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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.
Damages
The indemnity recoverable by a person who has sustained an injury, either in
his/her person, property, or relative rights, through the act or default of
another. (See liquidated damages)
Datum
A horizontal plane from which heights and depths are measured.
Debenture
A type of long-term bond or note given as evidence of debt. Unlike a mortgage
note, a debenture is not secured by a specific property. Fannie Mae issues
debentures to finance the acquisition of mortgages in the secondary mortgage
market. If a borrower defaults on an FHA loan, the government gives
interest-bearing debentures to the mortgagee after the title is transferred to
FHA. (See Fannie Mae, FHA)
Debit
A charge on an accounting statement or balance sheet (appearing on the left-hand
column); the opposite of a credit. Used in bookkeeping and in preparing the
closing statement in a real estate transaction.
Debtor
One who owes money; a borrower, a maker of a note; a mortgagor.
Debt ratio
The relationship between a person's long term debt payments and their monthly
income.
Debt-To-Income Ratio
A borrower's monthly long term debt payments divided by the borrower's gross
monthly income and expressed as a percentage. This ratio is used by lenders to
determine if a loan applicant is qualified for the amount of the loan.
Decedent
A deceased person, especially one who has died recently.
Declaration of Condominium
The declaration includes 1. A legal description of the condominium units and the
common elements (including limited common elements-those that serve only one
particular unit); 2. A copy of the condominium's bylaws, drafted to govern the
operation of the owners' association; 3. A survey of the property; 4. An
architect's drawings, illustrating both the vertical and horizontal boundaries
of each unit; and 5. Any restrictive covenants controlling the rights of
ownership.
Declaration of Restrictions
A statement of all the covenants, conditions and restrictions (CC&Rs) that
affect a parcel of land. A subdivider may note the restrictions on the map or
plan when recording the subdivision plat. If the restrictions are numerous, the
subdivider may also prepare a separate document called a declaration, listing
all the restrictions, and then record this declaration. (See CC&Rs)
Declaratory Relief Action
An action to have a court determine the rights of parties before a violation of
rights has occurred.
Dedication
The voluntary transfer of private property by its owner to the public for some
public use, such as for streets or schools. deed A written instrument that, when
executed and delivered, conveys title to or an interest in real estate.
Declining-Balance Method
An accounting method of depreciation for income-tax purposes designed to provide
larger-than-straight-line deductions in the early years of a property's life,
and applicable to property placed in service before 1981.
The declining-balance method of calculation is applied in the IRS percentage
tables for determining ACRS depreciation deductions applicable to personal
property. The 3-, 5-, 7- and 10-year classes use the 200 percent
declining-balance method, switching to straight-line at the appropriate time,
and the 15- and 20-year classes use the 150 percent declining-balance method,
also switching to straight-line. (See depreciation, straight-line method)
Deed
A written instrument, when executed and delivered, conveys title to or an
interest in real estate. The written document conveying real property. The deed
must be executed (signed), acknowledged, and delivered to the grantee. Once
recorded at the courthouse, the original piece of paper is not needed to convey
title in the future.
Deed Executed Pursuant to Court Order
Executors' and administrator' deeds, masters' deeds, sheriffs' deeds and many
other types are all deeds executed pursuant to a court order. These deeds are
established by state.
Deed in Lieu of Foreclosure
Voluntarily signing over to a lender the property pledged as collateral on a
defaulted loan. It is an alternative to a foreclosure action. Its main
disadvantage to a lender is that the deed does not wipe out junior liens, as a
foreclosure action would. (See junior liens)
Deed in Trust
An instrument that grants a trustee under a land trust full power to sell,
mortgage and subdivide a parcel of real estate. The beneficiary controls the
trustee's use of these powers under the provisions of the trust agreement.
Deed of Trust
A voluntary lien to secure a debt deeding the property to trustees who
foreclose, sell the property at public auction, in the event of default on the
note the deed of trust secures.
Deed of Trust and Assignment of Rents
The first page of a lending instrument; identifies the parties to the agreement,
conveys title to the trustee, describes the collateral, states the terms and
conditions of the note, and refers to previously recorded "fictitious deeds of
trust."
Deed of Re-conveyance
A document used to transfer legal title from the trustee back to the borrower (trustor)
after a debt secured by a deed of trust has been paid to the lender
(beneficiary). (See trust deed (deed of trust))
Deed Restrictions
Provisions placed in deeds to control future uses of the property. (See
covenants, conditions & restrictions, restrictive covenants)
Default
The non-performance of a duty or obligation that is part of a contract. The most
common occurrence of default on the part of a buyer or lessee is non-payment of
money when due. A default is normally a breach of contract, and the
non-defaulting party can seek legal remedies to recover any loss. Defaults in
long-term leases or contracts for deed other than non-payment might be failure
to pay real estate taxes, damage to the property and so forth.
Defeasance Clause
A clause used in leases and mortgages that cancels a specified right upon the
occurrence of a certain condition, such as cancellation of a mortgage upon
repayment of the mortgage loan.
Defeasible Fee Estate
An estate in which the holder has a fee simple title that may be divested upon
the occurrence or non-occurrence of a specified event. There are two categories
of defeasible fee estates fee simple on condition precedent (fee simple
determinable) and fee simple on condition subsequent.
Defect
A condition that materially affects the value or use of residential property in
an adverse manner.
Defect of Record
Any encumbrance on a title that is made a part of the public record. Recorded
defects include judgments, deeds of trust, mortgages, other liens and easements.
(See encumbrance)
Deferred Capital Gain
The part of the realized gain that is tax deferred. (See capital gains, excluded
capital gain, realized capital gain (loss), recognized capital gain)
Deferred Maintenance
Physical deterioration of a building resulting from postponed maintenance.
Deficiency Judgment
A personal judgment levied against the borrower when a foreclosure sale does not
produce sufficient funds to pay the mortgage debt in full. If the foreclosure
sale does not bring sufficient proceeds to pay the costs of sale and the note in
full, the holder of the note may obtain a judgment against the maker for the
difference.
Delayed Exchange
A three way exchange in which the properties close at different times.
Delinquent
The status of a financial obligation, such as a mortgage loan, when it is
past-due.
Delivery
The final, unconditional and absolute transfer of a deed to the grantee so that
the grantor may not revoke it. A deed, signed but held by the grantor, does not
pass title.
Demand
The amount of goods people are willing and able to buy at a given price; often
coupled with supply. (See supply)
Density Zoning
Zoning ordinances that restrict the maximum average number of houses per acre
that may be built within a particular area, generally a subdivision. (See
zoning)
Department of Real Estate (California)
The California agency that administers the Real Estate Law, including the
licensing of real estate brokers and agents; headed by the Real Estate
Commissioner, who is appointed by the Governor and presides over the Real Estate
Advisory Commission whose ten members are appointed by and serve at the
Commissioner's discretion.
Deposit
Money offered by a prospective buyer as an indication of good faith in entering
into a contract to purchase; earnest money; security for the buyer's performance
of a contract. An earnest money deposit is not necessary to create a valid
purchase contract because the mutual promises of the parties to buy and to sell
are sufficient consideration to enforce the contract. If the buyer completes the
purchase, the deposit money is applied toward the purchase price.
Depreciation
The decrease in the value of an asset allowed when computing property value for
tax purposes. It can also be a loss in the appraised value of a property due to
physical deterioration. This latter type of depreciation is curable when it can
be remedied by repair or an addition to the property, and incurable when there
is no easy or economic remedy. (See appreciation)
Depreciable Basis
In investment real estate only structures can be depreciated. The depreciable
basis is the original basis less the value of the land. (See basis)
Descent
Acquisition of an estate by inheritance in which an heir succeeds to the
property by operation of law.
Designated Agent
A licensee authorized by a broker to act as the agent for a specific principal
in a particular transaction. A designated agent is the only agent in the company
who has a fiduciary responsibility toward the principal.
Destruction of Premises
In many states, once the sales contract is signed by both parties, the buyer
bears the risk of any damage to the property that may occur before closing. Of
course, the contract may provide otherwise.
Detached Garage
A garage that is not attached to a home. Usually found in older homes.
Deviation
The measure of how widely the individual varies from the general population.
Devisible Contract
A contract that consists of separate agreements that are not dependent on each
other. The illegality of one part will not void the balance of the contract.
Devise
A transfer of real property under a will. The donor is the devisor, and the
recipient is the devisee.
Direct Management Costs
Expenses that can be attributed to the operation of a management firm or
department. (See indirect management costs)
Direct Endorsement
The ability of an FHA-approved lender to secure FHA single- and multifamily
mortgage insurance by following FHA guidelines. Under a direct endorsement
program, applications for many of FHA's mortgage insurance programs can be
underwritten by approved lenders who certify that the mortgage complies with
applicable FHA requirements. (See mortgage insurance)
Disability
A physical or mental impairment that substantially limits one or more major life
activities, such as walking, seeing, learning and working. Disability includes a
record of such impairment or the fact of being regarded as having such
impairment. The Americans with Disabilities Act (ADA) protects individuals with
disabilities from various forms of discrimination in employment, public
services, transportation, public accommodations and telecommunication services.
A person abusing illegal drugs or alcohol is not covered, but a person who is
rehabilitated in these areas may be protected under ADA. (See handicap)
Discharge
The release of any waste into the environment from a point source. Usually
refers to the release of a liquid waste into a body of water through an outlet
such as a pipe, but also refers to air emissions.
Discharge of Contract
A contract is discharged when the agreement is terminated. Obviously, the most
desirable case is when a contract terminates because it has been completely
performed, with all its terms carried out. However, a contract may be terminated
for other reasons, such as a party's breach or default.
Disclaimer
A statement denying legal responsibility, frequently found in the form of the
statement, "There are no promises, representations, oral understandings or
agreements except as contained herein." Such a statement, however, would not
relieve the maker of any liabilities for fraudulent acts or misrepresentations.
(See hold-harmless clause)
Disclosed Dual Agency
Real estate licensing laws may permit dual agency only if the buyer and seller
are informed and consent to the broker's representation of both in the same
transaction. Although the possibility of conflict of interest still exists,
disclosure is intended to minimize the risk for the broker by ensuring that both
principals are aware of the effect of dual agency on their respective interests.
The disclosure alerts the principals that they may have to assume greater
responsibility for protecting their interests than they would if they had
independent representation. The broker must reconcile how, as agent, he or she
will discharge the fiduciary duties on behalf of both principals, particularly
providing loyalty and protecting confidential information.
Disclosure
It is the agent's duty to keep the principal informed of all facts or
information that could affect a transaction. Duty of disclosure includes
relevant information or material facts that the agent knows or should have
known.
Discount
To sell at a reduced value; the difference between face value and cash value.
Discounted Cash Flow
Used in measuring the return from a real estate investment, the present value of
a future income stream as determined by a given discount rate. (See present
worth, return on investment)
Discounting
To sell at a reduced value; the difference between face value and cash value.
Some companies specialize in buying mortgages and real estate contracts (often
referred to as paper) at a discount. Often the original lender, wanting to cash
out on the loan, will thus sell the mortgage at the current published mortgage
discount rate. If the discount rate is 12 percent, for example, the lender could
sell a $100,000 mortgage at 88 percent of its worth ($88,000 or 12 percent below
par).
Discount Rate
1. An annual competitive rate of return on total invested capital necessary to
compensate the investor for the risks inherent in a particular investment. 2.
The rate at which the Federal Reserve lends money to its eligible banks. These
are short-term loans to fulfil immediate cash needs, not supplement the bank's
capital. Thus, the discount rate is not a cost of funds indicator but more of a
signal to the banking community. (See Federal Reserve System)
Discount Points
An added loan fee charged by a lender to make the yield on a
lower-than-market-interest VA or FHA loan competitive with higher-interest
conventional loans. One discount point is equal to 1 percent of the loan amount.
Discretionary Income
Income left over for investment after allocations for bills and savings.
Disintermediation
The process of individuals investing their funds directly instead of placing
their savings with banks, savings and loan associations and similar institutions
for investment by such institutions. This bypassing of financial institutions
occurs when proportionately higher yields are available on secure investments
(such as high-grade corporate bonds, money market funds and government
securities) than can be obtained on savings deposits.
Display Ads
Newspaper and magazine advertisements sold by the column inch. More elaborate
than classified ads, display ads often include more extensive text, graphics and
photographs. (See classified ads)
Disposal
The discharge, deposit, injection, dumping, spilling, leaking, or placing of any
solid waste or hazardous waste into the environment (land, surface water, ground
water, and air).
Divided Agency
Acting for more than one party in a transaction without the knowledge and
consent of all parties thereto. This situation is considered unlawful and may be
grounds for revocation or suspension of license under Section 10176(d) of the
Business and Professions Code. (See dual agency)
Doctrine of Prior Appropriation
In states where water is scarce, ownership and use of water are often determined
by the doctrine of prior appropriation. Under this doctrine, the right to use
any water; with the exception of limited domestic use, is controlled by the
state rather than by the landowner adjacent to the water.
Documentary Transfer Tax
Tax applicable to property transfers and affixed to the grant deed; varies from
county to county, city to city.
Domicile
From domus, Latin for "house." The state where an individual has his or her
true, fixed permanent home and principal business establishment and where that
person has the intention of returning whenever he or she is absent from it. Once
established a domicile is never lost until there is a concurrence of specific
intent to abandon the old domicile, intent to acquire a specific new domicile
and actual physical presence in the new domicile.
Though a person may have residences in different states and reside there at
different times of the year, it is possible to have only one domicile. Because
domicile consists of physical presence plus an intention to make the state one's
permanent abode, such factors as local registration of autos, driver's license,
voting, paying taxes, membership in local organizations, local bank accounts and
local business interest are all important in establishing the requisite intent.
Dominant Tenement
The estate that is said to attach to and derive benefit from the servient estate
in reference to an easement appurtenant. For example, an easement road passes
over an owner's land (the servient tenement) to give access to an adjacent
parcel (the dominant tenement). The dominant tenement usually adjoins the
servient tenement. (See easement, servient tenement)
Double Taxation
One of the main disadvantages of corporate ownership of income property is that
the profits are subject to double taxation. As a legal entity, a corporation
must file an income tax return and pay tax on its profits. The portion of the
remaining profits distributed to shareholders as dividends is taxed again as
part of the shareholders' individual incomes.
Dower
The legal right or interest, recognized in some states, that a wife acquires in
the property her husband held or acquired during their marriage. During the
husband's lifetime the right is only a possibility of an interest; upon his
death it can become an interest in land. A spouse's interest in the property of
a deceased spouse.
Down Pipe
A drain pipe or similar conduit to allow water to flow from the rain gutter at
the edge of the roof to the ground.
Downzoning
A change in zoning from a higher to a lower classification or from a more active
to less active classification, such as from residential to conservation, or
multifamily to single-family use. In these cases, there is no taking under
eminent domain and thus no compensation paid to the affected landowner who
helplessly sees the property reduce in value. (See zoning)
Draws
1. An advancement of money against future earnings. 2. Periodic advances of
funds under a construction loan agreement.
Drywall
A construction material used as a basis for interior walls in a home. Drywall is
composed of an inner core of chalk with a paper facing on each side.
Dual Agency
An agency relationship in which the agent acts concurrently for both principals
in a real estate transaction. (See agency, agent, fiduciary)
Due-On-Sale-Clause
A form of acceleration clause found in some mortgages, especially savings and
loan mortgages, requiring the mortgagor to pay off the mortgage debt when the
property is sold, resulting in automatic maturity of the note as the lender's
option. This clause effectively eliminates the possibility of the new buyer's
assuming the mortgage unless the mortgagee permits the assumption, in which case
the mortgagee might increase the interest rate or charge as assumption fee.
A clause in the deed of trust or mortgage that makes the loan non-assumable by
providing the noteholder may call the loan immediately due and payable upon a
sale or conveyance of an interest in the property. The fnma/fhlmc form provides
that a lease of more than three years or a lease with an option to buy also
triggers this provision.
Dump
A land site where wastes are discarded in a disorderly or haphazard fashion
without regard to protecting the environment. Uncontrolled dumping is an
indiscriminate and illegal form of waste disposal. Problems associated with
dumps include multiplication of disease-carrying organisms and pests, fires, air
and water pollution, unsightliness, loss of habitat, and personal injury.
Duplex
A structure that provides housing accommodations for two families and supplies
each with separate entrances, kitchens, bedrooms, living rooms and bathrooms. A
two-family dwelling with the units either side by side or one above the other.
Duress
Unlawful constraint or action exercised upon a person whereby the person is
forced to perform an act against his or her will. A contract entered into under
duress is voidable.
Dwelling
Any building, structure or part thereof used and occupied for human habitation
or intended to be so used, including any appurtenances. Many municipalities have
adopted ordinances relating to the repair, closing and demolition of dwellings
unfit for human habitation.
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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