Real Estate & Investing Dictionary
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Call Option
Similar to the acceleration clause.

Call Option
Loan agreement clause allowing the lender to ask for the balance due at any time.

Cancelation Clause
Provision in a contract that gives one or more parties the right to terminate the contract if a specific event occurs.

Adjustable Rate Mortgages have fluctuating interest rates, but those fluctuations are usually limited to a certain amount. Those limitations may apply to how much the loan may adjust over a six month period, an annual period, and over the life of the loan, and are referred to as "caps." Some ARMs, although they may have a life cap, allow the interest rate to fluctuate freely, but require a certain minimum payment which can change once a year. There is a limit on how much that payment can change each year, and that limit is also referred to as a cap.

Capacity of Parties
Legal competence to sign and be bound by a contract. One might lack capacity as a result of being a minor, being mentally challenged or not being of right mind. A contract signed by an incapable person is not binding.

Cape Cod Colonial
A one-storey house, compact in design and in an early-American-style. Symmetrical layout with a central entrance. Steep, gable-type roof, usually shingled, with a low central chimney.

Money used for investment purposes.

The working money in a business venture.

Capital Asset
A property to which certain tax rules (capital gains and capital losses) apply.

Capital Assets
Assets purchased for use over long periods of time, such as land and buildings, rather than for resale and can be fixed assets consisting of tangible assets such as plants and equipment and intangible assets, such as patents.

Capital Expenditure
Money spent to improve a property and enhance its value over an extended period of time (as opposed to a repair). May be added to the adjusted cost base of the property improved or depreciated over the useful life of the improvement.

Capital Gains
The profit realized above adjusted cost basis on the sale of property.

Capital Improvement
A permanent structure erected to extend the useful life and value of a property. (The replacement of a roof would be considered a capital improvement.)

Capital Loss
Decrease in value of a capital property (a property other than a principal residence). May be set off against capital gains or against regular income according to the tax rules.

Capital Loss
Loss from an investment resulting from the sale of that real estate.

Carrying Costs
The expense required to maintain a property over a given period of time, including property taxes, maintenance, insurance payments, interest charges on financing, etc.

Cash Accounting
Keeping records of money received or expended.

Cash Basis
Method of accounting in which expenses are recorded when cash is paid and revenue is recorded when cash is received.

Cash Cow
Term used to describe an income property with a high positive cash flow.

Cash Equity
Amount, in cash, invested in property.

Cash Equivalency
Price for which real estate would be sold if all cash was involved.

Cash Flow
Cash remaining on a rental property when the operating expenses and loan payment are deducted from the gross rental.

Cash Flow
Effective gross income minus operating expenses and debt service.

Cash Flow Statement
Financial records of receipts and expenditures during a specific period.

Cash Reserve
An amount of money that the purchaser of a property still has after the transaction closes. Some lenders require a certain level of cash reserve (equal to two payments) before granting a mortgage.

Cash Value
Expected market value of property if sold today.

Cash-Out Refinance
When a borrower refinances his mortgage at a higher amount than the current loan balance with the intention of pulling out money for personal use, it is referred to as a "cash out refinance."

Caveat Emptor
Latin for Let the buyer beware. Buyer must inspect the goods or property and purchase at their own risk.

The limit over which the interest rate on a variable rate mortgage may not rise over the life of the loan.

Ceiling Loan
Maximum loan that can be borrowed by a potential debtor.

Ceiling Rate
A controlled or administered price, which is set for property by a federal or local agency, usually in extraordinary circumstances.

Census Tract
A portion of a county from which statistics are derived, typically consisting of 2,500 - 8,000 people.

Certificate of Deposit
A time deposit held in a bank which pays a certain amount of interest to the depositor.

Certificate of Deposit Index
One of the indexes used for determining interest rate changes on some adjustable rate mortgages. It is an average of what banks are paying on certificates of deposit.

Certificate of Eligibility
A document issued by the Veterans Administration that certifies a veteran’s eligibility for a VA loan.

Certificate of Occupancy
Document issued by the local municipality indicating that a new dwelling is suitable for occupation. Generally confirms that the dwelling complies with local building, safety and health by-laws.

Certificate of Occupancy
Document issued by the building department of the town, stating that the house has met all of the building codes and is habitable.

Certificate of Reasonable Value - CRV
Once the appraisal has been performed on a property being bought with a VA loan, the Veterans Administration issues a CRV.

Certificate of Sale
A document indicating that a property has been sold to a buyer at foreclosure, subject to a right of redemption for a set period after the foreclosure sale. In an IRS, the redemption period is 180 days. The redemption period is different in other types of foreclosure. Many foreclosures take place without any certificate sale. Instead, if the sale is final, or near final, the buyer gets a deed rather than a certificate of sale.

Certificate of Sale
Document issued by the court at a judicial sale, entitling the purchaser to receive a deed once the court approves the purchase.

Certificate of Title
Attorney's opinion of the status of a title, which is attached to the abstract of title.

Certified Copy
A copy of a document which bears some form of declaration (usually by the holder of the original document) that it is a true copy of the original.

Certified General Appraiser
A person who has met the requirements to be licensed to appraise the value of property. Qualification requirements may vary from one jurisdiction to the next.

Certified Home Inspector
A person who has met the requirements to be "certified" to inspect the physical condition of homes. Qualification requirements may vary from one jurisdiction to the next.

1. A list of previous owners of a certain piece or parcel of land, typically going back to 1940, showing recorded date, grantor, grantee, and recorded instrument information; or 2. A unit of measurement equaling sixty-six feet, or 4 Rods.

Chain of Title
A history of the conveyances and encumbrances affecting a title from the time the original patent was granted, or as far back as records are available.

Chain of Title
An analysis of the transfers of title to a piece of property over the years.

Chapter 13
One of the bankruptcy chapters in the federal Bankruptcy Code. Under Chapter 13, a wage earner can reduce debt payments through a bankruptcy court order according to the terms of a plan that will allow the debtor to pay much or even all of the original amount.

Chapter 7
One of the chapters in the federal Bankruptcy Code. Chapter 7 is liquidation bankruptcy in which a debtor's nonexempt assets are gathered together and given up or sold for the benefit of creditors in order of their priority. Priority creditors get much of the cash, if any. Their debts are not discharged. Secured creditors receive continued payments or the asset that served as collateral for the loan. Unsecured creditors are usually given little or nothing in a Chapter 7 bankruptcy.

Chapter Eleven
Type of bankruptcy filing allowing restructuring and reorganization of existing debts which is used most often by businesses. Creditors must vote on a debt-paying plan and a judge must approve.

Chapter Seven
Type of bankruptcy filing, a provision of the 1978 Bankruptcy Reform Act, which provides for a person's property to be divided among creditors to satisfy unpaid debts.

Chapter Thirteen
Type of bankruptcy filing in which a person's obligations are paid back within a three year period, allowing the obligated party to pay off debts without liquidating assets.

Personal property, such as household goods or fixtures.

Chattel Mortgage
A mortgage on personal property.

Classified Property Tax
Tax rate that varies based on the usage of the property in question.

Cleaning Deposit
A nonrefundable fee to pay for the painting and cleaning of an apartment or office after a tenant vacates the premises.

Clear Title
Ownership rights to a piece of real estate that are not diminished by liens, leases or other types of encumbrances. No other ownership claims exist.

The one by whom a broker is employed (the principal) and by whom the broker will be compensated.

Closed Mortgage
Mortgage in which the collateralized property cannot be used as security for another loan.

Legal procedure in which property ownership is transferred.

This has different meanings in different states. In some states a real estate transaction is not consider "closed" until the documents record at the local recorders office. In others, the "closing" is a meeting where all of the documents are signed and money changes hands.

Closing Costs
Closing costs are separated into what are called "non-recurring closing costs" and "pre-paid items." Non-recurring closing costs are any items which are paid just once as a result of buying the property or obtaining a loan. "Pre-paids" are items which recur over time, such as property taxes and homeowners insurance. A lender makes an attempt to estimate the amount of non-recurring closing costs and prepaid items on the Good Faith Estimate which they must issue to the borrower within three days of receiving a home loan application.

Closing Costs
Expenses incidental to the closing of title, which are in addition to the price of the property. These items include loan, title and appraisal fees. Usually budget 2%-3% of the homes cost.

Closing Date
The date upon which the buyer takes over the property.

Closing Statement
See Settlement Statement.

Closing Statement
Also known as HUD-1 statement. A document which sets out the financial agreement between the parties, the costs each must pay, and all other similar information regarding a transaction (may be joint or separate for each party).

Cloud on Title
Any conditions revealed by a title search that adversely affect the title to real estate. Usually clouds on title cannot be removed except by deed, release, or court action.

Cloud on Title
A claim, lien or encumbrance, which, if valid, may impair the owner's title to the property. Property can be transferred but its market value may be reduced.

Cluster Housing
Planned subdivision where detached housing is located in close proximity to each other and share common open space including recreation areas and parking.

Cluster Housing
Development design which places attached dwelling in close proximity to each other, with nearby open spaces set out for common use of the dwelling owners.

An additional individual who is both obligated on the loan and is on title to the property.

Two or more authorized brokers who agree to cooperate together in representing a principal for the completion of a real estate sale.

Code enforcement agency
the official, agency, or board that has been delegated the responsibility for enforcing the housing code by the governing body

Code of Ethics
A set of rules governing the behavior of members of the organization that has established the Code. Lawyers and real estate brokers/agents both have their own Codes.

In a home loan, the property is the collateral. The borrower risks losing the property if the loan is not repaid according to the terms of the mortgage or deed of trust.

Collateral Loan
Loan secured by the pledge of specific collateral such a borrowing $45,000 against a savings account of $60,000.

Collateral Mortgage
A loan which is secured by some sort of written note of indebtedness (such as a Promissory Note) which is secondarily secured by a mortgage registered against a property.

Collateral Security
Additional security supplied by borrower to obtain a loan.

When a borrower falls behind, the lender contacts them in an effort to bring the loan current. The loan goes to "collection." As part of the collection effort, the lender must mail and record certain documents in case they are eventually required to foreclose on the property.

Commercial Bank
A financial institution, providing business loans, credit cards, checking and saving accounts, etc. Commercial banks are the largest financial intermediaries directly involved in the financing of real estate.

Commercial Broker
Real estate broker who specializes in the listing and selling of commercial property such as businesses, industrial, apartments, office buildings, etc.

Commercial Listing
Lists of business properties.

Commercial Property
Business property, such as office buildings, medical centers, hotels, stores, etc., which are intended to operate with a profit.

Commercial Real Estate
Real estate usable in a trade or business.

Most salespeople earn commissions for the work that they do and there are many sales professionals involved in each transaction, including Realtors, loan officers, title representatives, attorneys, escrow representative, and representatives for pest companies, home warranty companies, home inspection companies, insurance agents, and more. The commissions are paid out of the charges paid by the seller or buyer in the purchase transaction. Realtors generally earn the largest commissions, followed by lenders, then the others.

Common Area Assessments
In some areas they are called Homeowners Association Fees. They are charges paid to the Homeowners Association by the owners of the individual units in a condominium or planned unit development (PUD) and are generally used to maintain the property and common areas.

Common Areas
Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD) or condominium project's homeowners' association (or a cooperative project's cooperative corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.

Common Law
An unwritten body of law based on general custom in England and used to an extent in some states.

Community Property
In some states, especially the southwest, property acquired by a married couple during their marriage is considered to be owned jointly, except under special circumstances. This is an outgrowth of the Spanish and Mexican heritage of the area.

Community Property
A classification of property peculiar to certain states and referring to property accumulated through the efforts of both husband and wife.

Distance and time between a person's workplace and home.

Comparable Sales
Recent sales of similar properties in nearby areas and used to help determine the market value of a property. Also referred to as "comps."

Comparative Market Analysis
The estimated value of property based on the comparison of like properties.

Competent Party
A person legally able to contract being of legal age and of sound mind.

During negotiations, these are the items that each party is willing to give up in order to get the items each party really wants.

Concurrent Ownership
Ownership in a property by two or more owners, simultaneously.

The acquisition of private property for public use, with fair compensation to the owner.

Conditional Sales Contract
A contract for the sale of property stating that, although delivery is to be made to the buyer, the title is to remain vested in the sell until the conditions of the contract have been fulfilled.

A land ownership arrangement in which one owns an individual unit and a percentage of common acres.

A type of ownership in real property where all of the owners own the property, common areas and buildings together, with the exception of the interior of the unit to which they have title. Often mistakenly referred to as a type of construction or development, it actually refers to the type of ownership.

Condominium Conversion
Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.

Conforming Loans
Loans that meet FNMA standards.

A state of affairs in which a bank or savings and loan association has been taken over by the FDIC or RTC and is being managed by these federal institutions, either directly or through hired managers. The institution will be reserved in its existing form until it can be sold complete or broken down into its major components. The institution is run on a caretaker basis until it can be sold.

Something of value exchanged between the parties to a contract. It may consist of goods, services, or promises.

Construction loan
A short-term, interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses.

Constructive Notice
Information that a person is assumed, by law, to have simply because it could be ascertained by proper diligence and inquiry, for example, information that is to be found in the public records.

A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.

Contingency Fee
An employment arrangement commonly used by attorneys in which the attorney is paid a percentage of whatever money damages are awarded at the final judgment in a lawsuit.

An oral or written agreement to do or not to do a certain thing.

Contract for Deed
A sales arrangement in which the seller holds title until the buyer finishes paying for the property. The terms of the sale and the payments are set in a written contract signed by the buyer and the seller. At the end of the payment period, the buyer gets title to the real estate by means of a deed.

Contract for Purchase and Sale
An agreement between buyer and seller of real property to transfer title to that property at a future time for a specific sum of money.

Insertion of written agreement into deeds and other documents promising performance of certain acts, or stating certain uses of real estate.

Conventional Mortgage
Refers to home loans other than government loans (VA and FHA).

In terms of property, the exchange of personal real property of one character or use for another.

Convertible ARM
An adjustable-rate mortgage that allows the borrower to change the ARM to a fixed-rate mortgage within a specific time.

The process of transferring title or some interest in real estate to a new owner.

Cooperative (co-op)
A type of multiple ownership in which the residents of a multiunit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.

Corporate Grant Deed
A grant deed in which the Grantor is a corporation. Not used in all states.

Corporate Relocation
The movement of an employee of a corporation to a new location as part of the normal business of the corporation. The employee's moving expenses, including the costs of selling and buying a home, may be paid by the corporation and are tax deductible.

The final state of the appraisal process in which the appraiser reviews the data and estimates the subject property's value.

Cost of Funds Index - COFI Cost of Funds Index - COFI
One of the indexes that is used to determine interest rate changes for certain adjustable-rate mortgages. It represents the weighted-average cost of savings, borrowings, and advances of the financial institutions such as banks and savings & loans, in the 11th District of the Federal Home Loan Bank.

Counter Offer
A change in price or terms of an unacceptable offer.

Agreements written into deeds and other instruments promising performance or nonperformance of certain acts, or stipulating certain uses or restrictions on the property.

The amount of money an insurance company will pay in response to a claim.

A chapter 13 bankruptcy arrangement in which a plan to repay lenders and creditors, which was developed by the debtor's attorney, is ordered into effect by the bankruptcy court. It is crammed down on the sometimes unwilling creditors.

The willingness of a borrower to repay borrowed money. It is usually measured by a borrower's past record of payments on loans and debts, which is kept in a credit report.

An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.

Credit Bureau
An agency that complies data on an individual's credit history and, upon request, distributes a report to potential creditors.

Credit Bureau Report
The compilation of an individual's credit history. Potential creditors may request a copy from a credit bureau.

Credit History
A record of an individual's repayment of debt. Credit histories are reviewed my mortgage lenders as one of the underwriting criteria in determining credit risk.

Credit Limit
Generally found when dealing with credit cards, this is the maximum amount the cardholder may charge to that account.

Credit Report
A report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness.

Credit Repository
An organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.

A person to whom money is owed.

Cure Date
The last day given for bringing mortgage payments current at the beginning of the foreclosure process.

Cured Default
Correction of a borrower's failure to make payments or meet the terms of a loan to the lender's satisfaction.

Current Value
The value at the time of an appraisal.
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