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Real Estate Dictionary/Glossary A,
B,
C,
D,
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F,
G,
H,
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K,
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X,
Y,
Z
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.
401(k) Four Zero One Retirement Plan
401(k) retirement plans allow an individual to contribute part of their
"pre-tax" income to an investment account. Pre-tax contributions are not
tax-free, they are tax-deferred, meaning the person does not pay income tax on
this money until they withdraw it from the plan (which should be at retirement).
Some companies offer to "match" the individual's contribution as an incentive to
join the company's retirement plan.
Depending on the provisions of a company's retirement plan, a person may take a
loan from their 401(k) account, however, not all plans allow for loans. The loan
is paid back, plus interest (a fixed rate determined at the time of the loan),
through after-tax payroll deductions. As long as the individual repays the loan
on time, they are not subject to withholding taxes or penalties.
Fair Credit Reporting Act
The Fair Credit Reporting Act gave consumers the right of access to, and
correction of, credit reports. (See credit report)
Fair Employment and Housing Act
California's Fair Employment and Housing Act (FEHA) (Sections 13100-13196 of the
Government Code) prohibits housing discrimination based on marital status as
well as race, color, religion, sex, national origin or ancestry. The Department
of Fair Employment and Housing enforces the law, which is based on the former
Rumford Fair Housing Act.
Fair Housing Act
Pursuant to the federal Fair Housing Act, any offer to sell, rent, buy, or
exchange property shall not contain any preference, limitation, or
discrimination based on race, color, religion, sex, national origin, handicap,
familial status, or an intention to make such preference, limitation or
discrimination.
Fair Housing Amendment Act of 1988
Extends the Civil Rights Act of 1968 to cover handicapped persons and families
with children.
Familial Status
Familial status is defined as one or more individuals who have not obtained the
age of eighteen (18) years, being domiciled with a parent or other person having
custody, or anyone who is pregnant. It is therefore unlawful to refuse housing
to anyone with children under the age of 18 or anyone who is pregnant, except
when such housing meets the definition of housing for older persons.
Farm Credit System
A national banking system for financing the activities of farmers and ranchers.
Farming
Prospecting an area for buyers or sellers.
Farm Service Agency (FSA)
Formerly the Federal Agricultural Mortgage Corporation (FAMC or Farmer MAC), the
FSA is a federal agency of the Department of Agriculture. FSA offers programs to
help families purchase or operate family farms. It also provides loans to help
families purchase and improve single-family homes in rural areas. The FSA
provides assistance to rural and agricultural businesses and industry through
the Rural Business and Cooperative Development Service. Loan programs fall into
two categories guaranteed loans, made and serviced by private lenders and
guaranteed for a specific percentage by FSA, and loans made directly by the FSA.
Federal Deposit Insurance Corporation (FDIC)
An independent federal agency that insures the deposits in commercial banks.
Federal Funds Rate
The interest rate the Federal Reserve charges its member banks on
uncollateralized loans.
Federal Housing Administration (FHA)
A federal agency established in 1934 under the National Housing Act to encourage
improvement in housing standards and conditions, to provide an adequate
home-financing system through the insurance of housing mortgages and credit and
to exert a stabilizing influence on the mortgage market. FHA was the
government's response to a lack of quality housing, excessive foreclosures and a
building industry that collapsed during the depression.
Federal Home Loan Bank System (FHLB)
Regulates the nation's savings and loan associations, much like the Federal
Reserve governs the commercial banking industry.
Federal Home Loan Mortgage Corporation (FHLMC)
Commonly known as "Freddie Mac," a federally chartered corporation established
in 1970 for the purpose of purchasing mortgages in the secondary market. Freddie
Mac was created as a part of the savings association system and, while it is not
so limited, its loan purchase policies are designed to accommodate savings
association needs. It functions with an independent board of directors but is
subject to oversight by HUD.
Federal National Mortgage Association (FNMA)
Popularly known as "Fannie Mae," an active participant in the secondary mortgage
market. Fannie Mae was established as a federal agency in 1938 for the purpose
of purchasing FHA loans from loan originators to provide some liquidity for
government-insured loans in a depression-wracked economy when few lending
institutions would undertake this type of loan.
Federal Reserve System ("the Fed")
The nation's central bank created by the Federal Reserve Act of 1913. Its
purpose is to help stabilize the economy through the judicious handling of the
money supply and credit available in this country. The system functions through
a seven-member Board of Governors (appointed by the President) and 12 Federal
Reserve District Banks, each with its own president. The system sets policies
and works with the privately owned commercial banks.
Federal Water Pollution Control Act
Enacted by Congress in 1972, this federal law administered by the EPA regulates
the release of pollutants into navigable waters.
Fee Appraiser
A non-salaried appraiser who is paid a fee for the appraisal assignments
performed.
Fee Simple
The maximum possible estate one can possess in real property. A fee simple
estate is the least limited interest and the most complete and absolute
ownership in land; it is of indefinite duration, freely transferable and
inheritable. Fee simple title is sometimes referred to as "the fee." (See fee
title)
Fee Simple Absolute
The maximum possible estate or right of ownership of real property, continuing
forever.
Fee Simple Defeasible
An estate in land in which the holder has a fee simple title subject to being
divested upon the happening of a specified condition; also called a qualified
fee or a defeasible fee. There are two categories of fee defeasible estates--fee
simple determinable and fee simple subject to a condition subsequent. The term
fee simple determinable implies that the duration of the estate can be
determined from the deed itself. This is not true of a fee simple subject to a
condition subsequent, in which case the estate's duration depends on the
grantor's independent choice of whether to terminate the estate.
Fee Title
The maximum possible estate one can possess in real property. A fee title estate
is the least limited interest and the most complete and absolute ownership in
land; it is of indefinite duration, freely transferable and inheritable. A "fee
title" is sometimes referred to as "the fee."
Feudal System
A system of ownership usually associated with pre-colonial England, in which the
king or other sovereign is the source of all rights. The right to possess real
property was granted by the sovereign to an individual as a life estate only.
Upon the death of the individual title passed back to the sovereign, not to the
decedent's heirs.
Fictitious Business Name
A business name other than that of the person under whom the business is
registered. Most state license laws require such brokerage offices operating
under an assumed name be jointly registered under the supervising broker's name
and the fictitious business name.
FICO
Acronym for "Fair, Isaac & Company." FICO is the most commonly used scoring
system used by lenders to derive credit scores for borrowers.
Fictitious Deed of Trust
Comprehensive master deeds of trust are established by lenders to cover all
areas of trust deed finance. (See deed of trust)
Fiduciary
A relationship that implies a position of trust or confidence wherein one person
is usually entrusted to hold or manage property or money for another. The term
fiduciary describes the faithful relationship owed by an attorney to a client or
by a broker (and salesperson) to a principal. The fiduciary owes complete
allegiance to the client. Among the obligations that a fiduciary owes to his or
her principal ane the duties of loyalty, obedience and full disclosure; the duty
to use skill, care and diligence; and the duty to account for all monies.
Filled Land
An area of a property where the grade has been raised by depositing dirt, gravel
or rock. Under most circumstances a seller (broker) has a duty to disclose to a
buyer the fact that a property is on filled land.
Final Escrow Instructions
Statements prepared by the escrow agent which reflect the final figures and
instructions required to close escrow. (See escrow instructions)
Financing Statement
Security interests in chattels (personal property) are created by an instrument
known as a security agreement. To give notice of a security interest, a
financing statement must be recorded. (See personal property, Uniform Commercial
Code)
Financial Institutions Reform, Recovery and Enforcement Act (FIRREA)
Legislation that abolished the FSLIC and established a new deposit insurance
fund, SAIF, for savings institutions; appropriated funds and created the
Resolution Trust Corporation to dispose of failed thrifts; imposed wide-ranging
changes in savings institution investment activities and operations; and created
the Office of Thrift Supervision as part of a restructuring of the federal
thrift regulatory and supervisory systems. (See Office of Thrift Supervision,
Resolution Trust Corporation)
Financial Intermediaries
A financial institution that accepts deposits and makes loans.
Financial Management Rate of Return (FMRR)
A multi-year analysis of rate of return. Used by investors in medium and large
properties (occasionally on small properties). Multi-year cash flows and net
sale proceeds are analyzed using discounted cash flow techniques to solve for
the Financial Management Rate of Return (FMRR).
FMRRs are the best rate of return indicator, because they require an analysis of
the investor's entire holding period, not just a single year. The discounting
process takes into consideration the time value of money, and thereby produces a
more realistic rate of return.
Financial Statement
A brief summary of a person's assets, liabilities and earnings records.
Finder's Fee
A fee paid to someone for "finding" either the buyer to purchase or the seller
to list a property.
Fire Insurance Requirement Form
A statement signed by the "borrower" agreeing to comply with the lender's
requirements for fire insurance coverage.
Fire Rating
A rating of the length of time it takes a fire to penetrate a barrier.
Designates the ability of a material to contain a fire in a carefully controlled
test setting for a specified period of time. A material tested in a laboratory
that adequately contains a fire for two hours and meets other requirements
during the laboratory fire test, is given a two-hour fire resistance rating.
Fire-resistance ratings are based on full-scale tests under controlled
conditions and are generally recognized by building code authorities and fire
insurance rating bureaus. Requirements for fire-resistance ratings are usually
set by local building code officials based on the expected occupancy of the
building.
Fiscal Policy
The government's policy in regarding to taxation and spending programs. The
difference between these two areas determines the amount of money the government
will withdraw from or feed into the economy, which can stimulate or restrain
economic growth.
Fixed Expenses
Those recurring expenses that have to be paid regardless of whether the property
is occupied; for example, real property taxes, hazard insurance and debt
service. These expenses contrast with operating expenses necessary to maintain
the production of income from the operation of a property. (See operating
expenses)
Fixed-Fee
A contractor submits a bid proposing a fixed amount to do a job. Most
construction bids are made on this basis. (See cost-plus)
Fixed-Rate Loan
A loan with the same rate of interest for the life of the loan.
Fixtures
An article that was once personal property but has been so affixed to real
estate that it has become real property. Whether an article is a fixture depends
on the intention of the parties and may be determined by the manner in which the
item is attached, its type and adaptability to the real property, the purpose it
serves, and the relationship of the parties.
Flashing
Sheet metal or other impervious material used in roof and wall construction as a
barrier to water seepage.
Flat Fee
A property management fee expressed as a dollor amount per year or month. (See
percentage fees)
Flood Hazard Areas
Locations specified on Federal Emergency Management Agency (FEMA) maps
indicating areas that are subject to flooding. The seller's agent is required to
inform potential buyers if the agent has knowledge that a property is located in
such an area.
Flue
The pipe or conduit that allows combustion gasses to exit the house. (See
combustion gasses)
Flush
To open a cold-water tap to clear out all the water that may have been sitting
for a long time in the pipes. In new homes, to flush a system means to send
large volumes of water gushing through the unused pipes to remove loose
particles of solder and flux.
Forbearance
The act of refraining from taking legal action despite the fact that payment of
a promissory note in a mortgage or deed of trust is in arrears. It is usually
granted only when a borrower makes a satisfactory arrangement by which the
arrears will be paid at a future date.
Formaldehyde
A colourless, pungent, and irritating gas, used chiefly as a disinfectant and
preservative and in synthesizing other compounds like resins. (See
urea-formaldehyde)
For Sale By Owner
Some owners choose to sell their own property without the aid of a real estate
broker. "For Sale By Owner" properties are often a source of listings when the
owner is unsuccessful finding qualified buyers.
Foreign Investment in Real Property Tax Act (FIRPTA)
Enacted by the United States Congress in 1985, the act requires buyers to
withhold estimated taxes equal to 10% of the sale price of a property sold or
exchanged by a foreign person. The withholdings must be reported and paid to the
Internal Revenue Service within 10 days of closing. The act applies to sales of
personal residences with prices of $300,000 or more.
Foreclosure
A legal procedure whereby property used as security for a debt is sold to
satisfy the debt in the event of default in payment of the mortgage note or
default of other terms in the mortgage document. The foreclosure procedure
brings the rights of all parties to a conclusion and passes the title in the
mortgage property to either the holder of the mortgage or a third party who may
purchase the realty at the foreclosure sale, free of all encumbrances affecting
the property subsequent to the mortgage. There are three general types of
foreclosure proceedings judicial foreclosure, nonjudicial foreclosure and strict
foreclosure.
Form Appraisal Report
Any of the relatively brief standard forms prepared by agencies such as the
Federal Home Loan Mortgage Corporation and Federal National Mortgage Association
and others for routine property appraisals. Narrative appraisal report A
detailed written presentation of the facts and reasoning behind an appraiser's
estimate of value.
Fractional Basis
Each property in the improvement district is charged a prorated share of the
total amount of the special tax assessment. The share is determined either on a
fractional basis (four houses may equally share the cost of one streetlight) or
on a cost-per-front-foot basis (wider lots incur a greater cost than narrower
lots for street paving and curb and sidewalk installation).
Fractional Section
A parcel of land less than 160 acres, usually found at the edge of a rectangular
survey. Undersized or oversized sections are classified as fractional sections.
Fractional sections may occur for a number of reasons. In some areas, for
instance, the rectangular survey may have been made by separate crews and gaps
less than a section wide remained when the surveys met. Other errors may have
resulted from the physical difficulties encountered in the actual survey. For
example, part of a section may be submerged in water.
Franchise
1. A privilege granted to conduct certain service businesses, such as a
franchise real estate brokerage.
2. The private contractual right to operate a business using a designated trade
name and the operating procedures of the parent company (the franchisor). Such
firms as Century 21 and Coldwell Banker operate national franchise brokerages.
Franchise Investment Law
Administered by the California corporations commissioner, the law requires
disclosure from the franchisor to the franchisee and is intended to protect
prospective purchasers of franchises. (See franchise)
Fraud
Any form of deceit, trickery, breach of confidence or misrepresentation by which
one party attempts to gain some unfair or dishonest advantage over another.
Unlike negligence, fraud is a deceitful practice or material misstatement of a
material fact, known to be false, and done with intent to deceive, or with
reckless indifference as to its truth, and relied on by the injured party to his
or her damage.
Freehold Estate
An estate in land in which ownership is for an indeterminate length of time, in
contrast to a leasehold estate.
Friable
The breaking down of a substance into tiny filaments and particles. Asbestos is
harmful only if it is disturbed or exposed, as often occurs during renovation or
re-modeling. Asbestos is highly friable. This means that as it ages, asbestos
fibres break down easily into tiny filaments and particles. When these particles
become airborne, they pose a risk to humans.
Friable Asbestos
Any material containing more than one-percent asbestos, and that can be crumbled
or reduced to powder by hand pressure. (See asbestos, friable)
Frivolous
Void of significance or reason; of little or no worth, or importance; not worthy
of serious notice; trivial; unimportant.
Front-end Zero
Under a conventional loan, a borrower may elect to finance all of the mortgage
insurance premium, thus incurring no cash obligation for this charge at closing.
(See mortgage insurance premium)
Front-end Qualification
When qualifying a prospective buyer for financing, the ratio of the borrower's
income to monthly debt obligation is a primary consideration. (See back-end
qualification, pre-qualify)
Front-end ratio
The ratio of monthly housing cost (PITI) to gross monthly income. (See back-end
ratio, PITI)
Front Footage
The measurement of a parcel of land by the number of feet of street or road
frontage.
Fructus Industriales
Corn, wheat and other crops that are produced annually by labour and industry,
and not spontaneously. They are referred to in Latin as "fructus industriales."
(See emblements)
Fully Amortized
Fully amortized mortgages are paid in equal monthly installments, which include
interest and amortization of principal, paid over a period of years. The
interest is set at a predetermined rate and is charged only on the loan balance.
As payments are made, the amount allocated to interest decreases while the
amount allocated to principal increases. At the end of the term the mortgage
will be paid in full, including interest. No balloon payment is required. (See
amortization, balloon payment)
Functional Obsolescence
A loss of value to an improvement to real estate arising from functional
problems, often caused by age or poor design.
Funding Fee
A percentage of the loan amount charged on VA loans to provide for
administrative costs. The fee has increased over time and is higher for
subsequent use by veterans, reservists and National Guard.
Funding Letter
Cover letter prepared by the escrow agent to the lender detailing the documents
being forwarded to the lender to complete the borrower's loan and release the
loan proceeds to escrow.
Future Interest
A person's present right to an interest in real property that will not result in
possession or enjoyment until some time in the future, such as a reversion or
right of reentry.
Future Worth
The compounding increase in the value of money over time.
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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