A
Absentee Owner - An owner of a property who lives elsewhere, leaving tenants in control and occupation of the property.
Abstract of Title - A condensed, chronological history of the title to a particular piece of real estate consisting of a summary of the various documents that have been recorded in the office of the Registrar of Deeds and certain other public offices constituting the various links in the chain of title. An abstract of title also includes a statement of all liens, judgments, taxes, or encumbrances that affect particular property. An abstract of title prepares an Opinion of Title based upon his review of matters in the abstract and elsewhere.
Acceleration Clause - A clause in a mortgage note or contract stating that upon default of payment, the balance of the debt or obligation becomes immediately due and payable.
Acceptance - In contract law, a promise by the offeree to be bound by the terms of an offer. An acceptance must be absolutely identical with the terms of the offer and must be communicated to the offeror in the manner indicated or implied in the offer.
Accord and Satisfaction - A settlement or compromise of a dispute between parties to a contract with the rendering of some different performance by one of the parties which is accepted by the other.
Accretion - The gradual and imperceptible deposit of additional soil to land by natural causes, usually the flow of water. See Alluvion.
Accrued Interest - Interest earned but not yet paid. The amount of interest due for the period of time that has passed since interest was last paid.
Acre - A measure of land equal to 43,560 square feet, 4,840 square yards, 4,047 square meters, 160 square rods or 0.4047 hectares.
Adjusted Basis - For Income Tax purposes, the original cost (adjusted purchase price) of a property, referred to as its "basis", less the amount of allowable depreciation taken, plus the cost of capital improvements.(Note: A depreciation deduction is not allowed for a personal residence).
Administrator - A person appointed by the court to manage and settle the estate of a deceased person who died in testate, that is, died without leaving a will. (Technically, the term administrator is now obsolete, and the term personal representative is the property statutory title. The old terminology remains in popular use, however.)
Ad valorem - Designates an assessment of taxes against property; literally, “according to value.”
Adverse Possession - A possession that is inconsistent with the right of possession and title of the true owner. Adverse possession is the actual, open, notorious, exclusive, continuous, and hostile occupation and possession of the land of another under a claim of right or under color of title. If adverse possession is maintained for the period prescribed by statue, a new title is created in the adverse possessor and the title of the record owner is extinguished. An unusual feature of regular adverse possession in North Carolina is that the claimant must have the conscious intent to appropriate the land of another; i.e., land cannot be acquired under the regular doctrine (as opposed to color of title) by mistake.
Aesthetic Zoning - Zoning laws designed to regulate the physical appearance of property. Such zoning might require, for example, that junkyards be screened from public view by a fence or shrub line.
Affidavit - A statement or declaration reduced to writing, and sworn or affirmed to before some officer who has authority to administer oaths or affirmations.
Affidavit as to Mechanic’s Liens - An affidavit provided by a seller to a buyer assuring the buyer that no work has been done on the subject property that might give rise to the filing of a mechanic’s lien.
Affirmation - A solemn declaration in the nature of an oath made by persons who have religious scruples against taking oaths.
Agency - The legal relationship between a principal and an agent. In real estate transactions, usually the seller is the principal, and the broker is the agent: however, a buyer represented by a broker (i.e., buyer as principal is a growing trend. In an agency relationship, the principal delegates to the agent the right to act on his or her behalf in business transactions and to exercise some discretion while so acting. The agent has a fiduciary relationship with the principal and owes to that principal the duties of accounting, care, loyalty, and obedience.
Agent - A person who represents and acts on behalf of another person, called the principal, in dealing with a third party or parties pursuant to a contract of agency.
Agreement of Sale - See Purchase Contract and Sales Contract
Agricultural Fixtures - Chattels annexed to land for farming and agricultural purposes.
Air Rights - The right vested by a grant (deed, lease agreement, or other conveyance) of an estate in real property to build upon, occupy, or use, in the manner and degree permitted, all of any portion of space above the ground or any other stated elevation within vertical planes, the basis of which corresponds with the boundaries of he real estate described in the grant.
Alienation Clause - (See Due on Sale Clause)
Annual Percentage Rate (APR) - The cost of credit expressed as a yearly rate. The annual percentage rate is often not the same as the interest rate. It is a percentage that results from an equation considering the amount financed, the finance charges, and the term of the loan.
Amortization - Number of fixed payments or the period of time required to reduce a debt to zero when payments are made regularly.
Alluvion - Soil deposited on existing land by accretion; increase in land on the shore or bank of a river due to change in flow of stream. See accretion.
Assumption Agreement - A legal document signed by a home buyer, which requires the buyer to assume responsibility for the obligations of a mortgage made by a former owner.
Appraisal - For mortgage lending purposes it is a process whereby the (lending) value of the property is determined. The lending value may or may not match the purchase price of the home. An appraisal done for mortgage lending purposes is carried out for the benefit of the lender or the mortgage insurer.
Amenities - The qualities and state of being pleasant and agreeable. In real estate, those qualities that attach to property in the form of benefits derived from ownership other than monetary. Satisfaction of possession and use arising from architectural excellence scenic beauty, and social environment.
Annexation - (a) The permanent attachment of an item of personal property to real property, thus creating a “fixture”; (b) The addition of real property to its co4rporate limits by a city or town.
Appreciation - An increased conversion value of property or mediums of exchange due to economic or related causes that may prove to be either temporary or permanent; generally, an appraisal term referring to the increase in value of property.
Appurtenance - That which belongs to something else. In real estate law, an appurtenance is a right, privilege, or improvement that passes as an incident to the land, such as a right of way.
Appurtenant Easement - An easement over one parcel, the servient estate, that benefits (is appurtenant to) another parcel, the dominant estate. According to property law, whoever owns the dominant estate has the right to use the easement over the servient estate. (See Easement for a full definition of that term).
Artificial Monument - Those monuments, which are made by, man.
Assessed Value - The official appraised value of property for ad valorem property tax purposes.
Assessment - The process of determining real property value for the purpose of ad valorem taxation.
Assignee - The person to whom an agreement or contract is assigned.
Assignment - The method or manner by which a right or a contract is transferred from one person to another.
Assignment of Lease - Transfer by a lessee (tenant) of all his interest under a lease for the entire balance of the term of the lease.
Assignor - One who makes an assignment
B
Balloon mortgage - A mortgage loan that requires the remaining principal balance be paid at a specific point in time. For example, a loan may be amortized as if it would be paid over a thirty year period, but requires that at the end of the tenth year the entire remaining balance must be paid.
Balloon payment - The final lump sum payment that is due at the termination of a balloon mortgage.
Bill of Sale - A written instrument that evidences the transfer of right, title, and interest in personal property from one person to another.
Binder - An agreement, usually temporary, executed by a buyer and/or seller, normally in connection with the deposit of earnest money toward the purchase of real estate; generally intended only to temporarily “bind” the signatories until a formal contract can be drawn; not commonly used in real estate transactions in North Carolina. In insurance, a binder is a temporary agreement given to one having an insurable interest that desires insurance subject to the same conditions that will apply if and when a policy is issued.
Blanket Mortgage - A single mortgage that covers more than one parcel of real estate.
Blighted Area - A declining area in which real property values are seriously affected by destructive economic forces, such as encroaching inharmonious property usages and/or rapidly deteriorating buildings.
Blockbusting - Persuading or trying to persuade persons to sell or move out by creating or exploiting fears of racial change in a neighborhood. An illegal practice under the Federal Fair Housing Act of 1968 and the State Fair Housing Act. Also known as panic peddling.
Bona fide - Made in good faith; good, valid, without fraud.
Bond - Any obligation under seal. A real estate bond is a written obligation, usually issued on security of a mortgage or deed of trust.
Breach - The breaking of a law, or failure of a duty, either by omission or commission; the failure to perform, without legal excuse, any promise that forms a part or the whole of a contract.
Blended Payments - Equal payments consisting of both a principal and an interest component, paid each month during the term of the mortgage. The principal portion increases each month, while the interest portion decreases, but the total monthly payment does not change.
Bridge Financing - Interim financing to bridge the time gap between the closing date on the purchase of the new home and the closing date on the sale of the current home.
Broker, Real Estate - Broker has several meanings in different situations. Most Realtors are "agents" who work under a "broker." Some agents are brokers as well, either working form themselves or under another broker. In the mortgage industry, broker usually refers to a company or individual that does not lend the money for the loans themselves, but broker loans to larger lenders or investors. As a normal definition, a broker is anyone who acts as an agent, bringing two parties together for any type of transaction and earns a fee for doing so.
Budget Mortgage - Any mortgage where the monthly payments are set up to include not only principal and interest, but also deposits to an escrow (reserve or impound) account maintained by the lender and used to pay property taxes and insurance charges when they become due. Most single family residence mortgages are “budget” mortgages.
Building Code - Regulations established by state and by local governments setting forth the structure requirements for building.
Building Line - A line fixed at a certain distance from the front and/or sides of a lot, beyond which no building can project. See also Setback.
Building Permit - A certificate that must be obtained from the municipality by the property owner or contractor before a building can be erected or repaired. It must be posted in a conspicuous place until the job is completed and passed as satisfactory by a municipal building inspector.
Brokerage - For a commission or fee, bringing together parties interested in buying, selling, exchanging, or leasing real property.
Buyer's Agent (also known as "Buyer's Broker" or "Purchaser's Agent") A person or firm representing the buyer. A Buyer's Agent's primary allegiance is to the buyer. The buyer is the Buyer Agent's client.
Buyer's broker - A licensee who has declared to represent only the buyer in a transaction, regardless of whether compensation is paid by the buyer or the listing broker through a commission split. Some brokers conduct their business by representing buyers only.
Buyer's Market - Market conditions that favor buyers. With more sellers than buyers in the market, sellers may be forced to make substantial price concessions.
Bundle of rights - A term commonly used to describe the various rights and privileges of an owner of real property.
Buy-down mortgage - Any mortgage where the seller has paid a sum of money to the lender to either temporarily or permanently “buy down” the interest rate and/or monthly payments for the buyer/borrower. Often used by developers when selling new residential properties.
Buyer Agency Contract - A contract between a prospective buyer of real estate and a real estate agent authorizing the salesperson/broker/firm to act as the agent for the prospective buyer in locating a particular type of property for purchase.
C
Call - Under a metes and bounds property description, a reference to a course, distance, or monument used in describing a boundary.
Cancellation - The discharge of a contractual obligation by marking the document “cancelled”, surrendering possession of it, or by destroying it.
Capital - Accumulated wealth; a portion of wealth set aside for the production of additional wealth; specifically, the funds belonging to the partners or shareholders of a business, invested with the expressed intention of the funds remaining permanently in the business.
Capital Assets - Assets that are permanent or have a long life expectancy (e.g., land, buildings, heavy equipment.)
Capital Expenditures - Expenditures made for the acquisition of capital assets (assets that are permanent or have a long life expectancy) or for capital improvements (permanent or long term improvements). See also Capital Assets and Capital Improvements)
Capital Gain/Loss - For income tax purposes, the profit/loss realized upon the sale of a capital asset; the difference between the “amount realized” (sale price less closing expenses) and the adjusted basis of real property.
Capital Improvement - Any structure erected on real property or any permanent or long term improvement made to real property that adds to its value and useful life.
Capitalization - A process used by appraisers in connection with the income capitalization approach method of appraisal to convert a property’s actual or projected net income into an estimate of property value. In its simplest form, known as “direct capitalization”, this is accomplished by dividing net operating income by a “capitalization rate”. See also Direct Capitalization Income Capitalization Approach.
Capitalization Rate - Any rate, expressed as a percentage, used in the process of “capitalization” of income in connection with the income capitalization approach method of appraisal to derive an estimate of value based on a property’s income. See also Capitalization; Income Capitalization Approach.
Cash Flow (before taxes) - The net income produced from an income producing property after deducting operating expenses and debt service from gross income received. See also Cash Flow (after taxes)
Cash Flow (after Taxes) - The net income produced from an income producing property after deducting depreciation and income taxes from the “before tax cash flow.” See also Cash Flow (before taxes).
Caveat Emptor - A literal translation of this term is “let the buyer beware.” Under this old legal doctrine, a buyer of real estate has the duty to inspect the property he is purchasing and will be held to have accepted any defects or conditions that are discoverable by a reasonably diligent inspection. Under a strict application of this doctrine, the buyer is considered to take the property “as is”. This doctrine has been eroded somewhat by modern court decisions so that sellers of real estate today may have an affirmative duty to disclose some property defects, especially latent (hidden) defects, about which the seller has knowledge. (See also Implied Warranty of Fitness dealing with the sale of new dwellings.) The doctrine has little, if any, application to actions of real estate agents, who have extensive duties to both buyers and sellers under various state real estate license laws.
Certificate of Reasonable Value (CRV) - A form on which is reported the appraised value of a property that is to be security/collateral for a mortgage loan guaranteed by the Veterans Administration (VA).
Chain - Unit of land measurement; 66 feet.
Chain of Title - A history of conveyances and encumbrances affecting the title to particular real property.
Chattel - Items of movable personal property, such as animals, household furnishings, money, jewels, motor vehicles, and all other items that can be transferred from one place to another.
Chattel mortgage - When an interest is given on moveable property other than real property (in which case it is usually a "mortgage"), in writing, to guarantee the payment of a debt or the execution of some action. It automatically becomes void when the debt is paid or the action is executed.
Civil Rights Act of 1866 - An act of Congress that generally prohibits racial discrimination and that has been interpreted to allow a citizen to sue for racial discrimination in the sale or rental of housing.
Clear Title - Title to property that is free and clear of all encumbrances or defects.
Closing - The consummation or completion of a transaction involving the sale or exchange of real estate; may be accomplished either at a closing meeting attended by the various parties (or their agents) or by way of an escrow closing. At closing, title to the property is formally transferred to the purchaser and all financial matters relevant to the transaction are settled.
Closing Statement - A detailed accounting of all receipts and disbursements in connection with a real estate sale, which is provided to the seller and purchaser at the time of closing.
Closed Mortgage - A mortgage, which cannot be prepaid, renegotiated or refinanced.
Closing Date - In most cases, the date on which the sale of the property becomes final and the new owner takes possession.
Cloud on Title - An outstanding claim or encumbrance, which, if valid, would affect or impair the owner’s title.
CMA - See Comparative Market Analysis
Coastal Area Management Act - North Carolina legislation, passed in 1974, that regulates real estate development within coastal areas of environmental concern.
Coinsurance - A clause placed in most property insurance policies requiring the insured to share the loss with the insurer if the property is underinsured.
Collateral - Something of value deposited with a lender as a pledge to secure repayment of a loan.
Color of Title - An apparent title founded upon a written instrument, a deed, will, or judicial decree that purports to convey and apparently passes title to land but fails to do so, either because of a defect in its execution or a want of title in the person executing the instrument.
Co-Mingling - The illegal practice by a real estate broker of maintaining personal or business funds in the same account with trust funds held for others.
Commission - Compensation earned by a broker for the performance of specific duties in connection with the sale or lease of a property. The amount of payment is usually measured by a percentage of another sum and usually is paid by the seller (if a sale is involved) or owner (if a lease is involved).
Commission’s Deed - In certain court actions or special proceedings, a commissioner is appointed to sell real or personal property and is empowered to give a commissioner’s deed to the purchaser. Specific statutory procedures must be carefully followed by he commissioners.
Commitment - A pledge, a promise, or a firm agreement. See also Loan Commitment.
Common Areas (Elements) - Those portions of a property owned or rented by multiple parties (such as a condominium complex, apartment, or shopping mall) that are designated or reserved for shared use by all the owners or tenants.
Common Law - A body of law that is based on custom and cases decided in the courts, as distinguished from codified or statutory law enacted by a legislative body.
Comparable - A recently sold property that has similar characteristics to a property being appraised (the “subject” property) and that is used for comparative purposes when estimating the value of the subject property.
Compensatory Damages - A measure of damages utilized to place the party injured by the contractual breach in the same position that he or she would have been in had the contract been performed; the intent is to make the injured party whole rather than to penalize the breaching party.
Compound Interest - Interest paid on the original principal of an indebtedness and also on the accrued and unpaid interest that has accumulated.
Competitive Market Analysis (CMA) - Document, usually prepared by a real estate agent in report form, that will give an estimated sales price for a given property based on current market conditions.
Concurrent Ownership - The ownership of the same parcel of property by two or more persons. Concurrent ownership is generally referred to as “co-tenancy” or “co-ownership”. The three principal types of concurrent ownership are Joint Tenancy, Tenancy in Common and Tenancy by the Entirety.
Condemnation - The taking of private property for a public purpose with compensation to the owner, by the state, other body politic, or public service corporation authorized to exercise the power of eminent domain; also a declaration that a structure is unfit for use. See also Eminent Domain.
Conditional Use Permit - In zoning law, a permit that is issued authorizing a certain use to be made of property only after certain stated prerequisites have been met.
Condominium (Condo) - Housing consisting of a complex of dwelling units (as an apartment house) in which each unit is individually owned
Conner Act - The North Carolina recording act that requires all conveyances of real property, contracts to convey, and leases of land for more than three years to be recorded at the office of the Register of Deeds in order to be effective as against certain third parties. See Recording.
Consequential Damages - A form of special damages that may be obtained where the damages were foreseeable or within the contemplation of the breaching party at the time of the contract.
Consideration - The price or subject matter, which induces a contract; may be in money, commodity, exchange, or a transfer of personal effort. Something of value, usually money, that is the inducement for a contract. Any right, interest, property, benefit accruing to one party, or any forbearance, detriment, loss or responsibility given, suffered or undertaken, may constitute a consideration that will sustain a contract.
Construction Lien - See Mechanics’ Lien.
Construction Loan - A short term loan, usually made to builders and developers, that is used to finance the cost of construction and that usually is collateralized by a mortgage on the land.
Constructive Eviction - A situation which arises when a landlord, either by his affirmative act or by his failure to perform some required act, prevents a tenant from enjoying the use of a leased premises in the manner contracted for in a lease. In such situation, the tenant is said to be “constructively evicted” from the premises even though he has not actually been denied possession of the premises. See also Eviction.
Constructive Notice - Notice given by the public records. Persons with a duty to search are bound by whatever information they would find by a reasonable search of the public land records whether they in fact make the search.
Contingency - A condition which must be satisfied before a contract is legally binding
Contingency Provision - A provision in an offer or contract that makes performance and consummation of the offer or contact dependent or contingent upon the occurrence of some act.
Contingent Offer - An offer containing a contingency provision.
Contract - A legally enforceable agreement between two or more competent parties, based on legal consideration, to do or to abstain from doing some act.
Contract for deed - A contract for the sale of real estate where the deed (title) of the property is transferred only after all the payments have been made. Also known as a land contract, agreement of sale, conditional sales contract, or installment contract. Buyers should be wary of this type of contract, since they can lose their entire investment if the owner declares bankruptcy, before the deed has been transferred. See Installment Land Contract.
Covenant of Title - A promise (covenant) placed in a deed whereby the grantor agrees to indemnify the grantee against certain defects in title or a total failure of title.
Conventional Mortgage (Fixed-rate mortgage) - A mortgage loan which does not exceed 75% of the appraised value or purchase price of the property, whichever is the lesser of the two. Mortgages that exceed this limit must be insured.
Conventional Life Estate - A life estate arising by intentional act of the parties which is an express transfer of land “To A for life,” the estate being for the duration of A’s own life.
Conveyance - A general term for any document that transfers title to real property. The word is also a verb describing the act of transferring title to real property.
Cooperative - A multi unit development in which a purchaser obtains a stock certificate representing part ownership of the building and a lease to a specific apartment or unit within the development.
Cooperative Listing Service - An arrangement among real estate brokers in a given area whereby information on a property listed for sale with any of the brokers is shared with all other participating brokers so that all participating brokers can assist in selling the property. The participating brokers agree to split any earned commissions on a co-brokered sale. See also Multiple Listing Service.
Correction Deed - A type of deed often used to remedy defects in title to property. For example, a title examiner might discover that a deed in the chain of title has been improperly acknowledged. A correction deed, properly executed and acknowledged by the same grantors who executed the defective deed, might be required to clear the title defect.
Cost Approach - An appraisal method or procedure used to estimate the value, usually the market value, of an improved property by summation of the land value and the value of improvements, each of which has been estimated independently. The estimated value of the land, considered as though vacant, is added to the estimated replacement or reproduction cost of the improvements, less estimated depreciation, to derive an estimate of the property’s market value.
Cotenant - Any one of two or more parties who share an undivided ownership interest in real property.
Counteroffer - An offer made in reply to an original offer which contains new or different terms or conditions not included in the original offer. The offer made in reply (counteroffer), once communicated, has the effect of rejecting the original offer which cannot subsequently be accepted unless renewed by the original offeror.
Course - The direction of a line as used in a metes and bounds description of land.
Covenant - An agreement between two or more persons entered into by deed or lease whereby one of the parties promises the performance of certain acts, or that a given state does or shall, or does not/or shall not, exist. Simply put, a covenant is a promise.
Credit - A sum entered in favor of either the seller or purchaser on a closing statement. A credit indicates an amount that a party is to receive to be reimbursed for at closing, as well as the amount of any loan or deposit which is to serve as part of the purchase price.
Credit insurance - Insurance a lender offers or requires a borrower to purchase to cover the loan. If the borrower dies or becomes disabled before paying off the loan, the policy will pay off the remaining balance. Federal and state consumer protection laws require the lender to disclose to existing and potential borrowers the terms and costs of obtaining credit insurance because it can affect the terms of the loan.
Creditor - The party to whom a debt is owed.
Curative Statute - A law, retrospective in effect, which is designed to remedy some legal defect in previous transactions; specifically, they aid the title assurance process by eliminating technical title defects.
Curtesy - A life estate given under the common law to a husband in the lands has deceased wife was seized of during their marriage. The current statute, NC Gen. Stat. §29-30, provides a statutory substitute for curtesy whereby a husband is entitled to a life estate in one third in value of all real estate owned by his wife at any time during their marriage, in the event the husband elects not to take as his wife’s devisee or heir.
D
Damages - The indemnity recoverable by a person who has sustained an injury, either to his person, his property, or his rights, through the act or default of another.
Debit - A charge against either the seller or purchaser on a closing statement. A debit indicates an amount due from or owed by a party at closing.
Debt Equity Ratio - A comparison of the amount owing on a property with the equity (value of property minus amount owing).
Debt-service Ratio - The percentage of the borrower's gross income that will be used for monthly payments of principal, interest, taxes, space heating costs and condominium fees.
Debt Service - Periodic payments of principal and accrued interest made toward the liquidation (amortization) of a debt.
Debtor - The party who owes a debt.
Decedent - A deceased person.
Decree - A judgment of a court of equity.
Dedication - A form of transfer, either formal or informal, whereby an individual grants title of an interest in land for some public use and such grant is accepted by or on behalf of the public in some recognized legal manner.
Deed - The instrument by which title to property is conveyed from one person to another. A signed writing under which an interest in real property is transferred from a grantor to a grantee upon delivery of the writing to the grantee. To be recorded, the deed must be acknowledged.
Deed in Lieu of Foreclosure - A deed given by a mortgagor, who is in default under the terms of the mortgage, to the mortgagee in order to avoid foreclosure of the property. The courts frown on this type of deed because of the potential for undue influence by the mortgagee on the mortgagor in default.
Deed of Gift - The transfer of real property by a deed not supported by any consideration. A deed of gift is perfectly valid, but it must be recorded within two years or it will become void under North Carolina law.
Deed of Trust - A document in the nature of a mortgage that is widely used in North Carolina. Under a deed of trust, the borrower conveys the land to a third party trustee to hold for the beneficiary (mortgage lender) to secure a debt, subject to the condition that the conveyance shall be void and terminated on payment of the debt at maturity. Most deeds of trust contain a power of sale giving the trustee the power to sell the land in case of default and to apply the sale proceeds toward payment of the debt. Also called a Trust Deed. See also Mortgage.
Default - Non-payment of the installments due under the terms of the mortgage(s). Failure to abide by the terms of a mortgage loan agreement
Defendant - The party sued or called to answer in any lawsuit, legal action, or proceeding.
Defeasible Fee - A fee simple estate created in such a way that it will terminate on the occurrence of some contingent event that may or may not happen.
Deficiency Judgment - A judgment for the balance owning on a debt after the collateral given as security has been foreclosed on or attached and sold and applied toward payment of the indebtedness.
Demise - The conveyance of an estate for a certain period or for life, usually by a lease.
Department of Housing and Urban Development (HUD) - A United States Federal Agency that focuses on programs regarding housing and renewal of city communities. Oversees the Federal Housing Administration.
Derivative Titles - Titles obtained by a person from a prior owner either by will, deed, or inheritance.
Descent - The transfer of property ownership to the heirs of a deceased person by operation of law where the property owner dies in testate (without a will).
Devise - A gift of real estate by the last will and testament of a decedent.
Direct Capitalization - A method of estimating the present value of a property by dividing projected annual net operating income by a market derived capitalization rate. (Value = Net Operating Income/Capitalization Rate). See also Yield Capitalization, Capitalization, Capitalization Rate, and Income Capitalization Approach.
Discharge - The removal of all mortgages and financial encumbrances on a property.
Discharge of a Contract - Performance under a valid and binding contract may be legally discharged by a number of events, including: full and complete performance, a substantial breach by one of the parties, impossibility of performance, and by operation of law.
Discounted Cash Flow Analysis - See Yield Capitalization.
Discount Points - A fee charged by a lender (usually paid by the borrower) to increase he yield on mortgage loans with below market interest rates. The fee is stated in terms of “points”. See also Discount and Points.
Discrimination in Housing - Segregating, separating, excluding, or treating unequally any person because of race, color, religion, national origin, sex, handicap or familial status in the furnishing of housing or facilities or services related to obtaining or occupying housing. Largely prohibited by Federal and State law.
Dispossess - To oust or deprive a person of possession and use of real property.
Distance - The length of a line as used in a metes and bounds description of land.
Documentary Stamp - A revenue stamp on documents for payment of a tax. The stamps no longer are used, but the excise tax still is required on real property transfers. See Excise Tax on Real Property Transfers.
Domicile - The place where a person has his true, fixed, and permanent home and principal establishment, and to which, whenever he is absent, he has the intention of returning.
Dominant Estate - A parcel of land that is benefited by an easement on another parcel of land (the servient estate).
Dower - A life estate that existed at the common law whereby a widow was entitled to one third of the lands that her deceased husband was seized of during their marriage. Under the current statute, NC Gen. Stat. §29.30, a widow still is entitled to a life estate in one third in value of the real property owned by the husband during their marriage.
Dual Agency Agreement - An agreement between a real estate broker and two (or more) parties to a transaction authorizing the broker to act simultaneously as the agent of both parties in the transaction.
Dual Agent - A real estate broker or salesperson who acts as agent for both the seller and the buyer in the same transaction. Both buyer and seller are the agent's clients
Duplex - A building which houses two separate dwelling units.
Due on Sale Clause - A provision in a mortgage or deed f trust or promissory note stating that the entire balance of the mortgage loan will become due if the borrower transfers the mortgaged property without the prior consent of the lender. Also called an Alienation Clause.
Duress - The unlawful constraint or threatening of a person, whereby he is forced to perform some act or to sign an instrument against his will.
E
E-sign - The common name for the Electronic Records in Global and National Commerce Act, U.S.C. §§7001 et seq. This federal legislation validates electronic contracts and signatures in transactions in interstate commerce and provides that they will not be denied validity and enforceability solely because they are in electronic form. See also UETA.
Earnest Money - A sum paid by a prospective purchaser of real estate as evidence of good faith, usually paid to the broker at the time an offer is made.
Easement - A right acquired for access to or over, and perhaps use of, another person's land for a specific purpose such as a driveway or public utilities.
Easement of Condemnation - An easement created in favor of a government agency or public authority that has exercised the power of eminent domain.
Easement of Dedication - As easement, usually for the benefit of the public, that may be created under a number of express and implied circumstances.
Easement by Express Grant or Reservation - An easement that is expressly granted or expressly reserved by the grantor in a deed.
Easement by Implication - An easement that is implied from prior circumstances. There is nothing in writing that expressly creates the easement.
Easement by Necessity - An easement that is impliedly created when a grantor of property land locks the grantee.
Easement by Prescription - An easement that is created by operation of law because of the long continued, adverse use by the party claiming the easement.
Easement in Gross - A general category of easements that refers to all easements that is for the personal benefit of a specified individual or entity rather than for the benefit of a parcel of land. Distinguish from Appurtenant Easement.
Economic Life - The period over which an improvement on real property may be profitably utilized or the period over which the improvement will yield a return on the investment in the property.
Economic Obsolescence - Loss in value of property due to factors that impair the desirability or useful life which arise from economic forces, such as changes in optimum land use, legislative enactments that restrict or impair property rights, and changes in supply-demand relationships; a cause of depreciation in property value. Also called External Obsolescence.
Effective Age - In appraisal, the age assigned to a property at a given point in time based on its condition. The effective age may be more or less than the actual age.
Effective Gross Income - In an operating budget for an income producing property, the gross (maximum possible) income less projected vacancy and rent collection losses.
Effective interest rate - The cost of credit on a yearly basis expressed as a percentage. Includes up-front costs paid to obtain the loan, and is, therefore, usually a higher amount than the interest rate stipulated in the mortgage note. Useful in comparing loan programs with different rates and points.
Effective Rate - The effective rate is a consumer-oriented rate that takes into account the projected amount of time you tell us you will actually have the loan, as well as the specific costs, fees, and potential rate changes associated with it. The fees and costs are distributed over the time you plan to be in the house, allowing you to do an apples-to-apples comparison of a variety of loan types. The effective rate is not the APR. It is similar in that it factors in interest, mortgage insurance, and other fees (including points); however, the APR assumes that you keep your loan for the entire term, while the effective rate takes into account how long you tell us you plan to be in your house.
Ejectment - A form of legal action taken by a landlord to evict a tenant and regain possession of real property.
Electronic Records in Global and National Commerce Act – See E-Sign.
Emblements – Things that grow on the land and require annual planting and cultivation.
Eminent domain - The right of government to take private property for public use, through court action known as condemnation. The Fifth Amendment to the United States Constitution allows the government to take private property if the taking is for a public use and the owner is "justly compensated" (usually, paid fair market value) for his or her loss. A public use is virtually anything that is sanctioned by a federal or state legislative body, but such uses may include roads, parks, reservoirs, schools, hospitals or other public buildings. Sometimes called expropriation.
Encroachment – A building, part of a building, or other improvement that intrudes or trespasses upon the property of another.
Encumbrance - A register claim for debt against a property, such as a mortgage. Any right to, or interest in, land, which diminishes the value of the estate although it does not prevent conveyance of the estate by the owner thereof. For instance, mortgages, unpaid taxes, and judgments are encumbrances known as “liens”. Both restrictive covenants restricting the use of lands to certain purposes and easements are encumbrances, although they are not liens.
Equal Credit Opportunity Act – The federal law that prohibits lenders from discriminating in the extension of credit on the basis of age, race, color, religion, national origin, sex, or marital status.
Equitable Conversion – An equitable doctrine stating that, as soon as a valid sales contract has been entered into by a seller and a buyer, the buyer is treated as having “equitable title” to the land (and thus owner of the land for certain purposes), and the seller as having bare “legal title” as security for the payment of the purchase money by the buyer.
Equitable Servitudes – See Restrictive Covenants
Equitable Title – The interest in real property that is held by (a) the grantor (borrower) under a deed of trust, (b) the buyer under a valid “interim” real estate sales contract pending closing, and (c) the buyer under an installment land contract. See also Equitable Conversion. Distinguish from Legal Title. (Note: The owner of real estate that is not encumbered by a deed of trust and is not the subject of a real estate sales contract holds both legal and equitable title to the property.)
Equity (owner) - The difference between the price for which a home could be sold and the total debts registered against the home. Owner equity usually increases as the outstanding principal of the mortgage is reduced through regular payments. Market values and improvements to the property also affect equity.
Equity Line of Credit – A loan transaction in which the borrower uses the equity that has developed in the borrower’s home to secure a line of credit. The borrower then has the right to draw funds up to the agreed upon loan limit. This equity line of credit is secured by a mortgage on the borrower’s home. This transaction is often termed a “home equity loan”.
Equity of Redemption – The right of an original owner who has mortgaged his property by mortgage or deed of trust to reclaim and recover his title to real property, even after the mortgage debt is past due, by paying to the obligee the principal of the debt, accrued interest, and costs incurred up to the time of redemption. Also called Right of Redemption. See also Statutory Redemption Period.
Erosion – The wearing away of land through natural causes, such as running water or winds.
Escheat – The reverting of property to the State when there are no persons legally entitled to hold title or when heirs capable of inheriting the property are lacking.
Escrow – An arrangement by which one deposits a thing of value with a third person (called an escrow agent) who will make delivery to another person when specific conditions are fulfilled. For instance, a contract, deed, bond, or other written instrument may be deposited with a third person, by whom it is to be delivered to the grantee or promisee upon the performance of some act.
Escrow Agent – (a) With regard to real estate brokerage, a special demand account maintained by a broker at an insured bank or savings and loan association for the purpose of holding trust funds on behalf of his principal or other parties to a transaction (see also Trust Account); (b) With regard to mortgage lending, a special account maintained by the lender to cover the payment of property taxes and insurance on the mortgaged property.
Estate – A term used to refer to the legal rights and interests one has in real property as an owner or tenant. An estate in real property is either a freehold or a non-freehold estate.
Estate for Life – See Life Estate.
Estate for Years – A less than freehold (i.e., a non-freehold) estate created by the leasing of property for any fixed, definite period of time, whether such period be one week, one month, one year, ten years, or any other definite period of time. Also see a Tenancy For Years.
Estate from Year to Year – A less than freehold (non-freehold) estate created by the leasing of property for an indefinite period of time. Such estates, which are also called estates from period to period or periodic tenancies, may be from year to year, month to month, week to week, etc., depending on the period of time for which rent is regularly paid. Such an estate may also be created when a tenant for years holds over and pays rent for an additional term and the rent is accepted by the lessor or owner.
Estate at Sufferance – A less than freehold (non-freehold) estate created when a tenant who has lawful possession of a property holds over without the consent of the owner; the lowest estate in property. Also called a Tenancy of Suferance.
Estate at Will – A less than freehold (non-freehold) estate created when a tenant occupies land with the consent of the owner, but without any agreement for a definite rental period or for the regular payment of rent.
Estate Not of Inheritance – A freehold estate that extends only for the term of some person’s life.
Estates of Inheritance – A freehold estate that may continue beyond the life of the holder and pass on to his heirs upon his death.
Estoppel Certificate – A certificate provided by a commercial tenant confirming the term of the tenant’s lease, important rights of the tenant under the lease, and a confirmation that the tenant has no pending claims that the landlord is in default under the lease. Once given, the tenant is estopped from denying the facts asserted.
Estovers – The right of a tenant to take wood from the landlord’s property to use as fuel or make necessary property repairs.
Ethics – The principles of conduct established for its members by a profession or professional organization.
Et ux – Abbreviation for et uxor, meaning “and wife”
Eviction – The process instituted to oust a person from possession of real estate. Also the ousting or deprivation of one from the possession of lands or tenements. See also Constructive Eviction.
Excise Tax on Real Property Transfers – A tax imposed on the transfer of real property.
Exclusive agency (EA) - A listing agreement which gives the listing agent the right to sell the property for a specified time. The owner reserves the right to sell the property himself without paying a commission to the agent. Brokers run the risk of investing their time, effort, and money in a listing that, even if sold through their marketing efforts, does not produce a commission. Contrast with Exclusive Right to Sell.
Exclusive right to sell (ERS) - A listing agreement which gives the listing agent the right to sell the property for a specified time, with the right to collect a commission if the property is sold by anyone, including the owner, during the listing period. Contrast with Exclusive Agency.
Execute – (a) To perform or carry out a contract; (b) To sign an instrument such as a contract or deed.
Executed Contract – A contact that has been fully performed by the parties. (Distinguish from Executory Contract)
Execution – A judicial writ or process issued by the court to the sheriff directing him to sell property to satisfy a judgment debt.
Executor – A man designated by the maker of a will (the Testator (male) or Testatrix (female)) to carry out the execution of the terms of the will. See also Excutrix.
Executor’s Deed – A deed given by a deceased person’s executor.
Executory Contract – A contrast that has not yet been fully performed by the parties, such as a real estate sales contract prior to closing.
Executrix – A woman designated by the maker of a will to carry out the execution of the terms of the will. See also Éxecutor.
Express Contract – A contract stated in words, either orally or in writing.
Express Easement – See Easement by Express Grant or Reservation
Extender Clause – See Override Clause
External Obsolescence – See Economic Obsolescence.
F
Fair Housing Act of 1968 – A federal law which, as amended, prohibits discrimination on the basis of race, color, religion, sex, national origin, handicap or familial status with respect to all significant aspects of the sale or rental of housing and other related activities. See also State Fair Housing Act.
Fair market value - The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.
Familial Status – A technical legal term that basically means discrimination against families with children (individuals under the age of 18), but also emcompasses more than the traditional family.
Fannie Mae (Federal National Mortgage Association) - Fannie Mae's operates under a congressional charter that directs it to channel its efforts into increasing the availability and affordability of homeownership for low, moderate, and middle-income Americans. Fannie Mae receives no government funding or backing, and is one of the nation's largest taxpayers as well as one of the most consistently profitable corporations in America. Fannie Mae establishes strict guidelines for mortgage loans it is willing to purchase. As the largest buyer of mortgage loans in the US, these guidelines have become the industry standard for the majority of home loans. Any loan that meets these Fannie Mae guidelines is called a "conforming loan".
Federal Deposit Insurance Corporation (FDIC) – The independent federal agency that insures the deposits of eligible commercial banks and savings and loan associations.
Federal Home Loan Bank System – The federal agency that regulates many of the activities of federally chartered (and some state chartered) savings and loan associations, primarily through control of the reserve requirements of these institutions.
Federal Home Loan Mortgage Corporation (FHLMC or “Freddie Mac”)– A corporation established to purchase conventional mortgage loans (primarily from savings and loan associations) on the secondary mortgage market.
Federal Home Loan Mortgage Disclosure Act (HMDA) – A law that assists the federal government in enforcing the requirement that lending institutions not discriminate against minorities by redlining or similar practices. The Act requires lenders to prepare certain information about their loan practices and make that information available for public inspections.
Federal Housing Administration (FHA) – An agency of the federal government, operating under the Department of Housing and Urban Development (HUD), that insures mortgage loans made by lenders to certain qualified borrowers.
Federal National Mortgage Association (FNMA or “Fannie Mae”) – See Fannie Mae
Federal Reserve System – Commonly referred to as the “Fed”, the nation’s central banking system that, through various actions taken by its governing board, regulates the money supply ad interest rates.
Fee – When applied to real property, an inheritable estate in the property.
Fee Simple Absolute – The highest quality of estate that a person can have in real property. It is of a potentially infinite duration and is transferable, devisable, and inheritable.
Fee Simple Determinable – A fee estate in land that is potentially infinite duration but that might terminate prematurely and automatically if a condition attached to the estate is breached.
Fee Simple on a Condition Subsequent – A fee simple estate in land that is of potentially infinite duration but that might terminate prematurely if a condition attached to the estate is breached. The chief distinction between this estate and the fee simple determinable is that forfeiture of the fee simple on a condition subsequent is not automatic if the condition is breached, i.e., the party who imposed the condition on the estate must step forward and enforce it.
Fee Tail – This is an obsolete fee estate that is created by the language “to A and the heirs of his body”. Whenever this language occurs, NC law automatically converts the fee tail into a fee simple absolute.
FHA Mortgage – A mortgage loan that is insured by the Federal Housing Administration.
Fiduciary - The relationship of trust, honesty and confidence between agent and principal; the faithful relationship owed by an agent to the principal. A relationship wherein one party imposes special trust and confidence in another party, usually involving the holding or managing of money or other property for another. An example is the relationship between a real estate broker and his principal. Also refers to the party in whom special trust and confidence is placed.
Financing Statement – The form used for filing to give notice of a security interest in personal property under the Uniform Commercial Code.
First Mortgage – A mortgage (or deed of trust in NC) that has priority as a lien over all other mortgages (r deeds of trust), which are “second” or “junior” mortgages.
First Right of Refusal – See Right of First Refusal.
Fit Premises – What a landlord must provide a residential tenant in NC under NC Gen. Stat §42-43. That statute requires the landlord to do a number of things including putting and keeping the premises in a fit and habitable condition. See also Residential Rental Agreements Act.
Fixed rate mortgage - A mortgage with an interest rate and monthly payment that doesn't vary for the term of the loan.
Fixed Rental Lease – A lease calling for payment of a fixed payment of a fixed amount of rent at regular intervals during the term of the lease. Also called a flat lease.
Fixed-Rate Loans - Fixed-rate loans have interest rates that do not change over the life of the loan. As a result, monthly payments for principal and interest are also fixed for the life of the loan. Fixed-rate loans typically have 15-year or 30-year terms. With a fixed-rate loan, you will have predictable monthly mortgage payments for as long as you have the loan.
Fixture – An item of personal property, a chattel, affixed to a building or structure or land in such a manner that it becomes a part of the building, structure, or real estate to which it is affixed and annexed. Fixtures affixed to real estate become appurtenances of the real estate to which they are affixed and subject to the legal rules that apply to real estate, rather than the legal rules that apply to personal property. This means that a fixture is automatically passes with the real estate unless the contract to convey provides otherwise.
Flat Fee – A brokerage fee arrangement in a listing contract whereby the broker is to receive a fixed sum upon sale of the property.
Flat Fee Listing – A brokerage fee arrangement in a listing contract that involves the payment of a fixed fee to a broker. The fee is not a percentage of the ultimate sales price and may not even be tied to whether or not the broker is successful in selling the listed property.
Flat Lease – See Fixed Rental Lease
Floodplain – An area of land near a river or other body of water that is subject to periodic flooding and typically has it use restricted by zoning.
Foreclosure - A legal procedure whereby the lender obtains ownership of the property following default by the borrower. A legal remedy to enforce security rights in land under a mortgage or deed of rust. The lender or creditor may bring an action in court to foreclose a mortgage or deed of trust to compel a public sale of the property involved and to apply the sale proceeds to payment of the secured debt. In addition, most mortgages and deeds of trust provide that the secured lender or creditor can compel a foreclosure under a power of sale given to the mortgagee or trustee (in a deed of trust) upon default in payment of the indebtedness without the necessity of a court action. A valid foreclosure terminates the debtor mortgage’s interest in the secured property and the proceeds of the foreclosure sale are applied to payment of his indebtedness.
Forfeiture - The loss of property or a privilege due to breaking a law. A loss of anything of value due to failure to perform, such as under a lease or contract for the sale of property if there is such a provision in the lease or contract.
Fraud – Fraud covers a multitude of intentional and deceitful acts committed by one party to take unfair advantage of another. Traditional elements of fraud are: a false representation as to a material fact, made with knowledge of its falsity, made with an intent to deceive, and resulting in action by the victim in justifiable reliance on the misrepresentation.
Fraudulent Misrepresentation – With regard to real estate laws, the intentional misrepresentation of a material fact by a seller or his real estate agent to induce the purchase of property. The purchaser under these circumstances will be entitled to certain remedies including damages and possible rescission. See also Fraud.
Freddie Mac - The common name for the Federal Home Loan Mortgage Corporation (FHLMC), a congressionally chartered institution that buys mortgages from lenders and resells them as securities on the secondary mortgage market.
Freehold – An interest (estate) in real estate of not less than a life estate; either a fee simple estate or a life estate.
Front Footage – A property measurement for sale or valuation purposes consisting of the number of feet of street or road frontage.
Fructus Industriales – Crops or vegetable products that are the result of annual labor and cultivation and treated as personal property for certain purposes.
Fructus Naturales – Plant life that is the natural and spontaneous growth of nature requiring no annual planting or cultivation and created as real property as long as it remains unsevered.
Full Assignment – An assignment in which the assignee expressly assumes responsibility for all covenants and provisions in the original lease for the rest of the term.
Full Performance – In contract law, the complete performance of the contract terms by each party. See also Executed Contract.
Full Service Lease – A type of lease, commonly used with mult0tenant commercial property, where the lessees share overall operating expenses for the building and common areas.
Functional Obsolescence – Loss in value of property due to factors that impair the desirability of a property which arise from its being out of date with respect to design and style, capacity and utility in relation to site, lack of modern facilities, or the like; a cause of depreciation in property value.
Future Advances Mortgage – A security instrument placed on real property to secure both present funds given at the time of the mortgage and future funds (future advances) that will or may be given to the borrower. Article 7, Chapter 45 of the NC General Statutes sets forth requirements and guidelines for future advances mortgages.
Future Estate (or Future Interest) – An interest in land entitling its owner to possession of the land at a future date, as, for example, the interest that a remainderman holds during the life of a present life tenant.