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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.
Package Loan
A real estate loan used to finance the purchase of both real property and
personal property, such as in the purchase of a new home that includes
carpeting, window coverings and major appliances.
Par
The face value of a bond or security. (See security)
Parol Evidence Rule
A rule of evidence providing that a written agreement is the final expression of
the agreement of the parties, not to be modified by oral or written
negotiations.
Partial Release Clause
A mortgage provision under which the mortgagee agrees to release certain parcels
from the lien of the blanket mortgage upon payment of a certain sum of money by
the mortgagor. The clause is frequently found in tract development construction
loans.
Partial Zoning
Zoning that does not consider its effect on other areas. (See zoning)
Participation Financing
Where a lender becomes a partner in a development.
Participation Certificates
Certificates issued by Freddie Mac backed by pools of mortgages.
Participation Mortgage
A mortgage loan wherein the lender has a partial equity interest in the property
or receives a portion of the income from the property.
Partition
Co-tenants who wish to terminate their co-ownership may file an action in court
to partition the property. Partition is a legal way to dissolve the relationship
when the parties do not voluntarily agree to its termination. If the court
determines that the land cannot be divided physically into separate parcels
without destroying its value, the court will order the real estate to be sold.
The proceeds of the sale will then be divided among the co-owners according to
their fractional interests. (See co-ownership)
Partnership
An association of two or more individuals who carry on a continuing business for
profit as co-owners. Under the law a partnership is regarded as a group of
individuals rather than as a single entity. (See general partnership, limited
partnership, joint venture)
Parts per Billion (ppb)
Units commonly used to express contamination ratios, as in establishing the
maximum permissible amount of a contaminant in water, land, or air. These ratios
can also be expressed in "parts per million (ppm)."
Parts per Million (ppm)
Units commonly used to express contamination ratios, as in establishing the
maximum permissible amount of a contaminant in water, land, or air. These ratios
can also be expressed in "parts per billion (ppb)."
Party Wall
A wall that is located on or at a boundary line between two adjoining parcels of
land and is used or is intended to be used by the owners of both properties.
Party Wall Easement
A party wall can be an exterior wall on a building that straddles the boundary
line between two lots, or it can be a commonly shared partition wall between two
connected properties. Each lot owner owns the half of the wall on his or her
lot, and each has an appurtenant easement in the other half of the wall. A
written party wall agreement must be used to create the easement rights.
Expenses to build and maintain the wall are usually shared. A party driveway
shared by and partly on the land of adjoining owners must also be created by
written agreement, specifying responsibility for expenses. (See easement,
appurtenant easement)
Passive Income
Income generated when a person is not active in a business or occupation.
Examples of situations where passive income is generated include limited
partnerships or rental income remaining after allowable deductions. (See limited
partnerships)
Passive Losses
Losses left over when deductions for annual operating expenses, loan interest,
and depreciation exceed annual rents. For tax purposes, passive losses can only
be used to offset passive income.
Pass-Throughs
Payments on securities sold in the secondary market that are sent directly to
investors. (See secondary market)
Pass-Through Security
A security issued by the Government National Mortgage Association (Ginnie Mae)
to mortgage investors. Cash flows from the underlying block individual mortgage
loans are "passed through" to the holders of the securities in pro rata share,
including loan prepayments. With a mortgage-backed security, the timely payment
of principal and interest is guaranteed by Ginnie Mae. In 1982, the Federal
National Mortgage Association (Fannie Mae) instituted its own mortgage-backed
securities program designed to attract billions of dollars into the conventional
mortgage market from pension funds and other investors. (See FHA, Fannie Mae,
Freddie Mac, Ginnie Mae, mortgage-backed securities, VA loan)
Patent
The instrument that conveys real property from the state or federal government
to an individual.
Patent Defect
A defect that is obvious from a reasonable inspection of a property.
Payee
The person to whom a debt instrument, such as a check or promissory note, is
made payable; obligee, the "receiver." (See maker, receiver)
Payment Cap
The limit on the amount the monthly payment can be increased on an
adjustable-rate mortgage when the interest rate is adjusted.
Payoff Statement
See reduction certificate.
Payor
The debtor on a promissory note or the party who makes payment to another. (See
obligor)
Percentage Fee
A property management fee expressed as a percentage of the gross collectable
income from a property. (See flat fees)
Percentage Lease
A lease, commonly used for commercial property, whose rental is based on the
tenant's gross sales at the premises. It usually stipulates a base monthly
rental plus a percentage of any gross sales above a certain amount. (See lease)
Pension Funds
Pension funds usually have large amounts of money available for investment.
Because of the comparatively high yields and low risks offered by mortgages,
pension funds have begun to participate actively in financing real estate
projects. Most real estate activity for pension funds is handled through
mortgage bankers and mortgage brokers. (See noninstitutional lenders)
Percolation
1) The movement of water downward in a circular direction through subsurface
soil layers, usually continuing downward to ground water. Can also involve
upward movement of water.
2) Slow seepage of water through a filter.
Percolation Test
A test of the soil to determine if it will absorb and drain water adequately to
use a septic system for sewage disposal.
Periodic Tenancy
A leasehold interest from period to period that renews automatically unless a
notice of termination is given.
Personal Income
A person's gross income from wages, salaries, commissions, interest and profits
from businesses or investments.
Personal Property
Things that are tangible and movable; property that is not classified as real
property, such as chattels. Title to personal property is transferred by way of
a bill of sale, as contrasted with a deed for real property.
Items of personal property frequently become the object of dispute between buyer
and seller, most often due to whether an item is considered a fixture or due to
the seller's attempt to substitute a similar item. Some cautious buyers insert a
clause in their purchase contracts to the effect that the buyer will get the
appliances "as currently installed and used in the premises."
A tree is real property while it is rooted in the ground, but when severed it is
transformed into personal property. When lumber is assembled, however, and used
as material to construct a house, it once again becomes a fixture or real
property. (See fixture)
Physical Deterioration
A reduction in a property's value resulting from a decline in physical
condition; can be caused by action of the elements or by ordinary wear and tear.
Piggyback Loans
A loan divided into two parts with one lender taking a secondary security
position.
P.I.T.I.
Acronym for Principal, Interest, Taxes & Insurance.
Planned Unit Development (PUD)
A relatively modern concept in housing designed to produce a high density of
dwellings and maximum use of open spaces. This efficient use of land allows
greater flexibility for residential land and development. It also usually
results in lower-priced homes and minimum maintenance cost. Often, PUDs are
specifically provided for in zoning ordinances or are listed as a conditional
permitted use, sometimes called planned development housing.
Plaintiff
A person who brings an action; the party who complains or sues in a personal
action and is so named on the record.
Plat Map
A map of a town, section or subdivision indicating the location and boundaries
of individual properties.
Plottage
The increase in value or utility resulting from the consolidation (assemblage)
of two or more adjacent lots into one larger lot. (See assemblage).
PMI
Acronym for Private Mortgage Insurance. (See private mortgage insurance).
Point of Beginning (POB)
In a metes-and bounds legal description, the starting point of the survey,
situated in one corner of the parcel; all metes-and-bounds descriptions must
follow the boundaries of the parcel back to the point of beginning.
Points
A percentage of the principal conventional loan amount. A lender often charges a
borrower "service-charge" points for making a loan. Points may cover expenses in
origination of the loan to increase a lender's yield or to "buy down" the rate.
In conventional financing, points may be paid by the buyer or seller.
Point Source
A stationary location or fixed facility such as an industry or municipality that
discharges pollutants into the air or surface water through pipes, ditches,
lagoons, wells, or stacks - a single identifiable source such as a ship or a
mine.
Police Power
The inherent right of the state to regulate for the purpose of promoting health,
safety, welfare, and morality. Police power gives the state the right to impose
certain restraints on human conduct which are reasonably necessary in order to
safeguard the public interest. This right is the basis of zoning, the official
map, building codes, and subdivision regulations.
Pollution
Any substances in water, soil, or air that degrades the natural quality of the
environment, offends the senses of sight, taste or smell, or causes a health
hazard. The usefulness of the natural resource is usually impaired by the
presence of pollutants and contamination.
Pollution Prevention
Actively identifying equipment, processes, and activities which generate
excessive wastes or use toxic chemicals and then making substitutions,
alterations, or product improvements. Conserving energy and minimizing wastes
are pollution prevention concepts used in manufacturing, sustainable
agriculture, recycling, and clean air/clean water technologies.
Portfolio Loan
A loan originated and maintained by the lender and not sold in the secondary
mortgage market. (See secondary mortgage market)
Potentially Responsible Party (PRP)
Any individual or company that is potentially responsible for or has contributed
to a spill or other contamination at a Superfund site. Whenever possible, EPA
requires PRP's to clean up sites they have contaminated. (See Superfund)
Power-of-attorney
A written instrument authorizing a person, the attorney-in-fact, to act as the
agent on behalf of another to the extent indicated in the instrument. (See
attorney-in-fact)
Power-of-sale clause
A clause in a mortgage authorizing the holder of the mortgage to sell the
property in the event of the borrower's default. The prodeeds from the public
sale are used to pay off the mortgage debt first, and any surplus is paid to the
mortgagor. A power-of-sale clause is also found in trust deeds, giving the
trustee authority to sell the trust property under certain circumstances.
Pressure relief valve
A valve used on hot water heating appliances to help keep the pressure in the
heated tank or boiler from getting too high by allowing the relief of pressure
from the valve.
Preliminary notice
Notifies a customer that work to be completed is subject to the lien rights of
the contractor. Preliminary notice must be given prior to recording of a
mechanic's lien, and should be filed by a contractor at least 20 days prior to
the start of work. If notice is given later, liens will cover only the work
starting 20 days prior to filing. (See mechanic's lien)
Preliminary public report
Under the Subdivided Land Law the preliminary public report can be issued before
the public report, and allows a subdivider to take reservations from buyers but
not sell parcels. (See public report, Subdivided Land Law)
Preliminary report
A title report that is made before a title insurance policy is issued or when
escrow is opened. A preliminary report or policy of title insurance reports only
on those documents having an affect on the title and should not be relied on as
being an abstract. An abstract of title, on the other hand, reflects all
instruments affecting title from the time of the original grant and also
includes a memorandum of each instrument, and makes no attempt to determine
which of the documents currently affects record title. The "preliminary" is not
a binder or commitment that the title company will insure the title to the
property, although this commitment may be obtained at an added cost. (See
abstract of title)
Premium
A fee paid to an insurance company.
Premium (in excess of par)
A price paid for a security in excess of its face value. (See par)
Prepaid items
On a closing statement, items that have been paid in advance by the seller, such
as insurance premiums and some real estate taxes, for which he or she must be
reimbursed by the buyer.
Prepayment penalty
The amount set by the creditor as a penalty to the debtor for paying off the
debt before it matures; an early-withdrawal charge. The prepayment penalty is
charged by the lender to recoup a portion of interest that the lender had
planned to earn when the loan was made. It covers the lender for initial costs
to set up the loan, to service it and to carry it in the early years of high
risk. This punitive device also may represent the loss of income to the lender
for the time the mortgage is paid off and the funds remain uncommitted. The
reason most lenders are willing to allow prepayment after five years without
penalty is that much of the total note's interest has been paid in by that time.
Prequalify
Determine the maximum loan amount a prospective buyer qualifies for prior to
showing them properties. Failing to prequalify may result in wasted efforts
showing the prospect properties they cannot afford to purchase. (See back-end
qualification, front-end qualification)
Prescription
Acquiring a right in property, usually in the form of an intangible property
right such as an easement or right-of-way, by means of adverse use of property
that is continuous and uninterrupted for the prescriptive period established by
state statute. Use of land is adverse when it is made under a claim or right.
Therefore, there is no adverse use if the owner has granted permission, or if
the user has paid for the use of the property, or if the user has admitted that
the owner has a superior right in the property.
Prescription is often used interchangeably with the term adverse possession,
which more strictly refers to the acquiring of title to lands. As in adverse
possession, the essential elements are that the prescriptive right be adverse,
under claim of right, continuous and uninterrupted, open, notorious and
exclusive, with the knowledge and acquiescence of the servient owner, and
continuing for the full prescriptive period. By "continuous" is meant that the
property is used on a regular basis.
Present worth
The discounted present-day value of money to be collected in the future.
Pressed wood products
Materials used in building and furniture construction that are made from wood
veneers, particles, or fibers bonded together with an adhesive under heat and
pressure.
Press release
A news announcement written by a property manager or advertising specialist
highlighting a property's features. Sent to local newspapers and real estate
magazines to promote a property.
Preventive maintenance
Includes regularly scheduled activities such as painting and seasonal servicing
of appliances and systems. Preventive maintenance preserves the long-range value
and physical integrity of the building. This is both the most critical and the
most neglected maintenance responsibility. Failure to perform preventive
maintenance invariably leads to greater expense in other areas of maintenance.
Price fixing
The practice of conspiring to establish fixed fees or prices for services
rendered or goods sold. In recent years, the setting of attorney fees by local
bar associations and commission percentages and management fees by local realty
associations has been successfully attacked as price fixing and thus a violation
of the Sherman Antitrust Act.
Prima facie
At first sight; on the first appearance; on the face of it; so far as can be
judged from the first disclosure; presumably; a fact presumed to be true unless
disproved by some evidence to the contrary.
Prime rate
The minimum interest rate a commerical bank will charge to its largest clients.
Prime rates are determined in part by the rate the bank pays for the money they
lend to borrowers. Decisions of the Federal Reserve Bank (The Fed) to increase
or decrease the supply of money can cause the prime rate that banks charge to
fluctuate. (See Federal Reserve System)
Primary lenders
Originators of real estate loans including commercial banks, savings and loan
associations and mutual savings banks.
Primary mortgage market
The mortgage market in which loans are originated and consisting of lenders such
as commercial banks, savings and loan associations and mutual savings banks.
(See secondary mortgage market)
Primary personal residence
The dwelling in which a taxpayer lives and occupies most of the time.
Principal
1. One of the main parties to a transaction. For example, the buyer and seller
are principals in the purchase of real property.
2. In a fiduciary relationship, the person who hires a real estate broker to
represent him or her in the sale of property. The phrase, "principals only,"
often found in real estate ads, is meant to exclude real estate agents from
contacting the owners of the property. (See fiduciary)
Principal meridian
The main imaginary line running north and south and crossing a base line at a
definite point, used by surveyors for reference in location and describing land
under the rectangular (government) survey system of legal description. (See base
line, government survey system, legal description, meridian)
Prior appropriation
A concept of water ownership in which the landowner's right to use available
water is based on a government administered permit system.
Priority
The order of position, time or place. The priority of liens is generally
determined by the chronological order in which the lien documents are recorded;
tax liens, however, have priority even over previously recorded liens. Thus the
old adage "prior in time is prior in right" is applicable.
Private mortgage insurance (PMI)
Insurance provided by private carrier that protects a lender against a loss in
the event of a foreclosure and deficiency. A special form of insurance designed
to permit lenders to increase their loan-to-market-value ratio, often up to 95
percent of the market value of the property. Many lenders are restricted to 80
percent loans by government regulations, special loss reserve requirements or
internal management policies related to mortgage portfolio mix. A lender,
however, may lend up to 95 percent of the property value if the excess of the
loan amount, over 80 percent of value, is unsured by a private mortgage guaranty
insurer. (See deficiency, foreclosure)
Private Offering
An offering of securities to no more than 25 persons and sale to no more than 10
persons.
Privity of Contract
The relationship between contracting parties (mortgagor-mortgagee or
assignee-assignor).
Probate
The formal judicial proceeding to prove or confirm the validity of a will, to
collect the assets of the decedent's estate, to pay the debts and taxes and to
determine the persons to whom the remainder of the estate is to pass. (See
decedent, will)
Procuring Clause
That effort which brings about the desired results. Also called predominant
efficient cause or the contributing cause.
Profit and Loss Statement
A detailed statement of income and expenses of a business that reveals the
operating position of the business over a period of time. Commonly referred to a
P&L.
Progression
An appraisal principle that states that, between dissimilar properties, the
value of the lesser-quality property is favorably affected by the presence of
the better-quality property. (See appraisal)
Promissory note
An unconditional written promise of one person to pay a certain sum of money to
another person, order or bearer at a future specified time. A broker who accepts
a promissory note as a deposit from a prospective purchaser must generally
disclose to the seller that the buyer's deposit is in the form of a promissory
note.
Property analysis
A study made to familiarize a property manager with the nature and condition of
a building, its relative market position, and its estimated income and operating
expenses.
Property brief
Produced by the listing agent, a property brief is simply a one-page flier about
the property pointing out attractive features. It usually contains a drawing or
photograph of the home, and is given to people the agent feels are especially
interested in the property.
Property management
That aspect of the real estate industry devoted to marketing, leasing, managing,
and the maintenance of the property of others.
Property Manager
Someone who manages real estate for another person for compensation. Duties
include collecting rents, maintaining the property and keeping up all
accounting.
Property reports
The mandatory federal and state documents compiled by subdividers and developers
to provide potential purchasers with facts about a property prior to their
purchase.
Property taxes
Assessment made by county or city assessor's office for real property taxes.
Payment dates may vary according to state regulation.
Proprietary lease
A lease given by the corporation, which owns a cooperative apartment building to
the shareholder for the shareholder's right as a tenant to an individual
apartment.
Prorations
Expenses, either prepaid or paid in arrears, that are divided or distributed
between buyer and seller at the closing.
Prospecting
Locating owners of properties who are interested in selling, or buyers who are
interested in purchasing property. (See endless chain, farming, networking)
Protected class
Any group of people designated as such by the Department of Housing and Urban
Development (HUD) in consideration of federal and state civil rights
legislation. Currently includes ethnic minorities, women, religious groups, the
handicapped and others.
Public records
Records which by law give constructive notice of matters relating to property.
Public report
A disclosure statement required by the Subdivided Land Law stating that a buyer
is not obligated until he or she has read the report and signed a receipt. (See
Subdivided Land Law)
Public water system
A system that provides piped water for human consumption to at least 15 service
connections or regularly serves 25 individuals.
Puffing
Exaggerated or superlative comments or opinions not made as representations of
fact and thus are not grounds for misrepresentation, such as, "This property is
a real good buy." One test used is whether a reasonable person would have relied
on the statement. A statement such as, "The apartment has a fantastic view, " is
puffing because the prospective buyer can clearly assess the view for himself or
herself, whereas a statement such as "The apartment has a fantastic view of the
lake," when in fact all its windows face the street, would be misrepresentation.
(See caveat emptor, misrepresentation)
Punitive damages
Damages awarded to one party to punish another party for dishonest conduct.
Meant to deter others from committing a similar offense.
Pur antre vie
"For the life of another." A life estate pur autre vie is a life estate that is
measured by the life of a person other than the grantee.
Purchase-money mortgage
A mortgage given as part of the buyer's consideration for the purchase of real
property, and delivered at the same time that the real property is transferred
as a part of the transaction. It is commonly a mortgage taken back by a seller
from a purchaser in lieu of purchase money. A purchase-money mortgage is usually
used to fill a gap between the buyer's down payment and a new first mortgage or
mortgage assumed, as when the buyer pays 10 percent in cash, gets an 80 percent
first mortgage from a bank, and then the seller takes back a purchase-money
second mortgage for the remaining 10 percent.
Pyramiding
The process of acquiring properties by refinancing properties already owned and
investing the loan proceeds in additional properties.
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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