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Real Estate Dictionary/Glossary A,
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N.B. This glossary is provided with the understanding that the author is not
providing any legal, or other professional services. If legal or real estate
advice is required, the services of a competent professional person should be
sought.
Backup Offer
An offer to buy, submitted to a seller, with the understanding that the seller
has already accepted a prior offer; a secondary offer. Sometimes the seller
accepts the backup offer contingent on the failure of the sales transaction on
the part of the first purchaser within a specified period of time. The seller
must be careful how he or she proceeds, however, when the time for the buyer's
performance, under the first contract, has expired.
Back-end Qualification
When qualifying a prospective buyer for financing, the ratio of the borrower's
income to monthly debt obligation is a primary consideration. Based on "back-end
qualification," the ratio of a prospect's income to their total housing expense
plus their long-term debt obligation should not exceed 36%. (See front-end
qualification, prequalify)
Back-end Ratio
The ratio of monthly housing costs plus long-term debt service to total monthly
income.
Bail Bond Lien
A real estate owner who is charged with a crime for which he or she must face
trial, and may post bail in the form of real estate rather than cash. The
execution and recording of such a bail bond creates a specific, statutory,
voluntary lien against the owner's real estate. If the accused fails to appear
in court, the lien may be enforced by the sheriff or another court officer.
Balance
The appraisal principle that states that the greatest value in a property will
occur when the type and size of the improvements are proportional to each other
as well as the land.
Balanced Trust
A "combination trust" is referred to as a "balanced trust" in California. (See
combination trust)
Balloon Payment
Under an installment loan agreement, a final payment that is substantially
larger than the previous installment payments and repays the debt in full; the
remaining balance that is due at maturity (stop date) of a note or obligation.
(See amortization, fully amortized, stop date)
Baluster
Any of the vertical supports for a stair, balcony or railing.
Banker's Rule
Using a 360-day year for prorations.
Bankruptcy
A provision of federal law whereby a debtor surrenders his assets to the
bankruptcy court and is relieved of the future obligation to repay his unsecured
debts. A condition of financial insolvency in which a person's liabilities
exceed assets and the person is unable to pay current debts.
Bankruptcy Score
A scoring system to indicate risk of borrower default. (See bankruptcy)
Bargain and Sale Deed
A deed that carries with it no warranties against liens or other encumbrances
but that does imply that the grantor has the right to convey title. The grantor
may add warranties to the deed at his or her discretion.
Base Line
One of a set of imaginary lines running east and west used by surveyors for
reference in locating and describing land under the government survey method of
property description.
Basic Form Homeowner's Policy
The most common homeowner's policy is called a basic form. It provides property
coverage against fire and lightning; glass breakage; windstorm and hail;
explosion; riot and civil commotion; damage by aircraft; damage from vehicles;
damage from smoke; vandalism and malicious mischief; theft; and loss of property
removed from the premises when it is endangered by fire or other perils. (See
homeowner's insurance policy)
Basis
The dollar amount that the Internal Revenue Service attributes to an asset for
purposes of determining annual depreciation or cost recovery, and gain or loss
in the sale of the asset. The determination of basis is of fundamental
importance in tax aspects of real estate investment.
Before-Tax Cash Flow
The result when the annual debt service is subtracted from the net operating
income. (See annual debt service, net operating income)
Benchmark
A permanent reference mark or point established for use by surveyors in
measuring differences in elevation.
Beneficiary
A person named to receive a benefit from a trust or person who receives benefits
from the gifts or acts of another.
Beneficiary Statement
When an existing loan is to be paid or assumed by a buyer, the escrow agent will
obtain a statement of the balance due on the loan so the buyer receives the
proper amount of credit.
Best-Faith Estimate
The acquisition cost is the purchase price plus a "best-faith estimate" of all
settlement costs.
Blended Rate
An interest rate for a newly financed loan that is higher than the existing rate
but lower than the current market rate.
Bilateral Contract
A contract in which each party promises to perform an act in exchange for the
other party's promise to perform. The usual real estate contract is an example
of a bilateral contract in which the buyer and seller exchange reciprocal
promises respectively to buy and sell the property. If one party refuses to
honor his or her promise and the other party is ready to perform, the
nonperforming party is said to be in default.
Bill of Sale
A written agreement by which one person sells, assigns or transfers to another
his or her right to, or interest in, personal property. A bill of sale is
sometimes used by a seller of real estate to evidence the transfer of personal
property, such as when the owner of a store sells the building and includes the
store equipment and trade fixtures.
BIF
Bank Insurance Fund
Binder
An agreement that may accompany an earnest money deposit for the purchase of
real property as evidence of the purchaser's good faith and intent to complete
the transaction.
Binder Policy
A type of title insurance policy offered by some title companies which allows
for a refund of the basic title insurance rate if the property is sold within a
specified period of time.
Biweekly Loan
A loan with twice-monthly payments to match a borrower's payroll schedule.
Blanket Loan
A mortgage covering more than one parcel of real estate, providing for each
parcel's partial release from the mortgage lien upon repayment of a definite
portion of the debt.
Blanket Trust Deed
A trust deed secured by several properties or a number of lots. A blanket
mortgage is often used to secure construction financing for proposed
subdivisions or condominium development projects. The developer normally seeks
to have a "partial release" clause inserted in the mortgage so that he or she
can obtain a release from the blanket loan for each lot as it is sold, according
to a specified release schedule.
Blind Ad
An advertisement that does not include the name and address of the person
placing the ad, only a phone number or post office box address. Licensed brokers
are generally prohibited by state license laws from using blind ads.
Blockbusting
An illegal and discriminatory practice whereby one person induces another to
enter into a real estate transaction from which the first person may benefit
financially by representing that a change may occur in the neighbourhood with
respect to race, sex, religion, colour, handicap famial status or ancestry of
the occupants. A change possibly resulting in the lowering of the property
values, a decline in the quality of schools or an increase in the crime rate.
Blue-Sky Provision
Requiring full disclosure of all risks in a limited partnership solicitation
under the Uniform Partnership Act. (See Uniform Partnership Act)
Bona Fide
In good faith, honestly, openly, and sincerely and without deceit or fraud. In
an attitude of trust and confidence, without notice of fraud.
Bond
An amount of money, often posted with the court, to guarantee against loss as a
result of a possible claim. A written promise that accompanies a mortgage and is
evidence of the debt secured by the mortgage, or an interest-bearing certificate
issued by a government to finance public projects.
Boot
Money or other property that is not like-kind, which is given to make up any
difference in value or equity between exchanged properties. Boot may be in the
form of cash, notes, gems, the market value of an asset such as a mortgage, land
contract, personal property, goodwill, a service or a patent offered in an
exchange. The taxable gain in the like-kind exchange is recognized immediately
to the extent of boot, whereas, other gain from the exchange may be deferred
until subsequent transfer. (See exchange, like-kind)
Branch Office
A secondary place of business apart from the principal or main office from which
real estate business is conducted. A branch office usually must be run by a
licensed real estate broker working on behalf of the broker.
Breach of Contract
Violation of any of the terms or conditions of a contract without legal excuse;
default; non-performance. The non-breaching party can usually seek one of three
alternative remedies upon a material breach of the contract rescission of the
contract, action for money damages or an action for specific performance.
Breaker
A switch-like device in electrical panel boxes used to keep the electrical
current from exceeding the recommended load for the wire size connected to the
breaker.
Breaker Panel
A large rectangular shaped electrical box used to distribute electricity
throughout a house after passing through protective breakers located within the
box. (See breaker)
Break-Even Point
In income property, the figure at which rental income is equal to expenses and
debt service.
Bridge Loan
A short-term loan made to cover the period between the termination of one loan,
such as an interim construction loan, and the beginning of another loan, such as
a permanent takeout loan.
Broad-Form Homeowner's Policy
Covers falling objects; damage due to the weight of ice, snow or sleet; collapse
of all or part of the building; bursting, cracking, burning or bulging of a
steam or hot water heating system or of appliances used to heat water;
accidental discharge, leakage or overflow of water or steam from within a
plumbing, a heating or an air-conditioning system; freezing of plumbing, heating
and air-conditioning systems and domestic appliances; and injury to electrical
appliances, devices, fixtures and wiring from short circuits or other
accidentally generated currents.
Broker
One who acts as an intermediary on behalf of others for a fee or commission.
Broker Cooperation
Working with outside licensed real estate brokers who have prospective tenants
in exchange for a finder's fee or commission split.
Brokerage
The bringing together of parties interested in making a real estate transaction.
The business of a broker in acting as a third party agent to a transaction.
Brownfields
Economically depressed urban areas suffering from real or perceived hazardous
material contamination.
Budget Loan
A loan with payments set up to cover taxes and insurance in addition to interest
and principal reductions.
Building Code
An ordinance that specifies minimum standards of construction for buildings to
protect public safety and health. (See Uniform Building Code)
Building Inspection
An overall inspection of a home or building performed by a qualified contractor
or inspector. The inspection usually covers all major systems including
foundation, plumbing, electrical, roof, heating and air conditioning.
Building Owners and Managers Association
A national organization of more than 4,000 professionals in the highrise/office
building industry, with 80 local BOMA associations.
Building Permit
Written governmental permission for the construction, alteration or demolition
of an improvement, showing compliance with building codes and zoning ordinances.
Build-up Rate
The discount or interest rate used in the selection of the capitalization rate
for an investment property.
Building Restriction Line
A required set-back a certain distance from the road within which no building
may take place. This restriction may appear in the original plat of subdivision,
restrictive covenants or by building codes and zoning ordinances.
Bulk Sales Act
An act that requires the recording and publication of a sale that is not in the
normal course of business. The act is intended to give notice to the creditors
of the seller so they can protect their interests.
Bulk Sales Transfer
Any transfer in bulk (and not a transfer in the ordinary course of the seller's
business) of a major part of the materials, inventory or supplies of an
enterprise. The Uniform Commercial Code (UCC) regulates bulk transfers to deal
with such commercial frauds as a merchant selling out stock, pocketing the
proceeds and leaving creditors unpaid. The UCC requires the buyer of the goods
to demand that the seller provide a schedule of all the property and a list of
all creditors and that the buyer give notice to creditors of the pending sale.
Bulk Transfer of Goods
Any transfer in bulk of a substantial part of the materials, supplies,
merchandise, equipment or other inventory of an applicable enterprise that is
not in the ordinary course of the transferor's business.
Bulk Zoning
Zoning for density. Regulates height restrictions, open-space requirements,
parking and setback.
Bullet Loan
A loan that includes a call date earlier than its normal amortization period;
also called a renegotiable rate loan or a rollover loan.
Burden of Proof
The obligation to prove the truth or falsity of a fact.
Bundle of Legal Rights
The concept of land ownership that includes ownership of all legal rights to the
land. For example, possession, control within the law and enjoyment.
Business Cycle
The wavelike movement of increasing and decreasing economic prosperity
consisting of four phases expansion, recession, contraction and revival.
Business Opportunity
Any type of business that is for sale (also called business brokerage). The sale
or lease of the business and goodwill of an existing business, enterprise or
opportunity, including a sale of all or substantially all of the assets or stock
of a corporation, or assets of partnership or sole proprietorship.
Buy Down
A financing technique used to reduce the monthly payments for the first few
years of a loan. Funds in the form of discount points are given to the lender by
the builder or seller to buy down or lower the effective interest rate paid by
the buyer, thus reducing the monthly payments for a set time.
Buyer Listing
An agreement where a buyer agrees to pay a commission if a broker locates a
property that the buyer purchases.
Buyer's Agent
A residential real estate broker or salesperson who represents the prospective
purchaser in a transaction. The buyer's agent owes the buyer/principal the
common-law or statutory agency duties.
Buyer-Agency Agreement
A principal-agent relationship in which the broker is the agent for the buyer,
with fiduciary responsibilities to the buyer. The broker represents the buyer
under the law of agency.
Buyer's Broker
A broker who represents the buyer in a fiduciary capacity. Some buyer's brokers
practice single agency, in which they represent either buyers or sellers, but
never both in the same transaction. Some buyer's brokers represent only buyers
and refer prospective sellers to other brokers. The broker is paid by the buyer,
or through the seller or listing broker at closing, provided all parties
consent.
Buying Motives
Ownership of real estate satisfies certain basic human needs. These needs are
what motivate a person to purchase real property. They include comfort and
convenience, desire for profit, pride of ownership, and security.
Buying on Contract
A type of contract used in connection with the sale of real property where the
seller retains legal title to the property until some future date, usually when
the full purchase price has been paid. Referred to as one of four terms, all
meaning much the same thing agreement to convey, contract for deed, contract of
sale, or installment sales contract.
Buying Signals
Words, actions or facial expressions that signal a prospect's readiness to buy.
Buyer's Remorse
Buyers of expensive items, like a home or automobile, sometimes regret their
decision. They wonder if they paid too much or made the wrong selection. This
fear of having made a serious mistake is referred to as "buyer's remorse."
Real Estate Dictionary/Glossary A,
B,
C,
D,
E,
F,
G,
H,
I,
J,
K,
L,
M,
N,
O,
P,
Q,
R,
S,
T,
U,
V,
W,
X,
Y,
Z
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