Real Estate Dictionary
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Dictionary Real Estate 2

Dictionary Real Estate - Page Two


CALENDAR YEAR - A year that uses the actual number of days in each month, which total up to 365 days for a regular year and 366 days in a leap year.

CALL OPTION - A provision or term that is part of the conditions of a loan and which allows the lender to accelerate the repayment of the debt. Depending on the particular agreement, the lender may demand an immediate full repayment of the loan, or may require repayment at the end of a stated period, or for a specific reason.

CAP - A limitation placed upon the how much the monthly payment or the interest rate on an Adjustable Rate Mortgage (ARM; Adjustable Mortgage Loan; Variable Rate Mortgage) can move up or down (the maximum allowable increase or decrese) at a specified adjustment time. 

The Cap may apply to the complete lifetime (term) of the loan or only on each of the loan’s regular adjustments.

CAPITAL GAIN - For use by the Internal Revenue Service, the capital gain is the total taxable profit one receives from an appreciated capital asset, such as a home or other real property (real estate), stocks, or other capital assets.

CAPITAL IMPROVEMENT - Any structure or part of a structure added as a permanent improvement to real property. A Capital Improvement increases the property’s value or serves to extend the useful life of the property.

CASH AVAILABLE FOR CLOSING - Funds which are available to a buyer of real property to be used for closing costs as well as the down payment.

CASH-OUT-REFINANCE (Cash Out Refinance; Cash Out; Cash-Out) - A refinance loan in which a borrower receives all funds over and above (in excess of) the money needed to ay off the existing mortgage as well as any closing costs, loan points, and other costs (e.g., subordinate items).

CAVEAT EMPTOR - A latin phrase meaning “Let the buyer beware.” In terms of real estate, a more appropriate term today is Caveat Venditor (Let the Seller Beware) because the seller (e.g., seller’s real estate agent) is required to disclose any major defects to the buyer.

CC&R’s--See Covenants, Conditions, and Restrictions.

CCCS--See Consumer Credit Counseling Service.

CCIM--See Certified Commercial Investment Member.

CERTIFIED COMMERCIAL INVESTMENT MEMBER (CCIM) - An acronym for Certified Commercial Investment Member, a designation that is conferred upon (awarded to) experts in valuation and investment analysis, commercial real estate brokerage, and asset management, by the Commerical Invstment Real Estate Institute (CIREI). The CCIM designation requires an intensive education program as well as a comprehensive examination and experience in the field of commercial real estate investment.

CERTIFIED RESIDENTIAL SPECIALIST (CRS) - This professional designation is awarded to experienced real estate agents who complete a required course of study in the area of residential real estate and also are able to demonstrate a required proficiency in real estate sales and production.

Certified Residential Specialist Designees are members of the Residential Sales Council, which is a not-for-profit affiliate of the National Association of Realtors®.

CEILING - An upper limit on the interest rate that may be applied over the term (lifetime) of an Adjustable Rate Mortgage (ARM; Adjustable Mortgage Loan; Variable Rate Mortgage). Also see Rate Cap.

CENSUS - An official count, as required by the United States Constitution every decade, of the number of persons in a particular area (e.g., city, county, district, state, country). The U.S. census gathers information about age, gender, family status, and also economic and social status. This information is sometimes used by real estate agents to research the demographics of a particular area to see if it is suitable for a particular client.

CERCLA - Acronym for the Comprehensive Environmental Response Compensation and Liability Act, a federal law that is also known as the Superfund. The CERCLA was enacted to provide money for cleaning up hazardous waste sites and also to set standards for cleaning up hazardous waste.

CERTIFICATE OF ELIGIBILITY - The written verification provided by the Veterans Administration proving a veteran’s service qualifications and providing evidence that the veteran is eligible to receive a mortgage loan (for a home business, or mobile home) that is guaranteed by the Veterans Administration.

CERTIFIED INTERNATIONAL PROPERTY SPECIALIST (CIPS) - An acronym for Certified International Property Specialist, a designation that the National Association of Realtors® confers upon (awards to) real estate agents achieving the specified international experience and education requirements.

CERTIFIED REAL ESTATE BROKER MANAGER (CRB) - A designation awarded by the Real Estate Brokerage Managers Council to managers who complete the CRB Management Series amd also meet the extensive requirements in management experience.

CERTIFICATE OF OCCUPANCY - Verification in writing showing approval by a government agency, such as the local Building Department, that a structure meets local building standards and requirements, and thus may be legally occupied.

CERTIFICATE OF REASONABLE VALUE (CRV) - A Department of Veterans Affairs estimate of the value of a particular piece of real property based upon their approved appraisal. 

The Certificate of Reasonable Value establishes the maximum loan amount a Veterans Administration (VA) loan will provide to purchase the property, and any difference in price could not be part of the loan.

CERTIFICATE OF TITLE - A written certification that declares who holds the title to a particlar piece of real property based upon the current public record. 

The Certificate Of Title is provided by a abstract company or a title company, or a written opinion is rendered by an attorney, and provides an assurance that a title is insurable and marketable, though it does not guarantee against title defects which may not have been registered in the public record. 

The issuer of the Certificate Of Title can only be held liable if they are negligent. A greater protection for a homeowner may be provided by a title insurance policy.

CERTIFIED CHECK - A bank-guaranteed check guaranteed which is not subject to a stop payment order.

CHAIN OF TITLE - The recorded history of a title to a particular piece of real property (real estate) showing the property ownership history, from the earliest recorded ownership up to the current certificate of title. 

The Chain Of Title usually begins with the title’s original recommended source (earliest existing document), and also includes all recorded encumbrances (e.g., liens) and conveyances.

CHANNELING -  The illegal practice of leading, channeling, or steering buyers of real property (real estate) away from or toward particular neighborhoods due to race, national origin, minority status, or other discriminatory criteria. Also see Steering.

CHATTEL - A term historically used to refer to items that are personalty (personal property).

CIPS - An acronym for Certified International Property Specialist, a designation that the National Association of Realtors® confers upon (awards to) real estate agents achieving the specified international experience and education requirements.

CIRIE (COMMERCIAL INVESTMENT REAL ESTATE INSTITUTE) -  Organization which awards the Certified Commercial Investment Member designation to members who complete the requirements in the field of commercial real estate investment.

CIVIL RIGHTS ACT OF 1866 - Legislation prohibiting racial discrimination in the United States, enacted one year after the the American Civil War ended.

CLEANING FEE - A fee, usually norefundable, which is charged to a tenant by a landlord at the time that a tenant moves into a property, to cover the costs associated with cleaning the premises at the time the tenant moves out. 

Some states disallow the charging of a cleaning fee which may be kept by the landlord even if the tenant leaves the premises in pristine condition. Other states specifically allow a cleaning fee, and still others remain silent on the issue.

Typically a security deposit payed by the tenant to the landlord may be used to clean the rented premises in the event that the tenant leaves the property dirty and in need of cleaning.

CLEAR TITLE - An established title that is free of defects (e.g., liens) and any other legal encumbrances. The only exceptions are encumbrances that the home buyer is willing to accept, such as an Assumable Mortgage that the buyer is willing to assume. Also called Title Without Clouds.

CLIENT (Principal) - An entity (e.g., person, company) which employs an agent. For example, a seller of a home is typically a client of the listing agent for the home. If a buyer employs a broker to help them purchase a home, the buyer is the client of the buyer’s broker (buyer’s agent).

CLIENT TRUST ACCOUNT - A bank account initiated by a broker (e.g., real estate agent) to safeguard a client’s monies and keep them separate from the broker’s own general and/or personal funds. (See Commingling.)

CLOSING - The completion (final stage) of a financial (sales) transaction (e.g., real estate transaction). In the case of a mortgage loan the closing includes signing mortgage documents, the seller delivering (transferring) the title to the buyer in exchange for consideration (e.g., the purchase price), and recording the transaction.

CLOSING COSTS - Up-front fees and expenses beyond the purchase price and related to a mortgage loan transaction, which may be either the seller’s expense (and thus deducted from the sale proceeds) or the buyer’s expense and thus must be paid by the buyer in addition to the purchase price. Some examples of closing costs are the loan origination fee, insurance, legal fees, homeowner dues, title and recordation fees.

CLOSING DATE - The date that a real estate transaction is finalized, as agreed to by all parties involved including the buyer, lender, seller, escrow company, and real estate agents.

Dictionary Real Estate Continued

CLOSING STATEMENT - A summary of a real estate transaction’s fees, costs, credits, charges, disbursements, and any other money matters required to be finalized to complete the close of the transaction.

The Closing Statement is typically prepared by a broker, escrow officer, lender, closing agent, or title company. 

The HU1 is a standard form that most lenders use at closing to disclose all of the items listed above, and to make sure they are in compliance with the provisions of the Real Estate Settlement Procedures Act. (RESPA).

The Closing Statement is also called the HUD 1 Statement or Settlement Statement.

CLOUD ON TITLE - A lien, outstanding claim, or encumbrance found during a title search and adversely affecting the owner’s title because the removal of the claim likely requires court action, a release, or a quite claim deed.

CO-BORROWER - A borrower in addition to the primary borrower whose name appears on the mortgage note and application.

CODE OF ETHICS - A written system of rules and standards of conduct based upon moral principles. The National Association of Realtors® (NAR) has established high standards of conduct for its members and codified these a Code of Ethics which requires Realtors® to treat all parties to a transaction fairly including both clients as well as customers, whether or not they are being represented by the Realtor® in the transaction.

COFI (Cost of Funds Index) - An index used to calculate the change in the interest rate for some Adjustable Rate Mortgage loans (Variable Rate Mortgage loans; ARMs; Adjustable Mortgage Loans).

COLLATERAL - Any asset (something of value) that is pledged to a lender as security to guarantee repayment of a debt or other obligation. If the loan is not paid according to its stated and agreed upon terms of the loan agreement, the borrower risks losing the pledged asset. Real property (real estate) is typically the collateral for a real estate mortgage loan. In this case the property is said to be hypothecated.

COMMERCIAL INVESTMENT REAL ESTATE INSTITUTE (CIRIE) - Organization which awards the Certified Commercial Investment Member designation to members who complete the requirements in the field of commercial real estate investment.

CIRIE--See Commercial Investment Real Estate Institute.

COMMERCIAL PROPERTY - A real estate classification for income-producing property including stores, office buildings, restaurants, hotels, and other businesses.

COMMINGLING - To illegally mix or mingle a client’s funds with the agent’s own funds. For example, if a broker deposits a client’s money in the broker’s own personal account, this is commingling, which is illegal and may lead to a revocation or suspension of the broker’s license.

COMMISSION - The fee/compensation charged for services performed by a real estate broker, or paid to a salesperson by a broker for services performed. The commission is usually based upon a percentage of the sale price of the item sold, such as a commission a real estate agent earns on the sale of a real property (real estate; realty) such a home.

COMMITMENT LETTER - A letter (written promise) from a lender which serves as a written promise stating their definite (and binding) willingness to provide/insure a mortgage loan of a specified amount to a specific borrower. The Commitment Letter typically includes the loan amount, interest rate, and the terms for the repayment of the loan.

COMMON AREA ASSESSMENTS - Assessments (payments) required by the individual owners of a planned unit development (PUD) project of a condominium.

Common area assessments are used to fund improvements, repairs, maintenance and general operation of the project’s common areas, as well as to defray the expenses of the homeowners’ association.

COMPARABLE PROPERTIES (Comps; Comparables) - Properties used by an appraiser as comparisons to help determine the fair market value of the property being appraised.

COMPARABLES (Comparable Properties; Comps) - Properties used by an appraiser as comparisons to help determine the fair market value of the real property (real estate) being appraised.

COMPS (Comparable Properties; Comparables) - Properties used by an appraiser as comparisons to help determine the fair market value of the property being appraised.

COMPOUND INTEREST - Interest that is computed based upon the sum of the original principal as well as any unpaid interest that has already accrued.

CONDEMNATION - A legal procedure through which a government entity uses the power of eminent domain to take ownership and control of an underutilized or blighted piece of real estate.

CONDOMINIUM - A form of real estate; one unit within a multi-unit building; an estate in real property comprised of an individual interest in a particular unit (e.g., commercial unit or apartment) as well as a right (undivided common interest) to use common areas (e.g., stairways, exterior walls, elevators, the land, etc.) which are owned by the condominium association, which in turn imposes periodic fees to pay for regular maintenance, improvements, repairs, insurance, taxes and other necessary costs.

CONFIDENTIALITY - This provision of fiduciary duty requires an agent to protect their client’s interest by keeping confidential all information that might harm the client as well as personal information the client wishes to keep private. For example, if a seller client has a strong desire to sell their property to generate money for some other purpose, this would be information kept confidential by the agent. Likewise a buyer agent would be required to keep confidential information that the buyer is able to pay more for a property than is offered. However, an agent is not ever required to keep confidential, or misrepresent, relevant information about the condition of a property, which must by law be revealed to all parties in a real estate transaction.

CONSIDERATION - The money or other incentive (e.g., commodity, exchange, etc.) that induces the formation of a contract.

CONSUMER CREDIT COUNSELING SERVICE (CCCS) - A national agency whose stated mission is to help people who owe money (e.g., debtors) organize and plan their personal budgets with the goal of repaying their debts. 

The Consumer Credit Counseling Service is a noprofit agency and does not charge a fee for its services, though their local offices receive primary funding from voluntary donations by creditors receiving payments from debtors.

While the Consumer Credit Counseling Service may help to arrange a manageable payment plan for a particular person, the person may still surffer damage to their credit score due to the reporting of delinquencies to credit bureaus by creditors. 

CONTINGENCY - A provision in a contract that requires the completion of a certain event or act for the contract to be legally binding; dependence upon a stated event (e.g., a contingency that contract to purchase a home will only be binding if the potential buyer’s current home sells within a certain time period).

CONTRACT - A legally binding agreement between two or more parties who are competent and who agree to complete certain acts or to refrain from particular acts, for a consideration; especially if formally stated in writing; enforcable by law; the document containing the terms of the agreement. There are many types of real estate contracts including sales contracts, listings, loan committments, mortgages, options, deeds, escrow agreements, and assignments.

CONVENTIONAL LOAN - A real estate loan, such as a mortgage, which is not guaranteed or insured by the federal government or any government agency (e.g., Veterans Administration, Federal Housing Administration). Also called Conventional Mortgage.

CONVENTIONAL MORTGAGE - A real estate loan that is not guaranteed or insured by the federal government or any government agency (e.g., Veterans Administration, Federal Housing Administration). Also called Conventional Loan.

CONVERSION OPTION - A clause in an Adjustable Rate Mortgage (ARM; Adjustable Mortgage Loan; Variable Rate Mortgage) which allows the borrower to convert the loan to a Fixed Rate Mortgage (with an interest rate that doesn’t change) if the borrower meets certain conditions of the loan, or for an extra fee. Also called Conversion Clause.

Dictionary Real Estate Continued:

CONVERSION CLAUSE  - A clause in an Adjustable Rate Mortgage (ARM; Adjustable Mortgage Loan; Variable Rate Mortgage) which allows the borrower to convert the loan to a Fixed Rate Mortgage (with an interest rate that doesn’t change) if the borrower meets certain conditions of the loan, or for an extra fee. Also called Conversion Option.

CONVERTIBLE ARM - An Adjustable Rate Mortgage (ARM; Adjustable Mortgage Loan; Variable Rate Mortgage) with a Conversion Option (Conversion Clause) allowing the borrower to change the Adjustable Rate Mortgage to a Fixed Rate Loan if the borrower meets the specified requirments.

CONVEYANCE - A formal written instrument (e.g., deed, assignment of lease) which serves as evidence that an ownership interest in real property (real estate) has been transferred from one party to another.

COOPERATIVE (CO-OP) - A type of multiple property ownership by a cooperative (corporation) allowing individual owner/residents of a multi-unit housing complex to own shares of stock in the cooperative corporation wich in turn owns the real property (real estate). The cooperative entitles the owner/reisdents to occupy a specific unit or apartment due to the document known as a proprietary lease.

CORPORATION - A legal entity created by specific state laws allowing personal liability to be limited.

COST OF FUNDS INDEX (COFI) - An index used to calculate the change in the interest rate for some Adjustable Rate Mortgage loans (ARMs; Adjustable Mortgage Loans; Adjustable-Rate Mortgage Loan; Variable Rate Mortgage loans).

CO-TENANCY - A form of property ownership that involves two or more persons sharing concurrent ownership, with each party owning an undivided interest in the real property (real estate).

COUNTER-OFFER (Counter Offer) - A new offer made by one party (e.g., a home seller) to another party (e.g., a potential home buyer) in response to a previous offer by that party.

For legal purposes, it should be understood that a counter-offer also has the effect of turning down (rejecting) the original offer. This means that the initial offer can no longer be accepted unless it is repeated by the offeror (e.g., the potential home buyer).

COVENANT - A promise in writing in a mortgage or deed which either requires or prevents a particular use of a property. If a Covenant is violated, it can lead to loss of the property or foreclosure on the proerty.  Some examples of Covenants are landscaping restrctions, parking restrictions, allowable architectural styles, maintenance rules that must be followed, a requirement that the real estate must be used for residential purposes, etc. Covenants may be included in deeds binding all owners in a particular developement. Also known as a Restrictive Covenant. See Covenants, Conditions, and Restrictions.

COVENANTS, CONDITIONS, AND RESTRICTIONS (CC&R’s) - Private controls on the uses allowable on real estate (real property) and/or land. CC&R’s are typically enforced by a homeowner’s association or by a developer, and may include restrictions in the deed which require certain architectural styles, a certain type of exterior (e.g., brick), restrictions on house size, maintenance/landscape rules that must be followed, whether you may have pets, a requirement that the real estate must be used for residential purposes, etc. CC&R’s may be passed on to a property’s new owners and may be included in deeds binding all owners in a particular development. Purchasers must be notified before the sale of any property that is subject to CC&R’s. Also see Deed Restrictions.

CRB (Certified Real Estate Broker Manager) - A designation awarded by the Real Estate Brokerage Managers Council to managers who complete the CRB Management Series amd also meet the extensive requirements in management experience.

CREDIT - The ability of a company or a person to borrow money, or to pay over time for services provided or for goods purchased.

CREDIT REPORT - A detailed accounting of an individual’s employment and residential history as well as their credit which includes any past bankruptcies, tax liens, judgments, and any ther negative or positve matters of public record entered for or against the individual. A person’s Credit Report is an important factor that a lender considers in determining an individual’s credit worthiness and the risk involved in extending them future credit.

CREDIT HISTORY - Information contained within a credit bureau that details a consumer’s debt as well as the person’ s financial history and whether their past debts have been paid back on time and/or “as agreed.”

CREDIT SCORE (Credit Scoring) - A numerical value which is calculated based on a statistical evaluation of an individual’s credit history information. The Credit Score ranks a borrower’s risk so the lender can make a decision regarding the grandting of future credit to the indvidual.

The credit score applies to a partiular point in time, and the assessment is based upon the person’s currently available credit, oustanding credit, total current debt, and their payment history regarding past debts (e.g., whether those debts have been paid on time).

Credit scores have been shown to be relaible predictors of future loan performance (e.g., whether the individual will repay a loan).

CREDITOR - A firm or person who extends credit, and thus is owed that money back in order to repay the debt.

CRS - See Certified Residential Specialist.

CUL-DE-SAC - A deaend street which widens at the end so as to provide room for cars to turn around.

CURABLE DEPRECIATION - A depreciation that may be remedied by the owner of the real property (real estate). Also see Physical Depreciation.

CURTESY - A husband’s legal right, recognized only in some states, to a portion of the estate of his deceased wife.

CUSTOMER - In the context of a transaction involving the buying or selling of real property (real estate), the term customer refers to the party that is not represented by a particular real estate agent.

For example, if an agent has a listing with a home seller, the seller is considered the agent’s client (principal), and any potential buyer of the listed home is considered a customer. That customer may have their own agent (e.g., a buyer’s agent), in which case the potential home buyer will be considred a client of the buyer’s agent, though still is considred a customer to the seller’s agent.

Real estate agents are obligated by the laws of agency to treat both customers and clients fairly, but there are different standards for each one. The customer is owed the duties of honesty and fair dealing from the agent, but a client is owed fiduciary duties.

CRV (CERTIFICATE OF REASONABLE VALUE) -  A Department of Veterans Affairs estimate of the value of a particular piece of real property based upon their approved appraisal. 

The Certificate of Reasonable Value establishes the maximum loan amount a Veterans Administration (VA) loan will provide to purchase the property, and any difference in price could not be part of the loan.

DEBT - Money that is owed to an institution or person by another institution or person.

DEBT-TO-INCOME RATIO - The ratio of a person’s gross monthly income to the total amount of money they pay each month toward open-ended, revolving accounts (e.g., credit cards) or installment debts (e.g., car payments, child support, alimony, etc.).

DEED - The written legal document (instrument) by which a grantor (previous owner; seller) of real property (real estate) formally transfers (conveys) an ownership interest or title to a new owner, who is the grantee (e.g., home buyer).

DEED OF TRUST - A legal document which serves as a security device for real estate (real property). In essence, the borrower is transfering the title to a third party (the trustee) so it may be held as security for the obligation (debt) that the trustor owes to the lender. A Deed of Trust is very similar to a mortgage between a mortagee and mortgagor, except that in a Deed of Trust there are three parties including the trustor (borrower), beneficiary (lender), and the third party known as the trustee who then holds partial title until the debt has been fully repaid. Deeds of Trust are not used in all states. Also called Trust Deed.

DEED RESTRICTIONS - Restrictions on a deed that specify allowable land uses and home sizes and types on a particular piece of real property. Deed restrictions may require certain architectural styles, a certain type of exterior (e.g., brick), restrictions on house size, landscape/maintenance rules that must be followed, whether you may have pets, a requirement that the real estate must be used for residential purposes, or other restrictions. Deed restrictions may be passed on to a property’s new owners and may be included in deeds binding all owners in a particular development. Deed restrictions are also known as Covenants, Conditions, and Restrictions (CC&R’s). 

DEFAULT - Occurs when one party fails to perform on reneges on a legal obligation, required act, or duty as previoulsy agreed upon in a contract. 

This non-performance of a duty, or failure to fulfill an obligation. For example, if a home renter (lessee) fails to pay the rent, they have defaulted on the lease contract.

Dictionary Real Estate Continued

DEFEASANCE CLAUSE - A clause (provision) in a legal document (e.g., lease, deed, will, home mortgage) which cancels or negates partially or completely the legal document if a particular condition occurs, or if a particular condition fails to cocur. 

DEFERRED COMMISSION - A commission that has been earned, but has not yet been fully paid.

DEFICIENCY JUDGMENT - A judgment - a decree issued by a judge in a court case against the losing party - which a lender may pursue against a borrower, guarantor, or endorser for the balance (remainder) of a debt. 

The issuance of a deficiency judgment may occur when the total security for a debt is not sufficient to satisfy the debt as well as any interest that accrued on that debt.

For example, if a homeowner defaults on their mortgage loan, the lender may receive a deficiency judgment for the difference between the amount of the loan and whatever proceeds resulted from a foreclosure sale and were applied toward the debt.

DELINQUENCY - A failure to complete a payment when it is due as per the terms of the contract agremeent.

DELIVERY - An act performed by a seller which shows the seller’s intent to make the deed effective (e.g., the deed’s actual transfer). Delivery is required to complete the transfer of a title to real property (real estate).

DEMAND - In the context of real property (real estate), demand is defined as the quantity (e.g. number) of ready, willing, and able buyers in a particular market.

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD) - The United States Department of Housing and Urban Development, which is the government agency (federal cabinet department) which is responsible for developing programs for renewal projects, administering Federal Fair Housing Laws (e.g., enforcing the provisions of the Fair Housing Act), and regulating closing costs for borrowers.

DEPOSIT - In terms of real estate, the term deposit refers to an earnest money deposit that a potential home buyer puts towards a home purchase, demonstrating that they are committed to buying the home and securing the performance of the contract. The Earnest Money Deposit demonstrates the buyer’s good faith in completing the real estate transaction.

In most real easte transactions, if the seller agrees to accept the earnest money deposit it is held in an escrow account by a title company from the time of the offer’s acceptance of the terms of the contract until the time of settlement (e.g., the closing process).

Typically a deposit will not be refunded to the potential home buyer unless the original offer contained a contingency which was not fulfilled. Also called Earnest Money Deposit.

DEPRECIATION - A decline/decrease in the worth (e.g., market value) of real property (real estate) as a result of lack of upkeep (e.g., a deterioration of the property’s quality) or changing market conditions (eg., a recession or other economic woes). Depreciaton is the opposite of appreciation.

1) In terms of the real estate appraisal process, depreciation is defined as a loss in value for any reason including physical obsolescence (e.g. aging mechanical systems, deterioration from ordinary wear and tear), external obsolescence (e.g. a landfill opening nearby), or functional obsolescence (e.g., poor home design).

2) In terms of taxes, depreciation refers to a deduction that is permissible on a tax return for certain types of income-producing real property (e.g., a home, but not land), and allows an owner to “write off” the cost of the depreciation. 

The time period during which the straight line depreciation of the income-producing property is measured (allowed) varies depending on the structure (e.g., commercial: 39 years; residential: 27.5 years).

DESCENT - The legal term describing the acquisition of property through state laws (inheritance laws) which govern the distribution of an estate when a person dies intestate (with no will).

DESIGNATED AGENT - An agent who is appointed by a broker to exclusively represent a principal (which may be either a seller or buyer of real estate), even though another agent in that same real estate firm is representing the other principal (e.g., buyer or seller) in that same real estate transaction.

 DEVISE - The transfer of real property (real estate) using a will or last testament.

DEVISEE - The recipient of real property (real estate) through a will or last testament.

DISABILITY - The Americans With Disabilities Act (ADA) defines a disability as any mental or physical impairment which substantially limits one or more major life activities including hearing, speaking, seeing, working, or learning.

DISBURSEMENT - A payment completed during an escrow or at the time of the settlement of the loan (e.g. during the closing process).

DISCLOSURE - 

1) A provision of fiduciary duty requiring an agent to provide a client (e.g., home buyer or home seller) with all material and/or relevant information pertaining to a particular home.

This requirment of disclosure includes information about the business transaction in general, and information about any and all potential buyers or sellers as well as any information that may potentially benefit the agent’s client including: facts that may affect the value of the real property (real estate); the bargaining position of the customer (e.g., a home seller or buyer); and anything else that may potentially benefit the agent’s client.

For example, if a potential home buyer (customer) has indicated to the real estate agent that they (the buyer) may not be able to qualify for a mortgage, or that they might be willing to pay an amount of money higher than their offer and asks the agent to keep the information confidetnial, the agent is still required to provide the information to the client (home seller).

The client may keep certain types of information confidential between the agent and client, but still must treat the customer and any other parties to the real estate transaction honestly and fairly, and must follow all laws about disclosing all material facts about a particular home (e.g., any significant problems with the home).

Also called Full Disclosure.

2) Revealing a previously hidden fact such as a major physical defect in a home for sale. Some examples of a such a major defect include mold, a leaking roof, an unstable foundation, potential flooding, electrical problems, etc.

Also called Full Disclosure.

DISCOUNT POINTS - A fee paid by a borrower to a lender during the closing process of a loan. Discount Points are paid either to reduce or maintain the interest rate charged on the loan.

One discount point is equal to 1% (one percent) of the principal of the loan. For example, one point on a $300,000 mortgage loan is equal to $3,000.

Also called Points.

POINTS - One point is equal to one percent of the amount of the mortgage loan. On a $400,000 loan, for example, one point is equal to $4,000.

DISCOUNT RATE - 

1) The interest rate charged by Federal Reserve member banks that borrow money from the Federal Reserve System.

2) The rate that is used for converting future income to present value.

DISPOSSESS - The legal process of ousting someone from land (real estate).

DISCRIMINATION - The process of deciding against or for a particular person based soley or in part on a specific trait (e.g., religion, age, gender).

DISPARATE IMPACT - A legal doctrine that deems as discriminatory any actions or rules that by their nature discriminate against a specific group even if there is no intent to discriminate.

DOMINANT TENEMENT - The legal name for the party which benefits from the existence of an appurtenant easement, and whose use of the easement dominates the servient tenement.

DOCUMENT PREPARATION - The fee which covers the expenses associated with the process of preparing legal documents which will be signed during the closing process of a real estate transaction. Some examples are the mortgage loan papers, note, and the Truth-ILending statement.

DOUBLE ESCROW - An escrow which concurrently handles both the purchase of one property and the sale of another property.

DOWER - A wife’s legal right to a share of her deceased husband’s estate. State laws vary with regards to Dower rights, with some states not recognizing them.

DOWN PAYMENT (Downpayment; Dowpayment) - Monies paid by a borrower toward a home purchase; the difference between the home mortgage loan amount and the home’s purchase price. A typical down payment is between 5% and 20% of the purchase price.

DOWN ZONING - A change in zoning regulations which have the effect of easing restrictions on particular uses of land (from more restrictive regulations to less restrictive regulations). For example, changing the zoning from only two-story homes allowed to three-story homes allowed.

DRAW PERIOD - The period of time during which a borrower with a line of credit may access and use that credit.

DUAL AGENCY - An agent representing both the buyer and seller (the two princials) in the same business transaction at the same time. Because the agent in this case has an inherent conflict in fiduciary duties (obligations) to the two principals in the transaction, the agent’s dual agency status must be disclosed in advance to both parties, and have the consent of both parties (Disclosed Dual Agency). Also called Dual Representation.

DISCLOSED DUAL AGENCY--When an agent represents both the buyer and seller (the two principals) in the same business transaction at the same time, with the dual agency status having been disclosed in advance to both parties, and having the consent of both parties. The agent involved in dual agency (dual representation) has an inherent conflict in fiduciary duties (obligations) to the two principals in the transaction.

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