An 'Abstract of Title' is a comprehensive summary of all significant legal actions, including recorded instruments and court proceedings, that relate to a particular property's title. It serves as an essential document for title examination, providing potential buyers, investors, and lenders with a detailed history of property ownership and encumbrances.
An accommodating party is an intermediary in a Section 1031 exchange, often utilized in delayed (tax-free) exchanges to temporarily hold money or property to facilitate the exchange.
Adjustments made at the settlement of a real estate transaction that outline expenses and fees charged to the buyer or seller.
The amount of money left for the investor after all obligations of a real estate transaction, including personal income taxes on the transaction.
Agency refers to the legal relationship between a principal and an agent whereby the principal employs the agent to perform certain acts on their behalf. This relationship is founded on a contract that outlines the duties, responsibilities, and limits of authority delegated to the agent.
Agency Disclosure is a written explanation, to be signed by a prospective buyer or seller, explaining to the client the role that the broker plays in the transaction. This ensures clients understand to which party the broker owes loyalty.
An Agreement of Sale is a written contract where the buyer agrees to purchase and the seller agrees to sell real estate under specified terms and conditions.
Apportionment involves the division and allocation of expenses, property, or assets. It is commonly used in real estate transactions to prorate property expenses between buyers and sellers, distribute inherited properties, or allocate unit values for taxation purposes.
An appraisal fee is a payment made to an appraiser for evaluating the value of a property and producing an official appraisal report.
An Appraisal Report is a comprehensive document that explains a property's value, including the data and methodologies used to determine that value. It provides detailed insights and is foundational in real estate transactions.
An arm's length transaction refers to a deal in which both parties act independently and in their own self-interest, ensuring that the transaction reflects true market value.
AS IS refers to a condition under which a property is sold or leased indicating that it will be accepted in its current state with no guarantees or warranties regarding its condition. Buyers or tenants agree to accept the property with all visible and latent defects.
An assumption fee is a charge levied by a lender on a buyer who assumes the existing loan on the subject property.
Assumption of mortgage is a real estate transaction where the buyer accepts liability for the existing mortgage debt on the property, often facilitating a smoother and potentially cheaper transfer of ownership compared to obtaining a new loan.
An attorney-in-fact is an individual authorized to act on behalf of another person under a power of attorney, which can be either general or limited in scope.
A condition where complete real estate ownership is impaired by unsettled claims and liens, which may prevent an owner from selling the property.
A Bargain and Sale Deed is a type of property deed where the grantor indicates an implied interest in the property without offering any warranties of title to the grantee.
The term 'Bona Fide' refers to actions, transactions, or situations conducted in good faith, without intent to deceive or defraud. It signifies genuine sincerity and authenticity in legal and financial contexts.
An individual or firm licensed to arrange real estate transactions, matching property buyers and sellers or tenants and landlords, while earning a commission for services rendered.
A broker protection clause, often referred to as an extender clause, allows a real estate agent to earn a commission after the expiration of the listing contract if the agent introduced the buyer during the contract period.
The term brokerage encompasses both the business operations of brokers and the commissions they earn through these services. Brokers act as intermediaries, facilitating transactions and charging fees for their expertise.
A business day is a standard day for conducting business and excludes weekends and public holidays. Business days are crucial for determining deadlines in contracts and other formal agreements.
A Buyer's Agency Agreement is a contract that establishes the relationship between a potential buyer and a Buyer's Broker, where the broker represents the buyer's interests in real estate transactions.
Carry-back financing, also known as seller financing, occurs when the seller of a property provides a loan to the buyer to complete the property purchase. This arrangement can be beneficial in situations where traditional mortgage financing is difficult to secure.
Cash equivalent in real estate refers to converting the price of a property sold with either favorable or unfavorable financing into the price the property would have sold for if the seller had accepted all cash in the transaction.
A cash purchase in real estate refers to acquiring property without the use of financing or loans, where the buyer pays the full purchase price in cash.
'Caveat Emptor,' a Latin phrase meaning 'let the buyer beware,' is a fundamental principle in real estate transactions. It emphasizes the responsibility of buyers to thoroughly inspect and review the property themselves, utilizing due diligence, except for latent defects, which are hidden or concealed defects not immediately detectable during an inspection.
A Certificate of No Defense, also known as an Estoppel Certificate, is a legal document used in real estate transactions to certify that the represented facts are accurate and there are no existing claims or disputes. This document plays a crucial role in ensuring transparent and risk-free real estate deals by confirming the status and obligations attached to a property.
A Certificate of Title is an authoritative opinion rendered by an attorney regarding the status of a property's title based on public records. It ensures the property's title is clear of public record claims.
Closing costs are the various fees and expenses payable by both the seller and buyer at the time of a real estate closing. These costs can vary widely and include items such as brokerage commissions, lender fees, and title insurance premiums.
The closing date is the date on which the seller delivers the deed and the buyer pays for the property. This is a critical day in real estate transactions as it finalizes the transfer of ownership.
The closing date in real estate is the date upon which the sale of a property is finalized and ownership is officially transferred from the seller to the buyer through the execution of associated legal documents.
A 'Cloud on the Title' refers to an outstanding claim, lien, or encumbrance that can potentially impair or affect the owner's title to a property. Resolving this issue is crucial for attaining a clear, marketable title when buying or selling real estate.
The terms 'Co-Broker' and 'Co-Broker Commission'—also known as 'Cooperating Broker' and 'Commission Split,' refer to the collaborative efforts between two or more real estate brokers to sell a property and the shared commission earned from the sale.
A 'CO-OP' (Cooperative) is a dual concept in real estate that can refer to a cooperative arrangement between agents for splitting commissions, or more commonly, a type of housing where residents own shares in a corporation that owns the property.
A Code of Ethics in real estate is a set of guidelines designed to establish fair practice behavior between agents, clients, and other parties in the real estate transaction process.
In the context of real estate, 'commitment' refers to a pledge or promise, particularly regarding financial arrangements or agreements, such as a firm's agreement to provide a loan or mortgage to a borrower, thus ensuring the progress and completion of a transaction.
A computer-based network of lenders that allows affiliated real estate brokers, builders, or advisors to originate loans at the site of the home. Provides a streamlined process whereby a person can buy a home and apply for a loan at the same place and time.
A conditional commitment is an agreement by a lender to provide a loan to a qualified borrower, subject to specific conditions that must be met. It serves as a binding commitment from the lender, provided that all pre-stipulated criteria and terms are satisfied.
A conditional offer is a purchase contract tendered to the seller that stipulates one or more requirements to be satisfied before the purchaser is obligated to buy.
Confirmation of Sale refers to the official recognition and approval of the sale of property by a court of law. This process validates that the sale was conducted properly according to legal standards.
A conflict of interest in real estate arises when an individual faces a potential decision in an official capacity from which they stand to benefit personally. This often necessitates the individual stepping down from one role to maintain ethical standards.
Constructive notice is a legal concept wherein an individual is presumed to have knowledge of a fact when such fact is a matter of public record, even if they do not have actual knowledge of it.
Contamination refers to the presence of harmful substances in real estate properties, which can significantly impact property value, usage restrictions, and potential health hazards. Identifying and addressing contamination are critical steps in real estate transactions, environmental assessments, and property development.
A Contract for Purchase or Sale, also known as an Agreement of Sale, is a comprehensive legal document between a buyer and a seller that outlines the terms and conditions of a real estate transaction.
A Contract of Sale, also known as an Agreement of Sale, is a legal document that outlines the terms and conditions under which a sale of property will be completed between a seller and a buyer.
In an installment sale, the contract price (tax) is the selling price less any existing mortgages assumed by the buyer. Understanding this term is crucial for accurate tax calculations and compliance.
A cooperating broker is a real estate professional who agrees to share the commission with another broker, usually the one representing the other party in a property transaction.
Cost basis refers to the original value of a property for tax purposes, adjusted over time for improvements, deprecation, and other related factors. This concept is fundamental in real estate transactions for determining capital gains or losses upon the sale of the property.
The term 'Counselor' is commonly used interchangeably with 'attorney' or 'lawyer' to refer to an attorney at law. In a broader context within the real estate industry, it can also refer to an individual who provides specialized services required for specific loan programs or offers advice on financial matters related to real estate transactions. Comparable terms include Counselor of Real Estate.
The 'Date of Appraisal' refers to the specific date on which the value of a property is determined by an appraiser. It is a crucial component in real estate transactions as it establishes the value of a property at a specific point in time, impacting sale prices, taxes, and loan terms.
In real estate and accounting, a debit refers to an amount that is charged to a party, either in the context of a closing statement or as entries on the left side of a general ledger.
A deed is a written document, properly signed and delivered, that conveys title to real property. It serves as a legal record of ownership and may include warranties or specific conditions. There are several types of deeds, including general warranty deeds, quitclaim deeds, and special warranty deeds.
Delivery refers to the transfer of possession of a thing from one person to another. In real estate, it typically involves the transfer of a deed or other documents to confirm possession.
Disposition costs refer to the various expenses incurred by a seller in the process of selling a property. These can include real estate agent commissions, legal fees, closing costs, and transfer taxes.
Document recording is a crucial process in real estate transactions that involves filing documents, such as deeds or mortgages, with a recorder of deeds or an appropriate government office to create a public record of property ownership and interests.
Documentary evidence refers to evidence in the form of written or printed papers used in legal and real estate proceedings to support facts and claims.
DocuSign is a computer software that allows proposed contracts to be emailed to principals for electronic signature and/or initials. It streamlines the process by indicating where to sign, initial, and date the document.
DRY CLOSING refers to a real estate closing without the actual immediate exchange of property and funds, where parties meet and provide assurances that the transaction will occur according to the previously negotiated sales contract.
Dual agency occurs when a real estate agent represents both the buyer and seller in the same real estate transaction. This arrangement is subject to strict regulatory controls to manage potential conflicts of interest.
Dual Contract refers to the illegal or unethical practice of providing two different contracts for the same real estate transaction. This is often done to deceive lenders or other stakeholders.
Due diligence is the process by which an individual or organization makes a reasonable effort to gather and provide accurate, complete information before executing a financial transaction or agreement. It often precedes the purchase of property and includes a careful examination of physical, financial, legal, and environmental characteristics.
An Earnest Money Contract is a crucial document in the real estate acquisition process, outlining the intention of a buyer to purchase a property and of a seller to sell it. It typically includes details about the amount of earnest money paid, the conditions under which the money will be applied or forfeited, and other terms of the sale.
In real estate, endorsement refers to the act of signing one's name to authorize a check, note, or other financial document, as well as offering support or credibility to a statement.
Equitable title is the interest held by a buyer who has agreed to purchase a property but has not yet completed the transaction. This interest grants the buyer certain rights even though the legal title has not been officially transferred.
Escrow is an arrangement in which a third party holds funds or documents on behalf of the primary parties involved in a transaction, pending the fulfillment of specified conditions.
An escrow agent is a neutral third party who holds funds or assets during a transaction until specified conditions are met, ensuring a secure process for the involved parties.
Escrow Closing refers to the final phase in a real estate transaction, particularly in states that use deeds of trust instead of mortgages. During this phase, an escrow agent or title company holds onto necessary documents and funds until all conditions of the sale are met.
An estoppel certificate is a document used in real estate transactions to detail the current status and conditions of a lease agreement, providing verification of lease information to third parties, such as lenders or prospective buyers.
An abbreviation of the Latin term et uxor, meaning 'and wife.' Commonly used in legal documents to indicate that a husband and wife are both parties to a contract, agreement, or deed involving real estate.
To execute a contract means to sign and implement it, formalizing the agreement between involved parties and potentially fully performing the terms of the contract.
An executed contract is a legal agreement whose terms have been fully fulfilled by all parties involved, signifying the completion of the contract's stipulated obligations.
An executory contract is a contract under which one or more parties has not yet performed their obligations. It remains in a state of incompletion until all terms have been fully met by all involved parties.
Express Agency refers to a clearly articulated and formally recognized relationship between an agent and a principal, delineated through a written contract or oral agreement. This is in contrast to Implied Agency, which might arise from actions or circumstances rather than explicit communication.
An express contract is a written agreement that clearly outlines the elements needed for a valid contract and specifies the terms of the agreement. This differs from an implied contract, which is formed based on the actions and circumstances of the parties involved.
An extension is an agreement between two or more parties to extend the time period specified in a contract. Extensions are common in real estate transactions and are used to ensure that all parties have adequate time to fulfill their obligations.
Fair Market Value (FMV) is the price that a property would sell for on the open market. Calculating FMV helps in real estate transactions, taxation, litigation, and insurance claims.
A federally related transaction refers to a real estate transaction that is governed and regulated by federal agencies such as the Federal Reserve Board, FDIC, OCC, OTS, NCUA, Fannie Mae, Freddie Mac, FHA, and the Department of Veterans Affairs. For the transaction to be valid, it necessitates real estate appraisal conducted by state-licensed or certified appraisers.
A Fee Appraiser, also known as an Independent Fee Appraiser, is a professional who provides an objective evaluation of a property's market value based on current market conditions. This unbiased assessment is crucial for various real estate transactions and financing activities.
The First Refusal Right, also known as Right of First Refusal (ROFR), grants the holder the opportunity to enter a transaction—such as purchasing or leasing property—before the owner can enter into a similar transaction with a third party.
Flopping is a fraudulent practice used by fraudsters to undervalue a property intentionally to induce a lender to make a short sale, thereby benefiting the fraudster at the detriment of the property owner and the lender.
For Sale By Owner (FSBO) refers to a property sale conducted directly by the owner without the use of a real estate agent. This approach allows sellers to avoid paying commission fees but requires them to handle all aspects of the sale process.
Fraud and flipping is an illegal real estate practice involving the purchase and immediate resale of property, typically to deceive and defraud lenders or other stakeholders by inflating the property's value artificially.
Full Disclosure is a requirement that compels parties involved in a transaction to reveal all pertinent information that could impact the party receiving the information, ensuring fair and transparent dealings.
Good faith in real estate refers to the intent to act honestly and sincerely without any intention to defraud or deceive others. This concept is pivotal in establishing trust between parties involved in property transactions.
Good faith money, also known as earnest money, is a deposit made by a buyer to demonstrate serious interest and intent in purchasing a property. This deposit helps assure the seller of the buyer's commitment while the transaction details are finalized.
A grantor is an individual or entity that conveys ownership of an asset, typically through the execution of a deed. This figure plays a key role in real estate transactions by transferring the title of property to a grantee.
A Grantor/Grantee Index is a crucial public record that cross-indexes grantors and grantees and the properties they relate to. This index aids in tracing the history of property ownership.
Hard sell refers to aggressive sales practices aimed at pressuring a customer into completing a transaction quickly. This approach often creates a sense of urgency or scarcity in the customer's mind to expedite the sales process.
A Holder in Due Course (HDC) is a person or entity that acquires a negotiable instrument in good faith and for value, and thus has certain protections under the law, even if the instrument was previously subject to certain defenses or claims.
In perpetuity refers to an indefinite duration, often used legally to describe rights that are permanent or last indefinitely.
A crucial aspect of financial compliance involving the submission of detailed transaction information to the IRS. This ensures accurate tax assessment and can include various types of income, including commissions earned by real estate sales agents and the proceeds from real estate transactions.
An insurable title refers to a property title that a title insurance company is willing to insure, ensuring that the title is clear of any disputes, defects, or encumbrances which could affect the ownership or value. This term is significant in real estate transactions to mitigate risk and provide protection to the buyer or lender.
An insurance binder is a temporary document provided by an insurance company that serves as proof of insurance coverage until a formal policy is issued.
A kick-out clause is a provision in a real estate sales contract that enables the seller to void the agreement if a superior offer is received before the sale closes.
A letter of credit is a financial instrument issued by a bank that guarantees a buyer's payment to a seller will be received on time and for the correct amount. It reduces risk in transactions, especially in real estate, by substituting the bank's credit for the customer's.
A Letter of Intent (LOI) is a formal document expressing the intention to enter into a contract or agreement without formally binding the parties involved.
A Letter of Intent (LOI) in real estate serves as a preliminary agreement that outlines the terms and details before finalizing a contract. It is commonly used during property sales, leases, and development transactions.
License laws govern the activities of real estate salespersons to ensure that transactions are conducted fairly, ethically, and legally, thereby protecting consumers and maintaining integrity in the marketplace.
In legal terms, majority refers to the age at which an individual is no longer considered a minor and is fully able to conduct their own affairs. It can also refer to more than half of a group when making collective decisions.
