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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.
Identification Period
The period during which the exchanger must identify replacement property in a
1031 tax deferred exchange. The identification period starts on the day the
exchanger transfers the first relinquished property and ends at midnight on the
45th day thereafter.
Illusory Contract
An apparent contract that is not a contract because the parties have not agreed
to be bound.
Implied Agency
An agency agreement created by the actions of the parties, and not a stated
(written or verbal) agreement. (See express agency)
Implied Agreement/Contract
A contract under which the agreement of the parties is demonstrated by their
acts and conduct.
Implied Easement
When the owner of two or more adjacent properties sells a part thereof, he or
she grants by implication all those apparent and visible easements which are
necessary for the reasonable use of the property granted. (See easement)
Implied Authority
The authority of an agent to perform acts which are reasonably necessary to
accomplish the purpose of the agency.
Implied Warranty
A theory in landlord/tenant law in which the landlord renting residential
property implies quiet enjoyment of the property or that the property is
habitable. (See habitability, quiet enjoyment)
Improvement
1) Any structure, usually privately owned, erected on a site to enhance the
value of the property--for example, building a fence or a driveway.
2) A publicly owned structure added to or benefiting land, such as a curb,
sidewalk, street or sewer.
Incentive Zoning
Zoning that offers incentives to developers, such as retail shops on the first
floor of multistory office buildings if a plaza for public use is included. (See
zoning)
Income and Expense Report
A financial report generated by a property manager that details the income and
expenses from a property and the amount remitted to the owner.
Income Approach
The process of estimating the value of an income-producing property through
capitalization of the annual net income expected to be produced by the property
during its remaining useful life. (See appraisal)
Income Ratio
The relationship between a person's total income and the amount needed to make
one month's mortgage payment.
Incorporeal Right
A non-possessory right in real estate; for example, an easement or a right
of-way.
Increasing and Diminishing Returns
The addition of more improvements to land and structures which increases value
only to the assets' maximum value. Beyond that point, additional improvements no
longer affect a property's value. As long as money spent on improvements
produces an increase in income or value, the law of increasing returns applies.
At the point where additional improvements do not increase income or value, the
law of diminishing returns applies.
Independent
A brokerage firm operating on-its-own without an affiliation with a regional or
national franchise.
Independent Contractor
One who is retained to perform a certain act, but who is subject to the control
and direction of another only as to the end result and not as to how he or she
performs the act. The critical feature, and what distinguishes an independent
contractor from an employee or agent, is the degree of control the employer has
over such a person's activities.
Because many licensing laws make brokers responsible for the activities of their
salespeople, even if they are independent contractors, many brokers want to
exercise a high degree of control over such activities. However, the state
licensing laws do not preclude the establishment of independent contractor
status for tax purposes, provided the relationship is carefully structured to
avoid possible classification of such a person as an employee. A broker should
always consult a tax attorney concerning such matters. (See employee)
Index
Used to set interest rates, such as the six month Treasury bill rate. (See index
rate)
Indoor Air
Breathing air inside a habitable structure, often highly polluted because of
lack of exchange with fresh oxygen from outdoors. Solvents, smoke, paints,
furniture glues, carpet padding, and other synthetic chemicals trapped inside
contribute to an often unhealthy environment.
Industrial Broker
A real estate broker who specializes in brokering industrial real estate.
Industrial Development Bonds
A bond that allows private investors to finance apartment and commercial
development by using tax-exempt, inexpensive funds. TRA '86 imposed severe
restrictions on this financing technique.
Industrial Property/Parks
A property primarily used for the production or manufacture of goods or
products.
Industrial Revenue Bonds
Bonds issued for the development of an industrial park or the construction of a
building for lease to commercial tenants.
Inflation
The gradual reduction of the purchasing power of the dollar, usually related
directly to the increases in the money supply by the federal government.
Ingress
A way to enter a property - access. The opposite of egress.
Inheritance Taxes
An "estate" tax imposed by the state on heirs for their right to inherit
property. The tax is not levied on the property itself, but rather on the heirs
for their right to acquire the property by succession or devise. Therefore, the
rates or the deductions may vary depending on the degree of the relationship.
At the time of a person's death, a statutory lien usually attaches to all real
property interests owned by the decedent, which lien remains in effect until the
inheritance taxes have been paid and a "tax clearance" is issued. This applies
even if property was held in joint tenancy with right of survivorship. (See
estate taxes, statutory lien)
In-house Sale
A sale in which the listing broker is the only broker in the transaction; there
is no outside broker involved as in a cooperative sale. Either the listing
salesperson finds the buyer, or another salesperson working for the listing
broker finds the buyer. If the buyer is a client of the broker, the issue of
dual agency arises.
Initial Rate
The initial rate charged to a borrower for the first adjustment period of an
adjustable rate mortgage.
Injunction
A legal action whereby a court issues a writ that forbids a party defendant from
doing some act or compels the defendant to perform an act. An injunction
requires the person to whom it is directed to refrain from doing a particular
thing, such as violating deed restrictions or house rules. (See restraining
order)
Installment Contract
A contract for the sale of real estate whereby the purchase price is paid in
periodic installments by the purchaser, who is in possession of the property
even though title is retained by the seller until a future date, which may not
be until final payment. Also called a contract for deed or articles of agreement
for warranty deed.
Installment Note
A promissory note with payments of principal and interest made at designated
intervals. (See promissory note)
Installment Sale
An income tax method of reporting gain received from the sale of real estate
when the sales price is paid in installments, i.e., where at least one payment
is to be received after the close of the taxable year in which the sale occurs.
No down payment is required in an installment sale.
If certain conditions are met the taxpayer can save on taxes by postponing the
receipt of an installment and the reporting of such income to future years when
his or her other income may be lower. Thus, a taxpayer can avoid paying the
entire tax on the gain in the year of sale.
Institute of Real Estate Management (IREM)
A national organization concerned with professional management of real estate.
The professional designation conferred by IREM is ARM, Accredited Resident
Manager.
Institutional Lenders
Savings and loan associations, banks, life insurance companies and mutual
savings banks. (See noninstitutional lenders, savings and loan associations)
Insurance Companies
Insurance companies accumulate large sums of money from the premiums paid by
their policyholders. While part of this money is held in reserve to satisfy
claims and cover operating expenses, much of it is free to be invested in
profit-earning enterprises, such as long term real estate loans. Although
insurance companies are considered primary lenders, they tend to invest their
money in large, long-term loans that finance commercial and industrial
properties rather than single-family home mortgages.
Interest
A charge made by a lender for the use of money.
Interest Factor
In a table, numbers derived from formulas used to determine the present or
future value of money. Interest factors are a function of interest rate and
time, and can be derived for any combination of the two. (See future worth)
Interest-Only Loan
A term loan calling for payments of interest only, not to include any amount for
principal. (See term loan)
Interim Financing
A short-term loan usually made during the construction phase of a building
project (in this case often referred to as a construction loan).
Interim Occupancy Agreement
An agreement allowing a buyer to take possession of a property as a tenant prior
to close of escrow.
Internal Rate of Return (IRR)
A multi-year analysis of rate of return similar to Financial Management Rate of
Return (FMRR). 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).
IRRs and FMRRs are the best rate of return indicators, 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. (See Financial Management Rate of
Return (FMRR))
Intestate
The condition of a property owner who dies without leaving a valid will. Title
to the property will pass to the decedent's heirs as provided in the state law
of descent.
Intestate Succession
A succession of a property to the heirs when a person dies without a will.
Intrinsic Value
An appraisal term referring to the value created by a person's personal
preferences for a particular type of property.
Inure
1. to come into use; take or have effect.
2. to become beneficial or advantageous.
Inverse Condemnation
A property owner forcing a government to take a property by eminent domain when
that government's actions resulted in the owner's inability to use the property.
(See condemnation, eminent domain)
Investment
Money directed toward the purchase, improvement and development of an asset in
expectation of income or profits.
Investment Group Financing
Large real estate projects, such as high-rise apartment buildings, office
complexes and shopping centers, are often financed as joint ventures through
group financing arrangements like syndicates, limited partnerships and real
estate investment trusts. (See equity trust)
Investment Property Rule
The Internal Revenue Code specifies that no gain or loss should be recognized on
the exchange of property held for productive use in trade or business or for
investment if the property is exchanged for property of like kind that is to be
held for productive use in trade or business or for investment. (See like kind)
Involuntary Lien
A lien placed on property without the consent of the property owner. (See lien).
IRS Tax Lien
A federal tax lien, or Internal Revenue Service (IRS) tax lien, results from a
person's failure to pay any portion of federal taxes, such as income and
withholding taxes. A federal tax lien is a general, statutory, involuntary lien
on all real and personal property held by the delinquent taxpayer. Its priority,
however, is based on the date of filing or recording; it does not supersede
previously recorded liens.
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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