rule about how property can be used. Covenants, conditions, and restrictions (CC&Rs) are written into real estate documents like deeds and leases to create private restrictions. Most of the time, court orders are used to make sure that rules are followed. A quitclaim deed signed by all the right people can get rid of restrictions. If you want to know who needs to sign the deed, it is always best to ask a title company. Restrictive covenants that make it hard for people of a certain race, colour, sex, religion, disability, family status, marital status, or ancestry to get something or use it are illegal.

Private restrictions can be found in deed restrictions, mortgage restrictions, and/or declarations of restrictions. These are used in developments like subdivisions, PUDs, shopping centres, and industrial parks. Some CC&Rs limit the number and size of buildings that can be put on the land, the cost of buildings, fence heights, setbacks, and whether or not the property can be used to sell alcohol, among other things. Language about limits should be clear because people often have different ideas about what it means.

Zoning laws set limits on what people can do in public. Unlike private rules, they must tend to help the health, welfare, and safety of the public. Most restrictive agreements that could lead to a monopoly or less competition in any line of business are illegal. For example, a restriction that says the grantee can't run any business on the deeded property except a funeral home may be against the law.

A restriction imposed on the usage of a property.

Restrictive covenant

Promise not to use land or buildings for the purposes specified in the clause establishing the covenant.

Perhaps the land is sold with the condition that just one home be built on it, or that the home be built at a certain cost or height.

A private agreement, usually in a deed or a lease, that limits how real property can be used and who can live there (sometimes caIIed private zoning). People say that this kind of agreement stays with the land and binds all future buyers, their heirs, and assigns. It also usually talks about things like the size of the lot, the building lines, the type of architecture, and what the property can be used for.

Most restrictive covenants can be ended by getting quitclaim deeds from all owners who benefit from them. But this may not be possible because the termination must be agreed upon by everyone, and the mortgagees may also need to agree. The covenants can also be ended if the same people keep breaking them and if the properties that are burdened and benefited by the covenants are bought together. Often, subdividers say that deed restrictions will end after a certain amount of time, or the state law may say that they will end after a certain amount of time. This is done so that land use won't be held up unnecessarily in the far future. People who want to enforce restrictive covenants have to take them literally. Then, all ambiguities are ruled against the restriction and in favor of the person who wants to use the property freely and without restrictions.

Resulting trust

A trust that is implied by law because of what the parties do or how they relate to each other. For example, if M gives P the money to buy a high-rise apartment building, but the title is put in P's name for ease of use, the result is a trust in which P holds the property for M.

Resyndication

A resale partnership.

Retainage

A portion or percentage of payments held back by the landowner until the construction contract has been completed satisfactorily and the time for filing mechanics' liens has passed (or when the lien has been released by the contractor and subcontractors). In the same way, the contractor holds back a portion of its payments to subcontractors until the subcontractor's work is done and a waiver of any mechanics' liens has been obtained.

The amount of retainage is often 10 percent of each progress payment. Instead of taking the retainage out of the progress payments, the owner may just put the last one or two payments into escrow and release them when the lien period is over. Retainages can also be called holdbacks.

Amount of money kept back in a building contract until the contractor has met all of the contract's requirements.

Retaining wall

1. Any wall that is built to hold back or support a hill of earth.

2. Any wall that is built to hold up against the side pressure of internal loads.

Retaliatory eviction

The process by which a landlord kicks out a tenant because the tenant has made a complaint. The Uniform Residential Landlord and Tenant Act and many state laws say that a landlord can't evict a tenant, raise the rent, or cut services for tenants for any of the following reasons:

  • If the tenant has made a good-faith complaint to the right authorities about conditions that break a health law or regulation;
  • If a tenant complains about a health or building code violation and the authorities file a notice or complaint; or
  • If the renter has asked for needed repairs in good faith.

Usually, the tenant would be able to get money for this kind of eviction. But even if a tenant files a complaint, a landlord can still evict a tenant for a good reason, like not paying rent or breaking the rules of the building.

Retention

A stormwater management approach in which rainwater is kept on-site in basins, underground, or discharged into the soil.

Retire a mortgage

To be able to pay off a loan.

Return

Profit from an investment.

Return of capital

The original investor's capital contribution is returned, however it is not immediately taxed.

Return on equity

The amount, stated as a percentage, that is returned to the investor on his initial investment.

Revenue bonds

Securities used to fund revenue-generating initiatives, the proceeds of which will be utilized for interest payments and the retirement of securities.

Revenue sharing

Profit and tax advantages are distributed between general and limited partners.

Reverse annuity mortgage (RAM)

A mortgage designed for the elderly with significant equity, in which the lender gives the borrower a sum on a regular basis, resulting in negative amortization.

A type of mortgage that lets older people borrow against the value of their homes so they can get the money they need each month to pay for living expenses. In this plan, the way money comes in and goes out is the opposite of a normal loan.

The homeowner gets regular payments, which don't have to be the same amount each time. These payments are made by the lender directly or by buying an annuity from an insurance company. Most of the time, interest is added to the principal, so the borrower doesn't have to make any mortgage payments. The loan is due on a certain date or when a certain event happens, like when the property is sold or when the borrower dies.

Reverse leverage

Financing is too expensive when the total return on an investment of cash is less than the interest rate on borrowed money. Web site: www.reversemortgage.org

When the financial benefits of ownership accumulate at a faster rate than the interest rate on the mortgage.

Reverse mortgage

A loan agreement in which a lender agrees to pay money to an elderly homeowner on a regular or irregular basis and is reimbursed from the homeowner's equity when the home is sold or other financing is obtained.

Reversion

After a holding term, a property's final selling or re-leasing (this can be a theoretical sale).

Term used to express a person's desire in receiving title provided a conditional fee is waived.

The transaction proceeds in cash.

The part of the estate that still belongs to the grantor or to the estate of a person who has given away a smaller part of their estate. A future right to use real property that is created by the law when a grantor gives away less of his own property rights than he has. Since a reversion is created by the way the law works, no words are needed to make it happen. The part of an estate that stays with the person who gave it or left it to them is called a "reversion," and it starts to be used in the future when the estate is over, whether it is freehold or not. For example, Adam grants Eve a life estate. After she dies, the estate goes back to Adam.

A grantor can put a condition in a deed that would give the property back to the grantor if the condition isn't met. For example, Adam gives Eunice his land, and in the deed, he says that Eunice can't run a restaurant there. If she does, title goes back to the person who gave it to her. This kind of situation gives the grantor what is called a "possibility of reverter." In some states, the courts won't enforce a "possibility of reverter." They would, however, tell Eunice not to break the condition, and if she did, they could even punish the grantor by giving them money. In practice, the courts tend to look at the condition as more of a promise.

Common-law rules say that all improvements made by the lessee to the leased property would go back to the lessor when the lease is over. Some laws, on the other hand, say that when a residential lease ends or the lease term is up, the lessee can remove all improvements on the lot that the lessee built or paid for without having to pay the lessor anything as long as the lessee doesn't damage the property.

When a lease expires, a landlord has the right to take possession of the leased property.

Reversionary Cap Rate

The cost of capital applied to a property's estimated sale price after a period of holding. This will be greater than the cap rate at the start.

Reversionary factor

A number found in tables of present value that is used to convert a single, lump-sum future payment into its value at the present time, given the right discount rate and time period. Often used to figure out how much the lessor's leased fee interest is worth.

Reversionary Value

The projected reversion value of a property

The amount of money a property is expected to be worth at the end of the expected holding period. Present worth tables are used to figure out how much a reversion is worth right now.

Reverter

A contingent interest held by the former owner (or heirs) in exchange for a conditional fee.

Review appraiser

An appraiser who looks at the written reports of other appraisers to see if the data and conclusions are accurate. Review appraisers usually work for a bank, an insurance company, or the government.

Revisions

Work changes that necessitate the architect providing alternative drawings or revising the original working drawings.

Revocation

The act of ending, canceling, or nullifying an offer, like when a seller cancels a listing to end a broker's agency. The license of a broker or salesperson can be taken away for a good reason. It's important to know the difference between an agent's ability to break a contract and their right to do so. Unless the agency is tied to an interest, the principal always has the power to revoke it. However, if the principal has no good reason to revoke, the principal could be held financially responsible. Take back an offer or get out of a contract.

Revoke

The process of putting an offer to an end, canceling it, or rescinding it.

RevPAR

The revenue generated by a hotel per available room is derived by multiplying annual occupancy by the average room rate.

Rezoning

a planning word referring to the ability of a local government to change a planning scheme to allow, for instance, commercial rather than residential construction.

Rider

A change, addition, or endorsement that is attached to a document and made part of its terms is called a "special endorsement." Riders are often added to insurance policies, usually to give more coverage. For example, a comprehensive personal liability policy might have a rider for fire liability coverage. In a contract of sale, buyers often ask for a rider to be added to the seller's insurance policy so that the buyer is also covered (called a contract of sale rider clause). Usually, it's a good idea to have both parties sign a rider addendum to a sales contract to prove that it is real.

An addendum to a contract.

Ridgeboard

At the apex of the roof, a heavy horizontal board set on edge to which the rafters are attached.

Right of contribution

The right of a person who has paid off a shared obligation to get back his or her proportionate share from another party with the same obligation. For example, one cotenant who pays taxes or other liens against the whole property has a right of contribution. The cotenant (also called a "tenant in common" or "joint tenant") has a legal right to a lien on the other cotenants' shares. The cotenant can use foreclosure to make sure this lien is paid off.

Right of first refusal

A commercial lease condition that gives the tenant first dibs on leasing space in a facility if space becomes available.

The right of a person to be the first person to buy or rent a piece of real estate. The owner of a right of first refusal, on the other hand, can't buy the property until the owner actually puts it up for sale or considers an offer to buy from someone else. The holder can then choose to match the offer. If the owner first offers the property to the person who has the right of first refusal and this person turns it down, the owner is free to offer it to any third party at that price or higher.

In a lease situation, a right of first refusal might give the tenant the right to buy the property if it is put up for sale, to renew the lease, or to rent the space next door. This right of first refusal clearly helps the tenant more than it helps the landlord, since this property is harder to sell than one that doesn't have this right. But it might make the tenant want to make changes that he or she wouldn't have made otherwise.

With an option to buy, the tenant has a certain amount of time to decide whether or not to buy the property at a fixed price. In a right of first refusal, however, the holder can only use the right if the property owner has offered to sell or rent the property or if the owner has accepted a real offer from a third party to buy or rent the property. One of the most important ways to tell the difference between an option and a right of first refusal is to look at who has the right to start the sale or lease. In both an option and a right of first refusal, until the option or right is used, the holder has no interest in the land or equitable estate.

In some condos, the association of unit owners has the right to buy back any unit that is being sold. Some state laws say that a tenant whose apartment is being turned into a condo unit has the right to buy it first. But restrictions like a right of first refusal are not allowed in condos that are regulated by HUD and FHA or that can get financing from Fannie Mae. Right of first refusal clauses are common in contracts between partners, shareholders, joint owners (where the end result is to give up the right to split the property), landlords, and tenants.

Right of prepayment

The ability to pay off a mortgage before it matures. The right to prepay is determined by the law of the state in which the property is located as well as the specific mortgage contract.

Right of re-entry

The interest in the property's future left to the person who gave it away when an estate on condition subsequent was transferred. If the condition is not met, the person who made the transfer has the right and ability to end the estate. Unlike a possibility of reverter, however, the person who transferred the property must take action to end the estate, such as filing a lawsuit in court, or the condition may be discharged. For example, Adam gives Alice some land on the condition that Alice doesn't use it to raise pigs. If Alice raises pigs, Adam will have to come back and take over the premises. There is no automatic reverter.

Right of redemption

The ability to reclaim property that has been conveyed through a mortgage or lien by repaying the obligation before or after a foreclosure.

Right of survivorship

A right that is exclusive to joint tenancy. If one of the joint tenants dies, the remaining joint tenants inherit his or her interest.

Surviving partners in a joint tenancy have the right to divide the interests of a deceased partner.

What makes a joint tenancy (also called tenancy by entirety) unique is that the surviving joint tenant(s) take over all of the rights, titles, and interests of the deceased joint tenant(s) without having to go through probate.

When one owner of a jointly owned property dies, the other owner has the right to acquire title to the property.

Right to rescind

Individual's right to terminate an agreement, reverting all parties to their pre-agreement legal status or relationship.

Right-of-Way (R/W)

A strip of land that is or will be occupied by a street, one or more sidewalks, utility lines, or other special uses.

An easement is the right or privilege to travel through another's land.

1. The right or privilege, gained through common use or by contract, to cross a certain part of someone else's property. A right-of-way can be private, like when a neighbor is given an access easement, or it can be public, like when the public has the right to use the highways or streets or to get to public beaches safely. For example, a gas company might send out one of its "right-of-way" agents to talk to the owners of land that needs to be crossed to get to gas lines about buying easements from them.

2. Land that a railroad either owns or has a right to use in order to run its tracks in accordance with government safety rules and industry standards.

Right-to-use

1. The legal right to use or live on a piece of land.

2. A license, vacation lease, or club membership that gives you the right to live in a time-share unit.

Right, title, and interest

A term that is often used in conveyance documents to mean the transfer of everything that the grantor or assignor can transfer. In a quitclaim deed, the grantor gives up all rights, titles, and interests in a piece of property without saying how big those rights, titles, and interests are, if any.

Riparian

The habitat along a stream's banks; typically referred more generally to the greater lowland corridor on the stream valley floor.

Riparian lands

Lands that border a body of water or a body of water. Depending on whether the river is navigable, title may extend to the water's edge or to the middle of the water.

Riparian lease

A contract that says how to lease land between the high-water mark and the low-water mark.

Riparian rights

Adjacent landowners' rights to bodies of non-navigable water.

The rights and responsibilities that come with owning land next to or touching a body of water, like a lake or stream. Some examples of these rights are the right to water, to swim, to boat, to fish, and to the alluvium that the water deposits. Riparian rights don't exist unless there is a water boundary on one side of a piece of land that is said to be riparian. This kind of real property right in water is called a right of use or a usufructuary right. The right to make reasonable use of the water that flows by is shared with other riparian owners, as long as the use doesn't change the flow of the water or make it dirty. A person who owns land next to a stream that can't be crossed by boat also owns the land under the stream up to its centre.

The owner next to a moving body of water, like a stream or river, is called a "riparian owner." If the water is still, like in a pond, lake, or the ocean, the owner next to it is called a littoral owner. The word "riparian" means "riverbank" in English.

Water rights are governed by a legal doctrine. It asserts that the water belongs to the natural users, particularly those who live near it.

Riparian Wetland

Wetlands that grow along the border of a body of water, such as a lake or stream.

Riser

The part of the step that is vertical and holds up the tread. The riser is the part of the step that faces the person going up the stairs.

Risk

Measurable likelihood of deviation from a predicted outcome. Risk is commonly expressed as variance or standard deviation.

Potentially favorable and/or negative occurrences that may have an influence on a project.

The chance that actual results would differ from those anticipated when the asset was purchased.

The potential that the expected profits on an investment or loan will not be realized.

The potential that an investment's financial return may not be as expected.

Risk averters

Refers to the economic principle that people prefer less risk to higher risk at the same level of reward. Most people shun risk and will only take on extra risk if it is accompanied by the anticipation of a higher return.

Risk capital

Capital put into a risky business venture, which is the least safe and has the highest chance of loss. But capital that is risky often gives the best rate of return. When deciding if an offering is a security or not, people often talk about the idea of risk capital.

Risk factor

The portion of an investment's rate of return that is assumed to cover the risk of that investment. The higher the risk, the higher the rate of capitalization.

Risk Management

A kind of planning that entails preparing for and responding to dangers such as floods, storms, and hazardous waste spills.

Risk of loss

Who is responsible for damage to improvements? Many states have passed the Uniform Vendor and Buyer Risk Act, which covers the typical real estate sales contract. Unless the contract says otherwise, the seller can't enforce the contract and the buyer can get all the money back if a big part of the property is destroyed or taken by the government without the buyer's fault, as long as the buyer hasn't gotten legal title or possession.

If the house is completely destroyed by a fire, flood, or tornado, and the buyer doesn't want to back out of the deal and wants the seller to rebuild the house and sell the property as promised, that's a harder question to answer. Most courts will tell the seller to give the buyer the title to the destroyed property and the money from the insurance. Most of the time, they don't require the seller to rebuild and pay all of the carrying costs until the work is done.

Most sales contracts should give ownership to the buyer when the deal is closed. When legal title or possession has been transferred to the vendee and all or part of the real estate is destroyed without the seller's fault or is taken by eminent domain, the vendee cannot get any money back and still has to pay the full price. When either title or possession changes hands, the risk of loss moves to the new owner. The new owner should protect himself by getting the right insurance. If the buyer moves in before the closing date and there is no rental agreement, the buyer may be responsible for any losses. If there is a rental agreement, on the other hand, the buyer would not take on the risk of loss unless the contract says so.

Risk premium

Incremental return is required to persuade investors to take on extra risk.

Risk return relationship

The financial philosophy that acknowledges that if an investor wants a high rate of return, he or she must incur a high risk.

Risk-adjusted discount rate

A discount rate that incorporates the lowest acceptable yield on a risk-free investment as well as a premium to compensate the investor for the perceived risk connected with the endeavor under consideration.

Potential investors use the discount rate to value risky cash flows. The asset/property being appraised must be valued in relation to its riskiness.

Risk-free discount rate

Capital opportunity cost based on risk free alternative investments.

Risk-reward indifference curve

A graphical illustration of the connection between perceived risk and acceptable rates of expected return in which all risk-reward combinations satisfy the investor equally.

Risk-weighted assets

The total of an institution's portfolio assets weighted by their risk classification, used to calculate regulatory capital requirements for depository institutions.

Road

A main road in a rural area that doesn't have full improvements like curbs and sidewalks.

Rod

A unit of length that is equal to 1612 feet or 512 yards. It is also the same amount of space.

16 1/2 feet is a linear unit of measurement.

ROI (or Return On Investment)

Net operating income is calculated by dividing the initial building cost by the net operating income.

Rollover

1. Refers to tax rules that allow the taxpayer to put off paying taxes in certain situations, such as when real estate is traded or when the taxpayer is forced to change their tax status.

2. In finance, the process of rewriting a new loan when an old one ends. For example, a three-year mortgage with a rollover clause lets the borrower get a new loan with different terms at the end of the three years by using a rollover note. Loans with rates that change often have this clause.

Rollover mortgage

A long-term mortgage loan with an interest rate that is modified on a regular basis.

Rollover option

A contract in which the potential buyer has the ability to renew the option one or more times for a fee.

Roof boards

Boards that are nailed on top of the rafters and usually touch each other to hold the roof together and give the roofing material a place to go. Sheets of plywood can also be used to make the boards, which are also called "roof sheathing."

Roof inspection clause

A clause that is sometimes added to a real estate sales contract that says the seller must give the buyer a certified report about the roof's type and condition. If the roof is found to be broken, the seller will have to pay to fix it.

Roofing felt

Felt or other densely woven, heavy material placed on top of the roof boards to insulate and waterproof it. Roofing felt, like building paper, is treated with bitumen or another tar derivative to increase its water resistance. Sometimes roofing felt is applied with a bonding and sealing compound or with intense heat, which softens the tar and causes it to adhere to the roof.

Roofing shingles

Roof shingles are thin, small sheets of wood, asbestos, fiberglass, slate, metal, clay, or other materials that are used as the roof's outer covering. To cover the whole roof, the tiles are put down in rows that overlap. Shingles are sometimes used on the outside of walls as a covering.

Rooming house

A house with rooms that can be rented out to people for money.

Root title

The first document or deed that gives someone the right to own land; the original source of title.

Row house

One of a group of individual homes that all look the same and share a wall. The land in front of, under, and behind the house is owned by a different person. Row houses in older parts of cities like Philadelphia and Baltimore are owned differently than townhouses in newer neighborhoods, which are usually set up as condos.

Royalty

1. The money paid to a property owner for the right to use up the property's natural resources, such as oil, gas, minerals, stone, builders' sand and gravel, and timber. Usually, the royalty payment is a set percentage of the amount taken away, such as 1/s or 1/s of the oil and gas taken away, six cents per tonne of sand and gravel taken away, or a set price per cubic yard of material taken away. The royalty payment covers rent and wear and tear (depletion charge).

2. A licensing fee.

Rubber Sheet

A procedure for nonuniformly adjusting characteristics of a digital geographic information system layer; "from" and "to" locations are used to describe the adjustment.

Rule 10-B5

A rule made by the Securities and Exchange Commission (SEC) as part of the Securities Act of 1934's rules against fraud. When buying or selling a security, it is against the law to use tricks, make false or misleading statements about important facts, or do anything else that could be seen as fraud.

Even if a private or intrastate offering of securities doesn't need to be registered, the issuer is still subject to the antifraud provisions of both federal and state securities laws. In other words, if the issuer didn't say something important, the person who bought the security would be able to get their money back plus interest from the date they bought it.

Rule 146

A rule that the Securities and Exchange Commission (SEC) put in place in 1974 to make it easier to figure out when offers or sales of securities are "not involving any public offering" and therefore don't need to be registered. For example, the act shouldn't apply when there is no public offering. It also talks about whether or not the consumer needs the protection that the Securities Act's disclosure rules offer.

Rule 146 lets anyone who is "rich and smart" make an offer, as long as the issuer knows ahead of time that the person making the offer is knowledgeable (smart) enough about real estate investments to evaluate the risk themselves, is represented by an independent adviser with such experience, and has enough money to handle a loss. The rule limits the number of sales (not offers) under $150,000 to 35. Sales above that amount are not limited. All buyers must sign a written statement that they are only buying to invest and not to resell.

Rule 147

A rule that the Securities and Exchange Commission (SEC) made in 1974 to make it clear that a security doesn't have to be registered with the SEC if it is being sold in the same state or in the same city. The rule says how to figure out who lives in a state, especially when it comes to legal entities like corporations and partnerships. If a local issuer wants to raise money for a local project but has a lot of assets (like real estate holdings) in another state, it might not be exempt. The rule also says that exempt securities can't be sold to people who don't live in the issuer's state for at least nine months after the issuer's last sale and receipt of all money from any part of the securities issue ("coming to rest").

Rule against perpetuities

A rule of law that says a future contingent interest in real property must become valid as soon as possible. This keeps the property from becoming unsellable for long periods of time. The effect of the rule is to get rid of future interests that make it hard to get property rights for longer than the required time, which is usually no later than 21 years after the interest was created. For example, if a property is given "to George Allen for life, then to his son Butch Allen for life, and remainder to Butch's children who reach age 24," the remainder does not follow the rule because it is possible that the remainder will not become valid until after 21 years of some life-in-being. For example, George and Butch could die when Butch's only child is one year old. The rule only applies to interests that could change.

Rule of 72

In finance, there is a rule of thumb that says the interest rate at which a single sum will double can be found by dividing the number of years the money is growing by 72. Example: A banker would use this formula to figure out how much the money has grown over eight years: 72 + 8 = 9%. If the money grows at a known rate, say 9%, the investor can figure out how long it will take to double: 72 years plus 9% = 8 years.

Rule of 78s

A way to figure out how much to refund for unearned finance charges on contracts with pre-calculated finance charges, so that the amount refunded is proportional to the amount still owed each month at the time the refund is given. Under this rule, the creditor would keep 1/10th of the total finance charge for the first month of a 12-month contract, 12 of the total for the second month, and so on. If the creditor held a 12-month contract for only 6 months, it would be entitled to 512 percent of the total finance charge (12 + 11 + 10 + 9 + 8 + 7 = 57). In the end, the customer would be able to get the last 21/100ths of the finance charge.

Under the truth-in-lending laws, the creditor must explain how any unearned part of the finance charge is calculated if the debt is paid off early. The Rule of 78s is the name most creditors give to their way of giving rebates.

Rule of capture

The owner of an oil or gas well may claim all of the oil or gas extracted from it, regardless of whether the oil or gas migrated from nearby land.

Rule of five

A rule of thumb that sub-dividers use to estimate how much a subdivision will cost. Usually, a quarter (20%) of the final sales price goes to the cost of buying the land, a quarter (20%) goes to costs like engineering, grading, roads, and legal fees, a quarter (20%) goes to costs like interest and carrying charges, and a fourth (20%) goes to costs like advertising, sales commissions, and the profit.

Rules of thumb

Benchmarks are shorthand terms that are used to make investing judgments. Gross rent multipliers and the overall capitalization rate are two common examples.

Run with the land

A phrase that refers to rights or agreements that bind or help each new owner of a piece of property. One example is a building restriction in a recorded deed that would apply to all future owners. Unlike an easement in gross, an easement appurtenant stays with the land and goes to the next owner even if it's not in the deed. For example, the covenant won't stay with the land if the grantee agrees, as part of a deal, to fix a building on land that the grantor, Leonard, owns. This is because it only gives the grantee a duty. The promise has nothing to do with the land that was given from the grantor to the grantee. It is just a personal promise for the benefit of the grantor. 

Runoff

The movement of water from the land as both surface and subsurface discharge; surface discharge in the form of overland flow and channel flow in the more restricted and common use.

Rural

Zoning that permits landowners to use their land to grow crops or raise livestock.

A classification of land use that has to do with rural areas, as opposed to cities; land used for farming.

Rural housing service (RHS)

A federal agency within the United States Department of Agriculture that makes loans for housing in open country, all rural communities with populations under 10,000, and most towns with populations between 10,000 and 20,000 that are outside standard metropolitan statistical areas (SMSAs) and have a severe lack of mortgage credit.

Various credit programmes are available to assist in the purchase or operation of farms, the creation of new employment and business opportunities, the improvement of the environment, and the acquisition of homes. Most programmes are divided into two categories: guaranteed loans (made and serviced by a private lender and guaranteed for a specified percentage by the FmHA) and insured loans (made and serviced by the agency). Discounts or points are not permitted with these loans, and eligible veterans are given preference.

Rurban

Having to do with those areas outside of cities but close to them where land use is changing from rural to urban.

Glossary Index

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